CIT Says Commerce Didn't Adequately Explain Treatment of Conversion Costs in AD Review
The Commerce Department failed to adequately explain its treatment of costs needed to convert steel plates into wind towers in the 2021-22 administrative review of the antidumping duty order on utility scale wind towers from South Korea, the Court of International Trade held on Dec. 2. Judge Leo Gordon said the U.S. provided "inadequate" explanation of the decision to use respondent Dongkuk’s reported conversion costs instead of the costs reported by the petitioner, the Wind Tower Trade Coalition.
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Conversion costs, which are included in production costs reported to Commerce, include direct labor costs, and both variable and fixed overhead costs. In its reported costs, Dongkuk "subdivided the variable overhead costs by reporting them in two categories: (1) direct variable costs that were linked to specific projects or (2) indirect variable costs that were 'not impacted by differences in product characteristics.'"
The agency found Dongkuk's reported costs to be appropriate, which the coalition challenged on various bases, one of which is that Commerce failed to adequately explain its finding.
Gordon agreed, noting that Commerce didn't explain why Dongkuk’s reported conversion costs were appropriate, except for "circular reasoning that 'Dongkuk reported its conversion costs based on its normal books and records.'"
The judge added that Commerce didn't explain why the petitioner's conversion cost analysis using the first control number (CONNUM) characteristic, tower sections, is appropriate, except for a "conclusory statement" that the petitioner doesn't consider that the CONNUMs "vary in complexity with regard to bus bars, conduits, elevators, platforms, and other internal components." The agency didn't address the "first three enumerated CONNUM characteristics (tower sections, weight, and height), nor did it explain why internal components’ complexities are appropriately reflected in Dongkuk’s reported conversion costs," Gordon held.
While the government said Commerce's finding that CONNUMs vary in complexity with regard to internal components is supported by Dongkuk's reporting of its direct conversion costs and the "linkage to specific wind tower projects," the judge said this explanation isn't found in Commerce's decision memorandum. Thus, it's a "post hoc rationalization by agency counsel, and not the reasoning of the agency itself."
However, Gordon rejected the petitioner's other challenges to Commerce's decision to accept Dongkuk's reported conversion costs.
The coalition initially argued that Commerce misinterpreted the relevant statute, which imposes a requirement that "[c]osts shall normally be calculated based on the records of the exporter or producer ... if such records ... reasonably reflect the costs associated with the production and sale." The petitioner said this requirement is "best interpreted as records that 'reflect costs attributable to the physical characteristics of the merchandise.'" However, at oral argument, counsel for the petitioner "conceded that there is no dispute as to the meaning of the statute."
Gordon said he considers the legal challenge to the statute waived, indicating that the coalition's challenge is, in fact, a factual one.
The judge also rejected the petitioner's argument that Commerce unlawfully departed from its past practice of "adjusting a producer’s costs that do not reasonably reflect the costs associated with the merchandise’s physical characteristics." The court held that the petitioner "[f]atally" made "no showing of its alleged established practice." While the coalition provided three examples of Commerce adjusting conversion costs due to differences in production time or quantities where the costs didn't correspond to physical characteristics, the court found these examples "unpersuasive," since prior determinations "with regard to one industry typically provide little guidance for later determinations with regard to different industries."
The agency reasonably explained that the industry at issue here is different from those found in the three examples provided by the petitioner, the court said.
(Wind Tower Trade Coalition v. United States, Slip Op. 25-148, CIT # 24-00070, dated 12/02/25; Judge: Leo Gordon; Attorneys: Maureen Thorson of Wiley Rein for plaintiff Wind Tower Trade Coalition; Sosun Bae for defendant U.S. government; Jarrod Goldfeder of Trade Pacific for defendant-intervenor Dongkuk S&C Co.)