CAFC Judge Questions Commerce's PMS Adjustment to Sales-Below-Cost Test Where NV Based on CV

Judge Todd Hughes at the U.S. Court of Appeals for the Federal Circuit during July 10 oral argument expressed doubt over antidumping duty petitioner Wheatland Tube's claim that the Commerce Department can make a cost-based particular market situation adjustment to the sales-below-cost test where normal value is based on constructed value. The judge referenced the Federal Circuit's past ruling in Hyundai Steel v. U.S., which found that cost-based PMS adjustments cannot be made to the sales-below-cost test (Saha Thai Steel Pipe Public Co. v. United States, Fed. Cir. # 22-1175).

Hughes noted that Wheatland's problem is just that the company "redescribed a way of doing something that we said they couldn't do in Hyundai Steel, which is alter the cost of production in determining normal value. They've just tried to push it to a later phase, but to me that still seems to be impermissible under Hyundai." The judge said that as he understands it, Commerce first looks at the sufficiency of the home market sales, but in the present case, on the 2017-18 review of the AD order on circular welded pipe from Thailand, Commerce found that some of those home market sales could be used.

To this, Elizabeth Drake of Schagrin Associates, counsel for Wheatland, said that this was not the case since the agency found that the home market sales were not made in the course of ordinary trade. In defining the "ordinary course of trade," Congress said that "situations in which a PMS prevents a proper comparison are not in the ordinary course of trade," Drake said. Given this, Commerce said it could not use the Thai sales since doing so would prevent proper comparison.

Drake ultimately led the argument to a discussion between the different elements of the statute. Under one subsection, the Federal Circuit has already ruled that a PMS adjustment to the cost of production when conducting a sales-below-cost test is illegal. Under another, concerning where normal value is based on constructed value, Congress said Commerce can use "any other methodology" to conduct the test where a PMS prevents a proper comparison.

Hughes noted how two different conclusions could be drawn from the language of these two subsections, but still expressed some hesitancy in adopting the idea that a PMS adjustment could be made in this context. "It seems to me that there's a little bit of wiggle room there, but not a lot since what we've said is you've got to use these normal value sales, and you can't adjust the cost of production for that," the judge said. "If the only thing that's not in the ordinary course of trade is that, then why is that permissible to adjust later?" Drake responded by saying that Hyundai Steel only addressed PMS adjustments under one subsection and kept open the possibiliy of making this type of adjustment where normal value is based on constructed value.

James Durling of Curtis Mallet-Prevost, counsel for exporter Saha Thai Steel Pipe Public Co., echoed Hughes' comments in arguing that the court already dismissed the idea that a PMS adjustment could be made to costs in the sales-below-cost test. Durling further addressed a question from one of the judges on what limits the agency's ability to take distortive influences into account when finding whether something is in the normal course of trade. Saha Thai's counsel said that the "ordinary course of trade" refers to price, which is not cost. "Congress has not let Commerce take a cost problem and stick it in this provision limited to sales problems," Durling said.

The government has not appeared in this case and was not present at the oral argument.