CVD Petitioner Argues Against Cross-Owned Input Supplier Analysis in Turkish Rebar Suit

The Commerce Department failed to adequately support its position on remand to not treat ship building company Nur Gemicilik ve Tic, an affiliate of countervailing duty respondent Kaptan Demir Celik Endustrisi ve Ticaret, as a cross-owned input supplier of goods primarily dedicated to the production of downstream products, CVD petitioner Rebar Trade Action Coalition said (Kaptan Demir Celik Endustrisi ve Ticaret v. United States, CIT # 21-00565).

Submitting remand comments to the Court of International Trade on Aug. 23, the petitioner said that Commerce didn't support its characterization of the relationship between Nur's scrap and Kaptan's rebar and "inappropriately" focused on the nature of Nur's business activity over the evidence regarding Nur's production of scrap. The record clearly shows that scrap is a "primary input" in Kaptan's rebar production, similar to the use of semolina in pasta or timber in lumber, as opposed to a general product such as plastics used in automobiles, the brief said.

In the case on the 2018 CVD review on steel concrete rebar from Turkey, Commerce discussed on remand the factors it considers when finding if Nur is a cross-owned input supplier of goods mainly dedicated to the production of downstream products (see 2307250051). The factors include whether an input supplier made the goods, whether the input could be used in making downstream goods, whether the input is just a link in the overall production chain or just a common input in a wide array of goods, and whether the downstream manufacturers are the main users of the input.

The agency said the record does not support the idea that Nur's steel scrap is primarily dedicated to Kaptan's Demir's downstream rebar production. The coalition said this claim is undercut by the record, particularly the evidence of Kaptan's production process. Kaptan starts by melting scrap, then uses that metal to make billets, which are rolled into rebar. The scrap is the only raw material in the respondent's production flow diagram and was described by Kaptan as a "major input." The record shows it has a "close physical relationship to Kaptan's downstream goods," the comments said.

Commerce only cites one other case where it draws a distinction between processed and other steel scrap supplied by cross-owned affiliates to make downstream steel goods, and even this case has been remanded by the trade court, the coalition noted. The agency has failed in either suit to identify any products where unprocessed steel scrap could be used except in downstream steel production. The petitioner claimed that there "is no obvious use for steel scrap," except in making more steel. "Certainly, steel scrap is not an input of 'universal application,' like electricity." It is "unclear how (or why) scrap could ever be 'generated' for the specific purpose of feeding downstream production," the comments said.

The petitioner also challenged Commerce's analysis of Nur's business activity. The agency's regulations show that Commerce's focus should be on the supplier's production of the input product instead of its operations as a whole, the brief said.