Federal Circuit Says Commerce Rightly Found Certain Plywood Didn't Circumvent AD/CVD Orders

The Commerce Department properly found that Shelter Forest International Acquisition's hardwood plywood exports didn't circumvent the antidumping and countervailing duty orders on hardwood plywood from China, the U.S. Court of Appeals for the Federal Circuit said in a June 15 opinion. Affirming the Court of International Trade's opinion, the Federal Circuit said that the merchandise was commercially available before Dec. 8, 2016, and was thus not later-developed merchandise that circumvented the AD/CVD orders.

"We are pleased but not surprised by the CAFC’s decision affirming the Lower Court that no circumvention was taking place," Gregory Menegaz, counsel to various plaintiff-appellees, told Trade Law Daily. "Not only Shelter Forest but all the participating mandatory exporters provided sufficient evidence that the products at issue were not newly developed after the 2016 Plywood antidumping and countervailing measures were imposed. Rather, the products all existed prior to that time."

Added Bryan Cenko, counsel to other appellees: “We are pleased with the CAFC’s in depth consideration of the record evidence and confirmation of the CIT’s decision and Commerce’s amended determination.”

Judges Richard Taranto, Raymond Clevenger and Raymond Chen further rejected arguments from the Coalition for Fair Trade in Hardwoood Plywood that Commerce was right to reject a factual submission from Shelter Forest as untimely. The judges held that this was an abuse of discretion.

The case concerns an anti-circumvention inquiry on hardwood plywood that (1) had face and back veneers of radiata or agathis pine, (2) had a Toxic Substances Control Act or California Air Resources Board label certifying compliance with TSCA/CARB requirements, and (3) was made with a resin, the majority of which is composed of urea-formaldehyde, polyvinyl acetate or soy (see 2105110035). Commerce initially ruled that plywood made by Shelter Forest before the orders were issued was made with glue that wasn't primarily made with urea-formaldehyde, rejecting a letter from the exporter that contained evidence to the contrary and laying the groundwork for a finding that the plywood made with urea-formaldehyde glue was later-developed merchandise.

In its initial remand, CIT ordered Commerce to reconsider the letter, after which Commerce found that Shelter Forest did sell goods that met the characteristics of goods subject to the inquiry prior to the AD/CVD orders, resulting in a finding of no AD/CVD circumvention. This contention was upheld by CIT (see 2107210028). The Coalition for Fair Trade in Hardwood Plywood then took the case to the Federal Circuit where it argued that the letter was properly rejected as untimely.

The Federal Circuit, though, said that Commerce abused its discretion in the original proceeding by failing to notify Shelter Forest of any deficiency in its letter and to give the company a chance to remedy or explain the deficiency. The coalition argued that Shelter Forest knew or should have known that its past submissions were deficient and the level of detail needed to overcome such a deficiency.

However, the appellate court ruled that the facts undermine this position since Shelter Forest gave more information and documents over its resin than the mandatory respondents themselves. "This undercuts the notion that Shelter Forest should have known that its own materials were deficient based on Commerce’s reaction to what the mandatory respondents initially submitted," the opinion said.

Further, contrary to the coalition's arguments that Shelther Forest should have known how to fix the deficiency on its own, Commerce did not have "monolithic vision" of the type of information needed to show that the glue criteria wasn't met, the appellate court said. "Finally, to the extent the Coalition’s argument is one of harmless error, such argument fails: it is clear in this case that Commerce’s decision not to abide by § 1677m(d) was not harmless," the opinion said.

The Federal Circuit also said that substantial evidence backed the agency's decision, which relied on (1) the composition of Shelter Forest's glue which was later fortified with melamine for waterproofing and (2) the use of melamine-fortified glue in the radiata pine marketed and sold before Dec. 8, 2016. The coalition argued that the glue recipe does not refer to melamine and that Shelter Forest's documentation has contradictory information over how much melamine was added to the glue.

"But Commerce’s definition of inquiry merchandise -- the exact definition the Coalition proposed ... says nothing about the presence (or absence) of melamine in the resin, the degree to which the resin is waterproof, or the degree to which the merchandise itself is waterproof," the Federal Circuit said. "Thus, the alleged discrepancies the Coalition identifies are irrelevant and do not detract from the substantial evidence supporting Commerce’s negative determination."

(Shelter Forest International Acquisition v. United States, Fed. Cir. #21-2281, dated 06/15/22, Judges Richard Taranto, Raymond Clevenger and Rayond Chen. Attorneys: James Durling of Curtis Mallet-Prevost for plaintiffs-appellees led by Shelter Forest; Bryan Cenko of Mowry & Grimson for plaintiffs-appellees Patriot Timber Products and Taraca Pacific; Patrick Gill of Sandler Travis for plaintiff-appellee IKEA Supply; Gregory Menegaz of DeKieffer & Horgan for plaintiffs-appellees led by Far East American; Maureen Thorson of Wiley Rein for defendant-appellant)