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. 

Trade Updates for Week of April 25, 2018

United States Court of International Trade

 

Final Results Regarding Certain Activated Carbon Remanded in Part

In Jacobi Carbons AB Jacobi Carbons, Inc. et al. v. United States et al., Consol. Court No. 15-286, Slip Op. 18-46 (April 19, 2018), the Court remanded in part, Department of Commerce’s final results in the seventh administrative review (“AR7”) of the antidumping duty order on certain activated carbon from the People’s Republic of China (“PRC” or “China”). Because of the growing difference between PRC’s per capita gross national income (GNI) and the Philippines’ per capita GNI, it was clear that the Philippines and China moved in different levels of economic development. Thus, Philippines was not an appropriate surrogate country for purposes of AR7.  The Court sustained Commerce’s determination that Philippines was not listed as a possible surrogate country.

However, the Court remanded Commerce’s decision as to what is a significant producer.  According to the Court, there is “a lack of reasoning as to why the chosen measures and particular amounts of domestic production or net exports represent significant production.” Slip Op. pg. 25.  Commerce did not explain why two Thai firms’ (Cabokarn Co., Ltd. and C. Gigantic Carbon Co., Ltd.)  domestic sales and net exports are “significant” to   designate Thailant as a significant producer.

Moreover, a remand was required for Commerce to further explain its determination that the Cabokarn 2011 statement contains no evidence of countervailable subsidies to  value financial ratios or otherwise provides suitable surrogate financial data.  A remand was also required for aberrational data used for an input where it was beyond the high end range in value for this input, and why historical data from other surrogate countries may not be used, even if they are not currently economically comparable to the PRC. Finally, the Court remanded again the VAT adjustment so Commerce may reconsider the record evidence and apply a methodology consistent with the record evidence and U.S. law.

 

Final Results in Review on Steel Threaded Rod from the PRC Sustained

In Vulcan Threaded Products Inc. v. United States et. al.  Slip Op. 18-45, Court No. 16-00268 (April 18, 2018) the Court reviewed Commerce’s determinations regarding surrogate values in an antidumping investigation of threaded steel rod from China. During the investigation, Commerce selected import data from Bulgaria as the best available information on the record. Plaintiffs argued that Thai import data was the best available information, and that Commerce’s decision was not supported by substantial evidence on the record. For the following reasons, the Court sustained Commerce’s decisions in full as being supported by substantial evidence.

Plaintiffs argued there was substantial evidence on the record so that no reasonable person could find the Bulgarian import data superior to the Thai import data. Specifically, plaintiffs argued the Bulgarian HTS breakdown of steel rods by diameter affected the reliability of the data, and that the Thai data was more representative of the industry in China. Commerce’s determinations must be supported by substantial evidence, meaning the evidence must be enough so that reasonable mind might accept it as adequate to support a conclusion. The Court said that Commerce “chose to prioritize the quality of wire rod data” and since “the Bulgarian set contained some data for wire rod with diameters of 14mm or larger, while the Thai set contained no information” reasonable minds could conclude that Commerce used the best available data, supported by substantial evidence. Id. at 9. Plaintiffs also argued that since the Bulgarian data included steel rods with a .25% carbon content as opposed to Thailand’s .23% carbon content the data was not as specific. However, the Court said plaintiffs pointed “to nothing in the record that would indicate that the inclusion of steel imports with a carbon content of 0.24 percent would affect the accuracy of Commerce’s calculations,” as such the Court sustained the determination. Id. at 10. The Court also pointed out that each ADD investigation, is an independent investigation by Commerce and because Commerce had selected Thai data before the agency was under no obligation to do so again.

 

Duty Drawback Adjustment Decision in Corrosion-Resistant Steel Products from India Remanded

In Uttam Galva Steels Ltd. v. United States et. al. Slip Op. 18-44, Court No. 16-00162 (April 18, 2018) the Court heard arguments regarding Commerce’s determinations regarding an antidumping investigation of certain corrosion-resistant steel products from India. The main issue was whether “Commerce erred in its determination of the amount of duty drawback adjustment for Uttam Galva.” For the following reasons the Court holds Commerce’s methodology for calculating the adjustment was not in accordance with the law.

The main issue in the case was “whether Commerce reasonably calculated the duty drawback adjustment” “by reducing the … adjustment to Uttam Galva’s U.S. sales and allocating the duty exemptions and rebates claimed over total cost of production.” Id. at 9. Plaintiffs argued that this practice violated the statutory authority given to Commerce, and was inconsistent with Commerce’s prior practice and thus should have been subject to APA notice and comment. The Court said that the purpose of the drawback adjustment was to properly adjust the export price and normal value of the goods under investigation, so that a fair dumping duty margin could be calculated. By using Commerce’s current methodology, Commerce improperly “reduced the duty drawback adjustment to Uttam Galva’s U.S. sales by allocating duty exemptions claim over total production.” Thus, there is no true link between the duty drawback adjustment and the act of exporting.  As such, the Court held that Commerce’s practice was inconsistent with the statute and not in accordance with the law. In regards, to plaintiff’s argument that the change in test should have been subject to APA notice and comment, the Court said “agencies may deviate from past practice, as long as they provide a reasonable explanation for the change.” Id. at 15.  In this case, the change did not need require any notice and comment as long as Commerce reasonably explained why it changed the test. Since, the test was inconsistent with the law it was an unreasonable explanation. As such, the Court remanded to Commerce to recalculate Uttam Galva’s duty drawback adjustment in accordance with the opinion. 

 

Decision Remanded to Reconsider Treatment of Cost of Caps in Circular Welded Carbon-Quality Steel Pipe Case

In Wheatland Tube Company v. United States, Court No. 17-21, Slip Op. 18-49 (April 24, 2018), plaintiff Wheatland Tube Company (“Wheatland”), a domestic producer of circular welded carbon-quality steel pipe (“CWP”), challenged the treatment of the cost of caps by the U.S. Department of Commerce (“Commerce”) in the investigation of CWP from the United Arab Emirates (“UAE”). At verification, Commerce found that respondent, Universal Tube and Plastic Industries, LLC – Jebel Ali Branch, Universal Tube and Pipe Industries, Ltd., and KHK Scaffolding and Framework LLC (collectively, “Universal”), had impermissibly double counted the cost of caps as both a packing expense and part of its cost of manufacturing.  In other proceedings Commerce had already instructed Universal to remove the cost of caps from packing expenses, treating them as a cost of Universal’s manufacturing.  However, in the investigation of CWP from the UAE, because the error was not found until verification, Commerce held that the record does not contain sufficient information to determine whether the caps should be treated as packing or a direct material. The Court disagreed and remanded the determination to reconsider the treatment of Universal’s cost of caps.

 

United States Court of Appeals for the Federal Circuit

 

Federal Circuit Upholds Use of “Substantial Transformation” Test in AD, CVD Scope Inquiries

The Commerce Department can use the country of origin test of “substantial transformation” in deciding whether further-manufactured products are included within the scope of an antidumping or countervailing duty order, according to a new decision of the United States Court of Appeals for the Federal Circuit.

In Bell Supply Co. LLC v. United States, Court No. 2017-1492 et al (April 25, 2018), an antidumping order covered Oil Country Tubular Goods from China, whether finished or unfinished (“green” tubes).  The plaintiff purchased “green” tubes made in China, and then sent them to Indonesia where, by processes of heat treatment, threading, coating and other working, they were turned into finished OCTG, which was then imported  into the United States from Indonesia.

Domestic steel producers asked Commerce to rule on whether the Indonesian steel was within the scope of the Chinese antidumping order [there was no outstanding order against Indonesian tubes].  The domestics argued that it should be considered subject merchandise of Chinese origin, and covered by the antidumping duty order. The Commerce Department ruled that the finishing processes performed in Indonesia did not constitute a “substantial transformation”, resulting in a change of name, character or use, and thus did not confer Indonesian origin.

The CIT held that because the antidumping order did not expressly address goods further processed in other countries, Commerce could not use the “substantial transformation” rule to hold the Indonesian goods subject to the order. Instead, to include the Indonesian goods in the order, Commerce would need to initiate an “anticircumvention” inquiry.

There is a critical difference between the two: a finding that the goods were subject to the AD order based on the “lack of substantial transformation” principle would mean that the goods had always been subject to the order.  By contrast, an “anticircumvention” proceeding would require a new investigation and, if affirmative, could only be applied on a prospective basis.

The Court of Appeals for the Federal Circuit vacated and remanded the CIT’s decision, holding that Commerce could apply either the “substantial transformation” test or the anticircumvention proceeding to resolve the question.

The Court held that the question of which country a product was “from” was amorphous and that the “substantial transformation” test could be used to determine whether the imported “finished” tubes were products of China. The Court stated the test as follows:

A substantial transformation occurs where, “as a result of manufacturing or processing steps . . . [,] the[product] loses its identity and is transformed into a new product having a new name, character and use.” Bestfoods v. United States, 165 F.3d 1371, 1373 (Fed. Cir.1999). To determine whether there has been a substantial transformation, Commerce looks to factors such as (1) the class or kind of merchandise; (2) the nature and sophistication of processing in the country of exportation; (3) the product properties, essential component of the merchandise, and intended end-use; (4) the cost of production/value added; and (5) level of investment.

If Commerce determines that the goods do not undergo a “substantial transformation” outside of the subject country, then they will be treated as products of the country subject to the antidumping or countervailing duty order, and covered by such orders ab initio.

If the product does undergo a “substantial transformation” in the foreign country, then Commerce’s only way to include it in the scope of an antidumping order would be a prospectively-focused “anticircumvention” proceeding. With respect to such proceedings, the CAFC held:

Separate from the substantial transformation analysis, § 1677j provides an anti-circumvention provision that prevents importers from avoiding AD or CVD orders by routing their merchandise through a third country. Section 1677j(b) applies to “merchandise imported into the United States [that] is of the same class or kind as any merchandise produced in a foreign country that is the subject of” an AD or CVD order, but is assembled or completed in a third country not subject to the order. To include such merchandise within the scope of an order, Commerce must determine that (1) “the process of assembly or completion in the foreign country . . . is minor or insignificant,” (2) the value added in the country subject to the AD and CVD order is a significant portion of the total value of the merchandise, and (3) “action is appropriate under this paragraph to prevent evasion of such order or finding.” § 1677j(b)(1)(C)–(E).

Trade Updates for Week of April 11, 2018

United States Court of International Trade

 

Preliminary Injunction Denied in 232 Case

Earlier this year the President imposed a 25 percent ad valorem tariff on imports of steel (the “Steel Tariff”) under the authority of Section 232 of the Trade Expansion Act of 1962, 19 U.S.C. § 1862, which allows the president to impose trade restrictions on imports that threaten U.S. national security based on findings from the Secretary of Commerce. The President’s proclamation invites countries to negotiate alternative arrangements to address the national security threat, and exempts Canada, Mexico, and South Korea permanently, and Australia, Argentina, Brazil, and the European Union temporarily.

In response, in Severstal Export GMBH and Severstal Miami Corporation v. United States et al., Court No. 18-57, Slip Op. 18-37 (public version April 6, 2018), a domestic importer and Swiss exporter (collectively, “Severstal”) of Russian steel filed suit in the U.S. Court of International Trade to challenge the lawfulness of the Steel Tariff. Severstal argues that the President has exceeded his authority under Section 232 because the Steel Tariff is being imposed for economic rather than national security reasons.  In a decision dated Thursday, April 5, Senior Judge Jane A. Restani, after accepting probable jurisdiction to hear the challenge, denied Severstral’s request for a preliminary injunction against the Steel Tariff, holding that it is insufficiently likely Severstal will succeed on the merits of the case.

Section 232 allows the President to act only as necessary “to adjust the imports of [an] article and its derivatives so that such imports will not threaten to impair the national security.”  The core of Severstal’s argument is that the President exceeded his authority under Section 232 by “over-reading what can constitute a threat to national security” and using the Steel Tariff in trade negotiations to draw concessions unrelated to steel imports, as evidenced by Twitter statements and certain campaign rhetoric from the President regarding renegotiation of the North American Free Trade Agreement (NAFTA). However, Judge Restani explained that the factors that Commerce must and did consider under Section 232 are largely economic in nature and not limited to production for national defense alone. Commerce had found that the domestic steel industry is vital to national security, and thus the economic health of the domestic steel industry may indeed threaten national security, and that other economic benefits may follow was not inconsistent with the statute.

The Court did first agree that Severstal would suffer a marginally sufficient level of irreparable harm without preliminary relief. Severstal explained that at the time the Steel Tariff was imposed, Severstal was under contract to import certain Russian steel landed, duty-paid, under which terms Severstal would upon entry be responsible to the government to pay any tariff assessed, and which goods would be subject to the Steel Tariff; furthermore, the company had since suspended and would continue to suspend all U.S. sales in light of the Steel Tariff. While the value of an injunction to any pending sales would be minor because Severstal’s sales process lasts nearly four months, by which time the trial should have proceeded, the Court found that the additional tariffs would likely force the closure of the domestic importer given the unequal footing resulting from the exemption of other countries from the Steel Tariff. In the end though, this level of harm, plus a slight favor in the balance of hardships, was not enough to overcome the low likelihood of success on the merits necessary for an injunction.

 

Temporary Restraining Order Granted in Part

In U.S. Auto Parts Network v. United States et. al. Slip Op. 18-36, Court No. 18-00068 (April 6, 2018) the Court heard arguments about plaintiff’s request for a temporary restraining order (“TRO”) against Customs from requiring plaintiff to provide a single entry bond for each of their shipments. The bond amount would need to be three times the amount of the shipment. The government argued the bond will serve as a deterrent against importing counterfeit goods, as opposed to individually inspecting each shipment. For the following reasons the Court granted plaintiff’s request for a TRO “with respect to the subject merchandise not alleged to be infringing.” Id. at 13. The Court denied the TRO, with respect to infringing goods.

The issue in the case was whether plaintiff met the standard for a TRO. The Court weights four factors while deciding on a TRO, “(1) whether the party will incur irreparable harm in the absence of such order or injunction; (2) that the party is likely to succeed on the merits of the action; (3) that the balance of hardships favors the imposition of temporary equitable relief; and (4) that the temporary restraining order or injunction is in the public interest.” Id. at 5. No one factor is dispositive. The Court agreed with plaintiff that it could suffer irreparable harm because the company had not been able to find a surety willing to cover the bond requirement, which endangered the sustainability of the business. The next factor the Court considered was the balance of hardship. The Court found for plaintiff because they face “closing of its business, loss of reputation, loss of customers, and other potentially permanent consequences.” Id. at 8. In regards to likelihood of success on the merits of plaintiff’s two main claims under the APA and for a violation of due process, the Court concluded that “based on the facts available at this juncture of the action, Plaintiff has shown a likelihood of success on the merits with regards to its claims under the Administrative Procedure Act,” but not in regards to its due process claim. Id. at 10. The final factor considered was public interest. The Court concluded, “the public interest factor alone would be in defendants’ favor, since the public benefits from the efficient administration and enforcement of the law.” Id. at 12.

 

United States Court of Appeals for the Federal Circuit

 

Snacking Sunflower Seeds are Classified as Prepared or Preserved Products

In Well Luck Company, Inc. v. United States, Court No. 2017-1816 (April 11, 2018), the Federal Circuit reviewed the decision of the Court of International Trade (CIT) in the classification of in-shell sunflower seeds for snacking imported by plaintiff.  While the Court determined that in-shell sunflower seeds were prima facie classifiable under Harmonized Tariff Schedule (HTS) Headings 1206 and 2008, the Court held pursuant to Rule 3(b) of the General Rules of Interpretation, that the subject seeds were more specifically covered under Heading 2008 because the seeds are prepared by wet-cooking, salting, roasting, and flavoring.  Seeds under Heading 1206, which covers “[s]unflower seeds, whether or not broken” are not processed in ways that would alter the seeds from their character as natural products.  For these reasons the Federal Circuit, affirmed the CIT’s decision to classify the sunflower seeds under Heading 2008.19.60, covers “[f]ruit, nuts and other edible parts of plants, otherwise prepared or preserved, whether or not containing added sugar or other sweetening matter or spirit, not elsewhere specified or included: [n]uts, peanuts (groundnuts) and other seeds, whether or not mixed together: [o]ther, including mixtures: [o]ther.”

Trade Updates for Week of April 4, 2018

United States Court of International Trade

 

Commerce’s Determinations Sustained in Cold-Rolled Steel Flat Products Case

In ArcelorMittal USA LLC et al. v. United States, Court No. 16-173, Slip Op. 18-34  (April 3, 2018), Plaintiff ArcelorMittal USA LLC (“ArcelorMittal”), on behalf of itself and plaintiff intervenors AK Steel Corporation, Nucor Corporation, and United States Steel Corporation, challenged Commerce’s final determination in the less than fair value investigation involving imports of certain cold-rolled steel flat products (“cold-rolled steel”) from the Russian Federation (“Russia”). See Certain Cold-Rolled Steel Flat Products From the Russian Federation: Final Determination of Sales at Less Than Fair Value and Final Affirmative Determination of Critical Circumstances, in Part, 81 Fed. Reg. 49,950 (Dep’t Commerce July 29, 2016) (“Final Determination”)

ArcelorMittal argued that: (1) Commerce should have used the date of contract between Novex Trading (Swiss) SA (“Novex”) -- the exporting arm of mandatory respondent Novolipetsk Steel OJSC (known collectively with its affiliates as “NLMK”) -- and its U.S. customers, rather than the date of invoice, as the date of sale in determining the universe of transactions subject to investigation; and (2) Commerce should have relied on NLMK’s 2014 unconsolidated financial statements prepared in accordance with Russian Accounting Standards (“RAS”), rather than its 2014 consolidated financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), to calculate NLMK’s financial expense ratio.

The Court sustained both decisions.  First because the use of the invoice date was set by regulation, plaintiff had to show why another date of sale should apply as the date of sale in determining the transactions subject to investigation.  ArcelorMittal argued that Commerce should have analyzed differences in quantity and accompanying tolerance for each contract rather than on a specification basis.  However, the Court was not persuaded by ArcelorMittal where the mill specification sheets appended to each contract were integral to the sale.  Thus, these arguments did not rebut the presumption that Commerce use the invoice date as the date of sale.

Second, the 2014 consolidated financial statements were selected because they were prepared with the highest level of consolidation as per Commerce’s longstanding practice, and Commerce determined that the unconsolidated statements were not as accurate. This decision was supported by substantial evidence.

 

Decisions Regarding Certain New Pneumatic Off-the-Road Tires are Remanded

In Qingdao Qihang Tyre Co., Ltd. et al. v. United States, Consolidated Court No. 16-75, Slip Op. 18-35 (April 4, 2018), plaintiffs contested Certain New Pneumatic Off-the-Road Tires From the People’s Republic of China: Final Results of Antidumping Duty Administrative Review; 2013-2014, 81 Fed. Reg. 23,272 (Int’l Trade Admin. Apr. 20, 2016) (“Final Results”). In the Final Results, Commerce assigned individually-determined weighted-average dumping margins to two groups of Chinese companies: Xuzhou Xugong Tyres Co., Ltd., Armour Rubber Co. Ltd., and Xuzhou Hanbang Tyre Co., Ltd. (collectively, “Xugong”), which  Commerce treated as a single entity for purposes of the review; and Qingdao Qihang Tyre Co., Ltd. (“Qihang”). Having selected these exporters/producers of OTR tires as “mandatory” respondents, i.e., respondents it intended to examine individually, Commerce assigned a weighted-average dumping margin of 65.33% to Xugong and a weighted-average dumping margin of 79.86% to Qihang in the Final Results. Id. at 23,273. Commerce assigned a weighted average of these two margins, 70.55%, to respondents that it did not select for individual examination but that Commerce found to have qualified for a “separate rate” based on demonstrated independence from the government of China.

Both Xugong and Qihang claim that Commerce, when determining the export prices or constructed export prices of the sales of their subject merchandise, erred in making deductions for unrefunded value-added tax (“VAT”) incurred in China.  Moreover, Commerce’s calculation of a “surrogate” value for one of their production materials, reclaimed rubber, was not supported by substantial evidence. Finally, both contest the method by which Commerce valued foreign inland freight in China.

As for the VAT the Court disagreed with the Department’s interpretation of the current § 1677a(c)(2)(B) to require a margin increase for irrecoverable VAT, which is not supported by the plain meaning of the provision, and also conflicts with the legislative purpose. because irrecoverable VAT would be present in both the price of the foreign like product and the U.S. price, no adjustment to the margin is necessary to achieve tax neutrality. Making an adjustment under these circumstances by reducing the starting price for EP or CEP by the amount of the irrecoverable VAT would be “double-counting” the effect of the irrecoverable VAT, inflating the dumping margin accordingly. In conclusion, Commerce has made downward adjustments to the EP and CEP starting prices for subject merchandise exported by Xugong and Qihang which is an impermissible construction of 19 U.S.C. § 1677a(c)(2)(B), not intended by Congress. Commerce has been ordered to correct this error.

As to Commerce’s finding that its surrogate value for reclaimed rubber was not aberrational, such a finding was unsupported by record evidence, especially where the historic record shows the price of natural higher to be significantly higher than reclaimed rubber. Moreover there is conflicting support that reclaimed rubber is used in production of off-the-road tires because of cost advantages. For example, Commerce acknowledged that the “Thai AUV for reclaimed rubber was approximately two-and-one-half times the median value for this product obtained from import data from most of the other potential surrogate countries.” SlipOp. Pg. 31.  Commerce must reconsider that value and reach a new determination.

For inland freight, Xugong and Qihang claim that the surrogate value Commerce applied to foreign inland freight in China, based on data for Thailand, was not supported by record evidence. Because of issues with the data and the distances calculated, the court determines that the findings were not supported by substantial evidence.

The Court did sustain: the use of Thailand as the principal surrogate country; Commerce’s decision to deny Trelleborg’s request as a voluntary respondent; and Commerce’s conclusion that Xugong and Qihang were representative of all exporters and producers in the review.  It also sustained the adverse inference and facts otherwise available to Xugong for failing to respond to required questionnaires.

As a result of these reconsiderations, Commerce will recalculate the margins for Xugong and Qihang, also margins assigned to Trelleborg, Full World, and Weihai Zhongwei.

 

Determinations in Xanthan Gum Reviews Sustained

In Deosen Biochemical Ltd. et. al.  v. United States Slip Op. 18-32, Court No. 17-00044, & Deosen Biochemical Ltd. et. al. v. United States Slip Op. 18-33, Court No. 17-00045, the Court reviewed Commerce’s decision to apply adverse facts available (“AFA”)  and facts otherwise available (“FA”) against plaintiffs in an antidumping investigation regarding xanthan gum imported from China in two separate periods of review. Mandatory respondent, AHA International Co. Ltd. (“AHA”), was requested to provide documentation relating to any “agreements for sales in the United States” Id. at 3. From these documents, Commerce learned that a major part of AHA’s business was purchasing subject merchandise from Deosen and reselling it to Deosen USA. Commerce delayed publishing its results to investigate this relationship further. Eventually, AHA disclosed a formal agreement with Deosen. Commerce determined that the documents showed “AHA’s sales to Deosen’s U.S. customers were not a legitimate sales process.” Id. at 4.  In its final results Commerce determined that AFA should be applied to plaintiffs because they had hindered the investigation by not acting to the best of their ability to comply with a request for information. Commerce applied the China wide rate of 154.07% as a result. For the following reasons the Court sustains Commerce’s determinations in full.

The first issue in the cases was Commerce’s determination to apply the “AFA” against plaintiffs for failing “to cooperate by not acting to the best of their ability to comply with a request for information.” Id. at 5.  In order to apply the AFA “the Department must identify a justification for the application of FA and, only then, if there is a determination that a party has not acted to the best of its ability, may Commerce apply AFA.” Id. at 6. The Court said that the formal agreement between the companies was clearly requested by Commerce because the documents laid out an agreement for sale in the US and “should have been produced in response to Commerce’s original questionnaire.” Id. at 8. As such the application of AFA was justified. Next, the Court examined if Commerce could apply the China wide rate. The plaintiff’s argued they were entitled to receive a separate rate. The Court said “AFA permits Commerce to choose from among the options available on the record; that Plaintiffs had established their entitlement to a separate rate as an initial matter did not eliminate the China-wide rate as an option when the Department deemed AFA appropriate.” Id. at 12. As a result, this court sustained Commerce’s chosen China wide rate.

Trade Updates for Week of March 28, 2018

United States Court of International Trade

 

Commerce’s Determinations Sustained


In Itochu Building Products Co. Ltd., et. al. v. United States, et.al. Slip Op. 18-24, Court No. 12-00065 (March 22, 2018) the Court reviewed Commerce’s determinations on remand regarding an antidumping order. Previously, the Court had remanded the case for reconsideration of surrogate Indian import data, surrogate financial ratios and to determine if the adverse facts available (“AFA”) should be applied to a respondent. In addition, The Court also requested Commerce to conduct an investigation regarding if defendant intervener, Mid Continent, acted improperly by withdrawing numerous antidumping petitions in the case. For the following reasons the Court sustains all of Commerce’s determinations in full.

The first issue discussed was Commerce’s finding that Mid Continent did not act improperly by withdrawing petitions. In responses to Commerce, Mid-Continent replied “its decision to withdraw the requests was based on the particular facts of the case” and “no payments were made in exchange for the withdrawal.” Id. at 6. Commerce had no further evidence on the record; as a result the determination was sustained. The next issue was the selection of surrogate values for import data and financial ratios. Commerce’s previous determination was remanded because they were not supported by substantial evidence. On
remand Commerce selected India Joint Plan Committee (“JPC”) import data. The “use of JPC data on remand is supported by substantial evidence because the data is more specific, “tax-exclusive, publicly available, contemporaneous with the POR, and represented imports into the principal surrogate country.” Id. at 10. The next issue was the use of financial ratios from
Sundram. Commerce had requested the Court remand this issue in order to investigate if the company received countervailable subsidies. On remand, Commerce determined that it was appropriate to rely on the financial statements “because while Sundram was eligible for subsidies, there was no evidence showing that Sundram actually benefitted from them.” Id. at 12. As a result, the determination was sustained. The final issue was Commerce’s decision not to apply the AFA to Jinchi, a respondent, for failing to supply information from a supplier. The Court had previously ruled that Commerce was not allowed to apply the AFA because
Commerce never found Jinchi failed to cooperate. On remand, Commerce applied neutral facts available because the evidence shows that Jinchi tried to persuade its producer to provide the necessary records. As a result the determination is upheld.

 

Decision in Diamond Sawblades Remanded in Part

In Diamond Sawblades Manufacturers’ Coalition v. United States, Court No. 16-124,Slip Op. 18-29 (March 22, 2018), the Court reviewed the Final Results in a review of an antidumping order on diamond sawblades. This opinion concerns the November 1, 2013, through October 31, 2014 period of review (“POR”) of the antidumping duty order on diamond sawblades (“DSBs”) and parts thereof from the People’s Republic of China (“PRC”). DSBs and Parts Thereof From the PRC, 81 Fed. Reg. 38673 (June 14, 2016) (“Final Results”).

The following issues are being challenged: (1) deduction of irrecoverable value added tax (“VAT”) from Jiangsu Fengtai and Weihai’s export prices, (2) surrogate valuation of nitrogen and oxygen, (3) surrogate valuation of labor, (4) calculation of surrogate truck freight, (5) treatment of graphite plates as direct material rather than factory overhead, (6) selection of financial statements for financial ratios, (7) denial of a request to rescind the review as to Weihai, (8) valuation of self-produced and purchased DSB cores in the calculation of Weihai’s normal value, and (9) the margin for the separate rate respondents, as impacted by the foregoing.

Because Commerce asks for a voluntary remand on the last two of these issues, valuation of self-produced and purchased DSB cores and the margin for separate respondents, the Court grants the request for a voluntary remand.

As for deducting irrevocable VAT, Jiangsu Fengtai and Weihai argued that the irrevocable VAT, represents an amount that must necessarily be included in the export price, because it is that differential, between the full amount that the PRC government would otherwise receive, and the amount of VAT that the exporter actually receives in rebate. This amount is the irrevocable VAT and functions as an equivalent cost. The Court however, sustains Commerce’s decision to NOT deduct this irrevocable VAT from the export prices.

The Court sustained the surrogate valuation of nitrogen, oxygen, and labor, as well as the treatment of graphite plates as a direct material. Further, the Court sustained the selection of financial statements from K.M. and A.A. Co., Ltd. (“KM”), a Thai company, because the alternative predated the POR and they are from the primary surrogate country. However, the
calculation of surrogate truck freight was remanded to consider whether the freight distance must be based on the average of the distances to both the Port of Khlong Toei (i.e. the Port of Bangkok) and the Port of Laem Chabang. The Court affirmed Commerce’s decision to include Weihai as a respondent because it did not raise the issue of the denial of its request to rescind the review in its administrative case brief, unlike a U.S. petitioner in Glycine & More, Inc. v. United States, 39 CIT ___, 107 F. Supp. 3d 1356 (2015), remand results sustained, 40 CIT ____, 181 F. Supp. 3d 1360 (2016)(“Glycine & More”), affirmed, 880 F.3d 1335 (Fed. Cir. 2018) who submitted a timely request for rescission of the review.

For these reasons, the Commerce’s decisions are remanded in part.

 

No Conference? No Section 592 Penalty, Court Says

Customs’ failure to provide an importer with a requested in-person conference to discuss a penalty claim being imposed under Section 592 of the Tariff Act invalidates the agency’s $4.5 million claim for penalties and withheld duties, according to recent decision of the United States Court of International Trade.

In United States v. Aegis Sec. Ins. Co, Slip Op. 18-29 (March 26 th , 2018), Customs sued Tricots Liesse 1983 Inc., a Montreal area fabric producer, for withheld duties and penalties under Section 592. Tricots had made a “prior disclosure” to CBP that some fabric it imported into the United States did not qualify as “originating” goods, entitled to duty free entry under the North American Free Trade Agreement (NAFTA). However, Tricots claimed that the products did qualify for duty free entry under Tariff Preference Level (TPL) programs. The company tendered merchandise processing fees to Customs, but took the position that no duties had been underpaid or withheld.

Customs rejected the importer’s tender, asserting that a claim for TPL treatment had to be made prior to the time the import entries were liquidated, and told Tricots Liesse that it would need to pay withheld duties to perfect its prior disclosure and avoid the imposition of penalties.  Tricots continued to argue that no loss of revenue had occurred. After efforts to resolve the matter with an offer in compromise failed, Customs sued the company for Section 592 withheld duties and penalties. This case was consolidated with another, related, case, previously brought to recover withheld duties from Tricots’ Customs bond surety.

Tricots moved to dismiss the Government’s complaint for failure to state a claim. Tricots argued that it had requested an in-person conference with Customs officials to discuss the penalty claim, and had not received it. Since the Customs regulations gave the importer the right to such a conference, Tricots claimed, the government by failing to provide the conference, had failed to exhaust its administrative remedies.

The Court of International Trade agreed. After holding that telephone calls between Tricots officials and Customs officers did not constitute the requested and required conference, Senior Judge Richard Eaton held that Customs had failed to exhaust its administrative remedies which were necessary to undertake in order to perfect its cause of action. The legislative history to Section 592, he held, provided importers with the right to a hearing, which was an expected part of the process. Finding the oral conference to be an essential part of the section 592 administrative process, and having determined that CBP failed to exhaust this remedy, the Court held that the government had failed to state a cause of action, and dismissed the government’s penalty case. The court further held that the defendant did not need to show substantial prejudice to itself to secure the dismissal.

The case is a surprising one, and a pleasant surprise for importers. The decision will undoubtedly be appealed by the government to the Federal Circuit in an appeal that will bear watching.

 

No Injunction Pending Appeal in Silicon Photovoltaic Cells Case

The Court would again, not grant the injunction sought by plaintiffs in Silfab Solar, Inc. et al, v. United States, Court No. 18-00023, Slip Op. 18-30 (March 26, 2019). On March 5, 2018, the court denied the motion of plaintiffs Silfab Solar, Inc., Heliene, Inc., Canadian Solar (USA), Inc., and Canadian Solar Solutions, Inc. for a temporary restraining order and a
preliminary injunction. Silfab Solar, Inc. v. United States, Slip Op. 18-15, 2018 WL 1176619 (Mar. 5, 2018), ECF No. 47 (“Silfab I”). The motion for equitable relief sought to enjoin defendants from asserting “safeguard” measures, or temporary duties, beginning February 7, 2018 on imports of silicon photovoltaic (“CSPV”) cells and certain products (including “modules”) that contain such cells. This was imposed by presidential proclamation (“Proclamation”) on January 23, 2018 under section 203 of the Trade Act of 1974, 19 U.S.C. 2253. The Court now entertains two motions pursuant to the interlocutory appeal of that order.  The first motion seeks an injunction preventing defendants from taking action to impose or enforce the Proclamation with respect to their products, and a stay of proceedings in this Court pending appeal, and the second seeks an expedited ruling on their first motion. In regards to the second motion, in the alternative, plaintiffs seek an extension of time to respond to a motion to dismiss until their first motion is resolved.

While the Court granted the second motion, the Court denied the injunction motion. First,  there was no likelihood of success, where ITC affirmatively found CSPV products were being imported into the United States in such increased quantities to cause serious injury to the domestic industry, and that plaintiff’s interpretation of applicable statutes would negate the ITC’s findings and recommendations. As to the second Count of the Complaint, the Court questioned standing to assert a claim that the Proclamation violated section 312 of the North American Free Trade Agreement Implementation Act where the plaintiffs did not allege that they produced or imported CSPV cells from Canada. Even if there were standing, the Court doubted that the tariff-rate quota can be said not to “permit” the importation of a specified quantity or value of CSPV cells from Canada, and was a “quantitative restriction” within the meaning of 19 U.S.C. 3372. Finally, as to the third count that the President lacked authority to impose a restriction on CSPV products, the Court found that determinations of the ITC are not binding on the President who is directed to make his own findings, and that the Court may not review the judgment of the President in this matter. As to the other issues for an injunction pending appeal, the Court found that it would not be in the public interest; that it would not be necessary to have a hearing; and that a Stay would not be necessary. While it did it not make a finding, the Court presumed that the plaintiffs have met the requirement of irreparable harm in the absence of an injunction pending an appeal.

Trade Updates for Week of March21, 2018

United States Court of International Trade


 

Remand Determination Affirmed

In DynaEnergetics U.S. Inc. v. United States, Court No. 16-45, Slip Op. 18-23 (March 16, 2018), the Court affirmed the U.S. Department of Commerce’s (“Commerce”) scope determination in the Remand Results, where Commerce determined that Plaintiff’s customized tubing for perforating gun carriers (“gun carrier tubing”) is within scope of the antidumping and countervailing duty orders.  This action involves a challenge to a U.S. Department of Commerce scope determination for the antidumping and countervailing duty orders on Certain Oil Country Tubular Goods from the People’s Republic of China, 75 Fed. Reg. 28,551 (Dep’t Commerce May 21, 2010) (final determination of sales at less than fair value and antidumping duty order) (“AD Order”); Certain Oil Country Tubular Goods from the People’s Republic of China, 75 Fed. Reg. 3,203 (Dep’t Commerce Jan. 20, 2010) (am. final affirmative countervailing duty determination and countervailing duty order) (“CVD Order”) (collectively, “AD & CVD Orders” or “the Orders”).  

Applying the 19 C.F.R. §351.225(k)(1) factors and looking specifically at the language of the scope of the orders, gun carrier tubing fits the description which covers, “hollow steel products of circular cross-section . . . of iron (other than cast iron) or steel (both carbon and alloy), whether seamless or welded, regardless of end finish (e.g., whether or not plain end, threaded, or threaded and coupled).”  Plaintiff’s description of the gun carrier tubing is “a tubular steel product used in oil and gas wells” satisfied the definition of the OCTG Commerce set forth. Given that the requirements of (k)(1) are satisfied, the Court need not look at the 19 C.F.R. § 351.225(k)(2) factors.  For this reason, the Court affirmed Commerce’s decision.

 

Trade Updates for Week of March 14, 2018

United States Court of International Trade

 

Remand Determination Affirmed

In Evonik Corporation et al. v. United States, Court No. 15-296, Slip Op.18-21 (March 12, 2018), the Court reviewed the remand determination in the 2013-2014 administrative review of the antidumping duty order on glycine from the People’s Republic of China. This consolidated action was brought by Evonik Rexim (Nanning) Pharmaceutical Co. Ltd. and Evonik Corporation (collectively, “Evonik” or “Plaintiffs”), Baoding Mantong Fine Chemistry Co., Ltd. (“Baoding”), and GEO Specialty Chemicals, Inc. (“GEO”) (collectively, “Consolidated Plaintiffs”) for judicial review of decisions made by the U.S. Department of Commerce (“Commerce” or “Department”) during the 2013–2014 administrative review of the antidumping duty order on glycine from the People’s Republic of China (“China” or “PRC”).  The court remanded the Department’s findings with respect to Baoding on (1) the surrogate value selection for liquid ammonia, and (2) the selection of companies used for Baoding’s surrogate financial ratios. Commerce found that the Indonesian GTA import data for anhydrous ammonia “were the most product-specific data placed on the record” for the administrative review period and “representative of a broadmarket average,” and, accordingly, assigned the surrogate value for liquid ammonia as $619.21 USD per metric ton.  There was an issue with which review data being used, but the Court found that the import data relied upon was 2013/2014 was used and verified.

The surrogate value was affirmed because PT Budi and PT Lautan (source of surrogate designated value) was comparable to Baoding’s processing. 

 

Default Judgment Granted in Crayfish Case

In United States v. Rupari Food Services In. Slip Op. 18-20, Court No. 10-00119 (March 9, 2018) the Court granted the Government’s motion for a default judgment in a case “whose background spans more than two decades, and which has seen the reorganization of a federal agency, a bankruptcy, … and the withdrawal of counsel.” Id. at 1. The Government argued that Rupari “knowingly and falsely claimed that five seized entries of frozen Chinese crawfish tail meat” imported into the US originated in Thailand, thus circumventing an antidumping order and sought civil penalties.  Id. at 2. The action was brought to recover penalties in the amount of $2,784,636.18.  For the following reasons the default judgment was granted against Rupari.

Rupari’s major business practice was to purchase crawfish internationally and sell it to restaurants for consumption in the US. One of Rupari’s major suppliers was investigated in an antidumping investigation by Commerce, and was subject to a 201.63% duty rate on crawfish. In 1998 Rupari ordered crawfish through a Thai company called Seamaster. Rupari knew that Seamaster was a shell company formed by its major supplier subject to the dumping order. The shellfish would be sent to Thailand by the Chinese producer, repacked and labeled made in Thailand and shipped to Rupari in the US. In 1998, Customs issued a request for information regarding the entries and then numerous cases were filed at the CIT for penalties against Rupari and other involved parties. These would eventually be consolidated into this action. Amid the litigation, the involved corporate officers from Rupari passed away, and the company filed for bankruptcy. However, most importantly, in June 2017 Rupari’s counsel moved to withdraw, which was granted by the Court. The Court then ordered Rupari to retain new counsel in 30 days or “it would entertain a motion for default judgment,” Rupari failed to do so. Id. at 17.   “A defendant who defaults thereby admits all well-pleaded factual allegations contained in the complaint.” Id. at 19. The complaint supports its claim by including statements from Thai government that no crawfish producers farmed in the country, and that Rupari never purchased from a source in Thailand.  Additionally, Rupari submitted documents to Customs that were false.  The Court said this was clear and convincing evidence to establish the materiality and falsehood of Rupari’s representations to Customs. As such, the default judgment for civil penalties was granted.

 

Rebar Scope Ruling Upheld

In Quiedan Co. v. United States et. al.  Slip Op. 18-19, Court No. 16-00275 (March 9, 2018) the Court reviewed Commerce’s final scope ruling holding an antidumping order on rebar applicable to plaintiff’s agricultural training stakes and allowing Customs to collect duty on the unliquidated entries of the product. For the following reasons the Court upholds the scope inquiry in full.

Plaintiff produces steel bars in lengths of four to five feet that are stamped into a stake at one end to help farmers grow vine plants, such as grapes, vertically. “Quiedan argues that the Department’s determination in the Final Scope Ruling is unsupported by substantial evidence” and argues that the ruling was not “supported by the plain meaning of the scope language”. Id. at 7. Commerce’s ruling found it unimportant that the bars were stamped to provide a point at the end saying that the bar was still straight, and the process of stamping the bars was not a further manufacturing process.  Quiedan argued that this ruling was incorrect because a training stake is pointed at one end and may no longer be “straight through its length.”  However, the Court said that the dictionary definition of straight on the record, “generated by a point moving continuously in the same direction and expressed by a linear equation”, applied to the product because the rod starts at one point and ends in a linear fashion at another.  Id. at 14. Plaintiff also argued that their product was not rebar because the product was different from rebar’s dictionary definition.  The Court said the dictionary definition was unnecessary, because the order defines rebar as “all steel concrete reinforcing bars (rebar) sold in straight lengths.” Id. at 15. Plaintiff also argued that ITC sunset reviews defined rebar as for use in construction. However, the Court points out language in the reviews including all steel bars used in a variety of ways, including farming.  Based on this evidence “the court concludes that the Department’s decision is reasonable and supported by substantial evidence.” The Court also found that because the product fell within the plain language of the scope no formal inquiry needed to be opened, and that Customs should be allowed to retroactively collect duties.

           

Amicus Curiae Status Granted

In Irving Paper Limited et al. v. United States, Court No. 17-128, Slip Op. 18-22, the Court considered the application for leave to file a brief as Amicus Curiae of the Committee Overseeing Action for Lumber International Trade (“the COALITION”).  The COALITION seeks to participate as amicus to respond to the court’s letter asking the parties to provide the specific authority according to which Commerce promulgated 19 C.F.R. § 351.214(k) (2015), establishing expedited reviews in countervailing duty (“CVD”) proceedings. The COALITION explains that its interest in the action “relates to the question of whether an expedited review of a non-individually investigated producer in a CVD proceeding is a determination provided for by 19 U.S.C. § 1675, governing the ‘administrative review of determinations.’” Because the Court found the COALITION’s argument and analysis not represented by any party, the Court determined COALITION’s comments useful to the Court’s review in this case, especially for jurisdiction purposes.

Trade Updates for Week of March 7, 2018

United States Court of International Trade

 

Motion to Dismiss Denied in Penalty Case

In United States v. Maverick Marketing, LLC et al., Court No. 17-174, Slip Op. 18-16 (March 7 2018), plaintiff claimed that Maverick and Good Times are liable for $3,339,011.08 worth of unpaid FET pursuant to 19 U.S.C. § 1592(d), stemming from the companies’ violations of 19 U.S.C. § 1592(a). Plaintiff, the United States (“Plaintiff”), on behalf of United States Customs and Border Protection (“CBP” or “Customs”), seeks to recover unpaid Federal Excise Tax (“FET”), in various amounts, and prejudgment interest from Defendants, Maverick, Good Times, and American Alternative Insurance Company (“AAIC”) (collectively, “Defendants”), pursuant to section 592 of the Tariff Act of 1930, as amended 19 U.S.C. § 1592 (2012). 

Plaintiff’s claim arose under 19 U.S.C. § 1592(a), (d), which allows the United States to recover any tax owed from any person who entered or introduced merchandise into United States commerce.  Plaintiff alleges that the contract between Maverick and Good Times allowed Maverick to act as a “pass-through” entity, while Good Times financed all the transactions underlying the importation of the subject merchandise. Plaintiff alleges that the Agreement allowed Maverick and Good Times to calculate the FET based on a “purported price,” i.e., the sales price from Rolida Investments, Inc. (“Rolida”), the exporter of the subject merchandise, to Maverick, plus one dollar per carton.  As a result, the sales prices were not based on the first sale of the subject merchandise domestically at an arm’s-length transaction, but instead was the result of a “special arrangement” or scheme between Maverick and Good Times.  As this special arrangement was not disclosed, such failed disclosures are “false statements and/or omissions” under 19 U.S.C 1592. Because these allegations are sufficient and not “naked assertions,” Defendants’ motion to dismiss was denied.

 

Toilet Paper Rack Holders are Classified under Harmonized Tariff Schedule Heading 8302

In Moen, Inc. v. United States, Court No. 15-145, Slip Op. 18-17 (March 7, 2018), Plaintiff contends that all of its toilet paper holders are entitled to duty-free treatment because the products are classifiable under Harmonized Tariff Schedule of the United States (HTSUS) subheading 8302.50.00, which encompasses “[b]ase metal mountings,” including “hat-racks, hat pegs, brackets and similar fixtures, and parts thereof.” See id. at 2. The United States (“Defendant” or “Government”) maintains that Customs properly classified the imported toilet paper holders under HTSUS subheading 7907.00.10, which covers “[o]ther articles of zinc” including “[t]oilet and sanitary wares.”

According to the Court, HTSUS heading 8302, encompasses objects made of base metal that are affixed to a wall and are used to hang, hold, or support other items. The subject entries should share these three features to be classifiable within the scope of this heading. Plaintiff argued that its toilet paper holders fall clearly within the scope of HTSUS heading 8302 because the products are made of base metal, are designed to be affixed to a wall, and are used to hold or hang an item.  However, the government argued because there are movable pieces “that pivots, swivels, or springs open and shut” to secure a roll of toilet paper, it is not as simple as a hat rack or bracket on which an item hangs. The Court found such distinction non-dispositive.

Because the subject toilet paper holders are made of base metal and are also designed to be mounted on a wall and are used to hold, hang, or support an object, such as toilet paper, according to plaintiff’s facts and defendant’s response to plaintiff’s facts, the Court found that the subject merchandise fall under the scope of HTSUS heading 8302, and thus are classifiable under HTSUS subheading 8302.50.00, and granted plaintiff’s motion for summary judgment denied defendant’s cross motion for summary judgment.

Trade Updates for Week of February 28, 2018

11th ADD Review on Frozen Fish Fillets from Vietnam Remanded in Part

In An Giang Fisheries Import and Export Joint Stock Company et al., v. United States, Court No. 16-72, Slip Op. 18-10 (published February 21, 2010), the court sustained in part and remanded in part, the U.S. Department of Commerce’s final determination in the eleventh antidumping administrative review of certain frozen fish fillets from the Socialist Republic of Vietnam.  Commerce initiated this eleventh ADD administrative review covering subject imports entered during the period of review (“POR”), August 1, 2013 through July 31,2014. See Initiation of Antidumping and Countervailing Duty Administrative Reviews, 79 Fed. Reg. 58,729, 58,731–32 (Dep’t Commerce Sept. 30, 2014) (initiation of [ADD] administrative review in Certain Frozen Fish Fillets from [Vietnam], A-552-801). Commerce subsequently selected Vinh Hoan Corporation (“Vinh Hoan”) and HVG as mandatory respondents in this review.

The Court sustained most of findings in the review.  For example, the court held that Commerce’s use of facts otherwise available to calculate HVG’s and Thuan An Production Trading & Services Co., Ltd.’s (“TAFISHCO”) normal value was supported by record evidence where respondents did not provide factors of production (FOP) on a CONNUM-specific basis  (“CONNUM” are control-numbers created by Commerce and specific to the subject merchandise, where they identify the key physical characteristics that are commercially meaningful to the U.S. market) and they failed to accurately report water soaking levels of the fillets sold in the United States. Likewise, the Court sustained Commerce’s surrogate value selections for fish feed, fingerlings, water, fish waste by-product, and packing tape.

However, the Court remanded HVG’s farming FOPs because Commerce’s adjustment to the farming FOP denominator without adjusting the numerator wrongfully inflated HVG’s farming FOP. While Commerce adjusted the denominator to represent “shark equivalent” farming FOP to account for differences in whole fish to subject merchandise (shank fillets)FOP, the numerator had no such adjustment as Commerce simply added farming FOPs from all farming activities at HVG, Agifish, and Europe JSC.

For these reasons, the Court sustained and remanded this decision in part.

 

TAA Decision Sustained in Full

In Former Employees of Geokinetics v. United States Secretary of Labor Slip Op. 18-11, Court No. 16-00057 (February 16, 2018) the Court reviewed the Department of Labor’s determinations on remand in a Trade Adjustment Assistance (“TAA”) case. On remand Labor was to reconsider the appropriate time period for assessing Geokinetics’ decrease in sales, “whether like imports had shifted to foreign countries, or explain why it was reasonable not to examine whether like imports had shifted to foreign countries; and to explain its determination not to certify Plaintiffs as secondary workers eligible for TAA benefits.” Id. at 7. For the following reasons the Court sustains Labor’s remand results in full.

The first issue was Labor’s failure in explaining the reasoning for not requesting necessary sales data from Geokinetics. On remand, Labor requested data for all the necessary time periods and explained its general practice was to request data “through the month that just ended” when a TAA petition is filed. Id. at 10. Labor admitted it had inadvertently not requested the data.

The next issue was the Court’s concern that Labor had not explained the process of determining a product shift of like articles, properly to Geokinetics. It was not clear that Labor considered whether there was a shift in production of seismic data services in foreign countries or acquisition of seismic data services from foreign countries. On remand, Labor again found that there was no shift in production in seismic data services. However, Labor took steps to “ensure that Geokinetics understood that it was to report whether the firm had or planned to shift” seismic data services to a foreign country or overseas.

Finally, the Court sustained Labor’s determination that Geokinetics employees were not eligible for assistance as secondary workers. Secondary workers are eligible for TAA assistance if a client firm’s “workers are eligible for adjustment assistance benefits” and these clients accounted for a significant percentage of the decline in sales that Geokinetics experienced over the review.  The Court said that because Labor provided evidence it had searched data bases of “all of the firms provided in Geokinetics’ client list” that its determination would be upheld.  Id. at 26.

 

Trade Updates for Week of February 21, 2018

United States Court of International Trade

 

ITC Decision on Hydrofluorocarbons Remanded in Part

In Arkema Inc., The Chemours Company FC, LLC, Honeywell International Inc. v. United States, Court No. 16-179, Slip Op. 18-12 (Feburary 16, 2018), the court remanded in part the material injury determination of the International Trade Commission.  This action involved the final affirmative material injury determination of the U.S. International Trade Commission (“ITC” or the “Commission”) in the antidumping duty investigation covering hydrofluorocarbon (“HFC”) blends and components from the People's Republic of China (“PRC”). See Hydrofluorocarbon Blends and Components from China, 81 Fed. Reg. 53,157 (Int’l Trade Comm’n Aug. 11, 2016) (“Final Determination”). The court agreed with plaintiffs that it appears that the ITC incorrectly relied upon the X percent figure as the approximate percentage of HFC Components used in out-of-scope blends, and that this figure weighed significantly in the ITC’s finding that HFC Components are not dedicated for use in the production of HFC Blends. The court also agreed that in comparing the HFC blends to HFC components the ITC wrongly relied upon value added data that included costs and expenses used in the manufacture of HFC components rather than the blending of the components into Blends.

However, on all other decisions, the court sustained the ITC’s findings.  Thus, the Final Determination was sustained except for the ITC’s dedicated for use and value added portions of its semi-finished products analysis.

Trade Updates for Week of February 14, 2018

United States Court of International Trade

 

Pet Carriers are Not Classified under Heading 4202

In Quaker Pet Group LLC v. United States, Slip Op. 18-9, Court No. 13-0093 (February 12, 2108), plaintiffs challenged Customs denial of an administrative protest, and classification of imported pet carrier bags.  Customs found that the pet carriers were classifiable under “HTSUS heading 4202, which covers travel, sports, and similar bags, and carries a 17.6 percent duty rate.” Id. at 2. Plaintiffs argued “that pets are not personal effects and therefore the pet carriers -- cloth and mesh carrying bags used for transporting pets -- are classifiable under … heading 6307, carrying a duty rate of seven percent” Id. For the following reasons the Court agreed with plaintiffs that the pet carriers were not classifiable under heading 4202. The Court also found that there was not enough evidence to decide if heading 6307 was the proper classification.

The first issue was whether the Government was correct in classifying the pet carriers under heading 4202. “Tariff classification is determined according to the General Rules of Interpretation.” Id. at 8. Under GRI 1, “classification shall be determined according to the terms of the headings and any relative section or chapter notes.” Id. at 8. The Court of Appeals for the Federal Circuit, has developed a test for determining if an article is included in language of Heading 4202, that the “the common characteristic or unifying purpose of the goods in heading 4202 consist[s] of organizing, storing, protecting, and carrying various items.” Id. at 13. The Court determined that because pets are living things they do not fit into the definition of items as is used in the HTSUS; therefore heading 4202 was not applicable. The next issue was if the plaintiffs proposed classification under 6307 was correct.  The Court said “the undisputed facts contained in the pleadings do not provide sufficient information … for the court to determine whether the pet carriers are properly classifiable under HTSUS heading 6307 or another heading.” Id. at 16.  The Court has a duty to determine the correct classification for the goods, and will do so in the future.

 

Court Sustained Commerce’s Determination in CORE Products case

In Nucor Corporation and Accelormittal USA LLC et al., v. United States, Slip Op. 18-7, Court No. 16-164 (Published February 14, 2018), Nucor and Plaintiff-Intervenors challenged as contrary to law, arbitrary and capricious, and unsupported by substantial evidence Commerce’s determinations: (1) that the Government of Korea’s (“GOK”) price-setting method or standard pricing mechanism for electricity did not confer a benefit; and (2) not to apply an adverse inference that state intervention by the GOK results in electricity prices that are inconsistent with market principles.  This motion for judgment on the agency record challenged U.S. Department of Commerce’s (“Commerce”) final determination in the countervailing duty investigation of certain corrosion-resistant steel (“CORE”) products from the Republic of Korea.

For a subsidy to be countervailable, Commerce must determine that an authority provides a subsidy that is specific and constitutes a financial contribution, by which a benefit is conferred. See 19 U.S.C. § 1677(5), (5A). A benefit is conferred “where goods or services are provided, if such goods or services are provided for less than adequate remuneration.” 19 U.S.C. § 1677(5)(E)(iv).

Commerce’s regulations provide that the agency shall measure the adequacy of remuneration by comparing the government price to a multi-tiered series of benchmark prices. See 19 C.F.R. § 351.511(a)(2)(i)–(iii). Generally, Commerce “will normally seek to measure the adequacy of remuneration by comparing the government price to a market-determined price for the good or service resulting from actual transactions in the country in question,” (i.e., a tier one benchmark). 19 C.F.R. § 351.511(a)(2)(i).

Commerce recognized “what constitutes adequate remuneration depends on the nature of the marketplace, and where the marketplace is a government-controlled monopoly, there is a role for a preferentiality based test.” Slip Op., pg. 15. Commerce only uses the tier three benchmark analysis when market prices outside of the government controlled market are not available. Further, plaintiffs argued that Commerce’s methodology did not evaluate a benefit because it compared the Korea Electric and Power Corporation’s (“KEPCO”) electricity rates to themselves rather than to benchmark, market determined rates. However, Commerce found that the relevant price for KEPCO’s industrial tariff schedule is the price KEPCO pays for the electricity through the Korea Power Exchange (“KPX”).  Given the statutory and regulatory language, the Court found Commerce’s methodology to be reasonable and upheld the determination that no benefit was conferred.

As for prices paid, Commerce focused on prices KEPCO paid on the KPX and determined that KEPCO fully covered its cost for the industry tariff applicable to respondents. Thus, Commerce’s determination that KEPCO’s electricity prices are consistent with market principles was supported by substantial evidence.  Moreover, Commerce identified flaws in the alternative calculations proposed by plaintiffs and the Court declined to reweigh the evidence based on the alternative calculations.

Finally, AFA is not warranted where GOK submitted timely and complete responses to Commerce’s questionnaires.

For all these reasons, Commerce’s determinations were sustained.