Uttam Galva Steels Ltd. v. United States

Slip Op. 20-15
UNITED STATES COURT OF INTERNATIONAL TRADE
UTTAM GALVA STEELS LIMITED,
Plaintiff,
Before: Leo M. Gordon, Judge
v. Court No. 19-00044
UNITED STATES,
Defendant,
CALIFORNIA STEEL INDUSTRIES INC.,
AND STEEL DYNAMICS, INC.,
Defendant-Intervenors.
OPINION and ORDER
[Commerce’s Final Results sustained in part and remanded in part.]
Dated: February 6, 2020
John M. Gurley and Aman Kakar, Arent Fox LLP, of Washington, DC, for Plaintiff
Uttam Galva Steels Limited.
Elizabeth A. Speck, Senior Trial Counsel, Commercial Litigation Branch, Civil
Division, U.S. Department of Justice of Washington, DC, for Defendant United States.
With her on the brief were Joseph H. Hunt, Assistant Attorney General, Jeanne E.
Davidson, Director, and Claudia Burke, Assistant Director. Of counsel on the brief was
Rachel A. Bogdan, Attorney, U.S. Department of Commerce, Office of the Chief Counsel
for Trade Enforcement and Compliance of Washington, DC.
Roger B. Schagrin and Christopher T. Cloutier, Schagrin Associates of
Washington, DC, for Defendant-Intervenors California Steel Industries, Inc. and Steel
Dynamics, Inc.
Gordon, Judge: This action involves the final results of the administrative review
Court No. 19-00044 Page 2
conducted by the U.S. Department of Commerce (“Commerce”) of the countervailing duty
(“CVD”) order of certain corrosion-resistant steel products (“CORE”) from India. See
Certain Corrosion-Resistant Steel Products from India, 84 Fed. Reg. 11,053 (Dep’t of
Commerce Mar. 25, 2019) (final results admin. review) (“Final Results”); see also
accompanying Issues and Decision Memorandum, C-533-864, PD 1 193 (Dep’t of
Commerce Mar. 18, 2019), available at
https://enforcement.trade.gov/frn/summary/india/2019-05647-1.pdf (last visited this date)
(“Decision Memorandum”).
Before the court is the USCIT Rule 56.2 motion for judgement on the agency record
filed by Plaintiff Uttam Galva Steels Limited (“Uttam Galva” or “UGSL”). See Pl.’s Mem.
in Supp. of its 56.2 Mot. for J. on the Agency R., ECF No. 25 2 (“Pl.’s Br.”); see also Def.'s
Resp. in Opp'n to Pl.'s Mot. for J. on the Agency R., ECF No. 26 (“Def.'s Resp.”); Def.-
Intervenors’ Resp. in Opp’n to Pl.’s Mot. for J. on the Agency R., ECF No. 27 (“Def.-
Intervenors’ Resp.”); Reply Br. of Pl. Uttam Galva, ECF No. 28 (“Pl.’s Reply”). The court
has jurisdiction pursuant to Section 516A(a)(2)(B)(i) of the Tariff Act of 1930, as amended,
19 U.S.C. § 1516a(a)(2)(B)(i) 3, and 28 U.S.C. § 1581(c) (2012). For the reasons that
follow, the court sustains in part and remands in part the Final Results.
1 “PD” refers to a document in the public administrative record, which is found in ECF No.
20-3, unless otherwise noted. “CD” refers to a document in the confidential administrative
record, which is found in ECF No. 20-2, unless otherwise noted.
2 All citations to parties’ briefs and the agency record are to their confidential versions
unless otherwise noted.
3 Further citations to the Tariff Act of 1930, as amended, are to the relevant provisions of
Title 19 of the U.S. Code, 2012 edition.
Court No. 19-00044 Page 3
I. Standard of Review
The court sustains Commerce’s “determinations, findings, or conclusions” unless
they are “unsupported by substantial evidence on the record, or otherwise not in
accordance with law.” 19 U.S.C. § 1516a(b)(1)(B)(i). More specifically, when reviewing
agency determinations, findings or conclusions for substantial evidence, the court
assesses whether the agency action is reasonable given the record as a whole. Nippon
Steel Corp. v. United States, 458 F.3d 1345, 1350–51 (Fed. Cir. 2006). Substantial
evidence has been described as “such relevant evidence as a reasonable mind might
accept as adequate to support a conclusion.” DuPont Teijin Films USA v. United States,
407 F.3d 1211, 1215 (Fed. Cir. 2005) (quoting Consol. Edison Co. v. NLRB, 305 U.S.
197, 229 (1938)). Substantial evidence has also been described as “something less than
the weight of the evidence, and the possibility of drawing two inconsistent conclusions
from the evidence does not prevent an administrative agency’s finding from being
supported by substantial evidence.” Consolo v. Fed. Mar. Comm’n, 383 U.S. 607, 620
(1966). Fundamentally, though, “substantial evidence” is best understood as a word
formula connoting reasonableness review. 3 Charles H. Koch, Jr. Administrative Law and
Practice § 9.24[1] (3d ed. 2019). Therefore, when addressing a substantial evidence issue
raised by a party, the court analyzes whether the challenged agency action “was
reasonable given the circumstances presented by the whole record.” 8A West’s Fed.
Forms, National Courts § 3.6 (5th ed. 2019).
Court No. 19-00044 Page 4
II. Discussion
A. Application of Total Adverse Facts Available to Uttam Galva
In initiating its administrative review of the CVD order of CORE from India,
Commerce examined whether producers/exporters of the subject merchandise are cross-
owned with one another, a parent or holding company, or with their input suppliers.
19 C.F.R. § 351.525(b)(6). Commerce required respondents, including Uttam Galva, to
disclose the firms with which they are affiliated and cross-owned as part of their initial
questionnaire response. See Decision Memorandum at 25. Specifically, the questionnaire
referenced the definition of “Affiliated Persons” in 19 U.S.C. § 1677(33), which includes:
(1) members of the same family, (2) any officer or director of
an organization and such organization, (3) partners, (4)
employers and their employees, and (5) any person or
organization directly or indirectly owning, controlling, or
holding with power to vote, 5 percent or more of the
outstanding voting stock or shares of any organization and
such organization. In addition, affiliates include (6) any person
who controls any other person and that person, or (7) any two
persons who directly control, are controlled by, or are under
common control with, any person. “Control” exists where one
person is legally or operationally in a position to exercise
restraint or direction over the other person.
Id. Commerce explained that affiliation information for respondents is critical to how
Commerce conducts the administrative review. “Commerce considers the identification
of affiliates … to be so integral to its countervailing duty proceedings that … it seeks
information regarding affiliates prior to submission of all the other information solicited by
the questionnaire. From a procedural standpoint, Commerce uses [this affiliation
information] to determine the universe of companies from which additional information
Court No. 19-00044 Page 5
may need to be solicited.” Id. Commerce further explained that “[i]f Commerce requests
a full questionnaire of a company identified in a respondent’s affiliation response,
Commerce then uses the information in that … response to determine … whether or not
cross-ownership exists between the respondent and the affiliate for the purposes of the
countervailing duty law, in accordance with 19 CFR 351.525(b)(6)(vi).” Id. at 25–26.
In its initial questionnaire response, Plaintiff identified several affiliates and
Commerce preliminarily found that “cross-ownership exists among UGSL, [Uttam Value
Steels Limited (“UVSL”)], and an affiliated input supplier, Uttam Galva Metallics Limited
(UGML).” See Memorandum from J. Maeder to G. Taverman, re: Post-Preliminary
Analysis, at 2 (Dep’t of Commerce Dec. 19, 2018), PD 182 (“Post-Preliminary Analysis
Memo”). Additionally, in its initial questionnaire response, UVSL “identified its controlling
shareholders as First India Infrastructure Private Limited (“FIIPL”) and Metallurgical
Engineering and Equipment Limited (“MEEL”).” Id. at 4. Notably, Uttam Galva did not
identify any affiliation with FIIPL or MEEL, even though these entities are “owned by Anuj
and Ankit Miglani, who were in turn the managing director and director, respectively, of
UGSL during the [period of review (“POR”)].” Id. Moreover, Uttam Galva failed to report
any affiliation with Lloyds Steels Industries Limited (“LSIL”). See Decision Memorandum
at 26 (citing Post-Preliminary Analysis Memo).
In the course of evaluating new subsidy allegations brought by petitioners, 4
Commerce placed on the record certain financial statements of LSIL covering the POR.
4Petitioners alleged in the new subsidy allegations that “UGSL and UVSL benefitted from
debt-to-equity swaps provided to UVSL prior to the POR, when it was known as Lloyds
Court No. 19-00044 Page 6
See Post-Preliminary Analysis Memo at 5. “[T]hese financial statements identif[ied] FIIPL
and MEEL as owners of 46.11 percent of the shares in LSIL and identified a ‘scheme of
arrangement’ between UVSL and LSIL regarding a demerger of the Engineering Division
from the former to the latter.” Id. Commerce invited interested parties to comment on the
LSIL financial statements but received no comments. Id. Commerce then issued a
supplemental questionnaire to Plaintiff for the purpose of clarifying the role of its
previously disclosed affiliates and its relationship with LSIL, including the “demerger
arrangement” identified in the LSIL documents. Id. In response, Plaintiff submitted
information acknowledging that FIIPL and MEEL owned 46.11 percent of the shares in
both UVSL and LSIL during the POR. Id. Commerce noted that:
Nearly 11 months passed between UGSL’s submission of its
November Affiliation Response and its response to the Third
Supplemental Questionnaire, in October, nearly a full year
later. In the intervening time, Commerce issued its Preliminary
Results, while UGSL continued to obfuscate its relationship
with LSIL via common shareholding through the Miglani
family, and moreover continued to not identify the Engineering
Division which it also acquired. At no point prior to Commerce
placing the LSIL Memorandum on the record did UGSL proffer
the information that the same Miglani family that controlled the
Uttam group of companies also owned significant shares in
LSIL. Instead, the company provided false information that it
acquired control of a single division of Lloyds Steel[5] as a
corporate entity, without providing any detail regarding how
Lloyds Steel was in fact acquired as whole, and only during
the POR effectively divided into two affiliated companies,
UVSL and LSIL.
Steel Industries Limited (Lloyds Steel).” Post-Preliminary Analysis Memo at 5. UGSL
explained that FIIPL and MEEL “acquired a controlling number of shares in Lloyds Steel
in 2012, whereupon the name was changed to UVSL.” Id.5 See footnote 4 regarding “Lloyds Steel.”
Court No. 19-00044 Page 7
Id. at 5–6. Ultimately, Commerce found that Plaintiff had “withheld necessary information
that was requested of it, failed to provide information within the deadlines established,
and significantly impeded this proceeding by not fully disclosing its affiliation with LSIL,
a company with which we found to be cross-owned, and submitting an incomplete
response on behalf of UVSL.” Id. at 6. Commerce elaborated that “[b]y doing so, UGSL
has undermined Commerce’s ability to fully investigate the universe of affiliated and
cross-owned companies that may have subsidies attributable to UGSL as a producer of
CORE.” Id.As a result, Commerce determined that it would “rely on facts otherwise
available…with respect to UGSL, pursuant to [19 U.S.C. § 1677e(a)(2)(A)–(C).]” Id.; see
also Decision Memorandum at 26. Moreover, Commerce found that Plaintiff “did not
cooperate to the best of its ability to comply with the requests for information in this
investigation.” Id. Accordingly, Commerce determined that an adverse inference was
warranted under 19 U.S.C. § 1677e(b) because Plaintiff’s failure to timely provide
Commerce with complete and accurate affiliate information deprived Commerce of the
opportunity to examine the issues of affiliation and cross-ownership between Uttam Galva
and LSIL. Id.
Plaintiff concedes that it failed to provide information regarding LSIL in its initial
questionnaire response. See Pl.’s Br. at 7. Despite this concession, Plaintiff maintains
that Commerce’s decision to apply AFA with respect to the issues of affiliation and cross-
ownership between Uttam Galva and LSIL was unreasonable. Id. Plaintiff provides a
detailed history of the origin of LSIL, noting that LSIL is the present name of the former
Court No. 19-00044 Page 8
Engineering Division of Lloyds Steel. Id. at 8–10. Plaintiff further explains that Lloyds Steel
was composed of both an engineering division and a steel division, and that Plaintiff
gained a controlling share of only the steel division. Id. Although the two divisions were
technically part of the same company, Plaintiff argues that they operated separately
(separate business activities, separate teams, separate manufacturing locations,
separate accounting systems). Id. Plaintiff also notes that there was an informal
agreement or a “mutual understanding” that ownership and control of the steel division
would be transferred to FIIPL and MEEL (owned and operated by the Miglani family) as
part of a “Demerger Scheme,” while control of the engineering division would remain with
the original owners of Lloyds Steel. Id. at 10. According to this agreement, the Miglanis
were to transfer their ownership stake in LSIL to the original owners. Id. Plaintiff
acknowledges that this transfer has not yet occurred and continues to maintain that
although the Miglani family owns 46.11 percent of the shares in LSIL, they do not have
“managerial control.” Id. at 10–11.
Commerce considered and rejected Plaintiff’s arguments as to why it was
unreasonable for Commerce to conclude that affiliation existed between Plaintiff and LSIL
during the POR. See Decision Memorandum at 27–28. Commerce explained that despite
Plaintiff’s arguments regarding the demerger scheme, 6 the agency did not “consider the
6 Plaintiff argues that Commerce dismissed the significance of the dates of the demerger
scheme without providing an adequate reason. See Pl.’s Reply at 6. Plaintiff contends
that in considering the demerger scheme of the steel and engineering divisions,
Commerce ignored the “appointed date,” which was before the POR, and focused on the
“effective date,” which was within the POR. Id.
Court No. 19-00044 Page 9
date of the demerger to be especially relevant in the first place, as the Miglani’s ownership
stake in LSIL was acquired upon the demerger of the UVSL Engineering Division to LSIL.
Therefore, the Miglani family’s stake in UVSL was merely substituted with an identical
stake in a new affiliate, LSIL.” Id. at 28. Accordingly, Commerce found that “[r]egardless
of whether UVSL or LSIL owned and operated the Engineering Division, common
ownership with Uttam Galva and LSIL exists via the Miglani family.” Id.
Given this explanation, the court concludes that Plaintiff has failed to demonstrate
that Commerce’s finding of cross-ownership was unreasonable. Plaintiff points to the
information it (belatedly) provided to Commerce regarding the unique ownership
agreement and control scheme of LSIL between the original owners and the Miglani
family. See Pl.’s Br. at 9–13. However, as Commerce emphasized, “Uttam Galva
acknowledges that this understanding between the parties is not documented anywhere.”
Decision Memorandum at 28. Plaintiff urges the court to direct Commerce to infer from
the record that LSIL operated outside of the control of Uttam Galva and the Miglani family,
but the court will not overturn Commerce’s reasonable refusal to make this inference
given that “the sole fact remains that a significant ownership share of LSIL remained
within the Miglanis during the POR.” Id.; see also Aristocraft of Am., LLC v. United States,
42 CIT ___, ___, 331 F. Supp. 3d 1372, 1380 (2018) (“What the court cannot do is direct
Commerce to favor Plaintiffs' preferred evidentiary inference over another reasonable
inference.”); Mitsubishi Heavy Indus. Ltd. v. United States, 275 F.3d 1056, 1062 (Fed.
Cir. 2001) (“The possibility of drawing two inconsistent conclusions from the evidence
Court No. 19-00044 Page 10
does not prevent an administrative agency's finding from being supported by substantial
evidence.” (internal citation and quotation marks omitted)).
Plaintiff challenges Commerce’s finding that Uttam Galva hindered the CVD
proceeding and that “Commerce had no opportunity to consider whether Uttam Galva
should provide a full questionnaire response.” See Pl.’s Br. at 13. Plaintiff notes that
“Commerce had four months after the third supplemental questionnaire for consideration
but did not ask for any supplemental or full questionnaire responses from Uttam Galva.”
Id. Plaintiff argues that these four months gave Commerce ample time to request any
additional information and because the agency did not do so, Uttam Galva cannot be said
to have “impeded the investigation.” Id.Plaintiff’s argument ignores the importance that Commerce places on receiving
affiliated company information early in the proceeding. See Decision Memorandum
at 25-26 (describing importance of Commerce receiving affiliation information early in
proceeding in order to conduct cross-ownership evaluation pursuant to 19 C.F.R.
§ 351.525(b)(6)(vi)). As Commerce emphasized, Plaintiff’s submission of additional
affiliate information “nearly 11 months after the [due date of the] response to the affiliation
section of the initial questionnaire” effectively deprived Commerce of the ability to
evaluate whether additional information from LSIL was necessary to determine the
existence of cross-ownership between Uttam Galva and LSIL. See Decision
Memorandum at 26 & n.69. “Agencies with statutory enforcement responsibilities enjoy
broad discretion in allocating investigative and enforcement resources.” Torrington Co. v.
United States, 68 F. 3d 1347, 1351 (Fed. Cir. 1995). The court will not second-guess
Court No. 19-00044 Page 11
Commerce’s assessment of its own workload, and Plaintiff has failed to demonstrate that
Commerce acted unreasonably by not further investigating LSIL after Plaintiff belatedly
supplemented the record with affiliation information.
Commerce’s determination as to whether programs are countervailable is a
fact-intensive examination that the agency is entitled to undertake, and Plaintiff cannot
preclude it by failing to provide a response. See Essar Steel Ltd. v. United States, 34 CIT
1057, 1073, 721 F. Supp. 2d 1285, 1298–99 (2010) (“Regardless of whether [the
respondent] deemed the information relevant, it nonetheless should have produced it [in]
the event that Commerce reached a different conclusion…”); see also Ansaldo
Componenti, S.p.A. v. United States, 10 CIT 28, 37, 628 F. Supp. 198, 205 (1986)
(holding that “it is Commerce, not the respondent, that determines what information is to
be provided,” despite any claim by respondent that information request “cannot legally
serve as the basis” for agency’s view). Commerce reasonably found that “Uttam Galva
failed to provide information requested of it regarding its affiliates, failed to provide
information by established deadlines, and significantly impeded Commerce’s ability to
conduct this administrative review.” Decision Memorandum at 25. Commerce also
reasonably found that Uttam Galva’s failure to provide the affiliation information regarding
LSIL in a timely manner demonstrated that Plaintiff “failed to cooperate in this proceeding
to the best of its ability.” Id. at 26. Accordingly, the court sustains Commerce’s
determination that Uttam Galva’s failure to disclose its affiliation with LSIL merited the
application of AFA pursuant to 19 U.S.C. § 1677e.
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B. Calculation of AFA Rate
As AFA, Commerce assigned LSIL’s use of applicable subsidy programs to Uttam
Galva, resulting in the assignment of an AFA rate of 588.43 percent for Uttam Galva. See
Decision Memorandum at 24, 41–45. Plaintiff contends that Commerce erred in its
application of AFA when it determined “that LSIL used all of the applicable programs
under review, and [attributed] the use of these programs to Uttam Galva.” Id. at 24.
Specifically, Plaintiff contends that Commerce’s AFA analysis was not reasonable
because it “Failed to Evaluate the Situation or Provide a Reasoned Explanation for Its
Selection of Rates for Each Countervailable Program Commerce Identified.” Pl.’s Br.
at 20–25. Plaintiff highlights that for at least one of the program rates that Commerce
assigned, a 16.63 percent rate for the “Market Access Initiative Program,” Commerce’s
proffered basis for that rate only supports a 6.06 percent rate. Id. at 21–22.
Additionally, Plaintiff maintains that Commerce’s AFA rate selection for Uttam
Galva was unreasonable regarding several programs from “which LSIL could not have
benefited based on the record evidence.” Id. at 25. Plaintiff specifies that “(1) Hot-Rolled
Steel for LTAR, (2) SGUP Exemption from Entry Tax for the Iron and Steel Industry, (3)
SGUP Long-term Interest Free Loans Equivalent to the Amount of VAT and CST Paid;
and (4) SGUP’s Interest Free Loans Under the SGUP Industrial Development Promotion
Rules 2003 are programs that were assigned an AFA rate and aggregated as part of the
total AFA rate in the Final Results but were never in the initial questionnaire or initiated
as a part of the new subsidy allegations during the administrative review.” Id. Plaintiff also
contends that there are several other programs for which Commerce assigned AFA rates
Court No. 19-00044 Page 13
that “are plainly inapplicable to LSIL” given the record. Id. at 26–27. Plaintiff argues that
“Commerce should have considered record evidence that LSIL could not have used all of
the programs for which it determined AFA rates.” Id. at 27.
Defendant, for its part, appears to recognize the merit of some of Plaintiff’s
arguments and has requested a remand for Commerce to reconsider its determination of
AFA rates with respect to the Market Access Initiative Program, as well as the other four
programs specifically identified by Plaintiff (i.e., Hot-Rolled Steel for LTAR, SGUP
Exemption from Entry Tax for the Iron and Steel Industry, SGUP Long-term Interest Free
Loans Equivalent to the Amount of VAT and CST Paid; and SGUP’s Interest Free Loans
Under the SGUP). See Def.’s Resp. at 16–19. The court will therefore remand the matter
to Commerce to reconsider these issues. SKF USA Inc. v. United States, 254 F.3d 1022,
1029–30 (Fed. Cir. 2001).
This leaves the question of the scope of the remand. Defendant seeks to have the
court sustain its AFA subsidy rate assignments for Uttam Galva, excluding the five
specific rates for which Commerce requests a remand. See Def.’s Resp. at 19–28.
Plaintiff has highlighted that Commerce provided a limited explanation for why each of
the 70 AFA rates assigned to LSIL and Uttam Galva was reasonable. See Pl.’s Br. at 20–
25. Furthermore, Plaintiff has identified record evidence indicating that LSIL could not
have benefitted from certain countervailed programs. See id. at 25–28. Because the issue
of Uttam Galva and LSIL’s cross-ownership was not resolved until late in the proceeding,
it appears that Commerce has not had the opportunity to address Plaintiff’s arguments as
to the specific rates assigned as AFA to LSIL and Uttam Galva. The remand sought by
Court No. 19-00044 Page 14
Defendant provides Commerce with an opportunity to address Plaintiff’s arguments in the
first instance as to why certain rates should not be included and to further explain its rate
selections. The court therefore declines to limit the scope of the remand, and the court
will reserve decision on the reasonableness of Commerce’s AFA rate selections.
III. Conclusion
Accordingly, it is hereby
ORDERED that Commerce’s decision to apply AFA to Uttam Galva is sustained;
it is further
ORDERED that this matter is remanded for Commerce to reconsider and further
explain its AFA rate assignments; it is further
ORDERED that Commerce shall file its remand results on or before May 6, 2020;
and it is further
ORDERED that, if applicable, the parties shall file a proposed scheduling order
with page limits for comments on the remand results no later than seven days after
Commerce files its remand results with the court.
/s/ Leo M. Gordon
Judge Leo M. Gordon
Dated: February 6, 2020
New York, New York