Nakornthai Strip Mill Public Co. v. United States

Slip Op. 09-27

UNITED STATES COURT OF INTERNATIONAL TRADE

NAKORNTHAI STRIP MILL PUBLIC COMPANY
LIMITED,

Plaintiff,
Before: Pogue, Judge

v. Court No. 07-00180

PUBLIC VERSION
UNITED STATES,

Defendant,

-and-

UNITED STATES STEEL CORPORATION,

Defendant-
Intervenor.

OPINION

[Commerce’s second remand determination sustained.]

Dated: April 7, 2009

Hughes, Hubbard & Reed LLP (Kenneth J. Pierce, Robert L.
LaFrankie, Victor S. Mroczka) for the Plaintiff.

Michael F. Hertz, Acting Assistant Attorney General; Jeanne E.
Davidson, Director, Patricia M. McCarthy, Assistant Director,
Commercial Litigation Branch, Civil Division, U.S. Department of
Justice (Jane C. Dempsey); Matthew D. Walden, Attorney, Of Counsel,
Office of the Chief Counsel for Import Administration, U.S.
Department of Commerce, for the Defendant.

Skadden, Arps, Slate, Meagher & Flom LLP (Robert E.
Lighthizer, John J. Mangan, Jeffrey D. Gerrish, Luke A. Meisner)
for the Defendant-Intervenor.

Pogue, Judge: Plaintiff Nakornthai Strip Mill Public Co., Ltd.
Court No. 07-00180 Page 2

(“Nakornthai”),1 Defendant United States (the “government”) and

Defendant-Intervenor U.S. Steel Corp. (“U.S. Steel”) are before the

court a third time following a second court-directed U.S.

Department of Commerce (“Commerce”) remand determination in this

matter. See Final Results of Redetermination Pursuant to Second

Remand, A-549-817, ADR 11/1/2004—10/31/2005 (Feb. 6, 2009) (“Second

Remand Results”). In response to Commerce’s Second Remand Results,

Nakornthai again challenges Commerce’s choice of the invoice date,

rather than contract date, as the date of sale for the calculation

of Nakornthai’s antidumping duties.

Because Commerce’s ultimate conclusion -- that Nakornthai has

not established that the material terms of its contract were

established on a date other than invoice date -- is based both on

a reasonable legal interpretation of the applicable regulation and

sufficient factual findings supported by substantial evidence, the

court affirms Commerce’s Second Remand Results.

BACKGROUND

As a producer of hot-rolled carbon steel flat products (“hot-

rolled steel”) in Thailand, Nakornthai is subject to an antidumping

order on its imports of hot-rolled steel into the United States.

See Certain Hot-Rolled Carbon Steel Flat Products from Thailand, 66

Fed. Reg. 59,562 (Dep’t Commerce Nov. 29, 2001) (notice of

1
Nakornthai is now known as G J Steel Public Co. Ltd. For
consistency, as the court has in its previous opinions, the court
will continue to refer to the company under its former name.
Court No. 07-00180 Page 3

antidumping duty order) (“Antidumping Duty Order”). From 2001 to

2007, as a result of the Antidumping Duty Order, Nakornthai paid

the separate “all others” duty rate of 3.86 percent on its imports.

See id. at 59,563.

In May 2007, following Commerce’s publication of the

opportunity to request an administrative review of the Antidumping

Duty Order, see Antidumping or Countervailing Duty Order, Finding,

or Suspended Investigation, 70 Fed. Reg. 65,883 (Dep’t Commerce

Nov. 1, 2005) (notice of opportunity to request administrative

review), U.S. Steel and Nucor Corp. (“Nucor”) requested review for

the period of November 1, 2004 through October 31, 2005. Commerce

granted this request, see Initiation of Antidumping and

Countervailing Duty Administrative Reviews and Request for

Revocation in Part, 70 Fed. Reg. 76,024 (Dep’t Commerce Dec. 22,

2005), and, after publishing preliminary results of its review, and

inviting comments thereon by Nakornthai, U.S. Steel and Nucor,

revised the Antidumping Duty Order to calculate a Nakornthai-

specific dumping margin for the period of review (and a resulting

antidumping duty cash deposit rate for the next review period) of

8.23 percent.2 See Certain Hot-Rolled Carbon Steel Flat Products

2
More thorough descriptions of the facts can be found in
this court’s previous opinions in this matter. See Nakornthai
Strip Mill Pub. Co. v. United States, 587 F. Supp. 2d 1303 (CIT
2008) (“Nakornthai II”); Nakornthai Strip Mill Pub. Co. v. United
States, 558 F. Supp. 2d 1319 (CIT 2008) (“Nakornthai I”).
Familiarity with these two opinions is presumed.
Court No. 07-00180 Page 4

from Thailand, 72 Fed. Reg. 27,802, 27,803 (Dep’t Commerce May 17,

2007) (final results and partial rescission of antidumping duty

administrative review) (“Final Results”); Issues & Decision

Memorandum, A-549-817, ADR 11/01/04-10/31/05 (May 7, 2007),

available at

http://ia.ita.doc.gov/frn/summary/THAILAND/E7-9526-1.pdf (“Decision

Memorandum”); Proprietary Arguments from the Issues and Decision

Memorandum for the Final Results of Certain Hot-Rolled Carbon Steel

Flat Products from Thailand, A-549-817, ADR 11/01/04-10/31/05 (May

7, 2007) (“Proprietary Memorandum”).

During the period of review, according to Nakornthai’s

responses to Commerce’s questionnaires, Nakornthai made one U.S.

sale of hot-rolled steel pursuant to a contract with a U.S.

wholesaler (the “original contract”). The original contract

specified certain terms, including both a total “quantity

tolerance” and “per item tolerance level” of products to be

shipped.3 After the original contract was signed, Nakornthai and

its wholesaler executed three changes in the contract: elimination

3
The contract provided for the sale of a specific quantity,
[ ] MT, of hot-rolled steel products at a uniform unit net
price of [ ]. (“MT” connotes metric tons.) The contract
further provided for both an overall “quantity tolerance” of +/-
a specific percentage [ ] for the total quantity, and a
specific individual line item tolerance, or “per item tolerance
level,” of +/- a specific percentage [ ]. (“Quantity
tolerance” refers to acceptable range of quantities to be
purchased, expressed as a number, plus or minus (+/-) a specified
percentage.) The individual line items referred to specific
products, identified by size, quality and thickness.
Court No. 07-00180 Page 5

of the line item quantity tolerance level, changes to payment

terms4 and amendments to delivery dates.5 Nonetheless, Nakornthai

claimed, and continues to claim, that these changes are immaterial

and did not affect the uniform net unit price or the total quantity

agreed to be purchased.

At a certain point, Nakornthai issued commercial invoices to

the wholesaler. The final invoice quantity, though changed

slightly from the total quantity specified in the original

contract, remained within the total quantity tolerance provided for

in the original contract. In fact, the contract amendment affected

less that 0.1% of the total quantity of goods sold and shipped

under the contract, and each of the individual line item quantities

shipped were also within the original stated tolerance levels,

except for one single line item. The quantity shipped of the

single, changed line item was 14.5% more than the upper end of the

4
The original contract’s payment terms were changed from
total payment against a specified shipping receipt to payment of
a specified percentage [ ] against a different
shipping receipt [ ] and the
remaining [ ] payment against another [ ] receipt. In
addition, Nakornthai originally reported a particular date, [
], as the payment date. However, the record shows that
Nakornthai received payment on different dates, with [

].
5
The delivery date amendments involved changes to the letter
of credit expiry date and last shipment date on the letter of
credit. Nakornthai changed the expiration date from [
] to [ ]. Nakornthai also changed the last
shipment date from [ ] to [ ].
Court No. 07-00180 Page 6

original line item tolerance level and more than 25% above the

specific line item quantity for that product.

Faced with this record, Commerce made a “date of sale”

determination pursuant to its regulations:

In identifying the date of sale of the subject
merchandise or foreign like product, the Secretary
normally will use the date of invoice, as recorded in the
exporter or producer's records kept in the ordinary
course of business. However, the Secretary may use a date
other than the date of invoice if the Secretary is
satisfied that a different date better reflects the date
on which the exporter or producer establishes the
material terms of sale.

19 C.F.R. § 351.401(i).6

Applying its regulation in Nakornthai’s case, despite the

limited nature of the quantity changes, Commerce concluded that the

elimination of the line item tolerance levels demonstrated that the

contract’s material terms were not settled until the invoice date.

According to Commerce, the elimination of the line item quantity

tolerance level materially changed the original contract, because

the elimination, at least potentially, allowed Nakornthai to make

6
Commerce has explained its use of the presumption in
support of the use of invoice date: “in many industries, even
though a buyer and seller may initially agree on terms of sale,
those terms remain negotiable and are not finally established
until the sale is invoiced.” Antidumping Duties; Countervailing
Duties, 62 Fed. Reg. 27,296, 27,349 (Dep’t Commerce May 19, 1997)
(final rule). Thus, the party challenging this presumption bears
the burden to prove that a different date “better reflects” the
parties establishment of material contract terms and “must submit
information that supports the use of [the] different date.” Id.;
see also Allied Tube & Conduit Corp. v. United States, 25 CIT 23,
25, 132 F. Supp. 2d 1087, 1090 (2001).
Court No. 07-00180 Page 7

quantity changes affecting “product mix” and “resulting in [

] products being shipped.” Proprietary Memorandum 14. Given this

finding, Commerce did not address the materiality of the changes to

payment and delivery terms, as it deemed these issues “moot.” Id.

In response, and in accordance with 19 U.S.C §§

1516a(a)(2)(i)(I), 1516a(a)(2)(B)(iii) and 28 U.S.C. § 1581(c),

Nakornthai filed this action, to contest Commerce’s determinations

in calculating Nakornthai’s specific antidumping duty rate.

Specifically, as is relevant here, Nakornthai claimed that Commerce

erred by using the invoice date, instead of the contract date, as

the date of sale to determine its weighted average dumping margin

for the period covered by the administrative review and the

assessment rate going forward.7 Nakornthai argued to Commerce and

argues before the court that Commerce should adhere to its “long-

standing practice” of using the contract date as the date of sale,

because, according to Nakornthai, the record reveals that the

contract date “better reflects the date on which the exporter or

producer establishe[d] the material terms of sale.”

7
Commerce’s use of date of invoice instead of contract date
affects the calculation of Nakornthai’s dumping margin. See 19
C.F.R. § 351.401(a). As noted in Nakornthai I, “[t]he
identification of a ‘date of sale’ for U.S. price may affect
[Commerce’s] comparison with sales in the foreign or ‘home’
market, for example, if exchange rates are changing during the
period of review.” Nakornthai I, 558 F. Supp. 2d at 1321 n.1.
Court No. 07-00180 Page 8

I. Nakornthai I

In Nakornthai I, the court affirmed Commerce’s initial legal

interpretation, holding that Commerce’s identification of line item

quantities as a “material term of sale” of Nakornthai’s contract

was based on the agency’s reasonable interpretation of its own

regulation. Nakornthai I, 558 F. Supp. 2d at 1327. In addition,

the court refused to consider alternative dates of sale, other than

contract date, as Nakornthai had failed to exhaust its

administrative remedies on this issue. Id. at 1329-30.

However, the court held that Commerce’s factual findings on

the finality of the terms of sale were incomplete, and remanded the

issue back to the agency for reconsideration. Id. at 1328-29.

Noting that Commerce, in applying it’s date-of-sale regulation,

“weighs the evidence presented and regularly determines the

significance of any changes to the terms of sales involved”, id. at

1327, the court stated that “Commerce did not discuss or make a

finding with regard to this [i.e., Nakornthai’s] evidence [as to

the quantities of goods actually ordered and delivered], either on

its own or when considered in light of the elimination of the

tolerance levels in the contract.” Id. at 1328. Therefore, the

court could not determine whether the variation in quantities for

one line item was sufficiently significant, e.g., either to affect

“product mix” in a significant way or to alter the dumping margin,

to meet the regulatory standard that the terms of the contract not
Court No. 07-00180 Page 9

be essentially “established.” Id. As such, the court remanded the

case back to Commerce to make a factual finding “with regard to the

significance of Nakornthai’s evidence” and whether “the date the

terms of the contract were essentially ‘established’ [at the date

of contract] in light of the evidence submitted.” Id. at 1328-29.

II. Nakornthai II

On remand, Commerce reconsidered its original determination,

but again chose to use the date of invoice rather than the date of

contract as the date of sale. See Final Results of Redetermination

Pursuant to Remand, A-549-817, ADR 11/1/2004—10/31/2005 (July 28,

2008) (“First Remand Results”). Commerce distinguished

Nakornthai’s case from prior instances where Commerce found changes

to contractual terms of sale insignificant, and thus used the

contract date for date of sale. Id. 3-4 (discussing Certain

Cut-to-Length Carbon Steel Plate from Romania, 72 Fed. Reg. 6,522

(Dep’t Commerce Feb. 12, 2007)(notice of final results of

antidumping duty administrative review and final partial

rescission) and accompanying Issues and Decision Memorandum, A-485-

803, ADR 08/01/2004-07/31/2005 (Feb. 2, 2007), available at

http://ia.ita.doc.gov/frn/summary/ROMANIA/E7-2216-1.pdf (“Romanian

Plate”); Circular Welded Non-Alloy Steel Pipe from the Republic of

Korea, 63 Fed. Reg. 32,833 (Dep’t Commerce June 16, 1998) (final

results of antidumping duty administrative review)). In addition,

Commerce refused to address Nakornthai’s proposed alternative dates
Court No. 07-00180 Page 10

of sale. Id. 11-12. The court sustained these two determinations.

Nakornthai II, 587 F. Supp. 2d at 1308-09, 1311-12.

However, Commerce seemingly ignored the court’s specific

instructions regarding analysis of Nakornthai’s particular

evidence, declaring that the change to the specific quantity

shipped “is not [] relevant” and concluding that the “relevant

change” was the elimination of the tolerance levels from the

original contract. First Remand Results 5. Rather, Commerce merely

restated its prior hypothetically-based reasoning previously

rejected by the court,8 and therefore the court remanded again as

to Commerce’s factual findings on date of sale. Nakornthai II, 587

F. Supp. 2d at 1309. The court instructed Commerce to, on remand:

determine [in accordance with its standard practice], and
explain its rationale, as to whether the evidence
presented by Nakornthai of the change in the quantity
shipped was actually of any significance, and whether, in
context, this change materially affected the date that
the terms of the contract were essentially established.

Id. at 1311.

8
“Commerce determined that the mere removal of the [line
item] quantity tolerance from the contract was significant
because it ‘provided [Nakornthai] with the flexibility to affect
the product mix and, in turn, the overall dumping margin,’
because ‘the product mix . . . is used for matching purposes and
the overall margin calculation.’ Commerce then set forth a
hypothetical example demonstrating how the tolerance removal
‘could conceivably’ permit Nakornthai to alter product
combinations in an effort to impact the overall dumping margin.
While Commerce did state that ‘it is reasonable to characterize
the quantity change as significant,’ the agency did not provide a
reasoned explanation on this issue, and immediately reiterated
that this analysis ‘[was] not the basis’ for its determination.”
Nakornthai II, 587 F. Supp. 2d at 1309 (citations omitted).
Court No. 07-00180 Page 11

III. Commerce’s Second Remand Results

Pursuant to the court’s second remand, Commerce once again re-

examined its date of sale analysis. See Second Remand Results 1,

3. Commerce first determined “that the change in aggregate

quantity shipped [by Nakornthai] is not, on its own, significant

and does not, by itself, materially affect the date that the terms

of contract were essentially established.” Id. 3. Commerce

explained that, according to its practice, differences between

aggregate quantity contracted for and shipped, as long as these

differences fall within the overall quantity tolerance, do not

constitute changes to material contractual terms. Id. 5-6 (citing

Romanian Plate; Certain Large Diameter Carbon and Alloy Seamless

Standard, Line and Pressure Pipe From Mexico, 65 Fed. Reg. 39,358

(Dep’t Commerce June 26, 2000) (notice of final determination of

sales at less than fair value)).9

But Commerce continued:

[However,] when the change in aggregate quantity is
considered in the context of ongoing amendments to
material contract terms subsequent to [Nakornthai’s]
original contract date, including the elimination of the
line item quantity tolerance from [Nakornthai’s] original
contract and subsequent amendments to payment and
delivery terms, record evidence demonstrates a continuum
of change to material contract terms that fails to
overcome [Commerce’s] regulatory presumption that invoice
date is the appropriate date of sale.

9
Because this determination is inconsistent with Commerce’s
consideration of line item quantity levels, discussed supra, the
court expresses no view on the reasonableness of this asserted
“standard practice.”
Court No. 07-00180 Page 12

Id. 3-4. In other words, Commerce determined that “the context in

which [the within-tolerance change] occurred demonstrates that the

terms of [Nakornthai’s] U.S. sales contract were not set in the

original contract.” Id. 7.

This “context” as considered by Commerce has several elements.

First, Commerce noted that, unlike the record in Romanian Plate,

“the record in this case lacks any similar evidence [of the

parties’ conclusion of a final agreement regarding terms of sale]

supporting [Nakornthai’s] proposal that [Commerce] rely upon the

contract date.” Id. 5.10 Second, Commerce identified a “series of

changes to the material terms of sale” including (1) the

elimination of the line item quantity tolerance, as well as (2)

changes to payment terms and (3) amendments to delivery terms, that

demonstrate that Nakornthai and its U.S. customer “did not share an

agreement on final contract terms until the invoice date.” Id. 7.

With respect to the elimination of the line item quantity

tolerance level, Commerce stated that this “by itself” was material

to its date of sale analysis because “it shows that parties did not

share an agreement on the final terms of sale on the original

10
The Romanian Plate respondent’s evidence included “the
specific language of the order acknowledgment -- language that
Commerce deemed to definitively state ‘that there can thereafter
be no changes in the terms of sale’ -- as well as affidavits from
U.S. customers ‘declaring that the order acknowledgments are
understood as the parties’ final agreement on quantities and
prices ordered.’” Nakornthai II, 587 F. Supp. 2d at 1307 (quoting
Romanian Plate 7).
Court No. 07-00180 Page 13

contract date.” Id. 13. Commerce also found that this change was

“commercially significant” because Nakornthai’s original contract

stated that a certain quantity of each item would be
shipped, and that a [line item] quantity beyond [ ]% of
the [line item] quantity tolerance would constitute a
breach of contract. Therefore, the final sale quantity
. . . would have resulted in a breach of contract had the
original contract not been subsequently amended.
Amending the original contract to allow for a final
shipment that would have constituted a breach of the
original contract is a “significant” amendment for
commercial purposes.

Id. (citation omitted).

Similarly, Commerce also concluded that, “as a factual matter,

the amendments to payment and delivery terms demonstrate that the

parties did not share an agreement concerning these material terms

at the time of their original contract.” Id. 8. Commerce determined

that the fact that the payment and delivery terms, considered

“material” in Commerce’s practice, were subject to amendment “is

sufficient to demonstrate their materiality . . . .” Id. 13. But

Commerce further noted that “the record demonstrates that [the

amendments to payment and delivery terms] impacted [sic] the sales

transactions at issue.” Id. 14. More particularly, the payment

term change allowed Nakornthai to receive a certain percentage of

its payment at an earlier point in time11 than specified in the

11
Commerce relied upon Nakornthai’s reported payment date of
[ ] in determining Nakornthai’s “credit expense
calculation.” Def.’s Resp. to Pl.’s Comments Regarding the Second
Remand Determination (“Def.’s Resp.”) 12. The credit expense “is
the interest expense incurred (or interest revenue foregone)
between shipment of merchandise to a customer and receipt of
Court No. 07-00180 Page 14

original contract, and the changes to the letter of credit’s

expiration and last shipment dates12 gave Nakornthai [ ] additional

days to ship the subject merchandise to its customer and still be

entitled to full payment. Id. Accordingly, these changes affected

“the credit calculation for [Nakornthai’s] U.S. sales used to

derive [its] weighted-average dumping margin.” Id.13

payment from the customer.” Rebuttal to Pl.’s Comments on the
Dep’t of Comm.’s Second Remand Results 16.
12
Nakornthai reported, and Commerce relied upon, shipment
dates [ ] in
determining Nakornthai’s “credit expense calculation.” Moreover,
Nakornthai provided certain specified [ ] receipts that show
that its shipments were commenced and completed on certain dates,
from [ ] to [ ]. Thus, according
to Commerce, “[ ] of Nakornthai’s shipments to the
United States were conducted in accordance with the shipment
terms present upon invoice date.” Def.’s Resp. 12.
13
According to Commerce:

The credit expense calculation functions as an
adjustment in Commerce’s determination of an
antidumping margin that is aimed at valuing, in part,
the opportunity costs involved with the timing of the
transactions at issue. Commerce’s Antidumping Manual
explains that the most common adjustment for
differences in circumstances of sale is for differences
in credit costs, and that this adjustment is necessary
because there “is usually a period of time between the
shipment of merchandise to a customer and payment for
the merchandise.” The manual further states that this
adjustment is required “to account for the opportunity
cost associated with the loss of the use of monies
involved,” and that in “all instances where the
respondent provides shipment and payment dates, we use
this information to calculate the actual number of days
credit is outstanding.”

In this case, Nakornthai reported its credit
expenses to Commerce using the following formula:
Court No. 07-00180 Page 15

Finally, Commerce again refused to consider any alternate

dates proposed by Nakornthai and limited its date of sale analysis

to the contract and invoice dates. Id. 15. Accordingly, Commerce

reaffirmed its conclusion to use invoice date. Id.

STANDARD OF REVIEW

As in reviewing earlier Commerce determinations in this case,

the court reviews remand determinations for compliance with the

court’s remand order. See NMB Sing. Ltd. v. United States, 28 CIT

1252, 1259-60, 341 F. Supp. 2d 1327, 1333-34 (2004); Olympia

Indus., Inc. v. United States, 23 CIT 80, 82, 36 F. Supp. 2d 414,

CREDITU {credit expenses} = GRSUPRU {gross
unit price} x U.S. dollar interest rate X
((PAYDATEU {payment date} - SHIPDATU
{shipment date})/365)

Therefore, by definition, the shipment date or the
payment date . . . reported by Nakornthai affects the
credit calculation. Because Nakornthai’s own reported
shipment and payment dates, as well as the shipments
and payments between Nakornthai and its United States
customer, conform with the contract terms present at
the time of the invoice date, Commerce’s calculation of
Nakornthai’s credit expenses reflects Nakornthai’s
adherence to material contract terms present at the
time of the invoice date and not the terms present in
the original contract.

Def.’s Resp. 13-14 (quoting Import Administration Antidumping
Manual, Ch. 8, 22-23, available at
http://ia.ita.doc.gov/admanual/index.html (last visited Mar. 19,
2009)) (citations omitted). Commerce did not provide a specific
calculation of this effect on the dumping margin, as “Commerce
does not, as a matter of practice, calculate unofficial
antidumping margins to demonstrate the difference between the
actual antidumping margin and alternative margins that might
result from different factual scenarios.” Def.’s Resp. 14.
Court No. 07-00180 Page 16

416 (1999). Moreover, again, the agency’s legal determinations on

remand must be in accordance with law and its factual findings must

be supported by substantial evidence. 19 U.S.C. § 1516a(b)(1)(B);

see Huaiyin Foreign Trade Corp. v. United States, 322 F.3d 1369,

1374 (Fed. Cir. 2003); AG der Dillinger Hüttenwerke v. United

States, 28 CIT 94, 95, 310 F. Supp. 2d 1347, 1349 (2004).

“Substantial evidence is ‘such relevant evidence as a reasonable

mind might accept as adequate to support a conclusion.’” Huaiyin

Foreign Trade Corp., 322 F.3d at 1374 (citations omitted).

DISCUSSION

Commerce’s Second Remand Results comply with the court’s

remand orders in Nakornthai I and Nakornthai II. At the same time,

the court cannot affirm Commerce’s conclusion that the elimination

of a line item quantity tolerance level from the contract

constituted a significant change that materially affected

Nakornthai’s contract. Nonetheless, based on Commerce’s further

analysis of the significance of the particular evidence presented

in this case, the court otherwise deems Commerce’s factual findings

in its Second Remand Results to be supported by substantial

evidence and its interpretation of its own regulation to be in

accordance with law.

I. The Court Cannot Affirm Commerce’s Conclusion Regarding
Nakornthai’s Elimination of the Line Item Quantity Tolerance
Level

Despite Commerce’s conclusion, based on its established
Court No. 07-00180 Page 17

practice, that differences in line item quantities, so long as the

overall quantity is within the overall quantity tolerance level,

are not significant, Commerce nonetheless concluded that the

elimination of the line item tolerance from the contract was

“material” in this case. Previously, in Nakornthai I and

Nakornthai II, the court rejected Commerce’s proffered hypothetical

reasoning that this contractual change potentially allowed

Nakornthai to manipulate the “product mix.” Now, as explained in

its Second Remand Results, Commerce presents a different rationale.

Commerce reasons that, “[a]s a factual matter, the elimination of

the line item quantity tolerance demonstrates that the parties did

not share an agreement concerning quantity, a material contract

term, at the time of their original contract.” Second Remand

Results 7. Commerce based its conclusion upon the court’s previous

holding that Commerce can reasonably consider the change to a line

item quantity tolerance a “material” contract term, see Nakornthai

I, 558 F. Supp. 2d at 1327, and upon the fact that the shipped

quantity of the line item was 14.5% more than the upper end of the

original tolerance level and more than 25% above the specific line

item quantity for that product. Second Remand Results 7.

Nakornthai argues that Commerce, in employing “flawed”

reasoning, has not followed the court’s remand instructions with

regard to its analysis of the elimination of the line item quantity

tolerance level. Pl.’s Comments on the Dep’t of Comm.’s Second
Court No. 07-00180 Page 18

Remand Results Pursuant to Slip Op. 08-128 (“Pl.’s Comments”) 1.

More specifically, Nakornthai charges that Commerce once again

relied on speculation and hypotheticals, as there was no actual

breach of contract. Id. 5-6. Nakornthai also attacks Commerce’s

conclusions, that the amendment demonstrates that the contract was

subject to change, as “absurd and illogical.” Id. 9.

Nakornthai’s position, though somewhat overstated, has merit.

Commerce has once again attempted to make a factual finding of

“potential” significance regarding the line item contractual

quantity change, while at the same time making a factual finding

that the change in quantities, in total, are not significant.

Because of this inconsistency, Commerce has, with regard to this

issue, again failed to provide a non-arbitrary, reasoned basis for

its conclusion. Commerce argues that the elimination of the line

item tolerance level, because that tolerance level is, as a legal

matter, a material contract term, in and of itself materially

alters the contract. But, as Nakornthai points out, this

determination is directly contrary to the court’s instructions in

Nakornthai I. See Nakornthai I, 558 F. Supp. 2d at 1328 (“Commerce

argues that the fact that the quantity tolerance level was changed,

in whatever amount, demonstrates that the contract’s material terms

were subject to change and therefore not finally settled until the

invoice date. The problem with this argument is that it begs the

question of whether any such changes were insignificant.”).
Court No. 07-00180 Page 19

Nor, as the court has also previously instructed, can Commerce

use speculative or hypothetical reasoning to support its

conclusions. See Nakornthai II, 587 F. Supp. 2d at 1310

(“Commerce’s use of hypotheticals, generalizations . . . and

conditional language suggesting possible distortions in antidumping

calculations offer conjecture rather than a reasoned explanation

founded on substantial evidence.” (quoting Hynix Semiconductor,

Inc. v. United States, 27 CIT 1719, 1722, 295 F. Supp. 2d 1365,

1369 (2003), rev’d in part, 424 F.3d 1363, 1370 (Fed. Cir. 2005))).

Thus, Commerce’s hypothetical scenario, indicating that Nakornthai

-- had it and its U.S. customer not amended the contract -- would

have breached the contract when delivering its particular quantity

of the relevant line item, is of limited persuasiveness. Because

it is Commerce’s practice to disregard changes that are not

significant, see Nakornthai II, 587 F. Supp. 2d at 1309, Commerce

cannot simultaneously rely on contractual changes that it has found

insignificant to claim that such changes demonstrate that a

contract’s terms are not established.

Moreover, Commerce’s argument is circular. Commerce contends

that, because the contract was amended, the amendment was

“commercially significant.” Had the line item quantity shipped

fallen within the original line item quantity tolerance, i.e., had

the amount shipped been consistent with the original contractual

terms, Nakornthai would have had no need to amend the contract in
Court No. 07-00180 Page 20

the first place. Nonetheless, an amendment is not commercially

significant simply because it changes a contractual term, even if

that term is material.

Because Commerce, in making its date of sale determination,

must, in accordance with its own regulation, make a factual

determination with regard to whether the material terms were not

set until invoice, and because Commerce’s own practice in making

such a determination is to disregard changes that are

insignificant, the record must contain evidence sufficient to

support the finding that the change to the material terms

represented in the contract was significant. Commerce still has

not done so here with regard to the line item quantity tolerance

level and, thus, Commerce has not demonstrated to the court that

its determination of significance of the elimination of the line

item quantity tolerance level is supported by substantial evidence.

II. Commerce Nonetheless Provides Substantial Evidence to
Support Its Decision

However, the court finds other reasons to sustain Commerce’s

Second Remand Results. As a general matter, Commerce maintained

that evidence, other than differences between contracted-for and

shipped quantities, demonstrates that Nakornthai’s contract was

subject to change. Commerce noted that Nakornthai has not provided

evidence, such as that presented in Romanian Plate, that would

warrant deviation from its presumption of using invoice date as

date of sale. Second Remand Results 5. In addition, Commerce noted
Court No. 07-00180 Page 21

that it regularly considers payment and delivery terms as material

terms of sale, id. 7 (citing SeAH Steel Corp. v. United States, 25

CIT 133, 134 (2001)), and concluded that Nakornthai’s amendments to

payment and delivery terms “demonstrate that the parties did not

share an agreement concerning these material terms at the time of

their original contract.” Id. 8.

Nakornthai first takes issue with Commerce’s statement that

payment and delivery terms are generally considered by Commerce as

“material,” citing Certain Hot-Rolled Carbon Steel Flat Products

from Thailand, 66 Fed. Reg. 49,622 (Dep’t Commerce Sept. 28, 2001)

(notice of final determination of sales at less than fair value).

Commerce responds that its date of sale practice has “evolved,” and

that it “now considers, among other contractual terms, delivery and

payment terms as material terms of sale.” Def.’s Resp. 10.

The court accepts Commerce’s reasonable interpretation of its

regulatory practice and notes that this interpretation is supported

by recent Commerce decisions. See, e.g., Issues & Decision

Memorandum for Stainless Steel Sheet and Strip in Coils from Taiwan

(final results of the fourth antidumping administrative review), A-

583-831, AD/CVD 7/1/02-6/30/03 15 (Feb. 7, 2005), available at

http://ia.ita.doc.gov/frn/summary/taiwan/E5-631-1.pdf (“The

Department has interpreted ‘material terms of sale’ to include

price, quantity, and payment terms . . . .”); Certain Cold-Rolled

Flat-Rolled Carbon-Quality Steel Products from Brazil, 65 Fed. Reg.
Court No. 07-00180 Page 22

5,554, 5,575 (Dep’t Commerce 2000) (final determination) (payment

terms); Issues & Decision Memorandum for Cold-Rolled Flat-Rolled

Carbon Quality Steel Products from Turkey, A-489-808, POI 1998-99

Date of Sale cmt. 1 (Mar. 21, 2000), available at

http://ia.ita.doc.gov/frn/summary/turkey/00-6992-1.txt (payment

terms). Therefore, the court finds Commerce’s legal conclusion

that payment and delivery terms are “material” to be in accordance

with law.

Second, according to Nakornthai, Commerce failed to make a

significance finding for the payment term change or the delivery

term change. Nakornthai charges that Commerce’s analysis on these

terms’ affect on Nakornthai’s credit calculation is also “purely

conjectural,” as

[n]owhere does Commerce explain exactly how this is so,
or how such minor changes to secondary terms of sale are
otherwise “significant” to any aspect of the actual
dumping calculation. In fact, Commerce never determines
whether [Nakornthai] used additional days or received
payment any earlier, nor has Commerce analyzed whether
there was any actual impact on its dumping calculation.
Not surprisingly, Commerce provides no citation to the
record on its claim because there was no impact on the
margin.

Pl.’s Comments 7. For the same reasons stated above with regard to

the quantity tolerance level, the court cannot affirm Commerce’s

finding that merely because these material contractual terms were

amended, such amendments in and of themselves demonstrate that the

contract was subject to change.

Despite this deficiency, Commerce also made the requisite
Court No. 07-00180 Page 23

factual findings of significance with regard to the change in

payment and delivery terms. Commerce’s decision has sufficiently

demonstrated to the court that the payment and delivery terms

affected the sales transaction in a significant way, that is, that

these changes significantly affected the terms of Nakornthai’s

contract. Moreover, this demonstration is supported by substantial

evidence. For example, the payment term change allowed Nakornthai

to receive a significant portion, [ ], of its payment at an

earlier point in time than specified in the original contract, and

the changes to the letter of credit’s expiration and last shipment

dates gave Nakornthai [ ] additional days to ship the subject

merchandise to its customer while still being entitled to full

payment. Id. Indeed, “[ ] of Nakornthai’s shipments to

the United States were conducted in accordance with the shipment

terms present upon invoice date.” Supra note 12. In turn, these

amendments changed the credit expense calculation used to compute

Nakornthai’s dumping margin for the period of review.14

Based on Commerce’s findings and reasoned analysis regarding

the delivery and payment terms of Nakornthai’s contract, the court

14
Note that the court here makes only a substantial evidence
determination. The court does not conclude that an affect on the
dumping margin is a necessary condition for a finding of
significance. Nor does the court conclude that an affect on the
dumping margin is necessarily sufficient for a finding of
significance. Rather, the court concludes that the agency’s
finding of significance here is based on a reasonable
interpretation of the record evidence.
Court No. 07-00180 Page 24

concludes that Commerce’s conclusion in the Second Remand Results

-- that Nakornthai has not established that the material contract

terms were established on a date other than invoice date -- is

based on a reasonable interpretation of the “date-of-sale”

regulation and on sufficient factual findings that are supported by

substantial evidence.

CONCLUSION

Therefore, upon consideration of the pending motions before

the court, in accordance with this opinion, it is hereby:

ORDERED that the Department of Commerce’s second remand

determination is sustained. Judgement will be entered accordingly.

/s/ Donald C. Pogue
Donald C. Pogue, Judge

Dated: April 7, 2009
New York, New York