                                   Slip Op. 20-54

          UNITED STATES COURT OF INTERNATIONAL TRADE



JINDAL POLY FILMS LIMITED OF
INDIA,

                    Plaintiff,

v.

UNITED STATES,                                  Before: Claire R. Kelly, Judge

                    Defendant,                  Court No. 19-00050
and

DUPONT TEIJIN FILMS ET AL.,

                    Defendant-
                    Intervenors.


                            OPINION AND ORDER

[Sustaining Commerce’s final determination in its 2016 administrative review of the
countervailing duty order on polyethylene terephthalate film, sheet, and strip from
India.]

                                                             Dated: April 22, 2020

Lizbeth R. Levinson, Ronald M. Wisla, and Brittney R. Powell, Fox Rothschild LLP,
of Washington, D.C., for plaintiff Jindal Poly Films Limited of India.

Joseph H. Hunt, Assistant Attorney General, Civil Division, Commercial Litigation
Branch, U.S. Department of Justice, of Washington, D.C., for defendant. With him
on the brief were Jeanne E. Davidson, Director, Patricia M. McCarthy, Assistant
Director, and Sonia M. Orfield, Trial Attorney. Of counsel on the brief was Michele
D. Lynch, Assistant Chief Counsel, Office of the Chief Counsel for Enforcement and
Compliance, U.S. Department of Commerce.
Court No. 19-00050                                                            Page 2

Patrick J. McLain, Sarah S. Sprinkle, and Stephanie E. Hartmann, Wilmer, Cutler,
Pickering, Hale and Dorr, LLP, of Washington, D.C., for defendant-intervenors
DuPont Teijin Films, Mitsubishi Polyester Film, Inc. and SKC, Inc.

      Kelly, Judge: This action is before the court on motion for judgment on the

agency record. See Pl.’s 56.2 Mot. J. Agency Rec., Oct. 1, 2019, ECF No. 38. Plaintiff

Jindal Poly Films Limited of India (“Jindal”), a foreign producer and exporter of

polyethylene terephthalate (“PET”) film, sheet, and strip, challenge various aspects

of the U.S. Department of Commerce’s (“Department” or “Commerce”) final

determination in its administrative review of the countervailing duty (“CVD”) order

on PET film, covering the period of review January 1, 2016 to December 31, 2016

(“POR”). See [PET] Film, Sheet, and Strip from India, 84 Fed. Reg. 10,789 (Dep’t

Commerce Mar. 22, 2019) (final results of [CVD] admin. review; 2016) (“Final

Results”), and accompanying Issues and Decision Memo. for the [Final Results], C-

533-825, (Mar. 19, 2019), ECF No. 26-5.

      Jindal challenges four aspects of Commerce’s determination as unsupported

by substantial evidence and not in accordance with law. See Pl.’s Memo. of Points

and Authorities Supp. Pl.’s 56.2 Mot. J. Agency Rec. at 2, Oct. 1, 2019, ECF No. 38-2

(“Pl.’s Br.”). First, Jindal contends that Commerce erroneously included benefits

received on both subject and non-subject merchandise in its calculation of

countervailable benefits under the Government of India’s (“GOI”) Merchandise

Exports from India Scheme (“MEIS”). Id. at 2, 6–8. Second, Jindal argues that

Commerce failed to determine whether the State Government of Maharashtra’s
Court No. 19-00050                                                            Page 3

(“SGOM”) Package Scheme of Incentives (“PSI”) constitutes a subsidy to a

disadvantaged region. Id. at 2, 8–13. Third, Jindal alleges that Commerce should

not have determined that certain capital investment deductions, under subsection

32AC(1A) of Section 32 Capital Investment Deductions of India’s Income Tax Act of

1961 (“Subsection 32AC program”), were specific based on adverse facts available,

when Jindal had provided sufficient information during the review to demonstrate

that the deduction is not specific. Id. at 2, 13–17. Fourth, Jindal avers that because

it had purchased goods from suppliers exempt from the requirement of collecting

taxes under state laws (“state tax incentive programs”), Commerce erred in

determining that these programs provided a benefit to Jindal. Id. at 2, 17–18. For

the reasons set forth below, the court sustains Commerce’s Final Results in its

entirety.

                                  BACKGROUND

      On September 13, 2017, Commerce initiated an administrative review of the

CVD order on PET film from India. See Initiation of Antidumping and [CVD] Admin.

Reviews, 82 Fed. Reg. 42,974, 42,982 (Dep’t Commerce Sept. 13, 2017). Subsequently,

on August 10, 2018, Commerce issued the preliminary results of its administrative

review. See [PET] Film, Sheet and Strip from India, 83 Fed. Reg. 39,677 (Dep’t

Commerce Aug. 10, 2018) (prelim. results and partial rescission of [CVD] admin.
Court No. 19-00050                                                             Page 4

review) (“Prelim. Results”), and accompanying Decision Memo. for the [Prelim.

Results], PD 93, bar code 3739891-02 (Aug. 3, 2018) (“Prelim. Decision Memo.”).1

      Relevant here, in the preliminary results, Commerce determined that three

programs of the GOI—the MEIS, PSI, and state sales tax programs—provided

countervailable subsidies. Prelim. Decision Memo. at 20, 24–27. With respect to the

MEIS program, in which the GOI issues a duty scrip to exporters to be applied to the

payment of future customs duties or transferred to another company, Commerce

calculated Jindal’s rate by dividing benefits received by total export sales during the

POR. Id. at 6, 20. Commerce also preliminarily countervailed the PSI program that

provides incentives to encourage economic development within the State of

Maharashtra, id. at 24, as well as state tax incentive programs, which allow selected

industries in certain regions to sell goods without charging or collecting sales taxes,

id. at 26–27. However, Commerce required further information to determine whether

the Subsection 32AC program was countervailable. Id. at 28.

      On February 25, 2019, Commerce issued a post-preliminary analysis

memorandum, where it found that the GOI had withheld requested information

concerning, inter alia, the Subsection 32AC program and, as a result, applied adverse




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1 On June 26, 2019, Defendant filed indices to the public and confidential

administrative records underlying Commerce’s final determination, on the docket, at
ECF No. 26-2–3. Citations to administrative record documents in this opinion are to
the numbers Commerce assigned to such documents in the indices.
Court No. 19-00050                                                                Page 5

facts available (“AFA”)2 to determine de facto specificity. See Post-Prelim. Analysis

Memo. at 3–6, 9–10, PD 136, bar code 3797273-01 (Feb. 25, 2019).

                 JURISDICTION AND STANDARD OF REVIEW

      The court exercises jurisdiction pursuant to section 516A of the Tariff Act of

1930, 19 U.S.C. § 1516a (2012),3 and 28 U.S.C. § 1581(c) (2012), which grant the Court

authority to review final determinations in a CVD administrative review. “The court

shall hold unlawful any determination, finding, or conclusion found . . . to be

unsupported by substantial evidence on the record, or otherwise not in accordance

with law.” 19 U.S.C. § 1516a(b)(1)(B)(i).




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2  Parties and Commerce sometimes use the shorthand “adverse facts available” or
“AFA” to refer to Commerce’s reliance on facts otherwise available with an adverse
inference to reach a final determination. However, AFA encompasses a two-part
inquiry pursuant to which Commerce must first identify why it needs to rely on facts
otherwise available, and second, explain how a party failed to cooperate to the best of
its ability as to warrant the use of an adverse inference when “selecting among the
facts otherwise available.” See 19 U.S.C. § 1677e(a)–(b). The phrase “total adverse
inferences” or “total AFA” encompasses a series of steps that Commerce takes to
reach the conclusion that all of a party’s reported information is unreliable or
unusable and that as a result of a party’s failure to cooperate to the best of its ability,
it must use an adverse inference in selecting among the facts otherwise available.
3 Further citations to the Tariff Act of 1930, as amended, are to the relevant
provisions of Title 19 of the U.S. Code, 2012 edition. Citations to 19 U.S.C. § 1677e,
however, are to the unofficial U.S. Code Annotated 2018 edition, which reflects the
amendments made to 19 U.S.C. § 1677e by the Trade Preferences Extension Act of
2015 (“TPEA”). See Trade Preferences Extension Act of 2015, Pub. L. No. 114-27, 129
Stat. 362 (2015).
Court No. 19-00050                                                               Page 6

                                    DISCUSSION

I.   Commerce’s Calculation of Benefit Under the MEIS Program

      Jindal alleges that Commerce erroneously calculated benefit from the MEIS

program based on benefits received on sales of both subject and non-subject

merchandise. Pl.’s Br. at 6–8; see also Pl.’s Reply Br. at 6–7, Jan. 17, 2020, ECF No.

45 (“Pl.’s Reply Br.”). Instead, according to Jindal, Commerce should have calculated

benefits received only in connection with subject merchandise. Pl.’s Br. at 7–8.

Defendant and Defendant-Intervenors counter that Commerce’s reasonably

calculated benefit, because benefits under the MEIS program were not tied to subject

merchandise. Def.’s Br. at 7–9; Def.-Intervenors’ Br. at 5–6. For the reasons that

follow, Commerce’s reasonably calculated benefit under the MEIS program.

      Generally, Commerce’s subsidy attribution depends upon the type of subsidy

and whether it is tied to a particular market or product. 19 C.F.R. § 351.525 (2018).

However, if a firm produces more than one product, Commerce will attribute the

subsidy only to sales of a particular product if the subsidy is tied to the production or

sale of only that product.    See id. at § 351.525(b)(5).4    Neither the statute nor

Commerce’s regulation defines when a subsidy is tied to the production or sale of a

particular product. See 19 U.S.C. § 1677(5)(E)(iv); 19 C.F.R. §§ 351.525(b)(2), (b)(5).

Commerce, as a matter of practice, determines whether a subsidy is tied by



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4 Likewise, if a subsidy is an export subsidy Commerce will attribute it to only

exports. See id. at § 351.525(b)(5).
Court No. 19-00050                                                           Page 7

evaluating the purpose of the subsidy based on information available at the time of

bestowal; Commerce does not trace how the subsidy is actually used by recipients.

See Final Decision Memo. at 19; see also Large Residential Washers From the

Republic of Korea, 77 Fed. Reg. 75,975 (Dep’t Commerce Dec. 26, 2012) (final

affirmative [CVD] determination), and accompanying Issues and Decision Memo. for

the Final Determination in the [CVD] Investigation of Large Residential Washers

from the Republic of Korea at 41, C-580-869, (Dec. 18, 2012), available at

https://enforcement.trade.gov/frn/summary/korea-south/2012-31078-1.pdf          (last

visited Apr. 14, 2020)).

      Here, Commerce reasonably attributes the amount of benefit from the MEIS

program to all of Jindal’s export sales of subject and non-subject merchandise. Under

the MEIS program, the GOI issues a duty scrip, or credit, to licensed exporters that

can be applied to the payment of future customs duties or transferred to another

company. See Prelim. Decision Memo. at 18. Because the actual scrip amount, i.e.,

the amount of benefit, is not known until export sales are made,5 Commerce considers

the date that the GOI issued the MEIS license to be the date of bestowal. See Prelim.



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5 Under the MEIS program, an eligible exporter files an application, with supporting

documentation and up to 50 shipping bills, to obtain an MEIS license. See Prelim.
Decision Memo. at 19. The GOI issues a duty scrip worth one, three, or five percent
of the lesser of either the FOB value of exports in free foreign exchange or the FOB
value in the shipping bills in free foreign exchange. Id. (citing Jindal Poly
Questionnaire Resp. at 94–97, CD 9, barcode 3660266-01 (Jan. 10, 2018)). After
receiving and registering a scrip, the recipient may freely transfer it to another
company or apply it to payment of future customs duties. Id.
Court No. 19-00050                                                            Page 8

Decision Memo. at 20; Final Decision Memo. at 19; see also Countervailing Duties,

63 Fed. Reg. 65,348, 65,403 (Dep’t Commerce Nov. 25, 1998) (explanation of final

rules). The MEIS license does not restrict the merchandise to which an exporter could

apply the scrip. See Final Decision Memo. at 19. Therefore, at the point of bestowal,

the amount foregone by the GOI was the value of the MEIS license, regardless of the

fact that the license was later used for subject and non-subject merchandise. Id. Even

though Jindal could identify which scrips were used for export sales of subject

merchandise, see Jindal Poly Initial Questionnaire Resp. at Exs. 91–92, CD 48–49,

bar codes 3660266-40–41 (Jan. 10, 2018), and of non-subject merchandise, see Jindal

Poly Second Supp. Questionnaire Resp. at Exs. 115–116, CD 82, bar code 3735042-01

(July 25, 2018), Commerce’s practice is not to post hoc “trace the use of subsidies”

through records. See Countervailing Duties, 63 Fed. Reg. at 65,403; cf. Royal Thai

Gov’t v. United States, 30 CIT 1072, 1085, 441 F. Supp. 2d 1350, 1363–64 (2006).

Therefore, Commerce did not err in determining that the GOI provided a subsidy not

tied to the production or sale of a particular product and reasonably calculated

Jindal’s CVD rate based on benefits received for both subject and non-subject

merchandise.

II.   Commerce’s Application of AFA to Determine De Facto Specificity of
       the Subsection 32AC program

       Jindal argues that Commerce’s application of AFA to find the Subsection 32AC

program de facto specific is unsupported by substantial evidence and contrary to law.

See Pl.’s Br. at 13–17; see also Pl.’s Reply Br. at 4–6. Further, according to Jindal,
Court No. 19-00050                                                               Page 9

Commerce’s reliance on AFA “penalize[s]” Jindal for the GOI’s failure to cooperate.

See Pl.’s Br. at 16; see also Pl.’s Reply Br. at 5–6.      Defendant and Defendant-

Intervenors respond that Commerce appropriately relied on AFA and argue Jindal’s

suggestion that the application of AFA punishes Jindal is misplaced. See Def.’s Br.

at 15–19; Def.-Intervenors’ Br. at 7–10. For the reasons that follow, Commerce’s use

of facts available with an adverse inference is supported by substantial evidence and

in accordance with law.

      Commerce has discretion to use facts otherwise available to make

determinations where, inter alia, “necessary information is not available on the

record” or a party “withholds information that has been requested by [Commerce] . .

. , fails to provide such information by the deadlines for submission of the information

or in the form and manner requested . . . , [or] significantly impedes a proceeding[.]”

19 U.S.C. § 1677e(a). If Commerce additionally “finds that an interested party has

failed to cooperate by not acting to the best of its ability to comply with a request for

information . . . , [Commerce], in reaching the applicable determination . . . , may use

an inference that is adverse to the interests of that party in selecting from among the

facts otherwise available” to fill the factual gaps in the record. Id. at § 1677e(b)(1);

see also Nan Ya Plastics Corp., Ltd. v. United States, 810 F.3d 1333, 1338 (Fed. Cir.

2019). A respondent cooperates to the “best of its ability” when it “has put forth its

maximum effort to provide Commerce with full and complete answers to all inquiries

in an investigation.” Nippon Steel Corp. v. United States, 337 F.3d 1373, 1382 (Fed.
Court No. 19-00050                                                         Page 10

Cir. 2003).   Notwithstanding Commerce’s discretion to employ AFA in certain

situations, Commerce’s AFA determination must be supported by substantial

evidence. See 19 U.S.C. § 1516a(b)(1)(B)(i).

      Commerce reasonably applied facts otherwise available because it found that

necessary information was not on the record for it to determine whether the

Subsection 32AC program was specific within the meaning of 19 U.S.C. § 1677(5A).

In its initial questionnaire, Commerce requested the GOI to coordinate with

respondent companies and      report any other subsidy programs, not specifically

examined, used by these companies. See Letter from [Commerce] to Embassy of India

Pertaining to GOI/Jindal/SRF Questionnaire at II-18, PD 21, bar code 3645037-01

(Nov. 27, 2017).   Although both mandatory respondents Jindal and SRF reported

participating in the Subsection 32AC program, the GOI stated that it “is not aware

of any other schemes availed by the Mandatory Respondents.” Compare SRF Supp.

QR at 14–16, PD 84, bar code 3733852-01 (July 23, 2017); Jindal Poly Second Supp.

QR Resp. at 2–3, CD 82, bar code 3735042-01 (July 25, 2018) (“Jindal SQR”); with

GOI Sec. II QR Resp. at 96, CD 64, bar code 3661496-01 (Jan. 16, 2018). After

indicating that more information was needed with respect to the program, see Prelim.

Decision Memo. at 28, Commerce subsequently issued two supplemental

questionnaires to the GOI.

      However, in response to each, the GOI failed to fully answer Commerce’s

specific inquiries that pertain to whether the program is de facto specific. See GOI
Court No. 19-00050                                                           Page 11

Second Supp. QR at 28–40, CD 97, bar code 3751378-01 (Sept. 5, 2018) (“GOI Second

SQR”); GOI Third SQR at 31–41, CD 102, bar code 3758147-01 (Oct. 1, 2018) (“GOI

Third SQR”). By statute, Commerce discerns de facto specificity from the presence of

one or more factors: (1) whether the actual number of recipients are limited; (2)

whether an enterprise or industry is a predominant user of the subsidy; (3) whether

an enterprise or industry receives a disproportionally large amount of subsidy; and,

(4) whether the authority favored an enterprise or industry in its decision to grant a

subsidy. See 19 U.S.C. § 1677(5A)(D)(iii). Commerce asked the GOI to provide the

total amount of assistance for each mandatory respondent as well as for all

companies, the total number of companies approved for assistance, and the total

number of companies that applied for, but were denied, assistance. See GOI Second

SQR at 36–37; see also GOI Third SQR at 40–41. The GOI replied that “[t]he details

with respect to the mandatory respondents is provided in response to this

questionnaire[,]”6 did not provide any information about third companies, and

otherwise maintained that data on the program was not “maintained in a centralized

format.” GOI Second SQR at 37; GOI Third SQR at 40–41. The GOI’s response did

not equip Commerce with the information necessary to make a de facto specificity




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6  The GOI appears to refer to its response, where it lists the amount of assistance
approved to the two mandatory respondents. See GOI Second SQR at 37; GOI Third
SQR at 34.
Court No. 19-00050                                                                Page 12

finding. Therefore, Commerce reasonably filled in missing information with facts

otherwise available.7

       Further, Commerce’s application of an adverse inference in selecting among

facts otherwise available is reasonable, because the GOI did not act to the “best of its

ability” when it failed to provide requested information. Repeatedly, Commerce

requested that the GOI provide complete responses to its questions pertaining to the

Subsection 32AC program. See, e.g., Letter from Commerce Pertaining to GOI 2nd

Supp. Questionnaire, PD 99, bar code 3746828-01 (Aug. 22, 2018) (“[P]lease describe

. . . assistance in detail, including the amounts, date of receipt, purpose and terms,

and answer all questions in the [listed appendices].”); Letter from Commerce

Pertaining to GOI 3rd Supp. Questionnaire, PD 118, bar code 3754436-01 (Sept. 17,

2018) (“As previously requested, please provide a full narrative response to [questions



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7 Jindal avers that Commerce had the requisite information to make a de facto

specificity determination and points to its accounting of the benefits received under
the Subsection 32AC program. See Pl.’s Br. at 13–15 (citing Jindal SQR at 2–4, Ex.
105). However, that information submitted by Jindal concerns only its own use of the
program. Jindal SQR at 2–4, Ex. 105. To the extent that Jindal describes how the
program works, that information relates primarily to a determination of de jure
specificity, i.e., the availability of the subsidy to potential users. Id. at 2–4; see also
19 U.S.C. § 1677(5A)(D)(i)–(ii) (A subsidy is specific as a matter of law “[w]here the
authority providing the subsidy, or the legislation pursuant to which the authority
operates, expressly limits access to the subsidy to an enterprise or industry.” A
subsidy is not specific as a matter of law if “eligibility is automatic,” “the criteria or
conditions for eligibility are strictly followed,” and “the criteria or conditions are . . .
capable of verification.”) By contrast, a de facto specificity determination concerns
the actual recipients of the subsidy and the amount of support received. See 19 U.S.C.
§ 1677(5A)(D)(iii). Jindal’s own use of the program says nothing about the use of the
program by other recipients.
Court No. 19-00050                                                           Page 13

about the Subsection 32AC program].”).       Commerce also warned that failing to

provide the requested information could result in the application of AFA. Id. Despite

repeated opportunities, the GOI did not notify Commerce, and explain why, it could

not provide information in the form and manner requested.8            See 19 U.S.C.

§ 1677m(c). To avoid the risk of an adverse inference, the GOI must “put forth

maximum effort to investigate and obtain all requested information.” Mukand, Ltd.

v. United States, 767 F.3d 1300, 1306 (Fed. Cir. 2014) (citing Nippon Steel, 337 F.3d

at 1382). Here, as Commerce reasonably concluded, the GOI failed to act to the best

of its ability, warranting the application of an adverse inference.

      Given that the GOI, not Jindal, failed to cooperate, Jindal argues that the

collateral application of AFA is not warranted and is punitive. See Pl.’s Br. at 16;

Pl.’s Reply Br. at 5–6. However, the court cannot say that Commerce’s use of AFA to

calculate Jindal’s CVD rate is unreasonable. It is an unfortunate consequence that a

government’s failure to cooperate impacts a respondent that had cooperated;

therefore, to the extent it is able, Commerce must avoid this collateral effect in

making its determination.9 See Fine Furniture (Shanghai) Ltd. v. United States, 36


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8 Eleven months elapsed from the time Commerce first issued the initial

questionnaire to the GOI to the deadline for Commerce to respond to the third
supplemental questionnaire. See GOI Second SQR; see also GOI Third SQR.
9Jindal’s contention that Commerce’s application of AFA “penalizes” Jindal for the
GOI’s inaction is misplaced. Commerce applies facts otherwise available, with an
adverse inference, to fill in gaps in the record so that it may make a determination

                                                                  (footnote continued)
Court No. 19-00050                                                            Page 14

CIT 1206, 1212 n.10, 865 F. Supp. 2d 1254, 1262, n.10 (2012), aff’d, 748 F.3d 1365

(Fed. Cir. 2014); see, e.g., Guizhou Tyre Co., Ltd. v. United States, 42 CIT __, __, 348

F. Supp. 3d 1261, 1271 (2018) (noting that Commerce could have avoided the

collateral application of AFA by verifying alternate information placed on the record

by respondents, when the government failed to cooperate). Here, however, the record

did not enable Commerce to do so. See Final Decision Memo. at 14, 24–25.

III.   Commerce’s Treatment of the PSI Program as a Countervailable
        Subsidy

        Jindal alleges that Commerce erred in law by failing to consider whether an

exception to countervailability under 19 U.S.C. § 1677(5B)(C) applies to the PSI

program. See Pl.’s Br. at 8–9, 11–13. Jindal further avers that substantial evidence

supports a determination that the PSI program was a nonspecific program that

provided a subsidy in SGOM, an economically disadvantaged region, within the

meaning of subsection (5B)(C).      See id. at 10–11.     Defendant and Defendant-

Intervenors counter that Jindal never raised this argument during the

administrative proceeding, and, therefore, failed to exhaust its administrative

remedies. See Def.’s Br. at 9–12; see Def.-Intervenors’ Br. at 6–7. However, even if

Jindal did not waive this argument, Defendant and Defendant-Intervenors contend



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and encourage, in the future, cooperation of parties and their governments. See F.lli
De Cecco Di Filippo Fara S. Martino S.p.A. v. United States, 216 F.3d 1027, 1032
(Fed. Cir. 2000); see also Fine Furniture, 865 F. Supp 2d at 1373 (noting that the
collateral impact on a respondent may encourage the government to cooperate in
future investigations so as to not harm industry).
Court No. 19-00050                                                              Page 15

that Jindal’s arguments are premised on a misunderstanding of the statute. See

Def.’s Br. at 9, 12–14; Def-Intervenors’ Br. at 7. For the reasons that follow, Jindal

failed to exhaust its administrative remedies by not raising its arguments concerning

section 1677(5B)(C) in the underlying proceeding.

      Parties are required to exhaust administrative remedies before the agency by

raising all issues in their initial case briefs before Commerce. Dorbest Ltd. v. United

States, 604 F.3d 1363, 1375 (Fed. Cir. 2010) (citing to 19 C.F.R. § 351.309(c)(2), (d)(2);

Mittal Steel Point Lisas Ltd. v. United States, 548 F.3d 1375, 1383 (Fed. Cir. 2008));

ABB, Inc. v. United States, 920 F.3d 811, 818 (Fed. Cir. 2019). However, the court

has discretion not to require exhaustion of administrative remedies where a pure

legal question arises. 28 U.S.C. § 2637(d); see also Agro Dutch Indus. Ltd. v. United

States, 508 F.3d 1024, 1029 (Fed. Cir. 2007).10 A pure legal question does not require

additional factual development or resort to agency expertise for the court to dispose

of this purely legal question. See Consol. Bearings Co. v. United States, 348 F.3d

997, 1003–04 (Fed. Cir. 2003); see also Consol. Bearings Co. v. United States, 25 CIT

546, 553–54, 166 F. Supp. 2d 580, 587 (2001), rev’d on other grounds, 348 F.3d 997



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10 This Court has recognized other limited exceptions to the doctrine of exhaustion of

administrative remedies such as: “where exhaustion would be ‘a useless formality,’
intervening legal authority ‘might have materially affected the agency's actions,’ . . .
where ‘clearly applicable precedent’ should have bound the agency, or where the party
‘had no opportunity’ to raise the issue before the agency.” SeAH Steel Corp. v. United
States, 35 CIT 326, 329, 764 F. Supp. 2d 1322, 1325–26 (2011) (citing Jiaxing Brother
Fastener Co., Ltd. v. United States, 34 CIT 1455, 1464–65, 751 F. Supp. 2d 1355–56
(2010)).
Court No. 19-00050                                                                Page 16

(Fed. Cir. 2003) (synthesizing from numerous decisions four non-exhaustive

requirements for application of the “pure legal question” doctrine: (a) a new argument

that is (b) purely legal and (c) does not require agency involvement or fact finding and

(d) does not create undue delay) (internal citations omitted).

       Here, the doctrine of exhaustion of administrative remedies precludes the

court’s review of Commerce’s decision not to examine the applicability of 19 U.S.C.

§ 1677(5B)(C) to the PSI program. As Jindal concedes, it did not raise the argument

in the administrative proceeding. See Pl.’s Reply Br. at 1–4. Further, none of the

exceptions to the doctrine apply. Even though the applicability of section 1677(5B)(C)

entails a legal question—of whether or not the PSI program constituted a non-

countervailable subsidy—it also requires development of a factual record. See Pl.’s

Reply Br. at 2–3. Section 1677(5B)(C) provides that “[a] subsidy provided, pursuant

to a general framework of regional development, to a person located in a

disadvantaged region within a country shall be treated as noncountervailable, if it is

not specific . . . within eligible regions and if [certain] conditions are met[.]” 19 U.S.C.

§ 1677(5B)(C). By its plain language, the provision’s application is conditioned on a

subsidy not being specific and on meeting certain conditions. See id. Those are

factual determinations that require resolution by Commerce, not a pure legal

question that could, at this juncture, invite the court’s review. See Consol. Bearings
Court No. 19-00050                                                              Page 17

Co. v. United States, 348 F.3d 997, 1003–04 (Fed. Cir. 2003). Given that Jindal failed

to raise this issue to Commerce, the court will not now address that question here.11

IV.   Commerce’s Determination            to   Countervail      Certain    State    Tax
       Incentive Programs

       Jindal argues that Commerce erroneously treated Jindal as the recipient of

benefits under certain state tax incentive programs rather than its suppliers. See

Pl.’s Br. at 17–18. Defendant and Defendant-Intervenors counter that Jindal is

precluded from raising this argument, because Jindal failed to raise this issue to

Commerce during the administrative proceeding.          See Def.’s Br. at 17–19; Def.-

Intervenors’ Br. at 11. Jindal, again, failed to exhaust its administrative remedies.

       Although Jindal contends that Commerce “was on full notice” that its suppliers

and sellers, as opposed to Jindal itself, received benefits, Jindal’s only discussion of

this issue appears in its initial questionnaire response. See Pl.’s Reply Br. at 7 (citing

Jindal Poly Questionnaire Resp. at 81–87, Ex. 88, CD 9, 45, barcodes 3660266-01,

3660266-37, Jan. 10, 2018 (“Jindal QR”)). However, Jindal’s questionnaire response

merely explains that, in certain cases, its suppliers did not charge sales tax because




11 Although the court does not reach the issue, Defendant-Intervenors note 19 U.S.C.

§1677(5B)(C) expired in 2000, 66 months after the WTO Agreement entered into force
in January 1995. Def.-Intervenors’ Br. at 7; see also 19 U.S.C. § 1677(5B)(G)
(“Subparagraphs (B), (C), (D), and (E) shall not apply on or after the first day of the
month that is 66 months after the WTO Agreement enters into force[.]”); AG der
Dillinger Huttenwerke v. United States, 28 CIT 94, 105–106, 310 F. Supp. 2d 1347,
1358 (2004). Thus, Defendant-Intervenors argue Commerce had no statutory
obligation to analyze the applicability of this provision, which is no longer in force.
Def.-Intervenors’ Br. at 7.
Court No. 19-00050                                                             Page 18

of an exemption granted to the seller,12 see Jindal QR at 81–87, and details purchases

with the sales tax exemption and the amount of sales tax otherwise due. Id. at 82–

87, 88. Given that Jindal neither applied for an exemption itself “nor is aware of the

type of program[,]” it concludes that the sales tax exemption “cannot be a benefit

enjoyed by Jindal.” Id. at 81–82. A conclusory statement, without any further

elaboration in the questionnaire response or in any other part of the record or

proceeding, does not, as Jindal avers, “set forth this argument in detail[.]” See Pl.’s

Reply Br. at 7. Jindal did not contest Commerce’s preliminary determination that

the sales tax exemption conferred a benefit and its calculation of Jindal’s

countervailable duty rate under the program, see Prelim. Decision Memo. at 27; see

also Jindal Poly Case Br., PD 128, bar code 3765104-01 (Oct. 24, 2018), when it had




12 Jindal invokes Zhaoqing Tifo New Fibre Co., Ltd. v. United States, 39 CIT __, 60

F. Supp. 3d 1328 (2015), to claim that an exception to the doctrine of exhaustion
applies because Commerce was fully on notice that Jindal’s suppliers, rather than
Jindal itself, received benefits from certain sales tax exemption programs. See Pl.’s
Reply Br. at 7. However, the facts of Zhaoqing are readily distinguishable. Although
the court in Zhaoqing held that the exhaustion doctrine did not apply—with regard
to alleged double-counting of certain energy costs in using different financial
statements from the preliminary and final determinations—it also considered,
arguendo, whether an exception would have applied were the doctrine applicable. Id.,
39 CIT at __, 60 F. Supp. 3d at 1350–51. The court explained that Commerce would
have had an opportunity to consider the double-counting issue, because the domestic
producer had warned Commerce of potential double-counting in connection to the
financial statements in its case brief and, further, Commerce itself considered the
potential for double-counting at least for some energy inputs in the proceeding. Id.,
39 CIT at __, 60 F. Supp. 3d at 1356. Here, Jindal’s cursory reference to the alleged
recipient of benefits in a questionnaire response is insufficient to put, as Jindal
alleges, Commerce on “full notice of [Jindal’s] position concerning the sales tax.” Pl.’s
Reply Br. at 7.
Court No. 19-00050                                                           Page 19

an opportunity to do so. See 19 C.F.R. § 351.309(c)(2) (“The case brief must present

all arguments that continue in the submitter's view to be relevant to the Secretary's

final determination or final results, including any arguments presented before the

date of publication of the preliminary determination or preliminary results.”). Jindal

failed to alert Commerce to its position that the state tax incentive programs did not

confer benefits, and, therefore, did not exhaust its administrative remedies such that

the court will now review Jindal’s claim.

                                  CONCLUSION

      For the foregoing reasons, it is

      ORDERED that Commerce’s Final Results is sustained. Judgment will enter

accordingly.


                                                     /s/ Claire R. Kelly
                                                    Claire R. Kelly, Judge


Dated:         April 22, 2020
               New York, New York
