Dong-A Steel Co. v. United States

• Decision Date: 29 September 2020
• Docket Number: Consol. Court No. 19-00104,Slip Op. 20-139
• Citation: 475 F.Supp.3d 1317
• Parties: DONG-A STEEL COMPANY, Plaintiff, and Kukje Steel Co., Ltd., Consolidated Plaintiff, v. UNITED STATES, Defendant, and Independence Tube Corporation, Southland Tube, Incorporated, Atlas Tube, and Searing Industries, Defendant-Intervenors.
• Court: U.S. Court of International Trade

475 F.Supp.3d 1317

DONG-A STEEL COMPANY, Plaintiff,andKukje Steel Co., Ltd., Consolidated Plaintiff,

v. UNITED STATES, Defendant,andIndependence Tube Corporation, Southland Tube, Incorporated, Atlas Tube, and Searing Industries, Defendant-Intervenors.

Slip Op. 20-139

Consol. Court No. 19-00104

United States Court of International Trade.

September 29, 2020

Jarrod M. Goldfeder, Trade Pacific, LLP, of Washington, DC, argued for plaintiff and consolidated plaintiff. With him on the brief was Robert G. Gosselink.

Robert R. Kiepura, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, argued for defendant. With him on the brief were Joseph H. Hunt, Assistant Attorney General, Jeanne E. Davidson, Director and Tara K. Hogan, Assistant Director. Of counsel was Vania Y. Wang, Attorney, Office of the Chief Counsel for Trade Enforcement & Compliance, U.S. Department of Commerce, of Washington, DC. With them on the supplemental brief was Ethan P. Davis, Acting Assistant Attorney General Robert E. DeFrancesco, III, Wiley Rein LLP, of Washington, DC, argued for defendant-intervenors, Independence Tube Corporation and Southland Tube, Incorporated. With him on the brief were Alan H. Price, and Jake R. Frischknecht ; and supplemental brief Elizabeth V. Baltzan.

Roger B. Schagrin, Wiley Rein LLP, of Washington, DC, for defendant-intervenors, Atlas Tube and Searing Industries.

OPINION

Katzmann, Judge:

Did the Trade Preferences Extension Act of 2015 ("TPEA") provide the United States Department of Commerce ("Commerce") statutory authority to make a contested adjustment to the cost of production in an antidumping ("AD") proceeding? Were the application of various adjustments and the denial of others unsupported by substantial evidence? These are among the issues presented by this case, involving a challenge to Commerce's determination that Korean producers of heavy walled rectangular welded carbon steel pipes and tubes¹ ("HWR") sold their product in the United States at below normal value in their home market, resulting in the imposition of AD duties. Under this determination, Commerce imposed AD duty rates of 20.79 and 12.81 percent on Korean HWR manufacturers Dong-A Steel Company ("DOSCO") and Kukje Steel Company ("Kukje") (collectively, "Plaintiffs"), respectively. Heavy Walled Rectangular Welded Carbon Steel Pipes and Tubes from the Republic of Korea: Final Results of Antidumping Duty Administrative Review and Final Determination of No Shipments 2016-2017, 84 Fed. Reg. 24,471 (Dep't Commerce May 28, 2019), P.R. 244 ("Final Results") and accompanying Mem. from G. Taverman to J. Kessler, re: Issues and Decision Mem. for the Final Results of the 2016-2017 Administrative Review of the Antidumping Duty Order on Heavy Walled Rectangular Welded Carbon Steel Pipes and Tubes from the Republic of Korea (Dep't Commerce May 20, 2019), P.R. 237 ("IDM").

Plaintiffs bring this action against the United States (the "Government") to challenge Commerce's dumping margin determinations and move for judgment on the agency record pursuant to Rule 56.2 of the U.S. Court of International Trade. DOSCO's Mem. in Supp. of the R. 56.2 Mot. of Pl., DOSCO, for J. on Agency R., ECF No. 37 ("Pl.’s Br."); Mem. in Support of the R. 56.2 Mot. of Consol. Pl., Kukje, for J. Upon the Agency Rec., ECF No. 38 ("Consol. Pl.’s Br."). Specifically, Plaintiffs argue that Commerce erred by (1) finding the existence of a particular market situation² ("PMS") in Korea for hot rolled steel coil ("HRC"), an input used to produce HWR; and (2) applying a cost-based PMS adjustment to Plaintiffs’ margin calculations -- under the auspices of TPEA -- outside the scope of a constructed value-to-price comparison. Pl.’s Br. at 1-2. See Consol. Pl.’s Br. at 3. Plaintiffs additionally argues that Commerce improperly: (1) used DOSCO's theoretical rather than actual product weights; (2) determined that DOSCO was not entitled to a constructed export price ("CEP") offset; and (3) adjusted DOSCO's reported raw costs to capture physical differences across product units. Pl.’s Br. at 2-4. See Consol. Pl.’s Br. at 3. The court grants, in part, Plaintiffs’ motion for judgment on the agency record and remands to Commerce its PMS determination and adjustment. The court sustains Commerce's determinations on the remaining issues.

BACKGROUND

I. Legal and Regulatory Framework

Dumping occurs when a foreign company sells goods into the United States at a lower price than the company charges for the same product in its home market. Sioux Honey Ass'n v. Hartford Fire Ins. Co., 672 F.3d 1041, 1047 (Fed. Cir. 2012). To address the economic distortions arising from such conduct, Congress enacted the Tariff Act of 1930,³ which empowers Commerce to investigate potential dumping activity and, if necessary, to issue orders imposing duties on subject merchandise. Id. When Commerce concludes that AD duties are appropriate, the agency is required to determine margins as accurately as possible. Rhone Poulenc, Inc. v. United States, 899 F.2d 1185, 1191 (Fed. Cir. 1990).

Pursuant to 19 U.S.C. § 1673, Commerce imposes AD duties on foreign goods if it determines that the goods are being, or are likely to be, sold at less than fair value, and if the United States International Trade Commission concludes that the sale of the merchandise below fair value "materially injures, threatens, or impedes the establishment of an industry in the United States." Diamond Sawblades Mfrs. Coal. v. United States, 866 F.3d 1304, 1306 (Fed. Cir. 2017). Merchandise is sold at less than fair value when the product's normal value is greater than the price charged for the product in the United States (represented by the product's export price or the product's CEP). Union Steel v. United States, 713 F.3d 1101, 1103 (Fed. Cir. 2013). The AD duty is calculated by determining the difference between the normal value and the export or CEP for the merchandise. 19 U.S.C. § 1673.

A. Standard Normal Value Calculation Methodology

Normal value is ordinarily computed by looking at the sales price of the subject merchandise in the exporting country. 19 U.S.C. § 1677b(a)(1)(B)(i). However, Congress authorized Commerce to disregard the exporting country's sales price and to instead base the calculation of normal value on third country sales if Commerce determines that a PMS exists in the exporter's home market. 19 U.S.C. § 1677b(a)(1)(C)(iii).⁴ Alternatively, should Commerce find that normal value cannot be reliably determined from the exporting country's sales price, Commerce may also use the product's constructed value⁵ ("CV"), calculated pursuant to 19 U.S.C. § 1677b(e), in lieu of normal value. 19 U.S.C. § 1677b(a)(4). This approach, however, is similarly subject to a prior determination that the constructed value calculation would not be adversely distorted by the existence of an underlying PMS. Id.

B. Particular Market Situation Determinations and Adjustments under the TPEA.

Broadly, a PMS exists when a market possesses a unique set of circumstances that "prevents a proper comparison" between a product's normal value and its export price or CEP. See 19 U.S.C. § 1677b(a)(1)(B)(ii)(III). However, previous versions of the Tariff Act fell short of providing an explicit definition for a PMS. See Tariff Act, Pub. L. 103-465, § 773 (1994) (amended 2015). In 2015, Congress passed the TPEA, which, among other objectives, amended existing AD and countervailing duty statutes. Trade Preferences Extension Act of 2015 § 504, 19 U.S.C. §§ 1677(15), 1677b(e). Section 504 of the TPEA in particular provided greater color to the meaning and scope of particular market situations and clarified the circumstances under which Commerce may apply adjustments on the basis of a PMS determination. Specifically, section 504(a) incorporated PMS determinations as a circumstance existing outside of a country's ordinary course of trade.⁶ See 19 U.S.C. § 1677(15)(C). Concurrently, section 504(c) of the TPEA amended the calculation of constructed value to allow for PMS-specific adjustments. See 19 U.S.C. § 1677b(e). Here, the TPEA stipulates that a PMS exists when "the costs of materials and fabrication or other processing of any kind does not accurately reflect the cost of production in the ordinary course of trade," impeding Commerce's ability to accurately estimate a product's CV. See 19 U.S.C. § 1677b(e)(3). Under such a determination, the TPEA authorizes Commerce to use "any other calculation methodology" to determine the cost of production in the exporting country for the purposes of calculating CV. Id.

C. CEP Offset Determination

Beyond correcting for the distortive effects of a PMS, part of Commerce's statutory mandate to conduct a "fair comparison" of normal value and export price also involves making:

[T]wo types of adjustments to normal value based on differences in the level of trade. The first type is a level of trade adjustment, 19 U.S.C. § 1677b(a)(7)(A), and the second type is a [CEP] offset, 19 U.S.C. § 1677b(a)(7)(B). Commerce will grant a [CEP] offset when "normal value is established at a level of trade which constitutes a more advanced stage of distribution than the level of trade of the [CEP], but the data available do not provide an appropriate basis to determine ... a level of trade adjustment." Id. When these two conditions are present, Commerce must lower the normal value "by the amount of indirect selling expenses incurred in the country in which normal value is determined on sales of the foreign like product but not more than the amount of such expenses for which a deduction is made." Id.

Dong-A Steel Co. v. United States, 42 CIT ––––, ––––, 337 F. Supp. 3d 1356, 1374 (2018). In sum, Commerce may grant a CEP offset when it determines that an exporter's home market is at a "more advanced stage" than its foreign markets, based in large part on the quantity and intensity of sales activities occurring at each...