OTR Wheel Engineering, Inc. v. United States , 901 F. Supp. 2d 1375 ( 2013 )

Slip Op. 13-39
UNITED STATES COURT OF INTERNATIONAL TRADE
OTR WHEEL ENGINEERING, INC.,
Plaintiff,
v. Before: Jane A. Restani, Judge
UNITED STATES, Court No. 11-00166
Defendant,
BRIDGESTONE AMERICAS, INC. and
BRIDGESTONE AMERICAS TIRE
OPERATIONS, LLC,
Intervenor Defendants.
[Commerce’s Remand Results regarding the scope of the AD/CVD orders are sustained.]
OPINION
Dated: March 22, 2013
Arthur K. Purcell, Donna L. Bade, Mark R. Ludwikowski, and Mark J. Segrist,
Sandler, Travis & Rosenberg, PA, of New York, NY, for Plaintiff.
Alexander V. Sverdlov, Trial Attorney, Commercial Litigation Branch, Civil
Division, U.S. Department of Justice, of Washington, DC, for Defendant. With him on the
brief were Stuart F. Delery, Acting Assistant Attorney General, Jeanne E. Davidson, Director,
and Franklin E. White, Jr., Assistant Director. Of counsel on the brief were Daniel J. Calhoun
and Matthew D. Walden, Attorneys, Office of Chief Counsel for Import Administration, U.S.
Department of Commerce, of Washington, DC.
Christopher T. Cloutier, Joseph W. Dorn, Prentiss L. Smith, and J. Michael
Taylor, King & Spalding, LLP, for Intervenor Defendants.
Restani, Judge: Previously, this matter was before the court on Plaintiff OTR
Wheel Engineering, Inc.’s (“Plaintiff”) motion for judgment on the agency record pursuant to
Court No. 11-00166 Page 2
USCIT Rule 56.2. See OTR Wheel Eng’g, Inc. v. United States, 853 F. Supp. 2d 1281, 1283
(CIT 2012). Plaintiff, an importer of pneumatic off-the-road (“OTR”) tires from the People’s
Republic of China (“PRC”), challenged the U.S. Department of Commerce’s (“Commerce”) final
scope ruling regarding an antidumping duty (“AD”) order1 and a countervailing duty (“CVD”)
order2 (collectively the “Tire Orders”) covering certain pneumatic OTR tires from the PRC. See
Antidumping Duty and Countervailing Duty Orders on Certain New Pneumatic Off-The-Road
Tires from the People’s Republic of China: Final Scope Ruling OTR Wheel Engineering, Inc.,
(Apr. 26, 2011), Pl.’s Rule 56.2(C)(3) App. of Admin. R. (“Pl.’s App.”), Ex. F (“Final Scope
Ruling”).
The court ruled that Commerce lacked substantial evidence for its finding in the
Final Scope Ruling that Plaintiff’s tires did not fall within a scope exclusion to the Tire Orders
for tires designed for turf, lawn, and garden application. OTR Wheel, 853 F. Supp. 2d at 1290.
The court further concluded that Plaintiff’s request for the court to instruct Commerce to exclude
the tires from the scope of the Tire Orders was not warranted. Id. Instead, the court remanded
the matter to Commerce for a more in depth evaluation pursuant to the factors laid out in 19
C.F.R. § 351.225(k)(2).3 Id.1
Certain New Pneumatic Off-the-Road Tires From the People’s Republic of China:
Antidumping Duty Order: Notice of Amended Final Affirmative Determination of Sales at Less
Than Fair Value and Antidumping Duty Order, 73 Fed. Reg. 51,624 (Dep’t Commerce Sept. 4,
2008) (“AD Order”).
2
Certain New Pneumatic Off-the-Road Tires From the People's Republic of China:
Countervailing Duty Order, 73 Fed. Reg. 51,627 (Dep’t Commerce Sept. 4, 2008).
3
19 C.F.R. § 351.225(k)(1) states that: “in considering whether a particular product is
included within the scope of an order or a suspended investigation, the Secretary will take into
(continued...)
Court No. 11-00166 Page 3
Upon remand, Commerce employed the (k)(2) factors to conclude again that
Plaintiff had not demonstrated that its tires fell within the scope exclusion. Final
Redetermination Pursuant to Court Remand, (Nov. 9, 2010), App. of Docs Supporting Def.’s
Resp. to Pl.’s Comments on Final Redetermination Pursuant to Ct. Remand, Tab 8 (“Remand
Results”). Because Commerce complied with the court’s remand instructions by providing a
more thorough analysis under section 351.225(k)(2) and because Plaintiff’s objections are
without merit, the court sustains the Remand Results.
BACKGROUND
In September 2008, Commerce imposed the Tire Orders on certain new pneumatic
OTR tires from the PRC.4 The identical scope language of the Tire Orders included:
new pneumatic tires designed for off-the-road (OTR) and off-highway use, subject
to exceptions identified below . . . . The vehicles and equipment for which certain
OTR tires are designed for use include, but are not limited to: (1) Agricultural and
3
(...continued)
account the following: (1) The descriptions of the merchandise contained in the petition, the
initial investigation, and the determinations of the Secretary (including prior scope
determinations) and the Commission.” When the criteria examined under section 351.225(k)(1)
is not dispositive, section 351.225(k)(2) states that Commerce must then consider five factors:
“(i) The physical characteristics of the product; (ii) The expectations of the ultimate purchasers;
(iii) The ultimate use of the product; (iv) The channels of trade in which the product is sold; and
(v) The manner in which the product is advertised and displayed.”
4
“Generally, whenever domestic producers of a particular product believe that imports of
certain competing goods are being sold in the United States at less than fair market value (i.e.,
being ‘dumped’), they may petition Commerce to impose antidumping duties on the imports of
the goods.” King Supply Co. v. United States, 674 F.3d 1343, 1345 (Fed. Cir. 2012). After
investigations by Commerce and the U.S. International Trade Commission (“ITC”), Commerce
may issue “an AD order imposing antidumping duties on the appropriate imported merchandise.”
Id. (citing 19 U.S.C. § 1673d(c)(2)). “After an AD order is issued, Commerce is often called
upon to issue ‘scope rulings’ to clarify the scope of the AD order and determine whether
particular products are included within its scope.” Id. CVD orders are subject to the same scope
challenge.
Court No. 11-00166 Page 4
forestry vehicles and equipment, including agricultural tractors, combine
harvesters, agricultural high clearance sprayers, industrial tractors, log-skidders,
agricultural implements, highway-towed implements, agricultural logging, and
agricultural, industrial, skid-steers/mini-loaders; (2) construction vehicles and
equipment, including earthmover articulated dump products, rigid frame haul
trucks, front end loaders, dozers, lift trucks, straddle carriers, graders, mobile
cranes, compactors; and (3) industrial vehicles and equipment, including smooth
floor, industrial, mining, counterbalanced lift trucks, industrial and mining
vehicles other than smooth floor, skid-steers/mini-loaders, and smooth floor
off-the-road counterbalanced lift trucks. The foregoing list of vehicles and
equipment generally have in common that they are used for hauling, towing,
lifting, and/or loading a wide variety of equipment and materials in agricultural,
construction and industrial settings. Such vehicles and equipment, and the
descriptions contained in the footnotes are illustrative of the types of vehicles and
equipment that use certain OTR tires, but are not necessarily all-inclusive. While
the physical characteristics of certain OTR tires will vary depending on the
specific applications and conditions for which the tires are designed (e.g., tread
pattern and depth), all of the tires within the scope have in common that they are
designed for off-road and off-highway use. Except as discussed below, OTR tires
included in the scope of the order range in size (rim diameter) generally but not
exclusively from 8 inches to 54 inches.
AD Order, 73 Fed. Reg. at 51,624 25 (footnotes with definitions omitted). The Tire Orders also
excluded certain tires from the scope including, “tires of a kind designed for use on . . . vehicles
for turf, lawn and garden . . . applications.” Id. at 51,625.
In February 2011, Plaintiff filed a scope ruling request, asking Commerce to
find that Trac Master and Traction Master tires imported by Plaintiff fall within this
exclusion. Scope Ruling Request: OTR Wheel Engineering, Inc. Lawn & Garden Tires, (Feb.
11, 2011) Pl.’s App., Ex. A, at 4. Plaintiff argued that the plain scope language was dispositive
in excluding Plaintiff’s Trac Master and Traction Master tires. Id. Bridgestone Americas, Inc.
and Bridgestone Americas Tire Operations, LLC (collectively “Bridgestone”) filed comments
Court No. 11-00166 Page 5
opposing Plaintiff’s exclusion request.5
In April 2011, Commerce issued its Final Scope Ruling, finding that the tires
were not excluded from the Tire Orders. Final Scope Ruling at 8. Pursuant to 19 C.F.R.
§ 351.225(k)(1), Commerce stated that it found the description of the merchandise contained in
the petition, the initial investigation, and the determinations of the Secretary of Commerce and
the ITC to be dispositive. Id. at 6. Using data from the Tire and Rim Association (“TRA”) and
the ITC’s injury determination, Commerce decided that tires with R-1 and R-4 type treads, like
Plaintiff’s, are used for farming, light industrial service, and highway mowing and therefore are
not excluded from the scope of the Tire Orders. Id. at 7 8. As a result, Commerce found it
unnecessary to conduct further analysis considering the additional factors contained in 19 C.F.R.
§ 351.225(k)(2). Id. at 5. Plaintiff did not argue that its tires fall outside the general scope of the
Tire Orders, merely that they are within the exclusion for turf, lawn, and garden applications.
See OTR Wheel, 853 F. Supp. 2d at 1285.
Pursuant to the court’s remand in OTR Wheel, Commerce conducted a more
expansive analysis under 19 C.F.R. § 351.225(k)(2). See Remand Results at 12 23. After
agreeing with the court’s opinion that the analysis under 19 C.F.R. § 351.225(k)(1) was not
dispositive of whether the Trac Master and Traction Master tires were “designed for use” on
vehicles for turf, lawn, and garden applications, Commerce undertook the five-factor (k)(2) test.
Remand Results at 11. Guided by new record evidence regarding the physical characteristics of
the tires and the way in which Plaintiff marketed its tires and consumers used the tires,
5
Although Bridgestone participated in the proceedings before Commerce and has
intervened in this action, Bridgestone has chosen not to file briefs, appear at oral argument, or
otherwise actively participate in the proceedings before the court.
Court No. 11-00166 Page 6
Commerce concluded that the tires do not fall within the scope exclusion. Id. at 18.
Plaintiff again challenges Commerce’s findings, citing errors in Commerce’s 19
C.F.R § 351.225(k)(2) analysis and requesting reevaluation under 19 C.F.R § 351.225(k)(1). See
Comments on Final Results of Redetermination Pursuant to Court Remand (“OTR Comments”)
at 24. Defendant United States (“Defendant”) responds that Commerce’s determination was
supported by substantial evidence, and the record fails to establish that Plaintiff’s tires are
“unambiguously designed for use on vehicles for turf, lawn, and garden appliances.” Def.’s
Resp. to Pl.’s Comments (“Def.’s Resp.”) at 18. Defendant therefore requests that the court
sustain Commerce’s Remand Results. Id.
JURISDICTION AND STANDARD OF REVIEW
The court has jurisdiction pursuant to 28 U.S.C. § 1581(c). Commerce’s final
scope determination will be upheld unless it is found “to be unsupported by substantial evidence
on the record, or otherwise not in accordance with law.” 19 U.S.C. § 1516a(b)(1)(B)(i).
DISCUSSION
Plaintiff submits that the scope question may be resolved under a (k)(1) analysis
in light of the recent decision in Legacy Classic Furniture, Inc. v United States, 867 F. Supp. 2d
1321 (CIT 2012).6 OTR Comments at 21 22. Plaintiff also argues that, should the court find
6
Legacy Classic involved a scope review in which the court decided that a cedar-lined
storage bench with a padded seat might fall within a scope exclusion under 19 C.F.R.
§ 351.225(k)(1). 867 F. Supp. 2d at 1331. The order in that case covered various bedroom
“chests” but created an unqualified scope exclusion for “benches.” Id. at 1330. The court
previously had required Commerce to undertake a (k)(2) analysis on remand, yet subsequently it
decided that a (k)(1) determination placing the bench within the scope exclusion might be
sufficient because the unqualified exclusion should be read broadly. Id. at 1330 31. At any rate,
Legacy Classic is not binding authority in this case. See Algoma Steel Corp., Ltd. v. United
(continued...)
Court No. 11-00166 Page 7
that a (k)(2) analysis is necessary, Commerce’s redetermination is not supported by substantial
evidence. Id. In Plaintiff’s opinion, “it appears that the Department has additional arbitrary and
capricious distinctions in store with which to unlawfully enlarge the scope of the subject Tire
Orders.” Id. at 4.
I. Reconsideration of (k)(1) Criteria
Plaintiff argues that the court should revisit the (k)(1) analysis in light of Legacy
Classic. OTR Comments at 20 24. Plaintiff claims that because the Tire Orders’ exclusion of
tires for “turf, lawn, and garden” applications is unqualified, the exclusion applies to all tires
designed for such use, even if those tires may also be designed for other uses. Id. Defendant
successfully counters this assertion on exhaustion grounds. Def.’s Resp. at 6 8. Legacy Classic
was issued in September 2012. Assuming arguendo Legacy Classic altered the legal landscape,
Plaintiff was required to raise this claim during the remand proceedings. Congress has required
that the court “shall, where appropriate, require the exhaustion of administrative remedies” in
actions arising pursuant to Commerce’s antidumping duty determinations. 28 U.S.C. § 2637(d).
As Plaintiff concedes that this claim was not exhausted before the agency, the court will not
consider it now.
Plaintiff also points to Customs’ recent classification of OTR’s tires under the
Harmonized Tariff Schedule to support its characterization of the tires. OTR Comments at 4 5.
Plaintiff asks the court to take judicial notice of the ruling, relying on Win-Tex Prods. v. United
States, 829 F. Supp. 1349, 1351 52 (CIT 1993) (taking judicial notice of an unpublished scope
6
(...continued)
States, 865 F.2d 240, 243 (Fed. Cir. 1989).
Court No. 11-00166 Page 8
order interpreting the same scope language as the one challenged in that case). OTR Comments
at 6. The court declines to do so. The authority to clarify the scope of AD and CVD orders rests
solely with Commerce, and Customs’ rulings are not within the list of factors to be considered
under 19 C.F.R. § 351.225(k). See Crawfish Processors Alliance v. United States, 483 F.3d
1358, 1361 (Fed. Cir. 2007). Additionally, Win-Tex involved judicial notice of a conflicting
decision on essentially the same subject by the same agency. 829 F. Supp. at 1351 52.
Classification decisions by Customs and scope rulings by Commerce may be in conflict without
calling into question the reasonableness of either, even assuming both agencies apply the same
legal standard.
II. Application of the (k)(2) Factors
In reviewing Commerce’s analysis under 19 C.F.R. § 351.225(k)(2) the court will
not “substitute [its] judgment for that of Commerce . . . nor [will] it allow the parties to retry
factual issues . . . de novo.” See Inland Steel Indus., Inc. v. United States, 188 F.3d 1349, 1359
(Fed. Cir. 1999) (applying the substantial evidence standard of review to factual determinations
by Commerce in a trade remedy case). Under this standard, the court will not re-weigh the
evidence presented to Commerce, and will uphold Commerce’s determination provided it
chooses from among the range of possible reasonable conclusions based on the record.
Commerce conducted a thorough reconsideration of the scope of the Tire Orders pursuant to the
five (k)(2) factors and weighed evidence that was in conflict or inconclusive. Nonetheless,
Plaintiff asserts that Commerce erred and its decision must be overturned.
A. Physical Characteristics of the Product
The first of the (k)(2) factors instructs Commerce to review the physical
Court No. 11-00166 Page 9
characteristics of the product. 19 C.F.R. § 351.225(k)(2)(i). Commerce relied in particular on
the R-1 and R-4 tread design of Plaintiff’s tires, which cause turf disturbance because they are
designed to dig into uneven or moist ground. Remand Results at 12 14. On the other hand,
Commerce was not persuaded by the relatively small size of the tires7 and the markings on them,
the factors emphasized by Plaintiff. Id. at 13, 15. Plaintiff directed Commerce to a depiction of
what it claims to be a “sub-compact tractor” designed for lawn and gardening applications. OTR
Comments at 8 10. It also noted that this marking does not appear on its larger agricultural tires,
supporting its interpretation of the image as reflecting lawn and garden usage. Id. at 9.
Commerce found this evidence inconclusive, stating that the marking could “just as easily be a
go-kart or a small tractor.” Remand Results at 15. Before the court, Plaintiff again points to the
product marking that Plaintiff claims depicts a “riding lawn mower.” OTR Comments at 9 10.
Although the court is not persuaded by Commerce’s far-fetched conclusion that
the picture on the tires could be a go-cart, one not reiterated in Defendant’s brief, the court agrees
with Commerce’s conclusion that the image is inconclusive. Commerce, therefore, was
permitted to disregard the evidence as unhelpful, as it did. Similarly, although size is certainly
one consideration in classifying the tires at issue in this case, Commerce’s explanation that size is
not determinative is reasonable given the acknowledged range of tire sizes covered by the scope
of the Tire Orders and the decision to base scope, not on the size of the tire, but on its intended
use at the time of design. See AD Order, 73 Fed. Reg. at 51,624 (“OTR tires included in the
scope of the order range in size (rim diameter) generally but not exclusively from 8 inches to 54
7
Plaintiff’s tires range in size from 10 12 inches. While this size is within the size range
of the Tire Orders, the tires subject to the Tire Orders may be as large as 54 inches in agricultural
and industrial applications. Remand Results at 13 n.42.
Court No. 11-00166 Page 10
inches”) (emphasis added). Commerce’s decision to rely more heavily on tread type, as opposed
to size or the inconclusive tire markings, was not unreasonable.
B. Expectations of the Ultimate Purchaser
In terms of the expectations of the ultimate purchaser, Commerce addressed and
discounted Plaintiff’s marketing materials and its communications with its main customers
during the design process.8 Remand Results at 15 17. Plaintiff asserts that Commerce did not
focus enough on the marketing materials or correspondence and improperly discredited them,
despite the clear evidence found in them that the tires were designed to meet Plaintiff’s
customers’ needs for durable tires capable of handling uneven terrain. OTR Comments at 11 12.
Commerce concluded that the correspondence between Plaintiff and its customers
did not reference necessarily the subject tires. This determination is dubious. Commerce also
determined that Kubota’s BX Series tractors, on which Plaintiff asserts its tires are standard
features, are not the type of vehicles used solely for lawn, turf, and, garden applications. The
court cannot say, however, that this further conclusion is unsupported. See Remand Results at
15. Commerce noted in particular that the Kubota BX series tractors are designed for “digging,
earth-moving or loading, and log carrying” according to the marketing materials submitted by
Plaintiff. Id. at 15. This fact rendered questions about the scope of the communications between
Plaintiff and its customer less important. Accordingly, it was not unreasonable for Commerce to
conclude that the type of vehicle, for which Plaintiff claims it designed the tires, falls outside the
8
Commerce addressed communications between Plaintiff’s customer, Kubota, and
Plaintiff within the context of the physical characteristics factor. Remand Results at 15. This
evidence appears to relate more directly to the factor of the expectations of the ultimate
purchaser. Thus, the court will address it here.
Court No. 11-00166 Page 11
realm of the more traditional gardening applications seemingly the subject of the scope
exclusion.
C. Ultimate Use of the Product
With respect to the ultimate use of the product, Commerce relied in part on the
lack of clear evidence to support Plaintiff’s claims that its tires are used as standard features on
two sub-compact tractors. Remand Results at 17 18. Moreover, Commerce also found, as noted
supra, that the tractors may be used for activities not traditionally associated with “gardening,”
including “agricultural and construction activities, such as heavy excavation.” Id. at 18.
Although Plaintiff is correct that this scope exclusion is based on design rather
than actual use, the ultimate use factor addressed by Commerce is relevant circumstantial
evidence of the likely intent of Plaintiff at the time it designed the products. Because the parties
agree that the tires are in fact used for a variety of purposes that go beyond turf, lawn, and garden
applications, Commerce could conclude that Plaintiff’s assertion that the tires were designed
primarily for lawn, turf, and garden applications is undermined. See Remand Results at 18.
D. The Channels of Trade in Which the Product is Sold
Plaintiff essentially agrees with Commerce’s remand determination that the
channels of trade in this case “shed[] no light on the fundamental issue of whether OTR’s Trac
Master and Traction Master tires were ‘designed for use’ on vehicles with turf, land and garden
applications.” OTR Comments at 18; see also Remand Results at 19. Therefore, neither party
believes that this factor is entitled to much weight in deciding the scope question.
E. Manner in Which the Product is Advertised and Displayed
Commerce acknowledged that the marketing materials submitted by OTR
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describe the subject tires as “OTR’s premium Lawn and Garden Tire.” Remand Results at 19.
Nonetheless, Commerce gave substantial weight to Plaintiff’s website that classified the subject
tires within the “farm” and “utility”9 section but not the “turf and garden” section. Id. at 19 20.
Thus, according to Commerce, “the record does not demonstrate that the manner in which [the
tires] are advertised or displayed indicates they were designed for turf, lawn and garden
applications.” Id. at 21. Plaintiff contends that its evidence of marketing materials and previous
website classification of the tires as lawn and garden tires compels a finding that the tires were
designed for lawn and garden applications. OTR Comments at 18 20. Plaintiff argues that
Commerce relied to an unreasonable degree on its own independent research of Plaintiff’s
website, revealing the Plaintiff’s “misclassification” of the subject tires. Id. Plaintiff also renews
its arguments that this factor is irrelevant in considering the “designed for use” standard. Id. at
19.
The court finds that Commerce has discretion to allocate relative weight to each
piece of evidence, and the court will not entertain the invitation to re-weigh the evidence itself.
As explained, supra, marketing materials are relevant circumstantial evidence of the design
standard set out in the scope exclusion clause. Although Commerce was presented with
marketing materials that indicated the tires were advertised for lawn and garden use, the court
cannot say that Commerce erred in determining that evidence largely was negated by Plaintiff’s
classification of the tires on its own website as only utility and farm tires, both falling outside
9
Vehicles using utility tires are described on Plaintiff’s website as: “Skid
Steer/Backhoe/Utility Vehicles tend to operate best in all conditions and service a range of
applications. This includes construction, landscaping, farming, mining, and ground support
equipment.” Remand Results at 20.
Court No. 11-00166 Page 13
Commerce’s reasonable interpretation of lawn, turf, and garden applications.
CONCLUSION
Commerce undertook the “further evaluation,” pursuant to the factors set forth in
19 C.F.R. § 351.225(k)(2), as directed by OTR Wheel. The best that can be said for Plaintiff’s
case is that there is contradictory evidence. In such a case, Commerce may reach one supported
conclusion or the other. Commerce has met its burden of making a full and complete inquiry and
has undertaken a reasonable analysis. Commerce’s determination that Plaintiff’s tires do not fall
within the scope exception is one that is supported by substantial evidence, and therefore,
Commerce’s Remand Results are SUSTAINED. Judgment will be entered accordingly.
/s/ Jane A. Restani
Jane A. Restani
Judge
Dated: March 22, 2013
New York, New York