CIT Upholds Use of Prospective Evidence in Section 232 Exclusion Request Proceedings

Katzmann also sustained Commerce's focus on "prospective evidence of steel production," finding it to be in line with the "tariff's stated purpose and expected fact" of allowing U.S. steelmakers to use around 80% of existing domestic production capacity. The judge rejected Seneca's claim that the agency's approach gives "short shrift to course-of-dealing evidence" that suggests that a U.S. company that objects to a Section 232 exclusion request won't actually deliver the goods.

Commerce will consider past dealings evidence that is "clearly indicative of the parties' future dealings," and "nothing compels Commerce" to consider older course-of-dealing evidence, the court said. Katzmann found Commerce's path of recourse -- which allows importers to refile exclusion requests and get retroactive relief after executing foreign purchase orders should the domestic objector later fail to supply the steel products -- sufficient.

The judge held that so long as the new request is for the same "unliquidated entries" linked with the initial request, the applicable rule's text "suggests that Commerce can grant relief to the requester that is functionally the same as relating back to the initial request." Katzmann said "Commerce would do well to clarify that point to requesters."

CIT previously remanded the eight exclusion requests on the grounds that Commerce failed to address contrary evidence, namely three types of emails, either sent internally at Seneca or between the importer and objector U.S. Steel (see 2310180052). Katzmann held that on remand, the agency adequately addressed this evidence.

Commerce decided not to give any weight to an internal Seneca email, which said U.S. Steel failed to offer any tin mill products because "it was too dated to be probative" of U.S. Steel's steel availability. Katzmann said this explanation is "reasonable" given that the email was sent 11 months before the exclusion request was filed. The court upheld the agency's characterization of the "ever-changing nature of steel and aluminum production schedules," which was used to say the email didn't accurately represent U.S. Steel's production capacity.

The second group of emails, which were sent between the importer and U.S. Steel, were also not found to be probative of U.S. Steel's capacity on the grounds that the U.S. firm was offering "spot sales" and not contract sales and that Seneca was focused only on contract volumes. Katzmann found a "rational connection between the agency's factfindings" that Seneca's email doesn't undermine U.S. Steel's certification of spot availability.

The third group of emails, in which U.S. Steel offered to fill only a "small fraction" of Seneca's order, was found to be irrelevant because it was dated four months after Seneca placed its orders from foreign suppliers. Katzmann said the "email chain simply does not pertain to the particular orders that later went fulfilled by foreign suppliers."

The court also found that Commerce's denials didn't cut against the agency's regulations or past practice. In claiming they did, Seneca cited three Section 232 exclusion denials requested by exporter Borusan Mannesmann. The objector, Zekelman Industries, said it could supply 100% of the volume, though Commerce found this representation to be false. Katzmann said Seneca failed to show "how the Zekelman-specific reasoning Borusan denials," which rely on "the same piece of evidence" and operate as only one instance of Commerce's practice, are enough to show a prior practice was violated.

Seneca also claimed that Commerce should have started its analysis of timeliness with the date on which the company placed the purchase orders with the foreign suppliers instead of the dates of the exclusion requests. The court said Seneca didn't cite any "regulation, agency practice, or other authority to suggest" this practice "is an abuse of discretion."

The court similarly dispatched Seneca's claim that Commerce erred in its timeliness analysis by double counting the shipping time. The agency asked Seneca to estimate the number of days required to take delivery of the product from the time of the purchase order and the number of days required to ship the product from the foreign port to the U.S. loading dock. Seneca said this method double-counts shipping time if the terms of purchase include the seller's delivery to the buyer under cost, insurance and freight or delivered duty paid terms.

Katzmann said that while this could lead to double-counting, Seneca forfeited the issue by not raising it administratively or in its first round of briefing at the court. Regardless, the court found the error to be "harmless," since Commerce's analysis is unaffected by whether the company's foreign supplier time eliminated any double counting.

(Seneca Foods Corp. v. U.S., Slip Op. 24-117, CIT # 22-00243, dated 10/21/24; Judge: Gary Katzmann; Attorneys: James Smith of Covington & Burling for plaintiff Seneca Foods Corp.; Tara Hogan for defendant U.S. government)