Federal Circuit Rejects Commerce's Methodology for Adjusting for Duty Drawbacks in AD Case

The U.S. Court of Appeals for the Federal Circuit upheld the Court of International Trade's decision to reject a Commerce Department methodology for calculating antidumping duty margins, in a May 14 opinion. In the ruling, the Federal Circuit found Commerce's attempt to allocate import duties exempted or rebated "based on the import duty absorbed into, or imbedded in, the overall cost of producing the merchandise under consideration," when constructing the export price in an AD review, was unsupported by the law. Commerce attempted this new methodology for calculating the U.S. price for Indian exporter Uttam Galva Steels Limited in an antidumping duty investigation into corrosion-resistent steel products (CORE) from India.

Commerce generally adjusts export prices for duty drawback received by a foreign exporter to avoid an "inaccurately high dumping margin," the theory being that a company's export prices would be higher if it had to pay duty on imported inputs. But in Uttam Galva's case, Commerce adopted a new methodology to adjust for the duty drawback by allocating the import duties exempted or rebated over the overall cost of production for the merchandise. In effect, Commerce adjusted both home market prices and export prices for drawback, resulting in a lower overall adjustment to Uttam Galva's export prices.

CIT found that this methodology did not jibe with the law, which clearly states that the export price should be increased by the total amount of the drawback duties. On appeal, the Federal Circuit agreed with this reasoning. "It does not make a difference whether the imported inputs that qualified for a drawback were actually incorporated into goods sold in the exporter’s domestic market because the Indian government credited the drawback to the quantity of goods that were in fact exported, whatever the source of the inputs used to produce foreign goods," the Federal Circuit said. "As its text makes clear, the statute requires an upward adjustment to 'export price and constructed export price' based on the drawback that occurred 'by reason of the exportation of the subject merchandise to the United States.'"

(Uttam Galva Steels Limited, v. U.S., Fed. Cit. # 20-1461, dated 05/14/21. Attorneys: John Gurley of Arent Fox for plaintiff Uttam Galva Steels Limited; Melissa Brewer of Kelley Drye for defendant-apellant ArcelorMittal USA, LLC; Roger Schagrin of Schagrin Associates for defendant-appellant Steel Dynamics, Inc.; Thomas Beline of Cassidy Levy for defendant-appellant United States Steel Corporation; Alan Price of Wiley Rein for defendant-appellant Nucor Corporation.)