Bell Supply Co. v. United States

• Citation: 888 F.3d 1222
• Decision Date: 25 April 2018
• Docket Number: 2017-1492,2017-1504,2017-1495
• Parties: BELL SUPPLY COMPANY, LLC, Plaintiff–Appellee v. UNITED STATES, Defendant Boomerang Tube LLC, TMK IPSCO Tubulars, V & M Star L.P., Wheatland Tube Company, Maverick Tube Corporation, United States Steel Corporation, Defendants–Appellants
• Court: United States Courts of Appeals. United States Court of Appeals for the Federal Circuit

888 F.3d 1222

BELL SUPPLY COMPANY, LLC, Plaintiff–Appellee

v.UNITED STATES, Defendant

Boomerang Tube LLC, TMK IPSCO Tubulars, V & M Star L.P., Wheatland Tube Company, Maverick Tube Corporation, United States Steel Corporation, Defendants–Appellants

2017-1492

2017-1495

2017-1504

United States Court of Appeals, Federal Circuit.

Decided: April 25, 2018

Donald Cameron, Jr., Morris, Manning & Martin, LLP, Washington, DC, argued for plaintiff-appellee. Also represented by Eugene Degnan, Mary Hodgins, Julie Mendoza, Brady Mills, R. Will Planert.

John W. Bohn, Schagrin Associates, Washington, DC, argued for defendants-appellants Boomerang Tube LLC, TMK IPSCO Tubulars, V & M Star L.P., Wheatland Tube Company. Also represented by Roger Brian Schagrin, Christopher Cloutier, Paul Wright Jameson.

Robert E. DeFrancesco, III, Wiley Rein, LLP, Washington, DC, argued for defendant-appellant Maverick Tube Corporation. Also represented by Alan H. Price, Tessa V. Capeloto, Adam Milan Teslik.

Josef Ansorge, Quinn Emanuel Urquhart & Sullivan, LLP, Washington, DC, argued for defendant-appellant United States Steel Corporation. Also represented by Debbie Leilani Shon, Jonathan Gordon Cooper, Kelsey Rule.

Before Lourie, Chen, and Hughes, Circuit Judges.

Hughes, Circuit Judge.

Boomerang Tube LLC, TMK IPSCO Tubulars, V & M Star L.P., Wheatland Tube Company, Maverick Tube Corporation, and United States Steel Corporation (collectively, Domestic Steel Companies) appeal the U.S. Court of International Trade's final judgment in favor of Bell Supply Company, LLC. The Trade Court affirmed the U.S. Department of Commerce's determination that certain imported oil country tubular goods (OCTG), fabricated as unfinished OCTG in the People's Republic of China and finished in other countries, were not subject to the antidumping and countervailing duty orders covering OCTG imported from China. The Trade Court also affirmed Commerce's determination that OCTG finished in third countries do not meet the requirements for circumvention under 19 U.S.C. § 1677j. Because we conclude that the Trade Court improperly proscribed Commerce from using the substantial transformation analysis to determine the country of origin for imported OCTG, we vacate the Trade Court's decision and remand for further proceedings.

I

The Tariff Act of 1930, as amended, allows Commerce to impose antidumping and countervailing duties on merchandise from foreign countries. 19 U.S.C. §§ 1671, 1673. Antidumping duties (AD) provide relief from market distortions caused by foreign producers who sell their merchandise in the United States for less than fair market value, whereas countervailing duties (CVD) seek to address government subsidies to foreign producers. Allegheny Ludlum Corp. v. United States , 287 F.3d 1365, 1368 (Fed. Cir. 2002).

An AD or CVD investigation typically starts with a petition filed by a domestic industry. During the investigation, Commerce determines whether the subject merchandise is being sold for less than fair value or has been subsidized by foreign governments. Duferco Steel, Inc. v. United States , 296 F.3d 1087, 1089 (Fed. Cir. 2002). The U.S. International Trade Commission determines whether "the imported merchandise in question either materially injures or threatens to materially injure American domestic industry." Allegheny , 287 F.3d at 1368. Commerce will issue an AD or CVD order if the investigation reveals dumping or foreign subsidies that injure American domestic industry. Duferco Steel , 296 F.3d at 1089.

After Commerce issues an AD or CVD order, questions may arise about the scope of the order. To resolve these questions, Commerce conducts scope inquiries to clarify which goods are subject to its AD and CVD orders. 19 C.F.R. § 351.225(a). Commerce has established factors under 19 C.F.R. § 351.225(k) for determining whether specific articles fall within the scope of an existing order.

This appeal involves Commerce's scope inquiry regarding AD and CVD orders covering OCTG from China. OCTG are steel pipes and tubes used in oil drilling. To make OCTG, steel is first made into "green tube," which is a steel tube that must be finished before it can meet specifications for oil and gas well applications. The finishing process for green tubes typically includes heat treatment, threading, coating, and other processes.

In 2010, Commerce issued AD and CVD orders (the Orders) on OCTG from China. The scope of the Orders is defined as follows:

The scope of this order consists of certain OCTG ... 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.

Certain Oil Country Tubular Goods from the People's Republic of China: Amended Final Determination of Sales at Less Than Fair Value and Antidumping Duty Order, 75 Fed. Reg. 28,551 –54 (May 21, 2010).

Subsequently, U.S. Customs and Border Protection (Customs) determined that OCTG made with unfinished OCTG from China, but finished in Korea or Japan, had a country of origin of Korea or Japan. In particular, Customs noted that "heat treating has been held to substantially transform green tubes into oil well tubing." J.A. 533. This decision prompted several domestic steel companies to ask Commerce to clarify whether the scope of the Orders cover finished OCTG made from "green tubes" produced in China, but finished in another country.

In response to this request, Commerce issued a Final Scope Ruling in February 2014 (the 2014 Scope Ruling), which found that OCTG finished in third countries are still within the scope of the Orders. In reaching this conclusion, Commerce applied the substantial transformation analysis. But contrary to Customs' decision, Commerce determined that green tubes are not substantially transformed during the finishing process, even if that process includes heat treatment. Accordingly, Commerce ruled that OCTG finished in third countries from Chinese green tubes are still subject to the Orders.

Bell Supply is a U.S. steel importer that purchases green tubes from China and arranges for them to be heat treated and finished in Indonesia. It challenged Commerce's 2014 Scope Ruling at the Trade Court and argued that the scope of the Orders should not extend to OCTG imported from third countries like Indonesia, even if they are made from green tubes produced in China. Bell Supply noted that the language of the Orders does not include OCTG imported from Indonesia, and argued that Commerce cannot use the substantial transformation analysis to sweep in OCTG from Indonesia. Instead, Bell Supply argued that Commerce must conduct a circumvention inquiry under 19 U.S.C. § 1677j before it can impose AD or CVD on products imported from countries not specifically identified in the Orders.

The Trade Court agreed with Bell Supply and found that Commerce failed to properly interpret the Orders in its 2014 Scope Ruling. The Trade Court emphasized that, because "the words of an order must serve as a basis for the inclusion of merchandise within the scope of the order," merchandise is outside an order unless the words of the order support its inclusion. J.A. 17–18.

The Trade Court also held that Commerce should not have applied the substantial transformation analysis to evaluate whether OCTG imported from Indonesia was within the scope of the Orders. The court noted that the circumvention inquiry under § 1677j provides a specific standard for determining whether foreign producers are trying to evade AD or CVD orders by completing or assembling merchandise in third countries. Thus, if Commerce believed that importers were circumventing the Orders by finishing green tubes in third countries like Indonesia, then "Commerce must apply the statute Congress enacted for that purpose and must satisfy the enumerated requirements within the statute." J.A. 22. Accordingly, the Trade Court issued a remand to Commerce to "identify actual language from the scope of the Orders that could be reasonably interpreted to include OCTG finished in third countries." J.A. 35.

On remand, Commerce again found the Orders cover OCTG made from Chinese green tubes, even if they are finished in a third country. But this time, Commerce sought to rely on the language of the Orders instead of the substantial transformation analysis. Its decision reasoned that

Both unfinished OCTG and finished OCTG are in-scope merchandise; that is, they are both "OCTG" within the plain meaning of the scope language. Therefore, contrary to Bell Supply's arguments, the plain language of the scope of the Orders expressly covers unfinished Chinese OCTG, and that language can reasonably be interpreted to include unfinished OCTG, even when finished in a third country. The process of finishing does not remove the product from the plain language of the scope, which includes both unfinished and finished OCTG.

J.A. 3298. Bell Supply again appealed Commerce's Redetermination Pursuant to Remand to the Trade Court.

On appeal, the Trade Court found that Commerce still erred in its interpretation of the Orders. The court observed that "[t]he scope language makes no mention of whether green tubes manufactured in China remain subject to the Orders even if the green tubes undergo further processing in a third country. Commerce has not identified any specific language from the Orders that supports such a broad reading of the scope." J.A. 56. Because the Orders do not address third country processing, "Commerce cannot use its failure to expressly include third country processing in writing the scope of the Orders and rely upon its own silence to further support its current interpretation." J.A. 59. The Trade Court remanded to Commerce for a second...