Hyundai Steel Company v. United States

Slip-Op. 18-80
UNITED STATES COURT OF INTERNATIONAL TRADE
HYUNDAI STEEL COMPANY,
Plaintiff,
v.
UNITED STATES,
Defendant,
and
AK STEEL CORPORATION, STEEL
DYNAMICS, INC., ARCELORMITTAL
USA LLC, NUCOR CORPORATION,
UNITED STATES STEEL
CORPORATION,
Defendant-Intervenors.
Before: Mark A. Barnett, Judge
Court No. 16-00228
PUBLIC VERSION
OPINION AND ORDER
[Granting in part and denying in part Plaintiff Hyundai Steel Company’s motion for
judgment upon the agency record.]
Dated: June 28, 2018
Henry D. Almond and Daniel R. Wilson, Arnold & Porter Kaye Scholer LLP, of
Washington, DC, argued for Plaintiff. With them on the brief were J. David Park and
Sylvia Y. Chen.
Renée A. Burbank, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S.
Department of Justice, of Washington, DC, argued for Defendant. With her on the brief
were Chad A. Readler, Acting Assistant Attorney General, Jeanne E. Davidson,
Director, and Patricia M. McCarthy, Assistant Director. Of counsel on the brief was
Nanda Srikantaiah, Attorney, Office of the Chief Counsel for Trade Enforcement and
Compliance, U.S. Department of Commerce, of Washington, DC.
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Grace W. Kim, Kelley Drye & Warren LLP, of Washington, DC, argued for Defendant-
Intervenor ArcelorMittal LLC. With her on the brief were Paul C. Rosenthal, R. Alan
Luberda, Kathleen W. Cannon, and Joshua R. Morey.
Stephen A. Jones and Daniel L. Schneiderman, King & Spalding, LLP, of Washington,
DC, for Defendant-Intervenor AK Steel Corporation.
Roger B. Schagrin and Christopher T. Cloutier, Schagrin Associates, of Washington,
DC, for Defendant-Intervenor Steel Dynamics, Inc.
Alan H. Price, Timothy C. Brightbill, and Chris B. Weld, Wiley Rein LLP, of Washington,
DC, for Defendant-Intervenor Nucor Corporation.
Thomas M. Beline and Sarah E. Shulman, Cassidy Levy Kent (USA) LLP, of
Washington, DC, for Defendant-Intervenor United States Steel Corporation. With them
on the brief were Jeffrey D. Gerrish, Nathaniel B. Bolin, and Luke A. Meisner,
Skadden Arps Slate Meagher & Flom, LLP, of Washington, DC.
Barnett, Judge: Plaintiff Hyundai Steel Company (“Plaintiff” or “Hyundai Steel”)
moves, pursuant to United States Court of International Trade (“USCIT”) Rule 56.2, for
judgment on the agency record, challenging the final determination of the U.S.
Department of Commerce (“Commerce” or the “agency”) in its antidumping duty
investigation of certain cold-rolled steel flat products (“cold-rolled steel”) from the
Republic of Korea (“Korea”). See Certain Cold-Rolled Steel Flat Products From the
Republic of Korea, 81 Fed. Reg. 49,953 (Dep’t Commerce July 29, 2016) (final
determination of sales at less than fair value) (“Final Determination”), ECF No. 39-3,
and the accompanying Issues and Decision Mem., A-580-881 (July 20, 2016) (“I&D
Mem.”), ECF No. 39-2.1
1 The administrative record is divided into a Public Administrative Record (“PR”), ECF
No. 39-5, and a Confidential Administrative Record (“CR”), ECF No. 39-4. Parties
submitted joint appendices containing record documents cited in their briefs. See Public
Joint App. (“PJA”), ECF No. 58; Confidential Joint App. (“CJA”), ECF No. 57; Suppl.
Public Joint App. (“Suppl. PJA”), ECF No. 66; Suppl. Confidential Joint App. (“Suppl.
CJA”), ECF No. 65. 	The court references the confidential versions of the relevant
record documents, if applicable, throughout this opinion, unless otherwise specified.
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Plaintiff, a Korean producer and exporter of cold-rolled-steel, challenges
Commerce’s determination to: (1) use the facts available with an adverse inference
(referred to as “adverse facts available” or “AFA”) in adjusting Hyundai Steel’s reported
expenses concerning freight and warehousing transactions with affiliated companies;
(2) use AFA in connection with some of Hyundai Steel’s reported control number
(“CONNUM”) data; and (3) deny Hyundai Steel a constructed export price (“CEP”)
offset. Confidential Mem. in Supp. of Pl. Hyundai Steel Co.’s Rule 56.2 Mot. for J. on
the Agency R. (“Pl.’s Br.”) at 1, ECF No. 47. Defendant United States (“Defendant” or
the “Government”) and Defendant Intervenors—AK Steel Corporation, ArcelorMittal
USA LLC, Nucor Corporation, Steel Dynamics, Inc., and United States Steel
Corporation—support the Final Determination. See generally Confidential Def.’s Resp.
to Pl.’s Mot. for J. Upon the Agency R. (“Gov.’s Resp.”), ECF No. 50; Confidential Def.-
Ints.’ Joint Resp. in Opp’n to Pl.’s Mot. for J. on the Agency R. (“Def.-Ints.’ Resp.”), ECF
No. 53. For the reasons discussed below, the court grants, in part, Plaintiff’s motion.
B ACKGROUND
I. 	Legal Framework
A. Basic Antidumping Principles
Commerce imposes an antidumping duty on foreign merchandise that “is being,
or is likely to be, sold in the United States at less than its fair value,” and results in
material injury or threat of material injury to a U.S. domestic industry. 19 U.S.C. § 1673
(2012).2 The antidumping duty imposed is “an amount equal to the amount by which
2 Citations to the Tariff Act of 1930, as amended, are to Title 19 of the U.S. Code, and
all references to the United States Code are to the 2012 edition. Citations to 19 U.S.C.
§ 1677e, however, are to the United States Code 2016 edition, which reflects
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the normal value exceeds the export price (or the constructed export price) for the
merchandise.” Id. Accordingly, antidumping analysis requires Commerce to compare
the export price or constructed export price of the subject merchandise with the normal
value of the foreign like product. Id. § 1677b(a) (Commerce must make “a fair
comparison . . . between the export price or constructed export price and normal value”
of the subject merchandise); see also 19 C.F.R. § 351.401(a). Normal value typically is
“the price at which the foreign like product is first sold . . . for consumption in the
exporting country, in the usual commercial quantities and in the ordinary course of trade
and, to the extent practicable, at the same level of trade as the export price or
constructed export price.” 19 U.S.C. § 1677b(a)(1)(B)(i). In this case, “normal value”
refers to the price of cold-rolled steel sold in Korea. Constructed export price is “the
price at which the subject merchandise is first sold . . . in the United States . . . by or for
the account of the producer or exporter . . . or by a seller affiliated with the producer or
exporter,” to an unaffiliated purchaser. 19 U.S.C. § 1677a(b).
To achieve a fair comparison between the export price (or constructed export
price) and normal value, “Commerce seeks to ensure that a producer’s costs are
reflective of the market value of those goods or services, and may adjust both values.”
Hyundai Steel Co. v. United States, 41 CIT __, 279 F. Supp. 3d 1349, 1354 (2017).
When companies use affiliated providers for certain services, the prices paid to the
amendments to § 1677e pursuant to the Trade Preferences Extension Act
(“TPEA”), Pub. L. No. 114–27, § 502, 129 Stat. 362, 383–84 (2015). The TPEA
amendments affect all antidumping determinations made on or after August 6, 2015,
and, therefore, apply to the instant proceeding. See Dates of Application of
Amendments to the Antidumping and Countervailing Duty Laws Made by the Trade
Preferences Extension Act of 2015, 80 Fed. Reg. 46,793 (Dep’t Commerce Aug. 6,
2015).
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affiliated providers may not reflect the market price for those services. 	See id. at 1354-
55. Therefore, Commerce “determine[s] whether the transactions with the affiliated
company were made at arm’s-length, or comparable to transactions conducted with an
unaffiliated party.” Id. at 1355.
B. Facts Available and Adverse Facts Available
When “necessary information is not available on the record,” or an interested
party “withholds information” requested by Commerce,” “fails to provide” requested
information by the submission deadlines, “significantly impedes a proceeding,” or
provides information that cannot be verified pursuant to 19 U.S.C. § 1677m(i),
Commerce “shall . . . use the facts otherwise available.” 19 U.S.C. § 1677e(a).3
Additionally, if Commerce determines that the party “has failed to cooperate by not
acting to the best of its ability to comply with a request for information,” it “may use an
inference that is adverse to the interests of that party in selecting from among the facts
otherwise available.” Id. § 1677e(b). “Compliance with the ‘best of its ability’ standard is
determined by assessing whether a respondent has put forth its maximum effort to
provide Commerce with full and complete answers to all inquiries in an investigation.”
Nippon Steel Corp. v. United States, 337 F.3d 1373, 1382 (Fed. Cir. 2003).4 Before
using adverse facts available, Commerce “must make an objective showing that a
reasonable and responsible importer would have known that the requested information
3 As discussed infra, Commerce’s authority to use the facts otherwise available is
subject to 19 U.S.C. § 1677m(d). See 19 U.S.C. § 1677e(a). Section 1677m(d)
provides the procedures Commerce must follow when a party files a deficient
submission. See id. § 1677m(d).
4 Nippon Steel predates the TPEA. However, the relevant statutory language discussed
in that case remains unchanged. Compare 19 U.S.C. § 1677e(b)(2012), with 19 U.S.C.
§ 1677e(b)(1)(2016).
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was required to be kept and maintained under the applicable statutes, rules, and
regulations.” Id. at 1382. Next, Commerce
must [ ] make a subjective showing that the respondent['s] ... failure to fully
respond is the result of the respondent's lack of cooperation in either: (a)
failing to keep and maintain all required records, or (b) failing to put forth
its maximum efforts to investigate and obtain the requested information
from its records.
Id. at 1382–83. “An adverse inference may not be drawn merely from a failure to
respond.” Id. at 1383. Rather, Commerce may apply an adverse inference “under
circumstances in which it is reasonable for Commerce to expect that more forthcoming
responses should have been made.” Id.
When applying an adverse inference, Commerce may rely on information derived
from the petition, a final determination in the investigation, a previous administrative
review, or any other information placed on the record. 19 U.S.C. § 1677e(b)(2); 19
C.F.R. § 351.308(c)(2015). When Commerce “relies on secondary information rather
than on information obtained in the course of an investigation or review, [Commerce] . .
. shall, to the extent practicable, corroborate that information from independent sources
that are reasonably at [its] disposal.” 19 U.S.C. § 1677e(c)(1). Pursuant to agency
regulations, corroboration means that Commerce “will examine whether the secondary
information to be used has probative value.” 19 C.F.R. § 351.308(d). However, if it is
not practicable to do so, Commerce may still “apply[] an adverse inference as
appropriate and us[e] the secondary information in question.” Id. When Commerce
uses primary information (obtained in the course of the investigation or review), rather
than secondary information, to select from among the adverse facts available, the
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statute does not require corroboration. See Nan Ya Plastics Corp. v. United States, 810
F.3d 1333, 1348-49 (Fed. Cir. 2016).
C. CEP Offset
Commerce must establish normal value “to the extent practicable, at the same
level of trade as the export price or constructed export price.” 19 U.S.C.
§ 1677b(a)(1)(B)(i). The Federal Circuit has construed the term “same level of trade” to
mean “comparable marketing stages in the home and United States markets.” Micron
Tech., Inc. v. United States, 243 F.3d 1301, 1305 (Fed. Cir. 2001). When Commerce is
unable to find sales in the foreign market at the same level of trade as the sales in the
U.S. market, it will compare sales in those markets at different levels of trade and
account for that difference by, depending on the circumstances, making a level of trade
adjustment or granting a CEP offset. See id.
Commerce makes a level of trade adjustment when the difference in the level of
trade “(i) involves the performance of different selling activities; and (ii) is demonstrated
to affect price comparability, based on a pattern of consistent price differences between
the sales at the different levels of trade.” 19 U.S.C. § 1677b(a)(7)(A); see also 19
C.F.R. § 351.412(a)-(b); Micron Tech., 243 F.3d at 1305. The level of trade adjustment
may either increase or decrease normal value. 19 U.S.C. § 1677b(a)(7)(A). When the
level of trade in the home market constitutes a more advanced stage of distribution than
the level of trade of the constructed export price to the United States, but Commerce
lacks sufficient data to determine whether the difference affects price comparability to
grant a level of trade adjustment, Commerce will grant a CEP offset. See 19 U.S.C.
§ 1677b(7)(B); 19 C.F.R. § 351.412(f); Micron Tech., 243 F.3d at 1305. Commerce
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grants a CEP offset by deducting the indirect selling expenses included in the normal
value “up to the amount of indirect selling expenses deducted in determining
constructed export price.” 19 C.F.R. § 351.412(f); see also 19 U.S.C. § 1677b(a)(7)(B).
A party seeking a CEP offset bears the burden of establishing that the
differences in selling functions performed in the home and U.S. markets are
“substantial.” Sucocitrico Cutrale Ltda. v. United States, Slip-Op. 12-71, 2012 WL
2317764, at *5 (CIT June 1, 2012) (holding that 19 U.S.C. § 1677b(a)(7)(B), when read
in conjunction with 19 C.F.R. § 351.412(c)(2), requires “that a CEP offset is available
only when there are substantial differences in selling activities between the levels of
trade in the two markets”) (internal quotation marks omitted);5 see also 19 C.F.R. §
351.401(b) (the burden of establishing entitlement to a particular adjustment rests with
the party in possession of the relevant information).
II. 	Prior Proceedings
On August 17, 2015, in response to a petition filed by Defendant-Intervenors,
Commerce initiated an antidumping duty investigation covering cold-rolled steel from
Korea. Certain Cold-Rolled Steel Flat Products From Brazil, the People's Republic of
China, India, Japan, the Republic of Korea, the Netherlands, the Russian Federation,
and the United Kingdom, 80 Fed. Reg. 51,198 (Dep’t Commerce Aug. 24, 2015)
5 Pursuant to Commerce’s regulations,
The Secretary will determine that sales are made at different levels of
trade if they are made at different marketing stages (or their equivalent).
Substantial differences in selling activities are a necessary, but not
sufficient, condition for determining that there is a difference in the stage
of marketing. Some overlap in selling activities will not preclude a
determination that two sales are at different stages of marketing.
19 C.F.R. § 351.412(c)(2).
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(initiation of less-than-fair-value investigations). The period of investigation (“POI”) was
July 1, 2014, through June, 30, 2015. Id., 80 Fed. Reg. at 51,198. Commerce selected
Hyundai Steel as one of two mandatory respondents for individual examination. See
Respondent Selection Mem. (Sept. 15, 2015) at 6, CJA Tab 1, PJA Tab 1, PR 78, ECF
No. 57-1.
Commerce issued its initial antidumping questionnaire to Hyundai Steel on
September 18, 2015. See Commerce’s Initial Questionnaire to Hyundai Steel (Sep. 18,
2015) (“Hyundai Steel IQ.”), CJA Tab 3, PJA Tab 3, PR 89, ECF No. 57-1. By
November 9, 2015, Hyundai Steel had submitted its responses to Sections A through D
of the initial questionnaire. See Hyundai Steel’s § A Resp. (Oct. 16, 2015), CJA Tab 4,
CR 43, PJA Tab 4, PR 113, ECF No. 57-1; Hyundai Steel’s § B Resp. (Nov. 6, 2015),
Suppl. CJA Tab 5, CR 111, Suppl. PJA Tab 5, PR 171, ECF No. 65; Hyundai Steel’s §
C Resp. (Nov. 9, 2015), Suppl. CJA Tab 6, CR 113, Suppl. PJA Tab 6, PR 159, ECF
No. 65; Hyundai Steel’s § D Resp. (Nov. 4, 2015), CJA Tab 5, CR 85, PJA Tab 5, PR
115, ECF No. 57-1. Between November 2015, and January 2016, Commerce issued
supplemental questionnaires to Hyundai Steel, to which Hyundai Steel responded
between November 2015 and February 2016. See Hyundai Steel’s Suppl. § A Resp.
(Nov. 18, 2015), CJA Tab 8, CR 142, PJA Tab 8, PR 195, ECF No. 57-1; Hyundai
Steel’s Suppl. §§ B and C Resp. (Dec. 15, 2015), CJA Tab 9, CR 191, PJA Tab 9, PR
228, ECF No. 57-2; Hyundai Steel’s Second Suppl. §§ B and C Resp. (Feb. 2, 2016),
CJA Tab 10, CR 288-300, PJA Tab 10, PR 282, ECF No. 57-3. Because Hyundai
Steel’s responses implicate different issues, the court provides further factual
background relating to each relevant section when helpful to the analysis.
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On March 7, 2016, Commerce published its preliminary determination, finding
that there were sales of subject merchandise from Korea being, or likely to be, sold in
the United States at less than fair value. See Certain Cold-Rolled Steel Flat Products
From the Republic of Korea, 81 Fed. Reg. 11,757 (Dep’t Commerce Mar 7, 2016) (aff.
prelim. determination of sales at less than fair value and postponement of final
determination) (“Preliminary Determination”), and accompanying Prelim. Decision
Mem., A-580-881 (Feb. 29, 2016) (“Prelim. I&D Mem.”), CJA Tab 13, PJA Tab 13, PR
313, ECF No. 57-3. Commerce preliminarily determined a weighted-average
antidumping duty margin for Hyundai Steel of 2.17 percent. Preliminary Determination,
81 Fed. Reg. at 11,758.
Commerce conducted a cost verification of Hyundai Steel from January 18-29,
2016 and a sales verification from March 14-18, 2016, in Seoul, Korea. See Verification
of the Cost Resp. of Hyundai Steel Co. (May 20, 2016) (“Cost Verification Report”),
Suppl. CJA Tab 7, CR 595, Suppl. PJA Tab 7, PR 344, ECF No. 65; Verification of
Hyundai Steel Corp. on Sales Resp. in the Antidumping Duty Investigation of Cold-
Rolled Steel Flat Products from the Republic of Korea, (May 26, 2016) (“Sales
Verification Report”), Suppl. CJA Tab 8, CR 598, Suppl. PJA Tab 8, PR 347, ECF No.
65. Commerce conducted sales verifications of Hyundai Steel’s U.S. subsidiary,
Hyundai Steel America, Inc. (“HSA”), from April 27-28, 2016, in Greenville, Alabama.
Verification of the Sales Resp. of Hyundai Steel America (May 26, 2016) (“HSA Sales
Verification Report”) at 1, CJA 18, CR 597, PJA 18, PR 346, ECF No. 57-5.
On July 29, 2016, Commerce issued its Final Determination, in which it
calculated a weighted-average dumping margin of 34.33 percent for Hyundai Steel.
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Final Determination, 81 Fed. Reg. at 49,954. Commerce applied AFA to Hyundai
Steel’s home market inland freight and warehousing expenses, international freight, and
U.S. inland freight. I&D Mem. at 74. Commerce also applied partial AFA to certain cost
data for four specifications of products for which it determined that Hyundai Steel and
HSA had reported inaccurate, inconsistent, or unverifiable CONNUMS. Id. at 59-63.
Additionally, Commerce denied Hyundai Steel a statutory CEP offset based on its
finding that Hyundai Steel’s home market level of trade was not more advanced than its
U.S. level of trade. Id. at 87-89.
On August 1, 2016, Hyundai Steel submitted ministerial error comments on the
Final Determination. See Hyundai Steel’s Ministerial Error Comments (Aug. 1, 2016),
CJA Tab 24, CR 621, PJA Tab 23, PR 382, ECF No. 57-5. Following rebuttal
comments, Commerce determined that it had made two ministerial errors with respect
to Hyundai Steel’s home market inland freight from plant to port of exportation and with
regard to the assignment of CONNUMs, but left its Final Determination undisturbed
because the errors did not affect the estimated weighted-average dumping margin for
Hyundai Steel.6 Ministerial Error Mem. (Aug. 31, 2016) at 1, CJA Tab 25, CR 623, PJA
Tab 25, PR 385, ECF No. 57-5. Subsequently, following an affirmative determination by
the International Trade Commission that an industry in the United States is materially
injured by reason of dumped imports of certain cold-rolled steel from Korea, Commerce
6 Plaintiff requests the court to remand Commerce’s determination “with instructions to
Commerce to correct [the] errors” alleged by Plaintiff, and “to provide such other relief
as this court deems just and appropriate.” Pl.’s Br. at 45; Pl. Hyundai Steel’s Reply Br.
in Supp. of its Rule 56.2 Mot. for J. Upon the Agency R. (“Pl.’s Reply”) at 24, ECF No.
55. Because the court remands Commerce’s determination on other bases, it will
instruct the agency to reconsider this ministerial error finding in light of any changes
made on remand. See infra Conclusion.
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issued the antidumping duty order on September 20, 2016. Certain Cold-Rolled Steel
Flat Products from Brazil, India, the Republic of Korea, and the United Kingdom, 81
Fed. Reg. 64,432 (Dep’t Commerce Sept. 20, 2016) (am. final aff. antidumping
determinations for Brazil and the United Kingdom and antidumping duty orders). On
October 20, 2016, Hyundai Steel timely instituted this litigation. See Summons, ECF
No. 1.
J URISDICTION AND S TANDARD OF REVIEW
The court has jurisdiction pursuant to section 516A(a)(2)(B)(i) of the Tariff Act of
1930, as amended, 19 U.S.C. § 1516a(a)(2)(B)(i), and 28 U.S.C. § 1581(c). The court
will uphold an agency determination that is supported by substantial evidence and
otherwise in accordance with law. 19 U.S.C. § 1516a(b)(1)(B)(i).
DISCUSSION
I. 	Commerce’s Application of AFA to Freight and Warehousing Transactions
A. Relevant Factual Background
i. 	Domestic and International Freight and Warehousing Services
In its initial questionnaire, Commerce instructed Plaintiff to report its sales and
cost information for itself and its “affiliates involved with the production or sale of the
products under investigation during the [POI] in the foreign market or the United States.”
Hyundai Steel IQ at G-10 (emphasis omitted). Hyundai Steel reported that an affiliated
company provided domestic inland freight from plant to warehouse, domestic
warehousing services, domestic inland freight from plant/warehouse to customer,
domestic inland freight for U.S. sales from factory to port, and international freight.
Hyundai Steel’s § B Resp. at B-27—B-30, Hyundai Steel’s § C. Resp. at C-26—C-27,
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C-29.7 Hyundai Steel stated it was affiliated with this provider by virtue of both
companies belonging to the Hyundai Motor Group, “a group of legally independent
companies having certain limited cross-ownership.” Hyundai Steel’s § A Resp. at A-
11—A-12. Hyundai Steel reported that Hyundai Motor Group and its chairman, M.K.
Chung, “commonly control Hyundai Steel.” Id. at A-11.
In its reporting, Hyundai Steel asserted that it “will demonstrate . . . that
transactions with affiliated service providers are at arm’s length.” Id. at A-13. For inland
freight and warehousing services for home market sales, Hyundai Steel provided a
calculation worksheet from a sample shipment during the POI and the freight and
warehousing contracts with its affiliated service provider. Hyundai Steel § B Resp. at B-
28, B-30—B-31, Ex. B-14. Hyundai Steel explained that it does not use unaffiliated
freight companies for similar services and, therefore, “is unable to provide comparable
prices from unaffiliated vendors for comparison.” Id. at B-30. Instead, it provided
calculations from its affiliated company’s financial statements “demonstrating that the
company earned a profit during the POI,” which Hyundai Steel construed to be a
sufficient showing “that these transactions reflect arm’s length prices.” Id. at B-30—B-
31; see also id., Exs. B-14, B-15. Hyundai Steel provided a similar response for inland
freight services from factory to port for its U.S. sales. See Hyundai Steel § C Resp. at
C-27. Similarly, for international freight, Hyundai Steel provided a sample calculation of
its international freight expense, its contract with its affiliated company, and the affiliated
company’s freight contract with a sub-contractor. Id. at C-29; see also id., Ex. C-10.
7 The name of the affiliated provider of those services is [[ 	]]. For confidentiality
purposes, throughout this opinion the court refers to [[ 	]] as Hyundai Steel’s
“affiliate,” “affiliated company,” or “affiliated service provider.”
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Commerce issued a supplemental questionnaire seeking further information
related to inland freight, warehousing expenses, and international freight. See Hyundai
Steel’s Suppl. §§ B and C Resp. For inland freight for home market sales, Commerce
requested a complete copy of the freight contract between Hyundai Steel and its
affiliate, all freight contracts between its affiliate and all unaffiliated freight providers that
cover the full POI, and several other freight documents. Id. at 6-7. Commerce alerted
Plaintiff that the net profit information it had previously provided did not demonstrate that
Hyundai Steel’s affiliate earned a profit for its freight services. Id. at 8. 	Relatedly,
Hyundai Steel provided a copy of its freight contract with its affiliate. Id. at 6; see also
id., Ex. S-6. However, while it stated that its affiliate maintained contracts with over 30
subcontractors, Hyundai Steel provided only one freight contract with one of those sub-
contractors. Id. at 7; see also id., Ex. S-7.8 Hyundai Steel asserted that a comparison
of its contract with its affiliate and the affiliate’s contract with its subcontractor
demonstrated that Hyundai Steel’s affiliate earned a profit from its freight services,
which in turn, according to Hyundai Steel, “demonstrate[d] that these services were
negotiated at arm’s length.” Id. at 8.
For warehousing expenses, Commerce similarly requested a complete copy of
Hyundai Steel’s contract with its affiliate and contracts between its affiliate and all
unaffiliated providers covering the full POI. Id. at 9. With respect to this request,
Hyundai Steel provided the same response as it did for inland freight for home market
sales, citing to its affiliate’s contract with one subcontractor. Id. (citing id., Ex. S-7).
8 The affiliate’s subcontractor was [[ 	]]. Hyundai Steel’s Suppl. §§ B and C
Resp. at 7.
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Commerce also asked Hyundai Steel to “demonstrate that the warehouse expenses
provided by [Hyundai Steel’s affiliate] are at arm’s length prices for each warehouse”
and alerted Plaintiff that “[t]he net profit information provided for [the affiliated company]
does not show that [the affiliated company earned a profit from its warehousing
services].” Id. at 10. Hyundai Steel again asserted that a comparison between its
contract with its affiliate and its affiliate’s contract with its subcontractor demonstrates
the arm’s length nature of the warehousing services. Id.
For inland freight services from factory to port for U.S. sales, Commerce
requested that Hyundai Steel provide copies of all freight contracts with its affiliate and
all unaffiliated freight providers that cover the full POI. Id. at 20. Commerce also
requested the prices that Hyundai Steel’s affiliate charged to unaffiliated customers for
similar services. Id. at 21. Although Hyundai Steel stated that its affiliate had contracts
with almost 40 subcontractors, it provided, “as a representative sample,” a contract
between its affiliate and only one of the affiliate’s subcontractors. Id. at 20-21. In
response to Commerce’s request for the affiliated company’s inland freight prices to its
unaffiliated customers, Hyundai Steel explained that its affiliate “does not provide
comparable services to unaffiliated customers.” Id. at 21.
For international freight expenses, Commerce requested “all international freight
contracts between [Hyundai Steel’s affiliate] and its unaffiliated customers.” Id. at 24.
Hyundai Steel confirmed that its affiliate “does not have any contracts with unaffiliated
customers for shipments to the United States.” 	Id. It further explained that while
“[Hyundai Steel’s affiliate] does provide shipping services to unaffiliated customers for
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shipments to third countries, [it] has declined Hyundai Steel’s request to provide its
contracts with unaffiliated third parties” due to confidentiality concerns. Id.
In a second supplemental questionnaire, Commerce requested two categories of
information pertaining to inland freight services to warehouse: (1) “actual costs paid by
Hyundai Steel to [its affiliate]” and (2) “copies of all contracts that [Hyundai Steel’s
affiliate] has with all unaffiliated parties for similar services that covers the POI.”
Hyundai Steel’s 2nd Suppl. §§ B and C Resp. at 2. As to the first request, Hyundai
Steel produced an exhibit that provided a comparison of Hyundai Steel’s freight
expenses and its affiliated service provider’s total costs incurred. Id. at 2; see also id.,
Ex. 2. As to the second request, Hyundai Steel reiterated that its affiliate does not offer
similar services to unaffiliated parties; therefore, no such contracts existed. Id. at 2.
During verification of Hyundai Steel’s sales responses, the agency sought to
verify that Hyundai Steel’s freight services were provided at arm’s length. Sales
Verification Report at 3. Among other items, Commerce again requested (1) “complete
copies of freight contracts between [Hyundai Steel’s affiliate] and its unaffiliated freight
providers that cover the full POI”; (2) complete freight documents between Hyundai
Steel and its affiliate related to transportation of the subject merchandise; (3) copies of
all contracts between Hyundai Steel’s affiliate and unaffiliated parties for similar services
during the POI; and (4) detailed records, supported by source documentation, of the
actual costs incurred by Hyundai Steel’s affiliate. Id. at 42. Hyundai Steel provided to
Commerce a chart showing a comparison of its freight costs with its affiliate’s total
costs; however, the information in the chart was not based on transaction documents.
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See id. Rather, Hyundai Steel provided a sample inland freight contract for a single
transaction to show that the amount in the contract matched that in the chart. See id.
While Hyundai Steel provided examples of some contracts between its affiliate
and the affiliate’s subcontractor to demonstrate that its affiliate made a profit, it did not
provide requested information that was in its affiliate’s possession for the asserted
reason that “there was no ‘direct ownership’” to compel its affiliate to provide the
information. Id. at 42-43. Specifically at issue were the contracts Hyundai Steel’s
affiliate maintained with unaffiliated parties for similar services covering the POI. See
id. During verification, Hyundai Steel admitted that it did not go through other channels,
such as other affiliates in the Hyundai Group, to try to obtain the information that
Commerce requested; it had only asked its affiliate directly. See id. at 43.
Also during verification, Commerce requested a list of shareholders for Hyundai
Steel’s affiliate. Id. at 43. Upon examining the list of shareholders, and comparing it
with the translated list of Hyundai Steel’s Board Members, Commerce verified that the
majority owner of Hyundai Steel’s affiliate was also the Vice Chairman of Hyundai Steel.
See id. Commerce verified that a large shareholder of Hyundai Steel’s affiliate was also
the direct and indirect owner of Hyundai Steel. See id. at 43-44. Moreover, Hyundai
Steel’s officials confirmed that those two individuals were father and son. See id. at 43.
Given this information, Commerce, again, reiterated its request for the documentation
from Hyundai Steel’s affiliate, but Hyundai Steel continued to maintain that it had no
direct control over its affiliate to compel the company to provide the missing
documentation. See id. at 44.
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ii. 	U.S. Freight Services
In discussing its affiliates in its Section A questionnaire response, Hyundai Steel
identified a subsidiary of Hyundai Steel’s affiliate as “involved in transporting cold-rolled
and products manufactured from cold-rolled steel in the United States.” Hyundai Steel’s
§ A Resp. at A-12—A-13.9 Hyundai Steel did not mention this or any other subsidiary of
its affiliate in its initial or supplemental Section C responses. See Hyundai Steel’s § C
Resp.; Hyundai Steel’s Suppl. §§ B and C Resp.
During verification of the sales response of HSA, Commerce discovered that two
U.S. subsidiaries of Hyundai Steel’s affiliate provided U.S. inland freight from port to
warehouse. See HSA Verification Report at 12.10 Commerce further discovered that
one of those subsidiaries and two other unaffiliated companies provided the U.S. inland
freight from warehouse to customer. See id.11
iii. 	Final Determination
Commerce used AFA to determine Hyundai Steel’s antidumping duty margin on
the basis of its asserted inability to provide the information requested at verification.
I&D Mem. at 73 & n.368 (citing Sales Verification Report at 3). Commerce explained
that during Hyundai Steel’s sales verification, it verified that of the two largest
shareholders of Hyundai Steel’s affiliate, one is also a part owner, and the other is the
Vice Chairman, of Hyundai Steel. Id. at 73-74 & n.372 (citing Sales Verification Report
at 3). Moreover, the two individuals were father and son, respectively. Id. at 74.
9 The company was [[
]]. Hyundai Steel’s § A Resp. at A-12.
10 [[ 	]] provided the freight service for container shipments and [[ 	]]
provided the freight service for all other shipments. HSA Verification Report at 12.
11 The unaffiliated companies were [[ 	]]. Id.
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Court No. 16-00228 	Page 19
Commerce concluded that the same family members held and commonly controlled
Hyundai Steel and its affiliate during the POI. Id. at 74. 	It explained that “Hyundai
Steel defined the companies that are members of the Hyundai Motor Group and/or are
held by the Chung family as being affiliated parties via control by a ‘group,’ which has
the ability to directly or indirectly control its group members, and are expected to
cooperate with the [agency’s] antidumping investigation.” Id. at 74.
Commerce found that Hyundai Steel failed to demonstrate the arm’s length
nature of the services provided by its affiliate and its affiliate’s U.S. subsidiaries. Id. at
74. This failure was a result of Hyundai Steel’s insistence “that [it] could not obtain the
affiliated company’s information requested by the [agency].” Id. Therefore, Commerce
relied on facts otherwise available pursuant to section 19 U.S.C. § 1677e(a) for
warehousing and freight service expenses. Id. Moreover, the agency determined that
Hyundai Steel’s failure to provide the requested information “or fully cooperate with the
[agency’s] request for this information” warrants the application of an adverse inference
pursuant to section 19 U.S.C. § 1677e(b). Id. Commerce applied AFA to determine
Hyundai Steel’s home market inland freight and warehousing expenses, international
freight, and U.S. inland freight. Id. For home market inland freight and warehousing,
the agency applied Hyundai Steel’s lowest reported value in its home market inland
freight and warehousing fields. Id. For international freight and U.S. inland freight,
Commerce used Hyundai Steel’s highest reported expenses based on each destination.
Id. For home market inland freight for U.S. sales, Commerce selected the second-
highest transaction-specific value as AFA. Id.
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Plaintiff poses three challenges to Commerce’s Final Determination: (1) that the
record confirms that Hyundai Steel’s transactions with its affiliated providers were made
on an arm's-length basis; (2) that Commerce’s determination to apply AFA with respect
to transactions with its affiliated service providers was contrary to law; and (3) that
Commerce’s AFA adjustments were unreasonable and contrary to law. See Pl.’s Br. at
17-32. The court addresses each argument in turn.
B. Commerce’s Determination that Hyundai Steel Failed to Prove the
Arm’s Length Nature of The Transactions With its Affiliated
Providers is Supported by Substantial Evidence
Plaintiff argues that the information it provided in the initial and supplemental
questionnaire responses demonstrates that its affiliate earned a profit for rendering the
freight and warehousing services, which was sufficient to show that those transactions
were at arm’s length. Pl.’s Br. at 17.12 Plaintiff faults the agency for changing course
from the Preliminary Determination, arguing that Commerce verified the reported
information it relied upon in the Preliminary Determination and, therefore, should have
continued to rely on the same information for the Final Determination. Pl.’s Br. at 19
(citing Sales Verification Report at 42, 43; Sales Verification Exs. (“SVE”), Ex. 28, CJA
Tab 15, CR 388, PJA Tab 15, PR 326, ECF No. 57-4).
At the outset, Plaintiff’s argument that Commerce erred in declining to rely on the
same information as it did in the Preliminary Determination is incorrect. It is premised
on the contentions that Commerce verified Plaintiff’s reported information, and that the
Preliminary Determination was consistent with the parallel investigation on corrosion
12 By contrast, Plaintiff does not offer any argument or point to any evidence to show
that the transactions with its affiliate’s U.S. subsidiary were arm’s length. See Pl.’s Br.
at 17-20.
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Court No. 16-00228 	Page 21
resistant steel, which the agency should have followed.13 See Pl.’s Br. at 18-19.
Commerce did not verify that Hyundai Steel’s reported freight and warehousing
expenses were on an arm’s length basis. Specifically, the Sales Verification Report
states that it “does not draw conclusions as to whether the reported information was
successfully verified, and further does not make findings or conclusions regarding how
the facts obtained at verification will ultimately be treated in the [agency’s]
determinations.” Sales Verification Report at 1; see also I&D Mem. at 73-74. Prior to
verification, Commerce acknowledged Plaintiff’s documents purporting to show the
affiliate’s net profits in rendering these services for Hyundai Steel, but notified the
company that the submitted information was insufficient to show that its affiliate earned
a profit for the provision of the services in question. Hyundai Steel’s Suppl. §§ B and C
Resp. at 8. 	In supplemental questionnaires and at verification, Commerce requested
complete information for its review, to which Plaintiff responded by providing only self-
selected information. See id. at 6-7, 9, 20-21, 24 & Exs. S-6, S-7; Sales Verification
13 Plaintiff avers that the Preliminary Determination was consistent with Commerce’s
decision in the parallel investigation on corrosion resistant steel, “where Commerce
relied on similar documentation for similar services and calculated an arm’s length
adjustment.” Pl.’s Br. at 18 (citing Certain Corrosion-Resistant Steel Products From the
Republic of Korea, 81 Fed. Reg. 35,303 (Dep’t Commerce June 2, 2016) (final
determination of sales at less than fair value and final aff. determination of critical
circumstances), and accompanying Issues and Decision Mem. A–580–878 (May 24,
2016) at Cmt. 8). However, final determinations in antidumping duty investigations must
be supported by substantial evidence on the record, and the record of each
investigation is distinct. Thus, the question before the court is whether Commerce’s
determination in this case is supported by substantial evidence on this record. What
Commerce may have concluded in a parallel investigation of a different product with a
separate record is of little moment. See Yama Ribbons & Bows Co. v. United States,
36 CIT ___, ___, 865 F. Supp. 2d 1294, 1298 (2012) (“Commerce must base its
decisions on the record before it in each investigation”); Shandong Huarong Mach. Co.
v. United States, 29 CIT 484, 491 (2005) (“[E]ach administrative review is a separate
segment of proceedings with its own unique facts.”).
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Court No. 16-00228 	Page 22
Report at 3, 42-44. In fact, at verification, Commerce noted that some of the information
that Plaintiff submitted “was not based on actual transaction documents.” Sales
Verification Report at 42.
“Preliminary determinations are ‘preliminary’ precisely because they are subject
to change.” NTN Bearing Corp. v. United States, 74 F.3d 1204, 1208 (Fed. Cir. 1995).
The purpose of verification and briefing by the parties is to enable the agency to
determine dumping margins “as accurately as possible.” Cf. Yangzhou Bestpak Gifts &
Crafts Co. Ltd. v. United States, 716 F.3d 1370, 1379 (Fed. Cir. 2013) (“An overriding
purpose of Commerce’s administration of antidumping laws is to calculate dumping
margins as accurately as possible.”). Therefore, it follows that “Commerce has the
flexibility to change its position from the preliminary to the final results,” provided it
“explains the basis for the change” and its decision is supported by substantial evidence
and in accordance with law. See Timken Co. v. United States, 23 CIT 509, 515, 59 F.
Supp. 2d 1371, 1376. (1999) (internal quotation marks and citation omitted). 	As
discussed below, Commerce explained the basis for its application of AFA with respect
to freight and warehousing transactions in its final determination. Its factual findings are
supported by substantial evidence and its final determination on these expenses is
otherwise in accordance with law.
C. Commerce's Determination to Apply AFA is Supported by
Substantial Evidence and in Accordance with Law
As an initial matter, substantial evidence supports Commerce’s decision to apply
facts available. The statute provides that Commerce shall rely on the facts available
when a respondent withholds requested information or fails to provide requested
information. 19 U.S.C. § 1677e(a)(2). 	Here, Commerce relied on facts available
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because Hyundai Steel failed to demonstrate the arm’s length-nature of its transactions
with affiliated parties and failed to provide requested information. I&D Mem. at 74.
The record demonstrates that Plaintiff withheld information requested by
Commerce. Regarding domestic and international freight and warehousing services,
Commerce notified Plaintiff that the information it supplied in its initial questionnaire
responses was insufficient to demonstrate the arm’s length nature of the transactions.
See Hyundai Steel’s Suppl. §§ B and C Resp. at 8, 10.14 Commerce informed Hyundai
Steel precisely what documentation was necessary to make that showing, and
requested contracts from Hyundai Steel’s affiliate with all of its unaffiliated service
providers. See id. at 6-7, 9. Instead of complying with these requests, Plaintiff chose to
provide a self-selected, allegedly “representative sample,” consisting of a single contract
between its affiliate and one subcontractor. 	Id. at 20; see also id. at 7, 9. Plaintiff
declined altogether to provide its affiliate’s contracts with unaffiliated parties to third
country destinations. Id. at 24. Likewise, at verification, Plaintiff again declined to
provide the freight and warehousing information in the manner requested by
Commerce, instead proffering cost comparisons not based on transaction documents,
and selective contracts of its affiliate. Sales Verification Report at 42.
In light of the foregoing, Commerce reasonably found that Plaintiff’s alternate
submissions were insufficient, and that it could not complete the arm’s-length analysis
without the information it had requested. A respondent has an obligation “to fully
14 Regarding U.S. inland freight, Plaintiff provided no information in its Section C
responses that two U.S. subsidiaries of Hyundai Steel’s affiliate provided U.S. inland
freight from port to warehouse or any information attempting to show that those
transactions were arm’s length. See HSA Verification Report at 12 (stating that
Commerce discovered this information for the first time at verification).
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Court No. 16-00228 	Page 24
disclose all requested information, and cannot select which facts, from the range of
information requested, it will report to Commerce.” Fujian Lianfu Forestry Co. v. United
States, 33 CIT 1056, 1066, 638 F. Supp. 2d 1325, 1340 (2009) (citing NTN Corp. v.
United States, 28 CIT 108, 117, 120, 306 F. Supp. 2d 1319, 1329, 1332 (2004)). There
is, thus, substantial evidence on the record demonstrating that Hyundai Steel withheld
information pursuant to 19 U.S.C. § 1677e(a).
Substantial evidence further supports Commerce’s decision to apply an adverse
inference, which was otherwise in accordance with law.15 As discussed above,
Commerce “may use an inference that is adverse to the interests of [a respondent] in
selecting from among the facts otherwise available” when the respondent “fail[s] to
cooperate by not acting to the best of its ability to comply with a request for information.”
19 U.S.C. § 1677e(b)(1)(A). Commerce may apply an adverse inference in
circumstances under which it is it is reasonable for the agency “to expect that more
forthcoming responses should have been made.” Nippon Steel, 337 F.3d at 1382.
Commerce applied an adverse inference after finding that there was common control
and a familial relationship between Hyundai Steel and its affiliate, and, despite this
common control and familial relationship, “Hyundai Steel failed to provide the requested
15 At issue here is the subjective prong of the Nippon Steel test; i.e., whether Commerce
has shown that Hyundai Steel’s failure to supply the requested information “[was] the
result of [Hyundai Steel’s] lack of cooperation in . . . failing to put forth its maximum
efforts to investigate and obtain the requested information from its records.” Nippon
Steel, 337 F.3d at 1382-83. Plaintiff does not contend that Commerce has failed to
make the requisite “objective showing that a reasonable and responsible importer would
have known that the requested information was required to be kept and maintained
under the applicable statutes, rules, and regulations.” Id. at 1382.
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Court No. 16-00228 	Page 25
information or fully cooperate with the [agency’s] request for [] information.” I&D Mem.
at 74.
As a threshold matter, Commerce’s factual determination with respect to the
common control and familial relationship between Hyundai Steel and its affiliate is
supported by substantial evidence. Section 1677(33) defines “affiliated persons” as
“[m]embers of a family,” an “officer or director of an organization and such organization,”
or “[t]wo or more persons directly or indirectly controlling, controlled by, or under
common control with, any person.” 19 U.S.C. § 1677(33). Moreover, “a person shall be
considered to control another person if the person is legally or operationally in a position
to exercise restraint or direction over the other person.” Id. In determining whether
control over another person exists, Commerce considers, inter alia, corporate or family
groupings. See 19 C.F.R. § 351.102(b)(3).
Pertinent here, Hyundai Steel stated in its initial response that “Hyundai Motor
Group and M.K. Chung (the chairman of the group) commonly control Hyundai Steel.”
Hyundai Steel’s § A Resp. at A-11. Hyundai Steel identified its affiliate as belonging to
the Hyundai Motor Group, id. at A-12, and defined the relationship with its affiliate as
being under “common control of the Hyundai Motor Group through its chairman, M.K.
Chung,” id. at A-11. Commerce verified that M.K. Chung was one of the two largest
shareholders of Hyundai Steel’s affiliate. I&D Mem. at 73; Sales Verification Report at
3; SVE, Ex. 28. Moreover, M.K. Chung is the father of E.S. Chung, who was both the
Vice Chairman of Hyundai Steel and the second of the two largest shareholders of
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Hyundai Steel’s affiliate.16 I&D Mem. at 73-74 & nn.372-373; Sales Verification Report
at 3; Hyundai Steel’s § A Resp. at A-11.
The court’s assessment of whether Hyundai Steel “put forth its maximum efforts
to investigate and obtain the requested information from its records,” Nippon Steel, 337
F. 3d at 1382-83, necessarily must assess whether Plaintiff could or should have been
able to obtain the information in its affiliate’s possession. 	Given the nature of the
affiliation between Hyundai Steel and its affiliate, the agency reasonably expected that
Hyundai Steel would be able to access its affiliate‘s documentation. See Hyundai Steel,
279 F. Supp. 3d at 1362 (upholding Commerce’s determination to apply AFA to Hyundai
Steel’s freight, warehousing, and insurance transactions with its affiliates under similar
circumstances because the “agency reasonably expected that Hyundai would be able to
access its affiliates’ documentation”). The burden of creating an adequate record
before Commerce lies with interested parties. QVD Food Co. v. United States, 658
F.3d 1318, 1324 (Fed. Cir. 2011). Placing this burden on the respondent is consistent
with the fact that Commerce lacks subpoena power to require the respondent or any
other interested party to respond to information requests. See Rhone Poulenc, Inc. v.
United States, 899 F.2d 1185, 1191 (Fed. Cir. 1990). Rather, Congress gave the
16 Plaintiff argues that Commerce’s verification of the overlap in family members
between Hyundai Steel and its affiliate does not support the application of AFA. Pl.’s
Br. at 26-28. Plaintiff asserts that it had previously disclosed its affiliation with all parties
that played a role in the sale and production of the subject merchandise and
Commerce’s verification of the overlap did not contradict Plaintiff’s prior submissions on
this point. Id. at 26-27. As Defendant points out, however, Commerce confirmed at
verification a translation inconsistency in the record documents, “which otherwise would
not have been highlighted.” Gov.’s Resp. at 26 (citing Sales Verification Report at 43).
Having provided inconsistent translations of the names of these father and son
shareholders, Hyundai Steel cannot reasonably maintain that it informed Commerce of
the full relationship between these companies.
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agency the authority to use facts available to fill any gaps in the record and, when
certain conditions are present, to make an adverse inference in the selection of the
available facts. See 19 U.S.C. § 1677e(a),(b). This court has upheld Commerce’s use
of AFA when a respondent failed to induce an affiliate to cooperate with Commerce’s
request for information. See Hyundai Steel, 279 F. Supp. 3d at 1361-1364; Kawasaki
Steel Corp. v. United States, 24 CIT 684, 694, 110 F. Supp. 2d 1029, 1038 (2000)
(noting Commerce’s “general practice of attributing failure of an affiliate to the
respondent.”).
Plaintiff seems to suggest that it was relieved of its responsibility to fully comply
with Commerce’s requests because it “explained that its affiliate had declined to provide
the documentation due to confidentiality concerns, but in any event there was no data or
documentation pertaining to comparable transactions.” Pl.’s Br. at 21-22 (citing
generally Hyundai Steel’s Suppl. §§ B and C Resp.; Hyundai Steel’s 2nd Suppl. §§ B
and C Resp.). Plaintiff also seems to suggest that Commerce based its AFA
determination solely on Hyundai Steel’s failure to provide its affiliate’s contracts with
unaffiliated parties for shipments to third countries. See Pl.’s Reply at 11. The agency
explained, however, that its AFA finding was based on Hyundai Steel’s failure to provide
information responsive to the agency’s specific request for “certain freight information
between its affiliate and other unaffiliated parties”; it did not limit its finding to only the
missing third country shipping records. I&D Mem. at 73; see also Sales Verification
Report at 41-44. Even if Plaintiff’s reading of Commerce’s determination is correct,
Plaintiff nonetheless declined to produce information—contracts to third country
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destinations—responsive to Commerce’s request for an alternate benchmark to test the
arm’s length nature of the freight transactions.
Hyundai Steel offered no explanation for why its affiliate was willing to provide
only selective information in response to Commerce’s requests. See Sales Verification
Report at 44. Although Plaintiff asserted it was unable to procure the information from
its affiliate due to lack of “direct ownership,” the record does not disclose any additional
steps that Hyundai Steel took to procure the information. See id. at 43 (Hyundai Steel
admitted that it did not go through other channels, such as other affiliates in the Hyundai
Group, to try to obtain the information that Commerce requested; it asked its affiliate for
information, but the response was “no”). There is nothing on the record to suggest that
Hyundai Steel offered an alternative solution to its affiliate to provide the information to
Commerce directly so as to avoid the affiliate’s confidentiality concerns. Under these
circumstances, Hyundai Steel cannot be said to have “put forth its maximum efforts to
investigate and obtain requested information from its records.” Nippon Steel, 337 F.3d
at 1382; see also Hyundai Steel, 279 F. Supp. 3d at 1363 (upholding Commerce’s use
of AFA under similar circumstances); Cf. Kawasaki, 24 CIT at 692-93, 110 F. Supp. 2d
at 1037-38 (upholding Commerce’s determination to apply partial AFA to missing
information that the respondent’s affiliate refused to provide when substantial evidence
showed that the respondent had means to induce cooperation from its affiliate, to wit,
the ability to: (1) influence the affiliate’s cooperation through the shareholders’
agreement; (2) address the issue with a joint venture partner; (3) invoke rights to the
affiliate’s data under the shareholders’ agreement).
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Plaintiff argues that Commerce violated 19 U.S.C. § 1677m(d) by failing to notify
Plaintiff of any deficiencies in its submissions and provide it the opportunity to correct or
explain the deficiencies. Pl.’s Br. at 22. Pursuant to 19 U.S.C. § 1677m(d), if
Commerce determines that a respondent has not complied with a request for
information, it must promptly inform that respondent of the nature of the deficiency and,
to the extent practicable in light of statutory investigation time-limits, provide that
respondent “an opportunity to remedy or explain the deficiency.” 19 U.S.C. § 1677m(d).
Commerce’s supplemental questionnaire notified Plaintiff that its initial submissions
were insufficient to demonstrate the arm’s length nature of the transactions and
identified the information it needed to make that showing. See Hyundai Steel’s Suppl.
§§ B and C Resp. Commerce, therefore, fulfilled its obligation under § 1677m(d). See
Maverick Tube Corp. v. United States, 857 F.3d 1353, 1361 (Fed. Cir. 2017) (holding
that Commerce satisfied its obligation under § 1677m(d) when the respondent “failed to
provide the information requested in Commerce’s original questionnaire, and the
supplemental questionnaire notified [the respondent] of that defect.”); NSK Ltd. v.
United States, 481 F.3d 1355, 1360 n.1 (Fed. Cir. 2007)(holding that “Commerce . . .
satisfied its obligations under section 1677m(d) when it issued a supplemental
questionnaire specifically pointing out and requesting clarification of [the] deficient
responses.”).
Likewise, Plaintiff’s assertion that Commerce “turned the verification exercise and
administrative proceeding into a trap,” Pl.’s Br. at 23, is unconvincing. From the
initiation of the investigation, Commerce advised Hyundai Steel that “[a]ll information
submitted may be subject to verification.” Hyundai Steel IQ at G-9. In its verification
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agenda, Commerce specifically advised that the list of topics to be considered and
documents to be examined “should be considered illustrative but not all inclusive.”
Verification Agenda (Feb. 29, 2016) at 4, CJA Tab 11, CR 322, PJA Tab 11, PR 305,
ECF No. 57-3. Moreover, there was no question that the agency had inquired about the
arm’s length nature of these service transactions in its initial and supplemental
questionnaires. See, e.g., Hyundai Steel IQ at G-10; Hyundai Steel § A Resp. at A-13;
Hyundai Steel’s § B. Resp. at B-27—B-29; Hyundai Steel’s Suppl. §§ B and C Resp. at
6-9, 20-21, 24. 	Thus, Commerce adequately notified Hyundai Steel that it was
investigating the transactions between it and its affiliates for the purposes of its arm’s-
length determination.
In response to Plaintiff’s argument that Commerce did not articulate a basis for
applying AFA to the U.S. inland freight transactions, Pl.’s Br. at 32, the court finds that
the agency’s reasoning is sufficiently discernable from the determination itself such that
remand is unnecessary, see NMB Singapore Ltd. v. United States, 557 F.3d 1316,
1319 (Fed. Cir. 2009). The Issues and Decision Memorandum walks through
Commerce’s analysis: at verification, the agency asked for freight information from
Hyundai Steel’s affiliate, Hyundai Steel said the affiliate refused to provide the
information, Commerce reviewed the relationship between Hyundai Steel and the
affiliate (including the affiliate’s U.S. subsidiaries), including the family overlap, and
concluded that Hyundai Steel and the affiliate were under direct or indirect control by a
common group that was expected to cooperate in the antidumping proceeding. I&D
Mem. at 73-74.
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Finding a failure to cooperate, which is the predicate for the application of an
adverse inference, necessarily requires assessment of a respondent’s efforts
undertaken to comply with a request for information. 19 U.S.C. § 1677e(b). The record
supports Commerce’s finding that Hyundai Steel did not make its “maximum effort to
provide Commerce with full and complete answers to all inquiries in an investigation,”
Nippon Steel, 337 F.3d at 1382; thus, Commerce’s determination to apply AFA to
Hyundai Steel’s U.S. inland freight transactions will be sustained.
In sum, because Commerce did not have verified arm’s length freight and
warehousing data on the record, it was appropriate, pursuant to 19 U.S.C. § 1677e(a),
for the agency to use facts otherwise available to calculate those expenses.
Furthermore, because Hyundai Steel failed to make its best efforts to obtain the
requested documents, the agency was justified in concluding that Hyundai Steel had not
acted to the best of its ability and reasonably used an adverse inference in selecting the
facts otherwise available.
D. Commerce’s Selection of AFA was Reasonable
Hyundai Steel contends that Commerce’s selection of AFA was inconsistent with
verified record information and, thus, unreasonable. Pl.’s Br. at 28. With respect to
domestic inland freight expenses, Hyundai Steel asserts that “Commerce applied an
unreasonable, punitive, and aberrational result” by selecting as AFA an expense
amount that was “2,768 percent or 28 times the reported freight amount.” Id. at 29-30
(emphasis omitted). Hyundai Steel further complains that Commerce’s application of
AFA to certain transactions for which Hyundai Steel did not incur the freight expense,
and transactions with an unaffiliated freight provider, was unsupported by substantial
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Court No. 16-00228 	Page 32
evidence and not in accordance with law. Id. at 30-31. With respect to international
freight, Plaintiff avers that Commerce’s decision to apply the highest reported rate was
equally egregious because the agency neglected to consider that the vast majority of
Hyundai Steel’s shipments were bulk shipments, which would have been cheaper, while
a small percentage of shipments were made via containers, which were more
expensive. Id. at 31. With respect to U.S. inland freight expenses, Hyundai Steel
reiterates that Commerce made no AFA findings related to these transactions, and,
therefore, could not apply AFA adjustments. Id. at 32.
“Pursuant to 19 U.S.C. § 1677b(f)(2), Commerce may adjust various expenses
incurred for inputs or services provided by affiliates in the dumping margin calculation to
reflect market values, if necessary.” Hyundai Steel, 279 F. Supp. 3d at 1367 (citing 19
C.F.R. §§ 351.402(e), 351.403). As discussed above, having found that Hyundai Steel
failed to cooperate by not acting to the best of its ability to comply with a request for
information, Commerce was permitted to use an inference that is adverse to Hyundai
Steel’s interests in selecting from among the facts otherwise available. See 19 U.S.C.
§ 1677e(b)(1)(A). In fact, the statute authorizes Commerce to select “any [] information
placed on the record” when drawing an adverse inference pursuant to § 1677e(b)(1).
19 U.S.C. § 1677e(b)(2)(D). Commerce applied Hyundai Steel’s lowest reported value
as AFA for home market inland freight and warehousing. I&D Mem. at 74. For
international freight and U.S. inland freight, Commerce applied Hyundai Steel’s highest
reported values, by destination, as AFA. Id. For home market inland freight for U.S.
sales, Commerce applied the second-highest transaction-specific value as AFA. Id.;
see also Final Determination Calculation Analysis Mem. for Hyundai Steel Co. (July 20,
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Court No. 16-00228 	Page 33
2016) (“Final Sales Calculation Mem.”) at 6, CJA Tab 22, CR 610, PJA Tab 22, PR 375,
ECF No. 57-5.
Plaintiff’s arguments that “Commerce successfully verified Hyundai Steel’s
expenses and had previously confirmed that they were arm’s length transactions,” Pl.’s
Br. at 28, seek to ignore Hyundai Steel’s inability to verify the arm’s length nature of its
freight expenses, I&D Mem. at 74. Therefore, any arguments by Plaintiff predicated on
Commerce’s failure to rely on Hyundai Steel’s reported information are unpersuasive.
See 19 U.S.C. § 1677m(e)(2).17 	Commerce properly relied on an AFA adjustment
because the reported data could not be verified to be arm’s length and, therefore, was
unreliable for purposes of determining Hyundai Steel’s margin of dumping. Such
questionable data cannot be an appropriate benchmark for measuring the
reasonableness of Commerce’s selection of AFA. See id. Plaintiff’s characterization of
the adverse inference for domestic inland freight for U.S. sales as a punitive
multiplication of its average reported expense also is predicated on a
mischaracterization of Commerce’s determination. Commerce made a methodological
decision to use the second-highest transaction specific value as AFA. I&D Mem. at 74;
17 Section 1677m(e) precludes Commerce from disregarding information that is
“necessary to the determination,” provided all of the following five criteria are satisfied:
(1) the information is submitted by the [established] deadline . . .,
(2) the information can be verified,
(3) the information is not so incomplete that it cannot serve as a reliable
basis for reaching the applicable determination,
(4) the interested party has demonstrated that it acted to the best of its
ability in providing the information and meeting the requirements
established by the administering authority or the Commission with respect
to the information, and
(5) the information can be used without undue difficulties.
19 U.S.C. § 1677m(e).
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Court No. 16-00228 	Page 34
Final Sales Calculation Mem. at 6. Thus, the mathematical relationship between
Commerce’s selected AFA value and the reported value is irrelevant.
Notwithstanding the above discussion, with respect to Hyundai Steel’s arguments
that Commerce incorrectly applied AFA with respect to sales for which Plaintiff did not
incur domestic inland freight from plant to port or used an unaffiliated freight provider,
Pl.’s Br. at 30-31, Commerce has not articulated any justification for this application of
AFA and the court cannot provide a justification for the agency. Consequently, the court
will remand this limited aspect of Commerce’s application of AFA to the agency for
reconsideration or further explanation.
II. 	Commerce’s Application of AFA to Plaintiff’s CONNUM Reporting
A. Relevant Factual Background
In the Final Determination, Commerce identified four specifications of products
for which it determined that Hyundai Steel and HSA had reported inaccurate,
inconsistent, or unverifiable CONNUMs. See I&D Mem. at 59-63.18 Three of those
specifications related to home market sales and one related to U.S. sales. 19
18 In antidumping proceedings, Commerce uses CONNUMs “to identify the individual
models of products for matching purposes.” Ad Hoc Shrimp Trade Action Comm. v.
United States, 802 F.3d 1339, 1347 n.9 (Fed. Cir. 2015) (internal quotation marks and
citation omitted); see also Gov.’s Resp. at 33 (“Commerce establishes a CONNUM to
define the key physical characteristics of the subject merchandise that are commercially
meaningful in the U.S. marketplace”). In its investigation, Commerce instructed
Hyundai Steel to assign a CONNUM to each unique product reported in the Section B
(home market) and Section C (U.S. market) sales data files. See Hyundai Steel IQ at
B-7, C-6. Commerce explained that “products with identical physical characteristics
reported in the foreign market sales file and the U.S. market sales file should have the
same control number.” Id. Commerce identified steel quality (referred to as
“QUALITYH” or “QUALITYU”) as one of the reporting characteristics. See Hyundai
Steel’s § B Resp. at B-13; Hyundai Steel’s § C Resp. at C-10, C-11.
19 Due to the proprietary nature of the specifications, Commerce used “Spec” names in
the Issues and Decision Memorandum and provided additional analysis containing the
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With respect to Spec D products, Hyundai Steel reported these products as
“commercial quality.” I&D Mem. at 60; Hyundai Steel Sales Verification Report at 2, 21.
Upon reviewing Hyundai Steel’s internal product guidelines at verification, Commerce
noted that the mechanical and chemical requirements of the Spec D products
comported with a drawing quality rather than a commercial quality product. I&D Mem.
at 60; Hyundai Steel Sales Verification Report at 2, 21; Final Sales Calculation Mem. at
4 & nn.5-6 (citations omitted). Additionally, in examining Hyundai Steel’s product coding
designations, Commerce determined that the Spec D products were identified in a way
that was “very obviously characteristic of drawing quality.” I&D Mem. at 60.20
With respect to Spec H products, Hyundai Steel had classified these products as
meeting advanced high strength steel (“AHSS”) or ultra-high strength steel (“UHSS”)
requirements. I&D Mem. at 60. However, the information Commerce verified as to the
requirements of AHSS/UHSS products indicated that the Spec H products did not meet
these requirements. Id.; Sales Verification Report at 2, 21; Final Sales Calculation
Mem. at 4. As a result, Commerce found that Hyundai Steel had no basis to report the
products as AHSS/UHSS quality and that the products were “best characterized for this
investigation as structural quality.” I&D Mem. at 61.
product specifications in the confidential Final Sales Calculation Memorandum. See
I&D Mem. at 60-63; Final Sales Calculation Mem. at 3. With respect to home market
sales, Commerce identified issues with the following products: [[ 	]], designated as
“Spec D”; [[ 	]], designated as “Spec H”; and [[ 	]], designated as “Spec E.”
I&D Mem. at 60-61; Final Sales Calculation Mem. at 3. With respect to U.S. sales,
Commerce identified issues with product [[ 	]], designated as “Spec C.” I&D Mem. at
62; Final Sales Calculation Mem. at 3.
20 For instance, “[[ 	]] as pertaining to
drawing quality steel.” Final Sales Calculation Mem. at 4 & n.7 (citation omitted).
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Court No. 16-00228 	Page 36
With regard to Spec E products, Hyundai Steel identified a minimum specified
yield strength for the products in question. I&D Mem. at 61& n.291 (citing Hyundai
Steel’s Sales Verification Report at 18 & SVE, Ex. 12 at 23). At verification, Commerce
discovered that there was no basis for this identification because there was no minimum
specified yield strength required for the specification. I&D Mem. at 61; Sales
Verification Report at 18, 21-22. Thus, Commerce concluded that Hyundai Steel’s
identification was “unsupported by the record.” I&D Mem. at 61.
Finally, with regard to “Spec C” products, Commerce found that Hyundai Steel
inconsistently reported the product code (PRODCOD2U) for U.S. sales by HSA to
unaffiliated customers as being commercial quality when the reported quality for
CONNUM purposes was either drawing or deep drawing quality. I&D Mem. at 62. At
HSA’s sales verification, Commerce also found inconsistencies in certain reported
codes. Final Sales Calculation Mem. at 4 & n.11 (citation omitted).21 Thus, Commerce
found there was a lack of explanation for the inconsistent reporting and considered the
sales in question to be unverified. I&D Mem. at 62; see also HSA Sales Verification
Report at 10; CEP Verification Exs. (“CEP SVE”), EX. 17 at 61, CJA Tab 17, CR 572,
PJA Tab 17, PR 341, ECF No. 57-5 (listing the sales Commerce considered unverified).
Commerce determined that the use of facts available was warranted because
Hyundai Steel failed to provide necessary information, withheld requested information,
significantly impeded the proceeding, and failed to provide information that could be
verified. I&D Mem. at 60 (citing 19 U.S.C. § 1677e(a)(1),(2)). Commerce further found
21 In the Final Sales Calculation Memorandum, Commerce explained that certain [[
]] are inconsistent with other [[ 	]] Final Sales Calculation Mem. at 4-5 &
nn.12-13, 15 (citations omitted).
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Court No. 16-00228 	Page 37
that the application of partial AFA was warranted when data did not exist on the record
and Hyundai Steel was uncooperative. Id. at 59, 63. Commerce determined that
Hyundai Steel had failed to cooperate to the best of its ability by withholding information
until verification and providing inadequate explanations for its reporting errors and
inconsistencies. Id. at 59-60, 63. Accordingly, Commerce applied AFA in the following
manner:
For the U.S. sales associated with the Spec C issue (which are limited to a
small volume of U.S. sales of products classified under that specification
and under the two other specifications with comparable linking problems),
we are assigning as AFA the highest calculated margin for any other
reported U.S. sale of Hyundai Steel. For Spec D, Spec H, and Spec E, all
of which involve only home market sales, as AFA we are revising the
reported product characteristics, and therefore also the CONNUMs, as
described above, and assigning to the appropriate CONNUMs the highest
reported total cost of manufacturing for the CONNUMs in question.
Id. at 63.
Plaintiff asserts that its CONNUM reporting for each of those product
specifications was reasonable. Pl.’s Br. at 32-36. Plaintiff challenges Commerce’s
determination to apply AFA as unsupported by substantial evidence and contrary to law,
asserts that the agency had no basis to resort to AFA for Hyundai Steel’s reporting, and
further challenges Commerce’s AFA adjustment with respect to the U.S. CONNUM data
as unreasonable and an abuse of discretion by the agency. Id. at 32, 36-40.
B. Commerce’s Determination to Apply AFA to Hyundai Steel’s Home
and U.S. Market CONNUM Reporting is Supported by Substantial
Evidence and in Accordance with Law
As previously noted, if Commerce determines that a party “has failed to
cooperate by not acting to the best of its ability to comply with a request for information,”
it “may use an inference that is adverse to the interests of that party in selecting from
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Court No. 16-00228 	Page 38
among the facts otherwise available.” 19 U.S.C. § 1677e(b). Here, Commerce found
that because Hyundai Steel “was unable to substantiate its product reporting, which
include instances in which information was misreported and/or based on inconsistent
internal information, recalculations are possible” through “some application of partial
AFA whe[n] data do not exist on the record to fully correct the problems in question and
the [agency] found Hyundai [Steel] to be uncooperative.” I&D Mem. at 59; see also id.
at 60-63. Substantial evidence supports Commerce’s factual findings, and the agency’s
determination is in accordance with law.22
Hyundai Steel advances no arguments to challenge Commerce’s factual findings
with respect to Spec D and Spec H products. See Pl.’s Br. at 35, 36. With respect to
Spec E products, Plaintiff asserts that given Commerce’s confirmation that the product
did not require a yield strength measurement, it was logical for Hyundai Steel not to
maintain a measurement of yield strength. Id. at 35-36. This assertion, however, does
not explain the basis for Plaintiff’s reporting of the minimum yield strength value for
these products. See I&D Mem. at 61 (“Hyundai Steel provided no information indicating
how it had devised the minimum yield strength value it had identified as the basis for
reporting the minimum specified yield strength field.”). Given the lack of explanation or
evidence as to how Hyundai Steel devised the minimum yield strength that it reported,
Commerce reasonably concluded that Hyundai Steel’s identification was unsupported
by the record.
22 Plaintiff does not challenge the propriety of Commerce's decision to resort to facts
available, instead focusing its arguments on Commerce’s decision to apply an adverse
inference. See Pl.’s Br. at 36-38.
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Court No. 16-00228 	Page 39
Regarding Spec C products, Hyundai Steel asserted that the inconsistent
reporting was due to certain products being sold to the final customer on the basis of
less stringent specifications than the specifications to which the products were actually
made. Id. at 62. Before this court, Hyundai Steel explains that “[t]his could occur, for
example, whe[n] a customer ordered a lower grade product, particularly processed
skelp or sheet, but HSA fulfilled the order with a higher grade steel, based on
availability, inventory, or other considerations.” Pl.’s Br. at 33. Hyundai Steel asserts
that it reported the CONNUM data based on the physical characteristics of the imported
coil and reported the PRODCOD2U data based on HSA’s commercial invoices to the
unaffiliated customer. Id. at 34, 37. According to Plaintiff, this reporting was consistent
with Commerce’s questionnaire instructions. Id. at 37 (citing Hyundai Steel’s § C Resp.
at C-7 (requiring the PRODCODU data based on “the product sold” if the product sold
was further manufactured in the United States), C-8 (requiring CONNUM data on “the
product imported” if the product sold is further manufactured in the United States)).
Aside from advancing its theories or explanations for the inconsistent reporting,
Plaintiff points to no evidence to detract from the agency’s reasoning that the Spec C
sales in question were unverifiable. The agency considered Plaintiff’s explanations and
the “supporting documentation” for this explanation, which included the HSA production
order and production result line items, see HSA Verification Report at 13 (citing CEP
SVE, Ex. 17 at 63); however, it nonetheless concluded that it was “not evident from the
record which, if any, of the Hyundai Steel specifications in question are more or less
stringent than the others, with respect to requirements,” I&D Mem. at 62. The “sale
observations were not shown to be linked to the products as imported into the United
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Court No. 16-00228 	Page 40
States.” Id. at 62. Plaintiff does not point to any evidence that undermines these
conclusions. Importantly, Plaintiff’s proffered explanation of why it reported the
CONNUM and PRODCOD2U data differently does not explain why certain sales had
inconsistent and mutually exclusive specifications. See CEP SVE, Ex. 17 at 61.23 In its
briefing and at oral argument, Plaintiff did not, and in fact could not, identify any record
evidence that would explain the inconsistent classifications, which would detract from
the agency’s reasoning that the Spec C products were unverifiable. See Oral Arg. at
1:44:03-1:49:42 (reflecting the time stamp from the recording).
The court also finds that Commerce’s determination to apply AFA is in
accordance with law. In its initial questionnaire, Commerce requested information on
the home and U.S. market sales for a complete sales reconciliation. See Hyundai Steel
IQ at B-6—B-14, C4—C-11 (requesting information on product characteristics, product
specifications, quality, and yield strength and defining all terms). Commerce requested
a narrative response if Hyundai Steel needed to clarify that its products were described
differently for the purposes of calculating an accurate dumping margin. Id. at C-5 (“If
you add [product] characteristics not specified in the questionnaire, describe in the
narrative response why you believe that the Department should use this information to
define identical and similar merchandise.”) (emphasis in original). Plaintiff was
required to prepare an “accurate and complete record in response to questions plainly
asked by Commerce.” Tung Mung Dev. Co., Ltd. v. United States, 25 CIT 752, 788-89
(2001) (citing Olympic Adhesives, Inc. v. United States, 899 F.2d 1565, 1571-72 (Fed.
Cir. 1990)). Plaintiff had the opportunity to explain any additional product characteristics
23 See supra note 21.
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Court No. 16-00228 	Page 41
or reporting inconsistencies in the narrative portion of Commerce’s questionnaire, but
failed to do so prior to verification, and, even then, failed to provide adequate
explanations for its reporting.
With respect to home market sales, Plaintiff attempts to minimize the impact of its
failure to report accurate CONNUMs by focusing on the volume of each specification
sold. It argues that “[t]hese products were of truly miniscule volumes, were not
specifications typically sold, and as such, any reporting issues were minor and
insignificant and did not justify Commerce in resorting to AFA.” Pl.’s Br. at 35; see also
id. at 37; Pl.’s Reply at 19.24 However, the fact that the sales in question are a small
percentage as compared to the total number of the home market sales is of no
importance. Although the number of sales in question may be small in comparison to
the total number of home market sales, the quantity of products within those sales,
which is unknown, could be significant and, if the U.S. sales to which they match are
substantial, they could have a significant impact on the margin calculation. See Def.-
Int.’s Resp. at 26-27 (arguing that inaccurate and unverifiable reporting of CONNUMs
“has a far-reaching impact on the U.S. sales, home market sales and cost databases,
which would require the costs associated with the misreported product be assigned to
the correct products, as well as other adjustments to the home market and U.S. sales.”)
Plaintiff also asserts that its reporting errors were neither the result of
inattentiveness or carelessness, nor “intentional” or “nefarious.” Pl.’s Reply at 19.
However, Commerce’s findings that Plaintiff reported inaccurate, inconsistent, or
24 For example, Hyundai Steel states that for Spec D, Spec E, and Spec H, there were
only [[ 	]], [[ 	]], and [[ 	]] sale transactions, respectively, out of [[ 	]] reported
sales. Pl.’s Br. at 35-36.
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Court No. 16-00228 	Page 42
unverifiable CONNUMs, which findings are largely undisputed by Plaintiff, are supported
by substantial evidence. As further detailed above, the record shows that Plaintiff was
unable to adequately explain these reporting errors. Certainly, “[t]he best-of-one’s-
ability standard ‘does not require perfection and recognizes that mistakes sometimes
occur,’ but ‘it does not condone inattentiveness, carelessness, or inadequate record
keeping.’” Papierfabrik Aug. Koehler SE v. United States, 843 F.3d 1373, 1379 (Fed.
Cir. 2016) (quoting Nippon Steel, 337 F.3d at 1382). That Plaintiff’s errors may not
have been intended is not relevant to Commerce's decision to use an adverse
inference. See Nippon Steel, 337 F.3d at 1383 (“While intentional conduct, such as
deliberate concealment or inaccurate reporting, surely evinces a failure to cooperate,
the statute does not contain an intent element. ‘Inadequate inquiries’ may suffice. The
statutory trigger for Commerce's consideration of an adverse inference is simply a
failure to cooperate to the best of respondent's ability, regardless of motivation or
intent.”).
According to Plaintiff, Commerce was required to notify Plaintiff of any perceived
deficiencies or anomalies in the submission or take issue with its product code and
CONNUM methodology before resorting to AFA. See Pl.’s Br. at 38; Pl.’s Reply at 18.
As previously noted, if Commerce determines that a respondent has not complied with a
request for information, it must promptly inform that respondent of the nature of the
deficiency and, to the extent practicable in light of statutory investigation time-limits,
provide that respondent “an opportunity to remedy or explain the deficiency.” 19 U.S.C.
§ 1677m(d). Here, Commerce discovered the deficiency for the first time at verification.
Even then, Commerce provided Plaintiff an opportunity to explain the deficiencies,
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Court No. 16-00228 	Page 43
which Plaintiff was unable to do. Consequently, Commerce complied with the
requirements of section 1677m(d).
C. 	Commerce’s AFA Adjustment with Respect to Hyundai Steel’s U.S.
CONNUM was not Based on Substantial Evidence
As partial AFA for the issues it identified in Hyundai Steel’s U.S. sales (Spec C),
Commerce selected the highest calculated margin for any other reported U.S. sale of
Hyundai Steel. I&D Mem. at 63.25 Plaintiff argues that the selected margin is
“aberrational and punitive,” the sale that gave rise to this margin was itself
aberrational,26 and Commerce violated 19 U.S.C. § 1677m(e) in selecting this margin.
Pl.’s Br. at 38-39; Pl.’s Reply at 20; see also Pl.’s Br. at 39 (arguing that Commerce was
obligated to use the reported data because “the data for these sales was not so
incomplete that they could not serve as a reliable basis for use in the margin
calculations”).
“The purpose of the adverse facts statute is ‘to provide respondents with an
incentive to cooperate’ with Commerce's investigation, not to impose punitive
damages.” Essar Steel Ltd. v. United States, 678 F.3d 1268, 1276 (Fed. Cir.
2012) (quoting F.lli De Cecco Di Filippo Fara S. Martino S.p.A. v. United States, 216
F.3d 1027, 1032 (Fed. Cir. 2000)). Commerce “may employ adverse inferences about
the missing information to ensure that the party does not obtain a more favorable result
by failing to cooperate than if it had cooperated fully.” Statement of Administrative
25 The highest calculated margin for Hyundai Steel’s other U.S. sales was [[ 	]]
percent. Final Sales Calculation Mem. at 6.
26 Plaintiff argues that the sale was aberrational due to it being a single sale of a [[
]] product. 	Pl.’s Br. at 38-39 (citing Hyundai Steel Suppl. §§ B and C Resp. at 18-19;
Hyundai Steel’s Ministerial Error Comments at 13-14); see also Hyundai Steel Suppl. §§
B and C Resp., Ex. S-24 (sales documentation for the sale in question).
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Action accompanying the Uruguay Round Agreements Act (“SAA”), H.R. Rep. No. 103–
316, vol. 1, at 870 (1994), reprinted in 1994 U.S.C.C.A.N. 4040, 4199.27 “[I]n selecting
a reasonably adverse facts-available rate, Commerce must balance the statutory
objectives of finding an accurate dumping margin and inducing compliance, rather than
creating an overly punitive result.” Timken Co. v. United States, 354 F.3d 1334, 1345
(Fed. Cir. 2004).
When Commerce applies AFA, it may use information from the petition, a final
determination in the investigation, any previous review, or any other information on the
record. See 19 U.S.C. § 1677e(b). When Commerce relies on information obtained in
the course of an investigation or review, it is not required to corroborate that information.
See 19 U.S.C. § 1677e(c); Nan Ya Plastics, 810 F.3d at 1348. Section 502 of the TPEA
recently amended 19 U.S.C. § 1677e to significantly reduce the administrative burden
for selecting an AFA rate, making it clear that Commerce does not have to corroborate
an antidumping duty rate that has been applied in the same segment of the proceeding
or select an antidumping duty margin that reflects the “commercial reality” of the
interested party.
Here, the AFA margin applied to these Spec C sales was based on the highest
calculated margin for Hyundai Steel’s other U.S. sales and, when applied to those
sales, caused a margin increase of less than five points. See Final Sales Calculation
27 The SAA “shall be regarded as an authoritative expression by the United States
concerning the interpretation and application of the Uruguay Round Agreements and
this Act in any judicial proceeding in which a question arises concerning such
interpretation or application.” 19 U.S.C. § 3512(d).
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Mem. at 1.28 Consistent with 19 U.S.C. § 1677e(b)(2)(D), Commerce may use as AFA
the highest transaction-specific margin on the record of the segment of the proceeding.
See Nan Ya Plastics, 810 F.3d at 1350. To be clear, while Congress established a
corroboration requirement when using secondary information, by contrast, Congress did
not require Commerce to select adverse facts that “reflect a certain amount of sales,
yield a particular margin, fall within a continuum according to the application of particular
statistical methods, or align with standards articulated in other statutes and regulations.”
Id. at 1347.
Plaintiff recognizes the purpose behind the recent amendments to § 1677e, but
maintains that the amendment does not give the agency to freedom to select “any
figure, regardless of its source and reasonableness, as an AFA margin or AFA record
plug.” Pl.’s Br. at 39. At oral argument, Plaintiff stated that Commerce’s selection of the
AFA rate in this case was unreasonable because the sale was not representative of
Hyundai Steel’s sales. Oral Arg. at 2:02:42-2:03:35. Put another way, Hyundai Steel
argues that the sale upon which the AFA margin is based was aberrational. See Pl.’s
Br. at 38-39. While the Defendant disputes that the sale was “aberrational,” the
Defendant admits that “it was invoiced differently than other U.S. sales because of the
nature of the product.” Gov.’s Resp. at 39 (citation omitted). The Defendant goes on to
assert, without any record analysis to support it, that nothing in the record supports a
28 The weighted-average margin before application of AFA was 29.69 percent, whereas
the final weighted-average margin after the application of AFA was 34.33 percent; thus,
the resulting margin difference due to the application of the [[ 	]] percent AFA margin
was 4.64 percent. Final Sales Calculation Mem. at 1.
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finding that the prices, costs, or expenses are aberrational compared to other U.S.
sales.
A sale is aberrational when it deviates from the usual or normal way or may be
regarded as atypical. See Webster’s Third New Int’l Dictionary of the English Language
Unabridged (2002) at 3 (defining “aberration” as an “act of wandering away or going
astray: deviation from . . . a normal type.”) Defendant acknowledges that the sale in
question was invoiced differently because of the nature of the product, recognizing that
it was atypical of Hyundai Steel’s U.S. sales. As such, the sale was aberrational and an
inappropriate basis for the selection of an AFA margin.
The agency has broad discretion to select a margin to use as adverse facts
available, particularly following the amendments to 19 U.S.C. § 1677e pursuant to the
TPEA and when using primary information as AFA; however, that discretion is not
unbounded. While the margin need not reflect any alleged “commercial reality” or
otherwise seek to estimate what the margin might otherwise have been, 19 U.S.C.
§ 1677e(d)(3), an AFA margin is unsupported by substantial evidence when it is based
on an aberrational transaction. This is not to impose a representational test on the
selected margin, but simply to exclude those transactions (regardless of the resulting
margin) that are true outliers based on the nature of the transaction or product involved.
The court will remand Commerce’s selection of the AFA margin for Hyundai
Steel’s Spec C sales so that Commerce may select a margin not based on an
aberrational sale.
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III. 	Commerce’s Denial of a CEP Offset
Plaintiff’s final challenge to the Final Determination is to Commerce’s decision to
deny Hyundai Steel a CEP offset. Pl.’s Br. at 40-45. Plaintiff asserts that Commerce’s
denial of a CEP offset was unsupported by substantial evidence because Plaintiff’s
home market level of trade is more advanced than its U.S. level of trade. Pl.’s Br. at 40.
According to Plaintiff, the record established that Hyundai Steel performed significantly
greater selling activities in selling to its unaffiliated home market customers than to its
U.S. affiliates in all four categories of activities that Commerce examines: (1) sales and
marketing; (2) freight and delivery; (3) inventory maintenance and warehousing; and (4)
warranty and technical support. Pl.’s Br. at 41-43; Pl.’s Reply at 21. Plaintiff further
argues that Commerce unjustifiably denied Plaintiff a CEP offset, when it previously had
granted a CEP offset in other cases with similar facts. Pl.’s Br. at 44-45.
Commerce’s determination is unsupported by substantial evidence. Here,
Commerce examined the four selling function categories it typically considers for a CEP
offset analysis: (1) sales and marketing; (2) freight and delivery services; (3) inventory
maintenance and warehousing; and (4) warranty and technical support. I&D Mem. at
87; see also Prelim. I&D Mem. at 19 & n.75 (citing Certain Orange Juice from Brazil, 75
Fed. Reg. 50,999 (Dep’t Commerce Aug. 18, 2010) (final results of antidumping duty
admin. review and notice of intent not to revoke antidumping duty order in part), and
accompanying Issues and Decision Mem., A-351-840 (Aug. 11, 2010) at cmt. 7).
Commerce noted that Hyundai Steel had reported home market sales through “two
channels of distribution (i.e., direct shipments to end-users or distributors).” I&D Mem.
at 87. Based on its analysis of the selling function categories, Commerce found that
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Hyundai Steel performed sales and marketing, freight and delivery services, and
warranty and technical support for its reported sales to affiliated and unaffiliated
customers in the home market. Id. Commerce thus determined that Hyundai Steel
performed the same selling functions at the same “relative level of intensity” for all of its
home market sales. Id.
With respect to the U.S. market, Commerce noted that Hyundai Steel had
reported making those sales through three channels of distribution: EP sales through
unaffiliated Korean distributors (Channel 1); CEP sales through its affiliates HSA,
Hyundai Corporation, and HCUSA to unaffiliated processors (Channel 2); and CEP
sales through its affiliate HSA to unaffiliated processors and affiliated processors
(Channel 3). Id. at 87 & nn.462-463 (citing Hyundai Steel’s § A Resp. at A-21—A-25 &
Ex. A-13; Hyundai Steel’s Suppl. § A Resp. at 10 & Ex. SA-13). Commerce determined
that Hyundai Steel performed the same selling functions at the same relative level of
intensity for its sales through Channels 1 and 3. Id. at 88. Moreover, Commerce
determined that Channel 1 and Channel 3 sales were made at the same level of trade
as the home market sales; thus, no level of trade adjustment, and no CEP offset, was
warranted. Id. at 88-89. With respect to Channel 2, Commerce found that Hyundai
Steel “provided notably fewer selling functions . . . than it did in Channels 1 and 3,” and
determined “Channel 2 to be at another, less advanced [level of trade] than Channels 1
and 3.” Id. at 88. Notwithstanding its findings that Channels 1 and 3 were at the same
level of trade as the home market sales, and that Channel 2 sales were at a less
advanced level of trade than Channels 1 and 3, Commerce inexplicably concluded that:
Hyundai Steel’s home market sales during the POI were made at a same
[level of trade] as its CEP sales. Also, Hyundai Steel’s home market [level
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of trade] is not at a more advanced stage of distribution than its CEP [level
of trade] through Channels 1, 2, and 3, and thus, no [level of trade]
adjustment is possible. Consequently, there is no basis for considering a
CEP offset with respect to Hyundai Steel. Accordingly, we have not
granted a CEP offset, pursuant to section [19 U.S.C. 1677b(a)(7)(B)].
Id. at 88. In short, Commerce’s explicit finding with respect to U.S. Channel 2 does not
support this conclusion and cannot be reconciled with it. In the absence of substantial
evidence, this conclusion must be remanded. See Bowman Transp., Inc. v. Ark.-Best
Freight System, Inc., 419 U.S. 281, 285–86 (1974) (“The agency must articulate a
rational connection between the facts found and the choice made.”) (internal quotation
marks and citation omitted).
CONCLUSION
In accordance with the foregoing, it is hereby
ORDERED that Commerce’s Final Determination is remanded to Commerce so
that it may reconsider or further explain its application of AFA for domestic inland freight
expenses on transactions that incurred no foreign inland freight and on transactions for
which domestic inland freight was provided by an unaffiliated freight provider; and it is
further
ORDERED that Commerce’s Final Determination is remanded to Commerce so
that it may select an AFA margin to use for Hyundai Steel’s Spec C sales that is not
based on an aberrational sale; and it is further
ORDERED that Commerce’s Final Determination is remanded to Commerce so
that it may reconsider its denial of a CEP offset for Hyundai Steel; and it is further
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ORDERED that Commerce shall reconsider whether to correct its ministerial
errors that previously had no effect on Hyundai Steel’s weighted-average dumping
margin; and it is further
ORDERED that Commerce shall file its remand results on or before September
26, 2018; and it is further
ORDERED that subsequent proceedings shall be governed by USCIT Rule
56.2(h); and it is further
ORDERED that any comments or responsive comments must not exceed 5,000
words; and it is further
ORDERED that Commerce’s Final Determination in all other respects is
sustained.
/s/ 	Mark A. Barnett
Judge
Dated: June 28, 2018
New York, New York
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