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In a riveting decision, the U.S. Court of International Trade upheld the U.S. Department of Commerce's determination that oil pipes were strategically processed in Brunei and the Philippines to elude duties aimed at China. Bruneian powerhouse HLDS (B) Steel Sdn Bhd and Filipino giant HLD Clark Steel Pipe Co. contested Commerce's scrutiny, claiming the manufacturing process was not given its due consideration.

Oil Pipes Evaded Duties On China : Minor or Significant Operations?

Arguing their case, HLDS and HLD urged Commerce to dissect whether their transformation of steel sheets into oil piping was merely an assembly or completion process. However, CIT Judge M. Miller Baker asserted that the law treats "completion or assembly" as synonymous with the broader term "production process." In a twist of events, Judge Baker emphasized Commerce's prerogative to delve directly into determining the significance of the companies' operations.

"The Department did exactly that," Judge Baker proclaimed in a Tuesday opinion, firmly supporting Commerce's finding of "minor and insignificant" operations backed by substantial evidence.

The Intricate Antidumping and Countervailing Duty Probe

In a bold move, Commerce initiated an investigation in 2020 to scrutinize whether certain oil piping imports, completed in Brunei and the Philippines with China-made inputs, were sidestepping antidumping and countervailing duty orders targeting specific China-origin pipes. The investigation honed in on four mandatory respondents, including HLDS and HLD.

Commerce's conclusive determination, delivered later, ruled that the oil piping imports from these Southeast Asian countries indeed circumvented duty orders. Subsequently, the duty orders applicable to China were applied to HLDS and HLD.

HLD's Tenacious Legal Battle Unfolds

Undeterred, HLD took the legal battlefield, filing a lawsuit with the CIT in January 2022. In June 2022, the company intensified its offensive with a motion for judgment on the agency record, challenging multiple facets of Commerce's determination.

In addition to disputing Commerce's approach to manufacturing versus assembly, HLD contested the very initiation of the anti-circumvention action. The company argued that the oil piping from the Southeast Asian countries had only a minimal presence in the U.S. market. Moreover, HLD criticized Commerce for an alleged lack of adequate explanation for self-initiating the probe.

Judge Baker's Resounding Verdict

On Tuesday, Judge Baker delivered a resounding verdict, stating that Commerce was mandated to consider specific factors before initiating an anti-circumvention action. These factors included trade patterns, affiliations between input manufacturers and producers in third countries, and the increase in input shipments to third countries since the duty order imposition.

"That's what the Department did," Judge Baker affirmed, putting to rest HLD's challenges. "Because the agency considered those criteria before action, it necessarily considered whether such action was 'appropriate'...."

Oil Pipes Evaded Duties On China : Silence Prevails

As of Wednesday, neither counsel for HLD nor the U.S. Department of Justice responded to requests for comments on the verdict.

HLD is represented by Gregory S. Menegaz, Alexandra H. Salzman, and Vivien J. Wang of deKieffer & Horgan PLLC. The United States is represented by Hardeep K. Josan, Brian M. Boynton, Patricia M. McCarthy, and Claudia Burke of the U.S. Department of Justice's Civil Division, and Paul K. Keith of the U.S. Department of Commerce's Office of the Chief Counsel for Trade Enforcement and Compliance.