Arcelormittal USA Inc. v. United States

Slip Op. 08-52
UNITED STATES COURT OF INTERNATIONAL TRADE
_______________________________
:
ARCELORMITTAL USA INC., :
:
Plaintiff, :
:
v. : Before: Richard K. Eaton, Judge
:
UNITED STATES, : Court No. 06-00085
:
Defendant, : Public Version
:
and :
:
DONGBU STEEL CO., LTD., ET AL.,:
:
Def.-Ints. :
_______________________________:
[United States Department of Commerce’s final results of the
eleventh administrative review of the antidumping duty order
applicable to corrosion-resistant carbon steel flat products from
Korea, sustained.]
Dated: May 15, 2008
Stewart and Stewart (Terence P. Stewart and Wesley K.
Caine), for plaintiff.
Gregory G. Katsas, Acting Assistant Attorney General; Jeanne
E. Davidson, Director, Patricia M. McCarthy, Assistant 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 (Irene H. Chen), of counsel, for defendant.
Troutman Sanders LLP (Donald B. Cameron, Julie C. Mendoza,
R. Will Planert, and Brady W. Mills), for defendant-intervenors
Union Steel Manufacturing Co., Ltd. and Dongbu Steel Co., Ltd.
Akin, Gump, Strauss, Hauer & Feld, LLP (Spencer S. Griffith,
J. David Park, Jarrod M. Goldfeder, and Lisa W. Ross), for
defendant-intervenor POSCO.
Eaton, Judge: This action is before the court on plaintiff
Court No. 06-00085 Page 2
ArcelorMittal USA Inc.’s Rule 56.2 motion for judgment upon the
agency record.1 By its motion, plaintiff contests certain
aspects of the United States Department of Commerce’s (“Commerce”
or the “Department”) final results of the eleventh administrative
review of the antidumping duty order applicable to imports into
the United States of corrosion-resistant carbon steel flat
products (“CORE”) from Korea for the period of review August 1,
2003, through July 31, 2004. See Certain CORE from the Republic
of Korea, 71 Fed. Reg. 7,513 (Dep’t of Commerce Feb. 13, 2006)
(eleventh admin. review), as amended by Certain CORE from the
Republic of Korea, 71 Fed. Reg. 13,692 (Dep’t of Commerce Mar.
20, 2006) (amended final results) (collectively, the “Final
Results”). Jurisdiction lies pursuant to 28 U.S.C. § 1581(c)
(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. See Pl.’s Mot. J.
Agency R. (“Pl.’s Br.”) 4. On August 19, 1993, following its
investigation, Commerce published the antidumping duty order
1
During the pendency of this action, the court granted
plaintiff’s consent motion to amend the caption and all filings
in this proceeding to reflect its corporate name change, from
Mittal Steel USA Inc. to ArcelorMittal USA Inc. See
ArcelorMittal USA Inc. v. United States, Court No. 06-00085, Jan.
28, 2008 (order).
Court No. 06-00085 Page 3
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) (the “CORE Order”). On August 3, 2004,
after having conducted ten prior administrative reviews of the
CORE Order, Commerce published notice that it would consider
requests for the eleventh review. See Opportunity to Request
Admin. Review, 69 Fed. Reg. 46,496 (Dep’t of Commerce Aug. 3,
2004) (notice). Thereafter, on August 31, 2004, plaintiff asked
Commerce to conduct a review of the behavior and market
activities of certain Korean respondents including Pohang Iron &
Steel Co., Ltd. (“POSCO”), Dongbu Steel Co., Ltd. (“Dongbu”),
Hyundai HYSCO Co., Ltd. (“HYSCO”), and Union Steel Manufacturing
Co., Ltd. (“Union”). The eleventh administrative review was
initiated on September 22, 2004. See Initiation of Antidumping
and Countervailing Duty Admin. Reviews and Request for Revocation
in Part, 69 Fed. Reg. 56,745 (Dep’t of Commerce Sept. 22, 2004)
(notice).
On February 13, 2006, Commerce published its Final Results.
See Final Results, 71 Fed. Reg. at 7,513. Based on its analysis,
the Department assigned imports from POSCO a 2.16 percent dumping
margin; those from Union a de minimis margin;2 and those from
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 [Commerce]
(continued...)
Court No. 06-00085 Page 4
Dongbu a 2.26 percent dumping margin. See id. at 7,514.
Defendant-intervenor HYSCO received a margin of zero. See id.
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.
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
2
(...continued)
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).
Court No. 06-00085 Page 5
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
Plaintiff’s motion presents four issues3 in challenging
Commerce’s Final Results. The court is mindful that similar
issues were considered in Mittal Steel USA, Inc. (formerly
International Steel Group, Inc.) v. United States, 31 CIT __,
Slip Op. 07-117 (Aug. 1, 2007) (“Mittal”)4 (not reported in the
3
An additional issue was resolved by the United States
Court of Appeals for the Federal Circuit (the “Federal Circuit”)
during the pendency of plaintiff’s action. Plaintiff argued that
“safeguard” duties are “United States import duties” and
therefore that Commerce must deduct these duties in order to
accurately arrive at appropriate ex factory United States prices
for comparison with ex factory prices for comparable home market
sales. See Pl.’s Br. 45-47. As Mittal Steel USA, Inc. (formerly
International Steel Group, Inc.) v. United States, 31 CIT __,
Slip Op. 07-117 (Aug. 1, 2007) (not reported in the Federal
Supplement), acknowledged, the Federal Circuit recently held, in
Wheatland Tube Co. v. United States, 495 F.3d 1355, 1363 (Fed.
Cir. 2007), that the phrase “‘United States import duties’ does
not include § 201 safeguard duties for the purposes of
determining the [United States price] and calculating the dumping
margin . . . .” Therefore, the court again sustains as
reasonable Commerce’s interpretation of “United States import
duties” to exclude Section 201 duties and likewise sustains
Commerce’s decision to not deduct those duties from United States
price. Id.
4
The court’s January 28, 2008 order amending the caption
(continued...)
Court No. 06-00085 Page 6
Federal Supplement), by which the final results of Commerce’s
tenth administrative review were sustained. The issues raised by
plaintiff’s motion are resolved as follows.
I. Model Match
Plaintiff’s first claim is that Commerce abused its
discretion by failing to request the more detailed product
information from Dongbu, HYSCO, POSCO, and Union (collectively,
“defendant-intervenors”), that plaintiff believed was necessary
for use in Commerce’s model match comparisons. As a result,
plaintiff insists that Commerce’s model match results were not
supported by substantial evidence, because incomplete information
“likely yielded inaccurate results.” Pl.’s Br. 2.
Model match criteria are used by Commerce to ensure that the
merchandise sold in the United States 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). In this eleventh review, Commerce used a
CORE-specific questionnaire to gather information to identify
“identical” merchandise for use in its model match methodology.
4
(...continued)
in this matter to reflect plaintiff’s corporate name change does
not extend to the Mittal case, which dealt with the prior, tenth
administrative review of the same company.
Court No. 06-00085 Page 7
See, e.g., Letter Dated Nov. 1, 2004 from Commerce to POSCO, and
accompanying Request for Information, CORE from Korea (the
“Questionnaire”), Public Doc. (“PD”) No. 19. The Questionnaire
employed twelve criteria including “width,” “thickness,” “type,”
and “quality.” See Questionnaire, PD No. 19 at 3-5. For certain
categories of data sought, the Questionnaire asked for
information based on ranges of characteristics rather than
precise measurements.5 See Questionnaire, PD No. 19 at 3-5.
“Thus, to identify goods for price comparisons, Commerce would
treat as factually ‘identical’ all CORE within a given range . .
. [such that] articles with different actual dimensions could
still be treated as ‘identical’ . . . .” Pl.’s Br. 5.
Commerce’s questions relating to “type” and “quality” also used
groupings of characteristics rather than requiring exact product
matches.6 Questionnaire, PD No. 19 at 3-5.
5
For instance, Commerce’s Questionnaire uses four
measurement groups for widths, “a. >= ½” but <24” b. >=24” but
<40” c. >=40” but <60” [and] d. >=60”.” Questionnaire, PD No. 19
at 4. Similarly, it defines “minimum thickness” by employing 11
separate groups as follows: “ 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”.” Questionnaire, PD No. 19 at 4.
6
For “type” Commerce asked defendant-intervenors to
indicate, among other things, whether or not the merchandise was
painted and, if so, whether the paint was “PVDF” (polyvinyledene
flouride) or “all other.” Questionnaire, PD No. 19 at 2.
Further, for “quality,” Commerce’s questionnaire specified four
groups, as well as an “other” response. The four “quality”
(continued...)
Court No. 06-00085 Page 8
Before Commerce in the tenth administrative review and
before this court in Mittal, plaintiff made similar arguments by
presenting to Commerce a submission employing certain of
defendant-intervenors’ own price lists. See Pl.’s Br. 7.
According to plaintiff, this submission demonstrated that
Commerce’s model match methodology yielded aberrant results and
that this “should have prompted the agency to at least request
more precise data” such that Commerce and plaintiff “could have
pursued the matching issues in greater depth via computer
analysis.” Pl.’s Br. 26.
In the tenth administrative review, as it has here, Commerce
rejected plaintiff’s submission and its request to seek more
precise information primarily because the price lists submitted
by plaintiff did not reflect actual transaction prices. Further,
“several of the price lists cited . . . are exclusive to the
Korean respondents’ home market and, thus, offer no information
6
(...continued)
groups, in addition to the “other” category, were:
(a) Commercial, Lock Forming, or Structural;
(b) Drawing (whether or not special killed);
(c) Bake Hardened/Dent Resistant; and (d)
Deep Drawing Steels (e.g., Deep Drawing
Quality, Deep Drawing Quality Special Killed,
Extra Deep Drawing Quality, Extra Deep
Drawing Quality Special Killed, Deep Drawing
Quality Special Killed Fully Stabilized, Deep
Drawing Quality Special Killed Fully
Stabilized, Interstitial Free).
Questionnaire, PD No. 19 at 3.
Court No. 06-00085 Page 9
on how the products are sold in the U.S. market.” Pl.’s Br. 8
(quoting Memorandum from Eric. B. Greynolds to Melissa Skinner
Regarding Petitioners’ Proposal to Change the Model Match
Methodology (Dep’t of Commerce Aug. 27, 2004 (the “Tenth Review
Model Match Memo”), Confidential R. Doc. (“CR”) No. 1 at 5-6).
In this eleventh review, Commerce “reaffirmed” its reasoning
from the tenth administrative review and again declined to seek
all of the information requested by plaintiffs. See Issues and
Decisions for the Final Results of the Eleventh Administrative
Review of the Antidumping Duty Order on Certain CORE from Korea
(2003 - 2004) (Dep’t of Commerce Feb. 6, 2006) (the “I&D Memo”),
PD No. 226 at Comment 1. Before doing so, however, the
Department issued supplemental questionnaires to defendant-
intervenors responsive to certain of plaintiff’s requests. See
Def.’s Resp. Mot. J. Agency R. (“Def.’s Br.”) 3. By these
supplemental questionnaires, Commerce sought additional
information regarding “the physical characteristics of the goods
sold in Korea and in the United States and associated cost of
production information.” Def.’s Br. 3 (citations omitted).
Commerce did not, however, “request actual measurement data for
each model sold because such a request ‘would have been extremely
burdensome for [defendant-intervenors].’” See Def.’s Br. 3
(citations omitted). Thus, although Commerce did obtain more
detailed information, particularly with respect to type, quality,
Court No. 06-00085 Page 10
and cost of production, it did not request all of the data asked
for by plaintiff. See, e.g., Dongbu Suppl. Questionnaire
Sections A-D (Dep’t of Commerce May 17, 2005), PD No. 117
(requesting information concerning corporate structure, financial
statements, distribution process, type, and quality). In
addition, unlike in the tenth review, Dongbu, POSCO, and HYSCO
voluntarily submitted additional data reflecting exact widths and
thicknesses of the products covered by sales they reported to
Commerce. See I&D Memo, PD No. 226 at 4-5; see also Pl.’s Br.
11.
Notwithstanding this more detailed information, plaintiff
continues to insist that it needs more data so that it can
“demonstrate the likely inaccuracy of Commerce’s methodology so
far as quality and type were concerned.” Pl.’s Br. 11 (“Since no
respondent voluntarily submitted more precise ‘Type’ or ‘Quality’
information, Mittal was unable to test for those factors.”).
Having reviewed the record, the court finds that Commerce
made a reasonable decision not to seek all of the information
sought by plaintiff. Here, plaintiff’s submission, which
purports to demonstrate that Commerce’s results were aberrant,
relies on the identical price lists it presented in the tenth
review. Unsurprisingly, Commerce again concluded that “the price
lists submitted by [plaintiff] contained no evidence indicating
that the price lists reflect actual transaction prices, and,
Court No. 06-00085 Page 11
thus, . . . do not necessarily reflect the Korean [defendant-
intervenors’] actual sales and pricing practices.” I&D Memo, PD
No. 226 at 6. Commerce further observed that “several of the
price lists cited by [plaintiff] were exclusive to the [Korean
defendant-intervenors’] home market and offered no information
concerning how the products are sold in the United States.”7
Def.’s Resp. 11. Thus, for Commerce, this evidence is less
reliable and less accurate than the actual sales data it
obtained. See generally I&D Memo, PD No. 226 at Comment 1.
With respect to this evidence, the Mittal Court found that
Commerce was justified in relying upon the actual Unites States
sales data it obtained, rather than price lists for merchandise
sold in the Korean home market. See Mittal, 31 CIT at __, Slip
Op. 07-117 at 11-12.
7
Commerce’s Issues & Decisions Memorandum explains:
It is important to note that [plaintiff’s]
arguments and analysis in this review are
similar to those submitted in the tenth
administrative review. In particular, our
findings with respect to [plaintiff’s]
arguments on price-list information has
already been addressed in our Tenth Review
Model-Match Memo . . . As we also found in
the tenth administrative review, the price
lists submitted by [plaintiff] contained no
evidence indicating that the price lists
reflect actual transaction prices, and, thus,
we found that they do not necessarily reflect
the Korean [defendant-intervenors’] actual
sales and pricing practices.
I&D Memo, PD No. 226 at 6 (footnotes omitted).
Court No. 06-00085 Page 12
As to plaintiff’s argument that Commerce has not supported
its conclusions with substantial evidence because it did not
request the additional information plaintiff asked for, Commerce,
in fact, had in its possession all of the information needed to
make a fair and reasonable product comparison. That is, Commerce
had sufficient information——submitted in response to its initial
Questionnaire, the follow-up questionnaires, and voluntarily
submitted by defendant-intervenors——about product details such as
type, reduction and coating processes, clad material, quality,
yield strength, metallic coating weight, width, thickness, form,
temper rolling, and leveling. See Questionnaire, PD No. 19 at 3-
5. “Commerce enjoys broad discretion in conducting . . . reviews
under the antidumping statute, particularly in . . . [making]
decisions regarding relevant evidence.” See E.I. DuPont de
Nemours & Co. v. United States, 22 CIT 19, 32, Slip Op. 98-7
(Jan. 29, 1998) (not reported in the Federal Supplement); U.S.
Steel Group v. United States, 96 F.3d 1352, 1357 (Fed. Cir. 1996)
(“It is the [Department’s] task to evaluate the evidence it
collects during its investigation.”); but see Ceramica
Regiomontana, S.A., 10 CIT at 405, 636 F. Supp. at 966 (“Of
course, this Court will not allow an agency, under the guise of
lawful discretion, to contravene or ignore the intent of the
legislature or the guiding purpose of the statute.”).
Plaintiff, seemingly aware that it cannot demonstrate a
Court No. 06-00085 Page 13
compelling need for Commerce to change its model match
methodology, relies on the argument that, if Commerce obtained
more information, then perhaps it could demonstrate a compelling
need. This, however, is mere speculation. While it may be that
more information might be useful, plaintiff’s submission did not
demonstrate that it is necessary. See I&D Memo, PD No. 226 at
Comment 1. Commerce “cannot possibly account for every
difference between products . . . .” See Tenth Review Model
Match Memo, CR No. 1 at 6. Therefore, Commerce’s decision not to
request additional information was a “reasonable means of
effectuating the [antidumping law’s] statutory purpose . . . .”
Ceramica Regiomontana, S.A., 10 CIT at 404–05, 636 F. Supp. at
966. Accordingly, Commerce’s model match results are sustained
as supported by substantial evidence.
II. Constructed Export Price: Deduction of Selling Expenses
As it did in the tenth administrative review, plaintiff
argues that Commerce, in calculating constructed export price
(“CEP”), acted unlawfully and rendered a determination
unsupported by substantial evidence by not deducting certain
expenses incurred by the Korean exporter parent companies.8 See
8
CEP refers to
the price at which the subject merchandise is
first sold (or agreed to be sold) in the
(continued...)
Court No. 06-00085 Page 14
Pl.’s Br. 22-23, 30-36. According to plaintiff, when the Korean
parent companies perform “core selling functions9 in connection
with their U.S. affiliates’ resales,” Commerce must deduct these
expenses when calculating CEP.10 Pl.’s Br. 22-23. Plaintiff
8
(...continued)
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 United States 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 price or
constructed export price . . . .
19 U.S.C. § 1677b(a)(1)(B)(i).
9
Plaintiff makes reference to “core selling functions,”
“core reselling functions,” and “core selling expenses,” but
these phrases are not defined in the statute or in Commerce’s
regulations. Plaintiff’s briefs and its counsel’s
representations at oral argument, however, make clear that these
phrases are intended to describe such activities as price
negotiations, entering into sales contracts, and approving
resales, as well as certain travel expenses and information
sharing. See Pl.’s Br. 39; Transcript of Oral Argument at 18-19,
Court No. 06-00085 (Sept. 21 2007).
10
Subsection 1677a(d) provides, in pertinent part:
[T]he price used to establish [CEP] shall
(continued...)
Court No. 06-00085 Page 15
10
(...continued)
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
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). Commerce’s regulation further provides:
In establishing [CEP] under section [19
U.S.C. § 1677a(d)(1)], 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,
(continued...)
Court No. 06-00085 Page 16
maintains that “[a]ny other conclusion undermines the concept of
‘CEP’ as contemplated by the statute and construed by the Federal
Circuit.” Pl.’s Br. 22-23.
Plaintiff’s motion notes that, while the facts it relies on
are company-specific, a “common theme exists” for all of the
defendant-intervenors.11 Pl.’s Br. 12. Accordingly, plaintiff
10
(...continued)
although the Secretary may make an adjustment
to normal value for such expenses under
section 773(a)(6)(C)(iii) of the Act.
19 CFR § 351.402(b).
11
Plaintiff’s brief explains its characterization of the
facts:
Basically, parent companies in Korea sell
CORE to their U.S. subsidiaries, who in turn
resell the merchandise to unaffiliated U.S.
buyers in so-called “back to back” CEP
transactions. The evidence shows that the
parent companies participate in varying
degrees in the subsidiaries’ U.S. resales,
i.e., they effectively perform selling
functions in the resale operations.
Oftentimes they perform these activities
outside the United States - i.e., in Korea --
and the associated selling expenses appear on
their own books in Korea. The location of
the activities, however, does not change the
basic fact that the activities and associated
expenses relate to the U.S. resale
transactions, to be distinguished from the
sales by the parents to the affiliates. . . .
[Plaintiff] contends that all expenses
associated with core reselling functions are
“CEP selling expenses” for purposes of CEP
calculations under 19 U.S.C. 1677a(d), and
are therefore deductible as such. Commerce,
however, rejected the contention and refused
(continued...)
Court No. 06-00085 Page 17
alleges the following:
A. Union
Defendant-intervenor Union sold CORE to its American
affiliate, which in turn resold the CORE to unrelated United
States purchasers in reportable CEP transactions. Pl.’s Br. 12
(citing Union Sections A-C Questionnaire Resp. (“Union Quest.
Resp.”), PD No. 59 at 15, 17). Plaintiff alleges that record
evidence demonstrates that Union performed numerous selling
functions in the resales, including having final authority to
accept or reject orders and shipping the goods directly to
purchasers, as well as “process[ing] claims for defective
merchandise sold in the U.S. market.” See Pl.’s Br. 13 (citing
Union Quest. Resp., PD No. 59 at 7, 15). Plaintiff argues that
Commerce, despite inquiring in two supplemental questionnaires
about these activities, was wrong in concluding that the record
evidence did not demonstrate that these selling expenses should
have been deducted in CEP calculations. See Pl.’s Br. 13-14.
B. POSCO
Defendant-intervenor POSCO had two Korean affiliates that
11
(...continued)
to deduct the relevant amounts in all cases
except for HYSCO.
Pl.’s Br. 12 (citations and footnotes omitted).
Court No. 06-00085 Page 18
sold CORE to its United States affiliate, which then resold the
goods to unrelated United States buyers in CEP reportable
transactions. See Pl.’s Br. 14 (citing POSCO Sections A-D
Questionnaire Resp. (“POSCO Quest. Resp.”), PD No. 68 at 7-11).
Plaintiff alleges that one of POSCO’s Korean affiliates
negotiated sales terms and that its United States affiliate
simply assisted in these negotiations and communications. Pl.’s
Br. 14. Furthermore, according to plaintiff, the Korean
affiliates performed market research, computer/legal/accounting
work, engineering services, and advertising. See Pl.’s Br. 14-15
(citing POSCO Quest. Resp., PD No. 68 at 25-28). Plaintiff
further alleges that some of these activities had to relate to
United States resales, not simply sales to POSCO’s United States
affiliate. Thus, it again argues that Commerce should have
concluded that there was substantial evidence on the record
demonstrating that these selling expenses should have been
deducted in CEP calculations. See Pl.’s Br. 15.
C. Dongbu
Defendant-intervenor Dongbu sold CORE to its United States
affiliate which then resold the CORE to United States purchasers
in CEP reportable transactions. See Pl.’s Br. 15 (citing Dongbu
Section A Questionnaire Resp. (“Dongbu Quest. Resp.”), PD No. 57
at A-13, A-18). According to plaintiff, Dongbu’s United States
Court No. 06-00085 Page 19
affiliate played a self-described “liaison” role. Plaintiff
insists that Commerce did not ask for sufficient information for
Commerce to understand the true role of the United States
aaffiliate. See Pl.’s Br. 15-16. Thus, plaintiff asserts that,
because Commerce had incomplete information, it is “unclear
whether [the Department] ultimately deducted sufficient selling
expenses in the CEP calculations.” Pl. Br. 16.
D. HYSCO
Plaintiff insists that the record contained evidence that
HYSCO performed most of the functions in resales by its United
States affiliate. Thus, plaintiff agrees that Commerce has
supported with substantial evidence its decision to include a
portion of these selling expenses in its CEP calculations for
HYSCO. See Pl.’s Br. 16-17. For plaintiff, however, “all
[defendant-intervenor] parent companies participated in their
subsidiaries’ U.S. resales, particularly Union and POSCO.” See
Pl.’s Reply Br. 10. Therefore, plaintiff characterizes
Commerce’s treatment of HYSCO as contradictory behavior by the
agency. It maintains that “the government undercuts its own
position by the action it took on HYSCO’s facts,” when it
purportedly made similar showings for all defendant-intervenors.
See Pl.’s Reply Br. 10.
Court No. 06-00085 Page 20
For its part, Commerce maintains that, with respect to three
of the defendant-intervenors, it “reasonably determined not to
deduct home market indirect selling expenses from [CEP].” Def.’s
Br. 13. Commerce asserts that the antidumping statute and the
statute’s legislative history, as well as its “longstanding
practice,” confirm that a deduction is not warranted for indirect
selling expenses that are “general in nature” and “not associated
specifically with United States affiliates’ resales to
unaffiliated customers.” Def.’s Br. 13-14. The Department
further claims that record evidence demonstrates that the
expenses cited by plaintiff were general in nature, i.e.,
attributable to all sales not simply United States resales.
Def.’s Br. 17-18. For Commerce, plaintiff’s arguments are
misguided:
[Plaintiff] asserts that Commerce should have
deducted certain expenses incurred by the
foreign parent for selling activities like
price negotiation because without these
activities, the United States sales would not
have occurred. Yet, [plaintiff] fails to
recognize the critical distinction, i.e.,
that these types of expenses are general in
nature because they are incurred regardless
of whether the sale in question is an export
price sale (direct to the unaffiliated United
States customer) or a constructed export
price sale. The expenses that Commerce
deducts pursuant to 19 CFR § 351.402(b) are
only those associated with the additional
selling activities that the foreign parent or
its United States affiliate must undertake in
selling constructed export price subject
merchandise to unaffiliated United States
customers.
Court No. 06-00085 Page 21
Def.’s Br. 17 (citations omitted).
Additionally, Commerce notes that it made the deduction
where warranted, i.e., when “HYSCO had reported that it, not its
United States affiliate, performed most of the resale activities
in the United States market.” Def.’s Br. 18 (citing I&D Memo, PD
No. 226 at Comments 5, 15, and 23). Therefore, Commerce argues
that it “correctly applied the law to the facts” and asks that
this court sustain its determinations. Def.’s Br. 17-18.
A resolution of this dispute revolves around whether
Commerce misinterpreted the evidence before it. The court finds
that it did not. With respect to the deductibility of these
expenses, the only material difference between Mittal and the
present case is the treatment of HYSCO. Thus, Mittal is useful
here. Mittal sustained as lawful and supported by substantial
evidence Commerce’s refusal to deduct expenses it found to be
general in nature. See Mittal, 31 CIT at __, Slip Op. 07-117 at
14-16.
Here, as in Mittal, there is nothing in the record to
indicate that Commerce did not request and receive all of the
business information required in order to ascertain the
respective levels of involvement of the Korean companies and
their United States affiliates in the United States sales. That
is,
Commerce requested and received from
[defendant-intervenors] information regarding
Court No. 06-00085 Page 22
all business or operational relationships
affecting the development, product[ion], sale
or distribution of the subject merchandise in
the home and United States markets . . . .
[and] then concluded that [t]he reported
indirect selling expenses were general in
nature and not attributable to [CEP] resales
to unaffiliated United States purchasers.
Def. Br. 17-18; see also I&D Memo at Comments 5 (Dongbu), 14
(Union), and 23 (POSCO); I&D Memo at Comment 11 (HYSCO).
Although “plaintiff maintains that the record reveals a
substantial level of involvement by the [defendant-intervenors]
in the resale of CORE to unaffiliated U.S. purchasers,” Commerce
disagrees. See Mittal, 31 CIT at __, Slip Op. 07-117 at 17; see
also U.S. Steel Group v. United States, 96 F.3d 1352, 1357 (Fed.
Cir. 1996) (“It is the [Department’s] task to evaluate the
evidence it collects during its investigation.”). Commerce’s
position is based upon its assessment of verified information.12
12
In this review, Commerce relied on its verifications
from the tenth review. In that regard, Commerce verified
Dongbu’s home-market indirect selling expenses in the tenth
review and confirmed that they were unrelated to sales between
its United States affiliate and unaffiliated United States
buyers. See I&D Memo, PD No. 226 at 15. Commerce likewise
relied on its verification from the tenth review for Union and
POSCO. See I&D Memo, PD No. 226 at 28-29, 35. Commerce’s
reliance on prior verifications was proper. See Trade and Tariff
Act of 1984, H.R. Rep. 98-725, at 43, reprinted in 1984
U.S.C.C.A.N. 5127, 5170 (1984) (“The Committee . . . believes it
is essential to proper enforcement of the laws that information
used in determining annually the actual amount of any . . .
antidumping duty to be assessed under outstanding orders is
accurate to the extent possible. At the same time, the Committee
is concerned that requiring verification in every review would
result in an unnecessary additional administrative burden on the
(continued...)
Court No. 06-00085 Page 23
Here, “plaintiff has not made a case that the selling functions
performed by the parent companies were mischaracterized by
Commerce.” Mittal, 31 CIT at __, Slip Op. 07-117 at 20.13 Thus,
12
(...continued)
Department of Commerce for perfunctory verifications. Therefore,
verification would not be required if an interested party does
not request it in a timely manner, or after recent verifications
have taken place unless shown to be warranted.”).
13
Mittal discussed Commerce’s efforts in collecting and
verifying data:
. . . 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
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
(continued...)
Court No. 06-00085 Page 24
the court finds that, while plaintiffs and Commerce have a
difference of opinion as to the characterization of the parent
companies’ activities, Commerce adequately applied the law to the
facts and has “‘articulate[d] a[] rational connection between the
facts found and the choice made.’” See Mittal, 31 CIT at __, Slip
Op. 07-117 at 20-21 (quoting Burlington Truck Lines, Inc. v.
United States, 371 U.S. 156, 168 (1962)).
Plaintiff’s argument that Commerce’s decision to deduct
HYSCO’s selling expenses (and not other defendant-intervenors’
selling expenses) is somehow demonstrative of Commerce’s
contradictory behavior is not convincing. Commerce is entitled
to treat companies differently if it articulates its reasoning
for doing so and if its conclusions are supported by substantial
13
(...continued)
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 Mittal, 31 CIT at __, Slip Op. 07-117 at 18-19.
Court No. 06-00085 Page 25
evidence. Here, Commerce agreed with plaintiff that the “record
evidence indicates that HYSCO performed most of the functions
involved in [its United States affiliates’] resales.” See I&D
Memo, PD No. 226 at 22 (detailing Commerce’s review of HYSCO’s
selling functions chart and explaining that HYSCO “stated that it
negotiated and approved U.S. sales transactions”). Plaintiff has
simply not demonstrated that the selling functions performed by
the other parent companies were mischaracterized by Commerce.
Based on the foregoing, the court sustains as supported by
substantial evidence and according to law Commerce’s
determination not to deduct selling expenses from CEP because
(1) Commerce had all of the necessary information before it; and,
(2) the Department reasonably concluded that the defendant-
intervenors’ reported selling expenses were general in nature and
not specifically associated with resales of CORE to unaffiliated
purchasers in the United States.
III. CEP Offset Adjustments
In its investigation, Commerce was required by statute to
take into account level of trade (“LOT”) differences to account
for any price differential resulting from a Korean exporter’s
sales in Korea being made at a more advanced LOT than its sales
to the United States. See 19 U.S.C. § 1677b(a)(7)(A). Commerce
is directed to make an actual LOT adjustment to normal value only
Court No. 06-00085 Page 26
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).
Under 19 U.S.C. § 1677b(a)(7)(B), where the record contains
insufficient data to make a LOT adjustment, a CEP offset to
normal value calculations may be granted. See 19 U.S.C.
§ 1677(a)(7)(b).
When normal value is established at a [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 [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); see also Mittal, 31 CIT at __, Slip
Op. 07-117 at 24 (citing 19 CFR § 351.412 (f)(3)).14
In deciding whether to grant a CEP offset, Commerce will
analyze a party’s LOT for its home market and for its CEP sales.
See Def. Br. 20. “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
14
This provision provides: “Where available data permit
the Secretary to determine under paragraph (d) of this section
whether the difference in [LOT] affects price comparability, the
Secretary will not grant a [CEP] offset. In such cases, . . .
the Secretary will make a [LOT] adjustment.” 19 CFR § 351.412(f)(3).
Court No. 06-00085 Page 27
incurs more selling expenses, in its home market than it does in
the United States.” Mittal, 31 CIT at __, Slip Op. 07-117 at 25
(citing 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 [stage of distribution] 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 [stage of
distribution].”)).
Here, Commerce allowed CEP offsets for all defendant-
intervenors in the review. It did so based upon information
requested and received “relating to channels of distribution,
categories of customers, and all selling activities performed and
services offered in the United States and foreign markets.”
Def.’s Br. 5.
Commerce analyzed the defendant-intervenors’
selling functions in the United States and
the Korean markets and determined that sales
for all four defendant-intervenors involved a
single level of trade in both the home and
United States markets, and that the four
defendant-intervenors’ respective [LOT] in
the United States market were at a less
advanced stage of distribution than their
home market [LOT].
Def.’s Br. 6 (internal citations omitted).
Plaintiff maintains that Commerce’s analyses and conclusions
regarding CEP offsets were improper because Commerce “ignored
[plaintiff’s] contention that none of the [defendant-intervenors]
Court No. 06-00085 Page 28
had described all of the selling activities at the so-called CEP
LOT . . . .” Pl.’s Br. 18. That is, plaintiff asserts that the
record was incomplete and that Commerce did not have sufficient
evidence on the record to “perform fair comparisons of activities
at the two respective LOT[s].” Pl.’s Br. 18. “Because Commerce
refused to ask questions that would have revealed the selling
activities at the so-called CEP [LOT] . . ., it was not possible
for Commerce to determine that the parents’ sales to their U.S.
affiliates were at a less advanced LOT than sales to non-
affiliates in the home market.” See Pl.’s Reply Br. 13; Pl.’s
Br. 39. Plaintiff argues that Commerce’s failure to remedy these
deficiencies in the record demonstrates that the CEP offsets “are
unsupported by substantial evidence because no reasonable mind
would accept Commerce’s analysis of the facts on the basis of the
record as made.” Pl.’s Br. 18.
Specifically, plaintiff insists that defendant-intervenors
provided incomplete information in response to Commerce’s initial
and supplemental questionnaires requesting information about “all
the selling functions” at the CEP LOT. Pl.’s Br. 37 (citations
omitted). Plaintiff further argues that its comments to Commerce
“called attention to [the defendant-intervenors’] failure to show
entitlement to the offsets they claimed.” Pl.’s Br. 38.
According to plaintiff, the defendant-intervenors collectively
engaged in a “pattern” of “active[ly] assist[ing] their
Court No. 06-00085 Page 29
affiliates in reselling in the United States,” and thereby
promoting their own sales to their affiliates at the CEP LOT.
Pl.’s Br. 38. Plaintiff asserts that Commerce did not exercise
“common commercial sense” by not inquiring further into these
activities at the CEP LOT, thus failing to perceive “that
affiliates engage in numerous inter-company activities when
performing complementary and overlapping roles in marketing goods
internationally.”15 Plaintiff further asserts that Commerce’s
failure to seek more information about sales made by defendant-
intervenors to their United States affiliates “means that the
record cannot support the agency’s determination that home market
sales were made at a LOT ‘more advanced’ than the CEP LOT, as
judged by a reasonable mind.” Pl.’s Br. 39. Therefore,
plaintiff seeks a remand to have the record made complete.16
15
According to plaintiff, “[t]hese [activities] include,
among other things, continuing inter-company communications,
coordinate efforts, travel and visits, joint planning,
information sharing, and presumably other activities as well.”
Pl.’s Br. 39.
16
Plaintiff takes issue with Commerce’s explanation
responsive to its observations. Plaintiff argues that Commerce
gave similar and equally inadequate explanations in granting each
of the defendant-intervenors offsets. Pl.’s Br. 38-39.
Regarding Union, for example, Commerce wrote:
Contrary to [plaintiff’s] assertions that
Union’s selling activities in the HM [home
market] via sales intermediaries were not
significantly different from its CEP sales
made to its affiliate . . . we find that
Union provided sufficient information for the
(continued...)
Court No. 06-00085 Page 30
Pl.’s Br. 40.
Notwithstanding plaintiff’s arguments, the court finds that
Commerce’s grant of CEP offsets to defendant-intervenors are
supported by substantial evidence. For each defendant-
intervenor, Commerce determined that there was sufficient
evidence in the record to determine that: (1) each had a single
LOT in its home market and a single LOT in the United States
market, and (2) their home market sales were at more advanced LOT
than their United States CEP sales. See I&D Memo, PD No. 226 at
Comments 6, 8, 14, 24; see also Def.’s Br. 21. Thus, the
Department reasonably relied on the extensive information
provided by defendant-intervenors concerning their selling
functions in the Korean and United States markets in granting
each a CEP offset. See I&D Memo, PD No. 226 at Comments 6, 8,
14, 24; see also Def.’s Br. 21; Mittal, 31 CIT __, Slip Op. 07-
117 at 19.
Specifically, for Dongbu, Commerce reviewed its
16
(...continued)
Department to compare selling functions and
the difference in the degree of selling
functions in the two markets. For example,
information provided by Union demonstrates
that Union’s selling functions for the [home
market] sales are different and more
extensive than those associated with Union’s
sales to [its affiliate]. Therefore, we
conclude that [home market] sales are at a
more advanced LOT than its U.S. sales.
Pl.’s Br. 39 (quoting I&D Memo, PD No. 226 at 25).
Court No. 06-00085 Page 31
questionnaire responses and concluded that the same selling
activities occurred in both of its two home market distribution
channels in “comparable frequency” and found “that the two home
market channels of distribution alleged by [Dongbu] constitute
one [LOT].” Calculation Memo. for Dongbu Steel, Co., Ltd.
(“Dongbu Calc. Memo”), CR No. 79 at 2. Furthermore, Commerce
noted that, “[i]n the U.S. market, Dongbu made only CEP sales
through its U.S. affiliate, Dongbu USA, to unaffiliated customers
in two customer categories, end-users and distributors.” Dongbu
Calc. Memo, CR No. 79 at 2. Commerce “compared the selling
functions in the home market to the selling functions in the U.S.
market at the CEP LOT, and found a less advanced [LOT] in the
U.S. market.”17 Dongbu Calc. Memo, CR No. 79 at 2. Based upon
this selling function analysis, Commerce concluded that Dongbu’s
home market sales were “made at a different, and more advanced,
stage of marketing than the LOT of CEP sales.” Commerce,
however, found that it lacked the price data needed to make a LOT
adjustment. Dongbu Calc. Memo, CR No. 79 at 2. Therefore,
Commerce reasoned:
Dongbu did not sell subject merchandise in
the home market at the same LOT as that of
the CEP, and there [was] no other data on the
17
Commerce’s Calculation Memorandum for Dongbu indicates
[[
]] Dongbu Calc. Memo, CR
No. 79 at 2.
Court No. 06-00085 Page 32
record that would allow the Department to
establish whether there is a pattern of
consistent price differences between sales at
different [LOTs] in the comparison market.
Accordingly, while we determined that a LOT
adjustment may be appropriate for CEP sales .
. . we are unable to make such an adjustment.
Instead, we have made a CEP offset to NV
[normal value] . . . .
Dongbu Calc. Memo, CR No. 79 at 3.
With regard to HYSCO, Commerce undertook a similar analysis
and reached the same conclusion, i.e., that “the evidence on the
record was sufficient to demonstrate that HYSCO’s [home market]
sales were at a more advanced LOT than its CEP sales, and that
the data available does not provide an appropriate basis to
determine an LOT adjustment.” See I&D Memo, PD No. 226 at 19
(citing Calculation Memo. for Hyundai Hysco (Dep’t of Commerce
Aug. 31, 2005) (“HYSCO Calc. Memo”), PD No. 181). To reach this
conclusion, Commerce reviewed HYSCO’s questionnaire responses and
selling function charts.18 HYSCO Calc. Memo, PD No. 181 at 2.
18
Commerce’s analysis was as follows:
In the home market, HYSCO sold through one
channel of distribution to affiliated and
unaffiliated local distributors and end
users, and provided the same selling services
to all customers.
In the U.S. market, HYSCO made only CEP sales
through its U.S. affiliate, Hyundai Pipe
America (HPA), to unaffiliated U.S.
customers. According to HYSCO’s
questionnaire response, HYSCO conducted all
sales and marketing activities in Korea.
(continued...)
Court No. 06-00085 Page 33
Likewise, Commerce undertook the same kind of analysis for
Union and reached the conclusion, that Union was entitled to a
CEP offset. See generally I&D Memo, PD No. 226 at Comment 14.
Commerce found that all of Union’s Korean sales were made at one
LOT, which was more advanced than the LOT of its affiliate’s
United States sales, and that “it [was] not possible to quantify
the extent to which sales at different LOTs in the [home and
United States markets] differ in price.” See I&D Memo, PD No.
18
(...continued)
HPA, which did not have a separate sales
force for subject merchandise, relayed price
and sales information between potential
customers and HYSCO, and also received
payment from HYSCO’s customers on HYSCO’s
behalf.
. . . HYSCO provided an updated U.S. selling
function chart and requested a [LOT]
adjustment or CEP offset, stating that HYSCO
performed the same functions for its sales to
unaffiliated customers, whether in the home
market or the United States, and that HYSCO
performed very few functions in connection
with its sales to HPA.
HYSCO’s updated selling function chart . . .
indeed shows few selling activities at the
CEP [LOT]. Based on our review of the
selling functions that are related to CEP and
home market sales, we have determined that
HYSCO’s home market sales are made at a
different, and more advanced, stage of
marketing than the LOT of the CEP sales . . .
. Accordingly, while we have determinated
that an LOT adjustment may be appropriate for
CEP sales . . . we are unable to make such an
adjustment.
HYSCO Calc. Memo, PD No. 81 at 2-3 (citations omitted).
Court No. 06-00085 Page 34
226 at 25.19
19
Commerce’s Issues & Decisions Memorandum notes that
Commerce specifically requested that Union demonstrate that its
home market LOT was more advanced that the CEP LOT. See I&D
Memo, PD No. 226 at 25. Union did so to Commerce’s satisfaction.
Commerce’s analysis is as follows:
In the home market, Union sold through three
channels of distribution to unaffiliated
local distributors and end-users, and
provided the same selling services to all
customers. Union reported all home market
sales at the same LOT. In the home market,
Unico sold through two channels of
distribution to local unaffiliated local
[sic] distributors and end-users. In the
U.S. market, Union made only CEP sales
through its U.S. affiliate, DKA, to
distributors and end-users.
With respect to sales made by Union and Unico
in the home-market and the U.S. market, Union
identified the following selling activities:
[[
]]
[W]e asked Union to update . . . the selling
function chart . . . to account for all
activities performed by Union in selling
goods at the CEP LOT. Union added [[
]] to the revised
selling function chart. . . .
. . . [W]e compared the selling functions
performed for home-market sales with those
performed with respect to the CEP
transactions, after deductions for economic
activities occurring in the United States . .
.to determine if the home-market [LOT]
constituted a different [LOT] than the CEP
(continued...)
Court No. 06-00085 Page 35
Commerce again based this conclusion on its review of Union’s
questionnaire responses and selling function chart. See I&D
Memo, PD No. 226 at 25.
Commerce reached the same conclusions for POSCO. It found
that record evidence demonstrated that its home market sales were
at a more advanced LOT than its CEP sales, and granted POSCO a
CEP offset. See I&D Memo, PD No. 226 at 35-36. Commerce again
did so based upon its review of POSCO’s questionnaire responses
and selling chart.20 See I&D Memo, PD No. 226 at 35-36.
19
(...continued)
[LOT]. We compared the selling functions in
the home market to the selling functions in
the U.S. market at the CEP LOT, and found a
less advanced [LOT] in the U.S. market. . . .
Union provided [[ ]] or [[ ]] selling
activities in the U.S. market, as compared to
the home market for [[ ]]
selling functions identified . . . .
. . . Based on our review of the selling
functions that are related to CEP and home
market sales, we have determined that Union’s
home market sales are made at a different,
and more advanced stage of marketing than the
LOT of the CEP sales.
Calculation Memo. for Union (“Union Calc. Memo”), CR No. 77 at 2
(Dep’t of Commerce Aug. 31, 2005).
20
Commerce’s calculation memorandum details the analysis
it undertook leading to its conclusion that POSCO’s home market
LOT was more advanced than its CEP LOT.
The Department found that the level of [home
market] selling activities was [[ ]] with
regard to [[ ]] of the [[ ]]
selling activities reported for the three
(continued...)
Court No. 06-00085 Page 36
As noted, plaintiff takes issue with Commerce’s findings
20
(...continued)
channels of distribution (i.e., [[
]]). For [[ ]] of the
remaining selling activities (i.e.,
[[
]]) associated
with the three channels of distribution, we
found that there was [[ ]] selling activity
reported. There was [[ ]]
selling activity reported for [[ ]] of the
[[ ]] selling activities (i.e., [[post
sale warehousing and technical advice]])
associated with the three channels of
distribution. Only [[ ]] selling
activities (i.e., [[
]] were not consistently
found among all three channels of
distribution in the home market. Since the
level of selling activities was generally
consistent among the three channels of
distribution, we found that the home market
channels of distribution constitute one
[LOT].
. . . . We examined the sales to the
affiliated resellers and the selling
functions performed by POSCO or the POSCO
Group on behalf of its affiliate and found
only one [LOT]. [[ ]] of the selling
activities (i.e., [[
]] incurred in the United States
were [[ ]]. The selling activities were
[[ ]] for [[ ]] of the selling
activities (i.e., [[
(continued...)
Court No. 06-00085 Page 37
because it claims that the Department lacked sufficient evidence
to justify the offsets. Plaintiff claims that there was
incomplete information in the record to demonstrate that
defendant-intervenors’ home market sales were made at a more
advanced LOT more advanced than the CEP LOT. Plaintiff, however,
cites no record evidence to demonstrate that defendant-
intervenors’ reporting to Commerce was lacking; rather it relies
upon “common commercial sense.” Commerce, however, is entitled
to at least some deference when gauging the adequacy of the
factual representations made to it. See U.S. Steel Group v.
United States, 96 F.3d 1352, 1357 (Fed. Cir. 1996) (“It is the
[Department’s] task to evaluate the evidence it collects during
its investigation.”). Without more, plaintiff’s reference to
“common commercial sense” is unavailing. See Ceramica
20
(...continued)
]]).
The CEP [LOT] differed from the home market
[LOT] with respect to [[ ]] selling
activities associated with [[
]]. These selling
activities were [[ ]] for the United
States, and [[ ]] in at least [[ ]] of
the channels of distribution in the home
market. Therefore, we found that the CEP
[LOT] differs from the home market [LOT] and
is at a less advanced stage of distribution
than the home market [LOT].
Calculation Memo. for POSCO (Dep’t of Commerce Aug. 31, 2005)
(“POSCO Calc. Memo”), CR Doc. No. 75 at 2-3.
Court No. 06-00085 Page 38
Regiomontana, S.A., 10 CIT at 404–05, 636 F. Supp. at 966 (“As
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.”). Therefore, “[t]he court cannot . . .
credit plaintiff’s unsubstantiated assertion that commercial
realities render insufficient the evidence Commerce relied upon
in making its decision” to grant CEP offsets here. Mittal, 31
CIT at __, Slip Op. 07-117 at 31.
Thus, the court finds that in light of Commerce’s detailed
factual findings, and in accordance with the statutory scheme,
Commerce supported with substantial evidence its grant of CEP
offsets to the defendant-intervenors. That is, under 19 U.S.C.
§ 1677b(a)(7)(B), Commerce determined that “the data available
[did] not provide an appropriate basis to determine . . . a [LOT]
adjustment,” and thus Commerce reasonably relied on the evidence
of the selling functions performed by defendant-intervenors’
United States affiliates in deciding to grant the companies a CEP
offset. See Mittal, 31 CIT at __, Slip Op. 07-117 at 27-28; see
also Timken Co. v. United States, 12 CIT 955, 962, 699 F. Supp.
300, 306 (Fed. Cir 1988) (“It is not within the Court’s domain
either to weigh the adequate quality or quantity of the evidence
Court No. 06-00085 Page 39
for sufficiency or to reject a finding on grounds of a differing
interpretation of the record.”) (citations omitted).
Accordingly, the court sustains as being supported by
substantial evidence Commerce’s grant of CEP offsets to Dongbu,
HYSCO, Union, and POSCO.
IV. Duty Drawback Adjustment
A “[d]rawback is the reimbursement of duties paid on goods
imported into the United States and then used in the manufacture
or production of articles which are subsequently exported.”
Chrysler Motors Corp. v. United States, 14 CIT 807, 809, 755 F.
Supp. 388, 390 (1990); see also E.I. du Pont de Nemours and Co.
v. United States, 24 CIT 1045, 1046 n.2, 116 F. Supp. 2d 1343,
1345 n.2 (2000). The antidumping statute provides that “[t]he
price used to establish . . . [CEP] shall be . . . increased by .
. . the 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
Court No. 06-00085 Page 40
dependent upon, one another.” Far East Mach. Co. v. United
States, 12 CIT 972, 974, 699 F. Supp. 309, 311 (1988). The
second prong demands that “the company claiming the adjustment
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. at 974, 699 F. Supp.
at 311. 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., 12 CIT
at 431–33, 688 F. Supp. at 612; Hornos Electricos de Venezuela,
S.A. v. United States, 27 CIT 1522, 1525, 285 F. Supp. 2d 1353,
1358 (2003).
Plaintiff argues that Commerce should not have permitted a
duty drawback adjustment to the Korean companies’ CEP because the
Korean drawback system is susceptible to manipulation.21 See
21
Plaintiff’s brief explains its manipulation argument
with the following hypothetical:
Although unquestionably lawful in Korea, the
Korean system makes it possible to manipulate
U.S. antidumping results . . . . The
following hypothetical scenario can occur.
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.
(continued...)
Court No. 06-00085 Page 41
Pl.’s Br. 18-20. According to plaintiff, Commerce’s current
method of making drawback adjustments amplifies the potential for
distorted dumping margins on Korean products, in part, because
“Korean law allows substitution-type drawback, and this allows
Korean exporters to pick and choose the export shipments on which
they base their drawback claims when they export from Korea.”
Pl.’s Br. 19-20. Plaintiff argues that Commerce wrongfully
denied its request “to require [defendant-intervenors] to submit
certain aggregate data” in order “to test the fairness of their
claims.” Pl.’s Br. 20. According to plaintiff, “[t]his data
21
(...continued)
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 the
shipments to the United States while claiming
nothing on shipments to Canada - with U.S.
antidumping motivations in mind. As a
further hypothetical assumption, we can even
assume that “X” could do this even if, as a
matter of fact, none of the exports to the
United States actually used any imported
scrap, but were produced solely from domestic
scrap. In circumstances such as these, the
result would be a clear distortion so far as
U.S. antidumping results are concerned. The
claims may be normal and lawful in Korea, but
the effect distorts U.S. antidumping
calculations in a way that reduces
antidumping margins to the disadvantage of
U.S. producers. They result in
disproportionate upward adjustments to
reported United States prices.
Pl.’s Br. 41 (citations omitted).
Court No. 06-00085 Page 42
would have permitted Commerce to analyze whether any [defendant-
intervenor] claimed excessive amounts on U.S. sales.” Pl.’s Br.
20. Thus, plaintiff maintains that it was foreclosed from
pursuing this “theme” of argument before Commerce. Pl.’s Br. 20.
Moreover, plaintiff asserts that Commerce’s failure to
request further information was an abuse of its discretion,
particularly because Commerce itself “has called into question
its current methodology for drawback adjustments.” Pl.’s Br. 43-
44. Plaintiff points the court to a Federal Register notice of
June 30, 2005, in which Commerce stated that it “is considering
whether changes to its practice, including the two-prong test . .
., may be appropriate.” See Duty Drawback Practice in
Antidumping Proceedings, 70 Fed. Reg. 37,764, 37,765 (Dep’t of
Commerce June 30, 2005) (notice) (the “First Request for
Comments”). This First Request for Comments,22 according to
22
The First Request for Comments reads in pertinent part:
The Department is considering whether changes
to its practice, including the two-prong test
. . ., may be appropriate. For instance,
some parties have argued that the
Department’s practice should be modified by
requiring a respondent party seeking a duty
drawback adjustment to demonstrate payment of
import duties on raw material inputs used to
produce merchandise sold in the home market.
They argue that such a requirement is
consistent with principles of price
comparability and the implementation of
Congressional intent with respect to the duty
drawback adjustment. In addition, according
(continued...)
Court No. 06-00085 Page 43
plaintiff, represented an “implicit recognition” that Commerce’s
(...continued)
to such parties, any duty drawback adjustment
made should also be limited to the amount of
duties actually paid on material inputs used
to produce merchandise sold in the home
market. Certain parties have also argued
that the Department should allocate the total
pool of relevant drawback available under
some systems to total exports of subject
merchandise to ensure that the adjustment
claimed on U.S. sales is not overstated.
Parties advocating a change in Department
practice argue that in creating the duty
drawback adjustment, Congress intended that
an increase in the export price resulting
from the duty drawback adjustment was
designed to offset an increase in the home
market price resulting from the payment of
import duties on inputs. As a result, the
duty drawback adjustment was designed to
prevent dumping margins from arising simply
because of the rebate (or non-collection) of
import duties on the inputs resulting from
the export of subject merchandise to the
United States. Yet, these parties argue, to
permit a drawback adjustment where home
market sales do not include import duties
leaves nothing for the rebate or exemption to
offset.
In order to fully consider and address these
claims as well as other concerns about the
Department’s practice regarding duty
drawback, the Department is providing an
opportunity for the public to comment . . . .
The Department is particularly interested in
comments relating to questions and possible
approaches set forth in the Appendix to this
notice, including comments on the consistency
with the statute and Congressional intent.
First Request for Comments, 70 Fed. Reg. at 37,765 (internal
citations omitted) (emphasis added).
Court No. 06-00085 Page 44
two-prong test may be invalid in particular circumstances and, as
such, it is unfair to make plaintiff “wait for the agency to
complete is current review to get reconsideration of the drawback
adjustments. Pl.’s Br. 44.
Plaintiff further notes that, on October 19, 2006, Commerce
published another Federal Register notice that it characterizes
as an admission by the Department that its methodology “might
change” because it “is subject to manipulation and can be
unfair.” Pl.’s Reply Br. 14 (citing Antidumping Methodologies:
Market Economy Inputs, Expected Non-Market Economy Wages, Duty
Drawback; and Request for Comments, 71 Fed. Reg. 61,716, 61,723-
24 (Dep’t of Commerce Oct. 19, 2006) (notice) (the “Second
Request for Comments”)). In its Second Request for Comments,
Commerce wrote:
The Department previously requested and
received comments regarding its practice with
respect to duty drawback adjustments to
export price in antidumping proceedings . . .
. In past cases, certain parties have argued
that the Department should allocate the total
amount of relevant drawback received to total
exports, regardless of destination, to ensure
that the adjustment claimed on U.S. sales is
not overstated.
Second Request for Comments, 71 Fed. Reg. at 61,723 (citation
omitted). It then stated:
The Department agrees with these commenters
and proposes to modify its approach by
limiting the duty drawback adjustment in
certain circumstances. The Department
generally agrees that it should allocate the
Court No. 06-00085 Page 45
total amount of duty drawback received across
all exports that may have incorporated the
duty-paid input in question, regardless of
destination, to ensure that the adjustment
claimed on U.S. sales is not overstated.
Id. at 61,723-24 (emphasis added). According to plaintiff, this
language constitutes “an outright admission that a change in
practice should and will in due course be made.” Pl.’s Reply Br.
15. Plaintiff argues that, in circumstances like this, where
Commerce has stated that its methodology will change, “there is
no basis for the Court to [continue to] defer to Commerce’s
admittedly flawed precedents.” Pl.’s Reply Br. 15. Therefore,
plaintiff seeks a remand in order to “receive the benefit [of a
change in Commerce’s practice] now, not just in future reviews.”
Pl.’s Br. 44.
The Mittal Court upheld Commerce’s two-prong test as “a
reasonable interpretation of 19 U.S.C. § 1677a(c)(1)(B)” and held
that Commerce, in the tenth review, “properly applied the test to
the Korean [defendant-intervenors] in this case.” 31 CIT at __,
Slip Op. 07-117 at 35-36. Here, the court likewise agrees with
Commerce that, at this time, there is “no statutory requirement
that Commerce” must, as plaintiff suggests, “proportionateley
allocat[e] the total duty drawbacks to [defendant-intervenors]’
exports to all countries.” Def.’s Br. 23; Mittal, 31 CIT at __,
Slip Op. 07-117 at 36; Pesquera Mares Australes Ltda. v. United
States, 266 F.3d 1372, 1382 (Fed. Cir. 2001) (“[S]tatutory
Court No. 06-00085 Page 46
interpretations articulated by Commerce during its antidumping
proceedings are entitled to judicial deference under Chevron.”).
Furthermore, the court finds that Commerce properly
supported with substantial evidence its decision to make an
upward adjustment to CEP in order to account for the drawback
defendant-intervenors received from the Korean government on
their imports of raw materials. See Huaiyin Foreign Trade Corp.
(30), 322 F.3d at 1374 (Fed. Cir. 2003) (citations omitted); Def.
Br. 23 (noting that plaintiff “does not contest the substantial
record evidence that support’s Commerce’s determination pursuant
to its longstanding, Court-approved practice”). An examination
of the evidence reveals that Commerce reasonably concluded that
defendant-intervenors satisfied the two-prong test and, thus,
were entitled to the CEP adjustment.23
The only new argument that plaintiff presses in hopes of
distinguishing the instant review from the tenth review (and
avoiding the holdings of Mittal), is plaintiff’s reference to
Commerce’s two Requests for Comments. Plaintiff’s reliance on
these requests, however, is misplaced. In the administrative
23
As in Mittal, plaintiff’s argument concerning margin
manipulation essentially seeks to add a third prong to Commerce’s
two-prong test. That is, plaintiff insists that a third prong
“requir[ing] shipment-wide allocation of drawback would eliminate
the distortion of dumping margins and maintain the integrity of
the antidumping statute.” Mittal, 31 CIT at __, Slip Op. 07-117
at 35. The court declines plaintiff’s invitation to alter
Commerce’s reasonable interpretation of 19 U.S.C.
§ 1677a(c)(1)(B).
Court No. 06-00085 Page 47
setting
two conditions must be satisfied for agency
action to be final: First, the action must
mark the consummation of the agency’s
decision-making process, it must not be of a
merely tentative or interlocutory nature.
And second, the action must be one by which
rights or obligations have been determined,
or from which legal consequences will flow.
Bennett v. Spear, 520 U.S. 154, 178 (1997) (quotations and
citations omitted).
The court’s acceptance of these notices as binding
recognition that Commerce’s methodology was invalid or might be
invalid would contravene the administrative process and hold the
agency to a decision that is not final. This is the case despite
Commerce’s statement that it “agrees with [the] commenters and
proposes to modify its approach.” Second Request for Comments,
71 Fed. Reg. at 61,723. Commerce is still “welcom[ing] comment
on this proposed methodology,” see id. at 61,724 (emphasis
added), and therefore the Second Request for Comment is just
that——a call for comments. Thus, Commerce’s methodology and its
interpretation of 19 U.S.C. § 1677a is entitled to deference
until the Department completes its administrative processes. See
Wieland-Werke AG v. United States, 31 CIT __, __, 525 F. Supp.
2d 1353, 1360 (2007) (“The court must defer to the agency’s
reasonable interpretation of a statute even if the court might
have preferred another.”) (citing Zenith Radio Corp. v. United
States, 437 U.S. 443, 450 (1978)); see also Timken Co. v. United
Court No. 06-00085 Page 48
States, 11 CIT 786, 806, 673 F. Supp. 495, 514 (1987); Moore v.
East Cleveland, 431 U.S. 494, 525 (1977) (“By requiring
exhaustion of administrative processes the courts are assured of
reviewing only final agency decisions arrived at after considered
judgment.”). “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) (emphasis added).
Furthermore, while courts have recognized that policy
statements may constitute rules, even if they are not promulgated
through notice and comment rulemaking, this is not the general
practice. See Appalachian Power Co. v. EPA, 208 F.3d 1015, 1022
n. 13 (D.C. Cir. 2000). That is,
[t]he general consensus is that an agency
statement, not issued as a formal regulation,
binds the agency only if the agency intended
the statement to be binding . . . . The
primary consideration in determining the
agency’s intent is whether the text of the
agency statement indicates that it was
designed to be binding on the agency.
Farrell v. Dep’t of Interior, 314 F.3d 584, 590-91 (Fed. Cir.
2002) (citations omitted); see also Hamlet v. United States, 63
F.3d 1097, 1103 (Fed. Cir. 1995) (“Obviously, not every piece of
paper released by an agency can be considered a regulation
entitled to the force and effect of law.”).
Here, even a cursory review of the First and Second Requests
for Comments reveals that Commerce did not intend them to be
binding on the agency or enforceable in this Court. Accordingly,
Court No. 06-00085 Page 49
Commerce’s First and Second Requests for Comments do not
demonstrate that Commerce erred in refusing to request additional
information or otherwise acted improperly in this review by
adhering to its established methodology. See NSK Ltd. v. United
States, 510 F.3d 1375, 1384 (Fed. Cir. 2007) (holding that
Commerce’s public recommendation to change its methodology was
not a final decision where it “has not yet abandoned its previous
methodology or adopted a new one”).
Based on the foregoing, the court sustains as supported by
substantial evidence and otherwise in accordance with law
Commerce’s duty drawback adjustment to defendant-intervenors’
United States price of CORE.
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: May 15, 2008
New York, New York