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.

Trade Updates for Week of October 10, 2018

United States Court of International Trade

 

Commerce’s Decision Sustained in Less than Fair Value Sales Determination

Before the Court in Dong-A Steel Company et. al. v United States et. al. Slip Op. 18-134, Court No. 16-00201 (October 3, 2018) was the affirmative less than fair value sales determination in the antidumping investigation of heavy walled rectangular welded pipes from Korea. Plaintiffs, the largest importers of subject merchandise, challenged Commerce’s determination on six grounds. These were, the decision to use the earlier of the invoice date or the shipment date as the date of sale, the decision to assign full costs to non-prime merchandise, the decision to adjust plaintiff’s reported input costs for merchandise that was identical except for paint, the decision to compare merchandise on a theoretical weight basis, the decision to deny a constructed export price offset, and the decision to use the zeroing methodology. For the following reasons the Court sustained Commerce’s determination in full.

“In identifying the date of sale … Commerce normally will use the date of invoice.” Id. at 9. However, “Commerce may use a date other than the date of invoice if … a different date better reflects the date on which the exporter or producer establishes the material terms of sale.” Id. The Court believed that Commerce had correctly applied the standard by applying the later of the dates and that plaintiffs had failed to establish that another proposed date was a better reflection of the establishment of a sale.  The next issue was if Commerce’s decision to assign full costs to non-prime merchandise was supported by substantial evidence. “Commerce seeks to determine whether it is possible to use the non-prime merchandise in the same applications as the prime merchandise.” Id. The Court said there was substantial evidence to support Commerce’s decision because customers could use plaintiff’s “prime and non-prime products in any applications for which they consider the products suitable.”  Id. at 18.

The next issue was the adjustment of reported input costs for products that were identical except for paint. In determining cost, “an agency may either accept financial records … or reject the records if accepting them would distort the company’s true costs.” Id. at 21. The Court said Commerce’s adjustment was supported by substantial evidence because the agency “found that the significant cost differences between the two product control numbers could not be explained by the physical characteristic of one being painted and the other not painted” leading to distorted cost. Id. at 22.  The next issue was whether Commerce erred in deciding to compare merchandise weight on a theoretical basis, based on a standard industry formula. The court concluded that Commerce’s choice to use theoretical weight was reasonable and based upon substantial evidence on the record because “utilizing theoretical weight would not decrease any distortions in the calculation compared to actual weight.” Id. at 27. 

The next issue was if Commerce erred in deciding to deny a constructed export price (“CEP”) offset for plaintiffs. Commerce will grant a CEP offset when “normal value is established at a level of trade which constitutes a more advanced stage of distribution than the level of trade of the CEP, but the data available do not provide an appropriate basis to determine . . . a level of trade adjustment.” Id. at 28.  The Court said Commerce’s decision was supported by substantial evidence because the agency determined plaintiff did not qualify because there was only one home market level of trade. The final issue, was whether Commerce erred in deciding to use the zeroing methodology in its differential pricing analysis. Plaintiff’s argued “Commerce’s use of zeroing is not in accordance with the law because it violates the WTO Antidumping Agreement.” However, the Court sustained Commerce because “The WTO’s adverse ruling regarding the practice of zeroing has not been implemented into U.S. law, thus Commerce has no obligation to refrain from using zeroing in this case.” Id. at 33.

 

Sustained Remand Decisions in Nails Case

Before the Court in Stanley Works (Langfang) Fastening Co., Ltd. et. al. v. United States et. al., Slip Op. 18-134, Court No. 11-00102 (October 5, 2018) were Commerce’s final redeterminations in the agency’s first administrative review of an antidumping duty covering steel nails from China. Plaintiffs challenged Commerce’s inclusion of surrogate financial data from Indian company Sundram. Specifically, Commerce did not use the company as a surrogate initially in the first review, but reconsidered its approach in the second annual review. After determining in the second review Sundram was an appropriate surrogate, the agency then applied it as a surrogate in the first review and removed one of the initial surrogates used, J&K. This raised plaintiff’s duty margins from 10.63% to 15.43%. After extensive litigation two issues remained before the Court, whether Commerce reasonably included Sundram’s financial ratios in the calculation of Stanley’s dumping margin and whether Commerce’s decision to apply the revised 15.43 percent rate to the entries not associated with Stanley was contrary to law. For the following reasons Commerce’s determinations are sustained by the Court.

When selecting surrogate data Commerce should “avoid using any prices which it has reason to believe or suspect may be dumped or subsidized.” Id. at 9. Commerce’s decision was supported by substantial evidence because Sundram’s financial statement plainly states that it “has not received any grant from the Government.” Id. at 10.” In regards to the application of the 15.43% rate, the Court said “it is Commerce’s normal practice to assign non-investigated separate rate respondents a rate based on the average of the margins calculated for those companies selected for individual review.” Id. at 16. The Court pointed out that defendant intervenors could have participated in previous litigation to contest the all other rate applied to them, and that because Stanley had started its own litigation, injunctions against the rate in separate litigation were not applicable.

Trade Updates for Week of October 3, 2018

United States Court of International Trade

 

Commerce Decision Remanded to Apply Averaged Zero Rate

Before the Court in Heze Huayi Chemical Co. Ltd. v. United States et. al., Slip Op. 18-130, Court No. 15-00027 (September 28, 2018) was a challenge to the final results of Commerce’s administrative review of the antidumping order on chlorinated isocyanurates (“chlorinated isos”) from China. Plaintiffs are the third largest producer of chlorinated isos in China, but were not chosen to be mandatory respondents nor selected as voluntary respondents because of a late submissions to Commerce. As a result, plaintiff was assigned a 53.15% anti-dumping rate, while respondents all received de minimis rates of zero percent. During the course of this case, precedent had come down from the Court of Appeals for the Federal Circuit (“CAFC”) that held “Commerce should average the zero or de minimus rates of mandatory respondents in determining the rates of non-examined parties.” Id. at 4. For the following reasons the Court remands for Commerce to apply respondent’s averaged zero rate to plaintiff.

The CAFC “found Commerce’s practice of disregarding zero or de minimus mandatory respondent rates when determining the rates of non-respondents to be inconsistent with the Uruguay Round Agreements Act.” Id. at 5. The CAFC also made clear that there were some circumstances where deviation from this method may be reasonable. These were when there is evidence that the dumping margins have not changed from period to period and when Commerce is using the adverse facts available. The Court found that neither scenario was present here remanded the case for further proceedings consistent with the CAFC precedent.

 

Commerce Remanded Results on Scope Remanded

Before the Court in Agilent Technologies v. United States et. al., Slip Op. 18-131, Court No. 16-00183 (October 1, 2018) were scope determinations made by Commerce holding that plaintiff’s mass filter radiator was subject to antidumping (“ADD”) and countervailing duty (“CVD”) orders on aluminum extrusions from China. The plaintiff is a manufacturer of electronic and bio-analytical measurement instruments. Both the ADD and CVD orders excluded finished heat sinks from the scope of the order. Plaintiff argued its mass filter radiators were finished heat sinks, and therefore excluded. However, Commerce found they fell under the scope of their orders and were not subject to the exclusions, therefore subject to the duties. For the following reasons the Court remanded the scope ruling back to the agency for further consideration.

Antidumping and countervailing duty 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 first step is to examine “the scope of the Order to determine if that language is ambiguous and open to interpretation.” Id. at 7. If the order is open to interpretation, Commerce may then turn to examine the (k)(1) factors. These are “the descriptions of the merchandise contained in the petition, the initial investigation, and other determinations of Commerce, and the U.S. International Trade Commission” for clarification. Id. In this case, Commerce argued “Agilent’s mass filter radiator does not meet the definition of a finished heat sink because it was not designed and produced to meet specified thermal performance requirements and was not tested for compliance with specified design requirements.” Id. In reaching its determination, Commerce relied on a previous scope ruling regarding ECCO light bars. The Court said this reliance was unreasonable because the light bar issue supported “an analysis of specific facts to determine whether physical design” could establish the existence of specified thermal performance requirements. Id. at 12. In this case, the Court said what was needed was for specific determination of how “the physical elements lead to specified thermal performance requirements.” Id. Commerce’s determination lacked “substantial evidence that Agilent did not meet the specified thermal performance requirement of the finished heat sink exclusion.” Id. at 13.

 

Remand Required for Scope Determination Regarding Zinc and Nylon Anchors

Before the Court in Midwest Fastener Corp. v. United States et. al., Slip. Op. 18-132, Court No. 17-00131 (October 1, 2018) was another “iteration of litigation centering on whether a product is classified as a nail.” Id. at 1. Plaintiff challenged Commerce’s determination that its imported zinc and nylon anchors fall within the scope of the antidumping orders on steel nails from Vietnam. Midwest describes its zinc and nylon anchors as “a zinc or nylon body, and a steel pin.” Id. at 7. For the following reasons the Court remanded the issue to Commerce for further reconsideration.

“The language of the order determines the scope of an antidumping duty order,” any scope ruling begins with an examination of the language of the order at issue. Id. at 3. If the terms of the order are unambiguous, then those terms govern. If the terms of the order are either ambiguous or reasonably subject to interpretation, then the (k)(1) factors will need to be taken into account. These are the descriptions of the merchandise contained in the petition, the initial investigation, and prior determinations of Commerce and the International Trade Commission. The Court used dictionary definitions to define a nail as “a slim, usually pointed object used as a fastener for impact insertion.” Id. at 11. The Court said zinc and nylon anchors did not fit in the unambiguous common description of a nail. The scope ruling was remanded for further reconsideration consistent with the Court’s opinion.

Trade Updates for Week of September 26, 2018

United States Court of International Trade

 

Untimely GSP Claim; Case Dismissed

Before the Court in Industrial Chemicals, Inc. v. United States, Slip Op. 18-126, Court No. 17-00117 (September 24, 2018) was the Government’s motion to dismiss the plaintiff’s claim for lack of subject jurisdiction. Plaintiff claims that sixty-five entries of chemicals from India, imported between August and October of 2014, are eligible for duty free treatment under the Generalized System of Preferences (“GSP”). GSP expired in July of 2013, and was reauthorized by Congress in June of 2015. The reauthorization included a provision allowing for retroactive duty refunds on eligible goods within a 180 day limit. Plaintiff submitted a letter after the 180- day time limit to Customs requesting a refund. Customs returned the letter with a handwritten note saying they could not process the claims because the claim was untimely. Plaintiff then submitted a protest which was denied and bought this case. “The question of jurisdiction turns on whether Plaintiff challenges a protestable decision made by Customs.” Id. at 5. The Court said the protest was invalid “because it was not filed within 180 days of liquidation” because of this “the court does not have jurisdiction over the invalid protest.”  In addition, the Court also said “Customs' refusal to issue the refund, as indicated in the handwritten note, was not a protestable decision.” Id.  Defendant’s motion to dismiss was granted in full.

  

Motion to Dismiss Granted in Steel Nails Case

Before the Court in National Nail Corp. v United States et. al., Slip Op. 18-125, Court No. 18-00053 (September 24, 2018) was Plaintiff’s challenge to Commerce’s final results in the first administrative review of the antidumping order on steel nails from Taiwan. Plaintiff, National Nail, was not party to any of the underlying administrative proceedings conducted by Commerce. Defendant claims because of this the Court lacks jurisdiction.  The plaintiff brought the claim under (i) jurisdiction which is a “residual grant of jurisdiction, and it may not be invoked when jurisdiction under another subsection” was available. Id. at 6. “It is well-settled that (i) jurisdiction is generally unavailable when (c) jurisdiction could have been available,” unless the party is “able to demonstrate that the remedy afforded by (c) jurisdiction would be manifestly inadequate Id. at 8. In this case the Court held, that (c) jurisdiction would have been available to the plaintiff had they participated in the administrative proceedings. In addition, the Court found the financial harm alleged was not a manifestly inadequate remedy based on Federal Circuit precedent. The defendant’s motion to dismiss was granted in full.

  

Scope Determination Regarding Zinc and Nylon Anchors Remanded

Before the Court in Simpson Strong-Tie Company v. United States, Slip. Op. 18-123, Court No. 17-00057 (September 21, 2018) was “another installment in the continuing mystery series, Is It Classified as a Nail?” Id. at 1. Specifically, plaintiffs challenged Commerce’s determination that imported zinc and nylon anchors fall within the scope of the Antidumping Orders on Steel Nails from China. Simpson argued its anchors are not steel nails and therefore, do not fall within the scope of the Orders and that Commerce’s scope determination is unsupported by substantial evidence. For the following reasons the Court finds Commerce’s determination was not in accordance with law.

“The terms of an order govern its scope,” and “if the scope of an order is not ambiguous, the plain meaning of the language governs.” Id. at 9. “Antidumping duty orders “should not be interpreted in a vacuum devoid of any consideration of the way the language of the order is used in the relevant industry.” Id. The Court said a nail, which would fall in the scope of the order, is defined in the dictionary as “a small metal spike with a sharpened end and a blunt head, which may be driven in to a surface with a hammer or other tool in order to fasten things together” and therefore the definition of a nail was unambiguous.  Id. at 10. Simpson descried its merchandise “as zinc or nylon with a shell or body, and a carbon and stainless steel pin.  Based on these definitions the Court said “Simpson’s anchors are not inserted by impact into the materials to be fastened and do not grip by friction in the same manner as a nail.” Id. at 11. Since, the anchors were outside the scope of the order, Commerce’s determinations were remanded for further reconsideration.

 

Reinforcing Bar Determination Sustained

Before the Court in Rebar Trade Action Coalition v United States, Slip Op, 18-122, Court No. 17-00157 (September 20, 2018) were Commerce’s determinations in the first administrative review of the 2014 countervailing duty (“CVD”) order on steel concrete reinforcing bar from Turkey. The coalition challenges Commerce’s findings that the Government of Turkey (“GOT”) did not purchase electricity for more than adequate remuneration, that actual energy purchases were not a countervailable benefit, and that a zero percent margin was applicable to non-selected respondents. For the following reasons Commerce’s determinations were sustained in full. 

The court shall sustain “Commerce’s determinations, findings, or conclusions unless they are unsupported by substantial evidence on the record, or otherwise not in accordance with law.” Id. at 2. Commerce found in its investigation of the electricity market in Turkey that the GOT “administers the system through which the market prices are determined,” and that the GOT “can neither make losses nor earn profits from its activities and does not have cash flow, other than the collection of transmission fees and system utilization charges.” Id. at 5.  The Court said Commerce’s determination was supported by substantial evidence because the agency reasonably certified that GOT did not pay for or set the prices for electricity through questionnaire responses and research. The Court dismissed the coalition’s other arguments regarding the purchasing of electricity saying the plaintiffs had failed to establish direct evidence of payments for electricity. The next issue was Commerce’s determination the purchase of electricity by government affiliated entities under the GOT consumer program was not a subsidy. The Court said the determination was supported by evidence because the record contained proof that the price of electricity was not set by the government but rather were “priced pursuant to contracts negotiated by the public” along with the GOT. Id. at 14-45. Zero percent rates for non-selected respondents, was upheld by the Court because all of Commerce’s other determinations were sustained.

Trade Updates for Week of September 19, 2018

United States Court of International Trade

 

Sustained Results in Frozen Fish Filets from Vietnam

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

 

Trial Ordered in Ziploc Plastic Bags Case

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

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

 

Upheld Remand Results in Xantham Gum Case

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

Trade Updates for Week of September 12, 2018

United States Court of International Trade

 

 

New Shipper Review Should Not Have Been Rescinded for Insufficient Information

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

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

 

Drawback Refund Claims were Untimely and Incomplete

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

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

 

Commerce Decision Regarding Hot Rolled Steel Products Remanded in Part

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

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

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

 

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

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

Trade Updates for Week of September 6, 2018

United States Court of International Trade

 

These Dolls are Not Festive Articles

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

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

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

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

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

 

Motion for Preliminary Injunction and Motion to Strike were Both Denied

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

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

Trade Updates for Week of August 29, 2018

United States Court of International Trade

 

No Certification for Trade Adjustment Assistance for Displaced Bank Workers

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

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

 

Remand Results Sustained where Exporter of Pencils was State-Owned

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

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

 

United States District Court for the District of Connecticut

 

State Unfair Trade Remedies Not Available for NAFTA Issues

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

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

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

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

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

The Court concluded that:

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

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

Trade Updates for Week of August 22, 2018

United States Court of International Trade

 

Tapenades are Classified as Sauces under the HTSUS

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

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

           

Cross Motions for Summary Judgment Denied

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

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

 

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

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

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

 

Jurisdictional Requirements Not Met; Case Dismissed

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

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

Trade Updates for Week of August 15, 2018

United States Court of International Trade

 

Commerce Determination Remanded in Part

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

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

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

 

Commerce Determination Regarding Hot Rolled Coils Sustained

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

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

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

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

 

Commerce’s Results in Seventh Administrative Review were Sustained

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

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

 

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

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

 

 

Trade Updates for Week of August 8, 2018

United States Court of International Trade

 

Motion to Dismiss Denied in Byrd Amendment Case

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

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

 

Sustained Remand Determination Regarding Scope

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

 

Motion to Stay Denied

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

Trade Updates for Week of August 1, 2018

United States Court of International Trade

 

Injunction Granted in Vaquita Case

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

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

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

 

Trade Updates for Week of July 25, 2018

United States Court of International Trade

 

Cross Motions for Summary Judgment Granted and Denied in Part

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

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

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

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

 

United States District Court

Customs Broker, Forwarder Liable for Importing Counterfeit Goods

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

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

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

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

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

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

 

United States Court of Federal Claims

 

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

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

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

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

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

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

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

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

 

Trade Updates for Week of July 18, 2018

United States Court of International Trade

 

Remanded Determination where Commerce is to Proceed with New Shipper Review

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

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

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

 

Motion to Consolidate Denied

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

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

Trade Updates for Week of July 12, 2018

United States Court of International Trade

 

Finding of Countervailable Subsidies Affirmed

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

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

 

Remand Results Sustained

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

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

Trade Updates for Week of July 4, 2018

United States Court of International Trade

 

CIT Orders Customs to Move Quickly on Drawback Regulations

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

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

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

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

 

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

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

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

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

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

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

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

 

No Cross-Ownership; Commerce Determination Sustained

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

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