# United States **Court of Appeals**  **for the Federal Circuit**

______________________

AMERICAN TUBULAR PRO DUCTS, LLC, JIANGSU CHENGDE STEEL TUBE S HARE CO., LTD., Plaintiffs

- Appellants

v.

UNITED STATES, UNITE D STATES STEEL CORPORATION, TMK IPSCO, WHEATLAND TUBE COMPANY, V & M STAR L.P., Defendants

- Appellees

______________________

2016

- 1127

______________________ Appeal from the United States Court of International Trade in No. 1:13

- cv

- 000 29

- RWG, Senior Judge Richard W. Goldberg.

______________________

Decided: February 13, 2017

______________________

D ONALD C AMERON , J R

. , Morris, Manning & Martin, LLP, Washington, DC, for plaintiffs

- appellants. Also represented by M ARY H ODGINS , J ULIE M E NDOZA , B RADY M ILLS , R. W ILL P LANERT , S ARAH S UZANNE S PRINKLE

.

L OREN M ISHA P REHEIM , Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for defendant -appellee United States. Also represented by B ENJAMIN C. M IZER ,AMERICAN TUBULAR PRO DUCTS , LLC v. UNITED STATES 2

J EANNE E. D AVIDSON , C LAUDIA B URKE ; W HITNEY M ARIE R OLIG , Office of the Chief Counsel for Trade Enforcement and Compliance , United States Department of Commerce, Washington, DC.

P HILIP C HARLES S TERNHELL , Quinn Emanuel U rquhart & Sullivan, LLP, Washington, DC, argued for defendant

- appellee United States Steel Corporation. Also represented by D EBBIE L EILANI S HON , J ONATHAN G ORDON C OOPER , J ON D AVID C OREY , K ELSEY R ULE

.

R OGER B RIAN S CHAGRIN , Schagrin Associates, Was hington, DC, for defendants

- appellees TMK IPSCO, Whea tland Tube Company, V & M Star L.P. Also represented by J OHN W. B OHN , J ORDAN C HARLES K AHN

.

______________________

Before N EWMAN , M AYER , and L OURIE , Circuit Judges

. L OURIE , Circuit Judge

. American Tubular Products, LLC (“ATP”) and Jian gsu Chengde Steel Tube Share Co., Ltd. (“Chengde”) (co llectively, “the Appellants”) appeal from the decisions of the United States Court of International Trade (“ the T rade C ourt”) affirming the Department of Commerce ’s (“Commerce ”) antidumping duty calculations in the first administrative review of an antidumping duty order directed to certain oil country tubular goods (“OCTG”) from the People’s Republic of China

. See Am. Tubular Prods., LLC v. United States , No. 13

- 00029, 2015 WL 5236010 (Ct. Int’l Trade Aug. 28, 2015) (“ ATP II ”) (affir ming Commerce’ s r emand r esults ) ; Am. Tubular Prods., LLC v. United States

, No. 13

- 00029 , 2014 WL 4977626 (Ct. Int’ l Trade Sept. 26, 2014 ) (“ ATP I ”) (affirming in part and remanding in part Commerce’s final results)

. In that administrative review, Commerce ultimately calculated a weighted average dumping margin of 137.62 % for Chen gde

. See Am. Tubular Prods., LLC v. United States , No.AMERICAN TUBULAR PRO DUCTS , LLC v. UNITED STATES 3

13

- 00029, ECF No. 102 (Ct. Int’l Trade Jan. 28, 2015) (“ Remand Resu lts ”)

. Because we agree with the Trade C ourt that Commerce’s antidumping duty calculations

were supported by substantial evidence and otherwise in accordance with law, we affirm

. B ACKGROUND

OCTG are steel tubing products used in oil and gas drilling

. Chengde is a Chinese producer and exporter of OCTG , and ATP is the importer of record during the relevant period

. In June 2011

, Commerce initiat ed the first administrative review of the antidumping duty order directed to OCTG from China. Initiation of An tidumping and Countervailing Duty Administrative Reviews , 76 Fed. Reg. 37,781 (Dep’t of Commerce June 28, 2011); Initiation of Antidumping and Countervailing Duty Administrative Reviews , 76 Fed. Reg. 53,404 (Dep’t of Commerce Aug. 26, 2011) (correcting the period of re view). Commerce selec ted Chengde as a mandatory respond ent

. Because China is considered a nonmarket economy (“NME”) country, Commerce selected Indonesia , a market economy (“ME”) country, as the primary surrogate cou ntry from which it would use surrogate values to ascertain Chengde’s factors of production

. Certain Oil Country Tubular Goods from the People’s Republic of China , 77 Fed. Reg. 34,013 (Dep’t of Com merce June 8, 2012) (“ Pr eliminary Results ”)

. In the Final R esu lts , as later amen ded , Commerce assigned Chengde a dumping margin of 162.69%. Certain Oil Country Tubular Goods from the People’s Republic of China , 77 Fed. Reg. 74,644 (Dep’t of Commerce Dec. 17, 2012) (“ Final Results ”), as amended by Certain Oil Country Tubular Goods from the People’s Republic of China , 78 Fed. Reg. 9,033 (Dep’t of Commerce Feb. 7, 2013) . The Appellants ap pealed to the Trade Court, raising three issues that are relevant in this a ppeal . We provide further factual and procedural bac kground for each of those issues in turn.AMERICAN TUBULAR PRO DUCTS , LLC v. UNITED STATES 4

A. Steel Billets

The first issue pertains to Commerce’s valuation of steel billets used in the production of OCTG

. Steel billets may be composed of carbon steel or the more expensive alloy steel. In its initial quest ionnaire , Commerce request ed Chengde to “[d]escribe each type and grade of material used in the production process.” J.A. 168. Chengde responded that it consumed steel billets, and its counsel listed a Harmonized Tariff Schedule (“HTS”) subheading that c overs products of alloy steel as the proper tariff subheading for its steel billet s . J.A. 669.

Commerce then issued supplemental questionnaire s , requesting sample mill test certificates for various control numbers (“ CONNUMs ”) . A CONNUM is a code used to identify distinct p roducts within the class of subject merchandise under review . Chengde submitted the sample mill certificates

. J.A. 1720

– 25, 3161

– 71 . Those certificates con tain ed information on the chemical comp osition of the sampled OCTG , which c onstituted a portion, but not all, of OCTG sold in sixteen of nineteen sales made by Chengde during the period of review

. In add ition

, Commerce requested clarification of the technical description s of Chengde’s raw material inputs. J.A. 886. Chengde aga in responded with a general description of its steel billet input . J.A. 950

– 51.

I n the Preliminary Results , Commerce valued steel billet s using a surrogate value for alloy steel. Chengde then argued that Commerce should have use d a surrogate value for carbon steel. Chengde explained that its cou nsel’s prior reference to the HTS number for alloy steel was an inadvertent error, and that it in fact used carbon steel billets. Chengde called Commerce’s attention to the mill certifica tes on the record, which showed that the tested OCTG were all made of carbon steel

. In the Final Results

, as amended, Commerce use d a carbon -steel surrogate value , but only for the portion ofAMERICAN TUBULAR PRO DUCTS , LLC v. UNITED STATES 5

OCTG directly shown to be made of carbon steel by the mill certi ficates. For the remaining OCTG , Com merce continued to value the steel billet input using an alloy

steel surro gate value

. On appeal

, the Trade Court remanded Commerce’s s election of surrogate values for steel billets. For the si xteen sales partially supported by the mill certificates, t he court directed Commerce to “explain wheth er Chengde’s mill certificates prove the chemical properties of OCTG not specifi cally tested

. ” ATP I , 2014 WL 4977626, at *7. Moreover, t he court found that Commerce had fai led to consider a Customs entry sum mary relating to an add itional (seventeenth) transaction

, * which classified the OCTG as carbon steel . The court directed Commerce to assess whether the entry summary proved that the OCTG sold in that transaction were carbon steel

. Id.
On remand, Commerce explained that it was unable to conclude that the OCTG not specifi cally tested were necessarily carbon steel, noting the uncertainties in Chengde’s sampling process and its failure to provide the requested technical d escriptions of its steel billet input. Commerce found, however, that the Customs entry su mmary established that the entered OCTG were composed of carbon steel. Commerce thus continued to use a carbon-steel surro gate value to value the portion of steel bi llets for which there was direct evidence

, viz

. , the mill certificates or entry summary, to show that carbon steel billets were consumed

. As for the remaining portion of

* As to the remaining two of the nineteen sales co vered by the review, the Trade Court affirmed Commerce’s use of an alloy

- steel surrogate value based on evidence of a screenshot of Chengde’s website, which showed that the OCTG sold in those two transactions were composed of alloy steel. The Appellants do not challenge that aspect of the Trade Court’s decision.AMERICAN TUBULAR PRO DUCTS , LLC v. UNITED STATES 6

steel billets at issue , Commerce used a simple average of the surrogate value s for carbon steel billets and alloy steel billets

. Accordingly , Com merce recalculated Chengde’s weighted average dumping mar gin as 137.62%.
The Appellants again appealed to the Trade Court. The court sustained Commerce’s Remand Results

, finding that Comm erce reasonably chose to use a simple average of the surrogate values of carbon and alloy steel billets for the untested OCTG

. ATP II

, 2015 WL 5236010, at *6

– 9. The court agreed with Commerce that OCTG under the

same contract or CONNUM could have different chemical compositions

, i d. at *7, and that Chengde’s mill certificates lacked sufficient de tail to establish that the untes ted OCTG were made of carbon steel

, id. at *8. The court further noted that Chengde could have shown that its billets were carbon steel by answering Commerce’s que stionnaires “with exactness,” but it failed to do so

. Id.

B. Byproduct Offset

The second issue pertains to byproduct offset. The production of OCTG may generate steel scrap, which may be sold for revenue to offset the raw material cost for producing the OCTG that generated the scrap. In its initial questionnaire, Commerce requested information on the quantity of byproduct “produced, sold, reintroduced into production, or otherwise disposed of,” as well as records dem onstrating the production of byproduct during one month of the period of review. J.A. 169. In response, Chengde explained that it did not measure or record steel

sc rap production at the time it was produced , but rather measured the scrap quantity when it was sold. J.A. 651

– 52 . Chengde provided the quantities of monthly scrap sales for the period of review. J.A. 685

– 86. Commerce did not request further information regarding scrap offset.

In the Preliminary Results and the Final Results

, Commerce declined to allow any scrap offset because Cheng de had failed to quanti f y the amount of scrapAMERICAN TUBULAR PRO DUCTS , LLC v. UNITED STATES 7

produced

. On appeal, the Trade Court sustained Co mmerce’s denial of scrap offset as supported by substantial evidence and in accordance with law

, findi ng that Chen gde had failed to meet Commerce’s requirements to secure a scrap offset

. ATP I , 2014 WL 4977626, at *9

– 12.

C. International Freight
The third issue pertains to Commerce’s valuation of Chengde’s international freight expense . Chengde repor ted tha t most of its OCTG exports to the United States were shipped by carriers based in South Korea , an ME country, and that it paid for ocean fre ight in U.S. dollars. Chengde showed that it remitted the freight expense via a Chinese freight forwarder, which in turn paid the Chinese agents of the Korean carri ers, and those agents then paid the carriers in U.S. dollars

. However, Chengde did not provide any evidence on the amount paid by the Ch inese agents to the Korean carriers. It instead submitted certifications from two Chin e se agents stating that pa yments were made in U.S. dollars

, and that actual pa yment documentation was proprietary.

In the Preliminary Results , Commerce calculated i ntern ational freight using a surrogate value , as if it was purchased from an NME supplier . Commerce continued to do so in the Final Results , finding that Chengde had failed to establish that the Korean carriers set the freight price. On appeal, the Trade Cour t sustained Commerce’s use of a surrogate value to calcu late international freight

. The court observed that “ there is no proof that the Korean shippers hired the Chinese agents to collect Chengde’s fees, ” and thus “there is little reason to believe that t he price paid to the agents equaled the price remitted to the shippers.” ATP I , 2014 WL 4977626, at *13.

After the Trade Court affirmed Commerce’s Remand Results

, the Appellants appealed to this court. We have jurisdictio n under 28 U.S.C. § 1295(a)(5)

.AMERICAN TUBULAR PRO DUCTS , LLC v. UNITED STATES 8

D ISCUSSION In trade cases, we apply the sa me standard of review as the Trade Court, upholding Commerce ’s determin ations unless they are “unsupported by substantial ev idence on the record, or otherwise not in accordance with law.” 19 U.S.C. § 1516a(b)(1)(B )(i). Although we review the decisions of the Trade Court de novo

, “we give great weight to the informed opinion of the [Trade Court] . . .

, and it is nearly always the starting point of our analysis.” Ningbo Dafa Chem. Fiber Co. v. United States, 580 F .3d 1247, 1253 (Fed. Cir. 2009) (internal quotation marks, brackets, and citations omitted).
The Appellants challenge three aspects of Commerce’s antidumping duty calculations: (1) Commerce’s decision to

use a simple average of surro gate values for carbon steel billets and alloy steel billets for the untested OCTG ; (2) its denial of scrap byproduct offset; and (3) its trea tment of international freight as NME transactions . We addres s each of those issue s in turn.

A. Steel Billets

We first consider whether Commerce erred in using a simple average of surrogate values for carbon steel billets and alloy steel billets for the untested OCTG.
The Appellants argue that the sample mill certificates demonstrat e that the untested OCTG were composed of carbon steel , not alloy steel

. They emphasize that the untested OCTG were sold in the same transactions under the same CONNUMs as the tested OCTG. They criticize Commerce for not finding the mill certificates represent ative of the untested OCTG because Commerce requested only sample mill certificates. Ac cording to the Appellants, for the seventeen transactions at issue, there is no ev idence that Chengde consumed alloy steel billets. They
assert that Commerce improperly relied on the erroneous HTS number provided by Chengde’s former counsel

.AMERICAN TUBULAR PRO DUCTS , LLC v. UNITED STATES 9

The United States, United States Steel Corporation

, TMK IPSCO, Wheatland Tube Co., and V & M Star L.P. (collectively, “the Appellees”), filing three separate briefs, respond that Commerce’s sele ction of surrogate value for

s teel billet input was supported by substantial evidence. The Appellees contend that the record is inconclusive as to the chemical content of the untested OCTG, and that Chengde failed to prove that all of its steel billets we re made of carbon steel. The Appel lees note that Chengde used both carbon steel billets , as shown by the mill certificates and entry summary, and alloy steel billets , as shown by Chengde ’s website , to produce OCTG . They argue that Commerce therefore reas onably valued the steel billets by averaging the surrogate values

. We agree with the Trade Court and the Appellees that substantial evidence supports Commerce’s decision to use an average surrogate value of carbon steel and alloy steel

. Commerce reasonably concluded that the record did not demonstrate whether the untested OCTG were produced exclusively from carbon steel or alloy steel billets

. Rather, it is undisputed that Chengde’s website showed that it sold OCTG made of alloy steel un der two contracts during the period of review , whereas the sample mill certificates and entry summary showed that Chengde used carbon steel billets for some of its OCTG

. Faced with this record

, Commerce reasonably used a simple average of the surr ogate va lues for alloy and carbon steel for the portion of the billets for which the type of steel was not apparent. Substantial evidence thus supports Commerce’s decision

. As Commerce correctly found

, the sample mill certificates submitted by Chengde were limite d. They did not indicate whether they represented the entire quantity of a sales contract, and did not provide context for their rel evance to the un tested products by desc ribing the testing procedures. The certif icates represented limited quant ities of the sales contracts or CONNUMs involved. More

over, as Commerce found, the OCTG under each contractAMERICAN TUBULAR PRO DUCTS , LLC v. UNITED STATES 10

could be produced in multiple heats, i.e. , production runs or batches, and that the mill certificates did not list all of the required test results for each heat. Thus, we agree with Commerce and the Trade Court that the mill certificates were not represen tative of the untested OCTG.

As the Trade Court noted, Commerce repeatedly requested technical descriptions of Chengde’s raw materi al input, b ut Chengde failed to p rovide a straightforward and sufficient descrip tion of the chemical composition of its steel billets

. Chengde’s other submissions , including the sample mill certificates, were insufficient to establish the nature of its steel billet input as to the untested OCTG. Given this record, Commerce reasonably valued the untested steel billets by averaging the surrogate values of both carbon and alloy steel. See Nan Ya Plastics Corp. v. United States , 810 F.3d 1333, 1337

– 38 (Fed. Cir. 2016) (explaining that “ the burden of creating an ad equate record lies with interested parties and not with Commerce” (internal quotation marks and citation omi tted)).

We therefore conclude that Commerce’s use of a si mple average of surrogate values of carbon an d alloy steel billets for the untested OCTG is supported by substan tial evidence and otherwise in accordance with law.

B. Byproduct Offset

We next consider whether Commerce erred in decli ning to make any scrap byproduct offset because Chengde failed to pro vid e any records to establish the quantity of scrap produced , rather than the quantity of scrap sold

. The Appellants raise numerous arguments challen ging Commerce’s denial of scrap offset

. First

, they argue that Commerce acted arbitrarily in this case because

, in previous cases, it has allowed byprod uct offsets based on information similar to that provided by Chengde

. Second

, they argue that 19 U.S.C. § 1677b(f)(1)(A) requires thatAMERICAN TUBULAR PRO DUCTS , LLC v. UNITED STATES 11

Commerce base its cost calculations on the books and records of the pro ducer unless it determines that the information does not “reasona bly reflect” actual cost s , and that Commerce failed to make such a finding here

. Third

, they argue that under 19 U.S.C. § 1677m(d), when Co mmerce finds that information submitted by a respon dent is deficient, it must notify the party of the deficiency and provide an opportunity for correction, and that Commerce failed to do so here

. Fourth , they argue that the scrap sales data submitted by Chengde satisfy all of the stat utory requirements of 19 U.S.C. § 1677m(e), and thus that Commerce may not decline to consider the information even if it did not comply with all of Commerce’s requir ements

. Finally , they argue that Commerce’s refusal to make any byproduct offset constituted a de facto applic ation of adverse facts availa ble

, without any find ing that Chengde had failed to cooperate to the best of its ability.
The Appellees respond that Commerce reasonably d enied Chengde’s request for scrap offset because Chengde failed to show that the scrap so ld was generated from the production of OCTG, not some other products, and that the scrap was in fact produced during the period of r eview. The Appellees maintain that Commerce’s denial of scrap offset in this case is consistent with its standard practice. The Appel le es contend that the statute is silent on scrap offset, and Commerce has filled that gap with regulations. The Appellees also respond that Chengde in formed Commerce that it did not account for the quant ities of scrap as produced, and thus Commerce was not required to continue asking for that information or to accept Chengde’s deficient evidence. Finally, the Appe llees respond that Commerce did not app ly any adverse infer ence; rather, according to the Appellees, Commerce simply concluded that Chengde did not meet its burden of establish ing the requested scrap offset.
We agree with the Trade Court and the Appellees that Commerce did not err in declining to allow any scrapAMERICAN TUBULAR PRO DUCTS , LLC v. UNITED STATES 12

offset in this case . Chengde did not establish the quantity of scrap generated from the production of OCTG during the period of review

. It simply failed to satisfy its evide ntiary burden, and Commerce properly decided not to grant the requested offset.
The statute governing the calculation of normal value, 19 U.S.C. § 1677b (c) , does not discuss the treatment of byproducts. Commerce promulgated regulations stating that it may make adjustments to normal value, but that “[t]he interested party that is in possession of the relevant information has the burden of establishing to the satisfa ction of the Secretary the amount and nature of a partic ular adjustment.” 19 C.F.R. § 351.401(b). Accordingly

, Chengde bears the burden of establishing i ts entitlement to a scrap offset

. Here, Chengde submitted documentation of its scrap sales to Commerce , but it could not document the quant ity of scrap produced during the period of review

. Chen gde’s proposed offset calculation instead equated total

scrap sold during the period of review with total scrap produced during the period of review. However, as Co mmerce explained, Chengde failed to present any evidence to show either that the production of OCTG , the subject merchandise, actually generated the scr ap sold

, or that the scrap sold was indeed produced during the period of review . Ab sent evidence link ing the scrap sold with any scrap generated resulting from the production of OCTG during the period of re view, Commerce properly found that Chengde’s submissions were insufficient and prope rly denied the requested offset.
We find the Appellants ’ remaining arguments to be unavailing

. First, t his case is factually distinct f rom the cases cited by the Appellants

. In those cases, Comm erce had additional information linking the requested bypro duct offset to the production of subject merchandise during the period of review

. Chengde failed to make that sho w-AMERICAN TUBULAR PRO DUCTS , LLC v. UNITED STATES 13

ing in this case

. Second , the statutory provisions cited by the Appellants are in apposite. In this review

, Commerce requested Chengde to provide record s demonstrating the production of OCTG during the period of review. Chengde unambiguously responded that it did not measure or record steel scrap production at the time it was produced

. On this record, Commerce was not obligated to accomm odate Chengde’s failure to document scrap production ; n or

was Commerce obligated to continue asking for info rmation that Chengde clearly stated it did not record. Lastly, we agree with the Appellees t hat Commerce did not apply any adverse inference in its denial of scrap offset. R ather, Chengde simply failed to satisfy its ev identiary burden of establishing the requested offset , as the regulation requires. See 19 C.F.R. § 351.401(b)

. Accordingly, we conclude that Commerce’s denial of steel scrap offset is supported by substantial evidence and otherwise in accordance with law.

C. International Freight

We last consider whether Commerce erred in finding that Chengde’s international freight transactions cons t ituted NME transactions

. The Appellants argue that the record ev idence shows that Chengde’s ocean freight was in fact fur nished by ME carriers and that Chengde pa id for the freight in U.S. dollars. They argue that Commerce acted unreasonably in finding that Chengde purchased ocean freight from an NME supplier.
The Appellees respond that Chengde failed to satisfy Commerce’ s requirements to prove that its oce an freight constituted ME purchases. Specifically, the Appellees argue that Chengde failed to prov ide any documentation to establish the amount paid by the Chinese agents to the Korean shippers, or to otherwise show that the price it paid for ocean freight was set by ME shippers. The A ppel lees also argue that Commerce has consistently r equired respond ents such as Chengde to link the amountAMERICAN TUBULAR PRO DUCTS , LLC v. UNITED STATES 14

paid to an NME intermediary or agent w ith that paid to an ME carrier.
We agree with the Trade Court and the Appellees that Commerce properly calculated Chengde’s ocean freight expenses using a surrogate value. The s tatute presumes that government action distorts the prices that NME exporters pay for their inputs. See 19 U.S.C. §§ 1677(18), 1677b(c)(1). I n limited circumstances, however, pursuant to the regulation in effect at the relevant time, Commerce would “ normally ” value an input purchased from a n ME supplier and paid for in a n ME currency using “ the price paid to the [ME] supplier .” 19 C.F.R. § 351.408(c)(1) (2012). Accordingly

, “ under the regulation, merely esta blishing that the factor was purchased fro m [an ME] supplier is not enough; rather, the amount paid to the supplier must be documented.” Yantai Oriental Juice Co. v. United States , 26 C t. Int’l Trade 605, 615 (2002).
Here, Chengde failed to properly establish the price paid to the ME shippers or to otherwise show that the price it paid for ocean freight was set by the ME shippers

. The record shows that Chengde paid its ocean freight expenses to a freight forwarder in China , who then paid the Chinese agents of Korean carriers, who in turn paid the Korean carriers. Because the first two transac tions were between Chinese entities, Chengde is required to link the price it paid to the freight forwarder to the price paid to the Korean shippers

. However, Chengde failed to make that showing

. It only provided declarations that the Chinese agents paid the Korean shippers in U.S. dollars.
Accordingly , the only prices on the record relating to

ocean freight are those be tween Chinese enti ties, not the prices paid to the Korean carriers. On this record, Co mmerce properly declined to value Chengde’s international freight as an ME input and properly used a surrogate value to calculate international freight costs

. See Nan Ya

, 810 F.3d at 1337

– 38. We there fore conclude that Co m-AMERICAN TUBULAR PRO DUCTS , LLC v. UNITED STATES 15

merce’s decision is su pported by substantial evidence and otherwise in accordance with law.

C ONCLUSION We have considered the Appellants’ remaining arg uments, but find them to be unpersuasive. For the foreg oing reasons, we conclude that Commerce’s antidumping duty calculations were supported by substantial evidence and otherwise in according with law. We therefore affirm the Trade Court’s decisions sustaining Commerce’s ant idumping duty calculations.

AFFIRMED