Districargo, Inc. v. United States

Slip Op. 16-38
UNITED STATES COURT OF INTERNATIONAL TRADE
DISTRICARGO, INC.,
Plaintiff,
v.
UNITED STATES,
Defendant.
Before: Leo M. Gordon, Judge
Court No. 14-00208
OPINION
[Final scope ruling sustained.]
Dated: April 20, 2016
Peter S. Herrick, Peter S. Herrick, P.A. of St. Petersburg, FL, Josh Levy, Marlow,
Adler, Abrams, Newman & Lewis, P.A. of Coral Gables, FL for Plaintiff Districargo, Inc.
Douglas 	G. 	Edelschick, 	Trial 	Attorney, 	Commercial 	Litigation 	Branch, 	Civil
Division, U.S. Department of Justice of Washington, DC for Defendant United States. On
the brief with him were Benjamin C. Mizer, Principal Deputy Assistant Attorney General,
Jeanne E. Davidson, Director, Reginald T. Blades, Jr., Assistant Director. Of counsel on
the brief was David P. Lyons, Attorney, Office of the Chief Counsel for Trade Enforcement
and Compliance, U.S. Department of Commerce of Washington, DC.
Gordon, 	Judge: 	This 	action 	involves 	a 	scope 	inquiry 	conducted 	by 	the
U.S. Department 	of 	Commerce 	(“Commerce”) 	regarding 	the 	antidumping 	and
countervailing duty orders on aluminum extrusions from the People’s Republic of China.
See Final Scope Ruling on Exhibition Booth Kits (Dep’t of Commerce Aug. 14, 2014),
available 	at 	http://enforcement.trade.gov/download/prc-ae/scope/49-exhibition-booth-
kits-14aug14.pdf (last visited this date) (“Final Scope Ruling”); see also Aluminum
Extrusions from the People’s Republic of China: Antidumping Duty Order, 76 Fed. Reg.
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30,650 (Dep’t of Commerce May 26, 2011) (“AD Order”); Aluminum Extrusions from the
People’s Republic of China: Countervailing Duty Order, 76 Fed. Reg. 30,653 (Dep’t of
Commerce May 26, 2011) (“CVD Order”) (collectively, “Orders”). The U.S. Department of
Commerce (“Commerce”) determined that Plaintiff’s exhibition booth kits did not meet the
criteria for a “finished goods kit” as outlined in the Orders, and therefore were within the
scope of the Orders.
Before the court is Plaintiff Districargo Inc.’s USCIT Rule 56.2 motion for judgment
on the agency record. See Pl.’s Mem. of Law & Argument in Supp. of Pl.’s Mot. for J. on
the Agency R., ECF No. 16 (“Pl.’s Br.”); see also Def.’s Resp. to Pl.’s Mot. for J. on the
Agency 	R., 	ECF 	No. 18 	(“Def.’s 	Resp.”). 	The 	court 	has 	jurisdiction 	pursuant 	to
Section 516A(a)(2)(B)(vi) of Tariff Act of 1930, as amended, 19 U.S.C. § 1516a(2)(B)(vi)
(2012), 1 and 28 U.S.C. § 1581(c) (2012). For the reasons that follow, the court sustains
the Final Scope Ruling.
I. Standard of Review
The court sustains Commerce’s “determinations, findings, or conclusions” unless
they are “unsupported by substantial evidence on the record, or otherwise not in
accordance with law.” 19 U.S.C. § 1516a(b)(1)(B)(i). More specifically, when reviewing
agency determinations, findings, or conclusions for substantial evidence, the court
assesses whether the agency action is reasonable given the record as a whole. Nippon
Steel Corp. v. United States, 458 F.3d 1345, 1350-51 (Fed. Cir. 2006). Substantial
1 Further citations to the Tariff Act of 1930, as amended, are to the relevant provisions of
Title 19 of the U.S. Code, 2012 edition, and all applicable supplements.
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evidence has been described as “such relevant evidence as a reasonable mind might
accept as adequate to support a conclusion.” DuPont Teijin Films USA v. United States,
407 F.3d 1211, 1215 (Fed. Cir. 2005) (quoting Consol. Edison Co. v. NLRB, 305 U.S.
197, 229 (1938)). Substantial evidence has also been described as “something less than
the weight of the evidence, and the possibility of drawing two inconsistent conclusions
from the evidence does not prevent an administrative agency’s finding from being
supported by substantial evidence.” Consolo v. Fed. Mar. Comm’n, 383 U.S. 607, 620
(1966). Fundamentally, though, “substantial evidence” is best understood as a word
formula connoting reasonableness review. 3 Charles H. Koch, Jr., Administrative Law and
Practice § 9.24[1] (3d ed. 2015). Therefore, when addressing a substantial evidence
issue raised by a party, the court analyzes whether the challenged agency action “was
reasonable given the circumstances presented by the whole record.” Jane C. Bergner,
Steven W. Feldman, the late Edward D. Re, and Joseph R. Re, 8-8A, West’s Fed. Forms,
National Courts § 13342 (5th ed. 2015).
II. Legal Framework
The language of the order itself is the “cornerstone” of a scope analysis and
“a predicate for the interpretive process.” Duferco Steel, Inc. v. United States, 296 F.3d
1087, 1097 (Fed. Cir. 2007). Commerce first considers the scope language of the order
itself, the descriptions contained in the petition, and how the scope was defined in the
investigation and in the determinations issued by Commerce and the ITC. 19 C.F.R.
§ 351.225(k)(1) (2015); Duferco, 296 F.3d at 1097. If the (k)(1) factors are dispositive,
Commerce issues a final scope ruling. See Eckstrom Indus., Inc. v. United States,
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254 F.3d 1068, 1071 (Fed. Cir. 2001). If the (k)(1) factors are not dispositive, Commerce
analyzes the Diversified Products criteria under subsection (k)(2) of its regulations: (1) the
physical characteristics, (2) the expectations of ultimate purchasers, (3) the ultimate use,
(4) the channels of trade in which the product is sold, and (5) the manner of advertising
and display. 19 C.F.R. § 351.225(k)(2). In this action Commerce determined that the
(k)(1) analysis was dispositive. Final Scope Ruling at 9. Plaintiff does not argue that the
(k)(2) factors are in issue. See Pl.’s Br. at 6-16.
III. Scope of the Orders
The Orders cover “aluminum extrusions,” which are “shapes and forms, produced
by an extrusion process, made from [certain] aluminum alloys.” AD Order, 76 Fed. Reg.
at 30,650; CVD Order, 76 Fed. Reg. at 30,653. “Subject aluminum extrusions may be
described at the time of importation as parts for final finished products that are assembled
after importation . . . .” AD Order, 76 Fed. Reg. at 30,650-51; CVD Order, 76 Fed. Reg.
at 30,654. Nevertheless, the scope “excludes finished goods containing aluminum
extrusions that are entered unassembled in a ‘finished goods kit’” (“exclusion”). AD Order,
76 Fed. Reg. at 30,651; CVD Order, 76 Fed. Reg. at 30,654. A “finished goods kit” is a
“packaged combination of parts that contains, at the time of importation, all of the
necessary parts to fully assemble a final finished good and requires no further finishing
or fabrication, such as cutting or punching, and is assembled ‘as is’ into a finished
product.” AD Order, 76 Fed. Reg. at 30,651; CVD Order, 76 Fed. Reg. at 30,654.
The “finished goods kit” exclusion contains an exception: “[a]n imported product will not
be considered a ‘finished goods kit’ and therefore excluded from the scope of the
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investigation merely by including fasteners such as screws, bolts, etc. in the packaging
with an aluminum extrusion product.” Id.
IV. Discussion
Plaintiff imports exhibition booth kits comprised of extruded aluminum poles,
extruded aluminum beams, and iron buckles. Plaintiff imports the components together
in the same shipment and entry, but packages like parts together (i.e., poles with poles,
beams with beams, and buckles with buckles). Plaintiff explains that the components of
its exhibition booths were packaged separately for convenience, and that Plaintiff
imported the kits as a single shipment (i.e., in the same shipping container and on the
same Customs Form 7501 entry summary). Pl.’s Br. at 6-8, 14-16. After importation,
however, a distributor “unpacks, rearranges, and rents the various parts to the ultimate
consumer,” 	assembling 	the 	products 	per 	the 	specific 	requests 	of 	the 	end 	user.
Final Scope Ruling at 10. There is no dispute here that the poles and beams in Plaintiff’s
exhibition booth kits are aluminum extrusions and thus within the scope of the Orders and
that the iron buckles are non-aluminum extrusion parts. The only issue is whether the
subject exhibition booth kits, as a whole, qualify for the “finished goods kit” exclusion.
The Orders define a “finished goods kit” as a “packaged combination of parts that
contains, at the time of importation, all of the necessary parts to fully assemble a final
finished good and requires no further finishing or fabrication, such as cutting or punching,
and is assembled ‘as is’ into a finished product.” AD Order, 76 Fed. Reg. at 30,651
(emphasis added); CVD Order, 76 Fed. Reg. at 30,654.
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Commerce has treated kits with separately-packaged components as a “finished
goods kit” as defined in the exclusion, Final Scope Ruling on Trade Booth Kits 13-15
(Dep’t of Commerce June 23, 2014), available at http://enforcement.trade.gov/ download/
prc-ae/ scope/ 42-trade-booth-kits-24jul14.pdf (last visited this date) (“Trade Booth Kits”).
Commerce has not done so, however, in cases where the components must be
rearranged into kits after importation. Final Scope Ruling on 5 Diamond Promotions, Inc.’s
Aluminum 	Flag 	Pole 	Sets 	9-11 	(Dep’t 	of 	Commerce 	Apr. 19, 	2013), 	available 	at
http://enforcement.trade.gov/ download/ prc-ae/ scope/ 30-5-Diamond-Flag-Pole-Sets-
20130419.pdf (last visited this date) (“Although 5 Diamond imports a sufficient number of
packages of unassembled sections to create a predetermined number of three-and/or
four-section assembled flag pole sets together on the same Customs Entry Summary,
after importation, the packages must be opened, and the parts needed to fully assemble
an entire flag pole must be re-packaged before being sold to the end user”) (“Flag Poles”);
Final Scope Ruling on Law St. Enterprises, LLC’s Disappearing Door Screens 9-10
(Dep’t of 	Commerce 	Sept. 	12, 	2013), 	available 	at 	http://enforcement.trade.gov/
download/ 	prc-ae/ 	scope/3 	3-Law-St-Screen%20Kits-aluminum-extrusion-PRC-
20130912.pdf (last visited this date) (“Although Law St. imports together, on the same
CBP 7501 form, ‘each and every element or part that makes up the completed screen
kit,’ the packages must be opened, and the parts needed to fully assemble an entire
disappearing door screen must be re-arranged and re-packaged, after importation, before
being sold to the end user.”) (“Disappearing Doors”).
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Commerce 	below 	reviewed 	Plaintiff’s 	submissions 	and 	concluded 	that 	the
exhibition booth kits do not satisfy the “finished goods kit” criteria:
[I]nformation from Districargo indicates that it imports the exhibition booth
kits at issue as a single shipment, in the same shipping container, on the
same 7501 entry summary and that at the time of importation like parts are
packaged together (i.e., poles with poles, and beams with beams, and
buckles with buckles). Information from Districargo further indicates that
Districargo acts as the importer of record and that a separate firm, Pyramid
Construction Services Inc. (Pyramid), acts as the “ultimate consignee.”
Information from Districargo also indicates that Pyramid does not transfer
or sell the products at issue, but instead that Pyramid enters the materials
into “service inventory,” and then “assembles” the products at issue per the
specific requests of the rental client (aka the exhibitor).
Based on this information, we find that Districargo imports the products at
issue in separate packaging (i.e., poles with poles, beams with beams, and
buckles with buckles), the products are subsequently transferred to Pyramid
where the kits pieces remain unassembled in “service inventory,” and that
Pyramid, acting as a distributor, unpacks, rearranges, and rents the various
parts to the ultimate consumer. We find this fact pattern is akin to that
examined in [Disappearing Doors] in which the Department found that the
products at issue were inside the scope of the Orders because upon
importation it was necessary for the kits to be opened, re-arranged, and re-
packaged, before being sold to the end user as a kit ready to be assembled
into a finished good.
Final Scope Ruling at 10 (citing Disappearing Doors at 9; Flag Poles at 9) (footnotes
omitted). Commerce determined that Plaintiff’s exhibition booth kits are rearranged into
kits after importation and, analogizing this case to its prior rulings in Disappearing Doors
and Flag Poles, concluded that the exhibition booth kits are not “finished goods kits” as
defined in the Orders. Id.
Plaintiff argues that Commerce unreasonably concluded that the exhibition booth
kits do not meet the “finished goods kit” criteria. Plaintiff insists that there is no evidence
that the distributor “rearranges” or “repackages” anything. Pl.’s Br. at 14-15. According to
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Plaintiff, its exhibition booth kits are “kits at the time of importation” and therefore meet
the “finished goods kit” criteria. Id. As a consequence, Plaintiff argues, the facts below
are analogous to Commerce’s prior scope ruling in Trade Booth Kits, where Commerce
applied the exclusion to kits consisting of large, separately-packaged components. Id. at
15-16 (citing Trade Booth Kits at 13, 15).
In the court’s view, Commerce reasonably concluded that Plaintiff’s exhibition
booth kits are not “finished goods kits” as defined in the Orders. Final Scope Ruling at 9-
10 (citing Disappearing Doors at 9; Flag Poles at 9). Plaintiff submitted documents to
Commerce showing that it sells the booth kits to a distributor, who then rents booth kits
to end users. These documents indicate that the distributor opens the separate packages
and stores the booth kit parts in its inventory. The distributor “assembles” booths per the
specific requests of renters. Id. at 5, 9-10. These documents apparently do not specify
whether the booth components stay together as individualized kits from importation until
assembly. More specifically, they do not clarify whether the distributor mixes like
components in its inventory, rearranging and repackaging the components before
assembling each booth to fit renters’ requests. See id. On this record, it is reasonable for
Commerce 	to 	have 	determined 	that 	Plaintiff’s 	“kits” 	are 	actually 	rearranged 	and
repackaged into kits after importation, meaning they are not “finished goods kits” as
defined in the Orders. See id. at 9-10; see also id. at 3 (including “final finished products
that are assembled after importation” within the scope of the Orders).
Plaintiff would have preferred that Commerce had identified direct evidence that
the booth components were “rearranged” and “repackaged” after importation. See Pl.’s
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Br. at 15-16 (“Placing the kits unassembled in service inventory does not reasonably
bridge Commerce’s path to a conclusion that the exhibition booth kits were ‘rearranged’
or ‘repackaged’ after importation.”). The burden, however, is on Plaintiff, not Commerce,
to have demonstrated this fact. For example, Plaintiff does not show that the components
required to assemble a booth are arranged together in the shipping container or marked
in a way that communicates each box belongs to an individual kit. Cf. Final Scope Ruling
on J.A. Hancock Co., Inc.’s Geodesic Structures 7 (Dep’t of Commerce July 17, 2012),
available 	at 	http://enforcement.trade.gov/ 	download/ 	prc-ae/ 	scope/ 	16-Hancock-
Geodesic-Structures-20120717.pdf (last visited this date) (finding that the product in
question “meet the initial requirements” for inclusion into the exclusion in part because
the separate packages of like parts contained markings like “box 1 of 3,” “box 2 of 3,” and
“box 3 of 3”). Plaintiff does not show that the distributor maintains its inventory of booth
components to prevent mixing of parts between kits, which in turn might suggest the
components were kits upon importation. Cf. Trade Booth Kits at 13-15 (finding that the
importer’s detailed description of the shipping, import, and delivery process qualified the
product in question as a “finished goods kit,” despite separate packaging of components).
Commerce articulated a second basis for including Plaintiff’s merchandise within
the scope of the Orders, which Plaintiff also challenges in its brief. See Pl.’s Br. at 11-14.
The finished goods kit exclusion has an exception: “An imported product will not be
considered a ‘finished goods kit’ . . . merely by including fasteners such as screws, bolts,
etc. in the packaging with an aluminum extrusion product.” AD Order, 76 Fed. Reg. at
30,651; CVD Order, 76 Fed. Reg. at 30,654. Commerce interpreted this language to
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cover Plaintiff’s exhibition booth kits. Final Scope Ruling at 9-10. The court does not reach
this issue because the merchandise must first fall within the exclusion before the
exception may apply. More specifically, the “exception” to the exclusion is only implicated
if the merchandise is a “packaged combination of parts that contains, at the time of
importation, all of the necessary parts to fully assemble a final finished good and requires
no further finishing or fabrication, such as cutting or punching, and is assembled ‘as is’
into a finished product.” See AD Order, 76 Fed. Reg. at 30,651; CVD Order, 76 Fed. Reg.
at 30,654. Commerce reasonably concluded as a factual matter that Plaintiff’s exhibition
booth kits do not satisfy this definition, meaning the exclusion is inapplicable, and by
extension, the exception to the exclusion cannot apply. The court therefore does not
reach this aspect of Plaintiff’s challenge to the Final Scope Ruling.
III. Conclusion
The court sustains the Final Scope Ruling because Commerce reasonably
concluded that Plaintiff’s exhibition booth kits do not satisfy the criteria for a “finished
goods kit” as defined in the Orders. Judgment will enter accordingly.
/s/ Leo M. Gordon
Judge Leo M. Gordon
Dated: April 20, 2016
New York, New York
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