Dongkuk Steel Mill Co. v. United States , 29 Ct. Int'l Trade 724 ( 2005 )

Slip Op. 05-75
UNITED STATES COURT OF INTERNATIONAL TRADE
Before: Judge Judith M. Barzilay
____________________________________
Dongkuk Steel Mill Co., :
Plaintiff, :
v. :
United States, : Court No. 04-00190
Public Version
Defendant, :
and :
CMC Steel Group, et al., :
Defendant-Intervenors. :
____________________________________
[Plaintiff’s Motion for Judgment on Agency Record denied.]
Decided: June 22, 2005
Preston Gates Ellis & Rouvelas Meeds LLP, (Jeffrey M. Winton, Sam J. Yoon) for Plaintiff.
Peter D. Keisler, Assistant Attorney General; David M. Cohen, Director; (Jeanne E. Davidson),
Deputy Director, (Stephen C. Tosini), Attorney, U.S. Department of Justice, Civil Division,
Commercial Litigation Branch; Philip J. Curtin, Office of the Chief Counsel for Import
Administration, Department of Commerce, of counsel, for Defendant.
Wiley Rein & Fielding LLP, (Charles Owen Verrill, Jr.), Alan Hayden Price, Timothy C.
Brightbill, for Defendant-Intervenors.
OPINION
BARZILAY, JUDGE: This action is before the court on Plaintiff’s motion for judgment
on the agency record pursuant to USCIT Rule 56.2. Plaintiff, Dongkuk Steel Mill Co., Ltd.
Court No. 04-00190 Page 2
(“DSM”), challenges the final results of the U.S. Department of Commerce (“Commerce”) in the
administrative review of the antidumping duty order on Steel Concrete Reinforcing Bar from the
Republic of Korea, 69 Fed. Reg. 19399 (April 13, 2004) (“Final Determination”). Defendant,
United States, and Defendant-Intervenors, CMC Steep Group, Gerdau Ameristeel Corp., Nucor
Corp., and Tamco Steel, submitted their briefs in opposition to Plaintiff’s motion.
I. BACKGROUND
The administrative review challenged in this action covered rebar exported from the
Republic of Korea to the United States by DSM and Korea Iron and Steel Co., Ltd. (“KISCO”)
during the period from January 30, 2001 through August 31, 2002.1 Commerce preliminarily
determined that DSM and KISCO should be considered affiliates and collapsed the two
companies into a single entity for the purpose of calculating a dumping margin. See Steel
Concrete Reinforcing Bar from the Republic of Korea: Notice of Preliminary Results of
Antidumping Duty Administrative Review, 68 Fed. Reg. 57883 (Oct. 7, 2003). Following the
comments filed by DSM, KISCO and the Rebar Trade Action Coalition, Commerce made
changes in the margin calculation and determined the margin to be 11.74 % for DMS and
KISCO’s sales in the United States. See Final Determination, 69 Fed. Reg. at 19400.
In the pending motion, Plaintiff challenges Commerce’s determination that DSM was
affiliated with two Korean companies: KISCO and Dongkuk Industries Co., Ltd. (“DKI”).2
1
Rebar is steel used in construction and sold in straight lengths.
2
The first prong of the collapsing regulation is an affiliation between the entities subject
to collapsing. See 19 C.F.R. § 351.401(f)(1).
Court No. 04-00190 Page 3
Plaintiff argues that this finding was not based on any direct ownership or relationship between
DSM, KISCO and DKI, and challenges Commerce’s construction of the term “affiliated persons”
as defined in the Uruguay Round Agreements Act, ("URAA"), Pub.L. No. 103-465, 108 Stat.
4809 (1994). DSM also challenges Commerce’s decision to collapse DSM and KISCO and treat
them as a single entity for purposes of the antidumping review. Plaintiff argues that the record
does not support Commerce’s determination that there was a realistic potential for manipulation
of price or production between the two companies.
DSM was founded by Kyung-Ho Chang, who over a period of twenty years created a
group of companies involved in steel production, construction, and transportation, including
KISCO and DKI. Upon Kyang-Ho Chang’s death, his three sons assumed control of his
companies: Sang-Tae Chang became the principal owner of DSM, Sang-Don Chang – the
principal owner of KISCO, and Sang-Kuhn Chang – the principal owner of DKI. See DSM’s
Feb. 3, 2003 Submission (Confidential Doc.), at 44-45; Letter from DSM to Commerce, Nov. 15,
2002 (Confidential Doc.), at 2. The record shows that when the three brothers were alive, the
companies functioned under substantial cross-ownership, sharing a number of common directors
and officers. During Commerce’s original investigation, DMS still owned a notable percentage
of the total shares of KISCO, the majority owners of DSM and KISCO were brothers, and the
two companies shared common directors and officers.3 See Letter from DSM to Commerce, Nov.
15, 2002 (Confidential Doc.), at 2. At that time, prior to the review period at issue here, the
3
Information found in the confidential version of the administrative record has been
redacted in this public version of the opinion. Numbers have been replaced with words to
provide some guidance for the legal conclusions in this case.
Court No. 04-00190 Page 4
Korea Fair Trade Commission4 (“KFTC”) considered DSM and KISCO as part of the same
chaebol, or family of companies – the Dongkuk Steel Group. Id.Significant changes in the nature of corporate ownership occurred since Commerce’s
original investigation in this case. In early 2000, Sang-Tae Chang died, leaving his ownership in
DSM to his two sons Sae-Joo Chang and Saw-Wook Chang. See DSM’s Feb. 3, 2003
Submission (Confidential Doc.), at 44-45. By the end of 2000, DSM reduced its ownership in
KISCO to a minimal percentage of the outstanding shares. DSM’s Feb. 3, 2003 Submission
(Confidential Doc.), at 44-45. During the review period, KISCO did not own any shares of DSM
directly; however, KISCO indirectly owned a minuscule percentage of the outstanding shares of
DSM through its minimal percentage ownership in one of the other companies. DSM’s Feb. 3,
2003 Submission (Confidential Doc.), at 34. Furthermore, DSM and KISCO did not share
common directors or officers during the period of review – a change that also took place in 2000.
But DSM and KISCO did inherit several of each other’s directors and officers: a director of DSM
during part of the review period had been a senior manager at KISCO 22 years ago. See DSM’s
Mar. 24, 2003 Submission (Confidential Doc.), at 5. The vice president of DSM was the director
of the administrative department for one of KISCO’s plants 22 years ago. See id. The president
of DSM, was a non-standing director of KISCO 18 years ago. A director of DSM was a senior
manager of KISCO 23 years ago. Also, the current president and vice president of KISCO were
formerly managers at DSM. Id. at 6. The Chairman of KISCO left his position as the president
4
The Korea Fair Trade Commission is a Korean governmental organization that
formulates and administers competition policies and resolves antitrust cases, functioning as a
quasi-judiciary body. See About KFTC, Korea Fair Trade Commission, at www.ftc.go.kr/eng/.
Court No. 04-00190 Page 5
of DSM in 1998, fewer than five years ago. See id.
The administrative record indicates that during the review period, neither DSM nor any
other Dongkuk Group company provided KISCO, its affiliates, or DKI, with loans or other
financing assistance. DSM’s Feb. 3, 2003 Submission (Confidential Doc.), at 46. Likewise,
neither KISCO nor its affiliates provided DSM or any other Dongkuk Group company with
financing assistance. Meanwhile, several commercial activities continued between DSM and
KISCO, albeit at a lower level than prior to the review period. See Letter from DSM to
Commerce, Nov. 15, 2002 (Confidential Doc.), at 3. Thus, during the 18-month review period,
DSM sold a moderate number of tons of rebar to KISCO, and KISCO sold only a moderate
number of tons of rebar to DSM. See Letter from DSM to Commerce, Nov. 15, 2002
(Confidential Version), at 3 (In comparison, during the investigation period, DSM sold a
significant number of metric tons to KISCO, and KISCO sold a significant number of metric tons
of rebar to DSM. Id.).
In its affiliation analysis, Commerce focused on the Chang family’s stock ownership and
control over DSM, KISCO and DKI. The two brothers, Sae-Joo Chang and Sae-Wook Chang,
together owned a notable percentage of the shares of DSM5; their uncle, Sang Don Chang owned
a significant percentage of KISCO6, and Sang-Kuhn Chang owned a notable percentage of the
5
Both Sae Joo Chang and Sae Wook Chang owned certain percentages.
6
The members of Sang Don Chang’s immediate family (i.e., his wife and children) owned
additional percentages. See List of Shares of DSM, DKC, KISCO and DKI Owned by Chang
Family, App. SA-15; Chang Family Tree, App. SA-18.
Court No. 04-00190 Page 6
total shares of DKI.7 Based on this data, Commerce concluded “the Chang Family owns the
largest blocks of outstanding shares in DSM, KISCO and DKI.” Issues and Decision Mem., Apr.
5, 2004, at 7. In addition, Commerce considered the Chang Family’s leadership positions in the
three companies, which were as follows: Sae Joo Chang was the Chairman and Chief Economic
Officer of DSM, Sae Wook Chang was a Director of DSM, Sang Don Chang was a Chairman of
KISCO, and Sang Kuhn Chang was the Chairman of DKI.
Commerce observed that although there was no direct evidence that Sae Joo Chang and
Saw Wook Chang acted in concert with their uncles, Sang Don Chang and Sang Kuhn Chang,
there was a potential for their acting in concert or out of common interests. It found that “while
no single individual is in a position to restrain or direct the activities of DSM, KISCO and DKI,
. . . the Chang family [was] ‘a person’ for purposes of section 771(33)(F) of the Act.” Issues and
Decision Mem. at 7. Furthermore, “[b]ecause this family grouping has the potential to control
DSM, KISCO and DKI, and its actions may potentially impact decisions concerning pricing of
the subject merchandise, [Commerce] determined that DSM, KISCO and DKI are affiliated.” Id.
at 7-8.
The parties do not contest Commerce’s determination that DSM and KISCO “have
production facilities for similar or identical products” as required by the collapsing regulation.
See 19 C.F.R. § 351.401(f) (2004). The parties instead contest the third prong of the collapsing
regulation requiring “a significant potential for the manipulation of price or production” between
7
Sang-Kuhn Chang’s immediate family members owned additional percentages of DKI.
See List of Shares of DSM, DKC, KISCO and DKI Owned by Chang Family, App. SA-15; Chang
Family Tree, App. SA-18.
Court No. 04-00190 Page 7
the two companies. See id. Commerce considered common ownership as one of the factors in
determining whether the potential for the manipulation of price or production was present, noting
that in addition to the corporate ownership between DSM and KISCO, the Chang family owns a
substantial percentage of DMS’s and KISCO’s outstanding shares. See Collapsing Mem., Sept.
12, 2003, at 5. Commerce also determined that the Chang family occupied significant positions
on the board of directors and in senior management at DSM and KISCO. Commerce observed
that “[o]ver the years, there have . . . been several prominent transfers by Chang family members
and other senior managers between the two companies.” Collapsing Mem. at 5. Commerce
concluded that having “several senior management positions (president, chairman and vice
president) of both KISCO and DSM . . . held by employees that formerly worked for the other
company, compounded by the family relationships between the Chairman of KISCO and the
Chairman and a Director of DSM” contributed to the significant potential for the manipulation of
price or production between KISCO and DSM. Collapsing Mem. at 6.
Commerce also determined that the operations of DSM and KISCO were intertwined,
focusing on five major relationships between the two companies: 1) their sale of rebar to each
other and sharing of customer information in connection with those sales; 2) DSM’s and
KISCO’s ownership of Dongkuk International (“DKA”)8; 3) DSM’s and KISCO’s affiliation
with DKI through the Chang family ownership interest in the three companies and DSM’s and
KISCO’s commercial interaction with DKI; 4) DSM’s and KISCO’s ownership interest in
Chunyang Transportation Co., Ltd. (“Chunyang”) and the value of the transportation services
8
DSM owned a very large percentage of DKA and KISCO owned a minuscule
percentage. Collapsing Mem. at 6.
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both companies received from Chunyang during the review period; and 5) DSM’s and KISCO’s
ownership interest in Kukje Transportation Co., even though its freight transportation services
were not purchased by either DSM or KISCO during the review period. Collapsing Mem. at 6-8.
Plaintiff does not contest that those relationships exist, but argues that they provide no support
whatsoever for Commerce’s determination that there was a significant potential for manipulation.
As a result of collapsing, DSM’s sales of rebar in the United States were compared to a
blended normal value based on sales in Korea by both DSM and KISCO, resulting in a dumping
margin of 11.74 % of DSM’s sales. See Final Results, 69 Fed. Reg. at 19400.
II. JURISDICTION AND STANDARD OF REVIEW
The court exercises its jurisdiction over this case pursuant to 28 U.S.C. § 1581(c) (2004).
The court “must sustain ‘any determination, finding or conclusion found’ by Commerce unless it
is ‘unsupported by substantial evidence on the record, or otherwise not in accordance with the
law.’” Fujitsu General Ltd. v. United States, 88 F.3d 1034, 1038 (Fed. Cir. 1996) (quoting 19
U.S.C. § 1516a(b)(1)(B)). “Substantial evidence is more than a mere scintilla. It means such
relevant evidence as a reasonable mind might accept as adequate to support a conclusion.”
Consol. Edison Co. of New York v. NLRB, 305 U.S. 197, 229 (1938). “[T]he possibility of
drawing two inconsistent conclusions from the evidence does not prevent an administrative
agency's finding from being supported by substantial evidence.” Matsushita Elec. Indus. Co. v.
United States, 750 F.2d 927, 933 (Fed. Cir. 1984) (quoting Consolo v. Fed. Mar. Comm'n, 383
U.S. 607, 619-20 (1966)). When the court applies this standard, it affirms the agency's factual
Court No. 04-00190 Page 9
determinations “so long as they are reasonable and supported by the record as a whole, even if
there is some evidence that detracts from the agency’s conclusions.” Olympia Indus., Inc. v.
United States, 22 CIT 387, 389, 7 F. Supp. 2d 997, 1000 (1998) (citing Atlantic Sugar, Ltd. v.
United States, 744 F.2d 1556, 1563 (Fed. Cir. 1984)); see Granges Metallverken AB v. United
States, 13 CIT 471, 474, 716 F. Supp. 17, 21 (1989) (The court may not reweigh the evidence or
substitute its own judgment for that of the agency.).
In determining whether Commerce's interpretation of the statute is in accordance with
law, the court applies the two-step test set forth in Chevron U.S.A., Inc. v. Natural Res. Def.
Council. Inc., 467 U.S. 837, 842-43 (1984). First, the court evaluates as a matter of law
“whether Congress’s purpose and intent on the question at issue is judicially ascertainable,”
using “traditional tools of statutory construction.” Timex V.I., Inc. v. United States, 157 F. 3d
879, 881 (Fed. Cir. 1998). If the statute’s plain language addresses the issue, “that is the end of
the matter.” Id. If the statute’s language is silent or ambiguous with respect to that issue, the
court evaluates the reasonableness of Commerce’s interpretation of the statute. Koyo Seiko Co.
v. United States, 36 F.3d 1565, 1573 (Fed. Cir. 1994). Commerce’s reasonable interpretation of
the statute is accorded deference, even if the court finds another permissible interpretation. Id.“Deference to an agency's statutory interpretation is at its peak in the case of a court's review of
Commerce's interpretation of the antidumping laws.” Id. (internal citation omitted).
Court No. 04-00190 Page 10
III. DISCUSSION
A. Commerce’s Affiliation Determination
As amended by the Uruguay Round Agreements Act,9 the antidumping statute in
pertinent part defines “affiliated persons” as follows:
(A) Members of a family, including brothers and sisters (whether by the whole or
half blood), spouse, ancestors, and lineal descendants.
....
(F) Two or more persons directly or indirectly controlling, controlled by, or under
common control with, any person. (G) Any person who controls any other person
and such other person.
For purposes of this paragraph, a person shall be considered to control another
person if the person is legally or operationally in a position to exercise restraint or
direction over the other person.
19 U.S.C. § 1677(33) (2004). The Statement of Administrative Action to the URAA explained
that the antidumping statute was amended to account for the realities of the marketplace.10
Statement of Admin. Action, H.R. Rep. No. 103-316 (1994), reprinted in 1994 U.S.C.C.A.N.
3773, 4174 (“SAA”) (the “traditional focus on control through stock ownership fails to address
adequately modern business arrangements, which often find one firm ‘operationally in a position
to exercise restraint or direction’ over another even in the absence of an equity relationship.”).
9
Pub. L. 103-465, § 222 (1994).
10
Congress expressly approved of this Statement in 19 U.S.C. § 3511(a).
The statement of administrative action approved by the Congress under section
3511(a) of this title shall be regarded as an authoritative expression by the United
States concerning the interpretation and application of the Uruguay Round
Agreements and this Act in any judicial proceeding in which a question arises
concerning such interpretation or application.
19 U.S.C. 3512(d).
Court No. 04-00190 Page 11
As a result, today Commerce can analyze relationships between potentially affiliated companies
by considering whether “[a] company may be in a position to exercise restraint or direction . . .
through corporate or family groupings.” 1994 U.S.C.C.A.N. at 4174-75. Furthermore,
Commerce has chosen not to further define “affiliated persons” or “control” by regulation,
finding that it is “more appropriate to develop [its] practice regarding affiliation through the
adjudication of actual cases.” Antidumping Duties; Countervailing Duties; Final Rule, 62 Fed.
Reg. 27,296, 27,297 (Dep’t Commerce, May 19, 1997); see also 19 C.F.R. § 351.102(b) (2004)11
(adopting the statutory definition of “affiliated persons” without elaboration).
Considering this regulatory framework, the Court has previously upheld Commerce’s
interpretation that the definition of family includes uncle-nephew relationships under section
1677(33)(A). Ferro Union Inc. v. United States, 23 C.I.T. 178, 44 F. Supp. 2d 1310, 1325-26
(1999). Finding that the statute was not clear on its face as to the meaning of “family,” the Court
considered whether Commerce’s construction of “family” to include uncles and nephews was a
permissible interpretation of the statute under Chevron.12 Id. at 1324; see Chevron, 467 U.S.
11The regulation provides certain factors for Commerce to consider:
[T]he Secretary will consider the following factors, among others: corporate or
family groupings; franchise or joint venture agreements; debt financing; and close
supplier relationships. The Secretary will not find that control exists on the basis
of these factors unless the relationship has the potential to impact decisions
concerning the production, pricing, or cost of the subject merchandise or foreign
like product. The Secretary will consider the temporal aspect of a relationship in
determining whether control exists; normally, temporary circumstances will not
suffice as evidence of control.
19 C.F.R. § 351.102(b).
12
The Court in Ferro Union remanded the case, finding that Commerce failed to place
one of the companies on notice that it would construe family to encompass more relationships
Court No. 04-00190 Page 12
837. In the same opinion, the Court upheld Commerce’s interpretation of “any person” in section
1677(33)(F) to encompass “family.” See Ferro Union, 44 F. Supp. 2d at 1326 (“[T]he intent of
19 U.S.C. § 1677(33) was to identify control exercised through ‘corporate or family groupings.’ .
. . By interpreting ‘family’ as a control person, Commerce was giving effect to this intent.”)13; see
also Mitsubishi Heavy Industries, Ltd. v. United States, 23 C.I.T. 326, 54 F. Supp. 2d 1183, 1190
(1999) (citing Torrington Co. v. United States, 68 F. 3d 1347, 1351 (Fed. Cir. 1995)
(“Commerce is to be accorded substantial deference in interpreting the antidumping laws.”)
Plaintiff argues that DSM and KISCO may not be considered affiliated for purposes of
collapsing because they “are not members of a family” under section 1677(33)(A). Pl. Br. at 12.
Plaintiff also challenges the inclusion of nephews and uncles as part of a family definition under
section 1677(33)(A). Alternatively, Plaintiff asserts that “[w]hatever affiliation may exist
between the nephews and uncles does not create a direct relationship between the companies they
control.” Pl. Br. at 16. In the Issues and Decision Memorandum, Commerce did not address this
last point, instead focusing its final analysis of the affiliation between DSM and KISCO through
the definition in section 1677(33)(F). Nor did the government address this issue in its brief,
merely reiterating that because the nephews and uncles of the Chang family are members of the
same family, the companies are affiliated pursuant to section 1677(33)(A).
In challenging Commerce’s analysis of affiliation under section 1677(33)(F), Plaintiff
than those listed in the statute. See Ferro Union, 44 F. Supp. 2d at 1326.
13
It should be noted that Commerce’s regulations define “person” as “any interested
party, as well as any other individual, enterprise, or entity, as appropriate.” 19 C.F.R. §
351.102(b) (2004). For further discussion on the reasonableness of Commerce’s statutory
interpretation see Ferro Union, 44 F. Supp. 2d at 1325-27.
Court No. 04-00190 Page 13
contends that DSM and KISCO are not affiliated because the Chang family grouping that the
Department found to control the companies does not constitute a person. According to Plaintiff,
the statutory term “any person” in section 1677(33)(F) is meant to refer to a single person. Pl.
Br. at 16. Referencing section 1677(33)(A), which defines members of a family as affiliated
persons, Plaintiff argues that “members of a family” do not lose their separate existence by virtue
of being considered “affiliates.” In other words, because they are defined as “affiliates” in one
subsection (A), they cannot then be viewed as one person for purposes of subsection (F). See Pl.
Br. at 17. Interpreting the singular term “any person” in section 1677(33)(F) to encompass
plural “persons,” Plaintiff argues, renders the statutory provisions meaningless.
Commerce maintains that although section 1677(33)(F) uses a singular phrase “any
person,” the Court has already recognized that it can be interpreted to encompass a “family” in
order to carry out the intent of the antidumping statute. See Ferro Union, 44 F. Supp. 2d. at
1326. The court finds that Ferro Union’s conclusion that Commerce’s interpretation of section
1677(F) was reasonable under Chevron should not be disturbed because it complies with the
statutory framework. Id.; see also 19 C.F.R. § 351.102(b) (“In determining whether control over
another person exists, within the meaning of section [1677(33)]. . ., the Secretary will consider
the following factors, among others: corporate or family groupings.”).
Commerce’s determination that DSM, KISCO and DKI were affiliated under section
1677(F) is also supported by substantial evidence. Commerce explained that “the Chang
family’s leadership positions, namely Saw Joo Chang’s position as the Chairman and the CEO of
DSM, Sae Wook Chang’s position as a Director of DSM, and Sang Kuhn Chang’s position as the
Court No. 04-00190 Page 14
Chairman of DKI,” combined with “the fact that the Chang family owns the largest blocks of
outstanding shares in those three companies, places the Chang family in a position to legally
and/or operationally restrain or direct DSM, KISCO and DKI.” Issues and Decision Mem. at 7;
see19 U.S.C. § 1677(33) ( “a person shall be considered to control another person if the person is
legally or operationally in a position to exercise restraint or direction over the other person.”).
Furthermore, Commerce did not have to find that the affiliated companies acted in concert, but
rather that the Chang family has the potential to control DSM, KISCO and DKI, impacting
decisions concerning pricing of the subject merchandise. See Ferro Union, 44 F. Supp 2d at
1326 (holding that once it determined that certain family members controlled company Saha Thai
and Company A, Commerce logically determined that these companies were affiliated pursuant
to 19 U.S.C. § 1677(33)(F) because of the family’s control). Because the court finds that
Commerce’s analysis of affiliation between DSM and KISCO pursuant to section 1677(33)(F) is
supported by substantial evidence, the court does not need to review Commerce’s affiliation
analysis under section 1677(33)(A).
B. Commerce’s Decision to Collapse DSM and KISCO
Commerce’s collapsing regulation requires a three-prong analysis.14 First, Commerce
14
Collapsing involves treating two or more companies as a single entity for purposes of
calculating a single weighted-average dumping margin for those companies. The collapsing
regulation provides:
(f) Treatment of affiliated producers in antidumping proceedings.
(1) In general. In an antidumping proceeding under this part, the Secretary will
treat two or more affiliated producers as a single entity where those producers
have production facilities for similar or identical products that would not require
substantial retooling of either facility in order to restructure manufacturing
priorities and the Secretary concludes that there is a significant potential for the
manipulation of price or production.
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must determine that the companies are affiliated. 19 C.F.R. § 351.401(f)(1); see, e.g., Kaiyuan v.
Group Corp. v. United States, 28 CIT __, 343 F. Supp. 2d 1289, 1301 (2004) (“Commerce’s
initial affiliation determination is concerned with the parties [sic] potential to impact decisions
concerning price or production. . . . ”). Then, Commerce determines whether the producers share
“production facilities for similar or identical products.” 19 C.F.R. § 351.401(f)(1). Finally,
Commerce has to find “a significant potential for the manipulation of price or production”
between the affiliated companies in order to collapse. 19 C.F.R. § 351.401(f)(1). According to
its regulation,
[i]n identifying a significant potential for the manipulation of price or production,
the factors the Secretary may consider include:
(i) The level of common ownership;
(ii) The extent to which managerial employees or board members of one firm sit on
the board of directors of an affiliated firm; and
(iii) Whether operations are intertwined, such as through the sharing of sales
information, involvement in production and pricing decisions, the sharing of
facilities or employees, or significant transactions between the affiliated producers.
19 C.F.R. § 351.401(f)(2). In examining these factors, Commerce considers both actual
manipulation in the past and the possibility of future manipulation, which does not require
evidence of actual manipulation during the period of review. See Antidumping Duties;
Countervailing Duties; Final Rule, 62 Fed. Reg. at 27,346 (“[A] standard based on the potential
for manipulation focuses on what may transpire in the future.”)
In this case, Plaintiff does not dispute Commerce’s finding that DSM and KISCO share
“production facilities for similar or identical products.” Plaintiff contends that Commerce’s
19 C.F.R. § 351.401(f)(1).
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finding of a significant potential for the manipulation of price or production was not supported by
substantial evidence, arguing that Commerce did not adduce sufficient evidence that the
members of the Chang family have the ability or incentive to coordinate their actions in order to
direct DSM and KISCO to act in concert with each other. Plaintiff argues that the tenuous
affiliation between the members of the extended Chang family cannot compensate for the
absence of any evidence of mechanisms through which management of DSM and KISCO might
have been shared. Commerce maintains that its determination that there was a significant
potential for the manipulation between DSM and KISCO was supported by the evidence of
significant common ownership and management overlap by the companies’ senior managers,
who (a) have a significant influence over the production and sales decisions of both companies
due to their positions and ownership, (b) belong to the same family; and (c) are former managers
of the other company. Commerce supports its conclusion that the members of the Chang family
have the ability and incentive to coordinate their actions in order to direct DSM and KISCO to
act in concert with each other by citing to the fact that the Chang family is the largest shareholder
in DSM and KISCO and that the two nephews and their uncles hold senior leadership positions
in those companies.
Commerce’s conclusion that the Chang family members have the ability and financial
incentive to coordinate their actions in order to direct DSM and KISCO to act in concert with
each other is further buttressed by other factors considered by Commerce. Commerce found that
there had been several prominent transfers of senior managers between the two companies. See
Collapsing Mem. at 5-6. While the transfers of the senior managers occurred between 5 and 23
Court No. 04-00190 Page 17
years before the review period, Commerce explained that those transfers contributed to the
weight of evidence, suggesting that the companies had a significant potential for manipulation.
In addition, the Department observed that DSM and KISCO were involved in certain
intertwining operations, including: 1) home market sales of rebar to each other and sharing of
customer information in connection with those sales; 2) utilizing an affiliated transportation
company, in which both had ownership interest; and 3) jointly owning shares in other companies,
Kukje and DKA, and a common affiliation with DKI that resells certain DSM steel products to
the United States and supplies KISCO with refractories and ferrite. Issues and Decision Mem. at
8, 11. While the record also suggests that the companies had significantly reduced their
intertwined operations by the review period, Commerce did not have to consider the companies’
alleged desire to disentangle their operations, because its inquiry concerns the potential for
manipulation during the review period based on a non-exclusive list of factors.
The court finds that Commerce adduced sufficient evidence to anchor its determination
that the activities of DSM and KISCO show a significant potential for the manipulation of price
or production. While the individual factors considered by Commerce might not be sufficient to
support Commerce’s conclusion, the totality of evidence identified by Commerce demonstrates a
significant potential for manipulation between DSM and KISCO.
CONCLUSION
Plaintiff’s challenges to Commerce’s decision to collapse DSM and KISCO are without
merit. The court finds Commerce’s interpretation of the antidumping statute reasonable, and
Court No. 04-00190 Page 18
further concludes that Commerce’s decision to collapse DSM and KISCO is supported by
substantial evidence. Consequently, Plaintiff’s motion for judgment upon the agency record is
denied.
A separate order will be entered accordingly.
June 22, 2005 /s/ Judith M. Barzilay
Dated : _______________________ _________________________
New York, New York Judith M. Barzilay