US Magnesium LLC v. United States
2016 U.S. App. LEXIS 18147
Fed. Cir.2016Background
- Antidumping administrative review of pure magnesium from the People’s Republic of China for May 1, 2009–April 30, 2010; Commerce constructed normal value using surrogate values for nonmarket-economy inputs.
- Magnesium produced by the Pidgeon process uses stainless-steel retorts that endure intense heat and chemical attack and must be replaced after many production cycles (about 60 days of use; multiple 12-hour cycles per retort).
- Commerce classified retorts as indirect materials (factory overhead) rather than direct materials and therefore did not apply a separate surrogate value for them in constructing normal value.
- U.S. Magnesium (USM) argued retorts are direct materials (consumed in production, high unit cost, replaced frequently) and pointed to supplier and industry accounting records showing retorts treated as direct costs.
- The Court of International Trade remanded once for consideration of new evidence alleging fraud; on remand Commerce found no prima facie fraud and reaffirmed overhead classification; the Trade Court sustained Commerce; USM appealed.
Issues
| Issue | Plaintiff's Argument (USM) | Defendant's Argument (Government/Commerce) | Held |
|---|---|---|---|
| Whether retorts must be classified as direct materials rather than overhead | Retorts are consumed in production, have short useful life, high unit cost, and supplier/industry practice treats them as direct inputs | Retorts are not physically incorporated, are reusable across cycles, treated like furnaces/ovens; records are ambiguous and do not show industry practice | Affirmed: Commerce’s classification as overhead is supported by substantial evidence |
| Whether Commerce misread supplier accounting documents showing retorts as direct cost | Supplier subledger lists retorts under "materials consumption," indicating direct material treatment | Other items in that category are plainly non-material; supplier did not list retorts as raw material—documents are equivocal | Held: Commerce’s interpretation is plausible and supported by substantial evidence |
| Whether Commerce departed from prior practice or a four-factor test in classifying inputs | Commerce abandoned its four-factor test and failed to apply it here | Commerce uses a totality-of-the-circumstances approach and may emphasize different factors per case | Held: No unlawful departure; Commerce reasonably relied on non-incorporation and replacement frequency |
| Whether industry practice and relative cost require classifying retorts as direct materials | Industry records and cost significance demonstrate retorts are direct inputs and should be valued directly | Industry evidence was inconclusive (only one clear example); relative cost alone is not dispositive for equipment-like items | Held: Industry evidence inconclusive; relative cost not controlling; Commerce’s conclusion stands |
Key Cases Cited
- Consol. Edison Co. v. NLRB, 305 U.S. 197 (substantial-evidence standard definition)
- In re Jolley, 308 F.3d 1317 (deference to agency interpretations of record evidence)
- Diamond Sawblades Mfrs. Coalition v. United States, 612 F.3d 1348 (respect for Trade Court’s informed opinion)
- Consolo v. Fed. Maritime Comm’n, 383 U.S. 607 (possibility of drawing inconsistent inferences does not defeat substantial evidence)
- Fujitsu Gen. Ltd. v. United States, 88 F.3d 1034 (agency expertise in interpreting accounting documents)
- Am. Silicon Techs. v. United States, 261 F.3d 1371 (cost allocation must reasonably reflect actual costs)
- Atl. Sugar, Ltd. v. United States, 744 F.2d 1556 (substantial evidence review considers the record as a whole)
- Plant Genetic Sys., N.V. v. DeKalb Genetics Corp., 315 F.3d 1335 (factfinder presumed to have reviewed all evidence unless stated otherwise)