Meridian Products, LLC v. United States
851 F.3d 1375 (Fed. Cir. 2017)
Authored by Wesley Stafford
Statement of Facts: In 2012, the plaintiff-appellee, Meridian Products, LLC (“Meridian”), asked the defendant-appellant, the U.S. Department of Commerce (“Commerce”), to issue a scope ruling that an imported product containing aluminum extrusions[1] made specifically to line refrigerators did not fail inside the scope of the antidumping and countervailing duty orders on aluminum extrusions from China. (The Antidumping Order and the Countervailing Duty Order are identical in scope). Any imported product that fell inside the scope of the order would be subject to duties and taxes. Meridian was attempting to exclude its product from the order to avoid paying such duties and taxes. The applicable order, promulgated by the Department of Commerce, stated that the materials subject to the order are “‘aluminum extrusions’ that ‘are shapes and forms, produced by an extrusion process, made from’ specified aluminum alloys.” Meridian Products, LLC v. United States, 851 F.3d 1375 (Fed. Cir. 2017) (quoting Antidumping Duty Order, 76 Fed. Reg. 30,650 (Dep’t of Commerce May 26, 2011)). These extrusions “may be described at the time of importation as parts for final finished products that are assembled after importation” and “may be identified with reference to their end use.” Antidumping Duty Order, 76 Fed. Reg. at 30,650–51. The order contains several exclusions. The relevant exclusion here states that the order:
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 [Orders] merely by including fasteners such as screws, bolts, etc. in the packaging with an aluminum extrusion product. Id. at 30,651.
Commerce initially found that Meridian’s product did fall inside the scope of the order. It also found that the applicable exclusion did not apply, despite Meridian including an installation kit with fasteners, an instruction manual, hinge covers, and a hexagonal wrench.
Procedural History: Meridian appealed Commerce’s scope ruling to the U.S. Court of International Trade (“CIT”). The CIT remanded Commerce’s findings for failing to consider a previous scope ruling interpreting terms of the order. Meridian Prods., LLC v. United States (Meridian I), No. 1:13-cv-00018-RKM, 2013 WL 2996233, at *1 (Ct. Int’l Trade 2013). The saga of litigation that followed involved three total remands to the department of commerce for reconsideration, and five written opinions from the CIT. Upon the final remand, Commerce found that the imported products fell inside the conclusion; however, it also stated that the CIT’s directives created a tension between the plain language of the order and the holdings of CIT’s fifth opinion. Meridian Prods., LLC v. United States (Meridian V), 145 F. Supp. 3d 1329, 1330 (Ct. Int’l Trade 2016). United States then appealed to the Federal Circuit.
Question Presented: Does an imported product made primarily of aluminum extrusions, while containing fasteners, hinge covers, hexagonal wrenches, and an instruction manual, fall inside the finished goods kit exclusion to the Antidumping Duty Order or the Countervailing Duty Order because the order’s scope is ambiguous on its face or because the various non-extrusion elements to the finished goods kit were enough for the product to fall into the exception to the exclusion?
Holding: Reversing the CIT’s Holding in Meridian I that Commerce originally had incorrectly applied the finished good’s kit exclusion and vacating all subsequent rulings and holdings in the Meridian saga, the Federal Circuit held that the scope of the order was not ambiguous and that the non-extrusion parts included in the finished goods kit did not fit the exception to the exclusion.
Reasoning: The Federal Circuit disagreed with the CIT on two points: 1) that there was no ambiguity in the plain language of the order’s scope, and 2) that the finished goods kit did not fall in the exception to the exclusion based on the substantial evidence gathered by Commerce that the kit included only aluminum extrusions and fasteners.
The Federal Circuit found CIT’s reasoning that there was ambiguity in the order’s scope flawed for three reasons. First, CIT found that if a product fit the definition of the finished goods kit exclusion, the inquiry ended, and that there was no exception to the exclusion based simply on the inclusion of “fasteners such as screws, bolts, etc.” Antidumping Duty Order, 76 Fed. Reg. at 30,651. The Federal Circuit found that the CIT failed to include all the language of the exclusion in its determinations when it effectively read out the screws and bolts exception to the exclusion. The CIT stated that when an order contains multiple sentences and when there is no indication that one sentence is meant to inform the scope of an order while others do not, that the order must be read as a whole, and each part must be read such that it contributes to the overall understanding of the order. See Allegheny Bradford Corp. v. United States, 342 F. Supp. 2d 1172, 1183, 1190 (Ct. Int’l Trade 2004) (holding that a scope determination may not in itself change the scope of the order, but simply find whether a product falls inside the order’s scope).
Second, the CIT held that the order would exclude kits comprised solely of aluminum extrusions and fasteners. The only items not excluded by the order would be single pieces of extruded aluminum. The Federal Circuit found that the CIT’s interpretation of the exception would become the rule, making the order meaningless. This interpretation of the order would thus change the scope of the order, which it cannot do. See, e.g., Duferco Steel, Inc. v. United States, 296 F.3d 1087, 1097 (Fed. Cir. 2002) (explaining that the scope is the foundation of the analysis and the precursor to the interpretive process).
Third, The Federal Circuit found that CIT created internal inconsistencies because its rulings allowed for unassembled extrusions and their fasteners to be excluded while the same aluminum extrusions individually imported outside of the finished goods kit, or as parts to be assembled upon arrival with other parts, included. Wheatland Tube Co. v. United States, 161 F.3d 1365, 1371 (Fed. Cir. 1998).
Additionally, the Federal Circuit found that Commerce did not incorrectly interpret the finished goods kit exclusion. Commerce found that for a product to fall outside the scope, or within the exclusion, the kit must include aluminum exclusions as well as other non-extruded aluminum parts. See Antidumping Duty Order, 76 Fed. Reg. at 30,651. The Federal Circuit agreed with Commerce that the mere addition of fasteners, such as hinges, bolts, and screws, does not therefore qualify a kit for the exception to the exclusion. Id. The Court also agreed with Commerce that the only parts to be considered are those that will be included in the finished product. Id. Those items not a part of the final assembled product, e.g. wrenches and wrenches, will not be considered in conjunction with those materials that physically make up the final assembled product for purposes of qualifying a product for the exception to the exclusion. Also, the Court agreed with Commerce that those products that consisted of Aluminum extrusions were included in the order while products that included items not of aluminum extrusion were outside the order. This gave life to the purpose of the order and disagreeing with the CIT that there was any ambiguity in the scope of the order regarding the exclusion’s exception.
Finally, the Federal Circuit held that Commerce had presented substantial evidence that Meridian’s product was a finished goods kit but did not meet the requirements to fall into the exception to the exclusion for three reasons: 1) Meridian did not dispute that the majority of the items were aluminum extrusions; 2) Commerce found that the brackets and screws meet the definition of fasteners; and 3) Commerce also found that the hinge covers, hexagonal wrench and the instruction manuals were not part of the final assembled product and therefore not relevant to the inquiry. As such, the Federal Circuit ruled that Meridian’s imported product did not fit the exception to exclusion for the order and if it chooses to import its product it would be required to pay the applicable duties and taxes.
[1] Extrusions are the product of a process called extrusion. This is a process which transforms solid, raw metals into specific shapes by pressing those metals through a pre-formed outline, or die. This process is most analogous to pushing raw pasta dough through a pasta machine (process of extrusion), creating thin noodles of spaghetti (the extrusions) from a clump of raw dough (raw metal). Aluminum Extruders Council, http://www.aec.org/?page=dres_extrusion (last visited Apr. 20, 2017).