AMS Assocs., Inc. v. United States

• Decision Date: 18 December 2012
• Citation: 881 F.Supp.2d 1374
• Parties: AMS ASSOCIATES, INC., d/b/a Shapiro Packaging, Plaintiff, v. UNITED STATES, Defendant, and Laminated Woven Sacks Committee, Coating Excellence International, LLC, and Polytex Fibers Corporation, Defendant–Intervenors.
• Court: U.S. Court of International Trade

881 F.Supp.2d 1374

AMS ASSOCIATES, INC., d/b/a Shapiro Packaging, Plaintiff,

v. UNITED STATES, Defendant,andLaminated Woven Sacks Committee, Coating Excellence International, LLC, and Polytex Fibers Corporation, Defendant–Intervenors.

United States Court of International Trade.

Slip Op. 12–154.

Court No. 11–00148.

Dec. 18, 2012.

Lizbeth R. Levinson and Roland M. Wilsa, Kutak Rock LLP, Washington, DC, for plaintiff.

Tara K. Hogan, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, Washington, DC, for defendant. With her on the brief were Stuart F. Delery, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Reginald T. Blades, Jr., Assistant Director. Of counsel on the brief was Rebecca Cantu, Attorney, Office of Chief Counsel for Import Administration, U.S. Department of Commerce.

Joseph W. Dorn and Jeffrey B. Denning, of King & Spalding, Washington, DC, for defendant-intervenors.

OPINION

MUSGRAVE, Senior Judge:

This case involves similar issues to those argued before this court in AMS Associates, Inc. v. United States, Ct. No. 11–00101 (“ AMS I ”), see Slip Op. 12–98, 2012 WL 3065277, dated July 27, 2012, familiarity with which is presumed. Although that case was not decided on the merits of the issues present herein because the affected entries had all liquidated before the action became ripe, thus removing any harm alleged by plaintiff, the underlying issues are familiar to the court.

During the first administrative review of the relevant antidumping duty order, the U.S. Department of Commerce, International Trade Administration (“Commerce”) performed a scope inquiry and issued instructions retroactively suspending liquidation of the Plaintiff's entries made during the second administrative review period involved in the present action. For the reasons explained below, the court finds the suspension instructions ultra vires and remands the case to Commerce for actions consistent with this opinion.

I. Facts

Commerce found that laminated woven sacks from the People's Republic of China (“PRC”) were being dumped in Laminated Woven Sacks from the People's Republic of China. 73 Fed. Reg. 45,941 (Aug. 7, 2008) (“LWS Order”). The scope of the LWS Order was defined in part as “bags or sacks consisting of one or more plies of fabric consisting of woven polypropylene strip and/or polyethylene” that are “laminated to an exterior ply of plastic film or to an exterior ply of paper that is suitable for high quality print graphics.” LWS Order, 73 Fed. Reg. at 45,942.

In September, 2009, Commerce undertook the first administrative review of the LWS Order for the period January 31, 2008 through July 31, 2009 (“AR1”). During that review Commerce investigated how respondent Zibo Aifudi Plastic Packaging Co., Ltd. (“Aifudi”) determined whether merchandise was subject to the LWS Order due to concerns that not all of Aifudi's production of LWS was included in the information provided to Commerce.¹ At issue were sacks made in the PRC by Aifudi from fabric that originated elsewhere. Aifudi argued to Commerce that a country-of-origin ruling from U.S. Customs and Border Protection (“CBP”) provided an adequate basis for its decision not to include sacks made with non-PRC-origin fabric in its sales information. See HQ N08508 (May 27, 2008), Exhibit A to Plaintiff's Memorandum in Support of its 56.2 Motion for Judgment on the Agency Record (“Pl's Memo”). Pursuant to that ruling, Aifudi declared a non-PRC origin for LWS made with non-PRC origin fabric and as a result paid no cash antidumping deposits upon their entry.

In AR1, Commerce concluded pursuant to a substantial transformation analysis that the PRC was the country of origin of the Aifudi LWS.

We recommend preliminarily finding the country-of-origin of LWS produced in the PRC from imported fabric is of PRC origin. As a result, we also recommend preliminarily finding that the LWS imported by Aifudi into the U.S. are within the scope of the order. Based on these findings, we recommend that Aifudi be required to provide its U.S. sales of LWS produced from third countries['] woven fabric.

Preliminary Decision at 9. Based upon this finding, Commerce issued a “clarification” of its liquidation instructions to CBP. Commerce Message No. 0204301 to CBP (July 23, 2010) (“Clarification”), Exhibit C to Pl's Memo. Commerce instructed CBP to “continue to suspend liquidation of all LWS from the PRC, regardless of the origin of the woven fabric, that is entered, or withdrawn from warehouse, for consumption, on or after January 31, 2008.” Clarification at 2. While the text of the Clarification innocuously uses present tense, the effect of the Clarification was to retroactively suspend liquidation of and collect cash deposits of antidumping duties on all entries of Aifudi sacks made with non-PRC origin fabric after January 31, 2008, covering almost all of the affected entries made during the second review period, which ended July 31, 2010.²

In March, 2011, Commerce issued the final results of the first LWS administrative review.³ It determined that it had correctly determined the country of origin issue during the administrative review, and that the Clarification was in accordance with the regulatory scheme. Commerce incorporated the findings of the Preliminary Decision on country of origin into the AR1 Results.

Aifudi refused to participate in the second administrative review. Laminated Woven Sacks from the People's Republic of China: Preliminary Results of the Second Administrative Review, 75 Fed. Reg. 81,218 (Dec. 27, 2010) (“ AR2 Preliminary Results ”). Commerce preliminarily determined that Aifudi had not demonstrated its eligibility for separate-rate status for the administrative review and failed to rebut the presumption of PRC government control. AR2 Preliminary Results, 75 Fed. Reg. at 81,219. Due to Aifudi's lack of cooperation, Commerce applied adverse facts available and assigned the PRC-wide entity the rate of 91.73%. AR2 Preliminary Results, 75 Fed. Reg. at 81,219–20. These conclusions carried over to the final results of the second review. Laminated Woven Sacks from the People's Republic of China: Final Results of the Second Administrative Review, 76 Fed. Reg. 21,333, 21,334 (Apr. 15, 2011) (“ AR2 Final Results ”).

AMS Associates, Inc., d/b/a Shapiro Packaging (“Shapiro”), Plaintiff in this action, entered an appearance in the second review and filed briefs before Commerce. See P.D. 16 & 17, Tabs G & H to Defendant's Appendix (“Def's Appx.”). Shapiro contended before Commerce that the country of origin determination in the first review period was procedurally erroneous and that Commerce issued the suspension of liquidation instructions to CBP without statutory or regulatory basis. P.D. 16.

In the AR2 Final Results, Commerce concluded that it would continue to follow the decision made during the first administrative review regarding the country of origin of LWS made with non-PRC-origin fabric. Issues and Decision Memorandum for the Second AR Results, April 8, 2011 (“AR2 I & D Memo”), at 2–3, Tab 7 to Plaintiff's Appendix of Record Documents (“Pl's Appx.”). Commerce defended its decision to retroactively suspend liquidation of the entries of Aifudi LWS made with non-PRC-origin fabric.

Early in the first administrative review proceeding, it was apparent that the Department needed to address a scope issue to determine the country of origin of [LWS] produced in the PRC from imported woven fabric and sold to the United States by the respondent during the POR. Such an examination is akin to that made in a separate scope inquiry, which provides a mechanism for interested parties to obtain a scope decision, without having to seek an administrative review. Both proceedings provide interested parties notice and an opportunity to comment. The Department's regulations governing an administrative review, however, do not specifically address the suspension of liquidation with respect to a product whose status is subject to a scope inquiry conducted in the context of an administrative review proceeding. Accordingly, when the Department makes a scope decision within the context of the review, the regulations governing scope inquiries provide relevant guidance. See19 C.F.R. § 351.225. These regulations provide that the Department may order the suspension of liquidation of a product found to be included within the scope of an order to continue or to commence, as the case may be, following a preliminary scope determination. See19 C.F.R. § 351.225( l )(2). The provision for suspension of liquidation is to preserve the ability to assess appropriate duties on the subject merchandise in the future. Therefore, consistent with the regulations governing scope inquiries, when making a scope decision in the context of an administrative review, the Department has the authority to issue instructions to CBP regarding the suspension of entries, as appropriate, after issuing a preliminary country of origin or scope decision conducted within that segment.

The Department notes that in order to prevent subject merchandise from being liquidated without regard to antidumping or countervailing duties and in order to ensure the collection of appropriate cash deposits on [LWS] manufactured in the PRC, the Department issued an instruction to CBP to resolve the confusion that might arise from differences between the Department and CBP's respective country-of-origin classifications. Although no additional suspension of liquidation would normally be needed, as explained in 19 C.F.R. § 351.225( l ), in this instance the Department issued an instruction to prevent liquidation of merchandise properly subject to the order and to implement the findings in its preliminary country of origin memorandum.

AR2 I & D Memo at 4–5, Tab 7 to Pl's Appx.

II. Arguments Presented

Plaintiff Shapiro argues that Commerce violated its own regulations in deciding to rule on the scope of the LWS...