United States Court of International Trade
Commerce’s Determinations Sustained in Cold-Rolled Steel Flat Products Case
In ArcelorMittal USA LLC et al. v. United States, Court No. 16-173, Slip Op. 18-34 (April 3, 2018), Plaintiff ArcelorMittal USA LLC (“ArcelorMittal”), on behalf of itself and plaintiff intervenors AK Steel Corporation, Nucor Corporation, and United States Steel Corporation, challenged Commerce’s final determination in the less than fair value investigation involving imports of certain cold-rolled steel flat products (“cold-rolled steel”) from the Russian Federation (“Russia”). See Certain Cold-Rolled Steel Flat Products From the Russian Federation: Final Determination of Sales at Less Than Fair Value and Final Affirmative Determination of Critical Circumstances, in Part, 81 Fed. Reg. 49,950 (Dep’t Commerce July 29, 2016) (“Final Determination”)
ArcelorMittal argued that: (1) Commerce should have used the date of contract between Novex Trading (Swiss) SA (“Novex”) -- the exporting arm of mandatory respondent Novolipetsk Steel OJSC (known collectively with its affiliates as “NLMK”) -- and its U.S. customers, rather than the date of invoice, as the date of sale in determining the universe of transactions subject to investigation; and (2) Commerce should have relied on NLMK’s 2014 unconsolidated financial statements prepared in accordance with Russian Accounting Standards (“RAS”), rather than its 2014 consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), to calculate NLMK’s financial expense ratio.
The Court sustained both decisions. First because the use of the invoice date was set by regulation, plaintiff had to show why another date of sale should apply as the date of sale in determining the transactions subject to investigation. ArcelorMittal argued that Commerce should have analyzed differences in quantity and accompanying tolerance for each contract rather than on a specification basis. However, the Court was not persuaded by ArcelorMittal where the mill specification sheets appended to each contract were integral to the sale. Thus, these arguments did not rebut the presumption that Commerce use the invoice date as the date of sale.
Second, the 2014 consolidated financial statements were selected because they were prepared with the highest level of consolidation as per Commerce’s longstanding practice, and Commerce determined that the unconsolidated statements were not as accurate. This decision was supported by substantial evidence.
Decisions Regarding Certain New Pneumatic Off-the-Road Tires are Remanded
In Qingdao Qihang Tyre Co., Ltd. et al. v. United States, Consolidated Court No. 16-75, Slip Op. 18-35 (April 4, 2018), plaintiffs contested Certain New Pneumatic Off-the-Road Tires From the People’s Republic of China: Final Results of Antidumping Duty Administrative Review; 2013-2014, 81 Fed. Reg. 23,272 (Int’l Trade Admin. Apr. 20, 2016) (“Final Results”). In the Final Results, Commerce assigned individually-determined weighted-average dumping margins to two groups of Chinese companies: Xuzhou Xugong Tyres Co., Ltd., Armour Rubber Co. Ltd., and Xuzhou Hanbang Tyre Co., Ltd. (collectively, “Xugong”), which Commerce treated as a single entity for purposes of the review; and Qingdao Qihang Tyre Co., Ltd. (“Qihang”). Having selected these exporters/producers of OTR tires as “mandatory” respondents, i.e., respondents it intended to examine individually, Commerce assigned a weighted-average dumping margin of 65.33% to Xugong and a weighted-average dumping margin of 79.86% to Qihang in the Final Results. Id. at 23,273. Commerce assigned a weighted average of these two margins, 70.55%, to respondents that it did not select for individual examination but that Commerce found to have qualified for a “separate rate” based on demonstrated independence from the government of China.
Both Xugong and Qihang claim that Commerce, when determining the export prices or constructed export prices of the sales of their subject merchandise, erred in making deductions for unrefunded value-added tax (“VAT”) incurred in China. Moreover, Commerce’s calculation of a “surrogate” value for one of their production materials, reclaimed rubber, was not supported by substantial evidence. Finally, both contest the method by which Commerce valued foreign inland freight in China.
As for the VAT the Court disagreed with the Department’s interpretation of the current § 1677a(c)(2)(B) to require a margin increase for irrecoverable VAT, which is not supported by the plain meaning of the provision, and also conflicts with the legislative purpose. because irrecoverable VAT would be present in both the price of the foreign like product and the U.S. price, no adjustment to the margin is necessary to achieve tax neutrality. Making an adjustment under these circumstances by reducing the starting price for EP or CEP by the amount of the irrecoverable VAT would be “double-counting” the effect of the irrecoverable VAT, inflating the dumping margin accordingly. In conclusion, Commerce has made downward adjustments to the EP and CEP starting prices for subject merchandise exported by Xugong and Qihang which is an impermissible construction of 19 U.S.C. § 1677a(c)(2)(B), not intended by Congress. Commerce has been ordered to correct this error.
As to Commerce’s finding that its surrogate value for reclaimed rubber was not aberrational, such a finding was unsupported by record evidence, especially where the historic record shows the price of natural higher to be significantly higher than reclaimed rubber. Moreover there is conflicting support that reclaimed rubber is used in production of off-the-road tires because of cost advantages. For example, Commerce acknowledged that the “Thai AUV for reclaimed rubber was approximately two-and-one-half times the median value for this product obtained from import data from most of the other potential surrogate countries.” SlipOp. Pg. 31. Commerce must reconsider that value and reach a new determination.
For inland freight, Xugong and Qihang claim that the surrogate value Commerce applied to foreign inland freight in China, based on data for Thailand, was not supported by record evidence. Because of issues with the data and the distances calculated, the court determines that the findings were not supported by substantial evidence.
The Court did sustain: the use of Thailand as the principal surrogate country; Commerce’s decision to deny Trelleborg’s request as a voluntary respondent; and Commerce’s conclusion that Xugong and Qihang were representative of all exporters and producers in the review. It also sustained the adverse inference and facts otherwise available to Xugong for failing to respond to required questionnaires.
As a result of these reconsiderations, Commerce will recalculate the margins for Xugong and Qihang, also margins assigned to Trelleborg, Full World, and Weihai Zhongwei.
Determinations in Xanthan Gum Reviews Sustained
In Deosen Biochemical Ltd. et. al. v. United States Slip Op. 18-32, Court No. 17-00044, & Deosen Biochemical Ltd. et. al. v. United States Slip Op. 18-33, Court No. 17-00045, the Court reviewed Commerce’s decision to apply adverse facts available (“AFA”) and facts otherwise available (“FA”) against plaintiffs in an antidumping investigation regarding xanthan gum imported from China in two separate periods of review. Mandatory respondent, AHA International Co. Ltd. (“AHA”), was requested to provide documentation relating to any “agreements for sales in the United States” Id. at 3. From these documents, Commerce learned that a major part of AHA’s business was purchasing subject merchandise from Deosen and reselling it to Deosen USA. Commerce delayed publishing its results to investigate this relationship further. Eventually, AHA disclosed a formal agreement with Deosen. Commerce determined that the documents showed “AHA’s sales to Deosen’s U.S. customers were not a legitimate sales process.” Id. at 4. In its final results Commerce determined that AFA should be applied to plaintiffs because they had hindered the investigation by not acting to the best of their ability to comply with a request for information. Commerce applied the China wide rate of 154.07% as a result. For the following reasons the Court sustains Commerce’s determinations in full.
The first issue in the cases was Commerce’s determination to apply the “AFA” against plaintiffs for failing “to cooperate by not acting to the best of their ability to comply with a request for information.” Id. at 5. In order to apply the AFA “the Department must identify a justification for the application of FA and, only then, if there is a determination that a party has not acted to the best of its ability, may Commerce apply AFA.” Id. at 6. The Court said that the formal agreement between the companies was clearly requested by Commerce because the documents laid out an agreement for sale in the US and “should have been produced in response to Commerce’s original questionnaire.” Id. at 8. As such the application of AFA was justified. Next, the Court examined if Commerce could apply the China wide rate. The plaintiff’s argued they were entitled to receive a separate rate. The Court said “AFA permits Commerce to choose from among the options available on the record; that Plaintiffs had established their entitlement to a separate rate as an initial matter did not eliminate the China-wide rate as an option when the Department deemed AFA appropriate.” Id. at 12. As a result, this court sustained Commerce’s chosen China wide rate.