Fabuwood Cabinetry Corp. v. United States

• Decision Date: 19 August 2020
• Docket Number: Consol. Court No. 18-00208,Slip Op. 20-121
• Citation: 469 F.Supp.3d 1373
• Parties: FABUWOOD CABINETRY CORP., Plaintiff, and Cubitac Cabinetry Corp., and CNC Associates N.Y., Inc., Consolidated Plaintiffs, and IKEA Supply AG, Plaintiff-Intervenor, v. UNITED STATES, Defendant, and Coalition for Fair Trade in Hardwood Plywood and Masterbrand Cabinets Inc., Defendant-Intervenors.
• Court: U.S. Court of International Trade

469 F.Supp.3d 1373

FABUWOOD CABINETRY CORP., Plaintiff,

and

Cubitac Cabinetry Corp., and CNC Associates N.Y., Inc., Consolidated Plaintiffs,

and

IKEA Supply AG, Plaintiff-Intervenor,

v.UNITED STATES, Defendant,andCoalition for Fair Trade in Hardwood Plywood and Masterbrand Cabinets Inc., Defendant-Intervenors.

Slip Op. 20-121

Consol. Court No. 18-00208

United States Court of International Trade.

August 19, 2020

Matthew R. Nicely, Akin, Gump, Strauss, Hauer & Feld, LLP, of Washington, DC, argued for plaintiff, Fabuwood Cabinetry Corp. With him on the brief were Julia K. Eppard ; and Dean A. Pinkert of Hughes Hubbard & Reed LLP, of Washington, DC.

Richard W. Grohmann, Smith & Associates, of New York, NY, for consolidated plaintiff, Cubitac Cabinetry Corp.

Andrew T. Schutz, Grunsfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP, of Washington, DC, for consolidated plaintiff, CNC Associates of N.Y., Inc. With him on the brief was Kavita Mohan.

Kristen Smith, Sadler, Travis & Rosenberg, P.A., of Washington, DC and New York, argued for plaintiff-intervenor, IKEA Supply AG. With her on the brief were Sarah E. Yuskaitis and Arthur K. Purcell.

Sonia M. Orfield, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, argued for defendant. With her on the brief were Joseph H. Hunt, Assistant Attorney General, Jeanne E. Davidson, Director and Tara K. Hogan, Assistant Director. Of counsel was Rachel Bogdan, Attorney, Office of the Chief Counsel for Trade Enforcement & Compliance, U.S. Department of Commerce, of Washington, DC.

Timothy C. Brightbill, Wiley Rein LLP, of Washington, DC, argued for defendant-intervenors, Coalition for Fair Trade in Hardwood Plywood and Masterbrand Cabinets, Inc. With him on the brief were Stephanie M. Bell, Tessa V. Capleto, and Elizabeth S. Lee.

OPINION

Katzmann, Judge:

Did the decision by the United States Department of Commerce ("Commerce") to accept a scope ruling request to clarify the orders issued after an antidumping ("AD") and countervailing duty ("CVD") investigation comport with appropriate procedures? Can the scope determinations made by Commerce be sustained? These are the central questions in this case, arising from a dispute over a scope ruling regarding AD and CVD orders imposing duties on certain hardwood plywood products from China. Coalition for Fair Trade in Hardwood Plywood ("Coalition"), a petitioner for the orders, and Masterbrand Cabinets Inc. ("Masterbrand"), a domestic cabinets manufacturer, (collectively, "Petitioner-Masterbrand") requested the scope ruling to confirm a proposed description of certain in-scope products, and Commerce affirmed the scope ruling request. Fabuwood Cabinetry Corp. ("Fabuwood"), CNC Associates N.Y., Inc. ("CNC"), Cubitac Cabinetry Corp ("Cubitac"), and IKEA Supply AG ("IKEA") (collectively, the "Plaintiffs") brought this action against the United States (the "Government") to challenge Commerce's scope ruling for what they allege were procedural defects and wrongful interpretation of the scope of the original AD and CVD orders. As discussed below, the court grants the Plaintiffs' motion for judgment on the agency record, in part, and holds that Commerce's acceptance of Petitioner-Masterbrand's scope ruling request is unsupported by substantial evidence and not in accordance with law. The court remands to Commerce for further explanation or reconsideration consistent with this opinion.

BACKGROUND

I. Legal and Regulatory Framework

To empower Commerce to offset economic distortions caused by countervailable subsidies and dumping, Congress enacted the Tariff Act of 1930. Sioux Honey Ass'n v. Hartford Fire Ins. Co., 672 F.3d 1041, 1046 (Fed. Cir. 2012) ; ATC Tires Private Ltd. v. United States, 42 CIT ––––, ––––, 322 F. Supp. 3d 1365, 1366 (2018). Under the Tariff Act's framework, Commerce may -- either upon petition by a domestic producer or of its own initiative -- begin an investigation into potential countervailable subsidies and, if appropriate, issue orders imposing duties on the subject merchandise. 19 U.S.C. §§ 1671, 1673 ; Sioux Honey, 672 F.3d at 1046 ; ATC Tires, 322 F. Supp. 3d at 1366–67.

"When participants in a domestic industry believe that competing foreign goods are being sold in the United States at less than their fair value, they may petition Commerce to impose antidumping duties on importers." Mid Continent Nail Corp. v. United States, 725 F.3d 1295, 1297–98 (Fed Cir. 2013) (citing 19 U.S.C. § 1673a(b) ). If Commerce determines that "the subject merchandise is being, or is likely to be sold in the United States at less than its fair value," and the U.S. International Trade Commission ("ITC") determines that a domestic industry is injured as a result, Commerce issues an AD duty order. See 19 U.S.C. § 1673d(a), (b). Similarly, if Commerce determines that the government of a country is providing, directly or indirectly, a countervailable subsidy with respect to the manufacture, production, or export of a class or kind of merchandise imported, sold, or likely to be sold for import, into the United States, and the ITC determines that an industry in the United States is materially injured or threatened with material injury thereby, then Commerce shall impose a CVD order upon such merchandise equal to the amount of the net countervailable subsidy. See 19 U.S.C. § 1671(a).

Once Commerce issues an order, interested parties may apply for a scope ruling to clarify the scope of the order as it relates to their particular product. 19 C.F.R. § 351.225(c). Commerce may also choose to self-initiate a scope inquiry. Id. § 351.225(b). Pursuant to 19 C.F.R. § 351.225(a), when "[i]ssues arise as to whether a particular product is included within the scope of an antidumping or countervailing duty order," Commerce may issue "scope rulings that clarify the scope of an order or suspected investigation with respect to particular products" (internal quotations omitted). Issues as to the scope of an order can arise "because the descriptions of subject merchandise contained in [Commerce's] determinations must be written in general terms," or "a domestic interested party may allege that changes to an importer product or the place where the imported product is assembled constitutes circumvention ..." 19 C.F.R. § 351.225(a).

An interested party applying for a scope ruling must submit an application "contain[ing] the following, to the extent reasonably available to the interested party:"

(i) A detailed description of the product, including its technical characteristics and uses, and its current U.S. Tariff Classification number;

(ii) A statement of the interested party's position as to whether the product is within the scope of an order or a suspended investigation, including:

(A) A summary of the reasons for this conclusion,

(B) Citations to any applicable statutory authority, and

(C) Any factual information supporting this position, including excerpts from portions of the Secretary's or the Commission's investigation, and relevant prior scope rulings.

Id. § 351.225(c).

In determining the scope of an order, Commerce will consider:

(1) The descriptions of the merchandise contained in the petition, the initial investigation, and the determinations of the Secretary (including prior scope determinations) and the Commission.

(2) When the above criteria are not dispositive, the Secretary will further consider:

(i) The physical characteristics of the product;

(ii) The expectations of the ultimate purchasers;

(iii) The ultimate use of the product;

(iv) The channels of trade in which the product is sold; and

(v) The manner in which the product is advertised and displayed.

19 C.F.R. § 351.225(k). "[T]he plain language of an antidumping order is ‘paramount’ in determining whether particular products are included within its scope" and, "[i]n reviewing the plain language of a duty order, Commerce must consider the [ § 351.225(k)(1) factors]." Meridian Prod. v. United States, 890 F.3d 1272, 1277 (Fed. Cir. 2018) (" Meridian II") (internal quotation omitted). Commerce may issue a scope ruling without first initiating a scope inquiry if it can do so "based solely upon a party's application for a scope ruling and the descriptions of the subject merchandise referred to in § 351.225(k)(1)." United Steel & Fasteners, Inc. v. United States, 947 F.3d 794, 799 (Fed. Cir. 2020). If not, Commerce will initiate a scope inquiry -- "a broader inquiry as to whether a product is included within the scope of an antidumping duty order" -- to further consider the factors listed in § 351.225(k)(2). Id.; see also Shenyang Yuanda Aluminum Indus. Eng'g Co. v. United States, 776 F.3d 1351, 1354 (Fed. Cir. 2015) ; Sango Int'l, L.P. v. United States, 484 F.3d 1371, 1376–77 (Fed. Cir. 2007).

In issuing a scope ruling, Commerce "enjoys substantial freedom to interpret and clarify its ... orders. But while it may interpret those orders, it may not change them." Ericsson GE Mobile Commc'ns, Inc. v. United States, 60 F.3d 778, 782 (Fed. Cir. 1995), as corrected on reh'g (Sept. 1, 1995); see also Eckstrom Indus. v. United States, 254 F.3d 1068, 1072 (Fed. Cir. 2001) ("Commerce cannot ‘interpret’ an antidumping order so as to change the scope of that order, nor can Commerce interpret an order in a manner contrary to its terms.") (citing Wheatland Tube Co. v. United States, 161 F.3d 1365, 1370 (Fed. Cir. 1998) ).

II. Procedural and Factual History

On December 16, 2016, Commerce initiated AD and CVD investigations into hardwood plywood. Certain Hardwood Plywood From the People's Republic of China: Initiation of Less-Than-Fair-Value Investigation, 81 Fed. Reg. 91,125 (Dep't Commerce Dec. 16, 2016) ; Certain Hardwood Plywood From the People's Republic of China: Initiation of Countervailing Duty Investigation, 81 Fed. Reg. 91,131 (Dep't Commerce Dec. 16, 2016). Coalition filed petitions for both orders. Id. On November 16, 2017, Commerce issued its final affirmative...