Commerce Defends Inclusion of Suspended Production Line AD G&A Expenses
The Commerce Department this week stuck by its decision in an antidumping duty review on welded line pipe from South Korea to include losses on suspended product lines as part of antidumping duty respondent Nexteel Co.'s general and administrative (G&A) expenses, instead of as the cost of goods sold (Nexteel Co. v. United States, CIT # 20-03898).
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In March 6 remand results at the Court of International Trade, the agency said the losses of four product lines, only one of which was for subject merchandise, are "actual costs incurred by the company" that need to be recovered when setting prices. The result, if affirmed, would be an unchanged 1.12% dumping rate for Nexteel.
The trade court had previously ruled that Commerce failed to address Nexteel's challenge of Commerce's decision to treat as G&A expenses the company's costs from temporarily shutting down production lines for certain non-subject goods and also suspending one forming line of subject goods. The court said Commerce failed to explain the extent to which losses from stopping non-subject merchandise production was related to Nexteel's G&A expenses incurred on the products (see 2212060038).
Of the four lines, Commerce clarified that three made oil country tubular goods, non-subject merchandise. Of these three, one was suspended for the whole review period while the other two were suspended for the last five months of the review period. In its records, Nexteel assigned the costs incurred for each line to the cost of manufacturing (COM) the products made on each line. However, the suspension losses were not directly assigned to any products, instead marking the losses as company-wide costs.
Commerce explained on remand that when the lines were suspended, they became "assets held for future activities," but still required expenditures to maintain them. "Therefore, for the time frame during which they remain non-productive assets, it is appropriate to attribute those expenditures to the general operations of the company," the remand results said. "... Commerce’s point is that, once the suspended production lines are taken out of operation for an extended period of time, the recovery of such related costs becomes a company-wide burden, as opposed to a burden only on the products that are being produced on those lines. These costs are more associated with the company’s general operations (i.e., G&A) rather than product-specific costs (i.e., COM)."
If the agency only attributed the suspension costs to the merchandise made on each line, the "per-unit production costs for such merchandise would be unreasonably high" since the cost of the suspended lines would be tacked onto the normal operating cost for the lines, Commerce said.