                                        Slip Op 16 - 88

     UNITED STATES COURT OF INTERNATIONAL TRADE

                                            :
REBAR TRADE ACTION COALITION, et al., :
                                            :
                               Plaintiffs,  :
                                            :
                      v.                    : Before: R. Kenton Musgrave, Senior Judge
                                            :
UNITED STATES,                              : Court No. 14-00268
                                            :
                               Defendant, :
                                            :
                     and                    :
                                            :
ICDAS CELIK ENERJI TERSANE VE ULASIM :
SANAYI, A.S., and HABAS SINAI VE TIBBI      :
GAZLAR ISTIHSAL ENDUSTRISI A.S.,            :
                                            :
                     Defendant-Intervenors. :
                                            :

                                   OPINION AND ORDER

[Remanding administrative results of redetermination that rebar from Turkey was sold at less than
fair value.]

                                                                     Dated: September 21, 2016

      Alan H. Price, John R. Shane, Maureen E. Thorson, and Jeffrey O. Frank, Wiley Rein LLP,
of Washington, DC, for plaintiffs.

        Richard P. Schroeder, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S.
Department of Justice, of Washington, DC, for the defendant. With him on the brief were Benjamin
C. Mizer, Principal Deputy Assistant Attorney General, Jeanne E. Davidson, Director, and Reginald
T. Blades, Jr., Assistant Director. Of Counsel on the brief was David W. Richardson, Attorney,
Office of the Chief Counsel for Trade Enforcement and Compliance, U.S. Department of Commerce,
of Washington, DC.

       Matthew M. Nolan, Nancy A. Noonan, Diana Dimitriuc Quaia, and Julia L. Diaz, Arent Fox
LLP, of Washington, DC, for defendant-intervenor Icdas Celik Enerji Tersane ve Ulasim, A.S.
Court No. 14-00268                                                                            Page 2


      David J. Simon, Law Office of David L. Simon, of Washington, DC, for defendant-intervenor
Habas Sinai ve Tibbi Gazlar Istihsal Endustrisi A.S.


                Musgrave, Senior Judge:     Slip opinion 15-130 (Nov. 23, 2015) remanded Steel

Concrete Reinforcing Bar From Turkey: Final Negative Determination of Sales at Less Than Fair

Value and Final Determination of Critical Circumstances, 79 Fed. Reg. 21986 (Sep. 15, 2014)

(“Final Determination”),1 together with its accompanying issues and decision memorandum (“IDM”)

to the U.S. Department of Commerce, International Trade Administration (“Commerce” or

“Department”) for reconsideration or further explanation of four aspects of those final results: (1)

the decision to grant duty drawback adjustment to respondents ICDAS Celik Enerji Tersane ve

Ulasim, A.S. (“Icdas”) and Habas Sinai ve Tibbi Gazlar Istihsal Endustrisi A.S. (“Habas”), in

particular to account for the Turkish Resource Utilization Fund (“KKDF”) tax ultimately not

collected, pursuant to the Turkish Inward Processing Regime (“IPR”), on imports of raw materials

incorporated into exports; (2) the calculation of the duty drawback adjustment; (3) the decision to

use the date of invoice as the date of sale; and (4) a determination concerning the alloy content of

Icdas’s2 steel billets. See Slip Op. 15-130 (Nov. 23, 2015), familiarity with which is presumed. At

this point, the parties contest aspects of the remand results (“Redetermination”), which has yielded

margins of 3.64 percent for Icdas, de minimis for Habas, and 3.64 percent for “all others”. See ECF

No. 77 (Apr. 7, 2016) at 71. For the following reasons, the matter must be remanded a second time.


       1
           The period of investigation is July 2012, through June 2013.
       2
          Insofar as this court is aware, Professor Strunk’s First Rule is still vibrant. See William
Strunk, Jr., and Elwyn Brooks “E.B.” White, The Elements of Style (3rd ed. 1979), p. 1 (Rule 1:
“Form the possessive singular of nouns by adding ’s. Follow this rule whatever the final
consonant.”). Passages herein from the papers, however, are quoted unaltered for readability’s sake.
Court No. 14-00268                                                                          Page 3


                                           Discussion

               Concerning the first issue, Commerce previously determined that Turkey’s IPR,

which basically forgives the liability for customs duties owing on imported material upon export of

finished product incorporating such material, functions in the manner of a customs duty drawback

program similar to such regimes as exist in the United States. See, e.g., Redetermination at 4. The

duty drawback system of the United States, for example, permits rebate of 99 percent of the customs

duties paid on imported merchandise if the exported product, inter alia, either consists of the

imported merchandise itself, or consists of a suitable “substitute” for the imported merchandise,

otherwise known as “substitution” drawback. See 19 U.S.C. §1313(a)&(b); 19 C.F.R. §191.22.

                     I. Adjustment of U.S. Price for KKDF Tax Forgiveness

               The plaintiffs, Rebar Trade Action Coalition and its individual members (plaintiffs

or “RTAC”), previously challenged Commerce’s interpretation of the interplay between or operation

of Turkey’s IPR and its KKDF tax scheme and Commerce’s decision to include the latter as part of

the adjustment to the U.S. price of the subject merchandise required by 19 U.S.C. §1677a(c)(1)(B).

The issue was remanded as necessary to Commerce’s voluntary request to reconsider an aspect of

its duty drawback calculation methodology. See infra & generally Slip Op. 15-130 at 5-9.

               As a threshold matter, on remand Commerce reaffirmed that the respondents met the

requirements of its two-prong test for duty drawback pursuant to the established framework of

Turkey’s IPR. See Redetermination at 5-6, 38-40. RTAC did not comment on that finding but

argued against inclusion of the KKDF tax in the duty drawback adjustment calculation on the

following grounds: (1) the KKDF tax does not qualify as a statutory “import duty” under 19 U.S.C.
Court No. 14-00268                                                                              Page 4


§1677a(c)(1)(B) as it was not “import-dependent and export contingent”; (2) the KKDF tax is not

imposed on imports but on commercial loans that are financed in certain ways, and regardless of

whether those loans are used to support imports or not; (3) the KKDF tax did not qualify as an

“import duty” within the meaning of section 1677a(c)(l)(B) because the KKDF tax can be avoided

altogether even with respect to loans to support imports simply by avoiding certain types of financing

options such as acceptance loans or loans denominated in foreign currencies; and (4) “[i]f no tax was

ever owed, then it could not have either been rebated or foregone by reason of exports to the United

States.” See Redetermination at 6, 40-42.

                Considering the arguments on the record,3 Commerce again found, consistent with

its previous analytic experience therewith,4 that the KKDF tax qualifies as a statutory import duty

under section 1677a(c)(1)(B) and that the tax was “import-dependent and export contingent”5, to wit:

       The KKDF amount is considered a contingent liability similar to the duties exempted
       on raw materials imported under the requirements of the IPR. Therefore, we find that
       this contingency is tantamount to “owed duties” because such a tax would require
       payment absent the satisfactory exportation of the subject merchandise to the United
       States.

Id. at 14. See also id. at 42-45.




       3
           As supplemented during remand. See Redetermination at 8-14.
       4
          Id. at 6 n.14, referencing Final Results of the Antidumping Duty Administrative Review:
Welded Carbon Steel Standard Pipe and Tube Products from Turkey; 2012-2013, 79 Fed. Reg.
71087 (Dec. 1, 2014), and accompanying issues and decision memorandum at comment 3, which
stands for the proposition that the fact that KKDF taxes are a tax levied on financial transactions, not
on goods and services, does not prevent KKDF taxes from functioning as a duty on imports.
       5
           Redetermination at 6.
Court No. 14-00268                                                                                Page 5


                RTAC here re-emphasizes that its challenge is focused on “whether the KKDF can

properly be considered an ‘import duty’ within the meaning of 19 U.S.C. § 1677a(c)(I)(B), given that

it can be incurred on loans to support domestic purchases as well as imports, and can be avoided

entirely even with regard to import financing by choosing non-taxable loans,” and RTAC contends

the Redetermination has not clarified this particular question. RTAC Cmts. at 10, citing RTAC Br.

at 8-10, ECF Nos. 28, 29. Elaborating, RTAC argues Commerce’s finding that “[t]he KKDF amount

is based on the value of the goods themselves” (Redetermination at 9) is based on an incorrect

interpretation of the record, which indicates that the KKDF tax is incurred from financing options

and is based on the value of that financing rather than on the customs value of any relevant imported

goods, which are not necessarily the same values. Id. at 11. “The point is important, as the agency’s

determination that the KKDF, when incurred in transactions involving imports, is owed on the value

of the imports at issue, appears central to the agency’s conclusion that the tax functions in the

manner of an import duty.”6 Id.


        6
           From which point, further elaborating, RTAC points to two problems with Commerce’s
“disagree[ment]” with its claim that the KKDF decree itself states that the tax is imposed on the
value of financing and not on the value of the imports financed, to wit: (1) that Commerce had no
reasonable basis for concluding that it had cited an outdated version of the KKDF decree in making
its arguments when it, RTAC, citing the documentation provided in Icdas’s second supplemental
Section C response, pointed to the same language the agency had apparently found so pertinent --
in particular, the phrase “changed by government decree 2011/2304” in Section 7(D) of the KKDF
decree -- which did not, as Commerce may have assumed, revoke or replace (as opposed to merely
supplement) the decree but should, therefore, have been read in conjunction with the original decree
itself; and (2) that the language Commerce apparently found pertinent -- i.e., “7(D) - import by
acceptance credit, term L/C and cash against goods, 6 % (changed by government decree 2011/
2304)” -- (see Icdas Second Supp. C. Response at Ex. SC-14) does not in any way state that the tax
is being charged on the value of imports, versus the value of import financing vehicles. RTAC
Cmts. at 12-13. “In fact, when it is read in conjunction with the rest of the decree, it is clear that the
tax is on the value of the financing for goods financed in certain ways, and not on the value of
                                                                                           (continued...)
Court No. 14-00268                                                                          Page 6


               This court is unpersuaded that Commerce has misconstrued the record. The agency’s

determination on the record of the meaning and operation of foreign law is one of fact, and while

Commerce might just as well have been reasonably persuaded by RTAC’s contentions, for purposes

of its Redetermination the pertinent point for Commerce, as mentioned, appears to have been its

finding that the KKDF taxes on this record were assessed and owing in fact due to import, whether

or not imposed “on” the import(s) directly, and were therefore “tantamount to ‘owed duties’” that

the respondents ultimately persuaded were in fact excused or forgiven through the operation of the

IPR. See Redetermination at 13-15. RTAC’s arguments, which offer a different interpretation of

de jure aspects of the KKDF tax, essentially amount to asking for substitution of judgment for

Commerce’s interpretation on that matter of fact, and they do not here persuade, thereby, that

Commerce’s determination to adjust U.S. price to account for KKDF tax forgiveness, pursuant to

Commerce’s interpretation of the actual operation of the IPR on record, resulted from unreasonable

interpretation of it. See id. at 39-45 (cmts. 1 & 2).

                          II. Modification of Duty Drawback Calculation

               Undisputed is Commerce’s finding that the respondents sourced some of their inputs

from both foreign sources, which incurred import duties, and domestic sources, which incurred no

import duties. However, in light of that fact RTAC previously argued the Final Determination was

unclear in addressing its arguments on the calculation of the duty drawback adjustment, Commerce,

in response, requested remand voluntarily in order to reconsider its duty drawback adjustment



       6
         (...continued)
imported goods themselves”, and “[i]n concluding otherwise, the agency appears to be relying solely
on respondents’ assertions, and ignoring the KKDF decree itself.” Id. at 14.
Court No. 14-00268                                                                             Page 7


calculation. On remand, Commerce concluded that application of its usual methodology resulted

in a distorted margin; accordingly, it adjusted its methodology to eliminate the perceived distortion.

Redetermination at 49-58. RTAC supports the remand results while Icdas opposes.

               Commerce begins by explaining that the dumping margin, in its basic form, is

expressed as a ratio of normal value (“NV”) minus U.S. Price (“USP”) divided by U.S. Price, or

“(NV & USP) / USP”7. To achieve a “fair comparison”,8 19 U.S.C. §1677a(c)(1)(B) requires upward

adjustment of USP 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”. The purpose of this statutory “duty drawback adjustment” is to

achieve “tax neutrality” in a comparison of NV and USP when Commerce confronts the situation

where “goods sold in the exporter’s domestic market are subject to import duties while exported

goods are not”. Saha Thai Steel Pipe (Pub.) Co. v. United States, 635 F.3d 1335, 1339 (Fed. Cir.

2011) (“Saha Thai”). In such a situation, the purpose of the statute is to equilibrate by “increasing

EP to the level it likely would be absent the duty drawback” and amounts to “a plain and simple rule:

a duty drawback adjustment shall be granted when, but for the exportation of the subject

merchandise to the United States, the manufacturer would have shouldered the cost of an import

duty.” Id. at 1341. See also Maverick Tube Corp. v. United States, 40 CIT ___, 2016 WL 2844288,

at *8 (May 10, 2016) (observing that the language of the statute is “plain” only to a certain extent).


       7
         See Def’s Resp. at 12 (court’s alteration). Cf. 19 U.S.C. §1677(35)(A) (dumping margin).
For purposes of this calculation, USP will be either export price (“EP”) or constructed export price
(“CEP”).
       8
        See Uruguay Round Agreements Act, Statement of Administrative Action, H.R. Doc. No.
103-316, vol. 1, at 820 (1994), reprinted in 1994 U.S.C.C.A.N. 4040, 4161.
Court No. 14-00268                                                                              Page 8


               In theory, such an adjustment is unexceptional. However, the Redetermination

explains that Commerce identified an “imbalance” in its standard duty drawback adjustment

methodology:

       [O]n the NV side of the comparison, the annual average cost for an input was an
       average cost of both the foreign sourced input, which incur duties, and domestic
       sourced input on which no duties were imposed. Thus, the denominator over which
       the amount of the duties forgiven or rebated was allocated was all production. This
       per-unit amount of duties was a component of the respondent’s cost of production.
       On the EP/CEP side, however, the amount of duties forgiven or rebated was allocated
       over only the export sales quantity. As a result, the adjustment to the EP/CEP used
       a smaller denominator than that used on the NV side. Thus, the per unit U.S. sales
       adjustment was larger than the per unit duty amount imbedded in NV, and created an
       imbalance in the comparison of the EP/CEP with NV.

Redetermination at 16. Taking such facts into account, Commerce accordingly explained that it

       will make an upward adjustment to EP and CEP based on the amount of the duty
       imposed on the input and rebated or not collected on the export of the subject
       merchandise by properly allocating the amount rebated or not collected to all
       production for the relevant period based on the cost of inputs during the POI. This
       ensures that the amount added to both sides of the comparison of EP or CEP with NV
       is equitable, i.e., duty neutral meeting the purpose of the adjustment as expressed in
       Saha Thai. Thus, based on the facts of this investigation, the Department finds that
       the import duty costs, based on the consumption of imported inputs during the POl,
       including imputed duty costs for the imported inputs, properly accounts for the
       amount of duties imposed, as required by 772(c)(1)(B) of the Act. Thus, for this
       remand redetermination, the Department has revised its calculation of the adjustment
       to EP and CEP for duty drawback such that this adjustment is based on the per-unit
       duty costs included in the respondent’s cost of production.[ ]

Id. at 18-18 (footnotes omitted).

               RTAC supports this recalculation of the duty drawback adjustment. RTAC Cmts.

at 2-3. Icdas, however, argues the recalculation is inconsistent with the statute, inter alia, because

allocating duty drawback to “all production” is a flawed premise because it “allocates a part of the

duty drawback adjustment to home market sales, which could never earn duty drawback”. Icdas
Court No. 14-00268                                                                             Page 9


Cmts. at 2. The duty drawback statute does not permit this, Icdas argues, but requires a “full”

upward adjustment to EP or CEP for duties not collected “by reason of the exportation of the subject

merchandise to the United States.” Id., quoting 19 U.S.C. §1677a(c)(1)(B).

               Icdas’s reading of the statute appears correct, at least in part. See Avesta Sheffield,

Inc. v. United States, 17 CIT 1212, 1216, 838 F. Supp. 608, 612 (1993) (the statute “allows a full

upward adjustment” to EP for import duties “which have not been collected”); see also Wheatland

Tube Co. v. United States, 30 CIT 42, 62, 414 F. Supp. 2d 1271, 1288 (2006) (quoting same).

Commerce having determined that Icdas met the statutory requirements for the duty drawback

adjustment, see Redetermination at 15, 39-40, the problem with the Redeterminaion’s modification

of the per-unit “sales” side of the standard duty drawback adjustment calculation is that by conflating

duties paid and duties rebated or not collected by reason of export the modification effectively

disallows the full amount of the duty drawback (i.e., the amount of KKDF import-tax forgiveness)

allocable to EP/CEP in contravention of the statute. Thus, the court agrees with Icdas that what the

Redetermination’s modification of the standard duty drawback adjustment does, in effect, is attribute

to domestic production a part of the actual duty drawback received, and domestic production cannot,

by definition, be attributed with duty drawback under Turkish law. The USP adjustment for

drawback, being causally related to exportation, not production, is allocable only to the exports to

which it relates; therefore, because the result of the methodology applied in the Redetermination

apparently denies the full adjustment to EP/CEP which Icdas is lawfully entitled without adequate

justification, further remand for reconsideration (and justification of any modification) is required.
Court No. 14-00268                                                                            Page 10


               That said, the court does not agree that Commerce’s attempt to properly allocate the

duty amount attributable to NV was based on a “flawed premise”. See Icdas Cmts. at 12. Icdas

agrees that “the whole rationale for the [c]ourt’s decision in Saha Thai was that costs need to be

increased to erase distortions that might be created by duty drawback”, Icdas Cmts. at 17 (bracketing

added), and the court agrees with the Redetermination that Commerce’s standard duty drawback

methodology is flawed insofar as it produces a distorted comparison of a per-unit NV with a per-unit

EP/CEP when production involves a mixture of foreign-sourced and domestic-sourced inputs.

               Conceptually, whereas the “cost” side of NV reflects a simple average, i.e., a uniform

ratio of allocated input costs across all production, the Turkish drawback system (i.e., the IPR)

effectively “loads” the EP/CEP export sales side with duty inclusive (foreign sourced) input

production costs and correspondingly skews the proportion of the duty exclusive (domestic sourced)

production costs that must, as a matter of accounting logic, remain on the NV foreign like product

counterpart cost side. The operation of the IPR thus amounts to a “forced reallocation” of production

costs between the EP/CEP side and the NV side, rendering inapplicable and inappropriate the

calculation of a “simple” average cost of production that would otherwise cover both the export

product and the domestically-sold product alike.

               To take a simple example: if a respondent’s production consists of 75% foreign-

sourced inputs and 25% domestic-sourced inputs, and if it exports 75% of its finished product and

sells the remaining 25% of its production in the domestic market, and if the respondent claims and

receives 100% of the customs duties paid during the period of investigation as drawback (i.e.,

regardless of the fact that its exports consist in fact of a fungible mix of 75% foreign-sourced inputs
Court No. 14-00268                                                                             Page 11


and 25% domestic-sourced inputs), then under that scenario there are effectively no customs duty

costs that must be borne in sales of the domestic product, which is conceptually the comparative NV.

Under that scenario, either no duty drawback adjustment is necessary -- because USP and NV are

both “net” of the taxes with which the antidumping duty statute is concerned -- or the equivalent per-

unit “full” adjustment that is made to EP/CEP must likewise be made to the per-unit “cost” side of

NV in accordance with Saha Thai. As stated in the Redetermination:

          if the imported raw materials are assumed to be consumed in the exported
          merchandise and the domestic purchased raw materials [ar]e presumed to be
          consumed in the domestically sold merchandise, no duty offset adjustment can be
          justified, as the NV would no longer be duty inclusive as the CAFC presumed in
          Saha Thai. The duty exclusive U.S. price should then be matched directly with the
          duty exclusive Home Market price.

          Conversely, if the imported inputs were presumed to be consumed first in the
          products sold domestically, thus creating a duty inclusive NV, there would still be no
          justification for a duty drawback claim, as a precondition of a duty drawback is the
          consumption and subsequently re-exported as part of another good and the collection
          of the rebate.[ ] It would be nonsensical to claim a duty drawback for re-exporting
          the imported input while simultaneously claiming the same input was consumed in
          a domestically sold product. Therefore, while perhaps counterintuitive, the only
          reasonable assumption is that the imported raw materials and domestically sourced
          raw materials are consumed proportionally between the corresponding domestic sales
          and export sales, as then both the U.S. price and Home Market price will be duty
          inclusive.

Redetermination at 53-54. Cf. 19 U.S.C. §1677b(a)(6)(B)(iii) (purpose of NV adjustment is to net

“the amount of any taxes imposed directly upon the foreign like product or components thereof

which have been rebated, or which have not been collected, on the subject merchandise, but only to

the extent that such taxes are added to or included in the price of the foreign like product”) (italics

added).
Court No. 14-00268                                                                         Page 12


               The essence of the problem here, in accordance with Saha Thai, appears to be that

to the extent EP/CEP “must” be adjusted to account for duty drawback in order to achieve tax

neutrality, when EP/CEP is in fact adjusted upwards to account for the amount of duty drawback,

it is conversely appropriate to impute the payment of import duties to the cost side of NV up to the

level at which the NV cost side reflects a “mirror image” of the duties rebated or not collected by

reason of import. Saha Thai, 635 F.3d at 1342. Thus, as far as the NV cost side of Commerce’s

standard duty drawback adjustment methodology is concerned, substantial evidence of record

supports the Redetermination’s conclusion that the methodology is “imbalanced” when attempting

to impute a corresponding amount of import duties to the NV cost side in the context of substitution

drawback granted upon export to a product that presumptively consists of both domestic and foreign

sourced inputs, and the matter must be remanded for further consideration.

               In passing, the court notes for purposes of remand that the Redetermination is

premised on “recognizing that a drawback adjustment that overstates the amount of duty in NV will

distort a determination of dumping”. Redetermination at 54 (italics added). As a general principle,

that is true. But as to any particular solution that addresses the aforementioned imbalance

occasioned by “de jure re-allocation” of the input-content of exported subject merchandise resulting

from operation of the IPR (whereby domestic-sourced input is considered as “substituted” foreign-

sourced input for drawback purposes) and whether that solution would accord the statute and Saha

Thai, such matters are best left to Commerce and the parties to sort out on remand. Whatever avenue

is chosen to correct for the perceived imbalance in the duty drawback adjustment methodology
Court No. 14-00268                                                                           Page 13


should, of course, also address Commerce’s overstatement concern as to the amount of duty properly

imputable to NV by way of explanation.9

               Also in passing, the court notes Icdas’s arguments on case law clarifying that the duty

drawback adjustment does not require any inquiry into whether home market prices are duty

inclusive. See, e.g., Icdas Cmts. at 20, citing Wheatland Tube Co. v. United States, 30 CIT 42, 61-62

(2006), rev’d on other grounds, 495 F.3d 1355 (Fed. Cir. 2007). The cases to which Icdas points

for support, however, pre-date Saha Thai, and the point of law it raises is of little moment to the

issue at hand. Icdas then argues that “imputed” duty costs are already “accounted for”, id. at 22, but

that point does not address how those costs are to be allocated, as the petitioners note, which is the

issue before the court. Icdas further argues that any modification of the duty drawback adjustment

methodology requires rulemaking under the Administrative Procedure Act, id. at 23-24, but just as

a change of administrative policy “is irrelevant” because Commerce may substitute new

administrative policy based on a reasonable statutory interpretation that is entitled to Chevron

deference, Saha Thai, 635 F.3d at 1342, citing Rust v. Sullivan, 500 U.S. 173, 186-87 (1991),

Commerce is also entitled to change its methodology in the absence of any reliance interest if the

change is reasonably explained. Cf. SKF USA, Inc. v. United States, 537 F.3d 1373 (Fed. Cir. 2008)


       9
         In the first place, for example, would imputation, to the input content of the home market
NV “side,” of the same domestic-to-foreign input content ratio that is implicitly embodied in
exported subject merchandise receiving the benefit of IPR drawback result in overstating NV?
Assuming it would not, and assuming further, for simplicity’s sake, that the IPR treats 100% of the
input content of exported subject merchandise as foreign-sourced, would the imbalance in the duty
drawback equation be corrected on the NV cost side by, for example, “(rebated duties ÷ export
quantity) + (non-rebated duties ÷ (total production & export sales quantity)) = average Turkish
domestic like product import duty cost”, or is there is a form of “weighted” average that would more
properly impute a “like” proportion of the import duty to the NV cost side, i.e., in proportion to
impact of the import duty rebated or not collected by reason of export to the EP/CEP side?
Court No. 14-00268                                                                              Page 14


with Huvis Corporation v. United States, 570 F.3d 1347, 1354-55 (Fed. Cir. 2009) (“[s]ometimes

an agency must provide a more detailed justification than what would suffice for a new policy

created on a blank slate, such as . . . when its prior policy has engendered serious reliance interests

that must be taken into account”) (citation and internal quotes omitted). Icdas does not explain how

cost reporting is a reliance interest, but Commerce has yet to reconsider the issue in any event.

                                  III. Date of Sale Reconsideration

                On remand of the issue of the date of sale “at least for further explanation . . . or for

reconsideration, at Commerce’s discretion”,10 the Redetermination summarizes, first, that Commerce

       encountered a sales process that was subject to renegotiation for a significant
       percentage of U.S. sales, including renegotiated/revised terms of sales that occurred
       on the eve of the invoice date.[ ] In other instances, Icdas and the U.S. customer
       issued a revised P/O [i.e., purchase order] in which the signature blocks were left
       unsigned and the date of the amended P/O was merely penciled in at the top of the
       document.[ ] ln our view, such facts do not point to a formal or “ firmly established”
       agreement in which there is a meeting of the minds between the buyer and buyer.
       Rather, our view is that the facts indicate a fluid sales process where parties were
       able to fill out unsigned P/Os and amended P/Os that, in some instances, were
       revised multiple times right before the issuance of the invoice.[ ] As such, we find
       that it was reasonable to conclude in the Final Determination that the date of the P/O
       and amended P/Os do not constitute the formal “meeting of the minds.”

               The [c]ourt note[d] that the record lacks any evidence that Icdas’ terms of sale
       were revised as of the invoice date. We do not dispute this fact. However, as
       explained in Preamble[11], an informal “preliminary agreement” (which in the instant
       proceeding includes instances involving unsigned P/Os with dates merely penciled
       in at the top of the document) [“]in an industry where renegotiation is common,”
       (which is certainly true in the case of Icdas), may not constitute a “meeting of the
       minds,” and that this approach “holds even if, for a particular sale, the terms were not
       renegotiated.” Thus, we contend that our approach in the Final Determination to use


       10
            See generally Slip Op. 15-130 at 17-21.
       11
         See Antidumping Duties; Countervailing Duties; Final Rule, 62 Fed. Reg. 27296, 27349
(May 19, 1997).
Court No. 14-00268                                                                         Page 15


       invoice date as the date for sale for Icdas adhered to 19 CFR 351.40l(i) and the
       Preamble.

Redetermination at 23-24 (footnotes omitted). The administrative analysis then distinguishes the

facts of the instant matter from those of Nucor Corp. v. United States, 33 CIT 207, 612 F. Supp. 2d

1264 (2009), which emphasized formality in the contracting process, and from those of Habas Sinai

ve Tibbi Gazlar Istihsal Endustrisi A.S. v. United States, 33 CIT 695, 625 F. Supp. 2d 1339 (2009),

which involved the question of whether the relevant sales contract had, in fact, changed after the

contract date. Id. at 24-27. Nonetheless, in light of the “holding in the Remand Order”, id. at 27,

for the U.S. date of sale, Commerce “under protest” used either Icdas’s last amended purchase order

(“P/O”) date, where such information was available, or Icdas’s initial P/O date. See id. at 27.

               Icdas argues that Commerce has “misread” the court’s prior decision as “requiring”

Commerce to revise the date of sale. Icdas Cmts. at 25. Icdas is correct. Icdas further argues

Commerce’s explanation on why the original determination of invoice date as Icdas’s date of sale

is supported by substantial evidence on the record and in accordance with law and therefore the

matter should be remanded with instruction to recalculate its margin using invoice date as the date

of sale. Such instruction, however, would suffer from the same defect the defendant implicitly

accuses the prior opinion in its Redetermination on this issue.

               RTAC argues Commerce’s Redetermination on the date of sale as of the P/O or

contract or last-amended P/O or contract should be sustained; and arguably, there are grounds for

doing so. The plaintiffs note, correctly, that although Commerce continues to find meaningful the

lack of formal contracts or formality involved in Icdas’s sales, it is unclear why that is actually

meaningful. “The agency’s duty is to determine when a meeting of the minds took place, not to
Court No. 14-00268                                                                              Page 16


opine on the level of formality involved in the parties’ documentation of that meeting.” RTAC

Cmts. at 6 (citations omitted). Further, RTAC contends, while Commerce points to the Preamble

to its regulations in defense of its original determination, the issues alluded to in the Preamble do

not appear to be reasonably in play here. For example, RTAC argues, there is no reason to believe

that the terms in the last-amended PO/contracts were “merely proposed”, given that Icdas and its

customers never varied in observing those terms, and while Commerce refers to such last-amended

P/Os as “preliminary agreement[s]”, given that their terms were in fact observed Commerce again

seems to be solely taking issue with the level of formality involved in the parties documentation of

their final meeting of the minds, as RTAC understands the Redetermination. Id. Again, RTAC

argues, the fact that Icdas and its customers did not enter into “formal” contracts is irrelevant because

the question is when the meeting of the minds took place. See id. at 8. And on that issue, RTAC

argues the actual practice of the parties should speak volumes. Id.

                As above indicated, the court sought to give Commerce wide latitude -- quite -- in

remanding this issue previously “at least for further explanation . . . or for reconsideration, at

Commerce’s discretion.” On the one hand, the court could simply overlook Commerce’s “under

protest” pique, conclude that the Redetermination “adopts” the prior opinion’s analysis of the issue

of the date of sale, and sustain it on that basis as supported by substantial evidence and in accordance

with law. See, e.g., Whirlpool Corp. v. United States, 40 CIT ___, Slip Op. 16-81 (Aug. 26, 2016);

Peer Bearing Company--Changshan v. United States, 39 CIT ___, 128 F. Supp. 3d 1304 (2015).

On the other hand, since the matter requires remand of the issue of changed methodology, supra, the

court will also remand this date-of-sale issue without further opinion at this pont, in order to afford
Court No. 14-00268                                                                           Page 17


Commerce the opportunity (and latitude, again) to evaluate its stated interpretation of the prior

remand order and the substance of this issue afresh. See, e.g., Qingdao Taifa Group Co., Ltd. v.

United States, 34 CIT 560, 710 F. Supp. 2d 1352 (2010), aff’d, 467 Fed. Appx. 887 (Fed. Cir. 2012);

Acciai Speciali Terni S.p.A. v. United States, 28 CIT 2013, 350 F. Supp. 2d 1254 (2004).

                             IV. Yield Strength; Alloy Cost Allocation

               Among Commerce’s model match criteria for rebar is yield strength, a physical

characteristic attributable to carbon equivalency. As requested, the Redetermination clarifies

Commerce’s revision to certain yield strength CONNUMs for Habas’s products and explains the

information obtained on remand for the record to support the accuracy of Icdas’s reported value of

of Grade S420 rebar. See generally Redetermination at 28-33. As no party contests such treatment

at this point, the defendant argues for sustaining this issue.

               Also remanded for further explanation or reconsideration was the accounting

treatment of the alloy content of Icdas’s water cooled versus air cooled rebar. Slip Op. 15-130 at 28.

As Commerce explains, see generally Redetermination at 35-38, it sent an additional questionnaire

to Icdas during remand seeking additional information relating to Commerce’s understanding of

Icdas’s reported CONNUM-specific alloy costs among its normal books and records. Specifically,

Commerce requested clarification of whether the reported alloy costs reflect actual quantities of

alloys added in production, an estimate of alloys added in production based on the composition of

the billets produced, or some other method. Commerce concluded from Icdas’s supplemental

response that its reported “product-specific” alloy costs, which are based on Icdas’s normal books
Court No. 14-00268                                                                            Page 18


and records, are not actually product-specific but rely on daily averages for alloys consumed in

production, not actual product-specific consumption.

               Commerce then considered whether relying on the daily average alloy cost method

used in their normal books and records would be reasonable. The petitioners claimed that alloy costs

should significantly differ between the different grades of billet produced, while Icdas claimed they

should not. Icdas did not track such cost differences in its normal books and records and did not

attempt to quantify such differences in reporting to Commerce. To assess whether Icdas’s reporting

method was reasonable, Commerce analyzed the amount of alloy costs allocated to each of the

different internal product codes that make up the highest volume CONNUM sold in the U.S. market

that was reviewed at verification. The relied-on exhibit (“CVE 7”) indicated the per-unit production

costs assigned to the CONNUM, by cost element, and also indicated the per-unit cost of production

(in detailed cost elements) assigned to all the internal product codes that fall within the CONNUM.

               Commerce found that the cost of producing the internal product codes are weight-

averaged in arriving at the final CONNUM-specific cost. Among the detailed cost element fields

contained in CVE 7 are alloy costs. By dividing the total alloy costs assigned to each internal product

by the total production quantity of the same product, Commerce was able to determine the amount

of alloy costs per unit of finished production assigned to each internal product making up the

CONNUM. From this information, Commerce was then able to discern the magnitude of the

differences in alloy costs assigned to the different products making up the same CONNUM; the

greater the difference between the highest per-unit alloy cost and the average per-unit alloy cost, the

“more likely”, Commerce found, that alloy cost differences between products are not inconsequential
Court No. 14-00268                                                                                Page 19


as contended by Icdas. Lacking record evidence to indicate the mix of products produced on any

given day which factor into the daily average alloy costs assigned to each of the products, Commerce

found it reasonable to conclude that discerning significantly different alloy costs assigned to the

different products falling within the same CONNUM is the result of the existence of differences in

the mix of billet grades produced and the existence of a meaningful difference in alloy costs between

the grades of billets produced. Commerce found the difference between the highest per-unit alloy

cost and the average per-unit alloy cost not inconsequential, as the calculation represents the

difference in alloy costs for products that fall within the same CONNUM.

                Commerce thus found that the reported product-specific alloy cost information is

unreasonable, that an adjustment is warranted, and that necessary information is not available on the

record. See 19 U.S.C. §1677e. Commerce used the alloy cost information contained in CVE 7 as

“facts available”, see id., to calculate an adjustment to alloy costs. Specifically, using the internal

product codes’ detailed cost information, Commerce calculated the difference between the highest

per-unit alloy cost and the average per-unit alloy cost assigned to the CONNUM expressed as a

percentage of the CONNUM’s total direct material costs, and it applied the resulting percentage to

the reported total per-unit direct material costs for all CONNUMs, thus increasing the total cost of

manufacturing accordingly. Commerce found that this was the most reasonable manner for adjusting

for the difference in light of the fact that the actual difference in alloy costs is not available from the

company’s books and records.

                Icdas opposes Commerce’s Redetermination on this issue, noting that Commerce’s

standard questionnaire specifically envisions that allocations will be necessary to report costs, such
Court No. 14-00268                                                                           Page 20


as in instances where a company’s normal books and records do not track certain costs on a

product-specific basis, and that Commerce “often” accepts allocations of costs on a weight basis and

finds it reasonable. Icdas Cmts. at 28, referencing Ball Bearings and Parts Thereof From France,

Germany, Italy, Japan, and the United Kingdom, 74 Fed. Reg. 44819 (Aug. 31, 2009) (final results),

and accompanying issues and decision memorandum at 40. Icdas implies Commerce should have

done so here, and that the Redetermination has resulted in only a “modest” difference in alloy costs.

Should the court consider the Redetermination on this issue reasonable, however, Icdas asks that the

matter be remanded nonetheless “to correct [Commerce’s] calculation, if needed, so that any

adjusted/attributed alloy costs applied do not exceed total alloy costs incurred during the POI.” Id.

at 28-29.

               Icdas’s substantive arguments do not persuade that the Redetermination on the issue

of alloy cost allocation is unreasonable. Commerce has provided a careful and detailed explanation

of its consideration of the issue, and the court may not substitute judgment therefor in the absence

of unreasonably-applied logic or an unreasonable interpretation of the record. The court will not,

however, at this time sustain the Redetermination on this issue, in order to afford Commerce an

opportunity to consider Icdas’s argument on whether “correction” to cap the adjusted/attributed alloy

costs so that they do not exceed total alloy costs incurred during the POI is appropriate. If error is

manifest but has de minimis impact on the margin, that is harmless, but where the difference is “on

the line” between a negative and an affirmative determination of sales at less than fair value,

correction for precision is required; otherwise, it is encouraged where only a modicum of

administrative resources is necessary therefor.
Court No. 14-00268                                                                           Page 21


                                             Conclusion

               The quality of the briefing obviates Icdas’s motion for oral argument, ECF No. 105,

which is hereby denied as moot, and in view of the above opinion, the case must again be, and

hereby is, remanded for further proceedings not inconsistent with this decision. Remand results shall

be due November 23, 2016, after the filing of which the parties shall again confer and file a joint

status report by November 30, 2016 or, if filed earlier, five business days of such filing in order to

propose dates for filing comments and/or concerning any other matters.

               So ordered.



                                               /s/ R. Kenton Musgrave, Senior Judge
                                               R. Kenton Musgrave, Senior Judge
Dated: September 21, 2016
       New York, New York
