Petitioner Appeals to CAFC, Says CIT Made Changing Positions Too Hard for Commerce
Petitioner Nucor filed an opening brief in the U.S. Court of Appeals for the Federal Circuit on April 7 challenging a trade court ruling that favored exporter KG Dongbu Steel, the mandatory respondent in a 2019 countervailing duty administrative review on corrosion-resistant steel products from Korea. It said the Commerce Department had “plainly satisfied” the legal standard for changing its position from one review to another (Nucor Corp. v. KG Dongbu Steel Co., Fed. Cir. # 25-1411).
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The Court of International Trade ruled that, after having not done so in prior reviews, the Commerce Department cannot countervail three 2015 and 2016 debt-to-equity restructurings Dongbu received without citing new information (see 2404040043). After two remands, it upheld in January Commerce’s decision to reverse course and not countervail the restructurings (see 2501170044).
During the first three reviews of the CVD order on corrosion-resistant steel products, Nucor explained that Commerce found the three debt-to-equity conversions -- made possible by government-controlled creditor committees -- “provided Dongbu no benefit.” The department determined that “Dongbu's creditors committees had acted like reasonable commercial investors in the course of those transactions,” the petitioner said.
But during the 2019 review, Commerce “reconsidered” after Dongbu underwent a fourth debt-to-equity conversion, using the same program as the previous three, during the period of review, Nucor said. It said a “newly commissioned report” showed that Dongbu was still struggling financially. The fourth conversion, moreover, saw the participation of a private investor for the first time -- but the private investor required Dongbu to make “significant concessions,” it said.
That private investor’s actions, and the new report, made Commerce reevaluate whether the creditor committees involved in the prior restructurings had actually behaved like reasonable commercial investors, Nucor said.
The petitioner said CIT failed to adequately consider “Commerce’s extensive re-evaluation of the facts,” including the “new information” provided by the fourth debt-to-equity swap. It said the trade court instead “concluded in a single paragraph that, because the agency had previously determined ‘private creditors in the debt-to-equity swaps were significant,’ a contrary finding could not now be supported by substantial evidence.” And the court “expressly” forbade the department from countervailing the swaps “absent new information to address fraud or mistake in fact,” it said.
It said the Supreme Court has set the bar for agency reversals much lower. It cited the Supreme Court case FCC v. Fox Television Stations for the “well-established” standard: first, the agency must demonstrate it is aware it is changing positions, and, second, it must provide “good reasons for the new policy” being implemented over the prior one, Nucor said.
Commerce met both requirements here, the petitioner argued.
“In imposing an ad hoc, heightened legal standard -- requiring first new information, and then new information specifically demonstrating fraud or mistake of fact -- the CIT erred,” it said.
It also acknowledged that the department’s “standard countervailing duty questionnaire states, ‘[a]bsent new information warranting a program reexamination, we will not reevaluate prior determinations regarding the countervailabilty of programs.’”
But Commerce had identified new information, the petitioner claimed -- CIT simply rejected it because that new information didn’t directly regard the first three debt-to-equity restructurings, which was too high a standard. The standard also wasn’t necessitated by the questionnaire statement, which only mentioned “new information” without setting limitations on what that new information had to be, Nucor argued.
And the petitioner said that while “Commerce’s boilerplate questionnaire instructions may refer to new evidence, its actual determinations consistently refer to reevaluation” based on either new evidence or simply new argument.
“Commerce has thus never represented itself as limited to reconsidering previous determinations only in the face of new evidence,” it said.