United States Steel Corp. v. United States

• Decision Date: 19 March 2010
• Docket Number: Court No. 07-00133.,Slip Op. 10-28.
• Citation: 712 F.Supp.2d 1330
• Parties: UNITED STATES STEEL CORPORATION, Plaintiff,v.UNITED STATES, Defendant,andPohang Iron & Steel Company, Ltd. and Pohang Coated Steel Company, Ltd., Defendant-Intervenors.
• Court: U.S. Court of International Trade

712 F.Supp.2d 1330

International Trade.

UNITED STATES STEEL CORPORATION, Plaintiff,v. UNITED STATES, Defendant,andPohang Iron & Steel Company, Ltd. and Pohang Coated Steel Company, Ltd., Defendant-Intervenors.

Slip Op. 10-28. Court No. 07-00133.

United States Court of

March 19, 2010.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Skadden, Arps, Slate, Meagher & Flom LLP (Robert E. Lighthizer, John J. Mangan, Jeffrey D. Gerrish, and Jared R. Wessel), Washington, DC, for Plaintiff United States Steel Corporation.

Tony West, Assistant Attorney General; Jeanne E. Davidson, Director, and Patricia M. McCarthy, Assistant Director, Commercial Litigation Branch, Civil Division, U.S. Department of Justice (David F. D'Alessandris); Jonathan M. Zielinski, Office of the Chief Counsel for Import Administration, U.S. Department of Commerce, Of Counsel; for Defendant.

Akin Gump Strauss Hauer & Feld LLP (Spencer S. Griffith, J. David Park, Jarrod M. Goldfeder, and Lisa W. Ross), Washington, DC, for Defendant-Intervenors Pohang Iron & Steel Company, Ltd. and Pohang Coated Steel Company, Ltd.

OPINION

RIDGWAY, Judge.

In this action, Plaintiff United States Steel Corporation (“U.S.Steel”)-a domestic steel producer-contests the Final Results of the U.S. Department of Commerce's twelfth administrative review of the antidumping duty order covering corrosion-resistant carbon steel from the Republic of Korea (“Korea”). See Notice of Final Results of the Twelfth Administrative Review of the Antidumping Duty Order on Certain Corrosion-Resistant Carbon Steel Flat Products from the Republic of Korea, 72 Fed.Reg. 13,086 (March 20, 2007) (“Final Results”) ¹; Issues and Decisions for the Final Results of the Twelfth Administrative Review of the Antidumping Duty Order on Certain Corrosion-Resistant Carbon Steel Flat Products from the Republic of Korea (2004-2005) (March 12, 2007) (Pub.Doc. No. 232) (“Decision Memorandum”). ²

Pending before the Court is Plaintiff's Motion for Judgment on the Agency Record, in which U.S. Steel challenges the methodology for calculating the U.S. indirect selling expenses (“indirect selling expenses” or “ISEs”) that Commerce used in the Final Results for Pohang Iron & Steel Company, Ltd. and Pohang Coated Steel Company, Ltd. (collectively, “POSCO”), foreign manufacturers/exporters of the subject merchandise. See generally Memorandum in Support of Plaintiff's Motion for Judgment on the Agency Record under Rule 56.2 (“Pl.'s Brief”); Reply Brief in Support of Motion for Judgment on the Agency Record Filed by Plaintiff United States Steel Corporation (“Pl.'s Reply Brief”). Specifically, U.S. Steel contends that Commerce erred by calculating indirect selling expenses using the “payroll methodology” (an alternative methodology proposed by POSCO), rather than using Commerce's default methodology, known as the “relative sales value methodology.” See Pl.'s Brief at 1, 7-8, 19; Pl.'s Reply Brief at 1-3, 15.³

U.S. Steel's motion is opposed by the Government, which maintains that Commerce's allocation of indirect selling expenses in the Final Results was both based on substantial evidence and otherwise in accordance with law. The Government therefore urges that U.S. Steel's motion be denied, and that Commerce's Final Results be sustained in all respects. See generally Defendant's Memorandum in Opposition to Plaintiff's Rule 56.2 Motion for Judgment Upon the Agency Record and Appendix (“Def.'s Brief”).

The Defendant-Intervenors-collectively, POSCO-also oppose U.S. Steel's motion. Like the Government, POSCO asserts that Commerce's treatment of its indirect selling expenses was based on substantial evidence and otherwise in accordance with law, and that the agency's Final Results should be sustained in all respects. See generally Memorandum of Defendant-Intervenors, POSCO and POCOS, in Opposition to Plaintiff's Rule 56.2 Motion for Judgment Upon the Agency Record (“POSCO Brief”).

Jurisdiction lies under 28 U.S.C. § 1581(c) (2000).⁴ For the reasons detailed below, U.S. Steel's Motion for Judgment on the Agency Record must be denied.

I. Background

U.S. antidumping laws require that antidumping duties be imposed upon imported merchandise that “is being, or is likely to be, sold in the United States at less than fair value ...,” and results in material injury or the threat of material injury to a domestic industry. See 19 U.S.C. § 1673. The antidumping duty is equal to the “amount by which the normal value exceeds the export price [“EP”] (or constructed export price [“CEP”] ) for the merchandise.” Id. Normal value is defined as “the price at which the foreign like product is first sold ... in the exporting country....” See 19 U.S.C. § 1677b(a)(1)(B)(i). When normal value exceeds the price at which the merchandise is first sold to an unaffiliated purchaser in the United States, a sale is considered “dumped.”

This case involves Commerce's calculation of the constructed export price (“CEP”), which is the first sale by a seller affiliated with the producer to an unaffiliated purchaser in the United States. See 19 U.S.C. § 1677a(b). The statute requires Commerce to adjust the reported constructed export price, in order to properly assess the amount by which normal value exceeds that price. See 19 U.S.C. §§ 1673, 1677a(c), 1677a(d)(1). Adjustments are necessary because the reported prices “represent prices in different markets affected by a variety of differences in the chain of commerce ...,” and must be adjusted to “reconstruct the price at a specific, ‘common’ point in the chain of commerce, so that value can be fairly compared on an equivalent basis.” See SKF USA Inc. v. INA Walzlager Schaeffler KG, 180 F.3d 1370, 1373 (Fed.Cir.1999) ( citing Smith-Corona Group v. United States, 713 F.2d 1568, 1572-73 (Fed.Cir.1983)). The adjustments thus permit an “apples-to-apples” comparison between the price of the subject merchandise sold in the United States and the price of the foreign like product sold in the home market.

A. Overview of Indirect Selling Expenses

Among the adjustments that Commerce must make to the constructed export price is the deduction of “U.S. indirect selling expenses” (“indirect selling expenses” or “ISEs”), which are the focus of U.S. Steel's challenge to the Final Results at issue here. See 19 U.S.C. § 1677a(d)(1)(D).⁵ Indirect selling expenses are those expenses incurred by a respondent (or, as in this case, a respondent's U.S. affiliate) which are related to the sale of subject merchandise but which cannot be directly tied to any particular sale-in other words, expenses that “would be incurred by the seller regardless of whether the particular sales in question are made,” including common expenses such as rent payments, and telephone charges that a company incurs in selling subject merchandise but which cannot be directly connected to a specific sale. See Koenig & Bauer-Albert AG v. United States, 22 CIT 574, 580, 15 F.Supp.2d 834, 843 (1998) aff'd in part, rev'd on other grounds, 259 F.3d 1341 (Fed.Cir.2001); Antidumping Manual, Glossary of Terms (Dept. of Commerce Oct. 13, 2009) (noting that “[c]ommon examples of indirect selling expenses include inventory carrying costs, salesmen's salaries, and product liability insurance.”); see generally Pl.'s Brief at 2, 9; Def.'s Brief at 8.

For example, companies typically do not calculate an amount of office rent based on how much rent was incurred in making any particular sale. Instead, companies generally report to Commerce the total amount of rent paid during the relevant period. In order to account for rent incurred in selling subject merchandise (so that an appropriate sum can be included in the agency's antidumping calculations), Commerce must allocate to sales of subject merchandise a portion of the total rent paid by the company. In doing so, Commerce must allocate the total rent (as well as other total indirect selling expenses) between the company's sales of subject merchandise and the company's other activities, including sales of non-subject merchandise. Indirect selling expenses may also include, for instance, salaries paid to employees who sell subject merchandise, since salaries normally are paid without regard to whether the employees sell subject merchandise or non-subject merchandise, or-for that matter-whether the employees actually sell any merchandise at all, during the relevant period. See generally Pl.'s Brief at 2; Def.'s Brief at 8-9; Transcript of Oral Argument (“Tr.”) at 16.

The antidumping statute directs that, in calculating net U.S. prices using the CEP price methodology, Commerce is to deduct “any ... expenses generally incurred by or for the account of the producer or exporter, or the affiliated seller in the United States, in selling the subject merchandise (or subject merchandise to which value has been added)....” See 19 U.S.C. § 1677a(d); see also id. at § 1677a(d)(1)(D). Thus, the statute includes a general provision for the deduction of selling expenses in the CEP price calculation, but is entirely silent as to how Commerce is to calculate those expenses (including indirect selling expenses).

Commerce's regulations similarly include general provisions concerning the calculation of expenses. See 19 C.F.R. § 351.401(g). Commerce's stated preference is for the calculation of expenses on a transaction-specific basis. See 19 C.F.R. § 351.401(g)(1). However, where expenses cannot be ascertained on a transaction-specific basis, the agency's regulations permit expenses (including indirect selling expenses) to be allocated, provided, first, that the allocation is on “as specific a basis” as possible, and, second, that the methodology “does not cause inaccuracies or distortions”:

(1) In general. The Secretary may consider allocated expenses and price adjustments when transaction-specific reporting is not feasible, provided the Secretary is satisfied the allocation method used does not cause inaccuracies or distortions.

(2)

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