AK Steel Corp. v. United States

• Decision Date: 15 November 2012
• Citation: 885 F.Supp.2d 1321
• Parties: AK STEEL CORP., Allegheny Ludlum Corp., and North American Stainless, Plaintiffs, v. UNITED STATES, Defendant, ThyssenKrupp Mexinox S.A. de C.V., and Mexinox USA, Inc., Defendant–Intervenors.
• Court: U.S. Court of International Trade

885 F.Supp.2d 1321

AK STEEL CORP., Allegheny Ludlum Corp., and North American Stainless, Plaintiffs,

v. UNITED STATES, Defendant,ThyssenKrupp Mexinox S.A. de C.V., and Mexinox USA, Inc., Defendant–Intervenors.

United States Court of

International Trade.

Slip Op. 12–139.

Court No. 11–00366.

Nov. 15, 2012.

Kelley Drye & Warren LLP, Washington, DC, (David A. Hartquist, Kathleen W. Cannon, and R. Alan Luberda) for AK Steel Corp., Allegheny Ludlum Corp., and North American Stainless, Plaintiffs.

James M. Lyons, General Counsel; Neal J. Reynolds, Assistant General Counsel; Karl Von Schriltz, Office of the General Counsel, U.S. International Trade Commission, for Defendant, United States.

Hogan Lovells U.S. LLP, (Lewis E. Leibowitz, Craig A. Lewis, Brian S. Janovitz, and Wesley V. Carrington) for ThyssenKrupp Mexinox S.A. de C.V. and Mexinox USA, Inc., Defendant–Intervenors.

OPINION and ORDER

TSOUCALAS, Senior Judge:

Plaintiffs AK Steel Corp., Allegheny Ludlum Corp., and North American Stainless (collectively “domestic industry” or “plaintiffs”) move pursuant to USCIT Rule 56.2 for judgment upon the agency record challenging the determination of the United States International Trade Commission (“Commission”) in Stainless Steel Sheet and Strip from Germany, Italy, Japan, Korea, Mexico and Taiwan, USITC Pub. 4244, Inv. Nos. 701–TA–382 and 731–TA–798–803, 76 Fed. Reg. 46,323 (2011) (second sunset review) (“ Views ”). The Commission and defendant-intervenors ThyssenKrupp Mexinox S.A. de C.V. (“Mexinox”) and Mexinox USA, Inc. oppose the motion.

BACKGROUND

In 1999, the Commission determined that certain imports of stainless steel sheet and strip (“SSSS”) from France, Germany, Italy, Japan, Korea, Mexico, Taiwan, and the United Kingdom had materially injured an industry in the U.S., Certain SSSS from France, Germany, Italy, Japan, Korea, Mexico, and the United Kingdom, USITC Pub. 3208, Inv. Nos. 701–TA–380–382 and 731–TA–797–804 (1999), resulting in the imposition of antidumping and countervailing duty orders on August 6, 1999. Views, at 3–4. In 2005, the Commission completed its first five-year review of those orders. Id. at 4. Based on the Commission's findings, the Department of Commerce revoked the orders as to France and the United Kingdom. Id. at 4–5. As a result of changed circumstances, Commerce also revoked the orders as to Italy in 2006. Id. The Commission initiated its second five-year review of the remaining orders on September 1, 2010, id. at 5, the results of which domestic industry appeals to this court. See Pls.' Mem. Supp. Mot. J. Agency R. (“Pls.' Br.”) at 1–4.

Mexinox is one of several affiliated steel producers subject to the antidumping and countervailing duty orders in question. Respondents below also included German producers ThyssenKrupp Nirosta GmbH and ThyssenKrupp VDM GmbH, Italian producer ThyssenKrupp Acciai Speciali Terni S.p.A., domestic producer ThyssenKrupp Stainless USA LLC (“SL–USA”), and several affiliated importers. Views, at 5. The multinational ThyssenKrupp group (collectively, including other unlisted corporate affiliates, “TK”) is responsible for [[Confidential Data Deleted]] of SSSS production in Germany and Italy, and [[Confidential Data Deleted]] of SSSS production in Mexico. Id. at 6.

Since the last review, TK has contracted $1.2 billion and spent $950 million on a new production facility in Greenfield, Alabama. Id. at 26–27 & n. 127. TK plans to spend $1.4 billion on the new Alabama facility in total, id., with the goal of adding two additional cold rolling mills, a hot-annealing and pickling line, a hot-rolling mill, and a melt shop to increase production capacity substantially over the next several years. Id. at 48–49. The Commission found that the facility's SSSS production capacity “[[Confidential Data Deleted]]” and that its projected production is “[[Confidential Data Deleted]].” Id. at 49. SL–USA has control over the Alabama facility. Id. at 27.

In its responses to the Commission's questionnaires, TK explained that it made its investment in SL–USA pursuant to its new “local supply strategy.” Response of SL–USA to U.S. Producers' Questionnaire (Mar. 9, 2011) Conf. Rec. 85 App'x at 10, 14–18.¹ Under the local supply strategy, TK plans to serve the North American market with SSSS produced by Mexinox and SL–USA “almost exclusively[,] ... while [TK's] German and Italian operations focus on serving the European market.” Views, at 26–27; see CR 96 at 7–8. TK plans to limit imports from Germany and Italy to “small quantities of niche products not produced by SL–USA or Mexinox, such as certain embossed or pattern surfaced SSSS.” Views, at 49. As SL–USA increases its 300–series SSSS production, Mexinox will shift its focus onto production of 400–series SSSS. Id. at 56; CR 96 at 7–8. In addition to contracting $1.2 billion in developing SL–USA's capacity, TK reconfigured its corporate hierarchy and consolidated its steel marketing divisions under the vice president for sales at SL–USA in furtherance of this strategy. Views, at 48; see Intervenor–Def.'s Mem. Opp'n Pls.' Br. at 15–16 (detailing uncontroverted administrative changes). Lastly, TK vested SL–USA's vice president for sales with the authority to “veto” any imports from TK's international production facilities with instructions “to wield such authority to safeguard [TK's] substantial investment in SL–USA.” Views, at 50; see PR 102 at 161 (“SL–USA will not permit any action” by an affiliated foreign producer “that could potentially harm the economic viability of its operations and jeopardize the billions that we have invested in the Alabama mill.”).

TK also explained that it adopted its local supply strategy in response to a series of changes in the domestic and international SSSS market arising since the last review. PR 102 at 143–44. Customers in the U.S. began to demand shorter “lead times” for SSSS products, now expecting delivery in as little as four to six weeks where they had previously tolerated six to eight weeks. Views at 44–45. Domestic producers were able to meet this expectation by increasing inventories, id. at 45, but TK found it “impossible” to do the same with its German and Italian production. Id. at 44, 50. Furthermore, logistical costs for ocean transport and raw materials increased over the period of review, rendering importation from Europe generally less feasible. Id. at 50. Lastly, the relative weakness of the U.S. dollar over the period of review resulted in higher costs for all of TK's foreign goods sold in the U.S. Id.

The Commission recognized two additional changes in the SSSS market during the last period of review. First, domestic industry reorganized substantially and expanded its production capacity, leading the Commission to find that it stood at a much stronger competitive posture than in previous reviews. Id. at 38–41, 58–62. Second, although U.S. demand for SSSS dipped at the end of the review period due to a recession, world demand for SSSS was at its highest level of the period of review in 2010. Id. at 42–43. U.S. and world demand for SSSS is expected to increase significantly over the next several years, Mexico and Latin America included. Id.; CR 96 at 8.

After the period of review, TK announced its intention to sell its entire SSSS production unit. In a statement to the Commission regarding the planned sale, Clemens Iller, Chairman of TK's SSSS Marketing Board, wrote that the sale represents “a chance for [the] stainless [unit] to further develop its strength as a manufacturer of high-quality stainless steel and high performance alloys on an independent basis.” PR 108 Ex. 3 at 2. TK offered evidence indicating that it would assemble a set of possible separation plans by January, 2012, including “an IPO[,] Spin–Off[,] ... [and] possible strategic partnerships.” Id. 2–3; see PR 102 at 206–07. Nevertheless, Chairman Iller affirmed that “there are no intentions to break the current stainless activities apart,” as TK intended to sell “the stainless activities in total.” PR 108 Ex. 3 at 3; see PR 102 at 206–07.

The Commission made three determinations relevant to the present appeal. First, based on the implications of TK's common ownership and the local supply strategy, the Commission cumulated subjectimports from Mexico, Germany and Italy together on the one hand, and cumulated those from Japan, Korea, and Taiwan on the other. Views, at 14, 26–32. Second, relying on TK's historical practices, the likely effect of the local supply strategy, and current SSSS market conditions, the Commission found that the cumulated volume of imports from Mexico, Germany, and Italy were not likely to increase substantially in the event of revocation. Id. at 46–54. Lastly, the Commission relied on TK's historical sales and the local supply strategy to conclude that the cumulated effect of Mexican, German, and Italian imports on prices would not be substantially depressive or suppressive in the event of revocation. Id. at 54–64.

JURISDICTION

The court has jurisdiction over this matter pursuant to 28 U.S.C. § 1581(c) and section 516A(a)(2)(B)(iii) of the Tariff Act of 1930, as amended, 19 U.S.C. § 1516a(a)(2)(B)(iii) (2006).²

STANDARD OF REVIEW

Under 19 U.S.C. § 1516a, “[t]he court shall hold unlawful any determination, finding or conclusion found ... to be unsupported by substantial evidence, or otherwise not in accord with the law.” 19 U.S.C. § 1516a(b)(1)(B)(i). “Substantial evidence is ‘such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.’ ” Huaiyin Foreign Trade Corp. (30) v. United States, 322 F.3d 1369, 1374 (Fed.Cir.2003) (quoting Consol. Edison Co. v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, 83 L.Ed. 126 (1938)). Substantial evidence “can be translated roughly to mean[:] [I]s [the determination] unreasonable?” Globe Metallurgical Inc. v. United States, 32 CIT 274, 275, 547 F.Supp.2d 1371, 1374 (2008) (quoting Nippon Steel Corp. v. United States, ...