Mid Continent Steel & Wire, Inc. v. United States

• Decision Date: 26 January 2017
• Docket Number: Slip Op. 17–05,Consolidated Court No. 15–00214
• Parties: MID CONTINENT STEEL & WIRE, INC., Plaintiff, v. UNITED STATES, Defendant, v. Oman Fasteners, LLC, Defendant–Intervenor.
• Court: U.S. Court of International Trade

203 F.Supp.3d 1295

MID CONTINENT STEEL & WIRE, INC., Plaintiff,

v.UNITED STATES, Defendant,

v.Oman Fasteners, LLC, Defendant–Intervenor.

Slip Op. 17–05

Consolidated Court No. 15–00214

United States Court of International Trade.

Dated: January 26, 2017

Adam Henry Gordon and Ping Gong, The Bristol Group PLLC, of Washington, DC, argued for plaintiff.

Mikki Cottet, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, D.C., argued for defendant. With her on the brief were Benjamin C. Mizer, Principle Deputy Assistant Attorney General, Jeanne E. Davidson, Director, and Patricia M. McCarthy, Assistant Director. Of Counsel on the brief was Lydia C. Pardini, Office of Chief Counselor for Trade Enforcement and Compliance, U.S. Department of Commerce, of Washington D.C.

Michael P. House and David J. Townsend, Perkins Coie LLP, of Washington, D.C., argued for defendant-intervenor. With them on the brief was David S. Christy, Jr.

OPINION AND ORDER

Richard W. Goldberg, Senior Judge

Goldberg, Senior Judge: Plaintiff, Mid Continent Steel & Wire, Inc. ("Mid Continent"), and Defendant–Intervenor, Oman Fasteners, LLC ("Oman Fasteners"), separately moved for judgment on the agency record under USCIT Rule 56.2. The court remands for the Department of Commerce ("Commerce") to either change its selection of profit data or provide a more thorough explanation of its reliance on third-country profit data. Unless the issue is rendered moot on remand, the court orders Commerce to provide a more thorough explanation for any determinations concerning the calculation of a profit cap. The court sustains the remainder of the contested determinations of Commerce.

BACKGROUND

In June of 2014, Commerce initiated an antidumping duty investigation on steel nails from the Sultanate of Oman ("Oman"). Certain Steel Nails From India, the Republic of Korea, Malaysia, the Sultanate of Oman, Taiwan, the Republic of Turkey, and the Socialist Republic of Vietnam , 79 Fed. Reg. 36,019 (Dep't Commerce June 25, 2014) (initiation). Commerce selected Oman Fasteners as the mandatory respondent. Antidumping Duty Investigation of Certain Nails from the Sultanate of Oman Resp't Selection, P.R. 51 (July 29, 2014).

Under 19 U.S.C. § 1673, antidumping duties are "equal to the amount by which the normal value exceeds the export price (or the constructed export price) for the [subject] merchandise." Section 1677a defines "export price" and "constructed export price." The "export price" is the price the producer or exporter charges to an "unaffiliated purchaser" either within or for exportation to the United States.

Sometimes, however, the producer sells subject merchandise to an affiliated purchaser in the United States. The "constructed export price" is the price that the affiliated purchaser charges within the United States "to a purchaser not affiliated with the producer or exporter."

On December 29, 2014, Commerce issued its preliminary determination of sales at less than fair value. Certain Steel Nails from the Sultanate of Oman , 79 Fed. Reg. 78,034 (Dep't Commerce Dec. 29, 2014) (prelim. determ.) (" Preliminary Determination ") and accompanying memorandum ("Prelim. Mem."), P.R. 150 (Dec. 19, 2014). Mid Continent had urged Commerce to find that Oman Fasteners and its primary U.S. customer are affiliated. However, Commerce's Preliminary Determination included a finding that there was no such affiliation. Prelim. Mem. 8–9.

When calculating normal value, Commerce generally equates the home-market price of subject merchandise with the normal value of subject merchandise. 19 U.S.C. § 1677b(a)(1). But there are exceptions to this norm. Commerce uses a third-country price as the normal value if the aggregate quantity of home-market sales of subject merchandise is less than five percent of U.S. sales of subject merchandise. Id. § 1677b(a)(1)(C)(ii). However, Commerce cannot use this third-country price if aggregate sales in the third-country amount to less than five percent of aggregate sales to the U.S. Id. § 1677b(a)(1)(B)(ii)(II). If Commerce cannot use a third-country price, Commerce then resorts to calculating the constructed value ("CV") of subject merchandise. Section 1677b(e) guides Commerce's calculation of CV. Id. § 1677b(a)(4).

In the course of the investigation, Commerce concluded that Oman Fasteners had an insufficient volume of both home-market and third-country market sales. Commerce Request for CV Profit Comments and Information, P.R. 93 (Oct. 17, 2014). As a result, Commerce asked any interested parties to submit information for use in calculating a constructed value selling expenses and profit ratio under § 1677b(e). Id. Oman Fastener's submitted information concerning various third parties, reflecting what Oman Fasteners believed to be an appropriate CV profit rate.

On May 20, 2015 Commerce issued its final determination. Certain Steel Nails from the Sultanate of Oman , 80 Fed. Reg. 28,972 (Dep't Commerce May 20, 2015) (final determ.) (" Final Determination ") and accompanying memorandum ("I & D Mem."). In its Final Determination , Commerce declined to use Oman Fastener's preferred CV profit rate data, opting instead to use the financial statements of a Thai company, Hitech. I & D Mem. 12. Commerce also affirmed its earlier finding that no affiliation exists between Oman Fasteners and its U.S. purchaser. Id. at 20.¹

Both Mid Continent and Oman Fasteners challenge the Final Determination . Mid Continent argues, as it did at the administrative level, that Commerce erred when it found no affiliation and, thus, declined to calculate a constructed export price for the steel nails. For reasons discussed below, the court disagrees and sustains Commerce's finding of no affiliation.

Oman Fasteners argues, as it did at the administrative level, that Commerce erred in relying on data from Hitech when determining the CV profit rate. Specifically, Oman Fasteners insists that Commerce erred when it (i) refused to use Oman Fastener's own home-market sales of steel nails to calculate the CV profit of the steel nails, (ii) relied on third-country profit data of comparable products instead of home-market profit data to calculate CV profit, (iii) rejected the partially translated financial statement of L.S. Industry Co Ltd. ("LSI"), a Thai producer of steel nails, and refused to allow Oman Fasteners to supplement the record with the fully translated LSI statement, and (iv) refused to calculate a profit cap on the CV profit rate. For reasons discussed below, the court sustains Commerce's decisions with the exception of its reliance on third-country profit data of comparable products instead of home-market profit data (point ii), which the court remands for either further explanation or reconsideration. The court also orders Commerce to more fully explain any profit cap determinations, unless that issue is rendered moot on remand.

DISCUSSION

I. The Court Sustains Commerce's Finding of No Affiliation Between Oman Fasteners and its Largest U.S. Customer.

To support its determination that Oman Fasteners was not affiliated with its largest U.S. customer,² Commerce explained that the customer did not control Oman Fasteners. Affiliation Mem. 4–6. Mid Continent contests this finding on two grounds. First, Mid Continent claims that Commerce applied the wrong legal standard for affiliation through control. Rule 56.2 Mot. for J. Upon the Agency R. of Pl. Mid Continent Steel & Wire, Inc. 19–20, ECF No. 26 ("Mid Cont. Br."). According to Mid Continent, the law requires only an "ability to control" and Commerce incorrectly required that the customer assert actual control over Oman Fasteners. Id. Second, Mid Continent contends that Commerce's finding of no affiliation lacked the support of substantial evidence. Id. at 14. For the reasons set forth below, Mid Continent's claims are without merit.

A. Background

In an antidumping investigation, Commerce must determine either an export price or a constructed export price for the subject merchandise. See 19 U.S.C. § 1677(35). Generally, the export price is the price of the subject merchandise when sold to an "unaffiliated purchaser in the United States." Id. § 1677a(a). When an exporter sells the merchandise to a U.S. purchaser with which it is affiliated, Commerce typically determines a constructed export price for the merchandise. Id. § 1677a(a), (b). Mid Continent argues that Oman Fasteners and the customer are affiliated, making it necessary to construct an export price.

Section 1677(33) defines "affiliated persons" as, in relevant part, "[a]ny person who controls any other person and such other person." § 1677(33)(G). Section 1677(33) explains that "a person shall be considered to control another person if the person is legally or operationally in a position to exercise restraint or direction over the other person." The Statement of Administrative Action accompanying the Uruguay Round Agreements Act ("SAA") provides that "[a] company may be in a position to exercise restraint or direction ... through corporate or family groupings, franchises or joint venture agreements, debt financing, or close supplier relationships in which the supplier or buyer becomes reliant upon the other." SAA, H.R. Doc. No. 103–316, vol. 1, at 838 (1994). Commerce incorporated this guidance from the SAA in its regulations, which direct the agency to consider "[c]orporate or family groupings; franchise or joint venture agreements; debt financing; and close supplier relationships" when assessing control. 19 C.F.R. § 351.102(b)(3). The regulation stipulates that the agency cannot "find that control exists on the basis of these factors unless the relationship has the potential to impact decisions concerning the production, pricing, or cost of the subject merchandise or foreign like product." Id. In addition, Commerce "will consider the temporal aspect of a relationship in determining whether control exists; normally, temporary...