Interest on Unpaid AD Duties Should Be Deducted From CEP, AD Petitioners Tell Trade Court
The Commerce Department erred by failing to reduce respondent Koehler Paper's constructed export price by interest accrued on unpaid antidumping duties, plaintiffs Domtar Corp. and Appvion argued in a Sept. 15 motion for judgment at the Court of International Trade. Commerce failed to explain why this unpaid interest should be added to the cost of production rather than taken from the CEP given that the agency has the authority to make needed adjustments to cost items that are treated as a CEP deduction and not just to cost items that are components of COP, the brief said (Matra Americas v. United States, CIT Consol. #21-00632).
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The case concerns Commerce's final determination in the antidumping duty investigation of thermal paper from Germany. The petitioners, Domtar and Appvion, launched their suit to contest Commerce's alleged failure to reduce CEP by the interest on unpaid antidumping duties, the agency's acceptance of various home market post-sale price adjustments, Commerce's failure to classify certain products within the same control number and the agency's determination that Koehler's reporting of static sensitivity was complete.
Before the contested AD investigation, Kohler served as a respondent in many different AD proceedings on the same product. In two previous administrative reviews, Koehler concealed certain transshipped sales to try and lower its rate, leading to the use of total adverse facts available. The respondent was hit with around $200 million in antidumping duties, though the company has refused to pay them along with interest on the duties, the petitioners said. In its normal accounting system, Koehler failed to recognize the assessed interest, leading to Commerce finding that an adjustment was needed, increasing Koelher's financial expense ratio.
Domtar and Appvion, though, argue that while the adjustment was appropriate, it "should have been made as a reduction to CEP rather than as an increase to COP, because the expenses were directly associated with commercial activities occurring in the United States." The petitioners said that the unpaid interest relates specifically to Koehler's U.S. thermal paper sales and to activities in the U.S., meaning the unpaid interest should have been treated as a U.S. indirect sellinge expense.
The petitioners stake their argument on 19 U.S.C. 1677b(f)(1)(A), which has the explicit authority for adjusting a respondent's reported COP when its normal cost accounting system does not reasonably reflect the cost associated with the production and sale of the merchandise. Domtar and Appvion said that this same concept applies to other costs deducted from CEP rather than treated as parts of COP.
"Presumably, the government will, in its response brief, offer explanations for the adjustment selected by Commerce," the brief said. "This court, however, 'may not accept counsel’s post hoc rationalizations for agency action … it is well-established that an agency’s action must be upheld, if at all, on the basis articulated by the agency itself.' ... This case, therefore, should be remanded for Commerce to consider in the first instance whether it is appropriate to treat the unpaid interest amount as an indirect selling expense that should be deducted from CEP."