Court Opinion

ID: 2713742
Source: CourtListenerOpinion
Date Created: 2014-08-05 20:59:34.333756+00
Date Added: 2024-06-11T10:01:35.402301
License: Public Domain

Slip Op. 13-128

                 UNITED STATES COURT OF INTERNATIONAL TRADE

                                               :
ALUMINUM EXTRUSIONS FAIR                       :
TRADE COMMITTEE,                               :
                                               :
              Plaintiff,                       :
                                               :   Before: Gregory W. Carman, Judge
                      v.                       :
                                               :   Court No. 12-00374
                                               :
UNITED STATES,                                 :
                                               :
              Defendant.                       :
                                               :

                                      OPINION & ORDER

[Commerce’s final scope ruling is sustained]

                                                                                October 9, 2013

      Alan H. Price, Derick G. Holt, Laura El-Sabaawi, Lori E. Scheetz, Robert E.
DeFrancesco, III, and Tessa V. Capeloto, Wiley Rein, LLP, of Washington DC, for Plaintiff.

        Tara K. Hogan, Commercial Litigation Branch, Civil Division, U.S. Department of
Justice, of Washington, DC, for Defendant. With her on the brief were Stuart F. Delery, Acting
Assistant Attorney General, Jeanne E. Davidson, Director, and Reginald T. Blades, Jr., Assistant
Director. Of counsel on the brief was Joanna V. Theiss, Office of Import Administration, U.S.
Department of Commerce, of Washington, DC.

       Carman, Judge: This matter comes before the Court following the U.S. Department of

Commerce’s (“Commerce” or “Defendant”) determination in Antidumping (AD) and

Countervailing Duty (CVD) Orders: Aluminum Extrusions from the People’s Republic of China

(PRC): Final Scope Ruling on Side Mount Valve Controls (Oct. 26, 2012) (“Final Scope
Court No. 12-00374                                                                         Page 2

Ruling”), A.R. 8. 1 Plaintiff Aluminum Extrusions Fair Trade Committee (“AEFTC” or

“Plaintiff”) challenges Commerce’s determination that importer Innovative Controls, Inc.’s

(“Innovative”) merchandise “side mount valve controls” (“SMVC”) meets the exclusion for

“finished goods kits” and accordingly is not subject to the antidumping and countervailing duty

orders covering Aluminum Extrusions from the People’s Republic of China: Antidumping Duty

Order, 76 Fed. Reg. 30,650 (May 26, 2011) and Aluminum Extrusions from the People’s

Republic of China: Antidumping Duty Order, 76 Fed. Reg. 30,652 (May 26, 2011) (collectively,

“Orders”). Without reaching the merits of Commerce’s scope determination, the Court denies

Plaintiff’s motion on the agency record because the doctrine of exhaustion of administrative

remedies applies in this case.

                                         BACKGROUND

       The Orders at issue cover aluminum extrusions from China. See supra Orders. On May

11, 2012, Innovative submitted a scope ruling request advocating that its product SMVC kits fell

under a scope exclusion for “finished goods kits” in the Orders. See Letter from Innovative

Controls Inc. to Sec’y of Commerce, Re: Scope Ruling Request, Aluminum Extrusions from

People’s Republic of China (A-570-967, C-570-968) (May 11, 2012) (“Ruling Request”), A.R. 1.

       Plaintiff asserts that Innovative’s SMVC do not fall under the exclusion of “finished

goods kits” because they are subassemblies “that will be incorporated into a larger, finished

downstream product.” Pl.’s Mem. in Supp. of Pl.’s R. 56.2 Mot. for J. on the Agency Record

1
  A.R. is the Administrative Record, which is comprised of both the antidumping duty (“AD”)
case number (A-570-967) and countervailing duty (“CVD”) case number (C-570-968). The AD
and CVD cases contain identical documents. See Def.’s Opp’n at 2 n.1. For ease of reference,
the Court will refer to the documents filed under the CVD case number.
Court No. 12-00374                                                                           Page 3

(“Pl.’s Mot.”) at 10. Plaintiff urges that SMVC are “merely parts for final finished products that

are assembled after importation—firetrucks.” Id. at 11 (internal quotations omitted). Citing to

the Ruling Request as support, Plaintiff points out Innovative imports its SMVC under

Harmonized Tariff System of the United States (“HTSUS”) subheading 8708.29 for “other parts

and accessories (of the bodies) of the motor vehicles of heading 8701 to 8705.” Id. (internal

quotations and citations omitted) (emphasis in original). Plaintiff argues “Commerce unlawfully

broadened the definition of the exclusion, improperly excluding” SMVC. Id. at 9.

       Commerce issued an initiation of scope inquiry and a preliminary scope ruling pursuant

to 19 C.F.R. §351.225(f). See Mem. to Christian Marsh, Deputy Assistant Sec’y for Antidumping

and Countervailing Duty Operations, Re: Initiation and Preliminary Scope Ruling on Side

Mount Valve Controls (Sept. 24, 2012) (“Preliminary Scope Ruling”), A.R. 7. Commerce

preliminarily determined that SMVC kits were excluded from the scope of the Orders as finished

goods kits, “revising the manner in which it determines whether a given product is a ‘finished

goods’ or ‘finished goods kit.’” Preliminary Scope Ruling at 6-7. In prior scope rulings,

Commerce concluded that “merchandise could not be considered a ‘finished goods’ or ‘finished

goods kit’ if it was designed to work with other parts to form a larger structure or system.” Id. at

6. However, in the instant case, Commerce “identified a concern with this analysis, namely that

it may lead to unreasonable results. An interpretation of ‘finished goods kit’ which requires all

parts to assemble the ultimate downstream product may lead to absurd results, particularly where

the ultimate downstream product is, for example, a fire truck.” Id. at 7. Given the change in its

“finished goods” and “finished goods kit” analysis in the Preliminary Scope Ruling, Commerce

“invite[d] interested parties to submit comments.” Id. at 8. Neither Innovative nor Plaintiff
Court No. 12-00374                                                                             Page 4

submitted any comments. See Final Scope Ruling at 2. Accordingly, Commerce issued its Final

Scope Ruling without any change from the Preliminary Scope Ruling. Id.

       As an affirmative defense, Commerce raises the doctrine of exhaustion of administrative

remedies as a bar to Plaintiff’s claim. Def.’s Opp’n to Pl.’s Mot. for J. upon the Agency Record

(“Def.’s Opp’n”) at 5-10. Commerce alleges that Plaintiff “failed to present any arguments to

Commerce concerning its new subassemblies analysis” announced in the Preliminary Scope

Ruling and that Plaintiff’s failure “deprived Commerce of the opportunity to address [Plaintiff’s]

arguments” in the Final Scope Ruling. Id. at 5. Plaintiff responds that “invoking the exhaustion

requirement in this case would be inappropriate.” Pl.’s Reply to Def.’s Opp’n to Pl.’s Mot. for J.

upon the Agency Record (“Pl.’s Reply”) at 1. In support of its position, Plaintiff cited to the

Court of the Appeals for the Federal Circuit’s (“CAFC”) recently issued decision in Itochu

Building Products v. United States, __ F.3d __, 2013 WL 4405863 (Fed. Cir. 2013) (“Itochu”).

In Itochu, where plaintiff similarly did not file comments after the preliminary determination and

defendant raised the exhaustion doctrine as an affirmative defense, the CAFC reversed the lower

court’s decision that the exhaustion doctrine applied by invoking the futility exception. 2013

WL 4405863. The CAFC issued Itochu on August 19, 2013, after Defendant’s opposition brief

was filed but before Plaintiff’s reply brief was filed.

       To give all parties the opportunity to be heard on the impact of the Itochu decision, the

Court invited parties to provide supplemental briefing on whether that decision applies to the

instant case. See Letter from the Court to Counsel, Re: Application of Itochu (Sept. 9, 2013),

ECF No. 32. Plaintiff argues that Itochu “is directly applicable here.” Pl.’s Resp. to the Ct.’s

Sept. 9, 2013 Letter to the Parties (“Pl.’s Suppl. Br.”) at 1. Plaintiff urges that “invoking the

exhaustion requirement in this case would be inappropriate” because “the facts of the instant case
Court No. 12-00374                                                                            Page 5

are analogous to those of Itochu.” Id. at 1-2. Plaintiff claims that it “put its full argument on the

record” prior to the issuance of the preliminary results so “any additional material or argument”

would not “have been significant to Commerce’s consideration of the issue in the final results.”

Id. at 2-3. Plaintiff avers that in the Preliminary Scope Ruling “Commerce acknowledged and

definitively rejected Plaintiff’s argument,” id. at 3, and argues that “no purpose would be served

by requiring Plaintiff to have resubmitted its comments in the scope inquiry after Commerce

announced its preliminary results,” id. at 2.

       Defendant asserts that the CAFC’s “decision in Itochu does not affect this case because

the ‘futility’ exception does not apply, and there was no potential for the plaintiff to suffer harm

by submitting comments.” Def.’s Resp. to the Ct.’s Order (“Def.’s Suppl. Br.”) at 3. Defendant

points out three key differences between Itochu and the instant case: (1) this case involves a new

interpretation of scope language while Itochu involved a past practice that Commerce was

defending in litigation; (2) this case involves a policy decision while Itochu involved a perceived

statutory mandate; and (3) this case does not involve any potential prejudice by submitting

comments while Itochu had the threatened delay of 225 days, during which time Itochu would

have had to continue depositing duties on the merchandise, if comments were submitted. Id. at

4-5.

                                      STANDARD OF REVIEW

       The Court has jurisdiction pursuant to 28 U.S.C. § 1581(c) (2006). 2 For scope

determinations, the Court sustains determinations, findings or conclusions of Commerce unless

2
  All references to the United States Code refer to the 2006 edition hereinafter, unless otherwise
stated.
Court No. 12-00374                                                                             Page 6

they are “unsupported by substantial evidence on the record, or otherwise not in accordance with

law.” 19 U.S.C. § 1516a(b)(1)(B)(i). Substantial evidence “is more than a mere scintilla. It

means such relevant evidence as a reasonable mind might accept as adequate to support a

conclusion.” Consol. Edison Co. v. NLRB, 305 U.S. 197, 229 (1938).

                                                DISCUSSION

       Defendant raises the affirmative defense that Plaintiff’s claim is barred by the doctrine of

exhaustion of administrative remedies. The doctrine of exhaustion is not only mandated by

statute but also well-settled law. “[T]he Court of International Trade shall, where appropriate,

require the exhaustion of administrative remedies.” 28 U.S.C. § 2637(d). “Simple fairness to

those who are engaged in the tasks of administration, and to litigants, requires as a general rule

that courts should not topple over administrative decisions unless the administrative body not

only has erred but has erred against objection made at the time appropriate under its practice.”

Mittal Steel Point Lisas Ltd. v. United States, 548 F.3d 1375, 1383-84 (Fed. Cir. 2008) (emphasis

in original) (quoting United States v. L.A. Tucker Truck Lines, Inc., 344 U.S. 33, 37 (1952)). The

statutory exhaustion requirement “indicates a congressional intent that, absent a strong contrary

reason, the court should insist that parties exhaust their remedies before the pertinent

administrative agencies.” Corus Staal BV v. United States, 502 F.3d 1370, 1379 (Fed. Cir.

2007). Under the doctrine of exhaustion, “no one is entitled to judicial relief for a supposed or

threatened injury until the prescribed administrative remedy has been exhausted.” Sandvik Steel

Co. v. United States, 164 F.3d 596, 599 (Fed. Cir. 1998) (internal quotations and citations

omitted). The purpose of this doctrine is to permit the agency to consider an issue prior to

judicial review, as the CAFC has explained:
Court No. 12-00374                                                                            Page 7

       Requiring exhaustion can protect administrative agency authority and. . .
       serve judicial efficiency by promoting development of an agency record that
       is adequate for later court review and by giving an agency a full opportunity
       to correct errors and thereby narrow or even eliminate disputes needing
       judicial resolution.

Itochu, 2013 WL 4405863 at *4 (internal citations omitted).

       As with every general rule, there are exceptions. At issue in this case is an exception for

futility, where a party must demonstrate that exhaustion would require it “to go through

obviously useless motions in order to preserve [its] rights.” Corus Staal, 502 F.3d at 1379

(internal quotation omitted). The futility exception, however, “is a narrow one.” Id. Faced with

rare circumstances, the CAFC invoked the futility exception in the Itochu case because

“Commerce’s position, which Commerce was defending in court at the time, was that it had no

discretion in the matter because it was constrained by statute to reject Itochu’s position.” Itochu,

2013 WL 4405863 at *7. The Itochu court recognized, however, that these were “likely rare”

circumstances in which “the demanding abuse-of-discretion standard for reversal of an

exhaustion ruling under section 2637(d)” was satisfied. Id.

       Under this purview, the Court reviews the circumstances of the instant case. First, this

case involves a scope ruling challenge while Itochu involved a changed circumstance challenge.

Distinguishable from Itochu, where Commerce had no power of discretion over the effect of a

statutory mandate, here, Commerce was clearly exercising its power of discretion on a policy

question. Commerce explains that “[i]ndeed, because this was the first time Commerce

announced its preliminary revision to its subassembly test, there can be no allegation that

Commerce would have been unreceptive to comments or arguments submitted by” Plaintiff.

Def.’s Opp’n at 10. The Court agrees. In a scope proceeding, when Commerce announces a

new interpretation or policy in its preliminary determination and invites interested parties to
Court No. 12-00374                                                                             Page 8

comment, the appropriate time for parties to object to Commerce’s new analysis is after

publication of the preliminary determination and before issuance of the final determination.

Further, the possibility of prejudice and risk of harm—the potential to pay 225 more days of duty

deposit if Commerce decided to delay the issuance of its final determination to review parties’

comments—cited in Itochu is not present here.

          Therefore, the instant case does not present the same rare circumstances found in Itochu.

Given that a new discretionary policy regarding an interpretation of a scope exclusion was

announced in the preliminary determination, that Commerce requested comments from all

interested parties regarding its new interpretation, that the parties chose not to file comments, and

that there was no possibility of prejudice caused by filing comments, the Court holds that the

futility exception of the exhaustion doctrine does not apply under these circumstances. Plaintiff

is therefore barred from raising issues before the Court that it neglected to raise appropriately

during the administrative proceeding.

                                                 CONCLUSION

          As a result of the considerations detailed above, the Court holds that the doctrine of

exhaustion of administrative applies to this case, barring Plaintiff’s claims. Consequently, it is

hereby

          ORDERED that Defendant’s Final Scope Ruling is sustained; and it is further

          ORDERED that Plaintiff’s motion for judgment on the agency record is denied; and it is

further
Court No. 12-00374                                                                   Page 9

      ORDERED that Plaintiff’s motion for oral argument (ECF No. 33) is denied.

      Judgment to enter accordingly.

                                                           /s/ Gregory W. Carman
                                                          Gregory W. Carman, Judge

      Dated: October 9, 2013
             New York, New York