CIT Remands Use of Statistical Test and PMS Determination in Antidumping Review

In the review, Commerce used the Cohen's d test before it undertook a differential pricing analysis to single out potentially masked dumping. In antidumping duty investigations, Commerce has been tasked by Congress with identifying goods that are dumped into the U.S. market through "targeted" or "masked" dumping. Since Commerce typically conducts its dumping investigations by comparing the average home market price of the good in question with its U.S. price, certain exporters may work around this by dumping the goods in certain areas and selling them at a higher price in another or at another time to get a non-dumped average U.S. price. To combat this, Commerce may compare the weighted average of sales in the home country with individual sales prices.

Before conducting the differential pricing analysis though, Commerce must first gather data on the export sales and detect the masked dumping using the differential pricing analysis. The agency breaks down the U.S. sales data into sets based on comparable product groups. Once placed in the product group, Commerce then breaks that data into various subsets. Commerce will then pick one subset as the "test group" while aggregating the remaining subset into the "comparison group." This is where the Cohen's d test comes in, as Commerce uses the test to find out if the test group is significantly different from the comparison group. If it is, Commerce applies a "ratio test" to see if the ratio of significantly different transactions warrants using the weighted average to individual transaction comparison.

This statistical practice faced scrutiny from the U.S. Court of Appeals for the Federal Circuit in July, when the appellate court refused to uphold Commerce's use of the test (see 2107150032). Finding that the agency failed to meet basic statistical assumptions, including the fact that the data set that the test is used on must be normally distributed, the Federal Circuit said that Commerce must reconsider or further explain its use of this test. Choe-Groves relied on this recent opinion to force Commerce to make a similar choice: reconsider its use of the test or further explain why these statistical requirements are not necessary in this instance.

The agency also held in the review that a PMS existed for the sale of OCTG in South Korea, basing this finding on five factors: (1) subsidies to hot-rolled coil producers, a key OCTG input, by the Korean government; (2) influx of Chinese HRC; (3) alliances between HRC suppliers and OCTG producers; (4) the Korean government's influence on electricity prices; and (5) steel industry restructuring efforts by the Korean government.

Going through these reasons one by one, Choe-Groves eventually came to the conclusion that Commerce's PMS finding was unsupported by substantial evidence. She held that the record evidence on the first and third factors was all before the period of review. On the deluge of Chinese HRC into the Korean market, Choe-Groves said that this was not a uniquely Korean problem, dismissing that factor. Korean electricity company KEPCO showed a loss in 2018, but evidence does not support the idea that this was due to government regulation, the judge said, tossing that concern out. Lastly, while resources may have been available for steel industry restructuring efforts, there's no evidence that respondent Hyundai actually took advantage of these efforts, the judge said.

Since Choe-Groves remanded the PMS finding, she declined to even consider two other issues in the case that were dependent on the PMS finding. For instance, the judge did not opine on Commerce's PMS adjustment using a regression analysis, nor the agency's application of PMS unadjusted costs to PMS adjusted costs when calculating constructed value profit.

The judge also devoted serious consideration to Commerce's constructed value profit calculation. Finding that there was no valid home market or third country sales market to use to calculate constructed value, the agency relied on 2018 surrogate financial statements from two companies, Tenaris and TMK. The court backed the use of these statements since they didn't suffer from viability concerns while the home market and third country markets did.

SeAH argued that since one of Tenaris' subsidiaries received a $6 million grant in 2013, the 2018 data was distorted by this effective subsidy. The court sided with Commerce, however, which held that this grant would've been fully allocated to 2013 as a non-recurring subsidy since the grant was only 0.5% of Tenaris' net sales. Choe-Groves also upheld Commerce's decision to not apply a profit cap, finding that the agency's contention that it couldn't put on the cap based on the actual amounts reported was reasonable.

SeAH also sought to challenge Commerce's decision to depart from using SeAH's own data to construct export price profit. The respondent said that there was nowhere in the law providing for Commerce to depart from the respondent's own data, unlike the case for constructed value profit. "Despite the absence of such a provision, the U.S. Court of Appeals for the Federal Circuit has upheld the use of surrogate values to adjust constructed export price under section 1677a," the judge said. The court wrapped up the lengthy decision by upholding Commerce's exclusion of freight revenue profit from constructed export price, holding that the statute requires the agency to "make adjustments when calculating export price or constructed export price 'to achieve a fair, apples-to-apples comparison between U.S. price and foreign market value.'"

(SeAH Steel Corporation v. United States, Slip Op. 21-146, CIT #20-00150, dated 10/19/21, Judge Jennifer Choe-Groves; Attorneys: Jeffrey Winton of Winton & Chapman for plaintiff SeAH Steel Corporation; Hardeep Josan for defendant U.S. government)