Industry News

Court of Appeals Issues Important Decision on Agency Discretion

Mar. 21, 2022

David B. Sessions, Contract Attorney

On March 11, the U.S. Court of Appeals for the Federal Circuit (CAFC) issued a decision in NexteelCo., Ltd. v. United States, Appeal Nos. 2021-1334, 2021-1430, Slip Op. (Fed. Cir. Mar. 11, 2022) addressing the Department of Commerce’s (the “Department”) capacity to find a “particular market situation” in calculating constructed value in an antidumping duty investigation or administrative review.

Background: In 2016, the Department initiated the second administrative review of the antidumping duty order on oil country tubular goods (“OCTG”) from South Korea, covering the period from September 1, 2015 through August 31, 2016. In that review, the Department had to calculate normal value based on constructed value pursuant to 19 U.S.C. § 1677b(a)(4). In calculating costs, the Department found that four distinct circumstances created a “particular market situation” affecting two inputs to OCTG—hot-rolled coil (“HRC”) and electricity. Specifically, the Department “found a particular market situation ‘based on the collective impact of Korean HRC subsidies, Korean imports of HRC from China, strategic alliances, and government involvement in the Korean electricity market.’” On the basis of that finding, the Department adjusted the cost of HRC in its constructed value calculation so that the cost of HRC more closely aligned with the value of that input in the ordinary course of trade. Respondents appealed this and other aspects of the Department’s Final Results to the Court of International Trade (“CIT”).

The CIT concluded that the Department’s particular market situation finding was not supported by substantial evidence and remanded for further assessment. On remand, the Department continued to find a particular market situation; however, this time, the Department relied on a fifth factor in addition to the other four: government-supported steel industry restructuring in South Korea. Respondents appealed this finding to the CIT, and the CIT again concluded that the Department’s finding was unsupported by substantial evidence. Specifically, the court found that none of the five circumstances cited by the Department provided the substantial evidence to support the particular market situation finding, “both when viewing the five factors individually and collectively.” NEXTEEL Co. v. United States, 450 F.Supp. 3d 1333, 1343 (Ct. Int’l Trade 2020). However, instead of remanding to the Department for a second time, the CIT reversed the Department’s finding based on its independent assessment and weighing of the record evidence. Petitioner appealed the decision to the U.S. Court of Appeals for the Federal Circuit.

Holding: The U.S. Court of Appeals for the Federal Circuit agreed with the CIT that three of the five circumstances cited by the Department could neither independently nor collectively provide the substantial evidence needed to support a particular market situation finding; however, the court found that the record evidence was mixed with respect to the other two circumstances and, therefore, did not support only one outcome, especially since the Department expressly reserved discretion to decide whether the aforementioned circumstances individually or collectively provided the necessary support for its finding (see Final Results memo). Accordingly, the court held that the CIT impermissibly reversed the Department’s finding and should have remanded to allow the Department to further develop the record or explain itself in light of the conflicting evidence.

This case is another reminder that the Department has considerable latitude to develop the record and explain its findings in AD/CVD proceedings and that courts will typically defer to the Department’s findings, explanations, and methodologies unless they are contrary to law or clearly precluded by record evidence.

If you have any questions about the application of antidumping or countervailing duties do not hesitate to contact any attorney at Barnes, Richardson & Colburn, LLP.