Court Opinion

ID: 4547986
Source: CourtListenerOpinion
Date Created: 2020-07-13 22:01:50.775453+00
Date Added: 2024-06-11T09:24:59.150080
License: Public Domain

Slip Op. 20-

               UNITED STATES COURT OF INTERNATIONAL TRADE

  MAGNUM MAGNETICS CORPORATION,

                        Plaintiff,

                 v.
                                                       Before: Jane A. Restani, Judge
  UNITED STATES,

                        Defendant,                     Court No. 19-00126

                 and

  MAGNETIC BUILDING SOLUTIONS,

                        Defendant-Intervenor.

                                           OPINION

[Commerce’s Scope Ruling finding the subject merchandise outside of the scope of the relevant
antidumping and countervailing duty orders is sustained]

                                                                            Dated: July 13, 2020

      Ritchie T. Thomas, Jeremy W. Dutra, and Christopher D. Clark, Squire Patton Boggs
(US) LLP, of Washington, D.C., for Plaintiff Magnum Magnetics Corporation.

       Jason M. Kenner, Trial Attorney, and Claudia Burke, Assistant Director, U.S.
Department of Justice, Civil Litigation Division, Commercial Litigation Branch, of New York,
N.Y., for Defendant United States of America. Of counsel on the brief was Brandon J. Custard,
Attorney, U.S. Department of Commerce, Office of Chief Counsel for Trade Enforcement &
Compliance, of Washington, D.C.

        Melissa M. Brewer and Laurence J. Lasoff, Kelley Drye & Warren, LLP, of Washington,
D.C., for Defendant-Intervenor Magnetic Building Solutions.

       Restani, Judge: This action challenges a final scope ruling of the United States Department

of Commerce, International Trade Administration (“Commerce”) regarding certain flexible

magnets from the People’s Republic of China (“PRC”), imported by Defendant-Intervenor
Court No. 19-00126                                                                          Page 2

Magnetic Building Solutions (“MBS”). Commerce determined that MBS’s magnets are excluded

from the scope of the antidumping and countervailing duty orders because they are “printed

flexible magnets” of a kind that the orders’ plain text expressly excludes. See Scope Ruling on the

Antidumping and Countervailing Duty Orders on Raw Flexible Magnets from the People’s

Republic of China: Request by Magnetic Building Solutions, A-570-922, C-570-923 (Dep’t

Commerce June 19, 2019) (“Scope Ruling”).

       Plaintiff, Magnum Magnetics Corporation (“Magnum”) moves for judgment on the agency

record and asks the court to hold that Commerce’s determination is contrary to the text of the

antidumping and countervailing duty orders, and therefore, is unsupported by substantial evidence

or otherwise not in accordance with law. See Mem. of P. & A. in Supp. of Pl. Magnum Magnetic

Corp.’s Rule 56.2 Mot. For J. on the Agency R., ECF No. 22 at 12 (Dec. 2, 2019) (“Magnum Br.”).

Defendant, the United States of America (the “government”), responds that Commerce’s scope

ruling is supported by substantial evidence and otherwise in accordance with law, and asks the

court to sustain Commerce’s determination. See Defendant’s Response to Pl. Rule 56.2 Mot. For

J. on the Agency R., ECF No. 25 at 7 (Mar. 3, 2020) (“Gov. Br.”). For the following reasons, the

court affirms Commerce’s scope ruling.

                                        BACKGROUND

       In 2008, Commerce published antidumping and countervailing duty orders on certain

flexible magnets from the PRC. See Antidumping Duty Order: Raw Flexible Magnets from the

People’s Republic of China, 73 Fed. Reg. 53,847 (Dep’t Commerce Sept. 17, 2008) (“ADD

Order”); Raw Flexible Magnets from the People’s Republic of China: Countervailing Duty Order,

73 Fed. Reg. 53,849 (Dep’t Commerce Sept. 17, 2008) (“CVD Order”) (collectively, the

“Orders”). The Orders cover merchandise under subheadings 8505.19.10 and 8505.19.20 of the
Court No. 19-00126                                                                             Page 3

Harmonized Tariff Schedule of the United States (“HTSUS”), under which the MBS magnets are

classified. 1 Specifically, the Orders include the following merchandise:

       [C]ertain flexible magnets regardless of shape, color, or packaging. Subject
       flexible magnets are bonded magnets composed (not necessarily exclusively) of (i)
       any one or combination of various flexible binders (such as polymers or co-
       polymers, or rubber) and (ii) a magnetic element, which may consist of a ferrite
       permanent magnet material (commonly, strontium or barium ferrite, or a
       combination of the two), a metal alloy (such as NdFeB or Alnico), any combination
       of the foregoing with each other, or any other material capable of being
       permanently magnetized.

       Subject merchandise may be in either magnetized or unmagnetized (including
       demagnetized) condition, and may or may not be fully or partially laminated or
       fully or partially bonded with paper, plastic, or other material, of any composition
       and/or color. Subject flexible magnets may be uncoated or may be coated with an
       adhesive or any other coating or combination of coatings.

ADD Order, 73 Fed. Reg. at 53,847; CVD Order, 73 Fed. Reg. at 53,850. But, the Orders expressly

exclude:

       [P]rinted flexible magnets, defined as flexible magnets (including individual
       magnets) that are laminated or bonded with paper, plastic, or other material if such
       paper, plastic, or other material bears printed text and/or images, including but not
       limited to business cards, calendars, poetry, sports event schedules, business
       promotions, decorative motifs, and the like.

ADD Order, 73 Fed. Reg. at 53,487; CVD Order, 73 Fed. Reg. at 53,850. Nevertheless, the

foregoing “exclusion does not apply” to those “printed flexible magnets” whose printing consists

“only of the following:”

       [A] trade mark or trade name; country of origin; border, stripes, or lines; any
       printing that is removed in the course of cutting and/or printing magnets for retail
       sale or other disposition from the flexible magnet; manufacturing or use instructions
       (e.g., “print this side up,” “this side up,” “laminate here”); printing on adhesive
       backing (that is, material to be removed in order to expose adhesive for use such as
       application of laminate) or on any other covering that is removed from the flexible
       magnet prior or subsequent to final printing and before use; non-permanent printing

1
  The Orders provide that the HTSUS subheadings are “provided only for convenience and
customs purposes; the written description of the scope of the order is dispositive.” ADD Order, 73
Fed. Reg. at 53,847; CVD Order, 73 Fed. Reg. at 53,850.
Court No. 19-00126                                                                             Page 4

       (that is, printing in a medium that facilitates easy removal, permitting the flexible
       magnet to be re-printed); printing on the back (magnetic) side; or any combination
       of the above.

ADD Order, 73 Fed. Reg. at 53,487; CVD Order, 73 Fed. Reg. at 53,850. The parties do not

dispute the meaning of the main language of the Orders, Magnum instead challenges Commerce’s

determination that the MBS magnets fall within the exclusion. See Magnum Br. at 3–19. The MBS

magnets are raw flexible magnetic underlays sold in both rolls and panels. Scope Ruling at 3. The

Orders address three types of underlays. Id. at 3, 10. The first underlay is sold in a roll and is

“rolled onto the floor with the non-magnetized side facing down.” Id. Users then purchase flooring

material with a magnetic backing to attach to the magnetized side of the product. Id. The non-

magnetized side of the product is “permanently bonded” with paper printed with a design, such as

hardwood. Id. The second underlay is identical, except that the non-magnetized side with the

hardwood design is covered in adhesive material and a strip of removable paper, so that the product

can be stuck to the floor. Id. at 3, 10. The third underlay is sold in panels with an adhesive backing

and is meant to be stuck to walls. Id. Customers similarly can attach wall coverings with magnetic

backing to the product. Id. at 3. In sum, each of the three types of underlays have a permanent

hardwood design on the non-magnetized side. Id. at 3–4.

       After reviewing the “language of the scope, the description of the products contained in

MBS’s Scope Inquiry, prior scope determinations, including in the investigation, and the

[International Trade Commission (“ITC”)] Final Injury Determination,” Commerce determined

that the MBS magnets are excluded from the scope of the Orders. Scope Ruling at 12. In particular,

Commerce considered two prior scope rulings in arriving at its determination. Id. at 4–5, 12.

Commerce found that although the list of exemplars in the exclusion language did not apply to
Court No. 19-00126                                                                               Page 5

MBS magnets, the list was a non-exhaustive guideline and that the permanent decorative motif on

the underlays rendered them subject to the exclusion. Id. at 13–15.

          Magnum contended that MBS’s magnets are in-scope because: 1) they do not serve a

decorative purpose, 2) they are not like the products listed in the exclusion, and 3) the design is

printed on the back of the product, and thus falls within an exception to the exclusion. See Magnum

Br. at 6–12. The government argues that Commerce did not err in finding the merchandise out of

scope. Gov. Br. at 7–18. 2

                         JURISDICTION AND STANDARD OF REVIEW

          The court’s jurisdiction to review a challenge to a final scope ruling is pursuant to 19 U.S.C.

§ 1516a(a)(2)(B)(vi) and 28 U.S.C. § 1581(c) (2012). 3 Unless “unsupported by substantial

evidence on the record, or otherwise not in accordance with law,” the court upholds Commerce’s

determination that the scope of an antidumping or countervailing duty order excludes the subject

merchandise. 19 U.S.C. § 1516a(b)(1)(B)(i). “Substantial evidence is such relevant evidence as a

reasonable mind might accept as adequate to support a conclusion.” Eckstrom Indus., Inc. v.

United States, 254 F.3d 1068, 1071 (Fed. Cir. 2001) (internal quotation and citations omitted).

                                             DISCUSSION

          I.     Legal Framework

          In making a scope ruling, Commerce must look first to the language of the antidumping

or countervailing duty order. See Duferco Steel, Inc. v. United States, 296 F.3d 1087, 1097–98

(Fed. Cir. 2002). Commerce must also consider the (k)(1) sources: “[1] The descriptions of the

2
 In lieu of a brief, MBS submitted a letter supporting Commerce’s final scope ruling. MBS
Letter Re: Magnum Magnetics Corp. v. United States, Court No. 19-00126, ECF No. 26 (March
4, 2020).
3
    Further citations to the United States Code are to the 2012 edition unless otherwise indicated.
Court No. 19-00126                                                                            Page 6

merchandise contained in the petition, [2] the initial investigation, and [3] the determinations of

[Commerce] (including prior scope determinations) and the Commission.” 19 C.F.R. §

351.225(k)(1). If the sources in (k)(1) are not dispositive, Commerce must then consider the

(k)(2) factors. 19 C.F.R. § 352.225(k)(2). “Commerce cannot ‘interpret’ an antidumping or

countervailing duty order so as to change the scope of that order, nor can Commerce interpret an

order in a manner contrary to its terms.” See Duferco Steel, 296 F.3d at 1095 (quoting Eckstrom

Indus., Inc. v. United States, 254 F.3d 1068, 1072 (Fed. Cir. 2011)).

       II.     Language of the Orders

       Commerce found that the MBS magnets are excluded from the scope of the Orders

because the plain language excludes printed flexible magnets, and because the MBS magnets do

not conform to any of the exceptions to the exclusion. Scope Ruling at 18.

       Magnum contends that the MBS magnets are not like the enumerated excluded items:

“business cards, calendars, poetry, sports event schedules, business promotions, decorative motifs,

and the like.” Magnum Br. at 6–10. It argues that the list implies that any decorative motif must

be visible during use for merchandise to merit exclusion. Id. The government responds that the

phrase “including but not limited to” in the exclusion language renders the list informational, not

exhaustive, and that the product need not be like the other products on the list to qualify for the

exclusion. Gov. Br. at 9–11. In coming to this conclusion, the government stresses that although

Commerce may clarify existing orders, it may not interpret them in a way to change the scope of

the orders. See Gov. Br. at 11 (citing Global Commodity Grp. LLC v. United States, 709 F.3d

1134, 1138 (Fed. Cir. 2013)).

       Magnum argues that the unifying characteristic of “business cards, calendars, poetry, sports

event schedules, business promotions, decorative motifs, and the like” is to display a printed design
Court No. 19-00126                                                                               Page 7

to the user, either to relay information or decorate the surrounding space. See Magnum Br. at 7–8.

Accordingly, it contends that any excluded article should serve a similar purpose to merit

exclusion. Id. MBS’s magnets do not ultimately display information or decorate the space they are

installed in. Scope Ruling at 3–4, 7. Their design is either never visible, or briefly visible after they

are removed from their packaging until they are placed design-side down on a floor or wall. See

id. Therefore, in Magnum’s view, the product is not “like” the products enumerated in the

exclusion. Magnum Br. at 7–8.

        The utilization of the phrase “including but not limited to,” however, supports the

government’s position. The list: “business cards, calendars, poetry, sports event schedules,

business promotions, decorative motifs, and the like,” see Scope Ruling at 2, is exemplary but not

exhaustive, and was justifiably read to include products without a common purpose or unifying

quality with the enumerated items. MBS’s product meets the requirements of the exclusion; it is

permanently bonded with paper bearing a conforming printed image. Further, Magnum does not

argue, nor does the court find, that any of the exceptions to the exclusion apply to the MBS

magnets. It was reasonable based on the language of the Orders for Commerce to determine that

merchandise need not have a design visible after installation to merit exclusion.

        III.    Relevant (k)(1) Sources

        Turning to the (k)(1) sources, none appear inconsistent with Commerce’s ruling. The

investigation report is of little probative value because MBS did not produce the magnets at issue

at the time of the underlying petition and investigation. See Raw Flexible Magnets from the

People’s Republic of China; Scope Request from Magnetic Building Solutions LLC – Final

Scope Determination, A-570-922, C-570-923 at 11–12 (Dep’t Commerce Mar. 6, 2018) (“MBS

2018 Ruling”). With that said, there are indications in the investigation documents that printed
Court No. 19-00126                                                                             Page 8

products, as stated by the ITC, generally do not fall within the scope of the Orders, as “Raw

flexible magnets” is a term “adopted for the purposes of these investigations to distinguish

between the unprinted products of raw magnet producers such as Magnum, Flexmag, and Holm,

and the printed magnets and other products of their non-distributor customers.” Raw Flexible

Magnets from China and Taiwan, USITC Pub. 4030, Inv. Nos. 701-TA-452 and 731-TA-1129-

1130 at I-7, n. 15 (May 8, 2008) (final determination) (“Investigation Report”); see also id. at 5

(noting that “Commerce has excluded most types of printed flexible magnets from the scope of

investigation.”). In its scope ruling, Commerce mainly focuses on two prior determinations in

concluding that the MBS magnets are properly excluded from the scope of the Orders. See Scope

Ruling at 4–5. Each is addressed in turn.

        First, the government argues that its determination is consistent with a prior scope ruling

on a magnetic label holder with a zebra print design. See Gov Br. at 16–17. In 2017, Tatco

Products, Inc. (“Tatco”) requested a scope ruling for four magnetic label holders. Scope Ruling on

the Antidumping and Countervailing Duty Orders on Raw Flexible Magnets from the People’s

Republic of China: Request by Tatco Products, Inc., A-570-922, C-570-923 at 2 (Dep’t Commerce

Aug. 23, 2017) (“Tatco Ruling”). The label holders consisted of a raw flexible magnet and a clear

plastic pocket heat-sealed to the front of the magnet. See id. at 4. Although one of the label holders

had zebra stripes printed in black ink on the front of the white magnet, end users could insert a

piece of fiberboard into the plastic pocket, obscuring the design. See id. at 4, 7. The government

concluded that the zebra-print label holder was exempt from the antidumping order because it

contained a permanent printed design on the non-magnetic side of the magnet, rejecting Magnum’s

argument that the printing was functionally removed before use because it was concealed during

use. Id. at 12.
Court No. 19-00126                                                                            Page 9

       In its brief, Magnum attempts to distinguish MBS from Tatco by claiming that Tatco’s

zebra design is not completely covered by the label when in use, and even if it is, the Tatco product

is meant to be seen while empty, during which time the zebra print serves a decorative purpose.

Magnum Br. at 11. In comments made in the Tatco Ruling, however, Magnum itself argued that

the printing on Tatco’s magnets had no function, decorative or otherwise, writing that “Tatco’s

printed magnets are precisely the type of non-functional printing that is addressed in the scope

language.” Tatco Ruling at 8. Commerce addressed Magnum’s argument in Tatco by saying: “We

disagree with Magnum that the exclusion language of the scope Orders contains an exception for

printing that is concealed during the use of a flexible magnet.” Id. at 12. Therefore, by the same

logic, Commerce found that MBS’s printed flooring magnets can qualify for the exclusion even if

the printing is not visible during use and serves no functional purpose. Scope Ruling at 15–16.

       Second, Commerce issued an earlier scope ruling to MBS for a similar product on March

6, 2018, and determined that the product was in scope “[1] because it is a bonded flexible

magnet…[2] it consists of a flexible binder and a magnetic element…combined into a solid sheet

by mechanical rolling...[and] [3] none of the exclusions in the scope of the Orders are applicable.”

MBS 2018 Ruling at 15–16. The magnetic flooring underlay in that determination was identical to

the product at issue here, except that it had “no printing on it.” Scope Ruling at 4. The government

distinguished a previous ruling finding surgical drapes out of scope by noting that, unlike the

underlays, the surgical drape magnets were “unprintable and unusable for other purposes” because

they were permanently encased in other materials. MBS 2018 Ruling at 14.

       Commerce’s decision to exclude the MBS magnets at issue is consistent with its previous

scope rulings. The MBS 2018 Ruling is clearly distinguishable because there the product at issue

did not have any printing, thereby rendering it not subject to any exclusion. See MBS 2018 Ruling
Court No. 19-00126                                                                        Page 10

at 5, 16. The Tatco Ruling, similarly, is entirely consistent with Commerce’s decision here.

Although the zebra design was obscured when used in certain ways, Commerce determined that

the language of the Orders did not require visibility during use. Tatco Ruling at 12. In continuing

that logic here, Commerce noted that nothing in the language of the exclusion or the exceptions to

the exclusion requires the design to be seen while in use. Scope Ruling at 15. Although it may

have been reasonable for Commerce to interpret the exclusion language to more closely track the

listed exemplars, nothing in the language of the Orders or the (k)(1) sources undermines

Commerce’s contrary position. King Supply v. United States, 674 F.3d 1343, 1348 (Fed. Cir. 2012)

(noting that “even if it is possible to draw two inconsistent conclusions from the evidence in the

record, such a possibility does not prevent Commerce’s determination from being supported by

substantial evidence.”) (citations omitted). Further, it is important that orders be interpreted

consistently and not expanded so that importers and exporters have notice that their merchandise

is subject to unfair trade remedies. See ArcelorMittal Stainless Belgium N.V. v. United States, 694

F.3d 82, 88 (Fed. Cir. 2012) (noting that “the primary purpose of an antidumping order is to place

foreign exporters on notice of what merchandise is subject to duties.”); see also Eckstrom, 254

F.3d at 1072 (“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.”) (citation

omitted).

       Magnum raises one final argument. It argues that because the MBS magnets are installed

with the printed side down, the printed side is the “back” of the product. Magnum Br.at 11–12. In

the Orders, Commerce stated that printing “on the back (magnetic) side” does not merit exclusion.

ADD Order, 73 Fed. Reg. at 53,487; CVD Order, 73 Fed. Reg. at 53,850. Accordingly, Commerce

determined that the “back” of an MBS magnet is the magnetic side, regardless of how the product
Court No. 19-00126                                                                        Page 11

is positioned. Scope Ruling at 16. MBS magnets are printed on the non-magnetic side, i.e. the

“front,” and therefore are not excluded by the scope language. Id. Commerce’s finding is based on

a reasonable, straightforward reading of the scope language and Magnum cites nothing to call into

question this interpretation.

       Commerce declined to read into the language of the Orders an exclusion requirement that

did not clearly exist and nothing Magnum points to sufficiently undermines that decision.

Accordingly, the court sustains Commerce’s decision. 4

                                            CONCLUSION

       For the foregoing reasons, Magnum’s motion for judgment on the agency record is denied.

The court sustains Commerce’s determination that the MBS magnets are excluded from the scope

of the Orders. Judgment will enter accordingly.

                                                                   _/s/ Jane A. Restani____
                                                                   Jane A. Restani, Judge

Dated: July 13, 2020
       New York, New York

4
  Throughout its brief, Magnum appears to argue that MBS is attempting to circumvent the
previous scope ruling finding that certain MBS magnets were within the scope of the Orders.
See Magnum Br. at 3, 6, 10. As the government notes, however, Magnum did not request an
anticircumvention inquiry and Commerce did not exercise its discretion to self-initiate one. See
Gov. Br. at 13; see also 19 U.S.C. § 1677j (circumvention of antidumping and countervailing
duty orders); 19 C.F.R. §§ 351.225(g–j) (corresponding regulations). Given the differing analysis
between standard scope rulings and anticircumvention inquiries, it is possible that Commerce
would have arrived at a different decision had such a process been pursued. See Target v. United
States, 578 F. Supp. 2d 1369, 1373 (CIT 2008) (discussing Commerce’s practice and the
differing statutory and regulatory procedures for anticircumvention inquires as compared to other
scope rulings). Nonetheless, Magnum’s anticircumvention arguments are beyond the purview of
this action. See Consol. Bearings Co. v. United States, 348 F.3d 997, 1003 (Fed. Cir. 2003) (“If a
party does not exhaust available administrative remedies, ‘judicial review of Commerce's actions
is inappropriate.’”) (citation omitted).