Costs of Suspended Production Lines Are 'General' Costs, DOJ Argues at Trade Court
The Commerce Department correctly treated expenses from suspended production lines as general and accounting costs during an antidumping duty review on welded line pipe from South Korea, DOJ said in its May 5 remand comments at the Court of International Trade. The losses are attributable to the general operations of the company because when lines are shut down for an extended period, no products are produced, which could outweigh the cost of maintaining those lines, DOJ said (Nexteel Co. v. U.S., CIT # 20-03898).
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For shorter shutdown expenses, Commerce had explained that its practice is to include such expenses in the company’s reported costs. In this case in which the production lines were suspended for extended periods, Commerce reasonably found that costs no longer relate to ongoing production, DOJ said. During that longer time period, the production lines are "a non-productive asset whose costs are attributable to G&A expenses because there are no products to bear the costs directly."
In its remand comments, Nexteel argued that Commerce’s approach in this case created a new rule that shutdown costs can only be attributable to the products produced if such production occurred after, but not before, the line was shut down (see 2304060007). DOJ called that argument a "misguided hypothetical," saying that whether production occurred before or after the shutdown is irrelevant, "what matters is the length of time of the shutdown itself."
Nexteel also had argued that Commerce failed to explain why Nexteel’s treatment of the suspension loss costs was unreasonable, saying that the statute requires Commerce to rely on a company’s “normal books and records” when they “reasonably reflect the costs associated with the production and sale of the merchandise.” Therefore, Commerce shouldn't ever have arrived at the question of whether to classify suspension losses as G&A expenses.
The issue is not whether the accounting treatment used is generally reasonable, DOJ said, but instead whether those records “reasonably reflect" the costs associated with production and sale. In this case, production costs were not reasonably reflected because Nexteel’s books did not adequately show how costs from the shuttered production lines were spread out throughout the company, DOJ said.