Husteel Co. v. United States

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.

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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

Consol. Court No. 14-00215 Page20

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–

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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.”).

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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.

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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

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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,

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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

Consol. Court No. 14-00215 Page54

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

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(“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”).

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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.

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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

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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

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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.

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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;

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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.

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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.

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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.

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.