CIT Defines Term 'Partners' in AD Affiliation Statute Using Loper Bright Analysis

Conducting an analysis of the statute under Loper Bright Enterprises v. Raimondo, Judge Claire Kelly rejected Commerce's definition of the term and remanded the agency's finding that respondent Louis Dreyfus Co. Sucos S.A. and an unnamed supplier, dubbed "Supplier A," are not affiliated for the purposes of the AD investigation on lemon juice from Argentina. The judge said Commerce must apply this new definition in finding whether Louis Dreyfus Co. and the supplier "formed a cooperative business endeavor in which they shared risk and reward."

However, Kelly sustained Commerce's calculation of Louis Dreyfus Co.'s cost of production and general and administrative expense rate. The judge also said petitioner Ventura Coastal failed to timely allege that Commerce committed ministerial errors in its programming instructions, though Kelly said if the agency revises its calculations as a result of revisiting the affiliation analysis, Ventura can raise its ministerial errors allegations again.

In the investigation, Commerce said Louis Dreyfus wasn't affiliated with Supplier A, leading to a de minimis mark for the exporter. Ventura challenged this finding at CIT, first setting up the question of whether the petitioner exhausted its administrative remedies. As a result, Kelly said Ventura raised the issue of whether the supplier was "reliant" on the exporter before Commerce, but that it failed to raise the issue of Commerce's alleged "failure to assess the temporal aspect of the parties' relationship in its affiliation analysis."

The court said the fact that Ventura cited a case in its administrative brief that discussed the temporal nature of parties' relationship doesn't mean the petitioner exhausted this argument at Commerce. Kelly added this question is not one of law, which would excuse administrative exhaustion, and that the court won't fault the agency for failing to explicitly address this argument. "Ventura cannot now complain that Commerce failed to explicitly discuss an argument it failed to raise before the agency," the brief said.

Kelly then turned to the merits of Ventura's challenge to the affiliation analysis, first noting that Commerce identified the "correct legal standard" in saying the issue is whether the buyer or seller has "become reliant on the other."

Where the judge said Commerce got it wrong relates to its failure to consider whether Louis Dreyfus Co. "has the ability to control Supplier A, and, consequently, whether Supplier A is reliant upon LDC." Commerce failed to address Ventura's evidence showing a mutual reliance, since a certain percentage of Louis Dreyfus Co.'s total lemon purchases were procured or grown by the supplier, Kelly said. While Commerce noted contractual terms between the parties indicate "no obligation toward each other beyond those spelled out" by the contract's terms, the agency's finding that the parties "have no obligation to each other beyond the contract is conclusory," the court said.

Kelly then dipped into the realm of statutory construction, assessing the parties' interpretations of the term "partners" in the statute (see 2409030050). Arguments on this point arose after the Supreme Court's Loper Bright decision, which compels judicial review of agencies' interpretations of ambiguous statutes. The judge explained that she would look to dictionary definitions and the use of the term in context to determine its proper meaning.

The judge first said the statute has "no indication that Congress expressly delegated to Commerce the authority to give meaning to the word ‘partners.’" Kelly also rejected the government's claim that Commerce's authority to issue regulations to implement the statute is a delegation of authority to "give meaning to statutory terms." This claim "would have the power to give meaning to every statutory term rendering Loper Bright meaningless," the judge said.

The court then rejected Commerce's proposed definition of the term, ultimately finding that the term "partners" in the affiliation statute requires "not only the sharing of risk and reward but also a cooperative endeavor, e.g., an association, joint venture, or unincorporated organization.” Kelly said this "makes sense in the context of the statute," since Congress "sought to identify affiliates in cases where a party relationship might have an impact on price.”

Commerce's definition, which encompasses those who "jointly own anything" or "engage in joint selling activities," is "helpful but inadequate," the decision said. The affiliation statute "targets relationships which might affect price," and while joint selling or ownership are two things that may affect price, they are "not the only arrangements that do so," the judge said. Thus, the court's read of the word "requires Commerce to analyze not only whether entities are involved in joint selling or joint ownership but also whether they more generally form a cooperative endeavor in which they share risk and reward."

Ventura also challenged Commerce's use of Louis Dreyfus Co.'s financial year 2021 financial statements in its cost of production calculations as unreasonable, noting that Commerce used data it found "unreliable for other purposes." The agency said it used costs it took from "source documents." Kelly held that while Commerce's explanation could be "clearer," it's "reasonably discernible that Commerce refers to source documents to mean those reflecting monthly purchases occurring in the [period of investigation], which includes the year 2021." That the source documents would also be documents for the 2021 fiscal year doesn't mean that the agency used the 2021 statements to get prices of lemons from 2021, the court said.

The petitioner lastly contested Commerce's exclusion of costs of certain Louis Dreyfus Co. affiliates when calculating the company's general and administrative expense rate. The court said Commerce's decision not to adjust the expenses for calculating constructed export price "is reasonable and consistent with past practice." The court said it's "discernible that Commerce’s review of the financials it requested, and the corporate structure, led it to believe that it did not need to review further financial documents from the ultimate parent company or holding companies.”

Daniel Pickard, counsel for Ventura, said in an email that the opinion is a "good decision for the domestic lemon juice industry. The evidence in the case demonstrated that all the Brazilian companies were selling at dumped prices. We are confident that on remand the Department will reconsider the affiliation issue, and we believe this will result in an affirmative determination of dumping."

(Ventura Coastal v. United States, Slip Op. 24-125, CIT # 23-00009, dated 11/07/24; Judge: Claire Kelly; Attorneys: Daniel Pickard of Buchanan Ingersoll for plaintiff Ventura Coastal; Anne Delmare for defendant U.S. government; Gregory Spak for defendant-intervenor Louis Dreyfus Co. Sucos S.A.)