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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.
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.