Nippon Steel Corp. v. United States

Slip Op. 01-122
UNITED STATES COURT OF INTERNATIONAL TRADE
:
NIPPON STEEL CORPORATION, :
:
Plaintiff, :
:
v. :
:
THE UNITED STATES, :
:
Defendant, :
:
and :
:
BETHLEHEM STEEL CORPORATION, U.S. STEEL :
GROUP, A UNIT OF USX CORPORATION, ISPAT :
INLAND INC., LTV STEEL COMPANY, INC., :
GALLATIN STEEL, IPSCO STEEL, INC., STEEL :
DYNAMICS, INC., and WEIRTON STEEL :
CORPORATION, :
: Consolidated Court
Defendant-Intervenors. : No. 99-08-00466
:
: Public Version
BETHLEHEM STEEL CORPORATION, U.S. STEEL :
GROUP, A UNIT OF USX CORPORATION, ISPAT :
INLAND INC., and LTV STEEL COMPANY, INC., :
:
Plaintiffs, :
:
v. :
:
THE UNITED STATES, :
:
Defendant, :
:
and :
:
NIPPON STEEL CORPORATION, :
:
Defendant-Intervenor. :
:
CONSOL. COURT NO. 99-08-00466 PAGE 2
[ITA Second Remand Determination Remanded.]
Dated: October 12, 2001
Gibson, Dunn & Crutcher LLP (Daniel J. Plaine, Gracia M. Berg, Merritt R. Blakeslee,
and Seth M. M. Stodder) for plaintiff Nippon Steel Corporation.
Skadden, Arps, Slate, Meagher & Flom LLP (Robert E. Lighthizer and John J. Mangan)
for plaintiffs Bethlehem Steel Corporation, U.S. Steel Group, a unit of USX Corporation, Ispat
Inland, Inc. and LTV Steel Company, Inc.
Robert D. McCallum, Assistant Attorney General, David M. Cohen, Director,
Commercial Litigation Branch, Civil Division, United States Department of Justice (Kyle
Chadwick), John D. McInerney, Elizabeth C. Seastrum, and Linda S. Chang, Office of the Chief
Counsel for Import Administration, United States Department of Commerce, of counsel, for
defendant.
OPINION
RESTANI, Judge: Nippon Steel Corporation (“Nippon”) challenges the second remand
determination by the United States Department of Commerce (“Department” or “Commerce”) in
Hot-Rolled Flat-Rolled Carbon-Quality Steel Products from Japan, 64 Fed. Reg. 24,329 (Dep’t
Comm. 1999) (final determ.) [“Final Results”]. Nippon contests what it characterizes as a
change in the Department’s methodology upon remand as well as the Department’s selection of
neutral facts available in arriving at a revised dumping margin.1 Commerce and Defendant-
intervenors, Bethlehem Steel Corporation, U.S. Steel Group, a unit of USX Corporation, Ispat
Inland, Inc., and LTV Steel Company, Inc., reject Nippon’s characterization of the Department’s
actions upon remand as a change in methodology and insist on the reasonableness of the agency’s
selection of neutral facts available. Familiarity with the opinions ordering remand is presumed.
1
Nippon’s separate motion to reconsider this court’s earlier remand decision
denying Nippon’s request to invalidate the investigation is denied.
CONSOL. COURT NO. 99-08-00466 PAGE 3
See Nippon Steel Corp. v. United States, 146 F. Supp. 2d 835 (Ct. Int’l Trade 2001) (“Nippon
II”); Nippon Steel Corp. v. United States, 118 F. Supp. 2d 1366 (Ct. Int’l Trade 2000) (“Nippon
I”).
I. Change in Methodology
Nippon alleges that the Department’s remand analysis constitutes a change in its
methodology from that applied in the Final Results. Nippon claims that the Department’s use of
weighted averages and product-specific (otherwise described as CONNUM-specific) margins
was a shift in methodology that inflated Nippon’s dumping margin. Nippon also claims that
Commerce’s calculation of a margin for each of Nippon’s products that had exclusively
theoretical weight sales (in addition to margins for those products that had both actual and
theoretical weight sales) was an unexplained departure from the original methodology.2
Commerce has not improperly changed its methodology because there has been no
methodological change that necessitates further explanation here. In stark contrast to the cases
relied upon by Nippon, see, e.g., Shikoku Chems. Corp. v. United States, 16 CIT 382, 388, 795
F. Supp. 417, 422 (1992); Citrosuco Paulista, S.A. v. United States, 12 CIT 1196, 1209, 704 F.
Supp. 1075, 1088 (1988); Calcium Hypochlorite from Japan, 55 Fed. Reg. 41,259, 41,260 (Dep’t
Comm. 1990) (final admin. rev.), the changes undertaken by Commerce here were necessitated
by this court’s directive to calculate a dumping margin for Nippon without an adverse inference.
See Nippon II, 146 F. Supp. 2d at 844-45. When a court remands a determination after finding
2
Nippon contests the Department’s separate margin calculation for each the [ ]
products that only had theoretical weight sales, in addition to the separate margin calculation for
each of the [ ] products with both theoretical and actual weight sales.
CONSOL. COURT NO. 99-08-00466 PAGE 4
that Commerce has relied on adverse facts available where the evidence cannot support an
adverse inference, Commerce must re-calculate a margin by replacing those steps in the original
calculation that were designed to be punitive with measures that are designed to be neutral. See
Statement of Administrative Action, accompanying H.R. Rep. No. 103-826(I), at 869, reprinted
in 1994 U.S.C.C.A.N. 4040, 4198 (“SAA”) (“[19 U.S.C. § 1677e(a)] generally will require
Commerce to reach a determination by filling gaps in the record due to deficient submissions or
other causes . . . . [T]he facts available are information or inferences which are reasonable to use
under the circumstances.”). In other words, Commerce follows the same steps in its calculation
on remand that it would if the agency were undertaking the calculation for the first time in the
original investigation or administrative review with complete information, except that the agency
may employ non-adverse facts available to fill informational gaps.
Had the Department been provided properly with the necessary weight conversion factor
during the investigation, it would have converted the theoretical weight sales into actual weight
sales and subsequently calculated a weighted average margin for each CONNUM. See
Department of Commerce, Antidumping Manual ch. 7 at 28 (1998).3 In doing so, margins would
3
The Department states the following in its Antidumping Manual:
Because the normal method of comparison in an investigation is weighted-average
EP or CEP to weighted average NV, the boundaries of the averaging groups are
extremely important. We do not simply calculate one weighted-average price for
all products within the scope of the investigation to determine EP, CEP, or NV.
While easy to do a comparison of such averages, it would be meaningless. The
items within the averaging groups should share as many common characteristics
as feasible. For example, we nearly always calculate model-specific weighted-
average prices . . . . Calculation of these “narrower” weighted-average prices
yields more accurate results than broad averages which mix sales with different
characteristics which affect prices . . . .
CONSOL. COURT NO. 99-08-00466 PAGE 5
be calculated separately for each “mixed” CONNUM, i.e., those product groups with actual and
theoretical weight sales, as well as for each “pure” CONNUM, i.e., those product groups with
only theoretical weight sales. The fact that one set of CONNUMs contained only theoretical
weight sales would not preclude that set of CONNUMs from being given a margin with the
available data. Because there was no weight conversion factor on record, however, Commerce
focused on “mixed” CONNUMs, with both theoretical and actual weight sales, in the Final
Results. Taking the highest sale-specific margin for each of these CONNUMs, based on the
actual weight sales, the Department then took a simple average of these margins, which result
became the margin applied to all of Nippon’s theoretical weight sales. See Final Results, 64 Fed.
Reg. at 24,362; see also Second Remand Analysis Memo (June 18, 2001), at 1, R.C.R. Doc. 3,
DOC Response Br., Tab 5, at 1. Nippon’s overall dumping margin as a result of this calculation
was 19.65%. See Final Results, 64 Fed. Reg. at 24,370.
In responding to the court’s concerns expressed in the previous decisions in this case,
Commerce sought on the second remand to derive a new, non-adverse dumping margin for
Nippon by performing the following steps: (1) for each “mixed” CONNUM, which had both
actual and theoretical weight sales, the Department calculated a weighted-average margin based
on the actual weight sales (for which sufficient data existed on the record); (2) this real margin
for the actual weight sales in each of these mixed CONNUMs became the facts available margin
for the theoretical weight sales in the same CONNUM; and (3) for the remaining “pure”
CONNUMs, which had exclusively theoretical weight sales, the Department calculated a
weighted average margin of all the actual weight margins calculated in step (1) for the mixed
Antidumping Manual, at ch. 7, 28.
CONSOL. COURT NO. 99-08-00466 PAGE 6
CONNUMs. See Second Remand Analysis Memo, at 1, DOC Response Br., Tab 5, at 1. These
steps resulted in a revised overall dumping margin for Nippon of 18.39%. See id.
The aspects of the calculation that have changed since the final determination and
about which Nippon now complains are precisely those elements that together rendered the final
determination an application of adverse facts available. By using simple averages and
indiscriminately applying a single margin for all theoretical sales regardless of specific
CONNUM, Commerce sacrificed a certain amount of accuracy in the Final Results in order to
“ensure that [Nippon] does not obtain a more favorable result by failing to cooperate than if it
had cooperated fully.” SAA, at 870. It may be possible that purposeful reliance on simple
averages instead of weighted averages and the selection of a generally applicable margin that is
not CONNUM-specific is appropriate to further the purposes of the adverse facts available
provision of the statute. Cf. Comitex Knitters, Ltd. v. United States, 16 CIT 817, 821-22, 803 F.
Supp. 410, 414-16 (1992) (upholding Commerce’s reliance on simple averages in BIA
methodology over respondent’s objections to use more accurate weighted averages). Actions and
calculations that are appropriate in the context of an adverse inference, however, may not
necessarily be appropriate when calculating a margin using neutral facts available. Nippon seeks
to have this court mandate, in a neutral facts available context, a methodology that the court may
not even be able to permit in such a context. See Allied Tube & Conduit Corp. v. United States,
132 F. Supp. 2d 1087, 1096 (Ct. Int’l Trade 2001) (rejecting Commerce’s unreasoned reliance on
simple average in lieu of more accurate weighted average in non-adverse facts available context).
Commerce, by ensuring that margins were based on weighted averages and were CONNUM-
specific, performed its calculations here according to the standards of reasonableness which must
CONSOL. COURT NO. 99-08-00466 PAGE 7
guide the agency in the application of neutral facts available. The court rejects Nippon’s attempt
to bind the Department to methodologies which would only be acceptable if no longer existing
adverse inferences existed.
II. Selection of Non-Adverse Facts Available
Nippon further argues that the Department erred in its selection of non-adverse facts to be
relied upon in lieu of the missing weight conversion factor data. As an initial matter, Nippon
argues that the Department is permitted to use only those “facts” that replace the specific
information that is missing from the record in order for the Department to perform its margin
calculations. The specific information that Nippon failed to provide in a timely manner is the
weight conversion factor that is necessary to translate the theoretical weight sales made by
Nippon into an actual weight basis. Commerce did not insert a substitute weight conversion
factor into its calculations. Instead, the Department created substitute margins based on other
evidence in the record. Nippon insists that Commerce, in failing to identify other evidence that
might produce a stand-in weight conversion factor, exceeded its authority under the facts
available provision of the statute.
Nippon’s reading of the statute and the SAA is unduly restrictive in the limitations it
places upon the agency’s discretion to employ non-adverse facts available. Neither the statute
nor the SAA mandate that the facts selected by the agency directly “take the place of the missing
or otherwise unacceptable fact.” Nippon Br., at 15. The SAA instructs the Department not
simply to replace the missing facts, but to make “determinations on the basis of the facts
available.” SAA, at 869. The SAA further grants the Department a degree of flexibility to
CONSOL. COURT NO. 99-08-00466 PAGE 8
“weigh[] the record evidence to determine that which is most probative of the issue under
consideration,” and it identifies “facts available” as “information or inferences which are
reasonable to use under the circumstances.” Id. Commerce may thus employ record evidence to
arrive at a margin calculation in the absence of complete data, even if the evidence does not
necessarily replace the precise data missing, subject to the constraint that the facts and the
manner in which they are employed are reasonable. See Koenig & Bauer-Albert AG v. United
States, 15 F. Supp. 2d 834, 846 (Ct. Int’l Trade 1998), aff’d in part, vacated in part on other
grounds, 259 F.3d 1341 (Fed. Cir. 2001).
It does not follow from the statutory discretion to use substitute margins instead of a
replacement weight conversion factor, however, that the use of the specific margins in this case
was proper. As Nippon points out, the margins derived by the Department in its remand
calculations could only have resulted from data that yields a weight conversion factor that seems
unreasonable on its face. Because the weight conversion factor is intended to reflect the ratio of
the actual weights upon delivery to the theoretical weights at which products are sold, one may
not realistically expect a direct one-to-one ratio, but one would expect that the actual weights are
not dramatically greater than the theoretical weights. Particularly as steel customers often pay for
these products on the basis of theoretical weight rather than actual weight, a firm will seek to
prevent a weight conversion factor of much greater than 1.0. For the margins to be what the
Department’s calculation has suggested, however, Nippon must have delivered in actual weight
multiple times what it sold in theoretical weight.4 The non-adverse facts relied upon by the
4
It appears that the implicit weight conversion factor behind the Department’s
remand margins is [ ], suggesting that Nippon delivered to each U.S. customer approximately
[ ]%, or [ ] times, as much steel as the customer had actually bought. Nippon Br., at 16 n.6.
CONSOL. COURT NO. 99-08-00466 PAGE 9
Department under such circumstances, therefore, cannot be said to bear “a rational relationship
between data chosen and the matter to which they are to apply.” Koenig & Bauer, 15 F. Supp. 2d
at 846 (quoting Manifattura Emmempi v. United States, 16 CIT 619, 624, 799 F. Supp. 110, 115
(1992)).5
Finally, Nippon suggests that the Department use weight conversion data provided by
another respondent in this review, Kawasaki Steel Corporation, notwithstanding the
Department’s stated concerns of improperly revealing business proprietary information by doing
5
In briefing before this court, neither Commerce nor Defendant-intervenors even
attempts to respond to Nippon’s arguments or otherwise rationalize the use of data that upon
deconstruction reveals this grossly inflated conversion factor. Although Nippon had raised this
precise concern at the agency level, the Department stated at oral argument that it had undertaken
no further analysis to determine whether Nippon’s [ ]% figure was accurate. Instead, the
agency argues that its facially neutral methodology, discussed supra at Part I, is sufficient to
render its remand determination a proper application of non-adverse facts available,
notwithstanding the possibility that the facially neutral methodology rests on an implicit weight
conversion factor of [ ]. The Department is incorrect. When applying non-adverse facts
available, if the Department chooses to adopt a methodology to complete its margin calculation,
instead of directly replacing the missing information, such methodology must be reasonable. See
Mitsubishi Heavy Indus. v. United States, 54 F. Supp. 2d 1183, 1186-87 (Ct. Intr’l Trade 1999)
(upholding neutral facts available methodology because “reasonable”). Where the purportedly
neutral methodology results in a figure that could have been produced under ordinary
circumstances (i.e., where the Department simply replaces the missing information) only by
substituting incredible data for the respondent’s missing information, the application of the
methodology is unreasonable, and therefore, impermissible. Cf. D & L Supply Co. v. United
States, 113 F.3d 1220, 1223 (Fed. Cir. 1997) (“Information that has conclusively been
determined to be inaccurate does not qualify as the ‘best information’ under any test, and
certainly cannot be said to serve the ‘basic purpose’ of promoting accuracy.”); Borlem S.A. --
Empreedimentos Industriais v. United States, 913 F.2d 933, 937 (Fed. Cir. 1990) (“Congress'
desire for speedy determinations on dumping matters should not be interpreted as authorizing
proceedings that are based on inaccurate data.”). In advance of oral argument, the court
specifically asked the parties to address how this methodology might be reasonable despite the [
]% figure. No acceptable explanation was proffered. The court deems it futile to ask for
Defendant again to attempt to justify its methodology.
CONSOL. COURT NO. 99-08-00466 PAGE 10
so.6 Nippon’s reliance on various determinations in which Commerce employed data from
certain respondents to calculate a margin for another respondent is misplaced. Those
determinations either involved weight averaged data from multiple respondents that does not risk
the derivation of proprietary information, Fresh Atlantic Salmon from Chile, 66 Fed. Reg.
18,431, 18,436-37 (Dep’t Comm. 2001) (prelim. admin. rev.), or did not clearly use proprietary
information, Certain Fresh Cut Flowers from Colombia, 52 Fed. Reg. 6842, 6845 (Dep’t Comm.
1987) (final determ.). Cf. Shop Towels from Bangladesh, 61 Fed. Reg. 55,957, 55,964 (Dep’t
Comm. 1996) (final admin. rev.) (“[W]e are using proprietary data from four respondents, which
adequately protects each respondent’s proprietary data.”). As Nippon conceded at oral argument,
if the Department were to rely on Kawasaki’s weight conversion data, Nippon would be able to
derive that proprietary information in the same manner that Nippon was able to calculate the
implicit weight conversion factor discussed supra. Commerce, therefore, properly refused to rely
on Kawasaki’s proprietary weight conversion data where such use may reveal proprietary
information to Nippon. See Geum Poong Corp. v. United States, No. 00-06-00298, slip op. 01-
115, at 6-7 (Ct. Int’l Trade Sept. 6, 2001).7
6
Nippon also urges the Department to use the company’s actual weight conversion
factor data, untimely submitted and therefore rejected by Commerce pursuant to 19 C.F.R. §
351.104 (2001). At oral argument, Commerce claimed it did not use Nippon’s data because the
agency believed, erroneously, that the regulation rendered the submitted data unavailable for
consideration. Although the Department understandably seeks to enforce its time limits for
submissions, as the court noted in Nippon II, 146 F. Supp. 2d at 840 n.6, “Commerce remains
free to use NSC’s data or other non-adverse data.” Although the rejected data was not verified,
verification is only a spot check, and Nippon’s other data did not fail verification. Depending on
necessity, it is Commerce’s decision whether to use this data.
7
This does not mean that Commerce may not use Kawasaki’s data as one check on
the reasonableness of its methodology, or use it in some other generalized manner.
CONSOL. COURT NO. 99-08-00466 PAGE 11
Conclusion
The Department is not prohibited from altering the original adverse inference
methodology in order to ensure the use of neutral facts available when re-calculating Nippon’s
dumping margin. Nevertheless, the Department unreasonably selected weighted average margins
for theoretical weight sales as non-adverse facts available, where those margins reflected a
weight conversion factor that is clearly implausible. On remand, the agency shall devise a new
approach to the determination of neutral facts available. Remand results are due within thirty
(30) days hereof. Objections may be filed eleven (11) days later.
____________________________
Jane A. Restani
JUDGE
Dated: New York, New York
This 12th day of October, 2001