Canadian Solar

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, argued 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 determination, Commerce imposed countervailing and antidumping duties on the importation of a class or kind of merchandise—specifically, solar cells and modules, laminates, and/or panels (collectively, “panels”), containing solar 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 determine 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 conclude 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 investigations, 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 antidumping 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 industry. Id. If the investigation reveals dumping or foreign subsidies that injure the domestic industry, Commerce must issue an order imposing countervailing or antidumping 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 manufactured. 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 solar 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 petitions 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, including 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 countervailing and antidumping investigations based on petitions filed by SolarWorld. The investigations resulted in countervailing 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 order) (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 transformation 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 transformation. 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 order) (“Solar I Taiwan”). Thus, the scope of the order in So- lar I Taiwan covers Taiwanese solar cells and solar panels—including solar panels

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