Steel Nail Exporter Challenges Use of Surrogate Data Distorted by Subsidies at CAFC

The Commerce Department has illegally "tripled down" on its use of "data tainted by foreign-government subsidies" in calculating constructed value in an antidumping duty case, respondent Oman Fasteners argued in its Feb. 13 opening brief at the U.S. Court of Appeals for the Federal Circuit. Despite the Federal Circuit's previous opinion remanding the use of a surrogate company's financial data over subsidy concerns, "Commerce jumped from the frying pan to the fire" and used a new proxy that also received government subsidies, the brief said (Mid Continent Steel & Wire v. U.S., Fed. Cir. # 23-1039).

The case concerns the antidumping duty investigation on steel nails from Oman, in which Oman Fasteners was the mandatory respondent. Opting to use constructed value to calculate the exporter's expected home-market profits and expenses, Commerce initially used financial data from Thai company Hitech. In a 2021 decision in the case, the Federal Circuit found the use of this company's data to be illegal given foreign subsidy concerns.

On remand, the agency switched to using Indian company Sundram Fasteners' data (see 2204120060), citing the contemporaneity of the data. The Court of International Trade in August upheld the remand redetermination, despite Oman Fasteners' insistence that the agency had other options, including Omani steelmaker Al Jazeera or steel nail producer LSI, that did not receive subsidies (see 2208090008).

Appealing to the Federal Circuit for a second time, the respondent argued Commerce's reliance on Sundram's data "was unreasonable" because it uses "admittedly unreliable data." Rather than consider the other options, the agency said it only had Hitech's and Sundram's data to choose from. "But Commerce did not explore the extent and nature of those subsidies or compare them -- nor could it on this record," the exporter said. "Commerce simply considered the two companies 'equal' in that regard and again ignored the subsidies. Commerce’s decision was based on a false choice, and it should not have used either company."

Oman Fasteners said Commerce should have looked to the potential surrogate companies it originally discarded -- a total of 11 financial statements. "Proper comparison of those eleven statements likely would have changed Commerce’s ultimate determination because several of the alternative statements had meaningful advantages," the brief said. The six Omani statements, for instance, were rejected because they made dissimilar products, even though Commerce used Sundram's data despite finding that most of its products were even more dissimilar, Oman Fasteners said.

Oman Fasteners had asked Commerce to reopen the record if the agency truly believed all the remaining options were flawed. Commerce said it did not reopen the record because the available information was sufficient. "But that premise was flawed because the information on which Commerce ultimately chose to rely was admittedly subsidy-distorted, and the agency did not bother to determine the degree of the distortion," the brief said. "Commerce did not know, and without further investigation could not have known, whether its calculation was accurate enough."