Nippon Steel Corporation, Nkk Corporation, Kawasaki Steel Corporation, and Toyo Kohan Co., Ltd. v. United States, and Mittal Steel USA Isg Inc.
Docket: 05-1404
Court: Court of Appeals for the Federal Circuit; August 10, 2006; Federal Appellate Court
The United States Court of Appeals for the Federal Circuit reviewed appeals from the United States and Mittal Steel USA ISG Inc. concerning a decision by the United States Court of International Trade. The trade court had instructed the United States International Trade Commission (Commission) to determine that the domestic industry was not materially injured by less-than-fair-value imports of tin- and chromium-coated steel sheets from Japan. The Commission subsequently concluded there was no material injury or threat of injury. The trade court upheld these negative determinations.
Appellants contended that the trade court improperly reweighed evidence and made its own credibility assessments, contrary to legal standards and prior remand instructions. They also argued that the trade court erred by finding that the Commission's prior affirmative material injury determination lacked substantial evidence. The Federal Circuit agreed with the appellants, reversing the trade court's decisions and instructing it to vacate the Commission's negative determinations while reinstating the Commission's affirmative material injury ruling from a previous remand.
This case has a complex procedural history spanning six years, including multiple determinations and opinions from both the Commission and the Court of International Trade. The appeals court noted familiarity with the case's extensive record and chose to summarize only the remaining disputed factual and evidentiary issues.
In 2000, the Commission determined that the domestic industry suffered material injury due to the dumping of Tin-and Chromium-Coated Steel Sheet from Japan, based on factors including import volume, price effects, and impact on domestic producers. This determination was contested by Nippon Steel Corporation and others, leading to a review by the Court of International Trade, which upheld a finding of a small but significant volume of imports but remanded for reevaluation of price effects and causation. On remand, the Commission reaffirmed its material injury determination in March 2002, but Nippon appealed again, and the court identified flaws in the analysis, ultimately vacating the affirmative finding and instructing the Commission to issue a negative determination due to perceived deficiencies in addressing the respondents' claims.
The Commission appealed this decision, and the appellate court vacated the lower court's ruling, remanding for further analysis and data gathering. On this second remand, the Commission again found material injury, but upon subsequent review, the Court of International Trade remanded for a third time, directing a negative determination and requiring an assessment of potential threats to the domestic industry.
Following this third remand, the Commission issued a negative material injury determination, citing the court's constraints on its decision-making process. Despite recognizing that certain factors favored an affirmative threat determination, the Commission stated that the court’s prior findings limited its ability to reach a conclusion aligned with its factual evaluations. Consequently, the Commission expressed concern about the Court of International Trade exceeding its authority in these matters.
Concerns have been raised regarding the Court's compliance with its review authority, suggesting it has overstepped its boundaries by re-evaluating facts and substituting its interpretations for those of the Commission. This includes questioning the significance of underselling and correlations with increased purchases of subject imports, as well as rejecting the Commission's credibility assessments of witness testimony. The Court has directed the Commission to conclude that subject imports did not cause material injury, contradicting prior mandates from the Federal Circuit.
Defendant-intervenor International Steel Group Inc. sought judicial review of the third remand determination, arguing for an affirmative threat determination, while Nippon contested certain findings related to the Commission's negative threat determination. The Court upheld the Commission's negative material injury determination but identified flaws in two of three subsidiary rulings concerning threat of material injury.
Jurisdiction for the appeals rests on 28 U.S.C. 1295(a)(5). Congress established a specialized system for addressing antidumping claims, dividing responsibilities between the Department of Commerce for LTFV determinations and the Commission for material injury assessments. Commissioners, appointed by the President and confirmed by the Senate, are tasked with evaluating evidence based on their expertise, while judges of the Court of International Trade primarily focus on legal sufficiency in reviewing Commission determinations. The Court is mandated to invalidate any findings that lack substantial evidence or legal compliance.
Congress did not establish a specific standard of review for the Court of International Trade; however, the Federal Circuit, in Atlantic Sugar, Ltd. v. United States, adopted the "substantial evidence" standard from 19 U.S.C. § 1516a(b)(1)(B)(i) for appellate review. This standard entails a comprehensive review of the entire administrative record, including both the trade court's decisions and the Commission's determinations, as seen in cases like Am. Silicon Techs. v. United States and Matsushita Elec. Indus. Co. v. United States. The court gives considerable weight to the informed opinions of the Court of International Trade, which often serves as the starting point for analysis.
In the recent case Nippon III, the court noted that it would now evaluate the substantiality of the evidence supporting the Commission's affirmative material injury determination. "Substantial evidence" lacks a precise definition, yet the Supreme Court and prior panels have indicated it must be more than a mere suspicion and should be sufficient for a reasonable mind to accept as adequate support for a conclusion. The reviewing court must consider the entire record, including evidence that detracts from the conclusions, as established in Universal Camera and NLRB v. Columbian Enameling.
Moreover, Judge Nies noted that substantial evidence is the second most deferential standard in the hierarchy of review standards, roughly meaning that a determination is "unreasonable." Legislative history from the Administrative Procedure Act (APA) highlights the challenge of defining substantial evidence, warning against reliance on insufficient evidence such as suspicion or implausible claims. The courts are tasked with ensuring that the evidence is adequately substantial to support agency findings. Universal Camera clarified that a reviewing court can set aside a decision if it finds that the evidence supporting it is not substantial when considering the entire record.
Challenging the Commission's determination under the substantial evidence standard presents a significant hurdle, as established in Mitsubishi Heavy Indus. Ltd. v. United States. The Commission's conclusions can still be upheld even if contradictory interpretations of the evidence exist, as noted in Am. Silicon Techs. v. United States. The Court must affirm the Commission's findings if they are reasonable and supported by the overall record, regardless of evidence that might contradict the Commission's conclusions, as clarified in Altx, Inc. v. United States.
In assessing material injury, the Commission is mandated to evaluate the volume, price effects, and the impact of subject imports, as per 19 U.S.C. 1677(7). An affirmative determination necessitates a finding that the injury to the domestic industry is "by reason of" such imports, per 19 U.S.C. 1673d(b)(1). The Commission thoroughly researched and analyzed information from domestic TCCSS producers and significant purchasers, including detailed questionnaires and site visits to Weirton Steel. The Commission's process involved gathering data on production, pricing, and sales practices, and it included testimony from key industry stakeholders and congressional representatives.
The Court of International Trade conducted a meticulous review of the Commission's findings, sustaining the identification of a small but significant volume of imports while also recognizing significant impact, which was not contested. The crux of the issue is whether the Commission’s findings linking Japanese TCCSS dumping to price effects and causation of injury to the domestic market sufficiently support its ultimate affirmative determination of material injury. Section 1677(7)(C)(ii) outlines that in evaluating price effects, the Commission must consider significant price underselling by the imports relative to domestic products and whether the imports significantly depressed prices or hindered potential price increases.
The trade court found that while one of the Commission's findings lacked substantial evidence, other findings were supported by adequate evidence. The Court of International Trade dismissed the Commission's price effects evidence, citing that Japanese underselling and domestic price suppression were insignificant during the investigation period. Factors such as limited impact of imported TCCSS on domestic sales, segmented price negotiations, and lack of documentary evidence from Weirton supported this conclusion. The court correctly identified a mathematical error in the Commission's price effects evidence due to inconsistent data aggregation, leading to an erroneous increase in total underselling bid volume. Despite this, the court upheld two other Commission findings related to price comparison methodology.
Conversely, the court's rejection of the Commission's analysis regarding domestic producer accounting data and its conclusion on domestic price suppression was deemed unsupported. The Commission had noted a cost-price squeeze affecting domestic producers, with the cost of goods sold increasing relative to net sales and profitability declining over the years. The Commission attributed these trends to a decline in unit prices that exceeded unit costs. Despite a temporary reduction in operating losses in 2000, the Commission linked this to the filing of an antidumping petition rather than an improved market condition. The Commission also refuted claims that domestic producers could raise prices in response to import competition, indicating that any increases were insufficient to counteract changes in the industry's cost structure.
The Court of International Trade acknowledged a cost-price squeeze in the domestic industry but rejected the Commission's conclusion due to Nippon's argument that two domestic producers competing directly with Japanese TCCSS importers had positive operating margins. This situation indicates a division within the industry, where some producers experienced negative margins, while the two major producers did not. The Commission's preference for one interpretation over another was upheld by the statutory standard requiring deference to the Commission.
Furthermore, the trade court's rejection of the Commission's findings regarding competition conditions was not supported. The Commission found that negotiations between U.S. and Japanese suppliers occurred on equal footing, despite the trade court's assertion that the differences in negotiation practices undermined this conclusion. The Commission cited evidence that domestic producers' lead-time advantages were countered by purchasers negotiating well in advance and Japanese suppliers’ willingness to manage consignment inventories in the U.S. The court's view that these practices indicated unequal negotiation conditions was deemed unreasonable, as the Commission's finding was supported by evidence showing that each supplier negotiates based on unique advantages and that competition exists despite differences in negotiation strategies. Thus, the Commission's conclusion of equal negotiation footing was deemed plausible based on the overall evidence.
The trade court questioned the Commission's inference regarding Weirton's lack of contemporaneous evidence of Japanese price competition. Weirton's representative provided only domestic pricing data and indicated he was unaware of competing Japanese prices during negotiations. The Commission initially downplayed the significance of the missing documentation, supported by testimony from Weirton's CEO and a sales manager, who noted that purchasers did not identify suppliers during negotiations. These statements were corroborated by purchaser documents and another domestic producer's responses. On remand, the Commission reaffirmed that the lack of contemporaneous records was not significant, as other evidence supported the claims of competition from Japanese producers.
The trade court, however, criticized the Commission's reasoning, asserting that Weirton's inability to provide direct evidence undermined its claims of injury. The court expressed skepticism about Weirton's failure to document competition, emphasizing that the Commission's findings were unreasonable given the evidence. Despite this, the Commission maintained that the credibility of Weirton's representative and supporting testimony justified its conclusions. The court reiterated that determining the weight of testimony is within the Commission's purview, referencing Senior Judge Nichols' views in a related case regarding the assessment of evidence in injury claims.
Testimony provided by Mr. Moss is deemed credible and pivotal for judicial review under the "substantial evidence" standard, despite potential doubts about its accuracy, as no opposing evidence was presented. The court emphasizes the necessity for substantial evidence to challenge a quasi-legislative determination. The record supports Weirton's claims, indicating that the absence of contemporaneous documentation alone does not invalidate the findings.
Under Section 1673d(b)(1), the Commission must ascertain whether material injury results from imports; if imports are negligible, the investigation is to be terminated. The requirement for causation is satisfied unless the effects of dumping are trivial. The Court of International Trade improperly replaced the Commission's credibility assessments with its own, disregarding the Commission's reliance on purchaser questionnaires and testimonies for its causation finding.
Specifically, Purchaser F indicated in its questionnaire and testimony that it diversified sourcing due to delivery and quality issues with U.S. mills, including Weirton. However, the Commission found that Purchaser F's testimony conflicted with its increased purchases from Weirton in 1999 and other data indicating price was the primary factor in sourcing decisions. The trade court's rejection of the Commission's rationale was deemed flawed, as the Commission reaffirmed its conclusion based on the inconsistency of Purchaser F's testimony and purchasing patterns, reinforcing the credibility of price as the driving factor for sourcing decisions.
The Court of International Trade rejected the Commission's findings, affirming that Purchaser F's testimony and questionnaire responses were consistent, noting that quality was a factor in its switch to foreign suppliers. The court chose not to revisit the Commission's claim regarding inconsistencies in Purchaser F's documented purchasing patterns, instead concluding that the domestic industry did not suffer harm due to subject imports.
While acknowledging that the trade court may have performed a more thorough analysis than the Commission, it did not find that the Commission’s evidence regarding price effects and causation was inadequate under the substantial evidence standard. The trade court had accepted the Commission's findings on volume and impact but noted that credible evidence existed on both sides concerning price effects and causation.
The existence of inconsistencies between Purchaser F's questionnaire and testimony indicated that the record contained credible evidence on both sides of the issue. Factors influencing the relative strength of domestic and Japanese negotiations and the credibility of testimony related to documentation were recognized as matters for the expert factfinder to resolve. Overall, the determination of the Commission was deemed to be supported by substantial evidence despite the potential for differing conclusions.
The Court of International Trade is required to correct obvious errors in the Commission's calculations under the substantial evidence standard. However, when evidence does not provide a clear answer, it is the responsibility of the expert factfinders—namely, the Commissioners—to determine which evidence to credit. As long as the Commission's evidentiary choices are adequately supported, the reviewing courts must defer to the Commission's determinations.
The United States contends that the Court of International Trade acted beyond its authority by instructing the Commission to issue a negative material injury determination, arguing that 19 U.S.C. § 1516a only allows for affirmations or remands, not outright reversals. While previous dicta suggest that a court may reverse a determination lacking substantial evidence, the court concludes that there is substantial evidence supporting the Commission's affirmative material injury determination in the current case. Therefore, the court does not address the limits of the Court of International Trade's authority under § 1516a.
The court holds that the Court of International Trade erred in evaluating credibility and reweighing evidence, ultimately finding that the Commission's affirmative material injury finding was supported by substantial evidence. Consequently, the court reverses the decisions in Nippon IV and Nippon V, invalidates the Commission's negative material injury determinations, and instructs the trade court to reinstate the Commission's affirmative finding.
Notes indicate that Nippon did not contest the Commission's findings on the significant impact on domestic producers, there was a merger involving ISG and Weirton, and that the panel cannot alter the standard of appellate review set by Atlantic Sugar, as only the full court can do so. Additionally, a cost-price squeeze occurs when the cost of goods sold exceeds the selling price, which challenges the producer’s viability.
