Trade Court Says Commerce Properly Found EU Ag Subsidies Were de Facto Specific to Olive Growers

The case concerns the countervailing duty investigation on ripe olives from Spain in which plaintiffs Guadalquivir, Agro Sevilla and Angel Camacho served as mandatory respondents. In the investigation, Commerce found that Spanish olive growers were receiving a subsidy via the EU's Common Agricultural Policy scheme, which is administered through the Spanish government.

CIT has held twice now that this program is not de jure specific to Spanish olive growers, making it ineligible to be a countervailable subsidy (see 2106170075). The program doles out subsidies through the Basic Payment Scheme, which provides subsidies based on "geographical indicators of farmland productivity," which is based on data provided by Spain's government. BPS relies on this data to allocate subsidies based on the productive potential of a region.

The rates don't vary with the type and amount of crop produced but instead reflect historical data regarding agricultural practices carried out in the region, including whether the region produced olives. In the investigation, Commerce found that the grants received by the olive growers under BPS are directly related to the grant amount only olive growers received, purportedly establishing de jure specificity.

CIT rejected this notion twice, most recently holding that since the law explicitly says that the subsidy program needs to limit access to it so that olive growers have an exclusive right to use the BPS payments, the program is not de jure specific. Commerce then shifted its position to say that the subsidies were de facto specific. Commerce issued a supplemental questionnaire to the Spanish government to get the numbers behind the assistance approved on a per industry basis (see 2111040026). While the Spanish government gave some general data, it did not provide per-industry information, prompting Commerce to pull data from the CVD petition and use facts otherwise available.

On its third go, Katzmann upheld the agency's de facto specificity finding. Looking to the petitioner's estimates of the BPS payments received by olive growers compared with the total BPS payments, Commerce found that the payments to olive growers represented a fourth of all payments. The judge held that this was reasonable given that the Spanish government failed to provide this necessary information.

"Commerce’s analysis of the facts otherwise available is sufficient to support its finding of de facto specificity," the opinion said. "Although the facts available consisted of secondary information -- namely, estimations by Coalition of the current industry-wide BPS subsidy payments -- Coalition supported its estimates with publicly available information, including statements by the European Commission that BPS funding would remain stable from 2014 (under the [Single Payment Scheme (SPS), predecessor to the BPS] program) to 2020."

The plaintiffs, led by the Asociacion de Exportadores e Industriales de Aceitunas de Mesa, further challenged Commerce's finding that the demand for certain varietals of raw olives is substantially dependent on table olives, allowing the agency to impose CV duties on the olive imports. Previously, Katzmann ruled that the prior stage product cannot be defined as the raw agricultural product that the industry under review considers principally suitable for use in a prior stage of production of the latter-stage product, as Commerce had done. On remand, the agency then revised its application of the statute, finding that ripe olives' prior stage good is table olives and dual-use raw olive varietals that are biologically distinct from other raw olives, and that the latter-stage product is all table olives.

The judge upheld this interpretation. Looking to four specific olive varietals as the prior stage product and finding that since 55.28% of them were made into table olives, the demand for these four varietals is "substantially dependent" on processed table olives. The plaintiffs argued that this consumption ratio does not reflect substantial dependence and is not backed by proper evidence. Katzmann disagreed on both fronts.

As far as the legal standard is concerned, the judge said it was satisfied. The law says that substantial dependence requires finding that raw olive demand is largely but not wholly contingent on demand for table olives, and that Commerce's practice is to treat as dependent any raw agricultural product for which at least half of the demand depends on relevant latter stage products. "In light of the plain meaning of the statute and Commerce’s established past practice, Plaintiffs are not correct that Commerce’s 55.28 percent consumption ratio cannot reflect substantial dependence," the judge said. Further, Katzmann held that the ratio was backed by substantial evidence since the four varielets accounted for 87% of olive production grown for table olives, and Commerce used the four varietals as the prior stage product.

(Asociacion de Exportadores e Industriales de Aceitunas de Mesa, et al. v. United States, Slip Op. 22-108, CIT #18-00195, dated 09/14/22, Judge Gary Katzmann. Attorneys: Matthew McCullough of Curtis Mallet-Prevost for plaintiffs; Tara Hogan for defendant U.S. government; David Levine of McDermott Will for defendant-intervenor Coalition for Fair Trade in Ripe Olives)