Court Opinion

ID: 4577976
Source: CourtListenerOpinion
Date Created: 2020-10-16 20:02:24.277928+00
Date Added: 2024-06-11T13:38:34.688571
License: Public Domain

Slip Op. 20-146

                 UNITED STATES COURT OF INTERNATIONAL TRADE

VANDEWATER INTERNATIONAL, INC.,

                      Plaintiff,
            v.
                                                       Before: Leo M. Gordon, Judge
UNITED STATES,

                      Defendant,
                                                       Court No. 18-00199
            and

ISLAND INDUSTRIES,

                     Defendant-Intervenor.

                                   OPINION and ORDER

[Remanding Final Scope Ruling to Commerce to conduct (k)(2) analysis.]

                                                                 Dated: October 16, 2020

      Richard Preston Ferrin, Dorothy Alicia Hickok, and Douglas John Heffner, Faegre
Drinker Biddle & Reath, LLP of Washington, DC, for Plaintiff Vandewater International,
Inc.

      Joshua Ethan Kurland, Trial Attorney, U.S. Department of Justice, Civil Division,
Commercial Litigation Branch, Washington, DC., argued for Defendant United States.
On the brief were Jeffrey Bossert Clarke, Assistant Attorney General, Jeanne E.
Davidson, Director, L. Misha Preheim, Assistant Director, International Trade Field Office,
New York, NY. Of counsel were John Anwesen and Saad Younus Chalchal, Office of the
Chief Counsel for Trade Enforcement & Compliance, U.S. Department of Commerce of
Washington, DC.

       Matthew Jon McConkey, Mayer Brown LLP of Washington, DC, for Defendant-
Intervenor Island Industries.

       Gordon, Judge: This opinion addresses the scope of the antidumping duty order

on Carbon Steel Butt-Weld Pipe Fittings from the People’s Republic of China, which

covers:
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              carbon steel butt-weld pipe fittings, having an inside diameter
              of less than 14 inches, imported in either finished or unfinished
              form. These formed or forged pipe fittings are used to join
              sections in piping systems where conditions require
              permanent, welded connections, as distinguished from fittings
              based on other fastening methods (e.g., threaded, grooved,
              or bolted fittings). Carbon steel butt-weld pipe fittings are
              currently classified under subheading 7307.93.30 of the
              Harmonized Tariff Schedule (HTS). Although the HTS
              subheading is provided for convenience and customs
              purposes, our written description of the scope of the order is
              dispositive.

Certain Carbon Steel Butt-Weld Pipe Fittings from the People’s Republic of China,

57 Fed. Reg. 29,702 (Dep’t of Commerce July 6, 1992) (“Order”). Plaintiff, Vandewater

International Inc., sought a scope determination from the U.S. Department of Commerce

(“Commerce”) that their products, steel branch outlets used to join sections in fire sprinkler

systems, are not covered by the Order. Commerce determined that they were. Carbon

Steel Butt-Weld Pipe Fittings from the People’s Republic of China, (Dep’t of Commerce

Sept. 10, 2018) (final scope ruling on Vandewater’s steel branch outlets) (“Final Scope

Ruling”). For the reasons set forth below, the court holds that Commerce unreasonably

concluded that the sources in 19 C.F.R. § 351.225(k)(1) were dispositive on the inclusion

of Plaintiff’s steel branch outlets within the Order, and remands the matter to Commerce

to conduct a full scope inquiry and evaluate the factors under 19 C.F.R. § 351.225(k)(2).

                                   I.   Standard of Review

       The court sustains Commerce’s “determinations, findings, or conclusions” unless

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). More specifically, when reviewing
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agency determinations, findings, or conclusions for substantial evidence, the court

assesses whether the agency action is reasonable given the record as a whole. Nippon

Steel Corp. v. United States, 458 F.3d 1345, 1350–51 (Fed. Cir. 2006); see also Universal

Camera Corp. v. NLRB, 340 U.S. 474, 488 (1951) (“The substantiality of evidence must

take into account whatever in the record fairly detracts from its weight.”). Substantial

evidence has been described as “such relevant evidence as a reasonable mind might

accept as adequate to support a conclusion.” DuPont Teijin Films USA v. United States,

407 F.3d 1211, 1215 (Fed. Cir. 2005) (quoting Consol. Edison Co. v. NLRB, 305 U.S.

197, 229 (1938)). Substantial evidence has also been described as “something less than

the weight of the evidence, and the possibility of drawing two inconsistent conclusions

from the evidence does not prevent an administrative agency's finding from being

supported by substantial evidence.” Consolo v. Fed. Mar. Comm'n, 383 U.S. 607, 620,

(1966). Fundamentally, though, “substantial evidence” is best understood as a word

formula connoting reasonableness review. 3 Charles H. Koch, Jr., Administrative Law and

Practice § 9.24[1] (3d ed. 2020). Therefore, when addressing a substantial evidence issue

raised by a party, the court analyzes whether the challenged agency action

“was reasonable given the circumstances presented by the whole record.” 8A West's Fed.

Forms, National Courts § 3.6 (5th ed. 2020).

                                     II.   Discussion

      Commerce may render a scope ruling after a full “scope inquiry,” 19 C.F.R.

§ 351.225(e), or, as Commerce did in this case, on the expedited basis of a party’s

application and the sources listed in 19 C.F.R. § 351.225(k)(1) (the “descriptions of the
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merchandise contained in the petition [for imposition of an antidumping duty order], the

initial investigation, and the determinations of the Secretary (including prior scope

determinations) and the [International Trade] Commission.”). 19 C.F.R. § 351.225(d).

Here, Commerce determined that the (k)(1) sources were dispositive and included

Vandewater’s steel branch outlets within the Order.

       Had Commerce determined the (k)(1) sources were not “dispositive,” Commerce

would have conducted a full scope inquiry and evaluated the criteria under

§ 351.225(k)(2), which include the product’s physical characteristics, ultimate purchasers’

expectations, the ultimate use of the product, trade channels in which the product is sold,

and the manner in which the product is advertised and displayed. 19 C.F.R.

§ 351.225(k)(2).

       In rendering its scope determination Commerce began with a “plain reading” of the

Order, finding that Vandewater’s description of its steel branch outlets matched the

description of the butt-weld pipe fittings in the Order:

              A plain reading of the scope includes carbon steel butt-weld
              pipe fittings that have an inside diameter of fourteen inches or
              less, which require a weld to be permanently attached to a
              piping system. Based on Vandewater’s description, and the
              samples provided, the steel branch outlets are made of
              carbon steel, have an inside diameter of less than fourteen
              inches, and are used to join sections in fire sprinkler piping
              systems where conditions require permanent, welded
              connections. Thus, we find that Vandewater’s description of
              its steel branch outlets matches the description of the scope
              covering butt-weld pipe fittings.

Final Scope Ruling at 9. Commerce omitted from its “plain reading” the scope language

that distinguishes “fittings based on other fastening methods (e.g., threaded, grooved, or
Court No. 18-00199                                                                 Page 5

bolted fittings).” Plaintiff’s products have threaded or grooved ends on their non-weldable

end. It is therefore not plainly apparent from the language of the Order whether a steel

branch outlet qualifies as a butt-weld fitting covered by the Order or not. They may be

covered: they are made of carbon steel, have an inside diameter of less than fourteen

inches, and are used to join sections in fire sprinkler piping systems where conditions

require a permanent, welded connection. They also may not be covered: they have a

non-weldable, threaded or grooved end, and according to Vandewater, the weldable end

is never joined to the sprinkler system via a true “butt-weld.” The language of the Order

itself simply does not resolve the issue of whether Vandewater’s steel branch outlets are

covered.

       As for the (k)(1) sources, Commerce long ago included steel branch outlets

virtually identical to Vandewater’s within the scope of a companion antidumping duty

order on butt-weld fittings from another country. Carbon Steel Butt-Weld Pipe Fittings

from Taiwan, (Dep’t of Commerce Mar. 25, 1992) (final scope ruling on Sprink, Inc.

exclusion request) (“Sprink Scope Ruling”); see also Certain Carbon Steel Butt-Weld Pipe

Fittings from Taiwan, 51 Fed. Reg. 45,152 (Dep’t of Commerce Dec. 17, 1986) (“Taiwan

Butt-Weld Order”). In the Final Scope Ruling here, Commerce noted this prior ruling:

              Sprink’s scope inquiry request stated that “{i}t appears that the
              definition of a butt-weld fitting is one that requires welding as
              a method of attachment for all connections. The Sprink-let
              does require that it be welded onto the outside of the pipe, but
              the connection for the joining pipe is either threaded or
              grooved.

              Commerce specifically stated in its ruling, “the order does not
              require that all pipe fitting connections be welded.” Commerce
Court No. 18-00199                                                               Page 6

             further stated that, “although the initial connection is obtained
             because of threading or grooving, the Sprink-let, like other
             products subject to this order, is permanently joined by
             welding.” Commerce concluded that, “{a}ccording to the
             product descriptions presented above, a pipe fitting with
             beveled edges that is permanently joined through welding
             falls within the scope of the order on carbon steel butt-weld
             pipe fittings from Taiwan. Because the Sprink-let, possesses
             these characteristics, we determine that the Sprink-let,
             imported by Sprink, Inc. is within the scope of the antidumping
             duty order on carbon steel butt-weld pipe fittings from
             Taiwan.”

Final Scope Ruling at 5-6 (footnotes omitted). For over 25 years, then, Commerce has

treated steel branch outlets as butt-weld fittings. That would seem to be dispositive.

Commerce, however, for some reason, chose to dismiss its Sprink Scope Ruling as non-

binding:

             . . . We agree that the products at issue in the Sprink Scope
             Ruling were essentially physically identical to Vandewater’s
             steel branch outlets. However, we note that Commerce
             analyzed those products under the Taiwan Butt-Weld Order
             and not the China Butt-Weld Order. We recognize that some
             of the language in both orders is the same, but as Vandewater
             points out, there is also language unique to the China Butt-
             Weld Order. Accordingly, we are not bound by the agency’s
             analysis in the Sprink Scope Ruling, although we not [sic] that
             here, as in that case, we have concluded that the
             merchandise is covered by the scope of an antidumping duty
             order on “butt- weld pipe fittings” because the merchandise is
             permanently joined by welding.

Final Scope Ruling at 11 (emphasis added).

      Commerce chose instead to look for support in its King Scope Ruling that fittings

with only one weldable end were covered by the Order. Id. at 9 (citing Carbon Steel Butt-

Weld Pipe Fittings from the People’s Republic of China (Dep’t of Commerce Oct. 20,
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2009) (“King Scope Ruling”). The King Scope Ruling, however, dealt with subject butt-

weld fittings used in applications other than pressurized piping systems—as handrails,

fencing, and guardrails—it did not address dual-nature fittings like Vandewater’s steel

branch outlets. Commerce’s reliance on the King Scope Ruling, which has no facial

applicability or relevance to Vandewater’s branch outlets, and Commerce’s eschewing

the Sprink Scope Ruling, signals to the court that something is not quite right with

Commerce’s (k)(1) analysis.

       The court was further confused by the balance of Commerce’s (k)(1) analysis.

Searching for dispositive support among the (k)(1) sources to cover the steel branch

outlets, Commerce identified two quotes, one from the petition and one from the U.S.

International Trade Commission (“ITC”) sunset review. The petition language reads: “{t}he

edges of finished butt-weld fittings are beveled, so that when a fitting is placed against

the end of a pipe (the ends of which have also been beveled), a shallow channel is created

to accommodate the ‘bead’ of the weld which joins the fitting to the pipe.” Final Scope

Ruling at 9–10 (quoting Petitioners’ Letter, “In the Matter of Certain Carbon Steel Butt-

Weld Pipe Fittings from the People’s Republic of China and from Thailand,” dated

May 22, 1991 (Petition)). The quoted language contemplates beveling on both parts of

the assembled pipe—“{t}he edges . . . are beveled, so that when a fitting is placed against

the end of a pipe (the ends of which have also been beveled) . . ..” Vandewater pointed

out to Commerce that its branch outlets, although beveled on one end, do not join to a

beveled end on the header pipe. The quoted petition language, which contemplates
Court No. 18-00199                                                                 Page 8

beveling on both parts of the assembled pipe, is therefore not descriptive of the actual

physical characteristics of Vandewater’s steel branch outlets.

      The quoted language Commerce relied upon from the ITC sunset review suffers

from the same problem as the petition language—it contemplates beveling on both parts

of the assembled pipe: “When placed against the end of a beveled pipe or another fitting,

the beveled edges form a shallow channel that accommodates the ‘bead’ of the weld that

fastens the two adjoining pieces.” Final Scope Ruling at 10 (quoting Carbon Steel Butt-

Weld Pipe Fittings from Brazil, China, Japan, Taiwan, and Thailand, Inv. Nos. 731-TA-

308-310 and 520-521, at I-4 (Fourth Review), USITC Pub. 4628 (Aug. 2016)). Again,

though, Vandewater’s branch outlets are welded to header pipe, which is not, apparently,

beveled at the weld. The quoted sunset review language is therefore not descriptive of

the actual physical characteristics of Vandewater’s steel branch outlets.

      Commerce also highlights butt-weld caps as an example of a butt-weld fitting that

has only one weldable end. Id. at 10. A butt-weld cap though does not also have threads

or grooves, problematical attributes that are expressly excluded from the Order.

      Other than the Sprink Scope Ruling, which Commerce dismisses as non-binding,

the other (k)(1) sources Commerce relied upon as dispositive (the King Scope Ruling, the

petition language, and the language from the ITC sunset review) do not really tell the

court anything about the inclusion of steel branch outlets within the scope of the Order.

Commerce’s determination that the (k)(1) sources are dispositive is therefore not

reasonable (unsupported by substantial evidence).
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       For whatever reason Commerce does not have much confidence in its Sprink

Scope Ruling. Given that posture, the court believes that Commerce must consider the

factors under (k)(2) to determine whether Vandewater’s steel branch outlets are within

the scope of the Order. Accordingly, it is hereby

       ORDERED that Commerce’s determination that the (k)(1) materials are dispositive

of the inclusion of Vandewater’s steel branch outlets within the scope of the Order is

unreasonable; it is further

       ORDERED that this matter is remanded to Commerce to conduct a scope inquiry

to evaluate the factors under (k)(2); it is further

       ORDERED that Commerce shall file its remand results once the scope inquiry is

completed; and it is further

       ORDERED that, if applicable, the parties shall file a proposed scheduling order

with page limits for comments on the remand results no later than seven days after

Commerce files its remand results with the court.

                                                            /s/ Leo M. Gordon
                                                         Judge Leo M. Gordon

Dated: October 16, 2020
       New York, New York