Dongkuk S&C Co., Ltd. v. United States

Slip Op. 21-167
UNITED STATES COURT OF INTERNATIONAL TRADE
Before: Leo M. Gordon, Judge
Court No. 20-03686
OPINION and ORDER
[Final Determination remanded in part.]
Dated: December 13, 2021
Robert 	G. 	Gosselink 	and 	Jarrod 	M. 	Goldfeder, 	Trade 	Pacific 	PLLC,
of Washington, D.C., argued for Plaintiff Dongkuk S&C Co., Ltd. With them on the brief
was MacKensie R. Sugama.
Ashley 	Akers, 	Trial 	Attorney, 	U.S. 	Department 	of 	Justice, 	Civil 	Division,
Commercial Litigation Branch, Washington, D.C., argued for Defendant United States.
Of counsel on the argument was Kirrin Hough, Attorney, Office of the Assistant Chief
Counsel for Trade Enforcement and Compliance, U.S. Department of Commerce,
of Washington, D.C. With Ms. Akers on the brief were Brian M. Boynton, Acting Assistant
Attorney General, Patricia M. McCarthy, Director, and Reginald T. Blades, Jr., Assistant
Director. 	Of counsel on the brief was Jesus N. Saenz, Attorney, Office of the Assistant
Chief Counsel for Trade Enforcement and Compliance.
Derick G. Holt, Wiley Rein LLP, of Washington, D.C., argued for Defendant-
Intervenor Wind Tower Trade Coalition. 	On the brief were Alan H. Price, Daniel B.
Pickard, Robert E. DeFrancesco, Laura El-Sabaawi, and Stephanie M. Bell.
DONGKUK S&C CO., LTD.,
Plaintiff,
v.
UNITED STATES,
Defendant,
and
WIND TOWER TRADE COALITION,
Defendant-Intervenor.
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Gordon, 	Judge: 	This 	action 	involves 	the 	U.S. 	Department 	of 	Commerce’s
(“Commerce”) final affirmative determination in the antidumping duty investigation of utility
scale wind towers (“subject merchandise”) from the Republic of Korea. See Utility Scale
Wind Towers from the Republic of Korea, 85 Fed. Reg. 40,243 (Dep’t of Commerce
July 6, 2020) (“Final Determination”), and the accompanying Issues and Decision
Memorandum, 	A-580-902 	(Dep’t 	of 	Commerce 	June 	29, 	2020),
https://enforcement.trade.gov/frn/summary/korea-south/2020-14438-1.pdf 	(last 	visited
this date) (“Decision Memorandum”).
Before the court is the USCIT Rule 56.2 motion for judgment on the agency record
filed by Plaintiff Dongkuk S&C Co., Ltd. (“DKSC”). See Mem. In Supp. of Mot. for J. upon
the Agency R. of Pl. Dongkuk S&C Co. Ltd., ECF No. 22 1 (“Pl.’s Br.”); see also Def.’s
Resp. to Pl.’s Rule 56.2 Mot. for J. upon the Agency R., ECF No. 27 (“Def.’s Resp.”);
Def.-Intervenor Wind Tower Trade Coal.’s Resp. Br., ECF No. 31 (“Def.-Intervenor’s
Resp.”); Pl. Dongkuk S&C Co. Ltd.’s Reply to Def.’s and Def.-Intervenor’s Resps. to
DKSC’s Mot. for J. upon the Agency R., ECF No. 35. 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) (2018), 2 and 28 U.S.C. § 1581(c) (2018). 	For the reasons set forth
below, the court remands in part and sustains in part the Final Determination.
1 All citations to the parties’ briefs and the agency record are to their confidential versions
unless otherwise noted.
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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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); see also Universal Camera
Corp. v. NLRB, 340 U.S. 474, 488 (1951) (“The substantiality of evidence must take into
account whatever in the record fairly detracts from its weight.”). 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.
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. & Richard Murphy,
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).
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II. Discussion
A. Steel Plate Cost Adjustment
Utility scale wind towers are produced for use in utility scale wind turbine electrical
power generating systems. Pl.’s Br. at 3. Wind towers are large structures designed to
support the nacelle and rotor blades of a wind turbine, and can vary in height and weight,
among other physical characteristics. Id. They typically consist of three to five cylindrical
or conical sections, with each section consisting of multiple steel plates—the main
material input—that are rolled and welded together to form a steel shell. 	Id. 	The wind
tower sections are usually produced and then shipped to a project site for assembly into
a completed wind tower. Id.
At the beginning of the underlying investigation, Commerce identified 11 physical
characteristics 3 that are most significant in differentiating the costs between products.
3 Those characteristics are:
Physical Characteristic 	Description
1. Type 	Whether the product is a complete tower or
section
2. Weight 	Weight of tower/section
3. Height 	Height of tower/section
4. Tower Sections 	Number of tower sections for the particular sale
5. Type of Paint 	The top paint coat for the tower/section
6. Metalizing 	The degree of metalizing of the tower/section
7. Elec. Conduit-Bus Bars 	Whether the tower/section contains bus bars
8. Elec. Conduit-Power 	Whether 	the 	tower/section 	contains 	power
cables
(footnote continued)
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Decision Memorandum at 21 (citing “Product Characteristics for the Antidumping Duty
Investigation of Utility Scale Wind Towers from the Republic of Korea,” at Att. I, PD 4 94
(Dep’t of Commerce Sept. 17, 2019)). These physical characteristics define the unique
products, i.e., CONNUMs, 5 for sales comparison purposes and the level of detail within
each physical characteristic (e.g., thickness, width, or height, etc.) that reflect the
importance that Commerce places on comparing the most similar products in price-to-
price comparisons. Id. A wind tower’s height and weight were two of the most significant
physical characteristics. 	See id. 	However, neither the dimensions, nor the grade, nor
any other characteristic of the steel plate used to create the subject merchandise were
listed as one of the physical characteristics of the wind towers. Id.
9. Lift 	Whether an elevator is attached to the
tower/section
10. Platform 	The number of platforms in the tower/section
11. Internal Components 	Whether there were other internal components
Pl.’s Br. at 13 (citing “Product Characteristics for the Antidumping Duty Investigation of
Utility Scale Wind Towers from the Republic of Korea,” at Att. I, PD 94 (Dep’t of Commerce
Sept. 17, 2019)).
4 “PD ___” refers to a document contained in the public administrative record, which is
found in ECF No. 15-3 unless otherwise noted. “CD ___” refers to a document contained
in the confidential administrative record, which is found in ECF No. 15-2 unless otherwise
noted.
5 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 price comparison. The hierarchy of
product characteristics defining a unique CONNUM varies from case to case depending
on the nature of the subject merchandise.
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In certain circumstances in an antidumping duty investigation, Commerce is to
determine whether sales of the foreign like product were made at less than the cost of
production of that product. 	Commerce is to normally calculate costs “based on the
records of the exporter or producer of the merchandise, if such records are kept in
accordance with the generally accepted accounting principles of the exporting country ...
and 	reasonably 	reflect 	the 	costs 	associated 	with 	the 	production 	and 	sale 	of 	the
merchandise.” 	19 U.S.C. § 1677b(f)(1)(A). 	A respondent’s reported costs “reasonably
reflect the costs associated with the production and sale of the merchandise” if they reflect
meaningful cost differences attributable to the finished product’s different physical
characteristics. See Thai Plastic Bags Indus. Co. v. United States, 746 F.3d 1358, 1368
(Fed. Cir. 2014) (explaining that “physical differences in products ‘generally account’ for
major differences in costs” and “[r]eliance on physical characteristics, because of its ability
to promote consistency, is a predictable methodology that is administrable across all
investigations and administrative reviews”).
In reporting the costs incurred in producing the subject wind towers, DKSC
included the specific steel plate input costs for each individual wind tower project during
the period of investigation (“POI”). Pl.’s Br. at 5. Commerce found, however, that DKSC’s
reported steel plate costs “were significantly different between [CONNUMs] sold in the
Japanese 	comparison 	market 6 	and 	those 	sold 	in 	the 	U.S. 	market.” 	Decision
6 Upon determining that DKSC’s “sales in the home market [were] under the five percent
viability threshold,” Commerce instructed DKSC to report its sales to Japan as the basis
for normal value. Decision Memorandum at 9; see also 19 U.S.C. §§ 1677b(a)(1)(B)(ii),
1677b(a)(1)(C) (normal value may be based on third country sales if “[Commerce]
(footnote continued)
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Memorandum at 19. To determine the reason for the cost differences in steel plate in the
various wind tower projects, Commerce purportedly analyzed the reported costs “[u]sing
the physical characteristics as [its] guidepost” and by “grouping CONNUMs by the related
height and weight physical characteristics, and the steel plate cost difference between
steel grades and dimensions (i.e., thickness, width, or height) within the same time
period.” Id. at 22. As a result, Commerce found that “the overwhelming factor that caused
the differences in the steel plate costs was the timing of the steel plate purchases, rather
than 	the 	physical 	characteristics 	of 	the 	[wind 	towers].” 	Id.; 	see 	also 	19 	U.S.C.
§ 1677b(f)(1)(A). 	In accordance with its normal practice, Commerce then decided to
adjust (“smooth”) “costs to address distortions when such cost differences are attributable
to factors beyond the physical characteristics.” 	Decision Memorandum at 21. 	Here,
because of the impact of the timing of the steel plate purchases, Commerce adjusted
costs by weight-averaging “the reported steel plate costs for all reported CONNUMs.” Id.
DKSC challenges Commerce’s determination that DKSC’s normal books and
records did not reflect the cost to produce the subject merchandise based on the physical
characteristics, and Commerce’s subsequent decision to adjust those costs by weight-
averaging. 	In particular, 	DKSC argues that the record fails to demonstrate that
Commerce “analyzed the steel plate costs by grouping CONNUMs by the related height
and weight physical characteristics.” 	Pl.’s Br. at 14. 	DKSC also maintains that
determines that the aggregate quantity (or, if quantity is not appropriate, value) of [home
market sales] 	is insufficient to permit a proper comparison with the sales of the subject
merchandise to the United States,” and aggregate quantity (or value) is normally
insufficient if “such quantity (or value) is less than [five] percent of the aggregate quantity
(or value) of sales of the subject merchandise to the United States”).
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“Commerce does not appear to have ever compared DKSC’s CONNUM costs using any
of the eleven enumerated physical characteristics as its guidepost, as it stated it did.” Id.
Lastly, DKSC contends that because Commerce did not identify steel plate as one of the
CONNUM physical characteristics “[a]ny analysis by Commerce of DKSC’s steel plate
material input prices ... was not relevant to a determination of whether the costs ...
reasonably reflected differences in the physical characteristics of the completed wind
towers.” Id. at 13–14.
To the contrary, Defendant argues that Commerce’s analysis (or at least a
summary thereof) is contained in the record in the Final Cost Calculation Memorandum.
See Def.’s Resp. at 10, 14; see also Cost of Production and Constructed Value
Calculation Adjustments for the Final Determination – Dongkuk S&C Co., Ltd. at 1–2,
PD 327, 	CD 	230 	(Dep’t 	of 	Commerce 	June 	29, 	2020) 	(“Final 	Cost 	Calculation
Memorandum”). Defendant maintains that Commerce’s analysis identified purchases of
steel plate that were incorporated into two CONNUMs with different reported ranges for
both the height and weight characteristics. Def.’s Resp. at 10. Defendant also contends
that Commerce explained the relevance of its steel plate analysis in regard to its
determination 	that 	steel 	plate 	cost 	fluctuations 	were 	unrelated 	to 	the 	physical
characteristics 	of 	the 	subject 	merchandise. 	Id. 	(citing 	Final 	Cost 	Calculation
Memorandum at 1–2).
The court disagrees. The only analysis in the Final Cost Calculation Memorandum
focused on a cost comparison of “Japanese and U.S. steel plate purchases made in the
same month” and found that “the per-unit steel plate prices did not significantly vary due
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to the thickness, weight, or height, i.e., the physical characteristics of the steel plate.”
Final Cost Calculation Memorandum at 1–2. There is nothing in that Memorandum that
supports 	a 	conclusion 	that 	Commerce 	did 	in 	fact 	group 	CONNUMs 	by 	any 	of
the 11 physical characteristics or otherwise use those characteristics as a “guidepost.”
Cf. Decision Memorandum at 22. 	As DKSC points out, Commerce’s analysis may not
constitute a reasonable application of 19 U.S.C. § 1677b(f)(1)(A). See Pl.’s Br. at 12.
Lastly, Defendant argues that the analysis nonetheless supports Commerce’s
determination because “Commerce applies its practice of adjusting unreasonable cost
reporting both to finished products CONNUMs and to individual inputs for such products.”
Def.’s Resp. at 11 (emphasis in original) (citing Pipe & Tube from Turkey, 82 Fed. Reg.
49,179, and Pasta from Italy, 83 Fed. Reg. 63,627). The court must reject this argument
as it is a post hoc rationalization by agency counsel and does not reflect Commerce’s
rationale as set forth in the Decision Memorandum. 	See Motor Vehicle Mfrs. Ass’n v.
State Farm Ins., 463 U.S. 29, 50 (1983) (“courts may not accept appellate counsel’s
post hoc rationalization for agency action” (citing Burlington Truck Lines, Inc. v. United
States, 371 U.S. 156, 168 (1962))). 	Commerce made no reference to its “practice” of
adjusting costs based solely on an analysis of individual inputs, nor did Commerce rely
on 	Pasta from 	Italy 	in 	reaching 	its 	determination 	on 	this 	issue. 	See 	Decision
Memorandum at 21–22 (making no reference to Pasta from Italy, and citing only, without
any discussion, Pipe & Tube from Turkey).
Here, the record fails to demonstrate how Commerce’s analysis could lead a
reasonable mind to conclude that DKSC’s reported costs did not reflect the cost to
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produce and sell the subject merchandise. 	Accordingly, this issue is remanded to
Commerce for further consideration. 7
B. CV Profit and Selling Expenses
Plaintiff also challenges Commerce’s selection of surrogate data for the calculation
of constructed value. 	See Pl.’s Br. at 19–25. 	Plaintiff noted at oral argument that it is
undisputed that “Commerce compared US prices to CV after finding that all reported
Japanese market sales failed the sales below cost test;” and “that occurred only because
of Commerce’s unsupportable cost smoothing methodology ….” 	See Oral Argument
at 25:20–25:50, ECF No. 44 (Dec. 1, 2021). 	Given that the court is remanding
Commerce’s steel plate cost smoothing determination, see Section A supra, and that
Commerce’s 	reconsideration 	of 	that 	issue 	may 	impact 	Commerce’s 	calculation
of constructed value, the court will hold in abeyance consideration of Plaintiff’s challenge
to Commerce’s selection of surrogate data used to calculate constructed value pending
the filing of remand results.
7 DKSC argues in the alternative that, even if Commerce’s steel plate analysis were
relevant, the analysis does not support Commerce’s finding that “the significant cost
fluctuations found in the steel plate consumption costs for different CONNUMs was not
due to differences in physical characteristics, but rather due to timing of the steel plate
purchases.” 	Pl.’s Br. at 16 (citing Final Cost Calculation Memorandum at 1). 	Because
the issue is remanded to Commerce and the agency may address this argument on
remand, the court does not need to reach this argument.
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III. Conclusion
For the foregoing reasons, it is hereby
ORDERED that Commerce’s determination as to an adjustment for steel plate
costs 	is 	remanded 	to 	Commerce 	for 	further 	explanation, 	and 	if 	appropriate,
reconsideration of its cost analysis under 19 U.S.C. § 1677b(f)(1)(A); it is further
ORDERED that Commerce shall file its remand results on or before March 15,
2022; and it is further
ORDERED that, if applicable, the parties shall file a proposed scheduling order
with page limits for comments on the remand results no later than seven days after
Commerce files its remand results with the court.
/s/ Leo M. Gordon
Judge Leo M. Gordon
Dated: December 13, 2021
New York, New York
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