United States Court of Appeals for the Federal Circuit
2008-1040, -1054
MITTAL STEEL POINT LISAS LIMITED
(formerly known as Caribbean Ispat Limited),
Plaintiff-Appellant,
v.
UNITED STATES,
Defendant-Appellee,
and
GERDAU AMERISTEEL CORP.
and KEYSTONE CONSOLIDATED INDUSTRIES, INC.,
Defendants-Cross Appellants.
Michael A. Pass, Steptoe & Johnson LLP, of Washington, DC, argued for plaintiff-
appellant. With him on the brief were Mark A. Moran and Eric C. Emerson.
L. Misha Preheim, Attorney, Commercial Litigation Branch, Civil Division, United
States Department of Justice, of Washington, DC, argued for defendant-appellee. With
him on the brief were Gregory G. Katsas, Acting Assistant Attorney General, Jeanne E.
Davidson, Director, and Patricia M. McCarthy, Assistant Director. Of counsel on the brief
was Jonathan Zielinski, Office of the Chief Counsel for Import Administration, United
States Department of Commerce, of Washington, DC.
Mary T. Staley, Kelley Drye & Warren LLP, of Washington, DC, argued for
defendants-cross appellants. With her on the brief were Paul C. Rosenthal and Daniel P.
Lessard.
Appealed from: United States Court of International Trade
Judge Donald C. Pogue
United States Court of Appeals for the Federal Circuit
2008-1040, -1054
MITTAL STEEL POINT LISAS LIMITED
(formerly known as Caribbean Ispat Limited),
Plaintiff-Appellant,
v.
UNITED STATES,
Defendant-Appellee,
and
GERDAU AMERISTEEL CORP.
and KEYSTONE CONSOLIDATED INDUSTRIES, INC.,
Defendants-Cross Appellants.
Appeals from the United States Court of International Trade
in Case No. 05-00681, Judge Donald C. Pogue.
____________________________
DECIDED: December 3, 2008
____________________________
Before NEWMAN and LOURIE, Circuit Judges, and ALSUP, District Judge. *
LOURIE, Circuit Judge.
*
Honorable William Alsup, District Judge, United States District Court for
the Northern District of California, sitting by designation.
DECISION
Mittal Steel Point Lisas Limited (formerly known as Caribbean Ispat Limited and
now known as Arcelormittal Point Lisas Limited) (“Mittal”) appeals from the judgment of
the United States Court of International Trade affirming the Department of Commerce’s
(“Commerce’s”) classification of Mittal’s composite rod as non-prime merchandise.
Mittal Steel Point Lisas Ltd. v. United States, 491 F. Supp. 2d 1222 (Ct. Int’l Trade
2007). Gerdau Ameristeel Corp. and Keystone Consolidated Industries, Inc.
(collectively “Gerdau”) cross-appeal from the court’s affirmance of Commerce’s remand
determination calculating credit expenses from the date of invoice, rather than the date
of shipment. Mittal Steel Point Lisas Ltd. v. United States, 502 F. Supp. 2d 1345 (Ct.
Int’l Trade 2007). Because the court correctly classified the goods and because Gerdau
abandoned the argument for calculating credit expenses from the shipment date by
failing to exhaust its administrative remedies on remand, we affirm on both issues.
BACKGROUND
Mittal manufactures and sells steel wire rod in Trinidad & Tobago. Together with
its North American affiliate and importer, Mittal also sells steel wire rod for export to the
United States. Under 19 U.S.C. § 1673 (2006), Commerce imposes an antidumping
duty if it determines that (1) a category of foreign merchandise is being sold in the
United States at less than fair market value and (2) the importation causes or threatens
material injury to a U.S. market. 1 Commerce calculates that duty by comparing the
1
In Mittal Steel Point Lisas Ltd. v. United States, No. 2007-1552, 2008 U.S.
App. LEXIS 19774 (Fed. Cir. Sept. 18, 2008), we addressed the material injury prong of
19 U.S.C. § 1673 with respect to Mittal’s steel wire rod. We vacated the judgment of the
Court of International Trade and remanded the case to that court with instructions to
remand the case to the International Trade Commission. If there is ultimately no
2008-1040, -1054 2
“normal value” to the “constructed export price.” See id. Commerce determines the
normal value by including foreign sales of “prime” merchandise but excluding foreign
sales of “non-prime” merchandise. In determining the constructed export price,
Commerce deducts credit expenses over a length of time, known as the credit expense
period.
Mittal manufactures two types of steel wire rod that are relevant to this appeal—
“prime” rod 2 and composite rod. Prime rod and composite rod are composed of steel of
the same grade and chemical structure. 3 Commerce classifies steel wire rod based on
eight characteristics: grade range, carbon content range, surface quality, deoxidization,
maximum total residual content, heat treatment, diameter range, and coating.
Commerce then assigns an eight-digit control number based on those characteristics.
Mittal’s composite and prime rod have the same control number and are thus the same
in each of the eight characteristics. A coil of each contains approximately the same
weight of steel.
However, prime and composite rod are listed separately on Mittal’s price lists.
The difference is that, while a coil of prime rod consists of a single piece of steel, a coil
of composite rod contains multiple separate segments. Because of resulting processing
inefficiencies, Mittal also sells composite rod at a lower price than prime rod.
material injury, no duty will be imposed, regardless of our decision today.
2
Although we use the term “prime” in referring to Mittal’s rod, we do not
prejudge that Commerce correctly classified it as prime merchandise. Instead, we use
“prime,” as Mittal does, to distinguish over Mittal’s composite rod.
3
Although Gerdau asserts that the chemical structures are not the same,
we need not deal with this issue in view of our holding in favor of Gerdau on other
grounds.
2008-1040, -1054 3
Commerce thus found that composite rod was non-prime merchandise and excluded it
from Commerce’s normal value calculation because composite rod was “not identified
as prime on [Mittal’s] price list for matching purposes” and because, in Mittal’s prime
rod, Commerce “found identical or similar matches” to the rod sold in the United States.
Carbon and Certain Alloy Steel Wire Rod from Trinidad & Tobago, 70 Fed. Reg. 69,512
& accompanying Issues and Decisions Mem., 9 cmt. 4, available at http://ia.ita.doc.gov/
frn/summary/trinidad/E5-6331-1.pdf (Dep’t of Commerce Nov. 16, 2005).
The Court of International Trade affirmed Commerce’s non-prime determination
because the composite rod was not identical to the prime rod. Mittal Steel, 491 F.
Supp. 2d at 1229. The court reasoned that Mittal sold the rods at different prices,
demonstrating that the rods had commercially significant differences. Id.
Commerce also computed Mittal’s credit expense period to determine the duty
Mittal owed. Credit expenses are the costs associated with money being owed to the
seller after the seller has sold its merchandise but before the customer has paid the
seller. Id. at 1230. Mittal follows a unique sales model in the United States. Under
Mittal’s system, a U.S. customer first places an order with Mittal’s North American
affiliate. Mittal then ships the rods from Trinidad to the United States. After the rods
arrive in the United States, the North American affiliate issues an invoice to the
customer and ships the rods to him. At any point prior to the date of invoice, all terms of
sale, including the quantity of merchandise to be sold, are changeable.
In previous cases and in its prior administrative review involving Mittal,
Commerce had calculated credit expenses beginning on the date of shipment. Thus, in
2008-1040, -1054 4
this case, Commerce initially began Mittal’s credit expense period on the shipment
date—the date Mittal shipped the merchandise from Trinidad to the United States.
However, in the same administrative review, Commerce had also determined a
“date of sale.” Commerce normally chooses the invoice date as the date of sale
because, on the invoice date, the terms of sale have usually been fixed. Commerce
uses the shipment date as the date of sale, however, when the shipment date is earlier
than the invoice date or when a U.S. affiliate warehouses the merchandise in the United
States and sells from inventory. In those situations, the terms of sale have not been
fixed until the date that the seller ships the merchandise. In the same administrative
review here, Commerce had used the invoice date, rather than the shipment date, as
the date of sale for all of Mittal’s constructed export price sales.
While the case was on appeal to the Court of International Trade, the court
requested briefing on the date for beginning the credit expense calculation. Gerdau
supported Commerce’s determination, arguing that the date of sale was irrelevant to the
credit expense period determination. The government responded by requesting a
voluntary remand, with the consent of Mittal and Gerdau, for Commerce to reevaluate
the credit expense period based on the date of sale. In other words, Commerce wanted
to consider making the beginning of the credit expense period, which had been the
shipment date, match the chosen date of sale, which had been the invoice date. On
April 24, 2007, the court granted the voluntary remand for Commerce to “determine the
date on which credit expenses should begin to run.” Mittal Steel, 491 F. Supp. 2d at
1233. The court reasoned that, given Mittal’s sales model and Commerce’s decision
2008-1040, -1054 5
that the date of sale was Mittal’s invoice date, Commerce could reasonably find that
Mittal’s terms of sale were not set until the invoice date. Id. at 1232.
On remand, Commerce issued a draft remand determination on May 21, 2007,
and requested comment from the parties by May 29, 2007. In the draft remand
determination, Commerce recalculated the credit expense period to begin on the invoice
date because “the material terms of sale were not set before the invoice date.” On June
21, 2007, after receiving no comments from Gerdau, Commerce filed the final remand
determination in the Court of International Trade, incorporating the other parties’
comments and calculating credit expenses from the invoice date. The court then
affirmed Commerce’s final remand determination, noting that Gerdau had “filed no
comments on the remand results.” Mittal Steel, 502 F. Supp. 2d at 1347 n.1.
Mittal timely appealed to this court, and Gerdau has filed a timely cross-appeal.
We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(5).
DISCUSSION
“We review the Court of International Trade’s judgment, affirming or reversing the
final results of an administrative review, de novo.” Fag Kugelfischer Georg Schafer AG
v. United States, 332 F.3d 1370, 1372 (Fed. Cir. 2003). In so doing, “[w]e apply anew
the same standard used by the court, and will uphold Commerce’s determination unless
it is unsupported by substantial evidence on the record, or otherwise not in accordance
with law.” Yancheng Baolong Biochem. Prods. Co. v. United States, 337 F.3d 1332,
1333 (Fed. Cir. 2003) (citation and internal quotation marks omitted). Substantial
evidence means “more than a mere scintilla” and “such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion.” Suramerica de
2008-1040, -1054 6
Aleaciones Laminadas, C.A. v. United States, 44 F.3d 978, 985 (Fed. Cir. 1994)
(quoting Consol. Edison Co. v. Nat’l Labor Relations Bd., 305 U.S. 197, 229 (1938)).
“[T]he substantiality of evidence must take into account whatever in the record fairly
detracts from its weight,” including “contradictory evidence or evidence from which
conflicting inferences could be drawn.” Id.
A. Classification of Mittal’s Composite Rod as Non-Prime
Mittal argues that Commerce incorrectly determined that Mittal’s composite rods
were non-prime merchandise. Mittal asserts that its prime and composite rods are
identical for calculation purposes because, on each of Commerce’s eight criteria,
Mittal’s prime and composite rods are identical, and they have the same control
number. Moreover, according to Mittal, its composite rods are neither defective nor sold
outside the ordinary course of trade, as they are used in the same applications as prime
rod. Mittal asserts that a price difference between prime and composite rod alone is not
a sufficient basis for Commerce’s non-prime determination. Finally, Mittal argues that
the Court of International Trade improperly substituted its own analysis for the agency’s
insufficient analysis in order to uphold Commerce’s decision.
Gerdau and the government respond that significant differences exist between
Mittal’s composite and prime rods. According to Gerdau, Mittal’s composite rod
consists of smaller pieces than the industry standard, is always sold for less than prime
rod, and is not identified as “prime” quality in price lists. The government adds that the
control number and the eight criteria are irrelevant to Commerce’s prime determination.
Gerdau adds that Mittal’s composite rod sales are outside the ordinary course of trade
because, compared with Mittal’s prime rods, the composite rods are used differently,
2008-1040, -1054 7
they are a small percentage of Mittal’s total sales, they are priced lower, and they could
be classified as overruns or seconds.
We agree with Gerdau and the government that Commerce correctly classified
Mittal’s composite rods as non-prime merchandise. The court must defer to
Commerce’s permissible construction of the statute and permissible choice of matching
methodology. See Koyo Seiko Co. v. United States, 66 F.3d 1204, 1210-11 (Fed. Cir.
1995) (citing Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 843
(1984)). “Under Chevron, in order to survive judicial scrutiny, an agency’s construction
need not be the only reasonable interpretation or the reading the court would have
reached if the question initially had arisen in a judicial proceeding.” Id. at 1210.
In determining the normal value of merchandise, Commerce may classify some
goods as non-prime, taking them out of the normal value calculation. See id. at 1206
(explaining that Commerce must “match” the U.S. product to a similar home-market
product); see also 19 U.S.C. § 1677(16)(A) (2006) (describing that goods that are
“identical in physical characteristics [and] produced in the same country by the same
person” may be matched). Although Commerce has established eight characteristics
for reviewing steel wire rod, resulting in a control number, this categorization is distinct
from and not conclusive of the prime and non-prime determination. For example,
Commerce may conclude that merchandise is non-prime when it has material defects or
is sold outside the ordinary course of trade. See SKF USA, Inc. v. United States, 537
F.3d 1373, 1380 (Fed. Cir. 2008) (sold outside the ordinary course of trade); Certain
Corrosion-Resistant Carbon Steel Flat Products from the Republic of Korea, 70 Fed.
Reg. 12,443, 12,445 cmt. 6 & accompanying Issues and Decisions Mem., 20-24 cmt. 6,
2008-1040, -1054 8
available at http://ia.ita.doc.gov/frn/summary/korea-south/E5-1065-1.pdf (Dep’t of
Commerce Mar. 14, 2005) (material defects). Commerce may also conclude that
merchandise is non-prime if it has commercially significant differences from prime
merchandise. Cf. Pesquera Mares Australes Ltda. v. United States, 266 F.3d 1372,
1384 (Fed. Cir. 2001) (“Commerce has concluded that merchandise should be
considered to be identical despite the existence of minor differences in physical
characteristics, if those minor differences are not commercially significant. We conclude
that this standard adopted by Commerce constitutes a permissible construction of the
statute.”); Certain Polyethylene Terephthalate Film, Sheet, and Strip from India, 70 Fed.
Reg. 8,072 & accompanying Issues and Decisions Mem., 22 cmt. 5, available at
http://ia.ita.doc.gov/frn/ summary/india/E5-658-1.pdf (Dep’t of Commerce Feb. 17, 2005)
(finding shorter rolls to be prime solely because there was “no evidence . . . that Jindal
America consistently sold shorter rolls of PET film at prices lower than that charged for
full rolls of identical PET film”). Indeed, Commerce may rely on any reasonable
distinction. See Koyo Seiko, 66 F.3d at 1210-11.
In this case, as Commerce explained, composite rod was “not identified as prime
on [Mittal’s] price list for matching purposes.” Carbon and Certain Alloy Steel Wire Rod
from Trinidad & Tobago, 70 Fed. Reg. 69,512 & accompanying Issues and Decisions
Mem., 9 cmt. 4. Mittal admits that it charges a lower price for composite rod and that
composite rod is less efficient to use. Those price and quality differences represent
“commercially significant” differences. And Commerce explained that Mittal’s prime rod
better represented an “identical or similar match[]” with the rod sold in the United States.
2008-1040, -1054 9
Id. We therefore hold that Commerce’s decision to treat composite rod as non-prime
merchandise was supported by substantial evidence and was adequately explained.
B. Calculation of Credit Expenses from Invoice Date
In its cross-appeal, Gerdau argues that, on remand, Commerce should have
calculated Mittal’s credit expenses beginning on the shipment date, not the invoice date.
Gerdau points out that, in its previous cases and in the prior administrative review
involving Mittal, Commerce has calculated credit expenses beginning on the date of
shipment. According to Gerdau, Commerce has merely given a post hoc rationalization
for changing its practice. Gerdau also argues that Commerce has specifically rejected
the claim that the date of sale is relevant in determining the credit expense period.
According to Gerdau, Mittal’s process is not unique and does not warrant different
treatment from previous practice because, like most sellers, once Mittal has shipped
goods to one customer, it can no longer sell those goods to another customer.
The government and Mittal respond first by arguing that Gerdau both waived its
argument before the Court of International Trade and failed to present its argument to
Commerce on remand, thus failing to exhaust its administrative remedies. The
government and Mittal argue that no exception to the exhaustion requirement applies
here because Gerdau’s arguments involve the factual question of when Mittal can no
longer sell the goods and because Gerdau’s participation in the remand proceeding
would not have been futile, as Commerce had indicated that it would reevaluate its
position.
On the merits, the government and Mittal respond that Commerce calculates the
date of sale similarly to the way it calculates credit expenses, so the date of sale is
2008-1040, -1054 10
relevant to the credit expense calculation. Moreover, according to the government and
Mittal, Commerce’s policy bulletin states that the credit expense on a sale is measured
by the interest on the “sale revenue,” requiring the date of sale to have passed by the
beginning of the credit expense period. The government and Mittal also argue that
Commerce’s practice of using the shipping date for credit expenses is premised on a
seller having committed specific goods to a specific customer. Unlike other sellers,
Mittal remains in control of the terms of sale and the goods, not committing them to a
particular customer, until the invoice date. According to Mittal and the government,
Mittal’s sales process is similar to warehousing or unloading goods in the United States,
for which Commerce calculates the shipping date from the date when the goods leave
the warehouse (similar to Mittal’s invoice date), not when the company ships them from
abroad.
On the waiver and exhaustion arguments, Gerdau responds that it raised the
credit expense issue before Commerce and before the court. Gerdau argues that it
exhausted its administrative remedies because Commerce knew Gerdau’s position, and
raising the issue again would have been futile, as evidenced by Commerce’s choice to
reject Gerdau’s position. Moreover, according to Gerdau, the date for calculating credit
expenses is a purely legal issue—there was no factual dispute over the date that the
goods were shipped from the port.
We agree with the government and Mittal that, on the issue of the credit expense
period, Gerdau abandoned its argument by failing to exhaust its administrative
remedies. Gerdau should have argued to Commerce on remand, during the comment
period, in favor of beginning the credit expense period on the shipment date. At the
2008-1040, -1054 11
very least, Gerdau should have indicated that it maintained its prior position with respect
to the credit expense period. Moreover, even if Gerdau had preserved the issue for
appeal, Commerce’s determination to begin the credit expense period on the invoice
date was supported by substantial evidence and was not contrary to law.
In the initial hearing before Commerce, Gerdau argued that the credit expense
period should begin on the shipment date. When the Court of International Trade
requested briefing on the credit expense period, Gerdau again argued that the credit
expense period should begin on the shipment date. However, with the consent of Mittal
and Gerdau, the government then requested a voluntary remand to recalculate the
credit expense period based on the invoice date, and Gerdau did not object to the
remand. On remand to Commerce, Gerdau again did not raise its shipment date
argument. Gerdau effectively chose not to participate in the remand proceedings. It did
not comment on Commerce’s proposed revised results and submitted no argument as
to why Commerce should continue to adhere to its initial determination.
Gerdau was procedurally required to raise the issue before Commerce at the
time Commerce was addressing the issue. “Simple fairness to those who are engaged
in the tasks of administration, and to litigants, requires as a general rule that courts
should not topple over administrative decisions unless the administrative body not only
has erred but has erred against objection made at the time appropriate under its
practice.” United States v. L.A. Tucker Truck Lines, Inc., 344 U.S. 33, 37 (1952)
(emphasis added); see also Metz v. United States, 466 F.3d 991, 999 (Fed. Cir. 2006).
“[N]o one is entitled to judicial relief for a supposed or threatened injury until the
prescribed administrative remedy has been exhausted.” Sandvik Steel Co. v. United
2008-1040, -1054 12
States, 164 F.3d 596, 599 (Fed. Cir. 1998) (citations and quotation marks omitted).
Gerdau failed to raise the issue at the appropriate time on remand and thus abandoned
its argument by failing to exhaust its administrative remedies before Commerce. See
AIMCOR v. United States, 141 F.3d 1098, 1111-12 (Fed. Cir. 1998) (holding that, when
Aimcor failed to raise an issue on remand to Commerce “during the applicable comment
period,” it “was precluded from raising this issue de novo before the court”).
Gerdau argues that two exceptions to the exhaustion requirement apply: (1) its
shipment date argument is a purely legal argument, and (2) raising the argument before
Commerce would have been futile. See Corus Staal BV v. United States, 502 F.3d
1370, 1378-79 & n.4 (Fed. Cir. 2007). Neither exception applies here. Gerdau’s
argument is not purely legal—Gerdau relies on a judicial record of Commerce’s past
practices, an assessment of Commerce’s justifications of those practices, and an
analysis of why the unique facts of Mittal’s shipping practice do not support a deviation
from Commerce’s practice. See Consol. Bearings Co. v. United States, 348 F.3d 997,
1003 (Fed. Cir. 2003) (finding no pure question of law when a party alleged that
Commerce changed its well-established practice).
Additionally, raising the argument before Commerce would not have been futile.
To show futility, a party must demonstrate that it “would be required to go through
obviously useless motions in order to preserve [its] rights.” Corus Staal, 502 F.3d at
1379 (citations and quotation marks omitted). Moreover, we apply the exception
narrowly. Id. Gerdau argues that Commerce understood Gerdau’s position based on
Gerdau’s arguments in the initial administrative proceeding and its submissions to the
court, and that making them again would have been obviously useless. But Commerce
2008-1040, -1054 13
had requested the remand to reevaluate its credit expense calculation because of a
possible conflict with its other practices. That request indicates that Commerce might
have been receptive to counter-arguments. Commerce also explicitly requested
comments from the parties on its draft remand determination, and Gerdau did not
comment. Given that Gerdau never disputed the remand, Commerce could have
reasonably assumed that Gerdau, much like Commerce itself, was persuaded by
Mittal’s arguments and no longer opposed revision of the credit expense calculations.
The futility exception thus does not apply. We therefore hold that Gerdau failed to
exhaust its administrative remedies.
Even if Gerdau had preserved the issue for appeal, we would affirm Commerce’s
determination to begin the credit expense period on the invoice date as supported by
substantial evidence and not contrary to law. The issue in Gerdau’s cross-appeal is
when Mittal actually began to incur credit expenses. “Credit expenses are the costs
associated with carrying accounts receivable on the books and the expenses related to
extending credit to purchasers for the interim between shipment and payment.”
AIMCOR, 141 F.3d at 1111 n.21. Even though, as Gerdau points out, Commerce’s
standard practice is to begin calculating credit upon the date of shipment, Commerce
explained in its remand determination that Mittal has an exceptional case that provides
a reason to deviate from Commerce’s normal practice. For most companies,
irrespective of the date of sale, once goods have been shipped from a foreign port, the
material terms of sale have been set, as the seller may not then sell those goods to
another customer. See Silicomanganese from India, 67 Fed. Reg. 15,531 &
accompanying Issues and Decisions Mem., cmt. 19, available at
2008-1040, -1054 14
http://ia.ita.doc.gov/frn/summary/india/02-7952-1.txt (Dep’t of Commerce Apr. 2, 2002)
(beginning the credit period on the date of shipment because “at this point, the company
has identified a specific customer and, therefore, the goods are no longer available for
general sale”). Thus, at that point, the seller has extended credit to a specific buyer. In
Mittal’s case, however, record evidence shows that the material terms of sale were not
set before the invoice date, and Mittal therefore retained control of the goods until the
invoice date. Thus, no credit was extended to Mittal until the invoice date. Commerce’s
judgment calculating credit expenses beginning on the invoice date was therefore
supported by substantial evidence and was not contrary to law.
CONCLUSION
Accordingly, the judgment of the United States Court of International Trade is
affirmed.
AFFIRMED
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