Downhole Pipe & Equipment LP v. United States

Slip Op. 12-141
UNITED STATES COURT OF INTERNATIONAL TRADE
Before: Nicholas Tsoucalas, Senior Judge
DOWNHOLE PIPE & EQUIPMENT LP and :
DP-MASTER MANUFACTURING CO., LTD. :
:
Plaintiffs, :
:
v. : Court No.: 11-00081
:
UNITED STATES, :
:
Defendant, :
:
and :
:
VAM DRILLING USA, TEXAS STEEL :
CONVERSIONS, INC., ROTARY :
DRILLING TOOLS, TMK IPSCO, and :
U.S. STEEL CORP., :
:
Defendant-Intervenors. :
:
OPINION and ORDER
Held: Plaintiffs’ Motion for Judgment on the Agency Record is
granted in part because the final determination issued by the
Department of Commerce was not supported by substantial evidence
and is not in accord with the law as to drill pipe green tube and
labor wage rate surrogate values, but is denied in all other
respects.
Dated: November 20, 2012
Lehnardt & Lehnardt, LLC, (Mark B. Lehnardt); Chen Law Group,
LLC, (Irene H. Chen) for Downhole Pipe & Equipment, LP and DP-
Master Manufacturing Co., Ltd., Plaintiffs.
Stuart F. Delery, Acting Assistant Attorney General; Jeanne E.
Davidson, Director, Claudia Burke, Assistant Director, Commercial
Litigation Branch, Civil Division, United States Department of
Justice (Courtney S. McNamara); Office of Chief Counsel for Import
Administration, United States Department of Commerce, Nathaniel J.
Halvorson, Of Counsel, for the United States, Defendant.
Schagrin Associates, (Roger B. Schagrin, John W. Bohn, and
Michael J. Brown) for VAM Drilling USA, Texas Steel Conversions,
Court No. 11-00081 Page 2
Inc., Rotary Drilling Tools, TMK IPSCO; Skadden Arps Slate Meagher
& Flom, LLP, (Jeffrey D. Gerrish, Luke A. Meisner, and Robert E.
Lighthizer) for United States Steel Corp., Defendant-Intervenors.
TSOUCALAS, Senior Judge: Plaintiffs Downhole Pipe & Equipment,
LP, and DP-Master Manufacturing Co., Ltd. (“Downhole” and “DP-
Master,” respectively, and “DP,” collectively) move pursuant to
USCIT Rule 56.2 for judgment upon the agency record challenging the
determination of the International Trade Administration of the
United States Department of Commerce (“Commerce”) in Drill Pipe
From the People’s Republic of China (“PRC”), 76 Fed. Reg. 1,966(Jan. 11, 2011) (“Final Determination”). VAM Drilling USA, Inc.,
Rotary Drilling Tools, Texas Steel Conversions Services, Inc.,
United States Steel Corp., (collectively, “defendant-intervenors”),
and Commerce oppose DP’s motion.
BACKGROUND
On December 30, 2009, VAM Drilling USA, Inc., TMK IPSCO, Texas
Conversion Services, Inc., Rotary Drill Tools, and United Steel,
Paper and Forestry, Rubber, Manufacturing, Energy, Allied
Industrial and Service Works International Union, AFL-CIO, CLC
(collectively, “petitioners” or “domestic industry”) filed
petitions with Commerce seeking the imposition of antidumping and
countervailing duties on drill pipe from the PRC. Letter from
Roger B. Schagrin to the Secretary of Commerce, Re: Petitions for
the Imposition of Antidumping and Countervailing Duties: Drill Pipe
Court No. 11-00081 Page 3
From the PRC, Public Rec. 1 at 1–4.1 The parties do not dispute
that drill pipe is a specialized high-strength iron alloy tube
manufactured in three phases. “First, seamless tubes — called
‘green tubes’ — are produced from raw steel.” Pls.’ Am. Mem. Supp.
Mot. J. Agency R. (“Pls.’ Br.”) at 3–4. Second, a manufacturer
uses complex and expensive processes to “upset” and heat treat
green tube so as to thicken the ends and increase the yield
strength to the desired American Petroleum Institute (“API”) grade.
Id. at 3–6. Raw green tube can be processed into “oil country
tubular goods” (“OCTG”) — tubular products other than drill pipe,
such as casing and finished tubing — as well, but the parties
dispute the interchangeability of drill pipe green tube and OCTG
green tube. See Pls.’ Br. at 32–33; Def.’s Mem. Opp’n Pls.’ Br.
(“Def.’s Br.”) at 11–15. Lastly, a manufacturer friction-welds a
specialized “tool joint” to the ends of the heat-treated and upset
tube to complete the drill pipe. Id. at 3, 7–8. A manufacturer
may also apply a protective coating or other post-production
enhancements to the drill pipe. See Pls.’ Br. at 30–31, 35–36.
DP-Master purchases raw green tubes that it upsets and heat-
treats to desired API specifications. DP-Master manufactures some,
but not all, of its tool joints in-house and friction-welds them to
1
Hereinafter all documents in the public record will be
designated “PR” and all documents in the confidential record
designated “CR” without further specification except where
relevant.
Court No. 11-00081 Page 4
the upset and heat-treated green tubes. DP-Master uses an
unaffiliated third party subcontractor — referred to in these
proceedings as a “toller” — to apply a protective phosphate coating
to its completed drill pipes. DP-Master sells finished drill pipe
and other goods directly to companies in the U.S. PR 62 at A-5 to
A-6, A-26 to A-27, Ex. A-19; PR 107 at D-5 to D-6.
Domestic industry proposed a broad scope for the antidumping
and countervailing duty investigations: “[D]rill pipe . . . whether
or not conforming to [API] or non-API specifications, whether
finished (with or without tool joints attached) or unfinished
(including green tubes), and without regard to the specific
chemistry of the steel . . . [and excluding] tool joints not
attached to drill pipe.” PR 1 at 7. In its comments from January
15, 2010 and its comments from January 19, 2010, DP-Master argued
that the proposed scope overlapped with an existing investigation
into OCTG from China. PR 14 at 2–5; PR 19 at 1–4. Commerce and
domestic industry then agreed on revised scope language, which
among other changes included a new exception: “The scope does not
include . . . unfinished tubes for casing or tubing covered by any
other antidumping or countervailing duty order.” PR 20 at 2.
Commerce initiated the investigation based on industry support
calculated using the revised scope. Drill Pipe from the PRC:
Initiation of Antidumping Duty Investigation, 75 Fed. Reg. 4,531(Jan. 28, 2010) (“Initiation”).
Court No. 11-00081 Page 5
During the investigation, Commerce directed parties to report
factor of production data using “actual quantities consumed to
produce the merchandise under investigation.” PR 53 at D-2. In
the event that a party could not provide such information, it was
to “provide a detailed explanation of all efforts undertaken to
report the actual quantity of each [factor of production] consumed
to produce the merchandise.” Id. DP-Master notified Commerce that
it was having difficulty obtaining the requested factor of
production information from its phosphate toller. PR 107 at D-5 to
D-6; PR 115 at 6. Nevertheless, once it did report what limited
factor of production data it could obtain from its toller, DP-
Master did not reveal that it had actually provided data based on
purchased quantities instead of actual quantities consumed. Drill
Pipe from the PRC: Issues and Decision Memorandum for the Final
Determination (Jan. 3, 2011), PR 258 at 45 (“I&D Memorandum”).
In Drill Pipe from the PRC: Preliminary Determination of Sales
at Less than Fair Value and Affirmative Determination of Critical
Circumstances, and Postponement of Final Determination, 75 Fed.
Reg. 51,004 (Aug. 18, 2010) (“Preliminary Determination”),2
2
Commerce published corrections to the Preliminary
Determination to address a ministerial error concerning Baoshan
Iron and Steel Co., a respondent below not participating in the
present action. Drill Pipe from the PRC: Notice of Correction to
the Preliminary Determination of Sales at Less Than Fair Value and
Affirmative Determination of Critical Circumstances, and
Postponement of Final Determination, 75 Fed. Reg. 51,014 (Aug. 18,
2010).
Court No. 11-00081 Page 6
Commerce found that DP-Master was selling drill pipe in the U.S. at
less than fair value. Commerce selected India as the primary
surrogate country, and used Indian data to calculate surrogate
values for two key drill pipe inputs relevant to this case. First,
Commerce calculated a surrogate value for green tube by averaging
listings for prices and offers for J/K-55 grade tube, a finished
product similar to green tube, from the January and March 2009
issues of “Metal Bulletin Research” (“MBR”). PR 186 at 7. Second,
Commerce established a surrogate value for the tool joints that DP-
Master purchased using average unit values of imports under Indian
Harmonized Tariff Schedule (“IHTS”) category 8431.43.90.3 Id.Commerce maintained the Initiation scope over DP-Master’s
objections, but, given “concerns regarding the imprecision of the
definition of ‘green tubes suitable for drill pipe,’” Commerce
declared that it would remove green tube from the scope unless a
more definite physical distinction between drill pipe green tube
and OCTG green tube emerged in future submissions. PR 187 at 8.
In the Preliminary Determination, Commerce also found that DP-
Master was “unable to obtain” certain data from its phosphate
toller. Id. at 28. To fill gaps in the data, DP-Master offered
“estimated [factors of production] based on [its] knowledge of the
3
Commerce calculated average unit values from IHTS categories
using the Global Trade Atlas, which is published by Global Trade
Information Services, Inc. Global Trade Information Services
compiles information it receives directly from the Indian Ministry
of Commerce. PR 186 at 2.
Court No. 11-00081 Page 7
production process,” which Commerce found to be “a reasonable proxy
to account for the production costs associated with [DP-Master’s]
. . . tolled merchandise.” Id. When Commerce sought to verify the
information DP-Master did obtain and report, however, it discovered
“for the first time” that DP-Master did not report quantities in
the manner Commerce requested, and that DP-Master could not provide
records necessary for verification. I&D Memorandum at 45–47.
Following verification and the final comment period, Commerce
issued the Final Determination, six aspects of which are presently
on appeal. First, Commerce narrowed the scope by adding three
physical criteria to the description of subject green tube.
Second, in calculating DP-Master’s surrogate financial ratio,
Commerce elected to use financial information solely from the
Indian company Oil Country Tubular, Ltd. Third, contrary to its
finding in the Preliminary Determination, Commerce determined that
the average unit value of imports under IHTS categories 7304.29 and
7304.23 was the best available surrogate value for drill pipe green
tube. Fourth, at DP-Master’s urging, Commerce abandoned IHTS
category 8431.43.90 and instead used the same surrogate value it
chose for the tool joints DP-Master produced in-house to calculate
the surrogate value for the tool joints DP-Master purchased.
Without prompting from DP-Master, however, Commerce multiplied the
in-house tool joint surrogate value by the applicable financial
ratio to account for the selling, general and administration
Court No. 11-00081 Page 8
expenses (“SG&A”), profit, and overhead that would be reflected in
prices offered on the open market. Fifth, Commerce calculated the
surrogate value for labor by averaging rates in all countries that
produced subject goods, regardless of how much each country
actually produced. Lastly, Commerce found that DP-Master’s
failures with respect to reporting its phosphate toller’s factor of
production data warranted the application of facts otherwise
available and an adverse inference therefrom. I&D Memorandum at
10–12, 14–22, 24–32, 44–47.
Subsequent to the filing of this action, the United States
Court of Appeals for the Federal Circuit (“Federal Circuit”) held
that the simultaneous application of nonmarket methodology and
countervailing duty law was contrary to the Tariff Act of 1930.
GPX Int’l Tire Corp. v. United States, 666 F.3d 732 (Fed. Cir.
2011), superseded by statute, Application of Countervailing Duty
Provisions to Nonmarket Economy Countries, Pub. L. No. 112-99, 126
Stat. 265 (effective Mar. 13, 2012). Commerce also issued a
countervailing duty order against DP-Master below. Drill Pipe from
the PRC: Countervailing Duty Order, 76 Fed. Reg. 11,758 (Mar. 3,
2011) (“Countervailing Duty Order”).
JURISDICTION and STANDARD OF REVIEW
The court has jurisdiction over this matter pursuant to 28
U.S.C. § 1581(c) and section 516A(a)(2)(B)(iii) of the Tariff Act
Court No. 11-00081 Page 9
of 1930, as amended, 19 U.S.C. § 1516a(a)(2)(B)(iii) (2006).4
Additionally, the court will uphold Commerce’s determinations in
administrative reviews unless they are “unsupported by substantial
evidence on the record, or otherwise not in accordance with the
law.” 19 U.S.C. § 1516a(b)(1)(B)(I).
DISCUSSION
DP argues that the Final Determination is contrary to law and
unsupported by the record with respect to: scope; surrogate
financial ratio; surrogate values for drill pipe green tube,
purchased tool joints, and labor; and the partial application of
adverse facts available. DP also challenges the Final
Determination as contrary to law on the basis that it is being
applied simultaneously with the Countervailing Duty Order. See GPX
Int’l Tire Corp., 666 F.3d at 737. For the reasons outlined below,
the Final Determination is affirmed in all respects except with
regard to the surrogate values for drill pipe green tube and labor.
I. Scope
DP argues that “the record lacks substantial evidence to
support Commerce’s three criteria for including green tube within
the scope” of the Final Determination5 because some green tube
4
All further citations to the Tariff Act of 1930 are to the
relevant provisions of Title 19 of the United States Code, 2006
edition, and all applicable supplements thereto.
5
The scope of the Final Determination covers:
unfinished drill collars (including all drill collar
green tubes) and unfinished drill pipe (including drill
Court No. 11-00081 Page 10
fitting its criteria are also subject to antidumping and
countervailing duty orders on OCTG.6 Pls.’ Br. at 32; see OCTG
from the PRC, 75 Fed. Reg. 28,551 (May 21, 2010) (antidumping duty
order); OCTG from the PRC, 75 Fed. Reg. 3,203 (Jan. 20, 2010)
(countervailing duty order). DP-Master does not export green tube
to the U.S., and neither it nor any party below have requested a
scope determination pursuant to 19 C.F.R. § 351.225 (2012).
Instead, DP requests that “this Court . . . remand to Commerce to
exclude green tube from the scope of the orders, to recalculate
industry support, and to revoke the AD and CVD orders if industry
support is lacking.” Pls.’ Br. at 33. Because DP seeks remand to
reassess an industry support figure calculated using the Initiation
scope based on a purported deficiency in the Final Determination
scope, its challenge turns on whether modifying the scope during
the course of an antidumping investigation requires Commerce to
pipe green tubes, which are tubes meeting the following
description: seamless tubes with an outer diameter of
less than or equal to 6 5/8 inches[,] . . . containing
between 0.16 and 0.75 percent molybdenum, and containing
between 0.75 and 1.45 percent chromium). The scope does
not include tool joints not attached to the drill pipe,
nor does it include unfinished tubes for casing or tubing
covered by any other antidumping or countervailing duty
order.
Final Determination, 76 Fed. Reg. at 1967.
6
DP identifies “P-110” as a finished OCTG product made from
green tube that is seamless, can have an outside diameter of less
than 6 5/8 inches, and is typically (though not required to be
under API standards) alloyed with molybdenum and chromium within
the parameters of the Final Determination. See Pls.’ Br. at 32; CR
103 at 33-34, 45.
Court No. 11-00081 Page 11
recalculate industry support.
To initiate an antidumping duty investigation, Commerce must
“determine that the petition has been filed by or on behalf of an
industry.” 19 U.S.C. § 1673a(c)(1)(A)(ii). The Act requires
Commerce to complete the industry support determination within
twenty days of the filing of a petition. Id. § 1673a(c)(1)(A).
Although interested parties may comment in the interim, “[i]t is
for Commerce to determine whether those requirements have been met,
and [it] has broad discretion in reaching its decision.” Minebea
Co. v. United States, 16 CIT 20, 21, 782 F. Supp. 117, 119 (1992),
aff’d, 984 F.2d 1178 (Fed. Cir. 1993); see Gulf States Tube Div. of
Quanex Corp. v. United States, 21 CIT 1013, 1015–19, 981 F. Supp.
630, 634–38 (1997). “After [Commerce] makes a determination with
respect to initiating an investigation, the determination regarding
industry support shall not be reconsidered.” 19 U.S.C. §
1673a(c)(4)(E). In other words, “Commerce is prohibited from
reconsidering industry support after the initiation of an
investigation.” P.T. Pindo Deli Pulp & Paper Mills v. United
States, 36 CIT , , 825 F. Supp. 2d 1310, 1323 (2012) (citing 19
U.S.C. § 1673a(c)(4)(E)); see Yantai Xinke Steel Structure Co. v.
United States, 36 CIT , , Slip Op. 12-95, at 11 (July 18, 2012)
(“[R]equiring [Commerce] to examine record evidence in addition to
that contained in the petition in no way disturbs the ‘finality’ of
its decision to initiate an investigation.”).
Court No. 11-00081 Page 12
DP’s sole argument — that some green tube used to produce OCTG
meet the technical specifications of the Final Determination and
are thus subject to two antidumping orders — has little bearing on
Commerce’s decision to initiate the investigation. 19 U.S.C. §
1673a(c)(4)(E). In fact, DP-Master conceded below that Initiation
scope, “distinguishing green tube by end-use, might have remedied
the overlap if it had been published before the OCTG investigation
was initiated.”7 PR 33 at 3 (emphasis added). The Final
Determination scope contains the same end-use distinction as the
Initiation, but DP does not analyze the purported overlap in light
of this potentially remedial exception. See Pls.’ Br. at 32–33.
Because Commerce is “prohibited” from reevaluating industry support
during the course of an investigation regardless of whether the
scope is modified, see P.T. Pindo Deli Pulp, 36 CIT at , 825 F.
Supp. 2d at 1323, and because DP does not challenge the Initiation
scope here, DP’s request for remand to reevaluate industry support
must be denied.
Even if DP’s challenge were procedurally appropriate, it would
fail on a substantive basis. See id. at , 825 F. Supp. 2d at
1323 (prohibition against Commerce from reconsidering industry
7
Commerce initiated the OCTG investigation well before it
settled on the revised scope language to initiate the present
investigation. See OCTG from the PRC, 74 Fed. Reg. 20,706 (May 5,
2009) (initiation notice). DP-Master may actually have been
referring to the publication of the countervailing duty order on
OCTG from the PRC. Compare PR 20 at 1–2, with OCTG from the PRC,
75 Fed. Reg. 3,203 (Jan. 20, 2010) (countervailing duty order).
Court No. 11-00081 Page 13
support “does not limit” the court’s power to review it).
“Commerce owes deference to the intent of the proposed scope of an
antidumping investigation as expressed in an antidumping petition,”
Ad Hoc Shrimp Trade Action Comm. v. United States, 33 CIT , ,
637 F. Supp. 2d 1166, 1174–75 (2009), and Commerce properly
identified domestic industry’s intent to investigate drill pipe
green tube. In the Initiation, Commerce observed that it was
“clear throughout Petitioners’ submissions that their use of the
term ‘drill pipe’ includes ‘green tubes’ for drill pipe production
only,” not green tubes for OCTG production. PR 22, Att. II at 8.
In supplements to the petition, domestic industry described how the
OCTG and drill string channels of distribution are distinct and
that “the companies that process green tubes into finished drill
pipe intimately know the few producers of the appropriate green
tube.” PR 7 at 5–6. Domestic industry also provided three prior
International Trade Commission determinations describing why
technical specifications and customer expectations led it to treat
green tube for drill pipe as a “distinct like product” from green
tube for OCTG. Id. Ex. 1 (excerpts from OCTG from Argentina,
Austria, Italy, Japan, Korea, Mexico, and Spain, USITC Pub. 2911,
Inv. Nos. 701-TA-363 and 701-TA-364 and 731-TA-711-717 (1995)
(investigation notice), OCTG from Argentina, Italy, Japan, Korea
and Mexico, USITC Pub. 3434, Inv. Nos. 701-TA-364 and 731-TA-711
and 731-TA-713-716(June 2001) (first sunset review), and OCTG from
Court No. 11-00081 Page 14
Argentina, Italy, Japan, Korea, and Mexico, USITC Pub. 3923, Inv.
Nos. 731-TA-711 and 731-TA-713-716 (June 2007) (second sunset
review)). Given the end-use exception and the extensive evidence
showing a distinction in channels of distribution, customer
expectations, and technical specifications, it would not be
appropriate for this court to usurp Commerce’s exercise of
discretion in defining the scope of the Initiation. See Ad Hoc
Shrimp Trade, 33 CIT at , 637 F. Supp. 2d at 1174–75. A thorough
review of the record reveals that Commerce properly determined that
the petition met the support threshold required to commence the
investigation, CR 15 Att. 2; PR 22 Att. 2, and as such, DP’s
request must be denied.
II. Surrogate Values
“Commerce ordinarily determines the normal value of subject
merchandise of an exporter or producer from a nonmarket economy .
. . country ‘on the basis of the value of the factors of production
utilized in producing the merchandise.’” Shantou Red Garden
Foodstuff Co. v. United States, 36 CIT , , 815 F. Supp. 2d
1311, 1316 (2012) (quoting 19 U.S.C. § 1677b(c)(1)). This
procedure seeks “to assess the ‘price or costs’ of factors of
production” of subject merchandise in a comparable market economy
“in an attempt to construct a hypothetical market value of that
product” in the nonmarket economy. Nation Ford Chem. Co. v. United
States, 166 F.3d 1373, 1375 (Fed. Cir. 1999). Because “the process
Court No. 11-00081 Page 15
of constructing foreign market value for a producer in a nonmarket
country is difficult and necessarily imprecise,” id. at 1377(quoting Sigma Corp. v. United States, 117 F.3d 1401, 1407 (Fed.
Cir. 1997)), Commerce must use the “best available information” to
select surrogate prices for each factor of production. 19 U.S.C.
§ 1677b(c)(4). Commerce “normally will use publically available
information to value factors,” 19 C.F.R. § 351.408(c)(1), and it
prefers to use information “reflect[ing] a broad market average,”
“contemporaneous with the period of review,” “specific to the input
in question,” and “exclusive of taxes on exports.” Fuwei Films
(Shandong) Co. v. United States, 36 CIT , , 837 F. Supp. 2d
1347, 1350–51 (2012).
In evaluating Commerce’s selection of the best available
surrogate value under the substantial evidence standard, “[t]he
Court’s role is not to make that determination anew, but rather to
decide ‘whether a reasonable mind could conclude that Commerce
chose the best available information.’” China First Pencil Co. v.
United States, 34 CIT , , 721 F. Supp 2d 1369, 1375 (2010)
(quoting QVD Food Co. v. United States, 34 CIT , , 721 F. Supp.
2d 1311, 1315 (2010), aff’d, 658 F.3d 1318 (Fed. Cir. 2011)). It
is critical that Commerce’s selection “establishes the antidumping
margins as accurately as possible.” Zhejiang DunAn Hetian Metal
Co. v. United States, 652 F.3d 1333, 1341 (Fed. Cir. 2011) (quoting
Shakeproof Assembly Components v. United States, 268 F.3d 1376,
Court No. 11-00081 Page 16
1382 (Fed. Cir. 2001)). Nevertheless, Commerce has “broad
discretion to determine the ‘best available information’ in a
reasonable manner on a case-by-case basis.” Goldlink Indus. Co. v.
United States, 30 CIT 616, 619, 431 F. Supp. 2d 1323, 1327 (2006)
(quoting Timken Co. v. United States, 25 CIT 939, 944, 166 F. Supp.
2d 608, 616 (2001)).
A. Surrogate Financial Ratio
Commerce selected Oil Country Tubular, Ltd. (“OCTL”) as the
only financial surrogate for DP-Master in both the Preliminary
Determination and Final Determination. DP argues that Commerce
should have averaged financial statements from OCTL with those from
Jindal Saw, another Indian producer. DP’s challenge is twofold:
first, DP questions OCTL’s suitability as a surrogate on the basis
that it has a lower drill pipe production capacity, provides more
services, and produces a wider variety of expensive goods than DP-
Master; second, DP disputes Commerce’s finding that Jindal Saw was
too vertically integrated to be comparable to DP-Master. In
essence, DP argues that OCTL is just as poor a match for DP-
Master’s production experience as Jindal saw, meaning that
Commerce’s decision to use only OCTL as a surrogate was unsupported
by substantial evidence.
To account for factory overhead, SG&A, and profit in a
nonmarket economy context, Commerce uses financial statements from
“one or more surrogate companies.” Fujian Lianfu Forestry Co. v.
Court No. 11-00081 Page 17
United States, 33 CIT , , 638 F. Supp. 2d 1325, 1353 (2009).
“To serve as an adequate proxy for the respondent companies being
reviewed, the surrogate companies selected ideally should produce
comparable merchandise” in the surrogate country. Id. (citing 19
C.F.R. § 351.408(c)(4)). In selecting an adequate proxy, “Commerce
‘narrow[s] the list of financial statements meeting this criterion
by consider[ing] the quality and specificity of the statements,’”
Qingdao Sea-Line Trading Co. v. United States, 36 CIT , , Slip
Op. 12-39 at 36 (Mar. 21, 2012) (citing Dorbest Ltd. v. United
States, 604 F.3d 1363, 1374 (Fed. Cir. 2010)), including whether
they show a comparable level of vertical integration. Mittal Steel
Galati S.A. v. United States, 31 CIT 1121, 1139, 502 F. Supp. 2d
1295, 1311 (2007); see Air Prods. & Chems., Inc. v. United States,
22 CIT 1125, 31 F. Supp. 2d 999 (1998). Although “Commerce
generally finds that the greatest number of financial statements
yields the most representative data from the relevant manufacturing
sector,” Fujian Lianfu, 33 CIT at , 638 F. Supp. 2d at 1353,
“Commerce is not justified in sacrificing quality for quantity.”
Dorbest Ltd. v. United States, 30 CIT 1671, 1717, 462 F. Supp. 2d
1262, 1302 (2006). As such, Commerce must avoid averaging
financial statements that would have an unjustifiably distortive
effect on the resulting surrogate financial ratio. Id. at 1716–24,
462 F. Supp. 2d at 1301–08.
The first prong of DP’s argument focuses on differences
Court No. 11-00081 Page 18
between OCTL and DP-Master. DP argues that “OCTL’s [oil tubular
goods] production capacity vastly overshadows its drill pipe
production capacity, which itself is only 1/10 of DP-Master’s.”
Pls.’ Br. at 30–31. Commerce found that DP-Master and OCTL were at
an “identical level of integration” because both “purchas[e] green
tube that is then processed into drill pipe.” I&D Memorandum at
22. As DP argues elsewhere, oil tubular goods are comparable to
drill pipe because the production of both requires modification of
raw green tubes. Pls.’ Br. at 5–6, 13, 24, 32–33; CR 103 at 2-10
& Ex. 2. Because the processes for producing drill pipe and oil
tubular products are at least comparable, see 19 C.F.R. §
351.408(c)(4), DP’s attempt to discredit OCTL’s suitability on the
basis that it has a lower capacity to produce drill pipe is
unpersuasive. DP also argues that “OCTL provides services, such as
phosphating, plastic coating, reconditioning, and rethreading of
drill pipe, and field inspection of tubulars,” whereas “DP-Master
outsources some [of those] services . . . and does not engage in
any reconditioning, rethreading, or field inspection,” and that
“OCTL manufactures a much wider range of products[] than DP-
Master,” including many advanced and expensive specialty tools.
Commerce recognized that OCTL offers many goods and services that
DP-Master does not and that such production experience weighs
against its viability as a surrogate. I&D Memorandum at 22.
The second prong of DP’s argument is that Commerce improperly
Court No. 11-00081 Page 19
rejected Jindal Saw as a surrogate because it “does not appear to
be as fully-integrated as Commerce believed.” Pls.’ Br. at 32. DP
supports its argument with a quote from a Jindal Saw 2009-2010
annual report: “Jindal ‘focused on value added production’ and
reduced production of pig iron by 81.7% ‘to [a] negligible level.’”
Pls.’ Br. at 31 (quoting PR 218 at 29, 71) (alteration in Pls.’
Br.). This quotation is irrelevant for two reasons. First,
although pig iron is an input for some steel products, there is no
indication that Jindal Saw used its pig iron to make pipes.8 See
PR 218 at 26-29. Second, contrary to DP’s assertion, the annual
report shows that Jindal Saw’s consumption of raw iron ore and iron
fines increased by 20% along with its production of pipes. PR 218
at 71. In other words, DP’s selective quotation does not undermine
Commerce’s finding that Jindal Saw is more vertically integrated
than DP-Master because it “begin[s] its production at the iron ore
stage.” I&D Memorandum at 22.
Furthermore, the same annual report demonstrates that Jindal
Saw produces “certain out of scope merchandise that [DP-Master]
does not,” just like OCTL. See I&D Memorandum at 22. In addition
to non-drill pipe metal tube products, Jindal Saw “provides various
8
The annual report lists pig iron with other finished
products, not raw materials. PR 218 at 71. Furthermore, the
quoted 81.7% reduction in pig iron appears on a table labeled
“Company’s sales mix” alongside sales of steel plates, steel coils,
and steel pipes. PR 218 at 29, 71. These facts imply that Jindal
produced pig iron for sale, not as an input for green tubes.
Court No. 11-00081 Page 20
value added products like pipe coatings, bends and connector
castings,” PR 218 at 19, which DP does not claim to provide.
Jindal Saw also produces and sells steel plates, steel coils, and
pig iron, id. at 29, products DP does not claim to produce.
Finally, Jindal Saw’s wholly-owned subsidiary “owns and operates
businesses in three core sectors of the Indian economy,” none of
which bear any relation to producing drill pipe or other oil
extraction products: “Water, Waste Water and Solid Waste
Management[;] Domestic Transportation & Logistics[; and]
Transportation Equipment Fabrication.” Id. at 8, 63–64, 89–90.
Jindal Saw reaches as wide across as it does far down the stream of
production, and as such it is equally subject to the criticism DP
applies to OCTL.
Commerce’s decision to use only OCTL as a financial surrogate
is supported by substantial evidence in the record. OCTL and
Jindal Saw both produce nonsubject goods, but Jindal Saw has a high
level of vertical integration that neither DP-Master nor OCTL
possess. On these facts, Commerce’s choice not to average OCTL’s
data with distortive data from Jindal Saw was reasonable.
Therefore, DP’s request to remand for redetermination of the
financial surrogate ratio must be denied.
B. Surrogate Value for Drill Pipe Green Tube
In the Preliminary Determination, Commerce calculated a
$1262.50 surrogate value for green tube by averaging prices and
Court No. 11-00081 Page 21
offers for J/K-55 grade tube listed in the January and March 2009
issues of MBR. As Commerce stated, “[MBR] is a widely respected
steel industry journal produced outside the context of this case .
. . [and] J/K55 is the most similar in yield strength to drill pipe
green tubes, a key characteristic in green tubes.” PR 186 at 7.
In the Final Determination, however, Commerce opted instead to use
average unit values of goods imported under IHTS categories 7304.29
and 7304.23 to calculate a $2,511.67 surrogate value. I&D
Memorandum at 31–32. One of the reasons Commerce changed its mind
was that, in its opinion, the IHTS categories actually “capture”
green tube, whereas the MBR issues described J/K-55 grade tube, a
product “that is only comparable to” green tube.9 Id. DP contends
that Infodrive India listings for IHTS categories 7304.29 and
7304.23 show that imports under both categories were actually
devoid of green tube and dominated by high-priced finished
products, meaning that Commerce did not base its determination on
substantial evidence.10 Pls.’ Br. at 15–17.
9
Commerce also rejected the MBR data as derived from a time
frame “so isolated . . . as to be potentially subject to temporary
market fluctuations” and listing mere “offers for sale,” whereas
the IHTS categories are transaction prices “fully contemporaneous
with the POI [representing] broad market average prices in India
during the entire POI.” Id. at 31–32.
10
DP also alleges that Commerce issued its determination
contrary to law because “Commerce . . . based its green-tube SV
determination on a limitation that only HTS categories could be
considered for selection as SV.” Pls.’ Br. at 17. Nothing in the
Final Determination suggests that Commerce rejected DP-Master’s
proposed surrogates solely because they were not IHTS categories.
Court No. 11-00081 Page 22
This Court has recognized Infodrive’s utility in specifying
descriptions of products at the moment of import as a supplement to
aggregated IHTS data. See Dorbest Ltd., 30 CIT at 1695–98, 462 F.
Supp. 2d at 1284–86 (2006); Zhejiang, 652 F.3d at 1342. Infodrive
is not a perfect tool, Zhejiang, 652 F.3d at 1342, and so Commerce
need not rely on Infodrive data that is incomplete or demonstrably
inaccurate. Globe Metallurgical, Inc. v. United States, 33 CIT ,
, Slip Op. 09-37 at 7–8 (May 5, 2009), appeal dismissed per
stipulation, 449 Fed. App’x 9 (Fed. Cir. 2010); Calgon Carbon Corp.
v. United States, 35 CIT , , Slip Op. 11-21 at 17 (Feb. 17,
2011). Nevertheless, this Court has consistently found that
Commerce is obliged to address Infodrive data offered in rebuttal
if it specifies a “definite and substantial percentage” of imports
under a particular IHTS category. Calgon Carbon, 33 CIT at ,
Slip Op. 11-21 at 17; see Zhengzhou Harmoni Spice Co. v. United
States, 33 CIT , , 617 F. Supp. 2d 1281, 1325 (2009); Longkou
Haimeng Mach. Co. v. United States, 32 CIT 1142, 1162–65, 581 F.
Supp. 2d 1344, 1361–64 (2008).
In the Final Determination, Commerce admitted that the
Infodrive data was substantially complete and an accurate
DP’s confusion may be a result of Commerce’s justification for
describing IHTS categories 7309.23 and 7309.29 as more product
specific than other Indian HTS data. See I&D Memorandum at 31
(“[DP-Master] has placed no evidence on the record demonstrating
that a different HTS category is more appropriate for green tubes
. . . .” (emphasis added)).
Court No. 11-00081 Page 23
representation of imports under IHTS category 8431.43.90 in the
context of explaining its selected surrogate value for tool joints.
I&D Memorandum at 26. When it evaluated the Infodrive data with
respect to green tube, however, Commerce dismissed DP-Master’s
argument in one sentence: “Infodrive data placed on the record by
[DP-Master] definitively show entries of green tube under . . .
categories [7309.23 and 7309.29].” I&D Memorandum at 31. Although
DP-Master argued “that these [IHTS] categories are ‘overwhelmed’ by
products further along in the production process than raw green
tube,” Commerce found that they were not “necessarily
unrepresentative of the input” and were in fact “product-specific
to the green tubes used in the production of drill pipe.” Id. In
response to the instant motion, Commerce reiterates its position:
“While J/K 55 demonstrably cannot be used to make drill pipe, the
basket categories did, in fact contain prices for the green tube at
issue.” Def.’s Br. at 19. Put simply, Commerce found that because
IHTS averages actually “captured” green tube, as demonstrated by
the Infodrive data, it was the best available surrogate value. See
I&D Memorandum at 31–32.
Commerce’s description of the Infodrive data in the Final
Determination is misleading to the point where it is impossible to
determine whether its reliance on the IHTS data was reasonable.
See Calgon Carbon, 33 CIT at , Slip Op. 11-21 at 17–19. Commerce
determined that the IHTS data was a reasonable surrogate because
Court No. 11-00081 Page 24
the Infodrive listings “definitively show entries of green tube,”
I&D Memorandum at 31, but of the hundreds of entries listed on the
Infodrive tables, only three might be properly categorized as
“definitively” green tube: two 9/9/09 entries describing “RAW-PIPE
SEAMLESS” and “RAW - TBG SEAMLESS” and one 9/5/09 entry describing
“RAW-PIPESEAMLESS.” See PR 162 Ex. SV-45 (tables for imports under
7304.23.90 at page 4). DP argues that there are no entries for
green tube, Pls.’ Br. at 16, and indeed these three entries are
also described as being “WALL MATERIAL,” implying that they may be
unsuitable for the production of drill pipe. See PR 162 Ex. SV-45
(tables for imports under 7304.23.90 at page 4). Neither party
thoroughly explains the other entries for “seamless pipe”11 at
present, but DP-Master did submit a detailed analysis of the
Infodrive data below tending to show that there are in fact no
green tube entries. See PR 162 at 7–17. DP-Master corroborated
its interpretation below with evidence indicating that Indian green
tube imports would be low during the period of investigation
because of “measures taken [in late 2008] by the Indian
11
The record establishes a distinction between raw seamless
green tube on the one hand, and finished seamless tubing on the
other. CR 98 2–9 & Att. 1; CR 103 at 2-10. Given the unspecific
descriptions for tube entries and the absence of entries for green
tube suitable for drill pipe, the Infodrive listings are, at a
minimum, ambiguous as to what kinds of pipes and tubes actually
entered India under categories 7309.23 and 7309.29. See PR 162 Ex.
SV-45. Even the most generous interpretation of the Infodrive data
cannot support Commerce’s explicit finding that the data
“definitively show entries of green tube.” I&D Memorandum at 31.
Court No. 11-00081 Page 25
government[] to restrict imports [of green tube] . . . from low-
price producers in China.” PR 138 Ex. 3 at 10. Commerce did not
address this evidence in the Final Determination.
Defendant-intervenors argue that the IHTS data is accurate
because the finished casing and tubes actually imported under those
categories are comparable to drill pipe green tube. Intervenor-
Def.’s Mem. Opp’n Pls.’ Br. (“Intervenor-Def.’s Br.”) at 5–8.
Specifically, “while the [IHTS] categories selected by Commerce may
include products more fully advanced than green tube, these
categories also include OCTG casing and tubing that have less
demanding performance characteristics and may be produced from less
expensive materials using less expensive processing than green tube
for drill pipe.” Intervenor-Def.’s Br. at 7. As DP correctly
points out, Pls.’ Reply at 3 n.2, Commerce hints at this same
argument in its response to the instant motion: “[A]fter
identifying green tube within the Indian customs data, Commerce
determined that the data was sufficiently product specific.”
Def.’s Br. at 19 (emphasis added). In the Final Determination,
however, Commerce explicitly rejected MBR data for J/K-55 tubing
because J/K-55 is “a product that the record demonstrates cannot be
used to produce drill pipe.” I&D Memorandum at 31. Both J/K-55
tubing and the IHTS 7309.23 and 7309.29 imports are comparable to
drill pipe green tube, and both J/K-55 and the IHTS 7309.23 and
7309.29 imports cannot be used to produce drill pipe.
Court No. 11-00081 Page 26
Consequently, if Commerce meant to say in the Final Determination
that the IHTS categories were product specific because they
captured related goods, then it did not adequately describe why it
dismissed the MBR data. Defendant-intervenors cannot use the
benefit of hindsight to justify the Final Determination with an
analysis Commerce demonstrably could not have relied upon below.
Commerce’s rebuttal of each of DP’s four alternative
surrogates12 in response to the instant motion does not cure its
inadequate explanation of its reliance upon the IHTS data. See
Longkou Haimeng, 32 CIT at , 581 F. Supp. 2d at 1363–64.
Although Commerce is not required to address every counterargument
or piece of evidence before it, see Taian Ziyang Food Co. v. United
States, 33 CIT , , 637 F. Supp. 2d 1093, 1141 (2009), its
failure here to explain evidence apparently contrary to a finding
central to its determination leaves the court without the means
necessary to affirm it as supported by the record. See Taian
Ziyang Food Co. v. United States, 35 CIT , , 783 F. Supp. 2d
12DP’s four alternatives are as follows: First, and what DP
characterizes as “possibly the best viable alternative,” are May
2009 MBR descriptions of “prices” and “offers” for Indian seamless
OCTG. Second, DP offers the January and March 2009 Indian prices
and offers for J/K-55 that Commerce used in the Preliminary
Determination with a deflation adjustment “to account for
[downward] global pricing trends.” Third, DP constructs a value by
taking the cost of alloy billets and adding proprietary amounts
representing the cost of processing billets into green tube.
Lastly, given “that drill pipe green tube is always seamless,” DP
suggests averaging Indian prices for seamless tube and adding a
proprietary adjustment for chemistry. Pls.’ Br. at 19–20.
Court No. 11-00081 Page 27
1292, 1331–32 (2011) (remand appropriate where there remained
“serious unanswered questions” as to Commerce’s justification for
selecting apparently distorted import statistics as the best
available surrogate). On remand, Commerce is not barred from
selecting the IHTS data — it need only explain why such data is
more representative of the price for drill pipe green tube than
other potential surrogate values in light of Infodrive data that
appears to demonstrate that categories 7309.23 and 7309.29 do not
actually “capture” green tube and are highly distorted by
expensive, finished tubular goods.
C. Surrogate Value for Purchased Tool Joints
Commerce used average unit values of imports under IHTS
8431.43.90 to calculate the tool joint surrogate value in the
Preliminary Determination. DP-Master objected, offering two
alternatives: “petitioners’ actual experience . . . even though it
is non-public and from the [U.S.],” and a value “that could be
calculated from the [factors of production] information DP-Master
submitted on the record prior to the preliminary determination . .
. [that] would have reflected commercial reality.” PR 191 at 8–10.
Commerce chose the latter in the Final Determination, adding
“surrogate ratios for overhead, SG&A, and profit . . . to as
closely as possible approximate the experience of purchasing [tool
joints] from an unaffiliated supplier.” I&D Memorandum at 28. DP
now contends that it was unreasonable for Commerce to have chosen
Court No. 11-00081 Page 28
this surrogate valuation method because petitioners’ tool joint
data was in fact the best available information, and because the
chosen $10,529.40 surrogate value is much higher than the $5571.40
value selected for tool joints DP-Master produced in-house and the
comparably priced proprietary value of tool joints petitioners
purchased in the U.S. Pls.’ Reply at 9–10.
Commerce acted reasonably when it declined to use petitioners’
data as the best available information on the record. See QVD Food
Co., 34 CIT at , 721 F. Supp. 2d at 1315 (citing Goldlink, 30 CIT
at 619, 431 F. Supp. 2d at 1327). DP admits that petitioners’
prices are derived from U.S. market prices and that the U.S. market
is not economically comparable to the PRC, Pls.’ Br. at 25–26, and
it does not dispute that the chosen surrogate value is derived
entirely from the primary surrogate country, India. I&D Memorandum
at 28. DP also admits that petitioners’ data is proprietary,
whereas the chosen surrogate is based on public information. Pls.’
Br. at 25–26. DP argues at great length that petitioners’ prices
are a “precise product match” for the tool joints DP-Master
purchased, e.g., Pls.’ Br. at 25, but it does not contest that the
chosen surrogate value is also product specific.13 See id. at
13
The most direct argument DP makes challenging product
specificity has no basis in the law. DP argues that “because the
[chosen surrogate] is not a value for tool joints at all, but
rather is based upon the sum of values of other products,” Commerce
ignored “the statutory requirement to ‘determine the normal value
of the subject merchandise on the basis of the factors of
production utilized in producing the merchandise.’” Pls.’ Br. at
Court No. 11-00081 Page 29
24–29; I&D Memorandum at 27–28. Faced with a choice between two
product-specific surrogate valuation methods spanning the period of
investigation, this court cannot say that Commerce erred when it
selected the method that was based on public data from the primary
surrogate country over proprietary data from a country not
economically comparable to the U.S. See Goldlink, 30 CIT at 619,
431 F. Supp. 2d at 1327 (“[T]he Court must defer to Commerce” if
its determination below is reasonable.).
DP employs a false comparison of the $10,529.40 surrogate
value with the $5571.40 constructed value for the tool joints it
produces to raise doubts about Commerce’s choice. The $5571.40
tool joint value lacks the profit, SG&A, and overhead
considerations that would be reflected in the price of tool joints
offered for sale in a surrogate market, and so $5571.40 is not an
accurate representation of purchased tool joint value. See I&D
Memorandum at 28. Furthermore, given the nature of the tool joint
market, the record shows that the chosen surrogate value is not
aberrational when compared to the proprietary average value of tool
joints purchased in the U.S. The parties agree that tool joints
are highly specialized and expensive components that are not
29. However, this Court has held that “assigning a surrogate value
to the factors of production going into the production of . . .
intermediate inputs” when valuing those intermediate inputs is in
fact consistent with the law. Anshan Iron & Steel Co. v. United
States, 27 CIT 1234, 1238–41 (2003) (not published in the Federal
Supplement).
Court No. 11-00081 Page 30
comparable to other kinds of pipe fittings. See I&D Memorandum at
26–27. Tool joints are only produced “in a few countries,” none of
which are market economies comparable to the PRC. I&D Memorandum
at 28. Because tool joints are so specialized and because there
are so few tool joint producers in the world, it was reasonable for
Commerce to accept variation among potential surrogate values,
especially when comparing normalized prices in a developing
nonmarket economy to actual prices in an advanced market economy.
“[T]he process of constructing foreign market value for a
producer in a nonmarket economy country is difficult and
necessarily imprecise.” Nation Ford Chem., 166 F.3d at 1377(quoting Sigma, 117 F.3d at 1407). That DP also presents a well-
reasoned case for why Commerce could have chosen petitioners’ data
as the best available does not change the fact that this court
cannot usurp Commerce’s sound judgment in selecting a different
viable surrogate. See Peer Bearing Co. v. United States 25 CIT
1199, 1201–02, 182 F. Supp. 2d 1285, 1292 (2001). Because
Commerce’s choice here was reasonable, DP’s challenge must fail.
See Goldlink, 30 CIT at 619, 431 F. Supp. 2d at 1327.
D. Surrogate Value for Labor
DP argues that, when calculating the labor wage rate surrogate
value, Commerce averaged the wage rate of thirty-one countries that
produced comparable merchandise without distinguishing between
producers and “significant producers” as required under 19 U.S.C.
Court No. 11-00081 Page 31
§ 1677b(c)(4)(B). As a result, Commerce included low-producing
countries in the surrogate wage rate average like Swaziland, even
though it only exported $469 worth of comparable merchandise.
Commerce concedes that it should reconsider its labor wage rate
determination in light of Shandong Rongxin Import and Export Co. v.
United States, 35 CIT , , 774 F. Supp. 2d 1307, 1315–16 (2011).
Accordingly, DP’s request to remand for reconsideration of the
surrogate labor wage rate is granted.
III. Partial Application of Adverse Facts Available
DP argues that “Commerce’s application of adverse facts
available . . . because of an independent toller’s failure to
report certain information regarding consumption of material inputs
is unsupported by substantial evidence and is contrary to law.”
Pls.’ Br. at 35. Under 19 U.S.C. § 1677e(b), Commerce may apply an
adverse inference when a party has “failed to cooperate by not
acting to the best of its ability to comply with a request for
information.” Id. “Failure to cooperate” is evaluated under an
objective and subjective standard. Nippon Steel Corp. v. United
States, 337 F.3d 1373, 1382 (Fed. Cir. 2003). First, Commerce must
show that “a reasonable and responsible [party] would have known
that the requested information was required to be kept and
maintained under the applicable statues, rules and regulations,”
and second, “that the respondent under investigation . . . either:
(a) fail[ed] to keep and maintain all required records, or (b)
Court No. 11-00081 Page 32
fail[ed] to put forth its maximum efforts to investigate and obtain
the requested information from its records.” Id. at 1382–83; Ad
Hoc Shrimp, 33 CIT at , 637 F. Supp. 2d at 1304.
Commerce relied on DP-Master’s failures in deciding to apply
an adverse inference, not its toller’s poor recordkeeping.14 I&D
Memorandum at 47. On April 7, 2010, Commerce instructed DP-Master
to provide “a detailed explanation of all efforts undertaken to
report the actual quantity of each [factor of production]” if it
could not report its toller’s actual consumption. I&D Memorandum
at 47 (citing PR 53 at G-1 to G-5 & §§ C, D). DP-Master provided
information that was not based on its toller’s actual consumption,
but it failed to offer any explanation until verification. PR 226
at 2. DP-Master was also instructed to inform Commerce
“immediately” if it would not be able to assemble materials
required for verification of its responses due to a recalcitrant
third party. I&D Memorandum at 47; PR 53 at G-1. DP-Master
provided information but failed to notify Commerce that it was
unable to assemble documents required for verification. Id. At
verification, DP-Master revealed “for the first time” that it
14
Commerce did use the toller’s inadequate recordkeeping as
a basis to apply facts otherwise available. I&D Memorandum at 45.
DP does not contest this aspect of Commerce’s determination. See
Pls.’ Br. at 35–36; Pls.’ Reply at 11–13; Nippon, 337 F.3d at 1831(“The mere failure of a respondent to furnish requested
information — for any reason — requires Commerce to resort to other
sources of information to complete the factual record upon which it
makes its determination.” (emphasis added)).
Court No. 11-00081 Page 33
neither provided information in the manner requested nor assembled
records necessary for verification of that information. Id. at 45.
DP-Master’s actions — lulling Commerce into believing it had
provided information in the manner requested when it in fact had
not, and then suddenly admitting that it had not provided reliable
information at verification — are closer to the kind of “deliberate
concealment or inaccurate reporting” that “surely evince[] a
failure to cooperate” than to the mere “inadequate inquiries”
sufficient for application of an adverse inference. See Nippon,
337 F.3d at 1383 (emphasis added). Although DP-Master notified
Commerce that it was having difficulty securing information from
its toller, DP does not and cannot dispute that Commerce provided
“extensive instructions . . . numerous times over the course of the
investigation” to the effect that DP-Master should notify Commerce
if it was unable to provide information in the manner requested.
I&D Memorandum at 47; Wuhan Bee Healthy Co. v. United States, 31
CIT 1182, 1191 (2007) (not published in the Federal Supplement)
(objective prong satisfied where “a reasonable and responsible
respondent would have brought any problems surrounding its
supporting documentation to Commerce’s attention before the
verification”). DP also does not and cannot dispute that DP-Master
failed to provide a detailed explanation of its efforts to get
actual-consumption data before verification as requested. See
Sidenor Indus. SL v. United States, 33 CIT , , 664 F. Supp. 2d
Court No. 11-00081 Page 34
1349, 1358 (2009) (subjective prong satisfied where respondent
failed to act as requested even though it was able to do so).
The record belies DP’s contention that it is “not the party
who failed to cooperate,” Pls.’ Br. at 35 (emphasis omitted), and
so this court cannot say that the application of an adverse
inference to DP-Master’s unverifiable submissions was unreasonable
or contrary to law.15 Wuhan Bee, 31 CIT at 1191–93. DP-Master’s
inability to acquire trustworthy information cannot serve as an
excuse for its failure to notify Commerce as requested. See
Nippon, 337 F.3d at 1382–83; Wuhan Bee, 31 CIT at 1191–93.
Consequently, Commerce acted reasonably and in accordance with the
law when it applied an adverse inference to the information it
could not verify.
15
DP offers two additional arguments that have no bearing on
Commerce’s determination below. First, DP suggests that an adverse
inference is inappropriate because it otherwise provided verifiable
information “with only minor discrepancies.” Pls.’ Br. at 36.
Commerce, however, applied an adverse inference “only . . . to the
portion of [DP-Master’s] response dealing with its phosphate
treatment toller’s factors [of production],” I&D Memorandum at 47,
and so DP-Master’s cooperation during the rest of the investigation
is irrelevant. Second, DP asserts in its reply that “Commerce only
cites to its own threats regarding cooperation and [adverse facts
available], but it does not . . . cite to any record information
indicating how [DP-Master] was uncooperative in any way.” Pls.’
Reply at 13. Given that Commerce found that DP-Master failed to
provide a “detailed explanation of all efforts undertaken to report
the actual quantity of each [factor of production]” its toller
consumed, I&D Memorandum at 47, it is no surprise that Commerce
would be unable to locate and cite such a document in the record.
In any event, DP’s argument does not deter from the fact that
Commerce explained its decision with ample citations to the record.
See id. at 44–47; Nippon, 337 F.3d at 1382–83.
Court No. 11-00081 Page 35
IV. Simultaneous Application of Nonmarket Economy Methodology and
Countervailing Duty Law
DP’s motion — dated February 8, 2012 — argues for remand on
the basis of the Federal Circuit’s decision in GPX International
Tire Corp., 666 F.3d at 734. That decision invalidated Commerce’s
simultaneous application of countervailing duty law and nonmarket
economy methodologies below, which was its usual approach under
then-existing law. The Federal Circuit decided GPX on December 19,
2011, almost a year after DP appealed the Final Determination to
this court. Id. Just over a month after DP filed the instant
motion, Congress passed Public Law 112-99, amending the Tariff Act
of 1930. 126 Stat. 265. Public Law 112-99 clarifies that
“merchandise on which countervailing duties shall be imposed . . .
includes a class or kind of merchandise imported, or sold (or
likely to be sold) for importation, into the [U.S.] from a
nonmarket economy.” 19 U.S.C. § 1671(f)(1). On deciding a motion
to rehear the case, the Federal Circuit recognized that with the
passage of Public Law 112-99, “Congress clearly sought to overrule
. . . GPX.” GPX Int’l Tire Corp. v. United States, 678 F.3d 1308,
1311 (Fed. Cir. 2012). Accordingly, the Federal Circuit held that
“the statute prior to the enactment of the new legislation did not
impose a restriction on Commerce’s imposition of countervailing
duties on goods imported by [nonmarket economy] countries to
account for double counting.” Id. at 1312.
Recognizing that Public Law 112-99 “permits Commerce to apply
Court No. 11-00081 Page 36
[countervailing duties] concurrently with the [nonmarket economy]
methodology,” DP argues for the first time in its reply that Public
Law 112-99 is unconstitutional because it violates DP’s equal
protection, due process, and ex post facto rights and that “the law
may have other constitutional infirmities.” Pls.’ Reply at 14–15.
“Arguments raised for the first time in a reply brief are not
properly before this court,” United States v. Ford Motor Co., 463
F.3d 1267, 1276–77 (Fed. Cir. 2006), and such arguments are usually
deemed to be waived. Novosteel SA v. United States, 284 F.3d 1261,
1273–74 (Fed. Cir. 2002); see Ford Motor Co., 463 F.3d at 1276–77.
Here, however, DP did not have an opportunity to present its
constitutional objections before it filed its reply because Public
Law 112-99 did not become effective until March 13, 2012 — well
after it filed the instant motion. DP’s good faith effort to
preserve its objections is dissimilar from other parties’ failure
in previous cases to present arguments available to them at the
time of filing the main brief, and therefore, waiver is
inappropriate. See Novosteel SA, 284 F.3d at 1273–74; Ford Motor
Co., 463 F.3d at 1276–77.
A more fundamental concern is that Commerce and domestic
industry have not yet been afforded a full opportunity to be heard.
The unique circumstances of this case may deem the application of
waiver inappropriate, but it is impossible at present for the court
to address the important constitutional issues briefed only in two
Court No. 11-00081 Page 37
short paragraphs in DP’s reply. Indeed, beyond challenging the
substance of DP’s arguments, Commerce or domestic industry may
justifiably raise concerns about standing, mootness or estoppel.
Therefore, DP’s request for a remand on its due process, equal
protection, and ex post facto objections is denied without
prejudice to renew after Commerce returns with its remand
determination.
CONCLUSION
For the foregoing reasons, the court concludes that the Final
Determination is in accord with the law and is supported by
substantial evidence, except with respect to Commerce’s explanation
of its findings regarding the surrogate value for drill pipe green
tube and to its findings regarding the surrogate labor wage rate as
applied to DP-Master. On remand, Commerce must either select a new
surrogate value or explain why IHTS categories 7309.23 and 7309.29
are more representative of the price for drill pipe green tube than
other potential surrogate values in light of Infodrive data that
appears to demonstrate that the categories do not actually
“capture” green tube imports, and are highly distorted by
expensive, finished tubular goods. This court also reserves
judgment on any constitutional issues until after Commerce returns
with its remand results.
ORDER
In accordance with the above, it is hereby
Court No. 11-00081 Page 38
ORDERED that this case is remanded to the United States
Department of Commerce, International Trade Administration, to
reconsider its findings regarding drill pipe green tube and labor
wage rate surrogate values; and it is further
ORDERED that the Final Determination is affirmed in all other
respects; and it is further
ORDERED that the remand results are due within ninety (90)
days of the date this opinion is entered. Any responses or
comments are due within thirty (30) days thereafter. Any rebuttal
comments are due within fifteen (15) days after the date responses
or comments are due.
/s/ NICHOLAS TSOUCALAS
Nicholas Tsoucalas
Senior Judge
Dated: November 20, 2012
New York, New York