Slip Op. 25-60
UNITED STATES COURT OF INTERNATIONAL TRADE
Court No. 23-00221
BYD (H.K.) CO., LTD., Plaintiff, and FLORIDA POWER & LIGHT COMPANY, Plaintiff-Intervenor, v. UNITED STATES, Defendant, and AUXIN SOLAR INC., Defendant-Intervenor.
Before: M. Miller Baker, Judge
OPINION
[Sustaining the Department of Commerce’s circum- vention determination.]
Dated: May 16, 2025
Craig A. Lewis, Nicholas W. Laneville, and Gregory M.A. Hawkins, Hogan Lovells US LLP, Washington, DC, on the briefs for Plaintiff. Ct. No. 23-00221 Page 2
Matthew R. Nicely, Daniel M. Witkowski, and Julia K. Eppard, Akin Gump Strauss Hauer & Feld LLP, Washington, DC, on the briefs for Plaintiff-Intervenor.
Brian M. Boynton, Principal Deputy Assistant Attor- ney General; Patricia M. McCarthy, Director; Re- ginald T. Blades, Jr., Assistant Director; and Stephen C. Tosini, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, Washington, DC, on the brief for Defendant. Of coun- sel on the brief was Spencer C. Neff, Attorney, Office of Chief Counsel for Trade Enforcement and Compli- ance, U.S. Department of Commerce, Washington, DC.
Baker, Judge: Plaintiff BYD (H.K.) Co. challenges the Department of Commerce’s finding that solar cell imports from Cambodia circumvent antidumping and countervailing duty orders on such equipment made in China. As explained below, the court sustains the agency’s determination.
I
The Tariff Act of 1930, as amended, allows Com- merce to impose antidumping or countervailing duties on a “class or kind” of imported merchandise if it “finds that the merchandise reflects unfair pricing or unfair subsidization and the [International Trade] Commis- sion finds material injury to the domestic industry.” Canadian Solar, Inc. v. United States, 918 F.3d 909, 917 (Fed. Cir. 2019) (citing 19 U.S.C. §§ 1671(a)(1), 1673(1)). In imposing such duties, the Department Ct. No. 23-00221 Page 3
must “include ‘a description of the subject merchan- dise, in such detail as [it] deems necessary.’” Id. (em- phasis removed) (quoting 19 U.S.C. §§ 1671e(a)(2), 1673e(a)(2)). The statute “defines ‘subject merchan- dise’ as ‘the class or kind of merchandise that is within the scope of an investigation [or] an order under this subtitle.’” Id. (quoting 19 U.S.C. § 1677(25)). In prac- tice, Commerce describes the product “within the scope of the order[ ]” by reference to its “technical char- acteristics” and “country of origin” (sometimes re- ferred to in this opinion as the “source country”). Id. at 913.
The Department “typically determines country of origin based on the country where the merchandise is processed or manufactured.” Id. But in trade, as in war, the antagonist gets a vote. To avoid duties, a pro- ducer may “finish[ ] or assemble[ ]” its products “in a different country” using components manufactured in the source country. Bell Supply Co. v. United States, 888 F.3d 1222, 1228 (Fed. Cir. 2018). Whether the fi- nal product as exported from the third country is deemed to originate from the source country depends on whether it was “substantial[ly] transform[ed]” in the former. Id.
“A substantial transformation occurs where, as a result of manufacturing or processing steps, the prod- uct loses its identity and is transformed into a new product having a new name, character and use.” Id. (cleaned up) (quoting Bestfoods v. United States, Ct. No. 23-00221 Page 4
165 F.3d 1371, 1373 (Fed. Cir. 1999)). If such a trans- formation occurs, the third country becomes the coun- try of origin, and the product is out-of-scope. Id. at 1230. Otherwise, such goods are deemed to originate from the source country, meaning they’re in-scope. Id.
Even if substantially transformed in a third coun- try, the products finished or assembled there from source-country components are not necessarily home free, as it were. As relevant here, the statute’s anticir- cumvention provision, 19 U.S.C. § 1677j, authorizes— but does not require—Commerce to extend antidump- ing and countervailing duty orders to such articles when certain other conditions are satisfied. See id. § 1677j(b)(1); see also Bell Supply, 888 F.3d at 1230 (explaining that if the Department “applies the sub- stantial transformation test and concludes that the imported article has a country of origin different from the country identified in an AD or CVD order, then [it] can include such merchandise within the scope of [such an] order only if it finds circumvention under § 1677j”).
For there to be circumvention, imports “completed or assembled” in a third country from source-country components must be “of the same class or kind” as goods subject to the duty order. 19 U.S.C. § 1677j(b)(1)(A), (B). The “process of assembly or com- pletion” has to be “minor or insignificant.” Id. § 1677j(b)(1)(C). The value of the parts made in the source country must also be “a significant portion of Ct. No. 23-00221 Page 5
the total value” of the product as finally exported to this nation. Id. § 1677j(b)(1)(D). Finally, “action [must be] appropriate . . . to prevent” avoidance of duty or- ders. Id. § 1677j(b)(1)(E).
If Commerce finds those conditions satisfied, it must then determine whether to extend the orders to the third-country goods. In doing so, it must “take into account” certain considerations. Id. § 1677j(b)(3). As relevant here, they include any “affiliat[ion]” between the company doing the “assembl[y] or complet[ion]” and the manufacturer or exporter of source-country parts or components. Id. § 1677j(b)(3)(B).
In many anticircumvention cases, including this one, the crux of the controversy is the “minor or insig- nificant” condition under § 1677j(b)(1)(C). As to that question, Commerce must “take into account” certain factors regarding operations in the third country. They are “(A) the level of investment”; “(B) the level of re- search and development”; “(C) the nature of the pro- duction process”; “(D) the extent of production facili- ties”; and “(E) whether the value of the processing per- formed” there “represents a small proportion of the value of the merchandise imported into the United States.” Id. § 1677j(b)(2). “Commerce will evaluate each of these factors . . . , depending on the particular circumvention scenario. No single [one] will be control- ling.” Statement of Administrative Action Accompany- ing the Uruguay Round Agreements Act (SAA), H.R. Ct. No. 23-00221 Page 6
Doc. 103–316, vol. 1, at 893, 1994 U.S.C.C.A.N. 4040, 4216. 1
II
In 2012, Commerce issued orders imposing anti- dumping and countervailing duties on solar cells made in China. 2 See 77 Fed. Reg. 73,018; 77 Fed. Reg. 73,017. A decade later, domestic producer Auxin Solar Inc. asked the Department to investigate whether
1 The SAA is an “authoritative expression” of the statute’s
meaning. 19 U.S.C. § 3512(d). 2 In technical jargon, the orders cover “crystalline silicon
photovoltaic cells, . . . whether or not partially or fully as- sembled into other products, including, but not limited to, modules, laminates, panels and building integrated mate- rials.” Appx0001019. According to the Energy Department, a solar cell “is a nonmechanical device that converts sun- light directly into electricity.” https://www.eia.gov/ener- gyexplained/solar/photovoltaics-and-electricity.php. “Indi- vidual cells can vary from 0.5 inches to about 4.0 inches across.” Id. One such cell “can only produce 1 or 2 Watts, which is only enough electricity for small uses, such as powering calculators or wristwatches.” Id. Cells can be “electrically connected in a packaged, weather-tight . . . panel (sometimes called a module).” Id. (emphasis in origi- nal). In plain English, a solar panel is an assembly of linked solar cells. A solar cell, in turn, is created by “the addition of a p/n junction” to a solar wafer. Appx0001205 (Commerce so not- ing); ECF 36, at 9 (BYD, citing prior agency decisions). For purposes of the orders, that is the key manufacturing step that determines the country of origin. Appx0001205. Ct. No. 23-00221 Page 7
such merchandise imported from Thailand, Cambodia, Vietnam, and Malaysia circumvented those orders. See 87 Fed. Reg. 19,071. The agency did so and se- lected BYD as a mandatory respondent for the Cam- bodian segment. Appx0003958.
A
Commerce preliminarily determined that all condi- tions in 19 U.S.C. § 1677j(b)(1) were satisfied and that—with certain exceptions not applicable here—ex- tending the duty orders to solar cell exports from Cam- bodia was appropriate. See generally Appx0001015– 0001037.
One of those conditions disputed here is whether the process of assembly or completion in Cambodia was minor or insignificant. See 19 U.S.C. § 1677j(b)(1)(C). Of the five statutory factors bearing on this condition, see id. § 1677j(b)(2)(A)–(E), the De- partment found that all but one (the “nature of the pro- duction process,” see id. § 1677j(b)(2)(C)) indicated cir- cumvention. See generally Appx0001027–0001033.
Explaining those findings, the Department ob- served that BYD does not directly engage in produc- tion of solar cells and modules in Cambodia. Instead, it provides inputs to unaffiliated “tollers,” who do the Ct. No. 23-00221 Page 8
work. 3 Appx0001025. The tollers, in turn, own their own manufacturing equipment and facilities. 4 Appx0001176. The company provided Commerce with information about the scale of the tollers’ investments, infrastructure, workforce, and production capabilities. Appx0001028, Appx0001032.
The Department nevertheless declined to use that information for purposes of determining the “level of investment” (§ 1677j(b)(2)(A)) and “extent of produc- tion facilities” (§ 1677j(b)(2)(D)) in Cambodia. Limiting its consideration instead to BYD’s non-existent activi- ties, it found that those factors indicated circumven- tion. Appx0001028; Appx0001032.
3 “[T]oll processing”—also known as “toll manufacturing”—
“is ‘[a]n arrangement under which a customer provides the materials for a manufacturing process and receives the fin- ished goods from the manufacturer. . . . The same party owns both the input and the output of the manufacturing process. This is a specialized form of contract manufactur- ing.’” Wind Tower Trade Coal. v. United States, 569 F. Supp. 3d 1221, 1226 n.3 (CIT 2022) (quoting Toll Manufac- turing, Black’s Law Dictionary (11th ed. 2019)). 4 The record is inconsistent regarding the degree to which
the tollers owned versus leased their facilities. Compare Appx0001176 (Commerce stating that the Cambodian manufacturing “facilities/equipment were purchased/ owned by the . . . tollers”) with id. (stating that “the tollers leased their facilities”). As the parties appear to assume the former, so does the court. Ct. No. 23-00221 Page 9
As to R&D (§ 1677j(b)(2)(B)), Commerce observed that BYD reported that neither it nor its tollers under- took any. Appx0001029. Thus, the Department found that this factor also indicated circumvention. Id.
To determine the value added by Cambodian pro- cessing (§ 1677j(b)(2)(E)), the Department summed BYD’s toller costs and divided the result by the per- unit weighted average value of the company’s U.S. sales. Appx0001003. That “exceeded a third,” ECF 36, at 39, which the agency found to be a small proportion and thus to indicate circumvention. Appx0001003.
On the other hand, Commerce determined that the final relevant factor, the nature of the Cambodian pro- cessing (§ 1677j(b)(2)(C)), cut in the other direction. Appx0001032. That’s because, compared to the pro- duction of precursor components in China, “solar cell and module production involves a greater number of stages, each requiring a high level of technological so- phistication.” Appx0001031. In marked contrast to its disregard of the tollers’ activities in connection with investment and production facilities (§§ 1677j(b)(2)(A) and (D)), in this context the Department treated them as proxies for BYD: “[W]e find that the nature of the production performed by the respondents in the third country is not minor or insignificant compared to” the production of precursor components in China. Appx0001032 (emphasis added).
In balancing the § 1677j(b)(2) considerations, Com- merce acknowledged that “record evidence shows that Ct. No. 23-00221 Page 10
the nature of the production process in Cambodia for solar cells and modules is significant.” Appx0001036. Nevertheless, for the reasons discussed above the level of investment and extent of production facilities pointed in the opposite direction. Id. The company’s “insignificant amount” of R&D was of “particular im- portance” in view of “the uniquely complex nature of solar cell and module production.” Id. Under the “to- tality of the factors,” the agency found “the process of assembly or completion in Cambodia” to be “minor and insignificant.” Id.; see also 19 U.S.C. § 1677j(b)(1)(C).
The second disputed statutory condition here in- volves the Department’s finding that the Chinese com- ponents of BYD’s solar cell exports from Cambodia to this nation were “a significant portion of the total value” of the finished products. See Appx0001033 (dis- cussing 19 U.S.C. § 1677j(b)(1)(D)). Noting that China is a nonmarket-economy country, the agency used sur- rogate data from market-economy countries, rather than the prices BYD paid, to value the Chinese-pro- duced inputs. Id.
The third and final disputed statutory condition is Commerce’s finding—without any supporting reason- ing—that “action is warranted to prevent evasion of the Orders.” Appx0001037 (citing 19 U.S.C. § 1677j(b)(1)(E)). Ct. No. 23-00221 Page 11
B
After receiving comments from interested parties, the Department reaffirmed its findings with some mi- nor modifications and, as relevant here, additional ex- planation. See Appx0001196–0001363.
As to its conclusion that BYD’s process of assembly or completion in Cambodia was “minor or insignifi- cant” under 19 U.S.C. § 1677j(b)(1)(C), the agency dis- cussed the relevant § 1677j(b)(2) factors. For R&D, it observed that the company “agree[d] with” its finding that there was no such activity in Cambodia, and only contested its relative significance. Appx0001257. In response, Commerce emphasized that the China- based R&D is of “preeminent importance in the solar industry,” as it “has been key for technological break- throughs.” Id. In these “particular circumstances,” the agency attached great weight to this factor. Id.
The Department also responded to BYD’s objec- tions as to its findings about the “level of investment” and “extent of production facilities” factors. Defending its decision to disregard the tollers’ activities because those entities were “unaffiliated” with the company, Appx0001246, the agency asserted that it had the dis- cretion to base its findings on the “particular circum- vention scenario.” Appx0001245–0001246 (quoting SAA at 893, 1994 U.S.C.C.A.N. at 4216).
In a similar vein, Commerce justified its decision to evaluate investment “on an absolute basis as opposed Ct. No. 23-00221 Page 12
to a per-unit basis.” Appx0001213. It noted that the “statute does not instruct [the agency] to employ a par- ticular analysis.” Id. Using a per-unit comparison would underweight the magnitude of the investment for establishing the precursor “ingot and wafer produc- tion facilities in China.” Id. It would also distort the results because Chinese economies of scale allowed for “lower-per unit investment costs.” Appx0001213– 0001214.
The Department also responded to BYD’s critique of its finding that the “value of processing” in Cambo- dia was a “small proportion of the value of the mer- chandise imported into the United States.” Appx0001259 (quoting 19 U.S.C. § 1677j(b)(2)(E)). The agency rejected the company’s argument that “value” encompasses monetary and qualitative considera- tions. Appx0001259–0001261. It also explained that its calculation here—greater than one-third—was comparable to ratios it had previously “found . . . to be minor.” Appx0001261.
Commerce then answered BYD’s challenge to its conclusion that the “value” of the Chinese components was a “significant portion” of the “total value” of the solar cells exported to this country. Appx0001239; 19 U.S.C. § 1677j(b)(1)(D). In response to the conten- tion that it should have used the prices the company paid for Chinese parts rather than surrogate data from market-economy countries, the agency explained that neither the statute nor agency regulations “describe Ct. No. 23-00221 Page 13
how . . . to determine ‘value.’” Appx0001239. Because the inputs were produced in a nonmarket-economy country, their prices “could be distorted” by govern- ment controls. Appx0001240.
Finally, the Department addressed whether action was “appropriate . . . to prevent evasion” of the orders. Appx0001271 (quoting 19 U.S.C. § 1677j(b)(1)(E)). It explained that extending them to Cambodian solar cells was necessary because the other statutory condi- tions “were met, and the factors under [§ 1677j(b)(3)] further evinced the existence of circumventing behav- ior, and because [nothing] suggested that circumven- tion would cease absent” such action. Id.
III
Invoking jurisdiction conferred by 28 U.S.C. § 1581(c), BYD brought this suit under 19 U.S.C. §§ 1516a(a)(2)(A)(ii) and (a)(2)(B)(vi) challenging the Department’s final determination. Florida Power & Light (FPL), an importer of Cambodian solar cells, in- tervened as a plaintiff, while Auxin did likewise as a defendant. The parties have fully briefed BYD’s and FPL’s motions for judgment on the agency record, which are ripe for disposition.
In § 1516a(a)(2) actions such as this, “[t]he court shall hold unlawful any determination, finding, or con- clusion found . . . to be unsupported by substantial ev- idence on the record, or otherwise not in accordance with law.” 19 U.S.C. § 1516a(b)(1)(B)(i). The question Ct. No. 23-00221 Page 14
is not whether the court would have reached the same decision on the same record. Rather, it is whether the administrative record as a whole permits Commerce’s conclusion.
Substantial evidence has been defined as more than a mere scintilla, as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. To determine if substan- tial evidence exists, we review the record as a whole, including evidence that supports as well as evidence that fairly detracts from the sub- stantiality of the evidence.
Nippon Steel Corp. v. United States, 337 F.3d 1373, 1379 (Fed. Cir. 2003) (cleaned up); see also SSIH Equip. S.A. v. U.S. Int’l Trade Comm’n, 718 F.2d 365, 382 (Fed. Cir. 1983) (if Commerce makes a choice be- tween “two fairly conflicting views,” the court may not substitute its judgment even if its view would have been different “had the matter been before it de novo”) (quoting Universal Camera Corp. v. NLRB, 340 U.S. 474, 488 (1951)).
IV
In concluding that “the process of assembly or com- pletion” in Cambodia is “minor or insignificant,” 19 U.S.C. § 1677j(b)(1)(C), as explained above Com- merce made affirmative findings on four of the five Ct. No. 23-00221 Page 15
§ 1677j(b)(2) considerations—all but the “nature of the production process” in that country. BYD and FPL at- tack the Department’s balancing of these factors as well as its conclusions as to three of them.
BYD first contends that Commerce erred as a mat- ter of law in finding the “process of assembly or com- pletion” in Cambodia “minor or insignificant.” ECF 36, at 30–39. The company asserts that the agency’s “in- quiry should have ended as soon as it found that the value-added in Cambodia exceeded a third and the na- ture of the Cambodian processing—the processing at the heart of [the] inquiry—was neither minor nor in- significant. But it did not.” Id. at 39.
The problem for BYD is that § 1677j(b)(2) requires the Department to consider and balance all five fac- tors, not just the company’s preferred ones. That’s what the agency did here: It weighed them based on the record before it. To contend that it erred as a mat- ter of law because it refused to limit its analysis to a subset of the mandatory considerations flies in the face of the statute.
Taking a different tack, FPL argues that Commerce erroneously balanced the § 1677j(b)(2) factors. See ECF 38, at 12–17. As the company sees it, the Depart- ment’s “nature of the production process” findings show that solar cell manufacturing operations in Cam- bodia “are significant, extensive, and complex.” Id. at Ct. No. 23-00221 Page 16
14. They also demonstrate “the addition of substantial value.” Id. at 15.
Although the record might have permitted the De- partment to reach such a conclusion, it did not compel such a result. “Where two different, inconsistent con- clusions may reasonably be drawn from the evidence in [the] record, an agency’s decision to favor one con- clusion over the other is the epitome of a decision that must be sustained upon review for substantial evi- dence.” In re Morsa, 713 F.3d 104, 109 (Fed. Cir. 2013) (brackets omitted) (quoting In re Jolley, 308 F.3d 1317, 1329 (Fed. Cir. 2002)). As the agency reasonably ex- plained the basis for its weighing of the § 1677j(b)(2) factors, including its finding that R&D in the solar in- dustry context was of “preeminent importance,” Appx0001257, FPL’s argument that it should have reached a different result is unavailing.
BYD complains that “Commerce improperly placed decisive weight on the importance of R&D” because “[n]othing in the text of the statute indicates that [it] should be afforded ‘particular importance.’” ECF 36, at 57. The company also argues that as the SAA teaches that “no single [§ 1677j(b)(2)] factor will be controlling,” id. (quoting SAA at 893, 1994 U.S.C.C.A.N. at 4216), the Department may not “af- ford R&D determinative status,” id. at 57–58. Ct. No. 23-00221 Page 17
The company misreads both the statute and the SAA. Commerce must consider the five § 1677j(b)(2) factors “depending on the particular circumvention scenario.” SAA at 893, 1994 U.S.C.C.A.N. at 4216. No single one is controlling as a matter of law, but the statute permits the Department to balance them based on the record evidence in any given case. Here, the agency did that and reasonably explained why it assigned preponderant weight to R&D. See Appx0001257 (explaining that the China-based R&D is of “preeminent importance in the solar industry,” as it “has been key for technological breakthroughs”). The record supports that weighting, even if a different finder of fact might have reached a different conclu- sion. Cf. Morsa, 713 F.3d at 109.
BYD also contends that Commerce’s weighting of R&D contradicts agency precedent. ECF 36, at 58–59. In the cited decisions, however, the agency simply as- signed less weight to R&D based on the facts before it. That it assigned greater weight here is not a contra- diction but instead merely reflects the differing record evidence in this case. It should go without saying—but apparently it needs restating—that each case turns on its own facts. 5
5 In passing, BYD also appears to challenge the Depart-
ment’s R&D finding on the ground that the agency did not consider the tollers’ activities. See id. at 57. This half- hearted contention fails for two reasons. Ct. No. 23-00221 Page 18
BYD challenges the failure to include the tollers’ operations in evaluating the “level of investment” and “extent of production facilities” factors (§§ 1677j(b)(2)(A) and (D)). ECF 36, at 39–40. It insists it was unlawful for the Department not to consider their activities. Id. at 40. According to the company, the agency must examine, “without qualification,” the process of assembly or completion in the third country and decide whether it is minor or insignificant. Id. at 41. “Quite simply, for purposes of the circumvention analysis, it is what goes on in the inquiry country that is at issue, not who does it.” Id. at 42 (emphasis added). It argues that the statute neither “state[s nor] im- plie[s] that Commerce may choose to disregard pro-
To begin with, arguments only made in passing are waived. See ArcelorMittal France v. AK Steel Corp., 700 F.3d 1314, 1325 n.6 (Fed. Cir. 2012). Moreover, before Commerce, the company “agree[d] with” the agency’s pre- liminary determination that there was no relevant R&D activity in Cambodia, and only contested the relative sig- nificance of the finding. Appx0001257 (emphasis added). Having so failed to contest the Department’s finding that Cambodian R&D was minor, it’s too late to do so now. See 28 U.S.C. § 2637(d) (requiring exhaustion of administrative remedies); 19 C.F.R. § 351.309(c)(2) (requiring parties to submit case briefs that “present all arguments that con- tinue in the submitter’s view to be relevant to the [agency’s] final determination or final results”). At this stage, the court will only entertain the argument that BYD made be- low—that the agency assigned undue weight to its R&D finding. Ct. No. 23-00221 Page 19
cessing activities performed in the third country be- cause they are not carried out by the respondent it- self.” ECF 43, at 11.
FPL, in turn, argues that “[b]y focusing its analysis solely on a company not involved in production opera- tions (BYD), while ignoring the data for the Cambo- dian companies engaged in the actual process of com- pletion or assembly of the imported merchandise (BYD’s tollers),” Commerce conducted an incomplete investigation. ECF 38, at 21 (emphasis in original). FPL also contends that the Department’s “inability” to verify the tollers’ data was a problem of its own mak- ing because it knew BYD relied on tollers and could have selected them as additional respondents. Id. at 24 (citing Appx0003710–0003723).
The government responds that the statute gives Commerce discretion to consider any affiliation be- tween “the producer in a third country” and the input supplier based in the source country. ECF 41, at 21 (citing 19 U.S.C. § 1677j(b)(3)(B)). It also contends that the Department reasonably exercised that discretion in not including the tollers’ activities in assessing the level of investment and the extent of production facili- ties. Id. at 18–22.
The court agrees with BYD that under the statute, “what goes on in the inquiry country . . . is at issue, not who does it.” ECF 36, at 42 (emphasis added); see 19 U.S.C. § 1677j(b)(1)(C) (requiring the Department to determine whether “the process of assembly or Ct. No. 23-00221 Page 20
completion” in the third country “is minor or insignifi- cant”) (emphasis added). As to each § 1677j(b)(2) fac- tor, Commerce must evaluate the relevant aspect of “the process of assembly or completion” without gerry- mandering its findings—as it did here—based on the identity of the actor(s) undertaking it. 6
Contrary to the government’s argument, § 1677j(b)(3)(B) does not license Commerce to consider affiliations at the § 1677j(b)(1)(C) stage. As explained today in the court’s concurrent opinion in Canadian Solar International Ltd. v. United States, Ct. Nos. 23-00222 and 23-00227, Slip Op. 25-59, at 16 (CIT May 16, 2025), the statute requires the Department to undertake an “if/then” analysis. “Only if it finds the conditions in § 1677j(b)(1)(A)–(E) satisfied does it then consider whether to expand an order to cover a third country. In doing so, it must then consider the § 1677j(b)(3) factors,” including affiliation. Id. (empha- sis in original); see also 19 U.S.C. § 1677j(b)(3)(B) (“In determining whether to include” products assembled in
6 The court also observes that the Department’s erroneous
reading of the statute does not even have the benefit of in- ternal consistency. If the tollers’ activities are irrelevant, then why did the agency consider them in finding that the “nature of the production process” (§ 1677j(b)(2)(C)) is sig- nificant? See Appx0001031 (“[T]he process for turning wa- fers into solar cells requires an expensive, multi-stage as- sembly line requiring high-technological machinery and workers with strong technological knowledge.”). The tollers provided the hi-tech equipment and services of skilled tech- nicians. Ct. No. 23-00221 Page 21
a third country in a duty order, Commerce “shall take into account such factors as . . .” any affiliation be- tween the manufacturer or exporter of source-country parts and “the person who uses” those parts “to assem- ble or complete” the products) (emphasis added). The agency cannot allow § 1677j(b)(3) considerations to “bleed over into its weighing of the § 1677j(b)(2) factors that bear on § 1677j(b)(1)(C).” Canadian Solar, Slip Op. 25-59, at 16. 7
That all said, as in the companion case from Thai- land, this legal error was harmless. As BYD acknowl- edges, the weight Commerce attached to China-based
7 The court observes that even if the § 1677j(b)(3) consider-
ations applied at the stage of determining whether the § 1677j(b)(1) conditions are satisfied, the tollers were affil- iated with BYD for the statute’s purposes if the company could control them under the relevant contracts. See 19 U.S.C. § 1677(33)(G) (defining “affiliated” to include “[a]ny person who controls any other person and such other person” and providing that “control” exists when one per- son “is legally or operationally in a position to exercise re- straint or direction over” another); cf. DeFiore v. SOC LLC, 85 F.4th 546, 555 (9th Cir. 2023) (noting the “crucial dis- tinction between independent contractors that are agents and independent contractors that are instead non-agent service providers”); see also Restatement (Second) of Agency § 14N (1958) (“One who contracts to act on behalf of an- other and subject to the other’s control except with respect to his physical conduct is an agent and also an independent contractor.”) (emphasis added). On this record, it’s unclear whether the tollers were agents or non-agent service pro- viders. Ct. No. 23-00221 Page 22
R&D was “determinative” here in balancing the § 1677j(b)(2) factors. ECF 36, at 59. 8 Even if the De- partment had considered the tollers’ activities and flipped its findings about the investment and produc- tion facilities factors, see § 1677j(b)(2)(A) and (D), the result would have been the same.9 A remand would be wasteful. Cf. Al Ghurair Iron & Steel LLC v. United States, 65 F.4th 1351, 1363 (Fed. Cir. 2023) (“Com- merce’s finding . . . was supported by many findings other than its [erroneous] calculation of [the plain- tiff’s] value added.”).
BYD attacks the agency’s finding that “the value of the processing performed in” Cambodia was “a small proportion of the value of the merchandise imported into the United States.” ECF 36, at 47–56 (addressing 19 U.S.C. § 1677j(b)(2)(E)). The company first argues that on an absolute basis, the figure calculated here— greater than one-third—cannot be “small.” Id. at 48– 51. It argues that “[i]t is simply unreasonable for
8 FPL endorses BYD’s arguments as to R&D. See ECF 38,
at 17–18. 9 In Commerce’s finding of circumvention in Thailand that
the court sustains today, as to one respondent the Depart- ment concluded that the process of assembly or completion was minor or insignificant based on the singular im- portance of R&D, even though the rest of the § 1677j(b)(2) factors pointed in the other direction. Canadian Solar, Slip Op. 25-59, at 7–8. Ct. No. 23-00221 Page 23
Commerce to have considered this level of processing to be minor or insignificant.” Id. at 48.
In effect, the company asks the court to legislate a ceiling for determining what is a “small proportion.” But there are no “rigid numerical standards for deter- mining the significance of the [§ 1677j(b)(2)] activi- ties.” SAA at 894, 1994 U.S.C.C.A.N. at 4217; cf. Al Ghurair, 65 F.4th at 1361 n.4 (noting with approval the concession that “Commerce should not be held to a numerical or ‘bright-line’ test in considering the value added in third-country processing”).
It suffices here that the Department observed that in prior cases it “found similar ratios to be minor,” Appx0001261–0001262 (emphasis added) (citing 85 Fed. Reg. 8823)—a point BYD does not dispute. The court thus rejects the company’s contention that Com- merce unreasonably found the value added in Cambo- dian processing to be small. Cf. Al Ghurair, 65 F.4th at 1361 n.4 (sustaining the agency’s finding that “the value added” in the third country “was insignificant in view of prior [agency] cases making similar findings”) (emphasis added). 10
10 BYD also complains that Commerce’s value-added find-
ing here contradicts three agency decisions. See ECF 36, at 49–50. The Department, however, reasonably explained why it found them unpersuasive. In one, the agency “ranged” the values “by plus or minus 10 percent” and found the § 1677j(b)(2)(E) factor “inconclusive.” Ct. No. 23-00221 Page 24
Shifting gears, BYD argues that the Department erroneously “failed to evaluate the value added on a qualitative basis as directed by Congress.” ECF 36, at 51. To support that proposition, the company pur- ports to quote from the SAA. See id. at 53. The cited language, however, does not appear in that document. In any event, the statute forecloses the company’s ar- gument. The “nature of the production process” in § 1677j(b)(2)(C) necessarily encompasses qualitative considerations. As the government argues, to evaluate such matters under both § 1677j(b)(2)(C) and § 1677j(b)(2)(E) “would double-count the nature of the production process within the totality of the factors.” ECF 41, at 26.
The company also contends that Commerce’s re- fusal to include qualitative considerations in its value- added determination departs from previous practice.
Appx0001261 (discussing 73 Fed. Reg. 21,580, 21,585). In a second, it “did not provide an explicit determination as to whether the value of processing was small.” Id. (citing 64 Fed. Reg. 40,336, 40,341–43). And in a third, the De- partment “stressed” that its “not small” finding “was an anomaly” because the percentage fell within a range (12– 26 percent) it had found to be “small” in previous cases. Appx0001261–0001262 (citing 77 Fed. Reg. 6537, 6539). That anomaly resulted from the agency basing its “not small” finding on “the extensive and substantial processing that occurred.” Appx0001262. In this case, Commerce ex- plained that such qualitative considerations should have no bearing on “the percentage calculated under” § 1677j(b)(2)(E). Id. Ct. No. 23-00221 Page 25
See ECF 36, at 52. But the previous agency decisions BYD cites are of limited value. To begin with, they an- tedate the applicable regulation for circumvention in- quiries, which requires assessing the “value of pro- cessing” based on “the cost of producing the part or component.” Appx0001259 (emphasis added and quot- ing 19 C.F.R. § 351.226(i)). Commerce observed that “[c]osts are measured numerically, as is the value of merchandise.” Id. It discussed its prior decisions and explained that they referred to “the overall decision of whether processing is minor or insignificant or the overall determination of whether circumvention is oc- curring,” rather than the specific § 1677j(b)(2)(E) fac- tor. Appx0001260. Even if the Department changed course, it sufficiently explained its rationale for doing so. See Al Ghurair, 65 F.4th at 1360 (stating an agency is not bound by its prior determinations if it explains its reasons for departing from past practice).
BYD complains that for purposes of § 1677j(b)(2)(A), Commerce compared the company’s level of investment in Cambodia to the level made by its Chinese affiliates “on an absolute basis (i.e., total value of investments made) rather than on a per-meg- awatt basis (i.e., value of the investments relative to production).” ECF 36, at 60. 11 It says this was “unrea- sonable and highly distortive” because the Cambodian
11 FPL joins this argument. ECF 38, at 27–28. Ct. No. 23-00221 Page 26
operations serve a “vastly smaller market” than the Chinese affiliates who serve “the very large Chinese and global markets.” ECF 36, at 60–61. It also asserts that the agency’s approach is wrong because it “ig- nores the very different scales of production in the two countries. The Chinese industry has invested in a large upstream industry that supplies virtually all of the world’s demand for polysilicon wafers, whereas the Cambodian industry is manufacturing cells and mod- ules for the U.S. and (relatively small amounts) for cer- tain other markets.” Id. at 61.
As the government argues, see ECF 41, at 32, the Department observed that the statute does not speak to how the level of investment should be calculated. Appx0001213. Doing so here using the “per-unit” methodology proffered by BYD and FPL would “over- look[ ] the relative requirements of establishing ingot and wafer production facilities in China, as compared with the cell and module production facilities in Cam- bodia.” Id. It thus “would dilute the large necessary in- itial investments required by the production volume of the facilities.” Id. Commerce explained that it must ac- count for the “threshold level of investment in the Chi- nese facilities” and that a per-unit analysis would be distortive because China’s dominance in ingot and wa- fer manufacturing means that economies of scale re- sult in lower per-unit investment costs. Appx0001213– 0001214. Ct. No. 23-00221 Page 27
The court agrees with the government. Nothing in the statute requires the agency to calculate the level of investment in the manner BYD and FPL prefer. The administrative record, in turn, shows that the Depart- ment considered their arguments and reasonably ex- plained why the calculation should be made on an ab- solute basis. Given its discretion regarding questions of methodology, that suffices.
* * *
The court sustains Commerce’s balancing of the § 1677j(b)(2) factors and thus its conclusion that “the process of assembly or completion” of solar cells in Cambodia is “minor or insignificant” under § 1677j(b)(1)(C).
BYD next attacks Commerce’s § 1677j(b)(1)(D) find- ing that the value of Chinese components in solar cells exported to this country from Cambodia is a “signifi- cant portion of the total value” of those goods. The com- pany zeroes in on the Department’s use of surrogate data from market-economy countries, rather than the prices BYD paid, to value the Chinese inputs. See ECF 36, at 63–69; Appx0001239–0001240.
Commerce observed that the Tariff Act generally presumes that prices of goods from nonmarket-econ- omy countries are unreliable because of government controls, and it found that such controls could have Ct. No. 23-00221 Page 28
distorted BYD’s prices. Appx0001240. It therefore deemed it inappropriate to use the company’s records to value the Chinese inputs. Id.
BYD objects that the agency did not contest its data’s accuracy. ECF 36, at 64. “It is undisputed that Cambodia is a market economy. There is therefore no evident factual or statutory basis for Commerce to have used [a nonmarket-economy] surrogate value methodology in this case.” Id. It adds that the agency “unlawfully overstated” the inputs’ value because the surrogate values were higher than the actual prices. Id. at 64–65.
The government responds that it is irrelevant whether Cambodia has a market economy—the De- partment must value merchandise produced in the country subject to the duty orders, which in this case has a nonmarket economy. ECF 41, at 34–35. “To use Chinese input prices based on nonmarket principles to determine what proportion of the United States mar- ket price was derived from Chinese production would be irrational.” Id. at 34.
The only significant case law the parties discuss is Al Ghurair Iron & Steel LLC v. United States, 536 F. Supp. 3d 1357, 1376–78 (CIT 2021), aff’d, 65 F.4th 1351 (Fed. Cir. 2023), which the Department also cited, see Appx0001239–0001240. The plaintiff there argued, as BYD does here, that the statute does not allow Commerce to use surrogate values to calculate the cost of source-country components when the third Ct. No. 23-00221 Page 29
country has a market economy. 536 F. Supp. 3d at 1376. The government responded that the agency’s standard practice is to presume that nonmarket-econ- omy costs and pricing are inherently unreliable even when the inputs are used in a market-economy coun- try. Id. at 1377. The court agreed with the government and held that Congress had left a gap for the Depart- ment to fill: “Given the lack of definition of ‘value’ and silence as to the method to use to assess ‘value,’ Com- merce acted reasonably.” Id. at 1378.
BYD argues that Al Ghurair is no longer persuasive authority in the wake of Loper Bright Enterprises v. Raimondo. ECF 36, at 66–67 (citing 603 U.S. 369, 404 (2024)). Under that decision, “[a] statutory ambiguity ‘is not a delegation to anybody.’” Pickens v. Hamilton- Ryker IT Sols., LLC, 133 F.4th 575, 587 (6th Cir. 2025) (Sutton, C.J.) (quoting Loper Bright, 603 U.S. at 400). When faced with “an unclear statute,” judges must “arrive at their own ‘independent judgment’ about what [it] means.” Id. (quoting Loper Bright, 603 U.S. at 412).
In Loper Bright, however, the Court did not throw out the administrative discretion baby with the Chev- ron deference bathwater. See id. (citing Gary Lawson, “Then What?”: A Framework for Life Without Chevron, 60 Wake Forest L. Rev. 57, 93–94 (2025)). “[I]t will sometimes be the case that ‘the best reading of a stat- ute is that it delegates discretionary authority to an agency.’” Id. (quoting Loper Bright, 603 U.S. at 395). Ct. No. 23-00221 Page 30
“‘[B]road and open-ended’ grants of authority . . . are incapable of precise definition not because they are ambiguous, but because they unambiguously convey discretion.” Id. (quoting Kisor v. Wilkie, 588 U.S. 558, 632 (2019) (Kavanaugh, J., concurring in the judg- ment), and citing Donald L.R. Goodson, Discretion Is Not (Chevron) Deference, 62 Harv. J. on Legis. 12, 16– 17 (2024)). In those circumstances, and assuming the statute provides constitutionally delegable authority and that the agency has stayed within its lane, see id., the court’s role is to ensure that the former’s “action is both ‘reasonable and reasonably explained,’” id. at 588 (quoting FCC v. Prometheus Radio Project, 592 U.S. 414, 423 (2021)).
Here, the statute delegates authority to Commerce to define the general term “value” in 19 U.S.C. § 1677j(b)(1)(D). The court agrees with Al Ghurair and holds that the Department reasonably exercised that discretion using surrogate values rather than Chinese prices.
Consider the relevant background principles. Com- merce observed that the Tariff Act generally presumes the prices of goods produced in nonmarket-economy countries are unreliable because of government con- trols. Appx0001240. China is such a country. See 46 Fed. Reg. 24,614, 24,614. The orders here impose antidumping and countervailing duties on solar cells from that nation. Ct. No. 23-00221 Page 31
That, in turn, raises a fundamental point: Counter- vailing duties respond to a foreign government’s sub- sidizing of the manufacture, production, or export of merchandise, see 19 U.S.C. § 1671(a)(1), so it is reason- able to assume that the price of such goods, or of the inputs used to make them, reflects the subsidy. The subsidy is baked into the price. So, while BYD com- plains that the surrogate values were higher than the actual prices, ECF 36, at 64–65, that is exactly the point—the agency reasonably presumed that the ac- tual prices of Chinese-made components are artifi- cially low.
The Tariff Act presumes that nonmarket-economy pricing is unreliable, and there is no reason to believe that otherwise-suspect prices of goods from such coun- tries are valid for sales just because they’re made in a third country rather than the United States. Thus, the court holds that Commerce’s discretionary use of sur- rogate data to value the cost of Chinese-made inputs was reasonable.
C
Finally, BYD contends that the statute requires the Department “to weigh the evidence and provide rea- soning as to why an affirmative determination is ‘ap- propriate.’” ECF 36, at 71 (citing 19 U.S.C. § 1677j(b)(1)(E)). It asserts that “[n]either the statute nor the SAA provides a specific definition of ‘appropri- ate’ to be applied in the circumvention context,” id., and that under Michigan v. EPA, the agency was Ct. No. 23-00221 Page 32
required to consider “all the relevant factors” and pay “at least some attention to cost.” Id. (quoting 576 U.S. 743, 752 (2015)). According to the company, action was not appropriate in view of Presidential Proclamation 10414 12 and the Department’s own precedents. ECF 36, at 72–75.
The court agrees with BYD, and the government does not dispute, that § 1677j(b)(1)(E) is an independ- ent condition that the agency must find satisfied be- fore it may include exports from a third country within the scope of orders applying to source-country exports. That said, the court concurs with the government that the company’s “appeals to matters of cost and public policy lack merit.” ECF 41, at 37.
To begin with, BYD failed to argue before the De- partment that the latter should consider costs in mak- ing its § 1677j(b)(1)(E) finding. Exhaustion doctrine precludes the company from now raising that conten- tion. See 28 U.S.C. § 2637(d).
In any event, BYD misreads the statute, under which the only relevant inquiry is whether “action is appropriate under [§ 1677j(b)(1)] to prevent evasion.”
12 In this order, the President declared an emergency with
respect to the availability of reliable electricity and di- rected Commerce to suspend the application of antidump- ing and countervailing duties on solar cells and modules from Cambodia, Malaysia, Thailand, and Vietnam for two years. See 87 Fed. Reg. 35,067. Ct. No. 23-00221 Page 33
19 U.S.C. § 1677j(b)(1)(E) (emphasis added). It simply does not require the broad inquiry suggested by the company.
Commerce explained that the § 1677j(b)(1)(A)–(D) conditions for finding circumvention were met and that no information on the record suggested that cir- cumvention “would cease” unless the orders were ex- tended to cover exports from Cambodia, Appx0001271—a finding that BYD does not dispute. Therefore, the Department reasonably found “that ac- tion is appropriate under” § 1677j(b)(1)(E) to prevent evasion. Id. That is all the statute required at this stage. 13
But even if the statute required the broader inquiry pressed by BYD, the agency reasonably explained why action was appropriate given the objections raised by the company. As to Proclamation 10414, nothing in it precluded the Department from finding circumven- tion—it just meant that the agency could not imple- ment its affirmative finding until the proclamation ex- pired. Appx0001272. The court further observes that, in any event, the statute gives the responsibility of
13 If the Department finds all the § 1677j(b)(1) conditions
satisfied, that does not automatically require it to extend duty orders to exports from third countries. It has discre- tion to do so based on its evaluation of the § 1677j(b)(3) fac- tors, other considerations that it deems relevant, and input from the International Trade Commission. See 19 U.S.C. §§ 1677j(b)(1), (b)(3). Ct. No. 23-00221 Page 34
assessing potential circumvention to Commerce, not to the President, whose order was irrelevant under the § 1677j criteria.
As to the Department’s prior decisions, nowhere in its original investigation did it disclaim future circum- vention inquiries—as BYD asserts—concerning the conversion of “Chinese-origin wafers into [solar] cells in a third country.” ECF 36, at 73. Instead, the agency observed that domestic producers have “the option of bringing additional [antidumping and countervailing duty] petitions to address any . . . concerns . . . regard- ing solar modules/panels assembled from solar cells produced in a third country.” Appx0013244 (emphasis added). It “did not preclude circumvention inquiries” as an option when solar cells are made in third coun- tries using Chinese components. Appx0001271.
BYD also asserts that the Department “previously confirmed that it is inappropriate to conduct a circum- vention inquiry where merchandise was ‘expressly and intentionally excluded from the scope of the Orders,’ as was the case here.” ECF 38, at 73 (citing Walk-Be- hind Lawn Mowers from China, 88 Fed. Reg. 13,434, 13,435, and quoting accompanying Memorandum of Intent to Rescind Circumvention Inquiry at 4). The company conflates the apples (the technical character- istics of products covered by an order) and oranges (the country of origin) that are the elements of scope. See Canadian Solar, 918 F.3d at 913. In Walk-Behind Lawn Mowers, the Department found a § 1677j(a) Ct. No. 23-00221 Page 35
circumvention inquiry 14 unwarranted because the original scope language expressly excluded by tech- nical description the components that would be subject to the circumvention duties. See Memo of Intent to Re- scind at 6–8. Extending the order to such components “would introduce an internal inconsistency into the scope by both excluding and including the same mer- chandise and would expand the scope contrary to the terms of the Orders.” Id. at 7. Here, Commerce’s cir- cumvention determination extends the duties to the products sharing the same technical characteristics described in the original orders. Thus, no internal in- consistency as to such characteristics is created.
Insofar as the company contends that extending the orders to the same products that are the result of sub- stantial transformation in the third country creates an internal inconsistency, the Federal Circuit’s decision in Bell Supply forecloses that theory. See 888 F.3d at 1230 (explaining that when Commerce finds sub- stantial transformation, it “can include such merchan- dise within the scope of an [antidumping or counter- vailing duty] order . . . if it finds circumvention under § 1677j”) (emphasis added).
14 In such an inquiry, the exports in question are source-
country components that are shipped to the United States and then completed or assembled into products “of the same class or kind” of merchandise from the former nation that is subject to duty orders. See 19 U.S.C. §1677j(a)(1). Ct. No. 23-00221 Page 36
BYD’s arguments challenging the Department’s finding that action was “appropriate . . . to prevent evasion,” 19 U.S.C. § 1677j(b)(1)(E), are unavailing. The court therefore upholds it.
The court denies the motions for judgment on the agency record filed by BYD (ECF 36) and FPL (ECF 38) and sustains Commerce’s determination. Judgment will enter. See USCIT R. 58(a).
Dated: May 16, 2025 /s/ M. Miller Baker New York, NY Judge