Commerce Sticks With 'd' Test on Remand, Offers Greater Explanation
The Commerce Department stuck by its use of the Cohen's d statistical test as part of its differential pricing analysis to detect "masked dumping" in antidumping proceedings, offering a more detailed explanation of the practice in April 4 remand results submitted to the Court of International Trade. Responding to the U.S. Court of Appeals for the Federal Circuit's remand on the issue, Commerce repeatedly stressed that certain statistical assumptions did not need to be true to properly run the test since the test measures the practical rather than the statistical significance of the data and Commerce has the entire population of data rather than just a sample (Stupp Corp. v. United States, CIT #15-00334).
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In antidumping matters, Commerce seeks to identify goods that are dumped into the U.S. market through "targeted" or "masked" dumping. Since Commerce typically conducts its dumping investigations by comparing the average home market price of the good in question to its average U.S. price (average-to-average), certain exporters may work around this by dumping the goods in certain areas and selling them at a higher price in another or at another time to get a non-dumped average U.S. price. To combat this, Commerce may compare the weighted average of sales in the home country to individual sales prices (average-to-transaction).
Before running an average-to-transaction test, though, Commerce must first gather data on the export sales and detect the masked dumping using the DPA. The agency breaks down the U.S. sales data into sets based on comparable product groups. Once in the product group, Commerce then breaks that data into various subsets, including the region the U.S. sales took place. Commerce will then pick one subset as the "test group" while aggregating the remaining subset into the "comparison group." This is where the Cohen's d test comes in, as Commerce uses the test to find if the test group is significantly different from the comparison group. If it is, Commerce applies a "ratio test" to see if the ratio of significantly different transactions warrants using the weighted average to individual transaction comparison.
In a July 2021 opinion, the Federal Circuit remanded Commerce's use of this test (see 2107150032). The appellate court called into question Commerce's use of the test since the agency failed to meet three statistical criteria (assumptions of normality, sufficient observation size and roughly equal variances) the court said could be vital to running the test. The Federal Circuit sent the matter back to Commerce to reevaluate its use of the test and to take another look at the statistical literature surrounding this question.
On remand, Commerce said that it can continue to use the Cohen's d test and that the court's concerns over the three statistical criteria are unfounded. Since the criteria are not part of Dr. Cohen's thresholds that interpret the value of the "effect size," they are not relevant, the remand results said. Further, Commerce looks at the entire population of sales at issue, rather than just a sample, nixing the need to meet the statistical assumptions paired with running the test, the agency said.
"Unlike with a sample of data where the estimated parameters will change with each sample selected from a population, each time these parameters would be calculated as part of Commerce’s Cohen’s d test, the exact same results would be found because the calculated parameters are the parameters of the entire population and not an estimate of the parameters based on a sample," the remand said. This means the Cohen's d coefficients measure the actual values that describe a respondent's pricing behavior.
SeAH Steel Corp., one of the plaintiffs in the case, responded by arguing that nothing in Dr. Cohen's work suggests that the test would be valid for real-world populations and that Commerce failed to account for the chance that it could find a pattern that exists simply by chance. In response, Commerce said that SeAH failed to find a "single passage in the academic literature which supports its argument that the three statistical criteria limit the usefulness of the results of Commerce's Cohen’s d test."
The agency also said that chance has no role in a company's pricing behavior. "A company’s pricing behavior is foundationally based on corporate strategies and goals, including maximizing profit, within the bounds of supply and demand in the marketplace," the remand said. "Thus, the differences in a company’s prices do not reflect chance, but the company’s market research, corporate practice and priorities, resulting in deliberative pricing decisions."