JSW Steel (USA) Inc. v. United StatesJSW Steel (USA) Inc. v. United States
OPINION AND ORDER
[Remanding the U.S. Department of Commerce‘s denials of plaintiff‘s requests for exclusion of certain steel articles from Section 232 tariffs, ordering further explanation of the steps taken to complete the record and supplementation of the record as appropriate, and denying plaintiff‘s request for discovery and for a privilege log.]
Dated: August 5, 2020
Joseph H. Hunt, Assistant Attorney General, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, D.C., for defendant. With him on the brief were Jeanne E. Davidson, Director, Tara K. Hogan, Assistant Director, and Stephen C. Tosini, Senior Trial Counsel.
Kelly, Judge: This action is before the court on motion for judgment on the agency record. See Pl.‘s Mot. J. Agency R., Dec. 13, 2019, ECF No. 29 (“Pl.‘s Mot.“). Plaintiff JSW Steel (USA) Inc. (“JSW“) challenges the U.S. Department of Commerce‘s (“Department” or “Commerce“) denials of twelve requests for exclusions (“exclusion requests“) for certain steel slabs from an additional 25 percent ad valorem tariff imposed on steel articles pursuant to section 232 of the Trade Expansion Act of 1962 (“Section 232“),
BACKGROUND
Following an investigation and determination by the Bureau of Industry and Security (“BIS“), a sub-agency of Commerce, that imports of steel threaten national security, the President issued an executive order, Proclamation 9705, imposing a 25 percent ad valorem tariff on all imports of certain steel articles, effective March 23, 2018. Adjusting Imports of Steel Into the United States, Proclamation 9705 of March 8, 2018, 83 Fed. Reg. 11,625 (Mar. 8, 2018) (“Proclamation 9705“); see also
On March 19, 2018, Commerce published an interim final rule that set forth the product exclusion process. See Requirements for Submissions Requesting Exclusions From the Remedies Instituted in Presidential Proclamations Adjusting Imports of Steel Into the United States and Adjusting Imports of Steel Into the United States and Adjusting Imports of Aluminum Into the United States; and the Filing of Objections to Submitted Exclusion Requests for Steel and Aluminum, 83 Fed. Reg. 12,106 (Dep‘t Commerce Mar. 19, 2018). Subsequently, based on comments and Commerce‘s experience administering the first interim final rule, Commerce issued a second interim final rule on September 11, 2018 that modified the first interim final rule.2 See Submissions of Exclusion Requests and Objections to Submitted Requests for Steel and Aluminum, 83 Fed. Reg. 46,026 (Dep‘t Commerce Sept. 11, 2018) (“September Rule“). Taken together, the rules, now codified at
Directly affected individuals or organizations using steel in business activities located
Commerce reviews complete exclusion requests to determine whether the article described in the request meet any of three criteria, namely “the article is not produced in the United States in a sufficient and reasonably available amount, is not produced in the United States in a satisfactory quality, or for specific national security concerns.” Id. at ¶¶ (c)(6), (h)(2). The regulations define the criterion “not produced in the United States in a sufficient and reasonably available amount” to mean that the amount of steel needed by the requestor is not available “immediately” to meet its business needs. Id. at ¶ (c)(6)(i). By “immediately,” the regulations elaborate that the product is currently produced or could be produced within eight weeks in the amount needed described in the exclusion request. Id. The criterion “not produced in the United States in a satisfactory quality” requires the steel to be equivalent as a “substitute product,” as in steel produced by an objector that can “immediately” meet “the quality (e.g., industry specs or internal company quality controls or standards), regulatory, or testing standards, in order for the U.S. produced steel to be used in that business activity in the United States by that end user.” Id. at ¶ (c)(6)(ii). Finally, the criterion “for specific national security considerations” enables Commerce, in consultation with other parts of the government, as warranted, to determine whether denying an exclusion request would have an impact on national security. Id. at ¶ (c)(6)(iii).
Commerce “normally” will issue its response to an exclusion request as a memorandum that is “responsive to any of the objection(s), rebuttal(s) and surrebuttal(s)” within 106 days of the exclusion request submission. Id. at ¶¶ (h)(2)(i)(B), (h)(3)(i).5 Granted exclusion requests are generally approved for one year on a product basis and are usually limited to the requestor, unless Commerce authorizes the exclusion to apply to additional importers. Id. at
JSW submitted twelve requests for exclusion for alloy and non-alloy steel slabs.6 Six of the requests were for slab from India with thicknesses of 8, 10, and 12 inches;7 the other six were for slab from Mexico with thicknesses of 7.8, 8.8, and 9.8 inches.8 JSW explained that it required the steel slabs to manufacture steel plate because the slabs were not available in the United States. See, e.g., Request for Exclusion from Remedies: Section 232 National Security Investigation of Steel Imports at BIS-2018-0006-1218-11-15; Request for Exclusion from Remedies: Section 232 National Security Investigation of Steel Imports at BIS-2018-0006-2337-11-19. Three U.S. producers, U.S. Steel Corporation, AK Steel Corporation, and Nucor Corporation (collectively, “domestic objectors“), objected to JSW‘s requests and disagreed with JSW‘s characterization of the domestic non-availability of steel slab. See, e.g., [AK Steel] Objection Filing to Posted Section 232 Exclusion Request: Steel at BIS-2018-0006-1218-34-36; [Nucor] Objection Filing to Posted Section 232 Exclusion Request: Steel at BIS-2018-0006-1218-37-50; [U.S. Steel] Objection Filing Posted to Section 232 Exclusion Request: Steel at BIS-2018-0006-1218-51-73. For each of the exclusion requests, JSW submitted rebuttals to the domestic objector‘s objections, and the domestic objectors submitted surrebuttals. See, e.g., [JSW] Rebuttal to [Nucor‘s] Objection Filed Against Request for Exclusion from Remedies: Section 232 National Security Investigation of Steel Imports at BIS-2018-0006-1218-75-85; [JSW] Rebuttal to [U.S. Steel‘s] Objection Filed Against Request for Exclusion from Remedies: Section 232 National Security Investigation of Steel Imports at BIS-
2018-0006-1218-86-92; [Nucor‘s] Surrebuttal to Objection Filed Against Request for Exclusion from Remedies: Section 232 National Security Investigations of Steel Imports at BIS-2018-0006-1218-94-97; [U.S. Steel‘s] Surrebuttal to Objection Filed Against Request for Exclusion from Remedies: Section 232
Nearly one year following the submission of JSW‘s exclusion requests, BIS issued separate decision memoranda (“BIS decision memoranda“) that denied each request. See, e.g., BIS Decisions for JSW Exclusion Requests (BIS-2018-0006-1218-2337) at JSW-GEN-0002. Each BIS decision memorandum concludes that the requested steel slab “is produced in a sufficient and reasonably available amount and of a satisfactory quality” and “that no overriding national security concerns requires that this exclusion request be granted notwithstanding the domestic availability.” See, e.g., BIS Decision Document – Steel Section 232 Remedy Exclusion Request, Exclusion Request Number: BIS-2018-0006-29484 at BIS-2018-0006-29484-5. In addition, for half of the exclusion requests, BIS found that the exclusion request was incomplete because “the product description is inconsistent with the claimed classification under the [HTSUS].”9 See, e.g., BIS Decision Document – Steel Section 232 Remedy Exclusion Request, Exclusion Request Number: BIS-2018-0006-29481 at BIS-2018-0006-29481-4-5.
On July 30, 2019, JSW initiated this action, challenging Commerce‘s denials of the exclusion requests. See Summons, July 30, 2019, ECF No. 1; Compl. Subsequently, the government filed on the docket the confidential and public administrative records underlying those denials and certified the records as complete. See Confidential Admin. Record, Oct. 7, 2019, ECF No. 15; Public Admin. Record, Oct. 7, 2019, ECF No. 16. JSW, in its moving brief, alluded to a missing email from the Department in connection with three exclusion requests, see Pl.‘s Br. at 31 n.83, and indicated that the Inspector General had issued a warning to Commerce Secretary Wilbur Ross, advising that undocumented ex parte communications “giv[e] the appearance that the Section 232 exclusion request review process is not transparent and that decisions are not rendered based on evidence contained in the record.” Id. at 3; Pl.‘s Mot. at Ex. C. Defendant did not respond to these assertions in its response brief. See generally Def.‘s Br. However, after the matter had been fully briefed and following the court‘s issuance of oral argument questions, Defendant informed the court that certain documents were missing from the administrative record. See Def.‘s Status Report, May 28, 2020, ECF No. 59. Following a teleconference with the parties, see Telephone Conference, June 4, 2020, ECF No. 69, the court issued an order directing Defendant to complete the administrative record and to file on the docket, on a rolling basis, documents it identified through search that were previously missing from the record. See Order, June 4, 2020, ECF No. 71.
The court also noted that it considered the matter submitted for decision and that it would render its decision in due course. Id.
Subsequently, and following Defendant‘s filing of a status report on its completion of the record, see Def.‘s Status Report, July 6, 2020, ECF No. 81, the court held a second teleconference with the parties on July 7, 2020. See Order, June 30, 2020, ECF No. 79 (ordering that the parties be prepared to advise the court of any concerns with the compilation or contents of documents filed to complete the administrative
JURISDICTION AND STANDARD OF REVIEW
The Court has jurisdiction under
[t]he reviewing court shall--
(1) compel agency action unlawfully withheld or unreasonably delayed; and
(2) hold unlawful and set aside agency action, findings and conclusions found to be--
(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law[.]
DISCUSSION
JSW contends that Commerce‘s denials of its twelve exclusion requests are arbitrary and capricious, because Commerce‘s determinations run counter to the evidence before the agency and Commerce fails to articulate any reasoned explanation for its conclusions. See Pl.‘s Br. at 15-37. In addition, JSW argues that the administrative record is missing information about certain ex parte meetings with objectors to JSW‘s exclusion requests. See Pl.‘s Br. Resp. Ct‘s Order at 1-6, App‘x; see also Pl.‘s Status Report. JSW requests discovery to unearth the contents of those meetings as well as for Defendant to furnish a privilege log for any redacted materials from the administrative record. See Pl.‘s Br. Resp.
Under section 706 of the APA, a court “review[s] the whole record or those parts of it cited by a party.”
When a party challenges an administrative determination, the agency must produce the complete administrative record. See Nat. Res. Def. Council, Inc. v. Train, 519 F.2d 287, 291 (D.C. Cir. 1975). The administrative record includes only those documents directly or indirectly considered by the agency. See Ammex, Inc. v. United States, 23 CIT 549, 554-55, 62 F. Supp. 2d 1148, 1156 (1999) (“Ammex“). An agency enjoys a presumption of regularity as to the record it prepares, because the agency, as the decision-maker, is generally in the best position to identify and compile those materials it considered. See Fund for Animals v. Williams, 245 F. Supp. 2d 49, 55-7 (D.C. Cir. 2003); Pacific Shores, 448 F. Supp. 2d at 5.
However, in certain circumstances, a court may direct an agency to complete or supplement the record or order discovery. Specifically, a court may order completion or supplementation of the record in light of clear evidence that the record was not properly designated or the identification of reasonable grounds
Here, although JSW indicates that the record remains incomplete, see Pl.‘s Status Report, it has not made the requisite showing that discovery is necessary to complete or supplement the record and that a privilege log is merited. JSW identifies several likely ex parte meetings held with objectors for which Commerce made no record of information discussed in the meetings. See Pl.‘s Br. Resp. Ct‘s Order at 5, App‘x; see also Pl.‘s Status Report. As JSW indicates in its status report, the government has now identified these meetings but has not disclosed their substance. See Pl.‘s Status Report. Section 232 does not compel agency officials to maintain a record of ex parte communications, unlike the statutory framework governing anti-dumping proceedings. See
Further, although JSW casts Commerce‘s behavior as “perplexing,” “aberrant,” “certainly suspicious,” and “creat[ing] a strong inference of undue influence suggesting the Department‘s decisions were not based on the merits of the requests[,]” JSW does not allege impropriety that would warrant discovery. See Pl.‘s Br. Resp. Ct.‘s Order at 6 n.4. As a consequence, a privilege log cataloguing “redactions it has made to documents it has recently added to the Record” is neither necessary nor appropriate. Pl.‘s Br. Resp. Ct.‘s Order at 6. At this juncture, the court declines to order discovery.
Remand of all twelve exclusion requests is warranted because Commerce‘s denials are devoid of explanation and frustrate judicial review. Cf. Glickman, 945 F. Supp. at 331-32. The court cannot be certain what record evidence, if any, Commerce relied upon when both the BIS decision memoranda and ITA recommendation memoranda do not explain what information the sub-agencies considered, how it was weighed, or why the evidence compelled denial.11 See, e.g., BIS Decision Document – Steel Section 232 Remedy Exclusion Request, Exclusion Request Number BIS-2018-0006-1221 at BIS-2018-0006-1221-5; Recommendation for Denying of Steel Exclusion Under Section 232 Exclusion Requests: 2018-0006-1221, 2018-0006-1227 at BIS-2018-0006-1221-9.
Each BIS decision memorandum, which is the document communicating the agency‘s final decision, begins with the same statement that “BIS has considered the evidence provided . . . and taken into account analysis provided by the [ITA]“; and, each memorandum ends with the same conclusion that “BIS accepts ITA‘s recommended findings as to the domestic availability of the product, and finds that no overriding national security concerns require that this exclusion request be granted notwithstanding the domestic availability.” See, e.g., BIS Decision Document – Steel Section 232 Remedy Exclusion Request, Exclusion Request Number BIS-2018-0006-1221 at BIS-2018-0006-1221-5. Nowhere does BIS refer to any record evidence in its decision memoranda, be it the exclusion requests themselves or the applicable objections. See, e.g., id. at BIS-2018-0006-1221-4–6. For example, for six of JSW‘s exclusion requests, the BIS decision memoranda conclude that JSW supplied the incorrect 10-digit HTSUS statistical reporting number to identify a submission, stating that Customs and Border Protection (“CBP“) advised BIS that the claimed classification is inconsistent with the product description and “provid[ed] the following guidance:“—yet no guidance follows the colon.12 See, e.g., id. at BIS-2018-0006-1221-4-5. BIS‘s unsupported conclusion does not apprise the court of the reason
where a request is denied for HTSUS issues, companies are encouraged to work with CBP to confirm the proper classifications and resubmit.“)13
Likewise, the ITA recommendation memoranda, which recommend to BIS whether to grant or deny an exclusion request, suffer from the same paucity of analysis as the BIS decision memoranda.14 Although the regulations provide that
Commerce‘s “[r]esponse to an exclusion request will . . . be responsive to any of the objection(s), rebuttal(s), and surrebuttal(s) for that submitted exclusion request[,]”
in the section of the memoranda entitled “Analysis.”17 See, e.g., id. at BIS-2018-0006-9. In addition, the ITA recommendation memoranda for all twelve exclusion requests at issue conclude that “[b]ecause there is indication of sufficient U.S. production availability” the ITA recommends denying JSW‘s requests. See, e.g., Recommendation for Denying of Steel Exclusion Under Section 232 Exclusion Requests: 2018-0006-1221, 2018-0006-1227 at BIS-2018-0006-1221-10. However, the regulations simply state that “[a]n exclusion will only be granted if an article is not produced in the United States in a sufficient and reasonably available amount, is not produced in the United States in a satisfactory quality, or for specific national security considerations.” See
production of the steel articles in question accords with the regulation. Commerce does not further explain how that term is used either in its regulations or in the BIS decision or ITA recommendation memoranda. Given the defects in the record and Commerce‘s failure to engage with record evidence,18 the court orders completion of the record, inclusive of any information directly or indirectly considered by the Department in its determinations, and remands, for further consideration and explanation
CONCLUSION
In accordance with the foregoing, it is
ORDERED that on or before Monday, August 17, 2020 Defendant shall file, as part of its U.S. Court of International Trade Rule 73.3 certification, a statement that sets forth: the steps taken to ascertain that the record for the original proceeding is complete, including identifying how the Department identified missing information and the existence of ex parte communications; and, to what extent any ex parte communications were or were not directly or indirectly relied upon or referred to by Commerce in making its determinations; and it is further
ORDERED that Defendant shall file on the docket and further supplement the record with any information, inclusive of any information directly or indirectly considered by Commerce, in its determinations that it determines should be included in the record as a result of explaining the steps taken to ensure completion of the administrative record on or before Monday, August 17, 2020; and it is further
ORDERED that Commerce‘s determinations not to exclude twelve steel articles from the remedy imposed by the President under Section 232 of the Trade Expansion Act of 1962,
ORDERED that Commerce shall file its remand redeterminations with the court within 90 days of this date; and it is further
ORDERED that Defendant shall file the administrative record for any remand proceedings no later than 14 days after filing the remand results; and it is further
ORDERED that on the same day that Defendant files the administrative record for any remand proceedings, Defendant shall also file as part of its U.S. Court of International Trade Rule 73.3 certification,
ORDERED that the parties shall have 30 days after the filing of the remand results 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.
Dated: August 5, 2020 New York, New York
/s/ Claire R. Kelly
Claire R. Kelly, Judge
Notes
Moreover, the Government‘s assertion that “the record allows the Court, and, indeed, the public, to easily discern how the agency reached its decision[,]” Def.‘s Br. at 34, is troubling, particularly when the ITA recommendation memoranda for JSW‘s requests, which, as noted above, refer to record evidence, were entirely confidential. In addition, given that the regulations compel disclosure of information contained in the exclusion requests, objections, rebuttals, and surrebuttals and require any proprietary information submitted to be summarized “in sufficient detail to permit a reasonable understanding of the substance of the information[,]”
In addition, JSW explained in its exclusion requests that it requires certain thicknesses of steel to satisfy “reduction ratios” to manufacture steel plate. See Pl.‘s (footnote continued) (continued) Br. at 33-34. Even though the regulations state that steel may be considered equivalent as a substitute product if it meets, inter alia, “internal company quality controls or standards[,]”