Hyundai Steel Co. v. United States

19 F.4th 1346

HYUNDAI STEEL COMPANY, SeAH Steel Corp., Nexteel Co., Ltd., Plaintiffs-Appellees

Husteel Co., Ltd., Plaintiff

v.UNITED STATES, California Steel Industries, IPSCO Tubulars Inc., Maverick Tube Corporation, Defendants

Welspun Tubular LLC USA, Defendant-Appellant

2021-1748

United States Court of Appeals, Federal Circuit.

Decided: December 10, 2021

Henry David Almond, Arnold & Porter Kaye Scholer LLP, Washington, DC, argued for plaintiff-appellee Hyundai Steel Company. Hyundai Steel Company and NEXTEEL Co., Ltd. also represented by Leslie Bailey, Kang Woo Lee, Jaehong David Park, Daniel Wilson.

Jeffrey M. Winton, Winton & Chapman PLLC, Washington, DC, argued for plaintiff-appellee SeAH Steel Corp. Also represented by Michael John Chapman, Jooyoun Jeong, Vi Mai.

Elizabeth Drake, Schagrin Associates, Washington, DC, argued for defendant-appellant. Also represented by Benjamin Jacob Bay, Nicholas J. Birch, Christopher Cloutier, Geert M. De Prest, William Alfred Fennell, Luke A. Meisner, Kelsey Rule, Roger Brian Schagrin.

Before O'Malley, Bryson, and Hughes, Circuit Judges.

Bryson, Circuit Judge.

Appellant Welspun Tubular LLC USA appeals from a decision of the Court of International Trade ("the Trade Court") regarding an administrative review of an antidumping duty order on welded line pipe from the Republic of Korea. In that review, the Department of Commerce found that a "particular market situation" ("PMS") existed in the Korean market for welded line pipe. Based on that finding, Commerce made an upward adjustment in its calculation of the costs of production of the subject welded line pipe for the two selected respondents, Hyundai Steel Company and SeAH Steel Corporation, which resulted in enhanced antidumping duties.¹

The Trade Court overturned Commerce's determination on the ground that Commerce was not statutorily authorized to adjust the exporters' costs of production to account for the existence of a PMS. The court also found that Commerce's determination that a PMS existed in Korea was unsupported by substantial evidence. We agree with the Trade Court that the 2015 amendments to the antidumping statute do not authorize Commerce to use the existence of a PMS as a basis for adjusting a respondent's costs of production to determine whether a respondent has made home market sales below cost. In light of our decision on the statutory construction issue, it is unnecessary for us to decide whether Commerce's finding of a PMS was supported by substantial evidence.

I

A

The administrative review at issue in this case focused on sales of welded line pipe made by Hyundai and SeAH between May 22, 2015, and November 30, 2016. After its investigation, Commerce issued a preliminary determination finding that sales of welded line pipe in the United States had been made below "normal value." Welded Line Pipe from Korea: Preliminary Results of Antidumping Duty Administrative Review; 2015-2016, 83 Fed. Reg. 1,023 (Jan. 9, 2018). In determining normal value, Commerce found that a PMS existed in Korea during the review period. Based on that finding, Commerce made an upward adjustment to the costs of production for both Hyundai and SeAH. See id. ; Decision Memorandum for the Preliminary Results of the 2015-2016 Administrative Review of the Antidumping Duty Order on Welded Line Pipe from Korea (Dep't Commerce Jan. 9, 2018) ("Preliminary Memo"), https://enforcement.trade.gov/frn/summary/korea-south/2018-00183-1.pdf. When Commerce issued its final determination on July 18, 2018, it continued to apply that upward adjustment.² See Welded Line Pipe from the Republic of Korea: Final Results of Antidumping Duty Administrative Review; 2015-2016, 83 Fed. Reg. 33,919 (Dep't Commerce July 18, 2018) ; Issues and Decision Memorandum for the Final Results of the 2015-2016 Administrative Review of the Antidumping Duty Order on Welded Line Pipe, at 23 (Dep't Commerce July 18, 2018) ("Final Memo"), https://enforcement.trade.gov/frn/summary/korea-south/2018-15327-1.pdf. Based in part on that upward adjustment, Commerce found that Hyundai and SeAH were selling welded line pipe for less than fair value in the United States and therefore assessed antidumping duties against them.

B

In general, when Commerce determines whether a product is being sold for less than fair value, it must make "a fair comparison ... between the export price or constructed export price and normal value." 19 U.S.C. § 1677b(a).³ The normal value of merchandise is ordinarily determined by the price at which comparable goods were sold in the exporter's home market during the period of review. In determining normal value, Commerce looks first at home market sales of comparable goods; it may also use third-country market sales of comparable goods as the basis for normal value if certain conditions are met. See id. § 1677b(a)(1)(C). In either case, Commerce is directed to exclude sales made below the exporter's cost of production. Id. § 1677b(b)(1). That inquiry is referred to as the "sales-below-cost test." If all market sales in the ordinary course of trade⁴ fail the sales-below-cost test (i.e., those sales are all below the exporter's cost of production), then Commerce may base normal value on the constructed value of the goods.⁵ Id. However, if there are market sales in the ordinary course of trade that pass the sales-below-cost test, Commerce must use those sales in determining normal value unless it makes one of a few specified findings, such as that a PMS "prevents a proper comparison with the export price or constructed export price." Id. § 1677b(a)(1)(B)(ii)(III) ; see also id. § 1677b(a)(1)(C)(iii).⁶

Here, Commerce based Hyundai's normal value on home market sales and SeAH's normal value on third-country sales. Preliminary Memo at 15 (discussing Hyundai); J.A. 27 (discussing SeAH). Accordingly, Commerce applied the sales-below-cost test to determine which of those sales should be included in the normal value calculation. See Preliminary Memo at 21. With respect to both respondents, Commerce calculated normal value using the respondents' market sales above the cost of production, as provided in section 1677b(b). To determine the dumping margins that are now before the court, Commerce did not calculate either respondent's normal value using the constructed value provision, section 1677b(e).⁷

Section 1677b(b)(3) sets forth a specific methodology for calculating the cost of production for a particular product for purposes of the sales-below-cost test:

For purposes of this part, the cost of production shall be an amount equal to the sum of—

(A) the cost of materials and of fabrication or other processing of any kind employed in producing the foreign like product, during a period which would ordinarily permit the production of that foreign like product in the ordinary course of business;

(B) an amount for selling, general, and administrative expenses based on actual data pertaining to production and sales of the foreign like product by the exporter in question; and

(C) the cost of all containers and coverings of whatever nature, and all other expenses incidental to placing the foreign like product in condition packed ready for shipment.

19 U.S.C. § 1677b(b)(3). Section 1677b(e) contains a similar methodology for calculating the constructed value of a product, although constructed value also includes an amount for profits. Id. § 1677b(e).

In 2015, Congress enacted the Trade Preferences Extension Act ("TPEA"), which amended the constructed value calculation statute, section 1677b(e), to include the following proviso:

[I]f a particular market situation exists such that the cost of materials and fabrication or other processing of any kind does not accurately reflect the cost of production in the ordinary course of trade, the administering authority may use another calculation methodology under this part or any other calculation methodology.

Trade Preferences Extension Act of 2015, Pub. L. No. 114-27, § 504, 129 Stat. 362, 385 (2015); see also 19 U.S.C. § 1677b(e). Thus, the TPEA enabled Commerce to adjust the calculation methodology for determining constructed value when it finds that a PMS exists.

In its final determination, Commerce found that a particular market situation existed with respect to hot-rolled coil ("HRC") and electricity, key inputs in the production of welded line pipe. Final Memo at 13–14. Specifically, Commerce identified four factors that collectively impacted the cost of production of welded line pipe: (1) Korean government subsidies of Korean steel producers, including HRC producers; (2) overcapacity in Chinese steel production, which put downward pressure on Korean domestic HRC prices, (3) "strategic alliances" among companies in the Korean steel industry that resulted in favorable HRC prices to some domestic Korean producers; and (4) "government involvement in the Korean electricity market." Id. Commerce was able to quantify only the first factor, the Korean HRC subsidies. Commerce used that factor to adjust Hyundai's and SeAH's costs of production when conducting the sales-below-cost test. Id. at 23–24.

In support of its adjustment to the respondents' costs of production for purposes of the sales-below-cost test, Commerce relied on the amendment to section 1677b(e), which allows for an adjustment to constructed value, to justify its use of an adjustment to Hyundai's and SeAH's costs of production. Commerce explained:

Section 504 of the TPEA added the concept of "particular market situation" in the definition of the term "ordinary course of trade," for purposes of [constructed value] under section 773(e) of the Tariff Act of 1930, as amended (the Act), and through these provisions for purposes of the [costs of production] under section 773(b)(3) of the Act.

Id. at 12.

C

Four Korean respondents, including Hyundai and SeAH, filed an action in the Trade Court challenging Commerce's final determination. Their challenge focused mainly on Commerce's determination that...