Mid Continent Nail Corp.. v. United States

• Decision Date: 17 May 2011
• Docket Number: Slip Op. 11–55.Court No. 10–00247.
• Citation: 770 F.Supp.2d 1372
• Parties: MID CONTINENT NAIL CORPORATION, Plaintiff,v.UNITED STATES, Defendant,andTarget Corporation, Defendant–Intervenor.
• Court: U.S. Court of International Trade

770 F.Supp.2d 1372

MID CONTINENT NAIL CORPORATION, Plaintiff,

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

Slip Op. 11–55.Court No. 10–00247.

United States Court of International Trade.

May 17, 2011.

Wiley Rein, LLP, (Adam H. Gordon, Lori E. Scheetz, Robert E. DeFrancesco, III) for Mid Continent Nail Corporation, Plaintiff.Tony West, Assistant Attorney General; Jeanne E. Davidson, Director, Commercial Litigation Branch, Civil Division, United States Department of Justice, Patricia M. McCarthy, Assistant Director, Commercial Litigation Branch, Civil Division, United States Department of Justice, (David D'Alessandris); Brian Soiset, Office of Chief Counsel for Import Administration, United States Department of Commerce, Of Counsel, for the United States, Defendant.Jochum, Shore, & Trossevin, PC, (Marguerite E. Trossevin and James J. Jochum) for Target Corporation, Defendant–Intervenor.

OPINIONTSOUCALAS, Senior Judge.

This matter comes before the Court upon the Motion for Judgment on the Agency Record filed by Plaintiff, Mid Continent Nail Corporation (“Mid Continent Nail”) on November 23, 2010 pursuant to Rule 56.2 of the Rules of the United States Court of International Trade. Mid Continent Nail challenges a determination by the United States Department of Commerce (“Commerce”) that steel nails imported as components of household tool kits fall outside the scope of an antidumping duty order on certain steel nails from the People's Republic of China (“PRC”). See Final Scope Ruling—Certain Steel Nails from the People's Republic of China (“PRC”), Request by Target Corporation (Aug. 10, 2010), Public Rec. 27, (“ Final Scope Ruling ”).¹ Mid Continent Nail argues that the Final Scope Ruling is not supported by substantial evidence and is otherwise not in accord with law primarily because its analysis focused on the household tool kits rather than the steel nails contained therein. Additionally, Mid Continent Nail asserts that Commerce failed to properly conduct the analysis required in scope inquiries under 19 C.F.R. § 351.225, and seeks a remand of this matter for further proceedings. Defendant, United States (“Government”), and Defendant–Intervenor, Target Corporation (“Target”), oppose remand of this matter arguing that Commerce conducted a sufficient scope analysis, and that its determination was supported by substantial evidence and otherwise in accord with the law.

For the reasons set forth below, the Court finds that Commerce's determination was unsupported by substantial evidence and not in accord with the law and remands this matter for proceedings consistent with this opinion.

BACKGROUND

On August 1, 2008, Commerce issued an order imposing an antidumping duty on steel nails from the PRC. See Notice of Antidumping Duty Order: Certain Steel Nails from the People's Republic of China, 73 Fed.Reg. 44, 961 (Aug. 1, 2008) (“ Final Order ”). The scope of the merchandise covered by the Final Order is as follows:

The merchandise covered by this proceeding includes certain steel nails having a shaft length up to 12 inches. Certain steel nails include, but are not limited to, nails made of round wire and nails that are cut. Certain steel nails may be of one piece construction or constructed of two or more pieces. Certain steel nails may be produced from any type of steel, and have a variety of finishes, heads, shanks, point types, shaft lengths and shaft diameters. Finishes include, but are not limited to, coating in vinyl, zinc (galvanized, whether by electroplating or hot-dipping one or more times), phosphate cement, and paint. Head styles include, but are not limited to, flat, projection, cupped, oval, brad, headless, double, countersunk, and sinker. Shank styles include, but are not limited to, smooth, barbed, screw threaded, ring shank and fluted shank styles. Screw-threaded nails subject to this proceeding are driven using direct force and not by turning the fastener using a tool that engages with the head. Point styles include, but are not limited to, diamond, blunt, needle, chisel, and no point. Finished nails may be sold in bulk, or they may be collated into strips or coils using materials such as plastic, paper, or wire. Certain steel nails subject to this proceeding are currently classified under the Harmonized Tariff Schedule of the United States (“HSTUS”) subheadings 7317.00.55, 7317.00.65 and 7317.00.75.

Excluded from the scope of this proceeding are roofing nails of all lengths and diameter, whether collated or in bulk, and whether or not galvanized. Steel roofing nails are specifically enumerated and identified in ASTM Standard F 1667 (2005 revision) as Type I, Style 20 nails. Also excluded from the scope of this proceeding are corrugated nails. A corrugated nail is made of a small strip of corrugated steel with sharp points on one side. Also excluded from the scope of this proceeding are fasteners suitable for use in powder-actuated hand tools, not threaded and threaded, which are currently classified under HTSUS 7317.00.20 and 7317.00.30. Also excluded from the scope of this proceedings are thumb tacks, which are currently classified HTSUS 7317.00.10.00. Also excluded from the scope of this proceeding are certain brads and finish nails that are equal to or less than 0.0720 inches in shank diameter, round or rectangular in cross section, between 0.375 inches and 2.5 inches in length, and that are collated with adhesive or polyester film tape backed with a heat seal adhesive. Also excluded from the scope of this proceeding are fasteners having a case hardness greater than or equal to 50 HRC, a carbon content greater than or equal to 0.5 percent, a round head, a secondary reduced-diameter raised head section, a centered shank, and a smooth symmetrical point, suitable for use in gas-actuated hand tools.

While the HTSUS subheadings are provided for convenience and customs purposes, the written description of the scope of this investigation is dispositive.

Final Order, 73 Fed.Reg. at 44,961–44,962.²

Target imports household tool kits from the PRC. The tool kits contain tools such as hammers, measuring tapes, screwdrivers, and wrenches. See Letter from Jochum, Shore & Trossevin to the Secretary of Commerce, Re: Certain Steel Nails from the People's Republic of China: Scope Ruling Request Regarding Household Tool Kits (Dec. 11, 2009) (“Scope Ruling Request” or “Request”), PR 1 at 2–3, CR 1 at 2–3. Of relevance to this matter, the tool kits also include a plastic container holding approximately fifty one-inch brass coated steel nails. Id. at 2–3, 6. On December 11, 2009, Target requested a ruling from Commerce that these tool kits are outside the scope of the Final Order.

In making its Request, Target conceded that if the nails contained in the tool kits were considered on their own they would be subject to the Final Order. Scope Ruling Request at 5. It argued, however, that Commerce should focus its scope analysis not on the nails alone, but on the entire tool kit. Target based this argument, first, on the Final Order's silence regarding coverage of nails packaged with non-subject items. Second, Target relied on prior scope rulings that considered items containing both subject and non-subject goods, otherwise known as “mixed-media” items or sets. See Government's Mem. in Opp'n to Pl.'s Mot. for J. upon the Agency R. (“Gov.'s Opp'n”) at 10. In these earlier rulings, Commerce focused its scope inquiry on the mixed-media item rather than the subject good contained within it because the subject good was a minor component of the mixed-media item, consumable, and easily replaced with non-subject merchandise. Scope Ruling Request at 5.

Target stated that when using the approach enunciated in these prior scope rulings, Commerce subjected the mixed-media item to analysis under the factors set forth in 19 C.F.R. § 351.225(k)(2) ³ (“(k)(2) factors”). Addressing each of the (k)(2) factors in turn, Target argued that the physical characteristics, advertising and display methods, purchaser expectations, ultimate use, and different channels of trade in which subject nails and the tool kits are sold show that the tool kits are distinct enough from subject nails to be outside the scope of the Final Order.

Mid Continent Nail, a domestic manufacturer of nails and original petitioner in the antidumping proceedings, see Final Order, 73 Fed.Reg. at 44,962 n. 3, opposed Target's Scope Ruling Request. See Letter from Wiley Rein to the Secretary of Commerce, Re: Certain Steel Nails from the People's Republic of China: Opposition to Target Corporation's Request to Exclude Steel Nails Packaged With Non–Subject Merchandise From the Scope of This Order (Dec. 22, 2009), PR 2. Mid Continent Nail argued that it is impermissible to bypass the factors set forth in 19 C.F.R. § 351.225(k)(1)(“(k)(1) factors”) and begin with the (k)(2) factors, as advocated by Target. Proper adherence to case precedent and weighing of the sources identified by the (k)(1) factors, Mid Continent Nail continued, would show that steel nails imported in mixed-media sets remain subject to the Final Order despite being packaged with non-subject items.

Mid Continent Nail first pointed to the scope language of the Final Order itself. It argued that the Final Order's silence regarding nails packaged in tool kits was irrelevant to the nails' inclusion because the Final Order clearly includes all steel nails matching a broad physical description unless those nails fit within an articulated exclusion. PR 2 at 5–8. As seen above, there are six exclusions from the Final Order's scope: roofing nails, corrugated nails, thumb tacks, small finishing nails, and certain nails used in either powder- or gas-actuated tools. See Final Order, 73 Fed.Reg. at 44,961–44,962. The scope language excludes no nails based on their packaging or inclusion in a mixed-media set. Mid Continent Nail also argued that prior scope ruling precedent...