Al Tech Specialty Steel Corp. v. United States

Court No. 98-10-03054



FINAL RESULTS OF REDETERMINATION

PURSUANT TO COURT REMAND



SUMMARY



The Department of Commerce (the Department) has prepared these final results of redetermination pursuant to the remand from the Court of International Trade (CIT) in Al Tech Specialty Steel Corp. v. United States, Court No. 98-10-03054 (CIT October 31, 2000). This remand covers the final antidumping duty determination of sales at less than fair value on stainless steel wire rod from Korea in light of the decision of the U.S. Court of Appeals for the Federal Circuit (Federal Circuit) in AK Steel v. United States, 226 F.3d 1330 (Fed. Cir. 2000) (AK Steel).

For these final remand results, we have reviewed the classification of the U.S. sales of Changwon Specialty Steel Co., Ltd. (Changwon) under the AK Steel decision, and have reclassified Changwon's U.S. sales as constructed export price (CEP) sales.

BACKGROUND

On July 29, 1998, the Department published in the Federal Register a notice of final determination of sales at less than fair value on stainless steel wire rod from Korea. See Notice of Final Determination of Sales at less than Fair Value: Stainless Steel Wire Rod from Korea, 63 FR 40404 (July 29, 1998) (Final Determination). On September 15, 1998, the Department published in the Federal Register a notice of amendment of final determination of sales at less than fair value and antidumping duty order on stainless steel wire rod from Korea. See Notice of Amendment of Final Determination of Sales at Less Than Fair Value and Antidumping Duty Order: Stainless Steel Wire Rod From Korea, 63 FR 49331 (September 15, 1998). In the Final Determination, the Department determined that, consistent with the standard developed in PQ Corp. v. United States, Changwon's U.S. sales were properly classified as export price (EP) sales. See PQ Corp. v. United States, 652 F. Supp. 724, 733-35 (Ct. Int'l Trade 1987) (PQ Corp.); and Final Determination, 63 FR at 40418.

Subsequent to the Final Determination (and during the pendency of the litigation) in this case, the Federal Circuit issued its opinion in AK Steel. (1) In its opinion, the Court determined that the PQ Test utilized by Commerce is inconsistent with the relevant statutory provisions. Because we relied on the PQ Corp. test for purposes of classifying Changwon's U.S. sales in the Final Determination in this case, we are reconsidering that determination in light of the Federal Circuit's decision in AK Steel.

On January 12, 2001, we released our Draft Results of Redetermination Pursuant to Court Remand for comment. On January 26, 2001, we received comments on the Draft Results from the respondents, Pohang Iron and Steel Co., Ltd. (POSCO), Changwon, and Dongbang Special Steel Co., Ltd. (Dongbang), and from the petitioners, Al Tech Specialty Steel Corporation, Carpenter Technology Corp., Republic Engineered Steels, Talley Metals Technology, Inc., and United Steelworkers of America, AFL-CIO/CLC. Upon consideration of the comments, our determination to treat the sales in question as CEP transactions remains unchanged from our Draft Results. However, due to changes in our calculations as a result of consideration of the parties' comments, as noted below, the margin has changed from our Draft Results.

DISCUSSION

Section 772(a) of the Tariff Act of 1930, as amended (the Act) defines EP as "the price at which the subject merchandise is first sold (or agreed to be sold) before the date of importation by the producer or exporter of the subject merchandise outside of the United States to an unaffiliated purchaser in the United States, or to an unaffiliated purchaser for exportation to the United States, as adjusted." See 19 U.S.C. 1677a(a). Section 772(b) of the Act defines CEP as "the price at which the subject merchandise is first sold (or agreed to be sold) in the United States before or after the date of importation by or for the account of the producer or exporter of such merchandise or by a seller affiliated with the producer or exporter, to a purchaser not affiliated with the producer or exporter, as adjusted." See 19 U.S.C. 1677a(b). In 1987, Commerce developed a three-part test (i.e., the PQ Corp. test) for determining whether sales should be classified as EP or CEP. (2) Under the PQ Corp. test, Commerce would classify sales made by U.S. affiliates as EP sales if the following criteria were met:

  • the subject merchandise was shipped directly from the manufacturer to the unrelated buyer, without being introduced into the inventory of the related shipping agency;
  • direct shipment from the manufacturer to the unrelated buyer was the customary channel for sales of the merchandise between the parties involved; and

(3) the related selling agent in the United States acted only as a processor of sales-related documentation and a communication link with the unrelated U.S. buyer.



652 F. Supp. at 733-35. In the Final Determination in this case, the Department applied the PQ Corp. test and determined that Changwon's sales should be classified as EP sales. See 63 FR at 40418.

In finding that the PQ Corp. test was inconsistent with the statute, the Court in AK Steel explained, "Congress provided for only two mutually exclusive categories: EP and CEP sales. In distinguishing the two, Congress opted for what can be seen as a structural approach to defining EP and CEP sales, not the function-driven approach of the PQ Test." 226 F.3d at 1371. The Court explained that, consistent with the statutory language, "the location of the sale and the identity of the seller are critical to distinguishing between the two categories." Id. (internal citations omitted). Based upon this reasoning, the Court held that:

if the contract for sale was between a U.S. affiliate of a foreign producer or exporter and an unaffiliated U.S. purchaser, then the sale must be classified as a CEP sale. Stated in terms of the EP definition: if the sales contract is between two entities in the United States, and executed in the United States and title will pass in the United States, it cannot be said to have been a sale "outside the United States"; therefore the sale cannot be an EP sale. Similarly, a sale made by a U.S. affiliate or another party other than the producer or exporter cannot be an EP sale.
Id. at 1374.

Based upon the Court's reasoning in AK Steel, we now find that Changwon's sales are classifiable as CEP sales. In making this determination, the Department has examined the circumstances surrounding Changwon's U.S. sales process in order to assess whether the reviewed sales were made "in the United States . . . by a seller affiliated with the producer or exporter" as defined in section 772(b) of the Act. The record in this case shows that Changwon's U.S. sales during the period of investigation (POI) were made and executed with the assistance of two of its affiliates: POSCO Steel Sales & Service Co., Ltd. (POSTEEL), its Korean affiliate, and Pohang Steel America Corporation (POSAM), its U.S. affiliate. POSAM served as a point of contact for Changwon's U.S. customers, and relayed price inquiries and purchase orders from U.S. customers to and from Changwon through POSTEEL. After Changwon approved and produced the orders for its U.S. sales, POSTEEL and POSAM arranged for transportation of Changwon's merchandise to the U.S. customers. During this process, title passed from Changwon to POSTEEL, and then to POSAM (in what has been referred to as a back-to-back transaction). POSAM then invoiced Changwon's U.S. customers, and received payment from these U.S. customers.

Changwon's only direct contact with its U.S. customers during the POI was during an export strategy meeting held in March 1997 to discuss future terms of sale, payment, and delivery terms with these customers. Although this meeting established a basis for future sales between Changwon (and/or its affiliate) and its U.S. customers, the record contains no evidence of any sales contract or other direct involvement between Changwon and the U.S. customers.

Based upon these facts, including POSAM's role in invoicing and receiving payment from Changwon's U.S. customers, and Changwon's lack of direct contact with its U.S. customers, we have determined, consistent with the AK Steel decision, that Changwon's U.S. sales were made in the United States by its U.S. affiliate, and thus, are properly classified as CEP sales. For the details of our revised calculations, see Calculation Memorandum for the Final Results of Remand: Final Determination of Sales At Less Than Fair Value of Stainless Steel Wire Rod from Korea.

INTERESTED PARTY COMMENTS

Comment 1: Classification of Changwon's U.S. Sales

The respondents note, without specific explanation, that they disagree with the Department's determination to treat Changwon's U.S. sales as CEP transactions, rather than EP transactions. The petitioners did not comment on this issue.

DOC Position:

As we stated above, based on the facts in this case, and consistent with the Federal Circuit's decision in AK Steel, we have determined that Changwon's U.S. sales were made in the United States by its U.S. affiliate, and thus, are properly classified as CEP sales.

Comment 2: Calculation of Total Home Market Revenue

The petitioners and the respondents both argue that the Department failed to include duty drawback and interest revenue on home market sales in the total home market revenue used in the CEP profit calculation.

DOC Position:

We agree with the parties and have included duty drawback and interest revenue on home market sales in the total home market revenue used to calculate CEP profit.

Comment 3: Omission of Expenses from the CEP Profit Calculation

The respondents argue that the Department improperly excluded foreign movement expenses incurred by Changwon and Dongbang on their U.S. sales, and bank charges incurred by Dongbang for its home market and U.S. sales, from the CEP profit calculation. In regard to the bank charges, the respondents point out that these expenses, which were reported in the fields CREDIT2H and CREDIT2U, are incurred for, and directly related to, Dongbang's sales, and therefore should be included in the CEP profit calculation.

DOC Position:

We agree with the respondents. Consistent with Import Administration Policy Bulletin 97.1, Calculation of Profit for Constructed Export Price Transactions, and in accordance with section 772(f) of the Act, we have included foreign movement expenses incurred by Changwon and Dongbang on their U.S. sales, and bank charges incurred by Dongbang for its home market and U.S. sales, in the CEP profit calculation.

Comment 4: Calculation of Net U.S. Prices

The petitioners argue that the Department failed to deduct foreign movement expenses incurred by Changwon on U.S. sales in calculating net prices for CEP sales. The respondents contend that the Department failed to include interest revenue on U.S. sales in the calculation of net prices for all U.S. sales.

DOC Position:

We agree with the parties, and have made the appropriate changes to the calculation of net prices for U.S. sales.



FINAL RESULTS OF REMAND REDETERMINATION

As a result of this redetermination, the weighted-average dumping margin of the collapsed entity of Changwon, Dongbang, and POSCO is 5.77 percent; and the "All Others Rate" is 5.77 percent.

_____________________________________
Bernard T. Carreau, fulfilling the duties of
Assistant Secretary for Import Administration

______________________________________
Date

1. Note, on February 23, 2000, the Federal Circuit first issued an opinion in AK Steel, No. 99-1296. See 203 F.3d 1330 (Fed. Cir. 2000). The Korean producers then filed a petition for rehearing and suggestion for rehearing en banc. The Federal Circuit granted the petition for rehearing for the limited purpose of clarifying the Court's opinion. As a result, the Court withdrew the previous opinion and issued a revised opinion on September 12, 2000. See AK Steel, 226 F.3d 1330 (Fed. Cir. 2000). All references to AK Steel in this remand refer to the revised, September 12, 2000, opinion.

2. The statutory provisions in 1987 actually referred to "purchase price" (now EP) and "exporter's sales price" (now CEP). The effect of the amendments to the language in the statute is discussed thoroughly in the Court's opinion in AK Steel. Because this remand determination focuses solely on the meaning and application of the current statutory provisions (and does not apply the previously developed PQ Corp. test), the question of the effect of these amendments is not at issue here.