CIT Upholds Rejection of Production Shutdown Per-Unit Cost Reduction in AD Review
The Commerce Department permissibly rejected an adjustment to the cost of production of utility-scale wind towers to "account for production volume decreases before a shutdown" and properly selected two Malaysian pipe manufacturers as the surrogate companies to determine antidumping duty respondent CS Wind's constructed value profit, the Court of International Trade held on Oct. 8. Judge Gary Katzmann upheld both of Commerce's decisions challenged by CS Wind in the 2021-22 administrative review of the AD order on Malaysian utility-scale wind towers, leaving the exporter with a 17.97% AD rate.
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During the review, CS Wind told Commerce it shuttered production at its Malaysia plant in March 2022, reporting "substantial post-shutdown fixed overhead costs captured by a variable titled 'FOH_SD.'" The respondent later updated its submission to report a new shutdown-related cost in a variable titled "COST_ADJ_SD."
The company said the conversion costs, namely labor cost plus manufacturing overhead, found in its books were "distorted" by the consequences of and preparation for the shutdown in the first four months of the review period, requiring the adjustment. Commerce accepted the FOH_SD adjustment but not the COST_ADJ_SD adjustment, explaining that the FOH_SD adjustment "represented actual post-shutdown costs incurred during the period of review, which could now be excluded as Commerce had determined that production had ceased, not merely idled."
Meanwhile, the COST_ADJ_SD adjustment represented the difference between the investigation period and the review period costs of manufacturing wind towers, the agency explained. CS Wind calculated the variable by first comparing the conversion costs of the "same or similar wind towers" in the 2019-20 investigation period with the 2021-22 review period, then reporting the difference as the cost adjustment. The costs during the investigation period were lower than the costs during the review period, "when production volume was lower as the facility approached shutdown," leading Commerce to find that the COST_ADJ_SD variable was a downward cost adjustment to "eliminate distortions created by abnormally low production volumes during" the review period.
Instead, the agency said the FOH_SD variable "included all overhead costs incurred after the March 2022 shutdown." Commerce picked this variable, since it captured "actual post-shutdown costs."
CS Wind argued that Commerce bucked its past practice of excluding shutdown costs, though the agency said the FOH_SD adjustment was in line with its past practice. Katzmann noted that "Commerce does not have, as CS Wind suggests, a past practice of reducing per-unit production costs to reflect a lower volume of production in anticipation of a shutdown."
The two prior AD proceedings the respondent cites for this claim suggest the agency has previously "excluded overhead costs incurred in a past or contemporaneous shutdown of a different production line or facility from the per-unit costs of production on the relevant production line or facility," the court noted. The proceedings don't establish that the agency "must reduce per-unit production costs because production volume was low in anticipation of a shutdown." The court said Commerce acted in line with its past practice.
CS Wind also argued that the agency's ability to make adjustments for startup operations implies that it also must make adjustments for shutdown operations. Katzmann rejected this claim, finding that the explicit inclusion in the AD statute of startup adjustments but lack of inclusion for shutdown adjustments indicates that "Congress knows how to mandate that Commerce make adjustments to per-unit costs and chose to explicitly do so for startup operations." The judge said, "Congress did not do the same for shutdown operations."
The respondent also challenged Commerce's selection of Mycron, a Malaysian conglomerate of steel product producers, and Alpine, a Malaysian welded steel pipe manufacturer, as the two surrogate companies. The agency had resorted to surrogates because CS Wind didn't have any viable home or third market sales. Since none of the potential surrogate companies made utility-scale wind towers, Commerce was left to consider the similarity between the surrogate firms' smaller steel pipe and hollow sections and the subject wind towers.
CS Wind argued that Saudi pipe maker Arabian Pipes Company and French pipe maker Vallourec Group were better surrogate picks, since they produced large steel pipes, which are more comparable to the pipes the respondent makes for its wind towers. However, Katzmann said this doesn't appear to be true and the "steel pipe produced by these companies appears to be of a much smaller diameter than the utility scale wind towers produced by CS Wind." The judge referenced pictures of Arabian Pipes Company and Vallourec's pipes and counsel for CS Wind's comments during oral argument noting the massive scale of the wind tower pipes.
Presented with "imperfect surrogate companies who all produce smaller diameter steel pipes and hollow sections than utility scale wind towers, Commerce’s determination that Malaysian steel pipe is more similar to Malaysian wind towers than Saudi and French steel pipe is reasonable," the judge said.
Katzmann also noted that Commerce already considered the similarity of Alpine's products during the original AD investigation, in which CS Wind itself argued that Alpine is a producer of comparable merchandise. While the respondent now says Alpine's business and merchandise bears no relationship to its operations, it doesn't suggest Alpine's merchandise has changed "in any way" since the investigation. Without such a change, the agency's conclusion is adequately supported, the judge said.
And while CS Wind said Commerce improperly rejected Malaysian producer Engtex's statements due to the fact that it's a holding company while simultaneously accepting holding company Mycron's statements, the court noted that Commerce found that Mycron's financial statements "predominately reflect the results of Mycron’s subsidiaries that produce steel products and not the parent company’s investment activities."
Derick Holt, counsel for petitioner Wind Tower Trade Coalition, said in an email that the coalition is "pleased that the Court upheld the Commerce Department’s decision to deny plaintiffs an unlawful adjustment to their cost of production and to uphold Commerce’s determination to use certain financial statements when" calculating CS Wind's AD margin.
(CS Wind Malaysia v. United States, Slip Op. 25-135, CIT # 24-00150, dated 10/09/25, Judge: Gary Katzmann; Attorneys: Jarrod Goldfeder of Trade Pacific for plaintiff CS Wind Malaysia Sdn. Bhd. and CS Wind Corp.; Tate Walker for defendant U.S. government; Derick Holt of Wiley Rein for defendant-intervenor Wind Tower Trade Coalition)