Recent Scope Disputes Add Clarity for 'Finished Merchandise' Exemption From Aluminum Extrusions Duties

The Court of International Trade had in late 2014 ordered Commerce to reconsider two scope rulings on the “finished merchandise” exemption. In cases involving mop frames and handles imported by Rubbermaid (see 14092420) and straightedges imported by Plasticoid (see 1411280009), the court took issue with the agency’s position that importers of goods consisting of 100% aluminum extrusions cannot use the exemption, even if they are imported in final finished form. According to CIT, Commerce improperly used language from a separate exemption for “finished goods kits,” which requires non-extruded aluminum parts, to read the same requirement into finished goods.

Commerce filed a brief in response to the CIT that continued to find goods made entirely of extruded aluminum are ineligible for the finished merchandise exemption, but changed its justification (see 1502090056). The scope of the order exempted “finished merchandise containing aluminum extrusions as parts,” which implies that there must be non-extruded aluminum parts as well to qualify for the exemption, said Commerce in the brief. It has used that reasoning ever since, including in two recent scope rulings on products imported by IKEA (see 1505050017).

The Rubbermaid and Plasticoid cases appear to have fizzled out without a debate over Commerce’s new position. CIT dismissed the Plasticoid case on April 3 after the company dropped its challenge altogether following a change in ownership. Meanwhile, Rubbermaid told the court in early April that it will not oppose Commerce’s brief, after the agency reversed course and found Rubbermaid’s product exempt from duties. While Rubbermaid's lack of opposition doesn't mean CIT is bound to rubber stamp Commerce's decision, without opposition it is more likely that the Court will affirm, said a trade lawyer.

The past year of scope disputes has begun to clarify the scope of an order that has been the subject of countless scope rulings. “I think we are starting to understand the scope of the scope,” said Jeff Henderson, director of operations at the Aluminum Extruders Council, a trade group made up largely of U.S. manufacturers that facilitated the filing of the original request for AD/CV duties in 2011. “In recent decisions, we’re starting to see some consistencies.”

“Products that are 100% extruded aluminum are clearly covered by the scope, and do not satisfy the final finished product exception,” said Robert DeFrancesco of Wiley Rein, which represents domestic aluminum extrusions manufacturers in several trade cases. “You don’t have to look much further than the examples in the scope, fence posts, heat sinks, those are complete products as far as that production process is concerned, yet they’re expressly covered and do not satisfy the final finished product exception.”

That it has taken so long for Commerce to focus on the actual language of the “finished merchandise” exemption is “extraordinary,” said one lawyer who represents aluminum product importers. By conflating its definitions of the finished merchandise and finished goods kits exemptions, Commerce “confused a lot of people,” and possibly even themselves, said the lawyer. By eliminating that confusion, Commerce has made it more difficult for importers to assert products made fully of aluminum extrusions are eligible for the finished merchandise exemption, although there still may be some ambiguity for finished goods that are entirely extruded aluminum but include multiple parts, he said. The order covers extruded aluminum products that have undergone a multitude of processes, including milling, coating, polishing, anodizing, and powder coating, among others. “It’s pretty broad,” he said.

That breadth may come back to bite domestic manufacturers after next year, when Commerce and the International Trade Commission begin a five-year sunset review of aluminum extrusions duties, said the lawyer representing aluminum product importers. To keep the duties in place, domestic manufacturers will have to show that an industry consisting of such a broad classification of products is injured, he said. If not, the orders will be revoked. However, the number of HTS numbers covered by the scope has gone from 15 when the ITC first found injury in 2011 during the original investigation to 123 as of late April. “No one investigated whether industry producing many of the products that have been subject to scope determinations,” he said. “I gather that they simply don’t make these products in the United States.”

“What in the world is the ITC going to consider the industry for injury purposes?” said a second trade lawyer who represents importers of aluminum products. “It's like an antidumping order on steel that covers everything made of steel,” he said. “There are so many things made of extruded aluminum that are being found to be within the scope.”

The lawyer representing domestic manufacturers disagreed that the sunset review will be an obstacle to keeping the duties on aluminum extrusions in place. “The ITC’s original investigation understood that the scope covered extrusions and fabricated extrusions incorporated into subassemblies and they collected data on those products,” said DeFrancesco, who also pointed out that HTS numbers are informational only and not used to define the scope. “The ITC collected production and shipment data on extrusions in all various end uses,” he said. "These products were all part of the ITC’s injury analysis. We would expect the ITC to continue to include this information in the sunset review.”

The representative of the domestic trade group at the heart of the original extrusions case also disagreed. “The only thing that saved this industry from utter collapse is these orders as written,” said Henderson. “It is the lynchpin that keeps the domestic industry with a fighting shot.” The relief provided by the duties allowed U.S. manufacturers to respond with “unprecedented” capital investment in plant and equipment, he said. “If the orders were in any way removed and those barriers were demolished, this industry would go right back where it was before against unfair and subsidized trade, and it would be destroyed,” said Henderson. Any collapse of the U.S. aluminum extrusions industry would also injure sectors that depend on U.S. manufacturers in their supply chains, including automakers, construction and renewable energy, he said.

Meanwhile, other cases are currently under consideration by CIT that could still upset Commerce’s finished merchandise definition. Domestic manufacturers are fighting Commerce’s decision that subassemblies of larger goods can qualify as exempt finished merchandise, according to DeFrancesco. Also, Ford Atlantic filed a CIT complaint on May 4 challenging a scope ruling that found its wall standards for retail shelving and displays are not eligible for the finished merchandise exemption (see 1503090058). According to Ford Atlantic, by ignoring steel fasteners to find the wall standards were wholly aluminum extrusions, Commerce is still using the “finished goods kits” language to define finished merchandise.