CIT Sends Back Commerce's Unexplained Change in Treatment of 'Unfinished' Pipe Fittings in Scope Referral

The referral came as part of an Enforce and Protect Act investigation, which was fully resolved in favor of the importer after the trade court upheld CBP's negative evasion finding in a separate case. Nonetheless, Choe-Groves said the issue isn't moot "because harm is still possible if the covered merchandise referral determination is relied upon by Commerce in future proceedings."

The judge relied on the government's representation that it would rely on the scope referral ruling in future scope rulings as a (k)(1) source. As a result, "a litigant’s rights could be affected by the covered merchandise scope referral ruling," the decision said.

The substance of the challenge centered on whether the order covered "unfinished" pipe fittings. In the referral, Commerce said that the rough fittings under review that were bought in China weren't unfinished products within the scope of the order and only became equivalent to in-scope unfinished merchandise after further processing in Vietnam.

Choe-Groves noted that the "heart of the case" involves distinctions between "rough," "unfinished," and "finished" fittings and the definition of butt-weld pipe fittings. The judge first held that the scope language is "ambiguous" regarding whether unfinished fittings include further processed rough fittings and regarding the definition of unfinished fittings. The order doesn't define "unfinished" or "butt-weld pipe fittings," the court said, teeing up a discussion of the (k)(1) sources.

The judge went through the petition, the International Trade Commission report, a memo from Commerce responding to the original petitioners' request to clarify the scope language, declarations from domestic industry executives and a prior Thailand circumvention determination.

Most of the sources discussed the three-step production process of subject pipe fittings, which the petition established are: (1) converting seamless pipe into the rough shape of an elbow, tee or reducer through a cold- or hot-forming process; (2) reforming or sizing the rough fitting to match the pipe it's meant to be welded to; and (3) undergoing finishing processes.

Of the sources, Commerce's reliance on the Thai circumvention ruling drew the most ire from Choe-Groves. The judge noted that the agency inconsistently applied its treatment of unfinished pipe fittings between 1994 and 2023, the year of the circumvention inquiry. In 1994, Commerce described steel pipe products that were cut to length but not heat-treated or formed as unfinished butt-weld pipe fittings -- a definition in line with the domestic industry's understanding.

However, in 2023, the agency said those same products should be considered rough fittings and not unfinished butt-weld pipe fittings. Choe-Groves said that the change "shows Commerce’s contradictory practices and magnifies the fact that Commerce treated the same situation differently, without sufficient explanation." The judge said that it's "contradictory" for the agency to have previously referred to a product that went through the first production stage but not the second as an "unfinished butt-weld pipe fitting" 30 years ago "then claim that such product" no longer has this designation but is a "rough fitting."

"This contradiction without justification is puzzling and disingenuous," the court held. After more than 30 years, the agency "suddenly and surprisingly changed its decades-long past practice without recognizing a switch in this case," and failed to provide a sufficient explanation, the decision said. While Commerce "is entitled to change its views," it acted "arbitrarily" here, the court said.

Regarding the agency's consideration of the petition itself, Choe-Groves held that Commerce must address the petition's lack of reference to the term "rough fitting" and also analyze whether the petition answers whether a carbon steel pipe that has been cut to length in the rough shape of an elbow, tee or reducer is identifiable as a butt-weld pipe fitting.

Addressing the ITC report, Choe-Groves held that the document doesn't support the agency's ultimate finding that only after the second production stage is a carbon steel product identifiable as a butt-weld pipe fitting, given that the report only uses the term "rough" once. This reference also only says that "rough-formed carbon steel pipes are unfinished fittings that are later processed.”

On the memo from Commerce responding to the original petitioners, the document notes that the preliminary scope language excluded unfinished fittings that were not processed, though this language was removed. Choe-Groves said the removal of this exclusion doesn't help Commerce or the U.S. companies challenging the referral decision, since there's no documentation of why the agency made this move at the time it was made.

Lastly, the court took issue with Commerce's failure to properly consider declarations from domestic industry executives that say no one in the industry has ever been confused on whether rough fittings are butt-weld pipe fittings in unfinished form. After recognizing the declarations as proper secondary (k)(1) sources, Choe-Groves said the "declarations from industry executives establish a recognized practice and understanding in the industry for over 30 years that rough fittings are considered butt-weld pipe fittings in unfinished form subject to the Order.”

The judge said she doesn't agree with Commerce that the declarations "should be ignored or minimized, particularly when weighing over 30 years of understanding and industry practice against a new policy that Commerce only developed in this covered merchandise referral request for the first time in 2023.”

(Tube Forgings of America v. United States, Slip Op. 25-1, CIT Consol. # 23-00231, dated 01/02/25; Judge: Jennifer Choe-Groves; Attorneys: Lawrence Bogard of Neville Peterson for plaintiffs Tube Forgings of American and Mills Iron Works; L. Misha Preheim for defendant U.S. government; Jeremy Dutra of Squire Patton for defendant-intervenors Nora Industrial Co. and International Piping & Procurement Group)