Trade Court Upholds Commerce's Decision to Drop PMS Finding in South Korean Oil Tubes AD Case

The Court of International Trade in an Aug. 26 opinion upheld the Commerce Department's remand results in a case over the 2016-17 administrative review of the antidumping duty order on oil country tubular goods from South Korea. In the remand results, Commerce reversed its decisions finding that a particular market situation existed for a key input of the OCTG products, and adjusting respondent Nexteel Co.'s reported costs for the value of non-prime products at their sales price and allocating the difference between the full production cost and market value of the non-prime products to the production costs of the prime OCTG.

The agency, however, stuck by its positions to allocate production line suspension costs to Nexteel's general and administrative (G&A) expenses, apply respondent SeAH Steel Corp.'s U.S. affiliate's reported general expense ratio to further manufacturing costs and include SeAH's valuation losses related to raw materials and work-in-process to its G&A expense ratio calculation. Judge Jennifer Choe-Groves accepted the agency's revised explanations for these determinations.

In the review, Commerce said that a PMS existed for hot-rolled coil based on four factors. Among them, Commerce tried to show that overcapacity of Chinese steel inputs -- a global phenomenon -- uniquely affected the Korean steel market. In the case's previous opinion, Choe-Groves found all four factors unconvincing. Commerce dropped its finding that a PMS existed for hot-rolled coil on remand -- a move then upheld by Choe-Groves.

However, the move did not go without dissent from the AD petitioners, particularly U.S. Steel. The petitioner argued against the court's previous finding that U.S. Steel's evidence of a PMS was not contemporaneous to the review period. Commerce, in its remand, said that U.S. Steel cited contemporaneous evidence, but that it's not in a position to reverse the court's finding. Choe-Groves called the agency's explanation "disingenuous." The judge said that the court "already noted the evidence of record to which Commerce refers on remand," and that Commerce does not claim why the evidence would be contemporaneous. The judge waived the claim.

Commerce also flipped its findings on one other element of the review -- the decision to adjust Nexteel's reported costs for the value of non-prime products at their sales price and allocate the difference between the full production cost and market value of the non-prime products to the production costs of the prime OCTG. Looking to the key U.S. Court of Appeals for the Federal Circuit case, Dillinger France S.A. v. U.S., Choe-Groves previously said Commerce needed to rely on the actual costs of prime and non-prime products -- something the agency then did on remand. Given that Commerce followed the court's order, the judge upheld the position.

In the last opinion, the court sent back Commerce's decision to include the cost of suspending production at one of Nexteel's facilities as part of its G&A expenses. The agency stuck by the position, explaining that the respondent suspended production of slitting and threading lines for a limited period and that the related costs were not assigned to products but transferred directly to the cost-of-goods-sold metric in accordance with normal accounting practices. However, Nexteel did not account for the costs in the reported costs of making OCTG since the costs are unrelated to production activities. This move inflated the cost-of-goods-sold figure, so Commerce reallocated the non-product costs as G&A expenses, which is along the lines of its move to include routine shutdown expenses in a respondent's reported costs and to associate the costs with the products made on those lines.

"The Court concludes that Commerce’s explanation on remand of its adjustment is reasonable," the judge ruled. "In a recent case, the Court sustained substantially identical treatment by Commerce of NEXTEEL’s suspended losses."

The judge also previously sent back Commerce's decision to proportionally attribute the G&A expenses of SeAH's U.S. affiliate, Pusan Pipe America (PPA), for further manufactured products and not further manufactured products when calculating SeAH's constructed export price. For the further manufactured goods, Commerce used PPA's general expense ratio to the total cost of further manufacturing plus the cost of the imported OCTG that was further processed, including these expenses as a "further manufacturing" cost. For the non-further processed goods, Commerce used PPA's general expense ratio to the cost of making the imported OCTG, including the expenses as an "indirect selling" cost. Choe-Groves originally took issue with the attribution for the further manufactured goods, finding that the cost of imported OCTG was not a cost incurred for further manufacture.

On remand, Commerce noted that the statute requires the deduction of further manufacturing costs and selling expenses, adopting a revised approach that doesn't deduct the cost of PPA's imported OCTG pipe as a further manufacturing expense. SeAH argued that the statute does not allow Commerce to deduct from the constructed export price of "any and all expenses" including G&A expenses incurred by the U.S. affiliate. Choe-Groves said the argument "misses the mark. ... SeAH has not identified any statutory language that prohibits Commerce from treating G&A expenses of PPA, a selling arm of SeAH in North America, as indirect selling expenses," the judge said. "… The Court does not conclude that Commerce’s treatment on remand of the G&A expenses for SeAH’s U.S. affiliate was improper."

Lastly, the court previously said that it was unclear whether inventory valuation losses over SeAH's raw materials and work-in-progress were expenses, ruling that Commerce failed to cite evidence showing that the inventory valuation losses became realized costs, which would only happen if the raw materials and work-in-process were sold. Commerce then cited additional details and evidence which "more clearly" showed that the inventory valuation losses are actually recognized as actual in SeAH's normal books and records. The evidence convinced Choe-Groves, who then upheld the position.

Commerce subsequently recalculated the weighted average dumping margins for SeAH, Nexteel and the "non-examined companies" and arrived at changes of "16.73 percent to 5.28 percent [for SeAH], 32.24 percent to 9.77 percent [for Nexteel], and 24.49 percent to 7.53 percent [for the non-examined companies]."

(SeAH Steel Corp. v. United States, Slip Op. 22-100, CIT Consol. #19-00086, dated 08/26/22, Judge Jennifer Choe-Groves. Attorneys: Jeffrey Winton of Winton & Chapman for plaintiff SeAH; Donald Cameron of Morris Manning for consolidated plaintiff Husteel Co.; J. David Park of Arnold & Porter for consolidated plaintiff NEXTEEL Co.; Jarrod Goldfeder of Trade Pacific for consolidated plaintiff AJU Besteel Co.; Hardeep Josan for defendant U.S. government; Thomas Beline of Cassidy Levy for defendant-intervenor U.S. Steel; Gregory Spak of White & Case for defendant-intervenors led by Maverick Tube Corp.; Roger Schagrin of Schagrin Associates for defendant-intervenors Vallourec Star and Welded Tube USA)