CIT Says ITC Didn't Fully Grapple With Role of US Sanctions on Russia in OCTG Injury Proceeding

The Court of International Trade on April 19 sent back the International Trade Commission's decision to cumulate imports of oil country tubular goods (OCTG) from Argentina, Mexico, Russia and South Korea, in part because the commission failed to take into account the effect of U.S. sanctions on Russia in assessing whether the Russian goods compete at the same level of competition as the good from the other nations.

Judge Jennifer Choe-Grove also sent back the affirmative injury finding so the ITC can reassess its decision to cumulate South Korean OCTG since the commission included non-subject imports from Korea and Korean goods subject to an antidumping duty order. However, the judge sustained the ITC's decision to cumulate OCTG from Argentina and Mexico with OCTG from Russia and South Korea.

The injury determination covered OCTG imports entered from January 2019 to June 2022. The U.S. imposed sanctions on Russia following its invasion of Ukraine that affected OCTG trade for the last four months of the review period. The ITC said the sanctions didn't impact Russian producers' ability to compete over the entire 42-month review period -- a decision that spawned the legal challenge from U.S. importers led by Tenaris Bay City and exporter TMK Group.

TMK Group said there was no "reasonable overlap of competition" of the imports at the end of the investigation period between Russian OCTG and goods from the other three nations on the day the ITC voted. Choe-Groves agreed with this interpretation of the governing statute, ruling that it's "reasonable to require the ITC's determination to be made in the present tense on vote day."

As a result, "the conditions of competition must exist in the present tense, not in the past tense," the opinion said. "It is not sufficient if the conditions of competition leading to an unfair determination existed at some point during the period of investigation. The unfair condition must continue to exist on vote day.”

Choe-Groves then addressed the substantive claims that U.S. sanctions on Russia affected the conditions of competition. TMK Group noted that, due to the restrictions, Russian goods lost their certification from the American Petroleum Institute (API), rendering them not fungible with other imports. The ITC said the loss of this certification didn't bar cumulation since all OCTG are generally made in line with API standards except for "limited service" OCTG which call still be used in certain OCTG applications without API specifications and "green tube" OCTG types, which aren't sold as meeting a given API grade.

The judge found that the information the ITC used didn't reflect "responses for quality after the loss of API-certification for Russian subject imports," nor does it address the "competitive impact that losing API-certification would have on the subject Russian products."

Choe-Groves noted that the commission seemingly made "contradictory statements" on whether Russian goods should be cumulated, since it said that the impact of losing API certification "is not yet clear," though it also discussed the effects of the sanctions. The ITC claimed that losing API certification wouldn't bar Russian OCTG from being sold in the U.S. since Russian exporters could still send green tubes to API-certified processors and then sell the processed tubes in the U.S.

In all, the commission failed to add all the information it used on the record and failed to address potentially contradictory evidence on the fungibility of Russian OCTG with the goods from other countries. For instance, a witness said the loss of API certification would be a "major setback" and TMK Group said at oral argument that goods without certification can't be sold, effectively putting affected companies out of business.

TMK Group also said that the sanctions on Russia effectively excluded Russian OCTG from the U.S., while the ITC said this wasn't the case since significant volumes of Russian OCTG entered the U.S. market for two of the four post-invasion months. Choe-Groves held that while there's evidence showing that Russian goods entered in those two months, "the ITC did not provide an adequate explanation to account for the lag of the sanction measures taking place or the impact of the loss of API-certification services on Russian OCTG’s competitiveness."

Choe-Groves also remanded the decision since the ITC included non-subject Korean merchandise in its cumulation decision. The judge said that, whether or not the ITC believes the inclusion to be "harmless error, the statute is clear that only subject imports shall be included in the cumulation analysis and does not allow for the cumulation of non-subject imports." In addition, after finding the claim to not be waived, Choe-Groves said that the ITC didn't address the "possible effect resulting from the subject imports from South Korea that were under an antidumping duty order in its final determination."

The judge lastly sustained the cumulation analysis with regard to Argentina and Mexico despite claims from Tenaris that OCTG from the two nations didn't sufficiently share channels of distribution with goods from Russia or South Korea to warrant a finding of a "reasonable overlap" of competition. Tenaris said the ITC didn't look at evidence that it sold goods from Argentina and Mexico and its U.S.-made OCTG to U.S. buyers mainly via the "Rig Direct" program, and that this program is the reason for the shift in market share and the boost in Tenaris' market share. The importer added that the ITC relied on a "small overlap" of competition for Argentine and Mexican OCTG with Russian and Korean OCTG instead of a "reasonable" one.

The ITC didn't find the Rig Direct program to be a factor for the shift in market share since "large majorities of purchasers rated domestically produced OCTG as superior or comparable" to imports due to availability and technical support and because the U.S. industry also lost market share to Russian and Korean imports not sold through the program. After looking at the data, Choe-Groves said the commission's finding that the Rig Direct program wasn't a cause of the loss of domestic market share is supported, though she deferred consideration of other challenges to the overall injury determination in light of the remand.

(Tenaris Bay City v. United States, Slip Op. 24-48, CIT Consol. # 22-00344, dated 04/19/24; Judge: Jennifer Choe-Groves; Attorneys: Gregory Spak of White and Case for plaintiffs led by Tenaris Bay City; Michael Chapman of Winton & Chapman for consolidated plaintiff TMK Group; Andrea Casson for defendant U.S. government; Thomas Beline of Cassidy Levy for defendant-intervenor U.S. Steel Corp.; Luke Meisner of Schagrin Associates for defendant-intervenors led by Borusan Mannesmann Pipe U.S.)