Canadian Solar, Inc. v. United States
Opinion
This is an appeal from a judgment of the Court of International Trade sustaining a remand determination from the U.S. Department of Commerce ("Commerce").
SunPower Corp. v. United States
,
I. BACKGROUND
A. Legal Framework
The Tariff Act of 1930, as amended, authorizes Commerce to initiate countervailing or antidumping duty investigations, and, in certain circumstances, impose duties on foreign merchandise sold, or likely to be sold, in the United States.
A countervailing or antidumping duty investigation typically begins with a petition filed by a domestic industry.
Commerce typically determines country of origin based on the country where the merchandise is processed or manufactured.
See
Cold-Rolled Carbon
,
B. The Parties & The Merchandise
SolarWorld, an appellee in this appeal, is a domestic producer of solar products. It initiated the trade remedy investigations from which this appeal arises by filing petitions alleging injury to the domestic solar industry. The appellants in this appeal-Canadian Solar, Inc., Changzhou Trina Solar Energy Co., Ltd., Hefei JA Solar Technology Co., Ltd., Shanghai JA Solar Technology Co., Ltd., Yingli Green Energy Holding Company Limited, and Yingli Green Energy Americas, Inc.-export and/or produce the class or kind of merchandise within the scope of Commerce's orders from/in China.
While the parties agree on the type of merchandise within the scope of Commerce's order-crystalline silicon photovoltaic cells, and modules, laminates, and/or panels consisting of crystalline silicon photovoltaic cells, whether or not partially or fully assembled into other products, including building integrated materials-they *914 dispute whether Commerce erred in its country of origin analysis.
C. Procedural History
Commerce's orders at issue in Solar II China are the subject of this appeal, but two prior sets of orders are relevant to the issues before us. Each of these is detailed below.
1. Solar I China
On November 16, 2011, Commerce initiated countervailing and antidumping investigations based on petitions filed by SolarWorld. The investigations resulted in countervailing duty and antidumping duty orders covering both solar cells and solar panels containing solar cells from China.
Crystalline Silicon Photovoltaic Cells, Whether or Not Assembled Into Modules, From the People's Republic of China
,
Because some solar cells manufactured in China can be assembled into panels elsewhere and because some solar cells manufactured elsewhere can be assembled into panels in China, Commerce applied the substantial transformation test to determine the country of origin. Commerce determined that the solar cell is the origin-conferring component because the process of assembling the solar cells into panels does not constitute a substantial transformation.
SunPower
,
2. Solar I Taiwan
SolarWorld later filed petitions alleging that imports of solar cells and panels from Taiwan had increased, causing injury to the domestic solar industry.
3. The Proceedings Below
a. Commerce's Decision Regarding Solar II China Orders
On October 19, 2011, SolarWorld filed petitions concerning imports of the subject merchandise from China.
Crystalline Silicon Photovoltaic Cells, Whether or Not Assembled Into Modules, From the People's Republic of China
,
Commerce initiated investigations and, on December 23, 2014, published final orders imposing countervailing and antidumping duties.
Countervailing Duty Investigation of Certain Crystalline Silicon Photovoltaic Products From the People's Republic of China
,
(1) the unique nature of the solar products industry in light of the readily adaptable supply chain and record evidence of a shift in trade flows following the implementation of the [ Solar I China ] Orders; (2) [Commerce]'s concerns that the scope language in the Petitions would be neither administrable nor enforceable, and could invite further evasion of any resulting order; and (3) the fact that [Commerce] needed a mechanism to address the alleged injury to the domestic industry, which stemmed, in relevant part, from modules assembled in [ China ] using third-country solar cells, and which would not be captured by a traditional substantial transformation analysis.
SunPower
,
b. Court of International Trade Remands
On March 18, 2015, appellants filed complaints challenging both
Solar II China
and
Solar I Taiwan
in the Court of International Trade.
c. Commerce's Remand Decision
In its remand decision, Commerce explained why its country of origin determination
*916
in
Solar II China
differed from its determinations in
Solar I China
and
Solar I Taiwan
. Commerce explained at the outset that it has broad discretion to determine the applicable scope of an order.
Solar II China Remand Results
, slip op. at 17. It stated that it did not apply different country of origin rules to the same class or kind of merchandise.
Commerce also explained that using the country of assembly in this case would "best effectuate the purpose of the antidumping [and countervailing duty] laws and the violation found."
Id.
at 24 (quoting
Mitsubishi Elec. Corp. v. United States
,
Commerce then explained why it departed from the substantial transformation test. It acknowledged that, in Solar I China and Solar I Taiwan , it had found that the process of panel assembly does not transform solar cells and that, therefore, the solar cells are the origin-conferring component. See id. at 25. But it also recognized that the circumstances underlying its orders in Solar I China and Solar I Taiwan differed in significant ways from the circumstances underlying the orders in Solar II China . Specifically, it "recognized that the harm alleged in the [ Solar II China ] petitions was connected with the activities in [China]" and that record evidence demonstrated shifts in trade flows and evasion related to solar panels assembled in China following issuance of the Solar I China orders. Id. No similar evidence of harm was alleged or presented in the record in Solar I Taiwan or Solar I China . Id. These differing circumstances in Solar II China , it reasoned, justified departing from the substantial transformation test because "a rote application of a substantial transformation analysis would not allow [Commerce] to address unfair pricing decisions and/or unfair subsidization concerning the [panels] that is taking place in the country of export." Id. at 5-6.
Appellants challenged Commerce's remand determination in the Court of International Trade, arguing that Commerce unlawfully created two country of origin rules for products within the same type of merchandise and that it impermissibly departed from the substantial transformation test without a reasoned explanation for doing so.
d. Court of International Trade's Decision
The Court of International Trade affirmed Commerce's remand decision. It agreed with Commerce's conclusion that what is the "class or kind of merchandise" in a countervailing duty or antidumping duty determination is a proceeding-specific inquiry, and that, therefore, the classes or kinds of merchandise in
Solar I China
,
Solar I Taiwan
, and
Solar II China
are distinct because the scopes of those orders are distinct.
SunPower
,
Appellants timely appeal. We have jurisdiction pursuant to
II. DISCUSSION
As noted above, the Tariff Act authorizes Commerce to impose countervailing and/or antidumping duties on a "class or kind of [foreign] merchandise" imported or sold for importation into the United States if Commerce finds that the merchandise reflects unfair pricing or unfair subsidization and the Commission finds material injury to the domestic industry.
The Tariff Act does not require Commerce to define the "class or kind of [foreign] merchandise" in any particular manner. Because the Tariff Act is silent in this regard, Commerce has the authority to fill that gap and define the scope of an order consistent with the countervailing duty and antidumping duty laws.
SKF USA Inc. v. United States
,
Commerce's authority to define the class or kind of merchandise within the scope of an order encompasses the authority to determine the country of origin.
Bell Supply
,
*918
Fox
, 566 U.S. at 515,
Here, appellants argue that, because Commerce typically uses the substantial transformation test to determine country of origin for merchandise produced in more than one country and because Commerce used that test in earlier orders regarding solar panels, it should have, but failed to provide a reasoned explanation under State Farm for departing from that practice in Solar II China . 1 Appellants also argue that, even if Commerce provided a reasoned explanation, substantial evidence does not support its findings. As explained below, we conclude that Commerce provided a reasoned explanation for its departure under State Farm and that substantial evidence supports its findings.
A. Commerce Provided a Reasoned Explanation Under State Farm
It is undisputed that the test Commerce used to determine the class or kind of merchandise within the scope of the Solar II China orders differs from the test it used to determine the scope of its Solar I China and Solar I Taiwan orders. It is also undisputed that, if Commerce had used the substantial transformation test in defining the scope of these orders, it would have concluded that the country of cell production confers origin because the process of assembling the solar cells into solar panels does not substantially transform those solar cells. But, here, Commerce determined that the country of assembly determines origin, regardless of whether the assembly process substantially transforms the merchandise at issue. We find that Commerce provided a reasoned explanation for using the country of assembly test and for departing from its previous practice in this case.
Commerce explained why its "new policy is permissible under the statute[s]."
Fox
, 566 U.S. at 515,
We agree. We conclude that it was reasonable for Commerce to use the country of assembly test to determine country of origin. This is because it is reasonable to use the country where the merchandise was assembled to define the class or kind of merchandise within the scope of the orders-especially where, as here, the very imports found to cause injury due to unfair pricing and/or subsidies were
panels assembled in China
containing cells produced in other countries. Indeed, "[i]t would make little sense for Commerce to expend significant resources investigating certain imports, and for the [Commission] to determine that those imports were causing injury to a domestic industry, if Commerce were precluded from including those imports within the scope of the ... order[s] arising out of the ... investigation[s]."
NTN Bearing Corp. of Am. v. United States
,
We also find that Commerce provided "good reasons for" departing from the substantial transformation test.
Fox
, 566 U.S. at 515,
Commerce also explained that a departure was necessary because the Chinese solar industry, anticipating a rote application of the substantial transformation test, had shifted its supply chains so that their solar imports to the United States would no longer fall within the class or kind of merchandise defined in Solar I China . Id. at 48-49. We agree that this is another good reason for departing from the substantial transformation test. The Chinese solar industry-recognizing that the solar cells were defined as the origin-conferring component under the substantial transformation test-began sourcing the solar cells from other countries. In this way, the industry was using the substantial transformation test as a means of circumventing the duties imposed by the orders. Thus, it was reasonable for Commerce to depart from the substantial transformation test in view of these evasion concerns.
Appellants contend that evasion concerns are irrelevant to determining from where the imports originate. But Commerce did not use evasion concerns to determine country of origin. It determined the country of origin based on the country of assembly, and it cited evasion concerns to justify departing from its previous practice of using the substantial transformation test. As noted above, using the place of assembly in this case is a reasonable means of determining country of origin, and evasion concerns constitute a reasoned explanation for departing from Commerce's previous practice. Therefore, appellants' argument fails.
*920
Finally, Commerce also explained its reasons for disregarding its previous factual findings regarding the relative insignificance of panel assembly in determining country of origin.
Fox
, 566 U.S. at 515-16,
For these reasons, we conclude that Commerce provided a reasoned explanation for departing from the substantial transformation and using the country of assembly test.
B. Substantial Evidence Supports Commerce's Determination
Appellants contend that substantial evidence does not support Commerce's determination that the Chinese solar industry was shifting its supply chains to evade duties because Commerce relied on mere allegations from SolarWorld's petitions. But SolarWorld submitted documents in support of its allegations, including public admissions of shifting supply chains and data of increased importation of non-Chinese solar cells into China. Commerce weighed the available evidence and ultimately agreed with SolarWorld that appellants were attempting to evade the duties imposed by the Solar I China orders.
Specifically, Commerce found that five large Chinese solar panel producers and one U.S. importer publicly admitted "the ease with which they were able to modify their production chain to avoid paying" the duties imposed by the
Solar I China
orders.
Solar II China Remand Results
, slip op. at 49 n.131 (citing SolarWorld's Petition,
Solar II China
at 4 (J.A. 41) ("
Recharge
reported that 'in the future, [Trina Solar Limited] will outsource cells from Canada or Taiwan to work around the tariffs.' "),
Commerce also found that these public admissions reflected reality-that the Chinese solar industry was in fact sourcing solar cells from other countries at an increased frequency following the
Solar I China
orders.
Solar II China Remand Results
, slip op. at 49 n.131 (citing SolarWorld's Petition,
Solar II China
at 21 (J.A. 53.1) (describing chart depicting extremely high levels of shipments of solar cells from Taiwan to China in the third quarter of 2013), 37 (J.A. 53.3) (describing reports that Chinese producers switched
*921
from using Chinese cells to using cells from other countries),
Finally, the record indicates that appellants never denied shifting their supply chains to evade duties.
3
SunPower
,
C. Appellants' Remaining Arguments Are Unpersuasive
Appellants also contend that there are other means of preventing circumvention. They contend that "a petitioner like SolarWorld has the ability to file additional petitions related to unfairly-priced and unfairly-subsidized solar products that are produced in other countries." Appellants Br. at 43. But, as Commerce found:
[T]he length of time that it would take to file a petition, for the Department to initiate and conduct an investigation, for the [Commission] to conduct its own investigation and reach a final determination, eventual publication of an antidumping and/or countervailing duty order if both [Commerce]'s and the [Commission]'s final determinations were affirmative, and thereafter, for [Commerce], a year later, to conduct an administrative review, trade flows likely could have already shifted to another country.
Solar II China Remand Results , slip op. at 48. We agree with Commerce. It is unnecessary for Commerce to engage in a game of whack-a-mole when it may reasonably define the class or kind of merchandise in a single set of orders, and within *922 the context of a single set of investigations, to include all imports causing injury.
Appellants contend that another means of preventing circumvention is the anti-circumvention statute. 19 U.S.C. § 1677j. But, as the Court of International Trade found, this statute applies "to circumstances where an order with a defined scope is already in effect."
SunPower
,
III. CONCLUSION
For the reasons stated above, we find that Commerce provided a reasoned explanation for its departure from the substantial transformation test and that its findings are supported by substantial evidence. We therefore affirm.
AFFIRMED
COSTS
No costs.
Although appellants argued to the Court of International Trade that "class or kind of merchandise" is not proceeding-specific, they do not pursue that argument on appeal. See Oral Arg. at 3:33, http://oralarguments.cafc.uscourts.gov/default.aspx?fl=2017-2577.mp3. Rather, they contend that, regardless of whether the term is proceeding-specific, Commerce must provide a reasoned explanation when it departs from the practice employed in earlier proceedings when defining the scope of its current orders. Id .
"Plaintiffs" encompasses appellants as well as other parties who were involved in the proceedings below but are not involved in this appeal.
During oral argument, appellants claimed that the record evidence was disputed below.
See
Oral Arg. at 39:05. In support of this claim, appellants directed the court to pages from their reply brief in support of their motion for judgment on the agency record.
We have considered appellants' other remaining arguments and find them unpersuasive.
Reference
- Full Case Name
- CANADIAN SOLAR, INC., Changzhou Trina Solar Energy Co., Ltd., Hefei JA Solar Technology Co., Ltd., Shanghai JA Solar Technology Co., Ltd., Yingli Green Energy Holding Company Limited, Yingli Green Energy Americas, Inc., Plaintiffs-Appellants Shanghai BYD Co., Ltd., BYD (Shangluo) Industrial Co., Ltd., China Sunergy (Nanjing) Co., Ltd., Chint Solar (Zhejiang) Co., Ltd., ET Solar Industry Ltd., Jinko Solar Co., Ltd., LDK Solar Hi-Tech (Nanchang) Co., Ltd., Perlight Solar Co., Ltd., Renesola Jiangsu Ltd., Shenzhen Sacred Industry Co., Ltd., Shenzhen Sungold Solar Co., Ltd., SUMEC Hardware & Tools Co., Ltd., Sunny Apex Development Ltd., Wuhan FYY Technology Co., Ltd., Wuxi Suntech Power Co., Ltd., Zhongli Talesunsolar Co., Ltd., Znshine PV-Tech Co., Ltd., SunPower Corporation, Plaintiffs v. UNITED STATES, SolarWorld Americas, Inc., Defendants-Appellees
- Cited By
- 14 cases
- Status
- Published