Canadian Solar, Inc. v. United States , 918 F.3d 909 ( 2019 )

United States Court of Appeals
for the Federal Circuit
______________________
CANADIAN SOLAR, INC., CHANGZHOU TRINA
SOLAR ENERGY CO., LTD., HEFEI JA SOLAR
TECHNOLOGY CO., LTD., SHANGHAI JA SOLAR
TECHNOLOGY CO., LTD., YINGLI GREEN
ENERGY HOLDING COMPANY LIMITED, YINGLI
GREEN ENERGY AMERICAS, INC.,
Plaintiffs-Appellants
SHANGHAI BYD CO., LTD., BYD (SHANGLUO)
INDUSTRIAL CO., LTD., CHINA SUNERGY
(NANJING) CO., LTD., CHINT SOLAR (ZHEJIANG)
CO., LTD., ET SOLAR INDUSTRY LTD., JINKO
SOLAR CO., LTD., LDK SOLAR HI-TECH
(NANCHANG) CO., LTD., PERLIGHT SOLAR CO.,
LTD., RENESOLA JIANGSU LTD., SHENZHEN
SACRED INDUSTRY CO., LTD., SHENZHEN
SUNGOLD SOLAR CO., LTD., SUMEC HARDWARE
& TOOLS CO., LTD., SUNNY APEX DEVELOPMENT
LTD., WUHAN FYY TECHNOLOGY CO., LTD., WUXI
SUNTECH POWER CO., LTD., ZHONGLI
TALESUNSOLAR CO., LTD., ZNSHINE PV-TECH
CO., LTD., SUNPOWER CORPORATION,
Plaintiffs
v.
UNITED STATES, SOLARWORLD AMERICAS, INC.,
Defendants-Appellees
______________________
2017-2577
______________________
2 CANADIAN SOLAR, INC. v. UNITED STATES
Appeal from the United States Court of International
Trade in Nos. 1:15-cv-00067-CRK, 1:15-cv-00083-CRK,
1:15-cv-00087-CRK, 1:15-cv-00088-CRK, 1:15-cv-00089-
CRK, 1:15-cv-00090-CRK, Judge Claire R. Kelly.
______________________
Decided: March 12, 2019
______________________
SPENCER STEWART GRIFFITH, DEVIN S. SIKES, Akin
Gump Strauss Hauer & Feld LLP, Washington, DC, ar-
gued for plaintiffs-appellants.
TARA K. HOGAN, Commercial Litigation Branch, Civil
Division, United States Department of Justice, Washing-
ton, DC, argued for defendant-appellee United States. Also
represented by REGINALD THOMAS BLADES, JR., ROBERT
EDWARD KIRSCHMAN, JR., JOSEPH H. HUNT; SCOTT DANIEL
MCBRIDE, Office of the Chief Counsel for Import Admin-
istration, United States Department of Commerce, Wash-
ington, DC.
TIMOTHY C. BRIGHTBILL, Wiley Rein, LLP, Washington,
DC, argued for defendant-appellee SolarWorld Americas,
Inc. Also represented by STEPHANIE MANAKER BELL, TESSA
V. CAPELOTO, LAURA EL-SABAAWI, CYNTHIA CRISTINA
GALVEZ, USHA NEELAKANTAN, ADAM MILAN TESLIK,
MAUREEN E. THORSON.
______________________
Before NEWMAN, O’MALLEY, and CHEN, Circuit Judges.
O’MALLEY, Circuit Judge.
This is an appeal from a judgment of the Court of In-
ternational Trade sustaining a remand determination from
the U.S. Department of Commerce (“Commerce”). Sun-
Power Corp. v. United States, 253 F. Supp. 3d 1275 (Ct.
CANADIAN SOLAR, INC. v. UNITED STATES 3
Int’l Trade 2017) (“Solar II China”). In its remand deter-
mination, Commerce imposed countervailing and anti-
dumping duties on the importation of a class or kind of
merchandise—specifically, solar cells and modules, lami-
nates, and/or panels (collectively, “panels”), containing so-
lar cells imported or sold for importation to the United
States from the People’s Republic of China (“China”). Final
Results of Redetermination Pursuant to Ct. Order, Sun-
Power Corp. v. United States, No. 15-00067 (Oct. 5, 2016)
(“Solar II China Remand Results”), ECF No. 105-1. When
defining the class or kind of merchandise within the scope
of the orders, Commerce used a new test, rather than the
typically-used “substantial transformation” test, to deter-
mine the country of origin. Appellants contend that Com-
merce failed to provide a reasoned explanation for
departing from its previous practice and that substantial
evidence does not support its findings. Because we con-
clude that Commerce provided a reasoned explanation and
that substantial evidence supports its findings, we affirm.
I. BACKGROUND
A. Legal Framework
The Tariff Act of 1930, as amended, authorizes Com-
merce to initiate countervailing or antidumping duty inves-
tigations, and, in certain circumstances, impose duties on
foreign merchandise sold, or likely to be sold, in the United
States. 19 U.S.C. §§ 1671, 1673. Specifically, Commerce
may impose countervailing duties “to address government
subsidies to foreign producers,” and it may impose anti-
dumping duties to “provide relief from market distortions
caused by foreign producers who sell their merchandise in
the United States for less than fair market value,” so long
as the U.S. International Trade Commission (“Commis-
sion”) finds that those activities materially injure or
threaten to materially injure domestic industry. Bell Sup-
ply Co. v. United States, 888 F.3d 1222, 1225 (Fed. Cir.
2018).
4 CANADIAN SOLAR, INC. v. UNITED STATES
A countervailing or antidumping duty investigation
typically begins with a petition filed by a domestic indus-
try. Id. If the investigation reveals dumping or foreign
subsidies that injure the domestic industry, Commerce
must issue an order imposing countervailing or antidump-
ing duties. In this order, Commerce describes the class or
kind of merchandise within the scope of the order in two
parts—first, the type of merchandise, i.e., its technical
characteristics, and second, the merchandise’s country of
origin. Certain Cold-Rolled Carbon Steel Flat Prods. From
Argentina, 58 Fed. Reg. 37,062, 37,065 (Dep’t of Commerce
July 9, 1993); see Glob. Commodity Grp. LLC v. U.S., 709
F.3d 1134, 1140 (Fed. Cir. 2013) (affirming Commerce’s
class or kind determination because it “appropriately ac-
counts for both the physical scope of the product as well as
the country of origin.”).
Commerce typically determines country of origin based
on the country where the merchandise is processed or man-
ufactured. See Cold-Rolled Carbon, 58 Fed. Reg. at 37,065.
But, in circumstances in which the merchandise undergoes
partial processing or manufacturing in multiple countries,
Commerce relies on the substantial transformation
test. Id. Under the substantial transformation test, a so-
lar cell manufactured in country A, but assembled into a
panel elsewhere would cease to be from country A if, as a
result of the assembly process, the solar panel “loses its
identity and is transformed into a new product having a
new name, character and use.” Bell Supply, 888 F.3d at
1228 (quoting Bestfoods v. United States, 165 F.3d 1371,
1373 (Fed. Cir. 1999)).
B. The Parties & The Merchandise
SolarWorld, an appellee in this appeal, is a domestic
producer of solar products. It initiated the trade remedy
investigations from which this appeal arises by filing peti-
tions alleging injury to the domestic solar industry. The
appellants in this appeal—Canadian Solar, Inc.,
CANADIAN SOLAR, INC. v. UNITED STATES 5
Changzhou Trina Solar Energy Co., Ltd., Hefei JA Solar
Technology Co., Ltd., Shanghai JA Solar Technology Co.,
Ltd., Yingli Green Energy Holding Company Limited, and
Yingli Green Energy Americas, Inc.—export and/or pro-
duce the class or kind of merchandise within the scope of
Commerce’s orders from/in China.
While the parties agree on the type of merchandise
within the scope of Commerce’s order—crystalline silicon
photovoltaic cells, and modules, laminates, and/or panels
consisting of crystalline silicon photovoltaic cells, whether
or not partially or fully assembled into other products, in-
cluding building integrated materials—they dispute
whether Commerce erred in its country of origin analysis.
C. Procedural History
Commerce’s orders at issue in Solar II China are the
subject of this appeal, but two prior sets of orders are rele-
vant to the issues before us. Each of these is detailed be-
low.
1. Solar I China
On November 16, 2011, Commerce initiated counter-
vailing and antidumping investigations based on petitions
filed by SolarWorld. The investigations resulted in coun-
tervailing duty and antidumping duty orders covering both
solar cells and solar panels containing solar cells from
China. Crystalline Silicon Photovoltaic Cells, Whether or
Not Assembled Into Modules, From the People’s Republic of
China, 77 Fed. Reg. 73,018 (Dep’t of Commerce Dec. 7,
2012) (antidumping duty order); Crystalline Silicon Photo-
voltaic Cells, Whether or Not Assembled Into Modules,
From the People’s Republic of China, 77 Fed. Reg. 73,017(Dep’t of Commerce Dec. 7, 2012) (countervailing duty or-
der) (collectively, “Solar I China”).
Because some solar cells manufactured in China can be
assembled into panels elsewhere and because some solar
cells manufactured elsewhere can be assembled into panels
6 CANADIAN SOLAR, INC. v. UNITED STATES
in China, Commerce applied the substantial transfor-
mation test to determine the country of origin. Commerce
determined that the solar cell is the origin-conferring com-
ponent because the process of assembling the solar cells
into panels does not constitute a substantial transfor-
mation. SunPower, 253 F. Supp. 3d at 1279 & n.3. Com-
merce therefore concluded that the duty orders covered
solar cells and solar panels from China—including solar
panels assembled outside of China using Chinese solar
cells, but excluding solar panels assembled in China using
non-Chinese solar cells. Id.
2. Solar I Taiwan
SolarWorld later filed petitions alleging that imports of
solar cells and panels from Taiwan had increased, causing
injury to the domestic solar industry. Id. at 1280. Com-
merce initiated an antidumping investigation and eventu-
ally issued an antidumping duty order. Id. In its order,
Commerce applied the substantial transformation test to
conclude—as it had in Solar I China—that the solar cells
are the origin-conferring input. Certain Crystalline Silicon
Photovoltaic Products from Taiwan, 80 Fed. Reg. 8,596(Dep’t of Commerce Feb. 18, 2015) (antidumping duty or-
der) (“Solar I Taiwan”). Thus, the scope of the order in So-
lar I Taiwan covers Taiwanese solar cells and solar
panels—including solar panels assembled elsewhere using
Taiwanese solar cells and excluding solar panels assem-
bled in Taiwan using non-Taiwanese solar cells. Id. at
8,596.
3. The Proceedings Below
a. Commerce’s Decision Regarding Solar II China Orders
On October 19, 2011, SolarWorld filed petitions con-
cerning imports of the subject merchandise from China.
Crystalline Silicon Photovoltaic Cells, Whether or Not As-
sembled Into Modules, From the People’s Republic of China,
76 Fed. Reg. 70,960 (Dep’t of Commerce Nov. 16, 2011)
CANADIAN SOLAR, INC. v. UNITED STATES 7
(antidumping duty inv. initiation); Crystalline Silicon Pho-
tovoltaic Cells, Whether or Not Assembled Into Modules,
From the People’s Republic of China: Initiation of Counter-
vailing Duty Investigation, 76 Fed. Reg. 70,966 (Dep’t of
Commerce Nov. 16, 2011) (countervailing duty inv. initia-
tion). In its petitions, SolarWorld alleged that the Chinese
solar industry had shifted its trade flows to circumvent the
orders in Solar I China by assembling panels using only
non-Chinese cells. Id.Commerce initiated investigations and, on December
23, 2014, published final orders imposing countervailing
and antidumping duties. Countervailing Duty Investiga-
tion of Certain Crystalline Silicon Photovoltaic Products
From the People’s Republic of China, 79 Fed. Reg. 76,962(Dep’t of Commerce Dec. 23, 2014) (antidumping duty or-
der); Certain Crystalline Silicon Photovoltaic Products
from the People’s Republic of China, 79 Fed. Reg. 76,970(Dep’t of Commerce Dec. 23, 2014) (countervailing duty or-
der). To determine the country of origin, Commerce de-
clined to use the substantial transformation test. Rather,
it concluded that the country of assembly confers origin re-
gardless of whether the assembly process substantially
transforms the merchandise (“the country of assembly
test”). To justify departing from its previous practice, it
pointed to the following facts and circumstances unique to
Solar II China:
(1) the unique nature of the solar products industry
in light of the readily adaptable supply chain and
record evidence of a shift in trade flows following
the implementation of the [Solar I China] Orders;
(2) [Commerce]’s concerns that the scope language
in the Petitions would be neither administrable nor
enforceable, and could invite further evasion of any
resulting order; and (3) the fact that [Commerce]
needed a mechanism to address the alleged injury
to the domestic industry, which stemmed, in rele-
vant part, from modules assembled in [China]
8 CANADIAN SOLAR, INC. v. UNITED STATES
using third-country solar cells, and which would
not be captured by a traditional substantial trans-
formation analysis.
SunPower, 253 F. Supp. 3d at 1283. Thus, Commerce con-
cluded that the class or kind of merchandise within the
scope of the orders included all solar panels assembled in
China consisting of non-Chinese cells and excluded any
products covered by existing orders, such as those in Solar
I China. Id.
b. Court of International Trade Remands
On March 18, 2015, appellants filed complaints chal-
lenging both Solar II China and Solar I Taiwan in the
Court of International Trade. Id. They then moved for
judgment on the administrative record, arguing that Com-
merce’s scope determination in Solar II China “was incon-
sistent with the agency’s prior practice for determining
country of origin in similar proceedings, and departed from
that practice without sufficient explanation.” Id. The
Court of International Trade agreed. It found that “Com-
merce’s final scope determinations departed from the
agency’s prior rule for determining national origin for solar
panels” and that it did so “without adequate consideration
or discussion of the continuing relevance, if any, of Com-
merce’s prior factual finding that the assembly of imported
solar cells into panels is insufficient to change the product’s
country-of-origin from the country of cell-production to the
country of panel-assembly.” Id. at 1284 (quoting SunPower
v. United States, 179 F. Supp. 3d 1286, 1288–89 (Ct. Int’l
Trade 2016)). Accordingly, on June 8, 2016, the Court of
International Trade remanded the proceeding to Com-
merce. Id. On remand, it ordered Commerce to explain “its
departure from its prior practice of using a single country
of origin test for a particular class or kind or merchandise”
and its “dissimilar treatment of similarly situated mer-
chandise.” Id.CANADIAN SOLAR, INC. v. UNITED STATES 9
c. Commerce’s Remand Decision
In its remand decision, Commerce explained why its
country of origin determination in Solar II China differed
from its determinations in Solar I China and Solar I Tai-
wan. Commerce explained at the outset that it has broad
discretion to determine the applicable scope of an order.
Solar II China Remand Results, slip op. at 17. It stated
that it did not apply different country of origin rules to the
same class or kind of merchandise. Id. This is so because,
according to Commerce, the class or kind of merchandise in
Solar II China was not the same class or kind of merchan-
dise in Solar I China or in Solar I Taiwan. Id. at 17. Ra-
ther, it reasoned, each class or kind determination is
proceeding-specific. Accordingly, it found that the three
sets of orders differed in scope based on which products
from which countries were found to cause injury to the do-
mestic industry. Id. Therefore, Commerce explained, it did
not apply a different country of origin test to the same class
or kind of merchandise. Id. at 22.
Commerce also explained that using the country of as-
sembly in this case would “best effectuate the purpose of
the antidumping [and countervailing duty] laws and the vi-
olation found.” Id. at 24 (quoting Mitsubishi Elec. Corp. v.
United States, 898 F.2d 1577, 1583 (Fed. Cir. 1990)). Ac-
cording to Commerce, the country of assembly test would
allow it to fashion an order that addresses the very imports
found to cause injury.
Commerce then explained why it departed from the
substantial transformation test. It acknowledged that, in
Solar I China and Solar I Taiwan, it had found that the
process of panel assembly does not transform solar cells
and that, therefore, the solar cells are the origin-conferring
component. See id. at 25. But it also recognized that the
circumstances underlying its orders in Solar I China and
Solar I Taiwan differed in significant ways from the cir-
cumstances underlying the orders in Solar II China.
10 CANADIAN SOLAR, INC. v. UNITED STATES
Specifically, it “recognized that the harm alleged in the [So-
lar II China] petitions was connected with the activities in
[China]” and that record evidence demonstrated shifts in
trade flows and evasion related to solar panels assembled
in China following issuance of the Solar I China orders. Id.
No similar evidence of harm was alleged or presented in
the record in Solar I Taiwan or Solar I China. Id. These
differing circumstances in Solar II China, it reasoned, jus-
tified departing from the substantial transformation test
because “a rote application of a substantial transformation
analysis would not allow [Commerce] to address unfair
pricing decisions and/or unfair subsidization concerning
the [panels] that is taking place in the country of export.”
Id. at 5–6.
Appellants challenged Commerce’s remand determina-
tion in the Court of International Trade, arguing that Com-
merce unlawfully created two country of origin rules for
products within the same type of merchandise and that it
impermissibly departed from the substantial transfor-
mation test without a reasoned explanation for doing so.
d. Court of International Trade’s Decision
The Court of International Trade affirmed Commerce’s
remand decision. It agreed with Commerce’s conclusion
that what is the “class or kind of merchandise” in a coun-
tervailing duty or antidumping duty determination is a
proceeding-specific inquiry, and that, therefore, the classes
or kinds of merchandise in Solar I China, Solar I Taiwan,
and Solar II China are distinct because the scopes of those
orders are distinct. SunPower, 253 F. Supp. 3d at 1287–
88. It also found that Commerce had explained sufficiently
why it departed from the substantial transformation test
in Solar II China. Specifically, it found that “it was rea-
sonable for Commerce to determine that the appropriate
country-of-origin for subject merchandise within the inves-
tigation was the country of panel assembly” because, here,
“the harm alleged and ultimately confirmed in [Solar II
CANADIAN SOLAR, INC. v. UNITED STATES 11
China] was specific to solar panels that had been assem-
bled in China.” Id. at 1288. Based on these conclusions,
the Court of International Trade affirmed Commerce’s de-
cision.
Appellants timely appeal. We have jurisdiction pursu-
ant to 28 U.S.C. § 1295(a)(5).
II. DISCUSSION
As noted above, the Tariff Act authorizes Commerce to
impose countervailing and/or antidumping duties on a
“class or kind of [foreign] merchandise” imported or sold for
importation into the United States if Commerce finds that
the merchandise reflects unfair pricing or unfair subsidiza-
tion and the Commission finds material injury to the do-
mestic industry. 19 U.S.C. §§ 1671(a)(1), 1673(1). Within
these orders, Commerce shall include “a description of the
subject merchandise, in such detail as the administering
authority deems necessary.” §§ 1671e(a)(2), 1673e(a)(2)
(emphasis added). The Tariff Act defines “subject mer-
chandise” as “the class or kind of merchandise that is
within the scope of an investigation [or] an order under this
subtitle.” § 1677(25).
The Tariff Act does not require Commerce to define the
“class or kind of [foreign] merchandise” in any particular
manner. Because the Tariff Act is silent in this regard,
Commerce has the authority to fill that gap and define the
scope of an order consistent with the countervailing duty
and antidumping duty laws. SKF USA Inc. v. United
States, 254 F.3d 1022, 1030 (Fed. Cir. 2001) (stating that,
when a statute is silent, “agencies are entitled to formulate
policy and make rules to fill any gap left, implicitly or ex-
plicitly, by Congress” (internal quotations omitted)). But,
even when a “statute is silent . . . with respect to [a] specific
issue,” Commerce’s determination must be “based on a per-
missible construction of the statute.” Chevron U.S.A. Inc.
v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 843 (1984).
Accordingly, Commerce must exercise its discretion “in
12 CANADIAN SOLAR, INC. v. UNITED STATES
light of all the facts before” it and in a manner that reflects
Commerce’s “judgment regarding the scope and form of an
order that will best effectuate the purpose of the [Tariff
Act] and the violation found.” Mitsubishi, 898 F.2d at 1583.
Commerce’s authority to define the class or kind of
merchandise within the scope of an order encompasses the
authority to determine the country of origin. Bell Supply,
888 F.3d at 1228–29; see also Global Commodity, 709 F.3d
at 1140 (affirming Commerce’s class or kind of merchan-
dise determination because it “appropriately accounts for
both the physical scope of the product as well as the coun-
try of origin”). But if, in determining the country of origin
in a given order, Commerce deviates from a previous policy
or practice, it must provide an explanation for doing so.
Motor Vehicle Mfrs. Ass’n of United States, Inc. v. State
Farm Mut. Auto. Ins. Co., 463 U.S. 29, 46–49 (1983); FCC
v. Fox Television Stations, Inc., 556 U.S. 502, 516 (2009).
We review Commerce’s explanation under the arbitrary
and capricious standard, meaning that we consider
whether Commerce’s determination is the product of rea-
soned decisionmaking. State Farm, 463 U.S. at 43–44.
Reasoned decisionmaking or a reasoned explanation does
not require Commerce to show that the reasons for the new
policy are better than the reasons for the prior policy. Fox,
566 U.S. at 515. Rather, an explanation is reasoned if
Commerce demonstrates that “the new policy is permissi-
ble under the statute, that there are good reasons for it,
and that the agency believes it to be better.” Id. And, if
Commerce’s “new policy rests upon factual findings that
contradict those which underlay its prior policy,” the rea-
soned explanation must justify “disregarding facts and cir-
cumstances that underlay or were engendered by the prior
policy.” Id. at 515–16.
Here, appellants argue that, because Commerce typi-
cally uses the substantial transformation test to determine
country of origin for merchandise produced in more than
one country and because Commerce used that test in
CANADIAN SOLAR, INC. v. UNITED STATES 13
earlier orders regarding solar panels, it should have, but
failed to provide a reasoned explanation under State Farm
for departing from that practice in Solar II China. 1 Appel-
lants also argue that, even if Commerce provided a rea-
soned explanation, substantial evidence does not support
its findings. As explained below, we conclude that Com-
merce provided a reasoned explanation for its departure
under State Farm and that substantial evidence supports
its findings.
A. Commerce Provided a Reasoned
Explanation Under State Farm
It is undisputed that the test Commerce used to deter-
mine the class or kind of merchandise within the scope of
the Solar II China orders differs from the test it used to
determine the scope of its Solar I China and Solar I Tai-
wan orders. It is also undisputed that, if Commerce had
used the substantial transformation test in defining the
scope of these orders, it would have concluded that the
country of cell production confers origin because the pro-
cess of assembling the solar cells into solar panels does not
substantially transform those solar cells. But, here, Com-
merce determined that the country of assembly determines
origin, regardless of whether the assembly process sub-
stantially transforms the merchandise at issue. We find
that Commerce provided a reasoned explanation for using
1 Although appellants argued to the Court of Inter-
national Trade that “class or kind of merchandise” is not
proceeding-specific, they do not pursue that argument on
appeal. See Oral Arg. at 3:33, http://oralargu-
ments.cafc.uscourts.gov/default.aspx?fl=2017-2577.mp3.
Rather, they contend that, regardless of whether the term
is proceeding-specific, Commerce must provide a reasoned
explanation when it departs from the practice employed in
earlier proceedings when defining the scope of its current
orders. Id.
14 CANADIAN SOLAR, INC. v. UNITED STATES
the country of assembly test and for departing from its pre-
vious practice in this case.
Commerce explained why its “new policy is permissible
under the statute[s].” Fox, 566 U.S. at 515. Specifically,
Commerce explained that, once the Commission finds that
certain imports are causing injury to the domestic injury,
Commerce must provide a remedy that addresses those im-
ports. Solar II China Remand Results, slip op. at 20–21.
According to Commerce, that is exactly what it did here
when it used the country of assembly test. Id. at 21. Only
that test, it reasoned, would include within the scope of the
orders the very imports found to injure the domestic indus-
try—solar panels assembled in China using non-Chinese
solar cells. See id., slip op. at 5, 23. Commerce found that
applying the country of assembly test to these facts would
therefore, “best effectuate the purpose of the antidumping
[and countervailing duty] laws and the violation found.”
Id. at 24 (quoting Mitsubishi, 898 F.2d at 1583). In other
words, in these investigations, Commerce determined that
the harm to domestic industry was caused, not by Chinese
solar cells or solar panels containing Chinese cells, but by
Chinese pricing and subsidization of solar panels assem-
bled in China using non-Chinese cells. Id. at 22.
We agree. We conclude that it was reasonable for Com-
merce to use the country of assembly test to determine
country of origin. This is because it is reasonable to use the
country where the merchandise was assembled to define
the class or kind of merchandise within the scope of the or-
ders—especially where, as here, the very imports found to
cause injury due to unfair pricing and/or subsidies were
panels assembled in China containing cells produced in
other countries. Indeed, “[i]t would make little sense for
Commerce to expend significant resources investigating
certain imports, and for the [Commission] to determine
that those imports were causing injury to a domestic indus-
try, if Commerce were precluded from including those im-
ports within the scope of the . . . order[s] arising out of
CANADIAN SOLAR, INC. v. UNITED STATES 15
the . . . investigation[s].” NTN Bearing Corp. of Am. v.
United States, 997 F.2d 1453, 1457 (Fed. Cir. 1993). Com-
merce has the discretion to alter the country of origin test
it uses when the harm suffered by the domestic industry
justifies such alteration.
We also find that Commerce provided “good reasons
for” departing from the substantial transformation test.
Fox, 566 U.S. at 515. Commerce explained that the depar-
ture was necessary because “its standard substantial
transformation analysis would be insufficient for determin-
ing the country-of-origin of this specific product because re-
lying on the substantial transformation analysis alone
could result in failure to provide relief to the domestic in-
dustry for the alleged injury.” Solar II China Remand Re-
sults, slip op. at 46 (internal quotation marks and citation
omitted). We agree that is a good reason for departing from
the substantial transformation test—indeed, “rote applica-
tion” of the substantial transformation test would be inad-
equate to remedy the unfair pricing decisions and/or unfair
subsidization because it would exclude the very imports
found to injure the domestic industry. Id.
Commerce also explained that a departure was neces-
sary because the Chinese solar industry, anticipating a
rote application of the substantial transformation test, had
shifted its supply chains so that their solar imports to the
United States would no longer fall within the class or kind
of merchandise defined in Solar I China. Id. at 48–49. We
agree that this is another good reason for departing from
the substantial transformation test. The Chinese solar in-
dustry—recognizing that the solar cells were defined as the
origin-conferring component under the substantial trans-
formation test—began sourcing the solar cells from other
countries. In this way, the industry was using the substan-
tial transformation test as a means of circumventing the
duties imposed by the orders. Thus, it was reasonable for
Commerce to depart from the substantial transformation
test in view of these evasion concerns.
16 CANADIAN SOLAR, INC. v. UNITED STATES
Appellants contend that evasion concerns are irrele-
vant to determining from where the imports originate. But
Commerce did not use evasion concerns to determine coun-
try of origin. It determined the country of origin based on
the country of assembly, and it cited evasion concerns to
justify departing from its previous practice of using the
substantial transformation test. As noted above, using the
place of assembly in this case is a reasonable means of de-
termining country of origin, and evasion concerns consti-
tute a reasoned explanation for departing from
Commerce’s previous practice. Therefore, appellants’ ar-
gument fails.
Finally, Commerce also explained its reasons for disre-
garding its previous factual findings regarding the relative
insignificance of panel assembly in determining country of
origin. Fox, 566 U.S. at 515–16. It acknowledged that, just
like in Solar I China and Solar I Taiwan, panel assembly
does not substantially transform the solar cells at issue in
Solar II China. But, in the previous two investigations, no
similar shift in trade flow and evasion of duties was alleged
or established. And the harm to domestic industry in those
cases was found to be from the importation of Chinese or
Taiwanese solar cells—and solar panels containing Chi-
nese or Taiwanese solar cells. The additional record evi-
dence in Solar II China justified disregarding the facts and
circumstances underlaying the prior practice in Solar I
China and Solar I Taiwan because the harm could be
traced to the importation of solar panels assembled in
China using non-Chinese solar cells.
For these reasons, we conclude that Commerce pro-
vided a reasoned explanation for departing from the sub-
stantial transformation and using the country of assembly
test.
CANADIAN SOLAR, INC. v. UNITED STATES 17
B. Substantial Evidence Supports
Commerce’s Determination
Appellants contend that substantial evidence does not
support Commerce’s determination that the Chinese solar
industry was shifting its supply chains to evade duties be-
cause Commerce relied on mere allegations from Solar-
World’s petitions. But SolarWorld submitted documents in
support of its allegations, including public admissions of
shifting supply chains and data of increased importation of
non-Chinese solar cells into China. Commerce weighed the
available evidence and ultimately agreed with SolarWorld
that appellants were attempting to evade the duties im-
posed by the Solar I China orders.
Specifically, Commerce found that five large Chinese
solar panel producers and one U.S. importer publicly ad-
mitted “the ease with which they were able to modify their
production chain to avoid paying” the duties imposed by
the Solar I China orders. Solar II China Remand Results,
slip op. at 49 n.131 (citing SolarWorld’s Petition, Solar II
China at 4 (J.A. 41) (“Recharge reported that ‘in the future,
[Trina Solar Limited] will outsource cells from Canada or
Taiwan to work around the tariffs.’”), id. (“[T]he President
of Trina Solar Europe stated that ‘the modules that we’re
shipping now to the U.S. have solar cells that are made
from outside of China and so in that sense we’re not so af-
fected by the [tariffs]’”), 5 (J.A. 42) (quoting statement from
Suntech analyst indicating that “Suntech will experience
no further impact [because it is] sourcing all cells outside
of China going forward for all [its] U.S. shipments, so [it
has] no exposure to tariffs”), id. (“Canadian Solar, which
makes most of its panels in China, has been buying solar
cells from Taiwan for years as part of its supply chain strat-
egy, said Chief Financial Officer Michael Potter. Now all
U.S.-bound [panels] would be made with these slightly
more expensive Taiwanese cells to avoid the tariff.”)).
18 CANADIAN SOLAR, INC. v. UNITED STATES
Commerce also found that these public admissions re-
flected reality—that the Chinese solar industry was in fact
sourcing solar cells from other countries at an increased
frequency following the Solar I China orders. Solar II
China Remand Results, slip op. at 49 n.131 (citing Solar-
World’s Petition, Solar II China at 21 (J.A. 53.1) (describ-
ing chart depicting extremely high levels of shipments of
solar cells from Taiwan to China in the third quarter of
2013), 37 (J.A. 53.3) (describing reports that Chinese pro-
ducers switched from using Chinese cells to using cells
from other countries), id. (quoting industry article stating
that, “ever since U.S. duties on cells came into effect, every
cell/module maker from China active in America has
sourced cells from Taiwan and other regions that have not
been affected by the decision” (emphasis omitted))). In-
deed, the plaintiffs 2 submitted responses during the inves-
tigation indicating that the bulk of their own imports to the
United States were panels made with non-Chinese solar
cells. J.A. 403 (quoting Renesola Jiangsu Ltd.’s response
that “[a]ll of Renesola’s sales during the [period of investi-
gation] were of modules assembled in China using cells
produced in Korea and Taiwan,” Jinko Solar Co., Ltd.’s re-
sponse that it “assume[s] all its sales during the period of
investigation were subject to the scope of the investiga-
tion,” and Trina Solar Energy’s response that it had “re-
ported all sales of Chinese modules not covered by the
scope of the original investigations”).
Finally, the record indicates that appellants never de-
nied shifting their supply chains to evade duties. 3
2 “Plaintiffs” encompasses appellants as well as
other parties who were involved in the proceedings below
but are not involved in this appeal.
3 During oral argument, appellants claimed that the
record evidence was disputed below. See Oral Arg. at
39:05. In support of this claim, appellants directed the
CANADIAN SOLAR, INC. v. UNITED STATES 19
SunPower, 179 F. Supp. 3d at 1291–92 (“As a factual mat-
ter, no party challenges this shift of production or its nega-
tive effect on the reach of the [Solar I China] orders.”);
Solar II China Remand Results, slip op. at 20 (“In other
words, there is undisputed evidence that Chinese produc-
ers of solar [panels] shifted part of their production in a
way that pulled merchandise that otherwise would be cov-
ered by the Solar I [China orders] outside the remedy af-
forded by those orders.”). Therefore, substantial evidence
supports Commerce’s finding.
C. Appellants’ Remaining Arguments
Are Unpersuasive
Appellants also contend that there are other means of
preventing circumvention. They contend that “a petitioner
like SolarWorld has the ability to file additional petitions
related to unfairly-priced and unfairly-subsidized solar
products that are produced in other countries.” Appellants
Br. at 43. But, as Commerce found:
[T]he length of time that it would take to file a pe-
tition, for the Department to initiate and conduct
an investigation, for the [Commission] to conduct
its own investigation and reach a final determina-
tion, eventual publication of an antidumping
court to pages from their reply brief in support of their mo-
tion for judgment on the agency record. Id. (citing
J.A. 469–71). Contrary to appellants’ claim, these pages do
not indicate that appellants ever challenged the veracity of
Commerce’s findings—i.e. they never denied shifting trade
flows in an effort to evade the duties imposed in Solar I
China. Rather, they argued that Commerce cannot rely on
mere allegations of such activity in its country of origin
analysis. Thus, it appears from the record that appellants
never disputed engaging in evasive tactics once the record
of such activities was developed.
20 CANADIAN SOLAR, INC. v. UNITED STATES
and/or countervailing duty order if both [Com-
merce]’s and the [Commission]’s final determina-
tions were affirmative, and thereafter, for
[Commerce], a year later, to conduct an adminis-
trative review, trade flows likely could have al-
ready shifted to another country.
Solar II China Remand Results, slip op. at 48. We agree
with Commerce. It is unnecessary for Commerce to engage
in a game of whack-a-mole when it may reasonably define
the class or kind of merchandise in a single set of orders,
and within the context of a single set of investigations, to
include all imports causing injury.
Appellants contend that another means of preventing
circumvention is the anti-circumvention statute. 19 U.S.C.
§ 1677j. But, as the Court of International Trade found,
this statute applies “to circumstances where an order with
a defined scope is already in effect.” SunPower, 253
F. Supp. 3d at 1290 n. 20 (quoting SunEdison, Inc v.
United States, 179 F. Supp. 3d 1309, 1319 (Ct. Int’l Trade
2016)). Here, Commerce is defining the scope of an order
prior to its imposition. And, even if Commerce found this
statute applicable, we have previously concluded that
Ҥ 1677j is meant to address [specific types of] attempts at
circumvention, [but does] not preclude Commerce from
making a country of origin determination in the first in-
stance.” 4 Bell Supply, 888 F.3d at 1231.
IV. CONCLUSION
For the reasons stated above, we find that Commerce
provided a reasoned explanation for its departure from the
substantial transformation test and that its findings are
supported by substantial evidence. We therefore affirm.
4We have considered appellants’ other remaining
arguments and find them unpersuasive.
CANADIAN SOLAR, INC. v. UNITED STATES 21
AFFIRMED
COSTS
No costs.