Husteel Co., Ltd. v. United StatesHusteel Co., Ltd. v. United States
OPINION AND ORDER
[ Remanding the U.S. Department of Commerce’s final determination in the second administrative review of the antidumping duty order covering welded line pipe from the Republic of Korea. ]
Dated: August 26, 2020
Jaehong D. Park, Henry D. Almond, Kang W. Lee, and Leslie C. Bailey, Arnold & Porter Kaye Scholer LLP, of Washington, DC, argued for consolidated plaintiffs Hyundai Steel Company and NEXTEEL Co., Ltd. Also on the briefs was Daniel R. Wilson.
Jeffrey M. Winton, Winton & Chapman PLLC, of Washington, DC, argued for consolidated plaintiff SeAH Steel Corporation. Also on the briefs was Amrietha Nellan.
Robert R. Kiepura, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, argued for defendant. Also on the brief were Joseph H. Hunt, Assistant Attorney General, Jeanne E. Davidson, Director, and L. Misha Preheim, Assistant Director. Of Counsel was Reza Karamloo,
Elizabeth J. Drake, Schagrin Associates, of Washington, DC, argued for defendant-intervenors California Steel Industries and Welspun Tubular LLC USA. Also on the brief were Roger B. Schagrin, Christopher T. Cloutier, and Luke A. Meisner.
Kristina Zissis and Frank J. Schweitzer, White & Case, LLP, of Washington, DC, argued for defendant-intervenors Maverick Tube Corporation and IPSCO Tubulars Inc. Also on the brief were Gregory J. Spak and Matthew W. Solomon.
Kelly, Judge: This consolidated action is before the court on motions for judgment on the agency record filed respectively by Husteel Co., Ltd. (“Husteel”), SeAH Steel Corporation (“SeAH”), NEXTEEL Co., Ltd. (“NEXTEEL”), and Hyundai Steel Company (“Hyundai”) (collectively, “Plaintiffs”). See Pl. [Husteel]’s Mot. J. Agency R., Dec. 18, 2019, ECF No. 46; [Consol. Pl. SeAH]’s Mot. J. Agency R., Dec. 18, 2019, ECF No. 41; Consol. Pl. [NEXTEEL]’s 56.2 Mot. J. Agency R., Dec. 18, 2019, ECF No. 44; Consol. Pl. [Hyundai]’s 56.2 Mot. J. Agency R., Dec. 18, 2019, ECF No. 45. Plaintiffs challenge various aspects of the final results of the U.S. Department of Commerce’s (“Commerce” or “Department”) second administrative review of the antidumping duty (“ADD”) order covering welded line pipe (“WLP”) from the Republic of Korea (“Korea”). See Pl. [Husteel]’s Br. Supp. Mot. J. Agency R., Dec. 18, 2019, ECF No. 46-2 (“Husteel’s Br.”); [SeAH]’s Br. Supp. 56.2 Mot. J. Agency R. Confidential Version, Dec. 18, 2019, ECF No. 41-1 (“SeAH’s Br.”); Consol. Pl. [NEXTEEL]’s Memo. Supp. 56.2 Mot. J. Agency R., Dec. 18, 2019, ECF No. 44-1 (“NEXTEEL’s Br.”); Consol. Pl. [Hyundai]’s Memo. Supp. 56.2 Mot. J. Agency R., Dec. 18, 2019, ECF No. 45-1 (“Hyundai’s Br.”); see also Welded Line Pipe From the Republic of Korea, 84 Fed. Reg. 27,762 (Dep’t Commerce June 14, 2019) (final results of [ADD] admin. review and final determination of no shipments; 2016–2017) (“Final Results”) as amended by 84 Fed. Reg. 35,371 (Dep’t Commerce July 23, 2019) (amended final results of [ADD] admin. review; 2016–2017) (“Amended Final Results”) and accompanying Issues and Decision Memo. for the [Final Results], A-580-876, (June 7, 2019), ECF No. 36-5 (“Final Decision Memo”).
SeAH challenges Commerce’s decision to reject its third country sales and to use constructed value to determine the normal value of its sales of subject merchandise into the United States. SeAH’s Br. at 7–18. Further, Plaintiffs contest various aspects of Commerce’s constructed value methodology. See SeAH’s Br. at 18–36, 43–49; NEXTEEL’s Br. at 15–44; Husteel’s Br. at 14–31; see generally Hyundai’s Br.
Namely, Plaintiffs challenge as contrary to law and unsupported by substantial evidence Commerce’s determination that a particular market situation (“PMS”) in Korea distorts the cost of production for WLP, as well as the resultant PMS adjustments to SeAH’s and NEXTEEL’s reported costs when determining the constructed value of the subject merchandise. See SeAH’s Br. at 18–33; NEXTEEL’s Br. at 15–38; Husteel’s Br. at 14–27; see generally Hyundai’s Br. SeAH and NEXTEEL object to Commerce’s reliance on the constructed value profit ratio (“CV profit ratio”) and selling expenses calculated for Hyundai from the first administrative review of the ADD order to calculate profit and selling expenses for SeAH and NEXTEEL. See SeAH’s Br. at 43–49; NEXTEEL’s Br. at 38–41. NEXTEEL challenges
Further, SeAH challenges Commerce’s method and justification for allocating the G&A expenses of its U.S. sales affiliate Pusan Pipe America (“PPA”) when adjusting the constructed export price of its U.S. sales. See SeAH’s Br. at 37–42. Husteel challenges Commerce’s calculation of the non-examined companies’ rate. See Husteel’s Br. at 28–32.
For the reasons that follow, the court remands Commerce’s determination that SeAH’s third country sales into the Canadian market are nonrepresentative for further explanation or reconsideration. Moreover, regarding its calculation of constructed value, the court remands for further explanation or reconsideration Commerce’s: PMS determination and resultant adjustment to the reported cost of production for WLP; reliance on the CV profit ratio and selling expenses calculated for Hyundai in the first administrative review; reclassification of NEXTEEL’s reported losses relating to the suspended production of certain product lines; adjustment to NEXTEEL’s constructed value to account for sales of non-prime products; and refusal to employ its quarterly costs methodology to calculate SeAH’s constructed value. Additionally, the court remands Commerce’s decision to allocate PPA’s G&A expenses across all of SeAH’s U.S. sales of WLP when calculating SeAH’s constructed export price for further explanation or reconsideration. Any modifications to the dumping margins of NEXTEEL and SeAH resulting from this remand shall be reflected in the rate applied to Husteel.
BACKGROUND
On February 23, 2018, in response to timely requests by interested parties, Commerce initiated an administrative review of various ADD and countervailing duty (“CVD”) orders and findings, including an ADD order covering WLP from Korea.1 See
On August 7, 2018, Defendant-Intervenors Maverick Tube Corporation (“Maverick”), California Steel Industries (“CSI”), IPSCO Tubulars Inc. (“IPSCO Tubulars”),2 and Welspun Tubular LLC USA
Commerce published its preliminary results on February 14, 2019. See
Finding the aggregate volume of SeAH’s and NEXTEEL’s WLP sales in the home market insufficient, Commerce considered calculating normal value for both respondents based on third country sales. See Prelim. Decision Memo at 18–19 (citing section 773(a)(1)(C)(ii) of the Tariff Act of 1930, as amended,
using constructed value. See Prelim. Decision Memo at 10 n.36, 18–19 (citing
Commerce made several contested decisions when calculating the constructed value of SeAH’s and NEXTEEL’s sales of WLP. First, finding that a PMS exists that distorts the cost of production for WLP, Commerce upwardly adjusted SeAH’s and NEXTEEL’s reported costs of HRC by the CVD rate applied to HRC producers from Commerce’s CVD investigation into hot-rolled steel products from Korea.6 See Prelim. Decision Memo at 16; see also
(final results of [ADD] admin. review; 2015–2016) (“WLP from Korea 2015–2016”) as amended by
review of the ADD order to determine profit and selling expenses for NEXTEEL and SeAH in this review. See Prelim. Decision Memo at 20, 22–26. Third, Commerce found that some of NEXTEEL’s WLP sales related to “non-prime” products with a lower market value, and accounted for the loss associated with those sales by reducing the constructed value of NEXTEEL’s “prime” WLP sales. See id. at 22–23; see also Final Decision Memo at 42–43. Fourth, Commerce reclassified certain losses incurred by NEXTEEL, associated with suspended production of certain product lines during the period of review (“POR”), from cost of goods sold, allocated to those product lines specifically, to G&A expenses attributable to the operations of the entire company, and adjusted NEXTEEL’s G&A expense ratio accordingly. See Prelim. Decision Memo at 22–23; see also Final Decision Memo at 43–44. Finally, when examining SeAH’s cost data for purposes of calculating G&A expenses, interest, profit, selling expenses, and U.S. packing costs, after assessing SeAH’s claim that it experienced substantial cost and price changes during the POR, Commerce declined to apply its quarterly-average costs methodology. See Prelim. Decision Memo at 22. Commerce preliminarily calculated weighted-average dumping margins of 50.09 percent for NEXTEEL, 26.47 percent for SeAH, and 41.53 percent for non-selected respondents. Prelim. Results,
On August 10, 2018, Commerce published its Amended Final Results, and recalculated respondents’ weighted-average dumping margins. See generally,
Amended Final Results and Final Decision Memo.7 For its final determination, Commerce deducted from SeAH’s constructed export price G&A expenses incurred by its U.S. sales affiliate PPA by allocating those expenses to all of SeAH’s U.S. sales.8 See Final Decision Memo at 58–61. The remaining aspects of Commerce’s preliminary determination, discussed above, did not change. See generally Final Decision Memo. Commerce assigned rates of 38.87 percent for NEXTEEL, 22.70 percent for SeAH, and 29.89 percent for non-selected respondents. See Amended Final Results,
JURISDICTION AND STANDARD OF REVIEW
The court has jurisdiction pursuant to
DISCUSSION
I. Rejection of SeAH’s Third Country Sales
SeAH argues that Commerce’s decision to calculate the normal value of its sales
Where Commerce finds that home market sales are an inappropriate basis for determining normal value, it may instead use third country sales. See
“The substantiality of evidence must take into account whatever in the record fairly detracts from its weight.” CS Wind Vietnam Co. v. United States, 832 F.3d 1367, 1373 (Fed. Cir. 2016) (quoting Gerald Metals, Inc. v. United States, 132 F.3d 716, 720 (Fed. Cir. 1997)).
Commerce’s reliance on the CITT’s finding that SeAH’s sales into Canada were dumped to determine that those sales are not representative is unreasonable because Commerce does not address detracting evidence that Canadian antidumping law is materially inconsistent with U.S. antidumping law. See Final Decision Memo at 48–50; see also
II. Commerce’s CV Calculation
1. Particular Market Situation
Plaintiffs argue Commerce’s determination that distortions present in the Korean market collectively give rise to a PMS that renders the costs of HRC outside the ordinary course of trade is unsupported by substantial evidence, and that the resultant adjustments to SeAH’s and NEXTEEL’s reported costs are unreasonable. See NEXTEEL’s Br. at 15–38; SeAH’s Br. 18–33; Hyundai’s Br. at 7–8; Husteel’s Br. at 14–24, 26–27. Defendant and the Domestic Interested Parties maintain that Commerce’s PMS determination and adjustments to SeAH’s and NEXTEEL’s reported costs are reasonable and lawful. See Def.’s Br. at 10–41; Def.-Intervenors [CSI, TMK IPSCO, & Welspun’s] Resp. Br. at 8–34, Mar. 18, 2020, ECF No. 60 (“CSI & Welspun’s Br.”); Def-Intervenors [Maverick & IPSCO Tubulars’] Resp. Br. at 1, Mar. 18, 2020, ECF No. 61 (“Maverick & IPSCO Tubulars’ Br.”). For the reasons that follow, Commerce’s determination is remanded for further explanation or reconsideration.
When reviewing an ADD order, Commerce determines antidumping duties owed on entries of subject merchandise by calculating the amount by which the normal value of the merchandise exceeds its export price (or constructed export price). See
Commerce finds that a PMS exists in Korea that distorts the cost of HRC, the main input in WLP production, based on the cumulative effect of Chinese steel overcapacity, the government of Korea’s (“GOK”) subsidization of hot-rolled steel products,11 strategic alliances between Korean HRC suppliers and Korean WLP producers, and government control over electricity prices in Korea. See Final Decision Memo at 17. Yet, Commerce fails to explain how each factor lends credence to its finding that a PMS distorts the costs of HRC during the POR such that Commerce could not properly determine a constructed value of WLP that could properly be compared to export price (or constructed export price).
First, Commerce points to import data that demonstrates Korea receives the largest volume of Chinese steel exports, creating downward pressure on Korean domestic steel prices. See Final Decision Memo at 17–18, 20 (citations omitted). However, Commerce does not explain how this global phenomenon prevents a proper comparison between normal value and export price (or constructed export price). See, e.g., Final Decision Memo at 21 (“This global excess steel capacity has the potential to depress steel prices not just in Korea but in various markets. Although the effect may vary, steel prices in various countries are likely lower than they would be but for global excess capacity.”).
Second, Commerce cites to dated CVD findings and calculations that resulted in subsidy rates, based on total adverse facts available with an adverse inference (“AFA”),12 and which Commerce has since reduced significantly,13 to corroborate its finding that government subsidies
Decision Memo. for [Hot-Rolled Steel from Korea CVD 2016], C-580-884, (June 11, 2019) available at https://enforcement.trade.gov/frn/summary/korea-south/2019-12991-1.pdf (last visited Aug. 17, 2020) (assigning ad valorem CVD subsidy rates of 0.55 and 0.58 percent to POSCO and Hyundai, respectively). Nowhere does Commerce explain how the GOK’s subsidization of hot-rolled steel, which are already subject to countervailing duties, distort HRC prices in such a way as to prevent a proper comparison between normal value and export price (or constructed export price). Moreover, given the non-contemporaneity of Commerce’s findings in Hot-Rolled Steel from Korea CVD, and the fact that the rate was based on AFA, such findings alone do not constitute an approximation of HRC cost distortions during the POR.
Third, regarding the Domestic Interested Parties’ allegation that strategic alliances distort HRC costs, Commerce concedes “the record does not contain specific evidence showing that strategic alliances directly created a distortion in HRC pricing in the current POR,” yet speculates that “these strategic alliances and price fixing schemes between certain Korean HRC suppliers and Korean WLP producers are relevant as an element of Commerce’s analysis in that they may have created distortions in the prices of HRC in the past, and may continue to impact HRC pricing in a distortive manner during the instant POR and in the future.” Final Decision Memo at 18–19. Commerce’s speculation stems from evidence relating to the Korean Fair Trade Commission’s (“KFTC”) imposition of penalties on various steel pipe manufacturers for rigging bids offered by the Korea Gas Corporation for orders of steel pipe between 2003 and 2013. See Final Decision Memo at 18 (citing Petitioners’ Home Market Viability Allegation as to SeAH at Exs. 1–2, PD 69–70, bar codes 3711361-01–02 (May 24, 2018)).15 These findings are dated and bear no discernible relation to HRC costs during the POR. Although Commerce may not need to demonstrate direct causation when administering the cost-based PMS provision, Commerce’s finding that strategic alliances distorted HRC costs must be reasonably and discernibly based on record evidence.
Fourth, Commerce cites evidence of the government’s use of the electricity market as a tool of industrial policy and its control of the largest electricity supplier, the Korea Electric Power Corporation. Final Decision Memo at 19, 22 & nn. 94–95 (citing PMS Allegation at Ex. 24, Sub-Exs. 2, 8). Commerce does not explain or support the claim that the purported government control places a downward pressure on electricity prices or otherwise renders HRC costs outside the ordinary course of trade.
Here, Commerce predicates its PMS determination, and adjustment, on the cumulative
2. Profit and Selling Expense Information
SeAH submits that Commerce must use its third country sales data to calculate CV profit and selling expenses. SeAH’s Br. at 43–46. NEXTEEL similarly requests Commerce use its own profit information when calculating constructed value. NEXTEEL’s Br. at 39–40. Alternatively, SeAH and NEXTEEL insist that Commerce use contemporaneous financial statements, instead of using Hyundai’s profit and selling expense information from the first administrative review. See SeAH’s Br. at 46–47; NEXTEEL’s Br. at 40. Should Commerce continue to rely on Hyundai’s data, SeAH and NEXTEEL request Commerce do so under the statutory “profit cap” provision. See SeAH’s Br. at 47–48; NEXTEEL’s Br. at 40–41. Defendant argues that Commerce reasonably determines that Hyundai’s information is the best source of profit and selling expense data, and that Commerce reasonably decided not to apply the statutory profit cap provision. See Def.’s Br. at 56–61. Defendant-Intervenors Maverick and IPSCO Tubulars add that Commerce found that Hyundai’s profit and selling expense information would serve as the only reasonable profit cap. See Maverick & IPSCO Tubulars’ Br. at 34–35. For the reasons that follow, Commerce’s determination is remanded.
When determining expenses for constructed value, the statue provides that Commerce shall use:
the actual amounts incurred and realized by the specific exporter or producer being examined in the investigation or review for selling, general, and administrative expenses, and for profits, in connection with the production and sale of a foreign like product, in the ordinary course of trade, for consumption in the foreign country[.]
- the actual amounts incurred and realized by the specific exporter or producer being examined in the . . . review . . . in connection with the production and sale . . . of merchandise that is in the same general category of products as the subject merchandise,
- the weighted average of the actual amounts incurred and realized by exporters or producers that are subject to the . . . review . . .
- the amounts incurred and realized . . . based on any other reasonable method, except that the amount allowed for profit may not exceed the amount normally realized by exporters or producers[.]
Here, Commerce rejects record evidence of “actual [profit and selling expenses] incurred and realized” by NEXTEEL and SeAH under
Commerce relies instead on Hyundai‘s CV profit ratio and selling expense information from the first administrative review under
absent specific evidence of significant differences in market conditions during the two time periods, the specificity of the data outweighs concerns over contemporaneity.“).
As a preliminary matter, Commerce‘s invocation of
To the extent that Commerce alternatively relies on “[Hyundai‘s] information from the first review . . . as the only reasonable profit cap” under
3. NEXTEEL‘s Non-Prime WLP Products
NEXTEEL argues that Commerce‘s methodology for classifying and treating certain sales of WLP as non-prime in this proceeding contradicts agency practice. See NEXTEEL‘s Br. at 41–43. Defendant counters that Commerce‘s methodology is consistent with agency precedent and maintains that Commerce‘s determination is reasonable. For the reasons that follow, Commerce‘s deduction to NEXTEEL‘s constructed value to account for sales of non-prime products is remanded.
When determining the constructed value of the subject merchandise, Commerce shall normally calculate costs based on the records of the respondent under investigation or review. See
Commerce seems to imply that its consideration as to whether the product can be put to the same application as prime product is dispositive, yet the precedent it invokes to evidence its practice suggests otherwise. For example Steel Concrete Reinforcing Bar from Mexico, Commerce addresses whether the respondent was justified in “its departure from its normal books and records” and whether the non-prime product was “reportable merchandise.” See, e.g., Steel Concrete Reinforcing Bar From Mexico, 82 Fed. Reg. 27,233 (Dep‘t Commerce June 14, 2017) (final results of [ADD] admin. review; 2014–2015) (“Rebar from Mexico“) and accompanying Issues and Decision Memo. for [Rebar from Mexico] at Cmt. 3, A-201-844, (June 7, 2017) available at https://enforcement.trade.gov/frn/summary/mexico/2017-12304-1.pdf (last visited Aug. 18, 2020)); see also Final Decision Memo at 42 n.195.
Moreover, in OCTG from Ukraine, Commerce considered whether a respondent‘s sales of “reject” merchandise were properly within the scope of the ADD investigation. See OCTG from Ukraine IDM at 8–11. After analyzing the scope of the investigation, Commerce concluded that the reject merchandise remained within scope as non-prime products, and included those sales in its calculation of the dumping margin. See id. If the products at issue here are not within the scope of the ADD order, then Commerce should explain why the cost associated with their manufacture would be relevant to calculation of NEXTEEL‘s dumping margin. On remand, Commerce must clarify its practice, explain why its practice is reasonable and how its determination in this case accords with its practice in light of the record evidence. Accordingly, the court remands Commerce‘s determination.
4. Reclassification of NEXTEEL‘s Costs from Suspended Production
NEXTEEL argues that Commerce errs by reallocating costs related to the suspended production of certain product lines from cost of goods sold assigned to those products specifically to G&A expenses, and challenges Commerce‘s resultant adjustment to NEXTEEL‘s reported G&A expense ratio for WLP. See NEXTEEL‘s
When determining constructed value, Commerce “shall normally [calculate selling expenses, G&A expenses, and profit] based on the records of the exporter or producer of the merchandise, if such records are kept in accordance with the generally accepted accounting principles of the exporting country (or the producing country, where appropriate) and reasonably reflect the costs associated with the production and sale of the merchandise.”
5. Use of SeAH‘s Average Costs for the Review Period
SeAH argues that Commerce‘s refusal to calculate its costs based on quarterly averages is unreasonable and contrary to agency practice. See SeAH‘s Br. at 33–36. Defendant submits that Commerce‘s decision use average costs for the review period (i.e., annual weighted averages) is reasonable and consistent with agency practice. See Def.‘s Br. at 65–67. For the reasons that follow, Commerce‘s determination is remanded.
When determining constructed value, Commerce usually relies on the weighted average of costs incurred throughout the entire POR (i.e., annual costs). See Antidumping Methodologies for Proceedings that Involve Significant Cost Changes Throughout the Period of Investigation (POI)/[POR] that May Require Using Shorter Cost Averaging Periods, 73 Fed. Reg. 26,364, 26,365 (Dep‘t Commerce May 9, 2008) (request for comment). Nonetheless, Commerce deviates from its standard methodology when it determines that there are significant changes in costs during the POR. See id.; see also Final Decision Memo at 55 (citing Steel Concrete Reinforcing Bar From Taiwan, 82 Fed. Reg. 34,925 (Dep‘t Commerce July 27, 2017) (final determination of sales at less than fair value) (“Rebar from Taiwan“) and accompanying Issues and Decision Memo. for the [Rebar from Taiwan] at Cmt. 2, A-583-859, (July 20, 2017), available at https://enforcement.trade.gov/frn/summary/taiwan/2017-15840-1.pdf (last visited Aug. 17, 2020) (“Rebar from Taiwan IDM“). In such instances, Commerce instead relies on quarterly average costs, provided that there is a linkage (i.e., reasonable correlation) between costs and sales information during the shorter averaging periods. See Rebar from Taiwan IDM at Cmt. 2; see also Final Decision Memo at 55.
Commerce explains that although SeAH‘s reported cost fluctuations during the POR were “significant“, the data does not demonstrate that sales prices and costs were linked. See Final Decision Memo at 55–57. Specifically, Commerce observes that “the magnitude of the changes in the quarterly costs and sales prices of WLP were not comparable and the quarterly prices and costs did not trend consistently for all the CONNUMs tested.” Id. at 56. However, the costs and prices between first and second quarters—i.e., the only period during which SeAH experienced a magnitude of fluctuation in costs that satisfied Commerce‘s criteria for determining “significance“—do appear to be reasonably correlated. See SeAH‘s Suppl. Questionnaire Resp. at Attachment SD-5, PD 145–146, CD 151–167, bar codes 3738658-01–02, 3738614-01–17 (Aug. 3, 2018) (showing an increase in cost and price from the first to second quarters). Nonetheless, Commerce finds, “that the quarterly prices and costs of WLP do not appear to be reasonably correlated and that linkage does not exist.” Final Decision Memo at 56. It is not discernible from Commerce‘s analysis whether it notes the correlation of prices and costs between the first and second quarters, but finds that the linkage requirement is not satisfied nonetheless (e.g., because Commerce examines whether costs and prices are linked across the entire POR), whether it mistakenly overlooked the correlation, or whether Commerce finds that SeAH‘s prices and costs are not reasonably correlated for some other reason. Should Commerce continue to rely on constructed value to determine the normal value of SeAH‘s sales, it must either reconsider its use of the annual weighted averages to calculate SeAH‘s costs, or explain its continued reliance on annual averages despite the fact that SeAH‘s prices and costs appear to be correlated during the period of time between the first and second quarters.
III. Allocation of G&A Expenses when Calculating Constructed Export Price
SeAH argues that Commerce erred by deducting from its constructed export price certain G&A expenses incurred by PPA, its affiliate U.S. reseller, as selling expenses. See SeAH‘s Br. at 37–42. Defendant counters that Commerce has discretion to apply PPA‘s G&A expenses to both further manufactured and non-further manufactured products, and that Commerce reasonably allocated those expenses when adjusting SeAH‘s constructed export price. See Def.‘s Br. at 49–55. For the following reasons, Commerce‘s determination is remanded.
Commerce describes at length its methodology for determining PPA‘s G&A expense ratio, but neither clarifies whether it is treating PPA‘s G&A expenses as indirect selling expenses, nor explains why it is authorized to do so under the statute. See Final Decision Memo 58–61. Instead, Commerce frames the issue as “how to properly account for the G&A expenses that have been allocated over the full cost of the products sold[,]” explaining that Commerce‘s approach accords with agency practice and is a “balanced and reasonable” way to assign PPA‘s G&A expenses to both resold and further manufactured products. See id. at 59–60 (citations omitted). In doing so, Commerce dismisses SeAH‘s request to apply the G&A expense ratio only to PPA‘s costs of further manufacturing, explaining that “[a]pplying such a ratio to only the cost of further manufacturing would result in a mismatch between the figures used in the G&A expense ratio calculation[.]” Id. at 60. However, bare assertions about what is “proper” or “balanced” as a matter of accounting say nothing of what is authorized and reasonable under the statute. Accordingly, Commerce‘s determination is remanded for further explanation as to whether it is treating PPA‘s G&A expenses as indirect selling expenses under the statute, and if so, why it is so authorized, or for reconsideration.
IV. Calculation of Non-Examined Rate
Husteel adopts and incorporates by reference NEXTEEL and SeAH‘s challenges to Commerce‘s calculation of the dumping margin, and requests “in addition to the recalculation of the all-others rate to remove the distortive total AFA rate, any other relief granted by the Court and resulting adjustment to the individual weighted average dumping margins for NEXTEEL and SeAH be incorporated into the revised average dumping margin applied to Husteel.” Husteel‘s Br. at 31–32.20
Commerce normally calculates the non-examined company‘s rate, or “all others rate,” as the “weighted average of the estimated weighted average dumping margins established for exporters and producers individually examined, excluding, in
recalculate the non-examined company‘s rate as appropriate to reflect any adjustments to its calculation of the dumping margins for NEXTEEL and SeAH.
CONCLUSION
For the foregoing reasons, it is
ORDERED that Commerce‘s determination is remanded for further explanation or reconsideration consistent with this opinion; and it is further
ORDERED that Commerce shall file its remand redetermination with the court within 90 days of this date; and it is further
ORDERED that the parties shall have 30 days thereafter to file comments on the remand redetermination; and it is further
ORDERED that the parties shall have 30 days to file their replies to comments on the remand redetermination; and it is further
ORDERED that the parties shall have 14 days thereafter to file the Joint Appendix; and it is further
ORDERED that Commerce shall file the administrative record within 14 days of the date of filing of its remand redetermination.
/s/ Claire R. Kelly
Claire R. Kelly, Judge
Dated: August 26, 2020
New York, New York
Notes
In the Department‘s view, the criteria of a “particular market situation” and the “representativeness” of prices fall into the category of issues that the Department need not, and should not, routinely consider . . . the [Statement of Administrative Action] at 821 recognizes that the Department must inform exporters at an early stage of a proceeding as to which sales they must report. This objective would be frustrated if the Department routinely analyzed the existence of a “particular market situation” or the “representativeness” of third country sales . . . the party alleging . . . that sales are not “representative” has the burden of demonstrating that there is a reasonable basis for believing that a “particular market situation” exists or that sales are not “representative.”
Commerce explains:
In conducting this analysis, we note that the specific language of both the preferred and alternative methods appear to show a preference that the profit and selling expenses reflect: 1) production and sales in the foreign country; and 2) the foreign like product, i.e., the merchandise under consideration.
Final Decision Memo at 33.
SeAH contests Commerce‘s decision to reject the proffered financial statements as incomplete, arguing that no statute or regulation requires that surrogate financial statements be complete. See SeAH‘s Br. at 46. Commerce specifically indicated to the respondents that any surrogate financial statement submitted must be complete. Final Decision Memo at 35 (citing Request for CV Profit & Selling Expense Cmts. & Info., PD 128, bar code 3733367-01 (July 19, 2018)). It would not be unreasonable for Commerce to find such sources unreliable because it could not be certain of what the missing information revealed. See Final Decision Memo at 36. However, because the court is remanding Commerce‘s reliance on
Even if Commerce continues to find that SeAH‘s sales to Canada are not representative, it must reconcile its refusal to consider SeAH‘s third country sales with its treatment of SeAH‘s sales to Canada in OCTG from Korea. Certain Oil Country Tubular Goods from the Republic of Korea, 82 Fed. Reg. 18,105 (Dep‘t Commerce Apr. 17, 2017) (final results of [ADD] duty admin. review; 2014-2015) (“OCTG from Korea 2014-2015“) and accompanying Issues and Decision Memo. for [OCTG from Korea 2014-2015] at Cmt. 34, A-580-870, (Apr. 10, 2017), available at https://enforcement.trade.gov/frn/summary/korea-south/2017-07684-1.pdf (last visited Aug. 7, 2020) (“OCTG from Korea 2014-2015 IDM“). Commerce explains “that basing CV profit on SeAH‘s sales to Canada [in OCTG from Korea 2014-2015] was the appropriate methodology for that review based on the specific facts of that case[,]” but does not state what those facts are, or why the facts of this case are distinguishable. See Final Decision Memo at 32–33. In both cases, SeAH‘s sales into Canada were the subject of dumping proceedings, yet Commerce used SeAH‘s above-cost sales to calculate CV profit in OCTG from Korea while refusing to consider SeAH‘s sales in this instance. Compare id. with OCTG from Korea 2014-2015 IDM at 13–14. Commerce must explain what “specific facts” justify its departure from its previous methodology.
Commerce notes that its normal practice is to “to include routine shutdown expenses (i.e., maintenance shutdowns) in a respondent‘s reported costs and to associate them to the products produced on those lines.” Final Decision Memo at 44 (citing Gray Portland Cement and Clinker From Mexico, 62 Fed. Reg. 17,148, 17,159–17,160 (Dep‘t Commerce Apr. 9, 1997) (final results of [ADD] admin. review)).
Husteel argued that Commerce impermissibly used an AFA CVD rate from a previous proceeding to calculate the non-examined company‘s rate for cooperative respondents in this proceeding. See Husteel‘s Br. at 28–31. Husteel now concedes that Commerce did not base the non-examined rate “entirely” on the AFA CVD rate assigned to POSCO in Hot-Rolled Steel from Korea CVD, 19 U.S.C. § 1673d(c)(5)(A), but rather, used the AFA CVD rate as a component of constructed value when calculating NEXTEEL‘s and SeAH‘s dumping margins. See Oral Arg. at 2:11:20–2:13:40, June 25, 2020, ECF No. 79.
The Court of Appeals for the Federal Circuit has clarified that the methods under