Federal Circuit Says Quartz Fabricators Are Not Producers, OKs AD/CVD Initiation

The Commerce Department properly found that it had enough industry support to kick off the antidumping and countervailing duty investigations into quartz surface products from India, the U.S. Court of Appeals for the Federal Circuit held in a Jan. 5 opinion. Upholding the Court of International Trade's ruling, Judges Kimberly Moore, Alan Lourie and Sharon Prost ruled that Commerce permissibly found that the term "producer" did not include quartz surface product fabricators and that the agency backed its finding that fabricators are not producers with substantial evidence via its six-factor production-related activities test.

"The Federal Circuit’s rejection of [appellant M S International's] standing challenge is a huge victory for Cambria and the domestic industry," said Luke Meisner, counsel for Cambria Co. "In addition to MSI’s challenge to orders against" quartz surface products from India, "MSI had also filed standing challenges to the orders against" quartz surface products from China and Turkey. "If MSI had succeeded in these challenges, it would have meant that the orders against all three countries would be revoked or at least have been in serious jeopardy. Because of the Federal Circuit’s decision today, the orders and relief against all three countries will remain in place."

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." Plaintiff-appellant M S International claimed that, among other things, 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 trade 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.

The Federal Circuit ultimately upheld Commerce's determination to exclude fabricators from the definition of producers, though it disagreed that reliance on Chevron deference was needed in this case. While the statute is in fact silent on the definition of the term "producers," the appellate court said that its precedent already interpreted this term in the Eurodif v. U.S. decision. This decision found reasonable the agency's definition of producer as an entity with enough production-related activities such that it has a stake in the domestic industry.

"We find no error in Commerce’s use of the sufficient production-related activities test, and we further hold that the use of the test was reasonable in determining the definition of 'producer' and whether fabricators had a sufficient 'stake' in the U.S. industry to be considered producers," the opinion said.

After addressing this claim, the appellate court turned to MSI's second challenge, which declared that even if the agency could use the production-related activities test, its decision was not backed by substantial evidence since it "failed to consider evidence and to articulate a satisfactory explanation for its decision." The judges sided with the U.S. on this point, finding that petitioner Cambria's exhibits have multiple examples of differences between fabricators and producers.

"We note, as did the Trade Court, that MSI is unable to point to anything other than Commerce’s adverse finding that fabricators are not producers as evidence of Commerce’s alleged failure to consider the evidence in front of it," the opinion said. "Finally, that the Trade Court stated that Commerce could have reached an alternative finding is not sufficient to establish that Commerce’s finding was not supported by substantial evidence."

The court lastly struck down the appellant's argument that Commerce's position was "entitled to little deference" since the International Trade Commission came to the opposite conclusion in a related investigation. "We further note that there is no requirement that Commerce and ITC reach the same conclusion on the same issue," the opinion said. "In fact, we have repeatedly held that Commerce and the ITC can reach separate determinations on the same issue."

(Pokarna Engineered Stone Limited v. United States, Fed. Cir. #22-1077, dated 01/05/23, Judges Kimberly Moore, Alan Lourie and Sharon Prost. Attorneys: Jonathan Stoel of Hogan Lovells for plaintiff-appellant M S International; Joshua Kurland for defendant-appellee U.S. government; Luke Meisner of Schagrin Associates for defendant-appellee Cambria Co.)