Court Opinion

ID: 4505424
Source: CourtListenerOpinion
Date Created: 2020-02-06 21:01:36.154154+00
Date Added: 2024-06-11T12:42:39.635711
License: Public Domain

Slip Op. 20-15

               UNITED STATES COURT OF INTERNATIONAL TRADE

UTTAM GALVA STEELS LIMITED,

                        Plaintiff,
                                                   Before: Leo M. Gordon, Judge

                   v.                              Court No. 19-00044

UNITED STATES,
                        Defendant,

CALIFORNIA STEEL INDUSTRIES INC.,
AND STEEL DYNAMICS, INC.,
              Defendant-Intervenors.

                                     OPINION and ORDER

 [Commerce’s Final Results sustained in part and remanded in part.]

                                                                 Dated: February 6, 2020

      John M. Gurley and Aman Kakar, Arent Fox LLP, of Washington, DC, for Plaintiff
Uttam Galva Steels Limited.

       Elizabeth A. Speck, Senior Trial Counsel, Commercial Litigation Branch, Civil
Division, U.S. Department of Justice of Washington, DC, for Defendant United States.
With her on the brief were Joseph H. Hunt, Assistant Attorney General, Jeanne E.
Davidson, Director, and Claudia Burke, Assistant Director. Of counsel on the brief was
Rachel A. Bogdan, Attorney, U.S. Department of Commerce, Office of the Chief Counsel
for Trade Enforcement and Compliance of Washington, DC.

     Roger B. Schagrin and Christopher T. Cloutier, Schagrin Associates of
Washington, DC, for Defendant-Intervenors California Steel Industries, Inc. and Steel
Dynamics, Inc.

      Gordon, Judge: This action involves the final results of the administrative review
Court No. 19-00044                                                                    Page 2

conducted by the U.S. Department of Commerce (“Commerce”) of the countervailing duty

(“CVD”) order of certain corrosion-resistant steel products (“CORE”) from India. See

Certain Corrosion-Resistant Steel Products from India, 84 Fed. Reg. 11,053 (Dep’t of

Commerce Mar. 25, 2019) (final results admin. review) (“Final Results”); see also

accompanying Issues and Decision Memorandum, C-533-864, PD 1 193 (Dep’t of

Commerce              Mar.            18,            2019),            available           at

https://enforcement.trade.gov/frn/summary/india/2019-05647-1.pdf (last visited this date)

(“Decision Memorandum”).

       Before the court is the USCIT Rule 56.2 motion for judgement on the agency record

filed by Plaintiff Uttam Galva Steels Limited (“Uttam Galva” or “UGSL”). See Pl.’s Mem.

in Supp. of its 56.2 Mot. for J. on the Agency R., ECF No. 25 2 (“Pl.’s Br.”); see also Def.'s

Resp. in Opp'n to Pl.'s Mot. for J. on the Agency R., ECF No. 26 (“Def.'s Resp.”); Def.-

Intervenors’ Resp. in Opp’n to Pl.’s Mot. for J. on the Agency R., ECF No. 27 (“Def.-

Intervenors’ Resp.”); Reply Br. of Pl. Uttam Galva, ECF No. 28 (“Pl.’s Reply”). The court

has jurisdiction pursuant to Section 516A(a)(2)(B)(i) of the Tariff Act of 1930, as amended,

19 U.S.C. § 1516a(a)(2)(B)(i) 3, and 28 U.S.C. § 1581(c) (2012). For the reasons that

follow, the court sustains in part and remands in part the Final Results.

1 “PD” refers to a document in the public administrative record, which is found in ECF No.
20-3, unless otherwise noted. “CD” refers to a document in the confidential administrative
record, which is found in ECF No. 20-2, unless otherwise noted.
2 All citations to parties’ briefs and the agency record are to their confidential versions

unless otherwise noted.
3 Further citations to the Tariff Act of 1930, as amended, are to the relevant provisions of

Title 19 of the U.S. Code, 2012 edition.
Court No. 19-00044                                                               Page 3

                                I. Standard of Review

      The court sustains Commerce’s “determinations, findings, or conclusions” unless

they are “unsupported by substantial evidence on the record, or otherwise not in

accordance with law.” 19 U.S.C. § 1516a(b)(1)(B)(i). More specifically, when reviewing

agency determinations, findings or conclusions for substantial evidence, the court

assesses whether the agency action is reasonable given the record as a whole. Nippon

Steel Corp. v. United States, 458 F.3d 1345, 1350–51 (Fed. Cir. 2006). Substantial

evidence has been described as “such relevant evidence as a reasonable mind might

accept as adequate to support a conclusion.” DuPont Teijin Films USA v. United States,

407 F.3d 1211, 1215 (Fed. Cir. 2005) (quoting Consol. Edison Co. v. NLRB, 305 U.S.

197, 229 (1938)). Substantial evidence has also been described as “something less than

the weight of the evidence, and the possibility of drawing two inconsistent conclusions

from the evidence does not prevent an administrative agency’s finding from being

supported by substantial evidence.” Consolo v. Fed. Mar. Comm’n, 383 U.S. 607, 620

(1966). Fundamentally, though, “substantial evidence” is best understood as a word

formula connoting reasonableness review. 3 Charles H. Koch, Jr. Administrative Law and

Practice § 9.24[1] (3d ed. 2019). Therefore, when addressing a substantial evidence issue

raised by a party, the court analyzes whether the challenged agency action “was

reasonable given the circumstances presented by the whole record.” 8A West’s Fed.

Forms, National Courts § 3.6 (5th ed. 2019).
Court No. 19-00044                                                                    Page 4

                                      II. Discussion

         A.     Application of Total Adverse Facts Available to Uttam Galva

       In initiating its administrative review of the CVD order of CORE from India,

Commerce examined whether producers/exporters of the subject merchandise are cross-

owned with one another, a parent or holding company, or with their input suppliers.

19 C.F.R. § 351.525(b)(6). Commerce required respondents, including Uttam Galva, to

disclose the firms with which they are affiliated and cross-owned as part of their initial

questionnaire response. See Decision Memorandum at 25. Specifically, the questionnaire

referenced the definition of “Affiliated Persons” in 19 U.S.C. § 1677(33), which includes:

              (1) members of the same family, (2) any officer or director of
              an organization and such organization, (3) partners, (4)
              employers and their employees, and (5) any person or
              organization directly or indirectly owning, controlling, or
              holding with power to vote, 5 percent or more of the
              outstanding voting stock or shares of any organization and
              such organization. In addition, affiliates include (6) any person
              who controls any other person and that person, or (7) any two
              persons who directly control, are controlled by, or are under
              common control with, any person. “Control” exists where one
              person is legally or operationally in a position to exercise
              restraint or direction over the other person.

Id. Commerce explained that affiliation information for respondents is critical to how

Commerce conducts the administrative review. “Commerce considers the identification

of affiliates … to be so integral to its countervailing duty proceedings that … it seeks

information regarding affiliates prior to submission of all the other information solicited by

the questionnaire. From a procedural standpoint, Commerce uses [this affiliation

information] to determine the universe of companies from which additional information
Court No. 19-00044                                                                   Page 5

may need to be solicited.” Id. Commerce further explained that “[i]f Commerce requests

a full questionnaire of a company identified in a respondent’s affiliation response,

Commerce then uses the information in that … response to determine … whether or not

cross-ownership exists between the respondent and the affiliate for the purposes of the

countervailing duty law, in accordance with 19 CFR 351.525(b)(6)(vi).” Id. at 25–26.

       In its initial questionnaire response, Plaintiff identified several affiliates and

Commerce preliminarily found that “cross-ownership exists among UGSL, [Uttam Value

Steels Limited (“UVSL”)], and an affiliated input supplier, Uttam Galva Metallics Limited

(UGML).” See Memorandum from J. Maeder to G. Taverman, re: Post-Preliminary

Analysis, at 2 (Dep’t of Commerce Dec. 19, 2018), PD 182 (“Post-Preliminary Analysis

Memo”). Additionally, in its initial questionnaire response, UVSL “identified its controlling

shareholders as First India Infrastructure Private Limited (“FIIPL”) and Metallurgical

Engineering and Equipment Limited (“MEEL”).” Id. at 4. Notably, Uttam Galva did not

identify any affiliation with FIIPL or MEEL, even though these entities are “owned by Anuj

and Ankit Miglani, who were in turn the managing director and director, respectively, of

UGSL during the [period of review (“POR”)].” Id. Moreover, Uttam Galva failed to report

any affiliation with Lloyds Steels Industries Limited (“LSIL”). See Decision Memorandum

at 26 (citing Post-Preliminary Analysis Memo).

       In the course of evaluating new subsidy allegations brought by petitioners, 4

Commerce placed on the record certain financial statements of LSIL covering the POR.

4Petitioners alleged in the new subsidy allegations that “UGSL and UVSL benefitted from
debt-to-equity swaps provided to UVSL prior to the POR, when it was known as Lloyds
Court No. 19-00044                                                               Page 6

See Post-Preliminary Analysis Memo at 5. “[T]hese financial statements identif[ied] FIIPL

and MEEL as owners of 46.11 percent of the shares in LSIL and identified a ‘scheme of

arrangement’ between UVSL and LSIL regarding a demerger of the Engineering Division

from the former to the latter.” Id. Commerce invited interested parties to comment on the

LSIL financial statements but received no comments. Id. Commerce then issued a

supplemental questionnaire to Plaintiff for the purpose of clarifying the role of its

previously disclosed affiliates and its relationship with LSIL, including the “demerger

arrangement” identified in the LSIL documents. Id. In response, Plaintiff submitted

information acknowledging that FIIPL and MEEL owned 46.11 percent of the shares in

both UVSL and LSIL during the POR. Id. Commerce noted that:

             Nearly 11 months passed between UGSL’s submission of its
             November Affiliation Response and its response to the Third
             Supplemental Questionnaire, in October, nearly a full year
             later. In the intervening time, Commerce issued its Preliminary
             Results, while UGSL continued to obfuscate its relationship
             with LSIL via common shareholding through the Miglani
             family, and moreover continued to not identify the Engineering
             Division which it also acquired. At no point prior to Commerce
             placing the LSIL Memorandum on the record did UGSL proffer
             the information that the same Miglani family that controlled the
             Uttam group of companies also owned significant shares in
             LSIL. Instead, the company provided false information that it
             acquired control of a single division of Lloyds Steel[5] as a
             corporate entity, without providing any detail regarding how
             Lloyds Steel was in fact acquired as whole, and only during
             the POR effectively divided into two affiliated companies,
             UVSL and LSIL.

Steel Industries Limited (Lloyds Steel).” Post-Preliminary Analysis Memo at 5. UGSL
explained that FIIPL and MEEL “acquired a controlling number of shares in Lloyds Steel
in 2012, whereupon the name was changed to UVSL.” Id.
5 See footnote 4 regarding “Lloyds Steel.”
Court No. 19-00044                                                                   Page 7

Id. at 5–6. Ultimately, Commerce found that Plaintiff had “withheld necessary information

that was requested of it, failed to provide information within the deadlines established,

and significantly impeded this proceeding by not fully disclosing its affiliation with LSIL,

a company with which we found to be cross-owned, and submitting an incomplete

response on behalf of UVSL.” Id. at 6. Commerce elaborated that “[b]y doing so, UGSL

has undermined Commerce’s ability to fully investigate the universe of affiliated and

cross-owned companies that may have subsidies attributable to UGSL as a producer of

CORE.” Id.

       As a result, Commerce determined that it would “rely on facts otherwise

available…with respect to UGSL, pursuant to [19 U.S.C. § 1677e(a)(2)(A)–(C).]” Id.; see

also Decision Memorandum at 26. Moreover, Commerce found that Plaintiff “did not

cooperate to the best of its ability to comply with the requests for information in this

investigation.” Id. Accordingly, Commerce determined that an adverse inference was

warranted under 19 U.S.C. § 1677e(b) because Plaintiff’s failure to timely provide

Commerce with complete and accurate affiliate information deprived Commerce of the

opportunity to examine the issues of affiliation and cross-ownership between Uttam Galva

and LSIL. Id.

       Plaintiff concedes that it failed to provide information regarding LSIL in its initial

questionnaire response. See Pl.’s Br. at 7. Despite this concession, Plaintiff maintains

that Commerce’s decision to apply AFA with respect to the issues of affiliation and cross-

ownership between Uttam Galva and LSIL was unreasonable. Id. Plaintiff provides a

detailed history of the origin of LSIL, noting that LSIL is the present name of the former
Court No. 19-00044                                                                     Page 8

Engineering Division of Lloyds Steel. Id. at 8–10. Plaintiff further explains that Lloyds Steel

was composed of both an engineering division and a steel division, and that Plaintiff

gained a controlling share of only the steel division. Id. Although the two divisions were

technically part of the same company, Plaintiff argues that they operated separately

(separate business activities, separate teams, separate manufacturing locations,

separate accounting systems). Id. Plaintiff also notes that there was an informal

agreement or a “mutual understanding” that ownership and control of the steel division

would be transferred to FIIPL and MEEL (owned and operated by the Miglani family) as

part of a “Demerger Scheme,” while control of the engineering division would remain with

the original owners of Lloyds Steel. Id. at 10. According to this agreement, the Miglanis

were to transfer their ownership stake in LSIL to the original owners. Id. Plaintiff

acknowledges that this transfer has not yet occurred and continues to maintain that

although the Miglani family owns 46.11 percent of the shares in LSIL, they do not have

“managerial control.” Id. at 10–11.

       Commerce considered and rejected Plaintiff’s arguments as to why it was

unreasonable for Commerce to conclude that affiliation existed between Plaintiff and LSIL

during the POR. See Decision Memorandum at 27–28. Commerce explained that despite

Plaintiff’s arguments regarding the demerger scheme, 6 the agency did not “consider the

6 Plaintiff argues that Commerce dismissed the significance of the dates of the demerger
scheme without providing an adequate reason. See Pl.’s Reply at 6. Plaintiff contends
that in considering the demerger scheme of the steel and engineering divisions,
Commerce ignored the “appointed date,” which was before the POR, and focused on the
“effective date,” which was within the POR. Id.
Court No. 19-00044                                                                   Page 9

date of the demerger to be especially relevant in the first place, as the Miglani’s ownership

stake in LSIL was acquired upon the demerger of the UVSL Engineering Division to LSIL.

Therefore, the Miglani family’s stake in UVSL was merely substituted with an identical

stake in a new affiliate, LSIL.” Id. at 28. Accordingly, Commerce found that “[r]egardless

of whether UVSL or LSIL owned and operated the Engineering Division, common

ownership with Uttam Galva and LSIL exists via the Miglani family.” Id.

       Given this explanation, the court concludes that Plaintiff has failed to demonstrate

that Commerce’s finding of cross-ownership was unreasonable. Plaintiff points to the

information it (belatedly) provided to Commerce regarding the unique ownership

agreement and control scheme of LSIL between the original owners and the Miglani

family. See Pl.’s Br. at 9–13. However, as Commerce emphasized, “Uttam Galva

acknowledges that this understanding between the parties is not documented anywhere.”

Decision Memorandum at 28. Plaintiff urges the court to direct Commerce to infer from

the record that LSIL operated outside of the control of Uttam Galva and the Miglani family,

but the court will not overturn Commerce’s reasonable refusal to make this inference

given that “the sole fact remains that a significant ownership share of LSIL remained

within the Miglanis during the POR.” Id.; see also Aristocraft of Am., LLC v. United States,

42 CIT ___, ___, 331 F. Supp. 3d 1372, 1380 (2018) (“What the court cannot do is direct

Commerce to favor Plaintiffs' preferred evidentiary inference over another reasonable

inference.”); Mitsubishi Heavy Indus. Ltd. v. United States, 275 F.3d 1056, 1062 (Fed.

Cir. 2001) (“The possibility of drawing two inconsistent conclusions from the evidence
Court No. 19-00044                                                                   Page 10

does not prevent an administrative agency's finding from being supported by substantial

evidence.” (internal citation and quotation marks omitted)).

       Plaintiff challenges Commerce’s finding that Uttam Galva hindered the CVD

proceeding and that “Commerce had no opportunity to consider whether Uttam Galva

should provide a full questionnaire response.” See Pl.’s Br. at 13. Plaintiff notes that

“Commerce had four months after the third supplemental questionnaire for consideration

but did not ask for any supplemental or full questionnaire responses from Uttam Galva.”

Id. Plaintiff argues that these four months gave Commerce ample time to request any

additional information and because the agency did not do so, Uttam Galva cannot be said

to have “impeded the investigation.” Id.

       Plaintiff’s argument ignores the importance that Commerce places on receiving

affiliated company information early in the proceeding. See Decision Memorandum

at 25-26 (describing importance of Commerce receiving affiliation information early in

proceeding in order to conduct cross-ownership evaluation pursuant to 19 C.F.R.

§ 351.525(b)(6)(vi)). As Commerce emphasized, Plaintiff’s submission of additional

affiliate information “nearly 11 months after the [due date of the] response to the affiliation

section of the initial questionnaire” effectively deprived Commerce of the ability to

evaluate whether additional information from LSIL was necessary to determine the

existence of cross-ownership between Uttam Galva and LSIL. See Decision

Memorandum at 26 & n.69. “Agencies with statutory enforcement responsibilities enjoy

broad discretion in allocating investigative and enforcement resources.” Torrington Co. v.

United States, 68 F. 3d 1347, 1351 (Fed. Cir. 1995). The court will not second-guess
Court No. 19-00044                                                                 Page 11

Commerce’s assessment of its own workload, and Plaintiff has failed to demonstrate that

Commerce acted unreasonably by not further investigating LSIL after Plaintiff belatedly

supplemented the record with affiliation information.

       Commerce’s determination as to whether programs are countervailable is a

fact-intensive examination that the agency is entitled to undertake, and Plaintiff cannot

preclude it by failing to provide a response. See Essar Steel Ltd. v. United States, 34 CIT

1057, 1073, 721 F. Supp. 2d 1285, 1298–99 (2010) (“Regardless of whether [the

respondent] deemed the information relevant, it nonetheless should have produced it [in]

the event that Commerce reached a different conclusion…”); see also Ansaldo

Componenti, S.p.A. v. United States, 10 CIT 28, 37, 628 F. Supp. 198, 205 (1986)

(holding that “it is Commerce, not the respondent, that determines what information is to

be provided,” despite any claim by respondent that information request “cannot legally

serve as the basis” for agency’s view). Commerce reasonably found that “Uttam Galva

failed to provide information requested of it regarding its affiliates, failed to provide

information by established deadlines, and significantly impeded Commerce’s ability to

conduct this administrative review.” Decision Memorandum at 25. Commerce also

reasonably found that Uttam Galva’s failure to provide the affiliation information regarding

LSIL in a timely manner demonstrated that Plaintiff “failed to cooperate in this proceeding

to the best of its ability.” Id. at 26. Accordingly, the court sustains Commerce’s

determination that Uttam Galva’s failure to disclose its affiliation with LSIL merited the

application of AFA pursuant to 19 U.S.C. § 1677e.
Court No. 19-00044                                                                   Page 12

                             B.     Calculation of AFA Rate

       As AFA, Commerce assigned LSIL’s use of applicable subsidy programs to Uttam

Galva, resulting in the assignment of an AFA rate of 588.43 percent for Uttam Galva. See

Decision Memorandum at 24, 41–45. Plaintiff contends that Commerce erred in its

application of AFA when it determined “that LSIL used all of the applicable programs

under review, and [attributed] the use of these programs to Uttam Galva.” Id. at 24.

Specifically, Plaintiff contends that Commerce’s AFA analysis was not reasonable

because it “Failed to Evaluate the Situation or Provide a Reasoned Explanation for Its

Selection of Rates for Each Countervailable Program Commerce Identified.” Pl.’s Br.

at 20–25. Plaintiff highlights that for at least one of the program rates that Commerce

assigned, a 16.63 percent rate for the “Market Access Initiative Program,” Commerce’s

proffered basis for that rate only supports a 6.06 percent rate. Id. at 21–22.

       Additionally, Plaintiff maintains that Commerce’s AFA rate selection for Uttam

Galva was unreasonable regarding several programs from “which LSIL could not have

benefited based on the record evidence.” Id. at 25. Plaintiff specifies that “(1) Hot-Rolled

Steel for LTAR, (2) SGUP Exemption from Entry Tax for the Iron and Steel Industry, (3)

SGUP Long-term Interest Free Loans Equivalent to the Amount of VAT and CST Paid;

and (4) SGUP’s Interest Free Loans Under the SGUP Industrial Development Promotion

Rules 2003 are programs that were assigned an AFA rate and aggregated as part of the

total AFA rate in the Final Results but were never in the initial questionnaire or initiated

as a part of the new subsidy allegations during the administrative review.” Id. Plaintiff also

contends that there are several other programs for which Commerce assigned AFA rates
Court No. 19-00044                                                                  Page 13

that “are plainly inapplicable to LSIL” given the record. Id. at 26–27. Plaintiff argues that

“Commerce should have considered record evidence that LSIL could not have used all of

the programs for which it determined AFA rates.” Id. at 27.

       Defendant, for its part, appears to recognize the merit of some of Plaintiff’s

arguments and has requested a remand for Commerce to reconsider its determination of

AFA rates with respect to the Market Access Initiative Program, as well as the other four

programs specifically identified by Plaintiff (i.e., Hot-Rolled Steel for LTAR, SGUP

Exemption from Entry Tax for the Iron and Steel Industry, SGUP Long-term Interest Free

Loans Equivalent to the Amount of VAT and CST Paid; and SGUP’s Interest Free Loans

Under the SGUP). See Def.’s Resp. at 16–19. The court will therefore remand the matter

to Commerce to reconsider these issues. SKF USA Inc. v. United States, 254 F.3d 1022,

1029–30 (Fed. Cir. 2001).

       This leaves the question of the scope of the remand. Defendant seeks to have the

court sustain its AFA subsidy rate assignments for Uttam Galva, excluding the five

specific rates for which Commerce requests a remand. See Def.’s Resp. at 19–28.

Plaintiff has highlighted that Commerce provided a limited explanation for why each of

the 70 AFA rates assigned to LSIL and Uttam Galva was reasonable. See Pl.’s Br. at 20–

25. Furthermore, Plaintiff has identified record evidence indicating that LSIL could not

have benefitted from certain countervailed programs. See id. at 25–28. Because the issue

of Uttam Galva and LSIL’s cross-ownership was not resolved until late in the proceeding,

it appears that Commerce has not had the opportunity to address Plaintiff’s arguments as

to the specific rates assigned as AFA to LSIL and Uttam Galva. The remand sought by
Court No. 19-00044                                                                  Page 14

Defendant provides Commerce with an opportunity to address Plaintiff’s arguments in the

first instance as to why certain rates should not be included and to further explain its rate

selections. The court therefore declines to limit the scope of the remand, and the court

will reserve decision on the reasonableness of Commerce’s AFA rate selections.

                                      III. Conclusion

        Accordingly, it is hereby

        ORDERED that Commerce’s decision to apply AFA to Uttam Galva is sustained;

it is further

        ORDERED that this matter is remanded for Commerce to reconsider and further

explain its AFA rate assignments; it is further

        ORDERED that Commerce shall file its remand results on or before May 6, 2020;

and it is further

        ORDERED that, if applicable, the parties shall file a proposed scheduling order

with page limits for comments on the remand results no later than seven days after

Commerce files its remand results with the court.

                                                                 /s/ Leo M. Gordon
                                                              Judge Leo M. Gordon

Dated: February 6, 2020
       New York, New York