AG der Dillinger Huttenwerke v. United States

Slip Op. 21-102
UNITED STATES COURT OF INTERNATIONAL TRADE
Before: Leo M. Gordon, Judge
Consol. Court No. 17-00158
OPINION
[Commerce’s Final Determination sustained in part.]
Dated: August 18, 2021
Marc E. Montalbine, Gregory S. Menegaz, and Alexandra H. Salzman, deKieffer
& Horgan, PLLC of Washington, D.C. for Plaintiff AG der Dillinger Hüttenwerke and
Consolidated Plaintiff Friedr. Lohmann GmbH.
Robert 	L. 	LaFrankie, 	Crowell 	& 	Moring 	LLP, 	of 	Washington, 	D.C. 	for
Plaintiff-Intervenor thyssenkrupp Steel Europe AG.
AG DER DILLINGER HÜTTENWERKE,
Plaintiff,
and
ILSENBURGER GROBBLECH GMBH, SALZGITTER
MANNESMANN GROBBLECH GMBH, SALZGITTER
FLACHSTAHL GMBH, SALZGITTER MANNESMANN
INTERNATIONAL GMBH, and FRIEDR. LOHMANN
GMBH,
Consolidated Plaintiffs,
and
THYSSENKRUPP STEEL EUROPE AG,
Plaintiff-Intervenor,
v.
UNITED STATES,
Defendant,
NUCOR CORPORATION and
SSAB ENTERPRISES LLC,
Defendant-Intervenors.
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Kelly Ann Krystyniak, Trial Attorney, Commercial Litigation Branch, Civil Division,
U.S. Department of Justice of Washington, D.C. for Defendant United States. 	On the
brief were Brian M. Boynton, Acting Assistant Attorney General, Jeanne E. Davidson,
Director, Tara K. Hogan, Assistant Director, and Vito S. Solitro, Trial Attorney. Of counsel
were Natan P. L. Tubman and Ayat Mujais, Attorneys, U.S. Department of Commerce,
Office of Chief Counsel for Trade Enforcement and Compliance of Washington, D.C.
Alan H. Price, Christopher B. Weld, and Stephanie M. Bell, Wiley Rein LLP of
Washington, D.C. for Defendant-Intervenor Nucor Corporation.
Gordon, 	Judge: 	This 	consolidated 	action 	involves 	a 	challenge 	to 	the 	final
determination in the antidumping duty investigation conducted by the U.S. Department of
Commerce 	(“Commerce”) 	of 	certain 	carbon 	and 	alloy 	steel 	cut-to-length 	plate
(“CTL plate”) from the Federal Republic of Germany. See Certain Carbon and Alloy Steel
Cut-to-Length Plate from the Federal Republic of Germany, 82 Fed. Reg. 16,360 (Dep’t
of Commerce Apr. 4, 2017) (“Final Determination”), and accompanying Issues and
Decision 	Memorandum, 	A-428-844 	(Mar. 	29, 	2017),
http://enforcement.trade.gov/frn/summary/germany/2017-06628-1.pdf 	(last 	visited 	this
date) (“Decision Memorandum”).
Plaintiff AG der Dillinger Hüttenwerke (“Dillinger” or “Plaintiff”) challenges several
aspects of Commerce’s Final Determination. See Pl. Dillinger Mem. in Supp. of Rule 56.2
Mot. for J. on the Agency R., ECF No. 40 (“Dillinger Br.”); 1 Def.’s Mem. Opp. Pls.’ Rule
56.2 Mots. for J. on the Admin. R., ECF No. 55 (“Def.’s Resp.”); Def.-Intervenor Nucor
Corporation Resp. Br., ECF No. 58; Reply Br. of Pl. Dillinger, ECF No. 62 (“Dillinger
Reply”). 	The court has jurisdiction pursuant to Section 516A(a)(2)(B)(i) of the Tariff Act
1 Citations to the parties’ Rule 56.2 briefs and agency record are to confidential versions
unless otherwise noted.
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of 1930, as amended, 19 U.S.C. § 1516a(a)(2)(B)(i) (2018), 2 and 28 U.S.C. § 1581(c)
(2018).
In 	a 	separate 	opinion, 	the 	court 	remanded 	several 	issues 	from 	the 	Final
Determination for reconsideration (non-prime CTL plate cost shifting, application of the
major input rule, the treatment of certain general and administrative (“G&A”) expenses,
and an adverse facts available issue). See AG der Dillinger Huttenwerke v. United States,
45 CIT ___, Slip Op. 21-101 (Aug. 18, 2021). In this opinion, the court sustains the Final
Determination for other issues Dillinger challenged that the court has determined lack
merit: differential pricing and interest expense adjustments.
I. Standard of Review
The court sustains Commerce’s “determinations, findings, or conclusions” unless
they are “unsupported by substantial evidence on the record, or otherwise not in
accordance with law.” 19 U.S.C. § 1516a(b)(1)(B)(i). More specifically, when reviewing
agency determinations, findings, or conclusions for substantial evidence, the court
assesses whether the agency action is reasonable given the record as a whole. Nippon
Steel Corp. v. United States, 458 F.3d 1345, 1350–51 (Fed. Cir. 2006). 	Substantial
evidence has been described as “such relevant evidence as a reasonable mind might
accept as adequate to support a conclusion.” DuPont Teijin Films USA v. United States,
407 F.3d 1211, 1215 (Fed. Cir. 2005) (quoting Consol. Edison Co. v. NLRB, 305 U.S.
2 Further citations to the Tariff Act of 1930, as amended, are to the relevant provisions of
Title 19 of the U.S. Code, 2018 edition.
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197, 229 (1938)). Substantial evidence has also been described as “something less than
the weight of the evidence, and the possibility of drawing two inconsistent conclusions
from the evidence does not prevent an administrative agency’s finding from being
supported by substantial evidence.” 	Consolo v. Fed. Mar. Comm’n, 383 U.S. 607, 620
(1966). 	Fundamentally, though, “substantial evidence” is best understood as a word
formula connoting reasonableness review. 3 Charles H. Koch, Jr. Administrative Law and
Practice § 9.24[1] (3d ed. 2021). 	Therefore, when addressing a substantial evidence
issue raised by a party, the court analyzes whether the challenged agency action
“was reasonable given the circumstances presented by the whole record.” 	8A West’s
Fed. Forms, National Courts § 3.6 (5th ed. 2021).
Separately, the two-step framework provided in Chevron, U.S.A., Inc. v. Natural
Res. Def. Council, Inc., 467 U.S. 837, 842–45 (1984), governs judicial review of
Commerce’s interpretation of the antidumping statute. See United States v. Eurodif S.A.,
555 U.S. 305, 316 (2009) (Commerce’s “interpretation governs in the absence of
unambiguous statutory language to the contrary or unreasonable resolution of language
that is ambiguous.”).
II. Discussion
A.1. Differential Pricing Methodology
In the underlying investigation, Commerce found that there “is a meaningful
difference between using the different comparison methods” and ultimately determined
that the agency would “apply[] the A-to-T method to Dillinger’s U.S. sales that pass the
Cohen’s d test and the A-to-A method to Dillinger’s U.S. sales that do not pass the
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Cohen’s d test to calculate the weighted-average dumping margin for Dillinger.” Decision
Memorandum at 17; see also 19 C.F.R. § 351.414(c)(1). Commerce’s differential pricing
methodology (“DPM”) has been described extensively in other cases. See, e.g., Stanley
Works (Langfang) Fastening Systems Co. v. United States, 41 CIT ___, ___, 279 F.
Supp. 3d 1172, 1176–79 (2017) (“Stanley Works”).
Dillinger argues that Commerce’s DPM failed to show that Dillinger’s prices
differed significantly among purchasers, regions, or periods of time pursuant to 19 U.S.C.
§ 1677f-1(d)(1)(B). 	Specifically, Dillinger contends that Commerce (i) failed to find a
“pattern” of differences and (ii) unreasonably aggregated price differences across the
categories of purchasers, region, and time. See Dillinger Br. at 27–31; Dillinger Reply at
8–12. The court disagrees.
Before Commerce, Dillinger argued that its made-to-order sales and various other
economic considerations meant that DPM would only detect random variations, rather
than a significant pattern of price differences. 	See Decision Memorandum at 13.
Dillinger, however, provides no support to demonstrate that its made-to-order sales would
cause distortions in Commerce’s calculations. 	Commerce explained that a company’s
economic goals were reflected through its pricing behavior and that the DPM was
designed 	to 	reveal 	when 	a 	company 	resorted 	to 	targeted 	dumping. 	Decision
Memorandum at 20–21. 	Relying on the Statement of Administrative Action (“SAA”),
Commerce explained:
The SAA states that “targeted dumping” is where “an exporter
may sell at a dumped price to particular customers or regions,
while selling at higher prices to other customers or regions.”
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For “targeted” or masked dumping to exist, there must be both
lower-priced U.S. sales which evidence dumping as well as
higher-priced, non-dumped U.S. sales which “conceal,” mask,
hide this evidence of dumping. Therefore, since the purpose
of section 777A(d)(1)(B) is to provide a remedy for “targeted
dumping,” pursuant to which the Department must satisfy the
pattern requirement to demonstrate that the respondent’s
pricing behavior in the U.S. market exhibits characteristics
“where targeted dumping may be occurring,” the Department
continues to find reasonable and logical its approach of
including both lower-priced and higher-priced U.S. sales as
part of a potential pattern of prices that differ significantly.
Decision Memorandum at 21 (internal citations omitted). 	Commerce further addressed
Dillinger’s concerns about the made-to-order nature of its products by explaining that the
CONNUMs 3 used by Commerce in its analysis accounted for variations among Dillinger’s
products:
Dillinger further asserts that its made-to-order products are so
unique and embrace such a wide range of grades within a
given CONNUM that any comparison of U.S. prices on a
CONNUM basis must take into account these inter-CONNUM
variations. 	The Department disagrees. 	The CONNUM and
its 	constituent 	physical 	characteristics 	are 	all 	subject 	to
comment 	during 	this 	investigation. 	Dillinger 	provided
comments, 	and 	Dillinger’s 	arguments 	have 	been 	fully
considered. 	The established CONNUMs are the foundation
for reporting not only comparison and U.S. market sales, but
also Dillinger’s costs of production, and are the basis for
comparison of U.S. prices with normal value. 	Since the
purpose of the differential pricing analysis is to consider
whether 	the 	A-to-A 	method 	is 	appropriate 	to 	calculate
3 A “CONNUM” is a contraction of the term “control number,” and is Commerce jargon for
a unique product (defined in terms of a hierarchy of specified physical characteristics
determined in each antidumping proceeding). 	All products whose product hierarchy
characteristics are identical are deemed to be part of the same CONNUM and are
regarded as “identical” merchandise for purposes of the price comparison. The hierarchy
of 	product 	characteristics 	defining 	a 	unique 	CONNUM 	varies 	from 	case 	to 	case
depending on the nature of the merchandise under investigation.
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Dillinger’s 	weighted-average 	dumping 	margin, 	and 	the
comparisons on which this calculation is based are defined by
CONNUMs, the Department finds that it is appropriate, and
reasonable, to use these same CONNUMs as the basis for
the comparisons of U.S. prices in the differential pricing
analysis.
Id. at 20.
Nonetheless, Dillinger now argues that aggregation of price differences across the
categories of purchasers, region, and time “completely failed to establish any pattern of
price differences with respect to each category on its own” in contravention of the statute.
Dillinger Br. at 29.
The 	Decision 	Memorandum 	details 	how 	Commerce’s 	DPM 	evaluates 	such
differences, consistent with the statute:
The Cohen’s d test compares the U.S. sale prices sequentially
to each purchaser, region and time period, with all other
U.S. sale prices (i.e., the U.S. sales to all other purchasers,
regions 	or 	time 	periods, 	respectively) 	of 	comparable
merchandise. What appears to be the concern of Dillinger, for
example with purchasers, is that the U.S. sales to each
purchaser may not be evenly distributed across the other two
types of groups, regions and time periods. 	Thus, Dillinger
posits 	that 	the 	“Department 	therefore 	cannot 	determine
whether a price difference is actually due to real differences
between purchasers or simply due to the fact that the sales
are to purchasers in different regions or during different time
periods.”
The 	Department 	finds 	that 	this 	is 	neither 	a 	flaw 	in 	the
Cohen’s d test nor a distortion of the results. The Department
also does not find that there are flaws related to the other two
groups (i.e., U.S. sales to a particular region that are equally
distributed 	across 	all 	purchasers 	and 	time 	periods, 	or
U.S. sales 	in 	a 	particular 	time 	period 	that 	are 	equally
distributed across all purchasers and regions). 	The one
possible distortion that could arise, for example that each
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purchaser is located in a specific region, is that similar results
would occur when comparing prices by purchaser and by
region. 	However, the ratio test does not double-count the
sales value when a given U.S. sale price is found to be
significantly different by purchaser and region. 	There is no
assumption about correlated distribution of sales between
purchasers, regions or time periods, and indeed a given U.S.
sale price may be found to be significantly different by all three
categories. 	Yet 	the 	ratio 	test 	ensures 	that 	any 	such
correlation between purchasers, regions and/or time periods
does not distort the results of the test and result in a finding
that a larger proportion of the U.S. sale value is at prices which
differ significantly.
Decision Memorandum at 21–22.
The U.S. Court of Appeals for the Federal Circuit (“Federal Circuit”) has already
rejected similar arguments to those presented here challenging Commerce’s finding of a
“pattern” under § 1677f-1. 	See Dillinger France S.A. v. United States, 981 F.3d 1318,
1324–26 (Fed. Cir. 2020) (rejecting Dillinger’s various challenges to Commerce’s finding
of pattern in that matter, noting “there is nothing in § 1677f-1 or the regulations
promulgated thereunder that requires Commerce to consider custom products differently
when determining whether [a pattern exists pursuant to § 1677f-1(d)(1)(B)]”). 	As in
Dillinger France, Commerce here accounted for Dillinger’s concerns and reasonably
explained 	its 	finding 	of 	a 	pattern 	of 	significant 	price 	differences 	in 	the 	Decision
Memorandum. Accordingly, Commerce’s determination as to Dillinger’s DPM challenge
is sustained.
A.2. Zeroing as part of DPM
Dillinger next argues that Commerce’s use of zeroing as part of its DPM is unlawful
under the statute. It contends that zeroing “distorts both of the requirements provided in
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section 1677f-1(d)(1)(B)” because it compares “a non-zeroed margin” with a “zeroed
margin,” and the difference in result between the A-to-A and A-to-T method is due solely
to this asymmetrical use of zeroing. Dillinger Br. at 32.
The Federal Circuit has upheld Commerce’s use of zeroing for its DPM. See Apex
Frozen Foods Private Ltd. v. United States, 862 F.3d 1337, 1348 (Fed. Cir. 2017)
(“We hold that Commerce’s meaningful difference analysis -- comparing the ultimate
antidumping rates resulting from the A-A methodology, without zeroing; and the A-T
methodology, with zeroing – was reasonable.”). 	That Court rejected the very same
argument Dillinger raises here, stating:
[W]e find it immaterial whether the A-A and A-T margins would
be nearly identical if zeroing were applied evenly or not at all
… 	The 	notion 	that 	Commerce’s 	chosen 	methodology 	is
unreasonable because it only measures the effects of zeroing
is misplaced … [D]ifferences revealed by zeroing are not
inconsequential or to be ignored … In other words, the effects
of zeroing are precisely what 19 U.S.C. § 1677f-1(d)(1)(B)
seeks to address.
Id. at 1349 (citations omitted).
Dillinger 	attempts 	to 	distinguish 	Apex 	by 	arguing 	that 	the 	exception 	in
§ 1677f-1(d)(1)(B) applies only to significant differences for the same product among
purchasers, regions, or time periods and does not relate to significant price differences
between different products. Dillinger Br. at 30. 	Defendant responds that Dillinger failed
to raise the issue of applying the A-to-T method between different products at the
administrative level and therefore failed to exhaust its administrative remedies with
respect to this argument. 	Def.’s Resp. at 26–27. 	Dillinger replies that its inter-product
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argument is “part and parcel” of its argument that zeroing distorts the requirements under
§ 1677f-1(d)(1)(B)(i)-(ii) for application of the A-to-T method. Dillinger Reply at 12–13.
The court agrees with Defendant that Dillinger should have raised this argument
before the agency. 	Here, Dillinger failed to exhaust its inter-product argument before
Commerce when it did not argue whether § 1677f-1(d)(1)(B) permits using the A-to-T
method when evaluating significant price differences between products. If the argument
had been raised at the administrative level, Commerce would have had the opportunity
to apply its expertise to assess its practice and statutory interpretation on the basis of a
more developed record. 	See Stanley Works, 279 F. Supp. 3d at 1189. 	Dillinger’s
contention that its argument is merely “part and parcel” of its zeroing allegations,
see Dillinger Reply at 12–13, does not excuse its failure to explicitly expound on its inter-
product argument at the administrative level because a challenge to the application of
one aspect of § 1677f-1(d)(1)(B) “do[es] not incorporate any conceivable challenge to
elements of that analysis.” Id. Despite Dillinger’s contentions to the contrary, none of the
exceptions 	to 	administrative 	exhaustion 	apply. 	Accordingly, 	Commerce’s 	DPM
determination is sustained.
B. Interest Expense Adjustment
During the investigation, Dillinger reported to Commerce what Dillinger believed to
be its “full” general and administrative (G&A) expenses, including its share of the
operating 	expenses 	incurred 	by 	the 	holding 	company 	SHS 	Stahl-Holdings-Saar
(“SHS Holding”) with which Dillinger is affiliated. SHS Holding performs certain services
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for its affiliates and charges them for the cost of these services to cover SHS Holding’s
operating expenses, such as personnel expenses. See Dillinger Br. at 44–45.
For 	the 	final 	determination, 	Commerce 	reiterated 	its 	practice 	to 	exclude
investment-related gains and losses from the calculation of the cost of production
because it considers them a separate profit-making activity unrelated to a company’s
normal operations. 	Decision Memorandum at 97–98. 	Based on this, Commerce
determined to increase a portion of SHS Holding’s “unrecovered costs” that should be
allocated to its affiliates including Dillinger. The effect of the adjustment was to increase
the portion allocated to and included in Dillinger’s G&A expenses. 	See Decision
Memorandum at 97–98.
Dillinger 	challenges 	this 	adjustment 	as 	unreasonable 	given 	the 	record
(unsupported by substantial evidence). 	See Dillinger Br. at 44–47; Dillinger Reply
at 28-30. Dillinger argues that it complied with Commerce’s instructions to report its own
interest expenses based upon “the highest consolidation level available,” which was at
the level of DHS-Dillinger Hütte Saarstahl AG because Dillinger is not consolidated with
SHS Holding, and that Commerce verified Dillinger’s reported G&A without making any
adjustment. 	Dillinger points out that the adjustment relates completely to interest
expenses incurred by SHS Holding, arguing Commerce has a “long-standing and uniform
practice” not to include interest expenses in a respondent’s G&A expenses as indicated
by Commerce’s standard questionnaire requiring the calculation of the G&A expense ratio
and 	the 	interest 	expense 	ratio 	separately 	based 	upon 	different 	and 	distinct
methodologies. 	Dillinger Br. at 45–46 (citing Questionnaire at D-14 & D-15, PD 102).
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Alternatively, Dillinger argues Commerce erred by failing to offset the affiliate’s interest
expenses 	by 	the 	affiliate’s significant income from shareholding, because holding
investments is the “normal operation” or “ordinary business activity” of a holding company.
Id. at 46–47.
These arguments are unpersuasive. 	They conflate financial expenses with
Commerce’s treatment of investment activities and are contrary to Commerce’s practice
to include the suppliers’ financial expenses in the cost of production as Commerce
explained in the administrative proceeding. The court also perceives no inconsistency in
requiring a respondent to report separate ratios for its own G&A and interest expenses
versus Commerce’s treatment of supplier expenses attributable to the respondent.
See Decision Memorandum at 87–88, 98. 	Accordingly, the court sustains Commerce’s
determination for Dillinger’s interest expense adjustments.
III. Conclusion
For the foregoing reasons, the court sustains Commerce’s Final Determination as
to Dillinger’s challenges to Commerce’s differential pricing and the interest expense
adjustment.
/s/ Leo M. Gordon
Judge Leo M. Gordon
Dated: August 18, 2021
New York, New York
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