DOJ Makes Case for Commerce's Scope Ruling Including Steel Branch Outlets in Pipe Fittings Order

The Commerce Department properly found that importer Vandewater International Inc.'s steel branch outlets are covered by the scope of the antidumping duty order on carbon steel butt-weld pipe fittings from China, the Department of Justice told the Court of International Trade in a Jan. 11 brief. Commerce's scope ruling is backed by a reading of each "(k)(2)" factor, including the physical characteristics of the steel branch outlets, the ultimate purchasers' expectations, the ultimate use of the product, and channels of trade in which the product is sold (Vandewater International Inc. v. U.S., CIT #18-00199).

In October 2020, CIT issued an opinion striking down a then-2-year-old scope finding that Vandewater's steel branch outlets used in fire protection systems are subject to antidumping duties on carbon steel butt-weld pipe fittings from China (see 2010190031). The court found that Commerce failed to adequately explain itself, relying mostly on a previous scope ruling that doesn't fully address the issue. Upon reconsideration, Commerce continued to find that Vandewater's steel branch outlets fall within the scope of the AD order. The agency held that the physical characteristics of the steel branch outlets are similar to the characteristics of the butt-weld pipe fittings (see 2107260042).

After Vandewater and plaintiff-intervenor Sigma filed their comments on this remand result, DOJ twice requested an extension of time to file its comments. The plaintiff-intervenor opposed the extension bids, wanting a quick decision at CIT, because it was then embroiled in parallel litigation in a California district court, where it was found guilty of violating the False Claims Act by not paying antidumping duties on its welded outlet imports (see 2112080072). Sigma this week appealed a decision in the district court case to the U.S. Court of Appeals for the 9th Circuit (see 2201100030).

Vandewater and Sigma's brief argues that Commerce mischaracterized and disregarded key record evidence in its analysis, citing three shortcomings: consideration of industry standards, lack of discussion on the expert report of Walter Sperko, and relevance of the contoured edge of the steel weld outlets, "a fundamental physical characteristic of steel weld outlets" (see 2110040034).

DOJ addressed each of the purported shortcomings in its reply. Vandewater and Sigma said the pipe fittings must conform to a specific industry standard while Vandewater's steel branch outlets conform to a different standard. DOJ replied that just because an AD petition references an industry standard, this does not mean that the subject merchandise must meet that standard. Further, DOJ backed Commerce's contention that record evidence shows that pipe fits can be made to conform to specifications other than those laid out in the footnote of the petition.

"Thus, Commerce concluded that 'including a requirement that all [butt-weld pipe fittings] subject to the China BWPFs Order must conform to ... [the petition standard] would introduce a restriction that is not found in the scope language and would unduly restrict the coverage of the scope,'" DOJ said.

Vandewater and Sigma also argued that Commerce failed to treat Sperko's evidence that Vandewater's steel branch outlets have physical characteristics that are "materially distinct" from butt-weld pipe fittings. "Exercising its discretion in judging the credibility of conflicting record evidence, Commerce explained that it considered the documentary evidence stemming from the ordinary course of business to be a more reliable source of information to ascertain the defining physical characteristics of butt-weld pipe fittings (including whether the product must be designed for an end-to-end connection)," the brief said.

The importers also argued that Commerce ignored evidence that the subject merchandise needs to be designed to use a "butt weld" welding method for permanent connection to another adjoining pipe, which their outlets don't have. "As we explained when Vandewater previously made a similar assertion, the absence of an explicit and comprehensive discussion on each and every piece of evidence or argument raised by the interested parties does not satisfy the high burden to rebut that presumption, nor justify a remand to Commerce on procedural grounds," the brief said.