CAFC Reverses in Scope Case, Proposes Criteria for AD/CVD Scope Rulings on Mixed Products
The Court of Appeals for the Federal Circuit rejected a test used by the Commerce Department to determine if items covered by antidumping duty orders, but included in non-subject sets, are subject to AD duties. But while it found fault with the particulars of the test Commerce used to see whether Target’s nails are included under the AD duty order on China, the appeals court reversed a 2012 Court of International Trade ruling that said Commerce wasn’t allowed to perform any test at all on the “mixed media items.” Instead, the appeals court put forward its own test for when this issue arises, both in this Target case and in future cases, and appealed to Commerce to clearly define its mixed media analysis procedures for future cases.
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In its original 2010 scope ruling, Commerce acknowledged that the nails would fall within the scope of the order if imported alone, but looked to factors found in 19 CFR 351.225(k)(2), like consumer expectations, use, and methods of sale and advertising, to find that the nails in Target’s kits were different, and not subject to the AD duty order on steel nails from China. But CIT in 2011 rejected Commerce’s analysis, finding the agency needed a consistent test for determining how antidumping duty orders apply to mixed media items (sets with both subject and non-subject components).
Commerce responded with a four-factor test that looked at the relative value, use, and ease of separation of the subject component from the rest of the kit. CIT again reviewed Commerce’s determination, and this time found that Commerce had no right at all to perform any sort of test and exclude the nails from the scope. Only if the language of the order itself had addressed mixed media items would Commerce have had that authority, CIT said. Commerce finally found the nails in scope, and CIT affirmed.
On appeal, CAFC said the lower court was wrong in concluding Commerce had no authority to conduct any analysis whatsoever. Commerce has the authority to interpret scope, and the fact that this case involved a mixed media item without specific reference in the scope doesn’t mean Commerce loses that authority, the appeals court said.
But the appeals court also faulted Commerce’s proposed test, because it relied on criteria that didn’t exist at the time the AD duty order was issued. Using those criteria would in effect change the scope of the order without giving enough notice to affected domestic producers, importers, and foreign exporters, it said. CAFC ordered another remand, “to give Commerce one last opportunity to interpret its order.”
Proposed CAFC Test Includes Presumption of Scope Coverage
The appeals court offered “guidance” for Commerce to follow in the remand proceeding and In future cases. In general, Commerce should first look at whether the product at issue falls within the literal terms of the AD duty scope itself. Then, if it does, the agency should look at whether the product’s incorporation in a mixed media item should exclude it from AD duty coverage anyway. When it conducts its analysis, Commerce should work under the presumption that the subject product’s incorporation into a mixed media item doesn’t take it out of scope.
To overcome the presumption of inclusion, Commerce must identify published guidance issued before the date of publication of the original AD duty order, CAFC said. That includes “prior Commerce determinations” referenced in Section 351.225(k)(1), including prior scope determinations, the appeals court said. But the scope determination must have been publicly available at the time the order was issued. Whether a scope ruling simply marked “public document” is in fact publicly available is “unclear,” it said. Commerce can also look at relevant (k)(2) factors and the Harmonized Tariff Schedule when it looks at whether the subject product should be excluded, said CAFC.
Commerce Should Clearly Define Criteria, CAFC Says
The appeals court closed with an admonition to Commerce that its problems “are largely self-inflicted, because in the past Commerce has given low priority to an approach that should receive the highest priority from any administrative agency -- providing coherent and consistent guidance to regulated parties.” These problems could be avoided in future cases if Commerce sets forth its procedures for mixed media analyses in its AD duty orders or in a new set of regulations, the appeals court said.
(Mid Continent Nail Corp. v. U.S., CAFC No. 2012-1682 and -1683, dated 07/18/13, Judges Dyk, Lynn and Prost)
(Attorneys: Adam Gordon of Wiley Rein for plaintiff-appellee Mid Continent Nail Corporation; Patricia McCarthy for defendant-appellant U.S. government; Marguerite Trossevin of Jochum Shore for defendant-appellant Target Corporation)