Commerce Forced to Evolve on Export Buyer's Credit Program Despite Additional Burden, Lawyers Say

The Commerce Department has had to change its practices in countervailing duty cases when dealing with the China Export Buyer's Credit Program (EBCP), despite the increased burden on the agency, due to a series of unfavorable court decisions, lawyers said during a panel discussion at Georgetown Law's annual International Trade Update June 13.

The EBCP is a unique program because the benefits go to customers rather than the investigated respondents, Matthew Nicely of Akin Gump said. Since foreign governments are necessary parties to CVD cases and get their own questionnaires, non-cooperation by China has caused a lot of issues for Commerce on the EBCP program, Nicely said.

Also complicating matters is that the EBCP is massive, Elizabeth Drake of Schagrin Associates said. The export-import bank of China has hundreds of billions of dollars more than the EXIM banks of the U.S., Europe and Japan combined, so there is a potential for an awful lot of monetary benefit.

Commerce initially decided that it would use adverse facts available when dealing with the program because the Chinese government has not explained the program and refuses to discuss it, Nicely said. "Commerce's opinion was that since China won't talk about the program, they're going to go full AFA on it," Nicely said. That has started to get some attention in the courts, because respondents and their customers were able to show that they didn't use the program, he said.

A big question is whether the burden should be on Commerce to try to investigate whether or not the customers benefited and what burden is on the respondents to demonstrate that their customers did not benefit, Drake said. Commerce has had to make up a new method to determine whether the subsidies are used by customers, she said. "The right reaction is that the government won't comply unless the respondent can demonstrate that the benefit wasn't used."

Through back-and-forth at the Court of International Trade, Commerce developed a practice of confirming non-use through certifications, Drake said.

There was a series of CIT decisions that found that Commerce couldn't justify AFA against cooperating respondents, "particularly when those respondents had issued what has been termed non-use certifications," said Sosun Bae, a DOJ trial attorney. In response to these CIT decisions, Commerce has "evolved its practice," Bae said. It can still use AFA with respect to the Chinese government's refusal to cooperate, but when a respondent submits affirmative non-use by its customers, Commerce will then issue supplemental questionnaires seeking financial information from customers and trying to verify non-use. In at least one case, the court has found that Commerce is not required to reach out and get non-use certificates before issuing supplemental questionnaires.

As it now stands, the practice is that Commerce does not affirmatively ask for these non-use certifications. But if the respondents provide them from all U.S. customers, the agency will issue the supplemental questionnaires, Bae said. The current situation puts a higher burden on Commerce to conduct these verifications on other parties that are not even respondents, she said.