Decision Circumscribes Duty Circumvention

by Kelley Drye & Warren LLP
Contact

This article was authored by International Trade Specialist Michael J. Kelleher

On April 5, 2016, a three-judge panel of the Court of Appeals for the Federal Circuit (“CAFC”) issued an opinion in Deacero S.A. de C.V. v. United States, Appeal Nos. 2015-1362, 2015-1363, 2015-1367, affirming the final determination of circumvention by the U.S. Department of Commerce (“Commerce”), that the steel wire rod imports by a Mexican producer and its affiliated importer, were subject to the associated antidumping duty (“AD”) order.

The Federal Circuit holding is a particularly important precedent for several reasons.  In a broad sense, this reinforces previous decisions1 preventing foreign producers and exporters from evading orders by making slight dimensional changes in their production methods.  More specifically, Commerce does not have to consider whether the subject merchandise was commercially available at the time of the original investigation when making a determination under the “minor alteration” provision of the statute, thereby overturning the Court of International Trade (“CIT” or “Trade Court”) decision.

BACKGROUND

In 2002, Commerce issued an AD order on steel wire rod imported from various countries including Mexico.  Deacero S.A. de C.V. and Deacero USA, Inc. (“Deacero”), Mexican producers of the subject merchandise, were not individually investigated in the original investigation; consequently, its imports of steel wire rod were subject to the 20.11% all others rate.2

The order defined the scope as steel wire rod with a cross-sectional diameter of “5.00 or more, but less than 19.00 mm.”  Following the order’s issuance, Deacero manufactured and ultimately imported into the United States steel wire rod within a diameter of 4.75 mm, or 0.25 mm smaller than the wire rod subject to the order.  Based on the requests of domestic wire rod producers, Commerce instituted an anti-circumvention inquiry in May 2011 to determine whether 4.75 mm steel wire rod should be included within the scope of the order as either “minor alterations of merchandise” or “later-developed merchandise.”  19 U.S.C. §§ 1677j(c)(1), (d)(1).3  The Department issued a final determination in September 2012, finding 4.75 mm to 5.00 mm steel wire rod was a minor alteration of the subject merchandise, and that its import constituted an affirmative circumvention of the order. 

Deacero appealed to the Court of International Trade.  The CIT ultimately remanded to Commerce, finding that it’s affirmative circumvention determination was not supported by substantial evidence because 4.75 mm steel wire rod fell outside the literal scope of the order, and was “commercially available” at the time of the original investigation.4 Under protest, Commerce issued a negative finding of circumvention, finding it had no alternative.5  The Trade Court affirmed Commerce’s negative determination on December 22, 2014.6 The government, along with U.S. steel wire rod producers ArcelorMittal USA LLC, Gerdau Ameristeel U.S. Inc. and Nucor Corp., appealed to the Federal Circuit. 

CAFC APPEAL

Appellants presented two issues to the Federal Circuit.  Did the Trial Court err in finding, as a matter of law, that Commerce had intentionally excluded a product with certain dimensions in its antidumping order merely because (a) the order did not literally cover those dimensions and (b) the product with those dimensions was commercially available at the time of the order?

On the first issue, the Federal Circuit found that the Trade Court erred in interpreting Wheatland Tube v. United States, 161 F.3d 1365 (Fed. Cir. 1998).  Commerce’s order, unlike Wheatland, did not contain any “explicit exclusion of small-diameter wire rod.”7

Although the scope of the duty order sets a cross-sectional range (5.00 mm to 19.00 mm), that cannot be read to expressly exclude for purposes of anti-circumvention inquiries all products outside that range.  The purpose of minor alteration anti-circumvention inquiries is to determine whether articles not expressly within the literal scope of a duty order may nonetheless be found within its scope as a result of a minor alteration to merchandise covered in the investigation.  To conclude otherwise would render meaningless Congress’s intent to address circumvention concerns.8

On the second issue, Domestic Producers argued that Section 1677j(c) requires Commerce to include within scope “articles altered in form or appearance in minor respects;” but contains no language imposing a temporal limitation.  Instead, Congress directed that Commerce apply five specific factors to determine whether a minor alteration has occurred.9  The Trade Court did not question Commerce’s findings with respect to those factors but nonetheless overturned Commerce’s minor alteration finding based on commercial availability.  “By making an affirmative minor alteration finding contingent on a finding of no commercial availability, the Trial Court added a requirement to the statute that Congress itself had not imposed, contrary to the canons of statutory instruction.”10

Despite Deacero’s arguments that the narrower wire rod had been produced in Japan at the time of the order, Federal Circuit Judge Jimmie V. Reyna (who wrote the Deacero opinion) pointed out at oral argument that producers “can’t file a dumping petition based on imaginary products that don’t exist.”11

NEXT STEPS

Deacero has until May 20, 2016 to file a request for rehearing en banc of the Federal Circuit’s opinion, which is rarely granted.  Or, Deacero could file a Petition for Certiorari with the Supreme Court by July 5, 2016.

Kelley Drye & Warren (Kathleen Cannon; R. Alan Luberda; Paul Rosenthal; David Smith) represented domestic producers ArcelorMittal USA, LLC and Gerdau Ameristeel U.S. Inc., during the anti-circumvention inquiry before Commerce as well as the appeals before the Court of International Trade and Federal Circuit.


[1] See, e.g., Target. Corp. v. United States, 609 F.3d 1352, 1355 (Fed. Cir. 2010).

[2] Carbon and Certain Alloy Steel Wire Rod from Brazil, Indonesia, Mexico, Moldova, Trinidad and Tobago, and Ukraine, 67 Fed. Reg. 65,945, 65,946-47 (Dep’t Commerce Oct. 29, 2002) (order).

[3] Commerce’s later-developed product determination was not an issue before the Federal Circuit.  Deacero, Slip Op. at 5.

[4] Deacero S.A. de. C.V. v. United States, 942 F. Supp. 2d 1321, 1332 (CIT 2013). 

[5] Deacero S.A.P.I. de C.V. v. United States, No. 12-00345, 2014 Ct. Int’l Trade LEXIS 99, at 21-22 (Aug. 28, 2014). 

[6] Deacero S.A.P.I de C.V. v. United States, No. 12-00345, 2014 Ct. Int’l Trade LEXIS 159, at *2. 

[7] Deacero, Slip. Op. at 11.

[8] Id.

[9] These factors include:  (1) the overall physical characteristics of the product; (2) the expectations of the ultimate user; (3) the end-use of the product; (4) channels of trade and advertising; and (5) the cost of modification relative to the value of the products at issue.  Omnibus Trade Act, Report of the Senate Finance Committee, S. Rep. No. 71, 100th Cong., Sess. 100 (1987)

[10] See May 13, 2015 Brief of Defendants-Appellants ArcelorMittal USA, LLC and Gerdau Ameristeel U.S. Inc.  at 20, Deacero S.A. de C.V. v. United States, Appeal Nos. 2015-1362, 2015-1363, 2015-1367.

[11] See Federal Circuit Oral Argument dated Feb. 4, 2016, available at http://www.cafc.uscourts.gov/oral-argument-recordings.

[View source.]

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Kelley Drye & Warren LLP | Attorney Advertising

Written by:

Kelley Drye & Warren LLP
Contact
more
less

Kelley Drye & Warren LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.