Commerce Failed to Show How Indian Market Phenomena Create PMS, Trade Court Rules
The Commerce Department failed to explain how a particular market situation existed for hot-rolled coil in the Indian market such that it affected antidumping duty respondents' costs of production, the Court of International Trade said in a March 11 opinion made public March 21. Judge Claire Kelly said that while Commerce identified market phenomena that could have distorted the price of HRC, the agency failed to show how the collective impact of these phenomena is unique to the Indian market and constitutes a PMS. Kelly also remanded Commerce's regression analysis used to adjust for the PMS, should the agency find that one still exists.
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The case involves the 2017-18 administrative review of the antidumping duty order on welded carbon steel standard pipes and tubes (CWP) from India. Garg Tube Export, a mandatory respondent in the review, brought its case to CIT after Commerce made the PMS adjustment for hot-rolled coil, a key input for CWP and applied adverse facts available for the non-cooperation of an unaffiliated supplier. In the case's first opinion, Kelly remanded the PMS adjustment and use of partial AFA (see 2107210065).
On remand, Commerce switched its use of partial AFA to neutral facts available given that Garg didn't have the market power to make the unaffiliated supplier cooperate -- a position uncontested by all parties. The agency also dropped its PMS adjustment to the sales-below-cost test. Kelly sustained these positions but ruled against Commerce's remaining positions.
Commerce determined a PMS existed for HRC in India due to global steel overcapacity, the Indian government's trade interventions and Garg's nonpayment of antidumping and safeguard duties on HRC imports. The judge said that in doing so, Commerce failed to show how these market phenomena gave rise to a unique set of facts distorting the cost of materials or other processing such that the respondent's cost of production isn't within the normal course of trade.
"A global market condition is not a unique market phenomenon," the court said. "The existence of trade remedies and subsidies are not unique market phenomena, nor are the exceptions to the imposition of trade remedies." The agency also doesn't explain how this supposed PMS distorts Garg's costs so that the company's reported production costs aren't accurate in the ordinary course of trade, the judge said. Kelly ruled that Commerce must either further explain its PMS position to make a cogent case for why these phenomena cause a unique situation for Indian HRC to distort the cost of production outside the normal course of trade or drop the issue.
The judge then turned to Commerce's regression analysis -- the means by which Commerce makes the PMS adjustment. The agency does this through an ordinary least squares regression model it lifted from the AD petitioners. The model uses a 2017 counterfactual HRC price using HRC prices from eight countries including India using an 80% utilization rate. Commerce took the estimated regression coefficient for uneconomic capacity and multiplied it by percent reduction in uneconomic capacity that's required to reduce overall production capacity to implied capacity. The result was a 10.30% increase in Indian HRC prices, the court said.
The judge found certain elements of Commerce's model to be reasonable, including Commerce's decision to quantify a PMS adjustment using an ordinary least squares regression model and rely on the regression coefficient for uneconomic capacity of the counterfactual HRC price. What was unreasonable though was, among other things, Commerce's application of its selected methodology in the regression model, Kelly said. For instance, Commerce ran its model without satisfying certain assumptions.
Commerce also said it reduced the number of countries analyzed from 38 to eight. Kelly questioned the validity of such a move. "A significant reduction in the sample size without further explanation calls into question whether the eight remaining countries are a representative sample of the population or cherry-picked to favorably manipulate the results of the OLS Regression Model," the opinion said. If Commerce maintains that a PMS exists, it will also have to revisit its regression analysis.
(Garg Tube Export v. U.S., Slip Op. 22-18, CIT #20-00026, dated 03/11/22, Judge Claire Kelly. Attorneys: Ned Marshak of Grunfeld Desiderio for plaintiffs Garg Tube Export and Garg Tube Ltd.; Robert Kiepura for defendant U.S. government; Robert DeFrancesco III of Wiley Rein for defendant-intervenor Nucor Tubular Products)