Commerce Failed to Show Exporter Didn't Act to Best of Ability in Not Submitting Affiliate's Data, CIT Says

The Court of International Trade on Oct. 10 sent back the Commerce Department's use of partial adverse facts available against exporter Nippon Steel for its failure to submit sales data from some of its U.S. affiliates in the third review of the antidumping duty order on hot-rolled steel flat products from Japan. Judge Stephen Vaden said Commerce failed to grapple with Nippon Steel's limitations under Japanese law to collect this data from its affiliates.

However, Vaden rejected Nippon Steel's challenge to the agency's deduction of Section 232 steel and aluminum duties from the exporter's U.S. price in the third, fourth and fifth reviews of the AD order. The judge said Nippon Steel failed to raise the issue administratively. While the exporter claimed in the reviews that Commerce improperly deducted the Section 232 duties, the court found this statement to be "too vague" in relation to the company's current argument, which is that the company didn't include the duties in its U.S. price.

The decision came in a consolidated action, in which Nippon Steel is contesting the third, fourth and fifth reviews of the AD order, though the issue of Commerce's use of partial AFA on the company only arose in the third review.

In the third review, Nippon Steel failed to provide downstream sales data from an affiliated reseller despite repeated requests from Commerce for that information. The agency used partial AFA on the grounds that the exporter failed to respond to the best of its ability in soliciting the data. Vaden said that while this justifies the use of facts available, Commerce didn't support its contention that Nippon Steel didn't act to the best of its ability.

The respondent "went to some length" to obtain the data, including by hiring outside counsel and requesting the data from the affiliate multiple times. Nippon Steel next submitted a memo from a Japanese law firm explaining why Japanese law barred the company from taking more action to get the data. Vaden noted that these efforts went beyond Nippon Steel's efforts taken in the past to collect the data, holding that "Commerce cannot ignore these increased efforts."

In response, Commerce said it wasn't asking Nippon Steel to violate Japanese law. Vaden held that this "conclusory statement" failed to engage with the company's legal analysis "in any meaningful way." While the legal memo could be flawed, the court has no basis from Commerce on which to make that conclusion. The agency "cannot rest on its laurels and repeat the answers of yesterday" and must "instead explain how the new facts did or did not affect its analysis," the decision said.

Commerce and petitioner Nucor Corp. both claimed Nippon Steel could have restructured its contract with its affiliate to require the company to provide the data or refused to do business with the affiliate. Vaden responded that Commerce didn't make this point anywhere in its Issues and Decision Memorandum or respond to Nippon Steel's point that Japanese antitrust law would bar the company from taking these steps.

Regarding the deduction of the Section 232 duties from its U.S. price in all three of the reviews, Nippon Steel faced an uphill battle because the U.S. Court of Appeals for the Federal Circuit said in Borusan Mannesmann v. U.S. that Section 232 duties can be deducted from the U.S. price. The exporter said in response that Borusan doesn't control, since it didn't address scenarios where the Section 232 duties aren't included in the U.S. price.

Vaden found that Nippon Steel waived this argument by failing to raise it administratively. The company's claim in the review that Commerce improperly deducted the duties doesn't alert Commerce with "reasonable clarity" to its new challenge: that the agency made "insufficient factual findings about whether Nippon Steel included the Section 232 duties in its price," the opinion said. Finding otherwise "would open a Pandora’s box of permissible arguments a litigant could raise for the first time in court," the judge said.

Nippon Steel also argued that Commerce's position violates international treaties to which the U.S. is a party. Vaden rejected this claim as well, finding that providing relief to the company would "have the Court step beyond its proper role and interfere in a foreign policy matter on which Congress has spoken."

The exporter centered its claim on the "Charming Betsy" canon of statutory interpretation, which says statutes should never be construed to violate the law of nations if any other possible construction remains. Vaden found this canon to be inapplicable since "Congress has spoken." The legislature passed 19 U.S.C. Section 3512(c)(1)(B), which bars the company from challenging Commerce's finding on the ground that it doesn't comply with treaty obligations, and 19 U.S.C. Section 2504(a), which says no provision of any trade agreement which is in conflict with any law of the U.S. shall be given effect under U.S. laws.

As a result, Congress has spoken on the issue and said where a federal statute and the General Agreement on Tariffs and Trade conflict, "the statute wins."

Lastly, Nippon Steel said the trade court should shirk Borusan since it was wrongly decided. Vaden made quick work of this claim, finding that CIT "cannot disregard Federal Circuit precedent no matter how much Nippon Steel may disagree with the Federal Circuit’s reasoning."

(Nippon Steel Corp. v. United States, Slip Op. 24-112, CIT Consol. # 21-00533, dated 10/10/24; Judge: Stephen Vaden; Attorneys: Shawn Higgins of Sidley Austin for plaintiff Nippon Steel Corp.; Brenda Jacobs of Global Trade & Compliance for plaintiff-intervenors JFE Shoji Corp. and JFE Shoji America; Stephen Tosini for defendant U.S. government; Jeffrey Gerrish of Schagrin Associates for defendant-intervenors Steel Dynamics and SSAB Enterprises; Maureen Thorson of Wiley Rein for defendant-intervenor Nucor Corp.)