Opinion ID: 210163
Heading Depth: 2
Heading Rank: 1

Heading: Substantial Retooling of Production Facilities

Text: The substantial retooling prong requires first that each and every entity that Commerce proposes to collapse have production facilities for similar or identical products. 19 C.F.R. § 351.401(f)(1). But a company cannot avoid collapsing simply by outsourcing manufacturing to a subcontractor; while it does not itself possess production facilities, its use of the subcontractor's facilities is sufficient to satisfy this portion of the requirement. See 19 C.F.R. § 351.401(h) (The Secretary will not consider a toller or subcontractor to be a manufacturer or producer where the toller or subcontractor does not acquire ownership, and does not control the relevant sale, of the subject merchandise or foreign like product.). Thus the Viraj entities here all have production facilities to make SSWR from steel billets; in fact, they all utilize the same facilities since they all use the same subcontractor. We then must ask whether substantial retooling would be necessary in the production facilities to restructure manufacturing priorities between the three entities. See 19 C.F.R. § 351.401(f)(1). Here, it is clear that no retooling would be required at all because all three Viraj entities utilize the same facilities. Rather than requiring changes to the subcontractor's facilities, Viraj need only alter the quantities ordered for each respective entity to prioritize one entity's production over another's. This is made easier by the fact that all three obtain their steel billets from a common source that is also controlled by Viraj, namely VAL. The Court of International Trade, while not making an explicit finding as to the substantial retooling prong, seemed to base its decision at least in part on the view that because the evidence does not suggest that the Viraj entities' contracts with their common subcontractor were anything but lawful and at arm's length, the subcontractor would prevent any restructuring of manufacturing priorities between the Viraj entities. But even assuming that the contracts are lawful and at arm's lengthwhich both Commerce and Viraj concedethere is no evidence to indicate that these contracts or the subcontractor's operations would present any obstacle to Viraj shifting production quantities among the three entities. In any event, the proper analysis is whether substantial evidence supports Commerce's determination, and we hold that the Viraj entities' use of a common subcontractor for their SSWR production is substantial evidence that supports Commerce's finding that the substantial retooling prong was satisfied.