Decision Circumscribes Duty Circumvention
April 21, 2016

This article was authored by International Trade Specialist Michael J. Kelleher

On April 5, 2016, a three-judge panel of the Court of Appeals for the Federal Circuit (“CAFC”) issued an opinion in Deacero S.A. de C.V. v. United States, Appeal Nos. 2015-1362, 2015-1363, 2015-1367, affirming the final determination of circumvention by the U.S. Department of Commerce (“Commerce”), that the steel wire rod imports by a Mexican producer and its affiliated importer, were subject to the associated antidumping duty (“AD”) order.

The Federal Circuit holding is a particularly important precedent for several reasons.  In a broad sense, this reinforces previous decisions1 preventing foreign producers and exporters from evading orders by making slight dimensional changes in their production methods.  More specifically, Commerce does not have to consider whether the subject merchandise was commercially available at the time of the original investigation when making a determination under the “minor alteration” provision of the statute, thereby overturning the Court of International Trade (“CIT” or “Trade Court”) decision.

BACKGROUND

In 2002, Commerce issued an AD order on steel wire rod imported from various countries including Mexico.  Deacero S.A. de C.V. and Deacero USA, Inc. (“Deacero”), Mexican producers of the subject merchandise, were not individually investigated in the original investigation; consequently, its imports of steel wire rod were subject to the 20.11% all others rate.2

The order defined the scope as steel wire rod with a cross-sectional diameter of “5.00 or more, but less than 19.00 mm.”  Following the order’s issuance, Deacero manufactured and ultimately imported into the United States steel wire rod within a diameter of 4.75 mm, or 0.25 mm smaller than the wire rod subject to the order.  Based on the requests of domestic wire rod producers, Commerce instituted an anti-circumvention inquiry in May 2011 to determine whether 4.75 mm steel wire rod should be included within the scope of the order as either “minor alterations of merchandise” or “later-developed merchandise.”  19 U.S.C. §§ 1677j(c)(1), (d)(1).3  The Department issued a final determination in September 2012, finding 4.75 mm to 5.00 mm steel wire rod was a minor alteration of the subject merchandise, and that its import constituted an affirmative circumvention of the order. 

Deacero appealed to the Court of International Trade.  The CIT ultimately remanded to Commerce, finding that it’s affirmative circumvention determination was not supported by substantial evidence because 4.75 mm steel wire rod fell outside the literal scope of the order, and was “commercially available” at the time of the original investigation.4 Under protest, Commerce issued a negative finding of circumvention, finding it had no alternative.5  The Trade Court affirmed Commerce’s negative determination on December 22, 2014.6 The government, along with U.S. steel wire rod producers ArcelorMittal USA LLC, Gerdau Ameristeel U.S. Inc. and Nucor Corp., appealed to the Federal Circuit. 

CAFC APPEAL

Appellants presented two issues to the Federal Circuit.  Did the Trial Court err in finding, as a matter of law, that Commerce had intentionally excluded a product with certain dimensions in its antidumping order merely because (a) the order did not literally cover those dimensions and (b) the product with those dimensions was commercially available at the time of the order?

On the first issue, the Federal Circuit found that the Trade Court erred in interpreting Wheatland Tube v. United States, 161 F.3d 1365 (Fed. Cir. 1998).  Commerce’s order, unlike Wheatland, did not contain any “explicit exclusion of small-diameter wire rod.”7

Although the scope of the duty order sets a cross-sectional range (5.00 mm to 19.00 mm), that cannot be read to expressly exclude for purposes of anti-circumvention inquiries all products outside that range.  The purpose of minor alteration anti-circumvention inquiries is to determine whether articles not expressly within the literal scope of a duty order may nonetheless be found within its scope as a result of a minor alteration to merchandise covered in the investigation.  To conclude otherwise would render meaningless Congress’s intent to address circumvention concerns.8

On the second issue, Domestic Producers argued that Section 1677j(c) requires Commerce to include within scope “articles altered in form or appearance in minor respects;” but contains no language imposing a temporal limitation.  Instead, Congress directed that Commerce apply five specific factors to determine whether a minor alteration has occurred.9  The Trade Court did not question Commerce’s findings with respect to those factors but nonetheless overturned Commerce’s minor alteration finding based on commercial availability.  “By making an affirmative minor alteration finding contingent on a finding of no commercial availability, the Trial Court added a requirement to the statute that Congress itself had not imposed, contrary to the canons of statutory instruction.”10 

Despite Deacero’s arguments that the narrower wire rod had been produced in Japan at the time of the order, Federal Circuit Judge Jimmie V. Reyna (who wrote the Deacero opinion) pointed out at oral argument that producers “can’t file a dumping petition based on imaginary products that don’t exist.”11

NEXT STEPS

Deacero has until May 20, 2016 to file a request for rehearing en banc of the Federal Circuit’s opinion, which is rarely granted.  Or, Deacero could file a Petition for Certiorari with the Supreme Court by July 5, 2016.

Kelley Drye & Warren (Kathleen Cannon; R. Alan Luberda; Paul Rosenthal; David Smith) represented domestic producers ArcelorMittal USA, LLC and Gerdau Ameristeel U.S. Inc., during the anti-circumvention inquiry before Commerce as well as the appeals before the Court of International Trade and Federal Circuit.



[1] See, e.g., Target. Corp. v. United States, 609 F.3d 1352, 1355 (Fed. Cir. 2010).

[2] Carbon and Certain Alloy Steel Wire Rod from Brazil, Indonesia, Mexico, Moldova, Trinidad and Tobago, and Ukraine, 67 Fed. Reg. 65,945, 65,946-47 (Dep’t Commerce Oct. 29, 2002) (order).

[3] Commerce’s later-developed product determination was not an issue before the Federal Circuit.  Deacero, Slip Op. at 5.

[4] Deacero S.A. de. C.V. v. United States, 942 F. Supp. 2d 1321, 1332 (CIT 2013). 

[5] Deacero S.A.P.I. de C.V. v. United States, No. 12-00345, 2014 Ct. Int’l Trade LEXIS 99, at 21-22 (Aug. 28, 2014). 

[6] Deacero S.A.P.I de C.V. v. United States, No. 12-00345, 2014 Ct. Int’l Trade LEXIS 159, at *2. 

[7] Deacero, Slip. Op. at 11.

[8] Id.

[9] These factors include:  (1) the overall physical characteristics of the product; (2) the expectations of the ultimate user; (3) the end-use of the product; (4) channels of trade and advertising; and (5) the cost of modification relative to the value of the products at issue.  Omnibus Trade Act, Report of the Senate Finance Committee, S. Rep. No. 71, 100th Cong., Sess. 100 (1987)

[10] See May 13, 2015 Brief of Defendants-Appellants ArcelorMittal USA, LLC and Gerdau Ameristeel U.S. Inc.  at 20, Deacero S.A. de C.V. v. United States, Appeal Nos. 2015-1362, 2015-1363, 2015-1367.

[11] See Federal Circuit Oral Argument dated Feb. 4, 2016, available at http://www.cafc.uscourts.gov/oral-argument-recordings.