Mid Continent Nail Corporation v. United States

Slip Op. 11-55
UNITED STATES COURT OF INTERNATIONAL TRADE
Before: Nicholas Tsoucalas, Senior Judge
________________________________________
MID CONTINENT NAIL CORPORATION, 	:
:
Plaintiff, 	:
:
v. 	:
:
UNITED STATES, 	:
: 	Court No.: 10-00247
Defendant, 	:
:
and 	:
:
TARGET CORPORATION, 	:
:
Defendant-Intervenor. 	:
:
OPINION
Held: Plaintiff’s Motion for Judgment on the Agency Record is granted
because the Final Scope Ruling issued by the Department of Commerce
was not supported by substantial evidence and is not in accord with
the law.
Dated: May 17, 2011
Wiley 	Rein, 	LLP, 	(Adam 	H. 	Gordon, 	Lori 	E. 	Scheetz, 	Robert 	E.
DeFrancesco, III) for Mid Continent Nail Corporation, Plaintiff.
Tony 	West, 	Assistant 	Attorney 	General; 	Jeanne 	E. 	Davidson,
Director, Commercial Litigation Branch, Civil Division, United States
Department 	of 	Justice, 	Patricia 	M. 	McCarthy, 	Assistant 	Director,
Commercial 	Litigation 	Branch, 	Civil 	Division, 	United 	States
Department 	of 	Justice, 	(David 	D’Alessandris); 	Brian 	Soiset, 	Office
of Chief Counsel for Import Administration, United States Department
of Commerce, Of Counsel, for the United States, Defendant.
Jochum, 	Shore, 	& 	Trossevin, 	PC, 	(Marguerite 	E. 	Trossevin 	and
James J. Jochum) for Target Corporation, Defendant-Intervenor
TSOUCALAS, 	Senior 	Judge: 	This 	matter 	comes 	before 	the 	Court
upon the Motion for Judgment on the Agency Record filed by Plaintiff,
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Mid Continent Nail Corporation (“Mid Continent Nail”) on November 23,
2010 pursuant to Rule 56.2 of the Rules of the United States Court
of 	International 	Trade. 	Mid 	Continent 	Nail 	challenges 	a
determination 	by 	the 	United 	States 	Department 	of 	Commerce
(“Commerce”) 	that 	steel 	nails 	imported 	as 	components 	of 	household
tool 	kits 	fall 	outside 	the 	scope 	of 	an 	antidumping 	duty 	order 	on
certain steel nails from the People’s Republic of China (“PRC”). 	See
Final Scope Ruling - Certain Steel Nails from the People’s Republic
of 	China 	(“PRC”), 	Request 	by 	Target 	Corporation 	(Aug. 	10, 	2010),
Public Rec. 27, (“Final Scope Ruling”). 1 	Mid Continent Nail argues
that the Final Scope Ruling is not supported by substantial evidence
and 	is 	otherwise 	not 	in 	accord 	with 	law 	primarily 	because 	its
analysis 	focused 	on 	the 	household 	tool 	kits 	rather 	than 	the 	steel
nails 	contained 	therein. 	Additionally, 	Mid 	Continent 	Nail 	asserts
that 	Commerce 	failed 	to 	properly 	conduct 	the 	analysis 	required 	in
scope inquiries under 19 C.F.R. § 351.225, and seeks a remand of this
matter 	for 	further 	proceedings. 	Defendant, 	United 	States
(“Government”), 	and 	Defendant-Intervenor, 	Target 	Corporation
(“Target”), 	oppose 	remand 	of 	this 	matter 	arguing 	that 	Commerce
conducted a sufficient scope analysis, and that its determination was
supported 	by 	substantial 	evidence 	and 	otherwise 	in 	accord 	with 	the
law.
1 Hereinafter all documents in the public record will be
designated “PR” and all documents in the confidential record
designated “CR.”
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For the reasons set forth below, the Court finds that Commerce’s
determination 	was 	unsupported 	by 	substantial 	evidence 	and 	not 	in
accord 	with 	the 	law 	and 	remands 	this 	matter 	for 	proceedings
consistent with this opinion.
BACKGROUND
On 	August 	1, 	2008, 	Commerce 	issued 	an 	order 	imposing 	an
antidumping 	duty 	on 	steel 	nails 	from 	the 	PRC. 	See 	Notice 	of
Antidumping 	Duty 	Order: 	Certain 	Steel 	Nails 	from 	the 	People’s
Republic of China, 73 Fed. Reg. 44,961 (Aug. 1, 2008)(“Final Order”).
The 	scope 	of 	the 	merchandise 	covered 	by 	the 	Final 	Order 	is 	as
follows:
The 	merchandise 	covered 	by 	this 	proceeding 	includes
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. 	Certain steel nails subject to this proceeding
are 	currently 	classified 	under 	the 	Harmonized 	Tariff
Schedule 	of 	the 	United 	States 	(“HSTUS”) 	subheadings
7317.00.55, 7317.00.65 and 7317.00.75.
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Excluded 	from 	the 	scope 	of 	this 	proceeding 	are 	roofing
nails of all lengths and diameter, whether collated or in
bulk, and whether or not galvanized. 	Steel roofing nails
are 	specifically 	enumerated 	and 	identified 	in 	ASTM
Standard 	F 	1667 	(2005 	revision) 	as 	Type 	I, 	Style 	20
nails. 	Also excluded from the scope of this proceeding
are 	corrugated 	nails. 	A 	corrugated 	nail 	is 	made 	of 	a
small strip of corrugated steel with sharp points on one
side. 	Also 	excluded 	from 	the 	scope 	of 	this 	proceeding
are 	fasteners 	suitable 	for 	use 	in 	powder-actuated 	hand
tools, 	not 	threaded 	and 	threaded, 	which 	are 	currently
classified under HTSUS 7317.00.20 and 7317.00.30. 	Also
excluded 	from 	the 	scope 	of 	this 	proceedings 	are 	thumb
tacks, 	which 	are 	currently 	classified 	HTSUS
7317.00.10.00. 	Also 	excluded 	from 	the 	scope 	of 	this
proceeding 	are 	certain 	brads 	and 	finish 	nails 	that 	are
equal 	to 	or 	less 	than 	0.0720 	inches 	in 	shank 	diameter,
round 	or 	rectangular 	in 	cross 	section, 	between 	0.375
inches 	and 	2.5 	inches 	in 	length, 	and 	that 	are 	collated
with adhesive or polyester film tape backed with a heat
seal 	adhesive. 	Also 	excluded 	from 	the 	scope 	of 	this
proceeding are fasteners having a case hardness greater
than or equal to 50 HRC, a carbon content greater than or
equal to 0.5 percent, a round head, a secondary reduced-
diameter 	raised 	head 	section, 	a 	centered 	shank, 	and 	a
smooth 	symmetrical 	point, 	suitable 	for 	use 	in 	gas-
actuated hand tools.
While the HTSUS subheadings are provided for convenience
and 	customs 	purposes, 	the 	written 	description 	of 	the
scope of this investigation is dispositive.
Final Order, 73 Fed. Reg. at 44,961 - 44,962. 2
Target 	imports 	household 	tool 	kits 	from 	the 	PRC. 	The 	tool
kits contain tools such as hammers, measuring tapes, screwdrivers,
and 	wrenches. 	See 	Letter 	from 	Jochum, 	Shore 	& 	Trossevin 	to 	the
Secretary 	of 	Commerce, 	Re: 	Certain 	Steel 	Nails 	from 	the 	People’s
Republic 	of 	China: 	Scope 	Ruling 	Request 	Regarding 	Household 	Tool
2 This scope language is substantially similar to the scope
language that was proposed in the antidumping petition. 	Final
Scope Ruling at 5.
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Court No. 10-00247 	Page 5
Kits (Dec. 11, 2009) (“Scope Ruling Request” or “Request”), PR 1 at
2-3, CR 1 at 2-3. Of relevance to this matter, the tool kits also
include 	a 	plastic 	container 	holding 	approximately 	fifty 	one-inch
brass 	coated 	steel 	nails. 	Id. 	at 	2-3, 	6. 	On 	December 	11, 	2009,
Target 	requested 	a 	ruling 	from 	Commerce 	that 	these 	tool 	kits 	are
outside the scope of the Final Order.
In 	making 	its 	Request, 	Target 	conceded 	that 	if 	the 	nails
contained in the tool kits were considered on their own they would
be 	subject 	to 	the 	Final 	Order. 	Scope 	Ruling 	Request 	at 	5. 	It
argued, however, that Commerce should focus its scope analysis not
on the nails alone, but on the entire tool kit. 	Target based this
argument, first, on the Final Order’s silence regarding coverage of
nails 	packaged 	with 	non-subject 	items. 	Second, 	Target 	relied 	on
prior scope rulings that considered items containing both subject
and 	non-subject 	goods, 	otherwise 	known 	as 	“mixed-media” 	items 	or
sets. 	See 	Government’s 	Mem. 	in 	Opp’n 	to 	Pl.’s 	Mot. 	for 	J. 	upon
the 	Agency 	R. 	(“Gov.’s 	Opp’n”) 	at 	10. 	In 	these 	earlier 	rulings,
Commerce focused its scope inquiry on the mixed-media item rather
than the subject good contained within it because the subject good
was 	a 	minor 	component 	of 	the 	mixed-media 	item, 	consumable, 	and
easily replaced with non-subject merchandise. 	Scope Ruling Request
at 5.
Target stated that when using the approach enunciated in these
prior 	scope 	rulings, 	Commerce 	subjected 	the 	mixed-media 	item 	to
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analysis under the factors set forth in 19 C.F.R. § 351.225(k)(2) 3
(“(k)(2) factors”). 	Addressing each of the (k)(2) factors in turn,
Target 	argued 	that 	the 	physical 	characteristics, 	advertising 	and
display 	methods, 	purchaser 	expectations, 	ultimate 	use, 	and
different 	channels 	of 	trade 	in 	which 	subject 	nails 	and 	the 	tool
kits 	are 	sold 	show 	that 	the 	tool 	kits 	are 	distinct 	enough 	from
subject nails to be outside the scope of the Final Order.
Mid 	Continent 	Nail, 	a 	domestic 	manufacturer 	of 	nails 	and
original 	petitioner 	in 	the 	antidumping 	proceedings, 	see 	Final
Order, 73 Fed. Reg. at 44,962 n. 3, opposed Target’s Scope Ruling
3 In relevant part, 19 C.F.R. § 351.225(k) provides as
follows:
(k) . . . [I]n considering whether a particular product is
included within the scope of an order . . ., the Secretary
will take into 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.
(2) When the above criteria are not dispositive, the
Secretary will further consider:
(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.
19 C.F.R. § 351.225(k)(1)-(2) (2010). 	The (k)(2) factors are
also known as the Diversified Products factors because prior to
codification, they were recognized by this court in Diversified
Products Corp. v. United States, 6 CIT 155, 162, 572 F. Supp.
883, 889 (1983).
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Request. 	See Letter from Wiley Rein to the Secretary of Commerce,
Re: 	Certain 	Steel 	Nails 	from 	the 	People’s 	Republic 	of 	China:
Opposition to Target Corporation’s Request to Exclude Steel Nails
Packaged With Non-Subject Merchandise From the Scope of This Order
(Dec. 	22, 	2009), 	PR 	2. 	Mid 	Continent 	Nail 	argued 	that 	it 	is
impermissible 	to 	bypass 	the 	factors 	set 	forth 	in 	19 	C.F.R. 	§
351.225(k)(1) (“(k)(1) factors”) and begin with the (k)(2) factors,
as 	advocated 	by 	Target. 	Proper 	adherence 	to 	case 	precedent 	and
weighing 	of 	the 	sources 	identified 	by 	the 	(k)(1) 	factors, 	Mid
Continent Nail continued, would show that steel nails imported in
mixed-media 	sets 	remain 	subject 	to 	the 	Final 	Order 	despite 	being
packaged with non-subject items.
Mid Continent Nail first pointed to the scope language of the
Final 	Order 	itself. 	It 	argued 	that 	the 	Final 	Order’s 	silence
regarding nails packaged in tool kits was irrelevant to the nails’
inclusion because the Final Order clearly includes all steel nails
matching a broad physical description unless those nails fit within
an articulated exclusion. 	PR 2 at 5-8. 	As seen above, there are
six 	exclusions 	from 	the 	Final 	Order’s 	scope: 	roofing 	nails,
corrugated nails, thumb tacks, small finishing nails, and certain
nails 	used 	in 	either 	powder- 	or 	gas-actuated 	tools. 	See 	Final
Order, 73 Fed. Reg. at 44,961 - 44,962. The scope language excludes
no 	nails 	based 	on 	their 	packaging 	or 	inclusion 	in 	a 	mixed-media
set. 	Mid 	Continent 	Nail 	also 	argued 	that 	prior 	scope 	ruling
precedent supported including subject nails within the scope even
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Court No. 10-00247 	Page 8
though they were packaged in a set with non-subject goods. 	PR 2 at
10-14.
Finally, Mid Continent Nail noted that during the antidumping
proceedings, Stanley Fastening Systems, LP (“Stanley”), an importer
of 	nail 	gun 	sets 	comprised 	of 	a 	nail 	gun, 	nails, 	and 	a 	carrying
case, 	sought 	a 	determination 	that 	the 	nails 	in 	its 	sets 	were
outside 	the 	scope 	langauge. 	See 	PR 	2 	at 	8-9, 	PR 	6, 	Att. 	1. 	The
domestic 	manufacturers 	who 	filed 	the 	antidumping 	petition
(“Petitioners”) responded in opposition stating
[T]hey intend and have always intended these proceedings
to cover all certain steel nails exhibiting the physical
characteristics 	described 	in 	the 	written 	scope
description, whether imported alone or as part of a set
of goods including non-scope merchandise. 	To the extent
the 	Department 	[of 	Commerce] 	wishes 	to 	add 	clarifying
language 	to 	the 	written 	description 	of 	the 	scope
concerning this matter, Petitioners have no objection.
See 	Letter 	from 	Kelley 	Drye 	Collier 	Shannon 	to 	the 	Secretary 	of
Commerce, 	Re: 	Certain 	Steel 	Nails 	from 	the 	People’s 	Republic 	of
China 	(Aug. 	9, 	2007), 	PR 	2, 	Ex. 	3 	at 	6 	(“Petitioners’ 	Scope
Letter”). 	No 	objections 	were 	filed 	to 	the 	Petitioners’ 	Scope
Letter; 	however, 	Commerce 	did 	not 	add 	the 	suggested 	clarifying
language to the Final Order. 4
4In Certain Steel Nails from the People’s Republic of China:
Preliminary Determination of Sales at Less Than Fair Value and
Partial Affirmative Determination of Critical Circumstances and
Postponement of Final Determination, 73 Fed. Reg. 3928, 3929 n. 6
(Jan. 23, 2008), Commerce discussed Stanley’s request, but noted
only that it decided not to modify the Final Order’s scope to
exclude certain trademarked items. 	Commerce never addressed its
decision not to amend the scope to clarify whether nails meeting
the scope language’s physical description remain subject even
(continued...)
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Commerce 	issued 	the 	Final 	Scope 	Ruling 	on 	August 	10, 	2010
excluding 	the 	steel 	nails 	contained 	in 	the 	tool 	kits. 	First,
Commerce 	stated 	that 	it 	had 	examined 	the 	(k)(1) 	factors 	and
concluded 	that 	they 	were 	not 	dispositive 	as 	to 	whether 	the 	Final
Order’s 	scope 	applied 	to 	“brass 	coated 	steel 	nails 	in 	household
tool 	kits.” 	Final 	Scope 	Ruling 	at 	5. 	Commerce 	proceeded 	to 	an
analysis 	of 	the 	merchandise 	under 	the 	(k)(2) 	factors. 	Id. 	It
commenced 	this 	analysis 	by 	stating 	that 	it 	had 	“examined 	each 	of
the household tool kits as a set containing both brass coated nails
and 	other 	items.” 	Id. 	(emphasis 	added). 	As 	a 	basis 	for 	its
decision to focus its examination in this manner, Commerce stated:
While 	we 	acknowledge 	that 	Target’s 	brass 	coated 	steel
nails would meet the physical requirements of steel nails
that 	fall 	within 	the 	scope 	of 	the 	Order 	if 	they 	were
imported without any of the other tool kit components, we
also take into consideration that they were imported in
household tool kits containing non-subject merchandise.
Thus, the proper focus of the analysis is on the nails as
contained in the household tool kits.
Id. 5
Based 	on 	its 	analysis 	of 	the 	(k)(2) 	factors, 	Commerce
concluded 	that 	the 	six 	tool 	kits 	containing 	steel 	nails 	fall
4(...continued)
when packaged with non-subject merchandise.
5 Commerce’s characterization of the particular products it
examined varied throughout the Final Scope Ruling, e.g., “tool
kits,” id. at 7, “tool kits as a set containing both brass coated
nails and other items,” id. at 5, “nails as contained in the
household tool kits.” 	Id. 	However, it is clear from Commerce’s
analysis, and the fact that the nails on their own are subject to
the Final Order, that upon deciding not to conduct an inquiry on
the nails as advocated by Mid Continent Nail, Commerce conducted
its inquiry on the tool kits as advocated by Target.
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outside the scope of the Final Order. 	Mid Continent Nail initiated
this 	action 	seeking 	review 	of 	Commerce’s 	determination 	on 	August
25, 2010.
JURISDICTION
The 	Court 	has 	jurisdiction 	over 	this 	matter 	pursuant 	to
Section 516(a)(2)(B)(vi) of the Tariff Act of 1930, as amended, 19
U.S.C. 	§ 	1516a(a)(2)(B)(vi) 	(2006), 6 	and 	28 	U.S.C. 	§ 	1581(c)
(2006).
STANDARD OF REVIEW and LEGAL STANDARD
The Court will uphold a scope determination by Commerce unless
it 	is 	“unsupported 	by 	substantial 	evidence 	on 	the 	record, 	or
otherwise not in accord with law.” 	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.” 	Huaiyin
Foreign 	Trade 	Corp. 	(30) 	v. 	United 	States, 	322 	F.3d 	1369, 	1374
(Fed. Cir. 2003) (quoting Consol. Edison Co. v. NLRB, 305 U.S. 197,
229 (1938)). 	“The court gives significant deference to Commerce’s
interpretation of its own orders, but a scope determination is not
in accordance with the law if it changes the scope of an order or
interprets 	an 	order 	in 	a 	manner 	contrary 	to 	the 	order’s 	terms.”
Allegheny Bradford Corp. v. United States, 28 CIT 830, 842, 342 F.
Supp. 2d 1172, 1183 (2004). 	In other words, while Commerce “enjoys
6 All further citations to the Tariff Act of 1930 are to the
relevant provisions of Title 19 of the United States Code, 2006
edition.
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substantial freedom to interpret and clarify its antidumping duty
orders . . . it may not change them.” 	Ericsson GE Mobile Commc’ns,
Inc. v. United States, 60 F.3d 778, 782 (Fed. Cir. 1995); see also
Tak 	Fat 	Trading 	Co. 	v. 	United 	States, 	396 	F.3d 	1378, 	1382 	(Fed.
Cir. 2005) (“The language of the order determines the scope of an
antidumping duty order.”).
Notwithstanding 	this 	primacy, 	antidumping 	orders 	sometimes
employ general language when defining the scope of the merchandise
covered. 	See 19 C.F.R. § 351.225(a); see also Duferco Steel, Inc.
v. 	United 	States, 	296 	F.3d 	1087, 	1096 	(Fed. 	Cir. 	2002). 	This
general 	language 	can 	render 	the 	order’s 	scope 	ambiguous, 	and
interpretive aids become necessary. 	In these instances, Commerce
interprets 	the 	order 	pursuant 	to 	19 	C.F.R. 	§ 	351.225, 	the
regulation 	governing 	the 	initiation 	and 	prosecution 	of 	scope
inquiries. 	Section 	351.225(d) 	directs 	Commerce 	to 	first 	utilize
the (k)(1) factors to determine whether a particular product falls
within 	the 	scope 	of 	the 	order 	at 	issue. 	When 	the 	(k)(1) 	factors
“are not dispositive” regarding an order’s scope, Commerce is then
directed 	to 	consider 	the 	(k)(2) 	factors. 	19 	C.F.R. 	§
351.225(k)(2).
ANALYSIS
As 	noted 	above, 	in 	the 	Final 	Scope 	Ruling 	Commerce 	analyzed
the tool kits containing steel nails under the (k)(2) factors after
determining 	that 	the 	(k)(1) 	sources 	were 	not 	dispositive. 	Final
Scope 	Ruling 	at 	5. 	Commerce’s 	entire 	(k)(1) 	analysis 	reads 	as
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follows:
Pursuant to 19 CFR 351.225(k)(1) and as stated above, the
Department [of Commerce] first examined the descriptions
of 	the 	merchandise 	contained 	in 	the 	petition, 	the
determinations 	of 	the 	Secretary 	and 	the 	ITC, 	and 	the
initial 	investigation 	in 	examining 	Target’s 	scope
request. 	On March 18, 2010, we initiated a formal scope
inquiry of Target’s brass coated steel nails in household
tool 	kits, 	finding 	that 	the 	descriptions 	of 	the
merchandise contained in the petition, the determinations
of 	the 	Secretary 	and 	ITC, 	and 	the 	initial 	investigation
were 	not 	dispositive 	in 	this 	case. 	Therefore, 	we 	have
examined 	Target’s 	brass 	coated 	steel 	nails 	in 	household
tool 	kits 	pursuant 	to 	the 	criteria 	set 	forth 	in 	section
351.225(k)(2) 	of 	the 	Department’s 	regulations 	to
determine if they are covered by the scope of the Order.
Final Scope Ruling at 5.
This 	perfunctory 	recitation 	by 	Commerce 	failed 	to 	address
several significant items that should have been considered before
turning 	to 	the 	(k)(2) 	factors. 	For 	example, 	Commerce 	failed 	to
address 	the 	Petitioners’ 	Scope 	Letter 	which 	made 	clear 	the
Petitioners’ 	intention 	that 	their 	proposed 	scope 	language 	would
include 	subject 	goods 	packaged 	with 	non-subject 	items. 	This
failure 	alone 	renders 	the 	Final 	Scope 	Ruling 	unsupported 	by
substantial evidence. 	See Allegheny Ludlum Corp. v. United States,
24 	CIT 	452, 	479, 	112 	F. 	Supp. 	2d 	1141, 	1165 	(2000) 	(“It 	is 	. 	. 	.
well-established 	that 	Commerce’s 	total 	failure 	to 	consider 	or
discuss 	record 	evidence 	which, 	on 	its 	face, 	provides 	significant
support 	for 	an 	alternative 	conclusion 	renders 	the 	Department’s
determination unsupported by substantial evidence.”).
More 	significantly, 	it 	is 	clear 	that 	Commerce 	commenced 	its
analysis with its focus already on the tool kits, and not the steel
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Court No. 10-00247 	Page 13
nails. 	Commerce never addressed in any substantive way, however,
its decision to examine the tool kits rather than the steel nails. 7
It simply stated that the tool kits would be examined because the
nails 	were 	packaged 	therein 	with 	non-subject 	merchandise. 	See
Final 	Scope 	Ruling 	at 	5. 	A 	more 	thorough 	explanation 	was
necessary. 	See NMB Singapore Ltd. v. United States, 557 F.3d 1316,
1319 	(Fed. 	Cir. 	2009) 	(“Commerce 	must 	explain 	the 	basis 	for 	its
decisions; 	while 	its 	explanations 	do 	not 	have 	to 	be 	perfect, 	the
path 	of 	Commerce's 	decision 	must 	be 	reasonably 	discernable 	to 	a
reviewing court.”).
Properly 	addressing 	this 	issue 	is 	especially 	important 	in
mixed-media cases like this one because the scope inquiry steps set
forth above presuppose a “product” to which they are being applied.
If 	there 	is 	a 	dispute 	regarding 	what 	that 	product 	is, 	therefore,
resolving that dispute is one of the most important steps Commerce
makes during the inquiry. 	Here, the decision to examine the tool
kits 	proved 	outcome 	determinative 	because 	there 	was 	universal
agreement 	that 	the 	nails 	considered 	on 	their 	own 	were 	subject 	to
the Final Order. 	In deciding that its inquiry would focus on the
tool 	kits, 	Commerce 	addressed 	none 	of 	the 	parties’ 	arguments 	on
this 	issue 	and 	did 	not 	expressly 	rely 	on 	the 	Final 	Order, 	prior
7 It is worth noting that Commerce was not required to focus
its inquiry on the tool kits simply because Target framed its
Request in that manner. 	See Walgreen Co. of Deerfield v. United
States, 620 F.3d 1350, 1355 (Fed. Cir. 2010) (noting that such a
rule would allow importers to frame their scope ruling requests
in order to eliminate dispositive use of the (k)(1) factors).
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Court No. 10-00247 	Page 14
scope 	rulings, 	or 	other 	basis. 	A 	ruling 	from 	Commerce 	with 	such
infirmities will normally not be affirmed. 	See USX Corp. v. United
States, 	11 	CIT 	82, 	88, 	655 	F. 	Supp. 	487, 	492 	(1987) 	(“The 	court
cannot defer to a decision which is based on inadequate analysis or
reasoning.”). 	However, because the Final Order and its prior scope
rulings provide possible paths for Commerce’s decision to examine
the tool kits, the Court takes up each in turn.
1. 	The Final Order
Target and Mid Continent Nail are correct that the Final Order
is 	silent 	regarding 	coverage 	of 	nails 	packaged 	with 	non-subject
items. 	However, this silence does not amount to an ambiguity. 	The
Final 	Order 	gives 	a 	specific 	description 	of 	the 	broad 	range 	of
nails falling within its scope. 	It continues by setting forth six
types of nails excluded from that scope. 	None of these exclusions
turn on whether the nails are packaged with non-subject items, or
whether they are a minor part of the overall item in which they are
packaged. 	The 	only 	conclusion 	warranted 	by 	the 	Final 	Order’s
language, 	then, 	is 	that 	packaging 	does 	nothing 	to 	change 	the
scope’s broad coverage of steel nails.
Target 	argues 	that 	this 	case 	“is 	not 	a 	packaging 	case,”
because 	it 	concerns 	unique 	products 	- 	tool 	kits. 	See 	Target’s
Resp. 	in 	Opp’n 	to 	Pl.’s 	R. 	56.2 	Mot. 	for 	J. 	upon 	the 	Agency 	R.
(“Target’s Opp’n) at 19. 	It further states that Commerce alone can
determine 	whether 	the 	product 	presented 	for 	examination 	is 	a
separate item, unique from the subject good. 	Id. (citing Walgreen,
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Court No. 10-00247 	Page 15
620 F.3d at 1355). 	First, Target overstates the unique nature of
the tool kits. 	The tool kits are a collection of tools that will
be 	used 	by 	the 	consumer 	as 	tools, 	and 	nails 	that 	will 	be 	used 	by
the 	consumer 	as 	nails. 	Second, 	while 	it 	is 	true 	that 	Commerce
defines the product under review when necessary, Walgreen is clear
that this determination must “take into account the unique language
of 	the 	Final 	Order” 	at 	issue 	in 	the 	case. 	Walgreen, 	620 	F.3d 	at
1355. 	Here, 	deciding 	that 	the 	nails’ 	inclusion 	in 	tool 	kits
created a new product and ultimately excluding the nails from the
Final Order’s scope was an unreasonable interpretation of the Final
Order. 	By focusing its inquiry on the tool kits and excluding the
otherwise 	subject 	nails 	packaged 	therein, 	Commerce 	effectively
created a seventh exclusion to the Final Order, namely an exclusion
of steel nails packaged with non-subject items in tool kits.
In 	so 	doing, 	Commerce 	ran 	afoul 	of 	the 	well-established
prohibition 	against 	altering 	scope 	language 	ex 	post 	facto. 	See
Ericsson, 	60 	F.3d 	at 	782. 	If 	Commerce 	intended 	to 	exclude 	nails
imported 	as 	components 	of 	mixed-media 	sets 	from 	the 	scope 	of 	the
Final 	Order, 	the 	time 	to 	establish 	that 	exclusion 	was 	during 	the
antidumping 	investigation. 	“It 	is 	the 	responsibility 	of 	the
agency, not those who initiated the proceedings, to determine the
scope of the final orders.” 	Duferco, 296 F.3d at 1097. 	Commerce
undertook 	this 	responsibility 	here, 	as 	it 	always 	does, 	with
informed input from those most knowledgeable and with the greatest
interest 	in 	the 	proceedings, 	namely 	industry 	members 	who
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Court No. 10-00247 	Page 16
manufacture 	and 	import 	the 	nails 	in 	question. 	Stanley’s 	request
regarding its nail gun sets, and the Petitioners’ Scope Letter in
response, put Commerce on notice that subject nails were likely to
be 	imported 	with 	non-subject 	items, 	and 	that 	the 	Petitioners
believed 	this 	fact 	irrelevant 	to 	whether 	those 	nails 	remained
within 	the 	scope 	of 	the 	Final 	Order. 	Resolution 	of 	this 	issue
could 	easily 	have 	been 	provided 	for 	one 	way 	or 	the 	other 	in 	the
Final 	Order. 	Instead, 	Commerce 	issued 	a 	Final 	Order 	that
encompasses a broad range of steel nails regardless of whether they
are imported in mixed-media sets. 	This unambiguous scope may not
be changed now by means of the Final Scope Ruling.
The 	Government 	and 	Target 	argue 	that 	the 	tool 	kits 	at 	issue
should 	not 	be 	automatically 	encompassed 	within 	the 	Final 	Order’s
scope 	simply 	because 	the 	Final 	Order 	did 	not 	expressly 	exclude
them. 	See Gov.’s Opp’n at 13 (citing Duferco, 296 F.3d at 1096);
Target’s Opp’n at 18 n.11 (citing Toys “R” Us v. United States, 32
CIT 	__, 	__, 	Slip 	Op. 	08-79 	(July 	16, 	2008)(not 	published 	in 	the
Federal 	Supplement)). 	This 	argument, 	however, 	states 	the 	matter
backwards. 	The 	tool 	kits 	are 	important 	not 	because 	of 	what 	they
are, 	but 	because 	of 	what 	they 	contain 	- 	subject 	steel 	nails.
Importation 	of 	those 	nails 	provides 	the 	basis 	for 	this 	case; 	in
fact, it was the reason Target sought a scope ruling to begin with.
It is not surprising that household tool kits are outside the scope
of an order related to steel nails. 	The nails themselves, however,
are 	subject 	to 	the 	Final 	Order, 	and 	it 	is 	left 	only 	to 	determine
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Court No. 10-00247 	Page 17
whether 	the 	Final 	Order, 	or 	some 	other 	lawful 	source, 	provide 	a
basis for excluding them because they are packaged in tool kits.
As 	already 	stated, 	the 	Final 	Order 	provides 	no 	such 	basis.
While 	the 	Final 	Order’s 	unambiguous 	inclusion 	of 	the 	nails 	would
normally 	be 	the 	end 	of 	the 	Court’s 	analysis, 	the 	role 	Commerce’s
prior 	scope 	rulings 	may 	have 	played 	in 	its 	decision 	should 	be
reviewed. 	This scrutiny is warranted because it is unclear how the
procedures described in those rulings operate in conjunction with
the 	language 	of 	the 	final 	orders, 	and 	an 	issue 	exists 	regarding
whether Commerce is authorized to use such procedures at all.
2. 	Prior Scope Rulings
As relied on by the parties during the scope inquiry, Commerce
has 	previously 	considered 	scope 	ruling 	requests 	involving 	mixed-
media 	items. 	The 	relevant 	rulings 	all 	involved 	similar
circumstances: 	an 	item 	or 	set 	being 	imported 	included 	a 	subject
good, 	but 	the 	antidumping 	order 	at 	issue 	was 	silent 	regarding
coverage of the item or set. 	In response to these circumstances,
Commerce 	has 	adopted 	two 	different 	tests 	utilizing 	two 	different
sets 	of 	factors 	allowing 	it 	to 	determine 	the 	product 	under
examination. 	The test used is normally outcome determinative as to
whether Commerce ultimately finds coverage of the subject good.
In the scope rulings relied on by Target, Commerce focused its
inquiry 	on 	the 	entire 	mixed-media 	item 	or 	set 	rather 	than 	the
subject good alone and found no scope coverage. See Certain Lined
Paper Products from the People’s Republic of China - Davis Group of
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Court No. 10-00247 	Page 18
Companies Corp. Scope Ruling Request, (Feb. 21, 2008) (concluding
that padfolios containing subject lined paper pads were outside the
scope 	of 	the 	order) 	(“Davis 	Scope 	Ruling”); 	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) (same); Final Scope Ruling - Antidumping Duty Order
on Certain Cased Pencils from the People’s Republic of China (PRC)
- Request by Fiskars Brands, Inc., (June 3, 2005) (concluding that
compasses containing subject pencils were outside the scope of the
order) (“Fiskars Scope Ruling”); Final Scope Ruling - Antidumping
Duty Order on Certain Cased Pencils from the People’s Republic of
China 	(PRC) 	- 	Request 	by 	Target 	Corporation, 	(Mar. 	4, 	2005)
(concluding that art sets containing subject pencils and other non-
subject art supplies were outside the scope of the order) (“Clip N’
Color Scope Ruling”).
In these scope rulings, Commerce considered the item or set as
a 	whole 	after 	concluding 	that 	the 	subject 	good 	contained 	therein
was “not a substantial component of the set,” Clip N’ Color Scope
Ruling at 5, was “consumed” during use, Fiskars Scope Ruling at 6,
or could be “replaced” with another, presumably non-subject, good.
Davis 	Scope 	Ruling 	at 	6. 	Notably, 	Commerce 	identified 	none 	of
these factors (i.e., minor component, consumable, replaceable) in
the language of the antidumping order at issue.
In the scope rulings relied on by Mid Continent Nail, Commerce
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Court No. 10-00247 	Page 19
decided to examine the subject good regardless of the other items
with 	which 	it 	was 	packaged, 	and 	concluded 	that 	the 	subject 	good
remained subject to the antidumping order. 	See Final Scope Ruling:
Antidumping 	Duty 	Order 	on 	Certain 	Tissue 	Paper 	from 	the 	People’s
Republic of China, (Sept. 19, 2008) (concluding that tissue paper
contained 	in 	a 	gift 	bag 	set 	was 	subject 	to 	the 	order) 	(“Walgreen
Scope Ruling”); 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 	People’s 	Republic 	of
China, (Aug. 8, 1990) (concluding that porcelain-on-steel cookware
imported 	as 	part 	of 	a 	camping 	set 	was 	subject 	to 	the 	order)
(“Texsport Scope Ruling”).
In the Walgreen Scope Ruling, Commerce analyzed subject tissue
paper 	contained 	in 	gift 	bags 	and 	concluded 	that 	the 	tissue 	paper
was “not a component of a unique set but merely subject merchandise
packaged with non-subject merchandise.” 	Walgreen Scope Ruling at
11. 	Relying on the Texsport Scope Ruling, Commerce stated that it
evaluated the subject tissue paper apart from the other items with
which 	it 	was 	packaged 	because 	the 	items 	“could 	be 	used
independently 	of 	one 	another 	and 	at 	different 	times.” 	Id.
Commerce 	also 	stated 	that 	“[b]ecause 	the 	tissue 	paper 	at 	issue
included in these sets can be used independently, the question of
whether or not the tissue paper is ‘significant’ with regard to the
other 	products 	in 	the 	gift 	bag 	sets 	. 	. 	. 	is 	irrelevant 	to 	the
Department’s analysis in this case.” 	Id. at 11-12.
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Court No. 10-00247 	Page 20
In 	this 	case, 	Commerce 	appears 	to 	have 	followed 	the 	rulings
cited 	by 	Target. 	However, 	if 	Commerce 	had 	instead 	applied 	the
Walgreen Scope Ruling approach, it is likely that the subject nails
would have been examined and found within the Final Order’s scope
because they can be “used independently” of the other items in the
tool kits and “at different times.” 	In fact, the nails appear to
better satisfy these conditions than did the tissue paper at issue
in Walgreen.
Such inconsistency in agency procedure is not permitted. 	It
is 	true 	that 	Commerce 	has 	not 	given 	a 	general 	definition 	or 	test
for 	what 	constitutes 	a 	mixed-media 	set, 	and 	that 	Commerce 	must
issue each scope ruling based upon the facts and circumstances of
the 	specific 	case 	before 	it. 	See 	Walgreens, 	620 	F.3d 	at 	1355.
However, 	to 	the 	extent 	that 	Commerce 	develops 	a 	procedure 	for
defining 	the 	particular 	product 	to 	be 	examined 	in 	scope
proceedings, 	such 	procedure 	must 	remain 	consistent 	and 	any
deviations must be explained. 	See SFK USA, Inc. v. United States,
630 F.3d 1365, 1373 (Fed. Cir. 2011) (“When an agency changes its
practice, 	it 	is 	obligated 	to 	provide 	an 	adequate 	explanation 	for
the change.”).
An additional problem exists when Commerce uses criteria other
than 	the 	antidumping 	order 	to 	determine 	the 	particular 	product
under examination in scope proceedings. 	Specifically, Commerce has
cited no authority allowing it to consider factors other than the
Final Order or the provisions of 19 C.F.R. § 351.225 when defining
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Court No. 10-00247 	Page 21
the particular product to be examined in scope inquiries. 	However,
statutory 	authority 	is 	necessary 	when 	an 	agency 	takes 	action 	to
administer 	a 	statutory 	schemes 	over 	which 	it 	has 	oversight. 	See
Timken Co. v. United States, 354 F.3d 1334, 1341 (Fed. Cir. 2004)
(citing Chevron U.S.A., Inc. v. Natural Res. Def. Council, 467 U.S.
837, 842-43 (1984)).
This much is clear: a party seeks a scope ruling in a mixed-
media case because it is importing an item containing goods subject
to an antidumping order. 	As stated above, it is Commerce, and not
the 	party 	seeking 	the 	scope 	ruling, 	that 	decides 	where 	the 	scope
inquiry should be focused. 	See Walgreen Co. of Deerfield, 620 F.3d
at 	1355. 	The 	factors 	to 	be 	utilized 	in 	making 	this 	decision 	are
not expressly provided for in 19 C.F.R. § 351.225, but the question
itself remains governed by the principle that in scope proceedings,
Commerce may interpret its orders but is not at liberty to change
them. See Ericsson GE Mobile Commc’ns, 60 F.3d at 782. 	Therefore,
regardless 	of 	the 	test 	employed, 	examining 	mixed-media 	items 	or
sets 	instead 	of 	the 	subject 	goods 	they 	contain 	when 	such 	an
approach 	is 	not 	warranted 	by 	the 	antidumping 	order 	may 	not 	be 	in
accord 	with 	the 	law. 	However, 	since 	the 	Final 	Scope 	Ruling
provided 	no 	statutory, 	regulatory, 	or 	other 	legal 	basis 	for 	this
practice, 	the 	Court 	concludes 	that 	remand 	on 	this 	issue 	is
appropriate so that Commerce can identify not only a test it will
employ consistently, but the legal justification for employing such
a test at all.
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Court No. 10-00247 	Page 22
CONCLUSION
The Court concludes that the Final Scope Ruling is unsupported
by substantial evidence and otherwise not in accord with the law.
Commerce failed to articulate the reasons it examined the tool kits
instead 	of 	the 	nails 	contained 	therein. 	Commerce 	also 	gave
inadequate 	consideration 	to 	the 	language 	of 	the 	Final 	Order 	and
undertook an analysis under 19 C.F.R. §351.225(k)(2) prematurely.
Furthermore, to the extent Commerce relied on procedures set forth
in 	its 	prior 	scope 	rulings 	in 	deciding 	to 	examine 	the 	tool 	kits
rather 	than 	the 	nails 	contained 	therein, 	it 	failed 	to 	articulate
the factors of the test it followed or the legal authorization for
employing such a test.
In 	accordance 	with 	the 	above, 	this 	case 	is 	remanded 	to
Commerce for further proceedings consistent with this opinion.
/s/ NICHOLAS TSOUCALAS
Nicholas Tsoucalas
Senior Judge
Dated: May 17, 2011
New York, New York
Case 1:10-cv-00247-NT Document 45 Filed 05/17/11 Page 22 of 24

Slip Op. 11-55
UNITED STATES COURT OF INTERNATIONAL TRADE
Before: Nicholas Tsoucalas, Senior Judge
________________________________________
MID CONTINENT NAIL CORPORATION, 	:
:
Plaintiff, 	:
:
v. 	:
:
UNITED STATES, 	:
: 	Court No.: 10-00247
Defendant, 	:
:
and 	:
:
TARGET CORPORATION, 	:
:
Defendant-Intervenor. 	:
:
ORDER
This 	case 	having 	been 	duly 	submitted 	for 	decision 	and 	the
Court, after due deliberation, having rendered a decision herein;
now, in accordance with said decision, it is hereby
ORDERED, ADJUDGED, and DECREED that the Motion for Judgment on
the 	Agency 	Record 	filed 	by 	Plaintiff, 	Mid 	Continent 	Nail
Corporation, is granted; and it is further
ORDERED 	that 	the 	United 	States 	Department 	of 	Commerce’s
(“Commerce”) 	Final 	Scope 	Ruling 	- 	Certain 	Steel 	Nails 	from 	the
People’s Republic of China (“PRC”), Request by Target Corporation
(Dep’t 	Commerce 	Aug. 	10, 	2010) 	is 	remanded 	to 	the 	agency 	for
further 	proceedings. 	First, 	Commerce 	should 	explain 	whether, 	in
focusing 	its 	scope 	examination 	on 	tool 	kits 	containing 	subject
nails, 	it 	relied 	on 	a 	procedure 	or 	set 	of 	factors 	articulated 	in
its 	prior 	scope 	rulings 	and 	distinct 	from 	the 	final 	antidumping
order 	or 	the 	provisions 	of 	19 	C.F.R. 	§ 	351.225. 	If 	so, 	Commerce
should articulate that procedure or set of factors, as well as the
statutory, regulatory, or other legal source granting it authority
to employ such procedure or set of factors; and it is further
ORDERED 	that 	Commerce 	shall 	reconsider 	its 	determination 	of
Target 	Corporation’s 	December 	11, 	2009 	Scope 	Ruling 	Request 	in
light 	of 	the 	standard 	set 	forth 	by 	the 	Court 	in 	the 	accompanying
Case 1:10-cv-00247-NT Document 45 Filed 05/17/11 Page 23 of 24

opinion 	and 	the 	findings 	regarding 	the 	record 	set 	forth 	therein;
and it is further
ORDERED that the remand results are due within sixty (60) days
from 	the 	date 	that 	this 	opinion 	is 	issued. 	Any 	responses 	or
comments are due within thirty (30) days from the date the results
are filed. 	Any rebuttal comments are due within fifteen (15) days
from the date any responses are filed.
Commerce for further proceedings consistent with this opinion.
/s/ NICHOLAS TSOUCALAS
Nicholas Tsoucalas
Senior Judge
Dated: May 17, 2011
New York, New York
Case 1:10-cv-00247-NT Document 45 Filed 05/17/11 Page 24 of 24