Ecuadorian Shrimp Exporters Challenge Specificity Findings, Uses of AFA in CVD Investigation
Two Ecuadorian exporters challenged the Commerce Department's countervailing duty investigation on frozen warmwater shrimp from Ecuador, arguing, among other things, that the agency erred in finding that certain tax benefits were de facto specific and in applying adverse facts available for specific subsidy programs. Respondent Industrial Pesquera Santa Priscila challenges its final 3.57% CVD rate, while respondent Sociedad Nacional De Galapagos (SONGA) challenges its 4.41% CVD rate (Industrial Pesquera Santa Priscila v. United States, CIT # 25-00025).
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In all, Commerce investigated 25 subsidy programs. Santa Priscila and SONGA challenge the agency's findings regarding three of them: the income tax rate reduction from Ecuador's "Investment Contract program," the Annual Motor Vehicle Tax Reduction and the Currency Outflow Tax exemptions on imported raw materials.
Commerce preliminarily found that tax benefits, including the income tax rate reduction and Currency Outflow Tax exemptions, available "incident to the Investment Contract program," were de facto specific since the contract program gave benefits to a "limited number of users." The agency compared the number of Ecuadorian firms that entered into investment contracts in 2019, 2020, 2021 and 2022 with the "total number of companies that were registered in Ecuador in each of those years."
The respondents argued that this specificity finding wasn't supported by law or backed by substantial evidence.
Santa Priscila and SONGA additionally challenged Commerce's finding that it couldn't conduct a "disproportionality analysis" to find whether benefits under the Annual Motor Vehicle Tax Reduction program were de facto specific, since it said the respondents didn't report their subsidy usage for the program. The agency used adverse facts available as a result.
In response, the respondents said "Commerce unlawfully ignored information reported by the" Ecuadorian government that "allowed it to determine whether Santa Priscila or SONGA received disproportionate benefits" under the program.
Commerce also used AFA on SONGA; Produmar, Santa Priscila's cross-owned affiliated shrimp farmer; and Naturisa, SONGA's cross-owned affiliated shrimp farmer, to calculate benefits from the Annual Motor Vehicle Tax Reduction program. The agency said the parties failed to cooperate to the best of their ability by not "providing timely usage information" under the program. The parties attempted to provide the information, claiming that their attempted submissions were "minor corrections." The agency said the information was not "minor."
The respondents also challenged the AFA rate Commerce chose to use for the Annual Motor Vehicle Tax Reduction program. The agency said it erred in using the "net subsidy rate calculated for Santa Priscila to calculate the AFA rate" for the respondent and Produmar, also finding that it shouldn't have used the benefits calculated for Santa Priscila to set the AFA rate for SONGA and its affiliates.
Santa Priscila said in the complaint that it timely reported all tax benefits it received under the program "in the form and manner requested," making Commerce's rejection of the information unlawful. As a result, the agency erred in using the "highest calculated rate for a similar program" to set the AFA rate as opposed to using "the highest calculated rate for the AMVTR program in the instant investigation."
The respondents similarly said Commerce unlawfully used the wrong AFA rate on SONGA in regard to the Currency Outflow Tax exemptions. The agency used the 1.38% rate assigned to Santa Priscila for "benefits received under an income tax exemption on income generated by new productive investments." The complaint said the use of this "unduly punitive and dissimilar calculated rate for the income tax exemption on new productive investments received by Santa Priscila" as AFA to calculate SONGA's benefit for the Currency Outflow Tax exemptions "was not supported by substantial evidence and was not in accordance with law."
The agency also failed to inform SONGA that data it submitted regarding the Currency Outflow Tax exemptions was deficient, the complaint said.