Slip Op. 19-170
UNITED STATES COURT OF INTERNATIONAL TRADE
VENUS WIRE INDUSTRIES PVT. LTD., ET AL.,
Plaintiffs,
v. Before: Mark A. Barnett, Judge UNITED STATES, Court No. 18-00113 Defendant,
and
CARPENTER TECHNOLOGY CORPORATION, ET AL.,
Defendant-Intervenors.
OPINION AND ORDER
[Remanding the U.S. Department of Commerce’s Final Results in the Changed Circumstances Review of the Antidumping Duty Order on Stainless Steel Bar from India.]
Dated: December 20, 2019
Eric C. Emerson, Steptoe & Johnson LLP, of Washington, DC, argued for Plaintiffs. With him on the brief was St. Lutheran M. Tillman.
Kara M. Westercamp, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, argued for Defendant. With her on the brief were Joseph H. Hunt, Assistant Attorney General, Jeanne E. Davidson, Director, and Tara Hogan, Assistant Director. Of counsel on the brief was Emma T. Hunter, Attorney, Office of the Chief Counsel for Trade Enforcement and Compliance, U.S. Department of Commerce, of Washington, DC.
Grace W. Kim, Kelley Drye & Warren LLP, of Washington, DC, argued for Defendant- Intervenors. With her on the brief was Laurence J. Lasoff. Court No. 18-00113 Page 2
Barnett, Judge: Plaintiffs, Venus Wire Industries Pvt. Ltd. and its affiliates
Precision Metals, Sieves Manufacturers (India) Pvt. Ltd., and Hindustan Inox Ltd.
(collectively, “Venus”), challenge the U.S. Department of Commerce’s (“Commerce” or
“the agency”) final results in the changed circumstances review of the antidumping duty
order on stainless steel bar from India. See Compl., ECF No. 9; Stainless Steel Bar
From India, 83 Fed. Reg. 17,529 (Dep’t Commerce Apr. 20, 2018) (final results of
changed circumstances review and reinstatement of certain companies in the
antidumping duty order) (“Final Results”), ECF No. 20-5, and accompanying Issues and
Decision Mem., A-533-810 (Apr. 16, 2018) (“I&D Mem.”), ECF No. 20-6. 1
Venus challenges two aspects of the Final Results. Venus first contests
Commerce’s determination that Venus is not the producer of subject merchandise made
using inputs that are covered by the scope of the underlying antidumping duty order and
the corresponding determination that the producers are the unaffiliated suppliers of the
inputs. Confidential Pls.’ Rule 56.2 Mot. For J. Upon the Agency R., ECF No. 33, and
Confidential Venus Wire Indus. Pvt. Ltd. and its Affiliates Precision Metals, Sieves Mfrs.
(India) Pvt. Ltd., and Hindustan Inox Ltd.’s Mem. of P&A in Supp. of their Mot. For J. on
the Agency R. (“Pls.’ Mem.”) at 8–15, ECF No. 33. Venus also contests Commerce’s
1 The administrative record for this case is divided into a Public Administrative Record (“PR”), ECF No. 20-2, and a Confidential Administrative Record (“CR”), ECF Nos. 20-3, 20-4. Parties submitted joint appendices containing record documents cited in their briefs. See Public J.A. (“PJA”), ECF No. 50; Confidential J.A. (“CJA”), ECF No. 46. Parties submitted a supplemental confidential joint appendix containing additional record documents pursuant to the court’s request. See Confidential Joint Submission of R. Documents (“Suppl. CJA”), ECF No. 53. The court references the confidential version of the relevant record documents, unless otherwise specified. Court No. 18-00113 Page 3
decision to use total facts otherwise available with an adverse inference (referred to as
“total adverse facts available” or “total AFA”) to determine Venus’s rate. See id. at 16–
28.
Defendant United States (“the Government”) and Defendant-Intervenors 2 defend
the Final Results. See generally Confidential Def.’s Resp. to Pls.’ Mots. For J. Upon the
Agency R. (“Def.’s Resp.”), ECF No. 39; Confidential Def.-Ints.’ Resp. in Opp’n to Pls.’
Mot. For J. on the Agency R. (“Def.-Ints.’ Resp.”), ECF No. 42.
For the following reasons, the court remands Commerce’s determination that
Venus is not the producer of the subject merchandise and defers consideration of
arguments regarding the agency’s use of total AFA pending Commerce’s
redetermination on remand.
BACKGROUND
Commerce published the antidumping duty order on stainless steel bar (“SSB” or
“SS bar”) from India on February 21, 1995. See Stainless Steel Bar from Brazil, India
and Japan, 60 Fed. Reg. 9,661 (Dep’t Commerce Feb. 21, 1995) (antidumping duty
orders) (“SS Bar Order”). 3 On September 13, 2011, Commerce conditionally revoked
2 Defendant-Intervenors consist of Carpenter Technology Corporation; Crucible Industries LLC; Electralloy, a Division of G.O. Carlson, Inc.; North American Stainless; Outokumpu Stainless Bar, LLC; Universal Stainless & Alloy Products, Inc.; and Valbruna Slater Stainless, Inc. (collectively, “Defendant-Intervenors” or, when in reference to the underlying proceeding, “Petitioners”). 3 The SS bar covered by the scope of the SS Bar Order consists of
articles of stainless steel in straight lengths that have been either hot- rolled, forged, turned, cold-drawn, cold-rolled or otherwise cold-finished, or ground, having a uniform solid cross section along their whole length in the shape of circles, segments of circles, ovals, rectangles (including Court No. 18-00113 Page 4
the SS Bar Order with respect to subject merchandise produced or exported by Venus.
See Stainless Steel Bar from India, 76 Fed. Reg. 56,401, 56,402-03 (Dep’t Commerce
Sept. 13, 2011) (final results of the antidumping duty admin. review, and revocation of
the order, in part) (“Revocation Finding”). 4
On September 29, 2016, Petitioners submitted a request for a “changed
circumstances” review of Venus and Viraj Profiles Ltd. on the basis that they had
resumed selling SS bar in the United States at less than fair value. Pet’rs’ Req. for
Changed Circumstances Reviews (Sept. 29, 2016) at 1, 5, CR 1, PR 1, CJA Tab 1. 5 On
December 16, 2016, Commerce initiated a changed circumstances review for such
squares), triangles, hexagons, octagons or other convex polygons. SSB includes cold-finished SSBs that are turned or ground in straight lengths, whether produced from hot-rolled bar or from straightened and cut rod or wire, and reinforcing bars that have indentations, ribs, grooves, or other deformations produced during the rolling process. SS Bar Order, 60 Fed. Reg. at 9,661. 4 Commerce’s authority to revoke an order is grounded in 19 U.S.C. § 1675. By its
terms, Commerce “may revoke, in whole or in part, . . . an antidumping duty order” upon completion of a periodic or changed circumstances review. 19 U.S.C. § 1675(d)(1). Pursuant to the regulation in effect at the time of revocation, Commerce could revoke an order in part when it finds that (A) an exporter or producer has “sold the merchandise at not less than normal value for a period of at least three consecutive years”; (B) the exporter or producer has agreed in writing to immediate reinstatement of the order if Commerce determines that, subsequent to revocation, the exporter or producer sells subject merchandise at less than fair value; and (C) continued application of the order is unnecessary to offset dumping. 19 C.F.R. § 351.222(b)(2)(i) (2011). Commerce determined that Venus met each of these requirements. Revocation Finding, 76 Fed. Reg. at 56,403. 5 Commerce conducts a changed circumstances review of an antidumping duty order
when it “receives information concerning, or a request from an interested party for a review of” the “final affirmative determination” underlying the order that “shows changed circumstances sufficient to warrant a review.” 19 U.S.C. § 1675(b)(1)(A); see also 19 C.F.R. 351.216 (2019). Court No. 18-00113 Page 5
purpose. See Stainless Steel Bar From India, 81 Fed. Reg. 91,118 (Dep’t Commerce
Dec. 16, 2016) (initiation of antidumping duty changed circumstances review).
Venus responded to several questionnaires during the review. In section A of
Commerce’s initial questionnaire, the agency requested Venus to describe the materials
used in the production of subject merchandise. Questionnaire to Venus (Sec. A) (Dec.
14, 2016) at A-12, PR 48, CJA Tab 5. Venus responded that it uses “Stainless Steel
Black Bars (round/hex/square) or Stainless Steel Rods in Coil Form.” Submission of
Resp. to Sec. A of the Questionnaire in Changed Circumstances Review (Jan. 30,
2017) (“Venus AQR”) at A-24, CR 22, PR 65, CJA Tab. 6. In a separate chart, Venus
stated that its production begins with “S.S. Wire Rods” or “S.S. Rounds - Hot Rolled.”
Venus AQR, Annex. A-8, Suppl. CJA at ECF p. 138.
In subsequent questionnaire responses, Venus referred to its inputs of SS black
bar as SS rounds, straight rounds, or hot rolled bar. See I&D Mem. at 9 & n.26 (citation
omitted); Venus Group Annex. SQR-27 (March 30, 2017), CR 105, PR 144, CJA Tab
10; Venus Group Annex. SQR-28 (March 30, 2017), CR 106, PR 145, CJA Tab 11;
Venus Group’s Resp. to Sec. B & C Suppl. Questionnaire (Apr. 3, 2017), Annex. D-2,
CR 132, PR 173, Suppl. CJA at ECF pp. 212–19; Resp. to Sec. D of the Questionnaire
(May 18, 2017) (“Venus 2nd Suppl. DQR”) at 7, 13, Annex. DR-1, DR-2, CR 201, PR
260, Suppl. CJA at ECF pp. 254–82.
Supplier invoices appended to Venus’s second supplemental questionnaire
response alerted Commerce to the possibility that one of Venus’s inputs might be
subject merchandise; thus, the agency requested further information. I&D Mem. at 10 & Court No. 18-00113 Page 6
n.29 (citing Venus 2nd Suppl. DQR, Annex. SQR-85, CR 207, PR 266, Suppl. CJA at
ECF pp. 304–24); Resp. to SQR3-Questionnaire (July 10, 2017) (“Venus 3rd Suppl.
DQR”) at Question 15, CR 250, PR 308, CJA Tab 15. Venus reported that one of its
inputs, “Stainless Steel Hot Rolled Bars (termed as SS rounds)” is “included in the
scope of the [SS Bar Order].” Venus 3rd Suppl. DQR at Question 15. Venus also
described the processing it performs to convert the inputs into “Cold Finished Stainless
Steel Bright Bars.” Id.
Commerce preliminarily determined to reinstate Venus in the SS Bar Order
based on the agency’s finding that Venus sold subject merchandise at less than fair
value. Decision Mem. for the Prelim. Results of the Antidumping Duty Changed
Circumstances Review of Stainless Steel Bar from India (Oct. 12, 2017) at 1, PR 377,
CJA Tab 19. Commerce further determined that Venus is not the producer of the
subject merchandise and, in the absence of cost information from Venus’s suppliers,
assigned Venus a margin based on total AFA. Id. at 5, 7.
Thereafter, Commerce issued Venus a fourth supplemental questionnaire in
which it requested Venus to “obtain the actual costs of production” from its suppliers of
SS rounds used to make SS bar. Req. for Extension to 4th Suppl. Resp. (Nov. 14,
2017) at 1, CR 318–19, PR 398, CJA Tab 24. Venus reported its “significant efforts to
obtain the cost of the stainless steel rounds purchased from unaffiliated suppliers during
the [period of review].” Id. Those efforts included personal visits to several suppliers
and emails “cautioning [the suppliers] of cessation of future business” if they refused to
provide cost information. Id. at 3; see also id. at Ex. 1 (documenting Venus’s efforts). Court No. 18-00113 Page 7
Despite these efforts, only one of Venus’s suppliers submitted its cost information to
Commerce. Id. at 1–2.
On April 20, 2018, Commerce published the Final Results. Commerce continued
to find that Venus is not the producer of subject merchandise manufactured from SS
rounds. I&D Mem. at 11–14. Commerce did, however, conclude that Venus produced
the subject merchandise manufactured from SS wire rod. Final Results Analysis Mem.
for Venus Wire Indus. Pvt. Ltd. and its Affiliates Precision Metals, Sieves Mfrs. (India)
Pvt. Ltd., and Hindustan Inox Ltd. (Apr. 16, 2018) (“Final Analysis Mem.”) at 4, CR 327,
PR 424, CJA Tab 32. Commerce reinstated Venus in the SS Bar Order and assigned
Venus a weighted-average dumping margin of 30.92 percent based on the use of total
AFA. Final Results, 83 Fed. Reg. at 17,530; see also I&D Mem. at 14–17; Final
Analysis Mem. at 1–3. 6
Venus timely commenced this action on May 18, 2018. See Summons, ECF No.
1. Venus’s motion is fully briefed, and the court heard oral argument on September 10,
2019. Docket Entry, ECF No. 56.
6 Commerce also reinstated Viraj Profiles Ltd. (“Viraj”) in the SS Bar Order and used total AFA to determine its margin. Final Results, 83 Fed. Reg. at 17,530. Those determinations as to Viraj are not at issue here. Court No. 18-00113 Page 8
JURISDICTION AND STANDARD OF REVIEW
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) (2012), 7 and 28 U.S.C. § 1581(c).
The court will uphold an agency determination that is supported by substantial
evidence and otherwise in accordance with law. 19 U.S.C. § 1516a(b)(1)(B)(i).
“Substantial evidence is ‘such relevant evidence as a reasonable mind might accept as
adequate to support a conclusion.’” Huaiyin Foreign Trade Corp. (30) v. United States,
322 F.3d 1369, 1374 (Fed. Cir. 2003) (quoting Consol. Edison Co. v. N.L.R.B., 305 U.S.
197, 229 (1938)).
The two-step framework provided in Chevron, U.S.A., Inc. v. Natural Resources
Defense Council, Inc., 467 U.S. 837, 842–45 (1984), guides judicial review of
Commerce’s interpretation and implementation of the antidumping and countervailing
duty statutes. See Apex Frozen Foods Private Ltd. v. United States, 862 F.3d 1337,
1344 (Fed. Cir. 2017); Pesquera Mares Australes Ltda. v. United States, 266 F.3d 1372,
1379–82 (Fed. Cir. 2001) (affording Chevron deference to agency methodology in
furtherance of its statutory interpretations). First, the court must determine “whether
Congress has directly spoken to the precise question at issue.” Apex Frozen Foods,
862 F.3d at 1344 (quoting Chevron, 467 U.S. at 842). If Congress’s intent is clear, “that
is the end of the matter,” and the court “must give effect to the unambiguously
expressed intent of Congress.” Id. (quoting Chevron, 467 U.S. at 842–43). However, “if
7All citations to the Tariff Act of 1930, as amended, are to Title 19 of the U.S. Code, and references to the U.S. Code are generally to the 2012 edition unless stated otherwise. Court No. 18-00113 Page 9
the statute is silent or ambiguous,” the court must determine whether the agency’s
action “is based on a permissible construction of the statute.” Id. (quoting Chevron, 467
U.S. at 843).
DISCUSSION
I. Commerce’s Determination that Venus is Not the Producer of Subject Merchandise Venus Exported to the United States
An antidumping duty is the amount by which the normal value of a product—
generally, its price in the exporting country—exceeds the export price, as adjusted. 19
U.S.C. § 1673; see also id. § 1677b(a)(1)(B)(i) (defining normal value). In certain
situations, Commerce calculates normal value using the constructed value of the
merchandise. Id. § 1677b(a)(4). Constructed value is the sum of (1) “the cost of
materials and fabrication or other processing of any kind employed in producing the
merchandise”; (2) actual “selling, general, and administrative expenses” and profits; and
(3) “the cost of all containers and coverings . . . and all other expenses incidental to”
preparing the subject merchandise “for shipment to the Unites States.” Id.
§ 1677b(e)(1), (2)(A), (3).
To ascertain constructed value, Commerce typically requires information from
both the producer and the exporter of the subject merchandise. See id. § 1677(28);
Uruguay Round Agreements Act, Statement of Administrative Action, H.R. Doc. No.
103–316, vol.1, at 835 (1994), reprinted in 1994 U.S.C.C.A.N. 4040, 4172 (“SAA”) 8
(“[When] different firms perform the production and selling functions, Commerce may
8The SAA is the authoritative interpretation of the statute. 19 U.S.C. § 3512(d); RHP Bearings Ltd. v. United States, 288 F.3d 1334, 1345 n.7 (Fed. Cir. 2002). Court No. 18-00113 Page 10
include the costs, expenses, and profits of each firm in calculating cost of production
and constructed value.”). Consequently, Commerce must identify the producer of the
subject merchandise in order to obtain the information necessary to calculate the cost of
production and constructed value. I&D Mem. at 11. If Commerce properly concluded
that Venus was not the producer of the subject merchandise, then Commerce properly
required Venus to provide the production costs of its suppliers for the determination of
normal value. Otherwise, if Venus should have been regarded as the producer, cost
information from Venus’s suppliers would not be necessary.
In the underlying proceeding, Commerce applied a test for identifying the
producer of the subject merchandise that it first used in its investigation of narrow
woven ribbon with woven selvedge from Taiwan. I&D Mem. at 11 & n.35 (citing Narrow
Woven Ribbons with Woven Selvedge from Taiwan, 75 Fed. Reg. 41,804 (Dep’t
Commerce July 19, 2010) (“NWR”), and Issues and Decision Mem. for the Antidumping
Duty Investigation of Narrow Woven Ribbon with Woven Selvedge from Taiwan, A-583-
844 (undated) (“NWR Decision Mem.”) at 48–49, available at https://enforcement.trade.
gov/frn/summary/taiwan/2010-17538-1.pdf (last visited Dec. 20, 2019)). In NWR,
Commerce considered the extent to which the exporter “further manufactured” griege
ribbon, a type of in-scope merchandise used to produce subject narrow woven ribbon.
NWR Decision Mem. at 48. To ascertain the degree of further manufacturing,
Commerce considered “whether raw materials were added, and whether further
processing was performed that changed the physical nature and characteristics of the
product.” Id. at 48. Commerce concluded that “minimal” additional materials were used Court No. 18-00113 Page 11
in the manufacturing process. Id. at 49. Commerce further noted that 10 out of the
agency’s 16 essential characteristics for narrow woven ribbon were “created” by the
producer of the input greige ribbon. Id. Thus, “based on the totality of the record
evidence and the facts specific to [that] case,” Commerce determined that the greige
ribbon weavers were the producers. Id.
Commerce applied the same type of analysis here to assess whether Venus is
the producer of SS bar made from in-scope SS rounds. I&D Mem. at 12–13.
Commerce identified the six “essential physical characteristics” of SS bar as grade,
remelting, shape, finish, type of final finishing operation, and size. Id. at 12. Commerce
then explained that because Venus’s processing “does not affect three of the six
essential physical characteristics” of the subject merchandise—“grade, remelting, and
shape”—and does not require the addition of new materials, Commerce did not find
Venus to be the producer of the subject merchandise. Id. at 12–13.
In reaching this conclusion, Commerce dismissed Venus’s argument regarding
the relevance of Commerce’s treatment of Venus as the producer in eight prior reviews,
stating that “each segment of a proceeding has its own record and stands on its own,”
and the issue does not appear to have been raised in the prior proceedings. Id. at 12–
13. In response to Venus’s argument that its processing substantially transforms the
SS rounds, Commerce explained that “substantial transformation is not the proper
analysis when both products at issue fall within the same class or kind of merchandise.”
Id. at 13. Under those circumstances, Commerce stated, NWR is the “relevant
precedent” guiding its analysis. Id.; see also id. at 13–14 (dismissing scope rulings Court No. 18-00113 Page 12
cited by Venus in which the agency concluded that cold-finishing substantially
transformed SS wire rod into SS bar because the input and output products belonged to
different classes or kinds of products). Commerce also rejected Venus’s argument that
its manufacturing process changed proportionally more of the essential physical
characteristics as compared to NWR, explaining that “there is no threshold for the
number of characteristics, whether expressed as an absolute or relative number, that
may be determinative for our analysis.” Id. at 13. Looking to “the totality of the
circumstances,” Commerce reiterated that the absence of new materials coupled with
the changes to three out of six characteristics led it to conclude that Venus is not the
producer. Id.
II. Parties’ Contentions
Venus raises three arguments against Commerce’s determination. Venus first
contends that Commerce unlawfully departed from agency practice without adequate
justification. Pls.’ Mem. at 8–9. Venus next contends that prior scope determinations
finding that a “substantial transformation” occurred when SS wire rod was converted
into SS bar through a process similar to the process used by Venus in this case are
relevant and were improperly dismissed by the agency. Id. at 10–13. Lastly, Venus
contends that Commerce’s NWR analysis ignored crucial facts. Id. at 13–15; see also
Confidential Venus Wire Indus. Pvt. Ltd. and its Affiliates Precision Metals, Sieves Mfrs.
(India) Pvt. Ltd., and Hindustan Inox Ltd.’s Reply Br. in Supp. of their Rule 56.2 Mot. For
J. on the Agency R. (“Pls.’ Reply”) at 1–6, ECF No. 44. Court No. 18-00113 Page 13
The Government and Defendant-Intervenors contend that Venus has not shown
the existence of an agency practice respecting its producer determination and
Commerce permissibly concluded that Venus was not the producer of subject
merchandise based on the record developed in this review. Def.’s Resp. at 13–14;
Def.-Ints.’ Resp. at 9–10. The Government and Defendant-Intervenors further contend
that agency determinations applying Commerce’s substantial transformation analysis
are inapposite because those determinations involved inputs and outputs that occupied
different classes or kinds of merchandise and sought to identify the country of origin of
the imported merchandise, which is not at issue here. Def.’s Resp. at 17–19; Def.-Ints.’
Resp. at 10–13. The Government and Defendant-Intervenors also contend that
Commerce’s findings pursuant to its NWR test are supported by substantial evidence.
Def.’s Resp. at 16–17; Def.-Ints.’ Resp. at 14–16.
III. Commerce Must Reconsider or Further Explain its Use of the NWR Test to Determine the Producer of the Subject Merchandise
While Venus has not shown that Commerce’s determination is inconsistent with
an established agency practice, Commerce’s summary dismissal of the relevance of the
substantial transformation test in favor of the NWR test requires reconsideration and
further explanation. Thus, the court does not address Venus’s direct challenges to the
application of the NWR test.
A. Venus has not Established the Existence of an Agency Practice
While Venus casts its argument in terms of a departure from agency practice,
Pls.’ Mem. at 8–9; Pls.’ Reply at 6–8, Venus has not shown that Commerce previously
applied a practice or methodology to the question whether Venus is the producer of Court No. 18-00113 Page 14
subject merchandise. Instead, Venus asserts that Commerce’s treatment of Venus as
the producer in prior reviews constitutes the practice. See, e.g., Pls.’ Mem. at 8.
However, Venus does not dispute Commerce’s statement that the issue was never
examined in prior administrative reviews and, therefore, it is not possible to determine
whether prior facts were identical to this review and whether Commerce altered the
analytical framework applied to those facts. See I&D Mem. at 13; Pls.’ Mem. at 8–9;
Pls.’ Reply at 6–8. Absent evidence demonstrating the existence of an established
procedure or methodology relevant to this inquiry, Venus’s argument that Commerce
arbitrarily departed from agency practice must fail. See SeAH Steel VINA Corp. v.
United States, 40 CIT ___, ___,182 F. Supp. 3d 1316, 1327 (2016) (explaining that
departure from a consistent “contrary practice in similar circumstances” is arbitrary
when unaccompanied by a “reasonable explanation for the change in practice’”)
(quoting Consol. Bearings Co. v. United States, 348 F.3d 997, 1007 (Fed. Cir. 2003)
(emphasis added); Ranchers–Cattlemen Action Legal Found. v. United States, 23 CIT
861, 884–85, 74 F. Supp. 2d 1353, 1374 (1999) (explaining that identification of an
“agency practice” is predicated upon the existence of “a uniform and established
procedure [] that would lead a party, in the absence of notification of a change,
reasonably to expect adherence to the established practice or procedure”) (emphasis
added); cf. Shikoku Chems. Corp. v. United States, 16 CIT 382, 388, 795 F. Supp. 417,
422 (1992) (a methodology used in five previous segments of the proceeding effectively
became “the law of [the] proceeding[]” from which Commerce had departed without
adequate explanation). Court No. 18-00113 Page 15
In any event, in this review and in contrast to prior reviews, Commerce queried
Venus’s status as producer; developed the factual record accordingly; and rendered a
decision based on the evidence presented. See I&D Mem. at 10; 12–13. Thus, the
mere fact that Commerce reached a different conclusion in this review, standing alone,
does not require remand to the agency. Venus’s remaining arguments on this issue are
not persuasive. 9
B. Commerce Must Reconsider or Further Explain its Use of the NWR Test
At issue here is Commerce’s method of determining the producer of the subject
merchandise when in-scope inputs are used to manufacture subject merchandise for
purposes of 19 U.S.C §§ 1677b and 1677(28). The statute does not define “producer”
or provide a method for Commerce to apply in making its determinations. Thus, the
court must decide whether Commerce’s use of the NWR test to determine that Venus
was not the “producer” is in accordance with law. See, e.g., Pesquera Mares
9 Venus argues that the facts at issue have not changed across each review. Pls.’ Reply at 8. The pertinent point, however, is whether the factual record has changed. See Jiaxing Brother Fastener Co., Ltd. v. United States, 822 F.3d 1289, 1299 (Fed. Cir. 2016) (“[E]ach administrative review is a separate exercise of Commerce’s authority that allows for different conclusions based on different facts in the record.”) (alteration in original) (emphasis added) (citation omitted). Venus also argues that Commerce “is ‘presumed to have considered’ all record evidence in reaching its decision” in the prior reviews. Pls.’ Mem. at 9 n.4 (quoting Ta Chen Stainless Steel Pipe Co. v. United States, 31 CIT 794, 819 (2007)). However, it is unclear to what extent the prior records contained evidence relevant to the producer issue because, as noted, the issue was never raised, and those records are not now before the court. See I&D Mem. at 13. Lastly, Venus avers that Commerce has conducted verification of its facilities in past reviews “during which time [Commerce] officials almost certainly observed raw material being used in production.” Pls.’ Mem. at 8 n.2 (citations omitted). However, such speculation is insufficient to undermine the factual record before the agency in the present review. Court No. 18-00113 Page 16
Australes, 266 F.3d at 1379–82; cf. E.I. Du Pont de Nemours & Co. v. United States, 22
CIT 370, 373–76, 8 F. Supp. 2d 854, 858–59 (1998) (examining the lawfulness of
Commerce’s substantial transformation test pursuant to Chevron prong two). To
determine whether the standard adopted by Commerce is a permissible interpretation of
the statute, the court considers whether the construction is reasonable, consistent with
statutory goals, and reflects agency practice. Apex Exps. v. United States, 777 F.3d
1373, 1379 (Fed. Cir. 2015).
Here, Commerce provided little explanation to support its use of the NWR test
over its substantial transformation test beyond stating that the NWR test is the “relevant
precedent” when the input and output products are in the same class or kind of
merchandise. 10 I&D Mem. at 13. However, merely pointing to what the agency “has
10 Commerce relies heavily on the fact that while SS wire rod and SS bar are considered separate classes or kinds of merchandise, I&D Mem. at 13–14, SS rounds are considered to be within the same class or kind of merchandise as SS bar, id. at 12– 13. There is, however, no inherent, objective basis for these differences. The class or kind of merchandise involved in any proceeding is typically a function of, and coterminous with, the scope of merchandise for which the petitioner seeks relief—and the breadth of that scope may change from case to case. See, e.g., Hitachi Metals, Ltd. v. United States, 42 CIT ___, ___, 350 F. Supp. 3d 1325, 1343–49 (2018) (reviewing a U.S. International Trade Commission determination in a cut-to-length plate (“CTL”) investigation in which the scope (and Commerce’s determination as to class or kind) included certain alloy CTL which had not been included in prior CTL investigations). While production processes are taken into consideration, Commerce also considers non-production criteria such as administrability and circumvention concerns. See Issues and Decision Mem. for the Final Determination in the Antidumping Duty Investigation of Multilayered Wood Flooring from the People’s Republic of China, A-570- 970 (Oct. 18, 2011) at 54, available at https://enforcement.trade.gov/frn/summary/ PRC/2011-26932-1.pdf (last visited Dec. 20, 2019); Issues and Decision Mem. for the Final Determination of the Less-Than-Fair-Value Investigation of Certain Steel Wheels from the People’s Republic of China, A-570-082 (Mar. 21, 2019) at 9–13, available at https://enforcement.trade.gov/frn/summary/prc/2019-05957-1.pdf (last visited Dec. 20, Court No. 18-00113 Page 17
done [once] before . . . is not, by itself, an explanation of why its methodology comports
with the statute.” Mid Continent Steel & Wire, Inc. v. United States, 941 F.3d 530, 537–
38 (Fed. Cir. 2019) (ellipsis in original) (internal quotation marks and citation omitted).
Moreover, Commerce, in fact, has used its substantial transformation test when
the input and output products were in the same class or kind of merchandise. See, e.g.,
Tapered Roller Bearings from the People’s Republic of China: Issues and Decision
Mem. for the Final Results of the 2007–2008 Admin. Review of the Antidumping Duty
Order, A-570-601 (Dec. 28, 2009) (“TRBs from China Mem.”) at 7, available at
https://enforcement.trade.gov/frn/summary/prc/E9-31417-1.pdf (last visited Dec. 20,
2019) (substantial transformation did not occur when unfinished tapered roller bearings
were processed into finished tapered roller bearings and the processing did not alter the
class or kind of merchandise); Issues and Decision Mem. for the Final Determination in
the Antidumping Duty Investigation of [D]iamond [S]awblades and Parts Thereof from
the People’s Republic of China, A-570-900 (May 22, 2006) (“DSBs from China Mem.”)
at 17–19, available at https://enforcement.trade.gov/frn/summary/prc/E6-7763-1.pdf
(last visited Dec. 20, 2019) (substantial transformation occurred when diamond cores
were attached to diamond segments to produce finished diamond sawblades
notwithstanding that the upstream and downstream products were within the same
class or kind of merchandise); 3.5’’ Microdisks and Coated Media Thereof From Japan,
54 Fed. Reg. 6,433, 6,434–35 (Dep’t Commerce Feb. 10, 1989) (final determination of
2019). Thus, Commerce must establish the reasonableness of relying on its class or kind distinction if that distinction continues to play a central role in the agency’s analysis. Court No. 18-00113 Page 18
sales at less than fair value) (processing performed in Canada on microdisks from
Japan did not alter the class or kind of merchandise but was sufficiently significant to
render Canada as the country of origin for antidumping purposes); Erasable
Programmable Read Only Memories (EPROMs) From Japan, 51 Fed. Reg. 39,680,
39,692 (Dep’t Commerce Oct. 30, 1986) (final determination of sales at less than fair
value) (substantial transformation did not occur when processed wafers and dice from
Japan were assembled into finished EPROMs in Singapore and remained in the same
class or kind of merchandise).
As the foregoing agency determinations demonstrate, class or kind of
merchandise is but one factor Commerce considers in conducting its substantial
transformation test—and it “is not [even] a controlling factor.” DSBs from China Mem. at
18; 11 see also, e.g., TRBs from China Mem. at 7 (“[W]hile we consider the class or kind
of [merchandise] to be an important factor in determining substantial transformation, it is
not the only factor we considered. . . .”); supra note 10. Thus, Commerce’s attempt to
portray changes to the class or kind of merchandise as determinative of whether the
substantial transformation test applies runs counter to decades of agency precedent.
11 While the formulation of the factors Commerce considers in a substantial transformation test varies slightly across proceedings, in general, Commerce considers “(1) the class or kind of merchandise; (2) the nature and sophistication of processing in the country of exportation; (3) the product properties, essential component of the merchandise, and intended end-use; (4) the cost of production/value added; and (5) level of investment.” Bell Supply Co. v. United States, 888 F.3d 1222, 1228–29 (Fed. Cir. 2018); cf. Laminated Woven Sacks from the People’s Republic of China: Issues and Decision Mem. for the Final Results of the First Antidumping Duty Admin. Review, A-570-916 (Mar. 14, 2011) at 4–5, available at https://enforcement.trade.gov/ frn/summary/prc/2011-6450-1.pdf (last visited Dec. 20, 2019). Court No. 18-00113 Page 19
Further, while Commerce has used the substantial transformation test to
determine country of origin, see, e.g., Bell Supply, 888 F.3d at 1228–31, Commerce has
not limited the substantial transformation test to country of origin determinations, see
I&D Mem. at 13. 12 That test, which examines whether certain “manufacturing or
processing steps” result in a “new product having a new name, character and use,” Bell
Supply, 888 F.3d at 1228 (quoting Bestfoods v. United States, 165 F.3d 1371, 1373
(Fed. Cir. 1999)), appears at least facially relevant to Commerce’s identification of the
producer of the subject merchandise. Regardless of whether the “manufacturing or
processing steps” occur in country B or are performed by company B, Commerce’s
inquiry is directed at the circumstances under which an input becomes an output and
whether that output should be attributed to country B or company B. Commerce’s
disregard of the substantial transformation test without substantive explanation is not
entitled to deference.
As previously noted, Commerce concluded that Venus is the producer of SS bar
manufactured from SS wire rod. Final Analysis Mem. at 4. That finding is consistent
with several scope determinations upon which Venus relies and in which Commerce
concluded that that the conversion of SS wire rod into SS bar constitutes a substantial
transformation. See Pls.’ Mem. at 12–13 & n.16 (citations omitted); Pls.’ Reply at 2–5;
12Thus, the Government’s argument that the substantial transformation test is inapplicable here because country of origin is not at issue is entirely post hoc and, thus, not a basis to sustain Commerce’s determination. See Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168–69 (1962). Court No. 18-00113 Page 20
Scope Rulings, Suppl. CJA at ECF pp. 7–89. 13 However, to the extent that Commerce
relied on a substantial transformation analysis because SS wire rod and SS bar are in
different classes or kinds of merchandise, that reliance undermines the Government’s
post hoc argument that the substantial transformation test is inapplicable when country
of origin is not at issue. Further, because agency precedent demonstrates that the
substantial transformation test may apply irrespective of changes in the class or kind of
merchandise, see supra pp. 17–18, Commerce’s use of the substantial transformation
test in connection with one input (SS wire rod) but not the other (SS rounds) is, without
further explanation, arbitrary.
Additionally, Commerce’s dismissal of the relevance of the scope rulings and the
substantial transformation test led it to further ignore Venus’s central argument that the
13 The scope determinations submitted in the supplemental confidential joint appendix include, among others, (1) Final Recommendation Mem.—Scope Ruling Req. by Ishar Bright Steel Ltd. on Whether Stainless Steel Bar is Subject to the Scope of the Antidumping and Countervailing Duty Orders on Stainless Steel Wire Rod from Subject Countries (Feb. 7, 2005) (“UAE SSWR Scope Ruling”); (2) Scope Req. from Rodacciai S.p.A.—Final Scope Ruling Concerning the Stainless Steel Wire Rod from Spain Order [and] Initiation and Prelim. Scope Ruling Concerning the Stainless Steel Bar from Spain Order (May 12, 2015) (“Spain Final SSWR Scope Ruling”); and (3) Scope Req. from Rodacciai S.p.A.—Final Scope Ruling Concerning the Stainless Steel Bar from Spain Order (July 10, 2015) (“Spain Final SSB Scope Ruling”). Each of those rulings address the conversion of SS wire rod into SS bar for purposes of determining country of origin and the applicability of orders covering SS wire rod or SS bar. See UAE SSWR Scope Ruling at 1; Spain Final SSWR Scope Ruling at 1; Spain Final SSB Scope Ruling at 1. In the first ruling, Commerce—after extensive analysis—determined that SS bar and SS wire rod occupy different classes or kinds of merchandise and the SS bar produced in the United Arab Emirates using SS wire rod imported from countries subject to antidumping or countervailing duty orders on SS wire rod was not covered by those orders. UAE SSWR Scope Ruling at 5–12. Commerce relied on these findings in subsequent determinations. Spain Final SSWR Scope Ruling at 19–25, 29; Spain Final SSB Scope Ruling at 19–24, 26–27, 29. Court No. 18-00113 Page 21
processing of SS wire rod into SS bar affects the physical characteristics of SS wire rod
in the same way that the “nearly identical” processing of SS rounds into SS bar affects
the physical characteristics of the SS rounds. I&D Mem. at 4–5 (summarizing Venus’s
arguments); see also Pls.’ Mem. at 12–13; Pls.’ Reply at 2–3. Because changes in the
class or kind of merchandise (or lack thereof) are not necessarily determinative of
substantial transformation, it is not clear that conversion of SS rounds into SS bar would
not constitute a substantial transformation. It is also not clear that application of the
NWR test to the SS bar manufactured from SS wire rod would not produce the same
results as occurred when that test was applied to SS bar manufactured from SS rounds.
The record suggests that there is a comparable absence of additional materials and
changes in product characteristics regardless of the starting input. See Pls.’ Reply at 5.
Commerce, however, ignored these parallels and, instead, appeared to rely solely on
the class or kind demarcations. See Final Analysis Mem. at 4.
For these reasons, Commerce’s wholesale disregard of its established
substantial transformation test requires further consideration and explanation by the
agency. The court does not hold that Commerce must use its substantial
transformation test or must not use the NWR test. Rather, the court holds that
Commerce has not adequately addressed why the substantial transformation test is
irrelevant under the circumstances presented by this case. Accordingly, this matter is
remanded to the agency for further consideration and explanation. The court will defer Court No. 18-00113 Page 22
reaching Venus’s other arguments regarding Commerce’s application of the NWR test
and Commerce’s use of total AFA pending Commerce’s redetermination on remand. 14
CONCLUSION AND ORDER
In accordance with the foregoing, it is hereby:
ORDERED that Commerce’s Final Results are remanded to the agency for
further consideration and explanation consistent with this opinion; and it is further
ORDERED that Commerce shall file its remand results on or before March 19.
2020; and it is further
ORDERED that subsequent proceedings shall be governed by USCIT Rule
56.2(h); and it is further
ORDERED that any comments or responsive comments must not exceed 5,000
words.
/s/ Mark A. Barnett Mark A. Barnett, Judge
Dated: December 20, 2019 New York, New York
14Commerce based its decision to use an adverse inference on two subsidiary findings that Venus did not act to the best of its ability: (1) “by failing to clearly identify” its purchases of subject inputs “until directly asked in the third supplemental questionnaire,” and (2) “in attempting to obtain its unaffiliated suppliers’ cost data.” I&D Mem. at 16. While the first finding is arguably relevant notwithstanding the court’s remand of Commerce’s determination that Venus is not the producer, Commerce’s explanation suggests—though is not entirely clear—that both findings are necessary to support the use of AFA. See id. at 16–17. Because the second finding would be obviated in the event Commerce reconsiders its decision that Venus is not the producer, the court will await further clarity from Commerce on remand as to its basis for using an adverse inference—if it continues to do so—before addressing this issue.