In Dongkuk S&C Co., Ltd. v. United States, No. 23-1419 (Fed. Cir. Apr. 21, 2025), the Federal Circuit affirmed the U.S. Department of Commerce’s determinations in its antidumping investigation of utility-scale wind towers from South Korea. The decision clarifies Commerce’s discretion in adjusting reported production costs and selecting surrogate data when calculating constructed value under 19 U.S.C. § 1677b.
Key Takeaway
The Federal Circuit upheld Commerce’s authority to adjust input costs that are distorted by market fluctuations and to use consolidated financial statements as a proxy for profit and selling expenses when more targeted data is unavailable or incomplete—even over objections that a more product-specific alternative was available.
Background
Dongkuk S&C Co., Ltd. (DKSC), a Korean producer of utility-scale wind towers, challenged Commerce’s determination that its U.S. sales were made at less than fair value, leading to a 5.41% antidumping duty margin. The case focused on two aspects of Commerce’s methodology:
- Adjustment of Steel Plate Costs: Commerce found significant variation in DKSC’s reported steel plate input costs across different models (CONNUMs), which it attributed to the timing of raw material purchases rather than product differences. To remove this distortion, Commerce applied a weighted average cost for steel plate inputs.
- Surrogate Profit Data for Constructed Value: Because all of DKSC’s comparison market sales failed the sales-below-cost test, Commerce was required to calculate normal value based on constructed value. Lacking usable internal data or comparable respondents, Commerce used the consolidated 2018 financial statements of SeAH Steel Holdings Corp. (SSHC) as a surrogate for profit and selling expenses under § 1677b(e)(2)(B)(iii).
Court’s Analysis
1. Steel Cost Adjustment Was Supported by Substantial Evidence
Commerce’s decision to average steel plate costs was upheld under § 1677b(f)(1)(A). The court agreed with Commerce that variations in per-unit costs across CONNUMs were not tied to physical characteristics but rather to the timing of purchases. The court cited Thai Plastic Bags Indus. Co. v. United States, 746 F.3d 1358 (Fed. Cir. 2014), confirming that cost allocations should reflect real production differences and that Commerce may adjust distortive inputs.
“Commerce was not required to rely upon those distortive records and had the authority to adjust steel plate input costs to more accurately approximate DKSC’s costs of production.”
The remand proceedings confirmed that Commerce had used physical characteristics as a “guidepost” in its analysis and demonstrated through multiple comparisons that timing—not product variation—was the cost driver.
2. Surrogate Profit Selection Under “Reasonable Method” Standard
Commerce invoked § 1677b(e)(2)(B)(iii), the “any other reasonable method” provision, after determining that subsections (i) and (ii) were unavailable. Among eleven potential data sources, Commerce selected SSHC’s financials because they covered a full 12-month period and included profits from comparable steel manufacturing operations in Korea—even though they also included unrelated businesses and U.S. sales.
The court affirmed this choice, citing Mid Continent Steel & Wire, Inc. v. United States, 941 F.3d 530 (Fed. Cir. 2019), and American Silicon Techs. v. United States, 261 F.3d 1371 (Fed. Cir. 2001), for the proposition that Commerce has wide discretion in choosing among imperfect options, so long as its decision is reasonable and explained.
Dissent
Judge Reyna dissented in part, arguing that Commerce failed to justify why SSHC’s broadly consolidated financials were a better proxy than SeAH Steel Corporation’s four-month standalone financials, which were narrowly tailored to relevant steel products in Korea. He emphasized the lack of a sufficient rationale and cautioned that this approach could permit arbitrary future determinations.
Implications
This decision reinforces the deference Commerce enjoys in addressing distorted costs and selecting surrogate data in complex antidumping cases. It underscores the importance of clear cost allocation tied to physical characteristics and affirms that full-year financial data may take precedence over shorter-duration records, even when the latter are more product-specific—so long as Commerce adequately explains its choice.
Importers and foreign producers should take note of Commerce’s willingness to adjust internal accounting when it identifies distortions and its latitude in applying the “reasonable method” standard when no perfect surrogate exists.
By Charles Gideon Korrell