CIT Says Circumvention Finding on Vietnamese Pipe Not Backed by Substantial Evidence

Despite rejecting Vietnamese exporter SeAH Steel Vina Corp.'s statutory claims against the circumvention finding, Judge Mark Barnett said the circumvention finding wasn't backed by substantial evidence. The judge said Commerce only supported its determination with the circumvention statute's "mandatory" factors, adding that the statute requires additional evidence, which the agency didn't provide.

The five "mandatory" factors that the circumvention statute requires Commerce to consider are spelled out in 19 U.S.C. 1677j(b)(1)(A)-(E). The first four factors require, among other things, that the imports at issue have been "completed or assembled" in a country different from the one subject to the order and the "process of assembly or completion" must be "minor or insignificant."

Crucially, the fifth factor, established in (b)(1)(E), requires the agency to "determine that action is appropriate ... to prevent evasion." Barnett noted that the statute uses "and" to link this subsection with the other mandatory factors, "thereby signaling that it is a coequal factor that must be independently satisfied for an affirmative circumvention finding."

The judge highlighted that this fifth factor is missing from the provision in the circumvention statute addressing merchandise "completed or assembled in the United States." This provision, Section 1677j(a)(1), contains the other four mandatory factors verbatim. Noting that a statute must, if possible, be read in a way to give every word some operative effect, Barnett said Congress' addition of (b)(1)(E) "indicates that it intended for the determination of whether action is appropriate with respect to merchandise completed or assembled in other foreign countries to require something more than evaluating" the first four mandatory factors.

In the circumvention proceeding at issue, Commerce claimed that its "something more" is found in its evaluation of the statute's (b)(3) factors, which establish factors for the agency to consider in deciding whether to include the assembled or completed merchandise in the AD/CVD order. The factors are the "pattern of trade, including sourcing patterns"; whether any exporters from the subject country are affiliated with any third-country processors; and whether imports into the third country from the country subject to the order have increased after the start of the underlying AD or CVD investigation.

Commerce said for all three countries the (b)(3) factors are "mixed," since SeAH, the mandatory respondent in the inquiry, isn't affiliated with any company making hot-rolled steel in South Korea, India and China. In addition, SeAH's exports of pipe made with hot-rolled steel from all three countries to the U.S. declined from 2017 through 2021.

Barnett said that isn't enough to support the circumvention analysis. The judge said Commerce didn't identify "any other grounds beyond" the first four mandatory factors on which it can support its conclusion, which, as the court previously established, is not enough under the statute. The agency thus must identify what "other" factors it's relying on if it chooses to further defend its circumvention finding, adding that to the extent the agency reconsiders the (b)(3) factors, "it should explain the basis for the time periods that it used."

While the judge remanded the case on evidentiary grounds, he rejected a host of other statutory arguments from SeAH.

First, Barnett said prior negative AD/CVD investigations on steel pipe from Vietnam are irrelevant. The judge said SeAH failed to offer "statutory support" for its claim that Commerce must make an affirmative dumping or subsidization finding with respect to Vietnamese pipe "in order to make an affirmative finding of circumvention." AD/CVD orders are imposed under a different statute than circumvention inquiries, and, with regard to circumvention proceedings, the relevant AD/CVD orders "are those that have been imposed on the country subject to the original order," rather than any AD/CVD investigations "that may have been conducted with respect to the third country that is the alleged conduit of circumvention."

SeAH also argued that, "for circumvention purposes, an incomplete article must bear the 'essential character' of the complete product, and that production of pipe from imported coils does not constitute completion because steel coils lack the essential characteristics of steel pipe." The respondent urged the trade court to define "assembly or completion" as the terms are construed in the General Rules of Interpretation to the Harmonized Tariff Schedule, adding that the legislative history of the circumvention statute shows the tool is only meant to address "slight" changes.

Barnett said this claim isn't rooted in the law, first holding that there's "no reason why the HTSUS or GRIs should guide the court's interpretation of the circumvention statute." The judge added that the tests for a product's country of origin and for AD/CVD circumvention are different. Barnett said a process in a third country that "substantially transforms the merchandise," and thus migrates the product's country of origin to the third country "pursuant to the regulations governing scope inquiries, can nevertheless be found to be 'minor or insignificant' pursuant to a circumvention inquiry."

Lastly, the judge rejected SeAH's claim that its operations in Vietnam can't be minor or insignificant, since its operations are virtually identical to those of the U.S. producers that requested the inquiry. To assess whether the Vietnam operations were minor or insignificant, Commerce rightfully turned to the (b)(2) factors in the statute, which include comparisons of the "nature of the production process in Vietnam and the extent of production facilities and equipment in Vietnam" to those of input producers in Korea, India and China. Thus, there's "no statutory basis" for preferring a comparison to U.S. operations over the processes in the input countries, the court held.

(SeAH Steel Vina Corp. v. United States, Slip Op. 25-157, CIT #s 23-00256, 23-00257, 23-00258, dated 12/16/25; Judge: Mark Barnett; Attorneys: Jeffrey Winton of Winton & Chapman for plaintiff SeAH Steel Vina Corp.; Tate Walker for defendant U.S. government; Jeffrey Gerrish of Schagrin Associates for defendant-intervenors led by Bull Moose Tube; Alan Price of Wiley for defendant-intervenor Nucor Tubular Products)