                                         Slip Op. 18-66

                UNITED STATES COURT OF INTERNATIONAL TRADE


 TOSÇELIK PROFIL VE SAC
 (1'h675,6,$ù
     Plaintiff,

 v.

 UNITED STATES,                                   Before: Jennifer Choe-Groves, Judge

        Defendant,                                Consol. Court No. 17-00018

 and

 ZEKELMAN INDUSTRIES,

        Defendant-Intervenor.


                                   OPINION AND ORDER

[Sustaining in part and remanding in part the U.S. Department of Commerce’s final
determination in the 2014–2015 administrative review of the antidumping duty order on welded
carbon steel standard pipe and tube products from Turkey.]

                                                                   Dated: June 6, 2018

David L. Simon, Law Office of David L. Simon, of Washington, D.C., argued for Plaintiff
7RVoHOLN3URILOYH6DF(QGVWULVL$ù

Elizabeth A. Speck, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, U.S.
Department of Justice, of Washington, D.C., argued for Defendant United States. With her on
brief were Chad A. Readler, Acting Assistant Attorney General, Jeanne E. Davidson, Director,
and Franklin E. White, Jr., Assistant Director. Of counsel on the brief was Catherine D. Miller,
Attorney, Office of Chief Counsel for Trade Enforcement and Compliance, U.S. Department of
Commerce, of Washington, D.C.

Christopher T. Cloutier, Schagrin Associates, of Washington, D.C., argued for Consolidated
Plaintiff and Defendant-Intervenor Zekelman Industries. With him on brief were Paul W.
Jameson and Roger B. Schagrin. Of counsel were Elizabeth J. Drake and John W. Bohn.
Consol. Court No. 17-00018                                                                  Page 2


       Choe-Groves, Judge: This case involves corrosion-resistant steel products from Turkey.

Plaintiff 7RVoHOLN3URILOYH6DF(QGVWULVL$ù (“Plaintiff” or “Tosçelik”) and Consolidated

Plaintiff and Defendant-Intervenor Zekelman Industries (“Zekelman”) bring this action

contesting the final results of the administrative review of welded carbon steel standard pipe and

tube products from Turkey, in which the U.S. Department of Commerce (“Commerce” or

“Department”) found that the products at issue are being, or are likely to be, sold in the United

States at less-than-fair value. See Welded Carbon Steel Standard Pipe and Tube Products From

Turkey, 81 Fed. Reg. 92,785 (Dep’t Commerce Dec. 20, 2016) (final results of administrative

review; 2014–2015), as amended, 82 Fed. Reg. 11,002 (Dep’t Commerce Feb. 17, 2017)

(amended final results of antidumping duty administrative review; 2014–2015) (collectively,

“Final Results”); see also Issues and Decision Memorandum for the Final Results of the

Antidumping Duty Administrative Review: Welded Carbon Steel Standard Pipe and Tube

Products from Turkey, A-489-501, (Dec. 12, 2016), available at

https://enforcement.trade.gov/frn/summary/turkey/2016-30541-1.pdf (last visited May 29, 2018)

(“Final I&D Memo”). This matter is before the court on Rule 56.2 motions for judgment on the

agency record filed by Tosçelik and Zekelman challenging various aspects of the Department’s

antidumping duty order. For the reasons discussed below, the court concludes that

(1) Commerce’s decision to calculate Tosçelik’s duty drawback adjustment by allocating total

exemptions over total cost of production is not in accordance with the law, (2) Commerce’s

decision to grant Tosçelik a circumstance of sale adjustment for warehousing expenses is not

supported by substantial evidence, and (3) Commerce’s decision to use actual weight instead of

theoretical weight is supported by substantial evidence.
Consol. Court No. 17-00018                                                                Page 3


                                       BACKGROUND

       Commerce commenced an administrative review of the antidumping duty order on

welded carbon steel standard pipe and tube products from Turkey at the request of domestic

standard pipe producers, including JMC Steel Group (“JMC”), on July 1, 2015. 1 See Initiation

of Antidumping and Countervailing Duty Administrative Reviews, 80 Fed. Reg. 37,588 (Dep’t

Commerce July 1, 2015) (notice of initiation of administrative review) (“Initiation Notice”); see

also Letter from Schagrin Associates to Department of Commerce, PD 2, bar code 3280221-01

(May 29, 2015); Letter from Schagrin Associates to Department of Commerce, PD 4, bar code

3280623-01 (June 1, 2015). Commerce found that it would be impractical to examine all

importers and producers, and therefore opted to examine companies accounting for the largest

volume of the subject merchandise from Turkey during the investigation period. See Initiation

Notice, 80 Fed. Reg. at 37,588. Tosçelik was one of the selected companies. See id. at 37,593.

       Commerce published its preliminary results on June 13, 2016. See Welded Carbon Steel

Standard Pipe and Tube Products From Turkey, 81 Fed. Reg. 38,131 (Dep’t Commerce June 13,

2016) (preliminary results of antidumping duty administrative review, and partial rescission of

review; 2014–2015) (“Preliminary Results”); see also Decision Memorandum for Preliminary

Results of Antidumping Duty Administrative Review: Welded Carbon Steel Standard Pipe and

Tube Products from Turkey; 2014–2015 Administrative Review, A-489-501, (June 6, 2016),

available at https://enforcement.trade.gov/frn/summary/turkey/2016-13968-1.pdf (last visited



1
  Zekelman Industries was formerly known as JMC Steel Group. See Mot. Zekelman Industries
J. Agency R. USCIT Rule 56.2 1, n.1, July 10, 2017, ECF No. 24; Letter from Schagrin
Associates to Department of Commerce, PD 197, bar code 3537393-01 (Jan. 18, 2017). All
references to JMC throughout the underlying administrative proceeding are to Zekelman.
Consol. Court No. 17-00018                                                                  Page 4


May 29, 2018) (“Preliminary I&D Memo”). Pursuant to the Department’s differential pricing

analysis, Commerce used the average-to-average methodology to calculate dumping margins for

both mandatory respondents. See Preliminary I&D Memo at 5–8. It assigned a 0.96 percent

weighted-average dumping margin for Tosçelik. Preliminary Results, 81 Fed Reg. at 38,133.

The Department preliminarily granted a duty drawback adjustment to Tosçelik due to the

company’s participation in Turkey’s Inward Processing Regime. See Preliminary I&D Memo at

10. Commerce also preliminarily granted a circumstance of sale adjustment to Tosçelik. See id.

at 14.

         Following the preliminary determination, JMC filed an administrative case brief on July

27, 2016. See Administrative Case Brief of JMC Steel Group, PD 172, bar code 3491484-01

(July 27, 2016). JMC contested the Department’s grant of a circumstance of sale adjustment to

Tosçelik for warehousing expenses, as well as the Department’s decision to use actual weight as

opposed to theoretical weight for calculating the dumping margin. See id. at vi. Tosçelik

submitted a rebuttal brief on August 9, 2016, which contested, in part, Commerce’s methodology

in calculating the duty drawback adjustment. See Tosçelik Rebuttal Brief at 6–28, PD 174, bar

code 3495971-01 (Aug. 6, 2016).

         Commerce issued its final determination on December 20, 2016. See Welded Carbon

Steel Standard Pipe and Tube Products From Turkey, 81 Fed. Reg. 92,785 (Dep’t Commerce

Dec. 20, 2016) (final results of administrative review; 2014–2015). The Department assigned a

weighted-average dumping margin of 1.91 percent to Tosçelik for the period of May 1, 2014

through April 30, 2015. Id. at 92,786. JMC subsequently submitted a ministerial error

allegation. See Letter from Schagrin Associates to Department of Commerce, PD 188, bar code
Consol. Court No. 17-00018                                                               Page 5


3532690-01 (Dec. 27, 2016). Tosçelik filed comments in rebuttal to JMC’s submission. See

Letter from Law Offices of David L. Simon to Department of Commerce, PD 189, bar code

3533504-01 (Jan. 3, 2017). Commerce issued amended final results on February 17, 2017, in

which it calculated a final weighted-average dumping margin of 3.40 percent for Tosçelik. See

Welded Carbon Steel Standard Pipe and Tube Products From Turkey, 82 Fed. Reg. 11,002,

11,003 (Dep’t Commerce Feb. 17, 2017) (amended final results of antidumping duty

administrative review; 2014–2015).

       Tosçelik commenced this action contesting Commerce’s Final Determination on January

18, 2017, ECF No. 1, and filed its complaint on February 16, 2017, ECF No. 7. The court

consolidated this action with Zekelman Industries v. United States on May 3, 2017. See Order,

May 3, 2017, ECF No. 21.

       Zekelman submitted a Rule 56.2 motion for judgment on the agency record, challenging

Commerce’s use of actual weight in calculating the weighted-average dumping margin and

Commerce’s grant of a circumstance of sale adjustment to Tosçelik for warehousing expenses.

See Mot. Zekelman Industries J. Agency R. USCIT Rule 56.2, July 10, 2017, ECF No. 24

(“Zekelman’s Mot.”). Tosçelik filed a timely response. See Resp. Br. Pl. Tosçelik Profil ve Sac

(QGVWULVL$ù, Oct. 30, 2017, ECF No. 36. Zekelman filed a reply. See Consolidated Pl.

Zekelman Industries’ Reply Br. Supp. Mot. J. Agency R. Pursuant Rule 56.2, Nov. 29, 2017,

ECF No. 43 (“Zekelman’s Reply”).

       Tosçelik also filed a Rule 56.2 motion for judgment on the agency record, contesting the

methodology Commerce utilized to calculate the amount of the duty drawback adjustment. See

Mot. Pl. 7RVoHOLN3URILOYH6DF(QGVWULVL$ù J. Agency R. Pursuant Rule 56.2, July 10, 2017,
Consol. Court No. 17-00018                                                                    Page 6


ECF No. 25; see also Mem. Supp. Mot. Pl. 7RVoHOLN3URILOYH6DF(QGVWULVL$ù J. Agency R.

Pursuant Rule 56.2, July 10, 2017, ECF No. 27 (“Pl.’s Mot.”). Zekelman filed a response. See

Def.-Intervenor Zekelman Industries’ Resp. Pl.’s Mot. J Agency R., Oct. 30, 2017, ECF No. 38.

Tosçelik filed a timely reply. See Reply Br. Pl. Tosçelik Profil YH6DF(QGVWULVL$ù, Nov. 29,

2017, ECF No. 40.

         Defendant submitted a consolidated response to both motions. See Def.’s Consolidated

Resp. Opp’n Pl.’s & Consolidated Pl.’s Mots. J. Agency R., Oct. 30, 2017, ECF No. 39 (“Def.’s

Br.”). Pursuant to the two motions for judgment on the agency record, this court held oral

argument on March 20, 2018. See Oral Argument, Mar. 20, 2018, ECF No. 55.

                       JURISDICTION AND STANDARD OF REVIEW

         The court has jurisdiction over this matter pursuant to 19 U.S.C. § 1516a(a)(2)(B)(i) and

28 U.S.C. § 1581(c), which grant the court authority to review actions contesting the final

determination in an antidumping duty investigation. 2 The court “shall hold unlawful any

determination, finding or conclusion 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).

                                          DISCUSSION

    I.      Tosçelik’s Rule 56.2 Motion for Judgment on the Agency Record

            A. Legal Standard for Duty Drawback Adjustment

         The Tariff Act of 1930, as amended, directs Commerce to conduct antidumping duty

investigations and determine whether goods are being sold at less-than-fair value. See 19 U.S.C.


2
 All citations to the U.S. Code are to the 2012 edition. All further citations to the Tariff Act of
1930, as amended, are to the relevant provisions of Title 19 of the U.S. Code.
Consol. Court No. 17-00018                                                                    Page 7


§ 1673. If the Department finds that subject merchandise is being sold at less-than-fair value,

and the U.S. International Trade Commission finds that these less-than-fair value imports

materially injure a domestic industry, the Department issues an antidumping duty order imposing

antidumping duties equivalent to “the amount by which the normal value exceeds the export

price (or the constructed export price) for the merchandise.” Id. The Tariff Act defines export

price as the price at which the subject merchandise is first sold in the United States, whereas the

normal value represents the price at which the subject merchandise is sold in the exporting

country. 3 See id. §§ 1677a(a), 1677b(a)(1)(B). The statute provides further guidance for

determining export price as follows:

       (c) Adjustments for export price and constructed export price
       The price used to establish export price and constructed export price shall be--
               (1) increased by--
                       (B) the amount of any import duties imposed by the country of exportation
                       which have been rebated, or which have not been collected, by reason of
                       the exportation of the subject merchandise to the United States.

Id. § 1677a(c)(1)(B). This calculation is known as a duty drawback adjustment.

       The purpose of a duty drawback adjustment is to ensure a fair comparison between

normal value and export price. See Saha Thai Steel Pipe (Public) Co. Ltd. v. United States, 635

F.3d 1335, 1338 (Fed. Cir. 2011); Torrington Co. v. United States, 68 F.3d 1347, 1352–53 (Fed.

Cir. 1995). Under a duty drawback program, a producer may receive an exemption or rebate

from their home government for duties on imported inputs used to produce merchandise that is



3
 Constructed export price is “the price at which the subject merchandise is first sold . . . in the
United States . . . to a purchaser not affiliated with the producer or exporter.” 19 U.S.C.
§ 1677a(b). For readability purposes, all discussion of export price in this opinion will also
encompass constructed export price.
Consol. Court No. 17-00018                                                                 Page 8


subsequently exported to the U.S. See Saha Thai, 635 F.3d at 1338. As a result, producers are

still required to pay import duties for domestically-sold goods, which leads to an increase in

normal value. See id. A duty drawback adjustment “corrects this imbalance, which could

otherwise lead to an inaccurately high dumping margin, by increasing [export price] to the level

it likely would be absent the duty drawback.” Id.; see also S. Rep. No. 67-16, at 12 (1921).

       Commerce applies a two-pronged test to determine whether a producer qualifies for a

duty drawback adjustment. See Saha Thai, 635 F.3d at 1340. The respondent company must

show “(1) that the rebate and import duties are dependent upon one another, or in the context of

an exemption from import duties, that the exemption is linked to the exportation of the subject

merchandise, and (2) that there are sufficient imports of the raw material to account for the duty

drawback on the exports of the subject merchandise.” Id.

           B. Commerce’s Methodology for Calculating the Duty Drawback Adjustment

       Commerce awarded Tosçelik a duty drawback adjustment due to the company’s

participation in Turkey’s Inward Processing Regime. See Preliminary I&D Memo at 10.

Tosçelik described the duty drawback scheme in the administrative proceedings as follows:

               Under Turkey’s “Inward Processing Regime” (IPR), a company that imports raw
       materials and exports finished goods made from such raw materials may obtain an inward
       processing certificate (Turkish acronym, DIIB). A DIIB sets forth the quantity of raw
       material allowed to be imported without deposit of import duties under a given DIIB and
       the quantity of export required to close the DIIB, i.e., to satisfy the export commitment
       requirements of the DIIB. When a DIIB has been closed, and the closure is approved by
       Turkish customs, then the DIIB holder is released of any liability for import duties
       otherwise payable on the entries under the DIIB. The final approval of DIIB closures is
       within the jurisdiction of the Turkish Foreign Trade ministry; the process is generally
       completed 3 to 4 years after submission of a closed DIIB for approval.
              When a Turkish company imports or exports goods, it files an entry or exit
       declaration, respectively, with Turkish Customs. Customs verifies the accuracy of such
       import and export declarations and inserts the finalized quantities, values, and related
Consol. Court No. 17-00018                                                                 Page 9


       information, including DIIB numbers, into a Customs database. A holder of a DIIB can
       then query the Turkish Customs database, via an internet e-portal, to ascertain the import
       and export movements under its DIIBs. DIIB holders can also download their DIIB
       usage tables from the Customs e-portal.

Section B–D Questionnaire Response of 7RVoHOLN3URILOYH6DF(QGVWULVL$ù at 29, PD 75–76,

bar code 3400035-01 (Sept. 28, 2015). Both Plaintiff and Defendant agree that the duty

drawback adjustment was properly granted here. The issue in dispute is whether Commerce

reasonably calculated the duty drawback adjustment for Tosçelik.

       The Department made its calculation by reducing the duty drawback adjustment to

Tosçelik’s U.S. sales and allocating the duty exemptions and rebates claimed over the total

quantity of production using that input. See Def.’s Br. 12–13. Defendant describes the

calculation used by Commerce in the following equation:

 Input cost + rebated or forgiven duties
                                            = Per unit cost of the input, including its duty burden
Quantity of all production using that input


Id. at 13. Tosçelik argues that the Department’s calculation is inconsistent with the statute and

the agency’s practice of computing exempted and rebated duties over total exports to the U.S.

See Pl.’s Mot. 17, 19. Because the statute contemplates a drawback on duties that are rebated or

exempted “by reason of” the exportation of the subject merchandise to the United States,

Tosçelik contends that Commerce’s calculation of the duty drawback adjustment is contrary to

the statute’s plain language in that the chosen methodology ignores the statute’s textual linkage

between the adjustment and the act of exporting. See id. at 19. For the following reasons, the

court finds that Commerce calculated the amount of duty drawback adjustment not in accordance

with the law.
Consol. Court No. 17-00018                                                                  Page 10


        Under its previous practice, Commerce divided the amount rebated or forgiven by the

exported quantity to determine the duty burden borne by each unit of merchandise sold in the

United States. See Def.’s Br. 13. This “per unit” amount was then added to the export price.

See id. Commerce changed its practice in this case, and employed a “duty neutral” approach

when calculating Tosçelik’s duty drawback adjustment. See Final I&D Memo at 5. Commerce

stated that it

        continue[d] to find in these final results that where duty drawback inputs are sourced
        from both domestic (Turkish) and foreign [Non-Turkish] sources, a calculation of duty
        drawback which is based on export volume results in an imbalance in the comparison of
        export price (EP) or constructed export price (CEP) with NV [normal value]. . . . [T]his
        imbalance exists because the NV portion of the comparison reflects an average annual
        cost that reflects both foreign sourced inputs (which incur duties) and domestic inputs for
        which the Respondent incurs no duties. In contrast, on the EP/CEP side, the duty
        drawback adjustment to the USP [U.S. Price] employs a smaller denominator than that
        used on the NV side. As in Rebar Trade, we maintain that the combination of duties
        included within NV relative to what is included within USP, results in a larger per-unit
        U.S. sales adjustment than is imbedded within NV. This creates an imbalance in the
        comparison of the USP to NV.

Id. (footnotes omitted). As a result of these findings, the Department “based [its] duty drawback

calculation on the per-unit costs” within the cost of production database submitted by Tosçelik.

Id. at 6.

        Defendant contends that Commerce’s methodology is consistent with precedent,

specifically Saha Thai. See Def.’s Br. 15. Defendant argues that the “matching principle”

illustrated in Saha Thai instructs Commerce that export price, cost of production, and constructed

value “should all be increased together, or not at all.” Id. at 19 (citing Saha Thai, 635 F.3d at

1342–43). The court disagrees with Defendant’s reading of the case. The duty drawback regime

at issue in Saha Thai was one based solely on exemptions. Because the duties in Saha Thai were
Consol. Court No. 17-00018                                                                 Page 11


exempted, they were not recorded in the respondent company’s books as an expense incurred.

Commerce therefore increased the company’s cost of production (“COP”) and constructed value

(“CV”), which are both part of the Department’s normal value calculation, to account for the

duties presumably paid on inputs for products sold in the domestic market. The Court of

Appeals for the Federal Circuit recognized that:

       [T]he entire purpose of increasing EP is to account for the fact that the import duty costs
       are reflected in NV (home market sales prices) but not in EP (sales prices in the United
       States). An import duty exemption granted only for exported merchandise has no effect
       on home market sales prices, so the duty exemption should have no effect on NV. Thus,
       because COP and CV are used in the NV calculation, COP and CV should be calculated
       as if there had been no import duty exemption. It would be illogical to increase EP to
       account for import duties that are purportedly reflected in NV, while simultaneously
       calculating NV based on a COP and CV that do not reflect those import duties. Under
       the “matching principle,” EP, COP, and CV should be increased together, or not at all.

Saha Thai, 635 F.3d at 1342–43. Because Commerce adjusted EP in the Saha Thai case to

account for the duty drawback adjustment received by the respondent company, the Court of

Appeals for the Federal Circuit concluded that the subsequent adjustment to NV to reflect the

duties paid on inputs for products sold in the home market was proper. The “matching principle”

relates, therefore, to an adjustment to normal value with respect to the particular facts and

recordkeeping practices presented in Saha Thai, and should not be expanded to encompass all

duty drawback adjustment calculations made by Commerce. Here, the Parties do not allege

deficiencies in Tosçelik’s recordkeeping or in the normal value calculation with respect to duty

drawback to warrant application of the matching principle. When viewed in this context, Saha

Thai’s matching principle does not support Commerce’s methodology in the instant matter

before this court.
Consol. Court No. 17-00018                                                                Page 12


         Defendant argues further that Commerce’s methodology is permitted under 19 U.S.C.

§ 1677a(c)(1)(B). See Def.’s Br. 15. The statute allows for an upward adjustment to EP by “the

amount of any import duties imposed by the country of exportation which have been rebated, or

which have not been collected, by reason of the exportation of the subject merchandise to the

United States.” 19 U.S.C. § 1677a(c)(1)(B). Commerce’s calculation in this case is inconsistent

with the statute because allocating duty drawback to total production encompasses home market

(Turkish) sales, which could not earn a duty drawback, and fails to adequately connect the

adjustment to duties forgiven “by reason of” the products’ exportation to the United States. By

including costs associated with manufacturing goods sold in the domestic market, the

Department’s methodology lessens the upwards adjustment and conceptually reintroduces an

imbalance in the dumping margin calculation. Commerce’s method of calculating Tosçelik’s

duty drawback adjustment with respect to total production is inconsistent with and contravenes

the plain language of 19 U.S.C. § 1677a(c)(1)(B). The court rejects Defendant’s argument and

concludes that Commerce’s action is unreasonable and is not in accordance with the law, and

remands Commerce’s determination for further administrative proceedings consistent with this

opinion.

   II.      Zekelman’s Rule 56.2 Motion for Judgment on the Agency Record

            A. Commerce’s Use of Actual Weight as Opposed to Theoretical Weight

         When calculating Tosçelik’s antidumping margin, Commerce utilized actual weight as

opposed to theoretical weight, which is an estimated weight based on the products’ dimensions.

See Final I&D Memo at 19. Zekelman argues that Commerce should have either requested that

Tosçelik provide information on the basis of theoretical weight or converted Tosçelik’s
Consol. Court No. 17-00018                                                                 Page 13


information into theoretical weight. See Zekelman’s Mot. 12–16. Zekelman further contends

that Commerce’s failure to explain why it did not take either action alone warrants a remand on

this issue. See id. at 16.

        Contrary to Zekelman’s arguments, the record supports the Department’s decision.

Commerce’s questionnaire did not specify whether respondents should provide information in

either actual or theoretical weight, but rather that respondents should use the “same unit of

measure” to report sales. See Section B–D Questionnaire Response of Tosçelik Profil ve Sac

(QGVWULVL$ù at 61, PD 75–76, bar code 3400035-01 (Sept. 28, 2015). Tosçelik prepared all

databases for the Department on an actual-weight basis. See id. at 62. In its supplemental

questionnaire response, Tosçelik explained to the Department its belief that the use of theoretical

weight in this case may introduce unwanted distortions into the calculations. See Supplemental

Questionnaire Response of TosçelLN3URILOYH6DF(QGVWULVL$ù. at 5–7, PD 115, bar code

3546873-01 (Mar. 28, 2016). Although Commerce recognized that it may consider utilizing only

theoretical weight in future reviews, it explained that it would continue to use actual weight in

the instant review because the respondent provided data in actual weight and had done so in

previous administrative reviews. See Final I&D Memo at 19. Based on the information

available in the record, it was reasonable for Commerce to calculate Tosçelik’s antidumping

margin on an actual-weight basis. The court concludes that the Department’s decision to

calculate Tosçelik’s antidumping margin on an actual-weight basis is supported by substantial

evidence.
Consol. Court No. 17-00018                                                                 Page 14


           B. Commerce’s Grant of a Circumstance of Sale Adjustment for Warehousing

              Expenses to Tosçelik

       Commerce granted Tosçelik a circumstance of sale adjustment for Tosçelik’s

warehousing expenses. Zekelman argues that Commerce’s decision was unsupported by

substantial evidence because Commerce failed to address contrary evidence on the record

allegedly showing that Tosçelik overstated its warehousing expenses in its questionnaire

responses. See Zekelman’s Mot. 16–20. Zekelman contends further that Tosçelik’s refusal to

provide information relating to its warehousing expenses should have prompted the Department

to apply facts otherwise available with an adverse inference under 19 U.S.C. § 1677e. See id. at

18–20. Zekelman requests that the court remand this issue so the Department can conduct a

proper analysis. See Zekelman’s Reply 5. The Government defends Commerce’s grant of an

adjustment. See Def.’s Br. 25–27. For the following reasons, the court concludes that

Commerce’s decision to grant Tosçelik an adjustment for warehousing expenses was

unsupported by substantial evidence.

       As stated before, in an antidumping duty calculation, normal value represents the price at

which the subject merchandise is sold in the exporting country. See 19 U.S.C. § 1677b(a)(1)(A).

When determining the appropriate price for comparison, Commerce may make certain price

adjustments. See id. § 1677b(a)(6). The price may be

       (C) increased or decreased by the amount of any difference (or lack thereof) between the
           export price or constructed export price and the price described in paragraph (1)(B)
           (other than a difference for which allowance is otherwise provided under this section)
           that is established to the satisfaction of the administering authority to be wholly or
           partly due to--
              (iii) other differences in the circumstances of sale.
Consol. Court No. 17-00018                                                                  Page 15


Id. § 1677b(a)(6)(C)(iii).

       Section 776 of the Tariff Act provides that if “necessary information is not available on

the record” or if a respondent “fails to provide such information by the deadlines for submission

of the information or in the form and manner requested,” then the agency shall “use the facts

otherwise available in reaching” its determination. Id. §§ 1677e(a)(1), (a)(2)(B). If the

Department further finds that “an interested party has failed to cooperate by not acting to the best

of its ability to comply with a request for information” from the agency, then the Department

“may use an inference that is adverse to the interests of that party in selecting from among the

facts otherwise available.” Id. § 1677e(b)(1)(A). The Court of Appeals of the Federal Circuit

has interpreted these two subsections to have different purposes. See Mueller Comercial de

Mexico, S. de R.K. De C.V. v. United States, 753 F.3d 1227, 1232 (Fed. Cir. 2014). Subsection

(a) applies “whether or not any party has failed to cooperate fully with the agency in its inquiry.”

Id. (citing Zhejiang DunAn Hetian Metal Co. v. United States, 652 F.3d 1333, 1346 (Fed. Cir.

2011)). On the other hand, subsection (b) applies only when the Department makes a separate

determination that the respondent failed to cooperate “by not acting to the best of its ability.” Id.

(quoting Nippon Steel v. United States, 337 F.3d 1373, 1381 (Fed. Cir. 2003)).

       The law clearly requires Commerce to explain the basis for its decisions. See, e.g., NMB

Singapore Ltd. v. United States, 557 F.3d 1316, 1319–20 (Fed. Cir. 2009) (“[W]hile its

explanations do not have to be perfect, the path of Commerce’s decision must be reasonably

discernable to a reviewing court.”). With respect to antidumping duties cases specifically, “a

final determination by Commerce must include ‘an explanation of the basis for its determination
Consol. Court No. 17-00018                                                                    Page 16


that addresses relevant arguments[] made by interested parties who are parties to the

investigation or review.’” Id. at 1320 (quoting 19 U.S.C. § 1677f(i)(3)(A)).

       Tosçelik indicated in its questionnaire response that the company owns and operates two

steel service centers. See Section B–D Questionnaire Response of Tosçelik Profil ve Sac

(QGVWULVL$ù at 29, PD 75–76, bar code 3400035-01 (Sept. 28, 2015). “The main function of

these service centers is to provide cut-to-length (CTL) services for conversion of coils to sheets.

However, Tosçelik also uses these service centers for warehousing pipes for delivery to

customers in the vicinity of the service centers. Tosçelik books all the expenses of these service

centers in the respective cost center for each location.” Id. The company provided worksheets

demonstrating the costs of operating each warehouse. See Exhibit 4 of Section B–D

Questionnaire Response of Tosçelik 3URILOYH6DF(QGVWULVL$ù, CD 62–64, bar code 3400032-

01 (Sept. 28, 2015). Commerce issued a supplemental questionnaire, asking the respondent to

“re-calculate [its] claimed warehousing expenses,” ensuring “that all expenses incurred in [its]

warehousing claim are directly related to warehousing functions.” Supplemental Questionnaire

Response of TosçelLN3URILOYH6DF(QGVWULVL$ù. at 13, PD 115, bar code 3452802-01 (Mar.

28, 2016). Tosçelik responded that because each location is “a single cost center, it is not

possible to separate the warehousing expense from the other expenses of the operations.” Id.

The company resubmitted its worksheets after removing the “one expense in the warehouse that

is solely attributable to the CTL activities carried out . . . namely, the scrap generated.” Id. at 14.

       Commerce’s preliminary determination simply stated that the Department made

adjustments for differences in circumstances of sale by “deducting direct selling expenses

incurred on home market sales and adding U.S. direct selling expenses to [normal value].”
Consol. Court No. 17-00018                                                                  Page 17


Preliminary I&D Memo at 14–15. “Direct selling expenses consisted of credit expenses,

warranty expenses, and factoring expenses.” Id. at 15. The preliminary determination made no

mention of Tosçelik’s warehousing expenses.

       Commerce’s final determination briefly responded to comments concerned with

Tosçelik’s warehousing expenses. That section reads, in full:

               We agree with Toscelik. In the Preliminary Results, we made a circumstances of
       sale adjustment for Toscelik’s reported warehousing expenses, in accordance with section
       773(a)(6)(C)(iii) of the Act and 19 CFR 351.410.
                In reviewing Toscelik’s reported warehousing expenses, we find no evidence
       suggesting that Toscelik’s claimed expenses relate to activities other than warehousing,
       or that Toscelik’s reported warehousing expenses are overstated. Therefore, in these final
       results, pursuant to section 773(a)(6)(C)(iii) of the Act and 19 CFR 351.410, we have
       made no changes from our Preliminary Results, and we have continued to make a
       circumstances of sale adjustment for Toscelik’s warehousing expenses.

Final I&D Memo at 22 (footnotes omitted). The Department’s proclamation of “no evidence”

clearly contradicts Tosçelik’s admission that the claimed warehousing expenses encompassed

costs associated with both manufacturing and storing products for sale. The Department failed to

give reasons and substantiate its decision to make a circumstance of sales adjustment for

Tosçelik. Accordingly, the court remands Commerce’s final determination on this issue. On

remand, Commerce should adequately address contrary evidence on the record and provide clear

and discernable reasons for its decision.

                                            CONCLUSION

       For the foregoing reasons, the court concludes that Commerce impermissibly calculated

Tosçelik’s duty drawback adjustment, and that Commerce’s methodology was not in accordance

with the law. Tosçelik’s Rule 56.2 motion for judgment upon the agency record is granted. On
Consol. Court No. 17-00018                                                              Page 18


remand, the Department should recalculate Tosçelik’s duty drawback adjustment using a

methodology that is consistent with this opinion.

        The court concludes further that Commerce’s decision to grant Tosçelik a circumstance

of sale adjustment for warehousing expenses is not supported by substantial evidence, but

upholds Commerce’s use of actual weight as opposed to theoretical weight when calculating

Tosçelik’s weighted-average dumping margin as supported by substantial evidence. Zekelman’s

Rule 56.2 motion for judgment upon the agency record is granted with respect to the issue of

circumstances of sale adjustment and denied with respect to the issue of actual weight. On

remand, Commerce should reexamine the circumstance of sale adjustment granted to Tosçelik

consistent with this opinion.

        Accordingly, it is hereby

        ORDERED that Tosçelik’s Rule 56.2 motion for judgment on the agency record is

granted; and it is further

        ORDERED that Zekelman’s Rule 56.2 motion for judgment on the agency record is

granted in part with respect to the Commerce’s grant of a circumstance of sale adjustment for

warehousing expenses to Tosçelik; and it is further

        ORDERED that Zekelman’s Rule 56.2 motion for judgment on the agency record is

denied in part with respect to Commerce’s use of actual weight when calculating Tosçelik’s

weighted-average dumping margin; and it is further
Consol. Court No. 17-00018                                                               Page 19


         ORDERED that the Final Results are remanded to the U.S. Department of Commerce

for further proceedings consistent with this opinion; and it is further

         ORDERED that the U.S. Department of Commerce shall file its remand redetermination

on or before September 4, 2018; and it is further

         ORDERED that the U.S. Department of Commerce shall file the administrative record

on or before September 18, 2018; and it is further

         ORDERED that the Parties shall file any comments on the remand redetermination on or

before October 4, 2018; and it is further

         ORDERED that the Parties shall file any replies to the comments on or before November

5, 2018; and it is further

         ORDERED that the joint appendix shall be filed on or before November 13, 2018.




                                                              /s/ Jennifer Choe-Groves
                                                               Jennifer Choe-Groves, Judge

Dated:      June 6, 2018
         New York, New York
