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Exporter Challenges Deduction of Section 301 Duties From Price, Energy Valuation, at CIT

The Commerce Department illegally deducted Section 301 China tariff duties from exporter Neimenggu Fufeng Biotechnologies Co.'s U.S. price in the 2020-21 administrative review of the antidumping duty order on xanthan gum from China, Fufeng said in its Oct. 30 motion for judgment at the Court of International Trade. In addition, Fufeng argued that Commerce unlawfully valued the company's energy factors of productions and coal classifications, which Fufeng said skewed the dumping margins (Neimenggu Fufeng Biotechnologies Co. v. U.S., CIT # 23-00068).

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Fufeng originally challenged Commerce’s preliminary deduction of Section 301 duties from U.S. price in its case brief and said that the final results "improperly continued the deduction ... inconsistent with its own legal framework."

Wheatland v. U.S. created a "bright line distinction between normal U.S. import duties and special duties." Since Wheatland, special duties aren't to be deducted from the U.S. price, Fufeng. Commerce's attempts to differentiate Section 301 duties from “special duties" is unpersuasive, said Fufeng argued. Section 301 duties, "like all other special duties," are imposed to remedy the harm from unfairly traded goods, Fufeng said, noting that the statute gave the Office of the U.S. Trade Representative the objective of "eliminating harmful Chinese government practices." Commerce’s attempts to distinguish Section 301 duties from special remedial duties failed because they are all directed at protecting the bottom line of domestic producers, Fufeng said.

Commerce also unlawfully valued Fufeng's energy factors of production in its normal value calculation, Fufeng said. Commerce’s "established practice" has been to not separately value energy factors, in order to avoid double-counting energy costs, Fufeng argued. CIT has "not only affirmed Commerce’s practice," but also has required that Commerce exclude valuation of all forms of production energy factors that are potentially included in surrogate ratios, Fufeng said.

Fufeng said that Commerce also incorrectly classified its coal factors. The company said that its energy coal had a heat value of less than 5800 kcal/kg, meaning it was covered by subheading 2701.19 as "other" coal instead of Commerce's designation of 2701.12 as "bituminous coal." Fufeng said that CIT has variously upheld the finding that the applicability of subheading 2701.12 to bituminous coal is limited to coal with “a calorific value limit ... equal to or greater than 5,833 kcal/kg.”

Fufeng also alleged that Commerce unlawfully applied the "Cohen's d test" methodology. Even though Commerce ended up using the average-to-average price comparison because there's no "meaningful difference" between the margins, Fufeng still argued that the differential pricing methodology as applied to Fufeng’s U.S. sales was unlawful.