Trade Court Says Commerce Legally Excluded Plastic Shelf Dividers From AD/CVD Orders on Flexible Magnets

The Commerce Department legally excluded importer Siffron's plastic shelf dividers from the antidumping and countervailing duty orders on raw flexible magnets from China, the Court of International Trade ruled in a Sept. 26 opinion. Judge Jennifer Choe-Groves said that Commerce reasonably determined that the scope language and the (k)(1) sources, including prior scope rulings and a report from the International Trade Commission, established that the dividers didn't belong in the scope of the orders.

The judge also agreed with the government's contention that Commerce didn't actually carry out a (k)(3) analysis but merely responded to a proposal from petitioner Magnum Magnetics Corp. to conduct a (k)(3) analysis. The agency reasonably said a (k)(3) analysis was unneeded given the conclusion taken from the scope language and the (k)(1) sources, the opinion said.

While Commerce initially included Siffron's plastic shelf dividers under the scope of the orders pursuant to the plain meaning of the scope language, the agency ultimately excluded the products based on two key prior scope rulings, record evidence and language from the ITC investigation. In so ruling, Commerce distinguished between flexible and unflexible magnets, finding that flexible ones are within the scope and that unflexible ones fall outside of it. Magnum Magnetics said the orders do not expressly or impliedly exclude flexible magnets bonded to rigid materials, as is the case with Siffron's products.

Choe-Groves touched off her discussion of the case by ruling that Commerce had the discretion to consider the (k)(1) sources when determining whether the scope language plainly spoke to the inclusion or exclusion of Siffron's dividers "without first characterizing the existence of ambiguity as a condition precedent." The judge then turned to a discussion of the (k)(1) factors themselves.

Commerce considered the ITC's report, which said that a flexible magnet can be twisted or bent without losing its magnetic properties. Magnum Magnetics said the agency's analysis is "logically incoherent" and does not comport with the ITC's finding since Commerce said that an item can't be flexible if it can't be twisted or bent without breaking. The U.S. said this reading of the ITC report is too narrow, adding that its analysis only focuses on the loss of magnetic properties and doesn't focus on the functional flexibility of the magnet once attached to the shelf divider.

The court ruled that Commerce's consideration of the ITC report was "reasonable" since it aided the agency in interpreting whether the dividers were excluded from the orders' scope when the magnets were rendered functionally unflexible after affixation.

Commerce also considered two prior scope rulings in making its decision: a ruling on InterDesign's retail hook and paper towel magnets and one on Medical Action Industries' raw flexible magnets. The agency said that in the InterDesign ruling, Commerce previously said that the bonding of a raw flexible magnet to a functionally unflexible component rendered the flexible magnet outside the scope of the orders. Then, based on the Medical Action Industries ruling, Commerce said that Siffron created a good that was "substantially different" than the subject raw flexible magnet when it added another material, the plastic blade, to the raw flexible magnet.

While Choe-Groves said that Magnum Magnetics' arguments were not waived by way of failure to raise them administratively, the judge ruled that Commerce properly considered the two prior scope rulings. Choe-Groves said that she did not agree with Magnum Magnetics that Commerce added a new flexibility requirement by considering the InterDesign ruling since the first sentence of the scope specifies that the subject products must be flexible. The interpretation of the InterDesign ruling is reasonable since a product rendered "functionally unflexible" is no longer flexible and thus outside the scope.

The judge said it was similarly reasonable to find that the addition of another material to a raw flexible magnet can render the product substantially different from a raw flexible magnet and thus out of scope. This interpretation was taken from the Medical Action Industries ruling. Choe-Groves added that the agency properly considered the evidence, including photographs and schematics of different types of shelf dividers.

(Magnum Magnetics Corp. v. United States, Slip Op. 23-140, CIT #22-00254, dated 09/26/23; Judge: Jennifer Choe-Groves; Attorneys: Jeremy Dutra of Squire Patton for plaintiff Magnum Magnetics; Claudia Burke for defendant U.S. government; Kristen Smith of Sandler Travis for defendant-intervenor Fasteners for Retail, dba Siffron)