United States: The First Particular Market Situation Determination Falls: Nexteel Co. v. United States Slip Op. 19-1 (Ct. Int'l Trade 2019) (Choe-Groves, J.)

A new year brings new decisions. In the first opinion issued in 2019 by the U.S. Court of International Trade (CIT), Judge Choe-Groves addresses the application of a hot-button issue—the U.S. Department of Commerce’s recently expanded “particular market situation” authority—through a combination of procedure and record review.

Legal Framework: In antidumping proceedings, Commerce calculates dumping margins, an exercise that the agency normally undertakes by comparing sales prices in the country of export (e.g., Germany) to sales prices in the United States. Congress has authorized Commerce to disregard sales prices in the country of export under certain circumstances, including if a “particular market situation” exists in that country. Congress recently expanded this authority when it passed the Trade Preferences Extension Act of 2015, sanctioning Commerce to find that a particular market situation exists if “the costs of materials and fabrication or other processing of any kind does not accurately reflect the cost of production in the ordinary course of trade.”  In such circumstances, Commerce may use “any other calculation methodology” to determine costs of production in the exporting country, and those costs feed into the “constructed value” that Commerce compares to the sales prices in the United States. Depending upon the methodology that Commerce uses, the difference resulting from that comparison may increase, leading to higher dumping margins and, thus, duties.

Facts: In April 2017, Commerce used its newly conferred particular market situation authority with respect to costs for the first time in the final results of its administrative review of the antidumping duty order on certain oil country tubular goods from the Republic of Korea. Some four months after Commerce issued its preliminary results in the review, a U.S. producer of tubular goods alleged that a particular market situation existed in Korea with respect to hot-rolled coil, the largest input used to produce the merchandise under review. Commerce preliminarily found that no such situation existed. A few weeks later, Commerce placed an email on the record from Peter Navarro, Director of the National Trade Council, who recommended, in part, that Commerce use its particular market situation authority to increase the duty margins. In the final results, Commerce flipped its determination, despite no change in the record evidence. Not surprisingly, several parties appealed the determination to the CIT.

Opinion: Judge Choe-Groves faced two questions with respect to Commerce’s particular market situation determination. First, she addressed a procedural issue: Should the court grant Commerce’s request for a voluntary remand? Although the Court routinely grants such requests, precedent permits the presiding judge to determine the appropriate course of action at his or her discretion. Here, Judge Choe-Groves rejected the request, finding that it “is vague, overly-broad, and” simply seeks an impermissible “do-over.”  Slip Op. 19-1 at 12. She also concluded that Commerce had waived its defense of the determination because “{t}he Government has not put forth any substantive arguments regarding Commerce’s finding of a particular market situation.” Id. at 12–13. Commerce rarely briefs an issue’s merits when it asks for a voluntary remand, but this is the second time in four years that the CIT has held that the government waived a defense by not addressing the contested issue on the merits. In the other decision, Judge Restani found that the government waived its defense by only arguing (unsuccessfully) a failure to exhaust. See Calgon Carbon Corp. v. United States, 145 F. Supp. 3d 1312, 1321 (Ct. Int’l Trade 2016).

Having disposed of the procedural issue, Judge Choe-Groves turned to the next question: whether, on the merits, Commerce properly concluded that a particular market situation existed in Korea with respect to hot-rolled coil. After determining that Commerce possessed the legal authority to make such a determination, Slip Op. 19-1 at 13–15, Judge Choe-Groves concluded that substantial record evidence did not support the agency’s conclusion, id. at 15–18. In particular, she highlighted that “Commerce did not explain adequately how the same record supported both its previous conclusion of no particular market situation and its subsequent finding of a single particular market situation.”  Id. at 15. Rather than vacate and remand the issue for further consideration, Judge Choe-Groves reversed and instructed Commerce to recalculate the relevant dumping margins. Id. at 18.

Judge Choe-Groves’s decision to reverse, rather than vacate and remand, Commerce’s determination aligns with a recent development in the circuit’s administrative law jurisprudence. The Supreme Court’s decision in Florida Power & Light Co. v. Lorion acknowledges that a court normally should vacate and remand a determination “if the record before the agency does not support the agency action.” 470 U.S. 729, 744 (1985). However, the U.S. Court of Appeals for the Federal Circuit, which reviews appeals from the CIT, has, in a series of recent opinions, reversed agency decisions under the substantial evidence standard of review when “there is only one possible evidence-supported” conclusion. E.g., Owens Corning v. Fast Felt Corp., 873 F.3d 896, 901 (Fed. Cir. 2017). In fact, the Federal Circuit has done so in at least three appeals from the CIT over the last five years. See CS Wind Vietnam Co. v. United States, 832 F.3d 1367, 1374 (Fed. Cir. 2016); Albemarle Corp. v. United States, 821 F.3d 1345, 1359 (Fed. Cir. 2016); Fedmet Res. Corp. v. United States, 755 F.3d 912, 922–23 (Fed. Cir. 2014).

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