APPLETON PAPERS INC., Plaintiff, v. UNITED STATES, Defendant, and Paper Resources LLC, Defendant-Intervenor.
Court No. 12-00116
United States Court of International Trade
July 11, 2013
Slip Op. 13-87
equipped industrial park allowing tenants to immediately begin manufacturing.
Commerce‘s sole argument concerning the specific plot leased by Zhongya also fails. Commerce states that it “collected” photographs during verification which show power lines and a canal on or near the site. Gov‘t Br. at 17 (“Concerning the parcel for which New Zhongya purchased land-use rights, Commerce noted that, during verification, it collected pictures showing power lines and a canal on or near the site.“); I & D Memo at 107. Commerce does not clearly indicate the provenance of these photographs, but Plaintiffs state that they were selectively chosen from a slideshow they created to show the improvements they made to the land from 2005 to 2010. Pls.’ Br. at 7. Plaintiffs assert that the photographs Commerce used were takеn after Zhongya had completed its improvements to the land and therefore these photographs do not show the condition of the plot as it existed when Zhongya assumed the lease in 2006. Id. Given the record as a whole, the court is not persuaded that these photographs provide substantial evidence that the land Zhongya leased was a fully developed industrial park in 2006, or that the photographs even depict the land as it existed in 2006.
In sum, the court cannot conclude that a reasonable reading of the record as a whole supports Commerce‘s rebuttal of Plaintiffs’ claim that the land they leased was undeveloped in 2006 and therefore not comparable to a fully developed industrial park. Commerce relies on a 2010 screenshot of a promotional website for the region to support its claim that the plot as it existed in 2006 was a fully developed industrial park and has not placed any evidence on the record rebutting or addressing Plaintiffs’ claims that photographs showing a canal and power lines on or near the property were taken in 2010 and not 2006. The court therefore holds that Commerce‘s finding that the land as it existed in 2006 was comparable to a fully developed industrial park is not supported by substantial evidence and remands for reconsideration or further explanation.6 See Nippon Steel, 458 F.3d at 1350-51.
CONCLUSION
For the reаsons stated above, Commerce‘s Final Determination is affirmed in part and remanded in part for reconsideration of its selection of a fully developed industrial park as a benchmark for the land-use rights acquired by Plaintiffs in 2006. Commerce shall file its remand determination with the court by August 5, 2013. The parties will have until August 19, 2013 to file comments, and Commerce has until September 2, 2013 to file a response.
It is so ORDERED.
Stuart F. Delery, Principal Deputy Assistant Attorney General; Jeanne E. Davidson, Director, Reginald T. Blades, Jr., Assistant Director, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC (Joshua E. Kurland and Carrie A. Dunsmore); Office of the Chief Counsel for Import Administration, United States Department of Commerce, Whitney Rolig, Of Counsel, for the United States, Defendant.
Greenberg Traurig, LLP (Rosa S. Jeong and Philippe M. Bruno), Washington, DC, for Paper Resourcеs LLC, Defendant-In-tervenor.
OPINION
TSOUCALAS, Senior Judge:
This consolidated action comes before the court on plaintiff Appvion, Inc.‘s1 (“Appvion“) motion for judgment on the agency record challenging the United States Department of Commerce‘s (“Commerce“) determination in Final Scope Ruling for Paper Resources, LLC‘s Lightweight Thermal Paper Converted and Packaged in the People‘s Republic of China Using Jumbo Rolls Produced in a Third Country, Case Nos. A-570-920 and C-570-921 (Mar. 23, 2012), Public Rec. 2/32 (“Final Scope Ruling“).2 See Preliminary Scope Ruling for Paper Resources, LLC‘s Lightweight Thermal Paper Converted and Packaged in the People‘s Republic of China Using Jumbo Rolls Produced in a Third Country, Case Nos. A-570-920 and C-570-921 (Dec. 21, 2011), CR 2/11 (“Preliminary Scope Ruling“). Commerce and defendant-intervenor Paper Resources LLC (“Paper Resources“) oppose Appvion‘s motion. For the reasons stated below, Appvion‘s motion is denied.
BACKGROUND
Lightweight thermal paper (“LWTP“) “is a papеr coated with thermal active chemicals ... which react to form an image when heat is applied.” CR 1/1 at 2. It is “specially intended to be used in special printers containing thermal print heads.” Id. “LWTP is typically produced in jumbo rolls that are converted to narrower width rolls appropriate for its specific end uses.”3 Id. Production of LWTP occurs in
LWTP from the People‘s Republic of China (“PRC“) is subject to antidumping duty (“AD“) and countervailing duty (“CVD“) orders. See AD Orders: LWTP From Germany and the PRC, 73 Fed.Reg. 70,959 (Nov. 24, 2008); LWTP from the PRC: Notice of Amended Final Affirmative CVD Determination and Notice of CVD Order, 73 Fed.Reg. 70,958 (Nov. 24, 2008) (“CVD Order,” and collectively, the “Orders“). The Orders contain identical scope language, covering:
certain [LWTP], ... irrespective of dimensions; with or without a base coat on one or both sides; with thermal active coating(s) on one or both sides that is a mixture of the dye and the developer that react and form an image when heat is applied; with or without a top coat; and without an adhesive backing. CVD Order, 73 Fed.Reg. at 70, 958 (internal footnotes omitted). An explanatory footnote to the scope definition states that “[b]oth jumbo and converted rolls (as well as LWTP in any other form, presentation, or dimension) are covered by the scope of these orders.” Id. at 70,958 n. 1.
Paper Resourсes imports LWTP that is manufactured in JR form and coated in [[Confidential Data Deleted]] then is converted in the PRC by Shanghai Hanhong Paper Company (“Hanhong“). See PR 2/1 at 1. In February 2011, Paper Resources requested that Commerce determine that LWTP manufactured in this fashion is outside the scope of the Orders because its country of origin is not the PRC. CR 1/1 at 1, 4-10. Commerce initiated a scope inquiry in April 2011. See PR 1/9 at 1.
In the Preliminary Scope Ruling, Commerce found that Paper Rеsources‘s LWTP was outside the scope of the Orders because its country of origin was not the PRC. CR 2/11 at 11-12. Using its substantial transformation analysis, Commerce concluded that the conversion process was insufficient to change the country of origin of [[Confidential Data Deleted]] JRs because (1) JRs and converted rolls were of the same class or kind of merchandise; (2) conversion operations required only “minimal” capital investment and expertise; and (3) conversion did not alter the JRs’ end use, mechanical properties, or essential characteristic. See id. at 6-12. Commerce also declined to include an anticircumvention inquiry in its country of origin analysis. Id. at 13-15.
Commerce upheld the results of its preliminary determination in the Final Scope Ruling. See PR 2/32 at 3-4. Additionally, Commerce declined Appvion‘s request to impose a mandatory country of origin certification program on Hanhong and Paper Resources because it did not first make an affirmative determination that either party circumvented the Orders. Id. at 6.
Appvion challenges Commerce‘s scope determination and the decision not to impose a mandatory country of origin certification program. See Pl.‘s Br. Supp. Mot. J. Agency R. at 2-4 (“Pl.‘s Br.“). The court held oral argument on June 27, 2013. Oral Argument, Appleton Papers Inc. v. United States, Consol. Ct. No. 12-00116 (Ct. Int‘l Trade June 27, 2013) (“Oral Arg.“).
JURISDICTION
The Court has jurisdiction over this matter pursuant to
STANDARD OF REVIEW
This Court must uphold Commerce‘s scope determination unless it is “unsupported by substantiаl evidence on the record, or otherwise not in accordance with law.”
“Courts look for a reasoned analysis or explanation for an agency‘s decision as a way to determine whether a particular decision is arbitrary, capricious, or an abuse of discretion.” Wheatland Tube Co. v. United States, 161 F.3d 1365, 1369 (Fed. Cir. 1998). “An abuse of discretion occurs where the decision is based on an erroneous interpretation of the law, on factual findings that are not supported by substantial evidence, оr represent an unreasonable judgment in weighing relevant factors.” WelCom Prods., Inc. v. United States, 36 CIT —, —, 865 F.Supp.2d 1340, 1344 (2012) (citing Star Fruits S.N.C. v. United States, 393 F.3d 1277, 1281 (Fed. Cir. 2005)). “[A]n agency action is arbitrary when the agency offers insufficient reasons for treating similar situations differently.” SKF USA Inc. v. United States, 263 F.3d 1369, 1382 (Fed. Cir. 2001).
DISCUSSION
Appvion does not argue that the conversion process in the PRC substantially transformed the [[Confidential Data Deleted]] JRs. Oral Arg. at 14:05; see CR 2/8 at 6 (“Paper Resources is correct that [Appvion] does not contend that the converting operations are sufficient to transform [JRs].“). Instead, Appvion argues that Paper Resources‘s LWTP is subject merchandise because the Orders cover all LWTP converted in the PRC. Pl.‘s Br. at 12-15. Accordingly, Appvion insists it was inappropriate for Commerce to conduct a substantial transformation analysis. Id. at 20. Appvion also argues that Commerce abused its discretion by declining to consider evidence of circumvention in its scope ruling. See id. at 22-26. Finally, Appvion contends that Commerce‘s failure to impose a mandatory country of origin certification program was arbitrary, capricious, and an abuse of discretion. See id. at 27-30.
I. Commerce‘s Interpretation of the Scope Language
Appvion argues that the Orders cover all LWTP converted in the PRC, regardless of the origin of the underlying JRs. Id. at 13. According to Appvion, Commerce abused its discretion by using the substantial transformation test to “preclude[] relief for a portion of subject merchandise,” namely, LWTP converted in the PRC using JRs from a third country. Id. at 20. However, Aрpvion fails to demonstrate that Commerce altered the scope of the Orders or misapplied the substantial transformation test.
““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
Appvion cannot demonstrate that Commerce unlawfully altered the scope of the Orders. AD and CVD orders cover a particular class or kind of merchandise from a particular country. See
Appvion also argues that Commerce abused its discretion by using the substantial transformation analysis to exclude otherwise subject LWTP from the scope of the Orders. Pl.‘s Br. at 20. According to Appvion, application of thе substantial transformation test, and specifically the change in class or kind factor, is improper in cases where the scope covers upstream and downstream forms of a product and manufacturing occurs across multiple countries. Id. In such cases, Appvion contends, the downstream processing “inherently cannot be sufficient to move the merchandise from one class or kind to another,” and always indicates that a substantial trаnsformation did not occur. Id.
Appvion admitted before Commerce and the court that conversion was not a substantial transformation. See CR 2/8 at 6; Oral Arg. at 14:05. To the extent that Appvion is challenging the propriety of Commerce‘s use of the substantial
Ultimately, Appvion‘s argument boils down to its claim that the Final Scope Ruling denies relief from dumped LWTP from the PRC. Pl.‘s Br. at 15. Appvion insists that Commerce‘s determination forces the filing of numerous petitions against any and all countries from which Hanhong sources its JRs. See id. at 15. According to Appvion, this result is unreasonable because relief may be denied if fair trade practices mask dumping or total import volume does not surpass negligibility thresholds. Id. at 15-17. As Commerce did not articulate a “statutorily consistent mechanism” by which Appvion can obtain relief, Appvion insists that Commerce‘s decision is erroneous. Id. at 15.
Appvion simply fails to articulate a legal basis by which to determine that Paper Resourсes‘s LWTP is within the scope of the Orders. Commerce was not required to include the LWTP within the scope of the Orders simply because it was converted by Hanhong. See DuPont, 22 CIT at 375, 8 F.Supp.2d at 859 (“[A]ntidumping orders apply to merchandise from particular countries, not individual producers....“). Rather, the dispositive issue was the country of origin. See Ugine, 31 CIT at 1551, 517 F.Supp.2d at 1345. And, as stated above, the country of origin of Paper Resources‘s LWTP was [[Confidential Data Deleted]], not the PRC.
II. Circumvention
Appvion also argues that Commеrce abused its discretion by failing to consider evidence that Hanhong and Paper Resources were circumventing the Orders. See Pl.‘s Br. at 22-26. According to Appvion, Hanhong‘s “shift to third-country suppliers represents a change in the commercial practices (e.g., pattern of trade) indicating circumvention of existing relief.” Id. at 23. Appvion insists that Commerce also should have considered the following evidence: Hanhong and Paper Resources waited three years to request a scope ruling from Commerce; Paper Resources [[Confidential Data Deleted]]; Hanhong and Paper Resources [[Confidential Data Deleted]]; and Hanhong [[Confidential Data Deleted]]. See Pl.‘s Br. at 23-26.
Generally, Commerce addresses circumvention issues under
Here, Commerce declined to consider evidence of circumvention for several reasons. See CR 2/11 at 13-15. First, Commerce explained that the Orders did not cover [[Confidential Data Deleted]], the country in which the JRs are produced, and therefore thеre was no concern that relief under the Orders would be “eviscerated by moving minor processing outside the country covered by the order.” Id. at 14. Second, Commerce noted that the case did not lend itself to a section 1677j analysis because downstream processing occurred in the covered country rather than in the U.S. or a third country. Id. at 14-15. Commerce also noted that this Court previously upheld scope determinations conducted without considering evidence of circumvention. Id. at 15.
Commerce‘s decision was adequately explained and consistent with the law. This Court has held that “a ‘scope ruling is not the proper mechanism for addressing circumvention concerns.‘” See Laminated Woven Sacks Comm. v. United States, 34 CIT —, —, 716 F.Supp.2d 1316, 1328 (2010) (Tsoucalas, J.) (quoting E. Jordan Iron Works, 32 CIT at 422, 556 F.Supp.2d at 1358). Moreover, because conversion did not substantially transform the [[Confidential Data Deleted]] JRs, CR 2/11 at 6-12 (unchanged in PR 2/32), Commerce risked expanding the scope of the Orders by considering evidence of potential сircumvention. See E. Jordan Iron Works, 32 CIT at 422, 556 F.Supp.2d at 1358. Accordingly, Appvion cannot demonstrate that Commerce abused its discretion.
III. Country of Origin Certification
Finally, Appvion argues that Commerce‘s failure to impose a mandatory country of origin certification program was arbitrary, capricious, and an abuse of discretion. See Pl.‘s Br. at 27. Appvion insists that Commerce ignored evidence in the record evidencing a “high likelihood of past and current circumvention.” Id. Appvion also argues that Commerce failed to explain why it treated the instant case differently than other cases in which it imposed country of origin and end-use certification programs without an affirmative finding of circumvention. Id. at 28-30.
Commerce has a certain amount of discretion to act in order to “prevent[] the intentional evasion or circumvention” of the Act. See Tung Mung Dev. Co. v. United States, 26 CIT 969, 979, 219 F.Supp.2d 1333, 1343 (2002), aff‘d, 354 F.3d 1371 (Fed. Cir. 2004). To that end, Commerce may impose measures such as mandatory certification progrаms where it believes they will be effective in preventing future circumvention of its orders. See, e.g., Issues and Decision Memorandum for the Final Determination of the Anti-circumvention Inquiry of Certain Tissue Paper Products from the PRC at 9-12, Case No. A-570-894 (Sept. 19, 2008) (imposing country of origin certification requirements to address circumvention).
Appvion fails to demonstrate that Commerce abused its discretion or acted in an arbitrary and capricious manner. First, this Court has held that “сertification is not part of an ordinary scope analy-sis.” Laminated Woven Sacks, 34 CIT at —, 716 F.Supp.2d at 1328. Second, Commerce adequately explained its decision. In the Preliminary Scope Ruling, Commerce explained that Appvion‘s country of origin concerns could be “appropriately dealt with by [Customs and Border Protection].” CR 2/11 at 6. In the Final Scope Ruling, Commerce did not impose a country of origin certification program because it did not make an affirmative finding of сircumvention. See PR 2/32 at 6. As Commerce explained, there was “no precedent of [Commerce] establishing a certification program to preempt unfounded circumvention.”6 Id. Commerce also noted that end-use certification cases are not relevant because they involve different concerns—“avoid[ing] liquidation of components intended to be used for subject merchandise.” Id. Because Commerce provided a “rеasoned analysis” of its decision, the court finds that Commerce neither abused its discretion nor acted in an arbitrary and capricious manner. See Wheatland Tube, 161 F.3d at 1369.
CONCLUSION
For the foregoing reasons, the court finds that the Final Scope Ruling is supported by substantial evidence on the record and is otherwise in accordance with the law.
TSOUCALAS
Senior Judge