OCTG Importers Tell CAFC That ITC Ignored Market Conditions in Injury Analysis

Tenaris said that the investigation period, 2019-22, "coincided with extraordinary economic conditions that deeply impacted the U.S. industry that supplies steel pipe for drilling wells and extracting oil." A global pandemic and "[o]il supply wars" in 2020 led to a "historic collapse of demand for OCTG," which led to mill closures, production decreases and layoffs affecting output, shipments and inventories, the petitioner said.

Yet, as soon as the demand fell, "it abruptly changed course," leading to a "V"-shaped recovery in 2021. However, a "convergence of market supply constraints prevented domestic producers from meeting the rising demand," including large inventory buildups, rapidly rising input prices and labor shortages, the petitioner said. These constraints prevented U.S. producers from ramping up production, and OCTG shortages in the market confirmed that imports were needed.

Instead of focusing on these realities, the ITC "focused on a sliver of the investigation period," used a "subjective standard" and declared the domestic industry "weaker than would have been expected" due to the increasing demand. The commission's "expectation" was "completely detached from the commercial reality of the market," Tenaris said, adding that the U.S. industry was healthy and profitable by the first half of 2022 "by nearly every production, employment, and financial indicator."

The importer's appeal comes from the Court of International Trade's decision to affirm the ITC's affirmative injury finding on OCTG from Argentina, Mexico, Russia and South Korea (see 2506200060). In the decision, the trade court rejected all of Tenaris' claims and held that the statute doesn't require the commission to consider "conditions of competition" in its analysis of volume, nor does it restrict consideration of volume to "absolute volume," as suggested by the importer.

On appeal, Tenaris raised three issues, the first of which concerned the ITC's statutory mandate to analyze whether subject import volume is "significant." The importer said this analysis is a "contextual exercise," adding that this claim is in line with the statute's plain meaning and that courts have found that the "touchstone" of the volume inquiry is "significance."

The ITC can't comply with the injury statute by just "describing separately various conditions of competition in isolation," the brief said. Instead, the ITC has to analyze subject import volume by looking at whether products are "practically unavailable from U.S. sources" and considering "actual limitations" in assessing whether subject imports are significant.

Here, when assessing the significance of subject import volume, the ITC "failed to consider the market conditions distinctive to the OCTG industry, including whether subject imports were needed to satisfy demand," the brief said. In only three paragraphs of an over 50-page decision, the commission "merely summarized the absolute and relative volume fluctuations" during the investigation period to "summarily conclude that the subject import volume was 'significant in absolute terms and relative to consumption in the United States,'" Tenaris said. This "rote exercise of noting volume figures" doesn't have any "meaningful analysis of the market context and condition of competition distinctive to the OCTG industry," the brief said.

Tenaris added that the ITC failed to analyze the impact of imports "within the context of the conditions of competition as the statute mandates." The commission used a subjective standard and found a "causal nexus between cumulated subject imports and the industry's weak performance relative to the strong growth in demand from 2020 to 2021," the brief said. The importer said the facts simply don't support this causal nexus finding, adding that other conditions, including the 2020 demand collapse and V-shaped recovery, "explained the domestic industry's condition throughout" the investigation period.

The metrics show that the U.S. industry's condition was "already improving in 2021, before the petitions were filed, as demand was increasing and supply constraints easing," the brief said. These metrics confirm that by "nearly every measure (production, output, employment, wages, and financial indicators)," the U.S. industry "performed dramatically better" even as import volumes were increasing, Tenaris argued.

The importer also contested the trade court's finding that it abandoned its claim that the ITC didn't properly interpret the meaning of the phrase "compete with" in the injury statute in the commission's analysis of the ability of subject imports to compete with other imports and the domestic like product in the U.S. market.