OMG, Inc. v. United States , 321 F. Supp. 3d 1262 ( 2018 )

Slip Op. 18-
UNITED STATES COURT OF INTERNATIONAL TRADE
OMG, INC.,
Plaintiff,
v.
UNITED STATES, Before: Gary S. Katzmann, Judge
Defendant, Court No. 17-00036
and
MID CONTINENT STEEL & WIRE INC.,
Defendant-Intervenor.
OPINION
[Commerce’s Final Results are remanded and plaintiff’s motion for judgment on the agency record
is granted in part.]
Dated:0D\
Ned H. Marshak, Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP, of New York, NY,
argued for plaintiff. With him on the brief were David M. Murphy and Andrew T. Schutz.
Sosun Bae, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of
Justice, of Washington, DC, argued for defendant. With her on the brief were Chad A. Readler,
Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Patricia M. McCarthy,
Assistant Director. Of counsel was Nikki Kalbing, Office of the Chief Counsel for Trade
Enforcement & Compliance, U.S. Department of Commerce of Washington, DC.
Adam Gordon, The Bristol Group PLLC, of Washington, DC, argued for defendant-intervenor.
With him on the brief was Ping Gong.
Court No. 17-00036 Page 2
Katzmann, Judge: A prominent psychologist once suggested that it must be tempting “if
the only tool you have is a hammer, to treat everything as if it were a nail.” ABRAHAM MASLOW,
PSYCHOLOGY OF SCIENCE: A RECONNAISSANCE 15–16 (1966). Plaintiff OMG, Inc. (“OMG”)
believes that the Department of Commerce (“Commerce”) made such an error, and challenges
Commerce’s determination that zinc anchors imported by OMG fall within the scope of the
Antidumping and Countervailing Duty Orders on Certain Steel Nails from the Socialist Republic
of Vietnam. Certain Steel Nails from the Socialist Republic of Vietnam: Final Scope Ruling on
OMG, Inc.’s Zinc Anchors (Feb. 6, 2017), P.D. 29 (“Final Scope Ruling”); Certain Steel Nails
from the Socialist Republic of Vietnam: Countervailing Duty Order, 80 Fed. Reg. 41,006 (July 14,
2015) and Certain Steel Nails from the Republic of Korea, Malaysia, the Sultanate of Oman,
Taiwan, and the Socialist Republic of Vietnam: Antidumping Duty Orders, 80 Fed. Reg. 39,994
(July 13, 2015) (collectively the “Orders”). OMG argues that its anchors are not steel nails and,
therefore, do not fall within the scope of the orders and that Commerce’s analysis and scope
determination is unsupported by substantial evidence on the record and is otherwise not in
accordance with law. Compl., Feb. 21, 2017, ECF No. 7; Pl.’s Mot. For J. on the Agency R. and
Br. in Supp., June 29, 2017, ECF No. 26 (“Pl.’s Br.”); Pl’s Reply, Nov. 30, 2017, ECF No. 34.
The court concludes that Commerce’s determination was not in accordance with law, for the
reasons stated below.
BACKGROUND
A. Legal and Regulatory Framework of Scope Reviews Generally.
Dumping occurs when a foreign company sells a product in the United States for less than
fair value -- that is, for a lower price than in its home market. Huzhou Muyun Wood Co., Ltd. v.
United States, 42 CIT ___, ___, 279 F. Supp. 3d 1215, 1218 (2017) (citing Sioux Honey Ass’n v.
Hartford Fire Ins. Co., 672 F.3d 1041, 1046 (Fed. Cir. 2012)). Similarly, a foreign country may
Court No. 17-00036 Page 3
countervailably subsidize a product and thus artificially lower its price. U.S. Steel Grp. v. United
States, 96 F.3d 1352, 1355 n.1 (Fed. Cir. 1996). To empower Commerce to offset economic
distortions caused by dumping and countervailable subsidies, Congress enacted the Tariff Act of
1930. 1 Huzhou, 279 F. Supp. 3d at 1218–19. Under the Tariff Act’s framework, Commerce may
-- either upon petition by a domestic producer or of its own initiative -- begin an investigation into
potential dumping or subsidies and, if appropriate, issue orders imposing duties on the subject
merchandise. Id.
In order to provide producers and importers with notice as to whether their products fall
within the scope of an antidumping or countervailing duty order, Congress has authorized
Commerce to issue scope rulings clarifying “whether a particular type of merchandise is within
the class or kind of merchandise described in an existing . . . order.” 19 U.S.C. §
1516a(a)(2)(B)(vi). As “no specific statutory provision govern[s] the interpretation of the scope
of antidumping or countervailing orders,” Commerce and the courts developed a three-step
analysis. Shenyang Yuanda Aluminum Indus. Eng’g Co. v. United States, 776 F.3d 1351, 1354
(Fed. Cir. 2015); Polites v. United States, 35 CIT ___, ___, 755 F. Supp. 2d 1352, 1354 (2011);
19 C.F.R. § 351.225(k).
Because “[t]he language of the order determines the scope of an antidumping duty order[,]”
any scope ruling begins with an examination of the language of the order at issue. Tak Fat Trading
Co. v. United States, 396 F.3d 1378, 1382 (Fed. Cir. 2005) (citing Duferco Steel, Inc. v. United
States, 296 F.3d 1087, 1097 (Fed. Cir. 2002)). If the terms of the order are unambiguous, then
those terms govern. Id. at 1382–83.
1
Further citations to the Tariff Act of 1930 are to the relevant portions of Title 19 of the U.S.
Code, 2012 edition.
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However, if Commerce determines that the terms of the order are either ambiguous or
reasonably subject to interpretation, then Commerce “will take into account . . . the descriptions
of the merchandise contained in the petition, the initial investigation, and [prior] determinations
[of Commerce] (including prior scope determinations) and the [International Trade] Commission.”
19 C.F.R. § 351.225(k)(1) (“(k)(1) sources”); Polites, 755 F. Supp. 2d at 1354; Meridian Prod.,
LLC v. United States, 851 F.3d 1375, 1382 (Fed. Cir. 2017). To be dispositive, the (k)(1) sources
“must be ‘controlling’ of the scope inquiry in the sense that they definitively answer the scope
question.” Polites, 755 F. Supp. 2d at 1354 (quoting Sango Int’l v. United States, 484 F.3d 1371,
1379 (Fed. Cir. 2007)). If Commerce “can determine, based solely upon the application and the
descriptions of the merchandise referred to in paragraph (k)(1) of . . . section [351.225], whether a
product is included within the scope of an order . . . [Commerce] will issue a final ruling[.]” 19
C.F.R. § 351.225(d).
If a section 351.225(k)(1) analysis is not dispositive, Commerce will initiate a scope
inquiry under § 351.225(e), and apply the five criteria from Diversified Prods. Corp. v. United
States, 6 CIT 155, 162, 572 F. Supp. 883, 889 (1983) as codified in 19 C.F.R. § 351.225(k)(2). 2
Polites, 755 F. Supp. 2d at 1355.
B. Factual and Procedural History of this Case
In May 2014, Mid Continent Steel & Wire (“Mid Continent”) petitioned Commerce to
impose antidumping and countervailing duties on steel nails from a number of countries, including
the Socialist Republic of Vietnam (“Vietnam”). Certain Steel Nails from the Socialist Republic
of Vietnam: OMG Scope Request: Zinc Anchors (“Scope Ruling Request”) at Ex. 10, Petition for
2
These criteria are: (1) The physical characteristics of the product, (2) the expectations of the
ultimate purchasers, (3) the ultimate use of the product, (4) the channels of trade in which the
product is sold, and (5) the manner in which the product is advertised and displayed. 19 C.F.R. §
351.225(k)(2); see Diversified Prods., 572 F. Supp. at 889.
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the Imposition of Antidumping and Countervailing Duties, P.D. 1–5 (May 29, 2014). In July 2015,
after having determined that dumping was occurring, Commerce issued the antidumping and
countervailing duty Orders covering certain steel nails from Vietnam. The scope of the Orders
reads in full:
The merchandise covered by the Orders is certain steel nails having a nominal shaft
length not exceeding 12 inches. Certain steel nails include, but are not limited to,
nails made from round wire and nails that are cut from flat-rolled steel. Certain
steel nails may consist of a one piece construction or be constructed of two or more
pieces. Certain steel nails may be produced from any type of steel, and may have
any type of surface finish, head type, shank, point type and shaft diameter. Finishes
include, but are not limited to, coating in vinyl, zinc (galvanized, including but not
limited to electroplating or hot dipping one or more times), phosphate, cement, and
paint. Certain steel nails may have one or more surface finishes. Head styles
include, but are not limited to, flat, projection, cupped, oval, brad, headless, double,
countersunk, and sinker. Shank styles include, but are not limited to, smooth,
barbed, screw threaded, ring shank and fluted. Screw-threaded nails subject to this
proceeding are driven using direct force and not by turning the nail using a tool that
engages with the head. Point styles include, but are not limited to, diamond, needle,
chisel and blunt or no point. Certain steel nails may be sold in bulk, or they may
be collated in any manner using any material.
Excluded from the scope of the Orders are certain steel nails packaged in
combination with one or more non-subject articles, if the total number of nails of
all types, in aggregate regardless of size, is less than 25. If packaged in combination
with one or more non-subject articles, certain steel nails remain subject
merchandise if the total number of nails of all types, in aggregate regardless of size,
is equal to or greater than 25, unless otherwise excluded based on the other
exclusions below.
Also excluded from the scope are certain steel nails with a nominal shaft length of
one inch or less that are (a) a component of an unassembled article, (b) the total
number of nails is sixty (60) or less, and (c) the imported unassembled article falls
into one of the following eight groupings: 1) builders’ joinery and carpentry of
wood that are classifiable as windows, French-windows and their frames; 2)
builders’ joinery and carpentry of wood that are classifiable as doors and their
frames and thresholds; 3) swivel seats with variable height adjustment; 4) seats that
are convertible into beds (with the exception of those classifiable as garden seats or
camping equipment); 5) seats of cane, osier, bamboo or similar materials; 6) other
seats with wooden frames (with the exception of seats of a kind used for aircraft or
motor vehicles); 7) furniture (other than seats) of wood (with the exception of i)
medical, surgical, dental or veterinary furniture; and ii) barbers’ chairs and similar
chairs, having rotating as well as both reclining and elevating movements); or 8)
Court No. 17-00036 Page 6
furniture (other than seats) of materials other than wood, metal, or plastics (e.g.,
furniture of cane, osier, bamboo or similar materials). The aforementioned
imported unassembled articles are currently classified under the following
Harmonized Tariff Schedule of the United States (HTSUS) subheadings: 4418.10,
4418.20, 9401.30, 9401.40, 9401.51, 9401.59, 9401.61, 9401.69, 9403.30, 9403.40,
9403.50, 9403.60, 9403.81 or 9403.89.
Also excluded from the scope of the Orders are steel nails that meet the
specifications of Type I, Style 20 nails as identified in Tables 29 through 33 of
ASTM Standard F1667 (2013 revision).
Also excluded from the scope of the Orders are nails suitable for use in powder-
actuated hand tools, whether or not threaded, which are currently classified under
HTSUS subheadings 7317.00.20.00 and 7317.00.30.00.
Also excluded from the scope of the Orders are nails having a case hardness greater
than or equal to 50 on the Rockwell Hardness C scale (HRC), a carbon content
greater than or equal to 0.5 percent, a round head, a secondary reduced-diameter
raised head section, a centered shank, and a smooth symmetrical point, suitable for
use in gas-actuated hand tools.
Also excluded from the scope of the Orders are corrugated nails. A corrugated nail
is made up of a small strip of corrugated steel with sharp points on one side.
Also excluded from the scope of the Orders are thumb tacks, which are currently
classified under HTSUS subheading 7317.00.10.00.
Certain steel nails subject to the Orders are currently classified under HTSUS
subheadings 7317.00.55.02, 7317.00.55.03, 7317.00.55.05, 7317.00.55.07,
7317.00.55.08, 7317.00.55.11, 7317.00.55.18, 7317.00.55.19, 7317.00.55.20,
7317.00.55.30, 7317.00.55.40, 7317.00.55.50, 7317.00.55.60, 7317.00.55.70,
7317.00.55.80, 7317.00.55.90, 7317.00.65.30, 7317.00.65.60 and 7317.00.75.00.
Certain steel nails subject to the Orders also may be classified under HTSUS
subheading 8206.00.00.00 or other HTSUS subheadings.
While the HTSUS subheadings are provided for convenience and customs
purposes, the written description of the scope of the Orders is dispositive.
Orders (emphasis added).
On August 5, 2016, OMG, an importer of zinc anchors, filed a request with Commerce for
a scope ruling that its zinc anchors should be excluded from the scope of the Orders. Scope Ruling
Request. In its Scope Ruling Request, OMG described its zinc anchors as follows:
Court No. 17-00036 Page 7
Each Zinc Anchor consists of two components: (1) a zinc alloy body, which
comprises approximately 62% of the total weight of the complete Zinc Anchor; and
(2) a zinc plated steel pin, which comprises approximately 38% of the Zinc
Anchor’s total weight. The zinc body and zinc plated pin are produced in Vietnam,
and then assembled together in Vietnam, resulting in a one-piece article of
commerce: a Zinc Anchor. While it may be physically possible to separate the zinc
body from the steel pin after the Zinc Anchor has been created, disassembly is not
commercially realistic, in light of the Zinc Anchor’s cost and use, as well as the
likelihood that the components will be damaged and rendered useless by the
disassembly process.
The zinc body of each Zinc Anchor contributes approximately 74% of the total cost
of the Zinc Anchor, while the steel pin contributes 17% of the total cost. The
balance of cost, 9%, is comprised of packing materials and assembly labor. While
one thousand Zinc Anchors cost approximately $31.50, one thousand subject steel
nails similar to the pin mechanically attached to the Zinc Anchor costs
approximately $5.30 (i.e., approximately 17% of the total cost).
In order to secure termination bars to concrete or masonry walls, Zinc Anchors are
inserted into predrilled holes, ZKLFKPXVWEHDPLQLPXPRI»>LQFK@ deeper than
the Zinc Anchor embedment. The Zinc Anchors are then installed with a hammer,
which is used to drive the steel pin, thereby expanding the zinc body in the
predrilled hole. The pin facilitates the expansion of the Zinc Anchor in all
directions. In other words, the termination bar is secured to a wall by the expanded
zinc body. The steel pin is used only to expand the zinc body.
Id. at 3–4.
Following OMG’s scope ruling request, Mid Continent submitted comments arguing that
OMG’s zinc anchors were within the scope of the Orders. Letter from the Bristol Group PLLC to
Sec’y Commerce, P.D. 8 (Aug. 16, 2016). OMG filed timely rebuttal comments. Letter from
Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP to Sec’y Commerce, P.D. 9 (Aug. 24,
2016).
On February 6, 2017, Commerce issued its Final Scope Ruling, in which it determined that
OMG’s zinc anchors were unambiguously within the scope of the Orders based upon the plain
meaning of the Orders and stated that the (k)(1) factors also supported its conclusion. Final Scope
Ruling at 10.
Court No. 17-00036 Page 8
OMG filed a complaint with this court contesting the Final Scope Ruling and on June 29,
2017, OMG submitted its Motion for Judgment on the Agency Record and Brief in Support.
Compl.; Pl.’s Br. The Government and defendant-intervenor Mid Continent submitted their briefs
in opposition on October 30, 2017. Def.’s Br., ECF No. 31; Def.-Inter.’s Br., ECF No. 32. OMG
replied on November 30, 2017. Pl.’s Reply. Oral argument was held before this court on May 9,
2018. ECF No. 41. OMG presented the court with samples of its merchandise at oral argument
and confirmed that the samples were identical to the merchandise subject to this action. Resp. to
Court’s Request, May 14, 2018, ECF No. 42. OMG and the Government filed supplemental
authority on May 15 and 16, 2018, respectively. ECF Nos. 43–44.
JURISDICTION AND STANDARD OF REVIEW
This court has jurisdiction over this action pursuant to 28 U.S.C. § 1581(c) and 19 U.S.C.
§ 1516a(a)(2)(B)(vi). The standard of review in this action is set forth in 19 U.S.C. §
1516a(b)(l)(B)(i): “[t]he 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.”
DISCUSSION
The Government argues that: (1) Commerce’s determination that OMG’s zinc anchors fit
within the plain language of the Orders is in accordance with law; (2) there is substantial evidence
that the (k)(1) sources dispositively place OMG’s product within the scope of the orders; (3) a
formal scope inquiry was unnecessary and thus Commerce did not need to consider the (k)(2)
sources; and (4) Commerce may instruct CBP to retroactively suspend liquidation on OMG’s
shipments entered prior to the date of Commerce’s ruling. “[T]he question of whether the
unambiguous terms of a scope control the inquiry, or whether some ambiguity exists, is a question
of law that we review de novo.” Meridian, 851 F.3d at 1382. The court concludes that the product
Court No. 17-00036 Page 9
at issue is not a nail within the plain meaning of the word “nail” and is, therefore, outside the scope
of the Orders.
As the Federal Circuit has held, the terms of an order govern its scope. Duferco, 296 F.3d
at 1097; see Eckstrom Indus., Inc. v. United States, 254 F.3d 1068, 1072 (Fed. Cir. 2001);
Wheatland Tube Co. v. United States, 161 F.3d 1365, 1370 (Fed. Cir. 1998). Additionally,
“[a]lthough the scope of a final order may be clarified, it can not be changed in a way contrary to
its terms.” Duferco, 296 F.3d at 1097 (quoting Smith Corona Corp. v. United States, 915 F.2d
683, 686 (Fed. Cir. 1990)). For that reason, “if [the scope of an order] is not ambiguous, the plain
meaning of the language governs.” ArcelorMittal Stainless Belg. N.V. v. United States, 694 F.3d
82, 87 (Fed. Cir. 2012).
“In determining the common meaning of a term, courts may and do consult dictionaries,
scientific authorities, and other reliable sources of information, including testimony of record.”
NEC Corp. v. Dep’t of Commerce, 23 CIT 727, 731, 74 F. Supp. 2d 1302, 1307 (1999) (quoting
Holford USA Ltd. Inc. v. United States, 19 CIT 1486, 1493–94, 912 F. Supp. 555, 561 (1995)).
Furthermore, “[b]ecause the primary purpose of an antidumping order is to place foreign exporters
on notice of what merchandise is subject to duties, the terms of an order should be consistent, to
the extent possible, with trade usage.” ArcelorMittal, 694 F.3d at 88.
A nail, as defined by THE AMERICAN HERITAGE DICTIONARY OF THE ENGLISH LANGUAGE
(“AMERICAN HERITAGE”) (4th ed. 2000), is “[a] slim, pointed piece of metal hammered into
material as a fastener.” Similarly, WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY OF THE
ENGLISH LANGUAGE (UNABRIDGED) (“WEBSTER’S”) (1993) defines a nail as “a slender and usually
pointed and headed fastener designed for impact insertion.” These definitions present a “single
clearly defined or stated meaning”: a slim, usually pointed object used as a fastener designed for
Court No. 17-00036 Page 10
impact insertion. Unambiguous, WEBSTER’S (1986), quoted in Meridian, 851 F.3d at 1381 n.7.
Therefore, “nail” is an unambiguous term.
The merchandise at issue here does not fit into the above definitions. OMG described its
zinc anchor as: “(1) a zinc alloy body . . . and (2) a zinc plated steel pin.” Scope Ruling Request
at 3. Commerce made its determination based upon the steel pin, arguing “the securely fastening
steel nail or ‘pin’ operates as a critical component of the OMG anchors, without which the anchors
could not function as a fastener.” Final Scope Ruling at 10. As both parties agreed at oral
argument, the steel pin fits within the common definition of a nail. Oral Arg. However, as
Commerce noted in its Final Scope Ruling, and as both parties agreed at oral argument, OMG’s
zinc anchor is a unitary article of commerce. Id.; Final Scope Ruling at 4–5. As such, the entire
product, not just a component part, must be defined as a nail to fall within the scope of the orders.
The entire product here is not a nail. The definitions of a nail cited above define a nail as
a fastener inserted by impact into the materials to be fastened. The merchandise at issue is not
inserted by impact into the materials to be fastened. Rather, OMG’s anchors are “inserted into
predrilled holes ZKLFKPXVWEHDPLQLPXPRI» [inch] deeper than the Zinc Anchor embedment.”
Scope Ruling Request at 4. A hammer is then used to strike the steel pin, which expands the zinc
body into firm contact with the materials to be fastened. Id. Nor is the steel pin acting as the
primary fastener; rather, the materials are fastened by the expanded zinc body while the steel pin
is only used to facilitate expansion. Id.
Trade usage further supports the conclusion that OMG’s zinc anchors are not nails.
Multiple industry actors categorize anchors with steel pins as anchors rather than as nails. Scope
Ruling Request at Exs. 5–9. Where the word “nail” is used in the description of these products, it
is used as an explicit or an implicit modifier for the noun “anchor” as in “Hammer Drive Nail-In
Court No. 17-00036 Page 11
Anchors,” “Drive Nail Anchors,” or “Nail-Ins.” Scope Ruling Request at Ex. 8 (emphases added).
These examples indicate that industry usage accords with the plain meaning of the word “nail.”
Thus, according to industry usage, the pin is a nail but the unitary article of commerce is an anchor.
The Government asserts that Commerce “considered how the language of the orders is
used in the relevant industry and [found] the language and marketing of masonry anchors is not
dissimilar to the variety of nails marketed in different categories.” Def.’s Br. at 13–14 (quoting
Final Scope Ruling at 10). However, neither Commerce in its Final Scope Ruling nor the
Government in its brief furnished support for this proposition.
Therefore, OMG’s zinc anchor, taken as a unitary article of commerce, is not a nail within
that word’s plain meaning and thus does not fall within the unambiguous scope of the Orders.
CONCLUSION
The court remands to Commerce for further consideration consistent with this opinion.
Commerce shall issue appropriate instruction to U.S. Customs and Border Protection regarding
the retroactive suspension of liquidation. Commerce shall file with the Court and provide to the
parties a revised scope determination within 90 days of the date of this order; thereafter, the parties
shall have 30 days to submit briefs addressing the revised final determination to the Court and the
parties shall have 15 days thereafter to file reply briefs with the Court.
SO ORDERED.
/s/ Gary S. Katzmann
Gary S. Katzmann, Judge
Dated:0D\
New York, New York