CAFC: Commerce Can't Use Back Door to Make PMS Adjustment to Production Cost in AD Review

The U.S. Court of Appeals for the Federal Circuit on Dec. 4 again ruled against Commerce's use of a particular market situation adjustment to the sales-below-cost test in antidumping duty cases.

Upholding Commerce's remand results removing the adjustment for two respondents to the 2018 AD review on circular welded carbon steel pipes from Thailand, Judges Todd Hughes, Richard Linn and Leonard Stark said petitioner Wheatland Tube Co. failed to distinguish the case from the appellate court's holding in Hyundai Steel v. U.S., in which the court first ruled against the practice. The U.S. government didn't participate in the appeal.

In enacting the 2015 Trade Preferences Extension Act, Congress "simply and unambiguously allowed for a PMS adjustment to constructed value but not to the costs of production for purposes of the sales-below-cost test," Hughes said in the precedential opinion, echoing the holding from Hyundai Steel.

"Saha Thai is very pleased that the Court of Appeals for the Federal Circuit agreed with the Saha Thai’s argument that there was no legal or factual justification to overturn the Trade Court’s decision that it would be contrary to law for Commerce to apply a particular market situation (“PMS”) cost adjustment in the calculation of Saha Thai’s antidumping (AD) rate for the AD review at issue," Daniel Porter, counsel for Saha Thai, said in an email. "Such decision affirms a 0.00% AD rate for Saha Thai for this AD review."

In the review, Wheatland alleged that a PMS distorted the costs of hot-rolled steel coil in Thailand, requiring an adjustment to the costs of production to allow for the proper comparison between normal value and export price or constructed value. Commerce initially agreed and made the adjustment, though the Court of International Trade rejected the agency's authority for doing so. The trade court relied on the Hyundai Steel ruling, which said that the TPEA doesn't permit such an adjustment, only allowing a PMS adjustment for constructed value (see 2112100039).

The petitioner argued that the present review is distinguished from Hyundai Steel because the Federal Circuit in that case said 19 U.S.C. Section 1677b(a)(1) gives Commerce the tools to ensure a proper comparison with the export price. Wheatland added that the agency relied on one of the statute's subsections "to adjust the cost of production upward" by framing the adjustment "as a constructed value calculation." Hughes, the opinion's author, said Wheatland "ignores the actual holding of Hyundai Steel, where we explicitly stated that the amendment authorizing PMS adjustments for constructed value calculations was not added to the section of the statute addressing cost of production calculations."

The Hyundai Steel decision "is indistinguishable from this case and is controlling," the opinion said. Just because Commerce used the phrase "ordinary course of trade" in making the adjustment "does not change the fact that the statute simply does not authorize PMS adjustments to cost of production calculations." Commerce may not use the constructed value language in the statute "as a backdoor to slip in a PMS adjustment for cost of production calculations," Hughes said.

Cases are currently proceeding at CIT regarding whether Commerce can make a sales-based PMS adjustment to the sales-below-cost test, given that this adjustment has a different statutory basis.

(Saha Thai Steel Pipe Public Co. v. U.S., Fed. Cir. # 22-1175, dated 12/04/23; Judges: Todd Hughes, Richard Linn and Leonard Stark; Attorneys: James Durling of Curtis Mallet-Prevost for plaintiff-appellee Saha Thai Steel Pipe Public Co.; Robert Gosselink of Trade Pacific for plaintiff-appellee Thai Premium Pipe Co.; and Elizabeth Drake of Schagrin Associates for defendant-appellant Wheatland Tube Co.)