Win-Tex Products, Inc. v. US

• Decision Date: 05 August 1993
• Docket Number: No. 92-04-00302 (BN).,92-04-00302 (BN).
• Citation: 829 F. Supp. 1343
• Parties: WIN-TEX PRODUCTS, INC., Plaintiff, v. UNITED STATES, Defendant, and Milliken & Company, Inc., Defendant-Intervenor.
• Court: U.S. Court of International Trade

829 F. Supp. 1343

WIN-TEX PRODUCTS, INC., Plaintiff, v. UNITED STATES, Defendant and Milliken & Company, Inc., Defendant-Intervenor.

No. 92-04-00302 (BN).

United States Court of International Trade.

August 5, 1993.

Adduci, Mastriani, Schaumberg & Schill, Ralph H. Sheppard, Barbara A. Murphy and Robert J. Leo, New York City, for plaintiff.

Frank W. Hunger, Asst. Atty. Gen., David M. Cohen, Director, Commercial Litigation Branch, Civ. Div., Dept. of Justice, Jeffrey M. Telep, Atty., J.C. Lowe, Attorney-Advisor, Office of Chief Counsel for Import Admin., U.S. Dept. of Commerce, Washington, DC, for defendant.

Wilmer, Cutler & Pickering, John D. Greenwald, Ronald I. Meltzer, Bahram A. Zia, Washington, DC, for defendant-intervenor.

OPINION AND ORDER

NEWMAN, Senior Judge:

INTRODUCTION

In this action, commenced pursuant to 28 U.S.C. § 1581(c), 19 U.S.C. § 1516a (a)(2)(A)(ii) and 19 U.S.C. § 1516a(a)(2)(B)(vi), plaintiff seeks to overturn the antidumping duty Final Scope Ruling of March 31, 1992 by the International Trade Administration, United States Department of Commerce ("ITA" or "Commerce"): Final Scope Ruling on the Request By Win-Tex Products, Inc. for Clarification of the Scope of the Antidumping Duty Order on Shop Towels of Cotton From the People's Republic of China ("Final Scope Ruling"). By its Final Scope Ruling, ITA determined that plaintiff's cotton shop towels imported from Honduras are within the scope of Shop Towels of Cotton From the People's Republic of China; Antidumping Duty Order, 48 Fed. Reg. 45,277 (October 4, 1983) ("Order").

Currently before me is plaintiff's motion under CIT Rule 56.2 for judgment upon the agency record that ITA's Final Scope Ruling is unsupported by substantial evidence on the record or is otherwise not in accordance with law. See 19 U.S.C. § 1516a(b)(1)(B). The relief sought by plaintiff is either the reversal of ITA's Scope Ruling and judgment on the existing record that plaintiff's shop towels from Honduras are not within the scope of the Order, or alternatively, a remand of the action to the agency with instructions to conduct a scope inquiry under 19 C.F.R. § 353.29(f), or alternatively, apply the scope criteria in 19 C.F.R. § 353.29(i)(2).

For the reasons that follow, this case is remanded to ITA for further proceedings, as specified below.

BACKGROUND

On March 12, 1991, plaintiff filed an application with Commerce for a scope determination that plaintiff's shop towels from Honduras are not within the scope of the Order. Briefly, at ITA plaintiff argued for a scope ruling under 19 C.F.R. § 353.29(f), covering merchandise "completed or assembled" in a third country. As the basis for its contention that plaintiff's shop towels are "completed or assembled" in Honduras and excluded from the scope of the Order, plaintiff maintained before ITA, and argues here, that Chinese cotton greige fabric undergoes substantial manufacturing and finishing operations in Honduras resulting in a change in commercial identity of the Chinese fabric into finished or completed towels with significant added value, and that the towels completed in Honduras are not of the same class or kind as those covered by the Order because the product from Honduras is packaged and intended for marketing at the retail level of trade for home use, rather than sold to industrial users.

On March 31, 1992, after conducting a scope inquiry in accordance with 19 C.F.R. § 353(i)(1) rather than under § 353.29(f), as requested by plaintiff, ITA issued the Final Scope Ruling that plaintiff's shop towels from Honduras are within the scope of the Order. In an unpublished memorandum explaining its determination, ITA: (1) declined to conduct the scope inquiry pursuant to 19 C.F.R. § 353.29(f), finding that Win-Tex conducts only minimal processing in Honduras and hence its shop towels are not "completed or assembled" in a third country; (2) conducted the scope inquiry under 19 C.F.R. § 353.29(i)(1), finding that the description of the shop towels covered by the Order is "dispositive"; and (3) declined to conduct further inquiry pursuant to the criteria in § 353.29(i)(2).

DISCUSSION

Plaintiff's claim that its shop towels are "completed or assembled" in Honduras, and therefore, 19 C.F.R. § 353.29(f) is applicable.

As noted above, in the Final Scope Ruling, ITA found that Win-Tex does not qualify for a scope review analysis under 19 C.F.R. § 353.29(f), which regulation (following 19 U.S.C. § 1677j(b)) provides certain criteria specifically applicable to products "completed or assembled" in a third country, and is intended to prevent circumvention of antidumping duty orders through third country operations.

In declining to conduct the scope inquiry under 19 C.F.R. § 353.29(f), as requested by plaintiff, ITA relied on the legislative history underlying the corresponding statutory provision, 19 U.S.C. § 1677j(b), pursuant to which the regulation was promulgated. Citing S. 490, S.Rep. No. 71, 100th Cong., 1st Sess. 99-101 (1987), ITA concluded that 19 U.S.C. § 1677j(b) does not apply to plaintiff's Honduras shop towel operations since plaintiff's "products imported into Honduras did not consist of parts or components, or of unfinished products being completed or assembled in that third country." Adm.Rec. 14 at 5. ITA also relied on 19 U.S.C. § 1677b(f) and agency precedents, explaining that, unless merchandise shipped through a third country is "substantially transformed prior to importation into the United States," such merchandise "may be determined to be within the scope of an existing antidumping duty order." Adm.Rec. 14 at 5-6. ITA reviewed Win-Tex's evidence regarding the additional operations performed in Honduras and concluded that "the Honduran shipments do not enter the commerce of Honduras," and "upon examination, we do not regard `... desizing, dying sic, washing, drying, sorting and packaging' as constituting substantial transformation." Adm.Rec. 14 at 6 (quoting Win-Tex Request for Scope Determination at 15).

Plaintiff insists that its shop towels are "completed" in Honduras, and thus ITA was required, but failed, to apply the analysis for determining circumvention as set out in 19 U.S.C. § 1677j(b) and 19 C.F.R. § 353.29(f). Plaintiff further argues, and defendant does not dispute, that where the requisite third country processing exists, the circumvention criteria in 19 U.S.C. § 1677j(b) and 19 C.F.R. § 353.29(f) preempt other lines of scope inquiry.

As administrative precedent for a scope analysis under 19 C.F.R. § 353.29(f) and exclusion of its shop towels from the scope of the Order, Win-Tex called ITA's and the court's attention to a prior unpublished scope ruling involving shop towels from the PRC: Final Scope Ruling on the Request of Able Textile Corporation for Clarification of the Scope of the Antidumping Duty Order on Shop Towels of Cotton from the Peoples' Republic of China (August 21, 1990) ("Able Textile"). Plaintiff insists that ITA erred in failing to follow the Able Textile analysis as precedential in the scope ruling regarding plaintiff's shop towels. Defendant contends that Able Textile is distinguishable on its facts from the present case.

There can be little question that as administrative precedent for a scope inquiry pursuant to § 353.29(f) on the basis of third country completion or assembly of shop towels and exclusion of the towels from the Order, Able Textile is pivotal to the present scope controversy.

In Able Textile, bolts or bales of cotton fabric (continuous length uncut and unhemmed material) imported into Canada from China were processed into shop towels by cutting to size, stitching the unfinished edges, stamp labelling and folding and packing for shipment to the United States. The Canadian processing, ITA found, resulted in a substantial value added to the Chinese fabric (45 percent of the selling price to the United States). ITA determined that Able Textile's shop towels were "assembled" in Canada within the purview of 19 U.S.C. § 1677j(b) and 19 C.F.R. § 353.29(f) and excluded from the order because of the substantial value added by the Canadian manufacturing operations and the absence of any necessity for inclusion of Able Textile's shop towels in the order to prevent evasion.

As contrasted with Able Textile's continuous length bolts or bales of cotton fabric from China, which required inter alia cutting to size and shape and hemming in Canada, ITA found that most of the Win-Tex goods shipped from the PRC and imported into Honduras were pre-cut to size and hemmed fabric pieces that had the physical characteristics of already completed shop towels within the scope of the Order. The foregoing finding was based in part on Win-Tex' scope request itself stating that its Chinese fabric arrives in Honduras "principally * * * cut to shape and usually hemmed." Adm.Rec. 6 at 3-4. ITA also placed great significance on the fact that Win-Tex reported the cost of the Chinese fabric component of its shop towels imported into Honduras on a per dozen towels basis.

Plaintiff nonetheless maintains that ITA should have considered the pre-cut and hemmed fabric pieces as "finished" in Honduras by plaintiff's additional Honduran processing, and consequently as "completed or assembled" in a third country. Moreover, argues plaintiff, ITA failed to consider plaintiff's additional information in its Request for Scope Review that some of plaintiff's Chinese fabric is imported into Honduras in continuous length and is cut and/or hemmed in Honduras.

ITA reasonably concluded that its Able Textile determination is not precedential relative to plaintiff's pre-cut to size and hemmed pieces of fabric from the PRC imported into Honduras which already possessed the essential physical characteristics of the shop towels covered by the Order. ITA also reasonably interpreted the language "completed or assembled" in the statute and regulation in holding that the pre-cut and hemmed pieces...