Power Train Components, Inc. v. United States

911 F. Supp. 2d 1338, 2013 CIT 67, 2013 WL 2350183, 35 I.T.R.D. (BNA) 1511, 2013 Ct. Intl. Trade LEXIS 67

• Court: United States Court of International Trade
• Decided: May 29, 2013
• Docket: Slip Op. 13-67; Court 11-00153
• Status: Published

Opinion

OPINION & ORDER

CARMAN, Judge:

Plaintiff Power Train Components, Inc. (“Plaintiff’ or “PTC”) contests the scope ruling by the United States Department of Commerce (“Commerce”) that its wheel hub assemblies are within the scope in the antidumping duty order covering tapered roller bearings (“TRBs”) from the People’s Republic of China (“China”). Tapered Roller Bearings from the People’s Republic of China: Final Scope Ruling on New Trend Engineering Ltd. ’s Wheel Hub Assemblies, Memorandum from Wendy Franlcel, Director, Office 8, to Gary Taverman, Acting Deputy Assistant Secretary for Antidumping and Countervailing Duty Operations (Apr. 18, 2011) (“Final Scope Ruling ”), A/R 1 48; Tapered Roller Bearings and Parts Thereof, Finished or Unfinished, From the People’s Republic of China, 52 Fed.Reg. 22,667 (June 15, 1987) (“TRB Order”). Pursuant to Plaintiffs motion for judgment on the agency record, the Court sustains Commerce’s Final Scope Ruling.

Background

The antidumping duty order scope covers tapered roller bearings from China. See TRB Order, 52 Fed.Reg. at 22,667. The current scope description, as of the last administrative review, is:

[ijmports covered by the order are shipments of tapered roller bearings and parts thereof, finished and unfinished, from the PRC; flange, take up cartridge, and hanger units incorporating tapered roller bearings; and tapered roller housings (except pillow blocks) incorporating tapered rollers, with or without spindles, whether or not for automotive use. These products are currently classifiable under Harmonized Tariff Schedule of the United States (“HTSUS”) item numbers 8482.20.00, 8482.91.00.50, 8482.99.15, 8482.99.45, 8483.20.40, 8483.20.80, 8483.30.80, 8483.90.20, 8483.90.30, 8483.90.80, 8708.99.80.15 and 8708.99.80.80. Although the HTSUS item numbers are provided for convenience and customs purposes, the written description of the scope of the order is dispositive.

Tapered Roller Bearings and Parts Thereof, Finished or Unfinished, from the People’s Republic of China, 76 Fed.Reg. 3,086, 3,087 (Jan. 19, 2011) (“Final Results”). 2

On March 5, 2010, New Trend Engineering Ltd. (“New Trend”) submitted a request for a scope determination that its imports of certain wheel hub assemblies from China are outside the scope of the TRB Order. See New Trend Scope Request (Mar. 5, 2010) (“Scope Request”), A/R 1. Defendant-Intervenor The Timken Company (“Timken”) opposed the scope request as .the petitioner in the original antidumping investigation. See Def.-Int. the Timken Company’s Opp’n to the Mot. for J. on the Agency R. of PI. Power Train Components, Inc. (“Def.-Int.’s Opp’n”) at 6, ECF No. 34. On June 15, 2010, Commerce issued a notice stating that it would open a scope inquiry pursuant to 19 C.F.R. § 351.225(e). Def.’s Opp’n to Pl.’s Mot. for J. upon the Agency R. (“Def.’s Opp’n”) at 5, ECF No. 36 (citing Notice of Initiation of Scope Inquiry (June 15, 2010) (“Scope Initiation”), A/R 8). On July 14, 2010, Plaintiff submitted its notice of appearance as an interested party and importer of like merchandise. Brief of PL Power Train Components, Inc. in Supp. of Its Mot. for J. on the-Agency R. (“PL’s Mot.”) at 4, ECF No. 28 (referencing PTC Comments to Scope Inquiry (July 14, 2010), A/R 15). 3

New Trend’s, wheel hub assemblies include “several varieties of generation three wheel hub assemblies that incorporate [tapered roller bearings (‘TRBs’) ]” which “are designed for front wheel use.” Id. at 5 (internal citations omitted). All the wheel hub assemblies

incorporate] two non-removable tapered roller bearings in an inner race and cup that is machined into the unit’s flange, an outer race machined into the assembly forging, and mounting studs for attachment of the assembly, to an automobile. The two machined bearing races are characteristic of products known in the industry as generation three wheel hub assemblies. The generation three wheel hub assemblies subject to the request including [sic] front wheel models both with a splined spindle and without; and both with antilock braking (“ABS”) sensors and without.

Id. at 8 (internal citations omitted). . ■

Commerce divided the subject wheel hub assemblies into two groups — with and without ABS sensors — and analyzed each group individually. Commerce determined that wheel hub assemblies without ABS elements are within the scope pursuant to 19 C.F.R. § 351.225(k)(l) (“(k)(l) Factors”), 4 meeting the “description of wheel hub units and tapered roller housings included in the scope of the Petition, the ITC Report, and the .Order.” Id. at 4 (citing Tapered Roller Bearings from the People’s Republic of China: Preliminary Scope Ruling on New Trend Engineering Ltd. ’s Wheel Hub Assemblies, Memorandum from Wendy Frankel, Director Office 8, to Christian Marsh, Deputy Assistant Secretary for Antidumping and Countervailing Duty Operations at 12 (Dec. 18, 2010) (“Preliminary Scope Ruling”), A/R 30). Commerce noted that the International Trade Commission (“ITC” or “Commission”) specifically identified “wheel hub units,” which are the same as wheel hub assemblies, 5 as part of the scope. Def.’s Opp’n at 3 (citing Tapered Roller Bearings and Parts Thereof, and Certain Housings Incorporating Tapered Rollers from Hungary, the People’s Republic of China, and Romania, USCIT Publ. 1983, Inv. Nos. 731-TA-3M, 3kh, and Sf.5 (final) at A-6 (June 1987) (‘ITC Report ”), A/R 4, Attach. 2.) Commerce then determined that wheel hub assemblies with ABS elements are within the scope pursuant to 19 C.F.R. § 351.225(h)(2) (“(k)(2) Factors”). 6 Pl.’s Mot. at 4.

Plaintiff challenges Commerce’s scope determinations and explains that the wheel hub assemblies “are not mere tapered roller housings, or tapered roller housed bearings,” but “they also incorporate enough additional structures and functions that they do not constitute tapered roller housings or housed bearings” thereby removing them from the TRB scope. Id. at 12 (citations omitted) (emphasis in original).

Defendant-Intervenor Timken, who was petitioner in the underlying investigation, supports Commerce’s scope determinations, advancing the argument that it listed wheel hub assemblies as “part of the scope” in its underlying petition. Def.Int.’s Opp’n at 4 (citing Antidumping Duty Petition: Tapered Roller Bearings, Rollers and Other Parts from Japan, Italy, Yugoslavia, Romania, Hungary, The People’s Republic of China at 9-10 (Aug. 25, 1986) (“Petition”), A/R 4, Attach. 1).

Standard of Review

The Court has jurisdiction pursuant to 28 U.S.C. § 1581(c) (2006). For scope determinations, the Court sustains determinations, findings or conclusions of Commerce unless they are “unsupported by substantial evidence on the record, or otherwise-not in accordance with law.” 19 U.S.C. § 1516a(b)(l)(B)(i). The possibility of drawing two inconsistent conclusions from the evidence does not prevent Commerce’s finding from being supported by substantial evidence. Consolo v. Fed. Marit. Comm’n, 383 U.S. 607, 620, 86 S.Ct. 1018, 16 L.Ed.2d 131 (1966). “Substantial evidence” means “such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.” Consol. Edison v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, 83 L.Ed. 126 (1938).

Discussion

It is well-established that the cornerstone in any scope determination is the language of .the order itself. Walgreen Co. of Deerfield, IL v. United States, 620 F.3d 1350, 1357 (Fed.Cir.2010) (citing Duferco Steel, Inc. v. United States, 296 F.3d 1087, 1097 (Fed.Cir.2002)). Commerce may not impermissibly expand the scope of the order. Id. at 1354. Issues regarding scope arise because “the descriptions of subject merchandise contained in [Commerce’s] determinations must be written in general terms.” 19 C.F.R. § 351.225(a). Accordingly, scope inclusions are written in broad terms and then specific exclusions are carved out from the general terms. Some exclusions are qualified and some are not.

In considering whether a particular product is within the scope of an order, Commerce will take into account the descriptions of the merchandise contained in the petition, the investigation, and the determinations of Commerce and the ITC. Final Scope Ruling at 3 (citing 19 C.F.R. § 351.225(k)(l)). If it determines that these descriptions are dispositive, then Commerce will issue a final scope ruling. Id. But if the descriptions are not dispositive, then Commerce will consider the factors set forth in 19 C.F.R. § 351.225(k)(2). Id. (citing 19 C.F.R. § 351.225(e)).

I. Administrative Review

Commerce noted that “the scope’s language in the [TRB] Order (i.e., tapered roller, housings with spindles for automotive use) is broad and includes multiple products that have varied applications.” Final Scope Ruling at 7; see Petition at 10 (“In all, there are over 160 types in approximately 26,000 bearing combinations .... This petition covers all types of TRBs (including self-contained bearing packages).”). While admitting that “the scope [language] does not explicitly list ‘wheel hub assemblies,’ ” Commerce found “that New Trend’s wheel hub assemblies without ABS elements are tapered roller housings in that the outer flange is a flanged housing that incorporates TRBs,” which are covered by the scope of the TRB Order. Final Scope Ruling at 5. In contrast, while admitting that the subject products “incorporate tapered roller housings and housed bearings,” Plaintiff asserted that its wheel hub assemblies “also incorporate enough additional structures and functions that they do not constitute tapered roller housings or housed bearings.” Pl.’s Mot: at 12 (emphasis in original) (internal citations omitted). Commerce considered Plaintiffs argument and determined that

wheel hub units with additional features and functions retain the essential function of wheel hub units covered by the Order; that is, they continue to reduce friction. Thus, the additional features found on wheel hub units are engineering and design variations which do not alter the fundamental nature of the subject TRB.

Preliminary Scope Ruling at 7.

New Trend’s scope inquiry involved various subject wheel hub assemblies, but Commerce divided the subject wheel hub assemblies into two categories for scope determination purposes. New Trend’s wheel hub assemblies are described as follows:

Although there are several different types of wheel hub assemblies that are subject to this scope request, all of them incorporate two nonremovable TRBs in an inner race and cup that are machined into the unit’s flange, an outer race machined into the assembly forging, wheel and brake “pilots” for aligning the wheels and brake rotors, and mounting wheel studs. The majority of the assemblies consist of a flanged outer hub with two TRBs, into which has been pressed a flanged spindle having a splined inner surface and mounting .studs. The wheel hub assemblies are “sealed for life,” “greased at factory,” and “the bearing preload is set at factory.” ... Certain of the products do not have a splined spindle and certain of the products include ABS capability. New Trend’s wheel hub assemblies may be categorized into the following types of merchandise: (1) splined and nonsplined without ABS elements and (2) splined and non-splined with ABS elements.

Final Scope Ruling at 4 (internal citations omitted). Accordingly, given the broad language of the scope and the apparently indiscernible characteristics of TRB incorporation into the subject product, Commerce initiated a formal scope inquiry pursuant to 19 C.F.R. § 351.225(e) and received comments from New Trend, Plaintiff and Defendant-Intervenor. See Def.’s Opp’n at 5. Because there is no objection to Commerce’s division of the subject products, the Court’s review will follow Commerce’s trajectory, first looking at wheel hub assemblies without ABS under the ambit of the (k)(l) Factors, and then looking at the wheel hub assemblies with ABS under the ambit of the (k)(2) Factors, checking for support on the record for Commerce’s scope determinations.

II. Administrative Determinations A. Wheel Hub Assemblies without ABS Pursuant to the (k)(l) Factors

Commerce determined that wheel hub assemblies without ABS are included in scope based upon the language of the petition and the ITC Report pursuant to the (k)(l) Factors. Commerce found that “New Trend’s wheel hub units without ABS elements meet the physical description of subject merchandise as explicitly stated in the Order” because “New Trend’s wheel hub assemblies without ABS elements are essentially tapered roller housings with spindles.” Preliminary Scope Ruling at 8 (emphasis in original); see Final Scope Ruling at 5.

To sustain a (k)(l) determination, the Court reviews the record for support that Commerce’s determination that wheel hub assemblies without ABS elements are in-scope. The petition was filed by DefendanNIntervenor, Timken. To illustrate its desired scope description, Timken attached advertisement sheets to its petition, which included depictions of wheel hub units identified as being “part of the scope of this petition.” Def.-Int. Opp’n at 4 (citing Petition at 10). Commerce also considered the ITC Report, which specifically stated that “wheel hub units are a type of tapered roller housing.” Final Scope Ruling at 6, 9. Commerce reasoned:

The ITC specifically identified wheel hub units as one category of in-scope products and described them as “self-contained tapered roller bearing packages.” According to the ITC, these “self-contained tapered roller bearing packages include cartridge bearing units and wheel hub units” and .“the next generation of the self-contained units will have flanged inner and outer rings as part of the assembly.”

Final Scope Ruling at 7 (citing ITC Report at A-6). The “next generation of the self-contained units” that “have flanged inner and outer rings as part of the assembly” as referenced by the ITC describes the wheel hub assemblies imported by New Trend, which are considered third generation. Final Scope Ruling at 7. Ber cause the “next generation of wheel hub units with their flanged inner and outer rings as part of the assembly” are still “a type of self-contained tapered roller bearing package, subject to the scope,” Commerce determined that the ITC. Report supported a finding that wheel hub units are within the scope of the TRB Order. Id. Upon review of the record, the Court finds that Commerce’s determination that wheel hub assemblies without ABS are within the scope based upon a review of TRB Order, petition and ITC Report — the (k)(l) Factors — is supported by the record and otherwise in accordance with law,

Regarding Plaintiffs argument that the subject product falls under a different HTSUS than those listed in the scope, the Court notes that thedanguage of the scope expressly states “[ajlthough the HTSUS item numbers are provided for convenience and customs purposes, the written description of the scope of the order is dispositive,” Final Results, 76 Fed.Reg. at 3,087, and agrees with Commerce that “HTSUS items numbers do not define the scope, rather the scope’s written description is dispositive of its coverage,” Final Scope Ruling at 15. See also Novosteel SA v. United States, 284 F.3d 1261, 1270 (Fed.Cir.2002) (“[o]ur precedent has ... indicated, meanwhile, that a reference to an HTSUS number is not dispositive about the scope of an antidumping or countervailing-duty order”) (internal citations omitted).

B. Wheel Hub Assemblies with ABS Pursuant to the (k)(2) Factors

An ABS sensor is “an electronic component that generates a small electric signal that indicates the speed of revolution of each respective wheel.” Pl.’s Mot. at 17 (citing Awtar Aff. ¶ 11, A/R 15, Ex. B). Plaintiff asserts that “incorporating the ABS sensor into the wheel hub ... changes the essential character of the wheel hub.” Id. at 17. Plaintiff argues that Commerce should have found the subject. wheel hub assemblies with ABS elements out of scope pursuant to the (k)(l) Factors and should have never “resorted to” the (k)(2) Factors. Id. Defendant Intervenor points out, however, that the scope descriptions do not include “any language that limits scope to mechanical ‘systems’ or that excludes electromechanical ‘systems’ .... so there is no factual basis in the record for [Commerce] to distinguish between products based on this criterion.” Def.-Int.’s Opp’n at 17.

Commerce acknowledges '“ambiguity” over ABS elements, Def.’s Opp’n at 6, because they were neither “expressly covered by the Order” nor “discussed in the ITC Report,” Preliminary Scope Ruling at 8. Accordingly, Commerce decided that the (k)(l) Factors do “not unambiguously address the ABS component of Power Train’s merchandise.” Def.’s Opp’n at 16. Because the (k)(l) Factors are not dispositive for wheel hub assemblies with ABS elements, Commerce resorted to the criteria set forth in 19 C.F.R. § 351.225(k)(2).

In reviewing a scope ruling, a court must grant “significant deference to Commerce’ own interpretation of those orders,” Duferco Steel, 296 F.3d at 1094-95, be cause “Commerce’s discretion [is] at the very heart of its expertise,” Walgreen Co., 620 F.3d at 1355. With this in mind, the Court cannot say that Commerce’ decision to conduct a further, more in-depth analysis regarding a product’s character and function is unreasonable. The Court reviews Commerce’s analyses of each of the (k)(2) Factors for wheel hub assemblies with ABS elements for substantial evidence on the record.

Plaintiff relies on Legacy Classic Furniture, Inc. v. United States, 807 F.Supp.2d 1353, 35 CIT-(2011) in support of its challenge. See Pl.’s Reply Br. at 3, ECF No. 42. That scope case is distinguishable because its subject product — the Heritage Court Bench — fit ambiguously in the scope description of the order and unambiguously in a listed exclusion. In the instant case, there is no exclusion for wheel hub assemblies, with or without ABS elements. This case is more akin to Color Television Receivers from Taiwan: Notice of Final Scope Ruling Couch Master International Corporation, where the subject merchandise was “neither specifically included ... nor excluded,” and subsequently Commerce determined that “additional features that do not change the primary nature of an ‘in-scope’ product do not serve to move that product outside of the scope order.” 63 Fed.Reg. 805, 806 (Jan. 7,1998).

1. Physical Characteristics of the Product

Regarding the factor of physical characteristics of the product, Commerce concluded that

[r]ecord evidence demonstrates that New Trend’s wheel hub assemblies with ABS elements share the same physical characteristics as TRBs covered by the Order. Specifically, all of New Trend’s wheel hub assemblies incorporate the cup, cone, cage, and rollers associated with TRBs.... Additionally, record evidence demonstrates that New Trend’s wheel hub assemblies with ABS elements share the same physical characteristics of tapered roller housings (considered TRBs under the scope of the Order) because all of them incorporate two non-removable tapered roller bearings that are sealed into a cast, flanged housing, taking the place of the typical tapered roller bearing cup. The flange houses the TRBs to reduce friction.

Preliminary Scope Ruling at 9; see Def.’s Opp’n at 18-20. Plaintiff argues that the addition of the ABS sensor changes the fundamentals of this product removing it from the scope, but Commerce found the ABS sensor “to be an additional design and engineering element of the wheel hub unit that enhances the product’s functionality but does not alter the fundamental physical nature of the wheel hub unit as described above.” Preliminary Scope Ruling at 9. Commerce determined that “the mere addition of a sensor does not take an otherwise subject product out of the scope of the order.” Def.’s Opp’n at 19-20.

The Court agrees with Commerce that the essential physical characteristics of in-scope TRBs and wheel hub assemblies with ABS elements — the cup, cone, cage and rollers — are the same. The Court notes that an electronic sensor imparts an additional physical characteristic to wheel hub assemblies with ABS, which is not shared by non-ABS wheel hub assemblies. While the contrary conclusion- — ■ that an electronic component does indeed change the physical characteristic of a product — could have been drawn, the Court is mindful of its standard of review and cannot say a reasonable mind would not accept as adequate Commerce’s determination that the addition of a sensor does not take an otherwise subject product out of the order. The Court therefore sustains Commerce as to the physical characteristics of the wheel hub assemblies with ABS sensors.

2. Expectations of the Ultimate Purchasers

Regarding the factor of customer expectations of the product, Commerce reasoned that “TRBs are designed and sized for specific applications in a variety of products and industries, including both industrial applications and automotive equipment.... [T]he ultimate purchasers expect that wheel hub units, with or without ABS elements, will function as part of a complete wheel hub bearing unit to reduce friction between moving parts.” Preliminary Scope Ruling at 10 (citing Petition at 8-9; ITC Report at 5). According to the ITC Report, the U.S. market for TRBs has historically been the automotive market, with 85% of all TRBs sold to original equipment manufacturers (“OEMs”), and the remainder going to the aftermarket. Preliminary Scope Ruling at 10-11 (citing ITC Report at A-24). Commerce posited that “purchasers of wheel hub units, regardless of whether they contain ABS elements, would install them in an automobile.” Preliminary Scope Ruling at 10; see Def.-Int.’s Opp’n at 20. Plaintiff argues that “[without the ABS sensor, they would not be expected to allow on-board electronic safety systems to operate.” Pl.’s Mot. at 22.

While recognizing that the expectations of the ultimate purchasers of wheel hub assemblies with ABS elements may exceed the baseline expectations of the ultimate purchaser of mere wheel hub units, the Court cannot say a reasonable mind would not accept as adequate Commerce’s determination that the ultimate purchasers’ expectations, regardless of any bonus features, is to purchase a product that reduces friction between moving parts.

3. . Ultimate Use of the Product

Regarding the factor of ultimate use of the product, as with the above factor,. Commerce again emphasized that “New Trend's wheel hub assemblies and TRBs-covered-under the Order have a similar ultimate use: reduction of friction between- moving parts.” Preliminary Scope Ruling at 10; see Def.-Int.’s Opp’n at 21. While admitting that “the ABS sensor serves an additional purpose,” Commerce emphasized that it “does not replace the original fundamental use of the wheel hub units/tapered roller housings covered by the scope of the Order and as described in the ITC Report.” Id. In a similar vein with the expectations of the ultimate purchasers, discussed supra, while the wheel hub assembly with ABS may exceed the ultimate use of a mere TRB, the Court finds that Commerce’s determination that wheel hub assemblies with ABS elements and in-scope TRBs have the same ultimate use of reducing friction between moving parts is supported by record evidence.

4.Channels of Trade in Which the Product Is Sold

Regarding the factor of channels of trade in which the product is sold, Commerce determined that “New Trend’s wheel hub assemblies with ABS elements are sold in the same channels of trade as TRBs and other wheel hub units covered under the Order.” Preliminary Scope Ruling at 11. Plaintiff does not contest Commerce’s finding of this criterion. See Def.’s Opp’n at 22 (“Power Train does not object to this finding in its brief before this Court.”).

5.The Manner in Which the Product Is Displayed and Advertised

Regarding the factor of the manner in which the product is displayed and advertised, Commerce determined that “integrated wheel' hub assemblies, which includes [sic] ABS elements .... are all advertised and displayed similarly to TRBs and wheel hubs without ABS elements covered by the Order.” Prelimi nary Scope Ruling at 12. Plaintiff does not contest Commerce’s finding of this criterion. See Def.’s Opp’n at 22 (“Power Train does not object to this finding in its brief before this Court.”).

Upon review of the record, the Court finds that Commerce’s determination that wheel hub assemblies with ABS elements are within the scope based upon a review of the (k)(2) Factors is supported by the record and otherwise in accordance with law.

Conclusion

For the foregoing reasons, it is hereby

Ordered that Commerce’s Final Scope Ruling is sustained; and it is further

Ordered that the stay entered by the Court on Plaintiffs motion for oral argument (ECF No. 45) is hereby lifted; and it is further

Ordered that Plaintiffs motion for oral argument (ECF No. 43) is hereby denied.

Judgment to enter accordingly.

1 . A/R refers to Administrative Record.

2 . In the Final Results, there was a different scope determination discussed regarding a company called New Torch and its wheel hub units. In contrast to this determination, Commerce found that New Torch’s wheel hub units were outside the scope of the order because they do not contain TRBs. Final Results, 76 Fed.Reg. at 3,087.

3 . After New Trend submitted its scope request, PTC filed its own scope request for a substantially similar product, but Commerce merged PTC’s request into New Trend's scope proceeding. See Def.’s Opp’n at 4.

4 . When considering whether a particular product is included within the scope of an order, first the (k)(l) Factors are considered, and if they are found to be dispositive, the inquiry is complete. The (k)(l) Factors are:

The descriptions of the merchandise contained in the petition, the initial investigation, and the determinations of the Secretary [of the Department of Commerce] (including prior scope determinations) and the [International Trade] Commission.

19 C.F.R. § 351.225(k)(l).

5 . The terms "units” and "assemblies” are used interchangeably within the industry, and Commerce highlighted that "New Trend itself has used the terms interchangeably during the scope proceeding.” Preliminary Scope Ruling at 6; see Def.-Int.’s Opp’n at 6, n. 3.

6 .When considering whether a particular product is included within the scope of an order, if the (k)(l) Factors are not dispositive, then the (k)(2) Factors are considered:

(2) When the above criteria are not dispositive, the Secretary will further consider:

(i) The physical characteristics of the product;

(ii) The expectations of the ultimate purchasers;

(iii) The ultimate use of the product;

(iv) The channels of trade in which the product is sold; and

(v) The manner in which the product is advertised and displayed.

19 C.F.R. § 351.225(k)(2).