Commerce Says Fish Exporter Didn't Make Bona Fide Sale, Flips New Shipper Review Finding

Commerce came to its conclusion after remand from the Court of International Trade to address the agency's finding that AD cash deposits shouldn't be included in "determining the profitability of the resale of Co May's merchandise" and the relevance of evidence suggesting affiliation between Co May's customer -- referred to as "Customer A" -- and its downstream customers "as part of its profitability analysis." The agency relied heavily on the role of cash deposits paid in the review after reversing course on remand in deciding to consider them at all.

Co May initially requested the new shipper review under the AD order on frozen fish fillets from Vietnam for a five-month period between 2022-23, and Commerce granted the company a zero percent dumping margin, finding that the exporter made one bona fide sale to the U.S. The petitioner, the Catfish Farmers of America, challenged this conclusion on multiple grounds, primarily contesting the agency's conclusion that Co May's sale was profitable.

The trade court agreed with the petitioner, ruling that Commerce didn't adequately explain why it should or should not deduct AD cash deposits in evaluating profitability (see 2506090005). The court also said the agency should have considered the affiliation between Customer A and its downstream customers, adding that it's unclear how resale profitability for the importer can be determined reliably where the downstream sales are between an importer and related entities.

On remand, Commerce reversed its position regarding cash deposits, finding that "cash deposits may appropriately be considered in the context of bona fides analysis." The issue inherent in considering cash deposits in AD proceedings themselves, "i.e., ignoring the remedy that has already been provided in determining the necessary remedy to be provided in the future," isn't present here, since the question isn't whether the sale is dumped, the agency said.

Instead, the issue is "whether the sale itself is a legitimate sale which is 'likely to be typical of those the exporter or producer will make after completion of the review,'" or whether the sale was instead "made for the one-time purpose of establishing a favorable cash deposit rate."

Commerce said, in this context, "the existence of a cash deposit of estimated dumping duties is not only a relevant, but also a necessary, consideration when evaluating Customer A’s business decision to source subject merchandise covered by this order." In this review, Co May's U.S. buyer was required to post a "substantial cash deposit in deciding to make a purchase of subject merchandise from Co May." Refund of this deposit isn't guaranteed, so the importer couldn't know with certainty it would get a refund. This risk is a "commercially significant consideration for Customer A which should be considered in determining whether the underlying sale was bona fide," the remand results said.

Regarding the relationship between Customer A and its downstream customer, Commerce said it now agrees with the court that various facts indicate Customer A and its downstream buyers are affiliated. Those facts are that Customer A and all but one of its buyers share the same address, that address is the same address of Customer A's CEO, each downstream buyer had the same CEO and that CEO is listed as an employee of Customer A.

With this backdrop, the agency said "Co May did not meet its burden in demonstrating that the merchandise was resold at a profit due to the manner of its disclosures regarding affiliation."

Considering its changed analyses regarding the cash deposits and affiliation of Customer A with its downstream buyers, Commerce said Co May didn't make a bona fide sale. The agency said the decision "is driven largely, but not exclusively, by considering the significant risk borne by Customer A by paying a [sizable] cash deposit when ordering from Co May."

By purchasing from Co May instead of other suppliers, "Customer A both lost access to the value of the cash deposit and accepted a significant risk of never recovering that cash deposit if Co May does not receive its own rate or receives a high new shipper rate." While customers could make a "commercially reasonable decision to take on significant risks in some circumstances," the decision here wasn't commercially reasonable, "because Customer A did not receive benefits that would justify these risks and time value of money losses," the agency said.

Co May offered no clear answer to the question of why Customer A would take on additional risk and cashflow expenses to buy from Co May, Commerce said.