Trade Updates for Week of December 13, 2017

United States Court of International Trade

 

New Shipper Review Decision Remanded

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 This request was denied by Commerce and the review was rescinded because Commerce concluded that plaintiff had not made bona fide sales.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

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

 

Commerce Decision Remanded in Part

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

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

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

 

Sustained Remand Results

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

Trade Updates for Week of December 6, 2017

United States Court of International Trade

 

Changed Circumstances Decision Remanded

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

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

 

Scope Ruling Sustained

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

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

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

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

Trade Updates for Week of November 29, 2017

United States Court of International Trade

 

Differential Pricing Analysis Upheld

In The Stanley Works (Langfang) Fastening Systems Co. Ltd., et. al. v United States  Slip Op. 17-156, Court No. 14-00112 (November, 27 2017) the Court reviewed Commerce’s differential pricing analysis and its application in the fourth administrative review of nails from China. Plaintiffs argued that Commerce’s pricing test was an unlawful application of statutory authority given to Commerce, and even if lawful the application was unreasonable, and that the results contravene applicable regulations. For the following reasons the Court sustained Commerce’s Final Results in full.

To determine whether a class or kind of foreign merchandise is being sold in the United States at less than fair value to certain purchasers in certain regions or during certain periods of time, also known as targeted dumping, Commerce uses the average to transaction (“A to T”) method, where it compares averaged values to the values of individual transactions. In order to analyze the presence of targeted dumping of goods sold in the United States, Commerce has developed three differential price analysis tests: the ratio test, Cohen’s d test (CDT), and the meaningful difference test. Of the many claims made by plaintiffs, plaintiffs argued that the CDT was unlawfully applied because the test was not designed to be used in antidumping or pricing scenarios and that CDT is an estimation tool to be used for evaluating the size of a value in a sample of data.

To review whether Commerce’s interpretation and application of the statute was in accordance with the law, the Court applied the parameters set forth in Chevron U.S.A, Inc. v. Natural Res. Def. Council, Inc., 467 U S. 837, 842–43 (1984).  First, the Court questioned if there is an ambiguity in the authorizing statute delegating certain powers to an agency, then if the agency’s regulation was a reasonable interpretation of such delegation. The Court found that Commerce has not specifically instructed Commerce on how to measure targeted dumping. The Court also found that the test was valid because Commerce had “adequately explained on the record the choices it made in employing that methodology.” Id. at 19.  The Court also held that the application of the CDT in this scenario was valid because it was used to “assess the presence and significance of differences of United States sales prices among purchasers, regions, or periods of time” Id. at 21. The Court held that Stanley had failed to exhaust its administrative remedies in regards to arguments about the meaningful difference test because no such claims were made in briefs to the agency during the administrative process. Finally, the Court held that 19 C.F.R. § 351.414(f) does not apply to administrative reviews at issue here.

 

EAJA Fees were Not Available Where Customs Substantiated its Protest Denial

In Consolidated Fibers Inc. v United States Slip Op. 17-157, Court No. 14-00222 (November, 27 2017) the Court reviewed plaintiff’s application for attorney fees under the Equal Access to Justice Act (EAJA). Plaintiff filed this case to protest Commerce’s re-liquidation of imported fiber to include increased antidumping duties. Previously, plaintiff followed the proper administrative process to protest the re-liquidation. After discovery, defendants moved for a judgment on confession regarding the duties. Afterwards, plaintiff filed EAJA petition for $30,000 in attorney fees. For the following reasons the Court denied the application and does not award any fees.

When a party files suit against the United States in a civil matter Court’s must award attorney fees when “the claimant is a prevailing party “or when “the government’s position was not substantially justified.” Id. at 4.  Because in this case the defendant sought to “conclude litigation by satisfying plaintiff’s claim”, the Court will take judicial notice of the legal arguments presented by Customs in the administrative process. Id. at 5. In this case, Customs considered the legal arguments raised and denied plaintiff’s protest, arguing that because of an amendment in the law, re-liquidation was available if done within 90 days of the bulletin notice of the original liquidation. The protest denial laid out valid legal arguments and proved the government’s argument was substantially justified. Plaintiff also argued that attorney fees were available because the government unnecessarily delayed litigation, but the Court did not find any convincing evidence of this on the record.

Trade Updates for Week of November 15, 2017

United States Court of International Trade

 

Protest Not Approved Until Entry Reliquidated, CIT Says

In a case of first impression, the United States Court of International Trade has ruled that a protest is not “allowed” until the protested entries have been reliquidated and refunds granted.

In Erwin Hymer Group, f/k/a Roadtrek Motorhomes, Slip Op. 17-151, an importer challenged Customs decision to liquidate certain entries of imported motorhomes without an HTS subheading 9802.00.50 “repairs or alterations” allowance. Customs at the port of Detroit “approved” the protest, and sent notice of allowance to both the importer and the broker. However, Customs refused to reliquidate the entries or pay duty refunds, claiming that it had placed the entry in “suspended” status, while awaiting the outcome of a case being litigated before the United States Court of Appeals for the Federal Circuit.

The importer brought suit, invoking the CIT’s “residual” jurisdiction, and challenging Customs’ refusal to pay the refunds. Once the protest is allowed or denied, the importer argued, Customs has to take a second, implementing action which is non-discretionary – reliquidating the entry and issuing refunds in the case of an allowance, or sending notice of denial if the protest if denied.

The CIT agreed that the importer’s suit was properly commenced under the Administrative Procedure Act, and that the Court had jurisdiction over it. However, the Court held that the protest is not “allowed” until the entry reliquidated. So the entry remains in the curious status of being “approved” but “suspended”.

Trade Updates for Week of November 8, 2017

United States Court of International Trade

 

Casings Classified as Other Made-Up Textiles

In Kalle USA, Inc. v. United States, Court No. 13-00003, Slip Op.17-149 (November 2, 2017), the Court denied plaintiff’s motion for summary judgment and granted defendant’s cross motion for summary judgment.  The classification issue was whether the G1 and G2 products – which are used for encasing raw sausage, scalded-emulsion sausage, ham and other processed meat, and cheese, should be classified as plastics under Heading 3917 or under textiles products under Heading 6307.  The casings are textile fabrics with coated plastic layers; thus the Court found that the G1 and G2 casings are textiles made from man-made viscose rayon and polyester fibers, which are coated with plastic.  The Court held under GR1 that the casings were more correctly classified under Heading 6307, because (1) they are textile and (2) they are made-up, due to the gluing process of the ends of the casings, pursuant to Heading 6307.  Moreover Note 1(h) of Section XI does not preclude the classification of this textile article under Chapter 63, as a textile-plastic composite.  For these reasons, the Court denied plaintiff’s motion and granted defendant’s cross motion.

 

Remand Results Affirmed

In Ajinomoto North America, Inc. v. United States, Court No. 14-351, Slip Op. 17-150, the Court previously granted plaintiff’s motion to the extent of remand to ITA for reconsideration of the issues of (1) the appropriate corn factor-of-production weight and (2) the calculation of an inland-freight surrogate value.  The defendant filed ITA’s Final Results of Redetermination Pursuant to Court Remand (Aug. 30, 2017), amending its analysis thereof and resulting dumping margin from 21.28 percent to 34.15 percent.  With no opposition to the remand results, and after the Court has reviewed the results, the Court affirmed the remand determination.

Trade Updates for Week of October 25, 2017

United States Court of International Trade

 

Commerce Decision Sustained

In Weishan Hongda Aquatic Food Co., Ltd. et al. v. United States and Crawfish Processors Alliance, Court No. 16-73, Slip Op. 17-45 (October 25, 2017), Plaintiffs Weishan Hongda Aquatic Food Co., Ltd (“Weishan”), China Kingdom (Beijing) Import & Export Co., Ltd. (“China Kingdom”), Shanghai Ocean Flavor International Trading Co., Ltd. (“Ocean Flavor”), and Deyan Aquatic Products and Food Co., Ltd. (“Deyan”) (collectively, “Plaintiffs”) initiated this case challenging Commerce’s Final Results in the 2013-2014 administrative review (“AR”) and new shipper review (“NSR”) of the antidumping duty order covering freshwater crawfish tail meat from the People’s Republic of China (“PRC” or “China”).1 See Freshwater Crawfish Tail Meat from the People’s Republic of China, 81 Fed. Reg. 21,840 (Dep’t Commerce Apr. 13, 2016) (final results of antidumping duty admin. review and new shipper review).

Plaintiffs challenged Commerce’s rejection of Thai financial statements in favor of a 2014 Annual Report from a South African seafood processor, Oceana Group (the “Oceana Report”), to value factory overhead, selling, general and administrative expenses, and profit (hereinafter referred to as “financial ratios”).  Specifically, plaintiffs argued that Commerce did not adequately support or explain its determination that the Oceana Report provided the necessary information to accurately calculate financial ratios or compare the Thai and South African financial statements to determine which was more reliable and representative of Plaintiffs’ production experience.  Moreover, plaintiffs argued that South Africa is not a significant producer of comparable merchandise.

However, because plaintiff Weishan only contested the cost of sales data and insufficient disaggregation of line items for labor and raw materials in the Oceana Report administratively, it may not raise other issues regarding overhead, general and administrative expenditures. These cost of sales data and disaggregation issues were addressed in Commerce’s discussion of its preferred methodology in the Final Results. Moreover, Commerce’s decision regarding its choice of the Oceana Report was supported by evidence where Commerce explained that the Thai financial statements were not sufficient because they benefitted from countervailable subsidies and that the South Africa data was comparable to the PRC as well as contemporaneous, and that South Africa was a significant producer.

For all these reasons, the Court sustained Commerce’s decision.

 

Commerce’s Decision Regarding Crystalline Silicon Photovoltaic Cells Remanded in Part

In SolarWorld Americas, Inc. et al. v. United States and Changzhou Trina Solar Energy Co., Ltd. et al., Consol. Court No. 16-00134, Slip Op.17-134 (Public Version published October 25, 2017), plaintiff, SolarWorld Americas, Inc. (“SolarWorld”), commenced this action pursuant to 19 U.S.C. § 1516a(a)(2)(B)(iii) to review the second administrative review of the antidumping duty (“ADD”) order covering crystalline silicon photovoltaic cells, whether or not assembled into modules, from the People’s Republic of China (“China” or “the PRC”). See Crystalline Silicon Photovoltaic Cells, Whether or Not Assembled Into Modules, From the [PRC], 81 Fed. Reg. 39,905 (Dep’t Commerce Jun. 20, 2016).  SolarWorld moved for judgment on the agency record, challenging five aspects of the final determination.  The Court sustained Commerce’s selection of financial statements for calculating financial ratios for respondents’ overhead, selling, general, and administrative (“SG&A”) expenses, and profit, and Commerce’s application of adverse facts available (“AFA”) to respondent’s unreported, purchased solar cells. 

However, the Court remanded for further explanation Commerce’s surrogate value selection for valuing respondents’ tempered glass.  Specifically in regards to the use of inputs of tempered glass, Commerce must explain the use of disproportionate Hong Kong values, and why the benchmark valued from Ecuador and Ukraine are not reliable. 

The Court also remanded Commerce’s valuation of broken and scrapped polysilicon cells and modules using Harmonized Tariff Schedule category 8548.10.  Commerce failed to address SolarWorld’s argument that the language of heading 8548, HTS, evidences that the products imported under that heading are specific to electrical batteries and “are produced using a significantly different manufacturing process with completely different raw material inputs than are solar cells.”

Finally, the Court remanded Commerce’s determination to include import data with quantities of zero in the surrogate value calculations.  Trina argued that the inclusion of these reported quantities of zero in the surrogate value calculations, distorted surrogate values.  However, it is uncontested that the majority of the values with zero quantities were not within range of other low-quantity values, and that there is a lack of an alternate reasonable explanation as to why these values are reliable.  Commerce is therefore required to explain why such import data with reported quantities of zero should be included in the surrogate value calculations.

Trade Updates for Week of October 18, 2017

United States Court of International Trade

 

Commerce Decision Remanded in Part

In Özdemir Boru San. Ve. Tic. Ltd. Sti., v. United States, Court No. 16-00206, Slip Op. 17-142, (October 16, 2017), Plaintiff, Özdemir Boru San. ve Tic. Ltd. Sti (“Özdemir”), a Turkish producer and exporter to the United States of heavy walled rectangular welded carbon steel pipes and tubes (“HWR pipes and tubes”), brought this action against Defendant, the United States (“the Government”), to challenge Commerce’s final determination in Heavy Walled Rectangular Welded Carbon Steel Pipes and Tubes from the Republic of Turkey: Final Affirmative Countervailing Duty Determination, 81 Fed. Reg. 47,349 (Dep’t Commerce July 21, 2016) (final results of investigation) Özdemir argues that Commerce’s application of adverse facts available (“AFA”) to Özdemir regarding the Turkish Exemption from Property Tax (“EFPT”) program, and Commerce’s inclusion of two particular land parcels in the Land for Less-than-Adequate-Remuneration (“LTAR”) benchmark, are actions unsupported by record evidence and contrary to law.

Because Özdemir withheld information as shown by Özdemir’s brief, its incorrect QR statement, and explicit requests for information by Commerce, applied AFA was supported by substantional evidence.  Specifically, Commerce’s Questionnaire asked for detailed responses regarding its history with the EFPT program. When Özdemir responded that it did not have plants located in regions for the EFPT program, Commerce discovered this response was not accurate as Özdemir did take advantage of the EFPT program with facilities in the designated region. Thus full and complete answers to Commerce’s questionnaire warranted the application of AFA. Despite Özdemir’s arguments that Commerce could have used additional tax information provided at verification to ascertain participation in the EFPT, the Court was not persuaded by Özdemir’s arguments that it complied when it did not provide accurate responses.  Additionally, Commerce reasonably determined the AFA rate and correctly corroborated that rate.

As for the LTAR benchmarks, the Court remanded the decision finding that Commerce’s selection of land price data in Istanbul and Yalova Altinova are highly priced and anomalous compared to other areas in Turkey. Commerce must consider relevant record evidence to compare land parcels and provide a reasonable benchmark to alleviate the distortive pricing.  For these reasons, Commerce’s decision was remanded in part.

 

Personal Liability Tested in Footwear Case

In United States v. Sterling Footwear Inc., et. al. Slip. Op. 17-140, Court No. 12-00193, (October 12, 2017) the Court heard summary judgment arguments regarding Customs and Border Protection’s (CBP) attempts to collect unpaid duty and monetary penalties from entries of shoes imported by the defendant.  From 2007 and 2009, Sterling Footwear Inc. (“Sterling”) imported rubber tennis shoes into the United States which were classified under HTSUS 6402.91.40 described as “tennis shoes” with a “textile upper, rubber sole and foxing band.” Id. at 9. Starting in May 2009, Customs import specialists began to examine the shoes.  After a meeting in July, Sterling agreed to submit post entry amendments.  However, this was never done and CBP reviewed all of Sterling’s past entries.  CBP also issued notices to Alex Ryan Ng and Ng Branding involving the entries because they felt Ng actions as the president, CEO, and majority stake holder of both companies made him liable and that the two companies were operated as continuation of each other. For the following reasons the Court granted the Government’s motion for summary judgment against Sterling and denied the motion for summary judgment against Alex Ryan Ng and Ng Branding.

The first issue was whether Alex Ryan Ng could be personally liable for the unpaid duties. Under United States v. Trek Leather, Inc., 767 F.3d 1288 (Fed. Cir. 2014) individuals may be held liable for violating § 1592(a)(1)(A) if that individual engages in conduct proscribed by the statutory provision. However, the Court said summary judgment was inappropriate because there was “conflicting evidence regarding Ng’s role in determining the tariff provision pursuant to which Sterling’s footwear would be entered.” Id. at 30. Mr. Ng’s testimony regarding his role in selecting the tariff classifications conflicts with that of employees and other evidence on the record.  For this reason, the Court denied the motion.  The Court then reviewed the tariff classification used by Sterling.  HTSUS 6402.91.40 describes “tennis shoes” with a “textile upper, rubber sole and foxing band.” Id. at 9.  Using photos submitted by plaintiff the Court says it is obvious the goods were misclassified. “Several of the photographs depict boots, one with tassels, that clearly are not tennis shoes, rubber or otherwise.” Id. at 38.  The next issue was the culpability of Sterling and Ng Branding for the misclassification.  The government sought to prove gross negligence or that the companies acted “with actual knowledge of or wanton disregard for the relevant facts” and obligations under the statute. Id. at 41. The Court said the record indicated “Sterling had knowledge of the footwear it imported, because it had designed it. It knew that it was responsible for correctly classifying its footwear. Yet, Sterling repeatedly described the footwear as rubber tennis shoes.” Id. at 44. As a result, Sterling was found to have been grossly negligent. The government sought to hold Ng Branding liable for gross negligence because it was a mere continuation of Sterling. However, “In the absence of undisputed evidence that a purchase or transfer of assets occurred” the Court could not hold Ng Branding liable.  Id. at 50. The final issue was the amount of penalties to be collected from Sterling.  Under statute the government is entitled to collect at maximum four times the revenue lost by grossly negligent defendants.  However, the Court said that in order to decide the penalties further briefing on the 14 factor test from Complex Mach. Works Co., 23 CIT 942, 949–50, 83 F. Supp. 2d 1307, 1315 (1999) was required. This issue will be decided upon consideration of these factors.

 

Optical Fibers for Telecommunications Network Classified as Other Optical Appliances

In ADC Telecommunications, Inc. v. United States, Court No. 13-400, Slip Op. 17-144 (October 18, 2017), plaintiff ADC challenged the liquidation of “value added modules” or  VAMS are under Harmonized Tariff Schedule Subheading as 9013.80.90 “other optical appliances and instruments” and argued that they were more accurately classifiable under  Harmonized Tariff Schedule of the United States (“HTSUS”), subheading 8517.62.00, as “machines for the reception, conversion and transmission or regeneration of voice, images or other data”, duty-free. The VAMS are intended to ease installation of articles into the plaintiff’s telecommunications network operator customers’ fiber optic network using optical fibers.  Plaintiff argued that the VAMs are not classifiable as optical appliances or optical instruments of Chapter 90 because they do not aid or enhance human vision, and that the VAMs are more appropriately classified under HTS Subheading 8517.62 as apparatus used for transmission of voice, images, or other data, including for communication in a wired or wireless network.  However, because the Court more closely associated “optical fibers” with “other optical appliances,” as per defendant’s reiteration of the definition “optical,” it classified the VAMs under Heading 9013. The Court therefore granted defendant’s motion for summary judgment and denied plaintiff’s motion.

Trade Updates for Week of October 11, 2017

United States Court of International Trade

 

Customs Allowed to Collect Dump Duties from Surety with Interest

In United States v. International Fidelity Insurance Company, Slip Op. 17-136, Court No. 13-00256, (October 5, 2017) the Court heard arguments about the United States efforts to collect unpaid antidumping duties from Fidelity. In May of 2002, China Leader Express Co. imported fresh garlic from China with a 376.67% antidumping rate. China Leader submitted a bond as security for the estimated dumping duties, with Fidelity as the surety.  In December of 2002, Commerce began a periodic review of Huaiyang Hongda Dehydrated Vegetable Company (“Hongda”) the exporter of garlic imported by China Leader. However, Commerce rescinded the review with respect to Hongda, and the garlic was subject to the full PRC rate. Commerce’s decision was challenged in Court, which suspended efforts to collect. In November of 2004, the Court sustained Commerce’s decision, and no appeals were filed. In January 2007, Commerce notified Customs the injunction had expired and the shipments were to be liquidated. In September 2007,  Customs liquidated the goods with a 376.67% duty. Customs’ attempts to collect from China Leader and Fidelity were unsuccessful which resulted in the filing of this case on July 23, 2013. For the following reasons the Court agreed with the government and ordered Fidelity to pay $231,000 plus pre-judgment and post judgment interest.

The first issue was whether the Government’s case was commenced after the statute of limitations for collecting on a bond had expired. The government may collect “within six years of the date on which the Government’s right of action accrues,” which for a Customs bond is the date of liquidation. Id. at 7. “Here, the six-year statute of limitations on the Government’s collection action commenced on the date the subject entry was deemed liquidated by operation of law.”  Id. at 8.  Notice of removal of the suspension is when deemed liquidation occurred.  In this case, Commerce sent the liquidation instructions to Customs on July 24, 2007; the summons was filed on July 23, 2013, one day before the six year period expired. Thus, the case was timely.

Next, the Court denied any claims that the bond was invalid due to handwritten changes on the bond made by Customs.  The Court said that “Fidelity offers no evidence in support” of this claim and the bond was valid. Id. at 17.

The final issue was the amount of interest that the Government was entitled to collect. The Court allowed the government to collect statutory pre judgment interest because “19 U.S.C. § 580 provides for interest on bonds securing both traditional customs duties and antidumping duties” at a rate of 6% per annum. Id. at 21. The Court stated that “the Government's entitlement to statutory pre-judgment interest” outweighs any equitable factors in the Government’s favor because “the 6% rate under § 580 far exceeds the applicable rates at which the Government would receive equitable interest.” Id. at 25.  Post judgment interest was allowed because 28 U.S.C. § 1961(a) provides that post-judgment “interest shall be allowed on any money judgment in a civil case”. Id. at 26. For these reasons, the Court denied defendant’s motion for summary judgment and granted plaintiff’s cross motion.

 

U.S. Commissions are Constructed Export Price Selling Expenses

In ABB, Inc. v. United States, Court No. 15-108, Slip Op. 17-137 (October 10, 2017), the Court sustained Department of Commerce’s (“Commerce”) redetermination on remand in the first administrative review of the antidumping duty order on large power transformers from the Republic of Korea (“Korea”), for the period of review (“POR”) February 16, 2012, through July 31, 2013 (“POR 1”). The court directed Commerce to “further address the sequencing of certain of [Hyundai Heavy Industries Co., Ltd. and Hyundai Corporation USA’s (collectively “Hyundai”)] documents in the record,” and “defer[red] ruling on the issue of whether Commerce should have applied facts available or [adverse facts available (“AFA”)] in calculating Hyundai’s dumping margin with respect to the discrepancies in the sequencing of Hyundai’s documents alleged by ABB.” ABB Inc. v. United States (ABB I), 40 CIT_ 190 F. Supp. 3d 1159, 1164, and 1184 (2016). The court also directed Commerce to “further explain its treatment of the respondents’ U.S. commissions, the record basis for such treatment, whether such U.S. commissions result in the granting of commission offsets, and the legal and factual basis for the granting or denial of the commission offsets.” See id.

As for the sequencing of Hyundai’s sales documents, on remand, all discrepancies on the sequencing were resolved.  However, in regards to commission offsets, because respondents’ commissions were incurred in the U.S., Commerce denied home market commission offsets to Hyosung Corporation, the defendant intervenor, and Hyundai, because there were no commission expenses in the home market.  Such expenses are already treated as constructed export price or CEP selling expenses and get deducted from the price to establish CEP. Both Hyosung and Hyundai challenged this decision, arguing that Commerce went beyond the remand instructions in its factual findings to findwhere the commissions were incurred and that the review was “results-oriented” and contrary to government statutes and regulations.

The Court accorded substantial weight to the agency’s interpretation of the statute it administers and held that deductions in the CEP for U.S. commissions is in accordance with the law under 19 U.S.C. § 1677a(d)(1)(A).  For these reasons, the Court sustained Commerce’s redetermination.

 

Default Judgment Granted in Misclassification Case

In a penalty case seeking the collection of duties amounting to $40,288.82 and penalties totaling $131,358.22 for misrepresentations on entry documents regarding the classification of dairy products, defendants Juan Carlos Chavez and Chavez Import & Export, Inc. (“CIE”) failed to appear. Summary judgment was already granted in plaintiff’s favor against Chavez in a previous opinion. Plaintiff then moved for entry of default judgment against CIE. Because CIE has failed to appear or respond to the government’s allegations, CIE has not shown that it exercised reasonable care or competence to justify the claimed classifications.  As result, the Court granted default judgment in favor of plaintiff and against CIE for unpaid duties, penalty, interest, and costs. 

Trade Updates for Week of October 4, 2017

United States Court of International Trade

 

Motion to Dismiss Cross Claim Granted in Part

In United States v. UPS Supply Chain Solutions, Inc. et al., Court No,16-00010, Slip Op. 17- 134 (September 29, 2017 ), the Court considered a motion to dismiss cross claims initiated by Defendant 4174925 Canada, Inc. d/b/a Majestic Mills (“Majestic Mills”). Plaintiff United States, on behalf of U.S. Customs and Border Protection (“Customs”), brought claims against Majestic Mills, UPS, American Service Insurance Co. (“ASI”), and Great American Alliance Insurance Co. (“Great American”) (collectively, “Defendants”) for unpaid duties and civil penalties under Section 592 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1592(a) and (d) (2012). In UPS’ cross-claim, UPS alleged that Majestic Mills agreed to indemnify UPS from any liabilities arising from the importation of subject merchandise through a series of contractual agreements. The other causes of action in the cross-claim: breach of contract, fraud, and negligent representation were borne from Majestic Mills’ provision of incorrect information to UPS upon which UPS relied upon to declare classifications to Customs.

While the Court denied counts regarding breach of contract, fraud, and negligence, because they were time barred, the Court did allow the claim regarding indemnification. 28 U.S.C. § 1583 grants the Court the authority to decide cross-claims when “(1) such claim or action involves the imported merchandise that is the subject matter of such civil action, or (2) such claim or action is to recover upon a bond or customs duties relating to such merchandise. UPS seeks judgment on which party is liable to pay duties sought by plaintiff United States involving those entries, and reimbursement of any amounts plaintiff obtains from UPS in the underlying action.  Because liability of the duties owed and reimbursement of those duties involve the imported merchandise, the case falls in the CIT’s jurisdiction under section 1583(1). Moreover, because of judicial efficiency and because both parties are defendants in the case, the Court allowed jurisdiction over the indemnification claim.

 

Commerce’s Decision Remanded in Part

Before the Court in Aristocraft of America, LLC, et al. v. United States, Court No. 15-307, Slip Op. 17-132 (September 28, 2017) were the USCIT Rule 56.2 motions for judgment on agency record of Plaintiffs Shanghai Wells Hanger Co., Ltd., Hong Kong Wells Ltd., and Hong Kong Wells Ltd. (USA), (collectively “Shanghai Wells”); Best For Less Dry Cleaners Supply LLC, Ideal Chemical & Supply Company, Laundry & Cleaners Supply Inc., Rocky Mountain Hanger MFG Co., Rosenberg Supply Co., Ltd., and ZTN Management Company, LLC (collectively, “U.S. Distributors”); and Aristocraft of America LLC (“Aristocraft”), (together with Shanghai Wells and U.S. Distributors, “Plaintiffs”). This action involves the sixth administrative review conducted by the U.S. Department of Commerce (“Commerce”) of the antidumping duty order covering steel wire garment hangers from the People’s Republic of China (“PRC”). See Steel Wire Garment Hangers from the PRC, 80 Fed. Reg. 69,942 (Dep’t of Commerce Nov. 12, 2015) (final results admin. rev.) (“Final Results”). First, plaintiff challenged Commerce’s calculations of Export Price (EP) and Constructed Export Price (CEP). The issue was whether irrevocable VAT may be deducted from EP and CEP. While the Court agreed that the irrevocable VAT should be deducted, it did not agree with the manner in the amount of VAT to be deducted was calculated.

Second, the Court sustained both the surrogate value of Shanghai Wells’ corrugated paper input and the B&H surrogate costs because they were the “best information available”.  Finally, in regards to selecting financial statements for calculating surrogate financial ratios, the Court remanded this issue to Commerce to address reasonably the importance of drawing wire from wire rod as a surrogate company selection criterion. An efficient way to address this would be to simply use the one company’s statements (LS) that drew wire from wire rod, as Commerce did in the fourth administrative review.

Trade Updates for Week of September 27, 2017

United States Court of International Trade

 

Plaintiff’s Motion for Summary Judgment Granted; Defendant’s Motion to Reconsider Denied

In Irwin Industrial Tool Company v. United States, Court No. 14-28, Slip Op. 17-28 (September 21, 2017), the Court granted plaintiff’s motion for summary judgment and denied defendant’s motion for reconsideration. This case involved the classification of five styles of Plaintiff’s hand tools where United Customs and Border Protection liquidated the subject entries of hand tools under Harmonized Tariff Schedule of the United States (HTSUS) subheading 8204.12, which covers “hand-operated spanners and wrenches . . . : Adjustable, and parts thereof.” The Court held that the subject tools were not wrenches but were more akin to pliers classified under HTS Subheading 8203.20. The Court determined that as a matter of law that the term “pliers,” as it appears in subheading 8203.20.6030, 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.”   Furthermore, the Court determined that the term, “vises, clamps and the like,” under 8205.70.0060, HTSUS, refers 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.” 

Defendant in its motion to reconsider did not offer any reasons for reconsideration.  Namely, defendant has not demonstrated that there has been a controlling of significant change in the law; that the Court previously misunderstood the parties; or that the Court failed to consider controlling decisions or data.  Moreover, the Court agreed that the subject tools are classifiable under 8203.20.6030, as pliers, because the products 1) are versatile hand tools, 2) have two handles, and 3) have two jaws, that are flat or serrated and are on a pivot, which can be squeezed together to enable the tools to grasp an object. For these reasons, the Court denied defendant’s motion and granted plaintiff’s motion for summary judgment.

 

Upholding Customs’ Classification of Metal Key Operating Locks

In Home Depot U.S.A. Inc. v United States, Slip Op. 17-129, Court No. 14-00061, (September 21, 2017)  the Court decided the proper classification of metal key operated locking hardware articles imported into the U.S. by Home Depot. Customs initially classified the goods under HTSUS subheading 8301.40.6030, at a duty rate of 5.7% ad valorem. Home Depot believed that the goods were properly classifiable under HTSUS subheading 8302.41.6045, at a duty rate of 3.9% ad valorem. For the following reasons the Court agreed with the decision of Customs to classify the goods under HTSUS subheading 8301.40.6030.

Goods imported into the US are classified according to the General Rules of Interpretation “GRI”, which are applied in numerical order. If the proper classification of a good is reached further GRI’s are not applied. GRI 1 requires the Court to determine classification “according to the terms of the headings and any relative section or chapter notes”. Id. at 3. The Court may “rely upon its own understanding of the terms used and may consult lexicographic and scientific authorities, dictionaries, and other reliable information sources.” Id. at 3.  In this case, the Court said that the subject articles were described in whole by Heading 8301. 8301 is used to describe “Padlocks and locks (key, combination or electrically operated), of base metal.” The court said that each device was a locking mechanism and the knobs were incorporated into the locks. The Court said heading 8302 was not applicable because the articles possess features “substantially in excess” of plain door knobs. Because Heading 8301 was applicable and not 8302 the Court explained that the subheadings Customs used were also correct. The goods were properly classifiable under 8301.

 

Sustaining Commerce’s Findings on Remand

In Cooper Tire & Rubber Co. v. United States, Slip Op. 17-130, Court No. 15-00251 (September 25, 2017) the Court examined Commerce’s decisions on remand from a previous decision in the case.  Commerce had assigned plaintiffs a cash deposit rate of 11.13% after ADD and CVD investigations; the rest of the respondents to the investigations received a better rate.  Plaintiffs commenced this action alleging that their cash deposit rate was calculated unlawfully. The Court agreed with plaintiffs, and remanded the issue back to Commerce for reconsideration. On remand, Commerce recalculated the rate and an 8.72% rate as was assigned to the respondent using the weighted average of the export subsidies received by the mandatory respondents in the CVD investigation. However, Commerce instructed Customs to apply the rate 10 days after the Court’s final decision instead of retroactively to when Cooper was paying the 11.13% rate. Cooper sought an injunction for retroactive application. The parties reached an agreement in regards to the terms allowing Customs to refund Cooper, which the Court subsequently entered. Since the parties have reached agreement about the rate and its implementation, the Court upheld Commerce’s findings on remand. 

Claims in Antidumping Case Complaint Require More Detail

A foreign producer’s complaint challenging aspects of the investigation resulting in an antidumping duty against 1-Hydroxythylidine-1, 1-Disphosphonic Acid from China was too vague, requiring a more definite statement of claims, the Court of International Trade recently held. In Nantong Uniphos Chemicals Co. Ltd. v. United States, Slip Op. 17-131 (September 26, 2017), the Court held that allegations in a complaint charging broadly that the Commerce Department “applied excessive and improper adjustments to raw surrogate data”, “misread the record and misapprehended certain key facts” and “erred” in calculating a cash deposit rate, were too general and vague to permit the government to formulate a response, the Court held. These counts were not saved by the fact that other counts had been adequately pleased, the court held. The plaintiff was directed to file an amended Complaint either clarifying or dropping the claims in question.

 

Plaintiff May Not Pursue Action Under Assumed Name

A company fearing “commercial retaliation” from a trademark owner may not bring its challenge to Customs’ grant of “Lever Rule” protection under an assumed name, the Court of International Trade recently held.

In XYZ Corporation v. United States, Slip Op. 17-124 (September 12, 2017), the plaintiff brought its challenge under an assumed name, and the Court entered a protective order which, among other things, protected the plaintiff’s identity. Subsequently, Duracell intervened in the action and moved to force the plaintiff to proceed under its real name, Milecrest Corporation. The CIT held that fear of commercial retaliation was not a sufficient basis to keep the plaintiff’s name under wraps, and ordered the plaintiff to make future filings under its real name. But Duracell’s glee was probably short-lived, because –

 

CIT Rejects Motion to Dismiss Importer’s Challenge to “Lever-Rule” Protection Grant

The Court of International Trade denied a motion by Duracell Corporation to dismiss an importer’s lawsuit challenging a Customs’ grant of “Lever Rule” protection to imported gray market batteries.  In Milecrest Corporation v. United States, Slip Op. 17-125 (September 15, 2017), the court upheld an earlier ruling which denied the Government’s motion to dismiss the action, rejecting new grounds which Duracell offered for dismissal. The CIT had earlier held that the Lever Rule grant was a “ruling” which the court could review under its pre-importation ruling jurisdiction.

Milecrest claims that Customs’ decision granting Lever Rule protection, thereby restricting imports of genuine Duracell batteries, constitutes a “rule” which may not be issued without following the “notice and comment” rulemaking procedures of the Administrative Procedure Act (APA).  Under CBP’s regulations, the agency publishes notice of the receipt of Lever Rule applications, and their approval, in the Customs Bulletin, but does not seek public comment or information.

The CIT held that Milecrest had adequately pleased irreparable harm in its amended Complaint. It also rejected Duracell’s argument that the Lever Rule grant was not a “ruling” subject to judicial review because it was issued under Part 133 of the Customs Regulations, rather than Part 177 (which deals with rulings generally). The court also found that Milecrest had standing to bring the action, and that the action was timely and not barred by the statute of limitations.

Trade Updates for Week of September 20, 2017

United States Court of International Trade

 

Action to Recover Unpaid Duties and a Civil Penalty is Exempt from the Automatic Stay

In United States v. Greenlight Organic, Inc., Court No. 17-31, Slip Op. 17-127 (September 15, 2017), the Court considered whether the automatic bankruptcy stay of 11 U.S.C. § 362(a) (2012)1 applies to an action brought pursuant to 19 U.S.C. § 1592 for fraudulent misrepresentations made in the course of importing merchandise into the commerce of the United States.  Plaintiff argued that the stay was inapplicable because 11 U.S.C. § 362(b)(4) excluded action against a debtor by the government when the case involved the government’s police power.  Defendant argued that the action should be stayed because the government seeks to recover unpaid duties and a penalty for fraud, rather than merely to fix damages for the alleged violation.  The Court held that since the government seeks to enforce United States customs laws related to the fraudulent importation of merchandise and is there an enforcement action under the exemptions.  The automatic stay provisions therefore did not apply and the action will proceed.

 

Sustained Remand Results Concerning 19th Review

In Fresh Garlic Producers Association et. al. v. United States et. al., Slip. Op. 17-127, Court No. 14-00180, (September 19, 2017), the court reviewed Commerce’s determinations on remand concerning the 18th and 19th Administrative Review of the Antidumping Order on Fresh Garlic from China. Previously in the case, the Court remanded the 18th review for selection of a new surrogate country. Commerce reopened the administrative record, after consulting with plaintiffs, and Ukraine was chosen as the surrogate. Defendant-intervenors argued that Commerce should not have reopened the record and the decision to use Ukraine as a surrogate was not supported by evidence. The defendant intervenors also argued the 19th review was invalid because the ADD rates were based on factors from the surrogate country the court rejected in this case. For the following reasons, the Court sustained the results on Commerce’s remand decisions and the outcome of the 19th annual review.

The first issue was Commerce’s decision to reopen the record for choosing a new surrogate country. Intervenors argued since two other countries had been proposed as surrogates the record did not need to be reopened. The Court stated that “reopening the record on remand is a matter largely left up to Commerce’s discretion,” as long as the Court did not forbid Commerce for examining new information. Id. at 8. The Court had previously said that the record may be reopened in this matter and upheld Commerce’s determination. The next issue was Commerce’s selection of Ukraine as a surrogate. Intervenors argued that the decision was unsupported by evidence. The court said “substantial evidence supports Commerce’s determination that Ukraine offers the best available information.” Id. at 14. The Court also suggested that Ukraine offered better statistics for use then the other proposed surrogates. The final issue was the 19th review’s use of the surrogate country rejected by the Court previously in the case. The Court said in determining the non-mandatory respondents’ rate, Commerce is expected to use “the all others’ rate provision of 19 U.S.C. § 1673d(c)(5).” Id. at 20. However, if the rate could not be calculated, Commerce may use reasonable means to determine a rate. Previously, “the court explicitly said that Commerce could use the 18th AR’s rate as long as it resulted in a non-punitive rate”, this was reasonable enough for the Court to uphold Commerce. Id. at 21. Commerce’s determination in the 19th review was therefore, upheld.

 

Trade Updates for Week of September 13, 2017

United States Court of International Trade

 

Preliminary Injunction Granted

In New Mexico Garlic Growers Coalition, et al., and Shandong Jinxiang Zhengyang Import & Export Co., Ltd.  v. United States, Consol. Court No. 17-146, Slip Op. 17-121 (September 7, 2017), the court considered plaintiff-intervenors Shandong Jinxiang Zhengyang Import & Export Co., Ltd. (“Zhengyang”) and Jining Alpha Food Co., Ltd.’s (“Alpha”) partial consent motion for a preliminary injunction to enjoin defendant, the United States (“Defendant”), from liquidating certain of its entries of fresh garlic from the People’s Republic of China.  Despite the government’s arguing that intervenors could not move for a preliminary injunction under court rules, the court granted the motion claiming that such rules were intended to provide deadlines for filing the intervenor motion and did not limit the scope of injunctive relief.   Moreover, the court found that plaintiff intervenors satisfied the requirements for preliminary injunction, where plaintiff-intervenors would suffer irreparable harm because liquidation of entries would bar them from obtaining any benefits from the outcome; where Qingdao Tiantaixing Foods Co., Ltd. (“QTF”) demonstrated likelihood of success on the merits; and where public interest and balance of equities supported plaintiff-intervenor’s position. 

 

Government’s Motion to Dismiss was Denied

Before the Court, in Kent International, Inc. v. United States, Court No.  15-135, Slip Op.  17-23 (September 8, 2017), was Defendant United States’ partial motion to dismiss the second and third causes of action (“Count 2” and “Count 3” respectively) of Plaintiff’s complaint pursuant to USCIT Rule 12(b)(6).   Plaintiff’s Count 2 alleges the existence of an established and uniform practice under Section 315 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1315(d),2 and Count 3,  alleges the existence of a treatment under 19 U.S.C. § 1625(c) and 19 C.F.R. § 177.12(c)(1)(i).  Kent argues that due to existing rulings its imported bicycle seats should be classified under 9401.80, as duty free.   Kent alleges that Customs classified numerous entries of child bicycle seats, duty free, under HTSUS subheading 9401.80 for multiple importers at multiple ports, other than the ports utilized by the Plaintiff.  Plaintiff further alleges that over a seven year period—between 2007 and 2014— Customs classified child bicycle seats for Bell, Todson, and Brix under HTSUS heading 9401, duty free. Kent also claims that, despite the 2005 Ruling, Customs granted Kent’s protests for duty free classification for the Newark entries of its imported merchandise, but failed to grant Kent the same classification for its Long Beach entries. The Court determined that with the existence of a series of rulings and actions by Customs there is uncertainty as to the classification of the imported bicycle seats and that there is plausible claim for Established Uniform Practice (EUP).

As for Count 3, Plaintiff claims that Customs accorded duty-free treatment to children’s bicycle seats between September 21, 2007 (at the latest), and September 22, 2014, as evidenced by the Child Bicycle Seat Rulings and subsequent liquidation of duty free entries for Plaintiff by Newark Customs, and for Bell, Todson, and Brix at other ports. It also appears that Plaintiff’s requested relief is the duty-free reliquidation for its entries from (at the latest) September 21, 2007 through September 22, 2014 by Long Beach Customs. Given the facts presented in the complaint, plaintiff does have a plausible claim which may show the existence of treatment under 19 U.S.C. 1625(c)(2). 

 

Remanded Commerce Decision in Part Regarding Steel Nails from the People’s Republic of China

In Xi’an Metals & Minerals Import & Export Co., Ltd., & The Stanley Works (Langfang) Fastening Systems Co., Ltd. and Stanley Black and Decker, Inc., v. United States, & Mid Continent Steel & Wire, Inc., Slip Op. 17-120, Court No. 15-00109 (September, 6 2017) the Court reviewed Commerce’s determinations from the final results of the Fifth Administrative Review the Antidumping Order covering certain steel nails from the People’s Republic of China (PRC). For the following reasons the Court remanded in part back Commerce for further consideration, but upheld in part other parts of the review.

The first issue was Commerce’s selection of Thailand as the surrogate for the non-market economy (NME) of the PRC. Plaintiffs challenged the selection because, there was reported corruption in Thailand as the military controlled the government during the period of review which inflated statistics.  The Court said the “record evidence of manipulation of Thai customs values does not rise to such a level” where Commerce must reject it. Id. at 11. In regards to the military, “the burden is on the plaintiff, however, to provide for the record evidence to support its argument.” The Court said the plaintiffs did not present enough evidence the military affected surrogate values. Id. at 11. The Court upheld the selection of Thailand as a surrogate.

The next issue was whether the surrogate values used by Commerce were unreliable. Plaintiff believed that the some fees were unreasonable for surrogate calculation.  With regards to the brokerage and handling fees, no arguments happened during the administrative review under Commerce.  The court shall “require the exhaustion of administrative remedies” before jurisdiction can be exercised. Id. at 16. In this case, the Court said “by failing to raise this argument until now, Xi’an Metals deprived ITA of the opportunity to consider the matter” and therefore the Court may not consider the issue. Id. at 17. In regards to the labor fees, plaintiffs argued the fees were counted twice. The Court said “by not removing the various line items such as welfare and social security and compensation that are presumptively included already in the Thai NSO rate, the SV for labor is inflated.” Id. at 24. The Court remanded the labor fees back to Commerce for further consideration.

The final issues were raised by consolidated plaintiffs, who argued that clerical errors made by the respondent inflated the ADD rate and challenged the use of the A-T method by defendant. A decimal point was misplaced in the hundredth column of a spreadsheet provided to Commerce by respondent. Commerce refused to adjust the ADD for such a mistake which led to an increase in the dumping margin of about 30%. Given the large adverse affect, the Court remanded the issue for reconsideration by Commerce. The other issue was the use of the A-T method by plaintiff to calculate dumping margin. In general A-A or T-T method is preferred unless “the existence of a pattern of export prices that differ significantly among customers, regions, or time periods” is found. Id. at 28. Plaintiffs attacked the A-T method for not being in conformity with regulations and as an improper application of the test used to prove irregularities.  The Court said defendant missed the “point that the regulation expressly limits the A-T methodology to those sales that constitute targeted dumping”.  Id. at 36. It was improper for Commerce to apply the A-T methodology to all Stanley sales”. Id. at 37.  In regards to the rest of plaintiff arguments, the Court said “plaintiffs have not established that ITA’s utilization of its differential pricing analysis was out of order”. Id. at 63.  The labor surrogate values and A-T methodology were remanded back to Commerce for further consideration.

 

Trade Updates for Week of September 6, 2017

United States Court of International Trade

 

Remand Ordered in Scope Ruling

In Agilent Technologies, Inc. v. United States, Court No. 16-183, Slip Op. 17-119 (September 1, 2017), the Court reviewed Department of Commerce’s (Commerce’s) scope ruling on Agilent’s mass filter radiator (MFR).  Commerce determined that the MFR is covered by the scope of the antidumping and countervailing duty orders on aluminum extrusions from the People’s Republic of China (“China”). See Final Scope Ruling on Agilent Technologies, Inc.’s Mass Filter Radiator, A-570-967 and C-570-968 (Aug. 10, 2016).  Before the Court was plaintiff’s Rule 56.2 motion for judgment on the agency record, where plaintiff argued that (1) the MFR is within the finished merchandise exclusion because it is a finished product comprised exclusively of aluminum extrusions; and (2) the MFR is within the finished heat sink exclusion because it was designed precisely to have specific thermal resistance properties to remove damaging heat from electronic equipment and the MFR has been tested around meeting certain thermal requirements.  Because Commerce did not fully explain its decision and provided a conclusory statement in its consideration of plaintiff’s objections, the Court remanded the ruling. The Court stated, “The court finds that Commerce’s scope ruling did not adequately discuss the record evidence submitted in support of Agilent’s position, including the R&D Declaration and questionnaire responses. Commerce noted merely that ‘surface finish, flatness, perpendicularity, and locational tolerances’ were ‘not in and of themselves ‘specified thermal performance requirements,’ around which the design and production of the product is organized.’”  Commerce must explain why the description of thermal performance requirements provided by Agilent were insufficient.

 

Remand on a Remand Decision Regarding Polyester Fiber from China

In Zhaoqing Tifo New Fibre Co., Ltd.,  v. United States and DAK Americas LLC., Slip Op. 17-118, Court No. 13-00044 (August 30th 2017) the Court reviewed Commerce’s determination on remand regarding the Fourth Administrative Review of the Antidumping Duty Order on polyester staple fiber from China. Previously in the case, the Court had remanded the review in order for Commerce to reconsider if values for energy expenses, such as coal, had been counted twice in the process and inflated the ADD margin for Zhaoqing. On remand, Commerce reconsidered the selection of financial statements as a whole for the review, instead of the limited scope from the Court regarding potential double counting. Zhaoqing argued that Commerce should not have considered the financial statements and instead should have just considered the remand issued from the Court. For the following reasons, the Court agreed with the Plaintiffs and remanded the issue back to Commerce again with specific instructions to consider if energy costs were double-counted in the surrogate value process.

The main issue in the case was if Commerce reconsidering the financial statements used to calculate surrogate values was outside of the remand scope from the Court. In general, Commerce is given much discretion and “remands that restrict Commerce’s ability to collect and fully analyze data on a contested issue” are disfavored. Id at 30. In this case, Commerce was not permitted to reopen and re-review the settled issue of the agency’s decision in its Final Determination to select the financial statements.  The Court said “the issue of Commerce’s selection of financial statements was laid to rest in the Final Determination” and, because no party sought judicial review, the issue cannot be resurrected. Id. at 34.  Commerce could have done many things which would have met the remand requirements, such as reopening the agency record on the financial statements regarding only the section on energy. Commerce supported their financial statement determination with little evidence and did not give plaintiff’s argument much thought. The case will be remanded again for Commerce to adequately consider if energy costs have been counted twice in the surrogate value process.

 

Preliminary Injunction Granted

In New Mexico Garlic Growers Coalition, et al., and Shandong Jinxiang Zhengyang Import & Export Co., Ltd.  v. United States, Consol. Court No. 17-146, Slip Op. 17-121 (September 7, 2017), the court considered plaintiff-intervenors Shandong Jinxiang Zhengyang Import & Export Co., Ltd. (“Zhengyang”) and Jining Alpha Food Co., Ltd.’s (“Alpha”) partial consent motion for a preliminary injunction to enjoin defendant, the United States (“Defendant”), from liquidating certain of its entries of fresh garlic from the People’s Republic of China.  Despite the government’s arguing that intervenors could not move for a preliminary injunction under court rules, the court granted the motion claiming that such rules were intended to provide deadlines for filing the intervenor motion and did not limit the scope of injunctive relief.   Moreover, the court found that plaintiff intervenors satisfied the requirements for preliminary injunction, where plaintiff-intervenors would suffer irreparable harm because liquidation of entries would bar them from obtaining any benefits from the outcome; where Qingdao Tiantaixing Foods Co., Ltd. (“QTF”) demonstrated likelihood of success on the merits; and where public interest and balance of equities supported plaintiff-intervenor’s position. 

 

Government’s Motion to Dismiss was Denied

Before the Court, in Kent International, Inc. v. United States, Court No.  15-135, Slip Op.  17-23 (September 8, 2017), was Defendant United States’ partial motion to dismiss the second and third causes of action (“Count 2” and “Count 3” respectively) of Plaintiff’s complaint pursuant to USCIT Rule 12(b)(6).   Plaintiff’s Count 2 alleges the existence of an established and uniform practice under Section 315 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1315(d),2 and Count 3,  alleges the existence of a treatment under 19 U.S.C. § 1625(c) and 19 C.F.R. § 177.12(c)(1)(i).  Kent argues that due to existing rulings its imported bicycle seats should be classified under 9401.80, as duty free.   Kent alleges that Customs classified numerous entries of child bicycle seats, duty free, under HTSUS subheading 9401.80 for multiple importers at multiple ports, other than the ports utilized by the Plaintiff.  Plaintiff further alleges that over a seven year period—between 2007 and 2014— Customs classified child bicycle seats for Bell, Todson, and Brix under HTSUS heading 9401, duty free. Kent also claims that, despite the 2005 Ruling, Customs granted Kent’s protests for duty free classification for the Newark entries of its imported merchandise, but failed to grant Kent the same classification for its Long Beach entries. The Court determined that with the existence of a series of rulings and actions by Customs there is uncertainty as to the classification of the imported bicycle seats and that there is plausible claim for Established Uniform Practice (EUP).

As for Count 3, Plaintiff claims that Customs accorded duty-free treatment to children’s bicycle seats between September 21, 2007 (at the latest), and September 22, 2014, as evidenced by the Child Bicycle Seat Rulings and subsequent liquidation of duty free entries for Plaintiff by Newark Customs, and for Bell, Todson, and Brix at other ports. It also appears that Plaintiff’s requested relief is the duty-free reliquidation for its entries from (at the latest) September 21, 2007 through September 22, 2014 by Long Beach Customs. Given the facts presented in the complaint, plaintiff does have a plausible claim which may show the existence of treatment under 19 U.S.C. 1625(c)(2). 

 

Remanded Commerce Decision in Part Regarding Steel Nails from the People’s Republic of China

In Xi’an Metals & Minerals Import & Export Co., Ltd., & The Stanley Works (Langfang) Fastening Systems Co., Ltd. and Stanley Black and Decker, Inc., v. United States, & Mid Continent Steel & Wire, Inc., Slip Op. 17-120, Court No. 15-00109 (September, 6 2017) the Court reviewed Commerce’s determinations from the final results of the Fifth Administrative Review the Antidumping Order covering certain steel nails from the People’s Republic of China (PRC). For the following reasons the Court remanded in part back Commerce for further consideration, but upheld in part other parts of the review.

The first issue was Commerce’s selection of Thailand as the surrogate for the non-market economy (NME) of the PRC. Plaintiffs challenged the selection because, there was reported corruption in Thailand as the military controlled the government during the period of review which inflated statistics.  The Court said the “record evidence of manipulation of Thai customs values does not rise to such a level” where Commerce must reject it. Id. at 11. In regards to the military, “the burden is on the plaintiff, however, to provide for the record evidence to support its argument.” The Court said the plaintiffs did not present enough evidence the military affected surrogate values. Id. at 11. The Court upheld the selection of Thailand as a surrogate.

The next issue was whether the surrogate values used by Commerce were unreliable. Plaintiff believed that the some fees were unreasonable for surrogate calculation.  With regards to the brokerage and handling fees, no arguments happened during the administrative review under Commerce.  The court shall “require the exhaustion of administrative remedies” before jurisdiction can be exercised. Id. at 16. In this case, the Court said “by failing to raise this argument until now, Xi’an Metals deprived ITA of the opportunity to consider the matter” and therefore the Court may not consider the issue. Id. at 17. In regards to the labor fees, plaintiffs argued the fees were counted twice. The Court said “by not removing the various line items such as welfare and social security and compensation that are presumptively included already in the Thai NSO rate, the SV for labor is inflated.” Id. at 24.  The Court remanded the labor fees back to Commerce for further consideration.

The final issues were raised by consolidated plaintiffs, who argued that clerical errors made by the respondent inflated the ADD rate and challenged the use of the A-T method by defendant. A decimal point was misplaced in the hundredth column of a spreadsheet provided to Commerce by respondent. Commerce refused to adjust the ADD for such a mistake which led to an increase in the dumping margin of about 30%. Given the large adverse affect, the Court remanded the issue for reconsideration by Commerce. The other issue was the use of the A-T method by plaintiff to calculate dumping margin. In general A-A or T-T method is preferred unless “the existence of a pattern of export prices that differ significantly among customers, regions, or time periods” is found. Id. at 28. Plaintiffs attacked the A-T method for not being in conformity with regulations and as an improper application of the test used to prove irregularities.  The Court said defendant missed the “point that the regulation expressly limits the A-T methodology to those sales that constitute targeted dumping”.  Id. at 36. It was improper for Commerce to apply the A-T methodology to all Stanley sales”. Id. at 37.  In regards to the rest of plaintiff arguments, the Court said “plaintiffs have not established that ITA’s utilization of its differential pricing analysis was out of order”. Id. at 63.  The labor surrogate values and A-T methodology were remanded back to Commerce for further consideration.

Trade Updates for Week of August 30, 2017

United States Court of International Trade

 

Default Judgment Granted in Penalty Case

In United States v. Deladiep, Inc., Court No. 16-241, Slip Op. 17-108 (August 23, 2017), the United States (“Plaintiff” or “Government”) brought this action against Deladiep, Inc. (“Deladiep”) and John Delatorre (“Mr. Delatorre”) (collectively, “defendants”) to recover unpaid duties and a civil penalty under Section 592 of the Tariff Act of 1930, as amended, 19 U.S.C. §
1592. Because defendants have failed to plead or otherwise defend themselves in this action, the Government requested that the Court enter a default judgment against defendants in the amount of $32,931.53 for unpaid customs duties, plus prejudgment interest, and $87,740.60 as a civil penalty for negligent violations of 19 U.S.C. § 1592(a). Plaintiffs made two entries of flexible magnet sheets representing that they were not subject to antidumping and countervailing duties when they indeed were. Raw Flexible Magnets from the People’s Republic of China, 73 Fed. Reg. 53,847 (Dep’t Commerce Sept. 17, 2008) (antidumping duty order) (“AD Order”); Raw Flexible Magnets from the People’s Republic of China, 73 Fed. Reg. 53,849 (Dep’t Commerce Sept. 17, 2008) (countervailing duty order) (“CVD Order”). The scope of both orders covers “certain flexible magnets regardless of shape, color, or packaging.” AD Order, 73 Fed. Reg. at 53,847; CVD Order, 73 Fed. Reg. at 53,850. Magnets subject to these orders imported from exporters that have not been assigned an individual rate are subject to an antidumping duty rate of 185.28 percent and a countervailing duty rate of 109.95 percent. Customs issued notices of action that the AD and CVD rates applied but Deladiep only responded that the merchandise was sold to law enforcement entities and did not contest the action demanding AD and CVD. 

Moreover, Deladiep did not pay the assessed AD and CVD duties. Because defendant has not argued as to why the imported magnets were out of scope of the orders, and because defendant has not responded to the complaint the Court issued default
judgment in favor of plaintiff for $32,931.53 for duties plus pre-judgment interest and $17,548.12 for the civil penalty.

 

Sustained Remand Results on Ball Bearings and Parts

In BMW North America LLC v. United States, Court No. 15-52, Slip Op. 17-109 (August 23, 2017), BMW of North America LLC (“BMW”) challenged the final determination in the 2010-2011 administrative review of the antidumping duty order on ball bearings and parts thereof from the United Kingdom. See Ball Bearings and Parts Thereof, From Japan and the
United Kingdom, 80 Fed. Reg. 4,248 (Dep’t Commerce Jan. 27, 2015) (final results for administrative review 2010–2011), as amended. In an earlier decision, the Court remanded Commerce’s decision to issue a 254.25 percent rate to BMW. On remand, Commerce assigned a 126.44 percent margin under its statutory obligations, and the Court found this decision to be supported by substantial evidence. For this reason, the Court sustained the remand results.

 

Commerce Determination on Pasta Remanded

In La Molisana S.p.A. v. United States, Court No. 16-47, Slip Op.17-111 (August 23, 2107), the plaintiff, La Molisana S.p.A., challenges two determinations from the eighteenth (2013-2014) antidumping duty administrative review of certain dry pasta from
Italy1: (1) whether the U.S. Department of Commerce, International Trade Administration (“Commerce” or “Department”) erred in requiring La Molisana’s pasta sales product shapes to be reported without variance from the proceeding’s pasta
shape classification list; and whether Commerce failed to provide meaningful opportunity for addressing the agency’s differential pricing analysis.  The Court remanded Commerce’s decision in requiring plaintiff’s sales product shapes to be reported without variance, where the questionnaire itself contemplates revisions and the record shows that the production of various cuts of pasta should be re-classified due to the similarity in line speeds as exemplar cuts. Moreover, defendant voluntarily requested a remand in regards to Commerce’s differential price analysis.


Commerce Decision Sustained in Multilayered Wood Flooring from China Case

In Linyi Bonn Flooring Manufacturing, Inc. v. United States, Court No. 15-227, Slip Op. 17-113 (August 25, 2017), the Court sustained Commerce’s remand decision where it was satisfied that Commerce complied with the Court’s previous Order. Before the court was the decision (the “Remand Redetermination”) the International Trade Administration, U.S. Department of Commerce (“Commerce” or the “Department”) issued in response to the court’s order in Linyi Bonn Flooring Mfg. Co. v. United States, 41 C.I.T. __, 222 F. Supp. 3d 1274 (2017) (“Linyi Bonn”). Final Results of Redetermination Pursuant to Court Order (June 19, 2017), ECF No. 53 (“Remand Redeterm.”). The Court stated, “The court concludes that the court’s order was satisfied by the Department’s method of allowing Linyi Bonn the opportunity to demonstrate for the record that it had no shipments of subject merchandise during the period of June 1 through November 30, 2013. Accordingly, the court sustains the Department’s ultimate determination that “Linyi Bonn had no shipments that are subject to the second administrative review.” Slip Op, pg. 6.

Trade Updates for Week of August 23, 2017

United States Court of International Trade

 

Decision on Welded Line Pipe Remanded in Part

In Toscelik Profil Ve Sac Endustriusi A.S., and Tosyali Dis Ticaret A.S. v. United States, Court No. 15-339, Slip Op. 17-107 (August 22, 2017), the Court considered plaintiffs’ motion for judgment on the agency record filed by Plaintiffs Cayirova Boru Sanayi ve Ticaret A.S./Yucel Boru Ithalat-Ihracat ve Pazarlama A.S. (collectively, “Yucel”) and Toscelik Profil ve Sac Endustrisi A.S./Tosyali Dis Ticaret A.S. (collectively, “Toscelik”). This action involves the U.S. Department of Commerce (“Commerce”) antidumping duty investigation covering Welded Line Pipe from the Republic of Korea and the Republic of Turkey. See Welded Line Pipe From the Republic of Turkey, 80 Fed. Reg. 61,362 (Dep’t of Commerce Oct. 13, 2015) (final determination of sales at less than fair value) (Final Determination).  The Court determined that Commerce’s normal use of the invoice date as the date of sale is a presumption that must not be disturbed unless a better date is established that correctly reflects the date on which the exporter or producer provides the material terms of sale.  Thus, the Court sustained the use of the invoice date since Yucel has not provided sufficient evidence to the contrary.  As for drawback, Commerce requested an unopposed remand to address its treatment of plaintiffs’ duty drawback claims.  The Court thus granted the remand.

 

Commerce’s Decision Remanded in Part regarding Silicon Photovoltaic Cells

In Changzhou Trina Solar Energy Co., Ltd., & Solarworld Americas, Inc. v. United States, & Solarworld Americas, Inc., & Changzhou Trina Solar Energy Co., Ltd., Slip Op. 17-106, Court No. 16-00157 (August 18, 2017) the Court heard arguments about Commerce’s decisions from the second annual review of the countervailing duty order on crystalline silicon photovoltaic cells from the People’s Republic of China (“PRC”). Plaintiffs argued Commerce erred by finding US Customers did not use a loan program sponsored by the respondent, by averaging data sets for the benchmark price of solar glass, by choosing not to average data sets for an ocean freight benchmark adjustment, and by including value added tax (“VAT”) in its benchmark calculations. For the following reasons, the Court agreed with Commerce on three issues, but remanded back to the agency to reconsider its decision to average data in calculating the solar glass benchmark.

The first issue was the loan credit program used by the respondent. In the administrative review Commerce determined that no customers from mandatory respondent, JA Solar, used the credit program.  The respondent submitted to Commerce declarations that none of their US customers used the program, however the PRC government did not cooperate or submit any declarations.  Plaintiffs believed that because the PRC government did not cooperate, Commerce should have applied adverse facts available (“AFA”) and found use of the program. Commerce should use the AFA “when an interested party . . . withholds information that has been requested.” Id. at 6. However, Commerce should “seek to avoid such impact if relevant information exists elsewhere on the record.” Id. at 7.  The Court agreed with Commerce that the declarations on the record that no US customers used the program was substantial evidence enough to not use any AFA. The next issue involved Commerce averaging data from respondents IHS Technology and Global Trade Atlas.  Commerce concluded that the IHS data was more specific than the GTA data, but that the GTA data was favorable because it was reported in an annual statistic rather than IHS’s monthly, so Commerce averaged the data.  The Court agreed with plaintiffs and said that Commerce’s decision to average the data was not supported by evidence on the record. The Court remanded to Commerce for an opportunity to provide this evidence to support averaging.

The next issue was Commerce’s decision to use ocean freight data submitted by respondent, JA Solar, rather than Solarwold’s data because the JA Solar’s data was from the period of review, and specific to the forty foot containers used to ship the goods. Plaintiff argued this decision was not supported by substantial evidence.  The Court said that “Commerce has broad discretion in determining how to adjust the world market benchmark price to reflect costs incurred by purchasers so long as it does so reasonably.” The court agreed with Commerce that the evidence on the record, data from the POR and involving the forty foot containers, was enough to use it. The final issue was Commerce’s decision to include VAT in the calculation for benchmark prices. Plaintiffs argued regulations prevent Commerce from including any adjustment other than delivery charges and import duties, because the regulation lists these and does not explicitly state that other adjustments are allowed. Commerce believed inclusion of VAT is allowed under law. Commerce is allowed to make adjustments “to reflect the price that a firm actually paid or would pay if it imported the product,” but the statue does not make clear whether that includes VAT. Id. at 15.  The Court agreed with Commerce because the agency’s interpretation to include the VAT was not “plainly erroneous or inconsistent with the regulation”. Id. at 19.

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].