Commerce Properly Used Above-Cost Home Market Sales to Find Normal Value in AD Review, CIT Says

The Court of International Trade sustained the Commerce Department's final results of the third administrative review of the antidumping duty order on steel nails from Taiwan, in a Sept. 14 opinion. Chief Judge Mark Barnett found that Commerce's use of mandatory respondent Unicatch Industrial Co.'s above-cost home market sales to calculate normal value was legal, the agency's decision to not include Unicatch's antidumping duty deposits in the company's freight revenues was proper, and that Commerce's move to increase Unicatch's cost of production to account for purchases from an affiliated supplier at less than market value was appropriate.

Part of Unicatch's challenge stemmed from the agency's home market viability and constructed value profit findings. To deem a home market viable, Commerce must first find that sales in the home market amount to over 5% of the aggregate U.S. sales of a given product. Commerce ran this test and found that Taiwan was a viable home market, but Unicatch urged the agency to reconsider.

Commerce had used Unicatch's above-cost home market sales to calculate normal value for most of the respondent's sales and to calculate constructed value profit. This CV profit was then included in the constructed value used as normal value for the few sales where Commerce was unable to find identical or similar model matches, the opinion said. Unicatch argued that Commerce's use of the above-cost home market sales to find the normal value failed to reach the "commercially realistic result required by law."

But this requirement was completely removed with the passage of the Uruguay Round Agreements Act, the court said. "The statute permits Commerce to disregard sales below cost and to calculate normal value using 'the remaining sales ... in the ordinary course of trade,'" the opinion said. "Unicatch’s attempt to impose a 'commercially realistic' test on the result of Commerce’s normal value calculations also lacks merit." All Unicatch was able to do was point out how its margin was higher in this review than it was in the second one and when normal value is based on constructed value, Barnett added.

Unicatch also challenged Commerce's decision to not include the respondent's antidumping duty deposits in its reported freight revenue. The law, roughly translated here, permits Commerce to reduce the price used to find the constructed export price (CEP) by the amount attributed to additional costs incurred when shipping the good to the U.S. But, if a respondent receives any freight revenue from a U.S. customer, Commerce will include that revenue in the CEP up to, but no more than, the level of the freight expense.

The respondent tried to include five different elements in its freight revenue, among which were its ADD deposits. But Commerce capped Unicatch's freight revenue based on the other four elements. Barnett agreed, finding that "Unicatch’s arguments on the issue unnecessarily complicate what is in fact a simple factual issue regarding a favorable adjustment to US price that Unicatch hoped to obtain but which Commerce denied as unsupported by the record," the opinion said. Commerce's treatment of freight revenue and the ADD deposits was based on substantial evidence.

Finally, in the review, Commerce increased Unicatch's costs of production to account for purchases from an affiliated supplier at less than market value. In the face of Unicatch's challenge, Commerce declared that its practice is to analyze the input transfer price from each supplier individually, not as a weight average from all affiliated suppliers -- precisely what Unicatch did when submitting its data.

"When a respondent purchases inputs or services from more than one affiliate, however, Commerce may reasonably decide to examine each affiliate individually," Barnett said. "The statute vests Commerce with discretion to determine how best to apply the transactions disregarded rule, see 19 U.S.C. § 1677b(f)(2), and Unicatch does not argue that Commerce’s methodology represents an impermissible construction of the statutory terms."

(Unicatch Industrial Co., Ltd., et al. v. United States, Slip Op. 21-117, CIT Consol. # 20-00079, dated 09/14/21, Chief Judge Mark Barnett. Attorneys: Ned Marshak of Grunfeld Desiderio for plaintiff Unicatch; Sosun Bae for defendant U.S. government)