United States Steel Corp. v. United States

2011 CIT 66

Opinion

Slip Op. 11 - 66

UNITED STATES COURT OF INTERNATIONAL TRADE

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UNITED STATES STEEL CORPORATION, :

Plaintiff, :

-and- :

NUCOR CORPORATION, :

Intervenor-Plaintiff, :

v. : Court No. 08-00216

THE UNITED STATES, :

Defendant, :

ESSAR STEEL, LIMITED, :

Intervenor-Defendant. :

Memorandum & Order

[Motions for judgment on agency record granted; remanded to International Trade Administration.]

Decided: June 14, 2011

Skadden, Arps, Slate, Meagher & Flom LLP (Robert E. Lighthizer, Jeffrey D. Gerrish, Ellen J. Schneider, M. Allison Guagliardo, and Luke A. Meisner) for the plaintiff.

Wiley Rein LLP (Alan H. Price, Timothy C. Brightbill, and Maureen E. Thorson) for the intervenor-plaintiff.

Tony West, Assistant Attorney General; Jeanne E. Davidson, Director, Patricia M. McCarthy, Assistant Director, Commercial Litigation Branch, Civil Division, U.S. Department of Justice (David D’Alessandris); and Office of the Chief Counsel for Import Court No. 08-00216 Page 2

Administration, U.S. Department of Commerce (Thomas M. Beline), of counsel, for the defendant.

Arent Fox LLP (Mark P. Lunn and Diana Dimitriuc Quaia) for the intervenor-defendant.

AQUILINO, Senior Judge: This case contests two aspects

of Certain Hot-Rolled Carbon Steel Flat Products From India: Notice

of Final Results of Antidumping Duty Administrative Review, 73 Fed.

Reg. 31,961 (Dep’t of Comm. June 5, 2008) (“Final Results”),

covering a 2005-2006 period of review (“POR”).

The court’s jurisdiction is pursuant to 19 U.S.C.

§1516a(a)(2)(A) and 28 U.S.C. §§ 1581(c) and 2631(c).

I

Moving for judgment on the agency record, the plaintiff

United States Steel Corporation (“USSC”) and the intervenor-

plaintiff Nucor Corporation initially contend the International

Trade Administration, U.S. Department of Commerce (“ITA”) erred in

dating certain exports of Essar Steel Limited from India to the

United States. The defendant also perceives inadequacy and

requests remand in order to “reevaluate record evidence and change

or more fully explain” its position on the issue. Defendant’s

Response to . . . Motions for Judgment Upon the Administrative

Record (“Gov’t Br.”), p. 2. See id. at 16. Court No. 08-00216 Page 3

Because the request does not involve a change in or

interpretation of policy and does not appear frivolous or in bad

faith, cf. SKF USA Inc. v. United States, 254 F.3d 1022, 1029 (Fed.

Cir. 2001), remand appears appropriate and is therefore hereby

ordered.

II

USSC and Nucor also claim it was unreasonable for ITA to

have adjusted Essar’s U.S. sales price contrary to section

772(c)(1)(B) of the Tariff Act of 1930, as amended, i.e., by “the

amount of any import duties imposed by the country of exportation

which have been rebated, or which have not been collected, by

reason of the exportation of the subject merchandise to the United

States.” 19 U.S.C. §1677a(c)(1)(B). See 73 Fed.Reg. at 31,964 and

Issues and Decision Memorandum to Final Results (“DecMemo”) at

comment 18. Cf. Public Record Document (“PDoc”) 184. Their claim

concerns the “Advance Licence” program of the Government of India

(“GOI”), pursuant to which, as revealed in the administrative

record, a company may be authorized to import certain quantities of

raw materials for further processing without payment of import

duties thereon upon condition that proper documentation is provided

to establish exportation within the time specified by the license Court No. 08-00216 Page 4

of the required amount of further processed goods, at which point

the non-collection of duties becomes final. See, e.g., Essar’s

Supplemental Questionnaire Response (“SQR”) at Ex. 16B, pp. 65-68,

and Ex. 16C, p. 1, PDoc 90. The critical point, USSC and Nucor

argue, is that, if no such proof is provided to GOI, the relevant

processor remains liable for the uncollected import duties.

A

Essar claimed an adjustment for duty drawback and

“reported in its U.S. sales the advance license number

corresponding to each commercial invoice[.]” Essar’s Questionnaire

Response (“QR”) at C-33, PDoc 50, Confidential Record Document

(“ConfDoc”) 9. It provided the following for support: (1) a copy

of a publication announcing the per-kilogram input amount(s) for

“standard input output norm C-495” (“SION”), pertaining, inter

alia, to subject merchandise, and a copy of relevant GOI law and

regulation on its advance license program; (2) copies of advance

licenses issued to Essar under that program; (3) bills supporting

an ITA finding of entry into GOI customs of, inter alia, material

imported pursuant to the licenses (said bills bearing handwritten

numbers or notes evidently correlative to the SION calculus); and

(4) a table of the amount of duty drawback Essar had purportedly

received during the POR pursuant to the advance license program. Court No. 08-00216 Page 5

See id. at C-33, C-34, & Ex. C-13 (A, B & C), PDoc 50, ConfDoc 9;

Essar’s SQR at 19, Ex. 16 (A, B & C), Ex. 17, & Ex. 18, PDoc 90,

ConfDoc 33. Based upon that information, Essar claimed a certain

license-specific duty saving from each commercial invoice in its

U.S. sales listing but claimed none from a fourth license it

contended was yet to be utilized during the POR. Essar’s QR at

C-33, PDoc 50, ConfDoc 9. See Defendant-Intervenor Essar Steel

Limited's Response to . . . Motions for Judgment on the Agency

Record Pursuant to Rule 56.2, p. 15.

In its preliminary results, ITA found Essar had failed to

provide sufficient evidence to show it had received “rebates” from

the GOI as duty drawback and rejected the duty-drawback adjustment

request. See Preliminary Results Calculation Memorandum, p. 2,

PDoc 131. Essar argued in its brief to the agency, inter alia,

that ITA had misapprehended GOI’s advance license program as a

program of direct rebate upon export whereas the program actually

involves non-collection of import duty on a contingent basis, and

that it, Essar, had in fact provided sufficient evidence to meet

the requirements for adjustment. See Essar’s Case Brief, pp. 2-6,

PDoc 162. Responding, USSC and Nucor contended Essar had failed to

establish entitlement thereto, in significant part because it did Court No. 08-00216 Page 6

not prove full compliance with the advance license program’s post-

export requirements. See, e.g., Rebuttal Brief on Behalf of USSC,

pp. 1-6, PDoc 170.

In the Final Results, ITA agreed it had mistakenly

believed Essar’s duty-drawback-adjustment claim had been based upon

a different drawback program and acknowledged that GOI’s advance

license program could meet its test for a drawback adjustment. See

DecMemo at comment 18. ITA then

re[-]analyzed the record evidence . . . and found that Essar’s advance license program used SION (the standard the GOI uses to calculate the quantity of imports that are eligible for duty drawback based on a specified quantity of exports), and that this meets the requirements of the Department's two-prong test: 1) the import duties and rebates are directly linked to, and are dependent upon, one another, and 2) the company claiming the adjustment can demonstrate that there are sufficient raw material imports to account for the duty drawback received on exports of the manufactured product.[1] . . . Essar's reported SION of import duties and rebates were directly linked to, and are dependent upon, one another.

Id. (footnotes omitted and referencing, inter alia, Essar’s QR at

Ex. C-13 (generally) & Essar’s SQR at Ex. C-18).

1 See Antidumping Methodologies: Market Economy Inputs, Expected Non-Market Economy Wages, Duty Drawback; and Request for Comments, 71 Fed.Reg. 61,716 (Dep’t of Comm. Oct. 19, 2006). Court No. 08-00216 Page 7

B

USSC and Nucor do not contest ITA’s test per se, which

has been upheld in other circumstances, e.g., Carlisle Tire &

Rubber Co. v. United States, 11 CIT 168, 657 F.Supp. 1287 (1987),

rather the finding that Essar met its requirements. That is, while

in accordance with law within the meaning of 19 U.S.C.

§1516a(b)(1)(B)(I), the finding is not supported by the requisite

substantial evidence2 on the agency record.

The defendant posits that the two prongs of the duty

drawback test “focus first ‘on the drawback program itself’ and

second on ‘the specific application of the drawback program to the

firm claiming the adjustment.’” Gov’t Br., p. 10, quoting Far East

Machinery Co. v. United States, 12 CIT 428, 431, 688 F.Supp. 610,

612 (1988). It contends ITA properly found the test satisfied in

this instance in light of the evidence of Essar’s subject

merchandise exports in its U.S. sales database linked to the

company’s advance license and import data via the relevant SION

2 “Substantial evidence is . . . such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.” Consolidated Edison Co. v. NLRB, 305 U.S. 197, 229 (1938). It requires “something less than the weight of the evidence, and the possibility of drawing two inconsistent conclusions from the evidence does not prevent an administrative agency's finding from being supported by substantial evidence.” Consolo v. Federal Maritime Comm'n, 383 U.S. 607, 619-20 (1966). Court No. 08-00216 Page 8

used by GOI for the advance license program. Id., referencing

DecMemo at comment 18, citing Notice of Final Determination of

Sales at Less Than Fair Value: Certain Hot-Rolled Carbon Steel Flat

Products from India, 66 Fed.Reg. 50,406 (Dep’t of Comm. Oct. 3,

2001).

Given that the second prong’s concern is only with

respect to imported material input amounts, however, the first

prong cannot reasonably be focused solely upon “the drawback

program itself” –– in disregard of a claimant’s specific compliance

with program requirements. See, e.g., Rajinder Pipes Ltd. v.

United States, 23 CIT 656, 70 F.Supp.2d 1350 (1999) (party must

show the link between its duty-free imports and its exports as part

of first prong of drawback adjustment test). In the context of a

rebate program, the proper “payment” of import duty must still be

proved, or any linking of a “rebate” will be problematic. See,

e.g., Allied Tube & Conduit Corp. v. United States, 25 CIT 23, 132

F.Supp.2d 1087 (2001). Similarly, the mere finding of validity on

a “non-collection”-duty-drawback program without proof of a

respondent’s full compliance therewith would not amount to

substantial evidence on the record to support imputing a “link”

between such respondent’s exports and duty-free imports. Court No. 08-00216 Page 9

The SION formula may be considered necessary but is

insufficient, on its own, to prove “duty-free” importation linked

to exportation for purposes of U.S. antidumping law. SION simply

equates input for a given output. SION’s bare existence in the

record, in the absence of proof of compliance with GOI’s post-

export requirements or official excuse of contingent liability for

GOI customs duty on the imported input(s), cannot reasonably be

concluded to amount to substantial evidence on the record of

definitive lack of such liability.

The defendant argues, nonetheless, there is nothing in

the statute or in the two-prong test requiring submission of export

documentation to establish entitlement to the duty-drawback

adjustment. Gov’t Br., p. 12, referencing Rajinder, 23 CIT at 665,

70 F.Supp.2d at 1358 (“in making its adjustment determinations on

non-collection programs, Commerce has applied the same two-prong

duty drawback test as it has in standard rebate programs”). The

defendant further argues the court must defer to ITA’s conclusions

if the evidence supports them, and it implies the agency’s previous

grant of the duty-drawback adjustment to Essar in the original

investigation was a factor in ITA’s decision in this matter. See

id. at 12-13, referencing, inter alia, Certain Hot-Rolled Carbon

Steel Flat Products from India, supra. See DecMemo at comment 18. Court No. 08-00216 Page 10

The first point may be so, but this memorandum is not

intended to delimit what would properly satisfy the two-prong test.

The general rule, however, is that an agency’s decisions must be

consistent, or reasonably explained for deviation. E.g., Secretary

of Agric. v. United States, 347 U.S. 645 (1954). The fact that

Essar may have satisfied the duty-drawback test in the original

investigation does not answer whether it also did so during the

administrative review at bar. See, e.g., Alloy Piping Products,

Inc. v. United States, 33 CIT ___, Slip Op. 09-29 at 22, 2009 WL

983078 at *9 (April 14, 2009) (“different data compiled in

different periods of review . . . have no legal effect on the

administrative review” under consideration), appeal docketed, No.

2010-1288 (Fed.Cir. April 6, 2010).

Based on the present record, USSC and Nucor now cast

reasonable doubt on how ITA reached its conclusion. The plain

language thereof appears simply to have assumed that Essar’s

liability for import duties incurred during the POR was no longer

conditional. At first blush, that might have appeared not unrea-

sonable3, but assumption is not substantial evidence. Compare

3 It appears undisputed that the record would support finding that import duties on input(s) were not paid, and that export of subject merchandise embodying transformed input(s) of the same class or kind (whether or not consisting of those duty-deferred imports) to the United States did occur. Court No. 08-00216 Page 11

Jinan Yipin Corp. v. United States, 31 CIT 1901, 1933, 526 F.Supp.

2d 1347, 1375 (2007) (rejecting ITA’s determination based on “mere

assumptions, which find no apparent support in record evidence”)

with Pohang Iron & Steel Co. v. United States, 23 CIT 778, 790-91

(1999)(an administrative inference must evince “some likelihood” of

truth from the record, not mere possibility).

Essar had the burden of establishing entitlement to the

duty-drawback adjustment. See, e.g., Fujitsu General Ltd. v.

United States, 88 F.3d 1034, 1040 (Fed.Cir. 1996). There is

nothing of record, however, to suggest that subsequent collection

of deferred import duties by GOI for any non-compliance of the

requirements of the advance license program was precluded, de jure

or de facto, simply by reason of export to the United States. If

there is such proof of permanent excuse, or removal by affirmative

action vis-à-vis GOI or otherwise, of Essar’s contingent liability

for import duties, it is not obvious from this administrative

record. For example, as USSC and Nucor argued, there is no

apparent proof of export submitted to the relevant Regional

Authority within two months from expiration of the export

obligation period, as required under the GOI program, nor does the

record encompass any shipping bills bearing a relevant advance

license number or evince that export itself could not have occurred Court No. 08-00216 Page 12

except in compliance with the advance license program. See Essar’s

SQR at Exhibit 16B (“Handbook of Procedures-(Vol. I)”,

9/1/2004--3/31/2009, Min. of Comm. and Indus., Dept. of Comm.,

GOI), p. 58 (shipping documents “should be” endorsed with advance

license file or authorization number “to establish co- relation of

exports . . . with Authorization issued”) and p. 65 (“Monitoring of

Obligation”)4.

Certainly, process matters, and ITA is required to

address all relevant argument, 19 U.S.C. §1677f(i)(3)(A), but its

DecMemo to the Final Results herein inadequately addresses USSC’s

and Nucor’s relevant concern(s) over whether the agency duty-

drawback adjustment test may lawfully be interpreted not to require

proof or corroboration of the complete removal of contingent

liability for deferred import duties under the GOI advance license

program (via compliance, e.g., with GOI’s post-export requirements

under Indian law). Cf. 19 U.S.C. §1677a(c)(1)(B) (“by reason of

the exportation of the subject merchandise to the United States”).

4 Cf. Rajinder Pipes Ltd. v. United States, 23 CIT 656, 659-60 and 70 F.Supp.2d 1350, 1358, n. 3 (1999) (describing a program involving a “duty exemption entitlement certificate” book purportedly submitted to GOI customs officials upon export). Court No. 08-00216 Page 13

III

In view of the foregoing, plaintiff's and

intervenor-plaintiff's motions for judgment on the agency record

should be, and they hereby are, granted to the extent of remand of

the Final Results to ITA to clarify or reconsider its analysis of

the intervenor-defendant's entitlement to duty-drawback adjustment

within the meaning of 19 U.S.C. §1677a(c)(1)(B). Specifically, if

ITA’s position on remand is that the evidence of record proves

Essar’s contingent liability for deferred import duties has been

removed or permanently excused, the remand results shall clarify

why th at is so, or ITA may reconsider the issue of

Essar’s eligibility for duty-drawback adjustment altogether,

should that be determined necessary on remand -- and in light of

this decision.5

5 Although not relevant to this memorandum, this court considers exhaustion arguments inapplicable with respect to USSC’s and Nucor’s point regarding inconsistency in the Final Results as compared with ITA’s pronouncement in Certain Hot-Rolled Carbon Steel Flat Products from India, 73 Fed.Reg. 40,295 (Dep’t of Comm. July 14, 2008) (final results), Issues and Decision Memorandum at comment 22 (“India does not have an effective system in place during the POR for regularly monitoring and updating the accuracy of SIONs”), the companion countervailing-duty administrative review of hot rolled steel from India, involving overlapping review periods, and issued approximately one month after the Final Results herein. See, e.g., China Steel Corp. v. United States, 28 CIT 38, 59, 306 F.Supp.2d 1291, 1310 (2004) (on challenge to basis for corroboration, exhaustion inapplicable where ITA did not explain its basis until final determination). Court No. 08-00216 Page 14

The defendant may have until August 5, 2011 to carry out

that analysis and report the results thereof to the court and the

parties, which may comment thereon on or before September 2, 2011.

So ordered.

Decided: New York, New York June 14, 2011

/s/ Thomas J. Aquilino, Jr. Senior Judge