Commerce Illegally Read Ambiguity Into Hardwood Plywood AD/CVD Scope Language, Exporters Tell CIT

The Commerce Department illegally expanded the antidumping and countervailing duty orders on hardwood plywood from China by "reading ambiguity into the scope language when there is none," plaintiffs Vietnam Finewood, Far East American and Liberty Woods International argued in a Dec. 29 reply brief at the Court of International Trade. The scope language clearly states there is only one category of in-scope product -- hardwood and decorative plywood -- although the U.S. says there are two general types -- hardwood and decorative plywood and certain veneered panels -- though the latter category is "not in the scope language at all," the plaintiffs said (Vietnam Finewood Company Limited v. U.S., CIT Consol. #22-00049).

Commerce originally imposed the AD/CVD orders in January 2018. Later that year, CBP initiated an Enforce and Protect Act investigation on Finewood and its U.S. customers, ultimately making a scope referral 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 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 and the remaining plaintiffs appealed to the trade court, arguing "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 an August motion, Finewood argued its two-ply panels are intermediate raw material products and completely different from finished plywood. Finewood said it never sold any two-ply panels to the U.S., only finished hardwood plywood consisting of at least three plies.

In their reply brief, the plaintiffs said the government illegally read ambiguity into the scope. In the orders' scope, the term "certain veneered panels" is referenced as "other veneered panel" and defined as a good "consisting of two or more layers or plies of wood veneer and a core, with the face and/or back veneer made of non-coniferous wood (hardwood) or bamboo." Using the government's logic, if the term "other veneered panels" were not used to reference "certain veneered panels," the use of "certain veneered panels as described below" would be completely unnecessary, the brief said.

"Defendant would have the Court to agree that the mere reference to 'certain veneered panels' is a separate category of in-scope merchandise from hardwood plywood, not defined anywhere in the scope language, and therefore is ambiguous. However, drafting the scope language in general terms (and thus creating some ambiguity) cannot be confused with Defendant’s argument that Commerce completely failed to define one of the two categories of in-scope merchandise," the brief said. "The latter, if true, runs afoul of the fundamental principle of fairness that guides the interpretation of a scope language."

The plaintiffs further touched on whether substantial evidence backs Commerce's substantial transformation test, claiming that the issue is moot if the court finds two-ply is not within the orders. The plaintiffs said the class or kind criterion "should be given no weight" based on the case's record, even though Commerce said that where the upstream and downstream goods are within the same class, the agency weighs against a finding of substantial transformation. "However, Commerce’s analysis of this criterion amounts to nothing more than 'we decided they were the same, therefore they are the same,'" the brief said.