CAFC Holds Oral Argument on Whether Independent Plain Language Analysis a Threshold Question in Scope Rulings
In oral argument March 7, judges on the U.S. Court of Appeals for the Federal Circuit and attorneys addressed whether the Commerce Department must, in scope rulings, make an independent determination about whether a product is covered by the plain language of an antidumping or countervailing duty order before moving on to (k)(1) factors (Magnum Magnetics Corp. v. U.S., Fed. Cir. # 24-1164)..
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The appeal was brought by petitioner Magnum Magnetics regarding the applicability of antidumping duty and countervailing duty orders on flexible magnets to importer Siffron’s plastic shelf dividers, which are composed of flexible magnets attached to plastic sheets (see 2403260058). Commerce said in a scope ruling that the merchandise “appears to fall within the scope of the orders,” but determined it didn’t after looking to (k)(1) factors “to provide further context,” as Court of International Trade Judge Jennifer Choe-Groves explained in her opinion in September (see 2309260049).
The U.S. asked the court to affirm CIT’s judgment. U.S. attorney Christopher Berridge said that, under Meridian Products v. U.S. -- and Commerce’s subsequent 2021 amendment of 19 C.F.R. 351.225(k)(1) to reflect that case’s result -- the department doesn’t need to make a threshold determination that the language of an order is unambiguous before reaching a ruling.
On the other hand, Magnum Magnetic’s counsel, Jeremy Dutra, said that Commerce had skipped the first step of the three-step Meridian analysis: considering the plain language of an order. If it had conducted that step independently, it would have determined that Siffron’s products were in-scope, he argued.
But the department had instead turned to (k)(1) factors without explaining why the plain language of the orders wasn’t dispositive, he said.
“They just went to the (k)(1) factors because they wanted to,” he said. “Well, that’s whim.”
The judges noted that the 1930 Tariff Act and Commerce’s own regulations grant the department broad discretion in how it chooses to conduct scope rulings.
Judge Richard Linn asked Berridge if, under the new regulations, Commerce could make a determination that the language of an order clearly covered a product in question, but then go on to look at (k)(1) factors anyway. Berridge said that the department could.
“Just as a policy matter -- I know we don’t do policy,” Judge Sharon Prost said. “But doesn’t your construction of the regulation dislodge any reasonable reliance?”
We “want people to know that there’s a clear order out there,” she said. She asked if that could be disrupted when, “even if everyone in the world would construe the scope order to cover something,” that could change “20 years down the road” if Commerce can “reinterpret it based on other things.”
Berridge said that he took “the court’s point,” but that there are only a limited number of k(1) factors -- the orders’ initial investigation determination, the orders’ petition, and prior decisions by Commerce and the International Trade Commission. If, after looking at those, an importer was still unsure if their product fell under a particular order, it could then ask Commerce for a scope ruling, he said.
The parties also discussed whether Siffron’s products fell under the scope of the AD/CVD orders on flexible magnets.
Dutra said that Commerce reached its determination based on the fact that the dividers were inflexible, but the evidence, he argued, showed they were “clearly” capable of being flexed.
Berridge argued Commerce reasonably looked at the orders covering flexible magnets and determined that “a plastic, rigid shelf divider” didn’t fall “within the scope of the actual language.”