Trade Courts Updates for Week of April 8, 2015

United States Court of International Trade

Commission’s Final Determination Sustained

In Coalition of Gulf Shrimp Industries v. United States et al., Court No. 13-386, Slip Op. 15-29 (April 3, 2015),  Plaintiff Coalition of Gulf Shrimp Industries’ (“Plaintiff” or “COGSI” or “Petitioner”) moved for Judgment on the Agency Record pursuant to USCIT Rule 56.2, challenging the U.S. International Trade Commission’s(“Defendant” or “ITC” or “Commission”) negative final determination in the countervailing duty (“CVD”) investigation concerning frozen warmwater shrimp from various countries published as Frozen Warmwater Shrimp from China, Ecuador, India, Malaysia, and Vietnam, 78 Fed. Reg. 64,009 (ITC Oct. 25, 2013) (final determination) (“Final Determination”), P.R. 393, and the accompanying views of the Commission, USITC Pub. 4429, Inv. Nos. 701-TA-491-493, 495 and 497 (final) (Oct. 2012) (“Views”), P.R. 382, C.R. 1282.   The Court denied Plaintiff’s motion and sustained the ITC’s negative final injury determination.

As per COGSI’s allegation that the ITC relied solely on the rate of increase in its volume analysis, the Commission stated that it “clearly considered all of the statutory factors relating to subject import volume.”  The ITC considered the absolute volume and market share and  found that “the absolute volumes and market share of subject imports” were significant but that “the increases in the volumes and market share of subject imports” were not significant because “they were not made at the expense of the domestic industry[,] whose shipment and market share also increased.” Slip Op. pg. 8.  The ITC found that both subject imports and shipments by the domestic industry increased during the POI at the expense of the nonsubject imports, particularly from Thailand.  Thus, it was precisely because subject imports did not fully offset this substantial decline in nonsubject imports that the domestic industry was able to increase its shipments and market share during the POI, which suggests that the industry was not significantly affected by the increases in subject imports.  Because the ITC was afforded much discretion on how it weighed the relevant factors, and because the Court does not reweigh evidence, the Court did not disturb the ITC’s conclusion that the increases in the volumes and market share of subject imports were not significant.  Thus, there was substantial evidence to support the ITC’s volume decision.

As for underselling, COGSI claimed that the data “showed subject imports underselling domestic product” about 64% of the time, and also “showed the frequency and intensity of underselling increasing over the POI as the volume of imports rose,” citing an underselling rate jump from 40.7% at the beginning of the POI in 2010 to 84.2% by the end of the POI in interim 2013. COGSI further asserted that the ITC had not addressed “the price-sensitivity of the domestic shrimp market and the fact that both purchasers and processors reported imports were priced lower than domestic product.”  See Slip Op. pg. 11.  According to the Court, the ITC has discretion to select a data set that it will use in its investigation, and in the instant case, the ITC explained that it “collected a comprehensive pricing data base” from the questionnaire responses and decided to use that data set.  The Court found that when the ITC “has reliable, comprehensive pricing data obtained from its questionnaire responses, as it did in the underlying investigations,” it has “consistently relied on that data, rather than rely on alternative public source data series.” Slip Op., pg. 12.  The Court agreed with the ITC that its chosen methodology—relying on its questionnaire responses—was reasonable. The Court therefore affirmed the underselling aspect of the Final Results.

As per price suppression, COGSI asserted that by excluding one processor’s 2012 data, the ITC violated the statutory mandate to define industry as “the producers as a whole of the domestic like product.” However, the Commission acknowledged that the domestic industry’s COGS/net sales ratio slightly increased over the POI but determined that this increase “was significantly affected by the substantial increases in one producer’s COGS/net sales that were associated with a factory relocation and machinery/equipment upgrade [ ] in 2012.”  Slip Op. pg. 15.  Thus, the Court found that the ITC’s decision to exclude a processor that had a one-time relocation expense which skewed the data was supported by record evidence.

Furthermore, COGSI alleged “as subject imports rose from 2010 to 2012, fishermen’s number of workers, hours worked, days at sea, and operating income all declined, and their already high ratio of operating expenses to net sales increased.” Additionally, “[s]hrimp processors’ operating income was marginal and also declined” during the POI. COGSI alleged the ITC appeared to improperly rely on non-operating “other” income, such as BP Oil settlement payments and CDSOA distributions, despite the fact that COGSI admits the ITC “correctly classified [these items] as ‘other income’ and properly distinguished [this other income] from the industry’s primary operations,” in reaching a negative injury determination.  However, according to the Court, the ITC found that the net income of fishermen and processors was positive throughout the POI and exceeded their operating income each year,” and that the evidence showed that the domestic industry’s financial performance continued at a marginal level and declined at the end of the POI. As a whole this showed, that there was no material injury as it related to the subject imports.  The industry’s net income levels benefitted from CDSOA distributions and BP Oil Spill compensation.

Because the BP Oil Spill “was the worst in U.S. history” and “significantly disrupted domestic shrimp production in 2010,” COGSI claimed that the ITC should have started the POI in 2009 rather than 2010.  However, the Court found that the ITC has broad discretion in determining the POI and according to the ITC a 3 year period was consistent with past practice.  ITC explained that using 2009 as a starting point would have resulted in an unrepresentative reference point because 2009 generally reflected the industry’s second highest landings and shipment levels during the 2005-2012 period.   ITC not only considered typical factors, such as supply, demand, and substitutability, found in every investigation or review but also considered conditions distinctive to this investigation, such as the BP Oil Spill and EMS, in its investigation.  For these reasons a 3 year POI was sustained.

As for the threat determination, the Court found substantial evidence.  In its analysis, the ITC found that there were many “positive trends” and it appeared that the subject imports had not adversely affected the domestic industry as the industry was able to increase its market share and shipments and to increase prices overall.   For all these reasons, and because the ITC could not make the requisite finding of causation, the ITC could not make a material injury determination resulting from the subject imports.