Slip Op. 11-19
UNITED STATES COURT OF INTERNATIONAL TRADE
UNITED STATES STEEL CORPORATION,
Plaintiff,
and
NUCOR CORPORATION,
Plaintiff-Intervenor,
v. Before: Timothy C. Stanceu, Judge
UNITED STATES, Consol. Court No. 09-00156
Defendant,
and
UNION STEEL, POSCO, POHANG
COATED STEEL CO., LTD., and HYUNDAI
HYSCO,
Defendant-Intervenors.
OPINION AND ORDER
[Remanding for reconsideration and redetermination the final results of an administrative review
of the antidumping order on certain corrosion-resistant carbon steel flat products from the
Republic of Korea]
Dated: February 15, 2011
Skadden, Arps, Slate, Meagher & Flom, LLP (Jeffrey D. Gerrish and Stephen J. Narkin)
for plaintiff United States Steel Corporation.
Wiley Rein, LLP (Timothy C. Brightbill, Lori E. Scheetz, and Alan H. Price) for plaintiff-
intervenor Nucor Corporation.
Tony West, Assistant Attorney General, Jeanne E. Davidson, Director, Patricia M.
McCarthy, Assistant Director, Commercial Litigation Branch, Civil Division, United States
Department of Justice (Claudia Burke); Daniel J. Calhoun, Office of the Chief Counsel for
Consol. Court No. 09-00156 Page 2
Import Administration, United States Department of Commerce, of counsel, for defendant
United States.
Troutman Sanders LLP (Donald B. Cameron, Julie C. Mendoza, R. Will Planert, Brady
W. Mills, and Mary S. Hodgins) for defendant-intervenor Union Steel.
Akin, Gump, Strauss, Hauer & Feld, LLP (Jaehong D. Park, Bryce V. Bittner, Jarrod M.
Goldfeder, Lisa-Marie W. Ross, and Natalya D. Dobrowolsky) for defendant-intervenors POSCO
and Pohang Coated Steel Co., Ltd.
Akin, Gump, Strauss, Hauer & Feld, LLP (Jaehong D. Park, Bryce V. Bittner, Jarrod M.
Goldfeder, Lisa-Marie W. Ross, and Natalya D. Dobrowolsky) for defendant-intervenor Hyundai
Hysco.
Stanceu, Judge: Plaintiff United States Steel Corporation (“U.S. Steel”), a domestic
manufacturer of corrosion-resistant carbon steel flat products (“CORE”), brought this action
under section 516A of the Tariff Act of 1930 (“Tariff Act” or the “Act”), 19 U.S.C. § 1516a
(2006), to contest a determination (the “Final Results”) that the International Trade
Administration, United States Department of Commerce (“Commerce” or the “Department”)
issued in the fourteenth periodic administrative review of an antidumping duty order on imports
of certain CORE from the Republic of Korea (“subject merchandise”). U.S. Steel Compl.
¶¶ 1, 3; Certain Corrosion-Resistant Carbon Steel Flat Products from the Republic of Korea:
Notice of Final Results of the Fourteenth Admin. Review & Partial Rescission, 74 Fed.
Reg. 11,082 (Mar. 16, 2009) (“Final Results”). In an action (Court No. 09-00152) consolidated
with that brought by U.S. Steel, Nucor Corporation (“Nucor”), a domestic manufacturer of
CORE, also contested the Final Results.
Before the court are U.S. Steel’s and Nucor’s Rule 56.2 motions for judgment upon the
agency record. U.S. Steel claims that Commerce, when determining the cost of production of
subject merchandise produced by respondent Union Steel Manufacturing Co., Ltd. (“Union”),
Consol. Court No. 09-00156 Page 3
acted in disregard of its own regulation in declining to adjust data pertaining to the costs Union
incurred in obtaining from suppliers affiliated with Union a production input, “steel substrate”
(carbon steel coil used to make the subject merchandise), based on a finding that any such
adjustment would be negligible. Mem. in Supp. of Pl.’s Mot. for J. on the Agency R. under
Rule 56.2, at 2 (“U.S. Steel Mem.”). Nucor objects to other decisions Commerce made affecting
the valuation of Union’s purchases of steel substrate from suppliers affiliated with Union. Br. in
Supp. of Nucor Corp.’s Rule 56.2 Mot. 1 (“Nucor Br.”) . Nucor also claims that Commerce
erred in determining that Pohang Iron & Steel Co., Ltd. (“POSCO”) and Pohang Coated Steel
Co., Ltd. (collectively, the “POSCO Group”), producers of subject merchandise affiliated with
Union, should not be “collapsed” with Union, i.e. treated as a single entity, for purposes of the
administrative review. Id. at 2.
Defendant voluntarily requests a remand order under which the Department would
reconsider its determination that potential adjustments to Union’s reported costs for acquiring
steel substrate should be disregarded as negligible. Def.’s Resp. to Pls.’ Mot. for J. upon the
Agency R. 1-2 (“Def. Resp.”) . U.S. Steel supports the government’s remand request, which the
court will grant. Reply Br. in Supp. of Pl.’s Mot. for J. on the Agency R. under Rule 56.2, at 2.
With one exception, the court finds merit in Nucor’s claims and includes in the remand order
instructions under which Commerce must address these claims.
I. BACKGROUND
Commerce published the antidumping duty order on corrosion-resistant carbon steel flat
products in 1993. Antidumping Duty Orders on Certain Cold-Rolled Carbon Steel Flat Products
& Certain Corrosion-Resistant Carbon Steel Flat Products From Korea, 58 Fed. Reg. 44,159
Consol. Court No. 09-00156 Page 4
(Aug. 19, 1993). On September 25, 2007, Commerce initiated the fourteenth review of the
order, which pertains to imports of subject merchandise made during the period of August 1,
2006 through July 31, 2007 (the “period of review”). Initiation of Antidumping &
Countervailing Duty Admin. Reviews & Requests for Revocation in Part, 72 Fed. Reg. 54,428,
54,428 (Sept. 25, 2007). On September 9, 2008, Commerce issued the preliminary results of the
review (“Preliminary Results”). Certain Corrosion-Resistant Carbon Steel Flat Products From
the Republic of Korea: Notice of Prelim. Results of the Antidumping Duty Admin. Review, 73
Fed. Reg. 52,267 (Sept. 9, 2008) (“Prelim. Results”). Following publication on March 16, 2009
of the Final Results, 74 Fed. Reg. at 11,082, U.S. Steel and Nucor instituted the current actions.
U.S. Steel Compl.; Nucor Compl.
II. DISCUSSION
The court exercises jurisdiction pursuant to section 201 of the Customs Courts Act of
1980, 28 U.S.C. § 1581(c), which grants the Court of International Trade exclusive jurisdiction
over any civil action commenced under 19 U.S.C. § 1516a. The court reviews the Final Results
based on the agency record. See Customs Courts Act of 1980, § 301, 28 U.S.C. § 2640(b);
19 U.S.C. § 1516a(b)(1)(B)(i). The court “shall hold unlawful any determination, finding, or
conclusion found . . . to be unsupported by substantial evidence on the record, or otherwise not
in accordance with law . . . .” 19 U.S.C. § 1516a(b)(1)(B)(i). “Substantial evidence is more than
a mere scintilla. It means such relevant evidence as a reasonable mind might accept as adequate
to support a conclusion.” Consol. Edison Co. v. NLRB, 305 U.S. 197, 229 (1938).
Consol. Court No. 09-00156 Page 5
A. Remand Is Appropriate to Allow the Department to Reconsider Its Finding that Potential
Adjustments to Union’s Steel Substrate Costs Should Be Disregarded as Negligible
Commerce may “decline to take into account adjustments which are insignificant in
relation to the price or value of the merchandise.” Tariff Act, § 777A(a)(2), 19 U.S.C.
§ 1677f-l(a)(2). The Department’s regulations, in 19 C.F.R. § 351.413 (2007), set forth a
standard of less than 0.33% ad valorem that Commerce ordinarily applies to determine whether
an adjustment is insignificant.1
U.S. Steel challenges the Department’s valuation of steel substrate that Union purchased
from affiliated suppliers. U.S. Steel Mem. 2. U.S. Steel argues that under both the “transactions
disregarded rule” of section 773(f)(2) of the Tariff Act, 19 U.S.C. § 1677b(f)(2), and the “major
input rule” of section 773(f)(3) of the Tariff Act, 19 U.S.C. § 1677b(f)(3), Commerce erred in
valuing an input obtained from affiliated suppliers using the transfer prices, which U.S. Steel
alleges to have been lower than the market prices. U.S. Steel Mem. 12.2 U.S. Steel claims that
1
The regulation provides that,
Ordinarily, under section 777A(a)(2) of the Act [(i.e., 19 U.S.C. § 1677f-1)], an
“insignificant adjustment” is any individual adjustment having an ad valorem effect
of less than 0.33 percent, or any group of adjustments having an ad valorem effect of
less than 1.0 percent, of the export price, constructed export price, or normal value,
as the case may be. Groups of adjustments are adjustments for differences in
circumstances of sale under § 351.410, adjustments for differences in the physical
characteristics of the merchandise under § 351.411, and adjustments for differences
in the levels of trade under § 351.412.”
19 C.F.R. § 351.413 (2007).
2
In the “transactions disregarded” rule, the antidumping law provides that,
A transaction directly or indirectly between affiliated persons may be disregarded if,
in the case of any element of value required to be considered, the amount
representing that element does not fairly reflect the amount usually reflected in sales
of merchandise under consideration in the market under consideration.
19 U.S.C. § 1677b(f)(2) (2006). The “major input” rule provides that,
(continued...)
Consol. Court No. 09-00156 Page 6
Commerce should have made an upward adjustment to those prices and unlawfully disregarded
the standard of 19 C.F.R. § 351.413 in deciding to disregard any adjustment as insignificant.
Id. at 12, 19.
Defendant responds by stating that “because Commerce’s finding that certain potential
adjustments under the major input rule and transactions disregarded rule were negligible may
have been based on erroneous calculations, we respectfully request a remand to reexamine the
accuracy of those calculations, to make any necessary corrections to those calculations, and to
reconsider, if appropriate, the treatment of those adjustments.” Def. Resp. 6. The court
concludes that Commerce should be granted the opportunity on remand to reconsider the
decision to disregard the adjustments as negligible and to make all changes that may be required
to resolve this issue in accordance with the antidumping statute and regulations.
B. Upon Remand, Commerce Must Reconsider its Decision Not to Apply the Major Input Rule
to Union’s Purchases of Steel Substrate from the POSCO Group
In the Final Results, Commerce applied the major input rule to only one of Union’s
related suppliers of steel substrate. Issues & Decisions Mem., A-580-816, ARP 3-09, at 20
(Mar. 9, 2009) (Admin. R. Doc. No. 4868) (“Decision Mem.”); Final Results, 74 Fed. Reg.
at 11,083. Nucor claims that Commerce erred in declining to apply the major input rule to
2
(...continued)
If, in the case of a transaction between affiliated persons involving the
production by one of such persons of a major input to the merchandise, the
administering authority has reasonable grounds to believe or suspect that an
amount represented as the value of such input is less than the cost of
production of such input, then the administering authority may determine the
value of the major input on the basis of the information available regarding
such cost of production, if such cost is greater than the amount that would be
determined for such input under paragraph (2) [19 U.S.C. § 1677b(f)(2)].
19 U.S.C. § 1677b(f)(3).
Consol. Court No. 09-00156 Page 7
Union’s steel substrate purchases from all other suppliers related to Union, including the POSCO
Group. Nucor Br. 10. In the issues and decisions memorandum that Commerce incorporated by
reference in the Final Results (“Decision Memorandum”), Final Results, 74 Fed. Reg. at 11,083,
Commerce based its decision not to apply the major input rule to the POSCO Group on a finding
of fact that “the record shows that the POSCO Group, and certain other affiliated suppliers,
accounted for insignificant percentages of Union’s total purchases of substrate during the POR.”
Decision Mem. 20. With respect to the POSCO Group, Nucor cites to record evidence
demonstrating that Union’s purchases of steel substrate from the POSCO Group were not
insignificant as a percentage of Union’s total substrate purchases. Nucor Br. 10 (“This
determination was mathematically incorrect and therefore unsupported by substantial
evidence.”). Defendant now concedes that the Department erred in stating in the Decision
Memorandum that Union’s purchases from the POSCO Group were an insignificant percentage
of Union’s total substrate purchases, describing that finding as an “inadvertent error.” Def.
Resp. 13. According to defendant’s argument, the real reason that Commerce declined to apply
the major input rule to these purchases was that “there was insufficient information on the record
to conduct a major input analysis.” Id. Defendant adds that “[i]n its proprietary calculation
memorandum, Commerce fully explains the reasons why it declined to apply the major input rule
to the POSCO Group purchases.” Id.
The court is required to review a determination of an agency on the basis of the reasoning
the agency puts forth. SEC v. Chenery Corp., 332 U.S. 194, 196 (1947) (“[A] reviewing court,
in dealing with a determination or judgment which an administrative agency alone is authorized
to make, must judge the propriety of such action solely by the grounds invoked by the agency.”).
Consol. Court No. 09-00156 Page 8
The Decision Memorandum, unlike the “proprietary calculation memorandum” to which
defendant refers therein, is incorporated by reference into the Final Results and, therefore,
presents the reasoning on which the court must consider the Department’s decision not to apply
the major input rule to the POSCO Group. Because that reasoning is based on a finding of fact
that is, as defendant concedes, unsupported by substantial record evidence, the decision not to
apply the major input rule to the valuation of Union’s purchases of substrate from the POSCO
Group must be reviewed and reconsidered on remand.
C. On Remand, Commerce Must Reconsider, and Explain Satisfactorily, its Method of Applying
the Major Input Rule to Value the Steel Substrate that Union Obtained from JFE Steel through
Purchases from a Trading Company Affiliated with Union
The one supplier of steel substrate affiliated with Union to which Commerce applied the
major input rule, JFE Steel, sold to Union through a trading company also affiliated with Union.
Br. in Opp’n to the Mot. of Pls. U.S. Steel Corp. & Nucor Corp. for J. upon the Agency R. 12
(“Union Br.”) (disclosing that Commerce applied the major input rule to JFE Steel). Decision
Mem. 21. (“We note that Union purchased various forms of steel substrate manufactured by [a]
certain affiliated supplier and sold to Union through a certain affiliated supplier during the
POR.”). In applying the major input rule, under which Commerce is to value the input on the
basis of the information available regarding the cost of production, see 19 U.S.C. § 1677b(f)(3),
Commerce obtained and examined data from the trading company, even though the trading
company was not the producer, Decision Mem. 21. As it had for Union’s purchases from the
other affiliated suppliers of steel substrate, Commerce ultimately decided not to make any
adjustment to the data on Union’s cost of acquisition. Id.
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Nucor claims that Commerce misapplied the major input rule in requesting and
examining only data from the trading company and not cost of production data from the actual
producer. Nucor Br. 10-11. Although Nucor acknowledges that application of the major input
rule is discretionary, it argues that once Commerce decided to apply the major input rule, it was
required to value the input according to information on the actual cost of production. Id. at 11
(“In this case, the Tariff Act explicitly states that ‘[i]f, in the case of a transaction between
affiliated persons involving the production by one of such persons of a major input to the
merchandise . . . then the administering authority may determine the value of the major input on
the basis of the information available regarding such cost of production.’” (alterations in
original) (citing 19 U.S.C. § 1677b(f)(3))).
Defendant argues that Commerce complied with the major input rule by comparing the
trading company’s average selling price to Union with the “cost of production,” which it based
on the cost the trading company incurred in purchasing substrate from the producer and the
trading company’s selling, general, and administrative expenses. Def. Resp. 10. Defendant
bases its argument on the language of 19 U.S.C. § 1677b(f)(3), emphasizing that the statute
allows valuation “on the basis of the information available regarding such cost of production.”
Id. at 9 (quoting 19 U.S.C. § 1677b(f)(3)). According to defendant, Commerce could base its
application of the major input rule on data from the trading company because those data were the
best information available, in that the record contained no cost of production information from
the producer. Id. at 10.
The court must consider Commerce’s decision based on the reasoning the Department
put forth. Chenery Corp., 332 U.S. at 196. The Decision Memorandum, however, contains only
Consol. Court No. 09-00156 Page 10
the briefest explanation of the reasoning underlying the Department’s decision to request and use
the information from the trading company. The Decision Memorandum explains that “[b]ecause
this certain affiliated supplier is a trading company, and therefore does not manufacture, we
requested and obtained its weighted average purchase costs for certain steel substrates during the
POR.” Decision Mem. 21 (emphasis added). There is no explanation in the Decision
Memorandum of why Commerce did not seek to obtain production cost information from the
producer rather than purchase cost information from the trading company or why it concluded
that purchase cost information from the trading company would suffice for application of the
major input rule. Defendant, in its response to Nucor’s motion, argues that there was no
guarantee that the trading company would have responded to an information request, noting that
the trading company was not a party to the proceeding, could not have been compelled to
provide information, and, in a previous segment of the proceeding, had refused to provide its
cost of production data. Def. Resp. 10-11. This explanation appears nowhere in the Decision
Memorandum and, therefore, does not constitute a statement of the Department’s reasoning for
purposes of judicial review.
The Decision Memorandum also states, confusingly, that “[t]he Department determines
that Union’s purchases of steel substrate from a certain supplier constitute a major input and,
therefore, we examined these purchases as directed by section 773(f)(3) of the Act [19 U.S.C.
§ 1677b(f)(3)] and 19 CFR 351.407(b)(2).” Decision Mem. 20-21. The statutory provision it
cites, section 773(f)(3) of the Tariff Act, refers to valuing a major input based on the cost of
production, but the regulatory provision it cites refers to valuing a major input based on market
value. See 19 C.F.R. § 351.407(b) (“For purposes of section 773(f)(3) of the Act, the Secretary
Consol. Court No. 09-00156 Page 11
normally will determine the value of a major input purchased from an affiliated person based on
the higher of . . . (2) the amount usually reflected in sales of the major input in the market under
consideration . . . .”). Because the Department gives no indication elsewhere that it intended to
value the input based on market value as opposed to cost of production, it is arguable that the
court should read the Decision Memorandum as intending to refer to 19 C.F.R. § 351.407(b)(3)
(“The cost to the affiliated person of producing the major input.”).3 However, in view of
Commerce’s own finding that the record did not contain data on the producer’s costs, the
Department’s statement of its reasoning is unsatisfactorily opaque even when read in this way.
Due to the deficiencies in the explanation put forth in the Decision Memorandum, the court will
remand for reconsideration and explanation the Department’s valuation of the steel substrate
produced by JFE Steel.
D. Commerce Did Not Err in Declining to Apply the Major Input Rule to Union’s Other Steel
Substrate Suppliers
The court next considers Nucor’s claim that the Department acted unlawfully in applying
the transaction disregarded rule, rather than the major input rule, to Union’s affiliated suppliers
of steel substrate other than the trading company and the POSCO Group. Nucor Br. 14-18. In
the Decision Memorandum, Commerce explained that “[i]n determining whether an input is
3
The regulation provides that:
For purposes of section 773(f)(3) of the Act [19 U.S.C. § 1677b(f)(3)], the Secretary
normally will determine the value of a major input purchased from an affiliated
person based on the higher of:
(1) The price paid by the exporter or producer to the affiliated person for the major
input;
(2) The amount usually reflected in sales of the major input in the market under
consideration; or
(3) The cost to the affiliated person of producing the major input.
19 C.F.R. § 351.407(b).
Consol. Court No. 09-00156 Page 12
considered ‘major,’ among other factors, the Department looks at both the percentage of the
input obtained from affiliated suppliers (as opposed to unaffiliated suppliers) and the percentage
the individual element represents in the product’s cost of manufacture (COM).” Decision
Mem. 20. Commerce found that only purchases of steel substrate from a certain affiliated
supplier (i.e. the trading company, as discussed previously) qualified as major inputs under
19 U.S.C. § 1677b(f)(3) and 19 C.F.R. § 351.407(b) and therefore applied the major input rule to
those purchases of steel substrate. Decision Mem. 20. For Union’s purchases of steel substrate
from all other affiliated suppliers, including in particular the POSCO Group, Commerce applied
the transactions disregarded rule. Id. Commerce found, pursuant to 19 U.S.C. § 1677b(f)(3),
that the purchases from the other affiliated suppliers and the POSCO Group “accounted for
insignificant percentages of Union’s total purchases of substrate during the POR.” Id.
As discussed previously, Nucor concedes that the application of the major input rule is
discretionary. Nucor Br. 11; see 19 U.S.C. § 1677b(f)(3) (providing that the Department, in the
circumstance contemplated by the major input provision, “may determine the value of the major
input on the basis of the information available regarding such cost of production . . . .”). Nucor’s
argument is that, despite the discretion afforded by § 1677b(f)(3), Commerce, without adequate
explanation, departed in this case from its past practice of aggregating all purchases of the same
input from various affiliates when determining whether an input is considered major for purposes
of deciding whether to apply the major input rule. Nucor Br. 15. Nucor invokes the established
principle that an agency must either conform itself to prior decisions or explain the reasons for
its departure. Id. Nucor characterizes the decision to depart from this alleged practice as
“unsupported by substantial evidence,” arguing that the record demonstrates that a large
Consol. Court No. 09-00156 Page 13
percentage of Union’s steel substrates were purchased from affiliated suppliers and that “steel
substrates are by far the most significant input to the production of CORE . . . .” Id. at 17.
Defendant takes issue with Nucor’s contention that the Department’s decision not to
apply the major input rule to the suppliers in question was a departure from practice. Def.
Resp. 15. Defendant cites a recent administrative review in which “Commerce found that an
input purchased by one affiliated supplier was not significant in relation to the total costs
incurred to produce the merchandise” and “excluded that company’s input from the major input
rule while subjecting the same input from another affiliated supplier to the major input rule.”
Id. at 15-16 (citing Certain Hot-Rolled Carbon Steel Flat Products from Thailand: Final Results
of Antidumping Duty Admin. Review & Partial Rescission of Antidumping Duty Admin. Review,
72 Fed. Reg. 27,802 (May 17, 2007); Issues & Decision Mem., A-549-817, ARP 5-07, cmt. 3
(May 7, 2007), available at http://ia.ita.doc.gov/frn/index.html). Defendant also cites the
preamble accompanying the promulgation of the Department’s regulations in support of the
Department’s decision to apply the major input rule to fewer than all affiliated suppliers of steel
substrate. Id. at 15 (citing Antidumping Duties; Countervailing Duties; Final rule, 62 Fed. Reg.
27,295, 27,336 (May 19, 1997) (“The determination of which inputs are ‘major’ must be made
on a case-by-case basis taking into consideration the nature of the product, its inputs, and the
company-specific information on the record.”)).
As defendant’s citation to a recent review demonstrates, what Nucor considers to be a
Departmental “practice” has not been uniformly followed. The court, therefore, will not reject
the Department’s explanation of its reasons for declining to apply the major input rule to
affiliates other than the POSCO Group and the trading company for failure to explain a departure
Consol. Court No. 09-00156 Page 14
from an alleged agency practice. The court also concludes that substantial evidence supports the
Department’s finding that the affiliated suppliers in question “accounted for insignificant
percentages of Union’s total purchases of substrate during the POR.” See Decision Mem. 20.
In conclusion, the court rejects Nucor’s claim that Commerce acted contrary to law in
declining to apply the major input rule to the affiliated suppliers other than the POSCO Group
and the trading company.
E. Commerce Based its Decision Not to Collapse Union and the POSCO Group Partly on a
Finding of Fact that Is Unsupported by Substantial Evidence on the Record
Acting under its regulation, 19 C.F.R. § 351.401(f)(1), Commerce decided not to treat
Union and the POSCO Group as a single entity, i.e., not to “collapse” the two affiliated parties,
for purposes of the review. Decision Mem. 22-23. The regulation provides that Commerce will
collapse two affiliated producers if it makes the following two findings of fact: (1) the producers
have production facilities for similar or identical products that would not require substantial
retooling of either facility in order to restructure manufacturing priorities, and (2) there is a
significant potential for the manipulation of price or production. 19 C.F.R. § 351.401(f)(1).
According to the regulation, the factors Commerce considers when identifying a “significant
potential for the manipulation of price or production” include, but are not limited to: “[t]he level
of common ownership;” “[t]he extent to which managerial employees or board members of one
firm sit on the board of directors of an affiliated firm;” and “[w]hether operations are
intertwined, such as through the sharing of sales information, involvement in production and
pricing decisions, the sharing of facilities or employees, or significant transactions between the
affiliated producers.” Id. § 351.401(f)(2).
Consol. Court No. 09-00156 Page 15
Nucor challenges the decision not to collapse Union and the POSCO Group. Nucor
objects, first, that Commerce found in the Preliminary Results that the two companies have
production facilities for manufacturing subject merchandise that would not require substantial
retooling to restructure manufacturing priorities but then, contrary to the record evidence,
reversed that finding in the Final Results. Nucor Br. 20. Nucor contends, second, that
Commerce erroneously found that there was no potential for manipulation of price or production.
Id. at 21. In making this second argument, Nucor takes issue with a finding by Commerce that
there were no significant transactions between Union and the POSCO Group during the period of
review. Id. at 19-20. Nucor’s second argument relies on a memorandum of understanding
between the POSCO Group and Union’s parent company, which Nucor construes to signify “a
real and significant potential for manipulation” that meets “the Department’s forward-looking
test for collapsing two companies.” Id. at 22; Reply Br. of Nucor Corp. 13; Def. Resp. 20
(discussing the “memorandum of understanding”).
Nucor cites a pre-decisional memorandum (“Collapsing Memorandum” or “pre-
decisional memorandum”) in contending that Commerce, in the Preliminary Results, found that
production facilities of Union and the POSCO Group would not require substantial retooling to
restructure manufacturing priorities. Nucor Br. 20 (citing Mem. to Dir., AD/CVD Operations
Office 3, at 4 (Sept. 2, 2008) (Admin R. Doc. No. 4733)). Based on its review of the Collapsing
Memorandum, the court concludes that Nucor is correct in its characterization of the finding
stated therein. As published, the Preliminary Results make no mention of such a finding. See
Prelim. Results, 73 Fed. Reg. at 52,267-72. But referring to the Preliminary Results, the
Decision Memorandum states that “[t]he Department also found that the POSCO Group and
Consol. Court No. 09-00156 Page 16
Union did not fit the criteria of 19 CFR 351.401(f), where two or more producers have
production facilities for similar or identical products that would not require substantial retooling
of either facility to restructure manufacturing priorities.” Decision Mem. 22 (emphasis added).
The discussions in the Decision Memorandum and the pre-decisional memorandum
appear to be inconsistent on what the Department decided in the Preliminary Results as to
possible retooling of manufacturing facilities. The Decision Memorandum makes no separate
finding on this point; it appears that Commerce considered discussion of this issue unnecessary
due to its finding that “there is no significant potential for the POSCO Group and Union to
manipulate the price or cost of CORE exported to the U.S.” Id. at 23. As support for the latter
finding, the Decision Memorandum states that “the POSCO Group[’s] and Union’s operations
are not intertwined, such as through common ownership, sharing of board members, sharing of
sales information, involvement in production and pricing decisions, the sharing of facilities or
employees, or significant transactions between affiliated producers.” Id. at 22. Invoking the
criteria of 19 C.F.R. § 351.401(f)(2), the Decision Memorandum concludes that “there is no
evidence that the POSCO Group and Union share sales information, production and pricing
decisions, facilities, or employees” and that “[t]here is no evidence on the record of this
proceeding which indicates that the POSCO Group and Union are engaged in any significant
transactions during the POR.” Id.
Regarding “the level of common ownership” criterion of 19 C.F.R. § 351.401(f)(2), the
record evidence is that common ownership existed between the two entities but also that it was,
as defendant argues, a small percentage of ownership. Def. Resp. 21. While the Department’s
application of the “common ownership” criterion is supported by substantial record evidence, the
Consol. Court No. 09-00156 Page 17
same cannot be said of the analysis the Department conducted under the criterion of “significant
transactions between the affiliated producers,” see 19 C.F.R. § 351.401(f). Without elaborating,
Commerce found, in the Decision Memorandum, a lack of “any significant transactions”
between Union and the POSCO Group during the period of review. Decision Mem. 22.
Defendant attempts to characterize this finding as one supported by substantial evidence, arguing
that “record evidence demonstrated that the POSCO Group made no purchases from Union
during the period of review, while Union purchased only a limited amount of input materials
from the POSCO Group–accounting for only a small portion of Union’s overall purchases.”
Def. Resp. 19. As discussed previously, defendant concedes that the Department erred in stating
in the Decision Memorandum that Union’s purchases of steel substrate from the POSCO Group
were an insignificant percentage of Union’s total steel substrate purchases and describes that
finding, as stated in the Decision Memorandum, as an “inadvertent error.” Id. at 13.
The court holds that the Department erred in stating in the Decision Memorandum its
finding that “[t]here is no evidence on the record of this proceeding which indicates that the
POSCO Group and Union are engaged in any significant transactions during the POR.” See
Decision Mem. 22. Because that erroneous finding was one of the stated reasons why Commerce
decided not to collapse Union and the POSCO Group, the court must remand for reconsideration
the decision not to collapse Union and the POSCO Group. On remand, the Department also
must revisit the question of whether the two companies have production facilities for
manufacturing subject merchandise that would not require substantial retooling to restructure
manufacturing priorities. As discussed previously, the Department answered that question in the
Consol. Court No. 09-00156 Page 18
affirmative in the pre-decisional memorandum prior to issuance of the Preliminary Results and
then, in the Decision Memorandum, mischaracterized its earlier decision.
III. CONCLUSION AND ORDER
The court will grant defendant’s request for a voluntary remand so that Commerce may
review and reconsider its finding that adjustments to the valuation of steel substrate that Union
obtained from its affiliated suppliers should be disregarded as negligible. On remand, the
Department also must review and reconsider its decision not to apply the major input rule to
Union’s purchases of steel substrate from the POSCO Group, its method of applying the major
input rule to value the steel substrate that Union obtained from JFE Steel through purchases from
the trading company, and its decision not to collapse Union and the POSCO Group.4
ORDER
Based on the court’s consideration of Certain Corrosion-Resistant Carbon Steel Flat
Products from the Republic of Korea: Notice of Final Results of the Fourteenth Admin. Review
& Partial Rescission, 74 Fed. Reg. 11,082 (Mar. 16, 2009) (the “Final Results”), the motions of
plaintiffs under USCIT Rule 56.2 for judgment on the agency record, the submissions of all
parties, and all other papers and proceedings herein, and upon due deliberation, it is hereby
ORDERED that the Rule 56.2 motion of plaintiff United States Steel Corporation be,
and hereby is, GRANTED; it is further
ORDERED that the Rule 56.2 motion of plaintiff Nucor Corporation be, and hereby is,
GRANTED in part and DENIED in part; it is further
4
The court’s order sets forth a schedule for the remand proceeding parallel to that
ordered in Union Steel v. United States, Court No. 09-130 (Feb. 15, 2011) (“Union”), so that the
remand redetermination filed pursuant to this Opinion and Order will take into account any other
adjustments to redetermined dumping margins resulting from the court’s remand order in Union,
which pertains to the same administrative review that is the subject of this litigation.
Consol. Court No. 09-00156 Page 19
ORDERED that the Final Results be, and hereby are, remanded to the Department for
reconsideration and redetermination in accordance with this Opinion and Order; it is further
ORDERED that Commerce, on remand, shall review and reconsider its determinations
that potential adjustments to the costs of Union Steel Manufacturing Co., Ltd. (“Union”) to
purchase steel substrate from affiliated suppliers should be disregarded as negligible; it is further
ORDERED that Commerce, on remand, shall review and reconsider its decision not to
apply the major input rule to Union’s purchases of steel substrate from Pohang Iron & Steel Co.,
Ltd. and Pohang Coated Steel Co., Ltd. (collectively, the “POSCO Group”); it is further
ORDERED that Commerce, on remand, shall reconsider its method of applying the
major input rule to value the steel substrate that Union obtained from JFE Steel through
purchases from a trading company and include a satisfactory explanation for its decisions; it is
further
ORDERED that Commerce, on remand, shall review and reconsider its decision not to
treat Union and the POSCO Group as a single entity for purposes of the administrative review; it
is further
ORDERED that the Department shall file remand results in compliance with this
Opinion and Order that are supported by substantial evidence and otherwise in accordance with
law; and it is further
ORDERED that the Department shall have ninety (90) days from the date of this
Opinion and Order to file its remand results, that plaintiff, plaintiff-intervenor and defendant-
intervenors shall have thirty (30) days from the filing of those results to file comments thereon
with the court, and that defendant shall have fifteen (15) days thereafter to file any reply to such
comments.
/s/ Timothy C. Stanceu
Timothy C. Stanceu
Judge
Dated: February 15, 2011
New York, New York