Since the last update on the AD / CVD aluminum extrusions
investigation (dubbed Extrusions II) in what appears to be a
response to strong opposition from trade industry groups,
legislators, governments, and other interested parties, as well as
dubious signals from the Department of Commerce, (Commerce) the
Petitioners in the ongoing Aluminum Extrusions investigation have
proposed modifications to the scope of the investigation. The
modifications address the “parts and subassemblies” scope
language which represents the defining difference between the scope
of the original AD / CVD order on aluminum extrusions from China
(“Extrusions I”), and Extrusions II.
In Extrusions I (aka China I), which only covered China,
(Extrusions II covers 14 countries) the scope provided for a
“finished merchandise” exclusion which provided for the
exclusion of “finished merchandise containing aluminum
extrusions as parts that are fully and permanently assembled and
completed at the time of entry, such as finished windows with
glass, doors with glass or vinyl, picture frames with glass pane
and backing material, and solar panels.” A second exclusion
covered “finished goods kit(s)” which covered unassembled
finished merchandise where all the parts are included in the
kit.
After the Order in Extrusions I, and numerous scope rulings
later, the finished merchandise exclusion was held to cover all
types of finished merchandise that met the definition, including
merchandise that would constitute a “part” or
“subassembly” of a larger article of merchandise.
Commerce articulated it rationale in one particular scope ruling as
follows:
Upon further reflection of the language in the scope of the
Orders, [Commerce] was revising the manner in which it determines
whether a given product is a “finished good” or
“finished goods kit.” The Department explained that it
identified a concern with its prior analysis, namely that it may
lead to unreasonable results. The Department explained that an
interpretation of “finished goods kit” which requires all
parts to assemble the ultimate downstream product may lead to
absurd results, particularly where the ultimate downstream product
is, for example, a fire truck. The Department explained that such
an interpretation may expand the scope of the Orders, which are
intended to cover aluminum extrusions. . .
the scope, taken as a whole, indicates that
“subassemblies” (i.e., “partially assembled
merchandise”) may be excluded from the scope provided that
they enter the United States as “finished goods” or
“finished goods kits” and that the
“subassemblies” require no further “finishing”
or “fabrication.”
Despite the risk, in Commerce’s words, of “unreasonable
results”, Extrusions II sought to close off the exclusion for
all parts and subassemblies of ultimate downstream products and
require that the extrusion content of parts and components of
downstream products be accounted for and declared as subject to AD
/ CVD. This approach does away with concepts such as substantial
transformation and would essentially require every commercial
invoice for products that constitute a part or subassembly
containing aluminum extrusions to break out the aluminum extrusion
value in the products sold for AD / CVD declaration. Further, it is
not always easy to draw a line between what constitutes a part or
subassembly vs. a product deemed not to be a part or subassembly of
something else.
In response to Commerce’s concerns and the numerous comments
from both the public and interested parties, in late February the
Petitioners proposed a modification to the scope that would appear
to lessen the impact of the parts and subassemblies scope language,
however only in part. The Petitioners proposed modifications that
further define parts and subassemblies and provide possible relief
for products containing multiple parts and subassemblies as
follows:
“The scope also excludes merchandise containing multiple
subassemblies of a
larger whole with non-extruded aluminum components beyond
fasteners. A
covered subassembly, including any product expressly identified
as subject
merchandise in this scope, can only be excluded if it is fully
and permanently
assembled with at least one other different subassembly, and
where (1) at least
one of the subassemblies, if entered individually, would not
itself be subject to the
scope; (2) the non-extruded aluminum portion (excluding any
fasteners)
collectively accounts for more than 50 percent of the actual
weight of the
combined multiple subassemblies; and (3) the non-extruded
aluminum portion
(excluding any fasteners) collectively accounts for more than 50
percent of the
number of pieces of the combined multiple
subassemblies.”
While the proposed language would serve to open avenues for
exclusion for certain parts and subassemblies, it clearly would
further complicate and burden suppliers with even more input
material tracking and accounting requirements.
In response to the scope revision proposal, Commerce issued a
scope questionnaire to Petitioners on March 8 and Petitioners
responded on March 18. Commerce was seeking clarification of
several points related to apparent disparate treatment of certain
products and why some products (such as doors and windows) were
described as expressly out of scope, while other products (window
walls / curtain walls) were expressly in-scope.
Commerce also inquired numerous times how CBP was going to
manage the requirements of assessing AD / CVD on extrusions making
up only a part of an assembly and how these were going to be broken
out for the assessment of AD / CVD. From the general tone of
DOC’s questions, it appears that the DOC was acknowledging some
degree of overreach by Petitioners.
Despite the above-described issues, on March 5 Commerce issued
an affirmative preliminary determination in the CVD segment, which
was published in the Federal Register on March 11. In the
preliminary determination Commerce indicated it would address the
February 20 scope revisions proposed by Petitioners and accepted
comments on Petitioners March 18 scope questionnaire answers during
a narrow comment period in late March.
Commerce announced its determination regarding the scope will be
included in the May 1, Preliminary Determination. In the meantime,
practitioners, trade professionals and importers can gain further
insight by reviewing Petitioner’s March 18 questionnaire
response which includes a listing of products deemed to be outside
the scope, as well as additional clarification of the treatment of
extrusion-containing products pending the May 1 AD Preliminary
Determination.
As the investigation progresses, stakeholders are encouraged to
review the latest developments to better understand the potential
implications for their business operations.
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