CIT Holds Oral Argument on Scope Ruling for Wheels With One Chinese Part

Jay Campbell, counsel for exporter Asia Wheel, told Judge Gary Katzmann that Commerce's scope ruling contains "profound unfairness." During the original AD/CVD investigations, two importers asked Commerce near the end of the proceedings for clarification on whether the orders cover mixed goods, with either a rim or disc made in China. Campbell said that Commerce said "don't worry," the existing scope language says that subject goods must be made of both Chinese discs and rims.

Bemoaning the retroactive imposition of AD/CVD on its goods, Campbell argued that Commerce's prior scope ruling, coupled with the imposition of duties on its goods without adequate notice, is "profoundly unfair."

In response, DOJ attorney Stephen Tosini said that Commerce didn't "foreclose the idea of including mixed goods." The agency made it "abundantly clear" that it was leaving the door open for addressing mixed products by explicitly saying that the question of whether wheels made of either Chinese rims or discs exported from a third country can be subject to a substantial transformation analysis.

Tosini added that there were no such third-country exports at the time of the original investigations, excusing Commerce from fully ruling on whether these goods were covered at the time.

Nicholas Birch, counsel for petitioner Dexstar Wheel Division of Americana Development, argued that Asia Wheel is trying to "tap dance" around what Commerce said when it held that mixed goods would be covered by a later substantial transformation test. The exporter attempts to claim that there's no ambiguity on whether its wheels are covered by the AD/CVD orders, "but there is ambiguity," he said.

In rebuttal, Campbell dubbed the government's and petitioner's argument "disingenuous," since neither side addressed the context in which Commerce said it would punt the question to a later substantial transformation test. In the investigations, Commerce specifically responded to importers asking for clarification on whether third-country goods with either a Chinese rim or disc were covered, and the agency "answered that question," he said.

Campbell added that Commerce's line addressing a later substantial transformation test was issued in reference to an argument from the petitioners, who attempted to change the scope from covering wheels with Chinese rims and discs to wheels with Chinese rims or discs. The agency was "clear" that the orders didn't cover wheels made with only Chinese rims or discs, Campbell claimed. Birch replied that Commerce didn't have adequate time to fully consider the issue in the underlying investigations, since the issue was raised at the end of the proceedings.

The parties also discussed the relevance of a 2021 CIT decision, Diamond Tools Technology v. U.S., in which the court sustained "CBP's decision to continue a prior suspension of liquidation imposed as interim measures" under the Enforce and Protect Act. In its briefs and before the court at oral argument, Asia Wheel said the case can be distinguished since it involves CBP's EAPA authority, while the issue here is "Commerce’s unlawful decision to continue a prior (and retroactive) suspension of liquidation in violation of 'the broader due-process principle' that importers must have fair warning" before being subject to AD/CVD (see 2312010047).

At oral argument, Campbell added that the decision deserves even less weight, since it was decided using the principle of Chevron deference -- a standard recently abandoned by the Supreme Court (see 2406280051). He said Loper Bright v. Raimondo "casts doubt" on Diamond Tools and, in any case, that the trade court in that case didn't consider that Commerce, not CBP, has the ultimate authority to determine an order's scope. Since the importers here lacked notice that the mixed wheels were covered until Commerce's most recent scope ruling, any retroactive imposition of AD/CVD on those goods violates due process protections, he said.