Court Opinion

ID: 2645944
Source: CourtListenerOpinion
Date Created: 2013-12-14 01:01:29.12254+00
Date Added: 2024-06-11T11:58:24.258889
License: Public Domain

United States Court of Appeals
      for the Federal Circuit
                ______________________

             AMS ASSOCIATES, INC.
      (doing business as Shapiro Packaging),
                 Plaintiff-Appellee,

                           v.

                  UNITED STATES,
                     Defendant,

                         AND

   LAMINATED WOVEN SACKS COMMITTEE,
 COATING EXCELLENCE INTERNATIONAL, LLC,
    AND POLYTEX FIBERS CORPORATION,
            Defendants-Appellants.
            ______________________

                      2013-1208
                ______________________

   Appeal from the United States Court of International
Trade in No. 11-CV-0148, Senior Judge R. Kenton Mus-
grave.
                ______________________

              Decided: December 13, 2013
                ______________________

   RONALD M. WISLA, Kutak Rock LLP, of Washington,
DC, argued for plaintiff-appellee. With him on the brief
was LIZBETH R. LEVINSON.
2                                 AMS ASSOCIATES, INC.   v. US

    JEFFERY B. DENNING, King & Spalding, LLP, Wash-
ington, DC, argued for defendants-appellants. With him
on the brief was JOSEPH E. DORN.
                  ______________________

    Before LOURIE, DYK, and O’MALLEY, Circuit Judges.
LOURIE, Circuit Judge.
    Laminated Woven Sacks Committee et al. (“LWSC”)
appeal from the decision of the United States Court of
International Trade (the “trade court”) reversing the final
results of a second administrative review of an antidump-
ing duty order for Chinese laminated woven sacks by the
United States Department of Commerce (“Commerce”)
that retroactively suspended liquidation instructions
implementing a country of origin determination. See
AMS Assocs., Inc. v. United States, 881 F. Supp. 2d 1374
(Ct. Int’l Trade 2012). Because we agree with the trade
court that Commerce did not abide by its own regulations,
we affirm.
                       BACKGROUND
    Laminated woven sacks are sacks made of plastic
strips that are woven together and then laminated so that
graphics or letters can be printed on the resulting surface.
In August 2008, Commerce found that laminated woven
sacks exported from the People’s Republic of China were
being sold in the United States at less than fair market
value and issued an antidumping duty order pursuant to
19 U.S.C. § 1673. Laminated Woven Sacks from the
People’s Republic of China, 73 Fed. Reg. 45,941 (Dep’t of
Commerce Aug. 7, 2008). The scope of the order was
defined in part as “bags or sacks consisting of one or more
plies of fabric consisting of woven polypropylene strip
and/or polyethylene” that are “laminated to an exterior
ply of plastic film or to an exterior ply of paper that is
suitable for high quality print graphics.” Id. at 45,942.
AMS ASSOCIATES, INC.   v. US                                3

    In September 2009, Commerce initiated a series of
administrative reviews of that order for the periods Janu-
ary 31, 2008 through July 31, 2009 (first administrative
review) and August 1, 2009 through July 31, 2010 (second
administrative review) pursuant to 19 U.S.C. § 1675.
During those periods, AMS Associates, Inc., doing busi-
ness as Shapiro Packaging (“Shapiro”), imported laminat-
ed woven sacks into the United States that were
manufactured and exported by its Chinese affiliate Zibo
Aifudi Plastic Packaging Co., Ltd. (“Aifudi”). There were
two types of sacks: (1) those made from fabric sourced in
China, and thus undisputedly subject to the antidumping
duty order; and (2) those made from fabric that had been
imported into China from other countries.
    During the first administrative review, petitioners
LWSC were concerned that not all of Aifudi’s production
of laminated woven sacks was being included in the
information provided to Commerce and requested that
Commerce investigate how respondent Aifudi determined
whether or not its merchandise was subject to the anti-
dumping duty order. AMS Associates, Inc. v. United
States, No. 10-0101, 2012 WL 3065277, at *1 (Ct. Int’l
Trade July 27, 2012). Commerce thus investigated the
origin of the Aifudi sacks made with non-Chinese fabric
within the ongoing first administrative review, but de-
spite requests by Aifudi, Commerce chose not to initiate a
formal scope inquiry pursuant to 19 C.F.R. § 351.225. Id.
    Aifudi argued to Commerce that a ruling it obtained
from the United States Customs and Border Protection
Service (“Customs”) provided that the sacks produced
from non-Chinese fabric were deemed to be from the
country of origin of the fabric itself (viz., India, Pakistan,
and Vietnam, inter alia) and thus not subject to the
antidumping duty order. Id.; AMS Assocs., 881 F. Supp.
2d at 1376. Following that ruling, Aifudi declared a non-
Chinese origin for sacks made with non-Chinese fabric,
4                                 AMS ASSOCIATES, INC.   v. US

and those entries were consequently not subject to anti-
dumping deposits. Id.
    However, in a May 25, 2010 memorandum, Commerce
issued a preliminary country of origin determination
concluding that China was indeed the country of origin of
the Aifudi sacks made with non-Chinese fabric under a
substantial transformation analysis and that they were
therefore within the scope of the antidumping duty order.
Preliminary Decision Regarding the Country of Origin of
Laminated Woven Sacks Exported by [Aifudi] (Dep’t of
Commerce May 25, 2010) (“Preliminary Decision”); J.A.
10283–91. Based on its finding in that Preliminary
Decision, Commerce then issued a self-styled “clarifica-
tion” of its liquidation instructions to Customs. Message
No. 0204301 (Dep’t of Commerce July 23, 2010) (“Clarifi-
cation”); J.A. 10293–95. In the Clarification, Commerce
instructed Customs to “suspend liquidation of all [lami-
nated woven sacks] from [China], regardless of the origin
of the woven fabric, that is entered, or withdrawn from
warehouse, for consumption, on or after January 31,
2008.” Clarification at 2.
    Commerce issued the final results of the first admin-
istrative review in March 2011, which prompted a dispute
over the rate that Commerce applied to the amount of the
duty levied on Aifudi for that period. Acting for Aifudi,
Shapiro sued in the trade court, which sustained Com-
merce’s application of a country-wide rate to Aifudi, and
we affirmed on appeal. AMS Assocs., 2012 WL 3065277,
at *4, aff’d, 719 F.3d 1376, 1381 (Fed. Cir. 2013). Shapiro
argued at the trade court that the effect of the Clarifica-
tion had been to retroactively suspend liquidation of and
collect cash deposits on all entries of Aifudi sacks made
since January 31, 2008. However, by the time that the
Clarification instructions were transmitted to Customs,
all affected entries within the period of the first adminis-
trative review had already been liquidated in due course.
AMS Assocs., 2012 WL 3065277, at *1.
AMS ASSOCIATES, INC.   v. US                             5

    Aifudi subsequently withdrew from participation in
the second administrative review and Commerce thus
applied an adverse facts available (“AFA”) rate to Aifudi
in the preliminary results. Laminated Woven Sacks from
the People’s Republic of China: Preliminary Results of the
Second Administrative Review, 75 Fed. Reg. 81,218 (Dep’t
of Commerce Dec. 17, 2010); J.A. 10200–03. Shapiro
contested both the application of the retroactive suspen-
sion of liquidation and the assessment of antidumping
duties on sacks exported from China that had been manu-
factured from non-Chinese fabric and entered into the
United States during the period of the second administra-
tive review. J.A. 20001–16. Shapiro argued that Com-
merce’s determination to apply such duties to
merchandise entered during that period related directly to
its country of origin determination and issuance of sus-
pension of liquidation instructions during the first admin-
istrative review. Id. at 20009–10.
     In the final results of the second administrative re-
view, Commerce affirmed its decision to apply AFA to
Aifudi. Laminated Woven Sacks from the People’s Repub-
lic of China: Final Results of the Second Antidumping
Duty Administrative Review, 76 Fed. Reg. 21,333 (Dep’t of
Commerce Apr. 15, 2011); J.A. 10250–52. With respect to
whether entries of sacks from China produced from non-
Chinese fabric were covered by the antidumping duty
order, Commerce stated: “[w]e continue to follow the
decision made by the Department in the first administra-
tive review and find that the correct procedures were
followed when determining the country of origin . . . .”
Laminated Woven Sacks from the People’s Republic of
China: Issues and Decision Memorandum for the Final
Results of the Second Administrative Review at 2 (Dep’t of
Commerce Apr. 8, 2011); J.A. 10244–49.
    Shapiro then filed the instant action challenging the
final results of the second administrative review in the
trade court. Shapiro did not take issue with Commerce’s
6                                 AMS ASSOCIATES, INC.   v. US

application of the AFA rate, Commerce’s authority to
conduct a country of origin scope inquiry, or the factual
findings of Commerce’s country of origin decision.
Shapiro only challenged Commerce’s authority to issue
retroactive suspension of liquidation instructions that
brought merchandise that had previously entered not
subject to the antidumping duty order within the scope of
that order in violation of the procedures specifically set
forth in Commerce’s scope regulations.
    The trade court agreed with Shapiro and held that
Commerce violated its own regulations by instructing
Customs to retroactively suspend liquidation of entries of
the sacks made with non-Chinese fabric. AMS Assocs.,
881 F. Supp. 2d at 1382. The court found that it was clear
from the facts in the record that Commerce and LWSC
wanted to prevent Shapiro and Aifudi’s alleged circum-
vention of the antidumping duty order by declaring that
sacks made from non-Chinese fabric were of Chinese
origin, but that they had not followed the correct proce-
dures to do so. Id. The court therefore held that Com-
merce had exceeded its authority under 19 C.F.R. §
351.225(l) and remanded the case to Commerce for fur-
ther proceedings and with instructions to lift the liquida-
tion suspension. Id.
    LWSC timely appealed. We have jurisdiction pursu-
ant to 28 U.S.C. § 1295(a)(5).
                       DISCUSSION
    We review decisions of the trade court without defer-
ence, applying the same substantial evidence standard of
review that the trade court itself applies in reviewing
Commerce’s determinations. Mid Continent Nail Corp. v.
United States, 725 F.3d 1295, 1300 (Fed. Cir. 2013);
Global Commodity Grp. LLC v. United States, 709 F.3d
1134, 1138 (Fed. Cir. 2013); Atlantic Sugar, Ltd. v. United
States, 744 F.2d 1556, 1559 n.10 (Fed. Cir. 1984).
AMS ASSOCIATES, INC.   v. US                             7

    LWSC argues that Commerce’s Clarification did not
enlarge the scope of the antidumping duty order but
merely enforced that order against Shapiro, which LWSC
asserts was unlawfully attempting to avoid paying duties
by falsely declaring that Aifudi’s goods were not of Chi-
nese origin. LWSC contends that Commerce’s suspension
of liquidation in the initial investigation was proper
because all subject entries fell within the scope of Com-
merce’s original antidumping duty order. LWSC further
asserts that Commerce is entitled to deference in inter-
preting its own regulations and has inherent authority to
clarify its orders. Shapiro responds that Commerce
violated its own regulations because Commerce can only
instruct Customs to suspend liquidation prospectively in
certain investigations and proceedings to bring products
within the scope of an existing antidumping duty order,
and that Commerce’s actions in this case were retroactive.
Commerce has neither appealed the trade court’s decision
itself nor joined in LWSC’s appeal.
    As an initial matter, we note our general agreement
with LWSC that Commerce is entitled to deference in
interpreting its own regulations and has authority to
clarify its scope orders. See generally Am. Signature, Inc.
v. United States, 598 F.3d 816, 827 (Fed. Cir. 2010) (“In
general, [Commerce’s] construction of its own regulations
is of controlling weight unless it is plainly erroneous or
inconsistent with the regulation.”) (internal quotations
omitted); Novosteel SA v. United States, 284 F.3d 1261,
1269 (Fed. Cir. 2002) (“The ‘Commerce Department enjoys
substantial freedom to interpret and clarify its antidump-
ing orders. But while it may interpret those orders, it
may not change them.’”) (quoting Ericsson GE Mobile
Commc’ns, Inc. v. United States, 60 F.3d 778, 782 (Fed.
Cir. 1995)); accord Crawfish Processors Alliance v. United
States, 483 F.3d 1358, 1361 (Fed. Cir. 2007).
    However, an agency’s interpretation of its regulations
is neither entitled to deference nor given controlling
8                                 AMS ASSOCIATES, INC.   v. US

weight if it is “plainly erroneous or inconsistent with the
regulation” itself. Bowles v. Seminole Rock & Sand Co.,
325 U.S. 410, 414 (1945). Moreover, “[i]t is a familiar rule
of administrative law that an agency must abide by its
own regulations.” Fort Stewart Schools v. Fed. Labor
Relations Auth., 495 U.S. 641, 654 (1990) (citing Vitarelli
v. Seaton, 359 U.S. 535, 547 (1959); Service v. Dulles, 354
U.S. 363, 388 (1957)). We have specifically applied that
principle to Commerce. See Torrington Co. v. United
States, 82 F.3d 1039, 1049 (Fed. Cir. 1996) (“Commerce,
like other agencies, must follow its own regulations.”).
     This is a case about what procedures Commerce must
follow when the scope of an existing antidumping duty
order is unclear and Commerce seeks to further clarify
that scope. Commerce has the express authority to con-
duct a scope inquiry and to clarify the scope of an unclear
order during an administrative review pursuant to 19
C.F.R. § 351.225(f)(6). However, as the trade court cor-
rectly noted, the appeal before us questions whether
Commerce failed to abide by the restrictions imposed on
that authority to suspend liquidation to only those entries
made on or after the date of initiation of a formal scope
inquiry. We conclude that it did. We agree with Shapiro
and the trade court that Commerce exceeded its authority
under 19 C.F.R. § 351.225(l)(2) by ordering the suspension
of liquidation retroactive to the beginning of the period of
review with respect to an antidumping duty order that
did not clearly cover laminated woven sacks manufac-
tured in China from imported fabrics.
    In order to prevent circumvention, 19 U.S.C.
§§ 1677j(a)–(d) authorize Commerce to expand the scope
of existing antidumping and countervailing duty orders to
reach products that are not covered by the existing scope
and to suspend liquidation through formal anti-
circumvention inquiries. When concerns about scope
arise after Commerce issues an antidumping or counter-
vailing duty order, those concerns are to be resolved
AMS ASSOCIATES, INC.   v. US                               9

through the procedures set forth in Commerce’s own
regulations. See 19 C.F.R. § 351.225(a). Specifically,
Commerce may conduct formal circumvention inquiries
pursuant to 19 C.F.R. §§ 351.225(g)–(j) and may conduct
formal scope inquiries pursuant to 19 C.F.R. § 351.225(k),
which may include country of origin determinations.
    However, during the course of such anti-
circumvention or scope inquiries, if Commerce determines
that a product that is not subject to the existing order
should be included within the scope of that order, then the
scope regulations specifically authorizing Commerce to
instruct Customs to suspend liquidation and to require
cash deposits of estimated duties for such merchandise
have limits. 19 C.F.R. § 351.225(l)(2). Commerce’s own
provision states:
   If the Secretary issues a preliminary scope ruling
   under paragraph (f)(3) of this section to the effect
   that the product in question is included within the
   scope of the order, any suspension of liquidation
   described in paragraph (l)(1) of this section will
   continue. If liquidation has not been suspended,
   the Secretary will instruct the Customs Service to
   suspend liquidation and to require a cash deposit
   of estimated duties, at the applicable rate, for each
   unliquidated entry of the product entered, or
   withdrawn from warehouse, for consumption on or
   after the date of initiation of the scope inquiry.
Id. (emphasis added).
    Accordingly, when Commerce “clarifies” the scope of
an existing antidumping duty order that has an unclear
scope, the suspension of liquidation and imposition of
antidumping cash deposits may not be retroactive but can
only take effect “on or after the date of the initiation of
the scope inquiry.” Id. The unambiguous plain language
of the regulation only authorizes Commerce to act on a
prospective basis, and such express prospective authoriza-
10                                AMS ASSOCIATES, INC.   v. US

tion reasonably is interpreted to preclude retroactive
authorization; expressio unius est exclusio alterius. See
also 19 U.S.C. § 1673b(d)(2) (using the same “on or after”
language).
     However, Commerce does not have to initiate a formal
scope proceeding under 19 C.F.R. § 351.225 when it
wishes to issue a ruling that does not clarify the scope of
an unambiguous original order. Commerce must only
follow the procedures outlined in § 351.225 when it wishes
to clarify an order that is unclear. To hold otherwise
would permit importers to potentially avoid paying anti-
dumping duties on past imports by asserting unmeritori-
ous claims that their products fall outside the scope of the
original order. Importers cannot circumvent antidumping
orders by contending that their products are outside the
scope of existing orders when such orders are clear as to
their scope. Our precedent evinces this understanding.
We have not required Commerce to initiate a formal scope
inquiry when the meaning and scope of an existing anti-
dumping order is clear. Huaiyin Foreign Trade Corp. (30)
v. United States, 322 F.3d 1369, 1378–79 (Fed. Cir. 2003)
(recognizing that although Commerce “cannot interpret
an antidumping order so as to change the scope of that
order, nor can Commerce interpret an order in a manner
contrary to its terms,” Commerce can issue clarifying
instructions during an administrative review (internal
citations omitted)).
    Commerce erred in failing to conduct a formal scope
inquiry in this case because the scope of the original
antidumping order was unclear. Both Commerce’s Pre-
liminary Decision as well as the Customs ruling confirm
this lack of clarity.
    Here, if Commerce and LWSC wanted to prevent
Shapiro and Aifudi’s alleged circumvention of the anti-
dumping duty order, then they could have utilized and
abided by the statutory and regulatory provisions that
AMS ASSOCIATES, INC.   v. US                           11

authorize Commerce to investigate such allegations. But
Commerce did not engage in a scope inquiry pursuant to
its own procedures and formalities detailed in 19 C.F.R.
§ 351.225. Following the Preliminary Decision issued on
May 25, 2010, in which Commerce concluded that sacks
made with non-Chinese fabric were within the scope of
the antidumping duty order under a substantial trans-
formation analysis, Commerce issued its July 23, 2010
Clarification that instructed Customs to suspend liquida-
tion of all sacks retroactive to January 31, 2008. Those
instructions were clearly inconsistent with the limited
prospective authority provided by § 351.225(l)(2).
                          CONCLUSION
    For the foregoing reasons, we conclude that the trade
court did not err in holding that Commerce exceeded its
authority under 19 C.F.R. § 351.225(l) and remanding the
case to Commerce for further proceedings with instruc-
tions to lift the liquidation suspension. Accordingly, the
judgment of the trade court is affirmed.
                         AFFIRMED