NEXTEEL CO., LTD., Plaintiff-Appellee SEAH STEEL CORP., Plaintiff-Cross-Appellant v. UNITED STATES, MAVERICK TUBE CORPORATION, TENARIS BAY CITY, INC., Defendants-Appellees UNITED STATES STEEL CORPORATION, Defendant-Appellant
2021-1334, 2021-1430
United States Court of Appeals for the Federal Circuit
Decided: March 11, 2022
Appeals from the United States Court of International Trade in No. 1:18-cv-00083-JCG, Judge Jennifer Choe-Groves.
HARDEEP KAUR JOSAN, International Trade Field Office, United States Department of Justice, New York, NY, argued for defendant-appellee United States. Also represented by BRIAN M. BOYNTON, CLAUDIA BURKE, JEANNE DAVIDSON; MYKHAYLO GRYZLOV, Office of the Chief Counsel for Trade Enforcement and Compliance, United States Department of Commerce, Washington, DC.
GREGORY J. SPAK, White & Case LLP, Washington, DC, for defendants-appellees Maverick Tube Corporation, Tenaris Bay City, Inc. Also represented by FRANK JOHN SCHWEITZER, MATTHEW WOLF SOLOMON, KRISTINA ZISSIS.
THOMAS M. BELINE, Cassidy Levy Kent (USA) LLP, Washington, DC, argued for defendant-appellant. Also represented by MYLES SAMUEL GETLAN, JAMES EDWARD RANSDELL, IV, SARAH E. SHULMAN.
Before O‘MALLEY, BRYSON, and HUGHES, Circuit Judges.
HUGHES, Circuit Judge.
OPINION
This appeal arises out of the United States Department of Commerce‘s administrative review of its antidumping order on oil country tubular goods from the Republic of Korea.
Calculating constructed value, Commerce found five circumstances that created a “particular market situation” affecting inputs to oil country tubular goods. The Court of International Trade determined that this finding was not supported by substantial evidence and “direct[ed] Commerce to reverse its finding of a particular market
Comparing normal value to export price, Commerce relied on its “differential pricing analysis” methodology. In Stupp Corp. v. United States, 5 F.4th 1341 (Fed. Cir. 2021), we vacated aspects of Commerce‘s differential pricing analysis over concerns about Commerce‘s use of statistical methodologies when certain preconditions for their use are not met. Id. at 1360. Commerce‘s analysis here raises identical concerns, so we vacate the trial court‘s decision upholding the methodology and remand for reconsideration in view of Stupp.
Seeing no error in the other methodologies that Cross-Appellant challenges, we otherwise affirm.
BACKGROUND
In 2016, the Department of Commerce initiated its second administrative review of the antidumping order on oil country tubular goods (OCTG) from the Republic of Korea (Korea). Certain Oil Country Tubular Goods from the Republic of Korea: Preliminary Results of Antidumping Duty Administrative Review; 2015-2016, 82 Fed. Reg. 46,963, 46,963 (Oct. 10, 2017) (Preliminary Results). The review covered the period from September 1, 2015 through August 31, 2016. Id. Commerce selected for individual examination the two companies that accounted for the largest volume of subject merchandise during the period of review, NEXTEEL Co., Ltd. and SeAH Steel Corporation. Decision
In an antidumping review, Commerce generally compares the price at which the subject merchandise is sold in the United States to the “normal value,” which is the price of like products in the exporting country or a third country.
Considering costs, Commerce found “a particular market situation” under
When calculating export price, Commerce adjusted for freight expenses pursuant to
Finally, Commerce compared export price and normal value. Employing its “differential pricing analysis” methodology based on a statistic called “Cohen‘s d,” Commerce found a pattern of U.S. prices that “differ significantly among purchasers, regions, or periods of time” under
NEXTEEL and SeAH appealed the Final Results to the Court of International Trade, arguing that Commerce‘s particular market situation, profit cap, freight revenue cap, and differential pricing analyses were unsupported by substantial evidence or not in accordance with law. NEXTEEL Co. v. United States, 392 F. Supp. 3d 1276, 1282-83 (Ct. Int‘l Trade 2019) (NEXTEEL I). The court concluded that Commerce‘s particular market situation finding was unsupported by substantial evidence. Id. at 1288. It remanded for further proceedings on that issue. Id. The court affirmed Commerce‘s profit cap, freight revenue cap, and differential pricing analyses. Id. at 1290, 1293, 1295-97.
On remand, Commerce continued to find a particular market situation, relying on a fifth factor, “steel industry restructuring effort by the Korean government,” along with the previous four. Final Results of Redetermination Pursuant to Ct. Remand at 20, NEXTEEL I, 392 F. Supp. 3d 1276 (No. 18-00083), ECF No. 81-1 (First Remand Results).
Reviewing Commerce‘s first remand results, the Court of International Trade rejected Commerce‘s finding of a particular market situation as unsupported by substantial evidence, “both when viewing the five factors individually and collectively.” NEXTEEL Co. v. United States, 450 F. Supp. 3d 1333, 1343 (Ct. Int‘l Trade 2020) (NEXTEEL II). The court remanded the issue to Commerce a second time, this time “direct[ing] Commerce to reverse its finding of a particular market situation.” Id.
Under protest, Commerce reversed its finding of a particular market situation and recalculated the dumping margins accordingly. Final Results of Redetermination Pursuant to Ct. Remand at 4-5, NEXTEEL II, 450 F. Supp. 3d 1333 (No. 18-00083), ECF No. 96-1 (Second Remand Results). The Court of International Trade affirmed
United States Steel appeals, challenging the trial court‘s ruling that Commerce‘s finding of a particular market situation is unsupported by substantial evidence, as well as the trial court‘s direction to Commerce to reach a particular outcome on its second remand. SeAH cross appeals, challenging the trial court‘s affirmance of Commerce‘s differential pricing analysis, its freight revenue cap, and its use of SeAH‘s own data as a profit cap.
ANALYSIS
I. Standard of Review
“We review a decision of the Court of International Trade evaluating an antidumping determination by Commerce by reapplying the statutory standard of review that the Court of International Trade applied in reviewing the administrative record.” Peer Bearing Co.-Changshan v. United States, 766 F.3d 1396, 1399 (Fed. Cir. 2014). Thus, “[w]e will uphold Commerce‘s determination unless it is unsupported by substantial evidence on the record or otherwise not in accordance with the law.” Id.;
When “identifying, selecting and applying methodologies to implement the dictates set forth in the governing statute,” we recognize the technical expertise of the agency and give it deference “both greater than and distinct from that accorded the agency in interpreting the statutes it administers.” Fujitsu Gen. Ltd. v. United States, 88 F.3d 1034, 1039 (Fed. Cir. 1996).
II. Particular Market Situation
The Trade Preferences Extension Act of 2015 (TPEA) allows Commerce to consider a “particular market situation” when calculating constructed value. Pub. L. No. 114-
if a particular market situation exists such that the cost of materials and fabrication or other processing of any kind does not accurately reflect the cost of production in the ordinary course of trade, the administering authority may use another calculation methodology under this part or any other calculation methodology.
The statute does not define “particular market situation,” but the plain language of
Congress provided examples of a particular market situation:
[A] “particular market situation” . . . might exist . . . where there is government control over pricing to such an extent that home market prices cannot be considered to be competitively set. It also may be the case that a particular market situation could arise from differing patterns of demand in the United States and in the foreign market. For example, if significant price changes are closely correlated with holidays which occur at different times of the year in the two markets, the prices in the
foreign market may not be suitable for comparison to prices to the United States.
Statement of Administrative Action, H.R. Rep. No. 103-316, vol. 1, at 822 (1994), as reprinted in 1994 U.S.C.C.A.N. 4040, 4162. These are all situations in which some circumstance distorts costs so that they are not set based on normal market forces or do not move with the rest of the market.
Nothing in the statute requires Commerce to quantify the distortion precisely. Still, a quantitative comparison showing a difference between costs incurred and costs in the ordinary course of trade could be substantial evidence supporting the existence of a particular market situation. Likewise, evidence that costs do not differ at all from what they would have been in the ordinary course of trade would “fairly detract[] from the substantiality of the evidence.” Atl. Sugar, Ltd. v. United States, 744 F.2d 1556, 1562 (Fed. Cir. 1984).
Commerce found a particular market situation based on the “collective impact” of
- Korean government subsidies for HRC production,
- strategic alliances between HRC suppliers and OCTG producers,
- Korean government steel industry restructuring efforts,
- Korean government involvement in the electricity market, and
- imports of low-priced HRC from China.
Final Results Memo at 17; First Remand Results at 20. We address these circumstances in turn.
Commerce determined that “[r]ecord evidence shows subsidization of HRC by the Korean government,” and because “approximately 80 percent of the cost of OCTG production” is the HRC input, “distortions in the HRC market . . . have a significant impact on production costs of OCTG.” First Remand Results at 21. Commerce relied on an earlier investigation of HRC from Korea from January 1, 2014, through December 31, 2014, which, Commerce explained, found a subsidy rate of almost 60% for POSCO. Id. at 21, 18 & n.84. Commerce found that the mandatory respondents in the present review bought HRC from POSCO in significant quantities. Id. at 21; see also Appx7560 (SeAH Preliminary Results Analysis Memorandum showing 19.9% of HRC purchases from POSCO).
Commerce arrived at the 60% subsidy rate after it determined that it “c[ould] not accurately calculate POSCO‘s . . . subsidy rate.” Issues and Decision Memorandum for the Final Determination in the Countervailing Duty Investigation of Certain Hot-Rolled Steel Flat Products from the Republic of Korea, at 61, 81 ITADOC 53,439 (Aug. 4, 2016). Commerce thus relied on facts otherwise available and made inferences adverse to POSCO, id., as permitted by
But in its first administrative review of the same countervailing duty order, Commerce found de minimis subsidy rates. Certain Hot-Rolled Steel Flat Products from the Republic of Korea: Final Results of Countervailing Duty Administrative Review, 2016, 84 Fed. Reg. 28,461, 28,461 (June 19, 2019), as amended by 84 Fed. Reg. 35,604 (July 24, 2019). In that review, Commerce did not rely on adverse facts available. Commerce considered data from January 1, 2016, through December 31, 2016, a period which overlaps with the period of review for this administrative review.
Commerce could support a finding of a particular market situation with evidence of subsidies to producers of an input to the subject merchandise. But the subsidies must be shown to affect the price of the input so that it does “not accurately reflect the cost of production in the ordinary course of trade,”
B. Strategic Alliances
Based on an affidavit showing that POSCO charged different prices to its affiliates than to its other customers, Commerce found that strategic alliances between HRC and OCTG producers “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 [period of review] and in the future.” Final Results Memo at 18. Commerce initially identified no evidence that either SeAH or NEXTEEL was part of such an alliance, that the alliances affected SeAH and NEXTEEL specifically, or that the alliances affected the Korean HRC market as a whole. See id. (“[T]he record does not contain specific evidence showing that strategic alliances directly created a distortion in HRC pricing in the current period of review.“). On remand, Commerce bolstered its conclusion that such alliances exist by pointing to a SeAH Steel Group brochure that describes a SeAH Steel Group processing center “as the processing center for POSCO,” which Commerce concluded “demonstrates a close entanglement between HRC suppliers such as POSCO and OCTG producers.” First Remand Results at 22-23. SeAH maintains that it was not affiliated with POSCO. SeAH explains that the SeAH entity that runs a “processing center for POSCO” referenced in the brochure had nothing to do with its OCTG operations, and that Commerce has previously found SeAH and POSCO to be unaffiliated. SeAH Resp. Br. 44; Appx7993-94 (SeAH Comments on Draft Remand Redetermination).
Although the parties dispute whether a cost-based particular market situation adjustment must be supported by a showing of market-wide distortions or respondent-specific distortions, Commerce has shown neither. Commerce merely speculated that strategic alliances affected the Korean HRC market as a whole. Its showing of some
C. Steel Industry Restructuring
On remand, Commerce cited evidence of government-led restructuring of the Korean steel industry. First Remand Results at 25-26. Commerce reasoned that “[t]he Korean government‘s assistance to accelerate the steel industry‘s response and restructuring interferes with the normal functioning of the free market and alters the ordinary course of trade.” Id. at 26. Commerce cited a press release from the Korean Ministry of Strategy and Finance announcing restructuring. Id. at 25. As the Court of International Trade noted, though, the period of review concluded on August 31, 2016, and the press release, dated January 25, 2017, announced the Korean government‘s “2017 Action Plan for Industrial Restructuring.” NEXTEEL II, 450 F. Supp. 3d at 1343.
The announcement and other publications discussing future restructuring efforts provide no evidence of actual government interference during the period of review. Substantial evidence does not support Commerce‘s finding that steel industry restructuring efforts contributed to a particular market situation.
* * *
We affirm the Court of International Trade‘s conclusions in NEXTEEL II that three of the circumstances Commerce cited do not support a finding of a particular market situation on the existing record.4
Although low-priced Chinese steel could contribute to a particular market situation, the record does not show sufficient particularity for this circumstance to create a particular market situation on its own. Commerce acknowledged that significant quantities of cheaper Chinese HRC flow to many countries and “affect[] the whole world.” Final Results at 21; First Remand Results at 21-22 (citing a government announcement stating that Chinese excess supply is targeted toward “Korea, ASEAN, and
Government control of electricity prices is a type of distortion expressly contemplated by Congress, but the evidence is mixed on whether the Korean government is involved “to such an extent that home market prices cannot be considered to be competitively set,” H.R. Rep. No. 103-316, vol. 1 at 822, and whether the prices are any different from what they would be in the ordinary course of trade. First Remand Results at 65 (citing a report showing that Korean electricity prices are lower than Japan‘s but comparable to median prices among all countries studied). Commerce‘s countervailing duty determinations have consistently found that Korean electricity prices are set in accordance with market principles and thus that Korean steel producers have not benefited from government involvement in Korean electricity pricing. E.g., POSCO v. United States, 337 F. Supp. 3d 1265, 1282-83 (Ct. Int‘l Trade 2018) (upholding Commerce‘s finding that the Korean electricity prices were “set in accordance with market principles,” covered costs, and did not confer a benefit to the subject producers); POSCO v. United States, 353 F. Supp. 3d 1357, 1368-73 (Ct. Int‘l Trade 2018) (sustaining similar findings for a period of investigation from January 1, 2015 through December 31, 2015); Maverick Tube Corp. v. United States, 273 F. Supp. 3d 1293, 1303-12 (Ct. Int‘l Trade 2017) (sustaining similar findings for welded line pipe from Korea). Commerce has not justified its departure from those findings here. See First Remand Results at 66.
We therefore affirm the trial court‘s decision in NEXTEEL II that Commerce‘s conclusion—“the presence of all five factors, as well as the interaction of the five factors with one another, supports the finding that a [particular market situation] existed in Korea during the relevant
III. The Court of International Trade‘s Reversal
Remanding for the second time, the Court of International Trade “direct[ed] Commerce to reverse its finding of a particular market situation.” NEXTEEL II, 450 F. Supp. 3d at 1343.
“[T]he Court of International Trade is precluded by statute from ever outright reversing a decision by Commerce . . . when reviewing countervailing duty and antidumping duty proceedings. Rather, at most it can simply remand for further consideration consistent with its decision.” Ad Hoc Shrimp Trade Action Comm. v. United States, 515 F.3d 1372, 1383 (Fed. Cir. 2008);
As in Nippon I, the court issued its directed remand after one open-ended remand. NEXTEEL II, 450 F. Supp. 3d at 1343. The court reversed Commerce based on its weighing of the evidence, e.g., discounting evidence that predated the period of review, id. at 1339-42, and not because the record supports only one outcome. Indeed, in view of the conflicting evidence discussed above, the record evidence does not appear to support the absence of a particular market situation any more than it supports the
IV. Differential Pricing Analysis
By default, Commerce calculates dumping margins by comparing averaged normal value sales to averaged export prices.
To show such a “pattern,” Commerce uses its “differential pricing analysis” methodology based on a statistic called “Cohen‘s d.” Based on this analysis, Commerce relied on an average-to-transaction comparison here. Preliminary Results Memo at 10-11; Final Results Memo at 76.
SeAH argues Commerce‘s methodology was flawed because Commerce relied on Cohen‘s d even though the express conditions for its application were not satisfied: that the data sets being compared be normally distributed, have at least 20 or more data points, and have roughly equal variances. SeAH Resp. Br. 67-68. Our recent opinion in Stupp Corp. v. United States, 5 F.4th 1341 (Fed. Cir. 2021), addressed the same argument and vacated the Court of International Trade‘s decision upholding the differential pricing analysis. Id. at 1360. Because Commerce‘s use of Cohen‘s d here presents identical concerns to those in Stupp,5 we vacate this portion of NEXTEEL I and remand
V. Freight Revenue Cap
To achieve a “fair comparison” between normal value and export price, Commerce must adjust for shipping. See
Commerce starts with the amount charged to the customer for the subject merchandise and subtracts the net freight expense. Dongguan Sunrise Furniture Co. v. United States, 36 Ct. Int‘l Trade 860, 893 (2012). The net freight expense is the cost of freight (“freight expense“) less the amount charged to the customer for freight (“freight revenue“). Id. Commerce‘s “normal practice” is to cap freight revenue at freight cost. Final Results Memo at 87; see Dongguan, 36 Ct. Int‘l Trade at 893. Thus, no adjustment is made if revenue exceeds freight expenses.
Section
SeAH argues Commerce‘s methodology is unreasonable because it treats profits and losses on shipping differently, reducing export price when the exporter incurs a loss on shipping but not increasing export price when the exporter achieves a profit. SeAH Resp. Br. 75-76. This result is perhaps counterintuitive, but SeAH gives no explanation of why it is unreasonable.
Commerce is not required to show that its chosen methodology is superior to all others. Still, the freight revenue cap has advantages over other possible methodologies. Compared to simply removing the freight revenue cap, Commerce‘s interpretation ensures that the freight adjustment is only a downward adjustment, as the statute contemplates.
SeAH contends that it would be reasonable to deduct freight cost from the combined price for the merchandise and freight, regardless of whether the invoiced freight revenue was greater than the freight cost. SeAH Resp. Br. 75. But compared to this proposed method, Commerce‘s method “prevents an exporter from improperly inflating its export price or [constructed export price] of a good by charging a customer more for freight than the exporter‘s actual freight expenses.” Final Results Memo at 87. And Commerce‘s methodology allows “a proper ‘apples-to-apples’ comparison” between export price and normal value by excluding “profit earned from the sale of a service (freight) as opposed to profit earned from the sales of
SeAH also advocates disregarding separately-invoiced freight altogether and considering only the amount invoiced for the product with no freight adjustment. SeAH Resp. Br. 75. But if separately-invoiced freight were disregarded altogether, an exporter could improperly inflate its export prices by charging more for the merchandise and less for shipping. Such methodology could be inconsistent with the statutory language if the price for the merchandise were inflated in this way. The price charged for the merchandise might include an “amount . . . attributable to [freight expense],” which the agency would have to deduct under
Commerce‘s freight revenue cap methodology is reasonable. We thus affirm the Court of International Trade‘s decision upholding Commerce‘s methodology.
VI. Profit Cap
When normal value is based on constructed value, constructed value includes the actual profit earned by the exporter on its sales of the subject merchandise in the relevant comparison market.
(iii) . . . any other reasonable method, except that the amount allowed for profit may not exceed the amount normally realized by exporters or producers (other than the exporter or producer described in clause (i)) in connection with the sale, for consumption in the foreign country, of merchandise
that is in the same general category of products as the subject merchandise.
Here, after justifying its departure from the other three methods, Commerce relied on “any other reasonable method” pursuant to
SeAH argues that Commerce‘s use of SeAH‘s own sales to set the profit cap is directly prohibited by the phrase “other than the exporter or producer described in clause (i)” in
SeAH misreads the statute. Part (iii) describes the quantity Commerce must calculate—the profits normally realized by other exporters. The language “other than the exporter or producer described in clause (i)” clarifies whose profit Commerce must calculate but does not limit the data Commerce may rely on to calculate it. As with any other quantity, Commerce may rely on facts available pursuant to
We thus affirm the holding of the Court of International Trade that Commerce‘s application of the profit cap is lawful.
CONCLUSION
In summary, we agree with the Court of International Trade that substantial evidence does not support the
We vacate the Court of International Trade‘s decision upholding Commerce‘s differential pricing analysis for the reasons stated in our recent decision in Stupp, 5 F.4th 1341, and remand for proceedings consistent with that decision.
We affirm the Court of International Trade‘s decision upholding Commerce‘s use of a freight revenue cap as a reasonable methodology to implement
We affirm the Court of International Trade‘s decision upholding Commerce‘s use of SeAH‘s own data to calculate a profit cap as consistent with
AFFIRMED IN PART, VACATED IN PART, AND REMANDED
COSTS
No costs.