Commerce Erred in Finding 2-Ply Within Scope of Plywood AD/CVD Orders, Plaintiffs Argue at CIT

A Commerce Department scope ruling improperly found that two-ply hardwood plywood falls under the antidumping and countervailing duty orders on hardwood plywood from China, plaintiffs Vietnam Finewood, Far East American and Liberty Woods said in an Aug. 16 motion at the Court of International Trade (Vietnam Finewood Company Ltd. v. U.S., CIT #22-00049).

Commerce imposed the AD/CVD orders in January 2018. In August of that year, CBP initiated an Enforce and Protect Act investigation on Finewood and its U.S. customers, including FEA and Liberty. CBP then made a scope referral to Commerce to determine whether the two-ply cores further processed in Vietnam were within the scope of the orders. In January 2022, Commerce issued its final determination, which found that Finewood’s two-ply panels were within the scope based on the ambiguous scope language and that the two-ply panels were not substantially transformed in Vietnam.

Finewood, FEA and Liberty complained to CIT in February that "Commerce’s conclusion that two-ply is covered by the Orders is not reasonable in light of the clear scope language defining the subject merchandise as consisting of a minimum of three plies" (see 2202220052).

In their Aug. 16 motion, the plaintiffs argued that Finewood’s two-ply panels are intermediate raw material products and are completely different from finished plywood. "Finewood never used only a single two-ply as the core to produce plywood," the motion said. "Finewood glued multiple two-ply panels to form the core platform before applying the face and back veneers or did not consume the two-ply at all, producing plywood from individual face, back and core veneers," the company said. Finewood said it never sold any two-ply panels to the U.S., and only sold finished hardwood plywood consisting of at least three plies. The company argued that hardwood plywood is sold on the basis of grade, type of core, overall panel thickness, face species and type of glue used. In contrast, the two-ply panels that Finewood purchased have "none of the essential characteristics of finished hardwood plywood and can only reasonably be characterized as semi-finished raw materials."

Commerce also abused its discretion by finding ambiguity in the scope language where there was none, said InterGlobal, a U.S. plywood importer, in a separate motion for judgment (see 2208170040). CBP and Commerce engaged in a "transparent ruse" designed to allow CBP to claim that the specific two-ply panels used by Finewood constituted “covered merchandise," InterGlobal said. The Federal Circuit has emphasized the general rule that “Commerce cannot interpret an antidumping order so as to change the scope of that order, InterGlobal said, yet Commerce is "unilaterally changing the scope ... [or] ... interpreting the Orders in a manner contrary to their plain language."

The Finewood motion argued that if the court agrees that the scope language confirms that the merchandise must include at least three plies and does not cover two-ply panels, then a further analysis of Commerce’s substantial transformation criteria is unnecessary, stating that it has found no examples in which either Commerce or the courts ever conducted a substantial transformation analysis on an upstream product found to be outside the scope of the relevant orders. "If the out-of-scope upstream product is not substantially transformed by downstream processing, then the downstream product is still out of scope," it said.

The two-ply panels actually used by Finewood were intermediate materials that underwent a substantial transformation, InterGlobal said in its own motion. The two-ply panels sourced from China possess none of the qualities that Coalition for Fair Trade in Hardwood Plywood members, the International Trade Commission or Finewood and its customers report as "decisive characteristics of plywood," InterGlobal said.