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 However, Commerce rescinded the review with respect to Hongda, and the garlic was subject to the full PRC rate.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].

Trade Updates for Week of July 5, 2017

United States Court of International Trade

  

Labor FOP was Reconsidered on Remand

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

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

 

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

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

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

 

 

United States Court of Appeals for the Federal Circuit

Lower Court Decision on Offset Affirmed

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

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

 

Trade Updates for Week of June 28, 2017

United States Court of International Trade

 

Commerce’s Decision on Certain Steel Nails Remanded

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

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

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

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

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

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

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

 

 

Case Dismissed Where No Relief Available

 

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

 

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

 

Trade Updates for Week of June 21, 2017

 

United States Court of International Trade

 

EAJA Fees Award in Trade Adjustment Assistance Case

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

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

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

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

 

Trade Updates for Week of June 14, 2017

United States Court of International Trade

 

Decision Remanded Back to Commerce

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

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

 

Remand Decision Remanded Again to Commerce  

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

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

 

Court Sustained Commerce’s Findings in Garlic Case

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

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

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

 

United States Court of Appeals for the Federal Circuit

Reversed ITC Decision Regarding Infringement of Sonar Patents

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

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

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

 

Federal Circuit Affirms Commission’s Findings

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

 

Trade Updates for Week of June 7, 2017

United States Court of International Trade

 

Decision Remanded Back to Commerce

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

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

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

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

 

Sustained Remand Results

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

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

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

 

Trade Updates for Week of May 31, 2017

United States Court of International Trade

 

Decision Remanded in Part Back to Commerce

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

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

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

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

 

Extended Liquidations were Held to Be Lawful

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

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

 

United States Court of Appeals for the Federal Circuit

 

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

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

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

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

 

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

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

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

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

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

 

United States Supreme Court

 

Foreign Sale Exhausts Patent Rights, as Does Domestic Sale

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

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

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

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

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

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

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

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

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

 

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

 

Trade Updates for Week of May 24, 2017

United States Court of Appeals for the Federal Circuit

 

Affirmed Decision that Finding No Violation of Section 337

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

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

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