Slip Op. 12-31
UNITED STATES COURT OF INTERNATIONAL TRADE
Before: Nicholas Tsoucalas, Senior Judge
________________________________________
MID CONTINENT NAIL CORPORATION, :
:
Plaintiff, :
:
v. :
:
UNITED STATES, :
: Court No.: 10-00247
Defendant, :
:
and :
:
TARGET CORPORATION, :
:
Defendant-Intervenor. :
:
OPINION
Held: Redetermination upon remand by the Department of Commerce was
not supported by substantial evidence nor in accord with the law.
Dated: March 7, 2012
Wiley Rein, LLP, (Adam H. Gordon, Lori E. Scheetz, Robert E.
DeFrancesco, III) for Mid Continent Nail Corporation, Plaintiff.
Tony West, Assistant Attorney General; Jeanne E. Davidson,
Director, Commercial Litigation Branch, Civil Division, United States
Department of Justice, Patricia M. McCarthy, Assistant Director,
Commercial Litigation Branch, Civil Division, United States
Department of Justice, (David D’Alessandris); Brian Soiset, Office
of Chief Counsel for Import Administration, United States Department
of Commerce, Of Counsel, for the United States, Defendant.
Jochum, Shore, & Trossevin, PC, (Marguerite E. Trossevin and
James J. Jochum) for Target Corporation, Defendant-Intervenor.
TSOUCALAS, Senior Judge: This matter comes before the Court
upon the Final Results of Redetermination Pursuant to Remand Order
(“Redetermination”) issued by the United States Department of
Court No. 10-00247 Page 2
Commerce (“Commerce”) on October 17, 2011. Comments in opposition
have been filed by Plaintiff, Mid Continent Nail Corporation (“Mid
Continent Nail”) and in support by Defendant-Intervenor, Target
Corporation (“Target”). For the reasons set forth below, the Court
concludes that the Redetermination is not supported by substantial
evidence and is otherwise not in accord with law, and remands this
matter for proceedings consistent with this opinion.
BACKGROUND
The Court issued an opinion remanding this matter on May 17,
2011, in which the facts underlying this case are fully set forth.
See Mid Continent Nail Corp. v. United States, 35 CIT __, 770 F.
Supp. 2d 1372 (2011). In sum, Commerce had determined that steel
nails otherwise subject to an antidumping order (“Final Order”)1 were
not within the Final Order’s scope when imported in household tool
kits. See Final Scope Ruling - Certain Steel Nails from the People’s
Republic of China (“PRC”), Request by Target Corporation (Aug. 10,
2010), Public Rec. 27, (“Final Scope Ruling”). Before making this
ultimate determination, Commerce decided to focus its scope inquiry
not on the nails themselves, but on the tool kits within which the
nails were imported. Final Scope Ruling at 5. After subjecting the
tool kits to analysis under 19 C.F.R. § 351.225(k)(2), Commerce
concluded that they were not subject to the Final Order.
Mid Continent Nail sought review, and the Court concluded that
1
Notice of Antidumping Duty Order: Certain Steel Nails from
the People’s Republic of China, 73 Fed. Reg. 44,961 (Aug. 1,
2008).
Court No. 10-00247 Page 3
Commerce’s determination was unsupported by substantial evidence and
otherwise not in accord with law. First, the Court found that
Commerce failed to address evidence from the antidumping
investigation record indicating that the antidumping Petitioners
intended their proposed scope language to include all certain steel
nails, whether imported with non-subject merchandise or not. Mid
Continent Nail, 35 CIT at __, 770 F. Supp. 2d at 1379.
Next, the Court found that Commerce had failed to sufficiently
explain its decision to analyze the tool kits rather than the nails.
Id. The Court concluded that this decision by Commerce was not
supported by the Final Order, which unambiguously includes the nails
in question and grants no exception based on packaging or manner of
importation. Id. at 1381. The Court also noted that Commerce has,
in the past, employed inconsistent tests in deciding whether to
analyze a mixed-media item or set2 on its own as a unique product or
the subject goods it contains. Id. at 1382.
Additionally, because it is well-established that Commerce may
only interpret, and not change, its antidumping orders during scope
inquiries, Ericsson GE Mobile Commc’ns, Inc. v. United States, 60
F.3d 778, 782 (Fed. Cir. 1995), the Court stated that any test
leading Commerce to treat a subject good as a separate, unique
product when such an approach was not warranted by the antidumping
order was possibly unlawful. Mid Continent Nail, 35 CIT at __, 770
2
As noted in Mid Continent Nail, a mixed-media item is an item
containing both subject and non-subject merchandise. Id. at 1375.
Court No. 10-00247 Page 4
F. Supp. 2d at 1382. The Court therefore remanded this matter to
Commerce so that it could, first, identify the legal authorization
for employing such a mixed-media test, and second, clarify the test
factors it would apply consistently.
On remand, Commerce stated that its authority to issue scope
rulings derives generally from section 731 of the Tariff Act of 1930,
which states that Commerce shall impose antidumping duties on “a
class or kind of foreign merchandise.” Redetermination at 2; see
also 19 U.S.C. § 1673.3 Commerce also relied on its inherent
authority to define the scope of its antidumping orders.
Redetermination at 2 (citing Duferco Steel, Inc. v. United States,
296 F.3d 1087, 1089-90 (Fed. Cir. 2002)). In exercising this
authority, Commerce must fashion scope provisions in “general terms,”
and it therefore has authority to inquire into whether certain goods
are included within the scope, and then issue scope rulings. Id. at
3 (citing 19 C.F.R. § 351.225(a)). Commerce continued that
neither [it] nor domestic petitioners can predict every
permutation of a product that might be imported into the
United States at a future time. . . . If [Commerce] were
required to address every possible permutation of a
product in an order, and [Commerce] were strictly limited
to excluding only those products specifically identified
and excluded in an order, then there would be little need
for scope proceedings.
Id. at 3.
3
All further citations to the Tariff Act of 1930 are to the
relevant provisions of Title 19 of the United States Code, 2006
edition.
Court No. 10-00247 Page 5
Commerce stated that, in addition to issuing scope rulings,
the statutory and regulatory authority set forth above also permits
it “to employ an analysis to determine whether its scope analysis
should focus on the entire product or only on certain specific
components of the imported product.” Id. at 4. Commerce asserted
that this authority has been upheld by a number of federal
appellate court decisions. It relied on Walgreen Co. of Deerfield
v. United States, 620 F.3d 1350, 1355 (Fed. Cir. 2010), for the
authority to exercise discretion in focusing its scope inquiries
and to determine whether a mixed-media item is a unique product.
Additionally, Commerce relied on Crawfish Processors Alliance v.
United States, 483 F.3d 1358 (Fed. Cir. 2007), in asserting that it
has authority to determine when a subject good has been transformed
or subsumed into a new, non-subject good prior to importation. Id.
at 5 (citing Crawfish, 483 F.3d at 1363-64).
Its authority thus set forth, Commerce provided a four factor
test it would employ to determine the focus of its scope inquiries
when faced with a subject good imported as part of a mixed-media
item. Specifically, Commerce will consider:
(1)the practicability of separating the component
merchandise for repackaging or resale; (2) the value of
the component merchandise as compared to the value of the
product as a whole; (3) the ultimate use or function of
the component merchandise relative to the ultimate use or
function of the mixed-media set as a whole; and (4) any
other relevant factors that may arise on a product-
specific basis.
Id. at 8.
Court No. 10-00247 Page 6
Upon applying this test to the goods at issue in this case,
Commerce determined that the proper focus of its scope inquiry was
the tool kits within which the nails are packaged. Commerce then
analyzed the tool kits under the factors set forth in 19 C.F.R. §
351.225(k)(1), and concluded that they were outside the scope of
the Final Order.
JURISDICTION
The Court has jurisdiction over this review pursuant to 19
U.S.C. § 1516a(a)(2)(B)(vi) (2006), and 28 U.S.C. § 1581(c) (2006).
STANDARD OF REVIEW and LEGAL STANDARD
Similar to the Court’s review of the Final Scope Ruling, the
Redetermination will be upheld unless it is “unsupported by
substantial evidence on the record, or otherwise not in accord with
law.” 19 U.S.C. § 1516a(b)(1)(B)(i). “The court gives significant
deference to Commerce’s interpretation of its own orders, but a
scope determination is not in accordance with the law if it changes
the scope of an order or interprets an order in a manner contrary
to the order’s terms.” Allegheny Bradford Corp. v. United States,
28 CIT 830, 842, 342 F. Supp. 2d 1172, 1183 (2004).
ANALYSIS
Commerce is correct in its assertions that an antidumping duty
can only be imposed on a “class or kind of foreign merchandise,”
that authority to define the scope of this class or kind of
merchandise rests with Commerce, and that general language must be
employed to accomplish this end. The law is clear, however, that
Court No. 10-00247 Page 7
once a final antidumping order is issued, Commerce’s role in
defining the scope of that order is finished, and it then becomes
the interpreter of the order. The test set forth by Commerce in
the Redetermination invites analysis of the product in question
rather than interpretation of the Final Order’s scope, but the law
upon which Commerce relies does not support such a variance from
the well-established primacy of a final order.
First, as made clear by the Redetermination, there is no
statute or regulation that squarely addresses the question of when
Commerce should analyze a subject good within a mixed media item on
its own, and when it should analyze the mixed-media item as a
unique product. The statutes cited by Commerce simply authorize it
to undertake scope inquiries and issue scope rulings.
This authority, however, must be exercised in light of the
controlling case law cited above saying that Commerce is free to
interpret its orders, but may not change them. See Ithaca College
v. N.L.R.B., 623 F.2d 224, 228 (2d Cir. 1980) (“The position of any
administrative tribunal whose hearings, findings, conclusions and
orders are subject to direct judicial review is much akin to that
of a United States District Court, . . . and as must a district
court, an agency is bound to follow the law of the Circuit.”).
(Internal citation omitted).
Commerce also stretched the holding of the court in Walgreen
beyond what the facts of that case warranted. In Walgreen, the
party seeking the scope ruling argued that because its petition
Court No. 10-00247 Page 8
identified the item for review as the entire mixed-media set,
Commerce did not have the discretion to focus its inquiry on the
subject good the set contained. Walgreen, 620 F.3d at 1354-55.
The Court of Appeals affirmed that Commerce was not bound by the
petition, and that it had authority to decide how the scope inquiry
would be focused. Id. at 1355. However, the court in Walgreen
never stated that this authority abrogated Commerce’s obligation to
exercise its authority in light of the final order in question.
Indeed, the court reaffirmed that the basis of any scope proceeding
is the language of the antidumping order. See id. at 1357 (“This
court has made clear that it is the language of Commerce’s final
order that defines the scope of the order . . . .”).
The Court also concludes that the Crawfish decision does not
support the action taken by Commerce here. In Crawfish, the court
affirmed Commerce’s conclusion that subject crawfish tail meat had
undergone a substantial transformation as an ingredient of
etouffee, and could “no longer be considered freshwater crawfish
tail meat.” Crawfish, 483 F.3d at 1363. This standard for
substantial transformation is not met in this case. In Crawfish,
the subject tail meat was an ingredient in a stew-like etouffee
that only needed to be heated to be eaten, and the record supported
Commerce’s conclusion that the other ingredients in the stew had
penetrated the tail meat, permanently altering its flavor. Id.
The nails in question here were packaged in a tool kit, but they
were still nails that were going to be used as nails by the
Court No. 10-00247 Page 9
purchasers of the tool kits. The nails simply did not experience
a Crawfish-like substantial transformation by merit of their
inclusion in the tool kits.
Next, in reliance on the statement in 19 C.F.R. § 351.225(a)
that antidumping orders must be written in “general terms,”
Commerce argues that it cannot “predict every permutation of a
product that might be imported into the United States at a future
time.” Redetermination at 3. Putting aside for a moment this
concern as a general matter, the record in this case indicates that
no predictive powers were required to know that subject nails would
be imported in mixed-media sets. During the antidumping
investigation, i.e., before the Final Order was issued, an importer
of nail gun sets including subject nails sought a determination
that its sets were outside the proposed scope language. See Mid
Continent Nail, 35 CIT at __, 770 F. Supp. 2d at 1376-77. In
response, the Petitioners stated their belief that their proposed
scope language, which was incorporated in all relevant parts in to
the Final Order, included “nails exhibiting the physical
characteristics described in the written scope description, whether
imported alone or as part of a set of goods including non-scope
merchandise.” Mid Continent Nail, 35 CIT at __, 770 F. Supp. 2d at
1377. The Petitioners even stated that if Commerce believed
clarifying language was necessary, they had no objection to
Commerce including it. Id. Although Commerce was thereby
expressly made aware of the fact that the Petitioners and importers
Court No. 10-00247 Page 10
had opposing views on whether the scope language covered subject
nails imported in sets, Commerce never addressed the issue in
either its preliminary determination or the Final Order. Id. It
may not now rely on the “general terms” provision of 19 C.F.R. §
351.225(a) to attempt a new analysis and import into the Final
Order language it did not put there initially.
Looking beyond the specific facts of this case, the Court
notes that inclusion of subject goods in mixed-media items should
come as no surprise to Commerce or petitioners and respondents in
antidumping investigations. There is a long history of litigation
over whether subject goods imported with non-subject goods remain
subject to the final order.4 Recognizing this possibility, and
addressing it in the final order, does not require the ability to
predict a product’s every permutation, as lamented by Commerce in
the Redetermination. Rather, it would move the mixed-media item
discussion to the investigation, a preferable alternative since
this is when Commerce has the greatest freedom to exercise its
expertise in properly defining its orders’ scopes. While no one
expects antidumping orders to address every possible permutation,
addressing easily foreseeable areas of dispute like this one
provides greater certainty for those subject to the order, and
4
The Court previously discussed a number of prior scope
rulings in which Commerce, dealing with a final order silent on
the matter, had to determine whether a subject good remained
subject when imported in a mixed-media item or set with non-
subject goods. See Mid Continent Nail, 35 CIT at __, 770 F.
Supp. 2d at 1381-82.
Court No. 10-00247 Page 11
preserves resources not only for those same parties, but for
Commerce as well.
CONCLUSION
The law cited in the Redetermination does not grant Commerce
authority to avoid the well-established principle that after a
final antidumping order is issued, that order can be interpreted,
but not changed. The factors set forth by Commerce to help it
decide how to focus its scope inquiry expand impermissibly beyond
interpretation of a final order into new analysis of goods better
undertaken during the investigation. The nails in question here
are unambiguously subject to the Final Order, and there is no
support in the law or the record for concluding otherwise.
In accordance with the above, this case is remanded to
Commerce for further proceedings consistent with this opinion.
/s/ NICHOLAS TOUCALAS
Nicholas Tsoucalas
Senior Judge
Dated: March 7, 2012
New York, New York