Slip Op 09 - 30

UNITED STATES COURT OF INTERNATIONAL TRADE

 

 :

NUCOR CORPORATION, GERDAU :

AMERISTEEL, INC., and COMMERCIAL :

METALS COMPANY, :

 :

 Plaintiffs, :

 :

 v. : Before: MUSGRAVE, Senior Judge

 : Consol. Court No. 07-00457 

UNITED STATES OF AMERICA, :

 :

 Defendant, :

 :

 and :

:

EKINCILER DEMIR ve CELIK SANAYI A.S., :

EKINCILER DIS TICARET A.S., HABAS :

SINAI ve TIBBI GAZLAR ISTIHSAL :

ENDUSTRISI A.S., COLAKOGLU DIS :

TICARET A.S., COLAKOGLU METALURJI :

A.S., KAPTAN DEMIR CELIK ENDUSTRISI :

ve TICARET A.S., KAPTAN METAL DIS : 

TICARET ve NAKLIYAT A.S., DILER DEMIR : 

CELIK ENDUSTRISI ve TICARET A.S., : 

DILER DIS TICARET A.S., TAZICI DEMIR :

CELIK SANAYI ve TURIZM TICARET A.S., :

KROMAN CELIK SANAYII A.S., :

:

 Defendant-Intervenors. :

 :

OPINION AND ORDER

[Motion for judgment on an administrative record of antidumping duty review of rebar from Turkey,

remanded to International Trade Administration, U.S. Department of Commerce, for further

proceedings.]

Dated: April 14, 2009
Court No. 07-00457 Page 2

Wiley Rein LLP (John R. Shane, Alan H. Price, Maureen E. Thorson, and Lori E. Scheetz),

for Nucor Corporation, Gerdau Ameristeel, Inc., and Commercial Metals Company.

Michael F. Hertz, Acting Assistant Attorney General; Jeanne E. Davidson, Director, Patricia

M. McCarthy, Assistant Director, Civil Division, Commercial Litigation Branch, United States

Department of Justice (Richard P. Schroeder); Office of the Chief Counsel for Import

Administration, United States Department of Commerce (Scott D. McBride), of counsel, for The

United States of America.

Arnold & Porter (Michael T. Shor, Lawrence A. Schneider, and Francis Franze-Nakamura),

for Ekinciler Demir ve Celik Sanayi A.S. and Ekinciler Dis Ticaret A.S.

Law Offices of David L. Simon (David L. Simon) for Habas Sinai ve Tibbi Gazlar Istihsal

Endustrisi A.S. and Kroman Celik Sanayii A.S.

Arent Fox LLP (Myles S. Getlan) for Colakoglu Dis Ticaret A.S., Colakoglu Metalurji A.S.,

Kaptan Demir Celik Endustrisi ve Ticaret A.S., and Kaptan Metal Dis Ticaret ve Nakliyat A.S. 

Hogan and Hartson (Craig A. Lewis, Jonathan T. Stoel and Lewis E. Leibowitz), for Diler

Demir Celik Endustrisi ve Ticaret A.S., Diler Dis Ticaret A.S., and Tazici Demir Celik Sanayi ve

Turizm Ticaret A.S.

MUSGRAVE, Senior Judge: This consolidated matter implicates Certain Steel

Concrete Reinforcing Bars from Turkey; Final Results of Antidumping Duty Administrative Review

and New Shipper Review and Determination to Revoke in Part, 72 Fed. Reg. 62630 (Nov. 6, 2007)

(“Final Results”), inter alia an antidumping duty administrative review covering the period April

1, 2005 through March 31, 2006 (“POR”). Originally, it included three separate actions initiated by

the domestic petitioners Nucor Corporation, Gerdau Ameristeel, Inc., and Commercial Metals

Company that have since been voluntarily dismissed, and on March 23, 2009, the parties presented

oral argument on the remaining matter: the claim of Ekinciler Demir ve Celik Sanyi A.S. and

Ekinciler Dis Tacaret A.S. (“Ekinciler”), respondent producer and exporter of Turkish rebar, that the

International Trade Administration, U.S. Department of Commerce (“Commerce”) erred by
Court No. 07-00457 Page 3

imputing depreciation to a specific account Ekinciler maintains on its books and records as a fixed

asset, nominally “melt shop modernization,” which purportedly consists almost solely of losses on

foreign exchange loans due to the devaluation of the Turkish lira in 2000/2001 and that were not

incurred for the construction or acquisition of fixed assets. 

During the previous administrative review, Commerce also imputed depreciation to

the account, and Ekinciler was ultimately unsuccessful in contesting that decision because it had

failed to prove as a matter of evidence or law that depreciation could not be imputed to the account

based on the administrative record before the court. Ekinciler Demir ve Celik Sanyi A.S. v. United

States, 32 CIT ___, Slip Op. 08-34 (Mar. 20, 2008), aff’d, No. 08-1371, 2009 WL 279066 (Fed. Cir.

Feb. 6, 2009), incorporated herein by such reference. Ekinciler renewed its claim during this

subsequent review, but was again rebuffed, for the reasons Commerce explains in its Issues and

Decision Memorandum for the Antidumping Duty Administrative Review and New Shipper Review

on Certain Steel Concrete Reinforcing Bars from Turkey – April 1, 2005, through March 31, 2006

(Oct. 31, 2007) (“IDM”).

The Court has jurisdiction pursuant to 28 U.S.C. § 1581(c) and 19 U.S.C. §

1516a(a)(2)(B)(iii) to hold unlawful in accordance with 19 U.S.C. § 1516a(b)(1)(B)(i) any

administrative determination “unsupported by substantial evidence on the record, or otherwise not

in accordance with law[.]” 

According to the IDM, Commerce rejected Ekinciler’s explanations regarding the

nature of the expenses and the supporting documentation it had submitted because “there is no way

to link the documents to the ‘asset’ listed in Ekinciler’s financial statement.” IDM at 43. Commerce
Court No. 07-00457 Page 4

did not, however, find that the account reflected expenses incurred for melt shop modernization or

for any other fixed asset. Indeed, as before, Commerce again made no explicit finding as to what

the account actually represents. Cf. Slip Op. 08-34 at 7. Rather, Commerce reasoned that even if

the expenses were of a type that should have been expensed in the year incurred under U.S. generally

accepted accounting principles (GAAP) and the international equivalent, international financial

reporting standards (IFRS), the fact that Ekinciler did not do so “results in a situation simply not

addressed by U.S. GAAP or the IFRS.” Id. In the end, Commerce concluded

it is unreasonable for Ekinciler to ignore the expense forever and as a result

artificially inflate its balance sheet. In other words, it is unreasonable for Ekinciler

to continue to record the asset in its financial statements and indefinitely suspend

recording the corresponding depreciation expense associated with the asset. More

importantly, we find that Ekinciler’s failure to recognize an allocated portion of these

capitalized expenses during the POR is contrary to the requirements of section

773(f)(1)(A) of the Act, because Ekinciler’s reported costs do not “reasonably reflect

the costs associated with the production of the merchandise.”

Id. at 44.

And yet, as noted, when Commerce examines costs of production the antidumping

statutes require the calculation of only those costs that “reasonably reflect the costs associated with

the production and sale of the merchandise.” 19 U.S.C. § 1677b(f)(1)(A). See, e.g., Hornos

Electricos de Venez. v. United States, 27 CIT 1522, 1533, 285 F.Supp.2d 1353, 1364 (2003)

(“Commerce’s practice is to calculate COP based on actual costs incurred during the POI”); Micron

Tech., Inc. v. United States, 23 CIT 380, 382 (1999) (“[t]he object of the cost of production exercise

is not to capture all past expenses, but rather those expenses that reasonably and accurately reflect

a respondent’s actual production costs for a period of review”). But here, Commerce did not find or

allege from the record that the “melt shop modernization” account reflected costs “associated with
Court No. 07-00457 Page 5

the production of merchandise” during the POR or find that it largely consists of other than foreign

exchange losses incurred outside the POR that are unrelated to acquisition or construction of fixed

assets. E.g., see generally Pl.’s Br. at 5-11, 19-21 (and citations therein). Ekinciler further agrees,

with Commerce, that the foreign exchange losses should have been recognized as they were incurred,

and it also pressed the point, before Commerce, that maintaining those losses, proved by source

documentation, on its books and records as a fixed asset amounts to incorrect accounting treatment.

E.g., Pub. R. Doc. 363 (Oct. 3, 2007 Hearing Tr.) at 101; see Pl.’s App. E at EK 0052.

Commerce’s stated policy is to treat all foreign exchange losses as an expense in the

year realized. See, e.g., Certain Preserved Mushrooms from India: Preliminary Results of

Antidumping Administrative Review, 68 Fed. Reg. 11045, 11048 (Mar. 7, 2003). It has not

justifiably explained its departure from such policy in this instance. See, e.g., Cultivos Miramonte

S.A. v. United States, 21 CIT 1059, 1064-65, 980 F.Supp. 1268, 1274-75 (1997); Hussey Copper,

Ltd. v. United States, 17 CIT 993, 998, 834 F.Supp. 413, 419 (1993); Citrosuco Paulista, S.A. v.

United States, 12 CIT 1196, 1209, 704 F.Supp. 1075, 1088 (1988). Its only apparent rationale for

imputing depreciation to this account is concern over Ekinciler showing an “inflated” balance sheet.

But, as Ekinciler pointedly stated at oral argument, Commerce’s mandate does not include acting as

the “financial statements police,” it includes calculating only those costs that reasonably relate to cost

of production during the period of review. 19 U.S.C. § 1677b(f)(1)(A). 

Given Ekinciler’s uncontroverted evidence on the nature of the melt shop

modernization account at the administrative review, the decision to impute depreciation to the

account has no basis on the administrative record or in law. Cf. Pullman-Standard v. Swint, 456 U.S.
Court No. 07-00457 Page 6

273, 292 (1982) (additional fact finding unnecessary where record permits only one resolution of

factual issue); Richardson v. Suzuki Motor Co., 868 F.2d 1226, 1240 (Fed. Cir. 1989) (additional fact

finding unnecessary where record is clear). The court considers Commerce’s other arguments

without merit and herebyremands the matter to Commerce for the purpose of redetermining imputed

depreciation without the amount that currently reflects the foreign exchange losses in the melt shop

modernization account. Results of remand shall be filed within 30 days hereof.

So ordered.

 /s/ R. Kenton Musgrave 

 R. KENTON MUSGRAVE, Senior Judge

Dated: April 14, 2009

New York, New York