Dongkuk S&cco., Ltd. v. United States, Wind Tower Trade Coalition

United States Court of Appeals
for the Federal Circuit
______________________
DONGKUK S&C CO., LTD.,
Plaintiff-Appellant
v.
UNITED STATES, WIND TOWER TRADE
COALITION,
Defendants-Appellees
______________________
2023-1419
______________________
Appeal from the United States Court of International
Trade in No. 1:20-cv-03686-LMG, Senior Judge Leo M.
Gordon.
______________________
Decided: April 21, 2025
______________________
MAC KENSIE R. SUGAMA , Trade Pacific PLLC, Washing-
ton, DC, argued for plaintiff-appellant. Also represented
by J ARROD GOLDFEDER , R OBERT GOSSELINK.
SOSUN BAE , Commercial Litigation Branch, Civil Divi-
sion, United States Department of Justice, Washington,
DC, argued for defendant-appellee United States. Also
represented by R EGINALD T HOMAS B LADES, JR ., BRIAN M.
B OYNTON, P ATRICIA M. MC CARTHY; J ESUS N IEVES SAENZ ,
Office of the Chief Counsel for Trade Enforcement and
Compliance, United States Department of Commerce,
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DONGKUK S & C CO., LTD. v. US 2
Washington, DC.
MAUREEN E. THORSON, Wiley Rein, LLP, Washington,
DC, argued for defendant-appellee Wind Tower Trade Co-
alition. Also represented by T HEODORE PAUL B RACKEMYRE ,
T ESSA V. CAPELOTO, R OBERT E. DEF RANCESCO, III, LAURA
E L-SABAAWI, DERICK HOLT, ELIZABETH S. LEE , A LAN H.
P RICE , J OHN A LLEN R IGGINS .
______________________
Before L OURIE , REYNA , and HUGHES, Circuit Judges.
Opinion for the court filed by Circuit Judge HUGHES.
Dissenting opinion filed by Circuit Judge R EYNA .
HUGHES, Circuit Judge.
Appellant Dongkuk S&C Co., Ltd. appeals a decision of
the Court of International Trade, affirming the United
States Department of Commerce’s final determination that
utility scale wind towers from Korea were being sold in the
United States at less than fair value. Dongkuk S&C, the
sole respondent in Commerce’s investigation, is a Korean
producer of utility scale wind towers. The final determina-
tion resulted in the imposition of an antidumping duty or-
der. Because Commerce’s final determination is supported
by substantial evidence and in accordance with law, we af-
firm.
I
We begin with a brief review of the Tariff Act of 1930.
Dumping occurs when a foreign firm sells a product in the
United States at an export price that is below the product’s
normal value. See 19 U.S.C. § 1673. For producers such as
Dongkuk S&C (DKSC), normal value is generally calcu-
lated as “the price at which the foreign like product is first
sold” in the home market, or, where that data is unavaila-
ble, in a third-country market other than the United
States. 19 U.S.C. § 1677b(a)(1)(B)(i)–(ii). A “foreign like
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product” is a product made by the foreign firm and sold in
the home- or third-country market that is “identical in
physical characteristics” to the product sold by the foreign
firm in the United States. 19 U.S.C. § 1677(16). The
amount by which the normal value of the foreign like prod-
uct exceeds the United States export price is known as the
dumping margin, and Commerce must impose an anti-
dumping duty on the imported product equal to that
amount. See 19 U.S.C. § 1673.
Commerce will not consider sales that are made at less
than the foreign firm’s cost of production to be reflective of
normal value because they fail the “sales-below-cost test.”
Hyundai Steel Co. v. United States, 19 F.4th 1346, 1349
(Fed. Cir. 2021). If all sales of foreign like products fail the
sales-below-cost test, Commerce may base normal value on
a constructed value of the imported product. 19 U.S.C.
§ 1677b(b)(1), 1677b(a)(4). “Constructed value” approxi-
mates a foreign firm’s costs of producing and selling the
foreign like product, 19 U.S.C § 1677b(e), reflecting the
“minimum price level at which imported goods may be sold
without incurring antidumping duties.” Am. Silicon Techs.
v. United States, 261 F.3d 1371, 1376 (Fed. Cir. 2001).
The Tariff Act specifies that a product’s constructed
value shall be equal to the sum of (1) “the cost of materials
and fabrication or other processing”; (2) “the actual
amounts incurred and realized” by the investigated firm
“for selling, general, and administrative expenses, and for
profits”; and (3) “the cost of all containers and coverings”
for exporting the product to the United States. 19 U.S.C
§ 1677b(e)(1)–(3). When evaluating a firm’s reported ex-
penses, Commerce normally relies “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 re-
flect the costs associated with the production and sale of
the merchandise.” 19 U.S.C. § 1677b(f)(1)(A).
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In response to a petition filed by Defendant-Appellee,
Wind Tower Trade Coalition, Commerce initiated an inves-
tigation of utility scale wind tower imports from Korea to
determine whether they were being sold at dumped prices.
Wind towers are large, tubular steel structures designed to
support wind turbines. Commerce selected DKSC, a Ko-
rean producer of wind towers, as a mandatory respondent.
The investigation covered sales of utility scale wind
towers made by DKSC between July 1, 2018, and June 30,
2019. Though wind towers can vary in size (e.g., from 63 to
over 103 meters in height), Commerce is tasked with un-
dertaking a “fair comparison” of the investigated product’s
United States export price and its normal value. 19 U.S.C.
§ 1677b(a). To this end, Commerce identified eleven physi-
cal characteristics that it considered to be the most signifi-
cant for comparing costs among wind towers.1 J.A. 682–91.
These physical characteristics, including height and
weight, were used to define the unique products (which
Commerce refers to as CONNUMs) sold by DKSC during
the period of investigation.
Once the investigation was complete, Commerce issued
a preliminary determination finding that DKSC’s sales of
wind towers in the United States had been made below nor-
mal value. See Utility Scale Wind Towers From the Repub-
lic of Korea: Preliminary Affirmative Determination of
Sales at Less Than Fair Value and Preliminary Affirmative
Determination of Critical Circumstances, 85 Fed. Reg.
8,560 (Feb. 14, 2020) (Preliminary Results); Decision
1 In order of importance, the characteristics Com-
merce identified were: (1) type (i.e., full tower or section);
(2) weight; (3) height; (4) total number of tower sections;
(5) type of top paint coating; (6) metalizing; (7) electrical
conduit - bus bars; (8) electrical conduit - power cables;
(9) elevators; (10) number of platforms; and (11) whether
other internal components are attached to the tower.
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DONGKUK S & C CO., LTD. v. US 5
Memorandum for the Preliminary Determination in the
Less-Than-Fair-Value Investigation of Utility Scale Wind
Towers from the Republic of Korea, 85 ITADOC 8560
(Feb. 4, 2020), J.A. 1357–76 (Preliminary Results Memo);
Cost of Production and Constructed Value Calculation Ad-
justments for the Preliminary Determination (Feb. 4, 2020),
J.A. 1377–83 (Cost Calculation Memorandum). In deter-
mining normal value, Commerce mostly relied on DKSC’s
reported costs except that it, in relevant part, “weight-av-
eraged the steel plate input costs for all CONNUMs to mit-
igate the unreasonable material cost differences unrelated
to the product physical characteristics.” J.A. 1374. This
weight-averaging increased DKSC’s estimated costs of pro-
duction.
As a result, none of DKSC’s comparison market sales
were found to pass the sales-below-cost test, and Com-
merce decided to base normal value on constructed value.
J.A. 1375. It again relied on DKSC’s reported costs and
weight-averaged steel plate input costs to calculate DKSC’s
cost of materials and fabrication under 19 U.S.C
§ 1677b(e)(1). J.A. 1375 & n.86. But because DKSC’s com-
parison market sales were made at below-cost prices, Com-
merce determined that it could not use DKSC’s records to
approximate “the actual amounts incurred” for expenses
and for profits under § 1677b(e)(2)(A). J.A. 1375. In such a
situation, the statute directs Commerce to rely on one of
three alternatives:
(i) the actual amounts incurred and realized by the
specific exporter or producer being examined in the
investigation . . . in connection with the production
and sale, for consumption in the foreign country, of
merchandise that is in the same general category
of products as the subject merchandise,
(ii) the weighted average of the actual amounts in-
curred and realized by exporters or producers that
are subject to the investigation or review (other
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DONGKUK S & C CO., LTD. v. US 6
than the exporter or producer described in clause
(i)) . . . in connection with the production and sale
of a foreign like product . . . , or
(iii) the amounts incurred and realized . . . based on
any other reasonable method, except that the
amount allowed for profit may not exceed the
amount normally realized by exporters or produc-
ers (other than the exporter or producer described
in clause (i)) in connection with the sale, for con-
sumption in the foreign country, of merchandise
that is in the same general category of products as
the subject merchandise[.]
19 U.S.C § 1677b(e)(2)(B).
Commerce chose to rely on 19 U.S.C
§ 1677b(e)(2)(B)(iii), i.e., “any other reasonable method,”
because the other options were unavailable. DKSC did not
have records on the sale of different products in the same
general category which could be used under subsection (i),
and there were no other firms subject to the investigation
whose records could be used under subsection (ii). Pursu-
ant to subsection (iii), Commerce selected a source of sur-
rogate data to calculate constructed value profit and selling
expenses for DKSC. J.A. 1375–76. It chose the 2018 consol-
idated financial statements of SeAH Steel Holdings Corpo-
ration (SSHC), a Korean holding company which owns
subsidiaries that produce steel pipes. J.A. 1378, 1434.
In July 2020, Commerce issued its affirmative final de-
termination in which it calculated a final weighted average
antidumping duty margin of 5.41 percent. Utility Scale
Wind Towers from the Republic of Korea, 85 Fed. Reg.
40,243 (July 6, 2020), J.A. 1972–74 (Final Determination);
Issues and Decision Memorandum for the Final Affirmative
Determination in the Less-Than-Fair-Value Investigation
of Utility Scale Wind Towers from the Republic of Korea, 85
ITADOC 40243 (June 29, 2020), J.A. 1686–1716 (Final Re-
sults Memo). To arrive at this antidumping margin,
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Commerce based the normal value of DKSC’s wind towers
on constructed value using largely the same methodologies
employed in the preliminary determination.
Commerce elaborated on its decision to adjust steel
plate costs, explaining that DKSC’s records reflected differ-
ent steel plate costs for CONNUMs sold in the comparison
market and CONNUMs sold in the United States.
J.A. 1707. Commerce recognized that 19 U.S.C.
§ 1677b(f)(1)(A) requires it to use a respondent’s records
when they “reasonably reflect” costs but explained its view
that “[i]n cases where the costs reported according to a com-
pany’s normal books are unreasonable . . . Commerce may
revise such costs.” J.A. 1706. Because the preliminary de-
termination found that these cost differences were not tied
to differences in any of the eleven physical characteristics
used to define the CONNUMs—and hence, unreasonable—
Commerce maintained that weight-averaging steel plate
input costs across CONNUMs was appropriate. See J.A.
1707 (finding that “the primary factor driving the plate cost
differences is . . . the timing of the raw material purchases,
not the physical differences of the input[.]”).
The final determination also continued to use SSHC’s
consolidated financial statement as surrogate data to cal-
culate DKSC’s constructed value profit and selling ex-
penses. J.A. 1709. Commerce reviewed eleven different
sources of surrogate data on the record by weighing factors
that it had developed in prior antidumping determinations.
J.A. 1710–11. It reasoned that SSHC’s statement was “the
only option on the record that includes 12 months of finan-
cial data, and reflects profits on the production and sale of
comparable merchandise that is produced and sold in the
Korean market.” J.A. 1712. Although Commerce acknowl-
edged that the statement also included data pertaining to
the sale of unrelated merchandise, it found that SSHC’s
statement was still the best of the eleven options. J.A.
1712.
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DONGKUK S & C CO., LTD. v. US 8
DKSC challenged Commerce’s final results in the
Court of International Trade (CIT), alleging that Com-
merce erred in finding that its records reflected unreason-
able costs and in deciding to weight-average its steel plate
input costs. The CIT remanded Commerce’s decision to ad-
just steel plate costs because it could not identify analytical
support for Commerce’s contention that it had “group[ed]
CONNUMs by any of the 11 physical characteristics or oth-
erwise use[d] those characteristics as a ‘guidepost’” to com-
pare DKSC’s steel plate costs and determine that such
costs were unrelated to the characteristics of the CON-
NUMs. Dongkuk S&C Co. v. United States, 548 F. Supp. 3d
1376, 1381 (Ct. Int’l Trade 2021) (DKSC I); J.A. 38–39. Alt-
hough DKSC had also challenged Commerce’s choice of
surrogate data for the calculation of constructed value, the
CIT held consideration of this challenge in abeyance pend-
ing the filing of Commerce’s remand results. DKSC I,
548 F. Supp. 3d at 1382.
In April 2022, Commerce issued a redetermination
pursuant to the remand seeking to demonstrate that it had
used physical characteristics as a guidepost to compare
steel plate costs among CONNUMs. Slip-Op. 21-167,
Dongkuk S&C Co. v. United States, Case No. 1:20-cv-03686
(Ct. Int’l Trade Apr. 14, 2022), ECF No. 45 (Remand Re-
sults); J.A. 44–75. In support of its preliminary and final
determinations, Commerce compared the reported steel
plate input costs of two different CONNUMs made in Sep-
tember 2018. “[T]he analysis showed that the purchase
price for input steel plate in the selected month was very
consistent, despite the fact that the steel plate was incor-
porated into finished wind towers with different physical
characteristics (i.e., weight and height).” J.A. 49. This
meant that there was also no cost variation attributable to
the different dimensions and grades of steel plate used by
the CONNUMs. J.A. 48–49, 64–65. Though this would sug-
gest that steel plate costs on a per-unit weight basis should
have remained the same across all CONNUMs, Commerce
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identified significant fluctuations in these per-unit costs
throughout the period of investigation. J.A. 49.
To bolster its point, Commerce produced additional
analysis comparing steel plate purchase costs for three dif-
ferent CONNUMs in September 2018 and four different
CONNUMs in May 2018. See J.A. 73. This analysis showed
that the per-unit cost of steel plate purchased in May 2018
was about the same, just as the per-unit cost of steel plate
purchased in September 2018 was about the same—but the
per-unit cost of steel in September was far higher than in
May. J.A. 64–65, 73. Commerce identified this same pat-
tern in the purchasing records of a single CONNUM, for
which the per-unit cost of steel plate increased from May
to September despite the lack of any changes in physical
characteristics or the type of steel plate purchased. J.A. 69–
70. Taken together, this data established that the timing of
the purchase was what affected the steel plate price.
The CIT thereafter sustained Commerce’s remand re-
determination and entered a final judgment. Dongkuk
S&C Co. v. United States, 600 F. Supp. 3d 1331 (Ct. Int’l
Trade 2022) (DKSC II); J.A. 78–93. It was satisfied that
Commerce used CONNUM physical characteristics as
“guideposts” to determine whether DKSC’s costs were rea-
sonable under § 1677b(f)(1)(A) and sustained Commerce’s
adjustment of steel plate costs. DKSC II, 600 F. Supp. 3d
at 1338. The CIT also sustained Commerce’s choice of sur-
rogate financial data for its constructed value calculations.
Id. at 1340. DKSC timely filed an appeal. We have jurisdic-
tion pursuant to 28 U.S.C. § 1295(a)(5).
II
“In reviewing the Trade Court’s decision to affirm Com-
merce’s final determination, we apply anew the Trade
Court’s standard of review; thus, we will uphold Com-
merce’s determination unless it is unsupported by substan-
tial evidence on the record, or otherwise not in accordance
with law.” Saha Thai Steel Pipe (Pub.) Co. v. United States,
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DONGKUK S & C CO., LTD. v. US 10
635 F.3d 1335, 1340 (Fed. Cir. 2011) (internal quotation
marks and citations omitted). The applicable “APA
court/agency substantial evidence standard . . . require[s]
a court to ask whether a reasonable mind might accept a
particular evidentiary record as adequate to support a con-
clusion.” Dickinson v. Zurko, 527 U.S. 150, 162 (1999) (in-
ternal quotation marks and citations omitted).
III
DKSC challenges Commerce’s decision to adjust
DKSC’s reported steel plate costs under 19 U.S.C.
§ 1677b(f)(1)(A). In an antidumping duty investigation,
Commerce is tasked with allocating a respondent’s costs
“using a method that reasonably reflects and accurately
captures all of the actual costs incurred in producing and
selling the product under investigation or review.” State-
ment of Administrative Action, H.R. REP. N O. 103-316
(1994), reprinted in 1994 U.S.C.C.A.N. 4040, 4172 (SAA).
Normally, Commerce calculates costs using a respondent’s
own records so long as “such records are kept in accordance
with the generally accepted accounting principles of the ex-
porting country . . . and reasonably reflect the costs associ-
ated with the production and sale of the merchandise.”
19 U.S.C. § 1677b(f)(1)(A). Commerce “shall consider all
available evidence” submitted by the respondent regarding
the proper allocation of costs. Id.
In Thai Plastic Bags Indus., Co. v. United States, we
confirmed that records reasonably reflect costs if they re-
flect meaningful cost differences attributable to the fin-
ished product’s different physical characteristics, and that
Commerce is not required by § 1677b(f)(1)(A) to accept re-
ported costs if they are unreliable and unreflective of actual
costs. See Thai Plastic Bags, 746 F.3d 1358, 1364–67
(Fed. Cir. 2014). On the contrary, “[a]s cost allocation
based on physical characteristics is a primary factor in
Commerce’s analysis, Commerce may adjust a company’s
allocation method to more reasonably reflect costs.” Id.
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at 1363. This practice has consistently been recognized. See
Remand Results at J.A. 51 (“Commerce applies its practice
of adjusting unreasonable cost reporting both to finished
products (i.e., CONNUMs) and to individual inputs for
such products.” (citing Certain Pasta from Italy: Final Re-
sults of Antidumping Duty Administrative Review; 2016-
2017, 83 Fed. Reg. 63,627 (Dec. 11, 2018); Certain Pasta
from Italy: Issues and Decision Memorandum for the Final
Results; 2016-2017, 83 ITADOC 63627 at 3–11. (Dec. 11,
2018) (weight-averaging costs for semolina, an input for
pasta))); Final Results Memo at J.A. 1706–07; SAA, H.R.
R EP. N O. 103-316, 1994 U.S.C.C.A.N. at 4172 (Commerce
has the authority to “adjust costs appropriately, to ensure
they are not artificially reduced.”); Saha Thai, 635 F.3d at
1342 (“[T]his court has recognized that Commerce has the
discretion to diverge from a company’s books and records
when necessary to calculate an accurate dumping mar-
gin.”).
We conclude that Commerce relied on substantial evi-
dence in determining that DKSC’s reported steel plate in-
put costs were distortive and unrelated to the product’s
physical characteristics. Commerce was not required to
rely upon those distortive records and had the authority to
adjust steel plate input costs to more accurately approxi-
mate DKSC’s costs of production during the period of in-
vestigation.
As Commerce stated in its final determination, “the
question . . . is whether the reported steel plate costs from
[DKSC]’s normal books and records reasonably reflect the
cost to produce the subject merchandise based on the phys-
ical characteristics identified by Commerce.” J.A. 1706.
Commerce’s consistent answer, from its preliminary deter-
mination onwards, is that they did not. See, e.g., J.A. 1378;
J.A. 1707. To arrive at this conclusion, Commerce analyzed
the cost of steel plate used in CONNUMs of similar height
and weight, and separately, the cost of steel plate
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DONGKUK S & C CO., LTD. v. US 12
purchased in an isolated time period for use in CONNUMs
of different heights and weights. J.A. 1378 (citing J.A.
1382); see also J.A. 63, 1707. The latter analysis is particu-
larly compelling because it revealed a pattern: Commerce
found that the per-unit weight cost of steel plate purchased
in September 2018 was “virtually the same regardless of
the grade, thickness, width, or height” of the steel plate
purchased, and regardless of the physical characteristics of
the final CONNUM being built. J.A. 1707. Accordingly,
Commerce concluded that “the overwhelming factor that
caused the differences in the steel plate costs [for the final
CONNUMs] was the timing of the steel plate purchases.”
Id.
At first, the CIT was concerned that Commerce had not
adequately explained how cost variation was unrelated to
physical characteristics. DKSC I, 548 F. Supp. 3d
at 1381–82. On remand, Commerce elaborated that DKSC
had reported different per-unit steel plate input costs for
CONNUMs finished at different times because the price of
steel had fluctuated during the period of investigation. J.A.
49–50. In additional analysis, Commerce showed that
these fluctuations in raw material prices were reflected by
an increase in the per-unit cost of steel plate purchased to
build a single CONNUM, despite the lack of any change in
the type of steel plate purchased or the physical character-
istics of the CONNUM. J.A. 69–70. Commerce also found
no evidence to suggest that per-unit steel plate costs corre-
sponded to a CONNUM’s size, J.A. 68, and demonstrated
that in May 2018, just as in September 2018, the per-unit
cost of steel plate varied negligibly when purchased in the
same month—despite many differences in the characteris-
tics of the CONNUMs being built and in the dimensions of
the plates being purchased. J.A. 64–65.
Accordingly, Commerce’s explanation on remand satis-
factorily demonstrated that it had used CONNUM physical
characteristics as a “guidepost” for its analysis: it had
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DONGKUK S & C CO., LTD. v. US 13
considered and ruled out CONNUM physical characteris-
tics as the reason for variations in DKSC’s reported steel
input costs. J.A. 70. The record identifies ample support for
Commerce’s conclusion that it was timing which was re-
sponsible for these variations. Because the timing of steel
plate purchases is a cost distortion unrelated to the physi-
cal characteristics of the products, Commerce was empow-
ered to mitigate this distortion under § 1677b(f)(1)(A) by
averaging DKSC’s reported per-unit steel plate costs.
DKSC argues that Commerce’s analysis of DKSC’s
steel plate input costs was irrelevant to the question of
whether DKSC’s records reasonably reflect costs under
§ 1677b(f)(1)(A) because steel plate was not identified as
one of the eleven CONNUM physical characteristics. Ap-
pellant’s Opening Br. 25. We agree with Commerce that its
authority to adjust costs is not limited to the costs of the
physical characteristics used to define CONNUMs. See J.A.
51–52; see also NEXTEEL Co. v. United States, 355 F.
Supp. 3d 1336, 1361 (Ct. Int’l Trade 2019) (“If factors be-
yond the physical characteristics influence the costs, . . .
Commerce will normally adjust the reported costs in order
to reflect the costs that are based only on the physical char-
acteristics.”). To hold otherwise would impede Commerce’s
ability to mitigate cost distortions when calculating anti-
dumping margins. Here, DKSC acknowledged fluctuating
raw material prices during the period of investigation, and
Commerce found that “differences in [per-unit] steel plate
costs . . . are the only raw material cost difference between
CONNUMs.” J.A. 62 (emphasis added). It was reasonable
for Commerce to analyze whether or not DKSC’s costs were
attributable to some relationship between raw material in-
puts and CONNUM physical characteristics.
We have considered the remainder of DKSC’s objec-
tions and find them to be unpersuasive. DKSC claims that
Commerce’s remand determination fails to address the
CIT’s request that it compare DKSC’s CONNUM costs
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DONGKUK S & C CO., LTD. v. US 14
using physical characteristics as a guidepost. We disagree.
Contrary to DKSC’s suggestion, Commerce’s analysis did
not have to focus on comparing the costs of finished wind
towers sharing the same physical characteristics. Com-
merce stated that it did compare the steel plate costs of
similar CONNUMs, J.A. 1704, but it was not necessary to
divulge this analysis to have substantial evidence in sup-
port of its decision to weight-average steel plate costs.
DKSC’s argument that Commerce should have considered
the costs of steel plate consumption for differently sized
CONNUMs similarly does not disturb Commerce’s finding
of variable raw material costs on a per-unit weight basis.
Finally, DKSC claims that Commerce did not compare the
costs of substantially different steel plate or demonstrate
significant differences in steel plate costs across CON-
NUMs. These claims are unsupported by the record. See
J.A. 66 (Commerce’s explanation of its analysis of the cost
of steel plate based on steel grade), J.A. 67 (Commerce find-
ing that both “Commerce’s and DKSC’s [preferred] meth-
odologies demonstrate that there are significant
differences in the per-unit steel plate costs that are not re-
lated to the physical characteristics of the products.”). We
thus affirm the CIT’s decision upholding Commerce’s input
cost adjustment.
IV
19 U.S.C. § 1677b(e)(2)(B) establishes alternative
methods for calculating constructed value profit and selling
expenses in those instances where the method described in
§ 1677b(f)(1)(A)—i.e., reliance on a respondent’s actual
records—cannot be used. In this case, DKSC’s records were
found not to reasonably reflect the costs associated with the
production of wind towers because its sales in the
comparison market were at below-cost prices. See
J.A. 1709. Of the alternatives, Commerce elected to use
any “reasonable method” under § 1677b(e)(2)(B)(iii),
because the options in subsections (i) and (ii) were not
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DONGKUK S & C CO., LTD. v. US 15
available. J.A. 1710. Under subsection (iii), “[t]he objective
is to find a good proxy (or surrogate) for the profits [and
selling expenses] that the respondent can fairly be
expected to build into a fair sales price for the particular
merchandise.” Mid Continent Steel & Wire, Inc. v. United
States, 941 F.3d 530, 542 (Fed. Cir. 2019) (internal citation
omitted).
DKSC argues that Commerce’s choice of surrogate data
could not have been supported by substantial evidence
because there was a better option available. Of the eleven
options put before Commerce, DKSC thinks that the
unconsolidated financial data of SeAH Steel Corporation
should have been selected because SeAH Steel
Corporation’s merchandise—large diameter steel pipes
made in Korea—is more comparable to DKSC’s steel wind
towers. Meanwhile, SSHC is a large Korean holding
company, and a majority of its sales are made by non-
Korean subsidiaries. Though DKSC claims that SSHC’s
consolidated 2018 financial statement is not correlated
with the sale of comparable merchandise, seven of SSHC’s
seventeen subsidiaries are directed at the
“[m]anufacturing and distributing steel pipe,” and of those
seven subsidiaries, three are in Korea and one is in the
United States. J.A. 1434. One of the Korean subsidiaries is
SeAH Steel Corporation, which spun off from SSHC four
months before the end of 2018. It is the unconsolidated
financial data pertaining to these four months of SeAH
Steel Corporation’s operations which DKSC believes
Commerce was required to select as a proxy.
We find that Commerce’s decision to calculate con-
structed value profit and selling expenses using the consol-
idated 2018 financial statement of SSHC, rather than the
standalone financial data of SeAH Steel Corporation, was
supported by substantial evidence. As the CIT concluded,
“[w]hile [DKSC] may have preferred that Commerce select
SeAH Steel Corporation’s financial statement, [DKSC] has
failed to demonstrate that Commerce acted unreasonably
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DONGKUK S & C CO., LTD. v. US 16
by selecting SSHC’s statement instead.” DKSC II, 600 F.
Supp. 3d at 1340.
The SAA, which accompanied the bill that was passed
by Congress and codified under 19 U.S.C. § 3511(a) (1994),
provides that “Commerce will develop [the alternative
provided by subsection (iii) for the use of any other
reasonable method] through practice” because the
Administration did not wish to “establish particular
methods and benchmarks for applying this alternative.”
H.R. REP. N O. 103-316, 1994 U.S.C.C.A.N. at 4176.
Accordingly, Commerce developed four factors for
analyzing the suitability of sources of surrogate data under
§ 1677b(e)(2)(B)(iii): “(1) the similarity of the potential
surrogate companies’ business operations and products to
the respondent’s business operations and products; (2) the
extent to which the financial data of the surrogate company
reflects sales in the home market and does not reflect sales
to the United States; . . . (3) the contemporaneity of the
date to the [period of investigation]; . . . [and] [(4)] the
extent to which the customer base of the surrogate and the
respondent were similar.” See J.A. 1711 (citing Notice of
Final Determination of Sales at Less Than Fair Value: Pure
Magnesium from Israel, 66 Fed. Reg. 49,349 (Sept. 27,
2001); Issues and Decision Memorandum for the Final
Determination in the Antidumping Duty Investigation of
Pure Magnesium from Israel, 66 ITADOC 49349 (Sept. 27
2001), at Comment 8; Notice of Final Determination of
Sales at Less Than Fair Value: Certain Color Television
Receivers from Malaysia, 69 Fed. Reg. 20,592 (Apr. 16,
2004); Issues and Decision Memorandum for the
Antidumping Duty Investigation of Certain Color
Television Receivers from Malaysia, 69 ITADOC 20592
(Apr. 16, 2004), at Comment 26).
The record contained eleven possible sources for
surrogate data, and Commerce weighed these sources
against the applicable factors. In so doing, Commerce
acknowledged the trade-off posed by using SSHC’s
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DONGKUK S & C CO., LTD. v. US 17
financial statement versus SeAH Steel Corporation’s
financial statement: SSHC’s data was the only option on
the record that spanned a full year (the length of the period
of investigation), while SeAH Steel Corporation’s four
months of data more narrowly reflected the sale of
comparable merchandise. J.A. 1712. In other words, SeAH
Steel Corporation’s data failed factor (3), i.e.
contemporaneity, and SSHC’s data had some non-
disqualifying shortcomings under factors (1) and (2).
Though some of SSHC’s subsidiaries are engaged in
unrelated businesses, Commerce was not incorrect to find
that SSHC’s consolidated financial statement includes
“profits for comparable merchandise in the Korean market”
under factor (1). J.A. 1712. Indeed, SeAH Steel
Corporation’s operations were part of SSHC’s before the
spin-off. J.A. 1532. DKSC complains that SSHC’s data
includes sales in the United States and in other countries,
but factor (2) does not require Commerce to disregard a
source of surrogate data on that basis. Here, Commerce
explained its view that SSHC was the only source of
surrogate data on record which “includes 12 months of
financial data” and could also satisfy the remaining factors.
J.A. 1711–12.
DKSC’s belief that the four applicable factors should
favor SeAH Steel Corporation’s data does not disturb
Commerce’s purview to decide which of two imperfect
sources of data to use under § 1677b(e)(2)(B)(iii). “Where
we are faced with two opposing views of the record, it is the
function of the court to uphold Commerce’s determination
if it is supported by substantial evidence and is otherwise
in accordance with the law. Here, we are presented with a
record that amply supports the reasonableness of
Commerce’s decision to [select SSHC’s consolidated 2018
financial statement as a source for calculating constructed
value profit and selling expenses].” Am. Silicon Techs.,
261 F.3d at 1380–81. We thus affirm the CIT’s decision
upholding Commerce’s use of SSHC’s data under 19 U.S.C.
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DONGKUK S & C CO., LTD. v. US 18
§ 1677b(e)(2)(B)(iii) to calculate constructed value profit
and selling expenses.
AFFIRMED
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United States Court of Appeals
for the Federal Circuit
______________________
DONGKUK S&C CO., LTD.,
Plaintiff-Appellant
v.
UNITED STATES, WIND TOWER TRADE
COALITION,
Defendants-Appellees
______________________
2023-1419
______________________
Appeal from the United States Court of International
Trade in No. 1:20-cv-03686-LMG, Senior Judge Leo M.
Gordon.
______________________
R EYNA, Circuit Judge, dissenting.
I agree with the majority’s affirmance of Commerce’s
cost-smoothing determination. I, however, disagree with
the majority that under 19 U.S.C. § 1677b(e)(2)(B)(iii),
Commerce’s constructed value determination, which relied
on SSHC’s financial statement as a proxy for Dongkuk’s
profits and selling expenses of steel wind towers in Korea,
is free from error. This statute requires Commerce to use
a “reasonable method” for calculating constructed value.
The majority characterizes this issue as simply a matter of
whether Commerce’s weighing and selection of the better
between two “imperfect” options was substantially sup-
ported by the record. But that is an oversimplification of
the record and the issue on appeal, the result of which
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DONGKUK S & C CO., LTD. v. US 2
provides Commerce with cover in the future to make arbi-
trary constructed value determinations.
Part and parcel with substantial evidence review is de-
termining whether the agency provided a rationale ade-
quate to enable us to review its determination. Here,
Commerce summarily concluded that SSHC’s twelve-
month financial statement, almost entirely reflective of
non-steel, non-Korean sales, is the better proxy than
SeHC’s four-month financial statement, reflective of only
steel sales in Korea. In other words, Commerce chose a
seemingly unreasonable proxy over a seemingly reasonable
proxy without explaining why. And even accepting the ma-
jority’s characterization of SSHC’s statement as “imper-
fect,” this is still problematic. Commerce does not
adequately explain why using a seemingly unreasonable,
or “imperfect,” financial statement to calculate constructed
value is a “reasonable method” under 19 U.S.C.
§ 1677b(e)(2)(B)(iii). Without an adequate rationale as to
why Commerce selected SSHC’s financial statement, over
SeHC’s, as a reasonable method for calculating constructed
value, we are unable to determine whether Commerce’s
constructed value determination is supported by substan-
tial evidence and comports with 19 U.S.C.
§ 1677b(e)(2)(B)(iii). I would thus remand Commerce’s con-
structed value determination for a more fulsome explana-
tion. Perhaps Commerce has some reason for using
SSHC’s financial statement over SeHC’s. But this reason
is not in the record before us. I do not, and legally cannot,
speculate as to this reason. I respectfully dissent.
I.
To fulfill our obligation of determining whether Com-
merce’s constructed value determination is supported by
substantial evidence, “we insist that Commerce examine
the record and articulate a satisfactory explanation for its
action.” CS Wind Vietnam Co. v. United States, 832 F.3d
1367, 1376 (Fed. Cir. 2016) (internal quotations omitted).
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DONGKUK S & C CO., LTD. v. US 3
Commerce “must provide an explanation that is adequate
to enable the court to determine whether its choices are ac-
tually reasonable, including as to calculation methods.”
Mid Continent Steel & Wire, Inc. v. United States, 941 F.3d
530, 537 (Fed. Cir. 2019); SKF USA Inc. v. United States,
263 F.3d 1369, 1382–83 (Fed. Cir. 2001). “The requirement
of explanation presumes the expertise and experience of
the agency and still demands an adequate explanation in
the particular matter.” CS Wind, 832 F.3d at 1377. For
without a sufficient explanation, we are left to speculate as
to Commerce’s reasoning, which we cannot do. See id.;
SEC v. Chenery, 318 U.S. 80, 88 (1943).
A “constructed value” is “a good proxy (or surrogate) for
the profits [and selling expenses] that the respondent can
fairly be expected to build into a fair sales price for the par-
ticular merchandise.” Mid Continent Steel & Wire, 941
F.3d at 542. While such calculations may be imprecise,
“Commerce’s choice[]” in choosing surrogate financial data
“must be reasonable” and “within the dual constraints of
the statute and the record.” Id. And “accuracy and fairness
must be Commerce’s primary objectives.” Id. (internal
quotations omitted). In this case, Commerce may calculate
constructed value profit and selling expenses based on any
“reasonable method.” 19 U.S.C. § 1677b(e)(2)(B)(iii). In
employing a “reasonable method,” and as explained further
on, Commerce uses certain factors for selecting surrogate
data.
II.
Commerce considers certain factors when selecting
surrogate data.1 The financial statement of SeAH Steel
1 No party challenges whether these factors are a
“reasonable method” under 19 U.S.C. § 1677b(e)(2)(B)(iii).
Thus, I do not address this open question.
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DONGKUK S & C CO., LTD. v. US 4
Holdings Corporation (“SSHC”)2 is undisputedly lacking
under two of these factors.3 J.A. 1711–12. Under the first
factor, which considers whether the surrogate data reflects
sales of comparable merchandise (steel wind towers) in the
home market (Korea), SSHC’s financial statement reflects
little comparability. Id. SSHC’s data shows that 92.68 %
of SSHC’s total sales revenue was generated from non-Ko-
rean, non-steel manufacturing entities. J.A. 1432–41; J.A.
2051. The second factor considers the extent to which the
data reflects sales in the home market (Korea) and does not
reflect sales to the United States. J.A. 1711. The record
shows that 62.68 % of SSHC’s overall consolidated sales
revenue and 41.03 % of its overall profits were attributable
to sales by two affiliated distribution companies located in
the United States. J.A. 1432–41.
Meanwhile, the financial statement of SeAH Steel Cor-
poration (“SeAH”),4 the second option presented to Com-
merce, undisputedly satisfies these two factors. This
financial statement reflects sales of comparable merchan-
dise only in Korea. See J.A. 1712. SeAH is a long-
2 SSHC is a large holding company with numerous
subsidiaries.
3 Commerce also considers a third and fourth factor.
The third factor considers the “contemporaneity of the date
[of the data] to the [period of investigation].” J.A. 1711.
Here, both financial statements were lacking, with SSHC’s
statement containing six months of data pre-dating the
twelve-month POI, and with SeHC’s four-month statement
corresponding with the POI, but not spanning the entirety
of the POI. See J.A. 1711–12; J.A. 1447. The fourth factor,
“the extent to which the customer base of the surrogate and
the respondent were similar,” did not play a role in Com-
merce’s analysis and thus I do not address it. J.A. 1711.
4 SeAH is a former subsidiary of SSHC.
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DONGKUK S & C CO., LTD. v. US 5
established steel pipe producer in Korea. See Appellant Br.
42; see also J.A. 1446–1578.
Commerce selected SSHC’s financial statement over
SeAH’s because SSHC’s statement was “the only option on
the record that includes 12 months of financial data.” J.A.
1712. This rationale is legally insufficient. Commerce does
not explain or provide support for why a financial state-
ment with twelve months of largely irrelevant data trumps
a financial statement with four months of relevant data.
Even assuming Commerce has a practice of requiring fi-
nancial statements with at least twelve months of data,
this standard requirement, without sufficient justification,
does not carry the day. A mere statement by Commerce of
what it “normally does or has done before” is “not, by itself,
an explanation of why its methodology comports with the
statute.” Mid Continent Steel & Wire, 941 F.3d at 544
(cleaned up) (remanding when Commerce only noted that
it was following “the Department’s practice” (internal quo-
tations omitted)); see also CS Wind, 832 F.3d at 1376.
Again, the purpose of selecting surrogate financial data
is to create a “constructed value” of the profit and selling
expenses Dongkuk would have experienced when selling
steel wind towers in Korea. Here, Commerce must calcu-
late constructed value using a “reasonable method.” 19
U.S.C. § 1677b(e)(2)(B)(iii). Without a rationale from Com-
merce supporting its decision, I cannot determine whether
its choice to select SSHC’s twelve-month financial state-
ment, reflecting mostly irrelevant data, over SeHC’s four-
month financial statement, reflecting only relevant data, is
sufficiently supported by the evidence or comports with 19
U.S.C. § 1677b(e)(2)(B)(iii). Such a conclusory decision is
not aligned with Commerce’s “primary objectives” of “accu-
racy and fairness.” Mid Continent Steel & Wire, 941 F.3d
at 539. I respectfully dissent.
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