Asociacion de Exportadores e Industriales de Aceitunas de Mesa et al v. United States

Slip Op. 21-
UNITED STATES COURT OF INTERNATIONAL TRADE
ASOCIACIÓN DE EXPORTADORES E
INDUSTRIALES DE ACEITUNAS DE
MESA, ACEITUNAS GUADALQUIVIR,
S.L.U., AGRO SEVILLA ACEITUNAS S.
COOP. AND., and ANGEL CAMACHO
ALIMENTACIÓN, S.L.,
Plaintiffs,
v.
UNITED STATES,
Defendant,
and
COALITION FOR FAIR TRADE IN
RIPE OLIVES,
Defendant-Intervenor.
Before: Gary S. Katzmann, Judge
Court No. 18-00195
OPINION
[The court declines to affirm Commerce’s Remand Results and remands for further action.]
Dated: June 17, 2021
Matthew P. McCullough, Curtis Mallet-Prevost, Colt & Mosle LLP, of Washington, D.C., for
plaintiffs.
Sonia W. Murphy, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department
of Justice, of Washington, DC, for defendant. With her on the brief were Ethan P. Davis, Acting
Assistant Attorney General, Jeanne E. Davidson, Director, Tara K. Hogan, Assistant Director. Of
counsel on the brief was Saad Y. Chalchal, Senior Attorney, Office of the Chief Counsel for Trade
Enforcement and Compliance, U.S. Department of Commerce, of Washington, D.C.
David J. Levine and Raymond Paretzky, McDermott Will & Emery LLP, of Washington, D.C.,
for defendant-intervenor.
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Katzmann, Judge: The court returns to an investigation by the United States Department of
Commerce (“Commerce”) into subsidies received by the Spanish olive industry. The case involves
a claim from the U.S. domestic olive industry that the Government of Spain (“GOS”) and European
Union (“EU”) unfairly subsidized Spanish olives that were then imported into the U.S. to the
detriment of the U.S. industry. 	Before the court is Commerce’s Final Results of Remand
Redetermination (Dep’t Commerce Jun. 1, 2020), ECF No. 47 (“Remand Results”), which the
court ordered in Asociación de Exportadores e Industriales de Aceitunas de Mesa v. United States,
44 CIT __, 429 F. Supp. 3d 1325 (2020) (“Asemesa I”) so that Commerce could further consider
and explain its attribution of subsidies to ripe olives under 19 U.S.C. § 1677-2 (“Section 1677-2”)
and 	could 	provide 	a 	reviewable 	interpretation 	of 	19 	U.S.C. 	§ 	1677(5A)(D)(i) 	(“Section
1677(5A)”). 	Plaintiffs Asociación de Exportadores e Industriales de Aceitunas de Mesa,
Aceitunas Gudalquivir, S.L.U., Agro Sevilla Aceitunas S. Coop. And., and Angel Camacho
Alementación, S.L. (collectively, “Plaintiffs” or “Asemesa”) challenge the Remand Results,
arguing that the subsidy program at issue is not de jure specific under Section 1677(5A), and that
Commerce’s determination of the appropriate “prior stage product” under Section 1677-2 is
unsupported by substantial evidence and contrary to law. Pls.’ Cmts. on the Commerce Dep’t’s
Final Results of Remand Redetermination, Jun. 30, 2020, ECF No. 49 (“Pls.’ Br.”). 	Defendant
United States (“the Government”) and Defendant-Intervenor Coalition for Fair Trade in Ripe
Olives (“Coalition”) request that the court affirm Commerce’s Remand Results. Def.’s Reply to
Cmts. on the Remand Redetermination, July 31, 2020, ECF No. 52 (“Def.’s Br.”); Reply Cmts. of
Def.-Inter. Addressing Remand Results, July 31, 2020, ECF. No. 51 (“Def.-Inter.’s Br.”). 	The
court remands both Commerce’s finding of de jure specificity under Section 1677(5A) and its prior
stage product analysis under Section 1677-2 for further proceedings consistent with this opinion.
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BACKGROUND
The court set out the relevant legal and factual background of the proceedings in further
detail in its previous opinion, Asemesa I,429 F. Supp. 3d at 1330–38. Information relevant to the
instant opinion is set forth below.
I. 	Legal and Regulatory Framework
To empower Commerce to offset economic distortions caused by countervailable subsidies
and dumping, Congress promulgated the Tariff Act of 1930. Sioux Honey Ass’n v. Hartford Fire
Ins., 672 F.3d 1041, 1046–47 (Fed. Cir. 2012); ATC Tires Priv. Ltd. v. United States, 42 CIT __,
__, 322 F. Supp. 3d 1365, 1366 (2018). Under the Tariff Act, Commerce may -- upon petition by
a domestic producer or of its own initiative -- initiate an investigation into potential countervailable
subsidies and, where such subsidies are identified, issue orders imposing duties on the subject
merchandise. 	Sioux Honey, 672 F.3d at 1046–47; ATC Tires, 322 F. Supp. 3d at 1366–67;
19 U.S.C. §§ 1671, 1673. 	A countervailable subsidy exists when (1) a government or public
authority has provided a financial contribution; (2) a benefit is thereby conferred upon the recipient
of the financial contribution; and (3) the subsidy is specific to a foreign enterprise or foreign
industry, or a group of such enterprises or industries. 	19 U.S.C. § 1677(5). 	Where, as here, a
domestic subsidy is at issue, such subsidy may be either de jure or de facto specific. 19 U.S.C. §
1677(5A)(D). In particular, a domestic subsidy is de jure specific “[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.” 19 U.S.C. § 1677(5A)(D)(i).
If Commerce determines that the government of a country is providing, directly or
indirectly, a countervailable subsidy with respect to the manufacture, production, or export of a
class or kind of merchandise imported, sold, or likely to be sold for import, into the United States,
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and the International Trade Commission (“ITC”) determines that an industry in the United States
is materially injured or threatened with material injury thereby, then Commerce shall impose CVD
upon such merchandise equal to the amount of the net countervailable subsidy. See 19 U.S.C. §
1671(a). When the investigated merchandise includes a processed agricultural product for which
(1) the demand for the prior stage, or raw, product is substantially dependent on the demand for
the processed product, and (2) the processing operation adds only limited value to the raw
commodity, Commerce further analyzes countervailable subsidies received by producers or
processors of the raw agricultural product and will deem such subsidies to be received by
manufacturers, producers, and exporters of the processed product. See 19 U.S.C. § 1677-2.
II. 	Factual and Procedural History
On July 12, 2017, Commerce initiated a CVD investigation into ripe olives from Spain in
response to a petition from Coalition. Ripe Olives from Spain: Initiation of Countervailing Duty
Investigation, 82 Fed. Reg. 33,050 (Dep’t Commerce July 19, 2017), P.R. 63; Petition for
Imposition of AD and CVD Duties, Vol. I (June 21, 2017), P.R. 1 (“Pet. Vol. I”). In its petition
Coalition alleged that the EU, through the GOS, provided countervailable subsidies to raw olive
growers that should properly be attributed to processors of ripe olives. Petition for the Imposition
of Antidumping and Countervailing Duties, Vol. III at 10 (June 21, 2017), P.R. 1 (“Pet. Vol. III”).
Ripe olives -- the product at issue in this litigation -- are a type of edible table olive produced by
curing, rinsing, and brining raw olives. Asemesa I, 429 F. Supp. 3d at 1331. Raw olives are a raw
and unprocessed agricultural product which can be transformed into an edible consumer product
through processing into table olives or olive oil. Id.
At the conclusion of its initial investigation, Commerce determined that countervailable
subsidies indeed existed with respect to ripe olive producers from Spain. Id. at 1337–38; see also
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Issues and Decision Memorandum for the Final Determination in the Countervailing Duty
Investigation of Ripe Olives from Spain (Dep’t Commerce June 11, 2018), P.R. 594 (“IDM”);
Ripe Olives From Spain: Amended Final Affirmative Countervailing Duty Determination and
Countervailing Duty Order, 83 Fed. Reg. 37,469 (Dep’t Commerce August 1, 2018), P.R. 622
(“Amended Final Determination”). 	In reaching this conclusion, Commerce determined that the
subsidies provided to olive growers through the EU’s Common Agricultural Policy (“CAP”) are
de jure specific domestic subsidies under Section 1677(5A), and further determined that the
subsidies could be attributed to producers of table olives as a latter stage product of raw olives
under Section 1677-2. IDM at 32–36.
As discussed in Asemesa I, the CAP subsidies at issue are provided to Spanish olive
growers through the Basic Payment Scheme (“BPS”): the most recent iteration of EU agricultural
subsidy programs. 429 F. Supp. 3d at 1333. Because portions of the current BPS subsidy program
are based on past iterations of EU (and European Community) subsidy programs, Commerce
“traced the history of these programs in making its determination that the current program is de
jure specific.” Id. That history begins in 1997 with the Common Organization of Market in Oils
and Fats (“the Common Market Program”), which was an annual grant-to-farmer program
applicable to Spanish olive growers. Id. In 2003 the Single Payment Scheme (“SPS”) replaced
the Common Market Program and remained in effect until 2014. 	Id. 	The SPS program was
replaced in 2015 by the current BPS program, which provides subsidies to those Spanish olive
growers both that meet the eligibility requirements and apply for subsidies. Id.
While the BPS program provides subsidy payments based on geographical indicators of
farmland productivity, those indicators are based on data collected by the GOS under the Common
Market Program. Remand Results at 7. This data reflects the hectares of farmland, quantity of
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crop produced per hectare, and type of crop produced in each hectare, for each qualifying farm.
Id.; Decision Memorandum for the Preliminary Determination in the Countervailing Duty
Investigation of Ripe Olives from Spain at 19–22 (Nov. 20, 2017), P.R. 329 (“Preliminary
Decision Memo”). For olive growers, a value per hectare was calculated depending on whether
the olives were grown for olive oil production or table olive production. 	Preliminary Decision
Memo at 22–23. 	Under the SPS, this value was then multiplied by a farm’s area in hectares to
determine the amount of aid that a particular farmer would receive. Id. at 22; Remand Results at
8. In this way, the SPS program provided subsidy payments with reference to the value per hectare
calculated under the Common Market Program. 	Preliminary Decision Memo at 23; Remand
Results at 8. The BPS then relied upon data collected under the SPS to allocate subsidy payments
using regional rates based on the “productive potential and . . . productive orientation” of a
particular region. Remand Results at 8. The resultant rates assigned to participating farmers do
not vary with the type and volume of crop produced but do reflect historic data regarding the
agronomic practices carried out in the region, including whether it historically produced permanent
crops -- among them, olives. 	IDM at 33–34. 	Commerce concluded that, as “the annual grant
amount provided under BPS [is] based on annual grant amounts that were crop-specific . . . the
grant amounts received by olive growers under BPS . . . are directly related to the grant amount
only olive growers received under the [Common Market Program],” and are therefore de jure
specific to olive growers. Preliminary Decision Memo at 24.
In further determining that the subsidies to olive growers are properly attributable to
producers of table olives, Commerce identified the relevant “prior stage product” as raw olives.
Remand Results at 20–21. Noting that table olives constitute eight percent of the market for raw
olives, Commerce concluded that demand for raw olives is substantially dependent upon demand
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for table olives, and that the subsidies to olive growers may therefore be attributed to ripe olive
producers pursuant to Section 1677-2. Id.
Plaintiffs challenged Commerce’s determination on September 28, 2018, arguing in
relevant part that that the subsidies cannot properly be attributed to ripe olive producers because
the demand for raw olives is not substantially dependent upon the demand for table olives as
required by Section 1677-2, and that the subsidies are not de jure specific (and therefore are not
countervailable). 	Compl., Sept. 28, 2018, ECF No. 7; Asemesa I, 429 F. Supp. 3d at 1340–41.
The court determined that Commerce’s interpretation of Section 1677-2 was arbitrary and not in
accordance with law, concluding that Commerce applied an impermissible interpretation of the
statutory term “substantially dependent,” and that its interpretation of the term constituted an
unexplained and arbitrary deviation from past practice. Asemesa I, 429 F. Supp. 3d at 1339, 1344.
The court also concluded that Commerce’s finding that the subsidies at issue were de jure specific
and thus countervailable failed to include a reviewable interpretation of Section 1677(5A). Id. at
1339. Accordingly, the court remanded to Commerce for further proceedings consistent with its
opinion. Id. at 1352.
A. 	The Remand Results
On June 1, 2020, Commerce submitted its Remand Results to the court. Pursuant to the
court’s instructions in Asemesa I, Commerce “reconsidered its interpretation and analysis of
[Section 1677-2].” Remand Results at 2. On remand, Commerce first reiterated and clarified its
finding that the EU subsidy payments at issue are de jure specific to olive growers, and thus
countervailable. 	Id. at 10. 	Consistent with the Amended Final Determination, Commerce then
determined that “the demand for the prior stage product is substantially dependent on the demand
for the latter stage product,” but clarified that it interprets “‘prior stage product’ to be the raw
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agricultural product that the industry under examination considers principally suitable for use in
the prior stage of production of the latter stage product” -- in this case, raw olives “principally
suitable for . . . the production of table olives.” Id. at 27, 29.
Following the issuance of the Remand Results, Plaintiffs filed comments on June 30, 2020,
reiterating their original arguments and opposing Commerce’s findings on remand. 	Pls.’ Br.
Defendant-Intervenor Coalition also filed comments on the Remand Results requesting that the
court affirm Commerce’s determination and dismiss the action. Def.-Inter.’s Br. The Government
and Coalition each submitted replies to the Plaintiff’s comments on July 31, 2020. Reply to Cmts.
on Remand Results, Jul. 31, 2020, ECF No. 51 (“Def.-Inter.’s Reply”); Reply to Cmts. on Remand
Results, July 31, 2020, ECF No. 52 (“Def.’s Reply”). 	On January 6, 2021, the court issued
questions prior to oral argument. Letter Concerning Questions for Oral Arg., Jan. 6, 2021, ECF
No. 59. The parties filed their responses to the oral argument questions on January 19, 2021. Resp.
to Ct.’s Req. Regarding Questions for Oral Arg., Jan. 19, 2021, ECF No. 61 (“Pls.’ OAQ Resp.”);
Resp. to Ct.’s Req. Regarding Questions in Advance of Oral Arg, Jan. 19, 2021, ECF 64 (“Def.’s
OAQ Resp.”); Resp. to Ct.’s Req. Regarding Questions for Oral Arg., Jan. 19, 2021, ECF No. 63
(“Def-Inter.’s OAQ Resp.”). 	Oral argument was held on February 9, 2021. 	Oral Arg., Feb. 9,
2021, ECF No. 66. On February 19, 2021, the parties filed supplemental submissions following
oral argument. Resp. to Ct.’s Req. Regarding Cmts. After Oral Arg., Feb. 19, 2021, ECF No. 68
(“Pls.’ Post-Arg. Br.”); Resp. to Ct.’s Req. for Post-Arg. Submission, Feb. 19, 2021, ECF. No. 69
(“Def.’s Post-Arg. Br.”); Resp. to Ct.’s Req. for Post-Arg. Submission, Feb. 19, 2021, ECF No.
67 (“Def.-Inter.’s Post-Arg. Br.”).
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JURISDICTION, STANDARD OF REVIEW, AND INTERPRETIVE FRAMEWORK
The court has jurisdiction over this action pursuant to 19 U.S.C. § 1516a and 28 U.S.C.
§ 1581(c). The standard of review is set forth in 19 U.S.C. § 1516a(b)(1)(B)(i) which provides
“[t]he court should hold unlawful any determination, finding, or conclusion found . . . to be
unsupported by substantial evidence on the record, or otherwise not in accordance with law.” The
court also reviews the determinations pursuant to remand “for compliance with the court’s remand
order.” 	See Beijing Tianhai Indus. Co. v. United States, 39 CIT __, __, 106 F. Supp. 3d 1342,
1346 (2015) (citations omitted).
As laid out in Asemesa I, 429 F. Supp. 3d at 1338–39, the court reviews Commerce’s
interpretation of a statute by application of the two-step test laid out in Chevron, U.S.A., Inc. v.
Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984); see also Dupont Teijin Films USA, LP v. United
States, 407 F.3d 1211, 1215 (Fed. Cir. 2005). Under Chevron, the court first determines “whether
Congress has directly spoken to the precise question at issue.” 467 U.S. at 842. If so, “that is the
end of the matter; for the court, as well as the agency, must give effect to the unambiguously
expressed intent of Congress.” Id. at 842–43. However, “if the statute is silent or ambiguous with
respect to the specific issue,” the court must then determine “whether the agency’s answer is based
on a permissible construction of the statute.” Id. at 843. If the agency’s interpretation of the statute
is reasonable, it must withstand judicial scrutiny. Koyo Seiko Co. v. United States, 36 F.3d 1565,
1573 (Fed. Cir. 1994).
DISCUSSION
Plaintiffs argue that (1) Commerce misinterpreted Section 1677(5A) such that Commerce’s
de jure specificity finding is not responsive to the court’s remand order; and (2) Commerce’s
finding that the demand for raw olives principally suitable for the production of table olives is
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substantially dependent on the demand for table olives is unsupported by substantial evidence and
not in accordance with law. Pls.’ Br. at 4, 13. The Government and Coalition respond in support
of Commerce’s Remand Results by arguing that (1) Commerce’s construction of Section 1677(5A)
is permissible and accompanied with a reasonable explanation of BPS’s de jure specificity; and
(2) Commerce’s interpretation of Section 1677-2, and particularly its distinction between prior
stage and raw agricultural products, is reasonable and not unlawful. 	Def.’s Br. at 11, 17; Def.-
Inter.’s Br. at 4, 10, 15–19. 	The court concludes that Commerce’s interpretations of de jure
specificity under Section 1677(5A), and of the meaning of “prior stage product” under Section
1677-2, are unreasonable and not in accordance with law.
I. 	Commerce’s Interpretation of Section 1677(5A)’s De Jure Specificity Inquiry is
Unreasonable and Not in Accordance with Law.
The court determined in Asemesa I that Commerce’s finding that the BPS program
constituted a de jure specific subsidy did not include a reviewable interpretation of the statute. 429
F. Supp. 3d at 1339–40. In relevant part, the court stated that:
Neither Commerce nor the Government provides an explanation or interpretation
of the statute to support its conclusion that the BPS program is de jure specific. Nor
does the Government explain how references to past subsidy programs as part of a
larger subsidy calculation satisfy the “express” requirement of the statute because
neither Commerce nor the Government makes more than a conclusory statement
about the application of the statute to the facts of this subsidy program.
Id. at 1340. Accordingly, the court remanded the de jure specificity determination to Commerce
for explanation of its interpretation of the statute.
On remand, Commerce “further explain[ed] its interpretation of [Section 1677(5A)] for the
de jure specificity finding.” Remand Results at 2. In so doing, Commerce emphasized Congress’s
legislative intent, noting that the specificity test was “intended to function as a rule of reason and
to avoid the imposition of countervailing duties in situations where, because of the widespread
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availability and use of a subsidy, the benefit of the subsidy is spread throughout an economy” and
not to provide “a loophole through which narrowly [focused] subsidies provided to or used by
discrete segments of an economy could escape the purview of the [countervailing duty] law.” Id.
at 12 (quoting Uruguay Round Agreements Act, Statement of Administrative Action, H.R. Doc.
No. 103-316, Vol. 1, 929 (1994), reprinted in 1994 U.S.C.C.A.N. 4040, 4163). 	Commerce
concluded that, although the limitation of the BPS to the agricultural sector is itself not sufficient
basis to deem it a de jure specific subsidy program, its non-uniform application across the
agricultural sector does constitute an express limitation of the subsidy to an enterprise or industry.
Id. at 14–15. 	Finding that the legislation implementing the BPS incorporates by reference
eligibility data arising from the SPS, further finding that the SPS itself incorporated eligibility data
from the Common Market Program, and finding that the Common Market program expressly
limited access to olive growers, Commerce redetermined on remand that the BPS provides de jure
specific subsidies to olive growers. Id. at 15.
Plaintiffs argue that Commerce’s interpretation of the statute is incorrect because it fails to
account for the unambiguous language of Section 1677(5A). Pls.’ Br. at 4. In particular, Plaintiffs
argue that the phrase “expressly limits access” requires Commerce to “show that the BPS program
(through the administering authority or the legislation under which it operates) makes clear that its
purpose is to control eligibility for BPS payments such that olive growers have a right to, or use,
BPS payments in a manner that is limited to them.” 	Id. at 5 (emphasis in original). 	Plaintiffs
conclude that, because BPS subsidy payments are made available without reference to specific
crops or farmers, Commerce’s determination that the BPS program “‘limited [subsidy] access’ to
‘olive growers,’” disregards the unambiguous meaning of the statute and is therefore unlawful. Id.
at 9–10. The Government and Coalition respond that Commerce correctly interpreted the meaning
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of “expressly limits access” to permit a finding of de jure specificity where “by law, there is no
uniform treatment across the agricultural sector in the provision of benefits.” Remand Results at
14; see Def.’s Br. at 9–10; Def.-Inter.’s Br. at 5. 	The Government contends that the statute is
clearly ambiguous, and that the court is therefore obligated to defer to Commerce’s reasonable
interpretation of the de jure specificity analysis. 	Def.’s Br. at 7–8. 	Both the Government and
Coalition conclude that Commerce reasonably determined that the incorporation of historical
production data in the BPS program’s implementing legislation resulted in the law’s non-uniform
treatment of olive growers, and therefore in de jure specificity under Section 1677(5A). Id. at 9–
11; Def.-Inter.’s Br. at 11–12.
Chevron requires that the court begin with the plain meaning of the statute, for “if the text
answers the question [of Congress’s intent], that is the end of the matter.” 	Timex V.I., Inc. v.
United States, 157 F.3d 879, 882 (Fed. Cir. 1998) (citations omitted). 	Thus, in determining
whether step one of Chevron is satisfied, the court looks first to the statute’s text, and employs the
“traditional tools of statutory construction.” 	Id. (quoting Chevron, 467 U.S. at 843 n.9). 	Here,
Section 1677(5A) provides that “[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, the subsidy is specific as a matter of law.” 	The dictionary definition of the adjective
“express” 	is 	“directly, 	firmly, 	and 	explicitly 	stated.” 	Express, 	Merriam-Webster,
https://www.merriam-webster.com/dictionary/express (last visited June 8, 2021). The dictionary
definition of the adjective “limit” is “to assign certain limits to” or “to restrict the bounds or limits
of,” while the noun is defined as “something that bounds, restrains, or confines.” Limit, Merriam-
Webster, https://www.merriam-webster.com/dictionary/limit (last visited June 8, 2021). Thus, the
plain meaning of the statute is that a subsidy is de jure specific when the authority providing the
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subsidy, or its operating legislation, directly, firmly, or explicitly assigns limits to or restricts the
bounds of a particular subsidy to a given enterprise or industry. 	There is no ambiguity in this
reading. 1
The court therefore rejects Commerce’s interpretation of Section 1677(5A) as permitting a
finding of de jure specificity when “by law, there is no uniform treatment across the agricultural
sector in the provision of benefits.” Remand Results at 14. The law’s failure to provide uniform
treatment in the distribution of subsidies is not equivalent to its explicit restriction of those benefits
to a specific enterprise or industry. It is not sufficient, as Commerce and the Government suggest,
for the legislation underlying the subsidy under consideration to merely “reference[] and
incorporate[]” prior legislation which itself may favor a specific sector. Remand Results at 48;
see Def.’s Br. at 10–11. Such reading reduces the de jure specificity test to a general finding of
non-uniform treatment, without any determination that the subsidy in question be explicitly limited
to a specific enterprise or industry by the administering authority or its implementing legislation.
See Pls.’ Post-Arg. Br. at 2–3. As Plaintiffs note, it therefore fails to give meaning to the statute’s
requirement that a de jure specific subsidy must exhibit explicit restriction to an enterprise or
industry. Id. (citing Colautti v. Franklin, 439 U.S. 379, 392 (1979)). Nor is it sufficient for the
current scheme to exhibit “a linkage between eligibility for . . . crop-specific payments provided
under the prior legislation” and the payments currently provided, without more. Remand Results
1 While the Government contends that “[b]y directing Commerce to explain its interpretation of
the statute, the [c]ourt acknowledged that the statute is silent on whether ‘a program expressly
based on programs that limited access of payments to a specific crop’ is de jure specific,” this is
not correct. Def.’s Br. at 11. Rather, the court is unable to make any determination as to whether
Commerce’s determination is supported by substantial evidence and in accordance with law if
neither Commerce nor the Government provide any explanation for that determination. Asemesa
I, 429 F. Supp. 3d at 1340–41. Conclusory statements without more are not reviewable even where
the statute applied by Commerce is unambiguous.
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at 48–49. 	For example, it is conceivable that a prior subsidy scheme could be constructed to
explicitly 	favor 	cabbage 	growers, 	and 	that 	the 	current 	scheme 	incorporates 	a 	regional
implementation of the prior favorable rates (as the BPS program does) -- but that changes in soil
composition, weather patterns, or consumer demand has since caused most cabbage fields to be
replaced by a wide range of alternative crops. In such a case, Commerce’s reading would require
a finding of de jure specificity even where the historic data included in the statute has no
relationship to current production and might even correspond to equal treatment across the
agricultural sector despite what appears to be “non-uniform” distribution of subsidies. 2 Under the
plain meaning of Section 1677(5A), subsidies are only de jure specific where the authority
providing the current subsidy, or its operating legislation, directly and explicitly prescribes
limitations on the distribution of subsidies to an enterprise or industry.
As both Plaintiffs and the Government acknowledge, the purpose of the specificity test is
to “function as an initial screening mechanism” to avoid the imposition of duties on subsidies
which are truly generally available across the agricultural sector. Pls.’ Br. at 5 (quoting SSA at
929); Def.’s Br. at 9 (quoting SSA at 913). As such, the test contemplates a number of avenues
for determining specificity. Where, as here, a subsidy is not directly and expressly limited in its
application, and is therefore not de jure specific, Commerce is not precluded from further analyzing
the distribution of benefits to determine whether the subsidy is specific on other grounds. 	See,
e.g., 19 U.S.C. § 1677(5A)(B)–(C), (D)(iii)–(iv). There is therefore no basis to conclude that, as
2 Coalition makes much of the BPS program’s express provision of favorable subsidy rates to
permanent crops as defined under the Common Market Program. See Def.-Inter.’s Post-Arg. Br.
at 3–6. However, neither Commerce nor Coalition provides sufficient evidence for the court to
conclude that identified “‘permanent crop’ regions of Spain” meaningfully correspond to those
regions engaged in olive farming for any period beyond the specific period during which the
Common Market Program data was gathered. Id.; see Remand Results at 8. Without more, this is
not enough to constitute an express limitation to an industry or enterprise.
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the Government and Coalition suggest, that application of the plain meaning of Section 1677(5A)
risks allowing “shielding [from duties] subsidies that on their face provide differentiated treatment
to subsets of the agricultural sector,” or otherwise undermining the purpose of the statute. 3 Def.-
Inter.’s Br. at 8; see also Def.’s Br. at 11.
In sum, Commerce’s interpretation Section 1677(5A) to permit a finding of de jure
specificity where “by law, there is no uniform treatment across the agricultural sector in the
provision of benefits,” is impermissible. Remand Results at 14. Interpreting “expressly limits” to
require the uniform provision of benefits statute deviates from the plain meaning of Section
1677(5a) and thus from Congress’s unambiguous intent. The court concludes that Commerce’s
interpretation of the statute is unreasonable and not in accordance with law.
Accordingly, the court does not consider whether Commerce’s application of the statute to
the BPS program was in accordance with law and supported by substantial evidence. 4 The court
remands the question of de jure specificity in the instant case to Commerce for further proceedings
consistent with this opinion.
3 The Government argues, in line with the Remand Results, that “[a]n interpretation that would
‘require the BPS program to restate the entirety of the laws and regulations pursuant to which the
SPS and Common Market Program were implemented would create a loophole through which
foreign governments could provide countervailable subsidies in the guise of a “new” program and
avoid the imposition of countervailing duties.’” Def.’s Br. at 11 (quoting Remand Results at 20).
However, if the favorable treatment of olive growers is indeed fully incorporated in the BPS by
reference to the prior schemes, neither Commerce nor the Government provides any basis for the
court to conclude it would survive an analysis of its de facto specificity. The court therefore rejects
this argument as without merit.
4 Although the Government argues that the BPS is nevertheless de jure specific under a plain
language reading of Section 1677(5A), the explanation provided by the Government in large part
overlaps with Commerce’s impermissible reading of the statute. 	See Def.’s Br. at 11–15. 	The
court has accordingly considered and rejected the Government’s contentions that “express
limitation need not be in terms of a particular crop or farmer,” and that express reference to prior
legislation which itself codifies non-uniform treatment is sufficient for a finding of de jure
specificity. Id. at 15.
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II. 	Commerce’s Interpretation of Section 1677-2’s “Substantially Dependent”
Requirement is Not in Accordance with Law.
The court determined in Asemesa I that Commerce applied an impermissible interpretation
of Section 1677-2, and that its deviation from past practice with respect to the meaning of
“substantially dependent” was arbitrary and not in accordance with law. 429 F. Supp. 3d at 1341,
1344. 	The court’s determination was rooted in Commerce’s failure to acknowledge the
unambiguous language of the statute, and its unexplained deviation from past practice in finding
that table olives’ control of eight percent of the market for raw olives constituted substantial
dependence. 	Id. at 1342–44. 	The court ultimately remanded to Commerce for further analysis
and for explanation of its interpretation of the statute.
Commerce’s analysis of Section 1677-2 on remand raises two questions before the court:
first, whether Commerce permissibly interpreted the statute on remand, and second, whether
Commerce reasonably found substantial dependence in the present case. Accordingly, the court
begins by considering whether Commerce set out a permissible construction of Section 1677-2.
A. 	Commerce Permissibly Concluded that “Prior Stage Product” is Not
Coextensive 	with 	“Raw 	Agricultural 	Product,” 	but 	Applied 	an
Impermissible Interpretation of Section 1677-2 in Determining that “Prior
Stage Product” is Properly Defined as “the Raw Agricultural Product that
the Industry Under Examination Considers Principally Suitable for Use in
the Prior Stage of Production of the Latter Stage Product.”
In its Remand Results, Commerce identified a statutory ambiguity that satisfies the first
step of the Chevron analysis. Remand Results at 25–26. Section 1677-2 provides that:
In the case of an agricultural product processed from a raw agricultural product in
which--
(1) the demand for the prior stage product is substantially dependent on the
demand for the latter stage product, and
(2) the processing operation adds only limited value to the raw commodity,
countervailable subsidies found to be provided to either producers or processors of
the product shall be deemed to be provided with respect to the manufacture,
production, or exportation of the processed product.
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Court No. 18-00195 	Page 17
19 U.S.C. § 1677-2. Neither the term “raw agricultural product” nor the term “prior stage product”
is defined by the statute, although Commerce noted that it has, “through its practice, adopted a . .
. definition of the term ‘raw agricultural product’” similar to that provided in 19 U.S.C. §
1677(E)(iv), namely, “any farm or fishery product.” Remand Results at 25. With respect to the
term “prior stage product,” Commerce acknowledged that it has, “in past cases and in the Final
Determination, . . . defined the raw agricultural product and the prior stage product to be the same.”
Id. at 25–26. However, Commerce explained on remand that it concluded that continuing to treat
the two terms as coterminous in the context of its investigations “would give ‘raw agricultural
product’ and ‘prior stage product’ the same meaning,” in conflict with the text of the statute. Id.
at 26–27.
Accordingly, Commerce explained that it revised its interpretation of “prior stage product”
so that it is meaningfully distinct from “raw agricultural product” in reflection of the “strong
presumption that Congress expresses its intent through the language it chooses and that the choice
of words in a statute is therefore deliberative and reflective.” 	Id. at 26 (quoting KYD, Inc. v.
United States, 35 CIT 475, 479, 779 F. Supp. 2d 1361, 1367 (2011)). Rather, Commerce found
that “[t]he language used in the statute . . . shows that Congress contemplated that a raw agricultural
product could undergo several stages of production and that each stage of production may produce
a distinct processed agricultural product.” Id. at 27. Ultimately, Commerce determined that “[t]he
plain language and structure of the statute signals that Congress intended the ‘prior stage product’
to be the raw agricultural product that the industry under examination considers principally suitable
for use in the prior stage of production of the latter stage product.” Id.
Plaintiffs argue that this determination constitutes an impermissible attempt to limit the
denominator of its substantial dependence analysis on remand. Pls.’ Br. at 13–16. In particular,
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Court No. 18-00195 	Page 18
Plaintiffs argue that (1) “raw agricultural product” and “prior stage product” are not distinct and
exclusive, and (2) that even if the terms are in fact distinct, “prior stage product” cannot merely be
a subset of “raw agricultural product. 	Id. 	The Government responds that the use of both “raw
agricultural product” and “prior stage product” in the statute supports an interpretation of Section
1677 that distinguishes between the terms so as to avoid rendering either superfluous. Def.’s Br.
at 18–19. 	The Government and Coalition together argue that, in the instant case, Commerce
correctly found that the appropriate prior stage product is olive varietals suitable for the production
of table olives, and not all raw olives varietals inclusive of raw mill olives suitable only for the
production of olive oil. Id. at 19–21; Def.-Inter.’s Br. at 21–22.
The court concludes that, while Commerce has reasonably determined that “prior stage
product” and “raw agricultural product” are not coextensive, its decision to define “prior stage
product” as “the raw agricultural product that the industry under examination considers principally
suitable for use in the prior stage of production of the latter stage product” represents an
impermissible construction of Section 1677-2. Remand Results at 27.
Commerce’s determination that “prior stage product” and “raw agricultural product” are
not coextensive in the context of Section 1677-2 is both reasonable and in accordance with law. It
is well-established that “[t]he language of the statute is the best indication of Congress’s intent.”
Shoshone Indian Tribe of Wind River Res. v. United States, 364 F.3d 1339, 1345 (Fed. Cir. 2004)
(citing Consumer Prod. Safety Comm’n v. GTE Sylvania, Inc., 447 U.S. 102, 118 (1980)). In the
present case, while the meaning of the term “prior stage product” is left ambiguous in the statutory
text, Commerce’s construction of Section 1677-2 is well-reasoned and ensures that both “raw
agricultural product” and “prior stage product” are given meaningful effect. As Chevron requires
deference to Commerce’s interpretation of the law, so long as that interpretation is reasonable, 407
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Court No. 18-00195 	Page 19
U.S. at 843, the court finds that Commerce’s determination that “prior stage product” is distinct
from “raw agricultural product” is in accordance with law.
However, the court rejects Commerce’s determination that the intended definition of “prior
stage product” is “the raw agricultural product that the industry under examination considers
principally suitable for use in the prior stage of production of the latter stage product.” Remand
Results at 27. It does not follow from the conclusion that “prior stage product” is distinct from
“raw agricultural product” that a prior stage product may also be a subset of the raw agricultural
product. 	Rather, such a definition of “prior stage product” seems to render the requirements of
Section 1677-2 largely self-fulfilling, insofar as raw olives principally suitable for use in table
olive production are likely processed into table olives, or tomatoes principally suitable for canning
are likely processed into canned tomatoes. Commerce’s interpretation cannot be “consistent with
language and structure of the statute” if, by giving meaning to the term “prior stage product,” it
simultaneously causes the statute as a whole to become superfluous. See Def.’s Br. at 19 (citing
Agro Dutch Indus. Ltd. v. United States, 508 F.3d 1024, 1032 (Fed. Cir. 2007)). 	Thus,
Commerce’s interpretation of “prior stage product” as used in Section 1677-2 is unreasonable and
not in accordance with law.
Arguments by the Government and Coalition to the contrary are unavailing. 	The
Government asserts that interpreting the prior stage product to be a subset of the raw agricultural
product “avoids a construction that would render either term superfluous.” Id. at 19. As the court
has explained, Commerce’s interpretation risks superfluity of a different kind. 	While Chevron
obligates the court to defer to Commerce’s interpretation of a statute so long as it is reasonable --
even if it is not “the only possible interpretation, nor even the interpretation deemed most
reasonable by the courts” -- it does not require the court to accept one erroneous interpretation to
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Court No. 18-00195 	Page 20
avoid another. 	Entergy Corp. v. Riverkeeper, Inc., 556 U.S. 208, 218 (2009). 	Nor is the court
convinced by Coalition’s argument that the rejection of Commerce’s interpretation of “prior stage
product” necessarily risks “preclud[ing] . . . CVD remed[ies] for processed products” and thereby
undermining Congressional intent. Def.-Inter.’s Br. at 18. Such risk is only present to the extent
that Commerce has determined that “raw agricultural product” cannot itself be delimited; for
example, if the appropriate raw agricultural product in the production of diced, canned tomatoes
is necessarily “all tomatoes.” 	As no such determination is apparent from the Remand Results, 5
the court declines to consider Coalition’s argument further.
Accordingly, the court finds that Commerce’s interpretation of Section 1677-2 is not in
accordance with law, and remands for further proceedings consistent with this opinion.
B. 	The Court Does Not Reach Commerce’s Conclusion that the Demand for
Olive Varietals Principally Suitable for the Production of Table Olives is
Substantially Dependent on the Demand for Table Olives.
Commerce concludes, pursuant to its interpretation of Section 1677-2, that the appropriate
prior stage product for analysis of substantial dependence in the instant case is those raw olive
varietals principally suitable for the production of table olives. 	Remand Results at 29, 81–82.
Applying this construction to the record, Commerce ultimately determined that the demand for
raw olive varietals principally suitable for the production of table olives is substantially dependent
on the demand for table olives. 	Remand Results at 30–34. 	In light of the foregoing, the court
declines to reach this determination on the basis that it relies on an impermissible interpretation of
Section 1677-2.
5 Indeed, Plaintiffs argue, and Commerce acknowledged, that “a distinct biological varietal can be
considered 	a 	distinct 	raw 	agricultural 	product 	under 	the 	definition 	Commerce 	employs,
specifically, ‘any farm or fisheries product’ as used in 19 U.S.C. § 1677(4)(E)(iv).” Pls.’ Br. at
17; see Remand Results at 80–81.
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Court No. 18-00195 	Page 21
CONCLUSION
For the foregoing reasons, the court concludes that Commerce’s interpretations of Section
1677(5A)’s de jure specificity test and of Section 1677-2’s prior stage product analysis are not in
accordance with law. The court therefore remands to Commerce for further proceedings consistent
with this opinion. Commerce shall file with this court and provide to the parties its remand results
within 90 days of the date of this order; thereafter, the parties shall have 30 days to submit briefs
addressing the revised remand determination with the court, and the parties shall have 30 days
thereafter to file reply briefs with the court.
SO ORDERED.
/s/ 	Gary S. Katzmann
Gary S. Katzmann, Judge
Dated: June 17, 2021
New York, New York
Case 1:18-cv-00195-GSK Document 70 Filed 06/17/21 Page 21 of 21