United States Court of International Trade
Court Remanded in Part Redetermination Results Regarding Floor-Standing, Metal-Top Ironing Tables from China
In Foshan Shunde Yongjian Housewares & Hardwares Co., Ltd., v. United States, Court No. 12-69, Slip Op. 16-1 (January 8, 2016), the court considered, Final Results of Redetermination, ECF No. 64 (“Remand Results”) filed by Commerce pursuant to Foshan Shunde Yongjian Housewares & Hardwares Co. v. United States, 37 CIT ___, 896 F. Supp. 2d 1313 (2013) (“Foshan I”). The underlying action involved the U.S. Department of Commerce’s (“Commerce”) sixth administrative review of the antidumping duty order covering Floor- Standing, Metal-Top Ironing Tables from China. See Floor-Standing, Metal-Top Ironing Tables and Certain Parts Thereof from the People’s Republic of China, 77 Fed. Reg. 14,499 (Dep’t of Commerce Mar. 12, 2012) (final results admin. review) (Final Results).
Foshan Shunde Yongjian Housewares & Hardwares Co., Ltd. (“Foshan Shunde”) challenges several aspects of the Remand Results: (1) Commerce’s use of a provision in the Harmonized Tariff Schedule (“HTS”) that includes high-carbon steel to value its steel wire input; (2) Commerce’s use of the World Bank’s Doing Business 2010: Indonesia publication to value Foshan Shunde’s brokerage and handling (“B&H”), or in the alternative, Commerce’s failure to adjust the World Bank data to reflect Foshan Shunde’s actual experience; and (3) Commerce’s application of zeroing.
As for the application of a higher carbon steel wire, Commerce, on remand, replaced the higher cost, high carbon surrogate value with a surrogate value derived from the broader six-digit HTS subheading 7217.10 that includes both high carbon and low carbon steel wire. However, the court still does not understand why a provision with a higher carbon would be applied where it was shown in Foshan I that Foshan Shunde would not use such high carbon steel to make ironingboards. The court holds that the relatively lower cost, low carbon surrogate value derived from Indonesian HTS subheading 7217.10.10 is the only surrogate value on this administrative record that a reasonable mind would select as the best available information for Foshan Shunde’s steel wire input. Accordingly, the court remands this issue to Commerce to use HTS subheading 7217.10.10 to calculate Foshan Shunde’s steel wire input.
Foshan Shunde also challenged the broker & handling charges value based on Doing Business 2010: Indonesia over other sources in the record. However the court sustained this finding where it was sourced from the primary surrogate country, reflected a broad market average, and was publicly available and contemporaneous with the period at issue.
As for zeroing, Foshan Shunde argued that zeroing using the average to transaction method (A-T) was less accurate in a non-market economy where the average value does generally change over time. However, the court disagreed with the comparison between A-T use in a non-market versus in a market economy. Zeroing in previous cases was allowed using A-T methodologies in the non-market economy over average to average (A-A) methods because it uses individual transaction values over average transaction prices. Moreover, Foshan Shunde did not explain how this practice in a non-market economy eliminates the comparative advantage of A-T over A-A. For this reason, the court sustained this finding.
Less than Fair Value Determination Remanded in Part
In CC Metals and Alloys, LLC, and Globe Specialty Metals, Inc. v. United States, Court No. 14-202, Slip Op. 16-3 (January 12, 2106), Plaintiffs CC Metals and Alloys, LLC, and Globe Specialty Metals, Inc. (“Plaintiffs”) moved for judgment on the agency record. This action involved the U.S. Department of Commerce’s (“Commerce”) final negative determination in the less than fair value investigation of ferrosilicon from the Russian Federation. See Ferrosilicon from the Russian Federation, 79 Fed. Reg. 44,393 (Dep’t of Commerce July 31, 2014) (final LTFV determ.). Plaintiffs challenged Commerce’s date of sale selection and model matching analysis, as well as Commerce’s treatment of certain revenue and expenses. The court sustained Commerce’s determination in part and remanded to Commerce the warehousing and imputed credit expense issues for further consideration.
As for date of sale, Commerce, selected the invoice date as the date of sale for RFA International LP’s (“RFAI”) home market sales, including RFAI’s “storage sales.” These “storage sales” were “bill-and-hold” type transactions where RFAI’s affiliated producer Chelyabinsk Electrometallurgical Integrated Plant Joint Stock Company (“CHEMK”) stored customers’ ferrosilicon after the invoice was issued for delivery at a later date. Plaintiffs argued that Commerce should not have selected the invoice date as the date of sale for these storage sales because of differences between the ferrosilicon described in the invoices and the ferrosilicon CHEMK delivered. Plaintiffs may challenge the invoice date, only if there is some other date of sale where terms of sale are firmly and finally established. Because Commerce “normally” uses invoice date as the date of sale, 19 C.F.R. § 351.401(i), and no other date of sale establishing firm terms were provided, the court sustained this finding.
Despite Plaintiffs arguments challenging use of “as invoiced” sales characteristics in its model-matching analysis, Commerce reasonably found that any differences between the “as delivered” and “as invoiced” merchandise were not material. Moreover, Plaintiffs’ argument about the size for model-matching purposes was not material to change Commerce’s determination. The court sustained this determination.
As for inbound expenses, Plaintiffs challenged Commerce’s decision to accept RFAI’s methodology for allocating movement expenses in calculating constructed export price. Specifically, Plaintiffs argued that four different types of movement expenses should have been allocated by the quantity of ferrosilicon RFAI shipped to the U.S. during the period of review (“POR”) rather than the quantity of ferrosilicon RFAI sold in the U.S. during the POR. “Because Plaintiffs’ methodology did not tie to RFAI’s books and records and had the potential to cause inaccuracies and distortions, Commerce reasonably concluded that RFAI’s allocation was ‘as specific as RFAI was able to provide.’” Slip Op. pg. 21. The court sustained this finding.
However the court did issue a remand on the warehouse expenses, where Commerce capped CHEMK’s warehousing expenses which would alter normal value. In CHEMK’s case, warehousing expenses were incurred before goods were moved to the production facility and thus were not included. The court did not agree with Defendant’s post hoc rationalization for not applying such expenses.
As for imputing credit expenses, Commerce adjusts normal value to account for differences in the circumstances of sale in the United States and foreign markets under 19 U.S.C. § 1677b(a)(6)(C)(iii). Such an adjustment is made to account for differences in credit terms by “imput[ing] a U.S. credit expense and a foreign market credit expense on each sale.” Plaintiffs challenged the interest Commerce selected to calculate RFAI’s home market imputed credit expenses. RFAI’s affiliated producer CHEMK used “factoring” arrangements to finance receivables on home market sales denominated in rubles during the period of review. According to the court, factoring is a recognized form of financing that involves the sale of receivables at a discounted rate. After the Preliminary Results but before verification, RFAI notified Commerce in a corrections submission that it believed CHEMK’s factoring arrangements could be applied as a short-term borrowing experience. Commerce thereafter used an average of the rates applicable to the sales it verified as the rate for RFAI’s imputed credit expense.
While the court did not agree that this credit expense should have been rejected, the court found that Commerce may have run afoul Policy Bulletin 98.2 when it assigned a factor related interest rate. Commerce described its selection as “the average of factoring-related interest rates that [it] verified,” which did not appear to be a weighted average as described in Policy Bulletin 98.2. Therefore, the court remanded this decision back to Commerce to consider whether it violated Policy Bulleting 98.2 by applying a simple average.
Customs Doesn’t Get to Interpret Ambiguities in Dumping Orders, CIT Funds
In a major rebuke to Customs and Border Protection, the U.S. Court of International Trade has ruled that the agency may not “interpret” ambiguous terms in antidumping orders and act on its interpretation by demand cash deposits of importers.
In Supreme Inc. v. United States, Slip Op. 16-02 (January 8, 2016), Judge Claire Kelly granted an importer’s motion to preliminarily enjoin CBP from collect cash deposits of estimated antidumping duties on the company’s imported solar modules using “thin film” technology. In the event of a question concerning interpretation of an antidumping order, where Customs cannot act and decide on the basis of discerned facts, the agency must wait for the Commerce Department to initiate a scope inquiry before suspending liquidation of an importer’s entries.
California-based Sunpreme imported solar power modules using proprietary thin film technology without depositing estimated antidumping duties, in reliance on the “thin film” exclusion contained in the antidumping order against Crystalline Silicon Photovoltaic Cells from China. During 2015, Customs began investigating the company’s imports, and the company cooperated, providing samples for testing by the Customs Laboratory, and inviting CBP officials to tour its facilities. The Customs Laboratory acknowledged the thin film present in the imported modules, but noted that the modules had physical features in common with other, covered solar cells. CBP then began requiring the importer to post cash deposits of estimated antidumping duties, first at the “China-wide”, rate, alter at the specific rate assigned to the Chinese producer-exporter. By late 2015, however, the company had tied up substantial money in antidumping deposits, while insisting its product was covered by the “thin film” exception to the order, and continued deposits were threatening to force the company out of business. It brought suit in the CIT, securing a Temporary Restraining Order against further collection of estimated duties, and moving for a preliminary injunction.
The government, bless their eternally predictable hearts, moved to dismiss the case, claiming the CIT lacked subject matter jurisdiction to hear the case under its residual jurisdiction, and alternatively claiming that the plaintiff had failed to state a claim on which relief could be granted.
The Court rejected the motion to dismiss for lack of jurisdiction, holding that Sunpreme did not have a cause of action regarding CBP’s action which could be brought under the Court’s 28 USC §1581(c) jurisdiction to review decisions in antidumping and countervailing duty proceedings. The Court also held that the importer would not have an opportunity to challenge CBP’s actions by protest.
Turning to the motion to dismiss for failure to state a claim on which relief could be granted, the Court found that Sunpreme had squarely brought an action to challenge CBP’s ultra vires decision to interpret what it considered to be ambiguous language in the antidumping order, and to take action on its interpretation by requiring cash deposits of antidumping duties. If Customs has questions about whether an import fits within the scope of an antidumping order, and cannot resolve those questions based on observed facts and the language of the order, the agency may not act, but must await action by the Commerce Department, which has the power and expertise to issue a scope determination. The Court rebuked CBP in no uncertain terms:
In order to act within its designated role, CBP must be able to point to clear language in the scope of the Orders, including any exclusions, that places goods within the scope based upon observable facts. Where factual determinations alone to not permit CBP to determine whether a good is within the scope or outside the scope of the orders, goods must be considered outside of the scope until Commerce clarifies or interprets the orders and clarifies what products should be included.
Turning to the injunction application, the Court found that Sunpreme had satisfied the requirements for a preliminary injunction, showing a likelihood of irreparable harm if CBP was not enjoined, and a likelihood of success on the merits of its claims. The balance of hardships favored Sunpreme, and the public interest favored fair and balanced enforcement of the Customs and trade laws. Sunpreme was required to post security as a condition of its injunction, but CBP was restrained from collecting duties until Commerce made a scope determination authorizing their collection.
Canadian International Trade Tribunal
Zippers Without Pulls are Parts “Of Plastic”, Rather than “Of Textiles
“Zipper parts” consisting of a plastic slide fastener on a textile backing, are classified as “other” slide fastener parts, rather than as parts “of textile materials”, the Canadian International Trade Tribunal held recently.
In Rimowa North America Inc. v. President, Canada Border Services Agency, AP No. 2015-004 (January 6, 2016), the merchandise was a plastic zipper without a pull. CBSA classified the article as a slide fastener part “of textile materials”, and the importer challenged the classification. Interestingly, the Tribunal did not perform an “essential character” analysis and determine that the plastic teeth were more important than the textile backing. Rather, it resolved the case on General Rule of Interpretation 1 to the tariff, holding that since the articles contained more than just textiles, they were more than “of textile materials”. The competing provision for “other” parts covered any parts not wholly of textiles, the Tribunal ruled.
“Combi-Boilers” Classified as Boilers of HTS Heading 8403
“Combi-boilers”, designed to provide gas-fired hot water for heating homes, but also capable of heating water for domestic dispensing from a tap, are “multifunction machines” whose principal function is as a Boiler, of HTS Heading 8403, the Canadian International Trade Tribunal ruled in EMCO Corp. Ltd. v. President, Canada Border Services Agency, AP No. 2014-042 (December 21, 2015).
The product in question was a gas-fired devices which, internally, and without need of a tank, heated water for a hot water domestic heating system. On the other hand, when a tap was opened in a household plumbing system, indicating a request for hot water, the product was able to shift water to a different heat exchanger, which supplied hot water to the tap. The importer argued that the item was a multifunction machine, and that its principal function was that of a boiler in HTS Heading 8403. The CBSA argued that the product was more appropriately classified under Heading 8419 as a gas-fired water heater.
The Tribunal held that the product was a multifunction machine, classifiable according to its principal use. That use was as a boiler, the Tribunal indicated, noting that the product could provide heat to a 2,500 square foot home, but had limited functionality in supplying domestic hot water. The Tribunal was also influence by the fact that the product met technical standards for certification as a boiler for home use.