CAFC Questions Whether Quartz Surface Product Fabricators Are Part of Domestic Industry

Chief Judge Kimberly Moore at the U.S. Court of Appeals for the Federal Circuit, during Nov. 3 oral argument, questioned plaintiff-appellant M S International's (MSI's) position that the Commerce Department failed to include quartz surface product (QSP) fabricators as part of the domestic industry for quartz surface products when initiating the antidumping and countervailing duty investigations on QSPs from India (Pokarna Engineered Stone Limited v. United States, Fed. Cir. #22-1077).

Moore employed an analogy to cookies. If a bakery makes a cookie, then a child crumbles up the cookie, would the child be considered a producer of the cookie, the judge asked. In reply, Jonathan Stoel, counsel for MSI, said that in this case, yes, the child would be considered a producer of the cookie. Stepping away from the analogy, Stoel argued that the statute does not permit Commerce to label producers as responsible for production processes that created the subject goods then exclude these companies from the domestic support question via a "production-related activities" test.

"The problem for me is I don’t see that the people who are participating in creating the fabricated quartz tops are necessarily producers of the fabricated quartz," the judge said. "I still think it still might be the stone suppliers, and that’s where we have a fundamental problem because the statute doesn't define producers, and that’s where it kind of feels like maybe the deference should go to the government to figure out a reasonable test to sort that through because it’s not immediately self-evident on how to do it."

Commerce requires that producers representing over 25% of domestic production back petitions for AD/CVD cases prior to initiation, but the statute is silent on the definition of "producers." MSI claims that Commerce abused its discretion by excluding fabricators from its definition of "producers," for the sake of determining proper industry support to initiate the AD/CVD investigations.

The Court of International Trade originally held that the Federal Circuit and the CIT have previously ruled that Commerce is afforded Chevron deference in regard to how it determines which companies are "producers" of the merchandise in question. Commerce decided to use the "sufficient production-related activities" test, which employs a six-factor test to find if a company has enough production-related activities to qualify as a domestic producer (see 2110080035). The court said that MSI failed to point to any basis on which the court could find that Commerce's interpretation of who is a producer is unreasonable.

Taking to the Federal Circuit, MSI argued that Commerce was wrong to drop fabricators from the industry support determination since "fabricated QSP is part of both the domestic like product and the scope of the Investigations" (see 2112290047). MSI said that the statute lays out two clear exceptions to when domestic like product producers should be barred from the standing calculation but that Commerce did not invoke either in this case. Commerce and the petitioner, Cambria, replied that Commerce could ignore the views of fabricators since they should not be considered producers of the domestic like product.

At oral argument, Luke Meisner, counsel for Cambria, employed his own analogy, likening the situation to cake. Meisner said that if one friend mixes the ingredients, pours them into a pan, then sticks it into the oven, and another friend comes along, cuts it up and serves it, the second friend would still not be deemed the producer of the cake. Despite a quip from Moore that Meisner would still claim credit for the cake while only being the one to cut it, Meisner said that, nevertheless, the fabricators are not producers. Commerce had to draw the line on who is and isn't a producer to start the investigations, and then MSI collected a group of fill-in-the-blank declarations from fabricators saying they oppose the petition to muck things up.

Joshua Kurland, representing DOJ, also fielded questions from the Federal Circuit, arguing that there is nothing significant about the fact that the fabricated slabs were included in the domestic like product. If this were not the case and just core slabs were included in the scope of the order, industry players would just import fabricated slabs and completely undercut the purpose of the AD/CVD orders. He said that it is common practice to include a product in the scope of the AD order without parties that conduct processing steps on those items to be considered producers.