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Mittal Steel USA, Inc. v. United States , 31 Ct. Int'l Trade 1395 ( 2007 )


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  •                           Slip Op. 07-117
    UNITED STATES COURT OF INTERNATIONAL TRADE
    :
    MITTAL STEEL USA, INC.         :
    (formerly INTERNATIONAL        :
    STEEL GROUP, INC.),            :
    :
    Plaintiff,          :
    :
    v.                        :
    :
    UNITED STATES,                 : Before: Richard K. Eaton, Judge
    :
    Defendant,          : Consol. Court No. 05-00308
    : Public Version
    and                       :
    :
    UNION STEEL MANUFACTURING      :
    CO., LTD.; DONGBU STEEL CO.,   :
    LTD.; POSCO; and HYUNDAI       :
    HYSCO CO., LTD.,               :
    :
    Deft.-Ints.         :
    :
    OPINION
    [United States Department of Commerce’s final results of the
    tenth administrative review of the antidumping duty order
    applicable to corrosion-resistant carbon steel flat products from
    Korea sustained.]
    Dated: August 1, 2007
    Stewart and Stewart (Wesley K. Caine, Caryn B. Schenewerk and
    Sarah V. Stewart), for plaintiff.
    Peter D. Keisler, Assistant Attorney General; Jeanne E. Davidson,
    Director, Commercial Litigation Branch, Civil Division, United
    States Department of Justice; Patricia M. McCarthy, Deputy
    Director, Commercial Litigation Branch, Civil Division, United
    States Department of Justice (Stephen C. Tosini); Office of the
    Chief Counsel for Import Administration, United States Department
    of Commerce (Ada Loo and Irene H. Chen), of counsel, for
    defendant.
    Troutman Sanders LLP (Donald B. Cameron and Brady W. Mills), for
    defendant-intervenors Union Steel Manufacturing Co., Ltd. and
    Consol. Court No. 05-00308                                Page   2
    Dongbu Steel Co., Ltd.
    Akin, Gump, Strauss, Hauer & Feld, LLP (Spencer S. Griffith,
    Warren E. Connelly, Jaehong D. Park, Jarrod M. Goldfeder, Jason
    A. Park and Lisa W. Ross), for defendant-intervenors POSCO and
    Hyundai HYSCO Co., Ltd.
    Eaton, Judge:   This consolidated action1 is before the court
    on plaintiff Mittal Steel USA, Inc.’s (“Mittal”) motion for
    judgment upon the agency record pursuant to USCIT Rule 56.2.     By
    its motion, plaintiff contests certain aspects of the United
    States Department of Commerce’s (“Commerce” or the “Department”)
    final results of the tenth administrative review of the
    antidumping duty order applicable to imports into the United
    States of corrosion-resistant carbon steel flat products (“CORE”)
    from Korea made during the period of review (“POR”) August 1,
    2002, to July 31, 2003.   See Certain CORE from the Republic of
    Korea, 70 Fed. Reg. 12,443 (Dep’t of Commerce Mar. 14, 2005)
    (tenth admin. rev.) (“Final Results”).   In addition, plaintiff
    contests portions of the Department’s conclusions with respect to
    Hyundai HYSCO Co., Ltd.’s (“HYSCO”) new shipper review, which was
    part of the same determination.   See 19 U.S.C. § 1675(a)(2)(B)
    (2000).   Jurisdiction is had pursuant to 28 U.S.C. § 1581(c)
    1
    This action includes court numbers 05-00308 and 05-
    00309. See Mittal Steel USA ISG, Inc. v. United States, Consol.
    Ct. No. 05-00308 (Oct. 5, 2005) (order granting plaintiff’s
    consent motion to consolidate cases). Court number 05-00309
    involved plaintiff’s challenge to the final results of the new
    shipper review.
    Consol. Court No. 05-00308                                  Page   3
    (2000), and 19 U.S.C. § 1516a(a)(2)(B)(iii).      For the reasons set
    forth below, Commerce’s Final Results are sustained.
    BACKGROUND
    Plaintiff is a domestic producer of CORE products.      On
    August 19, 1993, Commerce published the antidumping duty order
    applicable to imports into the United States of CORE from Korea.
    See Certain CORE From Korea, 58 Fed. Reg. 44,159 (Dep’t of
    Commerce Aug. 19, 1993) (“CORE Order”).      After having conducted
    nine prior administrative reviews of the CORE Order, Commerce, on
    August 1, 2003, published notice that it would consider requests
    for what would be the tenth review.       See Certain CORE from Korea,
    68 Fed. Reg. 45,218 (Dep’t of Commerce Aug. 1, 2003) (notice).
    Thereafter, on August 29, 2003, plaintiff asked Commerce to
    conduct an administrative review with respect to the behavior and
    market activities of certain Korean respondents including: POSCO;
    Dongbu Steel Co., Ltd. (“Dongbu”); and Union Steel Manufacturing
    Co., Ltd. (“Union”).   The tenth administrative review was
    initiated on September 30, 2003.    See Initiation of Antidumping
    and Countervailing Duty Reviews, 68 Fed. Reg. 56,262, 56,263–64
    (Dep’t of Commerce Sept. 30, 2003) (notice).      In addition, during
    the proceeding, HYSCO sought a new shipper review of its sales of
    CORE to the United States pursuant to 19 U.S.C. § 1675(a)(2)(B),
    which Commerce initiated on October 3, 2003.       See Certain CORE
    Consol. Court No. 05-00308                               Page    4
    from Korea, 68 Fed. Reg. 57,423 (Dep’t of Commerce Oct. 3, 2003)
    (notice).
    On March 14, 2005, Commerce published the Final Results of
    both the tenth administrative review and HYSCO’s new shipper
    review.   See Final Results, 70 Fed. Reg. at 12,443.   Based on its
    analysis, Commerce assigned subject imports from POSCO a 2.34
    percent dumping margin; Union and Dongbu received de minimis
    margins;2 and HYSCO, as a result of the new shipper review,
    received a margin of zero.   See id. at 12,445.
    STANDARD OF REVIEW
    When reviewing a final antidumping determination the court
    “shall hold unlawful any determination, finding, or conclusion
    found . . . to be unsupported by substantial evidence on the
    record, or otherwise not in accordance with law.”   19 U.S.C.
    § 1516a(b)(1)(B)(i).   “Substantial evidence is ‘such relevant
    evidence as a reasonable mind might accept as adequate to support
    a conclusion.’”   Huaiyin Foreign Trade Corp. (30) v. United
    States, 
    322 F.3d 1369
    , 1374 (Fed. Cir. 2003) (quoting Consol.
    2
    Under the statute, Commerce is required to “disregard
    any weighted average dumping margin that is de minimis as defined
    in section 1673b(b)(3) of this title.” 19 U.S.C. § 1673d(a)(4).
    “[A] weighted average dumping margin is de minimis if the
    administering authority determines that it is less than 2 percent
    ad valorem or the equivalent specific rate for the subject
    merchandise.” 19 U.S.C. § 1673b(b)(3). Thus, Union and Dongbu
    were not required to pay antidumping duties on their entries.
    Consol. Court No. 05-00308                                Page   5
    Edison Co. v. NLRB, 
    305 U.S. 197
    , 229 (1938)).   The existence of
    substantial evidence is determined “by considering the record as
    a whole, including evidence that supports as well as evidence
    that ‘fairly detracts from the substantiality of the evidence.’”
    Id. (quoting Atl. Sugar, Ltd. v. United States, 
    744 F.2d 1556
    ,
    1562 (Fed. Cir. 1984)).
    In addition, “[a]s long as the agency’s methodology and
    procedures are reasonable means of effectuating the statutory
    purpose, and there is substantial evidence in the record
    supporting the agency’s conclusions, the court will not impose
    its own views as to the sufficiency of the agency’s investigation
    or question the agency’s methodology.”    Ceramica Regiomontana,
    S.A. v. United States, 10 CIT 399, 404–05, 
    636 F. Supp. 961
    , 966
    (1986), aff’d, 
    810 F.2d 1137
    , 1139 (Fed. Cir. 1987).
    DISCUSSION
    I. Model Match Methodology
    Plaintiff’s first claim is that the Department unreasonably
    denied its request that respondents be asked to provide more
    detailed product data for use in Commerce’s model match
    criteria.3   The agency employs these criteria to ensure that the
    3
    The criteria include: type; reduction process; metallic
    coating process; clad material/coating metal; quality; yield
    strength; metallic coating weight; minimum thickness; width;
    form; temper rolling; and leveling. Letter from Stewart and
    (continued...)
    Consol. Court No. 05-00308                                Page   6
    merchandise sold in the U.S. market is being compared “with a
    suitable home-market product” for purposes of calculating
    antidumping duties.   Koyo Seiko Co. v. United States, 
    66 F.3d 1204
    , 1209 (Fed. Cir. 1995); see also 19 U.S.C.
    § 1677(16)(C)(iii).
    Commerce maintains that, in accordance with its practice, it
    chose the model match criteria during the initial sales at less
    than fair value investigation and has used them in each review
    since in order to provide a “consistent methodology from review
    to review” upon which respondents could rely.   Def.’s Resp. Pl.’s
    Mot. J. Agency R. (“Def.’s Resp.”) 9; see also Certain CORE From
    Korea, 58 Fed. Reg. 37,176 (Dep’t of Commerce July 9, 1993).
    It is plaintiff’s position that, had respondents been asked
    for more specific product data, it would have been able to
    conduct a more detailed analysis and possibly uncover a
    compelling reason for changing the criteria, thus enabling
    Commerce to produce more accurate results.   See Pl.’s Mem. Supp.
    Mot. J. Agency R. (“Pl.’s Mem.”) 12 (“Commerce refused even to
    request that respondents submit the more precise data.    This
    precluded Mittal from analyzing detailed sales information that
    might have substantiated Mittal’s fair concerns . . . .”)
    3
    (...continued)
    Stewart, Wesley K. Caine, to Commerce (May 28, 2004) Ex. A, at A-
    2.
    Consol. Court No. 05-00308                                Page   7
    (emphasis omitted).4
    For Commerce, the need for consistency in the model match
    criteria stems from its duty to calculate antidumping rates as
    accurately as possible.   See, e.g., Lasko Metal Prods., Inc. v.
    United States, 
    43 F.3d 1442
    , 1446 (Fed. Cir. 1994).   Because
    consistency is, according to Commerce, linked inextricably to
    accuracy, the Department maintains that it changes its model
    match criteria only if a participant can demonstrate a
    4
    For instance, plaintiff states:
    Commerce defined “widths” by reference to the
    following four measurement groups: (a) >= ½"
    but <24"; (b) >=24" but <40"; (c) >=40" but
    <60"; and (d) >=60". Similarly, it defined
    “thickness” by reference to these 11 separate
    groups: (a) <0.014"; (b) >=0.014" but
    <0.015"; (c) >=0.015" but <0.016; (d)
    >=0.016" but <0.018"; (e) >=0.018" but
    <0.022"; (f) >=0.022" but <0.028"; (g)
    >=0.028" but <0.044"; (h) >=0.044" but
    <0.060"; (i) >=0.060" but <0.085"; (j)
    >=0.085" but <0.130"; and (k) >=0.130".
    Thus, to identify goods for price
    comparisons, Commerce would treat as
    “identical” articles all CORE within a given
    range, so far as the particular criterion was
    concerned. Put differently, articles with
    different physical dimensions could still be
    treated as “identical,” and Commerce could
    directly compare their prices in antidumping
    margin calculations.
    Pl.’s Mem. 6.   In Mittal’s view, requiring respondents to
    provide product data on a narrower range of dimensions might have
    provided a compelling reason to change the criteria. That is,
    more specific data could, according to plaintiff, have
    demonstrated a substantial difference between the subject
    merchandise and the purportedly comparable foreign like product.
    Consol. Court No. 05-00308                              Page    8
    “compelling reason” for the modification.   Def.’s Resp. 9; see
    also Mem. from Eric B. Greynolds, Program Manager, Office of
    AD/CVD Enforcement VI, to Melissa G. Skinner, Dir., Office of
    AD/CVD Enforcement VI (Aug. 27, 2004) (“Model Match Mem.”) at 5
    (citing Steel Wire Rope From Malaysia, 66 Fed. Reg. 12,759 (Dep’t
    of Commerce Feb. 28, 2001); Antifriction Bearings (Other than
    Tapered Roller Bearings) and Parts Thereof From France; et al.,
    57 Fed. Reg. 28,360, 28,366 (Dep’t of Commerce June 24, 1992);
    Tapered Roller Bearings, Finished and Unfinished, and Parts
    Thereof, From Japan, 56 Fed. Reg. 41,508, 41,509 (Dep’t of
    Commerce Aug. 21, 1991)).
    Plaintiff first introduced its concerns in a letter from its
    counsel to Commerce.   See Letter from Stewart and Stewart, Wesley
    K. Caine, to Commerce (May 28, 2004) (“May 28 Letter”).    By this
    letter, plaintiff sought to demonstrate the necessity of
    demanding more specific data by claiming that the product ranges
    in Commerce’s questionnaire, for thickness, width, type and
    quality did not correspond with the actual data contained in
    Union’s, Dongbu’s and POSCO’s pricing sheets.   See May 28 Letter
    at 2.   To bolster its position that Commerce should have asked
    respondents for additional product and pricing information,
    plaintiff compared merchandise within Commerce’s ranges to the
    Consol. Court No. 05-00308                                Page    9
    prices charged.5   Mittal concluded that Commerce’s ranges
    produced a variance in prices sufficient to warrant the agency’s
    issuance of a supplemental questionnaire.     See Pl.’s Mem. 27
    (“This should have prompted the agency to at least request more
    precise data, which would have allowed it and Mittal to pursue
    the matching issues more deeply via computer analysis.    However,
    the agency refused to request the information, much less perform
    analyses, which left valid issues un-addressed.”) (emphasis
    omitted); see also Pl.’s Mem. 27 (citing Freeport Minerals Co. v.
    United States, 
    776 F.2d 1029
    , 1033 (Fed. Cir. 1985)).    Before the
    court, plaintiff continues to press this claim insisting,
    5
    Specifically, plaintiff [[
    ]] Pl.’s
    Mem. 8. For instance, with respect to thickness, plaintiff
    contends that it examined
    [[
    ]]
    Pl.’s Mem. 8 (emphasis omitted). Plaintiff contends that it
    found similar results after analyzing [[
    ]]. See Pl.’s Mem. 8–10.
    Consol. Court No. 05-00308                                Page    10
    however, that it is not “asking the Court at this point to rule
    categorically that Commerce’s methodology completely fails as a
    matter of law.”   Pl.’s Mem. 27 n.13.
    According to Commerce, it found the issuance of a
    supplemental questionnaire was not required because plaintiff’s
    May 28 Letter, and the various price analyses contained therein,
    failed to establish its necessity.    As Commerce stated in its
    Model Match Memorandum:
    Regarding the price lists cited by
    [plaintiff] in [its] submission, we find
    there is no evidence indicating that the
    price lists reflect actual transaction
    prices, and, thus, we find that they do not
    necessarily reflect the Korean respondents’
    actual sales and pricing practices. In
    addition, several of the price lists cited by
    [plaintiff] are exclusive to the Korean
    respondents’ home market and, thus, offer no
    information on how the products are sold in
    the U.S. market. Therefore, we find that the
    internal pricing guidelines cited by
    [plaintiff]: (1) fail to indicate a change in
    the Korean respondents’ production/pricing
    practices and (2) do not necessarily reflect
    the norms of the Korean respondents.
    Model Match Mem. at 5–6.
    Commerce further argues that plaintiff “overstates the case
    that narrower bands for model matches will necessarily create
    more accurate results.”    Def.’s Resp. 14.   The Department insists
    that “the more bands that are applied, the fewer actual sale to
    sale matches there will be -- requiring Commerce to resort to
    constructed value for additional United States sales.”    Def.’s
    Consol. Court No. 05-00308                               Page    11
    Resp. 14.
    As has been noted, plaintiff does not demand a change in the
    Department’s methodology.    Mittal’s sole claim is that Commerce
    should have sought more information from the respondents.     The
    stated purpose of plaintiff’s request is to uncover additional
    information that it hopes will provide a basis for a challenge to
    Commerce’s model match criteria.   Therefore, the court is asked
    to determine whether Commerce supported with substantial evidence
    its decision not to issue a supplemental questionnaire seeking
    additional model match data.   The court finds that Commerce has
    justified its decision.
    First, as noted by Commerce, the price lists plaintiff
    references are just what they appear to be — price lists.     This
    being the case, Commerce was justified in finding that they did
    not necessarily reflect actual sales.   Commerce, on the other
    hand, had obtained actual sales data from the questionnaire
    responses upon which it reasonably relied.   Also, Commerce
    observed that some of plaintiff’s evidence of respondents’
    pricing practices related solely to home market sales, which shed
    no light on the price of CORE sold by respondents in the United
    States.   Moreover, Commerce was not unreasonable in finding that
    plaintiff’s demand to narrow the range of dimensions compared
    would create more inaccuracies in dumping calculations because
    fewer actual sales would be available for direct comparison.
    Consol. Court No. 05-00308                                 Page   12
    Thus, because plaintiff has not made out a sufficient case
    for the issuance of a supplemental questionnaire and because the
    Department had in its possession all of the information needed to
    make a fair and reasonable product comparison, the court sustains
    Commerce’s decision not to seek additional product and sales
    data.
    II.   Constructed Export Price: Deduction of Selling Expenses
    A.   Location of Incurred Costs
    Plaintiff next insists that Commerce unlawfully failed to
    deduct from constructed export price (“CEP”)6 certain “core
    6
    Constructed export price (“CEP”) is
    the price at which the subject merchandise is
    first sold (or agreed to be sold) in the
    United States before or after the date of
    importation by or for the account of the
    producer or exporter of such merchandise or
    by a seller affiliated with the producer or
    exporter, to a purchaser not affiliated with
    the producer or exporter, as adjusted under
    subsections (c) and (d) of this section.
    19 U.S.C. § 1677a(b). CEP, or U.S. price, is then compared to
    normal value to calculate the dumping margin. Normal value is
    defined as
    the price at which the foreign like product
    is first sold (or, in the absence of a sale,
    offered for sale) for consumption in the
    exporting country, in the usual commercial
    quantities and in the ordinary course of
    trade and, to the extent practicable, at the
    same level of trade as the export or
    constructed export price . . . .
    (continued...)
    Consol. Court No. 05-00308                                 Page   13
    selling expenses7 associated with resale transactions of subject
    merchandise in the United States . . . merely because [the
    expenses] involved activities that occurred ‘outside’ the United
    States.”   Pl.’s Mem. 33.   More specifically, plaintiff asserts
    that Commerce committed legal error by its unwillingness to make
    a downward adjustment to CEP equal to the claimed selling
    expenses incurred by the Korean parents in facilitating the
    resales of CORE to unaffiliated U.S. customers.8   See Pl.’s Mem.
    12–13.   For plaintiff, under 19 U.S.C. § 1677a(d),9 if “the
    6
    (...continued)
    19 U.S.C. § 1677b(a)(1)(B)(i).
    7
    Plaintiff’s reference to “core” selling functions is
    apparently intended to describe such activities as negotiating
    price, entering into sales contracts and approving resales;
    however, neither the statute nor the regulations define the
    phrase. See Pl.’s Mem. 39 (suggesting that Commerce define
    “core” functions, if necessary).
    8
    The Korean parent companies are respondents: Union,
    Dongbu, POSCO and HYSCO.
    9
    Subsection 1677a(d) provides, in pertinent part:
    [T]he price used to establish [CEP] shall
    also be reduced by——
    (1) the amount of any of the
    following 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)——
    (A) commissions for
    (continued...)
    Consol. Court No. 05-00308                                     Page   14
    activities and associated expenses relate to the resales in the
    United States,” the deduction must be made regardless of when and
    where the expenses were incurred.          Pl.’s Mem. 12.
    With respect to plaintiff’s legal contention, Commerce does
    not disagree.        That is, the Department maintains that it makes
    justified CEP deductions no matter where expenses are incurred or
    paid.        See Def.’s Resp. 16 (noting that Commerce deducts from CEP
    selling expenses that “relate directly to the sale to an
    unaffiliated purchaser, even if, for example, the foreign parent
    of the affiliated U.S. importer pays those expenses”) (internal
    quotation marks & citation omitted).          Rather, Commerce urges that
    its decision here not to deduct certain costs from CEP was
    9
    (...continued)
    selling the subject
    merchandise in the United
    States;
    (B) expenses that result
    from, and bear a direct
    relationship to, the
    sale, such as credit
    expenses, guarantees and
    warranties;
    (C) any selling expenses
    that the seller pays on
    behalf of the purchaser;
    and
    (D) any selling expenses
    not deducted under
    subparagraph (A), (B), or
    (C) . . . .
    19 U.S.C. § 1677a(d)(1).
    Consol. Court No. 05-00308                                Page   15
    appropriate because the amounts expended by respondents related
    to sales to affiliated U.S. importers and not to unaffiliated
    U.S. customers.   See Def.’s Resp. 14; see also 19 C.F.R.
    § 351.402(b) (2005);10 Issues & Decisions for the Final Results
    of the Antidumping Duty New Shipper Review and the Antidumping
    Duty Administrative Review of Certain CORE from Korea (Dep’t of
    Commerce Mar. 7, 2005) (“Issues & Decs. Mem.”) at 10.
    Moreover, at no point does Commerce state that it did not
    deduct the expenses because they were incurred in Korea.    Rather,
    it is apparent that Commerce’s justification for its decision to
    not deduct from respondents’ CEP certain expenses is its
    conclusion that selling expenses can only be deducted from CEP
    when they are incurred in connection with the sale of merchandise
    to an unaffiliated U.S. customer.    Thus, plaintiff’s legal
    argument that Commerce acted unlawfully by refusing to deduct
    10
    The regulation provides:
    In establishing [CEP] under section 772(d) of
    the Act, the Secretary will make adjustments
    for expenses associated with commercial
    activities in the United States that relate
    to the sale to an unaffiliated purchaser, no
    matter where or when paid. The Secretary
    will not make an adjustment for any expense
    that is related solely to the sale to an
    affiliated importer in the United States,
    although the Secretary may make an adjustment
    to normal value for such expenses under
    section 773(a)(6)(C)(iii) of the Act.
    19 C.F.R. § 351.402(b).
    Consol. Court No. 05-00308                                Page   16
    from CEP selling expenses incurred by respondents simply because
    those expenses were from activities taking place outside the
    United States is without merit.
    B.   Costs Related to Resales of CORE to Unaffiliated U.S.
    Purchasers
    Plaintiff also raises the factual argument that respondents
    did, in fact, incur core selling expenses “associated with
    commercial activities in the United States that relate to the
    sale to an unaffiliated purchaser . . . .”   19 C.F.R.
    § 351.402(b).   Commerce’s failure to deduct those expenses from
    CEP was, in Mittal’s view, unsupported by substantial evidence.
    To buttress its point, plaintiff sets forth what it believes
    were the selling functions performed by each respondent in the
    resale of its merchandise in the United States.   For instance,
    with respect to Union’s relationship with its affiliate DKA,
    plaintiff states:
    Union sold CORE to DKA, its U.S. affiliate,
    who in turn resold the merchandise to
    unrelated U.S. buyers in reportable CEP
    transactions. The record shows that Union,
    the parent, performed many selling functions
    in the affiliate’s U.S. re-sales. In fact,
    describing the affiliate’s limited role,
    Union reported that DKA was the importer of
    record for all of Union’s U.S. sales and
    acted as a communications liaison between
    U.S. customers and Union and as a processor
    of sales-related documentation. Thus, while
    DKA receives inquiries from customers and may
    propose a price for the purchase, it does not
    have the authority to accept or reject the
    order. In fact, DKA does not even take
    possession of the imported goods; rather,
    Consol. Court No. 05-00308                                    Page   17
    Union ships the goods directly to DKA’s U.S.
    customer.
    Pl.’s Mem. 13 (internal quotation marks & citations omitted)
    (emphasis in original).     In addition, plaintiff states that Union
    engaged in other activities aimed at selling CORE to unrelated
    U.S. customers including handling claims for defective CORE sold
    in the U.S. and sending company engineers directly to a
    customer’s plant in order to assist that customer with
    streamlining its facility.     See Pl.’s Mem. 13.11   Thus, it is
    plaintiff’s contention that the costs absorbed by Union in the
    resale of CORE to an unaffiliated U.S. customer should have been
    deducted from CEP.
    Plaintiff makes similar claims with regard to POSCO, Dongbu
    and HYSCO.   Based on its construction of the facts, plaintiff
    maintains that the record reveals a substantial level of
    involvement by the respondents in the resale of CORE to
    unaffiliated U.S. purchasers.     That is, Mittal insists that the
    respondents incurred selling expenses related to the resale of
    CORE to unaffiliated buyers in the United States and, thus, in
    accordance with 19 U.S.C. § 1677a(d)(1) and 19 C.F.R.
    § 351.402(b), Commerce is required to deduct the costs from CEP.
    See Pl.’s Mem. 33, 37–38.
    11
    Moreover, plaintiff suggests that Union [[
    ]]   Pl.’s Mem. 13.
    Consol. Court No. 05-00308                                Page   18
    Despite plaintiff’s contentions, the court finds that
    Commerce supported with substantial evidence its decision to
    refrain from deducting the selling expenses identified by
    plaintiff as being associated with the resale of CORE to
    unaffiliated purchasers in the United States.    Commerce must
    deduct from the starting price only those expenses that are
    “associated with commercial activities in the United States that
    relate to the sale to an unaffiliated purchaser . . . .”    19
    C.F.R. § 351.402(b).   Commerce, however, “will not make an
    adjustment [to CEP] for any expense that is related solely to the
    sale to an affiliated importer in the United States . . . .”      Id.
    Here, “Commerce requested and received from respondents
    information regarding all business or operational relationships
    affecting the development, product, sale or distribution of the
    subject merchandise,” verified that information, and found that
    respondents’ expenses did not relate to sales to unaffiliated
    U.S. buyers.   Def.’s Resp. 16.   For example, verification of
    Dongbu’s questionnaire responses revealed:
    [S]ales negotiations begin with Dongbu USA
    [Dongbu’s United States affiliate] and the
    U.S. customer. Dongbu USA informs Dongbu of
    the sales order, then Dongbu inputs the sales
    order into Dongbu’s sales system, at which
    time the merchandise is produced to order.
    Company officials stated that Dongbu ships
    directly to the port of the customer’s
    request, which is stated in the sales
    contract between Dongbu USA and customer.
    Company officials added that the shipment
    arrangements are made by Dongbu according to
    Consol. Court No. 05-00308                                 Page    19
    the terms that are negotiated between the
    customer and Dongbu USA. . . . Company
    officials also stated that Dongbu USA clears
    the merchandise through Customs and arranges
    for the payments of the customs broker and
    customs duties. . . . Company officials
    stated that Dongbu USA generally issues the
    invoice to the customer after it has been
    shipped, but before it arrives to the United
    States. . . . They stated that the customer
    pays Dongbu USA . . . .
    Dongbu Verification Mem. (Dep’t of Commerce Feb. 1, 2005) at 29;
    see also id. at 30 (“We reviewed the list of selling activities
    performed by Dongbu and Dongbu USA for each market, and
    distribution channel.    We also reviewed the list of selling
    activities and confirmed with company officials the level of
    activity in each market . . . .      We noted no discrepancies.”).
    The Department understood this evidence to indicate that Dongbu’s
    U.S. affiliate, not Dongbu, incurred the selling expenses
    resulting from U.S. resales of CORE.      Because “[t]here is no
    evidence on the record to suggest [Dongbu’s] reported . . .
    selling expenses are directly attributable to U.S. sales,”
    Commerce concluded that these expenses were not deductible from
    CEP.    Issues & Decs. Mem. at 10.
    Commerce made similar findings with respect to the level of
    involvement in resales of CORE to unaffiliated U.S. purchasers
    upon verifying Union’s, POSCO’s and HYSCO’s responses and
    likewise found the reported incurred expenses to be unrelated to
    those sales.    See Union Verification Mem. (Dep’t of Commerce Feb.
    Consol. Court No. 05-00308                                Page    20
    1, 2005) at 20; Sales Verification Rep. for POSCO (Dep’t of
    Commerce Feb. 1, 2005) at 26; Verification of Sales and Cost
    Information Submitted by HYSCO (Dep’t of Commerce Feb. 1, 2005)
    at 9.
    As discussed above, plaintiff interprets the record evidence
    to indicate a higher level of involvement by the respondents in
    the resale of CORE than that found by the Department.     Commerce,
    however, considered the verification data and determined that
    there was “no evidence on the record to suggest respondents’
    reported . . . selling expenses [were] directly attributable to
    U.S. sales.”    Issues & Decs. Mem. at 10.   In fact, after
    verifying respondents’ questionnaire responses, the Department
    found that the expenses respondents incurred in selling CORE to
    their affiliates in the United States were general and not
    related to resales of CORE to unaffiliated buyers.     See id.
    An examination of Commerce’s analysis and of the evidence
    submitted by plaintiff confirms that Commerce was justified in
    its findings.    That is, plaintiff has not made a case that the
    selling functions performed by the parent companies were
    mischaracterized by Commerce.    In addition, Commerce has
    adequately explained its conclusions.    Thus, despite plaintiff’s
    claim to the contrary, the court finds that the Department
    “articulate[d] a[] rational connection between the facts found
    and the choice made.”    Burlington Truck Lines, Inc. v. United
    Consol. Court No. 05-00308                                Page   21
    States, 
    371 U.S. 156
    , 168 (1962).
    Based on the foregoing, the court sustains as supported by
    substantial evidence Commerce’s refusal to deduct selling
    expenses from CEP because the Department reasonably concluded
    that respondents’ reported expenses were not directly associated
    with resales of CORE to unaffiliated purchasers in the United
    States.
    III. Dongbu and POSCO CEP Offset Adjustments
    Next, plaintiff takes issue with Commerce’s grant of a CEP
    offset to normal value to both POSCO and Dongbu to adjust for
    their home-market sales having been made at a more advanced stage
    of distribution than their sales in the United States.12    See 19
    U.S.C. § 1677b(a)(7)(B).   Specifically, plaintiff asserts that
    “Commerce acted unreasonably when it allowed the . . . ‘CEP
    offsets’ to respondents who failed to provide full descriptions
    of all selling activities at the CEP [level of trade].”    Pl.’s
    Mem. 24.   For these purposes, CEP sales involve the resale of
    12
    The Federal Circuit has stated that “the level of trade
    adjustment is designed to ensure that the normal value and U.S.
    price are being compared . . . at the same level of trade, that
    is, at the same marketing stage in the chain of distribution that
    begins with the manufacturer.” Micron Tech., Inc. v. United
    States, 
    243 F.3d 1301
    , 1314 (Fed. Cir. 2001). Indeed, an
    adjustment to normal value is necessary because “[e]ach more
    remote level of trade must be characterized by an additional
    layer of selling activities, amounting in the aggregate to a
    substantially different selling function.” Id. (internal
    quotation marks, alteration & citation omitted).
    Consol. Court No. 05-00308                              Page   22
    goods from the U.S. affiliate to an unaffiliated U.S. buyer.
    Because it is often the case that the U.S. affiliate will absorb
    the majority of the selling expenses and perform most, if not all
    of the selling functions in the resale to an unaffiliated buyer,
    Commerce looks to the “sale to the affiliate, not the affiliate’s
    resale transaction” for purposes of determining the CEP level of
    trade (“LOT”).   Pl.’s Mem. 18 (emphasis in original); see also
    Certain Hot-Rolled Carbon Steel Flat Products from Romania, 70
    Fed. Reg. 72,984, 72,987 (Dep’t of Commerce Dec. 8, 2005)
    (prelim. results) (stating that “[f]or CEP sales, the U.S. level
    of trade is the level of the constructed sale from the exporter
    to the affiliated importer”).13   Because neither Dongbu nor POSCO
    13
    While CEP is statutorily defined as “the price at which
    the subject merchandise is first sold . . . in the United States
    before or after the date of importation by . . . a seller
    affiliated with the producer or exporter, to a purchaser not
    affiliated with the producer or exporter,” 19 U.S.C. § 1677a(b),
    for purposes of comparing the level of trade for CEP sales,
    Commerce examines the selling functions performed by the foreign
    producer or exporter in selling the merchandise to its U.S.
    affiliate. See Preamble to Final Rule, 62 Fed. Reg. 27,296,
    27,370 (Dep’t of Commerce May 19, 1997) (“[T]he Department will
    base the LOT of CEP on the U.S. affiliate’s starting price in the
    United States . . . .”).
    In an unrelated investigation, Commerce explained its
    procedure for determining the CEP LOT:
    First, the indirect selling expenses incurred
    in the United States by [U.S. affiliate]
    CIC’s sales departments are, pursuant to [19
    U.S.C. § 1677a(d)(1)(D)], properly excluded
    from the price calculated for the U.S. CEP
    sales. Pursuant to this and other . . .
    adjustments, [the U.S. affiliate]’s price to
    (continued...)
    Consol. Court No. 05-00308                                   Page   23
    reported any selling expenses incurred for sales to their U.S.
    affiliates, plaintiff insists that the record does not support
    Commerce’s grant of a CEP offset.
    Commerce is required by statute to make an LOT adjustment to
    normal value to account for the price differential resulting from
    a respondent’s sales in the home market being made at a more
    advanced LOT than its sales to the United States.14     See 19
    U.S.C. § 1677b(a)(7)(A).     The statute further provides that the
    Department only makes an LOT adjustment to normal value if “the
    difference in [LOT] . . . is demonstrated to affect price
    comparability, based on a pattern of consistent price differences
    between sales at different [LOTs] in the country in which normal
    value is determined.”     19 U.S.C. § 1677b(a)(7)(A)(ii).
    13
    (...continued)
    its unaffiliated customer (the “starting
    price”) is transformed into a constructed
    export price, i.e., a constructed equivalent
    of a market-based sale by [foreign
    producers/exporters] Cinsa or ENASA to CIC
    [the U.S. affiliate]. This is the point at
    which the level of trade comparison is made.
    Porcelain-on-Steel Cookware From Mexico, 63 Fed. Reg. 38,373,
    38,378 (Dep’t of Commerce July 16, 1998) (final results).
    14
    The Federal Circuit has noted that “[n]either the
    statute nor the accompanying Statement of Administrative Action
    . . . defines the phrase ‘same level of trade.’” Micron Tech.,
    243 F.3d at 1305 (citation omitted). Nonetheless, the Court has
    interpreted the term “to mean comparable marketing stages in the
    home and United States markets, e.g., a comparison of wholesale
    sales in Korea to wholesale sales in the United States.” Id.
    Consol. Court No. 05-00308                                Page   24
    Where the record contains insufficient data to make an LOT
    adjustment, a CEP offset to normal value may be granted.15
    When normal value is established at a[n]
    [LOT] which constitutes a more advanced stage
    of distribution than the [LOT] of the [CEP],
    but the data available do not provide an
    appropriate basis to determine under
    subparagraph (A)(ii) a[n] [LOT] adjustment,
    normal value shall be reduced by the amount
    of indirect selling expenses incurred in the
    country in which normal value is determined
    on sales of the foreign like product . . . .
    19 U.S.C. § 1677b(a)(7)(B).    Unlike an LOT adjustment, then, the
    CEP offset does not demand evidence of an effect on price
    comparability.   Indeed, the CEP offset can only be used in the
    absence of such evidence.     See 19 C.F.R. § 351.412(f)(3) (“Where
    available data permit the Secretary to determine under paragraph
    (d) of this section whether the difference in [LOT] affects price
    15
    Congress anticipated the situation where the record
    would support a finding that sales were made at different levels
    of trade but would fall short of establishing that the difference
    had a measurable effect on price comparability and thus created
    the CEP offset adjustment. See Statement of Administrative
    Action, Uruguay Round Agreements Act, accompanying H.R. Rep. No.
    103-316, 656, 830–31 (1994), reprinted in 1994 U.S.C.C.A.N. 4040,
    4169 (“SAA”).
    The constructed export price offset
    adjustment will only be made where normal
    value is established at a level of trade more
    remote from the factory than the level of
    trade of the constructed export price; i.e.,
    where the [LOT] adjustment . . . if it could
    have been quantified, would likely have
    resulted in a reduction of the normal value.
    Id. at 831, 1994 U.S.C.C.A.N. at 4169.
    Consol. Court No. 05-00308                              Page     25
    comparability, the Secretary will not grant a [CEP] offset.    In
    such cases, . . . the Secretary will make a[n] [LOT]
    adjustment.”).
    Finding sales to be at a more advanced stage of distribution
    can be shown by evidence that the foreign producer or exporter
    performs more selling activities, and thus incurs more selling
    expenses, in its home market than it does in the United States.
    See Micron Tech., Inc. v. United States, 
    243 F.3d 1301
    , 1305
    (Fed. Cir. 2001) (“The effect [of the CEP offset] is to reduce
    the price of the more advanced level of trade by ‘indirect
    selling expenses’ that have been included in the price on the
    apparent theory that such costs would not have been incurred if
    the sale had been made on a less advanced [LOT].”).
    Here, Commerce allowed both Dongbu and POSCO a CEP offset.
    In reaching its decision to grant the offset, Commerce examined
    the data submitted by each respondent for its home-market and
    United States sales.
    After comparing Dongbu’s selling functions in the home
    market to its selling functions in the United States, the
    Department “found a less advanced level of trade in the U.S.
    market.”   Calculation Mem. for Dongbu (Dep’t of Commerce Aug. 30,
    2004) (“Dongbu Offset Mem.”) at 2.   For that reason, Commerce
    found warranted the grant of a CEP offset in order to “match[]
    the U.S. CEP sales to sales at the same level of trade in the
    Consol. Court No. 05-00308                                   Page    26
    home market.”     Id.
    The Department also reviewed POSCO’s reported home-market
    selling activities and
    granted a CEP offset because we found that
    the home market sales16 were at a different
    stage of distribution compared to sales to
    the U.S. [stage of distribution] with respect
    to the [home market] [stage of distribution].
    Because the [stage of distribution] of the
    U.S. sales is different than the home market
    [stage of distribution] and there is no home
    market [stage of distribution] comparable to
    that of the CEP sales, there is no reliable
    basis for quantifying a[n] LOT adjustment
    . . . . Therefore, a CEP offset was applied
    to [normal value] for the [normal value]-CEP
    comparisons.
    Id. at 10.
    Plaintiff’s principal claim is that Commerce lacked evidence
    sufficient to justify a CEP offset.     See Pl.’s Mem. 39–40.
    Mittal argues that “[i]n its initial questionnaire Commerce
    instructed all respondents to identify all selling activities
    relevant to claims for any LOT adjustments, ergo CEP
    offsets. . . .     Both POSCO and Dongbu responded to Commerce’s
    questionnaire.     They did not, however, provide information
    regarding selling activities in sales at the CEP LOT.”       Pl.’s
    Mem. 40.     In other words, plaintiff maintains that the absence of
    information regarding respondents’ selling expenses incurred in
    16
    Commerce calculated net home market price using a
    formula set forth in the POSCO Offset Memorandum. The formula
    appears to have taken into account various expenses including
    packing, credit and rebates. POSCO Offset Mem. at 5–6.
    Consol. Court No. 05-00308                                Page   27
    making CORE sales to their U.S. affiliates should have prompted
    Commerce to ask respondents for that data before granting the
    respondents a CEP offset.
    Plaintiff further argues that this absence of information
    does not mean that there were no such expenses and that the
    inclusion of these expenses would likely indicate that the home-
    market LOT was not more advanced than that at the CEP level.      See
    Pl.’s Mem. 43.   For plaintiff,
    both POSCO and Dongbu actively assist their
    U.S. affiliates in reselling merchandise in
    the United States. Since those resales are
    affiliates’ sales, it is fair to conclude
    that the Korean parents perform the
    activities to promote their own sales to the
    affiliates at the CEP LOT. Therefore,
    Commerce should have weighed the activities
    in the analysis of offset claims.
    Pl.’s Mem. 42 (emphasis in original); see also Pl.’s Mem. 42–43.
    Despite plaintiff’s arguments, the court finds Commerce’s
    grant of a CEP offset to POSCO and Dongbu supported by
    substantial evidence and in accordance with law.   In particular,
    the court concludes that the Department, while not having
    sufficient evidence to make an LOT adjustment, reasonably relied
    on evidence of the selling functions performed by POSCO’s and
    Dongbu’s U.S. affiliates in deciding to grant the companies a CEP
    offset.
    In making its determination, the Department “review[ed] the
    distribution system in each market (i.e., the ‘chain of
    Consol. Court No. 05-00308                                Page   28
    distribution’) [for both Dongbu and POSCO] including selling
    functions, class of customer (“customer category”) and level of
    selling expenses for each type of sale.”   Issues & Decs. Mem. at
    11.
    With respect to Dongbu, Commerce’s analysis of that
    company’s verified questionnaire responses revealed that in its
    home market, “Dongbu sold [CORE] through two channels of
    distribution to two customer categories, and claimed one level of
    trade in the home market.”   Dongbu Offset Mem. at 2.   Commerce
    determined that, although Dongbu reported selling CORE in Korea
    through two channels of distribution, “the two home market
    channels of distribution . . . constitute one of level of trade.”
    Id.   Plaintiff does not dispute this finding.
    Commerce also analyzed Dongbu’s sales to the United States
    for purposes of determining whether an offset was necessary.     Of
    importance here are two findings.   First, as plaintiff
    acknowledges, Dongbu completed Commerce’s questionnaire asking
    that it “list . . . all the selling and activities performed and
    services offered in the U.S. market and the foreign market.”
    Pl.’s Mem. 40.   Plaintiff claims that Dongbu’s answers were
    deficient even though Commerce verified the answers.      See Pl.’s
    Mem. 40; Def.’s Resp. 21.    That is, plaintiff insists that Dongbu
    must have had more selling expenses with respect to its sales at
    the CEP LOT, i.e., sales to its U.S. affiliate, Dongbu USA, than
    Consol. Court No. 05-00308                               Page    29
    it reported.    Commerce, though, in verifying Dongbu’s responses,
    found only that “Dongbu’s activities for U.S. sales are limited
    to foreign movement expenses.”    Dongbu & Union Br. Opp’n Pl.’s R.
    56.2 Mot. J. Agency R. 40 (quoting Dongbu’s Section A Resp. at
    18).    Thus, while plaintiff may insist that there were other
    unlisted expenses, the verified evidence on the record indicates
    otherwise.
    Commerce further found that “Dongbu made only CEP sales
    through its U.S. affiliate, Dongbu USA, to unaffiliated customers
    in two customer categories, end-users and distributors, and had
    only one level of trade for U.S. sales.”    Dongbu Offset Mem. at
    2.    Noting that Dongbu USA “perform[ed] most of the selling
    functions in the United States,” Commerce concluded that Dongbu’s
    sales in the United States were at a less advanced stage of
    distribution than its sales in its home market of Korea, and
    granted Dongbu the CEP offset.    See id.
    After performing the same analysis for POSCO, Commerce found
    that the company sold CORE in Korea to three different types of
    customer categories through three channels of distribution.      See
    POSCO Offset Mem. at 9.    Commerce concluded that because the
    selling activities undertaken in each of the three channels of
    distribution “differed only slightly, . . . the home market
    channels of distribution constituted one level of trade.”       Id. at
    10.
    Consol. Court No. 05-00308                                  Page   30
    Commerce also “examined the sales to [POSCO’s] affiliated
    resellers and examined the selling functions performed by
    POSCO . . . on behalf of its affiliate and found only one level
    of trade.”     Id.   The Department found that, “[i]n the U.S.
    market, [POSCO] made only CEP sales of subject merchandise,”
    through only one channel of distribution.      Id.   Further, sales
    were made by POSCO’s affiliate to unaffiliated U.S. trading
    companies.   Id.     Plaintiff does not dispute these findings.
    POSCO, too, submitted timely and complete responses to
    Commerce’s questionnaire and the Department subsequently verified
    the answers.     See POSCO & HYSCO Opp’n Pl.’s R. 56.2 Mot. J.
    Agency R. (“POSCO & HYSCO Br.”) 28.     POSCO’s questionnaire
    responses showed that the company performed a substantial number
    of selling activities when selling CORE in Korea, but did not
    perform these activities when selling CORE in the United States.
    See POSCO & HYSCO Br. 28 (listing home-market selling activities
    including, but not limited to “sales and marketing; freight and
    delivery arrangement; market research; quality control; computer,
    legal, and accounting assistance and business-systems development
    assistance; . . . [and] sales force development and end user
    contact and support”).     Based on this verified information,
    Commerce found that “the home market sales were at a different
    stage of distribution compared to sales to the U.S. LOT.”        POSCO
    Offset Mem. at 10.
    Consol. Court No. 05-00308                                Page    31
    As has been noted by defendant, plaintiff’s objections do
    not amount to much more than speculation.    Indeed, plaintiff’s
    contention that Commerce unreasonably granted a CEP offset
    because “a reasonable mind would recognize, as a matter of common
    commercial sense, that affiliates engage in numerous inter-
    company activities when performing complementary and overlapping
    roles in marketing goods internationally,” finds no evidentiary
    support.   Pl.’s Mem. 42–43.   Commerce issued Dongbu and POSCO
    questionnaires, the respondents provided timely and complete
    answers, the Department then verified those responses and found
    no discrepancies.   As a result, Commerce determined that the
    hypothetical costs Mittal insisted had to exist simply did not.
    Further, plaintiff’s related claim that Commerce lacked
    sufficient evidence to grant the CEP offset because of Dongbu’s
    and POSCO’s incomplete submissions is directly contradicted by
    Commerce’s verification of the companies’ questionnaire
    responses, which revealed no inconsistencies and which provided
    sufficient evidence with respect to selling activities in both
    the home and U.S. markets.     The court cannot, therefore, credit
    plaintiff’s unsubstantiated assertion that commercial realities
    render insufficient the evidence Commerce relied upon in making
    its decision to grant Dongbu and POSCO a CEP offset.
    Thus, the court sustains as supported by substantial
    evidence and in accordance with law the Department’s grant of a
    Consol. Court No. 05-00308                              Page     32
    CEP offset to both POSCO and Dongbu.
    IV.   Duty Drawback Adjustment
    Plaintiff further contends that Commerce should not have
    allowed for a duty drawback adjustment to CEP because it claims
    the Korean drawback system is susceptible to manipulation.17     As
    part of this claim, plaintiff maintains that Commerce’s current
    standard for making drawback adjustments amplifies the potential
    for distorted dumping margins on Korean products, in part,
    because a Korean exporter is not required to allocate its total
    rebates over all of its shipments.   Mittal’s specific complaint
    is that the Department acted unlawfully by refusing to ask
    respondents for further data thus “allowing for fair and
    appropriate allocations” of the rebate received to the total lot
    of respondents’ shipments of CORE.   Pl.’s Mem. 45 (emphasis
    omitted).
    The antidumping statute provides that “[t]he price used to
    establish . . . [CEP] shall be . . . increased by . . . the
    17
    Generally, a “drawback” is “[a] government allowance or
    refund on import duties when the importer reexports imported
    products rather than selling them domestically.” Black’s Law
    Dictionary 532 (8th ed. 2004); see also E.I. du Pont Nemours &
    Co. v. United States, 24 CIT 1045, 1046 n.2, 
    116 F. Supp. 2d 1343
    , 1345 n.2 (2000) (“[D]uty drawback” generally, is the refund
    of duties paid on goods imported into the United States when
    those goods, or domestic goods of the same kind and quality, are
    used in the manufacture or production of articles which are
    subsequently exported.”).
    Consol. Court No. 05-00308                               Page   33
    amount of any import duties imposed by the country of exportation
    which have been rebated, or which have not been collected, by
    reason of the exportation of the subject merchandise to the
    United States . . . .”   19 U.S.C. § 1677a(c)(1)(B).   Based on the
    statute, Commerce has created a two-prong test that must be
    satisfied prior to the grant of a drawback adjustment.   The first
    prong requires the exporter to establish that “the import duty
    and rebate are directly linked to, and dependent upon, one
    another.”   Far East Mach. Co. v. United States, 12 CIT 972, 974,
    
    699 F. Supp. 309
    , 311 (1988) (internal quotation marks & citation
    omitted).   The second prong demands that “the company claiming
    the adjustment [must] demonstrate that there were sufficient
    imports of imported raw materials to account for the duty
    drawback received on the exports of the manufactured product.”
    Id., 699 F. Supp. at 311; see also Issues & Decs. Mem. at 13.
    For over twenty years, Commerce has consistently applied, and
    this Court has consistently upheld, this test.   See, e.g.,
    Carlisle Tire & Rubber Co. v. United States, 11 CIT 168, 171, 
    657 F. Supp. 1287
    , 1290 (1987); Far East Mach. Co. v. United States,
    12 CIT 428, 431–33, 
    688 F. Supp. 610
    , 612 (1988) (citation
    omitted); Hornos Electricos de Venezuela, S.A. v. United States,
    27 CIT 1522, 1525, 
    285 F. Supp. 2d 1353
    , 1358 (2003); Wheatland
    Tube Co. v. United States, 30 CIT    ,   , 
    414 F. Supp. 2d 1271
    ,
    1286–87 (2006).
    Consol. Court No. 05-00308                               Page   34
    Here, following verification, Commerce found that the
    respondents had satisfied the two-prong test.    See Issues & Decs.
    Mem. at 13.   Mittal does not fault this finding.   Rather,
    plaintiff questions the utility of the test as applied to exports
    from Korea.   According to plaintiff, “Korea’s duty drawback law
    effectively allows exporters to choose the export shipments on
    which they base drawback claims on exportations,” which in turn
    permits an exporter to manipulate its dumping margin.    Pl.’s Mem.
    24.   That is, for plaintiff, if an exporter is allowed to apply
    its drawback claims solely to shipments intended for the United
    States, CEP increases artificially and the dumping margin
    decreases.    Plaintiff insists that this potential for distorted
    results should have induced the Department to ask respondents for
    additional specific information relating to their drawback
    claims, which, in turn, Commerce could have used “to determine
    whether drawback claims were in fact disproportionate and
    excessive.”   Pl.’s Mem. 46.
    In essence, Mittal seeks the addition of a third prong to
    Commerce’s current two-prong test.   That is, Mittal believes that
    the opportunity for margin manipulation would diminish if an
    exporter were required to demonstrate that it had allocated its
    rebates across all of its shipments. Plaintiff observes that, as
    in the United States, the Korean drawback scheme does not require
    such an allocation and thus opens the door for inaccurate dumping
    Consol. Court No. 05-00308                                 Page   35
    calculations.    In Mittal’s view:
    Although unquestionably lawful in Korea, the
    Korean system makes it possible to manipulate
    U.S. antidumping results. . . . We can
    assume that Korean “Producer X” produces only
    one product, CORE, and that it uses steel
    scrap as the basic input. We can further
    assume that “X” imports 50 percent of its
    scrap consumption (paying import duties on
    the same) and obtains the balance locally.
    We can finally assume that “X” sells 50
    percent of its total production for export to
    the United States and 50 percent to Canada.
    Under these imagined circumstances, in
    conjunction with the Korean law, “X” could
    limit its claims for drawback solely to
    shipments to the United States while claiming
    nothing on shipments to Canada – with U.S.
    antidumping motivations in mind.
    Pl.’s Mem. 44–45.    Thus, plaintiff insists that a required
    shipment-wide allocation of drawback would eliminate the
    distortion of dumping margins and maintain the integrity of the
    antidumping statute.
    The court finds that Commerce’s two-prong test is a
    reasonable interpretation of 19 U.S.C. § 1677a(c)(1)(B) and that
    it properly applied the test to the Korean respondents in this
    case.   As noted, pursuant to 19 U.S.C. § 1677a(c)(1)(B), there
    are two requirements for adjusting upward CEP based on rebated
    import duties.    First, there must be “import duties imposed by
    the country of exportation . . . .”    19 U.S.C. § 1677a(c)(1)(B).
    Second, those duties must either be rebated or not collected by
    the exporting country “by reason of the exportation of the
    subject merchandise to the United States.”    Id.   As this Court
    Consol. Court No. 05-00308                              Page    36
    has held previously, nothing in the statute requires an exporter
    to demonstrate that it allocated its rebated or non-collected
    duties across the totality of its subject shipments.   See Far
    East Mach. Co., 12 CIT at 979, 699 F. Supp. at 315 (finding that
    Commerce’s “approach is not an unfair way of proceeding,” and
    that the “method seems reasonably calculated to arrive at a
    proper adjustment to price”); Avesta Sheffield, Inc. v. United
    States, 17 CIT 1212, 1216, 
    838 F. Supp. 608
    , 612 (1993) (“As a
    matter of policy in drawback cases, [Commerce] does not require
    exporters to account for a sufficient amount of imported product
    to cover all products sold to third countries, as well as to the
    United States.”).   Thus, the statute and the two-prong test put
    the emphasis on proof of a direct link between the rebate of the
    import duty and on evidence of sufficient imports to account for
    the duty drawback and the exports of subject merchandise.   The
    court, therefore, agrees with defendant that “[t]here is no legal
    basis for the argument that Commerce should not make a duty
    drawback adjustment unless it can allocate the total pool of duty
    drawback on a proportional basis among all countries to which
    respondents export the subject merchandise.”   Def.’s Resp. 24;18
    18
    The court notes that Commerce has sought public comment
    on the two-prong test. See Duty Drawback Practice in Antidumping
    Proceedings, 70 Fed. Reg. 37,764 (Dep’t of Commerce June 30,
    2005) (request for comments). Plaintiff claims that “[i]f
    Commerce’s practice might very well change, Mittal should get the
    benefit now, not just in future reviews.” Pl.’s Mem. 48. As
    (continued...)
    Consol. Court No. 05-00308                                Page   37
    see also Pesquera Mares Australes Ltda. v. United States, 
    266 F.3d 1372
    , 1382 (Fed. Cir. 2001) (“[S]tatutory interpretations
    articulated by Commerce during its antidumping proceedings are
    entitled to deference under Chevron.”).
    In addition, the court finds that the Department supported
    with substantial evidence its decision to make an upward
    adjustment to CEP to account for the drawback respondents
    received from the Korean government on their imports of raw
    materials.     Commerce verified that respondents received drawback
    for their imports of raw materials used to produce the subject
    merchandise and that the amount of raw materials imported covered
    the amount of the drawback.     See Issues & Decs. Mem. at 13.   In
    other words, the Department reasonably concluded that respondents
    satisfied the two-prong test and, thus, were entitled
    to the CEP adjustment.
    Based on the foregoing, the court sustains as supported by
    substantial evidence and otherwise in accordance with law
    Commerce’s duty drawback adjustment to respondents’ U.S. price of
    CORE.
    18
    (...continued)
    yet, however, Commerce has not altered its treatment of duty
    drawback adjustments. Thus, “Commerce’s potential rulemaking has
    no effect here.” Rhone-Poulenc, Inc. v. United States, 20 CIT
    573, 584 n.5, 
    927 F. Supp. 451
    , 461 n.5 (1996).
    Consol. Court No. 05-00308                                Page   38
    V.   Section 201 Safeguard Duties
    Plaintiff next insists that Commerce erred by declining to
    deduct from CEP certain duties imposed on imports of steel into
    the United States pursuant to Section 201 of the Trade Act of
    1974, 19 U.S.C. § 2251 (“Section 201 Duties”).
    In the Final Results, Commerce determined that the Section
    201 Duties were not deductible from CEP under 19 U.S.C.
    § 1677a(c)(2)(A).   Pursuant to that provision, when calculating
    dumping margins, Commerce reduces U.S. price by “the amount, if
    any, included in such price, attributable to any additional
    costs, charges, or expenses, and United States import duties,
    which are incident to bringing the subject merchandise from the
    original place of shipment in the exporting country to the place
    of delivery in the United States . . . .”   19 U.S.C.
    § 1677a(c)(2)(A) (emphasis added).   Based on its interpretation
    of the phrase “United States import duties,” Commerce customarily
    deducts from CEP “normal customs duties”19 but does not deduct
    either unfair trade duties or Section 201 Duties.
    With respect to Section 201, that provision “permit[s] the
    President of the United States to impose safeguard measures in
    19
    Commerce apparently understands the phrase “normal
    customs duties” to include, inter alia, import duties as set out
    in the Harmonized Tariff Schedule of the United States and the
    Harbor Maintenance Tax. In other words, Commerce deducts from
    CEP those permanent, generally applicable duties fixed at the
    time of importation.
    Consol. Court No. 05-00308                                  Page   39
    reaction to threats posed to domestic industry by identified
    imported items.”    Wheatland Tube Co., 30 CIT at      , 
    414 F. Supp. 2d
     at 1272 n.1.    For example, the President “may, for purposes of
    taking action under [19 U.S.C. § 2253(a)(1)] . . . proclaim an
    increase in, or the imposition of, any duty on the imported
    article . . . .”    19 U.S.C. § 2253(a)(3).    The President may take
    action, however, only “[i]f the United States International Trade
    Commission [(“ITC” or “Commission”)] determines under [19 U.S.C.
    § 2252(b)] that an article is being imported into the United
    States in such increased quantities as to be a substantial cause
    of serious injury, or the threat thereof, to the domestic
    industry . . . .”    19 U.S.C. § 2251(a).     Thus, the President may
    not act unilaterally to increase duties on imports.      Rather,
    there must first be an affirmative serious injury, or threat of
    serious injury finding from the ITC.
    At issue here is the 2002 Presidential Proclamation that
    imposed duties to counteract a surge in steel imports.      On
    December 19, 2001, pursuant to 19 U.S.C. § 2252, the Commission
    submitted to the President its affirmative determination that
    certain steel products were “being imported into the United
    States in such increased quantities as to be a substantial cause
    of serious injury, or threat of serious injury, to the domestic
    industries producing like or directly competitive articles.”
    Presidential Proclamation 7529 To Facilitate Positive Adjustment
    Consol. Court No. 05-00308                                Page    40
    to Competition From Imports of Certain Steel Products
    (“Proclamation 7529”), 67 Fed. Reg. 10,553 (Mar. 5, 2002).       As a
    result, on March 5, 2002, the President, pursuant to 19 U.S.C.
    § 2253(a)(3)(A), imposed a duty of 15 percent ad valorem on,
    among other things, imports into the United States of cold-rolled
    steel “for a period of 3 years plus 1 day . . . .”   Proclamation
    7529, 67 Fed. Reg. at 10,555.   This Section 201 Duty applied to
    the CORE imports into the United States that were the subject of
    the instant review.   Upon entering their merchandise, respondents
    paid to U.S. Customs and Border Protection (“Customs”) the
    Section 201 Duty.   There is no dispute over the amount of the
    duty charged, nor is there any complaint that respondents failed
    to pay the duty owed.
    Here, as in the past, the Department concluded it would not
    deduct Section 201 Duties from CEP
    because 201 duties are not “United States
    import duties” within the meaning of the
    statute, and to make such a deduction
    effectively would collect the 201 duties a
    second time. Our examination of the
    safeguard[] and antidumping statutes, and
    their legislative histories indicates that
    Congress plainly considered the two remedies
    to be complementary and, to some extent,
    interchangeable. Accordingly, to the extent
    that 201 duties may reduce dumping margins,
    this is not a distortion of any margin to be
    eliminated, but a legitimate reduction in the
    level of dumping.
    Issues & Decs. Mem. at 15.
    Consol. Court No. 05-00308                                 Page   41
    Mittal insists that Commerce acted unreasonably in not
    deducting the Section 201 Duties from U.S. price.    Plaintiff’s
    principal argument is that Section 201 Duties are closer to being
    normal customs duties than they are to antidumping duties and
    thus constitute “United States import duties,” which must be
    deducted from CEP.   See Pl.’s First Supplemental Br. 3.    While
    plaintiff does not dispute Commerce’s practice of not deducting
    antidumping and countervailing duties from U.S. price under 19
    U.S.C. § 1677a(c)(2)(A), it maintains that Section 201 Duties are
    not of the same nature as those duties.   In plaintiff’s view,
    Section 201 Duties are more akin to normal customs duties because
    they share a common purpose, i.e., “both types of duties are
    protective in nature.”   Pl.’s Supplemental Br. 3.
    Since the completion of briefing in this case, the Federal
    Circuit has considered the appeal of this Court’s decision in
    Wheatland Tube Co., which held that Section 201 Duties must be
    deducted from United States price when calculating a respondent’s
    dumping margin under 19 U.S.C. § 1677a(c)(2)(A).     Wheatland Tube
    Co., 30 CIT at   , 
    414 F. Supp. 2d
     at 1285–86.   In reversing
    Wheatland Tube Co., the Federal Circuit made two related
    findings.   First, it found that the Department’s “interpretation
    that ‘United States import duties’ do not include § 201 safeguard
    duties was the result of its formal notice-and-comment rulemaking
    process,” and thus that Commerce’s interpretation “is entitled to
    Consol. Court No. 05-00308                                 Page   42
    deference as required by . . . [Chevron U.S.A. Inc. v. Natural
    Resources Defense Council, Inc., 
    467 U.S. 837
     (1984)] if its
    interpretation is reasonable.”   Wheatland Tube Co. v. United
    States, Nos. 2006-1524, 2006-1525, 
    2007 WL 2119824
    , at *4 (Fed.
    Cir. July 25, 2007).   Second, it concluded that,
    [i]n light of the legislative history of the
    Antidumping Duty Act of 1921, the
    similarities between antidumping duties and
    § 201 safeguard duties, and the likelihood
    that deducting § 201 safeguard duties from
    the [United States price] would result in
    collecting a double remedy, we hold that
    Commerce’s interpretation that “United States
    import duties” does not include § 201
    safeguard duties for the purposes of
    determining the [United States price] and
    calculating the dumping margin is reasonable.
    Wheatland Tube Co., 
    2007 WL 2119824
    , at *7.   Thus, based on the
    Federal Circuit’s holding in Wheatland Tube Co., the court
    sustains as reasonable Commerce’s interpretation of “United
    States import duties” to exclude Section 201 Duties and its
    decision to not deduct those duties from United States price.
    CONCLUSION
    Based on the foregoing, the court sustains Commerce’s Final
    Results.   Judgment shall be entered accordingly.
    /s/ Richard K. Eaton
    Richard K. Eaton
    Dated:     August 1, 2007
    New York, New York
    UNITED STATES COURT OF INTERNATIONAL TRADE
    :
    MITTAL STEEL USA, INC.           :
    (formerly INTERNATIONAL          :
    STEEL GROUP, INC.),              :
    :
    Plaintiff,            :
    :
    v.                          :
    :
    UNITED STATES,                   : Before: Richard K. Eaton, Judge
    :
    Defendant,            : Consol. Court No. 05-00308
    : Public Version
    and                         :
    :
    UNION STEEL MANUFACTURING        :
    CO., LTD.; DONGBU STEEL CO.,     :
    LTD.; POSCO; and HYUNDAI         :
    HYSCO CO., LTD.,                 :
    :
    Deft.-Ints.           :
    :
    JUDGMENT
    This case having been submitted for decision and the Court,
    after deliberation, having rendered a decision therein; now, in
    conformity with that decision, it is hereby
    ORDERED that the United States Department of Commerce’s
    final results of the tenth administrative review of the
    antidumping duty order applicable to imports into the United
    States of CORE from the Republic of Korea are sustained; and it
    is further
    ORDERED that this case is dismissed.
    /s/ Richard K. Eaton
    Richard K. Eaton
    Dated:     August 1, 2007
    New York, New York
    ERRATUM
    Mittal Steel USA, Inc. (formerly International Steel Group, Inc.)
    v. United States, Consol. Court No. 05-00308, Slip Op. 07-117,
    dated August 1, 2007.
    Page 1:   The name “Julie C. Mendoza” is added after the name
    “Brady W. Mills” as counsel for defendant-intervenors
    Union Steel Manufacturing Co., Ltd. and Dongbu Steel
    Co., Ltd.
    September 17, 2007
    

Document Info

Docket Number: Consol. Court 05-00308

Citation Numbers: 2007 CIT 117, 31 Ct. Int'l Trade 1395

Judges: Eaton

Filed Date: 8/1/2007

Precedential Status: Precedential

Modified Date: 11/3/2024

Authorities (17)

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Carlisle Tire & Rubber Co. v. United States , 11 Ct. Int'l Trade 168 ( 1987 )

Wheatland Tube Co. v. United States , 30 Ct. Int'l Trade 42 ( 2006 )

Freeport Minerals Company, (Freeport-Mcmoran, Inc.) v. The ... , 776 F.2d 1029 ( 1985 )

Far East MacHinery Co., Ltd. v. United States , 12 Ct. Int'l Trade 428 ( 1988 )

Chevron U. S. A. Inc. v. Natural Resources Defense Council, ... , 104 S. Ct. 2778 ( 1984 )

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lasko-metal-products-inc-v-the-united-states-durable-electrical-metal , 43 F.3d 1442 ( 1994 )

Burlington Truck Lines, Inc. v. United States , 83 S. Ct. 239 ( 1962 )

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