Trade Courts Updates for Week of March 26, 2015

United States Court of International Trade

Results from Aluminum Extrusions Review Remanded in Part

Tai Shan City Kam Kiu Aluminum Extrusion Co., Ltd. v. United States, Court No. 14-16, Slip Op. 15-21 (March 20, 2015) came before the court as a result of Plaintiff’s, Tai Shan City Kam Kiu Aluminium Extrusion Co. Ltd., (“Kam Kiu” or “Plaintiff”), USCIT Rule 56.2 motion for judgment on the agency record challenging the United States Department of Commerce’s (“Commerce”) administrative review of the countervailing duty order covering certain aluminum extrusions from the People’s Republic of China (“PRC”). See Aluminum Extrusions From the People’s Republic of China, 79 Fed. Reg. 106 (Dep’t Commerce (Jan. 2, 2014) (final results of countervailing duty administrative review; 2010 and 2011).  Kam Kiu commenced this action, pursuant to 19 U.S.C. § 1516a (2012), to challenge Commerce’s use of adverse facts available (“AFA”) in calculating Kam Kiu’s rate. While Defendant United States, and Defendant-intervenor, Aluminum Extrusions Fair Trade Committee, opposed this motion, Kam Kiu argued that Commerce abused its discretion by not considering Kam Kiu’s quantity and value (“Q&V”) submission, and, as a result, applying a rate based on facts available with an adverse inference. Alternatively, Kam Kiu argued that the rate Commerce calculated for Kam Kiu was not supported by substantial evidence or in accordance with law. For the following reasons, Commerce acted reasonably and within its discretion in disregarding late submitted information, using facts otherwise available and applying an adverse inference to Kam Kiu. However, Commerce’s AFA rate as applied to Kam Kiu was unsupported by substantial evidence because Commerce failed to corroborate the rate.

In selecting mandatory respondents, Commerce determined to limit the number of respondents it would review by choosing companies that accounted for the largest volume of subject merchandise. Because Kam Kiu did not respond pursuant to the designated deadline, Kam Kiu was treated as an uncooperative respondent, and despite, Kam Kiu’s late submissions, it was assigned a 121.22% rate based on facts otherwise available with an adverse inference.

The court found substantial evidence to support Commerce’s disregard of untimely supplied information and application of AFA.  Because Commerce selected mandatory respondents as early as November 2012, Commerce’s administrative process in the countervailing duty review could be compromised if it had to consider late-filed responses to the Q&V questionnaire.  Commerce would have to restart its respondent selection process each time a respondent submitted Q&V information late, or, as in this case, after signing the preliminary results. Such a systemic burden outweighed any potential benefit to Kam Kiu.  Moreover Kam Kiu’s failure to maintain adequate procedures in filing a response did not excuse its inaction here.  Finally, Kam Kiu had sufficient notice that it was being named as a respondent through the notice of initiation in the Federal Register and Maclean-Fogg certifying that it served a copy of its request for review specifically on Kam Kiu.  Under these facts, Commerce had not abused its discretion or acted unreasonably in disregarding plaintiff’s untimely filed response.

However, the court did not find substantial evidence in Kam Kiu’s AFA rate because it was not fully corroborated.   Kam Kiu specifically argued that Commerce unlawfully assigned rates from location specific subsidy programs spanning across the entire PRC and one program Kam Kiu claimed was plainly not for the industry within which Kam Kiu operates. Kam Kiu thus argued that applying all the rates resulted in a rate that was unsupported and punitive.  While the court found that Commerce tried to determine whether it was unreasonable to attribute location-specific subsidies to the company, Commerce has not tried to corroborate programs with independent sources, nor the idea that Kam Kiu could not have benefitted from all subsidies covering the entire PRC – all at the same time. As the court stated, “Commerce has turned corroboration on its head by presuming that Kam Kiu availed itself of all subsidies provided by the Chinese government, and only eliminating programs Kam Kiu demonstrated it could not have conceivably used.  . . . As applied to Kam Kiu, this method was not consistent with Commerce’s obligation to corroborate the rate assigned to Kam Kiu’s ‘actual rate, albeit with some built-in increase intended as a deterrent to non-compliance.’ ”  Slip Op. pg. 21.  The court suggested that Commerce review the untimely filed responses and other information available on the record to substantially corroborate the AFA rate. For this reason, the court remanded Commerce’s decision in part.

 

Default Judgment Set Aside as Per Plaintiff’s Motion

 In NYCC, Inc. v. United States, Court No. 14-45, Slip Op.15-25 (March 25, 2015), due to inaccuracies in evidence set forth by the Government in its original claims and relied upon by the Court in granting initial Default Judgment against defendant, the Court set aside Default Judgment and reopened action to allow Plaintiff to file a corrected motion for default judgment.  

 

Court Denied Plaintiff’s Motion for Judgment on Agency Record, But Remanded Decision to Apply AFA Rate

In Fengchi Import & Export Co., Ltd. et al. v. United States et al., Court No. 13-186, Slip Op. 15-23 (March 25, 2015), Plaintiffs Fengchi Import and Export Co., Ltd. of Haicheng City, Fengchi Refractories Co. of Haicheng City, and Fedmet Resources Corporation (collectively “Plaintiffs”), moved for judgment on the agency record contesting defendant United States Department of Commerce’s (“Commerce”) determination in Certain Magnesia Carbon Bricks (MCBs) From the People’s Republic of China: Final Results and Final Partial Rescission of Antidumping Duty Administrative Review; 2010–2011, 78 Fed. Reg. 22,230 (Apr. 15, 2013) (“Final Results”). Concurrent with 2010-2011 Administrative Review, Commerce conducted a scope inquiry to determine whether magnesia alumina carbon bricks (“MACBs”) from the PRC were subject to the Orders. After issuing the MACB Scope Ruling which found MACBs within MCB scope, Commerce sent a supplemental questionnaire to Fengchi indicating its intention to consider sales of MACBs as part of the 2010-2011 Administrative Review.  Moreover, Commerce requested that Fengchi confirm whether it had reported all sales of subject merchandise, including MACBs, in its initial questionnaire responses, and if not, it requested that Fengchi provide such information.  When Fengchi failed to provide the requested sales and responses, it was hit with the 236% rate in April 2013. Plaintiffs brought suit and contested the following aspects of the Final Results: Commerce’s request for sales information on magnesium alumina carbon bricks (MACBs); Commerce’s application of adverse facts available (AFA); Commerce’s selection of 236% as the AFA rate.

For purposes of Commerce’s request for plaintiff’s sales information regarding MACBs, Commerce’s interpretation of section 351.225(l)(4) was consistent with the plain language of the regulation. Section 351.225(l)(4) does not proscribe Commerce’s power to collect information on a respondent’s sales of a product subject to a scope ruling issued over ninety-days after the initiation of the review, so long as it is practicable to do so. 19 C.F.R. § 351.225. It does, however, permit Commerce to decline to collect such information and instead rely on non-adverse facts available. Plaintiffs argued that Commerce’s request was impracticable because there was no time to consider the sales data and because consideration of its MACB sales data would require Commerce to modify the control number product hierarchy, surrogate country, and surrogate value data, where there was not sufficient time remaining in the review.  The court found no merit to such arguments where Commerce requested that Fengchi provide information on its MACB sales on August 3, 2012, well before the October 1, 2012 deadline for its preliminary determination, and Commerce repeatedly offered to extend the deadline for Fengchi to provide the requested information, but Fengchi declined to comply with Commerce’s request.  Moreover, as long as the information sought was for products in MCB scope, Commerce would not have to modify other product hierarchy, surrogate country or surrogate value data.

As for AFA, Fengchi’s refusal to provide information on its MACB sales demonstrated a failure to comply with Commerce’s request for information, and thus, Commerce reasonably applied AFA.

The court then turned to the 236% AFA rate as it applied to Fengchi.  Commerce determined that the rate was relevant to Fengchi by comparing the CBP data for Fengchi’s five MACB sales with the data Commerce used to determine the petition rate. Specifically, Commerce found that the U.S. sales price from the petition rate was within the range of the average unit values for Fengchi’s entries. Additionally, Commerce found that the usage rates for the factors of production in the petition were within the range of values of Fengchi’s reported usage rates. Because the rate was both reliable and relevant to Fengchi, Commerce found that it adequately corroborated the 236% petition rate.

However, while the instant case was before the court, the Federal Circuit issued a decision in Fedmet Resources Corp. v. United States, 755 F.3d. 912, (Fed. Cir. 2014) (mandate issued on Feb. 4, 2015), holding that certain MACBs from the PRC were outside the scope of the antidumping order. The Court became concerned that Commerce used out of scope sales to corroborate the 236% rate. Because the Federal Circuit’s decision in Fedmet may potentially affect the reasonableness of Commerce’s corroboration of the AFA rate, the court remanded this issue so that Commerce had the opportunity to address this concern at the administrative level with the benefit of comment from Plaintiffs and Defendant-Intervenors.

 

United States Court of Appeals for the Federal Circuit

Affirmed ITC Commission No-Violation Decision Regarding Patents on WiFi Chips

In LSI Corporation and Agere Systems LLC v. United States International Trade Commission et al., Court No. 2014-1410 (March 20, 2015),   LSI Corporation and Agere Systems LLC (collectively, LSI) appealed from an order of the United States International Trade Commission. That order rejected LSI’s allegation that Funai Electric Co., Ltd., Funai Corporation, Inc., P&F USA, Inc., Funai Service Corporation, and Realtek Semiconductor Corporation (Funai and Realtek) violated 19 U.S.C. § 1337 by importing WiFi chips or chipcontaining products that, according to LSI, infringed two of LSI’s patents—U.S. Patent Nos. 6,452,958  (‘958 patent) and 6,707,867 (‘867 patent).

The Federal Circuit affirmed the Commission’s no-violation decision regarding the ’958 patent.  It made such a conclusion based on the fact that LSI has shown no error in the Commission’s finding that LSI failed to establish the existence of the required domestic industry. LSI only argued that the Commission acted arbitrarily and capriciously by retroactively applying a purportedly “brand new legal standard” announced by the Commission in its January 2014 Certain Computers decision to an evidentiary record produced in early 2013. LSI also contended that, had it known that it would be required to prove a licensing related article covered by the patent, it would have provided additional evidence sufficient to meet that standard.  LSI has not questioned the Commission’s substantive interpretation of § 1337(a)(3)(C) in Certain Computers, or disputed the Commission’s understanding of that provision. Moreover, LSI has not challenged the Commission’s finding that LSI’s proof failed to meet the standard the Commission applied.  Because LSI’s arguments were focused entirely on notice at the close of discovery and the submission of evidence, the Federal Circuit rejected LSI’s arguments and affirmed the Commission’s findings as to lack of a domestic industry.   The Federal Circuit refrained from addressing the infringement and invalidity rulings of the Commission.

As to the ’867 patent, LSI has not shown that the Commission abused its discretion in declining to vacate the Administrative Law Judge’s (ALJ) finding of no violation based on that patent. The Commission asserted that, because it undertook to review the ALJ’s findings on the ’867 patent but “t[ook] no position” on them,  there was no “final determination” on the ’867 patent that the Federal Circuit could review. Although the Commission took no position on the substance of the ALJ’s findings, it issued an order that finally terminated the investigation regarding the ’867 patent and denied vacatur of the ALJ’s decision. Again, because there was no showing of abuse of discretion, the Federal Circuit affirmed the Commission’s findings.