US, Petitioner Failed to Defend 'Substantial Transformation' Analysis, Tire Importer Tells CIT

Tire importer ZC Rubber America told the Court of International Trade on July 2 that the government and petitioner Accuride Corp. failed to defend the Commerce Department's "substantial transformation" analysis regarding steel truck wheels made in Thailand with either Chinese-origin rims or discs (Asia Wheel Co. v. United States, CIT # 23-00143).

ZC Rubber said in a reply brief that, contrary to the government's claims, the importer didn't argue that the "qualities, function, and origin of the Chinese disc are irrelevant to" the substantial transformation analysis and instead said the "essential character" factor of the test is "straightforward." Commerce instead centered "exclusively on the characteristics and purpose of the Chinese disc, to the exclusion of other key characteristics and the purpose of the finished truck wheel."

The importer claimed that "abundant record evidence showing that the finished truck wheel's essential character" and "end use were established in Thailand, making the finished truck wheel Thai-origin for purposes of the AD/CVD Orders." In its "essential character" analysis, Commerce "assigned no weight to several key properties of a finished truck wheel," dismissing them because a disc's "key qualities" aren't changed through the Thai processing, ZC Rubber noted.

Commerce's scope ruling said that Thai truck wheels with Chinese-origin rims or discs fall within the AD/CVD orders on Chinese steel wheels. Exporter Asia Wheel Co. and ZC Rubber sued, claiming the plain language of the orders' scope limits the duties to steel wheels made from both Chinese-origin rims and discs (see 2402140027).

In its reply to the government's and Accuride's arguments, ZC Rubber said: "unlike what the Government’s argument suggests, just because Commerce may not be precluded from considering certain facts related to the Chinese disc does not mean that it has done so in a reasonable and lawful manner." In fact, the U.S. and Accuride run "headlong" into the trade court's rulings in two cases brought by Peer Bearing Co.-Changshan regarding a scope decision on tapered roller bearings.

In those cases, the court said Commerce's findings that processing in Thailand imbued no changes to the mechanical or physical properties of the merchandise was unsupported since "manufacturing operations, assembly, and finishing processes performed in Thailand on cups and cones" changed the chemical and mechanical nature of the cup and cone. In the Peer Bearing cases, the court said Commerce couldn't lawfully have found that any single part made in China had the essential character of the goods at issue.

The decisions "rejected Commerce’s failure to consider the essential character of the imported product as such, as opposed to the Chinese components, and in particular, its failure to acknowledge the importance of the processes performed in Thailand and their effects on the physical characteristics and end use of the finished product, not the Chinese components," the brief said. The decision here "suffered from the same flaws," the importer argued.

ZC Rubber also addressed Accuride's claim that the importer argued that Commerce is limited to analyzing the imported good in a vacuum in its country-of-origin analysis. The importer said that instead it claimed that "Commerce cannot ignore the fundamental fact that the finished wheel in the condition in which it is imported is significantly different from the Chinese disc in critical aspects, which is a result of complex and extensive Thai production processes."