IKEA Supply AG v. United States

180 F.Supp.3d 1202

IKEA Supply AG, Plaintiff,

v. United States, Defendant,andAluminum Extrusions Fair Trade Committee, Defendant-Intervenor.

Slip Op. 16-65

Court No. 15-00153

United States Court of International Trade.

Dated: July 5, 2016

Kristen S. Smith, Mark R. Ludwikowski, Arthur K. Purcell, and Michelle L. Mejia, Sandler Travis & Rosenberg P.A., of Washington, DC, for plaintiff.

Douglas G. Edelschick, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, DC, for defendant. With him on the brief were Benjamin C. Mizer, Principal Deputy Assistant Attorney General, Jeanne E. Davidson, Director, and Reginald T. Blades, Jr., Assistance Director. Of counsel on the brief was David P. Lyons, Office of the Chief Counsel for Trade Enforcement and Compliance, U.S. Department of Commerce.

Alan H. Price, Robert E. DeFrancesco, III, and Derick G. Holt, Wiley Rein LLP, of Washington, DC, for defendant-intervenor.

OPINION AND ORDER

GOLDBERG, Senior Judge:

Plaintiff IKEA Supply AG (“IKEA”) challenges a decision by the U.S. Department of Commerce (“Commerce”) interpreting the scopes of two antidumping and countervailing duty orders (the “Orders,” which state their scopes in essentially identical terms) to include towel racks that IKEA imported. Final Scope Ruling, PD 39 (Apr. 27, 2015) (interpreting Aluminum Extrusions from the People's Republic of China: Antidumping Duty Order , 76 Fed. Reg. 30,650 (Dep't 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 Commerce May 26, 2011) (“CVD Order ”)).¹ The orders apply to certain “aluminum extrusions” from the People's Republic of China. AD Order , 76 Fed. Reg. 30,650.

IKEA has moved for judgment on the agency record, arguing that Commerce should have found the towel racks to be excluded from the Orders' scope. Defendant United States (“the Government”) and defendant-intervenor Aluminum Extrusions Fair Trade Committee oppose plaintiff's motion. The court affirms Commerce's decision interpreting the Orders' scope to include IKEA's towel racks.

BACKGROUND

Commerce issued the Orders in May 2011. AD Order , 76 Fed. Reg. 30,650. The Orders include within their scope “aluminum extrusions which are shapes and forms, produced by an extrusion process, made from aluminum alloys having metallic elements corresponding to the alloy series designations published by The Aluminum Association commencing with the numbers 1, 3, and 6 (or proprietary equivalents or other certifying body equivalents).” Id. at 30,650.

The Orders exclude from their scope “finished merchandise” and “finished goods kits.” Id. at 30,651. Under the “finished merchandise” exclusion, “[t]he scope ... excludes finished merchandise containing aluminum extrusions as parts that are fully and permanently assembled and completed at the time of entry, such as finished windows with glass, doors with glass or vinyl, picture frames with glass pane and backing material, and solar panels.” Id. And under the “finished goods kits” exclusion,

[t]he scope ... excludes finished goods containing aluminum extrusions that are entered unassembled in a “finished goods kit.” A finished goods kit is understood to mean 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. An imported product will not be considered a “finished goods kit” and therefore excluded from the scope of the investigation merely by including fasteners such as screws, bolts, etc. in the packaging with an aluminum extrusion product.

Id.

On January 16, 2014, IKEA requested a scope ruling on two types of its towel racks. Scope Review Ruling Req. 2, PD 1 (Jan. 16, 2014). In its request, IKEA described the racks as “made of aluminum extrusions.” Id. at 6. Commerce later issued a supplemental questionnaire, and as part of IKEA's response IKEA differentiated the two types of racks by the parts packaged with the racks. Suppl. Questionnaire Response: IKEA Supply AG 1, PD 9 (Apr. 2, 2014). According to the questionnaire response, one type of rack includes “a plastic gasket and a steel bracket,” while the other includes just “a steel bracket.” Id. IKEA also specified that, with the parts included in the rack packages, the racks are “ready to be used.” Id. at 2.

In the scope ruling request, IKEA maintained that the towel racks qualified for the “finished merchandise” exclusion from the Orders' scope. See Scope Review Ruling Req. 2–3. IKEA did not raise any parallel contention concerning the “finished goods kit” exclusion. Id.

The regulation that governs Commerce's scope rulings provide an interpretive framework through which the agency can decipher ambiguous scope language. 19 C.F.R. § 351.225(k). However, the Federal Circuit has cautioned that “a predicate for the interpretive process is language in the order that is subject to interpretation.” Tak Fat Trading Co. v. United States , 396 F.3d 1378, 1383 (Fed.Cir.2005) (citing Duferco Steel Inc. v. United States , 296 F.3d 1087, 1097 (Fed.Cir.2002) ).

If Commerce determines that the language at issue is not ambiguous, it states what it understands to be the plain meaning of the language, and the proceedings terminate. On the other hand, if Commerce finds that the scope language is ambiguous, it then looks to two sets of factors spelled out in [19 C.F.R. § 351.225(k)(1) and (2) ] to determine the intended scope of the order.

ArcelorMittal Stainless Belgium N.V. v. United States , 694 F.3d 82, 84 (Fed.Cir.2012). 19 C.F.R. § 351.225(k)(1) instructs Commerce to “take into account” the relevant order's regulatory history, as contained in “[t]he descriptions of the merchandise contained in the petition, [Commerce's] initial investigation, and the [prior] determinations of [Commerce] (including prior scope determinations) and the [International Trade] Commission.”

If the ... materials [listed in 19 C.F.R. § 351.225(k)(1) ] are not dispositive, Commerce then considers the ... criteria [listed in 19 C.F.R. § 351.225(k)(2) ]: “[t]he physical characteristics of the product,” “[t]he expectations of the ultimate purchasers,” “[t]he ultimate use of the product,” “[t]he channels of trade in which the product is sold,” and “[t]he manner in which the product is advertised and displayed.”

Mid Continent Nail Corp. v. United States , 725 F.3d 1295, 1302 (Fed.Cir.2013).

Commerce issued its final scope ruling on April 27, 2015. At the outset, Commerce described IKEA's two towel racks as follows: “[One model] is comprised of a[n] ... aluminum extrusion and a plastic gasket; [the other model] is comprise of a[n] ... aluminum extrusion with two steel brackets.” Final Scope Ruling 2. No party contests Commerce's description before this court.

After looking to “the sources listed in [19 C.F.R. § 351.225(k)(1) ],” Commerce concluded that “IKEA's towel racks are covered by the scope.” Final Scope Ruling 10. The “finished merchandise” exclusion did not apply because the exclusion requires eligible merchandise to include aluminum extrusions “as parts.” Id. at 11. Commerce took the “as parts” requirement to mean that the merchandise had to be assembled from aluminum extrusions “plus an additional non-extruded aluminum component.” Id. IKEA's towel racks did not meet this requirement because both were “comprised entirely of extruded aluminum and d [id] not have [an]other non-extruded aluminum component, aside from fasteners ( [for example,] a plastic gasket).” Id. According to Commerce, fasteners could not qualify as eligible non–extruded aluminum components because the “finished goods kit” exclusion expressly provided that including fasteners would not transform otherwise unqualifying merchandise into a “finished goods kit.” Id. at 12. Commerce said it would be inconsistent to read the “finished merchandise” exclusion without a matching requirement. Id. And Commerce classified the plastic gaskets and steel brackets packaged with IKEA's towel racks as fasteners because IKEA had described those components as being “used as sturdy plates that are affixed to the wall for the towel racks to be attached in order to provide stability for the rack to hold towels.” Id. at 11 (quoting IKEA Rebuttal Comments 3, PD 34 (Nov. 17, 2014)). This description accorded with some online dictionary definitions that Commerce had found for “fastener.” Id. at 11 & n.41.

IKEA commenced this action by filing a summons with this court on May 27, 2015. Summons, ECF No. 1. IKEA has moved for judgment on the agency record, contending that its towel racks are excluded from the scope of the order under the “finished merchandise” exclusion or, alternatively, the “finished goods kit” exclusion. Pl.'s 56.2 Mot. for J. on Agency R., ECF No. 30.²

JURISDICTION AND STANDARD OF REVIEW

The court exercises jurisdiction under 28 U.S.C. § 1581(c) (2012). In reviewing Commerce's scope ruling, the court must set aside “any determination, finding, or conclusion found ... to be unsupported by substantial evidence on the record, or otherwise not in accordance with law.” 19 U.S.C. § 1516a(b)(1)(B).

“Commerce is entitled to substantial deference with regard to its interpretations of its own antidumping duty order.” King Supply Co., LLC v. United States , 674 F.3d 1343, 1348 (Fed.Cir.2012) (citing Tak Fat Trading , 396 F.3d at 1382 ). “This broad deference is not unlimited, however, since ‘Commerce cannot interpret an antidumping duty order so as to change the scope of that order, nor can Commerce interpret an order in a manner contrary to its terms.’ ” Id. (quoting Walgreen Co. v. United States , 620 F.3d 1350, 1354 (Fed.Cir.2010) ). “[M]erchandise facially covered by an order may not be excluded from the scope of the order unless the order can reasonably be interpreted so as to...