Nippon Steel Corp. v. United States

Slip Opinion 02-86

UNITED STATES COURT OF INTERNATIONAL TRADE
__________________________________________
:
NIPPON STEEL CORPORATION, :
NKK CORPORATION, :
KAWASAKI STEEL CORPORATION :
and :
TOYO KOHAN CO., LTD., :
:
Plaintiffs, :
:
v. : Court No. 00-09-00479
:
UNITED STATES, : Public Version
:
Defendant, :
:
WEIRTON STEEL CORPORATION, :
:
Defendant-Intervenor. :
__________________________________________:

[ITC injury determination vacated.]

Dated: August 9, 2002

Willkie Farr & Gallagher (William H. Barringer; James P. Durling; Daniel L. Porter; Sean M.
Thornton; Karl von Shriltz) for plaintiffs.

Lyn M. Schlitt, Office of General Counsel, James M. Lyons, Deputy General Counsel, U.S.
International Trade Commission (Laurent M. deWinter), for defendant.

Schagrin Associates (Roger B. Schagrin), for defendant-intervenor.

OPINION
RESTANI, Judge:

This matter comes before the court as a result of the court’s decision in Nippon Steel

Corp. v. United States, 182 F. Supp. 2d 1330 (Ct. Int’l Trade 2001) (“Nippon I”), in which the

final affirmative injury determination of the International Trade Commission (the
COURT NO . 00-09-00479 PAGE 2

“Commission”) in Tin- and Chromium-Coated Steel Sheet From Japan, 65 Fed. Reg. 50005,

USITC Pub. 3300, Inv. No. 731-TA-860 (final determ.) (Aug. 2000) (hereinafter “Final

Determination”) was remanded. Although the court found the Commission’s subsidiary

conclusions with respect to subject import volume supported, at least minimally, by substantial

evidence, the court ordered the Commission to reevaluate its analysis of the effect of subject

imports on domestic pricing, as well as its conclusions with respect to causation. Nippon Steel

Corporation, NKK Corporation, Kawasaki Steel Corporation, and Toyo Kohan Co., Ltd.,

(collectively “Nippon” or “Plaintiffs”), respondents in the underlying investigation, contest the

Commission’s March 4, 2002 affirmative injury determination pursuant to remand

(“Redetermination”) on the grounds that the Commission’s analysis of price effects and

causation remain unsupported by substantial evidence.1

JURISDICTION AND STANDARD OF REVIEW

The Court has jurisdiction pursuant to 28 U.S.C. § 1581(c) (1994). The court will uphold

the Commission’s determination in an antidumping investigation unless it is “unsupported by

substantial evidence in the administrative record or is otherwise not in accordance with law.” 19

U.S.C. § 1516a(b)(1)(B)(i).

1
In its original challenge to the Commissioners’ affirmative determination, Plaintiffs
claimed both a lack of substantial evidence for the ITC’s determination and prejudicial
Congressional interference. The court found insufficient evidence to support the latter challenge.
Although the court’s finding that ITC had no substantial evidence for its decision may be
relevant to Plaintiffs’ claim of undue Congressional influence, there is no purpose to revisiting
that issue because the case is fully disposed on the alternative ground.
COURT NO . 00-09-00479 PAGE 3

OVERVIEW

The crucial question of price effects and ultimate causation of material injury arise in the

context of an industry with peculiar conditions of competition. Chairman Koplan in dissent

succinctly summarized these conditions, which cannot be seriously disputed by the parties or the

Commission majority. He stated as follows:

The following conditions of competition unique to the U.S. tin plate industry, which were
identified in the preliminary determination, are central to my analysis: (1) tin plate is
almost always sold in the United States pursuant to annual contracts that establish fixed
prices and target volumes; (2) reliable delivery is extremely important to the purchasers –
the domestic can making [industry] – because food must be canned as soon as possible
after it reaches the canning facility; 2 (3) the purchasers have consolidated and are now
highly concentrated (the six largest purchasers account for more than three-quarters of
apparent domestic consumption); (4) several of the major purchasers operate canning
facilities on the grounds of Weirton’s mill and commit to buy a minimum volume of steel
from Weirton;3 (5) non-subject imports entered the U.S. market in a larger volume than
subject imports from Japan during the period of investigation (POI) and non-subject
imports occupied a greater market share than did imports from Japan; (6) most domestic
producers, including petitioner Weirton, are located either on the East Coast or in the
Midwest and focus their sales in regions near their mills; and (7) demand in the canning
industry is affected by the harvest of agricultural goods used for canned foods.4

Tin- and Chromium-Coated Steel Sheet From Japan, 65 Fed. Reg. 50005, USITC Pub. 3300, Inv.

No. 731-TA-860 (final determ.) (Koplan, S., dissenting) (Aug. 2000) (footnotes added). The

court also notes that the U.S. producers are largely long established integrated steel producers. A

new domestic producer of tin-milled products, which is said to have a cost advantage, was

present during the POI.

2
There are contractually set performance times the can producers must meet. The other
dissenting commissioner noted that there are some minor non-food uses.
3
Weirton Steel Corporation has the largest tin mill in the United States.
4
Lack of demand was not cited as a reason for harm.
COURT NO . 00-09-00479 PAGE 4

Both dissenters found evidence of no price effects due to subject imports, based on the

manner of price negotiation and setting, and the seemingly incontrovertible evidence that

domestic reliability problems were a tremendous concern to the purchasers. The majority cites

no evidence that can sustain its opposite conclusion.

Further, upon review of the Redetermination, the court finds that the Commission has

failed to comply with the court’s instructions in Nippon I, and either conceded, or failed to

contest evidence that leads inexorably to a finding that subject imports have not caused material

harm to the domestic industry.

The Commission failed to follow the court’s instructions on selection and compilation of

data. First, it maintained a particular purchaser’s separate facilities and product types in

disaggregated form. Second, the Commission ignored the court’s directive to justify limiting the

range of price comparisons to only those instances in which sales were ultimately made from

both Japanese and U.S. suppliers. Lastly, at times it relied solely on underselling data for one

year.

In its analysis of underselling, the Commission ignored explanatory information provided

by large purchasers where: (1) Silgan cited quality and service as being its two most important

purchasing priorities and explained that unique manufacturing capabilities led to its decision to

purchase from some off-shore sources; (2) Crown stated that it based its purchases of Japanese

imports on quality considerations; and (3) the Commission failed to determine the extent to

which purchasers’ measurements of determinative price differentials are borne out by the

purchasing histories of these purchasers.

Furthermore, in regard to the correlation between subject imports and pricing, the
COURT NO . 00-09-00479 PAGE 5

Commission: (1) failed to address Nippon’s contention that a large purchaser – [ ] – paid

increasing domestic prices at the same time it increased its purchases of subject imports; (2)

failed to address the correlation between the introduction of subject import by another purchaser

[ ] in 1999 and the subsequent rise in domestic prices between 1999 and 2000; (3)

addressed another purchaser’s [ ] ability to secure price decreases from its domestic

suppliers, yet conceded that non-subject import volume largely accounted for the price decline;

and (4) failed to address the lack of correlation between Silgan’s purchases of subject imports

and pricing, where Nippon specifically cited Silgan as evidence of a lack of correlation. Lastly,

the Commission failed to assess the extent of the domestic lead-time price premium in relation to

the underselling margin.

The Commission failed to take into account relevant market factors in determining price

sensitivity. First, it conceded that factors such as quality and service are generally ranked higher

than price by purchasers, yet concluded that the market is characterized by a high degree of price

sensitivity. Furthermore, the Commission asserted that quality and reliability are important only

for the purpose of qualifying suppliers, yet failed to rebut the assertion that purchasers ranked

price as a low consideration in choosing among qualified purchasers.

The Commission failed to adequately address Nippon’s contention that negotiations run

on separate tracks according to different procedures and criteria. In its analysis, the Commission:

(1) failed to support its conclusion that purchasers reallocate volume following the conclusion of

price negotiations; (2) conceded that the existence of supply agreements cuts against the finding

that competition from subject imports impacted domestic prices; (3) conceded that delivery time

issues operate to limit the absolute amount of the domestic market that imports could obtain, yet
COURT NO . 00-09-00479 PAGE 6

failed to evaluate purchaser perceptions with respect to the domestic industry’s lead-time

advantage as an explanation for keeping negotiations on separate tracks with volume allocated

among domestic versus foreign producers; and (4) conceded that Weirton was unable to submit

any documents indicating that it set its prices with reference to foreign importers, and provided

insubstantial justification for Weirton’s failure to give such support.

In its lost sale analysis, the Commission relied on a lost sale allegation, where it ignored

evidence on the record undermining the likelihood that a significant sale was lost for price

reasons. Also, the Commission inadequately responded to the court’s concerns regarding

whether on-time performance and quality concerns were the predominant cause of harm to the

domestic TCCSS industry. The Commission: (1) failed to cite the sources of its individual

purchaser volume data throughout its analysis; (2) appeared to use numbers from Table TCCSS-

1, for its analysis of purchaser BWAY, while for the remaining purchasers it inexplicably

appeared to use figures from tables in the Staff Report that conflict with Table TCCSS-1; (3)

supported its position with “trends” over two year periods of time, which ignore that the full set

of data indicates that there had been no clear trend at all; and (4) never accounted for the year

2000, and at times limited its analysis to the change from 1998 to 1999.

The Commission inadequately responded to the court’s concerns regarding whether non-

subject imports were the predominant cause of harm to the domestic TCCSS industry. It

apparently conceded that non-subject import volume prevails over subject imports industry wide,

and failed to provide sufficient evidence that there is a correlation between subject import

volume and harm to the domestic industry on the West Coast where subject imports are

concentrated. Further, by comparing bids over two year periods, the Commission created trends
COURT NO . 00-09-00479 PAGE 7

for pricing in the marketplace, where again no actual trends exist.

As the following discussion demonstrates, with relatively low subject import volume and

market share, no substantial evidence of adverse price effects caused by subject imports and no

valid links establishing causation of material injury, this case compels the conclusion that this

record will support only a negative determination.

DISCUSSION

With respect to the effect of subject imports on domestic pricing, the court in Nippon I

generally ordered the Commission on remand to: (1) reconsider its underselling findings taking

into account inconsistencies in the manner in which the data were presented; (2) explain its

methodology for making price comparisons for underselling; (3) indicate the basis for calculating

the yearly average margin of underselling and for concluding that such margins are significant;

(4) reassess its conclusions with respect to a correlation between subject import competition and

domestic prices; (5) reevaluate its price sensitivity finding in light of evidence in the record; and

(6) indicate the data and context upon which it bases its findings regarding lost sales. In addition,

the court ordered the Commission to reassess causation taking into consideration the role of non-

price factors in purchasing decisions as well as that of non-subject imports.

I. Effect of Subject Imports on Domestic Prices

Nippon claims that the Commission failed to comply with the court’s following

directives: (1) to present data on customer purchase prices “in a way that will facilitate review of

pricing/volume trends” and “in a reasonably consistent manner with respect to purchaser and
COURT NO . 00-09-00479 PAGE 8

product grouping”; and (2) to “indicate the basis for its . . . underselling analysis,” and why

underselling margins in 1999 were significant.5 Nippon I 182 F. Supp. 2d at 1356.

A. Methodology for Making Price Comparisons

In the Preliminary Determination, the Commission analyzed underselling by comparing

weighted average f.o.b. prices and quantities for U.S. producers with those for Japanese

producers. See Preliminary Determination at V-6. In the Final Determination, however, the

Commission based its underselling findings on data that included separate bidding information

for a particular purchaser’s6 three different tin-mill products purchased at each of its three

facilities, while other large purchasers submitted a unified pricing chart detailing a single bid

price for each supplier. See Final Determination at 15-16. Nippon argued that data for this

purchaser was consequently “over-represented” on account of the Commission’s methodology of

counting “instances” of underselling without regard to the actual volumes purchased.

The court in Nippon I ordered the Commission to “present the data in a reasonably

consistent manner with respect to purchaser and product grouping, as well as the expression of

prices bid and paid.” 182 F. Supp. 2d at 1343. Nippon claims that the Commission has not

complied with the court’s directive by continuing to “rely on the number of instances of

underselling without first taking into account how the underlying data is grouped.” Id. at 1342.

5
Nippon does not contest the Commission’s explanation of its reliance on bidding data
submitted by purchasers.
6
This purchaser is [ ].
COURT NO . 00-09-00479 PAGE 9

1. Standardization of Pricing Data

With respect to the “expression of prices bid and paid,” the court expressed

dissatisfaction with the Commission’s unexplained division of data into two separate groups, i.e.,

according to those purchasers who reported prices in dollar amounts and those who reported

prices in terms of the discount rate from an industry list price. See Nippon I, 182 F. Supp. 2d at

1340 n.18. First, the Commission had not indicated the yearly list prices to which the discount

rates were applied, thereby precluding the court from converting the discount rates into dollar

prices, or vice versa, assuming it was inclined to do so. Simply presenting year-to-year discount

rates without taking into consideration the list price may be misleading inasmuch as an increase

in the list price may outstrip an increase in the discount rate. Second, the Commission’s use of

bifurcated data hinders review of the Commission’s determinations with respect to pricing trends

across the entire market.

On remand, the Commission stated that “[b]ecause of the different manners in which

purchasers reported data, and differences in product mix between purchasers, we find that

calculating a single rate across all purchasers would not be appropriate.” Redetermination at 10.

Nippon does not contest the Commission’s explanation for its decision not to convert discount

rates into prices, or vice versa.

2. Selection and Compilation of Price Comparison Data

With respect to purchaser and product grouping, the court in Nippon I found that the

Commission failed to explain why it based its underselling calculations “solely on the number of

individual bids from purchasers that purchased from both Japanese and domestic suppliers in a

particular year, irrespective of volume,” or “why it chose to reject the quarterly weighted average
COURT NO . 00-09-00479 PAGE 10

price calculations made in the Preliminary Determination.” 182 F. Supp. 2d at 1341. The court

specified that “where the Commission chooses to limit its underselling analysis to a subset of the

pricing data available, the Commission must indicate the criteria it used for making the price

comparisons.” Id.

The court also ordered the Commission on remand to “account for differences in the way

that data is reported in order to ensure that its calculations are accurate.” Id. The court reasoned

that “the Commission cannot ignore the manner in which the data is presented, and the

Commission cannot rely on the number of instances of underselling without first taking into

account how the underlying data is grouped.” Id. Specifically, the court indicated that the

Commission failed to explain why a particular purchaser’s three facilities were counted

separately, or why for this particular purchaser it counted separately each type of product

purchased by an individual canning company, other than stating that the purchaser had reported

its data in this manner. Id.

On remand, the Commission recompiled the data on price comparisons. The

Commission created a new table counting Japanese bids below, within the range of, and above

domestic bids, with the corresponding subject import volume. The Commission provided

separate bidding data for the purchaser that had reported data for each of its three facilities as

well as for three different varieties of TCCSS – [ ].

The Commission explained that it continued to separate out the particular purchaser’s

data from the rest of the purchasers for two reasons: (1) “[b]ecause the company’s data were

based on average unit values (“AUVs”), rather than discount rates, consolidation of the firm’s

data into single annual price figures posed the risk of masking price differences based on product
COURT NO . 00-09-00479 PAGE 11

mix or geographical considerations”; and (2) the purchaser “reported data on the basis of a May-

April fiscal year that straddles individual calendar years and does not conform to the calendar-

year basis on which other purchasers reported data.” Redetermination at 9.

Nippon claims that by segregating data for one purchaser and indicating corresponding

volume, the Commission “does not place underselling in context,” and that “the Commission’s

emphasis on the increased volume of underbid subject imports in 1999 for purchasers other than

[the segregated purchaser] and in 1999/2000 for [the same purchaser] is directly contradicted by

the lack of correlation between subject import purchasers and domestic price suppression or

depression for numerous individual purchasers.” Pl. Br. at 2.

The court finds that the Commission’s decision to keep in disaggregated form the

particular purchaser’s separate facilities and product types is not adequately explained or cannot

be explained. Further, the court finds that the Commission has not addressed the court’s

principal concern – as stated in the opinion and during the summary judgment hearing – that the

decision to narrow the pool of comparisons to only those instances in which sales were ultimately

made from both Japanese and U.S. suppliers is seemingly unprecedented and might give skewed

results. For example, by not considering instances in which bids were received from both U.S.

and Japanese producers, yet purchases ultimately were made only from suppliers from one of the

countries, the Commission does not assess sales actually lost. The use of such a narrow data

sample also renders a misleading picture of underselling frequency, as the number of total

comparisons is artificially lowered. Because the Commission ignored the court’s directive to

justify limiting the range of price comparisons in the manner it did, or indicate any prior

application of such a limitation, the court determines that the Commission inappropriately relied
COURT NO . 00-09-00479 PAGE 12

on an apparently skewed picture of the extent of underselling.

Furthermore, the Commission’s analysis relies solely on underselling data for one year,

apparently discounting the importance of its acknowledgment that there was no underselling of

any significance in 1997 or 1998. Having dispensed with the use of a trend analysis of

underselling data, the Commission may not rely, as it has done in this case, on trends in subject

import market share and domestic pricing to substantiate the significance of its one-year data on

underselling. The court therefore finds that the Commission has not complied with its

instructions to indicate the criteria for its decision to limit its underselling analysis to particular

data and to explain the selection and compilation of data on underselling. Without this

information, the Commission’s analysis cannot be supported by substantial evidence because

there is no logical connection between the facts found and the choice made. See Burlington

Truck Lines v. United States, 371 U.S. 156, 168 (1962).

B. Underselling Analysis

In Nippon I, the court ordered the Commission to explain why the margin of underselling

was significant, considering in particular the purchaser questionnaire responses regarding the

price differential likely to induce a switch of suppliers. The court also ordered the Commission

to explain whether any of the underselling reflected premiums paid to domestic producers for

superior lead times.

1. Margin of Underselling

In the Final Determination, the Commission calculated an underselling margin of 2.156

percent, and found that a there was “a significant increase in the magnitude of the underselling,”

where “[i]n 1997 Japanese bids were generally not underselling domestic bids. In 1998, Japanese
COURT NO . 00-09-00479 PAGE 13

bids undersold domestic bids by 0.70 percent on average and by 1999, when subject import

volume was greatest, the magnitude of underselling had risen to 5.77 percent on average.” Final

Determination at 16.

In Nippon I, the court found that the Commission had not met its burden of establishing

why, assuming the margins actually exist, the margins are significant because (1) the

Commission cited a non-existent table;7 (2) the rate of increase in the margin was of limited

probative value in the absence of any analysis of the range of price differentials that purchasers

indicated would induce them to switch suppliers; and (3) the Commission did not analyze

whether the domestic producers’ undisputed lead-time advantage accounted for the margin of

underselling.

On remand, the Commission found that “Japanese bids were often within the range of or

higher than U.S. bids in 1997 and 1998, but were generally lower than U.S. bids in 1999,” and

that “[t]he instances of lower Japanese bids in 1999 represent higher volumes of subject imports

than in previous years.” Redetermination at 9.8 Having dispensed with relying on an average

margin, the Commission on remand focused on the margins of underselling for several larger

purchasers in 1999, the only year in which it found generally lower Japanese prices.9 From the

7
On remand, the Commission indicated that the mis-cited table was in fact “Table 1 –
Requested by Commissioner Hillman for INV. No. 731-TA-860 (final) Tin- and Chromium-
coated Steel from Japan,” which consolidated pricing data from the Staff Report.
8
As indicated, the Commission found that “calculating a single rate across all purchasers
would not be appropriate” due to “differences in product mix between purchasers” and therefore
analyzes underselling data for individual purchasers. Nippon does not contest the Commission’s
decision to analyze underselling data on an individual purchaser basis.
9
The Commission indicated that these margins in 1999 were as follows: [ ]. See
Redetermination at 11; Purchaser Questionnaire, IV-8.
COURT NO . 00-09-00479 PAGE 14

purchaser responses’, the Commission derived an overall range – two to six percent – of a price

differential that would induce a switch of suppliers for 1999,10 and concluded that the

underselling margins are “generally near or at the ranges found by responding purchasers to be

significant . . . .” Redetermination at 12-13.

Nippon argues that the Commission’s reliance on an aggregate range of price differentials

and underselling margins masks that four of the six major purchasers indicated in their

questionnaire responses and elsewhere that the actual underselling margins were not significant

to their purchasing decisions. Nippon further argues that for one of the remaining two purchasers

–[ ] – the reported price differential is not borne out by its actual purchasing history.

Thus, Nippon concludes that only one major purchaser’s – [ ] – underselling margin fell

within its reported price differential.

The court determines that the Commission has ignored explanatory information provided

by large purchasers that give context to their responses’ determinant price differential. First, [

] did not give a price differential, instead referring the Commission to its response to Question

IV-7, in which it described its purchasing criteria as follows:

We choose steel suppliers based on 1) quality, 2) service and 3) price, in that order
of importance. As a result of longer lead times (part of service) we purchase
significantly less material from non-domestic producers than from U.S. sources. . .
. [U]nique manufacturing capabilities of some off-shore sources drive us to
purchase from them irrespective of their prices which, in most cases, are higher
than U.S. producer prices.

[ ] Questionnaire Response at Question IV-7. Second, [ ] specified in its response that it

“did not select the Japanese based on price, but on quality performance.” [ ] Questionnaire

10
The Commission noted purchaser responses as follows: [ ]. See
Redetermination at 12 n. 34.
COURT NO . 00-09-00479 PAGE 15

Response at Question IV-8. Third, the margin of underselling cited by the Commission,

Redetermination at 8, for [ ] in 1999 is not the margin found in Table V-16, [ ], below the

stated determinant price differential. Rather than address these inconsistencies, the Commission

merely reiterates its aggregate range figures and states that they were “generally near or at the

ranges reported by purchasers to be significant . . .” ITC Br. at 3. The Commission cannot

ignore purchaser comments that would give meaning to their estimates of the price differential

that would induce a switch of suppliers. The Commission has also failed to determine the extent

to which purchaser measurements of determinative price differentials are actually borne out by

the purchasing history of these particular purchasers.11

The court notes that the form of the question in the Purchaser Questionnaires is a likely

source of the apparent disconnect between purchaser responses regarding the slight determinative

price differential and their indication that other criteria drove their pricing decisions, as well as

their actual purchasing history. The questionnaire asks purchasers how much higher Japanese

prices would have to be before they switch to a domestic producer. Since the Commission is

attempting to analyze the extent of underselling, a more relevant question is how much lower

Japanese prices would have to be before the purchasers would switch to a Japanese producer.

Such a question necessarily would take into account purchasers’ non-price considerations in

making a switch of supplier. Thus, the data relied upon by the Commission in addressing the

11
For example, the Commission fails to address Nippon’s contention that [ ], which
accounted for the bulk of the instances of underselling calculated by the Commission,
represented that a [ ] increase in subject import prices would cause it to switch to domestic
suppliers, but domestic purchases by this purchaser actually increased from 1998 to 1999, in spite
of an underselling margin that increased from [ ] percent in 1998 to [ ] percent in 1999.
See [ ] Questionnaire Response at Question IV-8; Staff Report at V-12-13.
COURT NO . 00-09-00479 PAGE 16

effect of underselling below a certain margin is questionable at best, as are the conclusions drawn

therefrom.

2. Correlation between Subject Imports and Domestic Prices

The court in Nippon I found that the Commission had ignored “evidence apparently

contradicting a finding of a correlation” between subject import purchases and domestic price

suppression and depression, holding that “where data is available,” and “relied on by

respondents, the Commission must address the individual purchaser data in some manner.” 182

F. Supp. 2d at 1344. The court reasoned that “[p]ricing trends for a particular large purchaser

may indicate the lack of a correlation between the existence of competition with Japanese

imports and a decline in prices paid by that particular purchaser,” and that where data on general

pricing trends were admittedly mixed, the Commission should use available data to determine

whether a correlation existed for particular purchasers. Id. The court therefore instructed the

Commission to address data that apparently showed that: (1) the largest purchasers of subject

imports generally paid increased prices to domestic suppliers and (2) those who purchased no

subject imports were able to secure price decreases from their domestic suppliers.

On remand, the Commission reiterated its findings that subject imports generally

undersold domestic producers in 1999, and that increased import volume coincided with reduced

domestic volume:

For the largest purchasers, the data indicate that (1) Japanese discount rates were
higher in 1999 than the U.S. rates for the same customer; (2) Japanese prices were
lower in 1999 than U.S. prices for the same customer; (3) the volumes of bids
accepted from Japanese suppliers by every purchaser increased from 1997 to 1999;
and (4) the volumes of bids accepted from domestic suppliers by every purchaser
COURT NO . 00-09-00479 PAGE 17

except Silgan decreased in 1999 compared to the volumes of bids accepted over
prior periods.

Redetermination at 25.12

In accordance with the court’s instructions, the Commission also reexamined the

individual purchaser data cited by respondents as undercutting its correlation finding. The

Commission first discounted the importance of evidence that a particular purchaser – [ ] paid

prices apparently higher than its competitors did, notwithstanding the fact that the bulk of its

purchases were from Japan. The Commission reasoned that comparing the average annual price

among purchasers is likely to be of limited probative value due to the variations in product

specifications among them.

Nippon asserts that the Commission’s explanation ignores the court’s instructions. The

12
The court in Nippon I did not find error in the Commission’s findings regarding general
pricing and volume trends per se, and instead evaluated the extent to which the Commission
addressed Nippon’s contentions regarding the lack of correlation. Nippon now alleges that the
Commission’s finding of a general decline in subject import pricing is contradicted by evidence
that [ ] accepted Japanese bids that were higher than certain accepted bids in 1999.
Nippon inappropriately focuses on isolated bits of data that on the whole do not necessarily
undermine the Commission’s conclusions regarding overall trends.
Nippon also disputes the Commission’s finding that “the volumes of bids accepted from
Japanese suppliers by every purchaser increased from 1997 to 1999,” on the ground that one
purchaser – [ ] purchased subject imports for the first time in 1999, another – [ ]–
increased its purchase of subject imports by only insignificant amounts, and another – [ ]
decreased subject import purchases between 1998 and 1999. Nippon also alleges that the
Commission’s finding that “the volumes of bids accepted from domestic suppliers by every
purchaser except Silgan decreased in 1999 compared to volumes of bids accepted over prior
periods” is false. Nippon contends that two purchasers – [ ] increased domestic
purchases, while another – [ ] – had reduced domestic purchases by a slight amount from 1997
to 1998, and increased domestic purchases from 1998 to 2000. The court in Nippon I, however,
sustained the Commission’s finding of low but significant subject import volume as an isolated
finding and does not revisit the issue, except as it affects the ultimate causation conclusion. See
Nippon I, 182 F. Supp. 2d at 1335-40.
COURT NO . 00-09-00479 PAGE 18

court agrees that, by focusing only on comparative pricing, the Commission ignored its

instructions to address Nippon’s contention that “the largest purchasers of subject imports

generally paid increased prices to domestic suppliers.” Although the court noted an apparent

inconsistency in pricing trends for this purchaser in comparison to other purchasers, it is clear

that the court did not restrict the Commission’s analysis to comparative pricing across the

industry. Thus, the Commission fails to address the contention that a large purchaser – [ ]–

paid increasing domestic prices at the same time it increased its purchases of subject imports

between 1997 and 1999. As this particular purchaser accounts for the bulk of the instances of

underselling that the Commission determined to be significant, the individual purchasing history

is of critical importance.

The Commission did address, however, the case of a particular purchaser – [ ] – who

was able to secure price decreases from its domestic suppliers notwithstanding the lack of any

purchases from Japan until 1999. The Commission noted that the purchaser’s bid range of the

discount rate did in fact increase over the POI, but attributed the price decline to (1) the

purchaser’s inability to settle at prices “substantially at odds” with its competition; (2) its

purchase of substantial volumes of non-subject imports. The Commission found, however, that

this purchaser’s experience “indicates that non-subject imports also impacted domestic prices,

but is in no way inconsistent with the conclusion, based on the experience of other purchasers,

that subject imports had a significant impact as well.” Redetermination at 26. Having found that

a particular purchaser’s non-subject imports volume largely accounted for the price decline, the

Commission attempts to circumvent the implications of its concession by stating that it was “not

inconsistent” with a finding that subject imports also had an impact based on the experience of
COURT NO . 00-09-00479 PAGE 19

other purchasers. The use of circumlocution and vaguely referencing other purchasers’

experiences hardly constitutes supporting its individual purchaser determinations with substantial

evidence.

The Commission also analyzed whether another purchaser – [ ] – increased its prices

to domestic suppliers in 1999 despite the introduction of lower-priced bids from Japanese

suppliers. The Commission found that “the data . . . do not indicate that . . . prices paid to

domestic producers actually increased in 1999,” as the prices were [ ] Although prices

paid by this purchaser were stable from 1998-1999, the Commission omits that after the

introduction of lower-priced subject import purchases in 1999, prices increased for all domestic

producers over the period 1999 to 2000, the time period which the court was clearly instructing

the Commission to address. Thus, in the absence of any explanation of why this lack of

correlation is somehow insignificant, the court rejects the Commission’s treatment of this third

producer’s data.

Lastly, the Commission did not address data from Silgan on the grounds that the court

only drew its attention to three other purchasers, namely [ ]. The Commission omits

that the court specifically instructed it to address individual purchaser data where such data is

available and “relied on by respondents.” The Commission does not dispute that the

respondents specifically cited the case of Silgan as evidence of a lack of correlation.

In sum, the court finds that the Commission’s treatment of individual pricing data does

not comply with the court’s instructions and certainly does not constitute a serious analysis of

large purchaser’s pricing data trends that at least facially invalidates its overall correlation

determination.
COURT NO . 00-09-00479 PAGE 20

3. Domestic Producers’ Price Premium due to Lead-Time Advantage

The court in Nippon I found that the Commission failed to analyze “whether the

undisputed lead-time advantage held by the domestic industry in fact translated into an ability to

maintain a price premium over imports, which may or may not account for the margin of

underselling.” 182 F. Supp. 2d at 1342. On remand, the Commission concedes that domestic

producers did enjoy a lead time advantage over their Japanese competitors, and acknowledged

that quicker product delivery translates into an ability to exact a price premium due to the benefit

to purchasers in being able to modify purchase orders on shorter notice. Redetermination at 13.

Nevertheless, the Commission found that this phenomenon was diminished by: (1) the existence

of supply contracts that allow suppliers to know several quarters ahead of time how much

TCCSS they are required to deliver to their customers, as evidenced by purchaser testimony

regarding the superior on-time delivery of Japanese importers; and (2) purchasers’ uniform

assessment that Japanese TCCSS is superior in quality to domestic TCCSS.

The Commission’s explanation is inconsistent with its findings regarding price sensitivity

and alternative causation. The Commission found that superior on-time delivery and quality

were not to such an extent as to account for purchasers’ decision to switch to Japanese suppliers,

see section C.1, infra, but were somehow of such an extent to minimize the price premium

attributable to the domestic lead-time advantage. Even if the conceded price premium due to an

acknowledged lead-time advantage were somewhat diminished, the price premium may still

eclipse the underselling margin. The Commission failed to assess the extent of the price

premium in relation to the underselling margin.
COURT NO . 00-09-00479 PAGE 21

C. Conditions of Competition relating to Price Effects

1. Price Sensitivity

In the Final Determination, the Commission found that the TCCSS market is

characterized by a high degree of price sensitivity, notwithstanding evidence that “lowest price”

was ranked by purchasers seventh of approximately ten factors in terms of importance in

decision-making. The court in Nippon I found that the Commission’s price sensitivity finding

was not supported by substantial evidence where it rested solely on evidence of market

concentration (in terms of both supply and demand) and on the price specificity used in

negotiations. 182 F. Supp. 2d at 1345-48. The court also held that “if the Commission chooses

to rely on price sensitivity . . . it must assess other aspects of the TCCSS industry that would tend

to reduce, if not entirely vitiate, the importance of price in purchaser decision-making,” such as

on-time delivery or product quality, or at least evaluate the responses regarding the price

differential sufficient to induce a switch of suppliers. Id. at 1346.

On remand, having discounted the effect of domestic lead-time advantage, the

Commission averred that the “high degree of price sensitivity” substantiates the significance of

underselling. The Commission acknowledged that purchasers generally ranked “lowest price” as

less important than other considerations in questionnaire responses. Nevertheless, the

Commission concluded that because bids are only solicited from qualified suppliers13

“purchasing decisions are sometimes, or even usually, based mainly on price.” Id. at14-15

(emphasis added). The Commission further indicated that once a supplier is qualified, “the

13
The Commission defines qualified suppliers as those suppliers that have proven that
they can deliver the desired quality and quantity in a steady and reliable manner.
Redetermination at 15.
COURT NO . 00-09-00479 PAGE 22

quality and reliability of that supplier’s product have already been established, leaving price and

volume the primary remaining factors to be negotiated.” Id. at 15 n.47.

The Commission then restated its previous findings from the Final Determination

regarding price specificity, i.e., that “[p]urchaser documents indicate that very modest changes in

the discount rate could mean the difference between winning or losing contracts,” and that

“[p]rice is negotiated intensely in annual contract negotiations, often down to the hundredths of

one percent.” Id. at 15-16.14 Lastly, the Commission indicated that the fact that purchasers

entered into buying alliances to improve their negotiating position “emphasize[s] the central role

of obtaining lower prices to the purchasers of TCCSS,” although the Commission determined

that such developments ultimately had a limited impact on prices during the POI. Id. at 16-17.15

Nippon argues that the Commission’s finding that once a supplier is qualified, quality and

reliability are no longer important considerations is unsupported by substantial evidence where

questionnaire responses demonstrate that purchasers emphasize quality and reliability when

choosing among qualified suppliers. The record shows that non-price factors are in fact major

determinants in purchasers’ decision-making, even after suppliers are deemed “qualified.” See

14
The Commission relied upon a questionnaire response and an internal document of two
particular purchasers, one of which involved a price difference of [ ] and the other
[ ].
15
Although the court found that the Commission’s decision to discount purchaser
consolidation, in isolation, was not error, there is no doubt that the opposite conclusion reached
by the dissents is supported. This factor has implication for the ultimate causation decision. The
Commission must assess the strength of its subsidiary findings in arriving at its final
determination.
COURT NO . 00-09-00479 PAGE 23

Staff Report at II-11 to 12.16 Questions III-18 and IV-11 of the purchaser questionnaires clearly

ask purchasers to rank the importance of “lowest price” and other considerations in choosing

among qualified suppliers only. Neither the Commission nor the Defendant-Intervenors attempt

to rebut this fact. Rather, they merely reiterate that the Commission acknowledged the

importance of other factors such as quality, sidestepping the court’s admonition in Nippon I that

simply noting the importance of other factors does not constitute analysis sufficient to support its

conclusion. 182 F. Supp. 2d at 1346. Furthermore, the insertion of qualifying phrases such as

“sometimes or even usually” and “mainly on price” only serve to undercut the Commission’s

overall determination that the market is characterized by a “high degree” of price sensitivity.

Although the Commission in all cases need not make specific findings with respect to

price sensitivity, this condition of competition is of particular importance when the margin of

underselling is slight, debatable or not markedly or universally greater than the amount of a price

differential determinative of purchasing decisions, and even more so when evidence credibly

indicates that non-price factors outrank the importance of price in purchaser decision-making.

As the Commission has not met its burden of assessing purchaser decision making in the context

of relevant market factors, the court finds the Commission’s conclusion of price sensitivity

unsupported by substantial evidence.

2. Negotiating Practices

In the Final Determination, the Commission found that the record reflected aggressive

16
The court notes the Commission’s normal skepticism as to the purchasers’ ranking of
price considerations, but here such generalized skepticism is unwarranted. On-time reliable
performance was particularly important in the TCCSS market and the Commission cannot ignore
this fact in assessing purchasing decision-making.
COURT NO . 00-09-00479 PAGE 24

pricing of subject imports “has been used by at least some purchasers in their price negotiations

with the domestic suppliers.” Final Determination at 16. The court in Nippon I held that the

Commission’s analysis of contract negotiating practices was unsupported by substantial evidence

because the Commission inappropriately rejected four large purchasers’ entire testimony, and had

inadequately considered evidence “support[ing] the purchaser’s contention and fundamental

point that negotiations run on separate tracks according to different procedures and criteria.” 182

F. Supp. 2d at 1346-47. The court explained that: (a) the overlap of time in negotiation was not

inconsistent with supply compartmentalization; (b) the Commission failed to adequately consider

supply agreements that limit price competition to domestic suppliers; (c) the Commission did not

adequately analyze the significance of long import lead times; and (d) the Commission failed to

address Weirton’s submission of contemporaneous pricing documents citing domestic

competition, but not import competition, when it should have been motivated to submit such

documentation if it existed.

a. Contemporaneity versus Compartmentalization

On remand, the Commission reiterated its findings that negotiations did not take place

consecutively, and that there was a substantial overlap in time periods for negotiating. See

Redetermination at 17. By emphasizing in Nippon I that the time overlap was of little

consequence in light of Nippon’s fundamental claim that negotiations were compartmentalized,

the court drew the Commission’s attention to evidence that a large TCCSS purchaser delayed

concluding negotiations with foreign producers until it had secured a certain level of volume

from domestic producers, and that foreign prices aren’t established until negotiations with

domestic mills are concluded. See 182 F. Supp. 2d at 1347 n.32. The Commission did not
COURT NO . 00-09-00479 PAGE 25

address the extent to which such a division of major and minor tonnage and bifurcation of price

negotiation was representative of TCCSS purchasers’ practices. Rather, the Commission stated

that the evidence suggests that “under the contract terms, while prices may be set, volumes are

not; therefore, even after negotiations with domestic suppliers are concluded, purchasers can

reallocate volume to non-domestic suppliers during the year (without breaking the contract)

based on lower prices of imports,” and that “[d]omestic producers testified that, even if a

purchaser breached a contract, they were not likely to sue on and terminate the contract.”

Although the Commission theorizes that volume can be reallocated based on lower prices of

imports, the Commission fails to cite any evidence as to whether such reallocation in fact

occurred. The mere possibility that subject import pricing could induce a purchaser to reallocate

volume even after prices have been set does not speak to the issue of whether prices are set

wholly independently at the outset. The issue here is likely price effects.

b . Supply Agreements

On remand, the Commission determined that supply agreements were not a large factor in

the market, where it found only two supply agreements limiting price competition to domestic

producers, both of which pre-date the increase in subject imports, and would not have prevented

purchasers from using “the possibility of additional purchases of foreign product to improve their

negotiating position with domestic suppliers.” Redetermination at 23-24.

Nippon alleges that the Commission ignored supply agreements on the record,17 and that

the Commission’s findings do not detract from the clear evidence that agreements limiting price

17
Specifically, Nippon alleges that the Commission did not address supply agreements
between [ ] on the record.
COURT NO . 00-09-00479 PAGE 26

competition to domestic suppliers are prevalent in the TCCSS industry. Nippon further argues

that the prevalence of such agreements is consistent with Weirton’s practice of calculating its

“pricing allowance range solely according to pricing data of domestic producers,” as the court

noted in Nippon I, 182 F. Supp. 2d at 1348.

The Commission does not address Nippon’s arguments relating to the prevalence and

impact of supply agreements, and merely states that it acknowledged that the existence of supply

agreements “cut against a finding that competition from subject imports impacted domestic

prices.” ITC Br. at 10. Thus, the court finds that the Commission has conceded this point.

c. Lead Times

The court instructed the Commission to analyze “whether the acknowledged difference in

lead times cause purchasers to consider foreign supply ‘supplementary,’ and allocate

predetermined volumes to foreign and domestic supply sources.” Nippon I, 182 F. Supp. 2d at

1347. On remand, the Commission stated that “the ability of purchasers to use lower foreign

prices to obtain more favorable domestic prices could be limited if it were generally understood

that foreign product, because of longer lead times, could only occupy a small residual or

supplementary portion of the domestic market.” Redetermination at 20. The Commission

conceded that “delivery time issues do operate to limit the absolute amount of the domestic

market that imports could realistically hope to obtain.” Id. The Commission found, however,

that “[t]he substantial share of the market acquired by imports . . . rebuts the notion that imports

can only occupy a niche position in the U.S. TCCSS market and are therefore inherently

incapable of impacting the overall pricing environment.” Id. at 21. The Commission reasons

that “in an industry with relatively few players each possessing very good market knowledge,”
COURT NO . 00-09-00479 PAGE 27

domestic producers would have felt compelled to offer lower prices to defend their market share

against “rapidly rising import volumes.” Id. at 22.

Nippon contends that market knowledge is in fact limited among TCCSS market

participants, as evidenced by data for two purchasers accounting for a substantial percentage – [

] – of the increase in subject imports over the POI that [

].

The court finds that the Commission has mischaracterized the court’s instructions,

creating a straw-man argument that is easily refuted. The court did not order the Commission to

determine whether subject imports could only capture a limited percentage of the market.

Rather, the court instructed the Commission to evaluate purchaser perceptions with respect to the

domestic industry’s lead-time advantage as a potential explanation for keeping negotiations on

separate tracks with volume allocated among domestic versus foreign producers. Naturally, the

Commission in conducting this analysis would need to evaluate whether such a condition of

competition, if it in fact existed, would have an effect on the ability of subject imports to have an

effect on domestic prices. The Commission has avoided addressing this issue. Furthermore, the

Commission reliance on the acceleration of subject import volume is misplaced, as the rate of

increase of subject imports says nothing about allocation of volume based on risks involved in a

substantial lead-time differential.18

d. Weirton Documentation regarding Price Competition

18
In Nippon I, the court drew the Commission’s attention to the Staff Report’s indication
that most U.S. producers were reported as being capable of delivery within 6 to 8 weeks, while
most importers had lead times in the 3 to 4.5 month range. See Staff Report at II-13.
COURT NO . 00-09-00479 PAGE 28

On remand, the Commission conceded that Weirton was unable to submit any

contemporaneous documents citing import price competition, and that the lack of such

documents supports the view that import and domestic contract negotiations are

compartmentalized. Nevertheless, the Commission assigned little weight to the absence of such

documents, in light of the fact that “purchasers failed to provide any documentation regarding

their contract negotiations with importers of Japanese product . . . .” Redetermination at 22.

Nippon claims that purchasers did in fact submit documentation regarding contract

negotiations with importers of Japanese product. Nippon Br. at 10 (citing Redetermination at 17

n.51). Nippon further argues that the Commission’s reliance on the purported lack of such

evidence is a red herring inasmuch as it does not detract from the fact that “Weirton had every

incentive to submit documentary evidence of subject import competition, but could only submit

documents demonstrating that its prices were calculated with reference to only domestic

competitors.” Id.

As with supply agreements, the Commission concedes that the lack of Weirton

documents regarding Japanese pricing undermines a finding that subject imports had an adverse

impact on domestic pricing. Nevertheless, the Commission responds that, although Nippon

indicated that some evidence regarding purchaser’s negotiations with foreign suppliers was in

fact in the record, Nippon omits that none of the evidence substantiates its claim that subject

foreign producers set their prices solely in reaction to prices previously agreed by domestic

producers.

The court finds that the Commission’s justification for assigning little weight to the lack

of documentation regarding import price competition is unpersuasive. The court in Nippon I
COURT NO . 00-09-00479 PAGE 29

underscored the importance of Weirton’s supporting documentation, as the only pricing

documents submitted by Weirton apparently showed that its pricing range was determined

without regard to foreign prices. 182 F. Supp. 2d at 1347-48. The court clarified that in the

absence of any other pricing documentation or evidence that subject import prices fell outside of

Weirton’s pre-determined range or that Weirton was somehow forced below its minimum price

level, the court could not sustain the Commission’s decision to discount the importance of

Weirton’s inability to substantiate the assertion that Weirton’s prices were set at least in part in

reaction to the presence of lower-priced Japanese imports. Id. Even if the Japanese producers

did not submit purchaser documents on their contract negotiations with importers of subject

merchandise, this fact is irrelevant to factors affecting how domestic producers set their pricing.

The Commission’s attempt to refute Nippon’s argument speaks only to how foreign producers set

their prices and says nothing about how domestic producers set their pricing, the fundamental

issue in determining whether the presence of subject imports had an effect on domestic pricing in

this case.

In sum, the Commission has not given the court any basis for sustaining its treatment of

conditions of competition with regard to the effect of subject imports on domestic pricing.

3. Lost Sales and Revenue

The court in Nippon I found that the Commission’s conclusions regarding the confirmed

lost sales allegation19 did not reflect the purchasing history data provided for the particular

purchaser, and directed the Commission to “indicate the specific data upon which it relied” in

19
In the Final Determination, the Commission relied upon [ ] confirmation of [
] lost sales allegation.
COURT NO . 00-09-00479 PAGE 30

confirming the allegation, notwithstanding the Commission investigator’s inability to find a

competing import price for the sale while conducting the on-site verification. 182 F. Supp. 2d at

1349-50.

On remand, the Commission stated that it reexamined the one lost sales allegation that the

Commission determined to be confirmed by the purchaser. The Commission specified that the

allegation is consistent with a lost sale of [ ] tons of chromium coated steel to a particular

purchaser’s – [ ] – in fiscal year 2000 where Japanese producers had underbid all

domestic producers, including the producer making the allegation – [ ]. Redetermination

at 28.20 The Commission found that the volume of the lost sale, combined with that of the three

lost revenue allegations, represented a substantial percentage – [ ] percent – of the market, and

was therefore significant. The Commission indicated, however, that it is difficult for suppliers to

identify lost sales events because annual contracts are awarded to multiple suppliers, rather than

spot sales with a single supplier.

Nippon argues that the lost sale allegation remains unsupported by substantial evidence

on the ground that the producer making the allegation would have lost these sales even in the

absence of Japanese competition.21

20
The Commission explains for the first time that although the lost sale allegation
involved a December 1998 quote for a 1999 delivery, the most relevant data provided by the
purchaser is actually its [ ] purchases because [
]. Nippon does not contest the Commission’s application of 1998
bid quotes to FY2000 purchase volumes. The Commission does not indicate whether this lag-
time was applied for [ ] in its underselling analysis, thereby casting further doubt on its
conclusions of significant underselling.
21
Specifically, Nippon alleges that [
].
COURT NO . 00-09-00479 PAGE 31

First, it appears that the Commission is confirming a lost sale allegation that may not

have been made and wasn’t verified, as the Staff Report indicates that Weirton claimed it lost a

sale – also involving [ ] short tons – to a Japanese producer on a quote given in October of

1998, not December of 1998. Compare Staff Report at V-22 to 25 & Table V-14 with

Redetermination at 28. Second, if the Commission is in fact referring to the lost sale allegation

described in the Staff Report, the Commission’s phraseology obscures the fact that the alleged

lost sale involved a rejected U.S. price of $650, when 1998 bids by Weirton to the relevant

facility in FY2000 never went below [ ], and in fact was [ ] for double rolled chromium

coated steel sheet (“CCSS”). Furthermore, the Commission omits that the purchaser cited long-

term commitments with its Japanese supplier,22 and that Weirton did not bid seriously for its

West Coast business, thereby supporting Nippon’s contention that Weirton would have lost the

sale to another domestic supplier in the absence of Japanese competition.23 Lastly, the

Commission’s reliance on this single lost sale allegation is undermined by the purchaser’s

22
The Declaration of [ ], C.R. Docs. 222-223, Nippon Appendix at Tab 8, states
that:

[

]

23
In the Declaration, [ ] states that [

].
COURT NO . 00-09-00479 PAGE 32

representation that any such sale was lost for several reasons: price, quality, delivery time, and

whether the producer can supply globally. See Staff Report at V-25. Although in other

circumstances a lost sale allegation might be confirmed and relied upon by the Commission even

though other domestic producers underbid the producer making the allegation, the Commission’s

reliance on this particular lost sale allegation is unsupported because it ignores record evidence

undermining the likelihood that a significant sale was lost for price reasons attributable to

imports.

II. Causation

The court in Nippon I instructed the Commission to determine whether quality and

delivery time issues as well as non-subject imports “‘may have such a predominant effect in

producing the harm as to...prevent the [subject] imports from being a material factor.’” Nippon I,

182 F. Supp. 2d at 1350 (citing Taiwan Semiconductor Indus. Ass’n v. United States, 59 F. Supp.

2d 1324, 1329 (Ct. Int’l Trade 1999)). On remand, the Commission found that it was not

persuaded by “inconsistent and contradictory” testimony that purchasers turned to Japanese

sourcing solely because of domestic quality and delivery time problems or non-subject import

competition.24 The Commission concluded that, the significant volume of subject imports at

declining prices, and the frequent underselling of the domestic like product, had adversely

affected the domestic TCCSS industry.

A. U.S. On-Time Performance and Quality

24
The Commission had earlier discounted other causes and was not specifically ordered
to reassess them, although it was ordered to reassess its overall decision to attribute material
injury to subject imports.
COURT NO . 00-09-00479 PAGE 33

In the Final Determination, the Commission had acknowledged that there was

documentary evidence that showed domestic producers’ on-time performance was poor during

the POI.25 It was not persuaded, however, by what it found to be inconsistent and contradictory

purchaser testimony that these purchasers turned to Japanese sourcing because of non-price

reasons. The Commission based this determination solely on the supposedly internally

contradictory testimony of U.S. Can representatives.

In Nippon I, the court remanded on the issues of quality and on-time delivery, finding the

Commission’s reasons for rejecting purchaser testimony to be ill-founded and its conclusions

incapable of being reviewed properly. 182 F. Supp. 2d at 1351-52. First, the court cited the Staff

Report describing U.S. Can’s purchasing history as showing two sets of pricing data for U.S.

Steel, while Weirton was not listed at all. Second, the court found that Mr. Yurco had

consistently stated U.S. Can shifted sourcing from Weirton to other domestic producers. Third,

the court determined that the Commission failed to address U.S. Can’s stated concerns with

Weirton’s on-time performance problems, or Weirton’s performance requirements in its supply

contract with U.S. Can. Fourth, the court indicated that the Commission failed to analyze

whether quality problems were indeed prevalent among U.S. producers.

On remand, the Commission found that quality and delivery time problems do not

preclude a finding that price factors adversely affected the domestic TCCSS industry. In support

of its analysis, it considered the circumstances of four large purchasers, who have increased

purchases of subject imports. In each case, the Commission found that low prices played an

important role in the decisions of the purchasers to shift toward subject imports. The

25
At times during the POI one major producer’s on time performance did not reach 50%.
COURT NO . 00-09-00479 PAGE 34

Commission considered testimonial evidence from the producers that delivery and quality issues

were the predominant reasons for shifting volume to subject imports, and determined that the

testimony did not preclude a finding that subject imports made a material contribution to the

injury.

As a preliminary matter, the Commission failed to cite the sources of its individual

purchaser volume data throughout its analysis. For its analysis of BWAY, it appeared to use

numbers from Table TCCSS-1, while for the remaining purchasers it inexplicably appeared to

use figures from tables in the Staff Report that for some reason conflict with Table TCCSS-1. In

addition, the Commission supported its position with “trends” over limited periods of time,

ignoring the full set of data, and omitting that a fluctuating year-by-year analysis at best would

indicate that there had been no clear trend at all. Lastly, the Table TCCSS-1 shows bid and

volume numbers for the years 1997 through 2000, yet the Commission never accounted for the

year 2000, and at times limited its analysis to the change from 1998 to 1999. The Commission’s

apparent tunnel-vision is misleading and violates the court’s directive to analyze and present data

in a manner that facilitates review.

1. BWAY

The Commission found BWAY to be inconsistent in its testimony that its pattern of

purchases reflected its attempt to broaden its portfolio of suppliers due to quality and delivery

concerns, and its need to supply geographically diverse operations. BWAY specifically cited its

concern with the on-time performance of Weirton, yet increased its purchases from Weirton from
COURT NO . 00-09-00479 PAGE 35

1998 to 1999.26 The Commission concluded that increasing its supply from Weirton is

inconsistent with BWAY’s quality concerns, thus pointing to the predominance of price as a

determining factor in purchaser decision-making.

Nippon responds that BWAY’s testimony is not inconsistent, as it testified that, “[I]n

1998 and 1999 we had a series of delivery and quality disappointments with U.S. mills,” not just

Weirton. Hr’g Tr., P.R. Doc. 74, Nippon App. Tab 4, at 198.27 Between 1998 and 1999, BWAY

in fact reduced purchases from another producer – [ ] by [ ] tons, and a lower amount – [

] tons – was shifted to Japanese suppliers in 1999, the only year in which BWAY purchased

from Japanese subject importers. In the same year, purchases from domestic suppliers also

increased and purchases from non-subject importers were double that of the subject imports.

Thus, it is not inconsistent that BWAY increased purchases from Weirton notwithstanding

quality and delivery problems, given that it was also experiencing similar problems with another

domestic producer from which BWAY reduced its purchase volume.

2. Crown

The Commission noted on remand that Crown’s questionnaire response attributed its

increased purchases of subject imports in 1999 to quality- and performance-driven West Coast

shortage of supply from two domestic suppliers.28 Redetermination at 35. The Commission

26
Specifically, the Commission indicated that BWAY [

].
27
BWAY’s questionnaire response [
].
28
The Commission specified that Crown attributed the shift to Japanese sources to [
COURT NO . 00-09-00479 PAGE 36

found Crown’s stated quality concerns to be inconsistent because Crown’s data showed that it

had directed significant volume requirements to markedly lower-priced TCCSS from Japan,

beginning in 1999, and that it in fact qualified a particular domestic producer – [ ] – and

sourced TCCSS from [ ] U.S. mills in 1999. The Commission indicated that it would expect

to see higher prices paid to Japanese producers where superior quality was the supposed

predominant factor behind Crown’s purchase decisions.

Nippon responds that the Commission’s focus on the lower prices of subject imports

sidesteps Crown’s explanation of its problems with the two West Coast suppliers, and that the

data supports such explanation.29 Either a showing of adequate West Coast supply of quality

TCCSS, or a showing of East Coast suppliers willing to fill the void would provide sufficient

evidence of inconsistency in Crown’s testimony. The court finds that the Commission has failed

to provide any specific evidence that would contradict Crown’s explanation for its shift to

Japanese sources. The fact that Japanese prices were generally lower than domestic prices does

not negate the verifiable claims of quality and performance concerns with West Coast suppliers.

Furthermore, Crown’s qualification of a particular producer – [ ] – is not necessarily

inconsistent with its stated quality concerns, since a supplier’s drop in performance may not be of

such an extent as to entirely preclude it from being a qualified source of supply. In addition,

Crown’s significant increase of its purchases of TCCSS from the particular producer in both

1999 and 2000 is not necessarily inconsistent with its quality concerns, as Crown in fact

]
29
Nippon indicates that Crown’s data show a decrease in purchases from [ ] of [
] tons corresponds to a [ ] ton increase in purchases from subject importers.
COURT NO . 00-09-00479 PAGE 37

significantly reduced its purchases from two other domestic suppliers – [ ] and [ ]–

with quality concerns that may have been more extensive. Under the unique facts of this case

there is no support for the Commission’s assumption that if domestic producers switch from

lower quality producers, they would not be expected to pay lower prices. The Commission does

not provide substantial evidence to discount the purchaser testimony that quality and on-time

considerations in a certain geographic area were the dominant factors in its purchasing decisions.

3. Silgan

The Commission found that Silgan described its purchases of subject imports as being

primarily for specialized applications that are either not available from a U.S. producer or of a

quality level not obtainable from a U.S. producer. Redetermination at 36. Silgan attributed its

increase in purchases of TCCSS from Japan as a result of its acquisition of Campbell’s Soup,

which used small quantities of TCCSS produced by Nippon because of its superior quality and

according to certain unique specifications not available from U.S. domestic producers. Id. The

Commission also cited Silgan’s testimony that it terminated Weirton as a supplier for failing to

meet Silgan’s quality and service requirements. Finally, Silgan stated that if it were to purchase

according to price, it would purchase from Brazil, Korea and Taiwan.

The Commission found Silgan’s testimony inconsistent because most of Silgan’s

specialized purchases could in fact be made from U.S. producers. It acknowledged that most of

the increase in Silgan’s purchases was attributable to its acquisition of Campbell’s, but it asserts

that [ ]. The Commission also acknowledges that Silgan [

] and [ ], but discounted this evidence because Silgan [ ]

its purchases of Japanese subject imports. Finally, the Commission states that deciding not to
COURT NO . 00-09-00479 PAGE 38

purchase from Brazil, Korea, and Taiwan reflects its priority rankings where [

].

Nippon argues that the Commission ignores the extent of the quality concerns

documented by Silgan in its dealings with [ ] and other U.S. mills. The court agrees that

Silgan’s testimony is entirely consistent with the evidence relating to its quality problems. On

remand, the Commission has made no further effort to determine whether the extensive quality

concerns with domestic producers were not the reason Silgan increased subject imports.

Furthermore, the Commission acknowledges that the acquisition of Campbell’s was the

predominant factor in the increase in subject import prices paid by Silgan, but does not explain

why it finds inconsistent Silgan’s explanations for not shifting its purchases to domestic TCCSS

producers when Silgan testified they are perceived to be of inferior quality. The Commission is

correct to perceive that Silgan’s priorities appear to be [ ], in that order, but fails to

recognize that the same ranking of priorities explains why Silgan chose not to purchase from

Brazil, Korea, and Taiwan, and explains why Silgan would shift its purchases toward subject

imports. The Commission fails to cite substantial evidence indicating that Silgan’s predominant

purchasing decision was not based on its stated quality and on-time performance concerns.

4. U.S. Can

U.S. Can had testified that delivery time and quality reasons were the two reasons U.S.

Can reduced its volume from a particular producer – [ ]. On remand, the Commission

conceded that it erred in finding Mr. Yurco’s testimony to be inconsistent in its prior

determination. The Commission maintained, however, that U.S. Can’s stated concerns about on-

time delivery and quality, and its desire to source globally were not supported by the record. The
COURT NO . 00-09-00479 PAGE 39

Commission based its conclusion on a domestic producer’s – [ ] – records showing that

on-time performance rates did not drop below contractual levels for sourcing from another

supplier until late in the POI, that is [ ]. Further, the Commission found that U.S. Can

documents discuss quality issues only after volume was reduced from the particular domestic

producer.30

First, simply because performance rates prior to 1999 were not yet so poor that they were

grounds for sourcing from another supplier does not mean that performance was not a concern.

Second, U.S. Can’s internal documents indicate that quality problems persisted with the domestic

producer “for a long period of time,” a fact that is not negated by statements in the same

document that the problems had improved over this time. Thus, contrary to the Commission’s

conclusion, the evidence indicates that the producer had a track record of quality problems in

supplying U.S. Can and consistently failed to meet delivery time, such that the Commission’s

rejection of U.S. Can’s testimony regarding volume reductions is not well-founded.

B. Non-Subject Imports

On remand, the Commission was required to examine whether non-subject import

volume and pricing did not constitute the predominant source of injury sufficient to sever the link

to causation by subject imports in light of the conditions of competition, particularly regional

distribution of shipments.

1. Volume

The court in Nippon I instructed the Commission to address Nippon’s concern that non-

30
The Commission also states that there was a [
].
COURT NO . 00-09-00479 PAGE 40

subject imports were predominant in the regions where the majority of domestic shipments were

concentrated. 182 F. Supp. 2d at 1354-55. On remand, the Commission indicated that the

record showed that: (1) the financial performance of U.S. mills primarily competing on the West

Coast “mirrored” the poor performance of domestic mills competing on the East Coast; (2) the

rapid increase in subject imports entered both regions at comparable levels; and (3) subject

import pricing was aggressive across the country.

Specifically, the Commission presented evidence of poor performance by a particular

producer – [ ] – which sells [ ] percent of its shipments on the West Coast. Specifically,

from 1997 to 1999, this producer experienced a significant drop in operating income, net sales in

terms of value and volume, and gross profits. Simply noting the declining performance of West

Coast TCCSS producers is not sufficient to establish that subject imports were not precluded

from being the source of that harm. To find subject imports a material cause, even on the West

Coast where non-subject imports were not the predominant imports, the Commission needed to

determine whether there is a correlation between the supposedly declining U.S. mills’ West

Coast revenues, specific instances of underbidding by producers of subject imports, and a

subsequent shift in volume to those subject imports. The Commission’s assertion that subject

import volume increased in comparable amounts on the West Coast and East Coast, without

specific supporting evidence, such as an increase in volume that correlates in some way to

instances of subject import underbidding, does not meet this requirement, nor does the

Commission’s assertion that subject importers bid aggressively industry wide.

2. Non-subject Import Pricing

On remand, the Commission was first required to reassess non-subject underselling by
COURT NO . 00-09-00479 PAGE 41

either providing further explanation for how it divided non-subject importers into “countries that

are sources of high-quality TCCSS” and “those whose principal sales advantages are favorable

prices and/or discounts,” or grouping non-subject importers in one set for comparison to bids

made by subject importers. Nippon I, 182 F. Supp. 2d at 1355-56. The Commission responded

by providing Table TCCSS-4 comparing final bids submitted by suppliers of subject imports

versus final bids by suppliers of non-subject imports. The Commission found a marked reversal

in terms of pricing in the marketplace. Whereas in 1997-98 final bids submitted by subject

import suppliers were higher than final bids from non-subject import suppliers, in 1999-00 the

subject importers overbid less than one half of the time.

It is unclear why the Commission chose to analyze this chart in two year increments when

there is only one recorded instance in 2000 where subject and non-subject importers made final

bids for the same purchaser. The Commission omits that a year-to-year trend analysis indicates

that there is no clear pattern to the bidding relationship of subject and non-subject importers, and

certainly not a marked reversal in terms of pricing in the marketplace. In 1997, non-subject

importers underbid subject importers twice and overbid twice. In 1998, non-subject

underbidding increased to six instances, while overbidding decreased to three instances. Finally

in 1999, non-subject underbidding retreated to four instances, while overbidding increased to

three.

The Commission was also required to construct a table comparing Japanese prices

directly to non-subject prices. The Commission submitted Table TCCSS 5 and 6 comparing

actual weighted average prices and discount rates for subject imports and non-subject imports.

Once again it found a marked reversal in terms of pricing in the marketplace, finding a trend
COURT NO . 00-09-00479 PAGE 42

from higher Japanese prices (and lower discount rates) to lower Japanese prices (and higher

discount rates). Once again the Commission’s analysis of the data is misleading. By collapsing

data for the years 1997-98, the Commission masks the similarity between the years 1997 and

1999. In 1997 there were two instances of non-subject underbidding of Japanese imports and

one instance of Japanese underbidding. In 1999, there were two instances of non-subject

underbidding, one instance of Japanese underbidding, and one instance where bids were the

same. In 1998, the numbers are the same as 1999, except there is one additional instance of non-

subject underbidding. Contrary to the Commission’s assertion, there is no evidence to support a

finding of a marked reversal in terms of pricing in the marketplace.

The Commission has inadequately responded to the court’s concerns regarding whether

non-subject imports were the predominant cause of harm to the domestic TCCSS industry, so as

to undermine the finding of harm by subject imports.31

31
The court acknowledges that there may be more than one sufficient cause of material
injury. The question is whether the evidentiary links for causation of material injury by subject
imports are severed.
COURT NO . 00-09-00479 PAGE 43

CONCLUSION

The record reflects that the increased subject import volume must be attributed largely to

purchaser priorities that are unrelated to price. Purchasers began sourcing more merchandise

from subject importers because of poor performance and quality issues with domestic producers.

Further, few domestic producers ship to the West, where the majority of imports from Japan are

sold. The record also reflects that the market conditions were such that the effect of subject

imports on domestic prices did not cause material harm. Purchasers reported that they conduct

their price negotiations with domestic suppliers first, and then conduct negotiations with

importers to meet additional needs. Annual contracts, setting a fixed price and volume targets,

require domestic producers to meet only other domestic prices, and there is no evidence that

purchasers shifted volume after signing the contracts to lower priced subject imports. Lower

Japanese prices reflect that the domestic industry is able to charge a price premium for its lead-

time delivery advantage over subject importers. Lastly, throughout the POI non-subject

importers held a larger market share than subject importers from Japan, and an even larger

market share on the East Coast, where domestic suppliers are concentrated.

As the Commission’s concessions and uncontested evidence lead inexorably to the

conclusion that lower priced subject imports did not have a material effect on domestic prices,

and in the absence of any valid reason to discount non-price factors or non-subject imports as the

predominant cause of material injury, the court remands with instructions for the Commission to

revoke the antidumping duty order. Remand for reconsideration or recalculation is not necessary

in this case, as not only are the Commission’s conclusions unsupported by substantial evidence,

it has also demonstrated an unwillingness or inability to address the substantial claims made by
COURT NO . 00-09-00479 PAGE 44

respondents or the concerns expressed by the court in Nippon I, leaving the only reasonable

conclusion from the evidence on the record to be that subject imports were not a material cause

of injury to the domestic TCCSS industry.32 The Commission’s determination is vacated and the

Commission is directed to enter a negative determination.

_______________________

Jane A. Restani
Judge

DATED: New York, New York

This 9th day of August, 2002

32
Because neither Defendant nor Defendant-Intervenor has suggested threat of material
injury as an alternative basis for an affirmative injury finding the court declines to remand for
consideration of threat.