Kaptan Demir Celik Endustrisi ve Ticaret A.S. v. United States

666 F.Supp.3d 1334

KAPTAN DEMIR CELIK ENDUSTRISI VE TICARET A.Ş., Plaintiff,andÇolakoğlu Diş Ticaret A.Ş. and Çolakoğlu Metalurji A.Ş., Plaintiff-Intervenors, v. UNITED STATES, Defendant,andRebar Trade Action Coalition, Byer Steel Group, Inc.,Commercial Metals Company, Gerdau Ameristeel U.S. Inc.,Nucor Corporation, and Steel Dynamics, Inc., Defendant-Intervenors.

Slip Op. 23-167 Court No. 21-00565

United States Court of International Trade

November 27, 2023

Andrew T. Schutz, Grunfeld Desiderio Lebowitz Silverman & Klestadt, LLP, of Washington, D.C., for Plaintiff Kaptan Demir Celik Endustrisi ve Ticaret A.S.

Matthew M. Nolan, Jessica R. DiPietro and Leah N. Scarpelli, ArentFox Schiff LLP, of Washington, D.C., for Plaintiff-Intervenors Çolakoğlu Diş Ticaret A.Ş. and Çolakoğlu Metalurji A.Ş.

Sosun Bae, Senior Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, D.C., for Defendant United States. With her on the brief were Brian M. Boynton, Principal Deputy Assistant Attorney General, Patricia M. McCarthy, Director, L. Misha Preheim, Assistant Director. Of counsel on the briefs was W. Mitch Purdy, Attorney, Office of the Chief Counsel for Trade Enforcement and Compliance, U.S. Department of Commerce, of Washington, D.C.

John R. Shane, Alan H. Price, and Maureen E. Thorson, Wiley Rein, LLP, of Washington, D.C., for Defendant-Intervenors Rebar Trade Action Coalition, Byer Steel Group, Inc., Commercial Metals Company, Gerdau Ameristeel U.S. Inc., Nucor Corporation, and Steel Dynamics, Inc.

OPINION

Gary S. Katzmann, Judge

Katzmann, Judge: The court returns to litigation arising from a challenge to the Department of Commerce's ("Commerce") 2018 administrative review of the countervailing duty order on rebar¹ from Turkey. See Steel Concrete Reinforcing Bar from the Republic of Turkey: Final Results of Countervailing Duty Administrative Review and Rescission, in Part; 2018, 86 Fed. Reg. 53279 (Dep't Com. Sept. 27, 2021), P.R. 288 ("AR Results"). Now before the court is a challenge to Commerce's Final Results of Redetermination Pursuant to Court Remand (Dep't Com. July 24, 2023), ECF No. 66 ("Remand Results"). Resolving this challenge implicates the trade law applications of the proverbial wisdom that one man's trash is another's treasure: on remand, Commerce determined that a shipbuilder's sale of steel scrap to an affiliated rebar manufacturer did not warrant the attribution of Turkish government subsidies from seller to buyer. The court concludes that this redetermination is both adequately explained and supported by substantial evidence on the record, and accordingly sustains the Remand Results in their entirety.

BACKGROUND

I. Legal Background

Commerce is directed by statute to assess countervailing duties on the basis of the countervailable subsidies provided "directly or indirectly" with respect to "the manufacture, production, or export of a class or kind of merchandise imported . . . into the United States." 19 U.S.C. § 1671(a)(1). As this provision is silent on the question of how Commerce is to attribute countervailable subsidies to products, see id., Commerce in 1998 promulgated a series of gap-filling regulations on the subject. Relevant here is Commerce's regulation with respect to "Input suppliers," which reads as follows:

If there is cross-ownership between an input supplier and a downstream producer, and production of the input product is primarily dedicated to production of the downstream product, the Secretary will attribute subsidies received by the input producer to the combined sales of the input and downstream products produced by both corporations (excluding the sales between the two corporations).

19 C.F.R. § 351.525(b)(6)(iv) (emphasis added).

This provision leaves open the question of when the production of an input product is "primarily dedicated" to the production of a downstream product. Commerce provided the following illustrations in the preamble to the Federal Register notice in which it promulgated § 351.525:

The main concern we have tried to address is the situation where a subsidy is provided to an input producer whose production is dedicated almost exclusively to the production of a higher value added product—the type of input product that is merely a link in the overall production chain. This was the case with stumpage subsidies on timber that was primarily dedicated to lumber production and subsidies to semolina primarily dedicated to pasta production. We believe that in situations such as these, the purpose of a subsidy provided to the input producer is to benefit the production of both the input and downstream products.

Countervailing Duties, 63 Fed. Reg. 65348, 65401 (Dep't Com. Nov. 25, 1998) ("Preamble") (citations omitted).

Commerce also laid out the following contrasting scenario:

Where we are dealing with input products that are not primarily dedicated to the downstream products, however, it is not reasonable to assume that the purpose of a subsidy to the input product is to benefit the downstream product. For example, it would not be appropriate to attribute subsidies to a plastics company to the production of cross-owned corporations producing appliances and automobiles.

Id.

As Commerce's reference to illustrative examples in its explanation suggests, Commerce's "primarily dedicated" analyses are highly fact-specific and defy attempts to trace universally applied decisional principles. See Nucor Corp. v. United States ("Nucor I"), 46 CIT —, —, 600 F. Supp. 3d 1225, 1238 (2022). In some cases Commerce has focused on the nature of the business entity producing the input product, finding production of that product not to be "primarily dedicated" to the downstream product where the entity's business is largely dedicated to matters other than production of the product. See, e.g., Certain Glass Containers from the People's Republic of China: Final Affirmative Countervailing Duty Determination, 85 Fed. Reg. 31141 (Dep't Com. May 22, 2020) and accompanying Issues and Decisions Mem. cmt. 12 (declining to attribute subsidies for glass machinery where an input supplier's business license listed "several kinds of business activities beyond merely glass equipment manufacturing, such as rubber machinery and winery equipment"). In other cases Commerce has analyzed the nature of the input product itself, finding production of the input not to be "primarily dedicated" to the downstream product where the input product has many other potential applications besides incorporation into the downstream product.² See Final Affirmative Countervailing Duty Determination and Final Negative Critical Circumstances Determination: Certain Lined Paper Products from Indonesia, 71 Fed. Reg. 47174 (Dep't Com. Aug. 16, 2006) and accompanying Issues and Decisions Mem. cmt. 3 (finding that production of pulp logs was primarily dedicated to production of downstream paper products because "pulp logs are used to make pulp which, in turn, is used to make paper"). This court will uphold such differing modes of "primarily dedicated" analysis—and indeed differing conclusions with respect to the same input product in different cases, see Nucor I, 46 CIT at —, 600 F. Supp. 3d at 1238—so long as Commerce's conclusion in each case rests on substantial evidence and Commerce reasonably explains the basis for its decision. See NMB Sing. Ltd. v. United States, 557 F.3d 1316, 1319 (Fed. Cir. 2009)); see also Save Domestic Oil, Inc. v. United States, 357 F.3d 1278, 1283-84 (Fed. Cir. 2004) (citing Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 42, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983)); see also SKF USA Inc. v. United States, 630 F.3d 1365, 1373 (Fed. Cir. 2011) ("When an agency changes its practice, it is obligated to provide an adequate explanation for the change." (citing Motor Vehicle Mfrs., 463 U.S. at 42, 103 S.Ct. 2856)).

II. Procedural Background

The court presumes familiarity with the background of this case as discussed in the court's review of challenges to the AR Results. See Kaptan Demir Celik Endustrisi ve Ticaret A.S. v. United States ("Kaptan I"), 47 CIT —, 633 F. Supp. 3d 1276 (2023). In that proceeding, Plaintiff Kaptan Demir Celik Endustrisi ve Ticaret A.S. ("Kaptan"), a Turkish producer and exporter of rebar, brought a motion for judgment on the agency record on the basis of two challenges to Commerce's determinations in the AR Results. Id. at 1281. Kaptan specifically challenged Commerce's determination that subsidies received by Nur Gemicilik ve Ticaret A.S. ("Nur"), a shipbuilding company affiliated with Kaptan, were properly attributed to Kaptan on the basis of a cross-owned input supplier relationship as defined by 19 C.F.R. § 351.525(b)(6)(iv).³ Defendant the United States ("the Government") and domestic producers, Defendant-Intervenors Rebar Trade Action Coalition, Byer Steel Group, Inc., Commercial Metals Company, Gerdau Ameristeel U.S. Inc., Nucor Corporation, and Steel Dynamics, Inc., ("Domestics"), opposed Kaptan's motion. The court concluded that Commerce had failed to properly explain how Nur's production of steel scrap, which Kaptan bought and melted down to produce rebar, constituted "production of the input product [that] is primarily dedicated to production of the downstream product." Id. at 1280, 1285 (quoting 19 C.F.R. § 351.525(b)(6)(iv)). The court remanded Commerce's finding for "further explanation and review." Kaptan I, 633 F. Supp. 3d at 1285.

On remand, Commerce initially indicated that it would reaffirm its determination that Nur is Kaptan's cross-owned input supplier. Draft Results of Redetermination Pursuant to Court Remand (Dep't. Com. June 26, 2023), P.R.R. 1 ("Draft Remand Results").⁴ But following the submission of comments from interested parties on the Draft Remand Results, see Letter from Kaptan to G. Raimondo, Sec'y of Com., re: Kaptan Comments on Draft Remand (July 7, 2023), P.R.R. 6 ("Kaptan's Cmts....