US, Petitioners Tell CAFC Mixed-Origin Wheels Properly Included in AD/CVD Orders
The Commerce Department reasonably found that wheels made in a third country with a mix of Chinese and third-country parts are covered by the scope of the antidumping duty and countervailing duty orders on steel trailer wheels from China, the U.S. told the U.S. Court of Appeals for the Federal Circuit on Dec. 15 (Asia Wheel Co. v. United States, Fed. Cir. #s 25-1689, 25-1694).
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Filing a reply brief in a pair of appeals on Commerce's scope ruling, the government argued that the agency reasonably determined that the orders' language was "ambiguous" regarding exporter Asia Wheel's mixed-origin wheels and that Asia Wheel's wheels weren't "unambiguously excluded" from the orders. The U.S. noted that Asia Wheel is only challenging a "small sliver" of the Court of International Trade's findings and isn't challenging CIT's decision to sustain Commerce's findings that the orders were ambiguous as to mixed-origin wheels and the agency's "substantial transformation analysis."
In the scope proceeding, Commerce first said the orders were ambiguous as to whether they covered wheels processed in a third country from a mix of one wheel part from China and one from a third country. The agency then conducted a substantial transformation analysis, finding that the processing of Asia Wheel's wheels, which were made of Chinese rims and Thai discs, in Thailand didn't transform them into being of Thai origin.
In February, the trade court sustained Commerce's scope ruling (see 2502210039). The court said Commerce didn't illegally expand the scope of the orders, since the agency left open the possibility in the original AD/CVD investigations to discuss mixed-origin wheels in a later scope ruling.
The original investigations were central to Asia Wheel's opening brief before the Federal Circuit (see 2506260002). The exporter argued that during the original investigations, the agency conceded that wheels completed in a third country from mixed-origin rims and discs are outside the scope of the orders. Asia Wheel said, as a result, there's no need to conduct a substantial transformation analysis.
The government said Asia Wheel's claims "were correctly debunked as unsupported by the record by the trial court."
During the investigations, Commerce responded to concerns from petitioner Dexstar that importers would use the third-country processing language in the orders' scope to circumvent the orders by revising the language to include "rims and discs from China that have been further processed in a third country into finished steel wheels." The agency said it made this decision, since it understood Dexstar to be requesting that Chinese rims and discs that have been further processed in a third country into finished wheels be included in the orders' scope.
However, after Commerce proposed this addition, Dexstar asked the agency to clarify that either a rim or disc from China would be covered by the investigations, "not only a rim and a disc together." The agency explicitly decided not to include this revision, explaining that this interpretation was "inconsistent with Dexstar's initial request," the U.S. said. Commerce said it wouldn't substitute the word "or" for "and" in the phrase "rims and discs from China," since doing so would "expand this example of third country processing beyond its original intent."
The government argued that Asia Wheel exaggerated the meaning of Commerce's response. Contrary to the exporter's arguments, the agency didn't "articulate how it would later, based on a substantial transformation analysis, determine whether other merchandise was outside the scope of the orders," the government said. "It plainly left that determination for a future, merchandise-specific inquiry."
Commerce's statement in the underlying investigations that the current scope language is clear that "only if all constituent rim and disc parts to form a steel wheel are from China does the order apply notwithstanding any analysis of substantial transformation" only relates to wheels made with Chinese discs and rims and not to mixed-origin wheels, the U.S. said. "It does not matter, as Asia Wheel shrugs off, that 'Commerce always has the authority to conduct a scope ruling and perform a substantial transformation analysis to address a particular fact pattern,'" the brief said.
What matters is that Commerce didn't specifically address wheels that were processed in a third country and made of mixed origin parts, the U.S. argued.
The government also contested Asia Wheel's claim that Commerce didn't give the exporter enough notice that its mixed-origin wheels could be subject to the orders prior to starting the scope inquiry, meaning the agency can only impose duties from the start of the scope proceeding and not from the start of CBP's AD/CVD evasion investigation. The U.S. said Commerce lawfully continued the suspension of liquidation of Asia Wheel's entries from CBP's investigation, as it had clear statutory authority to do.
Petitioners Dexstar and Accuride, both represented by Schagrin Associates, filed nearly identical briefs in the twin appeals on the scope ruling. The companies echoed many of the government's points and argued that Asia Wheel is attempting to "send this Court down an irrelevant path of analysis by claiming that the question here is one of scope interpretation" using (k)(1) sources, namely Commerce's comments in the underlying investigations. In the scope ruling, Commerce was presented with a question of origin, which doesn't involve the use of (k)(1) sources at all, and instead entitles the agency to use its substantial transformation test, the companies argued.