U.S. Court of Appeals for the Federal Circuit, Seah Steel Vina Corp. v. United States Steel Corp., Docket No. 19-1091, J. Wallach

Customs

Import

Export

Antidumping Duties

Non-Market Economy

Hypothetical Market

Surrogate Financial Ratios

(Financial ratios = (1) factory overhead (‘overhead’), (2) selling, general and administrative expenses (‘SG&A’), and (3) profit into the calculation of normal value)

Surrogate Value for Movement Expenses

Surrogate Values for Inland Insurance:

Here: the “freight contract” was an “insurance contract.”

Freight Forwarder Contract

Contract Drafting

B&H Services v. Transportation

Dumping Margin

Constructed Export Price

Unfair Competition

Appeal from the United States Court of International Trade in Nos. 1:14-cv-00224-RWG, 1:14-cv-00259-RWG, Senior Judge Richard W. Goldberg.

This opinion was originally filed under seal and has been unsealed in full.

Appellant SeAH Steel VINA Corporation (“SeAH”) sued Appellee the United States (“Government”) in the U.S. Court of International Trade (“CIT”), challenging the U.S. Department of Commerce’s (“Commerce”) final determination of an antidumping duty investigation covering certain oil country tubular goods (“OCTG”) from the Socialist Republic of Vietnam (“Vietnam”). See Certain Oil Country Tubular Goods From the Socialist Republic of Vietnam, 79 Fed. Reg. 41,973, 41,973 (July 18, 2014) (final determination) (“Final Determination”), as amended by Certain Oil Country Tubular Goods From the Socialist Republic of Vietnam, 79 Fed. Reg. 53,691 (Sept. 10, 2014) (order and amended final determination). The CIT remanded the case twice to Commerce, SeAH Steel VINA Corp. v. United States (SeAH I), 182 F. Supp. 3d 1316, 1345 (Ct. Int’l Trade 2016); SeAH Steel VINA Corp. v. United States (SeAH II), 269 F. Supp. 3d 1335, 1365 (Ct. Int’l Trade 2017), and sustained Commerce’s second redetermination on remand, see SeAH Steel VINA Corp. v. United States (SeAH III), 332 F. Supp. 3d 1314, 1318 (Ct. Int’l Trade 2018) (Opinion and Order); see also J.A. 3011–46 (Redetermination II); J.A. 2942–69 (Redetermination I).

SeAH appeals. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(5) (2012). We affirm-in-part, reverse-in-part, and remand.

(…) Becton Dickinson & Co. v. C.R. Bard, Inc., 922 F.2d 792, 800 (Fed. Cir. 1990) (“We see no reason to depart from the sound practice that an issue not raised by an appellant in its opening brief . . . is waived.”).

Antidumping duties may be imposed on “foreign merchandise” that “is being, or is likely to be, sold in the United States at less than its fair value.” 19 U.S.C. § 1673 (2012). Antidumping duties are a trade remedy “imposed to protect domestic industries against unfair trade practices.” Canadian Wheat Bd. v. United States, 641 F.3d 1344, 1351 (Fed. Cir. 2011). Domestic industries may seek “relief from imports that are sold in the United States at less than fair value,” Allegheny Ludlum Corp. v. United States, 287 F.3d 1365, 1368 (Fed. Cir. 2002), by filing a petition with Commerce and the U.S. International Trade Commission (“ITC”) to initiate an antidumping duty investigation, see 19 U.S.C. §§ 1673a(b), 1677(9)(C). Following investigation, if Commerce determines that imported merchandise “is being, or is likely to be, sold in the United States at less than its fair value,” id. § 1673(1), and the ITC determines that the importation or sale of that merchandise has “materially injured” or “threatens” to “materially injure” an industry in the United States, id. § 1673(2), then Commerce will “publish an antidumping duty order . . . directing U.S. Customs and Border Protection to assess . . . antidumping duties” on subject merchandise, id. § 1673e(a)(1).

Commerce “determines the estimated weighted average dumping margin for each exporter and producer individually investigated” and “the estimated all-others rate for all exporters and producers not individually investigated.” Id. § 1673d(c)(1)(B)(i). A dumping margin reflects the amount by which the “‘normal value’ (the price a producer charges in its home market) exceeds the ‘export price’ (the price of the product in the United States) or ‘constructed export price.’” U.S. Steel Corp. v. United States, 621 F.3d 1351, 1353 (Fed. Cir. 2010) (footnote omitted) (citing 19 U.S.C. § 1677(35)(A)); see 19 U.S.C. §§ 1677b(a)(1) (defining “normal value” as “the price at which the merchandise is first sold . . . for consumption” in the home country or third country), 1677a(b) (defining “constructed export price” as “the price at which the subject merchandise is first sold . . . in the United States” to “a purchaser not affiliated with the producer or exporter”).

If Commerce finds that the exporting country is a “non-market economy” (“NME”) country and “that available information does not permit the normal value of the subject merchandise to be determined under § 1677b(a),” then Commerce calculates normal value using surrogate values for the “factors of production” in a comparable “market economy country.” Id. § 1677b(c)(1). Further, “because firms have ‘general expenses and profits’ not traceable to a specific product, in order to capture these expenses and profits, Commerce must factor surrogate values for (1) factory overhead (‘overhead’), (2) selling, general and administrative expenses (‘SG&A’), and (3) profit into the calculation of normal value”—that is, the respondent’s “financial ratios.” Dorbest Ltd. v. United States, 462 F. Supp. 2d 1262, 1300 (Ct. Int’l Trade 2006) (quoting 19 U.S.C. § 1677b(c)(1)). Commerce may, similarly, adjust export price or constructed export price using surrogate values for “movement expenses.” Prelim. I&D Memo at 10– 11; see 19 U.S.C. § 1677a(c)(2)(A) (instructing Commerce to adjust constructed export price by, inter alia, “the amount . . . attributable to any additional costs, charges, or expenses . . . incident to bringing the subject merchandise from the original place of shipment in the exporting country to the place of delivery in the United States”); Fine Furniture (Shanghai) Ltd. v. United States, 182 F. Supp. 3d 1350, 1368 (Ct. Int’l Trade 2016) (explaining that Commerce will use “a surrogate value for movement expenses” for NME respondents).

In selecting surrogate values, Commerce “attempts to construct a hypothetical market value of the subject merchandise in the NME.” Downhole Pipe & Equip., L.P. v. United States, 776 F.3d 1369, 1375 (Fed. Cir. 2015). Commerce’s surrogate value determinations must “be based on the best available information regarding the values of relevant factors in a market economy country or countries.” 19 U.S.C. § 1677b(c)(1); see id. § 1677b(a) (providing that Commerce constructs the “normal value” “to achieve a fair comparison with the export price”). “Commerce has broad discretion to determine” what constitutes “the best available information,” as this term “is not defined by statute.” QVD Food Co. v. United States, 658 F.3d 1318, 1323 (Fed. Cir. 2011). Commerce “generally selects, to the extent practicable, surrogate values that are publicly available, are product-specific, reflect a broad market average, and are contemporaneous with the period of review.” Qingdao Sea–Line Trading Co. v. United States, 766 F.3d 1378, 1386 (Fed. Cir. 2014).

(…) Commerce’s selection of Bhushan for surrogate financial ratios Is supported by substantial evidence and otherwise in accordance with law.

In its Final Determination, Commerce selected Welspun’s, not Bhushan’s, financial records as the “best available information on the record” for SeAH’s surrogate financial ratios. J.A. 2206; see J.A. 2205–06 (selecting Welspun as “a producer of OCTG,” with the closest available “production processes” to SeAH and a “financial statement that is contemporaneous, publically available, and evidences no receipt of countervailable subsidies”). However, following voluntary remand and the submission of additional evidence, Commerce found that there was “insufficient evidence to conclude that Welspun is actually a producer of OCTG.” J.A. 2962. Commerce determined that Bhushan, a company it had previously disqualified because “its production process was not sufficiently similar” to SeAH, was acceptable because there was “no superior option . . . available on the record.” J.A. 2963–64; see J.A. 2205 (disqualifying Bhushan, in the Final Determination, “because its production process is not sufficiently similar to SeAH’s”). Commerce explained that Bhushan was the “best available information on the record” because “Bhushan produces OCTG and their financial statements are publicly available and contemporaneous with the period of investigation (‘POI’).” J.A. 2964. The CIT sustained this determination as a “reasonable exercise of Commerce’s wide discretion to choose from among imperfect options.” SeAH II, 269 F. Supp. 3d at 1350 (internal quotation marks omitted).

Substantial evidence supports Commerce’s determination that Bhushan’s financial statements are the best available information on the record to calculate SeAH’s surrogate financial ratios. Commerce found that Bhushan, unlike the other available options, “produced identical merchandise” to SeAH, and further, that Bhushan has “financial statements that are publicly available and contemporaneous with the POI.” J.A.2964. Under the circumstances, this is sufficient. See Qingdao Sea–Line, 766 F.3d at 1386 (“Commerce generally selects, to the extent practicable, surrogate values that are publicly available, are product-specific, reflect a broad market average, and are contemporaneous with the period of review.”). Commerce acted in keeping with its “practice . . . to use, whenever possible, the financial statement of a producer of identical merchandise.” J.A. 2962; see J.A. 2204 (explaining that Commerce’s “preference for using the financial statements of producers of identical merchandise is especially strong here because of the unique nature of OCTG among the wide range of pipe products . . . specifically it is among the most expensive and profitable”); see also 19 C.F.R. § 351.408(c)(4) (2013) (providing that, to value surrogate financial ratios, Commerce “normally will use non-proprietary information gathered from producers of identical or comparable merchandise in the surrogate country”). Accordingly, substantial evidence supports Commerce’s selection of Bhushan’s financial statements as the best available information on the record. See Ad Hoc Shrimp Trade Action Comm. v. United States, 618 F.3d 1316, 1322 (Fed. Cir. 2010) (“Commerce has broad discretion to determine the best available information.”).

Commerce’s Use and Selection of Surrogate Values for Inland Insurance Is Supported by Substantial Evidence and Otherwise in Accordance with Law.

In its Final Determination, Commerce did not “deduct a surrogate value from SeAH’s constructed export price to represent domestic inland insurance.” J.A. 2227. Commerce reasoned that, while the record included a contract between SeAH and a freight forwarder (“the Freight Forwarder Contract”) that suggested the freight forwarder had provided inland insurance, this did not “constitute an ‘insurance contract’ that would require a separate surrogate value” because “it is not uncommon for freight forwarders to bear the risk of loss on the shipments they handle.” J.A. 2227. (…) On remand, Commerce found that, because SeAH’s contract with its freight forwarder “includes language to insure SeAH against ‘any accidental or any damage to cargoes’ for the full amount of the invoice,” the “freight contract” was an “insurance contract.” J.A. 2957. Accordingly, Commerce “included a surrogate value for domestic inland insurance in its revised margin calculations.” J.A. 2957. Commerce used the only “available surrogate value source” on the record, the inland insurance value of Agro Dutch, a preserved mushroom producer, with some adjustment for inflation, since the value was from 2004–2005. J.A. 2958.

Substantial evidence supports Commerce’s determination that SeAH’s Freight Forwarder Contract included domestic inland insurance separate from transportation costs. The express terms of SeAH’s Freight Forwarder Contract included an insurance clause with fees for cargo safety. J.A. 705 (providing that “if there is any accident or any damage to cargoes the freight forwarder has responsibility to compensate to SeAH 100% of the invoice amount”); J.A. 705–06 (providing that agreed price included both “transportation charge from SeAH’s factory to port” and “fees for cargo’s safety”). Accordingly, Commerce’s decision to account for such fees in its export price determination is supported by substantial evidence.

SeAH further argues that, in selecting surrogate values, “Commerce was required to determine the cost in India of an agreement in which a carrier undertook to transport merchandise and to bear the cost of any losses during transport” and that Commerce’s finding any additional cost “is directly contrary to Indian law.” Appellant’s Br. 45–46. This, however, misapprehends what Commerce was required to do. Commerce was required to “construct a hypothetical market value of SeAH’s product” using surrogate values, Downhole Pipe, 776 F.3d at 1375 (internal quotation marks and citation omitted), not a hypothetical price using surrogate laws, see Nation Ford, 166 F.3d at 1377 (“A surrogate value must be as representative of the situation in the NME country as is feasible.” (internal quotation marks and citation omitted)); id. at 1378 (“There is no reason . . . to incorporate the distortions in the surrogate market into a hypothetical respondent market.”). Accordingly, Commerce’s inclusion of a separate surrogate value for inland insurance is supported by substantial evidence and otherwise in accordance with law.

(…) Second, Commerce concluded that “it is appropriate to value B&H on a weight basis because this basis reflects SeAH’s own service contract”; specifically, SeAH’s Freight Forwarder Contract “provides evidence that SeAH itself paid certain B&H charges on a weight basis.” J.A. 3026. SeAH’s Freight Forwarder Contract provided both prices per container and ton. J.A. 705 (providing “price of container” for forty foot and forty-five foot containers and “price of bulk cargoes” by “ton”). These prices were meant to include customs clearance, J.A. 706, and other services that, according to Commerce, “clearly . . . include document preparation,” J.A. 3040; see J.A. 705 (providing for “arranging and finishing Customs Declaration, clearing customs at port, customs inspection” and “paying port charges and any kind of fees that relate to port formalities”). However, the prices per ton for bulk cargo also expressly provide that they are for “transport from SeAH” to regional ports, with price varying by destination, suggesting those fees are for transport (i.e., freight forwarding). J.A. 705; see CS Wind, 971 F. Supp. 2d at 1295 (“Common sense indicates that a half-full, twenty-foot container would incur the same document preparation expenses as a full twenty-foot container of a single type of good.”). The contract does not otherwise explain why or when per container or per ton price might be charged. See J.A. 704–06. Commerce conceded that SeAH’s Freight Forwarder Contract “does not show how a Vietnamese company would charge for B&H services separate from transportation,” but states that the contract is nonetheless “adequate to show that B&H costs can be incurred on a weight basis in Vietnam.” J.A. 3040; see Gov’t’s Br. 20 (arguing that Commerce “reasonably determined that B&H costs should be allocated by weight” because record evidence “indicates that SeAH’s costs are or could be allocated by weight”). While “the burden of creating an adequate record lies with interested parties,” QVD Food, 658 F.3d at 1324, Commerce must, nonetheless, support its decision with substantial evidence, Downhole Pipe, 776 F.3d at 1374; see China Nat’l Arts & Crafts Imp. & Exp. Corp. v. United States, 771 F. Supp. 407, 413 (Ct. Int’l Trade 1991) (“Guesswork is no substitute for substantial evidence in justifying decisions.”). Commerce has failed to do so here. See CS Wind, 971 F. Supp. 2d at 1295 (finding Commerce’s by-weight B&H allocation methodology unsupported by substantial evidence where “Commerce has failed to explain why document preparation and customs clearance costs, as opposed to other B&H fees, would change depending on the size or weight of the shipment”). Substantial evidence “must do more than create a suspicion of the existence of the fact to be established.” NLRB v. Columbian Enameling & Stamping Co., 306 U.S. 292, 300 (1939).

(…) As the CIT has already explained, we understand “that Commerce commonly converts all surrogate values into a per kilogram amount for use in calculating dumping margins,” however, “its method of doing so here, based on the weight of the containers” is “unsupported by substantial evidence.” DuPont Teijin, 7 F. Supp. 3d at 1351–52; see CS Wind, 971 F. Supp. 2d at 1295.

CONCLUSION

We have considered the parties’ remaining arguments and find them unpersuasive. Accordingly, the Opinion and Order of the U.S. Court of International Trade is affirmed-in-part and reversed-in-part, and the case is remanded.

(U.S. Court of Appeals for the Federal Circuit, February 14, 2020, Seah Steel Vina Corp. v. United States Steel Corp., Docket No. 19-1091, J. Wallach)