TMK IPSCO et al v. United States

Slip Op. 16-62
UNITED STATES COURT OF INTERNATIONAL TRADE
TMK IPSCO ET AL.,
Plaintiffs and Consolidated
Plaintiffs,
and
MAVERICK TUBE CORPORATION ET AL.,
Plaintiff-Intervenors and
Consolidated Plaintiff-
Intervenors,
v.
UNITED STATES,
Defendant,
and
TIANJIN PIPE (GROUP) CORP. ET AL.,
Defendant-Intervenors and
Consolidated Defendant-
Intervenors.
Before: Claire R. Kelly, Judge
Consol. Court No. 10-00055
Public Version
OPINION AND ORDER
[Sustaining in part and remanding in part the U.S. Department of Commerce’s final
determination in the countervailing duty investigation of certain oil country tubular goods
from the People’s Republic of China.]
Dated: June 24, 2016
Roger Brian Schagrin, Schagrin Associates, of Washington, DC, argued for plaintiffs TMK
IPSCO, V&M Star L.P., Wheatland Tube Corp., Evraz Rocky Mountain Steel, and United
Steelworkers. With him on the brief was John Winthrop Bohn.
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 1 of 58

Consol. Court No. 10-00055 	Page 2
Alan Hayden Price and Robert Edward DeFrancesco, III, Wiley Rein, LLP, of Washington,
DC, for consolidated plaintiff and plaintiff-intervenor Maverick Tube Corporation.
Jonathan Gordon Cooper, Quinn Emanuel Urquhart & Sullivan, LLP, of Washington, DC,
argued for consolidated plaintiff and plaintiff-intervenor United States Steel Corporation.
With him on the brief were Jon David Corey and Susan Rachael Estrich.
Loren Misha Preheim, Senior Trial Counsel, Commercial Litigation Branch, Civil Division,
U.S. Department of Justice, of Washington, DC, argued for defendant United States. With
him on the brief were Benjamin C. Mizer, Principal Deputy Assistant Attorney General,
Jeanne E. Davidson, Director, and Claudia Burke, Assistant Director. Of counsel on the
brief was Shelby Mitchell Anderson, Office of the Chief Counsel for Trade Enforcement &
Compliance, U.S. Department of Commerce, of Washington, DC.
Daniel Lewis Porter, Claudia Denise Hartleben, Matthew Paul McCullough and William
Henry Barringer, Curtis, Mallet-Prevost, Colt & Mosle LLP, of Washington, DC, for
defendant-intervenors Tianjin Pipe (Group) Corp. and Tianjin Pipe International Economic
& Trading Corp.
Kelly, Judge: This consolidated action comes before the court on USCIT Rule 56.2
motions 	for 	judgment 	on 	the 	agency 	record 	challenging 	the 	U.S. 	Department 	of
Commerce’s (“Department” or “Commerce”) determination in the countervailing duty
investigation of certain oil country tubular goods (“OCTG”) from the People’s Republic of
China. See Certain Oil Country Tubular Goods From the People’s Republic of China, 74
Fed. Reg. 64,045 (Dep’t Commerce Dec. 7, 2009) (final affirmative countervailing duty
determination, final negative critical circumstances determination) (“Final Results”), as
amended, 	75 	Fed. 	Reg. 	3,203 	(Dep’t 	Commerce 	Jan. 	20, 	2010) 	(amended 	final
affirmative countervailing duty determination and countervailing duty order) (“Amended
Final Results”); see also Issues and Decision Memorandum for the Final Determination
in the Countervailing Duty Investigation of Certain Oil Country Tubular Goods (“OCTG”)
from 	the 	People’s 	Republic 	of 	China, 	C-570-944, 	(Nov. 	23, 	2009), 	available 	at
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 2 of 58

Consol. Court No. 10-00055 	Page 3
http://ia.ita.doc.gov/frn/summary/prc/E9-28779-1.pdf (last visited June 3, 2016) (“Final
Decision Memo”).
Plaintiffs TMK IPSCO, V&M Star L.P., Evraz Rocky Mountain Steel, Wheatland
Tube Corp., and United Steelworkers (collectively “TMK”), domestic producers of OCTG
and a union of OCTG workers, commenced this action pursuant to section 516A of the
Tariff Act of 1930, as amended, 19 U.S.C. § 1516a (2006). 1 	The court consolidated
TMK’s action with actions filed by: (1) Tianjin Pipe (Group) Corp. (“TPCO”) and Tianjin
Pipe International Economic & Trading Corp. (collectively “TPCO Group”), exporters of
OCTG; (2) Maverick Tube Corporation (“Maverick”), a domestic producer of OCTG; and
(3) United States Steel Corporation (“U.S. Steel”), also a domestic producer of OCTG.
See Order, Oct. 6, 2010, ECF No. 46. 	TMK, TPCO Group, Maverick, U.S. Steel, and
Plaintiff-Intervenor Bureau of Fair Trade Imports & Exports, Ministry of Commerce,
People’s Republic of China (“Bureau of Fair Trade”) filed Rule 56.2 motions for judgment
on the agency record. See Mem. in Supp. Mot. J. Agency R. of TMK IPSCO, V&M Star
L.P., Wheatland Tube Corp., Evraz Rocky Mountain Steel, and the United Steelworkers,
Oct. 6, 2010, ECF No. 55 (“TMK Mot.”); Pls. Tianjin Pipe (Group) Corp.’s and Tianjin Pipe
International Economic and Trading Corp.’s Mem. P. & A. Supp. Mot. J. Agency R., Oct.
6, 2010, ECF No. 54; Mem. in Supp. Maverick Tube Corporation’s 56.2 Mot. J. Agency
R., Oct. 7, 2010, ECF No. 71 (“Maverick Mot.”); Mem. in Supp. Pl. United States Steel
Corporation’s Mot. J. Agency R. Under Rule 56.2, Oct. 6, 2010, ECF No. 67 (“U.S. Steel
1 Further citations to the Tariff Act of 1930, as amended, are to the relevant provisions of Title 19
of the U.S. Code, 2006 edition.
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 3 of 58

Consol. Court No. 10-00055 	Page 4
Mot.”); Rule 56.2 Mot. J. Agency R. of Pl.-Intervenor Bureau of Fair Trade for Imports and
Exports, Ministry of Commerce, The People’s Republic of China, Oct. 6, 2010, ECF No.
56. Defendant thereafter filed a response to the Rule 56.2 motions for judgment on the
agency record filed by the above named parties. 	See Def.’s Resp. Opp’n to Pls.,’ Pl.-
Intervenors,’ and Def.-Intervenors’ Mots. J. Agency R., May 5, 2011, ECF No. 86 (“Def.
Resp.”). 	U.S. 	Steel 	also 	filed 	a 	supplemental 	brief 	and 	Defendant 	submitted 	a
supplemental response brief. 2 	See Opening Suppl. Br. Supp. Pl. United States Steel
Corporation’s Mot. J. Agency R. Under Rule 56.2, Sept. 30, 2015, ECF No. 142 (“U.S.
Steel Suppl. Br.”); Def.’s Suppl. Resp. Br. Pursuant to This Ct.’s July 2, 2015 Scheduling
Order, Dec. 17, 2015, ECF No. 145 (“Def. Suppl. Resp.”). TMK and U.S. Steel each filed
replies to Defendant’s response to their motions for judgment on the agency record. See
Reply Mem. Supp. Mot. J. Agency R. of TMK IPSCO, V&M Star L.P., Wheatland Tube
Corp., Evraz Rocky Mountain Steel, and the United Steelworkers, Feb. 16, 2016, ECF
2 On June 16, 2011, the court stayed this action pending the final resolution by the U.S. Court of
Appeals for the Federal Circuit of the appeal of GPX Int’l Tire Corp. et al. v. United States, Consol.
Court No. 08-00285. See Order, June 16, 2011, ECF No. 106. On May 7, 2015, the court lifted
the stay and directed the parties to submit a status report. 	See Order, May, 7 2015, ECF No.
124. On June 18, 2015, the parties filed a joint status report in which TPCO Group and Bureau
of Fair Trade requested dismissal of their claims. See Joint Status Report Pursuant to Ct.’s May
7, 2015 and June 7, 2015 Orders, June 18, 2015, ECF No. 128. In the same document, TPCO
Group indicated it wished to remain in the action as Defendant-Intervenors and Bureau of Fair
Trade indicated it would no longer participate in the action in any capacity. 	See id. at 2. 	The
parties also requested an opportunity to submit supplemental briefs limited to discussing the
surviving issues that were raised in each party’s opening brief. See id. at 2–3.
The court dismissed all claims of TPCO Group and Bureau of Fair Trade with TPCO Group
remaining 	in 	the 	action 	as 	Defendant-Intervenors, 	and 	permitted 	the 	parties 	to 	submit
supplemental briefs limited to the surviving issues in the case. See Order, July 2, 2015, ECF No.
131; Order, July 2, 2015, ECF No. 132; Order, July 9, 2015, ECF No. 133.
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 4 of 58

Consol. Court No. 10-00055 	Page 5
No. 146; Reply Br. Supp. Pl. United States Steel Corp.’s Mot. J. Agency R. Under Rule
56.2, Feb. 16, 2016, ECF No. 147 (“U.S. Steel Reply”).
BACKGROUND
On April 28, 2009, in response to a petition filed by TMK, Maverick, U.S. Steel, and
other 	domestic 	companies 	(collectively 	“Petitioners”), 	Commerce 	initiated 	a
countervailing duty investigation of OCTG from the People’s Republic of China for the
period of January 1, 2008 through December 31, 2008. See Certain Oil Country Tubular
Goods from the People’s Republic of China, 74 Fed. Reg. 20,678, 20,679–80 (Dep’t
Commerce May 5, 2009) (initiation of countervailing duty investigation); see also Petitions
for the Imposition of Antidumping and Countervailing Duties: Certain Oil Country Tubular
Goods From the People’s Republic of China, PD 3 (Apr. 8, 2009) (“Petition”). 3 Commerce
selected four Chinese producers and exporters of subject merchandise as mandatory
respondents: Jiangsu Changbao Steel Tube Co., Ltd. (“Changbao”), TPCO, Wuxi
Seamless Oil Pipe Co., Ltd. (“Wuxi”), and Zhejiang Jianli Enterprise Co., Ltd. (“Jianli”).
See Respondent Selection Memorandum at 6, PD 69 (June 3, 2009). Commerce issued
its final determination on November 23, 2009, see Final Results, 74 Fed. Reg. at 64,045,
which Commerce later amended to correct certain ministerial errors resulting in final net
countervailing duty rates of 12.46% for Changbao, 10.49% for TPCO, 14.95% for Wuxi,
and 15.78% for Jianli, from which Commerce calculated an all others rate of 13.41%.
Amended Final Results, 75 Fed. Reg. at 3,204–05.
3 On May 12, 2010, Defendant submitted an index with a complete list of the confidential and
public documents comprising the administrative record, which can be found at ECF No. 40. All
further references to the administrative record may be located in that index.
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 5 of 58

Consol. Court No. 10-00055 	Page 6
The parties in this action make the following challenges to Commerce’s final
determination: (i) TMK, Maverick, and U.S. Steel (collectively “Plaintiffs”) challenge
Commerce’s decision to postpone its investigation of certain subsidies first alleged during
the course of the investigation and its refusal to investigate alleged export restraints on
steel rounds and billets; 4 (ii) TMK challenges Commerce’s refusal to investigate alleged
subsidies 	received 	by 	Changbao; 	(iii) 	Plaintiffs 	challenge 	Commerce’s 	refusal 	to
investigate 	subsidies 	prior 	to 	the 	date 	that 	China 	acceded 	to 	the 	World 	Trade
Organization (“WTO”); (iv) Maverick and U.S. Steel contest Commerce’s inclusion of
certain benchmarks for steel rounds and billets; (v) Plaintiffs challenge Commerce’s
refusal to make a quality adjustment to the benchmarks for steel rounds and billets; (vi)
U.S. Steel disputes Commerce’s freight cost adjustments to the benchmark for steel
rounds and billets; (vii) TMK and U.S. Steel argue that Commerce erroneously attributed
subsidies 	received 	by 	Changbao 	and 	Changbao’s 	subsidiary 	Jiangsu 	Changbao
Precision Steel Tube Co., Ltd. (“Precision”); (viii) U.S. Steel argues that Commerce
incorrectly attributed subsidies received by TPCO and four of TPCO’s subsidiaries; (ix)
U.S. Steel argues that Commerce failed to tie the provision of steel rounds and billets for
less-than-adequate-remuneration (“LTAR”) only to TPCO’s sales of steel pipe; and (x)
Maverick challenges Commerce’s decision not to apply facts otherwise available with an
4 In its Rule 56.2 motion, U.S. Steel additionally claims Commerce failed to countervail export
restraints on coke. See U.S. Steel Mot. 42–46. However, U.S. Steel abandoned this argument
in its supplemental brief because Commerce found export restraints on coke to be a
countervailable subsidy in a subsequent administrative review. See U.S. Steel Suppl. Br. 20.
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 6 of 58

Consol. Court No. 10-00055 	Page 7
adverse inference (“AFA”) 5 to Jianli’s purchases of steel rounds and billets. 	See TMK
Mot. 12–40; Maverick Mot. 13–49; U.S. Steel Mot. 13–42, 46–65.
For the reasons set forth below, the court finds that Commerce failed to adequately
explain its decision to use China’s WTO accession date as a cut-off for identifying and
measuring countervailable subsidies, failed to reasonably explain how the Maersk and
Jianli freight rates included in the benchmark price for steel rounds and billets are both
representative of what an importer would pay, erred in attributing subsidies received by
Precision to the sales of Changbao’s other subsidiaries and in attributing subsidies
received by four of TPCO’s subsidiaries to the sales of TPCO’s other subsidiaries, and
failed to make a determination regarding whether the provision of steel rounds and billets
at LTAR to TPCO were tied to its sales of seamless steel pipe. 	Additionally, the court
grants Defendant’s remand request for Commerce to recalculate its benchmark excluding
the SBB East Asia pricing data. 	The court sustains Commerce’s decision in all other
respects.
JURISDICTION AND STANDARD OF REVIEW
The court has jurisdiction pursuant to 19 U.S.C. § 1516a(a)(2)(B)(i) and 28 U.S.C.
§ 1581(c) (2006), 6 which grant the court authority to review actions contesting the final
determination in a countervailing duty investigation. 	The court will uphold Commerce’s
5 Although 19 U.S.C. § 1677e(a)–(b) and 19 C.F.R. § 351.308(a)–(c) (2009) each separately
provide for the use of facts otherwise available and the subsequent application of adverse
inferences to those facts, Commerce uses the shorthand term “adverse facts available” or “AFA”
to refer to Commerce’s use of such facts otherwise available with an adverse inference. 	See,
e.g., Final Decision Memo at 3–6, 55–63, 125–126.
6 Further citations to Title 28 of the U.S. Code are to the 2006 edition.
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 7 of 58

Consol. Court No. 10-00055 	Page 8
determination unless it is “unsupported by substantial evidence on the record, or
otherwise not in accordance with law.” 19 U.S.C. § 1516a(b)(1)(B)(i).
DISCUSSION
I. 	Commerce’s 	Decision 	to 	Defer 	Investigation 	of 	Certain 	New 	Subsidy
Allegations Until First Administrative Review
Plaintiffs argue that both the relevant statute and regulations preclude Commerce
from deferring its investigation of new subsidy allegations timely raised during the
investigation. 	See TMK Mot. 12–17; Maverick Mot. 13–18; U.S. Steel Mot. 30–37.
Defendant argues Commerce deferred its investigation in accordance with 19 U.S.C.
§ 1671a(b)(1) and 19 C.F.R. § 351.311(b) (2009). 7 	See Def. Resp. 76–83. 	The court
finds 	that 	Commerce’s 	postponement 	of 	its 	investigation 	of 	new 	subsidies 	is 	in
accordance with law and not an abuse of discretion.
If Commerce discovers a practice during the course of a countervailing duty
proceeding which appears to be a countervailable subsidy that was not alleged in the
petition, Commerce “shall include the practice, subsidy, or subsidy program in the
proceeding.” 	19 U.S.C. § 1677d(1). 	An interested party may submit new subsidy
allegations during the course of the investigation no later than “40 days before the
scheduled date of the preliminary determination.” 	19 C.F.R. § 351.301(d)(4)(i)(A).
Commerce shall initiate an investigation where an interested party “alleges the elements
necessary” along with “information reasonably available to the petitioner supporting those
allegations.” 19 U.S.C. § 1671a(b)(1). Commerce investigates alleged subsidies meeting
7 Further citations to Title 19 of the Code of Federal Regulations are to the 2009 edition.
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 8 of 58

Consol. Court No. 10-00055 	Page 9
such requirements “if [it] concludes that sufficient time remains before the scheduled date
for the final determination.” 	19 C.F.R. § 351.311(b). 	Should Commerce find that
insufficient time remains, it “defer[s] consideration of the newly discovered practice,
subsidy, or subsidy program until a subsequent administrative review, if any.” 19 C.F.R.
§ 351.311(c).
On 	July 	30, 	2009, 	Petitioners 	timely 	submitted 	new 	subsidy 	allegations.
Commerce initiated investigations into nine of the alleged subsidies. See Memorandum
Regarding New Subsidy Allegations at 3–12, PD 209 (Sept. 18, 2009) (“New Subsidy
Allegations Memo”). However, Commerce ultimately postponed its investigation of these
newly alleged subsidies until the first administrative review because “the number and
complexity of the newly alleged subsidies, and the short time the Department has to
complete its investigation makes it impossible to conduct a meaningful examination of the
subsidies validly alleged by petitioners.” 	Memorandum Regarding Status of New Subsidy
Allegations at 6, PD 260 (Oct. 21, 2009) (“Status of New Subsidy Allegations”).
Commerce did not act contrary to law or abuse its discretion by postponing its
investigation into the new subsidy allegations because it reasonably determined that there
was insufficient time remaining to investigate the new subsidy allegations. An interested
party may submit new subsidy allegations during the course of the investigation no later
than “40 days before the scheduled date of the preliminary determination.” 	19 C.F.R.
§ 351.301(d)(4)(i)(A). 	The plain meaning of this regulatory provision imposes a burden
on the interested party to timely raise new subsidy allegations, but it does not require
Commerce to investigate all timely raised allegations. This regulatory provision must be
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 9 of 58

Consol. Court No. 10-00055 	Page 10
read together with 19 C.F.R. § 351.311(b) which obligates Commerce to investigate
potentially countervailable subsidies first alleged during a proceeding if it “concludes that
sufficient time remains before the scheduled date for the final determination.” 19 C.F.R.
§ 351.311(b). 	Commerce has discretion under the regulation to determine whether
“sufficient time remains” in a proceeding to investigate new subsidy allegations. 8 	Id.
Thus, the question is whether Commerce abused its discretion in determining that
insufficient time remained in the proceeding to complete its investigation of the newly
alleged subsidies. The court finds Commerce has not.
Commerce 	explained 	that 	the 	subsidy 	allegations 	cover 	complex 	subsidies
requiring a laborious and difficult investigation. Status of New Subsidy Allegations at 5.
Commerce specifically determined that investigating the provision of land for LTAR is
complicated 	because 	it 	requires 	“investigat[ing] 	the 	pricing 	policies 	of 	the 	local
government providing the land-use rights.” 	Id. 	Commerce added that even the more
straightforward alleged subsidy programs were provided by different levels of the PRC
government (e.g., national, regional, municipal), which would further add to the time
necessary to develop a proper investigative record. Id. Commerce cited numerous tasks
it would have had to complete in the short time remaining given that the deadline in the
8 Plaintiffs argue that the regulatory deadline for new subsidy allegations stripped Commerce of
its discretion if the allegations are timely made because the 40-day regulatory deadline ensures
that Commerce is given sufficient time for its investigation. TMK Mot. 13–14; Maverick Mot. 14–
18; U.S. Steel Mot. 30–32. While the submission deadline for new subsidy allegations may have
been intended to inform Commerce of potentially countervailable subsidies sufficiently early in the
proceeding, Commerce’s regulations do not specify how much time is sufficient to investigate
such subsidies because “the time necessary to investigate a particular subsidy practice will vary
from case to case.” Antidumping Duties; Countervailing Duties, 62 Fed. Reg. 27,296, 27,342–43
(Dep’t Commerce May 19, 1997).
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 10 of 58

Consol. Court No. 10-00055 	Page 11
countervailing 	duty 	proceeding 	had 	not 	been 	aligned 	with 	the 	antidumping 	duty
proceeding. 9 	Id. 	Commerce also relied on the fact the subsidies alleged had not
previously been investigated. 	Id. at 5–6. 	Based on Commerce’s workload in the
investigation, the number of new subsidy allegations, the complexity of those allegations,
and the limited time period in which to complete its investigation, the court cannot say
that Commerce unreasonably determined it lacked sufficient time to investigate these new
subsidies. 10
9 Section 1671d(a)(1) of Title 19 of the U.S. Code provides that petitioners may request that the
final determination in a countervailing duty and antidumping duty investigation be due at the same
time if the investigations are initiated simultaneously and involve the same class or kind of
merchandise. 	19 U.S.C. § 1671d(a)(1). 	Because the statutory timeframe for completing a
countervailing duty investigation is shorter than in an antidumping duty investigation, aligning the
deadlines in parallel antidumping and countervailing duty investigations affects Commerce’s
timeframe to complete the countervailing duty investigation. Commerce noted that because the
petitioners opted not to align the parallel antidumping and countervailing duty investigations, the
deadline in the countervailing duty investigation was November 23, 2009. 	See Status of New
Subsidy Allegations at 3–5.
Plaintiffs 	contest 	Commerce’s 	reliance 	on 	Petitioners’ 	decision 	not 	to 	align 	the
antidumping and countervailing duty proceedings in deciding to postpone the investigation. TMK
Mot. 16–17; Maverick Mot. 18; U.S. Steel Mot. 34. 	However, Commerce did not postpone its
investigation because the proceedings were not aligned, but rather because they were too
complex. See Status of New Subsidy Allegations at 5. Commerce merely noted the decision not
to align had the consequence of giving Commerce a smaller window of time in which to complete
its investigation. See id. At oral argument, TMK argued that Commerce penalized petitioners for
choosing not to align the proceedings. See Oral Arg., 00:09:07–00:14:15, May 4, 2016, ECF No.
151. However, TMK has not offered any record evidence to substantiate this claim.
10 In deciding to defer its investigation of these subsidies, Commerce in part relied upon previous
court decisions in Bethlehem Steel Corp. v. United States, 25 CIT 307, 140 F. Supp. 2d 1354
(2001) and Royal Thai Gov’t v. United States, 28 CIT 1218, 341 F. Supp. 2d 1315 (2004). See
Status of New Subsidy Allegations at 3–5. 	Plaintiffs argue that Commerce’s reliance upon
Bethlehem Steel and Royal Thai Gov’t is misplaced because, in both cases, Commerce deferred
its investigation of untimely new subsidy allegations, while here petitioners raised new subsidy
allegations in a timely manner. 	TMK Mot. 16; Maverick Mot. 17–18; U.S. Steel Mot. 35–36.
However, nothing in these cases suggests that Commerce does not retain discretion to postpone
investigating timely raised new subsidy allegations.
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 11 of 58

Consol. Court No. 10-00055 	Page 12
Maverick argues that Commerce’s acceptance of a significant amount of new
factual information submitted by the respondents at the “eleventh hour” contradicts its
position that it lacked time to complete its investigation. 	Maverick Mot. 15. 	Maverick
suggests that Commerce was required to investigate the new subsidy allegations rather
than accepting and reviewing the new factual information. However, it is not appropriate
for the court to substitute its judgment for the agency’s regarding the allocation of
resources here. 	Torrington Co. v. United States, 68 F.3d 1347, 1351 (Fed. Cir. 1995).
Further, Commerce’s acceptance of new factual information is not relevant to evaluating
the reasonableness of Commerce’s determination that it lacked sufficient time to
investigate new subsidies given their novelty and complexity. 11
TMK argues that Commerce acted contrary to its own practice by declining to
investigate timely raised new subsidy allegations. TMK Mot. 16. TMK does not point to
any case in which Commerce articulates such a practice, but instead asserts that it “can
find no case in which the Department refused to investigate allegations that were timely
under its regulations and that otherwise constituted proper subsidy allegations.” 	TMK
Mot. 16. Even if Commerce has such a practice, it may provide a reasonable explanation
for departing from it. See Save Domestic Oil, Inc. v. United States, 357 F.3d 1278, 1283–
84 (Fed. Cir. 2004) (citing Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto.
11 Maverick cites to Zhejiang Native Produce & Animal By-Products Imp. & Exp. Corp. v. United
States, 33 CIT 1125, 1129, 637 F. Supp. 2d 1260, 1263–64 (2015), arguing that Commerce
cannot base its decision to postpone investigating timely raised new subsidy allegations on
workload concerns. See Maverick Mot. 17–18. However, the issue before the court in Zhejiang
Native Produce involved the standard for limiting the number of respondents that are individually
examined, not the “sufficient time remaining” standard under 19 C.F.R. § 351.311(c). 	See
Zhejiang Native Produce, 33 CIT at 1129, 637 F. Supp. 2d at 1263–64.
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 12 of 58

Consol. Court No. 10-00055 	Page 13
Ins. Co., 463 U.S. 29, 42 (1983)). 	Commerce reasonably explained why there was
insufficient time in this case to investigate the alleged subsidies even though the
allegations were timely submitted.
II. 	Commerce’s Refusal to Investigate Certain New Subsidy Allegations
While Commerce deferred its investigation of the subsidies discussed above,
Commerce declined to investigate other new subsidy allegations. 12 Plaintiffs argue that
Commerce’s refusal to investigate alleged export restraints on steel rounds and billets
based 	on 	a 	heightened 	initiation 	standard 	is 	contrary 	to 	law 	and, 	alternatively,
unsupported by substantial evidence. See TMK Mot. 17–25; Maverick Mot. 19–23; U.S.
Steel Mot. 37–42. 	TMK also argues that Commerce’s refusal to investigate land-use
rights, 	a 	steel 	mill, 	and 	equipment 	allegedly 	provided 	to 	Changbao 	at 	LTAR 	is
unsupported by substantial evidence and contrary to law. 	See TMK Mot. 25–32.
Commerce’s refusal to investigate each of these alleged subsidies is supported by
substantial evidence and in accordance with law.
A. 	Commerce’s Refusal to Investigate Alleged Export Restraints on Steel
Rounds and Billets
An investigation into a particular subsidy program is warranted if an interested
party, 	using 	information 	reasonably 	available 	to 	it, 	sufficiently 	alleges 	that: 	(1) 	a
12 Commerce declined to investigate the following new subsidy allegations: (1) alleged export
restraints on steel rounds and billets, see New Subsidy Allegations Memo at 2–3; (2) Changbao’s
alleged receipt of land-use rights from the Government of China for LTAR, see id. at 6–7; and (3)
Changbao’s alleged receipt of a steel mill and equipment from a state owned enterprise,
Changzhou Baosteel, at LTAR. See id. at 12–13.
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 13 of 58

Consol. Court No. 10-00055 	Page 14
government or public authority has provided a financial contribution, 13 (2) to a specific
enterprise or industry, 14 and (3) a benefit is conferred upon the recipient of the financial
contribution. 15 	See 19 U.S.C. §§ 1671a(b)(1), 1677(5)–(5A). 	Upon receipt of an
allegation, Commerce determines whether the petition alleges the necessary elements
and contains information supporting the allegations. 	19 U.S.C. § 1671a(c)(1)(A).
Commerce applies the same standard to subsidies not raised in the petition that are
13 The statute defines “financial contribution” as
(i) 	the direct transfer of funds, such as grants, loans, and equity infusions, or the
potential direct transfer of funds or liabilities, such as loan guarantees,
(ii) foregoing or not collecting revenue that is otherwise due, such as granting tax
credits or deductions from taxable income,
(iii) providing goods or services, other than general infrastructure, or
(iv) purchasing goods.
19 U.S.C. § 1677(5)(D).
14 A subsidy is specific if it is conditioned upon export performance or upon preferring domestic
goods over imported goods. 19 U.S.C. § 1677(5A)(B)–(C). The statute further provides that a
subsidy can be specific as a matter of law (de jure) or specific as a matter of fact (de facto). 19
U.S.C. § 1677(5A)(D). 	A subsidy is specific as a matter of law if “the authority providing the
subsidy, or the legislation pursuant to which the authority operates, expressly limits access to the
subsidy to an enterprise or industry.” 	19 U.S.C. § 1677(5A)(D)(i). 	A subsidy is specific as a
matter of fact if: (i) the number of actual recipient enterprises or industries is limited; (ii) the subsidy
is predominantly used by a particular enterprise or industry; (iii) a large amount of the subsidy is
disproportionately received by a particular enterprise or industry; or (iv) the subsidy is
administered in a manner that indicates an enterprise or industry is favored over others. See 19
U.S.C. § 1677(5A)(D)(iii). A subsidy is also considered specific if it “is limited to an enterprise or
industry located within a designated geographical region within the jurisdiction of the authority
providing the subsidy.” 19 U.S.C. § 1677(5A)(D)(iv).
15 In relevant part, the statute views the following as a “benefit conferred”:
(iv) 	in the case where goods or services are provided, if such goods or services
are provided for less than adequate remuneration, and in the case where
goods are purchased, if such goods are purchased for more than adequate
remuneration.
19 U.S.C. § 1677(5)(E)(iv). The statute further provides that “the adequacy of remuneration shall
be determined in relation to prevailing market conditions for the good or service being provided.”
19 U.S.C. § 1677(5)(E).
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 14 of 58

Consol. Court No. 10-00055 	Page 15
alleged for the first time during the course of an investigation. 	See New Subsidy
Allegations Memo at 2.
While export restraints are not financial contributions that directly provide goods or
services at LTAR, such restraints may function in a manner that indirectly confers a
benefit 	on 	producers. 	Commerce 	may 	countervail 	export 	restraints 	in 	these
circumstances. 16 See 19 U.S.C. § 1677(5)(B)(iii), (5)(D)(iii), (5)(E)(iv); see also 19 U.S.C.
§ 1671(a). 	Commerce has developed a practice of requiring petitioners to demonstrate
a long-term correlation by presenting historical data before initiating an investigation into
export restraints that allegedly constitute countervailable subsidies. 	See, e.g., Leather
From Argentina, 55 Fed. Reg. 40,212, 40,213–14 (Dep’t Commerce Oct. 2, 1990) (final
affirmative countervailing duty determination and countervailing duty order); 17 Certain
Softwood Lumber Products from Canada, 57 Fed. Reg. 22,570, 22,604–605 (Dep’t
Commerce May 28, 1992) (final affirmative duty determination); Certain Hot-Rolled
Carbon Steel Flat Products From Argentina, India, Indonesia, South Africa, and Thailand,
65 Fed. Reg. 77,580, 77,584 (Dep’t Commerce Dec. 12, 2000) (notice of initiation of
16 The Statement of Administrative Action (“SAA”) accompanying the Uruguay Round Agreements
Act acknowledged Commerce’s past treatment of export restraints and did not reject Commerce’s
view that 19 U.S.C. § 1677(5)(B)(iii) encompasses indirect subsidies such as export restraints so
long as the standard under that statutory provision has been met. SAA, H.R. Doc. No. 103-316,
vol. 1, at 925–26, reprinted in 1994 U.S.C.C.A.N. 4040, 4239–40.
17 In Leather From Argentina Commerce “held petitioners to an extremely high standard of proof”
in alleging that an Argentine cattle hide embargo was a countervailable subsidy, requiring
petitioners “to substantiate their claim that the embargo had a direct and discernible effect on hide
prices in Argentina.” 	Leather From Argentina, 55 Fed. Reg. 40,212, 40,213 (Dep’t Commerce
Oct. 2, 1990) (final affirmative countervailing duty determination and countervailing duty order).
Commerce found “[t]he historical comparison of the U.S. and Argentine hide price data for the
period 1962 to 1989 shows a clear link between the imposition of the 1972 embargo and a
divergence between U.S. and Argentine hide prices.” Id.
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 15 of 58

Consol. Court No. 10-00055 	Page 16
countervailing duty investigations); Coated Free Sheet Paper from Indonesia, 72 Fed.
Reg. 60,642 (Dep’t Commerce Oct. 25, 2007) (final affirmative countervailing duty
determination).
Petitioners alleged that the Government of China’s (“GOC”) tax increase on
exports of steel billets, including steel rounds, from fifteen percent to twenty-five percent,
effective January 1, 2008, had the effect of substantially increasing the domestic supply
of steel rounds in the first two months of 2008. 	Country-wide New Subsidy Allegations
for the Provision of Steel Rounds for Less Than Adequate Remuneration at 2–6, PD 130
(July 30, 2009) (“Petitioners’ New Subsidy Allegations”). 	In an effort to establish a
correlation between the export tax increase and the price decrease, Petitioners observed
that from 2006 to approximately March 2008 “[s]teel billets exports fell 92.6 percent on an
annual basis in the first two months of the year and were zero in the month of February.”
Id. at 3. Petitioners additionally noted that, as a result of the dramatic decrease in exports,
“world steel prices rose by 38.1 percent year on year to 221.9 points, compared with an
increase in China’s domestic price index of 29.61 percent to 142.31 points.” 	Id. at 3–4.
Petitioners therefore claimed that Chinese producers received a subsidy because the
export tax had the effect of causing Chinese steel prices to increase at a slower pace
than the price increase for steel prices worldwide.
Commerce declined to investigate the alleged export restraints because the
information does not show a sufficient relationship between the price difference and the
export restraints. 	Final Decision Memo at 113. 	Specifically, Commerce referenced its
practice in prior cases that it requires “long-term historical price comparisons that
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 16 of 58

Consol. Court No. 10-00055 	Page 17
demonstrate[ ] a clear link between the imposition of the [restraint] and the divergence of
prices” to investigate subsidy allegations arising from export restraint programs. Id.
Commerce’s determination not to investigate the Petitioners’ export restraint
allegations is reasonable. 	Commerce’s practice required Petitioners to support their
allegation of an indirect subsidy with long term historical pricing data, and Petitioners
provided less than two years of data. Final Decision Memo at 113 (citing Leather From
Argentina, 55 Fed. Reg. 40,212). 	“[I]n the case of an indirect subsidy, evidence of a
causal nexus between the program and the benefit is also required.” 	AK Steel Corp. v.
United States, 192 F.3d 1367, 1372 (Fed. Cir. 1999). Petitioners were unable to offer the
sort of long-term historical data that Commerce requires to sufficiently allege such a
causal relationship. See Petitioners’ New Subsidy Allegations at 3–4. Thus, Commerce
reasonably determined that Petitioners’ export restraint allegation failed to allege the
necessary elements for the imposition of countervailing duties. 18
U.S. Steel argues that “since the export restraints in question had only been in
place since January 1, 2007, it is difficult to imagine how additional historical pricing
information would have been at all relevant to the Department’s analysis.” 	U.S. Steel
Mot. 40–41. 	Maverick echoes this argument, claiming that “domestic steel round and
billet pricing in China was not consistently available prior to 2006.” 	Maverick Mot. 22.
18 In its supplemental brief, U.S. Steel argues that the court recently confirmed that “‘[t]he bar for
launching a [countervailing duty] inquiry is low.’” 	See U.S. Steel Suppl. Br. 16 (quoting RZBC
Grp. Shareholding Co. v. United States, 39 CIT __, 100 F. Supp. 3d 1288, 1292 (2015)).
However, that case did not involve an allegation of indirect subsidies, such as an export tax, where
it is Commerce’s practice to hold petitioners to a higher standard of proof before initiating an
investigation. See, e.g., Leather From Argentina, 55 Fed. Reg. at 40,213–14.
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 17 of 58

Consol. Court No. 10-00055 	Page 18
Commerce is not obligated to initiate an investigation based on speculative allegations,
and U.S. Steel and Maverick point to nothing in the statute limiting Commerce’s discretion
to set a reasonable threshold for demonstrating a causal relationship between an export
restraint program and pricing trends. 	Commerce is required to “examine the accuracy
and adequacy of the evidence provided in the petition,” 19 U.S.C. § 1671a(c)(1)(A), and
establishing a causal nexus reasonably follows from that statutory mandate for indirect
subsidy allegations. 	Notwithstanding the difficulty in obtaining supporting evidence,
Commerce’s practice required Petitioners to sufficiently allege that the export tax
functioned as a countervailable subsidy and to make some threshold showing of a causal
relationship. 	Commerce found Petitioners failed to do so and reasonably declined to
investigate the export restraints allegation.
B. 	Commerce’s 	Refusal 	to 	Investigate 	Land-Use 	Rights 	Allegedly
Provided to Changbao for LTAR
TMK argues that Commerce’s refusal to investigate land-use rights allegedly
provided to Changbao by the GOC at LTAR is unsupported by substantial evidence and
contrary to law. See TMK Mot. 25–29. Defendant disagrees because Commerce found
TMK failed to allege that the land-use rights provided to Changbao were specific. 	See
Def. Resp. 98–101.
A subsidy is considered specific, among other reasons, if it “is limited to an
enterprise 	or 	industry 	located 	within 	a 	designated 	geographical 	region 	within 	the
jurisdiction of the authority providing the subsidy,” or it is administered in a manner that
indicates 	an 	enterprise 	or 	industry 	is 	favored 	over 	others. 	19 	U.S.C.
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 18 of 58

Consol. Court No. 10-00055 	Page 19
§ 1677(5A)(D)(iii)(IV)–(iv). 	TMK alleged during the course of the investigation that
Changbao received land-use rights from the GOC for LTAR. 	See New Subsidies
Allegations on Behalf of TMK IPSCO, V&M Star L.P., Wheatland Tube Corp., Evraz
Rocky Mountain Steel, and the United Steelworks in the Countervailing Duty Investigation
of Certain Oil Country Tubular Goods From the People’s Republic of China at 14, CD 31
(July 30, 2009) (“TMK New Subsidy Allegations re: Changbao”). 	In support of its
allegation, TMK submitted information to show that Changzhou Baogang Steel Pipe Co.,
Ltd. 	(“Changzhou 	Baosteel”), 	the 	state 	owned 	enterprise 	(“SOE”) 	predecessor 	of
Changbao, was given rights to land designated for industrial use by the Changzhou
municipal government in Jiangsu Province. TMK New Subsidy Allegations re: Changbao
at 14, Attachs. 11, 13.
Commerce reasonably refused to investigate the provision of land-use rights to
Changbao for LTAR because TMK failed to allege that the program was specific. 	See
Final Decision Memo at 124. TMK argued that, according to 19 U.S.C. § 1677(5A)(D)(iv),
the land-use rights are specific to Changbao because it received the rights as a result of
being located in the jurisdiction of the granting authority, the Changzhou municipal
government. TMK New Subsidy Allegations re: Changbao at 15. After examining TMK’s
allegation, Commerce found that TMK’s allegation only included information pertaining to
the location of one of Changbao’s subsidiaries and failed to show that Changbao is
located within the jurisdiction of the Changzhou municipal government. 	See Final
Decision Memo at 124; see also New Subsidy Allegations at 7.
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 19 of 58

Consol. Court No. 10-00055 	Page 20
TMK also argued the land-use rights provided to Changbao are specific according
to 19 U.S.C. § 1677(5A)(D)(iii)(IV) because the rights were valued at 63,542,750
renmimbi by the government, but Changbao paid less than 3% of the value for such rights.
TMK New Subsidy Allegations re: Changbao at 15. TMK submitted information showing
that Changbao allegedly received land-use rights at less than the appraised value,
however, TMK did not submit information to show that the government favored Changbao
over other enterprises or industries in providing those land-use rights. 	Commerce
reasonably found this allegation to be purely speculative because TMK failed to offer any
support. 	See Final Decision Memo at 124; New Subsidy Allegations Memo at 7.
Commerce’s determination not to investigate these subsidy allegations is reasonable
because TMK failed to allege specificity.
C. 	Commerce’s 	Refusal 	to 	Investigate 	a 	Steel 	Mill 	and 	Equipment
Allegedly Provided to Changbao for LTAR
TMK argues that Commerce’s refusal to investigate the alleged provision of a steel
mill and equipment to Changbao by the GOC for LTAR is unsupported by substantial
evidence and contrary to law. See TMK Mot. 29–32. In response, Defendant argues that
Commerce correctly refused to investigate the alleged subsidy because TMK failed to
sufficiently allege with supporting evidence that a benefit had been conferred upon
Changbao. See Def. Resp. 96–98. The court agrees with Defendant.
TMK alleged during the course of the investigation that Changbao received a steel
mill and equipment from the GOC for LTAR. 	See TMK New Subsidy Allegations re:
Changbao at 6–7. To show that the GOC made a financial contribution that conferred a
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 20 of 58

Consol. Court No. 10-00055 	Page 21
benefit upon Changbao, TMK alleged that Changzhou Baosteel obtained the mill and
equipment when [[ 	]] sold all its shares
in Changzhou Baosteel to [[ 	]] who then organized
Changbao as a private company. See id. at 6 (citing Questionnaire Response of Jiangsu
Changbao Steel Tube Co., Ltd. and Jiangsu Changbao Precision Steel Tube Co., Ltd. at
4, CD 22 (July 22, 2009) (“Changbao Questionnaire Response”)). 	TMK alleged that
Changbao effectively received the steel mill and equipment at LTAR because “Changbao
has provided no evidence that any price was paid for its predecessor’s assets” when
Changbao was privatized. Id. at 7. After examining TMK’s allegation, Commerce found
it insufficient on a prima facie basis. New Subsidy Allegations Memo at 13.
Commerce found that simply alleging privatization was insufficient to show that a
benefit was conferred upon Changbao. See New Subsidy Allegations Memo at 13; Final
Decision Memo at 124. 	Commerce found that neither Changbao’s questionnaire
response regarding the company’s history nor any other record evidence supports that
Changbao did not pay for the mill and equipment. See Final Decision Memo at 124. TMK
submitted 	no 	other 	information 	supporting 	its 	allegation. 	Therefore, 	Commerce
reasonably determined that TMK’s allegation was purely speculative and insufficient to
initiate an investigation.
III. 	Commerce’s Refusal to Identify and Measure Subsidies Prior to the Date
China Acceded to the WTO
Plaintiffs challenge Commerce’s determination to uniformly apply the date of
China’s accession to the WTO, i.e., December 11, 2001, as the earliest date it could
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 21 of 58

Consol. Court No. 10-00055 	Page 22
identify and measure subsidies by the Chinese government in this countervailing duty
investigation as contrary to law. See TMK Mot. 33–36; U.S. Steel Mot. 26–30; Maverick
Mot. 34–42. 	Defendant argues that Commerce’s application of this uniform cut-off date
is a reasonable exercise of its discretion to allocate investigative resources. 	See Def.
Resp. 45–49. Commerce has failed to reasonably explain its adoption of a uniform cut-
off date for the identification and measurement of subsidies.
Commerce arbitrarily picked China’s accession to the WTO as the date when
economic conditions in China made subsidies identifiable and measurable. 	The statute
requires that Commerce impose countervailing duties on merchandise from an NME
country if subsidies can be identified and measured. 19 	See 19 U.S.C. § 1671(f)(1)–(2)
(2012). 20 	Here, Commerce found that reforms in the years leading up to China’s WTO
accession brought changes in the Chinese economy that permit it to identify and measure
countervailable subsidies. 	Final Decision Memo at 52. 	Yet, Commerce articulates no
relationship between China’s WTO accession date and China’s implementation of such
reforms. 	In fact, Commerce acknowledged there “was not a single moment or single
19 When allocating the benefit for nonrecurring subsidies, Commerce normally allocates the
benefit “to a firm over the number of years corresponding to the average useful life (“AUL”) of
renewable physical assets.” 19 C.F.R. § 351.524(b)(1). Commerce determined the AUL for the
production assets for subject merchandise is 15 years. Final Decision Memo at 6. Therefore, by
selecting December 11, 2001 as a cut-off date for identifying and measuring subsidies,
Commerce may be failing to allocate subsidies attributable to years of the AUL of production
assets prior to the cut-off date.
20 Although this countervailing duty investigation was initiated on April 28, 2009, the 2012 version
of 19 U.S.C. § 1671(f) applies here because the March 13, 2012 amendment applies to all
countervailing duty proceedings initiated on or after November 20, 2006 and all civil actions
relating to such proceedings. 	See 19 U.S.C. § 1671 note (2012) (Effective and Applicability
Provisions 2012 Acts).
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 22 of 58

Consol. Court No. 10-00055 	Page 23
reform law that suddenly permitted [it] to find countervailable subsidies” in the Chinese
economy. 	Id. at 53. 	Commerce also acknowledged the reform process “may take hold
in some sectors of the economy or areas of the country before others.” 21 Id. at 54. None
of the reforms Commerce identified occurred on the date of China’s accession to the
WTO.
Commerce has not explained why China’s accession date was the first date where
subsidies were identifiable and measurable, although the statute requires Commerce to
countervail subsidies when they can be identified and measured. 	See 19 U.S.C.
§ 1671(f)(1)–(2) (2012). Therefore, on remand Commerce must investigate each subsidy
program and allocate subsidies beginning on the first date it could identify and measure
the subsidy considering the particular program in question and the impact of relevant
economic reforms on that program. 	Administrative burden alone does not excuse
Commerce of this statutory responsibility.
Defendant argues Commerce chose China’s WTO accession date because it
corresponds to the time the most significant Chinese economic reforms occurred. 	Def.
21 Commerce recognized that China’s reform process was uneven because it noted certain
reforms, such as the elimination of price controls, had been in place for decades, while other
areas continue to exhibit non-market characteristics today. 	Final Decision Memo at 54 (citing
Countervailing Duty Investigation of Coated Free Sheet Paper from People’s Republic of China –
Whether the Analytical elements of the Georgetown Steel Opinion are Applicable to China’s
Present 	Day 	Economy 	at 	3, 	C-570-907, 	(Mar. 	29, 	2007), 	available 	at
http://ia.ita.doc.gov/download/nme-sep-rates/prc-cfsp/china-cfs-georgetown-applicability.pdf last
visited June 4, 2016) (“Georgetown Steel Memo”)). Commerce cited its Georgetown Steel Memo,
which found subsidies identifiable and measureable, recognizing five major categories of reforms
but also that certain indirect government controls over aspects of the economy remained in place
despite these reforms. Georgetown Steel Memo at 5–8. Therefore, Commerce implied that a full
range of market reforms is not a necessary precondition to the identification and measurement of
subsidies.
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 23 of 58

Consol. Court No. 10-00055 	Page 24
Resp. 48. However, Commerce identifies no specific economic reforms that occurred on
that date. 	The only fact Commerce mentions that relates to China’s accession date is
that China’s WTO Accession Protocol contemplates application of the countervailing duty
law. Final Decision Memo at 52. Commerce’s analysis indicates the reforms themselves,
not China’s recognition that countervailing duty law applies to it, controls when Commerce
can identify and measure subsidies. 22 	See id. 	Commerce also recognized that many
reforms, including the elimination of price controls on most products, were in place before
China’s accession to the WTO. Id. at 54. Therefore, Commerce has not explained why
China’s WTO accession date was the first date it could identify and measure subsidies in
the Chinese economy.
IV. 	Benchmark Calculation for Steel Rounds and Billets
A. 	Inclusion of London Metal Exchange Benchmark Data
U.S. Steel and Maverick challenge Commerce’s determination to include the
London Metal Exchange (“LME”) Far East and Mediterranean benchmark data in its
benchmark calculation. 	U.S. Steel Mot. 57–60; Maverick Mot. 32–34. 	Defendant
counters that Commerce properly included the LME benchmarks in its benchmark
calculations for steel rounds because there is no record evidence to support the notion
22 Defendant argues that China’s recognition in the Accession Protocol that assumed obligations
with respect to subsidies supports “‘the notion the PRC economy had reached the stage where
subsidies and disciplines on subsidies’” were identifiable and measurable. Def. Resp. 47 (quoting
Final Decision Memo at 53). Even if it were true that China’s recognition of the Accession Protocol
signified it felt countervailing duty law could apply to it, it would not mean that China’s accession
date was the first date when Commerce could identify and measure Chinese subsidies.
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 24 of 58

Consol. Court No. 10-00055 	Page 25
that all reported steel round purchases were of OCTG-grade steel rounds. 	Def. Resp.
118. The court sustains Commerce’s determination.
Where goods are provided for LTAR, a benefit shall normally be treated as
conferred upon the recipient. 	19 U.S.C. § 1677(5)(E). 	If actual market prices are
unavailable, Commerce will measure remuneration against “a world market price where
it is reasonable to conclude that such price would be available to purchasers in the country
in question,” i.e., a tier two benchmark price. 23 19 C.F.R. § 351.511(a)(2)(ii). Commerce
averages prices where there is more than one commercially available world market price,
“making due allowance for factors affecting comparability.” Id.
Commerce 	included 	the 	LME 	benchmarks 	on 	the 	record 	in 	its 	benchmark
calculation for steel rounds and billet. Final Decision Memo at 77. Commerce reasoned
that it asked respondents to report purchases of all “steel rounds (e.g., billets, blooms)
because petitioners alleged the terms “billets” and “rounds” were used interchangeably.
Final Decision Memo at 77. Commerce included the LME benchmark because it included
all purchases in its LTAR calculation. Id. Commerce’s regulation requires that it average
all world benchmark data on the record to measure the adequacy of remuneration. See
23 Commerce measures the adequacy of remuneration using: (1) market prices for the good from
actual transactions in the subject country; (2) a world market price for the good that is
commercially available to purchasers in the subject country; or (3) government-set prices that are
consistent with market principles. 19 C.F.R. § 351.511(a)(2). Because Commerce prefers actual
market-determined prices as an appropriate benchmark price from these options, Commerce
refers to market-determined prices as “tier one” benchmarks and each option further removed
from an actual market price as a numbered “tier,” corresponding to Commerce’s level of
preference, as a shorthand. 	See, e.g., Final Decision Memo at 13–14. 	Thus, a world market
price where no actual market-determined price is available to purchasers is also referred to as a
“tier two” benchmark.
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 25 of 58

Consol. Court No. 10-00055 	Page 26
19 C.F.R. § 351.511(a)(2)(ii). 	Neither U.S. Steel nor Maverick argue that the LME
benchmark pricing is not commercially available to producers in China. 	Although
Commerce’s regulation requires it to make allowance for factors affecting comparability
in its benchmark calculation, see id., U.S. Steel and Maverick cite no authority requiring
Commerce to exclude a commercially available benchmark price to measure the
adequacy of remuneration for respondents’ purchases of steel inputs.
U.S. Steel and Maverick argue that Commerce erred in including the LME
benchmarks in its average calculation because record evidence shows that LME data
reflects standard commodity grade steel billets, which are not generally used to produce
OCTG.24 	U.S. Steel Br. 58; Maverick Br. 32. 	Commerce noted that it requested that
respondents report purchases other than rounds used to produce OCTG “based on
24 Maverick also argues that Commerce must exclude the LME benchmarks from its benchmark
calculations because it includes Chinese billet pricing, which distorts the benchmark and benefit
analysis because the benchmark used to measure the benefit includes subsidized Chinese billet
prices. 	Maverick Mot. 33 (citing Maverick Submission of New Relevant Information at Attach.
Petitioners’ Surrogate Value Submission at Tab R at Attach. “LME Steel Billet Futures Brand
Registration”, PD 236 (Oct. 9, 2009) (“Maverick New Relevant Information”)). Defendant counters
that Maverick failed to raise this argument before Commerce in the underlying proceeding. Def.
Resp. 119. “[T]he Court of International Trade shall, where appropriate, require the exhaustion
of administrative remedies.” 	28 U.S.C. § 2637(d). 	If a party fails to exhaust available
administrative 	remedies 	before 	the 	agency, 	“judicial 	review 	of 	Commerce’s 	actions 	is
inappropriate.” See Consol. Bearings Co. v. United States, 348 F.3d 997, 1003 (Fed. Cir. 2003).
Despite the fact that Commerce only elected to include LME pricing in its benchmark calculation
in its final results, Maverick was on notice that Commerce was considering including LME pricing
well before Commerce issued its final determination. 	Maverick submitted this information on
October 9, 2009, well before it submitted its case brief on November 11, 2009 challenging the
inclusion of LME benchmark data. See Maverick New Relevant Information; Maverick Case Brief,
PD 289 (Nov. 9, 2009). Maverick also challenged the inclusion of LME benchmarks in its rebuttal
brief on the grounds that the data lacks comparability in terms of quality and is distortive because
it includes only data for the second half of the period of investigation. See Maverick Rebuttal Brief
at 32–34, PD 309 (Nov. 16, 2009). However, Maverick did not raise this objection. Id. Therefore,
the court does not address Maverick’s argument.
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 26 of 58

Consol. Court No. 10-00055 	Page 27
petitioners’ allegations that interchanged the terms ‘billets’ and ‘rounds.’” Final Decision
Memo at 77.
U.S. Steel’s argument to exclude benchmark pricing that includes standard steel
billets depends upon the assumption that respondents purchased only OCTG-grade steel
rounds. If respondents used steel inputs that are included in the LME pricing data, then
Commerce’s regulations require that it average all prices that are commercially available
in the producing country. 	See 19 C.F.R. § 351.511(a)(2)(ii). 	None of the respondents’
questionnaire responses indicate that they produced solely OCTG. See TPCO Response
to the Department of Commerce’s CVD Questionnaire at 8–9, PD 111 (July 21, 2009)
(reporting TPCO produces mainly petroleum casing pipe, oil tubing, line pipes, boiler
pipes, and mechanical pipes); Wuxi Seamless Oil Pipe Co. Ltd. CVD Questionnaire
Response at 7, PD 112 (July 20, 2009) (reporting Wuxi primarily produces OCTG and
drill pipe, but also produces line pipe, tubes for perforating guns, plain-end pipes, heat
insulated tubings, seamless pressure pipes used in high-pressure boiler, and other pipe
products while an affiliate sells green pipe, high pressure boiler pipe, and drill pipe); Jianli
Group’s Initial CVD Questionnaire Response at 25–26, PD 112 (July 21, 2009) (reporting
Jianli’s billet purchases for production of OCTG and bearing tube). Although U.S. Steel
asserts that the questionnaire responses indicate all respondents primarily produce
seamless-pipe products, U.S. Steel cites no record evidence that the seamless-pipe
products respondents reported producing require only OCTG-quality rounds or that the
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 27 of 58

Consol. Court No. 10-00055 	Page 28
products included in the LME benchmarks cannot be used to make such products. 25
Neither U.S. Steel nor Maverick cite any record evidence that made it unreasonable for
Commerce to conclude that respondents purchased products other than OCTG-quality
billets.
U.S. Steel also argues that Commerce’s justification for including the LME
benchmarks data fails to justify its determination to include benchmarks reflecting
standard commodity billets because the only non-OCTG quality rounds reported by
respondents were seamless pipe quality rounds. U.S. Steel Mot. 59. Although U.S. Steel
correctly notes that the record does not contain evidence that respondents reported steel
rounds not used for seamless price production, id., U.S. Steel points to no record
evidence detracting from the notion that the steel billets included in the LME benchmark
pricing could be used in seamless pipe production. 26
25 U.S. Steel cites evidence that only premium-grade rounds are typically used for OCTG
production, that producing subject merchandise from square commodity-grade billets may be cost
prohibitive, and that OCTG-quality billets demand a significant price premium. See, e.g., Maverick
New Factual Information at Attachs. “Roland Balkenende Affidavit”, “Petitioners’ Surrogate Value
Submission” at Tab R. It is uncontested that respondents reported producing products other than
OCTG and reported all purchases of billets and rounds for all those products. See Memo to File
re: Changbao Steel Round Suppliers, PD 178 (Aug. 28, 2009); Wuxi Seamless Oil Pipe Co., Ltd.
Revised Appendix 5 for Billets at 2, PD 181 (Aug. 31, 2009); Memo to File re: Steel Round
Suppliers for Tianjin Pipe (Group) Corporation, Tianjin Pipe Iron Manufacturing Co., Ltd.,
Tianguan Yuantong Pipe Product Co., Ltd., Tianjin Pipe International Economic and Trading Co.,
Ltd., and TPCO Charging Development Co., Ltd. (collectively “TPCO”), PD 186 (Sept. 2, 2009);
Jianli Group First Supplemental Questionnaire Response at 10, PD 161 (Aug. 21, 2009).
Respondents cite no record information that non-OCTG seamless products require OCTG-quality
billets.
26 U.S. Steel argues Jianli separately identified its steel round purchases, which included
purchases used for OCTG production and for bearing tube. U.S. Steel Mot. 52–53 (citing Jianli
Group First Supplemental Questionnaire Response at 10, Ex. S-11, PD 161 (Aug. 21, 2009)).
(footnote continued)
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 28 of 58

Consol. Court No. 10-00055 	Page 29
U.S. Steel also argues Commerce erred in using the LME benchmark data
because the LME data reflects only prices for square steel billets used to produce
concrete reinforcing bar (“rebar”), which is not used in the production of OCTG. 	U.S.
Steel Mot. 58 (citing TPCO Submission of New Factual Information at Attach. 2 at 5, 8);
U.S. Steel Suppl. Br. at 23. 	U.S. Steel supports its argument that LME prices are for
rebar citing statements in the LME publication that LME prices are for “the most commonly
traded grade” of steel billet material and that there is a “high level of price correlation”
between LME prices and rebar prices. 	U.S. Steel Mot. 58 (citing TPCO Submission of
New Factual Information at Attach. 2 at 5, 8). 	However, it does not follow from either
statement that LME pricing only reflects rebar prices.27
B. 	Inclusion of SBB “East Asia” Benchmark Data
U.S. Steel and Maverick also challenge Commerce’s decision to include the Steel
Business Briefing (“SBB”) benchmark data on monthly export prices for billets from East
Asia in its benchmark calculation for the provision of steel rounds and billets. 	See U.S.
Steel Mot. 55–57; Maverick Mot. 30–32. 	Defendant requests remand for Commerce to
U.S. Steel further argues that billets used to produce seamless bearing tube are also not the type
of commercial quality steel billets represented in the LME benchmark data. 	Id. at 53 (citing
Maverick Submission of New Factual Information at “Petitioners’ Surrogate Value Submission” at
Tab R (stating that standard round commodity grade steel billets are not classified as seamless
tube quality billets and are not subject to stricter quality requirements)). However, even if Jianli
segregated its purchases, U.S. Steel cites no record evidence that the three other mandatory
respondents did. U.S. Steel offers no authority indicating Commerce must exclude benchmark
data that reflects merchandise commercially available from its calculation even if the data reflects
some non-comparable pricing. See 19 C.F.R. § 351.511(a)(2)(ii).
27 In fact, the document cited by U.S. Steel suggests a methodology for deriving a price for rebar
using the LME steel billet price as a benchmark. TPCO Submission of New Factual Information
at Attach. 2 at 8. 	If the LME data itself reflected rebar pricing, as U.S. Steel suggests, no
adjustment to the LME benchmark price would be necessary to derive a price for rebar.
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 29 of 58

Consol. Court No. 10-00055 	Page 30
recalculate the benchmark without the SBB East Asia data. See Def.’s Resp. 116. The
court grants Defendant’s request for remand.
The court has discretion to grant a remand request when Commerce wishes to
reconsider its previous position without confessing substantive error. See SKF USA Inc.
v. United States, 254 F.3d 1022, 1029 (Fed. Cir. 2001). 	Generally, a request for a
“remand due to substantial and legitimate agency concerns should be granted.” Timken
Co. v. United States, 38 CIT __, __, Slip Op. 14-51, at *5 (May 2, 2014) (citing SKF USA
Inc., 254 F.3d at 1029). 	Commerce has substantial and legitimate concerns if (1) there
is a compelling justification for remand, (2) that justification is not outweighed by the need
for finality, and (3) the scope of the requested remand is appropriate. 	Ad Hoc Shrimp
Trade Action Comm. v. United States, 37 CIT __, __, 882 F. Supp. 2d 1377, 1381 (2013).
Here, 	Defendant’s 	request 	for 	remand 	satisfies 	the 	three-prong 	test, 	and
Commerce’s concerns are substantial and legitimate. 	First, a remand request for
Commerce to correct a potentially erroneous calculation of countervailing duty rates is a
compelling justification. Cf. Baroque Timber Industries (Zhongshan) Co. v. United States,
37 CIT __, __, 925 F. Supp. 2d 1332, 1339 (2013) (citing Parkdale Int’l v. United States,
475 F.3d 1375, 1380 (Fed. Cir. 2007)). Second, the need for finality in this case does not
outweigh the need to calculate accurate countervailing duty rates, particularly because
Maverick and U.S. Steel seek remand on this very issue. Moreover, no party objects to
Defendant’s request. Third, the scope of Defendant’s remand request is appropriate for
the issue. 	Accordingly, Defendant’s remand request is based on a substantial and
legitimate concern, and it is therefore granted.
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 30 of 58

Consol. Court No. 10-00055 	Page 31
C. 	Comparability Adjustment to the Benchmark Calculation
Plaintiffs argue that Commerce was required to adjust the benchmark prices to
reflect the higher value of OCTG-quality steel rounds used in the production of subject
merchandise. See TMK Mot. 25; U.S. Steel Mot. 47–53; Maverick Mot. 24–29. Defendant
responds that Commerce properly declined to make a premium quality adjustment
because all purchases of steel rounds by producers were included in its benefit
calculations, not just those for premium quality steel rounds. 	See Def. Resp. 120.
Commerce’s decision not to adjust the benchmark prices to reflect premium quality steel
rounds is reasonable.
To determine whether a benefit is conferred, Commerce determines the adequacy
of remuneration relative to prevailing market conditions for the good being provided in the
country which is subject to the investigation. 	19 U.S.C. § 1677(5)(E)(iv). 	“Prevailing
market conditions include price, quality, availability, marketability, transportation, and
other conditions of purchase or sale.” 19 U.S.C. § 1677(5)(E). Commerce’s regulations
also provide that Commerce shall make allowance for factors affecting comparability in
its benchmark calculation. 19 C.F.R. § 351.511(a)(2)(ii).
Commerce recognized that some steel products purchased by Chinese producers
are OCTG-grade products, but it included all steel purchases in its benefit calculation
because respondents reported all steel billet purchases regardless of the ultimate product
they were used to produce. See Final Decision Memo at 78. Commerce found it would
be inappropriate to adjust the benchmark to reflect only premium-quality steel purchases
where Commerce must measure the adequacy of remuneration for all steel purchases,
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 31 of 58

Consol. Court No. 10-00055 	Page 32
not just OCTG-grade steel round purchases. Id. Although U.S. Steel and Maverick argue
that all of the products respondents reported producing also require steel rounds of higher
quality than those included in the benchmarks used here, no record evidence supports
that assertion. 	Therefore, Commerce reasonably concluded that it could not inflate all
benchmark prices to reflect premium-quality products.
U.S. Steel and Maverick argue that the statute and the regulations require
Commerce to adjust for premium quality rounds because seamless pipe quality rounds
are premium steel products that are not similar or commercially interchangeable with the
products included in the SBB or LME benchmarks, which reflect lower value commercial
quality steel billets. U.S. Steel Mot. 49–50; Maverick Mot. 32–33. They further argue that
Commerce’s 	practice 	is 	to 	select 	benchmarks 	that 	are 	comparable 	in 	physical
characteristics and that are commercially interchangeable with the government-provided
input. 	U.S. Steel Mot. 47; Maverick Mot. 23. 	Nothing in the petition indicates that the
GOC program provided only OCTG-quality steel rounds to Chinese producers. 	The
petition defined steel rounds for the production of OCTG broadly to include “round steel
billets,” “round billets,” or simply “billets” without reference to any specific quality grades
or physical or chemical properties. See Petition at 23 n. 263. Defendant does not contest
that the benchmarks used by Commerce reflected products other than OCTG-quality
billet. 	However, neither U.S. Steel nor Maverick point to any record evidence that the
GOC provided only OCTG-quality billet to producers of subject merchandise. Therefore,
Commerce reasonably declined to adjust the benchmark to reflect only premium-quality
goods.
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 32 of 58

Consol. Court No. 10-00055 	Page 33
U.S. Steel and Maverick also argue that Commerce had no basis to conclude
respondents reported steel rounds or billets that were not used to produce OCTG. U.S.
Steel Mot. 50; Maverick Mot. 28. First, U.S. Steel and Maverick argue that, by instructing
the companies to report “‘steel rounds (e.g. billets, blooms) purchase[d] for the production
of the subject merchandise during the POI’” in its questionnaire, Commerce only
requested that respondents report OCTG-quality steel rounds. 	U.S. Steel Mot. 50
(quoting Countervailing Duty Questionnaire at Section III at Question S, PD 72 (June 4,
2009) (“CVD Questionnaire”)); Maverick Mot. 28 (citing CVD Questionnaire at Question
S). Commerce noted that it did not limit its request to respondents’ purchases to OCTG-
grade product because the allegation in the petition “interchanged the terms ‘billets’ and
‘rounds.’” 	Final Decision Memo at 77. 	U.S. Steel and Maverick argue that the petition
and Commerce’s questionnaire were framed narrowly, but that interpretation is belied by
the broad wording of the petition and by Maverick’s specific request that Jianli report all
purchases of steel rounds regardless of the product the rounds were being used to
produce. 	See Petition at 23 n. 263; Maverick Deficiency Comments Regarding Jianli’s
July 20, 2009 Countervailing Duty Questionnaire Responses at 20, PD 127 (July 30,
2009). 	Respondents reported purchasing inputs for non-OCTG products. 28 	See
28 Although U.S. Steel argues that Jianli reported its purchases of OCTG-grade rounds separately
from those used to produce other merchandise, Commerce reasonably declined to adjust the
benchmark because it had to measure the adequacy of remuneration of the entire program
including the provision of steel rounds to OCTG producers, regardless of what products they were
ultimately used to produce. 	Even if the purchases designated for different products could be
separated from those for OCTG, the petition alleged generally that inputs referred to as round
steel billets, round billets and simply billets were provided to Chinese producers. See Petition at
23 n. 263.
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 33 of 58

Consol. Court No. 10-00055 	Page 34
Changbao Steel Round Purchases (stating Changbao reported purchases of all steel
rounds, not only those used in production of OCTG); Wuxi Revised Appendix 5 at 2
(stating Wuxi reported all billet purchases, not just those used for production of subject
merchandise and that billet purchase information is not segregated based on finished
product); TPCO Steel Round Purchases (stating TPCO reported purchases of all steel
rounds, not only those used in production of OCTG); Jianli Group First Supplemental
Questionnaire Response at 10, PD 161 (Aug. 21, 2009) (including Jianli’s purchases for
production of core rod and bearing tube purchases in addition to purchases used in the
production of OCTG). 	Petitioners cannot have it both ways. 	Since they requested that
Commerce frame the investigation of the benefit conferred broadly, Commerce had to
measure the benefit conferred by the whole program, not just that conferred by the highest
quality inputs.
Second, U.S. Steel and Maverick argue that Commerce had no basis to conclude
that respondents reported purchasing a variety of steel billets. 	U.S. Steel Mot. 51;
Maverick Mot. 28–29. U.S. Steel argues that information obtained at verification indicates
respondents purchased high-quality rounds. 29 	U.S. Steel Mot. 51–52. 	However, their
argument is based on an assumption that all seamless steel products require premium
quality steel rounds. 	Neither U.S. Steel nor Maverick point to any record evidence that
all seamless tube products respondents reported producing require OCTG-grade steel
29 Specifically, U.S. Steel argues that the Department confirmed at verification that [[
]]. U.S.
Steel Mot. 51–52.
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 34 of 58

Consol. Court No. 10-00055 	Page 35
rounds or that the seamless pipe products produced by respondents require similar
quality inputs to those used to produce OCTG. 30
D. 	Ocean Freight Adjustments to the Benchmark Calculation
U.S. 	Steel 	challenges 	Commerce’s 	freight 	adjustments 	to 	the 	benchmark
calculation for steel rounds and billets to reflect delivery charges, including Commerce’s
decision to use a freight quote from Jianli’s freight provider and its decision to exclude a
special equipment surcharge from the Maersk freight rate. 	See U.S. Steel Mot. 60–65.
Defendant argues that U.S. Steel’s arguments regarding the inclusion of Jianli’s freight
quote are “mere conjecture” and Commerce reasonably excluded the surcharge for using
flat rack containers from the Maersk data because importers of steel rounds and billets
would not necessarily pay such a charge to import steel rounds and billets. 	See Def.
Resp. 122–23. 	Commerce’s decision to exclude the special equipment surcharge is
reasonable, but Commerce must reconsider or further explain its decision to use an
average of the Jianli freight quote and the Maersk data to adjust the benchmark
calculation for freight costs.
Commerce adjusts its world market benchmark price for ocean freight costs “to
reflect the price that a firm actually paid or would pay if it imported the product.” 19 C.F.R.
§ 351.511(a)(2)(iv). 	Commerce’s regulations neither require nor preclude Commerce
from averaging freight costs when adjusting the world market benchmark for import costs.
30 U.S. Steel and Maverick argue that Commerce unreasonably concluded that Jianli purchased
non premium steel rounds because the only other products Jianli reported producing are bearing
tubes, which also they assert require premium steel rounds. U.S. Steel Mot. 52; Maverick Mot.
29. However, the parties point to no record evidence that indicates bearing tubes require premium
steel rounds.
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 35 of 58

Consol. Court No. 10-00055 	Page 36
19 C.F.R. § 351.511(a)(iv). 	Therefore, Commerce has broad discretion in determining
how to adjust the world market benchmark price to reflect freight costs incurred by
purchasers so long as it does so reasonably. 	Here, Commerce has not done so
reasonably. In the preliminary results, Commerce adjusted the benchmark price for steel
rounds and billets to include ocean freight costs a company would incur to import products
to China based on pricing data from the international shipping line Maersk. See Prelim.
Results, 74 Fed. Reg. at 47,219; see also U.S. Steel Pre-Preliminary Comments at Exs.
6–10, PD 164 (Aug. 25, 2009) (“U.S. Steel Pre-Prelim. Comments”). Jianli subsequently
submitted a price quote from its freight forwarder for shipping steel rounds and billets to
China. 	See Jianli Group’s Submission of Factual Information at Attachs. 1–2, PD 230
(Oct. 5, 2009) (“Jianli Freight Quote”). Commerce found that the two freight rates reflect
what a company would have paid to import the merchandise and used an average of the
Jianli freight quote and the Maersk data to adjust the benchmark for ocean freight costs.
Final Decision Memo at 84–85.
Commerce included the Jianli freight quote and continued to use the Maersk data
because it found both “reflective of what an importer would have paid to import steel
rounds.” 	Final Decision Memo at 84. 	Commerce rejected Jianli's argument to exclude
the Maersk data, stating "so long as the ocean freight costs are reflective of market rates
for ocean freight, and representative of the rates an importer – and not necessarily the
respondent specifically – would have paid, then the prices are appropriate to include in
our benchmark.” Id. at 85. Implicit in Commerce’s reasoning is that it is inappropriate to
include unrepresentative data in the benchmark. 	Commerce found both freight rates to
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 36 of 58

Consol. Court No. 10-00055 	Page 37
be representative because the record lacked information that would lead it “to question
the accuracy of these submitted ocean freight rates.” 	Id. at 84. 	However, a simple
comparison of the two quotes undermines the representativeness of one of them.
Both of the rates offered ocean freight costs for each month during the period of
the investigation from the same origin locations, yet the two freight rates widely differ.
During the period of investigation, the Jianli freight quote ranged from $290–$540 per
container, see Jianli Freight Quote at Attach. 2, whereas the Maersk data ranged from
$2,705.12–$3,821.96 per container. 	See U.S. Steel Pre-Prelim. Comments at Ex. 1 at
Figure 2. 	This price comparison is based on the two rates without the adjustments
Commerce had made in its final calculations, however, the price disparity remained
significant even with those adjustments. After Commerce’s final adjustments, 31 the Jianli
freight quote ranged from $510–$860 per container, see Jianli Freight Quote at Attach. 2,
and the Maersk data ranged from $909.09–$2,197.62 per container during the period of
investigation. 	See id. 	No matter how the two rates are compared, whether adjusted or
unadjusted, 	there 	is 	a 	considerable 	price 	difference 	that 	calls 	into 	question 	the
representativeness of the rates. However, at no point did Commerce address this price
31 For Jianli’s freight quote, Commerce added fees for freight, terminal handling charge, handling
charges, documentation, and custom clearance, which ranged from a total of $410–$510 per
container. 	See Final Decision Memo at 84–85; Calculations for the Final Determination for
Zhejiang Jianli Company Limited (“Jianli”), Zhejiang Jianli Steel Tube Co., Ltd. (“Jianli Steel
Tube”), Zhuji Jiansheng Machinery Co., Ltd. (“Jiansheng”), and Zhejiang Jianli Industry Group
Co., Ltd. (“Jianli Industry”) (collectively, the “Jianli Group”) at Attach. 3, PD 311 (Nov. 23, 2009)
(“Jianli Final Calculations”). 	For the Maersk data, Commerce excluded the “special equipment
surcharge” after finding that a company would not necessarily incur such an expense to import
the product, which was an additional cost that ranged from $1,000–$2,100 per container. See
Final Decision Memo at 85; Jianli Final Calculations at Attach. 3.
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 37 of 58

Consol. Court No. 10-00055 	Page 38
disparity. Although Commerce bases its decision on the representativeness of both rates,
it failed to explain how such different rates are each representative, and thus reflect the
price a firm actually paid or would pay if it imported the product as required by 19 C.F.R.
§ 351.511(a)(iv). 32 	On remand, Commerce must explain how Jianli’s freight quote and
the Maersk data represent the costs a company would have paid to import the
merchandise despite their significant price differences in order to continue using an
average of both rates or reconsider its freight adjustment.
However, Commerce’s decision to exclude the special equipment surcharge from
the freight adjustment is reasonable. Commerce excluded the flat rack charge because
Jianli’s freight provider’s statement indicated that a company would not necessarily pay
the flat rack charge to import steel rounds and billets. Final Decision Memo at 85 (citing
U.S. Steel Pre-Prelim. Comments at Exs. 5, 12; Jianli Freight Quote at Attach. 1 ¶5). U.S.
Steel submitted information stating that the “[c]ommodities commonly shipped in the flat
rack container include machinery, industrial boilers, tractors, parts packed in cases, steel
tubes, steel pipes, steel bars and cables” and that flat rack containers are “ideal for items
such as heavy machinery pipes and boats.” U.S. Steel Pre-Prelim. Comments at Exs. 5,
12. 	However, Commerce found the information submitted by U.S. Steel pertained to
finished or high-quality steel products, not steel rounds and billets. Final Decision Memo
32 At oral argument, Defendant argued that the quote from Jianli’s freight provider might simply
be a bargain, see Oral Arg., 01:28:32–01:29:12, May 4, 2016, ECF No. 151, but that explanation
suggests that the Jianli freight quote does not necessarily reflect what a company would have
paid to import the merchandise. 	That is not to say that the Jianli freight quote cannot be
considered representative or that it is improper for Commerce to use an average of two ocean
freight rates. 	However, without further explanation the court cannot accept that two widely
divergent quotes are both representative of what an importer would pay.
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 38 of 58

Consol. Court No. 10-00055 	Page 39
at 85. 	U.S. Steel points to no record evidence detracting from this finding. 	Thus,
Commerce reasonably excluded the special equipment surcharge from the Maersk data
because the record only contained information indicating that flat rack containers were
not used to ship steel rounds and billets.
U.S. Steel contends that it is Commerce’s practice to include all of the itemized
shipping costs in the Maersk data in determining freight costs. U.S. Steel Mot. 60 (citing
U.S. Steel Pre-Prelim. Comments at Exs. 2–3). Yet, U.S. Steel’s argument fails to show
that Commerce’s practice is to use all of the costs reported by Maersk even in the face of
record evidence that a company would not necessarily pay for one of the itemized costs
in the Maersk rate. Commerce reasonably used the Maersk data here only to the extent
that those costs reflected costs to import steel rounds and billets.
U.S. 	Steel 	argues 	that 	Commerce’s 	reliance 	on 	the 	freight 	quote 	and
accompanying affidavit submitted by Jianli to exclude flat rack fee is inappropriate
because, while Jianli’s freight provider might not use flat rack containers to ship steel
rounds and billets, other shippers would impose such a charge. U.S. Steel Reply 19–20.
However, Commerce found that the only pertinent evidence on the record regarding the
use of flat rack containers to ship steel rounds and billets indicated that a shipper would
not use them and thus a company would not pay a premium to ship such goods. 	Final
Decision Memo at 85. U.S. Steel heavily relies upon its submissions which state that flat
rack containers are used to ship “machinery, industrial boilers, tractors, parts packed in
cases, steel tubes, steel pipes and cables,” and that flat rack containers are “ideal for
items such as heavy machinery pipes and boats.” 	U.S. Steel Pre-Prelim. Comments at
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 39 of 58

Consol. Court No. 10-00055 	Page 40
Exs. 5, 12. However, Commerce found that this information discusses the use of flat rack
containers for finished or high-quality goods and is not reflective of costs to transport steel
rounds and billets. Final Decision Memo at 85. U.S. Steel is unable to point to any record
evidence that refutes Commerce’s finding. U.S. Steel asserts its information showed that
flat rack containers are used to ship heavyweight cargo and not only finished or high-
quality merchandise. 	U.S. Steel Mot. 62. 	Based upon the goods mentioned in the
information submitted by U.S. Steel, the court cannot say that it was unreasonable for
Commerce to infer that flat rack containers are used to ship finished or high-quality
merchandise.
U.S. Steel argues that Commerce lacked substantial evidence to exclude the flat
rack charge because “there is no evidence that Maersk Lines would ship steel rounds to
China by flat rack container without requiring customers to pay the special equipment
surcharge,” U.S. Steel Mot. 62. 	Commerce did not find that Chinese shippers did not
charge Chinese producers a premium to use flat rack containers, but rather that those
shippers did not necessarily use flat rack containers to ship steel rounds and billets to
China. See Final Decision Memo at 85. U.S. Steel cites to RZBC Grp. Shareholding Co.
v. United States, 39 CIT __, __–__, 100 F. Supp. 3d 1288, 1312–1313 (2015), where the
court affirmed the inclusion of Maersk’s special equipment surcharge in calculating
shipping costs to China. 	U.S. Steel Suppl. Br. 25. 	However, the record in that case
contained no evidence that producers did not pay an equipment surcharge. RZBC Grp.,
39 CIT at __, 100 F. Supp. 2d at 1312. Here, Jianli submitted information from its freight
provider stating that it did not use flat rack containers to ship steel rounds and billets to
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 40 of 58

Consol. Court No. 10-00055 	Page 41
China. In RZBC Grp., the court did not hold Commerce must include a flat rack surcharge
where no evidence in the record indicates producers paid such a charge. See id. at __–
__, 100 F. Supp. 2d at 1312–13. Therefore, Commerce’s decision to exclude the special
equipment surcharge from the Maersk data is reasonable.
V. 	Attribution of Subsidies
TMK and U.S. Steel argue that Commerce incorrectly calculated the ad valorem
subsidy rates for Changbao and TPCO. 	See TMK Mot. 35–40; U.S. Steel Mot. 13–26;
U.S. Steel Suppl. Br. 4–10. 	Commerce’s decision to allocate subsidies received by
Changbao and TPCO to the sales of each of their subsidiaries in addition to their own
sales is in accordance with law. However, Commerce acted contrary to law in attributing
the subsidies received by Precision to the sales of Changbao’s other subsidiaries and
attributing the subsidies received by four of TPCO’s subsidiaries to the sales of TPCO’s
other subsidiaries. Further, Commerce failed to reasonably explain its decision not to tie
the provision of steel rounds and billets at LTAR only to TPCO’s sales of seamless steel
pipe.
A. 	Attribution of Subsidies Received by a Parent Company
TMK and U.S. Steel argue that Commerce incorrectly attributed the subsidies
received by Changbao to the consolidated sales of Changbao and its subsidiaries without
additionally investigating the subsidies received by Changbao’s subsidiaries. 	See TMK
Mot. 35–36; U.S. Steel Mot. 24–26. U.S. Steel additionally argues that Commerce made
the same error in attributing the subsidies received by TPCO to its own sales as well as
the sales of its subsidiaries. 	See U.S. Steel Mot. 13–19. 	Defendant responds that
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 41 of 58

Consol. Court No. 10-00055 	Page 42
Commerce’s allocation of subsidies received by Changbao and TPCO is reasonable and
in accordance with law. See Def. Resp. 99–105.
In general, Commerce “calculate[s] an ad valorem subsidy rate by dividing the
amount of the benefit allocated to the period of investigation . . . by the sales value during
the same period of the product or products to which [Commerce] attributes the subsidy.”
19 C.F.R. § 351.525(a). 	Commerce ordinarily divides the subsidies received by a
company only by the sales of that company, even if there is cross-ownership between
corporations. 33 	See 19 C.F.R. § 351.525(b)(6)(i). 	However, Commerce’s regulations
provide an exception to its default attribution rule if the company that receives a subsidy
is a holding or parent company. 19 C.F.R. § 351.525(6)(b)(iii). Where a holding or parent
company receives a subsidy and does not merely serve as a conduit for transferring the
subsidy to a subsidiary, Commerce attributes the subsidy not only to the holding or parent
company’s own sales, but also to the sales of its subsidiaries.
Commerce’s decision to attribute the subsidies received by Changbao and TPCO
to each of their sales as well as the sales of each of their subsidiaries is reasonable.
Attributing subsidies received by a parent company to the sales of its subsidiaries is not
conditioned upon the parent company reporting, or Commerce additionally investigating,
subsidies received by its subsidiaries. See 19 C.F.R. § 351.525(b)(6)(iii). TMK and U.S.
33 	Commerce’s 	regulations 	provide 	that 	“[c]ross-ownership 	exists 	between 	two 	or 	more
corporations where one corporation can use or direct the individual assets of the other
corporation(s) in essentially the same ways it can use its own assets.” 19 C.F.R. § 351.525(6)(vi).
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 42 of 58

Consol. Court No. 10-00055 	Page 43
Steel point to no authority that supports its assertions that restrict the application of 19
C.F.R. § 351.525(b)(6)(iii) beyond the conditions expressed in the provision.
With respect to Changbao, Commerce learned at verification that Changbao’s
reported sales reflected not only its own sales, but also the sales of all of its subsidiaries.
See Final Decision Memo at 8 (citing Jiangsu Changbao Steel Tube Co., Ltd. and Jiangsu
Changbao Precision Steel Tube Co., Ltd. Verification Report at 6, PD 268 (Oct. 29,
2009)). 	Because Commerce found that Changbao is a parent company, Commerce
attributed the subsidies received by Changbao to the consolidated sales of Changbao
and its subsidiaries pursuant to 19 C.F.R. § 351.525(b)(6)(iii). 	Id. 	Likewise, TPCO’s
reported sales included its own sales and the sales of all of its subsidiaries. See id. at 9.
Commerce also found that TPCO is a parent company and attributed the subsidies
received by TPCO to the consolidated sales of TPCO and its subsidiaries. See id. (citing
Certain Oil Country Tubular Goods From the People’s Republic of China, 74 Fed. Reg.
47,210, 47,215 (Dep’t Commerce Sept. 15, 2009) (preliminary affirmative countervailing
duty determination, preliminary negative critical circumstances determination) (“Prelim.
Results”)). 	Because Commerce found that both Changbao and TPCO are parent
companies, Commerce reasonably attributed the subsidies received by Changbao and
TPCO to each of their own sales in addition to each of their subsidiaries’ sales.
U.S. Steel argues that “it is essential that the universe of subsidies reported
matches the universe of sales that the subsidies benefit.” 	U.S. Steel Mot. 16 (citing
Allegheny Ludlum Corp. v. United States, 24 CIT 452, 473, 112 F. Supp. 2d 1141, 1160–
61 (2000)). U.S. Steel’s reliance on Allegheny Ludlum is of no avail because the sales of
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 43 of 58

Consol. Court No. 10-00055 	Page 44
a parent company and its subsidiaries benefit equally from a subsidy received by the
parent 	company 	given 	the 	relationship 	between 	the 	companies. 	See 	19 	C.F.R.
§ 351.525(b)(6)(iii). 	Thus, the universe of subsidies matched the universe of sales
because the subsidies received by Changbao and TPCO also benefitted the sales of each
of their subsidiaries. U.S. Steel further argues that 19 C.F.R. § 351.525(a) requires that
“both the numerator (the benefit) and denominator (the universe of sales to which the
benefit applies) used in . . . calculation of a subsidy” must reflect the same universe of
goods. U.S. Steel Suppl. Br. 4–5 (citing Samsung Elecs. Co. v. United States, 38 CIT __,
__, 973 F. Supp. 2d 1321, 1324 (2014); Yama Ribbons & Bows Co. v. United States, 36
CIT __, __, 865 F. Supp. 2d 1294, 1298 (2012)). 	However, 19 C.F.R. § 351.525(a)
instructs Commerce to attribute subsidies in accordance with § 351.525(b), which
Commerce has done here.
TMK argues that, by accepting Changbao’s explanation at verification that its
reported sales included its own sales as well as all of its subsidiaries, Commerce
improperly accepted untimely new factual information. 	See TMK Mot. 37–38. 	In a
countervailing duty investigation, submission of factual information “requested by the
verifying officials . . . normally will be due no later than seven days after the date on which
the verification of that person is completed.” 	19 C.F.R. § 351.301(b)(1). 	Thus,
Commerce’s regulations anticipate the need for Commerce to obtain new factual
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 44 of 58

Consol. Court No. 10-00055 	Page 45
information before, during, or even after verification. 34 	TMK argues that Commerce is
barred from obtaining new factual information at verification if such information is
favorable to the respondent. 	See TMK Mot. 38. 	However, TMK does not offer any
authority to support its position. Therefore, Commerce did not err in attributing subsidies
received by Changbao and TPCO.
B. 	Attribution of Subsidies Received by Certain Subsidiaries
TMK claims Commerce had no regulatory basis to attribute subsidies received by
Precision, a subsidiary of Changbao, to the sales of Changbao’s other subsidiaries. See
TMK Mot. 36–40. 	U.S. Steel argues that Commerce erred in attributing the subsidies
received by Precision as well as four of TPCO’s subsidiaries because 19 C.F.R.
§ 351.525(b)(6)(iii) “allows subsidies received by a ‘holding company’ to be attributed to
the consolidated sales of the ‘holding company and its subsidiaries,’ but it does not
authorize the attribution to the entire corporate group of subsidies received by a
subsidiary.” U.S. Steel Suppl. Br. 7–8.
1. 	Waiver and Exhaustion
Defendant argues U.S. Steel waived its argument by failing to raise it in its opening
brief, see Def. Suppl. Resp. 8, and invokes the exhaustion doctrine with respect to TMK’s
argument. See Def. Resp. 105–06.
34 Although obtaining new factual information is not the primary purpose of verification, Commerce
has developed a practice of accepting new factual information at verification when “(1) the need
for that information was not evident previously, (2) the information makes minor corrections to
information already on the record, or (3) the information corroborates, supports, or clarifies
information already on the record.” Citic Trading Co. v. United States, 27 CIT 356, 373 (2003)
(citing previous determinations where Commerce has set forth circumstances where it accepts
new factual information at verification).
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 45 of 58

Consol. Court No. 10-00055 	Page 46
U.S. Steel raised the argument relating to Commerce’s method for attributing the
subsidies received by Precision and TPCO’s four subsidiaries in its opening brief.
Generally, “arguments not raised in the opening brief are waived.” SmithKline Beecham
Corp. v. Apotex Corp., 439 F.3d 1312, 1319 (Fed. Cir. 2006) (citing Cross Med. Prods.,
Inc. v. Medtronic Sofamor Danek, Inc., 424 F.3d 1293, 1320–21 n.3 (Fed. Cir. 2005)).
However, U.S. Steel argued in its opening brief that “Changbao reported only those
subsidies that were received by it and one of its subsidiaries, Precision Steel . . . ,
therefore, the Department should have attributed the subsidies reported for Changbao
Steel and Precision Steel to their combined unconsolidated sales, net of sales between
the two companies.” U.S. Steel Mot. 25. U.S. Steel clearly argued that Commerce erred
in attributing the subsidies received by Changbao and Precision to more than only the
sales of the two companies investigated. 	U.S. Steel’s argument encompasses a
challenge to Commerce’s decision to attribute the subsidies received by Precision to the
sales of Changbao’s other subsidiaries. 	U.S. Steel additionally argued that Commerce
had no basis for attributing the subsidies received by four of TPCO’s cross-owned
affiliates to the consolidated sales of TPCO and all of its subsidiaries. 	See U.S. Steel
Mot. 16–19. 	Thus, U.S. Steel did not fail to raise the argument in its opening brief and
has not waived the argument.
As 	a 	separate 	matter, 	Defendant 	claims 	TMK 	has 	failed 	to 	exhaust 	its
administrative remedies. See Def. Resp. 105–06. The Court “shall, where appropriate,
require 	the 	exhaustion 	of 	administrative 	remedies.” 	28 	U.S.C. 	§ 	2637(d). 	The
foundational principle of the exhaustion requirement is “that no one is entitled to judicial
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 46 of 58

Consol. Court No. 10-00055 	Page 47
relief for a supposed or threatened injury until the prescribed administrative remedy has
been exhausted.” Consol. Bearings Co. v. United States, 348 F.3d 997, 1003 (Fed. Cir.
2003). At the administrative level, interested parties are afforded an opportunity to submit
a case brief following the preliminary results to “present all argument that continue . . . to
be relevant to [Commerce’s] final determination or final results, including any arguments
presented before the date of publication of the preliminary determination or preliminary
results.” 	19 C.F.R. § 351.309(c). 	The Court of Appeals for the Federal Circuit has
consistently held that requiring exhaustion prior to judicial review is exercised with a
measure of discretion by the court. See, e.g., Corus Staal BV v. United States, 502 F.3d
1370, 1381 (Fed. Cir. 2007); Norsk Hydro Canada, Inc. v. United States, 472 F.3d 1347,
1356 n.17 (Fed. Cir. 2006); Consol. Bearings Co., 348 F.3d at 1003.
Before Commerce, TMK did not contest Commerce’s application of the attribution
rules in its case brief. 	See Domestic Interested Parties’ Case Brief, PD 282 (Nov. 9,
2009). 	U.S. Steel, however, contested Commerce’s application of the attribution rules
with respect to subsidies received by subsidiaries in its case brief and, as discussed
above, has not waived that argument before the court. 	The exhaustion requirement is
imposed to “allow[] the agency to apply its expertise, rectify administrative mistakes, and
compile a record adequate for judicial review–advancing the twin purposes of protecting
administrative agency authority and promoting judicial efficiency.” Carpenter Tech. Corp.
v. United States, 30 CIT 1373, 1374–75, 452 F. Supp. 2d 1344, 1346 (2006) (citing
Woodford v. Ngo, 548 U.S. 81, 88–90 (2006)). 	Courts have allowed litigants who have
failed to raise an issue at the administrative level to argue the issue if it was raised before
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 47 of 58

Consol. Court No. 10-00055 	Page 48
the agency by another party because, in such situations, the concerns that are meant to
be addressed by the exhaustion doctrine might not be implicated. 	See, e.g., Kessler v.
Surface Transp. Bd., 635 F.3d 1, 7–8 (D.C. Cir. 2011); Cellnet Commc’n, Inc. v. FCC,
965 F.2d 1106, 1109 (D.C. Cir. 2006). 	Because U.S. Steel raised the argument before
Commerce and the agency was given an opportunity to address the issue, it would be a
meaningless exercise to enforce the exhaustion requirement under these circumstances.
Having determined that U.S. Steel has not waived the argument and that requiring TMK
to exhaust its administrative remedies does not serve the doctrine’s purpose in this case,
the court now turns to the merits of these arguments.
2. 	Analysis
Generally, even in the case of cross-owned companies, Commerce’s default rule
is to “attribute a subsidy to the products produced by the corporation that received the
subsidy.” 	19 C.F.R. § 351.525(b)(6)(i). 	Commerce’s regulations provide several
exceptions to its default attribution rule. See 19 C.F.R. § 351.525(b). However, none of
these attribution rules provides a regulatory basis for attributing the subsidies received by
Precision and four of TPCO’s subsidiaries to the sales of other subsidiaries.
Changbao submitted its questionnaire response on behalf of itself and Precision.
See Questionnaire Response of Jiangsu Changbao Steel Tube Co., Ltd. and Jiangsu
Changbao Precision Steel Tube Co., Ltd., PD 110 (July 20, 2009). Commerce found that
Changbao and Precision are cross-owned companies that produce subject merchandise
and attributed the subsidies received by Precision to Changbao’s sales and vice versa
pursuant to 19 C.F.R. § 351.525(b)(6)(ii). See Final Decision Memo at 7–8 (citing Prelim.
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 48 of 58

Consol. Court No. 10-00055 	Page 49
Results, 74 Fed. Reg. at 47,215). 	Commerce additionally found that Changbao is a
parent company and attributed the subsidies received by Changbao to the consolidated
sales of Changbao and all of its subsidiaries pursuant to 19 C.F.R. § 351.525(b)(6)(iii).
Final 	Decision 	Memo 	at 	8. 	Based 	on 	a 	combined 	application 	of 	19 	C.F.R.
§ 351.525(b)(6)(ii) and (iii), Commerce attributed the subsidies received by Precision not
only to Changbao’s sales, but also to the sales of Changbao’s other subsidiaries. Id.
For TPCO, Commerce attributed the subsidies received by four of TPCO’s
subsidiaries to the consolidated sales of TPCO and all of its subsidiaries. 	TPCO
submitted its questionnaire response on behalf of itself and four of its subsidiaries. See
TPCO’s Response to the Department of Commerce’s CVD Questionnaire, PD 111 (July
21, 2009). The subsidiaries are Tianjin Pipe Iron Manufacturing Co., Ltd. (“TPCO Iron”);
Tianguan Yuantong Pipe Product Co., Ltd. (“TPCO Yuantong”); Tianjin Pipe International
Economic and Trading Co., Ltd. (“TPCO IETC”); and TPCO Charging Development Co.,
Ltd. (“TPCO Charging”). 	Commerce found that TPCO is a parent company to these
subsidiaries and attributed the subsidies received by TPCO to the consolidated sales of
TPCO and all of its subsidiaries pursuant to 19 C.F.R. § 351.525(b)(6)(iii). 	See Final
Decision Memo at 9 (citing Prelim. Results, 74 Fed. Reg. at 47,215). 	Commerce
additionally attributed the subsidies received by these four subsidiaries to TPCO’s sales:
(1) pursuant to 19 C.F.R. § 351.525(b)(6)(iv) because TPCO Iron produced an input used
in TPCO’s production of subject merchandise; (2) pursuant to § 351.525(b)(6)(ii) because
TPCO Yuantong produced subject merchandise during the period of investigation; (3)
pursuant to § 351.525(c) because TPCO IETC was a trading company exporting subject
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 49 of 58

Consol. Court No. 10-00055 	Page 50
merchandise; and (4) pursuant to 19 C.F.R. § 351.525(b)(6)(v) because TPCO Charging
transferred steel rounds at LTAR to TPCO. See id. (citing Prelim. Results, 74 Fed. Reg.
at 47,215). 	Commerce then attributed the subsidies received by TPCO Iron, TPCO
Yuantong, TPCO IETC, and TPCO Charging to the consolidated sales of TPCO and all
of its subsidiaries through a joint application of multiple attribution rules because
Commerce determined that the subsidies received by these four subsidiaries are
attributable to TPCO and TPCO is a parent company. See id. (citing Prelim. Results, 74
Fed. Reg. at 47,215).
As previously discussed, 19 C.F.R. § 351.525(b)(6)(iii) authorized Commerce to
attribute subsidies received by Changbao and TPCO to each of their sales as well as the
sales of each of their subsidiaries. 	Commerce was additionally authorized to attribute
subsidies received by Precision to Changbao and those received by TPCO’s four
subsidiaries to TPCO because Commerce found that one of the enumerated attribution
rules under 19 C.F.R. § 351.525 was met. 	However, Commerce’s regulations do not
authorize Commerce to attribute subsidies received by Precision and TPCO’s four
subsidiaries to the sales of Changbao’s and TPCO’s other subsidiaries.
Commerce claimed that it had authority to attribute subsidies received by Precision
and TPCO’s four subsidiaries to the sales of Changbao’s and TPCO’s other subsidiaries
pursuant to 19 C.F.R. § 351.525(b)(6)(iii). 	That regulation states that “[i]f the firm that
received a subsidy is a holding company, including a parent company with its own
operations, [Commerce] will attribute the subsidy to the consolidated sales of the holding
company and its subsidiaries.” 	19 C.F.R. § 351.525(b)(6)(iii). 	Commerce stated that
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 50 of 58

Consol. Court No. 10-00055 	Page 51
because the subsidies received by Precision are attributable to Changbao (and those
received 	by 	TPCO’s 	four 	subsidiaries 	are 	attributable 	to 	TPCO), 	Commerce 	was
authorized to additionally attribute these subsidies to sales of Changbao’s (and TPCO’s)
other subsidiaries under 19 C.F.R. § 351.525(b)(6)(iii). 	This attribution rule allows
Commerce to attribute subsidies received by a parent company to the consolidated sales
of the parent company and its subsidiaries. However, the plain language of the regulation
does not give Commerce authority to additionally attribute subsidies received by a
subsidiary to the consolidated sales of the parent company’s other subsidiaries.
The correct method for attributing a subsidy here was dictated by which company
received the subsidy. 	Commerce could not attribute subsidies received by one of
Changbao’s 	or 	TPCO’s 	subsidiaries 	to 	other 	subsidiaries 	pursuant 	to 	19 	C.F.R.
§ 351.525(b)(ii), (b)(iv), (b)(v), or (c) by way of § 351.525(b)(6)(iii) because the latter is
limited to subsidies received by a parent company. The subsidies at issue here were not
received by Changbao or TPCO. The subsidies were received by Precision, TPCO Iron,
TPCO Yuantong, TPCO IETC, and TPCO Charging. Thus, contrary to Commerce’s claim
in its final determination, 19 C.F.R. § 351.525(b)(6)(iii) did not grant Commerce authority
to attribute these subsidies to the sales of Changbao’s and TPCO’s other subsidiaries.
On remand, Commerce must explain what authority allows it to attribute subsidies
received by subsidiaries in this manner or reconsider its attribution methodology with
respect to Precision and TPCO’s four subsidiaries.
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 51 of 58

Consol. Court No. 10-00055 	Page 52
C. 	Commerce’s Decision Not to Tie the Provision of Steel Rounds and
Billets for LTAR Only to TPCO’s Sales of Steel Pipe
U.S. Steel argues that Commerce was required to attribute the benefit received by
TPCO from the provision of steel rounds at LTAR only to TPCO’s sales of seamless steel
pipe products, including OCTG, as opposed to TPCO’s consolidated sales because the
subsidy was tied to sales of such products. See U.S. Steel Mot. 19–24. U.S. Steel claims
that the tying regulation applied because the steel rounds provided by the GOC were
intended to benefit only TPCO’s sales of steel pipe. Id. at 19. Defendant responds that
Commerce 	properly 	attributed 	the 	provision 	of 	steel 	rounds 	at 	LTAR 	to 	TPCO’s
consolidated sales rather than tie the benefit only to its sales of seamless steel pipe. See
Def. Resp. 107–10.
“If a subsidy is tied to the production or sale of a particular product, [Commerce]
will attribute the subsidy only to that product.” 19 C.F.R. § 351.525(b)(5)(i). To determine
whether a subsidy is tied to a particular product, Commerce “analyze[s] the purpose of
the subsidy based on information available at the time of bestowal,” not what a company
ultimately uses the funds for after they have been received. See Countervailing Duties,
63 Fed. Reg. 65,348, 65,403 (Dep’t Commerce Nov. 25, 1998).
Commerce has failed to explain its decision not to tie the provision of steel rounds
and billets at LTAR only to sales of seamless steel pipe. 	Because TPCO is a parent
company, Commerce found that 19 C.F.R. § 351.525(b)(6)(iii) clearly applied, which
instructs Commerce to attribute subsidies received by a parent company to the sales of
that company and its subsidiaries. Id. Commerce additionally found that “[a]t the same
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 52 of 58

Consol. Court No. 10-00055 	Page 53
time, the facts in this case indicate that the regulation governing the attribution of
subsidies tied to a particular product, 19 CFR [§] 351.525(b)(5), may also be applicable.”
Id. Thus, Commerce found that two of the attribution rules may apply to TPCO, 19 C.F.R.
§ 351.525(b)(5) and (b)(6)(iii). 	Commerce acknowledged that multiple attribution rules
may apply to a particular company. See Final Decision Memo at 129. However, without
even determining whether the provision of steel rounds at LTAR was tied to the production
of seamless steel pipe, Commerce attributed the subsidy to TPCO’s consolidated sales
because 19 C.F.R. § 351.525(b)(6)(iii) clearly applied while it was less clear that 19 C.F.R.
§ 351.525(b)(5) also applied. Id.
The court is unable to discern whether Commerce in fact made a determination
that the provision of steel rounds at LTAR is not tied to sales of seamless steel pipe in
deciding to attribute the subsidy to TPCO’s consolidated sales. 	It is likewise unclear
whether Commerce determined that the subsidy is tied to sales of seamless steel pipe,
but 	found 	it 	impossible 	to 	harmoniously 	apply 	19 	C.F.R. 	§ 	351.525(b)(5) 	and
§ 351.525(b)(6)(iii). Commerce ultimately applied 19 C.F.R. § 351.525(b)(6)(iii) because
it found that “it is less clear that the product tying regulation under 19 CFR [§]
351.525(b)(5) is also applicable.” Id. Commerce was required to determine whether the
subsidy was tied to the production of seamless steel pipe. 	Without making such a
determination, Commerce’s decision to attribute the subsidy to TPCO’s consolidated
sales is unsupported by substantial evidence. 	On remand, Commerce must determine
whether the tying regulation applies to TPCO based on the record of this case.
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 53 of 58

Consol. Court No. 10-00055 	Page 54
VI. 	Commerce’s Decision Not to Use Facts Otherwise Available and Apply
Adverse Inferences to Jianli’s Purchases of Steel Rounds and Billets
Maverick challenges Commerce’s decision not to use AFA in calculating Jianli’s
steel round purchases. 	See Maverick Mot. 42–49. 	Maverick argues Jianli’s failure to
report steel rounds and billet purchases from a certain supplier justified using AFA. See
id. Defendant argues that Commerce reasonably declined to apply AFA. See Def. Resp.
123–28.
Commerce must use facts otherwise available to make determinations under
certain circumstances. 35 See 19 U.S.C. § 1677e. If Commerce finds a party did not act
“to the best of its ability to comply with a request for information,” Commerce may use an
adverse inference in selecting from among the facts otherwise available. 	19 U.S.C.
§ 1677e(b). 	Thus, the statute grants Commerce’s considerable discretion to apply
adverse inferences in selecting among the facts otherwise available.
Commerce reasonably declined to exercise its discretion to apply AFA to Jianli. At
verification, Commerce requested that Jianli provide records for select purchases of steel
rounds and billets from certain months and suppliers during the period of investigation.
See Verification Report: Jianli Group at 11, CD 104 (Oct. 28, 2009) (“Jianli Verification
Report”). 	Commerce traced the sample purchases from Jianli’s reported steel rounds
purchases to Jianli’s records, and at no point did Commerce discover any unreported
35 More specifically, Commerce shall use facts otherwise available where “necessary information
is not available on the record,” or a party “withholds information that has been requested by
[Commerce] . . . [or] significantly impedes a proceeding.” 19 U.S.C. § 1677e(a).
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 54 of 58

Consol. Court No. 10-00055 	Page 55
purchases. 36 See Jianli Verification Report at Attach. 1 at Ex. 10; Final Decision Memo
at 126. Commerce also requested original mill certificates for all steel rounds and billets
purchased during the period of investigation. See Jianli Verification Report at 10–11. Out
of the mill certificates provided by Jianli, Commerce selected five mill certificates at
random to confirm that the suppliers were reported in Jianli’s reported purchases. 	See
Jianli Verification Report at 10–11. 	One of the randomly selected mill certificates listed
[[ 	]] as a supplier, from which Jianli had not reported purchasing
steel inputs. See Jianli Verification Report at 11. Jianli explained in its case brief that this
discrepancy results from to the fact that [[ 	]] is the parent company
of [[ 	]], and both companies are listed on the mill
certificate and Jianli reported these purchases as purchases from [[
]].37 	See Jianli Group’s Case Brief at 9 n.6, Attach. 1, CD 114 (Nov. 9,
36 As requested, Jianli provided original records to substantiate its reported purchase information
for randomly selected suppliers and months during the period of investigation. See Verification
Agenda/Schedule – Jianli Group, CD 93 (Oct. 9, 2009). At verification, Commerce reviewed (1)
bank receipts for pre-payments to suppliers, (2) ledgers for each supplier showing pre-payment
entries, (3) value added tax invoices and quality certificates for purchases from each supplier,
and (4) vouchers and corresponding credit entries. See Jianli Verification Report at 11, Attach. 1
at Ex. 10.
37 Initially, Commerce accepted statements made by Jianli company officials that [[
]] is an alternative English spelling of [[
]] as a satisfactory explanation for the discrepancy. See Jianli Verification Report
at 11. Maverick argues that this explanation is false and was an attempt to mislead Commerce
in its verification process. 	See Maverick Mot. 43–44. 	However, Jianli rectified any erroneous
statement made by its officials at the first opportune moment in its case brief where Jianli
explained that [[ 	]] is the parent company of [[
]] and both companies are named on the mill certificate. See Jianli Group’s Case Brief
at 9 n.6, Attach. 1, CD 114 (Nov. 9, 2009). Commerce accepted this explanation and found that
“Jianli has not failed to cooperate or comply in any way.” Final Decision Memo at 126.
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 55 of 58

Consol. Court No. 10-00055 	Page 56
2009). 	Despite this inconsistency, Commerce was satisfied with the accuracy and
completeness of Jianli’s reported information. Final Decision Memo at 126.
Maverick argues that the existence of the [[ 	]] mill certificate
indicates that there are purchases that were not reported. 	Maverick Mot. 45–46.
However, Commerce accepted Jianli’s explanation that the rounds produced by [[
]] were reflected in Jianli’s reported purchases from [[
]]. 	See Final Decision Memo at 126; Jianli Group’s Case Brief at 9 n.6,
Attach. 1, CD 114 (Nov. 9, 2009).
Maverick further contests the reliability of Jianli’s reported purchases of steel
rounds and billets. 	See Maverick Mot. 47–49. 	Maverick notes that many of Jianli’s
purchases are from suppliers that are subsidiaries of a common parent company. 	See
id. (citing Jianli Group’s First Supplemental Questionnaire Response at Ex. S-11, CD 44
(Aug. 21, 2009)). Maverick argues that Jianli is inexplicably not listed as one of the parent
company’s largest customers in an annual report even though Jianli’s combined steel
purchases from the subsidiaries would make Jianli the [[ 	]] largest customer of the
parent company. 	See id. at 48; see also Pre-Preliminary Comments at Ex. 7 at 12, CD
52 (Aug. 25, 2009). 	Commerce addressed this purported discrepancy and found that
Jianli’s absence from a third party’s annual report did not warrant the application of AFA.
See Final Decision Memo at 126. 	Commerce examined a representative sample of
Jianli’s purchases and mill certificates, and Commerce was able to verify the accuracy
and completeness of Jianli’s information. 	Commerce found that Jianli provided all
necessary information and was cooperative. 	Thus, Commerce disagreed that the
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 56 of 58

Consol. Court No. 10-00055 	Page 57
statutory requirements for applying AFA were met. 	Commerce’s refusal to exercise its
discretion and apply AFA is reasonable.
CONCLUSION AND ORDER
In accordance with the foregoing, it is hereby
ORDERED that Commerce’s final determination is sustained with respect to the
following decisions: (i) to defer its investigation into certain new subsidy allegations until
the first administrative review; (ii) not to initiate an investigation into allegations of export
restraints on steel rounds and billets, land-use rights provided to Changbao at LTAR, and
a steel mill and equipment provided to Changbao at LTAR; (iii) to include LME benchmark
data in its benchmark calculation for steel rounds and billets; (iv) not to adjust the
benchmarks used to reflect premium quality steel rounds and billets; (v) to exclude the
special equipment surcharge from the steel round and billet benchmarks; (vi) to attribute
subsidies received by Changbao and TPCO to each of their consolidated sales; and (vii)
not to apply AFA to Jianli for its purchases of steel rounds and billets; and it is further
ORDERED that Commerce’s final determination is remanded for Commerce to
clarify or reconsider: (i) its use of China’s WTO accession date as a uniform cut-off date
for identifying and measuring subsidies; (ii) its attribution methodology for subsidies
received by Precision and TPCO’s four subsidiaries; (iii) its decision to include Jianli’s
freight quote in the benchmark price for steel rounds and billets; and (iv) its decision not
to tie the benefit received by TPCO from the provision of steel rounds and billets at LTAR
to sales of seamless steel pipe; and it is further
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 57 of 58

Consol. Court No. 10-00055 	Page 58
ORDERED 	that 	Defendant’s 	remand 	request 	is 	granted 	for 	Commerce 	to
recalculate the benchmark for steel rounds without the SBB East Asia pricing data; and it
is further
ORDERED that Commerce shall file its remand determination with the court within
60 days of this date; and it is further
ORDERED that the parties shall have 30 days thereafter to file comments; and it
is further
ORDERED that the parties shall have 15 days thereafter to file replies to
comments on the remand determination.
/s/ Claire R. Kelly
Claire R. Kelly, Judge
Dated: June 24, 2016
New York, New York
Case 1:10-cv-00055-CRK Document 159 Filed 07/07/16 Page 58 of 58