Commerce Drops PMS Finding on Remand at CIT in Line Pipe AD Case

The Commerce Department in July 18 remand results submitted to the Court of International Trade flipped its positions on whether a particular market situation adjustment distorts the cost of production of a welded line pipe input and whether an adjustment should be made to antidumping duty respondent Nexteel Co.'s constructed value for sales of non-prime goods. The agency conformed to the trade court's ruling, finding a PMS doesn't exist and recalculating CVD without the non-prime goods adjustment, leaving respondents Nexteel and SeAH Steel Corp. with 1.12% and zero percent dumping rates, respectively. However, the agency stuck by its decision to reclassify Nexteel's reported losses over its suspended production lines (Nexteel Co. et al. v. United States, CIT #20-03898).

The case concerns the 2017-2018 administrative review of the antidumping duty order on welded line pipe from South Korea. 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. 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.

Judge Claire Kelly remanded every element of the PMS issue. The judge cited the recent U.S. Court of Appeals for the Federal Circuit opinion in Hyundai Steel Co. v. U.S. which struck down Commerce's 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 combined 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. On remand, Commerce dropped the issue.

"We are unable to provide the Court with the expansive explanation it envisions in light of the limitations of the information on the record of this proceeding," the brief said. "Therefore, we are unable to address all of the Court’s concerns. Accordingly, in light of the Court’s opinion, we are unable to determine that a PMS exists that distorts the COP of WLP; as a result, we recalculated NEXTEEL’s and SeAH’s weighted-average dumping margins without making a PMS adjustment to the COP and the calculation of CV."

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. On remand, the agency did just that, finding that Nexteel's reported costs reflect the full actual costs of making its prime and non-prime goods. "Therefore, for purposes of this remand and consistent with the CAFC’s decision in Dillinger, we have reversed the adjustment made in the Final Results and rely on what the CAFC referred to as the actual costs of prime and non-prime products as reported by NEXTEEL."

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.

Commerce did so, further justifying its decisions. On the first point, Commerce said that while goods may have been made on later-shuttered production lines, that production happened before the shutdown. "Revenues from products produced prior to the shutdown should not be associated with the suspended losses incurred during the shutdown periods," the remand results said. "... If Commerce were to attribute the costs associated with the suspension of production to the subject or nonsubject merchandise produced on each line earlier in the [review period] the production costs would be double counted because the cost of the suspended lines would be added on top of the products’ full cost of production. Hence, the cost of the suspended lines should not be associated with the revenue that was generated prior to the suspension of production."

On the latter point, the agency said that the suspended losses are associated with the general operations of the company and are not directly linked with any products.