Stupp Corp. v. United States

CourtUnited States Courts of Appeals. United States Court of Appeals for the Federal Circuit
Citation5 F.4th 1341
Docket Number2020-1857
Parties STUPP CORPORATION, a Division of Stupp Bros., Inc., Welspun Tubular LLC USA, Ipsco Tubulars, Inc., Maverick Tube Corporation, Plaintiffs v. UNITED STATES, Defendant-Appellee Hyundai Steel Company, Defendant SeAH Steel Corp., Defendant-Appellant
Decision Date15 July 2021

Robert R. Kiepura, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for defendant-appellee. Also represented by Claudia Burke, Jeffrey B. Clark, Jeanne Davidson; Reza Karamloo, Office of the Chief Counsel for Trade Enforcement & Compliance, United States Department of Commerce, Washington, DC.

Jeffrey M. Winton, Winton & Chapman PLLC, Washington, DC, argued for defendant-appellant.

Before Taranto, Bryson, and Chen, Circuit Judges.

Bryson, Circuit Judge.

Appellant SeAH Steel Corporation appeals from a decision of the Court of International Trade ("the Trade Court") affirming a final determination of the United States Department of Commerce in an antidumping duty investigation. In that investigation, Commerce assessed SeAH a weighted average dumping margin above the de minimis threshold, which subjected SeAH to antidumping duties. SeAH challenges Commerce's rejection of portions of SeAH's case brief and various aspects of the analysis Commerce used to derive the dumping margin. We affirm with respect to the case brief issue and with respect to most of SeAH's challenges to Commerce's analysis. We vacate and remand, however, on the issue of whether it was reasonable for Commerce to apply a portion of its analysis—specifically, the "Cohen's d test"—to sales data that may have been of insufficient size, not normally distributed, and lacking roughly equal variances.

I

In late 2014, Commerce initiated a less-than-fair-value investigation into the importation of welded line pipe from the Republic of Korea. See Welded Line Pipe from the Republic of Korea : Preliminary Determination , 80 Fed. Reg. 29,620 (Dep't of Commerce May 22, 2015). The investigation covered the period from October 1, 2013, through September 30, 2014, and focused on sales by two Korea-based respondents, SeAH and Hyundai HYSCO.

Commerce issued a preliminary determination on May 14, 2015, that SeAH was, or likely was, selling welded line pipe in the United States at less than fair value during the relevant period. SeAH filed a case brief challenging Commerce's statistical analysis and citing academic literature in support of that challenge. Commerce rejected SeAH's case brief because Commerce found that it violated procedural regulations governing the filing of new factual information. J.A. 9698–99.

Commerce issued a final determination on October 13, 2015. Welded Line Pipe from the Republic of Korea : Final Determination , 80 Fed. Reg. 61,366, and accompanying Issues and Decision Memorandum (Dep't of Commerce Oct. 5, 2015) ("Final Memo "), available at https://enforcement.trade.gov/frn/summary/korea-south/2015-25980-1.pdf. In that final determination, Commerce found that SeAH had dumped welded line pipe in the United States, calculating SeAH's weighted average dumping margin to be above the de minimis threshold for less-than-fair-value investigations. Final Determination , 80 Fed. Reg. at 61,367.

When calculating a weighted average dumping margin, Commerce typically uses the average-to-average comparison method. 19 C.F.R. § 351.414(c)(1) ; see also 19 U.S.C. § 1677f-1(d)(1). That method compares the weighted average of the respondent's sales prices in its home country during the investigation period to the weighted average of the respondent's sales prices in the United States during the same period. 19 C.F.R. § 351.414(b)(1). The average-to-average method, however, sometimes fails to detect "targeted" or "masked" dumping, because a respondent's "sales of low-priced ‘dumped’ merchandise would be averaged with (and offset by) sales of higher-priced ‘masking’ merchandise, giving the impression that no dumping was taking place." Apex Frozen Foods Priv. Ltd. v. United States , 862 F.3d 1337, 1341 (Fed. Cir. 2017) (" Apex II ").

To address the problem of targeted dumping, Congress created an exception to the use of the average-to-average method. Congress provided that when "(i) there is a pattern of export prices1 (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 [the average-to-average method]," Commerce may compare the weighted average of the respondent's sales prices in the home country to the respondent's individual sales prices in the United States. 19 U.S.C. § 1677f-1(d)(1)(B). The rationale behind that statutory exception is that targeted dumping is more likely to be occurring when export prices fit a pricing model that differs significantly among different periods of time, different purchasers, or different regions of the United States. Apex II , 862 F.3d at 1347. Commerce refers to the alternative method of calculating a weighted average dumping margin as the "average-to-transaction" method. See 19 C.F.R. § 351.414(b)(3).

Congress has not delineated exactly how Commerce is to assess whether there is a " ‘pattern of export prices ... differ[ing] significantly among purchasers, regions, or periods of time,’ " or how Commerce is to " ‘explain[ ] why such differences cannot be taken into account’ using the average-to-average or transaction-to-transaction methods." Dillinger France S.A. v. United States , 981 F.3d 1318, 1324–25 n.5 (Fed. Cir. 2020) (quoting section 1677f-1(d)(1)(B) ); see also Apex II , 862 F.3d at 1346. Commerce has therefore devised a means for implementing Congress's directive. Until 2014, Commerce applied the "Nails test" to detect targeted dumping. See JBF RAK LLC v. United States , 790 F.3d 1358, 1367 n.5 (Fed. Cir. 2015). From 2013 to 2014, Commerce refined its methodology and began applying what it now calls "differential pricing analysis." See Differential Pricing Analysis ; Request for Comments , 79 Fed. Reg. 26,720, 26,722 (Dep't of Commerce May 9, 2014) ; Xanthan Gum from the People's Republic of China , 78 Fed. Reg. 33,351 (Dep't of Commerce June 4, 2013).

We have summarized the methodology behind Commerce's differential pricing analysis in prior decisions. See, e.g. , Apex II , 862 F.3d at 1343 n.2. Because the issues in this case concern specific aspects of that methodology, we provide a more thorough description below.

Before Commerce can conduct its differential pricing analysis, it must first collect data regarding the respondent's export sales and home sales. See Final Memo at 1. If those sales span multiple distinct products, Commerce segments the sales into sets based on comparable product groups. See Differential Pricing Analysis , 79 Fed. Reg. at 26,722.

To begin the differential pricing analysis, Commerce further segments the respondent's export sales for each product group into subsets based on the region of the United States in which those sales took place. Id. Commerce similarly constructs subsets based on the purchasers involved in the sales (i.e., the purchaser category) and also based on the time periods in which the sales took place (i.e., the time-period category). Id. A particular export sale will be present in multiple subsets across the regional, purchaser, and time-period categories. See id.

For each subset within a category, Commerce makes that subset the "test group" and aggregates the remaining subsets in that category into the "comparison group." Id. If both groups have at least two observations (i.e., sales prices), and if the sum of the comparison group is at least five percent of the total amount of export sales, Commerce applies the "Cohen's d test," named after statistician Jacob Cohen, to evaluate whether the test group differs significantly from the comparison group. Id. The formula for calculating the Cohen's d value is as follows:

                                |Mc — Mt|
                              __________
                                  sp
                

see Large Residential Washers from the Republic of Korea , 2016 WL 5854390 (Dep't of Commerce Sept. 6, 2016) (noting that Commerce applies the "two-tailed" version of the Cohen's d test, which uses the absolute-value operator to "focus[ ] on both lower and higher prices"). In the formula used by Commerce, Mc is the mean of the comparison group, Mt is the mean of the test group, and sp is the simple average of the two groups’ standard deviations. See Mid Continent Steel & Wire, Inc. v. United States , 495 F. Supp. 3d 1298, 1304 (C.I.T. 2021) (appeal docketed).

If the Cohen's d value is equal to or greater than 0.8 for any test group, the observations within that group are said to have "passed" the Cohen's d test, i.e., Commerce deems the sales prices in the test group to be significantly different from the sales prices in the comparison group. Id. at 1302–04. Commerce applies the Cohen's d test to each test group within the regional, purchaser, and time-period categories. See Differential Pricing Analysis , 79 Fed. Reg. at 26,722 –23.

Commerce counts the number of observations within each product group that were tagged as "passing," and applies what it calls a "ratio test" to the results: If the total percentage of passing transactions is 33% or less, Commerce uses the default average-to-average method to calculate the weighted average dumping margin. If the total percentage is 66% or more, Commerce tentatively selects the alternative average-to-transaction method as the method it will use to calculate the weighted average dumping margin. If the total percentage is between 33% and 66%, Commerce tentatively selects a hybrid approach in which it applies the alternative average-to-transaction method to those transactions passing the Cohen's d test and the average-to-average method to the remainder of the transactions. Id.

If Commerce tentatively...

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