Coal. of Am. Flange Producers v. United States

448 F.Supp.3d 1340

COALITION OF AMERICAN FLANGE PRODUCERS, Plaintiff,

v.UNITED STATES, Defendant.

Slip Op. 20-84

Court No. 18-00225

United States Court of International Trade.

June 17, 2020

Stephanie M. Bell and Daniel B. Pickard, Wiley Rein LLP, of Washington, DC, argued for plaintiff.

Geoffrey M. Long, Trial Attorney, 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 Tara K. Hogan, Assistant Director. Of counsel was Kirrin Ashley Hough, Attorney, Office of the Chief Counsel for Trade Enforcement & Compliance, U.S. Department of Commerce, of Washington, DC. Of counsel on the brief was Daniel J. Calhoun, Assistant Chief Counsel.

OPINION

Katzmann, Judge:

This case presents questions about the operation of the substantial evidence standard as applied to the U.S. Department of Commerce's ("Commerce") treatment of a foreign producer's home market sales database in an antidumping ("AD") investigation and determination. It involves a challenge to Commerce's calculation of normal value ("NV") in determining appropriate AD duty margins for a foreign producer and exporter, Chandan Steel Limited ("Chandan"), in the importation of stainless steel flanges from India into the United States. Plaintiff Coalition of American Flange Producers ("Coalition") is an ad hoc association whose members manufacture stainless steel flanges in the United States. Compl. at 2, Dec. 6, 2018, ECF No. 9. Coalition brings this action against the United States ("the Government"), to challenge certain aspects of Commerce's Stainless Steel Flanges from India: Final Affirmative Determination of Sales at Less Than Fair Value and Final Affirmative Critical Circumstances Determination, 83 Fed. Reg. 40,745 (Dep't Commerce Aug. 16 2018), P.R. 411 ("Final Determination") and accompanying issues and decision memorandum (Dep't Commerce Aug. 10, 2018), P.R. 406 ("IDM"), in which Commerce determined that certain reported sales should not be included in Chandan's home market sales database and that, therefore, Chandan's home market of India was not viable as a basis for determining NV. Commerce accordingly used Chandan's reported third-country market sales to determine the appropriate AD margins. Id.

Coalition asserts that Commerce's determination to exclude certain sales from Chandan's home market database was unsupported by substantial evidence and otherwise not in accordance with law because Commerce failed to provide an adequately reasoned explanation. Compl. at 4. Accordingly, Coalition asks that the court "remand Commerce's determination with respect to its decision that Chandan's home market was not viable for additional consideration." Pl.’s Mot. for J. on Agency R. at 18, June 17, 2019, ECF No. 23 ("Pl.’s Br."). The Government responds that the court should uphold the Final Determination, asserting that Coalition's argument is not meritorious and that "Commerce's determination was supported by substantial evidence and in accordance with law." Def.’s Resp. in Opp'n to Pl.’s Mot. for J. on Agency R. at 11, Sept. 10, 2019, ECF No. 27 ("Def.’s Br."). The court concludes that Commerce failed to provide a sufficient explanation of its findings on the record to permit judicial review. Therefore, the court remands this matter to Commerce for a more reasoned explanation of its classification of a challenged sale as an export sale and its 19 U.S.C. § 1677b(a)(1)(C) finding of home market non-viability.

BACKGROUND

I. Legal Framework

Dumping occurs when a foreign company sells goods in the United States at a lower price than the company charges for the same product in its home market. Sioux Honey Ass'n v. Hartford Fire Ins. Co., 672 F.3d 1041, 1046 (Fed. Cir. 2012). This practice constitutes unfair competition because it permits foreign producers to undercut domestic companies by selling products below reasonable fair market value. Id. at 1046–47. To address the harmful impact of such unfair competition, Congress enacted the Tariff Act of 1930, which empowers Commerce to investigate potential dumping and, if necessary, to issue orders instituting duties on subject merchandise. Id. When Commerce concludes that duties are appropriate, the agency is required to determine margins as accurately as possible. Rhone Poulenc, Inc. v. United States, 899 F.2d 1185, 1191 (Fed. Cir. 1990).

Pursuant to 19 U.S.C. § 1673, Commerce imposes AD duties on foreign goods if it determines that the goods are being, or are likely to be, sold at less than fair value, and the International Trade Commission concludes that the sale of the merchandise below fair value materially injures, threatens, or impedes the establishment of an industry in the United States. Diamond Sawblades Mfrs. Coal. v. United States, 866 F.3d 1304, 1306 (Fed. Cir. 2017). Merchandise is sold at less than fair value when the price the producer charges in its home market, the NV, is greater than the price charged for the product in the United States, the export price. Union Steel v. United States, 713 F.3d 1101, 1103 (Fed. Cir. 2013) (quotation omitted). The AD duty is calculated by determining the difference between the NV and the export price for the merchandise. 19 U.S.C. § 1673.

NV is ordinarily computed by looking to the sales price of the subject merchandise in the exporting country, the home market. 19 U.S.C. § 1677b(a)(1)(B)(i). However, when the volume of subject merchandise the producer sells in its home market is less than five percent of the quantity of the merchandise the producer sells in the United States, Commerce may look to third-country sales to calculate the appropriate NV. See 19 U.S.C. § 1677b(a)(1)(C) ; 19 C.F.R. § 351.404(b). "To determine whether a sale is a home market sale, Commerce objectively assesses whether, given the particular facts and circumstances, a producer would have known that the merchandise will be sold domestically or for export." Stupp Corp. v. United States, 43 CIT ––––, ––––, 359 F. Supp. 3d 1293, 1310 (2019) (citing INA Walzlager Schaeffler KG v. United States, 21 C.I.T. 110, 123–25, 957 F. Supp. 251, 263–64 (1997) ). If Commerce concludes that a producer knew or had reason to know, at the time of the sale, that the merchandise was destined for export, Commerce may exclude the sale from the home market database. INA Walzlager Schaeffler, 957 F. Supp. at 264–65. In making this determination, Commerce must "diligently inquire into allegations of knowledge and render its conclusion based on all relevant facts and circumstances" in the record. Stupp, 359 F. Supp. 3d at 1310. Further, Commerce's responsibility to conduct a diligent inquiry requires the agency to examine evidence presented by interested parties "which a reasonable mind would accept as calling into question whether respondents were able to distinguish home market sales destined for consumption in the home market from home market sales destined [for export]." Fed.-Mogul Corp. v. United States, 17 CIT 1015, 1020–21, 15 ITRD 2233 (1993).

II. Factual and Procedural History

On August 16, 2017, Coalition filed a petition with Commerce regarding the importation of certain stainless steel flanges from India and the People's Republic of China. Stainless Steel Flanges from India and the People's Republic of China: Initiation of Less-Than-Fair-Value Investigations, 82 Fed. Reg. 42,469 (Dep't Commerce Sept. 11, 2017), P.R. 18. On September 11, 2017, Commerce initiated an AD investigation into the importation of stainless steel flanges from India from the period of July 1, 2016 to June 30, 2017. Id. Commerce selected Chandan as one of three mandatory investigation respondents¹ and issued a questionnaire to Chandan seeking information on its sales of stainless steel flanges. See Mem. from C. Canales to E. Yang re: Investigation of Stainless Steel Flanges from India: Respondent Selection at 1 (Dep't Commerce Oct. 3, 2017), P.R. 29; Letter from P. Walker to Chandan Steel Ltd., re: Stainless Steel Flanges from India: Comments on Volume of Home Market Sales Destined for Consumption in Home Market at 1 (Dep't Commerce Oct. 20, 2017), P.R. 46.

Shortly thereafter, Chandan submitted a letter to Commerce regarding its home market sales. Letter from Chandan Steel Ltd. to Sec'y of Commerce re: Certain Stainless Steel Flanges from India, Comments on Volume of Home Market Sales Destined for Consumption at 1 (Oct. 18, 2017), P.R. 40, C.R. 13 ("Chandan's Initial Letter"). Chandan noted that it was aware that its home market sales of merchandise under investigation totaled [[ ]] kilograms, equivalent to [[ ]] of its aggregate sales of subject merchandise in the United States, which would make its home market viable for calculating NV. See id. Chandan expressed, however, that it had reason to believe that its sale to [[ ]] of [[ ]] kilograms of subject merchandise should be treated as an export sale. Id. at 1–3. Accordingly, Chandan asserted that its home market sales should be reduced by [[ ]], bringing the total home market sales to [[ ]] of its aggregate sales of subject merchandise in the United States. Id. at 1, 3. As such, Chandan posited that its home market was not a viable basis for calculating NV. Id. at 4; see 19 U.S.C. § 1677b(a)(1)(C) ; 19 C.F.R. § 351.404(b).

In that initial letter, Chandan articulated three reasons for its position. Chandan's Initial Letter at 2. First, the company stated that its initial offer to the customer, [[ ]], was quoted in U.S. dollars and marked for delivery in [[ ]], and that it was only upon the customer's later insistence that the final purchase order was received from [[ ]] and quoted in Indian Rupees for delivery in [[ ]]. Id. Second, the purchase order specified that the goods would carry mill testing reports compliant with [[ ]], a certification that is widely accepted for goods bound for export to [[ ]] states. Id. Finally,...