For Scope, An Assembly is Not a Set
MacLean Power LLC v. United States sets right a very troubling scope decision from the Department of Commerce concerning helical spring lock washers ("HSLW") from China. The scope of that order is here.
MacLean makes assembled pole line hardware used for building electrical transmission and distribution substations. Pole line hardware consists of various configurations of products. You can get a feel for the range of these products at the company's website. What is important to know is that MacLean imported complete assemblies. Some of these assembled items include HSLW from China.
For some reason, MacLean felt it was wise to ask the Department of Commerce for a scope ruling to confirm that the HSLW integrated into these assemblies were outside the scope of the corresponding order. It is possible an inquiry from Customs and Border Protection prompted the ruling request. It is also possible that MacLean was just being cautious. Either way, the result was not good.
Commerce looked at the assemblies as combinations of in-scope and out-of-scope merchandise. Earlier cases on "mixed media products" focused on sets containing, for example, in-scope nails and out-of-scope tools. In those cases, principally Mid Continent Nail Corp. and Walgreen Co., Commerce first looked at whether the merchandise in question is within the literal terms of the order. Here, the order covers HSLW and HSLW are parts of the imported product. So, arguably, the are within the terms of the order. Next, Commerce looked at whether the goods in their imported condition were excluded by the terms of the order. Here, Commerce found no basis to exclude the HSLW. That makes them in-scope, right?
This did not fly.
Looking to customs law, the Court started with the proposition that the merchandise in question is whatever crossed the border, "in the condition in which it is imported." From that perspective, the Court noted that "Commerce provides no support for its failure to treat the pole line hardware as unique manufactured products." Furthermore, while nothing in the order excludes assembled products, the Court found that the order "makes no mention of the importation of HSLWs as assembled components of larger products."
Really, the failure of the government's argument goes way beyond the text of the order. This is a textbook example of reasoning that leads to absurd results. It is overcome via reductio ad absurdum. Do you know where you can find helical spring lock washers? In all manner of mechanical devices. Anywhere there is a reason to ensure tension between a bolt and a surface, you can find a lock washer. As MacLean argued in its brief, HSLW are in refrigerators, automobiles and airplanes. Commerce's analysis would make all of these assembled HSLW in-scope despite not being the article of commerce entering the U.S.
[Side note: here is an interesting Reddit discussion on whether HSLW actually do anything that can't be accomplished by a regular washer. Spoiler alert . . . NASA seems to think the answer is no.]
In the end, the Court found that "Commerce failed to support by substantial evidence the determination that the pole line hardware were not unique products." The Court found that Commerce erred when it treated washers that are parts of assemblies as if they were loose items in a tool kit. They are not. Instead, the HSLW "are assembled into clamps and studs, interact with the other parts of the clamps and studs, and are not sold for use independent of the other component pieces."
The Court ordered Commerce to reconsider and issue a scope determination finding the HSLW imported as parts of pole line hardware of excluded from the scope of the order.
MacLean makes assembled pole line hardware used for building electrical transmission and distribution substations. Pole line hardware consists of various configurations of products. You can get a feel for the range of these products at the company's website. What is important to know is that MacLean imported complete assemblies. Some of these assembled items include HSLW from China.
For some reason, MacLean felt it was wise to ask the Department of Commerce for a scope ruling to confirm that the HSLW integrated into these assemblies were outside the scope of the corresponding order. It is possible an inquiry from Customs and Border Protection prompted the ruling request. It is also possible that MacLean was just being cautious. Either way, the result was not good.
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| From https://www.wclco.com/ |
Commerce looked at the assemblies as combinations of in-scope and out-of-scope merchandise. Earlier cases on "mixed media products" focused on sets containing, for example, in-scope nails and out-of-scope tools. In those cases, principally Mid Continent Nail Corp. and Walgreen Co., Commerce first looked at whether the merchandise in question is within the literal terms of the order. Here, the order covers HSLW and HSLW are parts of the imported product. So, arguably, the are within the terms of the order. Next, Commerce looked at whether the goods in their imported condition were excluded by the terms of the order. Here, Commerce found no basis to exclude the HSLW. That makes them in-scope, right?
This did not fly.
Looking to customs law, the Court started with the proposition that the merchandise in question is whatever crossed the border, "in the condition in which it is imported." From that perspective, the Court noted that "Commerce provides no support for its failure to treat the pole line hardware as unique manufactured products." Furthermore, while nothing in the order excludes assembled products, the Court found that the order "makes no mention of the importation of HSLWs as assembled components of larger products."
Really, the failure of the government's argument goes way beyond the text of the order. This is a textbook example of reasoning that leads to absurd results. It is overcome via reductio ad absurdum. Do you know where you can find helical spring lock washers? In all manner of mechanical devices. Anywhere there is a reason to ensure tension between a bolt and a surface, you can find a lock washer. As MacLean argued in its brief, HSLW are in refrigerators, automobiles and airplanes. Commerce's analysis would make all of these assembled HSLW in-scope despite not being the article of commerce entering the U.S.
[Side note: here is an interesting Reddit discussion on whether HSLW actually do anything that can't be accomplished by a regular washer. Spoiler alert . . . NASA seems to think the answer is no.]
In the end, the Court found that "Commerce failed to support by substantial evidence the determination that the pole line hardware were not unique products." The Court found that Commerce erred when it treated washers that are parts of assemblies as if they were loose items in a tool kit. They are not. Instead, the HSLW "are assembled into clamps and studs, interact with the other parts of the clamps and studs, and are not sold for use independent of the other component pieces."
The Court ordered Commerce to reconsider and issue a scope determination finding the HSLW imported as parts of pole line hardware of excluded from the scope of the order.
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