CAFC Affirms Rigid 'Mixed Media' Test for AD/CVD Scope Inquiries, Over Judge's Dissent
The U.S. Court of Appeals for the Federal Circuit granted the Commerce Department a wide berth to apply antidumping and countervailing duties to goods packaged alongside nonsubject merchandise, in a Nov. 30 decision that provoked a dissent from the appeals court’s only judge with a background in trade.
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Upholding a 2019 decision from the Court of International Trade, the Federal Circuit said Commerce does not have to conduct a “(k)(2)” product-specific determination on whether “mixed media” items are subject to AD/CV duties. Instead, mixed media items are covered if “(k)(1)” factors such as the scope and materials from the original AD/CVD investigation do not specifically exclude mixed media, the appeals court said.
Circuit Judge Jimmie Reyna dissented from the opinion, penned by Circuit Judge Raymond Chen and joined by Circuit Judge Kathleen O’Malley, calling it “erroneous and unfortunate.”
“The error lies in a clear misapprehension of this court’s precedent,” Reyna said. “And, unfortunately, this precedential opinion casts further confusion on an area of trade law that we in past decisions have bemoaned to lack clarity and predictability. But instead of putting the proverbial cart back on a straight path, we have driven it further into the bog.”
At issue in the case is a 2017 Commerce scope ruling that Star Pipe’s “joint restraint kits,” used to connect water and wastewater pipes, are subject to AD duties on steel threaded rod from China (see 1708220038). The kits include steel threaded rods as components, alongside castings, bolts, bolt nuts and washers that are not covered under the steel threaded rod order.
Commerce, and later CIT, followed a two-part test laid out in a 2013 Federal Circuit decision involving an importer called Mid Continent Nail Corp. (see 13071820). First, they determined whether the steel threaded rod components of Star Pipe’s kits fall “within the literal scope of the order.” They found that they did. Then, they looked to whether there is an exemption under the AD duty order for subject goods when included in mixed media items. They found none in the scope and other related documentation.
On appeal, the Federal Circuit affirmed both the approach and the result. “Here, it is undisputed that Star Pipe’s STR components are in fact within the literal terms of the antidumping order,” it said. “Moreover, the antidumping order and its history do not provide any exception for mixed media. That conclusion is itself sufficient to end the scope inquiry, in the absence of any pre-established, clear guidance to the contrary,” it said.
Star Pipe argued that the AD duty order on steel threaded rod does not specifically address mixed media, so the scope and related materials can’t form the basis for a determination either way. Instead, additional “(k)(2)” factors related to the joint restraint kits themselves, such as physical characteristics, consumer expectations and patterns of trade, should be examined to determine whether steel threaded rod duties should cover the joint restraint kits.
CAFC disagreed. “Where, as here, ‘neither the text of the order nor its history indicates that subject merchandise should be treated differently on the basis of its inclusion within a mixed media item,’ such an exception must be clear and ascertainable from Commerce’s prior published guidance,” CAFC said. “To permit otherwise would authorize the type of ad hoc determinations that fail to ‘allow importers to predict how Commerce would treat their mixed media products.’”
In his dissent, Reyna took issue with that failure to make a product-specific determination in the absence of clear guidance in the scope. “I disagree with the majority’s conclusion that Commerce could properly find Star Pipe’s joint restraint kits to be subject to the steel threaded rods anti-dumping duty order without considering the characteristics of the kit as a whole,” he said.
Generally, when the scope and history of an AD duty order do not resolve a scope inquiry, Commerce is required to examine the additional “(k)(2)” factors. “Our decision in Mid Continent Nail did not absolve Commerce of that obligation” when rendering a verdict on mixed media items, Reyna said.
Under the reasoning adopted in the main decision, “the importer of an IKEA-type unassembled bookshelf with two steel threaded rod components has no basis for avoiding Commerce’s duty order, even though the importer of an assembled shelf with the same components may very well escape the same order,” Reyna said. Indeed, “the unassembled shelf is legally indistinguishable from a package of assorted rods and nails that contains 100 STRs and five nails. All mixed media imports are treated as aggregations of ‘products’ for which Commerce must assess individual duties, regardless of how peripheral a given component is to the kit as a whole,” he said.
“That was not Commerce’s assumption when it issued the anti-dumping duty order at issue here in 2008,” Reyna said. “Nor was it the expectation of importers or domestic manufacturers.”