Uttam Galva Steels Ltd. v. United States , 2020 CIT 151 ( 2020 )

Slip Op. 20-151
UNITED STATES COURT OF INTERNATIONAL TRADE
UTTAM GALVA STEELS LIMITED,
Plaintiff,
Before: Leo M. Gordon, Judge
v.
Court No. 19-00044
UNITED STATES,
Defendant,
and
CALIFORNIA STEEL INDUSTRIES INC.,
AND STEEL DYNAMICS, INC.,
Defendant-Intervenors.
OPINION and ORDER
[Commerce’s Remand Results sustained in part and remanded in part.]
Dated: October 29, 2020
John M. Gurley and Aman Kakar, Arent Fox LLP, of Washington, DC, for Plaintiff
Uttam Galva Steels Limited.
Elizabeth A. Speck, Senior Trial Counsel, Commercial Litigation Branch, Civil
Division, U.S. Department of Justice of Washington, DC, for Defendant United States.
With her on the brief were Jeffrey Bossert Clark, Acting Assistant Attorney General,
Jeanne E. Davidson, Director, and Claudia Burke, Assistant Director. Of counsel on the
brief was Rachel A. Bogdan, Attorney, U.S. Department of Commerce, Office of the Chief
Counsel for Trade Enforcement and Compliance of Washington, DC.
Court No. 19-00044 Page 2
Roger B. Schagrin and Christopher T. Cloutier, Schagrin Associates of
Washington, DC, for Defendant-Intervenors California Steel Industries, Inc. and Steel
Dynamics, Inc.
Gordon, Judge: This action involves the final results of the 2016 administrative
review conducted by the U.S. Department of Commerce (“Commerce”) of the
countervailing duty (“CVD”) order of certain corrosion-resistant steel products from India.
See Certain Corrosion-Resistant Steel Products from India, 84 Fed. Reg. 11,053 (Dep’t
of Commerce Mar. 25, 2019) (final results admin. review) (“Final Results”); see also
accompanying Issues and Decision Memorandum, C-533-864, PD 1193 (Dep’t of
Commerce Mar. 18, 2019), available at
https://enforcement.trade.gov/frn/summary/india/2019-05647-1.pdf (last visited this date)
(“Decision Memorandum”).
Before the court are Commerce’s Final Results of Redetermination Pursuant to
Court Remand, ECF No. 34 2 (“Remand Results”), filed pursuant to the court’s remand
order in Uttam Galva Steels Ltd. v. United States, 44 CIT ___, 358 F. Supp. 3d 1366(2020) (“Uttam Galva I”). See Plaintiff’s Comments on Remand Redetermination, ECF
No. 39 (“Pl.’s Br.”); see also Defendant’s Response to Comments on Remand
Redetermination, ECF No. 41 (“Def.’s Resp.”); Defendant-Intervenors’ Responsive
1
“PD” refers to a document in the public administrative record, which is found in ECF No.
20-3, unless otherwise noted. “CD” refers to a document in the confidential administrative
record, which is found in ECF No. 20-2, unless otherwise noted.
2
All citations to the Remand Results, the agency record, and the parties’ briefs are to
their confidential versions unless otherwise noted.
Court No. 19-00044 Page 3
Comments in Support of the Remand Redetermination, ECF No. 40 (“Def.-Int.’s Resp.”).
The court has jurisdiction pursuant to Section 516A(a)(2)(B)(iii) of the Tariff Act of 1930,
as amended, 19 U.S.C. § 1516a(a)(2)(B)(iii) 3, and 28 U.S.C. § 1581(c) (2018). For the
reasons follow, the court sustains in part and remands in part the Remand Results.
I. Background
Although the court assumes familiarity with the procedural history and its prior
decision in this matter, some additional background will aid the reader. Commerce
assigned adverse facts available (“AFA”) rates totaling 588.42% to Uttam Galva Steels
Limited (“Uttam Galva” or “Plaintiff”) due to Uttam Galva’s failure to provide information
about its affiliation with Lloyds Steel Industry Limited (“LSIL”). See Final Results, 84 Fed.
Reg. at 11,054. Uttam Galva challenged, administratively and here, Commerce’s
application of AFA with respect to the issues of affiliation and cross-ownership between
Uttam Galva and LSIL, and Commerce’s calculation of AFA rates. See Decision
Memorandum at 22–28; Compl., ECF No. 4.
Recognizing the merit of some of Uttam Galva’s claims, Commerce requested and
received a voluntary remand to reconsider its determination of AFA rates with respect to
the Market Access Initiative Program and the other four programs specially identified by
Uttam Galva, but not for any other programs included in the Final Results. See Uttam
Galva I, 44 CIT at ___, 358 F. Supp. 3d at 1373. In addition to granting the voluntary
3
Further citations to the Tariff Act of 1930, as amended, are to the relevant provisions of
Title 19 of the U.S. Code, 2018 edition.
Court No. 19-00044 Page 4
remand, the court sustained Commerce’s determination that Uttam Galva’s failure to
disclose its affiliation with LSIL merited the application of AFA pursuant to 19 U.S.C.
§ 1677e. Id. at ___, 358 F. Supp. 3d at 1371 (“Plaintiff has failed to demonstrate that
Commerce’s finding of cross-ownership was unreasonable.”). In remanding the
calculation of AFA rates, the court declined to limit the scope of the remand to only those
programs for which Commerce sought a voluntary remand. Id. at ___, 358 F. Supp. 3d
at 1373–74.
Pursuant to the remand, Commerce revised Uttam Galva’s Market Access
Initiative program rate downward from 16.63% to 6.06% and excluded previously
assigned rates for “(1) the Provision of Hot-Rolled Steel for LTAR, (2) SGUP Exemption
for the Iron and Steel Industry, (3) SGUP Long-Term Interest Free Loans Equivalent to
the Amount of VAT and CST Paid, and (4) SGUP’s Interest Free Loans.” Remand Results
at 5–6. However, Commerce determined that it would continue to apply the same AFA
rates to all the other remaining programs identified in the Final Results based on the
adverse inference that Uttam Galva benefitted from all initiated programs. Id. at 6–7.
Uttam Galva now challenges Commerce’s continued assignment of AFA rates to
the other remaining programs in the Final Results. Pl.’s Br. at 2. In particular, Uttam Galva
contends that Commerce’s failed to explain the differences in its application of AFA under
substantially similar factual circumstances to Uttam Galva as compared with mandatory
respondent JSW Steel Limited (“JSW”) during the investigation segment of the underlying
proceeding. Id. at 4–7. Plaintiff also argues that Commerce unreasonably attributed, as
Court No. 19-00044 Page 5
AFA, 20 subsidy programs (“20 disputed programs”) to LSIL, and by extension to Uttam
Galva, despite information set forth in LSIL’s financial statement that indicates that LSIL
could not have benefitted from these programs. Id. at 7–10. Specifically, Uttam Galva
contends that LSIL (1) did not maintain facilities within the Indian States of Andhra
Pradesh and Karnataka and could not have been in receipt of the 16 initiated programs
specific to those territories (“geographically specific programs”), and (2) was not engaged
in mining activities and could not have received four subsidies specific to that sector
(“industry specific programs”). Id.
II. Standard of Review
The court sustains Commerce’s “determinations, findings, or conclusions” unless
they are “unsupported by substantial evidence on the record, or otherwise not in
accordance with law.” 19 U.S.C. § 1516a(b)(1)(B)(i). More specifically, when reviewing
agency determinations, findings or conclusions for substantial evidence, the court
assesses whether the agency action is reasonable given the record as a whole. Nippon
Steel Corp. v. United States, 458 F.3d 1345, 1350–51 (Fed. Cir. 2006). Substantial
evidence has been described as “such relevant evidence as a reasonable mind might
accept as adequate to support a conclusion.” DuPont Teijin Films USA v. United States,
407 F.3d 1211, 1215 (Fed. Cir. 2005) (quoting Consol. Edison Co. v. NLRB, 305 U.S.
197, 229 (1938)). Substantial evidence has also been described as “something less than
the weight of the evidence, and the possibility of drawing two inconsistent conclusions
from the evidence does not prevent an administrative agency’s finding from being
Court No. 19-00044 Page 6
supported by substantial evidence.” Consolo v. Fed. Mar. Comm’n, 383 U.S. 607, 620
(1966).
Fundamentally, though, “substantial evidence” is best understood as a word
formula connoting reasonableness review. 3 Charles H. Koch, Jr. Administrative Law and
Practice § 9.24[1] (3d ed. 2020). Therefore, when addressing a substantial evidence issue
raised by a party, the court analyzes whether the challenged agency action “was
reasonable given the circumstances presented by the whole record.” 8A West’s Fed.
Forms, National Courts § 3.6 (5th ed. 2020).
III. Discussion
A. Application of Adverse Facts Available to All Programs Initiated
In the investigation segment of the underlying proceeding, Commerce selected two
mandatory respondents: Uttam Galva and JSW. See Certain Corrosion-Resistant Steel
Products From India, 81 Fed. Reg. 35,323 (Dep’t of Commerce June 2, 2016) (final affirm.
determ.), and accompanying Issues and Decision Memorandum at 1, available at
https://enforcement.trade.gov/frn/summary/india/2016-12967-1.pdf (last visited on this
date). Commerce found that JSW failed to submit a response for a cross-owned input
supplier (“Affiliate X”) and determined that the application of AFA was appropriate. See
id. at 8–9. In applying AFA in calculating JSW’s subsidy rate, Commerce did not apply
adverse inferences to all programs initiated upon during the investigation. See id. at 9.
(“[W]e made an adverse inference that Affiliate X benefitted from all of the programs used
by the other entities within the JSW group of companies that did properly submit
Court No. 19-00044 Page 7
questionnaire responses.”); see also Remand Results at 18 (“we acknowledge that we
did not countervail all programs initiated upon when determining the subsidy rate for
JSW”). In the administrative review at issue here, Commerce similarly found that Uttam
Galva had failed to report the existence of an affiliate, LSIL, and determined that the
application of AFA was appropriate. See Decision Memorandum at 24. In calculating
Uttam Galva’s subsidy rate, however, Commerce did apply adverse inferences for all
programs initiated upon with respect to LSIL. Remand Results at 18 (“while we
acknowledge that we did not countervail all programs initiated upon when determining the
subsidy rate for JSW in the investigation, as we explain below, this does not require us to
deviate from our standard practice where companies fail to report all of their cross-owned
entities in this segment of the proceeding…”).
In its comments on the draft remand redetermination, Uttam Galva argued that
Commerce’s application of partial adverse facts available to JSW represented the
agency’s consistent administrative practice. See Remand Results at 18. Further, Uttam
Galva contended that Commerce unreasonably deviated from this practice when applying
AFA to Uttam Galva. See id. at 17–18 (“Commerce’s calculation of Uttam Galva’s AFA
rate in the Final Results constituted a change in agency policy because Commerce
announced a new method of calculating a duty.”).
Commerce disagreed that its partial AFA application to JSW in the investigation
segment demonstrated an established practice, and instead explained that application of
AFA to Uttam Galva was in fact the agency’s consistent practice. See Remand Results
Court No. 19-00044 Page 8
at 18–19 (“Uttam Galva misstates agency practice... Commerce has applied AFA rates
for all programs initiated upon in constructing a total AFA rate.”). Commerce identified
“numerous CVD proceedings” where the agency “applied AFA rates for all programs
initiated upon in constructing a total AFA rate.” Id. at 18. Commerce further explained why
its different calculation of JSW’s AFA subsidy rate did not constitute agency practice,
noting that an action only “becomes an ‘agency practice’ when a uniform and established
procedure exists that would lead a party, in the absence of notification of a change,
reasonably to expect adherence to the [particular action] or procedure.” Remand Results
at 20 (citing SeAH Steel Vina Corp. v. United States, 35 CIT ___, 182 F. Supp. 3d 1316(2011) and Huvis Corp. v. United States, 31 CIT ___, 525 F. Supp. 2d 1370 (2007)
(internal quotation marks omitted)). Given this explanation and analysis of prior
determinations, Commerce concluded that its “treatment of Uttam Galva is entirely
consistent with past practice.” Remand Results at 21.
After reviewing Commerce’s analysis in the Remand Results, Uttam Galva
appears to have accepted this position. See Pl.’s Br. at 4 (“Commerce’s practice is to
calculate an AFA rate for all programs when companies fail to report all their cross-owned
entities.”). However, Uttam Galva now focuses its argument on Commerce’s failure to
provide a reasoned explanation for the decision to calculate the AFA subsidy rates of
JSW and Uttam Galva differently. See id. at 4–6. In rejecting Uttam Galva’s “practice”
argument regarding its treatment of JSW, Commerce emphasized that the agency is “not
bound by its determination in the investigation segment of this proceeding because the
Court No. 19-00044 Page 9
records of each segment are distinct.” See Remand Results at 18. Commerce stated that
it is not required to “deviate from [its] standard practice where companies fail to report all
of their cross-owned affiliates in this segment of the proceeding.” Id.Commerce’s analysis in the Remand Results, while clarifying the agency’s practice
in the application of AFA, fails to explain why the agency found it appropriate to apply
AFA differently for JSW than it did for Uttam Galva. Defendant-Intervenors, California
Steel Industries and Steel Dynamics, Inc., attempt to provide a rationale for that differing
treatment, arguing that “[JSW’s] circumstances are… easily distinguished from Uttam
Galva’s.” See Def.-Int.’s Resp. at 2 (“The affiliate in the investigation was acquired
through a broader transaction and operated as an affiliate during only the final two months
of the period of investigation and was then closed down.”). Whatever the merits of
Defendant-Intervenors’ argument, the court may not sustain Commerce’s determination
on a rationale not provided by the agency. See Sec. & Exch. Comm'n v. Chenery Corp.,
332 U.S. 194, 196 (1947) (“[A] reviewing court, in dealing with a determination or
judgment which an administrative agency alone is authorized to make, must judge the
propriety of such action solely by the grounds invoked by the agency.”). While there may
have been factual distinctions between the application of AFA to JSW in the investigation
and the application of AFA to Uttam Galva in this review, Commerce failed to identify
them and explain what distinguished Uttam Galva’s situation from that of JSW. See
Remand Results at 18–21. The court therefore remands this issue so Commerce may
provide a reasoned explanation for the differences in its application of AFA to JSW and
Court No. 19-00044 Page 10
Uttam Galva, and, if appropriate, reconsider its application of AFA to Uttam Galva. See
Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43
(1983) (“[T]he agency must examine the relevant data and articulate a satisfactory
explanation for its action including a ‘rational connection between the facts found and the
choice made.’”); SKF USA Inc. v. United States, 263 F.3d 1369, 1382 (Fed. Cir. 2001)
(“[A]n agency action is arbitrary when the agency offer[s] insufficient reasons for treating
similar situations differently.”), aff'd, 332 F.3d 1370 (Fed. Cir. 2003).
B. Commerce’s Examination of LSIL’s Financial Statement
Uttam Galva contends that Commerce’s inclusion of the “20 disputed programs”
within its rate calculation was unreasonable. See Pl.’s Br. at 7–10. Uttam Galva argues
that Commerce improperly ignored and dismissed LSIL’s financial statement as an
“incomplete and unreliable source.” Id. at 10. Uttam Galva maintains that the LSIL
financial statement comprises conclusive proof that LSIL does not have facilities outside
of Maharastra. Id. at 8–9 (arguing against Commerce’s inclusion of geographically
specific programs in AFA rate calculation). Uttam Galva also argues that the statement
demonstrates that LSIL does not manufacture goods whose production could utilize
mining subsidies related to the “purchase of high-grade iron ore, captive mining rights for
iron ore and coal and mine allotments for less than adequate remuneration.” Id. at 8, 10
(challenging Commerce’s inclusion of industry specific programs in AFA rate calculation).
Accordingly, Uttam Galva maintains that LSIL could not have benefited from the
20 disputed programs. Id. at 9–10.
Court No. 19-00044 Page 11
Commerce rejected Plaintiff’s argument that the LSIL financial statement
demonstrated that LSIL (and thus Uttam Galva) could not have benefitted from the
20 disputed programs. See Remand Results at 23. Commerce explained that it did not
find the LSIL financial statement to provide a sufficiently reliable basis to conclude that
LSIL could not have benefitted from the 20 disputed programs, stating that the LSIL
financial statement did not “provide a definitive listing of LSIL’s business activities or
where LSIL conducted those business activities.” Id. at 25. Moreover, Commerce noted
that the provision of such a statement “does not substitute for a respondent’s obligation
to respond to Commerce’s questions on business activities/location…” and that
“Commerce… had no opportunity to pursue these lines of inquiry due to Uttam Galva’s
failure to fully cooperate.” Id.
Given this record, the court does not agree with Uttam Galva that Commerce acted
unreasonably by including the 20 disputed programs in Uttam Galva’s AFA rate
calculation. The court has already sustained Commerce’s decision to apply AFA to Uttam
Galva for its failure to provide complete and accurate information regarding its affiliation
with LSIL. See Uttam Galva I, 44 CIT at ___, 358 F. Supp. 3d at 1372. Commerce
reasonably explained why it found that the LSIL financial statement did not conclusively
provide a full account of LSIL’s geographic presence and sectoral activities.
Remand Results at 25. Plaintiff’s arguments fail to demonstrate that the LSIL financial
statement could lead Commerce to reach “one and only one reasonable outcome” on this
administrative record, namely that LSIL could not have benefitted from the 20 disputed
Court No. 19-00044 Page 12
programs. See Tianjin Wanhua Co. v. United States, 40 CIT ___, ___, 179 F. Supp. 3d
1062, 1071 (2016) (noting that plaintiff must demonstrate that its preferred evidentiary
finding is “the one and only one reasonable” outcome on the administrative record, “not
simply that [its preferred finding] may have constituted another possible reasonable
choice”). Accordingly, the court sustains as reasonable Commerce’s determination to
include the 20 disputed programs in Uttam Galva’s AFA rate calculation.
IV. Conclusion
Accordingly, for the foregoing reasons it is hereby
ORDERED that Commerce’s decision to include the 20 disputed programs within
the AFA rate calculation for Uttam Galva is sustained; it is further
ORDERED that this matter is remanded for Commerce to further explain, and if
appropriate, reconsider its application of AFA to Uttam Galva as compared to JSW; it is
further
ORDERED that Commerce shall file its remand results on or before December 22,
2020; and it is further
ORDERED that, if applicable the parties shall file a proposed scheduling order with
page limits for comments on the remand results no later than seven days after Commerce
files its remand results with the court.
/s/ Leo M. Gordon
Judge Leo M. Gordon
Dated: October 29, 2020
New York, New York