Target Corp. v. United States

Slip Op. 08-101

UNITED STATES COURT OF INTERNATIONAL TRADE

TARGET CORPORATION,

Plaintiff,

Before: Leo M. Gordon, Judge

v.

Consol. Court No. 06-00383

UNITED STATES,

Defendant.

OPINION AND ORDER

[Commerce’s anticircumvention determination remanded.]

Dated: September 18, 2008

Jochum Shore & Trossevin, P.C. (Marguerite E. Trossevin) for Plaintiff Target

Corporation.

Grunfeld, Desiderio, Lebowitz, Silverman & Klestadt LLP (Bruce M. Mitchell, Max F.

Schutzman, William F. Marshall, Andrew T. Schutz) for Plaintiffs Qingdao Kingking Applied

Chemistry Co., Ltd., Dalian Talent Gift Co., Ltd., Shanghai Autumn Light Enterprise Co., Ltd.,

Home Accent International (Honghzhou) Co., Ltd., Zhongshan Zhongnam Candle

Manufacturer Co., Ltd., Nantucket Distributing Co., Inc., Shonfeld’s (USA), Inc., Amstar

Business Company Limited and Jiaxing Moonlight Candle Art Co., Ltd.

Greenberg Traurig, LLP (Jeffrey S. Neeley, David R. Amerine) for Plaintiff Specialty

Merchandise Corporation, Inc.

Gregory G. Katsas, Assistant Attorney General; Jeanne E. Davidson, Director,

Patricia M. McCarthy, Assistant Director, Commercial Litigation Branch, Civil Division,

U.S. Department of Justice (David S. Silverbrand, Michael J. Dierberg); and Office of

Chief Counsel for Import Administration, U.S. Department of Commerce (Arthur D.

Sidney), of counsel, for Defendant United States.

Barnes & Thornburg LLP (Randolph J. Stayin, Karen A. McGee) for Defendant-

Intervenor National Candle Association.

Court No. 06-00383 Page 2

Gordon, Judge: Plaintiffs Target Corporation (“Target”), Qingdao Kingking

Applied Chemistry Co., Ltd., et al. (“Qingdao”), and Specialty Merchandise Corporation,

Inc. (“SMC”) challenge the U.S. Department of Commerce’s (“Commerce”)

determination that petroleum wax candles with 50 percent or more palm or other

vegetable-oil based waxes (“mixed-wax”) are later-developed merchandise

circumventing the antidumping duty order covering petroleum wax candles from China.

See Petroleum Wax Candles from the People’s Republic of China, 71 Fed. Reg. 59,075

(Dep’t Commerce Oct. 6, 2006) (final determ. anticircumvention inquiry)

(“Final Determination”), amended by Final Results Pursuant to Voluntary Remand,

Target Corp. v. United States, Consol. Court No. 06-00383 (May 16, 2008)

(“Voluntary Remand”). The court has jurisdiction pursuant to Section 516A(a)(2)(B)(vi)

of the Tariff Act of 1930, as amended, 19 U.S.C. § 1516a(a)(2)(B)(vi) (2000)1 and

28 U.S.C. § 1581(c) (2000). As discussed below, this action is remanded to Commerce

for further consideration.

I. Standard of Review

When reviewing an anticircumvention determination under 19 U.S.C.

§ 1516a(a)(2)(B)(vi) and 28 U.S.C. § 1581(c) (2000), the U.S. Court of International

Trade 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). When reviewing whether Commerce’s actions are

unsupported by substantial evidence, the Court assesses whether the agency action is

1

Further citations to the Tariff Act of 1930 are to the relevant provisions of Title 19 of the

U.S. Code, 2000 edition.

Court No. 06-00383 Page 3

reasonable given the record as a whole. See Nippon Steel Corp. v. United States,

458 F.3d 1345, 1350-51 (Fed. Cir. 2006). Additionally, the two-step framework provided

in Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842-45 (1984),

governs judicial review of Commerce's interpretation of the antidumping statute.

Dupont Teijin Films USA, LP v. United States, 407 F.3d 1211, 1215 (Fed. Cir. 2005).

II. Background

Commerce issued an antidumping duty order on petroleum wax candles from

China in 1986. Petroleum Wax Candles from the People’s Republic of China, 51 Fed.

Reg. 30,686 (Dep’t Commerce Aug. 28, 1986) (antidumping duty order) (“Petroleum

Wax Candle Order” or “Order”). In the less than fair value (“LTFV”) proceeding

Commerce defined the subject merchandise, in relevant part, as “petroleum wax

candles made from petroleum wax.” Petroleum Wax Candles from the People’s

Republic of China, 51 Fed. Reg. 25,085 (Dep’t Commerce July 10, 1986) (final less than

fair value determination). For the corresponding injury investigation, the

U.S. International Trade Commission (“ITC”) defined the domestic like product,

in relevant part, as candles “composed of over 50 percent petroleum wax.” Candles

from the People’s Republic of China, USITC Pub. 1888 at 5, Inv. No. 731-TA-282

(Aug. 1986) (final injury determination) (“Original Injury Determination”).

subject merchandise “petroleum wax candles

(COMMERCE) made from petroleum wax”

domestic like product “candles composed of over

(ITC) 50 percent petroleum wax”

Court No. 06-00383 Page 4

The ITC therefore interpreted Commerce’s redundant qualifier “made from

petroleum wax” to mean “composed of more than 50 percent petroleum wax.” See id.

This percentage benchmark proved dispositive in subsequent Commerce scope

determinations involving mixed-wax candles. Commerce ruled at least seven times in a

seven-year period that the ITC’s percentage-based like product definition mandated that

mixed-wax candles (containing less than 50 percent petroleum wax) be excluded from

the scope of the Petroleum Wax Candle Order.2

Central to these prior scope rulings is the unstated but fundamental tenet of

antidumping law that the domestic like product must encompass the subject

2

See Petroleum Wax Candles from the People’s Republic of China, Final Scope Ruling,

A-570-504, “Costco Wholesale” (Dec. 10, 1998) (candles composed of 19% petroleum

wax and 81% beeswax excluded from Order for not satisfying Commission’s like

product definition of petroleum wax candles); Petroleum Wax Candles from the People’s

Republic of China, Final Scope Ruling, A-570-504, “Et Al Imports, Inc.” (Dec. 11, 1998)

(candles composed of 20% paraffin wax and 80% beeswax excluded from Order based

upon the Commission’s definition of the domestic like product); Petroleum Wax Candles

from the People’s Republic of China, Final Scope Ruling, A-570-504, “Ocean State

Jobbers, Inc.” (Dec. 18, 1998) (candles composed of 20% petroleum wax and 80%

beeswax excluded from Order based upon the Commission’s definition of the domestic

like product); Petroleum Wax Candles from the People’s Republic of China, Final Scope

Ruling, A-570-504, “JC Penny Purchasing, Corp.” (May 21, 2001) (candles composed of

42% petroleum wax and 58% palm oil excluded from Order for not satisfying the

Commission’s definition of domestic like product); Petroleum Wax Candles from the

People’s Republic of China, Final Scope Ruling, A-570-504, “Leader Light, Inc.” (Dec.

12, 2002) (candles containing less than 50% petroleum wax excluded from Order for not

satisfying the Commission’s definition of domestic like product); Petroleum Wax

Candles from the People’s Republic of China, Final Scope Ruling, A-570-504, “Avon

Products, Inc.” (Nov. 17, 2003) (candles containing less than 50% petroleum wax

excluded from Order for not satisfying the Commission’s definition of domestic like

product); Petroleum Wax Candles from the People’s Republic of China, Final Scope

Ruling, A-570-504, “Pier 1 Imports, Inc.” (May 13, 2005) (candles with petroleum-based

wax content less than 50 percent excluded from the Order pursuant to the

Commission’s like product definition and Commerce’s treatment in prior scope rulings).

All scope rulings for the Petroleum Wax Candle Order are available at

http://ia.ita.doc.gov/download/candles-prc-scope/index.html.

Court No. 06-00383 Page 5

merchandise: “an antidumping duty order must be supported by an ITC determination of

material injury covering the merchandise in question.” Wheatland Tube Co. v.

United States, 21 CIT 808, 819, 973 F. Supp. 149, 158 (1997) (citing 19 U.S.C. § 1673),

aff’d, 161 F.3d 1365 (Fed. Cir. 1998).

Rather than have Commerce repeat another conventional scope proceeding, the

domestic interested party, National Candle Association (“NCA”), tried a different

approach in 2004. NCA petitioned Commerce to initiate a later-developed merchandise

anticircumvention inquiry and determine whether mixed-wax candles were

circumventing the Order. Commerce initiated the inquiry. Petroleum Wax Candles from

the People’s Republic of China, 70 Fed. Reg. 10,962, 10,963 (Dep’t Commerce

Mar. 7, 2005) (notice of initiation anticircumvention inquiry) (“Notice of Initiation”).

A later-developed merchandise anticircumvention inquiry is a specific type of scope

inquiry governed by its own statutory provision, 19 U.S.C. § 1677j(d), which codified

Commerce’s administrative practice for analyzing whether later-developed merchandise

fell within the scope of an antidumping duty order. H.R. REP. NO. 100-576, at 601

(1988) (Conf. Rep.), reprinted in 1988 U.S.C.C.A.N. 1547, 1634 (“This provision is

intended to clarify and codify current Commerce Department authority, which has been

recognized by the courts.”)

As Commerce was commencing the later-developed merchandise

anticircumvention inquiry, the ITC was coincidentally concluding a second five-year

sunset review of the Petroleum Wax Candle Order. See Petroleum Wax Candles from

China, USITC Pub. 3790, Inv. No. 731-TA-282 (July 2005) (second sunset review)

Court No. 06-00383 Page 6

(“Second Sunset Review”). The lone participant in the Second Sunset Review,

NCA, urged the ITC to re-examine the domestic like product definition from the Original

Injury Determination and include “all blended candles” regardless of the proportion of

petroleum wax. Second Sunset Review at 7. The ITC obliged and redefined the

domestic like product “to include all blended candles,” or more simply, candles

“containing any amount of petroleum wax.” Id. at 9. In addition, the ITC concluded that

revocation of the Petroleum Wax Candle Order “would be likely to lead to continuation

or recurrence of material injury to an industry in the United States within a reasonably

foreseeable time.” Id. at 3. No party challenged the Second Sunset Review.

Subsequently, Commerce completed the anticircumvention inquiry and

determined that mixed-wax candles containing “any amount” of petroleum wax are

within the scope of the Petroleum Wax Candle Order. Final Determination, 71 Fed.

Reg. at 59,077-78. Plaintiffs then commenced this action. Commerce, in turn, sought a

voluntary remand which the court granted. In the Voluntary Remand Commerce slightly

modified its legal analysis but did not change its determination. See discussion infra at

pp. 12-13. Plaintiffs raise a number of challenges to Commerce’s determination,

including:

(1) that Commerce’s interpretation of the phrase “later-developed merchandise”

to cover merchandise that was in existence but commercially unavailable during the

original investigation is contrary to the plain meaning of 19 U.S.C. § 1677j(d), and

further, that Commerce’s finding that mixed-waxed candles were commercially

unavailable at the time of the original investigation is unsupported by substantial

evidence;

Court No. 06-00383 Page 7

(2) that Commerce’s initiation of the anticircumvention inquiry on mixed-wax

candles was contrary to Commerce’s scope regulation, 19 C.F.R. § 351.225 (2004),3

the prior mixed-wax candle scope rulings, and case law governing the initiation of scope

inquiries; and

(3) that Commerce’s inclusion of mixed-wax candles within the scope of the

Order is a legally impermissible expansion of the Petroleum Wax Candle Order contrary

to the domestic like product definition.4

As explained more fully below, the court is not persuaded by these arguments;

nevertheless, the court cannot sustain Commerce’s later-developed merchandise

anticircumvention determination and therefore remands the matter to Commerce for

further consideration.

III. Discussion

A. Later-Developed Merchandise

1. Commercial Availability Standard

A critical legal issue for Commerce during the administrative proceeding was

whether mixed-wax candles were “later-developed merchandise.” This issue arose

because record evidence indicated that mixed-wax candles may have existed at the

3

Further citations to Title 19 of the Code of Federal Regulations are to the relevant

provisions of the 2004 edition.

4

Plaintiffs also challenge (1) Commerce’s finding that mixed-wax candles are the same

class or kind of merchandise as petroleum wax candles (the subject merchandise) and

specifically that four of Commerce’s findings in applying the statutory factors — the

physical characteristics of the product, the expectations of the ultimate purchasers, the

channels of trade in which the product is sold, and the manner in which the product is

advertised and displayed — are unsupported by substantial evidence; and Plaintiffs also

argue that (2) Commerce’s assessment of antidumping duties, pursuant to 19 C.F.R. §

351.225(l)(3), on Plaintiffs’ entries made after the initiation of the anticircumvention

inquiry is an impermissible retroactive application of the law. The court does not resolve

these issues in this decision.

Court No. 06-00383 Page 8

time of the original investigation. Section 1677j(d)(1) defines “later-developed

merchandise” as “merchandise developed after an [antidumping] investigation is

initiated.” 19 U.S.C. § 1677j(d)(1) (emphasis added). The question for Commerce was

whether mixed-wax candles were “developed” by the time of the initiation of the

investigation or “developed” sometime thereafter.

Commerce touched upon the meaning of “developed” in several prior

anticircumvention proceedings. “In each case, [Commerce] addressed the ‘commercial

availability’ of the later-developed merchandise in some capacity, such as the product’s

presence in the commercial market or whether the product was fully ‘developed,’

i.e., tested and ready for commercial production.” Final Determination, 71 Fed. Reg. at

59,076-77 (citing Portable Electronic Typewriters from Japan, 55 Fed. Reg. 47,358

(Dep’t Commerce Nov. 13, 1990) (final scope ruling), Electrolytic Manganese Dioxide

from Japan, 57 Fed. Reg. 395 (Dep’t Commerce Jan. 6, 1992) (final scope ruling), and

Erasable Programmable Read Only Memories from Japan, 57 Fed. Reg. 11,599

(Dep’t Commerce Apr. 6, 1992) (final scope ruling)). From these prior administrative

precedents Commerce derived a commercial availability standard for the term

“developed.” Simply stated, to be “developed” a product must be commercially

available—present in the commercial market or tested and ready for commercial

production. Commerce offered a straightforward rationale for the standard: “[T]he

product’s actual presence in the market at the time of the LTFV investigation is a

necessary predicate of its inclusion or exclusion from the scope of an antidumping duty

order.” Issues and Decision Memorandum for the Later-Developed Merchandise

Court No. 06-00383 Page 9

Anticircumvention Inquiry of the Antidumping Duty Order on Petroleum Wax Candles

from the People’s Republic of China, at 23, A-570-504 (Sept. 29, 2006), available at

http://ia.ita.doc.gov/frn/summary/prc/E6-16613-1.pdf (“Decision Memorandum”).

Plaintiffs challenge the commercial availability standard, arguing that “developed”

has one and only one meaning: created. Target Mot. J. Agency R. at 15; Qingdao Mot.

J. Agency R. at 25-26. It is an understandable position; if developed means created,

and mixed-wax candles existed at the time of the initiation of the investigation, they

cannot be “later-developed.”

The two-step framework provided in Chevron, 467 U.S. at 842-45, governs

judicial review of Commerce's interpretation of the antidumping statute. Dupont Teijin

Films USA, LP, 407 F.3d at 1215. The court first considers whether Congressional

intent on the issue is clear, and if not, the court next considers whether Commerce's

interpretation is reasonable. Id. The word “developed” has many meanings. See

"developed." The American Heritage® Dictionary of the English Language, Fourth

Edition. Houghton Mifflin Company, 2004; Dictionary.com entry,

http://dictionary.reference.com/browse/developed (last visited Sept. 18, 2008).

Although Plaintiffs’ proposed interpretation represents one possibility, Commerce’s

represents another. Therefore, this is not a matter of giving effect to one, clear,

Congressional intent (Chevron step one), but instead of reviewing the reasonableness

of Commerce’s proposed interpretation (Chevron step two). To determine whether

Commerce's interpretation is reasonable, the court “may look to ‘the express terms of

the provisions at issue, the objectives of those provisions, and the objectives of the

Court No. 06-00383 Page 10

antidumping scheme as a whole.’” Wheatland Tube Co. v. United States, 495 F.3d

1355, 1361 (Fed. Cir. 2007) (citing NSK Ltd. v. United States, 26 CIT 650, 654,

217 F. Supp. 2d 1291, 1296-97 (2002)).

Commerce’s commercial availability standard is reasonable. As Commerce

explained, “the product’s actual presence in the market at the time of the LTFV

investigation is a necessary predicate of its inclusion or exclusion from the scope of an

antidumping duty order.” Decision Memorandum at 23. The later-developed

merchandise provision is designed to prevent circumvention of an antidumping order by

a comparable product (as determined by the Diversified Products5 analysis) for the

subject merchandise. Commerce’s interpretation, which reaches products that emerge

in the market after imposition of the antidumping order, accomplishes this objective.

2. Commerce’s Finding of Commercial Unavailability

Qingdao challenges Commerce’s determination that mixed-wax candles were

commercially unavailable during the LTFV investigation. Qingdao Mot. J. Agency R. at

37-44. Implicit in Qingdao’s challenge is an assumption that Commerce made a finding

of commercial unavailability for mixed-wax candles, which it did in some vague sense:

[H]aving received no information either through relevant product

brochures, annual sales data, or any other information from any party

demonstrating that mixed-wax candles were commercially available prior

to the LTFV investigation, [Commerce] finds that it cannot definitively

conclude that mixed-wax candles were available in the market at the time

of the LTFV investigation.

5

The factors set forth in 19 U.S.C. § 1677j(d)(1) to determine whether later-developed

merchandise is within the scope of an outstanding antidumping duty order are derived

from the court’s decision in Diversified Prods. Corp. v. United States, 6 CIT 155, 162,

572 F. Supp. 883, 889 (1983). They are commonly referred to as the Diversified

Products criteria.

Court No. 06-00383 Page 11

Decision Memorandum at 26 (emphasis added).

Note that Commerce “cannot definitively conclude.” Id. This language creates

confusion, at least for purposes of judicial review. Rather than make a straightforward

finding that mixed-wax candles were commercially unavailable at the time of the LTFV,

Commerce introduced an unexplained, subjective, evidentiary standard—definitive

conclusiveness—and found this standard had not been met. It is a puzzling turn of

phrase; it almost bespeaks an administrative presumption of commercial

unavailability—rebuttable by definitively conclusive evidence (whatever that may be)

of commercial availability. Commerce, though, directly contradicted such notions:

[B]oth Respondents and Petitioners had the burden to establish whether

mixed-wax candles were commercially available at the time of the LTFV

investigation. All parties were given the opportunity to submit evidence

that mixed-wax candles were available or evidence that mixed-wax

candles were not available in the market. Accordingly, the burden did not

rest on any single party.

Id. at 25. The net effect of all this is that the court cannot review Commerce’s new,

subjective, evidentiary standard and the associated “finding” in its present posture, and

therefore must remand to Commerce for further consideration.

On remand Commerce has two choices: (1) Commerce may make a

straightforward finding of commercial unavailability at the time of the LTFV, which the

court can then review for reasonableness (substantial evidence review); or

(2) Commerce may further explain its proposed evidentiary standard as a reasonable

application and interpretation of the later-developed merchandise anticircumvention

provision. Once completed, Commerce must share it with the parties and provide an

Court No. 06-00383 Page 12

opportunity to address that standard as it applies to the record evidence. Commerce

can then make a factual finding based on the proposed standard. The court will then

review the proposed standard for reasonableness under Chevron step two, and

evaluate whether Commerce’s factual finding is supported by substantial evidence

(or more simply, for reasonableness).

3. Significant Technological Advance or Significant Alteration

of the Merchandise Involving Commercially Significant Changes

During the anticircumvention proceeding, Commerce referred to the legislative

history for the ITC consultation requirement of § 1677j(e) and discovered what it thought

was an additional definitional requirement for “later-developed merchandise.” According

to Commerce, “[t]he only other source of guidance available [for the definition of ‘later-

developed merchandise’] is the brief discussion of later-developed products in the

legislative history for section 781(d) of the Act, which although addressing later-

developed products with respect to the ITC's injury analysis, we find is also relevant to

[Commerce]'s analysis.” Final Determination, 71 Fed. Reg. at 59,076. Commerce then

selectively quoted the legislative history, mistakenly representing that the history

defined “a later-developed product as a product that has been produced as a result of a

‘significant technological advancement [sic] or a significant alteration of the

merchandise involving commercially significant changes.’'' Id. (emphasis omitted)

(quoting H.R. REP. NO. 100-576, at 603 (1988) (Conf. Rep.), reprinted in 1988

U.S.C.C.A.N. 1547, 1636). Commerce purportedly abandoned its reliance on the

legislative history of the ITC consultation requirement after reconsidering its

interpretation of later-developed merchandise pursuant to the voluntary remand in this

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matter. Voluntary Remand at 5. Commerce, though, did not abandon the additional

definitional requirements. Commerce maintained that later-developed merchandise

must have resulted from a significant technological advance or significant alteration to

an earlier product. Id.

Not much need be said here other than that Commerce misread the ITC

consultation provision and its legislative history. The full passage from which

Commerce selectively quoted in the Final Determination reads:

With respect to later-developed products, a significant injury issue can

arise if there is a significant technological development or a significant

alteration of the merchandise involving commercially significant changes

in the characteristics and uses of the product. In providing such advice,

the ITC should not focus narrowly on the product’s features at the time the

order was issued, but should analyze its general characteristics and uses

in light of its prior determination. Thus, a later-developed product

incorporating a new technology that provides additional capability, speed,

or functions would be covered by the order as long as it has the same

basic characteristics and uses.

H.R. REP. NO. 100-576, at 603 (1988) (Conf. Rep.), reprinted in 1988 U.S.C.C.A.N.

1547, 1636 (emphasis added). Likewise, the ITC consultation provision reads:

(e) Commission advice

(1) Notification to Commission of proposed action

Before making a determination--

...

(C) under subsection (d) of this section with respect to any later-

developed merchandise which incorporates a significant

technological advance or significant alteration of an earlier product,

with respect to any antidumping or countervailing duty order or finding

as to which the Commission has made an affirmative injury

determination, the administering authority shall notify the Commission

of the proposed inclusion of such merchandise in such countervailing

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or antidumping order or finding. Notwithstanding any other provision of

law, a decision by the administering authority regarding whether any

merchandise is within a category for which notice is required under this

paragraph is not subject to judicial review.

19 U.S.C. § 1677j(e) (emphasis added).

The ITC consultation provision does not define or limit the meaning of later-

developed merchandise. What it does is identify specific types of later-developed

merchandise that may raise “significant injury issue[s]” and require Commerce to

consult with the ITC before including those specific types of later-developed

merchandise within the scope of an order. H.R. REP. NO. 100-576, at 603 (1988)

(Conf. Rep.), reprinted in 1988 U.S.C.C.A.N. 1547, 1636. Simply put, it does not limit

the universe of “later-developed merchandise” to products that involve a significant

technological advance or significant alteration as Commerce suggests; it identifies a

subset of “later-developed merchandise” that requires consultation with the ITC.

Commerce, therefore, erred by inferring from § 1677j(e) that “later-developed

merchandise” under § 1677j(d) must in every instance involve a significant technological

advance or significant alteration of subject merchandise. Ironically, by defining “later-

developed merchandise” to require a significant alteration of the subject merchandise

and then making a factual finding that mixed-wax candles involve a significant alteration

of petroleum wax candles, Commerce may have created a “significant injury issue”

where none otherwise exists.

In any event Commerce’s interpretation is contrary to the clear Congressional

intent of § 1677j(e), and correspondingly, is one to which the court cannot defer. The

court must therefore remand the matter to Commerce to correct its erroneous

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interpretation of the statute. On remand Commerce may, of course, continue to limit

what constitutes “later-developed merchandise,” so long as whatever limitation

Commerce divines is a reasonable interpretation of the statute.

B. Initiation of the Anticircumvention Inquiry

Qingdao challenges the initiation of the anticircumvention inquiry as contrary to

(1) Commerce’s regulation for scope determinations, 19 C.F.R. § 351.225, and the prior

mixed-wax candle scope rulings, and (2) Wheatland Tube, 161 F.3d at 1371. Qingdao

Mot. J. Agency R. at 10-22.

Commerce’s procedures for conventional scope inquiries are governed by

19 C.F.R. § 351.225. In determining whether a product is included within the scope of

an antidumping duty order, Commerce examines the scope application and the

descriptions of the merchandise set forth in the antidumping petition, the initial

investigation, and all prior determinations (including prior scope determinations) of

Commerce and the ITC. 19 C.F.R. § 351.225(d) & (k)(1); Crawfish Processors Alliance

v. United States, 483 F.3d 1358, 1362-63 (Fed. Cir. 2007). If these descriptions

conclusively determine whether disputed merchandise is subject to the scope of an

order, Commerce issues a final determination that the merchandise is covered, or not

covered, by the order. Id. If these descriptions are not dispositive, Commerce initiates

a scope inquiry and considers the Diversified Products criteria: the physical

characteristics of the product, the expectations of the ultimate purchasers, the ultimate

use of the product, the channels of trade in which the product is sold, and the manner in

Court No. 06-00383 Page 16

which the product is advertised and displayed. 19 C.F.R. § 351.225(e) & (k)(2);

Crawfish Processors Alliance, 483 F. 3d at 1362.

In at least seven prior conventional scope determinations involving mixed-wax

candles, Commerce found the ITC’s like product definition—candles composed of over

50 percent petroleum wax—to be dispositive of whether mixed-wax candles were

subject to the scope of the Petroleum Wax Candle Order. See final scope rulings

supra note 2. In each instance, rather than initiating a scope inquiry, Commerce issued

a final ruling excluding mixed-wax candles from the Order pursuant to 19 C.F.R.

§ 351.225(d) and (k)(1). Qingdao wants similar treatment here. Qingdao Mot. J.

Agency R. at 12-13. Qingdao argues that Commerce should not have initiated the

anticircumvention inquiry, but rather should have issued a final ruling excluding mixed-

wax candles on the basis of the ITC’s original domestic like product definition, which the

ITC had not yet redefined in the Second Sunset Review. Id.

Commerce, though, determined that the threshold determination of 19 C.F.R.

§ 351.225(d) and (k)(1) for conventional scope inquiries did not apply to NCA’s petition

for a later-developed merchandise anticircumvention inquiry. See Petroleum Wax

Candles from the People’s Republic of China, 71 Fed. Reg. 32,033, 32,036-37

(Dep’t Commerce June 2, 2006) (prelim. determ. anticircumvention inquiry)

(“Preliminary Determination”); see also Decision Memorandum at 11-12. Commerce

instead noted that the later-developed merchandise anticircumvention provision

requires that Commerce shall consider the Diversified Products criteria enumerated in

19 U.S.C. § 1677j(d)(1)(A)-(E). Preliminary Determination, 71 Fed. Reg. at 32,036-37.

Court No. 06-00383 Page 17

Commerce distinguished conventional scope proceedings from later-developed

merchandise anticircumvention inquiries:

[Commerce] considered its prior scope ruling finding certain mixed-wax

candles outside the scope of the Order. While [Commerce] recognizes

that it made previous such scope rulings, [Commerce] notes that the

factors that govern [Commerce]’s analysis of whether a product is within

the scope of the Order differ for anticircumvention inquiries and other

scope determinations. In scope rulings under section 351.225(k)(1) of

[Commerce]’s regulations, [Commerce] relies upon relevant documents

. . . in determining whether a particular product is included within the

scope of an antidumping order. If [Commerce] finds that the descriptions

are dispositive, [Commerce] will issue a final scope ruling of whether the

product is within the scope of the antidumping duty order. But when the

descriptions are not dispositive, [Commerce] will further consider the

additional five factors, as stipulated in section 351.225(k)(2) of

[Commerce]’s regulations.

***

Later-developed merchandise anticircumvention inquiries are governed by

[19 U.S.C. § 1677j(d)], which instructs [Commerce] to determine whether

the product in question was developed after the investigation was initiated,

and, if so, whether it is within the scope of the order. If [Commerce] finds

that the product subject to the inquiry is later-developed, then [19 U.S.C.

§1677j(d)(1)] instructs [Commerce] to consider [the Diversified Products

factors]. In contrast to the prior scope rulings, in the present inquiry,

[Commerce] is obligated, pursuant to [19 U.S.C. § 1677j(d)], to make a

determination by explicitly analyzing these additional factors.

Preliminary Determination, 71 Fed. Reg. at 32,036-37 (citations omitted).

Plaintiffs argue that 19 C.F.R. § 351.225 “make[s] no distinction in the preliminary

inquiry Commerce is required to make whether dealing with a conventional scope

application or a scope application based upon alleged circumvention. In either case,

the agency is first required to determine if the language of the order, etc. is dispositive

[of scope].” Qingdao Mot. J. Agency R. at 16 (emphasis omitted).

Court No. 06-00383 Page 18

When reviewing Commerce’s interpretations of its own regulations, the court

does not “decide which among several competing interpretations best serves the

regulatory purpose.” Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512 (1994).

Rather, the court must accord Commerce’s interpretation of its own regulation

“‘controlling weight unless it is plainly erroneous or inconsistent with the regulation.’” Id.

(quoting Udall v. Tallman, 380 U.S. 1, 16-17 (1965)); see also Viraj Group v.

United States, 476 F.3d 1349, 1355 (Fed. Cir. 2007).

Commerce’s interpretation of 19 C.F.R. § 351.225 is not plainly erroneous or

inconsistent with the regulation. Paragraph (j), the scope provision governing “later-

developed merchandise,” states that “in determining whether later-developed

merchandise is within the scope of an antidumping . . . duty order, the Secretary will

apply [19 U.S.C. § 1677j(d)].” 19 C.F.R. § 351.225(j). Commerce followed this

directive. Rather than applying 19 C.F.R. § 351.225 (d), (e), and (k), Commerce applied

19 U.S.C. § 1677j(d).

Section 351.225(k), in turn, exempts later-developed merchandise proceedings

from the conventional scope procedures set forth in subparagraphs (k)(1) and (k)(2).

19 C.F.R. § 351.225(k) (Paragraph (k) is limited to “those scope determinations that are

not covered under paragraphs (g) through (j).”). Since paragraph (d) incorporates the

criteria of paragraph (k)(1), the exemption language of paragraph (k) renders paragraph

(d) equally inapplicable. 19 C.F.R. § 351.225(d). Thus, later-developed merchandise

anticircumvention inquiries fall outside the purview of the threshold inquiry of

Court No. 06-00383 Page 19

paragraphs (d) and (k)(1). Commerce’s construction of the scope regulation is therefore

not plainly erroneous or inconsistent with the terms of 19 C.F.R. § 351.225.

As a practical matter, Commerce does survey the petition, the investigation, and

all prior proceedings at the onset of a later-developed merchandise anticircumvention

inquiry to assess whether a product is in fact later-developed, which common sense

dictates is the more pertinent threshold issue:

In determining whether [the merchandise] is appropriately considered a

later-developed product under 19 U.S.C. 1677j(d), we evaluated the

arguments raised by interested parties in light of the language of the

statute, regulations, and the applicable legislative history . . . . A product

developed after the petition and investigation cannot have been

specifically excluded from the scope of the original investigation.

Accordingly, if [the merchandise] is later-developed, the descriptions of the

merchandise contained in the petition, the initial investigation, and the

determinations of the Secretary and the [ITC] cannot be dispositive.

However, if a product is developed before an antidumping case is initiated,

the later-developed product provision is clearly inapplicable.

Electrolytic Manganese Dioxide From Japan, 56 Fed. Reg. 56,977, 56,979-80

(Dep’t Commerce Nov. 7, 1991) (prelim. scope ruling). See also Erasable

Programmable Read Only Memories From Japan, 57 Fed. Reg. 11,599, 11,602

(Dep’t Commerce Apr. 6, 1992) (final scope ruling).

When considering whether to initiate the anticircumvention inquiry on mixed-wax

candles, Commerce reviewed the antidumping duty petition, the Petroleum Wax Candle

Order, and the ITC’s Original Injury Determination and found “no clear basis for

[Commerce] to make a conclusive determination that candles with non-petroleum waxes

in a different proportion are not later-developed merchandise.” See Notice of Initiation,

70 Fed. Reg. at 10,964-65.

Court No. 06-00383 Page 20

Plaintiffs challenge this finding. Relying on Wheatland Tube, 161 F.3d at 1371,

Qingdao contends that the description of the merchandise subject to the Petroleum Wax

Candle Order “unequivocally” excludes mixed-wax candles, and thus initiation of the

inquiry was legally impermissible. Qingdao Mot. J. Agency R. at 18-22. In Wheatland

Tube the antidumping duty order expressly excluded “line pipe” and “standard pipe that

is dual or triple certified/stenciled that enters the U.S. as line pipe of a kind used for oil

or gas pipelines,” Wheatland Tube, 161 F.3d at 1367 (emphasis omitted), which were

known products with specific applications in the circular welded non-alloy steel pipe

markets. On that basis the U.S. Court of International Trade precluded Commerce from

conducting a minor alterations inquiry for the excluded products because, as a matter of

law, no alteration had been made to the subject merchandise. Wheatland Tube, 21 CIT

at 824-26, 973 F. Supp. at 162-64 (“[T]he statute is unambiguous and applies only to

merchandise arguably within the scope of the antidumping duty order which is altered to

be outside the order, the minor alterations provision does not apply to the present

case.”), aff’d, 161 F.3d at 1370-71.

The facts here are different. The Order covers “petroleum wax candles made

from petroleum wax.” Petroleum Wax Candle Order, 51 Fed. Reg. at 30,686.

Commerce found that this phrase did not definitively resolve the issue of whether

mixed-wax candles could be later-developed merchandise. For Commerce, that was an

open question for the anticircumvention inquiry, which is a reasonable threshold

determination. See, e.g., Nippon Steel Corp. v. United States, 219 F.3d 1348, 1356

(Fed. Cir. 2000) (The statement in Wheatland Tube that the minor alterations provision

Court No. 06-00383 Page 21

does not apply to products unequivocally excluded from the order “cannot be read as

barring Commerce from conducting an inquiry to determine whether the addition of a

small amount of boron constituted a minor alteration that still left the product subject to

the antidumping duty order.”).

C. Whether Commerce’s inclusion of mixed-wax candles within the Order

impermissibly expands the Order contrary to the domestic like product

definition

Plaintiffs also argue that Commerce’s inclusion of mixed-wax candles within the

scope of the Order represents an impermissible expansion of the Order contrary to the

domestic like product definition. Plaintiffs correctly note that the original like product

definition, candles “composed of over 50 percent petroleum wax,” Original Injury

Determination at 5, did not cover mixed-wax candles, a fact repeatedly reinforced by

Commerce’s subsequent scope determinations involving mixed-wax candles. The ITC,

however, changed the like product definition during the Second Sunset Review to

include candles “containing any amount of petroleum wax,” a change that ostensibly

cured any potential like product issues. Second Sunset Review at 9.

Although the ITC’s expansion of the like product definition 19 years after the

Original Injury Determination may raise interesting issues, see, e.g., Ad Hoc Shrimp

Trade Action Comm. v. United States, 515 F.3d 1372, 1384 (Fed. Cir. 2008) (“the ITC

has no independent authority to expand the scope of an antidumping investigation”),

no one challenged the Second Sunset Review. That decision is final and conclusive

(as well as the domestic like product definition that it contains) and the court may not

entertain a collateral attack to the Second Sunset Review within this proceeding

Court No. 06-00383 Page 22

because the jurisdictional predicates for judicial review of the Second Sunset Review

have not been satisfied. See 19 U.S.C. § 1516a(a)(2)(A). As the domestic like product

now covers candles “containing any amount of petroleum wax,” Commerce’s inclusion

of mixed-wax candles within the scope of the Order does not impermissibly expand the

scope of the Order contrary to the domestic like product definition.

IV. Conclusion

The court concludes that (1) Commerce’s commercial availability standard is

reasonable, but Commerce’s finding that it could not “definitively conclude” that mixed-

wax candles were commercially available during the LTFV investigation cannot be

reviewed in its present posture; (2) Commerce’s requirement that “later-developed

merchandise” must in every instance involve a significant technological advance or

significant alteration of the subject merchandise is not in accordance with 19 U.S.C.

§ 1677j(e); (3) Commerce’s initiation of the anticircumvention inquiry was in accordance

with law; and (4) Commerce’s inclusion of mixed-wax candles within the scope of the

Order does not impermissibly expand the scope of the Order contrary to the domestic

like product definition.

Accordingly, it is hereby

ORDERED that this action is remanded to the U.S. Department of Commerce

(“Commerce”) to reconsider its finding that it “cannot definitively conclude that mixed-

wax candles were available in the market at the time of the LTFV investigation.” On

remand Commerce may (a) make a straightforward finding of commercial unavailability

at the time of the LTFV, or (b) further explain its proposed “definitive conclusiveness”

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evidentiary standard as a reasonable application and interpretation of the “later-

developed merchandise” anticircumvention provision. Commerce must share the new

proposed standard and accompanying explanation with the parties and provide them

with an opportunity to address that standard as it applies to the record evidence.

Commerce can then make a factual finding based on the proposed standard; and it is

further

ORDERED that Commerce’s requirement that “later-developed merchandise”

must in every instance involve a significant technological advance or significant

alteration of the subject merchandise is not in accordance with 19 U.S.C. § 1677j(e),

and Commerce must therefore reconsider this aspect of its definition of later-developed

merchandise; and it is further

ORDERED that Commerce is to file the remand results on or before

November 12, 2008; and it is further

ORDERED that the parties are to file a proposed scheduling order on or before

November 25, 2008, for the submission of comments with page limits on the remand

results.

/s/ Leo M. Gordon

Judge Leo M. Gordon

Dated: September 18, 2008

New York, New York