CAFC Questions Limits of Finished Merchandise Exclusion in Aluminum Extrusions AD/CVD Scope Case

U.S. Court of Appeals for the Federal Circuit judges questioned the limits of the finished merchandise exclusion in antidumping and countervailing duty orders during Jan. 9 oral argument in a case over whether solar panel roof mounts fall within the scope of the AD/CVD orders on aluminum extrusions from China. While Judges Pauline Newman, Raymond Chen and Tiffany Cunningham questioned plaintiff-appellant China Custom Manufacturing's contention that its solar mounts are a finished product even though they are incorporated into a larger downstream product, the judges further probed the U.S. claims against this point with equal vigor (China Custom Manufacturing v. U.S., Fed. Cir. #22-1345).

The case concerns CCM's scope request for its RockIt 3.0 solar roof mountings. Made with aluminum extrusion parts, the products are used to mount solar panels on a roof along with other parts of the plaintiffs' EcoFasten RockIt System 3.0. Since the AD/CVD orders' issue date in 2011, Commerce's interpretation of the scope of the orders has drastically evolved. Commerce originally found the roof mounts qualified for the finished merchandise exclusion because they required no further assembly. However, during that same year, the agency revised the way it finds whether a good qualifies as finished merchandise, requiring it to include all the downstream products.

Two Federal Circuit cases shored up this interpretation, eventually determining that a good found to be a subassembly cannot qualify for the finished merchandise exclusion. It was under this standard that Commerce made its scope ruling now subject to litigation. The plaintiff-appellants conceded that, as the interpretation stands now, their products constitute a subassembly and thus do not qualify for the finished merchandise exception to the extrusion orders. Instead, they challenged the interpretation of the exclusion itself at the Court of International Trade. The trade court upheld Commerce's decision to not exclude the solar panel roof mounts (see 2112070031).

At the Federal Circuit, the parties took aim at the central premise of whether the solar panel mounts constitute finished merchandise. Chen highlighted the "philosophical question" underpinning the case, which asks at what level a good is a finished product or component of a larger whole. George Tuttle, counsel for China Custom Manufacturing and Greentec Engineering, said that since the mounts require no further processing to become a functioning mount, the good is a finished product even though it later becomes part of a larger item, similar to how a door is a finished product yet later becomes part of a house.

Chen questioned the appellants' position, declaring that he does not believe it is consistent with the Federal Circuit's precedent in the 2015 Shenyang v. U.S. decision in which the court said that curtain wall units were not finished merchandise because they were part of a downstream product, a curtain wall. "You have to explain to me how we can get around Shenyang 2015 because right now, at this moment, I don't see how we can," Chen said. Tuttle countered by arguing that the Shenyang decision is distinct given the nature of the solar panel mounts and curtain walls. The curtain walls are not defined by units but rather the entire length of the wall, and the solar panel mounts are "no different than the examples provided" in the scope of the orders involving doors and windows, Tuttle said.

"The point in Shenyang was trying to ... look at the imported item, a curtain wall unit, and figure out what it's intended for, and what it's intended for was to use in combination with other curtain wall units to make a curtain wall," Chen said. "That was the intended use of the curtain wall unit, and that's why it could only be regarded as a part of a finished product, not the finished product itself. Same here with your mounts. What is the intended use of your mounts? It's intended to be used with a whole bunch of other units to create the EcoFasten RockIt mounting system, and in combination, they serve as a functional unit, and that's the purpose of your little component mounts. For that reason, I don't see how we can think differently about your little solar mounts as opposed to the curtain wall units in Shenyang 2015."

The government's position also faced scrutiny when DOJ's Jaime Shookman argued that the scope's plain language is that if an importer has a part whose sole function is to be included in a larger system, that good is within the scope of the orders. Newman asked why solar panels themselves are excluded from the orders, but their mounts are not if one cannot be used without the other. Shookman did not provide a clear answer on the question, declaring that the mount has more consumptive value on its own and reiterating the point that Shenyang 2015 finds that a product that is part of a bigger downstream good is included in the order.

Upon further questioning, Shookman said that finding whether a good is included in a larger downstream product is not a bright-line rule given that many goods could then be found to be included in a larger product (e.g., a door in a house or even a curtain wall in a building). While Chen suggested that considering if a product is part of something bigger may not be the proper analysis for the finished merchandise exception, Shookman said the functional analysis concerns whether a product's sole purpose is to become a part of a downstream product and has consumptive value outside of that purpose. "The court doesn't need to decide the bright-line rule in this case," Shookman said. "The product in this case is only intended for incorporation in a downstream product and falls within the scope of the order."