Magnum Magnetics Corp. v. United States , 2020 CIT 96 ( 2020 )

Slip Op. 20-
UNITED STATES COURT OF INTERNATIONAL TRADE
MAGNUM MAGNETICS CORPORATION,
Plaintiff,
v.
Before: Jane A. Restani, Judge
UNITED STATES,
Defendant, Court No. 19-00126
and
MAGNETIC BUILDING SOLUTIONS,
Defendant-Intervenor.
OPINION
[Commerce’s Scope Ruling finding the subject merchandise outside of the scope of the relevant
antidumping and countervailing duty orders is sustained]
Dated: July 13, 2020
Ritchie T. Thomas, Jeremy W. Dutra, and Christopher D. Clark, Squire Patton Boggs
(US) LLP, of Washington, D.C., for Plaintiff Magnum Magnetics Corporation.
Jason M. Kenner, Trial Attorney, and Claudia Burke, Assistant Director, U.S.
Department of Justice, Civil Litigation Division, Commercial Litigation Branch, of New York,
N.Y., for Defendant United States of America. Of counsel on the brief was Brandon J. Custard,
Attorney, U.S. Department of Commerce, Office of Chief Counsel for Trade Enforcement &
Compliance, of Washington, D.C.
Melissa M. Brewer and Laurence J. Lasoff, Kelley Drye & Warren, LLP, of Washington,
D.C., for Defendant-Intervenor Magnetic Building Solutions.
Restani, Judge: This action challenges a final scope ruling of the United States Department
of Commerce, International Trade Administration (“Commerce”) regarding certain flexible
magnets from the People’s Republic of China (“PRC”), imported by Defendant-Intervenor
Court No. 19-00126 Page 2
Magnetic Building Solutions (“MBS”). Commerce determined that MBS’s magnets are excluded
from the scope of the antidumping and countervailing duty orders because they are “printed
flexible magnets” of a kind that the orders’ plain text expressly excludes. See Scope Ruling on the
Antidumping and Countervailing Duty Orders on Raw Flexible Magnets from the People’s
Republic of China: Request by Magnetic Building Solutions, A-570-922, C-570-923 (Dep’t
Commerce June 19, 2019) (“Scope Ruling”).
Plaintiff, Magnum Magnetics Corporation (“Magnum”) moves for judgment on the agency
record and asks the court to hold that Commerce’s determination is contrary to the text of the
antidumping and countervailing duty orders, and therefore, is unsupported by substantial evidence
or otherwise not in accordance with law. See Mem. of P. & A. in Supp. of Pl. Magnum Magnetic
Corp.’s Rule 56.2 Mot. For J. on the Agency R., ECF No. 22 at 12 (Dec. 2, 2019) (“Magnum Br.”).
Defendant, the United States of America (the “government”), responds that Commerce’s scope
ruling is supported by substantial evidence and otherwise in accordance with law, and asks the
court to sustain Commerce’s determination. See Defendant’s Response to Pl. Rule 56.2 Mot. For
J. on the Agency R., ECF No. 25 at 7 (Mar. 3, 2020) (“Gov. Br.”). For the following reasons, the
court affirms Commerce’s scope ruling.
BACKGROUND
In 2008, Commerce published antidumping and countervailing duty orders on certain
flexible magnets from the PRC. See Antidumping Duty Order: Raw Flexible Magnets from the
People’s Republic of China, 73 Fed. Reg. 53,847 (Dep’t Commerce Sept. 17, 2008) (“ADD
Order”); Raw Flexible Magnets from the People’s Republic of China: Countervailing Duty Order,
73 Fed. Reg. 53,849 (Dep’t Commerce Sept. 17, 2008) (“CVD Order”) (collectively, the
“Orders”). The Orders cover merchandise under subheadings 8505.19.10 and 8505.19.20 of the
Court No. 19-00126 Page 3
Harmonized Tariff Schedule of the United States (“HTSUS”), under which the MBS magnets are
classified. 1 Specifically, the Orders include the following merchandise:
[C]ertain flexible magnets regardless of shape, color, or packaging. Subject
flexible magnets are bonded magnets composed (not necessarily exclusively) of (i)
any one or combination of various flexible binders (such as polymers or co-
polymers, or rubber) and (ii) a magnetic element, which may consist of a ferrite
permanent magnet material (commonly, strontium or barium ferrite, or a
combination of the two), a metal alloy (such as NdFeB or Alnico), any combination
of the foregoing with each other, or any other material capable of being
permanently magnetized.
Subject merchandise may be in either magnetized or unmagnetized (including
demagnetized) condition, and may or may not be fully or partially laminated or
fully or partially bonded with paper, plastic, or other material, of any composition
and/or color. Subject flexible magnets may be uncoated or may be coated with an
adhesive or any other coating or combination of coatings.
ADD Order, 73 Fed. Reg. at 53,847; CVD Order, 73 Fed. Reg. at 53,850. But, the Orders expressly
exclude:
[P]rinted flexible magnets, defined as flexible magnets (including individual
magnets) that are laminated or bonded with paper, plastic, or other material if such
paper, plastic, or other material bears printed text and/or images, including but not
limited to business cards, calendars, poetry, sports event schedules, business
promotions, decorative motifs, and the like.
ADD Order, 73 Fed. Reg. at 53,487; CVD Order, 73 Fed. Reg. at 53,850. Nevertheless, the
foregoing “exclusion does not apply” to those “printed flexible magnets” whose printing consists
“only of the following:”
[A] trade mark or trade name; country of origin; border, stripes, or lines; any
printing that is removed in the course of cutting and/or printing magnets for retail
sale or other disposition from the flexible magnet; manufacturing or use instructions
(e.g., “print this side up,” “this side up,” “laminate here”); printing on adhesive
backing (that is, material to be removed in order to expose adhesive for use such as
application of laminate) or on any other covering that is removed from the flexible
magnet prior or subsequent to final printing and before use; non-permanent printing
1
The Orders provide that the HTSUS subheadings are “provided only for convenience and
customs purposes; the written description of the scope of the order is dispositive.” ADD Order, 73
Fed. Reg. at 53,847; CVD Order, 73 Fed. Reg. at 53,850.
Court No. 19-00126 Page 4
(that is, printing in a medium that facilitates easy removal, permitting the flexible
magnet to be re-printed); printing on the back (magnetic) side; or any combination
of the above.
ADD Order, 73 Fed. Reg. at 53,487; CVD Order, 73 Fed. Reg. at 53,850. The parties do not
dispute the meaning of the main language of the Orders, Magnum instead challenges Commerce’s
determination that the MBS magnets fall within the exclusion. See Magnum Br. at 3–19. The MBS
magnets are raw flexible magnetic underlays sold in both rolls and panels. Scope Ruling at 3. The
Orders address three types of underlays. Id. at 3, 10. The first underlay is sold in a roll and is
“rolled onto the floor with the non-magnetized side facing down.” Id. Users then purchase flooring
material with a magnetic backing to attach to the magnetized side of the product. Id. The non-
magnetized side of the product is “permanently bonded” with paper printed with a design, such as
hardwood. Id. The second underlay is identical, except that the non-magnetized side with the
hardwood design is covered in adhesive material and a strip of removable paper, so that the product
can be stuck to the floor. Id. at 3, 10. The third underlay is sold in panels with an adhesive backing
and is meant to be stuck to walls. Id. Customers similarly can attach wall coverings with magnetic
backing to the product. Id. at 3. In sum, each of the three types of underlays have a permanent
hardwood design on the non-magnetized side. Id. at 3–4.
After reviewing the “language of the scope, the description of the products contained in
MBS’s Scope Inquiry, prior scope determinations, including in the investigation, and the
[International Trade Commission (“ITC”)] Final Injury Determination,” Commerce determined
that the MBS magnets are excluded from the scope of the Orders. Scope Ruling at 12. In particular,
Commerce considered two prior scope rulings in arriving at its determination. Id. at 4–5, 12.
Commerce found that although the list of exemplars in the exclusion language did not apply to
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MBS magnets, the list was a non-exhaustive guideline and that the permanent decorative motif on
the underlays rendered them subject to the exclusion. Id. at 13–15.
Magnum contended that MBS’s magnets are in-scope because: 1) they do not serve a
decorative purpose, 2) they are not like the products listed in the exclusion, and 3) the design is
printed on the back of the product, and thus falls within an exception to the exclusion. See Magnum
Br. at 6–12. The government argues that Commerce did not err in finding the merchandise out of
scope. Gov. Br. at 7–18. 2
JURISDICTION AND STANDARD OF REVIEW
The court’s jurisdiction to review a challenge to a final scope ruling is pursuant to 19 U.S.C.
§ 1516a(a)(2)(B)(vi) and 28 U.S.C. § 1581(c) (2012). 3 Unless “unsupported by substantial
evidence on the record, or otherwise not in accordance with law,” the court upholds Commerce’s
determination that the scope of an antidumping or countervailing duty order excludes the subject
merchandise. 19 U.S.C. § 1516a(b)(1)(B)(i). “Substantial evidence is such relevant evidence as a
reasonable mind might accept as adequate to support a conclusion.” Eckstrom Indus., Inc. v.
United States, 254 F.3d 1068, 1071 (Fed. Cir. 2001) (internal quotation and citations omitted).
DISCUSSION
I. Legal Framework
In making a scope ruling, Commerce must look first to the language of the antidumping
or countervailing duty order. See Duferco Steel, Inc. v. United States, 296 F.3d 1087, 1097–98
(Fed. Cir. 2002). Commerce must also consider the (k)(1) sources: “[1] The descriptions of the
2
In lieu of a brief, MBS submitted a letter supporting Commerce’s final scope ruling. MBS
Letter Re: Magnum Magnetics Corp. v. United States, Court No. 19-00126, ECF No. 26 (March
4, 2020).
3
Further citations to the United States Code are to the 2012 edition unless otherwise indicated.
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merchandise contained in the petition, [2] the initial investigation, and [3] the determinations of
[Commerce] (including prior scope determinations) and the Commission.” 19 C.F.R. §
351.225(k)(1). If the sources in (k)(1) are not dispositive, Commerce must then consider the
(k)(2) factors. 19 C.F.R. § 352.225(k)(2). “Commerce cannot ‘interpret’ an antidumping or
countervailing duty order so as to change the scope of that order, nor can Commerce interpret an
order in a manner contrary to its terms.” See Duferco Steel, 296 F.3d at 1095 (quoting Eckstrom
Indus., Inc. v. United States, 254 F.3d 1068, 1072 (Fed. Cir. 2011)).
II. Language of the Orders
Commerce found that the MBS magnets are excluded from the scope of the Orders
because the plain language excludes printed flexible magnets, and because the MBS magnets do
not conform to any of the exceptions to the exclusion. Scope Ruling at 18.
Magnum contends that the MBS magnets are not like the enumerated excluded items:
“business cards, calendars, poetry, sports event schedules, business promotions, decorative motifs,
and the like.” Magnum Br. at 6–10. It argues that the list implies that any decorative motif must
be visible during use for merchandise to merit exclusion. Id. The government responds that the
phrase “including but not limited to” in the exclusion language renders the list informational, not
exhaustive, and that the product need not be like the other products on the list to qualify for the
exclusion. Gov. Br. at 9–11. In coming to this conclusion, the government stresses that although
Commerce may clarify existing orders, it may not interpret them in a way to change the scope of
the orders. See Gov. Br. at 11 (citing Global Commodity Grp. LLC v. United States, 709 F.3d
1134, 1138 (Fed. Cir. 2013)).
Magnum argues that the unifying characteristic of “business cards, calendars, poetry, sports
event schedules, business promotions, decorative motifs, and the like” is to display a printed design
Court No. 19-00126 Page 7
to the user, either to relay information or decorate the surrounding space. See Magnum Br. at 7–8.
Accordingly, it contends that any excluded article should serve a similar purpose to merit
exclusion. Id. MBS’s magnets do not ultimately display information or decorate the space they are
installed in. Scope Ruling at 3–4, 7. Their design is either never visible, or briefly visible after they
are removed from their packaging until they are placed design-side down on a floor or wall. See
id. Therefore, in Magnum’s view, the product is not “like” the products enumerated in the
exclusion. Magnum Br. at 7–8.
The utilization of the phrase “including but not limited to,” however, supports the
government’s position. The list: “business cards, calendars, poetry, sports event schedules,
business promotions, decorative motifs, and the like,” see Scope Ruling at 2, is exemplary but not
exhaustive, and was justifiably read to include products without a common purpose or unifying
quality with the enumerated items. MBS’s product meets the requirements of the exclusion; it is
permanently bonded with paper bearing a conforming printed image. Further, Magnum does not
argue, nor does the court find, that any of the exceptions to the exclusion apply to the MBS
magnets. It was reasonable based on the language of the Orders for Commerce to determine that
merchandise need not have a design visible after installation to merit exclusion.
III. Relevant (k)(1) Sources
Turning to the (k)(1) sources, none appear inconsistent with Commerce’s ruling. The
investigation report is of little probative value because MBS did not produce the magnets at issue
at the time of the underlying petition and investigation. See Raw Flexible Magnets from the
People’s Republic of China; Scope Request from Magnetic Building Solutions LLC – Final
Scope Determination, A-570-922, C-570-923 at 11–12 (Dep’t Commerce Mar. 6, 2018) (“MBS
2018 Ruling”). With that said, there are indications in the investigation documents that printed
Court No. 19-00126 Page 8
products, as stated by the ITC, generally do not fall within the scope of the Orders, as “Raw
flexible magnets” is a term “adopted for the purposes of these investigations to distinguish
between the unprinted products of raw magnet producers such as Magnum, Flexmag, and Holm,
and the printed magnets and other products of their non-distributor customers.” Raw Flexible
Magnets from China and Taiwan, USITC Pub. 4030, Inv. Nos. 701-TA-452 and 731-TA-1129-
1130 at I-7, n. 15 (May 8, 2008) (final determination) (“Investigation Report”); see also id. at 5(noting that “Commerce has excluded most types of printed flexible magnets from the scope of
investigation.”). In its scope ruling, Commerce mainly focuses on two prior determinations in
concluding that the MBS magnets are properly excluded from the scope of the Orders. See Scope
Ruling at 4–5. Each is addressed in turn.
First, the government argues that its determination is consistent with a prior scope ruling
on a magnetic label holder with a zebra print design. See Gov Br. at 16–17. In 2017, Tatco
Products, Inc. (“Tatco”) requested a scope ruling for four magnetic label holders. Scope Ruling on
the Antidumping and Countervailing Duty Orders on Raw Flexible Magnets from the People’s
Republic of China: Request by Tatco Products, Inc., A-570-922, C-570-923 at 2 (Dep’t Commerce
Aug. 23, 2017) (“Tatco Ruling”). The label holders consisted of a raw flexible magnet and a clear
plastic pocket heat-sealed to the front of the magnet. See id. at 4. Although one of the label holders
had zebra stripes printed in black ink on the front of the white magnet, end users could insert a
piece of fiberboard into the plastic pocket, obscuring the design. See id. at 4, 7. The government
concluded that the zebra-print label holder was exempt from the antidumping order because it
contained a permanent printed design on the non-magnetic side of the magnet, rejecting Magnum’s
argument that the printing was functionally removed before use because it was concealed during
use. Id. at 12.
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In its brief, Magnum attempts to distinguish MBS from Tatco by claiming that Tatco’s
zebra design is not completely covered by the label when in use, and even if it is, the Tatco product
is meant to be seen while empty, during which time the zebra print serves a decorative purpose.
Magnum Br. at 11. In comments made in the Tatco Ruling, however, Magnum itself argued that
the printing on Tatco’s magnets had no function, decorative or otherwise, writing that “Tatco’s
printed magnets are precisely the type of non-functional printing that is addressed in the scope
language.” Tatco Ruling at 8. Commerce addressed Magnum’s argument in Tatco by saying: “We
disagree with Magnum that the exclusion language of the scope Orders contains an exception for
printing that is concealed during the use of a flexible magnet.” Id. at 12. Therefore, by the same
logic, Commerce found that MBS’s printed flooring magnets can qualify for the exclusion even if
the printing is not visible during use and serves no functional purpose. Scope Ruling at 15–16.
Second, Commerce issued an earlier scope ruling to MBS for a similar product on March
6, 2018, and determined that the product was in scope “[1] because it is a bonded flexible
magnet…[2] it consists of a flexible binder and a magnetic element…combined into a solid sheet
by mechanical rolling...[and] [3] none of the exclusions in the scope of the Orders are applicable.”
MBS 2018 Ruling at 15–16. The magnetic flooring underlay in that determination was identical to
the product at issue here, except that it had “no printing on it.” Scope Ruling at 4. The government
distinguished a previous ruling finding surgical drapes out of scope by noting that, unlike the
underlays, the surgical drape magnets were “unprintable and unusable for other purposes” because
they were permanently encased in other materials. MBS 2018 Ruling at 14.
Commerce’s decision to exclude the MBS magnets at issue is consistent with its previous
scope rulings. The MBS 2018 Ruling is clearly distinguishable because there the product at issue
did not have any printing, thereby rendering it not subject to any exclusion. See MBS 2018 Ruling
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at 5, 16. The Tatco Ruling, similarly, is entirely consistent with Commerce’s decision here.
Although the zebra design was obscured when used in certain ways, Commerce determined that
the language of the Orders did not require visibility during use. Tatco Ruling at 12. In continuing
that logic here, Commerce noted that nothing in the language of the exclusion or the exceptions to
the exclusion requires the design to be seen while in use. Scope Ruling at 15. Although it may
have been reasonable for Commerce to interpret the exclusion language to more closely track the
listed exemplars, nothing in the language of the Orders or the (k)(1) sources undermines
Commerce’s contrary position. King Supply v. United States, 674 F.3d 1343, 1348 (Fed. Cir. 2012)
(noting that “even if it is possible to draw two inconsistent conclusions from the evidence in the
record, such a possibility does not prevent Commerce’s determination from being supported by
substantial evidence.”) (citations omitted). Further, it is important that orders be interpreted
consistently and not expanded so that importers and exporters have notice that their merchandise
is subject to unfair trade remedies. See ArcelorMittal Stainless Belgium N.V. v. United States, 694
F.3d 82, 88 (Fed. Cir. 2012) (noting that “the primary purpose of an antidumping order is to place
foreign exporters on notice of what merchandise is subject to duties.”); see also Eckstrom, 254
F.3d at 1072 (“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 its terms.”) (citation
omitted).
Magnum raises one final argument. It argues that because the MBS magnets are installed
with the printed side down, the printed side is the “back” of the product. Magnum Br.at 11–12. In
the Orders, Commerce stated that printing “on the back (magnetic) side” does not merit exclusion.
ADD Order, 73 Fed. Reg. at 53,487; CVD Order, 73 Fed. Reg. at 53,850. Accordingly, Commerce
determined that the “back” of an MBS magnet is the magnetic side, regardless of how the product
Court No. 19-00126 Page 11
is positioned. Scope Ruling at 16. MBS magnets are printed on the non-magnetic side, i.e. the
“front,” and therefore are not excluded by the scope language. Id. Commerce’s finding is based on
a reasonable, straightforward reading of the scope language and Magnum cites nothing to call into
question this interpretation.
Commerce declined to read into the language of the Orders an exclusion requirement that
did not clearly exist and nothing Magnum points to sufficiently undermines that decision.
Accordingly, the court sustains Commerce’s decision. 4
CONCLUSION
For the foregoing reasons, Magnum’s motion for judgment on the agency record is denied.
The court sustains Commerce’s determination that the MBS magnets are excluded from the scope
of the Orders. Judgment will enter accordingly.
_/s/ Jane A. Restani____
Jane A. Restani, Judge
Dated: July 13, 2020
New York, New York
4
Throughout its brief, Magnum appears to argue that MBS is attempting to circumvent the
previous scope ruling finding that certain MBS magnets were within the scope of the Orders.
See Magnum Br. at 3, 6, 10. As the government notes, however, Magnum did not request an
anticircumvention inquiry and Commerce did not exercise its discretion to self-initiate one. See
Gov. Br. at 13; see also 19 U.S.C. § 1677j (circumvention of antidumping and countervailing
duty orders); 19 C.F.R. §§ 351.225(g–j) (corresponding regulations). Given the differing analysis
between standard scope rulings and anticircumvention inquiries, it is possible that Commerce
would have arrived at a different decision had such a process been pursued. See Target v. United
States, 578 F. Supp. 2d 1369, 1373 (CIT 2008) (discussing Commerce’s practice and the
differing statutory and regulatory procedures for anticircumvention inquires as compared to other
scope rulings). Nonetheless, Magnum’s anticircumvention arguments are beyond the purview of
this action. See Consol. Bearings Co. v. United States, 348 F.3d 997, 1003 (Fed. Cir. 2003) (“If a
party does not exhaust available administrative remedies, ‘judicial review of Commerce's actions
is inappropriate.’”) (citation omitted).