Bell Supply Co. v. United States

• Decision Date: 18 October 2018
• Docket Number: Slip Op. 18-141,Court No. 14-00066
• Citation: 348 F.Supp.3d 1281
• Parties: BELL SUPPLY COMPANY, LLC, Plaintiff, v. UNITED STATES, Defendant, and Boomerang Tube LLC et al., Defendant-Intervenors.
• Court: U.S. Court of International Trade

348 F.Supp.3d 1281

BELL SUPPLY COMPANY, LLC, Plaintiff,

v.UNITED STATES, Defendant,andBoomerang Tube LLC et al., Defendant-Intervenors.

Slip Op. 18-141

Court No. 14-00066

United States Court of International Trade.

October 18, 2018

Donald Bertrand Cameron, Julie Clark Mendoza, Rudi Will Planert, Brady Warfield Mills, and Mary Shannon Hodgins, Morris, Manning & Martin, LLP, of Washington, DC, for plaintiff.

Agatha Koprowski, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, for defendant. With her representing the Defendant were Chad A. Readler, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Loren Misha Preheim, Assistant Director.

Roger Brian Schagrin, Schagrin Associates, of Washington, DC, for defendant-intervenors Boomerang Tube LLC, TMK IPSCO Tubulars, V & M Star L.P., and Wheatland Tube Company.

Robert Edward DeFrancesco, III, and Alan Hayden Price, Wiley Rein, LLP, of Washington, DC, for defendant-intervenor Maverick Tube Corporation.

Thomas M. Beline, Cassidy Levy Kent (USA) LLP, of Washington, DC, for defendant-intervenor United States Steel Corporation.

OPINION AND ORDER

Kelly, Judge:

This case is on remand from the U.S. Court of Appeals for the Federal Circuit. The Court of Appeals vacated and remanded this court's decision in Bell Supply Co., LLC v. United States, 39 CIT ––––, 83 F.Supp.3d 1311 (2015) (" Bell Supply I"), which held that section 781 of the Tariff Act of 1930, 19 U.S.C. § 1677j (2012), precluded the U.S. Department of Commerce's ("Department" or "Commerce") use of a "substantial transformation test" to determine whether certain oil country tubular goods ("OCTG") originated in the People's Republic of China ("PRC" or "China") and was subject to the antidumping order on OCTG from China.¹ As a result, the sole issue before the court is whether Commerce's application of its substantial transformation test is supported by substantial evidence. In both its Preliminary and Final Scope Rulings, Commerce found that seamless unfinished OCTG produced in China and finished in third countries had not undergone a substantial transformation, and is thus within the scope of the antidumping and countervailing duty orders on OCTG from China. See Preliminary Scope Ruling on Green Tubes manufactured in the [PRC] and Finished in Countries Other than the United States and the PRC at 31, AD CD 48 (May 31, 2013) ("Preliminary Scope Ruling"); Final Scope Ruling on Green Tubes Manufactured in the People's Republic of China and Finished in Countries Other than the United States and the People's Republic of China at 24, Feb. 7, 2014, ECF 31-1 ("Final Scope Ruling"); see also Certain [OCTG] From the People's Republic of China, 75 Fed. Reg. 28,551 (Dep't Commerce May 21, 2010) (amended final determination of sales at less than fair market value and antidumping order) ("ADD Order"); Certain [OCTG] From the People's Republic of China, 75 Fed. Reg. 3,203 (Dep't Commerce Jan. 20, 2010) (amended final affirmative countervailing duty determination and countervailing duty order) ("CVD Order") (collectively "Orders"). For the reasons that follow, Commerce's determination is remanded for reconsideration or further explanation consistent with this opinion.

BACKGROUND

The court assumes familiarity with the facts of this case as set out in the previous opinions and now recounts the facts relevant to the issue currently before the court. See Bell Supply I, 39 CIT ––––, 83 F. Supp. 3d 1311 ; Bell Supply Co., LLC v. United States, 40 CIT ––––, 179 F.Supp.3d 1082 (2016) (" Bell Supply II"); Bell Supply Co., LLC v. United States, 40 CIT ––––, 190 F.Supp.3d 1244 (2016) (" Bell Supply III"); Bell Supply Co., LLC v. United States, 888 F.3d 1222 (2018) (" Bell Supply IV"). On January 20, 2010 and May 21, 2010, respectively, Commerce published the countervailing and antidumping duty orders on OCTG from the PRC. See CVD Order, 75 Fed. Reg. 3,203 ; ADD Order, 75 Fed. Reg. 28,551. The Orders define the subject merchandise as:

certain [OCTG], which are hollow steel products of circular cross-section, including oil well casing and tubing, of iron (other than cast iron) or steel (both carbon and alloy), whether seamless or welded, regardless of end finish (e.g., whether or not plain end, threaded, or threaded and coupled) whether or not conforming to American Petroleum Institute ("API") or non-API specifications, whether finished (including limited service OCTG products) or unfinished (including green tubes and limited service OCTG products), whether or not thread protectors are attached. The scope of the order also covers OCTG coupling stock. Excluded from the scope of the order are: casing or tubing containing 10.5 percent or more by weight of chromium; drill pipe; unattached couplings; and unattached thread protectors.

CVD Order, 75 Fed. Reg. at 3,203 –04; ADD Order, 75 Fed. Reg. at 28,553.

Following a determination by U.S. Customs and Border Protection ("CBP"), see Petition for Scope Inquiry at Ex. 1, 39, AD PD 1, bar code 3065185-01 (Mar. 26, 2012),² that OCTG made from unfinished OCTG from the PRC—but finished in third countries—had a country of origin other than the PRC, several domestic steel companies sought clarification from Commerce regarding the scope of the Orders.³ On June 20, 2012, pursuant to a request from several domestic companies, United States Steel Corporation, TMK IPSCO, Wheatland Tube Company, Boomerang Tube LLC, and V & M Star L.P, Commerce initiated a scope inquiry regarding Plaintiff's merchandise. See Initiation of Scope Inquiry, AD PD 25, bar code 3082712-01/CVD PD 25, 3082735-01 (June 20, 2012); see also 19 C.F.R. § 351.225(e) (2012). Specifically, these domestic companies sought clarification on whether the Orders covered OCTG finished in third countries but made from unfinished OCTG (including green tubes) produced in the PRC.⁴ The domestic companies argued that CBP's ruling conflicted with the mandate of the Orders on OCTG from the PRC, and that the Orders should cover the OCTG. Id. On February 7, 2014, Commerce issued a final scope ruling determining that unfinished green tubes manufactured in China and processed into finished OCTG in third countries are subject to the Orders because the merchandise is not substantially transformed during the finishing process. See Final Scope Ruling at 2.

Plaintiff, Bell Supply Company, LLC ("Bell Supply") is a U.S. importer of OCTG sourced from Chinese green tubes later heat-treated and finished in Indonesia. Plaintiff challenged Commerce's Final Scope Ruling in this court, arguing, inter alia, that Commerce's determination unlawfully expanded the scope of the Orders and relied on a substantial transformation analysis unsupported by substantial evidence and otherwise not in accordance with law. Compl. ¶¶ 21, 25, Apr. 4, 2014, ECF No. 8; see Bell Supply I, 39 CIT at ––––, 83 F.Supp.3d at 1313–14.

This court held that Commerce erred by applying the substantial transformation test, and that Commerce failed to follow the interpretive framework established in its regulations and thus unlawfully expanded the scope of the Orders to include Plaintiff's merchandise. See Bell Supply I, 39 CIT at ––––, 83 F.Supp.3d at 1328–30. This court remanded Commerce's scope determination with instructions to "identify actual language from the scope of the Orders that could be reasonably interpreted to include OCTG finished in third countries in order to find that the merchandise is covered by the scope of the Orders," as required by the regulatory scheme. Id. at 1329.

On remand, Commerce again found that the Orders cover OCTG made from green tubes from the PRC, even where they are finished in a third country.⁵ Under protest, Commerce abandoned its substantial transformation analysis, instead invoking the plain language of the Orders. See Final Results of Redetermination Pursuant to Remand, at 2, 15, 20, Nov. 9, 2015, ECF No. 88-1 ("First Remand Results"). This court determined that Commerce's First Remand Results did not comply with the court's remand order in Bell Supply I, and that the results were not supported by substantial evidence and not in accordance with law. Bell Supply Co. II, 40 CIT at ––––, 179 F. Supp. 3d 1082, 1090 (2016). Although Commerce identified language in the Orders that Commerce believed covered green tubes manufactured in China and finished in third countries, this court held that the language was insufficient to permit such a conclusion. See Bell Supply II, 40 CIT at ––––, 179 F.Supp.3d 1082, 1091, 1094–95. The court remanded Commerce's First Remand Results for further consideration and instructed that Commerce must interpret the Orders pursuant to the regulatory framework enumerated by 19 C.F.R. § 351.225(k)(1) (2013) and 19 C.F.R. § 351.225(k)(2) (2013) or, alternatively, conduct a circumvention analysis pursuant to 19 U.S.C. § 1677j(b) and 19 C.F.R. § 351.225(h) (2013). Id. at 1098–99, 1105.

In its Final Results of Second Redetermination Pursuant to Remand ("Second Remand Redetermination"), Commerce determined that (1) the language of the Orders does not cover unfinished OCTG manufactured in the PRC and finished in third countries, and (2) that imports of finished OCTG from Indonesia processed from unfinished green tubes from China do not circumvent the Orders pursuant to 19 U.S.C. § 1677j(b). See Second Remand Redetermination, at 1, 5, 19–20, 33–35, Aug. 11, 2016, ECF No. 132-1. Per this court's instruction, Commerce utilized the 19 C.F.R. § 351.225(k)(1) and (2) factors in its analysis regarding whether OCTG finished in third countries fall within the orders. See id. at 5, 14–19. Commerce found that the (k)(1) and (k)(2) factors did not support a finding that the OCTG finished in Indonesia were covered by the Orders. Id. at 15–19. With respect to its circumvention analysis under § 1677j, Commerce explained that "the process of assembly or completion performed ... in Indonesia is neither...