Trade Court Says Commerce Illegally Read Ambiguity Into Scope of Plywood AD/CVD Orders

The Commerce Department wrongly said there was ambiguity in the scope of the antidumping and countervailing duty orders on hardwood plywood from China, the Court of International Trade ruled. Judge Mark Barnett, remanding Commerce's scope ruling, said the scope language and the (k)(1) sources confirm the "unambiguous" meaning of the orders' scope, which excludes two-ply panels imported from China to Vietnam.

The court also upheld Commerce's rejection of exporter Interglobal Forest's (IGF) initial and rebuttal scope comments and ordered that Vietnam Finewood Co. be dismissed from the case since the company dissolved in 2019.

“We were extremely pleased with the opinion," said Greg Menegaz, counsel for the plaintiffs. "The Court worked hard and applied common sense to find that the scope of the China Hardwood Plywood orders (AD/CVD) does not and never did include two-producers such as veneered panels. This same common sense is what importers rely on every day when they do business planning. The agency decision, now reversed, whipsawed the importers with a novel and unsupported expansion of the scope of those orders.”

Commerce imposed the AD/CVD orders in 2018 and later received a scope referral as part of an Enforce and Protect Act investigation on Finewood and its U.S. customers that began later that year. The scope referral concerned whether the two-ply cores further processed in Vietnam were within the scope of the orders. Commerce said they were because of the ambiguous scope language, and because the panels were not substantially transformed in Vietnam.

Finewood, along with Far East American, Liberty Woods and IGF sued, arguing that Commerce illegally read ambiguity into the scope (see 2212300028). Barnett agreed, sending the agency's scope ruling back. The first sentence of the orders' scope says that the merchandise under investigation is "hardwood and decorative plywood, and certain veneered panels as described below." The second sentence defines hardwood and decorative plywood as a "generally flat, multilayered plywood or other veneered panel, consisting of two or more layers or plies of wood veneers and a core, with the face and/or back veneer made of non-coniferous wood (hardwood) or bamboo."

Commerce said the scope actually covers two products, hardwood and decorative plywood and certain veneered panels, centering its scope ruling on the idea that the phrase "certain veneered panels" was ambiguous because the scope's second sentence only defined hardwood plywood. Barnett found this to be "problematic in light of applicable statutory provisions and Commerce's regulation." The law requires Commerce to include a description of the merchandise covered by the orders.

Barnett ruled that the agency "failed to address the consequences of its ambiguity determination in the context of these important considerations but took an interpretive approach which was at odds with them." The agency added that the inclusion of "certain veneered panels" would be unnecessary if the scope only includes hardwood plywood. But the judge said accepting this claim would "render the phrase 'as described below' ... superfluous" since certain veneered panels would not be described.

The court went through each of the (k)(1) sources to confirm the unambiguous nature of the scope. Barnett walked the litigants through the revisions to the proposed scope language, Commerce's preliminary investigation scope memo, the agency's product characteristics memo and the International Trade Commission report. "When read in light of the (k)(1) sources, it is clear that the scope of the Plywood Orders unambiguously covers hardwood plywood and certain veneered panels," the judge said.

The exporters also contested Commerce's rejection of parts of Finewood's comments on the preliminary scope ruling, which the agency barred from consideration due to Finewood's references to parts of the petitioner's scope comments from the investigation that were not previously included in the factual submissions. Barnet upheld these rejections. The judge also upheld Commerce's rejection of comments from IGF on the grounds that the company failed to exhaust its administrative remedies.

(Vietnam Finewood Co., et al. v. United States, Slip Op. 23-58, CIT Consol. #22-00049, dated 04/20/23; Judge: Mark Barnett; Attorneys: Gregory Menegaz of deKieffer & Horgan for plaintiffs led by Finewood; Thomas Cadden of Cadden & Fuller for consolidated plaintiff Interglobal Forest; Hardeep Josan for defendant U.S. government; and Stephanie Bell of Wiley Rein for defendant-intervenor Coalition for Fair Trade in Hardwood Plywood)