American Tubular Products, LLC et al v. United States

OCR transcription for search; preserved printed pages are authoritative

Case 1:13-cv-00029-RWG Document97 Filed 10/06/14 Page 1 of 33

Slip Op. 14-116

UNITED STATES COURT OF INTERNATIONAL TRADE

AMERICAN TUBULAR PRODUCTS, LLC,
and JIANGSU CHENGDE STEEL TUBE
SHARE CO., LTD.,

Before: Richard W. Goldberg, Senior Judge

Plaintiffs, Court No. 13-00029
v. PUBLIC VERSION
UNITED STATES,

Defendant,
and

UNITED STATES STEEL CORPORATION,
TMK IPSCO, WHEATLAND TUBE
COMPANY, and V&M STAR L.P.,

Defendant-Intervenors.

OPINION AND ORDER

[The court remands the final results of an administrative review of an antidumping duty order on
oil country tubular goods from the People’s Republic of China. ]

Dated: September 26, 2014

Donald B. Cameron, Julie C. Mendoza, R. Will Planert, Brady W. Mills, Mary S.
Hodgins, and Sarah S. Sprinkle, Morris, Manning & Martin LLP, of Washington, DC, for
plaintiffs.

L. Misha Preheim, Senior Trial Counsel, Commercial Litigation Branch, Civil Division,
U.S. Department of Justice, of Washington, DC, for defendant. With him on the brief were
Stuart F. Delery, Assistant Attorney General, Jeanne E. Davidson, Director, and Claudia Burke,
Assistant Director. Of counsel on the brief was Whitney Rolig, Office of the Chief Counsel for
Trade Enforcement & Compliance, U.S. Department of Commerce, of Washington, DC.

Robert E. Lighthizer, Jeffrey D. Gerrish, Ellen J. Schneider, and Luke A. Meisner,
Skadden, Arps, Slate, Meagher & Flom LLP, of Washington, DC, for defendant-intervenor
United States Steel Corporation.

AUTHENTICATED
U.S. GOVERNMENT
INFORMATION

GPO

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Roger B. Schagrin and John W. Bohn, Schagrin Associates, of Washington, DC, for
defendant-intervenors TMK IPSCO, Wheatland Tube Company, and V&M Star L.P.
Goldberg, Senior Judge: In this case, Jiangsu Chengde Steel Tube Share Co., Ltd.
(“Chengde”) and American Tubular Products, LLC (“ATP”) (collectively, “Plaintiffs”) challenge
the results of the 2010−2011 review of an antidumping duty order on 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, 77 Fed. Reg. 74,644 (Dep’t Commerce Dec. 17, 2012) (final
admin. review) (“Final Results”) and accompanying Issues & Decision Mem. (“I&D Memo”), as
amended by Certain Oil Country Tubular Goods from the People’s Republic of China, 78 Fed.
Reg. 9033 (Dep’t Commerce Feb. 7, 2013) (amended admin. review). 1
Plaintiffs argue that the Department of Commerce (“Commerce” or “the agency”) made
five incorrect decisions in the Final Results. These decisions include (1) Commerce’s choice of
surrogate values for steel billet, one of the inputs into Chengde’s OCTG, (2) the decision to deny
Chengde a normal value offset for steel scrap produced and sold during the review period, (3)
Commerce’s surrogate value for ocean freight, (4) Commerce’s surrogate value for inland
freight, and (5) the decision to classify thread protectors as a direct input into OCTG and not as a
packing material. See generally I&D Memo. The court remands the first of these decisions for
reevaluation but sustains the agency’s reasoning on the remaining four topics.
GENERAL BACKGROUND
The U.S. government levies fees on foreign goods sold in the United States for less than
their fair value, so long as those sales harm or threaten U.S. domestic industry. See 19 U.S.C.
§ 1673 (2006). Commerce begins calculating these fees—called antidumping duties—by
1 Chengde is a producer and exporter of OCTG. ATP is an importer of OCTG into the United States. See
Summons, ECF No. 1.
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subtracting a foreign product’s “export price,” or the product’s price in the United States, from
its “normal value,” or the product’s price in the exporting country. See id. The difference is the
goods’ “dumping margin.” Id. § 1677(35)(A).
How Commerce calculates normal value (“NV”) depends on whether the exporter makes
its wares in a market economy (“ME”) or a nonmarket economy (“NME”). For goods made in
ME countries, Commerce generally uses the goods’ price in the exporting country as NV. See
id. § 1677b(a)(1)(B)(i). For NME exports, however, the calculus is not so simple. The law
presumes that government action distorts both the price of goods made in NME countries and the
cost of inputs used to make those goods. See Blue Field (Sichuan) Food Indus. Co. v. United
States, 37 CIT __, __, 949 F. Supp. 2d 1311, 1317 (2013). To calculate NV for goods made in
NME countries, then, the agency assigns each of the goods’ inputs an artificial market price or
surrogate value. See 19 U.S.C. § 1677b(c)(1). Once Commerce finds the total cost of inputs
used, it adds an amount for general expenses, profit, containers, and other costs. Id. The sum of
this equation is the goods’ NV.
Naturally, Commerce cannot pack the NV formula with whatever data it wishes. Rather,
the law requires that only “the best available information” be used for surrogate values. Id.
Ordinarily, Commerce selects surrogate values from ME countries that produce significant
amounts of subject merchandise and that are economically comparable to the exporting country.
Id. § 1677b(c)(4). Commerce also prefers data that are “product-specific, representative of a
broad-market average, publicly available, contemporaneous with the [review period], and free of
taxes and duties” for use as surrogates. I&D Memo at cmt. 1.
To aid these calculations, the parties to a review—including foreign exporters and
interested U.S. companies—may submit data. Commerce generally requests data through
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questionnaires at the outset of a review. See 19 C.F.R. § 351.221(b)(2) (2014). Later, if the
agency finds it needs more information to complete its work, it may send out supplemental
questionnaires. See id. § 351.301(a). Commerce then analyzes the data on the administrative
record and publishes preliminary results, to which the parties respond with case briefs and
rebuttals. See id. §§ 351.221(b)(4)(ii), 351.309(c)(1)(ii). Final results are issued after
Commerce closes the record to additional information and argument. See id. § 351.221(b)(5).
In the present review, Commerce sought to determine dumping margins for OCTG from
the People’s Republic of China, an NME country. The agency made a number of preliminary
decisions that Plaintiffs contested in their case briefs. These included (1) Commerce’s choice of
surrogate values for steel billet, (2) the decision to deny Chengde an NV offset for steel scrap
produced and sold during the review period, (3) Commerce’s surrogate value for ocean freight,
(4) Commerce’s surrogate value for inland freight, and (5) the decision to classify thread
protectors as a direct input into the OCTG and not as a packing material. See I&D Memo at
cmts. 1−2, 7−9. Commerce reaffirmed these decisions in the Final Results, and Chengde
appealed on January 16, 2013. See Summons, ECF No. 1.
JURISDICTION AND STANDARD OF REVIEW
The court has jurisdiction to hear this appeal under 28 U.S.C. § 1581(c). The court will
uphold the agency’s decisions unless those decisions are “unsupported by substantial evidence
on the record, or otherwise not in accordance with law.” 19 U.S.C. § 1516a(b)(1)(B)(i).
DISCUSSION
In light of these standards, the court must remand one issue to Commerce: the choice of
surrogate values for steel billet. The court sustains the agency on all other counts, including
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Commerce’s denial of an offset for steel scrap, the choice of surrogate values for ocean and
inland freight, and the decision to classify thread protectors as direct inputs.
I. 	The Surrogate Values for Steel Billet Were Not Based in Substantial Evidence
To begin, the court considers Plaintiffs’ claims regarding steel billet, the main ingredient
in Chengde’s OCTG. Plaintiffs allege that the agency made three wrong decisions when
assigning surrogate values for billet: (1) Commerce incorrectly concluded that Chengde used
alloy steel billets—not carbon steel billets—to produce most of the OCTG sold during the review
period, (2) the agency selected a surrogate value for carbon steel billet that was not specific to
the billet Chengde used, and (3) Commerce chose a surrogate value for high-carbon steel billet
that was aberrantly expensive. Pls.’ Mot. for J. on Agency R. 12−23, ECF No. 39-1 (“Pls.’ Br.”).
The court finds the first of these decisions was not based in substantial evidence, because
Commerce failed to explain why documents proving the chemical makeup of some of Chengde’s
billet could not also prove the makeup of the remaining billet. The court also remands the third
decision at the agency’s request.
A. Background
Before tackling the merits, the court must explain how Commerce decided what fraction
of Chengde’s billet was alloy or carbon steel. The administrative history is complex, so the court
provides tables below to summarize the data relevant to the agency’s decision making.
At the outset of the review, Commerce asked Chengde to identify the factors of
production it used to produce subject OCTG. Chengde responded with proposed surrogate
values for its inputs, including a surrogate value for steel billet. Chengde Resp. to Sections C&D
Questionnaire (“C&D Resp.”) at Ex. D-5, CD IV 19−23 (Nov. 17, 2011), ECF No. 46-3 (May
24, 2013). The surrogate Chengde offered was U.S. Harmonized Tariff Schedule (“HTS”)
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7224.90.0075, a subheading covering semifinished alloy steel products. Id. Chengde also
furnished inventory out slips and a monthly steel billet consumption statement to document its
billet use. Id. at Ex. R-2.
In December 2011, Commerce issued its first supplemental questionnaire. First
Supplemental Questionnaire (“First Supp. Q.”), CD IV 30 (Dec. 12, 2011), ECF No. 46-3 (May
24, 2013). The questionnaire asked Chengde to state the chemical makeup of its inputs and to
provide supporting documents, including sample purchase contracts, invoices, packing lists, and
certificates of assay. Id. at 6. Chengde answered with a technical description of its inputs and
sales contracts from a billet supplier. First Supplemental Resp. (“First Supp. Resp.”) at Exs. S1-
4, S1-5, CD IV 36−43 (Jan. 11, 2012), ECF No. 46-3 (May 24, 2013). These data outlined the
American Society of Mechanical Engineers (“ASME”) specifications for Chengde’s billet:
SA106C, 28Mn2, and SA210C. These data did not indicate whether Chengde’s billet was
carbon or alloy steel, however. 2
Commerce then sent a second supplemental questionnaire asking Chengde to “submit
sample product quality certificates and mill test reports/certificates for all control numbers
(‘CONNUMS’) sold during the [review period].” Second Supplemental Questionnaire (“Second
Supp. Q.”) at 4, CD IV 47 (Feb. 15, 2012), ECF No. 46-3 (May 24, 2013). In reply, Chengde
sent its U.S. purchase contracts and the first pages of ten mill certificates, which listed the
chemical properties of OCTG sold during the review period. Second Supplemental Resp.
(“Second Supp. Resp.”) at Exs. S2-13, S2-14, CD IV 50−58 (Mar. 15, 2012), ECF No. 46-3
(May 24, 2013). Each page from the mill certificates corresponded to a discrete U.S. sales
2 In its Section A response, Chengde furnished a brochure detailing the chemical properties of ASME
SA210C steel. Chengde Resp. to Section A Questionnaire at Ex. A-19, CD IV 14−18 (Oct. 20, 2011), ECF No. 46-
3 (May 24, 2013). Commerce found the brochure was inconclusive regarding whether SA210C is alloy or carbon
steel. See I&D Memo at cmt. 1.
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contract for a single type of OCTG, but only part of the total OCTG sold was sampled. All
OCTG specifically tested in the mill certificates was made of carbon steel.*

Table 1 shows the amount of OCTG sampled and sold under each U.S. sales contract
during the review period. Henceforth, the court refers to the [[ ]] percent of OCTG
specifically tested in the certificates as the “sampled OCTG.” The remaining [[ ]] percent

of OCTG sold is referred to as the “unsampled OCTG.”

Table 1: OCTG Sampled in Mill Certificates*
U.S. Sale | Contract | Model [| CONNUM | Weight Sampled in | Total Weight Percent
Number | Number Mill Certificate Sold (MT) | Sampled (%)
1 {i {t I] 1 iT { {t Jl
2 {i J {t I 2 {i Jl {i Jl {f
3 {i J {t I 3 { J ff {i I
4 {i J {t I 4 { J ff {i I
5 { {t I 5 { J { {t J
6-7 {i {fl 6 {i J { ft
8-10 {i {fl 5 {i J { ft
11-13 {i {{ 6 {i Jl { {
14 {i {{ I] 7 Not sampled { 0.00
15 {i {{ J] 8 Not sampled ff 0.00
16 [. i ll 9 Not sampled [ 1 0.00
17 {i {{ I] 6 {i { {{ Jl
18-19 {i {{ I] 6 {i { {
TOTAL ft Jj jj {i Jj

3 Chengde also sent the agency a few more billet sales contracts. Second Supp. Resp. at Ex. $2-15.

4 Table 1 is based on Attachment A to Defendant-Intervenor United States Steel Corporation’s brief. Mem.
in Opp’n to Pls.’ Mot. for J. on Agency R., ECF No. 72. The data in the chart come from Chengde’s mill
certificates, its U.S. sales contracts, and a sales database from the third supplemental response. See Second Supp.
Resp. at Exs. $2-13, S2-14; Third Supplemental Resp. at Ex. S3-12, CD IV 60-65 (May 2, 2012), ECF No. 46-3
(May 24, 2013). Furthermore, each numeral in the chart’s CONNUM column corresponds to a unique control
number or product identifier, as outlined in Attachment A to U.S. Steel’s brief.

Court No. 13-00029 	Page 8
After issuing yet another questionnaire, Commerce published its preliminary results.
Certain Oil Country Tubular Goods from the People’s Republic of China, 77 Fed. Reg. 34,013
(Dep’t Commerce June 8, 2012) (prelim. admin. review) (“Preliminary Results”). As a surrogate
value for steel billet, Commerce used Indonesian Global Trade Atlas (“GTA”) import data for
alloy steel. Prelim. Factor Valuation Mem. (“Prelim. Factor Mem.”) at Attach. 1, PD II 114
(May 30, 2012), ECF No. 46-2 (May 24, 2013). Apparently, Commerce had either ignored or
rejected any data hinting that Chengde’s OCTG was made of carbon steel.
Between the Preliminary Results and the case briefs, the parties submitted additional
data. First, in an administrative protective order (“APO”) application, ATP sent Commerce a
Customs and Border Protection (“CBP”) entry summary that classified OCTG sold under
contract [[ 	]] as carbon steel. APO Appl. at Attach. 1, CD IV 69 (Jul. 16, 2012), ECF No. 46-
3 (May 24, 2013). The United States Steel Corporation (“U.S. Steel”), a Defendant-Intervenor
on appeal, also submitted rebuttal data including website screenshots. U.S. Steel Surrogate
Value Rebuttal at Exs. J−K, PD II 130 (July 16, 2012), ECF No. 46-2 (May 24, 2013). The
screenshots showed that Chengde’s model P110 steel tubes—the type of OCTG sold under
contracts [[ 	]]—were made of alloy steel.
Plaintiffs then submitted case briefs contesting Commerce’s surrogate value for steel
billet. See ATP Revised Case Br. (“ATP Case Br.”) at 3−13, CD IV 73 (Aug. 3, 2012), ECF No.
46-3 (May 24, 2013); Chengde Revised Case Br. (“Chengde Case Br.”) at 1−9, PD II 144 (Aug.
2, 2012), ECF No. 46-2 (May 24, 2013). In both of those briefs, Plaintiffs argued that Chengde
made a mistake in its initial response, accidentally classifying its billet as alloy steel instead of
carbon steel. To correct this error, they asked Commerce to value billet under HTS 7207.19, a
subheading covering semifinished products of iron or nonalloy steel. Chengde Case Br. 1−2; see
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also ATP Case Br. 3−4. In Plaintiffs’ view, Chengde’s mill certificates proved that all the
OCTG sold during the review period was carbon steel. Plaintiffs also argued that the Indonesian
GTA data were unfit as surrogate values for carbon steel billet. See Chengde Case Br. 3−9. In
their estimation, prices under Indonesian HTS 7207.19 seemed aberrantly high and not specific
to Chengde’s inputs, especially when judged against alternative Ukrainian data. Id.
At the end of the administrative marathon, Commerce concluded that most of Chengde’s
billet was made of alloy steel. See Final Analysis Mem. at 2, CD IV 80 (Dec. 5, 2012), ECF No.
46-3 (May 24, 2013). In support, the agency relied on Chengde’s initial questionnaire response,
which claimed that all its billet inputs were alloy steel. I&D Memo at cmt. 1. Commerce also
cited the billet consumption statement, inventory out slips, and website data to prove that the
preponderance of Chengde’s billet was alloy steel. Id.
Even so, Commerce held that part of Chengde’s billet was carbon steel for two reasons.
First, Commerce found that finished OCTG has the same chemical properties as raw billet. Id.
No one disputes this finding on appeal. Second, Commerce said Chengde’s mill certificates
proved that all sampled OCTG was made of carbon steel. Id. The agency thus concluded that
[[ 	]] percent of Chengde’s billet was made of carbon steel. Final Analysis Mem. at 2.
Commerce also adopted the Indonesian GTA data to value carbon steel billet over Plaintiffs’
objections. I&D Memo at cmt. 1.
Table 2 summarizes record data respecting the chemical makeup of Chengde’s billet.
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Page 10

Table 2: Record Evidence Regarding Steel Billet

No. | Data Name Source Date Submitted | Description

1 Chengde Company | Section A Resp., Ex. | Oct. 20, 2011 Describes the chemical properties of
Brochure A-19 SA210C steel.

2 Surrogate Value C&D Resp., Ex. D-5 | Nov. 17, 2011 Classifies billet under HTS 7224.90.0075
Spreadsheet (alloy steel items) and specifications

SA106C, 28Mn2, and SA210C.

3 Steel Billet C&D Resp., Ex. R-2 | Nov. 17, 2011 Shows that Chengde consumed steel billet
Consumption of specifications SA210C, 28Mn2, and
Statement others during the review period.

4 Inventory-Out Slips | C&D Resp., Ex. R-2 | Nov. 17, 2011 Shows that Chengde consumed steel billet
of specifications SA210C, 28Mn2, and
others during the review period.

5 Description of First Supp. Resp.. Jan. 11, 2012 Classifies billet under specifications
Factors of Ex. S1-4 (S1-15) SA106C, 28Mn2, and SA210C.
Production

6 Billet Sales First Supp. Resp.. Jan. 11, 2012 Shows billet of specifications [[

Contracts Ex. $1-4 (S1-15) ]] purchased in November 2009 and
March 2010.

7 Mill Test Second Supp. Resp., | Mar. 15, 2012 Shows sample chemical data for OCTG
Certificates Ex. $2-13 sold under contracts [[

Il.

8 Billet Sales Second Supp. Resp., | Mar. 15, 2012 Shows billet of specification SA210C and
Contracts Ex. $2-15 SA106C purchased during the review

period.

9 CBP Entry APO Appl., Attach. | July 16, 2012 Classifies goods shipped in contract [[ J]
Summary 1 under HTS 7304.29.2030, or seamless tube

of iron or nonalloy steel.

10 | Chengde Website USS. Steel Surrogate | July 16, 2012 Shows model P110 steel tube made of alloy

Value Rebuttal steel; calls Chengde’s J/K55, L80, and P110
Data, Exs. JI-K tubing “alloy steel pipe.”

Court No. 13-00029 	Page 11
B. The Decision to Value Most of Chengde’s Billet as Alloy Steel Was
Unsubstantiated in Evidence
Plaintiffs first challenge the decision to value most of Chengde’s billet as alloy steel.
Pls.’ Br. 12−18. In their view, Chengde’s mill certificates proved that not only some, but all the
billet consumed during the review period was carbon steel. Commerce, by contrast, argues that
any OCTG not specifically sampled in the mill certificates was alloy steel. Def.’s Resp. to Pls.’
Rule 56.2 Mot. for J. on Agency R. 13−18, ECF No. 66 (“Gov’t Br.”). But neither argument is
entirely correct.
On one hand, the record does not support Plaintiffs’ claim that all billet consumed to
make OCTG was carbon steel. That is because Chengde furnished no mill certificates to prove
that the goods sold under contracts [[ 	]] were made of carbon steel. See supra
Table 1 nos. 14−15. On the contrary, a website screenshot showed that model P110 tubing—the
item sold in these contracts—contained 0.8 to 1.10 percent chromium by weight. See supra
Table 2 no. 10 at Ex. J; see also Mem. in Opp’n to Pls.’ Mot. for J. on Agency R. 14 n.13, ECF
No. 72 (“U.S. Steel Br.”). Normal steel becomes alloy steel if it contains more than 0.3 percent
chromium, and Chengde’s P110 exceeded this threshold. See HTS ch. 72 n.1(f). Commerce
thus had a simple choice to make. It could rely on Chengde’s unsupported suggestion that the
billet used to manufacture P110 tubing was carbon steel, or it could credit firm record data
showing that P110 tubing is made of alloy steel. The agency reasonably chose the latter course
in the Final Results.
On the other hand, Commerce was too quick to conclude that all unsampled OCTG was
made of alloy steel billet. Although it reasonably relied on Chengde’s mill certificates to find the
sampled OCTG was carbon steel, Commerce never explained why unsampled OCTG sold in the
same contracts as sampled OCTG was not also carbon steel. See I&D Memo at cmt. 1; supra
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Table 2 no. 7. Plaintiffs describe how the mill certificates tend to prove the unsampled OCTG
was made of carbon steel:
Chengde provided sample mill test certificates for 16 of the 19 U.S. sales made
during the period of review. Each sale consisted of only one product. Those 16
U.S. sales accounted for 10 of the 13 purchase contracts and six of the nine
specific OCTG products (control numbers, or “CONNUMs”) applicable to the
[review period].
Pls.’ Br. 12 (internal citations omitted). Furthermore, “[a]ll of those mill certificates indicated
the products were carbon steel.” Id. Taken together, this evidence suggests that OCTG not
specifically sampled—yet commercially identical to sampled OCTG—was made of carbon steel.
In fact, the agency itself suggested that testing a fraction of Chengde’s products could prove the
chemical makeup of unsampled OCTG. First Supp. Q. 6 (requesting certificates of assay for
inputs, but only for first purchase during review period); Second Supp. Q. 4 (requesting sample
product quality certificates for each type of OCTG sold). Nevertheless, the Final Results treated
OCTG sampled in the mill certificates as if it were unrepresentative of the chemical makeup of
unsampled OCTG. The agency never explained why this might be the case. See I&D Memo at
cmt. 1. This omission rendered Commerce’s decision unsubstantiated in evidence.
Commerce also failed to consider the CBP entry summary submitted with ATP’s APO
application. See supra Table 2 no. 9. That document classified OCTG sold in contract [[ 	]]
under HTS 7304.29.2030, a subheading covering seamless tube of iron or nonalloy (i.e., carbon)
steel. It was unreasonable for Commerce to ignore this evidence yet conclude that the billet used
to make these goods was alloy steel.
Furthermore, the agency used flawed data to prove that most of the unsampled OCTG
was alloy steel. See I&D Memo at cmt. 1. Consider, for example, Chengde’s inventory out slips
and billet consumption statement. See supra Table 2 no. 3−4. Although these data imply that
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Chengde consumed alloy billet to make tubes generally, the documents do not reveal whether
Chengde used alloy billets to make the OCTG now under review. See Pls.’ Br. 17.
Nor do the websites clearly show that all the unsampled OCTG was alloy steel.
Admittedly, Chengde’s online advertising calls grade J/K55, L80, and P110 tubing “alloy steel
pipe.” See supra Table 2 no. 10 Ex. K. The websites also show that certain types of pipe contain
alloy metals. See id. at Ex. J. But these online data may not describe subject goods. One
website’s entry for L80 pipe, for instance, describes a product that does not fall under the OCTG
antidumping order. See Pls.’ Br. 16 (noting website says L80 pipe contains 13 percent
chromium); Certain Oil Country Tubular Goods from the People’s Republic of China, 75 Fed.
Reg. 28,551, 28,553 (Dep’t Commerce May 21, 2010) (amended final determ.) (“OCTG Order”)
(excluding OCTG with 10.5 percent or more chromium by weight from order). It was
unreasonable for Commerce to rely on these data—yet disregard the mill certificates and entry
summary—to decide that the unsampled OCTG was alloy steel.
Citing Timken v. United States, 434 F.3d 1345 (Fed. Cir. 2006), U.S. Steel counters that
Chengde failed to disprove its initial position, i.e., that the billet was alloy steel. U.S. Steel Br.
16−17. But this argument incorrectly shifts scrutiny from Commerce to the Plaintiffs. In
Timken, a respondent used dubious evidence to show that its home market sales were mislabeled,
and Commerce fairly explained why respondent’s proof failed. See 434 F.3d at 1349−50. Here,
by contrast, the agency did not fully confront Chengde’s arguments and data regarding carbon
steel billet. Although Commerce found that Chengde’s mill certificates were “a reliable basis on
which to determine the chemical composition” of sampled OCTG, the agency never told why
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those data were not equally useful to prove the properties of unsampled OCTG. I&D Memo at
cmt. 1. Timken does not plug this hole in Commerce’s reasoning. 5
On remand, Commerce need not reconsider the chemical makeup of billet used to
manufacture the OCTG sold in contracts [[ 	]]. See supra Table 1 nos. 14−15.
Chengde offered no evidence that these goods were made of carbon steel, and the agency
reasonably found that this OCTG consisted of alloy billet. Commerce must reevaluate the
chemical composition of OCTG sold in contracts [[
]], however. See id. at nos. 1−13, 17−19. In
particular, the agency must explain whether Chengde’s mill certificates prove the chemical
properties of OCTG not specifically tested in those certificates. See supra Table 2 no. 7. The
agency must also assess whether Chengde’s entry summary proves that the OCTG in contract
[[ 	]] was carbon steel. See supra Table 1 no. 16; Table 2 no. 9. Then Commerce must
recalculate the percentage of Chengde’s billet that was alloy steel or carbon steel in accordance
with this analysis.
C. The Indonesian Surrogates Were Reasonably Specific to Chengde’s Carbon
Steel Billets
Plaintiffs next challenge Commerce’s surrogate values for carbon steel billet, calling
them insufficiently specific to Chengde’s actual inputs. See Pls.’ Br. 18−19. In its review, the
5 Defendant-Intervenors raise other arguments, but the court rejects them outright. See U.S. Steel Br. 15
(claiming chemical composition of OCTG varied within single mill certificate); id. (claiming Chengde furnished
mill certificate pages on “selective” basis); id. at 17−18 (noting Chengde drew its initial classification of alloy steel
billet from investigation that also involved carbon steel billet). Commerce used none of these arguments below, so
the parties cannot try them on appeal. See SEC v. Chenery Corp., 318 U.S. 80, 95 (1943) (“[A]n administrative
order cannot be upheld unless the grounds upon which the agency acted in exercising its powers were those upon
which its action can be sustained.”).
The parties also debate whether the ASME specifications for Chengde’s billet—SA210C, SA106C, and
28Mn2—reveal the chemical makeup of the input. See, e.g., Pls.’ Br. 13. The court finds no record data defining
the chemical properties of SA106C and 28Mn2, however, and Chengde’s company brochure shows SA210C can be
either alloy or carbon steel. See supra Table 2 no. 1. The court thus agrees with Commerce that these data did not
prove the type of billets Chengde used to make OCTG. See I&D Memo at cmt. 1.
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agency used Indonesian GTA data from HTS subheadings 7207.19 and 7207.20 to value high-
and low-carbon steel billet. I&D Memo at cmt. 1. Nevertheless, the record shows that six
Indonesian OCTG producers either made a different type of OCTG than Chengde, or used
semifinished steel pipe rather than raw billet during production. See Pls.’ Br. 18−19; Domestic
Interested Parties’ Surrogate Country Comments at Ex. 1, PD II 51 (Dec. 19, 2011), ECF No. 46-
2 (May 24, 2013); U.S. Steel Surrogate Country Comments at Ex. A, PD II 55 (Jan. 6, 2012),
ECF No. 46-2 (May 24, 2013). In Chengde’s view, this proves that “the Indonesian import data
[do] not include any imports of the type of billets used for [Chengde’s] OCTG production.” Pls.’
Br. 19.
Doubtless, if a surrogate does not value an item similar to an exporter’s input, this could
distort the exporter’s dumping margin. See Blue Field, 37 CIT at __, 949 F. Supp. 2d at 1328.
Yet Plaintiffs marshaled no concrete data to show that imports under Indonesian HTS 7207.19
and 7207.20 are different from the billet Chengde used to produce subject OCTG. See id.
(holding exporter bears de facto burden to show surrogate not specific). And Chengde’s
inference—in essence, that Indonesia does not import carbon steel billet because domestic
OCTG manufacturers do not use it in their production—rests on an assumption that only OCTG
producers consume steel billet. Chengde has not shored up this assumption with record
evidence. As such, the court cannot hold that Commerce’s carbon steel surrogates were not
specific to Chengde’s inputs.6
6 Plaintiffs also claim that HTS 7207.19 and 7207.20 are “basket” categories that cover products other than
billets. Reply Br. 10–11. But Plaintiffs did not make this claim in their lead brief. See Pls.’ Br. 18–19. Hence the
argument was waived. See Novosteel SA v. United States, 284 F.3d 1261, 1273−74 (Fed. Cir. 2002).
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D. On Remand, Commerce May Determine Whether the Indonesian Surrogate
Data Were Aberrational
Finally, Plaintiffs argue that Commerce’s surrogate for high-carbon steel billet was
aberrantly high. In their brief, Plaintiffs note that high-carbon steel billet prices on the London
Metals Exchange were far lower than prices under Indonesian HTS 7207.20. See Pls.’ Br. 22.
They also argue that Indonesian steel high-carbon prices seem too expensive when compared to
low-carbon prices from the same country. Id. at 19−20. Thus Plaintiffs would use Ukrainian
data to value carbon steel billet. See id. at 21. Defendant-Intervenors, by contrast, argue that
Commerce’s high-carbon steel billet surrogate was reasonable compared to similar data from
comparable economies. See U.S. Steel Br. 23−24; Mem. of Def.-Intervenors TMK IPSCO,
Wheatland Tube Co., and V&M Star L.P. 9−10, ECF No. 66. 7
Independent of these arguments, Commerce found on appeal that its surrogates for high-
and low-carbon steel billet were unreliable. This is so because the I&D Memo “analyzed the
import values [for carbon steel billet] submitted by U.S. Steel, which differed from the import
values Commerce actually used in calculating the Final Results.” Gov’t Br. 19. The agency
requests a voluntary remand to determine “whether the surrogate value for carbon non-alloy steel
billets was aberrational.” Id.
The law permits voluntary remand when the agency “believes that its original decision is
incorrect on the merits and it wishes to change the result.” SKF USA Inc. v. United States, 254
F.3d 1022, 1029 (Fed. Cir. 2001). That is certainly the case here. Given alleged flaws in the
Indonesian values, and given the agency’s desire to reconsider its choice, the court remands the
7 Plaintiffs argued in their lead brief that Ukrainian HTS data with ten-digit breakouts were both more
specific than the Indonesian data and not aberrational. Pls.’ Br. 19−22. Yet pursuant to the court’s order on
Defendant’s motion to strike, the ten-digit data were stricken from Plaintiffs’ brief. Opinion and Order, ECF No. 58
(Aug. 6, 2013). Accordingly, the court does not consider whether the Indonesian data are aberrational or less
specific than Ukrainian ten-digit breakout data.
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high- and low-carbon steel billet surrogates to Commerce to reconsider whether they are the best
available information on the record compared to other carbon steel billet surrogate data.
II. 	Commerce’s Denial of a Byproduct Offset Was Based in Substantial Evidence
Plaintiffs next allege that Commerce wrongly withheld a byproduct offset for the scrap
Chengde produced and sold during the review period. The court finds, however, that Chengde
did not carry its burden to clinch the offset. The court thus declines to remand the issue.
A. Background
Under 19 U.S.C. § 1677b(c)(1), Commerce finds the NV of NME goods by tallying the
cost of inputs used to make the merchandise, then adding an amount for profit and other
expenses. Pursuant to this calculus, Commerce must decide the “quantities of raw materials
employed” to produce subject goods. 19 U.S.C. § 1677b(c)(3)(B). Not all raw materials
employed in production become part of the finished product, however. In recognition of this
fact—and though not required to do so by law—Commerce subtracts or “offsets” from NV the
revenue an exporter earns from selling manufacturing byproducts or scrap. See Arch Chems.,
Inc. v. United States, 33 CIT 954, 956 (2009).
Commerce requires two data points from exporters before it will grant the offset. First,
the exporter must document how much byproduct it made when producing subject merchandise.
See id. Second, the exporter must show either that the byproduct was resold or that the scrap has
commercial value and reentered the production process. Id. Exporters usually prove their
entitlement to the offset by furnishing documents that measure the amount of scrap produced and
sold during the review period. Nevertheless, if an exporter does not record scrap production, the
exporter may still claim the offset if it “reasonably link[s]” the amount of scrap sold during the
review period to the amount produced during the same time. See Drawn Stainless Steel Sinks
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from the People’s Republic of China, 78 Fed. Reg. 13,019 (Dep’t Commerce Feb. 26, 2013)
(final determ.) and accompanying Issues & Decision Mem. (“Stainless Steel Sinks”) at cmt. 9.
By demanding this proof, Commerce excludes scrap made during prior review periods from the
offset formula, and ensures that NV reflects the actual cost of making subject goods.
In its first questionnaire, Commerce asked Chengde whether it made or sold any
byproduct during the review period. Initial Antidumping Questionnaire (“Initial Q.”) at E-9, PD
II 32 (Sept. 19, 2011), ECF No. 46-2 (May 24, 2013). Chengde reported that it produced steel
scrap, but added that it recorded only scrap sales—not production—on its company books. C&D
Resp. at D-14, D-15. Because it did not track scrap production, Chengde proposed an offset ratio
dividing the total scrap it sold by the amount of “green tubes” it made, whether or not those tubes
became subject OCTG. Id. at D-15, D-16, Ex. D-13.
In both the Preliminary Results and Final Results, Commerce denied Chengde a scrap
offset. Prelim. Factor Mem. at 4; I&D Memo at cmt. 2. Though Chengde claimed that the
amount of scrap it produced and sold were the same, Commerce found Chengde had not
supported this conclusion “with evidence such as inventory ledgers or inventory out slips.” I&D
Memo at cmt. 2. Thus Commerce found that Chengde had not carried its burden to secure the
offset. Id.
B. Discussion
Plaintiffs allege Commerce committed a raft of errors when it denied Chengde a scrap
offset. First, they claim the agency has granted scrap offsets based on data similar to the
information Chengde presented below. Pls.’ Br. 23−25. Second, Plaintiffs argue that Commerce
could not deny the offset before pointing out deficiencies in Chengde’s questionnaire responses.
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Id. at 27−28. And third, Plaintiffs claim that Commerce needed to explain why Chengde’s data
were inadequate to secure the offset. Id. 26−29. None of these arguments persuade.
The reason Commerce denied the scrap offset is simple: Chengde failed to meet the
agency’s well-settled prerequisites to secure the deduction. As discussed above, the law neither
requires nor forbids byproduct offsets. See Arch Chems., 33 CIT at 956; Guangdong Chems.
Imp. & Exp. Corp. v. United States, 30 CIT 1412, 1422, 460 F. Supp. 2d 1365, 1373 (2006). In
this vacuum of legal guidance, Commerce has chosen to offset scrap revenue only if respondents
prove the amount of scrap they made during the review period. But here, Chengde voiced that it
could not corroborate its scrap production. C&D Resp. at D-14 (“Jiangsu Chengde does not
account for the quantity of steel scrap generated in the production process.”). Nor did it
corroborate that its scrap production and sales were the same during the review period. The
agency was not required to grant Chengde the offset when it lacked the information needed to do
so accurately. See Taian Ziyang Food Co. v. United States, 37 CIT __, __, 918 F. Supp. 2d
1345, 1355 (2013) (holding Commerce must calculate margins “as accurately as possible”)
(quoting Shakeproof Assembly Components v. United States, 268 F.2d 1376, 1382 (Fed. Cir.
2001).
Plaintiffs counter with examples of exporters who did not track scrap production but still
got the offset. Yet none of these cases are relevant here. For example, in Multilayered Wood
Flooring from the People’s Republic of China, 76 Fed. Reg. 64,318 (Dep’t Commerce Oct. 18,
2011) (final determ.) and accompanying Issues & Decision Mem. at cmt. 23, Commerce allowed
an offset when it learned that respondent produced and sold wood scraps on a monthly basis.
The agency also confirmed that the wood scrap stemmed from the manufacture of subject
merchandise. Id. Chengde, by contrast, did not show that it sold its scrap right after production.
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It also failed to prove that the scraps included in its offset ratio were made when producing
subject goods. See C&D Resp. at Ex. D-13. Because Chengde did not meet its evidentiary
burden, Commerce reasonably denied the offset. See 19 C.F.R. § 351.401(b)(1) (stating
interested party bears burden to prove amount of adjustment to NV).8
The court also disagrees that Commerce needed to identify shortcomings in Chengde’s
responses before denying the offset. Pls.’ Br. 27−28. Under 19 U.S.C. § 1677m(d), if
Commerce “determines that a response to a request for information . . . does not comply with the
request,” then the agency must “promptly inform the person submitting the response of the
nature of the deficiency.” This ensures that Commerce’s data collection does not morph into an
administrative guessing game, where the agency punishes parties for giving incomplete answers
to cryptic questions. See Böwe-Passat v. United States, 17 CIT 335, 342 (1993) (remanding
where deficiency letter failed to state data needed to grant level-of-trade adjustment).
Here, however, Commerce told Chengde exactly what it needed: data regarding the
production of steel scrap. In its lead questionnaire, Commerce asked Chengde to identify by
month the quantity of scrap “produced, sold, [or] reintroduced into production.” Initial Q. at E-9.
It also asked for documents, including “production records demonstrating production of each by-
product/co-product during one month of the [review period].” Id. In response, Chengde stated
8 Plaintiffs’ other cases do not show that Commerce’s decision to deny the offset was unreasonable. In
Stainless Steel Sinks, Commerce granted an offset because warehouse out-slips supported respondent’s claimed rate
of scrap production. Stainless Steel Sinks at cmt. 9. And in Utility Scale Wind Towers from the Socialist Republic of
Vietnam, 77 Fed. Reg. 75,984 (Dep’t Commerce Dec. 26, 2012) (final determ.) and accompanying Issues &
Decision Mem. at cmt. 5, Commerce granted an offset for steel scrap because respondent sold scrap each month and
based its yield loss ratio on production instructions for subject goods. Neither of these proceedings helps Chengde,
which claimed only that the amount of scrap it sold equaled the amount it produced.
In fact, Commerce denied an offset for aluminum scrap in Wind Towers for much the same reason that it
denied an offset to Chengde. In Wind Towers, respondent divided the total amount of aluminum scrap sold by the
amount of aluminum used during the investigation period—regardless of whether it related to subject or non-subject
goods—and Commerce found these data inadequate to estimate the true amount of scrap made in the manufacture of
subject merchandise. See id.
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that it kept no records of scrap production. C&D Resp. at D-14, D-16. So unlike Böwe-
Passat—where Commerce made hazy requests for data then punished respondents for failing to
deliver—Commerce stated exactly what it needed, and Chengde answered that it could not
provide the information. In such situations, Commerce need not flag deficiencies in a party’s
responses, because the party never “responded” to the agency’s request to begin with. See Ta
Chen Stainless Steel Pipe, Inc. v. United States, 298 F.3d 1330, 1337−38 (Fed. Cir. 2002) (“A
failure to respond is not the same as a ‘response’ as required by the statute.”).
In a similar vein, Plaintiffs argue Commerce needed to explain why it rejected the data
accompanying Chengde’s scrap offset formula. Pls.’ Br. 26−29. Under § 1677m(e)(3) and (5),
the agency must consider a party’s submission if it is “not so incomplete that it cannot serve as a
reliable basis for reaching the applicable determination” and “can be used without undue
difficulties.” Statute also requires Commerce, in general, to calculate NV based on records “kept
in accordance with the generally accepted accounting principles [“GAAP”] of the exporting
country.” 19 U.S.C. § 1677b(f)(1)(A). According to Plaintiffs, Commerce should have relied on
Chengde’s GAAP-consistent records to grant the offset.
Commerce complied fully with both of these laws. In its responses, Chengde provided
no evidence to show that the amount of scrap it produced equaled the amount it sold. Hence,
although it did not analyze each § 1677m(e) factor in its analysis, Commerce reasonably
concluded that Chengde’s data were not a “reliable basis” to permit the offset. See I&D Memo at
cmt. 2; 19 U.S.C. § 1677m(e)(3). Similarly, the agency did not need to grant the offset just
because Chengde’s books complied with GAAP. See 19 U.S.C. § 1677b(f)(1)(A). As the
agency noted, Chengde’s records tracked only scrap sales, and this scrap could have been made
during prior review periods or in the manufacture of nonsubject goods. I&D Memo at cmt. 2.
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With no data to tie scrap sales to scrap produced, Chengde’s records did not reasonably reflect
Chengde’s scrap production. See Hynix Semiconductor, Inc. v. United States, 424 F.3d 1363,
1369−70 (Fed. Cir. 2005) (upholding agency’s finding that GAAP-compliant books did not
reflect R&D costs).
Commerce’s decision to deny the scrap offset was based in substantial evidence and
accorded with law.9
III. 	Commerce Properly Used a Surrogate to Value Chengde’s Ocean Freight
Plaintiffs also dispute the decision to use a surrogate value to estimate Chengde’s ocean
freight costs. Chengde bought freight services from Korean shippers through Chinese agents,
and Plaintiffs argue Commerce should have used the price Chengde actually paid to value
Chengde’s freight. See Pls.’ Br. 32−36. Yet because Plaintiffs could not prove the price
exchanged between Chengde’s agents and the Korean shippers, Commerce’s choice passes
muster.
A. Background
As discussed above, the law requires Commerce to calculate the NV of NME goods using
surrogate prices from ME countries. See 19 U.S.C. § 1677b(c)(4). If an NME exporter
purchases inputs directly from ME suppliers, however, then Commerce may value those inputs
using the actual price the exporter paid. 19 C.F.R. § 351.408(c)(1) (2012); Antidumping
Methodologies: Market Economy Inputs, Expected Non-Market Economy Wages, Duty
Drawback, 71 Fed. Reg. 61,716, 61,717−18 (Dep’t Commerce Oct. 19, 2006) (request for cmts.)
9 Chengde also argues that Commerce incorrectly applied adverse facts available (“AFA”) to deny the scrap
offset. See Pls.’ Br. 30−32. Yet the AFA regime, by its own terms, applies only where “necessary information is
not available on the record.” 19 U.S.C. § 1677e(a)(1). Here, there was no evidentiary gap to fill. Commerce, in its
discretion, offered an offset not required by law, and Chengde could not carry its burden to secure it.
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(creating presumption to use market prices if 33 percent or more of input purchased from ME
suppliers).
To ship its goods abroad, Chengde hired ocean freight services from a few Korean
shippers. Chengde did not pay the Koreans directly, however. Instead, it gave money to a
freight forwarder, Shanghai Loyal, which in turn liaised with Chinese agents. These agents then
paid the shippers to carry Chengde’s freight. See I&D Memo at cmt. 8.
Because Korea is an ME country, Plaintiffs urged Commerce to use the amount Chengde
paid the Korean shippers as its freight value. See id. In support, Chengde provided invoices
between itself and its freight forwarder, Shanghai Loyal. Third Supplemental Resp. (“Third
Supp. Resp.”) at Ex. S3-4, CD IV 60−65 (May 2, 2012), ECF No. 46-3 (May 24, 2013).
Chengde also furnished documents displaying the amount Shanghai Loyal paid to the Chinese
agents who contracted with the Korean shippers. Id. at Ex. S3-5. Chengde was unable to
document how much the Chinese agents paid the Korean shippers, however. When Chengde
asked the agents to disclose how much they paid the shippers, the agents refused to release the
data. In the end, all Chengde could get from the agents was a confirmation that they paid the
Korean shippers in U.S. dollars. See id. at Ex. S3-6.
In light of this gap in the record, Commerce declined to use Chengde’s proposed ocean
freight price in the Final Results. The agency explained that it could not rely on payments
between Chinese entities to establish the amount Chengde paid for ME freight services. See I&D
Memo at cmt. 8. Commerce therefore used a surrogate to value Chengde’s ocean freight.
B. Discussion
On appeal, Plaintiffs argue that Commerce should have valued Chengde’s ocean freight
using the amount Chengde paid the Koreans through its freight forwarder. They cite Certain
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Polyester Staple Fiber from the People’s Republic of China, 72 Fed. Reg. 19,690 (Dep’t
Commerce Apr. 19, 2007) (final determ.) and accompanying Issues & Decision Mem.
(“Polyester Staple Fiber”) at cmt. 15, to show that Commerce does not always require proof of
the price exchanged between agents and ME shippers. And so, Plaintiffs continue, the agency’s
decision to value ocean freight using a surrogate was unlawful. See Pls.’ Br. 32−36.
The court disagrees. As discussed above, the law presumes that government action
distorts the prices NME exporters pay for their inputs. See Blue Field, 37 CIT at __, 949 F.
Supp. 2d at 1317. Consequently, before using an NME exporter’s actual costs to value freight,
Commerce requires proof of the U.S. dollar amount exchanged between NME shipping agents
and ME carriers. See, e.g., Sebacic Acid from the People’s Republic of China, 65 Fed. Reg.
49,537 (Dep’t Commerce Aug. 14, 2000) (final admin. review) and accompanying Issues &
Decision Mem. at issue 8. This ensures that freight prices used in the NV calculus reflect market
reality and not less-than-fair prices traded between NME companies.
Here, Chengde could not prove the price exchanged between its Chinese agents and the
Koreans, so Commerce reasonably used a surrogate to value ocean freight. Indeed, the situation
mirrors Yantai Oriental Juice Co. v. United States, 26 CIT 605, 614−16 (2002), where plaintiff
proved the price paid to a Chinese freight forwarder but not the price paid to the ME shipper.
Yantai affirmed the agency’s decision to use a surrogate for ocean freight, because plaintiff had
not shown how a transaction between “two nonmarket entities would be determined by market
forces.” Id. at 615−16. Furthermore, this case is unlike Polyester Staple Fiber, where an ME
shipper hired a Chinese agent to collect fees on its behalf. Polyester Staple Fiber at cmt. 15.
Presumably, this contractual arrangement guaranteed that the price paid to the agent and the
price received by the shipper were the same. See id. Here, however, there is no proof that the
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Korean shippers hired the Chinese agents to collect Chengde’s fees. Because the agent and
shippers were unaffiliated, there is little reason to believe that the price paid to the agents
equaled the price remitted to the shippers.10
Plaintiffs also argue that Commerce could not punish Chengde for its failure to squeeze
price data from the Chinese agents. Pls.’ Br. 35. Yet the case Plaintiffs cite for this proposition,
Shantou Red Garden Foodstuff Co. v. United States, 36 CIT __, 815 F. Supp. 2d 1311 (2012),
does not jibe. In Shantou, Commerce applied AFA when an exporter failed to secure factor of
production data from a noncomplying supplier. Id. at __, 815 F. Supp. 2d at 1316. The court
remanded because Commerce had not ordered the plaintiff to solicit the data from the supplier;
hence Commerce’s finding that plaintiff had not complied was unsubstantiated in evidence. Id.
at __, 815 F. Supp. 2d at 1317−19. Here, by contrast, Commerce did not deploy AFA to
calculate Chengde’s margins, but instead used a surrogate where the evidence did not justify
using Chengde’s actual costs. This approach was permissible and not punitive.
Finally, Plaintiffs argue that Commerce’s surrogate was not specific to Chengde’s ocean
freight. Pls.’ Br. 36. Chengde shipped its wares in bulk, but Commerce used the cost to ship a
full container as its ocean freight value. The court rejects this argument, however, on procedural
grounds. During the review, Plaintiffs never said Commerce’s surrogate was insufficiently
specific to Chengde’s input. And although ATP arguably broached the topic in its case brief, it
relegated its discussion to a one-sentence footnote. See ATP Case Br. 23 n.46. This meager
effort was not enough to exhaust the argument for appeal. See 28 U.S.C § 2637(d) (requiring
10 Chengde argues that it did document the price between the agent and shippers, that is, it proved there was
a U.S. dollar settlement between the Chinese agents and the Korean suppliers. Pls.’ Br. 34. But the fact that the
companies exchanged U.S. currency is unimportant. Chengde failed to prove the amount of money paid to the
shipper, and this is the information Commerce needed to confirm Chengde’s freight costs.
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exhaustion); see also SmithKline Beecham Corp. v. Apotex Corp., 439 F.3d 1312, 1320 (Fed. Cir.
2006) (holding arguments footnoted in opening brief not preserved).11
The decision to use a surrogate to value ocean freight was moored in substantial evidence
and accorded with law.
IV. 	Commerce Reasonably Selected a Surrogate for Inland Freight Expenses
Next, Plaintiffs claim that Commerce chose a flawed surrogate for Chengde’s inland
freight expenses. Pls.’ Br. 37−40. This argument fails too, because there was no inland freight
surrogate on the record besides the one Commerce used.
A. Background
Once again, Commerce must value inputs into NME goods using “the best available
information” on the record. 19 U.S.C. § 1677b(c)(1). One such input was truck freight services,
by which Chengde shipped OCTG from its factory to an inland port 7.5 kilometers away, then on
to the port of exit 280 kilometers further. C&D Resp. at C-22.
To value inland freight, Commerce used a rate schedule from Indonesian freight
forwarder PT Mantap Abiah Abadi (“PT Mantap”). Prelim. Factor Mem. at Attach. 3.
Commerce based the rate on shipments between 50 and 200 kilograms from Jakarta to twelve
outlying cities. See id. This calculus yielded a freight rate of 5.433 Indonesian rupiah per
kilogram per kilometer. Final Analysis Mem. at Attach. 1. No other party—Plaintiffs
included—proposed an alternative surrogate value for inland freight.
11 Even if Chengde exhausted its specificity argument, the court still rejects it. In support of its position,
Chengde cites Home Meridian International, Inc. v. United States, 36 CIT __, __, 865 F. Supp. 2d 1311, 1316−19
(2012). There, Commerce rejected non-contemporaneous actual prices in favor of a contemporaneous third-country
surrogate to value a major input. Id. at 1316. The court held it was unreasonable to ignore otherwise valid market
prices when contemporaneous surrogates were flawed. Id. at 1319. Yet in this case, Commerce considered the
proposed ME price for ocean freight and found it unreliable, and for good reason: Chengde offered no evidence to
support the price supposedly paid to the market economy shippers.
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In its case brief, ATP argued that Chengde shipped its goods in volumes comparable to a
full container load. ATP Case Br. 18−20. As a consequence, ATP claimed Commerce should
have priced inland freight on a per-metric ton basis rather than a per-kilogram basis. Id.
Commerce rejected this argument in the Final Results because there was “no evidence on the
record as to whether Chengde shipped full container loads by truck” during the review period.
I&D Memo at cmt. 9. The agency also noted that the record lacked per-metric ton inland freight
surrogates. Id.
B. Discussion
On appeal, Plaintiffs offer two main reasons why Commerce could not rely on the PT
Mantap data to value inland freight. First, Chengde sold OCTG in volumes much greater than a
ton, meaning kilogram-based freight rates were likely too high, and second, the PT Mantap data
were not authenticated. Pls.’ Br. 37–40. Neither of these arguments prevails, however, because
there were no inland freight surrogates on the record besides the one Commerce used.
The court cannot find any precedent—and the parties cite none—requiring Commerce to
hunt for surrogates when relevant data are already on the record. The law surely compels
Commerce to use the “best available information” to value inputs, 19 U.S.C. § 1677b(c)(1), but
the law also sets the burden of supplying record data on the parties, QVD Food Co. v. United
States, 658 F.3d 1318, 1324 (Fed. Cir. 2011) (quoting Tianjin Mach. Imp. & Exp. Corp. v.
United States, 16 CIT 931, 936, 806 F. Supp. 1008, 1015 (1992)) (“[T]he burden of creating an
adequate record lies with [interested parties] and not with Commerce.”). In this case, the record
sported only one option for pricing inland freight: the PT Mantap per kilogram rate. Plaintiffs
argue these data were flawed,12 yet without an alternative value to choose, Commerce reasonably
12 Plaintiffs have not proven here that the PT Mantap data were unrepresentative. Although they now claim
that the volume of Chengde’s smallest U.S. sale during the review was [[ 	]] metric tons, (footnote continued)
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relied on that information to price inland freight. See Ames True Temper v. United States, 31
CIT 1303, 1310−13 (2007) (sustaining agency’s choice to use only brokerage and handling
surrogate in record and not surrogate from prior reviews). If Chengde wanted the agency to use
a different surrogate, it should have provided one, as respondents have done in past reviews.
See, e.g., Certain Steel Wheels from the People’s Republic of China, 77 Fed. Reg. 17,021 (Dep’t
Commerce Mar. 23, 2012) (final determ.) and accompanying Issues & Decision Mem. at cmt. 5
(using per-ton freight rate after respondent added full-container shipping data to record).
Plaintiffs nevertheless contend that “Commerce routinely supplements the record with
surrogate value data it considers reliable.” Pls.’ Br. 39. Yet this argument ignores a critical
point. Although Commerce may supplement the record where it lacks reliable surrogate values,
this discretion does not shift from respondents the burden to provide surrogate data. See QVD
Food, 658 F.3d at 1324. Nor has anyone proven that Commerce supplements the record with its
own research as a matter of binding agency practice. See Pls.’ Br. 39−40 (citing three reviews,
not of OCTG, where Commerce voluntarily supplemented record); Huvis Corp. v. United States,
31 CIT 1803, 1811, 525 F. Supp. 2d 1370, 1378 (2007) (recognizing agency binding practice
where “uniform and established procedure exists that would lead a party, in the absence of
notification of a change, reasonably to expect adherence to the [action] or procedure”). Hence
Commerce’s decision to use the PT Mantap data as a surrogate value for inland freight was
neither arbitrary nor unfounded in substantial evidence.
see Pls.’ Br. 38, Plaintiffs did not cite this figure below to challenge Commerce’s inland freight surrogate, see ATP
Case Br. 18−20. This means the argument was not exhausted—yet even if it were, simply because Chengde sold its
wares in the United States in tons does not mean it shipped its goods to the port of exit in tons. See U.S. Steel Br.
40. Furthermore, Chengde’s brief neither disproves the authenticity of the PT Mantap data nor identifies anything
unreasonable in Commerce’s interpretation thereof. See Pls.’ Br. 40. As such, the court finds the agency’s surrogate
choice was reasonable on the record available.
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V. 	Commerce Reasonably Treated Thread Protectors as a Direct Input
Finally, Plaintiffs challenge the decision to include thread protectors as a direct input into
Chengde’s OCTG. Pls.’ Br. 40−43. They claim thread protectors are better described as a
packing material. The court rejects this argument, however, because Commerce reasonably
interpreted the antidumping duty order and record evidence to classify thread protectors as direct
inputs.
A. Background
When calculating the NV of NME goods, Commerce adds an amount for overhead,
profit, and other expenses attributable to the manufacture of the merchandise. See Pls.’ Br. 41;
19 U.S.C. § 1677b(c)(1). Commerce calculates these expenses as a fraction of the cost of inputs
directly consumed in the goods. See Prelim. Analysis Mem. at Attach. I, CD IV 68 (May 30,
2012), ECF No. 46-3 (May 24, 2013). Hence, if Commerce classifies an input as a material part
of the product, that input will inflate the exporter’s general expenses. Conversely, if Commerce
classifies an input as an indirect material, such as packaging, then the agency excludes that cost
when generating the exporter’s expenses. See Pls.’ Br. 41.
In this case, Commerce included thread protectors as a direct input into Chengde’s
OCTG. See Prelim. Factor Mem. at Attach. I.13 ATP challenged this decision in its case brief,
arguing “the Department should only include the surrogate value for threading protectors as a
packing expense.” ATP Case Br. 21. Nevertheless, in the Final Results, Commerce deemed that
thread protectors were part of the subject merchandise. In support, the agency cited the OCTG
antidumping duty order and American Petroleum Institute (“API”) standards treating thread
13 In fact, Commerce double counted thread protectors for certain control numbers in the Preliminary
Results, deeming them both direct and indirect materials. In the Final Results, however, Commerce classified thread
protectors only as a direct material. I&D Memo at cmt. 7.
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protectors as an integral part of the subject goods. See I&D Memo at cmt. 7 (discussing API-
5CT tubing).
B. Discussion
On appeal, Plaintiffs challenge Commerce’s decision to classify thread protectors as a
direct material. Pls.’ Br. 40−43. They begin with the language of the antidumping duty order,
which encompasses “certain OCTG . . . regardless of end finish (e.g., whether or not plain end,
threaded, or threaded and coupled) . . . whether or not thread protectors are attached.” OCTG
Order at 28,553. In Plaintiffs’ view, the words “whether or not thread protectors are attached”
means the protectors are not part of the subject good. See Pls.’ Br. 41−42. Plaintiffs also argue
that the statute’s definition of packing materials embraces thread protectors, and in support, they
cite purchase contracts listing end protectors as a packing item. Id. at 42.
The court disagrees. To begin, the antidumping order does not clearly include or exclude
thread protectors as a part of subject OCTG. Although the clause “whether or not thread
protectors are attached” suggests protectors are not a part of the good, other language betokens
the opposite. Immediately following Plaintiffs’ favored phrase, the order states “[e]xcluded from
the scope of the order are . . . unattached thread protectors.” OCTG Order at 28,553. Because
the government excluded unattached thread protectors from the order’s scope, Commerce
inferred that attached protectors are part of the subject good. See I&D Memo at cmt. 7. The
court will defer to this reasonable interpretation of the order. See Global Commodity Grp. LLC
v. United States, 709 F.3d 1134, 1138 (Fed. Cir. 2013) (granting Commerce “significant
deference” to interpret scope of antidumping order).
Furthermore, the statute does not compel Commerce to classify thread protectors as a
packing material. 19 U.S.C. § 1677b(a)(6)(B)(i) defines packing materials as “containers and
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Court No. 13-00029 	Page 31
coverings . . . incident to placing the foreign like product in condition packed ready for shipment
to the place of delivery to the purchaser.” Yet as U.S. Steel points out, thread protectors not only
preserve OCTG during shipment, but also protect the goods from dust and water damage in
storage. U.S. Steel Br. 42; First Supp. Resp. at Ex. S1-9 (ISO 11960 document requiring thread
protectors to protect OCTG during transit and “normal storage period” of one year); see also
Fresh Garlic from the People’s Republic of China, 72 Fed. Reg. 34,438 (Dep’t Commerce June
22, 2007) (final admin. review) and accompanying Issues & Decision Mem. at cmt. 10 (treating
jars as direct material because they extended shelf life of peeled garlic). This suggests thread
protectors are more than a mere incident to shipping.
Finally, Chengde’s own response defines thread protectors as a direct input. In the
second supplemental questionnaire, Commerce asked whether Chengde used anything to pack its
OCTG other than iron or steel straps and buckles. In answer, Chengde wrote, “Jiangsu Chengde
reported the threading protector as a packing material for convenience. However, API-5CT [the
specification for the OCTG in question] treats threading protector as part of subject
merchandise.” Second Supp. Resp. 11. And immediately thereafter, Chengde confirmed that it
used no other packing materials “[e]xcept steel belts and steel buckles.” Id. These data implied
that thread protectors are direct inputs, and although ATP listed protectors as a packing material
in its purchase orders, Commerce had discretion, when faced with conflicting record evidence, to
choose the result that it found more plausible. See Home Meridian Int’l, Inc. v. United States, 37
CIT __, __, 922 F. Supp. 2d 1366, 1376 (2013) (“When presented with conflicting evidence that
provides substantial evidence to support opposite conclusions, the court will defer to
Commerce’s reasoned choice between the two.”). Commerce’s designation of thread protectors
as a direct input was grounded in substantial evidence and accorded with law.
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CONCLUSION AND ORDER
In summary, the court sustains Commerce’s decision making regarding steel scrap, ocean
freight, inland freight, and thread protectors. Commerce’s reasoning regarding steel billet,
however, was not similarly sound. On remand, Commerce must reconsider its classification of
Chengde’s billet inputs as alloy steel or carbon steel. And pursuant to its voluntary remand,
Commerce must also reconsider whether the Indonesian GTA data are the best available
information on the record to value high- and low-carbon steel billet.
Upon consideration of all papers and proceedings herein, it is hereby:
ORDERED that the final determination of the International Trade Administration,
United States Department of Commerce, published as Certain Oil Country Tubular Goods from
the People’s Republic of China, 77 Fed. Reg. 74,644 (Dep’t Commerce Dec. 17, 2012) (final
admin. review), as amended by Certain Oil Country Tubular Goods from the People’s Republic
of China, 78 Fed. Reg. 9033 (Dep’t Commerce Feb. 7, 2013), be, and hereby is, REMANDED to
Commerce for redetermination; it is further
ORDERED that Plaintiffs’ Rule 56.2 Motion for Judgment on the Agency Record be,
and hereby is, GRANTED as provided in this Opinion and Order; it is further
ORDERED that Commerce shall issue a redetermination (“Remand Redetermination”)
in accordance with this Opinion and Order that is in all respects supported by substantial
evidence, in accordance with law, and supported by adequate reasoning; it is further
ORDERED that Commerce shall reevaluate the chemical composition of billet used to
make the OCTG sold under contracts [[
]]—explaining whether Chengde’s mill certificates (supra
Table 2 no. 7) establish the chemical properties of OCTG not specifically tested in those
certificates—and shall redetermine surrogate values for that billet in accordance with this
explanation; it is further
ORDERED that Commerce shall reevaluate the chemical composition of billet used to
make the OCTG sold under contract [[ 	]]—explaining whether Chengde’s entry summary
(supra Table 2 no. 9) establishes the chemical properties of OCTG described in that summary—
and shall redetermine surrogate values for that billet in accordance with this explanation; it is
further
ORDERED that Commerce shall reconsider its decision to use Indonesian GTA data
under HTS 7207.19 and 7207.20 as surrogate values for high- and low-carbon steel billet, and in
doing so, must determine whether such surrogates represent the “best available information” on
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the record in accordance with 19 U.S.C. § 1677b(c)(1), as compared with alternative surrogates
in the record; it is further
ORDERED that Commerce shall recalculate Chengde’s weighted-average dumping
margin consistent with the reevaluated surrogate values for steel billet; it is further
ORDERED that Commerce shall have ninety (90) days from the date of this Opinion and
Order in which to file its Remand Redetermination, which shall comply with all directives in this
Opinion and Order; that the Plaintiff and Defendant-Intervenor shall have thirty (30) days from
the filing of the Remand Redetermination in which to file comments thereon; and that the
Defendant shall have thirty (30) days from the filing of Plaintiff and Defendant-Intervenor’s
comments to file comments.
/s/ Richard W. Goldberg
Richard W. Goldberg
Senior Judge
Dated: September __, 2014
New York, New York
26
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