CAFC Questions Challenge to Weight-Averaging of Steel Plate Costs for All CONNUMs

Judges at the U.S. Court of Appeals for the Federal Circuit questioned claims from both exporter Dongkuk S&C Co. and the Commerce Department during Nov. 5 oral argument in a suit on the antidumping duty investigation on utility scale wind towers from South Korea (Dongkuk S&C Co. v. United States, Fed. Cir. # 23-1419).

Judge Todd Hughes expressed doubt over Dongkuk's argument that Commerce improperly weight averaged the company's steel plate cost for all reported control numbers (CONNUMs), while Judge Jimmie Reyna questioned the reasonableness of Commerce's decision to use financial data from SeAH Steel Holdings in calculating Dongkuk's constructed value over data from SeAH Steel Corp.

During the investigation, Commerce said Dongkuk's reported steel plate costs were significantly different from costs of its CONNUMs sold in the Japanese and U.S. markets. The agency decided to account for the timing of the steel plate purchases, instead of the towers' physical characteristics, by weight-averaging the reported steel costs for all reported CONNUMs.

MacKensie Sugama, counsel for Dongkuk, claimed at oral argument that Commerce wrongly focused on the steel inputs' physical characteristics and not the finished wind towers' physical characteristics. Hughes sharply questioned this position, declaring that Commerce did in fact conduct an analysis based on finished products but that Dongkuk just doesn't like "the way they did it." Sugama disagreed with the characterization of Commerce's analysis, noting that the agency only compared a subset of steel sheet purchases for only three CONNUMs.

Hughes said Sugama is "going to lose that argument" if she's claiming that Commerce wasn't exhaustive enough in its comparison, since all the agency has to show is that their methodology was allowed and that there's "some evidence underlying it."

The judge then asked if it would be permissible for Commerce to average the steel costs for all CONNUMs if the agency found that the steel input prices weren't affected by physical characteristics but rather were related to the time of the purchase. Sugama said she still wouldn't find that permissible, since that "unravels the whole concept of having common characteristics," as manufacturing costs naturally change over time.

Hughes suggested that Sugama's issue isn't with the decision to weight-average the reported steel costs but actually with Commerce's determination that the costs were due to temporal and not physical characteristics. Sugama replied that "the substantial evidence was not there to reallocate the cost, because they never determined that the difference in costs were unrelated to the product's physical characteristics."

"I think they made exactly that determination," Hughes said. "You don't like that determination, but that's exactly what they did." The judge added that Commerce "gets a lot of deference" on this decision, noting that Sugama will also lose if she's challenging Commerce's use of a sample instead of all the input.

Reyna, meanwhile, challenged DOJ attorney Sosun Bae on Commerce's decision not to use data from SeAH Steel Corp. and instead opted for its parent corporation's data in calculating constructed value. The agency defended its decision on the grounds that the parent company's data had information for a full year, while SeAH Steel Corp.'s data only covered a four-month stretch.

Reyna questioned how Commerce could possibly say its decision was reasonable, given that almost 93% of the parent corporation's data concerned sales of non-subject goods and included sales to the U.S. -- two factors Commerce ordinarily disfavors in picking surrogate data. Bae said the decision was reasonable since the agency found none of the suggested data sets to be perfect and because the chosen data "still reflected some sales of comparable merchandise that met" the agency's criteria.

Maureen Thorson, counsel for petitioner Wind Tower Trade Coalition, added that the four-month limitation of SeAH's data made it crucial to select its parent company's data. Wind towers "take a very long time to produce," Thorson said, noting that this "provides context" for the agency's "rationale for saying four months is not enough of a financial statement for us to feel comfortable with for constructed value profit."

Hughes questioned Thorson, asking if it would have been reasonable for Commerce to have picked SeAH's data, acknowledging that Thorson would likely be in court arguing that it wasn't reasonable. In response, Thorson said, "hypothetically, yes, the agency does have quite a lot of discretion here," also noting that had Commerce "gone the other way, we'd have a different case, and I'd probably be on the other side of the courtroom."