AD Petitioner Floats Alternative Arguments for Inclusion of PMS Adjustment in Sales-Below-Cost Test

The Commerce Department should have considered alternatives to account for an antidumping duty respondent's distorted costs even when faced with U.S. Court of Appeals for the Federal Circuit precedent barring particular market situation adjustments to the sales-below-cost test, Ellwood City Forge argued in comments at the Court of International Trade. One alternative would have been for Commerce to adjust for the PMS under the sales-below-cost test because the relevant exporter's records don't accurately reflect the exporter's costs, the brief said (Ellwood City Forge Co. v. United States, CIT # 21-00077).

Under Section 1677b(f)(1)(A) of the antidumping duty laws, the costs in the sales-below-cost test shall be based on the exporter's books and records if and only if those records are both kept in line with accepted accounting principles and "reasonably reflect the costs associated with the production of the merchandise." In the present case, which stems from the AD investigation on forged steel fluid end blocks from Germany, Commerce can say that since respondent BGH's input costs for electricity and ferrochrome are distorted, BGH's books and records cannot reasonably reflect the costs of making the subject merchandise, Ellwood City said.

"That Commerce at some point analyzed these same cost distortions under 19 U.S.C. § 1677b(e) and labeled them a 'PMS' cannot divest Commerce of its independent authority under 19 U.S.C. § 1677b(f)(1)(A) to eliminate said distortion," the brief said. Ellwood added that, as a result, Commerce could include a PMS adjustment to the sales-below-cost test.

"Such an approach is not only lawful, but imperative from a practical standpoint -- when a respondent’s reported production costs are distorted by a PMS, the sales below cost test (absent adjustment) is necessarily distorted because it compares sales prices to costs that are distorted by a PMS," the brief said. "Consequently, normal value may include home market prices that only pass the sales below cost test due to the use of distortedly low production costs."

In Hyundai Steel v. U.S., the Federal Circuit said that PMS adjustments were only meant to apply to constructed value and not the cost of production value when calculating normal value under 19 U.S.C. Section 1677b(e) (see 2112100039). In Ellwood's case, Commerce dropped its PMS adjustment for the sales-below-cost test following the Hyundai decision.