Trade Court Sends Back Multiple Elements of Welded Line Pipe Antidumping Review

The Court of International Trade sent back parts of and upheld one element of the Commerce Department's final results of the 2017-2018 administrative review of the antidumping duty order on welded line pipe from South Korea, in an April 19 opinion. Judge Claire Kelly sent back Commerce's particular market situation determination and adjustment methodology, PMS adjustment to respondent SeAH Steel Corp.'s home market sales for the sales-below-cost test, denial of a constructed export price (CEP) offset for SeAH, reallocation of respondent NEXTEEL Co.'s suspended loss and non-prime product costs, and separate rate calculation. The judge sustained, however, Commerce's decision to cap SeAH's freight revenue.

In the review, as it has done in other cases, Commerce said that a PMS existed in the market for South Korea hot-rolled coil steel -- a key input of welded line pipe. In all, the agency said a PMS was created based on the confluence of subsidies from the South Korean government, low-priced imports from China, strategic alliances between HRC suppliers and welded line pipe producers, and the South Korean government's intervention in the electricity market. Commerce then used this finding to adjust mandatory respondents SeAH's and NEXTEEL's cost of production for the sales-below-cost test.

Kelly remanded every element of the PMS issue. The judge cited a recent U.S. Court of Appeals for the Federal Circuit opinion -- currently the subject of a petition at the Supreme Court -- which struck down Commerce's ability to make a PMS adjustment in the sales-below-cost test (see 2112100039). Kelly further went through each of Commerce's reasons for establishing the PMS, remanding them for further consideration. For many of them, the judge ruled that the agency failed to show how they combine with the other factors to establish the PMS. For instance, under the strategic alliances criteria, the judge said that this conclusion amounted to speculation and was unsupported.

When making the PMS adjustment to the sales-below-cost test, Commerce also used a regression-based method. The plaintiffs argued that the method is arbitrary since it represents a departure from past determinations and expert testimony reveals it to be invalid. Kelly ruled against the model, finding that the agency failed to address evidence showing that the inclusion of the respondents' data renders the regression model unstable. Commerce can only continue to use this model if it explains away the contrary evidence.

In the case, NEXTEEL argued that Commerce erred in calculating the cost of the company's non-prime welded line pipe by valuing it at its sales price rather than the reported cost of production. Citing a key 2020 Federal Circuit opinion on this very matter, Kelly ruled that Commerce must use the respondent's actual costs when calculating constructed value. "Commerce’s methodology uses the likely market value of the non-prime product rather than the actual cost of production reported by NEXTEEL and its explanation is inadequate in light of the Court of Appeals’ precedent," the opinion said.

NEXTEEL further claimed that Commerce's decision to reallocate the costs relating to its suspension of the production lines of certain non-subject goods and one forming line of subject goods from the cost of goods sold to general and administrative expenses is illegal. Kelly pointed out that Commerce failed to clarify whether any of the merchandise was produced on the suspended production lines during the review period and the extent to which losses over the non-subject merchandise production lines relate to NEXTEEL's general and administrative expenses incurred on the products. The judge instructed the agency to clarify both points on remand.

The only element of the review sustained by Kelly was Commerce's cap of SeAH's freight revenue used when calculating the company's CEP, where it only included the separately invoiced freight. Again tapping Federal Circuit precedent, Kelly said the appellate court affirmed Commerce's use of a freight cap "on nearly identical facts."

Kelly did, however, remand Commerce's denial of SeAH's CEP offset. SeAH argued that an offset was warranted since it performed additional activities at a greater intensity to unaffiliated customers in South Korea, creating two levels of trade between its U.S. and home market sales. Commerce never addressed this supposed difference, so it must on remand, the judge ruled. "On remand, if Commerce continues to determine that a CEP offset is not warranted, it should explain how it compared SeAH’s home and U.S. sales and arrived at its conclusion that the markets were at the same level of trade," Kelly said.

(NEXTEEL Co. v. United States, Slip Op. 22-37, CIT #20-03898, dated 04/19/22, Judge Claire Kelly. Attorneys: Henry Almond of Arnold & Porter for plaintiff NEXTEEL; Jeffrey Winton of Winton & Chapman for consolidated plaintiff SeAH Steel; Jarrold Goldfeder of Trade Pacific for consolidated plaintiff and plaintiff-intervenor Hyundai Steel Co.; Donald Cameron of Morris Manning for plaintiff-intervenor Husteel Co.; Robert Kiepura for defendant U.S. government; Elizabeth Drake of Schagrin Associates for defendant-intervenors California Steel Industries, Inc. and Welspun Tubular USA; Timothy Brightbill of Wiley Rein for defendant-intervenors American Cast Iron Pipe Co. and Stupp Corporation; Gregory Spak of White & Case for defendant-intervenors Maverick Tube Corp. and IPSCO Tubulars)