Commerce Properly Threw Out Sales-Below-Cost Test Without PMS Adjustment, Petitioner Says

The Commerce Department has the authority to address a particular market situation in an antidumping case when normal value is based on home market sales, AD petitioner Wheatland Tube argued in its Sept. 12 opening brief at the U.S. Court of Appeals for the Federal Circuit. The Federal Circuit should overturn the Court of International Trade's ruling, which found that Commerce acted illegally in relying on constructed value when it found that a PMS distorted the cost of production of the home market sales (Saha Thai Steel Pipe Public Co. v. United States, Fed. Cir. #22-1175).

The case concerns the 2017-2018 administrative review of the antidumping duty order on circular welded pipe from Thailand. In the review, Commerce said that a PMS existed in Thailand so that the cost of production of the subject merchandise was distorted and did not reflect sales made in the ordinary course of trade. The agency then made a PMS adjustment to the sales-below-cost test. The case was taken to the trade court, where CIT held that Commerce does not have the statutory authority to make this adjustment.

On remand, Commerce said that conducting a sales-below-cost test without the PMS adjustment was meaningless and then based normal value on constructed value. The court again struck this down, finding that Commerce did not follow the statutory framework and that the agency could not exclude home market sales based on a cost-based PMS.

The trade court's position over Commerce's lack of authority to make a PMS adjustment to the sales-below-cost test was upheld in the key Hyundai Steel Co. v. U.S. decision at the Federal Circuit (see 2112100039). However, the court pointed out scenarios in wich a cost-based PMS could be addressed by Commerce. Wheatland argued that during the first remand period at CIT in its case, Commerce sought one of these exceptions.

In the review and on remand, Commerce found that a sales-below-cost test that did not have a PMS adjustment to account for the distorted costs "was not meaningful and would not permit Commerce to determine whether home market sales were actually in the ordinary course of trade." As laid out in the statute, when Commerce cannot find whether home market prices are in the ordinary course of trade, the agency can use constructed value for normal value. The CV part of the statute allows Commerce "to use any other methodology when calculating constructed value to account for the cost-based PMS found to exist," Wheatland said.

The trade court said that the sales-below-cost test is the only tool Commerce can use to find whether home market sales are outside the ordinary course of trade. "Nothing in the statute supports such a draconian reading," the brief said. "To the contrary, Section 1677(15) identifies three categories of 'sales and transactions, among others,' that Commerce must consider to be outside the ordinary course of trade. ... The inclusion of the phrase 'among others' indicates that the list is illustrative, and not exclusive."

Further, "the CIT’s holding is contrary to ... this Court’s explanation in Hyundai Steel that Commerce in fact does retain the power to address a PMS when normal value is based on home market sales," Wheatland said. Commerce's approach in the remand to use constructed value is needed to enable the agency to meet its statutory obligation to achieve a fair comparison in the dumping calculations as laid out by Congress.