Vandewater International Inc. v. United States

Slip Op. 20-146
UNITED STATES COURT OF INTERNATIONAL TRADE
VANDEWATER INTERNATIONAL, INC.,
Plaintiff,
v.
UNITED STATES,
Defendant,
and
ISLAND INDUSTRIES,
Defendant-Intervenor.
Before: Leo M. Gordon, Judge
Court No. 18-00199
OPINION and ORDER
[Remanding Final Scope Ruling to Commerce to conduct (k)(2) analysis.]
Dated: October 16, 2020
Richard Preston Ferrin, Dorothy Alicia Hickok, and Douglas John Heffner, Faegre
Drinker Biddle & Reath, LLP of Washington, DC, for Plaintiff Vandewater International,
Inc.
Joshua Ethan Kurland, Trial Attorney, U.S. Department of Justice, Civil Division,
Commercial Litigation Branch, Washington, DC., argued for Defendant United States.
On the 	brief 	were 	Jeffrey 	Bossert 	Clarke, 	Assistant 	Attorney 	General, 	Jeanne 	E.
Davidson, Director, L. Misha Preheim, Assistant Director, International Trade Field Office,
New York, NY. Of counsel were John Anwesen and Saad Younus Chalchal, Office of the
Chief Counsel for Trade Enforcement & Compliance, U.S. Department of Commerce of
Washington, DC.
Matthew Jon McConkey, Mayer Brown LLP of Washington, DC, for Defendant-
Intervenor Island Industries.
Gordon, Judge: This opinion addresses the scope of the antidumping duty order
on Carbon Steel Butt-Weld Pipe Fittings from the People’s Republic of China, which
covers:
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carbon steel butt-weld pipe fittings, having an inside diameter
of less than 14 inches, imported in either finished or unfinished
form. These formed or forged pipe fittings are used to join
sections 	in 	piping 	systems 	where 	conditions 	require
permanent, welded connections, as distinguished from fittings
based on other fastening methods (e.g., threaded, grooved,
or bolted fittings). Carbon steel butt-weld pipe fittings are
currently 	classified 	under 	subheading 	7307.93.30 	of 	the
Harmonized 	Tariff 	Schedule 	(HTS). 	Although 	the 	HTS
subheading 	is 	provided 	for 	convenience 	and 	customs
purposes, our written description of the scope of the order is
dispositive.
Certain Carbon Steel Butt-Weld Pipe Fittings from the People’s Republic of China,
57 Fed. Reg. 29,702 (Dep’t of Commerce July 6, 1992) (“Order”). Plaintiff, Vandewater
International Inc., sought a scope determination from the U.S. Department of Commerce
(“Commerce”) that their products, steel branch outlets used to join sections in fire sprinkler
systems, are not covered by the Order. Commerce determined that they were. Carbon
Steel Butt-Weld Pipe Fittings from the People’s Republic of China, (Dep’t of Commerce
Sept. 10, 2018) (final scope ruling on Vandewater’s steel branch outlets) (“Final Scope
Ruling”). For the reasons set forth below, the court holds that Commerce unreasonably
concluded that the sources in 19 C.F.R. § 351.225(k)(1) were dispositive on the inclusion
of Plaintiff’s steel branch outlets within the Order, and remands the matter to Commerce
to conduct a full scope inquiry and evaluate the factors under 19 C.F.R. § 351.225(k)(2).
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
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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); see also Universal
Camera Corp. v. NLRB, 340 U.S. 474, 488 (1951) (“The substantiality of evidence must
take into account whatever in the record fairly detracts from its weight.”). Substantial
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. 2020). 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.” 8A West's Fed.
Forms, National Courts § 3.6 (5th ed. 2020).
II. 	Discussion
Commerce may render a scope ruling after a full “scope inquiry,” 19 C.F.R.
§ 351.225(e), or, as Commerce did in this case, on the expedited basis of a party’s
application and the sources listed in 19 C.F.R. § 351.225(k)(1) (the “descriptions of the
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merchandise contained in the petition [for imposition of an antidumping duty order], the
initial investigation, and the determinations of the Secretary (including prior scope
determinations) and the [International Trade] Commission.”). 19 C.F.R. § 351.225(d).
Here, Commerce determined that the (k)(1) sources were dispositive and included
Vandewater’s steel branch outlets within the Order.
Had Commerce determined the (k)(1) sources were not “dispositive,” Commerce
would 	have 	conducted 	a 	full 	scope 	inquiry 	and 	evaluated 	the 	criteria 	under
§ 351.225(k)(2), which include the product’s physical characteristics, ultimate purchasers’
expectations, the ultimate use of the product, trade channels in which the product is sold,
and 	the 	manner 	in 	which 	the 	product 	is 	advertised 	and 	displayed. 	19 	C.F.R.
§ 351.225(k)(2).
In rendering its scope determination Commerce began with a “plain reading” of the
Order, finding that Vandewater’s description of its steel branch outlets matched the
description of the butt-weld pipe fittings in the Order:
A plain reading of the scope includes carbon steel butt-weld
pipe fittings that have an inside diameter of fourteen inches or
less, which require a weld to be permanently attached to a
piping system. Based on Vandewater’s description, and the
samples provided, the steel branch outlets are made of
carbon steel, have an inside diameter of less than fourteen
inches, and are used to join sections in fire sprinkler piping
systems 	where 	conditions 	require 	permanent, 	welded
connections. Thus, we find that Vandewater’s description of
its steel branch outlets matches the description of the scope
covering butt-weld pipe fittings.
Final Scope Ruling at 9. Commerce omitted from its “plain reading” the scope language
that distinguishes “fittings based on other fastening methods (e.g., threaded, grooved, or
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bolted fittings).” Plaintiff’s products have threaded or grooved ends on their non-weldable
end. It is therefore not plainly apparent from the language of the Order whether a steel
branch outlet qualifies as a butt-weld fitting covered by the Order or not. They may be
covered: they are made of carbon steel, have an inside diameter of less than fourteen
inches, and are used to join sections in fire sprinkler piping systems where conditions
require a permanent, welded connection. They also may not be covered: they have a
non-weldable, threaded or grooved end, and according to Vandewater, the weldable end
is never joined to the sprinkler system via a true “butt-weld.” The language of the Order
itself simply does not resolve the issue of whether Vandewater’s steel branch outlets are
covered.
As for the (k)(1) sources, Commerce long ago included steel branch outlets
virtually identical to Vandewater’s within the scope of a companion antidumping duty
order on butt-weld fittings from another country. Carbon Steel Butt-Weld Pipe Fittings
from Taiwan, (Dep’t of Commerce Mar. 25, 1992) (final scope ruling on Sprink, Inc.
exclusion request) (“Sprink Scope Ruling”); see also Certain Carbon Steel Butt-Weld Pipe
Fittings from Taiwan, 51 Fed. Reg. 45,152 (Dep’t of Commerce Dec. 17, 1986) (“Taiwan
Butt-Weld Order”). In the Final Scope Ruling here, Commerce noted this prior ruling:
Sprink’s scope inquiry request stated that “{i}t appears that the
definition of a butt-weld fitting is one that requires welding as
a method of attachment for all connections. The Sprink-let
does require that it be welded onto the outside of the pipe, but
the connection for the joining pipe is either threaded or
grooved.
Commerce specifically stated in its ruling, “the order does not
require that all pipe fitting connections be welded.” Commerce
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further stated that, “although the initial connection is obtained
because of threading or grooving, the Sprink-let, like other
products subject to this order, is permanently joined by
welding.” 	Commerce 	concluded 	that, 	“{a}ccording 	to 	the
product descriptions presented above, a pipe fitting with
beveled edges that is permanently joined through welding
falls within the scope of the order on carbon steel butt-weld
pipe fittings from Taiwan. Because the Sprink-let, possesses
these 	characteristics, 	we 	determine 	that 	the 	Sprink-let,
imported by Sprink, Inc. is within the scope of the antidumping
duty 	order 	on 	carbon 	steel 	butt-weld 	pipe 	fittings 	from
Taiwan.”
Final Scope Ruling at 5-6 (footnotes omitted). For over 25 years, then, Commerce has
treated steel branch outlets as butt-weld fittings. That would seem to be dispositive.
Commerce, however, for some reason, chose to dismiss its Sprink Scope Ruling as non-
binding:
. . . We agree that the products at issue in the Sprink Scope
Ruling were essentially physically identical to Vandewater’s
steel 	branch 	outlets. 	However, 	we 	note 	that 	Commerce
analyzed those products under the Taiwan Butt-Weld Order
and not the China Butt-Weld Order. We recognize that some
of the language in both orders is the same, but as Vandewater
points out, there is also language unique to the China Butt-
Weld Order. Accordingly, we are not bound by the agency’s
analysis in the Sprink Scope Ruling, although we not [sic] that
here, 	as 	in 	that 	case, 	we 	have 	concluded 	that 	the
merchandise is covered by the scope of an antidumping duty
order on “butt- weld pipe fittings” because the merchandise is
permanently joined by welding.
Final Scope Ruling at 11 (emphasis added).
Commerce chose instead to look for support in its King Scope Ruling that fittings
with only one weldable end were covered by the Order. Id. at 9 (citing Carbon Steel Butt-
Weld Pipe Fittings from the People’s Republic of China (Dep’t of Commerce Oct. 20,
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2009) 	(“King Scope Ruling”). The King Scope Ruling, however, dealt with subject butt-
weld fittings used in applications other than pressurized piping systems—as handrails,
fencing, and guardrails—it did not address dual-nature fittings like Vandewater’s steel
branch outlets. Commerce’s reliance on the King Scope Ruling, which has no facial
applicability or relevance to Vandewater’s branch outlets, and Commerce’s eschewing
the Sprink Scope Ruling, signals to the court that something is not quite right with
Commerce’s (k)(1) analysis.
The court was further confused by the balance of Commerce’s (k)(1) analysis.
Searching for dispositive support among the (k)(1) sources to cover the steel branch
outlets, Commerce identified two quotes, one from the petition and one from the U.S.
International Trade Commission (“ITC”) sunset review. The petition language reads: “{t}he
edges of finished butt-weld fittings are beveled, so that when a fitting is placed against
the end of a pipe (the ends of which have also been beveled), a shallow channel is created
to accommodate the ‘bead’ of the weld which joins the fitting to the pipe.” Final Scope
Ruling at 9–10 (quoting Petitioners’ Letter, “In the Matter of Certain Carbon Steel Butt-
Weld Pipe Fittings from the People’s Republic of China and from Thailand,” dated
May 22, 1991 (Petition)). The quoted language contemplates beveling on both parts of
the assembled pipe—“{t}he edges . . . are beveled, so that when a fitting is placed against
the end of a pipe (the ends of which have also been beveled) . . ..” Vandewater pointed
out to Commerce that its branch outlets, although beveled on one end, do not join to a
beveled end on the header pipe. The quoted petition language, which contemplates
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beveling on both parts of the assembled pipe, is therefore not descriptive of the actual
physical characteristics of Vandewater’s steel branch outlets.
The quoted language Commerce relied upon from the ITC sunset review suffers
from the same problem as the petition language—it contemplates beveling on both parts
of the assembled pipe: “When placed against the end of a beveled pipe or another fitting,
the beveled edges form a shallow channel that accommodates the ‘bead’ of the weld that
fastens the two adjoining pieces.” Final Scope Ruling at 10 (quoting Carbon Steel Butt-
Weld Pipe Fittings from Brazil, China, Japan, Taiwan, and Thailand, Inv. Nos. 731-TA-
308-310 and 520-521, at I-4 (Fourth Review), USITC Pub. 4628 (Aug. 2016)). Again,
though, Vandewater’s branch outlets are welded to header pipe, which is not, apparently,
beveled at the weld. The quoted sunset review language is therefore not descriptive of
the actual physical characteristics of Vandewater’s steel branch outlets.
Commerce also highlights butt-weld caps as an example of a butt-weld fitting that
has only one weldable end. Id. at 10. A butt-weld cap though does not also have threads
or grooves, problematical attributes that are expressly excluded from the Order.
Other than the Sprink Scope Ruling, which Commerce dismisses as non-binding,
the other (k)(1) sources Commerce relied upon as dispositive (the King Scope Ruling, the
petition language, and the language from the ITC sunset review) do not really tell the
court anything about the inclusion of steel branch outlets within the scope of the Order.
Commerce’s determination that the (k)(1) sources are dispositive is therefore not
reasonable (unsupported by substantial evidence).
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For whatever reason Commerce does not have much confidence in its Sprink
Scope Ruling. Given that posture, the court believes that Commerce must consider the
factors under (k)(2) to determine whether Vandewater’s steel branch outlets are within
the scope of the Order. Accordingly, it is hereby
ORDERED that Commerce’s determination that the (k)(1) materials are dispositive
of the inclusion of Vandewater’s steel branch outlets within the scope of the Order is
unreasonable; it is further
ORDERED that this matter is remanded to Commerce to conduct a scope inquiry
to evaluate the factors under (k)(2); it is further
ORDERED that Commerce shall file its remand results once the scope inquiry is
completed; and it is further
ORDERED that, if applicable, the parties shall file a proposed scheduling order
with page limits for comments on the remand results no later than seven days after
Commerce files its remand results with the court.
/s/ Leo M. Gordon
Judge Leo M. Gordon
Dated: October 16, 2020
New York, New York
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