Slip Op. 03-73 UNITED STATES COURT OF INTERNATIONAL TRADE __________________________________________ THE COMMITTEE FOR FAIR BEAM : IMPORTS, ET AL., : Plaintiffs, : v. : Ct. No. 02-00531 UNITED STATES, and THE UNITED STATES INTERNATIONAL : Public Version TRADE COMMISSION, : Defendants, : and : SALZGITTER AG STAHL UND TECHNOLOGIE, ET AL., : Defendant-Intervenors. : __________________________________________ [Plaintiffs’ Motion for Judgment upon an Agency Record is denied.] Decided: June 27, 2003 Wiley Rein & Fielding LLP, Charles Owen Verrill, Jr., Alan H. Price, (John R. Shane), Daniel B. Pickard, for Plaintiffs. Lyn M. Schlitt, General Counsel, Office of General Counsel, United States International Trade Commission, James M. Lyons, Deputy General Counsel, (Marc A. Bernstein), for Defendants. DeKieffer & Horgan, (J. Kevin Horgan), Marc E. Montalbine, Merritt R. Blakeslee, Wakako O. Takatori, for Defendant-Intervenor Salzgitter AG Stahl und Technologie. Shearman & Sterling, Jeffrey M. Winton, (Christopher M. Ryan), for Defendant-Intervenors Stahlwerk Thuringen Gmbh, TradeARBED, Inc., ProfilARBED, S.A., and Aceralia Corporacion Siderurgica, S.A. Ct. No. 02-00531 Page 2 OPINION BARZILAY, JUDGE: I. INTRODUCTION Plaintiffs, The Committee for Fair Beam Imports and its individual members, Nucor Corporation, Nucor-Yamato Steel Company, and TXI Chaparral Steel Company, (collectively “Fair Beam” or “domestic industry”) challenge the final negative material injury and the final negative threat of material injury determinations of the United States International Trade Commission (“ITC” or “Commission”), set forth in Certain Structural Steel Beams from China, Germany, Luxembourg, Russia, South Africa, Spain and Taiwan, Invs. Nos. 731-TA-935-936 and 938-942 (Final), USITC Pub. No. 3522 (June 2002) (“Final Determination” or “Beams II”)1 and made pursuant to 19 U.S.C. §§ 1671d(b) and 1673d(b) (1999). This court has jurisdiction pursuant to 19 U.S.C. § 1516a(a)(1) and 28 U.S.C. § 1581(c). For the reasons outlined below, Fair Beam’s USCIT R. 56.2 Motion for Judgment upon an Agency Record is denied. II. BACKGROUND A. Procedural History. On May 23, 2001, the domestic industry filed petitions with the United States Department of Commerce (“Commerce”) and the Commission which led to investigations by both 1 This opinion cites to the version of this document included in Administrative Record, List 2, Doc. No. 170. Ct. No. 02-00531 Page 3 concerning structural steel beams of certain specifications2 imported from China, Germany, Luxembourg, Russia, South Africa, Spain, and Taiwan (“subject countries” or “respondents”).3 Preliminary results were issued by the Commission on July 16, 2001, and by Commerce, on December 28, 2001. In May 2002, Commerce issued its final determinations. See 67 Fed. Reg. 35,479 - 35,490 & 35,497. A hearing was held before the Commission on May 15, 2002.4 Notice of the Commission’s final determination was published in the Federal Register on June 27, 2002. See 67 Fed. Reg. 43,340. A panel of five Commissioners found no present material injury from subject imports. One Commissioner, however, dissented from the panel’s negative determination with regard to threat of material injury. B. The product and the U.S. market. Structural steel beams are load-bearing support members in the construction of large steel structures, such as buildings, bridges, towers, pre-fabricated homes, ships, and equipment. Demand for structural beams fluctuates in tandem with construction activity which in turn tracks 2 The subject of this investigation is “doubly-symmetric shapes, whether hot-or cold- rolled, drawn, extruded, formed or finished, having at least one dimension of at least 80 mm (3.2 inches or more), whether of carbon or alloy (other than stainless) steel, and whether or not drilled, punched, notched, painted, coated, or clad.” E.g., Notice of Final Determination of Sales at Less than Fair Value: Structural Steel Beams from the People’s Republic of China, 67 Fed. Reg. 35,479 (May 20, 2002). The court notes that no scope or domestic like product issues are raised in this appeal. 3 Initially, Italy was also investigated. However, upon a finding of no dumping by Commerce, the ITC discontinued its investigation of Italian structural beams. For the same reason, one company from the People’s Republic of China was eliminated from the investigation. The court further notes that no cumulation issues are raised in this appeal. 4 “ITC Hearing Tr.” will signify the transcript of this administrative hearing, portions of which are included in tab 5 of Plaintiffs’ Appendix. Ct. No. 02-00531 Page 4 aggregate U.S. economic activity. Certain Structural Steel Beams from China, Germany, Luxembourg, Russia, South Africa, Spain, and Taiwan, Staff Report to the Commission on Invs. Nos. 731-TA-935-936 and 938-942 (Final) at I-6 & II-10 (June 3, 2002) (“Staff Report”) in Administrative Record, List 2, Doc. No. 169. In the U.S. market, there are two types of purchasers of structural steel beams: distributors (or service centers) and end users (or fabricators).5 Id. at II-1. Imported product is mostly sold to distributors; end users, however, typically buy from domestic suppliers. Distributors keep inventories while end users do not. Domestic mills charge the same price to both distributors and end users. In the event an end user buys from a distributor, it accordingly pays a higher price. Purchasers rank domestic product superior in availability and delivery time6 to imported product, but inferior in price. Id. at II-13. On the other hand, domestic and imported product are perceived to be comparable in product quality and consistency. Purchasers of structural steel beams report evaluating factors such as price, quality, and availability in determining whether to purchase domestic or imported beams and rank these factors in a descending order of importance.7 Id. at II-12. 5 Construction companies are the ultimate users of the finished product. 6 There is a three to five month “lead time” for subject imports whereas the lead time for domestic beams is shorter, Final Determination at 23, although not by “very much,” ITC Hearing Tr. at 26 (testimony of domestic executive). Orders for beams are therefore necessarily a function of perceptions of future demand and not of current demand conditions. 7 Price comes before all else under normal circumstances according to testimony offered at the administrative hearing. See ITC Hearing Tr. at 49 (“Price is the defining factor in determining who receives the order.”). The ITC in the Final Determination, however, paid virtually no heed to this information because of its implicit finding that in a time of supply shortage, purchasers are willing to pay more to circumvent the domestic unavailability of the product – which determination is more fully explained below. In connection with the price variable, the court also notes that at the administrative hearing at least one respondent witness Ct. No. 02-00531 Page 5 The short-term price elasticity of U.S. demand for structural steel beams is low reflecting lack of substitutes for steel beams in construction, especially after the design phase of construction is complete. Id. at II-9. In other words, once the quantity of beams requested is set, later price variation will have no or little effect.8 On the supply side, the price elasticity of domestic supply is lower than that of the subject countries’ supply. Staff Report at II-16 & 17. That is, subject countries can respond to price changes in the U.S. market faster than domestic producers can in terms of increasing shipments to the U.S. market.9 The price elasticity of supply is dependent on excess capacity, ability to shift production or alter capacity, inventories, and availability of alternate markets. The relatively greater flexibility of the subject countries is partially due to the existence of home markets and alternate export markets from which they are able to divert products to the U.S. market with relative ease. The largest share of cost in the production of structural steel beams is that of steel scrap, the raw material from which beams are produced. Id. at V-I. Thus, the supply of beams is tied to denoted respondents as price takers. See id. at 199-200. In other words, respondents normally peg their price to that of the market leader, Nucor, a domestic producer. In this period, however, because Chaparral Steel, another domestic producer, “was playing a little bit havoc with the market,” Chaparral Steel’s price was matched. Id. at 200. 8 Potential long-run substitutes for structural steel beams include reinforced concrete, structural tubing or wood. Staff Report at II-10 & 11. The Staff Report also indicated that “building design typically precedes construction and material purchases by months or even years,” which period can be termed “the long-run” in this context. Id. at II-11. 9 The Staff Report estimated that for every one percent increase in U.S. price, domestic producers could increase shipments either by one or two percent, as opposed to ten or twenty percent by subject countries. Staff leetracy@example.com. Ct. No. 02-00531 Page 6 the price of steel scrap.10 It has also been determined that in offers domestic producers use price lists whereas sales of subject imports are on a transaction-by-transaction basis, price and quantity being determined by the then existing market conditions.11 Staff leetracy@example.com. C. The ITC’s findings in the Final Determination. In the Final Determination, the ITC evaluated the prevailing market conditions during the period of investigation (“POI”). See Final leetracy@example.com. Consulting Census Bureau statistics, the ITC determined that nonresidential construction activity in the United States, which is an indicator of U.S. demand for structural steel beams, increased from 1999 to 2000 and declined in 2001. Using its own questionnaires and official Commerce import statistics, the ITC further observed that apparent U.S. consumption of steel beams rose from 4.96 million short tons in 1999 to 6.23 million in 2000, and then declined to 4.81 million in 2001. The ITC next noted that the domestic industry experienced supply difficulties during 1999 and the first half of 2000. The ITC based this finding on questionnaire responses of forty- five purchasers, eighteen of which (sixteen of thirty-one distributors) represented that they either were put on “allocation” during this time period by domestic producers or were otherwise unable to meet their requirements from domestic suppliers. The ITC further noted questionnaire responses of the largest domestic producers which confirmed that purchasers were “allocated a 10 During this period of investigation, scrap prices increased throughout 1999, reaching a peak in January 2000, and followed a general declining trend for the rest of the period, arriving at a low in November 2001. Staff leetracy@example.com. 11 In the Final Determination, the ITC observed that domestic producers on occasion deviated from list prices. Final Determination at 26 n.100. Ct. No. 02-00531 Page 7 portion of production based on historical levels of purchases” in applicable products.12 Staff leetracy@example.com. The ITC also referenced news articles in trade publications which reported a domestic supply shortage in this time period.13 The ITC’s finding of domestic supply shortage was informed by an additional observation that imports of structural steel beams from Japan became subject to a June 2000 antidumping duty order, and imports of structural steel beams from Korea became subject to antidumping and countervailing duty orders in August 2000. Finally, the ITC noted the changes to domestic production during the POI. Two new domestic mills (Nucor and TXI) became operational during 1999 with a third (Steel Dynamics, Inc.) expected to become operational in 2002. On the other hand, another domestic firm (Northwestern Steel & Wire Company) completely shut down its operations in May 2001. i. Subject import volumes. In a material injury investigation, the statute requires the Commission to determine whether a domestic industry “(i) is materially injured, or (ii) is threatened with material injury . . . by reason of imports.” 19 U.S.C. § 1673d(b)(1). The statute defines “material injury” as “harm 12 These domestic producers, Nucor-Yamato and TXI, together produced approximately [[ ]] of domestic structural steel beams in 2001. Staff leetracy@example.com. The Staff Report further pointed out that Nucor denied putting its Berkeley plant customers on “allocation” and that a Northwestern Steel & Wire Company witness testified that this domestic producer, which eventually went out of business, “was begging for orders” during this time. Staff Report at II-2 n.3. 13 Another piece of evidence supporting the existence of domestic shortage during the POI is the observation that the “average lead time” for domestic producers’ delivery increased in 2000 from its 1999 level. Staff Report at II-2 n.4; Final leetracy@example.com. The court additionally notes that counsel for Fair Beam all but conceded the presence of a supply shortage at oral argument before this court. Oral Arg. Tr. at 9:16-17 (“there was clearly a shortage”). Ct. No. 02-00531 Page 8 which is not inconsequential, immaterial, or unimportant.” § 1677(7)(A). In making a material injury determination, the statute first requires the ITC to consider the “volume” of subject imports already determined to be sold at less-than-fair value. § 1677(7)(B)(i)(I). In particular, the ITC shall consider whether the volume of subject imports (or any change therein) in either absolute or relative terms is “significant” during the POI. § 1677(7)(C)(i). In the Final Determination, the ITC observed that the volume of subject imports rose from 331,436 short tons in 1999 to 772,809 in 2000, and then fell to 300,150 in 2001 (to a level lower than its 1999 level). Final leetracy@example.com. The value (as opposed to quantity) of subject imports followed a similar curve. These numbers represented a market penetration by subject imports of 6.7% in 1999, 12.4% in 2000, and 6.2% in 2001. The ITC linked the rise in U.S. market penetration of subject imports to its finding that the domestic industry was experiencing supply difficulties. Accounting for the gap in time between order placement and delivery, the ITC noted that changes in volume of subject imports trailed the domestic supply conditions, with the domestic shortage and its subsequent alleviation responsible for the rise and in part for the later fall of subject imports during the POI. Id. at 23. Before the ITC, the domestic industry had argued that the increase in demand during 2000 was “relatively modest,” and therefore the domestic industry could satisfy “real” demand with their supplies – which argument was an attempt to dispute the domestic shortage finding of the ITC. The ITC responded by noting that instead of contemporaneous demand conditions, perceptions about future demand are what stimulate orders. Id. at 22. As evidence of purchasers’ expectations of strong future demand during the POI, the ITC cited testimony by one Ct. No. 02-00531 Page 9 fabricator and the predictions of a trade publication, which incidentally also reported “major concerns about steel availability.” Id. at 22-23. In the ITC’s scenario of events, expected strong demand and limited domestic supply led to an increase in purchases of subject imports (especially by distributors). The ITC further acknowledged that by the third quarter of 2000, the domestic supply situation improved and, after import volumes had reached their peak in August 2000, orders for subject imports began to fall. Id. at 23. Further, the ITC remarked that subject import volumes started to fall “well before” the filing of the May 2001 petition that initiated the present investigation. Id. at 23-24. Consistent with this observation, the ITC pronounced that the filing of the petition had “limited” impact on the decline of subject import volumes in 2001 and, accordingly, the ITC did not “reduce the weight” accorded to the 2001 data. The ITC finally concluded that resolution of domestic shortages coupled with decline in demand led to a decline in subject import quantities in this period. After thus accounting both for the upward movement of subject import volumes from 1999 to 2000 and their decline from 2000 to 2001, the ITC went on to say: “[I]n light of the foregoing conditions of competition and the lack of price effects discussed below, we find that the volume of subject imports is not significant.” Id. at 24. ii. Price effects. The statute also requires the ITC to consider the “effect of imports . . . on prices in the United States for domestic like products.” § 1677(7)(B)(i)(II). In particular, the ITC is required to analyze whether “there has been significant price underselling” of imports compared with Ct. No. 02-00531 Page 10 domestic products and whether “the effect of imports . . . otherwise depresses prices to a significant degree or prevents price increases, which otherwise would have occurred, to a significant degree.” § 1677(7)(C)(ii)(I) & (II). Comparing domestic prices with subject import prices, the ITC first found that prices of subject imports reflected “a mixed pattern of overselling and underselling” the domestic product during the POI. Final leetracy@example.com. In particular, subject imports undersold the domestic product in 90 of 147 quarterly comparisons. Id.; Staff Report at V-17 & V-18. The ITC noted that product 1, a type of structural steel beams (wide-flange beams of 8 to 14 inches), experienced the “most intense” competition because it was the most widely sold and additionally had the most complete pricing data from the subject countries. Final leetracy@example.com. Isolating the price information for this product, the ITC observed that prices of product 1 exhibited 22 occasions of underselling and 32 occasions of overselling. To estimate underselling more accurately, the ITC also conducted a second comparison which incorporated the differing delivery times of subject imports and domestic product. In this comparison, the incidence of underselling for product 1 increased to 27 and that of overselling decreased to 25. Even though in this instance underselling occurred more frequently than overselling, the ITC nevertheless emphasized that “still more tonnage was oversold.”14 Id. at 26 n.100; Staff Report at V-9 & V- 10. While also acknowledging that other products under investigation exhibited greater 14 Despite the domestic industry’s objections, the ITC used actual sale prices rather than list prices in comparisons because this method was the Commission’s customary practice and because the record established that domestic producers on occasion deviated from list prices. Final Determination at 26 n.100 (citing Fair Beam’s Prehearing Brief before the agency). Ct. No. 02-00531 Page 11 incidence of underselling, the ITC noted that the domestic product was typically sold at a premium, the existence of which was established at the administrative hearing by testimony of four domestic industry witnesses (also characterizing the premium of $10 to $40 per ton as “small”) and one respondents witness (adding that the premium could more than double in a “very weak market”).15 Final Determination at 25 n.98; ITC Hearing Tr. at 232. The ITC attributed the more frequent occurrence of underselling (as opposed to overselling) to the premium. The ITC additionally observed that subject imports continued to increase even though some subject import prices were higher than domestic price levels. Final leetracy@example.com. The ITC concluded that “[t]hese factors all serve to diminish the significance of the underselling that was observed.” Id. Next, the ITC noted that in 2000 the volume of imports was at its highest level when both domestic and subject import prices were highest. Prices of subject imports sharply rose from 1999 to their peak in 2000 and declined in 2001, following a trend similar to that of subject import volumes. Id.; Staff Report at V-9 to V-16. The ITC thus pronounced that “factors other than competition from subject imports were responsible for price movement of the domestically produced product.” Final leetracy@example.com. In identifying domestic shortages as the likely culprit, the ITC observed that “[p]rice increases are a natural function of supply shortages.” Id. at 28. The ITC further noted that once the domestic supply shortage was alleviated, prices along 15 The premium is due to some non-price considerations, such as domestic producers’ geographical proximity. See ITC Hearing Tr. at 200. Testimony was also presented to the effect that the premium was exacerbated in recent years due to strong dollar. See id. at 204. Ct. No. 02-00531 Page 12 with subject imports declined. According to the ITC, “the sharp decline in prices observed during 2001 cannot be a function of that year’s subject import volumes, which declined sharply, [and it] also cannot be a function of subject imports entering the U.S. market in 2000 at rising prices that were sometimes above those for the domestically produced product.” Id. The reason for the fall in price, the ITC determined, was the misestimation of the 2001 demand (which in fact declined from its 2000 level) by purchasers who placed their orders earlier and the consequential rise in distributors’ inventories – which can also be termed as an “oversupply” in the market.16 Id. at 28-29. The ITC ended its price effects analysis by stating that: We cannot conclude that the record indicates that either the inventory overhang or the resulting price declines were the function of the subject imports. High and increasing subject import prices during the portion of 2000 when subject import volumes increased cannot explain subsequent price declines. Nor, in light of the subject import pricing and volume patterns, can there be any nexus between the subject imports and business decisions by steel service centers to increase purchases that proved, in retrospect, to be wrong. We consequently conclude that the subject imports did not have significant price-depressing or -suppressing effects. Id. at 29-30. iii. Impact. The last component of a material injury determination is the analysis of the impact of 16 Fair Beam submitted to the ITC the conclusions of an econometric model which predicted that subject imports affected prices with a nine month lag. See Final Determination at 29 n.107. The ITC found that the model failed because it did not take into account changes in domestic supply capabilities. To rebut the predictions of the model the ITC cited testimony from industry players to the effect that price competition occurs when an order is placed. Ct. No. 02-00531 Page 13 subject imports sold at less-than-fair value on the domestic industry.17 The ITC is statutorily required to consider “all relevant economic factors” that bear on “the business cycle and conditions of competition” in the industry, including changes in output, sales, inventories, capacity utilization, market share, employment, wages, productivity, profits, cash flow, return on investment, ability to raise capital, and R&D. § 1677(7)(C)(iii). In addition, the 1994 amendments to the statute now require the ITC to consider the size of dumping margins determined in an anti-dumping investigation.18 § 1677(7)(C)(iii)(V); The Uruguay Round Agreements Act, Statement of Administrative Action (“SAA”) at 850, reprinted in 1994 U.S.C.C.A.N. at 4040, 4184. No single factor is dispositive. See § 1677(7)(E)(ii) (“The presence or absence of any factor which the Commission is required to evaluate under subparagraph (C) . . . shall not necessarily give decisive guidance” to a material injury determination). In the Final Determination, the ITC observed that apparent U.S. consumption of structural steel beams, domestic output indicators (such as capacity, capacity utilization, production, and U.S. shipments), domestic sales revenues (including per unit sales values, the domestic industry’s operating income and margins), employment indicators (such as number of workers, productivity, hours worked, and wages paid) – all followed a pattern of increase from 17 Besides volume, price, and impact, the ITC “may [also] consider such other economic factors as are relevant to the determination regarding whether there is material injury by reason of imports.” § 1677(7)(B)(ii). 18 Here, the ITC’s consideration of dumping margins was limited to a listing of amended dumping margins for companies in subject countries. Final Determination at 30 n.110. The Final Determination’s consideration of dumping margins is, however, not on review before the court because it was not raised. Ct. No. 02-00531 Page 14 1999 to 2000 and decline from 2000 to 2001. Final Determination at 31-34; Staff Report at VI- 2. In contrast, the ITC found that domestic producers’ inventories, hourly wages, and R&D steadily increased, and industry capital expenditures decreased from 1999 to 2001. More significantly, the ITC determined that the domestic industry’s market share (as measured by domestic output’s share in U.S. consumption), despite a “modest” decline in 2000, was actually higher in 2001 than it was in 1999 (specifically, 81.1% in 1999, 79.8% in 2000, and 90.3% in 2001). Final leetracy@example.com. Thus, the ITC dubbed the 2000 loss of market share by the domestic industry a “temporary phenomenon.” Id. at 32. The ITC concluded that domestic industry’s overall performance improved from 1999 to 2000, when imports were at their peak, and that none of the components that led to decline in performance from 2000 to 2001 were a result of the increase in imports. Id. at 33. The ITC attributed the decline in prices of the 2000-2001 period to increasing supply and declining demand for this period. Accordingly, the ITC determined that “the subject imports did not have a significant adverse impact on the domestic structural steel beams industry.” Id. at 34. iv. Threat of material injury. The statute also protects the domestic industry from a threat of material injury (as opposed to a present material injury) on account of imports sold at less-than-fair value in the U.S. market. To be able to conclude that the domestic industry is thus threatened, the ITC must find whether “further dumped or subsidized imports are imminent and whether material injury by reason of imports would occur unless an order is issued.” § 1677(7)(F)(ii). The ITC is required to evaluate the threat factors outlined in section 1677(7)(F)(i). Ct. No. 02-00531 Page 15 In the Final Determination, the ITC first looked at subject import volume and market penetration, emphasizing that, even though increasing in the beginning of the POI, both variables exhibited a sharp decline at the end of the POI. Final leetracy@example.com. The ITC found “no current shortages of domestic supply and no likelihood of shortages in the imminent future.” Id. In connection with this finding, the ITC stressed that TXI had solved its problems at its Petersburg mill and a new Steel Dynamics, Inc. mill was in the works. Further, although the subject countries projected an increase in imports in both 2002 and 2003, the projections fell short of their peak in 2000. Id. at 37. The subject countries had ready markets at home and abroad, and that, although there was some “ability to shift exports from other markets to the United States,” it was “unlikely that subject imports [would] increase to significant levels,” given the decline in subject imports in 2001.19 Id. Capacity utilization in the subject countries persisted at high levels during the POI, and further increases in both capacity and capacity utilization were anticipated in 2002 and 2003; the ITC thus found that there was no indication in the record of an “imminent” increase in subject volumes. Moreover, subject countries presented testimony (by one of their executives) rebutting the contention that an impending increase in subject imports was likely. Id. at 38 n.142; ITC Hearing Tr. at 201-202. The ITC additionally pointed to the lack of any significant price effects in the POI and predicted that such would continue in the imminent future. Final leetracy@example.com. With respect to subject countries’ inventories, the ITC observed that despite an increase in inventories, not all of the inventoried beams were suitable for sale in the United States because they did not 19 Here, the ITC noted outstanding antidumping duty orders against Russia by Korea and Taiwan and against South Africa by Australia. See Final Determination at 37 n.141. Ct. No. 02-00531 Page 16 conform to the U.S. standard. Moreover, even though other products which could be substituted for structural steel beams in production were subject to U.S. safeguards tariffs (as in the case of hot-rolled bar) – with the implication that more structural steel beams could be produced –, the ITC maintained that “[n]evertheless, as previously noted, we do not believe that the presence or potential for additional productive capacity in the subject countries is likely to lead to substantially increased imports.” Id. at 39. Finally, the ITC decided that the domestic industry was not in a “vulnerable state” because the industry remained “profitable overall” despite variable performances of individual producers and was also “characterized by the recent and imminent expansion of capacity at new and efficient production facilities.” Id. The ITC concluded: Accordingly, we find that material injury by reason of subject imports will not occur absent issuance of antidumping orders against the subject imports. We therefore conclude that the domestic structural steel beams industry is not threatened with material injury by reason of the subject imports. Id. III. DISCUSSION The court must uphold the Commission’s determinations 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). Substantial evidence is “such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.” Consol. Edison Co. of New York v. NLRB, 305 U.S. 197, 229 (1938). Ct. No. 02-00531 Page 17 A. THE ITC IS UNDER NO OBLIGATION TO FOLLOW ITS PR IOR FACTUAL DETERMINATIONS IN SUBSEQUENT INVESTIGATIONS . Parties’ arguments. Fair Beam charges that determinations made in the Final Determination (which Fair Beam denotes as Beams II) are “factually and logically inconsistent with the underlying record” and also with an earlier ITC decision, Certain Structural Steel Beams from Japan, Inv. No. 731- TA-853 (Final), USITC Pub. No. 3308 (June 2000) (“Beams I”) in Pls.’ App. tab 3. See Pls.’ Br. at 8. In Beams I, the ITC found that the domestic industry was materially injured or threatened with material injury by reason of structural steel beams imported from Japan.20 Beams I at 3. Fair Beam makes this argument by focusing on the language found in a recent United States Court of International Trade case, Usinor v. United States, Slip Op. 02-70 (July 19, 2002) (“Usinor”). The Usinor court, while acknowledging that “each injury or investigation is sui generis, involving a unique combination and interaction of many economic variables,” emphasized that the ITC “may not disregard previous findings of a general nature that bear directly upon the current review.” Usinor at 39 (quotation omitted). In Usinor, the issue was whether the ITC can assert in one case that the countries in the European Union (“EU”) were “export oriented,” poised to export to the United States, after having found in an earlier case that the primary marketing focus of one European country was the European market. Id. at 38-39. 20 This determination was subsequently adopted with respect to Korea by virtue of almost identical administrative records in both cases. See Certain Structural Steel Beams from Korea, Invs. Nos. 701-TA-401 and 731-TA-854 (Final), USITC Pub. No. 3326 (August 2000). In Beams I material injury and threat of material injury determinations were not unanimous, with three Commissioners finding material injury and the other three finding threat of material injury. Ct. No. 02-00531 Page 18 According to Usinor, the “observations regarding EU markets [were] general in nature and [did] not depend on the specific leetracy@example.com.” Id. at 39-40. The Usinor court accordingly ordered the ITC to sufficiently explain its contradictory positions. Basing its argument on Usinor, Fair Beam contends that observations on “general market dynamics” are sufficiently “of a general nature.” Pls.’ Br. at 9. Fair Beam adds that “Beams I and Beams II involved the same product, the same domestic producers, the same volume trends, the same manifestation of injury, in overlapping periods of investigation.” Id. On the other hand, the ITC emphasizes the sui generis nature of injury investigations. See Def.’s Br. at 8. ITC cites prior cases of this Court which rejected the argument, among others, that the ITC was required to use the same volume and price analysis in subsequent investigations for the same product. See id. at 9 (citation omitted). The ITC stresses the difference between “agency practice,” which would have precedential value, and case-specific determinations, which would not. See id. at 10 (citing Ranchers-Cattlemen Action Legal Foundation v. United States, 23 CIT 861, 884-85, 74 F. Supp. 2d 1353, 1374 (1999)). The ITC concludes that because Beams I or Beams II’s factual determinations are not “of a general nature” under Usinor, but based on specific facts, Beams II need not have followed Beams I. See id. at 10-11. The ITC argues in the alternative that even assuming such factual determinations are “of a general nature,” the “ITC acts in accordance with law when it either follows or distinguishes such determinations.” Id. at 11 (citation omitted). The ITC points to footnote 105 in Beams II, where the Commissioners rejected the argument that Beams I would have any precedential bearing on Ct. No. 02-00531 Page 19 the present investigation and further indicated that, in any event, the two investigations were factually different. For the ITC, footnote 105 serves to distinguish the Beams II investigation from the Beams I investigation sufficiently. The arguments of Defendant-Intervenors Stahlwerk Thuringen Gmbh et al. (“Stahlwerk”) and Salzgitter AG Stahl und Technologie (“Salzgitter”) center on the rejection of Fair Beam’s Usinor analysis. Specifically, Stahlwerk argues that the determinations of Beams II concerning volume, price, and impact are not “of a general nature,” but fact-specific. See Stahlwerk’s Br. at 7-8. Stahlwerk presents a doomsday scenario in which, were the court to agree with Fair Beam, the ITC would subsequently be required to consider “hundreds” of its prior determinations in every investigation in search of consistency. Id. at 9. Salzgitter adds that the Usinor court clearly adhered to the familiar standard of substantial evidence and that the plaintiff in Usinor was challenging the ITC’s construction of a statute, not fact findings.21 See Salzgitter Br. at 6. Comparative Analysis of Beams I and the Final Determination (or Beams II). An agency that engages in formal adjudication may not render arbitrary and inconsistent decisions. See Greater Boston Television Corp. v. FCC, 444 F.2d 841, 852 (D.C. Cir. 1970), cert. denied, 403 U.S. 923 (1971); Chisholm v. Defense Logistics Agency, 656 F.2d 42, 47 (3d Cir. 1981). Should the agency choose to deviate from a practice it consistently employed in the past for the evaluation and testing of a set of facts, it must delineate and give reasons for its 21 The court questions this argument. It can find no indication in Usinor that the Usinor court was engaged in statutory construction with respect to the “export oriented” nature of the EU. Ct. No. 02-00531 Page 20 subsequent change of policy as to provide adequate guidance to parties affected by its actions and to present the reviewing court with a discernable basis to judge the discrepancy. See Sec’y of Agriculture v. United States, 347 U.S. 645, 652-53 (1954); British Steel PLC v. United States, 127 F.3d 1471, 1475 (Fed. Cir. 1997). At the same time, it is an equally well-established proposition that the ITC’s material injury determinations are sui generis; that is, the agency’s findings and determinations are necessarily confined to a specific period of investigation with its attendant, peculiar set of circumstances. See U.S. Steel Group v. United States, 18 CIT 1190, 1213, 873 F. Supp. 673, 695 (1994) (quotation omitted). In Beams I, the period of investigation was from 1997 to 1999; in Beams II, from 1999 to 2001. Given the dynamic nature of the economy, rarely would circumstances and their multi-faceted interactions defining a period of material injury investigation exhibit sufficient similarity to those of another period. Fair Beam is correct in that Beams I and II involved the same product, and subject imports were present in the U.S. market at noticeable and increasing levels in both periods of investigation. Yet the statute dictates the ITC to attach importance only to those increases in subject import quantities and to those price effects of the subject imports which are deemed “significant.” § 1677(7)(C)(i) & (ii). Accordingly, the ITC first acknowledged in footnote 105 of the Final Determination that subject imports in Beams I “were entering the U.S. market at low and declining prices even after a period when the domestic industry was having difficulty satisfying demand.”22 Final Determination at 28 n.105. In contrast, a finding was made in the 22 The ITC in Beams I made a finding of supply shortage in the U.S. market in the fourth quarter of 1997 and the first two quarters of 1998. Beams leetracy@example.com. The ITC further observed that Ct. No. 02-00531 Page 21 Beams II investigation that both subject import volumes and prices were increasing during the first portion of the POI. Second, the ITC further noted in the Final Determination that “the peak subject import volume and the increase in subject import volume in [Beams I were] substantially greater than in [Beams II].” Id. As a third observation, the ITC offered that in Beams I “the subject imports undersold the domestic like product in the vast majority of pricing comparisons.” Id. (emphasis supplied). In Beams II, on the other hand, under- and overselling were approximately of equal frequency for product 1, the most widely traded product among structural steel beams and, even though more underselling than overselling occurred for other products, underselling was mitigated by the price premium. The ITC finally concluded in the Final Determination that “[a]s the accompanying discussion indicates, the record in these investigations is substantially different.” Id. The court agrees with the ITC that these three observations are of crucial importance to distinguish the underlying factual pattern of Beams II from that of Beams I. In a material injury determination, the ITC is required to determine whether a material injury to the domestic industry (or a threat thereof) occurred “by reason of” subject imports that are sold in the U.S. market at less-than-fair value. § 1671d(b)(1). That is, the record must support a sufficient nexus between the injury (or threat of injury) and subject imports. See Goss Graphics Sys. v. United supply shortage “quickly reversed as subject imports escalated in March 1998 and surged thereafter through the first quarter of 1999,” that “[t]he import surge far exceeded the prior shortfall in supply,” and that “imports gained market share at the expense of the domestic industry.” Id. at 11. Fair Beam represents that thereby the ITC in Beams I compared the size of the domestic shortage to the increase in subject imports. Ct. No. 02-00531 Page 22 States, 22 CIT 983, 989-90, 33 F. Supp. 2d 1082, 1089 (1998). Moreover, “evidence of de minimis (e.g., minimal or tangential) causation of injury does not reach the causation level required under the statute.” Gerald Metals, Inc. v. United States, 132 F.3d 716, 722 (Fed. Cir. 1997), quoted in Coalition for the Preservation of Am. Brake Drum and Rotor Aftermarket Mfrs. v. United States, 22 CIT 520, 523, 15 F. Supp. 2d 918, 922 (1998). In the Final Determination here, the ITC was unpersuaded by the argument that aggressive price cutting by the subject countries was what allowed subject imports to penetrate the U.S. market and subsequently cause injury to the domestic industry. Instead, the ITC attributed the rise in subject import volumes to a temporary domestic supply shortage observed during this period. The ITC based its finding of domestic supply shortage on three separate pieces of evidence: questionnaire responses of purchasers and of domestic producers, and contemporaneous news articles in industry publications. The ITC noted that “[p]rice increases are a natural function of supply shortages.” Final leetracy@example.com. The ITC further observed that subject import volumes were increasing alongside prices. According to the ITC, the rise in both the subject imports and prices was thus a consequence of the domestic supply shortage. In Beams II, the domestic industry was temporarily unable to satisfy demand.23 The domestic producers’ inability to satisfy demand resulted in a supply shortage or an excess demand in the market. As purchasers competed for fewer available products, prices rose. In 23 The domestic supply shortage may have been partially due to the exit of Japanese and Korean beams from the U.S. market, as the ITC implied, or to a positive shift in demand or to some other cause not easily discernable from the record. In any event, the “cause” of the domestic shortage is not relevant to the disposition of this case. Ct. No. 02-00531 Page 23 addition, the supply of the domestic industry was relatively more inelastic than the supply of the subject countries vis a vis the U.S. market. See Staff Report at II-16 & II-17. That is, subject producers could react to a rise in U.S. prices faster than their domestic counterparts in terms of increasing shipment to the U.S. market. As the subject countries diverted their goods to the U.S. market to satisfy excess demand, subject import quantities began to rise and, as expected, this phenomenon was observed alongside an increase in prices.24 Accordingly, the domestic shortage was, more likely than not, responsible for the rise in both subject import volumes and prices. In Beams I, however, prices were declining as the subject import volumes were increasing. In addition, the ITC found significantly more underselling than overselling the domestic product by subject imports. These two observations serve to show that in Beams I a more immediate connection could have been made between subject imports and falling prices. That is, it was likely that persistent price cutting by foreign exporters had led to the increase in subject import volumes by spurring purchases of imports over the domestic product where a domestic supply shortage by itself would have resulted in an increase in price. Accordingly, in Beams I the finding of domestic shortage was not as significant as in the Final Determination here. As urged by the ITC, this court also notes that in Beams I “[n]othwithstanding the 24 The court notes that in the absence of subject imports the price rise may have been higher. Not explicitly discussing this possibility, the ITC nevertheless found that the price effects were not significant. It should also be noted that non-subject imports (other than Japanese and Korean beams which left the market due to the antidumping order) also increased from 1999 to 2000. See Final Determination at 23 n.89; Staff Report at IV-6 & n.8. This fact further undermines the contention that price cutting by subject countries caused the volumes of subject imports to rise. Ct. No. 02-00531 Page 24 decrease from 1998 levels, the 1999 volume of subject imports represent[ed] a 728-percent increase over the 1997 volume.” Beams leetracy@example.com. In contrast, the volume of subject imports in Beams II showed a net decline over the POI. As a parallel observation, the domestic industry gained market share over the POI in Beams II (despite the dip in 2000) and lost market share in Beams I. This distinction between Beams I and II lends credence to the assertion that in Beams I subject imports penetrated the market in numbers which went beyond a temporary exploitation of a domestic shortage whereas in Beams II the rise in subject import volumes was a “temporary phenomenon.” The court finally observes that subject countries in the two investigations were different, a factor which plays an especially important role in a threat determination. As a result, the court finds (as did the ITC) that Beams I does not constitute legal precedent for Beams II and the ITC’s consideration of Beams I in footnote 105 of the Final Determination is sufficient to distinguish the two investigations factually. 25 In addition, the court rejects Fair Beam’s argument that Beams II’s factual findings concerning “general market dynamics” are “of a general nature” under Usinor. The “general market dynamics” Fair Beam refers to is presumably the statutory framework the ITC is required 25 Fair Beam claims that the Final Determination should have addressed Beams I more extensively, beyond a mere footnote. The ITC responds that Beams II did not have to distinguish Beams I at all and, assuming that it did, footnote 105 in Beams II constitutes an adequate consideration of Beams I. The court observes that because Fair Beam raised Beams I as an “underlying theme” of its arguments before the agency, the ITC was correct in addressing Beams I in footnote 105. Final Determination at 28 n.105; Altx, Inc. v. United States, 25 CIT __, __, 167 F. Supp. 2d 1353, 1374 (2001) (the agency “must address significant arguments and evidence which seriously undermines its reasoning and conclusions”). In footnote 105, the ITC first pointed out that Fair Beam’s Beams I argument called for no “response” as a “legal matter” and, to the extent the argument had merit as a “factual matter,” the ITC sufficiently addressed the crucial distinctions between Beams I and II in concluding that the two investigations had substantially different records. Ct. No. 02-00531 Page 25 to follow in every material injury determination. There is nothing in the statute or case law that requires the ITC to take as precedent any prior factual finding that was reached within this framework. In Usinor, the finding “of a general nature” pertained to a particular attitude toward the market of subject producers in question. Specifically, the Usinor court said that the ITC cannot reasonably claim that European countries are not export-oriented in one case and later retract that position without explanation. While Usinor correctly supports the need for consistency in the ITC’s determinations, as well as the need for reasoned explanation, this court observes that there is no finding in Beams II that is likely to be governed by Usinor. The findings in Beams II are confined to observations on economic variables, which are necessarily volatile. Fair Beam does not point to any determination in Beams II (or in Beams I) that bears on particular, persistent attitudes of trading countries which, because they persist within a sufficiently short interval of time, would arguably have called for the same treatment by the ITC in different investigations undertaken also close in time. In addition, the fact that similar patterns are observed in different investigations with regard to some of the variables does not preclude a different interpretation of the patterns after viewing the entire economic environment as a whole. In fact, the statute requires the ITC to evaluate patterns in a context, instead of encouraging an analysis of each piece in isolation. B. THE ITC’S FINDING REGARDING THE SIGNIFICANCE OF SUBJECT IMPORT VOLUME IS SUPPORTED BY SUBSTANTIAL EVIDENCE AND IS OTHERWISE IN ACCORDANCE WITH LAW . Parties’ arguments. Fair Beam next argues that the Final Determination’s findings are unsupported by substantial evidence. Fair Beam continues to compare the Final Determination to Beams I in this Ct. No. 02-00531 Page 26 portion of its arguments before the court, specifically with respect to similar volume trends found in the two investigations. See Pls.’ Br. at 11. In addition, Fair Beam contends that the Final Determination should have compared the size of the domestic shortage with the size of the increase in subject import volumes as Beams I did. Id. at 12. That subject import volumes exceeded the domestic shortage may have meant that the surge in subject imports was not solely due to the domestic supply shortage. Fair Beam also maintains that the Final Determination should have taken into account the impact of the filing of the petition on subject import volumes. See id. at 13. Fair Beam argues that the decrease in subject imports in the later part of the POI may have been in part due to the petition. Fair Beam points out that [[ ]] importer withdrew from the market upon the filing of the petition. See id. at 14 (citing Fax from TradeARBED to its customers (dated June 7, 2001) in Pls.’ App. tab 8 (“As is normal while under [an] investigation we are withdrawing from the market effective immediately.”)).26 The ITC counters that, even if there was a sharp increase in subject import volumes, the statute requires the ITC to concentrate on the significance of such increase. See Def.’s Br. at 12. The ITC also contends that the Final Determination was correct in not discounting post-petition data because the decrease in subject import volumes preceded the filing of the petition. See id. at 13. Moreover, the Commissioners did not completely ignore the petition, but decided that it had 26 At the administrative hearing an ARBED executive elaborated, “we never completely withdrew from the market.” ITC Hearing Tr. at 199. The ITC appears not to have considered the letter as evidence in its determination on post-petition data. However, consistent with the court’s evaluation of contradictory evidence under the substantial evidence standard, the court defers to the ITC’s treatment of the letter in the Final Determination. Ct. No. 02-00531 Page 27 a “limited” impact. Id. Subject import volume analysis. There is substantial evidence on the record to support the ITC’s finding that the volume of subject imports was not “significant.” First, as noted earlier, there is substantial evidence in the record to support the existence of a domestic supply shortage in the U.S. structural steel beams market. Second, there is substantial evidence in the record to support the ITC’s analysis of relationships among economic variables during the POI. Consulting data on both the subject import volumes and supply conditions, the ITC noted that the subject import quantities followed (with a temporal lag) the domestic supply conditions. Subject imports started to increase in response to the domestic supply shortage in 1999 and declined between 2000 and 2001 when the shortage was shrinking. Moreover, the ITC observed that in the beginning of the POI, purchasers overestimated future demand for structural steel beams, and towards the end of the POI, demand either declined or
{'dataset': 'courtlistener_opinions'}