CIT Says No Need for Standalone CEP Deduction for Further US Manufacturing

The Court of International Trade in a June 13 decision made public June 24 said the Commerce Department properly found that Aussie exporter BlueScope Steel (AIS) didn't reimburse its affiliated importer BlueScope Steel Americas (BSA) for antidumping duties. Sustaining the second review of the AD order on hot-rolled steel flat products from Australia, Judge Richard Eaton said that Commerce also properly declined to make a "standalone deduction" from the constructed export price for "profit resulting from the further manufacture of the steel in the United States."

Eaton heavily based the decision finding that AIS didn't reimburse BSA for the AD on U.S. Steel Corp. v. U.S. -- a U.S. Court of Appeals for the Federal Circuit decision issued in April (see 2404040020). In that decision, the appellate court said that the AD petitioners, led by U.S. Steel, failed to prove that the payments and prices charged between the entities were "anything other than those in a garden variety transaction among an exporter, an importer, and an unaffiliated producer."

Daniel Porter, counsel for BlueScope, said in an email that the "decision was entirely expected" in light of U.S. Steel. "The Trade Court correctly recognized there really was no difference between the facts underlying the Federal Circuit decision and the facts in the instant case. And so, once again, US Steel’s argument should be rejected."

Constructed Export Price Deductions

U.S. Steel claimed that Commerce should have made a standalone deduction from BlueScope's constructed export price to account for further manufacturing of the company's steel that took place in the U.S. by its subsidiary Steelscape. The agency in response said that the profit attributable to further manufacturing was already deducted. Eaton agreed with the U.S. in finding that this deduction was already made and that the statute doesn't direct Commerce to create an additional, separate deduction for "further manufacturing profit."

The petitioner said the statute requires "two profit deductions for activities taking place" in the U.S., one for "further manufacturing profit" and another for constructed export price profit. Eaton held that the statute only allows for "certain deductions from the U.S. starting price when calculating CEP" but doesn't say that these individual deductions "either be treated separately or as a sum."

In line "with the statute, Commerce allocated profit to U.S. selling expenses and the cost of further manufacture, combined it with certain expenses incurred with manufacturing and selling the coated steel, and deducted the combined amount from the U.S. starting price," the opinion said.

AD Reimbursement

As examined in the review, AIS sold subject goods to BSA, which then sold the goods to another subsidiary of the company, Steelscape. This company further processed the goods and sold them to unaffiliated U.S. buyers. These transactions are governed by a supply agreement, which sets a transfer price between the importer and Steelscape via a pricing formula. The effect of the formula, along with a confidential shipping term, is that the reference prices reflect duty-paid prices. Thus, the importer paid the AD, and the price paid by Steelscape included the estimated AD.

BlueScope Steel, the parent company, first set the price of the steel payable by Steelscape using the pricing formula. From this price, the parent company deducted commissions, ocean freight and inland freight to get the mill duty paid price. BlueScope then estimated the AD to reach the entered value that Steelscape paid.

Eaton said that this pricing arrangement didn't mean AIS reimbursed the importer for the AD. The importer paid duties on the steel "and Steelscape paid an amount for the steel that included those duties, and Steelscape’s customers paid a duty-inclusive price for the steel." The "burden of the duties was felt in the U.S. market," the judge said. These facts are nearly identical to U.S. Steel, the judge noted.

U.S. Steel in this case tried to identify two factual distinctions with the case recently dispatched by the Federal Circuit. The first said that the terms of a purchase order between the importer and Steelscape show that the exporter was responsible for the AD, evidenced by a purchase order between the two affiliates. Eaton said this doesn't win the case for the petitioners. While the purchase order "appears to allocate which affiliated entity takes the risk with respect to both antidumping duties and those duties in excess of duties represented by the cash deposit rate," the language "is of no use to Plaintiffs."

What matters in this case "is what actually occurred, not which entity contractually assumes what responsibility." Looking at the purchase order and the actual transactions themselves shows that the exporter didn't agree to pay AD. The burden was ultimately felt by an "unaffiliated purchase in the U.S. market" and not by an Australian exporter.

The second alleged factual distinction was a statement made from Commerce that said that, practically, the exporter lowered its transfer price to the importer by an amount of estimated AD. This claim also sees the petitioners come up short since the lowered price will be accurately reflected in the exporter's dumping margin, the opinion said. The petitioners might be right that the "lowered transfer price" wouldn't show up in BlueScope's dumping margin, but "this focus on Commerce's statement does not help Plaintiffs' case" since the amount of the AD was paid by U.S. buyers.

(United States Steel Corp. v. United States, Slip Op. 24-71, CIT # 21-00528, dated 06/13/24; Judge: Richard Eaton; Attorneys: Sarah Shulman of Cassidy Levy for plaintiff U.S. Steel Corp.; Roger Schagrin of Schagrin Associates for plaintiff-intervenors Steel Dynamics and SSAB Enterprises; Kelly Krystyniak for defendant U.S. government; Daniel Porter of Curtis Mallet-Prevost for defendant-intervenors BlueScope Steel and BlueScope Steel Americas)