Trade Court Sustains Circumvention Finding on Oil Piping From Brunei, Philippines

Judge M. Miller Baker ruled that the Commerce Department was right to compare production of oil piping in Brunei and the Philippines to the production of hot-rolled steel, an OCTG input, in China, when making its decision. In so holding, the judge relied on the U.S. Court of Appeals for the Federal Circuit's April 2023 holding in Al Ghurair Iron & Steel v. U.S., in which the appellate court upheld a similar comparison (see 2304120037).

The suit was brought by Bruneian exporter HLDS (B) Steel and Philippine exporter HLD Clark Steel Pipe Co., referred to collectively as HLD by the trade court, to contest the circumvention investigations, which the agency started of its own volition. In the review, Commerce compared HLD's production in Brunei and the Philippines to the hot-rolled steel production of integrated steel production mills in China in assessing whether the assembly processes in the two countries were minor or insignificant. The court noted that while hot-rolled steel is not the same class or kind of merchandise as OCTG, HLD made its piping from steel, and the production of hot-rolled steel is included in the production of OCTG.

Baker found that the Al Ghurair Iron & Steel decision resolved the issue, since it found that “Commerce reasonably explained that its comparison indicated what portion of the total value of the merchandise subject to these inquiries is accounted for by the last step of processing." As is the case here, the judge said, the agency explained why it compared the production of OCTG in the two countries to the Chinese production of the steel components of that piping.

HLD challenged Commerce's practice of finding that third country producers of steel articles not under the AD/CVD orders are circumventing the orders on the steel article from a different country since they use hot-rolled steel from the subject country. Baker again turned to Al Ghurair Iron & Steel, finding that the Federal Circuit sustained Commerce's use of the entire manufacturing process instead of just the "final steps" as consistent with the agency's prior determinations.

The exporters also contested Commerce's finding that the process of completion or assembly in Brunei or the Philippines was "minor" compared with that of integrated steel mills in China. Baker noted that the statute doesn't "contemplate a distinction between manufacturing and completion or assembly," since the statute equates completion or assembly with "production process." The court cited a dictionary definition of "manufacturing" to emphasize this point, noting that the word "production" is in the definition. As a result, the agency was not required to "first make a specific finding as to the former terms as HLD contends," the opinion said.

HLD also claimed that the anti-circumvention measures were not "appropriate" since OCTG from Brunei and the Philippines has only a "minimal presence" on the U.S. market, and that Commerce didn't have enough justification in launching the investigation itself. Baker found that the "statute does not require the Department to either explain why it initiates an anti-circumvention investigation or consider the extent to which a product under investigation has penetrated the U.S. market."

What the statute does require is for Commerce to consider trade patterns, whether the input maker is affiliated with the third-country producer and whether shipments of the inputs to the third country increased since the orders were imposed. Commerce assessed these factors, and because it did so, it properly started the investigation, Baker said.

(HLDS (B) Steel Sdn Bhd v. United States, Slip Op. 24-6, CIT # 21-00638, dated 01/23/24; Judge: M. Miller Baker; Attorneys: Gregory Menegaz of deKieffer & Horgan for plaintiffs HLD; Hardeep Josan for defendant U.S. government; Benjamin Bay of Schagrin Associates for defendant-intervenors led by Welded Tube USA)