# Nucor Corp. v. United States

> United States Court of International Trade · March 24, 2009 · 612 F. Supp. 2d 1264

URL: https://www.frixlaw.com/law-library/cases/817677

## Case

- **Full name:** 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; 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
- **Court:** United States Court of International Trade
- **Decided:** March 24, 2009
- **Citations:** 612 F. Supp. 2d 1264; 33 Ct. Int'l Trade 207; 33 C.I.T. 207; 31 I.T.R.D. (BNA) 1166; 2009 Ct. Intl. Trade LEXIS 32
- **Precedential status:** Published
- **Opinion:** Opinion by Ridgway
- **Judges:** Ridgway
- **Cited by:** 19 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/817677

## How later opinions describe it (automated extraction)

- holding that the company’s net foreign exchange gain was “part of the company’s overall net financing expense” and could reasonably be included in cost of production calculations
- discussing factors relevant to determination of locus of sale

## Opinion text

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
Court No. 05-00616 Page 51

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
Court No. 05-00616 Page 52

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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/817677. Public record. Not legal advice.