Trade Updates for Week of March 20, 2019

United States Court of International Trade

Summary Judgment Granted for Defendant

Before the Court in Apple Inc. v. United States Slip Op. 19-32, Court No. 13-00239 (March 13, 2019) were cross motions for summary judgment regarding the proper HTS classification of imported two IPad 2 Smart Covers, one made from leather and another made from plastic. When imported, CBP liquidated the plastic Smart Cover under subheading 6307.90.98, HTSUS, dutiable at seven percent, and the leather Smart Cover under subheading 4205.00.80, HTSUS, duty-free. Plaintiff then filed a protest to argue both covers were properly classified within subheading 8473.30.51, as “parts and accessories (other than covers, carrying cases and the like) suitable for use solely or principally with machines of headings 8469 to 8472: Parts and accessories of the machines of heading 8471: Other,” duty free. Id. at 4. CBP issued a ruling rejecting plaintiffs classification and ruled that the plastic iPad Smart Cover is properly classified subheading 3926.90.99, HTSUS, as an “Other articles of plastics and articles of other materials of headings 3901 to 3914: Other: Other,” dutiable at a rate of 5.3%. Id. at 4. Plaintiff filed this action to contest CBP’s denial of the protest. Before the Court, defendant also argued the Court lacked jurisdiction because CBP’s classification of the leather covers were liquidated duty-free and Plaintiff can claim no injury. For the following reasons the defendant’s summary judgment motion was granted.

“Plaintiff must demonstrate that its claim represents an injury in fact. An injury in fact is concrete and particularized and actual or imminent, not conjectural or hypothetical, fairly traceable to the challenged action, and likely to be redressed by a favorable decision.” Id. at 10. The Court said because “the leather Smart Covers were liquidated duty-free,” “plaintiff does not have standing to challenge Customs’ classification of the leather Smart Covers and therefore its claim is non-justiciable.” Id. at 11. In regards to the classification of the plastic cases, “Classification of merchandise under the HTSUS is governed by the principles set forth in the General Rules of Interpretation” (“GRIs”) applied in numerical order. Id. at 13. The Court may also use the nonbinding explanatory notes to provide guidance. Using the explanatory note for Heading 8473, the Court excluded the cover from the chapter because the note “affirmatively excludes parts or accessories that are “covers, carrying cases and the like.” Id. at 16.  The Court then said based on the undisputed facts the cover was “a composite good that is prima facie classifiable under either subheading 3926.90.99 … or subheading 6307.90.98.” Id. at 24. Turing to GRI 3b, the Court said the plastic outer layer gives the cover its essential character because “The plastic layer protects the screen and is the backing onto which the microfiber lining is attached,” “encapsulates the magnets that align with the sensor in the iPad 2 that prompt the machine to enter or exit sleep mode,” and “is folded to create the two different positions that prop up the iPad 2 to facilitate video watching and typing.” Id. at 24-25. As such the good was properly classifiable within subheading 3926.90.99.

 

Trade Updates for Week of March 13, 2019

United States Court of International Trade

Motion for Reconsideration Denied

Before the Court in Stupp Corp. et. al. v. United States et. al., Slip Op. 19-30, Court No. 15-00334 (March 7, 2019) was defendant intervenors, SeAH Steel Corporation, motion of reconsideration of the Court’s previous decision sustaining Commerce’s application of its differential pricing analysis in the less than fair value (“LTFV”) investigation of imported welded line pipe from Korea, which resulted in an antidumping order. SeAH argued “Commerce’s differential pricing analysis is merely a policy, necessitating Commerce to, on a case-by-case basis, justify and support with substantial evidence, any factual findings embodied in the Differential Pricing Analysis.” Id. at 3. For the following reasons, the Court denied the motion for reconsideration.

“A court should not disturb its prior decision unless it is manifestly erroneous.” Id. at 4. “Grounds for finding a prior decision to be manifestly erroneous include “an intervening change in the controlling law, the availability of new evidence, the need to correct a clear factual or legal error, or the need to prevent manifest injustice.” Id. at 4-5. The Court said that despite the defendant intervenors many arguments, they had “failed to demonstrate manifest error with the court’s reasoning for sustaining Commerce’s application of the differential pricing analysis” because the Court had applied the correct legal standard to the issue, and no new facts or controlling law had come forward. Id. at 10.

Decision Remanded in Polyethylene Terephthalate Film Case

Before the Court in Jindal Poly Films Ltd. of India v. United States, Slip Op. 19-31, Court No. 18-00038 (March 11, 2019) were challenges to Commerce’s final results in the administrative review of the antidumping duty order on polyethylene terephthalate film, sheet, and strip from India. Plaintiff argued Commerce’s decision to deny Jindal two post-sale price adjustments to its home market sales was contrary to law; Commerce unlawfully failed to issue a supplemental questionnaire to Jindal to seek additional information on the two post-sale price adjustments that Commerce denied; and Commerce violated Jindal’s due process rights by depriving it of an opportunity to meaningfully comment on Commerce’s preliminary results. For the following reasons, the Court remanded the results to Commerce for reconsideration.

Price adjustment is defined as “a change in the price charged for . . . the foreign like product, such as a discount, rebate, or other adjustment, including, under certain circumstances, a change that is made after the time of sale, that is reflected in the purchaser’s net outlay.” Id. at 8.

“Commerce does not accept a price adjustment that is made after the time of sale unless the interested party demonstrates . . . its entitlement to such an adjustment.” Id. The Court said “Commerce’s entire analysis for denying the two post-sale price adjustments is comprised of conclusory statements,” not supported by evidence. Id. at 11. In regards to the supplemental questionnaires, the Court said it could not rule on the issue because Commerce failed to articulate a reason for denying the post sales adjustments. The Court remanded the issues back to Commerce and said because of its remand on the first issue the due process claims were moot.

Reconsideration of Remand Results in Certain Corrosion-Resistant Steel Case

Before the Court in Uttam Galva Steels Ltd. et. al. v. United States et. al., Slip Op. 19-34, Court No. 16-00162 (March 12, 2019) was Commerce’s remand redetermination following an antidumping duty investigation on certain corrosion-resistant steel products from India. Plaintiff Uttam Galva Steels Limited (“Uttam Galva”) initiated this action to challenge the final determination in the antidumping duty investigation, in which the Commerce found that certain corrosion-resistant steel products from India are being, or are likely to be, sold in the United States at less-than-fair value. Plaintiff argued the drawback adjustment made on remand was made moot by the circumstance of sale adjustment to normal value. For the following reasons, the Court remands the results back to Commerce for reconsideration.

“If Commerce finds that merchandise is being sold at less than fair value, Commerce issues an antidumping duty order imposing antidumping duties equivalent to the amount by which the normal value exceeds the export price for the merchandise.” Id. at 4. A duty drawback adjustment is an adjustment to export price by “the amount of any import duties imposed by the country of exportation which have been rebated, or which have not been collected, by reason of the exportation of the subject merchandise to the United States.” Commerce may make certain price adjustments, to “ensure that there is no overlap or double-counting of adjustments.” Id. at 5. The Court said “Commerce’s action on remand here negates the statutory duty drawback adjustment that Uttam Galva earned by exporting its finished product to the United States and impinges on the agency’s ability to make a fair comparison.” As such, the results were remanded again.

Court of Appeals for the Federal Circuit

Solar Panels Country of Origin Test Altered to Reflect Differences in Scope and Harm Alleged

In Canadian Solar, Inc. et al. v. United States, SolarWorld Americas, Inc., plaintiff –appellee, Ct. No. 2017-2577 (March 12, 2019), SolarWorld, initiated the trade remedy investigations from which this appeal arises. The appellants – Canadian Solar, Inc., Changzhou Trina Solar Energy Co., Ltd., Hefei JA Solar Technology Co., Ltd., Shanghai JA Solar Technology Co., Ltd., Yingli Green Energy Holding Company Limited, and Yingli Green Energy Americas, Inc., -- export and or produce the class or kind of merchandise within the scope of the orders. Appellants argued that there should be only one type of origin rule – substantial transformation. However, the Federal Circuit affirmed the Court of International Trade’s decision for the alteration of the origin rule in the investigation before the Courts.

According to the CIT, the classes or kinds of merchandise in Solar I China, Solar I Taiwan, and Solar II China, previous decisions regarding solar cells and modules, laminates, and/or panels, are distinct because the scopes of those orders are distinct. SunPower, 253 F. Supp. 3d at 1287–88. It also found that Commerce had sufficiently explained why it departed from the substantial transformation test in Solar II China. Slip Op., pg. 10 Commerce also provided “good reasons for” departing from the substantial transformation test where such an analysis would be insufficient for determining the country-of origin of this specific product because reliance on that analysis alone would not provide relief to the domestic industry. In these investigations, “Commerce determined that the harm to domestic industry was caused, not by Chinese solar cells or solar panels containing Chinese cells, but by Chinese pricing and subsidization of solar panels assembled in China using non-Chinese cells.” See id. at 14.

Moreover because of the change of the industry practice to source cells from other countries, the industry was circumventing the duties imposed by the orders. That was the reason propounded by the Courts for a change in the country of origin test.

Trade Updates for Week of March 6, 2019

United States Court of International Trade

Commerce Decision Regarding Surrogate Country Remanded in Certain Activated Carbon Case

Before the Court in Jacobi Carbons AB et. al. v. United States et. al. Slip Op. 19-27, Court No. 15-00286 (March 4, 2019) and Jacobi Carbons AB et. al. v. United States et. al. Slip Op. 19-28, Court No. 16-00185 (March 5, 2019) were challenges to Commerce’s remand determinations in the seventh and eight administrative reviews of the antidumping duty order on certain activated carbon from China. “Plaintiffs challenged Commerce’s selection of Thailand as the primary surrogate country  … and Commerce’s adjustment to Jacobi’s constructed export price (“CEP”) to account for irrecoverable value-added tax (“VAT”).” Id. at 3. For the following reasons, the Court in both cases remanded with respect to the agency’s surrogate country selection and sustained with respect to the agency’s value-added tax adjustment.

When an antidumping investigation involves a nonmarket economy, “Commerce determines normal value by valuing the factors of production in a surrogate country.” Id. at 7-8. “Commerce must use the best available information that is, to the extent possible, from a market economy country or countries that are economically comparable to the nonmarket economy” are significant producers of comparable merchandise. Id. at 8. In both cases, the Court said Commerce failed support its determination that Thailand was a significant producer with substantial evidence. As such, the determination that Thailand was an appropriate surrogate was remanded. In regards to the CEP, “when calculating export price and constructed export price, Commerce may deduct the amount … of any export tax, duty, or other charge imposed by the exporting country on the exportation of the subject merchandise.”  Id. at 17. Commerce concluded that it previously erred in adjusting Jacobi’s CEP. The Court said “Commerce did not impermissibly base its adjustment on the contemporaneous Chinese law while ignoring evidence of Jacobi’s net VAT payment.” Id. at 35. As such, Commerce’s determination to deduct output VAT from the CEP was based on substantial evidence and was accordance with law.        

 

Commerce Scope Decision Regarding End Use and Further Processing of Certain Light-Walled Rectangular Pipe Remanded for Further Consideration

Before the Court in Stein Indus. Inc. v. United States, Slip Op. 19-29, Court No. 18-00150 (March 5, 2019) was a challenge to scope determination based on the antidumping and countervailing duty orders on light-walled rectangular (“LWR”) pipe and tube from China. Plaintiff challenged Commerce’s determination that its merchandising bar and adjustable welded mounted bar kit were within the scope of the Orders. Plaintiff argued the imported products were not LWR pipes or tubes but instead were finished downstream components made from LWR pipes or tubes. Commerce argued that all four parts in their original form were described by the scope language. For the following reasons, the scope determination was remanded to Commerce for reconsideration.

When dealing with a scope determination “Commerce’s inquiry must begin with the relevant scope language.” Id. at 4. If the language is ambiguous, Commerce “considers the description of the merchandise in the petition and initial investigation, and prior determinations by Commerce and the International Trade Commission” and factors specified in regulations. The Court said that although the agency was correct saying the products met the description of subject merchandise in the scope, Commerce failed “to consider whether the scope contained exclusionary language based on further processing or end use.” Id. at 13-14.  Specifically, the Court questioned whether Commerce considered the extent to which products must exhibit a rectangular or square cross-section to be covered by the scope of the order.  “Without more, the court cannot ensure that Commerce has not interpreted the scope of the Orders in a manner contrary to its terms.” Id. at 14. As such, the determination was remanded for further consideration.

Composite Pharmacy Machine Held Classifiable as “Packaging Machinery”

A composite machine used to store, measure and package pharmaceuticals for use by patients in hospitals and pharmacies derived its “essential character” from its packaging machinery component and is classified under Harmonized Tariff Schedule (HTS) Heading 8422, free of duty.

In McKesson Canada Corp. v. United States, Slip Op. 19-26 (February 28, 2019), the product was a “Pacmed” machine, used to dispense medications in pharmacies and hospitals. The upper part of the machine contained a number of bar-coded hoppers into which various medications were packaged. The lower part of the machine contained a printing mechanism which dispensed plastic material which was sealed around collections of medications, in bags which were then imprinted with patient identification and other information.

Customs had classified the Pacmed device under HTS Heading 8479, as other machines having single function not identified in Chapter 84. The government argued that the principal and controlling function of the machine was “dispensing” drugs to customers. The Court rejected this argument, noting that “dispensing” was a process which involved delivery to the patient or ultimate consumer – something the Pacmed did not do. [Packaged drugs were carried from the machine to patients by nurses, pharmacists or other health care personnel].

The Court also rejected a government suggestion that the principal function of the machine was “compliance” with hospital practices and standards designed to ensure that each patient received his or her correct medication, noting that “compliance” was more an aspiration than a function which could be used as a basis for classification. Noting that the device’s holding, measuring and other functions were in service of the packaging function, the court held the Pacmed device to be classifiable as packaging machinery of Heading 8422.

United States District Court

Customs Seizure Decisions Not Reviewable Prior to Forfeiture Proceedings, District Court Rules

A Federal District Court will not review petitions filed with Customs regarding seizure of merchandise, according to a recent decision from the United States District Court for the District of Delaware.

In LKQ Corporation et al. v. Department of Homeland Security et al., No. 18-225-MN (D. Del)(February 22, 2019), which an importer of “repair grilles” for cars challenged determinations by Customs and Border Protection to seize imported grilles as either bearing counterfeit or “confusingly similar” versions of registered trademarks which have been recorded with Customs for import protection. The importer had previously sought to challenge exclusions of its merchandise in the Court of International Trade. The dispute subsequently spilled over into Federal District Courts, where forfeiture cases against certain grilles are pending in California and Georgia.

The importer filed suit in the Federal District Court in Delaware in an attempt to get comprehensive review of all of CBP’s various seizure actions (some 165 in total), which are the subject of some 81 petitions for mitigation of seizures. It also sought to consolidate the California and Georgia seizure cases with its Delaware challenge.

Not surprisingly, the Court in Delaware has now dismissed the plaintiffs’ case in its entirety, for a variety of reasons. First, it held that the courts have no jurisdiction to review Customs’ “discretionary” review of petitions for mitigation, which it characterized as requests for “executive pardons of the property based on the petitioner’s innocence”. It declined to interfere with Customs’ seizures of various entries of goods, noting that the exclusive remedy was to have the government file a case to forfeit the property, in which case the importer could assert a claim to the goods. If the government delayed too long in bringing forfeiture cases, the importers could bring an equitable action seeking to have forfeitures commenced or the property released.

The court also noted that there was no due process right to pre-forfeiture hearings with respect to goods seized at the border.

Trade Updates for Week of February 27, 2019

United States Court of International Trade

Remand Determination Sustained in Cold-Rolled Steel Flat Products Case

Before the Court in Hyundai Steel Co. v. United States et. al., Slip Op. 19-24, Court No. 16-00228 (February 26, 2019) was Commerce’s remand redetermination in the antidumping duty investigation of certain cold-rolled steel flat products from Korea. The court had previously remanded for Commerce to reconsider some of the agency’s decisions regarding the use if adverse facts availbe (“AFA”) and constructed export price (“CEP”).  On remand, Commerce found that the use of AFA for U.S. sales where Plaintiff did not incur domestic inland freight was inappropriate; and found that the use of AFA for U.S. sales for which Plaintiff incurred domestic inland freight, regardless of the use of an affiliated or unaffiliated freight provider-- was warranted because it was not possible to distinguish freight providers. In addition, Commerce continued to deny Plaintiff a CEP offset.

“The court will uphold an agency determination that is supported by substantial evidence and otherwise in accordance with law.” Id. at 5. “The results of a redetermination pursuant to court remand are also reviewed for compliance with the court’s remand order.” Id. The Court said “the record did not allow Commerce to determine the percentage of freight charges provided by unaffiliated providers” because of this, the agency “was unable to reduce the AFA freight adjustment to account for unaffiliated domestic inland freight.” Id. at 6-7. In regards to the offset issue, “when Commerce is unable to find sales in the home market at the same level of trade as the sales in the U.S. market, it will compare sales at different levels of trade and account for that difference by making a level of trade adjustment or granting a CEP offset.” Id. at 10. Commerce re-examined the record and concluded that all three of Plaintiff’s U.S. sale channels represent the same level of trade in the home market. The court said “Substantial evidence supports that finding.” Id. at 13. In addition, the Court also said Commerce complied with the court’s remand order.

Commerce Decision Remanded Regarding Application of State Wide Duty Rate

Before the Court in Hubbell Power Sys., Inc. v United States et. al., Slip Op. 19-25, Court No. 15-00312 (February 27th, 2019) was Commerce’s results in the administrative review of an antidumping (“AD”) duty order on certain steel threaded rod from China. Plaintiff challenges Commerce Commerce’s rejection of Gem-Year’s, a Chinese exporter, application for separate rate status and assignment of the 206% country-wide rate. During the review, Commerce found that Gem-Year had failed to cooperate by not acting to the best of its ability. Particularly, Commerce took issue with the late disclosure that affiliate, Jinn-Well Auto Parts Co. Ltd. (“JinnWell”), had likely produced in-scope merchandise. As such, Commerce applied the China-wide rate against Gem-Year. For the following reasons, the matter is remanded for Commerce for reconsideration.

Courts have “consistently upheld Commerce’s use of a rebuttal presumption of state control such that entities in NMEs are assigned the state-wide AD duty rate unless they demonstrate eligibility for a separate rate.” Id. at 7. “If an entity demonstrates a lack of de jure and de facto government control, Commerce will assign it a separate rate.” Id. The Court said “the imposition of China’s total rate in response to Gem-Year’s failure to timely reveal Jinn-Well’s production of some small amount of subject merchandise appears unduly punitive or arbitrary given the extensive factual information that remained on the record.” Id. at 10. The Court said Commerce failed to consider an “indication that Gem-Year may not have understood the Jinn-Well products to be within the scope of the AD duty order and that these products were not sold in the United States.” Id. at 11. Therefore, the issue was remanded.

United States District Court

Customs Seizure Decisions Not Reviewable Prior to Forfeiture Proceedings, District Court Rules

A Federal District Court will not review petitions filed with Customs regarding seizure of merchandise, according to a recent decision from the United States District Court for the District of Delaware.

In LKQ Corporation et al. v. Department of Homeland Security et al., No. 18-225-MN (D. Del)(February 22, 2019), which an importer of “repair grilles” for cars challenged determinations by Customs and Border Protection to seize imported grilles as either bearing counterfeit or “confusingly similar” versions of registered trademarks which have been recorded with Customs for import protection. The importer had previously sought to challenge exclusions of its merchandise in the Court of International Trade. The dispute subsequently spilled over into Federal District Courts, where forfeiture cases against certain grilles are pending in California and Georgia.

The importer filed suit in the Federal District Court in Delaware in an attempt to get comprehensive review of all of CBP’s various seizure actions (some 165 in total), which are the subject of some 81 petitions for mitigation of seizures. It also sought to consolidate the California and Georgia seizure cases with its Delaware challenge

Not surprisingly, the Court in Delaware has now dismissed the plaintiffs’ case in its entirety, for a variety of reasons. First, it held that the courts have no jurisdiction to review Customs’ “discretionary” review of petitions for mitigation, which it characterized as requests for “executive pardons of the property based on the petitioner’s innocence”. It declined to interfere with Customs’ seizures of various entries of goods, noting that the exclusive remedy was to have the government file a case to forfeit the property, in which case the importer could assert a claim to the goods.  If the government delayed too long in bringing forfeiture cases, the importers could bring an equitable action seeking to have forfeitures commenced or the property released.

The court also noted that there was no due process right to pre-forfeiture hearings with respect to goods seized at the border.

Trade Updates for Week of February 20, 2019

United States Court of International Trade

Scope Determination Regarding Flanges Remanded for Reconsideration

Before the Court in Star Pipe Prods. v. United States et. al., Slip Op. 19-20, Court No. 17-00236 (February 13, 2019) was a 2017 Final Scope Ruling issued by Commerce interpreting the scope of an antidumping duty order on non-malleable cast iron pipe fittings from China to include certain ductile iron flanges imported by Star Pipe. Notice of Antidumping Duty Order: Non-Malleable Cast Iron Pipe Fittings From the People’s Republic of China, 68 Fed. Reg. 16,765 (Apr. 7, 2003) (the “Order”).  Plaintiff argued that their product was outside the scope of the Order, and in the alternative, that if the ruling was sustained Commerce acted unlawfully in issuing liquidation instructions to Customs directing the assessment of antidumping duties on entries of Plaintiff’s product that were made prior to issuance of the Final Scope Ruling. For the following reasons, the Court remanded the scope determination back to Commerce.

“Scope orders may be interpreted as including subject merchandise only if they contain language that specifically includes the subject merchandise or may be reasonably interpreted to include it.” Id. at 4. Because the products at issue are made of ductile cast iron rather than non-malleable (“gray”) cast iron, the Court found that they are not described by the first paragraph of the scope language. The Court said that “the analysis portion of the written determination … makes no mention of analyzing the merchandise descriptions in the petition and, to the contrary, indicates that Commerce did not consider the petition at all.” Id. at 9. In addition, the Court found “that no portion of the petition has been placed on the administrative record of this case, indicating further that Commerce failed to consider it.” Id.  Therefore the Court ordered “Commerce to consider the merchandise descriptions in the petition and the arguments Star Pipe made regarding them.” Id. at 10.

 

Remand Redetermination Sustained in Certain Frozen Warmwater Shrimp Case

Before the Court in Soc Trang Seafood Joint Stock Co. et. al. v. United States et. al., Slip Op. 19-23, Court No. 16-00205 (February 19, 2019) was Commerce’s remand redetermination in the tenth administrative review of the antidumping (“ADD”) order on certain frozen warm-water shrimp from Vietnam. The remand redeterminations were filed in response to the Court’s previous remand in order for Commerce to further explain or reconsider  its decision to value frozen shrimp using Bangladeshi UN Comtrade data for Harmonized Tariff Schedule (“HTS”) 0306.13,  and (ii) its decision to deny an offset for excess/scrap packaging. On remand the agency decided to use Indian data to value the frozen shrimp, and to continue its denial of the offset. For the following reasons the Court sustained Commerce’s remand determinations.

“In antidumping proceedings involving non-market economies, Commerce generally calculates normal value using the factors of production . . .” Id. at 7. “Commerce will value respondents’ factors of production using the best available information.” Id. The Court said “Commerce’s decision, on remand, to value the frozen shrimp input using Indian GTA import data is reasonable” because the agency explained that the Indian data was more specific to the input utilized by respondents, because it was limited in scope to warm-water shrimp and the data was more contemporaneous with the relevant period of review. Id. at 8. In regards to the offset issue, “Commerce has the discretion to set the standards by which items qualify for a byproduct offset, so long as Commerce’s selection satisfies the overall purpose of the antidumping statute, to calculate accurate dumping margins and is reasonable.” Id. at 11. The Court said Commerce adequately explained it reasoning and that “Commerce complied with the court’s order.” Id. at 12.

United States Court of Appeals for the Federal Circuit

Door Knobs with Locks are Composite Goods, Federal Circuit Rules

Door knobs with integral locks, of a kind used to protect the outer entry doors of homes, are “composite goods” and must be classified according to that component which imparts their “essential character,” according to a recent decision of the United States Court of Appeals for the Federal Circuit.

In Home Depot U.S.A., Inc. v United States, No. 2018-1206 (February 15, 2019), the merchandise at question consisted of door knobs having integral locks. They were typically made of steel and consisted of an interior knob assembly, an exterior knob assembly, a key cylinder, a latch mechanism assembly, a flanged strip plate and mounting hardware. Customs liquidated the articles under HTS subheading 8301.40.6030, as “locks (key, combination or electrically operated) of base metal” and specifically as “door locks, lock sets and other locks suitable for use with interior or exterior doors (except garage, overhead or sliding doors).” Home Depot asserted that the articles were properly classified under HTS subheading 8302.41.60 as “base metal… fittings and similar articles for… interior and exterior doors.”

On cross motions for summary judgment, the Court of International Trade upheld Customs’ classification of the products as “locks” under HTS Heading 8301. In its ruling, the CIT explained that “knobs can be, and are here, a part of a lock” and found that “in some types of locks, the lever is a door knob.” The Federal Circuit vacated the CIT’s judgment, and remanded for further findings.

The Federal Circuit held that the products were prima facie classified under both heading 8301 because the goods did contain locks. “[T]he fact that door knobs make up part of the overall locking mechanism does not alter the fact that the products, viewed as a whole, are locks”.

The Court also held that the products were classifiable as “fittings and similar articles suitable for doors, and for “interior or exterior doors.” Home Depot argued that the knobs at issue were not only correctly covered by the classification for “fittings” for “interior and exterior doors” but were also “similar articles” to privacy and passage knobs that the Government acknowledges are classifiable under HTS heading 8302. Finding the Explanatory Notes to the HTS not to be decisive for either party, the Court held that the products were “composite goods” which under General Rule of Interpretation 3(b) to the HTS must be classified as if they consisted of that component or material which imparts the “essential character” to the item.  Determining which component imparts the “essential character” is a fact-driven exercise, and the Federal Circuit remanded the case to the CIT with instructions for that court to conduct further proceedings and identify the essential character component of the goods.   

 

Infrared Modules for Fiber Data Networks Classifiable as “Optical Instruments”

Various “Value Added Modules” utilized to make connections in fiber data networks were properly classified by Customs as “optical instruments” of HTS subheading 9013.90.80 of the Harmonized Tariff Schedule, a provision for "other optical appliances”. The modules, used with home fiber optic networks to transmit images and data, consisted of (1) splitter modules, which “take individual signals from a single optical fiber and divide them, enabling that single signal to reach multiple telecommunication network subscribers,” (2) monitor modules, which “allow access to signaling and control functions of a communications network in order to evaluate performance and detect problems,” and (3) wavelength division multiplexer (“WDM”) modules, which “permit infrared signals of two different wavelengths to travel simultaneously on a single fiber,  All of the product operated using infrared light, using frequency ranges which made the light undetectable by human eyes.

In ADC Telecommunications Inc. v. United States, No. 2018-1306 (Fed. Cir. February 19, 2019), the Federal Circuit held that the definition of optical appliances did not require the appliances to operate in the human-visible range of the electromagnetic spectrum. Turning to legislative history, including the 1929 Summaries of Tariff Information, the Court held that an “optical instrument” was one which used light waves in a non-subsidiary function. “Optical instruments are primarily used to aid or supplement human vision; they also include apparatus which depends for its operation on the passage of light through prismatic or lenticular optical glass. Lenses and prisms are the fundamental parts of optical instruments”. Summary of Tariff Information, 552 (1929). While optical devices normally aid or supplement human vision, the Federal Circuit noted, this was not a necessary feature of being classified as an optical instrument. What is required, the Federal Circuit held, is that the appliance operate by means of transmitting or bending light – functions which the “value added modules” performed.

Finding the goods to be prima facie classifiable under the HTS subheading 9013.90.80 provision for other optical instruments, the court held that the importer’s proffered classification under HTS subheading 8517.62, as “ Machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus” was precluded by an exclusionary note to the tariff.

Trade Updates for Week of January 30, 2019

United States Court of International Trade

 

TAA Decision Remanded for Further Explanation

Before the Court in Former Employees of Honeywell Int'l, Inc. v. United States Secretary of Labor, Slip Op. 19-11, Court No. 17-00279 (January 23, 2019) was the final negative determination of the Department of Labor (“Labor”)  denying the eligibility of the former employees of Honeywell International, Inc. for benefits under the Trade Adjustment Assistance (“TAA”) program.  The Court had previously granted Labor a voluntary remand to reconsider their determinations regarding the number of employees separated during the applicable period. For the following reasons Labor’s remand results and negative determination regarding Plaintiffs’ eligibility for benefits were remanded for further consideration.

“Eligibility for TAA requires Labor to find that a significant number or proportion of the workers in such workers' firm have become totally or partially separated, or are threatened to become totally or partially separated” within the one year time period prior to the submission of the petition. Id. at 5.  29 C.F.R. § 90.2 “defines significant number or proportion of the workers as follows: … at least three workers in a firm … with a work force of fewer than 50 workers would ordinarily have to be affected.” Id. at 6. In this case, Labor concluded in its investigation that Honeywell-Procurement, a subdivision of a subdivision consisting of only three employees was the appropriate subdivision for evaluation for TAA eligibility, and that a significant number of workers were not affected or separated from their work. The Court said it was “having trouble sustaining as reasonable Labor’s reliance on its three-person minimum requirement when applied to a subdivision consisting of only three employees,” where the entire sourcing department was outsourced to Mexico. Thus, the results would be remanded for further reconsideration Id. at 10.   

 

Commerce’s Decision is Sustained in Part

Before the Court in Clearon Corp. et. al. v. United States et. al., Slip Op. 19-13, Court No. 17-00171 (January 25, 2019) were challenges to two determinations made by Commerce in the administrative review of the countervailing duty order on chlorinated isocyanurates from China. First, was the decision to use adverse facts available to determine that the Export Buyer’s Credit Program was countervailable because the Chinese Government withheld information that Commerce insisted it needed. Second was Commerce’s selection of 0.87 percent as the adverse facts available rate for the Export Buyer’s Credit Program. For the following reasons the Court sustained in part and remanded in part Commerce’s determinations.

“A foreign government may be found to be a non-cooperating party.” Id. at 18. “The application of adverse facts available may adversely impact a cooperating party, although Commerce should seek to avoid such impact if relevant information exists elsewhere on the record.” Id. The Court said “Commerce must resort to facts available only when necessary information is not available on the record,” and that in this case Commerce must “provide an adequate answer as to why the information it seeks to fully understand the operation of the program is necessary to fill a gap.” In addition the Court said all determinations made by Commerce regarding the 0.87 percent rate were based on substantial evidence.

 

Trade Updates for Week of January 23, 2019

United States Court of International Trade

Commerce Determination Regarding Pneumatic Off-the-Road Tires Remanded in Part

Before the Court in China Mfrs. Alliance, LLC et. al. v. United States, Slip Op. 19-07, Court No. 15-00124 (January 16, 2019) were the remand determinations of Commerce in regards to an administrative review of pneumatic off-the-road tires from China. Two issues remained before the Court from the remand determinations, whether the deductions from export price (“EP”) and constructed export price (“CEP”) for Chinese value-added tax (“VAT”) were lawful, whether charges were double counted in the calculation of a surrogate value for freight expenses. For the following reasons the Court sustained the remand determinations in part and remanded back to Commerce in part.

“Under the statutory scheme, a domestic value-added tax, whether or not refunded or avoided by reason of the exportation of the finished good, does not increase a dumping margin.” Id. at 10. In this case, Commerce made margin increasing, adjustments to plaintiffs’ EP and CEP based on “irrecoverable VAT included in the prices of materials used to make subject merchandise.” Id. at 11. The Court said “Commerce erred in finding, without any evidentiary support, that Chinese irrecoverable VAT is a tax not imposed on the domestic good.” Id. at 19.  In regards, to the surrogate values, statute directs Commerce to reduce U.S. price by “the amount, if any, included in such price, attributable to any additional costs, charges, or expenses, and United States import duties, which are incident to bringing the subject merchandise from the original place of shipment in the exporting country to the place of delivery in the United States.” Id. at 19. Plaintiffs claim “Commerce double counted some costs by including them both in the brokerage and handling surrogate value and in the ocean freight costs, thereby overstating the CEP deduction required.” Id. at 21. On remand, Commerce determined four of the costs in question were related to activities in the United States and they dropped from the calculations. However, plaintiffs argued that some cost were still double counted such as ocean freight, which should have been counted as inland transportation cost. The Court said “Commerce must ensure that no costs are double counted.” Id. at 25.

 

Default Judgment Granted

Before the Court in United States v. Six Star Wholesale, Inc., Slip Op. 19-07, Court No. 14-00252 (January 18, 2019) was a motion for a default judgment against defendant for a civil penalty for unpaid duties resulting from the alleged negligent misclassification of certain wire hangers and polyethylene retail carrier bags imported into the U.S. For the following reasons the Court granted the plaintiffs motion for default judgement.

The court considers three factors when considering a default judgment, “whether (1) denial of the motion will prejudice plaintiff; (2) defendant has a meritorious defense; and (3) defendant’s culpable conduct contributed to the default.” Id. at 5-6. The Court said that “denial of the motion prejudices the Government because Defendant’s failure to respond has prevented the Government’s collection of lost revenue and penalties,” that defendant “had the opportunity to present a meritorious defense, but chose not to defend this action,” and that defendant demonstrated “conscious disregard for the laws governing the importation of merchandise.” Id. at 6. The Court further said “the public interest favors a substantial penalty,” and granted the government pre and post action interest on the unpaid duties, fees and a civil penalty double the amount of the unpaid duties, totaling $529,684.06. Id. at 14.

Determination Regarding No Shipment Certification Remanded

Before the Court in Tosçelik Profil Ve Sac Endüstrisi A.S. et. al.  v. United States, Slip Op. 19-09, Court No. 17-00255 (January 18, 2019) was plaintiffs, Tosçelik Profil Ve Sac Endüstrisi A.S. (“Tosçelik”) and Erbosan Erciyas Boru Sanayi Ve Ticaret A.S (“Erbosan”), challenge to Commerce’s final results in an administrative review of the countervailing duty (“CVD”) order on circular welded carbon steel pipes and tubes from Turkey. For the following reasons the court sustained Commerce’s determinations for Tosçelik’s hot-rolled steel (“HRS”) issues, and remands Commerce’s determination regarding Erbosan’s no shipment certification for further consideration.

During a CVD investigation “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, which could include prices stemming from actual transactions between private parties.” Id. at 4.  Tosçelik made many arguments regarding Commerce determination regarding possible countervailable subsidies. However, the Court said plaintiff had relied on indirect evidence and that a reasonable mind could come to the determinations Commerce had reached. Erbosan challenged Commerce’s denial of its no shipment certification based on Customs and Border Protection (“CBP”) data demonstrating that Erbosan’s subject merchandise entered the United States. Commerce is required to “provide an explanation of the basis for its determination that addresses relevant arguments made by interested parties.” Id. at 10. In this case, the Court said that Commerce failed to provide such an explanation and just “simply concluded that record evidence contradicts Erbosan’s assertions.” Id.

United States Court of Appeals for the Federal Circuit

Ninth Circuit Revives RICO Claims in Garlic Antidumping Case

The Court of Appeals for the Ninth Circuit has revived certain Racketeer Influenced and Corrupt Organization (RICO) civil claims brought by a Chinese garlic exporter who claims that competitors wrongfully used the Commerce Department’s antidumping review procedures to attack it.

The story in Harmoni International Spice Inc. v. Hume, et al., No. 17-55926 (January 23, 2019), mirrors one currently being played out in the trade courts. Harmoni is a Chinese garlic exporter which was assigned a “zero” antidumping duty rate by the Commerce Department in an antidumping proceeding. The defendants include a small New Mexico-based garlic grower, two attorneys representing the grower, and a Chinese consulting firm. Harmoni charges that the defendants conspired to injure it by (1) filing frivolous claims with the Commerce Department for  a review of Harmoni’s antidumping rate, forcing Harmoni to spend money to appear and defend itself in review proceedings, (2) costing Harmoni customers through these actions, and (3) injuring Harmoni’s reputation by making frivolous claims of misconduct in the antidumping proceedings. Harmoni also charged that the defendants conspired to underpay antidumping duties by filing entries with false documentation.

The case also alleges that the New Mexico growers’ efforts are actually made at the behest of Harmoni’s Chinese competitors.

A district court dismissed Harmoni’s claims, holding that the company’s pleadings did not establish a causal nexus between the defendant’s actions and Harmoni’s claims. On appeal, the Ninth Circuit ruled that while the Complaint did not have adequate allegations of causal nexus, Harmoni should be granted leave to file an amended Complaint with additional factual allegations concerning its claims of injury arising from the allegedly frivolous Commerce Department proceedings. [The false documentation claims could not be revived]. The Circuit Court also rejected the defendants’ claims that the only party which might assert RICO claims might be the Commerce Department itself.

The Ninth Circuit decision echoes concerns recently voiced by the United States Court of International Trade in New Mexico Garlic Growers Coalition v. United States, Slip Op. 18-162 (November 26, 2018), in which the Commerce Department rejected as “void ab initio” an effort by the New Mexico growers to seek a review of the antidumping order on Fresh Garlic from China. The CIT in that case raised serious concerns about the propriety of the New Mexico growers’ activities.

Trade Updates for Week of January 16, 2019

United States Court of International Trade

Remanded Decision in Part in Oil Country Tubular Goods Case

Before the Court in Nexteel Co. et. al. v. United States et. al., Slip Op. 19-01, Court No. 17-00091 (January 2, 2019) was the U.S. Department of Commerce’s final results in the 2014–2015 administrative review of the antidumping duty order of oil country tubular goods from Korea. The case was the first time that the Commerce found the existence of a particular market situation in an administrative review under The Trade Preferences Extension Act of 2015. The issue was just one of the numerous issues the court looked at in the case.

The 2015 Act allowed Commerce to find “the existence of a particular market situation such that the cost of materials and fabrication or other processing of any kind does not accurately reflect the cost of production in the ordinary course of trade, the administering authority may use another calculation methodology under this subtitle or any other calculation methodology.” Id. at 13-14. The Court said that Commerce failed “to substantiate its finding of one particular market situation with evidence on the record.” Id. at 15. The agency initially determined that no special market situation existed. Over the investigation, the agency “did not receive any new evidence regarding conditions in the Korean market.” Id. The Court held “Commerce did not explain adequately how the same record supported both its previous conclusion of no particular market situation and its subsequent finding of a single particular market situation.” Id. The Court remanded two additional issues for further consideration, including NEXTEEL’s input costs based a separate proceeding, and Commerce’s dumping margin calculation for non-examined companies. The remaining determinations by Commerce were found to be supported by substantial evidence.

Default Judgment Granted

Before the Court in United States v. Selecta Corp., LLC, Slip Op. 19-04, Court No. 11-00089 (January 11, 2019) was the plaintiff’s motion for a default judgment in an action brought to recover a civil penalty.  The Government sought “$51,102, plus post-judgment interest and costs, stemming from administrative penalty procedures conducted by Customs against defendant “for misclassifying and undervaluing imported merchandise on 1295 entries” of medical scrubs and lab coats Id. at 2. The Court granted the motion because the defendant “failed to respond in any way since the issuance of the penalty claim and throughout the pendency of this litigation before the court.” Id. at 4.           

           

Trade Updates for Week of January 2, 2019

United States Court of International Trade

Commerce Determination Remanded in Tapered Roller Bearings Case

Before the Court in Zhejiang Zhaofeng Mech. & Elec. Co. v. United States et. al., Slip Op. 18-182, Court No. 18-0004 (December 27, 2019) was Commerce’s determination that plaintiff was ineligible for separate rate status in the 2015–2016 administrative review of tapered roller bearings and parts from China. Prior to Commerce’s selection of plaintiff as a mandatory respondent, the company had submitted an application for an individual rate in the administrative review. Initially, Commerce wanted to apply an adverse facts available (“AFA”) rate against plaintiff for failing to provide a complete and accurate U.S. sales database. Commerce also stated that it found no evidence of Chinese government ownership, and determined plaintiff was otherwise entitled to a separate rate in the review. Ultimately, Commerce decided that plaintiff had failed to rebut the presumption that it is subject to government control and concluded plaintiff should be assessed at the China-wide entity rate.  For the following reasons, the Court remanded the determination for further consideration.

“An exporter will receive the country-wide rate by default unless it affirmatively demonstrates that it enjoys both de jure and de facto independence from the government.” Id. at 6. “Commerce may not disregard a respondent’s separate rate information as tainted just because there were deficiencies in the respondent’s sales or factors of production data.” Id. at 7. In this case, the Court said plaintiff’s “misrepresentations do not speak directly to Zhaofeng’s corporate structure or to the de facto control of the company, the misrepresentations cannot and should not be inferred to pervade the separate rate analysis.”  “Because the AFA analysis and separate rate analysis are distinct statutory evaluations, the two analyses cannot be conflated,” therefore Commerce’s determination was not in accordance with law. Id. at 9. In addition, the Court said the determination was not supported by substantial evidence because “Commerce did not adequately explain how this misconduct related to its separate rate analysis.” Id.

Trade Updates for Week of December 26, 2018

United States Court of International Trade

Remand Decision Sustained in Off-The-Road Tire Case

Before the Court in Qingdao Qihang Tyre Co. et. al. v. United States, Slip Op. 18-176, Court No. 16-00075 (December 19, 2018) were Commerce’s determination made on remand regarding the administrative review of an antidumping duty order on off-the-road tires from China. The Court previously remanded the results for Commerce to reconsider downward adjustments made to determine export price to account for Chinese irrecoverable VAT, the surrogate value for the reclaimed rubber manufacturing input based on Global Trade Atlas data from Thailand, and the surrogate value obtained from the World Bank’s Doing Business 2015 report for valuing foreign inland freight. For the following reasons, the Court sustained Commerce’s remand determination.

Commerce, under protest, recalculated export price without making downward adjustments for Chinese irrecoverable VAT. Commerce was required to address any “export tax, duty, or other charge imposed by the exporting country on the exportation of the subject merchandise to the United States.” The Court dismissed Commerce’s protest and sustained the determination because “the record in this case does not support the notion that China imposed an export tax, or anything resembling one, on the subject merchandise.” Id. at 7. Commerce also reconsidered its surrogate values and instead used Romanian import price data for reclaimed rubber, and the World Bank’s Doing Business 2016: Thailand report for inland freight. The Court sustained these determinations because the sources “constituted the best available information.” Id. at 8. 

Motion for Summary Judgment Granted in Plaintiff’s Favor

Before the Court in Arbed Americas, LLC v. United States, Slip Op. 18-177, Court No. 15-00095 (December 21, 2018) were cross motions for summary judgement regarding Customs denial of protest regarding the collection of antidumping (“ADD”) and countervailing (“CVD”) duties assessed on six entries of stainless steel plate coils from Belgium. The entries of steel in question were produced in Belgium and imported into the U.S. by plaintiff in 1999. In 2001, Commerce published an administrative reviews of ADD and CVD orders covering the period and products at issue. The reviews were challenged, but ultimately Commerce issued instructions to Customs to liquidate the concerned entries, including plaintiff’s entries. The application of this instruction was challenged in further litigation. However, the litigation only included 211 specific entries, none of which were plaintiff’s entries. A preliminary injunction was ordered by the Court of Appeals for the Federal Circuit (“CAFC”), and instructions issued to Commerce not to liquidate any of the 211 entries concerned.  Eventually, litigation ended and in January 2011 Customs attempted to liquidate the plaintiff’s entries and receive ADD and CVD payment. Plaintiff filed a protest arguing that under 19 U.S.C. § 1504(d) the six entries were deemed liquidated six months after August 31, 2006 when Customs received instructions that implemented the preliminary injunction ordered by the CAFC. For the following reasons, the Court agreed with plaintiffs that the entries had previously liquidated. 

“An entry must be liquidated within one year after the date the merchandise is entered for consumption unless the time for doing so is extended administratively or suspended by a statute or court order.” Id. at 6. “The Federal Circuit has held that in order for deemed liquidation to occur by operation of law, three elements must be met: “(1) the suspension of liquidation that was in place must have been removed; (2) Customs must have received notice of the removal of the suspension; and (3) Customs must not liquidate the entry at issue within six months of receiving such notice.” Id. at 7. The Court said that the instructions issued to Customs about the CAFC’s preliminary injunction was an “unambiguous and public notice to Customs … that suspension of the liquidation of Arbed’s six entries … orders had been removed.” Id. at 15. The Court dismissed the Government’s arguments regarding CBP’s ministerial role because a reasonable Customs official could not have read the instructions other than applying to the 221 entries specifically named in the instructions, none of which were plaintiff’s entries. The Court found that the entries were deemed liquated by operation of law on “September 13, 2006, when the 90-day period for petitioning the Supreme Court for certiorari from the Federal Circuit’s decision of June 15, 2006 expired.” Id. at 18.

 

Commerce Remand Determination Sustained in Part in Raw Garlic Case

Before the Court in Shenzhen Xinboda Indus. Co. et. al. v. United States et. al., Slip Op. 18-179, Court No. 16-0016 (December 26, 2018) was Commerce remand determinations regarding the final results in an administrative review of the antidumping duty order on fresh garlic from China. The Court had previously remanded for Commerce to reconsider the issue of surrogate country information and deferred consideration of Plaintiff’s additional challenges pending the results of Commerce’s remand redetermination.  For the following reasons, the Court sustains Commerce determinations regarding surrogate value for raw garlic and remands Commerce’s addition of delivery costs to the surrogate value for raw garlic and calculation of Plaintiff’s movement expenses.

“When an antidumping duty proceeding involves a nonmarket economy country, Commerce determines normal value by valuing the factors of production in a surrogate country.” Id. at 6. “In selecting surrogate values, Commerce must use the best available information that is, to the extent possible, from a market economy country or countries that are economically comparable to the nonmarket economy country and significant producers of comparable merchandise.” Id.  On remand, Commerce reopened the record and choose Romania as a surrogate as opposed to its previous surrogate Mexico. The Court sustained this determination because the Romanian data was “more contemporaneous than the annual data from Mexico” and the “Romanian data represented a broad market average,” which could not be said about Mexico. Id. at 9. By contrast, the Court disagreed with the surrogate values for movement expenses.  While calculating the cost of inland freight using the Romanian surrogate data, Commerce presumed a container payload weight of 10,000kg for the garlic. The Court said that this was unsupported by substantial evidence because there was no record evidence to support the payload weight. Only the weight issue was remanded for reconsideration.

Trade Updates for Week of December 19, 2018

United States Court of International Trade

Bonds Were Not Nullified as a Result of Pension Protection Act

Before the Court in Hartford Fire Insurance Co. v. United States, Slip Op. 18-172, Court No. 11-00135 (December 14, 2018) were cross motions for summary judgement regarding the denial of plaintiff’s protests of demands by U.S. Customs and Border Protection (“CBP”) for payment of antidumping duties on surety bonds. During the summer of 2006, Shandong Longtai Fruits and Vegetables Co., Ltd. was a new shipper of fresh garlic into the US, which was subject the antidumping order on fresh garlic. Shandong Longtai did not deposit cash to cover the estimated antidumping duties, but rather provided single entry bonds, for which Hartford was the surety. Customs calculated the final amount of antidumping duties owed by Shandong Longtai on the subject entries, and demanded that Shandong Longtai pay. Shandong Longtai failed to pay the final duties. Hartford paid as the surety and commenced this case to challenge Custom’s authority to demand the payment. For the following reasons, the defendant’s motion for summary judgment was granted by the Court.

Under 19 U.S.C. § 1675, Customs was authorized to allow, new shippers, the option of a bond or security in lieu of a cash deposit for each entry of the subject merchandise. However, the Pension Protection Act of 2006 (“PPA”), suspended the new shipper bonding privilege. The PPA said “the new shipper bonding privilege shall not be effective during the period beginning on April 1, 2006, and ending on June 30, 2009.” Id. at 5. Plaintiff argued that the bonds were nullified and unenforceable when the ability of Customs to accept bond had been removed.

Customs should have gone after Shandong Longtai for the amount. The Court disagreed with all of these arguments, saying “suspension of the new shipper bonding privilege was enacted largely as a result of the significant loss of revenue attributed to new shippers of merchandise subject to antidumping duty orders.” Id. at 9. Ultimately, plaintiff’s arguments about the PPA “would run contrary to Congressional intent and result in additional revenue loss for Customs.” Id. at 12.

Remand Determinations were Sustained in Crystalline Silicon Photovoltaic Cell Case

Before the Court in SolarWorld Americas, Inc. et. al. v.  United States et. al., Slip Op. 18-171, Court No. 16-00134 (December 13, 2018) was Commerce’s remand redeterminations regarding an antidumping review of crystalline silicon photovoltaic cells from China. The court had previously remanded Commerce’s surrogate value selection for mandatory respondent Yingli Green Energy Holding Co., Ltd.’s (“Yingli”) tempered glass and Changzhou Trina Solar Energy Co., Ltd.’s (“Trina”) scrapped solar cells. For the following reasons, the court sustains Commerce determinations from remand.

When a respondent is from a nonmarket economy (“NME”), such as China, Commerce must determine normal value based on the factors of production (“FOPs”) used to produce the merchandise. Commerce determines the FOPs based on the best available information considered to be appropriate. “Commerce’s methodology for selecting the best source is to choose a price that is (1) specific to the input; (2) tax and import duty exclusive; (3) contemporaneous with the period of review; (4) representative of a broad market average; and (5) publically available.” Id. at 13. On remand, Commerce reconsidered its decision to use Thai data as a surrogate for tempered glass, instead the agency opted to use Bulgarian import data.

The Court sustained the used of the Bulgarian data because “the data is specific to the input, tax and duty exclusive, contemporaneous, representative of a broad market average, and publically available.” Id. at 14. On remand, Commerce opted to value Trina’s scrap cells and modules using import data under Thai HTS 2804.69, which covers silicon of a purity less than 99.99 percent as opposed to the previous Thai HTS 8548.10. The Court said this decision was supported by substantial evidence as it responds to the court’s order in SolarWorld Americas II.

Trade Updates for Week of December 12, 2018

United States Court of International Trade

Raising Bond Requirement was found to be an Abuse of Discretion

Before the Court in Tabacos USA, Inc. v. United States, Court No. 18-00221 (December 7, 2018) was plaintiff’s challenge to Customs raising of the company’s entry bond amount from $300,000 to $400,000. The plaintiff’s business was at risk of shutting down because of the increase. In addition, plaintiff also provided evidence that the error that caused Customs to raise its bond requirement was “through no fault of the plaintiff.” Id. at 6. For the following reasons the Court entered judgment in favor of the plaintiff.

“The wisdom of an agency’s legitimate policy choices … should be respected … unless they are arbitrary, capricious, or manifestly contrary to statute.” Id. at 11. The court said it “cannot and therefore does not disregard the compelling evidence … that continuing plaintiff’s entry bond … in its current amount of $300,000 will not endanger the revenue of the United States.” Therefore, the bond requirement did not need to be raised. The Court also pointed out that despite the Court’s finding that that the demand to raise the requirement in this instance was in violation of 5 U.S.C. § 706 (2)(A), Custom’s bonding system and “methodology is a reasonable application of the discretion granted to it by statute and is not arbitrary, capricious or contrary to statute.” Id. at 12.

Trade Updates for Week of December 5, 2018

United States Court of International Trade

Negative Injury Determinations Made By the ITC Were Sustained

Before the Court in T.B. Wood’s Inc.  v. United States et. al., Slip Op. 18-164, Court No. 17-00022 (November 29, 2018) was plaintiffs challenge to the negative injury determination made by International Trade Commission (“ITC”) in an antidumping duty investigation of iron mechanical transfer drive components (“IMTDCs”) from Canada and China and a parallel countervailing duty investigation of these products from China. For the following reasons, the negative injury determinations were sustained. Plaintiffs challenged five aspects of the ITC’s determination: first, that the ITC failed to reconcile its conclusion that there was no correlation between subject imports and domestic industry performance with basic economic logic; second, that the ITC failed to explain adequately its conclusions regarding market share due to unreliable data; third, that the ITC failed to acknowledge a gap in the data it collected and unlawfully relied on the data without adjustment;  fourth, that the ITC’s price-effects analysis was unsupported by substantial evidence; and fifth,  that the ITC did not support or explain adequately its conclusions regarding the impact of subject imports on the domestic industry.

Where “a party seeks review of a final ITC determination … the court shall hold unlawful any determination, finding, or conclusion found . . . to be unsupported by substantial evidence on the record.” Id. at 6. The Court rejected plaintiff’s economic logic argument because record evidence demonstrated “the volume of the subject imports did not show a sustained pattern of increasing significantly throughout the period of investigation (“POI”) and the share they occupied of the U.S. market remained relatively steady.” Id. at 14. In regards to the ITC’s determinations on market share, the Court said “because the ITC satisfactorily explained its methodology, the court cannot agree with plaintiff that the ITC acted contrary to law by failing to acknowledge the limits of its data.” Id. at 17. Plaintiff’s next argument on data also failed because “T.B. Wood’s has not shown that the Commission lacked necessary information, nor does it identify what information the ITC could have or should have used.” Id. at 18. The Court sustained the ITC’s determinations on price effect because “substantial record evidence supports the Commission’s finding of no clear trend in domestic pricing and … price depression.” Id. at 19. The Court found that the Commission’s negative finding was supported by substantial record evidence because the ITC could readily could see, through its collected data “that a number of changes in the indicia of the industry’s condition, including indicia on overall profitability, correlated temporally with changes in demand … but not with changes in the volume of cumulated subject imports.” Id. at 23.

Motion for Summary Judgment Denied

Before the Court in United States v. Greenlight Organic, Inc., Slip Op. 18-165, Court No. 17-00031 (November 29, 2018) was the defendant’s motion for summary judgment in an action by the United States Government for fraud in the course of importing merchandise into the United States. Greenlight argued the “Government’s action is time-barred by the five-year statute of limitations set forth in 19 U.S.C. § 1621 because the Government became aware of Greenlight’s fraudulent activities in 2011, more than five years before filing the summons and complaint in this case.” Id. at 1-2. For the following reasons the Court denied the defendant’s motion.

 “A statute of limitations requires a plaintiff to pursue diligent prosecution of known claims and promotes justice by preventing surprises through plaintiff’s revival of claims that have been allowed to slumber until evidence has been lost, memories have faded, and witnesses have disappeared.” Id. at 4. The language of 19 U.S.C. § 1621 “tolls the statute of limitations period until the date when the plaintiff first learns of the fraud.” Id. at 4. The Court said that “more facts are needed to ascertain when the Government first had knowledge of Greenlight’s fraudulent misclassification and undervaluation activities, including when the Government began to suspect a potential double invoicing scheme and when the Government had knowledge of an intent to defraud with respect to the misclassification of entries.” Id. at 5. Despite denying the motion for summary judgement, the Court noted the issue could be presented at trial. 

Remand Decision Sustained

Before the Court in Zhaoqing Tifo New Fibre Co. v. United States et. al., Slip Op. 18-168, Court No. 13-00044 (November 30, 2018) were Commerce’s determinations on remand regarding the administrative review of the antidumping duty order on polyester staple fiber from China. Plaintiff originally argued the dumping margin calculated by Commerce double counts certain energy costs because those costs are reflected in the surrogate financial ratios that Commerce used and then are counted again elsewhere in the agency’s calculations for the factors of production. The Court had previously remanded the issue to Commerce for reconsideration. On remand, Commerce, under protest to the Courts remand, excluded the costs of energy from the factors of production (“FOP”) database, to avoid double-counting energy expenses. For the following reasons Commerce’s results made under protest were sustained in full, and the agency’s arguments made regarding the protest were denied.

Commerce argued that instead of excluding energy cost from the FOP the agency should be allowed to choose another surrogate. The Court said “the selection of financial statements is … beyond the scope of this litigation … no party contends that Zhaoqing Tifo’s Complaint includes a claim challenging Commerce’s selection of financial statements.” Id. at 27. The Court said it was not within the power of Commerce to reconsider the choice of surrogate data in the case. In addition, the Court noted “Commerce elected not to reopen the administrative record to seek evidence that might have” clarified the manner in which surrogate financial statements account for energy and that ultimately the protest to the Court’s order was the agency’s own doing. Id. at 35.

 

Trade Updates for Week of November 28, 2018

United States Court of International Trade

18-161

Before the Court in Northern Tool and Equipment Company, Inc. v. United States, Slip Op. 18-161, Court No. 14-00146 (November 23, 2018) were cross motions for judgment in an action based on Customs’ denial of a protest contesting the amount of antidumping duties owed on hand trucks imported from China. In a 2004 antidumping order, Commerce had instructed Customs (“CBP”) to require cash deposits for hand trucks produced or exported by Taifa, a Chinese manufacturer equal to the specific weighted-average antidumping duty margin of 26.49 percent. This rate was different than the China wide rate calculated during the review.  Plaintiff imported hand trucks from China through the use of numerous different companies and ultimately identified Taifa as the manufacturer. However, CBP found Taifa was the producer of the goods but that another company, ITI, was the exporter of the hand trucks. As such, antidumping duties at the China-wide entity rate were assessed on Northern Tool’s entries. For the following reasons the Court sustained CBP’s determinations in full.

Northern Tool argued this case concerned the denial of its protest by CBP and jurisdiction was proper under 28 U.S.C. §1581(a). The Government argued the Court lacks jurisdiction because CBP’s actions were merely ministerial. The Court found there was jurisdiction “to review whether CBP correctly applied Commerce’s liquidation instructions with respect to Northern Tool’s entries.” Id. at 7. The Court said that it “does not perceive clear error in CBP’s analysis and consideration of the commercial documents that support its finding.” Id. at 8. The Court said, that ultimately jurisdiction did not lie over what Northern Tool was seeking, to establish that ITI was not the exporter and that the relevant entries should not be subject to the China-wide entity rate. The “ultimate decision of which instruction applied to a particular circumstance rested with Commerce,” who was not part of this case. Id. at 9.

 

 18-162

Before the Court in New Mexico Garlic Growers Coalition et. al. v. United States et. al., Slip Op. 18-162, Court No. 17-00146 (November 26, 2018) was Commerce’s final results and partial rescission of the 21st administrative review of the antidumping duty order on fresh garlic from China. During the review, Commerce selected two Chinese companies to be mandatory respondents, QTF and Harmoni, based on a request received by the agency including one from the New Mexico Garlic Growers Coalition (“NMGGC“). Commerce initially applied the adverse facts available (“AFA”) to both companies for failing to cooperate and for making misrepresentations in the investigation. In the final results, Commerce dropped Harmoni as a respondent because the request against the company was illegitimate. Commerce determined that some of the six companies with which QTF was affiliated were part of the China-wide entity and, therefore, denied QTF a separate rate, finding that it was part of the PRC-wide entity and subject to the China-wide rate. For the following reasons Commerce’s determinations were sustained in full.

“In antidumping duty proceedings involving a nonmarket economy country … Commerce presumes all respondents are government-controlled and therefore subject to a single country-wide rate.” Id. at 8.  “A respondent may rebut that presumption and obtain a separate antidumping duty rate by demonstrating the absence of … government control over its export activities. Id. The Court sustained Commerce’s determinations that QTF was not entitled to a separate rate because “Commerce properly determined that QTF’s misrepresentations rendered the entirety of its submissions unreliable when the information it withheld included the identity of its affiliates, at least some of which are part of the PRC-wide entity.” Id. at 24. The Court also sustained Commerce’s decisions to apply the AFA against QTF and to collapse QTF with affiliated entities.

The antidumping statue is silent on the rescission of request for reviews. However, Commerce’s regulations provide that the rescission of a review is allowed within 90 days of the date of publication or if reasonable to do so. Commerce initially certified the review request from NMGGC but elected to rescind the request after allegations of fraud arose against the NMGGC’s attorney. NMGGC argued that because the statute was silent, the review could not be rescinded. The Court found that Commerce’s regulations were valid because “Commerce’s interpretation of a review … is a reasonable interpretation of the statute.” Id. at 39.  The Court also found Commerce’s factual findings and credibility determinations regarding the fraud were supported by substantial evidence because Commerce cited email exchanges, and detailed information on the record.

Trade Updates for Week of November 21, 2018

United States Court of International Trade

Motion to Dismiss Granted in Countervailing Duty Order on Tires

Before the Court in Zhongce Rubber Group Company Limited v. United States, Slip Op. 18-160, Court No. 18-00082 (November 20, 2018) was defendant’s motion to dismiss. Plaintiff brought this action to contest the application of adverse facts available by Commerce in calculating the rate applied to Zhongce during an administrative review of the countervailing duty order on tires from China. Defendant moved to dismiss because plaintiff had not exhausted administrative remedies before commencing the action. For the following reasons the Court dismissed the case.

28 U.S.C. § 2637(d) “provides that the court shall, where appropriate, require the exhaustion of administrative remedies.” Id. at 3. “Exhaustion allows agencies to apply their expertise, rectify administrative mistakes, and compile records adequate for judicial review.” Id. at 4. “In this case, Zhongce failed to submit a case brief challenging Commerce’s preliminary results, and instead waited to challenge Commerce’s decision before this court.” Id. at 5. The Court found that plaintiff failed to exhaust administrative remedies because of the failure to submit a case brief for Commerce to review. The Court also found exceptions to the rule did not apply because the appropriate administrative remedies would not have been futile efforts and the pure law exception did not apply where there were factual questions at issue.

Trade Updates for Week of November 14, 2018

United States Court of International Trade

Motion to Dismiss Granted

Before the Court in U.S. Auto Parts Network, Inc. v. United States et. al., Slip Op. 18-154, Court No. 18-00068 (November 8, 2018) was defendant’s motion to dismiss the case. Plaintiff challenged the Government’s imposition of a $9 million entry bond requirement, well in excess of the plaintiff’s $200,000 worth of annual imports, for violating U.S. trademark laws. The Court had previously issued a preliminary injunction for plaintiff. For the following reasons the Court dismissed the case.

 “A claim is non-justiciable if it is moot, which occurs when the issues presented are no longer live or the parties lack a legally cognizable interest in the outcome.” Id. at 3. In this case, the Court found plaintiffs’ claims were moot because the “Port of Norfolk had released all containers to U.S. Auto” and because “U.S. Auto represented also that the company stopped importing goods through the Port of Norfolk.” Id. at 3. The Court also said plaintiffs failed the meet the ripeness doctrine “because there is no final agency action for the court to review.” Id. at 4. Plaintiff’s now “speculative set of facts do not present a justiciable controversy.” Id. at 4.

 

Commerce’s Determination in regards to Carbon and Alloy Steel Wire Remanded in Part

Before the Court in Deacero S.A.P.I de C.V. et. al. v. United States et. al., Slip Op. 18-155, Court No. 17-00183 (November 8, 2018) were challenges to Commerce’s determinations in the administrative review of carbon and certain alloy steel wire rod from Mexico. Commerce used the total facts available to apply an adverse inference to calculate Deacero’s final dumping margin. This resulted in Commerce selecting the highest rate alleged in the 2001 petition, 40.52%, as Deacero’s AFA rate and final dumping margin. For the following reasons the Court sustains the agency’s determination to apply total facts available with an adverse inference but remands Commerce’s selection of 40.52% as the AFA rate for further explanation.

“Commerce shall use facts otherwise available to reach its final determination when necessary information is not available on the record, a party withholds information that has been requested by Commerce, fails to provide the information timely or in the manner requested, significantly impedes a proceeding, or provides information Commerce is unable to verify.” Id. at 6. In this case, the Court held that Commerce was correct in applying adverse facts because “Deacero impeded Commerce’s review when it made changes to its cost dataset, misrepresented the effects of those changes, and did not provide supporting record evidence to explain the changes.” Id. at 7. Under a similar analysis the Court also upheld the application of adverse inferences because “Deacero did not act to the best of its ability to cooperate with Commerce’s requests for information.” Id. at 15. However, the Court did remand the 40.52% rate from the complaint because the rate was reached under an “analysis that was undertaken in 2001 without placing on the record any of the relevant documents.” Id. at 18.

 

Commerce’s Determination in Crystalline Silicon Photovoltaic Products Review Remanded in Part

Before the Court in SolarWorld Americas, Inc. et. al. v. United States et. al., Slip Op. 18-158, Court No. 17-00208 (November 13, 2018) were Commerce’s determinations in an administrative review of the antidumping duty order on crystalline silicon photovoltaic products from Taiwan. The court reviewed whether Commerce properly adjusted respondent, Motech, per-unit costs when it declined to apply partial adverse facts available; whether Commerce properly adjusted respondent, SAS, reported costs for different grades of merchandise when it declined to apply partial adverse facts available; and whether Commerce properly determined that all merchandise shipped by SAS during the period of review were United States sales. For the following reasons the Court sustained in part and remanded in part.

 “In order to calculate the dumping duty, Commerce compares the foreign market value, the normal value, of the product to the United States price, the export price.” Id. at 6. “Commerce’s practice in evaluating costs for non-prime merchandise is to determine if that merchandise can be used in the same applications as prime merchandise.” Id. at 7. In this case, the Court sustained Commerce’s action regarding Motech’s per unit cost because Commerce relied on Motech’s explanation of the companies grades in its questionnaire response. The Court also sustained the cost adjustment for SAS because it was reasonable for Commerce to reduce the costs of certain grade photovoltaic products based on evidence on the record that the grade could not be used for the same applications as prime merchandise. In addition, the Court sustained Commerce’s decision not to apply adverse facts to respondents because both “complied fully with Commerce’s requests.” Id. at 11. In regards to the United States sales of SAS’s merchandise, the Court remanded the issue to Commerce “because evidence on the record establishes sales to customers in Mexico and demonstrates that the merchandise was shipped to United States FTZ addresses” to be forwarded to Mexican customers. Id. at 13.

 

Trade Updates for Week of November 7, 2018

United States Court of International Trade

ITC Decision on Truck and Bus Tires Remanded in Part

Before the Court in United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union et. al. v. United States et. al., Slip Op. 18-151, Court No. 17-00078 (November 1, 2018) was plaintiffs’ challenge to the International Trade Commission’s (“ITC”) final negative material injury determination in the antidumping and countervailing duty investigations of truck and bus tires from China. Plaintiffs argued that the ITC’s findings on the conditions of competition, negative findings on adverse price effects, adverse impact, and threat determination were not supported by substantial evidence. For the following reasons the Court sustains the ITC on three of the issues, and remands one issue to the ITC for redetermination.

“The possibility of drawing two inconsistent conclusions from the evidence does not prevent the court from holding that the Commission’s determinations, findings, or conclusions are supported by substantial evidence.” Id. The Court said the ITC’s determinations on competition, that there was a high degree of substitutability among tires, three product tiers, and the importance of other major factors then price as a buying decision were all supported by substantial evidence because the ITC properly relied on the agency’s questionnaire responses in making the decisions. The Court also said the ITC’s negative adverse impact decisions was based on substantial evidence because “plaintiff’s assertions are an impermissible reweighing of the evidence.” Id. at 14. However, the Court did find the ITC’s determinations regarding negative adverse price effect were not supported by substantial evidence because the ITC “did not reference any statistics, and neglected to explain how its observation supported its conclusion.” Id. at 11. The Court declined to analyze the negative threat determination until after the remand regarding adverse price effect was conducted.

Decision on Certain Frozen Fish Fillets from Vietnam Remanded in Regards to NME and Vietnam Wide Rate

Before the Court in Thuan An Production Trading and Service Co., Ltd. et. al. v. United States et. al., Slip Op. 18-152, Court No. 17-00056 (November 5, 2018) were plaintiffs’ challenges to Commerce’s determination in the 12th annual review of the antidumping duty order covering certain frozen fish fillets from Vietnam. Plaintiffs challenged the asserted legal grounds which Commerce used to determine a non-market economy (“NME”) dumping rate for Vietnam, Commerce’s assignment of the $2.39 Vietnam wide rate to plaintiff, and Commerce requiring plaintiff to report its factors of production (“FOP”) on a CONNUM-specific basis. For the following reasons the Court sustains Commerce’s determination on the FOP reporting, but remands the issues involving the NME and Vietnam wide rate to Commerce for reconsideration.

“19 U.S.C § 1673d instructs that Commerce may establish two kinds of rates, … for each exporter and producer individually investigated and determine . . . the estimated all-others rate for all exporters and producers not individually investigated.” Id. at 9. The Court said here that the rate Commerce established was not one of the statutorily authorized rates because Commerce itself calls the established rate “a single country-wide rate … a rate that is not an individual rate or an all-others rate.” Id. at 12. The Court also found the assignment of the $2.39 rate not to be valid because NME rate itself was not authorized. The final issue was requiring the plaintiff to report its FOP on a CONNUM specific basis. Plaintiffs argued that Commerce failed to advise them of the CONNUM basis for reporting and that it was impossible to provide the information. However, the Court found Commerce’s decision to be valid because the agency had used the CONNUM data for other reviews of this antidumping order and notified producers of their intent to use the data before starting previous reviews.

Trade Updates for Week of October 31, 2018

United States Court of International Trade

 

Commerce’s Decision Remanded in Welded Line Pipe Case

Before the Court in Tosçelik Profil ve Sac Endustrisi A.Ş. et. al. v. United States et. al., Slip Op. 18-148, Court No. 15-00339 (October 24, 2018) were remand determinations from Commerce in the antidumping investigation of welded line pipe from Korea and Turkey. At issue in this case is the amount of which Commerce must increase the export price of goods from Turkey because of duty drawback received national companies. Specifically, the refunds received from companies through Turkish Government’s Inward Processing Regime which allows for import duty exemptions through certificates is under review. Commerce determined that all eligible claims must have been closed during the period of investigation at a specific date, which the plaintiffs do not agree with. For the reasons that follow, the court remands this matter to Commerce to recalculate plaintiffs’ duty drawback adjustment.

“Neither the duty drawback statute nor the legislative history provides guidance on the methodology to be used … in the absence of such guidance, Commerce may develop reasonable methodologies to fill gaps.” Id. at 7. The Court said the issue was to be reviewed as a “substantial evidence issue in which the court evaluates the reasonableness of Commerce’s POI limitation given the administrative record.” Id. at 7-8. Commerce’s main reason for denying the claim was because the agency claimed it was general practice to only examine costs and expenses during the POI. However, as the Court observed this could not be supported by substantial evidence because “Commerce collected and verified information on all” of claims submitted by Plaintiffs, regardless of whether the claims closed within the POI or not. Id. at 6. Commerce also argued impracticability in reviewing the data, an argument the Court also said could not be supported by substantial evidence because the agency reviewed and verified all of the claims regardless of whether they were in the POI. The agency’s final argument was that certain claims could get double counted, an argument dismissed by the Court by saying claims “simply cannot be double-counted.” Id. at 10. According to the Court, “Commerce’s imposition of the POI limitation in this matter unreasonably undercuts its stated goals of accuracy, transparency, and predictability by ignoring verified record information,” and that the only thing left to do was to calculate Plaintiffs’ duty drawback adjustments consistent with that verified information. Id. at 11.

Trade Updates for Week of October 24, 2018

United States Court of International Trade

Court Orders Enforcement of Judgment in Antidumping Matter

Before the Court in United States Steel Corp. et. al. v. United States et. al,. Slip Op. 18-139, Court No. 14-00263 (October 17, 2018) was plaintiff’s motion to enforce a judgment previously issued by the Court. In previous litigation, the Court ordered the Commerce Department to adjust the rates of two foreign respondents who had been assigned the “all others” rate. Commerce issued new rates for the respondents but did not recalculate the “all others rate.” Plaintiff requested that all other rate be recalculated according to the new respondent rates. The government refused to do so arguing it had carried out the Court’s order.  The plaintiffs argued that Commerce had failed to recalculate the “all others rate” as in previous cases. The Court granted the plaintiff’s request and ordered Commerce to issue a revised Timken notice either reconsidering or further explaining its determination.   The Court noted:

“Agency action becomes an established practice when a uniform and established procedure exists that would lead a party, in the absence of notification of change, reasonably to expect adherence to the agency’s past action.” Id. at 8.The Court held it was Commerce’s prior practice to recalculate the “all others rate” when respondent rates are changed because the agency had done so numerous times, and had even stated in agency decisions it was Commerce’s practice. In addition the Court said “where Commerce deviates from its practice, it has two options. First, Commerce may explain why it is reasonable under the circumstances to deviate from that practice. Second, Commerce may announce a change to its practice, unless the party in the instant case can be shown to have detrimentally relied on such practice.” Id. at 17. As such, the issue was remanded back to Commerce for a further reconsideration.     

Scope Determination on Strike Pins Remanded to Commerce.

Before the Court in Midwest Fastener Corp. v. United States et. al, Slip Op. 18-142, Court No. 17-00231 (October 19, 2018) was Commerce’s  determination that certain “strike pins” were within the scope of the antidumping duty (“ADD”) order covering steel nails from China. Commerce determined the strike pins were unambiguously subject to the scope of the orders on steel nails. Plaintiff’s argued Commerce’s decision was not supported by substantial evidence. The Court remanded the issue to Commerce for further reconsideration, holding:

“Scope orders may be interpreted as including subject merchandise only if they contain language that specifically includes the subject merchandise or may be reasonably interpreted to include it.” Id. at 6. The scope of the ADD order covered “nails . . . constructed of two or more pieces (i) includes multi-component products where one component is a nail, and the other non-nail components aid the functioning of the nail, and (ii) that here, the threaded body, washer and nut components merely aid the functioning of the nail component.”

Commerce considered the strike pin as a unitary object consisting of four components, one of which was a nail, therefore the agency found the object was within the scope of the ADD order.  However, the Court said Commerce had failed to produce evidence that “other components of the strike pin anchor merely aid the functioning of the pin” and that the agency needed to clarify the meaning of the phrase “constructed of two or more pieces”. Id. at 10. The issue was remanded for further clarification.

Court Denies Motion to Stay Judgment on Endangered Species

In National Resources Defense Council et. al. v. Wilbur Ross et. al., Slip Op. 18-143, Court No. 18-00055 (October 22, 2018), the court declined to stay its judgment requiring the United States to exclude certain Mexican fish harvested in a manner which engendered the vaquita, a small porpoise species in danger of extinction.  The Court had previously ordered the government to enforce the Marine Mammal Protection Act (“MMPA”) and ban the importation of fish caught with gillnets that also catch and endanger the vaquita, and issued a preliminary injunction to that effect. The Government motioned for a stay of the preliminary injunction pending appeal, alleging that the Court made several legal errors, but the Court declined to grant one.

“A stay pending appeal is not a matter of right, even if irreparable injury might otherwise result, and the party seeking the stay bears the burden of showing that the circumstances justify an exercise of the court’s discretion.” Id. at 6. The defendant’s arguments in support of the stay are that the Court made an error by issuing the injunction and the Government is suffering serious harm as a result of the injunction. The Court strongly stated no legal errors had been committed because the government “by failing to ban the fish imports as required by the MMPA, the Government unlawfully withheld agency action under § 706(1) of the Administrative Procedure Act.” Id. at 7.

The Court also strongly stated that it did not abuse its discretion when weighing the plaintiffs harm against the governments.  The Court said that “the declarations attached to the Government’s motion to stay provide no better evidence of a concrete rather than speculative injury” and that “the public interest is best served when the Government complies with the law, namely the preservation of marine mammal populations, such as the vaquita here.” Id. at 8.

 

Informal Consultations Insufficient to Discharge Discovery Obligations.

Before the Court in United States v. Great Neck Saw Manufacturers Inc., Slip Op. 18-144, Court No. 17-00049 (October 22, 2018) was the plaintiff’s motion to compel discovery responses from the defendant in a penalty litigation. On April 6, 2018 the government served defendant with numerous discovery requests with responses due on May 10th. Defendant requested an extension to May 25th, because of the large number of entries involved. GNSM failed to provide any responses by the deadline without explanation. Despite communication back and forth between the parties the issue was never resolved. On July 10th the defendant produced documentation to the plaintiff that the Government did not believe came close to fulfilling the defendant’s obligation, and the motion to compel was filed. Defendant argued it was impossible to fulfill the Government’s discovery request. The Court denied the motion to compel without prejudice.

Judge Leo Gordon indicated that, during discovery parties must make “an effort to determine precisely what the requesting party is actually seeking; what responsive documents or information the discovering party is reasonably capable of producing; and what specific, genuine objections or other issues, if any, cannot be resolved.” Id. at 6. The Court said “plaintiff’s description of its efforts to confer failed to provide the court with a sense of whether the parties reasonably engaged in deliberations, conversations, a comparison of views, or consultations with an eye to resolving the dispute prior to involving the court” because the plaintiffs email conversations with the defendant were “minimal in length.” Id. at 6-7. Because of this, the Court could not compel the discovery.  In order to assist in the litigation process the Court ordered the parties to confer and to make an effort to resolve the dispute. The Court left the option open for further motions to be filed at that time.

Trade Updates for Week of October 17, 2018

United States Court of International Trade

Commerce’s Decision Sustained in Differential Pricing Analysis Case

Before the Court in Stanley Works (Langfang) Fastening Co., Ltd. et. al. v. United States Slip Op. 18-135, Court No. 16-00053 (October 10, 2018) were plaintiff’s challenge to Commerce’s determinations in an antidumping duty order covering steel nails from China.

Plaintiff argued Commerce unlawfully rejected Stanley’s original case brief, and the final results were not made in accordance with the governing statute or Commerce’s regulations. For the following reasons the Court sustains Commerce’s results.

In order to remand the case back to Commerce, the Court must find Stanley was substantially prejudiced by Commerce’s rejection of the brief. The Court said Stanley could not have been substantially prejudiced because all arguments made in the brief were considered by the Court in a separate case involving the same issue, which Stanley lost. Moreover, the materials Stanley hoped to put on the record were closer to being part of its legal argument than factual information as defined in 19 C.F.R. § 351.102(b)(2) . Stanley was never denied an opportunity to makes its arguments and therefore was not substantially prejudiced by Commerce’s rejection. For the same reasons cited by the Court previously in Stanley’s lost case,

Slip Op. 18-99, the Court found Commerce’s differential pricing analysis was a reasonable interpretation of the statute and upheld Commerce in full.

Duty Drawback: CIT Orders Final Regulations Issued

The United States Court of International Trade has directed the government to publish, no later than December 17, 2018, duty drawback regulations implementing key provisions of the Trade Facilitation and Trade Enforcement Act of 2015.

In Tabacos de Wilson v. United States, Slip Op. 18-138 (October 12, 2018), the Court issued a judgment order to implement its earlier decision that Treasury had “unlawfully withheld agency action” by failing to issue regulations providing formulas for the calculation of drawback under the new rules set out in TFTEA. Since that time, Customs on August 2, 2018 issued a Notice of Proposed Rulemaking which would create a whole new part of the Customs Regulations for TFTEA drawback. The agency solicited public comments on the proposed regulations through September 17, 2018, with nearly 100 major stakeholders providing comment. The government had represented to the CIT that it could complete the massive rulemaking package before February 2019, the end of the TFTEA drawback “transition year”, but the Court seemed unconvinced.

The Court’s new order directs Customs to publish its drawback regulations in final form by December 17, 2018, and to make them effective on that date. This, the Court indicated, would give drawback claimants at least part of the “transition year” to make informed decisions on how to file drawback claims. But the order gives Customs an important “out”; the agency may delay issuance of any final regulations other than a small group which the plaintiffs had identified as essential to determining how to calculate TFTEA drawback claims.

The ball is now in the Government’s court. As of this writing, the government has not indicated whether it will try to implement its entire regulatory package by December 17. That package contains a number of controversial measures – such as those involving drawback of Federal Excise Taxes – which, if the rules are enacted, could prompt additional litigation.

The Tabacos decision is the latest in a saga which began back in February, 2018, when the Treasury Department bypassed a Congressional deadline for issuing regulations concerning how duty drawbacks should be calculated under TFTEA. Drawback claimants who had been promised a “transition year” in which they could claim drawback either under historical rules or TFTEA rules were at a loss concerning how they should structure and file duty drawback claims.

In lieu of regulations, Customs and Border Protection issued an Interim Guidance Document setting out “guidelines” for calculating TFTEA drawback – guidelines which were changeable at will and which would govern the drawback program until Customs could complete and finalize regulations regarding drawback under TFTEA.

Moreover, Customs indicated that it would not issue accelerated payments of drawback for TFTEA claims until final regulations were adopted. Mindful that CBP’s last major set of drawback regulations had taken nearly five (5) years to be finalized, and facing financial losses, a group of drawback claimants and drawback service providers brought suit, seeking to force Treasury to issue the calculation regulations which Congress had directed be in place by February 2018.

On June 29, 2018, the United States Court of International Trade ruled for the drawback claimants, holding that Treasury had “unlawfully withheld” required agency action, and that, under the Administrative Procedure Act, the Court was required to “compel agency action unlawfully withheld”. Tabacos de Wilson et al. v. United States, Slip Op. 18-81 (June 29, 2018).

Now the court has determined the scope of the action to be taken.