Viraj Group v. United States

 United States Court of Appeals for the Federal Circuit

                                     2006-1158


                                   VIRAJ GROUP,

                                                    Plaintiff-Appellant,

                                          v.


                                 UNITED STATES,

                                                    Defendant,

                                         and

                    SLATER STEELS CORPORATION,
                CARPENTER TECHNOLOGY CORPORATION,
        ELECTRALLOY CORP., CRUCIBLE SPECIALTY METALS DIVISION,
                   and CRUCIBLE MATERIALS CORP.,

                                                    Defendants-Appellees.


        Daniel P. Wendt, Miller & Chevalier, Chartered, of Washington DC., argued for
plaintiff-appellant. On the brief was Peter J. Koenig. Of counsel was Jeffery C. Lowe.

      Robin H. Gilbert, Kelley Drye Collier, Shannon, of Washington DC., argued for
defendants-appellees, Slater Steels Corporation, et al.

Appealed from: United States Court of International Trade.

Judge Judith M. Barzilay
 United States Court of Appeals for the Federal Circuit

                                      2006-1158


                                    VIRAJ GROUP,

                                                             Plaintiff-Appellant,

                                           v.

                                  UNITED STATES,

                                                             Defendant,

                                          and

                    SLATER STEELS CORPORATION,
                CARPENTER TECHNOLOGY CORPORATION,
        ELECTRALLOY CORP., CRUCIBLE SPECIALTY METALS DIVISION,
                   and CRUCIBLE MATERIALS CORP.,

                                                             Defendants-Appellees.

                           ___________________________

                           DECIDED: February 13, 2007
                           ___________________________


Before NEWMAN, LINN, and MOORE, Circuit Judges.

MOORE, Circuit Judge.

      Viraj Group appeals the decision of the United States Court of International

Trade instructing the United States Department of Commerce (“Commerce”) to treat the

Viraj Group companies as separate entities for purposes of calculating an antidumping

duty on stainless steel bar imports from India. Slater Steels Corp. v. United States, 27

I.T.R.D. (BNA) 1486 (Ct. Int’l Trade 2005) (“Slater III”).   As instructed, Commerce

calculated separate antidumping duties for the Viraj Group entities but stated that it
believed the Viraj Group companies should be treated as one entity for the duty

calculation. Redetermination Pursuant to Remand (III), Consol. Court No. 02-00551,

slip op. 05-23 (July 15, 2005) (“Remand Results III”). The Court of International Trade

affirmed the imposition of separate antidumping duties. Slater Steels Corp. v. United

States, 395 F. Supp. 2d 1353 (Ct. Int’l Trade 2005) (“Slater IV”). This appeal followed.

       Appellant argues that the Court of International Trade erred by finding that

Commerce had a prior practice of not collapsing the Viraj Group in other antidumping

reviews.    Appellant further argues that Commerce’s interpretation of its collapsing

regulation is correct, and that in accordance with that regulation, the Viraj Group entities

should be collapsed for purposes of calculating an antidumping duty.

       We agree. Accordingly, we reverse the Court of International Trade’s decisions

in Slater III and Slater IV, and instruct the Court of International Trade to vacate

Commerce’s imposition of separate antidumping duties, or margins, and reinstate

Commerce’s prior antidumping duty calculation for the Viraj Group as a collapsed entity.

                                     BACKGROUND

                                             I

       Congress has created a system for investigating and resolving antidumping

disputes.   According to this system, Commerce must make a determination as to

whether the subject merchandise is being or is likely to be sold in the United States at

“less than fair value.”   19 U.S.C. § 1673d(a)(1) (2000).         The International Trade

Commission (“ITC”) must determine whether a domestic industry exists that would

suffer material injury from the dumping activity. Id. § 1673d(b)(1). If both findings are

affirmative, the importer is subjected to an antidumping duty, which is intended to



2006-1158                                    2
equalize the prices between comparable goods sold in the United States and the

importer’s home market. See id. § 1673 (2000).

      To carry out its obligations in the antidumping context, Commerce has

promulgated regulations that guide its analyses. At issue in the present case is the

treatment of affiliated companies for purposes of calculating the antidumping duty under

19 C.F.R. § 351.401(f)(1). The regulation provides:

      In an antidumping proceeding under this part, the Secretary will treat two
      or more affiliated producers as a single entity where those producers have
      production facilities for similar or identical products that would not require
      substantial retooling of either facility in order to restructure manufacturing
      priorities and the Secretary concludes that there is a significant potential
      for the manipulation of price or production.
19 C.F.R. § 351.401(f)(1) (“collapsing regulation”). Specifically, this appeal questions

whether the Viraj Group meets each of the requirements set forth in Commerce’s

collapsing regulation, such that Commerce should treat the Viraj Group entities as one

company when calculating an appropriate dumping margin.

                                            II

      In 1995, Commerce issued the antidumping order central to this dispute,

covering stainless steel bars from India. Stainless Steel Bar from Brazil, India, and

Japan, 60 Fed. Reg. 9,661 (Dep’t of Commerce Feb. 21, 1995) (“the SSB Order”).

Under an antidumping order, such as the SSB Order, Commerce is required to conduct

an administrative review for each new importer of the subject merchandise as well as to

review entries for subject merchandise for any prior one-year period upon request.

      The present review involves Viraj’s stainless steel bar imports during the period

from February 1, 2000 to January 31, 2001 (“the ’00-‘01 POR”). For the ’00-’01 POR,

the relevant Viraj Group companies are: (1) Viraj Impoexpo, Ltd. (“VIL”), (2) Viraj Alloys,


2006-1158                                   3
Ltd. (“VAL”), and (3) Viraj Forgings, Ltd. (“VFL”). The subject merchandise includes two

types of steel bar products, stainless steel hot-rolled bar (“black bar”) and stainless steel

cold-rolled bar (“bright bar”).

       In 2002, Commerce made a final determination that the Viraj Group should be

collapsed (i.e., treated as a single entity) for calculating its dumping margin, and it

assigned the Viraj Group a single de minimis dumping margin of 0.47%. Stainless Steel

Bar from India, 67 Fed. Reg. 45,956 (Dep’t of Commerce July 11, 2002) (final admin.

review). On appeal, the Court of International Trade questioned Commerce’s decision

to collapse, focusing primarily on whether the Viraj Group companies had the type of

production capabilities required under the collapsing regulation to support Commerce’s

decision. Slater Steels Corp. v. United States, 279 F. Supp. 2d 1370, 1376-79 (Ct. Int’l

Trade 2003) (“Slater I”).     Finding that Commerce’s decision was not supported by

substantial evidence, the Court of International Trade remanded to Commerce to

reanalyze the collapsing decision and “if necessary, to revise its dumping margin

calculation.” Id. at 1379.

       Commerce thereafter reconsidered its collapsing analysis and again determined

that collapsing was permissible under its regulation because VAL could produce

equivalent products as VIL by adding annealing and pickling equipment to its facilities.

Final Results of Redetermination Pursuant to Remand (I), Consol. Court No. 02-00551,

slip op. 03-108, at 9 (Oct. 24, 2003) (“Remand Results I”). This retooling was not

“substantial” because Commerce estimated that it would require “less than 10 percent

of [VAL’s] current fixed asset value” to carry out.        Id.   On appeal, the Court of

International Trade disagreed with Commerce’s interpretation of its collapsing regulation



2006-1158                                    4
as not requiring analysis of the retooling that each company would need in order to

produce similar or identical products. Slater Steels Corp. v. United States, 316 F. Supp.

2d 1368, 1375 (Ct. Int’l Trade 2004) (“Slater II”). The Court of International Trade

remanded again, concerned that Commerce focused solely on the retooling that VAL

would need to produce VIL’s products, without consideration of the retooling VIL would

need to produce VAL’s products. Id. In Slater II, the Court of International Trade also

questioned how Commerce determined that less than ten percent of a company’s fixed

assets did not constitute “substantial retooling.”     Id. at 1379.   Finally, the Court of

International Trade criticized Commerce’s failure to address whether the “major input

rule” might have been more appropriate than collapsing for treatment of the affiliated

Viraj Group companies. Id. at 1380.

       On remand again, Commerce addressed each of the concerns that the Court of

International Trade raised in Slater II.    Final Results of Redetermination Pursuant to

Remand (II), Consol. Court No. 02-00551, slip op. 04-22 (May 7, 2004) (“Remand

Results II”).   Commerce explained that the regulation states collapsing is appropriate

where substantial retooling would not be required for “either facility,” which means that

Commerce needs only to consider whether retooling could occur in one direction. Id. at

9-21. Commerce also explained that its ten percent estimation was conservative and

detailed why a more precise calculation (2.88%) did not amount to a “substantial

retooling.” Id. at 33-38. Finally, Commerce defended its practice of not considering the

major input rule in its collapsing analysis. Id. at 38-41.

       Slater Steels Corporation (“Slater”) appealed this decision to the Court of

International Trade. Before the court ruled on the appeal, Slater submitted an ex parte



2006-1158                                     5
letter to the court, asking the court to consider its intervening decision in Carpenter

Technology Corp. v. United States, 344 F. Supp. 2d 750 (Ct. Int’l Trade 2004)

(“Carpenter”). In Carpenter, the Court of International Trade considered the dumping

margins assessed on the Viraj Group under an unrelated antidumping order involving

wire rods (“the Wire Rod Order”).       The Court of International Trade, in Carpenter,

reversed a decision by Commerce to collapse the Viraj Group for the review because it

found that collapsing was inexplicably inconsistent with Commerce’s prior treatment of

the Viraj Group under the Wire Rod Order. Id. at 755. Specifically, during an earlier

review period under the Wire Rod Order, Commerce affirmatively decided not to

collapse the Viraj Group, a decision that was affirmed by the Court of International

Trade on appeal. Viraj Group Ltd. v. United States, 162 F. Supp. 2d 656 (Ct. Int’l Trade

2001). Accordingly, in Carpenter, the court would not allow Commerce to depart from

its prior practices under the Wire Rod Order without valid reason.          After reviewing

Carpenter and its possible implications in the present review, the court issued a letter on

October 5, 2004, asking Commerce to “indicate what, if any, factual changes have

occurred prior to the [’00-’01 POR] such that its decision to collapse the Viraj Group

companies should not be remanded as it was in Carpenter?”

       Commerce responded to the court’s October 5th letter in a memorandum dated

November 12, 2004.         Commerce’s memorandum explained at length how the

underlying decision in Carpenter should not impact its decision in the current review

because it involved “different products; a different production process; different case

history . . . a different period of review; and different facts specifically contained in the

administrative record under review.”      Commerce’s memorandum further addressed



2006-1158                                    6
treatment of the Viraj Group under the SSB Order. Commerce erroneously stated that

the Viraj Group had only once before been reviewed under the SSB Order during a

period of review from 1998-1999 (“the ’98-’99 review”).           In the ’98-’99 review,

Commerce explained that it did not make an explicit determination as to whether or not

to collapse the Viraj Group due to insufficiencies in the Viraj Group’s questionnaire

responses.    Instead, Commerce applied adverse facts to the Viraj Group for its

Preliminary Results, and applied neutral available facts to the Viraj Group for its Final

Determination. See 65 Fed. Reg. 48,965 (Dep’t of Commerce Aug. 10, 2000); 65 Fed.

Reg. 12,209 (Dep’t of Commerce Mar. 8, 2000). Commerce reasoned that nothing in

the ’98-’99 review prevented it from affirmatively collapsing the Viraj Group in the

current review.

       Slater responded to the Court of International Trade’s inquiry and Commerce’s

memorandum, noting that the Viraj Group had been reviewed prior to the ’98-’99 review

under the SSB Order. Specifically, in 1995, when the Viraj Group began importing

stainless steel bars into the United States, it took part in a new shipper review (“the new

shipper review”). Slater argued that the record shows that Commerce “made a decision

not to collapse the Viraj Group companies” in the new shipper review.            This was

evident, Slater contended, from Commerce’s use of the price paid by VIL to VAL as the

input price in calculating VAL’s production costs. Thus, for the first time, the actions of

Commerce in the new shipper review became part of the record for the ’00-’01 POR.

       The Court of International Trade considered the submissions of Commerce and

Slater and found that Commerce’s decision in the ’00-’01 POR to collapse the Viraj

Group was inconsistent with Commerce’s previous determinations and Commerce had



2006-1158                                   7
not provided an adequate explanation for departure therefrom. Slater III, 27 I.T.R.D.

1486, at *18-22. Thus, the court held that Commerce’s “prior practice” dictated the

result, and the Court of International Trade instructed Commerce not to collapse the

Viraj Group, but rather, to calculate and impose individual dumping margins upon VAL

and VIL/VFL.1 Id. at *24.

       Commerce complied with the court’s instruction in Remand Results III,

calculating separate dumping margins for VAL and VIL/VFL.2             Commerce stated,

however, that it “respectfully disagrees with the Court’s order” and that it continued to

believe that collapsing the Viraj Group was appropriate for the ’00-’01 POR. Remand

Results III, at 5.   In addition, Commerce disagreed with the Court of International

Trade’s finding that Commerce had a “prior practice” of not collapsing the Viraj Group

during the reviews under the SSB Order. Commerce concluded that collapsing the Viraj

Group for the ’00-’01 POR was not inconsistent with its prior actions. Id. at 9-12.

       The Court of International Trade affirmed Commerce’s dumping margin

calculation in Remand Results III.    Slater IV, 395 F. Supp. 2d at 1353.     Viraj Group

challenges those decisions on appeal.      We have jurisdiction pursuant to 28 U.S.C.

§ 1295(a)(5).



       1
                The court noted that neither party objected to Commerce’s decision to
collapse VIL with VFL. Accordingly, the Court of International Trade did not consider
whether that collapsing determination was proper, stating “Commerce may consider
collapsing VIL and VFL in accordance with the court’s opinions in Slater I and Slater II.”
Slater III, 27 I.T.R.D. 1486, at *24.
       2
              Commerce again found in Remand Results III that VIL and VFL should be
collapsed. Remand Results III, at 5. That decision has not been challenged by any of
the parties. Accordingly, for the remainder of this opinion, we treat VIL and VFL as one
entity.

2006-1158                                   8
                                     DISCUSSION

      In reviewing judgments from the Court of International Trade in antidumping

proceedings, this court reapplies the “substantial evidence” standard prescribed at 19

U.S.C. § 1516a(b)(1)(B)(i) to the underlying Commerce decision. Atl. Sugar, Ltd. v.

United States, 744 F.2d 1556, 1559 n.10 (Fed. Cir. 1984). This court must reverse a

determination that is “unsupported by substantial evidence on the record, or otherwise

not in accordance with law.” 19 U.S.C. § 1516a(b)(1)(B)(i).       Our responsibility is to

ascertain whether Commerce’s decision is supported by substantial evidence on the

“record as a whole, including that which ‘fairly detracts from its weight.’” Nippon Steel

Corp. v. United States, 458 F.3d 1345, 1351 (Fed. Cir. 2006) (citations omitted).

                                            I

        In this case, we agree with Commerce that it did not have a prior practice of

collapsing the Viraj Group that would dictate the result in the present case. Both parties

admit that there was no explicit determination in either the new shipper or the ’98-’99

reviews to collapse the Viraj Group. Commerce’s actions in the ’98-’99 review appear

consistent with collapsing the Viraj Group, and, contrary to Slater’s urging, we find no

inference can be drawn from its application of the major input rule in the new shipper

review. The new shipper review took place prior to this court’s decision in AK Steel

Corp. v. United States, where Commerce changed its practice toward affiliated

companies.    226 F.3d 1361 (Fed. Cir. 2000).         In AK Steel, this court affirmed

Commerce’s decision to no longer apply the major input rule once it had determined to

collapse affiliated companies. Id. at 1376. Because the new shipper review occurred

prior to AK Steel, we find it unreasonable to infer, based on Commerce’s decision to



2006-1158                                   9
apply the major input rule in that review, that it had determined not to collapse the Viraj

Group. Accordingly, there is no inconsistency between Commerce’s prior practices and

its determination in this case that the Viraj Group should be collapsed.

                                            II

       The Viraj Group next argues that the decision not to collapse the Viraj Group

under Commerce’s collapsing regulation, as properly interpreted, is not supported by

substantial evidence. According to its regulation, Commerce collapses companies that

satisfy a three-part test: (1) the companies must be affiliated pursuant to 19 U.S.C.

§ 1677(33), (2) the companies must have “production facilities for similar or identical

products that would not require substantial retooling of either facility in order to

restructure manufacturing priorities,” and (3) there must be “significant potential for the

manipulation of price or production.” 19 C.F.R. § 351.401(f)(1).

       The parties only dispute whether the second prong of Commerce’s three-part

collapsing test is satisfied. Central to this analysis is the proper interpretation of the

collapsing regulation, as Commerce and the Court of International Trade apply different

interpretations to three aspects of the second prong.

       When reviewing Court of International Trade decisions, we review de novo the

proper interpretation of the governing statutes and regulations. Guess?, Inc. v. United

States, 944 F.2d 855, 857 (Fed. Cir. 1991).       If a regulation is clear on its face, no

deference is given to the promulgating agency’s interpretation, as we interpret the

regulation in accordance with its clear meaning. Christensen v. Harris County, 529 U.S.

576, 588 (2000). Where a regulation is ambiguous, however, we give the promulgating

agency’s interpretation substantial deference “as long as . . . the agency’s interpretation



2006-1158                                   10
is neither plainly erroneous nor inconsistent with the regulation.”    Gose v. U.S. Postal

Serv., 451 F.3d 831, 836 (Fed. Cir. 2006). In this context, “[d]eference to an agency's

interpretation of its own regulations is broader than deference to the agency's

construction of a statute, because in the latter case the agency is addressing

Congress’s intentions, while in the former it is addressing its own.” Cathedral Candle

Co. v. U.S. Int’l Trade Comm’n, 400 F.3d 1352, 1363-64 (Fed. Cir. 2005).

                                             A

       The first interpretive inquiry is whether the word “either” in the collapsing

regulation requires that all of the facilities be able to restructure without substantial

retooling, or whether the test is satisfied if any one of the facilities can. The Court of

International Trade stated that the regulation “appears to require that Commerce

examine the production facilities of both (or all) companies and evaluate the possibility

that production may be shifted from one company to another and vice versa.” Slater II,

316 F. Supp. 2d at 1375. Commerce, on the other hand, does not believe that its

regulation requires the possibility of shifting production among companies in either

direction, but rather, that it is appropriate to collapse if any one company could shift

production to that of the other, without substantially retooling. Remand Results II, at 9-

21.   Commerce and the Court of International Trade cite competing dictionary

definitions of the word “either” as supporting their respective positions.3 After review of

the parties’ positions, both seem reasonable and we conclude that the regulation is

ambiguous on its face. See Gose, 451 F.3d at 836.



       3
              One definition of “either” is “each of two.” Slater II, 316 F. Supp. 2d at
1375 (citing 5 Oxford English Dictionary 102 (2d ed. 1989)). An alternative definition,
listed by other dictionaries as the primary definition, is “one or the other of the two.” Id.
2006-1158                                    11
       We cannot conclude that Commerce’s definition is plainly erroneous. Moreover,

Commerce’s definition appears to be consistent with the purpose of the regulation. It

allows Commerce to collapse companies where manipulation could occur between

affiliated companies in any one direction. Because an important goal of the regulation is

to prevent such manipulation, Queen’s Flowers de Columbia v. United States, 981 F.

Supp. 617, 628 (Ct. Int’l Trade 1997), we find that Commerce’s interpretation is

consistent with that goal.   Accordingly, we hold that where any one of two related

companies could shift production to that of the other without necessitating substantial

retooling, this part of Commerce’s collapsing regulation is satisfied.

                                             B

       Next, the Court of International Trade disagreed with Commerce’s interpretation

of its regulation as focused “on whether the production facilities of the producers in

question do (or can) produce similar or identical merchandise, not on whether the

production facilities themselves are similar or identical.” Remand Results II, at 9. The

Court of International Trade’s interpretation of the collapsing regulation places the

emphasis on the production facilities, while Commerce’s interpretation focuses on the

products produced.     The Court of International Trade stated that “Commerce must

specifically address the question that the companies’ production facilities for similar

products would not require ‘substantial retooling.’” Slater II, 316 F. Supp. 2d at 1377-78

(emphasis added).

       Here, the regulation is clear on its face. The regulation on its face requires

similarity in the products produced, not in the facilities that produce them. 19 C.F.R.

§ 351.401(f). According to the clear language of the regulation, so long as the products



2006-1158                                   12
are similar or identical, different processes using different equipment could make them.

The facilities are relevant only to the examination of whether “substantial retooling”

would be necessary for the producers “in order to restructure manufacturing priorities.”

Id.

                                             C

        The final dispute regarding Commerce’s application of its collapsing regulation

involves whether Commerce should apply the major input rule when determining

whether or not to collapse related entities. The major input rule, codified at 19 U.S.C.

§ 1677b(f)(3), provides Commerce discretion in valuing one company’s production

input, when the company receives that input from an affiliated company at a price less

than the cost of production for the input. Similarly, the fair value rule is codified at 19

U.S.C. § 1677b(f)(2).     The fair value rule allows Commerce to disregard certain

transactions between affiliated companies and to value costs in the transaction based

on fair market value, as though the transaction occurred between unaffiliated

companies.

        During the present review, the Court of International Trade urged that

“Commerce must explain why it finds it unnecessary to address the relative merits of

collapsing and the major input rule as they relate to the facts of this case.” Slater II, 316

F. Supp. 2d at 1380. The Court of International Trade stated in Slater II, and Slater

argued to this court, that because VIL/VFL purchases an important, material input from

its affiliate VAL, application of the major input rule would accentuate “potential

misstatements” in costs that would arise if Viraj Group was treated as one entity. Id. at

1381.



2006-1158                                    13
       Commerce, on the other hand, explained that “unless and until [it] makes the

determination not to collapse these companies, we find that it is inappropriate to

analyze the facts of this case under the major input rule.” Remand Results II, at 39. It

is Commerce’s practice to either collapse affiliated companies or apply the major input

rule to the concerned companies, but not both. Commerce explained that it makes a

collapsing determination early in an antidumping proceeding, thereby allowing collapsed

entities to provide one set of information on its costs and sales. If the entities are not

collapsed, Commerce then evaluates the transactions between the companies and

determines whether to value inputs at cost, transfer price, or market value. The Court of

International Trade’s position would add a fourth component to the collapsing analysis,

requiring Commerce to also consider whether a higher antidumping duty could be

imposed if the companies were not treated as one. As Commerce explained, it would

be inappropriate “margin shopping” that could “impose a tremendous and potentially

unnecessary burden on the respondent and [Commerce]” if it were to consider the fair

value and major input rules prior to determining whether or not to collapse. Remand

Results II, at 17.

       Although this dispute involves Commerce’s interpretation of its collapsing

regulation, it appears more precisely to implicate whether Commerce is acting

appropriately in carrying out the statute establishing the major input rule, 19 U.S.C.

§ 1677b(f)(3).       Accordingly, we review Commerce’s actions under the framework

provided in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S.

837 (1984). In Chevron, the Supreme Court stated:

       If Congress has explicitly left a gap [in a statute] for the agency to fill, there
       is an express delegation of authority to the agency to elucidate a specific

2006-1158                                     14
       provision of the statute by regulation. Such legislative regulations are
       given controlling weight unless they are arbitrary, capricious, or manifestly
       contrary to the statute. Sometimes the legislative delegation to an agency
       on a particular question is implicit rather than explicit. In such a case, a
       court may not substitute its own construction of a statutory provision for a
       reasonable interpretation made by the administrator of an agency.
Id. at 844.

       We conclude that Congress made a “delegation on this issue to the agency.” Id.

Specifically, the major input statute states that Commerce “may determine the value of

the major input” if certain prerequisite conditions are met. 19 U.S.C. § 1677b(f)(3)

(emphasis added). This creates a gap as to when the rule should be applied if the

prerequisite conditions are met, and this court has concluded that Congress implicitly

intended for Commerce to create its own rules for implementing when to apply the

major input rule. AK Steel, 226 F.3d at 1376 (“[T]he statute leaves possible application

of the fair-value and major-input provisions to the discretion of the agency.”).

       Next, we consider whether Commerce’s practice in implementing the major input

rule is reasonable. Chevron, 467 U.S. at 844. It should be noted that our decision is

not dictated by AK Steel.     There, this court approved Commerce’s practice of not

applying the major input rule once it has properly determined that companies should be

collapsed. AK Steel, 226 F.3d at 1376. Here, we are considering Commerce’s practice

of not applying the major input rule when deciding whether or not to collapse affiliated

entities. Our conclusion, however, is the same. We find that the approach suggested

by the Court of International Trade is inappropriately results-oriented and would create a

tremendous burden on Commerce that is not required or suggested by the statute.

Commerce’s practice, to either treat affiliated companies as one or to consider

transactions among the companies under the fair value and major input rules, is


2006-1158                                   15
reasonable. Accordingly, we reverse the decision of the Court of International Trade to

the extent that Commerce was required to apply the major input rule when analyzing

whether to collapse affiliated entities under 19 C.F.R. § 351.401(f).

                                             III

       Given the proper interpretation of the collapsing regulation, the inquiry becomes

whether substantial evidence in the record supports the decision to collapse the Viraj

Group.4 See Nippon Steel Corp., 458 F.3d at 1351. We find that it does.

       VAL has production facilities to melt steel and cast billets, and to transform billets

into black bar. This includes equipment for cutting and heating, as well as a flat and bar

mill. VIL and VFL have production facilities to transform black bar into bright bar. This

includes equipment for cutting, heating, annealing and pickling, and cold-forming. In

order for VAL to make a product identical to that produced by VIL/VFL (i.e., bright bar),

it would need to add annealing and pickling, and cold-forming equipment. Remand

Results II, at 11-12.

       Commerce calculated that this retooling would require 2.88%5 of VAL’s

production-related assets. Commerce determined this was not “substantial” based on

the following evidence.     Although VAL reported losses during the ’00-’01 POR, it



       4
              Commerce has consistently maintained that the Viraj Group should be
collapsed. Remand Results III, at 8; Remand Results II, at 39; Remand Results I, at 14;
67 Fed. Reg. 45,956 (Dep’t of Commerce July 11, 2002). While the Court of
International Trade’s decision in Slater IV is the decision that has been directly
appealed, the proper inquiry is whether the Court of International Trade’s order in Slater
III was correct.
       5
             Commerce arrived at this number using VAL’s production machinery
assets as the denominator (335,937,034 Rupees) with VIL’s total production related
assets value (9,663,584 Rupees) as the numerator.


2006-1158                                    16
increased its production-related assets during the year by 5,582,079 Rupees

(approximately two-thirds the investment needed to produce bright bar). In addition,

during the ’00-’01 POR, VAL reported 1,635,750,466 Rupees in sales, and it received

883,280,559 Rupees in loans (more than ninety times the investment needed to

produce bright bar). Id. at 33-36.

       The evidence of record supports Commerce’s conclusion that the retooling that

VAL would need to undertake to produce bright bar would not be “substantial.”6 The

record establishes that VAL and VIL/VFL have “production facilities for similar or

identical products that would not require substantial retooling of either facility in order to

restructure manufacturing priorities.” 19 C.F.R. § 351.401(f). Accordingly, the Viraj

Group companies meet each of the three parts of Commerce’s collapsing regulation,

and collapsing the Viraj Group for purposes of calculating a single antidumping duty is

therefore appropriate.

                                      CONCLUSION

       We hold that the Court of International Trade erred in finding that Commerce had

a prior practice that dictated not collapsing VAL with VIL/VFL when calculating an

appropriate antidumping duty. Moreover, the decision to collapse the Viraj Group is

supported by substantial evidence when analyzing the companies under Commerce’s

properly interpreted collapsing regulation.       Accordingly, we reverse the Court of

International Trade’s decisions in Slater III and Slater IV, set aside Commerce’s



       6
               Commerce also noted that it took VFL less than one year to commission,
install, and expense its new forging production equipment, which is more complex than
the finishing equipment in the retooling at issue. Remand Results II, at 37-38. Thus, to
the extent that time for retooling should be a consideration, this too seems to establish
that the retooling would not be substantial.
2006-1158                                    17
dumping margin calculation in Remand Results III, and direct the Court of International

Trade to reinstate Commerce’s determination in Remand Results II.

                            REVERSED and REMANDED




2006-1158                                 18