Commerce Must Reconsider Decision to Adjust Input Costs for All CONNUMs in AD Case, CIT Rules

The case concerns the antidumping duty investigation into utility scale wind towers from South Korea, in which the plaintiff, Dongkuk S&C Co. (DKSC) served as a mandatory respondent. At the start of the investigation, Commerce picked out 11 physical characteristics that are the most important for differentiating the costs between the products under review, with the marquee two being height and weight. These characteristics define the unique products, CONNUMs, for "comparing the most similar products in price-to-price comparisons," the decision said.

In particular situations, Commerce is to look into whether sales of the foreign like product, in this case wind towers, were made below cost. The agency normally computes costs based on the exporter's records if those records reasonably reflect the costs associated with the production and sale of the subject merchandise. And those costs reasonably do this if they reflect "meaningful cost differences attributable to the finished product's different physical characteristics."

However, Commerce found that DKSC's reported steel plate costs -- a key wind tower input -- were significantly different between its CONNUMs sold in the Japanese and U.S. markets. While Commerce said that it analyzed the reported costs using the physical characteristics as its "guideposts" and by grouping CONNUMs together based on certain of these characteristics, the court found that it did no such thing. What the agency actually did is find that the "overwhelming factor that caused the differences in the steel plate costs was the timing of the steel plate purchases, rather than the physical characteristics of the [wind towers].”

To account for this, Commerce then decided to adjust costs to address distortions when the differences are not due to physical characteristics. This led to the agency adjusting costs by weight-averaging the reported steel plate costs for all reported CONNUMs. DKSC challenged this determination, arguing that its normal books and records reflect the cost to produce the wind towers based on their physical characteristics. In particular, DKSC says Commerce didn't analyze the steel plate costs by grouping CONNUMs by height and weight.

Gordon agreed, finding no evidence of this analysis. "The only analysis in the Final Cost Calculation Memorandum focused on a cost comparison of 'Japanese and U.S. steel plate purchases made in the same month' and found that 'the per-unit steel plate prices did not significantly vary due to the thickness, weight, or height, i.e., the physical characteristics of the steel plate,'" the opinion said. "There is nothing in that Memorandum that supports a conclusion that Commerce did in fact group CONNUMs by any of the 11 physical characteristics or otherwise use those characteristics as a 'guidepost.'"

The judge also tossed Commerce's argument that its analysis nevertheless backs its result since the agency applies its practice of adjusting unreasonable cost reporting to both finished goods and individual inputs. "The court must reject this argument as it is a post hoc rationalization by agency counsel and does not reflect Commerce’s rationale as set forth in the Decision Memorandum," Gordon said. "Commerce made no reference to its 'practice' of adjusting costs based solely on an analysis of individual inputs, nor did Commerce rely on [the relevant precedent] in reaching its determination on this issue."

(Dongkuk S&C Co., Ltd. v. United States, Slip Op. 21-167, CIT #20-03686, dated 12/13/21, Judge Leo Gordon. Attorneys: Robert Gosselink of Trade Pacific for plaintiff DKSC; Ashley Akers for defendant U.S. government)