ABB Inc. v. United States

437 F.Supp.3d 1289

ABB INC., Plaintiff,

v. UNITED STATES, Defendant,andHyundai Heavy Industries Co., Ltd. and Hyundai Corporation USA, Defendant-lntervenors.

Slip Op. 20-21

Court No. 16-00054

United States Court of International Trade.

February 19, 2020

Melissa M. Brewer, Kelley Drye & Warren LLP, of Washington, DC, argued for Plaintiff. With her on the brief was R. Alan Luberda and David C. Smith.

John J. Todor, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, argued for Defendant. With him on the brief were Joseph H. Hunt, Assistant Attorney General, Jeanne E. Davidson, Director, and Franklin E. White, Jr., Assistant Director. Of counsel on the brief was David W. Richardson. Senior Counsel, Office of the Chief Counsel for Trade Enforcement and Compliance, U.S. Department of Commerce, of Washington, DC.

David E. Bond and Ron Kendler, White & Case LLP, of Washington, DC, argued for Defendant-lntervenors Hyundai Heavy Industries, Co., Ltd.¹ and Hyundai Corporation USA. With them on the brief was William J. Moran.

OPINION AND ORDER

Barnett, Judge:

This matter is before the court following the U.S. Department of Commerce's ("Commerce" or "the agency") second redetermination upon remand. See Confidential Final Results of Redetermination Pursuant to Court Remand (Apr. 26, 2019) ("Second Remand Results"), ECF No. 149; see generally ABB Inc. v. United States ("ABB II"), 42 CIT ––––, 355 F. Supp. 3d 1206 (2018), recons. denied, 43 CIT ––––, 375 F. Supp. 3d 1348 (2019). Commerce conducted this second administrative review of the antidumping duty order on large power transformers ("LPT") from the Republic of Korea for the period of review August 1, 2013, to July 31, 2014. Large Power Transformers From the Republic of Korea, 81 Fed. Reg. 14,087 (Dep't Commerce Mar. 16, 2016) (final results of antidumping duty admin. review; 2013–2014) (" Final Results "), ECF No. 27-2; and accompanying Issues and Decision Mem., A-580-867 (Mar. 8, 2016), ECF No. 27-2.²

Defendant-Intervenor Hyosung Corporation ("Hyosung")³ and Plaintiff ABB Inc. ("ABB") filed separate motions for judgment on the agency record challenging certain aspects of the Final Results. See Confidential Rule 56.2 Mot. for J. Upon the Agency R. of Consol. PI. Hyosung Corp., ECF No. 40-2; Confidential Pl.’s Mot. for J. on the Agency R., ECF No. 41; see generally ABB, Inc. v. United States ("ABB I") , 41 CIT ––––, 273 F. Supp. 3d 1200 (2017).⁴ In response, the Government requested a remand for Commerce to address issues raised by ABB—that is, to reconsider its treatment of certain U.S. commission expenses incurred by Hyosung and Defendant-lntervenors Hyundai Heavy Industries Co., Ltd. ("HHI"), and Hyundai Corporation USA ("Hyundai USA") (together, "Hyundai") and Hyundai's sales-related revenue. See Def.’s Resp. to Pls.’ Rule 56.2 Mots. For J. Upon the Agency R., ECF No. 50; ABB I, 273 F. Supp. 3d at 1205.

In ABB I , the court granted the Government's request for remand and rejected Hyosung's arguments. 273 F. Supp. 3d at 1205–06, 1208–12. Commerce filed the first remand results on February 9, 2018. See Confidential Final Results of Redetermination Pursuant to Court Remand (Feb. 9, 2018) ("First Remand Results"), ECF No. 96. Therein, Commerce determined that Hyundai received revenue for services provided to unaffiliated U.S. customers that exceeded the related expense of providing those services. Id. at 6–8, 23. As a result, Commerce found that Hyundai's gross unit prices for those sales with service-related revenue were overstated. Id. at 20–24 (explaining Commerce's rationale for capping service-related revenue). Thus, for those sales, Commerce capped the service-related revenue by the amount of the service-related expense ("the capping methodology"), thereby lowering the U.S. price used in the dumping margin calculation.⁵ Id. at 6–8, 19–25. Commerce also concluded that "Hyundai failed to cooperate to the best of its ability" in reporting its service-related revenue and applied partial facts available with an adverse inference (or "partial AFA") in connection with service-related revenues. First Remand Results at 24.

On November 13, 2018, the court remanded the First Remand Results. ABB II, 355 F. Supp. 3d at 1223. Relevant to this discussion, the court determined that Commerce's application of the capping methodology "to those transactions or services for which Commerce relied only on internal communications among Hyundai employees or affiliates" was not supported by substantial evidence. Id. at 1221. The court found that the internal company communications did not, by themselves, serve as substantial evidence that the relevant services were separately negotiable⁶ with the unaffiliated customers. Id. at 1220. While the court sustained Commerce's use of facts available, the court also remanded Commerce's use of an adverse inference for further explanation or reconsideration.⁷ Id. at 1223.

On April 26, 2019, Commerce filed the Second Remand Results. For certain services provided for two transactions, identified as U.S. sales sequence numbers ("SEQU") 14 and 27, Commerce determined that the record did not support a finding that the services were separately negotiable with the unaffiliated customer and, therefore, did not cap the revenue based on the service-related expense. Second Remand Results at 17–18, 20–22. Commerce also did not apply its capping methodology to the delayed delivery charges associated with two transactions, SEQUs 11 and 14, instead making circumstance of sale adjustments to normal value for those charges.⁸ Id. at 17–18; Draft Results of Redetermination Pursuant to Court Remand (Apr. 3, 2019) at 17, PR2R 5, CR2R 11, CJA Tab 10. Commerce confirmed, however, that in the case of three transactions for which it had documentation, Hyundai received service-related revenues for separately negotiable services that exceeded the associated expenses. Second Remand Results at 16–17. Commerce provided additional explanation of its decision to apply partial AFA, concluding that an adverse inference was warranted "[b]ecause Hyundai had the service-related revenue information and failed to provide it as requested by Commerce." Id. at 15. Thus, Commerce found "Hyundai failed to cooperate to the best of its ability with regard to the reporting of service-related revenue." Id.

Hyundai argues that the Second Remand Results should again be remanded to the agency for two reasons: (1) Commerce's use of the circumstance of sale adjustment for the delayed delivery charges is not in accordance with law or supported by substantial evidence; and (2) Commerce's use of an adverse inference in its selection of facts available was not in accordance with law or supported by substantial evidence because Hyundai complied with Commerce's requests to the best of its ability. Confidential Def.-Ints.’ Cmts. in Opp'n to the Final Results of Redetermination Pursuant to Court Remand ("Hyundai's Opp'n Cmts."), ECF No. 154.

ABB separately challenges Commerce's Second Remand Results, arguing that (1) Commerce should have found all services associated with SEQUs 14 and 27 to have been separately negotiable with the unaffiliated customer such that the service-related revenue capping methodology applied; and (2) Commerce should have treated the delayed delivery charges as service-related revenues and applied the capping methodology. Confidential Pl.’s Cmts. in Opp'n to Second Remand Results ("ABB's Opp'n Cmts."), ECF No. 156.

The Government filed a response to both Hyundai and ABB arguing that the Second Remand Results are supported by substantial evidence and in accordance with law. Confidential Def.’s Resp. to Cmts. on Second Remand Results ("Gov't's Resp."), ECF No. 160. Additionally, ABB filed comments in support of Commerce's use of an adverse inference, Pl.’s Cmts. in Supp. of Second Remand Results ("ABB's Supp. Cmts."), ECF No. 161, and Hyundai filed comments asserting that, except for the use of circumstance of sale adjustments for delayed delivery charges, Commerce's application of the capping methodology with respect to the five transactions for which it did not draw an adverse inference was consistent with the court's guidance, Def.-Ints.’ Cmts. in Supp. of the Final Results of Redetermination Pursuant to Court Remand ("Hyundai's Supp. Cmts."), ECF No. 162.

For the reasons discussed below, the court remands the Second Remand Results for Commerce to reconsider its circumstance of sale adjustments for the delayed delivery charges. The Second Remand Results are sustained in all other respects.

JURISDICTION

The court has jurisdiction pursuant to section 516A(a)(2)(B)(iii) of the Tariff Act of 1930, as amended, 19 U.S.C. § 1516a(a)(2)(B)(iii) (2012),⁹ and 28 U.S.C. § 1581(c). The court will uphold an agency determination that is supported by substantial evidence and otherwise in accordance with law. 19 U.S.C. § 1516a(b)(1)(B)(i). "The results of a redetermination pursuant to court remand are also reviewed for compliance with the court's remand order." SolarWorld Ams., Inc. v. United States, 41 CIT ––––, ––––, 273 F. Supp. 3d 1314, 1317 (2017) (internal citation omitted).

DISCUSSION

I. Service-Related Revenue

A. Legal Authority

"When Commerce finds that a service is separately negotiable, its practice has been to cap the service-related revenue by the associated expenses when determining the U.S. price." Hyundai Heavy Indus., Co. v. United States, 42 CIT ––––, ––––, 332 F. Supp. 3d 1331, 1340 (2018) ; see also ABB II, 355 F. Supp. 3d at 1219-20. The court has recognized this practice as a reasonable exercise of Commerce's discretion in determining the price of the subject merchandise. See ABB II, 355 F. Supp. 3d at 1219–20 ; Hyundai, 332 F. Supp. 3d at 1340 ; ABB I, 273 F. Supp. 3d at 1208–09.

B. Background

In the First Remand Results, Commerce capped service-related revenue for certain services associated with SEQUs 14 and 27. First...