CIT Says Commerce Didn't Properly Support Denial of NLMK's Section 232 Exclusion Requests

The Court of International Trade on Jan. 23 sent back the Commerce Department's rejection of NLMK Pennsylvania's Section 232 steel and aluminum tariff exclusion requests, with Judge Claire Kelly finding Commerce didn't support its determinations that the objectors to the exclusion requests could provide "suitable substitutes" and make enough of the steel slab subject to the exclusion requests.

Administratively, NLMK sought exclusions for two different types -- 10-inch-thick and 8-inch-thick -- of semi-finished stainless steel slab from Russia via 58 exclusion requests. Commerce's Bureau of Industry and Security rejected the requests, finding that the domestic industry was capable of timely making the slabs in quantities sufficient to fill NLMK's orders. At CIT, NLMK argued that Commerce didn't provide sufficient analysis to deny the exclusion requests.

In its motion for judgment, NLMK asked CIT to take over the remand process and order Commerce to grant the exclusions. The plaintiff said the agency has repeatedly ignored the evidence that showed that the U.S. industry didn't have the capacity to fill the importer's requests (see 2207250032). In its reply, the U.S. said the request represented blatant overreach for which no legal support can be found (see 2209260064).

In remanding the case, Kelly first looked to whether the objectors offered a suitable substitute for the slab types imported by NLMK. When it came to the importer's products, Commerce denied the exclusion requests in three groups, ultimately finding that U.S. steel makers Cleveland-Cliffs and U.S. Steel could make substitutes of NLMK's products. For the first group, the agency said the steel makers could make slab that meets the chemical, mechanical and technical specifications laid out in the exclusion request. For the second and third groups, Commerce found that the objectors could make suitable substitutes.

The agency said that it considers smaller coils to virtually be the same as larger coils, meaning that it can use different coil sizes interchangeably from the coil user's perspective. "For each group of denials Commerce conflates the needs of NLMK, as the end user, with those of NLMK’s customers," Kelly said. "This mistake alone warrants a remand because the regulations make clear, and Defendant concedes, that the requestor is the end user and Commerce must assess the substitute with reference to the quality needs of the end user." Given Commerce's confusion of NLMK's end use with the company's customers' end use, the judge sent back the case for Commerce to assess whether NLMK itself can make coil using a substitute product.

Kelly further held on this point that BIS did "not engage with the issue of suitability." The agency didn't address issues raised by NLMK, only basing its conclusions on the opinion of an unidentified subject-matter expert. The judge explained that the importer had no chance to question the foundation of the expert's findings and that the court cannot find a link between the facts and the choice made given the secrecy shrouding the expert's opinion.

Turning to whether the objectors could provide NLMK with a sufficient quantity of slab, Kelly was equally unimpressed with the BIS explanation. "Commerce provides no reasoning in its denials, and does not engage with evidence which runs contrary to its decision," the judge said. "... It is unclear whether Commerce considered NLMK’s contrary evidence, as required by the statute, or what weight it accorded Cleveland-Cliffs’ replies. Commerce must address evidence that runs contrary to its decision."

However, the judge did reject NLMK's bid for a refund, declaring that the appropriate remedy in the matter is a remand. While the court can't substitute its own judgment for an administrative judgment, it can send an administrative judgment back for further explanation, Kelly said.

(NLMK Pennsylvania v. United States, Slip Op. 23-7, CIT #21-00507, dated 01/23/23, Judge Claire Kelly. Attorneys: Sanford Litvack of Chaffetz Lindsey for plaintiff NLMK Pennsylvania; Meen Geu Oh for defendant U.S. government)