Uttam Galva Steels Ltd. v. United States

476 F. Supp. 3d 1387, 2020 CIT 151

Opinion

Slip Op. 20-151

UNITED STATES COURT OF INTERNATIONAL TRADE

UTTAM GALVA STEELS LIMITED,

Plaintiff,

Before: Leo M. Gordon, Judge v. Court No. 19-00044

UNITED STATES,

Defendant,

and

CALIFORNIA STEEL INDUSTRIES INC., AND STEEL DYNAMICS, INC.,

Defendant-Intervenors.

OPINION and ORDER

[Commerce’s Remand Results sustained in part and remanded in part.]

Dated: October 29, 2020

John M. Gurley and Aman Kakar, Arent Fox LLP, of Washington, DC, for Plaintiff Uttam Galva Steels Limited.

Elizabeth A. Speck, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, U.S. Department of Justice of Washington, DC, for Defendant United States. With her on the brief were Jeffrey Bossert Clark, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Claudia Burke, Assistant Director. Of counsel on the brief was Rachel A. Bogdan, Attorney, U.S. Department of Commerce, Office of the Chief Counsel for Trade Enforcement and Compliance of Washington, DC. Court No. 19-00044 Page 2

Roger B. Schagrin and Christopher T. Cloutier, Schagrin Associates of Washington, DC, for Defendant-Intervenors California Steel Industries, Inc. and Steel Dynamics, Inc.

Gordon, Judge: This action involves the final results of the 2016 administrative

review conducted by the U.S. Department of Commerce (“Commerce”) of the

countervailing duty (“CVD”) order of certain corrosion-resistant steel products from India.

See Certain Corrosion-Resistant Steel Products from India, 84 Fed. Reg. 11,053 (Dep’t

of Commerce Mar. 25, 2019) (final results admin. review) (“Final Results”); see also

accompanying Issues and Decision Memorandum, C-533-864, PD 1193 (Dep’t of

Commerce Mar. 18, 2019), available at

https://enforcement.trade.gov/frn/summary/india/2019-05647-1.pdf (last visited this date)

(“Decision Memorandum”).

Before the court are Commerce’s Final Results of Redetermination Pursuant to

Court Remand, ECF No. 34 2 (“Remand Results”), filed pursuant to the court’s remand

order in Uttam Galva Steels Ltd. v. United States, 44 CIT ___, 358 F. Supp. 3d 1366

(2020) (“Uttam Galva I”). See Plaintiff’s Comments on Remand Redetermination, ECF

No. 39 (“Pl.’s Br.”); see also Defendant’s Response to Comments on Remand

Redetermination, ECF No. 41 (“Def.’s Resp.”); Defendant-Intervenors’ Responsive

1 “PD” refers to a document in the public administrative record, which is found in ECF No. 20-3, unless otherwise noted. “CD” refers to a document in the confidential administrative record, which is found in ECF No. 20-2, unless otherwise noted. 2 All citations to the Remand Results, the agency record, and the parties’ briefs are to their confidential versions unless otherwise noted. Court No. 19-00044 Page 3

Comments in Support of the Remand Redetermination, ECF No. 40 (“Def.-Int.’s Resp.”).

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) 3, and 28 U.S.C. § 1581(c) (2018). For the

reasons follow, the court sustains in part and remands in part the Remand Results.

I. Background

Although the court assumes familiarity with the procedural history and its prior

decision in this matter, some additional background will aid the reader. Commerce

assigned adverse facts available (“AFA”) rates totaling 588.42% to Uttam Galva Steels

Limited (“Uttam Galva” or “Plaintiff”) due to Uttam Galva’s failure to provide information

about its affiliation with Lloyds Steel Industry Limited (“LSIL”). See Final Results, 84 Fed.

Reg. at 11,054. Uttam Galva challenged, administratively and here, Commerce’s

application of AFA with respect to the issues of affiliation and cross-ownership between

Uttam Galva and LSIL, and Commerce’s calculation of AFA rates. See Decision

Memorandum at 22–28; Compl., ECF No. 4.

Recognizing the merit of some of Uttam Galva’s claims, Commerce requested and

received a voluntary remand to reconsider its determination of AFA rates with respect to

the Market Access Initiative Program and the other four programs specially identified by

Uttam Galva, but not for any other programs included in the Final Results. See Uttam

Galva I, 44 CIT at ___, 358 F. Supp. 3d at 1373. In addition to granting the voluntary

3 Further citations to the Tariff Act of 1930, as amended, are to the relevant provisions of Title 19 of the U.S. Code, 2018 edition. Court No. 19-00044 Page 4

remand, the court sustained Commerce’s determination that Uttam Galva’s failure to

disclose its affiliation with LSIL merited the application of AFA pursuant to 19 U.S.C.

§ 1677e. Id. at ___, 358 F. Supp. 3d at 1371 (“Plaintiff has failed to demonstrate that

Commerce’s finding of cross-ownership was unreasonable.”). In remanding the

calculation of AFA rates, the court declined to limit the scope of the remand to only those

programs for which Commerce sought a voluntary remand. Id. at ___, 358 F. Supp. 3d

at 1373–74.

Pursuant to the remand, Commerce revised Uttam Galva’s Market Access

Initiative program rate downward from 16.63% to 6.06% and excluded previously

assigned rates for “(1) the Provision of Hot-Rolled Steel for LTAR, (2) SGUP Exemption

for the Iron and Steel Industry, (3) SGUP Long-Term Interest Free Loans Equivalent to

the Amount of VAT and CST Paid, and (4) SGUP’s Interest Free Loans.” Remand Results

at 5–6. However, Commerce determined that it would continue to apply the same AFA

rates to all the other remaining programs identified in the Final Results based on the

adverse inference that Uttam Galva benefitted from all initiated programs. Id. at 6–7.

Uttam Galva now challenges Commerce’s continued assignment of AFA rates to

the other remaining programs in the Final Results. Pl.’s Br. at 2. In particular, Uttam Galva

contends that Commerce’s failed to explain the differences in its application of AFA under

substantially similar factual circumstances to Uttam Galva as compared with mandatory

respondent JSW Steel Limited (“JSW”) during the investigation segment of the underlying

proceeding. Id. at 4–7. Plaintiff also argues that Commerce unreasonably attributed, as Court No. 19-00044 Page 5

AFA, 20 subsidy programs (“20 disputed programs”) to LSIL, and by extension to Uttam

Galva, despite information set forth in LSIL’s financial statement that indicates that LSIL

could not have benefitted from these programs. Id. at 7–10. Specifically, Uttam Galva

contends that LSIL (1) did not maintain facilities within the Indian States of Andhra

Pradesh and Karnataka and could not have been in receipt of the 16 initiated programs

specific to those territories (“geographically specific programs”), and (2) was not engaged

in mining activities and could not have received four subsidies specific to that sector

(“industry specific programs”). Id.

II. Standard of Review

The court sustains Commerce’s “determinations, findings, or conclusions” unless

they are “unsupported by substantial evidence on the record, or otherwise not in

accordance with law.” 19 U.S.C. § 1516a(b)(1)(B)(i). More specifically, when reviewing

agency determinations, findings or conclusions for substantial evidence, the court

assesses whether the agency action is reasonable given the record as a whole. Nippon

Steel Corp. v. United States, 458 F.3d 1345, 1350–51 (Fed. Cir. 2006). Substantial

evidence has been described as “such relevant evidence as a reasonable mind might

accept as adequate to support a conclusion.” DuPont Teijin Films USA v. United States,

407 F.3d 1211, 1215 (Fed. Cir. 2005) (quoting Consol. Edison Co. v. NLRB, 305 U.S.

197, 229 (1938)). Substantial evidence has also been described as “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 Court No. 19-00044 Page 6

supported by substantial evidence.” Consolo v. Fed. Mar. Comm’n, 383 U.S. 607, 620

(1966).

Fundamentally, though, “substantial evidence” is best understood as a word

formula connoting reasonableness review. 3 Charles H. Koch, Jr. Administrative Law and

Practice § 9.24[1] (3d ed. 2020). Therefore, when addressing a substantial evidence issue

raised by a party, the court analyzes whether the challenged agency action “was

reasonable given the circumstances presented by the whole record.” 8A West’s Fed.

Forms, National Courts § 3.6 (5th ed. 2020).

III. Discussion

A. Application of Adverse Facts Available to All Programs Initiated

In the investigation segment of the underlying proceeding, Commerce selected two

mandatory respondents: Uttam Galva and JSW. See Certain Corrosion-Resistant Steel

Products From India, 81 Fed. Reg. 35,323 (Dep’t of Commerce June 2, 2016) (final affirm.

determ.), and accompanying Issues and Decision Memorandum at 1, available at

https://enforcement.trade.gov/frn/summary/india/2016-12967-1.pdf (last visited on this

date). Commerce found that JSW failed to submit a response for a cross-owned input

supplier (“Affiliate X”) and determined that the application of AFA was appropriate. See

id. at 8–9. In applying AFA in calculating JSW’s subsidy rate, Commerce did not apply

adverse inferences to all programs initiated upon during the investigation. See id. at 9.

(“[W]e made an adverse inference that Affiliate X benefitted from all of the programs used

by the other entities within the JSW group of companies that did properly submit Court No. 19-00044 Page 7

questionnaire responses.”); see also Remand Results at 18 (“we acknowledge that we

did not countervail all programs initiated upon when determining the subsidy rate for

JSW”). In the administrative review at issue here, Commerce similarly found that Uttam

Galva had failed to report the existence of an affiliate, LSIL, and determined that the

application of AFA was appropriate. See Decision Memorandum at 24. In calculating

Uttam Galva’s subsidy rate, however, Commerce did apply adverse inferences for all

programs initiated upon with respect to LSIL. Remand Results at 18 (“while we

acknowledge that we did not countervail all programs initiated upon when determining the

subsidy rate for JSW in the investigation, as we explain below, this does not require us to

deviate from our standard practice where companies fail to report all of their cross-owned

entities in this segment of the proceeding…”).

In its comments on the draft remand redetermination, Uttam Galva argued that

Commerce’s application of partial adverse facts available to JSW represented the

agency’s consistent administrative practice. See Remand Results at 18. Further, Uttam

Galva contended that Commerce unreasonably deviated from this practice when applying

AFA to Uttam Galva. See id. at 17–18 (“Commerce’s calculation of Uttam Galva’s AFA

rate in the Final Results constituted a change in agency policy because Commerce

announced a new method of calculating a duty.”).

Commerce disagreed that its partial AFA application to JSW in the investigation

segment demonstrated an established practice, and instead explained that application of

AFA to Uttam Galva was in fact the agency’s consistent practice. See Remand Results Court No. 19-00044 Page 8

at 18–19 (“Uttam Galva misstates agency practice... Commerce has applied AFA rates

for all programs initiated upon in constructing a total AFA rate.”). Commerce identified

“numerous CVD proceedings” where the agency “applied AFA rates for all programs

initiated upon in constructing a total AFA rate.” Id. at 18. Commerce further explained why

its different calculation of JSW’s AFA subsidy rate did not constitute agency practice,

noting that an action only “becomes an ‘agency practice’ when a uniform and established

procedure exists that would lead a party, in the absence of notification of a change,

reasonably to expect adherence to the [particular action] or procedure.” Remand Results

at 20 (citing SeAH Steel Vina Corp. v. United States, 35 CIT ___, 182 F. Supp. 3d 1316

(2011) and Huvis Corp. v. United States, 31 CIT ___, 525 F. Supp. 2d 1370 (2007)

(internal quotation marks omitted)). Given this explanation and analysis of prior

determinations, Commerce concluded that its “treatment of Uttam Galva is entirely

consistent with past practice.” Remand Results at 21.

After reviewing Commerce’s analysis in the Remand Results, Uttam Galva

appears to have accepted this position. See Pl.’s Br. at 4 (“Commerce’s practice is to

calculate an AFA rate for all programs when companies fail to report all their cross-owned

entities.”). However, Uttam Galva now focuses its argument on Commerce’s failure to

provide a reasoned explanation for the decision to calculate the AFA subsidy rates of

JSW and Uttam Galva differently. See id. at 4–6. In rejecting Uttam Galva’s “practice”

argument regarding its treatment of JSW, Commerce emphasized that the agency is “not

bound by its determination in the investigation segment of this proceeding because the Court No. 19-00044 Page 9

records of each segment are distinct.” See Remand Results at 18. Commerce stated that

it is not required to “deviate from [its] standard practice where companies fail to report all

of their cross-owned affiliates in this segment of the proceeding.” Id.

Commerce’s analysis in the Remand Results, while clarifying the agency’s practice

in the application of AFA, fails to explain why the agency found it appropriate to apply

AFA differently for JSW than it did for Uttam Galva. Defendant-Intervenors, California

Steel Industries and Steel Dynamics, Inc., attempt to provide a rationale for that differing

treatment, arguing that “[JSW’s] circumstances are… easily distinguished from Uttam

Galva’s.” See Def.-Int.’s Resp. at 2 (“The affiliate in the investigation was acquired

through a broader transaction and operated as an affiliate during only the final two months

of the period of investigation and was then closed down.”). Whatever the merits of

Defendant-Intervenors’ argument, the court may not sustain Commerce’s determination

on a rationale not provided by the agency. See Sec. & Exch. Comm'n v. Chenery Corp.,

332 U.S. 194, 196 (1947) (“[A] reviewing court, in dealing with a determination or

judgment which an administrative agency alone is authorized to make, must judge the

propriety of such action solely by the grounds invoked by the agency.”). While there may

have been factual distinctions between the application of AFA to JSW in the investigation

and the application of AFA to Uttam Galva in this review, Commerce failed to identify

them and explain what distinguished Uttam Galva’s situation from that of JSW. See

Remand Results at 18–21. The court therefore remands this issue so Commerce may

provide a reasoned explanation for the differences in its application of AFA to JSW and Court No. 19-00044 Page 10

Uttam Galva, and, if appropriate, reconsider its application of AFA to Uttam Galva. See

Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43

(1983) (“[T]he agency must examine the relevant data and articulate a satisfactory

explanation for its action including a ‘rational connection between the facts found and the

choice made.’”); SKF USA Inc. v. United States, 263 F.3d 1369, 1382 (Fed. Cir. 2001)

(“[A]n agency action is arbitrary when the agency offer[s] insufficient reasons for treating

similar situations differently.”), aff'd, 332 F.3d 1370 (Fed. Cir. 2003).

B. Commerce’s Examination of LSIL’s Financial Statement

Uttam Galva contends that Commerce’s inclusion of the “20 disputed programs”

within its rate calculation was unreasonable. See Pl.’s Br. at 7–10. Uttam Galva argues

that Commerce improperly ignored and dismissed LSIL’s financial statement as an

“incomplete and unreliable source.” Id. at 10. Uttam Galva maintains that the LSIL

financial statement comprises conclusive proof that LSIL does not have facilities outside

of Maharastra. Id. at 8–9 (arguing against Commerce’s inclusion of geographically

specific programs in AFA rate calculation). Uttam Galva also argues that the statement

demonstrates that LSIL does not manufacture goods whose production could utilize

mining subsidies related to the “purchase of high-grade iron ore, captive mining rights for

iron ore and coal and mine allotments for less than adequate remuneration.” Id. at 8, 10

(challenging Commerce’s inclusion of industry specific programs in AFA rate calculation).

Accordingly, Uttam Galva maintains that LSIL could not have benefited from the

20 disputed programs. Id. at 9–10. Court No. 19-00044 Page 11

Commerce rejected Plaintiff’s argument that the LSIL financial statement

demonstrated that LSIL (and thus Uttam Galva) could not have benefitted from the

20 disputed programs. See Remand Results at 23. Commerce explained that it did not

find the LSIL financial statement to provide a sufficiently reliable basis to conclude that

LSIL could not have benefitted from the 20 disputed programs, stating that the LSIL

financial statement did not “provide a definitive listing of LSIL’s business activities or

where LSIL conducted those business activities.” Id. at 25. Moreover, Commerce noted

that the provision of such a statement “does not substitute for a respondent’s obligation

to respond to Commerce’s questions on business activities/location…” and that

“Commerce… had no opportunity to pursue these lines of inquiry due to Uttam Galva’s

failure to fully cooperate.” Id.

Given this record, the court does not agree with Uttam Galva that Commerce acted

unreasonably by including the 20 disputed programs in Uttam Galva’s AFA rate

calculation. The court has already sustained Commerce’s decision to apply AFA to Uttam

Galva for its failure to provide complete and accurate information regarding its affiliation

with LSIL. See Uttam Galva I, 44 CIT at ___, 358 F. Supp. 3d at 1372. Commerce

reasonably explained why it found that the LSIL financial statement did not conclusively

provide a full account of LSIL’s geographic presence and sectoral activities.

Remand Results at 25. Plaintiff’s arguments fail to demonstrate that the LSIL financial

statement could lead Commerce to reach “one and only one reasonable outcome” on this

administrative record, namely that LSIL could not have benefitted from the 20 disputed Court No. 19-00044 Page 12

programs. See Tianjin Wanhua Co. v. United States, 40 CIT ___, ___, 179 F. Supp. 3d

1062, 1071 (2016) (noting that plaintiff must demonstrate that its preferred evidentiary

finding is “the one and only one reasonable” outcome on the administrative record, “not

simply that [its preferred finding] may have constituted another possible reasonable

choice”). Accordingly, the court sustains as reasonable Commerce’s determination to

include the 20 disputed programs in Uttam Galva’s AFA rate calculation.

IV. Conclusion

Accordingly, for the foregoing reasons it is hereby

ORDERED that Commerce’s decision to include the 20 disputed programs within

the AFA rate calculation for Uttam Galva is sustained; it is further

ORDERED that this matter is remanded for Commerce to further explain, and if

appropriate, reconsider its application of AFA to Uttam Galva as compared to JSW; it is

further

ORDERED that Commerce shall file its remand results on or before December 22,

2020; and it is further

ORDERED that, if applicable the parties shall file a proposed scheduling order with

page limits for comments on the remand results no later than seven days after Commerce

files its remand results with the court.

/s/ Leo M. Gordon Judge Leo M. Gordon

Dated: October 29, 2020 New York, New York