Slip Op. 17-45

UNITED STATES COURT OF INTERNATIONAL TRADE



### B ORUSAN 

### M ANNESMANN 

### B ORU 

### S ANAYI : VE 

### T ICARET 

### $ù

: Plaintiff , : v. : 

### U

NITED 

### S TATES 

### , Court No. 14-00009

: Defendant , : and : 

### U

NITED 

### S TATES 

### S TEEL 

### C ORPORATION 

### , : Defendant-Intervenor

. [Granting Plaintiff’s Motion for Judgment on the Agency Record and remanding action to agency] Dated: April 20, 2017 Brady W. Mills, Morris, Manning & Martin, LLP, of Washington, D.C., for Plaintiff. With him on the brief were Julie C. Mendoza, Donald B. Cameron, R. Will Planert, Mary S. Hodgins, and Sarah S. Sprinkle. Patricia M. McCarthy, Assistant Director, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, D.C., for Defendant. With her on the brief were Joyce R. Branda, Acting Assistant Attorney Genera l, Jeanne E. Davids on, Director, Commercial Litigation Branch, Franklin E. White, Jr., Assistant Director, and Douglas G. Edelschick, Trial Attorney. Of counsel on the brief was Devin S. Sikes, Office of the Chief Counsel for Trade Enforcement and Compliance, U.S. Depar tment of Commerce, of Washington, D.C. Jeffrey D. Gerrish, Skadden, Arps, Slate, Meagher & Flom LLP, of Washington, D.C., for Defendant-Intervenor. With him on the brief were Robert E. Lighthizer and Jamieson L. Greer.Court No. 14-00009 Page 2



### OPINION RIDGWAY, Judge: In this action, Plaintiff Borusan Mannesmann Boru Sanayi ve 7LFDUHW$ù3%RUXVDQ ́

– a Turkish producer and exporter of standard pipe – c ontests the final results of the U.S. Department

of Commerce’s 2011-2012 administra tive review of the antidumping duty order covering welded carbon steel standard pipe and tube pr oducts from Turkey (“standard pipe”). 1 The period of review is May 1, 2011 through April 30, 2012. See Welded Carbon Steel Standard Pipe and Tube Products From Turkey: Final Results of Antidumping Duty Administrative Review; 2011-2012, 78 Fed. Reg. 79,665 (Dec. 31, 2013) (“Final Results”); see also Issues and Decision Memorandum for the Final Results of the Antidumping Duty Adminis trative Review: Welded Carbon Steel Standard Pipe and Tube Products from Turkey; 2011-2012 at 2 (Dec. 23, 2013) (Pub. Doc. No. 265) (“Issues & Decision Memorandum”). 2

1 Previously, this was a consolidated action. See Order (April 8, 2014) (consolidating United States Steel Corp. v. United States, Cour t No. 14-00036 into this action). However, U.S. Steel did not file a motion for judgment on the ag ency record in the consolidated action, and – after the deadline for filing such a motion passed – U.S. Steel filed a consent motion to sever its case ( i.e. , Court No. 14-00036). See Consent Motion to Sever (Se pt. 2, 2014). That motion was granted. See Order (Sept. 4, 2014) (granting U.S. Steel’ s motion to sever, re instating Court No. 14-00036, and directing U.S. Steel to file motion for voluntary dismissal of that case). U.S. Steel subsequently filed a consent motion to dis miss United States Steel Corp., Court No. 14-00036, which also was granted. See Order (Sept. 5, 2014), entered in United States Steel Corp., Court No. 14-00036 (dismissing U.S. Steel’s complaint with prejudice).

2 The administrative record in this action includes both public and confidential ( i.e. , business proprietary) information. All documents in the record were filed through IA ACCESS, the Import Administration Antidumping and Count ervailing Duty Centralized Electronic Service System. The record index (like the record) is divi ded into two sections. One section consists of public documents and public ( i.e. , redacted) versions of confiden tial documents. The other section consists of unredacted versions of all doc uments on the record that include confidentialCourt No. 14-00009 Page 3

Now pending is Borusan’s Motion for Judgment on the Agency Record, which raises a single issue: whether, in calculating Borusan’s dumping margin, Commerce properly declined to include in Borusan’s duty drawback adjustment “yield loss” – i.e. , the “scrap” and “second-quality pipe” that are by-products of the company’s produc tion of the standard pipe that it exports to the

United States. See generally Brief of Plaintiff Borusan Ma nnesmann Boru Sanayi ve 7LFDUHW$ù (“Borusan”) in Support of Its Motion for Judgment Upon the Agency Record at 1-2, 3, 6-9, 10, 31-36 (“Pl.’s Brief”); Reply Brief of Plaintiff Borusan Mannesmann Boru Sanayi ve 7LFDUHW$ù3%RUXVDQ ́LQ5HV SRQVHWR'HIHQGDQW¶VDQG'HIHQGD QW -Intervenor’s Briefs at 1, 16-22 (“Pl.’s Reply Brief”). 3

Both the Government and Defendant-Interv enor United States Steel Corporation (“U.S. Steel”) – a domestic producer of standard pipe – oppose Borusan’s motion and maintain that the Final Results are supported by substantial evidence and are otherwise in accordance with law, and

therefore must be sustained. See generally Defendant’s Response to Plaintiff’s Motion for Judgment on the Agency Record at 2, 3-4, 6, 40-43 (“Def.’s Response Brief”); Memorandum in Opposition to Plaintiff’s Motion for Judgment on the Agency Record Filed by Defendant-

information. Only documents from the public section of the administrative record are cited in this opinion. They are cited as “Pub. Doc. No. ___.”

3 Borusan’s Complaint sets forth three c ounts challenging Comme rce’s Final Results. However, shortly before oral argument, Borusan voluntarily dismissed the first two counts of the Complaint, which contested Commerce’s application of the agency’s “targeted dumping” analysis. See Complaint, Count One (disputing agency determin ation that Borusan engaged in “differential pricing”); id ., Count Two (asserting that withdrawal of agency’s targeted dumping regulation was unlawful); Consent Motion [of Borusan] to Volunt arily Dismiss Counts One and Two of Plaintiff’s Complaint with Prejudice; Order (Oct. 1, 2015) (dis missing with prejudice Counts One and Two). Only Count Three remains at issue in this action.Court No. 14-00009 Page 4

Intervenor United States Steel Corporation at 1, 4-6, 9, 23-27 (“Def.-Int.’s Response Brief”). 4 In its brief, the Government argues that Borusan did not demonstrate that it was entitled to a duty drawback adjustment for yield loss ( i.e. , scrap and second-quality pipe) because Borusan did not

substantiate its claim with docum entary evidence. Def.’s Response Brief at 2, 6, 40-43. U.S. Steel argues that Commerce’s determination to exclude scrap and s econd-quality pipe from Borusan’s duty drawback adjustment is consistent with the plain language of the statute and that Commerce properly determined that Borusan was not entitled to a duty drawback adjustment for yield loss, because the scrap a nd second-quality pipe are not “subj ect merchandise,” because they were not exported, and because they were sold domestically, on the Turkish market. Def.-Int.’s Response Brief at 1, 4-6, 9, 23-27. Jurisdiction lies under 28 U.S.C. § 1581(c) (2006). 5 For the reasons set forth below, Borusan’s Motion for Judgment on the Agency Record must be granted, and this matter must be

remanded to Commerce for further consideration.

4 At one point, there were two defendant-intervenors in this action. Like U.S. Steel, Wheatland Tube Company – a domestic producer of st andard pipe – intervened on the side of the Government. See Order (Jan. 29, 2014) (granting Wheatland T ube’s consent motion to intervene). Unlike U.S. Steel, however, Wheatland Tube elected not to file a brief in response to Borusan’s motion for judgment on the agency record. Shortl y before oral argument, Wheatland Tube sought leave to withdraw, which was granted. See Order (Oct. 7, 2015) (granting Wheatland Tube’s consent motion for leave to withdraw from this action).

5 All citations to statutes herein are to the 2006 edition of the United States Code. The pertinent statutory text remained the same at all times relevant herein.Court No. 14-00009 Page 5

I. Background Understanding the issue presented in this case requires a brief overview of certain aspects of both U.S. antidumping law and Turkish custom s law, which are summarized below in the

context of the facts of the case.

A. Overview of the Basic Legal Framework Dumping and Antidumping Duty Orders. Dumping is the sale of foreign goods in the

United States at “less than fair value.” 19 U. S.C. § 1677(34) (defining “ dumped” and “dumping”);

see also United States Steel Corp. v. United Stat es, 621 F.3d 1351, 1360 (Fed. Cir. 2010). If dumping results in material injury (or the threat of material injury) to the relevant domestic industry, Commerce issues an antidumping duty or der imposing antidumping duties on imports of the foreign goods into the United States. 19 U.S.C. § 1673; see also Union Steel v. United States, 713 F.3d 1101, 1103 (Fed. Cir. 2013). The purpose of imposing antidumping duties is to offset any negative effects that dumping may have on the domestic industry. See generally Sioux Honey Ass’n v. Hartford Fire Ins. Co., 672 F.3d 1041, 1046-47 (Fed. Cir. 2012) (explaining that “dumping presents unfair competition concerns because fo reign companies selling goods below fair value can undercut domestic producers selling thos e same goods at market prices”). Dumping Margin, Normal Value, and Export Price. The amount of the antidumping duties that are imposed is determined by the “dumpi ng margin,” which is “the amount by which the

normal value exceeds the export price . . . of the subject mercha ndise.” 19 U.S.C. § 1677(35) (emphases added); see also Nan Ya Plastics Corp. v. United States, 810 F.3d 1333, 1337 (Fed. Cir. 2016) (same). The “normal value” of merchandise is generally the price that a foreign producerCourt No. 14-00009 Page 6

charges in its home market, while the “export price” is most often the price that the producer charges in the United States. 19 U.S.C. §§ 1677a, 1677b; see also Nan Ya Plastics Corp., 810 F.3d at 1337 (stating that dumping margin is the amount by which the price a producer charges in its home market ( i.e. , normal value) exceeds the price of the product in the U.S. ( i.e. , export price)) (citing United States Steel Corp., 621 F.3d at 1353).Adjustments to Normal Value and Export Price. In order to ensure a fair, “apples-toapples” comparison between normal value and export price, the statute directs Commerce to make certain “adjustments” to both. See 19 U.S.C. § 1677a(c) (specifying adjustments to be made to export price, including “duty drawback adju stment”); 19 U.S.C. §1677b(a)(6) (specifying adjustments to be made to normal value); see also Fla. Citrus Mutual v. United States, 550 F.3d 1105, 1110 (Fed. Cir. 2008) (explaining that purpose of adjustments is to achieve a fair comparison “between U.S. price [ i.e. , export price] and foreign market value [ i.e. , normal value]”). At issue in this action is the “duty drawback adjustment” – i.e. , an upward adjustment to export price that Commerce is statutorily required to make as part of its antidumpi ng analysis, in order to account for a foreign producer’s receipt of any “duty drawback” under the laws of another country. See 19 U.S.C. § 1677a(c)(1)(B). Duty Drawback. “Duty drawback” is a long-standing tool used by countries around the world to encourage export production. See generally , e.g. , Susan G. Markel, “Tax and Duty Incentives,” in Export Practice, 371, 391-92 (T erence P. Stewart ed., 1994) (providing overview of duty drawback program in the U.S.). In general, under a duty drawback program, a country either exempts from import duties – or refunds ( i.e. , rebates) import duties that were paid at the time of entry for – goods ( e.g. , material inputs or components) that are imported into the countryCourt No. 14-00009 Page 7

and used to produce merchandise that is then s ubsequently exported from the country. Depending on the country, the exemption or refund/rebate o ffered under a duty drawback program may cover all, or just a portion, of the impor t duties that would otherwise apply. 6 A country’s establishment of a duty drawback program promotes and ince ntivizes production for exportation, because duty drawback allows businesses in the country to comp ete in foreign markets without the handicap of including in their sales prices import duties that the companies otherwise would have been required to pay on imported material inputs or components. See generally id . at 392. (As discussed below, when Borusan imported into Turkey quantities of material inputs essential to the company’s production of standard pipe, Bo rusan availed itself of Turkey’s duty drawback laws. See generally infra section I.B.) Duty Drawback Adjustment. In calculating a foreign producer’s dumping margin, to ensure an “apples-to-apples” comparison betwee n normal value and export price, Commerce must – through a “duty drawback adjustment” – account fo r any duty drawback that the foreign producer received pursuant to the duty drawback program in its home country. Specifically, Commerce is directed by statute to increase the export price by “the amount of any import duties imposed by the country of exportation which ha ve been rebated, or which have not been collected, by reason of the exportation of the subject merchandise to the United States.” 19 U.S.C. § 1677a(c)(1)(B);

see also Saha Thai Steel Pipe (Public) Co. v. Un ited States, 635 F.3d 1335, 1338 (Fed. Cir. 2011)

6 In the United States, for example, a domestic manufacturer may obtain drawback of 99% of duties paid on inputs or components that are im ported into the U.S. and further processed or assembled and then s ubsequently exported. See generally U.S. Customs and Border Protection, What Every Member of the Trade Community Should Know About: Drawback at 7 (Dec. 2004).Court No. 14-00009 Page 8

(summarizing duty drawback adjustment statute). 7 Like any adjustment that increases the export price, a duty drawback adjustment (in effect) lowers the foreign producer’s dumping margin. The purpose of the duty drawback adjustment – i.e. , the upward adjustment made to the export price pursuant to 19 U.S.C. § 1677a(c)(1)(B) – is to prevent a dumping margin from being created, or artificially inflated, because the ex porting country exempts from import duties (or refunds/rebates import duties paid on) material inputs or component s that are imported into the country and used to produce a product that is subsequently exported. See generally , e.g. , Wheatland Tube Co. v. United States, 30 CIT 42, 60, 414 F. Supp. 2d 1271, 1286 (2006), rev’d on other grounds , 495 F.3d 1355 (Fed. Cir. 2007); Allied Tube & Conduit Corp. v. United States, 29 CIT 502, 506, 374 F. Supp. 2d 1257, 1261 (2005); Hornos Electricos de Venezuela, S.A. v. United States, 27 CIT 1522, 1525, 285 F. Supp. 2d 1353, 1358 (2003) (“HEVENSA”); Far East Mach. Co. v. United States, 12 CIT 428, 430-31, 688 F. Supp. 610, 611 (1988); Carlisle Tire & Rubber Co. v. United States, 10 CIT 301, 307, 634 F. Supp. 419, 424 (1986). 8

7 In deciding whether a foreign producer or other respondent is entitled to a duty drawback adjustment, Commerce applies a two-prong test, which requires the respondent to demonstrate that: “(1) the rebate a nd import duties are depende nt upon one another, or in the context of an exemption from import duties, that the exemption is linked to the exportation of the subject merchandise; and (2) that there are sufficient impor ts of the raw material to account for the duty drawback on the exports of the subject mercha ndise.” Saha Thai, 635 F.3d at 1340 (quoting Saha Thai Steel Pipe (Public) Co. v. Un ited States, 33 CIT 1541, 1542 (2009)); see also 2015 Enforcement and Compliance Antidumping Manual , Chapter 7: Export Price and Constructed Export Price at 10-11 (explaining adjustments to export price required by the statute). As with all adjustments to normal value or export price that fa vor respondents, the respondent bears the burden of demonstrating that both prongs of Commerce’s test are satisfied, thereby establishing the respondent’s entitlement to a duty drawback adju stment. Fujitsu Gen. Ltd. v. United States, 88 F.3d 1034, 1040 (Fed. Cir. 1996).

8 Duty drawback adjustments have long been a part of U.S. trade law. See generally S. Rep. No. 67-16, at 12 (1921) (stating that it is necessar y to add to the exporter’s sales price “anyCourt No. 14-00009 Page 9

Duty drawback adjustments thus account for the fact that producers do not have to factor import duty into their prices for their merchandise when it is sold in foreign markets , but “the producers remain subject to the import duty when they sell the subject merchandise domestically , which increases home market sales prices and ther eby increases [normal value].” Saha Thai, 635 F.3d at 1338 (emphasis added); see also id . at 1342 (stating that “the entire purpose of increasing [export price through the duty drawback adjustment] is to account for the fact that the import duty costs are reflected in [normal value] (home market sales prices) but not in [export price] (sales prices in the United States”)). 9 In other words, as the Court of Appeals has explained, when duty drawback is granted only for an imported input that is used to produce merchandise that is later exported (and not merchandise sold domestically), the cost of the import duty is reflected in normal value but not in export price. Id ., 635 F.3d at 1338. “The statut e corrects this imbalance, which could otherwise lead to an inaccurately high dumping margin” – or even a false finding of dumping when dumping is not actually occurring. Id .; see also , e.g. , Wheatland Tube Co., 30 CIT at 60, 414 F. Supp. 2d at 1286 (explaining that “[t]he duty drawback adjustment is intended to prevent

drawback given by the country of exportation upon the exportation of the merchandise, or any excise tax which is refunded or not collected upon the exportation” in order that the sale does not overstate or wrongly constitute dumping).

9 Stated differently, Congress provided for the duty drawback adjustment “because purchasers in the home market presumably must pay the passed on cost of import duties [paid on imported inputs used to produce the merchandise] wh en they buy the merchandise.” Huffy Corp. v. United States, 10 CIT 214, 215-16, 632 F. Supp. 50, 52 (1986). On the other hand, “[i]f the duties are rebated [or if the inputs are exempt from import duties] when the merchandise is exported [to the United States], presumably no simila r cost is passed on to purchasers in the United States. By adding the amount of the rebate [or exemp tion] to [the export price] . . . this adjustment accommodates the difference in cost to the two different purchasers.” Id

.Court No. 14-00009 Page 10

dumping margins from being created or affected by the rebate or exempti on of import duties on inputs used in the production of expor ted merchandise”) (e mphasis added). In sum, the purpose of the duty drawback adjustment is to correct the “imbalance” between the price charged for subject merchandise in the producer’s home market (which presumably reflects duties paid on imported inputs) and the price charged in the United States (where the producer received either a duty rebate on imported inputs or an exemption from duties on the inputs because the subject merchandise was exported). The duty drawback adjustment to export price serves to “offset” import duties that are reflected in normal value, and thus permits a fair comparison to be made between normal value and export price, eliminating a potential source of distortion in Commerce’s antidumping analysis. See Carlisle Tire & Rubber Co., 10 CIT at 307, 634 F. Supp. at 424 (describing duty drawback adju stment as “an offsetting adjustment” in the calculation of normal value, designed “[t]o prevent dumping margins from arising because the exporting country rebates import duties . . . for raw materials used in exported merchandise”); Wheatland Tube Co., 30 CIT at 46, 414 F. Supp. 2d at 1275 (noting argument that rationale for duty drawback adjustment is “to offset duties t hat are paid on inputs used in the production of merchandise sold in the home market”). As the Court of Appeals has repeatedly underscored, “[a]n overriding purpose of Commerce’s administration of [the] antidumping laws is to calculate dumping margins as accurately as possible .” Yangzhou Bestpak Gifts & Crafts Co. v. United States, 716 F.3d 1370, 1379 (Fed. Cir. 2013) (emphasis added) (citing Rhone Poulenc, Inc. v. United States, 899 F.2d 1185, 1191 (Fed. Cir. 1990)). Ultimately, the duty dr awback adjustment helps ensure that Commerce does exactly that.Court No. 14-00009 Page 11

B. The Facts of This Case The antidumping duty order covering imports of standard pipe from Turkey dates back roughly three decades, to 1986. See Antidumping Duty Order; Welded Carbon Steel Standard Pipe and Tube Products from Turkey, 51 Fed. Reg. 17,784 (May 15, 1986). “Once an antidumping duty order . . . is in place, ‘Commerce periodica lly reviews and reassesses antidumping duties’ during administrative reviews.” Dongtai Peak Honey Industry Co. v. United States, 777 F.3d 1343, 1349 (Fed. Cir. 2015) (quoting Gallant Ocea n (Thai.) Co. v. United States, 602 F.3d 1319, 1321 (Fed. Cir. 2010)). This action contests the Final Results of the 2011-2012 administrative review, where Commerce calculated Borusan’s we ighted-average dumping margin to be 1.79%. Final Results, 78 Fed. Reg. at 79,666. That dumping margin did not include the duty drawback adjustment that Borusan sought for “yield loss.” Id. ; Issues & Decision Memorandum at 18-19 (Comment 4). Commerce’s decision to deny Boru san a duty drawback adjustment for yield loss is the subject of Borusan’s claim here. The relevant facts are straightforward and not in dispute. Borusan produces standard pipe in Turkey, using as its primary material input hot -rolled steel coil which the company imports into Turkey in accordance with the terms of that country’s duty drawback program. Borusan’s Response to Commerce’s Initial Questionnaire – S ections B & C at C-35 (Oct. 9, 2012) (Pub. Doc. No. 57) (“Borusan’s Initial Questionnaire Responses”). 10 To account for the phenomenon known

10 The administrative record includes an English translation of the duty drawback regulation in effect in Turkey during the period of review. See Borusan’s Initial Questionnaire Responses at C-35, Ex. C-7; see also id . at C-36 to C-37, Ex. C-10 (official announcement of modification to Turkish duty drawback program, dated May 31, 2010, making the domestic sale of by-products such as the scrap and second-quality pipe at issu e here subject to impor t duties and value-addedCourt No. 14-00009 Page 12

as “yield loss,” Turkey’s duty drawback law a llows Borusan to obtain an exemption from import duties for a volume of hot-rolled steel coil that is gr eater than the volume of standard pipe that the company subsequently exports. Borusan’s Respons e to Commerce’s Supplemental Questionnaire

tax (“VAT”) at the rate in effect for imports of the specific by-products in question, as if they had been imported into Turkey). Under Turkish duty drawback law, to be eligible for an exemption from import duties on imported raw materials that are used to produce fi nished exported products, an exporter must apply for and obtain an Internal Processing Permit Certificate (“Internal Processing Certificate”) from Turkey’s Undersecretariat of Foreign Trade. On the application form, the exporter must specify the total volume of imported raw material that is required to produce the volume of finished products that the exporter plans to export. In a ddition, the exporter also must submit a “Letter of Export Commitment,” stating that the imported raw materials will be used to produce goods for export and acknowledging that failure to do so would subject the exporter to penalties. The specific duration of an Internal Processing Certificate depends on the industry and may be extended under certain circumstances. After the Internal Processing Certificate is issued, the producer/exporter must show it to Turkish customs authorities each time the company imports raw materials on a duty-exempt basis. The Turkish authorities stamp the entry documents to indicate that the entry is being made on a duty-exempt basis. In addition, the produ cer/exporter must indicate on customs export documentation whether a particular exportation of the finished product is being used to meet the exporter/producer’s obligation under the Internal Processing Certificate to export a specified volume of the finished product (relative to the vo lume of imported raw ma terials claimed to be imported for use in the production of the finished product). At the end of the period covered by the Internal Processing Certificate, the producer/exporter must submit certain documents to the Secretary General of the applicable Exporter’s Union for inspection and review. The re quisite documents include the original customs import and export declaration forms, the import list, the export list, and a raw material balancing table. The Secretary General of the Exporter’s Un ion reviews the documentation to verify that the volume of finished product that was exported was sufficient to have required the volume of raw materials that was imported duty-free. The Secretary General of the Exporter’s Union then issues a closing confirmation letter to the producer/ex porter. To be granted duty drawback, the producer/exporter submits the relevant Internal Processing Certificate and the associated closing documents to the Turkish authorities for approval. See generally Borusan’s Initial Questionnaire Responses at C-35 to C-37 (summarizing opera tion of Turkey’s duty drawback program).Court No. 14-00009 Page 13

– Sections A-C at C-29 (Feb. 19, 2013) (Pub. Doc. No. 158) (“Borusan’s Supp. Questionnaire Responses”); Borusan’s Initial Questi onnaire Responses at C-37 to C-39; see also Pl.’s Brief at 6, 32-33; Pl.’s Reply Brief at 19. As Borusan expl ains (using a simplified example), the company “may need to import 1.1 metric tons of [hot-rolle d steel] coil in order to produce 1 metric ton of finished standard pipe.” Pl.’s Brief at 33; see also Pl.’s Reply Brief at 19. In that example, the

difference between the 1.1 metric tons of hot-rolled steel coil and the 1.0 metric ton of finished standard pipe is the “yield loss.” Pl.’ s Brief at 6, 33; Pl.’s Reply Brief at 19; see also Borusan’s Supp. Questionnaire Responses at C-29. 11 The yield loss that results from Borusan’s produ ction of standard pipe consists of “scrap” and “second-quality pipe.” Borusa n’s Initial Questionnaire Responses at C-36 to C-37; Borusan’s Supp. Questionnaire Responses at C-28 to C-29. After the production process is complete, Borusan exports the standard pipe to the United States (among other countries) and sells the yield

loss – i.e. , the scrap and second-qualit y pipe – domestically, on the Turkish market. Borusan’s Initial Questionnaire Responses at C-37; Borusa n’s Supp. Questionnaire Responses at C-28 to C29. Turkish customs authorities historically and consistently have granted Borusan duty drawback for the entire volume of hot-rolled steel coil that Borusan imports into Turkey in order to produce a corresponding volume of standard pipe for exportation. See Borusan’s Initial Questionnaire Responses at C-37 to C-39; Boru san’s Supp. Questionnaire Responses at C-29 to C-30; Pl.’s Brief at 6, 32-33; Pl.’s Reply Brief at 19-20. In addition, until the period covered by

11 Yield loss can result from, for example, dryi ng or evaporation, or as a result of manufacturing processes (as it does in the case of Borusan’s production of standard pipe).Court No. 14-00009 Page 14

the administrative review here, there were no duties or additional taxes imposed on Borusan’s domestic (Turkish) sales of the scrap and second- quality pipe that are by-products of Borusan’s manufacture of standard pipe for export. Borusa n’s Initial Questionnaire Responses at C-36 to C37. In 2010, the Turkish government modified its duty drawback program, announcing that the domestic sale of by-products a nd scrap produced under an Internal Processing Certificate would be subject to import duties and value-added tax (“VAT”) at the rate in effect for imports of the specific by-products or scrap in question ( i.e. , as if the by-products or scrap had been imported into Turkey). See Borusan’s Initial Questionnaire Responses at C-36 to C-37, Ex. C-10; Borusan’s Supp. Questionnaire Responses at C-29. As a resu lt, Borusan is now required by Turkish law to declare the volume of steel scrap and second-qua lity pipe that results from its manufacture of standard pipe pursuant to Turkey’s duty drawback program. See Borusan’s Initial Questionnaire Responses at C-37; Borusan’s Supp. Questionnair e Responses at C-29. Under Turkish customs law, however, the import duty rate applicable to im ports of scrap and second-quality pipe was 0% throughout the period at issue here. See Borusan’s Initial Questionnaire Responses at C-37; Borusan’s Supp. Questionnaire Responses at C-29. 12 As a practical matter, the entire volume of hot-rolled steel coil that Borusan imported into Turkey for its production of standard pipe fo r export to the United States during the 2011-2012

12 Under Turkish law, throughout the period at issue here, there was no VAT on domestic sales of steel scrap. Although there was a VAT on domestic sales of sec ond-quality pipe, Borusan passed it through to the company’s customers. Thus, Borusan explains, “the VAT is a ‘wash’ transaction” for the company and “the net effect . . . [is that] the new regulation . . . [made] no change in the real costs” that Borusan incurr ed. Borusan’s Initial Questionnaire Responses at C37; see also Pl.’s Brief at 7. In any event, the treatme nt of VAT is not at issue in this action.Court No. 14-00009 Page 15

period was exempted from import duties by Turkish customs authorities, pursuant to Turkey’s duty drawback program. 13 The Turkish customs authorities imposed no import duties on the steel coil when it was entered into Turkey; and no import duties were imposed on the steel coil when Borusan exported the subject standard pipe, even though the scrap and second-quality pipe that resulted from the company’s production of standard pi pe were not exported and, in fact, were sold domestically, on the Turkish market. Borusan’s Initial Questionnaire Responses at C-37 to C-39; Borusan’s Supp. Questionnaire Responses at C-29 to C-30; see also Pl.’s Brief at 6, 32-33; Pl.’s Reply Brief at 16-17, 19, 20. In administrative reviews of the antidumping duty order on standard pipe from Turkey prior to the 2011-2012 review at issue, Commerce’ s duty drawback adjustment for Borusan has uniformly reflected the fact that Turkey grants the company duty drawback on the entire volume of hot-rolled steel coil that Borusan imports for its production of standard pipe for export. In other words, in the past, Commerce has not reduced Boru san’s duty drawback adjustment to account for the fact that the process of producing standard pi pe yields scrap and second-quality pipe that are not physically incorporated into the standard pipe that Borusan exports. Nor has Commerce reduced Borusan’s duty drawback adjustment to acc ount for the fact that Borusan did not export the scrap and second-quality pipe, and, in fact, sold them domestically, on the Turkish market. See generally Borusan’s Initial Questionnair e Responses at C-39 & n.4 (stating that Borusan’s duty drawback adjustment calculation including yield loss proffered in the instant administrative review used “the same methodology verified and ac cepted by [Commerce] in numerous Turkish

13 At least for 2011-2012, the duty rate applicab le to hot-rolled coil under Turkish customs law was 9% ad valorem

. See Borusan’s Initial Questionnaire Responses at C-39, Ex. C-7.Court No. 14-00009 Page 16

antidumping cases”); Borusan’s Supp. Questionnaire Responses at C-29; see also Pl.’s Brief at 32, 34; Pl.’s Reply Brief at 20, 21-22.

In the Final Results of the 2011-2012 administr ative review, Commerce – for the first time – declined to include scrap and second-quality pi pe in Borusan’s duty drawback adjustment. In its entirety, Commerce’s explanation for that determination (as set forth in the agency’s Issues & Decision Memorandum) states: We agree with U.S. Steel that [in the Preliminary Results, Commerce] erroneously incorporated yield loss factors relating to scrap and second-quality pipe in making Borusan’s duty drawback adjustment. In the Preliminary Results, [Commerce] used Borusan’s reported [duty drawback] field that accounted for the yield loss factors for scrap and second-quality pipes. Although it did not export the scrap and second-quality pipe, Borusan claimed that it did not pay regular import duties on that portion of the coil that represents th e yield loss on the finished, prime product because it exports the finished, prime produc t. This was in error because, under Turkish law, the scrap and second-quality pipe that are not re-exported are, in fact,“subject to import duty . . . at the rate in effect for imports of the specific byproducts . . . as if the by-products or scrap had been imported into Turkey.” Therefore, [Commerce] will not incorporate yield loss factors related to scrap and second-quality pipe in making Borusan’s dut y drawback adjustment in these final results. Issues & Decision Memorandum at 18-19 (footnotes, consisting of citations only, omitted).

This action ensued.

II. Standard of Review In an action reviewing an antidumping determination by Commerce, the agency’s determination must be upheld excep t to the extent that it is found to be “unsupported by substantial evidence on the record, or otherwise not in acco rdance with law.” 19 U.S.C. § 1516a(b)(1)(B)(i);

see also NMB Singapore Ltd. v. United States, 557 F.3d 1316, 1319 (Fed. Cir. 2009). Substantial evidence is “more than a mere scintilla”; rather, it is “such relevant evidence as a reasonable mindCourt No. 14-00009 Page 17

might accept as adequate to support a conclusi on.” Universal Camera Corp. v. NLRB, 340 U.S. 474, 477 (1951) (quoting Consol. Edison Co. v. NLRB, 305 U.S. 197, 229 (1938)); see also Dongtai Peak Honey Industry Co., 777 F.3d at 1349 (same). Moreover, any determination as to the substantiality of the evidence “must take into account whatever in the record fairly detracts fro m its weight,” including “contradictory evidence or evidence from which conflicting inferences could be drawn.” Sura merica de Aleaciones Laminadas, C.A. v. United States, 44 F.3d 978, 985 (Fed. Cir. 1994) (quoting Universal Camera Corp., 340 U.S. at 487-88); see also CS Wind Vietnam Co. v. United States, 832 F.3d 1367, 1373 (Fed. Cir. 2016) (same). That said, the mere fact th at it may be possible to draw two inconsistent conclusions from the record does not prevent Co mmerce’s determination from being supported by substantial evidence. Dongtai Peak Honey Industry Co., 777 F.3d at 1349 (citing Consolo v. Fed. Maritime Comm’n, 383 U.S. 607, 620 (1966)). In addition, while Commerce must explain the ba ses for its decisions, “its explanations do not have to be perfect.” NMB Singapore Ltd., 557 F.3d at 1319-20. Commerce’s rationale nevertheless must address the pa rties’ principal arguments; and, more generally, “the path of

Commerce’s decision must be r easonably discernable” in order to support judicial review. Id. (citing Motor Vehicle Mfrs. Ass’n of the U.S., Inc . v. State Farm Mut. Automobile Ins. Co., 463 U.S. 29, 43 (1983)); 19 U.S.C. § 1677f(i)(3)(A) (r equiring Commerce to “include in a final determination . . . an explana tion of the basis for its deter mination that addresses relevant arguments, made by interested parties”); see generally CS Wind Vietnam Co., 832 F.3d at 1375- 81 (highlighting agency’s “obligation to set forth a comprehensible and satisfactory justificationCourt No. 14-00009 Page 18

for its [determination] . . . as a reasonable impl ementation of statutory directives supported by substantial evidence,” and analyzing that obligation in depth). Further, “an agency’s action must be upheld, if at all, on the basis articulated by the agency itself.” State Farm, 463 U.S. at 50; see also Changzhou Wujin Fine Chemical Factory Co. v. United States, 701 F.3d 1367, 1377, 1379 (Fed. Cir. 2012) (citations omitted) (same); Home Prods. Int’l, Inc. v. United States, 633 F.3d 1369, 1381 (Fed. Cir. 2011) (citing, inter alia , Abbott Labs. v. United States, 573 F.3d 1327, 1332-33 & n.1 (Fed. Cir. 2009)) (same). An agency’s

determination thus cannot be sustained on the basis of a rationa le supplied after the fact – whether by the agency’s litigation counsel, by another party, or by the court. See Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168-69 (1962); see also Home Prods. Int’l, 633 F.3d at 1381 (citing Abbott Labs., 573 F.3d at 1332-33 & n.1 (same); Bowen v. Georgetown Univ. Hospital, 488 U.S. 204, 213 (1988)); Changzhou Wujin Fine Chemical Factory Co., 701 F.3d at 1379 (citation omitted) (same).

III. Analysis Borusan contests Commerce’s decision to exclude yield loss ( i.e. , scrap and second-quality pipe) from the duty drawback adjustment in calculating the company’s dumping margin. In essence, Borusan contends that Commerce’s ex clusion of scrap and second-quality pipe from the duty drawback adjustment results in an “imbalance” between export price and normal value, which – in turn – artificially inflates the company’s dumping margin. See Pl.’s Brief at 1-2, 3, 6-9, 10, 31-36; Pl.’s Reply Brief at 1, 16- 22; Saha Thai, 635 F.3d at 1338 (explaining that purpose of duty drawback adjustment is to correct “imbalance” between export price and normal value that wouldCourt No. 14-00009 Page 19

result if duty drawback received by an importer were not added to export price in agency’s calculation of dumping margin). As detailed below, Commer ce’s Issues & Decision Memorandum fails to address Borusan’s main argument, misstates Turkish customs law, and otherwise fails to adequately explain the agency’s decision. Mo reover, the arguments that the G overnment and U.S. Steel make in an effort to prop up Commerce’s determination are post hoc rationale. See generally Def.’s Response Brief at 2, 3-4, 6, 40-43; Def.-Int.’s Resp onse Brief at 1, 4-6, 9, 23-27. As such, the path of Commerce’s reasoning in deciding to exclude scrap and second-quality pipe from Borusan’s duty drawback adjustment is not “reasonably . . . discernable.” See State Farm, 463 U.S. at 43. And, absent an adequate explanation of Comme rce’s reasoning, it is not possible to conduct a “substantial evidence” review or to analyze whethe r the agency’s determination is in accordance

with the statute. Remand is therefore necessary to allow Commerce to reconsider this issue and to clearly explain whatever determination it may reach.

A. Borusan’s Arguments There are several significant deficiencies in Commerce’s stated bases for denying Borusan a duty drawback adjustment for its yield loss ( i.e. , the scrap and second-qua lity pipe that result from Borusan’s production of the standard pipe that it exports to the U.S.). In relevant part, the Issues & Decision Memorandum states: “Although it did not export the sc rap and second-quality pipe, Borusan claimed that it did not pay regula r import duties on that portion of the coil that represents the yield loss on the finished, prime products because it exports the finished, primeCourt No. 14-00009 Page 20

product. This was in error because, under Turk ish law, the scrap and second-quality pipe that are not re-exported are, in fact, ‘subject to import duty . . . at the rate in effect for imports of the specific by-products . . . as if the by-products or scrap had been imported into Turkey.’” Issues & Decision

Memorandum at 19. As Borusan emphasizes, however, the company’s principal argument throughout the administrative review was that the duty rate app licable to scrap and sec ond-quality pipe during the 2011-2012 period of review was 0%. Thus, Borusa n states, the amount of duty drawback that Turkey granted to Borusan was unaffected by the 2010 modification to Turkey’s duty drawback program, which subjects by-products such as scra p and second-quality pipe to import duty at the rate applicable to those by-products as if they had been imported into Turkey, if the by-products are sold on the domestic (Turkish) market. See Pl.’s Brief at 7, 10, 34-36; Pl.’s Reply Brief at 16- 17, 18-20, 22. Yet, in explaining Commerce’s decisi on to exclude scrap and second-quality pipe from Borusan’s duty drawback adjustment, the Issues & Decision Memorandum inexplicably fails to make any mention of the 0% duty rate. See Issues & Decision Memorandum at 18-19. Commerce is obligated by statute to “include in [its] final determination . . . an explanation

of the basis for its determination that addresses relevant arguments , made by interested parties .” 19 U.S.C. § 1677f(i)(3)(A) (emphases added); see Timken U.S. Corp. v. United States, 421 F.3d 1350, 1351, 1356 (Fed. Cir. 2005) (discussing statutory directive); NMB Singapore Ltd., 557 F.3d at 1320 (same); Husteel Co. v. United St ates, 39 CIT ____, ____, 98 F. Supp. 3d 1315, 1331 (2015), appeal docketed , No. 2016-2732 (Sept. 29, 2016) (observing that “Commerce has a general duty to explain the basis for its decisions,” whic h “includes addressing re levant arguments made by interested parties”) (citing NMB Singapore Ltd., 557 F.3d at 1319-20); see generally StateCourt No. 14-00009 Page 21

Farm, 463 U.S. at 48-49 (“reaffirm[ing]” the fundamen tal principle that “an agency must cogently explain why it has exercised its discretion in a given manner”) (citing Atchison, Topeka & Santa Fe Ry. Co. v. Wichita Bd. of Trade, 412 U. S. 800, 806 (1973); FTC v. Sperry & Hutchinson Co., 405 U.S. 233, 249 (1972); NLRB v. Metropolitan Life Ins. Co., 380 U.S. 438, 443 (1965)). In Amerijet, the U.S. Court of Appeals for the D.C. Circuit recently underscored the importance of an agency’s obligation to “articulate an explanation for its action”: “[A] ‘fundamental requirement of administr ative law is that an agency set forth its reasons for decision; an agency’s failure to do so constitutes arbitrar y and capricious agency action.’” Amerijet Int’l, Inc. v. Pistole, 753 F.3d 1343, 1350 (D.C. Cir. 2014) (re ferring to the requirement that an agency adequately explain its decision as a “basic principle” that is “indispensable to sound judicial review”) (quoting Tourus Records, Inc. v. DEA, 259 F.3d 731, 737 (D.C. Cir. 2001)). Amerijet further noted that “conclusory statements will not do; an ‘agency’s statement must be one of reasoning .’” Amerijet Int’l, Inc., 753 F.3d at 1350 (e mphasis added) (quotin g Butte Cty. v. Hogen, 613 F.3d 190, 194 (D.C. Cir. 2010)); see generally CS Wind Vietnam Co., 832 F.3d at 1376-77, 1379-81 (discussing at length and in great deta il Commerce’s obligati on to supply adequate explanations for its determinations; stating, inter alia , that the agency’s explanation for a

determination “must reas onably tie the determination under re view to the governing statutory standard and to the record evidence by indicating what statutory interpretations the agency is adopting and what facts the agency is finding”). Much like the flawed agency rationale at issue in Amerijet, Commerce’s explanation in the

Issues & Decision Memorandum here “does not a ddress the main thrust” of Borusan’s argument in support of its claim for a duty drawback adjustment on yield loss – i.e. , Borusan’s argumentCourt No. 14-00009 Page 22

that, under Turkish customs law, the duty rate ap plicable to scrap and second-quality pipe is 0%.

See Amerijet Int’l, Inc., 753 F.3d at 1351-52. As a result, much like the situation in Amerijet, it is impossible here to “discern if [Commerce] consid ered the substance of [Borusan’s] request and, if so, what reasons it had for denying it.” Id

. The bottom line is that, in its Issues & D ecision Memorandum, “Commerce essentially ignored [Borusan’s] argument[]” concerning the 0% duty rate. See Husteel Co. 39 CIT at ____, 98 F. Supp. 3d at 1331. 14 Commerce thus contravened its basi c duty under the statute to ensure

14 At oral argument, the Government empha sized that the footnotes to Commerce’s explanation in the Issues & Decision Memorandu m cite Borusan’s questi onnaire responses. The Government further emphasized that Borsuan’s qu estionnaire responses, in turn, state that – under Turkish customs law – the duty rate applicable to scrap and second-quality pipe is 0%. The Government contends that the footnotes in the Issues & Decision Memorandum (and the footnotes’ bare citations to Borusan’s submissions) suffice to discharge Commerce’s statutory obligation to acknowledge and address Borusan’s argument based on the 0% duty rate. The Government’s argument gr asps at straws. In effect, the footnotes to Commerce’s explanation in the Issues & Decision Memoran dum (at best) incorporate by reference, and constitute a restatement of, Borusan’s positi on. The footnotes do nothing to illuminate Commerce’s rationale for its decision to deny Bo rusan a duty drawback adjustment for scrap and second-quality pipe. In effect, the submissions ci ted in the footnotes set forth Borusan’s position. As such, references to those submissions cont ribute nothing to the substance of Commerce’s explanation. Merely restating a party’s position doe s not fulfill an agency’s obligation to grapple with the party’s main arguments and to adequa tely explain the reasoning that underpins the agency’s determination. See generally , e.g. , Amerijet Int’l, Inc., 753 F.3d at 1351 (rejecting as inadequate an agency’s proffered explanation which “simply restated the rules from which [a party] sought exception,” and observing that “[r]es tating a rule from which an exception is sought explains nothing about why the agency denied the exception; it begs the question”). In addition, a basic tenet of ci vil and appellate procedure is that “arguments raised in footnotes are not preserved.” SmithKline Beecham Corp. v. Apotex Corp., 439 F.3d 1312, 1320 (Fed. Cir. 2006) (citations omitte d). A reasonable corollary would preclude an agency from burying in a footnote some essential aspect of the rationale for the agency’s determination.Court No. 14-00009 Page 23

that its explanation for its determination “addresses relevant arguments, made by interested parties.” 19 U.S.C. § 1677f(i)(3)(A). Remand would be warranted for this reason alone. 15 There is, however, at least one additional problem with Commerce’s reasoning as set forth

in the Issues & Decision Memorandum. Commer ce fundamentally misstates the relevant Turkish customs law. Specifically, in the Issues & D ecision Memorandum, Commerce asserts that, “under Turkish law, the scrap and second-quality pipe that are not re-exported are, in fact, ‘subject to import duty . . . at the rate in effect for imports of the specific by-products . . . as if the by-products or scrap had been imported into Turkey.’” I ssues & Decision Memorandum at 19. Significantly, Commerce’s summary of Turkish law thus omits the pivotal concept of domestic sale. Contrary to Commerce’s assertion, under Turkish law, whether scrap and second-quality pipe are subject to import duty does not turn on whether or not they are exported from Turkey. Instead, the key

consideration is whether sc rap and second-quality pipe that is not exported is sold domestically ,

15 Further, as set forth in section II above, it is hoary black letter law that any analysis of the substantiality of evidence “must take into acc ount whatever in the record fairly detracts from its weight,” including “contradictory evidence or evidence from which conflicting inferences could be drawn.” Suramerica de Aleaciones Laminadas, C.A., 44 F.3d at 985 (quo ting Universal Camera Corp., 340 U.S. at 487-88); see also Mittal Steel Point Lisas Ltd. v. United States, 548 F.3d 1375, 1380-81 (Fed. Cir. 2008) (same). Moreover, “an ag ency ‘must address significant arguments and evidence which seriously undermine[] its reasoni ng and conclusions.’” Husteel Co., 39 CIT at ____, 98 F. Supp. 3d at 1359 (quoting Altx, Inc. v. United States, 25 CIT 1100, 1117-18, 167 F. Supp. 2d 1353, 1374 (2001)). By ignoring Borusan’s argument emphasizing t he 0% duty rate applicable to scrap and second-quality pipe under Turkish customs law, Co mmerce failed to take into account arguments and evidence that “fairly detract” from both the agency’s determination and the evidence on which that determination is based. In addition, Commerce failed to address a significant argument and evidence that “seriously undermin e” the agency’s reasoning and conclusions. Accordingly, on the existing record, it cannot be said that Commer ce’s decision to deny Borusan a duty drawback adjustment for scrap and second-quality pipe is supported by substantial evidence. Remand would be justified on these grounds as well.Court No. 14-00009 Page 24

on the Turkish market . In other words, even if scrap and second-quality pipe are not exported, Turkish customs law nevertheless does not subjec t them to import duty, unless they are the subject of domestic sales (and, even then, the applicable duty rate is 0%). In the course of oral argument, the G overnment argued that, although Commerce’s statement of Turkish law is incomplete, it is not inaccurate because, in this case, Borusan did sell the scrap and second-quality pipe on the Turkish market. Under the circumstances presented here, however, a clearer statement of Commerce’s position is required. From the Issues & Decision Memorandum, it is simply impossible to know whether or not Commerce fully understood applicable Turkish law at the time the agency made its determination. Even more to the point, from a reading of the I ssues & Decision Memorandum, it is impossible to state definitively whether Commerce’s position is that the scrap and second-quality pipe at issue should not be included in Borusan’s duty drawback adjustment because they were not exported, or whether Commerce’s position is that the scrap and second-quality pipe should not be included in the duty drawback adjustment because Borusan sold them on the Turkish domestic market, or whether Commerce’s position is that the scrap an d second-quality pipe sh ould not be included in the duty drawback adjustment because they are subject to import duty under Turkish customs law

– albeit at a rate of 0%. 16 In sum, just as Commerce’s fa ilure to acknowledge and address

16 Borusan observes that it would be more than passing strange if Commerce’s position here is that the scrap and second-quality pipe should not be included in the duty drawback adjustment because they were not exported. As Borusan indi cates, such a position would effectively constitute a “sea change” on Commerce’s part. Borusan has repeatedly pointed out that, in prior administrative reviews, Commerce has consistently included scrap and s econd-quality pipe in the company’s duty drawback adjustment, even though the company has never exported the scrap and second-qu ality pipe and even thoughCourt No. 14-00009 Page 25

Borusan’s argument based on the 0% duty rate ap plicable to scrap and second-quality pipe alone justifies remand to the agency, Commerce’s misstatement of Turkish law does as well.

the company has always sold the scrap and second-quality pipe domestically, on the Turkish market. See , e.g. , Borusan’s Supp. Questionnaire Responses at C-29; Pl.’s Brief at 32-35; Pl.’s Reply Brief at 20, 21-22. Moreover, in an investigation covering a time period more recent than the period of review in this case, Commerce granted Borusan “the duty drawback adjustment as it was reported” by the company – without excluding scrap and second-qu ality pipe. Issues & Decision Memorandum for the Final Affirmative Determination in the Less than Fair Value Investigation of Certain Oil Country Tubular Goods from the Republic of Turkey at 17 (Comment 1) (July 10, 2014); see also Certain Oil Country Tubular Goods From the Repub lic of Turkey: Final Dete rmination of Sales at Less Than Fair Value and Affirmative Final Determination of Critical Circumstances, in Part, 79 Fed. Reg. 41,971 (July 18, 2014). Indeed, Saha Thai – an oft-cited case concerni ng the duty drawback adjustment – involved a duty drawback adjustment for yield loss, much like the scrap and second-quality pipe at issue here. See Saha Thai Steel Pipe (Public) Co., 33 CIT at 1546-49 (rejecting Commerce’s decision to use Saha Thai’s actual “yield loss factors” – rat her than Thai government’s standard “yield loss factors” – in calculating company’s duty drawback adjustment), aff’d , 635 F.3d 1335 (Fed. Cir. 2011); see generally Pl.’s Reply Brief at 21 (summarizing Saha Thai and its implications for this case). Nowhere in the decisions in that case is there even a whisper of a hint that yield loss is not to be included in duty drawback adjustments. The sheer brevity of Commerce’s explanation in the Issues & Decision Memorandum further suggests that Commerce is not making a “sea change” by taking the position that yield loss that is not exported cannot be included in a duty drawback adjustment. “When an agency decides to change course, . . . it must adequately explain the reason for a reversal of policy.” Huvis Corp. v. United States, 570 F.3d 1347, 1354 (Fed. Cir. 2009) (quoting Nippon Steel Corp. v. U.S. Int’l Trade Comm’n, 494 F.3d 1371, 1377-78 n.5 (Fed. Cir. 2007)) (internal citations omitted). In circumstances such as those presented here, it would be incumbent upon Commerce to “provide a more detailed justification [for a change in policy or practice] than what would suffice for a new policy [or practice] created on a blank slate.” Huvis Corp., 570 F.3d at 1354-55 (citing FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515-16 (2009)); see also , e.g. , State Farm, 463 U.S. at 42 (ruling that “an agency changing its course by rescinding a rule is obligated to supply a reasoned analysis for the change beyond that which may be required when an agency does not act in the first instance”).Court No. 14-00009 Page 26

B. The Arguments of the Government and U.S. Steel In their briefs, both the Government and U.S. Steel strain to salvage Commerce’s determination, mainta ining that the agency properly declin ed to include scra p and second-quality pipe in calculating Borusan’s duty drawback adjustment. See generally Def.’s Response Brief at 2, 6, 40-43; Def.-Int.’s Response Brief at 4-6, 9, 23-27. Their efforts, however, are in vain. The gravamen of the Government’s brief is that Commerce correctly denied Borusan’s request for a duty drawback adjustment for scra p and second-quality pipe, due to a “failure of proof.” Specifically, in its brief, the Government asserts that “[t]he record does not support Borsuan’s contention” that, under Turkish customs law, the duty rate applicable to scrap and second-quality pipe was 0%. Def.’s Response Brief at 42; see also id . at 2, 6. While acknowledging that “Borusan asserted that the applicable duty ra te on scrap and second-quality pipe imported into Turkey was zero,” the Gove rnment’s brief argues that Borusan “did not substantiate its claim with any supporting evidence , such as a Turkish tariff schedule that lists the duty rate applicable to imports of scrap and second-quality pipe.” Id . at 42-43 (emphases in the original); see also id . at 2, 6. Wholly discounting the certified statements in Borusan’s questionnaire responses that “[t]here is no custom s import duty in Turkey on steel scrap or secondquality pipe” and that “the import duty on scrap and second quality pipe is zero,” the Government’s brief asserts that “[c]onclusory statements such as those made by Borusan, do not equate to preponderant evidence.” Id . at 43 (citation omitted); see Borusan’s Initial Questionnaire Responses at C-37; Borusan’s S upp. Questionnaire Responses at C-29. 17

17 As required by Commerce’s regulations, lik e all “submission[s] containing factual information” that respondents file with the agen cy, all of Borusan’s questionnaire responses wereCourt No. 14-00009 Page 27

The short answer to the Government’s argument is that it is pure, impermissible post hoc rationale. As discussed elsewhere herein, Commerc e’s explanation of its determination in the

Issues & Decision Memorandum does not even mention the 0% duty rate applicable to scrap and second-quality pipe. See Issues & Decision Memorandum at 18-19. Clearly Commerce did not base its determination on an alleged absence of record evidence substantiating that duty rate. See Pl.’s Reply Brief at 18-19.

As set forth in section II above , it is well-settled that an ag ency’s determination cannot be sustained on the basis of a rationale supplied after the fact by litigation counsel. See Burlington Truck Lines, 371 U.S. at 168-69. As the Suprem e Court has underscored, “an agency’s action must be upheld, if at all, on the basis articulated by the agency its elf.” State Farm, 463 U.S. at 50. The Government’s argument therefore must be rejected. 18

filed under certification by bot h Borusan and its counsel. See 19 C.F.R. § 351.303(g); Borusan’s Initial Questionnaire Responses at 4-5 (Pub. Doc. No. 54) (certifications by Borusan and its counsel); Borusan’s Supp. Questi onnaire Responses at 4-5 (same); see also Pl.’s Reply Brief at 17, 18. In their certifications (the precise la nguage of which is dictated by Commerce’s regulations), Borusan and its counsel attested to the accuracy and completeness of all information provided in the questionnaire responses, under pena lty of criminal sanctions for “material false statements” pursuant to 18 U.S.C. § 1001. See 19 C.F.R. § 351.303(g); Borusan’s Initial Questionnaire Responses at 4-5 (Pub. Doc. No. 54); Borusan’s Supp. Questionnaire Responses at 4-5; 18 U.S.C. § 1001; see also Pl.’s Reply Brief at 17, 18.

18 Quite apart from the fact that it constitutes post hoc rationale, the argument that the Government makes in its brief is plagued by a number of other serious infirmities. As a threshold matter, although it is true that there is no documentary evidence of the duty rate applicable to scrap and second-quality pipe in the existing administra tive record, the record does include Borusan’s certified questionnaire responses atte sting to the fact that the duty rate during the relevant period was 0%. See Borusan’s Initial Questionnaire Responses at C-37; Borusan’s Supp. Questionnaire Responses at C-29. And, pursuant to Commerce’s own regulations, such “statements of fact” constitute “[e]vidence.” See 19 C.F.R. § 351.102(b)(21)(i)-(ii) & (iv)-(v) (2016) (defining “[e]vidence” as “ including statements of fact , documents, and data . . . .”) (emphasis added). See generally Pl.’s Reply Brief at 17-18 (noting, inter alia , that 19 C.F.R. § 351.104(a)(1) specifiesCourt No. 14-00009 Page 28

Although it is perhaps a slightly closer ca ll, U.S. Steel’s arguments in support of

Commerce’s determination also constitute post hoc rationale. For example, U.S. Steel characterizes the scrap and s econd-quality pipe at issue as “nonsubject merchandise” and emphasizes that they were not exported to the U.S., asserting that yield loss that is not exported to the U.S. cannot be included in a duty drawback adjustment. See Def.-Int.’s Response Brief at 24- 26, 27; see also id . at 1, 5, 9. Contrary to U.S. Steel’s implication, however, there is no indication

in the Issues & Decision Memorandum that Co mmerce focused on the definition of “subject

that the administrative record includes “all factua l information, written argume nt, or other material developed by, presented to, or obt ained by the Secretary during the course of a proceeding that pertains to the proceeding”). It is therefore incorrect to assert that the record here includes no evidence of the 0% duty rate applicable to sc rap and second-quality pipe under Turkish customs law. Moreover, the notion that respondents must pr ove all facts by documentary evidence is highly impracticable and, in fact, has not be en Commerce’s practice. As Borusan puts it, “respondents . . . make factual statements in res ponse to hundreds of questions and are not required to submit a separate document substantiating . . . [ each and every] factual statement[].” Pl.’s Reply Brief at 17-18. Further, although the Government (and the domestic producer) here wish to discount a statement in a respondent’s certified questionnair e response and accord it no evidentiary weight, the precedent that they propose to set could be da ngerous. “The shoe will be on the other foot” in other proceedings, where the agency and the do mestic industry will want to rely on such a statement. To the extent that they here contend that such certif ied statements cannot be relied upon and have no evidentiary value, it would be incongruous (to say the least) for them to seek to rely on such statements in other proceedings or to seek to hold respondents accountable for them. In any event, at least in this case, any insi stence on documentary proof elevates form over substance, because the fact at issue is not in dis pute. No one contests Borusan’s statement that the applicable duty rate was 0%. See , e.g. , Def.-Int.’s Response Brief at 25 (acknowledging “the applicable import duty rate for [scrap and sec ond-quality pipe] established under Turkish customs laws – i.e. , zero percent”); id . at 25-26 (arguing that scrap and s econd-quality pipe are subject to import duties, “albeit at a zero percent rate”). Indeed, the administrative record here could not sustain a finding that the applicable duty rate was anything other than 0%.Court No. 14-00009 Page 29

merchandise” vis-à-vis the scra p and second-quality pipe; and Commerce’s explanation in the

Issues & Decision Memorandum does not even use the term “nonsubj ect merchandise.” See Issues & Decision Memorandum at 18-19. Further, according to the explanation in the Issues & Decision Memorandum, Commerce’s decision to exclude sc rap and second-quality pipe from Borusan’s duty drawback adjustment did not turn on the fact that the scrap and second -quality pipe were not exported. Instead, the explanation in the Issues & Decision Memorandum seemingly identifies as the critical factor the fact that the scrap a nd second-quality pipe were subject to import duty (though, again, the explanation fails to note that the applicable duty rate was 0%). See id . U.S. Steel cannot put words in Commerce’s mouth. U.S. Steel similarly highlights the fact that Borusan sold the scrap and second-quality pipe domestically, on the Turkish market. See Def.-Int.’s Response Brief at 24-25, 27; see also id . at 1, 5, 9. But Commerce’s explanation in the Issu es & Decision Memorandum is devoid of any

reference to Borusan’s domestic sale s of scrap and second-quality pipe. See Issues & Decision Memorandum at 18-19. Thus, according to the agen cy’s own explanation, those domestic sales played no part in Commerce’s determination. Lastly, U.S. Steel advances an argument tracking the language of the statute, which provides for a duty drawback adjustment to acco unt for “the amount of any import duties imposed by the country of exportation . . . which have not been collected[] by reason of the exportation of the subject merchandise to the United States.” See Def.-Int.’s Response Brief at 25; 19 U.S.C. § 1677a(c)(1)(B). Drawing on the statutory text, U.S. Steel concludes that the reason that Borusan pays no import duties on scrap and second-quality pipe is not becau se of “the exportation of the subject merchandise [here, standard pipe] to the United States,” but, rather, because – underCourt No. 14-00009 Page 30

Turkish customs law – the duty rate applicable to scrap and second-qu ality pipe is 0%. See Def.- Int.’s Response Brief at 25. However, any such nua nced parsing of the statute is conspicuously absent from Commerce’s explanati on of its determination in the Issues & Decision Memorandum.

See Issues & Decision Memorandum at 18-19. Whatev er the merits of U.S. Steel’s statutory analysis, it cannot be credited because it is post hoc rationale.

C. Proceedings on Remand Much as in CS Wind Vietnam Co., “[i]n this case, Commerce has not provided the needed explanation setting forth the interpretations and evidence-based factual findings that establish the required connection from stat ute to determination.” See CS Wind Vietnam Co., 832 F.3d at 1377. Remand will permit Commerce “to provide that A-to-Z explanation” that is missing from the existing administrative record. Id

. Some of the questions and uncertainties surrounding Commerce’s determination are

identified above and others were explored in oral argument. See Audio Recording of Oral Argument (Oct. 8, 2015). However, “[o]n remand, Commerce’s task is not to provide isolated responses” to the questions and concerns that have been specifically identified. See CS Wind Vietnam Co., 832 F.3d at 1380. Instead, Commerc e must give holistic consideration to the treatment of yield loss in calculating duty drawb ack adjustments and then “provide a coherent, full explanation” of its practice both in this case in particular and more ge nerally, “laying out and justifying each step so that not only are . . . [t he already identified] concerns addressed, but, more broadly, . . . [the court] may see how [Comme rce’s] ultimate result is grounded in a justified statutory interpretation and the evidence of record.” Id

.Court No. 14-00009 Page 31

IV. Conclusion

For all the reasons set forth above, Borusan’ s Motion for Judgment on the Agency Record must be granted and this matter remanded to the U.S. Department of Commerce for further action not inconsistent with this opinion. A separate order will enter accordingly.

/s/ Delissa A. Ridgway Delissa A. Ridgway Judge Dated: April 20, 2017 New York, New York