Mid Continent Nail Corp. v. United States, 062614 USCIT, 12-00133

Docket Nº:12-00133
Opinion Judge:Gregory W. Carman, Judge
Party Name:MID CONTINENT NAIL CORPORATION, Plaintiff, v. UNITED STATES, Defendant, and DUBAI WIRE FZE and ITOCHU BUILDING PRODUCTS CO., INC., and PRECISION FASTENERS, LLC, Defendant-Intervenors. Slip Op. 14-72
Attorney:Andrew W. Kentz, David A. Yocis, Jordan C. Kahn, and Nathan W. Cunningham, Picard Kentz & Rowe LLP, of Washington, DC, for plaintiff Mid Continent Nail Corporation. With them on the brief were Adam H. Gordon, Robert E. DeFrancseco, III, and Laura El-Sabaawi of Wiley Rein LLP, of Washington, DC. C...
Judge Panel:Before: Gregory W. Carman, Judge
Case Date:June 26, 2014
Court:Court of Appeals of International Trade
 
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MID CONTINENT NAIL CORPORATION, Plaintiff,

v.

UNITED STATES, Defendant,

and

DUBAI WIRE FZE and ITOCHU BUILDING PRODUCTS CO., INC., and PRECISION FASTENERS, LLC, Defendant-Intervenors.

No. 12-00133

Slip Op. 14-72

Court of Appeals of International Trade

June 26, 2014

         Affirming in part and remanding in part the final results of Commerce's antidumping duty investigation of certain steel nails from the United Arab Emirates.

          Andrew W. Kentz, David A. Yocis, Jordan C. Kahn, and Nathan W. Cunningham, Picard Kentz & Rowe LLP, of Washington, DC, for plaintiff Mid Continent Nail Corporation. With them on the brief were Adam H. Gordon, Robert E. DeFrancseco, III, and Laura El-Sabaawi of Wiley Rein LLP, of Washington, DC.

          Carrie A. Dunsmore, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, for defendant United States. With her on the brief were Stuart F. Delery, Principal Deputy Assistant Attorney General, Jeanne E. Davidson, Director, Franklin E. White, Jr., Assistant Director. Of counsel on the brief was Melissa M. Brewer, Attorney, Office of the Chief Counsel for Import Administration, U.S. Department of Commerce, of Washington, DC.

          Bruce M. Mitchell, Mark E. Pardo, Ned H. Marshak, and Kavita Mohan, Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP, of New York, NY, for defendant-intervenors Dubai Wire FZE and Itochu Building Products Co., Inc.

          Michael P. House and Sabahat Chaudhary, Perkins Coie LLP, of Washington, DC, for defendant-intervenor Precision Fasteners, LLC.

          Before: Gregory W. Carman, Judge

          OPINION AND ORDER

          Gregory W. Carman, Judge

         Three cases are consolidated before the court, each challenging portions of Certain Steel Nails From the United Arab Emirates, 77 Fed. Reg. 17, 029 (Dep't of Commerce Mar. 23, 2012) (final determination) ("Final Results"), as amended, 77 Fed. Reg. 27, 421 (Dep't of Commerce May 10, 2012) (am. final determination and antidumping duty order), and the unpublished Issues and Decisions Memorandum incorporated by reference, see Issues and Decisions Mem. for the Less Than Fair Value Investigation of Certain Steel Nails from the United Arab Emirates, A-520-804 (Mar. 19, 2012), available at http://enforcement.trade.gov/frn/summary/uae/2012-7067-1.pdf (last visited June 10, 2014) ("I&D Memo"). In the Final Results, the U.S. Department of Commerce ("Commerce, " "Department, " or "Defendant") determined that nails from the United Arab Emirates ("UAE") were being sold in the United States at less than fair value and calculated antidumping margins. Parties to the Commerce proceeding, both domestic and foreign, now challenge the Final Results. The Court upholds the Final Results in most respects but remands to Commerce to apply the improperly-withdrawn targeted dumping regulation.

         Background

         Plaintiff in this consolidated action is domestic nail producer Mid Continent Nail Corporation ("MCN" or "Plaintiff"). Defendant-Intervenors Dubai Wire FZE and Itochu Building Products Co., Inc. (collectively "Dubai Wire") and Precision Fasteners, LLC ("Precision") are producers of subject merchandise from the UAE.1

         I. Relationship Between Millennium and Precision

         In determining whether Precision sold its product into the United States at less than fair value, Commerce calculated Precision's normal value ("NV"), representing the sales price of subject merchandise in Precision's home market, by means of constructed value ("CV"), i.e. the price at which Precision's nails would sell in its home market (the UAE) under ordinary market conditions. Use of CV is appropriate where, as here, the respondents do not have a viable comparison market in their home country. See 19 U.S.C. § 1677b(a)(4). An important consideration in determining CV is whether any other company exercises control over the company whose CV is being calculated. MCN alleged that the UAE company Millennium Steel and Wire LLC ("Millennium") controlled Precision through an affiliation relationship. See I&D Memo at 37. MCN submitted evidence into the record purportedly supporting the allegation of affiliation, and evidence was also gathered and placed on the administrative record by Commerce officials who visited Precision's UAE facility to conduct verification. See generally Analysis Mem. for Precision Fasteners, LLC, C.R. (Part 2) 2202 ("Precision Analysis Memo"). After examining the evidence, Commerce determined that Precision was an independent company, and not an affiliate under the control of Millennium. See generally id.; see also I&D Memo at 37.

         II. Targeted Dumping

         Pursuant to 19 U.S.C. § 1677f-1(d)(1)(A), Commerce generally "shall determine whether the subject merchandise is being sold in the United States at less than fair value" in one of two ways: by comparing "the weighted average of the normal values to the weighted average of the export prices (and constructed export prices) for comparable merchandise, " or by comparing "the normal values of individual transactions to the export prices (or constructed export prices) of individual transactions for comparable merchandise." It is common to refer to these two price comparison methods as "average-to-average" and "transaction-to-transaction, " respectively.

         The statute contains an exception to this general rule regarding price comparisons. Commerce "may" make its determination regarding sales at less than fair value "by comparing the weighted average of the normal values to the export prices (or constructed export prices) of individual transactions for comparable merchandise" if two conditions are satisfied:

(i) there is a pattern of export prices (or constructed export prices) for comparable merchandise that differ significantly among purchasers, regions, or periods of time, and

(ii) [Commerce] explains why such differences cannot be taken into account using [average-to-average or transaction-to-transaction price comparisons].

19 U.S.C. §1677f-1(d)(1)(B).

         Shortly after the Uruguay Round Agreements Act, Pub. L. No. 103-465, 108 Stat. 4809 (1994) established the price comparison methods and their priorities as described above, Commerce held hearings and accepted comments about how it should implement its statutory authority over targeted dumping.3 As a result, Commerce promulgated a regulation stating that "normally" Commerce would limit the application of the targeted dumping methodology to those sales found to be targeted. See 62 Fed. Reg. 27, 296-01 (Dep't of Commerce May 19, 1997) (final rule), codified at 19 C.F.R. § 351.414(f) (1997) (the "limiting regulation"). In 2008, Commerce published notice in the Federal Register which stated that Commerce was withdrawing the targeted dumping regulation and would no longer be bound by it. Withdrawal of the Regulatory Provisions Governing Targeted Dumping in Antidumping Duty Investigations, 73 Fed. Reg. 74, 930 (Dep't of Commerce Dec. 10, 2008) ("Withdrawal Notice"). Although Commerce indicated that it would accept post-publication comments regarding the withdrawal, the withdrawal was given immediate effect. Id.

         In its investigation of nails from the UAE, MCN alleged that the respondents had engaged in targeted dumping, so Commerce analyzed respondents' U.S. sales data to determine whether the allegation had merit. In the preliminary results of the investigation, Commerce determined that Precision and Dubai Wire had made sales that were targeted by customer, region, and time period. 76 Fed. Reg. 68, 129 (Dep't of Commerce Nov. 3, 2011) (preliminary determination of sales at less than fair value) ("Preliminary Results"); see also Targeted Dumping Memoranda, C.R. 105, 110. Commerce found, however, that the ordinary average-to-average methodology sufficed to account for the resulting price differences, so it did not apply the average-to-transaction price comparison method. Targeted Dumping Memoranda, C.R. 105, 110 In its final determination, Commerce again found that the U.S. sales of Precision and Dubai Wire were targeted by customer, region, and time period. I&D Memo at cmt. 1. In the Final Results, Commerce changed its approach from the preliminary results, deciding that the average-to-average method was insufficient to account for the price differences stemming from the targeted sales. 77 Fed. Reg. at 17, 031. See also I&D Memo at cmt. 4. As a result, Commerce applied the average-to-transaction method. Id. In doing so, Commerce applied the average-to-transaction method to all of the U.S. sales of Precision and Dubai Wire pursuant to the Withdrawal Notice, rather than limiting the average-to-transaction method to targeted sales as required by the limiting regulation. Id.

         III. Surrogate Profit Values

         One of the factors Commerce may examine while determining CV, pursuant to 19 U.S.C. § 1677b(e)(2)(B)(iii), is the profit margin expected for production of the subject merchandise under ordinary market conditions. I&D Memo at cmt. 6. Commerce sought evidence showing surrogate profit values, and the parties to the administrative proceeding placed a number of financial statements into the record. In the Preliminary Results, Commerce relied on a surrogate financial statement from the company Arab Heavy Industries ("AHI") for profit data. 76 Fed. Reg. at 68, 134. When Commerce issued the Final Results, however, Commerce instead relied on the financial statement of the Abu Dhabi National Company for Building Materials ("BILDCO") for surrogate profit data. I&D Memo at 29. Commerce found that BILDCO's financial statement most closely satisfied the surrogate value selection criteria on which the agency relies...

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