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Date: 12-24-2015

Case Style: Husteel Co. v. United States

Case Number: 15-100

Judge: Jane A. Restani

Court: UNITED STATES COURT OF INTERNATIONAL TRADE

Plaintiff's Attorney: Donald B. Cameron, Julie C. Mendoza, R. Will Planert, Brady W. Mills, Mary S. Hodgins, Sarah S. Sprinkle

Defendant's Attorney: Melissa M. Devine, Emma E. Bond, Agatha Koprowski, Benjamin C. Mizer,
Jeanne E. Davidson, Claudia Burke, L. Misha Preheim

Description: Following the filing of a petition by U.S. Steel, Maverick, and other domestic producers
of OCTG, Commerce initiated anAD investigation of OCTG from Koreaon July 22, 2013. See
Certain Oil Country Tubular Goods from India, the Republic of Korea, the Republic of the
Philippines, Saudi Arabia, Taiwan, Thailand, the Republic of Turkey, Ukraine, and the Socialist
Republic of Vietnam: Initiation of Antidumping Duty Investigations, 78 Fed. Reg. 45,505,
45,506, 45,512(Dep’t Commerce July 29, 2013)(“Initiation Notice”). On August 26, 2013,
Commerce limited the number of respondents for individual examination, selecting the two
exporters or producers of OCTG that accountedfor the largest volume of importsfrom Korea to
the United States: NEXTEEL and HYSCO. Respondent Selection Memorandum at 6–8,PD80
(Aug. 27, 2013)(“Respondent Selection Memo”). Because the two mandatory respondents did
Consol. Court No. 14-00215 Page5
not have viable home or third-country marketsfor OCTG, pursuant to 19 U.S.C. §1677b(a)(4) (2012), Commerce used a constructed value (“CV”) to determine the appropriate normal value.2
Issues and Decision Memorandum for the Final Affirmative Determination in the Less than Fair
Value Investigation ofCertain Oil Country Tubular Goods from the Republic of Koreaat 3, A
580-870,(July 10, 2014), available athttp://enforcement.trade.gov/frn/summary/korea
south/2014-16874-1.pdf(last visited Aug. 27, 2015) (“I&D Memo”). In order to determine
whether OCTG from Korea were sold in the United States at less than fair value, Commerce compared HYSCO’s constructed normal value to aconstructed export price (“CEP”),3 because
HYSCO reported that it sold the subject merchandise to a wholly-owned subsidiary in the United
States that then sold the merchandise to an unaffiliated customer. Decision Memorandum for the
Preliminary Determination in the Less-Than Fair Value Investigation of Certain Oil Country
Tubular Goods from the Republic of Korea at 15, 19, PD 276(Feb. 14, 2014) (“Preliminary I&D
2 The normal value of the subject merchandise is defined as “the price at which the foreign like product is first sold... for consumption in the exporting country, in the usual commercial quantities and in the ordinary course of and, to the extent practicable, at the same level of trade as the export price or constructed export price.” 19 U.S.C. §1677b(a)(1)(B)(i)(2012). If normal value cannot be determined pursuant to 19 U.S.C. §1677b(a)(1)(B)(i), then the constructed value of the subject merchandise may be used in place of normal value. 19 U.S.C. §1677b(a)(4). A dumping margin is “the amount by which the normal value exceeds the export price or constructed export price of the subject merchandise. 19 U.S.C. §1677(35)(a). 3 CEP is “the price at which the subject merchandise is first sold (or agreed to be sold) in the United States before or after the date of importation by or for the account of the producer or exporter of such merchandise or by a seller affiliated with the producer or exporter, to a purchaser not affiliated with the producer or exporter.” 19 U.S.C. §1677a(b).
Consol. Court No. 14-00215 Page6
Memo”). NEXTEEL’s constructed normal value was compared to NEXTEEL’s export price4
for certain sales that it made directly to unaffiliated customers, and CEPfor sales made through
an affiliated customer. SeeI&D Memoat 90.
In February 2014, Commerce issued a negative preliminary determination. Certain Oil
Country Tubular Goods From the Republic of Korea: Negative Preliminary Determination of
Sales at Less Than Fair Value, Negative Preliminary Determination of Critical Circumstances
and Postponement of Final Determination, 79 Fed. Reg. 10,480 (Dep’t Commerce Feb. 25, 2014)
(“Preliminary Determination”). Commerce calculated weighted-average dumping margins of
zero for both mandatory respondents. Id.at 10,481.
In July 2014, Commerce issued an affirmative final determination. Final Determination,
79 Fed. Reg. at 41,983. Commerce calculated a dumping margin of 9.89% for NEXTEEL and
15.75% for HYSCO. Id.at 41,984. Korean producers and exporters not individually examined,
including Husteel, ILJIN, SeAH, and AJU Besteel,were assigned a margin of 12.82%, which
was the weighted average of the mandatory respondents’ dumping margins. Seeid. The largest
factor in the significant change in the dumping margin between the Preliminary Determination
and the Final Determinationwas the profit figure used in the CV calculation. For NEXTEEL,
Commerce preliminarily relied on the profit recorded in certain Korean OCTG producers’
financial statements, and for HYSCO, Commerce preliminarily used the profit HYSCO earned
on its home market salesof non-OCTG pipe products. I&D Memoat 14. For the Final
4 Export price is “the price at which the subject merchandise is first sold (or agreed to be sold) before the date of importation by the producer or exporter of the subject merchandise outside of the United States to an unaffiliated purchaser in the United States or to an unaffiliated purchaser for exportation to the United States.” 19 U.S.C. §1677a(a).
Consol. Court No. 14-00215 Page7
Determination, Commerce used the profit reflected in the financial statement of Tenaris S.A., a
multinational corporation,to calculate CV profit for both mandatory respondents. Id.at 14, 16,
The Tenaris financial statementwas placed on the record after the Preliminary Determination.
Seeid.at 28–29.
The International Trade Commission reached an affirmativeinjury determination in
September 2014. SeeCertain Oil Country Tubular Goods from India, Korea, the Philippines,
Taiwan, Thailand, Turkey, Ukraine, and Vietnam,79 Fed. Reg. 53,080 (ITC Sept. 5, 2014).
Commerce issued the AD order effectiveSeptember 10, 2014. SeeCertain Oil Country Tubular
Goods From India, the Republic of Korea, Taiwan, the Republic of Turkey, and the Socialist
Republic of Vietnam: Antidumping Duty Orders; and Certain Oil Country Tubular Goods From
the Socialist Republic of Vietnam: Amended Final Determination of Sales at Less Than Fair
Value, 79 Fed. Reg. 53,691 (Dep’t Commerce Sept. 10, 2014).
Korean producers NEXTEEL, HYSCO, Husteel, SeAH, AJU Besteel, and ILJIN,and
domestic producers U.S. Steel and Maverick, challenge numerous aspects of Commerce’s Final
Determination. Each issue will be discussed in turn.
JURISDICTION AND STANDARD OF REVIEW
The court has jurisdiction pursuant to 28 U.S.C. §1581(c). The court willuphold
Commerce’s final determination in an ADinvestigation, unless it is “unsupported by substantial
evidence on the record, or otherwise not in accordance withlaw.” 19 U.S.C.
§1516a(b)(1)(B)(i).
Consol. Court No. 14-00215 Page8
DISCUSSION
I. Respondent Selection
A. Background
In the Initiation Notice, Commerce indicated that it would rely on U.S. Customs and
Border Protection (“CBP”) data for U.S. imports of OCTG to select mandatory respondents in
the event that Commerce determined that the number of known exporters or producers was
“large.” Initiation Notice, 78 Fed. Reg. at 45,511. Commerce explained that it would release the
CBP data shortly following the Initiation Noticeand invited interested parties to comment
regarding the CBP data and respondent selection. Id.
Whereas the ADpetition listed ten Korean producers or exporters of OCTG, Petition at
Ex. I-5, PD 1–3(July 2, 2013), the CBP data released by Commerce listed twenty-twoproducers
or exporters. CBP Data, CD 16–17 (July 26, 2013). Of the twenty-twocompanies listed, several
of the companies had almostidentical names, suggesting that these firms were double counted, and issues with others cast doubt on their suitability as respondents.5 Id. The government states
that even if some of the entries in the CBP data were redundant, there were at least twelve
potential respondents, although the government maintains that twenty-twois the appropriate
figure in determining the number of potential respondents. Def.’s Resp. in Opp’n to Mots. for J.
upon the Administrative R. 67–70, ECFNo. 144 (confidential version).
5 [[ ]] of the companies listed in the CPB data [[ ]].
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Commerce concluded that “[b]ecause of the large number of known exporters or
producers involved in this investigation, and after careful consideration of [its] resources,... it
would not be practicable... to examineall known exporters and producers of the subject
merchandise as identified in the Petition and the CBP import data.” Respondent Selection Memo
at 6. Rather than review each known exporter or producer, Commerce limited the mandatory
respondents to the exporters or producers that accounted for the largest volume of importsof
OCTG that reasonably couldbeexamined, pursuant to 19 U.S.C. §1677f-1(c)(2)(B). Seeid.at
7. Commerce selected HYSCO and NEXTEEL, as they were the two largest exporters of OCTG.6 Id.at 8. Commerce indicated that it would consider requests to be treated as voluntary
respondents at a future date. Id.at 9.
Husteel, SeAH, and ILJIN requested to be individually examined as voluntary
respondents. Treatment of Voluntary Respondents Memorandum at 1, PD 194 (Dec. 30, 2013)
(“Voluntary Respondent Memo”). On December 30, 2013, approximately four months after
Commerce limitedthe number of mandatory respondents, Commerce determined that it could
not examine any voluntary respondents “as this would be unduly burdensome to the Department,
and inhibit the timely completion of this investigation.” Id. Commerce noted the complexities
involved in its examination of the two mandatory respondents, the truncated timeline for
investigations, the need to verify the responses of any additional respondents, its workload,
6 Together, HYSCO and NEXTEEL accounted for approximately [[ ]] percent of the Korean OCTG imports captured in the CBP date. Respondent Selection Memo at 5.
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including a number of ADand countervailing duty investigations on OCTG from other countries,
and its limited resources as factors bearing on its decision. Id.at 5–7. Husteel, SeAH,7 and ILJIN argue that they should have been examined either as either
mandatory respondents or voluntary respondents.
B. Mandatory Respondent Selection
Husteelarguesthat Commerce impermissibly interpreted the statute that authorizes
Commerce to limit the number of mandatory respondents “[i]f it is not practicable to make
individual weighted average dumping margin determinations [for each known exporter or
producer ofthe subject merchandise] because of the large number of exporters or producers
involved in the investigation.” 19 U.S.C. §1677f-1(c)(2). Itarguesthat Commerce improperly
relied on an assessment of its own resource constraints in defining “large number.” Husteel Br.
at 39–42. Husteelfurther contendsthat the number of exporters or producers involved in the
investigation was not “large.” Id.at 42–43.
ILJIN repeats the same arguments made byHusteel, but emphasizes Commerceshould
have predicted based on the CBP import data and the requests to be reviewed that only a handful
of companies were willing to cooperate in the investigation. ILJIN Br. at 19–21. According to
ILJIN, Commerce should have considered the number of respondents it in fact was likely to
review (i.e., the companiesthat had indicated they would cooperate) in determining whether it
could individually examine each respondent. Id.at 20–21. ILJIN additionally argues that
Commerce actedcontrary to law,because it did not examine a “reasonable number” of
7 SeAHadopted the arguments set forth by Husteel regarding mandatory and voluntary respondent selection. SeAH Br. at 5–6.
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respondents. Id.at 22–23. ILJIN also contends that Commerce erred by failing to take into
account evidence showing that ILJIN was the only Korean producer of seamless OCTG and that
any margin based solely on welded OCTG would not be representative. Seeid.at 23–30.
i. Reliance on Resources
The general rule in ADcases is that Commerce “shall determine the individual weighted
average dumping margin for each known exporter and producer of the subject merchandise.” 19
U.S.C. §1677f-1(c)(1). The statute, however, provides an exception, which Commerce invoked
in this case:
(2) Exception If it is not practicable to make individual weighted average dumping margin determinations under paragraph (1) because of the large number of exporters or producers involved in the investigation or review, the administering authority may determine the weighted average dumping margins for a reasonable number of exporters or producers by limiting its examination to— (A) a sample of exporters, producers, or types of products that is statistically valid based on the information available to the administering authority at the time of selection, or (B) exporters and producers accounting for the largest volume of the subject merchandise from the exporting country that can be reasonably examined.
19 U.S.C. §1677f-1(c)(2). Husteeland ILJIN first argue that Commerce impermissibly
determined whether there was a “large” number of potential respondents based upon its resource
constraints. They cite several decisions of the court wherein Commerce was criticized for
employing such reasoning. SeeAsahi Seiko Co.v.United States,34 CIT 1443, 1449–50,751F.
Supp. 2d 1335, 1340–41 (2010) (concluding that Commerce had implicitly construed “large” to
mean any number greater than three when Commerce stated in the issues and decision
memorandum that “[b]ased upon our analysis of the workload required of this administrative
review, we have determined that we can examine a maximum of three exporters/producers” and
Consol. Court No. 14-00215 Page12
determining that this construction was unreasonable); Carpenter Tech. Corp. v. United States, 33
CIT 1721, 1726–29, 662 F. Supp. 2d 1337, 1341–44 (2009) (concluding that Commerce had
interpreted “large” to mean any number greater than two based upon Commerce’s explanation in
the issues and decision memorandum that it could “examine a maximum of two
exporters/producers” and holding that this interpretation was unreasonable); Zhejiang Native
Produce & Animal By-Prods. Imp.& Exp.Corp. v. United States, 33 CIT 1125,1129, 637 F.
Supp. 2d 1260, 1263–64 (2009) (rejecting Commerce’sconclusionthat four was a large number
and explaining that “[t]he statute focuses solely on the practicability of determining individual
dumping margins based on the large number of exporters or producers” and thus “Commerce
may not rely upon its workload caused by other... proceedingsin assessing whether the number
of exporters or producers is ‘large’”). This argument lacks merit.
Commerce apparently took account of its limited resources and the workload caused by
other proceedings in deciding to limit the number of mandatory respondents. For example,
Commerce stated that “[i]n considering what constitutes a large number of exporters and
producers as part of selecting respondents for an antidumping duty investigation, the Department
carefully considers its resources, including its current and anticipated workload and deadlines
coinciding with the proceeding in question.” Respondent Selection Memo at 6. Commerce also
stated that although it ideally would examine all potential respondents, “in instances where
[Commerce is]forced to limit[its]examination due to the large number of potential respondents
relative to [its]resource constraints,” Commerce examines as many exporters or producers as it
is able. Id. Although Commerce referenced its resource constraints anumber of timesin the
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Respondent Selection Memo, these references do not fatally undermine Commerce’s conclusion
that there was a “large” number of exporters or producers involved in the investigation.
Thiscase distinguishable in a number of material respects from Asahi,Carpenter, and
Zhejiang. Unlike Commerce’s determinations in Asahiand Carpenter, Commerce’s
determination heredidnot rest on an interpretation that any number greater than two or three is
large. Rather, Commerce determined that a large number of potential respondents was involved
in the investigation and then limited its examination to two. And the situation faced by
Commerce in Zhejiangwas materially different, in that the number of respondents initially
involved in that case was four, the two respondents initiallyselected for review refused to
cooperate, and the plaintiff was the only company still seeking review. 33 CIT at 1130, 637F.
Supp. 2d at 1264. Thus, Commerce determinedin that casethat between one and four respondents was a large number. Seeid. Here, Commerce was determining whether twelve8
8 The government suggests that the number of exporters or producers involved in this investigation was twenty-two, which was the total number of companies listed in the CBP data. The government argues that Commerce is not required to conduct a pre-investigation into the accuracy of the CBP data for purposes of respondent selection, as such an investigation is not contemplated by the statute and would hinder the timely completion of the proceedings. Def.’s Resp. in Opp’n to Mots. for J. upon the Administrative R. 69–70, ECF. No. 146 (“Gov. Br.”). Although this argument may have some weight in certain situations, to the extent that Commerce wishes to rely on CBP data for respondent selection, it is unreasonable for Commerce to ignore evidence on the face of that data suggesting that the actual number of potential respondents is likely less than the number of companies separately listed. The court agrees with Husteel that it is unreasonable “to suggest that it requires a ‘pre-investigation’ to determine that an exporter appearing in the CBP data with a quantity of [[ ]] is not a potential respondent” and that “[l]ikewise, where the same exporter appears multiple times in the same dataset, it is hardly unreasonable to expect Commerce to recognize that exporter will constitute only a single respondent.” Reply Br. of Pl. Husteel Co., Ltd. in Resp. to Def.’s and Def.-Intvnrs.’ Brs. 35, ECF. No. 187 (confidential version).
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constituted a large number of exporters or producers, which is a much larger number. The court
recognizes that Zhejiangdid state that “Commerce may not rely upon its workload caused by
other antidumping proceedings in assessing whether the number of exporters or producers is
‘large,’ and thus deciding that individual determinationsare impracticable.” Id.at 1129, 637 F.
Supp. 2d at 1263–64. The court urges Commerce to focus solely on the number of exporters or
producers involved in the investigation or review, rather than its workload caused by other
proceedings, in determining whether there is a large number of potential respondents. The
statement in Zhejiang, however,should be read within its context. The very next sentence stated
that “Commerce cannot rewrite the statute based on its staffing issues.” Id.at 1129, 637 F. Supp.
2d at 1264. The problem in Zhejiangwas that Commerce used its resource constraintsto
interpret the statute to mean that even numbers that appear to be objectively small, such as one or
four, were defined as “large.” Commerce here has not written “large” completely out of the
statute, and the court will not reject Commerce’s conclusion that twelveis a large enough
number that examiningeach producer or exporter would beimpracticable,solely because
Commercereferenced its heavy workload.
ii. Whether Twelveis a Large Number
Husteeland ILJIN next argue that Commerce erred in concluding that there were a
“large” number of respondents involved in the investigation. The statute does not define the
term “large” and Commerce is afforded some discretion in interpreting that term. Cf.Carpenter,
33 CIT at 1727–28, 662 F. Supp. 2d at 1342 (noting that Congress did not define the term “large
number of exporters or producers involved in the [administrative proceedings]” and
acknowledging that “the term might be seen as inherently ambiguous in some contexts”). The
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court has suggested that numbers ranging from three,seeid.at 1726–29, 662 F. Supp. 2d at
1341–44,to eight, seeid.at 1730, 662 F. Supp. 2d at 1344, do not constitute “large” numbers.
The number of exporters or producers involved in this case, twelve, exceeds the number of
potential respondents involved in thecasescited by Husteel and ILJIN. In addition to the fact
that the number of potential respondents involved in this case is larger than the casescited, the
court notes that this case involvesan investigation. As explained in greater detail regarding
Commerce’s refusal to examineany voluntary respondents, the statutory deadlines for
completing an investigation are shorter than the deadlines for completing a review, and
Commerce is required to conduct a verification of respondents’ submissions. As a general
matter, “Commerce has more work to do in less time” when conducting an investigation. Mem.
in Opp’n to Pls.’ and Pl.-Intvnrs.’ Mot. for J. on the Agency R. Filed byDef.-Intvnr. United
States Steel Corp. 91, ECF No. 149 (“U.S. Steel Resp.”). Although Commerce’s shifting
resource allocations do not define “large,” “large” may mean something different in
investigations. The court concludes that Commerce’s determination that there was a “large”
number of known exporters or producers involved in this investigation was reasonable.
Husteeland ILJIN allude to fact that only five companies requested to be examined, and
suggest that Commerce should have considered the fact that its investigation likely would have
consisted of only those companies. The statute states that Commerce “shall determine the
individual weighted average dumping margin for each known exporter and producer of the
subject merchandise.” 19 U.S.C. §1677f-1(c)(1). The Statement of Administrative Action
indicates that Commerce’s practice is to attempt to calculate margins “for all producers and
exporters of merchandise who are subject to an antidumping investigation.” Statement of
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Administrative Action Accompanying the Uruguay Round Agreements Act, H.R. Doc. No. 103
316, vol. 1, at 872(1994), reprinted in1994 U.S.C.C.A.N. 4040, 4200(“SAA”). The statute
does not limit Commerce’s duty to investigate only respondents that specifically ask to be
reviewed. Furthermore, ILJIN’s apparent assumption that the other companies listed in the CBP
data would not have cooperated in any investigation is based on nothing more than speculation. The court therefore rejects this contention.9
iii. “Reasonable Number”of Respondents
ILJIN next cursorily argues that Commerce’s decision to limit the number of mandatory
respondents to only two was unreasonable. SeeILJINBr. at 22–23. ILJIN contends that “if the
exception can legally be invoked, it provides that the ‘administering authority may determine the
weighted average dumping margins for a reasonable number of exporters or producers by
limiting its examination to... [the selected subset identified in subparts (A) and (B)].’” Id.at
22–23(alterationsin original) (quoting 19 U.S.C. §1677f-1(c)). According to ILJIN, two out of
ten is not a “reasonable number.” Id.at 23. In support of this argument, ILJIN cites Zhejiang,
9 ILJIN also argues that Commerce failed to “individually address” certain comments submitted by several companies that reviewing their data, for various reasons, would not have been particularly burdensome. ILJIN Br. at 21–22. The court rejects this argument, as ILJIN never raised this issue in its case brief to Commerce. SeeILJIN Case Brief, PD 446 (June 8, 2014); Pakfood Pub. Co. v. United States, 34 CIT 1122, 1143–44, 724 F. Supp. 2d 1327, 1349–50 (2010) (discussing general rule that a party must present all of its arguments in its case brief in order to exhaust its administrative remedies). The court briefly notes, however, that many of the arguments and much of the data that Commerce supposedly failed to “individually address” was not submitted until after Commerce had made its decision regarding the number of mandatory respondents. These submissions would appear to be more germane to the issue of voluntary respondent selection.
Consol. Court No. 14-00215 Page17
Carpenter, and Asahias establishing a minimum number of respondents that must be reviewed.
This argument lacks merit.
First, ILJIN did not exhaust its administrative remedies on this issue. Nowhere in its
case brief did ILJIN argue that two was not a “reasonable number” of respondents. SeeILJIN
Case Brief, PD446 (June 8, 2014); Pakfood Pub. Co. v. United States, 34 CIT 1122, 1143–44,
724 F. Supp. 2d 1327, 1349–50 (2010) (discussing general rule that a party must present all of its
arguments in its case brief in order toexhaust its administrative remedies). Second, whether a
certain number of mandatory respondents is “reasonable” in any particular case is likely to
depend on the facts of that case, such as the subject merchandise at issue, the respondents
chosen, the mandatory respondents’ share of the total volume of imports, and other factors.
There is no magic numberof respondents that must be chosen for the number to be “reasonable,”
and the cases cited by ILJIN do not create any such bright line. None of those cases discussed
whether the number of respondents selected was a “reasonable number” once the authority to
limit the number of respondents was invokedproperly. The court therefore rejects this argument.
iv. Representativeness
ILJIN also argues that Commerce failed to take account of information it submitted
showing that the other potential respondents in the investigation, including the two respondents
that were selected for individual examination, were not representative of ILJIN. SeeILJIN Br. at
23–31. ILJIN notes that it produces only seamless OCTG, whereas each of the other Korean
companies produce only welded OCTG. Seamless OCTG requires different manufacturing
processes. SeeILJIN’sComments on Respondent Selection at 2–5, PD56 (Aug. 5, 2013).
ILJIN submitted information to Commerce showing that because of the specialized nature of
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seamless OCTG, the sales price of seamless OCTG was significantly higher than the sales prices for welded OCTG.10 Id. ILJIN contends that it is “fundamentally unfair to burden ILJIN’s sales
of seamless OCTG with the margins calculated on much lower-priced welded OCTG.” ILJIN
Br. at 24. This argument has merit.
“[A]n overriding purpose of Commerce’s administration of antidumping laws is to
calculate dumping margins as accurately as possible.” Parkdale Int’l v. United States, 475 F.3d
1375, 1380 (Fed. Cir. 2007) (citing Rhone Poulenc, Inc. v. United States, 899 F.2d 1185, 1191
(Fed. Cir. 1990)). The statute expresses a general preference that each exporter or producer
receive its own margin. See19 U.S.C. §1677f-1(c); see alsoCarpenter, 33 CIT at 1731, 662F.
Supp. 2d at 1345 (construing that the statute should be construed such that “limiting the number
of individually examined respondents is intended to be the exceptional circumstance, not the
norm”). By individually examining each exporter or producer, Commerce bases dumping
margins on each company’s own commercial behavior, which presumably supports the overall
goal of calculating dumping margins as accurately as possibly. As explained, in certain
circumstances, Commerce is authorized to limit its examination to a “reasonable number” of
respondents byusing “(A) a sample of exporters, producers, or types of products that is
statistically valid based on the information available to the administering authority at the time of
selection, or (B) exporters and producers accounting for the largest volume of the subject
10 According to ILJIN, seamless OCTG commands a price premium of approximately [[ ]] percent on average over welded OCTG. Br. of Pl.-Intvnr.IJLIN Steel Crop. in Supp. of Its Mot. for J. on the Agency R. 24, ECF No. 88-1 (confidential version).
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merchandise from the exporting country that can be reasonably examined.” 19 U.S.C.
§1677f-1(c)(2). It is not unreasonable to assume that the goals of these provisions are to capture
a broadly representative sample of the export market, whether through the use of a statistically
valid sample based on factors pertinent to the case orby the fact that capturing a large percentage
of the importedmerchandise generally will reflect the various commercial realities in the home
market. This assumption is at the heart of ILJIN’s argument.
As explained, ILJIN submitted information to Commerce showing that it was the sole
producer of seamless OCTG, which for a number of reasons markedly differs from welded
OCTG. Petitioners submitted similar information to Commerce and argued that “the Department
should select Iljin as a mandatory respondentto ensure that the investigation covers a
representative sample of Korean OCTG producers.” Petitioners’Comments onRespondent
Selection at 5, PD57 (Aug. 6, 2013). ILJIN noted that Commerce had the authority to consider
differences in product type and that using the sampling methodology under §1677f-1(c)(2)(A)
would allow Commerce to select producers of seamless and welded OCTG. ILJIN’sComments
onRespondent Selection at 5; ILJIN Case Brief at 6–7. ILJIN also argued that Commerce could
satisfy both statutory provisions by selecting ILJIN under subsection (A) to ensure that producers
of both kinds of OCTG were represented and then choosing the largest producers or exporters
under subsection (B). ILJIN Case Brief at 7.
Commerce provided the following explanation in the Respondent Selection Memo for its
choice of mandatory respondents:
[T]he Department has the statutory discretion to choose respondents by either sampling or selecting the exporters or producers that account for the largest volume of exports of subject merchandise. In selecting respondents in this antidumping
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duty investigation, the Department finds that, given its limited resources, it is most appropriate to select the exporters or producers accounting for the largest volume of the subject merchandise that can reasonably be examined, pursuant to section 777A(c)(2)(B) of the Act.
Respondent Selection Memo at 7. Regarding the arguments raised by ILJIN and the petitioners,
Commerce stated in a footnote that
[w]ith respect to... ILJIN’s argument that we should select it because it is allegedly the only Korean producer of seamless OCTG, and petitioners’ proposed respondent selection methodology, we note that none of these suggestions for respondent selection are pertinent to the factors that we normally consider in selecting respondents under the two methodologies (i.e.,choosing a statistically valid sample or selecting the largest volume exporters and producers) permitted by the statute.
Id.at 7–8 n.49. Commerce also stated that “[w]hile petitioner argues that ILJIN’s sales would be
more representative, the statute allows for selection based upon the largest exporters.” Id.at 8.
Later in the proceedings, when Commerce declined to investigate any voluntary respondents,
Commerce explained that
[i]n making our determination regarding mandatory respondent selection, the Department already took into account ILJIN’s argument that it was the only producer of seamless OCTG in Korea. The scope of this investigation covers both welded and seamless OCTG, and, thus, seamless OCTG is of the same class or kind as welded OCTG.
Voluntary Respondent Memo at 5 n.31. The I&D Memodid not address ILJIN’s
representativeness argument at all.
Commerce has a general duty to explain the basis for its decisions. NMB Sing. Ltd v.
United States, 557 F.3d 1316, 1319–20(Fed. Cir. 2009). This includes addressing relevant
arguments made by interested paries. Id. Even when an agency has discretion, “[a]n agency
‘must cogently explain why it has exercised its discretion in a given manner.’” Changzhou
Hawd Flooring Co.v. United States, 44 F. Supp. 3d 1376, 1390 (CIT 2015) (quoting Motor
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Vehicle Mfrs. Ass’n of the U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 48 (1983)).
Commerce failed to provide adequate reasoning for refusing to examineILJIN as a mandatory
respondent.
As is apparent from the quoted passages, Commerce essentially ignored ILJIN’s
arguments regarding whether its participationwas required in order for the examined
respondents to be representative of the Korean market and that dumping margins based on
producers who manufacture only welded OCTG would beunfair to ILJIN, which produces only
seamless OCTG. Commerce similarly ignored the argument by petitioners that examination of
ILJIN was necessary to ensure that the experiences of Korean seamless OCTG producers were
included in the investigation, leaving an important type of subject merchandise, which petitioners
successfully sought to have included in the investigation, completely unexamined. Commerce’s
reasoning appears to be little more than it has discretion in choosing between the respondent
selection methodologies. That is insufficient. Seeid. Nowherein the agency recordis there evidence that it exercised that discretion in a lawful way.11
11 The court additionally notes that selecting a larger and/or more representative sample of exporters might mitigate potential distortions caused by Commerce’s obligation to include the rates calculated for voluntary respondents when calculating an “all-others” rate for nonexamined producers or exporters. SeeMacLean-Fogg Co. v. United States, 753 F.3d 1237, 1244 (Fed. Cir. 2014). Only companies with relatively lower margins are likely to request voluntary respondent status, and thus the inclusion of their rates is likely to skew the all-other’s rate, which is based on an average of the rates calculated for all individually examined respondents. 19 U.S.C. §1673d(c)(5). By broadening the potential pool of mandatory respondents, Commerce is more likely to capture a variety of Commercial experiences, rather than being limited to the experience of the largest firms and the voluntary respondents that essentially selected themselves. Whether Commerce in the foreseeable futurewill accept voluntary respondents, given its view of its resources and the adverse precedent, is unknown.
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In its brief before the court, the government cites to Mid Continent Nail Corp. v. United
States,949 F. Supp. 2d 1247 (CIT2013), as supportingCommerce’s conclusion. Def.’sResp. in
Opp’n to Mots. for J. upon the Administrative R. 72–74, ECF. No. 146 (“Gov. Br.”). The court
in that case noted that “[n]othing in the language of [19 U.S.C. §1677f-1(c)(2)(B)]even hints
that theexporters and producers selected for individualreviewmust be ‘representative’” and that
nothing in the SAA suggeststhat Commerce’s selection of respondents based on volume is
constrained by concerns about representativeness. 949 F. Supp. 2dat 1271–72. The courtdid
suggest, however, that representativeness was a concern when employing the sampling method
in §1677f-1(c)(2)(A). Id.at 1272. The government’s reliance on this case is unavailing. First,
the court in Mid Continent Naildetermined that the plaintiff in that case had failed to exhaust its
administrative remedies, and thus this claim was barred. Id.at 1263. Thus, the discussion cited
by the government likely is nothing more than dicta. Second, the plaintiff in that case did not
challenge the government’s decision to rely solely on § 1677f-1(c)(2)(B) as the appropriate
method for choosing respondents. Thecourt specifically stated that
[n]othing herein should be understood to suggest that Commerce’s discretion to choose between the two methodologies specified in 19 U.S.C. § 1677f-1(c)(2) is wholly unfettered, or that “representativeness” could never constrain Commerce’s ability to rely on 19 U.S.C. § 1677f-1(c)(2)(B) or affect a determination as to whether a specific number of exporters and producers is “reasonable” given the facts of aparticular case. Those issues are not presentedhere.
Id.at 1274 n.25. This is exactly the situation presented here. ILJIN arguedthat Commerce’s
selection of mandatory respondents failed to consider thatthe twoproducers of welded OCTG
Consol. Court No. 14-00215 Page23
that were selected were not representative of producers of seamless OCTG such as ILJIN,and Commerce failed to deal with the issue.12 Accordingly,the court remandsthis issue for reconsideration.13 In making its decision
on remand, Commerce must consider record evidence that is probative of the difference between
welded and seamless OCTG, including costs and pricing.
C. Voluntary Respondent Selection
Even when Commerce lawfully limits the number of respondents selected as mandatory
respondents, the statute contemplates that exporters or producers can still obtain their own
margin as a voluntary respondent. 19 U.S.C. §1677m(a) provides:
In any investigation . . . or a review . . . in which the administering authority has, under section 1677f–1 (c)(2) of this title . . . , limited the number of exporters or producers examined, or determined a single country-wide rate, the administering authority shall establish . . . an individual weighted average dumping margin for any exporter or producer not initially selected for individual examination under
12 The court acknowledges that mandatory respondents are unlikely to match non-examined producers in all respects. Some deviation is inherent when Commerce limits the number of individually examined respondents, and Commerce might not need to provide a comprehensive response to every representativeness claim in every case. Here, however, there is an entirely distinct type of OCTGand record evidence shows that its production process and price differ significantly from the OCTGproduced by the other respondents, and Commerce failed to explain why representativeness of the entire subject product is not a pertinent factor in selecting mandatory respondents. 13 ILJIN additionally argues that Commerce should not have assigned it a rate based on the margins found for the mandatory respondents. ILJIN Br. at 36–37. The court need not discuss this argument in detail, as it is remanding Commerce’s decision toexclude ILJIN from the mandatory respondents selected. The court notes, however, that if Commerce lawfully declined to individually examine ILJIN, this argument likely would lack merit. The statute provides that Commerce “shall” calculate the margins ofnon-examined producers or exporters by using “the weighted average of the estimated weighted average dumping margins established for exporters and producers individually investigated.” 19 U.S.C. §1673d(c)(5). ILJIN has not pointed to any authority suggesting that Commerce can or should depart from this statutory mandate.
Consol. Court No. 14-00215 Page24
such sections who submits to the administering authority the information requested from exporters or producers selected for examination, if— (1)such information is so submitted by the date specified— (A) for exporters and producers that were initially selected for examination, [and]... (2) the number of exporters or producers who have submitted such information is not so large that individual examination of such exporters or producers would be unduly burdensome and inhibit the timely completion of the investigation.14
Commerce declined to accept any voluntary respondents, claiming that doing sowould be
unduly burdensome and inhibit the timely completion of the review.
Husteeland ILJIN argue that Commerce has not shown that examination of additional
respondents would have been “unduly burdensome.” Husteel Br. at 44–49; ILJIN Br. at 32–33.
They argue that Commerce failed to cite any burden that would result from investigating the
additional respondents that is different from the typical burdens of a thorough investigation,
which they claim is insufficient to create an “undue burden.” SeeHusteel Br. at 45–47; ILJIN
Br. at 33–35. They note that only three companies asked to be voluntarily reviewed and also
argue that the investigation of each company would have been relatively straight-forward.
Husteel Br. 47–49; ILJIN Br. 33. ILJIN also argues that Commerce could have chosen to review
14 The court notes that before this case was argued, Congress amended 19 U.S.C. §1677m(a). SeeTrade Preferences Extension Act of 2015, Pub. L. No. 114-27, §506, 129 Stat. 362, 386–87. The statute now specifies certain factors Commerce may consider in determining whether the examination of a voluntary respondent would be “unduly burdensome.” Seeid. Commerce has indicated that this change will apply to its determinations issued on or after August 6, 2015. Dates of Application of Amendments to the Antidumping and Countervailing Duty Laws Made by the Trade Preferences Extension Act of 2015, 80 Fed. Reg. 46,793, 46,795 (Dep’t Commerce Aug. 6, 2015). The court therefore analyzes the statute as it existed when Commerce issued the Final Determinationin this case (i.e., July 18, 2014), but notes that its ultimate conclusion would be the same even if it consideredthe statute as amended.
Consol. Court No. 14-00215 Page25
just a single additional company, rather than all three, and reemphasizes that it should have been
examined because it was the only producer of seamless OCTG, which has different costs and
sells at a higher price than welded OCTG. ILJIN Br. at 34–35.
The government argues that Commerce properly considered its limited resources, current
and anticipated workload, and the complexities of the investigation, and reasonably limited its
investigation to only the two mandatory respondents. Gov. Br. at 75–78. The government and
U.S. Steel note that the investigations into just the two mandatory respondents was extensive and
complex and that investigating additional companies would have required additional
verifications, which are mandatory in investigations. Id.; U.S. Steel Resp. at 89–91. The
government and U.S. Steel additionally highlight the shorter statutory deadlines in investigations
compared to reviews, explaining that “Commerce has more work to do in less time.” U.S. Steel
Resp. at 91;seealsoGov. Br. at76–77. On the facts of this case, the court agrees with the
government.
Husteeland ILJIN rely heavily on Grobest & I-Mei Industrial (Vietnam) Co.v. United
States, 815 F. Supp. 2d 1342 (CIT 2012) (“Grobest I”), and Grobest & I-Mei Industrial
(Vietnam) Co.v. United States,853 F. Supp. 2d 1352 (CIT2012) (“Grobest II”). The Grobest
plaintiff challenged Commerce’s decision to limit individual examinations in the administrative
review to only the two mandatory respondents initially chosen. SeeGrobest I, 815 F. Supp. 2d at
1360–61 &n.25. In Grobest I, the court remanded Commerce’s refusal to accept the plaintiff’s
request for review as a voluntary respondent because Commerce had unlawfully treated its
decision to limit the number of mandatory respondents under 19 U.S.C.§1677f-1(c) as
dispositive of the issue as to whether it needed to review any voluntary respondents. Id.at 1362–
Consol. Court No. 14-00215 Page26
64. The court noted that the two distinct standards listed in §1677f-1(c)(2) and §1677m(a)
requiretwo separate determinations, and concluded that §1677m(a) “sets a higher threshold of
agency burden before the requirement of individual review can be avoided.” Id.at 1363.
On remand, Commerce again refused to examine the plaintiffas a voluntary respondent.
The court rejected the plaintiff’s claim that Commerce’s determination violated the unambiguous
language of the statute pursuant tostep one of theChevronanalysis. Grobest II, 853 F. Supp. 2d
at 1363. The court noted that “the statute conditions consideration of ‘a number so large’ on
whether review of such a number of respondents would be unduly burdensome and inhibit the
timely completion of the review” and thus concluded that the statute does not require the number
of voluntary respondents to reach “some arbitrary thresholdof largeness,” as such an
interpretation would fail to consider the relative burdens that may be caused by reviewing any
onerespondent. Id. The court concluded, however, that Commerce had failed to show an undue
burden. Id.at 1364. The court determined that
the facts that Commerce put forward to support that conclusion do not distinguish this case from the paradigmatic review of an antidumping or countervailing duty order. Rather, the burdens Commerce names in the Remand Results are the same burdens that occur in every review. In this regard, Commerce’s decision that the burden in this case is undue sets the bar for undue burden too low because it would make individual review of voluntary respondents in any typical antidumping or countervailing duty review unduly burdensome, and such a determination renders § 1677m(a) meaningless.
Id.at 1364–65 (footnote omitted).
Husteeland ILJIN assert that because § 1677m(a)sets a higher bar than §1677f-1(c)(2),
Commerce could not limitits review to solely the two mandatory respondents. They reason that
cases interpreting § 1677f-1(c)(2) as requiring individual examination of numbers as large as
Consol. Court No. 14-00215 Page27
eight, see, e.g.,Carpenter, 33 CIT at 1730, 662 F. Supp. 2d at 1344, setthe baseline for the total
number of respondents that Commerce must review. They also note that many of the burdens
cited by Commerce in this case, including the need to issue supplemental questionnaires, issues
regarding affiliation, unfamiliarity with the respondents, and high workloads throughout
Commerce, reflect the “typical” burdens cited by Commerce in Grobest IIand rejected by the
court. CompareGrobest II, 853 F. Supp. 2d at 1365 n.12,withVoluntary Respondent Memo at
4–7. Accordingly, they argue Commerce failed to show that reviewing any and/or all of the
three firmsthat requested voluntary status would be unduly burdensome.
The court agrees with the analysis in Grobest IIthat §1677m(a) does not set an arbitrary
threshold as to the number of exporters or producers that must submit a request for voluntary
review before Commerce may decline to individually examine each such exporter or producer.
The court also agrees with the implicit conclusion in Grobest IIthat Commerce may in some
cases refuse to review any voluntary respondents. As the court noted in that case, the term “not
so large” is defined in relation to the burden additional examinations would place on the agency
and its ability to timely complete the investigation. 853 F. Supp. 2d at 1363. TheSAA also
contemplates that in certain cases, Commerce may decline to analyze such responses. SeeSAA,
H.R. Doc. No. 103-316, vol. 1,at 873, 1994 U.S.C.C.A.N. at4201(“Although Commerce...
will not discourage voluntary responses and will endeavor to investigate all firms that voluntarily
provide timely responses in the form required, in certain cases (including cases involving the
same product from multiple countries) where the number of exporters or producers is particularly
high, Commerce may decline to analyze voluntary responses because it would be unduly
burdensome and would preclude the completion of timely investigations or reviews.”).
Consol. Court No. 14-00215 Page28
The court does not agree, however, with Husteeland ILJIN’sinterpretation of Grobest
that §1677m(a)’s“higher threshold” means that cases interpreting “large” in §1677f-1(c)(2)
essentially set a minimum number of total respondents that must be examined, either as
mandatory or voluntary respondents. The court notes that the analysis in §1677f-1(c)(2)should
be made without considering the resources available to Commerce, whereas the concept of
“undue burden” contained in §1677m(a) is predicated on Commerce’s ability to complete the
investigation ontime, which would seem to invite consideration of Commerce’s resources.
Additionally, if the court were to conclude that §1677m(a) sets abar higherthan
§1677f-1(c)(2), in the manner suggested by Husteel and ILJIN, then the court’s cases
interpreting §1677f-1(c)(2) essentially would set a baseline as to the number of respondents that
Commerce must reviewin each case, which appears contrary to other parts of the analysis in
Grobest II.
The court understands the problem in Grobestto be a concern that Commerce was
interpreting §1677m(a) in a manner that rendered that provision a nullity. SeeGrobest I, 815 F.
Supp. 2d at 1362 (concluding that Commerce’s interpretation “would mean that § 1677m(a)
review of voluntary respondents isalready curtailed once a § 1677f-1(c)(2) decision to limit the
number of respondents is made” and would render § 1677m(a) “meaningless”); Grobest II, 853
F. Supp. 2d at 1365 (holding that Commerce’s failure to show that the burden of reviewing a
voluntaryrespondent would exceed that presented in a typical review rendered § 1677m(a)
“meaningless” and thus its decision was an abuse of discretion). Commerce initially had treated
its decision to limit the number of mandatory respondents as allowing it to ignore voluntary
respondent requests, and then on remand relied on burdens that are present in almost every single
Consol. Court No. 14-00215 Page29
case to justify its decision to limit the review to only two respondents. Thus, whether by
accepting Commerce’s interpretation of the statute or itsexplanation of its burdens, respondents
that were not chosen as mandatory respondents would have no hope of receiving an individual
margin via § 1677m(a), which defeats the congressional intentreflected in the inclusion of that
provision in the statute.
Viewed in this context, the “higher threshold” referenced in Grobestis better understood
as a requirement that Commerce rely on something other than its initial decision to limit the
number of mandatory respondents when analyzing requests for voluntary respondents.
Commerce has the authority to limit the number of mandatory respondents to a “reasonable
number.” 19 U.S.C. §1677f-1(c)(2). Once Commerce does that, it must show that it actually
would be burdened by individually examining exporters or producers that request to be treated as
voluntary respondents. 19 U.S.C. §1677m(a). It cannot simply rely on the fact that it already
chose to limit the number of respondents to a “reasonable number” pursuant to §1677f-1(c)(2).
Commerce in this casedid not simply rely on the fact that it limited the number of mandatory
respondents pursuant to §1677f-1(c)(2) in declining to review any voluntary respondents.
Rather, it gave specific reasons for why examining any additional respondents “would be unduly
burdensome and inhibit the timely completion of the investigation.” 19 U.S.C. § 1677m(a). The
court therefore rejects thearguments that any baselines supposedly created in cases interpreting
§1677f-1(c)(2) should be transportedinto the 19 U.S.C. §1677m(a) analysis on the basis that
§1677m(a) requires a “higher threshold” before Commerce may refuse to perform an individual
examination.
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The court’s understanding of the problem addressed by Grobest, namely the risk that
Commerce effectively was eliminating19 U.S.C. § 1677m(a) fromthe statute (either as a legal
matter or a practical matter), similarly informs its analysis of the argument that the burdens cited
by the agency in this case largely mirror the burdens rejected in Grobest II. Had thecourt
accepted the agency’s arguments in Grobest II, the standard for declining to review voluntary
respondents would have been so low that Commerce would be able to justify its refusal to
consider voluntary requests in nearly every single case. That is not the case here. Although
many of the burdens cited by Commerce in this case mirror the burdens cited in Grobest II, there
are two key distinctions.
First, this case involves an investigation. In investigations, Commerce’s statutory
deadlines for completing the administrative proceedings are shortened. Compare19 U.S.C.
§§1673b, 1673d,with19 U.S.C. §1675. Commerce must initially familiarize itself with the
product and respondents, and verification of all information relied upon is required, whereas
verification in reviews is needed only under certain circumstances. 19 U.S.C. §1677m(i).
Commerce noted that accepting additional respondents would require additional on-site
verifications in Korea and possiblythe United States. SeeVoluntary Respondent Memo at 7. As
Commerce explained, “[i]ninvestigations, we have less timeinwhich to complete more work
when considering the vast quantity of previously unknown information submitted to us.” Id.at
5. Thus, the burden placed on Commerce in this case is not typical of every administrative
proceeding, although it may be typical of many investigations.
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Second, this case was part of a number of investigations concurrently initiated regarding
OCTG. Commerce noted that “the Department is currently handling 11 concurrent AD and
CVD investigationson OCTG from various countries.” Id.at 6. The SAA specifically notes that
[a]lthough Commerce . . . will not discourage voluntary responses and will endeavor to investigate all firms that voluntarily provide timely responses in the form required, in certain cases (including cases involving the same product from multiple countries) where the number of exporters or producers is particularly high, Commerce may decline to analyze voluntary responses because it would be unduly burdensome and would preclude the completion of timely investigations or reviews.
H.R. Doc. No. 103-316, vol. 1,at 873,1994 U.S.C.C.A.N. at 4201 (emphasis added). The fact
that Commerce was handling numerousOCTG investigations is a pertinent factor the court takes
into consideration. Although Commerce limited the number of respondents examined in each
case, the total number of respondents examinedwas large. There is no indication that Commerce
faced a similar situation in Grobest.
Because of the concurrent investigations into the same product and the fact that
Commerce is required to do more work in less time when conducting such investigations,
Commerce has shown that the burden of reviewing a voluntary respondent in this case would
exceed the typical burden Commercefaces in other administrative proceedings. On the facts of
this case, Commerce’s determination that it would be unduly burdensome to examine any
additional respondents was supported by substantial evidence and was otherwise in accordance
with law. SeeGrobest II, 853 F. Supp. 2d at 1365 (“When Commerce can show that the burden
of reviewing a voluntary respondent would exceed that presented in the typical antidumping or
Consol. Court No. 14-00215 Page32
countervailing duty review, the courtwill not second guess Commerce’s decision on how to allocate its resources.”).15
II. Constructed Value Profit
Plaintiffs argue that Commerce committed a multitude of errors regarding Commerce’s calculation of CV profit, which can be distilled down to two general arguments.16 First,
Commerce should not have used the financial statement of Tenaris to calculate CV profit. See
HYSCO Br. at 12–46; NEXTEEL Br. at 13–44; HusteelBr. at 16–33, 36–38. Second, assuming
that Commerce could use Tenaris’s financial statement for the purposes of CV profit, Commerce
erred in failing to apply a profit cap. SeeHYSCO Br. at 46–50; NEXTEEL Br. at 44–49;
Husteel Br. at 33–36. These arguments have merit.
A. Background
When using constructed value to calculate the normal value, the constructed value is to
include “the actual amounts incurred and realized by the specific exporter or producer being
examined... 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
15 The court rejects ILJIN’s arguments regarding why fairness required it to be selected as a voluntary respondent. Commerce provided an adequate explanation for why examination of any additional respondents would have been unduly burdensome, and nothing in 19 U.S.C. §1677m(a) suggests an extraordinary need to accommodate voluntary respondents in order to ensure that margins are representativebeyond that required in mandatory respondent selection. 16 ILJIN, SeAH, and AJU Besteel did not independently brief this issue beyond arguing that because their rates were based on the margins assigned to NEXTEEL and HYSCO, any change to the NEXTEEL or HYSCO margins should apply to them. ILJIN Br. at 15, 37–38; SeAH Br. at2–3, 6; AJU Besteel Br. at 2. Accordingly, they have adopted the arguments presented by Husteel, NEXTEEL, and HYSCO pertaining to this issue. ILJIN Br. at 15, 37–38; SeAH Br. at 2–3, 6; AJU Besteel Br. at 2.
Consol. Court No. 14-00215 Page33
consumption in the foreign country.” 19 U.S.C. § 1677b(e)(2)(A). If such data is unavailable,
however, Commerce must resort to one of three alternatives for calculating an appropriate
amount for selling, general, and administrative expenses, and profits:
(i) 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, for consumption in the foreign country, of merchandise that is in the same general category of products as the subject merchandise, (ii) the weighted average of the actual amounts incurred and realized by exporters or producers that are subject to the investigation or review (other than the exporter or producer described in clause (i)) 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, or (iii) the amounts incurred and realized for selling, general, and administrative expenses, and for profits, based on 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, [i.e., what is commonly referred to as the “profit cap.”]
19 U.S.C. § 1677b(e)(2)(B). The court will refer to these alternatives as “alternative (i),”
“alternative (ii),”and “alternative (iii),”respectively. In this case, Commerce determined that
the data to calculate a profit figure under §1677b(e)(2)(A) was unavailable and therefore ithad to rely on one of the alternativeslisted in §1677b(e)(2)(B).17 I&D Memoat 14.
For the Preliminary Determination, Commerce considered three possible options for CV
profit: “[(1)]the profit reflected in the audited financial statements for seven Korean OCTG
producers, [(2)]the profit earned by HYSCO on its home market sales of non-OCTG pipe
17 No party has suggested that Commerce could have or should have calculateda profit figure pursuant to §1677b(e)(2)(A).
Consol. Court No. 14-00215 Page34
products,and [(3)]the profit forTenaris, SA(Tenaris), an Argentinian global producer and seller
of OCTG,”as described in a research paper prepared by a student at the University of Iowa
School of Management. Preliminary I&D Memoat 22. Commerce noted that “all three options
have their limitations.” Id. For the profit on HYSCO’s home market sales of non-OCTG pipes,
Commerce noted that this profit “reflect[ed] the profit on pipe products typically used in the
construction industry, as opposed to the OCTG products used in the specialized oil and gas
industry.” Id. “Likewise, the profit reflected in the Korean OCTG producers’ financial
statements reflect the profits on the same non-OCTG pipe products, as well as the profits on
OCTG sales predominantly to the United States.” Id. Regarding the Tenaris profit information,
Commerce explained that although the information reflected predominantly OCTG sales, “it
represents neither production nor sales in the market under consideration” and “is based on a
research paper containing a disclaimer statement regarding its accuracy.” Id.
After considering the relative strengths and weaknesses of the various profit sources,
Commerce preliminarily decidedto base HYSCO’s CV profit on HYSCO’s profit on home
market sales of non-OCTG pipe, pursuant to alternative (i). Id. For NEXTEEL, Commerce
preliminarily decided to base CV profit on the profit earned by six Korean OCTG producers that
earned a profit,pursuant to alternative (iii). Id. Commerce noted that “after the preliminary
determination, we intend to continue to explore other possible options for CV profit for both
respondents.” Id.
Following the Preliminary Determination, Commerce issued a supplemental
questionnaire to NEXTEEL, requesting a breakdown of its costs and sales figures by product
type (e.g., standard pipe, line pipe, OCTG) and by country to which it sold its products (e.g.,
Consol. Court No. 14-00215 Page35
U.S., Korea, Canada). SeeNEXTEEL’s Third Suppl.Section DQuestionnaire Resp., CD 264
(Mar. 6, 2014). On March 21, 2014, U.S. Steel submitted a large amount of new factual
information under 19 C.F.R. §351.301(c)(1)(v), purporting to “rebut, clarify, or correct”
evidence that was submitted by NEXTEEL in response to Commerce’s questionnaire. SeeU.S.
Steel’sComments re: NEXTEEL’s Third Suppl.Section D Questionnaire Resp., CD 303 (Mar.
21, 2014);U.S. Steel Resp. to Obj. of NEXTEEL at 1–2 & n.1, PD 366 (Apr. 2, 2014). Included
in U.S. Steel’s submission was Tenaris’s 2012 financial statement. Seeid.at Ex. P. NEXTEEL
promptly requested that Commerce reject the information as untimely on the grounds that the
information did not rebut, clarify, or correct the information contained in NEXTEEL’s response.
NEXTEEL’sReq.to Reject Untimely New Factual Information at 1–2,PD 354 (Mar. 27, 2014)
(“Req.to Reject Untimely Information”).
For the Final Determination, Commerce relied on the profit contained in Tenaris’s 2012
financial statement to calculate CV profit for both NEXTEEL and HYSCO pursuant to
alternative (iii). I&D Memoat 14. Commerce rejected NEXTEEL’s claim that the information
was untimely new factual information rather than rebuttal information. Id.at 29. Commerce
concluded that U.S. Steel’s submission was rebuttal evidence, because NEXTEEL’s data could
be used for purposes of calculating CV profit, and the information submitted by U.S. Steel was
for the same purpose. Id. Commerce also explained that it hasdiscretion to relax its regulations
regarding the timely submission of information as long as parties are not substantially
prejudiced, and it concluded that there was no prejudice because “NEXTEEL and HYSCO had
an opportunity to submit rebuttal information... had they chosen to do so.” Id.at 29–30.
Consol. Court No. 14-00215 Page36
Commerce determined that it could not rely upon alternative (i) for HYSCO, as it had in
the Preliminary Determination, because HYSCO’s non-OCTG pipe products, such as line pipe
and standard pipe, did not fall within the “same general category of products” as required to
apply alternative (i). See I&D Memoat 18–19. Commerce highlighted the fact that OCTG are
used in down-hole applications requiring that they withstand harsh conditions and are sold to the
oil and gas exploration industry, which had seen an uptick in activity and demand. Id.at 17–19.
Line pipe and standard pipe, however, are not used in down-hole applications, and the Korean
producers sold their non-OCTG pipe products primarily to the Korean construction industry,
which generally is unable and unwilling to pay the price premium paid in the oil and gas industry
and which had seen sluggish activity duringthe period of investigation (“POI”). Id.at 17–18.
Commerce also noted that OCTG require different grades of steel, are subjected to different
testing and certification requirements, and are generally connected in ways that are different
from non-OCTG products. Seeid. Commerce therefore had to resort to alternative (iii) for calculating a CV profit for both mandatory respondents.18
In considering the various alternatives for calculating CV profit pursuant to alternative
(iii), Commerce determined that the profit reflected in Tenaris’s financial statement represented
the best information available. Seeid.at 23. Commerce rejected the respondents’ arguments
that it should rely on the profit reflected in the financial statements of the various Korean OCTG
18 Commerce determined that it could not rely on alternative (ii), because there were no other respondents subject to the investigation. I&D Memoat 15–16. The parties do not contest this conclusion.
Consol. Court No. 14-00215 Page37
producers, because the majority of their sales were of non-OCTG pipe outside of the same
general category of products and the sales of OCTG imbedded in those statements were primarily the allegedly dumped sales to the United States.19 Seeid.at 20. Commerce explained
that “[a]s OCTG is a very specialized premium product used exclusively in the oil and gas
exploration industry with significant quality differences, different end uses, different end
customers, and different demand patterns than those ofnon-OCTG pipe, it is important that we
rely on a source that closely reflects such product.” Id.at 20–21(footnote omitted). Commerce
preferred the financial statement of Tenaris,because its sales consisted primarily of OCTG and
the majority of its OCTG sales were to non-U.S. customers. Id.at 19, 21. Commerce further
reasoned that “[b]ecause Tenaris is an OCTG producer that sells OCTG in significant quantities,
and in virtually every market in which OCTG is sold, we find its average profit experience is
representative of sales of OCTG across a broad range of different geographic markets.” Id.at
21.
Commerce also determined that it wasunable to calculate and apply aprofit cap under
alternative (iii), because Commerce did “not have home market profit data for other exporters
and producers in Korea of the same general category of products.” Id. Whereas the six Korean
OCTG producers used to calculate NEXTEEL’s CV profit for the Preliminary Determinationhad
an average profit margin of 5.30% and the revised CV profit rates calculated by the petitioners
for the petition were between 7.19% and 7.22%, Tenaris’s profit rate was 26.11%. Compare
19 Commerce also considered and rejected using the financial statements of four Indian companies. SeeI&D Memoat 19–20. No party has suggested that Commerce should have used the profit contained in any of these financial statements to calculate CV profit.
Consol. Court No. 14-00215 Page38
Preliminary Constructed Value Calculation Adjustments for NEXTEEL at 2–3, CD 234(Feb. 14,
2014),andPetitioner’s Resp. to July 8, 2013 Questionnaire re: Volume IV of the Petition at Ex.
IV-34, Attach. Suppl. F, PD 14–16 (July 12, 2013), withI&D Memoat 7.
B. Use of Tenaris’s Financial Statement Under Alternative (iii)
HYSCO, NEXTEEL, and Husteelargue that Commerce’s use of Tenaris’s profit to
calculate CV profit was unsupported by substantial evidence and unlawful. They contend that
the profit data used by Commerce was untimely and should have been rejected. SeeHYSCO Br.
at 43–46; NEXTEEL Br. at 44; Husteel Br. at 11, 18 n.5. They further contend that even if it
was properly allowed on the record, Commerce should have used either the profit earned by the
mandatory respondents’ on their home market sales of OCTG and/or non-OCTG pipe products
or the average profit earned by the Korean OCTG producers. They assert that Commerce’s
reasoning for declining to use this data, namely that the line pipe and standard pipe sold by the
Korean producers in the Korean market were not in the same general category of products as
OCTG, was unsupported by substantial evidence and contrary to prior Commerce decisions. See
HYSCO Br. at 16–28; NEXTEEL Br. at 17–29; Husteel Br. at 20–24. They also arguethat
Commerce was required to use this data, which was based on production and sales in Korea, over
the Tenaris profit data, which did not reflect production or sales in Korea. SeeHYSCO Br. at
12–15, 28–30; NEXTEEL Br. at 13–17, 29–31; Husteel Br. at 25–29. HYSCO, NEXTEEL, and
Husteelfurther highlight certain features of Tenaris’s OCTG products and business operations
that distinguish it from the Korean OCTG producers and that render Tenaris’s profit rate
aberrational and unrepresentative of what the Korean respondents could expect in selling to the
Korean market; according to plaintiffs, the profit earned on sales of pipeproducts in Korea by
Consol. Court No. 14-00215 Page39
Korean producers is more representative of the respondents’ commercial experiences. HYSCO
Br. at 30–43; NEXTEEL Br. at 31–44; Husteel Br. at 29–33.
i. Timeliness of the Tenaris Financial Statement
Commerce’s regulations provide that a party may submit “factual information to rebut,
clarify, or correct factual information contained in [a supplemental] questionnaire response”
within ten days. 19 C.F.R. §351.301(c)(1)(v). Thus, if U.S. Steel’s information rebutted,
clarified, or corrected factual information contained in NEXTEEL’s questionnaire response, it
was filed on time. If U.S. Steel’s factual information did not fall within this category of rebuttal
information, however, it should have been considered factual information not otherwise
specifically accounted for in §351.301(c), and it should have been filed at least thirty days
before the Preliminary Determination. See19 C.F.R. §351.301(c)(5).
The government and petitioners assert that Commerce reasonably concluded that the
factual information submitted by U.S. Steel, including the Tenaris financial statement,rebutted
clarified, or corrected information submitted by NEXTEEL in its Third Supplemental Section D
Questionnaire Response. Gov. Br. at 55–56; U.S. Steel Resp. at 64–66; Def.-Intvnr. Maverick
Tube Corp.’s Resp. to Pls.’Brs. in Supp. of Their Mots. for J. upon the Agency R. 43–44, ECF
No. 153 (“Maverick Resp.”). They contend that the data contained in NEXTEEL’s response
could be used to calculate a CV profit margin and they point to Commerce’s statement in the
Preliminary I&D Memothat it would continue to explore other possible options for CV profit as
supporting U.S. Steel’s belief that the supplemental questionnaire was aimed atobtaining
information to be used to calculate CV profit. Gov. Br. at 55–56; U.S. Steel Resp. at 64–66.
Becausethe information contained in NEXTEEL’s response was pertinent to CV profit, the
Consol. Court No. 14-00215 Page40
information submitted by U.S. Steel was properly considered rebuttal evidence, as this
information was also pertinent to calculating a CV profit margin. Gov. Br. at 55–56; U.S. Steel
Resp. at 64–66; Maverick Resp. at 43–44. The court disagrees.
The regulations donot define “factual information to rebut, clarify, or correct,” and thus
Commerce’s interpretation is given deference as long as it is reasonable. SeeBaroque Timber
Indus. (Zhongshan) Co. v. United States, 925 F. Supp. 2d 1332, 1350 (CIT 2013). “Rebuttal
evidence” is generally understood to be “evidence offered to disprove or contradict the evidence
presented by an opposing party.” Black’s Law Dictionary(10th ed. 2014). The information
submitted by U.S. Steel does not appear to satisfy this general understanding. NEXTEEL was
asked to break down its costs and sales by country of sale and product type. Little if anything in
U.S. Steel’s factual submission, and especially the evidence in Tenaris’s 2012 financial
statement, disproves or contradicts NEXTEEL’s answers to those questions. Rather, U.S. Steel’s
submission constituted a substitute data source that Commerce could use to calculate CV profit.
That such evidence should not be considered rebuttal evidence is supported by
Commerce’s treatment of similar data in other cases. In the non-market economy (“NME”)
context, Commerce must use surrogates to value the respondent’s factors of production,
including an amount for profit. See19 U.S.C. §1677b(c)(1). The use of a surrogate profit
margin in the NME context and a CV profit margin based on another company’s profit serve a
very similar purpose, namely to calculate an amount for profit that the respondent could have
been expected to earn if it had reliable home market sales data. In the NME context, however,
substitute surrogate information is notconsidered rebuttal evidence. Commerce’s regulations
specifically provide that “[a]n interested party may not submit additional, previously absent
Consol. Court No. 14-00215 Page41
from-the-record alternative surrogate value information” as rebuttal information in order to value
factors of production. 19 C.F.R. §351.301(c)(3)(iv); see alsoDefinition of Factual Information
and Time Limits for Submission of Factual Information, 78 Fed. Reg. 21,246, 21,248 (Dep’t
Commerce Apr. 10, 2013) (“Definition of Factual Information”) (“We also note that all
interested parties may submit factual information to rebut, clarify, or correct factual information
to value factors, as long as that information is submitted solely for rebuttal and not for purposes
of establishing new surrogate values.” (emphasis added)). Prior to Commerce explicitly
including this limitation on rebuttal evidence in the regulations, Commerce’s position had been
that the regulation for submitting rebuttal evidence did not allow a party to submit substitute
surrogate value information. SeeBaroque Timber, 925 F. Supp. 2d at 1350. The courtupheld
this interpretation, explaining that “Commerce’s interpretation is... consistent with the purpose
of the subsection, which is to respond to factual information that has been placed on the record,
not to expand the scope of the record.” Id. The court also explained that excluding new
surrogate value data “prevents Commerce from facing a scenario in which either a party has no
opportunity to rebut, clarify, or correct new surrogate values submitted in a rebuttal, or
Commerce must accede to rolling rebuttals while also complying with the statutory deadlines for
completing investigations and reviews.” Id. Commerce mentioned similar concerns when it
revised its regulations to explicitly prevent new surrogate value information from being
submitted as rebuttal information. SeeDefinition of Factual Information,78Fed. Reg. at 21,248.
The same concerns and reasoning applyin this case. The Tenaris profit data did not cast
doubt on NEXTEEL’s answers. Rather, U.S. Steel offered a new alternative for valuing
NEXTEEL’s profit. Commerce’s determination that this constituted rebuttal information does
Consol. Court No. 14-00215 Page42
not accord with the general understanding of “rebuttal evidence,” is contradicted by its
regulations and practice when facing similar situations, and effectively means there is no
distinction between rebuttal evidence and any new factual information. The court therefore
holds that Commerce’s determination that Tenaris’s financial statement constituted rebuttal
evidence was unreasonable.
The court’s conclusion is bolstered by the fact that treating the submission of substitute
CV profit valuation information as rebuttal evidence is also inconsistent with the limits
Commerce places on responding to rebuttal evidence. Under Commerce’s regulations, only the
party that submitted the original information may respond to the rebuttal information. 19 C.F.R.
§351.301(c)(1)(v). The submission of Tenaris’s financial statement as a possible CV profit
source, however, was relevant to all Korean producers, and fairness suggests that all parties
should have an opportunity to respond to this kind of information. When rebuttal information is
limited to submitting data that actually rebuts, clarifies, or corrects data submitted by a party, the
original submitter will be in the best position to respond to the rebuttal evidence, and this
fairness concern is mitigated. And ifinformation such as the Tenaris financial statementis
properly treated as factual information covered by §351.301(c)(5), all parties are given a chance
to respond to it. See19 C.F.R. §351.301(c)(5).
Furthermore, the court notes that earlier in the proceedings, U.S. Steel treated extremely
similar information as falling under §351.301(c)(5). Prior to the Preliminary Determination,
U.S. Steel submitted a research paper regarding Tenaris, which included a profit margin, to be
used as a possible source for CV profit data. U.S. Steel’s Jan. 16, 2014 Submission of Factual
Information at Ex. J, PD 227 (Jan. 16, 2014). U.S. Steel submitted this information pursuant to
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§351.301(c)(5) as information not covered by the other provisions of the regulation, including
the provision for submitting rebuttal information. Id.at 1–2. U.S. Steel did so despite that fact
that NEXTEEL and HYSCO both had submitted initial and supplemental Section D
questionnaire responses containing information that Commerce could use to calculate a CV
profit rate. NEXTEEL’sSectionsC–DQuestionnaire Resp., PD 152–153 (Nov. 5, 2013);
NEXTEEL’sSuppl.Section D Questionnaire Resp., PD 189 (Dec. 24, 2013); HYSCO’sSections
C–DQuestionnaireResp., PD 154–157 (Nov. 5,2013); HYSCO’sSuppl.SectionsA, C&D
QuestionnaireResp., PD 206–208 (Jan. 6, 2014);see alsoEnforcement and Compliance
Antidumping Manual, Ch. 4 at 7–8, (Mar. 16, 2015),available at
http://enforcement.trade.gov/admanual/2015/Chapter%2004%20Questionnaires.pdf(last visited
Aug. 27, 2015) (“In market economy cases we request a response to section D if CV is, or is
likely to be, used as [normal value] and/or if we decide to investigate whether foreign market
sales are made at prices below the COP.”). U.S. Steel’s actions lend further confirmation of the
court’s conclusion.
The court holds that Commerce unreasonably concluded that Tenaris’s financial
statement constituted evidence rebutting, clarifying, or correcting the information NEXTEEL
submitted in its supplemental questionnaire response, and under the applicable regulationthis
evidence should have been rejected as untimely.
ii. Prejudice
The government and petitioners argue that even if the evidence submitted by U.S. Steel
wereuntimely, plaintiffs did not show that they were substantially prejudiced by Commerce
allowing the information to remain on the record. Gov. Br. at 57–59; U.S. Steel Resp. at 67–70;
Consol. Court No. 14-00215 Page44
Maverick Resp. at 45. They contend that respondents were not substantially prejudiced because
they were on notice that Commerce would seek additional CV information, they had an
opportunity to submit further rebuttal evidence but chose not to do so, and they had an
opportunity to argue against the use of Tenaris’s financial statement in their case briefs. Gov.
Br. at 57–59; U.S. Steel Resp. at 67–70; Maverick Resp. at 45. The court rejects this contention.
The fact that Commerce indicated that it intended to explore other possible options for
CV profit says nothing as to whether the Tenaris financial statement was properly placed on the
record and/or whether plaintiffs were prejudiced by Commerce allowing the submission in
violation of its regulations. Commerce did not invite parties to submit alternative CV profit
sources. Had it done so, Commerce’s proclamation that it intended to explore alternative CV
profitsources might have some relevance.
The court also rejects thecontention that plaintiffs had an adequate opportunity to submit
additional evidence to either undercut or serve as an alternative to the Tenaris data. First,
Commerce’s regulation only permits the original submitter of the informationsought to be
“rebutted,”in this instance NEXTEEL,to respond to rebuttal evidence. 19 C.F.R.
§351.301(c)(1)(v). HYSCO and the other plaintiffs did not have such an opportunity.
Furthermore, NEXTEEL only had seven days to offer any such evidence. Id. Expecting
NEXTEELto adequately respond to the amount of information U.S. Steel filed within a week is
unreasonable, especially when that information did not directly pertain to NEXTEEL’s own data.
Apparently recognizing the obvious shortcomings of this supposed opportunity to submit
rebuttal information pursuant to19 C.F.R. §351.301(c)(1)(v), the government and petitioners
contend that plaintiffs could and should have asked Commerce for an opportunity to place
Consol. Court No. 14-00215 Page45
additional information on the record and/or for an extension of time to submit any additional
evidence it wished to present. Gov. Br. at 57–59; U.S. Steel Resp. at 68–70; Maverick Resp. at
45. 19 C.F.R. §351.301(a) states that Commerce “may... provide additional opportunities to
submit factual information.” And 19 C.F.R. §351.302(b) provides that Commerce “may, for
good cause, extend any time limit established” in Commerce’s regulations, unless precluded by
statute. Here,theoretical options, however, are insufficient to defeat plaintiffs’ objection.
First, the court notes that these are the avenues that U.S. Steel should have pursued if it
wanted to submit its new factual information, including the Tenaris financial statement.
Commerce’s decision to allow this untimely evidence onto the record should not force parties
that had complied with Commerce’s deadlines to seek discretionary relief from Commerce to file
additional evidence to rebut the untimely evidence. Second, and more importantly, it was not
clear whether plaintiffs needed to avail themselves of this option. On March 27,2014,less than
a week after U.S. Steel filed the untimely submission, NEXTEEL filed a request with Commerce
that the information be rejected. Req.to Reject Untimely Information at 1–2. Commerce failed
torespond to this request until the Final Determination. As explained, the information should
have been rejected, but hada request for an extension of time been made by U.S. Steel and
accepted, and had the informationbeen submitted and accepted under the proper provision, 19
C.F.R. §351.301(c)(5), Commerce would have issued a schedule providing deadlines for the
submission of information to rebut, clarify, or correct it. See19 C.F.R. §351.301(c)(5)(ii).
Under this scenario, all parties would have been notified that the information was on the record
and would have known that they needed to respond to it. In this case, however, because the
information was improperly submitted as rebuttal evidence and Commerce failed to rule on the
Consol. Court No. 14-00215 Page46
request to reject it, plaintiffs were left to guess whether Commerce would accept or reject the
information and speculate as to how Commerce would use the evidence (for example, whether
Commerce would consider it solely to cast doubt on the use of NEXTEEL’s data for CV profit,
or whether Commercewould consider it as a substitute surrogate for CV profit). By waiting
until the Final Determinationto rule on whether the evidence was properly submitted, Commerce
placed plaintiffs in a difficult and undesirable situation, where the scope of the record was
unclear. If Commerce had made clear that it considered the information timely filed earlier in
the proceedings, the government and petitioners’ argument might have carried more weight.
Finally, the fact that plaintiffs were able to comment on the Tenaris financial statement
does not eliminate the prejudicethey suffered by Commerce allowing the information onto the
record. Plaintiffs did not have a sufficient opportunity to submit evidence that would have either
undermined the information contained in U.S. Steel’s submission or acted as an alternative CV
profit source. The arguments that plaintiffs could make in their case briefs thus were limited.
Given the proper notice and opportunity to respond to the information, plaintiffs could have
conducted a more robust attack on its suitability to serve as the CV profit source in this case.
Thiscase is distinguishable from the cases cited by the government in support of its
contention that there was no prejudice. In the cases cited by the government, there was a
technical deficiency in the proceedings, but all parties had a full opportunity to respond. See
Am. Farm Lines v. Black Ball Freight Serv., 397 U.S. 532, 537–38 (1970) (application for
temporary operating authority submitted to Interstate Commerce Commission failed to contain
certain specific pieces of information, but parties opposing grant of authority able to make
precise and informed objections to the application); Pam, S.p.A. v.United States, 463 F.3d 1345,
Consol. Court No. 14-00215 Page47
1346–47, 1349(Fed. Cir. 2006) (failure to serve foreign producer with request for review, but
producer received actual and constructive notice of the proceedings and received multiple
extensions of time during the proceedingsto respond); Kemira Fibres Oy v. United States, 61
F.3d 866, 871, 875(Fed. Cir. 1995) (Commerce failed to follow regulations in seeking comment
from domestic producers as to whether order should be revoked, but foreign producer not
prejudiced by delay except to extent that dumping order remainedin effect). In those cases, the
complaining parties also asserted that these technical errors rendered the entirety of the agency’s
actions void, thus leaving the agency unable to act. SeeAm. Farm Lines, 397 U.S. at 536; Pam,
S.p.A., 463 F.3d at 1347; Kemira Fibres, 61 F.3d at 871.
In this case, the error affected a key component of the respondents’ dumping margins.
Tenaris’s profit marginof 26.11% was far greater than the Korean profit margins relied upon by
Commerce in the Preliminary Determination, which averaged 5.30%, and was the main factor in
the increase in the respondents’ dumping margins from zero in the Preliminary Determinationto
17.75% and 9.89% in the Final Determination. As explained, plaintiffs were prejudiced because
their need and ability to respond to the untimely filed information was murky at best.
Additionally, the public “harm” that would result from enforcing Commerce’s regulations seems
negligible. Commerce’s ability to remedy any unfair trade practices would not be impeded.
Rather, Commerce simply would have been left with fewer options for the purposes of
calculating a CV profit. And although petitioners obviously would prefer that the Tenaris data
be used because it would result in higher dumping margins, it appears that petitioners could have
submitted the same information by the regulatory deadlines, and thus the prejudice to them
Consol. Court No. 14-00215 Page48
caused by enforcing Commerce’s deadlines for submitting factual information would be of their own making.20
In conclusion, the court determines that this was not a simple technical violation that can
be overlooked, but rather plaintiffs were substantially prejudiced by Commerce’s acceptance and
use of U.S. Steel’s untimely submitted new factual information. On remand, Commerce may
simply remove this information from the record and reconsider its CV profit determination based
20 The court is also cognizant of the fact that Commerce’s decision to use this data resulted in an apparentdeviation from its prior practice in calculating CV profit. Commerce on prior occasionshad relied on sales of non-OCTG pipes to calculate CV profit. See Oil Country Tubular Goods, Other Than Drill Pipe, from Korea: Preliminary Results of Antidumping Duty Administrative Review, 72 Fed. Reg. 51,793, 51,796 (Dep’t Commerce Sept. 11, 2007) (using financial statement of SeAH to calculate Husteel’s CV profit), unchanged inOil Country Tubular Goods, Other Than Drill Pipe, from Korea: Final Results of Antidumping Duty Administrative Review,73 Fed. Reg. 14,439 (Dep’t Commerce Mar. 18, 2008); Certain Oil Country Tubular Goods from Mexico; Preliminary Results of Antidumping Duty Administrative Review and Partial Rescission, 71 Fed. Reg. 27,676, 27,679 (Dep’t Commerce May 12, 2006) (“[W]e based our profit calculations and indirect selling expenses on the income statement of Hylsa’s tubular products division, a general pipe division that produces OCTG and products in the same general category.”), unchanged inNotice of Final Results and Partial Rescission of Antidumping Duty Administrative Review: Certain Oil Country Tubular Goods from Mexico, 71 Fed. Reg. 54,614 (Dep’t Commerce Sept. 18, 2006). In fact, earlier in the proceedings, Commerce’s questionnaires to the respondents specifically referred to their standard and line pipe products as goods that were in the “same general category of products.” Department’s NEXTEEL Suppl.Section D Questionnaire at 11, PD 170 (Nov. 26, 2013); Department’s HYSCO Suppl.Section D Questionnaire at 11, PD173 (Dec. 4, 2013). Moreover,this appears to be the first time that Commerce hadrelied upon a CV profit source that was not based on either production or sales in the home market. SeePl. NEXTEEL’s Reply Br. in Supp. of Its Rule 56.2 Mot. for J.upon the Agency R.8–9, ECF No. 195. The court recognizesthat Commerce might have legitimate justifications for this departure, but it does not change the fact that Commerce used data that was submitted late to come to a conclusion that was seemingly at odds with its prior practice, with the result being a large increase in the respondents’ dumping margins sufficient to support an order. This is a make or break issue and Commerce should do its utmost to be fair in such circumstances.
Consol. Court No. 14-00215 Page49
on the information that was submitted in accordance with the regulatory deadlines.
Alternatively, Commerce must determineif and how, at this late date,the prejudice caused by
accepting the Tenaris financial statement in violation of the regulations can be rectified.
iii. Commerce’s Choice of Tenaris’s Data Over the Korean Producers’ Data
Because the court is remanding for Commerce to either remove the Tenaris financial
statementor to otherwise counter the prejudice to plaintiffs, the court deems it unnecessary to
decide the bulk of the other arguments raised by plaintiffs regarding why thevarious sources of
Korean datashould have been used instead of the Tenaris data. These arguments may be
rendered moot following remand, and many of the arguments presented in the briefs likely would
have been made more forcefullyif plaintiffs had beengiven a fully adequate opportunity before
the agency to cast doubt on the Tenaris data’s suitability as a CV profit source.
The court does hold, however, that Commerce must readdress its “same general category
of products” determination on remand, as certain aspects of its reasoning suggest that it has
impermissibly interpreted that term in making its determination. Specifically, although
Commerce’s explanation that Korean non-OCTG pipe products weresold to the construction
industry (in other words, theyhave different users and usesthan OCTG) appears to be onefactor
Commerce reasonably could considerin determining that non-OCTG pipe productsarenot in the
same general category of products, the specific market conditions within those industries seems
to be an irrelevant consideration. SeeI&D Memoat 17–19. Commerce’s reasoning appears to
suggest that the weak demand in the construction industry coupled with the strong demand in the
oil and gas industry was an important factor in its consideration. Seeid. Such logic, however,
Consol. Court No. 14-00215 Page50
suggeststhat if demand in the construction industry had been strong during the POI while
demand in the oil and gas industry had been weak, Commerce’s conclusion regarding the same
general category of productsmight have been different. This would suggest a product might be
within the same general category of productsone year, but outside of that category the next year
because of general market conditionsin the industry. The court has strong doubts that the
general categoryof products can bedefined by such temporary factors.
The court additionally has doubts regarding Commerce’s reliance on the testing and
certification requirements for OCTG. Seeid.at 18. If non-OCTG pipe products met those
testing and certification requirements, it seems that they would be classified as OCTG. The SAA
indicates that the “same general category of products” “encompasses a category of merchandise
broader than the ‘foreign like product.’” SAA, H.R. Doc. No. 103-316, vol. 1,at 840, 1994
U.S.C.C.A.N. at 4176. Commerce’s reasoning seems to suggest that because non-OCTG pipe
cannot be classified as OCTG, then it cannot be within the same general category of products.
Commerce thus appears to have limited the same general category of products to the foreign like
product.
On remand, Commerce must either omit these considerations from its analysis or provide
an adequate explanation as to why these are appropriate factors for it to consider in determining
what products fall within the same general category of products as OCTG.
C. Profit Cap
HYSCO, NEXTEEL, and Husteel argue that Commerce also erred by failing to apply a
profit cap when it relied upon theprofit from Tenaris’s financial statement for CV profit
pursuant to alternative (iii). They assert that Commerce’s reasoning for declining to apply the
Consol. Court No. 14-00215 Page51
cap, namely that there was no data on the record regarding the profits normally earned by Korean
producers on sales of merchandise in the same general category of products, was unsupported by
substantial evidence. HYSCO Br. at 47, 50; NEXTEEL Br. at 45–46, 48; Husteel Br. at 34–36.
They further assert that even if Commerce reasonably concluded that non-OCTG pipe does not
fall within the same general category of products, Commerce was still required to attempt to
apply a profit cap on the basis of the facts available. HYSCO Br. at 47–50; NEXTEEL Br. at 46,
48–49; Husteel Br. at 34–35. HYSCO, NEXTEEL, and Husteel emphasize the importance of
applying a profitcapin this case because of the allegedly aberrational profit margin Tenaris
earned, which was not based on production or sales of OCTG in Korea. HYSCO Br. at 48–49;
NEXTEEL Br. at 46–48; Husteel Br. at 36.
Because the court is remanding the use of Tenaris’s financial statement to valuea CV
profit figure for the mandatory respondents, it need not discuss this issue in great detail. On
remand, Commerce may decide to rely on the data plaintiffs suggest should be used as a profit
cap in order to calculate CV profit. On the other hand, the court finds it appropriate to give
Commerce some guidance on this issue should it continue to rely on the Tenarisfinancial
statement pursuant to alternative (iii) and continue to find that the non-OCTG products sold by
the Korean producers in Korea do not fall within the same general category of products as the
subject merchandise.
When Commerce used Tenaris’s financial statement to calculate a CV profit amount, it
relied on alternative (iii), which provides that Commerce may use
the amounts incurred and realized for selling, general, and administrative expenses, and for profits, based on any other reasonable method, except that the amount allowed for profit may not exceed the amount normally realized by exporters or
Consol. Court No. 14-00215 Page52
producers (other than the exporter orproducer 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... .
19 U.S.C. §1677b(e)(2)(B)(iii) (emphasis added). The government and petitioners argue that
Commerce lacked record evidence regarding “the amount normally realized by exporters or
producers... in connection with the sale, for consumption in the foreign country, of
merchandise that is in the same generalcategory of products as the subject merchandise.” Gov.
Br. at 48–49; Maverick Resp. at42; U.S. Steel Resp. at 56–57. In support of Commerce’s
decision to apply alternative (iii) without a profit cap, they cite to the following passage in the
SAA:
The Administration also recognizes that where, due to the absence of data, Commerce cannot determine amounts for profit under alternatives (1) and (2) or a “profit cap” under alternative (3), it might have to apply alternative (3) on the basis of “the facts available.” This ensures that Commerce can use alternative (3) when it cannot calculate the profit normally realized by other companies on sales of the same general category of products.
SAA, H.R. Doc. No. 103-316, vol. 1,at841, 1994 U.S.C.C.A.N. at 4177. According to the
government and petitioners, this passage indicates that Commerce had the authority to apply
alternative (iii) without calculating a profit cap. Gov. Br. at 48; Maverick Resp. at 41–42; U.S.
Steel Resp. at 56–57, 60.
Even assuming that Commercereasonably concluded that the record lacked data
regarding the profit normally realized by Korean producers on Korean sales of merchandise in
the same generally category of products, Commerce still was required to attempt to apply a profit
cap on the basis of the facts available. As explained in Geum Poong Corp. v. United States, “[i]f
Alternative Three without the profit cap may be used as ‘facts available,’ it would seem a ‘facts
Consol. Court No. 14-00215 Page53
available’ profit cap may also be used.” 25 CIT 1089, 1097, 163F. Supp. 2d 669, 679 (2001).
“Because the statute mandates the application of a profit cap, Commerce cannot sidestep the
requirement without giving adequate explanation even in a facts available scenario.” Id.;accord
Atar, S.r.l.v. United States, 34 CIT 465, 470, 703 F. Supp. 2d 1359, 1364 (2010) (“But even the
exception for absence of record data does not allow Commerce to ignore the profit cap
requirement entirely when determining constructed value profit. Where the record lacks data on
profit normally realized by other companies on sales of the same general category of products,
Commerce still must attempt to comply with the profit cap requirement through the use of facts
otherwise available.”), rev’d on other grounds, 730 F.3d 1320 (Fed. Cir. 2013). Even when the
record evidence is deficient for the purposes of calculating the profit cap, Commerce must
attempt to calculate a profit cap based on the facts otherwise available, and it may dispense with
the profit cap entirely only if it provides an adequate explanation as to why the available data
would render any cap based on facts available unrepresentative or inaccurate. SeeGeum Poong
Corp. v. United States, 26 CIT 322, 324, 193 F. Supp. 2d 1363, 1367 (2002) (“Geum Poong II”).
Contrary to the claims of the government and U.S. Steel, Commerce failed to provide an
adequate explanation as to why it dispensed with the profit cap. SeeGov. Br. at 50–52; U.S.
Steel Resp. at 60. The entirety of Commerce’s discussion regarding the profit cap was limited to
a single sentence. SeeI&D Memoat 21 (“Lastly, we are unable to calculate a profit cap for
Korea under section (iii) because we do not have home market profit data for other exporters and
producers in Korea of the same general category of products.”). This explanation falls far short
of the standard expressed in the court’s prior cases. As best the court can determine, Commerce
completely failed to consider the possibility of applying a facts available profit cap, based on an
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erroneous legal conclusion. Commerce certainly did not explain why the use of such a profit cap
would render the CV profit rate unreasonable and unrepresentative for HYSCO and NEXTEEL.
The use of an appropriate profit cap seems especially important in this case. The goal in
calculating CV profit is to approximate the home market profit experience of the respondents.
SeeGeum Poong II, 26 CIT at 327, 193 F. Supp. 2d at 1370. The profit data imbedded in
Tenaris’s financial statement does not appear to be based on any sales orproduction in Korea. It
therefore appears to be a relatively poor surrogate for the home market experience. Additionally,
record evidence suggests that Tenaris is a massive producer of OCTG with production and
associated services around the world. See,e.g.,U.S. Steel’sComments re: NEXTEEL’s Third
Suppl.Section D Questionnaire Resp.at Ex. P 6–11, 14. Record evidence also suggests that
Tenaris’s profits are among the highest in the world and that this profit figure is due in large part
toTenaris’s sales of unique,high-end OCTG products and global services. Seeid.at 19–20, 27;
U.S. Steel’s Jan. 16, 2014 Submission of Factual Informationat Ex. J 1–3,5–6. The Korean
producers, on the other hand, appear to be rather modest in comparison, both in the size of their
operations and in the products and services they offer. SeeHusteel Br. at 30–32. As Commerce
recognized in the preamble to its own regulations,“the sales used as the basis for CV profit
should not lead to irrational or unrepresentative results.” Antidumping Duties; Countervailing
Duties, 62 Fed. Reg. 27,296, 27,360 (Dep’t CommerceMay 19, 1997); see alsoThai I-Mei
Frozen Foods Co. v. United States, 32 CIT 865, 883, 572 F. Supp. 2d 1353, 1368 (2008) (“An
unreasonably high profit estimate will defeat the fundamental statutory purpose of achieving a
fair comparison between normal value and export price.”), rev’d on other grounds,616 F.3d
1300 (Fed. Cir. 2010). It appears that dispensing withthe profit cap requirement entirely in this
Consol. Court No. 14-00215 Page55
case could run the risk that the CV profit rate will be unrepresentative of the respondents’
expected home market experience.
On remand, if Commerce calculates CV profit pursuant to alternative (iii), Commerce
must either apply a profit cap or provide an adequate explanation as to why data on the record
cannot be used to calculate a facts available profit cap. This is especially so should Commerce
find adequate reason, heretofore absent,to use Tenaris’s 2012 financial statement to establish
CV profit.
III. NEXTEEL’s Affiliation with POSCO
In the Final Determination, Commerce determined that NEXTEEL was affiliated with
POSCO, one of its hot-rolled coil suppliers, due to a “close supplier relationship.” SeeI&D
Memoat 72. Commerce claimed that POSCO’s involvement in the production and sales sides of business put POSCO in a position topotentially exercise restraint or direction over NEXTEEL.21
Id.at 72–73. As a result of the affiliation finding, Commerce applied the major input rule and
adjusted NEXTEEL’s purchase prices for hot-rolled coil sourced from POSCO. Id.at 73–74. In
a related finding, Commerce determined that NEXTEEL was affiliated with one of its customers
21 Commerce looked to NEXTEEL’s commercial relationship with its customer [[ ]]. Commerce determined that [[ ]] NEXTEEL’s U.S. sales were made through [[ ]], and thatboth of these companies were [[ ]]. Commerce extended its affiliation finding and concluded that NEXTEEL was also affiliated with [[ ]] through POSCO’s [[ ]]and NEXTEEL’s supposed affiliation with POSCO. NEXTEEL Br. at 49–50; NEXTEEL Affiliation Memorandum at 4–5, CD 443 (July 10, 2014) (“NEXTEEL Affiliation Memo”).
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and disregarded NEXTEEL’s sales data, opting to use different sales and expense data as the
basis for its export and constructed export price calculations. Seeid.at 89.
NEXTEEL argues that Commerce erred in determining that it was affiliated with POSCO.22 NEXTEEL Br. at 49–53. NEXTEEL asserts that it was not reliant on POSCO for its
hot-rolled coil and that Commerce failed to consider certain temporal aspects of the relationship
pertaining to POSCO’s involvement with NEXTEEL’s sales suggesting that POSCO did not
control NEXTEEL. Id. NEXTEEL’s argument lacks merit.
The ADduty statute states “affiliated persons” include “any person who controls any
other person and such other person,” and that “a person shall be considered to control another
person if the person is legally or operationallyin a position to exercise restraint or direction over
the other person.” 19 U.S.C. §1677(33)(G). Commerce considers “close supplier relationships”
among other factors when determining whether control exists. 19 C.F.R. §351.102(b)(3).
Control will not be found to exist unless the relationship in question “has the potential to impact
decisions concerning the production, pricing,or cost of the subject merchandise or foreign like
product.” Id. The temporal aspect of a relationship is also considered. Id.
NEXTEEL disregards the text of the statute in arguing that POSCO didnot exercise
restraint or control over NEXTEEL. The statute does not require that Commerce find that
POSCO actually controlled or restrained NEXTEEL, but rather it only requires that Commerce
evaluate whether POSCO was in a position from which it could exercise such control. See19
22 AJU Besteel adopts NEXTEEL’s argument regarding this issue and asserts that AJU Besteel’s all-others margin should incorporate any changes made to NEXTEEL’s margin if this challenge is successful. SeeAJU Besteel Br. at 2.
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U.S.C. §1677(33)(G). Moreover, NEXTEEL fails to recognize that, although Commerce may
look to whether one of the parties has become reliant on the other, the presence or lack of
reliance is not necessarily dispositive. SeeSAA, H.R. Doc. No. 103-316, vol. 1,at 838,1994
U.S.C.C.A.N. at4174–75. The record reveals that POSCO and NEXTEEL sharedtechnology
and marketing information, and POSCO had a very significant role on both the production and sales sides of NEXTEEL’s OCTG operations during the POI.23 SeeNEXTEEL Affiliation
Memorandum at 2–5, CD 443 (July 10, 2014). Based on the record information, Commerce
reasonably concluded that POSCO had the ability to impact NEXTEEL’s decisions in most, if
not all, of these areas. Accordingly, Commerce did not errin concluding that NEXTEEL and
POSCO were affiliated.
IV. NEXTEEL’s Warranty Expenses
A. Background
Commerce’s initial questionnaire asked NEXTEEL to report its warranty expenses for its
reported U.S. sales and for its annual warranty expenses during the three most recent fiscal
years—2010, 2011, and 2012. I&D Memoat 80. NEXTEEL reported it had incurred no
23 POSCO provided [[ ]] percent of NEXTEEL’s total POI purchases of hot-rolled coil used for OCTG production, and the remaining [[ ]] percent was used [[ ]]. NEXTEEL Affiliation Memo at 3. Hot-rolled coil from POSCO accounted for [[ ]] percent of NEXTEEL’s POI consumption of hot-rolled coil during the POI. Id. Hot-rolled coil accounted for [[ ]] percent of NEXTEEL’s OCTG cost of manufacturing. Id. Additionally, [[ ]] although Commerce acknowledge that [[ ]]. Id.at 3–4.
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warranty expenses for its reported U.S. sales, but it did not address its warranty expenses for the
three most recent fiscal years. Id. Commerce then reiterated its request in a supplemental
questionnaire, noting that there appeared to be discrepancies between NEXTEEL’s claims about
its lack of warranty expenses during thePOIand other information provided in its questionnaire
response. Id. NEXTEEL responded with the three previous years’ warranty expenses, insisted
that there were no discrepancies, and stressed that it had not incurred any warranty expenses
during the POI. Id.at 80–81. NEXTEEL also made statements that appeared to imply that it had
not received any warranty claims during the POI. Seeid. At verification, however, NEXTEEL
revealed that it had outstanding unresolved warranty claims for2012 and 2013. Id.at 81.
Though Commerce acknowledged that NEXTEEL “may have been less than candid in its
questionnaire responses,” Commerce chose not to apply adverse facts available (“AFA”). Id.at
81. Commerce recognized that NEXTEEL did not appear to have incurred any warranty
expenses during the POI, as NEXTEEL maintained throughout the investigation and in its
questionnaire responses. Id. Commerce also noted that NEXTEEL supplied itsthree year
warranty expense data despite its initial failure to do so. Id. For NEXTEEL’s warranty
expenses, Commerce relied on NEXTEEL’s historical average, but excluded the year 2012
because there remained unresolved claims for that year. Id. Commerce similarly rejected using
NEXTEEL’s POI warranty expenses because of outstanding claims. Id. Commerce further
explained that “[u]se of all of the outstanding balances of NEXTEEL’s customer to determine
NEXTEEL’s expenses as facts available [as petitioners had suggested] may yield an excessive
estimate, given it is not evident that the outstanding balances are all due to warranty claims, nor
is it obvious that all claims would result in actual warranty expenses.” Id.
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B. Adverse Facts Available
Maverick and U.S. Steel argue that Commerce erred in deciding not to apply AFA to
NEXTEEL because NEXTEEL misled Commerce regarding its warranty experience and did not
fully cooperate during Commerce’s investigation. Maverick Br. at 31–35; U.S. Steel Br. at 12–
22. Maverick and U.S. argue that Commerce’s conclusion that NEXTEEL acted to the best of its
abilities was erroneous, and that the failure to apply AFA was an arbitrary departure from past
practice. Maverick Br. at 31–35; U.S. Steel Br. at 19–22. This argumentlacks merit.
According to the statute, Commerce shall use facts otherwise available if a party
(i)withholds requested information, (ii)fails to provide such information by the appropriate
deadlines or in the form and manner requested, (iii)significantly impedes a proceeding, or
(iv)provides the requested information, but the information is incapable of being verified. 19
U.S.C. §1677e(a)(2). Commerce may apply an adverse inference in selecting from the facts
otherwise available if the party “has failed to cooperate by not acting to the best of its ability to
comply with a request for information.” 19 U.S.C. §1677e(b). Commerce has discretion over
whether to apply or not apply AFA. SeeAK Steel Corp. v. United States, 28 CIT 1408, 1416–
17, 346 F. Supp. 2d 1348, 1355 (2004). Commerce is not required “to prove that an importer
cooperated to the best of its ability every time that the agency decides notto apply adverse facts
available.” Id.at 1417. The issue of whether a respondent has acted to the best of its ability and
whether AFA is appropriate “amounts to a line-drawing exercise that is precisely the type of
discretion left within the agency’s domain.” Ta Chen Stainless Steel Pipe Co. v. United States,
31 CIT 794, 812 (2007)(internal quotation marks and brackets omitted).
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Maverick and U.S. Steel argue that AFA should have been applied, yet such arguments
mischaracterize Commerce’s ability to apply AFA as an obligation to apply AFA. The statute
limits Commerce’s ability to apply AFA to situations in which Commerce finds that a party has
failed to act to the best of its ability. SeeKawasaki Steel Corp.v. United States, 24 CIT 684,
689, 110 F. Supp. 2d 1029, 1034 (2000). There is nothing in the statute, however, that requires
Commerce to apply an adverse inference upon such a finding. See19 U.S.C. §1677e(b) (“If
[Commerce]... finds that an interested party has failed to cooperate by not acting to the best of
its ability... , [Commerce]...mayuse an inference that is adverse to the interests of that
party....” (emphasis added)).
Maverick and U.S. Steel also overstate the events that transpired while NEXTEEL was
being investigated, exaggerating the possible effects onCommerce’s investigation. NEXTEEL
did provide information that suggested it had not received any warranty claims during the POI,
but Commerce later concluded that NEXTEEL’s repeated assertions about its warranty expenses
(as opposed to unresolved claims)during the POI appeared to be true. I&D Memoat 81.
Providing information capable of misinterpretation is not necessarily emblematic of
“gamesmanship” or attempts to obtain an “inaccurately low dumping margin,” particularly when
such information is capable of verification. SeeMaverick Br. at 31. NEXTEEL provided the
information Commerce requested,and ultimately relied upon,in plenty of time for the
information to be verified and considered by Commerce. Although U.S. Steel additionally
argues that NEXTEEL made false claims when it asserted that third parties were not involved in
settling warranty expenses, this is actually not a false claim. SeeU.S. Steel Br. at 19.
NEXTEEL stated that “[n]o third party acts on NEXTEEL’s behalf to cover warranty expenses,”
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or, in other words, no party but NEXTEEL ultimately pays for any warranty expenses.
NEXTEEL’s Suppl.Sections A&C Questionnaire Resp.at 25, PD193 (Dec. 30, 2013). This is
not the same as claiming no third party played a role in settling these expenses, and it is a weak
basis upon which to assert that NEXTEEL provided false information.
Maverick and U.S. Steel’s arguments that Commerce’s decision not to apply AFA is a
departure from its past practice are unpersuasive, as the petitioners rely on cases distinguishable
from the present case. For example, petitioners cite Mukand, Ltd. v. United Statesto argue that
AFA is appropriate when a respondent “evade[s] providing a direct response to Commerce’s
specific questions” and effectively “sit[s] out the preliminary phase of the investigation.” 767
F.3d 1300, 1307 (Fed. Cir. 2014). But in that case, the respondent,Mukand,repeatedly evaded
Commerce’s requests. Id.at 1303. Unsatisfied with Mukand’s responses in its fourth
supplemental questionnaire, Commerce went as far as to create a sample chart for Mukand to
complete that clearly identified the information Commerce was requesting and the manner in
which it should be recorded. Id. Here, it did not take Commerce four attempts to secure the
information it had initially requested from NEXTEEL, and NEXTEEL was demonstrably more
cooperative and forthcoming than Mukand. Similarly, in Shandong Huarong Machinery Co. v.
United States,the courtheld that Commerce’s need to resort to several supplemental
questionnaires to obtain information from an importer “surely significantly impeded
Commerce’s investigation.” 30 CIT 1269, 1277, 435 F. Supp. 2d 1261, 1269(2006). There is
nothing indicating that Commerce’s investigation was similarly hindered by NEXTEEL. And
unlike Essar Steel Ltd. v. United States, where the court held that providing false information
and failing to produce key documents demonstrated a respondent did not put forth its maximum
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effort, NEXTEEL’s pertinent responses were never found to contain false information. See678
F.3d1268, 1275–76 (Fed. Cir. 2012).
Moreover, Maverick cites toa number of prior issues and decision memoranda that
concern behavior much more problematic than NEXTEEL’s. SeeMaverick Br. at 34–35. For
example, in Certain Cold-Rolled Carbon Steel Flat Products from Brazil, Commerce applied
partial AFA where a respondent failed to report U.S. sales that were discovered at verification.
SeeIssues and Decision Memorandum for the Final Determination of Sales at Less Than Fair
Value: Certain Cold-Rolled Carbon SteelFlat Products from Brazilat 7–8,A-351-834, (Sept. 23,
2002), available athttp://enforcement.trade.gov/frn/summary/brazil/02-24800-1.pdf (last visited
Aug. 27, 2015). And in Prestressed Concrete Steel Wire Strand from Mexico,Commerce
applied AFA when the respondent misreported its movement expenses and failed to correct them
despite numerous opportunities to do so. Issues and Decision Memorandum for the Final
Determination of the Investigation of Prestressed Concrete Steel Wire Strand from Mexicoat 3–
4, A-201-831, (Dec. 1, 2003), available athttp://enforcement.trade.gov/frn/summary/mexico/03
30384-1.pdf (last visited Aug. 27, 2015). Such situations evince behavior that is more egregious,
deceitful, and deserving of AFA than NEXTEEL’s. Unlike the abovementioned respondents,
NEXTEEL voluntarily revealed information about its warranty expenses, and NEXTEEL did not
misreport and leave uncorrected any information it provided to Commerce. Commerce has not
arbitrarily refused to apply AFA or unreasonably departed from its past practice.
Finally, Commerce is not required to apply an AFA expense that it determines is likely to
be unreflective of the respondent’s actual expenses. Commerce explained that reliance on
NEXTEEL’s customer’s outstanding balancesas facts available “may yield an excessive
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estimate, given it is not evident that the outstanding balances are all due to warranty claims, nor
is it obvious that all claims would result in actual warranty expenses.” I&D Memoat 81.
Commerce’sgoal is tocalculate dumping margins that are as accurate as possible. Parkdale, 475
F.3d at 1380(citing Rhone Poulenc, 899 F.2d at 1191). Commerce acted reasonably in relying
upon NEXTEEL’s historical warranty experiences rather than using the distortive amounts
suggested by petitioners.
The court holds that Commerce’s decision to rely on NEXTEEL’s historical experience
regarding warranty expenses rather than applying AFA was reasonable, supported by substantial
evidence, and in accordance with law.
C. Warranty Claims in the Warranty Expense Calculation
U.S. Steel argues that Commerce erred when it excluded outstanding payments withheld
by NEXTEEL’s U.S. Customer for warranty claims filed during the POI. U.S. Steel Br. at 22–
24. U.S. Steel asserts that even if the court upholds Commerce’s determination regarding AFA,
the court should at least remand Commerce’s calculation of NEXTEEL’s warranty expenses and
direct Commerce to include the amount of the outstanding balances unpaid by NEXTEEL’s U.S.
customer due to warranty claims. Id. U.S. Steel’s argument lacks merit.
Generally, an entity’s total amount of warranty expenses is unknown at the time of sale,
and, because of this, Commerce has developed a practice of relying on a company’s warranty
expenses during the POI. I&D Memoat 80. If these warranty expenses are found distortive,
Commerce uses a company’s three-year historical warranty expenses regardless of the particular
periods during which the relevant sales occurred. Id.;see,e.g., Issues and Decision
Memorandum for the Final Determination in the Antidumping Duty Investigation of Crystalline
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Silicon Photovoltaic Cells, Whether or Not Assembled into Modules, from the People’s Republic
of China at 80, A-570-979,(Oct. 9, 2012), available at
http://enforcement.trade.gov/frn/summary/prc/2012-25580-1.pdf (last visited Aug. 27, 2015)).
Here, Commerce determined that relying on NEXTEEL’s POI warranty expenses would
be distortive, as NEXTEELhad outstanding warranty claims and its reported expenses were not
representative of its historical experience. SeeI&D Memoat 80–81. Commerce adjusted
NEXTEEL’s export price by a historical average of its 2010 to 2011 warranty expenses. Id.at
81. Commerce excluded the 2012 warranty expenses from its calculation, finding that including
unsettled warranty claims for that year also would be distortive. Id.
U.S. Steel’s argument that NEXTEEL’s outstanding warranty claims are the best measure
of NEXTEEL’s warranty expenses for the POI is unpersuasive. The warranty claims U.S. Steel
urges Commerce to include in NEXTEEL’s warranty expense calculation were pending claims.
SeeU.S. Steel Br. at 24. It was reasonable for Commerce to exclude claims of uncertain
amounts from its calculation and to conclude that such claims could be distortive. For example,
it is possible that a customer could make a warranty claim for an amount that, once investigated,
is determined to be incorrect and overestimated, or the alleged defect might have been caused by
a party other than NEXTEEL. SeeI&D Memoat 81. These examples illustrate that a claimed
amount will not necessarily equal the amount NEXTEEL ultimately pays, and thus including
unsettled claims in the margin calculation is likely to lead to inaccurate results. Commerce’s
decision to use NEXTEEL’s historical average for its warrantyexpenses rather than the full
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amount of the unsettled pending claims was reasonable, and the court therefore upholds Commerce’s warranty expense calculation for NEXTEEL.24
V. NEXTEEL’s Warehousing Expenses
Commerce is required to include general and administrative (“G&A”) expenses in the CV
calculation. See19 U.S.C. §1677b(e)(2). G&A expenses are costs associated with the day-to
day operation of a business, such as rent, electricity, and executive salaries. SeeAss’n of Am.
Sch. Paper Suppliers v. United States, 33 CIT 1742, 1745, 1752(2009) aff’d, 410 F. App’x 320
(Fed. Cir. 2010). It is Commerce’s practice to use the financial statements from the full fiscal
year that most closely corresponds to the POI in calculating these G&A expenses. Issues and
Decision Memorandum for the Final Affirmative Determination in the Less-Than-Fair-Value
Investigation of Grain-Oriented Electrical Steel from the Republic of Korea at 24, A-580-871,
(Sept. 24, 2014), available athttp://enforcement.trade.gov/frn/summary/korea-south/2014
23393-1.pdf (last visited Aug. 27, 2015). When the POI is divided across two fiscal years,
Commerce uses the financial statements from the most recently completed fiscal year. Id.
Commerce’s initial questionnaires requested that NEXTEEL identify each of its affiliated
entities and report its domestic warehousing expenses for its sales of OCTG to the United States.
NEXTEEL responded that it did not have affiliates beyond NEXTEEL America and NEXTEEL
24 To the extent that U.S. Steel relies on NEC Home Electronics, Ltd. v. United States, 18 CIT 336 (1994), to cast doubt on Commerce’s use of NEXTEEL’s 2010 and 2011 warranty expenses, the court notes that U.S. Steel failed to raise any issues with this data before the agency, and that in any event, U.S. Steel’s cursory argument regarding this case in its briefs is unpersuasive. Even U.S. Steel appears to recognize the limited relevance of that case in its reply brief. See Reply Br. in Supp. of Pl. United States Steel Corp.’s Mot. for J. on the Agency R. Under Rule 56.2 13–14, ECF No. 190.
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QNT Co., Ltd., and that it had no such warehousing expenses. NEXTEEL’s Section A
Questionnaire Resp.at A-8–A-9, PD 121 (Sept. 18, 2013);NEXTEEL’sSectionsC–D
Questionnaire Resp.at C-23, PD152–153(Nov. 5, 2013). Commerce requested that NEXTEEL
further explain how it reported expenses related to transporting OCTG from its plants to the
storage yards at ports or other intermediate locations. NEXTEEL’s Suppl. SectionsA&C
Questionnaire Resp. at 19. NEXTEEL again maintained that it did not have any warehousing
expenses and that it did not transport the OCTG to an intermediate distribution warehouse. Id.at
19–21.
Soon after the preliminary determination, however, NEXTEEL reported that it had a
previously unreported affiliate: NEXTOGY. NEXTEEL’sSecond Suppl.Sections A&C
Questionnaire Resp.at 9–10, CD256(Feb. 18, 2014). NEXTEEL acknowledged that it incurred
warehousing expenses during the POI for services provided by NEXTOGY and claimed that
these expenses were reported to Commerce as a part of NEXTEEL’s G&A expenses. Id. NEXTEEL submitted lease contracts between itself and an unaffiliated party25 to demonstrate
that NEXTEEL paid the same amount for warehousing services to an unaffiliated party as it did
to NEXTOGY, supposedly indicating that its transactions with NEXTOGY were conducted on
an arm’s-length basis. Id.at 10.
For the Final Determination, Commerce declined to apply AFA when calculating
NEXTEEL’s warehousing expenses, despite its recognition that NEXTEEL’s belated disclosure
25 [[ ]]
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was too late for Commerce to consider any expenses associated with NEXTOGY inits
preliminary margin calculations, and despite Commerce’s conclusion that it was implausible
NEXTEEL was unaware of the NEXTOGY facility. I&D Memoat 85. Commerce explained
that, consistent with the Preliminary Determination, it was basing its CV selling ratios, which
includes G&A expenses, on NEXTEEL’s 2012 data. Id. Commerce verified that NEXTEEL
had not made warehousing payments to NEXTOGY until 2013, and thus NEXTEEL had no
expenses it neglected to include in its 2012 G&A expenses. Id. Because Commerce was relying
on the 2012 data, any expenses incurred in 2013 were irrelevant to the margin calculation. Id.
Maverick and U.S. Steel argue that Commerce erroneously failed to apply AFA with
regard to NEXTEEL’s warehousing expenses. Petitioners claim that NEXTEEL failed to
cooperate with Commerce’s investigation as it related to reporting the warehousing expenses it
incurred during the POI and disclosing the fact that it purchased warehousing services from an
affiliate, NEXTOGY. Maverick Br. at 36–41; U.S. Steel Br. at 25–32. In addition to
NEXTEEL’s failure to supply this information when initially asked, they point to alleged errors
in the information that NEXTEEL ultimately submitted and challenge NEXTEEL’s assertion
that it included any relevant warehousing expenses in its G&Aexpenses. Maverick Br. at 36–
41; U.S. Steel Br. at 25–32. Petitioners argue that Commerce acted contrary to law and that its
determination was unsupported by substantial evidence. These arguments lack merit.
First, as the government points out, although NEXTEEL’s initial responses regarding its
affiliates and its warehousing expenses during the POI were incorrect, NEXTEEL corrected this
information before verification. Gov. Br. at95. The government also notes that NEXTEEL
provided over two thousand pages of initial and supplemental questionnaire responses and
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cooperated fully during the verification process. Id.at 94–95. The “best of its ability” standard
“does not require perfection and recognizes that mistakes sometimes occur.” Nippon Steel Corp.
v. United States, 337 F.3d 1373, 1382 (Fed. Cir. 2003). The court is disinclined to second guess
Commerce’s line-drawing when it determines that a party has acted to the best of its ability. See
Ta Chen, 31 CIT at 812.
Second, even if NEXTEEL’s ultimate disclosure of NEXTOGY and warehousing
expenses was untimely and in some ways deficient, Commerce is not required to apply an
adverse inference, even if a party has not acted to the best of its ability. SeeAK Steel Corp., 28
CIT at 1416–17, 346 F. Supp. 2d at 1355. Consistent with its practice, Commerce relied on
NEXTEEL’s 2012 data to calculate G&A expenses. This information was promptly submitted
and verified. NEXTEEL did not purchase warehousing services fromNEXTOGY until 2013
and thus any errors or omissions related to the NEXTOGY expenses did not affect NEXTEEL’s
margin calculation. Thus, even if Commerce could have concluded that NEXTEEL did not act
to the best of its abilities, Commerce did not abuse itsdiscretion by choosing to rely on
NEXTEEL’s timely submitted and verified 2012 expenses instead of applying AFAbecause of
supposed deficiencies regarding information that Commerce ultimatelydeemed irrelevant when
calculating NEXTEEL’s dumping margin.
VI. Excluding a Loss from NEXTEEL’s G&A Expense Calculation
U.S. Steel argues that Commerce improperly excluded a miscellaneous loss in calculating
NEXTEEL’s G&A expense. U.S. Steel Br. at 32–34. The loss at issue was incurred in
connection with a payment guarantee made forone of NEXTEEL’s domestic standard pipe
customers when the customer defaulted on a loan. I&D Memoat 101. Commerce included the
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loss when calculating NEXTEEL’s G&A expense ratio inthePreliminary Determination, but
excluded the loss from the G&A expense ratio calculated for the Final Determination. Id.
Commerce based its final conclusionon NEXTEEL’s argument that the loss was “akin to a bad
debt expense incurred in connection to the sales of standard pipes in the domestic market” and
thus a selling expense associated with non-subject merchandise. Id. U.S. Steel claims that the
loss at issue occurred as part of NEXTEEL’s general operations and thus should have been
included as aG&A expense. U.S. Steel Br.at 32. U.S. Steel’s arguments lack merit.
In calculating G&A expenses, it is Commerce’s practice to include those expenses
“which relate to the activities of the company as a whole rather than to the production process.”
Rautaruukki Oy v. United States, 19 CIT 438, 444 (1995). Commerce typically excludes
expenses from the G&A rate calculation “only when the expenses are both: (1)unusual; and
(2)infrequent in nature.” Torrington Co. v. United States, 25 CIT 395, 431, 146 F. Supp. 2d
845, 886 (2001); seealsoThai Plastic Bags Indus. Co. v. United States, 904 F. Supp. 2d 1326,
1331–32 (CIT 2013) (recognizing that losses that are not related to a company’s normal
production-related business operations are excluded from the G&A expense calculation).
Commerce reasonably concluded that the loss should not be included in NEXTEEL’s
G&A expense, as this loss was not related to NEXTEEL’s general operations. Although it is true
Commerce did not provide a thorough explanation of how it determined the loss was “akin to a
bad debt expense” in the I&D Memo, NEXTEEL is correct that what matters is not whether the
loss is properly classified as a bad debt, but rather whether the loss is related to NEXTEEL’s
general operations. See I&D Memoat 101; NEXTEEL’s Resp.in Opp’n to Consol. Pls.
Maverick and U.S. Steel Corp.’s Rule 56.2 Mots. for J.on the Agency R.45, ECF No. 157
Consol. Court No. 14-00215 Page70
(“NEXTEEL Resp.”). NEXTEEL primarily functions as a manufacturer and seller of tubular
products, and U.S. Steel has not pointed to anything in the record showing that guaranteeing
loans for customers is an ordinary aspect of NEXTEEL’s business operations. Commerce
therefore reasonably concluded that NEXTEEL’sproviding the loan guarantee to its customer of
non-subject merchandise was not part of NEXTEEL’s ordinary or general business operations,
but rather was more properly characterized as a selling expense related to non-subject
merchandise. To the extent that U.S. Steel contests Commerce’s decision to reverse course on
this issue in the Final Determinationwithout having received any new evidence following the
Preliminary Determination, the court rejects this contention. “[P]reliminary determinations are
‘preliminary’ precisely because they are subject to change.” NTN Bearing Corp. v. United
States, 74 F.3d 1204, 1208 (Fed. Cir. 1995). Commerce was not prohibited from reconsidering
its analysis of the evidence. The exclusion of this expense from NEXTEEL’s G&A calculation
was supported by substantial evidence and in accordance with law.
VII. Valuation of Hot-Rolled Steel Coil for NEXTEEL’s Constructed Value Calculation Using Weighted-Average Prices
Because Commerce determined that NEXTEEL and POSCO were affiliated within the
meaning of 19 U.S.C §1677(33)(G),Commerceapplied the major input rule to NEXTEEL’s
purchases of hot-rolled coil from POSCO. I&D Memoat 72–74. The major input rule is applied
when there is a transaction between affiliated parties involving one party’s production of a major
input needed for theproduction of the subject merchandise, as such a situation presents
reasonable grounds for Commerce to suspect that “an amount represented as the value of such
input is less than the cost of production of such input.” 19 U.S.C. §1677b(f)(3). Commerce
Consol. Court No. 14-00215 Page71
normally calculates the major input’s value using the higher of (1)the transfer price the
respondent paid the affiliate for the input, (2)the amountusually reflected in sales of the input in
the market under consideration, or (3)the costs the affiliate incurs in producing the input. 19
C.F.R. §351.407(b) (2014). Here, Commerce calculated the market price using the weighted
average of POSCO’s sales to all of its unaffiliated customers. SeeI&D Memoat 74. Commerce
used the transfer price to value certain grades of coil and used the market price for other grades
because the market price exceeded the transfer price. Constructed Value Calculation
Adjustments for the Final Determination—NEXTEEL at3, CD431 (July 10, 2014). The
transfer price for each grade was higher than the cost of production. Id.
Maverick argues Commerce erred in using a weighted average of the prices at which
POSCO sold hot-rolled steel coil to all of its unaffiliated customers as the market price for the
major input rule comparison. Maverick Br. at 21–28. Maverick claims Commerce improperly
disregarded evidence demonstrating that POSCO’s prices to its unaffiliated customers were
distorted and unreliable. Seeid.at 24–28. According to Maverick, the price paid by Company A26 is the best representation of the actual market price, because CompanyAis a larger producer
than some of the other unaffiliated producers and was the only unaffiliated producer with its own
alternative supply of hot-rolled coil. Id.at 24–25. Maverick argues Commerce should have
26 “Company A” refers to [[ ]].
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found that the POSCO-Company A price was the only price on the record that avoided the “aberrantly low weighted-average prices.”27 Id.at 22. Maverick’s arguments lack merit.
It was not irrational or arbitrary for Commerce to reason that using POSCO’s sales to all
of its unaffiliated customers to calculate a market price would better demonstrate the price
usually reflected in sales of the major input in Koreathan would the price paid by a single entity,
Company A. As the government has explained, nothing in the applicable regulation, 19 C.F.R.
§351.407(b)(2), requires Commerce to focus on only the largest producers in the market or
customers with independent sources for the input. Gov. Br. at 82. The regulationonly specifies
that Commerce should use the market price that is “usually” reflected in the sales of the input in
the relevant market, and thus it was within Commerce’s discretion to determine that theweighted
average of the prices that all of POSCO’s unaffiliated customers paid for the input would provide the most comprehensive overview of market conditions.28 19 C.F.R.§351.407(b). Commerce’s
27 As an example, Maverick argues that for one grade of hot-rolled coil, the weighted average price of the coil to POSCO’s affiliates was [[ ]] KRW, [[ ]] KRW for its unaffiliated customers, and [[ ]] KRW for [[ ]]. Maverick Br. at 27. 28 It is Maverick’s view that the price charged to the [[ ]] of its affiliate, NEXTEEL, is the only reasonable benchmark price, yet it is not clear why Maverick concludes this is true. SeeNEXTEEL’s Resp. at 48. As NEXTEEL points out, POSCO may have decided to charge a premium for its sales to [[ ]] of one of its affiliates, which would make this price more of a marketplace outlier. Seeid. It is equally plausible that any differences in the prices POSCO charged its customers were due to [[ ]] as argued by NEXTEEL. Seeid. Furthermore, although [[ ]] was NEXTEEL’s [[ ]], Maverick’s argument does not explain why POSCO would be willing to sell hot-rolled steel at favorable prices to [[ ]].
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decision demonstrates a “rational connection between the facts found and the choice made.” See
Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168 (1962).
Further, Maverick’s argument that Commerce failed to consider evidence of a “silent
agreement” between POSCO and Korean OCTG and line pipe producers is highly speculative
and unpersuasive. Maverick Br. at 24–25, 28. Maverick’s argument relies on the assumption
that the alleged agreement influenced prices for some unaffiliated OCTG producers, but not for
other unaffiliated Korean OCTG producers. But the affidavit cited by Maverick supporting its
argument does not mention any specific Korean OCTG producers, nor does it specifically discuss pricing practices in the Korean market.29 U.S. Steel’s Comments re: POSCO’s
Questionnaire Resp.at Ex. 3, CD304 (Mar. 21, 2014). Maverick takes issue with Commerce’s
failure to address the affidavit when conducting its major input rule analysis. Although an
agency “must address significant arguments and evidence which seriously undermines its
reasoning and conclusions,” an agencyneed not address every argument and piece of evidence.
Altx, Inc. v. United States, 25 CIT 1100, 1117–18, 167 F. Supp. 2d 1353, 1374 (2001). Because
this argument and accompanying evidence were not significant, Commerce did not err in failing
to specifically address them.
29 The affidavit states that POSCO [[
]]. There is no indication that the agreement was only with certain Korean producers or that POSCO discriminated in its prices to Korean producers. U.S. Steel’s Comments re: POSCO’s Questionnaire Resp. at Ex. 3, CD 304 (Mar. 21, 2014).
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Maverick’s additional argument that the prices to the other unaffiliated producers should
have been rejected because they were only slightly higher than the prices POSCO charged its
affiliates is also without merit. SeeMaverick Br. at 26–27. The major input rule compares the
transfer price to the market price (along with the cost of production), and Commerce will use the
higher of these prices. 19 C.F.R. §351.407(b). Implicit is the possibility that the transfer price
between affiliates might be equaltoor higher than the market price. The government correctly
notes that Maverick’s argument essentially requires a comparison of market prices to the transfer
price in order to determine if Commerce can properly rely on the market price when comparing it
to transfer price, which seems to defeat the whole point of conducting the comparison in the first
place. Gov. Br. at 84. Accordingly, Commerce’s application of the major input rule to NEXTEEL’s purchase of hot-rolled coil from POSCO is sustained.30
VIII. Costs Associated with HYSCO’s Affiliated Service Providers
In making an arm’s-length determination, Commerce typically compares the transfer
price a party pays an affiliate to the market price for the particular good. Where a market price is
unavailable, Commerce will use the affiliate’s cost of production of the relevant input or service
as a proxy for the market price. See I&D Memoat 44; seealsoIssues and Decision
30 Maverick made additional arguments involving a comparison of the prices POSCO charged to certain unaffiliated Korean OCTG producers and the pricing data for Korean hot-rolled coil from MEPS International Steel Review that was included in the petition. SeeMaverick Br. at 26. As the government notes, Maverick failed to make any arguments based on the MEPS data before Commerce, and Maverick failed in its reply brief to suggest any exception to the generally applicable rule that all arguments must be presented first to the agency. Gov. Br. at 85. The court will not consider this argument. See28 U.S.C. § 2637(d) (providing that the court “shall, where appropriate, require the exhaustion of administrative remedies”).
Consol. Court No. 14-00215 Page75
Memorandum for the Antidumping Duty Investigation of Large Residential Washers from
Mexico at 12, A-201-842,(Dec. 18, 2012), available at
http://enforcement.trade.gov/frn/summary/mexico/2012-31077-1.pdf(last visited Aug. 27,
2015). During the investigation, Commerce had first instructed HYSCO to provide the per-unit
price HYSCO paid to each affiliate and the affiliates’ per-unit costs of production (“COP”)data
so that Commerce could determine whether the services were obtained through arm’s-length
transactions. SeeHYSCO’s Suppl.SectionsA, C&DQuestionnaireResp. at SD-5. HYSCO
provided the per-unit price it paid to each affiliate, but it claimed it could not provide its
affiliates’ COP data, as its affiliates considered this data highly confidential. Id. Instead,
HYSCO provided an estimate of its affiliates’ COP data using their financial statements. Id.
Based on this estimated data, for the Preliminary Determination, Commerce made an upward
adjustment to the reported service costs so that they reflected the costs of arm’s-length
transactions. Preliminary CV CalculationMemorandum for HYSCO at 1–2, CD244 (Feb. 14,
2014). At verification, however, HYSCO backed away from its estimated COP data, arguing
that its affiliates were overstating costs and revenues in their financial statements and that these
costs and revenues should be reduced before calculating each affiliate’s per-unit COP. Cost
Verification Report for HYSCO at 19–20, PD419 (May 20, 2014). According to HYSCO, its
affiliates were recording revenue and expenses related to costs that were actually paid by
HYSCO. Id. For the Final Determination, Commerce accepted HYSCO’s assertions regarding
overstated costs and recalculated each affiliate’s per-unit COP. SeeI&D Memoat 45.
Maverick and U.S. Steel argue that Commerce erred in failing to apply AFA to the
service costs HYSCO paid to affiliated tolling service providers. Maverick Br. at 41–49; U.S.
Consol. Court No. 14-00215 Page76
Steel Br. at 34–42. Maverick and U.S. Steel claim that HYSCO did not act to thebest of its
ability in complying with Commerce’s request that it obtain and report COPdata for its affiliated
service providers. Maverick Br. at 41–49; U.S. Steel Br. at 34–42. Maverick and U.S. Steel
argue that Commerce erred in concludingthat HYSCO could not compel its affiliated service
providers to provide their COP data. Maverick Br. at 43–47; U.S. Steel Br. at 38–42. U.S. Steel
additionally contends that even if AFA was not warranted, Commerce erred when it concluded
that the service fees HYSCOpaid to its affiliates were arm’s-length transactions. U.S. Steel Br.
at 42–46. Petitioners’ arguments lack merit.
Maverick and U.S. Steel assert that HYSCO did not cooperate with Commerce’s
investigation to the best of its ability. Although evidence on the record might suggest that
HYSCO was in a relatively strong position to command its affiliates’ data, the court cannot say
that Commerce’s decision was without substantial evidence. SeeConsolo v. Fed. Mar. Comm’n,
383 U.S. 607, 620 (1966) (“[Substantial evidence] is something less than the weight of the
evidence, and the possibility of drawing two inconsistent conclusions from the evidence does not
prevent an administrative agency’s finding from being supported by substantial evidence.”). As
Commerce recognized, HYSCO maintained only “small equity ownership in each of its affiliated
service providers.” I&D Memoat 50. HYSCO’s ownership in each affiliate was less than 15%.
Resp. to Ct.’s Req.Re: Confidentiality of Certain of Hyundai HYSCO’sInfo. Contained in the
Parties’ Brs. 3, ECF. No. 214. Maverick and U.S. Steel challenge Commerce’s analysis,
pointing tothe unique and interconnected nature of companies operating within the structure of
larger Korean chaebols, yet HYSCO’s small ownership shares in its affiliatesis significant
considering Commerce hadpreviously considered small equity ownership consistent with a
Consol. Court No. 14-00215 Page 77
party’s inability to compel the COP data of their affiliates. SeeCertain Cut-To-Length Carbon
Steel Plate From Brazil: Final Results of Antidumping Duty Administrative Review, 63 Fed.
Reg. 12,744, 12,751 (Dep’t Commerce Mar. 16, 1998).
HYSCO’s situation is also distinguishable from the precedent Maverick and U.S. Steel
rely on to argue that HYSCO did not cooperate to the best of its ability. In Kawasaki, the court
sustained Commerce’s determination that the respondent’s letters and oral requests for
information from its affiliate did not demonstrate that the respondent had acted to the best of its
ability. 24 CIT at 694, 110 F. Supp. 2d at 1039. Although HYSCO’s telephonic and written
requests also do not appear to indicate the company expended a great degree of effort in
obtaining the requested COP data, further such effort likely would have been futile and HYSCO
did not exhibit the same “hands-off” approach that led Commerce to apply AFA to the
respondent in Kawasaki. Id. at 689–90, 110 F. Supp. 2d at 1034–35. HYSCO calculated its own
derived data and reconciled its affiliates’ sales revenues listed in each company’s 2012 financial
statement with the transfer prices HYSCO reportedly paid to each affiliate. I&D Memoat 44–
45. Unlike the respondent in Kawasaki, who requested to be excused from providing the data
and did not suggest any alternative method of providing the requested information, see 24 CIT at
686, 110 F. Supp. 2d at 1032, HYSCO made an effort to provide its best estimate of the
information Commerce had asked HYSCO to report.
HYSCO’s situation is similarly distinguishable from many of Commerce’s
determinations petitioners cite to for the same reason. See, e.g.,Notice of Preliminary
Determination of Sales at Less Than Fair Value, Postponement of Final Determination, and
Affirmative Preliminary Critical Circumstances Determination: Certain Orange Juice from
Consol. Court No. 14-00215 Page78
Brazil, 70 Fed. Reg. 49,557, 49,564(Dep’t Commerce Aug. 24, 2005) (applying AFA where
respondent completely failed to provide COP information for an affiliate’s facility);Stainless
Steel Wire Rods from India: Preliminary Results and Partial Rescission of Antidumping Duty
Administrative Review, 68 Fed. Reg. 70,765, 70,768–69(Dep’t Commerce Dec. 19, 2003)
(applying AFA on account of respondent’s repeated failure to provide affiliate’s COP data
without providing explanation for failure to comply). Failing to provide data requested by
Commerce is not the same as being unable to provide the requested data andproviding a
reasonable alternative. The court holds that Commerce’s decision to accept the estimated COP
data rather than applying AFA was supported by substantial evidence and in accordance with
law.
The court also concludes Commerce acted reasonablyin adjustingthe COP data to
exclude costs HYSCO’s affiliates recorded as both revenue and expenses once Commerce
learned that these costs actually were paid by HYSCO. SeeConstructed Value Calculation
Adjustments for the Final Determination—HYSCOat 2–3 and Attach. 4,CD433 (July 10,
2014). Once HYSCO brought this discrepancy to Commerce’s attention, Commerce reviewed
and tested the reconciled information, deemed it acceptable, and recalculated the COP
accordingly. I&D Memoat 45. HYSCO was able to sufficiently show that its affiliates were
treating the payment of certain costs by HYSCO as revenue, and Commerce could reasonably
infer that the affiliates likewise weretreating those costs as if they were the affiliates’ own costs.
Commerce’s determination was not based upon mere speculation without any support in the
record. Rather, Commerce’s decision to adjust the data demonstrated a “rational connection
between the facts found and the choice made.” SeeBurlington Truck Lines, 371 U.S. at 168.
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IX. HYSCO’s Warranty Expenses
Initially, HYSCO reported that it had incurred no warranty expenses related to its U.S.
sales during the POI, yet later it claimed to have made an error, stating that it had incurred
warranty expenses. SeeHYSCO’s SectionsC–D Questionnaire Resp.at C-29;HYSCO’s Suppl.
SectionsA, C&DQuestionnaireResp. at SC-21. Commerce also discovered three previously
unreported warranty claims regarding HYSCO merchandise at the verification of HYSCO’s U.S.
customer. I&D Memoat 58. Before Commerce, U.S. Steel argued that HYSCO and its U.S.
affiliate, Hyundai HYSCO USA, Inc.(“HHU”), absorbed losses incurred in shipping defective
pipe, but that these expenses were not reported as part of HYSCO’s warranty expenses or
elsewherein HYSCO’s data. Id.at 57. Commerce, however, did not revise HYSCO’s warranty
expenses to include movement expenses related to defective pipe. Id.at 58. Commerce found
the record was unclear whether these expenses were accounted for elsewhere in HYSCO’s costs,
and Commerce did not want to risk double counting these expenses. Id.; Gov. Br. at 122–23.
Commerce also did not revise HYSCO’s warranty expensesto include any of the three warranty
claims. I&D Memoat 58. Commerce determined that one of the three claims was dated after
the POI, and it found no evidence that the other two claims actually were paid and settled during
the POI. Id.
U.S. Steel argues that Commerce erred when it failed to adjust HYSCO’s reported
warranty expenses to include certain movement expenses and warranty claims HYSCO had
omitted from its calculation. U.S. Steel Br. at 46–50. U.S. Steel’s arguments lack merit.
Consol. Court No. 14-00215 Page 80
A. Movement Expenses
U.S. Steel argues that Commerce erred in refusing to revise HYSCO’s warranty expenses
to account for the costs it incurred in shipping defective pipe. U.S. Steel contends that the record
is clear that the data HYSCO reported only captured the movement costs for non-defective pipe.
See Reply Br. in Supp. of Pl. United States Steel Corp.’s Mot. for J. on the Agency R. Under
Rule 56.2 38, ECF No. 190 (“U.S. Steel Reply”). The court has reviewed the documents cited
by U.S. Steel in support of this contention, and the court cannot determine with any degree of
certainty whether such costs were included or excluded. The court therefore holds that
Commerce’s determination that the record was unclear as to whether these costs were already
captured elsewhere is supported by substantial evidence. Furthermore, although U.S. Steel does
not appear to independently challenge Commerce’s decision to employ a methodology that
avoids the risk of double counting, the court holds that this decision was reasonable.
B. Warranty Claims Discovered at Verification
U.S. Steel argues that the three warranty claims discovered at verification were all
“incurred” during the POI. According to U.S. Steel, Commerce’s practice is to deduct expenses
incurred during the POI, but Commerce arbitrarily departed from this practice. U.S. Steel Reply
at 39–40. Commerce’s practice, however, is to include only warranty claims paid within the POI
in its warranty expense calculation, regardless of whether the sale or the initial claim was made
during the POI. SeeI&D Memoat 58, 80; Gov. Br. at 124. Thispractices developed because
“the total actual amount of warranty expenses cannot be known at the time of sale.” Id. at 58. It
was reasonable for Commerce to focus on the amount paid rather than the amount claimed, as
the amount claimed could change as the warranty expense was negotiated. See Gov. Br. at 125;
Consol. Court No. 14-00215 Page81
see alsoSection IV.C,supra. In reaching this conclusion, Commerce followed the same
methodology as it did intheIssues and Decision Memorandum for the Antidumping Duty
Investigation of Narrow Woven Ribbon With Woven Selvedge from Taiwan at 28–29, A-583
844,(July 19, 2010), available athttp://enforcement.trade.gov/frn/summary/taiwan/2010-17538
1.pdf (last visited Aug. 27, 2015), where Commerce stressed that it is routine practice to require
not only that a warranty claim be evidenced in a respondent’s books and records at verification,
but also that the respondent actually paid the claimfor the expense to be counted.
Further, the Government is correct to distinguish warranty expenses from the examples
U.S. Steel cites concerning interest, production, and freight costs incurred during a POI. See
Gov. Br. at 124–25. Such expenses differ from warranty expenses because, unlike warranty
expenses, they are capable of calculation at the time of sale. Id.at 125. Thisgreater degree of
certainty allows Commerce to include these expenses in its calculations regardless of when they
are paid. Seeid. Conversely, there is no guarantee that a claim filed by a customer will
accurately reflect the amount eventually paid. The court holds that Commerce’s decision to
exclude the three warranty claims from the warranty expense calculation was reasonable,
supported by substantial evidence, and in accordance with law.
X. HYSCO’s Short-Term U.S. Interest Rate
HHU reported at the outset of verification that it had mistakenly included interest
expenses related to long-term loans in the numerator of its short-term interest rate calculation,
and it requested that these loans be excluded from the calculation. I&D Memoat 55. Commerce
subsequently verified the correction, revised the short-term interest rate, and used the resulting
figure to calculate HYSCO’s U.S. credit expenses and inventory carrying costs. Id.at 55–56.
Consol. Court No. 14-00215 Page82
The submission of this “minor correction,” however, revealed for the first time that HHU’s short
term borrowing involved affiliated transactions. U.S. Steel Br. at 52. U.S. Steel argued that
Commerce should have used the interest expense ratio HYSCO originally reported (i.e., with the
long-term loans included) as partial AFA because HYSCO had failed to reveal the role of an
affiliated party in HHU’s short-term borrowings prior to verification. I&D Memoat 54.
Commerce rejected this contention, explaining that relevantexpenses “are an inherent part of the
relationship between affiliated parties,” that there was no information on the record suggesting
that the verified information should be rejected, and that HHU borrowed from unaffiliated
parties. Final Sales Calculation Memorandum for HYSCO at 4, CD432 (July 10, 2014).
U.S. Steel argues that Commerce erroneously failed to apply partial AFA when
calculating the interest expense ratio for the short-term borrowings of HYSCO’s U.S. affiliate
HHU. U.S. Steel Br. at 50–53. U.S. Steel argues that HYSCO failed to disclose that HHU’s
short-term interest rate was determined based on transactions with an affiliated party, namely HYSCO itself.31 Id.at 51. U.S. Steel claims that this failure interfered with Commerce’s ability
to investigate whether HHU’sshort-term interest rate reflected arm’s-length transactions. Id.
U.S. Steel further claims that HYSCO violated its obligation to disclose all relationships with
affiliates that could affect the sale or distribution of the subject merchandise, includingany
relationships related to “borrowings.” Id. U.S. Steel’s arguments lack merit.
31 Documents obtained at verifications revealed that [[ ]]. U.S. Steel Br. at 7–8. The documents showed that HHU[[ ]]. Id.at 51.
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The use of facts otherwise available isappropriate only when there are gaps in the record
evidence and Commerce must depend on other sources to complete the record. Fine Furniture
(Shanghai) Ltd. v. United States, 865 F. Supp. 2d 1254, 1260 (CIT 2012). “Absent a valid
decision to use facts otherwise available, Commerce may not use an adverse inference.”
Shandong Huarong Mach. Co., 30 CIT at 1289, 435 F. Supp. 2d at1301.
Commerce explained that the expenses at issue are an inherent part of the relationship
between affiliated parties. HYSCO had already revealed the fact that HYSCO and HHU were
affiliated, just not the particular transactions. The disclosure of these transaction, however, only
confirmed what Commerce already logically presumed. U.S. Steel has not pointed to any
authority suggesting that Commerce’s analysis is required to take account of these specific
affiliated transactions or that Commerce normally treats such transactions as significant in
determining an appropriate dumping margin. And as HYSCO explains, “because HHU obtained
borrowings from unaffiliated banks, [the rates reported by HHU] reflect the market rate
associated with HHU’s actual interest expense. Moreover, HYSCO’s involvement makes any
resulting interest rate all the more probative of the imputed credit and inventory costs associated
with HYSCO’s sales to the United States through HHU.” Hyundai HYSCO’s Resp. in Opp’n to
Consol. Pls. Maverick and U.S. Steel Corp.’s Rule 56.2 Mots. for J. on the Agency R. 29–30,
ECF No. 155. U.S. Steel has not shown that the interest expense ratio was miscalculated, nor has
it shown that the disclosure of the particular transactions at issue issomething that normally
would affect Commerce’s analysis. Because U.S. Steel has failed to show that there was a gap in
the record, the use of AFA is not appropriate.
Consol. Court No. 14-00215 Page84
Furthermore, even assuming that HYSCO should have disclosed the affiliated
transactions earlier, Commerce was justified in relyingupon the verified information in the
record rather than using AFA. This case is readily distinguishable from Tianjin Magnesium
International Co. v. United States, 844 F. Supp. 2d 1342 (CIT 2012), upon which U.S. Steel
heavily relies in support of its argument that AFA should have been used. In Tianjin, the
respondent attempted to submit false voucher books after their falsity previously had been
determined during a failed verification. Id.at 1347. The matter was remanded because
Commerce had never addressed this conduct, which appeared designed to mislead Commerce.
Seeid. at 1347–48. Here, Commerce verified the correction made to HHU’s short-term interest
rate, and there was never any reason for Commerce to think HYSCO’s data werefalse. The
present case is not one where Commerce ignored the challenged action, and the analogy U.S.
Steel draws between the two cases is unfounded. HYSCO could have been more explicit in
disclosing the affiliated transactions associated with HHU’s short-term interest rate, but
regardless of this “transgression,” it was reasonable and permissible for Commerce to decline to
apply AFA, especially when the adverse facts suggested by U.S. Steel were known by
Commerce to be inaccurate.

Outcome: For the foregoing reasons, Commerce’s Final Determinationis remanded in part for
Commerce to reconsider its failure to select ILJIN as a mandatory respondent and for it to reconsider its calculation of CV profit. In all other respects, Commerce’s Final Determinationis sustained. Any change to NEXTEEL’s or HYSCO’s dumping margins shall be reflected in the all-others rate assigned to Husteel, AJUBesteel, SeAH, and ILJIN (ifILJIN is not individually Consol. Court No. 14-00215 Page 85
examined on remand). Commerce shall have until November 2, 2015, to file its remand results. The parties shall have until December 2, 2015, to file objections, and the government shall have until December 17, 2015, to file its response. Should Commerce determine on remand that individual examination of ILJIN is appropriate, however, the parties shall promptly notify the court and propose an appropriate timeframe for completion of the remand proceedings.

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