Federal Circuit Remands Commerce's Use of 'd Test' Analysis in Antidumping Case
The Commerce Department must further explain its use of a statistical test when using its differential pricing analysis in an antidumping duty investigation, the U.S. Court of Appeals for the Federal Circuit said in a July 15 opinion. Partially remanding an antidumping investigation into welded line pipe from South Korea, the Federal Circuit questioned Commerce's use of the "Cohen's d test" to discover targeted or masked dumping.
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In antidumping duty investigations, Commerce has been tasked by Congress with identifying goods that are dumped into the U.S. market through "targeted" or "masked" dumping. Since Commerce typically conducts its dumping investigations by comparing the average home market price of the good in question to its U.S. price, certain exporters may work around this by dumping the goods in certain areas and selling them at a higher price in another or at another time to get a non-dumped average U.S. price. To combat this, Commerce may compare the weighted average of sales in the home country to individual sales prices.
Before conducting the differential pricing analysis though, Commerce must first gather data on the export sales and detect the masked dumping using the differential pricing analysis. The agency breaks down the U.S. sales data into sets based on comparable product groups. Once in the product group, Commerce then breaks that data into various subsets, including the region the U.S. sales took place, the purchasers involved in the sales and even the time periods in which the sales took place. Commerce will then pick one subset as the "test group" while aggregating the remaining subset into the "comparison group." This is where the Cohen's d test comes in, as Commerce uses the test to find if the test group is significantly different from the comparison group. If it is, Commerce applies a "ratio test" to see if the ratio of significantly different transactions warrants using the weighted average to individual transaction comparison.
SeAH challenged the use of the Cohen's d test, claiming that Commerce was not abiding by certain assumptions required of the test. The creator of the test, statistician Jacob Cohen, required that his test be completed with normally distributed data of sufficient size and of roughly equal variances. The court raised concerns that the data Commerce used, in SeAH's case and in less-than-fair-value investigations more generally, does not adhere to these assumptions and therefore challenges the validity of the test. “The use of Cohen’s d with test groups consisting of very few observations may be particularly problematic," the court said.
Commerce argued that the concern over the normal distribution of the data is misplaced since normal distribution only concerns sampled data. Since the data in the differential pricing analysis is not sampled, there is no issue, Commerce said. This ignores the fact that the model itself was based on assumption of normality, the court responded.
"We therefore remand to give Commerce an opportunity to explain whether the limits on the use of the Cohen’s d test prescribed by Professor Cohen and other authorities were satisfied in this case or whether those limits need not be observed when Commerce uses the Cohen’s d test in less-than-fair-value adjudications," the decision said. "In that regard, we invite Commerce to clarify its argument that having the entire universe of data rather than a sample makes it permissible to disregard the otherwise-applicable limitations on the use of the Cohen’s d test."
(Stupp Corporation et al. v. U.S. et al., CAFC # 2020-1857, dated 07/15/21, Judges Taranto, Bryson and Chen. Attorneys: Jeffrey Winton of Winton & Chapman for defendant-appellant SeAH Steel Corp.; Robert Kiepura for defendant-appellee U.S. government)