CIT Upholds Commerce's Surrogate Data Selection, Steel Plate Cost Adjustments in AD Investigation

The Commerce Department properly held and explained that antidumping duty respondent Dongkuk S&C Co.'s reported steel plate costs do not reasonably reflect the cost of making wind towers in an antidumping duty investigation, the Court of International Trade ruled in a Nov. 17 opinion. Judge Leo Gordon also held that Commerce properly used exporter SeAH Steel Holdings Corp.'s 2018 consolidated financial statement as the basis for constructed value calculations for Dongkuk's profit and selling expenses.

"We are certainly gratified by the Court’s opinion and believe this firmly establishes the Commerce Department’s practice of smoothing costs to account for mere timing differences in the cost of production over the period of investigation," said Robert DeFrancesco, counsel for AD petitioner Wind Tower Trade Coalition, in an email. "The Court recognized that by appropriately accounting for these costs, the Commerce Department ensured that its margin calculation was as accurate as possible."

The case concerns the AD investigation on utility scale wind towers from South Korea. At the start of the investigation, Commerce picked out 11 physical characteristics that are the most important for differentiating costs between the products under review, with the marquee two being height and weight. These characteristics define the unique products, or CONNUMs (short for "control numbers"), for comparing the most similar products in price comparisons.

In certain investigations, Commerce looks at whether sales of the foreign-like product, in this case wind towers, were made below cost. The agency normally computes costs based on the exporter's records if they reasonably reflect the costs associated with the production and sale of the subject merchandise. Those costs reasonably do this if they reflect "meaningful cost differences attributable to the finished product's different physical characteristics."

However, Commerce found that Dongkuk's reported steel plate costs -- a key wind tower input -- were significantly different between its CONNUMs sold in the Japanese and U.S. markets. While Commerce said that it analyzed the reported costs using the physical characteristics as its "guideposts" and by grouping CONNUMs together based on certain of these characteristics, the court found in the case's first opinion that it did no such thing (see 2112130063). What the agency actually did is find that the "overwhelming factor that caused the differences in the steel plate costs was the timing of the steel plate purchases, rather than the physical characteristics of the [wind towers].”

To account for this, Commerce then decided to adjust costs to address distortions when the differences are not due to physical characteristics. This led to the agency adjusting costs by weight-averaging the reported steel plate costs for all reported CONNUMs. Dongkuk challenged this determination, arguing that its normal books and records reflect the cost of making the wind towers based on their physical characteristics. In particular, Dongkuk says Commerce didn't analyze the steel plate costs by grouping CONNUMs by height and weight. Gordon agreed, finding no evidence of this analysis. On remand, Commerce stuck by its analysis, offering a deeper explanation.

Satisfied with the agency's discussion of its adjustment, the judge upheld Commerce's remand results. "Commerce noted that it considered variations in [Dongkuk]’s reported costs and concluded that such discrepancies warranted adjustment as they were not caused by differences in physical characteristics of the finished wind towers," the opinion said. "Given this, the court does not agree with [Dongkuk] that Commerce failed to comply with the court’s remand order."

Dongkuk further argued that the remand does not support Commerce's conclusion that steel plate is an appropriate basis to find if an adjustment to the respondent's reported costs is warranted since "steel plate does not dictate a wind tower's physical characteristics," and that Commerce did not consider whether the physical characteristics of the finished wind towers also impact costs. Gordon said that he was "not persuaded by Plaintiff's arguments," since Commerce's explanation supports a finding that the agency grouped CONNUMs by the physical characteristics and used them as guideposts.

"To that end, Commerce found that the steel plate used in producing the subject merchandise impacts those physical characteristics of the completed wind towers and that 'the cost of the steel plate consumed is the only factor that ultimately determines the raw material cost of the wind tower,'" the judge said. Gordon also ruled against the plaintiff's argument that Commerce failed to abide by the court's orders, finding that the plaintiff ignored the fact that the standard of the court's review is whether the agency's decision-making process is "reasonable given the circumstances provided by the record as a whole," and not whether Commerce complied with the court's order.

Dongkuk also contested Commerce's use of SeAH's 2018 consolidated financial statement as the basis for certain constructed value calculations, arguing that the statement couldn't be used since it had data for goods not comparable to wind towers and had six months of data outside the review period. The judge ruled that Dongkuk failed to show that the agency acted unreasonably by picking SeAH's statement. Commerce picked this statement since it was the only one that was "complete and satisfied all four of the criteria relied on by Commerce."

(Dongkuk S&C Co. v. United States, Slip Op. 22-125, CIT #20-03686, dated 11/17/22, Judge Leo Gordon. Attorneys: Roberg Gosselink of Trade Pacific for plaintiff Dongkuk S&C Co.; Joshua Kurland for defendant U.S. government; Alan Price of Wiley Rein for defendant-intervenor Wind Tower Trade Coalition)