Commerce's Approach to 'Smoothing' Costs Not Best Read of AD Statute, Respondent Says
The Commerce Department erred in deciding to "smooth" antidumping duty respondent Prolamsa's production costs in the 2022-23 administrative review of the AD order on heavy walled rectangular carbon welded steel pipes and tubes from Mexico, Prolamsa argued in an Oct. 3 complaint at the Court of International Trade (Productos Laminados de Monterrey v. United States, CIT # 25-00195).
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In the review, Prolamsa reported its production costs, including "direct material costs," based on its reported costs kept in accordance with Mexican Generally Accepted Accounting Principles. With only seven days to go before Commerce was set to issue its preliminary results, the petitioner, Nucor Tubular Products, said Prolamsa's reported direct material costs should be equalized, or smoothed, across all its subject pipes and tubes, defined by control numbers (CONNUMs), due to alleged variances in these costs between similar CONNUMs.
Nucor rested its claim on an analysis of variances in the reported direct material costs among CONNUMs that "shared the same quality coding." In response, Prolamsa emphasized that the petitioner's claim was untimely, and it attacked the company's analysis. Prolamsa said its reported direct material costs "reflected the costs actually incurred for each product in the normal course of business," Nucor didn't account for costs reported in two additional reporting fields and the petitioner "failed to account for price differences caused by wall thickness."
While Commerce didn't initially smooth Prolamsa's costs in the preliminary results, the agency did so in the final results, ultimately hitting the respondent with a 14.03% AD rate. Commerce said Prolamsa's reported direct material costs “reflect cost differences that do not relate to Commerce’s designated product physical characteristics, and thus, do not reasonably reflect the costs associated with the production and sale of merchandise under consideration.”
The agency first flagged which CONNUMs had a variance greater than "plus or minus" 10% based on "smoothed" CONNUMs that only included the five qualities the agency "determined to have a potential impact on cost: Quality, Paint, Thickness, Scarfing, and Further Processing," the complaint said. For any smoothed CONNUM that had a "flagged quantity," the agency replaced Prolamsa's reported direct material costs with the average of the direct material costs calculated for that smoothed CONNUM "while all other CONNUMs continued to use" the initially reported costs.
The agency said applying its cost smoothing approach was akin to using facts available, though the agency said it wasn't disregarding Prolamsa's reported costs, just adjusting them according to its "own methodology."
In the complaint, Prolamsa urged the court to identify the "best" interpretation of the AD statute, as instructed by the Supreme Court in its decision eliminating Chevron deference. The respondent said Commerce didn't follow the "best" interpretation of the AD statute regarding when the agency can "smooth" costs. In addition, the decision to "smooth" costs wasn't supported by substantial evidence, the brief said.