Trade Updates for Week of August 16, 2017

United States Court of International Trade:   

 

Bankruptcy Stay Does Not Bar Action to Determine 19 U.S.C. §1592 Penalties

The automatic stay on lawsuit and actions to collect debts which attaches to a bankruptcy filing does not operate to block the government from pursuing a lawsuit to determine Customs penalties under Section 592 of the Tariff Act, according to recent decision of the United States Court of International Trade.

In United States v. Rupari Food Services, Slip Op. 17-104 (August 10 2017), Customs sued an importer to recover withheld duties and penalties arising out of an alleged pattern of activities designed to evade antidumping duties on crawfish. Administrative and judicial proceedings relative to the case had been in progress for nearly two decades. After the lawsuit was filed, Rupari, the importer, filed for Chapter 11 bankruptcy protection, and asserted that the automatic stay which applies in bankruptcy cases [11 U.S.C. §362(a)] required the Court to stay action in the case.

Describing the issue as one of first impression, Judge Gary Katzmann ruled that the “19 U.S.C. § 1592 civil penalty action is exempt from the automatic stay in bankruptcy under 11 U.S.C. § 362(b)(4), insofar as it constitutes an action for the entry, rather than the enforcement, of a money judgment. The court held that a suit to determine liability for a penalty and to liquidate the government’s claim to a certain amount did not improperly give the government an advantage over other creditors. On the other hand, the Court suggested that a suit to collect the judgment would have violated the stay.

 

Defects Did Not Invalidate Customs Surety Bonds, Court Rules

Technical defects in certain Customs single entry bonds did not render the bonds invalid, nor preclude Customs from suing to recover on them, according to a recent decision by the United States Court of International Trade.

Hartford Insurance Co. v. United States, Slip Op. 17-103 (August 10, 2017) was a consolidated action protesting demands on the surety under some 53 discrete single entry bonds, most to secure entries subject to antidumping duties. Hartford sought to recover some $2.2 million paid in duties with respect to the bonds.

Initially, Hartford had contended that errors in the execution of some 45 bonds rendered the bonds invalid, but subsequently withdrew that argument. The court dismissed the claims as moot.

In addition, the Court dismissed two claims because Hartford had not paid all liquidated duties, taxes and fees prior to the commencement of suit. The court  restated the well-established rule that prepayment of all monies owed in Customs protest cases is an absolute prerequisite to invoking the Court’s jurisdiction, which cannot be modified or waived. In these cases, Hartford had paid the estimated duties demanded, rather than the full penal amounts of the bonds.

With respect to Hartford’s claim that certain bonds were void for failure to meet the technical requirements of Part 113 of the Customs regulations (missing information, missing signatures, etc), the court ruled that these provisions were directory rather than mandatory, and that they were intended for the benefit of Customs rather than the surety. The court found irrelevant a report from CBP’s Office of the Inspector General (OIG) finding that Customs had written off some $46.3 million in revenues, due to bond defects, holding that the report was not the position of the agency.

If Customs accepted the bonds despite the technical defects, the surety was not prejudiced thereby, noting that the liabilities did not arise from the technical defects, but from the defaults of the various secured principals.

Finally, the court rejected Hartford’s argument that the single entry bonds were not binding contracts, holding that technical defects in the completion or execution of the contracts did not prevent contract formation under established legal principles.

 

Trade Updates for Week of August 2, 2017

United States Court of International Trade

 LED Candles are Lamps and Light Fittings of Heading 9405. 

In Gerson Company v. United States, Slip Op. 17-96, Court No. 11-225 (August 2, 2017), the Court determined that light emitting diodes or LED candles may not be classified under Chapter 85.  Instead of providing illumination by means of a wick and the combustion of candle wax, as does an ordinary candle, each of these subject articles provides illumination by means of an internal semiconductor that is a “light-emitting diode,” or “LED,” powered by a battery contained within the article.  When the LED is energized by the battery, the illuminated article resembles a lit candle. However, the Court does not see these articles as classifiable under Chapter 85, because (1) the LED candles are not components within a larger system like articles of Heading 8541, which describes light emitting diodes or semiconductor devices; and (2) the LED candles, while they may be considered electrical appliances, are described more specifically as lamps of Heading 9405.   The Court did not want to consider Heading 8543 broadly to encompass “all electric, luminescent lamps.” The Court held, “In summary, when considered together, the ENs relating to HS chapter 85, to certain headings therein, and to HS heading 94.05 support the conclusion that goods such as Gerson’s articles, which are self-contained, i.e., “independently used,” lamps suitable for household use as illuminating and decorative articles, were intended by the Harmonized System drafters to fall within HS heading 94.05, not HS heading 85.43.” Slip Op., pg. 15.

 

Sustained Commerce Decision

In Morex Ribbon Corp., Papillon Ribbon and Bow Inc., and Ad-Teck Ribbon, LLC v. United States, Slip Op. 17-95, Court No. 15-00141 (August 1, 2017) the Court heard challenges to the 137.20% antidumping margin assigned to Hen Hoa Trading Co. Ltd. in the third administrative review of the antidumping duty order covering narrow woven ribbons with woven selvedge from Taiwan. Hen Hao Trading was named in the administrative review as a mandatory respondent and withdrew without submitting any information. Consequently, they were given a 137.20% antidumping margin based on the adverse facts available. Plaintiffs imported Hen Hao’s ribbons, and challenged the margin as unreasonable, and not corroborated by evidence before Commerce. For the following reasons Commerce’s determinations were upheld by the Court.

The first issue was the reasonableness of the assigned rate. Commerce must use substitutes when a respondent drops from a review because no information has been submitted. These substitutes must be “reasonably accurate estimate of the respondent’s actual rate, albeit with some built-in increase intended as a deterrent to noncompliance.” Id. at 5. In selecting the rate Commerce choose between (1) 137.20% the highest rate in the petition, (2) 4.37% the rate from the less then fair value investigation, or (3) 30.64% a cooperative mandatory respondent’s rate. Commerce determined that at the 4.47% Hen Hao would continue to import and that using the 30.64% was not deter noncompliance because it belonged to a party that cooperated in the review.  Commerce felt that the 137.20% was the only rate sufficient to deter non-compliance with the respondent request. The Court agreed with these determinations.  Plaintiffs also challenged the rate was unreasonably high because as independent importers would need to pay the amount on Hen Hao’s products. The Court rejected this because the argument “would allow an uncooperative foreign exporter to avoid the adverse inferences permitted by statute simply by selecting an unrelated importer.” Id. at 8.

The final issue is if Commerce had corroborated the dumping margin with facts before the agency. When basing dumping margins on adverse facts available “Commerce may not select unreasonably high rates having no relationship to the respondent’s actual dumping margin.” Id. at 5. To corroborate the 137.20% rate, Commerce reviewed transaction-specific margins submitted by other respondents regarding hundreds of U.S. sales of ribbons during the POR. Plaintiffs argued that the number of sales examined was not satisfactory, however the Court disagreed and found numbers of transactions provided were sufficient. In addition, the 137.20% rate was relevant to Hen Hao because the company previously supplied ribbons to a Canadian reseller who Commerce found to be dumping at the same rate in the first administrative review. The Court found the rate to be corroborated by evidence before the agency. 

 

Trade Updates for Week of July 26, 2017

United States Court of International Trade

  

Remand Determination Sustained  in Both Solar Industries Cases

In Kyocera Solar, Inc. and Kyocera Mexicana S.A. de C.V. v. United States, Court No. 15-81, Slip Op. 17-90 (July 21, 2017),  the Court reviewed the U.S. Department of Commerce’s (“Commerce” or “Department”) remand determination in the antidumping investigation of certain crystalline silicon photovoltaic products from Taiwan, filed pursuant to the court’s order in SunEdison, Inc. v. United States, 40 CIT __, 179 F. Supp. 3d 1309 (2016).

Investigations in to the Chinese and Taiwanese solar industries resulted in two sets of antidumping and countervailing duty orders.  The investigation into the Chinese solar industry resulted in an ADD order and a CVD order covering modules, laminates, and/or panels assembled in China consisting of cells manufactured outside of China, including cells manufactured in Taiwan. Certain Crystalline Silicon Photovoltaic Products from the [PRC], 80 Fed. Reg. 8,592 (Dep’t Commerce Feb. 18, 2015) (ADD order; and amended final affirmative CVD determination and CVD order) (“the Solar IIPRC Orders”). The investigation into the Taiwanese solar industry resulted in an ADD order covering solar cells manufactured in Taiwan, including Taiwanese cells assembled into modules, laminates, and/or panels outside of Taiwan, but excluding Taiwanese cells assembled into modules, laminates, and/or panels in China covered by the Solar II PRC Orders. Certain Crystalline Silicon Photovoltaic Products from Taiwan, 80 Fed. Reg.8,596 (Dep’t Commerce Feb. 18, 2015) (ADD order) (“the Solar II Taiwan Order”).  It is the Solar II Taiwan Order which is at issue in this case.

Kyocera Solar, Inc. and Kyocera Mexicana S.A. de C.V. (collectively “Kyocera”) are affiliated entities within the Kyocera Corporation, and Kyocera Solar, Inc. headquartered in the United States is an importers of solar panels, while Kyocera Mexicana S.A. de C.V. is a Mexico-based foreign manufacturer of solar panels, which it assembles at its plant in Mexico using cells from Taiwan. More specifically, the court in SunEdison asked Commerce to further consider or explain: (1) whether Commerce had departed from its prior practiceof using a single rule of origin for a class or kind of merchandise; (2) whether Commerce treated similarly situated merchandise dissimilarly; and (3) whether Commerce had departed from its prior practice of calculating normal value “in the market where the majority of production of the subject merchandise  took place.”

The Court sustained the remand determination on all these issues finding that there are different origin rules for Solar II PRC and Solar II Taiwan merchandise, because they are different products, and thus they are treated differently. For Solar II PRC, it was reasonable for Commerce to determine country of origin for subject merchandise according to the country of panel assembly, and for Solar II Taiwan, it was reasonable for Commerce to determine the country of origin for subject merchandise was according to the country of cell manufacture. Due to the differences in products between the two investigations, the products were investigated, and reviewed with different rules of origin in mind.  Likewise, because the proper market for normal value is the market of origin determined by the origin test, the Court sustained Commerce’s designation of the home market to be Taiwan. 

In Sunpower Corporation et. al. and Canadian Solar Inc. et al. v. United States and Solar World Americas Inc., Slip Op. 17-89, Court No. 15-00067 (July 21, 2017) the Court reviewed arguments over Commerce’s determinations on remand. Plaintiffs brought this suit to challenge the results of antidumping and countervailing duty investigations regarding solar panel and cell assemblies and from China and Taiwan. The Court previously decided that Commerce had not properly explained its departure from the regular practice of using a single country of origin test for a particular class of merchandise, its potentially dissimilar treatment of similarly situated merchandise, and its departure from the prior practice of calculating normal value using the market where the majority of production took place. The Court ordered the case to be remanded to Commerce for further explanation or reconsideration. For the following reasons Commerce’s determinations on remand were upheld by the Court.

The first issue was whether Commerce deviated from its prior policy of applying only one rule of origin to a single class or kind of merchandise. Commerce explained that the solar panels under investigation belonged to different classes of merchandise and could be subject to different country of origin test. Subject merchandise is defined as “the class or kind of merchandise that is within the scope of an investigation” or review. Id. at 18.  Commerce had initiated numerous different investigations and reviews making the merchandise fit into different subject categories. The various country of origin tests applied by Commerce was to different classes of merchandise because of the separate investigations. The next issue was if Commerce treated similarly situated products differently in the PRC and Taiwan investigations. On remand, Commerce explained that the purpose behind the investigations was different and because of this the merchandise may not be treated similarly. The PRC investigation was initiated to address “injurious pricing decisions for and subsidization of solar panels assembled in China using non-Chinese cells”. Id. at 24. These factors were not present in the Taiwanese investigation. The Court held that this was an adequate explanation of the treatment and upheld the result.  The final issue was Commerce’s departure from the prior policy of calculating normal value using the market where the majority of production took place. Commerce explained to the court all the statute requires is “a fair comparison be made between normal value and export price,” not a comparison on the value of the product in the market where most production occurred. Id. at 25. Commerce stressed that it must be able to “address unfair pricing decisions or unfair subsidization that is taking place in the exporting country where further manufacturing” occurs. Id. at 28.  The Court agreed that Commerce had fulfilled its requirements in calculating normal value.

 

Remand Results Regarding Surrogate Country Selection Sustained

In Tianjin Wanhua Co., Ltd. v. United States, Court No. 15-190, Slip Op. 17-91 (July 24, 2017), the Courtreviewed the Remand Results filed pursuant to Tianjin Wanhua Co., Ltd. v. United States, 40 CIT __, 182 F. Supp. 3d 1301 (2016).  The Court in that decision analyzed the fifth administrative review conducted by the U.S. Department of Commerce (“Commerce”) of the antidumping duty order covering polyethylene terephthalate film, sheet, and strip from the People’s Republic of China (“PRC”). See Polyethylene Terephthalate Film, Sheet, and Strip from the People’s Republic of China, 80 Fed. Reg. 33,241 (Dep’t of Commerce June 11, 2015) (final results admin. review) (“Final Results”). Despite Tianjin Wanhua Co., Ltd. (Wanhua’s) arguments regarding preferring surrogate data from South Africa and untimely Gross National Income (GNI) data from 2013 for purposes of calculating the normal value, Commerce on remand found the Indonesian data and relevant financial statements to be more reliable and usable. Moreover, it came from a producer of “identical” merchandise rather than a producer of “comparable” merchandise.   The court therefore sustained Commerce’s selection of Indonesia as the primary surrogate country.

 

Assumes Jurisdiction over Lever Rule Challenge, Calls Lever Grant a “Ruling”

The Court of International Trade has subject matter jurisdiction over an importer’s challenge to a grant of “Lever Rule” protection, but has cast the challenge as one to a pre-importation ruling.

In XYZ Corporation v. United States, Slip Op. 17-88 (July 21, ,2017) an importer (bringing suit under an assumed name) challenged Customs’ decision to grant “Lever Rule” protection with respect to genuine DURACELL brand batteries. CBP had published in the March 31, 2017 Customs Bulletin a notice indicating that Customs would exclude and seize genuine batteries which differed from DURACELL batteries sold in the United States in terms of warranty protection, guarantee and warning labeling and customer care information. XYZ sued under the Administrative Procedure Act, claiming that the Lever Rule grant was a substantive legislative “rule” or regulation which may only be imposed after “notice and comment” rulemaking in the Federal Register. The plaintiff also contended that the Lever rule grant was arbitrary and capricious, in that it was unduly vague. It sought a preliminary injunction to block CBP from enforcing the Lever Rule restriction while its case went forward.

XYZ Corporation invoked the Court’s 28 U.S.C.§1581(i) “residual” jurisdiction, and the Government moved to dismiss the case.

The CIT denied the motion to dismiss, holding that it had jurisdiction, but under 28 U.S.C. §1581(h), which empowers the Court to render declaratory judgment regarding pre-importationrulings. Since the Court is limited to granting declaratory relief in such cases, it denied the plaintiff’s request for an injunction, and dissolved the Temporary Restraining Order it has issued. Expect this case to be litigated on a very expedited schedule.

 

Motions for Summary Judgment Regarding Classification of “Gum Base” Denied.

A lawsuit involving the tariff classification of “gum base” looks headed for trial, after the Court of International Trade denied cross-motions for summary judgment.

The issue in Mondelez Global Inc. v.. United States, Slip Op. 17-91 (July 25, 2017) is whether “gum base” – an odorless, colorless concoction of resins and chemicals used to make chewing gum – was properly classified by the government as a “food preparation” in HTS Heading 2106. This, in turn, depends on whether chewing gum is to be considered a “food”. The court noted that chewing gum is not intended to be ingested as a food. It rejected the government’s contention that the product was a “food preparation” based on the fact that it contained some vegetable oils and other ingredients which had nutritive value. The court held that chewing gum would not be considered a food preparation unless, like tea leaves or bouquet garni, it is designed to leach nutritive substances to be ingested. The Court denied the importer’s cross motion for summary judgment, saying that the government should be permitted to conduct further discovery, including laboratory testing on this point.

It seems unusual to reopen discovery in a case pending for 5 years, but the government moved for summary judgment because it did not want to incur the cost of laboratory testing.  The Court held the government should not be penalized or disadvantaged for trying to save costs.

Trade Updates for Week of July 19, 2017

United States Court of International Trade

 

 Partial Motion for Summary Judgment Granted in Plaintiff Government’s Favor

In this penalty case, United States v. Farhan Khan, Court No. 15-250, Slip Op. 17-85 (July 13, 2017), defendant imported three types of freezable products: (1) the beverage container bags (“CoolSack”); (2) the CanCooler for cans (“CanCooler”); and (3) the Wine Bottle Wrap for wine bottles (“Wine Bottle Wrap”). Defendant through his broker classified this merchandise under Harmonized Tariff Schedule of the United States Subheading 4202.92.1000, which covers “[i]nsulated food or beverage bags: With outer surface of sheeting of plastic or textile materials: Other” and carries a duty rate of 3.4 percent ad valorem.  Customs determined that the subject CoolSack bags should be classified under subheading 4202.92.90, HTSUS, which covers “Other [bags or cases]: With outer surface of sheeting of plastic or of textile materials: Other [than insulated food or beverage bags]: Other,” carrying a 17.6% ad valorem and rate advanced entries of the CoolSack bags. Because defendant had not paid the $8,228.20 in duties or the $45,374.21 penalties demanded by CBP, plaintiff initiated this case.

 The Court found that defendant provided no proof for its assertion that the CoolSack is an “insulated food or beverage bag,” nor did it show that the tariff term applies to items capable of maintaining the temperature or of chilling a beverage that is already cold. According to the Court, an “insulated food or beverage bag” as used in subheading 4202.92.1000 must be able to retard the passage of heat to or from a hot, as well as a cold, food, or beverage.  Accordingly, because defendant’s merchandise does not retard the passage of heat to and from a hot, as well as a cold, food or beverage it is not classifiable under 4202.92.1000, the Court held that defendant made material and false statements by classifying the goods under 4202.92.1000.

Moreover, defendant did not exercise reasonable care, by not seeking an additional expert opinion on the classification of the CoolSack or a binding ruling. The Court granted prejudgment interest on the unpaid duties in the amount of $8,228.20.  Finally, the Court denied summary judgment in regards to the appropriateness of the penalty, so that the Court may develop a record to address this issue.

For all these reasons, the Court granted plaintiff’s motion for summary judgment in part.

 

Remand Denying Issuance of Separate Sustained

Before the court, in Hebei Golden Bird Trading Co., Ltd., et al. v. United States et al., Court No. 15-182, Slip Op. 17-86 (July 17, 2017), is the U.S. Department of Commerce (“Commerce”)’s Final Redetermination Pursuant to Court Remand Order, ECF No. 74-1 (“Remand Results”) concerning the nineteenth periodic administrative review of the antidumping (“AD”) duty order on fresh garlic from the People’s Republic of China (“PRC”). The Court previously remanded to Commerce the issue of whether mandatory respondent Hebei Golden Bird Trading Co., Ltd. (“Golden Bird”) is eligible for a separate rate. In the Final Results, the PRC-wide rate was applied to Golden Bird as total adverse facts available (“AFA”) because it found that Golden Bird’s questionnaire responses were not credible, as Golden Bird failed to cooperate in providing Certain Export Declaration Forms and China Inspection Quality Bureau inspection certificates. Upon remand, Commerce reopened the record to consider evidence regarding alleged duty evasion by Golden Bird and allowed interested parties to submit information and comments.

The Court held that because Commerce found that most of Golden Bird’s exports were actually controlled by companies that received the PRC-wide rate and estimated its funneling activities to involve at minimum about one-third of the total export volume from companies subject to the PRC-wide rate, that Commerce’s determination that Golden Bird is ineligible for a separate rate was both reasonable and supported as many of Golden Bird’s alleged exports were apparently controlled by PRC entities.  Golden Bird could have rebutted these allegations, however it provided no substantive comments. Furthermore, Commerce’s protection of the identity of the declarant regarding Golden Bird’s activities was reasonable, and did not infringe Golden Bird’s right to due process.  For these reasons, the Court sustained Commerce’s decision not to provide Golden Bird a separate rate.

 

Determination Regarding Rebate Payment Adjustments Sustained

In Tension Steel Industries Co. Ltd. v. United States Slip Op. 17-84, Court No. 14-00218, (July 12, 2017), the Court reviewed Commerce’s determinations on remand.  In Commerce’s initial decision, the agency rejected adjustments for rebate payments made by Tension Steel. Final Decision regarding Certain Oil Country Tubular Goods from Taiwan, 79 Fed. Reg. 41,979 (Dep’t of Commerce July 18, 2014) (final LTFV determ.) Plaintiff challenged Commerce’s decision, and argued that Commerce’s practice regarding the rejection of rebates when Commerce is not satisfied that customers were aware of the terms and conditions of the rebate at the time of the sale violated Papierfabrik August Koehler AG v. United States, 38 CIT ___, 971 F. Supp. 2d 1246 (2014) (“Papierfabrik”), which held that Commerce’s practice contravened the plain language of Commerce’s regulations. The Court agreed and remanded to Commerce to fix any errors. On remand, Commerce fixed all errors in accordance with the Court ruling. However, petitioner Maverick, challenged the remand determinations arguing that the case law that the Court applied was an outlier. For the following reasons, the Court upheld Commerce’s determination on remand.

Petitioner argued that Commerce maintains broad discretion to reject any claimed price adjustments that are intended to evade or circumvent the antidumping duty law. The Court said the precedent that Maverick cited does not apply because the administrative record did not demonstrate “that any of Tension’s claimed rebates are either illusory or pose the risk of manipulation.” Slip Op., at 7.  “Maverick’s preferred arguments regarding Commerce’s practice of rejecting certain claimed rebate adjustments under the prior version of the applicable regulations were considered and rejected.” Id. at 7.  Petitioner also claimed that Commerce failed to adequately explain its determinations. The Court concluded that Maverick’s argument lacked merit, because the Court had provided the reasoning for the adjustments and ordered Commerce to make the necessary rebate adjustments pursuant to Papierfabrik.

 

Trade Updates for Week of July 12, 2017

United States Court of International Trade

 

Clarification Provided in Remand Issues for Multilayered Wood Flooring Case

In Fine Furniture (Shanghai) Limited, et al. v. United States, et al., Court No 14-135, Slip Op. 17-80, defendant United States moved for clarification of an aspect of the court’s previous opinion and order, Fine Furniture (Shanghai) Ltd. v. United States, 40 CIT __, 182 F. Supp. 3d 1350 (2016) (“Fine Furniture”). Def.’s Partial Consent Mot. for Clarification or, in the Alternative, Mot. for Voluntary Remand 1 (Nov. 18, 2016), ECF No. 327 (“Mot. for Clarification”).  Specifically, defendant would like a clarification in regards to what should be reconsidered in the determination of the normal value of Fine Furniture’s merchandise and Commerce’s choice of financial statements of companies in the chosen surrogate country, Philippines, for calculating surrogate values for Fine Furniture’s factory overhead expenses, selling, general administrative and interest expenses and for Fine Furniture’s profit.    According to the Court, “the record contains financial statements of four Philippine plywood manufacturers: Tagum PPMC Wood Veneer, Inc. (“Tagum”), Richmond Plywood Corporation (“RPC”), Philippine Softwoods Products, Inc. (“PSP”), and Mount Banahaw Industries, Inc. (“Mount Banahaw”), that Commerce considered to satisfy its criteria for use in calculating financial ratios because they “were specific to the product in question, contemporaneous with the period of review, complete, accurate, and otherwise reliable.”” Slip Op. pg. 5. However, Fine Furniture argued that RPC is not an integrated producer of the subject merchandise, i.e., multilayered wood flooring, and also challenged Commerce’s finding that Mount Banahaw was not an integrated producer. Fine Furniture also argued that Commerce erred in rejecting other financial statements for the other Philippine companies.

Defendant, in the clarification motion asks whether the remand was limited to the issue of Mount Banahaw’s status as an integrated producer, or whether the Commerce should reconsider its selection of surrogate financial statements as a whole.   The Court ordered that Commerce reconsider its selection of surrogate financial statements of RPC and Tagum and did not limit the remand to the status of Mount Banahaw as an integrated producer. Moreover, no voluntary remand was necessary for Commerce to reconsider Fine Furniture’s argument regarding the accuracy and completeness of the RPC statement.

 

Remand Issued in Light of Mid Continent Decision

In Beijing Tianhai Industry Co., Ltd., v. United States, and Norris Cylinder Company, Slip Op. 17-79, Court No. 12-00203 (July 5, 2017) the Court examined the second remand results of the Court’s order in the case and decided a Rule 54(b) motion seeking to revise the Courts previous decision in light of a new decision from the Court of Appeals of the Federal Circuit (CAFC). In May of 2012, Commerce found that Beijing Tianhai Industry, Co., Ltd. (“BTIC”) has engaged in targeted dumping in 10 transactions and used an “average to transaction” (A-T) method with zeroing applied to all of BTIC’s US sales to calculate a dumping rate. High Pressure Steel Cylinders from PRC, 77 Fed. Reg. 37,377 (Dep’t Commerce June 21, 2012) (antidumping order). Plaintiff filed this case to argue that Commerce should only have applied the A-T method to the 10 transactions identified. Commerce’s practice of applying A-T method was limited by 19 C.F.R. § 1677(d)(1)(B), which states “the secretary will minimally limit the application of the A-T method to those sales that constitute target dumping.” Beijing Tianhai Industry Co., Ltd. at 3.  In 2008, Commerce attempted to withdraw the regulation, which was the subject of litigation. In 2013, the Court held in a separate case, that Commerce’s withdrawal of the regulation violated the APA. Based on the decision, this Court ruled that Commerce’s error in procedure was harmless for the plaintiff, and Commerce was not bound by the decision in this case.

In 2017, the CAFC held that the regulation was in place during the time period of this suit. Mid Continent Nail Corp. v. United States, 846 F.3d 1364 (Fed. Cir. 2017). The CAFC in Mid Continent determined that Commerce’s failure to comply with notice-and-comment rulemaking invalidated the withdrawal of the Limiting Regulation under the APA and that this failure to comply was not excusable as harmless error. See Mid Continent, 846 F.3d at 1386 (“Commerce failed to comply with notice-and-comment rulemaking under the APA by repealing the Limiting Regulation in [the] Withdrawal Notice, [and] that its failure cannot be excused for good cause or harmless error . . . .”). Plaintiff argued that the interlocutory case should be binding on this case. Defendant argued plaintiff waived the right to use the cases because the issues were not raised in the plaintiff’s initial briefs. For the following reasons, the Court agreed with the plaintiff and remands the case to Commerce to reconsider using the interlocutory case.

“Generally… when a court decides upon a rule of law. That decision should continue to govern the same issues in subsequent stages in the same litigation.” Beijing Tianhai Industry Co., Ltd. at 15.  However, the Court points out there are exceptions to this rule. A Court is not precluded “from revisiting an issue on which it has ruled in an earlier stage … where controlling authority has since made a contrary decision.” Id. at 15. The Court stated that in light of Mid-Continent, the previous ruling on the harmless error can no longer hold, and that the new decision should be the controlling authority. The Court then discusses if the plaintiffs waived their argument about the interlocutory decision by not raising them in the initial briefs. The Court says “the doctrine of waiver is a prudential rule and considerations of litigation fairness and procedure may guide.” Id. at 16.  The Court stated that this is not a case of new legal theory, and that the defendant was not deprived of a fair opportunity to respond. The plaintiff raised the substantive issue that the regulation deals with in its first brief, and addressed the cases promptly in its reply briefs. The Court says “there can be no serious dispute that all parties have had an opportunity to be heard on the 2008 withdrawal,” therefore the issue has not been waived. Id. at 17. The Court ordered a remand back to Commerce to consider the case in light of Mid Continent.

 

Decision Remanded in Part Frozen Fish Case

In An Giang Fisheries Import and Export Joint Stock Co. et al., and Vietnam Association of Seafood Exporters and Producers et al., v. United States and Catfish Farmers of America et al., Slip Op. 17-82, Court No. 14-00109 (July 10, 2017), the Court examined Commerce’s determination from a previous remand. The Court had previously remanded Commerce’s Final Results in the ninth antidumping review of frozen fish fillets from the Socialist Republic of Vietnam (Vietnam) for further explanation or reconsideration for the use of Indian HTS data as a surrogate value for plaintiff’s rice husk, the use of constructive value as opposed to surrogate value for plaintiff’s fish oil, and the recalculation of plaintiff’s margins. On remand, Commerce decided that it had not used the best available information to calculate the rice husk surrogate value and adjusted anti-dumping duties. Commerce also decided that the use of constructed value for the fish oil was proper. For the following reasons, the Court sustained Commerce’s decision on the surrogate value of rice husk, and the recalculated margins, but remanded for further explanation Commerce’s use of constructed value as opposed to surrogate value for fish oil.

In the ninth annual review, Commerce used Indonesian import data under HTS 1213.00 for rice husk as a surrogate value for the NME of Vietnam. Surrogate values must be the best available information available, and cannot be aberrational. The Court felt that Commerce needed to further explain detracting evidence about the Indonesian HTS data. On remand, Commerce decided that the import data was not the best available and decided to use Indonesian ICBS data instead, calling it the best available information. Commerce adjusted dumping margins accordingly. Further, Commerce determined that it should recalculate respondent Vinh Hoan Corporation’s margins using a net weight denominator. Commerce concluded it should use a net weight denominator because, although Vinh Hoan reported its U.S. sales database on a mixture of a net weight and gross weight basis, most of Vinh Hoan’s sales were reported on a net weight basis. No party contested these actions and the Court sustained them.

The next issue was Commerce’s use of constructed value in determining the price of fish oil used by the plaintiff. There was a preference for the use of surrogate values in calculating dumping margins from NME. However, if all data is aberrational Commerce must explain why it chose to use constructed value. The Court stated that the Commerce has not adequately explained why it chose to use constructed value over surrogate values. The Court remanded to Commerce for further explanation or reconsideration of the constructed value.    

 

Importer's Ruling Challenge Up in Smoke for Lack of Jurisdiction

An importer seeking pre-importation judicial review of a Customs ruling excluding a cannabis-vaporizing “CannaCloud” device from entry into the United States was turned away from the Court of International Trade for failing to show that it would be “irreparably harmed” if forced to exhaust post-importation protest remedies, according to a recent decision from Judge Mark Barnett.

In CannaKorp, Inc.. v United States, Slip Op. 17-83 (July 11, 2017) the importer, a start-up company, sought a ruling from Customs that the CannaCloud could be imported into certain states which had legalized marijuana, without being subject to restrictions under the Controlled Substances Act. Customs ruled that the goods were prohibited entry as drug paraphernalia under the Act and would be turned away at the border. The importer asked the CIT to conduct pre-importation review of the ruling, to determine whether it was arbitrary, capricious, an abuse of discretion or not otherwise in accordance with law.  

The CIT’s governing jurisdictional statute, 19 U.S.C. §1581(h), allows pre-importation review of rulings only if the plaintiff can show that it would be “irreparably harmed” if forced to follow normal post-importation protest procedures. Surprisingly, CannaKorp’s challenge foundered because the affidavits and other information it provided were conflicting and contradictory on the question of whether the company would suffer irreparable harm, and what kind of harm would have been suffered. The company gave conflicting stories about whether it would run out of operating capital, and whether it had obtained new sources of funding; whether its foreign manufacturer would declare it to be in default of contracts, and would break down production equipment; and how the financial health of the company was affected by the ruling. CannaKorp was offered an evidentiary hearing on these issues, but declined.  A frustrated court held that CannaKorp had not shown irreparable harm by clear and convincing evidence, and dismissed the case for lack of jurisdiction.

One thing the plaintiff did not argue was that it might have faced irreparable harm if forced to exercise post-importation remedies because the importation of the CannaCloud might have subjected it to criminal prosecution. This argument, if made, might have carried the day for the plaintiff. [Ask Tommy Chong].

Trade Updates for Week of July 5, 2017

United States Court of International Trade

  

Labor FOP was Reconsidered on Remand

In Ad Hoc Shrimp Trade Action Committee v. United States, Slip. Op. 17-76, Court No. 15-00279 (June 29, 2017), the Court reviewed Commerce’s determinations on remand filed pursuant to Ad Hoc Shrimp Trade Action Committee v. United States, 41 CIT__, 219  F. Supp. 3d 1286 (2017) (Ad Hoc Shrimp 1). In the case, plaintiffs challenged Commerce’s use of Bangladeshi labor values as a surrogate value in calculating antidumping margins on frozen shrimp from Vietnam.  Plaintiff presented evidence of systematic labor abuse in the Bangladeshi shrimp industry to the Court. The Court remanded the decision to Commerce for an explanation as to whether the Bangladeshi data was still the best available.  On remand, Commerce decided “the Bangladeshi wage rate data does not constitute the best available information for valuing the labor factor” and opted to use Indian labor statistics instead. Id. at 4. The Court upheld Commerce’s decision on remand for the following reasons. 

“To determine normal value for subject merchandise exported from a nonmarket economy country, Commerce uses surrogate values for the factors of production.” Id. at 5.  However, “Commerce has acknowledged that aberrational values should not be used to value FOPs.” Id. at 7.  Where aberrational values are found Commerce must justify the data as the best available, or decide the data is unreliable and use data from another surrogate country.  In the original case the court held that Commerce had not addressed “evidence of alleged systemic labor abuses and thus had not reasonably found the Bangladeshi labor data to be the best available information.” Id. at 7.  On remand, Commerce reconsidered if the statistics was aberrational and the best available.  Given the Court’s concerns regarding the Bangladeshi labor abuse, Commerce decided to use wage rate data from another potential surrogate country on the record, and therefore applied Indian labor data as a surrogate. No party challenged Commerce’s remand results and the court sustained the remand.

 

Court Dismissed Case Where 1581(c) Was Not Manifestly Inadequate

In Shandong Dongfang Bayley Wood Co., Ltd. v. United States, Slip Op. 17-77, Court No. 17-00094 (July 3, 2017), plaintiff sought “declaratory and equitable relief following the publication of the preliminary results of a countervailing duty investigation.” Id. at 1. Bayley was assigned a 111.09% subsidy rate during a preliminary investigation. Certain Hardwood Plywood Product’s From the People’s Republic of China: Preliminary Affirmative Countervailing Duty Determination, Preliminary Affirmative Critical Circumstances Determination, in Part, and Alignment of Final Determination with Final Antidumping Investigation, 82 Fed. Reg. 19,022 (Int’l Trade Admin. Apr. 25, 2017).   Bayley sought to compel Commerce to consider a questionnaire submitted by Bayley, conduct verification, and assign Bayley a lower cash deposit rate. Bayley argued that they could lose millions of dollars as a result of the preliminary investigation. Commerce did not assign this rate based on review of subsidies provided to Bayley, but from authority under section 776 of the Tariff Act for when a party does not cooperate. The Court found that Bayley withheld necessary information that Commerce requested, and had failed to follow deadlines which impeded the agency proceeding under review.  For the following reasons, the court dismissed the action for lack of subject matter jurisdiction.

“In section 516A of the Tariff Act, Congress specifically has provided for the judicial review of the U.S. Court of International Trade of certain determinations issued under the antidumping and countervailing duty laws.” Id. at 4. Only, a final affirmative countervailing duty determination is expressly authorized for judicial review. However, the determination at issue in this case is a preliminary affirmative determination, which is not reviewable under 516A and 28 U.S.C. §1581(c). Bayley also asserted the court’s residual jurisdiction, 28 U.S.C. S 1581(i). “Resort to this jurisdictional provision is available only if the remedy potentially available in an action bought under 28 U.S.C. §1581 (c) would be manifestly inadequate.” Id. at 5. Under this provision, Bayley bore the burden of proving “the manifest inadequacy of its remedy.”  Id at 5.  Bayley alleged that they are “missing out on millions of dollars.” Id. at 6. However, the Court determined that this claim was not backed up by any factual allegations in the complaint. The Court stated, “Bayley has alleged no facts from which the court may conclude that the remedy available upon its contesting a final affirmative CVD determination … is manifestly inadequate.” Id at 5, and thus, the Court dismissed the case.

 

 

United States Court of Appeals for the Federal Circuit

Lower Court Decision on Offset Affirmed

In Maverick Tube Corporation et al. v. United States, Court No. 2016-2330 (July 3, 2017), appellants, Toscelik Profil ve Sac Endüstrisi A.S., and Çayirova Boru Sanayi ve Ticaret A.S. (collectively, “Çayirova”), appealed from the final judgment of the United States Court of International Trade (“Trade Court”) sustaining Commerce’s decision that Çayirova is not entitled to a duty drawback adjustment for its exports of oil country tubular goods.   Çayirova argued that because it received the duty drawbacks on its non-J55 coils solely “by reason of the exportation of the [oil country tubular goods] to the United States,” 19 U.S.C. § 1677a(c)(1)(B), Commerce should have offset Çayirova’s export price by the duty drawback. Commerce, however, determined that Çayirova was not entitled to a duty drawback adjustment because none of the goods for which duties were exempted, i.e., the non-J55 coils, were capable of being used to produce Çayirova’s oil country tubular goods. Here, Appellant Çayirova produces various types of steel pipes from different grades of hot-rolled steel coils. However, the particular pipes at issue here, oil country tubular goods, may only be produced from a grade of coil known as J55. Thus, offset may not be given to for duty drawback on nonJ55 coils, where it sourced it domestically from a Turkish producer.

Because the statute does not address the issue of whether offset should only be allowed on inputs of the subject merchandise, the court affirmed Commerce’s and the lower court’s reasoning.  Moreover, “allowing for duty drawbacks for goods unrelated to the subject merchandise contravenes the statutory goal of making apples-to-apples comparisons between foreign and United States prices.”  See Slip Op. pg.  9.

 

Trade Updates for Week of June 28, 2017

United States Court of International Trade

 

Commerce’s Decision on Certain Steel Nails Remanded

In Itochu Buildings Co., Inc. et al. v. United States,  Court No. 12-65, Slip Op 17-73 (June 22, 2017), the Court reviewed the U.S. Department of Commerce (“Commerce”)’s final results of the second administrative review of the antidumping (“AD”) duty order on certain steel nails from the People’s Republic of China (“PRC”). Certain Steel Nails from the People’s Republic of China: Final Results and Final Partial Rescission of the Second Antidumping Duty Administrative Review, 77 Fed. Reg. 12,556, 12,556 (Dep’t Commerce Mar. 1, 2012) (“Final Results”).  Before the Court were motions for judgment on the agency record by several plaintiffs, including Tianjin Jinchi Metal Products Co., Ltd. (“Jinchi”), Tianjin Jinghai

County Hongli Industry & Business Co. (“Hongli”), consolidated plaintiffs The Stanley Works (Langfang) Fastening Systems Co., Ltd. (“Stanley Langfang”) and Stanley Black & Decker, Inc. (collectively, “Stanley”), and another set of consolidated plaintiffs which included Itochu Buildings Co., Inc. (collectively, “Itochu”).

While the Court found the limitation of review to three respondents reasonable, the Court did question the withdrawal of numerous respondents due to possible settlements with the petitioners. About 160 respondents withdrew their requests for reviews from the initial 222 respondents who had requested reviews. The Court is concerned with funds diverted to petitioners or domestic competitors as settlement payments, instead of such funds eventually paid as antidumping duties to the government.  The Court would like more transparency into the reasons for withdrawal, and the Court would like to determine if the integrity of the proceeding is being maintained. Thus, the Court remanded Commerce’s decision for responses to the Court’s inquiries.

Itochu opposed Commerce’s selection of GTA India import data, i.e., a surrogate value of $1.68 per kilogram, to value cut steel plate, arguing that Commerce should have relied on a combination of Steelworld India data and Joint Plant Committee (“JPC”) India data, both domestic sources. The court remanded the selection of GTA India import data because it rejected outright other surrogate data sources without explaining why.  For example, the other data appears to be relevant where they fall within the narrow range of $0.68 to $0.78 per kilogram, and therefore, corroborate the Steelworld India value of $0.68 per kilogram and the JPC India value of $0.78 per kilogram. It further calls into question the GTA Import value data at $1.68 per kilogram, which is considerably more than the data range mentioned.  Moreover, Commerce failed to address evidence that price does not correlate to plate thickness, which was Commerce’s reason for rejecting JPC and Steelworld data as not sufficiently specific.   Therefore, the Court remanded for Commerce to consider whether the other data sources render the GTA India import data unreliable, and to provide evidence that supports the decision to disregard surrogate data for varying thickness of steel plate.

Furthermore, Stanley and Itochu challenged Commerce’s reliance on Sundram’s financial statements when calculating surrogate financial ratios. The Court granted Commerce’s request for remand where it incorrectly concluded that the EU never reviewed Section 35(2AB) of the Income Tax Act, and therefore did not consider an EU decision, which found aforementioned section countervailable.

Finally, the Court affirmed Commerce’s selection of neutral facts available for both Jinchi and Stanley in regards to unaffiliated tollers for the tolled intermediate inputs.  Commerce acted within its discretion by refusing to apply facts available to Hongli because it provided all relevant FOP data.  Commerce erred though in applying an adverse inference to Jinchi for missing data of its unaffiliated supplier and asked for a remand to reconsider AFA to Jinchi, where it did not conduct a case-specific analysis to determine whether it was appropriate to apply AFA to Jinchi for its supplier’s failure to cooperate.

For all these reasons, Commerce's final determination was remanded.

 

 

Case Dismissed Where No Relief Available

 

            In GEO Specialty Chemicals, Inc. v. United States, Slip Op. 17-74, Court No. 16-00247 (June 27, 2017), plaintiff sought to challenge the final results of an antidumping administrative review regarding glycine from China. Glycine from the People’s Republic of China: Final Results of Antidumping Duty Administrative Review; 2014– 2015, 81 Fed. Reg. 72,567 (Dep’t Commerce Oct. 20, 2016) (“Final Results”). Plaintiff was concerned with imports of Indian origin, which plaintiff believed to be from China. As a result of which, they should have been covered by the antidumping duty order. GEO argued that evidence of fraud was not properly considered in the review. The entries were liquidated without any antidumping duties collected. The government motioned to dismiss the action for lack of jurisdiction. The government believed that there is no relief the Court could order, where all the entries had been liquidated. For the following reasons the Court agreed with the government and dismissed the case.

 

Pursuant to Zenith Radio Corporation v. United States, 710 F.2d 806, 810 (Fed. Cir. 1983),  “it appears well settled that liquidation of entries moots an action challenging the final results of a periodic administrative review,” with two inapplicable exceptions. Id. at 2. The Court could not distinguish this case from Court precedent, and found that a case challenging the final results of a review under 28 U.S.C. § 1581(c) may not go forward after the entries liquidated. The Court found that there was no remedy available under 28 U.S.C. § 1581(c) jurisdiction.  However, “other potential avenues of relief may be available to domestic competitor(s)” like GEO.  Id. at 4. GEO may try to urge Customs and Border Protection (CBP) to recover duties under 19 U.S.C. § 1592(d) or collect penalties under 19 U.S.C. § 1592 (a)-(c).  GEO may also use new legislation to seek a decision from the Commissioner of CBP with respect to evasion of unfair trade duties.  The Court dismissed the case, as there was no available remedy under section 1581(c).

 

Trade Updates for Week of June 21, 2017

 

United States Court of International Trade

 

EAJA Fees Award in Trade Adjustment Assistance Case

In Former Employee of Marlin Firearms Co. v. United States Secretary of Labor Slip Op. 17-72, Court No. 11-00060, plaintiff sought to recover legal fees, under the Equal Access to Justice Act (EAJA), for the administrative review and litigation over Trade Adjustment Assistance (TAA) provided to employees of Marlin, a sporting rifle manufacturer in Connecticut. Marlin was bought by Remington, another gun manufacturer, and Marlin’s plant was shut down. On the behalf of Marlin’s employees, the Connecticut State Department petitioned the U.S. Department of Labor (Labor) for TAA available to workers who lost their jobs because of trade competition.  In Labor’s initial review they found that assistance could not be given to Marlin’s employees because imports have not affected the plant. This case was then initiated. Before Labor filed an answer, both parties agreed to file for a voluntary remand. Both parties agreed that Labor was to conduct a more intense investigation.  On remand, Labor found Marlin’s employees eligible for TAA benefits. Plaintiff then submitted application for attorney fees under the EAJA.  Labor responded that the application was improper and that fees should not be awarded. 

The Court identified three factors that are needed to recover attorney fees under the EAJA. The factors included the following: the application must be filed on time, the party seeking recovery must be the prevailing party, and the fees must be reasonable. The first issue, the court dealt with was defendant’s argument that the application was filed prematurely. The EAJA requires that “a party seeking an award of fees and other expenses submit its application within thirty days of final judgement.” Id. at 5.  Marlin’s employee’s application was filed prior to a final judgment by the court, and this was why Labor argued that it was filed prematurely.  The court looked at the legislative history and case law regarding the statute and found “this language as creating only a final deadline to submit applications.” Id. at 6. Thus, the Court found that plaintiff’s application was not filed prematurely.

The next issue was whether the plaintiff was the prevailing party in the case. The general rule is that a party only prevails when a court order is sufficient to change the relationship between the parties. In the context of administrative remands, when a plaintiff succeeds on remand because of an agency error the plaintiff qualifies as a prevailing party if the court retains jurisdiction and the agency admits the error.  In this case, the Court maintained jurisdiction over the case, even when on remand to the agency. In addition, in its voluntary consent to the remand, Labor stated that “existing surveys may be insufficient.” Id. at 9.  Although, Labor does not explicitly admit an error, the court sees this as evidence of admitting one. The Court was unable to differentiate this scenario from previous case law and found that the plaintiff was the prevailing party.

The final issue was whether the plaintiff’s requested $40,792.35 for 283 hours of work in the application was reasonable. The EAJA allows collection only of reasonable attorney fees and “hours that are excessive redundant or otherwise unnecessary should be excluded.” Id. at 11. The court says that any hours that “were not contemporaneously billed cannot be recovered.” Id. at 12. The court also stated that the twenty-five page brief for which over 100 hours were charged, appeared unreasonable. The court reduced the award by taking out any fees it finds unreasonable. The court let the plaintiff recover around $16,000 for 113 total hours of work. 

 

Trade Updates for Week of June 14, 2017

United States Court of International Trade

 

Decision Remanded Back to Commerce

 In Mitsubishi Polyester Film, Inc. v. United States, Court No. 13-62, Slip Op. 17-70 (June 8, 2017), the court considered whether the subject merchandise was within scope of the “Antidumping Duty Order on PET Film, Sheet, and Strip from Brazil: Final Scope Ruling, Terphane, Inc. and Terphane Ltda.” (Jan. 7, 2013), PD 35 (“Terphane Scope Ruling” or “Scope Ruling”).  Specifically, the court considered whether a particular set of PET products manufactured abroad by Terphane, Ltda. and imported by Terphane Inc. (collectively “Terphane”), falls within the scope of a duly issued antidumping duty order on imports of certain PET products. The basic issue was whether the Department of Commerce’s (“Commerce”) determination that Terphane’s products were not within the scope of the Terphane Scope Ruling was supported by substantial evidence and in accordance with law.  Commerce held that Terphane’s products are not within scope because they “have a performance-enhancing resinous layer that exceeds the thickness requirement listed in the scope exclusion,” which is known as COEX.  Slip Op. at pg. 9 . 

While Commerce acted reasonably in finding the scope language to be ambiguous, the court held that substantial evidence did not support its analysis under 19 CFR 351.225(k)(1).  The court held that Commerce did not discuss descriptions in the individual investigation or in the petitions. “Commerce nowhere justified its avoidance of the Petition and original investigation under its (k)(1) analysis, despite that they contain “descriptions of the merchandise” that Commerce is obligated to analyze thereunder.”  Slip Op. pg. 28. The original investigation and petition is where Mitsubishi expressed its intent for the scope.    Commerce must also clarify what “equivalent PET films” – whether they refer solely to those films excluded under the second sentence exclusion, or one that is a term of art in the industry.  For these reasons, the case was remanded back to Commerce.  Finally, the court determined that the remand moots any issue regarding the invalidation by delay.

 

Remand Decision Remanded Again to Commerce  

In Tri Union Frozen Products, Inc. et al. v. United States, Court No. 14-249, Slip Op. 17-71 (June 13, 2017), the court reviewed the U.S. Department of Commerce’s (“Commerce” or “the Department”) remand determination filed pursuant to the court’s order in Tri Union Frozen Products, Inc. v. United States, 40 CIT __, 163 F. Supp. 3d 1255 (2016) (“Tri Union I”). See Final Results of Redetermination Pursuant to Court Remand, Sept. 1, 2016, ECF No. 118-1 (“Remand Results”).

On remand, Commerce continued to use Bangladesh Bureau of Statistics (BBS) data to value the labor factor of production (“FOP”) in this review despite the Ad Hoc Shrimp Trade Action Committee’s (“Ad Hoc Shrimp”) arguments that the Bangladeshi wage rate data is aberrational and unreliable due to systemic labor abuses in the Bangladeshi shrimp industry.  The court remanded again to Commerce for further consideration of Ad Hoc Shrimp’s argument that record evidence of alleged labor abuses in the Bangladeshi shrimp industry renders the BBS data aberrational, unreliable, and not reflective of actual labor conditions in a market economy at comparable economic development to the Socialist Republic of Vietnam. While Commerce presumes the BBS data is reliable despite the evidence of systemic labor abuse, according to the court, such a presumption is not reasonable. The systemic labor abuses cited in the record by the Plaintiff at the very least, involve workers either not being paid for all of their labor.  Thus, if workers are being underpaid for their labor, as a result of forced or child labor practices, not compensated or not fully compensated for their work, then one cannot presume that the reported wage data represents either the actual labor costs in Bangladesh or the labor costs in a hypothetical market economy which is economically comparable to Vietnam. Because this information is unreliable, and does not fully reflect compensation of the shrimp industry, then it should not be applied.  Commerce on the second remand must address the use of BBS data or it must address the widespread abuses of the Bangladeshi shrimp industry.

 

Court Sustained Commerce’s Findings in Garlic Case

In Jinan Farmlady Trading Co. Ltd. v. United States v. Christopher Rand LLC, The Garlic Company, Valley Garlic, Vesey and Company Inc., and Fresh Garlic Producers Association Slip Op. 17-69, Court No. 12-00181, plaintiff challenged Commerce’s 16th administrative review of an antidumping order involving garlic. Farmlady objected to Commerce’s exclusion of non-market economy imports from the surrogate data used to calculate dumping margins. Farmlady also claimed that Commerce failed to exclude aberrational imports from the surrogate data leading to unfair margins. In addition, Farmlady challenged Commerce’s policy of issuing liquidation instructions to Customs and Border Patrol (CBP) 15 days after publication of the final result in an administrative review. For the following reasons the Court sustained Commerce’s administrative review and the surrogate data, but found the “15 day policy” unlawful.

Farmlady argued that Commerce was required to use all import data from a surrogate country, and cannot exclude import data from a non-market economy in using a surrogate to calculate dumping margins. Farmlady also argued that the surrogate data Commerce did use was aberrational, which led to an unfair distortion in the surrogate values.   19 U.S.C. § 1677 requires Commerce to use the “best available information regarding the values of such factors from an appropriate surrogate market.” Id. at 5-6.  The court stated that Commerce has “broad discretion to determine what constitutes such information.” Id. at 5. The courts stated “it is reasonable for Commerce to infer that data on imports from an NME country are inferior to import data for goods from a market economy.” Id. at 6.  In regards to plaintiff’s claims Commerce used aberrational data in making its surrogate calculations, the court said no evidence was provided. The court stated “because an average is calculated from higher and lower values within a range, it cannot be the case that a value it aberrant because it is lower than average.” Id. at 7. The court sustained all aspects of Commerce’s 16th annual review.

Farmlady also challenged Commerce’s “15 day policy” for notifying CBP of assessment instructions based on the review. 19 U.S.C § 1516 provides interested parties a 30-day period to commence civil action regarding the results of an administrative review. The Court says that “the 15 day policy causes recurring injury in fact by repeatedly forcing plaintiffs to file summons, complaint, and motion for preliminary injunctions within fifteen days of the publication of the final results.”  Id. at 10. The court ruled that the 15 day policy was not reasonable in light of the 30 days that parties are allowed to prepare litigation in statute.  

 

United States Court of Appeals for the Federal Circuit

Reversed ITC Decision Regarding Infringement of Sonar Patents

In Garmin International, Inc., Garmin USA, Inc., and Garmin Corporation, v. United States, Court No. 2016-1572 (June 13, 2017), appellants Garmin International, Inc., Garmin USA, Inc., and Garmin Corporation, collectively “Garmin”,  appealed from a Final Determination of the United States International Trade Commission that resulted in an exclusionary order.  The order prohibited the importation of certain solar imaging devices, which infringed U.S. Patent Nos. 8,305,840 and 8,605,550.  The Final Determination also found Patent No. 8,300,499 to be invalid, and thus, the Federal Circuit made a finding of noninfringement. However, because the Commission’s findings of validity and infringement of ‘840 and ‘550 patents were not supported by substantial evidence, the Federal Circuit reversed the Final Determination in part.

The ‘840 patent is a “Downscan imaging sonar” which discloses a sonar imaging device for generating images of objects beneath a water craft.  A linear transducer (“downscan tranducer”) directed downward prvides images of the water column and bottom features directly below the vessel, while transducers pointed toward the sides (“sidescan transducers”) are used to map the sea floor on the sides of the vessel.  Conventional circular transducer with conical beams are als o used under this patent, but provide poor quality images for sonar data.  The ‘550 patent which is also entitled a “Downscan imaging sonar” contains the same specification as the ’840 patent, however it has three transducers two of which are linear sidescan transducers and one of which is a linear transducer.  The two linear sidescan transducers are angled 30 degrees from the horizontal axis, and the downward transducer is directed 90 degrees south of the horizontal axis. 

The Commission had found some of the claims of the ‘550 patent to be invalid based on two references.  The first is a 1960 article by Tucker which is a “Narrow-beam echo ranger for fishery and geological investigations,” and the second is U.S. Patent No. 7,652,942 established by Betts entitled, “Sonar Imaging system for mounting to watercraft.” On appeal, appellants argue that the prior art invalidates patents ‘840 and ‘550 by disclosing a “sonar signal processor” limitation of certain independent claims on both patents.  Garmin argued that Tucker prior art describes a sonar signal processor which has a “receiver” for receiving bounce-back sonar echo and “the recorder” for processing the data received and displaying the information on a chart or cathode ray tube.  While the Commission argued on appeal that Tucker does not disclose receiving input from a transducer, the Federal Circuit found that Tucker shows how the receiver is connected to the transducer. Likewise, the Betts art also discloses a sonar signal processor. Thus, the Federal Circuit reversed the Commission’s findings that all asserted claims of ’550 and ‘840 are valid.

 

Federal Circuit Affirms Commission’s Findings

In Navico, Inc. and Navico Holdings AS v. United States, Court No. 2016-5033 (June 13, 2017),  a similar case to the above Garmin decision, appellants appeal from the Final Determination of the Commission where the Commission did not find infringement of certain claims  because of obviousness.  The Commission found claims 1, 7, 12, 13, and 57 of the ’550 patent obvious. These claims were directed to three linear transducer elements, two of which scan to the sides and one of which scans downwards. The Commission, reversing the Initial Determination, found these claims obvious based on a combination of the Betts and Tucker references.  The Federal Circuit agreed with the Commission’s findings and affirmed.

 

Trade Updates for Week of June 7, 2017

United States Court of International Trade

 

Decision Remanded Back to Commerce

In Itochu Building Products Co., Inc. et al. v. United States, Court No. 13-132, Slip Op. 17-66 (June 5, 2017), the Court reviewed the surrogate value date for steel wire rod, an input of steel nails, and the choice of financial statements.  This action challenged the U.S. Department of Commerce (“Commerce”)’s final results rendered in an administrative review of the antidumping (“AD”) duty order on certain steel nails from the People’s Republic of China (“PRC”), covering the period of August 1, 2010, through July 31, 2011. See Certain Steel Nails from the People’s Republic of China: Final Results of Third Antidumping Duty Administrative Review; 2010– 2011, 78 Fed. Reg. 16,651, 16,651 (Dep’t Commerce Mar. 18, 2013) (“Final Results”); see also Certain Steel Nails from the People’s Republic of China: Issues and Decision Mem. for the Final Results of the Third Antidumping Duty Admin. Review at 1, PD 359 (Mar. 5, 2013) (“I&D Memo”).

For purposes of constructing a surrogate value, Commerce relies on data from a market economy or economies to provide surrogate values for the various factors of productions (“FOPs”) used to manufacture the subject merchandise.  Commerce uses financial statements from producers of identical or comparable merchandise to yield surrogate financial ratios to calculate “general expenses and profit” for inclusion in normal value.  Here, while there were three data sources on record for calculating the surrogate value of steel wire rod – (1) Thai Global Trade Atlas (“GTA”) import data; (2) Ukrainian GTA import data; and (3) Ukrainian Metal Expert data – Commerce chose the GTA import data, because it was “comparably specific” to Metal Expert data. The court found that there was no substantial evidence to support the selection where the Metal Expert data and the GTA import data provided prices for rods with different diameters.  The GTA data provided prices for wire rods with a diameter of 14 mm and under; and the Metal Expert data reported prices for wire rods with a diameter of 6.5 mm to 8 mm.  Commerce’s only reasoning was that mandatory respondents’ diameter of 6.5 mm is “covered within” the GTA import data.  Moreover, Commerce does not state that carbon content was important than wire rod diameter to decide against the Metal Expert data. 

As for Commerce’s decision not to use the Ukrainian company Dneprometiz’s financial statements in the financial ratio calculations, because those statements were not public, the court found substantial evidence for such a decision.

However, what must be determined first is which data set for steel rod is superior, before determining what financial statements to use.   Commerce also may mix data sets from different countries if the Ukraine steel wire data is superior.  For these reasons, the court remanded to Commerce the choice of which data set to use in determining surrogate value and what financial statements to apply for the financial ratio calculations.

 

Sustained Remand Results

In Zhejian Native Produce & Animal By-Product Import & Export Group Corp. v United States and The American Honey Producers Association and the Sioux Honey Association Slip Op. 17-65, Court No. 04-00268 (June 1, 2017), Plaintiff challenged Commerce’s redetermination of an administrative review of a dumping order. Specifically, plaintiff challenged Commerce’s determination of the normal value of honey exported to the US. Plaintiff believed that Commerce failed to use the best available information to calculate the value, unreasonably calculated inflation adjustments and unreasonably failed to average two years’ worth of financial documents in calculating dumping margins.  Commerce argued that the remand results are reasonable, supported by the administrative record, and should be sustained.

To calculate the raw value of honey, Commerce used an article from 2000 as opposed to a similar one from 2001. The articles are about the price of honey in India, Commerce’s surrogate country for China. Id. at 10.  Commerce determines normal value for non-market economies by using surrogate values from similar market counties, and companies. Commerce also needs to use the best available information regarding the factors. The Court held that the record was strong enough to uphold Commerce’s decision to use the 2000 Article. The Court ruled this way because they believe the record reflects that Commerce was correct in finding that the 2001 article was unreliable because of unresolved price issues involving other nations. In addition, the 2000 article was the correct choice, because it weighed such information  as public availability, breadth of market, and specificity, and did not have unresolved issues regarding pricing. Id. at 16.

The next issues were Commerce’s inflation calculations and refusal to use the mean of two years’ worth of surrogate financial data.  The plaintiff felt that Commerce’s price calculations were unreasonable and cites a passage in the administrative record stating there is not “any organizations compiling prices” in India. Id. at 16. The article then provides prices from unidentifiable sources. Plaintiff argued that there was not enough public data to calculate surrogate margins and the prices in the letter should be included. Commerce chose to ignore the letter under belief that the record provided enough publicly available data.   The Court pointed out that Commerce’s regulations refer to a “preference to use publically available data”, and that Commerce had reviewed the documents in question. Id. at 18.  The court said that there was enough evidence on the record for Commerce to disregard the letter, as “the information in this document appeared to be prices obtained from sources not publically available.” Commerce should not have to change its methodology to account for nonpublic information in the letter.  The final issue was Commerce’s decisions to rely on 2001-02 financial statements of surrogate companies, as opposed to averaging 2001-02, and 02-03 statements. The Court pointed to the record saying that it is not Commerce’s normal practice rely on financial statements of surrogate companies, and that because more time from the POR was in the first year than the second it could unfairly skew the margins. The court said that this was enough evidence on the record for them to uphold Commerce. 

 

Trade Updates for Week of May 31, 2017

United States Court of International Trade

 

Decision Remanded in Part Back to Commerce

In Jinko Solar Co., Ltd. et al. v. United States, Slip Op. 17-62, Court No. 15-80 (public version published May 26, 2017), the court considered motions for judgment on the agency record arising from the final affirmative determination of the U.S. Department of Commerce (“Commerce”) in its antidumping investigation of certain solar panels from the People’s Republic of China (“PRC” or “China”). See Certain Crystalline Silicon Photovoltaic Products from the [PRC], 79 Fed. Reg. 76,970 (Dep’t Commerce Dec. 23, 2014) (final determination of sales at less than fair value) (“Final Results”). Plaintiffs Jinko Solar Co., Ltd., Jinko Solar Import and Export Co., Ltd., and JinkoSolar (U.S.) Inc. (collectively “Jinko Solar”), mandatory respondents in this investigation, challenge Commerce’s determination to treat Jinko Solar and certain additional companies as a single entity.  The court sustained all decisions except the following:  1) the decision to collapse the ReneSola entities with the Jinko entities and treat these companies as a single entity, and 2) the decision to value respondent Changzhou Trina Solar Energy Co., Ltd.’s solar modules by-products using South African import data within subheading 8548.10, HTS.  These items were remanded back to Commerce.

In regards to the decision to collapse the ReneSola and Jinko entities, there was no substantial evidence to support this decision where there is no overlap in ownership by any individual member or company, no overlap of individuals in management or corporate governance roles, and that the transactions between the companies are not significant enough to create a significant potential for manipulation.  Further, Commerce has not sufficiently explained how the raw material purchases, accounts receivable, and other transactions between the ReneSola entities and the Jinko entities support Commerce’s conclusion that the companies had intertwined operations during the period of investigation.

As for the decision to value Trina Solar Energy’s modules by-products using data in 8548, the court held that Commerce did not address SolarWorld’s arguments. SolarWorld argues that heading 8548, HTS, covering batteries that are produced using different raw materials and a different manufacturing process than solar cells, “has nothing at all to do with photovoltaic products, including scrap solar cells,” whereas subheading 2804.69, HTS, covers products that are specific to scrap solar cells, because it captures polysilicon of less than 99.99 percent purity, which “accounts for the ‘scrap’ nature of the scrap solar cells.” Slip Op. at pg. 31.   Because the value of scrapped solar cells, whose “predominant raw material” is polysilicon of greater than 99.99 percent purity, will differ from the value of scrapped lead-acid or nickel-cadmium batteries, SolarWorld argues that Commerce unreasonably valued scrap solar cells using data for spent batteries, rather than data for scrapped raw polysilicon.

For these reasons, Commerce’s determination was remanded in part.

 

Extended Liquidations were Held to Be Lawful

The issue in International Fidelity Insurance, Co. v. United States, Court No. 12-64, Slip Op. 17-64 (May 30, 2017) was whether Customs unlawfully extended liquidation of entries. Plaintiff served as the surety for the duties owed on entries made by U.S. importer Family Warehouse of poketin bleached woven fabric and poplin unbleached woven fabric. Between July 30, 2007, and January 7, 2008, Family Warehouse imported thirty-three entries of various fabrics through the Port of Laredo, Texas, claiming, on its entry summaries, that the goods qualified for duty-free treatment under NAFTA as “originating goods” from Mexico. Customs may extend the time in which it must liquidate for an additional one-year period if information is needed for the “proper appraisement or classification” of the merchandise. 19 U.S.C. § 1504(b)(1). For extensions to be lawful, Customs must give appropriate notice to both the importer of record and its surety, as well as articulate a statutory reason for the extension.

The court held that the government did not abuse its discretion and provided reasonable bases for the extensions of liquidation.  Namely the court found that Customs’ decision to extend the liquidation period was reasonable so that it could continue its investigation, verify the claims, initiate new verifications where necessary, and await information regarding the importer’s NAFTA claims was lawful. Moreover, the NAFTA regulations do not provide deadlines within which Customs is required to act during verifications.  During the period of the several extensions, Customs provided the requisite notices to the importer and suppliers of the need for more information and for the extensions of liquidation.

 

United States Court of Appeals for the Federal Circuit

 

CIT Decisions Upheld in Countervailing Duty Investigations of Oil Country Tubular Goods from Turkey

The Court of International Trade ruled correctly in applying “adverse facts available” (AFA) to a Turkish producer of oil country tubular goods in a countervailing duty review of Oil Country Tubular Goods from Turkey, and also properly set aside a Commerce Determination that the Turkish market for a given input material was distorted by government involvement, according to a recent determination of the United States Court of Appeals for the Federal Circuit.

In Maverick Tube Corporation v. United States, No 2016-1949 et al (May 30, 2017), the Commerce Department applied an AFA rate to a Turkish producer, Borusan, after that company failed to respond to Commerce’s request to supply purchase information for hot-rolled steel (HTS) used at the company’s facilities. Borusan provided data for only one of its three plants, arguing that this was the only plant which produced Oil Country Tubular Goods, that the task of providing data for this one plant was very difficult, and that Commerce should reconsider the scope of its information request. The CIT upheld the decision to apply an AFA rate to Borusan, and the CAFC affirmed, finding that determination to be supported by substantial evidence.

The CAFC also upheld the CIT’s decision to overturn a Commerce finding that the Turkish market for HRS was distorted, because a government-affiliated plant produced a “substantial” portion of HRS. The court concluded that there was no evidence which would support a finding that the government-affiliated plant produced a majority of Turkish HRS, and that Commerce’s decision not to apply an AFA rate to the Government of Turkey was supported by substantial evidence. It turned away the cross-appeal by domestic producer Maverick Tube Corporation, which argued that the Government of Turkey was being rewarded for having failed to provide Commerce with all information the agency requested.

 

Nails Producer Had Sufficient Notice of Antidumping Review by Virtue of Federal Register Publication

A producer of steel nails from China had adequate notice of a pending antidumping review by virtue of publication in the Federal Register of a Notice of Initiation of the review, even though counsel for the domestic petitioners failed to serve it with notice of its request for review, as required by regulations.

In Suntec Industries Co., Ltd. v. United States, No. 2016-2093, a domestic producer of nails, seeking a Commerce administrative review, failed to serve notice of the request on Suntec. Notice of initiation of the review was published in the Federal Register some weeks later. Suntec, because of an interruption in its relationship with counsel, did not timely appear as a party to the investigation. The company sued to set aside the antidumping determination as applied to it, arguing that there had been a lack of observance of procedures required by law, in violation of the Administrative Procedure Act.

The Federal Circuit first held that the Court of International Trade could hear Suntec’s case under its 28 USC Section 1581(i) “residual” jurisdiction, and that Suntec’s right to review was not limited to 28 USC Section 1581(c) review by participants in an antidumping review. For purposes of analyzing the government’s motion to dismiss, the Court held, it assumed well-pleaded allegations of the complaint to be true. These allegations asserted that Suntec could not have been a participant in the review.

But turning to the merits, the Court held that, while failure to serve notice of the request for review could have resulted in agency action without observance of procedure required by law, the publication in the Federal Register of the Notice of Initiation of Review constituted sufficient notice to Suntec of its opportunity to participate in the review. As a result, the domestic producer’s failure to make service was harmless error.  

 

United States Supreme Court

 

Foreign Sale Exhausts Patent Rights, as Does Domestic Sale

In a decision of major importance to the importing community, the United States Supreme Court has ruled, by a 7-1 margin, that the foreign sale of a patented article exhausts the patent owner’s rights in the article, meaning that the patent cannot be used to block importation of the goods. The Court also rule unanimously, that the sale of a good domestically exhausts patent rights, even if the patent owner tries to restrict the purchaser’s rights.

 In Impression Products Inc. v. Lexmark International Inc., No. 15-1189 (May 30, 2017), the Supreme Court ruled that any sale of a patented article, anywhere in the world, exhausts the patent owner’s rights in the article and precludes the patent owner from using the patent to further restrain trade in the goods sold.

The Supreme Court’s decision effectively overrules the controversial decision in Jazz Photo Corp. v. International Trade Commission, 264 F.3d 1094 (Fed. Cir. 2001), in which the Federal Circuit held that sale of a patented article exhausts the patentee’s rights only if the sale occurs in the United States.

In the Lexmark case, the patent owner sold printer cartridges in a “Return Program”. The purchaser paid a lower price for “Return Program” Cartridges, on the condition that the cartridges, once used, be returned to Lexmark (and not disposed of in a way such that a “refiller” could get ahold of it). When refillers started marketing cartridges recycled with “Return Program” cartridges sold in the United States and abroad, Lexmark sued the refillers for patent infringement. The Court of Appeals for the Federal Circuit upheld judgments in favor of Lexmark.

The Supreme Court reversed the Federal Circuit, both as to exhaustion regarding domestic and foreign-sold cartridges.

With respect to cartridges sold domestically, Lexmark had argued that it had implicitly reserved rights in the product, by requiring the purchasers to return the cartridges to Lexmark after use, rather than disposing of them otherwise.  The Supreme Court disagreed, holding that because Lexmark had sold the cartridges, rather than licensing rights to produce them, it had exhausted all possibilities for restricting their further sale or use. “The right to use, sell or import an item exists independently of the Patent Act. What a patent adds – and grants exclusively to the patentee – is a limited right to prevent others from engaging in those practices. Exhaustion extinguished that exclusionary power.”  The Court grounded its holding with respect to domestic sales on the old common law doctrine that restrictions on alienation are to be avoided – in other words, when you’ve sold a product, you’ve sold the entire bundle or rights associated with the product. You have nothing left.

With respect to goods sold abroad, the Court used the same rule against “restraints on alienation” to hold that the patentee’s sale of a patented article, anywhere in the world, exhausts its rights to control further sale, disposition or use of the good.  In this regard, the Court looked to its 2015 decision in Kirtsaeng v. John Wiley & Son, 568 U.S. 519, which held that copyright exhaustion was global, not territorial.  The court found that there should be no difference in the exhaustion rules for copyrights and patents.

The mere fact that patent protections only exist within the United States was not a limitation on the exhaustion doctrine, the Supreme Court held:

 The territorial limit on patent rights is, however, no basis for distinguishing copyright protections; those protections “do not have any extraterritorial operation” either. Nor does the territorial limit support the premise of Lexmark’s argument. Exhaustion is a separate limit on the patent grant, and does not depend on the patentee receiving some undefined premium for selling the right to access the American market. A purchaser buys an item, not patent rights. And exhaustion is triggered by the patentee’s decision to give that item up and receive whatever fee it decides is appropriate “for the article the invention which it embodies”. The patentee may not be able to command the same amount for its product abroad as it does in the United States. But the Patent Act does not guarantee a particular price, much less the price from selling to American consumers. Instead, the right to exclude [others from practicing a patent] just ensures that the patentee receives one reward – of whatever amount the patentee deems to be “satisfactory compensation” – for every item that passes outside the scope of the patent monopoly.

 

[Citations omitted].   In conclusion, the Supreme Court held that “[E]xhaustion occurs because, in a sale, the patentee elects to give up title to an item in exchange for payment. Allowing patent rights to stick remora-like to that item as it flows through the market would violate the principles against restraints on alienation”.

 

Trade Updates for Week of May 24, 2017

United States Court of Appeals for the Federal Circuit

 

Affirmed Decision that Finding No Violation of Section 337

In Adrian Rivera, Adrian Rivera Maynez Enterprises v. ITC, Court No. 2016-1841 (May 23, 2017), Rivera filed a complaint with the International Trade Commission (“Commission”), alleging that Solofill, LLC (“Solofill”) was importing beverage capsules that infringed claims 5–8 and 18–20 of the ’320 patent, in violation of Section 337. Rivera thereafter withdrew its allegations with respect to claims 8 and 19, leaving currently pending claims 5–7, 18, and 20. Solofill’s K2 and K3 beverage capsules are made to fit into a Keurig® brewer, and include an integrated mesh filter surrounding a space designed to accept loose coffee grounds. The main issue in this case was whether the ‘320 patent contained a written description of the invention so as to include “container(s)  . . . adapted to hold brewing material,” or a pod adaptor assembly with a filter in the cartridge.  According to the Commission, the description focused simply on a “pod adaptor assembly” or “brewing chamber” but did not disclose a container that was a pod itself, or that contained an integrated filter.  Moreover, the parties agreed that nothing in the ‘320 patent explicitly describes a pod adaptor assembly with a filter integrated into the cartridge.

The Federal Circuit agreed with the Commission and Solofill, Intervenor in this case, and held that the underlying concern that the ‘320 patent addressed was the compatibility between pods used in pod-type beverage brewers and cartridges used in cartridge-type beverage brewers. Moreover, the Commission’s failure to apply a broad definition of “pod” was not reversible error.    Finally, the Federal Circuit rejected the idea that those skilled in the art of pod or beverage capsule machines may supplement the specification to provide written description support.  A written description inquiry looks to the “four corners of the specification” to determine the extent to which inventor possesses the invention claimed.

For the reasons above, the Federal Circuit affirmed the Commission’s conclusion that claims 5-7, 18, and 20 are invalid for lack of written description and that Solofill did not violate Section 337. 

Trade Updates for Week of May 17, 2017

United States Court of International Trade

 

Motion of Preliminary Injunction Granted

In Nexteel Co., Ltd. and Husteel Co., Ltd. and Hyundai Steel Company v. United States, Slip Op. 17-59, Court No. 17-91 (May 15, 2017), the court reviewed plaintiff-intervenor Husteel Co., Ltd.’s (“Husteel”) partial consent motionfor preliminary injunction to enjoin defendant United States from liquidating Husteel’s entries of certain oil country tubular goods (“OCTG”) from the Republic of Korea (“Korea”).  These OCTG were produced and/or exported by Husteel and are subject to the U.S. Department of Commerce’s (“Commerce”) final results of the administrative review of the antidumping duty order on OCTG from Korea covering the period July 18, 2014 to August 31, 2015. Certain Oil Country Tubular Goods from the Republic of Korea, 82 Fed. Reg. 18,105 (Dep’t Commerce Apr. 17, 2017).

While the government did not oppose Husteel’s motion on the basis of the four factor test for injunctive relief, it did argue that the motion sought to enlarge the issues in the case by requesting an injunction for entries not the subject of plaintiff’s complaint.  According to the court, a motion for preliminary injunction, which does not raise new or additional substantive issues, does not enlarge the plaintiff’s complaint, because it merely ensures that the judicial opinion resulting from the present litigation will govern entries that are already covered by the administrative review and subject to the Final Results being challenged. The court, therefore granted the motion for preliminary injunction and enjoined defendant, during the pendency of this litigation including any appeals and remands, from issuing instructions to liquidate or allowing liquidation of any entries of certain OCTG from Korea, produced and/or exported by Husteel, Co., Ltd.  and are the subject of Certain Oil Country Tubular Goods from the Republic of Korea, 82 Fed. Reg. 18,105 (Dep’t Commerce April 17, 2017) (final results of antidumping duty administrative review; 2015-2015). 

 

Light Gauge Compression Hosiery Does Not Qualify for Nairobi Protocol Treatment, Compression Armsleeves Do.

Compression socks having 15-20 milligrams of mercury compression strength do not qualify for duty free entry under the HTS subheading 9817.00.96 provision for “articles specially designed for the blind and physically handicapped”, according to a new decision of the United States Court of International Trade.

In Sigvaris Inc. v. United States, Slip Op. 17-60 (May 17, 2017), the court noted that the compression hosiery was used to treat chronic venous insufficiency and lymphedema, chronic conditions which the court noted to be disabling. However, it held that while compression hosiery with higher compression (over 20 mm/Hg) were used by handicapped persons, the court ruled that lighter gauge products were used by ambulatory persons who were not “bedridden” and thus, in the Court’s view, not “handicapped”. For the first time, it appears, the court focused not on the condition being treated, in determining whether goods qualified for Nairobi Protoccol treatment, but rather on the severity of the symptoms the items were intended to treat.       

However, the Court ruled that compression armsleeves used by mastectomy patients did qualify for duty free HTS subheading 9817.00.96 treatment, rejecting a government claim that persons with only one functioning arm were not disabled.

 

Trade Updates for Week of May 10, 2017

United States Court of International Trade

 

Remand Results Sustained

Before the Court, in TMK IPSCO et al. v. United States, Slip Op. 17-54, Court No. 10-00055, Slip Op. 17-54 (May 3, 2017), was the U.S. Department of Commerce’s (“Department” or “Commerce”) Final Results of Redetermination Pursuant to Court Remand filed pursuant to the Court’s decision in TMK IPSCO v. United States, 40 CIT __, __, 179 F. Supp. 3d 1328 (2016). See Final Results of Redetermination Pursuant to Court Remand, Dec. 21, 2016, ECF No. 171 (“Remand Results”). The Court remanded Commerce’s final determination in its countervailing duty (“CVD”) investigation of certain oil country tubular goods (“OCTG”) from the People’s Republic of China (“China”) to explain or reconsider its determinations.  The Court sustained the Remand Results.

In regards to analyzing subsidies, the Court held that by ending its investigation and measurement of subsidies on December 11, 2001, when China acceded to the WTO, Commerce failed to countervail all identifiable and measurable subsidies as required by statute.  However, on remand, Commerce identified the dates adopted for each type of subsidy program and tied  specific reforms to Commerce’s ability to identify the sphere of commercial activity involved, the economic actors involved, and the government action required to bestow the type of subsidy.  Thus it complied with the Court’s decision by identifying the dates and specific reforms implemented and making connections between the reforms and the legal conditions reasonably deemed necessary for a particular grant.

In regards to the disparate freight quotes, the Court remanded to Commerce to reconsider or further explain its decision to use an average of two freight quotes from Maersk and Jianli’s freight-forwarder because Commerce had not adequately explained how two such disparate quotes could be representative of freight prices available to respondents. On remand, Commerce continued to find that the ocean freight quotes provided by Maersk and by Jianli’s freight forwarder are both reflective of market rates that the importer would have paid to import steel rounds and billets notwithstanding the pricing disparity. Commerce determined that working with a shipping company versus contracting with a freight forwarder may result in different costs, but still reflects market rates.

With regards to the inclusion of the SBB East Asia pricing from tier ii benchmark price for steel rounds and billets, Commerce decided to exclude the SBB East Asia pricing data from its tier ii benchmark pricing for steel rounds. If there is no useable market-determined price with which to make the comparison, Commerce will measure the adequacy of remuneration by comparing the government price to a world market price “where it is reasonable to conclude that such price would be available to purchasers in the country in question” (i.e., a tier ii benchmark). 19 C.F.R. § 351.511(a)(2)(ii). Here, Commerce concluded that the fact that the SBB East Asia pricing data could include Chinese import prices presents “a more compelling rationale for removing the data source from [its] benchmark.” Slip Op. pg. 24.

As to the attribution methodology, Commerce reconsidered it and agreed that it in some instances it should not have attributed subsidies to certain subsidiaries, however if the companies were cross-owned it attributed subsidies to the combined sales of both companies. The Court agreed with such findings.

In regards to the provision of steel rounds tied to production of subject merchandise, the Court remanded Commerce’s decision to attribute the benefit received by TPCO from the provision of steel rounds at LTAR because the Court could not “discern whether Commerce determined that the provision of steel rounds at less than adequate remuneration (LTAR) is tied to sales of seamless pipe.” TMK IPSCO, 40 CIT at __, 179 F. Supp. 3d at 1359. On remand, Commerce finds no record evidence as to the purpose or intended use of the steel rounds and billets under the subsidy program.  Thus, Commerce attributed the provision of steel rounds and billets at LTAR to all sales of TPCO rather than to only sales of seamless pipe. Such a decision was supported by substantial evidence.

 

Motion for Partial Summary Judgment Granted

In United States v. International Trading Services, LLC, and Julio Lorza, Court No. 12-135, Slip Op. 17-55 (May 5, 2017), the Court considered plaintiff’s motion for partial summary judgment pursuant to section 592 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1592 (2006), regarding eight misclassified shipments of sugar. Plaintiff contended that defendants International Trading Services, LLC (“ITS”) and Julio Lorza (“Mr. Lorza”) were jointly and severally liable for unpaid duties and penalties amounting to $986,967.31.  Entry documents show that ITS classified the sugar under HTSUS subheading 1701.99.0500, which provides for “[c]ane or beet sugar and chemically pure sucrose, in solid form,” that also is “[d]escribed in general note 15 of the tariff schedule and entered pursuant to its Provisions,” andhas a corresponding duty rate of $0.036606 per kilogram. Customs later classified defendants’ entries under HTSUS subheadings 1701.99.5010 and 1701.99.5090, with a corresponding duty rate of $0.3574 per kilogram. Moreover, defendants’ entries were not covered by general note (GN) 15 because they were not imported for any U.S. agency, exceeded the net weight of 5 kilograms, were cotton or blended syrups and were introduced to the commerce of the U.S.   As such, the classification of entries under subheading 1701.00.99.0500 constituted a material false statement.

Because defendants did not respond to plaintiff’s motion, and defendants have not provided any evidence of reasonable care, the Court held defendants jointly and severally liable for unpaid duties, penalties, and applicable interest. Applying the United States v. Optrex Am., Inc., 32 CIT 620, 640-42 (2008) and Complex Machine Works Co., 23 CIT 942 (1999) factors, the Court found the penalty amount to be appropriate where the defendants have not cooperated with the investigation, or provided any type of disclosure.  Moreover, further deterrence supported a heightened penalty for public policy reasons.  The Court awarded prejudgment and post-judgment interest to plaintiff. The Court, therefore, granted plaintiff’s motion for partial summary judgment. 

 

Motion to Amend Complaint Granted

In Jinxiang Hu Ameng Imp & Exp Co., Ltd. v. United States, Court No. 16-243, Slip Op. 17-57(May 10, 2017),  plaintiff sought to add two counts to the complaint, pursuant to 28 U.S.C. § 1581(i), asserting that (1) Customs unlawfully liquidated the single entry of subject merchandise subject to the new shipper review and (2) Commerce unlawfully failed to exclude plaintiff’s entry from the liquidation instructions issued during the administrative review. Moreover, plaintiff’s motion also wanted to add one count pursuant to 28 U.S.C. § 1585 claiming that equity requires reliquidation of the entry in order to avoid substantial injury to the importer of record, who is not a party in this action.  Defendant argued that plaintiff could have filed a protest to challenge the liquidation, but because plaintiff is an exporter, and not an importer, there would be no means for the plaintiff to file a protest.  Therefore, the Court allowed the first two counts to be added to the complaint and denied the third count because plaintiff did not have standing to make claims regarding the importer.  For these reasons, the Court partially granted the motion.

 

Motion to Dismiss Denied

In Jinxiang Hu Ameng Imp & Exp Co., Ltd. v. United States, Court No. 16-243, Slip Op. 17-58(May 10, 2017),  the Court denied defendant’s motion to dismiss because it must draw all reasonable inferences in favor of the plaintiff.  Those inferences are that the liquidation of the sole entry was in contravention of Commerce’s instructions and that the liquidation instructions were unlawful in deciding the motion. Assuming that plaintiff prevails on either of its claims, the complaint would therefore not be moot even if the entry was liquidated.

Trade Updates for Week of May 3, 2017

United States Court of International Trade

 

Redetermination Sustained.

Before the court in Albemarle Corp. and Ningxia Huahui Activated Carbon Co., Ltd., v. United States, Court No. 11-451, Slip Op. 17-51 (April 28, 2017) were the Final Results of Redetermination Pursuant to Court Remand (Oct. 14, 2016), ECF No. 135 (“Remand Redetermination”), which the International Trade Administration, U.S. Department of Commerce (“Commerce”) issued in response to the court’s Opinion and Order in Albemarle Corp. v. United States, __ CIT __, Slip Op. 16-84 (Sept. 7, 2016). Because all parties commented in favor of the remand redetermination which assigned Ningxia Huahui Activated Carbon Co., Ltd. a redetermined weighted average dumping margin of zero, the remand redetermination was sustained.

 

Sustained Remand Results

In CC Metals and Alloys, LLC and Globe Specialty Metals, Inc. v. United States, Court No. 14-202, Slip Op. 17-52 (April 28, 2017), the Court sustained the final remand results.  Commerce in its final determination, while it was not consistent with its actual treatment of home market warehousing expenses and revenue in the margin calculation program, it did in fact account for those items lawfully under the statute, as well as under its regulations and practice. 

Moreover, in regards to imputed credit expenses, Commerce explained that it “inadvertently applied a simple average of the short-term interest rates, rather than a weighted-average of the short-term interest rates,” and corrected the calculation. In the final determination, Commerce used a “simple” average of short-term rates derived from a small set of Chelyabinsk Electrometallurgical Integrated Plant Joint Stock Company’s (“CHEMK”) factoring arrangements that Commerce examined at verification.  In the remand results, a weighted average was applied.  Finally, Commerce used CHEMK’s verifiable data for purposes of short term borrowing rate selection. 

 

Injunction Granted

In CS Wind Vietnam Co., Ltd., and CS Wind Corporation, v. United States, Court No. 13-00102, Slip Op. 17-53, (April 28, 2017), the Court decided whether liquidation should be enjoined on entries subject to the antidumping duty order regarding wind towers from Vietnam.   CS Wind has already succeeded on the merits before this court and there are no public interest issues or balance of hardship issues, the only issue was whether any irreparable harm will come to CS Wind if liquidation is not suspended.  Because the Court already issued two notices that suspended liquidation pending a “conclusive” court decision, as per Timken Co. v. United States, 893 F.2d 337, 341 (Fed. Cir. 1990), the Court granted the motion for injunction covering the first entry, and decided that an open injunction was not further needed, as per the first Timken notice.  Moreover, the court will issue the limited injunction if the government consents to the broader injunction.  

 

United States District Court

 

Exporter’s Case Not Dismissed Where Administrative Forfeiture Proceedings Not Instituted; Government Blasted for Deception

A court will not dismiss an exporter’s lawsuit seeking return of property seized by United States Customs and Border Protection where no administrative forfeiture proceedings are underway, according to a recent decision by the United States District Court for the Central District of California.

In In re Seizures of Containers of Aluminum Pallets Detained at Long Beach Port, CV 16-2640 (April 21, 2017) was commenced by California-based Perfectus Aluminum Co. after Customs and Border Protection officers first detained, then seized, some 547 containers of aluminum pallets being exported at Long Beach. The basis for the seizure is unclear, but were supposedly part of a criminal investigation. Chinese-based Zhongwang Holdings, believed to be related to Perfectus, is under investigation for evasion of antidumping duties on Chinese-made aluminum extrusions, and there have been claims that Perfectus is hoarding large quantities of aluminum in Mexico.  Perfectus petitioned the Court for release of the seized merchandise, claiming it had no remedy at law.

The government sought to dismiss the case, claiming that the seized aluminum was currently part of “administrative forfeiture” proceedings being conducted by CBP, but these claims turned out to be false. The value of the goods was too high for administrative forfeiture proceedings, and no such proceedings had been initiated, the Court noted.  The Court blasted the government for misrepresenting the status of administrative forfeiture proceedings, noting “It is shocking and deeply disappointing that the United States Attorney’s Office would file a brief with this Court so replete with falsities. After the Court pointed out the inconsistencies in the government’s briefing, see Doc. # 39 (request for supplemental briefing), the government deflected responsibility, stating that any “suggestion” that administrative forfeiture proceedings were underway with respect to the aluminum pallets was “unintended.” Resp. Supp. Brief at 4. The Court refuses to interpret the government’s repeated assertions on this matter as inadvertent errors.”

Perfectus had requested that the seizures be referred to the U.S. Attorney for initiation of administrative forfeiture proceedings. The Court denied the government’s motion to dismiss, and stayed the petition pending initiation of the forfeiture proceedings.

 

 

Trade Updates for Week of April 26, 2017

United States Court of International Trade

 

Determination Remanded

In Borusan Mannesmann Boru Sanayi ve Ticaret A.S. v. United States, Court No. 14-00009, Slip Op. 17-45 (April 20, 2017), plaintiff Borusan Mannesmann Boru Sanayi ve Ticaret A.S. (“Borusan”), a Turkish producer and exporter of standard pipe – contests the final results of the U.S. Department of Commerce’s 2011-2012 administrative review of the antidumping duty order covering welded carbon steel standard pipe and tube products from Turkey (“standard pipe”).  Specifically, Borusan contested Commerce’s decision to exclude yield loss such as scrap and second quality pipe from duty drawback adjustment in calculating the company’s dumping margin.  Borusan argued that the exclusion would create an “imbalance” between export price and normal value, thereby inflating the dumping margin. The duty rate applicable to scrap and second quality pipe during the 2011-2012 period was 0%.   Remand was, therefore, warranted to address Borusan’s argument regarding the zero duty rate.  Moreover, Commerce’s decision misstated Turkish law, stating that any scrap or byproduct not exported would be subject to duties, when in fact only those goods which were actually sold in the Turkish domestic market would be subject to import duties and VAT.   For these reasons Commerce’s determination was remanded.

 

Sustained Remand Results

Before the Court in Hangzhou Yingqing Material Co. And Hangzhou Qingqing Mechanical Co., v. United States, Slip Op., 17-147, Court No. 14-133 were the Remand Results in Steel Wire Garment Hangers from the People’s Republic of China, 79 Fed. Reg. 31,298 (Dep’t Commerce June 2, 2014) (final results 4th admin. rev. and new shipper rev).  In the Remand Results, Commerce reconsidered its allocation of labor costs, determined that it would continue not to adjust the financial ratios, and provided further explanation for its departure from its decision to adjust the financial ratios based on similar labor expenses in the Certain Nails from the People’s Republic of China, 79 Fed. Reg. 19316 (Dep’t Commerce April 8, 2014) (final results 4th admin. rev.). Commerce also reconsidered its valuation of brokerage and handling (“B&H”) costs, deducted the cost of obtaining a letter of credit from the total amount of B&H expenses, and revised the combination rate weighted-average dumping margin accordingly.  All parties agreed that these results addressed the Court’s decision below. For these reasons the Remand Results were sustained.

 

Exporter Who Received Zero Countervailing Duty Margins Lacks Standing to Sue

An exporter who received a favorable determination in a countervailing duty case lacks “injury in fact” and standing to sue, according to a pair of decisions from the United States Court of International Trade.

In PAO Severstal v. United States, Slip. Op. 17-50 (April 25, 2017) an exporter of cold-rolled steel from Russia who had received a de minimis margin in a countervailing duty proceeding, and was thus not subject to special duties, sued to challenge various legal and factual determinations which the Commerce Department made in the CVD proceeding. On the government’s motion, the Court, per Judge Gary Katzmann, dismissed the plaintiff’s case without prejudice, indicating that the exporter, having received a favorable determination, lacked “injury in fact” and thus standing to sue.

In Arcelormittal USA Inc. v. United States, Slip Op. 17-49 (April 25, 2017), the court dismissed Severstal’s cross-claims in the domestic industry’s challenge to the CVD findings, on largely the same grounds. While Severstal could participate in the case and defend against the domestic industry’s challenge, it could not raise its own claims when it had not been subjected to special duties. Those claims were dismissed, without prejudice for Severstal to renew them, in the event that company became subject to a countervailing duty order in the future.

 

“New Shipper Review” Recipient Should Have Been Given Chance at Zero Rate

A company who received a zero antidumping rate in a “new shipper review” involving hardwood flooring should have been given a chance to retain that rate in a subsequent administrative review of the antidumping order, the Court of International Trade recently held.

In Linyi Bonn Flooring v. United States, Slip Op. 17-46 (April 21, 2017), an exporter sought a “new shipper review” and secured its own antidumping rate of 0.0%. While this proceeding was ongoing, the Commerce Department initiated an annual review of the order. Since Linyi Bonn did not enter an appearance in that proceeding and assert its right to a separate rate, Commerce subjected the company to the “China-wide” antidumping rate.  The exporter sued, and Commerce held that, because the company had not timely provided a certificate of no sales for the period in question, it was not entitled to a separate rate.

However, the CIT, per Chief Judge Timothy Stanceu, held that Commerce had erred by not providing the plaintiff, and other interested parties, with notice of an alternative procedure which would have allowed them to file a “partial no shipments” certification in the annual review. The court remanded the case to Commerce with instructions to allow the company to submit the certification.

 

Decision in Antidumping Review of MSG Remanded for Correction

While some of Commerce’s determinations in an annual review of the antidumping order against Monosodium Glutamate from China were supported by “substantial evidence”, others were not, according to a recent decision of the Court of International Trade.

In Ajinomoto North America v. United States, Slip Op. 17-48 (April 25, 2017), a domestic producer challenged Commerce’s determination of certain “surrogate values” used in the antidumping calculation. First, the Court granted a motion by the government for voluntary remand so that the government could recalculate the value of certain corn used in the production process, to reflect the producer’s actual consumption rather than a standard value.  However, the court sustained Commerce’s selection of an index to determine the value of coal used in the production process, as well as the department’s selection of data to value certain “high protein scrap”.

But the court remanded to Commerce the question of how it calculated inland freight charges, claiming that the agency had used some impermissibly fuzzy data centered on the “Jakarta periurban area”, while some of the production facilities were located relatively far from Jakarta.

 

Trade Updates for Week of April 19, 2017

United States Court of International Trade

 

Defendant United States’ Motion for Summary Judgment Denied

In Irwin Industrial Tool Company v. the United States, Court No. 15-00285, Slip Op. 17-41(April 12, 2017), plaintiff, Irwin, challenged the United States Customs and Border Protection (“Customs”) HTSUS classification of hand tools imported into the United States.  Defendant, the United States moved pursuant to USCIT Rule 56(a) for summary judgment in their favor.  There were four types of tools at issue in this case, large jaw locking pliers, curved jaw locking pliers, long nose locking pliers with wire cutter, and curved jaw locking pliers with wire cutter. When the goods were imported, Customs liquidated them under Harmonized Tariff Schedule of the United States (HTSUS) subheading 8204.12.00, Hand-operated spanners and wrenches (including torque meter wrenches but not including tap wrenches); socket wrenches, with or without handles, drives or extensions; base metal parts thereof: Hand-operated spanners and wrenches, and parts thereof: Adjustable, and parts thereof, with a duty rate of 9% ad valorem.

Plaintiff believed that the goods are properly classifiable under subheading 8203.20.60, which provides for Files, rasps, pliers (including cutting pliers), pincers, tweezers, metal cutting shears, pipe cutters, bolt cutters, perforating punches and similar hand tools, and base metal parts thereof: Pliers (including cutting pliers), pincers, tweezers and similar tools, and parts thereof at 12 cents per a dozen plus 5.5% ad valorem.  In the alternative, plaintiff believes the subject pliers are classified under HTS Subheading or 8205.70.0060,  which provides for Handtools (including glass cutters) not elsewhere specified or included; blow torches and similar self-contained torches; vises, clamps and the like, other than accessories for and parts of machine tools; anvils; portable forges; hand- or pedal-operated grinding wheels with frameworks; base metal parts thereof: Vises, clamps and the like, and parts thereof: Vises: Other, dutiable at 5% ad valorem.  For the following reasons, the Court denied the defendant’s motion for summary judgment.

The Court held that the United States did not prove as a matter of law that the tools at issue are classifiable under 8204.12.00. HTSUS heading 8204 applies to various kinds of wrenches. In determining the common meaning of wrenches, the Court looked at several dictionaries, scientific journals, safety aides, and a mechanical engineering journal for help. The Court held that the use of wrench in the HTSUS refers to “a hand tool composed of a head with jaws or sockets having surfaces adapted to snugly or exactly fit and engage the head of a fastener (such as a bolt-head or nut) and a frame with a singular handle with which to leverage hand pressure to turn the fastener without damaging the fastener’s head.” Slip Op., pg. 7.  The Court said that the defendant had not proved the four types of tools at issue fit into this definition and that the defendant’s reliance on a decision regarding the old TSUS was not applicable to the Harmonized schedule. As a result, the United States was not able to convince the Court to grant summary judgment.

The Court used a similar methodology, looking to dictionaries and trade journals, to analyze the possible classifications that the plaintiff put forward. The Court found that under subheading 8203.20.6030 pliers“refers to a versatile hand tool with two handles and two jaws that are flat or serrated and are on a pivot, which must be squeezed together to enable the tool to grasp an object.” Slip Op, pg. 21. The Court also found that under Subheading 8205.70.0060vises, clamps and the like refer“to tools with a frame and two opposing jaws, at least one of which is adjustable, which are tightened together with a screw, lever, or thumbnut, to press firmly on an object and thereby hold the object securely in place while the user is working “.  The Court said it has “determined that the relevant tariff terms are defined in a manner that would suggest that the subject merchandise is classifiable within one of the plaintiff’s preferred terms.” Slip Op., pg. 24. However, since the plaintiff has not filed for summary judgment, the Court may not make a firm determination for classification purposes.

 

Court Sustained Remand Redetermination

In Davis Wire Corporation and Insteel Wire Products Company v. United States, Court No. 14-131 (April 13, 2017), plaintiffs Davis Wire Corporation and Insteel Wire Products Company contested a negative less-than-fair-value determination (“Final Determination”) issued by the International Trade Administration, U.S. Department of Commerce (“Commerce” or the “Department”) following an antidumping duty investigation of prestressed concrete steel tie wire (“PC tie wire”) from Thailand. Final Determination of Sales at Not Less than Fair Value: Prestressed Concrete Steel Rail Tie Wire from Thailand, 79 Fed. Reg. 25,574 (Int’l Trade Admin. May 5, 2014) (“Final Determination”). In the Final Determination, Commerce calculated a 0.00% weighted-average dumping margin for Siam Industrial Wire Company, Ltd. (“SIW”). Because SIW was the sole exporter/producer investigated, Commerce terminated the investigation without issuing an antidumping duty order.

Plaintiffs had argued that certain wire costs were not included in SIW’s costs of production.  On remand, Commerce found that “wire rod used in the production of PC tie wire was also used to manufacture PC strand” and that “[b]ased on this evidence, the identical raw materials (i.e., grade 82B 13 mm wire rod held in inventory in the PC Strand division) should also be included as part of the weighted-average raw materials consumption cost in the cost of production (COP) calculation, in accordance with the Department’s normal practice.” Slip Op. pg. 5.  Commerce therefore included an upward adjustment in SIW’s wire rod costs and reasonably addressed plaintiffs’ claims. 

Moreover, the second issue on remand pertained to plaintiffs’ argument that the ratio the Department calculated for SIW’s general and administrative (“G&A”) expenses failed to include the value of certain information technology services provided to SIW by its parent company, Tata Steel.  In the Remand Redetermination, Commerce expressly found that Tata Steel invoiced SIW monthly for the costs of the IT services.  Thus, the IT services were included in the G&A expenses.

For all these reasons, the Remand Redetermination was sustained.

 

Revised Liquidation Instructions Sustained

In its previous decision, United Steel and Fasteners, Inc. v. United States, 41 CIT __, 203 F. Supp. 3d 1235 (2017), this Court sustained the U.S. Department of Commerce’s (“Commerce”) conclusion that American Railway Engineering and Maintenance-of-Way Association (“AREMA”) washers were included within the scope of the antidumping duty order covering certain helical spring lock washers from the People’s Republic of China (“China”), but remanded Commerce’s instructions to suspend liquidation of AREMA washers.  This Court had determined that the suspension instructions were unlawful because Commerce exceeded its authority by ordering retroactive suspension of liquidation when issuing a final scope ruling that clarified the scope of an order.  Before the Court was the remand determination.

On remand, Commerce revised instructions to “correct the effective date of the suspension of liquidation” and suspend liquidation of AREMA washers imported by United Steel and Fasteners, Inc. from China entered, or withdrawn from warehouse, for consumption on or after July 8, 2013, which is the date that Commerce issued the final scope ruling.    Given the revised instructions complied with the Court’s order and opinion, the Court sustained the remand redetermination.

 

Remand Redetermination Remanded

In Baoding Mantong Fine Chemistry Co., Ltd. v. United States, Court No. 12-362, Slip Op. 17-44 (April 19, 2017), plaintiff Baoding Mantong Fine Chemistry Co., Ltd. (“Baoding Mantong” or “Baoding”) contested the final determination (“Final Results”) that the International Trade Administration of the U.S. Department of Commerce (“Commerce” or the “Department”) issued to conclude an administrative review of an antidumping duty order (the “Order”) on glycine from the People’s Republic of China (“China” or the “PRC”). Glycine from the People’s Republic of China: Final Results of Antidumping Duty Administrative Review, 77 Fed. Reg. 64,100 (Int’l Trade Admin. Oct. 18, 2012) (“Final Results”). In that review, Commerce issued a weighted averaged dumping margin of 453.79% to Baoding, a Chinese exporter and producer of glycine. The Remand Redetermination calculated a new weighted-average dumping margin of 64.97% for Baoding Mantong.

First and foremost, it must be noted that Nan Ya Plastics Corp. v. United States, 810 F.3d 1333 (Fed. Cir. 2016), does not invalidate the opinion issued by this Court in Baoding Mantong Fine Chemistry Co. v. United States, 39 CIT __, 113 F. Supp. 3d 1332 (2015) (“Baoding Mantong”).  While the Court found that Commerce reasonably used Indonesian financial data of urea, fertilizer, and pupuk to calculate the applicable financial ratios and that the surrogate value for liquid chlorine was supported by substantial evidence, the Court did not find that the Surrogate Value for ammonia was reasonable where it was based on aqueous ammonia rather than anhydrous ammonia.  Moreover, the reasons for using Indonesian Global Trade Atlas (GTA) import data over Philippine GTA import data was inadequate.

Likewise, the Court found the use of Indonesian GTA for purposes of calculating Baoding Mantong’s formaldehyde input to be unreasonable considering that Indonesia was the lowest of the four available data sets that merited consideration, and thus the Indonesian import data may not be the best information with which to value the formaldehyde. Finally, in regards to valuing the steam coal input Commerce must ensure that its choice is the best available information, where the GTA import data for Indonesia appears to be lacking.

For these reasons, Commerce’s Remand Redetermination was remanded. 

Trade Updates for Week of April 12, 2017

United States Court of International Trade

 

Default Judgment Granted in Favor of U.S.

In Jacobi Carbons AB & Jacobi Carbons, Inc. v. United States et al, Court No. 15-286, Slip Op. 17-39 (April 7, 2017), plaintiffs Jacobi Carbons AB and Jacobi Carbons, Inc. (together, Jacobi”), and Plaintiff-Intervenors (collectively, with Jacobi, “Plaintiffs”), moved pursuant to United States Court of International Trade (“USCIT”) Rule 56.2, for judgment on the agency record, challenging the United States Department of Commerce’s (“Defendant” or “Commerce”) Final Results in the seventh administrative review (“AR7”) of the antidumping duty order on certain activated carbon from the People’s Republic of China (“PRC”). Plaintiffs argued that Commerce erred in (1) rejecting the Philippines and selecting Thailand as the primary surrogate country, (2) using Thai import data as the surrogate value for carbonized material, and (3) reducing Jacobi’s constructed export price (“CEP”) by an amount for Chinese value added tax (“VAT”). For the following reasons, the court remanded the determination to Commerce to clarify and, if necessary, revise its findings on the issues of the economic comparability and significant production of Thailand, and the irrecoverable VAT calculation.

The Court held that Commerce has discretion to develop a reasonable methodology to implement its surrogate country selection criteria. However, Commerce’s Office of Policy (OP) did not list the criteria reviewed to make the surrogate country selection.  Moreover, if Gross National Incomes (GNI) of potential surrogate countries were considered, there was no discussion of GNI in the Final Results. Reasoning that was offered post hoc, in briefing to the court or during oral argument, was not properly part of this court’s review of the agency’s underlying determination when such reasoning is not discernable from the record itself. Therefore, Commerce, in a remand, was to provide a reasoned explanation as to why the range of GNI data reflected on OP’s list demonstrates economic comparability to the PRC, including why Philippines’ GNI did not.

As for significant producer, Commerce did little in providing what substantiated its choice.  Commerce did not explain whether Thailand actually imports more higher-valued goods than it exports. Nor did it provided any basis for disfavoring net value as a measure of significant production.  Finally, Commerce’s reasoning failed to persuade that reliance on total exports, devoid of evidence of influence on world trade is a permissible method.  Again, more explanation and possible reconsideration was needed for this decision. Because the surrogate country selection was remanded, the Court defers the issue of the surrogate value until the redetermination.

As for reducing the constructed export price (CEP) by the VAT paid, the PRC levies a 17% VAT on inputs and raw materials used in the production of activated carbon, for which there is no VAT rebate. According to the Court since the VAT was irrevocable, Jacobi will be always burdened with such a payment . Thus, it was reasonable for Commerce to deduct the VAT as an export charge. However, the irrevocable VAT deducted must be equal to the actual amount of VAT paid on each transaction.  The Court remanded this decision to determine whether the 17% flate VAT rate did not overstate the amount of VAT Jacob paid.

For these reasons Commerce’s determinations were remanded in part.

 

Sustained Remand Results

In RZBC Group Shareholding, Co., Ltd., RZBC Co., Ltd., RZBC Imp. & Exp. Co., Ltd., RZBC (Juxian) Co., Ltd. v. United States, Court No. 15-22, Slip Op. 17-40 (April 10, 2017), plaintiffs RZBC Group Shareholding Co. and related companies (“RZBC”) moved for judgment on the agency record under USCIT Rule 56.2. This case concerned challenges to the fourth administrative review of a countervailing duty order on citric acid and certain citrate salts from the People’s Republic of China (the “PRC”). See Citric Acid and Certain Citrate Salts from the People’s Republic of China, 79 Fed. Reg. 78,799 (Dep’t Commerce Dec. 31, 2014) (final admin. review) (“Final Results”) (covering imports from January 1, 2012 to December 31, 2012). To ascertain the 10.54% AFA rate, “Commerce adversely inferred that RZBC benefited from the Buyer’s Credit program, a concessional-loan program instituted by the Government of China (“GOC”) owned EXIM Bank, and based the decision to apply AFA on the GOC’s noncooperation in refusing to allow Commerce to access information necessary for verifying non-use of the program.” Slip Op. pg. 2.

First the Court sustained the AFA finding as to whether RZBC benefitted from the credit program, because the “decree governing the Buyer’s Credit program” was “ambiguous” in its terms not making the $2,000,000 contract minimum or 50% Chinese components threshold mandatory. Commerce offered substantial evidence to support a decision to apply AFA that was consistent with the law and the remand order.

Second, as to the 10.54 rate, Commerce has a calculation method where no verified usage information was provided. Based on that program, which no party challenged, Commerce calculated the 10.54 rate. The Court rejected all four reasons proffered by RZBC as to why Commerce’s rate was incorrect, and found that Commerce’s AFA rate was consistent with the law and has the support of substantial evidence.

 

Remanded Labor Decision Declining Certification for TAA Benefits

In Former Employees of Geokinetics, Inc. v. United States Secretary of Labor, Court No. 16-57 (published April 11, 2017), the Court held that the Department of Labor’s (Labor) Remand Results were not supported by substantial evidence where the Court remanded Labor’s determination that Plaintiffs are not entitled to certification for TAA benefits as primary workers.

Labor had not explained why its practice for comparing a firm’s sales data is reasonable where Labor failed to consider whether like imports increased absolutely within additional periods as suggested by plaintiff, or explain why it was reasonable not to examine whether like imports had increased. Moreover, Labor failed to consider whether like imports had shifted to foreign countries, or explain why it was reasonable not to examine whether like imports had shifted to foreign countries. In addition, the court remanded Labor’s determination not to certify Plaintiffs as secondary workers eligible for TAA benefits. On remand, Labor must further explain its determination in light of these concerns or reconsider its determination consistent with this decision.

 

Commerce’s Antidumping Calculation Respecting Diamond Sawblades Remanded

Aspects of the Commerce Department’s dumping calculation in an annual review of the order against Diamond Sawblades from the People’s Republic of China were not supported by substantial evidence, or were insufficiently explained, prompting the United States Court of International Trade to remand the case for further proceedings.

In Diamond Sawblades Manufacturers’ Coalition v United States, Slip Op. 17-    (April 11, 2017),  the domestic petitioners took exception with certain aspects of Commerce’s calculation. In particular, the petitioners questioned Commerce’s’ decision to go outside the list of potential “surrogate” countries (Thailand was selected as the surrogate in this case), and to use data from a Philippine manufacturer to determine overhead and general expenses amounts for the calculation. The court found that Commerce had not satisfactorily explained its decision to use data from a Philippine supplier and remanded for further explanation.

Commerce also failed to explain its choice for selecting a surrogate value for steel “cores” used in making sawblades, having rejected certain value data as being “unreasonably high”, without pointing to a criterion for making that determination. The Court compared the determination to asking the question “How high is up?”

Finally, the Court rejected an argument from one respondent that it should not have been subjected to the “China wide” dumping rate, noting that the status of the entity – which previously had been accorded an individual zero rate – had changed, and that the “PRC-wide” entity had not been reviewed, even conditionally, in the administrative review in suit.

 

 

United States District Court 

Customs Failed to Adequately Respond to FOIA Request Regarding Seizures of Counterfeit and “Parody” Merchandise

At the 2015 Super Bowl, United States Customs and Border Protection announced seizures of large quantities of allegedly “counterfeit” NFL merchandise, including goods which were claimed to “parody” or “defame” team logos and mascots. Concerned that Customs appeared to be exceeding its legal mandate, and seizing “parody” goods which are not counterfeit, but governed by the doctrine of “fair use”, law Professor Rebecca Tushnet filed a Freedom of Information Act request with CBP, seeking information regarding the agency’s seizures of allegedly counterfeit goods.

Although Professor Tushnet received more than 4,500 pages of material in response, including over 3,000 photographs of seized goods, she was concerned that Customs had not conducted an adequate search of relevant terms and database systems, and that the agency had redacted far too much information based on cursory invocation of FOIA’s law enforcement records exception. Federal District Court Judge Christopher Cooper of the District of Columbia agreed with the professor, and ordered CBP to expand its FOIA search and review its redactions, in Tushnet v. United States Immigration and Customs Enforcement, No. 1:15-c-00907 (March 31, 2017).

The case is of potentially great interest to importers who have believed that CBP has used an overbroad definition of “counterfeit” in seizing imported goods.

 

 

Canadian International Trade Tribunal

Infant bottles and ‘sippy cups’ with a valve system are not “machines or mechanical appliances” and cannot be classified in Heading 8479 of the Customs Tariff, the Canadian International Trade Tribunal (CITT) recently held in a newly-released opinion,

In Phillips Electronics Ltd. v. President, Canada Border Services Agency (CBSA), AP 2016-003, the importer asserted that certain AVENT baby bottle “systems”, consisting of a bottle or cup housing, a teat or deformable spout, and connected to an incorporated anti-colic valve should be classified as “other” machines or mechanical appliances” of Heading 8479, rather than as household articles of rubber or plastic under Customs Tariff Heading 3924.

The Tribunal first held that the claims were not barred by “issue estoppel”, as a prior appeal regarding the classification of the valve assemblies alone had turned on specific facts, and not on binding legal interpretations. The Tribunal then held that the spouts were not properly considered “valves” of heading 8481, because the cups and bottles at issue were not “similar” to the pressure vessels described in that note and the Explanatory Notes thereto. Turning to the importer’s Heading 8479 claim, the Tribunal held that the cups, bottles and incorporated valves could be considered a “device, apparatus or instrument”, and that they were a “more or less complex combination of moving and stationary parts. Ultimately, however, the Tribunal lfound that the goods did not “act on something extraneous to themselves”, as all of the motion was generated by the child using the bottle, and the effects of air pressure.

The Tribunal upheld the Canada Border Services Agency (CBSA) classification of the articles in Heading 3924.

 

Certain High Definition Flat Panel Televisions Entitled to Duty-Free Treatment as “Articles for Use in or With Automatic Data Processing Machines or Units Thereof”

Certain high definition flat panel televisions were intended for use with automatic data processing machines and units thereof, and thus duty free treatment under Heading 9984 of Canada’s Customs Tariff, according to a recent Canadian International Trade Tribunal decision.

In Best Buy Canada Ltd. et al. v. President, Canada Border Services Agency, AP No. 2015-034, 2015-036 and 2016-001, the Tribunal addressed the question of whether duty-free classification of goods was dependent on the importer’s compliance with the Imported Goods Recordkeeping Regulations (IGRR), enacted pursuant to the Customs Act. Those regulations required every importer of goods released duty free to retain records showing, in this case, the use of the goods by the users. The Tribunal rejected this argument on two grounds. First, it found that the IGRR, implemented under authority of the Customs Act, was distinct from the provisions of the Customs Tariff. Compliance or non-compliance with the IGRR might have several consequences, but a change in tariff classification was not among them. Failure to keep or produce records would not preclude the plaintiffs from proving classification of the televisions under Heading 9984 of the Customs Tariff.

Second, the IGRR applies to goods released without payment of duty. Since the subject televisions in this case had been imported duty-paid, the IGRR by their terms did not apply to them. The Tribunal ordered that refunds be issued to the plaintiffs.

 

 

 

 

Trade Updates for Week of April 5, 2017

United States Court of International Trade

 

Default Judgment Granted in Favor of U.S.

In U.S. v. Paul Puentes, Court No. 14-310, Slip Op. 17-33 (March 29, 2017), plaintiff Government brought this action to recover a civil penalty imposed on Defendant Paul Puentes (“Puentes”) by the Bureau of Customs and Border Protection (“Customs”). Before the court was  Plaintiff’s Motion for Entry of Default Judgment, which sought judgment against Puentes in the amount of $30,000, as well as post-judgment interest and costs.  The two counts of the Government’s Complaint address four types of misconduct, which the Government characterizes as “Merchandise Processing Fees Deception,” “Late Entry Summaries,” “Failure To File Entry Summaries,” and “Misrepresentation Of The Importer of Record.”  Taking the facts alleged in the complaint to be true, the government has provided a basis for Puentes’ liability.  Because Puentes has not responded to the complaint, the Court found in favor of the plaintiff and held Puentes liable in the amount of $30,000 for his misconduct.

 

Cash Deposit Rate Set Aside

In Cooper Tire & Rubber Company, Cooper (Kunshan) Tire Co., Ltd., and Cooper Chengshan (Shandong) Tire Co., Ltd. v. United States, Slip Op. 17-32, Court No. 15-00251 (March 29, 2017), plaintiffs, Cooper Chengshan (Shandong) Tire Co., Ltd., Cooper (Kunshan) Tire Co., Ltd., and Cooper Tire & Rubber Company, collectively known as “Cooper,”  challenge the antidumping duty cash deposit rate of 11.12% ad valorem that the International Trade Administration, U.S. Department of Commerce (“Commerce” or the “Department”) applied to imports of passenger car and light truck tires that they produced and exported from the People’s Republic of China. For the reasons set forth, the Court set aside the cash deposit rate provided for Cooper.

Cooper was a respondent in parallel antidumping duty (“AD”) and countervailing duty (“CVD”) investigations conducted by Commerce. Cooper arguedthat Commerce erred in not allowing Cooper the benefit of a 13.53% downward export subsidy adjustment, which was the adjustment Commerce allowed for all other separate rate respondents in the AD investigation. Specifically, “even though Cooper is an AD separate rate respondent like the 62 other separate rate respondents, the AD cash deposit rate for Cooper is 11.12% ad valorem and that of all the other 62 separate rate respondents is 8.72% ad valorem.” Slip Op. pg. 10 (citing Cooper’s Brief, pg. 7).  There was no rational basis for treating Cooper differently from other separate AD respondents.  In the alternative, if Commerce were to treat Cooper separately Commerce should account for the record evidence in the CVD investigation recalculating the cash deposit rate down to 6.03% ad valorem.

However, the Court saw an issue with not having Cooper examined individually and not providing a rational basis for differing rates. The uncontested record facts pertaining to the cash deposits did not provide Commerce with a rational basis upon which to treat Cooper differently than the other separate rate respondents. If individually examined in the first review, Cooper would not receive a dumping margin determined by a method parallel to the “hybrid” method Commerce used to calculate its adjusted cash deposit in the AD investigation, which combines an all-others antidumping duty margin and an individually-determined export subsidy adjustment. Because the “hybrid” method Commerce employed as a means of estimating future AD duty liability has no basis in the statute, Commerce acted arbitrarily and capriciously in treating Cooper differently from the other separate rate respondents in the investigation. Therefore, defendant was not correct in arguing that the adjustment Commerce made “ensured that the export subsidy adjustment credited Cooper for the export subsidy rate that will be applied to it.

Trade Updates for Week of March 29, 2017

United States Court of International Trade

 

Sustaining Remand Results

In United States Steel Corporation et al. v. United States, Court No. 14-263, Slip Op. 17-28 (Public Decision Issued March 23, 2017), the Court reviewed the U.S. Department of Commerce’s (“Department” or “Commerce”).  Final Results of Redetermination Pursuant to Remand filed pursuant to the court’s decision in United States Steel Corp. v. United States, 40 CIT __, 179 F. Supp. 3d 1114 (2016) (“U.S. Steel”). See Final Results of Redetermination Pursuant to Remand Confidential Version, Aug. 31, 2016, ECF No. 113 (“Remand Results”). The court remanded Commerce’s final determination in its investigation of the antidumping duty (“ADD”) order covering certain oil country tubular goods (“OCTG”) from India for the period July 1, 2012 through June 30, 2013.  The court asked Commerce to reconsider and provide further explanation regarding: (1) its application of the ratio test of its differential pricing analysis; (2) its determination that Jindal SAW, Limited (“Jindal SAW”) is not affiliated with certain of its suppliers of electricity and steel billets; (3) its determination that Jindal SAW’s yield loss data reasonably reflected its costs of production (“COP”); and (4) its assignment of the highest cost data from GVN Fuels, Ltd.’s (“GVN”) production cost database to GVN’s dual-grade OCTG products.

As for application of the ratio test of its differential price analysis, Commerce first explained that its differential pricing methodology proceeds on a presumption that prices do not differ significantly by purchaser, region, or time period; it does not seek to prove that significant price differences do not exist. It further explained that sales are not excluded from the Cohen’s d test.  Commerce reasonably justifies its inclusion of all sales in the denominator of the ratio generated by comparing the value of sales passing the Cohen’s d test to the value of all sales. Commerce clarifies that “the ratio test assesses the extent of the significant price differences for all sales.”

For review of findings that Jindal SAW was not affiliated with certain of its suppliers of electricity and steel billets, Commerce evaluated the indirect holdings of Jindal families further.  Commerce determined that the additional indirect ownership of the Jindal family members that might be added to insignificant direct ownership numbers would be unlikely to rise to the level of ownership necessary to create a potential for control. Nor do the board memberships, management positions, or supplier relationships create a potential for control to manipulate production, pricing, or cost of the subject merchandise.

For Jindal SAW’s yield loss data, Commerce determined that it was necessary to adjust the per-unit direct material costs to take into account varying processing costs for CONNUMs with different physical characteristics, including thickness and diameter.  No party challenged Commerce’s determinations that Jindal SAW’s yield loss data did not reasonably reflect its COP or its determination to apply partial AFA, thus the Court found substantial evidence for this determination.

Finally, as for assignment of highest cost data from GVN cost database to GVN’s OCTG products,  Commerce found on remand, that it had “unintentionally overlooked its standard ‘proxy cost’ methodology by selecting the highest cost of L-80 grade” merchandise, and revised the cost assigned to the L-80 grade CONNUMs to conform to its standard proxy cost methodology.  This methodology provides that Commerce determines cost values for products for which it lacks COP data by matching COP to the most similar products based on reported physical characteristics where no adverse inference is applied, and assigned costs associated with cost data most similar to L-80 grade products.  Based on this cost adjustment, Commerce calculated a de minimis AD 1.07 rate for GVN. 

For all the above reasons, the Court sustained the remand results.

 

U.S. Court of Appeals for the Federal Circuit

Scope Determination Reversed

In Meridian Products, LLC v. United States, Ct. No. 2016-1730 (March 28, 2017),  the Federal Circuit reversed the Court of International Trade (“CIT”)’s decision sustaining Commerce’s finding that the trim kits do not fall within the scope of antidumping and countervailing duty orders on aluminum extrusions from the People’s Republic of China (“the Orders”).  See Meridian Prods., LLC v. United States (Meridian V), 145 F. Supp. 3d 1329, 1331 (Ct. Int’l Trade 2016). Meridian described the trim kits as “an aesthetic frame around the perimeter of (though not attached to) a major home kitchen appliance,” such as a “freezer” or “refrigerator.” According to Meridian, the “[t]rim kits are sold as a package of finished parts” and “consist[] of extruded aluminum forms[] made from aluminum alloy,” and further stated that “[t]he trim kits also include a customer installation kit for the consumer to use during the final assembly in the residential kitchen,” with the installation kit consisting of “a hexagonal wrench,” “fasteners,” “[a] set of instructions,” and “hinge covers.” Slip Op., pg. 6.

There were three issues for the Federal Circuit. First, in the CIT’s view, the inquiry ended if a disputed product met the definition of a “finished goods kit,” which then resulted in the disputed product’s exclusion from the Orders. However, according to the Federal Circuit, that interpretation failed to consider all of the terms of the exclusion, especially any exception to the exclusion, that a product will not be considered a finished goods kits “merely by including fasteners,” and “elevates certain aspects of the exclusion over others.”   Second, the CIT would exclude a kit even if it consists entirely of unassembled aluminum extrusions and fasteners. Third, citing precedent, the Federal Circuit held that the CIT’s interpretation would “render[] the [O]rders internally inconsistent” because it would allow for kits containing only unassembled aluminum extrusions and fasteners to be excluded from the scope of the Orders, whereas aluminum extrusions imported individually or as parts would be explicitly included in the scope.

For these reasons, the Federal Circuit reversed the CIT’s decision.