Pohang Iron & Steel Co. v. United States , 24 Ct. Int'l Trade 566 ( 2000 )

Slip Op. 00-77
UNITED STATES COURT OF INTERNATIONAL TRADE
____________________________________
:
POHANG IRON AND STEEL CO., LTD., :
POHANG COATED STEEL CO., LTD., AND :
POHANG STEEL INDUSTRIES CO., LTD., :
:
Plaintiffs, :
:
v. :
: Consol. Court No.
THE UNITED STATES, : 98-04-00906
:
Defendant, :
:
and :
: PUBLIC VERSION
NATIONAL STEEL CORPORATION; U.S. STEEL :
GROUP - A UNIT OF USX CORPORATION; :
INLAND STEEL INDUSTRIES, INC.; :
BETHLEHEM STEEL CORPORATION; AND LTV :
STEEL CO., INC., :
:
Defendant-Intervenors. :
:
NATIONAL STEEL CORPORATION, et al., :
:
Plaintiffs, :
:
v. :
:
THE UNITED STATES, :
:
Defendant, :
:
and :
:
POHANG IRON AND STEEL CO., LTD., et al.,:
:
Defendant-Intervenors, :
:
and :
:
UNION STEEL MANUFACTURING CO. LTD., :
:
Defendant-Intervenor. :
________________________________________:
CONSOL. COURT NO. 98-04-00906 PAGE 2
[Antidumping duty remand determination affirmed in part and
remanded in part.]
Dated: July 6, 2000
Akin, Gump, Strauss, Hauer & Feld, LLP (Sukhan Kim,
Spencer S. Griffith, J. David Park, and Sydney H. Mintzer) for
the POSCO Group.
David W. Ogden, Acting Assistant Attorney General,
David M. Cohen, Director, Commercial Litigation Branch, Civil
Division, United States Department of Justice (Michele D.
Lynch), Linda S. Chang, and Bernd G. Janzen, Office of the
Chief Counsel for Import Administration, Department of
Commerce, of counsel, for defendant.
Dewey Ballantine LLP (Michael H. Stein, Bradford L. Ward,
Jennifer Danner Riccardi and Andrew J. Conrad) for National
Steel Corporation, et al.
Kaye, Scholer, Fierman, Hays & Handler, LLP (Donald B.
Cameron, Julie C. Mendoza and Paul J. McGarr) for Union Steel
Manufacturing Co., Ltd.
OPINION
RESTANI, Judge: This matter is before the court following
remand. See Final Results of Redetermination Pursuant to
Court Remand: Pohang Iron and Steel Co., Ltd. v. United
States, Consol. Ct. No. 98-04-00906 (Feb. 22, 2000)
[hereinafter “Remand Results” or “RR”]. The court ordered
the United States Department of Commerce (“Commerce” or “the
Department”) to explain or reconsider (1) its determinations
CONSOL. COURT NO. 98-04-00906 PAGE 3
that the Posco Group’s1 U.S. sales were constructed export
price (“CEP”) sales as opposed to export price (“EP”) sales,
(2) U.S. indirect selling expenses for the Posco Group, and
(3) Union Steel Manufacturing Co., Ltd.’s (“Union”) claim of
free U.S. warehousing for one verification observation.
Pohang Iron and Steel Co. v. United States, No. 98-04-00906,
1999 WL 970743, at *19 (Ct. Int’l Trade Oct. 20, 1999)
[hereinafter “Pohang I”]. Familiarity with the court’s prior
opinion herein is presumed. See id. The issues will be
addressed in reverse order.
Jurisdiction and Standard of Review
The court has jurisdiction pursuant to 28 U.S.C. §
1581(c) (1994). In reviewing final determinations in
antidumping duty investigations and reviews, the court will
hold unlawful those agency determinations which are
unsupported by substantial evidence on the record, or
otherwise not in accordance with law. 19 U.S.C. §
1516a(b)(1)(B) (1994).
1 The plaintiffs herein, Pohang Iron and Steel Co., Ltd.
(“POSCO”), Pohang Coated Steel Co., Ltd. (“POCOS”) and Pohang
Steel Industries Co., Ltd. (“PSI”) are collectively referred
to as the “POSCO Group”.
CONSOL. COURT NO. 98-04-00906 PAGE 4
Discussion
I. Union Warehousing Expense
Although Commerce complains mightily that the court has
required an unreasonable amount of verification activity or
evidentiary support for its conclusion that Union had no
warehousing expense for a particular sale, the court
disagrees. See RR at 17-20 & 46. The particular aspect of
the verification at issue involved a very small sample.
Pohang I, 1999 WL 970743, at *15. In such a situation, the
individual observations are important. It was the verifiers’
obligation to state their conclusions accurately, whether
based on oral statements or documentary evidence. Further,
they needed to include in the record enough of a trail for the
court to determine if their conclusions were supported.
In this case, a domestic industry participant discovered
a disconnect in the verification report. Id. at *16. It was
up to the parties to resolve this issue by reference to the
record the first time the issue was presented to the court.
The explanation provided at that time was incomplete and
partially incorrect. Id. at *18. On remand, review of the
record revealed that a different Union sales contractual
arrangement from the one originally discussed applied to the
CONSOL. COURT NO. 98-04-00906 PAGE 5
observation at issue, Observation 83.2 RR at 45. Either the
company’s statement to the verifier or the verifier’s report
of it contained errors or ambiguities. Id. at 44-45.
When the supporting documentation reveals contradictions
or commercially nonsensical practices in a respondent’s
explanations, the verifier cannot simply accept them and move
on, as Commerce seems to assert. See Consolidated Edison Co.
v. NLRB, 305 U.S. 197, 229 (1938) (finding that substantial
evidence means “such relevant evidence as a reasonable mind
might accept as adequate to support a conclusion”). In any
case the ambiguity has now been resolved by reference to sales
information of record which is discussed in confidential
footnote 2. As the court found no problems with the rest of
the verification as to warehousing expenses, Commerce’s
determination on this issue is now sustained.
II. POSCO Group’s U.S. Indirect Selling Expenses
Because the POSCO Group, adhering to its position that
use of CEP information was not appropriate, specifically
declined on at least two occasions to provide information on
2
The contract reviewed by Commerce with respect to
observation 83 apparently was between [ ] and [ ], a Union
customer. RR at 45. The Union sales contract terms were
[ ]. Presumably Union would incur no warehousing expenses
in such a situation.
CONSOL. COURT NO. 98-04-00906 PAGE 6
U.S. indirect selling expenses, Commerce used facts available.
Pohang I, 1999 WL 970743, at *14. The court has already
approved the use of facts available for POSCO, if an
adjustment is necessary in U.S. indirect selling expenses to
account for an interest expense. See id. at *15. POSCO
asserts that such an adjustment is neither necessary nor
permissible. It states that Commerce improperly changed its
methodology after the final results had issued to include the
interest expense, and that Commerce did not simply correct a
ministerial error. Id. at *14. The court found Commerce’s
explanation wanting and remanded the issue. Id. at *15.
Commerce has now embraced the suggestion from the court
that perhaps its indirect selling expense calculation involved
a partial adverse facts available selection. Id. at *15, see
also Remand Results, at 14-17. Indeed, the court has no
problem with that selection because there is no reason to
believe POSCO could not have complied with Commerce’s request,
and POSCO’s decision not to comply was purposeful.
Accordingly, use of adverse facts available was permissible
under 19 U.S.C. § 1677e(b) (1994). The threshold problem,
however, is that Commerce is permitted to change the indirect
expenses calculation after the final results are issued only
if Commerce originally calculated such expenses incorrectly
CONSOL. COURT NO. 98-04-00906 PAGE 7
because of ministerial error. See 19 U.S.C. § 1675(h) (1994)
(ministerial errors to be corrected within a reasonable time
after final determinations are issued).
On remand, Commerce clarified that it intended to include
a number of items in indirect expenses even though under
normal circumstances it might exclude those items in order to
avoid double counting of expenses already counted, e.g., as
direct expenses. RR at 40-42. Because POSCO did not submit
specific CEP indirect expense information, Commerce alleges
that it cannot be certain that double counting would occur.
Id. at 41-42. Therefore, this alleged uncertainty with
respect to double counting caused Commerce, in fulfilling the
adverse inference it had drawn, to include the interest
expense at issue in indirect selling expenses. Id. Commerce,
however, failed to program its computer accordingly. Id. The
type of correction Commerce describes is a ministerial error
correction. See 19 C.F.R. § 351.224(f) (1999) (noting that
arithmetic function is ministerial error).
As to a related adjustment, in its remand determination
Commerce failed to clarify expressly, as instructed by the
court, why it rejected POSCO’s own claim of ministerial error
as to bank charges and commissions adjustments to indirect
sales expenses. RR at 37. The court nevertheless surmises
CONSOL. COURT NO. 98-04-00906 PAGE 8
from Commerce’s explanation as to interest that certain
commissions and bank charges also were included in the
original final results calculation because of Commerce’s
belief that there was a lack of POSCO information
demonstrating double counting. Thus, Commerce concluded no
post-final results ministerial error change in POSCO’s favor
was warranted.3
It is probably reasonable in a facts available situation,
and clearly so in an adverse facts available setting, to put
the risk of double counting on the delinquent party. This
would be the normal result of drawing an adverse inference.
POSCO alleges, however, that there was adequate data in the
record to make clear that Commerce’s method double counted.
Commerce cannot use information which is known to be
incorrect. D & L Supply Co. v. United States, 113 F.3d 1220,
1223 (Fed. Cir. 1997). Thus, the question now presented to
the court is whether the record demonstrates that Commerce
3 In Commerce’s supplemental brief, it confirms that the
treatment in methodology as to claimed corrections for both
interest and bank charges and commissions is consistent, as
the court surmised. Commerce’s Supp. Br. at 2 (May 17, 2000).
Because Commerce intended to include bank charges and
commissions there was no ministerial error which could be
corrected post-final results as to commissions and bank
charges, and POSCO’s claim fails. Ministerial Analysis
Memorandum (Apr. 15, 1998), at 3, P.R. Doc. 216, Def.’s Pohang
I Public App., Ex. 18, at 2.
CONSOL. COURT NO. 98-04-00906 PAGE 9
incorrectly included POSCO’s interest expenses in the U.S.
indirect selling expenses figure.4
First, Commerce normally makes a direct selling expense
adjustment based on an imputed credit expense for individual
sales, which it did here. The imputed credit expense, which
is not a separate actual expense figure, is excluded from the
total interest expense figure used to calculate indirect
selling expenses. New Minivans from Japan, 57 Fed. Reg.
21,937, 21,956-57 (Dep’t Commerce 1992) (final LTFV det.)
(excluding imputed credit expense on individual sales as part
of indirect selling expenses); see also Antifriction Bearings
(Other Than Tapered Roller Bearings) and Parts Thereof from
the Federal Republic of Germany, 56 Fed. Reg. 31,692, 31,721
(Dep’t. Commerce 1991) (final results of antidumping duty
admin. rev.) (Commerce “reduced interest expense on the firm’s
books for a portion of [imputed credit] expense . . . to avoid
double-counting.”). The court sees no reason which would
justify this known double counting here. No specific
additional information from POSCO is necessary to eliminate
this particular double counting. Nonetheless, the court
4 The court does not hold that such specific partial
adverse facts available data must be used, but Commerce chose
this method and must follow all facts available procedures
that flow from its choice.
CONSOL. COURT NO. 98-04-00906 PAGE 10
accepts Commerce’s explanation that it may make some indirect
selling expense adjustment with respect to interest expenses
because it lacks the information to determine if the imputed
credit deduction covered all sales-related interest expenses.
See RR at 42. Accordingly, while here the imputed credit
figure must be subtracted from the total interest figure,
interest expenses may generally be included in the indirect
selling expense adjustment where the respondent has not
provided full CEP expense data.
Second, POSCO asserts that the interest figure largely
relates to non-subject merchandise, that Commerce’s allocation
of interest expenses between subject and non-subject is
incorrect, and that interest expenses should be allocated
based on the relationship that a specific non-subject
merchandise business asset bears to total assets.5 Commerce
is not required to use this method of allocation if it is
already allocating interest expenses on another acceptable
subject - non-subject merchandise basis.
The problem is that the ratio of subject merchandise
revenue to total revenue may not account for the revenue
generated by the separate business asset because this figure
5 The specific business asset is [ ]. POSCO’s Comments
on Remand at 11-16.
CONSOL. COURT NO. 98-04-00906 PAGE 11
may not be included in the POSCO group’s balance sheets. See
Commerce’s Supp. Br. at 12-13 (May 17, 2000). Commerce states
it cannot tell which interest expenses are related to the
separate business asset and cannot deduct such interest
expenses from the total to be allocated. Thus, it implies
that it accepts the possibility that its allocation may be
distortive.
Had POSCO submitted all the data required by Commerce,
the court might be sympathetic to its arguments that Commerce
does not need any more information because it can allocate on
an asset basis, and that Commerce never requested the data.
Had Commerce received all the information it requested, it
might have been led to ask for this additional data. It also
seems improper under adverse inference circumstances to
require Commerce to abandon its normal allocation methods
because POSCO’s methods might be better. AK Steel Corp. v.
United States, 988 F. Supp. 594, 606 (Ct. Int’l Trade 1997)
(“[T]he [c]ourt’s role is not to determine whether the
information chosen was the ‘best’ actually available.” )
(quotation omitted), aff’d 1999 U.S. App. Lexis 15023 (Fed.
Cir. 1999). Further, because of the odd financial structure at
issue and POSCO’s lack of cooperation, the court cannot say
that Commerce is incorrect in focusing on debt financing as
CONSOL. COURT NO. 98-04-00906 PAGE 12
opposed to taking a broader view of financing. Accordingly,
Commerce is not required to allocate the interest expense on
the basis of the relationship of the separate business asset
to total assets.
Third, POSCO objected that the normal practice of
deducting interest income from interest expenses was not
followed. POSCO did not explain its objections in terms of
specific calculations, clarify whether only short term
interest was at issue or whether interest income was deducted
from imputed credit. Despite Commerce’s lack of response on
this point, the court finds POSCO’s objection insufficient.6
Finally, the court finds arguments with respect to
freight expenses and other periods of review irrelevant to
this matter. Accordingly, for purposes of the indirect
selling expenses adjustment, Commerce shall adjust the
interest expense figure removing previously deducted imputed
credit expenses.
III. Use of Constructed Export Price for POSCO Group’s
U.S. Sales
All parties agree that the Federal Circuit’s decision in
6 Only in its response to Commerce’s supplemental
brief did POSCO make its objection to the remand results on
this issue with any specificity. This was too late.
CONSOL. COURT NO. 98-04-00906 PAGE 13
AK Steel Corp. v. United States impacts this case. 203 F.3d
1330 (Fed. Cir. 2000). It involves the same parties, the same
product, and the same commercial patterns. In AK Steel, the
Federal Circuit rejected Commerce’s longstanding three-part
test for selecting EP versus CEP treatment for U.S. sales.
Id. at 1339-40. The court held that the additional words of
19 U.S.C. § 1677a (1994), “outside the United States” and “by
a seller affiliated with the producer” in the respective
definitions of EP and CEP are significant. Id. at 1337. It
found that the additional words invalidated the prior
administrative practice; whereas this court, in the absence of
contrary legislative history, had recognized the additional
words to be mere clarification. Compare AK Steel, 203 F.3d at
1338-39, with AK Steel Corp. v. United States, 34 F. Supp.2d
756, 762 (Ct. Int’l Trade 1998), aff’d in part, rev’d in part
by 203 F.3d 1330. The Court of Appeals declared the statute
wholly unambiguous and unambiguously eliminated Commerce’s
three-part test to determine whether sales by domestic
affiliates rendered the sales subject to EP or CEP treatment.
AK Steel, 203 F.3d at 1337-40.
No one has asserted that the U.S. sales at issue were not
made pursuant to contracts signed by the U.S. affiliates and
the U.S. customers in the United States. Under AK Steel’s
CONSOL. COURT NO. 98-04-00906 PAGE 14
geographic approach, the sales are subject to CEP treatment.7
That is all that remains of this issue and further remand, as
the domestic parties request, would serve no purpose in this
case.
Conclusion
This matter is remanded to correct the indirect selling
expenses adjustment as stated in this opinion. Remand is due
within 30 days. The parties may object within 11 days
thereafter.
______________________
Jane A. Restani
Judge
Dated: New York, New York
This 6th day of July, 2000.
7 The court does not mean to imply that a U.S. affiliate
and a U.S. customer could sign a contract in the Barbados to
avoid CEP treatment. If both contractual parties are U.S.
entities operating in the U.S. under AK Steel, the sale will
be a CEP sale. See AK Steel, 203 F.3d at 1339-40.