U.S. Court of Appeals for the Federal Circuit, Uttam Galva Steels Ltd. v. United States, AK Steel Corp., California Steel Industries, Inc., ArcelorMittal USA LLC, Steel Dynamics, Inc., United States Steel Corp., Nucor Corp., Docket No. 2020-1461

 

Customs

Import Export

Dumping

Normal Value

Constructed Value

Export Price

Duty Drawback Adjustment

Dumping Margin

Antidumping Duties

 

 

 

Appeal from the United States Court of International Trade in No. 1:16-cv-00162-JCG.

 

This appeal arises out of an antidumping duty investigation by the United States Department of Commerce concerning certain corrosion-resistant steel products from India. Following two remands, the United States Court of International Trade (Trade Court) sustained Commerce’s determination that granted Uttam Galva Steels Ltd. a duty drawback adjustment under 19 U.S.C. §1677a(c)(1)(B) that resulted in no dumping margin. Defendants-Appellants ArcelorMittal USA LLC, Steel Dynamics, Inc., United States Steel Corp., and Nucor Corp. appeal, challenging the propriety of the Trade Court’s first remand to Commerce and arguing that Commerce’s original determination should be reinstated. We affirm.

 

As this court has explained, “dumping occurs when a foreign firm sells a product in the United States at a price lower than the product’s normal value.” Home Prods. Int’l, Inc. v. United States, 633 F.3d 1369, 1372 (Fed. Cir. 2011). By statute, Commerce must impose antidumping duties on imported goods that are being sold, or are likely to be sold, in the United States at a less than fair value in a way that injures the domestic industry in the United States. 19 U.S.C. § 1673. Commerce determines a respondent’s dumping margin by calculating the amount by which normal value exceeds export price (U.S. price) or constructed export price. Id. Normal value is generally calculated to be “the price at which the foreign like product is first sold . . . for consumption in the exporting country.” 19 U.S.C. § 1677b(a)(1)(B)(i). To determine normal value, Commerce will disregard sales made at less than the respondent’s cost of production. Id. § 1677b(b)(1). Cost of production constitutes (1) the cost of manufacture; (2) “selling, general, and administrative expenses”; and (3) packaging expenses. Id. § 1677b(b)(3). If there are no sales in the exporting country that remain after removing the sales below cost of production, then Commerce will base normal value on the constructed value of the subject merchandise. Id. § 1677b(b)(1). Constructed value is essentially the cost of production plus profit. See id. § 1677b(e). Export price is typically calculated to be the price at which the subject products are first sold to an unaffiliated purchaser in the United States. Id. § 1677a(a). Constructed export price is “the price at which the subject merchandise is first sold . . . in the United States . . . by or for the account of the producer or exporter of such merchandise or by a seller affiliated with the producer or exporter, to a purchaser not affiliated with the producer or exporter.” Id. § 1677a(b). The export price is subject to several possible adjustments. Id. § 1677a(c).

 

One such adjustment is the “duty drawback adjustment,” which is at issue here. This adjustment involves duties paid or owed on imports (e.g., raw materials) to the home-market country that produces the goods for export to the United States (the country of exportation). Saha Thai Steel Pipe (Pub.) Co. v. United States, 635 F.3d 1335, 1340–41 (Fed. Cir. 2011). The import duties on the inputs used to produce home-market goods increase the normal value. The statute provides that the duty drawback adjustment requires an increase to U.S. price, stating that

the price used to establish export price and constructed export price shall be . . . increased by . . . the amount of any import duties imposed by the country of exportation which have been rebated, or which have not been collected, by reason of the exportation of the subject merchandise to the United States. 19 U.S.C. § 1677a(c)(1)(B).

 

In Saha Thai, we held that Commerce may appropriately adjust normal value to include “exempted duties in cost of production and constructed value” when making the duty drawback adjustment in situations in which “it would be illogical to increase export price to account for import duties that are purportedly reflected in normal value, while simultaneously calculating normal value based on a cost of production and constructed value that do not reflect those import duties.” 635 F.3d at 1342–43.

 

The question here is whether Commerce’s initial duty drawback methodology complied with 19 U.S.C. § 1677a(c)(1)(B).

 

Historically, Commerce, in calculating drawback duty adjustments, attributed all of a respondent’s reported duty drawbacks to U.S. sales. In other words, Commerce took the respondent’s reported duty drawbacks and divided that reported amount by the respondent’s total number of subject U.S. exports, attributing to each U.S. export its share of the duty drawback. Here, in initially calculating Uttam’s duty drawback adjustment, Commerce departed from this historical practice. Its new methodology allocated the import duties exempted or rebated “based on the import duty absorbed into, or imbedded in, the overall cost of producing the merchandise under consideration.” J.A. 6043. The effect was to attribute some portion of the duty drawbacks to home market sales and another portion to U.S. exports, rather than attributing the whole amount to U.S. exports. Commerce explained that it needed to change its methodology because certain respondents, such as Uttam, “sourced a material input from both domestic and foreign suppliers,” which might “result in an imbalance in the comparison of export price or constructed export price with normal value.” J.A. 6043. Uttam appealed the Final Determination to the Trade Court.

 

We explained the statute’s purpose in our decision in Saha Thai:

The purpose of the duty drawback adjustment is to account for the fact that the producers remain subject to the import duty when they sell the subject merchandise domestically, which increases home market sales prices and thereby increases normal value. That is, when a duty drawback is granted only for exported inputs, the cost of the duty is reflected in normal value but not in export price. The statute corrects this imbalance, which could otherwise lead to an inaccurately high dumping margin, by increasing export price to the level it likely would be absent the duty drawback. 635 F.3d at 1338. In effect, the duty drawback adjustment constitutes an increase to the U.S. price because the producer receives additional revenue attributable to its U.S. sales by reason of the duty drawback.

 

In the challenged methodology, Commerce allocated Uttam’s duty drawback adjustment between exported goods and home-market goods, which lessened Uttam’s overall duty drawback adjustment to export price. There is no basis for doing so. The statute provides that the price used to establish export price and constructed export price shall be . . . increased by . . . the amount of any import duties imposed by the country of exportation which have been rebated, or which have not been collected, by reason of the exportation of the subject merchandise to the United States. 19 U.S.C. § 1677a(c)(1)(B). The duty drawback statute requires an adjustment to “export price” based on the full extent of the duty drawback. It does not impose an additional requirement that the respondent trace particular imported goods to U.S. exports.

 

It does not make a difference whether the imported inputs that qualified for a drawback were actually incorporated into goods sold in the exporter’s domestic market because the Indian government credited the drawback to the quantity of goods that were in fact exported, whatever the source of the inputs used to produce foreign goods. As its text makes clear, the statute requires an upward adjustment to “export price and constructed export price” based on the drawback that occurred “by reason of the exportation of the subject merchandise to the United States.” Id. § 1677a(c)(1)(B). The entire drawback was allowed “by reason of the exportation.” Id.

 

The judgment of the Trade Court is affirmed.

 

 

(U.S. Court of Appeals for the Federal Circuit, May 14, 2021, Uttam Galva Steels Ltd. v. United States, AK Steel Corp., California Steel Industries, Inc., ArcelorMittal USA LLC, Steel Dynamics, Inc., United States Steel Corp., Nucor Corp., Docket No. 2020-1461)

 

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)