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.

Trade Updates for Week of February 7, 2018

United States Court of International Trade

 

Remand Decision Regarding LTAR Sustained

In Ozdmir Boru San. Ve Tic. Ltd. Sti., v. United States, Court No. 16-206,  Slip Op. 18-6 (February 1, 2018), the Court sustained the remand decision. Commerce chose to maintain its Land for Less than Adequate Remuneration (LTAR) benchmark calculation on remand by explaining that “there is a reasonable basis for treating the Istanbul and Yalova land parcels as outliers because (1) the prices of these parcels deviate substantially from the other prices in the dataset, and consequently, (2) the average price of the land parcels in the benchmark is skewed if the Istabul and Yalova land parcels are not removed from the dataset.”  Therefore Commerce removed the two parcels from the dataset, thus found moot other issues raised by the Court including “the relative levels of development of the land parcels in the benchmark, the importance of a land parcel’s future usage in benchmark selection, and issues involving comparability.”

Trade Updates for Week of January 24, 2018

United States Court of International Trade

 

Remand Determination Sustained on Nails Case

In Itochu Bldg. Prods. Co et. al. v. United States et. al. Slip Op. 18-03, Court No. 13-00132 (January 18, 2018) the Court reviewed remand redeterminations made by Commerce in regards to an annual administrative review of antidumping duties on steel nails from China. Previously in the case, the Court had remanded the case to Commerce for reconsideration of the selection of Thai GTA data as a surrogate value. The Court specifically asked Commerce to weigh the Thai GTA data against Ukrainian metal expert data, and to determine if carbon content or diameter were more important input in the the nails imported by plaintiffs. For the following reasons the Court upheld Commerce’s remand findings in full.

The first issue was whether Thai GTA data was more product specific then Ukrainian metal expert data.  Plaintiffs argued the Thai data was not product specific because it included data about nails created from steel bars and wires rods, while the nails at issue were solely created from wire rods. Commerce reviewed Thai HTS data and determined the data was “unlikely to contain unrelated products.” Id. at 9. The Court said that “Commerce’s determination on remand … is supported by substantial evidence.” Id. at 10. The Court also said that “Ukrainian metal expert data are only specific to one of the respondents, whereas GTA data covered” both respondents. Id. at 10. The Thai GTA data was the more appropriate surrogate value. The next issue was Commerce’s determination that carbon content, not diameter, was the primary factor in assessing steel nails. Plaintiffs argued that Commerce did not base its determination on substantial evidence. Commerce explained “the diameter of the wire rod may change throughout the production process, rendering the initial diameter less important.” The Court said there was adequate evidence of this on the record to support Commerce’s determination. As such, the determinations were upheld in full. 

 

Commerce Determination Remanded Regarding Corrosion-Resistant Steel Products

In Prosperity Tieh Enterprise Co., Ltd. and Yieh Phui Enterprise Co., Ltd., v. United States, Court No. 16-138, Slip Op. 18-5 (January 23, 2018), the Court remanded the determination by the U.S. Department of Commerce (“Commerce”).  Plaintiffs Prosperity Tieh Enterprise Co., Ltd. (“Prosperity”) and Yieh Phui Enterprise Co. Ltd. (“Yieh Phui”) are Taiwanese producers and exporters of corrosion-resistant steel products (“CORE”).  The determination at issue is Certain Corrosion-Resistant Steel Products From India, Italy, the People’s Republic of China, the Republic of Korea and Taiwan: Amended Final Affirmative Antidumping Determination for India and Taiwan, and Antidumping Duty Order, 81 Fed. Reg. 48,390 (Int’l Trade Admin. July 25, 2016) (“Amended Final Determination”). The period of investigation (“POI”) was April 1, 2014 through March 31, 2015. Id. at 35,313. 

Yieh Phui claims that Commerce violated 19 C.F.R. § 351.401(c) when it failed to make corresponding downward adjustments in the starting prices Commerce used in determining normal value, i.e., the prices at which Yieh Phui and Synn sold the foreign like product in its home market. The regulations require Commerce to recognize a reduction in the purchaser’s net outlay for the foreign like product that satisfies the definition of a “price adjustment” in section 351.102(b)(38). First the Court held that Commerce must make downward adjustments to Yieh Phui’s and Synn’s home market sales prices to account for rebates granted to their home customers.  Further, the Court determined that there was no substantial evidence to support collapsing Prosperity and Yieh Phui into one entity and that the case be remanded to further investigate and review this decision. Finally, there was no evidence to support the use of adverse facts available in calculating certain CORE sales, when there was an interpretation issue with yield strength reporting specifications.

 

United States Court of Appeals for the Federal Circuit

 

Commerce Cannot Use “Guideline” to Change Scope of Regulation

Once a regulation has been published, a government agency may  not change its scope or range of operation through issuance of an informal “guidance” document which has not been adopted using Administrative Procedure Act (APA) rulemaking procedures, according to a recent Federal Circuit opinion.

In Glycine & More v. United States, No. 2017-1312 (January 23, 2018), the Federal Circuit upheld a Court of International Trade determination that Commerce lacked the power to limit the circumstances where a regulation applied. . 

The case involved a Commerce Department regulation concerning when a request for review of an antidumping or countervailing duty order could be filed after the 90-day regulatory deadline for same. As enacted, the regulation said a party could file a tardy withdrawal request "for good cause shown". But Commerce, in a 2011 "Guidance" document, said that it would henceforth only honor tardy withdrawal requests if the party concerned showed "extraordinary circumstances" which prevented it from making its request within the 90 day period.  Glycine & More filed a tardy withdrawal request, and had good cause for doing so, But Commerce, applying the stricter standard from its "guidance" document, rejected the withdrawal, conducted an antidumping review no party wanted, and when Glycine & More did not respond to questionnaires, assigned that company a 457% antidumping rate based on "facts available".

Affirming the CIT decision, the Federal Circuit held that once a regulation has been enacted which defines its scope of operation, an agency may not thereafter change that scope of operation using a "guidance" document or anything less than formal APA rulemaking. The Commerce Department had rescinded its review determination “under protest”, but oddly did not make an appearance in the appeal.

 

Trade Updates for Week of January 10, 2018

United States Court of International Trade

 

Remand Ordered in Antidumping Duty Investigation Results of CORE from Korea

In Hyundai Steel Co. v. United Sates et al., Slip Op. 18-2, Court No. 16-161 (published January 10, 2018), the Court reviewed the final results in an antidumping investigation involving Corrision-Resistant Steel Products (“CORE”) from Korea.  This action concerns Commerce’s treatment, for computation of the United States sale price, of Hyundai’s further manufactured products, other than completed automobiles, including skelp, sheets or blanks (“SSBs”), tailorwelded blanks (“TWBs”), and after-market auto parts. To manufacture the latter two product categories, Hyundai first sold CORE to its U.S. subsidiary, Hyundai Steel America, Inc. (“HSA”), in coil form. HSA then sold the imported CORE: (1) in unaltered form; (2) in slightly further manufactured form, e.g., as SSBs; or (3) as TWBs. HSA sold the foregoing products to both affiliated and unaffiliated vendors that performed additional further processing before selling the ultimate product to an affiliated automobile manufacturer. While Commerce’s findings were generally supported by substantial evidence, calculations regarding Hyundai’s SSB data were remanded.

Commerce failed to provide adequate notice of deficiency when it came to discrepancies in Hyundai’s SSB data, and did not provide an opportunity for Hyundai to remedy the deficiencies.  Moreover, Commerce’s Third Supplemental Questionnaire precluded Hyundai from submitting “any new or revised sales, cost, or further manufacturing databases in response.” Thus, Hyundai may have been precluded from moving for exceptional treatment after the Preliminary Determination to submit more information. Accordingly, this matter was remanded for Commerce to address Hyundai’s SSB cost data, and to recalculate the overall margin as necessary.

 

Trade Updates for Week of January 3, 2018

United States Court of International Trade

 

Affirming Commerce’s Determination in Hot-Rolled Steel Flat Products Case

 In Hyundai Steel Co. v. United States Slip Op. 17-173, Court No. 16-00238 (December 27, 2017)  the court reviewed Commerce’s determinations from a less-than-fair-value antidumping investigation of hot-rolled steel flat products from Korea. In August 2016 Commerce issued the results of the investigation finding a 9.49% antidumping margin. Hyundai challenged Commerce’s application of adverse facts available to Hyundai’s reported expenses with affiliated companies, and Commerce’s determination not to grant a constructed export price offset to the company because of trade differences in other markets. For the following reasons the Court upholds Commerce’s determinations in full.

The first issue was Commerce’s application of the adverse facts available to Hyundai’s expenses incurred with affiliated companies.  Moreover, the information provided by Hyundai was not enough for Commerce to complete an arm’s-length determination.  When information is not available on the record, or a respondent withholds information, or does not cooperate Commerce shall “use the facts otherwise available in reaching the applicable determination.” Id. at 5.  Commerce had requested contracts between Hyundai’s affiliates and all unaffiliated freight providers through supplemental questionnaires and at verification. Hyundai “did not furnish in entirety the documents requested by Commerce.” Id. at 16.  The Court found “Commerce’s resort to facts otherwise available … in order to complete its analysis was reasonable.”  Id. at 17.  The Court also found that it was reasonable for Commerce to expect Hyundai to access its affiliates’ documentation, and that the adverse facts available were lawfully applied. The final issue was Commerce’s determination not to grant a constructed export price offset to Hyundai. Constructed export price offsets are used by Commerce to account for different levels of trade in home markets and in the US market. Hyundai argued the determination was unsupported by evidence, and was arbitrary and capricious. The Court found that all of evidence on the record was enough for Commerce to determine the same level of trade existed in Hyundai’s home market and in the US, and that any minor differences did not require the need for a CEP offset. In addition, the Court found the determination was not arbitrary and capricious and that it was a reasonable for Commerce to deny the offset. 

 

Remanded Separate Rate Request Decision

In National Nail Corp. et. al. v. United States Slip. Op. 18-001, Court No. 16-00052, (January 2, 2018) the court reviewed Commerce’s determinations from the sixth annual review of the antidumping order on steel nails from China. Commerce determined that because the agency used adverse facts available in determining an antidumping margin, plaintiff National Nail Corp.’s  (“National Nail”) request for a separate rate from the China wide rate was denied. For the following reasons the court remanded the issue back to the agency for reconsideration. 

The primary issue was that because the agency used adverse facts available in regards to the factors of production, and sales and product specifications that plaintiff was not entitled to a separate rate from the PRC-wide rate of 118.04 percent. The determination to apply adverse facts available was resulted from Commerce’s findings that Shandong’s Section C and D nonmarket economy questionnaire (“Original Questionnaire”) responses regarding its affiliate Jining Dragon Fasteners’ product and U.S. sales of shooting nails were unreliable and incomplete.  However, these sections of the questionnaire had nothing to do with the information submitted in the separate rate responses. It was unfair to assume that because plaintiff did not provide the best information in one section they should suffer in another because of it. The Court said “the denial of a separate rate ... appears to be based on deficiencies in questionnaire responses unrelated to evidence dealing with whether or not Shandong was part of the PRC-wide entity.” Id. at 11. The request for a separate rate needed to be considered independently. The court remanded the case for Commerce to reconsider the separate rate request information independently from the other sections of the Original Questionnaire.

 

United States District Court  for the Northern District of Illinois

 

Customs Power of Attorney Not a Contract, But Does Create Fiduciary Relationship

 A Customs Power of Attorney is not a contract, but does create a fiduciary relationship and a duty to account for funds received, according to a new decision from the United States District Court for the Northern District of Illinois.

In Union Pacific Railroad Company v. Pactrans Air & Sea, Inc., et al., No 16-c-8092 (December 20, 2017), the railroad sued the defendants, a freight forwarding company and its owners, seeking the return of $5.8 million which Union Pacific had advanced to the forwarder, ,and which was supposed to be used to pay estimated antidumping and countervailing duties on imports of certain shipping containers. Pactrans, the defendant freight forwarder, was not itself a licensed Customs broker, but gave a power of attorney to a licensed broker to make entries of the containers on Union Pacific’s behalf.  Ultimately, the United States International Trade Commission made a negative determination of injury in the AD and CVD cases, and Customs was ordered to refund estimated duty deposits. Only then did Union Pacific learn that the defendants had not returned the duties, and indeed, had not forwarded much of the monies entrusted to them to the broker for payment of the duties. Pactrans, the defendant forwarder, claimed that it lacked the wherewithal to pay back the $5.8 million, having commingled the funds with its own and used the same for business expenses.

Magistrate Judge Sheila Finnegan, considering Union Pacific’s motions for summary judgment on various claims, first held that the Customs power of attorney issued to Pactrans created a “principal and agency” relationship, sufficient to create a fiduciary obligation from Pactrans to Union Pacific, notwithstanding that Pactrans was not itself a licensed Customs broker. “The mere fact that Pactrans subcontracted the licensed brokerage services out to Nissin [a licensed broker] in no way relieved it of its own obligation as Union Pacific’s agent to ensure that Nissin paid all necessary Customs Charges on Union Pacific’s behalf”, the court ruled.  The court also found that Pactrans had breached its fiduciary duty under the Customs POA, and that this was the proximate cause of Union Pacific’s damages.

The court also ruled that the monies which Union Pacific paid to Pactrans were sufficiently identifiable, based on available records, to support a claim for conversion against Pactrans.

However, the Court found that Union Pacific had not proven its claim of breach of contract, since it had not shown that the Customs power of attorney constituted a “contract. There was no offer, acceptance or supporting consideration.  The POA did not, by itself, constitute a contract.  The court also denied Union Pacific’s claim for monies had and received, noting that since Union Pacific had prevailed on its legal claim for breach of fiduciary duty, it was not entitled to also receive equitable relief.

The Court granted Union Pacific’s request for an accounting, but held that the company had not pleaded sufficient facts to grant it a piercing of the corporate veil, indicating that the company needed to prove this claim at trial.

Trade Updates for Week of December 20, 2017

U.S. Court of International Trade

 

CIT ALLOWS BROAD DISCOVERY INQUIRY IN PENALTY CASE

Officers and employees of corporate importers may have reason to be concerned about their personal liability for Customs penalties and withheld duties, based on the sweeping discovery which the Court of International Trade recently granted the government in a pending lawsuit.

In United States v. Greenlight Organics Inc., Slip Op. 17-168 (December 19, 2017), the Court held that the government could conduct extensive discovery concerning the affairs of two individual officer of a corporate importer, requiring them to disclose all of their sources of income for a period of more than 10 years.  Holding that the scope of discovery was broader than the scope of the complaint, the Court held that the government could take discovery regarding the officers’ individual affairs, even though they had not been named parties to the lawsuit. The government claimed that the discovery was necessary to allow it to explore its claims of fraud in the classification and valuation of imported wearing apparel, and to determine whether the individual officers should be added as defendants to the case.

The CIT also outlined an incredibly broad theory of liability, under which corporate employees of an importer could be held liable for 19 U.S.C. §1592 civil penalties and withheld duties:

Liability for claims brought under Section 1592 is not limited to companies. Under principles of agency law, “an agent who actually commits a tort is generally liable for the tort along with the principal, even though the agent was acting for the principal.” United States v. Trek Leather, Inc., 767 F.3d 1288, 1299 (Fed. Cir. 2014) (citing Restatement (Second) of Agency § 343 (Am. Law Inst. 1958); Restatement (Third) of Agency § 7.01 (Am. Law Inst. 2006)). An officer of a corporation may be liable personally for violating Section 1592, even when the conduct falls within the scope of the officer’s authority. Trek Leather, Inc., 767 F.3d at 1299. The court will allow discovery into the officers’ sources of income and the companies with whom the officers have conducted business, in order to determine whether Greenlight’s officers may be liable individually in the Government’s Section 1592 case.

This sweeping language goes beyond merely “piercing the corporate veil”, which might be used to hold corporate owners liable, and beyond the holding in the Trek Leather case (which held a company President separately liable for “introducing” merchandise by means of false statements), to suggest that corporate employees must be responsible for corporate Section 592 violations simply by virtue of being considered “agents” of the company.

It should also be borne in mind that recently, in United States v. Greenlight Organic Inc., Slip Op. 17-126 (September 15, 2017), the CIT ruled that the corporate defendant’s decision to file bankruptcy did not trigger the “automatic stay” under the Bankruptcy Code and prevent the government from pursuing its case.  Perhaps fearing difficulties in collecting against the corporate defendant, the government may now be looking for other pockets to hit.

The Court also directed the corporate defendant to review its records and supplement its responses to discovery, after the government charged that the defendants’ responses had been incomplete.

 

CIT Directs Government to Correct Claims of “Deliberative Privilege” in Penalty Case

In a simultaneously issued opinion, the Court of International Trade directed the government to respond to discovery requests propounded by the defendant in a Section 592 penalty proceeding. In United States v. Greenlight Organic Inc., Slip Op. 17-167 (December 19, 2017), the government asserted “deliberative process” privilege with respect to some 145 documents sought by the defendant and provided an “enhanced” privilege log. However, the Court found that the privilege log did not describe the documents in sufficient detail to enable the court to determine whether the privilege was properly asserted. The court directed the government to revise the log to provide the required detail, and indicated that it would thereafter rule on the privilege claims.

 

Final Decision on Garlic Remanded in Part

In Shenzen Xinboda Industrial Co., Ltd. v. United States et al., Court No. 11-267, Slip Op. 17-66 (December 15, 2017), plaintiff Shenzen Xinboda Industrial Co.., Ltd. (“Xinboda”) challenged the Final Determination in the U.S. Department of Commerce’s fifteenth administrative review of the antidumping duty order covering fresh garlic from the People’s Republic of China.  Specifically Xinboda contested: Commerce’s selection of surrogate financial statements used to derive surrogate financial ratios, Commerce’s calculation of the surrogate value for labor (i.e., the surrogate wage rate), and Commerce’s calculation of the surrogate value for whole raw garlic bulbs, as well as Commerce’s application of its “zeroing” methodology in calculating Xinboda’s dumping margin.

For purposes of the surrogate value for the raw bulbs, Xinboda argued that the contemporaneous Azadpur Market prices for A-grade garlic bulbs that Commerce is using already reflect prices for garlic bulbs that previously would have been classified as grade S.A., and that this improperly inflates Commerce’s calculated surrogate value for whole raw garlic bulbs.  Instead, Commerce needs to adjust the values using price data from an Indian garlic processor and trader, Garlico which closely matches Xinboda’s experience. However, Commerce has discounted the use of a Xinboda’s consultant’s declaration which provided the condition of the garlic bulbs sold at the Azadpur market.as not being similar to those delivered to Dadi, an affiliated producer which supplied garlic products from local Chinese garlic farmers.  According to the Court, “If the garlic bulbs sold at the Azadpur APMC Market were at a more advanced level of trade (i.e., had been subjected to more processing) than the garlic bulbs that were delivered to Dadi (as all existing record evidence indicates), the Azadpur Market prices cannot reasonably be used as a surrogate value for the garlic bulbs that were delivered to Dadi at least not without further adjustment.”  Slip Op. at pg. 47.  Moreover, adjustment should be made for intermediary expenses. The decision regarding the surrogate value of the bulbs was remanded.

As for the surrogate financial statements, the Court held that this decision should be remanded to fully consider the evidence of alleged subsidies and explain the rational for its determination.

Finally, the Final Results were sustained as to Commerce’s determination on the surrogate value for labor and Commerce’s application of zeroing.

 

Trade Updates for Week of December 13, 2017

United States Court of International Trade

 

New Shipper Review Decision Remanded

 In Huzhou Muyun Wood Co. v. United States Slip Op. 17-162, Court No. 16-00245 (December 11, 2017) the court reviewed Commerce’s determination to rescind plaintiff’s request  for a new shipper review. In June 2015, plaintiff requested a review under an antidumping duty on multilayered wood floors. One week before the close of review period, Commerce requested data, about other exporters, from plaintiff. Plaintiff requested a time extension for Commerce to explain the data’s role in the investigation. This request was denied by Commerce and the review was rescinded because Commerce concluded that plaintiff had not made bona fide sales. Plaintiff raised two issues in this action, that Commerce abused its discretion in placing data on the record without clarifying its use, and that there was not substantial evidence for Commerce to conclude plaintiff’s sales were not bona fide. For the following reasons the Court agreed with plaintiff and remanded the issue to Commerce for reconsideration.

The first issue was if Commerce abused its discretion by placing data in the review a week before its conclusion, and by failing to explain to plaintiff what role the data will play in any of Commerce determinations. “Parties are permitted one opportunity to submit factual information to rebut, clarify, or correct factual information placed on the record of the proceeding by the Department.” Id. at 15. The Court believed that because of Commerce’s late request and failure to explain the use of the data, plaintiff was not presented with any of these required opportunities. The next issue was if there was substantial evidence for Commerce to conclude that plaintiff’s sales were not bona fide. Commerce evaluates six factors in deciding if a sale is bona fide.  Commerce found the sales not bona fide because of a price discrepancy, submitted data, and late payment from a customer. The Court concludes the use of this data and the late payment was unsupported by evidence and needed to be further explained by Commerce on remand.

 

Commerce Decision Remanded in Part

In GGB Bearing Technology Co., LTD. and Stemco LP, v. United States Slip. Op. 17-164, Court No. 12-00386 (December 12, 2017) the Court reviewed Commerce’s determinations made in a new shipper review of plaintiff under a 1987 antidumping order on tapered roll bearings from China. In 2011, plaintiff’s requested a new shipper review to receive a different antidumping margin. Since plaintiffs were based in the non-market economy of China, Commerce used surrogate values to calculate a 12.64% weighted dumping margin. Plaintiffs argued two main issues involving the surrogate selection. These were that the Commerce erred in choosing appropriate Thai companies for surrogates and that Commerce erred in choosing Thailand as a surrogate as opposed to other countries. For the following reasons the Court upheld Commerce’s determination in part and remanded in part.

The first main issue plaintiffs argued was that the Thai surrogate companies received a subsidy from the Thai government that made them unfit to be surrogates. Specifically at issue is whether the NSK financial statement may have been distorted by countervailable subsidies. The Court examined the Thai Investment Protection Act and its application to surrogate companies and found it reasonable for Commerce to conclude the surrogates did not receive a subsidy and that no financial data was distorted.

Plaintiffs also argued that manufacturing wage data from the Philippines and Ukraine were more accurate than those from Thailand for purposes of valuing GGB’s labor costs. 19 U.S.C. § 1677b(c)(1) requires Commerce to use the best available information to choose financial data from surrogate countries.  The Court held in this case, because Commerce had not determined “the Philippines and Ukraine were, or were not, significant producers of comparable merchandise” the surrogate country decisions was not made on the best available information. The Court remanded the case back to Commerce to determine if the Philippines and Ukraine are better surrogates and if so a determination on the best available information from their industries.

 

Sustained Remand Results

In Shenyang Yuanda Aluminum et. al. v. United States Slip Op. 17-163, Court No. 14-00106 (December 11, 2017) the Court reviewed a scope ruling made in a remand determination concerning Commerce’s antidumping and countervailing duty investigations on aluminum extrusions from the People’s Republic of China. Plaintiffs challenged Commerce’s determination that an aluminum curtain wall, imported in individual parts, was within the scope of the investigations. “Plaintiffs argued that curtain wall units, imported under a supply contract for a complete curtain wall, were partially assembled subassemblies of a complete curtain wall, and therefore excluded from the Orders as a finished goods kit.” Id. at  5. Commerce determined that the “entries failed the subassemblies test because … documents show that the individual curtain wall units do not contain all parts necessary to install them.” Id. at 7. Commerce identified additional finishing procedures required before the curtain walls could be installed, and thus the subject product failed the subassemblies test. The Court was unpersuaded by any of plaintiff’s arguments and agreed with Commerce.

Trade Updates for Week of December 6, 2017

United States Court of International Trade

 

Changed Circumstances Decision Remanded

In Inmax Sdn. Bhd.et. al. v. United States Slip Op. 17-158, Court No. 17-00205 (December 4, 2017) the Court reviewed Commerce’s determination to conduct a changed circumstances investigation of plaintiff, and the results of the investigation.  Plaintiff and affiliated company were respondents to an ADD investigation, and requested to be investigated as one company.  Commerce denied the request to collapse the companies and issued an ADD rate of 39.35% for Inmax and 2.66% for the affiliate. In response, Inmax sent a letter to the Taiwanese Stock Exchange stating sales to the US will take place through the affiliate company because of the high ADD rate. Commerce was requested to conduct a changed circumstances investigation of Inmax for illegally evading the ADD because of the letter. Commerce initiated the investigation and found that Inmax has stopped production of goods subject to the 39.35% ADD. The affiliate company had developed an independent product line and was legally exporting to the U.S. However, Commerce also found production could be shifted between the companies and Inmax could avoid a statutory remedy. For the following reasons, the Court remanded the changed circumstances findings in accordance with its decision.

In general, Commerce may initiate a changed circumstances investigation if good cause exists and that circumstances have changed since the last investigation.  The Court said, “it is difficult to imagine a better cause for initiating a changed circumstances review” than the evasion of an order by one company through the use of an affiliate.  Id. at 6. However, since Commerce determined that there was no evasion of the order, the dynamics of the rest of the investigation was changed. “Although the court believes Commerce had good cause to initiate the changed circumstances review—there were changed circumstances plus the possibility of evasion—the subsequent finding by Commerce that Inmax was not shipping its merchandise through Inmax Industries, does alter the dynamics of the proceeding and challenges the reasonableness of several aspects of Commerce’s subsequent decision. The court therefore must remand this matter to Commerce for further explanation.”  See Id. at 8.  The reasonableness of several aspects of Commerce’s subsequent decision” was uncertain. Id.   The Court remanded these issues to Commerce for further explanation.

 

Scope Ruling Sustained

In Adams Thermal Systems, Inc. v. United States and Aluminum Extrusions Fair Trade Committee, Court No. 16-128, Slip Op. No. 17-161 (December 6, 2017), plaintiff Adams Thermal Systems (“ATS”) contested the Final Scope Ruling on certain aluminum products imported by ATS.  For the reasons that follow, the Court sustained the ruling. The determination contested in this action is Antidumping and Countervailing Duty Orders on Aluminum Extrusions from the People’s Republic of China: Final Scope Ruling on Adams Thermal Systems’ Certain Fittings and Related Products for Engine Cooling Systems (July 11, 2016) (P.R. Doc. 26), available at https://enforcement.trade.gov/download/prcae/scope/96-fitting-engine-cooling-systems-12jul16.pdf (last visited Dec. 1, 2017) (“Final Scope Ruling”).

Initially, the plaintiff argued that the scope language should be confined to products that retain the general shape and form imparted by the extrusion process.  Specifically, ATS interprets the words “produced by an extrusion process” as a limitation on the meaning of the words “shapes and forms” that confines the scope to articles retaining the basic shape obtained upon extrusion. However, that is not the only interpretation and could include several conditions: that they be “shapes or forms”; that they be produced by an extrusion process in addition to being drawn, finished, or fabricated; and that they must be made from a specified alloy. All are reasonable interpretations.

Second, plaintiff has not shown how Commerce has misunderstood the scope to include articles which have “undergone fabrication that significantly altered their cross-sectional shape” or that resulted in a substantial transformation.

Finally, plaintiff has not shown how Commerce misapplied parameters in 19 C.F.R. section 351.225(k)(1) in support of an “overbroad” interpretation of the scope language.