USX Corp. v. US

• Decision Date: 15 March 1988
• Docket Number: Court No. 85-03-00325.
• Citation: 682 F. Supp. 60
• Parties: USX CORPORATION, f/k/a United States Steel Corporation, Plaintiff, v. The UNITED STATES and United States International Trade Commission, Defendants, and Propulsora Siderurgica, S.A.I.C., Defendant-Intervenor.
• Court: U.S. Court of International Trade

682 F. Supp. 60

USX CORPORATION, f/k/a United States Steel Corporation, Plaintiff, v. The UNITED STATES and United States International Trade Commission, Defendants and Propulsora Siderurgica, S.A.I.C., Defendant-Intervenor.

Court No. 85-03-00325.

United States Court of International Trade.

March 15, 1988.

COPYRIGHT MATERIAL OMITTED

USX Corp. (John J. Mangan, J. Michael Jarboe, Craig D. Mallick and Robin K. Capozzi), Pittsburgh, Pa., for plaintiff.

Lyn M. Schlitt, General Counsel, James A. Toupin, Asst. Gen. Counsel and Timothy M. Reif, U.S. Intern. Trade Com'n, Washington, D.C., for defendants.

Mudge, Rose, Guthrie, Alexander & Ferdon (David P. Houlihan, Jeffrey S. Neeley), Washington, D.C., for defendant-intervenor.

OPINION AND ORDER

RESTANI, Judge:

Plaintiff, USX Corporation, brings this action challenging the final determination of the United States International Trade Commission (ITC) that an industry in the United States was neither materially injured nor threatened with material injury by reason of imports of cold-rolled carbon steel plates and sheets from Argentina that were sold at less than fair value. Cold-rolled Carbon Steel Plates and Sheets from Argentina, USITC Pub. 1967, Inv. No. 731-TA-175 (March 1987) (Remand Determination). The March 1987 determination was the second determination in this investigation. The first negative determination, 50 Fed.Reg. 5136 (Feb. 6, 1985) was upheld by this court in February 1987 with respect to ITC's findings on like product, domestic industry and condition of the domestic industry. USX v. United States, 11 CIT ___, 655 F.Supp. 487 (1987).¹ Certain other aspects of that determination concerning the issues of causation, cumulation and threat of material injury were remanded to ITC by order dated February 9, 1987, for further investigation and analysis. Each of these issues will be discussed separately.

I. CAUSATION

In its previous opinion the court rejected ITC's majority causation analysis, stating that ITC's reasoning was not sufficient to support a negative determination. After determining that the domestic industry was materially injured, ITC concluded that less than fair value imports from Argentina were not the cause of material injury, basing its conclusion on two factors: First, ITC noted that although imports from Argentina rose consistently from 1981 to 1984 only "minimal market penetration" was achieved throughout the period of the investigation. Second, ITC found that while Argentine imports undersold domestic cold-rolled sheets by margins ranging from 5% to 14%, it could not confirm any actual instances of lost sales and revenue due to Argentine imports. Id. 655 F.Supp. at 489.

The court rejected ITC's analysis of market penetration because it "consisted solely of the statement that levels of market penetration remained low and stable ... without discussing the significance of this trend or its relationship to other facts uncovered in the investigation...." Id. at 490 (footnote omitted). The significance of a quantity of imports and not absolute volume alone was especially relevant in this case, noted the court, given the fact that ITC had previously recognized that cold-rolled steel is inherently a price sensitive and fungible product and that "the impact of seemingly small import volumes and penetrations is magnified in the market-place." Id. (quoting Certain Carbon Steel Products from Spain, USITC Pub. 1331, at 16-17, Inv. Nos. 701-TA-155, -157 to -160, -162 (December 1982)).²

The court rejected the second part of ITC's causation analysis because ITC had relied exclusively upon instances of lost sales and revenue to show the effect of Argentine imports on the domestic industry after admitting that it had failed to investigate four of seven allegations of lost sales and all three reported instances of lost revenue. The court held that such an inadequate investigation, standing alone, could not support a negative determination, given proven consistent margins of underselling. Id. 655 F.Supp. at 491. ITC was ordered to undertake a more thorough investigation and consideration of these factors if they were to be the basis of the negative determination.

The court now has before it the results of the remand. "In order for the Commission's determination to be upheld in this case, the court must be able to discern from the determination that a majority of the Commission has based its conclusions upon legally sufficient reasoning." BMT Commodity Corp. v. United States, 11 CIT ___, 667 F.Supp. 880, 882, reh'g denied, 11 CIT ___, 674 F.Supp. 868 (1987), appeal docketed, No. 88-1188 (Fed.Cir. Jan. 22, 1988). The causation analyses separately set forth by at least two of the commissioners in the four person majority do not satisfy this standard of review. Therefore, the court has no alternative but to remand this action to ITC for analysis that is in accordance with law.³ The two analyses found deficient are addressed separately as follows.

A. The Five Factor Causation Analysis

Plaintiff challenges the approach to causation analysis offered by one commissioner which would require ITC to consider five factors when determining whether the factual setting of a particular case merits an affirmative finding. According to the commissioner, "The stronger the evidence of the following ... the more likely that an affirmative determination will be made: (1) large and increasing market share, (2) high dumping margins, (3) homogenous products, (4) declining prices and (5) barriers to entry to other foreign producers (low elasticity of supply of other imports)." Remand Determination at 14 (citing Certain Red Raspberries from Canada, USITC Pub. 1707, at 16, Inv. No. 731-TA-196 (June 1985)).⁴

Applying these factors in the present case, the existence of relatively high dumping margins was acknowledged along with substitutable imported and domestic product and downward pricing trends, all consistent with an affirmative finding, but it was concluded that "these factors are outweighed by the absence of barriers to entry, and the fact that cumulated import penetration is very low, which strongly suggests the absence of unfair price discrimination." Remand Determination at 19-20 (footnote omitted).

Plaintiff asserts that this approach to causation analysis "disregards the explicit statutory criteria provided by the Congress for the conduct of injury investigations," and transforms causation analysis into a methodology for determining the existence of a new unfair trade practice, namely, "unfair price discrimination." Response of USX Corporation to the Remand Determination of the International Trade Commission (Plaintiff's Brief) at 10 & 13. Alternatively, plaintiff argues that even if the court were to accept this approach to causation, "application of that analysis to the facts of this case overwhelmingly demonstrates the existence of injury by reason of imports." Id. at 14. In order to decide whether the opinion resting on this analysis is supported by substantial evidence and is otherwise in accordance with law, it is appropriate to examine the nature and relevance of the two determinative factors in greater detail, that is, low import volume and no barriers to entry.

In the previous opinion, the court recognized that import volume alone cannot be used to gauge accurately the effect of imports in the cold-rolled steel industry. The court directed ITC on remand to explain the significance of import volume or its relationship to other facts uncovered in the investigation. USX, 655 F.Supp. at 490-91. The limited discussion of market penetration presented here offers no such explanation. Instead, it is stated that, "cumulated imports accounted for less than 1 percent of apparent U.S. consumption during 1981, then increased to 1.4 percent in 1982 and 2.0 in 1983 while import penetration was 3.4 percent in January-September 1984 compared to 1.9 percent in the corresponding period of 1983." Remand Determination at 15. It is then concluded that, "the cumulated import penetration of Argentina and Korea is very small and not consistent with a finding of unfair price discrimination." Id. This conclusory statement does not support a negative determination. It leaves unanswered the question of how the volume of imports relates to injury, particularly in the sense of the third statutory factor, impact on the domestic industry.⁵ The court, therefore, is left to examine the fifth factor in the five factor causation analysis — barriers to entry — to determine whether it provides the missing link.

An attempt is made in the determination to justify use of the five factor test and reliance on barriers to entry, in particular, as the determinative factor, by equating unlawful dumping with a particular form of "unfair price discrimination." In Red Raspberries, cited in this determination in support of the five factor analysis, it is more specifically explained that the antidumping statute is intended to protect U.S. industry only from unfair price discrimination in the form of predatory pricing, as that term is defined in the determination. Red Raspberries, USITC Pub. 1707, at 13-14 (citing the legislative history of the Trade Act of 1974 (1974 Act), S.Rep. No. 1298, 93rd Cong. 2nd Sess. 179, reprinted in 1974 U.S. Code Cong. & Admin.News 7186, 7316). The Red Raspberries determination goes on to state that:

Price discrimination can take several forms. The fact that Congress referred to unfair price discrimination suggests to believe that Congress meant some type of predatory pricing. Predatory pricing is a form of strategic behavior in which a firm lowers the price of its product below the marginal cost of production. Such behavior is only rational if the firm expects to be able to raise its prices in the future to a level at which it can more than recoup the losses it suffers in the present. Thus, predatory pricing can only be practiced by firms that have or expect to

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