SeAH Steel Corporation v. United States

Slip Op. 21-146
UNITED STATES COURT OF INTERNATIONAL TRADE
SEAH STEEL CORPORATION,
Plaintiff,
v.
UNITED STATES,
Defendant,
and
UNITED STATES STEEL
CORPORATION, MAVERICK
TUBE CORPORATION, IPSCO
TUBULARS INC., TENARIS BAY
CITY, INC., and VALLOUREC
STAR L.P.,
Defendant-Intervenors.
Before: Jennifer Choe-Groves, Judge
Court No. 20-00150
OPINION AND ORDER
[Sustaining in part and remanding in part the U.S. Department of Commerce’s
final results in the 2017–2018 administrative review of the antidumping duty order
on oil country tubular goods from the Republic of Korea.]
Dated: October 19, 2021
Jeffrey M. Winton, Michael J. Chapman, Amrietha Nellan, and Vi N. Mai, Winton
& Chapman PLLC, of Washington, D.C., for Plaintiff SeAH Steel Corporation.
Hardeep K. Josan, Trial Attorney, Commercial Litigation Branch, Civil Division,
U.S. Department of Justice, of New York, N.Y., for Defendant United States.
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With her on the brief were Brian M. Boynton, Acting Assistant Attorney General,
Jeanne E. Davidson, Director, and Claudia Burke, Assistant Director. Of counsel
on the brief was Mykhaylo Gryzlov, Senior Counsel, Office of the Chief Counsel
for Trade Enforcement and Compliance, U.S. Department of Commerce, of
Washington, D.C.
Thomas M. Beline, Myles S. Getlan, James E. Ransdell, and Nicole Brunda,
Cassidy Levy Kent (USA) LLP, of Washington, D.C., for Defendant-Intervenor
United States Steel Corporation.
Gregory J. Spak, Frank J. Schweitzer, Kristina Zissis, and Matthew W. Solomon,
White & Case LLP, of Washington, D.C., for Defendant-Intervenors Maverick
Tube Corporation, IPSCO Tubulars Inc., and Tenaris Bay City, Inc.
Choe-Groves, Judge: Plaintiff SeAH Steel Corporation (“SeAH” or
“Plaintiff”) filed this action challenging the final results published by the U.S.
Department of Commerce (“Commerce”) in the 2017–2018 administrative review
of the antidumping duty order on oil country tubular goods (“OCTG”) from the
Republic of Korea (“Korea”). See Certain Oil Country Tubular Goods from the
Republic of Korea (“Final Results”), 85 Fed. Reg. 41,949 (Dep’t of Commerce
July 13, 2020) (final results of antidumping duty administrative review; 2017–
2018); see also Issues and Decision Mem. for the Final Results of the 2017–2018
Admin. Review of the Antidumping Duty Order on Certain Oil Country Tubular
Goods from the Republic of Korea (July 6, 2020) (“Final IDM”), ECF No. 20-5.
Before the Court is the Motion of Plaintiff SeAH Steel Corporation for Judgment
on the Agency Record, ECF Nos. 43, 44. See also Br. SeAH Steel Corp. Supp. Its
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Rule 56.2 Mot. J. Agency R. (“SeAH’s Br.”), ECF Nos. 43-1, 44-1. For the
following reasons, the Court sustains in part and remands in part the Final Results.
ISSUES PRESENTED
The Court reviews the following issues:
1. 	Whether Commerce’s application of a differential pricing analysis in
calculating SeAH’s dumping margin is in accordance with the law;
2. 	Whether Commerce’s determination that a particular market situation
existed during the period of review in Korea is supported by
substantial evidence;
3. 	Whether Commerce’s regression-based particular market situation
adjustment is supported by substantial evidence;
4. 	Whether Commerce’s calculation of constructed value profit and
selling expenses is supported by substantial evidence;
5. 	Whether Commerce’s calculation of constructed export price profit is
in accordance with the law; and
6. 	Whether Commerce’s exclusion of freight revenue in calculating
SeAH’s constructed export price is in accordance with the law.
BACKGROUND
Commerce initiated this fourth administrative review (“OCTG IV”) of the
antidumping duty order on OCTG from Korea for the period covering September
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1, 2017 through August 31, 2018. Initiation of Antidumping and Countervailing
Duty Admin. Reviews, 83 Fed. Reg. 57,411, 57,413–14 (Dep’t of Commerce Nov.
15, 2018) (initiation notice). Commerce selected Hyundai Steel Company
(“Hyundai Steel”) and SeAH as mandatory respondents for individual
examination. Certain Oil Country Tubular Goods from the Republic of Korea, 84
Fed. Reg. 63,615, 63,615 (Dep’t of Commerce Nov. 18, 2019) (prelim. results of
antidumping duty admin. review; 2017–2018); see also Decision Mem. for the
Prelim. Results of the 2017–2018 Admin. Review of the Antidumping Duty Order
on Certain Oil Country Tubular Goods from the Republic of Korea (Nov. 8, 2019)
(“Prelim. DM”), PR 285. 1
In the Final Results, Commerce assigned weighted-average dumping
margins of 0% for Hyundai Steel, 3.96% for SeAH, and 3.96% for non-examined
companies. Final Results, 85 Fed. Reg. at 41,950. Commerce based normal value
on constructed value for Hyundai Steel and SeAH because neither mandatory
respondent had a viable home market or third-country market during the period of
review. Final IDM at 68.
1 Citations to the administrative record reflect the public record (“PR”) document
numbers.
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Commerce applied a differential pricing analysis and calculated SeAH’s
weighted-average duty margin by the alternative average-to-transaction method.
Id. at 79–91. Commerce determined that a particular market situation existed in
Korea based on a totality-of-the-circumstances assessment of five factors, namely:
(1) subsidies from the Government of Korea to producers of hot-rolled coil, (2) the
deluge of Chinese hot-rolled products exerting downward pressure on Korean
domestic hot-rolled coil prices, (3) strategic alliances between Korean hot-rolled
coil suppliers and Korean OCTG producers, (4) the Government of Korea’s
influence over the cost of electricity, and (5) steel industry restructuring efforts by
the Government of Korea. See id. at 5–6. Commerce used a regression-based
analysis to quantify the impact of the particular market situation in Korea and
adjusted for the particular market situation determination by increasing the
reported hot-rolled coil costs by a rate of 17.13%. See id. at 49, 61; Final
Calculations Mem. – SeAH Steel Corp. (July 6, 2020) (“SeAH Final Calculations
Mem.”) at 2, PR 350. Commerce utilized the 2018 financial statements of Tenaris
S.A. (“Tenaris”) and PAO TMK (“TMK”) to calculate SeAH’s constructed value
profit and selling expenses. See Final IDM at 67. Commerce deducted SeAH’s
reported freight revenue up to actual freight cost and calculated SeAH’s
constructed export price profit rate using the Tenaris and TMK 2018 financial
statements. See id. at 106, 109–11; see also Analysis of Data Submitted by SeAH
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Steel Corp. for Prelim. Results (Nov. 8, 2019) (“SeAH Prelim. Calculations
Mem.”) at 3, PR 290.
JURISDICTION AND STANDARD OF REVIEW
The Court has jurisdiction under 19 U.S.C. § 1516a(a)(2)(B)(iii) and 28
U.S.C. § 1581(c), which grant the Court authority to review actions contesting the
final results of an administrative review of an antidumping duty order. The Court
shall hold unlawful any determination found to be unsupported by substantial
evidence on the record or otherwise not in accordance with the law. 19 U.S.C.
§ 1516a(b)(1)(B)(i).
DISCUSSION
I. 	Statutory Framework
Commerce determines antidumping duties by calculating the amount by
which the normal value of subject merchandise exceeds the export price or the
constructed export price for the merchandise. Id. § 1673. When reviewing
antidumping duties in an administrative review, Commerce must determine: (1) the
normal value and export price or constructed export price of each entry of the
subject merchandise, and (2) the dumping margin for each such entry. Id.
§ 1675(a)(1)(B), (a)(2)(A). The statute dictates the steps by which Commerce may
calculate normal value “to achieve a fair comparison” with export price or
constructed export price. Id. § 1677b(a).
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Commerce normally determines dumping margins “by comparing the
weighted average of the normal values to the weighted average of the export prices
(and constructed export prices) for comparable merchandise” or “by comparing the
normal values of individual transactions to the export prices (or constructed export
prices) of individual transactions for comparable merchandise.” See id. § 1677f-
1(d)(1)(A)(i)–(ii); JBF RAK LLC v. United States, 790 F.3d 1358, 1364–65 (Fed.
Cir. 2015). Commerce may “compar[e] the weighted average of the normal values
to the export prices (or constructed export prices) of individual transactions for
comparable merchandise,” if two statutory conditions are met: “there is a pattern of
export prices (or constructed export prices) for comparable merchandise that differ
significantly among purchasers, regions, or periods of time,” and “[Commerce]
explains why such differences cannot be taken into account using a method
described in paragraph (1)(A)(i) or (ii).” 19 U.S.C. § 1677f-1(d)(1)(B).
If Commerce cannot determine the normal value of the subject merchandise
based on home market sales, then Commerce may use qualifying third-country
sales or constructed value as a basis for normal value. Id. § 1677b(a)(4),
(a)(1)(B)(ii), (b)(1). Constructed value represents: (1) the cost of materials and
fabrication or other processing of any kind used in producing the merchandise;
(2) the actual amounts incurred and realized for selling, general, and administrative
expenses, and for profits, in connection with the production and sales of a foreign
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like product, in the ordinary course of trade, for consumption in the foreign
country; and (3) the cost of packing the subject merchandise. Id. § 1677b(e).
When calculating constructed value, if Commerce determines that a particular
market situation exists “such that the cost of materials and fabrication or other
processing of any kind does not accurately reflect the cost of production in the
ordinary course of trade, [then] [Commerce] may use . . . any other calculation
methodology.” Id. The statute directs Commerce to calculate cost of production
and constructed value “based on the records of the exporter or producer of the
merchandise, if such records are kept in accordance with the generally accepted
accounting principles of the exporting country (or the producing country, where
appropriate) and reasonably reflect the costs associated with the production and
sale of the merchandise.” Id. § 1677b(f)(1)(A).
When Commerce is required to calculate constructed value for a respondent,
Commerce must utilize the respondent’s actual selling, general, and administrative
expenses and profits from the home market or a third-country market. Id.
§ 1677b(e)(2)(A). If those data are unavailable, the statute provides Commerce
with three alternatives:
(i) 	the actual amounts incurred and realized by the specific exporter
or producer being examined in the investigation or review for
selling, general, and administrative expenses, and for profits, in
connection with the production and sale, for consumption in the
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foreign country, of merchandise that is in the same general
category of products as the subject merchandise,
(ii) 	the weighted average of the actual amounts incurred and realized
by exporters or producers that are subject to the investigation or
review (other than the exporter or producer described in clause
(i)) for selling, general, and administrative expenses, and for
profits, in connection with the production and sale of a foreign
like product, in the ordinary course of trade, for consumption in
the foreign country, or
(iii) 	the amounts incurred and realized for selling, general, and
administrative expenses, and for profits, based on any other
reasonable method, except that the amount allowed for profit
may not exceed the amount normally realized by exporters or
producers (other than the exporter or producer described in
clause (i)) in connection with the sale, for consumption in the
foreign country, of merchandise that is in the same general
category of products as the subject merchandise.
Id. § 1677b(e)(2)(B).
The statute also dictates the steps by which Commerce is to calculate export
price or constructed export price (collectively, “U.S. price”). Export price is:
the price at which the subject merchandise is first sold (or agreed to be
sold) before the date of importation by the producer or exporter of the
subject merchandise outside of the United States to an unaffiliated
purchaser in the United States or to an unaffiliated purchaser for
exportation to the United States,
subject to certain adjustments. Id. § 1677a(a). Constructed export price is:
the price at which the subject merchandise is first sold (or agreed to be
sold) in the United States before or after the date of importation 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,
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subject to certain adjustments. Id. § 1677a(b). The price used to calculate export
price and constructed export price is reduced by selling expenses, further
manufacturing expenses, and the profit allocated to these expenses. Id. § 1677a(d).
II. 	Differential Pricing Analysis
Commerce determined that the results of the differential pricing analysis
justified using the alternative average-to-transaction methodology to calculate
SeAH’s dumping margin. See Final IDM at 79. SeAH argues that Commerce was
required to support with substantial evidence its determination to apply the
differential pricing analysis and the relevant numerical thresholds, but Commerce
failed to do so. SeAH’s Br. at 36–38. SeAH contends that Commerce’s
application of the Cohen’s d test to the non-normal distribution of SeAH’s U.S.
sales was unreasonable. Id. at 38–43.
Commerce ordinarily uses an average-to-average (“A-to-A”) comparison of
“the weighted average of the normal values [of subject merchandise] to the
weighted average of the export prices (and constructed export prices) for
comparable merchandise” when calculating a dumping margin. See 19 U.S.C.
§ 1677f-1(d)(1)(A)(i); 19 C.F.R. § 351.414(c)(1). The statute allows Commerce to
depart from using the A-to-A methodology and instead use an average-to-
transaction (“A-to-T”) comparison of the weighted average of normal values to the
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export prices and constructed export prices of individual transactions for
comparable merchandise when: (1) Commerce observes “a pattern of export prices
(or constructed export prices) for comparable merchandise that differ significantly
among purchasers, regions, or periods of time;” and (2) “[Commerce] explains
why such differences cannot be taken into account using [the A-to-A
methodology].” 19 U.S.C. § 1677f-1(d)(1)(B)(i)–(ii). In contrast to the A-to-A
method, which may mask dumped sales at low prices by averaging them with sales
at higher prices, the A-to-T method allows Commerce “to identify a merchant who
dumps the product intermittently—sometimes selling below the foreign market
value and sometimes selling above it.” Apex Frozen Foods Priv. Ltd. v. United
States, 862 F.3d 1337, 1341 (Fed. Cir. 2017) (citation and internal quotation marks
omitted). Commerce may apply the alternative A-to-T methodology on the same
basis in administrative reviews as in antidumping investigations. See JBF RAK
LLC, 790 F.3d at 1364–65.
The statute does not set forth the analysis for how Commerce is to identify a
pattern of price differences. See 19 U.S.C. §§ 1677, 1677f-1; see also Apex
Frozen Foods, 862 F.3d at 1346; Dillinger France S.A. v. United States, 981 F.3d
1318, 1325 (Fed. Cir. 2020). The Court affords Commerce deference in
determinations “involv[ing] complex economic and accounting decisions of a
technical nature.” See Fujitsu Gen. Ltd. v. United States, 88 F.3d 1034, 1039 (Fed.
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Cir. 1996) (citation omitted). However, Commerce still “must [] explain
[cogently] why it has exercised its discretion in a given manner.” Motor Vehicle
Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 48 (1983) (citation
omitted).
Commerce applied its two-step differential pricing methodology in this case,
the first step of which was the Cohen’s d test. See Final IDM at 79. The standard
of review for considering Commerce’s differential pricing analysis is
reasonableness. Stupp Corp. v. United States, 5 F.4th 1341, 1353 (Fed. Cir. 2021).
The U.S. Court of Appeals for the Federal Circuit and this Court have held the
steps underlying the differential pricing analysis as applied by Commerce to be
reasonable. See e.g., Mid Continent Steel & Wire, Inc. v. United States, 940 F.3d
662, 670–74 (Fed. Cir. 2019) (discussing zeroing and the 0.8 threshold for the
Cohen’s d test); Apex Frozen Foods Priv. Ltd. v. United States, 40 CIT __, __, 144
F. Supp. 3d 1308, 1314–35 (2016) (discussing application of the A-to-T method,
the Cohen’s d test, the meaningful difference analysis, zeroing, and the “mixed
comparison methodology” of applying the A-to-A method and the A-to-T method
when 33–66% of a respondent’s sales pass the Cohen’s d test), aff’d, 862 F.3d
1337; Apex Frozen Foods Priv. Ltd. v. United States, 862 F.3d 1322 (Fed. Cir.
2017) (affirming zeroing and the 0.5% de minimis threshold in the meaningful
difference test). However, the U.S. Court of Appeals for the Federal Circuit has
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stated that “there are significant concerns relating to Commerce’s application of
the Cohen’s d test . . . in adjudications in which the data groups being compared
are small, are not normally distributed, and have disparate variances.” Stupp, 5
F.4th at 1357.
The Cohen’s d test is “a generally recognized statistical measure of the
extent of the difference between the mean of a test group and the mean of a
comparison group.” Apex Frozen Foods, 862 F.3d at 1342 n.2. The Cohen’s d test
relies on assumptions that the data groups being compared are normal, have equal
variability, and are equally numerous. See Stupp, 5 F.4th at 1357. Applying the
Cohen’s d test to data that do not meet these assumptions can result in “serious
flaws in interpreting the resulting parameter.” See id. at 1358.
In Stupp Corp. v. United States, 5 F.4th 1341 (Fed. Cir. 2021), the U.S.
Court of Appeals for the Federal Circuit remanded Commerce’s use of the Cohen’s
d test for further explanation because the data Commerce used may have violated
the assumptions of normality, sufficient observation size, and roughly equal
variances. Id. at 1357–60. The Court addressed Commerce’s argument that it does
not need to worry about normality because it is using a population instead of a
sample, stating that Commerce’s argument “does not address the fact that
Professor Cohen derived his interpretive cutoffs under the assumption of
normality.” Id.
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SeAH contends that Commerce’s use of the Cohen’s d test was contrary to
well-recognized statistical principles. SeAH’s Br. at 38–40. Specifically, SeAH
argues that the Cohen’s d test can only be used when comparing “random samples
drawn from Normal (i.e., bell-curve shaped) distributions with roughly equal
variance containing a sufficient number of data points.” Id. at 38. SeAH asserts
that Commerce applied the Cohen’s d test to data that lacked normality, a
sufficient number of data points, and equal variances. Id. at 40 (citing SeAH Final
Calculations Mem. Attach. 2). Commerce contends that it chose the Cohen’s d test
“to evaluate the extent to which the prices to a particular purchaser, region, or time
period differ significantly from the prices of all other sales of comparable
merchandise.” Final IDM at 82 (quoting Prelim. DM at 10) (internal quotation
marks omitted). Commerce explained that application of the Cohen’s d test was
appropriate because “the U.S. sales data . . . reported to Commerce constitutes a
population. As such, sample size, sample distribution, and the statistical
significance of the sample are not relevant to Commerce’s analysis.” Id. at 86.
In accordance with the U.S. Court of Appeals for the Federal Circuit’s
decision in Stupp, this Court concludes that use of a population, instead of a
sample, does not negate the assumptions inherent to the Cohen’s d test. The Court
observes that Commerce did not explain whether the data used in its differential
pricing analysis met the assumptions associated with the Cohen’s d test. See Final
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IDM at 86; see also Def.’s Resp. Opp’n Mots. J. Upon Admin. R. (“Def.’s Resp.”)
at 39, ECF No. 52 (“[T]he Court has stated that ‘Commerce has made no finding
that United States prices tend to exhibit a normal distribution’”) (citation omitted).
The Court notes that the data cited by Commerce appear to contain a limited
number of data points and do not indicate whether they exhibit a normal
distribution. See SeAH Final Calculations Mem. Attach. 2. The evidence and
arguments before the Court call into question whether the data Commerce used in
its differential pricing analysis violated the assumptions of normality, sufficient
observation size, and roughly equal variances associated with the Cohen’s d test.
The Court remands for Commerce to further explain whether the limits on the use
of the Cohen’s d test were satisfied or whether those limits need not be observed
when Commerce uses the Cohen’s d test.
III. 	Particular Market Situation Determination
Commerce based normal value for SeAH on constructed value because
SeAH did not have a viable home market or third-country market during the period
of review. Final IDM at 68. In calculating constructed value, Commerce
determined that a particular market situation distorted the cost of production of
OCTG. See id. at 5–6, 26.
SeAH asserts that the record does not support Commerce’s particular market
situation determination. SeAH’s Br. at 5–7. Defendant United States
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(“Defendant”) responds that record evidence considered in OCTG IV is timely and
supports Commerce’s determination of a particular market situation based on the
cumulative effect of five factors related to the production of OCTG in Korea.
Def.’s Resp. at 4–14.
The Trade Preferences Extension Act amended certain subsections of the
Tariff Act of 1930. See Trade Preferences Extension Act of 2015, Pub. L. No.
114-27, 129 Stat. 362 (2015). When calculating constructed value under the
revised statute, if Commerce determines that a particular market situation exists
“such that the cost of materials and fabrication or other processing of any kind
does not accurately reflect the cost of production in the ordinary course of trade,
[Commerce] may use another calculation methodology under this subtitle or any
other calculation methodology.” 19 U.S.C. § 1677b(e).
In OCTG IV, covering the period from September 1, 2017 through August
31, 2018, Commerce determined that a particular market situation distorted the
cost of production of OCTG based on the cumulative effect of five factors:
(1) subsidization of Korean hot-rolled coil products by the Korean Government;
(2) distortive pricing of unfairly-traded Chinese hot-rolled coil; (3) “strategic
alliances” between Korean hot-rolled coil suppliers and Korean OCTG producers;
(4) distortive government control over electricity prices in Korea; and (5) steel
industry restructuring efforts by the Korean Government. See Final IDM at 5–6.
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Defendant-Intervenors U.S. Steel, Maverick Tube Corporation, Tenaris Bay City,
Inc., IPSCO Tubulars Inc. (formerly TMK IPSCO), Vallourec Star, L.P., and
Welded Tube USA Inc. collectively submitted a particular market situation
allegation letter with 226 attached exhibits. See Domestic Interested Parties’
August 5 Particular Market Situation Submission (Aug. 5, 2019) (“OCTG IV
Allegation”), PR 177–208. The Court observes that Commerce’s examination of
the OCTG IV record overall, with related explanations, does not support
Commerce’s determination that a particular market situation affected the cost of
production of OCTG.
As to the first factor, Commerce determined that subsidies of hot-rolled coil
production by the Government of Korea contributed to a particular market
situation. Final IDM at 31. Commerce supported its determination by citing
record evidence, including: an article in Korea Joongang Daily, dated December
27, 2018, titled “Restructuring to be Continued” (“Korea Joongang Daily Article”);
an article in the Korea Times, dated August 11, 2016, titled “One-Shot Act to Take
Effect” (“Korea Times Article”); an article in Business Korea, dated June 10, 2016,
titled “Korean Government to Assist Steel Industry in Restructuring from August;”
an article in Kallanish Commodities, dated June 13, 2016, titled “Korea’s ‘One
Shot’ Act Supports Steel Restructuring;” an article in Aju Business Daily, dated
November 22, 2016, titled “S. Korea Designates Two More Steel Firms for Fast-
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Track Corporate Restructuring” (“Aju Business Daily Article”); an article in The
Investor, dated November 22, 2016, titled “Gov’t Picks 3 Firms for Fast-Track
Restructuring;” an article in Pulse, dated November 23, 2016, titled “Hyundai
Steel, Dongkuk Steel Become Latest Beneficiaries of Fast-Track Restructuring
Program;” an article in Kallanish Commodities, dated November 23, 2016, titled
“Hyundai, Dongkuk Win ‘One Shot’ Government Approval;” an article in Pulse,
dated September 6, 2016, titled “Korean Gov’t Selects 3 Firms to Benefit from
One-Shot Act;” an article by Yonhap News in the Korean Herald, dated February
28, 2017, titled “5 More Firms Picked for Fast-Track Restructuring Program;” an
article in Kallanish Commodities, dated January 23, 2017, titled “POSCO to Get
Government Aid for BF No. 1;” an article in Market Screener, dated June 12,
2017, titled “POSCO Pohang Blast Furnace No. 3 Is Transformed into a Super-
Large Black Furnace Equipped with Smart Infrastructure;” a press release by the
Ministry of Economy and Finance, dated March 3, 2017, titled “Tenth Ministerial
Meeting on Industrial Restructuring: Government to Pursue Restructuring Beyond
Shipping and Shipbuilding;” a press release by the Ministry of Economy and
Finance, dated January 23, 2019, titled “Sixth Ministerial Meeting on Boosting the
Economy” (“Ministry of Economy and Finance Press Release I”); an article by
Yonhap News, dated September 30, 2016, titled “S. Korea to Induce Steel,
Petrochemical Firms to Cut Output;” a press release by the Ministry of Economy
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and Finance, dated January 25, 2017, titled “9th Ministerial Meeting on Industrial
Restructuring: 2017 Action Plan for Industrial Restructuring” (“Ministry of
Economy and Finance Press Release II”); an article in Business Korea, dated
January 26, 2017, titled “New Plans Released for Revival of Four Industries;” an
article in Business Korea, dated October 25, 2018, titled “South Korean Gov’t
Plans to Inject 300 Bill. Won for Steel Innovation;” a press release by the Ministry
of Economy and Finance, dated December 28, 2018, titled “First Ministerial
Meeting on Boosting the Economy: First Meeting Discussing General Policies of
New Economic Team, as well as 2019 Economic Policies;” a press release by the
Ministry of Economy and Finance, dated March 13, 2019, titled “Tenth Ministerial
Meeting on Boosting the Economy: Government to Promote Private Investment in
Infrastructure;” a press release by the Ministry of Economy and Finance, dated
March 4, 2019, titled “Ninth Ministerial Meeting on Boosting the Economy:
Government to Focus on Boosting Exports;” a press release by the Ministry of
Economy and Finance, dated April 23, 2019, titled “Twentieth Ministerial Meeting
on Industrial Restructuring: Government to Persist with Its Restructuring Policies;”
the Other Factual Information Submission for Valuing Particular Market Situation
in Korea and Respondents’ Constructed Value Profit in Case No. A-580-870;
Hyundai Steel’s Response to Commerce’s New Subsidies Questionnaire in Case
No. C-580-884, dated June 13, 2018 (“Hyundai Steel’s Questionnaire Response”);
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and the final countervailing duty determination in Countervailing Duty
Investigation of Certain Hot-Rolled Steel Flat Products from the Republic of
Korea, 81 Fed. Reg. 53,439 (Dep’t of Commerce Aug. 12, 2016) (final affirmative
determination; 2014), amended by Certain Hot-Rolled Steel Flat Products from
Brazil and the Republic of Korea, 81 Fed. Reg. 67,960 (Dep’t of Commerce Oct. 3,
2016) (amended final affirmative countervailing duty determinations and
countervailing duty orders; 2014), amended by Certain Hot-Rolled Steel Flat
Products From the Republic of Korea, 84 Fed. Reg. 23,019 (Dep’t of Commerce
May 21, 2019) (notice of court decision not in harmony with amended final
determination of the countervailing duty investigation). See id. at 31–33 (citing
OCTG IV Allegation Exs. 15, 77–100).
The record evidence cited by Commerce does not support Commerce’s
determination that programs and subsidies offered by the Government of Korea
contributed to a particular market situation during the period of review. Commerce
cited the OCTG IV Allegation, which referred to the subsidy rates of 0.55–0.58%
in Certain Hot-Rolled Steel Flat Products from the Republic of Korea, 84 Fed.
Reg. 28,461 (final results of countervailing duty admin. review, 2016). See Final
IDM at 32 n.144 (citing OCTG IV Allegation at 27 n.106). The Court notes that
record documents cited by Commerce suffer from a temporal problem because the
documents discuss programs and subsidy rates from 2016 and early 2017, prior to
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the OCTG IV period of review between September 1, 2017 and August 31, 2018,
or programs and subsidy rates from 2019, after the period of review. See id.;
OCTG IV Allegation Exs. 77–95, 96–100.
The Court observes that record documents reviewed by Commerce discuss
the restructuring programs and subsidies offered to non-steel industries and
anticipated restructuring efforts of the steel industry, but do not show that OCTG
producers actually received subsidies by taking advantage of the Government of
Korea’s approved restructuring programs during the period of review. See OCTG
IV Allegation Exs. 81, 84–86; see also Case Br. of Hyundai Steel Co. (Jan. 6,
2019) at 54, PR 311 (stating that Hyundai Steel disputes whether it took advantage
of the restructuring program, despite having received approval to participate in the
program). While some record documents cited by Commerce illustrate that OCTG
producers took advantage of programs and subsidies, the Court notes that these
documents suffer from a temporal problem as they discuss actions taken in 2016,
prior to the OCTG IV period of review. See OCTG IV Allegation Exs. 85, 87, 88.
None of the record documents cited by Commerce show that Korean OCTG
producers received subsidies or participated in subsidy programs during the period
of review. The Court holds that the record evidence cited by Commerce does not
support Commerce’s determination that OCTG producers received subsidies from
the Government of Korea that contributed to a particular market situation in Korea
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because the record evidence cited by Commerce suffers from a temporal problem
and does not show that OCTG producers actually received subsidies during the
period of review. In summary, the Court concludes with respect to the first factor
that Commerce’s determination that subsidized hot-rolled coil contributed to a
particular market situation that distorted the cost of OCTG production is not
supported by substantial evidence.
As to the second factor, Commerce determined that “significant
overcapacity in steel production” from the People’s Republic of China (“China”)
has “flooded [the Korean steel market] with imports of cheap steel products,”
exerting downward effects on Korean steel prices. Final IDM at 28–29.
Commerce cited record documents in support of its determination, including: an
article in the Korea Times, dated September 29, 2016, titled “Gov’t Seeks
Restructuring of Steelmaking, Petrochemical Industries;” an article by Bloomberg,
dated July 31, 2018, titled “China’s Steelmakers Are Smashing Production
Records;” an article by S&P Global Platts, dated May 13, 2019, titled “Chinese
Steel Output Rises Relentlessly Despite Plant Closures;” an article in the Business
Recorder, dated December 28, 2017, titled “Global Steel’s ‘China’ Problem”
(“Business Recorder Article”); an article in Kallanish Commodities, dated March
20, 2017, titled “China Loosens Credit for Coal and Steel Companies;” an article
by Reuters, dated December 15, 2017, titled “China Will Cut, Remove Export
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Tariffs on Some Steel, Fertilizer;” an article by Reuters, dated January 10, 2018,
titled “China’s Shanxi Province Sets Up Steel Fun Worth $770 Mln;” an article by
S&P Global Platts, dated May 28, 2019, titled “Chinese Steel Output Reaches New
Heights;” an article by the Southeast Asian Iron and Steel Institute, dated January
28, 2019, titled “Global Crude Steel Output Increases by 4.6 Percent in 2018;” an
article by the Southeast Asian Iron and Steel Institute, dated November 7, 2018,
titled “Baowu Says China Steel Output to Hit Record Level in 2018;” an article in
Kallanish Commodities, dated May 19, 2017, titled “China Explains why Capacity
Curbs Mean More Steel;” an article by Reuters, dated December 3, 2017, titled
“China’s 2018 Steel Output Seen Rising Even After Mill Closures;” an article by
Xinhua, dated May 11, 2019, titled “Iron and Steel Industry Posts Rising Revenue,
but Plummeting Profit;” an article by the American Metal Market, dated June 1,
2018, titled “China’s Steel Export Prices Set Global Tone;” an article in the South
China Morning Post, dated June 6, 2019, titled “In China’s Industrial Hinterlands,
State Subsidies Run Deep and Appetite for Reform Is Low Despite US Demands;”
and a presentation to the OECD Steel Committee, titled “Korean Iron and Steel
Market in 2017.” See Final IDM at 28–31 & nn.115–40 (citing OCTG IV
Allegation Exs. 6, 15–32, 37–39, 42, 52–54, 224, 225). 2
2 Commerce also cited the following exhibits: an article by the American Metal
Market, dated February 22, 2017, titled “China Remains Steel Behemoth;” an
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The record evidence cited by Commerce does not support a determination
that the influx of Chinese hot-rolled coil is particular to Korea because the record
documents describe a global influx that affected many other countries in addition
to Korea, rather than an effect that is unique or particular to Korea. See OCTG IV
Allegation Exs. 6, 17–18, 21, 23–31, 42, 224, 225. Commerce noted that Korea
was China’s second largest export market for hot-rolled products in 2017 and
2018. Final IDM at 30. The Court observes that the record evidence cited by
Commerce does not indicate that the experience in Korea due to Chinese hot-rolled
coil imports is distinct from the experience in other countries around the world,
which were also inundated with the global oversupply of low-priced Chinese
article by the American Metal Market, dated February 13, 2017, titled “China’s
Steel Capacity Up Despite Cut Attempts;” a 2016 article in Asian Steel Watch,
titled “China’s Steel Exports, Reaching 100 Mt: What It Means to Asia and
Beyond;” a report in the Global Steel Trade Monitor, dated February 2017, titled
“Steel Imports Report: Japan;” a report by the International Monetary Fund, dated
August 8, 2017, titled “People’s Republic of China: Staff Report for the 2017
Article IV Consultation;” five exhibits submitted in Case No. A-580-880 over
heavy walled rectangular welded carbon steel pipes and tubes from Korea; the
particular market situation allegation from Case No. A-489-501 over circular
welded carbon steel standard pipe and tube products from Turkey; and the
particular market situation allegation from Case No. A-533-502 over circular
welded carbon steel standard pipe and tube products from India. See Final IDM at
28–31 & nn.117, 118, 121, 125, 126, 128, 137–40 (citing OCTG IV Allegation
Exs. 15, 16, 19, 20, 22, 32, 37–39, 52–54). These exhibits were not included in the
Joint Appendix, so the Court was unable to review them. See J.A., ECF Nos. 58,
59.
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products. See OCTG IV Allegation Exs. 6, 17–18, 21, 23–31, 42, 224, 225.
Although it is clear that the oversupply of low-priced Chinese products affected
many countries in the global market, the Court notes that Commerce cited nothing
on the record to support its determination that the oversupply of low-priced
Chinese products is particular to the Korean market. See id. Commerce
acknowledged that the “global steel overcapacity crisis . . . [has] far-reaching
effects world-wide,” undermining its determination that Chinese hot-rolled coil
imports contributed to a particular market situation in Korea. Final IDM at 28; see
Husteel Co. v. United States, 44 CIT __, __, 426 F. Supp. 3d 1349, 1391 (2020)
(“Although 19 U.S.C. § 1677b may not demand that a [particular market situation]
be such that it only affects the subject market, there is no evidence on the record
that Chinese overcapacity affects the Korean market in some way that is specific to
the Korean market at all.”).
The Court observes that the record evidence cited by Commerce does not
support a conclusion that the global glut of Chinese hot-rolled coil imports caused
price distortions specific to the Korean steel market. The Court holds that
Commerce’s determination that excess capacity of Chinese hot-rolled coil imports
contributed to a particular market situation in Korea is not supported by substantial
evidence.
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As to the third factor, Commerce determined that strategic alliances between
certain Korean hot-rolled coil producers and Korean OCTG producers affected the
cost of hot-rolled coil and contributed to a particular market situation. Final IDM
at 33–34. Commerce cited the following record documents in support of its
determination: a report by the Korean Free Trade Commission, dated September 7,
2018, titled “KFTC Sanctions Six Steel Manufacturing Companies for Price
Fixing;” an article by S&P Global Platts, dated September 10, 2018, titled “South
Korea’s FTC Fines Six Steelmakers for Rebar Price Rigging;” an article in the
Korean Herald, dated September 9, 2018, titled “Six-Largest Steel Firms Fined
W100b Over Price Fixing;” an article in the Korea Times, dated December 20,
2017, titled “Steelmakers Fined W.92 Bil. For Bid Rigging;” an article in Pulse,
dated September 10, 2018, titled “FTC Slaps Biggest Fine on Korean Rebar
Suppliers for Price Fixing;” an article in Kallanish Commodities, dated September
10, 2018, titled “South Korea Fines Rebar Mills for Price Fixing;” an article by
Yonhap News, dated September 9, 2018, titled “Steelmakers Fined Over Price
Collusion;” a report by the Korean Free Trade Commission, dated December 21,
2017, titled “KFTC Punishes Six Steel Pipe Manufacturers for Rigging Bids
Offered by Korea Gas Corporation;” an article by Yonhap News, dated May 7,
2017, titled “Hyundai Steel fined 312 Mln Won for Obstructing FTC’s Probe;” an
article by Yonhap News, dated July 7, 2016, titled “Eight Business Groups Engage
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in Cross-Shareholding FTC;” an article by the Council on Foreign Relations, dated
May 4, 2018, titled “South Korea’s Chaebol Challenge;” an article by CNBC
News, dated October 9, 2018, titled “Seoul Relies on Chaebols for North Korea
Investment So Reform Doubtful;” an article by the Sage Business Researcher,
dated August 21, 2017, titled “South Korea’s Conglomerates;” an article by CNN,
dated January 17, 2107, titled “South Korea’s Long History of Light Sentences for
Business Leaders;” and an article by The Globe and Mail, dated May 12, 2018,
titled “South Korea’s Chaebol Problem.” See Final IDM at 33–34 & nn.148–51
(citing OCTG IV Allegation Exs. 101–20). 3
Commerce conceded that the record shows that SeAH is being fined for bid-
rigging schemes that occurred before the OCTG IV period of review. Id. at 34.
But Commerce asserted that unfair corporate practices are “a long-term, chronic
occurrence” and that the record does not indicate that unfair corporate practices did
not continue to occur during the OCTG IV period of review. Id. The record
3 Commerce also cited the following exhibits: an article by Foley & Lardner LLP,
dated April 16, 2013, titled “Another Steelmaker Subsidiary Raided in
International Antitrust Investigation;” a 2005 article in The Korean Journal of
International Relations, titled “The Origins of Korean Chaebols and Their Roots in
the Korean War;” and three exhibits submitted in Case No. A-580-876 over welded
line pipe from Korea. See Final IDM at 33 & n.148 (citing OCTG IV Allegation
Exs. 109, 111–13, 118). These exhibits were not included in the Joint Appendix,
so the Court was unable to review them. See J.A.
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documents cited by Commerce relate to findings of unfair corporate action that
occurred prior to 2017. See OCTG IV Allegation Exs. 101–08, 110, 119–20. The
Court observes that no record evidence cited by Commerce relates to unfair
corporate action or other strategic alliances during the OCTG IV period of review
from 2017–2018 in this case. See id. Exs. 101–08, 110, 114–17, 119–20. Because
none of the record evidence pertains to actions within the OCTG IV period of
review, Commerce’s purely speculative conclusions that strategic alliances “may
have created distortions” and “may continue to impact [hot-rolled coil] pricing in a
distortive manner during the [OCTG IV] [period of review] and in the future” are
not supported by substantial evidence on the record. See Final IDM at 34. The
Court holds that Commerce’s determination that strategic alliances between
Korean hot-rolled coil producers and Korean OCTG producers affected prices in
the Korean steel market and contributed to a particular market situation during the
OCTG IV period of review is not supported by substantial evidence.
As to the fourth factor, Commerce determined that the Korean
Government’s regulation of the Korean electricity market contributed to a
particular market situation. Id. Commerce cited the following record documents
in support of its determination: the Form 20-F annual report filed by Korea Electric
Power Corporation (“KEPCO”) with the U.S. Securities and Exchange
Commission for the fiscal year ending December 31, 2018; an article in Business
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Korea, dated February 14, 2019, titled “KEPCO Expected to Post 2.4 Tril. Won in
Operating Loss This Year;” an article in Korea Joongang Daily, dated May 15,
2019, titled “Records Big Loss in First Quarter of 2019;” and an article in Korea
Joongang Daily, dated February 23, 2019, titled “KEPCO Reports an Operating
Loss; the First in Six Years.” See Final IDM at 34–35 & nn.152–58 (citing OCTG
IV Allegation Exs. 121, 217–19).
The record evidence cited by Commerce does not support a determination
that the Korean Government’s regulation of the electricity market contributed to a
particular market situation. Commerce determined that Korean electricity prices
“cannot be considered to be competitively set” because the Korean Government
exercises control over KEPCO, which reported an operating loss in 2018. Id. at 34
(citing OCTG IV Allegation Exs. 217–19). The record evidence cited by
Commerce indicates that KEPCO reported an operating loss due to increased
environmental and renewable energy costs, decreased electricity demand due to
warmer winter weather, and higher natural gas prices. See OCTG IV Allegation
Exs. 121, 217–19. The Court observes that the record evidence reviewed by
Commerce does not appear to indicate that operating losses were a result of
government regulation or that electricity prices were not competitively set. See id.
The Court also notes that the record evidence cited by Commerce does not indicate
that Korean steel manufacturers received countervailable subsidies as to electricity.
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See id. Because the record evidence cited by Commerce does not show that the
Korean Government’s regulation of the electricity market resulted in subsidies
being granted to Korean steel manufacturers or prices not being competitively set,
the Court holds that Commerce’s determination that Korean Government
regulation distorted electricity prices and affected prices in the Korean steel
market, contributing to a particular market situation during the OCTG IV period of
review, is not supported by substantial evidence.
As to the fifth factor, Commerce determined that the Korean Government’s
steel industry restructuring efforts to provide subsidies to participating companies
contributed to a particular market situation. Final IDM at 35–36. Commerce cited
the following record documents in support of its determination: Hyundai Steel’s
Questionnaire Response; an article in Kallanish Commodities, dated September 19,
2017, titled “Korea Should Close 4-5M t-y Plate Capacity BCG;” the Korea
Joongang Daily Article; the Korea Times Article; the Aju Business Daily Article;
the Ministry of Economy and Finance Press Release I; the Ministry of Economy
and Finance Press Release II; and the Business Korea Article. See Final IDM at
35–36 & nn.159–68 (citing OCTG IV Allegation Exs. 7, 77, 78, 81, 93, 94, 124).
The Court observes that the record does not support Commerce’s
determination that Korean OCTG producers took advantage of or received benefits
from restructuring programs during the period of review. See OCTG IV
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Allegation Exs. 7, 77, 81, 93, 94, 124. For example, Commerce cited the Aju
Business Daily Article stating that Hyundai Steel had received approval to proceed
with corporate restructuring as evidence that OCTG producers took advantage of
restructuring programs, but the record does not indicate that Hyundai Steel actually
took advantage of restructuring efforts during the period of review, and Hyundai
Steel asserts that it did not take advantage of restructuring efforts. See OCTG IV
Allegation Ex. 81; Case Br. of Hyundai Steel Co. at 54. The Court notes that one
article cited by Commerce states that the Korean Government was “ask[ing] the
steel industry to execute a voluntary restructuring,” but the article does not state
that any Korean steel manufacturers had taken advantage of voluntary restructuring
programs. See OCTG IV Allegation Ex. 124. Record evidence cited by
Commerce discusses restructuring programs backed by the Korean Government
and laws passed to facilitate these programs, but does not show that Korean steel
manufacturers took advantage of these programs during the period of review. See
OCTG IV Allegation Exs. 78, 93, 94.
The Court observes that record evidence cited by Commerce also has a
temporal problem, as it covers restructuring efforts outside of the period of review.
See OCTG IV Allegation Exs. 77, 78, 81, 94. For example, Commerce cited
several articles discussing restructuring that are dated from 2016, prior to the
OCTG IV period of review covering 2017–2018. See OCTG IV Allegation Ex.
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Court No. 20-00150 	Page 32
77, 78, 81. Further, a press release cited by Commerce indicates that ten trillion
Korean won were allocated for business restructuring in 2019, outside of the
OCTG IV period of review between 2017 and 2018. See OCTG IV Allegation Ex.
90. The Court concludes that the mere existence of restructuring efforts, absent
evidence of actual restructuring and government interference during the period of
review, is insufficient to contribute to the existence of a particular market situation.
The Court holds that Commerce’s determination that the Korean Government’s
steel industry restructuring contributed to a particular market situation in Korea is
not supported by substantial evidence.
In summary, the Court concludes that substantial record evidence does not
support Commerce’s cumulative particular market situation determination in Korea
for the 2017–2018 period of review because the record evidence does not
demonstrate the existence during the period of review of the five factors allegedly
underlying the particular market situation determination. The Court remands
Commerce’s particular market situation determination for further explanation or
reconsideration consistent with this opinion.
IV. 	Calculation of Particular Market Situation Adjustment with
Regression Analysis
Commerce calculated a particular market situation adjustment for SeAH
based on a regression analysis. See Final IDM at 49–50. Commerce used the
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regression analysis to quantify the particular market situation that it determined
existed in Korea. See id. at 52–61. At this time, the Court need not assess whether
Commerce’s determination to use a regression-based adjustment is supported by
substantial evidence because the Court holds that Commerce’s determination that a
particular market situation existed is not supported by substantial evidence.
V. 	Constructed Value Profit Calculation
Commerce calculated constructed value profit and selling expenses by “any
other reasonable method,” based on the Tenaris and TMK 2018 financial
statements, citing them as the best information available on the record. Id. at 67.
SeAH argues that Commerce should have used SeAH’s third-country sales to
calculate constructed value profit and selling expenses; that, in the alternative,
Commerce’s selection of financial statements is not supported by substantial
evidence; and that Commerce failed to apply a “profit cap” in accordance with the
relevant statute. SeAH’s Br. at 22–33.
If Commerce determines that a respondent’s actual selling, general, and
administrative expenses and profits from the home market or a third-country
market are unavailable when calculating constructed value for the respondent, the
statute provides Commerce with three alternative calculation methods. See 19
U.S.C. § 1677b(e)(2). When calculating constructed value by the third alternative
method, Commerce may use “any other reasonable method” to calculate profits
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and selling, general, and administrative expenses. Id. § 1677b(e)(2)(B). “The
objective is to find a good proxy (or surrogate) for the profits that the respondent
can fairly be expected to build into a fair sales price of the particular merchandise.”
Mid Continent Steel & Wire v. United States, 941 F.3d 530, 542 (Fed. Cir. 2019)
(citations omitted).
In calculating constructed value, Commerce determined that SeAH did not
have a viable home market or third-country market during the period of review for
purposes of calculating constructed value profit and selling expenses under 19
U.S.C. § 1677b(e)(2)(A). Final IDM at 67–68. When considering the statutory
alternatives under 19 U.S.C. § 1677b(e)(2)(B)(i)–(iii), Commerce eliminated
subsection (i) because SeAH’s other steel products were in different categories
than OCTG, and subsection (ii) because SeAH had no sales of OCTG in the home
market of Korea in the ordinary course of trade. Id. at 69. Commerce calculated
constructed value under subsection (iii), using “any other reasonable method.” Id.
A. 	Commerce’s Selection of Surrogate Financial Statements
SeAH argues that Commerce should have selected SeAH’s home-market or
third-country sales as surrogate financial statements instead of the Tenaris and
TMK 2018 financial statements. SeAH’s Br. at 22–25.
The eleven sources of information on the record identified by Commerce
included: SeAH’s Canadian-market data from the first administrative review of the
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antidumping duty order on OCTG from Korea; SeAH’s third-country sales of
OCTG; Hyundai Steel’s home-market sales of non-prime OCTG; Hyundai Steel’s
home-market sales of line pipe; and the financial statements of seven non-Korean
producers, Tenaris, TMK, Borusan Mannesmann Boru Sanayi ve Ticaret A.S.
(“Borusan”), Chung Hung Steel Corporation (“Chung Hung”), Nippon Steel and
Sumitomo Metal Corporation (“NSSMC”), Welspun Corp. Limited (“Welspun”),
and Maharashtra Seamless Limited (“Maharashtra”). Final IDM at 70. Commerce
noted that many of these sources were not viable, as they included primarily sales
of non-OCTG products; lacked sufficient detail to determine the amount of sales
revenue from OCTG products; failed to show a profit on sales; reflected sales data
from non-viable markets; reflected profit data for line pipe; or were not
contemporaneous with the period of review. Id. Commerce chose to calculate
constructed value profit by utilizing the Tenaris and TMK 2018 financial
statements. Id. at 67, 70. Commerce favored the Tenaris and TMK 2018 financial
statements as the best information available on the record that reflected the profit
of a Korean OCTG producer on sales of OCTG in the ordinary course of trade. Id.
at 71.
Using subsection (iii) to calculate constructed value, Commerce may use
“any reasonable method” to determine constructed value. See 19 U.S.C.
§ 1677b(e)(2)(B)(iii). Commerce determined that the home-market data were for
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non-OCTG products and sales “not made in the ordinary course of business, i.e.,
transacted in a non-viable market at a net loss,” and that the third-country market
data failed the viability test. Final IDM at 71. Because the home-market and third-
country market data were from non-viable markets, Commerce reasoned that it
would be inconsistent and unreasonable to use this data to calculate constructed
value profit and selling expenses. Id. at 71–72. Commerce noted that the Tenaris
and TMK 2018 financial statements did not suffer from viability concerns and
selected them as the best available information. Id. at 72.
SeAH does not challenge Commerce’s determination that SeAH’s home-
market sales and third country market sales were non-viable, and does not dispute
that Commerce’s standard practice is to disregard sales from non-viable markets
when calculating constructed value profit under 19 U.S.C. § 1677b(e)(2)(A). See
SeAH’s Br. at 23–24. The Court observes that record evidence reviewed by
Commerce indicates that data from Tenaris and TMK did not suffer from viability
concerns, as the data showed sufficient sales populations compared to U.S. sales—
five percent or more of the aggregate quantity (or value) of the subject
merchandise sold in the United States. See 19 U.S.C. § 1677b(a)(1)(B)(ii)(II);
Constructed Value Profit and Selling Expense Comments and Information (July
26, 2019) (“Tenaris 2018 Annual Report”) Ex. 14, PR 135–37; Resp. to Req.
[Constructed Value] Profit and Selling Expense Information (“TMK 2018 Annual
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Report”) Attach. 1, PR 125–27, 132. The Court notes that the statute instructs
Commerce to exclude sales from non-viable markets when determining normal
value based on home market sales or third-country sales. See 19 U.S.C.
§ 1677b(a)(1)(B), (C). The Court regards as reasonable Commerce’s explanation
that use of data from sales in non-viable markets to calculate constructed value
could result in the constructed value being equal to a normal value that is based on
non-viable market sales, which the statute does not permit. See id.; Final IDM at
71. The Court concludes that Commerce’s use of the Tenaris and TMK 2018
financial statements is reasonable and supported by substantial evidence.
SeAH argues that, if Commerce relies on surrogate financial statements,
Commerce should exclude Tenaris’ financial statements in the calculation of
constructed value profit because Tenaris’ sales to North America constitute 48% of
its total sales and because a $6 million grant received by one of Tenaris’
subsidiaries in 2013 constitutes a subsidy that distorts the 2018 data. SeAH’s Br.
at 25–27. Because Commerce determined that there was no information on the
record regarding profit on sales of OCTG, or products in the same category, in
Korea, Commerce reasoned that the Tenaris and TMK financial statements
represented the best available information. See Final IDM at 71 (stating that “their
business operations and products are most similar to those of . . . SeAH”).
Commerce determined that Tenaris and TMK are significant producers of OCTG
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and their financial statements represent sales of mainly OCTG in a broad range of
geographic markets. See id.; see also Prelim. DM at 18. Commerce determined
that both Tenaris and TMK have “significant non-U.S. sales” and are suitable to be
used to calculate constructed value profit. Final IDM at 71, 73.
The Court observes that record evidence cited by Commerce shows that over
50% of Tenaris’ net sales and over 75% of TMK’s net sales were to end users in
non-U.S. markets in 2018. See Tenaris 2018 Annual Report; TMK 2018 Annual
Report. Because record evidence cited by Commerce shows that over 50% of
Tenaris’ 2018 net sales were to end users in non-U.S. markets, the Court finds that
Commerce’s determination that Tenaris has significant non-U.S. sales, sufficient to
use Tenaris’ financial statements in the calculation of constructed value profit, is
reasonable and supported by substantial evidence.
Further, Commerce reviewed Tenaris’ 2018 financial statements and
determined that the grant received by Tenaris in 2013 did not distort the 2018 data.
Final IDM at 73. Defendant asserts that the $6 million grant that Tenaris received
in 2013 is not a countervailable subsidy and that, even if the grant constitutes a
subsidy, it would have been fully allocated to 2013 as a non-recurring subsidy.
Def.’s Resp. at 26. Under 19 C.F.R. § 351.524, non-recurring benefits are
allocated over a number of years corresponding to the average useful life of
renewable physical assets, except when the benefit is less than 0.5% of relevant
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sales—in which case the benefit is allocated to the year in which it is received. 19
C.F.R. § 351.524(b). Defendant asserts that, because the $6 million grant
accounted for less than 0.5% of Tenaris’ net sales, the benefit would have been
allocated in its entirety to 2013 and would not impact the 2018 financial
statements. Def.’s Resp. at 26. Commerce determined, therefore, that Tenaris’
2018 financial statements did not need to be excluded due to subsidies. Final IDM
at 73.
The Court observes that Tenaris’ financial statements, cited by Commerce,
do not show subsidies and indicate that that the grant accounted for less than 0.5%
of Tenaris’ net sales. See Tenaris 2018 Annual Report. Based on the record
evidence cited by Commerce, indicating that the grant accounted for less than
0.5% of Tenaris’ net sales, and the relevant regulation instructing non-recurring
benefits to be allocated to the year in which they are received, the Court concludes
that Commerce’s determination that the 2013 grant did not distort Tenaris’ 2018
financial statements is reasonable and supported by substantial evidence.
SeAH argues also that Commerce should include Chung Hung’s financial
statements in the calculation of constructed value profit. SeAH’s Br. at 28–29.
Commerce determined that Chung Hung’s sales were not specific to the OCTG
industry and that Chung Hung’s customer base did not correspond to that of a
global OCTG producer. Final IDM at 72. Commerce explained that Chung
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Hung’s OCTG sales account for less than 6.8% of total sales, while other data on
the record, the Tenaris and TMK financial statements, included significant OCTG
sales. Id. Commerce reasoned that, because it is “particularly important to use
financial statements from a producer of identical merchandise,” it is “unnecessary”
for Commerce to rely on Chung Hung’s data when there are more closely
analogous data available on the record. See id.
The Court observes that the Chung Hung 2018 Annual Report cited by
Commerce supports Commerce’s determination that Chung Hung’s OCTG sales
account for less than 6.8% of total sales. See Resp. to Req. [Constructed Value]
Profit and Selling Expense Information Attach. 2, PR 125–27, 132. The Court
notes that Commerce reviewed record evidence that supports its determination that
Tenaris and TMK’s data were more closely analogous than Chung Hung’s data to
Korean OCTG producers. See id.; Tenaris 2018 Annual Report; TMK 2018
Annual Report. The Court concludes, therefore, that Commerce’s determination
not to include Chung Hung’s financial statements in the calculation of constructed
value profit is reasonable and supported by substantial evidence.
B. 	Commerce’s Determination Not to Apply A Profit Cap
SeAH argues that Commerce’s calculation of constructed value profit is
inconsistent with the statute because Commerce did not apply a “profit cap.”
SeAH’s Br. at 31–33. SeAH argues that Commerce’s “use of the same rate for
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[constructed value] profit and the profit cap is essentially a failure to calculate a
profit cap” and that Commerce erred by not applying a profit cap based on the
profit earned on Hyundai Steel’s home-market sales of OCTG or SeAH’s third-
country sales of OCTG produced in Korea. Id.
In utilizing a “reasonable method” under subsection (iii), Commerce
normally must apply an upward limit for profit, commonly termed the “profit cap.”
Atar S.r.l. v. United States, 730 F.3d 1320, 1322 (Fed. Cir. 2013) (citation
omitted). “This ‘profit cap’ prevents the ‘various possible calculation methods
from yielding anomalous results that stray beyond the amount normally realized
from sales of merchandise in the same general category.’” Mid Continent Steel &
Wire, 941 F.3d at 545 (quoting Atar S.r.l., 730 F.3d at 1327). Congress
contemplated situations, however, in which a profit cap would not be calculable:
[W]here, due to the absence of data, Commerce cannot determine
amounts for profit under alternatives (1) and (2) or a “profit cap” under
alternative (3), it might have to apply alternative (3) on the basis of “the
facts available.” 	This ensures that Commerce can use alternative (3)
when 	it 	cannot 	calculate 	the 	profit 	normally 	realized 	by 	other
companies on sales of the same general category of products.
Id. (quoting Uruguay Round Agreements Act, Statement of Administrative Action
(“SAA”), H.R. Doc. No. 103-316, vol. 1 at 841 (1994), reprinted in 1994
U.S.C.C.A.N. 4040, 4177). When Commerce explains reasonably that information
is not available for Commerce to calculate a profit cap, Commerce may calculate
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constructed profit under subsection (iii) without calculating a profit cap. Id. at
545–46.
Commerce explained here that “[it] [wa]s unable to calculate a profit cap
based on the actual amounts reported in accordance with the statutory intent under
section [1677b(e)(2)(B)(iii)]” because “[t]here is no profit information for sales in
Korea of OCTG and products in the same general category on the record.” Final
IDM at 74; see also Mid Continent Steel & Wire, 941 F.3d at 545 (“[T]he
statutorily specified information was not available to calculate a profit cap” when
“there [wa]s no viable domestic market in the exporting country for merchandise
that is in the same general category of products as the subject merchandise.”).
Commerce noted that the record did not contain any information regarding the
profit for sales in Korea of OCTG and products in the same general category. See
Final IDM at 74. Because Commerce articulated a reasonable justification for its
decision, tied to the record in the proceeding, the Court concludes that
Commerce’s decision not to calculate a profit cap when the statutorily specified
information was not available is reasonable.
C. 	Commerce’s Application of Unadjusted Costs to Adjusted
Costs
SeAH argues that Commerce incorrectly applied the unadjusted Tenaris and
TMK 2018 financial statements to SeAH’s adjusted costs. SeAH’s Br. at 29–30.
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Commerce reasoned that the particular market situation adjustment allowed
SeAH’s costs to “more accurately reflect ‘the [cost of production] in the ordinary
course of trade.’” Final IDM at 61. Commerce asserted that, because there is no
evidence that a particular market situation affects Tenaris or TMK, it would be
inaccurate to adjust their costs. Id. Commerce asserted that the unadjusted Tenaris
and TMK data and the adjusted SeAH data each most accurately reflect costs in the
ordinary course of trade. Id. Commerce determined that it was reasonable to
apply the unadjusted Tenaris and TMK 2018 financial statements to SeAH’s
adjusted costs when calculating the constructed value profit and selling expenses.
Id.
As discussed in detail above, the Court holds that Commerce’s
determination that a particular market situation affected the cost of production of
OCTG in Korea is not supported by substantial evidence. See supra Part III. The
Court notes that Commerce’s determination to apply unadjusted costs to SeAH’s
adjusted costs was based on its finding that a particular market situation affected
SeAH’s costs. See Final IDM at 61. Because the Court remands Commerce’s
particular market situation determination and does not consider Commerce’s
regression-based particular market situation adjustment, the Court likewise does
not consider at this time whether Commerce’s application of unadjusted costs to
adjusted costs is reasonable and supported by substantial evidence.
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VI. 	Constructed Export Price Profit Calculation
Commerce calculated SeAH’s constructed export price profit rate using the
same data that Commerce used to calculate the constructed value profit, the
Tenaris and TMK 2018 financial statements. See Final IDM at 5, 106; Prelim. DM
at 13–14. SeAH argues that Commerce should have used SeAH’s financial
statements to calculate SeAH’s constructed export price profit rate and that
Commerce is not permitted by statute to use other information. See SeAH’s Br. at
33–35.
When a foreign producer or exporter sells a product to a U.S. selling
affiliate, the law permits using “constructed export price” in calculating the
dumping margin. 19 U.S.C. § 1677a(d). Constructed export price is “the price at
which the subject merchandise is first sold (or agreed to be sold) in the United
States before or after the date of importation 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,” subject to
certain adjustments. Id. § 1677a(b). To calculate constructed export price, this
price is reduced by selling expenses, further manufacturing expenses, and the profit
allocated to these expenses. Id. § 1677a(d). To determine profit, Commerce “may
rely on any appropriate financial reports, including public, audited financial
statements, or equivalent financial reports, and internal financial reports prepared
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in the ordinary course of business.” 19 C.F.R. § 351.402(d)(2). Section
1677a(f)(1) of the statute states that “profit shall be an amount determined by
multiplying the total actual profit by the applicable percentage.” 19 U.S.C.
§ 1677a(f)(1). Total actual profit is “the total profit earned by the foreign
producer, exporter, and affiliated parties described in subparagraph (C) with
respect to the sale of the same merchandise for which total expenses are
determined under such subparagraph.” Id. § 1677a(f)(2)(D). The statute defines
the total expenses as:
(C) Total expenses
The term “total expenses” means all expenses in the first of the
following categories which applies and which are incurred by or on
behalf of the foreign producer and foreign exporter of the subject
merchandise and by or on behalf of the United States seller affiliated
with the producer or exporter with respect to the production and sale of
such merchandise:
(i) The expenses incurred with respect to the subject merchandise
sold in the United States and the foreign like product sold in the
exporting 	country if such expenses were requested by the
administering authority for the purpose of establishing normal
value and constructed export price.
(ii) The expenses incurred with respect to the narrowest category
of merchandise sold in the United States and the exporting
country which includes the subject merchandise.
(iii) The expenses incurred with respect to the narrowest category
of merchandise sold in all countries which includes the subject
merchandise.
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Id. § 1677a(f)(2)(C).
In calculating constructed export price, Commerce utilized the same data
that it used to calculate the constructed value profit, the Tenaris and TMK 2018
financial statements. See Final IDM at 106; SeAH Prelim. Calculations Mem. at 3.
Commerce determined that SeAH did not have a viable home market and,
therefore, did not have a viable comparison market. See Final IDM at 106; SeAH
Prelim. Calculations Mem. at 3. As a result, Commerce determined that relying on
SeAH’s financial statements was “unsuitable” and relied on the Tenaris and TMK
2018 financial statements. See Final IDM at 106; SeAH Prelim. Calculations
Mem. at 3.
SeAH argues that Commerce is required by statute to use SeAH’s own
information. See SeAH’s Br. at 33–35. Commerce asserted that the statute “does
not require Commerce to rely upon a company’s own financial data when using
constructed value for the home market.” Final IDM at 106. Defendant reiterates
this assertion and argues that Commerce may rely on financial statements on the
record when the comparison market is not viable. Def.’s Resp. at 31.
Under 19 U.S.C. § 1677b(e)(2)(B)(i)–(iii), Commerce may, when
appropriate, use “any other reasonable method” to determine profits for
constructed value. The Court observes that no such “any other reasonable method”
provision exists under section 1677a for constructed export price. Section 1677a,
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covering export price and constructed export price, refers to data from “the foreign
producer, exporter, and affiliated parties.” 19 U.S.C. § 1677a(d). Unlike the
constructed value provision in section 1677b, section 1677a contains no language
concerning the use of data from producers of comparable merchandise. Despite
the absence of such a provision, the U.S. Court of Appeals for the Federal Circuit
has upheld the use of surrogate values to adjust constructed export price under
section 1677a. See SeAH Steel VINA Corp. v. United States, 950 F.3d 833, 838
(Fed. Cir. 2020) (citing 19 U.S.C. § 1677a(c)(2)(A)) (stating that Commerce may
adjust constructed export price using surrogate values when the exporting country
is a non-market economy).
Section 1677a(f)(2)(C) provides that the first applicable category of three
listed categories is to be used to determine total expenses. 19 U.S.C.
§ 1677a(f)(2)(C). The first category provides for the use of expenses “requested
by [Commerce] for the purpose of establishing normal value and constructed
export price.” Id. The Court notes that Commerce calculated a constructed value
and did not use SeAH’s expenses to establish normal value, because Commerce
determined that SeAH’s home-market and third-country sales were non-viable.
See Final IDM at 71. Commerce determined, therefore, that use of the second
category was appropriate. Id. at 106. Under the second category, the Statement of
Administrative Action instructs that the information is obtained through financial
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reports. See SAA at 825, reprinted in 1994 U.S.C.C.A.N. at 4164. The Court
notes that neither the SAA nor section 1677a contain language requiring the use of
a company’s own financial data or prohibiting the use of data from producers of
comparable merchandise. See id.; 19 U.S.C. § 1677a(d). Accordingly, the Court
holds that Commerce is permitted under the statute to use surrogate data to
calculate constructed export price and, inherently, constructed export price profit
rates.
The Court holds that Commerce’s determination to use the Tenaris and
TMK 2018 financial statements to calculate SeAH’s constructed export price profit
rate, instead of SeAH’s own information, is in accordance with the law. The Court
sustains Commerce’s constructed export price profit rate determination.
VII. 	Exclusion of Freight Revenue Profit
Commerce capped the deduction for freight expenses at the amount actually
incurred. Final IDM at 109–11. SeAH asserts that Commerce’s determinations
that separately-invoiced freight revenue are included in the price of the
merchandise and that the portion of freight revenue up to actual freight expenses,
but not exceeding actual freight expenses, is included in the price of the
merchandise, are contrary to the law. SeAH’s Br. at 20–21. SeAH argues that
Commerce must treat freight profits and losses uniformly, either ignoring both or
including both. Id. at 21.
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Export price or constructed export price is the price at which the subject
merchandise is first sold in the United States. See 19 U.S.C. § 1677a(a), (b).
Under 19 U.S.C. § 1677a(c)(2)(A),
[t]he price used to establish export price and constructed export price
shall be reduced by . . . the amount, if any, included in such price,
attributable to any additional costs, charges, or expenses, and United
States 	import 	duties, 	which 	are 	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 . . . .
Id. § 1677a(c)(2)(A). Commerce uses adjustments when calculating export price
or constructed export price “to achieve ‘a fair, apples-to-apples comparison’
between U.S. price and foreign market value.” Fla. Citrus Mut. v. United States,
550 F.3d 1105, 1110 (Fed. Cir. 2008) (quoting Torrington Co. v. United States, 68
F.3d 1347, 1352 (Fed. Cir. 1995)). Such adjustments prevent exporters from
improperly inflating the export price of a good by charging a customer for freight
more than the exporter’s actual freight expenses. See Dongguan Sunrise Furniture
Co. v. United States, 36 CIT 860, 894 (2012). Commerce adjusts its price
calculation using net freight revenue, and it is reasonable for Commerce not to
consider freight revenue profit as part of the price of the subject merchandise in
accordance with the statutory language. See id. at 894–95.
Here, Commerce determined that increasing the merchandise gross unit
selling price with profit SeAH earned on the sale of freight would artificially
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inflate the constructed export price. See Final IDM at 110–11. Commerce isolated
the price of SeAH’s merchandise alone without any additional charges by capping
SeAH’s freight expenses at the actual cost incurred in order to exclude freight
revenue profit. Id.
SeAH contends that Commerce’s treatment of freight revenue below the cap
as part of the U.S. price in its calculations, and freight revenue above the cap as not
part of the U.S. price in its calculations, is inconsistent with the statute. See
SeAH’s Br. at 20–21. SeAH argues that, under the language of 19 U.S.C.
§ 1677a(c)(2)(A), Commerce “may deduct freight costs only if freight is included
in the price that Commerce uses as the starting point of its calculations.” Id. at 21
(emphasis omitted). SeAH also argues that the statute allows Commerce to include
all freight revenue and costs in the price or none of the freight revenue and costs in
the price, but does not allow Commerce to include only a part of the freight
revenue in the price. Id. This is an incorrect reading of the statute. Section 1677a
requires Commerce to make adjustments when calculating export price or
constructed export price “to achieve a fair, apples-to-apples comparison between
U.S. price and foreign market value.” Fla. Citrus Mut., 550 F.3d at 1110 (citation
and internal quotation marks omitted); see 19 U.S.C. § 1677a(c)(2)(A). A proper
“apples-to-apples” comparison between the U.S. price and foreign market value
would not include profit earned from freight rather than from the sale of subject
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merchandise. Because a proper comparison would not include profit earned from
freight rather than from the sale of subject merchandise, the Court concludes that
Commerce’s exclusion of freight revenue profit reflects the statutory method and is
in accordance with the law.
CONCLUSION
For the foregoing reasons, the Court sustains in part and remands in part
Commerce’s Final Results.
The Court sustains the following determinations of Commerce:
1. 	The Court sustains Commerce’s constructed export price profit rate as
in accordance with the law; and
2. 	The Court sustains Commerce’s exclusion of freight revenue profit as
in accordance with the law.
The Court remands the following determinations of Commerce:
1. 	The Court remands for Commerce to further explain or reconsider its
use of the Cohen’s d test in its differential pricing analysis; and
2. 	The Court remands for Commerce to further explain or reconsider its
particular market situation determination.
Accordingly, it is hereby
ORDERED that the Final Results are remanded to Commerce for further
proceedings consistent with this opinion; and it is further
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ORDERED that this case will proceed according to the following schedule:
1. 	Commerce shall file the remand results on or before December 17,
2021;
2. 	Commerce shall file the remand administrative record on or before
January 14, 2022;
3. 	Comments in opposition to the remand results shall be filed on or
before February 11, 2022;
4. 	Comments in support of the remand results shall be filed on or before
March 4, 2022; and
5. 	The joint appendix shall be filed on or before March 25, 2022.
/s/ Jennifer Choe-Groves
Jennifer Choe-Groves, Judge
Dated: 	October 19, 2021
New York, New York
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