Slip Op. 08-87
UNITED STATES COURT OF INTERNATIONAL TRADE
____________________________________
:
FAGERSTA STAINLESS AB, :
:
Plaintiff, :
:
v. :
:
UNITED STATES, : Before: WALLACH, Judge
: Court No.: 07-00153
Defendant, :
:
and : PUBLIC VERSION
:
CARPENTER TECHNOLOGY CORP., :
and UNIVERSAL STAINLESS & ALLOY :
PRODUCTS, INC., :
:
Defendant-Intervenors. :
____________________________________:
[Plaintiff’s Motion for Judgment on the Agency Record is DENIED and the Agency’s
Determination is AFFIRMED.]
Dated: August 28, 2008
Hunton & Williams LLP (William Silverman, Richard P. Ferrin, and James R. Simoes), for
Plaintiff Fagersta Stainless AB.
Gregory G. Katsas, Assistant Attorney General; Jeanne E. Davidson, Director, Patricia M.
McCarthy, Assistant Director, Commercial Litigation Branch, Civil Division, U.S. Department
of Justice (Michael Dierberg); and Hardeep K. Josan, Office of the Chief Counsel for Import
Administration, U.S. Department of Commerce, of Counsel, for Defendant United States.
Kelley Drye Collier Shannon (David A. Hartquist, Mary T. Staley, and Grace W. Kim), for
Defendant-Intervenors Carpenter Technology Corp. and Universal Stainless & Alloy Products,
Inc.
OPINION
Wallach, Judge:
I
INTRODUCTION
This action arises out of the administrative review of an antidumping duty order
conducted by the United States Department of Commerce (“Commerce”). During the course of
the review, Plaintiff Fagersta Stainless AB (“Fagersta”) requested that Commerce modify its
existing model-match methodology by adding an additional product criterion. Commerce
rejected this request on the basis that Fagersta had not demonstrated that there were “compelling
reasons” to do so. Plaintiff challenges this determination.
This court has jurisdiction pursuant to 28 U.S.C. § 1581(c). For the reasons set forth
below, Commerce’s determination is affirmed.
II
BACKGROUND
On September 15, 1998, Commerce published an antidumping duty order on stainless
steel wire rod (“SSWR”) from Sweden. Notice of Antidumping Duty Order: Stainless Steel Wire
Rod from Sweden, 63 Fed. Reg. 49,329 (September 15, 1998). The model-match criteria applied
by Commerce consisted of four product characteristics: (1) grade, (2) diameter, (3) further
processing, and (4) coating. See Memorandum in Support of Plaintiff’s Motion for Judgment on
the Agency Record (“Plaintiff’s Motion”) at 2; Defendant’s Memorandum in Opposition to
Plaintiff’s Rule 56.2 Motion for Judgment Upon the Agency Record (“Defendant’s Response”)
at 3.
2
On October 25, 2005, Commerce published a notice of initiation of the administrative
review on SSWR from Sweden for the period September 1, 2004 through August 31, 2005.
Initiation of Antidumping and Countervailing Duty Administrative Reviews, 70 Fed. Reg.
61,601 (October 25, 2005). As part of the administrative review, Commerce sent an
antidumping duty questionnaire to Fagersta in November 2005. Defendant’s Response at 2.
Fagersta responded and requested that Commerce revise its model-match criteria to include
electro-slag refining (“ESR”) as a fifth product characteristic. Fagersta Section B Questionnaire
Response, Confidential Record (“C.R.”) Doc. No. 3, at B-2. In its questionnaire response,
Fagersta defined electro-slag refining as a “separate and significant processing stage . . . [that]
imparts unique material qualities, primarily superior fatigue resistance, to the finished wire rod
product.” Id.
In October 2006, Commerce published the preliminary results of this review. Stainless
Steel Wire Rod from Sweden: Preliminary Results of Antidumping Duty Administrative Review,
71 Fed. Reg. 59,082 (October 6, 2006). Commerce determined that compelling reasons did not
exist to modify the model-match criteria by adding electro-slag refining as a product
characteristic. Id. at 59,085. In the preliminary phase of the administrative review, Commerce
therefore applied the same model-match criteria to determine the “foreign like product” as in the
initial “less than fair value” investigation. Plaintiff’s Motion at 2; Defendant’s Response at 3.
Fagersta subsequently renewed its request that Commerce modify the model-match criteria to
include ESR as a product characteristic. See Fagersta Stainless AB Case Brief, United States
Department of Commerce, International Trade Administration, Case No. A-401-806 (November
27, 2006), C.R. Doc. 33, at 3. Commerce again declined to modify its model-match criteria. See
Issues and Decision Memorandum for the Final Results of the Administrative Review of
3
Stainless Steel Wire Rod from Sweden (“Final Decision Memo”) (April 4, 2007), Public Record
(“P.R.”) Doc. 102, at 9; Stainless Steel Wire Rod from Sweden: Final Results of Antidumping
Duty Administrative Review, 72 Fed. Reg. 17,834, 17,835-37 (April 10, 2007).
III
STANDARD OF REVIEW
The court must uphold a determination by Commerce resulting from an administrative
review of an antidumping duty order unless it is “unsupported by substantial evidence on the
record, or otherwise not in accordance with law.” 19 U.S.C. § 1516a(b)(1)(B)(i); Carpenter
Tech. Corp. v. United States, 510 F.3d 1370, 1372-73 (Fed. Cir. 2007).
The substantial evidence test “requires only that there be evidence that a reasonable mind
might accept as adequate to support a conclusion.” Cleo Inc. v. United States, 501 F.3d 1291,
1296 (Fed. Cir. 2007) (citing Universal Camera Corp. v. NLRB, 340 U.S. 474, 477, 71 S. Ct.
456, 95 L. Ed. 456 (1951)). While the court must consider contradictory evidence, “the
substantial evidence test does not require that there be an absence of evidence detracting from
the agency’s conclusion, nor is there an absence of substantial evidence simply because the
reviewing court would have reached a different conclusion based on the same record.” Id. (citing
Universal Camera Corp., 340 U.S. at 487-88); see also Am. Silicon Techs. v. United States, 261
F.3d 1371, 1376 (Fed. Cir. 2001); U.S. Steel Group v. United States, 96 F.3d 1352, 1357 (Fed.
Cir. 1996).
To determine whether Commerce’s interpretation and application of the antidumping
statute at issue “is in accordance with the law,” the court must conduct the two-step analysis
articulated by the Supreme Court in Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467
U.S. 837, 842-43, 104 S. Ct. 2778, 81 L. Ed. 2d 694 (1984). Under the first step of the Chevron
4
analysis, the court must ascertain “whether Congress has directly spoken to the precise question
at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as
the agency, must give effect to the unambiguously expressed intent of Congress.” Wheatland
Tube Co. v. United States, 495 F.3d 1355, 1359 (Fed. Cir. 2007) (citing Chevron, 467 U.S. at
843).
The court reaches the second step of the Chevron analysis only “if the statute is silent or
ambiguous with respect to the specific issue.” Id. Under this second step, the court must
evaluate whether Commerce’s interpretation “is based on a permissible construction of the
statute.” Chevron, 467 U.S. at 843. The agency’s construction need not be the only reasonable
interpretation or even the most reasonable interpretation. Zenith Radio Corp. v. United States,
437 U.S. 443, 450, 98 S. Ct. 2441, 57 L. Ed. 2d 337 (1978). The court must defer to
Commerce’s reasonable interpretation of a statute even if it might have preferred another. Id.
IV
DISCUSSION
A
Legal Framework
Goods imported into the United States will be subject to an antidumping duty if
Commerce determines that foreign merchandise is being sold in the United States at “less than
its fair value.”1 19 U.S.C. § 1673; see also Ad Hoc Shrimp Trade Action Comm. v. United
States, 15 F.3d 1372, 1375 (Fed. Cir. 2008). The amount of the antidumping duty reflects the
1
In addition to Commerce’s less-than-fair-value determination, the International Trade Commission
(“Commission”) must determine that a domestic industry will be injured by imports or sales of that
merchandise before antidumping duties can be imposed. 19 U.S.C. § 1673. The Commission’s inquiry is not
relevant to the issues raised in this case. For an overview of the administrative process involving both
Commerce and the Commission that must take place before an antidumping duty order can be issued, see Ad
Hoc Shrimp Trade, 515 F.3d at 1375-76, and FAG Italia Spa v. United States, 291 F.3d 806, 808-09 (Fed. Cir.
2002).
5
amount by which the home-market price of the foreign like product (the “normal value”) exceeds
the price charged in the United States (the “export price”), 19 U.S.C. § 1677b(a)(1)(A)-(B); this
difference is referred to as the “dumping margin,” 19 U.S.C. § 1677(35)(A). After an
antidumping duty order is issued, the amount of the antidumping duty may be revised in
subsequent administrative reviews. 19 U.S.C. § 1675(a)(1)(B). In an administrative review,
Commerce recalculates the normal value and export price to establish an updated dumping
margin. 19 U.S.C. § 1675(a)(2)(A)(i)-(ii). In order to establish the dumping margin, whether in
an initial investigation or in an administrative review, Commerce must first identify the “foreign
like product” which will form the basis for comparison to merchandise exported to the United
States. See Pesquera Mares Australes Ltda. v. United States, 266 F.3d 1372, 1375 (Fed. Cir.
2001).
1
Commerce Has Considerable Discretion in Constructing a Model-Match Methodology for
Identifying the “Foreign Like Product”
Because Congress has not precisely defined the methodology by which Commerce must
identify the “foreign like product,” it has implicitly delegated that authority to Commerce. New
World Pasta Co. v. United States, 28 CIT 290, 305-06, 316 F. Supp. 2d 1338, 1352 (2004)
(citing Pesquera Mares, 266 F.3d at 1384; Koyo Seiko Co. v. United States, 66 F.3d 1204, 1209
(Fed. Cir. 1995)). Commerce has “considerable discretion” to construct a methodology for
identifying the “foreign like product” in antidumping proceedings. SKF USA, Inc. v. United
States, 2008 U.S. App. LEXIS 18159, at *13 (Fed. Cir. 2008); SKF USA Inc. v. United States,
263 F.3d 1369, 1381 (Fed. Cir. 2001).2 Commerce states that it does so by “devis[ing] a
2
Fagersta acknowledges that “Commerce has broad discretion in determining the appropriate model match
characteristics in an antidumping proceeding.” Plaintiff’s Motion at 11.
6
hierarchy of commercially significant characteristics suitable to each class or kind of
merchandise.” Defendant’s Response at 10. This hierarchy of commercially significant
characteristics is the “model-match methodology.” According to Commerce, it then utilizes
these characteristics to “compare[] United States sales to sales in the comparison market.” Id.
Pursuant to the statutory scheme, Commerce must “first look for identical merchandise
with which to match the United States model to the comparable home or third country market
model.”3 Viraj Forgings, Ltd. v. United States, 27 CIT 1472, 1477, 283 F. Supp. 2d 1335, 1340
(2003) (citing Torrington, 25 CIT 395, 417, 146 F. Supp. 2d 845, 874 (2001). The Federal
Circuit has established, however, that merchandise need not be exactly the same in order to be
considered “identical.” Pesquera Mares, 266 F.3d at 1384. In the final analysis, Commerce
states that it “considers merchandise to be identical within the meaning of section 1677(16)(A)
when all the relevant characteristics match.” Id. (citing Notice of Final Determination of Sales at
3
The term “foreign like product” is defined as follows:
[M]erchandise in the first of the following categories in respect of which a determination for
the purposes of part II of this subtitle can be satisfactorily made:
(A) The subject merchandise and other merchandise which is identical in physical
characteristics with, and was produced in the same country by the same person as, that
merchandise.
(B) Merchandise--
(i) produced in the same country and by the same person as the subject merchandise,
(ii) like that merchandise in component material or materials and in the purposes for
which used, and
(iii) approximately equal in commercial value to that merchandise.
(C) Merchandise--
(i) produced in the same country and by the same person and of the same general class or
kind as the subject merchandise,
(ii) like that merchandise in the purposes for which used, and
(iii) which the administering authority determines may reasonably be compared with that
merchandise.
19 U.S.C. ' 1677(16).
7
Less Than Fair Value: Steel Wire Rod from Trinidad & Tobago, 63 Fed. Reg. 9,177, 9,180
(February 24, 1998)).
2
A Party Seeking to Modifying an Existing Model-Match Methodology Must Meet a
“Compelling Reasons” Standard
Once Commerce has established a model-match methodology in an antidumping
investigation, it will not modify that methodology in subsequent proceedings unless there are
“compelling reasons” to do so. See Final Decision Memo, P.R. Doc. No. 102, at 10 (citing Ball
Bearings and Parts Thereof From France, Germany, Italy, Japan, Singapore, and the United
Kingdom: Final Results of Antidumping Duty Administrative Review, 70 Fed. Reg. 54,711
(September 16, 2005), and accompanying Issues and Decision Memorandum at cmt. 2.
A party seeking to modify an existing model-match methodology has alternative means
to demonstrate that “compelling reasons” exist to do so. Commerce will find that “compelling
reasons” exist if a party proves by “compelling and convincing evidence” that the existing
model-match criteria “are not reflective of the merchandise in question,” that there have been
changes in the relevant industry, or that “there is some other compelling reason present which
requires a change.” Notice of Final Results of the Twelfth Administrative Review of the
Antidumping Duty Order on Certain Corrosion-Resistant Carbon Steel Flat Products from the
Republic of Korea, 72 Fed. Reg. 13,086, and accompanying Issues and Decision Memorandum
at cmt. 1(b) (March 20, 2007). Such other compelling reasons may include, for example, (1)
“greater accuracy in comparing foreign like product to the single most similar U.S. model, in
accordance with [19 U.S.C. § 1677(16)(B)];” (2) “a greater number of reasonable price-to-price
comparisons in accordance with [19 U.S.C. § 1677b];” or (3) the existence of a “specific
standard . . . that is not captured in the model-matching criteria but which is industry-wide,
8
commercially accepted and recognizes material physical characteristics of various types for the
particular product at issue.” Final Decision Memo, P.R. Doc. No. 102, at 10, 14-15.
Commerce’s stated position that it will not modify an existing model-match methodology
absent “compelling reasons” has been recognized as a reasonable means of interpreting the
statute. See, e.g., SKF USA Inc. v. United States, 491 F. Supp. 2d 1354, 1363 (CIT 2007)
(“Commerce does indeed express its preference for maintaining a stable methodology across
reviews unless compelling reasons exist.”), aff’d, 2008 U.S. App. LEXIS 18159; Mittal Steel
USA, Inc. v. United States, Slip Op. 07-117, 2007 Ct. Int’l Trade LEXIS 138, at *8-*9 (August
1, 2007) (“For Commerce, the need for consistency in the model match criteria stems from its
duty to calculate antidumping rates as accurately as possible.”) (citing Lasko Metal Prods., Inc.
v. United States, 43 F.3d 1442, 1446 (Fed. Cir. 1994)).
Fagersta does not contest the lawfulness of the “compelling reasons” standard. Plaintiff’s
Motion at 11. Nor does Fagersta dispute that Commerce may define products as “identical” even
if those products are not exactly the same. Id. at 10. Instead, Fagersta argues that it sufficiently
demonstrated to Commerce that ESR and non-ESR SSWR are not “identical,” id., and thus that
the existing “model match is not reflective of the merchandise in question,” id. at 29. In
addition, Fagersta contends that it sufficiently demonstrated that there are other “compelling
reasons” for Commerce to modify the existing model-match methodology. Id. at 11. Fagersta
has not sufficiently demonstrated either of these positions. Accordingly, Commerce’s
designation of ESR SSWR and non-ESR SSWR as identical is both in accordance with law and
supported by substantial evidence. Likewise, Commerce’s determination that Fagersta did not
otherwise provide “compelling reasons” to add ESR as a product characteristic to the existing
model-match methodology is in accordance with law and supported by substantial evidence.
9
B
Commerce’s Designation of ESR SSWR and Non-ESR SSWR as “Identical” Products
is Based on a Reasonable Interpretation of the Relevant Statute and Supported by
Substantial Evidence
Fagersta frames the issue in this case as “whether ESR SSWR is so similar to non-ESR
SSWR to . . . justify Commerce treating them as identical.” Plaintiff’s Motion at 10. To that end,
Fagersta raises the question “whether the products are ‘the same with minor differences.’” Id.
Based on Commerce’s interpretation of the word “identical,” as discussed in Sub-section (A)(1)
above, the court must determine whether Fagersta has demonstrated that any differences between
ESR SSWR and non-ESR SSWR are “commercially significant.” See Pesquera Mares, 266 F.3d
at 1384. The court will also evaluate Fagersta’s contention that, in determining the structure of
the model match, Commerce has “simply brushed aside” the price and cost differences between
ESR SSWR and non-ESR SSWR that it placed on the record below. See Plaintiff’s Motion at 18.
1
Fagersta Has Not Demonstrated That Any Differences That Exist Between ESR SSWR and
Non-ESR SSWR are “Commercially Significant”
According to Fagersta, electro-slag refining is “a complex production process that
reduces the number and segregation of non-metallic inclusions, thereby resulting in a ‘cleaner’
steel with superior fatigue resistance and other important product characteristics.” Plaintiff’s
Motion at 3. Fagersta placed on the record below various technical reports and other evidence
demonstrating what it asserts are the physical differences, primarily “superior fatigue
resistance,” between ESR SSWR and non-ESR SSWR. See, e.g., Fagersta Section B
Questionnaire Response, C.R. Doc. No. 3, at Exhibit B-1 (product specification sheets); Fagersta
Supplemental Sections A-C Response, C.R. Doc. No. 14, at Exhibits S-6 to S-8, S-10 to S-12
10
(technical literature and test data).4 This “superior fatigue resistance,” asserts Fagersta, is a
result of the “significant reduction in non-metallic inclusion content in ESR treated . . .
products.” Plaintiff’s Motion at 15. Further, Fagersta represents that additional product
characteristics, such as maximum levels of various chemical compounds, are requested by the
customer to whom it sells the ESR SSWR. Id. Fagersta claims that, to the best of its knowledge,
this specific product (i.e., SSWR with maximum levels of various chemical compounds as well
as a maximum number of inclusions) cannot be produced without using the ESR process. Id.
Fagersta argues that “Commerce simply dismissed” these physical differences. Id. at 16.
In response, Commerce explains that it constructs its model-match methodology by
“devis[ing] a hierarchy of commercially significant characteristics.” Defendant’s Response at 10
(emphasis added). Commerce then asserts that it “did not contest that ESR-treated SSWR has
different properties than some other SSWR products,” but rather that “Fagersta did not establish
that these properties were unique to ESR-treated merchandise.” Defendant’s Response at 12. In
its Final Decision Memo, Commerce stated that “many factors and/or different production steps
could affect the final SSWR product with respect to both its internal characteristics (e.g.,
impurities or inclusion, dimensional tolerances) and its external characteristics (e.g., surface
imperfections).” Final Decision Memo, P.R. Doc. No. 102, at 14.5 Based on this statement,
Defendant-Intervenors argue that Commerce “established that the ESR product was not
4
Fagersta asserts that “Commerce did not request additional information from Fagersta to support this
point, or dispute, in the final results, th[is] information,” and this “silence is a concession that [Commerce]
either accepted the truth of the information . . . or never considered the information in the first place.”
Plaintiff’s Reply at 3. Fagersta provided no citations in its briefs nor at oral argument for its proposition that
“silence” by Commerce in an administrative proceeding is necessarily a concession of the veracity of a party’s
position.
5
At oral argument, Commerce stated that a different analysis might have been called for if Fagersta had
requested that ESR SSWR be distinguished from SSWR that had undergone other remelting processes such as
“vacuum arc refining,” for example. Fagersta confirmed that it did not make such a request.
11
significantly different than the non-ESR product . . . .” Defendant-Intervenors’ Response Brief
(“Defendant-Intervenors’ Response”) at 14.6
Commerce has interpreted the word “identical” to mean the same with “minor differences
in physical characteristics, if those minor differences are not commercially significant,” and this
interpretation has been upheld as a “permissible construction of the statute.” Pesquera Mares,
266 F.3d at 1384 (quoting Chevron, 467 U.S. at 843). Commerce has not explained what it
considers a “commercially significant” difference in physical characteristics, and appears to
conduct a case-by-case assessment each time it determines whether products are identical. See,
e.g., New World Pasta Co., 28 CIT at 309 n.20; Pesquera Mares Australes Ltda. v. United States,
24 CIT 443, 447 n.1 (2000), aff’d, 266 F.3d 1372 (Fed. Cir. 2001). Indeed, the Federal Circuit
has established that Commerce’s commercial significance determination is subject to review
under the “substantial evidence” standard, Pesquera Mares, 266 F.3d at 1384. In Pesquera
Mares, the court affirmed Commerce’s decision to treat “premium” and “super-premium”
salmon as identical, partly because that distinction was only reflected in the grading standards of
the Chilean salmon industry and not in any of the other of the “world’s largest salmon farming
countries.” Id.
In this case, Fagersta has not demonstrated that the differences between ESR SSWR and
non-ESR SSWR are commercially significant. In its response to Commerce’s questionnaire,
Fagersta stated that it produces and sells SSWR according to its own internal grading system
6
In their Response and at oral argument, Defendant-Intervenors set forth a number of arguments purporting
to characterize global practices in the steel industry with respect to SSWR, see Defendant-Intervenors’
Response at 3, and attempting to establish that the use of ESR is not necessary to manufacture the precise
product at issue in this case, see id. at 17, 21, in support of Commerce’s final determination. Defendant-
Intervenors did not provide citations to authority for any of these propositions. Defendant-Intervenors stated,
at oral argument, that those assertions were authoritative because that they had made those arguments in the
administrative proceeding below and Fagersta had not contested them. Given the lack of evidence in the
record, no weight has been given to those assertions in this analysis.
12
which, according to Fagersta, is more specific than the grading system established by either the
American Iron and Steel Institute (“AISI”) or the American Welding Society (“AWS”). Fagersta
Section C Questionnaire Response, C.R. Doc. No. 4, at C-4. Fagersta also stated that its internal
grades “occasionally do not have a comparable AISI or AWS counterpart.” Fagersta Section A
Questionnaire Response, C.R. Doc No. 1, at A-39. Fagersta has not disputed that both categories
of SSWR produced by Fagersta fit within the same commercial grade established by the AISI,
Final Decision Memo, P.R. Doc. No. 102, at 11, without regard to their respective levels of
inclusions or fatigue resistance or any other characteristic. What Fagersta has asserted is that
“AISI and other grade designation schemes do not fully capture certain physical distinctions.”
Fagersta Section B Questionnaire Response, C.R. Doc. No. 3, at B-2. Fagersta has placed no
evidence on the record which demonstrates that any relevant industry grading standards reflect a
distinction based on the use of ESR technology in the production of SSWR. Thus, because
Commerce can reasonably rely on industry grading standards to assess commercial significance,
see Pesquera Mares, 266 F.3d at 1384-85, Commerce’s decision not to modify the existing
model-match methodology to incorporate ESR as an additional product characteristic is both in
accordance with law and supported by substantial evidence.
2
Commerce is Not Required to Adjust for Differences in Price and Cost Between Products
When Those Products Are Identical
According to Fagersta, “ESR-treated merchandise is significantly more costly to make,
and carries a significant price premium in the market, compared to non-ESR-treated
merchandise.” Plaintiff’s Motion at 18. In support of this assertion, Fagersta sets out the
difference between the weighted-average price of ESR SSWR and the average price of non-ESR
SSWR, and the total cost of manufacture, across the three control numbers to which those
13
products were assigned. Id. Fagersta contends that Commerce “should have placed great weight
on the differences in price and cost” between these products. Id. at 21.
First, Fagersta asserts that “Commerce routinely considers prices and costs in the
structure of the model match,” and cites to two recent decisions issued by Commerce in support
of that proposition. See id. at 36 (citing Metal Calendar Slides from Japan: Notice of Final
Determination of Sales at Less Than Fair Value and Final Negative Determination of Critical
Circumstances, 71 Fed. Reg. 36,063, and accompanying Issues and Decision Memorandum at
cmt. 1 (June 23, 2006), and Certain Corrosion Resistant Carbon Steel Flat Products from
Canada, Final Results of Antidumping Duty Administrative Review, 70 Fed. Reg. 13,458, and
accompanying Issues and Decision Memorandum at cmt. 1 (March 21, 2005)).
Those decisions do not support that proposition. Commerce states that it did not switch
the hierarchical order of two model-matching criteria in Metal Calendar Slides from Japan, 71
Fed. Reg. 36,063, because the petitioner “did not demonstrate that the differences in
functionality, production, or pricing, and marketing were sufficient to overturn the established
methodology.” Final Decision Memo, P.R. Doc. No. 102, at 16. Similarly, Commerce states
that it decided not to include a certain characteristic in the model-match criteria in Carbon Steel
Flat Products from Canada, 70 Fed. Reg. 13,458, in part because there were no significant price
differences associated with it, and in part because the respondent had not demonstrated other
compelling reasons – such as new technological developments and/or an industry-wide,
commercially accepted standard. Id.
Second, Fagersta criticizes Commerce for not “address[ing] the significance of the
difference in production costs between ESR SSWR and non-ESR SSWR, particularly in light of
14
Commerce’s DIFMER test.” Id. at 34. Fagersta summarizes the test as follows:
(1) comparison between non-identical, or “similar,” products with differences in
variable production costs representing more than twenty percent of total
manufacturing costs are forbidden, even with an adjustment to normal value
to account for the difference; and
(2) when comparing non-identical, or “similar,” merchandise an adjustment to
normal value is made to account for the differences in variable production
costs.
Id. at 23.
That summary is not accurate. Commerce is required to make adjustments to reflect the
difference in price between home market sales and sales in the United States when that
difference in price arises because the foreign like product is not “identical” to the domestic
product to which it is being compared. See 19 U.S.C. § 1677b(a)(6)(C)(ii). In such a case,
Commerce must make an adjustment to normal value for the “difference in cost attributable to
the difference in physical characteristics.” Viraj Forgings, 27 CIT at 1478-79 (quoting
Mitsubishi Heavy Indus. v. United States, 23 CIT 326, 340, 54 F. Supp. 2d 1183, 1196 (1999)).
This adjustment is commonly referred to as the difference in merchandise (“DIFMER”)
adjustment. See U.S. Import Administration, Policy Bulletin 92.2, Differences in Merchandise;
20% Rule (1992) (“DIFMER Policy Bulletin”); see also Mitsubishi Heavy Indus. v. United
States, 275 F. 3d 1056, 1059 n.2 (Fed. Cir. 2001). A DIFMER calculation exceeding twenty (20)
percent does not result in an absolute prohibition of on comparing the products at issue, as
Fagersta asserts; rather, it creates a “presumption of noncomparability.” Mitsubishi Heavy
Indus., 275 F.3d at 1059 n.2; see DIFMER Policy Bulletin at 2. Any comparison of products
with a DIFMER exceeding twenty (20) percent “shall be noted and fully explained.” DIFMER
Policy Bulletin at 3.
15
Commerce urges the court not to consider Fagersta’s DIFMER argument on the basis that
Fagersta did not raise this argument in the administrative proceeding below and thus, according
to Commerce, failed to exhaust its administrative remedies.7 Defendant’s Response at 19. The
Federal Circuit has affirmed that “the application of ‘exhaustion principles in trade cases is
subject to the discretion of the judge of the Court of International Trade,’” Agro Dutch Indus.
Ltd. v. United States, 508 F.3d 1024, 1029 (Fed. Cir. 2007) (citing Corus Staal BV v. United
States, 502 F.3d 1370 (Fed. Cir. 2007)). However, it is not necessary to address Commerce’s
objection in detail because, as discussed above, Commerce is not required to take cost
differences into account when the products being compared are identical, see 19 U.S.C. §
1677b(a)(6)(C)(ii), and thus Fagersta’s arguments with respect to DIFMER fail as a matter of
law.
C
Commerce’s Determination that Fagersta Did Not Establish Other “Compelling Reasons”
to Modify the Model Match Criteria is Both In Accordance With Law and Supported by
Substantial Evidence
Fagersta contends that it has demonstrated other “compelling reasons” for Commerce to
modify its existing model-match methodology. Specifically, Fagersta claims that it has
demonstrated that adding electro-slag refining to the model-match criteria would result in (1)
greater accuracy in comparing the foreign like product to the single most similar U.S. model, id.
at 12; and (2) a greater number of reasonable price-to-price comparisons,” id.; and would also
(3) reflect a new technological development with respect to SSWR, id. at 29. Fagersta, however,
has neither made any of these showings nor demonstrated any other compelling reason for
7
Fagersta confirmed at oral argument that it did not raise the DIFMER argument during the briefing phase
of the administrative proceeding below; the parties agreed that Fagersta did not raise the issue until the hearing
in the administrative proceeding.
16
Commerce to modify its existing model-match methodology.
1
Fagersta Has Not Demonstrated That Adding Electro-Slag Refining to the Model-Match
Methodology Will Result in Greater Accuracy in Comparing the Foreign Like Product to
the Single Most Similar U.S. Model
Fagersta asserts that adding electro-slag refining to the existing model-match
methodology would result in greater accuracy in comparing the foreign like product to the single
most similar U.S. model. Plaintiff’s Motion at 12; Plaintiff’s Reply Brief (“Plaintiff’s Reply”) at
13. According to Fagersta, while both ESR SSWR and non-ESR SSWR are sold in the home
market, only non-ESR SSWR is sold in the United States. Plaintiff’s Motion at 12. Because the
current model-match methodology does not distinguish between the two products, the
comparison price for U.S. sales of non-ESR SSWR is calculated based on the weighted average
prices of home market sales of both ESR SSWR and non-ESR SSWR. Id.
Commerce notes that its current model-match methodology compares home market sales
of SSWR to U.S. sales of SSWR that fall within the same AISI grade, and that both ESR and
non-ESR SSWR are captured in that grading category. Final Decision Memo, P.R. Doc. No. 102,
at 11. On this basis, Commerce determined that by adding ESR to the model-matching criteria,
“the home market price and production costs of the SSWR grade at issue . . . are artificially
lowered when compared to sales of the same grade in the U.S. market.” Id. Therefore,
Commerce reasons, “including ESR as a model-matching criterion will not result in greater
accuracy with respect to product comparisons involving the SSWR grade at issue.” Id.
Commerce further reasons that because the use of ESR “is limited to the production of one AISI-
equivalent grade in this review, inclusion of ESR as a model-matching characteristic will not
result in greater accuracy with respect to comparing the remaining foreign like product.” Id.
Fagersta argues that Commerce’s methodology results in a “significant inaccuracy” and
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that its proposed modification would “correct this significant inaccuracy by matching U.S. sales
of the non-ESR product . . . to the weighted average prices of home market sales of only the truly
identical non-ESR product . . . because the ESR product would no longer be treated as identical.”
Plaintiff’s Motion at 12. In support of this proposition, Fagersta states that “[i]t cannot be
disputed that matching sales of the truly identical product is more accurate than matching the
U.S. sales price to a home market basket of the truly identical product and a vastly dissimilar and
superior product that costs roughly double to produce.” Id. Moreover, Fagersta argues,
“Commerce failed to explain . . . what could possibly be ‘artificial’ about a comparison market
price consisting of only sales of a truly identical product.” While Commerce correctly pointed
out that products need not be truly identical in order to be considered identical within the
meaning of 19 U.S.C. § 1677(16)(A), Defendant’s Response at 10 (citing Pesquera Mares, 266
F.3d at 1383-84), Fagersta responds that “a ‘compelling reason’ must necessarily include a
modification that is required to conform the model match to the governing law,” Plaintiff’s
Reply at 3.
The governing law – in this case, 19 U.S.C. § 1677(16)(A) and the Federal Circuit’s
clarification of the appropriate interpretation of the terms contained therein – does not compel
the outcome sought by Fagersta. The Federal Circuit recognized that interpreting the term
“identical” in 19 U.S.C. § 1677(16)(A) to require exact identity “would frustrate the purpose of
the [antidumping] statute.” Pesquera Mares, 266 F.3d at 1383. The court also observed that
“Congress could hardly have intended to require Commerce in each and every instance to
compare all the physical characteristics of the goods.” Id. (citation omitted). Thus, Fagersta’s
argument that “matching sales of the truly identical product is more accurate” is unavailing.
Because Commerce is not required to match only products that are truly identical, Fagersta
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would have to prove that the differences between ESR SSWR and non-ESR SSWR are
commercially significant and, thus, that Commerce’s characterization of those products as
identical does not conform to the governing law. As discussed in detail in Section IV(B)(1)
above, Fagersta has not made such a showing and Commerce’s designation of ESR SSWR and
non-ESR SSWR as identical is both in accordance with law and supported by substantial
evidence.
2
Fagersta Has Not Demonstrated That Adding Electro-Slag Refining to the Model Match
Methodology Will Result in More Reasonable Price-to-Price Comparisons
Fagersta asserts that adding electro-slag refining to the existing model-match
methodology will result in more reasonable price-to-price comparisons. Plaintiff’s Motion at 16-
17; Plaintiff’s Reply at 13-14. Specifically, Fagersta submits that its sales of AISI Grade 20 ESR
SSWR in its home market constitutes [[ a certain ]] percent of its total reported market home
sales, while its sales of AISI Grade 20 non-ESR SSWR constitutes [[ a different ]] percent of its
home market sales, and that its sales of non-ESR SSWR in the United States accounts for [[ a
certain ]] percent of its total U.S. sales. Plaintiff’s Motion at 16-17. Thus, Fagersta argues, “the
comparison market of fully [[ a certain ]] percent of [its] home market sales has been
inaccurately calculated” because Commerce treated ESR SSWR as identical to non-ESR SSWR.
Id. at 17.
Fagersta’s argument is unavailing, as it assumes that is unreasonable for Commerce to
treat ESR SSWR and non-ESR SSWR as “identical.” As discussed in Section IV(B)(1) above,
there is nothing unreasonable about Commerce’s decision to treat as identical two products that
are assigned the same commercial grade according to the AISI grading system, particularly in
light of the fact that Fagersta has not put forth any evidence that the distinction between ESR
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SSWR and non-ESR SSWR is reflected in any relevant commercial grading system. If
Commerce’s interpretation of the term “identical” to include products that have minor
differences that are not commercially significant is reasonable, then it follows that conducting
price comparisons between those products is also reasonable.
3
Fagersta Has Not Demonstrated That ESR is a New Technological Development in the
SSWR Industry
Fagersta states that it placed “undisputed evidence on the record stating that the ESR
process was not used to produce SSWR until after the investigation.” Plaintiff’s Motion at 28. In
addition, Fagersta argues that “it is not necessary to show that ESR is a new technological
development,” as “this is merely one of the factors that Commerce considers in determining
whether to alter its model match criteria.” Id. at 29 (citing SKF USA, Inc., 491 F. Supp. 2d at
1358 n.2).
Fagersta is not required to prove that ESR is a new technological development in the
SSWR industry in order to meet the “compelling reasons” standard because, as discussed in
Section IV(A)(2) above, a party seeking to demonstrate that there are “compelling reasons” for
Commerce to modify an existing model-match methodology has several alternative means to do
so. However, because Fagersta has not demonstrated any other compelling reason, it would have
to demonstrate that ESR is a new technological development in the SSWR industry in order to
prevail.
Commerce acknowledged that ESR was not used during the production of SSWR until
after the initial antidumping investigation. Defendant’s Response at 15. Nevertheless,
Commerce determined that this was insufficient to establish that ESR is a new technological
advancement to the SSWR industry, id., and this determination was supported by substantial
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evidence.
V
CONCLUSION
For the reasons stated above, Plaintiff’s Motion for Summary Judgment is DENIED and
Commerce’s determination in Stainless Steel Wire Rod from Sweden: Final Results of
Antidumping Duty Administrative Review, 72 Fed. Reg. 17,834 (April 10, 2007), as amended by
72 Fed. Reg. 26,337 (May 29, 2007), is AFFIRMED.
_/s/ Evan J. Wallach______
Evan J. Wallach, Judge
Dated: August 28, 2008
New York, New York
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