This matter concerns the final determination issued by the Department of Commerce ("Commerce" or the "Department") in the antidumping duty investigation of certain cut-to-length steel products. Certain Carbon and Alloy Steel Cut-to-Length Plate from Austria ,
BACKGROUND
In order to determine whether certain products are being sold at less than fair value (LTFV) in the United States, Commerce compares the export price (EP), or constructed export price (CEP), with the normal value (NV). 19 U.S.C. § 1677b(a)(1)(A). EP/CEP is the price at which the subject merchandise is being
(A) The subject merchandise and other merchandise which is identical in physical characteristics with, and was produced in the same country by the same person as, that merchandise.
(B) Merchandise (i) produced in the same country and by the same person as the subject merchandise, (ii) like that merchandise in component material or materials and in the purposes for which used, and (iii) approximately equal in commercial value to the subject merchandise.
(C) Merchandise (i) produced in the same country and by the same person and of the same general class or kind as the merchandise which is the subject of the investigation, (ii) like that merchandise in the purposes for which used, and (iii) which the administering authority determines may reasonably be compared with that merchandise.
In the instant proceeding, the Department compared the weighted-average of export sales within each CONNUM to the weighted-average of home market sales in that same CONNUM, i.e., identical merchandise, where such sales exist. Prеlim. Mem. 7. Otherwise, "[w]here there were no sales of identical merchandise in the home market made in the ordinary course of trade to compare to U.S. sales, [Commerce] compared U.S. sales to sales of the most similar foreign like product made in the ordinary course of trade."
The investigation at issue covers certain steel cut-to-length (CTL) plаte products from Austria. I&D Mem. 5. Commerce also conducted concurrent investigations of steel CTL plate from other countries.
On June 10, 2016, Commerce issued its revised model-match methodology, adopting some of Plaintiffs' requests, over the objections of Petitioners, and rejecting other suggestions by Plaintiffs. See Product Characteristics 1, 6 (June 10, 2016), P.R. 115. Commerce's revised methodology:
Matched foreign like products, based on the physical characteristics reported by the respondents, in the following order of importance: quality, minimum specified carbon content, minimum specified chromium content, minimum specified nickel content, minimum specified yield strength, nominal thickness, heat treatment status, nominal width, form, painting, the existence of patterns in relief and descaling.
See Prelim. Mem. 7.
In its July 15, 2016 questionnaire responses, Plaintiffs requested additional changes to Commerce's model-match methodology, on the basis that the revised methodology still captured drastically dissimilar products within individual CONNUMs. Pls. Questionnaire Resp. B-13, C-10 (July 15, 2016), P.R. 163-174. Specifically, Plaintiffs argued that the methodology failed to account for the alloy content of Plaintiffs' specialized high alloy steel products, thereby failing to account for significant differences in physical characteristics, costs, and price. Id. Plaintiffs proposed a revised methodology that would begin by sorting products by GRADE. Id. at B-14, C-11. The GRADE field is essentially a function of the amount of alloy in a product and the costs of those alloys. See Pls. Supp. Questionnaire Sec. D & E Resp. Ex. SQ D-3 (Oct. 6, 2016), P.R. 268-89. Plaintiffs later suggested a PROCESS field to further account for what Plaintiffs insist are significant variations in cost of production resulting from different manufacturing processes. See Pls. Supp. Questionnaire Sec. B & C Resp. SBC-1 (Oct. 13, 2016), P.R. 296-304; see also Pls. Case Br. 11. Commerce rejected Plaintiffs' proposed revisions on two bases: Commerce considered the proposals to be untimely and Commerce also disagreed that the newly proposed methodologies would have the effect of creating closer matches between exported merchandise and home market merchandise. I&D Mem. 17-32.
JURISDICTION AND STANDARD OF REVIEW
The court has jurisdiction over this matter under
DISCUSSION
Plaintiffs challenge the model-match methodology applied by Commerce to determine whether Plaintiffs sold certain steel products at LTFV. Plaintiffs argue, as they did below, that the Department's methodology yielded erroneous comparisons of merchandise. In its questionnaire responses to the Department, Plaintiffs asserted that the Department's CONNUM system "does not provide an accurate basis for comparing [home market and export] sales ... because it unreasonably groups together high alloy, Special Steel CTL plate products that differ significantly ... resulting in CONNUMs ... with wildly divergent sales prices and costs of production" which could "lead to highly arbitrary dumping margin calculations." Pls. Questionnaire Resp. B-13-14. In support, Plaintiffs have identified individual CONNUMs that group together products that Plaintiffs describe as having commercially significant physical differences, which are reflected in the costs and prices of those products.
Plaintiffs explain that the variances in cost of manufacturing and price are primarily attributable to the alloy content of the products, a physical feature insufficiently unaccounted for under the Department's methodology. Plaintiffs argue that alloy content, or grade, is not only a commercially significant physical characteristic of its various products, but indeed one of their defining commercial features. Therefore, according to Plaintiffs, the Department's insistence that these variоus, distinct products can nevertheless form the basis of a single CONNUM is not supported by substantial evidence and not otherwise in accordance with the law.
Plaintiffs' proposed two alternative model-match methodologies that they argue would achieve greater differentiation of distinct products, leading to more accurate dumping margins. The first alternative proposed the addition of a GRADE field to sort products by alloy content. The second alternative proposed that, in addition to a GRADE field, a PROCESS field be included to account for variations among the products owing to certain manufacturing processes to which only some products are subjected. The court sustains the determination of the Department insofar as it refused to amend the methodology to account for the manufacturing processes identified by Plaintiffs. However, the court remands to Commerce for redetermination in light of its methodology's deficient treatment of commercially significant physical differences among Plaintiffs' products owing to alloy content.
As discussed, " '[f]oreign like prоduct' is defined as either identical merchandise, § 1677(16)(A), or similar merchandise, § 1677(16)(B) and (C)." SKF USA, Inc. ,
B. The Department's Methodology Fails to Account for Commercially Significant Physical Differences Based on Alloy Content
Here, Commerce's methodology is not suited for such fair comparisons. The methodology clearly groups, within individual CONNUMs, goods that have differences in material composition. These differences are neither minor nor commercially insignificant. Plaintiffs explain that:
[T]he percentage differences between the highest grade and the lowest cost grade within each CONNUM are enormous. For example, CONNUM [ [ ] ] covers four grades ... ranging from a high VCOM of €[ [ ] ]/MT to a low VCOM of €[ [ ] ]/MT, which is a difference of €[ [ ] ]/MT or [ [ ] ]% of TCOM. On average across all listed CONNUMs, there is a difference of 96%, as a percentage of TOTCOM, between the highest-cost grade and the lowest-cost grade within each CONNUM ....
Pls. Pre-Prelim. Determ. Cmts. 11 (Oct, 19, 2016), P.R. 312-17. Similarly, Plaintiffs explain that CONNUM [ [ ] ] includes products that сost anywhere from €[ [ ] ] to €[ [ ] ] to make and are priced at anywhere from €[ [ ] ] to €[ [ ] ]. See Pls. Case Br. 16. Moreover, Plaintiffs insist, and the Department does not contest, that these differences in cost and price are driven by alloy content which, in turn, is driven primarily by the intended end use. See, e.g. , Pls. Case Br. 3-4, 7-8. As is supported by the record, end use is plainly a commercially significant factor. See Pls. Supp. Questionnaire Resp. Sec. D & E 7-10 (discussing the various manufacturing applications that require particular grades of steel products, including "automobiles, home appliances, electronic devices, medical сonsumables (e.g., syringes), [and] consumer goods."). Accordingly, because a single set of CONNUMs are used to identify and compare home market and U.S. sales, Commerce's methodology essentially treats certain "foreign like products" as "identical" to certain exported products, even though customers would view those products as commercially distinct in both utility and value.
Requires that we account for and adjust for any differences attributable to physical differences between subject merchandise and foreign like product if similar products are compared. For this purpose, [19 C.F.R. § 351.411 (b) ] directs us to consider differences in variable costs associated with the physical differences in the merchandise, i.e., the difference-in-merchandise adjustment [or DIFMER].
Thai Plastic Bags Indus. Co. v. United States ,
Nevertheless, as discussed, where there are export sales and home market sales within the same CONNUM, and the Department has therefore deemed those respective sales to be of "identical," rather than "similar," merchandise, the Department has not applied a DIFMER to account for any differences in material composition. Prelim. Mem. 7;
Plaintiffs identified such erroneous comparisons in their Case Brief below. Specifically,
In sum, the Department's methodology is unreasonable in failing to sufficiently account for alloy content. Commerce's methodology cannot be sustained because it allows subject merchandise to be cast as "identical" to dubiously similar foreign like products, when the statute plainly requires a different approaсh. Moreover, the record lacks substantial evidence that Commerce's flawed methodology nevertheless yielded "fair comparisons." See 19 U.S.C. § 1677b(a). On this basis, the court remands to Commerce for reconsideration of its model-match methodology.
Throughout the investigation, the Department largely ignored Plaintiffs' central argument: that the Department's methodology allows comparisons of products with commercially distinct physical characteristics, without applying a DIFMER, to determine whether Plaintiffs are dumping. Unfortunately, the Department dedicates significant energy to explaining why it believes it did not have to address Plaintiffs' arguments. Specifically, the Department insists that the Plaintiffs' challenges to the model-match methodology were untimely. They were not.
Plaintiffs raised their concerns at every turn. Plaintiffs proposed addition of a GRADE field to account for alloy content was submitted with their questionnaire responses on July 15, 2016, just 35 days after the Department had issued its revised model-match methodology, four months prior to the Department's Preliminary Determination , and four months before the Department issued its final ruling on the sсope of the investigation. Commerce then reviewed Plaintiffs' GRADE-field proposal and sought additional clarifying information on this issue in its September 14, 2016 supplemental questionnaire, which Plaintiff then provided. See Pls. Supp. Questionnaire Resp. Sec. D & E 7. The court will not now entertain the Government's argument that the model-match methodology was a closed issue prior to July 15, 2016. But even if the Department did consider the issue closed, this is a case where "the interests in fairness and accuracy outweigh the burden upon Commerce" presented by having to consider Plaintiffs' concerns about the model-match methodology. See Grobest & I-Mei Indus. (Vietnam) Co. v. United States , 36 CIT ----, ----,
The Government also feigns confusion at Plaintiffs' supposed change of position over time. Specifically, Commerce insists that Plaintiffs provide no explanation for suddenly providing an alternative set of CONNUMs based on GRADE, and then PROCESS, when previously they had provided comments only on the QUALITY-based CONNUMs. On the contrary, the record makes clear that Plaintiffs' overarching concern-that the Department's proposed model-match methodology would insufficiently differentiate high alloy specialty steel products-was cоnsistently communicated.
In response to Plaintiffs' claim that its products have commercially significant differences in physical characteristics that impact costs and price, the Department stated that this argument improperly focuses on "differences in costs or prices that may coincide with some type of variation in physical differences." I&D Mem. 23, 31. The Department cited prior proceedings to support the idea that differences in costs, in and of themselves, are not probative of relevant physical differences among products. I&D Mem. 23 n.86. As one prior proceeding explained, differences in costs are sometimes attributable to factors other thаn the physical characteristics of the products, such as "differences in production quantities [or] differences in the timing of production." See
The Department's remaining responses essentially call into question the merits of Plaintiffs' proposed alternative methodologies. The Department expresses concern that Plaintiff's proposals would amount to a proliferation of respondent- and product-specific CONNUMS. I&D Mem. 21. As a consequence, Commerce insists, the product distinctions Plaintiffs are requesting would not be relevant to the Department's other concurrent steel CTL plate investigations.
First, the reasonableness of the methodology in those othеr investigations is not the subject of this action. And while it would certainly be more convenient for the Department, Commerce cites no authority supporting a right to apply a single methodology across multiple investigations, notwithstanding potentially serious issues with that methodology. Indeed, perhaps the Department should anticipate the issues raised here when it applies a single methodology across 15 concurrent investigations of broad scope. Second, it may be that this particular investigation, or Plaintiffs' particular range of product offerings, call for more granular distinctions between products. See, e.g. , Pastificio Lucio Garofalo, S.p.A. v. United States , 35 CIT ----, ----,
In any event, Commerce's critiques concerning Plaintiffs' preferred methodologies largely lack legal significance. Certainly, Plaintiffs' case would be stronger if it had devised a perfect alternative to Commerce's methodology. However, if there are two reasonable conclusions-or, here, methodologies-supported by the record, the Department has the discretion to choose either. Thus, the only quеstion before this court is whether the Department's chosen methodology is reasonable, supported by substantial evidence on the record, and otherwise in accordance with the law. Insofar as that methodology insufficiently accounts for alloy content in Plaintiffs' products, the court finds that it is none of the above.
Accordingly, on remand, the Department is ordered to amend its model-match methodology in this investigation, in accordance with this opinion, to better account for the commercially significant differences in physical characteristics among Plaintiffs' products owing to alloy content. The Department is strongly encouraged to ensure that products it would not consider "similar," or to which it would apply a meaningful DIFMER, are not matched as "identical" under its revised methodology.
C. The Court Sustains the Department's Determination that a Process is not a Commercially Significant Physical Characteristic
The court comes to a different conclusion concerning the arguments raised by Plaintiffs with respect to a PROCESS field. Substantial evidence supports the Department's determination that its methodology need not further account for process.
Plaintiffs explain the process issue as follows: "different production processes are required depending on the alloy content of the plate. As the alloy content increases, more control is required in the melting, solidification, and production processes. To achieve such control, [Plaintiffs] use different production processes, with significantly different costs." Pls. Case Br. 8. Plaintiffs' own explanation betrays that "process" is not itself a physical charactеristic of the products, but is rather a function of a physical characteristic, alloy content. Moreover, while the record supports Plaintiffs' assertion that various processes can result in alterations in physical characteristics and lead to variances in costs and price, those variances should be accounted for when the Department gives sufficient consideration to grade in its redetermination. Ultimately, substantial evidence, as well as Plaintiffs' own arguments, support the Department's determination that a PROCESS field wоuld largely account for "variations in cost," I&D Mem. 22, and that "the PROCESS field would have no impact" if the GRADE field were applied, I&D Mem. 28.
CONCLUSION
For the foregoing reasons, the court sustains Commerce's determination in part and remands to Commerce for reconsideration of its model-match methodology. It is hereby:
ORDERED that the final determination of the United States Department of Commerce, published as
ORDERED that Plaintiffs' Motion for Judgment on the Agency Record Under USCIT Rule 56.2 is GRANTED in part as provided in this Opinion and Order; it is further
ORDERED that Commerce shall issue a redetermination ("Remand Redetermination") in accordance with this Opinion and Order that is in all respects supported by substantial evidence and in accordance with law; it is further
ORDERED that Commerce shall design a model-match methodology in this investigation that accounts for all commercially significant physical differences; it is further
ORDERED that Commerce apply recalculate dumping margins consistent with its redetermination of its model-match methodology; it is further
ORDERED that Commerce shall have ninety (90) days from the date of this Opinion and Order in which to file its Remand Redetermination, which shall comply with all directives in this Opinion and Order; that the Plaintiffs and Defendant-Intervenors shall have thirty (30) days from the filing of the Remand Redetermination in which to file comments thereon; and that the Defendant shall have thirty (30) days from the filing of Plaintiffs' and Defendant-Intervenors' comments to file comments.
Notes
Plaintiffs, along with "almost two dozen respondents" argued to the Department that the scope of the investigation is improperly broad. See Pls. Resр. to SSAB Cmts. 2. (October 25, 2016), P.R. 328. Plaintiffs contend that the investigation concerns at least two distinct classes of merchandise, traditional carbon steel CTL plate products and high alloy specialty steel plate products. Alloys are materials, including cobalt, tungsten, and nickel, the addition of which results in different "grades" of steel products. Commerce denied the various challenges to the scope of the investigation. Final Scope Memo (November 20, 2016), P.R. 359.
By contrast, in the Federal Circuit's Pesquera Mares decision, the Department reasonably and successfully argued that premium-grade salmоn and super-premium-grade salmon did not have commercially significant physical differences requiring separate classification because any distinctions between the grades, such as light lacerations on the fish, were "nominal."
The government broadly relies on Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc.,
See, e.g. , Pls. Cmts. on Product Characteristics 2-6; Pls. Rebuttal Cmts. on Product Characteristics 2-3 (June 8, 2016), P.R. 109; Pls. Questionnaire Resp. B-13, C-10; Memo to File of Meeting with Pls. Counsel (Aug. 10, 2016), P.R. 183.