Rautaruukki Oy v. United States ( 1999 )

Slip Op. 99 - 39
UNITED STATES COURT OF INTERNATIONAL TRADE
___________________________________
:
Rautaruukki Oy, :
:
Plaintiff, : Consolidated Court
: No. 97-05-00864
v. :
:
United States, :
:
Defendant, :
:
and :
:
Bethlehem Steel Corporation, :
U.S. Steel Group (a Division :
of USX Corporation), :
:
Defendant-Intervenors. :
___________________________________:
[Commerce’s Remand Results sustained in part; reversed in part.]
Dated: April 27, 1999
Holland & Knight LLP, (Frederick P. Waite and Kimberly R.
Young) for plaintiff and defendant-intervenor Rautaruukki Oy.
David W. Ogden, Acting Assistant Attorney General, David M.
Cohen, Director, A. David Lafer, Senior Trial Counsel, Commercial
Litigation Branch, Civil Division, United States Department of
Justice (Michele Lynch), Myles S. Getlan, Office of the Chief
Counsel for Import Administration, United States Department of
Commerce, of counsel, for defendant.
OPINION
RESTANI, Judge:
This matter is before the court following remand to the
United States Department of Commerce (“Commerce”) of the Final
Consol. Court No. 97-05-00864 Page 2
Results of its second administrative review of the antidumping
determination in Certain Cut-to-Length Carbon Steel from Finland,
62 Fed. Reg. 18,468 (Dep’t Commerce 1997) [hereinafter “Final
Results II”]. Final Results Pursuant to Court Remand, at 1
[hereinafter "Remand Results" or “RR”]. Familiarity with the
court's earlier decision in this case is presumed. See
Rautaruukki Oy v. United States, No. 97-05-00864, 1998 WL 465219(Ct. Int’l Trade Aug. 4, 1998).
Grade “A” Plate Specifications
Background
Before remand, Commerce stated that in Final Results II it
had considered steel plate classified grade “A” by different
national classification societies as not identical for comparison
purposes because the information offered by Rautaruukki Oy
(“Rautaruukki”) in response to Commerce Department questionnaires
had proved an inadequate basis from which to determine whether
the merchandise was or was not identical. Rautaruukki, 1998 WL
465219, at *4. On the basis of some apparently slight
differences in specifications of certain elements’ compositional
ranges, and without evidence of the significance of these
differences, Commerce resorted to what it referred to as its
default position: that without evidence of the insignificance of
Consol. Court No. 97-05-00864 Page 3
these differences, it would consider them significant. Id. at
*3.
At oral argument, Commerce explained that, although it had
not requested the brochures specifically, what it would have
liked to have examined were not Rautaruukki’s comparison charts
displaying information abstracted from the specification
brochures of the national classification societies but the
comprehensive specifications available in the brochures
themselves. The court acknowledged at that time that the
brochures might provide more detail as to the specifications of
the various national classification societies but questioned
whether Commerce would know any more about the significance of
those differences after examining them. When the court asked
what evidence Rautaruukki thought it might submit to provide
insight into the commercial significance of any apparent
differences, Rautaruukki suggested, inter alia, the expert
testimony of a metallurgist.
Because Commerce alleged that a factual question existed,
and because it had not been clear about the information it was
seeking from the respondent, the court remanded the case with the
instruction to Commerce to obtain additional grade “A” plate
information from Rautaruukki and to reconsider its decision as to
Consol. Court No. 97-05-00864 Page 4
whether to treat U.S. grade “AB A” steel plate and all other
grade “A” plate as identical merchandise. Id. at *8.
On remand, Commerce requested from Rautaruukki national
specification brochures for each national classification society
rating grade “A” shipbuilding steel sold in the United States and
Finland. RR, at 1. Rautaruukki provided Commerce both the
current national specifications and those in effect during the
period of review.1 Id. Commerce prepared draft remand results
on which Rautaruukki submitted comments, along with affidavits of
Dr. A.J. DeArdo, the William Kepler Whiteford Professor of
Materials and Engineering and Director of the Basic Metals
Processing Research Institute at the University of Pittsburgh,
and of Mr. Gerrit Johan van Dissel, a practicing Naval Architect
and Marine Engineer. Id. The affidavits addressed the
commercial significance of the specification differences to grade
“A” shipbuilding plate, and both concluded that the differences
lacked commercial significance. van Dissel Affidavit, at 4-5; De
Ardo Affidavit, at 3-5.
1
Commerce makes an unsubstantiated argument that changes in
the specifications during different periods reflect the
commercial significance of the specification differences. The
court cannot regard this as substantial evidence for the alleged
significance of the differences without some evidence (e.g.
comments by the societies relating their intent in making the
changes). There is no dispute that the specifications relevant
to this remand are those in effect during the period of review.
Consol. Court No. 97-05-00864 Page 5
In its Remand Results, Commerce considered steel classified
grade “A” by different national classification societies as non-
identical merchandise. RR, at 8. In response to the court’s
instruction on remand to explain the significance of the observed
specification differences, and in contrast to its earlier
position that the significance of the specification differences
was material although unproven, Commerce stated,
It is our position that any difference in plate
specification, whether large or small, renders
merchandise produced to these different specifications
as “non-identical” merchandise. This is a common
Department policy in steel plate cases and is based on
industry purchasing practices. Customers purchase
material that meets a certain specification. This
decision is based on the customer’s knowledge of the
minimum requirements that the product is guaranteed to
meet under certain conditions. For this reason, the
Department uses plate specification, and not actual
product characteristics, as its major matching
criterion.
RR, at 7 (emphasis supplied).
Discussion
Because the purpose of the remand in this case was to afford
Rautaruukki the opportunity to provide Commerce with the
information it alleged it was seeking, the court will address the
evidence. The only evidence in the record regarding actual
consumer conduct bearing on the significance of the
specifications are the two affidavits submitted by Rautaruukki.
Consol. Court No. 97-05-00864 Page 6
Commerce dismisses this expert testimony as “subjective” and
therefore not the kind of “nonsubjective” evidence to which it
claims the court referred in its opinion ordering remand. When
the court referred to the absence of “nonsubjective” evidence of
consumer conduct,2 the record contained only Rautaruukki’s claims
in its narrative responses to Commerce’s questionnaires
addressing the commercial significance of the carbon range
differences. Unsupported claims by interested parties and
testimony of a materials scientist and a naval engineer, both
experts familiar with the materials and the market, are not of
equivalent status. Commerce was not entitled to disregard this
testimony. This error is particularly grievous, given that there
is no other evidence in the record to the contrary and that
Commerce counters the experts’ report of insignificance with only
its own unsubstantiated assertions to the contrary.
2
The court wrote,
Commerce did not request, and respondent did not
furnish independently, any nonsubjective evidence from
which Commerce could determine the significance of
those differences. Rautaruukki provided only its own
assurance that the difference was not commercially
significant. While this is evidence, Commerce is not
required to accept it. But neither must the court
regard as substantial evidence seemingly nominal
differences in chemical composition, the significance
of which Commerce has not explained.
Rautaruukki, 1998 WL 465219, at *3.
Consol. Court No. 97-05-00864 Page 7
Commerce claims it did not disregard the expert testimony.
The agency, however, apparently observed the evidence only to the
extent necessary to conclude that it was “subjective” and did not
need to be considered. This was not a fair treatment of the
material submitted. Accordingly, the court finds that Commerce
abused its discretion in failing to consider the only material
evidence before it.
Commerce further claims its treatment of grade “A” steel
from different national classification societies as most similar,
rather than identical, merchandise in Rautaruukki’s Second
Administrative Review reflects its standard practice of
distinguishing identical from most similar merchandise and its
standard policy of treating different merchandise differently.
RR at 5-7. In Rautaruukki’s First Administrative Review,
however, Commerce assigned one value to all grade “A” steel
plate. See Rautaruukki, 1998 WL 465219, at *2. Thus, it did not
consider this “standard practice” to apply during the First
Administrative Review. Commerce may view the same facts
differently or change its methodologies, but to be in accordance
with law, the agency is required to articulate its reasons for
the change and accompany these by substantial evidence. Cultivos
Miramonte S.A. v. United States, 980 F. Supp. 1268, 1274 (Ct.
Consol. Court No. 97-05-00864 Page 8
Int’l Trade 1997).
Commerce’s general defense of its division of subject
merchandise into “identical” and “nearly identical” categories,
RR, at 10-11, does not support its choice to draw that line
anyplace in particular, much less specifically between “AB A”
steel and other grade “A” steel. Likewise, Commerce’s contention
that it may look at specifications rather than actual product
characteristics is inapposite, because no one contests this. At
issue is whether Commerce has made a reasonable distinction among
specifications.
Commerce continues to state that it cannot discern whether
the reported seemingly minor differences are commercially
significant3 and claims that it may therefore presume that they
are significant. RR, at 8. Nevertheless, Commerce makes its own
wholly unsubstantited and inconsistent claims about significance
3
The agency allows that it is
because the Department cannot determine which
particular specification requirements may influence a
purchasing decision, [that] the Department deems the
differences in specifications to be significant for
model-matching purposes. Therefore, the Department
maintains its position that differences in plate
specifications are significant and that plate produced
to different specifications constitutes non-identical
merchandise.
RR, at 8.
Consol. Court No. 97-05-00864 Page 9
based on unsupported conclusions about consumer conduct.
Commerce refers to its own hypotheses about the market as
evidence of “purchasing practices.” RR, at 8. The agency
postulates that
Grade A carbon steel shipbuilding plate is guaranteed
by the manufacturer based on the specification that it
meets. Unless a product is sold as “multi-spec”
merchandise, meaning that it meets the specifications
of various classification societies, it is only
guaranteed for the exact specification for which it was
sold. A commercial guarantee provides the customer
with the known minimum performance requirements for a
given product. As mentioned above, not all
classification societies have the same mechanical or
chemical requirements, and therefore cannot guarantee
the product based on the testing requirements of
another classification society. For this reason, not
all specifications of Grade A shipbuilding steel can be
sold interchangeably as Rautaruukki suggest.
Id., at 7-8.
Defendant argues that carbon range differences can be
significant and can affect strength and “weldability” of steel.
Id., at 7. Broadly stated, this must be correct, but this
argument as such does not address whether the differences between
the carbon ranges of different classification societies’ grade
“A” steel plate are of a magnitude that could render those
effects relevant to consumer selection among steel classified by
different societies.
Although Commerce claims that “not all specifications of
Consol. Court No. 97-05-00864 Page 10
Grade A shipbuilding steel can be sold interchangeably,” RR, at
8, the agency also avers that “Commerce was aware during the
course of the second administrative review that products
manufactured to different specifications are interchangeable,”
Id., at 12-13. Commerce maintains that this latter awareness is
not dispositive because “the Department’s definition of
‘identical’ is not synonymous with commercial
interchangeability.” Id., at 12.
Commerce claims that it is not necessarily commercial
interchangeability that matters but rather that any difference
whatsoever justifies its treatment of subject merchandise as non-
identical.4 RR, at 12-13. This position seems inconsistent with
other aspects of the Remand Results and perhaps with the agency’s
prior precedent as to steel model match methodologies. See,
e.g., AK Steel Corp. v. United States, No. 96-05-01312, 1997 WL
728284, at *13 (Ct. Int’l Trade Nov. 14 1997) (agency treatment
of missing product characteristics rested on their commercial
insignificance).
Further, this position, which Commerce newly espouses, is
4
In support, Commerce cites Koyo Seiko Co. v. United States,
66 F.3d 1204, 1210 (Fed. Cir. 1995), in which the Federal Circuit
upheld Commerce’s treatment of non-commercially substitutable
merchandise as identical. The court fails to see how this
permission includes the converse: the treatment of commercially
substitutable merchandise as non-identical.
Consol. Court No. 97-05-00864 Page 11
inconsistent with that asserted before remand. The agency’s new
view is that, in cases where Commerce matches by specification as
opposed to physical characteristics, any difference in
specifications of any type means the merchandise is non-
identical. Because the court relied on Commerce’s pre-remand
position in ordering remand, the court cannot accept this new
explanation for purposes of this review.
Before remand, Commerce took the position that specification
differences might or might not be significant but that the agency
lacked the evidence to determine whether they were. The court
accepted the agency’s theory that some specification differences
may be important while some may not. Recognizing that Commerce
had not clearly requested of Rautaruukki the information upon
which such a determination could be made, the court remanded with
the instruction to Commerce to request that information from
Rautaruukki. See Rautaruukki, 1998 WL 465219, *4. On remand,
Commerce did request the information it had reported needing. In
its Remand Results, however, the agency failed to address the
evidence submitted or to cite other evidence in the record upon
which it could determine whether the reported specification
differences were or were not significant.
After remand, Commerce presents its new theory that all
Consol. Court No. 97-05-00864 Page 12
specification differences are significant. In principle an
agency may change its methodology (or reach different conclusions
based on different fact patterns). The court does not address
whether the new methodology articulated in the Remand Results
might be permissible in future reviews. Commerce has introduced
the new method too late for this review. The introduction of a
new methodology is impermissible when it comes only after a
court-ordered remand to apply the methodology professed by the
agency before remand. See, e.g., Royal Thai Gov’t v. United
States, 18 CIT 277, 285-86, 850 F. Supp. 44, 50-51 (1994) (new
justification advanced only following limited remand
impermissible).
Normally, despite the fact that thus far the evidence
supports only Rautaruukki’s position and despite Commerce’s
inconsistency and half-hearted attempt to comply with the court’s
remand order, the court might permit Commerce to reconsider this
matter again and make some reasoned judgments under the rationale
set forth before remand, but this appears unnecessary and likely
futile in this case.
First, Commerce does not want to consider the significance
of the compositional ranges of certain elements, and to do so
likely would entail significant administrative effort. Second,
Consol. Court No. 97-05-00864 Page 13
the only information presented to the court as to the practical
significance of Commerce’s treatment of steel classified grade
“A” by different classification societies as non-identical
merchandise comes in a footnote to the Remand Results, in which
Commerce states that “treating grade A shipbuilding plates
produced to different specifications as identical merchandise
would not have affected the calculated dumping margin in this
case.” RR, at 8 n.4.
The court will take Commerce at its word. As Rautaruukki
apparently is entitled, on the record developed to date, to have
the merchandise treated as identical; as Commerce recognized this
as at least one permissible methodology based on essentially the
same facts in the first review; and as Commerce alleges no
downside, for purposes of this review, Commerce shall treat all
grade “A” steel plate as identical merchandise. This will not
entail a great deal of effort and will avoid an apparently
useless and time consuming exercise.
Facts Available Margin
In its decision ordering remand, the court directed
Commerce to use for total facts available for wide flats and
beveled plate products the revised weighted-average duty rate of
40.46 ad valorem. Rautaruukki, 1998 WL 465219, at *8. Commerce
Consol. Court No. 97-05-00864 Page 14
indicates that it has done so. RR, at 13-14. As the parties do
not contest this portion of the Remand Results, the court
sustains this re-calculation.
________________________________
Jane A. Restani
Judge
Dated: New York, New York
This day of April, 1999
ERRATA
Rautaruukki Oy v. United States, Consolidated Court No. 97-05-
00864, Slip Op. 99-39, dated April 27, 1999.
On p. 8, ln. 15: change “unsubstantited” to “unsubstantiated”
On p. 9, ln. 19: change “suggest” to “suggests”
April 28, 1999