WELCOM PRODUCTS, INC., Plaintiff, v. UNITED STATES, Defendant, and Gleason Industrial Products, Inc., and Precision Products, Inc., Defendant-Intervenors.
Court No. 11-00370
United States Court of International Trade
Sept. 27, 2012
Slip Op. 12-124
Joshua E. Kurland, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, Washington, D.C., for defendant. With her on the brief were Stewart F. Delery, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Claudia Burke, Assistant Director. Of counsel on the brief was Nathaniel J. Halvorson, Attorney, Office of Chief Counsel for Import Administration, U.S. Department of Commerce.
Matthew P. Jaffe, Neville Peterson LLP, Washington, D.C., for defendant-intervenors.
OPINION
MUSGRAVE, Senior Judge:
In this case, the U.S. Department of Commerce, International Trade Administration (“Commerce“) found that one model of hand truck was within the scope of an antidumping order while two others were not. Plaintiff claims that Commerce erred in finding the one model within scope because it previously found that similar models were outside the scope of the order, while defendant-intervenors claim that Commerce erred by finding the two other models outside scope. The government defends Commerce‘s actions on both counts. For the reasons explained below, plaintiff‘s request for remand is granted, and defendant-intervenor‘s request for reversal of the scope findings is denied.
I. Facts
In 2004, Commerce entered an antidumping duty order on certain varieties of hand trucks manufactured in China. See Notice of Final Determination of Sales at Less Than Fair Value: Hand Trucks and Certain Parts Thereof from the People‘s Republic of China, 69 Fed. Reg. 60,980 (Dep‘t Commerce, Oct. 14, 2004). The antidumping order‘s scope includes a “utility cart exclusion” which provides in relevant part as follows:
Excluded from the scope are small two-wheel or four-wheel utility carts specifically designed for carrying loads like personal bags or luggage in which the frame is made from telescoping tubular material measuring less than 5/8 inch in diameter. . . .
Commerce analyzed the utility cart exclusion in a scope ruling involving plaintiff WelCom Products, Inc.‘s (“WelCom“) 2004 Magna Cart model at the time of the original antidumping investigation that gave rise to the antidumping order. See Memo from Analysts to Jeffrey A. May, Scope Exclusion/Clarification Requests (Sept. 3, 2004) (P.D. 2 at Ex. 2) (“2004 Magna Cart Ruling“). In the 2004 Magna Cart Ruling, Commerce concluded that a telescoping center tube attached between a cross member and the toe plate was part of the cart‘s frame and that the utility cart exclusion applied because that tube measured less than 5/8” in diameter. 2004 Magna Cart Ruling at 15. Commerce stated that “[s]ince the scope exclusion does not specify that the frame be exclusively constructed of telescoping tubular material less than 5/8” in diameter, or further define which parts of the frame must telescope, a reasonable interpretation of the scope exclusion language is that the primary focus should be on the diameter of the tubular material comprising the telescoping section(s) of the frame.” Id. at 16.
Commerce construed this interpretation of the utility cart exclusion in a 2008 scope ruling concerning WelCom‘s MCX model hand truck. See Memo from Katharine G. Huang to Stephen J. Claeys, Request by WelCom Products (MCX Magna Cart) (May 12, 2008) Ex. 3 to WelCom Scope Request (“MCX Ruling“). Unlike the 2004 model, the MCX model lacked the center telescoping tube and featured telescoping side rails comprised of three segments, only one of which measured less than 5/8” in diameter. The MCX Ruling stated that “[c]onsistent with the 2004 Magna Cart Scope Ruling . . . since both telescoping sections are integral components of the frame, and we have determined that the frame does not have to be exclusively constructed of telescoping material less than 5/8 inch in diameter, it is reasonable to focus our analysis on whether either telescoping section of the frame is less than 5/8 inch in diameter.” MCX Ruling at 15. Because one section of the telescoping frame was less than 5/8” in diameter, the MCX was determined to be outside the scope of the Order. Id. Other scope rulings affirmed this result. See Ex. 6 to WelCom Scope Request at 6 (June 10, 2009 Safco Scope Ruling) and Ex. 7 to WelCom Scope Request at 5-6 (Mar. 26, 2010 Packard Scope Ruling).
On October 12, 2010, WelCom asked Commerce to determine whether three of its Magna Cart hand trucks (models MC2, MCI and MCK) were within the scope of the Order. WelCom Request for Scope Clarification (Oct. 8, 2010). Commerce preliminarily concluded that the MCK, MC2 and MCI did not qualify for the utility scope exclusion on May 9, 2011. Hand Trucks and Certain Parts Thereof from the People‘s Republic of China (PRC): Preliminary Scope Ruling—WelCom Products (May 9, 2011) (“Preliminary Scope Ruling“). In the Preliminary Scope Ruling, Commerce reversed the earlier rulings’ interpretations of the utility cart scope exclusion. The MC2 and MCI models, which resembled the cart in the 2004 Magna Cart Ruling, were preliminarily found within scope because Commerce decided the single vertical telescoping tube was not part of the frame. Preliminary Scope Ruling at 7. The MCK model, which resembled the MCX model and the other models ruled outside scope in 2008, was deemed in scope because its telescoping frame rails were not entirely less than 5/8” in diameter. Id.
The MCK model, although similar to a model found outside scope in the three later rulings, was found in scope in the Final Scope Ruling because the telescoping portion of the frame was not entirely less than 5/8” in diameter. The earlier rulings were found to have “improperly expanded” the 2004 Magna Cart Ruling‘s interpretation of the scope language. Final Scope Ruling at 17. Commerce determined that in order to fit within the exclusion, the entire telescoping portion of the frame must be less than 5/8” in diameter. Id. at 15. The MCK model was in scope because two sections of the telescoping frame were more than 5/8” in diameter.
Plaintiff WelCom challenges the Final Scope Ruling‘s determination that the MCK model is in scope; defendant-intervenors Gleason Indus. Prod., Inc. and Precision Prod., Inc. (“Gleason“) challenge the determination that the MC2 and MCI models are outside the scope of the Order. All three models at issue here are two-wheel utility carts which but for the utility cart exclusion would fall within the scope of the Order.
II. Arguments Presented
WelCom argues the utility cart exclusion does not “require” that all telescoping portions of the frame be less than 5/8” in diameter. Plaintiff‘s Memorandum in Support of its Motion for Judgment on the Agency Record (“Pl. Memo“), at 15. Commerce erred by not following the MCX ruling and its progeny because the MCK model is indistinguishable in construction and features with the MCX and Safco/Packard models involved in the earlier rulings. Pl. Memo at 20. WelCom argues that the case should be decided according to the factors set forth in
WelCom argues Commerce incorrectly construed the 2004 Magna Cart Ruling because that ruling provides that the entire telescoping portion of the frame need not be less than 5/8” in diameter. Pl. Memo at 8, 21. Commerce overturned findings made in its earlier MCX line of rulings without providing adequate reasoning for its reversal of its position. Id. WelCom also argues Commerce failed to address its argument that the 2004 Magna Cart was not reflected in the ITC‘s injury analysis. Id. at 26-27. In addition, WelCom argues, the MCK model should be outside the scope because there are no similar hand trucks being made in the U.S. Pl. Memo at 17, 31. The matter should be remanded to Commerce for an explanation of why it found the lack of U.S. production of similar merchandise “irrelevant“. Id. at 27, quoting Final Scope Ruling at 18.
Gleason argues that Commerce erred by finding the MC2 and MCI models were outside scope in the Final Scope Ruling.
The government argues that Commerce‘s decisions on both scope issues are supported by substantial evidence. Defendant‘s Memorandum in Opposition to Plaintiffs’ Rule 56.2 Motions for Judgment Upon the Agency Record (“Def. Memo“) at 11. Commerce reasonably determined that the utility cart exclusion for small carts featuring telescoping tubular materials measuring less than 5/8” in diameter does not require the entire hand truck frame to be made of telescoping tubular material, but it does require the entire telescoping section of the frame to measure less than 5/8” in diameter. Id. at 9. The utility cart language is ambiguous and thus required interpretation by Commerce. Id. at 14. Commerce correctly gave weight to the 2004 Magna Cart Ruling in deciding that the MCI and MC2 models were outside scope. Id. at 16. The government argues that Commerce likewise was correct to reverse its earlier finding that only part of the telescoping portion of the frame needed to have a diameter of less than 5/8” because that reversal flowed directly from the language of the 2004 Magna Cart ruling. Id. at 25.
III. Standard of Review
This court “shall hold unlawful any determination, finding, or conclusion found . . . to be unsupported by substantial evidence on the record, or otherwise not in accordance with law.”
“An agency action is arbitrary when the agency offer[s] insufficient reasons for treating similar situations differently.” SKF USA Inc. v. United States, 263 F.3d 1369, 1382 (Fed. Cir. 2001) (quoting Transactive Corp. v. United States, 91 F.3d 232, 237 (D.C. Cir. 1996)). If the Department provides “no reasonable explanation” for changing a practice that it has “consistently followed,” such a change is an unacceptable agency practice. See Consol. Bearings Co. v. United States, 348 F.3d 997, 1007 (Fed. Cir. 2003).
In analyzing the issues here, Commerce properly began by examining the language of the Order at issue. The “predicate for the interpretive process is language in the order that is subject to interpretation.” Duferco Steel Inc. v. United States, 296 F.3d 1087, 1097 (Fed. Cir. 2002). The Order states that “small two-wheel or four-wheel utility carts specifically designed for carrying loads like personal bags or luggage in which the frame is made from telescoping tubular material measuring less than 5/8 inch in diameter” are excluded from the scope of the Order. Although the parties disagree whether this language is subject to interpretation, the court agrees with the government that it is ambiguous. Because the terms of the Order alone were not dispositive, Commerce determined whether it could make a ruling based upon the request for a scope ruling and the factors listed in
A. Commerce Properly Determined that the MC2 and MCI Carts were Outside Scope
The court first addresses Gleason‘s argument that the MC2 and MCI carts should have been found within scope. In the Final Scope Ruling, Commerce applied the rationale of the 2004 Magna Cart Ruling to the MC2 and MCI carts pursuant to
B. Commerce Improperly Determined that the MCK Carts were Within Scope
The same analysis does not apply to Commerce‘s determination that the MCK model falls within the scope of the Order. In the Final Scope Ruling, Commerce reinterpreted the scope language as well as its prior rulings to require that the entire telescoping portion of a hand truck frame be less than 5/8” in diameter. Commerce used this “at all points” requirement to distinguish the 2004 Magna Cart Ruling from the later rulings which found carts similar to the MCK model outside scope. Final Scope Ruling at 16-17. The court disagrees that this interpretation naturally flows from the language of the Order or the 2004 Magna Cart Ruling and finds that Commerce‘s explanation for the reversal of position is unreasonable.
The court finds instructive our appellate court‘s recent decision in ArcelorMittal Stainless Belgium N.V. v. United States, 694 F.3d 82 (Fed. Cir. 2012), which reversed this court‘s finding that Commerce correctly found that steel plate with a nominal thickness equal to or exceeding 4.75 mm (but with a smaller actual thickness) was within the scope of an order applicable to plate that was 4.75 mm or greater. The appellate court scolded “Commerce‘s apparently shifting views regarding the scope of the antidumping order” and the “manifest injustice of enlarging the scope of the proceeding in [an] off-handed manner.” ArcelorMittal, 694 F.3d at 90. The court believes a similar analysis applies in this case.
The Final Scope Ruling overturns the findings of the MCX and later scope rulings without providing an adequate rationale for the change. SKF USA, Inc. v. United States, 263 F.3d 1369 at 1382 (Fed. Cir. 2001). For example, in explaining the reversal of position from the MCX Ruling, Commerce cited the 2004 Magna Cart Ruling‘s focus on “the diameter of the tubular material comprising the telescoping section(s) of the frame.” Final Scope Ruling at 16 (emphasis added). “[The 2004 Magna Cart] ruling specifies ‘section(s)’ as singular and plural, as a hand-propelled barrow may have one or more than one telescoping section. The Department interprets this to mean that all of the telescoping tubular parts of the frame must be less than 5/8 inches in diameter. . . .” Final Scope Ruling at 16-17.
The court finds this rationale unsupported by substantial evidence because the use of both plural and singular in the 2004 Magna Cart Ruling necessarily means that the exclusion language applies equally to multiple and single telescoping sections that are less than 5/8” in diameter. Because telescoping necessarily involves at least two sections which telescope one into another, it is not possible to have a telescoping frame with only one telescoping section. Thus, Commerce‘s use of “section(s)”1 in the 2004 Magna Cart Ruling implies that only one of the telescoping sections can be less than 5/8” in diameter and still qualify for the utility cart exclusion.2
Commerce also failed to adequately address WelCom‘s allegation that carts with telescoping frames consisting entirely of sections less than 5/8” in diameter would be impractical and unusable. WelCom Reply Brief at 8. Commerce cites to the examples of the MC2 and MCI carts as proof that such carts exist. Final Scope Ruling at 18. But Commerce fails to cite any other record information that addresses WelCom‘s credible argument that carts made of telescoping material entirely less than 5/8” in diameter do not exist in the market and are impractical.
WelCom argues that the Final Scope Ruling gives short shrift to its arguments that the MCK model should be excluded from the scope because the ITC found no material injury with regard to small foldable hand trucks. Pl. Memo at 26-28. In the Final Scope Ruling, Commerce noted that the ITC considers “domestic like product“, which may have included the small foldable hand trucks imported by WelCom. “U.S. products resembling the Magna Cart could have been considered in the injury analysis.”3 Commerce is bound when making scope determinations to consider “the determinations of the . . . [International Trade] Commission.”
V. Conclusion
Because Commerce adequately explained its rationale for following the 2004 Magna Cart Ruling, its determination that the MC2 and MCI hand trucks are outside the scope of the Order is supported by substantial evidence. The court finds Commerce‘s rationale for reversing its determination in the 2008 MCX Ruling is unsupported by substantial evidence because those reasons are not supported by the language cited. Commerce may not
SO ORDERED.
R. KENTON MUSGRAVE
SENIOR JUDGE