Bethlehem Steel Corp. v. United States

Slip Op. 03-143

UNITED STATES COURT OF INTERNATIONAL TRADE

BEFORE: RICHARD W. GOLDBERG, SENIOR JUDGE

BETHLEHEM STEEL CORPORATION, ISPAT
INLAND INC., LTV STEEL COMPANY,
INC., UNITED STATES STEEL, LLC,
and NATIONAL STEEL CORPORATION,

Plaintiffs,

v.

UNITED STATES,
Cons. Ct. No. 00-00151
Defendant,

and

USINAS SIDERURGICAS DE MINAS
GERAIS S/A, COMPANHIA SIDERURGICA
PAULISTA, COMPANHIA SIDERURGICA
NACIONAL, THAI COLD ROLLED STEEL
SHEET PUBLIC COMPANY LIMITED,
ISCOR, LTD., NIPPON STEEL
CORPORATION, NKK CORPORATION,
KAWASAKI STEEL CORPORATION,
SUMITOMO METAL INDUSTRIES, LTD.,
KOBE STEEL, LTD., NISSHIN STEEL
COMPANY, LTD., EREGLI DEMIR VE
CELIK FAB. T.A.S., and SHANGHAI
BAOSTEEL GROUP CORPORATION,

Defendant-
Intervenors.

[Remanded to the ITC to redefine “internal transfers,” clarify
how it applied facts otherwise available, and reconsider whether
the domestic industry has suffered material injury.]

Date: October 28, 2003

Dewey Ballantine, LLP (Alan Wm. Wolff, Michael Henry Stein, Kevin
M. Dempsey, and Andrew J. Conrad) representing Plaintiffs
Cons. Ct. No. 00-00151 Page 2

Bethlehem Steel Corporation, United States Steel, LLC, and
National Steel Corporation.

Lyn M. Schlitt, General Counsel, James Lyons, Deputy General
Counsel, U.S. International Trade Commission (Mary Jones),
representing Defendant United States.

Willkie Farr & Gallagher, LLP (William H. Baringer) representing
Defendant-Intervenors Thai Cold Rolled Steel Sheet Public Company
Limited, Usinas Siderurgicas de Minas Gerais S/A, Companhia
Siderurgica Paulista, and Companhia Siderurgica Nacional.

O’Melveny & Myers, LLP (Kristin Heim Mowry) representing
Defendant-Intervenor Iscor, Ltd.

Willkie Farr & Gallagher, LLP (Matthew Robert Nicely, James P.
Durling, and Jocelyn C. Flynn) representing Defendant-Intervenors
Nippon Steel Corporation, NKK Corporation, Kawasaki Steel
Corporation, Sumitomo Metal Industries, Ltd., Kobe Steel, Ltd.,
and Nisshin Steel Company, Ltd.

Law Offices of David L. Simon (David L. Simon) representing
Defendant-Intervenor Eregli Demir ve Celik Fab. T.A.S.

Dorsey & Whitney, LLP (Philippe M. Bruno) representing Defendant-
Intervenor Shanghai Baosteel Group Corporation.

OPINION

GOLDBERG, Senior Judge: This case concerns the final negative

injury determinations of the International Trade Commission

(“ITC”) in several antidumping ("AD") and countervailing duty

("CVD") proceedings involving cold-rolled steel ("CRS") products

from Argentina, Brazil, China, Indonesia, Japan, Russia,

Slovakia, South Africa, Taiwan, Thailand, Turkey, and Venezuela

(collectively, the “Final Determinations”).
Cons. Ct. No. 00-00151 Page 3

The Plaintiffs are a group of domestic steel producers:

Bethlehem Steel Corporation; Ispat Inland Inc.; LTV Steel

Company, Inc.; United States Steel, LLC; and National Steel

Corporation. Neither Ispat nor National Steel are plaintiffs

with respect to the investigation involving Japan.

The Defendant is the ITC. The Defendant-Intervenors are a

group of foreign steel producers: Usinas Siderurgicas de Minas

Gerais S/A; Companhia Siderurgica Paulista; Companhia Siderurgica

Nacional; Thai Cold Rolled Steel Sheet Public Company Limited;

Iscor, Ltd.; Nippon Steel Corporation; NKK Corporation; Kawasaki

Steel Corporation; Sumitomo Metal Industries, Ltd.; Kobe Steel,

Ltd.; Nisshin Steel Company, Ltd.; Eregli Demir ve Celik Fab.

T.A.S.; and Shanghai Baosteel Group Corporation.

I. BACKGROUND

On June 2, 1999, certain domestic producers of CRS products,

including the Plaintiffs, filed AD and CVD petitions with the

Department of Commerce and the ITC. On July 30, 1999, the ITC

published its preliminary determination. The ITC determined that

there was a reasonable indication that the domestic industry was

injured, or threatened with material injury, by CRS imports sold

at less than fair value from Argentina, Brazil, China, Indonesia,

Japan, Russia, Slovakia, South Africa, Taiwan, Thailand, Turkey,

and Venezuela, as well as by subsidized imports from Brazil. The
Cons. Ct. No. 00-00151 Page 4

ITC terminated the CVD investigations with respect to Indonesia,

Thailand, and Venezuela.

On December 1, 1999, the ITC began the final phase of its

investigations. On January 20, 2000, the ITC held a public

hearing. The parties filed pre- and post-hearing briefs shortly

before and after this hearing. On February 18, 2000, the ITC

filed its Final Staff Report. One week later, on February 25,

2000, the ITC made available to the parties all information on

which they had not yet had an opportunity to comment, and allowed

the parties until February 29, 2000, to submit final comments on

this information.

On March 14, 2000, the ITC found by a 5-1 vote that the

domestic industry was not materially injured, or threatened with

material injury, by reason of allegedly subsidized CRS imports

from Brazil, or by reason of allegedly dumped CRS imports from

Argentina, Brazil, Japan, Russia, South Africa, or Thailand. See

Certain Cold-Rolled Steel Products From Argentina, Brazil, Japan,

Russia, South Africa, and Thailand, 65 Fed. Reg. 15,008, USITC

Pub. 3283 (Mar. 20, 2000) (“March Determination”). Similar

negative determinations were subsequently published on May 17,

2000 with respect to allegedly dumped CRS imports from Turkey and

Venezuela, and on July 17, 2000 with respect to allegedly dumped

CRS imports from China, Indonesia, Slovakia, and Taiwan. See
Cons. Ct. No. 00-00151 Page 5

Certain Cold-Rolled Steel Products From Turkey and Venezuela, 65

Fed. Reg. 31,348 (May 17, 2000); Certain Cold-Rolled Steel

Products From China, Indonesia, Slovakia, and Taiwan, 65 Fed.

Reg. 44,076 (July 17, 2000). The analysis contained in the March

Determination was adopted in both subsequent determinations.

After defining the domestic like product and the industry,

and deciding to cumulate the imports from all of the subject

countries, the ITC began the final phase of its antidumping and

countervailing duty investigation. In the final phase, the ITC

must determine whether the domestic industry is materially

injured by reason of the subject imports. See 19 U.S.C. §§

1671d(b), 1673d(b). To make this determination, the ITC must

consider all relevant economic factors within the context “of the

business cycle and conditions of competition” of the domestic

industry. 19 U.S.C. § 1677(7)(C)(iii). In determining that

there was no material injury to the domestic CRS industry, the

ITC analyzed the conditions of competition. As part of that

analysis, the ITC looked to whether the captive production

provision applied. March Determination at 15-18. If the captive

production provision was applicable, then the ITC would “focus

primarily on the merchant market for the domestic like product”

to determine “market share and the factors affecting financial

performance.” 19 U.S.C. § 1677(7)(C)(iv).
Cons. Ct. No. 00-00151 Page 6

The ITC concluded that the threshold requirements of the

captive production provision were met — namely, that “domestic

producers internally transfer[red] a significant share of their

domestic production for captive consumption and [sold] a

significant share on the merchant market.” March Determination

at 16. The ITC also found that the first two prongs of the

captive production provision were met. Id. However, the ITC

concluded that the third prong (that “the production of the

domestic like product sold in the merchant market is not

generally used in the production of that downstream article”) was

not met. Id. Therefore, the ITC did not apply the captive

production provision. Id. at 18. Nevertheless, the ITC decided

to consider captive production as a condition of competition

because there was a significant volume of captive production.

Id.

This appeal followed. The Court has jurisdiction pursuant

to 28 U.S.C. § 1581(c).

II. STANDARD OF REVIEW

Under the applicable standard of review, the ITC's

determinations must be upheld unless they are not supported by

substantial evidence or otherwise not in accordance with law.

The ITC's determinations are presumed to be correct; the burden

is on the party challenging a determination to demonstrate
Cons. Ct. No. 00-00151 Page 7

otherwise. See 28 U.S.C. § 2639(a)(1); Trent Tube Div. v. United

States, 14 CIT 780, 784 (1990).

III. DISCUSSION

The Plaintiffs challenge three aspects of the ITC’s

investigation. First, the Plaintiffs allege that the ITC

improperly found that the captive production provision of 19

U.S.C. § 1677(7)(C)(iv) was inapplicable to the Final

Determinations. See Mem. Supp. Rule 56.2 Mot. of Bethlehem,

Ispat, LTV, & U.S. Steel at 17-43. Second, Plaintiffs argue that

the ITC improperly relied on information upon which the parties

were not given an opportunity to comment. See id. at 44-48.

Third, Plaintiffs charge that the ITC’s findings concerning

certain conditions of competition, and the volume and price

effects of CRS imports, were not supported by substantial

evidence and otherwise in accordance with law. See Mem. Supp.

Mot. J. Agency R. Under Rule 56.2 of Bethlehem, LTV, National

Steel, & U.S. Steel at 10-45.

A. Applicability of the Captive Production Provision

As a general rule, the ITC considers the domestic industry

as a whole in determining whether subject imports have caused

material injury. See 19 U.S.C. § 1673d(b)(1)(A)(i) (2000).

However, there is a narrow exception to this rule, commonly

called the "captive production" provision, which provides that if
Cons. Ct. No. 00-00151 Page 8

certain conditions are met, the ITC must "focus primarily on the

merchant market for the domestic like product" when determining

market share and the economic factors impacting the affected

domestic industry. See 19 U.S.C. § 1677(7)(C)(iv) (2000). The

captive production statute reads in pertinent part as follows:

(iv) Captive production

If domestic producers internally transfer significant
production of the domestic like product for the
production of a downstream article and sell significant
production of the domestic like product in the merchant
market, and the [ITC] finds that–

. . . .

(III) the production of the domestic like product
sold in the merchant market is not generally used in
the production of that downstream article,

then the [ITC], in determining market share and the
[economic factors impacting the affected domestic
industry], shall focus primarily on the merchant market
for the domestic like product.

19 U.S.C. § 1677(7)(C)(iv). Thus, the captive production

provision seeks to determine whether imports compete with U.S.

production of the domestic like product in all its forms as a

whole, or only with sales of the domestic like product in the

merchant market.

In the March Determination, the ITC concluded that the

threshold requirements of the captive production provision were

fulfilled, and the first two criteria were met. March
Cons. Ct. No. 00-00151 Page 9

Determination at 16. However, the ITC answered in the negative

to the third criterion. Id. The third criterion requires that

“the production of the domestic like product sold in the merchant

market is not generally used in the production of that downstream

article[.]” 19 U.S.C. § 1677(7)(C)(iv)(III). The Plaintiffs

challenge the ITC’s finding with respect to the third criterion.

Mem. Supp. Rule 56.2 Mot. of Bethlehem, Ispat, LTV, & U.S. Steel

at 21.

In the context of this investigation, there is no dispute

that domestic producers of CRS products (the "domestic like

product") transferred to related-party joint ventures

approximately sixty percent of their total production (i.e.,

“significant production”) of CRS for further processing into

galvanized/coated products (the "downstream articles"),

particularly corrosion-resistant steel and tin-mill products.

Id. at 19. The remaining forty percent of domestic production

was sold into the merchant market to indisputably unrelated

customers. Id. The threshold question is whether transfers to

those related-party joint ventures qualify as "internal"

transfers. If they do not, then the ITC’s interpretation of the

statute will be upheld. However, if the transfers to

related-party joint ventures are internal transfers, then the

factual question becomes whether, under sub-subparagraph (III),
Cons. Ct. No. 00-00151 Page 10

CRS sold in the merchant market is not generally used to produce

downstream articles. If not, then the captive production

provision does apply, and the ITC must focus its analysis

primarily on the forty percent of domestic sales of CRS made to

indisputably unrelated customers.

1. Whether Transfers to Related-Party Joint Ventures Are
Internal Transfers as a Matter of Law

The ITC found that transfers of CRS for further processing

to related-party joint ventures are not internal transfers for

purposes of 19 U.S.C. § 1677(7)(C)(iv). March Determination at

17. In reaching its determination, the ITC focused on the fact

that the related-party joint ventures in question were

independent corporate entities jointly owned with foreign steel

corporations. Id. The ITC reasoned that the statute speaks of

"internal transfers," not "transfers to related parties." Id.

The ITC also looked to the Statement of Administrative Action

(“SAA”), which defines captive production as that done by "the

same producer." Id.; see also URUGUAY ROUND AGREEMENTS ACT , STATEMENT

OF ADMINISTRATIVE ACTION , H.R. DOC . NO . 103-316, at 852 (1994). Given

the separate corporate status of the joint ventures, the ITC

found that in every instance the joint ventures and the domestic

CRS producers were not the same producer. March Determination at
Cons. Ct. No. 00-00151 Page 11

17. Thus, transfers to them could not be internal transfers

within the meaning of the captive production provision. Id.

To ascertain whether the ITC interpreted the captive

production provision in accordance with law, the Court must first

“determine whether Congress’s purpose and intent on the question

at issue is judicially ascertainable.” Timex V.I., Inc. v.

United States, 157 F.3d 879, 881 (Fed. Cir. 1998). In

determining Congress’s intent, the Court “looks at the plain

language of the statute, legislative history, and the canons of

statutory construction[.]” Dupont Teijin Films USA, LP v. United

States, 27 CIT __, Slip Op. 03-79 at 7 (July 9, 2003). If the

statute is vague or silent, then the Court will extend Chevron

deference to the ITC’s interpretation. Chevron U.S.A., Inc. v.

Natural Res. Def. Council, Inc., 467 U.S. 837, 842-44 (1984).

The “[C]ourt must defer to an agency’s reasonable interpretation

of a statute even if the [C]ourt might have preferred another.”

Koyo Seiko Co. v. United States, 36 F.3d 1565, 1570 (Fed. Cir.

1994).

Whether the third prong of the captive production provision

is met depends upon the measure of products “sold in the merchant

market,” and the measure of products “internally transferred” for

production of downstream articles. 19 U.S.C. § 1677(7)(C)(iv).

Congress did not define “sold” or “internally transferred” in the
Cons. Ct. No. 00-00151 Page 12

statute. It is clear that Congress intended to allocate all

transfers of CRS to either the “sold” category or the “internally

transferred” category. The captive production provision

establishes a dichotomy between those situations where domestic

producers "internally transfer significant production of the

domestic like product for the production of a downstream

article[,]" and those where they "sell significant production of

the domestic like product in the merchant market[.]" Id.

Therefore, as the ITC also found, the two categories of

transactions must encompass all CRS transfers. To define “sold”

and “internally transferred,” the Court looks to the legislative

history and other canons of statutory interpretation to ascertain

Congress’s intent.

The first term to define is “sold.” The statute does not

define “sold” or “sale.” As in NSK Ltd. v. United States, 115

F.3d 965, 974 (Fed. Cir. 1997), the Court will then resort to the

common meaning of the word “sold.” The ITC and Defendant-

Intervenors argue that the Court should not rely on the common

definition of “sold” because NSK is not applicable to this case.

Def.-Intervenors’ Opp’n at 15-16. While the ITC is correct that

NSK involved a different product, hot-rolled steel, and was

issued prior to the enactment of the captive production

provision, the principles of the case are relevant. Under NSK,
Cons. Ct. No. 00-00151 Page 13

because Congress did not define “sold” to mean something other

than its common meaning, the Court will defer to the common and

accepted meaning of sale. See NSK, 115 F.3d at 974. Therefore,

in this context, for the CRS to be sold in the merchant market,

the title to the CRS must be transferred, consideration must be

paid for the CRS, and the transfer of title must be to an

unrelated party.1 Id. at 975.

It is clear that Congress did not intend for transfers of

CRS to joint ventures to be included within the parameters of

“sold in the merchant market” if those transfers did not meet the

three requirements of a sale. It is undisputed that joint

ventures are related parties. The evidence presented by the

Plaintiffs to the ITC shows that the CRS passed to the joint

ventures was never sold to the joint ventures. Further, the ITC

found that the joint ventures were related parties, although they

were not the “same producers.” March Determination at 17.

Therefore, the Court will give no deference to the ITC’s

definition of sold.

1
The SAA’s definition of merchant market sales further
supports the common and accepted meaning of sale. As the ITC
noted in the March Determination, the SAA defines merchant market
sales as “sales of the domestic like product to unrelated
customers.” March Determination at 17; URUGUAY ROUND AGREEMENTS ACT ,
STATEMENT OF ADMINISTRATIVE ACTION , H.R. DOC . NO . 103-316, at 852
(1994).
Cons. Ct. No. 00-00151 Page 14

The next stage of the inquiry is to determine whether the

transfers to the joint ventures qualify as “internal transfers.”

The statute does not define internal transfers. There is no

commonly understood meaning of internal transfers, and no party

has provided one. Therefore, the Court will give deference to a

reasonable interpretation by the ITC.

The ITC has defined internal transfer to mean a transfer

between parts of the same corporation. March Determination at

17. Therefore, because the joint ventures have corporate

structures separate from the domestic producers, they internally

transfer significant production of the domestic like product for

the production of a downstream article, and sell significant

production of the domestic like product in the merchant market.

If Congress had not clearly excluded the transactions to the

related-party joint ventures from the sales category, this would

be a reasonable definition of internal transfers.

The Court recognizes that the term “internal transfers” does

not clearly include transfers to joint ventures. The statutory

language refers to “internal transfers,” although it could have

easily referenced “transfers to related parties” if that was the

intended result. Elsewhere in the statute Congress refers to

“transfers to related parties,” and Congress could easily have

used the same language if it had intended to include transfers to
Cons. Ct. No. 00-00151 Page 15

joint ventures. Further, the SAA defines captive production as

that done by the same producer. URUGUAY ROUND AGREEMENTS ACT ,

STATEMENT OF ADMINISTRATIVE ACTION , H.R. DOC . NO . 103-316, at 852

(1994). Independent of Congress’s use of the term “sold,” the

ITC would have reasonably defined internal transfers to include

only transactions within the same producer, or the same

corporation. However, because all transfers of CRS must be

either sales to the merchant market or internal transfers, and

Congress clearly excluded related-party joint venture transfers

from the “sales to the merchant market” category, the ITC’s

definition of internal transfers is unreasonable.

Therefore, transfers of CRS to related parties where title

has not transferred are internal transfers. The Court will

remand the ITC’s Final Determinations to re-examine the transfers

to joint ventures. The ITC is directed to define internal

transfers in a manner consistent with the statutory language and

this Opinion. If the transfers are to related parties and title

did not pass, or if compensation was not paid for the CRS, then

the ITC’s definition will have to categorize such a transaction

as an internal transfer.

Plaintiffs make several other challenges to the ITC’s

interpretation of the captive production provision that will only

be briefly addressed. First, the Plaintiffs argue that the ITC
Cons. Ct. No. 00-00151 Page 16

has previously found that transfers to joint ventures are

internal transfers rather than sales, and that it has therefore

unreasonably departed from its own precedent without explanation.

Mem. Supp. Rule 56.2 Mot. of Bethlehem, Ispat, LTV, & U.S. Steel

at 22-25. Moreover, the Plaintiffs point out that in the present

investigation the ITC's questionnaires defined "company

transfers" as "[s]hipments made to related domestic firms," and

defined "related firm" in turn as a "firm that your firm solely

or jointly owned, managed, or otherwise controlled[.]" Id. at

24. Thus, because the ITC apparently treated transfers to joint

ventures as internal transfers in the past and directed the

Plaintiffs to do so in this review, its unexplained departure

from that practice constitutes an abuse of discretion.

The ITC and Defendant-Intervenors argue that this is a novel

issue, because the NSK case was decided before the captive

production provision was even enacted. Def. ITC’s Opp’n at 19-

21. With regard to the substance of the Plaintiffs' argument,

the ITC notes that even in 1993 it distinguished "internal

transfers" from those to an "affiliated" company. Id. at 20

n.82.

The Court has already determined that the ITC’s definition

of “internal transfers” is unreasonable, in light of Congress’s

intention regarding the definition of “sold.” Even so, the ITC
Cons. Ct. No. 00-00151 Page 17

did not depart from its own precedent by defining internal

transfers as transfers within the same producer. As pointed out

by the ITC, in the NSK case the ITC was defining “sale” under

another statute.

Second, the Plaintiffs also contend that several of the

transfers to joint ventures were actually tolling arrangements.

Mem. Supp. Rule 56.2 Mot. of Bethlehem, Ispat, LTV, & U.S. Steel

at 25. The ITC counters that only a fraction of the transfers

were made pursuant to tolling arrangements. It is unnecessary

for the Court to make a factual finding regarding the number of

tolling arrangements. The ITC has been instructed to reconsider

whether any of the transfers were to related parties and whether

title was transferred to the downstream processor. In the case

of tolling arrangements, where title does not transfer, the

transaction is an internal transfer rather than a sale. This

analysis is subsumed within the Court’s previous instructions to

the ITC regarding the definition of “sold” and “internal

transfer.”

Third, the Plaintiffs argue that the SAA unambiguously

requires that transfers to joint ventures be treated as internal

transfers. Id. at 31-32. The relevant text in question

provides: "Captive production refers to production of the

domestic like product that is not sold in the merchant market and
Cons. Ct. No. 00-00151 Page 18

that is processed into a higher-valued downstream article by the

same producer. Selling in the merchant market refers to sales of

the domestic like product to unrelated customers." URUGUAY ROUND

AGREEMENTS ACT , STATEMENT OF ADMINISTRATIVE ACTION , H.R. DOC . NO . 103-316,

at 852 (1994). The Plaintiffs zero in on the second half of this

directive as "crystal-clear" proof that transfers to joint

ventures must be internal transfers. Mem. Supp. Rule 56.2 Mot.

of Bethlehem, Ispat, LTV, & U.S. Steel at 31.

The ITC and Defendant-Intervenors argue that the domestic

industry focuses on the second half of the language of the SAA,

to the exclusion of the first half. Def. ITC’s Opp’n at 8.

According to the ITC, if, as the Plaintiffs argue, it is absurd

to label related-party joint ventures "unrelated customers," then

it is equally ludicrous to call them the "same producer," given

their different corporate existence, and, in many cases, joint

ownership with a foreign steel producer. Id. at 11-12. The ITC

determined that by using the term "the same producer," rather

than terms such as "related parties" which appear elsewhere in

the SAA, Congress deliberately opted to restrict the exception

for captive production to internal transfers within the same

corporate entity. Id. The ITC and Defendant-Intervenors argue

that in light of this inherent contradiction in the language of
Cons. Ct. No. 00-00151 Page 19

the SAA, the Court must defer to the ITC's reasonable

interpretation. Id. at 12.

The SAA is ambiguous, at best. The SAA would exclude

transfers to joint ventures from both captive production and

sales in the merchant market. This unintended result occurs

despite the SAA’s attempt to define captive production as

everything that is not a sale in the merchant market. The Court

has already determined that Congress intended for transfers to

related parties to be excluded from sales in the merchant market.

Therefore, the Court will not rely on the ambiguous language of

the SAA to define “sold” and “internal transfers.”

Fourth, the Plaintiffs’ final argument is that the ITC erred

by making a completely unsupported factual finding that the joint

ventures had the authority to purchase CRS from other sources and

that the domestic producers may not have had distribution rights

for all of the coated products for which they provided the

substrate. Mem. Supp. Rule 56.2 Mot. of Bethlehem, Ispat, LTV, &

U.S. Steel at 34. The Plaintiffs emphasize that the ITC's sole

basis for this assertion was the joint brief of the respondents,

the foreign steel companies. Id. at 35. They claim that with

regard to the joint venture tolling arrangements, this assertion

is demonstrably false, because tolling operations by definition

cannot sell the steel they process. Id. They further claim with
Cons. Ct. No. 00-00151 Page 20

respect to other joint ventures that the domestic producers'

Securities and Exchange Commission corporate disclosure filings

(10-K filings) show that at least three entities jointly owned

with foreign producers are required to obtain one hundred percent

of their substrate from the domestic joint venture partner; a

fourth joint venture must obtain seventy-five percent of its

substrate this way for the next decade; and that one of the

domestic producers is the sole selling agent for one of these

joint ventures. Id. at 36. The Plaintiffs also argue that

although some of the joint ventures are co-owned with foreign

steel producers, a fact much emphasized by the ITC, a number of

others are jointly owned among only domestic producers, who

supply one hundred percent of the CRS substrate to these

entities. Id. at 37.

The ITC and Defendant-Intervenors observe that the majority

of the joint ventures are co-owned with foreign steel companies.

Def. ITC’s Opp’n at 15. In addition, they counter with their own

citations to 10-K filings tending to show that the domestic

industry does not account for all of the substrate requirements

of the joint ventures. Id. at 14-15.

The ITC’s determination is supported by substantial

evidence. The Plaintiffs are simply emphasizing the converse of

the facts relied upon by the ITC in reaching its determination.
Cons. Ct. No. 00-00151 Page 21

However, the Court doubts that this fact will be of much

relevance in determining whether the transfers were sales or

internal transfers under the Court’s instructions to the ITC to

redefine “internal transfers.”

2. Whether CRS Sold in the Merchant Market Is Used to
Produce Downstream Articles

The ITC found that a significant portion of the merchant

market purchases were devoted to producing the same downstream

products as the majority of the captive production. March

Determination at 17-18. The Plaintiffs argue that the ITC erred

in reaching this conclusion because, in calculating the degree of

overlap between captively-produced downstream products and

downstream products produced from merchant market sales, it

estimated the merchant market sales based on independent

galvanizers' purchases from all sources, including imports. Mem.

Supp. Rule 56.2 Mot. of Bethlehem, Ispat, LTV, & U.S. Steel at

40. The Plaintiffs argue that this was unreasonable given that

the sales figure in the denominator was limited to sales of the

domestic like product alone. Id.

The Plaintiffs assert that this methodology directly

violates the captive production statute, which states that "the

production of the domestic like product sold in the merchant

market is not generally used[.]" Id. at 40-41; 19 U.S.C. §
Cons. Ct. No. 00-00151 Page 22

1677(7)(C)(iv)(III) (emphasis added). The Plaintiffs also claim

that this methodology is inconsistent with the ITC's past

practice in cases such as Hot-Rolled Steel from Japan. Certain

Hot-Rolled Steel Products from Japan, USITC Pub. 3202, Inv. No.

731-TA-807 (June 1999). The Plaintiffs further claim that

correcting this error, and using instead their evidence of actual

sales of the domestic like product in the merchant market, would

result in a lower overlap ratio. Mem. Supp. Rule 56.2 Mot. of

Bethlehem, Ispat, LTV, & U.S. Steel at 43.

The ITC and Defendant-Intervenors contest these points,

arguing that the ITC's determination that the third prong of 19

U.S.C. § 1677(7)(C)(iv) was not satisfied is supported by

substantial evidence. Def. ITC’s Opp’n at 13-14. The ITC argues

that it was entitled to use CRS purchased from all sources as the

numerator, because there was no alternative data on the record

for domestically produced CRS alone, and it was obliged to use

the facts available. Id. at 18-19. The Plaintiffs' own figures

proposed above are not acceptable as facts otherwise available

because they encompass data only from the top producers. Id. at

19. The ITC also contests the accuracy of the Plaintiffs'

proposed figures. Id. However, in reply, the Plaintiffs argue

that the ITC did not follow the proper procedure for using facts
Cons. Ct. No. 00-00151 Page 23

available. Reply Br. Supp. Rule 56.2 Mot. of Bethlehem, Ispat,

LTV, & U.S. Steel at 37-45.

In antidumping and countervailing duty proceedings, the ITC

is required to use “facts otherwise available” if “necessary

information is not available on the record[.]” 19 U.S.C. §

1677e(a)(1). In addition, the statute requires the ITC to use

facts otherwise available where an interested party or any other

person: (1) withholds information that has been requested by the

ITC; (2) fails to provide the requested information by the

deadlines for submission of such information or in the form and

manner requested, subject to subsections (c)(1) and (e) of

section 1677m; (3) significantly impedes an antidumping or

countervailing duty proceeding; or (4) provides information that

cannot be verified as provided in section 1677m(i). Id. §

1677e(a)(2)(A)-(D). Section 1677e(a) cautions, however, that the

use of facts otherwise available is subject to the limitations

set forth in 19 U.S.C. § 1677m(d).

Section 1677m(d) governs “deficient submissions.” It

directs the ITC that if it determines that a response to a

request for information does not comply with the request, then

the ITC must promptly inform the entity submitting the response

of the nature of the deficiency and give that entity an

opportunity to remedy or explain the deficiency in light of the
Cons. Ct. No. 00-00151 Page 24

time limits established for the completion of the investigation.

19 U.S.C. § 1677m(d). Section 1677m(d) further provides that if

the ITC finds the remedial response to be either “not

satisfactory” or untimely, then it may, subject to section

1677m(e), disregard all or part of the original and subsequent

responses. Id.

In its Final Determinations, the ITC did not once mention,

let alone attempt to explain, its apparent decision to use facts

otherwise available. Rather, in its brief, the ITC explains for

the first time that it was entitled to use facts available

because the “data [from the purchaser questionnaire responses

was] not structured in such a way that it would be possible to

completely segregate purchases of the domestic like product from

purchases of subject imports.” Def. ITC’s Opp’n at 18. In a

footnote, the ITC supports its decision to use facts otherwise

available with a citation to 19 U.S.C. § 1677e(a). Id. at 19

n.74.

Although the ITC asserts in its brief that it was justified

in using facts otherwise available, this assertion is clearly

nothing more than a post hoc rationalization, given that the ITC

never even mentioned the phrase “facts otherwise available” in

its Final Determinations. This post hoc rationalization should

be given no deference by the Court because an ITC decision must
Cons. Ct. No. 00-00151 Page 25

be sustained, if at all, on the same basis as the reasoning

articulated in the Final Determination itself. NTN Bearing Corp.

of Am. v. United States, 25 CIT __, 155 F. Supp. 2d 715, 736

(2001); see also Burlington Truck Lines, Inc. v. United States,

371 U.S. 156, 168-69 (1962) (admonishing that “courts may not

accept . . . counsel’s post hoc rationalizations for agency

action; [rather,] an agency’s . . . order [may] be upheld, if at

all, on the same basis articulated in the order by the agency

itself”). Here, the ITC articulated no reasoning whatsoever in

the Final Determinations regarding its decision to use facts

otherwise available. As a result, there is no reasoning on which

to sustain the ITC’s decision to use facts otherwise available,

and the Court owes no deference to the ITC’s determination.

Moreover, in conducting its analysis of the third prong of

19 U.S.C. § 1677(7)(C)(iv), the ITC was obligated to attempt to

collect the comprehensive data it needed regarding domestically

produced CRS before resorting to facts otherwise available.

Indeed, “[i]t is incumbent on the ITC to acquire all obtainable

or accessible information from the affected industries on the

economic factors necessary for its analysis.” Roquette Freres v.

United States, 7 CIT 88, 94, 583 F. Supp. 599, 604 (1984). In

other words, the ITC “is obligated to make active, reasonable
Cons. Ct. No. 00-00151 Page 26

efforts to obtain relevant data.” Allegheny Ludlum Corp. v.

United States, 287 F.3d 1365, 1373 (Fed. Cir. 2002).

Here, the ITC itself acknowledged in its preliminary

determination that it did not possess sufficient information to

analyze properly the third prong of 19 U.S.C. § 1677(7)(C)(iv).

Specifically, the ITC stated as follows: “[W]e find that the

record contains insufficient information to determine the

applicability of factor . . . (III) of the captive production

provision. . . . We will seek additional information, including

data from purchasers, in any final phase of these investigations

and will reexamine the applicability of the captive production

provision at that time.” Certain Cold-Rolled Steel Products From

Argentina, Brazil, China, Indonesia, Japan, Russia, Slovakia,

South Africa, Taiwan, Thailand, Turkey, and Venezuela, USITC Pub.

3214 at 23-24, Inv. Nos. 701-TA-393-396 and 731-TA-829-840 (July

1999). However, the ITC never sought any additional information

from the Plaintiffs. This failure by the ITC to attempt to

obtain relevant data prior to resorting to facts otherwise

available renders its analysis of the third prong of 19 U.S.C. §

1677(7)(C)(iv) unsound.

Finally, 19 U.S.C. § 1677m(d) mandates that, before the ITC

can resort to facts otherwise available, a party must be given

prompt notice of any deficiency in the information it has
Cons. Ct. No. 00-00151 Page 27

submitted to the ITC, and it must be given an opportunity to

remedy that deficiency. See Mannesmannrohren-Werke AG v. United

States, 23 CIT 826, 837-38, 77 F. Supp. 2d 1302, 1312-14 (1999)

(interpreting the requirements of 19 U.S.C. § 1677m(d)). The

Final Determinations do not indicate in any way that the ITC

notified the Plaintiffs that the data they had provided was

deficient. Nor were the Plaintiffs given an opportunity to

provide more comprehensive data regarding domestically produced

CRS to the ITC. Simply put, it was improper for the ITC to

ignore the requirements of 19 U.S.C. § 1677m(d) before resorting

to facts otherwise available.

For the foregoing reasons, the Court cannot conclude that

the ITC’s use of facts otherwise available was warranted under 19

U.S.C. § 1677e(a). As a result, the Court remands the issue to

the ITC to clarify how it complied with the statutory framework

of both 19 U.S.C. § 1677e(a) and 19 U.S.C. § 1677m(d) for

applying facts otherwise available. If the ITC determines, on

remand, that it did not adhere to all of the statutory

prerequisite conditions, then the ITC must give the Plaintiffs an

opportunity to remedy any deficiencies in their data. See NTN

Bearing, 25 CIT at __, 155 F. Supp. 2d at 737-38 (remanding the

case to Commerce under 19 U.S.C. § 1677e(a) because of

“considerable uncertainty” in Commerce’s Final Results).
Cons. Ct. No. 00-00151 Page 28

B. Whether Parties Had Opportunity to Comment

The Plaintiffs' next major objection is procedural rather

than substantive. The Plaintiffs argue that the ITC acted

unreasonably by not giving them notice and opportunity to comment

on the perceived shift in methodology regarding treatment of

transfers to joint ventures. Mem. Supp. Rule 56.2 Mot. of

Bethlehem, Ispat, LTV, & U.S. Steel at 44-48. On February 18,

2000, the ITC released its Final Staff Report, in which,

consistent with all prior phases of the investigation, transfers

to related-party joint ventures were treated as internal

transfers. On February 25, 2000, the ITC made available to all

parties all information on which they had not had an opportunity

to comment, and permitted final comments to be submitted thereon

by February 29, 2000. This final release of information

allegedly contained no indication that the ITC intended to treat

the transfers in question any differently. Id. at 46. However,

on March 20, 2000, the ITC released the March Determination, in

which it recalculated merchant market sales data by determining

that such transfers were not internal transfers, that the captive

production provision therefore did not apply, and that all such

transfers were to be treated as sales to the merchant market.

March Determination at 15-18. The Plaintiffs claim that this

action represented an avulsive change in the ITC's practice, and
Cons. Ct. No. 00-00151 Page 29

that since the reports leading up to the Final Determinations

contained no hint that such a change was contemplated, the

Plaintiffs were effectively ambushed, as it would be unreasonable

to expect them to devote any portion of the fifteen pages allowed

for their final comments to addressing what they believed to be a

settled issue. Id. at 47. They claim that this action

contravenes the principles underlying the antidumping statutes,

which require the ITC to provide the parties with the “essential

facts” under consideration. Id. at 44-46.

The ITC, in the few short paragraphs it devotes to the

issue, claims that the data upon which it relied in reaching its

determination was entirely public and available for review and

comment by the Plaintiffs. Def. ITC’s Opp’n at 25-26. The ITC

further argues that nothing in United States or international law

obliges it to divulge in advance the weight that it intends to

give each specific piece of evidence; otherwise, it would have to

release a draft of its final determination for comment even

before the Commissioners had voted on it. Id. at 26. Finally,

the ITC observes that in Allegheny Ludlum Corp. v. United States,

24 CIT 858, 116 F. Supp. 2d 1276 (2000), the Court of

International Trade found that the plaintiffs were not prejudiced

by last-minute revisions to the final staff report made just
Cons. Ct. No. 00-00151 Page 30

before the Commissioners voted, since the staff report is only

one of the documents comprising the record. Id. at 24-25.

In light of the Court’s decision to remand this case to the

ITC for it to reconsider its definition of “internal transfers,”

it is unnecessary for the Court to rule on the Plaintiffs’ claim

that they did not have an opportunity to comment on the ITC’s

perceived shift in methodology regarding the treatment of

transfers to joint ventures.

C. The ITC's Findings Concerning Certain Conditions of
Competition, and the Volume and Price Effects of CRS Imports

In determining whether a domestic industry has suffered

"material injury," the ITC is directed by statute to consider (1)

the volume of imports of the subject merchandise; (2) the effect

of imports of that merchandise on prices in the United States for

domestic like products; and (3) the impact of imports of subject

merchandise on domestic producers of domestic like products. See

19 U.S.C. § 1677 (1994). The ITC determined with respect to each

of these considerations that the domestic industry had not

suffered material injury. March Determination at 15. Before

this Court, the Plaintiffs challenge each of these

determinations. See Mem. Supp. Mot. J. Agency R. Under Rule 56.2

of Bethlehem, LTV, National Steel, & U.S. Steel at 10-45.
Cons. Ct. No. 00-00151 Page 31

The analysis of the conditions of competition, the effect of

imports on prices of domestic like products, and the impact of

imports on domestic producers of domestic like products, are the

very economic factors and market share considerations that the

captive consumption provision contemplates. The ITC is directed

to reconsider whether the captive consumption provision applies;

if it does apply, then the ITC will have to consider primarily

the merchant market in its analysis of economic factors and

market share. Therefore, the Court will not opine at this time

whether the ITC’s factual determinations are supported by

substantial evidence.2

IV. CONCLUSION

For the reasons outlined above, the Court finds that the

ITC’s interpretation of 19 U.S.C. § 1677(7)(C)(iv)(III) is not in

accordance with law. Accordingly, the Final Determinations are

remanded to the ITC to define “internal transfers” consistent

with the will of Congress. Additionally, the Court finds that

the ITC did not observe the proper procedure for applying facts

otherwise available in its calculation of the overlap between

2
The ITC’s brief points out that the Plaintiffs rely heavily
on only merchant market data, while the ITC was not restricted to
the merchant market because it had determined that the captive
production provision did not apply. Def. ITC’s Opp’n at 27, 32.
It is necessary that the ITC re-evaluate whether the captive
production provision applies before the Court can determine if
the ITC’s determination was supported by substantial evidence.
Cons. Ct. No. 00-00151 Page 32

captively-produced downstream products and downstream products

produced from merchant market sales. The Court remands the Final

Determinations and instructs the ITC to clarify how it complied

with the statutory framework of both 19 U.S.C. § 1677e(a) and 19

U.S.C. § 1677m(d) for applying facts otherwise available. If the

ITC determines that it did not adhere to all of the statutory

prerequisite conditions, then it must give the Plaintiffs an

opportunity to remedy any deficiencies in their data. In

addition, in light of the Court’s instruction to the ITC to

reconsider its definition of “internal transfers,” the Court

declines to rule on whether the Plaintiffs had an opportunity to

comment on the perceived shift in methodology by the ITC.

Finally, the Court will not rule on the sufficiency of the

evidence prior to the ITC’s re-weighing of the evidence under the

Court’s remand instructions.

The ITC is instructed to issue its findings on remand within

90 days of the date of the Order accompanying this Opinion.

SO ORDERED.

Richard W. Goldberg
Senior Judge

Date: October 28, 2003
New York, New York
 ERRATUM

Bethlehem Steel Corporation, et al. v. United States, Cons. Court
No. 00-00151, Slip Op. 03-143, issued October 28, 2003.

• On page 2, the identification of Plaintiffs’ counsel should
read: “Skadden, Arps, Slate, Meagher & Flom LLP (Robert E.
Lighthizer, John J. Mangan, Stephen P. Vaughn, and Holly A.
Gimbel) for Plaintiffs Bethlehem Steel Corporation, LTV
Steel Company Inc., National Steel Corporation, and U.S.
Steel Group, a unit of USX Corporation.”