Slip Op. 08-101
UNITED STATES COURT OF INTERNATIONAL TRADE
TARGET CORPORATION,
Plaintiff,
Before: Leo M. Gordon, Judge
v.
Consol. Court No. 06-00383
UNITED STATES,
Defendant.
OPINION AND ORDER
[Commerce’s anticircumvention determination remanded.]
Dated: September 18, 2008
Jochum Shore & Trossevin, P.C. (Marguerite E. Trossevin) for Plaintiff Target
Corporation.
Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP (Bruce M. Mitchell, Max F.
Schutzman, William F. Marshall, Andrew T. Schutz) for Plaintiffs Qingdao Kingking Applied
Chemistry Co., Ltd., Dalian Talent Gift Co., Ltd., Shanghai Autumn Light Enterprise Co., Ltd.,
Home Accent International (Honghzhou) Co., Ltd., Zhongshan Zhongnam Candle
Manufacturer Co., Ltd., Nantucket Distributing Co., Inc., Shonfeld’s (USA), Inc., Amstar
Business Company Limited and Jiaxing Moonlight Candle Art Co., Ltd.
Greenberg Traurig, LLP (Jeffrey S. Neeley, David R. Amerine) for Plaintiff Specialty
Merchandise Corporation, Inc.
Gregory G. Katsas, Assistant Attorney General; Jeanne E. Davidson, Director,
Patricia M. McCarthy, Assistant Director, Commercial Litigation Branch, Civil Division,
U.S. Department of Justice (David S. Silverbrand, Michael J. Dierberg); and Office of
Chief Counsel for Import Administration, U.S. Department of Commerce (Arthur D.
Sidney), of counsel, for Defendant United States.
Barnes & Thornburg LLP (Randolph J. Stayin, Karen A. McGee) for Defendant-
Intervenor National Candle Association.
Court No. 06-00383 Page 2
Gordon, Judge: Plaintiffs Target Corporation (“Target”), Qingdao Kingking
Applied Chemistry Co., Ltd., et al. (“Qingdao”), and Specialty Merchandise Corporation,
Inc. (“SMC”) challenge the U.S. Department of Commerce’s (“Commerce”)
determination that petroleum wax candles with 50 percent or more palm or other
vegetable-oil based waxes (“mixed-wax”) are later-developed merchandise
circumventing the antidumping duty order covering petroleum wax candles from China.
See Petroleum Wax Candles from the People’s Republic of China, 71 Fed. Reg. 59,075
(Dep’t Commerce Oct. 6, 2006) (final determ. anticircumvention inquiry)
(“Final Determination”), amended by Final Results Pursuant to Voluntary Remand,
Target Corp. v. United States, Consol. Court No. 06-00383 (May 16, 2008)
(“Voluntary Remand”). The court has jurisdiction pursuant to Section 516A(a)(2)(B)(vi)
of the Tariff Act of 1930, as amended, 19 U.S.C. § 1516a(a)(2)(B)(vi) (2000)1 and
28 U.S.C. § 1581(c) (2000). As discussed below, this action is remanded to Commerce
for further consideration.
I. Standard of Review
When reviewing an anticircumvention determination under 19 U.S.C.
§ 1516a(a)(2)(B)(vi) and 28 U.S.C. § 1581(c) (2000), the U.S. Court of International
Trade sustains Commerce’s determinations, findings, or conclusions unless they are
“unsupported by substantial evidence on the record, or otherwise not in accordance with
law.” 19 U.S.C. § 1516a(b)(1)(B)(i). When reviewing whether Commerce’s actions are
unsupported by substantial evidence, the Court assesses whether the agency action is
1
Further citations to the Tariff Act of 1930 are to the relevant provisions of Title 19 of the
U.S. Code, 2000 edition.
Court No. 06-00383 Page 3
reasonable given the record as a whole. See Nippon Steel Corp. v. United States,
458 F.3d 1345, 1350-51 (Fed. Cir. 2006). Additionally, the two-step framework provided
in Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842-45 (1984),
governs judicial review of Commerce's interpretation of the antidumping statute.
Dupont Teijin Films USA, LP v. United States, 407 F.3d 1211, 1215 (Fed. Cir. 2005).
II. Background
Commerce issued an antidumping duty order on petroleum wax candles from
China in 1986. Petroleum Wax Candles from the People’s Republic of China, 51 Fed.
Reg. 30,686 (Dep’t Commerce Aug. 28, 1986) (antidumping duty order) (“Petroleum
Wax Candle Order” or “Order”). In the less than fair value (“LTFV”) proceeding
Commerce defined the subject merchandise, in relevant part, as “petroleum wax
candles made from petroleum wax.” Petroleum Wax Candles from the People’s
Republic of China, 51 Fed. Reg. 25,085 (Dep’t Commerce July 10, 1986) (final less than
fair value determination). For the corresponding injury investigation, the
U.S. International Trade Commission (“ITC”) defined the domestic like product,
in relevant part, as candles “composed of over 50 percent petroleum wax.” Candles
from the People’s Republic of China, USITC Pub. 1888 at 5, Inv. No. 731-TA-282
(Aug. 1986) (final injury determination) (“Original Injury Determination”).
subject merchandise “petroleum wax candles
(COMMERCE) made from petroleum wax”
domestic like product “candles composed of over
(ITC) 50 percent petroleum wax”
Court No. 06-00383 Page 4
The ITC therefore interpreted Commerce’s redundant qualifier “made from
petroleum wax” to mean “composed of more than 50 percent petroleum wax.” See id.
This percentage benchmark proved dispositive in subsequent Commerce scope
determinations involving mixed-wax candles. Commerce ruled at least seven times in a
seven-year period that the ITC’s percentage-based like product definition mandated that
mixed-wax candles (containing less than 50 percent petroleum wax) be excluded from
the scope of the Petroleum Wax Candle Order.2
Central to these prior scope rulings is the unstated but fundamental tenet of
antidumping law that the domestic like product must encompass the subject
2
See Petroleum Wax Candles from the People’s Republic of China, Final Scope Ruling,
A-570-504, “Costco Wholesale” (Dec. 10, 1998) (candles composed of 19% petroleum
wax and 81% beeswax excluded from Order for not satisfying Commission’s like
product definition of petroleum wax candles); Petroleum Wax Candles from the People’s
Republic of China, Final Scope Ruling, A-570-504, “Et Al Imports, Inc.” (Dec. 11, 1998)
(candles composed of 20% paraffin wax and 80% beeswax excluded from Order based
upon the Commission’s definition of the domestic like product); Petroleum Wax Candles
from the People’s Republic of China, Final Scope Ruling, A-570-504, “Ocean State
Jobbers, Inc.” (Dec. 18, 1998) (candles composed of 20% petroleum wax and 80%
beeswax excluded from Order based upon the Commission’s definition of the domestic
like product); Petroleum Wax Candles from the People’s Republic of China, Final Scope
Ruling, A-570-504, “JC Penny Purchasing, Corp.” (May 21, 2001) (candles composed of
42% petroleum wax and 58% palm oil excluded from Order for not satisfying the
Commission’s definition of domestic like product); Petroleum Wax Candles from the
People’s Republic of China, Final Scope Ruling, A-570-504, “Leader Light, Inc.” (Dec.
12, 2002) (candles containing less than 50% petroleum wax excluded from Order for not
satisfying the Commission’s definition of domestic like product); Petroleum Wax
Candles from the People’s Republic of China, Final Scope Ruling, A-570-504, “Avon
Products, Inc.” (Nov. 17, 2003) (candles containing less than 50% petroleum wax
excluded from Order for not satisfying the Commission’s definition of domestic like
product); Petroleum Wax Candles from the People’s Republic of China, Final Scope
Ruling, A-570-504, “Pier 1 Imports, Inc.” (May 13, 2005) (candles with petroleum-based
wax content less than 50 percent excluded from the Order pursuant to the
Commission’s like product definition and Commerce’s treatment in prior scope rulings).
All scope rulings for the Petroleum Wax Candle Order are available at
http://ia.ita.doc.gov/download/candles-prc-scope/index.html.
Court No. 06-00383 Page 5
merchandise: “an antidumping duty order must be supported by an ITC determination of
material injury covering the merchandise in question.” Wheatland Tube Co. v.
United States, 21 CIT 808, 819, 973 F. Supp. 149, 158 (1997) (citing 19 U.S.C. § 1673),
aff’d, 161 F.3d 1365 (Fed. Cir. 1998).
Rather than have Commerce repeat another conventional scope proceeding, the
domestic interested party, National Candle Association (“NCA”), tried a different
approach in 2004. NCA petitioned Commerce to initiate a later-developed merchandise
anticircumvention inquiry and determine whether mixed-wax candles were
circumventing the Order. Commerce initiated the inquiry. Petroleum Wax Candles from
the People’s Republic of China, 70 Fed. Reg. 10,962, 10,963 (Dep’t Commerce
Mar. 7, 2005) (notice of initiation anticircumvention inquiry) (“Notice of Initiation”).
A later-developed merchandise anticircumvention inquiry is a specific type of scope
inquiry governed by its own statutory provision, 19 U.S.C. § 1677j(d), which codified
Commerce’s administrative practice for analyzing whether later-developed merchandise
fell within the scope of an antidumping duty order. H.R. REP. NO. 100-576, at 601
(1988) (Conf. Rep.), reprinted in 1988 U.S.C.C.A.N. 1547, 1634 (“This provision is
intended to clarify and codify current Commerce Department authority, which has been
recognized by the courts.”)
As Commerce was commencing the later-developed merchandise
anticircumvention inquiry, the ITC was coincidentally concluding a second five-year
sunset review of the Petroleum Wax Candle Order. See Petroleum Wax Candles from
China, USITC Pub. 3790, Inv. No. 731-TA-282 (July 2005) (second sunset review)
Court No. 06-00383 Page 6
(“Second Sunset Review”). The lone participant in the Second Sunset Review,
NCA, urged the ITC to re-examine the domestic like product definition from the Original
Injury Determination and include “all blended candles” regardless of the proportion of
petroleum wax. Second Sunset Review at 7. The ITC obliged and redefined the
domestic like product “to include all blended candles,” or more simply, candles
“containing any amount of petroleum wax.” Id. at 9. In addition, the ITC concluded that
revocation of the Petroleum Wax Candle Order “would be likely to lead to continuation
or recurrence of material injury to an industry in the United States within a reasonably
foreseeable time.” Id. at 3. No party challenged the Second Sunset Review.
Subsequently, Commerce completed the anticircumvention inquiry and
determined that mixed-wax candles containing “any amount” of petroleum wax are
within the scope of the Petroleum Wax Candle Order. Final Determination, 71 Fed.
Reg. at 59,077-78. Plaintiffs then commenced this action. Commerce, in turn, sought a
voluntary remand which the court granted. In the Voluntary Remand Commerce slightly
modified its legal analysis but did not change its determination. See discussion infra at
pp. 12-13. Plaintiffs raise a number of challenges to Commerce’s determination,
including:
(1) that Commerce’s interpretation of the phrase “later-developed merchandise”
to cover merchandise that was in existence but commercially unavailable during the
original investigation is contrary to the plain meaning of 19 U.S.C. § 1677j(d), and
further, that Commerce’s finding that mixed-waxed candles were commercially
unavailable at the time of the original investigation is unsupported by substantial
evidence;
Court No. 06-00383 Page 7
(2) that Commerce’s initiation of the anticircumvention inquiry on mixed-wax
candles was contrary to Commerce’s scope regulation, 19 C.F.R. § 351.225 (2004),3
the prior mixed-wax candle scope rulings, and case law governing the initiation of scope
inquiries; and
(3) that Commerce’s inclusion of mixed-wax candles within the scope of the
Order is a legally impermissible expansion of the Petroleum Wax Candle Order contrary
to the domestic like product definition.4
As explained more fully below, the court is not persuaded by these arguments;
nevertheless, the court cannot sustain Commerce’s later-developed merchandise
anticircumvention determination and therefore remands the matter to Commerce for
further consideration.
III. Discussion
A. Later-Developed Merchandise
1. Commercial Availability Standard
A critical legal issue for Commerce during the administrative proceeding was
whether mixed-wax candles were “later-developed merchandise.” This issue arose
because record evidence indicated that mixed-wax candles may have existed at the
3
Further citations to Title 19 of the Code of Federal Regulations are to the relevant
provisions of the 2004 edition.
4
Plaintiffs also challenge (1) Commerce’s finding that mixed-wax candles are the same
class or kind of merchandise as petroleum wax candles (the subject merchandise) and
specifically that four of Commerce’s findings in applying the statutory factors — the
physical characteristics of the product, the expectations of the ultimate purchasers, the
channels of trade in which the product is sold, and the manner in which the product is
advertised and displayed — are unsupported by substantial evidence; and Plaintiffs also
argue that (2) Commerce’s assessment of antidumping duties, pursuant to 19 C.F.R. §
351.225(l)(3), on Plaintiffs’ entries made after the initiation of the anticircumvention
inquiry is an impermissible retroactive application of the law. The court does not resolve
these issues in this decision.
Court No. 06-00383 Page 8
time of the original investigation. Section 1677j(d)(1) defines “later-developed
merchandise” as “merchandise developed after an [antidumping] investigation is
initiated.” 19 U.S.C. § 1677j(d)(1) (emphasis added). The question for Commerce was
whether mixed-wax candles were “developed” by the time of the initiation of the
investigation or “developed” sometime thereafter.
Commerce touched upon the meaning of “developed” in several prior
anticircumvention proceedings. “In each case, [Commerce] addressed the ‘commercial
availability’ of the later-developed merchandise in some capacity, such as the product’s
presence in the commercial market or whether the product was fully ‘developed,’
i.e., tested and ready for commercial production.” Final Determination, 71 Fed. Reg. at
59,076-77 (citing Portable Electronic Typewriters from Japan, 55 Fed. Reg. 47,358
(Dep’t Commerce Nov. 13, 1990) (final scope ruling), Electrolytic Manganese Dioxide
from Japan, 57 Fed. Reg. 395 (Dep’t Commerce Jan. 6, 1992) (final scope ruling), and
Erasable Programmable Read Only Memories from Japan, 57 Fed. Reg. 11,599
(Dep’t Commerce Apr. 6, 1992) (final scope ruling)). From these prior administrative
precedents Commerce derived a commercial availability standard for the term
“developed.” Simply stated, to be “developed” a product must be commercially
available—present in the commercial market or tested and ready for commercial
production. Commerce offered a straightforward rationale for the standard: “[T]he
product’s actual presence in the market at the time of the LTFV investigation is a
necessary predicate of its inclusion or exclusion from the scope of an antidumping duty
order.” Issues and Decision Memorandum for the Later-Developed Merchandise
Court No. 06-00383 Page 9
Anticircumvention Inquiry of the Antidumping Duty Order on Petroleum Wax Candles
from the People’s Republic of China, at 23, A-570-504 (Sept. 29, 2006), available at
http://ia.ita.doc.gov/frn/summary/prc/E6-16613-1.pdf (“Decision Memorandum”).
Plaintiffs challenge the commercial availability standard, arguing that “developed”
has one and only one meaning: created. Target Mot. J. Agency R. at 15; Qingdao Mot.
J. Agency R. at 25-26. It is an understandable position; if developed means created,
and mixed-wax candles existed at the time of the initiation of the investigation, they
cannot be “later-developed.”
The two-step framework provided in Chevron, 467 U.S. at 842-45, governs
judicial review of Commerce's interpretation of the antidumping statute. Dupont Teijin
Films USA, LP, 407 F.3d at 1215. The court first considers whether Congressional
intent on the issue is clear, and if not, the court next considers whether Commerce's
interpretation is reasonable. Id. The word “developed” has many meanings. See
"developed." The American Heritage® Dictionary of the English Language, Fourth
Edition. Houghton Mifflin Company, 2004; Dictionary.com entry,
http://dictionary.reference.com/browse/developed (last visited Sept. 18, 2008).
Although Plaintiffs’ proposed interpretation represents one possibility, Commerce’s
represents another. Therefore, this is not a matter of giving effect to one, clear,
Congressional intent (Chevron step one), but instead of reviewing the reasonableness
of Commerce’s proposed interpretation (Chevron step two). To determine whether
Commerce's interpretation is reasonable, the court “may look to ‘the express terms of
the provisions at issue, the objectives of those provisions, and the objectives of the
Court No. 06-00383 Page 10
antidumping scheme as a whole.’” Wheatland Tube Co. v. United States, 495 F.3d
1355, 1361 (Fed. Cir. 2007) (citing NSK Ltd. v. United States, 26 CIT 650, 654,
217 F. Supp. 2d 1291, 1296-97 (2002)).
Commerce’s commercial availability standard is reasonable. As Commerce
explained, “the product’s actual presence in the market at the time of the LTFV
investigation is a necessary predicate of its inclusion or exclusion from the scope of an
antidumping duty order.” Decision Memorandum at 23. The later-developed
merchandise provision is designed to prevent circumvention of an antidumping order by
a comparable product (as determined by the Diversified Products5 analysis) for the
subject merchandise. Commerce’s interpretation, which reaches products that emerge
in the market after imposition of the antidumping order, accomplishes this objective.
2. Commerce’s Finding of Commercial Unavailability
Qingdao challenges Commerce’s determination that mixed-wax candles were
commercially unavailable during the LTFV investigation. Qingdao Mot. J. Agency R. at
37-44. Implicit in Qingdao’s challenge is an assumption that Commerce made a finding
of commercial unavailability for mixed-wax candles, which it did in some vague sense:
[H]aving received no information either through relevant product
brochures, annual sales data, or any other information from any party
demonstrating that mixed-wax candles were commercially available prior
to the LTFV investigation, [Commerce] finds that it cannot definitively
conclude that mixed-wax candles were available in the market at the time
of the LTFV investigation.
5
The factors set forth in 19 U.S.C. § 1677j(d)(1) to determine whether later-developed
merchandise is within the scope of an outstanding antidumping duty order are derived
from the court’s decision in Diversified Prods. Corp. v. United States, 6 CIT 155, 162,
572 F. Supp. 883, 889 (1983). They are commonly referred to as the Diversified
Products criteria.
Court No. 06-00383 Page 11
Decision Memorandum at 26 (emphasis added).
Note that Commerce “cannot definitively conclude.” Id. This language creates
confusion, at least for purposes of judicial review. Rather than make a straightforward
finding that mixed-wax candles were commercially unavailable at the time of the LTFV,
Commerce introduced an unexplained, subjective, evidentiary standard—definitive
conclusiveness—and found this standard had not been met. It is a puzzling turn of
phrase; it almost bespeaks an administrative presumption of commercial
unavailability—rebuttable by definitively conclusive evidence (whatever that may be)
of commercial availability. Commerce, though, directly contradicted such notions:
[B]oth Respondents and Petitioners had the burden to establish whether
mixed-wax candles were commercially available at the time of the LTFV
investigation. All parties were given the opportunity to submit evidence
that mixed-wax candles were available or evidence that mixed-wax
candles were not available in the market. Accordingly, the burden did not
rest on any single party.
Id. at 25. The net effect of all this is that the court cannot review Commerce’s new,
subjective, evidentiary standard and the associated “finding” in its present posture, and
therefore must remand to Commerce for further consideration.
On remand Commerce has two choices: (1) Commerce may make a
straightforward finding of commercial unavailability at the time of the LTFV, which the
court can then review for reasonableness (substantial evidence review); or
(2) Commerce may further explain its proposed evidentiary standard as a reasonable
application and interpretation of the later-developed merchandise anticircumvention
provision. Once completed, Commerce must share it with the parties and provide an
Court No. 06-00383 Page 12
opportunity to address that standard as it applies to the record evidence. Commerce
can then make a factual finding based on the proposed standard. The court will then
review the proposed standard for reasonableness under Chevron step two, and
evaluate whether Commerce’s factual finding is supported by substantial evidence
(or more simply, for reasonableness).
3. Significant Technological Advance or Significant Alteration
of the Merchandise Involving Commercially Significant Changes
During the anticircumvention proceeding, Commerce referred to the legislative
history for the ITC consultation requirement of § 1677j(e) and discovered what it thought
was an additional definitional requirement for “later-developed merchandise.” According
to Commerce, “[t]he only other source of guidance available [for the definition of ‘later-
developed merchandise’] is the brief discussion of later-developed products in the
legislative history for section 781(d) of the Act, which although addressing later-
developed products with respect to the ITC's injury analysis, we find is also relevant to
[Commerce]'s analysis.” Final Determination, 71 Fed. Reg. at 59,076. Commerce then
selectively quoted the legislative history, mistakenly representing that the history
defined “a later-developed product as a product that has been produced as a result of a
‘significant technological advancement [sic] or a significant alteration of the
merchandise involving commercially significant changes.’'' Id. (emphasis omitted)
(quoting H.R. REP. NO. 100-576, at 603 (1988) (Conf. Rep.), reprinted in 1988
U.S.C.C.A.N. 1547, 1636). Commerce purportedly abandoned its reliance on the
legislative history of the ITC consultation requirement after reconsidering its
interpretation of later-developed merchandise pursuant to the voluntary remand in this
Court No. 06-00383 Page 13
matter. Voluntary Remand at 5. Commerce, though, did not abandon the additional
definitional requirements. Commerce maintained that later-developed merchandise
must have resulted from a significant technological advance or significant alteration to
an earlier product. Id.
Not much need be said here other than that Commerce misread the ITC
consultation provision and its legislative history. The full passage from which
Commerce selectively quoted in the Final Determination reads:
With respect to later-developed products, a significant injury issue can
arise if there is a significant technological development or a significant
alteration of the merchandise involving commercially significant changes
in the characteristics and uses of the product. In providing such advice,
the ITC should not focus narrowly on the product’s features at the time the
order was issued, but should analyze its general characteristics and uses
in light of its prior determination. Thus, a later-developed product
incorporating a new technology that provides additional capability, speed,
or functions would be covered by the order as long as it has the same
basic characteristics and uses.
H.R. REP. NO. 100-576, at 603 (1988) (Conf. Rep.), reprinted in 1988 U.S.C.C.A.N.
1547, 1636 (emphasis added). Likewise, the ITC consultation provision reads:
(e) Commission advice
(1) Notification to Commission of proposed action
Before making a determination--
...
(C) under subsection (d) of this section with respect to any later-
developed merchandise which incorporates a significant
technological advance or significant alteration of an earlier product,
with respect to any antidumping or countervailing duty order or finding
as to which the Commission has made an affirmative injury
determination, the administering authority shall notify the Commission
of the proposed inclusion of such merchandise in such countervailing
Court No. 06-00383 Page 14
or antidumping order or finding. Notwithstanding any other provision of
law, a decision by the administering authority regarding whether any
merchandise is within a category for which notice is required under this
paragraph is not subject to judicial review.
19 U.S.C. § 1677j(e) (emphasis added).
The ITC consultation provision does not define or limit the meaning of later-
developed merchandise. What it does is identify specific types of later-developed
merchandise that may raise “significant injury issue[s]” and require Commerce to
consult with the ITC before including those specific types of later-developed
merchandise within the scope of an order. H.R. REP. NO. 100-576, at 603 (1988)
(Conf. Rep.), reprinted in 1988 U.S.C.C.A.N. 1547, 1636. Simply put, it does not limit
the universe of “later-developed merchandise” to products that involve a significant
technological advance or significant alteration as Commerce suggests; it identifies a
subset of “later-developed merchandise” that requires consultation with the ITC.
Commerce, therefore, erred by inferring from § 1677j(e) that “later-developed
merchandise” under § 1677j(d) must in every instance involve a significant technological
advance or significant alteration of subject merchandise. Ironically, by defining “later-
developed merchandise” to require a significant alteration of the subject merchandise
and then making a factual finding that mixed-wax candles involve a significant alteration
of petroleum wax candles, Commerce may have created a “significant injury issue”
where none otherwise exists.
In any event Commerce’s interpretation is contrary to the clear Congressional
intent of § 1677j(e), and correspondingly, is one to which the court cannot defer. The
court must therefore remand the matter to Commerce to correct its erroneous
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interpretation of the statute. On remand Commerce may, of course, continue to limit
what constitutes “later-developed merchandise,” so long as whatever limitation
Commerce divines is a reasonable interpretation of the statute.
B. Initiation of the Anticircumvention Inquiry
Qingdao challenges the initiation of the anticircumvention inquiry as contrary to
(1) Commerce’s regulation for scope determinations, 19 C.F.R. § 351.225, and the prior
mixed-wax candle scope rulings, and (2) Wheatland Tube, 161 F.3d at 1371. Qingdao
Mot. J. Agency R. at 10-22.
Commerce’s procedures for conventional scope inquiries are governed by
19 C.F.R. § 351.225. In determining whether a product is included within the scope of
an antidumping duty order, Commerce examines the scope application and the
descriptions of the merchandise set forth in the antidumping petition, the initial
investigation, and all prior determinations (including prior scope determinations) of
Commerce and the ITC. 19 C.F.R. § 351.225(d) & (k)(1); Crawfish Processors Alliance
v. United States, 483 F.3d 1358, 1362-63 (Fed. Cir. 2007). If these descriptions
conclusively determine whether disputed merchandise is subject to the scope of an
order, Commerce issues a final determination that the merchandise is covered, or not
covered, by the order. Id. If these descriptions are not dispositive, Commerce initiates
a scope inquiry and considers the Diversified Products criteria: the physical
characteristics of the product, the expectations of the ultimate purchasers, the ultimate
use of the product, the channels of trade in which the product is sold, and the manner in
Court No. 06-00383 Page 16
which the product is advertised and displayed. 19 C.F.R. § 351.225(e) & (k)(2);
Crawfish Processors Alliance, 483 F. 3d at 1362.
In at least seven prior conventional scope determinations involving mixed-wax
candles, Commerce found the ITC’s like product definition—candles composed of over
50 percent petroleum wax—to be dispositive of whether mixed-wax candles were
subject to the scope of the Petroleum Wax Candle Order. See final scope rulings
supra note 2. In each instance, rather than initiating a scope inquiry, Commerce issued
a final ruling excluding mixed-wax candles from the Order pursuant to 19 C.F.R.
§ 351.225(d) and (k)(1). Qingdao wants similar treatment here. Qingdao Mot. J.
Agency R. at 12-13. Qingdao argues that Commerce should not have initiated the
anticircumvention inquiry, but rather should have issued a final ruling excluding mixed-
wax candles on the basis of the ITC’s original domestic like product definition, which the
ITC had not yet redefined in the Second Sunset Review. Id.
Commerce, though, determined that the threshold determination of 19 C.F.R.
§ 351.225(d) and (k)(1) for conventional scope inquiries did not apply to NCA’s petition
for a later-developed merchandise anticircumvention inquiry. See Petroleum Wax
Candles from the People’s Republic of China, 71 Fed. Reg. 32,033, 32,036-37
(Dep’t Commerce June 2, 2006) (prelim. determ. anticircumvention inquiry)
(“Preliminary Determination”); see also Decision Memorandum at 11-12. Commerce
instead noted that the later-developed merchandise anticircumvention provision
requires that Commerce shall consider the Diversified Products criteria enumerated in
19 U.S.C. § 1677j(d)(1)(A)-(E). Preliminary Determination, 71 Fed. Reg. at 32,036-37.
Court No. 06-00383 Page 17
Commerce distinguished conventional scope proceedings from later-developed
merchandise anticircumvention inquiries:
[Commerce] considered its prior scope ruling finding certain mixed-wax
candles outside the scope of the Order. While [Commerce] recognizes
that it made previous such scope rulings, [Commerce] notes that the
factors that govern [Commerce]’s analysis of whether a product is within
the scope of the Order differ for anticircumvention inquiries and other
scope determinations. In scope rulings under section 351.225(k)(1) of
[Commerce]’s regulations, [Commerce] relies upon relevant documents
. . . in determining whether a particular product is included within the
scope of an antidumping order. If [Commerce] finds that the descriptions
are dispositive, [Commerce] will issue a final scope ruling of whether the
product is within the scope of the antidumping duty order. But when the
descriptions are not dispositive, [Commerce] will further consider the
additional five factors, as stipulated in section 351.225(k)(2) of
[Commerce]’s regulations.
***
Later-developed merchandise anticircumvention inquiries are governed by
[19 U.S.C. § 1677j(d)], which instructs [Commerce] to determine whether
the product in question was developed after the investigation was initiated,
and, if so, whether it is within the scope of the order. If [Commerce] finds
that the product subject to the inquiry is later-developed, then [19 U.S.C.
§1677j(d)(1)] instructs [Commerce] to consider [the Diversified Products
factors]. In contrast to the prior scope rulings, in the present inquiry,
[Commerce] is obligated, pursuant to [19 U.S.C. § 1677j(d)], to make a
determination by explicitly analyzing these additional factors.
Preliminary Determination, 71 Fed. Reg. at 32,036-37 (citations omitted).
Plaintiffs argue that 19 C.F.R. § 351.225 “make[s] no distinction in the preliminary
inquiry Commerce is required to make whether dealing with a conventional scope
application or a scope application based upon alleged circumvention. In either case,
the agency is first required to determine if the language of the order, etc. is dispositive
[of scope].” Qingdao Mot. J. Agency R. at 16 (emphasis omitted).
Court No. 06-00383 Page 18
When reviewing Commerce’s interpretations of its own regulations, the court
does not “decide which among several competing interpretations best serves the
regulatory purpose.” Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512 (1994).
Rather, the court must accord Commerce’s interpretation of its own regulation
“‘controlling weight unless it is plainly erroneous or inconsistent with the regulation.’” Id.
(quoting Udall v. Tallman, 380 U.S. 1, 16-17 (1965)); see also Viraj Group v.
United States, 476 F.3d 1349, 1355 (Fed. Cir. 2007).
Commerce’s interpretation of 19 C.F.R. § 351.225 is not plainly erroneous or
inconsistent with the regulation. Paragraph (j), the scope provision governing “later-
developed merchandise,” states that “in determining whether later-developed
merchandise is within the scope of an antidumping . . . duty order, the Secretary will
apply [19 U.S.C. § 1677j(d)].” 19 C.F.R. § 351.225(j). Commerce followed this
directive. Rather than applying 19 C.F.R. § 351.225 (d), (e), and (k), Commerce applied
19 U.S.C. § 1677j(d).
Section 351.225(k), in turn, exempts later-developed merchandise proceedings
from the conventional scope procedures set forth in subparagraphs (k)(1) and (k)(2).
19 C.F.R. § 351.225(k) (Paragraph (k) is limited to “those scope determinations that are
not covered under paragraphs (g) through (j).”). Since paragraph (d) incorporates the
criteria of paragraph (k)(1), the exemption language of paragraph (k) renders paragraph
(d) equally inapplicable. 19 C.F.R. § 351.225(d). Thus, later-developed merchandise
anticircumvention inquiries fall outside the purview of the threshold inquiry of
Court No. 06-00383 Page 19
paragraphs (d) and (k)(1). Commerce’s construction of the scope regulation is therefore
not plainly erroneous or inconsistent with the terms of 19 C.F.R. § 351.225.
As a practical matter, Commerce does survey the petition, the investigation, and
all prior proceedings at the onset of a later-developed merchandise anticircumvention
inquiry to assess whether a product is in fact later-developed, which common sense
dictates is the more pertinent threshold issue:
In determining whether [the merchandise] is appropriately considered a
later-developed product under 19 U.S.C. 1677j(d), we evaluated the
arguments raised by interested parties in light of the language of the
statute, regulations, and the applicable legislative history . . . . A product
developed after the petition and investigation cannot have been
specifically excluded from the scope of the original investigation.
Accordingly, if [the merchandise] is later-developed, the descriptions of the
merchandise contained in the petition, the initial investigation, and the
determinations of the Secretary and the [ITC] cannot be dispositive.
However, if a product is developed before an antidumping case is initiated,
the later-developed product provision is clearly inapplicable.
Electrolytic Manganese Dioxide From Japan, 56 Fed. Reg. 56,977, 56,979-80
(Dep’t Commerce Nov. 7, 1991) (prelim. scope ruling). See also Erasable
Programmable Read Only Memories From Japan, 57 Fed. Reg. 11,599, 11,602
(Dep’t Commerce Apr. 6, 1992) (final scope ruling).
When considering whether to initiate the anticircumvention inquiry on mixed-wax
candles, Commerce reviewed the antidumping duty petition, the Petroleum Wax Candle
Order, and the ITC’s Original Injury Determination and found “no clear basis for
[Commerce] to make a conclusive determination that candles with non-petroleum waxes
in a different proportion are not later-developed merchandise.” See Notice of Initiation,
70 Fed. Reg. at 10,964-65.
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Plaintiffs challenge this finding. Relying on Wheatland Tube, 161 F.3d at 1371,
Qingdao contends that the description of the merchandise subject to the Petroleum Wax
Candle Order “unequivocally” excludes mixed-wax candles, and thus initiation of the
inquiry was legally impermissible. Qingdao Mot. J. Agency R. at 18-22. In Wheatland
Tube the antidumping duty order expressly excluded “line pipe” and “standard pipe that
is dual or triple certified/stenciled that enters the U.S. as line pipe of a kind used for oil
or gas pipelines,” Wheatland Tube, 161 F.3d at 1367 (emphasis omitted), which were
known products with specific applications in the circular welded non-alloy steel pipe
markets. On that basis the U.S. Court of International Trade precluded Commerce from
conducting a minor alterations inquiry for the excluded products because, as a matter of
law, no alteration had been made to the subject merchandise. Wheatland Tube, 21 CIT
at 824-26, 973 F. Supp. at 162-64 (“[T]he statute is unambiguous and applies only to
merchandise arguably within the scope of the antidumping duty order which is altered to
be outside the order, the minor alterations provision does not apply to the present
case.”), aff’d, 161 F.3d at 1370-71.
The facts here are different. The Order covers “petroleum wax candles made
from petroleum wax.” Petroleum Wax Candle Order, 51 Fed. Reg. at 30,686.
Commerce found that this phrase did not definitively resolve the issue of whether
mixed-wax candles could be later-developed merchandise. For Commerce, that was an
open question for the anticircumvention inquiry, which is a reasonable threshold
determination. See, e.g., Nippon Steel Corp. v. United States, 219 F.3d 1348, 1356
(Fed. Cir. 2000) (The statement in Wheatland Tube that the minor alterations provision
Court No. 06-00383 Page 21
does not apply to products unequivocally excluded from the order “cannot be read as
barring Commerce from conducting an inquiry to determine whether the addition of a
small amount of boron constituted a minor alteration that still left the product subject to
the antidumping duty order.”).
C. Whether Commerce’s inclusion of mixed-wax candles within the Order
impermissibly expands the Order contrary to the domestic like product
definition
Plaintiffs also argue that Commerce’s inclusion of mixed-wax candles within the
scope of the Order represents an impermissible expansion of the Order contrary to the
domestic like product definition. Plaintiffs correctly note that the original like product
definition, candles “composed of over 50 percent petroleum wax,” Original Injury
Determination at 5, did not cover mixed-wax candles, a fact repeatedly reinforced by
Commerce’s subsequent scope determinations involving mixed-wax candles. The ITC,
however, changed the like product definition during the Second Sunset Review to
include candles “containing any amount of petroleum wax,” a change that ostensibly
cured any potential like product issues. Second Sunset Review at 9.
Although the ITC’s expansion of the like product definition 19 years after the
Original Injury Determination may raise interesting issues, see, e.g., Ad Hoc Shrimp
Trade Action Comm. v. United States, 515 F.3d 1372, 1384 (Fed. Cir. 2008) (“the ITC
has no independent authority to expand the scope of an antidumping investigation”),
no one challenged the Second Sunset Review. That decision is final and conclusive
(as well as the domestic like product definition that it contains) and the court may not
entertain a collateral attack to the Second Sunset Review within this proceeding
Court No. 06-00383 Page 22
because the jurisdictional predicates for judicial review of the Second Sunset Review
have not been satisfied. See 19 U.S.C. § 1516a(a)(2)(A). As the domestic like product
now covers candles “containing any amount of petroleum wax,” Commerce’s inclusion
of mixed-wax candles within the scope of the Order does not impermissibly expand the
scope of the Order contrary to the domestic like product definition.
IV. Conclusion
The court concludes that (1) Commerce’s commercial availability standard is
reasonable, but Commerce’s finding that it could not “definitively conclude” that mixed-
wax candles were commercially available during the LTFV investigation cannot be
reviewed in its present posture; (2) Commerce’s requirement that “later-developed
merchandise” must in every instance involve a significant technological advance or
significant alteration of the subject merchandise is not in accordance with 19 U.S.C.
§ 1677j(e); (3) Commerce’s initiation of the anticircumvention inquiry was in accordance
with law; and (4) Commerce’s inclusion of mixed-wax candles within the scope of the
Order does not impermissibly expand the scope of the Order contrary to the domestic
like product definition.
Accordingly, it is hereby
ORDERED that this action is remanded to the U.S. Department of Commerce
(“Commerce”) to reconsider its finding that it “cannot definitively conclude that mixed-
wax candles were available in the market at the time of the LTFV investigation.” On
remand Commerce may (a) make a straightforward finding of commercial unavailability
at the time of the LTFV, or (b) further explain its proposed “definitive conclusiveness”
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evidentiary standard as a reasonable application and interpretation of the “later-
developed merchandise” anticircumvention provision. Commerce must share the new
proposed standard and accompanying explanation with the parties and provide them
with an opportunity to address that standard as it applies to the record evidence.
Commerce can then make a factual finding based on the proposed standard; and it is
further
ORDERED that Commerce’s requirement that “later-developed merchandise”
must in every instance involve a significant technological advance or significant
alteration of the subject merchandise is not in accordance with 19 U.S.C. § 1677j(e),
and Commerce must therefore reconsider this aspect of its definition of later-developed
merchandise; and it is further
ORDERED that Commerce is to file the remand results on or before
November 12, 2008; and it is further
ORDERED that the parties are to file a proposed scheduling order on or before
November 25, 2008, for the submission of comments with page limits on the remand
results.
/s/ Leo M. Gordon
Judge Leo M. Gordon
Dated: September 18, 2008
New York, New York