Mid Continent Nail Corp. v. United States

Slip Op. 14-118
UNITED STATES COURT OF INTERNATIONAL TRADE
________________________________
MID CONTINENT NAIL CORP., :
:
Plaintiff, : Before: Nicholas Tsoucalas,
: Senior Judge
v. :
: Court No.: 10-00247
UNITED STATES, :
:
Defendant, :
:
and :
:
TARGET CORP., :
:
Defendant-Intervenor. :
OPINION
[Redetermination upon remand by the Department of Commerce was not
supported by substantial evidence nor in accord with the law.]
Dated: October 6, 2014
Adam H. Gordon and Jordan C. Kahn, Picard Kentz & Rowe LLP, of
Washington, DC, for Mid Continent Nail Corporation, plaintiff.
Stuart F. Delery, Assistant Attorney General, Jeanne E. Davidson,
Director, and Patricia M. McCarthy, Assistant Director, Department
of Justice, Civil Division, Commercial Litigation Branch,
Washington, DC, for defendant. Of counsel on the brief was
Nathaniel J. Halvorson, Attorney, Office of the Chief Counsel for
Trade Enforcement and Compliance, U.S. Department of Commerce, of
Washington, DC.
Marguerite E. Trossevin and James J. Jochum, Jochum Shore &
Trossevin, PC, of Washington, DC, for Target Corporation,
defendant-intervenor.
Court No. 10-00247 Page 2
Tsoucalas, Senior Judge: before the court are the final
results of defendant United States Department of Commerce’s
(“Commerce”) redetermination of its scope ruling on nails within
toolkits imported by Target Corporation (“Target”). See Final
Results of Redetermination Pursuant to Remand Order, ECF No. 99
(Apr. 30, 2014) (“Third Remand Results”). Commerce found that the
nails were outside the scope of the antidumping duty order on nails
from the People’s Republic of China (“PRC”) because they were part
of a mixed-media set. Id. at 51. Plaintiff Mid Continent Nail
Corp. (“MCN”) contests the Third Remand Results and requests
another remand of this case. See Pl.’s Cmts. on Remand Results,
ECF No. 104 (June 27, 2014). Commerce and defendant-intervenor
disagree, insisting that Commerce should affirm the Third Remand
Results. See Def.-Int.’s Cmts. on Def.’s Redetermination Pursuant
to Remand Order, ECF No. 103 (June 27, 2014); Def.’s Cmts. on
Redetermination Pursuant to Remand Order, ECF No. 113 (July 31,
2014).
BACKGROUND
A. Antidumping Duty Order and Initial Scope Ruling
In August 2008, Commerce issued an antidumping order
covering steel nails from the PRC. See Notice of Antidumping Duty
Order: Certain Steel Nails from the PRC, 73 Fed. Reg. 44,961 (Aug.
1, 2008) (“Nails Order”). The Nails Order covers:
Court No. 10-00247 Page 3
certain steel nails having a shaft length up to 12
inches. Certain steel nails include, but are not limited
to, nails made of round wire and nails that are cut.
Certain steel nails may be of one piece construction or
constructed of two or more pieces. Certain steel nails
may be produced from any type of steel, and have a
variety of finishes, heads, shanks, point types, shaft
lengths and shaft diameters. Finishes include, but are
not limited to, coating in vinyl, zinc (galvanized,
whether by electroplating or hot-dipping one or more
times), phosphate cement, and paint. 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
shank styles. Screw-threaded nails subject to this
proceeding are driven using direct force and not by
turning the fastener using a tool that engages with the
head. Point styles include, but are not limited to,
diamond, blunt, needle, chisel, and no point. Finished
nails may be sold in bulk, or they may be collated into
strips or coils using materials such as plastic, paper,
or wire.
Id. at 44,961–62. The scope language also identifies several
exclusions to the Nails Order, including “roofing nails,”
“corrugated nails,” “fasteners suitable for use in power-actuated
hand tools,” “thumb tacks,” nails of certain size specifications
that are “collated with adhesive or polyester film tape back with
a heat seal adhesive,” and fasteners meeting certain
specifications. Id. at 44,962.
Target imports toolkits from the PRC, which include
various household tools. See Mid Continent Nail Corp. v. United
States, 35 CIT __, __, 770 F. Supp. 2d 1372, 1375 (2011) (“MCN
I”). Of particular relevance to the instant case, the toolkits
Court No. 10-00247 Page 4
“include a plastic container holding approximately fifty one-inch
brass coated steel nails.” Id., 770 F. Supp. 2d at 1375. Target
requested a scope ruling from Commerce that six of its tool kits
containing these nails are outside the Nails Order. Id.; 770 F.
Supp. 2d at 1375. Although it conceded that the nails in the
toolkit would be in-scope merchandise if considered on their own,
Target insisted that Commerce should focus on the toolkits as a
whole. In support of its argument, Target noted that the Nails
Order did not mention nails packaged with non-scope merchandise
and that Commerce previously considered similar “mixed media”
items as a whole. Id.Commerce issued its scope ruling in August 2010. See
Final Scope Ruling – Certain Steel Nails from the PRC, Request by
Target (Aug. 10, 2010) (“Scope Ruling”). Commerce first noted
that the 19 C.F.R. § 351.225(k)(1) factors (“(k)(1) factors”) were
not dispositive as to whether the scope covered brass coated steel
nails in toolkits. Id. at 5. Commerce then applied the 19 C.F.R.
§ 351.225(k)(2) factors (“(k)(2) factors”), considering the tool
kit as a set including the subject merchandise. Id. Based on
this analysis, Commerce found that the tool kits were outside the
scope of the Nails Order. Id.B. Proceedings Before the Court of International Trade and
Remand Redeterminations
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This Court rejected Commerce’s analysis in the Scope
Ruling, finding that Commerce failed to articulate adequate
reasoning for its decision to focus the scope inquiry on the
toolkits rather than the nails. See MCN I, 35 CIT at __, 770 F.
Supp. 2d at 1379–83. The Court remanded the Scope Ruling so that
Commerce could identify a test for making such a determination 1
and provide legal justification for that test. Id. at __, 770 F.
Supp. 2d at 1382–83.
On remand, Commerce found that it had the authority to
consider mixed-media items as a set. See Final Results of
Redetermination Pursuant to Remand Order at 2–5 (Oct. 17, 2011)
(“First Remand Results”). It then articulated a four-factor test
for answering the Walgreen question: (1) the practicability of
separating the component merchandise for repackaging or resale;
(2) the value of the component merchandise as compared to the value
of the product as a whole; (3) the ultimate use or function of the
component merchandise relative to the ultimate use or function of
the mixed-media set as a whole; and (4) any other relevant factors
that may arise on a product-specific basis. Id. at 7–11. Using
this test, Commerce found that the toolkit as a whole was the
1 Whether Commerce should focus a mixed-media scope inquiry on the
set as a whole or on the individual component that appears to be
within the scope of the order is referred to as the “Walgreen
question.” This name refers to the decision of the Court of
Appeals for the Federal Circuit in Walgreen Co. of Deerfield, Inc.
v. United States, 620 F.3d 1350 (Fed. Cir. 2010).
Court No. 10-00247 Page 6
proper focus of the scope inquiry. Id. at 11–14. It then
determined that the toolkit was outside the scope of the Nails
Order. Id. at 14–18.
Upon review of the First Remand Results, the Court found
that Commerce’s analysis was improper because Commerce did not
have the authority to conduct a mixed-media analysis. See Mid
Continent Nail Corp. v. United States, 36 CIT __, __, 825 F. Supp.
2d 1290, 1296 (2012) (“MCN II”). The Court remanded for further
proceedings consistent with its opinion that “the nails in question
here are unambiguously subject to the Nails Order, and there is no
support in the law or the record for concluding otherwise.” Id.,825 F. Supp. 2d at 1296.
In its second redetermination, Commerce issued a ruling
consistent with the Court’s decision in MCN II. See Final Results
of Redetermination Pursuant to Remand Order at 5 (Mar. 7, 2012)
(“Second Remand Results”). Specifically, Commerce found that the
nails in the toolkits were within the scope of the Nails Order.
Id. The Court upheld the Second Remand Results in their entirety,
see Mid Continent Nail Corp. v. United States, 36 CIT __, __, Slip
Op. 12-97 at 1 (July 25, 2012), and Commerce appealed to the United
States Court of Appeals for the Federal Circuit (“CAFC”).
C. CAFC Determination
On appeal, the CAFC reversed the CIT’s opinion in MCN
II. See Mid Continent Nail Corp. v. United States, 725 F.3d 1295,
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1301 (Fed. Cir. 2013) (“MCN III”). Specifically, the CAFC found
that the CIT’s holding that Commerce lacked authority to conduct
a mixed-media inquiry was erroneous. It also found that Commerce
had yet to reasonably interpret the Nails Order in such a way as
to justifiably exclude the nails in Target’s toolkits from the
scope, noting that the fourth factor of the mixed-media test was
overly broad. Id. The CAFC provided Commerce with guidance for
its remand redetermination, stating that “any implicit mixed-media
exception to the literal scope of the order must be based on
preexisting public sources,” and that “Commerce may attempt to
draw an ascertainable standard from these rulings if they were
publicly available at the time the [Nails Order] was issued . . .
.” Id. at 1305.
D. Third Remand Redetermination
In its third remand results, Commerce attempted to find
a test by which it could determine whether to focus its scope
ruling on the mixed-media set as a whole or on the individual
component. Third Remand Results at 6–17. First, Commerce noted
that “mixed-media” scope inquiries “involve merchandise that
includes a component that appears to at least have some superficial
overlap with the literal language of the order, but also consists
of elements that do not appear to be covered by the literal
language of the order.” Id. at 6. Commerce also noted that the
outcome of these scope inquiries depends largely on whether
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Commerce treats the set as a whole or whether it focuses on the
individual component that appears to be covered by the order. Id.Next, Commerce surveyed the available scope rulings on
“mixed-media” products to determine whether there was a common
analytical framework for determining the proper focus a “mixed-
media” scope inquiry. Id. at 9–16. Commerce altered the four-
factor test it previously articulated in the First Remand Results
taking into account these rulings and the CAFC’s ruling in MCN
III, listing the factors as (1) the “unique language of the order”;
(2) the “practicability of separating the component merchandise
for repackaging or resale”; (3) the “value of the component
merchandise as compared to the value of the product as a whole”;
and (4) the “ultimate use or function of the component merchandise
relative to the ultimate use or function of the mixed-media set as
a whole”. Id. at 17. Where Commerce finds that it should analyze
the product as a whole set it will move straight to the (k)(2)
factors, but where it will analyze the individual component
Commerce will make its scope determination based on the (k)(1)
factors. Id. at 20.
Commerce then applied this test to Target’s toolkits.
Id. at 23–26. Commerce found that the language of the Nails Order
describes the nails in question but does not address merchandise
contained in toolkits, the packaging of nails with other products,
or the arrangement of the nails upon importation. Id. at 23–24.
Court No. 10-00247 Page 9
As for the relative value of the nails, Commerce found that it was
very small in light of Target’s statement that the total value of
the nails was a “small percentage” of the value of the toolkit as
a whole. Id. at 24. Commerce also determined that separating and
repackaging the nails was not practicable because the nails were
packaged with non-subject fasteners in a smaller case within the
toolkit. Id. at 24–25. Finally, Commerce found that the use of
the nails, fastening two objects together, was complementary to
but distinct from the use of the toolkit, which was “provid[ing]
a convenient collections of tools and accessories for the intention
of home repair and maintenance.” Id. at 25. It added that there
was a variety of tools and accessories, each of which had
specialized uses, so the choice of toolkit would not be based
exclusively on the type of nail inside tool kit. Id. at 25–26.
Because each factor of the test indicated that Commerce should
evaluate the toolkits as a whole, Commerce determined that it
should focus the scope inquiry on the toolkits rather than the
steel nails. Id. at 26.
Because it was focusing on the toolkits as a whole,
Commerce moved directly to an analysis of the (k)(2) factors. Id.Commerce analyzed each of the six toolkits at issue, determining
that they “include some merchandise that at least superficially
meets the physical description of the merchandise subject to the
Nails Order and some merchandise which clearly does not meet the
Court No. 10-00247 Page 10
physical description of the merchandise subject to the Nails Order.
Id. at 26–29. Commerce also noted that the brass coated nails
contained within the toolkits comprise, at most, a tangential
feature in the advertising” of Target’s toolkits. Id. at 29–30.
Commerce also noted that the display of the toolkits varied across
Target stores: in some cases the toolkits were displayed alongside
subject nails, but in other stores the toolkits were not displayed
by subject nails. Id. at 30. Commerce also found that the channels
of trade factor was inconclusive, as the toolkits and nails shared
certain channels of trade, but there were also channels of trade
that were distinct for the two products. Id. at 30–31.
Additionally, Commerce found that the expectations of the ultimate
purchaser differed as between toolkits and nails, because the
purchaser of the former expected to purchase an assortment of tools
for an assortment of functions at a price of $25 to $60, while a
purchaser of in-scope nails would expect more nails and a lower
price. Id. at 31. Commerce noted that the majority of the tools
in Target’s toolkits are not used with nails. Id. Commerce made
similar findings with regard to the ultimate use of the product,
as Target’s toolkits serve to “aid in various repair tasks” in the
home, while the in-scope nails are used to hang or fasten objects.
Id. at 32. Noting that three of the five (k)(2) factors support
a finding that the toolkits are outside the scope of the Nails
Order, and that the other two factors were inconclusive, Commerce
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found that Target’s toolkits were outside the scope of the Nails
Order. Id. at 32.
Commerce also addressed comments by the parties on its
determination relevant to the instant litigation. First, Commerce
rejected MCN’s assertion that the determination was unauthorized
rule making because it was simply resolving a gap in the statute
and regulations by clarifying existing procedures and providing a
justification for those procedures. Id. at 35. Second, Commerce
rejected MCN’s argument that the prior scope rulings were not
publicly available because they the scope rulings were “available
in [Commerce]’s Central Records Unit public reading room and listed
in the quarterly published list of scope rulings.” Id. at 38.
Finally, Commerce found that, contrary to MCN’s insistence, both
the mixed-media analysis and the (k)(2) factors analysis were
supported by substantial evidence and consistent with law. Id. at
42–51.
JURISDICTION and STANDARD OF REVIEW
The Court has jurisdiction pursuant to 28 U.S.C. §
1581(c) (2006) and section 516A(a)(2)(B)(vi) of the Tariff Act of
1930, 2 as amended, 19 U.S.C. § 1516a(a)(2)(B)(vi) (2006).
2 All further references to the Tariff Act of 1930 will be to the
relevant provisions of Title 19 of the United States Code, 2006
edition, and all applicable supplements thereto.
Court No. 10-00247 Page 12
The Court must uphold Commerce’s scope determination
unless it is “unsupported by substantial evidence on the record,
or otherwise not in accordance with law.” 19 U.S.C. §
1516a(b)(1)(B)(i). When reviewing a scope ruling, the Court grants
“significant deference to Commerce’s interpretation of its own
orders.” Allegheny Bradford Corp. v. United States, 28 CIT 830,
842, 342 F. Supp. 2d 1172, 1183 (2004). “However, 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.” Duferco Steel, Inc. v. United States, 296 F.3d 1087,
1095 (Fed. Cir. 2002) (citing Eckstrom Indus., Inc. v. United
States, 254 F.3d 1068, 1072 (Fed. Cir. 2001)).
DISCUSSION
I. Commerce’s Methodology
MCN contests the following aspects of Commerce’s method
for answering the Walgreen question in its Third Remand Results:
(1) Whether Commerce’s refusal to conduct notice and comment
rulemaking was consistent with the requirements of the APA; (2)
whether Commerce complied with the direction of the CAFC in MCN
III when deriving the mixed media test; and (3) whether Commerce’s
application of its four factor mixed media test was supported by
substantial evidence.
A. Commerce was not required to conduct notice-and-comment
rule making.
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The first issue before the court is whether Commerce’s
attempt to answer the Walgreen’s question through its adoption of
the four-factor mixed media test violated the notice-and-comment
rule making procedures required under the Administrative
Procedures Act (“APA”).
MCN argues that Commerce’s adoption of the four-factor
mixed media test was improper because Commerce promulgated a new
rule without the notice-and-comment rulemaking procedures required
under the APA. Pl.’s Cmts. at 6. MCN insists that the APA mandates
that a test of this nature must “occur with particularized notice
and comment” procedures. Id. MCN also insists that the CAFC
recognized the benefit of formal rule-making for this issue in MCN
III and that Commerce could have reasonably foreseen the need for
such rule-making given the need to “address mixed media scope
inquiries in a comprehensive manner.” Id. at 10.
The court must reject MCN’s arguments. The CAFC
specifically spoke to this issue in MCN III, stating that “Commerce
may attempt to draw an ascertainable standard” from “pre-existing
public sources” as long as they were publicly available at the
time the Nails Order was issued. MCN III, 725 F.3d at 1305. Thus,
the CAFC explicitly granted Commerce the ability to attempt to
support a mixed media standard without conducting notice-and-
comment under the APA in their Third Remand Results, so long as
Court No. 10-00247 Page 14
Commerce’s test complied with the CAFC’s MCN III guidelines. See
id.
B. Commerce’s mixed media test failed to comply with the
direction of the CAFC in MCN III
The next issue before the court is whether Commerce’s
mixed media test complied with the CAFC’s instructions in MCN III.
As discussed above, in MCN III, the CAFC instructed Commerce that
“any implicit mixed-media exception to the literal scope of the
order must be based on preexisting public sources,” and that
“Commerce may attempt to draw an ascertainable standard from these
rulings if they were publicly available at the time the [Nails
Order] was issued . . . .” MCN III, 725 F.3d at 1305.
The court must first address whether Commerce relied on
publicly available scope determinations issued before the Nails
Order to support its mixed media test in the Third Remand Results.
The scope rulings Commerce relied on were published quarterly in
the Federal Register, and were available for public viewing in
Commerce’s Public File Room. See Third Remand Results at 18.
Because these scope rulings were publically available, this court
will allow Commerce to attempt to support its mixed media analysis
based on sources that were publically available at the time the
Nails Order was issued.
Commerce constructed its mixed media test in order to
answer the Walgreen question, which addresses whether Commerce
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should focus its scope ruling on the mixed media set as a whole or
on the individual components. Third Remand Results 6–17. Commerce
relied on prior scope rulings in order to construct the mixed media
test from a common set of analytical principles. Id. at 9–17.
The mixed media test consisted of four factors: (1) the “unique
language of the order”; (2) the “practicability of separating the
component merchandise for repackaging or resale”; (3) the “value
of the component merchandise as compared to the value of the
product as a whole”; and (4) the “ultimate use or function of the
component merchandise relative to the ultimate use or function of
the mixed-media set as a whole.” Id. at 17. Commerce insists
that “these four factors articulate the common principles relied
upon in [its] prior scope rulings and throughout [its] past
practice.” Id. at 17.
In the first set of scope rulings relied on by Commerce
to support its mixed media test, Commerce focused on the product
as a whole and found the requested product to be outside the class
or kind of merchandise subject to the order. See Final Scope
Ruling – Antidumping Duty Order on Certain Cased Pencils from the
PRC – Request by Creative Designs Naturally Pretty (February 9,
1998) (concluding that pencils contained within a vanity set were
not subject to the order on pencils from the PRC)(“Vanity Set Scope
Ruling”); See Final Scope Ruling – Antidumping Duty Order on
Certain Cased Pencils from the PRC – Request by Dollar General
Court No. 10-00247 Page 16
Corporation at 3, (April 6, 2001) ("The issue presented by this
scope inquiry is whether Dollar’s [stationery sets], which include
a 3 1/4-inch or 4 1/2-inch pencil, are within the scope of the
order on certain cased pencils from the PRC.”) (“Stationery Sets
Scope Ruling”); See Final Scope Ruling – Antidumping Duty Order
on Certain Cased Pencils from the PRC – Request by Target
Corporation Regarding “Hello Kitty Fashion Totes” at 4, (September
29, 2004) ("[Commerce] observe[d] that the Totes include a single
pencil which, considered individually, is covered by the scope of
the order. The Totes are multimedia sets, however . . . [and] the
scope of the order does not contemplate mixed-media sets.”)(“Totes
Scope Ruling”); See Final Scope Ruling - Antidumping Duty Order
on Certain Cased Pencils from the PRC - Request by Target
Corporation, (March 4, 2005) (concluding that art sets containing
subject pencils and other non-subject art supplies were outside
the scope of the order) (“Art Sets Scope Ruling”); See Final Scope
Ruling - Antidumping Duty Order on Certain Cased Pencils from the
PRC - Request by Fiskars Brands, Inc., (June 3, 2005) (concluding
that compasses containing subject pencils were outside the scope
of the order) (“Compass Scope Ruling”) See Final Scope Ruling -
Antidumping Duty Order on Certain Lined Paper Products from the
People's Republic of China, Request by Avenues in Leather, Inc.,
(May 8, 2007) (concluding that padfolio containing subject lined
paper pads were outside the scope of the order) (“Padfolios Scope
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Ruling”) See Certain Lined Paper Products from the People's
Republic of China - Davis Group of Companies Corp. Scope Ruling
Request, (February 21, 2008) (concluding that padfolios containing
subject lined paper pads were outside the scope of the order)
(“Davis Padfolios Scope Ruling”).
In the second set of scope rulings relied on by Commerce
to support its mixed media test, Commerce focused on the component
and found the requested product to be within the class or kind of
the merchandise subject to the order. See Recommendation Memo --
Final Scope Ruling on the Request by Texsport for Clarification of
the Scope of the Antidumping Duty Order on Porcelain-on-Steel
Cooking Ware from the PRC, (August 8, 1990) (concluding that
porcelain-on-steel cookware imported as part of a camping set was
subject to the order) (“Cookware Scope Ruling”); See Final
Determination of Sales at Less Than Fair Value: Fresh Cut Roses
from Ecuador, 60 Fed. Reg. 7019, (February 6, 1995) (roses
individually dutiable in mixed flower bouquet) (“Bouquets Scope
Ruling”).
MCN argues that the scope rulings Commerce relied upon
to articulate the four-factor test it used in the Third Remand
Results “cannot and do not create a generally applicable analytical
framework” for addressing the Walgreen question. Id. at 17. MCN
insists that the scope rulings are isolated, contradictive, and
generally do not provide any guidance to respondents. Id.Court No. 10-00247 Page 18
MCN notes that, in MCN III, the CAFC recognized a
presumption that components of a mixed media set that meet the
physical specifications of an order are presumed to be within the
scope of that order. Id. at 10. MCN also notes that Commerce
recognized that the nails in Target’s toolkits, if analyzed alone,
would be subject to the Nails Order. Id. MCN argues that Commerce
failed to overcome this presumption, instead providing an “outcome
determinative” analysis that relied on scope rulings that were
“entirely devoid of reasoning that could provide guidance for
future cases.” Id. at 11. Ultimately, MCN concludes that the
“ad-hoc” determinations did not provide a standard or consistent
practice upon which to base Commerce’s methodology. Id. at 12–
13. MCN also argues that Commerce should have relied on evidence
like the Harmonized Tariff Schedule of the United States (“HTSUS”)
to consider whether there was sufficient evidence to overcome the
presumption that the nails in Target’s toolkits were subject to
the Nails Order.
The court finds that Commerce failed to comply with the
direction of the CAFC for the following reasons. First, Commerce
failed to demonstrate how the “unique language of the order” is
relevant to its mixed media test. Commerce supported the inclusion
of this factor by attempting to identify a standard derived from
the Cookware Scope Ruling and Bouquets Scope Ruling. Third Remand
Results at 7–11.
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The prior scope rulings Commerce relies on to support
including the unique language of the order as a factor in its mixed
media test fail to support an ascertainable mixed media standard.
Unlike in the instant case where the scope language is silent, in
both the Cookware Scope Ruling and the Bouquets Scope Ruling, the
language of the order clearly addresses all of the relevant
merchandise in the mixed media set. For instance, in the Cookware
Scope Ruling, Commerce determined whether “kitchenware” and
“cookware” imported together as part of a mixed media set were
subject to the order. Commerce found that only the “cookware”
within the set was dutiable because “kitchenware” was
“specifically excluded from the order.” Cookware Scope Ruling at
4. Because the scope language was clear, Commerce declined to
conduct a mixed media analysis. Id. at 2. Similarly, in the
Bouquets Scope Ruling, Commerce once again avoided conducting a
mixed media analysis when determining whether roses imported
within bouquets including non-dutiable flowers would be subject to
the order at issue. Bouquets Scope Ruling, 60 Fed. Reg. at 7022.
The language of the order contemplated bouquets, eliminating any
need for Commerce to conduct a mixed media analysis. Id.
In the Third Remand Results, Commerce insists that the
language of the order controls the mixed media analysis and
“informs the application” of the remaining factors in its mixed
media test. Third Remand Results at 21. Commerce argues that
Court No. 10-00247 Page 20
“[b]y looking at the language of the order, [Commerce] can
determine where such an analysis is warranted, either from the
silence of the order or language in the order speaking to these
factors.” Id. Commerce failed to support this contention. Apart
from the fact that both of these scope rulings involve a mixed
media set, neither scope ruling contemplated a mixed media
analysis. Furthermore, it is well established that “the process
must begin with the language of the order, which provides the
‘predicate for the interpretive process,’” but these scope rulings
do not provide guidance with regards to how this factor is relevant
to a mixed media analysis. MCN III 725 F.3d at 1303 (citing
Duferco Steel, Inc. v. United States, 296 F.3d 1087, 1097 (Fed.
Cir. 2002)). Where the scope language is clear, like in the
Cookware Scope Ruling and Bouquets Scope Ruling, “scope analysis
[is] at an end.” See id.Secondly, the Cookware Scope Ruling and Bouquets Scope
Ruling cannot be reconciled with the seven other scope rulings
Commerce cited in its Third Remand Results. None of the remaining
scope rulings contain orders which clearly address the subject
merchandise or the mixed media set. The remaining scope rulings
appear to be isolated examples of how the test is outcome
determinative as to whether Commerce finds that the mixed media
set is subject to the order. All of the remaining scope rulings
contain an ambiguous order, and rely on the (k)(2) factors in order
Court No. 10-00247 Page 21
to justify excluding the subject merchandise from the scope of the
order. Additionally, the nine scope rulings rely on a number of
different bases for excluding a product from the scope of an order.
Third Remand Results at 9–16. For instance, in the Vanity Set
Scope Ruling Commerce found as a “threshold matter” that it would
treat the vanity set as a whole set, rather than analyzing the
pencils included in the set individually. See Third Remand Results
at 11; Vanity Set Scope Ruling at 4. Commerce determined the
answer to the Walgreen question on the basis that the pencil
included within the vanity set was only a “minor component” of the
mixed media set. Vanity Set Scope Ruling at 4. This resulted in
Commerce limiting its analysis of the (k)(2) factors to only the
whole set, and thus, Commerce determined that the vanity set was
excluded from the scope of the order on pencils from the PRC. Id.at 4–8. Furthermore, in the Compass Scope Ruling, Commerce chose
to answer the Walgreen question primarily by weighing the (k)(2)
factors and concluding that the purchaser’s ultimate expectation
was to obtain a “drawing tool” as opposed to obtaining a pencil to
be used for writing. Compass Scope Ruling at 8. Contrary to
Commerce’s assertions, these scope rulings appear to answer the
Walgreen question based on the facts and circumstance in each
particular case, and do not identify a broader ascertainable mixed
media standard.
Court No. 10-00247 Page 22
Thirdly, Commerce argues that its mixed media test
occurs “within the context” of the (k)(1) factors. Third Remand
Results at 36. It is unclear to the court how this test occurs
within the (k)(1) factors. Commerce relies on scope rulings which
answer the Walgreen’s question based on the (k)(2) factors. See
Vanity Set Scope Ruling; Stationery Sets Scope Ruling; Totes Scope
Ruling; Art Sets Scope Ruling; Compass Scope Ruling; Padfolios
Scope Ruling; Davis Padfolios Scope Ruling. Thus, in the Third
Remand Results, Commerce attempts to imbed its test within the
(k)(1) factors by using “ad-hoc” determinations that do not provide
an “ascertainable standard that would allow importers to predict
how Commerce would treat their mixed media products.” MCN III,
725 F.3d at 1305.
Furthermore, MCN correctly notes that in MCN III the
CAFC did in fact recognize a presumption that components of a mixed
media set that meet the physical specifications of an order are
presumed to be within the scope of that order. See MCN III, 725
F.3d at 1304. In this case, neither party disputes the fact that
the nails contained in Target’s toolkits “meet the physical
characteristics of the nails subject to the scope of the Nails
Order.” Third Remand Results at 28–29. The CAFC stated that “[i]n
order to overcome this presumption Commerce must identify
published guidance issued prior to the date of the original
antidumping order . . . that provides a basis for interpreting the
Court No. 10-00247 Page 23
order contrary to its literal language.” See MCN III, 725 F.3d at
1304. Here, Commerce failed to explicitly address how its mixed
media test reflects this presumption at any point in the Third
Remand Results.
Ultimately, Commerce’s mixed media test fails to comply
with the instructions the CAFC articulated in MCN III, which
required Commerce to draw an ascertainable mixed media standard
from information that was publically available at the time the
Nails Order was issued. These nine scope rulings do not identify
a coherent and ascertainable standard encompassing all of the
factors in Commerce’s mixed media test, and thus, they do not
provide guidance that would allow importers to predict how Commerce
would treat their mixed media products. Because Commerce’s test
is inconsistent with MCN III, this court declines to find whether
Commerce’s application of its four-factor mixed media test was
supported by substantial evidence.
Conclusion
For the reasons discussed above, this case is remanded
to Commerce for further proceedings consistent with this opinion,
it is hereby
ORDERED that the Final Results of Redetermination
Pursuant to Remand Order is to be remanded to the United States
Department of Commerce for reconsideration of its mixed media
standard in accordance with the United States Court of Appeals for
Court No. 10-00247 Page 24
the Federal Circuit’s decision in Mid Continent Nail Corp. v.
United States, 725 F.3d 1295 (Fed. Cir. 2013).
/s/ Nicholas Tsoucalas
Nicholas Tsoucalas
Senior Judge
Dated: October 6, 2014
New York, New York