PRODUCTOS LAMINADOS DE MONTERREY S.A. DE C.V. v. UNITED STATES, аnd NUCOR TUBULAR PRODUCTS INC. and ATLAS TUBE AND SEARING INDUSTRIES
Court No. 20-00166
United States Court of International Trade
December 17, 2021
Timothy C. Stanceu, Judge
Slip Op. No. 21-170
David E. Bond, White and Case LLP, of Washington, D.C., for plaintiffs Productos Laminados de Monterrey S.A. de C.V. With him on the brief was Allison J.G. Kepkay.
Kara M. Westercamp, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, D.C., for defendant the United States of America. With her on the brief were Brian M. Boynton, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Claudia Burke, Assistance Director. Of counsel on the brief was Ayat
Alan H. Price, Wiley Rein LLP, of Washington, D.C., for defendant-intervenor Nucor Tubular Products Inc. With him on the brief were Robert E. DeFrancesco, III and Jake R. Frischknecht.
Christoрher T. Cloutier, Schagrin Associates, of Washington, D.C., for defendant-intervenors Atlas Tube and Searing Industries. With him on the brief were Roger B. Schagrin, Luke A. Meisner, and Kelsey M. Rule.
OPINION AND ORDER
[Remanding for reconsideration an agency decision concluding an administrative review of an antidumping duty order.]
Stanceu, Judge: In this action brought under Section 516A of the Tariff Act of 1930, as amended (the “Tariff Act“),
Before the court is Prolamsa‘s motion for judgment on the agency record, brought under
I. BACKGROUND
A. The Contested Agency Determination
The contested administrative determination (the “Final Results“) was published as Heavy Walled Rectangular Welded Carbon Steel Pipes and Tubes From Mexico: Final Results of Antidumping Duty Administrative Review and Final Determination of No Shipments; 2017–2018,
B. The Parties
Plaintiff is a Mexican producer and exporter of the subject merchandise that participated in the Department‘s second
C. Proceedings Before Commerce
Commerce issued the antidumping duty order (the “Order“) in 2016. Heavy Walled Rectangular Welded Carbon Steel Pipes and Tubes From thе Republic of Korea, Mexico, and the Republic of Turkey: Antidumping Duty Orders,
On November 15, 2018, Commerce initiated the second administrative review of the Order, which covered entries made during the period of September 1, 2017 to August 31, 2018 (the “period of review” or “POR“). Initiation of Antidumping and Countervailing Duty Administrative Reviews,
Commerce published preliminary results for the second review on November 18, 2019 (the “Preliminary Results“), in which Commerce preliminarily calculated a dumping margin of 0.8% for entries of subject merchandise produced and exported by Prolamsa. Heavy Walled Rectangular Welded Carbon Steel Pipes and Tubes from Mexico: Preliminary Results of Antidumping Duty Administrative Review and Preliminary Determination of No Shipments; 2017–2018,
On July 13, 2020, Commerce published the Final Results, in which it assigned Prolamsa a weighted average dumping margin of 7.47%. Final Results,
D. Proceedings Before the Court
Plaintiff brought this action in September 2020. Summons (Sept. 1, 2020), ECF No. 1; Compl. (Sept. 28, 2020), ECF No. 12. On March 5, 2021, plaintiff filed the instant motion for judgment on the agency record and accompanying brief. Rule 56.2 Mot. for J. on the Agency R., ECF Nos. 31 (conf.), 32 (public); Mem. of P. & A. in Supp. of Pl.‘s Rule 56.2 Mot. for J. upon the Agency R., ECF Nos. 31-1 (conf.), 32-1 (public) (“Pl.‘s Br.“). On May 4, 2021, Atlas Tube and Searing Industries filed a response in opposition to plaintiff‘s motion. Dеf.-Intervenors Atlas Tube and Searing Industries’ Resp. in Opp‘n to Rule 56.2 Mot. for J. on the Agency R., ECF Nos. 37 (conf.), 38 (public) (“Atlas Tube‘s Resp.“). Nucor and the government each submitted their respective responses on May 7, 2021. Def.-Intervenor Nucor Tubular Products Inc.‘s Resp. Br., ECF Nos. 40 (conf.), 41 (public) (“Nucor‘s Resp.“); Def.‘s Resp. to Pl.‘s Rule 56.2 Mot. for J. upon the Agency R., ECF No. 42 (“Def.‘s Resp.“). On June 11, 2021, Prolamsa filed its reply brief. Reply Br. in Supp. of Pl.‘s Rule 56.2 Mot. for J. upon the Agency R., ECF No. 45.
On July 2, 2021, plaintiff filed an unopposed motion for oral argument on its Rule 56.2 motion. Pl.‘s Unopposed Mot. for Oral Arg., ECF No. 49.
II. DISCUSSION
A. Jurisdiction and Standard of Review
The court exercises jurisdiction under section 201 of the Customs Courts Act of 1980,
In reviewing a final determination, the court “shall hold unlawful any determination, finding, or conclusion found . . . to be unsupported by substantial evidence on the record, or otherwise not in accordance with law.”
B. Levels of Trade in Calculations of Dumping Margins
Section 751(a)(1) of the Tariff Act requires Commerce, upon a proper request, to conduct а periodic administrative review at least once during each 12-month period beginning on the anniversary of the date of publication of an antidumping duty order.
The Tariff Act directs that Commerce, in the ordinary instance in which normal value is based on the price of the foreign like product in the home market, determine normal value beginning with the price (often referred to as the “starting price“) “at which the foreign like product is first sold . . . for consumption in the
One of the types of adjustments to the starting price is known as a “level-of-trade” adjustment, which Commerce must make according to
The first condition is met if the difference in the level of trade between the export price or constructed export price and normal value “involves the performance of different selling activities.”
The Department‘s regulations explain that “[i]n comparing United States sales with foreign market sales [i.e., sales in the comparison market, which typically is the home market of the exporting country], the Secretary may determine that sales in the two markets were not made at the same level of trade, and that the difference has an effect on comparability of the prices,” adding that “[t]he Secretary is authorized to adjust normal value to account for such a difference.”
C. The Department‘s Preliminary Determination of Two Levels of Trade in Prolamsa‘s Home Market Sales and its Level-of-Trade Adjustment to Normal Value
In questionnaire responses it submitted during the review, Prolamsa informed Commerce that its home market sales occurred in four channels of distribution, identifying its sales in what it termed “HM [home market] Channel 4” as sales of custom-designed parts that were made from HWR pipes and tubes and that were produced for, and sold to, original equipment manufacturers (“OEMs“). Heavy Walled Rectangular Welded Carbon Steel Pipes and Tubes from Mexico: Response to Section A of the Questionnaire (Mar. 15, 2019) (P.R. 46–56, at A-18, J. App. at 34) (“Section A Resp.“). Prolamsa contrasted its HM Channel 4 sales, to which it referred as its “industrial” sales, with those sold through its other three channels of distribution, to which it referred as its “commercial” sales of HWR pipes and tubes, and which it described as follows: direсt sales to unaffiliated customers from inventory stored at its plants (“HM Channel 1“); direct sales to unaffiliated customers from inventory stored at its warehouses (“HM Channel 2“); and sales to affiliated resellers, which products subsequently were resold to unaffiliated home market customers (“HM Channel 3“). Pl.‘s Br. 7–9.
Prolamsa points to record evidence in arguing that “sales through HM Channel 4 required substantially more selling activities” than did its sales through the other three channels. Pl.‘s Br. 8.
On the issue of price comparability, Prolamsa informed Commerce that its “[h]ome market sales prices did not vary based on whether the HWRT was sold through HM Channel 1, HM Channel 2, or HM Channel 3,” that “[h]ome-market sales priсes in HM Channel 4 were significantly higher than sales through HM Channel 1, HM Channel 2, and HM Channel 3” and that “[t]he higher prices reflected the significant, additional selling activities performed in relation to sales through HM Channel 4, as well as the additional production costs incurred to manufacture the parts.” Section A Resp. at A-22, J. App. at 38.
With respect to its U.S. sales of subject merchandise, Prolamsa explained to Commerce during the review that it sold HWR pipes and tubes through three channels of distribution.3 Prolamsa argued that all of its U.S. sales were more similar, in terms of characteristics and selling functions, to its HM Channels 1, 2, and 3 sales, i.e., its “commercial” sales, than they were to its “industrial” sales of HM Channel 4.
For purposes of calculating the 0.8% preliminary dumping margin for Prolamsa in the Preliminary Results, Commerce agreed. Commerce preliminarily determined, first, that all of Prolamsa‘s U.S. sales occurred at a single LOT. Prelim. Decision Mem. at 15, J. App. at 483. It preliminarily determined, next, “that sales to the home market non-OEM customers (i.e., in HM channels 1 through 3) during the POR were not made at a different LOT than sales to the United States.” Id. at 16, J. App. at 484. Regarding the requested level-of-trade adjustment, Commerce stated that “[i]n instances where we were unable to make price-to-price comparisons at the same LOT (i.e., comparisons involving OEM sales in HM channel 4) we made an LOT adjustment.” Id. In summary, for the Preliminary Results Commerce used Prolamsa‘s HM Channel 4 sales for price comparisons with U.S. sales only when no HM Channel 1, 2, or 3 sales were available for comрarison with U.S. sales, and when it used an HM Channel 4 sale for that purpose, it made an adjustment, i.e., a reduction, in normal value to account for the difference in level of trade.
D. The Department‘s Decision in the Final Results to Deny Prolamsa‘s Request for a Level-of-Trade Adjustment
Following the Department‘s issuance of the Preliminary Results, Petitioners Independence Tube Corporation, a Nucor company, and Southland Tube, Inc., a Nucor company, (the corporate predecessors to defendant-intervenor Nucor) filed a case brief with Commerce in which they opposed the decision in the Preliminary Results that would allоw Prolamsa a level-of-trade adjustment. See Final I&D Mem. at 16–20, J. App. at 546–50. They characterized the difference between HM Channel 4 sales and the sales in HM Channels 1 through 3 as demonstrating only “minor differences” in the customer bases and merchandise that they argued did not amount to a different stage of marketing. Overall, they argued that Prolamsa provided insufficient, and inadequately documented, proof for its request that Commerce recognize a second level of trade in its home market. In its case brief, Prolamsa made arguments in rebuttal. Id. at 20–23, J. App. at 550–53.
Commerce, reversing its preliminary decision in the Final Results, stated that “[b]ased upon the parties’ comments and our reexamination of the evidence on the record, we find that Prolamsa has not demonstrated that it sold HWR pipe and tube at two different LOTs in the home market.” Id. at 23, J. App. at 553. “Accordingly, for these final results we have treated all sales made in the home market at a single LOT during the POR.” Id.
E. The Department‘s Denial of the Requested Level-of-Trade Adjustment Is Not Supported by Substantial Evidence
In the Final Issues and Decisions Memorandum, Commerce stated as background that “reliance on qualitative evidence, such as narrative descriptions of differences in selling functions, customer correspondence, sample sales records, meeting presentations and the like, without supporting quantitative evidence frequently does not present a complete understanding of a respondent‘s selling activities.” Final I&D Mem. at 25, J. App. at 555. Commerce cited a change
After discussing its general requirement for “quantitative information,” Commerce based its decision denying Prolamsa‘s request for a level-of-trade adjustment on a finding that “[w]hile Prolamsa asserts that it fully demonstrated that there were significant differences in the selling activities performed between home market channels during the POR, none of the documents provided demonstrate direct quantitative support for such claims.” Id. at 27, J. App. at 557. “Therefore, for these final results, Commerce finds that Prolamsa has not shown that it made sales in the home market at more than one LOT because it has not supported its LOT claims with quantitative evidence.” Id.
Before the court, Prolamsa argues that Commerce “completely overlooked the quantitative information submitted by Prolamsa.” Pl.‘s Br. 14. The court agrees. Evidence on the record contradicts the Department‘s finding that none of the documents Prolamsa provided “demоnstrate direct quantitative support” for Prolamsa‘s assertion “that there were significant differences in the selling activities performed between home market channels during the POR.” Final I&D Mem. at 27, J. App. at 557.
With its response to the Department‘s supplemental Section A questionnaire, Prolamsa provided quantitative data illustrating differences between the staffing and expenses it incurred in making its home market “industrial” sales, i.e., its OEM sales of parts made from HWR pipe and tube in HM Channel 4, and its sales of standard HWR pipe and tube in the other three channels, to which it referred in the response as its “commercial” sales. Heavy Walled Rectangular Welded Carbon Steel Pipes and Tubes from Mexico: Response to the First Section A Supplemental Questionnaire (Oct. 21, 2019) (P.R. 135–37, at 7–8, J. App. at 307–08) (“Supp. Section A Resp.“). In columns in Supplemental Exhibit A-4, Prolamsa presented data for the “Commercial” and “Industrial” sales activities, broken down by “Total Sales Personnel (Directors, Managers, Staff) (Headcount),” “Total Selling Expenses (MXN [apparently, ‘Mexican‘]),” and “Sales Team‘s Salaries & Benefits (MXN).” Id. at Ex. Supp. A-4, J. App. at 325. Prolamsa summarized this confidential business data on page 8 of the response. Id. at 8, J. App. at 308. The data show generally that the industrial sales accounted for staffing and staffing expenses (salary and benefits) and tоtal selling expenses that, when related to total home market (“MXN“) sales in each of these two categories, were proportionally higher by a substantial amount than those of the commercial sales. Id. Describing these quantitative data to the court, Prolamsa describes this supplemental questionnaire response as presenting “comparisons of selling expenses, salaries/benefits, and headcount, all demonstrating the substantially higher expenses
Prolamsa provided a second set of quantitative data on inventory turnover to illustrate that the industrial sales involved substantially longer average inventory turnover periods than the commercial sales. Prolamsa argues that these data “support the conclusion that the sales through HM Channel 4 had a slower inventory turnover, which resulted in higher inventory costs, as compared to sales through HM channels 1 through 3” and that “[t]he slower inventory turnover was because of additional inventory requirements for just-in-time delivery requirements of OEMs and to compensate for specific customer needs.” Pl.‘s Br. 15 (citing Supp. Section A Resp. at 17 & Ex. Supp. A-8, J. App. at 317 & 360).
The Final Issues and Decision Memorandum does not specifically address the quantitative data on selling expenses and inventory turnover. Instead, the Department‘s analysis proceeds directly from its invalid finding that Prolamsa failed to provide documents that “demonstrate direct quantitative support” for Prolamsa‘s assertion “that there were significant differences in the selling activities performed between home market channels during the POR.” Final I&D Mem. at 27, J. App. at 557. In addition to that specific finding, Commerce offered only one other finding in support of its ultimate conclusion. Referring to its “analytical framеwork” since the 2018 change of practice, Commerce concluded that “[i]n applying this analytical framework to the record evidence, Commerce has reached a different conclusion in the final results of this review than it reached in the Preliminary Results because it has found that the totality of the record evidence contains inadequate support for Prolamsa‘s LOT claims.” Id. at 27-28, J. App. at 557–58. This second finding is unsatisfactory in two respects. First, it is entirely conclusory, hiding behind a vague and unexplained “totality of the record evidence.” Second, the actual “totality of the record evidence” would appear to include circumstances Commerce described in a number of specific factual findings that Commerce stated, and grounded in record evidence, in the Preliminary Results but did not identify in the Final Results as findings that it was reversing or abandoning.
For example, regarding “intensity” of selling activities, Commerce stated in the Preliminary Results that Prolamsa had “provided certain additional documentation adequately demonstrating that it performed 9 out of 14 selling activities for its HM channel 4 sales at a high level of intensity (i.e., personal training/exchange, engineering services, qualification requirements, order input/processing, inventory maintenance, freight and delivery, just-in-time delivery, teсhnical assistance, and after-sales services).” Prelim. Decision Mem. at 14, J. App. at 482 (footnote omitted). For the Preliminary Results, Commerce also found that Prolamsa performed certain selling activities for its “industrial” sales of HM Channel 4, which were sales of custom “HWR pipe and tube parts,” that it did not perform for its other, i.e., “commercial” sales of HM Channels 1–3, which were of “standard HWR pipe and tube.” Id. Commerce devoted detailed discussion in the Preliminary Decision Memorandum to these “OEM-specific selling activities not performed for the rest of Prolamsa‘s home market sales.” See id. In the Preliminary Decision Memorandum, Commerce stated that “Prolamsa undertakes significant
In summary, the Department‘s analysis rests on one finding that is contradicted by the record evidence and another that is vague and conclusory in invoking the “totality of the record evidence.” The court, therefore, must remand for reconsideration the Department‘s decision that all home market sales occurred at a single LOT and to reject Prolamsa‘s request for a level-of-trade adjustment.
Defendant argues that the court should sustain the Department‘s decision on the ground that “in reaching its conclusion that the record evidence was insufficient to support Prolamsa‘s level of trаde claim, Commerce explained in the final results that there was no quantitative evidence that would allow Commerce to determine if Prolamsa‘s claimed levels of trade were meaningful.” Def.‘s Resp. 12 (citing Final I&D Mem. at 23, 25, J. App. at 553, 555) (emphasis in original). This is not an accurate paraphrase of the discussion in the Final Issues and Decision Memorandum. Commerce ruled as it did upon a finding that Prolamsa failed to provide documents that demonstrated direct quantitative support for Prolamsa‘s assertion that there were significant differences in the selling activities performed between the industrial and the commercial home market sales and upon a cоnclusion that the totality of the record evidence was insufficient to support a level-of-trade adjustment.
Even were defendant‘s characterization of the Department‘s decision correct, the court would not agree with defendant‘s argument. The record evidence defendant implies is not “meaningful” includes, inter alia, quantitative and qualitative evidence concerning a number of selling activities that, according to findings in the Preliminary Results that Commerce did not abandon, uniquely characterized the home market industrial sales and distinguished them from the other home market sales and the U.S. sales. In summary, there is record evidence that sales in HM Chаnnel 4 involved different and more intense selling activities, a different type of customer (OEMs), and different products (what Commerce in the Preliminary Results termed custom “HWR pipe and tube parts“) than did the “commercial” sales of HM Channels 1–3 (which were of “standard HWR pipe and tube“).
Defendant-intervenors’ arguments parallel defendant‘s in some respects but also rest upon certain other findings and conclusions upon which Commerce did not base its decision. See Nucor‘s
III. CONCLUSION AND ORDER
Commerce, on remand, must reconsider its decision finding a single home market level of trade and declining to make a level-of-trade adjustment. That decision rests solely upon a factual finding that is not supported by substantial evidence and a vague and conclusory statement directed to the “totality of the record evidence.”
Therefore, upon consideration of all papers and proceedings herein, and upon due deliberation, it is hereby
ORDERED that plaintiff‘s Rule 56.2 Motion for Judgment on the Agency Record, ECF Nos. 30 (initial conf.) (Mar. 5, 2021), 31 (conf.) (Mar. 8, 2021), 32 (public) (Mar. 8, 2021), be, аnd hereby is, granted; it is further
ORDERED that Commerce, within 90 days from the date of issuance of this Opinion and Order, shall submit a redetermination upon remand (“Remand Redetermination“) that complies with this Opinion and Order; it is further
ORDERED that plaintiff and defendant-intervenors shall have 30 days from the filing of the Remand Redetermination in which to submit comments to the court; it is further
ORDERED that should plaintiff or defendant-intervenors submit comments, defendant shall have 15 days from the date of filing of the last comment to submit a response; and it is further
ORDERED that plaintiff‘s Unopposed Motion for Oral Argument (July 2, 2021), ECF No. 49, be, and hereby is, denied.
/s/ Timothy C. Stanceu
Timothy C. Stanceu, Judge
Dated: December 17, 2021
New York, New York
Notes
With respect to the U.S. market, Prolamsa reported that it made sales through three channels of distribution: (1) direct EP sales of HWR pipe and tube to unaffiliated U.S. customers for which Prolamsa knew the final destination was the United States (i.e., U.S. channel 1); (2) direct CEP sales of HWR pipe and tube to unaffiliated U.S. customers from Prolamsa‘s inventory sold through its U.S. affiliate, Prolamsa, Inc. (i.e., U.S. channel 2); and (3) direct CEP sales of HWR pipe and tube to unaffiliated U.S. customers sold from Prolamsa Inc.‘s warehouse through Prolamsa, Inc. (i.e., U.S. channel 3).
Decision Memorandum for the Preliminary Results of the 2017- 2018 Administrative Review of the Antidumping Duty Order on Heavy Walled Rectangular Welded Carbon Steel Pipes and Tubes from Mexico (Int‘l Trade Admin. Nov. 6, 2019) (P.R. 147, at 15, J. App. at 485).