Nucor Corp. v. United States

Slip Op. 09-20

UNITED STATES COURT OF INTERNATIONAL TRADE

______________________________________________

NUCOR CORPORATION, GERDAU :

AMERISTEEL CORPORATION, and

COMMERCIAL METALS COMPANY, :

Plaintiffs, :

v. :

UNITED STATES, :

Defendant, :

and :

IÇDAS CELIK ENERJI TERSANE VE :

ULASIM SANAYI, A.S.,

:

Defendant-Intervenor. Consolidated

__________________________________________: Court No. 05-00616

IÇDAS CELIK ENERJI TERSANE VE

ULASIM SANAYI, A.S., :

Plaintiff, :

v. :

UNITED STATES, :

Defendant, :

and :

NUCOR CORPORATION, GERDAU :

AMERISTEEL CORPORATION, and

COMMERCIAL METALS COMPANY, :

Defendant-Intervenors. :

__________________________________________________

[Denying Plaintiffs/Defendant-Intervenors Domestic Producers’ Motion for Judgment on the

Agency Record, granting in part Defendant-Intervenor/Plaintiff ICDAS’ Motion for Judgment on

the Agency Record, and remanding action to agency.]

Dated: March 24, 2009

Court No. 05-00616 Page 2

Wiley Rein LLP (Alan H. Price, John R. Shane, M. William Schisa, and Maureen E.

Thorson), for Plaintiffs/Defendant-Intervenors Nucor Corporation, Gerdau AmeriSteel Corporation,

and Commercial Metals Company.

Michael F. Hertz, Acting Assistant Attorney General; Jeanne E. Davidson, Director, Patricia

M. McCarthy, Assistant Director, and Reginald T. Blades, Jr., Assistant Director, Commercial

Litigation Branch, Civil Division, U.S. Department of Justice (David Silverbrand and Richard P.

Schroeder); Douglas S. Ierley, Ada L. Loo, and Scott McBride, Office of the Chief Counsel for

Import Administration, U.S. Department of Commerce, Of Counsel; for Defendant.

Arnold & Porter LLP (Lawrence A. Schneider, Zhiqiang Zhao, and Francis Franze-

Nakamura), for Defendant-Intervenor/Plaintiff ICDAS Celik Enerji Tersane ve Ulasim Sanayi, A.S.

OPINION

RIDGWAY, Judge:

These consolidated actions are before the court on cross-motions for judgment on the agency

record. Domestic steel manufacturers Nucor Corporation, Gerdau AmeriSteel Corporation, and

Commercial Metals Company (collectively, the “Domestic Producers”) and ICDAS Celik Enerji

Tersane ve Ulasim Sanayi, A.S. (“ICDAS”) – a Turkish producer/exporter of the subject

merchandise – separately challenge various aspects of the final results of the U.S. Department of

Commerce’s seventh administrative review of the antidumping duty order on Certain Steel Concrete

Reinforcing Bars From Turkey. See generally Certain Steel Concrete Reinforcing Bars From

Turkey; Final Results, Rescission of Antidumping Duty Administrative Review in Part, and

Determination To Revoke in Part, 70 Fed. Reg. 67,665 (Nov. 8, 2005) (“Final Results”). Also here

in dispute are the results of a voluntary remand to Commerce on the issue of the date of sale for

ICDAS’ U.S. sales, for use in Commerce’s antidumping margin calculations. See Final Results of

Redetermination Pursuant to Court Remand (“Remand Results”).

Court No. 05-00616 Page 3

In particular, the Domestic Producers contend that Commerce erred in the Final Results by

classifying ICDAS’ sales through its U.S. affiliate as Export Price (“EP”) sales, rather than

Constructed Export Price (“CEP”) sales. See Memorandum in Support of Plaintiffs’ Motion for

Judgment on the Agency Record (“Domestic Producers Brief”); Plaintiffs’ Reply Brief (“Domestic

Producers Reply Brief”) at 1-8.1 The Domestic Producers further assert that ICDAS’ attacks on the

Final Results are unfounded, and that the Final Results therefore should be sustained in all other

respects – with one major exception. See Response Brief of the Domestic Producers (“Domestic

Producers Response Brief”). Specifically, the Domestic Producers assert that the Final Results erred

in using contract date as the date of sale for ICDAS’ U.S. sales, and that the Remand Results –

1

Export Price (“EP”) and Constructed Export Price (“CEP”) refer to Commerce’s two

methods for calculating prices for merchandise imported into the United States. Commerce

compares those prices to normal values to determine whether merchandise has been dumped in the

United States.

Both EP and CEP are calculated using the price at which the subject merchandise is first sold

to a U.S. buyer not affiliated with the foreign producer or exporter. Generally, a U.S. sale is treated

as an EP sale when the first sale to an unaffiliated U.S. buyer occurs before the goods are imported

into the United States. In turn, a U.S. sale generally is calculated as a CEP sale when the first sale

to an unaffiliated U.S. buyer occurs after importation. See generally AK Steel Corp. v. United

States, 226 F.3d 1361, 1367-74 (Fed. Cir. 2000) (analyzing 19 U.S.C. § 1677a(a)-(b) (2000), and

distinction between EP and CEP sales).

Thus, in general, “EP treatment is limited to transactions that occur between a seller outside

the United States and an [unaffiliated] buyer inside the United States, before the date of

importation.” Corus Staal BV v. United States, 502 F.3d 1370, 1377 (Fed. Cir. 2007) (citing 19

U.S.C. § 1677a(a)); cf. AK Steel, 226 F.3d at 1370 n.8 (hypothesizing “a sales contract between two

U.S. domiciled entities that is entirely executed outside the United States,” but expressly declining

to decide “whether such a sale would be classified as an EP or CEP sale”). And, for reasons

summarized in section III.A below, the classification of U.S. sales as CEP sales (rather than EP

sales) is more likely to result in a determination that merchandise has been dumped in the United

States. See Corus Staal, 502 F.3d at 1376.

Court No. 05-00616 Page 4

where Commerce reversed itself – are correct. See Domestic Producers Brief at 2 n.1; Domestic

Producers Reply Brief at 1, 8-15.

For its part, ICDAS challenges four aspects of the Final Results: (1) Commerce’s

disallowance of a start-up adjustment for ICDAS’ Biga melt shop; (2) Commerce’s decision to treat

ICDAS’ foreign exchange gains within the category of “financial expenses,” and to cap ICDAS’

total financial expenses at zero; (3) Commerce’s use of the average cost of manufacturing for the

entire period of review (“POR”), rather than ICDAS’ quarterly costs, in the agency’s “sales below

cost” analysis; and (4) Commerce’s use of the date of entry, rather than the date of sale, to define

ICDAS’ universe of sales. See Plaintiff ICDAS’ Memorandum in Support of its Motion for

Judgment on the Agency Record Pursuant to Rule 56.2 (“ICDAS Brief”); Plaintiff ICDAS’ Reply

Brief in Support of Its Motion for Judgment on the Agency Record Pursuant to Rule 56.2 (“ICDAS

Reply Brief”). In addition, ICDAS contests Commerce’s decision in the Remand Results to use

invoice date as the date of sale for ICDAS’ U.S. sales, rather than using contract date (as the agency

did in the Final Results). See Defendant-Intervenor ICDAS’ Memorandum in Opposition to

Plaintiffs’ Motion for Judgment on the Agency Record at 1-3, 5-30 (“ICDAS Response Brief”);

Defendant-Intervenor ICDAS’ Supplemental Reply Brief Regarding the Date of Sale Issue (“ICDAS

Supp. Reply Brief”). ICDAS maintains that Commerce properly treated all of ICDAS’ U.S. sales

as Export Price (“EP”) sales, rather than Constructed Export Price (“CEP”) sales, and therefore

opposes the Domestic Producers’ Motion for Judgment on the Agency Record. See ICDAS

Response Brief at 1, 3-4, 30-40.

The Government maintains that the Final Results should be sustained in all respects, save

Court No. 05-00616 Page 5

three. See Defendant’s Response to Plaintiffs’ and Defendant-Intervenor’s Motions for Judgment

Upon the Agency Record (“Def. Response Brief”). First, the Government requests that two issues

be remanded to Commerce for further consideration – specifically, Commerce’s use of the POR

average cost of manufacturing (rather than ICDAS’ quarterly costs) in the agency’s “sales below

cost” analysis, and Commerce’s use of the date of entry (rather than the date of sale) to define

ICDAS’ universe of sales. See Def. Response Brief at 1-3, 8-9, 11-12, 28-29, 36. In addition, the

Government asserts that, as to the issue of the date of sale for ICDAS’ U.S. sales, the Remand

Results (which used invoice date as the date of sale) – rather than the Final Results (which used

contract date) – should be sustained. See Defendant’s Response to Defendant-Intervenor’s

Memorandum in Opposition to Plaintiff’s Motion for Judgment on the Agency Record (“Def. Supp.

Response Brief”).

Jurisdiction lies under 28 U.S.C. § 1581(c) (2000).2 For the reasons set forth below, the

Domestic Producers’ Motion for Judgment on the Agency Record challenging Commerce’s decision

to treat sales made through ICDAS’ U.S. sales affiliate as EP sales must be denied. ICDAS’ Motion

for Judgment on the Agency Record must similarly be denied as to ICDAS’ claims that Commerce

improperly denied ICDAS’ request for a startup adjustment, and that Commerce erred in its

treatment of ICDAS’ foreign exchange gains as well as in its decision to cap ICDAS’ total financial

expenses at zero. On the other hand, ICDAS’ Motion for Judgment on the Agency Record is granted

as to ICDAS’ challenges to Commerce’s use of invoice date (rather than contract date) as the date

of sale for ICDAS’ U.S. sales, Commerce’s use of the POR average cost of manufacturing (rather

2

All citations to federal statutes are to the 2000 edition of the United States Code.

Court No. 05-00616 Page 6

than ICDAS’ quarterly costs) in the agency’s “sales below cost” analysis, and Commerce’s use of

the date of entry (rather than the date of sale) to define ICDAS’ universe of sales; and this matter

is remanded to the Department of Commerce for further proceedings not inconsistent with this

opinion.

I. Standard of Review

In reviewing a challenge to a final determination by the Commerce Department in an

antidumping administrative review, the court must hold unlawful any agency determination, finding,

or conclusion that is found to be “unsupported by substantial evidence on the record, or otherwise

not in accordance with law.” 19 U.S.C. § 1516a(b)(1)(B)(i); see also Elkem Metals Co. v. United

States, 468 F.3d 795, 800 (Fed. Cir. 2006). Substantial evidence is “more than a mere scintilla”;

rather, it is “such relevant evidence as a reasonable mind might accept as adequate to support a

conclusion.” Universal Camera Corp. v. Nat’l Labor Relations Bd., 340 U.S. 474, 477 (1951)

(quoting Consol. Edison Co. v. Nat’l Labor Relations Bd., 305 U.S. 197, 229 (1938)); see also

Nippon Steel Corp. v. United States, 337 F.3d 1373, 1379 (Fed. Cir. 2003) (same).

Moreover, “the 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.” Suramerica de Aleaciones Laminadas, C.A. v. United

States, 44 F.3d 978, 985 (Fed. Cir. 1994) (quoting Universal Camera, 340 U.S. at 487-88). On the

other hand, the mere fact that “it [may be] possible to draw two inconsistent conclusions from

evidence in the record . . . does not prevent Commerce’s determination from being supported by

substantial evidence.” Am. Silicon Techs. v. United States, 261 F.3d 1371, 1376 (Fed. Cir. 2001);

Court No. 05-00616 Page 7

see also Consolo v. Federal Maritime Commission, 383 U.S. 607, 620 (1966) (same).

II. Background

In April 1997, the Department of Commerce issued an antidumping order covering rebar

from Turkey. See Antidumping Duty Order: Certain Steel Concrete Reinforcing Bars From Turkey,

62 Fed. Reg. 18,748 (April 17, 1997). Subsequently, in every annual administrative review that

Commerce has conducted for ICDAS since 1999 – including three consecutive administrative

reviews, covering the periods April 1, 2001 through March 31, 2004 – Commerce consistently found

that the dumping margin for ICDAS’ U.S. sales was zero or de minimis3 (at least until the Remand

Results here in dispute were issued).4

3

See 19 C.F.R. § 351.106 (2003) (providing that a de minimis dumping margin is one below

0.5%).

All citations to federal regulations are to the 2003 edition of the Code of Federal Regulations.

4

See Certain Steel Concrete Reinforcing Bars from Turkey; Amended Final Results of

Antidumping Duty Administrative Review, 66 Fed. Reg. 63,364 (Dec. 6, 2001) (amended final

results for administrative review covering April 1, 1999 through March 31, 2000, finding dumping

margin of zero); Certain Steel Concrete Reinforcing Bars from Turkey; Final Results, Rescission

of Antidumping Duty Administrative Review in Part, and Determination Not To Revoke in Part, 68

Fed. Reg. 53,127 (Sept. 9, 2003) (final results for administrative review covering April 1, 2001

through March 31, 2002, finding de minimis dumping margin of 0.10%); Certain Steel Concrete

Reinforcing Bars from Turkey; Final Results, Rescission of Antidumping Duty Administrative

Review in Part, and Determination Not To Revoke in Part, 69 Fed. Reg. 64,731 (Nov. 8, 2004) (final

results for administrative review covering April 1, 2002 through March 31, 2003, finding dumping

margin of zero); Certain Steel Concrete Reinforcing Bars from Turkey; Final Results, Rescission

of Antidumping Duty Administrative Review in Part, and Determination To Revoke in Part, 70 Fed.

Reg. 67,665 (Nov. 8, 2005) (final results for administrative review covering April 1, 2003 through

March 31, 2004, finding de minimis dumping margin of 0.16%).

A pending companion case challenges the results of the seventh administrative review

(covering 2003-2004) – the administrative review at issue here. See Habas Sinai ve Tibbi Gazlar

Court No. 05-00616 Page 8

The administrative review which is the subject of this action – the seventh such review –

began in April 2004, when Commerce gave notice of the opportunity to request a review of the

antidumping order on rebar from Turkey, for the period April 1, 2003 through March 31, 2004. See

generally Antidumping or Countervailing Duty Order, Finding, or Suspended Investigation;

Opportunity To Request Administrative Review, 69 Fed. Reg. 17,129 (April 1, 2004). At the

request of both the Domestic Producers and ICDAS, inter alia, Commerce initiated an

administrative review the following month. See generally Initiation of Antidumping and

Countervailing Duty Administrative Reviews and Request for Revocation in Part, 69 Fed. Reg.

30,282 (May 27, 2004).

In the Preliminary Results of the administrative review, Commerce calculated a margin of

0.47% for ICDAS. In light of that de minimis margin, and the company’s record of zero or de

minimis margins in the two prior administrative reviews, the agency also announced its intention to

revoke the antidumping order as to ICDAS. See generally Certain Steel Concrete Reinforcing Bars

from Turkey; Preliminary Results and Partial Rescission of Antidumping Duty Administrative

Review and Notice of Intent to Revoke in Part, 70 Fed. Reg. 23,990, 23,991, 23,995 (May 6, 2005)

(“Preliminary Results”); see also Gerdau AmeriSteel Corp. v. United States, 519 F.3d 1336, 1337-38

(Fed. Cir. 2008) (summarizing history of de minimis findings in administrative reviews of ICDAS,

leading to Commerce’s determination to revoke antidumping order as to ICDAS).

Istihsal Endustrisi A.S. v. United States, No. 05-00613 (Ct. Int’l Trade filed Nov. 10, 2005). An

action challenging the results of the sixth administrative review (covering 2002-2003) also remains

pending. See Gerdau AmeriSteel Corp. v. United States, No. 04-00608 (Ct. Int’l Trade filed Dec.

6, 2004); see also Gerdau AmeriSteel Corp. v. United States, 519 F.3d 1336 (Fed. Cir. 2008).

Court No. 05-00616 Page 9

Following briefing and oral argument by the parties before the agency, Commerce published

the Final Results of the administrative review. See generally Certain Steel Concrete Reinforcing

Bars From Turkey; Final Results, Rescission of Antidumping Duty Administrative Review in Part,

and Determination To Revoke in Part, 70 Fed. Reg. 67,665 (Nov. 8, 2005) (“Final Results”); see

also Issues and Decision Memorandum for the Antidumping Duty Administrative Review on Certain

Steel Concrete Reinforcing Bars From Turkey – April 1, 2003, through March 31, 2004 (Nov. 2,

2005) (Pub. Doc. No. 256) (“Decision Memo”).5

In reaching the Final Results, Commerce decided, inter alia, (1) to treat all of ICDAS’ U.S.

sales as Export Price (“EP”), rather than Constructed Export Price (“CEP”), transactions; (2) to

disallow a start-up adjustment for ICDAS’ Biga melt shop; (3) to treat ICDAS’ foreign exchange

gains within the category of “financial expenses” for purposes of calculating ICDAS’ cost of

production, and to cap ICDAS’ total financial expenses at zero; (4) to use contract date (rather than

invoice date) as the date of sale for ICDAS’ U.S. sales, for purposes of calculating ICDAS’

antidumping duty margin; (5) to use in its “sales below cost” analysis the weighted average cost of

manufacturing for the entire one-year period of review, rather than ICDAS’ quarterly average costs;

5

Because this action was remanded to Commerce for further consideration of the issue of the

date of sale to be used for ICDAS’ U.S. sales, two administrative records have been filed with the

court – the initial administrative record (which comprises the information on which the agency’s

Final Results were based), and the supplemental administrative record (on which the Remand

Results were based). Moreover, because confidential information is included in both administrative

records, there are two versions of each – a public version and a confidential version.

Citations to public documents in the initial administrative record and the supplemental

administrative record are noted as “Pub. Doc. No. ____” and “Remand Pub. Doc. No. ____,”

respectively. Citations to the confidential versions are, in turn, noted as “Conf. Doc. No. ____” and

“Remand Conf. Doc. No. ____.”

Court No. 05-00616 Page 10

and (6) to use the date of entry, rather than the date of sale, to define ICDAS’ universe of sales.

Based on Commerce’s analyses as reflected in its Final Results, the final dumping margin

for ICDAS was calculated to be 0.16% – once again, a de minimis margin. See Final Results, 70

Fed. Reg. at 67,667. As a result of the company’s de minimis dumping margin in the review at issue,

as well as its de minimis or zero margins in the two previous administrative reviews, Commerce

revoked the antidumping order as to ICDAS, in accordance with the agency’s regulations. See Final

Results, 70 Fed. Reg. at 67,666; 19 C.F.R. § 351.222(b)(2)(i) (providing for revocation of an order

as to a particular exporter or producer of subject merchandise where, inter alia, the exporter or

producer has “sold the merchandise at not less than normal value for a period of at least three

consecutive years”).

The Domestic Producers and ICDAS brought the two actions consolidated here, challenging

various aspects of the Final Results. One of the two issues raised in the Domestic Producers’

Complaint was Commerce’s use of the contract date as the date of sale for ICDAS’ U.S. sales. On

behalf of Commerce, the Government requested and was granted a voluntary remand on that issue.

On remand, Commerce reversed itself, changing its “date of sale” methodology for ICDAS’ U.S.

sales, using the invoice date – rather than the contract date – as the date of sale. See Final Results

of Redetermination Pursuant to Court Remand (“Remand Results”). As a result of that change,

Commerce recalculated the dumping margin for ICDAS as above the de minimis level, and

concluded that ICDAS does not qualify for revocation. See Remand Results at 2-3, 25.

The parties’ pending cross-motions for judgment on the agency record are directed to the

Final Results of Commerce’s seventh administrative review, as well as the “date of sale” issue

Court No. 05-00616 Page 11

addressed in Commerce’s Remand Results.6

III. Analysis

In their Motion for Judgment on the Agency Record, the Domestic Producers contend that,

in the Final Results, Commerce wrongly treated sales made through ICDAS’ U.S. affiliate as Export

Price (“EP”) – rather than Constructed Export Price (“CEP”) – sales. In its Motion for Judgment

on the Agency Record, ICDAS argues, in turn, that Commerce erred in denying ICDAS’ request for

a startup adjustment in the Final Results, that Commerce both improperly treated ICDAS’ foreign

exchange gains within the category of “financial expenses” for purposes of calculating ICDAS’ cost

of production in the Final Results and also improperly capped ICDAS’ total financial expenses at

zero, that Commerce erred on remand in using invoice date (rather than contract date) as the date

of sale for ICDAS’ U.S. sales, that Commerce erred in the Final Results by using in its “sales below

cost” analysis the weighted average cost of manufacturing for the period of review (“POR”) (rather

than ICDAS’ quarterly average costs), and that Commerce erred in the Final Results by using the

date of entry (rather than the date of sale) to define ICDAS’ universe of sales.

Each of the parties’ claims is discussed in detail below. As set forth there, there is no merit

to the Domestic Producers’ challenge to Commerce’s decision to treat sales made through ICDAS’

U.S. sales affiliate as EP sales. The Domestic Producers’ Motion for Judgment on the Agency

6

At the request of the Domestic Producers, and with the consent of all parties, the Court

preliminarily enjoined liquidation of the entries subject to the seventh administrative review, which

is the review at issue here. However, the Court declined to extend the injunction to entries made

after the period of review. See Nucor Corp. v. United States, 29 CIT 1452, 1453, 1470, 412 F. Supp.

2d 1341, 1343, 1357 (2005).

Court No. 05-00616 Page 12

Record therefore must be denied. Similarly lacking in merit are ICDAS’ challenge to Commerce’s

denial of ICDAS’ request for a startup adjustment, and ICDAS’ challenge to Commerce’s treatment

of ICDAS’ foreign exchange gains as “financial expenses” as well as the agency’s decision to cap

ICDAS’ total financial expenses at zero. Accordingly, ICDAS’ Motion for Judgment on the Agency

Record must be denied as to those claims. In contrast, Commerce’s use of invoice date (rather than

contract date) as the date of sale for ICDAS’ U.S. sales, Commerce’s use of the POR average cost

of manufacturing (rather than ICDAS’ quarterly costs) in the agency’s “sales below cost” analysis,

and Commerce’s use of the date of entry (rather than the date of sale) to define ICDAS’ universe

of sales cannot be sustained on the existing administrative record. ICDAS’ Motion for Judgment

on the Agency Record therefore must be granted as to those claims, and this matter remanded to

Commerce for further appropriate action.

A. Commerce’s Treatment of ICDAS’ U.S. Sales as Export Price (“EP”) Sales

Dumping takes place when merchandise is imported into the United States and sold at a price

lower than its “normal value” – i.e., the foreign market value of the subject merchandise. 19 U.S.C.

§§ 1673, 1677(34). The difference between the normal value and the U.S. Price is the “dumping

margin.” 19 U.S.C. § 1677(35). When normal value is compared to the U.S. Price and dumping is

found, antidumping duties equal to the dumping margin may be imposed to offset the dumping. 19

U.S.C. § 1673(2)(B).

For purposes of an antidumping analysis, the U.S. Price is calculated using either the Export

Price (“EP”) methodology or the Constructed Export Price (“CEP”) methodology. Commerce

compares either the EP or the CEP with the “normal value” of the subject merchandise, to ascertain

Court No. 05-00616 Page 13

whether dumping is occurring, and, if so, to calculate the dumping margin. 19 U.S.C. §§ 1673,

1677a. If a transaction is classified as a CEP sale, the statute requires that certain additional

deductions be taken from the sales price in order to arrive at the U.S. Price.7 The bottom line is that

use of CEP is more likely to result in a finding of dumping. See generally AK Steel Corp. v. United

States, 226 F.3d 1361, 1364-65 & n.4 (Fed. Cir. 2000).

Export Price (“EP”) is defined in the statute:

The term “export price” means 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 . . . .

19 U.S.C. § 1677a(a). The statute defines Constructed Export Price (“CEP”) as well:

The term “constructed export price” means 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 . . . .

19 U.S.C. § 1677a(b).

During the period of review, ICDAS exported merchandise to the United States both through

a U.S. affiliate (which serves as importer of record, and is basically a “paper company”), as well as

directly to unaffiliated customers. In the Final Results at issue here, Commerce classified all of

ICDAS’ U.S. sales as EP sales, as it has since the 2001-2002 review, applying AK Steel (which

7

Specifically, any selling commissions, any expenses associated with the sale (such as credit

expenses), any costs of further manufacture, and the profit allocated to those costs and expenses

must be deducted from CEP sales. See 19 U.S.C. § 1677a(d). No such deductions are taken from

EP sales. See AK Steel, 226 F.3d at 1364 n.4.

Court No. 05-00616 Page 14

includes a detailed analysis of the differences between EP and CEP sales) and emphasizing the

locations of the transactions.8 See generally Final Results, 70 Fed. Reg. 67,665; Decision Memo

at 63-68. Commerce concluded:

While we note that it is undisputed that ICDAS’s U.S. importer is affiliated with

ICDAS, this fact alone does not require a finding that the sales in question are CEP

transactions. Under AK Steel, the salient issue is whether the sale at issue takes

place inside or outside the United States, which the Court further discussed in Corus

Staal, noting that “the focus of the inquiry is on the location of the sale not the role

played by the affiliated importer.” See Corus Staal, 259 F. Supp. 2d at 1259.

In this case, the record indicates that ICDAS’s sales through its affiliated importer

were concluded in Turkey . . . . [T]he sales agreement was signed in Turkey by

ICDAS personnel, the invoice was issued by an entity in Turkey (i.e., the

producer/exporter) to an entity in the United States (i.e., the U.S. customer), and it

was concluded outside the United States.

Regarding the petitioners’ arguments involving the transfer of title, we disagree that

the evidence on the record shows that title passed to the customer inside the United

States. We have examined the documents taken at verification and find that none of

the contracts for . . . entries [during the period of review] shows that title passed after

entry.

Decision Memo at 66-67.

The Domestic Producers contend that Commerce erred in classifying sales made through

ICDAS’ U.S. affiliate as EP sales. According to the Domestic Producers, those transactions instead

should be treated as CEP sales. See generally Domestic Producers Brief, passim; Domestic

Producers Reply Brief at 1-9.

8

See Certain Steel Concrete Reinforcing Bars from Turkey; Preliminary Results of

Antidumping Duty Administrative Review and Notice of Intent Not To Revoke, 68 Fed. Reg.

23,972, 23,974 (May 6, 2003) (preliminary results for 2001-2002 period of review); Certain Steel

Concrete Reinforcing Bars from Turkey; Preliminary Results and Partial Rescission of Antidumping

Duty Administrative Review and Notice of Intent Not To Revoke In Part, 69 Fed. Reg. 25,063,

25,065 (May 5, 2004) (preliminary results for 2002-2003 period of review).

Court No. 05-00616 Page 15

In their briefs, the parties devote much ink to their competing interpretations of the Court of

Appeals’ opinion in AK Steel, and, to a lesser degree, the opinion of this court in Corus Staal. See

AK Steel, 226 F.3d 1361; Corus Staal BV v. U.S. Dep’t of Commerce, 27 CIT 388, 259 F. Supp.

2d 1253 (2003) (concerning Final Determination in antidumping investigation). The Domestic

Producers maintain that those two opinions require that sales made through ICDAS’ U.S. affiliate

be classified as CEP sales. See Domestic Producers Brief at 8; see also id. at 9-17; Domestic

Producers Reply Brief at 1-7.

The Domestic Producers initially asserted that AK Steel holds flatly that “any sale in which

the contract is between a U.S. affiliate and an unaffiliated U.S. customer must be classified as CEP,”

based solely on the domicile of the seller and without regard to the location of the sale or

transaction. See Domestic Producers Brief at 11; see also id. at 8, 12. In their Reply Brief, the

Domestic Producers moderated their stance slightly, arguing that “[t]he decision [in AK Steel]

appears to support two different, mutually exclusive tests for whether a transaction is CEP or EP”

– one test based on the domicile of the party making the sale to the first unaffiliated customer, and

one test based on the location of the sale or transaction. See Domestic Producers Reply Brief at 2.

Specifically, the Domestic Producers assert that “[p]ortions of the opinion [in AK Steel]

clearly state that whenever the sale to the first unaffiliated U.S. customer is made by a U.S. selling

affiliate, that transaction must be classified as CEP.” See Domestic Producers Reply Brief at 2. To

illustrate this point, the Domestic Producers excerpt language from the Court of Appeals’ conclusion

in AK Steel: “[I]f 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. . . . Similarly, a

Court No. 05-00616 Page 16

sale made by a U.S. affiliate or another party other than the producer or exporter cannot be an EP

sale.” AK Steel, 226 F.3d at 1374 (quoted in Domestic Producers Reply Brief at 2).

At the same time, however, the Domestic Producers candidly concede – as they must – that

“other portions of the opinion [in AK Steel] appear to state that a sale by a U.S. affiliate can be

classified as EP where title transfers and consideration is [given] outside of the United States.” See

Domestic Producers Reply Brief at 2-3. To illustrate that point, the Domestic Producers point to

another excerpt from AK Steel: “The term ‘outside the United States,’ read in the context of both

the CEP and the EP definitions, . . . applies to the locus of the transaction at issue, not the location

of the company.” AK Steel, 226 F.3d at 1369 (quoted in Domestic Producers Reply Brief at 2-3).

Summing up their analysis of AK Steel, the Domestic Producers state: “Thus, at different

points in the opinion, the Federal Circuit appears to endorse a bright-line rule whereby all sales

through a U.S. selling affiliate are CEP; in others, it appears to make the distinction based solely on

the location of title transfer.” Domestic Producers Reply Brief at 3. The Domestic Producers

conclude – based on both their analysis of the language of the opinion, as well as their analysis of

the facts and outcome of the case – that AK Steel’s references to “the location of the sale” were

actually intended to refer to “the domicile of the seller”; and, moreover, that, under AK Steel, it is

“the seller’s domicile, rather than the location of title-transfer” which is “the defining factor” in an

EP/CEP analysis. See Domestic Producers Brief at 13-17; Domestic Producers Reply Brief at 8.

To be sure, the detailed analysis in the Court of Appeals’ opinion in AK Steel is necessarily

dense, and can therefore be challenging to follow at points. It is therefore difficult not to sympathize

with the Domestic Producers, as they struggle to distill the implications of AK Steel for this case.

Court No. 05-00616 Page 17

And, as the Domestic Producers indicate, some statements in AK Steel appear (at least at first blush)

to be somewhat in tension with other statements in the opinion. The Government and ICDAS

correctly note, however, that the gravamen of AK Steel is the significance of the location of the sale

or transaction – specifically, “whether the sale or transaction takes place inside or outside the

United States.” See AK Steel, 226 F.3d at 1369-70 (characterizing location of sale or transaction

as a “critical difference” between EP and CEP sales).

In AK Steel, the Court of Appeals focused repeatedly and definitively on the importance of

the location of a sale or transaction in determining its classification as an EP or CEP sale.9 Thus,

the Court framed “[t]he question at the root of [the] appeal” in that case as whether a sale can be

properly classified as an EP sale “if the sales contract . . . is executed in the United States.” AK

Steel, 226 F.3d at 1368 (emphasis added).

AK Steel’s analysis of the language of the statute similarly highlights the significance of the

location of the sale or transaction. Reviewing the text of the statute, the Court of Appeals

determined that “the plain meaning of the language enacted by Congress . . . focuses on where the

sale takes place.” AK Steel, 226 F.3d at 1369 (emphasis added) (discussing 19 U.S.C. § 1677a

(defining “EP” and “CEP”)).10 Underscoring the fact that the location of the sale or transaction is

9

The Court of Appeals noted, for example, that “the statute appears to allow for a sale made

by the foreign exporter or producer to be classified as a CEP sale, if such a sale is made ‘in the

United States.’” AK Steel, 226 F.3d at 1367 n.6 (emphasis added). Similarly, in an aside, the Court

of Appeals observed that “[s]ales in the United States between unaffiliated purchasers and

unaffiliated sellers are never at issue.” AK Steel, 226 F.3d at 1367-68 (emphasis added).

10

See also AK Steel, 226 F.3d at 1373 (observing that “the distinction [between CEP sales

and EP sales] based on the location of the sale was already present” prior to the 1994 amendments

to the statute) (emphasis added).

Court No. 05-00616 Page 18

a “dispositive” factor in classifying sales as EP sales or CEP sales, the Court of Appeals continued:

The text of the [statutory] definition of CEP states that CEP is the “price at which the

subject merchandise is first sold in the United States.” 19 U.S.C. § 1677a(a)

(emphasis added). In contrast, EP is defined as the price at which the merchandise

is first sold “outside the United States.” 19 U.S.C. § 1677a(b). Thus, the location

of the sale appears to be critical to the distinction between the two categories.

AK Steel, 226 F.3d at 1369 (second emphasis added).11 Echoing its characterization of the location

of the sale or transaction as a “dispositive” factor, the Court expressly identified “whether the sale

or transaction takes place inside or outside the United States” as a “critical difference” between EP

and CEP sales. AK Steel, 226 F.3d at 1369-70 (emphasis added).

The Court of Appeals’ review of the specific facts of AK Steel continues the drumbeat on

the location of the sales or transactions. There, too, the Court of Appeals focused like a laser on the

issue, ultimately concluding that the transactions in the case were not EP sales, but CEP sales. See

AK Steel, 226 F.3d at 1370-72, 1374. Observing that – as a practical matter – “whether a sale is

‘outside the United States’ depends, in part, on whether the parties are or are not located in the

11

Further, in rejecting an alleged ambiguity in the statute, the Court of Appeals again

highlighted the significance of the location of the sale or transaction, ruling that “[t]he language of

the CEP definition leaves no doubt that the modifier ‘in the United States’ relates to ‘first sold.’

The term ‘outside the United States,’ read in the context of both the CEP and the EP definitions [at

19 U.S.C. § 1677a(a)-(b)], . . . applies to the locus of the transaction at issue, not the location of the

company.” AK Steel, 226 F.3d at 1369 (emphasis added).

The Court of Appeals also explained that “[a] sales contract executed in the United States

between two entities domiciled in the United States cannot generate a sale ‘outside the United

States.’” AK Steel, 226 F.3d at 1370 (final emphasis added). Emphasizing yet again the

significance of the location of the sale or transaction, the Court added: “In general, a

producer/exporter in a dumping investigation will always be located outside the United States.

Thus, it must be the locus of the transaction that is modified by ‘outside the United States’ in the

EP definition” which appears at 19 U.S.C. § 1677a(a). AK Steel, 226 F.3d at 1370.

Court No. 05-00616 Page 19

United States,” the Court ruled:

A transaction, such as those here, in which both parties are located in the United

States and the contract is executed in the United States cannot be said to be “outside

the United States.” Thus, such a transaction cannot be classified as an EP

transaction. Rather, classification as an EP sale requires that one of the parties to the

sale be located “outside the United States,” for if both parties to the transaction were

in the territory of the United States and the transfer of ownership was executed in the

United States, it is not possible for the transaction to be outside the United States.

AK Steel, 226 F.3d at 1370 (emphases added). Emphasizing that “Congress has made a clear

distinction between [EP sales and CEP sales] based on the geographic location of the transaction,”

the Court of Appeals stated that it would be “contrary to the plain meaning of the statute” to classify

the transactions in AK Steel as EP sales “[w]hen . . . there are contracts showing that the sales at

issue took place in the United States between two entities with United States addresses, one of which

was an affiliate of the producer/exporter.” AK Steel, 226 F.3d at 1370-71 (emphases added).12

In AK Steel, the Korean producers argued that the statutory term “seller” was ambiguous,

and that Commerce should be permitted to interpret it in terms of the U.S. affiliate’s activities. AK

Steel, 226 F.3d at 1371. The Court of Appeals made short work of that argument, again highlighting

12

AK Steel’s analysis of the participation of an affiliate as a seller simply reinforces the

significance of the location of the sale or transaction. Noting the relationship between the two

considerations, for example, the Court of Appeals stated that “[l]imiting affiliate sales to CEP flows

logically from the geographical restriction of the EP definition [to sales or transactions that take

place ‘outside the United States’].” AK Steel, 226 F.3d at 1370-71 (emphasis added).

As noted above, the Court then reiterated that “[t]he location of the sale” is a “critical” factor

in distinguishing between EP and CEP sales, and concluded that it would be “contrary to the plain

meaning of the statute” to classify the transactions in AK Steel as EP sales “[w]hen . . . there are

contracts showing that the sales at issue took place in the United States between two entities with

United States addresses, one of which was an affiliate of the producer/exporter.” AK Steel, 226 F.3d

at 1371 (emphasis added).

Court No. 05-00616 Page 20

the significance of the location of the sale or transaction. The Court of Appeals concluded: “If

Congress had intended the EP versus CEP distinction to be made based on which party set the terms

of the deal or on the relative importance of each party’s role, it would not have written the statute

to distinguish between the two categories based on the location where the sale was made and the

affiliation of the party that made the sale.” AK Steel, 226 F.3d at 1372 (emphasis added).

Finally, the significance of the location of the sale or transaction is highlighted in the

ultimate statement of the holding of AK Steel:

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.

AK Steel, 226 F.3d at 1374 (initial emphasis added). As illustrated by the excerpts quoted in the

discussion above (including notes 9 through 12), AK Steel’s emphasis on the location of a sale or

transaction in classifying it as EP or CEP is much greater than the Domestic Producers acknowledge.

In short, there is no merit to the Domestic Producers’ claim that AK Steel mandates that any

sale in which the contract is between two U.S. domiciled entities – i.e., a U.S. affiliate of a foreign

producer/exporter and an unaffiliated U.S. customer – must necessarily, by definition, be classified

as a CEP sale, without regard to the location of that sale or transaction. Indeed, the Court of Appeals

in AK Steel held that a critical inquiry in making an EP/CEP classification is the location of the sale

or transaction – in particular, whether the sale or transaction takes place inside or outside the United

States. See AK Steel, 226 F.3d at 1369; 19 U.S.C. § 1677a(a)-(b) (defining “export price” in terms

of a sale made (or an agreement to sell reached) “outside of the United States,” and defining

“constructed export price” in terms of a sale made (or an agreement to sell reached) “in the United

Court No. 05-00616 Page 21

States”).

The Court of Appeals held that, for purposes of 19 U.S.C. § 1677a, the term “outside of the

United States” refers to “the locus of the transaction at issue, not the location of the company.” AK

Steel, 226 F.3d at 1369. The Court noted that, in most situations, EP sales will involve one party

domiciled outside the United States, because sales between two U.S. domiciled parties normally will

take place inside the United States. AK Steel, 226 F.3d at 1370. Nevertheless, as all parties

acknowledge, the Court of Appeals expressly reserved judgment as to whether “a sales contract

between two U.S. domiciled entities that is entirely executed outside the United States” would be

classified as an EP sale or a CEP sale. See AK Steel, 226 F.3d at 1370 n.8 (emphasis added);

Domestic Producers Brief at 17 n.11; ICDAS Response Brief at 33-34; Decision Memo at 63.13

Thus, under the AK Steel test, it may be possible for two U.S. entities to conduct an EP sale,

provided that the sale is completed outside the United States. In any event, as discussed herein,

Commerce determined in this case that all sales in question were between ICDAS (a Turkish

producer/exporter) and unaffiliated U.S. purchasers, and that all sales in question were completed

outside the United States.

The Domestic Producers’ argument was fully laid to rest by the Court of Appeals in Corus

Staal. See Corus Staal BV v. United States, 502 F.3d 1370, 1377 (Fed. Cir. 2007) (concerning

second administrative review of antidumping order covering hot-rolled carbon steel flat products

from the Netherlands). The Court of Appeals there underscored its holding in AK Steel, reiterating

13

The Court of Appeals’ reservation of judgment on this point, alone, suffices to refute the

Domestic Producers’ claim that AK Steel established a bright line rule that any sale in which the

contract is between a U.S. affiliate and an unaffiliated U.S. customer is – by definition – a CEP sale.

Court No. 05-00616 Page 22

the significance of the location of a transaction in classifying it as an EP or CEP sale:

AK Steel does not stand for the proposition that all sales by foreign sellers to

unaffiliated U.S. customers should be considered EP transactions. In fact, AK Steel

states that transactions . . . in which the sale made by a foreign producer or exporter

occurs in the United States, should be treated as CEP transactions.

Corus Staal, 502 F.3d at 1377 (emphases added); see also id. (quoting AK Steel, 226 F.3d at 1369:

“[T]he location of the sale appears to be critical to the distinction between the two categories.”). It

is thus a major overstatement to assert (as the Domestic Producers do) that AK Steel mandates that

“where the first sale to an unaffiliated party is made by a U.S. selling affiliate of the foreign

producer/exporter, the sale must be classified as CEP,” without regard to the location of the

transaction. See Domestic Producers Brief at 8.14

14

The Domestic Producers contend that the facts and outcomes of AK Steel and Corus Staal

buttress the Domestic Producers’ interpretation of those cases. See generally Domestic Producers

Brief at 8-10, 13-17, 24 (discussing AK Steel and Court of International Trade’s opinion in Corus

Staal); Domestic Producers Reply Brief at 1-6 (same). The Domestic Producers concede that the

language of the opinions “emphasize[s] the ‘location of the sale.’” See Domestic Producers Brief

at 14. But, according to the Domestic Producers, “a review of the courts’ actions demonstrates that

the courts intended this phrasing to reflect the place of the seller’s domicile.” Id. In particular, the

Domestic Producers state that “neither Court analyzed . . . the location of title transfer (which would

appear to be required by the Federal Circuit’s definition of ‘sale’ as the transfer of ownership).” Id.

The Domestic Producers’ arguments again are wide of the mark.

As the Government pointedly observes, the Court of Appeals in AK Steel could have chosen

whatever verbiage it wished: “If the Federal Circuit had intended the phrasing to reflect the seller’s

domicile, it would have stated location of affiliate, or domicile of affiliate, not location of the sale.”

See Def. Response Brief at 33-34. Further, as the Government notes, AK Steel not only used the

term “location of the sale,” it specifically defined it – as the place of “the transfer of ownership or

title.” See Def. Response Brief at 34 (quoting AK Steel, 226 F.3d at 1371). The fact of that express

definition makes it crystal clear that the Court of Appeals meant what it said, and said what it meant,

in referring to the “location of the sale”; and, contrary to the Domestic Producers’ claims, the Court

of Appeals did not mean “the place of the seller’s domicile.”

Moreover, contrary to the Domestic Producers’ claims, both AK Steel and Corus Staal

Court No. 05-00616 Page 23

As the Government correctly points out, the statute requires that – in determining whether

a sale is an EP sale or a CEP sale – the first step in Commerce’s analysis is to identify when “the

subject merchandise is first sold (or agreed to be sold).” See Def. Response Brief at 30-31

(discussing definitions of EP and CEP in 19 U.S.C. § 1677a(a)-(b), both of which include quoted

phrase). The Government further notes that, in determining where merchandise is “first sold (or

agreed to be sold),” Commerce must adhere to the plain language definitions of the terms “sold” and

“agreed to be sold.” See Def. Response Brief at 31. AK Steel defined a “sale” in the context of 19

U.S.C. § 1677a to “require[] both a ‘transfer of ownership to an unrelated party and consideration.’”

AK Steel, 226 F.3d at 1371 (citation omitted; emphases added in AK Steel). Similarly, in Corus

Staal, the Court of Appeals defined an “agreement to sell” (for purposes of 19 U.S.C. § 1677a) as

“a binding commitment that has not yet been consummated by the exchange of goods for

specifically took note of the location of the transactions at issue in those cases. In AK Steel, the

Court of Appeals noted that there were “contracts showing that the sales at issue took place in the

United States.” AK Steel, 226 F.3d at 1371 (emphasis added); see also id., 226 F.3d at 1368 (noting

that issue on appeal is “whether a sale to a U.S. purchaser can be properly classified as a sale by the

producer/exporter, and thus an EP sale, even if the sales contract is between the U.S. purchaser and

a U.S. affiliate of the producer/exporter and is executed in the United States”) (emphasis added); id.

at 1370 (explaining that “[a] transaction, such as those here, in which both parties are located in the

United States and the contract is executed in the United States cannot be said to be ‘outside the

United States’”). See generally Def. Response Brief at 34. Similarly, in Corus Staal, this court

expressly took note of evidence indicating that “the terms of . . . sale were agreed upon prior to the

shipment of the merchandise,” and that “the sale was made by the producer ‘outside of the United

States,’” supporting Commerce’s determination “that there was a transfer of ownership in the

Netherlands.” Corus Staal, 27 CIT at 393, 259 F. Supp. 2d at 1258.

In sum, there is simply no truth to the Domestic Producers’ claim that neither AK Steel nor

Corus Staal analyzed the location of the sales there at issue. See generally Def. Response Brief at

34.

Court No. 05-00616 Page 24

consideration, i.e., the ‘sale’ itself.” Corus Staal, 502 F.3d at 1376-77.15 Thus, “[a]s used in the

statute, the terms ‘sale’ and ‘agreement to sell’ . . . cover different types of transactions.” Corus

Staal, 502 F.3d at 1377. Further, the Court of Appeals has held that “[n]either a sale nor an

agreement to sell occurs until there is mutual assent to the material terms [of a deal] (price and

quantity).” Corus Staal, 502 F.3d at 1376.

In the case at bar, all activities relevant to sales of ICDAS’ rebar to U.S. customers –

including sales negotiations, issuance of invoices, and preparation of documentation to facilitate

payment – were handled outside the United States, by ICDAS personnel in Turkey. See Section A

Questionnaire Response of ICDAS Celik Enerji Tersane ve Ulasim Sanayi, A.S. (Pub. Doc. No. 67;

Conf. Doc. No. 1) at A-8.16 Specifically, all of ICDAS’ sales to the United States were based upon

15

As such, it appears that, because – like a “sale” – an “agreement to sell” between a

producer/exporter and an unaffiliated purchaser in the United States (or an unaffiliated purchaser

for export to the United States) which is reached before importation is within the scope of 19 U.S.C.

§ 1677a(a), a transaction may be classified as EP even if ownership does not transfer and

consideration is not paid until a later date.

16

The Domestic Producers seek to analogize the facts of this case to the facts of AK Steel,

arguing that the same result should obtain. According to the Domestic Producers, the sales here at

issue – like those at issue in AK Steel – were so-called “‘back-to-back’ sales.” See AK Steel, 226

F.3d at 1365 (noting “back-to-back” nature of subject sales). The Domestic Producers further assert

that the Court of International Trade’s opinion in Corus Staal established a “bright-line” rule

classifying all “back-to-back” sales as CEP sales. See generally Domestic Producers Brief at 11-17;

Domestic Producers Reply Brief at 3-7. The Domestic Producers’ arguments are lacking in merit.

See generally Def. Response Brief at 32-33; ICDAS Response Brief at 35-36.

Contrary to the Domestic Producers’ assertions, there are critical differences between the

facts of AK Steel and those of this case. Thus, for example, the “back-to-back” sales in AK Steel

involved a Korean producer which sold steel to an affiliated Korean exporter, which in turn sold it

to a U.S. affiliate, who then made sales to unaffiliated U.S. purchasers. See AK Steel, 226 F.3d at

1365. Those “back-to-back” sales – which involved a chain of actions taken both outside and inside

the United States – are clearly distinguishable from the transactions at issue here, which were

Court No. 05-00616 Page 25

contracts which were negotiated and finalized in Turkey prior to ICDAS’ shipment of merchandise.

See id. The Domestic Producers highlight the fact that, inter alia, ICDAS’ sales documentation

shows that – for sales made through ICDAS’ U.S. affiliate – ICDAS first invoiced merchandise from

itself to its U.S. affiliate, and then from the U.S. affiliate to ICDAS’ U.S. customer. See, e.g.,

Domestic Producers Brief at 11. But ICDAS’ U.S. affiliate is merely a “paper” company that has

no employees or business premises in the United States, is not involved in the sales process, never

takes possession of subject merchandise, and acts only as importer of record. See Section A

Questionnaire Response of ICDAS Celik Enerji Tersane ve Ulasim Sanayi, A.S. (Pub. Doc. No. 67;

Conf. Doc. No. 1) at A-8, A-14-15.17 The Domestic Producers can point to no evidence refuting

completed entirely outside the United States. See generally Def. Response Brief at 32.

Further, notwithstanding the Domestic Producers’ claims to the contrary, the Court of

International Trade’s opinion in Corus Staal did not establish a bright line rule governing “back-to-

back” sales, without regard to where they occur. The Domestic Producers read the court’s language

out of context, and omit reference to the court’s discussion of AK Steel’s emphasis on the

significance of “the location of the sale.” See Def. Response Brief at 32-33 (discussing Corus Staal,

27 CIT at 392-93, 259 F. Supp. 2d at 1258-59). Moreover, as the Domestic Producers themselves

concede, the transactions at issue in Corus Staal were not “back-to-back” sales. See Domestic

Producers Brief at 16 n.10; Domestic Producers Reply Brief at 4. Accordingly, even if the Court

of International Trade had articulated the bright line rule that the Domestic Producers assert, the

court’s language presumably would have been dicta. Even more to the point, there is certainly

nothing in the Court of Appeals’ opinions in either AK Steel or Corus Staal establishing any such

per se rule.

17

As ICDAS points out, Commerce’s classification of the sales at issue here as EP sales is

consistent with agency practice in other cases, recognizing that – under AK Steel – the critical

difference between EP and CEP sales is “whether the sale or transaction takes place inside or outside

the United States.” See generally ICDAS Response Brief at 38.

Thus, for example, in Canned Pineapple Fruit from Thailand, Commerce treated transactions

as EP sales, where the foreign company’s U.S. affiliate handled customs clearances, issued invoices,

and received payment from U.S. customers, but was “not involved in the sales process, never [took]

Court No. 05-00616 Page 26

these record facts, and thus cannot establish that any entity other than ICDAS prepared all relevant

invoice documentation. See id. at A-8 (stating that “[a]ll sales activities related to the sales to U.S.

customers . . . such as . . . issuing of invoices . . . occurred in Turkey”); ICDAS Sales Verification

Report (Conf. Rec. No. 44) at 3 (confirming, in the course of verification process, that “the

personnel in ICDAS’s export sales department act on behalf of [the importer] because [the importer]

itself has no employees”). See generally Decision Memo at 66 (finding that “the sales agreement

was signed in Turkey by ICDAS personnel, the invoice was issued by an entity in Turkey (i.e., the

possession or inventory of subject merchandise, [had] no physical presence in the United States, and

act[ed] as an importer of record only,” because Commerce found that the sales in question took place

outside the United States. See Issues and Decision Memorandum for the Final Results of the

Antidumping Duty Administrative Review: Canned Pineapple Fruit from Thailand, 2001 WL

1241130 (Oct. 9, 2001) (“Canned Pineapple Fruit from Thailand”), at comment 16.

In the instant case, Commerce properly classified ICDAS’ sales through its U.S. affiliate as

EP sales – as the agency has done since the 2001-2002 review – because, like the sales in Canned

Pineapple Fruit from Thailand, all sales here in question were made outside the United States.

Similarly, ICDAS’ U.S. affiliate, like the U.S. affiliate in Canned Pineapple Fruit from Thailand,

is a mere “paper company” with no employees and no physical premises in the United States, and

no role in the sales process, and serves only as an importer of record. The Domestic Producers point

to no evidence concerning ICDAS’ “paper company” U.S. affiliate which undercuts Commerce’s

determination that the sales here at issue all occurred outside the United States.

Further, Commerce’s classification of transactions as EP sales was sustained in Corus Staal,

even though the U.S. affiliate there accepted payment for transmissions to the foreign producer, and

had an active role in certain administrative and sales functions. See Corus Staal, 27 CIT at 393-94,

259 F. Supp. 2d at 1259. Thus, the acceptance of payment by a U.S. affiliate (like ICDAS’ U.S.

affiliate here) does not suffice to preclude classification of transactions as EP sales, where – as here

– the transactions in question occur outside the United States. See generally ICDAS Response Brief

at 38 n.28; see also Issues and Decision Memorandum for the Final Results of the Ninth

Administrative Review of Certain Corrosion-Resistant Carbon Steel Flat Products from Canada for

Dofasco, Inc. and Sorevco, Inc. (Collectively, Dofasco), 2004 WL 3524484 (Jan. 16, 2004), at

comment 1 (where U.S. affiliate invoiced customer and accepted payment, transactions were

classified as CEP sales, not because of issuance of invoices or receipt of payment in themselves, but

because “transfer of ownership was executed in the United States”).

Court No. 05-00616 Page 27

producer/exporter) to an entity in the United States (i.e., the U.S. customer), and [the sale] was

concluded outside the United States”) (emphasis added).

Moreover, pursuant to the terms of ICDAS’ sales, all deliveries of merchandise (first from

ICDAS to its U.S. affiliate, then immediately from the affiliate to the unaffiliated purchaser)

occurred at the port of shipment in Turkey – outside the United States. See Section A Questionnaire

Response of ICDAS Celik Enerji Tersane ve Ulasim Sanayi, A.S. (Pub. Doc. No. 67; Conf. Doc. No.

1), Exh. A-9 at 1, 2; ICDAS Sales Verification Report (Conf. Rec. No. 44) at Exh. 11. Under the

circumstances, Commerce properly determined to treat ICDAS’ U.S. sales as EP transactions, in

accordance with AK Steel, “because the[] sales were made pursuant to agreements made between

[unaffiliated U.S. customers and] ICDAS personnel in Turkey.” See Decision Memo at 65

(emphasis added).18

Apart from their arguments disputing the legal significance of the location of the transaction

based on their interpretation of AK Steel (addressed above), the Domestic Producers further contend

that “the record lacks the evidence necessary to make any reasonable determination regarding the

location of the sales at issue.” Domestic Producers Brief at 17-18; see also id. at 2, 8-10, 17-21, 24;

18

Commerce’s classification of ICDAS’ U.S. sales as EP sales achieves the policy aims of

the antidumping statute. As AK Steel explains, Commerce distinguishes between EP and CEP sales

in order to “prevent foreign producers from competing unfairly in the United States market by

inflating the U.S. Price [sic] with amounts spent by [a] U.S. affiliate on marketing and selling the

products in the United States.” AK Steel, 226 F.3d at 1367.

In this case, the terms of the sales, including price, were set outside the United States. As

a “paper company” with no employees, inventory, or premises, ICDAS’ U.S. affiliate had no selling

or marketing functions, and incurred no costs beyond those normally associated with serving as

importer of record. ICDAS’ sales through its U.S. affiliate therefore are not at an inflated price, and

there is thus no policy reason to treat them as CEP sales. See ICDAS Response Brief at 36 n.25.

Court No. 05-00616 Page 28

Domestic Producers Reply Brief at 1, 7-8.19 Noting that AK Steel defined the term “sold” (for

purposes of EP/CEP classification) by reference to the transfer of ownership or title, the Domestic

Producers challenge the quantum of record evidence concerning the transfer of title in the sales at

issue here. Specifically, the Domestic Producers point to the fact that Commerce collected sales

trace information concerning two of ICDAS’ sales to unaffiliated U.S. customers during the period

of review. The Domestic Producers further note that only one of those sales traces includes

information concerning the transfer of title, and assert that it is not enough to support Commerce’s

determination. See Domestic Producers Brief at 18; see also Domestic Producers Reply Brief at 7.

Contrary to the Domestic Producers’ claims, the record evidence is sufficient to establish the

location of the limited number of transactions at issue. As a threshold matter, it is well-established

that, in principle, “[i]t is up to Commerce, not the court, to weigh the . . . evidence that was properly

submitted during verification.” See Corus Staal, 27 CIT at 394, 259 F. Supp. 2d at 1259. In this

case, Commerce “examined the documents taken at verification and [concluded] that none of the

contracts for POR entries shows that title passed after entry.” See Decision Memo at 67. In other

words, Commerce determined that – as to each transaction at issue – title transferred outside the

19

The Domestic Producers’ briefs advanced two alternative arguments predicated on their

principal claim on this issue – in other words, one argument assuming that they did not prevail on

their claim that AK Steel’s reference to “the location of the sale” is actually a reference to the

domicile of the seller, and a second argument assuming that they did prevail on that claim. In light

of the analysis above (rejecting the Domestic Producers’ claim that “the location of the sale” refers

to the seller’s domicile), there is no need to here consider the second of the Domestic Producers’

alternative arguments – specifically, their argument that, “to the extent that ‘location of the sale’

refers only to the domicile of the seller, [Commerce] improperly failed to apply the test, instead

relying on just the sort of ‘activities’ analysis invalidated by AK Steel.” See Domestic Producers

Brief at 18; see also id. at 9, 21-23; Domestic Producers Reply Brief at 8 n.3.

Court No. 05-00616 Page 29

United States. See Def. Response Brief at 34-35.20

One sale which was verified by Commerce specified that title passed when payment for the

merchandise was received in full – which occurred well before the import entry date. See ICDAS

Sales Verification Report (Conf. Doc. No. 44) at Exh. 14. Commerce thus confirmed that title for

that sale passed before the goods entered this country – that is, outside the United States. See

generally ICDAS Response Brief at 37; Def. Response Brief at 35. In addition, as to all other sales

at issue, Commerce determined that all deliveries of ICDAS’ goods were made outside the United

States, in accordance with the terms of each of the sales, which were governed by certain specific

Incoterms provisions. See Decision Memo at 67.

The Domestic Producers challenge ICDAS’ reliance on Incoterms, insisting that “Incoterms

are not relevant to transfer of title.” See Domestic Producers Brief at 19-20. But the Domestic

Producers’ argument glosses over certain pivotal points.

As ICDAS readily acknowledges, the relevant Incoterms (including FOB, CFR, and CIF)

deal directly with the transfer of risk, rather than transfer of title. See ICDAS Response Brief at 39.

20

As explained above, AK Steel defined “sale” (for purposes of EP/CEP analysis) by

reference to the transfer of ownership or title to the goods at issue. See AK Steel, 226 F.3d at 1371

(discussing “transfer of ownership or title,” as well as “transfer of ownership to an unrelated party

and consideration”) (citation and emphases omitted). However, in Corus Staal, the Court of Appeals

distinguished an “agreement to sell” from a “sale,” defining an “agreement to sell” (for purposes of

EP/CEP analysis) as “a binding commitment that has not yet been consummated by the exchange

of goods for consideration, i.e., the ‘sale’ itself.” See Corus Staal, 502 F.3d at 1376-77. Thus, it

appears that – to establish the existence of an “agreement to sell” – a producer/exporter need only

adduce evidence of “mutual assent to the material terms [of a deal] (price and quantity).” Corus

Staal, 502 F.3d at 1376. It would seem that, by definition, establishing the existence of an

“agreement to sell” does not require either proof of transfer of ownership or title, or proof of

payment of consideration.

Court No. 05-00616 Page 30

However, under generally accepted principles of commercial law (reflected domestically in, inter

alia, the Uniform Commercial Code, as well as in international lex mercatoria),21 in the absence of

an express agreement between the parties as to when title passes, title to goods transfers when the

seller completes performance with respect to the physical delivery of the goods. See ICDAS

Response Brief at 39. In each of the transactions here at issue, the goods were delivered outside the

United States. Thus, as to each of those transactions, Commerce reasonably concluded that title

transferred outside the United States as well.

In short, contrary to the Domestic Producers’ assertions, the administrative record in this

matter adequately supports Commerce’s determination that each of the transactions at issue occurred

outside the United States.22 The record before Commerce plainly includes “such relevant evidence

as a reasonable mind might accept as adequate” to support the agency’s determination on this point.

See Consol. Edison Co., 305 U.S. at 229. The law requires no more.

21

As Commerce noted, several of ICDAS’ U.S. sales were expressly governed by U.S. law

(specifically, Texas state law, which includes the relevant sections of the UCC), pursuant to choice-

of-law clauses. See Decision Memo at 67. Those contracts included no explicit agreement as to

when and where transfer of title occurred. Accordingly, as discussed above, because the goods were

delivered to the unaffiliated buyer outside the United States, title also transferred outside the United

States, pursuant to the UCC.

22

The mere fact that “it [may be] possible to draw two inconsistent conclusions from

evidence in the record . . . does not prevent Commerce’s determination from being supported by

substantial evidence.” Am. Silicon Techs., 261 F.3d at 1376; see also Consolo v. Federal Maritime

Commission, 383 U.S. at 620. Cf. INS v. Elias-Zacarias, 502 U.S. 478, 483-84 (1992) (stating that,

where Congress has entrusted agency to administer statute in fact-intensive situations, agency’s

conclusion should be reversed only if the record evidence is “so compelling that no reasonable

factfinder” could reach the same conclusion).

Court No. 05-00616 Page 31

B. Commerce’s Disallowance of Startup Adjustment for ICDAS’ Biga Melt Shop

During the administrative review proceedings, ICDAS requested that Commerce grant it a

startup adjustment for ICDAS’ Biga melt shop, which began production of steel billets in December

2003. See Decision Memo at 76-81.23 A startup adjustment is an adjustment to the costs incurred

by a company for production that is affected by startup operations during the period covered by an

administrative review. See generally 19 U.S.C. § 1677b(f)(1)(C)(i). In the Final Results, Commerce

denied ICDAS’ request, stating that ICDAS had failed to meet the requirements of the statute. See

Decision Memo at 76. ICDAS here challenges Commerce’s disallowance of the claimed startup

adjustment. See ICDAS Brief at 2, 5, 22-32; ICDAS Reply Brief at 5-10.

The statute authorizes a startup adjustment only where a producer establishes both that it is

“using new production facilities or producing a new product that requires substantial additional

investment,” and that “production levels are limited by technical factors associated with the initial

phase of commercial production.” See 19 U.S.C. § 1677b(f)(1)(C)(ii). In the case at bar, Commerce

concluded that ICDAS did not meet its burden as to the second criterion. Specifically, Commerce

determined that ICDAS did not demonstrate sufficiently limited production levels for its claimed

startup period (December 2003); nor did ICDAS establish that any asserted limitations on production

were attributable to “technical factors associated with the initial phase of production.” See Decision

Memo at 79.

23

Billets are short, thick bars of steel in the shapes of cylinders or rectangular prisms, which

are produced from ingots. See McGraw-Hill Dictionary of Scientific and Technical Terms 235 (6th

ed. 2003) (defining “billet”). Billet is the single primary input for rebar production. ICDAS Brief

at 7.

Court No. 05-00616 Page 32

ICDAS basically raises two challenges to Commerce’s disallowance of the claimed startup

adjustment. First, ICDAS argues that Commerce’s use of a full-month equivalent methodology to

compare December 2003 production levels at the Biga facility to those of subsequent months is not

in accordance with law, because – according to ICDAS – it relies on “theoretical” data. See

generally ICDAS Brief at 2, 5, 22-29; ICDAS Reply Brief at 5-8. And, second, ICDAS contends

that Commerce erred in concluding that ICDAS did not provide sufficient information concerning

technical factors limiting production. See generally ICDAS Brief at 5, 22-23, 29-31; ICDAS Reply

Brief at 8-10.

Both arguments are unavailing.

1. Commerce’s Determination That Biga’s December 2003 Production Was Not Limited

The startup adjustment statute does not define what constitutes “limited production.” Nor

does the statute dictate how Commerce is to measure levels of production.24 However, the statute

does delimit the duration of the startup period.

According to the statute, the startup period ends “at the point at which the level of

commercial production that is characteristic of the merchandise, producer, or industry concerned is

24

Although the startup adjustment statute itself does not specify how Commerce is to measure

levels of production, the Statement of Administrative Action accompanying the Uruguay Round

Agreements Act states generally that, for purposes of startup adjustment analyses, “[p]roduction

levels will be measured based on units processed.” See Statement of Administrative Action, H.R.

Doc. No. 103-316, at 836 (1994), reprinted in 1994 U.S.C.C.A.N. 4040, 4173.

Congress has directed that the Statement of Administrative Action is to be “regarded as an

authoritative expression by the United States concerning the interpretation and application of the

Uruguay Round Agreements and [the Uruguay Round Agreements] Act in any judicial proceeding

in which a question arises concerning such interpretation or application.” 19 U.S.C. § 3512(d).

Court No. 05-00616 Page 33

achieved.” 19 U.S.C. § 1677b(f)(1)(C)(iii). The statute thus does not extend the startup period up

to the date on which the new facility reaches optimum functioning capacity. Indeed, the Statement

of Administrative Action accompanying the Uruguay Round Agreements Act expressly provides

that “[a]ttainment of peak production levels will not be the standard for identifying the end of the

startup period because the startup period may end well before a company achieves optimum capacity

utilization.” See Statement of Administrative Action, H.R. Doc. No. 103-316, at 836 (1994),

reprinted in 1994 U.S.C.C.A.N. 4040, 4173.25

To be sure, as ICDAS repeatedly emphasizes, the absolute (unadjusted) production figures

for the Biga melt shop for December 2003 were relatively low. Indeed, no production at all occurred

in the first 10 days of the month, while ICDAS was conducting a series of test runs. Thus, the

facility did not begin production until well into the start of the month; and the December 2003

figures reflect only a partial month of production.

Because the December 2003 production figures were based on a partial month, Commerce

converted those figures to a full-month equivalent, so that Biga’s production data for December

2003 could be compared to the full-month production data for subsequent months. See Decision

Memo at 80. Specifically, Commerce examined ICDAS’ actual production measured in units

processed for the months of December 2003, and January through March 2004. Based on ICDAS’

25

In drafting the regulations governing startup adjustments, Commerce expressly took note

of Congress’ recognition that “any determination of the appropriate startup period involves a fact-

intensive inquiry . . . . For this reason, the Administration intends that Commerce determine the

duration of the startup period on a case-by-case basis.” Antidumping Duties; Countervailing Duties:

Proposed Rule, 61 Fed. Reg. 7308, 7340 (Feb. 27, 1996) (Preamble) (quoting Statement of

Administrative Action).

Court No. 05-00616 Page 34

actual production data, Commerce then calculated a full-month equivalent production figure for

December 2003. In addition, Commerce calculated December 2003 production starts using a full-

month equivalency, so that the agency would have data on production starts for that month to

compare to production starts data for January, February, and March 2004. See Decision Memo at

80.26

With the production data for December 2003 restated as full-month equivalents, Commerce

could reasonably compare the Biga melt shop’s production in December 2003 (the claimed startup

period) to the facility’s production levels in January, February, and March 2004. Based on its

26

Thus, for example, Commerce began with actual monthly data on production starts at the

Biga facility, for December 2003, as well as January, February, and March 2004, which ICDAS

provided to the agency in its Questionnaire Responses. See Decision Memo at 80. According to

ICDAS, the Biga facility operated for only 21 days in December 2003. Commerce therefore took

the December 2003 production starts data supplied by ICDAS and divided that figure by 21, to

derive an actual daily average. Commerce then multiplied that actual daily average by 31 days, to

arrive at a full month figure for production starts in December 2003, for comparison to production

starts data for the first three months of 2004. See Decision Memo at 80.

Clearly, comparing partial month production data to full month production data in the startup

cost adjustment analysis would distort that analysis. For example, comparing production start data

for a 21-day period (December 2003) to production start data for a 31-day period (January 2004) –

without adjusting for the 10-day difference – would not be an apples-to-apples comparison, and

would yield skewed results. All other things being equal, production starts during the 21-day period

obviously would be lower than production starts during the 31-day period. If Commerce were

limited to comparing partial month data to full-month data, any respondent company with a new

facility could greatly enhance its chances of being granted a startup cost adjustment simply by

delaying the start of production till late in the first month of operation, since that would help ensure

that the first (partial) month’s production levels would be lower than those of subsequent full months

of production.

When Commerce evaluates whether a respondent is entitled to a startup adjustment, it is

critical that Commerce have production data that are reasonably comparable. The full-month

equivalency methodology employed by Commerce here is a reasonable means to help ensure fair

comparisons.

Court No. 05-00616 Page 35

comparison of production data, Commerce concluded that – while Biga’s production in December

2003 clearly was not at the optimal level that ICDAS planned to achieve – the facility’s production

in December 2003 in fact was not limited within the meaning of the statute, and that ICDAS

therefore was not eligible for a startup adjustment. See Decision Memo at 80.

ICDAS charges that Commerce’s use of a full-month equivalent methodology is not in

accordance with law, because it “improperly uses hypothetical production data.” ICDAS Brief at

27; see also id. at 2, 5, 26-28; ICDAS Reply Brief at 5-6, 8. To support its argument, ICDAS points

to other instances in which Commerce has declined to grant a startup adjustment on the grounds that

the production data proffered by producers were “theoretical” or “hypothetical.” See, e.g., ICDAS

Brief at 24-25, 27 (citing Issues and Decision Memorandum for the Final Determination in the

Antidumping Investigation of Chlorinated Isocyanurates from Spain, 2005 WL 2290648 (May 2,

2005) (“Chlorinated Isos from Spain”), at comment 9 (where Commerce denied requested startup

adjustment, because respondent’s calculations relied “on a theoretical production capacity rather

than the level of commercial production as required by the [Statement of Administrative Action]”);

Issues and Decision Memorandum for the Final Results of the Administrative Review of Stainless

Steel Bar from India, 2003 WL 24153851 (Aug. 4, 2003) (“Stainless Steel Bar from India”), at

comment 2 (where Commerce rejected respondent’s production limitation analysis because

respondent compared “its actual production levels to its theoretical production capacity”)).

But there was nothing “hypothetical” about the full-month equivalent methodology that

Commerce used in the administrative review at issue here – at least not in the sense in which

Commerce has previously used that term. True enough, Commerce in the past has rejected purely

Court No. 05-00616 Page 36

hypothetical production data, such as data based solely on production capacity, or speculative

projections as to future production. See Decision Memo at 81. However, those situations were very

different from what Commerce did in this case.

Here, Commerce did not use theoretical production data to project future production levels.

Instead, the agency used actual production data to establish a full-month equivalent for a partial

month of production in the past. See Def. Response Brief at 19-20 (distinguishing full-month

equivalent methodology in this case from situations presented in Chlorinated Isos from Spain and

Stainless Steel Bar from India). Contrary to ICDAS’ implication, Chlorinated Isos from Spain and

Stainless Steel Bar from India do not stand for the proposition that Commerce is precluded from

using actual production data for a partial month of operations to extrapolate a full month equivalent

for purposes of comparison with other actual production data for subsequent full months. Those two

cases merely reflect Commerce’s policy of rejecting producers’ attempts to qualify for a startup

adjustment by using projected or optimal production capacity to establish an artificially-inflated

benchmark for commercial production.

In sum, in analyzing ICDAS’ request for a startup adjustment, Commerce used ICDAS’

actual production data, and adjusted those data to permit an apples-to-apples comparison of partial-

month production for December 2003 with full-month production in the three months that followed.

Commerce’s full-month equivalent methodology thus used ICDAS’ actual production data and

reasonably adjusted them to effectuate Congress’ intent – that is, to determine whether Biga’s

production in December 2003 was limited. See generally Domestic Producers Response Brief at 20-

Court No. 05-00616 Page 37

21.27

Nothing about Commerce’s full-month equivalent approach is inconsistent with the language

of the startup adjustment statute, which does not specifically define how Commerce is to measure

whether, in any given case, production was “limited.” Under such circumstances, Commerce is

entitled to substantial deference in interpreting the statute. And nothing about the agency’s

interpretation here is inherently unreasonable. See generally Domestic Producers Response Brief

at 20-21; Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837, 843 (1984)

(holding that, “if the statute is silent or ambiguous with respect to [a] specific issue, the question for

the court is whether the agency’s answer is based on a permissible construction of the statute”);

Suramerica de Aleaciones Laminadas, C.A. v. United States, 966 F.2d 660, 665 (Fed. Cir. 1992)

(observing that courts have duty to “respect legitimate policy choices made by the agency in

27

Although its point is not entirely clear, ICDAS also objects to Commerce’s full-month

equivalent methodology on the grounds that it “creates a mismatch between the cost of production

data and production starts data.” See ICDAS Brief at 28. According to ICDAS, Commerce’s

methodology “created phantom production starts for the first ten days of December with no

associated production costs at all.” Id. As the Government explained, however, production costs

play no role in determining whether a startup adjustment is granted. The focus of Commerce’s

startup adjustment analysis is solely on levels of production. See Def. Response Brief at 21.

Accordingly, any asserted “mismatch” did not prejudice ICDAS’ request.

Similarly, ICDAS points to “the extremely high costs that ICDAS incurred [in December

2003] relative to subsequent months,” and asserts that the purpose of the startup adjustment statute

is “to take into account that a firm may experience unusually high costs when it is ‘starting up’ . .

. new production facilities.” See ICDAS Brief at 26 (quoting Statement of Administrative Action,

H.R. Doc. No. 103-316, at 835, reprinted in 1994 U.S.C.C.A.N. at 4172); see also ICDAS Reply

Brief at 10 (same). Whatever may be the underlying purpose of the statute, the fact nevertheless

remains that the language of the statute on its face authorizes Commerce to grant a startup

adjustment only where a producer establishes that “production levels [were] limited by technical

factors associated with the initial phase of commercial production.” See 19 U.S.C. §

1677b(f)(1)(C)(ii). This ICDAS failed to do.

Court No. 05-00616 Page 38

interpreting and applying the statute”). Cf. INS v. Elias-Zacarias, 502 U.S. 478, 483-84 (1992)

(stating that, where Congress has entrusted agency to administer statute in fact-intensive situations,

agency’s conclusion should be reversed only if the record evidence is “so compelling that no

reasonable factfinder” could reach the same conclusion). ICDAS’ attack on Commerce’s full-month

equivalent methodology must therefore be rejected.28

28

ICDAS further asserts that, even under Commerce’s assertedly “flawed” full-month

equivalent methodology, the December 2003 production levels for the Biga facility were

“significantly limited.” In support of its position, ICDAS compares full-month equivalent data on

production starts for December 2003 to data on production starts for the first three months of 2004.

With those data in mind, ICDAS emphasizes that “Commerce has found in a variety of antidumping

contexts that differences greater than 20% to 25% are ‘significant.’” See generally ICDAS Brief at

29 & n.18.

However, as the Government observes, it is not enough for ICDAS to prove a difference

(even a significant difference) between production starts in December 2003 and those in subsequent

months. The issue is whether, in December 2003, Biga achieved “a level of commercial production

that is characteristic of the merchandise.” See Antidumping Duties; Countervailing Duties: Final

Rule, 62 Fed. Reg. 27,296, 27,364 (May 19, 1997) (Preamble). Comparing production starts data

for December 2003 to production starts data for subsequent months is essentially meaningless if, for

example, production levels in those subsequent months were optimal. See Statement of

Administrative Action, H.R. Doc. No. 103-316, at 836, reprinted in 1994 U.S.C.C.A.N. at 4173

(stating that “[a]ttainment of peak production levels” is not the standard for identifying the end of

a startup period). As the Government bluntly puts it, “ICDAS does not provide any basis to

conclude that just because the [December 2003] production levels were not optimal, they should still

be considered startup levels.” See generally Def. Response Brief at 21-22; see also Domestic

Producers Response Brief at 21 n.8 (arguing that “ICDAS’ attempt to compare December 2003

production to March 2004 production should be rejected, as it appears to simply be an attempt to

compare the commercial production levels achieved in December 2003 with ‘optimum’ production

levels of March 2004”).

Court No. 05-00616 Page 39

2. Commerce’s Determination That ICDAS

Failed to Prove That Technical Factors Limited Biga’s Production

In addition to its challenge to Commerce’s full-month equivalent methodology, ICDAS also

disputes Commerce’s conclusion that ICDAS failed to provide sufficient information to establish

that any limited production at Biga was the result of “technical factors associated with the initial

phase of commercial production.” See ICDAS Brief at 5, 22, 29-32; ICDAS Reply Brief at 8-10.

As discussed below, however, ICDAS’ argument is lacking in merit. Accordingly, even assuming

arguendo that ICDAS had established that Biga’s “production levels [were] limited” in December

2003 (the claimed startup period) (which, as discussed in section III.B.1 immediately above, it did

not), ICDAS nevertheless still would not be entitled to a startup adjustment, because ICDAS failed

to meet its burden of proof to establish the cause of any assertedly limited production. See generally

Def. Response Brief at 5-6, 9, 14-17; Domestic Producers Response Brief at 3, 17-18, 21-26.

In denying the requested startup adjustment, Commerce found that ICDAS failed to respond

to the agency’s inquiries concerning technical factors associated with the initial phase of commercial

production. Indeed, the record on point consisted of only a single vague statement, with no

documentary support. See Decision Memo at 80.

Section D of Commerce’s antidumping questionnaire explicitly requests that respondents

provide support for any claimed startup adjustments. Thus, in its questionnaire to ICDAS,

Commerce expressly asked ICDAS to provide detailed information and documentation to support

ICDAS’ claim that Biga’s production for the month of December 2003 was limited by (in the words

of the statute) “technical factors associated with the initial phase of commercial production.”

Court No. 05-00616 Page 40

Specifically, Commerce’s questionnaire requested that ICDAS:

8. [E]xplain how the production levels were limited by technical factors associated

with the initial phase of commercial production (as part of your analysis, describe the

technical factors which limited production, demonstrate how these technical factors

restricted the number of units processed by the company, and demonstrate how these

technical factors are unique to the startup phase, not a result of chronic or normal

production problems).

The sole information on point that ICDAS placed on the record was the following succinct

statement, in the company’s Section D Questionnaire Response:

Production levels were limited by technical factors associated with the initial phase

of commercial production because the company had to 1) develop the production

parameters of the new operations; 2) install, adjust, calibrate and test the new

equipment; and 3) train new employees to operate the new equipment. Operations

typically incur such technical problems because of the newness of the facility.

Section D Questionnaire Response of ICDAS Celik Enerji Tersane ve Ulasim Sanayi, A.S. (Pub.

Doc. No. 67) at D-40.

Although ICDAS bore the burden of proof on all elements necessary to establish its right to

a startup adjustment,29 Commerce followed up on ICDAS’ terse questionnaire response, on its own

29

ICDAS argues that “Commerce failed to identify any actual evidence . . . that reasonably

leads to its conclusion that the Biga melt shop had achieved a commercial level of production” in

December 2003. See ICDAS Brief at 24. As the Government observes, however, ICDAS – in effect

– seeks to turn the burden of proof on this issue on its head. See Def. Response Brief at 14-16.

The Statement of Administrative Action unequivocally places the burden of proving the right

to a startup adjustment squarely on the shoulders of the party seeking the adjustment:

The Administration intends that the burden will be on companies to demonstrate

their entitlement to a startup adjustment. Specifically, companies must demonstrate

that, for the period under investigation or review, production levels were limited by

technical factors associated with the initial phase of commercial production and not

by factors unrelated to startup, such as marketing difficulties or chronic production

problems. In addition, to receive a startup adjustment, companies will be required

Court No. 05-00616 Page 41

initiative. Specifically, Commerce took affirmative steps to seek to elicit the requisite detailed

to explain their production situation and identify those technical difficulties

associated with startup that resulted in the underutilization of facilities. This is

consistent with the general rule in antidumping practice that a party seeking an

adjustment has the burden of establishing entitlement to that adjustment as both a

legal and factual matter.

Statement of Administrative Action, H.R. Doc. No. 103-316, at 838, reprinted in 1994 U.S.C.C.A.N.

at 4174 (emphases added). See also Pam, S.p.A. v. U.S. Dep’t of Commerce, 27 CIT 671, 677, 265

F. Supp. 2d 1362, 1367-68 (2003) (sustaining Commerce’s decision denying startup adjustment

where plaintiff failed to prove it was entitled to adjustment); Agro Dutch Foods Ltd. v. United

States, 24 CIT 510, 518 n.10, 110 F. Supp. 2d 950, 958 n.10 (2000) (noting that, as to claim for

startup adjustment, “[t]he burden of creating an adequate record lies with Agro Dutch, not with

Commerce”).

Indeed, in drafting the regulations governing startup adjustments, Commerce expressly

rejected one commenter’s suggestion that “once a respondent [had] made a prima facie case of

entitlement to a startup adjustment, the Department would make the adjustment unless there was

clear and convincing evidence that factors other than startup” were responsible for low production.

Commerce explained: “[A]ccording to the [Statement of Administrative Action], the burden of proof

undoubtedly rests with the party seeking a startup adjustment. Therefore, it is incumbent upon that

party to (1) prove that the startup conditions [specified in the statute] existed during the period of

. . . review, and (2) as with any antidumping adjustment, document that fact to the Department’s

satisfaction.” See Antidumping Duties; Countervailing Duties: Proposed Rule, 61 Fed. Reg. at 7340

(Preamble) (citing Statement of Administrative Action).

Moreover, as the Domestic Producers correctly note, this case certainly is no outlier.

Commerce has denied requests for startup adjustments in other cases where there was insufficient

record evidence to prove that limited production was the result of technical factors unique to startup.

See Domestic Producers Response Brief at 25-26 (citing Notice of Final Determination of Sales at

Less Than Fair Value: Certain Preserved Mushrooms from Chile, 63 Fed. Reg. 56,613, 56,618 (Oct.

22, 1998) (noting that respondent company failed to establish that its production levels were limited

by technical factors associated with the initial phase of production); Certain Corrosion-Resistant

Carbon Steel Flat Products and Certain Cut-to-Length Carbon Steel Plate From Canada: Preliminary

Results of Antidumping Duty Administrative Reviews and Intent To Revoke in-Part, 63 Fed. Reg.

37,320, 37,324-25 (July 10, 1998) (unchanged in Final Results) (finding that respondent company’s

production levels were limited not by technical factors unique to startup, but rather by “chronic

production problems”)); see also, e.g., Notice of Preliminary Results of Antidumping Duty

Administrative Review: Stainless Steel Bar From India, 68 Fed. Reg. 11,058, 11,062 (March 7,

2003) (unchanged in Final Results) (finding that respondent company’s low production levels were

caused by “chronic production problems rather than technical factors associated with startup”).

Court No. 05-00616 Page 42

information and documentary support concerning the claimed limiting technical factors, issuing a

supplemental Section D Questionnaire to ICDAS,30 and inquiring again at ICDAS’ cost verification.

ICDAS nevertheless failed to supply any further information. See Decision Memo at 79-80.

Commerce ultimately concluded that the record lacked sufficient information to allow the agency

to conclude that any asserted limitation on production at the Biga facility in December 2003 was

attributable to technical factors unique to startup, rather than “factors unrelated to startup, such as

marketing difficulties or chronic production problems.” See Decision Memo at 79-80; Statement

of Administrative Action, H.R. Doc. No. 103-316, at 838, reprinted in 1994 U.S.C.C.A.N. at 4174.

In this action, ICDAS raises two principal objections to Commerce’s conclusion. ICDAS

first argues that the relationship between December 2003 production levels at the Biga facility and

technical factors associated with the initial phase of commercial production should have been “self-

evident” to Commerce, in light of the information that the agency had before it. See ICDAS Brief

at 30; see also id. at 5, 22, 29-31; ICDAS Reply Brief at 8. In addition, ICDAS argues that

Commerce’s failure to grant the requested startup adjustment amounts to the improper use of “facts

otherwise available” or adverse inference. See ICDAS Brief at 31-32. Neither argument holds

water.

30

Commerce’s supplemental Section D Questionnaire requested additional information on

production start dates, capitalization of costs, and specifically how the technical factors ICDAS

described limited the production levels that could be achieved. See Letter from Commerce to

ICDAS (Dec. 21, 2004) (Pub. Doc. No. 97) at 3. In response, ICDAS provided the date that

production began at Biga, as well as a breakdown of how costs were capitalized. But ICDAS gave

no explanation whatsoever in response to Commerce’s request for information and documentation

establishing exactly how the technical factors that ICDAS cited limited production levels. See Letter

from ICDAS to Commerce (Jan. 25, 2005) (Pub. Doc. No. 116; Conf. Doc. No. 24) at 18.

Court No. 05-00616 Page 43

a. ICDAS’ Claim That Limitation Due to Technical Factors Is “Self-Evident”

Notwithstanding the fact that it bore the burden of proof, and despite Commerce’s requests

for further detail and documentation (both through a supplemental questionnaire and at verification),

ICDAS maintains that – other than the existing information on the record – it was not required to

provide evidence that any asserted limitations on production at the Biga facility in December 2003

were due to factors unique to startup. ICDAS maintains that those factors and their limiting effects

are “self-evident” from the record evidence, and that it thus “provided sufficient information for

Commerce to address the startup issue.” See ICDAS Brief at 30, 31 n.21. ICDAS further

emphasizes that Commerce verified the fact that ICDAS conducted test runs at the Biga facility in

early December, and that it did not begin actual production until later that month. See ICDAS Brief

at 5, 22-23, 25, 30. Finally, ICDAS notes that the Biga facility produced only a limited number of

types of billet in December 2003, but produced many more types in the months that followed. See

ICDAS Brief at 22-23, 31 n.20.

As the Domestic Producers observe, however, the information to which ICDAS points was

not an adequate basis for a startup adjustment. See generally Domestic Producers Response Brief

at 3, 18, 21-26; see also Def. Response Brief at 5-6, 9, 14-17, 22. By any measure, the information

on which ICDAS relies was not sufficient to demonstrate that technical factors unique to startup –

rather than “factors unrelated to startup, such as marketing difficulties or chronic production

problems” – were the cause of assertedly limited production levels at Biga in December 2003, and

to “document that fact to the Department’s satisfaction.” See Statement of Administrative Action,

H.R. Doc. No. 103-316, at 838, reprinted in 1994 U.S.C.C.A.N. at 4174; Antidumping Duties;

Court No. 05-00616 Page 44

Countervailing Duties: Proposed Rule, 61 Fed. Reg. 7308, 7340 (Feb. 27, 1996) (Preamble).

The Domestic Producers sum up the state of the record thusly: “The verified evidence, as

identified by ICDAS, is this: Biga Melt was a new facility. . . . The production equipment was

newly installed. . . . Test runs were conducted prior to production. . . . [A limited number of] types

of billet were produced there in December 2003; [many more] types were produced in succeeding

months. . . . That is all.” See Domestic Producers Response Brief at 23. As discussed below, these

basic facts – considered alone, or even in the aggregate – simply do not suffice to allow Commerce

to grant the startup adjustment that ICDAS seeks.

For example, ICDAS’ first piece of evidence – that the Biga facility was entirely new – is

logically relevant only to the first criterion of the startup adjustment standard (i.e., that “a producer

[was] using new production facilities”), not to the second criterion (i.e., that “production levels

[were] limited by technical factors associated with the initial phase of commercial production”),

which is the criterion at issue here. Nothing about the newness of the Biga facility, in and of itself,

demonstrates that production levels were limited due to technical factors unique to the startup phase.

If newness were itself evidence that technical factors necessarily limit production in a facility’s

startup phase, the second criterion of Congress’ startup adjustment standard would be entirely

superfluous. See generally Domestic Producers Response Brief at 23-24; 19 U.S.C. §

1677b(f)(1)(C)(ii) (two-part standard for startup adjustment).

Similarly, ICDAS’ second piece of evidence – that the equipment at the Biga facility was

newly-installed – does not, without more, demonstrate that any asserted limitations on initial

production were attributable to technical factors associated with startup. It simply reinforces the fact

Court No. 05-00616 Page 45

that the facility itself was new. New equipment alone is not evidence of technical limitations

affecting production. See generally Domestic Producers Response Brief at 24.

ICDAS’ third piece of evidence – that ICDAS devoted days to testing equipment at the Biga

facility prior to beginning production – is also inapposite. This fact too merely demonstrates that

the facility was new, and does not necessarily say anything about whether production levels were

limited by technical factors unique to startup. See generally Domestic Producers Response Brief

at 24.

The fourth piece of evidence cited by ICDAS is the disparity between the number of types

of billet produced at the Biga facility in December 2003 and the number produced in later months.

But this evidence is equally meaningless vis-a-vis the existence (or non-existence) of technical

factors unique to the startup phase. There is nothing on the record to show that the relatively low

number of types of billet produced at Biga in December 2003 was due to technical factors associated

with startup. The record simply shows that additional types of billet were produced later. Indeed,

there is no record evidence to indicate that the difference between the types of billet produced in

December 2003 and the types produced in later months reflects anything more than a business

decision on the part of ICDAS. See Domestic Producers Response Brief at 24; see also id. at 23 n.9.

In sum, none of the evidence on which ICDAS relies speaks to whether any asserted

limitation on production at Biga in December 2003 was attributable to technical factors unique to

startup operations.31 The evidence either simply reflects that the Biga facility was new (a fact which

31

ICDAS asserts that its response to Commerce’s Section D Questionnaire constituted

adequate evidence that the assertedly limited production at the Biga facility in December 2003 was

attributable to technical factors unique to startup. See ICDAS Brief at 30. ICDAS there stated:

Court No. 05-00616 Page 46

was known and undisputed, and which is relevant at most to the first criterion of the startup

Production levels were limited by technical factors associated with the initial phase

of commercial production because the company had to 1) develop the production

parameters of the new operations; 2) install, adjust, calibrate and test the new

equipment; and 3) train new employees to operate the new equipment. Operations

typically incur such technical problems because of the newness of the facility.

Section D Questionnaire Response of ICDAS Celik Enerji Tersane ve Ulasim Sanayi, A.S. (Pub.

Doc. No. 67) at D-40.

ICDAS argues that the factors that it listed in its Section D Questionnaire Response closely

parallel the factors cited by Commerce as a basis for the startup adjustment granted in another case,

SRAMs from Taiwan. See ICDAS Brief at 30 (citing Notice of Final Determination of Sales at Less

Than Fair Value: Static Random Access Memory Semiconductors From Taiwan, 63 Fed. Reg. 8909,

8930 (Feb. 23, 1998) (“SRAMs from Taiwan”) (finding that “the development of process

parameters, cleaning of the . . . facility, and installation, adjustment, calibration, and testing of new

equipment” were technical factors unique to startup operations)). However, all ICDAS points to is

the Federal Register notice in the SRAMs proceeding. ICDAS provided no information from the

underlying administrative record to indicate the nature or quantum of evidence submitted to

Commerce by the producer there to substantiate the causal link between the listed factors and the

limited production it experienced in its initial phase of operations – in other words, the evidence to

substantiate its claim that technical factors unique to startup were to blame for limited production

in its initial phase of operations. There is thus no basis to conclude that Commerce granted the

startup adjustment in SRAMs from Taiwan on the strength of an evidentiary record as thin as the

record here.

Moreover, it would seem to be a near-universal truth that new facilities everywhere must

“develop the production parameters of . . . new operations; 2) install, adjust, calibrate and test . . .

new equipment; and 3) train new employees to operate the new equipment” (quoting ICDAS’

Section D Questionnaire Response). Indeed, ICDAS itself observed that “[o]perations typically

incur such technical problems because of the newness of the facility.” Id. It is difficult to imagine

that Congress could have intended that such bald, generalized statements of near-universal truth

would suffice to satisfy the requirements that a producer seeking a startup adjustment “demonstrate

that, for the period under investigation or review, production levels were limited by technical factors

associated with the initial phase of commercial production and not by factors unrelated to startup,

such as marketing difficulties or chronic production problems,” and, further, “explain their

production situation and identify those technical difficulties associated with startup that resulted in

the underutilization of the facilities.” See Statement of Administrative Action, H.R. Doc. No. 103-

316, at 838, reprinted in 1994 U.S.C.C.A.N. at 4174. Indeed, the recitation of the requirements in

the Statement of Administrative Action is longer than the sentence that ICDAS relies on as evidence

to satisfy those requirements.

Court No. 05-00616 Page 47

adjustment standard, which is not at issue here), or it is wholly irrelevant. Either way, ICDAS’

evidence does little or nothing to support its claim to a startup adjustment.32

ICDAS failed to provide Commerce with the evidence required to allow the agency to grant

ICDAS’ request for a startup adjustment. The statute requires more than mere evidence that a

production facility is new. Rather, to justify a startup adjustment, a producer must provide specific,

detailed information concerning how, and to what extent, technical factors associated with the initial

phase of commercial operations limited initial production at its new facility. See 19 U.S.C. §

1677b(f)(1)(C)(ii). ICDAS’ argument that the relationship between December 2003 production

levels at the Biga facility and technical factors unique to startup is “self-evident” therefore must fail.

b. ICDAS’ Claim That Commerce Resorted to “Facts Otherwise Available”

As its final challenge to Commerce’s denial of the requested startup adjustment, ICDAS

argues that, even if ICDAS failed to fully respond to Commerce’s requests for information and

32

In a back-door attempt to demonstrate that the asserted limitations on production at the

Biga facility in December 2003 were due to technical factors unique to startup, ICDAS emphasizes

that “[t]here has been no allegation, nor does the record reflect, that production [at Biga in December

2003] was limited by ‘factors unrelated to startup, such as marketing difficulties or chronic

production problems.’” See ICDAS Brief at 30 n.19 (quoting Statement of Administrative Action,

H.R. Doc. No. 103-316, at 838, reprinted in 1994 U.S.C.C.A.N. at 4174).

As discussed above, however, it was ICDAS that bore the burden of affirmatively

establishing that technical factors unique to startup were the cause of the assertedly limited

production at the Biga facility in December 2003; thus, it was ICDAS that bore the burden of (at

least implicitly) eliminating other potential causes of limited production. See n.29, supra. Contrary

to ICDAS’ implication, neither Commerce nor the Domestic Producers was under any obligation

to prove that any asserted limitations on production in the startup phase were attributable to “factors

unrelated to startup, such as marketing difficulties or chronic production problems.” The fact that

the record is devoid of evidence of any such “factors unrelated to startup” is therefore of no moment.

Court No. 05-00616 Page 48

documentation concerning “technical factors associated with the initial phase of commercial

production” at the Biga facility, Commerce had no “basis for resorting to facts available or drawing

any adverse inferences.” See generally ICDAS Brief at 31.33 ICDAS faults Commerce’s

determination because it does not include “any analysis under the antidumping law’s provisions on

‘facts available’” to justify “discard[ing]” information provided by ICDAS to support its adjustment

request. Id. ICDAS further complains that Commerce “erred by failing to explain why the

information that was allegedly withheld was necessary to reach a decision on the startup adjustment

issue.” Id. But ICDAS’ arguments have no basis in either law or fact.

ICDAS’ position is apparently based on its belief that it provided sufficient information to

Commerce to allow the agency to grant the requested startup adjustment. As discussed above,

however, that is simply not the case. Despite Commerce’s repeated prodding, and notwithstanding

the fact that ICDAS bore the burden of proof on the issue, ICDAS left the agency with only a very

thin record on its request.

The record evidence – basically, little more than a single statement by ICDAS – was not

33

As the Government notes, when Commerce receives insufficient information from an

interested party to make a determination, the statute and regulations authorize the agency to fill in

the gaps in the facts with “facts otherwise available.” See Def. Response Brief at 18 (citing 19

U.S.C. § 1677e(a)); see also 19 C.F.R. § 351.308(a). If Commerce finds that the information is not

available because the party “has failed to cooperate by not acting to the best of its ability to comply

with a request for information,” the statute and regulations further provide that Commerce “may use

an inference that is adverse to the interests of that party in selecting from among the facts otherwise

available.” See Def. Response Brief at 18 (citing 19 U.S.C. § 1677e(b)); see also 19 C.F.R. §

351.308(a); Nippon Steel Corp., 337 F.3d at 1380-81 (summarizing operation of statutory and

regulatory provisions governing use of “facts otherwise available” and adverse inference). As

explained below, however, the concepts of “facts otherwise available” and adverse inference have

no application here.

Court No. 05-00616 Page 49

sufficient to permit Commerce to properly consider ICDAS’ request for a startup adjustment. As

Commerce stated, “without an explanation of how the claimed technical factors limited production

levels, we are not able to determine whether ICDAS’s production levels were limited by technical

factors associated with the initial phase of commercial production.” See Decision Memo at 80. But,

contrary to ICDAS’ implication, that determination does not reflect Commerce’s invocation of “facts

otherwise available” or adverse inference. Rather, it is simply an explanation that, because ICDAS

failed to meet its burden of proof – in accordance with the Statement of Administrative Action and

established agency practice – Commerce could not even evaluate ICDAS’ request, and was forced

to deny the startup adjustment. See generally Domestic Producers Response Brief at 26-27; Def.

Response Brief at 18.

Like its other challenges to Commerce’s denial of its requested startup adjustment, ICDAS’

claim that Commerce improperly resorted to “facts otherwise available” or adverse inference is

similarly lacking in merit. In light of the record that the agency had before it, Commerce’s action

denying the startup adjustment must be sustained.

C. Commerce’s Treatment of ICDAS’ Net Foreign Exchange Gain

In the course of the administrative review at issue here, Commerce conducted a cost

investigation to determine whether ICDAS made sales of subject merchandise at prices below the

cost of production. The statute defines cost of production as an amount equal to the sum of “the cost

of materials and of fabrication or other processing . . . employed in producing the foreign like

product,” and includes “an amount for selling, general, and administrative expenses based on actual

data pertaining to production and sales of the foreign like product.” 19 U.S.C. § 1677b(b)(3).

Court No. 05-00616 Page 50

However, the statute does not specify the method of determining those expenses for purposes of

calculating cost of production. See generally Def. Response Brief at 22-23. Commerce has

interpreted the statute to include financial expenses in the calculation of cost of production, and

treats foreign exchange gains and losses as financial expenses. See, e.g., Silicomanganese from

Brazil: Preliminary Results of Antidumping Duty Administrative Review, 68 Fed. Reg. 61,185,

61,187 (Oct. 27, 2003).

During the period of review in question, ICDAS realized a net foreign exchange gain, as a

result of its foreign exchange income on sales, as well as its foreign exchange income on foreign

currency bank checking accounts (which, ICDAS emphasizes, were “necessary for [the company’s]

purchases and sales in foreign currencies”). See ICDAS Brief at 32; see also id. at 6; ICDAS Reply

Brief at 10. In accordance with its standard practice, in calculating ICDAS’ cost of production here,

Commerce treated the company’s foreign exchange gain within the category of “financial expenses,”

and included it in the total financial expense ratio calculation in the Final Results. See generally

Decision Memo at 86-88. Although ICDAS’ net foreign exchange gain exceeded its financial

expenses, Commerce did not allow any of that gain to offset other expenses included in ICDAS’ cost

of production, effectively “capping” ICDAS’ financial expenses at zero. See ICDAS Brief at 32-33;

ICDAS Reply Brief at 10.

ICDAS asserts that its foreign exchange gains or losses do not result from separate cash

management activities, but merely constitute adjustments necessary to ensure that other components

of its cost of production are properly stated in a single currency. See generally ICDAS Brief at 6,

32-36; ICDAS Reply Brief at 10, 12-13. ICDAS therefore contests Commerce’s treatment of

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ICDAS’ net foreign exchange gain as part of “financial expenses” in the agency’s calculation of

ICDAS’ cost of production. See generally ICDAS Brief at 2, 6, 32-35; ICDAS Reply Brief at 10-13.

ICDAS further contends that Commerce erred in capping ICDAS’ net foreign exchange gain so as

to set ICDAS’ “financial expenses” at zero. See generally ICDAS Brief at 2, 6, 35-37; ICDAS

Reply Brief at 10-12. According to ICDAS, Commerce should have fully recognized the company’s

net foreign exchange gain in the agency’s cost of production calculations. See generally ICDAS

Brief at 2, 6, 32-33, 35-37; ICDAS Reply Brief at 10-12.

As discussed below, however, Commerce’s treatment of ICDAS’ net foreign exchange gain

must be sustained.

1. Commerce’s Treatment of ICDAS’ Foreign Exchange Gain Within “Financial Expenses”

ICDAS’ threshold argument is that its foreign exchange gains or losses do not result from

separate cash management activities, but – instead – constitute an adjustment necessary to ensure

that other costs (such as the costs of manufacturing, sales, and general company operations) are

properly stated in a single currency. See generally ICDAS Brief at 6, 32-36; ICDAS Reply Brief

at 10-13. ICDAS maintains that its foreign exchange gains or losses therefore “should be fully

accounted for” in the cost of production, rather than included in “a discrete category of ‘financial

expenses,’” which Commerce capped at zero. ICDAS Reply Brief at 11; see also id. at 10-12;

ICDAS Brief at 2, 6, 32-33, 35-37.

ICDAS explains that its net foreign exchange gain during the period of review had “both a

cost of manufacturing component and a sales-related component.” ICDAS Brief at 33. ICDAS’

manufacturing operations depend upon both raw material inputs and capital assets which are

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purchased in currencies other than ICDAS’ domestic currency, the Turkish Lira. According to

ICDAS, consistent with generally accepted accounting principles, the company’s purchases of

foreign raw materials and foreign capital assets are generally booked as accounts payable on the date

they are received, using the appropriate foreign exchange rate on that date. However, actual

payment generally is not made until some time later. As ICDAS notes, the change in the foreign

exchange rate between the two dates results in a foreign exchange gain or loss for the company,

related to its manufacturing operations. See generally ICDAS Brief at 33.

Like ICDAS’ manufacturing operations, ICDAS’ sales operations also produce foreign

exchange gains or losses. When ICDAS makes a sale in foreign currency, the account receivable

booked at the time of sale is converted to Turkish Lira on that date. However, the actual amount of

Turkish Lira that ICDAS receives depends on the exchange rate when the buyer deposits its

payment in foreign currency into ICDAS’ account. The difference between the exchange rate on

the date of sale and the exchange rate on the date of payment results in a foreign exchange gain or

loss for ICDAS, as a result of its sales operations. See generally ICDAS Brief at 33.

In addition to the foreign exchange gains and losses associated with ICDAS’ manufacturing

and sales operations, foreign exchange gains and losses also result from ICDAS’ outstanding loans

denominated in foreign currency. ICDAS asserts that such loans “relate to the general operation of

the company,” and must be accounted for in Commerce’s cost of production calculations. See

generally ICDAS Brief at 33-34. ICDAS explains:

[A]s a company conducting business in multiple currencies, ICDAS constantly faces

the currency risk resulting from the mismatch between the currencies in which costs

are incurred and revenues are earned. To mitigate this risk directly linked to its

production and sale of merchandise, ICDAS . . . incur[s] some of its debt in foreign

Court No. 05-00616 Page 53

currencies. Thus, when the Turkish Lira appreciates, and revenue in Turkish Lira

terms declines relative to costs, the foreign currency loans provide a hedge and

generate foreign currency gains to offset the foreign currency loss generated by the

decline in sales income in Turkish Lira terms.

ICDAS Brief at 34.

ICDAS argues that foreign exchange gain or loss thus “is not a distinct element of cost.”

ICDAS Brief at 34. ICDAS asserts that “[t]here is no check or account credit received from a

financial institution for a foreign exchange gain, and no direct payment is made for a foreign

exchange loss. Rather, the exchange rate gain or loss results from a series of accounting entries that

are necessary and required by [generally accepted accounting principles] to ensure that all of the

other elements of cost and income recorded by the company are properly stated in a single

currency.” Id. ICDAS therefore characterizes net exchange rate gain or loss as “an overall

adjustment necessary to ensure that all other costs for the calculation of ICDAS’ [cost of production]

are properly stated in Turkish Lira.” Id.

As the Government correctly notes, however, ICDAS’ foreign exchange gains and losses are

not inherent in its manufacturing and sales operations. Instead, they are the product of cash

management decisions made by ICDAS in connection with its operations – cash management

decisions which expose the company to those gains and losses. See Def. Response Brief at 9, 24;

see generally Decision Memo at 86. In other words, ICDAS’ financing decisions – such as whether

to pay for its purchases immediately, or to carry them as accounts payable; whether to make sales

on a credit basis (i.e., as accounts receivable), or to require immediate payment; whether to borrow

in a foreign currency, or in its own domestic currency; and whether to enter into foreign currency

contracts – are related to, but separate and distinct from, the company’s manufacturing and sales

Court No. 05-00616 Page 54

activities. See generally Decision Memo at 86-87.

Thus, when ICDAS purchases raw materials or other inputs needed for production using a

foreign currency, the company can – at the time of purchase – pay in cash immediately, based on

the prevailing exchange rate between the Turkish Lira and the foreign currency. ICDAS could

thereby avoid any exposure to exchange rate gains or losses in its manufacturing operations, if it

wished to do so. See generally Def. Response Brief at 24; Decision Memo at 86-87. On the other

hand, if ICDAS instead elects to pay for the purchase of the inputs at a later date (i.e., to finance the

purchase, or to set it up as an account payable, which is – in effect – buying on credit), the value of

the inputs is booked in the equivalent domestic currency (i.e., in Turkish Lira) as of the date of sale,

and not as of the date of actual payment. And the change in the foreign exchange rate between the

date of purchase and the date of payment creates a foreign exchange gain or loss for the company.

Accordingly, it is not the purchase transaction itself that results in a foreign exchange gain or loss,

but – rather– ICDAS’ decision to defer payment and to finance the purchase instead. See generally

Def. Response Brief at 24-25; Decision Memo at 86-87.

The same logic applies with equal force to ICDAS’ export sales transactions denominated

in foreign currencies. As Commerce observed in the Final Results, ICDAS could demand immediate

payment in such transactions, and would then avoid any exposure to foreign exchange rate gains or

losses. On the other hand, if ICDAS instead elects to extend credit to customers in such transactions

(i.e., by setting up accounts receivable from customers), the difference between the foreign exchange

rate as of the date of sale and as of the date of payment results in a foreign exchange gain or loss for

ICDAS. ICDAS’ decision to extend credit and thus to expose itself to foreign currency fluctuations

Court No. 05-00616 Page 55

in such transactions is a cash management decision. See generally Decision Memo at 87.

Accordingly, it is not the sale transaction itself that results in a foreign exchange gain or loss, but

– rather – ICDAS’ decision to extend credit to its customer (rather than requiring immediate

payment).

In its briefs, ICDAS never directly confronts the fundamental logic of Commerce’s position,

but instead repeatedly asserts (in essence) that the company’s foreign exchange gains or losses are

“intertwined with and inseparable from” its manufacturing, sales, and other operations. See ICDAS

Reply Brief at 11; see also id. at 10, 12-13; ICDAS Brief at 6, 35. To the contrary, as Commerce

explained in its Final Results, ICDAS could completely avoid exposure to foreign exchange risks,

if it wished to do so, by making different cash management decisions – by, for example, making

immediate payment for inputs that it purchases in foreign currencies, and by requiring that its

customers make immediate payment in export sales transactions denominated in foreign currencies.

See Decision Memo at 86-87.

It is of no moment that, as ICDAS pointedly notes, the company is “not [in] the business of

speculating with foreign currencies,” and that the company’s foreign exchange gains or losses

associated with its operations “reflect the international currency market rate changes – which

ICDAS can neither predict nor control.” See ICDAS Reply Brief at 11. Although foreign exchange

rates are not within ICDAS’ control, Commerce’s point is that ICDAS can control whether or not

to expose itself to the risk of gains or losses in such rates. ICDAS’ affirmative decisions to expose

itself to such risks – for example, by delaying payment through the use of credit in purchasing inputs

using foreign currencies, and by extending credit to its own customers in export sales transactions

Court No. 05-00616 Page 56

in foreign currencies – are cash management decisions related to, but separate and distinct from, its

underlying decisions to purchase inputs or to make sales. Commerce therefore treated ICDAS’ net

foreign exchange gain within the category of financial expenses, for purposes of its cost of

production calculations. It cannot be said that Commerce’s interpretation is an unreasonable

interpretation of the statute. See Def. Response Brief at 22-23, 25-26 (citing Chevron, 467 U.S. at

842-43).

In short, Commerce reasonably concluded in the Final Results that ICDAS’ net foreign

exchange gain was “part of the company’s overall net financing expense.” See Decision Memo at

87. ICDAS’ arguments to the contrary are unavailing.

2. Commerce’s Decision Capping ICDAS’ Financial Expenses at Zero

Not only does ICDAS dispute Commerce’s treatment of the company’s foreign exchange

gain within the category of “financial expenses” for purposes of calculating cost of production, but

– in addition – ICDAS challenges Commerce’s decision to cap the company’s financial expenses

at zero. See generally ICDAS Brief at 2, 6, 35-37; ICDAS Reply Brief at 10-13. According to

ICDAS, Commerce should have fully recognized the company’s net foreign exchange gain, by using

all of that gain to offset expenses included in ICDAS’ cost of production. See generally ICDAS

Brief at 2, 6, 35-37; ICDAS Reply Brief at 10-12.

As Commerce explained in the Final Results, there is typically a cost associated with

financing a company’s operations, which is what the agency seeks to capture as part of “financial

expenses.” See Decision Memo at 88. Commerce includes a cost of borrowing, as determined by

various factors. If income is generated through those activities, the agency allows that income to

Court No. 05-00616 Page 57

be used to offset the cost of financing, up to the total financial expenses incurred. Id. But where

– as here – the amount of relevant income exceeds the company’s financial expenses, Commerce

recognizes that the company’s financial expenses were zero, and does not include a sum for financial

costs in calculating the company’s cost of production. Id. Commerce does not allow financial

expenses to be used to offset other expenses included in cost of production. As Commerce observed

in the Final Results, “while certain types of income can legitimately be used to offset an expense,

they can be used to do so only to the extent that there are costs to offset.” Id. It would therefore “be

inappropriate . . . to reduce other components of the [cost of production] by the net financing

income,” as ICDAS urges. Id.; see generally Def. Response Brief at 25-27; Domestic Producers

Response Brief at 29-33.

ICDAS argues that Commerce’s actions here run afoul of a new policy first articulated in

Mushrooms from India, which concerns the agency’s treatment of foreign exchange gains or losses

in calculating cost of production. See ICDAS Brief at 35-36 (citing Certain Preserved Mushrooms

from India: Preliminary Results of Antidumping Duty Administrative Review, 68 Fed. Reg. 11,045,

11,048 (March 7, 2003) (“Mushrooms from India”)); ICDAS Reply Brief at 10-12 (same). Prior to

Mushrooms from India, Commerce had required respondents to break down their foreign exchange

gains and losses into separate components based on the source, and to include only those from

certain sources in their reported costs. See generally Domestic Producers Response Brief at 29. But,

in Mushrooms from India, Commerce explained that it was changing its practice: “Instead of

splitting apart the foreign exchange gains and losses as reported in an entity’s financial statements,

[Commerce] will normally include in the interest expense computation all foreign exchange gains

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and losses.” See Mushrooms from India, 68 Fed. Reg. at 11,048 (emphasis added).

In citing to Mushrooms from India, ICDAS conveys the impression that Commerce’s intent

and practice is to fully recognize all foreign exchange gains and losses in calculating a respondent’s

cost of production. See ICDAS Brief at 35-36; ICDAS Reply Brief at 10-12. However, as

Commerce emphasized in the Final Results, Mushrooms from India did not address a net foreign

exchange gain. See Decision Memo at 88. Instead, the case stands for the proposition that

Commerce will include in its calculations all elements or components of foreign exchange gain and

loss – not that the agency will necessarily offset a net gain against any and all other elements of cost

of production. See generally Domestic Producers Response Brief at 30. Contrary to ICDAS’

claims, nothing in Mushrooms from India mandates that Commerce recognize the entirety of

ICDAS’ net foreign exchange gain by using all of it to offset expenses included in the company’s

cost of production.

ICDAS also quarrels with Commerce’s reliance on Cinsa to support the agency’s decision

in the Final Results to limit the use of ICDAS’ net foreign exchange gain to offsetting financial

expenses, rather than recognizing the entirety of that gain and allowing it to offset other expenses

included in the company’s cost of production. See ICDAS Brief at 36-37 (citing Cinsa S.A. de C.V.

v. United States, 21 CIT 341, 351, 966 F. Supp. 1230, 1239-40 (1997)); Decision Memo at 88

(same). The court in Cinsa rejected the plaintiff’s claim that Commerce had erred in allowing an

offset of interest income only to the extent of interest expenses. The Cinsa court explained:

[E]xpenses by their nature cannot produce a negative effect on the [cost of

production]. Expenses, as a component of costs, cannot become a profit by the

nature of their designation. Cinsa is effectively requesting that Commerce and the

Court recognize a negative cost. Based on sound accounting and economic

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principles, the Court declines to accept a finding of negative costs when calculating

[cost of production]. Interest expense, as a component of [cost of production], is a

discrete expense account and as such, cannot provide an offset to any other expense

accounts. Once the interest expense account is reduced to zero through the offset of

interest income, interest expense and interest income [have] no further effect on the

calculation of [cost of production]. . . . [O]nce interest expense is reduced to zero, no

further inquiry is necessary as Commerce cannot enter a profit into the calculation

of [cost of production].

Cinsa, 21 CIT at 351, 966 F. Supp. at 1239-40. So too, in the case at bar, Commerce reasoned –

by analogy to Cinsa – that “financial expenses, as a component of [cost of production], are a discrete

expense account and as such, cannot provide an offset to any other expense accounts.” Decision

Memo at 88; see generally Def. Response Brief at 26-27.

ICDAS argues that Cinsa is irrelevant here because, according to ICDAS, foreign exchange

gains or losses are not a subset of financial expenses. See ICDAS Brief at 36-37. As discussed in

section III.C.1 above, however, Commerce properly concluded that ICDAS’ foreign exchange gains

here were the product of its cash management decisions, and thus properly treated ICDAS’ net

foreign exchange gain as part of the company’s overall net financing expense for purposes of

Commerce’s cost of production calculations. See Decision Memo at 87; see generally Def.

Response Brief at 27. ICDAS’ attempt to distinguish Cinsa is therefore futile.

In sum, Commerce properly decided to include ICDAS’ net foreign exchange gain in the

financial expense ratio calculation, and to limit the recognition of that gain to offset only ICDAS’

financial expenses (effectively capping those expenses at zero). The agency’s determinations to that

effect were consistent with agency practice, and were both supported by substantial evidence and

otherwise in accordance with law. ICDAS’ arguments to the contrary must be rejected.

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D. Commerce’s Decision on Remand to Use Invoice Date As Date of Sale

ICDAS strenuously objects to Commerce’s determination on remand that, for purposes of

the agency’s antidumping analysis, the appropriate date of sale for ICDAS’ U.S. sales is the date of

invoice. See generally ICDAS Response Brief at 1-3, 5-30; ICDAS Supp. Reply Brief, passim. In

particular, ICDAS protests Commerce’s use of the same date of sale – invoice date – for both

ICDAS’ U.S. and home market sales, asserting that the ways that the two types of sales are

negotiated, orders are finalized, and merchandise is produced “differ markedly.” See ICDAS Supp.

Reply Brief at 1-2 (quoting Circular Welded Non-Alloy Steel Pipe from the Republic of Korea;

Final Results of Antidumping Duty Administrative Review, 63 Fed. Reg. 32,833, 32,835-36 (June

16, 1998) (“Pipe from Korea”)).

ICDAS contends that, with one exception, the contract date – rather than the invoice date –

best reflects the date on which ICDAS and its U.S. buyers reached a meeting of the minds on the

material terms of sale, and should be used as the date of sale for purposes of Commerce’s analysis.

See ICDAS Response Brief at 1, 3, 30; ICDAS Supp. Reply Brief at 13; see also Remand Results

at 2, 13-14. As to that one exception, involving a price increase in a single contract, ICDAS asserts

that the proper date of sale is invoice date (in effect, the date of contract amendment). See ICDAS

Response Brief at 3, 20-21, 30; ICDAS Supp. Reply Brief at 1, 5 n.3, 13; see also Remand Results

at 2, 13-14.

The antidumping statute on its face does not specify the manner in which Commerce is to

determine the date of sale. However, by enacting the Uruguay Rounds Agreements Act, Congress

“incorporated the trade agreements adopted by the World Trade Organization at the Uruguay Round

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negotiations into United States law.” Allied Tube and Conduit Corp. v. United States, 24 CIT 1357,

1367-68, 127 F. Supp. 2d 207, 216 (2000) (Allied Tube I). One such WTO agreement expressly

provides that “[n]ormally, the date of sale would be the date of contract, purchase order, order

confirmation or invoice, whichever establishes the material terms of sale.” See Agreement on

Implementation of Article VI of the General Agreement on Tariffs and Trade 1994, Art. 2.4.1 n.8

(emphasis added). Further, the Statement of Administrative Action accompanying the Uruguay

Round Agreements Act expressly defines date of sale as the “date when the material terms of sale

are established.” See Statement of Administrative Action, H.R. Doc. No. 103-316, at 810, reprinted

in 1994 U.S.C.C.A.N. at 4153. Through the Uruguay Round Agreements Act and the Statement of

Administrative Action, Congress thus “expressed its intent that, for antidumping purposes, the date

of sale be flexible so as to accurately reflect the true date on which the material elements of sale were

established.” Allied Tube I, 24 CIT at 1370, 127 F. Supp. 2d at 219 (emphasis added).

Consonant with Congress’ intent as manifested in the Uruguay Round Agreements Act,

Commerce promulgated a regulation on date of sale, which provides that the date of sale is invoice

date, except where another date better reflects the date on which the material terms of sale were

established:

In identifying the date of sale of the subject merchandise or foreign like product, the

Secretary normally will use the date of invoice, as recorded in the exporter or

producer’s records kept in the ordinary course of business. However, the Secretary

may use a date other than the date of invoice if the Secretary is satisfied that a

different date better reflects the date on which the exporter or producer establishes

the material terms of sale.

19 C.F.R. § 351.401(i) (emphasis added). In the Preamble to its date of sale regulation, Commerce

further explained that the focus of an agency date of sale analysis is to determine when the

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contracting parties reached a “meeting of the minds” on the material terms of sale:

If the Department is presented with satisfactory evidence that the material terms of

sale are finally established on a date other than the date of invoice, the Department

will use that alternative date as the date of sale. For example, in situations involving

large custom-made merchandise in which the parties engage in formal negotiation

and contracting procedures, the Department usually will use a date other than the

date of invoice. However, the Department emphasizes that in these situations, the

terms of sale must be firmly established and not merely proposed. A preliminary

agreement on terms, even if reduced to writing, in an industry where renegotiation

is common does not provide any reliable indication that the terms are truly

“established” in the minds of the buyer and seller. This holds even if, for a particular

sale, the terms were not renegotiated.

Antidumping Duties; Countervailing Duties: Final Rule, 62 Fed. Reg. 27,296, 27,349 (May 19,

1997) (Preamble) (emphasis added).

ICDAS acknowledges that Commerce’s regulations afford the agency discretion in

determining the date of sale to be used in its antidumping margin calculations. But, according to

ICDAS, Commerce abused that discretion in the Remand Results here – both by using a date of sale

methodology that is inconsistent with Congressional intent and the governing regulation, as well as

established agency practice, and by making factual findings that are not supported by substantial

evidence in the record. See ICDAS Response Brief at 2-3, 17 n.12; ICDAS Supp. Reply Brief at 1-

2.

ICDAS explains that, during the administrative review at issue, it used different bases to

report the dates of sales for its home market sales and its U.S. sales, because those sales were made

pursuant to two distinct sales processes. ICDAS made tens of thousands of home market sales

during the relevant period, most of which were relatively small and were filled out of ICDAS’

existing inventory. ICDAS did not negotiate and sign formal written contracts with its customers

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in its home market, and, instead, did business by phone or through written confirmation. For home

market sales, ICDAS reported the earlier of the date or invoice or the date of shipment as the date

of sale for use in Commerce’s margin calculations. See generally ICDAS Response Brief at 5 (and

authorities cited there).

In contrast, ICDAS had far, far fewer U.S. sales, but each of those sales was larger in

volume by orders of magnitude. Merchandise that ICDAS sold to the U.S. market was generally

manufactured to order, was sold in inches (rather than millimeters), and was subject to other special

requirements not applicable to ICDAS’ home sales. In light of the long lead time required to

produce, pack, and ship such large special orders, U.S. sales were made pursuant to a deliberate and

formal negotiation process, and formal written contracts were executed by the parties. As ICDAS

explains, the formal written contract afforded protection to both parties, memorializing their meeting

of the minds on the quantity and specifications of the merchandise to be supplied, the unit price, the

shipment date, and other material terms of their deal. The U.S. buyer thus was assured of the supply

of merchandise needed to fill orders from its customers. And ICDAS was assured that it had a

customer for the specified quantity of its U.S.-customized merchandise before it began production

of that merchandise. For purposes of Commerce’s antidumping analysis, ICDAS reported the

contract date as the date of sale for its U.S. sales, on the theory that the contract date better reflected

the date on which the material terms of those sales were established. See generally ICDAS

Response Brief at 5-7 (and authorities cited there).

In the course of the verification process, Commerce confirmed that ICDAS’ “export sales

process differs from the domestic sales process in that: 1) orders are always in written form; 2) a

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contract is signed after confirmation of the order; 3) merchandise is sold on a theoretical-weight

basis; and 4) merchandise is always produced to order.” See ICDAS Sales Verification Report

(Conf. Doc. No. 44) at 4. In its Preliminary Results, Commerce nevertheless used invoice date as

the date of sale for ICDAS’ U.S. sales. See Preliminary Results, 70 Fed. Reg. at 23,992. In the

Final Results, however, Commerce reversed its position on the date of sale issue. Concluding that

the material terms of ICDAS’ U.S. sales were established on the date of contract, Commerce used

contract date as the date of sale in its Final Results, and calculated a de minimis dumping margin of

0.16% for ICDAS. See Decision Memo at 29; Final Results, 70 Fed. Reg. at 67,666-67.

Several days after the Final Results were published, the Domestic Producers filed a

ministerial error letter disputing Commerce’s ruling on the date of sale issue, pointing to a price

change as to one of ICDAS’ U.S. contracts. Soon thereafter, the Domestic Producers filed suit,

challenging, inter alia, Commerce’s use of contract date as the date of sale for ICDAS’ U.S. sales.

Commerce’s request for a voluntary remand on the date of sale issue was granted. See

generally ICDAS Response Brief at 10 (and authorities cited there); Remand Results at 2-3. On

remand, Commerce reversed course once again, finding that invoice date – rather than contract date

– should be used as the date of sale for ICDAS’ U.S. sales. In its Remand Results, Commerce

stated:

[W]e find that the price change, while limited to a single contract, related to a

significant percentage of ICDAS’s U.S. entries during the [period of review]. Under

these circumstances, we determine that the contract date does not represent the date

on which the parties had a real “meeting of the minds” because the material terms of

sale not only could be, but were altered after the date in the ordinary course of

business.

Remand Results at 20. Using invoice date as the date of sale for ICDAS’ U.S. sales, Commerce

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recalculated ICDAS’ dumping margin to be 1.63% – a figure which exceeds the de minimis

threshold, rendering ICDAS ineligible for revocation of the antidumping order. See Remand Results

at 2-3, 5, 24-25.

ICDAS charges that the Remand Results “contravene[] the antidumping statute and

Commerce’s regulations by using a rigid date of sale methodology that relies entirely on a single

price change and the volume of sales affected by that price change to reach the conclusion that

invoice date is the date of sale for all of ICDAS’ U.S. sales.” ICDAS Response Brief at 2. ICDAS

argues that, “[a]lthough the [Remand Results] purport[] to establish the date on which the parties

had a ‘real meeting of the minds,’ [the Remand Results] fail to employ an appropriate test for

ascertaining whether the contracting parties reached a binding agreement.” Id. According to

ICDAS, the Remand Results “do[] not examine the parties’ expectations about what was to be

purchased, how much would be purchased, and how long it would take to produce.” Id. Moreover,

ICDAS asserts, the Remand Results fail to “consider whether the subsequent course of conduct

between the parties reveals that the parties understood that they were bound by the terms of

contract.” Id. at 2-3.

ICDAS requests that the date of sale issue be remanded to Commerce once again, “with

specific instructions that Commerce ascertain the point at which ICDAS and its U.S. customers had

a meeting of the minds by considering the nature of the U.S. sales process and the course of conduct

between the parties.” See ICDAS Response Brief at 3. ICDAS predicts that “[b]ased upon such an

analysis, Commerce should find that the date of sale generally is the contract date,” and that

“consistent with Commerce’s past decisions, the agency should treat the sole price change that

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occurred as an amendment to the contract, and use amendment date as date of sale only for that

particular transaction.” Id.

As set forth more fully below, Commerce’s determination on remand to use invoice date as

the date of sale for all of ICDAS’ U.S. sales is not supported by substantial evidence. Nor is that

determination otherwise in accordance with law. Accordingly, the issue must be remanded to

Commerce once again, for its reconsideration.

1. Whether the Remand Results Are In Accordance With Law

As ICDAS notes, under Commerce’s approach in the Remand Results here, even a single

change to a material term in a single transaction – without regard to the nature of the change or the

circumstances surrounding it – may require an across-the-board use of invoice date as the date of

sale for all sales to all customers during the period of review. As ICDAS observes, such an

approach is fundamentally at odds with the antidumping statute and regulations, as well as

Commerce’s past practice, because it involves nothing more than a superficial, black-and-white, all-

or-nothing determination whether there has been any change in any material term in any contract

at issue, rather than a reasoned, case-specific, fact-intensive analysis as to when the parties had a

meeting of the minds on the material terms of sale, which is what the law requires. See generally

ICDAS Response Brief at 16-17; see also Remand Results at 20 (noting that appropriate date of sale

is “the date on which the parties had a real ‘meeting of the minds’”).34

34

ICDAS correctly observes that – if the date of sale analysis conducted by Commerce in this

case actually were the rule – the nature of the information provided to Commerce in questionnaire

responses and the information confirmed by the agency through its verification process would be

radically different. Rather than analyzing the nature of a respondent’s sales process, Commerce

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The Government seeks to dismiss ICDAS’ challenge to the Remand Results out of hand,

boldly asserting that Commerce’s determination must be sustained because the agency has

“absolute” discretion in determining date of sale. See Def. Supp. Response Brief at 8.35 Apparently

relying on the phrasing of Commerce’s date of sale regulation (which provides for use of a date

other than invoice date “if the Secretary is satisfied” that use of the alternative date is more

appropriate), and on a single sentence in Hevensa, the Government maintains that “although

Commerce may exercise its discretion to use a different time than the invoice date as the date of

sale, because this is a discretionary act, it is not required to do so.” See generally Def. Supp.

Response Brief at 7-8 (emphases added) (citing 19 C.F.R. § 351.401(i) (emphasis added); Hornos

Electricos de Venezuela, S.A. v. United States, 27 CIT 1522, 1536, 285 F. Supp. 2d 1353, 1367

would simply survey a respondent’s documentation to determine whether there had been any change

in any material term of sale in any contract at issue. But the latter was not Congress’ intent; nor is

it reflected in Commerce’s own date of sale regulation. See Antidumping Duties; Countervailing

Duties: Final Rule, 62 Fed. Reg. at 27,364 (Preamble) (indicating that Commerce will verify “a

respondent’s description of its selling processes” to determine appropriate date of sale); see also

ICDAS Response Brief at 17 n.13.

35

The Government peppers its brief with repeated invocations of Commerce’s “discretion”

(which, as noted above, it claims is “absolute”). See, e.g., Def. Supp. Response Brief at 6 (quoting

Colakoglu Metalurji A.S. v. United States, 29 CIT 1238, 1240, 394 F. Supp. 2d 1379, 1381 (2005),

for proposition that, if material terms of sale were fixed at different time, Commerce “has the power

to exercise discretion” by using different date of sale); id. at 7 (quoting Hornos Electricos de

Venezuela, S.A. v. United States, 27 CIT 1522, 1536, 285 F. Supp. 2d 1353, 1367 (2003) (Hevensa)

and its discussion of Commerce’s “discretion”); id. at 8 (citing Hevensa, and referring to

Commerce’s “discretion,” and to agency’s use of a date of sale other than invoice date as a

“discretionary act”); id. at 11 (asserting that, although Commerce “may exercise its discretion” to

use date other than invoice date as date of sale, “it is not required to do so”); id. at 12 (indicating

that, in case at bar, Commerce exercised “its discretion” in deciding to use invoice date as date of

sale); id. at 12-13 (opining that, “even if Commerce did not possess discretion,” outcome of case

would not differ); see also Remand Results at 18 (quoting Hevensa).

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(2003) (Hevensa)); see also Domestic Producers Reply Brief at 9 (quoting Hevensa, 27 CIT at 1536,

285 F. Supp. 2d at 1366-67, for proposition that, even if material terms of sale are not subject to

change, “discretion . . . means that [Commerce] may use a date of sale other than the invoice date,

but is not required to do so”).

The Government’s position on Commerce’s authority is plainly far too expansive. As a

threshold matter, there is no area in which any government agency has “absolute,” unfettered

discretion. See, e.g., Beardmore v. Dep’t of Agriculture, 761 F.2d 677, 679 (Fed. Cir. 1985)

(holding that “an agency’s discretion is not unlimited”). Certainly no court in any international trade

case (including Hevensa) has held that Commerce has “absolute,” unbridled discretion to apply

invoice date as the date of sale across-the-board, with no regard for the record evidence in a case.

Notwithstanding the Government’s implications, there is nothing in Hevensa to suggest that

Commerce is free to arbitrarily choose to use as the date of sale some date other than the date when

the material terms of sale were established. In other words, if a particular date is demonstrated to

be the date when the material terms of sale were established, Commerce has no discretion to simply

ignore that date and choose to use some other date as the date of sale.

Similarly, contrary to the Domestic Producers’ claims, neither Commerce’s date of sale

regulation nor the Preamble to the agency’s antidumping regulations expresses a “strong preference”

for use of invoice date as a respondent’s date of sale. See Domestic Producers Reply Brief at 9

(asserting that agency regulations “express a strong preference” for invoice date, and also discussing

Preamble to regulations). In fact, neither Congress nor the agency in its regulations expresses any

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“preference” at all on the matter – “strong” or otherwise.36

Rather than the “strong preference” claimed by the Domestic Producers, Commerce’s date

of sale regulation and the Preamble to the agency’s antidumping regulations establish only a

“rebuttable presumption” – and, indeed, one that has been successfully rebutted in numerous cases

in the past, as illustrated in the discussion below. See, e.g., Colakoglu Metalurji A.S. v. United

States, 29 CIT 1238, 1240, 394 F. Supp. 2d 1379, 1380 (2005) (indicating that a “plain reading” of

date of sale regulation indicates that it establishes only a “rebuttable presumption”); Remand Results

at 3 (noting that date of sale regulation “provide[s] for a rebuttable presumption”). Thus, as the

Preamble to Commerce’s date of sale regulation explains, where the agency “is presented with

satisfactory evidence that the material terms of sale are . . . established on a date other than the date

of invoice, the Department will use that alternative date as the date of sale.” See Antidumping

Duties; Countervailing Duties: Final Rule, 62 Fed. Reg. at 27,349 (Preamble) (emphasis added).

Equally unfounded is the Domestic Producers’ assertion (also reflected in the Remand

Re

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