CIT Says Mixed-Origin Steel Wheels Fit Under Scope of AD/CVD Orders on China

The judge also held that Commerce sufficiently supported its finding that Asia Wheels' wheels were not "substantially transformed" into Thai wheels and permissibly imposed duties on the entire wheel based on its substantial transformation analysis. Katzmann said the affected importers also had adequate notice that their wheels were covered by the orders through Commerce's indication that mixed-origin wheels could be covered in a later scope ruling.

Plaintiffs, led by Asia Wheel, argued that the plain language of the scope excluded its steel wheels. The scope specifically includes "rims, discs, and wheels that have been further processed in a third country, including, but not limited to, the painting of wheels from China and the welding and painting of rims and discs from China to form a steel wheel, or any other processing that would not otherwise remove the merchandise from the scope of the Orders if performed in China."

Katzmann held that the phrase "rims and discs from China" comes after the phrase "including, but not limited to," indicating that the welding of rims and discs to form a steel wheel and painting of wheels amount to "two non-exclusive examples." The phrase "including, but not limited to" would be made "meaningless" if Commerce could read the scope to "unambiguously exclude wheels produced from mixed-origin components because they are not 'rims and discs from China,'" the judge said.

To say any method of processing not explicitly found in the scope is outside the orders' scope "would render certain key phrases superfluous," the court said. Thus, the language doesn't "indicate that wheels produced from mixed-origin components are unambiguously excluded from the scope."

Katzmann added that the scope ruling didn't change the scope of the orders. Asia Wheel argued that Commerce confirmed in its original investigation that wheels made in third countries with only wheel component, rims or discs originating in China are outside the scope. The judge rejected this claim, finding that the agency's statements made during the investigation didn't "recharacterize" or change the orders' scope, but instead "confirmed the scope was ambiguous as to which types of third-country processing would not remove a product from the scope."

The agency refused to accept requests from both Asia Wheel and the petitioner regarding mixed-origin wheels, declaring that it wouldn't address the inclusion of these wheels at that time. The court took this as a clear indication that mixed-origin wheels could later be included in the orders.

The judge then turned to the agency's substantial transformation analysis itself, which Asia Wheel contested on the grounds that the agency used the wrong test and didn't support its finding with substantial evidence.

Katzmann first said Commerce used the correct test. While Asia Wheel said the agency should merely look to whether the products became a new product with a new "name, character, and use" through the processing in Thailand, the judge said this analysis, while part of the correct analysis, cannot supplant the codified five-factor test.

The five-factor test was established by the U.S. Court of Appeals for the Federal Circuit in Bell Supply v. U.S. and says that a substantial transformation occurs where the product is made into a new product with a new name, character and use. Thus, whether the "name, character, and use" of a product change is "relevant to the substantial transformation question here, this is not where the analysis ends," the court said. The proper test is the five-factor test.

Challenging the substantive scope finding, Asia Wheel claimed that Commerce considered just one component -- the rims for wheels made with Chinese-origin discs and rims produced in Thailand -- rather than looking at the finished wheel itself. Katzmann said this claim "ignores Commerce’s thorough analysis of the wheel as a whole and the other component of the finished whee: the rim." The question isn't whether "the rectangular sheet of steel is substantially transformed when turned into a round rim" but whether "both wheel components undergo substantial transformation to become a finished wheel," the judge said.

The court said it's clear that Commerce "considered exactly this question at every stage of analysis." The agency found that the wheel parts and finished wheel are of the "same class or kind of merchandise included within the scope," both major components "continue to function as the only such component after incorporation into the finished wheel" and the production in China leads to a "complete component and an in-process component" that creates an "already-designed wheel."

Asia Wheel also claimed that Commerce expanded the scope of the orders when it said the entire wheel is subject to duties when just one wheel component was shipped from China. Katzmann again said that this claim is based on a "mischaracterization of Commerce’s substantial transformation analysis as concluding that only one component of the wheel was of Chinese origin."

The manufacturer also alleged that Commerce wrongly told CBP to continue to suspend the liquidation of subject imports entered before the start of the scope inquiry, alleging that the relevant importers didn't get fair warning that trailer wheels made in third countries from mixed-origin components are subject to the orders.

Katzmann held that "some ambiguity in scope language does not mean that notice is inadequate as to products requiring substantial transformation to determine country of origin." Commerce left open the question of what "other types of third-country processing would not remove merchandise from the scope" from the way it worded the orders' scope, the decision said.

Even if the scope wasn't enough, Commerce explicitly said it was reserving for another day the ability to address mixed-origin wheels, the court noted. "Commerce cannot be expected to anticipate every type of third-country processing, and thus cannot feasibly indicate with certainty every hypothetical product that would fall within the scope," the decision held.

(Asia Wheel Co. v. United States, Slip Op. 25-17, CIT # 23-00096, dated 02/21/25; Judge: Gary Katzmann; Attorneys: Jay Campbell of White & Case for plaintiff Asia Wheel Co.; Jordan Kahn of Grunfeld Desiderio for consolidated plaintiff Trailstar LLC; R. Kevin Williams of Clark Hill for consolidated plaintiff Lionshead Specialty Tire and Wheel LLC; Nancy Noonan of ArentFox Schiff for plaintiff-intervenor Dexter Distribution Group LLC; Stephen Tosini for defendant U.S. government; Nicholas Birch of Schagrin Associates for defendant-intervenor Dexstar Wheel Division of Americana Development Inc.)

(Asia Wheel Co. v. United States, Slip Op. 25-18, CIT # 23-00143, dated 02/21/25; Judge: Gary Katzmann; Attorneys: Jay Campbell of White & Case for plaintiff Asia Wheel Co.; Jing Zhang of Mayer Brown for plaintiff-intervenor ZC Rubber America, Inc.; Stephen Tosini for defendant U.S. government; Nicholas Birch of Schagrin Associates for defendant-intervenor Accuride Corp.)