Trade Updates for Week of September 19, 2018

United States Court of International Trade

 

Sustained Results in Frozen Fish Filets from Vietnam

Before the Court in An Giang Fisheries Import and Export Joint Stock Company et. al. v. United States et. al., Slip Op. 18-118, Court No. 16-00072 (September 12, 2018) were Commerce’s remand redeterminations in the eleventh antidumping administrative review of certain frozen fish filets from Vietnam. The Court had previously reviewed Commerce’s determinations and sustained the use of the adverse facts available (“AFA”) against respondents in the investigation. However, the Court did remand Commerce’s determination regarding the agency’s “decision to adjust the denominator and not the numerator when calculating Hung Vuong Group’s (“HGV”) farming factors of production” for explanation. Id. at 2. On remand, Commerce explained that the agency “first divided the farming FOP numerators … by the reported production quantity of harvested whole live fish.” Id.at 7. “Commerce then multiplied the resulting farming FOPs by the shank equivalent conversion factor so they would be on the same basis as the U.S. price.” Id. The Court sustained the results holding Commerce complied with the remand requirements.

 

Trial Ordered in Ziploc Plastic Bags Case

Before the Court in S.C. Johnson & Son, Inc. v. United States, Slip Op. 18-118, Court No. 14-00184 (September 14, 2018) were cross motions for summary judgment with respect to the proper tariff classification of Ziploc plastic bags. Plaintiff argued the Ziploc bags were properly classified under HTSUS Subheading 3924.90.56, which covers: Tableware, kitchenware, other household articles and hygienic or toilet articles, of plastics, with an applicable duty rate of 3.4% ad valorem. This heading was eligible for duty free entry under the Generalized-System of Preferences (“GSP”). Customs argued the merchandise was properly classifiable under HTSUS Subheading 3923.21.00, which covers: Articles for the conveyance or packing of goods, of plastics; stoppers, lids, caps and other closures, of plastics. This heading was not eligible for duty free treatment under GSP. For the following reasons the Court denies the motions for summary judgment.

“The classification of merchandise under the HTSUS is governed by the General Rules of Interpretation (“GRIs”) … applied in numerical order.” Id. at 6. GRI 1 instructs that, “for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes … construed according to their common and popular meaning.” Id.  Plaintiffs argued that SGI, Inc. v. United States, 122 F.3d 1468 (Fed. Cir. 1997) required the bags to be classified as “various household containers for food.” Id. at 11. However, the Court said this case was different because the precedent focused on the six digit tariff classification while this case still compared classifications at the four digit level.  However, the Court did conclude “HTSUS Heading 3924 is an eo nomine provision that encompasses plastic goods of or relating to the house or household.”  The Court did not consider the issue further because “genuine issues of material fact remain unresolved” regarding the bags’ principal use. The court will hold a trial on these issues.

 

Upheld Remand Results in Xantham Gum Case

Before the Court in CP Kelco US, Inc. v. United States et. al, Slip Op. 18-120, Court No. 13-00288 (September 17, 2018) were Commerce’s determinations on the fourth remand of the final results of the antidumping investigation of xanthan gum from China.  The Court had previously remanded to investigation results numerous times for Commerce to explain the agency’s rejection of a specific Thai company as a surrogate. On this remand, Commerce used the rejected data in order to calculate dumping duties for respondents. The antidumping duty rate dropped from 8.69 percent to 0 percent. The Court said the remand determinations were in accordance with the Court’s previous orders and upheld the results.

Trade Updates for Week of September 12, 2018

United States Court of International Trade

 

 

New Shipper Review Should Not Have Been Rescinded for Insufficient Information

The court in Jinxiang Huameng Imp & Exp Co., Ltd. and CS Farming Products, Inc., v. United States, Court No. 16-243, Slip Op. 18-116 (September 10, 2018) reviewed whether Plaintiff Jinxiang Huamgeng Imp & Exp Co., Ltd. (“Huameng”) was not bona fide was supported by substantial evidence. Huameng is an exporter and producer of fresh garlic who applied for a New Shipper Review based on a single sale of single-clove garlic that it produced and exported.

Commerce may rescind a new shipper review (1) if there has not been an entry and sale to an unaffiliated customer in the United States of the subject merchandise during the period of review, and (2) an “expansion of the normal period of review to include an entry and sale to an unaffiliated customer in the United States of subject merchandise would be likely to prevent the completion of the review within the [required] time limits.”  See 19 CFR 351.214(f)(2). Commerce interprets the term sale in section 351.214(f)(2) to mean that a transaction it determines not to be bona fide, is not a sale under the regulation.  Here, Commerce rescinded the new shipper review because Huameng did not provide information regarding contractual payments for the goods or for payment of freight and duties. However, the Court held the review should not have rescinded the review and that Commerce should have decided using facts available to fill any gaps in the record. For this reason the Commerce’s decision to rescind the new shipper review was remanded.

 

Drawback Refund Claims were Untimely and Incomplete

Before the Court in Flint Hill Resources, LP. et. al. v. United States, Slip. Op. 18-110, Court No. 06-00065 (September 6, 2018) were cross motions for summary judgment regarding Customs denial of plaintiff’s drawback refunds on Harbor Maintenance Taxes (“HMT”), Merchandise Processing Fees (“MPF”), and Environmental Taxes (“ET”). When plaintiffs imported their product in the U.S. “an importer could receive a refund of up to 99 percent of the amount paid on any duty, tax, or fee imposed under federal law “because of its importation” into the United States.” Id. at 3-4. Court precedent had found that HMT, MPF, and ET were ineligible under the drawback statute for refund. In response, Congress changed the law to make the fees eligible for drawback in 2004. After the change in legislation, numerous cases were filed to claim drawback on past entries. The Federal Circuit ruled the three year deadline included in 19 U.S.C. § 1313(r)(1) was applicable and the claims were time barred. Plaintiffs filed timely protest for the drawback of duty refunds paid on imports between 1998 and 2002, but not for other fees. After liquidation of previous the claims, plaintiffs filed protest seeking drawback refund of taxes and fees. Plaintiffs challenged the denial of these protest in this action. For the following reasons the Court sustained Customs denial of the protest, and found in favor of defendant’s summary judgment motion. 

“In order for Customs to grant a drawback claim, the claim must be complete.” Id. at 13. A complete claim includes providing notice to Customs that an importer is seeking a refund of HMT, MPF, and ET and a correct calculation of any taxes and fees sought within the three year time limit. In regards to plaintiffs’ drawback claims in this case, the Court said “plaintiffs here failed to put Customs on notice that they were seeking drawback of taxes and fees within the statutory timeframe.” Id. at 17. The Court also said plaintiffs had not provided a correct calculation in their initial drawback request by “merely setting forth a claim for drawback of import duties.” Id. at 20-21. Plaintiffs also argued the statute of limitations regarding plaintiffs’ claims did not begin until after the 2004 legislation was passed by Congress, that enactment of the legislation was a violation of separation of powers, and the defendant was responsible for the delays and the statute of limitation should be waived. The Court was unpersuaded by any of these arguments and found plaintiffs’ claims to be untimely.

 

Commerce Decision Regarding Hot Rolled Steel Products Remanded in Part

Before the Court in both POSCO et. al. v. United States et. al., Slip Op 18-115, Court No. 16-00225 (September 10, 2018) (Case #1) & POSCO et. al. v. United States et. al., Slip Op. 18-117, Court No. 16-00227 (September 11, 2018) (Case #2) were determinations made by Commerce in the countervailing duty (“CVD”) investigation of hot-rolled steel flat products from Korea. Commerce had chosen to apply the adverse facts available (“AFA”) against POSCO for failure to truthfully respond to Commerce regarding its cross owned companies, to report a facility owned in a free trade zone, and for failure to report any affiliated company loans. Commerce applied the same AFA as have been applied in previous CVD investigations involving Korea. Commerce also found that Government of Korea’s provision of electricity did not benefit POSCO and was not countervailable. POSCO challenges several issues regarding Commerce’s application of the AFA. For the following reasons the Court sustained Commerce in part and remanded in part in one case, and sustained the remand decision in the other.

In Case #1, the first issue the Court dealt with was whether the AFA should be applied at all to POSCO. Plaintiff argued Commerce’s decision to apply AFA is improper because POSCO did not fail to cooperate and it acted to the best of its abilities by sending corrections to Commerce. However, the Court pointed out POSCO had violated Commerce’s deadline by not submitting the corrections 30 days before a preliminary determination was issued. Instead the corrections were submitted after a preliminary determination was issued, therefore Commerce’s decision to apply AFA was reasonable. Plaintiff’s next argument regarding the AFA was that Commerce violated 19 U.S.C. § 1677e(d)(2) by “defaulting” to the highest rate and needed to evaluate the facts and circumstances that led to the application of the highest rate. The Court said “the statute allows Commerce to select the highest rate, but only after Commerce examines the circumstances that led to the application of AFA” and because “Commerce did not provide any such explanation in this investigation,” the issue would be remanded Id. at 19. In Case #1, the Court also sustained all of Commerce’s decisions finding electricity from the Korean Government a non-countervailable subsidy.  

In Case #2, determinations on remand regarding similar issues were before the Court. The Court said “On remand, Commerce explained, with citations to supporting evidence, why this case did not merit a deviation from the highest calculated rate selected pursuant to Commerce’s hierarchical methodology,” and the results were sustained.  Case #2 at 8.

 

Court Sustained Commerce’s New Antidumping China Wide Rate on Glycine

Before the Court in both Evonik Rexim (Nanning) Pharmaceutical Co. Ltd. et. al. v United States, Slip Op. 18-112, Court No. 17-00132 (September 7, 2018) and Pharm-RX Chemical Corporation v. United States, Slip Op. 18-113, Court No. 17-00268 (September 7, 2018) were Commerce’s determinations in administrative reviews of antidumping duties on glycine from China in 2010-11 and 2013-14. In both cases plaintiffs challenged the China-wide entity rate of 453.79 percent. In separate litigation the China wide rate was challenged, and Commerce calculated a new 155.89 percent dumping rate. Both plaintiffs did not challenge the new rate, as a result the Court sustained Commerce’s determination.

Trade Updates for Week of September 6, 2018

United States Court of International Trade

 

These Dolls are Not Festive Articles

Before the Court in Russ Berrie & Company, Inc. v. United States, Slip Op. 18-108, Court No. 93-00391 (August 30, 2018) were cross motions for summary judgement regarding the proper tariff classification nine different types of products imported and liquidated in 1993. Plaintiff, an importer of various goods, argued that all of the goods were classifiable under HTSUS subheading 9505.90.60, as festive objects with a duty rate of 3.1% ad valorem. The Government argued the merchandise was not festive and was classifiable under various HTSUS subheadings. For the following reasons the Court agreed with the government in regards to the classification of all products, except one which was classified as a festive article.

“Tariff classification under the HTSUS is determined according to the General Rules of Interpretation (“GRIs”) … the GRIs are applied in numerical order.” Id. at 6. GRI 1 provides that “classification shall be determined according to the terms of the headings and any relative section or chapter notes” construed according to their common and commercial meanings.   Some of the many articles the Court dealt with were toy trolls, goblin finger puppets, grim weeper figurines and Christmas Hug figurines. The trolls were dressed with Christmas outfits, the finger puppets and Christmas figurines were Halloween and Christmas themed, and the grim weeper figurine depicted the figure holding a scythe. The Court said the trolls, finger puppets, and figurines “have the amusing physical characteristics of toys, are not decorations or ornaments. Whether or not they are dressed in outfits with” or related to Christmas or Halloween themes.” Id. at 16. The correct subheading for the dolls, finger puppets and hugs was HTSUS subheading 9503.49.00, as toys with a 6.8% ad valorem duty rate.   The Court also used the same reasoning to classify a bobble head like model of a skeleton popping up from a head stone under HTSUS subheading 9503.90.70, as a toy with a spring with a 6.8 % ad valorem duty rate.

The next product at issue was the Trick ‘n Treat Fun Center. The center was a set that consisted of five articles: multiplying viewers, puzzle watches, squirt balls, paint palettes, and stencil sets. A threshold issue regarding this product was if it should be classified as a set. The Court declined to do this because the plaintiffs catalog described the product as individual articles which “may be sold separately at retail.” Id. at 31. The Court individually classified the multiplying viewers, puzzle watches, and stencil set under HTSUS Subheading 9503.90.60 as toys, using the same analysis as was used on the dolls, finger puppets and figurines. These were dutiable at 6.8% ad valorem. Under a similar analysis the paint pallet was classified under heading 3213 as a paint set for children’s use. The squirt balls, which can shoot water, were classifiable under subheading 9505.90.20 as festive practical joke articles, with a duty rate of 5.8% ad valorem.

Plaintiff also claimed that various candleholders were classifiable as festive articles. The candleholders had numerous designs including a pilgrim, a Santa Claus teddy bear, and angel’s wings. After evaluation the different possible classifications the Court said “goods that are holiday-themed decorations but also are lamps, if of a non-durable construction, fall within the scope of heading 9505, HTSUS, while such decorations of more durable construction (such as the candleholders at issue in this case) generally do not and remain classified under heading 9405, HTSUS.” Id. at 44.  The applicable HTSUS Subheading for the candleholders was 9405.50.40. In addition, plaintiff claimed that baby booties were classifiable as festive articles because the baby shoes each depict either a Halloween, Christmas, or Thanksgiving face. The Court found the shoes classifiable under HTSUS subheading 6405.20.90 as other footwear with a 12.5% duty rate ad valorem

The only product plaintiff’s festive article claims were successful on was its etched image plaques. The plaque depicts an Easter lily, a white dove and a gold chalice, and includes the words “The Lord is risen, alleluja!” The Court said “The Easter lilies, the gold chalice …, and the message referencing the resurrection of Jesus Christ are symbolic of the Easter holiday” therefore classification under HTSUS 9505.90.60 as a festive was correct. Id. at 47.

 

Motion for Preliminary Injunction and Motion to Strike were Both Denied

The Court in Sumecht NA, Inc. d.b.a., Sumec North America v. United States et. al., Slip Op. 18-109 (August 30, 2018) considered plaintiff’s motion for a preliminary injunction and motion to strike certain citations and claims made by the defendant in its reply brief to the motion for a preliminary injunction. Plaintiffs are importers of photovoltaic cells from China, who “initiated this case to contest certain administrative and enforcement actions taken by the U.S. Department of Commerce.” Id. at 2. For the following reasons the plaintiff’s motion for a preliminary injunction and motion to strike were both denied.

“A motion to strike constitutes an extraordinary remedy, and should be granted only in cases where there has been a flagrant disregard of the rules of court.” Id. at 4. The Court said plaintiff “has not made a sufficient showing to warrant granting the extraordinary remedy it seeks” because they could not prove bad faith or prejudice by the Government.  Id. at 5.  For purposes of the preliminary injunction, the Court considers four factors. These are “(1) whether the party is likely to suffer irreparable harm in the absence of such injunction; (2) whether the party is likely to succeed on the merits of the action; (3) whether the balance of hardships favors the imposition of the injunction; and (4) whether the injunction is in the public interest.” The Court said “Sumec does not specify any concrete, individualized harm, and does not proffer further evidence in support of its allegations. Plaintiff’s perceived financial harm is hypothetical and unsubstantiated.” Id. at 6. The Court choose not to consider the other factors due to plaintiff’s failure to establish irreparable harm.

Trade Updates for Week of August 29, 2018

United States Court of International Trade

 

No Certification for Trade Adjustment Assistance for Displaced Bank Workers

Before the Court in Former Employees of Fifth Third Bank v. United States Secretary of Labor, Slip Op. 18-106, Court No. 17-00258, was the Department of Labor’s remand determination “denying certification to Plaintiffs as a class of workers entitled to Trade Adjustment Assistance (“TAA”).” Id. at 1. On January 4, 2017, the State of Florida filed a petition for Trade Adjustment Assistance on behalf of certain workers of Fifth Third Bank, Global Financial Institutions (“Fifth Third GFI”), a wholly owned subsidiary of Fifth Third Bancorp (“Fifth Third”), Coral Gables, Florida. The workers, who were engaged in “International Correspondent Banking services,” identified the displacement of U.S. banks by non-U.S. banks in the correspondent banking market as the reason for their separation from Fifth Third GFI.

Labor previously denied certification to plaintiffs for failing to meet the threshold number of required employees for certification. The Court ordered Labor to reconsider this determination. In its redetermination, Labor found the threshold employee number was met, but denied certification on the grounds “the workers’ firm, customer, and aggregate U.S. imports of services like or directly competitive with global transaction services supplied by Fifth Third GTB did not increase during the relevant period.” Id. at 5.  Labor motioned, with the consent of plaintiff, for a voluntary remand to further investigate the application. “If the agency’s request is frivolous or in bad faith, a remand may be denied. However, if the agency’s concern is substantial and legitimate, a remand is usually appropriate.” Id at 6. The court found “the agency’s request is neither frivolous nor in bad faith” because “Labor intends to conduct additional investigation to determine whether plaintiffs are eligible for TAA certification and issue an appropriate redetermination.”  Id. at 7. As such, the Court agreed to the voluntary remand.

 

Remand Results Sustained where Exporter of Pencils was State-Owned

Before the Court in Shandong Rongxin Import & Export Co., Ltd. v. United States et. al., Slip Op. 18-107, Court No. 15-00151 was Commerce’s remand determinations regarding whether plaintiff was subject to Chinese Government control and therefore subject to country wide rate of  the antidumping investigation regarding cased pencils.  On remand, Commerce determined plaintiff, Shandong Rongxin Import & Export Co., Ltd. (“Rongxin”), an exporter of pencils from the People’s Republic of China (“PRC” or “China”) was under the control of the Chinese government because the government owned a majority of the company’s shares and had as significant influence in company management.  For the following reasons the Court sustains Commerce’s determinations in full.

“The absence of de facto government control can be shown by evidence that the exporter: (1) sets its prices independently of the government and of other exporters, (2) negotiates its own contracts, (3) selects its management autonomously, and (4) keeps the proceeds of its sales,” the company must establish each of the four factors to rebut the presumption of government control. Id. at 4. Commerce’s position that the de facto control analysis element of the overall separate rate determination requires satisfaction of all four factors is likewise reasonable and entitled to deference from this Court. Commerce had determined the plaintiff was not independent of the Government because the company’s majority is owned by Shandong International Trade Group (“SITG”), who is wholly owned by State-Owned Assets Supervision and Administration Commission (“SASAC”), a state supported agency of the Chinese Government.  The Court said this analysis and conclusion were both lawful and supported by substantial evidence and because plaintiff had failed to establish one of the four elements Commerce was not required to further consider the other elements.

 

United States District Court for the District of Connecticut

 

State Unfair Trade Remedies Not Available for NAFTA Issues

A state unfair trade practices law is not available to addressed claimed NAFTA violations, according to a recent decision from the United States District Court for the District of Connecticut.

Wind Corporation v. Wesko Locks, Ltd., No. 3: 18-cv-292 (D. Conn) was a lawsuit brought by a Connecticut distributor of furniture hardware (Wind) against a Canadian competitor (Wesko) under the broadly-couched Connecticut Unfair Trade Practices Act (CUTPA). Wind alleged that Wesko had improperly claimed NAFTA-originating treatment for certain furniture locks. As a result, Wind claimed, Wesko was able to sell locks for less than it otherwise would have, constituting an unfair trade practice in violation of CUTPA.

The case was based on the questionable proposition that an increase in Customs duty costs (or any other costs) automatically had to be passed on to Connecticut consumers, or an unfair trade practice would result.

CUTPA applies to unfair acts in “trade or commerce”. It does not apply when the conduct in question is the subject of comprehensive substantive and procedural regulation by a State or Federal agency.  Wesko moved to dismiss the suit, claiming (1) that the filing of tax returns (including Customs entries) was not an activity in “trade or commerce” and (2) that NAFTA issues were already comprehensively regulated through the Customs laws.

The court granted Wesko’s Motion to Dismiss the case. It disagreed with Wesko that the acts complained of were not in the scope of “trade and commerce”, viewing the unfair act not as the filing of Customs entries, but rather as marketing locks whose provenance had not been correctly represented. But the Court agreed with Wesko that issues relating to import duties, including claims for NAFTA treatment, were already comprehensively regulated by the Federal government under the Customs laws.  In addition to reviewing the myriad of Custom laws which deal with entry, assessment of duties, penalties and claims for recovery of withheld duties, the Court noted that Section 337 of the Tariff Act [19 U.S.C. §1337] prohibits “unfair practices in import trade”.

The Court concluded that:

Thus, it appears that the process by which persons import foreign-made products into the United States is provided for by statute and that it is regulated expressly by a “pervasive statutory scheme” that “carefully balances both the procedural and substantive remedies.” City of Danbury, 249 Conn. at 20. Moreover, as in Connelly, “holding that a CUTPA remedy, lacking the procedural prerequisites and specifically tailored remedies” provided for under the Tariff Act of 1930, governs unlawful conduct relating to the import of foreign-manufactured goods would upset the carefully crafted equilibrium between the competing interests of the various people and entities involved in the importation of foreign-made goods into the United States.

Thus, a party aggrieved by a competitor’s import practices will generally need to look to the Federal Customs laws for its remedy.

Trade Updates for Week of August 22, 2018

United States Court of International Trade

 

Tapenades are Classified as Sauces under the HTSUS

Before the Court in Mondiv, Div. of Lassonde Specialties, Inc. v. United States, Slip Op. 18-102, Court No. 16-00038, were cross motions for summary judgment regarding the tariff classification of imported artichoke antipasto and green olive tapenade. The main issue was if the imported food products were “other vegetables prepared or preserved” or “sauces” under the Harmonized Tariff Schedule of the United States (“HTSUS”). Both products consist of either artichokes or green olives mixed with other various vegetables and oils, then cooked, and packaged for retail sale. For the following reasons the Court found the antipasto and tapenade were properly classified as sauces.

“The classification of merchandise under the HTSUS is governed by the General Rules of Interpretation (“GRIs”) … applied in numerical order.” Id. at 7. “GRI 1 instructs that, for legal purposes, classification shall be determined according to the terms of the headings and any relative section or chapter notes,” construed according to their common and popular meaning. Id. at 7. GRI 3(a) instructs that “when a product is prima facie classifiable under two or more headings, the heading which provides the most specific description shall be preferred.” Id. at 18.  The Court found the products were prima facie classifiable as “other vegetables prepared or preserved” because the products were made from: vegetables, prepared or preserved, otherwise than by vinegar or acetic acid, not frozen, and were not preserved using sugar fulfilling the requirements the HTSUS provides. The Court also found that the products were prima facie classifiable as sauces “because both products are mixtures of ingredients in semisolid form that add flavoring to food.” Id. at 18. Using GRI 3(a) the Court found that the sauces heading was more appropriate because “the requirements of the sauce provision are more difficult to satisfy because preparing a sauce involves some degree of processing or adding ingredients.” Id. at 18.

           

Cross Motions for Summary Judgment Denied

Before the Court in Porsche Motorsport North America, Inc. v. United States, Slip Op. 18-105, Court No. 16-00182, were cross motions for summary judgment. The case involved the re-importation of various automobile parts, tools, nuts and bolts. Porsche had provided “emergency support for race teams during three of the Canadian 2014 Porsche GT3 Cup Challenge races in case of accidents or unexpected breakdowns” by sending the various parts across to border. Id. at 2. Porsche sold some of the parts it had exported during each of the three races, and it remained unclear what exactly was in the shipments returned. U.S. Customs and Border Protection (“CBP”) ultimately classified the articles under various dutiable tariff provisions of the HTSUS. Porsche filed a protest arguing the entries should be liquidated under HTSUS subheading 9801.00.85.00 and assessed duty free. For the following reasons the Court denies both parties motions for summary judgment regarding classification under HTSUS subheading 9801.00.85.00 and grants the defendant’s motion for summary judgment regarding if some of the entries were entitled to liquidation by operation of law.

“If there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law, summary judgment is appropriate.” Id. at 5.   The Court said with respect to the plaintiff’s substantive motion for summary judgment, “the identification of the merchandise remains imprecise” and the motion was premature because the Court cannot “make an informed determination regarding the propriety of a particular tariff provision without knowing exactly what it is being asked to classify.” Id. at 9-10. The Court also said the parties did not agree over the nature of the articles claimed for classification under HTSUS 9801.00.85. The Court said, “the “nature” of the imported article(s) actually remains in dispute, as whether the articles at bar are or are not “tools of the trade” returned to the United States after having been exported for “temporary use” abroad cannot be “found” on summary judgment.”  Id. at 18. As such, both the motions for summary judgment were denied. The other issue was if plaintiff was entitled to liquidation as an operation of law because Customs did not timely issue notices of extension of liquidation or provide adequate reasoning. The Court found the dispute centered on disputed facts and was not proper for summary judgment. However, in regards to the argument involving failing to provide a reason for the notices, the government was entitled to summary judgment because “the failure to include a reason for an extension on such notice constitutes harmless error and does not invalidate the extension notice.” Id. at 7.

 

Defendant’s Motion to Amend the Court’s Decision was Denied

Before the Court in Consolidated Fibers, Inc. v. United States, Slip Op. 18-103, Court No. 14-00222 (August 16, 2018), was the defendant’s motion for the Court to amend language concerning the application of the Equal Access to Justice (“EAJA”) in the Court’s previous decision on the case’s merits from November 2017.  The government requested the Court change its language “discussing the Government’s burden of demonstrating that its position was substantially justified for purposes of the EAJA.” Id. at 4. For the following reasons the Court denied the Government’s motion.

“The major grounds justifying a grant of a motion to reconsider a judgment are an intervening change in the controlling law, the availability of new evidence, the need to correct a clear factual or legal error, or the need to prevent manifest injustice.” Id. at 4. The Court said the language in the previous decision could not possibly be interpreted to show “the court … failed to apply the correct legal standard.” Id. at 6. The Court dismissed the government’s argument that the standard applied by the Court was not clear. In addition, the Court said the precedent cited by the Government was dicta and was not binding on the Court.

 

Jurisdictional Requirements Not Met; Case Dismissed

Before the Court in DIS Vintage, LLC v. United States, Slip Op. 18-104, Court No. 16-00085 (August 21, 2018), was defendant’s motion to dismiss the case for lack of subject matter jurisdiction. Plaintiffs brought this case to challenge the tariff classification of imported clothing. On April 12, 2013 plaintiff imported apparel into the Port of Miami. Customs liquidated the entry under subheading 6110.30.30 at an assessed duty rate of 32%, and issued a bill to plaintiffs for $9,247.29 plus interest. In July 2013, plaintiffs filed a protest, arguing the apparel was worn and should be duty free, and in November 2015 plaintiff requested accelerated deposition. The protest was denied in December 2015. On April 4, 2015 the bill issued by Customs remained unpaid, and Customs mailed to plaintiff a letter stating, “Full Amount Due Upon Receipt of $10,031.01 and an Amount Due After 4-05-16 (including interest) of $10,057.08.” Id. at 2. Plaintiff received the notice on April 11th and mailed Customs a check for $10,031.01. On May 9, 2015 Customs issued another notice stating that a balance of $26.16 remained. Plaintiff alleges they received this notice on May 16, 2015. On May 12, 2015 plaintiff filed this case and quickly paid the remaining balance. For the following reasons the Court grants defendant’s motion to dismiss.

28 U.S.C. § 1581(a) grants the Court exclusive jurisdiction over any civil action commenced to contest the denial of a protest under section 515 of the Tariff Act of 1930. To invoke the Trade Court’s jurisdiction under 28 U.S.C. § 1581(a), “an aggrieved importer must first file a protest under 19 U.S.C. § 1514, which the United States Customs and Border Protection” then denies. Id. at 3. “Once Customs denies that protest, the importer must then pay all liquidated duties, charges, or exactions owed before commencing suit in the Trade Court.” Id. at 3-4. The Court said the requirement “that all liquidated duties, charges, or exactions have been paid at the time the action is commenced is a jurisdictional requirement and, accordingly, is not a requirement that may be waived by the court.” Id. at 5. In addressing the plaintiff’s argument that an equitable exception be made, the Court made clear that it lacked the power to allow such exception. The Court also showed that even if such an exception was allowed, it could not be granted in this case because “Dis Vintage was placed on actual notice that payments were owing on the entry” on May 16th. Id. at 12. According to the Court, plaintiffs knew they did not meet the Court’s jurisdictional requirements and still chose not to refile the action invoking the proper jurisdiction of the Court.  

Trade Updates for Week of August 15, 2018

United States Court of International Trade

 

Commerce Determination Remanded in Part

In Aristocraft of America LLC. et. al. v. United States, Slip Op. 18-97, Court No. 15-00307 (August 9, 2018) before the Court was Commerce’s remand determinations regarding the agency’s calculation of irrecoverable amounts of VAT and the agency’s selection of Thai surrogate companies to calculate surrogate financial ratios. Previously, the Court had remanded these issues to Commerce to clarify the effects of Chinese law on the calculation of irrecoverable VAT and to clarify the importance of the practice of “drawing wire” in surrogate selection. For the following reasons the Court sustains Commerce’s determinations regarding the surrogate selections and remands again the VAT calculations.

The Court previously held that Commerce’s calculations of irrecoverable VAT, based on the FOB export value of the finished goods, “appeared inconsistent with Commerce’s definition of irrecoverable VAT as an un-refunded amount of VAT paid on inputs and raw materials.” Id. at 4-5. On remand, Commerce provided an explanation of how Chinese law “supports Commerce’s definition of irrecoverable VAT and resolves the apparent inconsistencies between the definition, and calculation, of the amount of irrecoverable VAT.” Id. at 5. The Court was “still confused and cannot understand how a reasonable mind would conclude that the amount of input tax actually deducted from Shanghai Wells’ VAT liability is “not relevant” to the adjustment of Shanghai Wells’ EP and CEP”. Id. at 11.  The Court remanded for further explanation.

Commerce selected financial statements for calculating surrogate financial ratios from three Thai companies. On remand, Commerce acknowledged that it prefers “financial statements from companies that draw wire from wire rod to produce identical or comparable merchandise in order to calculate the surrogate financial ratios”. Plaintiffs then argued the data from LS Industry alone represented the best available data. However, the Court held “Commerce reasonably concluded that “LS Industry’s financial statements are not superior to” the other companies and that all three were equal. Id. at 17.  The results were sustained.

 

Commerce Determination Regarding Hot Rolled Coils Sustained

In SeAH Steel VINA Corp. v. United States, Slip Op. 18-97, Court No. 14-00224 (August 13, 2018) before the Court was Commerce’s remand determinations regarding antidumping duties on oil country tubular goods from Vietnam. The Court had previously remanded for Commerce to reconsider the surrogate value of hot rolled coils, and the use of Argo Dutch data as a surrogate value. In addition, plaintiffs also argued that Commerce had acted in bad faith with regards to the investigation. For the following reasons the Court sustains Commerce’s determinations.

Plaintiff urged the Court to find that Commerce acted in bad faith, supporting allegations of malicious prosecutions by calling the results of the investigation arbitrary. “Bad faith is difficult to prove …essentially requiring the discovery of a smoking gun.” Id. at 4. Plaintiff had not produced any evidence of bad faith by Commerce, and the Court said plaintiff’s argument was unsupported by the record.

The previous remand required Commerce to adequately explain its valuation of hot-rolled coil using the HTSUS 7208.37.00 information. On remand, Commerce decided against using the HTSUS information because it was a basket provision and could obscure the data. Instead, Commerce opted to use market economy purchase data and called it the most specific data available. The Court said Commerce “has now given a more detailed explanation of its practice” and the use of the data was upheld. Id. at 7.

The Court ordered Commerce to reconsider its use of Argo Dutch data, because it included marine insurance cost, which was compiled using a per tonnage cost, and was adjusted using an Indian price index and was on the record in an illegible document. On remand, Commerce omitted valuations for marine insurance, disputed the assertion the data was compiled using tonnage cost and provided a clear copy of the data. Plaintiff argued Commerce’s actions in opening the record to supply a new copy of the data violated their due process rights, and that ambiguities still exist with the data.  The Court said plaintiff failed to demonstrate they had “been deprived of a protected right” and their due process rights were violated.  Id. at 11. The Court also said that “an examination of the document in question confirms that Commerce’s reading was a reasonable one” and there were no ambiguities for Commerce to further explain. Id. at 14.  The Court also sustained the brokerage and handling cost allocations.

 

Commerce’s Results in Seventh Administrative Review were Sustained

In Stanley Works (Langfang) Fastening Systems Co. Ltd. et.al. v. United States, Slip Op. 18-99, Court No. 17-00070 (August 13, 2018) before the Court was Commerce’s results in the seventh administrative review of antidumping duties on certain steel nails from China. Stanley objected to the results on three grounds that Commerce contravened regulations by self-initiating a targeted dumping analysis, that Commerce’s differential pricing analysis was an unreasonable interpretation of statute, and that the differential pricing analysis contravenes U.S. obligations under the World Trade Organization (“WTO”). For the following reasons the Court sustains Commerce’s final results in full.

Stanley argued that the final results violated 19 C.F.R. § 351.414 because Commence initiated a differential pricing analysis without an allegation that Stanley was engaged in targeted dumping. The Court said that although the allegation requirement did not apply to administrative reviews, the “appropriate statistical techniques” of the regulation did, and that the Court found that the appropriate statistical technique was used.  Commerce was free to self-initiate a targeted dumping analysis. Stanley also argued the Cohen’s d test was not an effective test, and Commerce’s results from the test were not permissible. Stanley argued the test was arbitrary and the data classifications used were not defined. The Court said “use of the Cohen’s d test in the context of a targeted dumping evaluation is not unreasonable and that it aids in Commerce fulfilling its obligation,” taking specific note that the test was widely used in many different fields. Id. at 26.  Stanley next argued that the results of the d test were unlawful because Commerce incorrectly calculated resulting statistics,” particularly the standard deviation Id. at 26.  The Court said “using a simple average to calculate the pooled standard deviation” was a reasonable decision by the agency and upheld the statistics. Id. at 30.  Moreover, the meaningful difference test, as applied is reasonable. Finally, in regards to the applicability of the WTO obligations the Court said “WTO decisions are irrelevant to the interpretation of domestic U.S. law” because the WTO bodies only interpret the terms of WTO treaties and agreements, Therefore, Stanley’s WTO arguments lacked merit.

 

The Court Clarified a Previous Order Regarding the Injunction to Ban Certain Fishery Imports

In Natural Resources Defense Council Inc., et. al. v. Wilbur Ross et. al., Slip Op. 18-100, Court No. 18-00055 (August 14, 2018) the Court clarified the applicability and scope of its previous injunction because of the governments motion to for clarification on the ruling regarding the ban of imported fish from Mexico. The case originated under the Marine Mammal Protection Act (“MMPA”) in an effort to help the endangered vaquita porpoise. The government argued the terms “incidental catching” and “taking of a marine mammal” should be interpreted under 50 C.F.R. § 216.3 because they were not specifically defined in the statute. The Court dismissed this argument, saying “by the regulation’s own terms, those definitions only apply to the part 216 regulations themselves.” Id. at 7. Next, the government argued the preliminary injunction could not “include imports of shrimp and chano caught in gillnets contrary to Mexican law because the Lacey Act and the Magnuson-Stevens Act statutorily ban fish harvested in violation of foreign law and impose steeper penalties than the MMPA.” Id. at 8.  The Court found the government’s argument unavailing because “Federal statutes can and do have complementary and overlapping objectives, and the existence of one source of enforcement authority does not render other statutory authorities inoperative.” Id. at 9. The government also argued the injunction was not immediately effective because they were required to take administrative steps under 50 C.F.R. § 216.24(h)(9) to carry out the Court’s Order. The Court reiterated that the injunction to ban imports from the four specified fisheries – shrimp, curvina, chano, and sierra, was “effective immediately as to all such imports, unless affirmatively identified as having been caught with a gear type other than gillnets or affirmatively identified as having been caught outside the vaquita’s range.” Id. at 12.

 

 

Trade Updates for Week of August 8, 2018

United States Court of International Trade

 

Motion to Dismiss Denied in Byrd Amendment Case

In DAK Americas LLC and Auriga Polymers, Inc. v. United States, Court No. 17-195, Slip Op. 18-95 (August 6, 2018), plaintiff challenged Customs and Border Protection’s (CBP) efforts to collect repayment of monetary distributions received under the Continued Dumping and Subsidy Offset Act of 2000 (“CDSOA” or “Byrd Amendment”).  Plaintiffs are affected domestic producers (“ADPs”), which are parties eligible under the CDSOA to receive monetary distributions paid from duties collected under an antidumping duty order (“AD”) order on certain polyester staple fiber (“PSF”) from the Republic of Korea (the “Korea PSF Order”) and an AD order on PSF from Taiwan (the “Taiwan PSF Order”).  Plaintiffs challenge Customs’ actions in issuing four letters demanding payment of amounts Customs characterized as having been disbursed erroneously to plaintiffs.

Because this case arises under the Administrative Procedure Act (APA), the Court must decide whether the actions taken by way of the demand letters were contrary to law under the APA.  The general question of whether the United States is authorized or required by the Constitution or the CDSOA to seek repayment of CDSOA is beyond the claims here, and potentially out of the Court’s subject matter jurisdiction.  Plaintiffs’ claims therefore may not be dismissed. At this stage of the litigation it is difficult to determine the grounds for the agency actions, and the underlying determinations of Customs’ actions.  Therefore, the claims and the litigation must stand pending further investigation and review.  Defendant’s motion to dismiss is denied.  

 

Sustained Remand Determination Regarding Scope

In Atkore Steel Components Inc. v. United States, Slip Op. 18-94, Court No. 17-00077 (August 3, 2018) before the Court was Commerce’s remand determinations concerning a scope ruling regarding cast iron electrical conduit articles produced by plaintiff. The Court had previously remanded Commerce’s scope determinations that the conduits were subject to an antidumping order and required Commerce to consider factors set forth in 19 C.F.R. § 351.225(k)(1) and (k)(2) such as physical differences between the dumping order and product. On remand, Commerce determined that the product was not subject to the dumping order because Atkore’s product was designed for use in electrical applications, not liquid or gas conveyance as the scope in the dumping order provided. No party raised any objection to the determination and the Court sustained.

 

Motion to Stay Denied

In Aluminum Extrusions Fair Trade Committee v. United States et. al., Slip Op. 18-96, Court No. 17-00179 (August 8, 2018) before the Court was plaintiff’s motion to stay further proceedings in this action pending final resolution of the litigation in Meridian Prods., LLC v. United States and Whirlpool Corp. v. United States. Plaintiff also requested, should the Court deny the motion to stay, an extension of ten days to file motion for judgment on the agency record. In this case, plaintiff contested a scope ruling issued by Commerce concluding that certain “kayak stabilizer kits” were not within the scope of the antidumping and countervailing duty orders on aluminum extrusions from China. “A decision as to when and how to stay proceedings is within the sound discretion of the trial court.” Id. at 4. The Court denied plaintiff’s motion to stay because the final resolution of the other disputes would not be instructive on any issue in this case. In addition, the Court granted plaintiff’s motion for a ten day extension.

Trade Updates for Week of August 1, 2018

United States Court of International Trade

 

Injunction Granted in Vaquita Case

In Natural Resources Defense Council Inc., et. al. v. Wilbur Ross et. al., Slip Op. 18-92, Court No. 18-00055 (July 26, 2018) the plaintiffs moved for an injunction against defendants, several United States government agencies and their officials, “to ban the importation of fish or fish products from any Mexican commercial fishery that uses gillnets within the vaquita’s range.” Id. at 3. The vaquita is an extremely engendered porpoise, with an estimated population of only 15 in the world’s oceans. Unfortunately, their numbers have declined because the porpoise gets unintentionally entangled in gillnets used for fishing. Despite laws against their use, many Mexican fishers still use gillnets. If gillnet use continues at its current rate, it is estimated the vaquita will be extinct by 2021. For the following reasons, the Court agreed with the plaintiffs and granted their motion for a preliminary injunction.

In 1972 Congress passed Marine Mammal Protection Act (“MMPA”). The MMPA “imposes on the Government an immediate and continuous duty to ban fish caught with fishing gear that kills marine mammals, such as the vaquita, in excess of United States standards.” Id. at 35.  By the terms the statute the United States Standard, “is the immediate goal that bycatch be reduced to insignificant levels approaching a zero mortality and serious injury rate.” Id.at 35. To succeed on a motion for a preliminary injunction the Court will equally weigh four factors, eventual success on the merits, the likelihood that plaintiffs suffer irreparable harm without an injunction, the balance of hardships between the parties, and the public interest in the matter.

Multiple provisions of the MMPA stress that “the statute is undergirded and propelled by a sense of urgency that mammals like the vaquita not be killed and brought to extinction, even if unintentionally.” Id. at 37. The current evidence suggests at least three vaquita are caught and killed in gillnets each year, far more than the standard set for the government to protect. Plaintiffs have established “a fair likelihood that the United States standards protections mandated under the MMPA’s Imports Provision are significantly impacted by the foreign harvesting nation’s regulatory program.” Id. at 41. In regards to the irreparable harm factor, the Court held “the likely, imminent extinction of a species in the absence of statutorily mandated action constitutes irreparable harm.” In addition, the Court held members of plaintiff organizations had standing as nature lovers who enjoy seeing the vaquita in its natural habitat. Under the balancing test between the parties, the Court said the balance of the hardships falls in favor of granting an injunction. The potential loss of the vaquita, as well as the possibility that if the species goes extinct the plaintiffs could lose their day in Court far outweighed the normal administrative duties of the government requested by imposing an embargo on certain imports, and any impact on government negotiations with Mexico. Regarding the public interest factor, the Court said “the vaquita’s plight is desperate, and that even one more bycatch death in the gillnets of fisheries in its range threatens the very existence of the species. In granting the preliminary injunction ordering the embargo set forth in the statute, the Court is simply directing compliance with a Congressional mandate,” fulfilling the public interest ideal that the government should be compelled to enforce environmental laws. Id. at 48.

 

Trade Updates for Week of July 25, 2018

United States Court of International Trade

 

Cross Motions for Summary Judgment Granted and Denied in Part

In Swimways Corporation v. United States, Slip Op. 18-91, Court No. 13-216 (July 23, 2018), plaintiff Swimways Corporation (“Swimways”) commenced this action to contest the denial of its administrative protests by U.S. Customs and Border Protection (“Customs”). Swimways claims that Customs erred in its determination of the tariff classification of merchandise it imported consisting of various models of “Spring Floats” and “Baby Spring Floats” designed for the flotation of users (adults, children, and infants) in swimming pools, lakes, and similar bodies of water. There are nine Spring Float models for adults and children and three Baby Spring Float models.  Customs classified all of the floats at issue in subheading 6307.90.98 (“Other made up articles, including dress patterns: Other: Other”) of the Harmonized Tariff Schedule of the United States (“HTSUS”), subject to duty at 7% ad valorem, however, Swimaways claims that the nine Spring Floats are classified under 3926.90.75, HTSUS (“Other articles of plastics and articles of other materials of headings 3901 to 3914: Other: Pneumatic mattresses and other inflatable articles, not elsewhere specified or included”), subject to duty at 4.2% ad valorem, while the three Baby Spring Float modes are classified under HTS Subheading 9506.29.00, HTSUS (“Articles and equipment for general physical exercise, gymnastics, athletics, other sports (including table-tennis) or outdoor games, not specified or included elsewhere in this chapter . . . : Water skis, surf boards, sailboards and other water-sport equipment . . . : Other”), free of duty.  In the alternative, Swimways claims that the Baby Spring Floats should be classified in the same provision as the Spring Floats, subheading 3926.90.75, HTSUS.

Pursuant to GRI 3(b), the Court determined that the PVC bladder component of the Spring Float model imparts the essential character because it is a more complex component, and is essential to the functioning of the finished article. Moreover, it imparts a defining characteristic to the commercial identity of the product. Thus, the Spring Float model is classified under HTS Subheading 3926.90.75.

Likewise, pursuant to GRI 3(b), the Baby Spring Float is also classified under Heading 3926 because both the inner and outer PVC tube achieve the essential function of flotation and moreover, the outer tube enhances the security and stability of the float by not allowing the float to tumble over.  HTS Subheading 3926.90.75 applies pursuant to GRI 6 because no other subheading specifically describes the Baby Spring Float.

The related items which function as toys are classified under HTS Subheading 9503.00.00. 

 

United States District Court

Customs Broker, Forwarder Liable for Importing Counterfeit Goods

A customs broker and two non-vessel owning common carriers (NVOCCs)/ freight forwarders were recently found liable for Lanham Act damages based on their involvement in importing two shipments of counterfeit “Nike” brand shoes, in a ruling recently issued by the United States District Court for the District of New Jersey.

In Nike Inc. v. Eastern Ports Customs Brokers, Inc. No.  2:11-CV-4390 (D.N.J.), Nike sued two NVOCCs and a Customs broker, who had handled certain imports for a company which had provided a false Customs Power of Attorney from the French Company Saint-Gobain, which was supposedly importing “ceramic tile”. The first eight of ten shipments cleared Customs normally, but the ninth and tenth, which turned out to contain counterfeit Nike footwear, were seized by Customs. Nike sued the forwarders and the broker on various claims of counterfeiting and violating import laws.

On motions for summary judgment,  the Court found in favor of Nike and against two forwarders. The Court found that the forwarders had been engaged in transporting the counterfeit goods, and thus in the “use in commerce” of the goods. It held that the forwarders’ lack of knowledge that the goods they were transporting were counterfeit did not go to the question of liability but only to the question of damages. Rejecting claims that the forwarders had never physically possessed the merchandise, the Court ruled that “arranging for transport is enough” to attach liability.

The Customs broker, Eastern Ports Shipping, defaulted in the case, by discharging its counsel and not appointing a new one. Nonetheless, the Court granted a default judgment in favor of Nike and against the broker. Whether a Customs broker is involved in “transporting” merchandise is questionable, but the Court ruled that Eastern Ports, having defaulted, was deemed to have admitted the allegations against it. This was sufficient to impose liability.

With regard to the question of damages, Nike sought statutory damages of $2,000,000 for each of 8 trademarks alleged to have been counterfeited, for a total of $16,000,000. While the Court found liability, it declined to award the maximum statutory damages, instead penalizing Eastern Ports in the amount of $30,000 for each of the marks in question, or $240,000 in total.

The Court rejected Nike’s claims for any award in respect of the eight shipments which were released without incident, finding that Nike’s claims that the shipments had potentially contained counterfeit goods was speculative.

 

United States Court of Federal Claims

 

Government Procurement: Claims Court Hears Bid Case While Origin Case Pending in CIT

The Court of Federal Claims recently held that it could hear a bid protest case brought by a supplier of pharmaceuticals regarding whether certain drugs were eligible for Federal agency procurement under the Trade Agreements Act (TAA) – even while a similar challenge to a Customs origin determination moves forward in the US Court of International Trade.

In Acetris Health LLC v. United States, No. 18-433C (May 8th, 2018; released July 16th, 2018), the CFC held that it had jurisdiction to hear a government contractor’s appeal regarding a pre-award bid protest that turned on the question of whether articles provided to the government constituted a “US made end product” for purposes of the TAA, or a “domestic end product” for purposes of the Buy American Act.

Acetris Health is a New Jersey-based company engaged in the sale of pharmaceuticals to the Federal Government. The product in question was a hepatitis drug produced in New Jersey by a company called Aurolife, which combined the Indian-origin active pharmaceutical ingredient (API) with a number of other ingredients and tableted them into a patient-usable form. The Department of Veterans Affairs questioned whether the tablets were “U.S. made end products” for purposes of TAA procurement, and required Acetris to secure a TAA origin ruling from Customs. Acetris applied for such a ruling and Customs held that the operations performed in the United States did not “substantially transform” the non-TAA active pharmaceutical ingredient. Thus, it held, the product was not a “U.S. made end product” eligible for federal procurement under the TAA.

Acetris filed a suit in the Court of International Trade, currently pending, to challenge the Customs origin determination.

When the VA threatened to terminate Acetris’ contract and seek another source, the company filed suit in the CFC. The crux of its argument was that, under the contract in question, Acetris could have provided a “domestic end product” as that is known under the Buy American Act. Acetris sought to enjoin the termination of its contract, or the award of a new contract until this matter could be resolved. The government tried to have the case dismissed, arguing that it was duplicative of the lawsuit filed in the CIT.

The Claims Court declined to dismiss, holding that the bid protest litigation raised significant questions not before the CIT. The Court held that a purpose of the lawsuit was to do more than just revisit the Customs ruling, and that the acquiring agency, the VA, did have some power, independent from Customs’ rule to make a determination regarding whether goods were eligible for procurement under the contract.

This creates a somewhat interesting possibility that a federal contracting agency might be able to disregard or second guess a CBP ruling concerning whether products are eligible for procurement under a particular contract.

 

Trade Updates for Week of July 18, 2018

United States Court of International Trade

 

Remanded Determination where Commerce is to Proceed with New Shipper Review

Before the court in Huzhou Muyun Wood Co., Ltd., v. United States, Court No. 16-245, Slip Op. 18-89 (July 16, 2018), is the United States Department of Commerce’s (“Commerce”) Final Results of Redetermination Pursuant to Court Remand Order (Dep’t Commerce March 6, 2018) (“Remand Redetermination”), ECF No. 39, which the court ordered in Huzhou Muyun Wood Co., Ltd. v. United States, 41 CIT ____, 279 F. Supp. 3d 1215 (2017) (“Muyun Wood I”).  At issue is whether the single sale of multilayered wood flooring was commercially reasonable and thus bona fide for the purposes of a “new shipper review,” the process for calculating individual antidumping duty rates for a shipper who had not previously exported a product covered by an antidumping order into the United States. Plaintiff Huzhou Muyun Wood Co., Ltd. (“Muyun Wood”) contests Commerce’s Remand Redetermination, which concluded that the sale upon which the review was based was not bona fide and thus rescinded the review. Muyun Wood seeks another remand in which Commerce would proceed with the new shipper review and ultimately calculate its antidumping margin.

It was found that Penghong product’s CONNUM was identical to Muyun Wood’s CONNUM. Moreover, the data was from an administrative review contemporaneous with Muyun Wood’s sale, and Penghong’s product was not subject to an anti-dumping duty margin. Muyun Wood contends, however, that Commerce’s CONNUM does not take into account all aspects of wood flooring products that affect price -- particularly, surface treatment and veneer type -- and that Commerce ignored evidence of this fact that Muyun Wood introduced to the record. However, the Court disagrees, and Muyun Wood concedes, its sale price would still be higher than the corresponding Penghong price by 19.35 percent. Commerce’s determination that Muyun Wood’s price was high, and therefore atypical, is supported by substantial evidence.

However, the finding that the sales was not bona fide was not supported by substantial evidence. In the matter before this court, Commerce determined that the sales quantity was typical, the expenses were normal, and the sale was made at arm’s length.  Considering all of the factors in the totality of the circumstances, analysis does not suggest that the sale was commercially unreasonable. Commerce was thus ordered to conduct a new shipper review for Myun Wood.

 

Motion to Consolidate Denied

In Vincentin S.A.I.C. et al., v. United States, Court No. 18-9, Slip Op. 18-90 (July 17, 2018), the court considers a motion to consolidate Vicentin S.A.I.C. v. United States, Court No. 18-00111 (USCIT filed May 15, 2018) (“Court No. 18-00111”) and LDC Argentina S.A. v. United States, Court No. 18-00119 (USCIT filed May 21, 2018) (“Court No. 18-00119”), with this action, Vicentin S.A.I.C. & Gov’t of Argentina v. United States, Consol. Court No. 18-00009 (USCIT filed Feb. 2, 2018) (“Consol. Court No. 18-00009”) filed by Vicentin S.A.I.C., LDC Argentina S.A., and the Government of Argentina (collectively “Consolidated Plaintiffs”). 

There are no likely benefits to consolidation as the challenges to Biodiesel CVD Final Determination and the Biodiesel ADD Final Determination do not share common questions of law. Further, the court must review each challenge on its own record, see 19 U.S.C. § 1516a(b)(1)(B), and therefore it is unclear why the single consideration of some common facts between the CVD and ADD final determinations would promote judicial efficiency, and it is not clear what harm result from reviewing the challenges separately.  Moreover, the challenged CVD and AD determinations are based on separate administrative records, containing business proprietary information.  Constant care would be necessary to protect the protected information.  Finally, consolidation would result in piecemeal scheduling involving multiple parties, and those the parties would be subject to normal delays as if both cases were reviewed separately.  Thus, the motion to consolidate was denied.

Trade Updates for Week of July 12, 2018

United States Court of International Trade

 

Finding of Countervailable Subsidies Affirmed

In ATC Tires Private Ltd. and Alliance Tires America, Inc. v. United States Slip Op. 17-89, Court No. 17-00064 (June 25, 2018) the Court heard arguments about Commerce’s determinations in a countervailing duty investigation of certain pneumatic off-the-road tires from India. Specifically, plaintiffs argued that benefits associated with the Indian Export Oriented Unit (“EOU”) and Special Economic Zone (“SEZ “) programs were not countervailable subsidies. For the following reasons the Court sustained Commerce’s determinations in full. 

Commerce had “determined that the SEZ and EOU units are countervailable because there was a financial contribution and a benefit was conferred.” Id. at 8. Plaintiffs argued that the EOU/SEZ zones were located outside of the Indian Customs territory and because of this no revenue was lost by the India Government. Plaintiffs support their argument with evidence of Indian government monitoring mechanisms in place to ensure the zones operated outside of the Indian Customs territory.  The Court sustained Commerce’s determinations because companies operating in the zones were only exempt if they met a certain level of net foreign exchange “NFE”. If the company did not produce at this level, they were liable to the Indian government for duties, meeting the requirement for a benefit to be conferred.  In addition, the Court found Commerce’s determinations that the Indian government lacked sufficient monitoring systems to ensure that the SEZs and EOUs operated outside its customs territory to be supported by substantial evidence. In responses to Commerce’s questionnaires the Indian Government stated its programs did not “consider waste and consumption production factors or monitor waste and scrap and physical inspections are atypical.” Id. at 12. The Court said all of Commerce’s determinations were “consistent with Commerce’s prior finding.” Id. at 12.

 

Remand Results Sustained

In Government of Sri Lanka et al. v. United States, Court No. 17-59, Slip Op. 18-87 (July 11, 2018), the Court reviewed the remand results in a countervailing duty investigation of off-the road rubber tires from Sri Lanka.  In the “guaranteed price scheme” or GPS, the Government of Sri Lanka would “set an above-market ‘guaranteed price’ for rubber smallholders, calculate a ‘market price’ to be paid by purchasers, and assume responsibility for paying the difference between the ‘guaranteed price’ and the‘market price.’”  See Slip Op., pg 2 citing Sri Lanka I, 2018 WL 1831791, at *4. In some cases the government of Sri Lanka would reimburse the excess of the market price. Commerce found the entire value of these reimbursement payments to constitute a countervailable subsidy.

However, the Court found that the GPS program did not provide a benefit within the meaning of 19 U.S.C. 1677(5)(E) and remanded the matter for Commerce to eliminate the duties attributable to GPS based on reimbursement for excessive rubber payments.  On remand, Commerce removed the .95 percent duty attributed to the GPS program, reducing the de minimis overall duty rate to 1.23 percent.  Commerce declined to conduct a further investigation into whether the GPS program provided plaintiff-intervenor with an upstream subsidy or cognizable benefit.  The Court sustains the remand results.

Trade Updates for Week of July 4, 2018

United States Court of International Trade

 

CIT Orders Customs to Move Quickly on Drawback Regulations

United States Customs and Border Protection needs to move quickly to issue regulations implementing the drawback provisions of the Trade Facilitation and Trade Enforcement Act of 2015, the Court of International Trade recently held.

In Tabacos de Wilson v. United States, Slip Op. 18-81 (June 29, 2018), a group of duty drawback claimants and drawback brokers brought suit to challenge CBP’s failure to promulgate regulations for calculating duty drawback under the TFTEA. Congress had set a date of February 24, 2018 for the regulations to become effective, but Customs failed to even propose a regulation by that date.  Instead, the agency issued “Interim Guidance” for filing TFTEA claims, while indicating that no such claims would be processed, and no accelerated payment of drawback made, until final regulations are issued – which could take years.

At the same time, CBP revealed that it had embedded the TFTEA calculation drawback regulation in a mammoth, 450-page collection of comprehensive new drawback regulations. The plaintiffs charged that Customs’ failure to publish the TFTEA regulation constituted agency action “unlawfully withheld”, and sought immediate publication of the regulation.  The court agreed.

Rather than demanding the agency publish the final regulation immediately, the Court said it would wait to see if the proposed regulatory package was published for comment at the end of the ongoing OMB review – on or about July 5, 2018.  If the regulations are not proposed at that time – and it seems unlikely they will be – the Court directed the parties to confer, and identify those portions of the proposed regulations which could be separated out and enacted immediately to satisfy the TFTEA requirements. The parties are to report to the Court by July 27th.

 

CIT Claims Jurisdiction Over Suits to Collect Federal Excise Taxes Paid on Imports

In a decision that may raise some controversy, the Court of International Trade recently held that it had subject matter jurisdiction over a government suit seeking to collect Federal Excise Taxes (FET) on imported tobacco. It also suggested that liability for such taxes might be imposed on a wide range of persons other than the importer of record.

In United States v. Gateway Import Management et al., Slip Op. 18-83 (July 3, 2018), the government sued an importer, Gateway, and a second company, Good Times, seeking to recover FET on imported tobacco products. The complaint alleged that Gateway and Good Times had conspired to undervalue the imported tobacco products, thereby underpaying the FET that was due with the import entry. This constituted the introduction of merchandise into the United States under 19 U.S.C. §1592(a). The government claimed that the FETs were owed as withheld duties, taxes or fees pursuant to 19 U.S.C. §1592(d).  The government made clear that it was not seeking Section 592 penalties, when it brought suit against Gateway, Good Times, and Hanover Insurance, the Customs bond surety for Gateway. [Hanover cross-claimed against Gateway and its principals].

Gateway and Good Times moved to dismiss the case for failure to state a claim on which relief could be granted. The Court, sua sponte, asked the parties to brief the issue of whether it had jurisdiction to hear the case under 28 U.S.C. §1582, which allows it to entertain cases under Section 592 to collect “duties” or “penalties”, but makes no mention of excise taxes.  This raised the possibility that, while the CIT might have jurisdiction over the government’s case against the surety, it would not have jurisdiction over the claims against the bond principal, Gateway.

The CIT determined that since the liability for FET arose from a violation of Section 592(a), it had jurisdiction over the claim for the taxes.  Even though 19 U.S.C. §1528 provides that a tax shall not be construed as a Customs duty in the absence of clear Congressional intent, the Court held that this statute was designed to prevent companies from claiming Customs preferences in the income and excise tax realm, and did not limit the jurisdiction of the CIT. 

Turning to the motions to dismiss, the Court held that the government’s Complaint had stated the fundamental facts to make out a claim against Gateway and Good Times.  What is somewhat chilling is that the court suggested that Good Times could be liable for “introducing” the goods by means of false statements even through relatively passive connections with the import transactions. The Complaint alleged that Good Times used Gateway as a “front” company to make entry, and that Gateway’s failure to disclose its contractual arrangements with Good Times constituted a “material omission” in violation of Section 592(a). The Court also noted that Good Times might be liable because it financed the transactions, and controlled the trademarks for the products concerned, and thus the importations.

The Court reached an essentially identical result in a similar action, United States v. Maverick Marketing Inc., Slip Op. 18-84 (July 3, 2018).

 

No Cross-Ownership; Commerce Determination Sustained

In Nantong Uniphos Chemical Co. Ltd., et. al. v. United States et. al., Slip Op. 18-78, Court No. 17-00150 (June 25, 2018) the Court reviewed arguments regarding Commerce’s determinations in a countervailing duty investigation of 1-Hydoxythylidene-1, 1-Disphosphonic Acid  (“HEDP”) from China. Plaintiff, Nanjing University of Chemical Technology Changzhou Wujin Water Quality Stabilizer Factory (“Wujin”), was named a mandatory respondent to the countervailing duty investigation. Wujin disclosed that Nantong Uniphos Chemicals Co., Ltd. (“Nantong”) was an affiliate. Commerce ultimately determined Wujin and Nantong were not crossed owned, and could not share the same rate. As a result, Wujin received a de minimis rate and Nantong received the all other rate of 2.40%. Plaintiffs jointly challenged Commerce’s determination the companies are not jointly owned. For the following reasons, the Court sustains Commerce’s determinations in full.

Plaintiffs argued that by “failing to find cross-ownership between Nantong and Wujin, Commerce failed to properly apply 19 C.F.R. § 351.525(b)(6)(vi).” Id. at 5. The regulation provides “cross-ownership does not require one corporation to own 100 percent of the other corporation,” rather “cross-ownership will exist where there is a majority voting ownership interest between two corporations or through common ownership of two (or more) corporations.” Id. at 5.  Commerce had found that Wujin acquired its shares in Nantong in 2014, and held that at the same level throughout the period of investigation. The agency also found Wujin was the second largest of three shareholders and held the same number of directors as the largest shareholder. In addition, despite its large number of shares, Commerce determined Wujin could not exercise exclusive control because any action would require two out of the three shareholders to consent. The Court found Commerce’s determinations were based on substantial evidence and sustained the determinations.

Trade Updates for Week of June 27, 2018

United States Court of International Trade

 

An Emergency Action Notification from the USDA is a Not a Customs Exclusion which May Be Protested under 19 USC 1514(a); the CIT Does Not Have Jurisdiction

Andritz Sundwig GmBH v. United States, Case No. 18-142, Slip Op. 18-74 (June 20, 2018), involved a request seeking the Court’s intervention to prevent the emergency exportation of machinery in wood packaging material containing an invasive insect species of the family Siricidae, commonly known as horntails or woodwasps. Plaintiff Andritz Sundwig GMBH (“Andritz” or “Plaintiff”) is a German company that supplies production machinery to steel and aluminum manufacturers. Plaintiff protested the Emergency Action Notification (EAN) which found the Siricidae in the packaging of imported cold rolling mills.  The Court held that since the USDA action was not a Customs exclusion, it could not be protested under 28 U.S.C. 1581(a) nor was the residual statute available for purposes of the enforcement of agricultural laws.  For these reasons, the Court dismissed plaintiff’s case. 

 

Commerce’s Decision Regarding Frozen Warmwater Shrimp

In SOC Trang Seafood Joint Stock Company et al., v. United States and Ad Hoc Shrimp Trade Action, Slip Op. 18-75, Court No. 16-205 (June 21, 2018), the Court decided two motions for judgment on the agency record challenging various aspects of the U.S. Department of Commerce’s (“Department” or “Commerce”) final determination in the tenth administrative review of the antidumping duty (“ADD”) order covering certain frozen warmwater shrimp from the Socialist Republic of Vietnam (“Vietnam”). First, the Respondents challenge Commerce’s differential pricing analysis as not in accordance with law and unsupported by substantial evidence.  Second, the Respondents challenge Commerce’s selection of surrogate value data sources to value head and shell byproducts, frozen shrimp, and ice. Third, the Respondents challenge Commerce’s decision to deny a byproduct offset for revenue from excess or scrap packaging. Fourth, the Respondents challenge as not in accordance with law and unsupported by substantial evidence Commerce’s calculation of the all-others separate rate.

The Court upheld the differential pricing analysis.  It stated, “Commerce’s differential pricing analysis, as applied, constitutes a reasonable methodology for identifying patterns of prices that differ significantly and is therefore in accordance with law. As applied by Commerce, this tool measures “the extent to which the net prices to a particular purchaser, region, or time period [i.e., the test group] differ significantly from the net prices of all other sales of comparable merchandise [i.e., the base or comparison group].”” Slip Op., pg. 13.  The Court also upheld the all others separate rate based on a remaining respondent.

Finally, while the Court upheld the head and shell by product values, it remands the surrogate value for the frozen shrimp.  As for the frozen shrimp, Commerce did not explain why it was reasonable to default to data from the primary surrogate country when that data is not contemporaneous and the record includes a more specific data source.

 

Sustained Remand Determinations in Pasta and Corrosive Steel Products

In La Molisana S.p.A v. United States et. al., Slip Op. 18-76, Court No. 16-00047 (June 21, 2018) the Court reviewed Commerce’s remand determinations of an administrative review of an antidumping order on pasta from Italy. The Court had previously remanded to Commerce two issues for reconsideration, whether Commerce failed to provide meaningful opportunity for addressing the agency’s differential pricing analysis, and whether Commerce erred in requiring the La Molisana  to report its pasta sales product shapes in conformity with the existing identities and categories of shapes on Commerce’s pasta shape classification list. For the following reasons the Court sustains Commerce’s remand determinations in full.

Plaintiff argued that it had not been provided opportunity to address Commerce’s differential pricing analysis.  Yet, the Court pointed to a recent Court of Appeals for the Federal Circuit decision which upheld the “the application of zeroing when using the average-to-transaction comparison methodology”, effectively disposing of plaintiff’s arguments.  Id. at 2. Furthermore, there was no analysis or evidence on the record to support plaintiff’s position.

In regards to Commerce’s classification of pasta, the agency has a duty “to uphold a stable and consistent model match methodology”, it is long-standing practice “that once a model-match methodology has been established, it will not” be modified “unless there are compelling reasons to do so”. Id. 3-4.  Commerce had determined that no industry wide change had occurred to compel a reclassification of pasta. Plaintiff had failed to supply Commerce with information for 14 out of the 20 pasta shapes that plaintiff would like reclassified. In addition, the only changes the plaintiffs designated were company specific, which Commerce did not allow due to the ability of producers to manipulate classification systems.

In Hyundai Steel Company v. United States et. al., Slip Op. 18-77. Court No. 16-00161 (June 22, 2018), the Court reviewed remand determinations made by Commerce concerning an antidumping investigation of corrosive resistant steel products from Korea. Previously, the Court had remanded the order to Commerce to reconsider the agency's use of the adverse facts available ("AFA") in calculating Hyundai Steel's dumping margin. Commerce had decided to apply AFA to Hyundai after identifying several problems in the company's responses to questionnaires. The Court remanded in order for Hyundai to be given an opportunity to explain or correct the deficiencies. On remand, Commerce recalculated Hyundai's dumping margin without using AFA. Despite defendant intervenors arguments, the Court upholds Commerce's remand determinations.

Commerce can make use of AFA where "necessary information is not available on the record, or an interested party withholds requested information, fails to timely provide information in the form requested, significantly impedes proceedings, or provides information which cannot be verified.” Id. at 5. Defendant-intervenors argued Hyundai’s databases and submissions were unverifiable even after Commerce’s remand determinations. The Court said these databases were subject to verification by Commerce, and Commerce’s reports find the databases verifiable. Since the databases were verified by Commerce, AFA could not be applied to them. Defendant-intervenors also argued AFA should have been applied because Hyundai incorrectly calculated yield loss, and improperly included management fees and misstated cost in calculating general and administrative expenses (“G&A”). The Court said Commerce’s determination was based on substantial evidence because the agency indicated the methodology was correct, and used the methodology in recalculating the dumping margin. In regards to the G&A, the Court said Commerce “commonly adjusts respondents’ ratio calculations” in dumping investigations. Id. at 7. The agency did not believe the adjustments of the reported G&A rose to the level to require the use of AFA, as such the Court sustained the determination.

 

No Cross-Ownership; Commerce Determination Sustained

In Nantong Uniphos Chemical Co. Ltd., et. al. v. United States et. al., Slip Op. 18-78, Court No. 17-00150 (June 25, 2018) the Court reviewed arguments regarding Commerce’s determinations in a countervailing duty investigation of 1-Hydoxythylidene-1, 1-Disphosphonic Acid (“HEDP”) from China. Plaintiff, Nanjing University of Chemical Technology Changzhou Wujin Water Quality Stabilizer Factory (“Wujin”), was named a mandatory respondent to the countervailing duty investigation. Wujin disclosed that Nantong Uniphos Chemicals Co., Ltd. (“Nantong”) was an affiliate. Commerce ultimately determined Wujin and Nantong were not crossed owned, and could not share the same rate. As a result, Wujin received a de minimis rate and Nantong received the all other rate of 2.40%. Plaintiffs jointly challenged Commerce’s determination the companies are not jointly owned. For the following reasons, the Court sustains Commerce’s determinations in full.


Plaintiffs argued that by “failing to find cross-ownership between Nantong and Wujin, Commerce failed to properly apply 19 C.F.R. § 351.525(b)(6)(vi).” Id. at 5. The regulation provides “cross-ownership does not require one corporation to own 100 percent of the other corporation,” rather “cross-ownership will exist where there is a majority voting ownership interest between two corporations or through common ownership of two (or more) corporations.” Id. at 5. Commerce had found that Wujin acquired its shares in Nantong in 2014, and held that at the same level throughout the period of investigation. The agency also found Wujin was the second largest of three shareholders and held the same number of directors as the largest shareholder. In addition, despite its large number of shares, Commerce determined Wujin could not exercise exclusive control because any action would require two out of the three shareholders to consent. The Court found Commerce’s determinations were based on substantial evidence and sustained the determinations.

Trade Updates for Week of June 20, 2018

United States Court of International Trade

 

Decision Remanded in Part in Multilayered Wood Flooring Case

In Fine Furniture Limited et al., v. United States, Court No. 14-135, Slip Op. 18-68 (June 13, 2018),  the Court remanded several issues in a remand redetermination on multilayered wood flooring from the People’s Republic in China (PRC) including the chosen electricity rate for a factor of production utilized in producing the merchandise, which is not the best available information as it only represents industrial electricity rates for Naga City and Iriga City/Pili instead of  a nationwide rate.  Moreover, separate rate plaintiffs should be assigned the ultimate rate determined for Fine Furniture, as no party commenting on the Remand Redetermination objects.   For these reasons, Commerce’s determination was remanded.

 

Remand Results Sustained in Polyester Film Case

In Mitsubishi Polyester Film, Inc. and SKC Inc. v. United States et al., Slip Op. 18-71 (June 19, 2018), Defendant-Intervenors Terphane, Inc. and Terphane, Ltda. (collectively, “Terphane”) have argued that its Copolymer Surface Films are not covered by the scope of the Order because they all “have a performance enhancing resinous layer that exceeds the thickness requirement listed in the scope exclusion.” Thus, the Department of Commerce (“Commerce”) found that, pursuant to the Second Sentence Exclusion, Terphane’s Copolymer Surface Films were outside the scope of the November 2008 antidumping duty order covering PET film, sheet, and strip from Brazil, provided Terphane could establish, to the satisfaction of United States Customs and Border Protection, that the performance-enhancing layer is greater than 0.00001 inches thick.  See Polyethylene Terephthalate Film, Sheet, and Strip From Brazil, the People’s Republic of China and the United Arab Emirates: Antidumping Duty Orders and Amended Final Determination of Sales at Less Than Fair Value for the United Arab Emirates, 73 Fed. Reg. 66,595 (Dep’t Commerce Nov. 10, 2008) (“Order”).  The first two sentences of the Order’s scope are the focus of the administrative proceedings and this litigation.  See id. (“The products covered by each of these orders are all gauges of raw, pre-treated, primed PET film whether extruded or co-extruded.  Excluded are metallized films and other finished films that have had at least one of their surfaces modified by the application of a performance-enhancing resinous or inorganic layer more than 0.00001 inches thick.”)

On remand, Commerce continued to find that the descriptions of the merchandise in its own and the ITC’s prior determinations support the conclusion that Terphane’s Copolymer Surface Films are not within the scope of the Order.  Neither Mitsubishi’s dissection of the (k)(1) factors, nor Mitsubishi’s argument that a post-processing treatment is needed to satisfy the Second Sentence Exlcusion, persuades the Court that substantial evidence does not support Commerce’s findings.  Therefore, because Commerce’s Remand Results are in accordance with the Court’s remand instructions and are supported by substantial evidence, the Results are sustained. 

 

Sustained Final Results Regarding Determinations on Steel Nails from China

In Mid Continent Steel & Wire, Inc. v. United States et. al., Slip Op. 18-72, Court No. 17-00051 (June 19, 2018) the Court heard arguments regarding Commerce’s determinations in an administrative review of an antidumping order on steel nails from China.  Commerce determined Stanley Works, a mandatory respondent, was entitled to a 5.48% dumping rate, and this rate would be used as the all other rate for qualified companies. Mid Continent challenged these determinations and argued the application of Stanley’s rate as the all other rate was unlawful and not supported by substantial evidence. In addition, Mid Continent challenged Commerce’s surrogate valuation of Stanley’s adhesive tape and plastic granule inputs as not being based on the best information available. For the following reasons the Court sustained Commerce’s final results.

Mid Continent’s first argument was that using Stanley’s 5.48% dumping margin as the all other rate was unlawful. When Commerce calculates all other rates the agency is required to “base this rate on the estimated weighted-average dumping margins established for the individually examined respondents, excluding zero and de minimis margins or margins based entirely on adverse facts available (“AFA”).” Id. at 11.  Mid Continent argued Commerce’s application of the statue was unlawful because there were only two mandatory respondents reviewed, one of which was based entirely on AFA, and that the dumping margin of one respondent could not accurately reflect the economic reality of the steel nail industry. The Court held Commerce’s determination was lawful because “its method comports with the statute.” Id. at 13. In addition, the Court said according to Commerce’s data Stanley was the largest exporter of subject merchandise, which “suggests an assumption that Stanley’s data can be viewed as representative of all exporters.” Id. at 15. Plaintiff’s next argument was Commerce’s input valuation of adhesive tape and plastic granule’s was not based on the best information available. “Commerce is charged with the duty of choosing the best available surrogate data on the record to value inputs, … among the criteria that the Department considers … is product specificity.” For both inputs, the Court held the proposed alternative HTS headings by Mid Continent were either basket provision or not specific enough, while the headings used by Commerce were more specific making them the best available information.

 

Motion to Dismiss Granted Regarding Claims in Chorinated Isocyanurates Determination

In Juancheng Kangtai Chemical Co., Ltd., NAC Group Limited v. United States, Slip Op. 18-72, Court No. 17-00257 (June 19, 2018) the Court heard arguments regarding defendants motion to dismiss for lack of subject matter jurisdiction and for failure to state a claim upon which relief can be granted. Plaintiffs challenged the administration and enforcement by Customs and Border Protection (“CBP”) of the final results issued by the Commerce in an antidumping duty investigation of chlorinated isocyanurates from China. Specifically, plaintiffs challenge the decision of Commerce to instruct CBP to collect antidumping duties on goods reported to Commerce in an annual review, where Commerce determined a zero percent dumping margin for plaintiff, that were not imported into the US until a later time when a substantial antidumping margin had been imposed on plaintiff. For the following reasons the Court dismissed the case.

The government motioned to dismiss plaintiff’s counts I-III for lack of subject matter jurisdiction because plaintiff improperly relied on the Court’s jurisdiction under 28 U.S.C. § 1581(i). In order to determine if jurisdiction arises under section 1581(i), the court assesses whether another “subsection of section 1581 is or could have been available and whether that other subsection would provide” an adequate remedy. Id. at 7.  The Court said this case arises not  “from the erroneous administration and enforcement of Commerce’s antidumping duty determinations but rather from an allegation that Commerce imposed a liquidation rate that improperly considered already reported sales and entries. Such an action is properly brought under section 1581(c).” Id. at 7. The Court also determined had the plaintiffs challenged the antidumping order under 1581(c)  “any resulting remedy could have addressed Commerce’s consideration of sales/entries.” Id. at 10. In addition the government motioned to dismiss count IV, challenging CBP’s 15 day liquidation policy, for failure to state a claim. When a case is filed plaintiffs must prove in the pleadings that they have “suffered injury in fact or the threat thereof.” Id. at 10. The Court said because the case was “directed at the rate Commerce assigned certain entries based on the Department’s distinction between sales and entries …  the 15-day policy cannot be said to have imposed an injury”, therefore no relief could be granted under count IV.  Id. at 11.

 

“ADA-Compliant Toilets Do Not Qualify For Nairobi Protocol Treatment

Extra high toilets meeting Americans With Disabilities Act (ADA) standards for use by handicapped individuals do not qualify for duty free treatment as “Articles specially designed for the blind or physically handicapped”,  according to the United States Court of International Trade

In Danze Inc. v. United States, Slip Op. 18-69 (June 19, 2018), the court considered the classification of toilets having a seat height of 16-1/2”, compared to the 14” or 15” height of regular toilets.  The ADA requires toilets specially designed for use by the handicapped to measure at least 17” from the floor to the top of the seat. Customs had already ruled that toilets with a 17” rim height qualified for Nairobi Protocol treatment. The importer contended, and the Court conceded, that with the addition of a seat, the toilets at bar would also meet the  ADA standard, and were, in fact, ADA-certified.

Notwithstanding this fact, the Court held that just because an article met ADA standards as being specially designed for the handicapped, this did not make them so designed for Nairobi Protocol purposes. The court held that the toilets had ergonomic qualities which also made them comfortable for use by non-handicapped persons, and this fact overcame the facts of their special design. The Court also demanded that the importer show that it, individually, had engaged in special design activities – a curious position given that a mandatory government standard had already been established.

 

 

United States Court of Appeals for the Federal Circuit

 

President Can Disregard Certain ITC Determination in Escape Clause Cases

Law took another step further away from reality when the Court of Appeals for the Federal Circuit, in Silfab Solar Inc. v. United States, No. 18-1718 (June 5, 2018) upheld aa Court of International Trade decision which declined to enjoin the imposition of escape clause tariffs on imports or Crystalline Photovoltaic Solar Panels from Canada.

The ITC had found that the domestic industry was seriously injured by reason of increase imports of solar panels from all sources. Under the NAFTA Implementation Act, an escape clause determination is not to be imposed against products of Canada unless they account for a “substantial portion” of imports. In this case, Canadian solar panel imports accounted for less than 2% of all imports, and Canada was not among the top 5 foreign suppliers. While the ITC made an affirmative finding of injury, it split on the issue of remedy, the Commissioners offering three different remedy recommendations to the President. Two of those three recommendations found Canadian imports to be insubstantial, and recommended that Canadian products be excluded from relief.

Nonetheless, in proclaiming higher tariffs on imported solar products, the President included Canada in the assessment of additional duties.

This, the President was allowed to do, the CAFC held. The escape clause statute only requires an injury determination from the ITC. Once such a determination is received, the President is free to take whatever action he wishes, consistent with the law. Notwithstanding that Canadian imports accounted for less than 2% of all imports, and that two Commission reports had deemed these insubstantial, the President was free to disregard those reports, make his own finding, and impose the tariffs.  The CIT had correctly denied the injunction application on the ground that the plaintiffs were not likely to prevail on the merits of their claims.

 

Importer Must Obtain Commerce Scope Ruling Before Proceeding to Court, CAFC Holds.

An importer challenging Customs decision to require cash deposits of estimated antidumping and countervailing duties on an imported product must first seek a Commerce Department Scope ruling before proceeding to court, the Court of Appeals for the Federal Circuit recently held.

In Sunpreme Inc. v. United States, No. 17-1338 (June 14, 2018) an importer of solar panels believed that its goods were exempt from the antidumping and countervailing duty orders because they were “thin film” types of solar panels. Customs disagreed, demanding that the importer deposits steep cash deposits of estimated duties, and file Type 03 antidumping entries. Faced with financial hardship, the importer challenged the deposit instructions in the Court of International Trade, and secured an injunction which prevented Customs from demanding the duty deposits. The government appealed.

Not so fast, the CAFC held. Sunpreme had failed to exercise and exhaust its administrative remedies, and could not proceed to court. The CIT lacked jurisdiction to entertain the importer’s case. The Court noted three potential bases for jurisdiction: 28 U.S.C. Section 1581(a) 1581(c) (review of scope determination) or 1581(i) (residual jurisdiction). Since there was a dispute about whether the goods were covered by the antidumping order, the Court held, protest jurisdiction under subsection (a) was not available. However, the importer should have waited until a Commerce Department Scope Determination was completed to bring its challenge to court under subsection (c). Because the liquidation of entries could be suspended while that type of inquiry takes place, the importer was required to seek a scope determination first, and proceed to court for a review of that determination if it was unfavorable.

Finding that the CIT lacked jurisdiction, the Court vacated the determination and remanded it with orders to dismiss the case.

Trade Updates for Week of June 13, 2018

United States Court of International Trade

 

Decision Remanded in Part in Welded Carbon Steel Case

In Tosçelik Profil Ve Sac A.S. v. United States and Zekelman Industries, Slip Op. 18-66, Court No. 17-00018 (June 6, 2018) the Court considered arguments regarding Commerce’s determinations in an administrative review of an antidumping duty order on welded carbon steel standard pipe and tube products from Turkey.  For the following reasons the Court sustains Commerce’s determinations in part and remands in part for further reconsideration.

The Court reviewed Commerce’s methodology for calculating the duty drawback adjustment given to plaintiff. “The purpose of a duty drawback adjustment is to ensure a fair comparison between normal value and export price.” Id. at 7.  Toscelik argued that the Department’s calculation did not account for computing exempted and rebated duties over total exports to the United States.  “Because the statute contemplates a drawback on duties that are rebated or exempted “by reason of” the exportation of the subject merchandise to the United States, Tosçelik contends that Commerce’s calculation of the duty drawback adjustment is contrary to the statute’s plain language in that the chosen methodology ignores the statute’s textual linkage between the adjustment and the act of exporting.” See id. at 9.  The determination was remanded for reconsideration.

The next issue was if Commerce’s use of actual weight versus theoretical weight was supported by substantial evidence. Commerce had not specified “whether respondents should provide information in either actual or theoretical weight, but rather that respondents should use the same unit of measure to report sales.” Id. at 13. Plaintiff had also notified Commerce of their “belief that the use of theoretical weight in this case may introduce unwanted distortions into the calculations.” Id. at 13. The Court concluded the determination was based on substantial evidence based on the record.

The final issue was whether Commerce’s sale adjustment for warehousing expenses for plaintiff was based on substantial evidence. Commerce’s “proclamation of “no evidence” clearly contradicts Tosçelik’s admission that the claimed warehousing expenses encompassed costs associated with both manufacturing and storing products for sale. The Department failed to give reasons and substantiate its decision to make a circumstance of sales adjustment for Tosçelik.” Id. at 17.   The Court held because Commerce granted a sale adjustment based on the warehousing expenses despite the evidence that the expenses included storage for local deliveries Commerce failed to take account all of the evidence in the record. The determination was remanded for reconsideration. 

 

Remanded Determinations in Multilayered Wood Flooring Case

In Jiangsu Senmao Bamboo and Wood Industry Co. Ltd., et. al. and Guangdong Yihua Timber Industry Co. Ltd., et. al. v. United States and Coalition for American Hardwood Parity, et. al. Slip Op. 18-67, Court No. 15-00225 (June 8, 2018) the Court heard numerous arguments regarding Commerce’s determinations in an administrative review of an antidumping duty order of certain multilayered wood flooring from China. Plaintiffs and defendant intervenor challenged many aspects of Commerce’s surrogate value selections from Thailand as a substitute for the non-market economy (“NME”) of China.  For the following reasons the Court remanded certain determinations to Commerce for reconsideration.

The first issue was if the surrogate value of input plywood was based on the best available information. Commerce based its determinations on the Global Trade Atlas data for Thai imports. Commerce calculated an average unit value (“AUV”) for the data and excluded data from countries where subsidies were provided. In the administrative review, defendant intervenors raised the issue to Commerce that the data on Thai imports from Taiwan and the U.S. also contained subsidies that resulted in the AUV being aberrationally low. However, this issue was never addressed by Commerce. “Commerce also has an obligation to address important factors raised by comments from petitioners and respondents.” Id at 15. Since Commerce never addressed the issue raised by defendant intervenors the Court remanded the determinations for reconsideration.

The Court also reviewed whether the surrogate value of input overlaying glue was based on best available information. In valuing the glue, Commerce classified the glue under HTS heading 3506. Plaintiffs argued the glue was properly classifiable under HTS heading 3909, therefore making Commerce’s determinations not based on the best information. The Court held that “because the record does not contain evidence to support a determination” that glue is properly classified under HTS heading 3506 the determination was not based on the best available information. On remand, Commerce must reconsider the classification.

Commerce must reconsider its decision to assign Fine Furniture an individual weighted-average dumping rate as a voluntary respondent. Commerce is required “to accept a qualifying voluntary respondent request if the number of exporters or producers who have submitted such information is not so large that individual examination of such exporters or producers would be unduly burdensome.” Id. at 43.  In interpreting this statute Commerce decided that the number “one is so large as to allow it to reject Fine Furniture’s voluntary respondent request, even though it was the only such request”. Id. at 47. The Court found the interpretation unreasonable because “Commerce may avoid reviewing any requestor of voluntary respondent status even if the number of requestors is as small as possible.” Id. at 48. Because the Court did not agree that Commerce could exercise its discretion based on misinterpretation of section 782(a)(2) before the amendment to the TPEA, Commerce’s decision to deny Fine Furniture’s voluntary respondent request was remanded.

The final major issue was whether a downward adjustment, based on a value added tax (“VAT”) Commerce made in determining the export price of plaintiff’s subject merchandise was unlawful. In determining dumping duties Commerce compares export price in the US to the normal value of goods in a home market. To achieve accurate figures various deductions are allowed including the deduction of VAT on goods. In this case, Commerce determined that there should be an 8% deduction to the export price of plaintiff’s goods based on an a 17 % Chinese VAT and 9% refund on goods at exportation. Based on this Commerce determined that a refund was only applicable to the 8% refunded VAT on exports for and not applicable to the normal value. However, the Court held that since the 17% VAT was paid on all goods, whether they were domestically used or exported both export price and normal value could be potentially receive deductions. The Court  said “Commerce lacked evidentiary support for its finding that under the PRC’s VAT system a producer of exported merchandise .. did not incur irrecoverable input VAT on domestic sales.” The issue was remanded for Commerce to reconsider the deduction of VAT.

Trade Updates for Week of June 6, 2018

United States Court of International Trade

 

Preliminary Injunction Granted

Where a single entry bond requirement (“SEB Requirement”) imposed an enhanced SEB Requirement amount of three times the value of the entire shipment, the Court granted an injunction restraining U.S. Customs and Border Protection from collecting such a bond, other than the $200,000 continuous bond currently in place for plaintiff.

In U.S. Auto Parts Network,  Inc. v. United States et al., Court No. 18-68, Slip Op. 18-62 (May 25, 2018), the Court reviewed the preliminary injunction factors to decide whether an injunction should be granted.  Because of plaintiff’s inability to pay the SEB Requirement at about $9 million, and plaintiff’s showing that it would be forced into bankruptcy if required to pay the SEB Requirement, the Court found for plaintiff in regards to irreparable harm, balance of hardships, and agency action in violation of the APA.   The single entry triple bond was determined to be excessive and the Court noted that the government determined that approximately 99% of the goods imported by U.S. Auto were not implicated by Customs’ counterfeit allegations, which was the reason for the SEB Requirement. In regards to public interest, the Court found that it weighs in favor of both plaintiff and defendants where, plaintiff has had to force time off for employees because of the SEB Requirement, and defendant is mandated to enforce the law. While the Court did not find that plaintiff provided a sufficient showing in regards to due process claims, it nonetheless granted the injunction.

 

Final Scope Ruling Remanded on Zinc Anchors

In OMG, Inc. v. United States and Mid Continent Steel & Wire Inc., Court No. 17-36 , Slip Op. 18-63 (May 29, 2018), plaintiff challenged Commerce’s determination that zinc anchors fall within the scope of Antidumping and Countervailing duty orders on Certain Steel Nails from the Socialist Republic of Vietnam. Certain Steel Nails from the Socialist Republic of Vietnam: Final Scope Ruling on OMG, Inc.’s Zinc Anchors (Feb. 6, 2017), P.D. 29 (“Final Scope Ruling”).  The zinc anchors by definition are not nails or “fastener(s) inserted by impact into the materials to be fastened.”  OMG’s anchors are “inserted into predrilled holes which must be a minimum of ½[inch] deeper than the Zinc Anchor embedment.” Slip Op. at pg. 10.   Moreover, trade usage supports the conclusion that OMG’s zinc anchors are not nails.  Thus, the Court remanded the Final Scope Ruling to Commerce for further consideration consistent with the Court’s opinion.

 

Ex Parte Communications Must Be Included In Administrative Record

In CSC Sugar LLC. v. United States, Slip Op. 18-64, Court No. 17-00214 (June 1, 2018) & in CSC Sugar LLC. v. United States, Slip Op. 18-65, Court No. 17-00215 (June 1, 2018) the Court heard arguments over Commerce’s duty to disclose ex parte communications about suspension agreement renegotiation regarding sugar from Mexico subject to antidumping and countervailing duty investigations. Commerce had previously placed antidumping and countervailing duties on sugar from Mexico,  but had made suspension agreements in regards to the duties with the Mexican Government. In 2016, Commerce notified Mexico that it intended to withdraw from the agreements unless the terms were renegotiated. After the renegotiation process “Commerce invited interested parties to comment on the draft” suspension agreements. Id. at 5. However, plaintiff brought this case contending the administrative record was incomplete because the Financial Times had published an article reporting phone calls between U.S. representatives, Mexican representatives, sugar industry representatives that was never disclosed on the record.

The issue in this case was whether Commerce was required to disclose the phone conversations between various U.S., Mexican, and industry representatives on the administrative record. 19 U.S.C. § 1516 required the government to disclose “a copy of all information presented to or obtained by the Secretary… including all government memoranda … and the record of ex parte meetings.” Id. at 10. 19 U.S.C. § 1677 required the memorialization of ex parte meetings. The government argued that it was not required to disclose the contents of the meetings because the content was exempt because they were confidential. In analyzing this argument the Court used the Chevron test.  The Court considered the language of the applicable statutes to determine if the language in the statute was ambiguous, if the language was ambiguous the Court would then consider if the government’s interpretation of the language was reasonable. In interpreting the applicable statute, the Court said there were no limitations on the “requirement that the record include all information presented to or obtained by Commerce in the course of the proceeding.” Id. at 11. The Court granted plaintiffs motion to complete the record by requiring the government to disclose these ex parte communications. However, the Court did not grant plaintiff’s request for the government to disclose ex parte communications from after Commerce’s final determinations were published because they were not subject to disclosure on the record.

Trade Updates for Week of May 30, 2018

United States Court of International Trade

 

Remand Redetermination Sustained

In Vinh Hoan Corporation et. al. v. United States et. al. Slip Op. 18-59, Court No. 13-00156 (May 24, 2018) and in An Giang Fisheries Import and Export Joint Stock Co. et. al. v. United States et. al. Slip Op. 18-60, Court No. 14-00109 (May 24, 2018) the Court reviewed Commerce’s decision on remand regarding the surrogate values for mandatory respondent Vin Hoan’s fish oil in various antidumping reviews. Originally, Commerce had selected Indonesia HTS data as the basis for the surrogate values. However, Commerce was concerned that the data included refined and unrefined fish oil, while respondent only used unrefined fish oil. Due to this concern Commerce “capped” the HTS value at an amount for unrefined fish oil. This amount was calculated using Vinh Hoan’s factors of production (“FOP”). Plaintiffs challenged this surrogate value and the capping procedure. Through various remands Commerce continued to believe the Indonesian HTS data the best available and continued to cap the data. However, the Court believed that Commerce was constructing a value and could not call the Indonesian data the best available. In the most recent remand under review, Commerce explained that the Indonesian data could not be used as a surrogate value and explained why it constructed a value in place of using a surrogate value. For the following reasons the Court upholds Commerce’s determinations in full.

Plaintiffs challenged Commerce’s determination to use constructed value as being unsupported by substantial evidence, and because it was unreasonable to disregard the Indonesia HTS data. When constructing surrogate values for non-market economies Commerce must use “the best available information regarding the values of such factors in a market economy” Id. at 10. Commerce is supposed to select the best available information based on five factors : “(1) specificity to the input; (2) tax and import duty exclusivity; (3) contemporaneity with the period of review; (4) representativeness of a broad market average; and (5) public availability.” Id. at 10. Commerce determined that the Indonesian HTS data was not specific because it covered refined and unrefined oil while the respondent only used unrefined oil in its product. In fact, Commerce determined the data only met the public availability factor and that constructing a value would be much more accurate. The Court said “Commerce has explained why it deviated from its usual practice and constructed a value using Vinh Hoan’s FOP data in this review. ” Id. at 14. The Court found the constructed value method reasonable because Commerce used the respondent’s own reported FOP data to build up a price that reflected the value of that respondent’s fish oil byproduct, and was more representative or respondent’s fish oil byproduct.

 

False Declaration of Country of Origin

In United States v. Active Frontier International Inc., Slip Op. 18-58, Court No. 11-00176 (May 24, 2018) the Court considered an action to recover civil penalties from defendant “for alleged false declarations of country of origin on seven entries of wearing apparel,” of women’s capris, jackets and pants.  Id. at 1. The government alleged the merchandise was “entered and/or introduced . . . by means of materially false documents, written statements, acts, and/or omissions.” The complaint alleged that Active Frontier falsely declared the country of origin of the goods on entry documentation. Before the Court was plaintiffs motion for a default judgment in the amount of $80,596.40. For the following reasons the Court agreed with the plaintiffs and granted the penalties. 

Firstly, the Court determined whether the Government’s complaint was sufficient enough for the Court to grant a default judgment. When evaluating a default judgment “the court accepts as true all well-pled facts in the complaint but must reach its own legal conclusions.” Id. at 2.  The legal conclusion the Court needed to reach in this case was that the misrepresentation was material under section 592 of the Tariff Act. The Court concluded that the misrepresentation was material because the imported pants were subject to an import quota; thus, the misrepresentation frustrated the purposes of the quota system. In addition, the Court found with regards to the other imported goods, that they were also material misrepresentations because the misrepresentation helped mask the false origin declaration in the pants since the goods were advertised and sold as single units.

Second, the Court determined the amount of the penalty to be imposed for the misrepresentations. For a negligent violation that did not result in a loss of revenue to the United States, there is a maximum penalty of 20% of the dutiable value of the merchandise. The Court concluded plaintiff’s factual allegations support a conclusion that Active Frontier was negligent. An importer is required to use reasonable care in importing merchandise. The Court found Active Frontier negligent because the Bills of Lading for the shipments clearly state China was the country of origin; it was obvious that defendant did not review available documentation.           

 

Remand Results Sustained on Crystalline Silicon Photovoltaic Products from China

In Jinko Solar Co., Ltd. et. al. v. United States et. al. Slip Op. 18-61, Court No 15-00080 (May 25, 2018) the Court reviewed Commerce’s decision on remand regarding an antidumping duty investigation of crystalline silicon photovoltaic products from China. On remand, Commerce reconsidered its use of South African HTS data as a surrogate value to value respondents scrapped solar module by-product. Under protest, Commerce instead choose to value the scrapped solar modules using Thai import data, the only other available surrogate option. For the following reasons the Court sustains Commerce’s determinations.

The issue for analysis in this case was whether the Thai import data for HTS 2408.69, which covered the raw material, was more specific, and was an appropriate choice as a surrogate value in the investigation. To select a surrogate value for non-market economies, Commerce uses “the best available information regarding the values of such factors in a market economy country.” Id. at 11. Commerce declined to provide an alternate explanation for selecting the South African data, and instead selected the other available category, the Thai import data, as the best available information for valuing the scrapped solar module by-product. The Court said the Thai data “covers the raw material that makes up the primary input in this by-product” and was therefore an appropriate surrogate value.

Trade Updates for Week of May 23, 2018

United States Court of International Trade

 

Remand Redetermination in New Shipper Review Sustained

Where record data from the International Labor Organization’s Yearbook for Thai labor wages was preferred to industry specific wages provided from the Ukraine or Philippines, the Court sustained Department of Commerce’s decision to use Thai labor information in remand determination.

Before the Court in GGB Bearing Technology (Suzhou) Co., Ltd. and Stemco LP v. United States, Court No. 12-386, Slip Op. 18-55 (May 22, 2018), was the remand redetermination issued by Commerce in response to the Court’s order of December 12, 2017 in GGB Bearing Tech. (Suzhou) Co. v. United States, 41 CIT_, 279 F. Supp. 3d 1233(2017)(“GGB I”).  The underlying decision contested dealt with results in a new shipper review concerning Tapered Roller Bearings and Parts Thereof, Finished and Unfinished from the People’s Republic of China.

Plaintiff GGB Bearing Technology (Suzhou) Co., Ltd. (“GGB”) is a Chinese producer and exporter of tapered roller bearings and parts thereof, finished and unfinished (“subject merchandise” or “TRBs”, while plaintiff Stemco LP is GGB’s U.S. affiliate and importer of subject merchandise.

In this Remand Redetermination the Court upheld Commerce’s finding that Philippines and Ukraine were significant producers. Record evidence showed that Philippines and Ukraine had exports of the subject merchandise valued at $16,850, 256 for Philippines and $97,047,957 for Ukraine in 2010.  This allowed Commerce to consider labor cost data from the Philippines or Ukraine.  However, the Court also sustained Commerce’s finding to use Thai “total manufacturing” labor cost data, as it was favored over the industry specific labor cost data of the Philippines or Ukraine.

 

Motion for Judgment on Agency Record Denied in Nails Case

Financials from a “toll processor” could not be used to provide a reasonable surrogate for constructed value profit and selling expenses.  In Mid Continent  Steel & Wire, Inc. v. United States, Court No. 16-244, Slip Op. 18-56 (May 22, 2018), the Court sustained Commerce’s decision regarding a surrogate for CV profit and selling expenses in Certain Nails from the United Arab Emirates (“UAE”), 81 Fed. Reg. 71482 (Oct. 17, 2016).  Because Overseas Distribution Services, Inc. (“ODS”) lacked a viable home or third country market, Commerce resorted to “any other reasonable method” to find a surrogate for the profit and selling expenses for ODS.  Plaintiff argued for the use of financial statements from Overseas International Steel Industry LLC (“OISI”), an affiliate of ODS located in Oman, however, Commerce decided that OISI was a more of a service provider than producer, who lacked the necessary expense information to be a surrogate for CV purposes.

“Commerce concluded OISI a “mere” toll processor and not a producer of comparable merchandise, it eliminated OISI’s financial statements from contention among those on the record for use as possible surrogates for ODS’s profit and expense data, and it selected LSI’s financials based on the quality of their data. Substantial evidence of record supports that determination.” Slip Op., pg. 10.  For this reason, the Court denied plaintiff’s motion and upheld Commerce’s determination. 

 

Judgment on Agency Record Denied in Chlorinated Isocyanurates Case

In Heze Huayi Chemical Co., Ltd. and Juancheng Kangtai Chemical Co., Ltd. v. United States, Court No. 17-32, Slip Op. 18-57 (May 22, 2018), the Court denied a motion for judgment on agency record sustaining the decision to hold Mexico as a significant producer of comparable merchandise.  The plaintiffs Heze Huayi Chemical Co., Ltd. (“Heze”) and Juancheng Kangtai Chemical Co., Ltd. (“Kangtai”), producers and/or exporters of subject merchandise, initiated this challenge to the 2014-2015 administrative review (“POR”) of the antidumping duty (“AD”) order on chlorinated isocyanurates (“chlor-isos”) from the People’s Republic of China (“PRC”). See Chlorinated Isocyanurates from the PRC, 82 Fed. Reg. 4852 (Jan.17, 2017) (final results of 2014-2015 antidumping duty admin. review) (“Final Results”). Commerce found Mexico to produce both “identical” and “comparable” merchandise. 

Because the governing statute does not define what is comparable or significant, the Court held that Commerce’s interpretation will govern if reasonable. Plaintiffs argue that the quantity of Mexican production of chlor-isos is uncertain, and that Commerce needs to explain why a small amount of production is a significant quantity, given that Mexico is also an importer of chlor-isos.. However the Court found that there was evidence there as cross border trade data on the shipments of the subject merchandise, and that Mexico was indeed a source of U.S. imports of chlor-isos.  Presented with no clear error or abuse of discretion, the Court finds Commerce decision supported by substantial evidence. Furthermore, the Court found Commerce’s use of CYDSA’s, a Mexican company, financial statement for calculating financial ratios also to be supported by substantial evidence.

 

Remand Decision Regarding Crystalline Silicon Photovoltaic Cells Remanded in Part

In Solarworld Americas Inc. et. al. v. United States et. al., Slip. Op. 18-53, Court No. 16-00134 (May 18, 2018) the Court considered the remand decision concerning the second administrative review of the antidumping duty order covering crystalline silicon photovoltaic cells.  In this second administrative review of the ADD order on crystalline silicon photovoltaic cells, whether or not assembled into modules, from China, Commerce selected Yingli Green Energy Holding Co., Ltd. (“Yingli”) and Changzhou Trina Solar Energy Co., Ltd. (“Trina”) as mandatory respondents. The Court had remanded three issues to Commerce for reconsideration: the agency’s use of import data with reported quantities of zero, Commerce’s valuation of tempered glass input using Thai import data, and Commerce’s selection of Thai HTS category 8548.10 to value scrapped solar cell and module byproduct. For the following reasons the Court sustains Commerce’s determinations in regards to the reported quantities of zero in the surrogate value calcultions but remands the other issues for further consideration.

The first issue the Court examined was Commerce’s inclusion of reported import data with values of zero. Plaintiff argued that the inclusion distorted the results and made them unreliable. On remand Commerce determined the zero-quantity data was “attributable to rounding small quantities down to zero, rather than random errors that might result in unreliable data” Id. at 10. The Court held that because Commerce had conducted two separate studies to confirm this determination Commerce had adequately supported the conclusion. The next issue was Commerce’s valuation of Yingli’s tempered glass input. Commerce used Thai import data as a surrogate value for the input. 1.6% of the Thai data was imports from Hong Kong but compromised over ¾ of the data’s overall value. The issue was previously remanded because Commerce cited two cases were not current practice at the time in support of its determination the data was proper. On remand, Commerce cited a case which the agency believed represented current practice. However, the Court said the agency still failed to adequately explain why the Hong Kong imports in the Thai data was not aberrational and remanded the issue back to Commerce. Further, Commerce must reconsider the issue of disproportionate impact of the Hong Kong data.  The final issue was Commerce’s selection of HTS 8548.10 to value scrapped solar cells. The issue was previously remanded because Commerce had not explained its decision regarding which HTS subheading to value the inputs under. On remand, the agency said it believed HTS 8548 was more specific then plaintiff’s proposed subheading. The Court believed that Commerce had not sufficiently explained why “the category is a reasonable choice for the best available information.” Id. at 24. The issue was remanded for Commerce to adequately explain why it believed HTS 8548 was more specific then other options.

 

Granted Motion to Dismiss Plaintiff’s Complaint Regarding Oil Country Tubular Goods from India

In United States Steel Corporation v. United States, Slip Op. 18-54, Court No. 17-00190 (May 18, 2018) the Court heard arguments regarding defendant’s motion to dismiss. Plaintiff challenged Commerce’s amended antidumping order regarding oil country tubular goods from India. The amended order was published in the Federal Registrar after previous litigation by plaintiff regarding the same antidumping investigation. Plaintiff bought a new case challenging the all others rate in the amended order as inconsistent with the Court’s previous decision about the order. For the following reasons the Court agrees with defendant and dismisses the case.

The first issue the Court analyzed was the motion to dismiss for lack of subject matter jurisdiction.  “A party may challenge an antidumping duty order based upon a final affirmative determination by filing a summons in this Court within 30 days of the order’s publication in the Federal Register” Id. at 7. The Court found that it had subject matter jurisdiction because “plaintiff’s complaint in the present action challenges Commerce’s purported failure to recalculate the all-others rate” in the amended order and was timely filed with on 30 days of publication. The next issue was whether plaintiff’s claims were precluded by the previous decision. “The doctrine of claim preclusion not only prohibits the litigation of matters that were previously litigated, but also those that could have been litigated.” Id. at 9.  The Court held that “Plaintiff could have challenged the all-others rate at the time that it challenged the individual respondents’ rate” therefore precluding this claim.  Id. at 9. For this reason, the Court dismissed the complaint and granted defendant’s motion.

 

United States Court of Appeals for the Federal Circuit

 

Federal Circuit Tries to Clarify Scope of Aluminum Extrusions Dumping, CVD Orders

The United States Court of Appeals for the Federal Circuit recently issued two new decisions attempting to clarify the scope of the antidumping and countervailing duty orders on Aluminum Extrusions from China, which have so far been interpreted to cover everything from tennis racket handles to curtain walls for buildings.

In Meridian Products LLC v. United States, No. 2016-2657 (May 22, 2018) the Court considered whether certain handles for ovens were within the scope of the order. The particular handles in question featured an aluminum tube and two plastic endcaps. The endcaps were designed to be fastened to the door of an oven or other appliance.

The Court of International Trade had concluded that these particular handles were not “aluminum extrusions” within the scope of the order, due to the presence of the plastic endcaps. It held that the endcaps were not “fasteners.” Consequently, it concluded that the handles fell within the scope of the “finished goods kit” exception to the order. On appeal, the Federal Circuit reversed, concluding that the endcaps were fasteners. It noted that, under the scope of the orders in question, where an aluminum extrusion is packaged with fasteners – in this case the endcaps and screws – the presence of fasteners did not put it within the scope of the “finished goods kit” exemption.

However, the Federal Circuit noted that the testimony was inconsistent about whether, in the products’ condition as imported, the plastic endcaps were permanently affixed to the aluminum tubes. The Court noted that if, at the time of importation the plastic caps were permanently affixed, then the product might be exempt from the scope of the orders as “finished merchandise” [“the scope also excludes finished merchandise containing aluminum extrusions as parts that are fully and permanently assembled and completed at the time of entry…”].

In Whirlpool Inc. v. United States, No. 2017-1117 (Fed. Cir., May 23, 2018) the Federal Circuit addressed the classification of that company’s refrigerator handles, which featured plastic end-caps. The Court held that the handles were within the inclusive language of the orders, but suggested that if the end-caps were permanently attached, the product could fall within the “finished goods” exclusion.

 

Trade Updates for Week of May 16, 2018

United States Court of International Trade

 

Remanded Scope Determination on Cast Iron Electrical Conduit Fittings

In Atkore Steel Components, Inc. v. United States, Slip Op. 18-52, Court No. 17-00077 (May 15, 2018) the Court reviewed Commerce’s determinations in a scope ruling which held plaintiff’s cast iron electrical conduit articles fall within the antidumping order on certain malleable iron pipe fittings from the People’s Republic of China. Plaintiff argued the results were not supported by substantial evidence and were unlawful. For the following reasons the Court agreed with plaintiff and remanded the scope inquiry to Commerce for reconsideration.

Plaintiff argued that the scope determination was unlawful because Commerce unreasonably delayed its inquiry. 19 C.F.R. § 351.225(c)(2) required Commerce to issue final scope ruling or initiate a scope inquiry within 45 days from the date of Commerce’s receipt of an application for a scope ruling. However, the regulation also allows Commerce to extend any time limit for good cause. Here, Commerce took 118 days, but had issued notifications of extension because of the complexity of the matter. The Court refused to hold the inquiry unlawful due to the delay because no statute or regulation contains any penalties for delay and because plaintiff did not object to the delay when Commerce initially sent notification of the delay.

More importantly, Commerce’s determination was not supported by substantial evidence. In order to issue a final scope ruling Commerce must find that the scope of the antidumping order was unambiguous, if not the agency must consider relevant factors specified in the regulations. In this case, Commerce found the scope of the dumping order unambiguous despite substantial discussion of the factors specified for further analysis in the regulation. The Court held however, that the term “pipe” is a broad term and there is ambiguity as to whether all non-grooved cast iron pipe fittings fall within “certain malleable iron pipe fittings, cast, other than grooved fittings” as mentioned in the order. The Court held that Commerce must determine whether the physical differences raised in Atkore’s ruling request were relevant to the scope of the Antidumping Order, as per 19 C.F.R. § 351.225(k)(1).  For example, Commerce failed to consider the industry standard of PSI rating for pipes, which the products at issue do not meet, and physical differences between the products at issue and the products in the order raised by plaintiffs. If Commerce finds that the (k)(1) sources are not dispositive, then it must consider the (k)(2) sources.  The Court remanded the case for Commerce to assess the factors mandated by regulation.

Trade Updates for Week of May 9, 2018

United States Court of International Trade

 

Remanded Decision in Certain Corrosion-Resistant Steel Products (CORE) Case

In JSW Steel Ltd. and JSW Steel Coated Products Ltd. v. United States, et al., Court No. 16-165, Slip Op. 18-51 (May 9, 2018), Plaintiffs JSW Steel Limited and JSW Steel Coated Products Limited (collectively, “Plaintiffs” or “JSW”), contest Commerce’s use of adverse facts available (“AFA”) in connection with a JSW affiliate called JSW Steel (Salav) Limited (“Salav”). Commerce initiated a CVD investigation into CORE from certain countries, including India, with a period of investigation (“POI”) of calendar year 2014. Certain Corrosion-Resistant Steel Products from the People’s Republic of China, India, Italy, the Republic of Korea, and Taiwan, 80 Fed. Reg. 37,223 (Dep’t Commerce June 30, 2015) (initiation). JSW was selected as a mandatory respondent and was asked to respond to several questionnaires. Commerce issued a CVD rate of 29.46% based on adverse facts available (AFA) because JSW withheld that Salav had been in operation during the POI, and therefore did not discuss activities of Salav or its subsidiaries during the POI.

However, the Court holds that the rate based on AFA was not supported by substantial evidence where JSW was not asked about Salav’s operational status and made no misrepresentations regarding same. One question is whether evidence indicates that Salav supplied an input for CORE production. JSW did correctly inform Commerce that in the final two months of the POI, Salav produced direct reduced iron or DRI, and made a small shipment of DRI to JSW. However, according to JSW, the Dolvi facility (i) is the only JSW facility capable of processing DRI, (ii) is incapable of producing subject merchandise, and (iii) did not send any inputs during the POI to Vijayanagar, the only JSW facility capable of producing subject merchandise.  Moreover, because Salav DRI was sent to Dolvi at the end of the POI, it was unlikely that the subject merchandise was finally produced until the after the POI.  Commerce has not verified this information, nor has it provided any evidence to contradict JSW’s representations.

The case was remanded because there was no evidence on the record to support Commerce’s use of adverse facts. The Court did not reach the merits of Commerce’s determination that JST failed to cooperate or arguments raised by JSW as to the reasonableness of the CVD rate.

 

Motion to Dismiss Granted in Garlic Case

In Coalition for Fair Trade in Garlic v. United States, Court No. 18-00005, Slip Op. 18-50 (May 4, 2018), the Court granted Defendant United States’ motion to dismiss plaintiff’s complaint, thereby rendering moot Plaintiff’s motions for a preliminary injunction and for judgment on the agency record.  In November of 2017, the Coalition for Fair Trade in Garlic (“CFTG”) filed a review request asserting status as a domestic interested party and asking Commerce to review “any exporters of fresh garlic. . . .during the period of review.”  CFTG did serve the review request to Harmoni, one Chinese garlic exporter.  However, because CFTG did not specify any exporters of Chinese garlic, its review request was denied.  Plaintiff filed a complaint and preliminary injunction motion asking to hold the review request valid.

The court granted Defendant’s motion to dismiss, because firstly, 1581(c) was not manifestly inadequate, and secondly, no final agency action was taken where Commerce’s final decision was not issued in the review.  CFTG could challenge a final decision to rescind the review of Harmoni, whether it occurs prior to or in conjunction with the publication of the final results of the review.  In regards to final agency action, Commerce has indeed initiated a review of Harmoni based on other review requests.