Mid Continent Nail Corp. v. United States

• Decision Date: 07 November 2013
• Docket Number: Nos. 2012–1682,2012–1683.,s. 2012–1682
• Citation: 725 F.3d 1295
• Parties: MID CONTINENT NAIL CORPORATION, Plaintiff–Appellee, v. UNITED STATES, Defendant–Appellant, and Target Corporation, Defendant–Appellant.
• Court: U.S. Court of Appeals — Federal Circuit

725 F.3d 1295

MID CONTINENT NAIL CORPORATION, Plaintiff–Appellee,

v. UNITED STATES, Defendant–Appellant,andTarget Corporation, Defendant–Appellant.

Nos. 2012–1682, 2012–1683.

United States Court of Appeals, Federal Circuit.

July 18, 2013.

Rehearing Denied Nov. 7, 2013.

Adam H. Gordon, Wiley Rein LLP, of Washington, DC, argued for plaintiff-appellee. With him on the brief were Robert E. Defrancesco, III, and Lori E. Scheetz. Of counsel was Charles O. Verrill, Jr.

Patricia M. McCarthy, Assistant Director, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendant-appellant United States. With her on the brief were Stuart F. Delery, Principal Deputy Assistant Attorney General, and Jeanne E. Davidson, Director. Of counsel on the brief was Nathaniel Halvorson, Attorney International, Office of Chief Counsel, for Import Trade Administration, United States Department of Commerce, of Washington, DC.

Marguerite E. Trossevin, Jochum Shore & Trossevin, PC, of Washington, DC, argued for defendant-appellant Target Corporation.

Before DYK, LINN, and PROST, Circuit Judges.

DYK, Circuit Judge.

Defendants Target Corporation and the United States appeal from a judgment of the Court of International Trade (“Trade Court”) rejecting the Department of Commerce's (“Commerce”) interpretation of an antidumping order on nails from the People's Republic of China. The Trade Court held that the steel nails included in certain household tool kits imported by Target were subject to the order. We vacate the judgment, and remand to the Trade Court with directions that it remand to Commerce for further proceedings.

Background

I

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. See19 U.S.C. § 1673a(b); Walgreen Co. of Deerfield, Ill. v. United States, 620 F.3d 1350, 1351 (Fed.Cir.2010). 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 International Trade Commission makes certain related determinations, Commerce issues an antidumping duty order. See19 U.S.C. §§ 1673d-e. This order “includes a description of the subject merchandise, in such detail as [Commerce] deems necessary.” § 1673e(a)(2).

After an order has issued, importers may seek “ ‘scope rulings' that clarify the scope of an order ... with respect to particular products.” 19 C.F.R. § 351.225(a),(c). Although there is no statutory provision defining the criteria to be applied in scope rulings, our cases and Commerce's regulations have to some extent defined the process by which the agency decides whether a particular product is included within the scope of an order. See Walgreen, 620 F.3d at 1356–57; 19 C.F.R. § 351.225(k).

This case presents the question of whether otherwise-subject merchandise (nails) that is packaged and imported together with non-subject merchandise (assorted household tools) as part of a so-called “mixed media” item (a tool kit) is subject to an antidumping order that in terms covers the included merchandise, and makes no exception for mixed media items. Commerce has historically treated the answer to this question as depending on whether the mixed media item is to be treated as a single, unitary item, or a mere aggregation of separate items. See Walgreen, 620 F.3d at 1355–56. As discussed below, the statute and Commerce's regulations do not address mixed media issues specifically, and the statute's mandate for Commerce to write its orders in “such detail as [Commerce] deems necessary,” see§ 1673e(a)(2), cannot be read to authorize Commerce to provide inadequate notice to regulated parties.

II

The antidumping order in this case originated from a petition filed by plaintiff Mid Continent Nail Corporation (“Mid Continent”) and other domestic companies, alleging dumping of certain nails imported from China. See Certain Steel Nails from the People's Republic of China and the United Arab Emirates: Initiation of Antidumping Duty Investigations, 72 Fed.Reg. 38,816, 38,817 (Dep't of Commerce July 16, 2007). Commerce's antidumping order contained an exhaustive description of the physical characteristics of the subject nails, including their length, construction, finish, head shape, and point shape, but did not address mixed media items. See Notice of Antidumping Duty Order: Certain Steel Nails from the People's Republic of China (“ Final Order ”), 73 Fed.Reg. 44,961, 44,961–62 (Dep't of Commerce Aug. 1, 2008). The order also noted that “steel nails subject to [the order] are currently classified under the Harmonized Tariff Schedule of the United States (‘HTSUS') subheadings 7317.00.55, 7317.00.65 and 7317.00.75,” which apply to various types of iron and steel nails, but specified that “[w]hile the HTSUS subheadings are provided for convenience and customs purposes, the written description of the scope of [the order] is dispositive.” Id.

In December 2009, after the order issued, Target requested a scope ruling clarifying whether “the brass plated steel nails [included in certain] household tool kits ... f[e]ll within the scope of the antidumping order.” J.A. 32. Target described six tool kits, each of which consisted of a plastic toolbox or bag containing a variety of household tools (such as screwdrivers, measuring tapes, and hammers), as well as “a small ... compartmentalized plastic box containing [an assortment of screws, tacks, and hooks] and approximately 50 one-inch brass coated steel nails of a type typically used with ... picture hooks.” J.A. 33–34. In each case, Target estimated that the nails represented between 0.8% and 3.3% of the cost of the tool kit and between 0.5% and 1.8% of its retail value. Target conceded that the nails were of the type described in the antidumping order.

Commerce issued a scope ruling in August 2010. Regarding the mixed media inquiry, Commerce stated that although the nails “would meet the physical requirements of steel nails that fall within the scope of the [order] if they were imported without any of the other tool kit components,” “the proper focus of the analysis is on the nails as contained in the household tool kits.” J.A. 212. In reaching this determination, Commerce looked to the so called “(k)(2) criteria” found in the agency's general scope-ruling regulations, see19 C.F.R. § 351.225(k)(2). Commerce found that “the ultimate purchaser would not pay [the retail price of the tool kits] to receive a small quantity of steel nails, when steel nails can be purchased in larger quantities for a much lower price”; “the tool kits serve a broader use of home or office repairs rather than strictly to fasten or hang objects, [which is] the ultimate use of subject steel nails”; the channel of trade used to sell the tool kits “is distinctly different from the channel of trade for nails”; and “the brass coated steel nails contained within the six tool kits comprise, at most, a tangential feature in the advertising of these tool kits.” See J.A. 214–16. Commerce concluded that “Target's six household tool kits encompassing brass coated steel nails are excluded from the scope of the order.” J.A. 207.

Mid Continent challenged Commerce's ruling, and the Trade Court vacated it, finding Commerce's explanation insufficient. Mid Continent Nail Corp. v. United States, 770 F.Supp.2d 1372 (C.I.T. 2011). The court remanded for Commerce to “identify not only a test it will employ consistently” for conducting mixed media inquiries, but also “the legal justification for employing such a test at all.” Id. at 1383.

On remand, Commerce cited three sources of authority for conducting a mixed media inquiry: the antidumping statute, which requires duties to be applied to a particular “class or kind of foreign merchandise,” 19 U.S.C. § 1673; the agency's regulations, which acknowledge that anti-dumping orders “must be written in general terms” and authorize the agency to issue scope rulings, 19 C.F.R. § 351.225(a); and our opinions in Walgreen and in Crawfish Processors Alliance v. United States, 483 F.3d 1358 (Fed.Cir.2007). Commerce also announced a four-factor test that it would henceforth rely on to “address [mixed media] question[s].” J.A. 225. The agency declared that it henceforth

will consider, at the time of importation: (1) the practicability of separating the component merchandise for repackaging or resale; (2) the value of the component merchandise as compared to the value of the product as a whole; (3) the ultimate use or function of the component merchandise relative to the ultimate use or function of the mixed-media set as a whole; and (4) any other relevant factors that may arise on a product-specific basis.

J.A. 225. Regarding the first factor, Commerce found that “[b]ecause the [nails were] packaged in the same case that contained similar non-subject fasteners, ... it would be impractical to remove the [nails] for the purpose of reselling.” J.A. 229. Regarding the second factor, Commerce found that “the value of the steel nails within the tool[ ]kits is very small as compared to the value of the entire tool[ ]kit.” J.A. 229. Regarding the third factor, the agency determined that the purpose of the tool kits was “to provide a convenient collection of tools and accessories for the intention of home repair and maintenance,” and that “[t]he general purpose of steel nails, fastening two objects together, while complementary, is not the same as the purpose of a tool[ ]kit.” J.A. 230. Commerce also found that “the choice of the tool[ ] kit selected [by the end-user] is not based exclusively upon the inclusion of the steel nails.” J.A. 230. Finally, Commerce did not identify “any other relevant factors which it [found] necessary to the mixed-media analysis for [the] tool[ ]kits under consideration.” J.A. 230.

On review,...