B. |
The Commissions cumulation and injury analyses did not apply
inconsistent standards and its finding that attenuated
competition existed between the subject imports and domestic like
product was supported by substantial evidence. |
The
essence of the Committees claim is that it was inconsistent for
the Commission to find that a reasonable overlap of competition
existed for cumulation purposes and also find that the competition between
the subject imports and the domestic like product was attenuated
and, therefore, did not contribute to material injury. On its face,
this logic seems attractive. However, a closer examination of the different
statutory schemes and criteria used in determining cumulation as opposed
to material injury reveals that two distinct competition
findings are logical and legally permissible. Particularly instructive
on this issue was this courts holding in BIC Corp. v. United
States, 21 CIT 448, 964 F. Supp. 391 (1997). In BIC, the domestic
producer of disposable lighters (BIC Corporation), filed a petition
with the Commission and Commerce alleging that the United States disposable
lighter industry was materially injured, or threatened with material
injury, by reason of subsidized and LTFV imports of disposable pocket
lighters from Thailand and China. See BIC, 964 F. Supp. at 395.
BIC claimed, inter alia that
the
Commission cannot legally justify its apparently inconsistent findings.
BIC points out that the Commission found sufficient fungibility between the subject imports and BIC's lighters to support its finding
of one like product, as well as its decision to cumulate. Yet, the
Commission also found that there was insufficient fungibility between the two groups of lighters to negatively affect domestic prices
and production. BIC asserts that such contradictory findings cannot
pass legal muster.
Id. at 397
(emphasis in original).
Judge
Goldberg articulated that determinations regarding like product, cumulation
and causation require the application of different statutory schemes.
[BICs]
argument fails because BIC again overlooks the importance of context;
like product, cumulation, and causation are functionally different
inquiries because they serve different statutory purposes. As a result,
each inquiry requires a different level of fungibility. Hence, the
record may contain substantial evidence that two products are fungible
enough to support a finding in one context (e.g., one like product),
but not in another (e.g., cumulation or causation).
Id. at 399 (citations omitted). The court noted that to support a
decision to cumulate, the Commission need only find a "reasonable
overlap" of competition between the subject imports, and between
the subject imports and the domestic like product. Id. at 400
(citations omitted). However, the court clearly stated that the standards
used in different parts of the investigation were dependent on the context of the analysis. The rationale employed
by the court regarding the application of different statutory schemes
delineated the differences in the standards used in determining like
product, cumulation, and material injury.
Indeed,
BIC ignores previous cases in which the court has consistently recognized
that the Commission's inquiry into product substitutability, i.e,
to what degree two or more products compete with each other, may differ
according to context:
Analysis
of substitutability varies according to the context of its application.
For the purposes of defining "like product" as described
in 19 U.S.C. § 1677(10)(1988), it is not necessary that like
products be completely substitutable, only that the like product
be like, or in the absence of like, most similar in characteristics
and uses. For purpose of cumulation, the analysis of substitutability
is also not stringent, as only a reasonable overlap in competition
is required where like product imports compete with each other and
with like products of the domestic industry. In analysis of material
injury, substitutability is one factor in the evaluation of volume
and price.
Id. at 397-98 (quoting R-M Indus., Inc. v. United States, 18 CIT
219, 226 n. 9, 848 F. Supp. 204, 210 n. 9 (1994) (citations and internal
quotations omitted).
The
rationale employed in BIC is applicable to the case before the
court. The antidumping duty statutes set forth different statutory requirements
and criteria for cumulation, material injury, and threat of material
injury. See 19 U.S.C. § 1677(7)(G),(H); 19 U.S.C. §
1677(7)(A),(B),(C),(D),(E); 19 U.S.C. § 1677(7)(F). In determining
whether to cumulate, the Commission need only find a reasonable
overlap of competition to support cumulation of the subject imports
because the purpose of cumulation is to ensure that the injury
test adequately addressed simultaneous unfair imports from different
countries. Ranchers-Cattlemen Action Legal Foundation v. United
States, 23 CIT 861, 880 74 F. Supp. 2d 1353, 1370 (1999) (quoting
House Comm. on Ways and Means, Trade Remedies Reform Act of 1984, H.R.
Rep. No. 98-725, at 37 (1984), reprinted in 1984 U.S.C.C.A.N.
5127, 5164 (emphasis added)). In determining if a domestic industry
in the United States was materially injured or threatened with material
injury, the Commission must determine if the subject imports were the
cause of the material injury or threat of material injury. See Gerald
Metals, Inc. v. United States, 132 F.3d 716, 722 (Fed. Cir. 1997).
In determining causation, fungibility plays a far more important
role in the causation context than in either the like product or cumulation
contexts; the more fungible two products are, the more likely underselling
by one will affect the price of the other. BIC, 964 F. Supp.
at 400 (emphasis in the original and citations omitted). Unlike the
reasonable overlap of competition standard used in cumulation
determinations, in its causation analysis the Commission must determine
the effects of the subject imports on the volume and price of the like
product, as well as their impact on the affected domestic industry.
Therefore, it was consistent for the Commission to determine in the
context of cumulation that a reasonable overlap of competition
existed, yet in the context of its causation analysis determine that
the competition was attenuated and did not materially injure
or threaten material injury to the domestic industry.
It
is clear from the record evidence in this case that the Commission could
have concluded for purposes of cumulation that a reasonable overlap
of competition existed, yet the competition was attenuated
and did not cause or threaten material injury to a domestic industry.
In fact, in both its cumulation and injury analyses, the Commission
found attenuated competition. In its cumulation analysis,
the Commission found that although the record also indicates that
competition between the domestic like product and subject imports, in
particular those from China, is attenuated due to quality
and product mix issues, it decided that cumulation was appropriate
because (1) imports and the domestic like product are sold through
overlapping channels of distribution, and (2) producers,
importers, and purchasers generally indicated that the subject product
from China and India, and the domestic like product are all at least
sometimes interchangeable, and are often used in the same applications. Final Determination at 16, 20. However, in evaluating the volume
and price effects in the context of the conditions of competition that
characterize the domestic market, the Commission stated that differences
in product mix and quality, limited competition between the imports
and the domestic like product. Id. at 22.
To
support its findings, the Commission detailed the reasons why the competition
between the subject imports and the domestic like product was attenuated.
In its volume, price, and impact analysis, the Commission found that
(1) differences in quality and product mix limited substitutability
between the subject imports and the domestic like product, (2) the subject
imports did not decrease domestic market share, adversely affect the
domestic volume, or depress the prices of the domestic like product,
and (3) the subject imports displaced the market share of nonsubject
imports. See Final Determination at 26-28, 33-34; infra Section
C. These findings were particularly evident for the subject imports
from China. See Final Determination at 17, 22. Although the findings
of the Commission as to the subject imports from India were not as pronounced,
the Commission supported its attenuated competition finding
in regard to the subject imports from India with substantial evidence.
Contrary to the Committees claims, the Commission did take into
account all relevant facts on the record when it analyzed the level
of competition between the subject imports from India and the domestic
like product. In fact, the Commission noted that the subject imports
from India were not as inferior as the subject imports from China. The
Commission found that distributors had concerns about potential liability
arising out of the failure of imported steel wire rope from China in
critical applications, yet [s]ome subject merchandise from India
is highstrength carbon steel wire rope, used in critical applications,
but the majority of the subject merchandise from that country is of
standard varieties. Final Determination at 19 (footnote
omitted). Similarly, the Commission noted that fourteen of seventeen
importers reported that steel wire rope imports from India were always,
frequently, or sometimes interchangeable with
the domestic like product. Final Determination at 19. Although
the quality of the subject imports was superior to that of the subject
imports from China, product mix and quality differences as compared
to the domestic like product supported that attenuated competition
existed between the subject imports from India and the domestic like
product.
The
total amount of steel wire rope imported into the United States from
India was predominately galvanized products. See Final Determination at 20, 22 (footnoting to the Staff Report at D-4, D-7.) However,
domestic production of galvanized steel wire rope accounted for only
2% of the entire steel wire rope market. See Final Determination at 20. Additionally, interchangeability between galvanized steel wire
rope and bright (non-galvanized) carbon steel wire rope was limited. Id. at 7. Since galvanized steel is more corrosive resistant
than bright carbon steel, carbon steel wire rope cannot be substituted
for galvanized steel wire rope in applications where corrosion resistance
is critical. Id. Similarly, the galvanized subject imports cannot
be substituted for stainless steel wire rope in applications where cleanliness
or reduced magnetic properties are required. Id. Therefore, nearly
half the imports from India were competing with a very small percentage
of the domestic wire rope market.
Additionally, there was evidence on the record that the subject imports
from India were inferior to the domestic like product. Of the seventeen
responding importers, only five stated that the subject imports from
India and the domestic like product were always interchangeable,
six reported that the two were only sometimes interchangeable
and three reported that they are never interchangeable. Id. at 19 n. 80 (citing to the Staff Report, Table II-4
at II-10).7 The Commission also found that
out of eight responding purchasers, four found the quality of the subject
imports from India comparable with the domestic like product while three
rated the quality of the domestic product as superior. Id. at
19. Only one purchaser rated the steel wire rope imports from India
as higher in quality than the domestic like product. Id. (footnoting
to the Staff Report, Table II-8 at II-14).
The
Commissions attenuated competition finding was critical
to the material injury determination because the difference in product
quality and mix, coupled with the low substitutability of the subject
imports with the domestic like product showed that the domestic industry
was not injured by the subject imports. Therefore, the Commission properly
found that although the competition between the subject imports and
the domestic like product was attenuated, there was a reasonable
overlap of competition to sustain cumulation. Similarly, the Commission
supported its conclusion that attenuated competition existed
between the subject imports and the domestic like product.8
C. |
The Commission considered Commerces dumping margin determinations
in the context of its findings. |
Commerce
in its final dumping determination found the dumping margins on the
subject imports from China ranged from 42.23% to 58% and the final estimated
dumping margin for subject imports from India was 38.63%. Commerces
Final Determination at 12,761. The magnitude of the dumping margin
is one of the subfactors listed 19 U.S.C. § 1677(7)(C)(iii) that
the Commission is required to consider when examining the impact of
the subject imports on the affected industry. At issue is subfactor
(V) of the statute. Section 1677(7)(C)(iii) states:
(iii) Impact
on affected domestic industry |
In
examining the impact required to be considered under subparagraph
(B)(i)(III), the Commission shall evaluate all relevant economic
factors which have a bearing on the state of the industry in the
United States, including, but not limited to |
|
|
|
(I)
actual and potential decline in output, sales, market share, profits,
productivity, return on investments, and utilization of capacity,
(II) factors affecting domestic prices,
(III) actual and potential negative effects on cash flow, inventories,
employment, wages, growth, ability to raise capital, and investment,
(IV) actual and potential negative effects on the existing development
and production efforts of the domestic industry, including efforts
to develop a derivative or more advanced version of the domestic
like product, and
(V) in a proceeding under part II of this subtitle, the magnitude
of the margin of dumping. |
|
The
Commission shall evaluate all relevant economic factors described
in this clause within the context of the business cycle and conditions
of competition that are distinctive to the affected industry. |
Subfactor
(V) was added as an amendment in the Uruguay Round Agreements Act of
1994 (URAA). See 19 U.S.C. § 1677(7)(C)(iii); See also Statement of Administrative Action, (SAA),
H.R. Rep. 103-826(I), 850 reprinted in U.S.C.C.A.N. 4040, 4184
(1994). The legislative history accompanying subfactor (V) states:
b. Impact on Affected Domestic Industry; Consideration of Dumping
Margin
Section
222(b)(1)(B) of H.R. 5110 amends section 771(7)(C)(iii) of the Act
by adding the magnitude of the margin of dumping to the list of
factors the Commission considers in determining the impact of imports
of subject merchandise on domestic producers of like products. There
is no similar provision in the Subsidies Agreement and, as under
current practice, the Commission will not be required to consider
the rate of subsidization. This amendment does not alter the requirement
in current law that none of the factors which the Commission considers
is necessarily dispositive in the Commission's material injury analysis.
SAA at 850.
Part
5
7.
The source of the information used in the Staff Report Table
was compiled from responses to Commission questionnaires.
8.
In its threat of material injury analysis, the Commission also found
that because the attenuated competition between the
subject merchandise and the domestic like product, due to the differences
in quality and product mix discussed earlier, the subject imports
did not threaten to materially injury an industry in the United States. Final Determination at 38.