Downhole Pipe & Equipment LP v. United States

Slip Op. 12-141

UNITED STATES COURT OF INTERNATIONAL TRADE

Before: Nicholas Tsoucalas, Senior Judge

DOWNHOLE PIPE & EQUIPMENT LP and :
DP-MASTER MANUFACTURING CO., LTD. :
:
Plaintiffs, :
:
v. : Court No.: 11-00081
:
UNITED STATES, :
:
Defendant, :
:
and :
:
VAM DRILLING USA, TEXAS STEEL :
CONVERSIONS, INC., ROTARY :
DRILLING TOOLS, TMK IPSCO, and :
U.S. STEEL CORP., :
:
Defendant-Intervenors. :
:

OPINION and ORDER
Held: Plaintiffs’ Motion for Judgment on the Agency Record is
granted in part because the final determination issued by the
Department of Commerce was not supported by substantial evidence
and is not in accord with the law as to drill pipe green tube and
labor wage rate surrogate values, but is denied in all other
respects.
Dated: November 20, 2012
Lehnardt & Lehnardt, LLC, (Mark B. Lehnardt); Chen Law Group,
LLC, (Irene H. Chen) for Downhole Pipe & Equipment, LP and DP-
Master Manufacturing Co., Ltd., Plaintiffs.
Stuart F. Delery, Acting Assistant Attorney General; Jeanne E.
Davidson, Director, Claudia Burke, Assistant Director, Commercial
Litigation Branch, Civil Division, United States Department of
Justice (Courtney S. McNamara); Office of Chief Counsel for Import
Administration, United States Department of Commerce, Nathaniel J.
Halvorson, Of Counsel, for the United States, Defendant.
Schagrin Associates, (Roger B. Schagrin, John W. Bohn, and
Michael J. Brown) for VAM Drilling USA, Texas Steel Conversions,
Court No. 11-00081 Page 2

Inc., Rotary Drilling Tools, TMK IPSCO; Skadden Arps Slate Meagher
& Flom, LLP, (Jeffrey D. Gerrish, Luke A. Meisner, and Robert E.
Lighthizer) for United States Steel Corp., Defendant-Intervenors.

TSOUCALAS, Senior Judge: Plaintiffs Downhole Pipe & Equipment,

LP, and DP-Master Manufacturing Co., Ltd. (“Downhole” and “DP-

Master,” respectively, and “DP,” collectively) move pursuant to

USCIT Rule 56.2 for judgment upon the agency record challenging the

determination of the International Trade Administration of the

United States Department of Commerce (“Commerce”) in Drill Pipe

From the People’s Republic of China (“PRC”), 76 Fed. Reg. 1,966

(Jan. 11, 2011) (“Final Determination”). VAM Drilling USA, Inc.,

Rotary Drilling Tools, Texas Steel Conversions Services, Inc.,

United States Steel Corp., (collectively, “defendant-intervenors”),

and Commerce oppose DP’s motion.

BACKGROUND

On December 30, 2009, VAM Drilling USA, Inc., TMK IPSCO, Texas

Conversion Services, Inc., Rotary Drill Tools, and United Steel,

Paper and Forestry, Rubber, Manufacturing, Energy, Allied

Industrial and Service Works International Union, AFL-CIO, CLC

(collectively, “petitioners” or “domestic industry”) filed

petitions with Commerce seeking the imposition of antidumping and

countervailing duties on drill pipe from the PRC. Letter from

Roger B. Schagrin to the Secretary of Commerce, Re: Petitions for

the Imposition of Antidumping and Countervailing Duties: Drill Pipe
Court No. 11-00081 Page 3

From the PRC, Public Rec. 1 at 1–4.1 The parties do not dispute

that drill pipe is a specialized high-strength iron alloy tube

manufactured in three phases. “First, seamless tubes — called

‘green tubes’ — are produced from raw steel.” Pls.’ Am. Mem. Supp.

Mot. J. Agency R. (“Pls.’ Br.”) at 3–4. Second, a manufacturer

uses complex and expensive processes to “upset” and heat treat

green tube so as to thicken the ends and increase the yield

strength to the desired American Petroleum Institute (“API”) grade.

Id. at 3–6. Raw green tube can be processed into “oil country

tubular goods” (“OCTG”) — tubular products other than drill pipe,

such as casing and finished tubing — as well, but the parties

dispute the interchangeability of drill pipe green tube and OCTG

green tube. See Pls.’ Br. at 32–33; Def.’s Mem. Opp’n Pls.’ Br.

(“Def.’s Br.”) at 11–15. Lastly, a manufacturer friction-welds a

specialized “tool joint” to the ends of the heat-treated and upset

tube to complete the drill pipe. Id. at 3, 7–8. A manufacturer

may also apply a protective coating or other post-production

enhancements to the drill pipe. See Pls.’ Br. at 30–31, 35–36.

DP-Master purchases raw green tubes that it upsets and heat-

treats to desired API specifications. DP-Master manufactures some,

but not all, of its tool joints in-house and friction-welds them to

1
Hereinafter all documents in the public record will be
designated “PR” and all documents in the confidential record
designated “CR” without further specification except where
relevant.
Court No. 11-00081 Page 4

the upset and heat-treated green tubes. DP-Master uses an

unaffiliated third party subcontractor — referred to in these

proceedings as a “toller” — to apply a protective phosphate coating

to its completed drill pipes. DP-Master sells finished drill pipe

and other goods directly to companies in the U.S. PR 62 at A-5 to

A-6, A-26 to A-27, Ex. A-19; PR 107 at D-5 to D-6.

Domestic industry proposed a broad scope for the antidumping

and countervailing duty investigations: “[D]rill pipe . . . whether

or not conforming to [API] or non-API specifications, whether

finished (with or without tool joints attached) or unfinished

(including green tubes), and without regard to the specific

chemistry of the steel . . . [and excluding] tool joints not

attached to drill pipe.” PR 1 at 7. In its comments from January

15, 2010 and its comments from January 19, 2010, DP-Master argued

that the proposed scope overlapped with an existing investigation

into OCTG from China. PR 14 at 2–5; PR 19 at 1–4. Commerce and

domestic industry then agreed on revised scope language, which

among other changes included a new exception: “The scope does not

include . . . unfinished tubes for casing or tubing covered by any

other antidumping or countervailing duty order.” PR 20 at 2.

Commerce initiated the investigation based on industry support

calculated using the revised scope. Drill Pipe from the PRC:

Initiation of Antidumping Duty Investigation, 75 Fed. Reg. 4,531

(Jan. 28, 2010) (“Initiation”).
Court No. 11-00081 Page 5

During the investigation, Commerce directed parties to report

factor of production data using “actual quantities consumed to

produce the merchandise under investigation.” PR 53 at D-2. In

the event that a party could not provide such information, it was

to “provide a detailed explanation of all efforts undertaken to

report the actual quantity of each [factor of production] consumed

to produce the merchandise.” Id. DP-Master notified Commerce that

it was having difficulty obtaining the requested factor of

production information from its phosphate toller. PR 107 at D-5 to

D-6; PR 115 at 6. Nevertheless, once it did report what limited

factor of production data it could obtain from its toller, DP-

Master did not reveal that it had actually provided data based on

purchased quantities instead of actual quantities consumed. Drill

Pipe from the PRC: Issues and Decision Memorandum for the Final

Determination (Jan. 3, 2011), PR 258 at 45 (“I&D Memorandum”).

In Drill Pipe from the PRC: Preliminary Determination of Sales

at Less than Fair Value and Affirmative Determination of Critical

Circumstances, and Postponement of Final Determination, 75 Fed.

Reg. 51,004 (Aug. 18, 2010) (“Preliminary Determination”),2

2
Commerce published corrections to the Preliminary
Determination to address a ministerial error concerning Baoshan
Iron and Steel Co., a respondent below not participating in the
present action. Drill Pipe from the PRC: Notice of Correction to
the Preliminary Determination of Sales at Less Than Fair Value and
Affirmative Determination of Critical Circumstances, and
Postponement of Final Determination, 75 Fed. Reg. 51,014 (Aug. 18,
2010).
Court No. 11-00081 Page 6

Commerce found that DP-Master was selling drill pipe in the U.S. at

less than fair value. Commerce selected India as the primary

surrogate country, and used Indian data to calculate surrogate

values for two key drill pipe inputs relevant to this case. First,

Commerce calculated a surrogate value for green tube by averaging

listings for prices and offers for J/K-55 grade tube, a finished

product similar to green tube, from the January and March 2009

issues of “Metal Bulletin Research” (“MBR”). PR 186 at 7. Second,

Commerce established a surrogate value for the tool joints that DP-

Master purchased using average unit values of imports under Indian

Harmonized Tariff Schedule (“IHTS”) category 8431.43.90.3 Id.

Commerce maintained the Initiation scope over DP-Master’s

objections, but, given “concerns regarding the imprecision of the

definition of ‘green tubes suitable for drill pipe,’” Commerce

declared that it would remove green tube from the scope unless a

more definite physical distinction between drill pipe green tube

and OCTG green tube emerged in future submissions. PR 187 at 8.

In the Preliminary Determination, Commerce also found that DP-

Master was “unable to obtain” certain data from its phosphate

toller. Id. at 28. To fill gaps in the data, DP-Master offered

“estimated [factors of production] based on [its] knowledge of the

3
Commerce calculated average unit values from IHTS categories
using the Global Trade Atlas, which is published by Global Trade
Information Services, Inc. Global Trade Information Services
compiles information it receives directly from the Indian Ministry
of Commerce. PR 186 at 2.
Court No. 11-00081 Page 7

production process,” which Commerce found to be “a reasonable proxy

to account for the production costs associated with [DP-Master’s]

. . . tolled merchandise.” Id. When Commerce sought to verify the

information DP-Master did obtain and report, however, it discovered

“for the first time” that DP-Master did not report quantities in

the manner Commerce requested, and that DP-Master could not provide

records necessary for verification. I&D Memorandum at 45–47.

Following verification and the final comment period, Commerce

issued the Final Determination, six aspects of which are presently

on appeal. First, Commerce narrowed the scope by adding three

physical criteria to the description of subject green tube.

Second, in calculating DP-Master’s surrogate financial ratio,

Commerce elected to use financial information solely from the

Indian company Oil Country Tubular, Ltd. Third, contrary to its

finding in the Preliminary Determination, Commerce determined that

the average unit value of imports under IHTS categories 7304.29 and

7304.23 was the best available surrogate value for drill pipe green

tube. Fourth, at DP-Master’s urging, Commerce abandoned IHTS

category 8431.43.90 and instead used the same surrogate value it

chose for the tool joints DP-Master produced in-house to calculate

the surrogate value for the tool joints DP-Master purchased.

Without prompting from DP-Master, however, Commerce multiplied the

in-house tool joint surrogate value by the applicable financial

ratio to account for the selling, general and administration
Court No. 11-00081 Page 8

expenses (“SG&A”), profit, and overhead that would be reflected in

prices offered on the open market. Fifth, Commerce calculated the

surrogate value for labor by averaging rates in all countries that

produced subject goods, regardless of how much each country

actually produced. Lastly, Commerce found that DP-Master’s

failures with respect to reporting its phosphate toller’s factor of

production data warranted the application of facts otherwise

available and an adverse inference therefrom. I&D Memorandum at

10–12, 14–22, 24–32, 44–47.

Subsequent to the filing of this action, the United States

Court of Appeals for the Federal Circuit (“Federal Circuit”) held

that the simultaneous application of nonmarket methodology and

countervailing duty law was contrary to the Tariff Act of 1930.

GPX Int’l Tire Corp. v. United States, 666 F.3d 732 (Fed. Cir.

2011), superseded by statute, Application of Countervailing Duty

Provisions to Nonmarket Economy Countries, Pub. L. No. 112-99, 126

Stat. 265 (effective Mar. 13, 2012). Commerce also issued a

countervailing duty order against DP-Master below. Drill Pipe from

the PRC: Countervailing Duty Order, 76 Fed. Reg. 11,758 (Mar. 3,

2011) (“Countervailing Duty Order”).

JURISDICTION and STANDARD OF REVIEW

The court has jurisdiction over this matter pursuant to 28

U.S.C. § 1581(c) and section 516A(a)(2)(B)(iii) of the Tariff Act
Court No. 11-00081 Page 9

of 1930, as amended, 19 U.S.C. § 1516a(a)(2)(B)(iii) (2006).4

Additionally, the court will uphold Commerce’s determinations in

administrative reviews unless they are “unsupported by substantial

evidence on the record, or otherwise not in accordance with the

law.” 19 U.S.C. § 1516a(b)(1)(B)(I).

DISCUSSION

DP argues that the Final Determination is contrary to law and

unsupported by the record with respect to: scope; surrogate

financial ratio; surrogate values for drill pipe green tube,

purchased tool joints, and labor; and the partial application of

adverse facts available. DP also challenges the Final

Determination as contrary to law on the basis that it is being

applied simultaneously with the Countervailing Duty Order. See GPX

Int’l Tire Corp., 666 F.3d at 737. For the reasons outlined below,

the Final Determination is affirmed in all respects except with

regard to the surrogate values for drill pipe green tube and labor.

I. Scope

DP argues that “the record lacks substantial evidence to

support Commerce’s three criteria for including green tube within

the scope” of the Final Determination5 because some green tube

4
All further citations to the Tariff Act of 1930 are to the
relevant provisions of Title 19 of the United States Code, 2006
edition, and all applicable supplements thereto.
5
The scope of the Final Determination covers:
unfinished drill collars (including all drill collar
green tubes) and unfinished drill pipe (including drill
Court No. 11-00081 Page 10

fitting its criteria are also subject to antidumping and

countervailing duty orders on OCTG.6 Pls.’ Br. at 32; see OCTG

from the PRC, 75 Fed. Reg. 28,551 (May 21, 2010) (antidumping duty

order); OCTG from the PRC, 75 Fed. Reg. 3,203 (Jan. 20, 2010)

(countervailing duty order). DP-Master does not export green tube

to the U.S., and neither it nor any party below have requested a

scope determination pursuant to 19 C.F.R. § 351.225 (2012).

Instead, DP requests that “this Court . . . remand to Commerce to

exclude green tube from the scope of the orders, to recalculate

industry support, and to revoke the AD and CVD orders if industry

support is lacking.” Pls.’ Br. at 33. Because DP seeks remand to

reassess an industry support figure calculated using the Initiation

scope based on a purported deficiency in the Final Determination

scope, its challenge turns on whether modifying the scope during

the course of an antidumping investigation requires Commerce to

pipe green tubes, which are tubes meeting the following
description: seamless tubes with an outer diameter of
less than or equal to 6 5/8 inches[,] . . . containing
between 0.16 and 0.75 percent molybdenum, and containing
between 0.75 and 1.45 percent chromium). The scope does
not include tool joints not attached to the drill pipe,
nor does it include unfinished tubes for casing or tubing
covered by any other antidumping or countervailing duty
order.
Final Determination, 76 Fed. Reg. at 1967.
6
DP identifies “P-110” as a finished OCTG product made from
green tube that is seamless, can have an outside diameter of less
than 6 5/8 inches, and is typically (though not required to be
under API standards) alloyed with molybdenum and chromium within
the parameters of the Final Determination. See Pls.’ Br. at 32; CR
103 at 33-34, 45.
Court No. 11-00081 Page 11

recalculate industry support.

To initiate an antidumping duty investigation, Commerce must

“determine that the petition has been filed by or on behalf of an

industry.” 19 U.S.C. § 1673a(c)(1)(A)(ii). The Act requires

Commerce to complete the industry support determination within

twenty days of the filing of a petition. Id. § 1673a(c)(1)(A).

Although interested parties may comment in the interim, “[i]t is

for Commerce to determine whether those requirements have been met,

and [it] has broad discretion in reaching its decision.” Minebea

Co. v. United States, 16 CIT 20, 21, 782 F. Supp. 117, 119 (1992),

aff’d, 984 F.2d 1178 (Fed. Cir. 1993); see Gulf States Tube Div. of

Quanex Corp. v. United States, 21 CIT 1013, 1015–19, 981 F. Supp.

630, 634–38 (1997). “After [Commerce] makes a determination with

respect to initiating an investigation, the determination regarding

industry support shall not be reconsidered.” 19 U.S.C. §

1673a(c)(4)(E). In other words, “Commerce is prohibited from

reconsidering industry support after the initiation of an

investigation.” P.T. Pindo Deli Pulp & Paper Mills v. United

States, 36 CIT , , 825 F. Supp. 2d 1310, 1323 (2012) (citing 19

U.S.C. § 1673a(c)(4)(E)); see Yantai Xinke Steel Structure Co. v.

United States, 36 CIT , , Slip Op. 12-95, at 11 (July 18, 2012)

(“[R]equiring [Commerce] to examine record evidence in addition to

that contained in the petition in no way disturbs the ‘finality’ of

its decision to initiate an investigation.”).
Court No. 11-00081 Page 12

DP’s sole argument — that some green tube used to produce OCTG

meet the technical specifications of the Final Determination and

are thus subject to two antidumping orders — has little bearing on

Commerce’s decision to initiate the investigation. 19 U.S.C. §

1673a(c)(4)(E). In fact, DP-Master conceded below that Initiation

scope, “distinguishing green tube by end-use, might have remedied

the overlap if it had been published before the OCTG investigation

was initiated.”7 PR 33 at 3 (emphasis added). The Final

Determination scope contains the same end-use distinction as the

Initiation, but DP does not analyze the purported overlap in light

of this potentially remedial exception. See Pls.’ Br. at 32–33.

Because Commerce is “prohibited” from reevaluating industry support

during the course of an investigation regardless of whether the

scope is modified, see P.T. Pindo Deli Pulp, 36 CIT at , 825 F.

Supp. 2d at 1323, and because DP does not challenge the Initiation

scope here, DP’s request for remand to reevaluate industry support

must be denied.

Even if DP’s challenge were procedurally appropriate, it would

fail on a substantive basis. See id. at , 825 F. Supp. 2d at

1323 (prohibition against Commerce from reconsidering industry

7
Commerce initiated the OCTG investigation well before it
settled on the revised scope language to initiate the present
investigation. See OCTG from the PRC, 74 Fed. Reg. 20,706 (May 5,
2009) (initiation notice). DP-Master may actually have been
referring to the publication of the countervailing duty order on
OCTG from the PRC. Compare PR 20 at 1–2, with OCTG from the PRC,
75 Fed. Reg. 3,203 (Jan. 20, 2010) (countervailing duty order).
Court No. 11-00081 Page 13

support “does not limit” the court’s power to review it).

“Commerce owes deference to the intent of the proposed scope of an

antidumping investigation as expressed in an antidumping petition,”

Ad Hoc Shrimp Trade Action Comm. v. United States, 33 CIT , ,

637 F. Supp. 2d 1166, 1174–75 (2009), and Commerce properly

identified domestic industry’s intent to investigate drill pipe

green tube. In the Initiation, Commerce observed that it was

“clear throughout Petitioners’ submissions that their use of the

term ‘drill pipe’ includes ‘green tubes’ for drill pipe production

only,” not green tubes for OCTG production. PR 22, Att. II at 8.

In supplements to the petition, domestic industry described how the

OCTG and drill string channels of distribution are distinct and

that “the companies that process green tubes into finished drill

pipe intimately know the few producers of the appropriate green

tube.” PR 7 at 5–6. Domestic industry also provided three prior

International Trade Commission determinations describing why

technical specifications and customer expectations led it to treat

green tube for drill pipe as a “distinct like product” from green

tube for OCTG. Id. Ex. 1 (excerpts from OCTG from Argentina,

Austria, Italy, Japan, Korea, Mexico, and Spain, USITC Pub. 2911,

Inv. Nos. 701-TA-363 and 701-TA-364 and 731-TA-711-717 (1995)

(investigation notice), OCTG from Argentina, Italy, Japan, Korea

and Mexico, USITC Pub. 3434, Inv. Nos. 701-TA-364 and 731-TA-711

and 731-TA-713-716(June 2001) (first sunset review), and OCTG from
Court No. 11-00081 Page 14

Argentina, Italy, Japan, Korea, and Mexico, USITC Pub. 3923, Inv.

Nos. 731-TA-711 and 731-TA-713-716 (June 2007) (second sunset

review)). Given the end-use exception and the extensive evidence

showing a distinction in channels of distribution, customer

expectations, and technical specifications, it would not be

appropriate for this court to usurp Commerce’s exercise of

discretion in defining the scope of the Initiation. See Ad Hoc

Shrimp Trade, 33 CIT at , 637 F. Supp. 2d at 1174–75. A thorough

review of the record reveals that Commerce properly determined that

the petition met the support threshold required to commence the

investigation, CR 15 Att. 2; PR 22 Att. 2, and as such, DP’s

request must be denied.

II. Surrogate Values

“Commerce ordinarily determines the normal value of subject

merchandise of an exporter or producer from a nonmarket economy .

. . country ‘on the basis of the value of the factors of production

utilized in producing the merchandise.’” Shantou Red Garden

Foodstuff Co. v. United States, 36 CIT , , 815 F. Supp. 2d

1311, 1316 (2012) (quoting 19 U.S.C. § 1677b(c)(1)). This

procedure seeks “to assess the ‘price or costs’ of factors of

production” of subject merchandise in a comparable market economy

“in an attempt to construct a hypothetical market value of that

product” in the nonmarket economy. Nation Ford Chem. Co. v. United

States, 166 F.3d 1373, 1375 (Fed. Cir. 1999). Because “the process
Court No. 11-00081 Page 15

of constructing foreign market value for a producer in a nonmarket

country is difficult and necessarily imprecise,” id. at 1377

(quoting Sigma Corp. v. United States, 117 F.3d 1401, 1407 (Fed.

Cir. 1997)), Commerce must use the “best available information” to

select surrogate prices for each factor of production. 19 U.S.C.

§ 1677b(c)(4). Commerce “normally will use publically available

information to value factors,” 19 C.F.R. § 351.408(c)(1), and it

prefers to use information “reflect[ing] a broad market average,”

“contemporaneous with the period of review,” “specific to the input

in question,” and “exclusive of taxes on exports.” Fuwei Films

(Shandong) Co. v. United States, 36 CIT , , 837 F. Supp. 2d

1347, 1350–51 (2012).

In evaluating Commerce’s selection of the best available

surrogate value under the substantial evidence standard, “[t]he

Court’s role is not to make that determination anew, but rather to

decide ‘whether a reasonable mind could conclude that Commerce

chose the best available information.’” China First Pencil Co. v.

United States, 34 CIT , , 721 F. Supp 2d 1369, 1375 (2010)

(quoting QVD Food Co. v. United States, 34 CIT , , 721 F. Supp.

2d 1311, 1315 (2010), aff’d, 658 F.3d 1318 (Fed. Cir. 2011)). It

is critical that Commerce’s selection “establishes the antidumping

margins as accurately as possible.” Zhejiang DunAn Hetian Metal

Co. v. United States, 652 F.3d 1333, 1341 (Fed. Cir. 2011) (quoting

Shakeproof Assembly Components v. United States, 268 F.3d 1376,
Court No. 11-00081 Page 16

1382 (Fed. Cir. 2001)). Nevertheless, Commerce has “broad

discretion to determine the ‘best available information’ in a

reasonable manner on a case-by-case basis.” Goldlink Indus. Co. v.

United States, 30 CIT 616, 619, 431 F. Supp. 2d 1323, 1327 (2006)

(quoting Timken Co. v. United States, 25 CIT 939, 944, 166 F. Supp.

2d 608, 616 (2001)).

A. Surrogate Financial Ratio

Commerce selected Oil Country Tubular, Ltd. (“OCTL”) as the

only financial surrogate for DP-Master in both the Preliminary

Determination and Final Determination. DP argues that Commerce

should have averaged financial statements from OCTL with those from

Jindal Saw, another Indian producer. DP’s challenge is twofold:

first, DP questions OCTL’s suitability as a surrogate on the basis

that it has a lower drill pipe production capacity, provides more

services, and produces a wider variety of expensive goods than DP-

Master; second, DP disputes Commerce’s finding that Jindal Saw was

too vertically integrated to be comparable to DP-Master. In

essence, DP argues that OCTL is just as poor a match for DP-

Master’s production experience as Jindal saw, meaning that

Commerce’s decision to use only OCTL as a surrogate was unsupported

by substantial evidence.

To account for factory overhead, SG&A, and profit in a

nonmarket economy context, Commerce uses financial statements from

“one or more surrogate companies.” Fujian Lianfu Forestry Co. v.
Court No. 11-00081 Page 17

United States, 33 CIT , , 638 F. Supp. 2d 1325, 1353 (2009).

“To serve as an adequate proxy for the respondent companies being

reviewed, the surrogate companies selected ideally should produce

comparable merchandise” in the surrogate country. Id. (citing 19

C.F.R. § 351.408(c)(4)). In selecting an adequate proxy, “Commerce

‘narrow[s] the list of financial statements meeting this criterion

by consider[ing] the quality and specificity of the statements,’”

Qingdao Sea-Line Trading Co. v. United States, 36 CIT , , Slip

Op. 12-39 at 36 (Mar. 21, 2012) (citing Dorbest Ltd. v. United

States, 604 F.3d 1363, 1374 (Fed. Cir. 2010)), including whether

they show a comparable level of vertical integration. Mittal Steel

Galati S.A. v. United States, 31 CIT 1121, 1139, 502 F. Supp. 2d

1295, 1311 (2007); see Air Prods. & Chems., Inc. v. United States,

22 CIT 1125, 31 F. Supp. 2d 999 (1998). Although “Commerce

generally finds that the greatest number of financial statements

yields the most representative data from the relevant manufacturing

sector,” Fujian Lianfu, 33 CIT at , 638 F. Supp. 2d at 1353,

“Commerce is not justified in sacrificing quality for quantity.”

Dorbest Ltd. v. United States, 30 CIT 1671, 1717, 462 F. Supp. 2d

1262, 1302 (2006). As such, Commerce must avoid averaging

financial statements that would have an unjustifiably distortive

effect on the resulting surrogate financial ratio. Id. at 1716–24,

462 F. Supp. 2d at 1301–08.

The first prong of DP’s argument focuses on differences
Court No. 11-00081 Page 18

between OCTL and DP-Master. DP argues that “OCTL’s [oil tubular

goods] production capacity vastly overshadows its drill pipe

production capacity, which itself is only 1/10 of DP-Master’s.”

Pls.’ Br. at 30–31. Commerce found that DP-Master and OCTL were at

an “identical level of integration” because both “purchas[e] green

tube that is then processed into drill pipe.” I&D Memorandum at

22. As DP argues elsewhere, oil tubular goods are comparable to

drill pipe because the production of both requires modification of

raw green tubes. Pls.’ Br. at 5–6, 13, 24, 32–33; CR 103 at 2-10

& Ex. 2. Because the processes for producing drill pipe and oil

tubular products are at least comparable, see 19 C.F.R. §

351.408(c)(4), DP’s attempt to discredit OCTL’s suitability on the

basis that it has a lower capacity to produce drill pipe is

unpersuasive. DP also argues that “OCTL provides services, such as

phosphating, plastic coating, reconditioning, and rethreading of

drill pipe, and field inspection of tubulars,” whereas “DP-Master

outsources some [of those] services . . . and does not engage in

any reconditioning, rethreading, or field inspection,” and that

“OCTL manufactures a much wider range of products[] than DP-

Master,” including many advanced and expensive specialty tools.

Commerce recognized that OCTL offers many goods and services that

DP-Master does not and that such production experience weighs

against its viability as a surrogate. I&D Memorandum at 22.

The second prong of DP’s argument is that Commerce improperly
Court No. 11-00081 Page 19

rejected Jindal Saw as a surrogate because it “does not appear to

be as fully-integrated as Commerce believed.” Pls.’ Br. at 32. DP

supports its argument with a quote from a Jindal Saw 2009-2010

annual report: “Jindal ‘focused on value added production’ and

reduced production of pig iron by 81.7% ‘to [a] negligible level.’”

Pls.’ Br. at 31 (quoting PR 218 at 29, 71) (alteration in Pls.’

Br.). This quotation is irrelevant for two reasons. First,

although pig iron is an input for some steel products, there is no

indication that Jindal Saw used its pig iron to make pipes.8 See

PR 218 at 26-29. Second, contrary to DP’s assertion, the annual

report shows that Jindal Saw’s consumption of raw iron ore and iron

fines increased by 20% along with its production of pipes. PR 218

at 71. In other words, DP’s selective quotation does not undermine

Commerce’s finding that Jindal Saw is more vertically integrated

than DP-Master because it “begin[s] its production at the iron ore

stage.” I&D Memorandum at 22.

Furthermore, the same annual report demonstrates that Jindal

Saw produces “certain out of scope merchandise that [DP-Master]

does not,” just like OCTL. See I&D Memorandum at 22. In addition

to non-drill pipe metal tube products, Jindal Saw “provides various

8
The annual report lists pig iron with other finished
products, not raw materials. PR 218 at 71. Furthermore, the
quoted 81.7% reduction in pig iron appears on a table labeled
“Company’s sales mix” alongside sales of steel plates, steel coils,
and steel pipes. PR 218 at 29, 71. These facts imply that Jindal
produced pig iron for sale, not as an input for green tubes.
Court No. 11-00081 Page 20

value added products like pipe coatings, bends and connector

castings,” PR 218 at 19, which DP does not claim to provide.

Jindal Saw also produces and sells steel plates, steel coils, and

pig iron, id. at 29, products DP does not claim to produce.

Finally, Jindal Saw’s wholly-owned subsidiary “owns and operates

businesses in three core sectors of the Indian economy,” none of

which bear any relation to producing drill pipe or other oil

extraction products: “Water, Waste Water and Solid Waste

Management[;] Domestic Transportation & Logistics[; and]

Transportation Equipment Fabrication.” Id. at 8, 63–64, 89–90.

Jindal Saw reaches as wide across as it does far down the stream of

production, and as such it is equally subject to the criticism DP

applies to OCTL.

Commerce’s decision to use only OCTL as a financial surrogate

is supported by substantial evidence in the record. OCTL and

Jindal Saw both produce nonsubject goods, but Jindal Saw has a high

level of vertical integration that neither DP-Master nor OCTL

possess. On these facts, Commerce’s choice not to average OCTL’s

data with distortive data from Jindal Saw was reasonable.

Therefore, DP’s request to remand for redetermination of the

financial surrogate ratio must be denied.

B. Surrogate Value for Drill Pipe Green Tube

In the Preliminary Determination, Commerce calculated a

$1262.50 surrogate value for green tube by averaging prices and
Court No. 11-00081 Page 21

offers for J/K-55 grade tube listed in the January and March 2009

issues of MBR. As Commerce stated, “[MBR] is a widely respected

steel industry journal produced outside the context of this case .

. . [and] J/K55 is the most similar in yield strength to drill pipe

green tubes, a key characteristic in green tubes.” PR 186 at 7.

In the Final Determination, however, Commerce opted instead to use

average unit values of goods imported under IHTS categories 7304.29

and 7304.23 to calculate a $2,511.67 surrogate value. I&D

Memorandum at 31–32. One of the reasons Commerce changed its mind

was that, in its opinion, the IHTS categories actually “capture”

green tube, whereas the MBR issues described J/K-55 grade tube, a

product “that is only comparable to” green tube.9 Id. DP contends

that Infodrive India listings for IHTS categories 7304.29 and

7304.23 show that imports under both categories were actually

devoid of green tube and dominated by high-priced finished

products, meaning that Commerce did not base its determination on

substantial evidence.10 Pls.’ Br. at 15–17.

9
Commerce also rejected the MBR data as derived from a time
frame “so isolated . . . as to be potentially subject to temporary
market fluctuations” and listing mere “offers for sale,” whereas
the IHTS categories are transaction prices “fully contemporaneous
with the POI [representing] broad market average prices in India
during the entire POI.” Id. at 31–32.
10
DP also alleges that Commerce issued its determination
contrary to law because “Commerce . . . based its green-tube SV
determination on a limitation that only HTS categories could be
considered for selection as SV.” Pls.’ Br. at 17. Nothing in the
Final Determination suggests that Commerce rejected DP-Master’s
proposed surrogates solely because they were not IHTS categories.
Court No. 11-00081 Page 22

This Court has recognized Infodrive’s utility in specifying

descriptions of products at the moment of import as a supplement to

aggregated IHTS data. See Dorbest Ltd., 30 CIT at 1695–98, 462 F.

Supp. 2d at 1284–86 (2006); Zhejiang, 652 F.3d at 1342. Infodrive

is not a perfect tool, Zhejiang, 652 F.3d at 1342, and so Commerce

need not rely on Infodrive data that is incomplete or demonstrably

inaccurate. Globe Metallurgical, Inc. v. United States, 33 CIT ,

, Slip Op. 09-37 at 7–8 (May 5, 2009), appeal dismissed per

stipulation, 449 Fed. App’x 9 (Fed. Cir. 2010); Calgon Carbon Corp.

v. United States, 35 CIT , , Slip Op. 11-21 at 17 (Feb. 17,

2011). Nevertheless, this Court has consistently found that

Commerce is obliged to address Infodrive data offered in rebuttal

if it specifies a “definite and substantial percentage” of imports

under a particular IHTS category. Calgon Carbon, 33 CIT at ,

Slip Op. 11-21 at 17; see Zhengzhou Harmoni Spice Co. v. United

States, 33 CIT , , 617 F. Supp. 2d 1281, 1325 (2009); Longkou

Haimeng Mach. Co. v. United States, 32 CIT 1142, 1162–65, 581 F.

Supp. 2d 1344, 1361–64 (2008).

In the Final Determination, Commerce admitted that the

Infodrive data was substantially complete and an accurate

DP’s confusion may be a result of Commerce’s justification for
describing IHTS categories 7309.23 and 7309.29 as more product
specific than other Indian HTS data. See I&D Memorandum at 31
(“[DP-Master] has placed no evidence on the record demonstrating
that a different HTS category is more appropriate for green tubes
. . . .” (emphasis added)).
Court No. 11-00081 Page 23

representation of imports under IHTS category 8431.43.90 in the

context of explaining its selected surrogate value for tool joints.

I&D Memorandum at 26. When it evaluated the Infodrive data with

respect to green tube, however, Commerce dismissed DP-Master’s

argument in one sentence: “Infodrive data placed on the record by

[DP-Master] definitively show entries of green tube under . . .

categories [7309.23 and 7309.29].” I&D Memorandum at 31. Although

DP-Master argued “that these [IHTS] categories are ‘overwhelmed’ by

products further along in the production process than raw green

tube,” Commerce found that they were not “necessarily

unrepresentative of the input” and were in fact “product-specific

to the green tubes used in the production of drill pipe.” Id. In

response to the instant motion, Commerce reiterates its position:

“While J/K 55 demonstrably cannot be used to make drill pipe, the

basket categories did, in fact contain prices for the green tube at

issue.” Def.’s Br. at 19. Put simply, Commerce found that because

IHTS averages actually “captured” green tube, as demonstrated by

the Infodrive data, it was the best available surrogate value. See

I&D Memorandum at 31–32.

Commerce’s description of the Infodrive data in the Final

Determination is misleading to the point where it is impossible to

determine whether its reliance on the IHTS data was reasonable.

See Calgon Carbon, 33 CIT at , Slip Op. 11-21 at 17–19. Commerce

determined that the IHTS data was a reasonable surrogate because
Court No. 11-00081 Page 24

the Infodrive listings “definitively show entries of green tube,”

I&D Memorandum at 31, but of the hundreds of entries listed on the

Infodrive tables, only three might be properly categorized as

“definitively” green tube: two 9/9/09 entries describing “RAW-PIPE

SEAMLESS” and “RAW - TBG SEAMLESS” and one 9/5/09 entry describing

“RAW-PIPESEAMLESS.” See PR 162 Ex. SV-45 (tables for imports under

7304.23.90 at page 4). DP argues that there are no entries for

green tube, Pls.’ Br. at 16, and indeed these three entries are

also described as being “WALL MATERIAL,” implying that they may be

unsuitable for the production of drill pipe. See PR 162 Ex. SV-45

(tables for imports under 7304.23.90 at page 4). Neither party

thoroughly explains the other entries for “seamless pipe”11 at

present, but DP-Master did submit a detailed analysis of the

Infodrive data below tending to show that there are in fact no

green tube entries. See PR 162 at 7–17. DP-Master corroborated

its interpretation below with evidence indicating that Indian green

tube imports would be low during the period of investigation

because of “measures taken [in late 2008] by the Indian

11
The record establishes a distinction between raw seamless
green tube on the one hand, and finished seamless tubing on the
other. CR 98 2–9 & Att. 1; CR 103 at 2-10. Given the unspecific
descriptions for tube entries and the absence of entries for green
tube suitable for drill pipe, the Infodrive listings are, at a
minimum, ambiguous as to what kinds of pipes and tubes actually
entered India under categories 7309.23 and 7309.29. See PR 162 Ex.
SV-45. Even the most generous interpretation of the Infodrive data
cannot support Commerce’s explicit finding that the data
“definitively show entries of green tube.” I&D Memorandum at 31.
Court No. 11-00081 Page 25

government[] to restrict imports [of green tube] . . . from low-

price producers in China.” PR 138 Ex. 3 at 10. Commerce did not

address this evidence in the Final Determination.

Defendant-intervenors argue that the IHTS data is accurate

because the finished casing and tubes actually imported under those

categories are comparable to drill pipe green tube. Intervenor-

Def.’s Mem. Opp’n Pls.’ Br. (“Intervenor-Def.’s Br.”) at 5–8.

Specifically, “while the [IHTS] categories selected by Commerce may

include products more fully advanced than green tube, these

categories also include OCTG casing and tubing that have less

demanding performance characteristics and may be produced from less

expensive materials using less expensive processing than green tube

for drill pipe.” Intervenor-Def.’s Br. at 7. As DP correctly

points out, Pls.’ Reply at 3 n.2, Commerce hints at this same

argument in its response to the instant motion: “[A]fter

identifying green tube within the Indian customs data, Commerce

determined that the data was sufficiently product specific.”

Def.’s Br. at 19 (emphasis added). In the Final Determination,

however, Commerce explicitly rejected MBR data for J/K-55 tubing

because J/K-55 is “a product that the record demonstrates cannot be

used to produce drill pipe.” I&D Memorandum at 31. Both J/K-55

tubing and the IHTS 7309.23 and 7309.29 imports are comparable to

drill pipe green tube, and both J/K-55 and the IHTS 7309.23 and

7309.29 imports cannot be used to produce drill pipe.
Court No. 11-00081 Page 26

Consequently, if Commerce meant to say in the Final Determination

that the IHTS categories were product specific because they

captured related goods, then it did not adequately describe why it

dismissed the MBR data. Defendant-intervenors cannot use the

benefit of hindsight to justify the Final Determination with an

analysis Commerce demonstrably could not have relied upon below.

Commerce’s rebuttal of each of DP’s four alternative

surrogates12 in response to the instant motion does not cure its

inadequate explanation of its reliance upon the IHTS data. See

Longkou Haimeng, 32 CIT at , 581 F. Supp. 2d at 1363–64.

Although Commerce is not required to address every counterargument

or piece of evidence before it, see Taian Ziyang Food Co. v. United

States, 33 CIT , , 637 F. Supp. 2d 1093, 1141 (2009), its

failure here to explain evidence apparently contrary to a finding

central to its determination leaves the court without the means

necessary to affirm it as supported by the record. See Taian

Ziyang Food Co. v. United States, 35 CIT , , 783 F. Supp. 2d

12
DP’s four alternatives are as follows: First, and what DP
characterizes as “possibly the best viable alternative,” are May
2009 MBR descriptions of “prices” and “offers” for Indian seamless
OCTG. Second, DP offers the January and March 2009 Indian prices
and offers for J/K-55 that Commerce used in the Preliminary
Determination with a deflation adjustment “to account for
[downward] global pricing trends.” Third, DP constructs a value by
taking the cost of alloy billets and adding proprietary amounts
representing the cost of processing billets into green tube.
Lastly, given “that drill pipe green tube is always seamless,” DP
suggests averaging Indian prices for seamless tube and adding a
proprietary adjustment for chemistry. Pls.’ Br. at 19–20.
Court No. 11-00081 Page 27

1292, 1331–32 (2011) (remand appropriate where there remained

“serious unanswered questions” as to Commerce’s justification for

selecting apparently distorted import statistics as the best

available surrogate). On remand, Commerce is not barred from

selecting the IHTS data — it need only explain why such data is

more representative of the price for drill pipe green tube than

other potential surrogate values in light of Infodrive data that

appears to demonstrate that categories 7309.23 and 7309.29 do not

actually “capture” green tube and are highly distorted by

expensive, finished tubular goods.

C. Surrogate Value for Purchased Tool Joints

Commerce used average unit values of imports under IHTS

8431.43.90 to calculate the tool joint surrogate value in the

Preliminary Determination. DP-Master objected, offering two

alternatives: “petitioners’ actual experience . . . even though it

is non-public and from the [U.S.],” and a value “that could be

calculated from the [factors of production] information DP-Master

submitted on the record prior to the preliminary determination . .

. [that] would have reflected commercial reality.” PR 191 at 8–10.

Commerce chose the latter in the Final Determination, adding

“surrogate ratios for overhead, SG&A, and profit . . . to as

closely as possible approximate the experience of purchasing [tool

joints] from an unaffiliated supplier.” I&D Memorandum at 28. DP

now contends that it was unreasonable for Commerce to have chosen
Court No. 11-00081 Page 28

this surrogate valuation method because petitioners’ tool joint

data was in fact the best available information, and because the

chosen $10,529.40 surrogate value is much higher than the $5571.40

value selected for tool joints DP-Master produced in-house and the

comparably priced proprietary value of tool joints petitioners

purchased in the U.S. Pls.’ Reply at 9–10.

Commerce acted reasonably when it declined to use petitioners’

data as the best available information on the record. See QVD Food

Co., 34 CIT at , 721 F. Supp. 2d at 1315 (citing Goldlink, 30 CIT

at 619, 431 F. Supp. 2d at 1327). DP admits that petitioners’

prices are derived from U.S. market prices and that the U.S. market

is not economically comparable to the PRC, Pls.’ Br. at 25–26, and

it does not dispute that the chosen surrogate value is derived

entirely from the primary surrogate country, India. I&D Memorandum

at 28. DP also admits that petitioners’ data is proprietary,

whereas the chosen surrogate is based on public information. Pls.’

Br. at 25–26. DP argues at great length that petitioners’ prices

are a “precise product match” for the tool joints DP-Master

purchased, e.g., Pls.’ Br. at 25, but it does not contest that the

chosen surrogate value is also product specific.13 See id. at

13
The most direct argument DP makes challenging product
specificity has no basis in the law. DP argues that “because the
[chosen surrogate] is not a value for tool joints at all, but
rather is based upon the sum of values of other products,” Commerce
ignored “the statutory requirement to ‘determine the normal value
of the subject merchandise on the basis of the factors of
production utilized in producing the merchandise.’” Pls.’ Br. at
Court No. 11-00081 Page 29

24–29; I&D Memorandum at 27–28. Faced with a choice between two

product-specific surrogate valuation methods spanning the period of

investigation, this court cannot say that Commerce erred when it

selected the method that was based on public data from the primary

surrogate country over proprietary data from a country not

economically comparable to the U.S. See Goldlink, 30 CIT at 619,

431 F. Supp. 2d at 1327 (“[T]he Court must defer to Commerce” if

its determination below is reasonable.).

DP employs a false comparison of the $10,529.40 surrogate

value with the $5571.40 constructed value for the tool joints it

produces to raise doubts about Commerce’s choice. The $5571.40

tool joint value lacks the profit, SG&A, and overhead

considerations that would be reflected in the price of tool joints

offered for sale in a surrogate market, and so $5571.40 is not an

accurate representation of purchased tool joint value. See I&D

Memorandum at 28. Furthermore, given the nature of the tool joint

market, the record shows that the chosen surrogate value is not

aberrational when compared to the proprietary average value of tool

joints purchased in the U.S. The parties agree that tool joints

are highly specialized and expensive components that are not

29. However, this Court has held that “assigning a surrogate value
to the factors of production going into the production of . . .
intermediate inputs” when valuing those intermediate inputs is in
fact consistent with the law. Anshan Iron & Steel Co. v. United
States, 27 CIT 1234, 1238–41 (2003) (not published in the Federal
Supplement).
Court No. 11-00081 Page 30

comparable to other kinds of pipe fittings. See I&D Memorandum at

26–27. Tool joints are only produced “in a few countries,” none of

which are market economies comparable to the PRC. I&D Memorandum

at 28. Because tool joints are so specialized and because there

are so few tool joint producers in the world, it was reasonable for

Commerce to accept variation among potential surrogate values,

especially when comparing normalized prices in a developing

nonmarket economy to actual prices in an advanced market economy.

“[T]he process of constructing foreign market value for a

producer in a nonmarket economy country is difficult and

necessarily imprecise.” Nation Ford Chem., 166 F.3d at 1377

(quoting Sigma, 117 F.3d at 1407). That DP also presents a well-

reasoned case for why Commerce could have chosen petitioners’ data

as the best available does not change the fact that this court

cannot usurp Commerce’s sound judgment in selecting a different

viable surrogate. See Peer Bearing Co. v. United States 25 CIT

1199, 1201–02, 182 F. Supp. 2d 1285, 1292 (2001). Because

Commerce’s choice here was reasonable, DP’s challenge must fail.

See Goldlink, 30 CIT at 619, 431 F. Supp. 2d at 1327.

D. Surrogate Value for Labor

DP argues that, when calculating the labor wage rate surrogate

value, Commerce averaged the wage rate of thirty-one countries that

produced comparable merchandise without distinguishing between

producers and “significant producers” as required under 19 U.S.C.
Court No. 11-00081 Page 31

§ 1677b(c)(4)(B). As a result, Commerce included low-producing

countries in the surrogate wage rate average like Swaziland, even

though it only exported $469 worth of comparable merchandise.

Commerce concedes that it should reconsider its labor wage rate

determination in light of Shandong Rongxin Import and Export Co. v.

United States, 35 CIT , , 774 F. Supp. 2d 1307, 1315–16 (2011).

Accordingly, DP’s request to remand for reconsideration of the

surrogate labor wage rate is granted.

III. Partial Application of Adverse Facts Available

DP argues that “Commerce’s application of adverse facts

available . . . because of an independent toller’s failure to

report certain information regarding consumption of material inputs

is unsupported by substantial evidence and is contrary to law.”

Pls.’ Br. at 35. Under 19 U.S.C. § 1677e(b), Commerce may apply an

adverse inference when a party has “failed to cooperate by not

acting to the best of its ability to comply with a request for

information.” Id. “Failure to cooperate” is evaluated under an

objective and subjective standard. Nippon Steel Corp. v. United

States, 337 F.3d 1373, 1382 (Fed. Cir. 2003). First, Commerce must

show that “a reasonable and responsible [party] would have known

that the requested information was required to be kept and

maintained under the applicable statues, rules and regulations,”

and second, “that the respondent under investigation . . . either:

(a) fail[ed] to keep and maintain all required records, or (b)
Court No. 11-00081 Page 32

fail[ed] to put forth its maximum efforts to investigate and obtain

the requested information from its records.” Id. at 1382–83; Ad

Hoc Shrimp, 33 CIT at , 637 F. Supp. 2d at 1304.

Commerce relied on DP-Master’s failures in deciding to apply

an adverse inference, not its toller’s poor recordkeeping.14 I&D

Memorandum at 47. On April 7, 2010, Commerce instructed DP-Master

to provide “a detailed explanation of all efforts undertaken to

report the actual quantity of each [factor of production]” if it

could not report its toller’s actual consumption. I&D Memorandum

at 47 (citing PR 53 at G-1 to G-5 & §§ C, D). DP-Master provided

information that was not based on its toller’s actual consumption,

but it failed to offer any explanation until verification. PR 226

at 2. DP-Master was also instructed to inform Commerce

“immediately” if it would not be able to assemble materials

required for verification of its responses due to a recalcitrant

third party. I&D Memorandum at 47; PR 53 at G-1. DP-Master

provided information but failed to notify Commerce that it was

unable to assemble documents required for verification. Id. At

verification, DP-Master revealed “for the first time” that it

14
Commerce did use the toller’s inadequate recordkeeping as
a basis to apply facts otherwise available. I&D Memorandum at 45.
DP does not contest this aspect of Commerce’s determination. See
Pls.’ Br. at 35–36; Pls.’ Reply at 11–13; Nippon, 337 F.3d at 1831
(“The mere failure of a respondent to furnish requested
information — for any reason — requires Commerce to resort to other
sources of information to complete the factual record upon which it
makes its determination.” (emphasis added)).
Court No. 11-00081 Page 33

neither provided information in the manner requested nor assembled

records necessary for verification of that information. Id. at 45.

DP-Master’s actions — lulling Commerce into believing it had

provided information in the manner requested when it in fact had

not, and then suddenly admitting that it had not provided reliable

information at verification — are closer to the kind of “deliberate

concealment or inaccurate reporting” that “surely evince[] a

failure to cooperate” than to the mere “inadequate inquiries”

sufficient for application of an adverse inference. See Nippon,

337 F.3d at 1383 (emphasis added). Although DP-Master notified

Commerce that it was having difficulty securing information from

its toller, DP does not and cannot dispute that Commerce provided

“extensive instructions . . . numerous times over the course of the

investigation” to the effect that DP-Master should notify Commerce

if it was unable to provide information in the manner requested.

I&D Memorandum at 47; Wuhan Bee Healthy Co. v. United States, 31

CIT 1182, 1191 (2007) (not published in the Federal Supplement)

(objective prong satisfied where “a reasonable and responsible

respondent would have brought any problems surrounding its

supporting documentation to Commerce’s attention before the

verification”). DP also does not and cannot dispute that DP-Master

failed to provide a detailed explanation of its efforts to get

actual-consumption data before verification as requested. See

Sidenor Indus. SL v. United States, 33 CIT , , 664 F. Supp. 2d
Court No. 11-00081 Page 34

1349, 1358 (2009) (subjective prong satisfied where respondent

failed to act as requested even though it was able to do so).

The record belies DP’s contention that it is “not the party

who failed to cooperate,” Pls.’ Br. at 35 (emphasis omitted), and

so this court cannot say that the application of an adverse

inference to DP-Master’s unverifiable submissions was unreasonable

or contrary to law.15 Wuhan Bee, 31 CIT at 1191–93. DP-Master’s

inability to acquire trustworthy information cannot serve as an

excuse for its failure to notify Commerce as requested. See

Nippon, 337 F.3d at 1382–83; Wuhan Bee, 31 CIT at 1191–93.

Consequently, Commerce acted reasonably and in accordance with the

law when it applied an adverse inference to the information it

could not verify.

15
DP offers two additional arguments that have no bearing on
Commerce’s determination below. First, DP suggests that an adverse
inference is inappropriate because it otherwise provided verifiable
information “with only minor discrepancies.” Pls.’ Br. at 36.
Commerce, however, applied an adverse inference “only . . . to the
portion of [DP-Master’s] response dealing with its phosphate
treatment toller’s factors [of production],” I&D Memorandum at 47,
and so DP-Master’s cooperation during the rest of the investigation
is irrelevant. Second, DP asserts in its reply that “Commerce only
cites to its own threats regarding cooperation and [adverse facts
available], but it does not . . . cite to any record information
indicating how [DP-Master] was uncooperative in any way.” Pls.’
Reply at 13. Given that Commerce found that DP-Master failed to
provide a “detailed explanation of all efforts undertaken to report
the actual quantity of each [factor of production]” its toller
consumed, I&D Memorandum at 47, it is no surprise that Commerce
would be unable to locate and cite such a document in the record.
In any event, DP’s argument does not deter from the fact that
Commerce explained its decision with ample citations to the record.
See id. at 44–47; Nippon, 337 F.3d at 1382–83.
Court No. 11-00081 Page 35

IV. Simultaneous Application of Nonmarket Economy Methodology and
Countervailing Duty Law

DP’s motion — dated February 8, 2012 — argues for remand on

the basis of the Federal Circuit’s decision in GPX International

Tire Corp., 666 F.3d at 734. That decision invalidated Commerce’s

simultaneous application of countervailing duty law and nonmarket

economy methodologies below, which was its usual approach under

then-existing law. The Federal Circuit decided GPX on December 19,

2011, almost a year after DP appealed the Final Determination to

this court. Id. Just over a month after DP filed the instant

motion, Congress passed Public Law 112-99, amending the Tariff Act

of 1930. 126 Stat. 265. Public Law 112-99 clarifies that

“merchandise on which countervailing duties shall be imposed . . .

includes a class or kind of merchandise imported, or sold (or

likely to be sold) for importation, into the [U.S.] from a

nonmarket economy.” 19 U.S.C. § 1671(f)(1). On deciding a motion

to rehear the case, the Federal Circuit recognized that with the

passage of Public Law 112-99, “Congress clearly sought to overrule

. . . GPX.” GPX Int’l Tire Corp. v. United States, 678 F.3d 1308,

1311 (Fed. Cir. 2012). Accordingly, the Federal Circuit held that

“the statute prior to the enactment of the new legislation did not

impose a restriction on Commerce’s imposition of countervailing

duties on goods imported by [nonmarket economy] countries to

account for double counting.” Id. at 1312.

Recognizing that Public Law 112-99 “permits Commerce to apply
Court No. 11-00081 Page 36

[countervailing duties] concurrently with the [nonmarket economy]

methodology,” DP argues for the first time in its reply that Public

Law 112-99 is unconstitutional because it violates DP’s equal

protection, due process, and ex post facto rights and that “the law

may have other constitutional infirmities.” Pls.’ Reply at 14–15.

“Arguments raised for the first time in a reply brief are not

properly before this court,” United States v. Ford Motor Co., 463

F.3d 1267, 1276–77 (Fed. Cir. 2006), and such arguments are usually

deemed to be waived. Novosteel SA v. United States, 284 F.3d 1261,

1273–74 (Fed. Cir. 2002); see Ford Motor Co., 463 F.3d at 1276–77.

Here, however, DP did not have an opportunity to present its

constitutional objections before it filed its reply because Public

Law 112-99 did not become effective until March 13, 2012 — well

after it filed the instant motion. DP’s good faith effort to

preserve its objections is dissimilar from other parties’ failure

in previous cases to present arguments available to them at the

time of filing the main brief, and therefore, waiver is

inappropriate. See Novosteel SA, 284 F.3d at 1273–74; Ford Motor

Co., 463 F.3d at 1276–77.

A more fundamental concern is that Commerce and domestic

industry have not yet been afforded a full opportunity to be heard.

The unique circumstances of this case may deem the application of

waiver inappropriate, but it is impossible at present for the court

to address the important constitutional issues briefed only in two
Court No. 11-00081 Page 37

short paragraphs in DP’s reply. Indeed, beyond challenging the

substance of DP’s arguments, Commerce or domestic industry may

justifiably raise concerns about standing, mootness or estoppel.

Therefore, DP’s request for a remand on its due process, equal

protection, and ex post facto objections is denied without

prejudice to renew after Commerce returns with its remand

determination.

CONCLUSION

For the foregoing reasons, the court concludes that the Final

Determination is in accord with the law and is supported by

substantial evidence, except with respect to Commerce’s explanation

of its findings regarding the surrogate value for drill pipe green

tube and to its findings regarding the surrogate labor wage rate as

applied to DP-Master. On remand, Commerce must either select a new

surrogate value or explain why IHTS categories 7309.23 and 7309.29

are more representative of the price for drill pipe green tube than

other potential surrogate values in light of Infodrive data that

appears to demonstrate that the categories do not actually

“capture” green tube imports, and are highly distorted by

expensive, finished tubular goods. This court also reserves

judgment on any constitutional issues until after Commerce returns

with its remand results.

ORDER

In accordance with the above, it is hereby
Court No. 11-00081 Page 38

ORDERED that this case is remanded to the United States

Department of Commerce, International Trade Administration, to

reconsider its findings regarding drill pipe green tube and labor

wage rate surrogate values; and it is further

ORDERED that the Final Determination is affirmed in all other

respects; and it is further

ORDERED that the remand results are due within ninety (90)

days of the date this opinion is entered. Any responses or

comments are due within thirty (30) days thereafter. Any rebuttal

comments are due within fifteen (15) days after the date responses

or comments are due.

/s/ NICHOLAS TSOUCALAS
Nicholas Tsoucalas
Senior Judge

Dated: November 20, 2012
New York, New York