Commerce Properly Classified Suspension Losses as G&A Expenses in AD Review, Trade Court Rules

The Court of International Trade on July 14 upheld the Commerce Department's decisions in an antidumping duty review to disregard respondent Nexteel's accounting method and classify the company's losses from suspension of production lines as general and administrative expenses (G&A) instead of costs of goods sold (COGS). Judge Claire Kelly said that Commerce, in the 2016-2017 administrative review on welded line pipe from South Korea, "adequately explains that the depreciation and other costs" linked with suspended production lines "are more akin to a company-wide cost" instead of a cost of manufacturing borne by specific products.

Kelly backed Commerce's finding that Nexteel's cost allocations would be contradicted by the company's own explanation of its costs. Commerce said the exporter just puts the costs in COGS to drop them from the antidumping duty calculations and itself said that the suspension losses were unrelated to the cost of making the subject goods. The judge said that the agency "adequately explains why its allocation of suspension costs is reasonable," adding that Commerce rightly ditched Nexteel's books and records since the costs did not "reasonably reflect the costs" linked with making and selling the goods.

The court also upheld Commerce's explanation of which Nexteel production lines were suspended during what time periods, ruling that the agency addressed this question previously raised by the court (see 2212060038). In the case's last opinion, the judge asked Commerce to clarify which of Nexteel's production lines were suspended during what time periods and explain whether the agency treats suspension losses from the beginning and end of the review differently.

Commerce said that only one of the four lines in question made subject goods and that this line was shuttered for the last 10 months of the review. The agency added that two of the non-subject merchandise-making lines were suspended for the last five months of the review and one of the lines was down for the whole period. Nexteel said this was accurate, and Kelly held that this "satisfied the Court's instructions."

The agency also said that it "does not differentiate between suspension periods based on whether they occur at the beginning or the end of the" review period. While Kelly said that Commerce's initial explanation was confusing, it is now clear that the agency's use of "prior to" in saying that revenues from goods made prior to the shutdown should not be linked to the suspended losses sustained during the shutdown periods "did not imply that timing relative to the [period of review] affected Commerce's determination. Rather, for each of the three production lines which were partially suspended, the suspension period occurred at the end" of the review period, and here, "Commerce could only refer to products that had been produced prior to shutdowns," the opinion said.

(Nexteel Co. v. United States, Slip Op. 23-103, CIT Consol. # 20-03898, dated 07/14/23; Judge: Claire Kelly; Attorneys: J. David Park of Arnold & Porter for plaintiff Nexteel; Jarrod Goldfeder of Trade Pacific for plaintiff and plaintiff-intervenor Hyundai Steel Co.; Robert Kiepura for defendant U.S. government)