Trans Tex. Tire, LLC v. United States

519 F.Supp.3d 1289

TRANS TEXAS TIRE, LLC, Plaintiff,andZhejiang Jingu Company Limited, Consolidated Plaintiff,

v. UNITED STATES, Defendant,andDexstar Wheel, Defendant-Intervenor.

Slip Op. 21-63

Court No. 19-00189

United States Court of International Trade.

May 18, 2021

Jordan C. Kahn, Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP, of New York, N.Y. and Washington, D.C., argued for plaintiff. With him on the briefs were Ned H. Marshak, Alan R. Klestadt, Max F. Schutzman and Andrew T. Schutz.

Ting-Ting Kao, White & Case LLP, of Washington, D.C. and New York, N.Y., argued for consolidated plaintiff. With her on the briefs were Walter J. Spak and Jay C. Campbell.

Ashley Akers, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S. Department of Justice, of Washington, D.C., argued for defendant. With her on the briefs were Ethan P. Davis, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and L. Misha Preheim, Assistant Director. Of Counsel Brandon J. Custard, Senior Attorney, Office of Chief Counsel for Trade Enforcement & Compliance, U.S. Department of Commerce. With them on the post argument submission were Brian M. Boynton, Acting Assistant Attorney General, and Daniel J. Calhoun, Assistant Chief Counsel.

Nicholas J. Birch, Schagrin Associates, of Washington, D.C., argued for defendant-intervenor. With him on the brief was Roger B. Schagrin and Geert De Prest.

OPINION

Katzmann, Judge:

Katzmann, Judge: Was the final scope determination by the U.S. Department of Commerce ("Commerce") in a countervailing duties ("CVD") investigation a permissible clarification or an improper scope expansion in the application of duties to a product manufactured in China and subsidized so as to generate sale at less than fair value in the American market? Was Commerce's assessment of retroactive duties on the product permissible or in error for failure to provide adequate notice prior to its issuance of a final scope decision in the CVD proceedings? Was Commerce's CVD calculation, including the higher duties imposed where the manufacturer did not cooperate with the agency's investigation, supported by substantial evidence and in accordance with law? This case involves Commerce's final CVD determination of on steel trailer wheels from the People's Republic of China and its calculation of a CVD rate that applied adverse facts available ("AFA"). Mem. from J. Maeder to J. Kessler, re: Issues and Decision Mem. for the Final Determination in the Countervailing Duty Investigation (Dep't Commerce July 1, 2019), P.R. 599 ("IDM"); Certain Steel Wheels 12 to 16.5 Inches in Diameter from the People's Republic of China: Final Affirmative Countervailing Duty Determination, and Final Affirmative Determination of Critical Circumstances, 84 Fed. Reg. 32,723 (Dep't Commerce July 9, 2019), P.R. 603 ("Final Determination"). Plaintiffs Trans Texas Tire, LLC ("TTT"), a domestic importer, and Zhejiang Jingu Company Limited ("Jingu") a Chinese manufacturer of trailer wheels, (collectively, "Plaintiffs"), filed this suit to challenge Commerce's Order on Certain Steel Wheels 12 to 16.5 Inches in Diameter from the People's Republic of China, 84 Fed. Reg. 45,952 (Dep't Commerce Sept. 3, 2019), P.R. 608 ("Order"); Compl. of Trans Texas Tire at 1–2, Nov. 1, 2019, ECF No. 10 ("Pl.’s Compl."); Compl. of Zhejiang Jingu, Zhejiang Jingu Co. Ltd. v. United States, No. 19-cv-00187 (CIT Nov. 1, 2019), ECF No. 13 ("Consol.-Pl.’s Compl."). The suit challenges the inclusion of steel trailer wheels coated in chrome through a Physical Vapor Deposition ("PVD") process ("PVD chrome wheels") in the final CVD determination, the assessment of duties back to Commerce's preliminary determination, and Commerce's CVD calculation. Pl.’s Compl. at 5–7.

Initially, Commerce excluded "certain on-the-road steel wheels that are coated entirely in chrome" from its preliminary determination. Certain Steel Wheels 12 to 16.5 Inches in Diameter from the People's Republic of China: Preliminary Affirmative Countervailing Duty Determination, 84 Fed. Reg. 5,989, 5,991 (Dep't Commerce Feb. 25, 2019), ("Preliminary Determination"). Although the parties’ positions differ as to the meaning of this preliminary language, Commerce determined in the course of its investigation that its final CVD scope determination included PVD chrome wheels and excluded only electroplated chrome wheels. Final Determination. Plaintiffs assert that the inclusion of PVD chrome wheels in Commerce's Final Determination is unsupported by substantial evidence, that the retroactive assessment of duties on PVD chrome wheels is unlawful, and that Commerce's CVD rate of 386.45 percent for supplier Xingmin Intelligent Transportation Systems ("Xingmin") is punitive and therefore unlawful, and move for judgment on the agency record accordingly. Pl.’s Mot. for J. on the Agency R., Apr. 28, 2020, ECF No. 31 ("Pl.’s Br."); Consol. Pl.’s Mot. for J. on the Agency R., Apr. 28, 2020, ECF. No. 32 ("Consol.-Pl.’s Br."). Defendant United States ("Government") and Defendant-Intervenor Dexstar Wheel oppose this motion and ask the court to sustain Commerce's Final Determination and retroactive assessment of duties. Def.’s Resp. to Pl.’s Mot. for J. on Agency R., Aug. 10, 2020, ECF No. 37 ("Def.’s Br."); Resp. Br. of Dexstar Wheel, Aug. 10, 2020, ECF No. 36 ("Def.-Inter.’s Br.").

At the request of the petitioner -- Defendant-Intervenor Dexstar Wheel ("Petitioner" or "Dexstar") -- and in accordance with section 705(a)(1) of the Tariff Act of 1930, Commerce aligned the final CVD determination in this case with the final determination in the companion antidumping case, Consol. Ct. No. 19-00188. Similarly, this court has considered the cases simultaneously and publishes both cases today. The court sustains Commerce's CVD determination but concludes that retroactive assessment of duties was impermissible under the circumstances here.

BACKGROUND

I. Legal & Regulatory Framework

To empower Commerce to offset economic distortions for the American market caused by countervailable subsidies provided by a foreign government and by dumping, Congress enacted the Tariff Act of 1930. Sioux Honey Ass'n v. Hartford Fire Ins., 672 F.3d 1041, 1046–47 (Fed. Cir. 2012) ; ATC Tires Private Ltd. v. United States, 42 CIT ––––, ––––, 322 F. Supp. 3d 1365, 1366 (2018). That Act, "as amended, allows Commerce to impose ... duties on imports that injure domestic industries." Guangdong Wireking Housewares & Hardware Co. v. United States, 745 F.3d 1194, 1196 (Fed. Cir. 2014). Under the Tariff Act's framework, Commerce may -- either upon petition by a domestic producer or of its own initiative -- begin an investigation into potential countervailable subsidies and, if appropriate, issue orders imposing duties on the subject merchandise. Sioux Honey, 672 F.3d at 1046–47 ; ATC Tires, 322 F. Supp. 3d at 1366–67 ; 19 U.S.C. §§ 1671, 1673. A subsidy is countervailable if the following elements are satisfied: (1) a government or public authority has provided a financial contribution; (2) a benefit is thereby conferred upon the recipient of the financial contribution; and (3) the subsidy is specific to a foreign enterprise or foreign industry, or a group of such enterprises or industries. 19 U.S.C. § 1677(5). In short, Commerce assesses CVDs when it determines a foreign government is providing "a countervailable subsidy with respect to the manufacture, production, or export" of the subject merchandise and the United States International Trade Commission ("ITC") finds that the countervailable subsidy injures a domestic industry. See 19 U.S.C. § 1671(a)(1). In so doing, Commerce issues a CVD order which "includes a description of the subject merchandise, in such detail as [Commerce] deems necessary." OMG, Inc. v. United States, 972 F.3d 1358, 1361 (Fed. Cir. 2020) (citing 19 U.S.C. § 1671e(a)(2) ).

The federal regulations describe the CVD duty assessment process in 19 C.F.R. § 351. The requirements for the description of the merchandise are found in 19 C.F.R. § 351.202(b)(5), and state that "[a] detailed description of the subject merchandise that defines the requested scope of the investigation, including the technical characteristics and uses of the merchandise and its current U.S. tariff classification number." The ITC uses the provided merchandise description to determine the effects of the dumped or countervailed imported goods on the domestic like product. 19 U.S.C. § 1671(a)(2) ; Timken Co. v. United States, 20 C.I.T. 76, 80, 913 F.Supp. 580, 584 (1996).

II. Factual Background

On August 8, 2018, Dexstar Wheel Division of Americana Development, Inc. ("Dexstar" or "Petitioner"), a domestic producer of trailer wheels, filed AD and CVD petitions seeking the imposition of AD and CVD duties on certain steel trailer wheels from the People's Republic of China. Petitions for the Imposition of AD and CVD Duties on Behalf of Dexstar Wheel Division of Americana Development, Inc. Re: Certain Steel Wheels 12 to 16.5 Inches in Diameter from the People's Republic of China, P.R. 47, 49 ("Petition"). Commerce initiated its CVD investigation on September 5, 2018. Certain Steel Wheels 12 to 16.5 Inches in Diameter From the People's Republic of China: Initiation of Countervailing Duty Investigation, 83 Fed. Reg. 45,100 (Dep't Commerce Sept. 5, 2018), P.R. 162 ("Initiation Notice"). Commerce requested and received supplemental information from Dexstar before initiating the investigation into certain steel trailer wheels on August 28, 2018. Petitioner's Response to the Department's August 17, 2018 Additional Questions (Aug. 20, 2018), P.R. 156. In October 2018, the ITC found that there is a reasonable indication that the government of China's subsidization of certain steel trailer wheels and the sale of those wheels in the U.S. at less than fair value materially injured U.S. industry. Steel Trailer Wheels from China, Inv. Nos. 701-TA-609 and 731-TA-1421 (Preliminary), USITC...