United States Court of International Trade

ITC Redetermination Sustained

 In JMC Steel Group et al. v. United States, Court No. 13-22, Slip Op. 15-51 (May 29, 2015), the court reviewed the redetermination ordered in JMC Steel Group v. United States, 38 CIT __, 24 F. Supp. 3d 1290 (2014) (“JMC I”).  This matter arose from the International Trade Commission’s (“ITC” or “Commission”) antidumping and countervailing duty investigations into certain circular welded carbon-quality steel pipe (“CWP”) from India, Oman, the United Arab Emirates, and Vietnam (“subject imports).  The court ordered the Commission to (1) “reconsider its findings with regard to lost sales and revenue, taking into account [the] argument that the structure of the domestic CWP market precludes Plaintiffs from providing the ITC the lost sales and revenue information in the form and manner in which it was sought,” and (2) “explain how it has evaluated the impact of subject imports on the domestic industry within the context of the business cycle.”  Plaintiffs made the following objections to the remand results: (1) the ITC’s alleged use of the absence of lost sales allegations to support its finding of no negative volume effects; (2) the ITC’s alleged failure to explain why the domestic industry’s loss of market share to subject imports did not lead to an affirmative injury determination, (Comments at 4-11); and (3) its finding of no correlation between subject import volume and the domestic industry’s financial performance, (Comments at 13-25).  For the reasons below, the court sustained the redetermination.

The Commission in its investigation, determined that subject imports and the domestic like product were “generally fungible,” shared the same channels of distribution, had a “reasonable overlap” of competition, and that price was a significant factor in CWP purchasing decisions. While it found a significant increase in the volume of subject imports during the POI, in absolute terms and relative to domestic consumption and production, it concluded that the increase did not have significant adverse effects on the domestic industry. Although the ITC observed that subject imports “pervasively undersold” the domestic like product by significant margins during the POI, it nevertheless found “no evidence” that subject imports significantly depressed or suppressed prices of the domestic like product.  The ITC also found that the domestic industry’s performance improved in “almost every measure [during the POI] despite the weak recovery in CWP demand” following the 2008 economic crisis and that there was no correlation between subject import volume, market share, and underselling, on the one hand, and domestic industry performance, on the other.

In its remand results regarding revised lost sales and revenue analysis, the ITC noted that the court, in its previous decision, had affirmed its finding that subject imports had no negative price effects on the domestic like product. The ITC then determined that it “ha[d] no need to rely on the absence of confirmed lost sales and revenue allegations as further support for these findings.”  Moreover, Commission reexamined the record and found “no evidence that the domestic interested parties invoked [19 U.S.C. § 1677m(c)], nor d[id] the domestic interested parties claim to have done so” during the remand proceedings. The Commission clarified that it does not make adverse inferences against parties for failing to report lost sales and revenue allegations because, inter alia, responses to lost sales and revenue questions are voluntary.  The court affirmed these results and indicated that “(b)ecause the Commission expressly abandoned any reliance on the lack of verifiable lost sales and revenue allegations in making its remand determination the Commission has addressed the court’s concern that the agency improperly used the domestic producers’ failure to provide lost sales and revenue allegations as a basis for an adverse inference against the domestic industry”. While plaintiff suggested another methodology for lost sales and revenue analysis, the court could not disturb the calculations, without demonstrating that such methodology was unreliable.

As to the effect of the subject imports on the domestic industry and finding of no correlation between subject imports domestic industry performance, the court sustained the Commission’s findings. Between 2009 and 2010, the domestic industry’s performance improved “markedly by most measures,” even though the prevalence of subject import underselling rose, and the margin of underselling was at its highest point of the POI.  As for 2011, the domestic industry’s operating income margin reached a peak in interim 2011, despite underselling by subject imports in all quarterly comparisons, and that operating income margin declined in interim 2012, even though the prevalence and margin of underselling by subject merchandise fell. Thus there, appeared to be no rhyme or reason – in associating underselling to the domestic industry’s performance. The Commission also examined nonsubject imports and found that they held a highermarket share, and had lower prices, than subject imports and the domestic like product during the POI. Id. (citing Staff Report at Tables IV-3, IV-10, C-1, App. D). According to the ITC, this data demonstrated that “nonsubject import competition was no less a factor in the U.S. market than subject imports.”  Therefore, the Commission held that the subject imports did not affect the progress of the domestic industry and that domestic industry’s improved performance during POI was the result of the economic collapse in the 2009 and resulting recovery. Because the Commission satisfactorily accounted for the effects of the business cycle, and cited to substantial evidence for the lack of correlation between subject imports and the domestic industry, the court sustains the Commission’s results.  Finally, because in JMC I, the court affirmed the Commission’s findings of no correlation between subject import volume and the domestic industry’s financial performance, and subject import prices and the domestic industry’s financial performance – the court will not reconsider these findings.

Final Administrative Review Results Sustained

US Magnesium LLC v. United States, Court No. 14-38, Slip Op. 15-52 (June 2, 2015) involved a review of the final results of an administrative review conducted by the U.S. Department of Commerce (“Commerce”) of the antidumping duty order covering pure magnesium from the People’s Republic of China. See Pure Magnesium From the People’s Republic of China, 79 Fed. Reg. 94 (Dep’t of Commerce Jan. 2, 2014) (final results admin. review) (“Final Results”).  US Magnesium challenged (1) Commerce’s financial statement selection, (2) Commerce’s refusal to apply adverse facts available to Tianjin Magnesium Metal Co. Ltd. (“TMM”), and (3) Commerce’s surrogate valuation of magnesium scrap. For the reasons set forth below, the court sustained the Final Results on each of the issues challenged by US Magnesium.

Commerce calculates dumping margins by determining “the amount by which the normal value exceeds the export price or constructed export price of the subject merchandise.” 19 U.S.C. § 1677(35)(A). In the non-market economy context, Commerce calculates normal value using data from surrogate countries to value the factors of production. The surrogate data must “to the extent possible” be from a market economy country or countries that are (1) “at a level of economic development comparable to that of the nonmarket economy country” and (2) “significant producers of comparable merchandise.” 19 U.S.C. § 1677b(c)(4). Commerce here chose the Philippines as the surrogate country. In its preliminary determination Commerce used financial statements from two Philippine companies to calculate TMM’s financial ratios: SOH Technologies Corp. and RU Foundry and Machine Shop Corporation (“RU Foundry”). TMM, however, argued in its administrative case brief that RU Foundry’s financial statements indicated that RU Foundry did not in fact produce comparable merchandise. Confronted with financial statements containing “irreconcilable contradictions as to what merchandise RU Foundry actually produces and sells,”  — which was actually beverages rather than metal, Commerce chose not to use the RU Foundry financial statements for the Final Results. The court therefore agreed with TMM and Defendant that Commerce’s rejection of RU Foundry’s financial statement was reasonable.

As for adverse facts available (“AFA”), US Magnesium argued that Commerce did not consider whether TMM significantly impeded the proceeding by failing to include a complete and accurate translation of a Ukrainian financial statement, and therefore TMM should be given an AFA rate.  despite devoting almost its entire administrative case brief arguing TMM deserved a total AFA rate, US Magnesium could only identify three apparent discrepancies within a single exhibit among the many submitted by TMM.  All US Magnesium submitted to support its argument was a competing translation of the same financial statement.  Thus, the court sustained Commerce’s reasonable decision to refuse to find that TMM impeded the proceeding.

While Commerce selected Philippine HTS 8104.20 (“Magnesium Waste and Scrap”) to value TMM’s scrap input in the preliminary results, it declined to use the Philippine data in the Final results. Philippine scrap surrogate data point exceeded the values of Indonesian, South African, Thai, and Colombian imports under HTS 8104.19, which covered the finished subject merchandise as well as the magnesium TMM used to produce its scrap. The Philippine scrap surrogate data point also exceeded the values of Indonesian, South African, and Thai imports for pure (99.8% or greater) unwrought magnesium under HTS 8104.11. This benchmark data rendered the Philippine scrap values unreasonable. According to Commerce, scrap should not be more valuable than both the subject merchandise and the material used to produce the scrap. Without a usable surrogate value from the primary surrogate country (Philippines), Commerce applied its standard selection criteria (specificity, contemporaneity, public availability, representativeness, and whether prices exclude taxes and duties) to the other available secondary surrogate country data on the administrative record.  US Magnesium instead challenged Commerce’s use of the Serbian HTS 8104.20 data point as an unreasonable departure from past practice. According to US Magnesium, once Commerce “established a benchmark” price, it should have also selected that benchmark price as the surrogate value, i.e., “cap” the scrap value at the benchmark price. US Mag. Br. at 27-31. Thus, US Magnesium argued that Commerce should have selected the Indonesian, South African, Thai, and Colombian HTS 8104.19 data points, either individually or in some combination.

Commerce acknowledged that its recent practice “is to continue to utilize the scrap value in question as the [surrogate value], but to cap this value at the price of the primary product.”  However, Commerce does not use a cap in all instances. If Commerce does “cap” a surrogate scrap value, Commerce uses the cap value in place of the unreasonable scrap surrogate value. As Commerce explained, “because the instant record lack[ed] a value for finished unwrought magnesium from the Philippines from which an appropriate cap may be determined (i.e., Philippine price data for imports of HTS 8104.19),” it was unable to cap the SV in question and must instead look to the other available SV information on the record. This therefore was not a circumstance, as US Magnesium contends, in which Commerce unreasonably departed from past practice, but instead a circumstance in which Commerce attempted to identify the “best available information” for TMM’s scrap surrogate given a lack of available usable data from the primary surrogate country. 19 U.S.C. § 1677b(c)(1).

US Magnesium also argued that Commerce failed to explain why imports under Serbian HTS are specific to TMM’s scrap, which, according to US Magnesium, was a necessary finding because that provision is a basket category that may include imports of lower-quality and lower-priced scrap.  If US Magnesium believed Serbian HTS 8104.20 was a poor choice, US Magnesium should have developed the administrative record with information substantiating its inference that the Serbian scrap provision contains lots of low-quality, non-comparable scrap.  Because Commerce provided a reasonable explanation for its selection criteria, as well as for its reasons not to use a cap, the court sustained Commerce’s selection of Serbian HTS 8104.20 to value TMM’s scrap input.