Court: Court of Appeals for the Federal Circuit; April 19, 2002; Federal Appellate Court
Allegheny Ludlum Corporation and others appeal a United States Court of International Trade decision that upheld a Final Determination by the International Trade Commission (ITC), which found that the U.S. steel industry was not materially injured by imports of stainless steel coded plate from Belgium and Canada. The appellate court identifies flaws in the ITC's analysis regarding three statutory factors it must consider, leading to the conclusion that the lower court's affirmation is improper.
Under the Tariff Act of 1930, American industries can seek relief from unfair imports. The ITC's role is to assess whether such imports materially injure or threaten to injure domestic industries. A critical part of this analysis involves defining the "domestic like product" that corresponds to the imported goods. Initially, in 1998, the ITC identified “certain stainless steel plate in coils” as the sole domestic like product. However, in its May 1999 Final Determination, the ITC changed its stance, identifying two distinct domestic like products: hot-rolled steel coiled plate and cold-rolled steel coiled plate, which differ in characteristics and applications. The ITC found that while the domestic hot-rolled steel plate industry was materially injured by the imports, the cold-rolled steel plate industry was not.
Allegheny challenged this distinction and the finding that cold-rolled steel plate producers were not injured. The Court of International Trade, however, upheld the ITC's determination, citing substantial evidence supporting the classification of hot and cold-rolled plates as separate products. The appellate court vacates the lower court's ruling and remands the case for further consideration.
The Court of International Trade found the Commission's analysis of material injury regarding cold-rolled steel plate legally flawed in considering the factors of volume, price, and impact as required by 19 U.S.C. 1677(7)(B). Despite these flaws, the Court upheld the Commission’s Final Determination of no material injury based on evidence indicating a "lack of interest" from the domestic industry in the cold-rolled steel plate market. This conclusion was supported by industry representatives' statements that the market was negligible and that domestic manufacturers had no intention to participate. On appeal, Allegheny contested the Court's affirmation of the no material injury finding, arguing that the Commission's analysis of the mandatory factors was unsupported by substantial evidence and legally incorrect. Specifically, Allegheny claimed errors in the Commission's interpretation of volume and impact factors under 19 U.S.C. 1677(4)(D) and asserted that the Court misapplied the lack of interest factor, which is not mentioned in the statutory language. The Commission's material injury determination relies on evaluating the imports' effects on the domestic market, with an exception for lacking data allowing separate identification of domestic production based on production processes or profits as outlined in the statute.
If the domestic production of a like product lacks distinct identity, the impact of imports will be evaluated by analyzing the narrowest group of products that includes the domestic like product, contingent upon the availability of necessary data. The Commission indicated in its Final Determination that due to the domestic industry's failure to provide segregated trade and financial data for cold-rolled stainless steel coiled plate, it assessed the effects of subject imports on the broader category of all stainless steel coiled plate. This approach introduces tension between the product line provision and the mandatory volume-price-impact analysis outlined in section 1677(7)(B). The Commission may rely on broader data if specific information for a narrow subcategory is unavailable, which risks obscuring the actual impact of imports on the narrower domestic market.
Section 1677(4)(D) is designed to be used as a last resort when there is no separate identity for the domestic like product. The Senate report emphasizes that when evaluating the effects of imports on domestic producers, the Commission should focus on relevant economic factors pertaining to the like product, provided separate data is accessible. In cases where such data is unattainable due to accounting challenges, a broader range that includes the like product should be analyzed instead.
The Court of International Trade has mandated that the Commission must actively seek relevant data before resorting to the product line provision. In Babcock & Wilcox Co. v. United States, the Commission faced criticism for relying on overly broad data concerning the seamless stainless boiler tube industry, as only the domestic producer provided detailed profit and loss information for the specific products under investigation.
The Babcock court determined that the Commission failed to seek profit information from all domestic producers, not just the petitioner, before concluding that there was no material injury. The Court of International Trade ruled that this lack of effort rendered the Commission’s determination unsupported by substantial evidence and inconsistent with the law, necessitating a remand for further inquiry. The language of section 1677(4)(D), which allows for the use of alternative product line data, is interpreted as requiring the Commission to actively seek relevant information, a duty emphasized in previous case law. The court highlighted that the Commission's assertion that domestic producers could not provide necessary data was incorrect, noting that producers had provided certain segregated data. The Commission's failure to request price comparison data further undermined its rationale for invoking section 1677(4)(D), leading to the conclusion that the Commission did not meet the standard for such action. The record contained sufficient evidence to contradict the Commission's decision.
The Commission's actions regarding the domestic industry were scrutinized, particularly its initial agreement to consider a single segment of the industry, which it later reversed without independently verifying data on a separate cold-rolled plate industry. The domestic industry did not need to prove the existence of two segments; its strategy was to advocate for treating cold-rolled plate as part of a unified market. Testimonies highlighted a lack of interest in cold-rolled plate due to its minor market presence. Ultimately, the Commission divided the industry into two segments, creating a challenge in justifying a conclusion of no material injury to the cold-rolled plate segment without sufficient data. To resolve this, the Commission compared cold-rolled imports to the overall domestic stainless steel plate market, stating that the imports were too minimal to impact profitability or capacity declines in the domestic industry.
The analysis indicated that cold-rolled plate production was limited and deemed unimportant by the industry itself. The Court of International Trade emphasized the Commission's obligation to gather all accessible information for its analysis, rejecting the notion that the parties must specifically request data collection. The Commission's reliance on product line provisions without attempting to collect relevant data rendered its volume and impact analysis legally flawed. Additionally, the Court found errors in the Commission's price analysis, specifically its reliance on average unit values (AUVs) of imports for determining price trends, although it noted that AUVs could be used as indicators under certain circumstances.
The Court of International Trade determined that differences in product mixes between domestic and foreign cold-rolled plate merchandise hinder the relevance of average unit values (AUVs) in assessing price competition. Although AUVs for subject imports were initially higher than for domestic products, this did not indicate significant price competition, especially as the AUVs for subject imports declined over the review period. The Commission's reliance on AUVs to conclude there was no material injury was criticized for being logically unsound, as declining prices of imports could indicate harm to domestic producers regardless of the higher initial pricing. Furthermore, the AUV data was influenced by specific orders of certain grades, undermining its reliability. The government acknowledged significant differences between domestic and imported products, which further weakened the Commission's price determination.
Despite these flaws, the Court affirmed the Commission's no material injury ruling, highlighting substantial evidence indicating that the domestic cold-rolled plate industry lacked interest in producing this product. Industry representatives consistently stated that there was insufficient market demand for cold-rolled plate, often describing it as a negligible part of their business. Testimonies indicated that domestic producers were primarily focused on hot-rolled products, and at least one representative was unaware if their company produced cold-rolled plate at all. The Commission's findings on industry volume were based on this lack of interest, which was compounded by the context of the domestic industry's push for a unified rolled plate classification, impacting their treatment of cold-rolled plate as a relevant product category.
The Commission's Final Determination was criticized for relying on the domestic industry's perceived lack of interest in cold-rolled steel plate, which influenced its assessments of impact and volume. Allegheny argues that this reliance contradicts the Supreme Court's decision in *Securities and Exchange Commission v. Chenery*, claiming that the Court of International Trade incorrectly affirmed the Commission's decision based on the domestic industry's lack of interest instead of the required volume-price-impact analysis. However, it was determined that the Court of International Trade did not improperly substitute its judgment, as the Commission’s analysis was informed by the industry's interest.
Allegheny's argument against this reliance was deemed misplaced, as prior cases like *Suramerica de Aleaciones Laminadas* and *Oregon Steel Mills* support the inclusion of industry representatives' testimonies as relevant economic factors. The Commission is permitted to consider other economic factors but must not disregard the mandatory elements of price, volume, and impact unless those elements cannot be assessed. The statutory requirement in Section 1677(7)(B) mandates consideration of all three factors in evaluating material injury, reinforcing that the Commission's analysis must adhere strictly to these requirements. Previous rulings, such as in *Angus Chemical Co. v. United States*, confirmed that any deviation from evaluating all mandatory factors cannot be justified and that the Commission must fully comply with the statutory mandate.
The Angus court mandated a thorough review of the concurring commissioners' opinions to ensure adequate findings on price, volume, and impact factors. The Commission is required to make a good faith effort to meet its statutory obligations. While not every factor under section 1677(7)(B) must be perfectly analyzed for the Commission's decision to be affirmed, the review is subject to a substantial evidence standard. Courts have upheld Commission determinations even when one mandatory factor was inadequately supported, as seen in United States Steel Group. However, if the Commission fails to seek necessary information or if all mandatory factors are legally flawed, a court cannot affirm the Final Determination. The Commission is legally bound to consider volume, price, and impact, and while it may evaluate additional economic factors under 19 U.S.C. 1677(7)(B)(ii), it must first address the mandatory factors. A failure to do so undermines the requirement to consider each factor. The Court of International Trade’s affirmation of the Commission’s Final Determination was deemed incorrect due to legal flaws in all statutory factors. Consequently, the decision was vacated and remanded for further proceedings. The Commission's Final Determination specifically applied to stainless steel plate in coils, excluding other forms, and the Court noted that the volume analysis had errors affecting its overall validity, as the Commission assessed the impact on the entire domestic stainless steel plate market instead of a more relevant subset.
