CAFC Upholds Commerce's Surrogate Value Picks in 2 AD Reviews on Chinese Activated Carbon

In the 2018-19 review, respondent Carbon Activated Tianjin challenged Commerce's use of Malaysian import data under Harmonized Tariff Schedule subheading 4402.90.1000, which covers coconut-shell charcoal, as the surrogate value for coal-based carbonized material, an input of activated carbon. Carbon Activated said Malaysian import data for subheading 4402.90, which covers "wood charcoal (including shell or nut charcoal), excluding that of bamboo," is superior.

The company first challenged the agency's contention that there's a long history in reviews of this AD order of using coconut-shell carbonized material, unlike wood carbonized material, which has never been used to make the subject merchandise. The respondent said this is incorrect, since in each past review, the respondents reported using coal-based carbonized materials to make their merchandise. The exporter added that there's a difference in the activation process used to make wood-based charcoal and coal-based carbonized material.

Schall, writing for the court, rejected Carbon Activated's claims, first holding that Commerce has "broad discretion to determine what constitutes the best available information" and can "properly resort" to its methodology from past reviews.

The court also found "no error" in the agency's reliance on evidence related to the activation process used to make activated carbon, noting that there's "no direct evidence that coal-based carbonized materials, coconut shell charcoal, and wood-based charcoal share similar physical or chemical properties." Schall said that since the physical properties depend on the activation process, the agency "reasonably relied on the activation process for steam-activated carbon" in making its surrogate value picks, especially since Carbon Activated reported that it only made steam-activated carbon.

In the 2019-20 review, Carbon Activated challenged Commerce's selection of Malaysia as the primary surrogate country and the surrogate values for carbonized material, coal tar, hydrochloric acid, steam and ocean freight. The court sided with the Court of International Trade's rulings on each point, which upheld all of the agency's picks.

The respondent said Commerce erred in picking Malaysia, since it solely relied on the "net exporter criterion" in the agency's policy bulletin. Schall said the court doesn't agree, finding that the court previously "recognized Commerce’s reliance on the Policy Bulletin" and that this reliance was supported by substantial evidence. And while the two Malaysian financial statements were not as detailed as Commerce normally prefers, the court said the standard is only "whether a reasonable mind could conclude that Commerce chose the best available information," which it did here.

Schall then sustained the use of data from the preceding review to value carbonized material, finding the contemporaneity of data to not be a "dispositive factor" in picking the best available information. As with the 2018-19 review, the court also upheld Commerce's selection of data on coconut shell charcoal over wood charcoal.

Regarding the surrogate value picks for coal tar, the court said CIT properly found that Carbon Activated failed to support its claim that Malaysian values under HTS subheading 2706.00 are higher than those under 2708.10 for "pitch," a downstream product that should thus "reflect higher values than coal tar." Schall similarly sustained the trade court's finding that the respondent failed to support its contention that the Malaysia data is "unreliable" due to disparities between the domestic market and Malaysian import prices for both Malaysia and Spain.

The respondent then said Commerce should use Brazilian import data for aqueous hydrochloric acid instead of Malaysian data that covers both aqueous and gaseous hydrochloric acid. Schall said the trade court got it right when it found that the respondent failed to show that all its hydrochloric acid inputs are aqueous in "nature." The appellate court also said Carbon Activated failed to show any error in CIT's ruling that Commerce can value steam based on an energy source that's not in the "same phase (solid, liquid, gaseous) as the steam the energy creates.”

Schall also rejected the respondent's challenge to Commerce's selection of Maersk data in valuing ocean freight. The court said none of the respondent's arguments convinced the appellate court that CIT erred in sustaining the Maersk data selection. The trade court said even if the Maersk data represented approximations and not actual tariff rates, as alleged, the respondent failed to show "the Descartes data was the best available information with which to value ocean freight."

(Carbon Activated Tianjin Co. v. United States, Fed. Cir. #s 23-2135, -2413, dated 05/09/25; Judges: Richard Taranto, Alvin Schall and Raymond Chen; Attorneys: Stephanie Hartmann of Wilmer Cutler for plaintiffs-appellants Carbon Activated Tianjin and Carbon Activated Corp.; Joshua Kurland for defendant-appellee U.S. government; and Melissa Brewer of Kelley Drye for defendants-appellees Calgon Carbon Corp. and Cabot Norit Americas Inc.)