Trade Updates for Week of January 23, 2019

United States Court of International Trade

Commerce Determination Regarding Pneumatic Off-the-Road Tires Remanded in Part

Before the Court in China Mfrs. Alliance, LLC et. al. v. United States, Slip Op. 19-07, Court No. 15-00124 (January 16, 2019) were the remand determinations of Commerce in regards to an administrative review of pneumatic off-the-road tires from China. Two issues remained before the Court from the remand determinations, whether the deductions from export price (“EP”) and constructed export price (“CEP”) for Chinese value-added tax (“VAT”) were lawful, whether charges were double counted in the calculation of a surrogate value for freight expenses. For the following reasons the Court sustained the remand determinations in part and remanded back to Commerce in part.

“Under the statutory scheme, a domestic value-added tax, whether or not refunded or avoided by reason of the exportation of the finished good, does not increase a dumping margin.” Id. at 10. In this case, Commerce made margin increasing, adjustments to plaintiffs’ EP and CEP based on “irrecoverable VAT included in the prices of materials used to make subject merchandise.” Id. at 11. The Court said “Commerce erred in finding, without any evidentiary support, that Chinese irrecoverable VAT is a tax not imposed on the domestic good.” Id. at 19.  In regards, to the surrogate values, statute directs Commerce to reduce U.S. price by “the amount, if any, included in such price, attributable to any additional costs, charges, or expenses, and United States import duties, which are incident to bringing the subject merchandise from the original place of shipment in the exporting country to the place of delivery in the United States.” Id. at 19. Plaintiffs claim “Commerce double counted some costs by including them both in the brokerage and handling surrogate value and in the ocean freight costs, thereby overstating the CEP deduction required.” Id. at 21. On remand, Commerce determined four of the costs in question were related to activities in the United States and they dropped from the calculations. However, plaintiffs argued that some cost were still double counted such as ocean freight, which should have been counted as inland transportation cost. The Court said “Commerce must ensure that no costs are double counted.” Id. at 25.


Default Judgment Granted

Before the Court in United States v. Six Star Wholesale, Inc., Slip Op. 19-07, Court No. 14-00252 (January 18, 2019) was a motion for a default judgment against defendant for a civil penalty for unpaid duties resulting from the alleged negligent misclassification of certain wire hangers and polyethylene retail carrier bags imported into the U.S. For the following reasons the Court granted the plaintiffs motion for default judgement.

The court considers three factors when considering a default judgment, “whether (1) denial of the motion will prejudice plaintiff; (2) defendant has a meritorious defense; and (3) defendant’s culpable conduct contributed to the default.” Id. at 5-6. The Court said that “denial of the motion prejudices the Government because Defendant’s failure to respond has prevented the Government’s collection of lost revenue and penalties,” that defendant “had the opportunity to present a meritorious defense, but chose not to defend this action,” and that defendant demonstrated “conscious disregard for the laws governing the importation of merchandise.” Id. at 6. The Court further said “the public interest favors a substantial penalty,” and granted the government pre and post action interest on the unpaid duties, fees and a civil penalty double the amount of the unpaid duties, totaling $529,684.06. Id. at 14.

Determination Regarding No Shipment Certification Remanded

Before the Court in Tosçelik Profil Ve Sac Endüstrisi A.S. et. al.  v. United States, Slip Op. 19-09, Court No. 17-00255 (January 18, 2019) was plaintiffs, Tosçelik Profil Ve Sac Endüstrisi A.S. (“Tosçelik”) and Erbosan Erciyas Boru Sanayi Ve Ticaret A.S (“Erbosan”), challenge to Commerce’s final results in an administrative review of the countervailing duty (“CVD”) order on circular welded carbon steel pipes and tubes from Turkey. For the following reasons the court sustained Commerce’s determinations for Tosçelik’s hot-rolled steel (“HRS”) issues, and remands Commerce’s determination regarding Erbosan’s no shipment certification for further consideration.

During a CVD investigation “Commerce will normally seek to measure the adequacy of remuneration by comparing the government price to a market-determined price for the good or service resulting from actual transactions in the country in question, which could include prices stemming from actual transactions between private parties.” Id. at 4.  Tosçelik made many arguments regarding Commerce determination regarding possible countervailable subsidies. However, the Court said plaintiff had relied on indirect evidence and that a reasonable mind could come to the determinations Commerce had reached. Erbosan challenged Commerce’s denial of its no shipment certification based on Customs and Border Protection (“CBP”) data demonstrating that Erbosan’s subject merchandise entered the United States. Commerce is required to “provide an explanation of the basis for its determination that addresses relevant arguments made by interested parties.” Id. at 10. In this case, the Court said that Commerce failed to provide such an explanation and just “simply concluded that record evidence contradicts Erbosan’s assertions.” Id.

United States Court of Appeals for the Federal Circuit

Ninth Circuit Revives RICO Claims in Garlic Antidumping Case

The Court of Appeals for the Ninth Circuit has revived certain Racketeer Influenced and Corrupt Organization (RICO) civil claims brought by a Chinese garlic exporter who claims that competitors wrongfully used the Commerce Department’s antidumping review procedures to attack it.

The story in Harmoni International Spice Inc. v. Hume, et al., No. 17-55926 (January 23, 2019), mirrors one currently being played out in the trade courts. Harmoni is a Chinese garlic exporter which was assigned a “zero” antidumping duty rate by the Commerce Department in an antidumping proceeding. The defendants include a small New Mexico-based garlic grower, two attorneys representing the grower, and a Chinese consulting firm. Harmoni charges that the defendants conspired to injure it by (1) filing frivolous claims with the Commerce Department for  a review of Harmoni’s antidumping rate, forcing Harmoni to spend money to appear and defend itself in review proceedings, (2) costing Harmoni customers through these actions, and (3) injuring Harmoni’s reputation by making frivolous claims of misconduct in the antidumping proceedings. Harmoni also charged that the defendants conspired to underpay antidumping duties by filing entries with false documentation.

The case also alleges that the New Mexico growers’ efforts are actually made at the behest of Harmoni’s Chinese competitors.

A district court dismissed Harmoni’s claims, holding that the company’s pleadings did not establish a causal nexus between the defendant’s actions and Harmoni’s claims. On appeal, the Ninth Circuit ruled that while the Complaint did not have adequate allegations of causal nexus, Harmoni should be granted leave to file an amended Complaint with additional factual allegations concerning its claims of injury arising from the allegedly frivolous Commerce Department proceedings. [The false documentation claims could not be revived]. The Circuit Court also rejected the defendants’ claims that the only party which might assert RICO claims might be the Commerce Department itself.

The Ninth Circuit decision echoes concerns recently voiced by the United States Court of International Trade in New Mexico Garlic Growers Coalition v. United States, Slip Op. 18-162 (November 26, 2018), in which the Commerce Department rejected as “void ab initio” an effort by the New Mexico growers to seek a review of the antidumping order on Fresh Garlic from China. The CIT in that case raised serious concerns about the propriety of the New Mexico growers’ activities.