Trade Court Updates for Week of March 5, 2015

United States Court of International Trade

The Court Sustained Commerce’s Final Remand Results in Polyethylene Terephthalate Film Review

In DuPont Teijin Films China Limited et al. v. United States et al., Court No. 13-229, Slip Op. 15-19 (February 27, 2015), the Court of International Trade sustained Commerce’s remand results.  This court reviewed the U.S. Department of Commerce’s  (“Commerce”) final results in the third antidumping duty administrative review of polyethylene terephthalate (“PET”) film, sheet, and strip from the People’s Republic of China. See DuPont Teijin Films China Ltd. v. United States, 7 F. Supp. 3d 1338 (CIT 2014); Polyethylene Terephthalate Film, Sheet, and Strip From the People’s Republic of China: Final Results of Antidumping Duty Administrative Review; 2010–2011, 78 Fed. Reg. 35,245 (Dep’t Commerce June 12, 2013) (“Final Results”). The court remanded to Commerce for it to reconsider its valuation of DuPont’s recycled PET chip and brokerage and handling issues expenses. Regarding the recycled PET chip, the court held that Commerce’s valuation of DuPont’s recycled PET chip input as virgin PET chip while denying DuPont a by-product offset for the recyclable PET chips produced in the manufacturing process was unreasonable because it resulted in double counting. The court gave Commerce the option of either valuing the recycled PET chip input at zero or providing a by-product offset for the recyclable PET chip produced. Regarding the brokerage and handling expenses, the court held that Commerce’s calculations of DuPont’s customs clearance costs and document preparation expenses were unreasonable because it assumed that these expenses would be based on the weight of a container rather than based on a shipment as a whole. On remand, Commerce granted DuPont a by-product offset for the recyclable PET waste it produces.  Commerce also divided the surrogate values for the document preparation and customs clearance costs by the weight of DuPont’s shipments. DuPont’s dumping margin decreased from 12.80 percent to 4.42 percent. Commerce applied this decrease to Wanhua’s rate as well.  Accordingly, Commerce’s Remand Results complied with the court’s remand order and were supported by substantial evidence, and since no party has objected, the court sustained the results. 

Court Remanded Final Results in Eighth Dumping Review 

In Vinh Hoan Coporation et al. v. United States et al., Court No. 13-156, Slip Op. 15-16, (public version published on February 27, 2015), the court decided USCIT Rule 56.2 motions for judgment on the agency record, challenging the Department of Commerce’s (“Department” or “Commerce”) determination in Certain Frozen Fish Fillets From the Socialist Republic of Vietnam, 78 Fed. Reg. 17,350 (Dep’t Commerce Mar. 21, 2013) (final results of eighth antidumping duty administrative review and ninth new shipper review) (“Final Results”), as amended, 78 Fed. Reg. 29,323 (Dep’t Commerce May 20, 2013) (“Amended Final Results”). Vinh Hoan Corporation (“Vinh Hoan”) commenced this action pursuant to section 516A of the Tariff Act of 1930, as amended, 19 U.S.C. § 1516a (2012).  The court consolidated Vinh Hoan’s challenge with actions filed by Vietnam Association of Seafood Exporters and Producers (collectively “VASEP”), Binh An Seafood Joint Stock Company (“Binh An”), Anvifish Joint Stock Company and Vinh Quang Fisheries Corporation (“Anvifish and Vinh Quang”), and Catfish Farmers of America, an association of processors and growers, and individual U.S. catfish processors, America’s Catch, Alabama Catfish Inc. dba Harvest Select Catfish, Inc., Heartland Catfish Company, Magnolia Processing, Inc. dba Pride of Pond, and Simmons Farm Raised Catfish, Inc. (collectively “Catfish Farmers of America”). In addition to the above named parties’ Rule 56.2 motions, Catfish Farmers of America filed a response, as a defendant-intervenor.

First, the court considered Commerce’s methodology in selecting a primary surrogate country as well as Commerce’s analysis of nonfish factors of production, financial statements and whole fish in selecting a primary surrogate country. VASEP argued Commerce’s decision to consider the 2010 GNI data from the OP List, but not to consider 2011 GNI data and 2010 GDP data, and to reject Subsequent Review GNI Lists was contrary to law. The court sustained Commerce’s decisions to disregard the 2010 GDP data, where it has been Commerce’s long standing practice and because GDP data was unreliable as it is derived from two sources, the World Bank and the International Monetary Fund.  Further, the court sustained Commerce’s rejection of Subsequent Review GNI Lists which were considered factual information and were submitted untimely according to Commerce, and it sustained the application of non-fish factors as Vinh Hoan is highly integrated and the largest seller of the subject merchandise.

However, the court found that Commerce’s decision to disregard the 2011 GNI data was contrary to law, where it did not consider such data in determining a primary surrogate country and where Commerce was under obligation to consider all record evidence.  The court further found that the record in this case required Commerce to compare relative economic comparability with the data of the potential surrogate countries. Although Commerce was not required to choose a primary surrogate country that was the most economically comparable, Commerce was required to use the best available information to value the factors of production.  The court therefore remanded the primary surrogate selection back to Commerce.  If Commerce continued to rely on factors other than whole fish to make its primary surrogate country selection, it must explain why Indonesian data for these nonfish FOPs was the best available information.  Moreover, it should explain why the IAS Data was more reliable than the DAM Data in primary surrogate selection.

Second, as to factors of production and Commerce’s analysis of specific surrogate values, the court reserved its decision until after remand and the primary surrogate selection had been revisited by Commerce. The court granted Commerce’s voluntary remand regarding Commerce’s fish oil calculation.

Third, as for Commerce’s treatment of certain sales as consignment sales, the court remanded this decision for Commerce to reconsider its decision to treat all sales to one customer as consignment sales or explain why it is doing so despite record evidence that only some sales to such customers were consignment sales. 

Fourth, the court sustained Commerce’s decision to include sample transactions in its margin calculation where no evidence was provided to support plaintiff’s challenge. 

Finally, the court remanded Commerce’s normal value calculation for Vin Hoan, specifically its refusal to adjust the ratio used to value Vinh Hoan’s FOPs. Catfish Farmers of America demonstrated with record evidence below that “(1) Vinh Hoan’s U.S. sales did not include any glazed sales; and (2) each factor ratio reported by Vinh Hoan was calculated with a denominator that includes glazed weight.”  Commerce did not adequately explain why no adjustment was necessary to make a fair comparison or why it could not make such an adjustment.  For all these reasons, the court remanded the Final Results.

CIT Denies Motion to Strike Summary Judgment Motion in Duty Collection Case

The request of importers and their surety to strike a Summary Judgment motion in a case seeking to collection of duties and penalties was denied, but the Summary Judgment motion was stayed, according to a procedural ruling from the U.S. Court of International Trade. 

In United States v. American Casualty Co. of Reading, PA, Slip Op. 15-20 (March 5, 2015), the defendants objected to a government motion for summary judgment, claiming that the identity of two witnesses whose affidavits were attached to the motion had not previously been disclosed to them, and that the affidavits were intended to prejudice the court. Noting that motions to strike are a drastic and disfavored remedy, the court noted that one of the affiants had not previously been identified to the defendants, and that they should have the opportunity to depose him before being required to respond to the summary judgment motion. The court stayed the motion pending further proceedings. As to the second affiant, the Court found that his identity had been disclosed to the defendants. 

The court stayed the summary judgment motion until after the defendants= pending Motion to dismiss the case is decided. 

CIT Concludes Longstanding Squabble over Bearing Duties

A multi-party dispute over antidumping duties charged on Ball Bearings from Japan was recently put to rest in the U.S. Court of International Trade. In JTEKT Corporation v. United States, the Court reviewed a final remand order dealing with the 16th annual review of the order, and affirmed the Commerce Department's use of Azeroing@ to determine weighted average dumping margins in the review. The court also granted a motion by plaintiff JTEKT to sever its claims from other consolidated claims, so that the company's entries could be liquidated in accordance with the final results of the review. 


Note: The information contained in this memorandum is for general information only, and is not intended as advice or counsel regarding any specific situation. If you have an issue relating to the subject matter discussed in this memorandum, you should consult with counsel or your customs advisers concerning the proper course of action to be followed in your case.

Entire contents copyright 2015 by Neville Peterson LLP.

For additional information concerning the subjects discussed in this Neville Peterson LLP background memorandum, please contact our offices at (212) 635-2730 or (202) 861-2959, or e-mail using the mailbox on this Website.

Trade Court Updates for Week of February 11, 2015

U.S. Court of International Trade

Motion for Default Judgment Granted

In United States v. NYCC 1959, Inc., Court No. 14-45, Slip Op. 15-13 (February 6, 2015), the United States brings this action to recover a civil penalty as permitted by Section 592 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1592 (2012) (“Section 592”).  Defendant NYCC failed to timely appear, plead, or otherwise defend, default was entered against it, and the government moved for default judgment pursuant to USCIT Rule 55(b).  Because the defendant defaulted in appearing and because the allegations were well-plead and supported by an affirmation, the court granted the motion for default judgment.  The court held, “Because the false entry information was material to Customs’ evaluation of NYCC’s duty liability for the attempted entry, the Government’s factual allegations, deemed admitted by the defaulting defendant, establish that NYCC attempted to enter merchandise into the commerce of the United States by means of information that was both material and false.”  Slip Op, pg. 4.  Moreover, because the penalty amount at $15,310 was lesser than “the domestic value of the merchandise” or “four times the lawful duties, taxes, and fees of which the United States is or may be deprived,” the court upheld the penalty and found that defendant NYCC was liable. For all of the foregoing reasons, the Government’s motion for default judgment against NYCC for a grossly negligent violation of 19 U.S.C. § 1592(a) was granted. 

United States Court of Appeals for the Federal Circuit

Affirming CIT Decision Regarding Export Price 

In Apex Exports & Falcon Marine Exports Limited v. United States, et al., 2014-1234 (February 5, 2015), the Ad Hoc Shrimp Trade Action Committee appealed the final decision of the Court of International Trade (“CIT”), sustaining the refusal by the Department of Commerce (“Commerce”) to deduct antidumping duties when calculating an export price. 

Antidumping duties are levied when foreign merchandise is sold in the United States at less than fair value and such sales pose a threat to domestic industry. 19 U.S.C. § 1673 (2012). Commerce calculates the antidumping duty using the export price methodology where Commerce determines whether subject merchandise is being sold at less than fair value. If it is, Commerce determines how much less, and then assesses antidumping duties to make up the difference.  For purposes of this export price methodology, Commerce first determines the “export price” (“EP”) which is the price that the first unaffiliated U.S. buyer pays for the subject merchandise. 19 U.S.C. § 1677a(a) (2012). Then, Commerce calculates the “normal value” (“NV”). This is treated as the fair value, and it is the price at which the subject merchandise is sold in the exporting country. 19 U.S.C. § 1677b(a)(1)(B)(i) (2012). If EP is lower than NV, and it poses a threat to U.S. industry, then Commerce assesses a duty “equal to the amount by which the normal value exceeds the export price.” Commerce sets the duty by determining the dumping margin. A weighted average dumping margin is the difference between NV and EP, then divided by EP ((NV − EP)/EP). 19 U.S.C. § 1677(35) (2012). The goal of this methodology is to compare fair value with price paid in the United States, allowing for adjustments. For purposes of this case, EP is adjusted by the cost of bringing goods to the United States for example, freight expenses, U.S. customs duties, and port charges. 

In 2005, Commerce made a final determination that certain shrimp imported from India were likely being sold in the U.S. at less than fair market value inCertain Frozen Warmwater Shrimp from India, 70 Fed. Reg. 5147 (Feb. 1, 2005) (notice of amended final determination). During the fifth administrative review of that antidumping order, shrimp exporters Apex Exports (“Apex”) and Falcon Marine Exports Limited (“Falcon”) were selected as individual respondents. Commerce assessed a 2.31% and 1.36% dumping margin for Apex and Falcon, respectively.  Certain Frozen Warmwater Shrimp from India, 76 Fed. Reg. 41203, 41205 (July 13, 2011) (final admin. review, partial rescission, and final determination). Apex and Falcon brought suit in the CIT, challenging the dumping margins assigned to them as excessive because of an alleged error by Commerce in calculating the normal value of their exports. The CIT rejected their claim, and they do not appeal. Ad Hoc Shrimp Trade Action Committee (“Ad Hoc”), an intervenor-defendant association of domestic shrimp producers which participated in the administrative proceeding, also challenged the dumping margins in the CIT. Ad Hoc argued that the EP of the merchandise sold by Apex and Falcon should be recalculated by the deduction of the amount of antidumping duties assessed on their exports and paid by Apex and Falcon. Such a deduction would have the effect of increasing the dumping margins  Because the words of the applicable statute were abundantly clear, Ad Hoc argued that the deduction of “additional costs, charges, or expenses” associated with importation was required, regardless of whether Commerce refused to make such deductions. 

The Federal Circuit in reviewing Commerce’s statutory interpretations, applied the two-part framework laid out in ChevronUnion Steel v. United States, 713 F.3d 1101,1106–07 (Fed. Cir. 2013) (citing Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842–43(1984)). The first step in the Chevron analysis asks if the statute in question is ambiguous. If not, the statute speaks for itself in its plain language, and the interpretation springing from the unambiguous language governs. Where the statute is ambiguous, the second step asks if the interpretation proffered by the government is reasonable. 

The Federal Circuit held that the statute was ambiguous as Congress was unclear as to what exactly was deducted as “import duties.” The Federal Circuit stated that “[t]his Court previously held that “Congress has not defined or explained the meaning or scope of ‘United States import duties’ as set forth in 19 U.S.C. § 1677a(c)(2)(A).” Wheatland Tube Co. v. United States, 495 F.3d 1355, 1359 (Fed. Cir. 2007). We agree that Congress was similarly silent on the precise definition of § 1677a(c)(2)(A)’s “any additional costs, charges, or expenses”—and specifically silent as to whether antidumping duties fall within that definition.”  As such, the Federal Circuit then determined that Commerce’s interpretation was reasonable.  Specifically, it stated that Commerce’s refusal to deduct antidumping duties from EP was entitled to deference, as it was consistent with the goals of the statute, and reflects Commerce’s long-standing practice.  

Ad Hoc further argued that because of the reimbursement regulation, the antidumping duties should be deducted where the exporter reimburses the importer for payment of the additional duties due to dumping.  However, Commerce refused to double count duty where it has already been paid by the importer, and thus, Commerce’s general approach of refusing to deduct antidumping duties addresses the situation where the importer has to pay antidumping duties itself.  For these reasons, the Federal Circuit affirmed the CIT’s findings that sustained Commerce’s final determination.


Note: The information contained in this memorandum is for general information only, and is not intended as advice or counsel regarding any specific situation. If you have an issue relating to the subject matter discussed in this memorandum, you should consult with counsel or your customs advisers concerning the proper course of action to be followed in your case.

Entire contents copyright 2015 by Neville Peterson LLP.

For additional information concerning the subjects discussed in this Neville Peterson LLP background memorandum, please contact our offices at (212) 635-2730 or (202) 861-2959, or e-mail using the mailbox on this Website.

Trade Court Updates for Week of February 4, 2015

U.S. Court of International Trade

Final Results Affirmed in Part and Remanded in Part; Defendants Collaterally Estopped from Defending Fifteen Day Liquidation Rule

In NTN Bearing Corporation of America, et al., v. United States and the Timken Company (Defendant-intervenor), Court No. 10-286, Slip Op. 15-12 (February 3, 2015), plaintiffs (collectively, “NTN”) contested the final determination (“Final Results”) issued by the International Trade Administration, U.S. Department of Commerce (“Commerce” or the “Department”), to conclude a set of administrative reviews of antidumping duty orders on ball bearings and parts thereof (“subject merchandise”) from France, Germany, Italy, Japan, and the United Kingdom.  Plaintiffs asserted claims stemming from the antidumping order on subject bearings from Japan.  For Count I, they challenged the Department’s use of zeroing in the twentieth administrative review, to which Commerce assigned to U.S. sales made above normal value a dumping margin of zero.  In Count II, they challenged the Department’s issuance of liquidation instructions to Customs and Border Protection (“CBP”) fifteen days after the publication of the final results of the review, and in Count III, plaintiffs asserted that Commerce made clerical and other methodological errors in calculating NTN’s credit expenses by failing to use updated information from NTN’s supplemental questionnaire. Plaintiff-intervenor JTEKT Corp., a Japanese producer and exporter of ball bearings, and an affiliated importer, joined in the “zeroing” claim.  While defendants claimed that plaintiffs did not have subject matter jurisdiction to assert claims I and III, the Court decided to find subject matter jurisdiction over such claims which is subject to judicial review under 19 U.S.C.§1516a(b)(1)(B)(i). Additionally, the court has subject matter jurisdiction over Count II under 28 U.S.C. §1581(i).

As for Count I, the court rejected such a claim where Union Steel v. United States, 713 F.3d 1101, 1103 (Fed. Cir. 2013) (“Union Steel II”) held permissible the Department’s construction of the antidumping statute that authorized the use of zeroing in administrative reviews despite the Department’s decision not to use zeroing in antidumping investigations.  Thus, the court affirmed the Department’s use of zeroing.

For purposes of Count III, the court allowed a voluntary remand for the Department to correct its inadvertent use of “CREDITU” variable in calculating the constructed export price (CEP).  Finally, for  Count II, because SKF USA Inc. v. United States, 35 CIT__, __, 800 F. Supp. 2d 1316, 1326-28 (2011) (“SKF V”) found the rule to liquidate entries fifteen days after publication of the final results, as applied, was unlawful, defendants were collaterally estopped from defending the fifteen-day rule in the twentieth administrative review as applied to NTN, where defendants had full and fair opportunity to litigate that issue in SKF V.  As for defendants challenge to NTN’s standing to challenge the fifteen day liquidation instructions, the court reiterated, “Due to the burden of filing a summons and a complaint and obtaining an injunction against liquidation within fifteen days of publication, the application of the fifteen-day rule caused and adverse effect on NTN following publication of the final results of the twentieth reviews that is capable of repetition in future reviews.” The court held that NTN had shown injury in fact sufficient for standing.  However, NTN had no relief when asking the court to correct the Department’s November 2010 announcement which continually applied the fifteen day rule in the face of declaratory judgments issued by this court that such practice was unlawful.

Final Results of Remand Redetermination Affirmed

Changshan Peer Bearing Company, Ltd. and Peer Bearing Company v. United States and Timken Company, the  v. United States, concerned the final determination by the U.S. Department of Commerce in the twenty-third administrative review of an antidumping duty order on tapered roller bearings and parts thereof from the People’s Republic of China.  Court No. 12-00039, Slip Op. 15-10 (February 2, 2015).  Previously, the Court remanded the Final Results to Commerce to reconsider the method of determining a surrogate value for certain bearing-quality alloy steel bars used as material in the production of the tapered roller bearings.  Before the Court was Plaintiffs’ challenge to the Remand Redetermination, in which Commerce decided not to reopen the administrative record and not to modify its valuation of the steel bar input.  The surrogate value for the input in the Remand Redetermination continued to be based on Indian import data. 

The Court affirmed Commerce’s use of the Indian import data rather than the market-economy-country data to determine the surrogate value for the steel bar input.  Commerce explained that market-economy purchase prices are only used for producers whose market economy-purchases comprise 33 percent of the total volume of steel bar input purchased to produce the tapered roller bearings.  Commerce also offered as an explanation the fact that market-economy purchase prices are not representative of the producers experience, are not publicly available, are not from an economically comparable country, and are not broad market averages.  While the market-economy purchase data might be superior in that it describes the steel bars actually purchased for use in making the tapered roller bearings, all other statutory guidance support Commerce’s decision to use the Indian import data.  Finding that Commerce was justified in using the Indian import data, the Court affirmed the Remand Redetermination in that respect. 

The Court affirmed the Remand Redetermination in full, finding that Plaintiffs’ objections were meritless.  The Court rejected Plaintiffs’ first argument that Commerce erred in rejecting certain market-economy purchase data from one producer but accepting the same data from a different producer, reasoning that it was reasonable for Commerce to limit the use of market-economy purchase data to one producer due to its statutory directives.  Furthermore, Commerce’s decision not to reopen the record was reasonable given that the Court did not direct the agency to reopen the record, but rather left it to Commerce’s discretion.  The agency provided a rational explanation for its decision.  Finally, cases cited by Plaintiff as directing Commerce to use the market-economy data are not binding precedent and each can be easily distinguishable from the case at bar.

United States Court of Appeals for the Federal Circuit

Federal Circuit B CIT Lacks Jurisdiction Over Challenges to Rulings, Court Holds

Again turning cases away from the Court of International Trade, the Court of Appeals for the Federal Circuit has ruled that the CIT lacks subject matter jurisdiction to hear challenges to the issuance and revocation of Customs rulings.

In Best Key Textiles Co. v. United States, No. 2014-1327 (February 3, 2015), the recipient of a ruling concerning the tariff classification of metalized yarn challenged Customs decision to revoke the ruling as being Aarbitrary, capricious, an abuse of discretion, and not otherwise in accordance with law@, in violation of the Administrative Procedure Act. The plaintiff contended that it had lost $200 million in customer orders as a result of the revocation, and asked the court to review both the substance of the ruling and the process by which it was revoked. The ruling recipient could not file a protest on the classification of its yarn, since the revocation ruling assigned it a lower rate of duty than applied to metalized yarn. The plaintiff=s damage was not in the payment of Customs duties, but in the loss of business, it contended.

After initially dismissing the case for lack of subject matter jurisdiction, the CIT reconsidered and reinstated the case, and upheld the revocation ruling. Best Key appealed to the Federal Circuit.

In its decision, the Federal Circuit ignored the merits of the plaintiff=s claim altogether, and told the CIT to reinstate its earlier ruling dismissing the action for lack of subject matter jurisdiction. The plaintiff was not trying to vindicate its own rights, the appellate court said, but the rights of its customers who would be assessed with higher duties on garments made with the yarn. The plaintiff=s remedy, the Court held, would be to go into the garment business, import garments and pay the higher duty, and then slog through the traditional protest procedure B a years-long undertaking which, in any event, would not lead to review of the contested ruling. The plaintiff did not have a case which could be heard under the CIT=s 28 U.S.C. '1581(I) residual jurisdiction which, the Court indicated, must be Astrictly construed@.The decision should be alarming to the trade community, since it suggests that Customs rulings, and their revocation or modification, are not judicially reviewable C or perhaps reviewable only in the Federal District Courts.

The Federal Circuit Affirms CIT Decision to Deny Motion for Judgment on Agency Record

In Dongtai Peak Honey Industry Co., Ltd. v. United States, 2014-1479 (January 31, 2015), Dongtai Peak Honey Industry Co., Ltd. (“Dongtai Peak”) appealed the decision of the United States Court of International Trade (“CIT”) denying its Motion  for Judgment on the Agency Record. See Dongtai PeakHoney Indus. Co. v. United States, 971 F. Supp. 2d 1234

(Ct. Int’l Trade 2014). Because the United States Department of Commerce (“Commerce”) properly exercised its discretion in denying Dongtai Peak’s untimely filings, and because Commerce’s decisions to treat Dongtai Peak as part of the China-wide entity and to impose a dumping margin based on adverse facts available were supported by substantial evidence and were in accordance with law, this court affirms. Dongtai Peak challenged Commerce’s decisions to deny untimely supplemental filings where good cause was allegedly shown.  Dongtai Peak pointed to such reasons as difficulties in communication between the rural-Chinese based Appellant and its U.S counsel, Chinese holidays, debilitating computer systems, and burdens of responding to the Supplemental questionnaire. 

However, the Federal Circuit found none of these reasons to be good cause in light of the obligations under the regulations and the fact that Appellant was aware of each of these items causing delay before April 17th. It could have asked for a timely extension.  The Federal Circuit held that Commerce properly exercised its discretion in rejecting Dongtai Peak’s extension requests and Supplemental Responses because (1) the extension requests were submitted after the established deadline in violation of 19 C.F.R. § 351.302(c), and (2) Appellant failed to show “good cause” for an extension as required by § 351.302(b). As to Dongtai Peak’s fairness and accuracy argument, this court has made clear Commerce’s rejection of untimely-filed factual information does not violate a respondent’s due process rights when the respondent had notice of the deadline and an opportunity to reply. Dongtai Peak had full opportunity to be heard and was well aware of the deadlines for filing.  With regard to issues regarding control by a government entity, the Federal Circuit held that Commerce did not have accurate information to make the proper evaluation.  The Federal Circuit stated, “Without a timely-filed Supplemental Response, Commerce did not have information regarding Dongtai Peak’s “shareholders, management, accounting practices, corporate structure, and affiliations,” and information addressing whether “several organizations to which [Dongtai] Peak belonged were state-sponsored, controlled [Dongtai] Peak’s business operations or coordinated [Dongtai] Peak’s export activities.” Slip 16. Without the necessary responses, Appellant did not provide information to demonstrate the absence of government control.  Finally, because Dongtai Peak was fully aware of the mandatory deadlines, it had the opportunity to participate in the investigation.  Because little information was provided timely, Commerce was correct in applying adverse facts available (AFA). Substantial evidence supported Commerce’s use of AFA in this case and its selection of an AFA rate for the China-wide entity.

Federal Circuit Affirmed CIT’s Decision to Sustain Commerce’s Scope and Remand Redetermination Results

In Downhole Pipe & Equipment, LP and DPMaster Manufacturing Co., Ltd. v. United States, Court et al., Court No. 2014-1225 (January 30, 2015), Downhole Pipe & Equipment, LP, and DPMaster Manufacturing Co., Ltd. (collectively, “Downhole Pipe”) appealed the decisions of the United States Court of International Trade (“CIT”) (1) affirming the United States Department of Commerce’s (“Commerce”) scope and industry support determinations and (2) sustaining Commerce’s Final Results of Redetermination Pursuant to Court Remand.  Downhole Pipe is a United States importer of “drill pipe” produced by DP-Master Manufacturing Co., Ltd. (“DP-Master”), a Chinese producer. Drill pipe is a specialized high-strength iron alloy tube, used in oil-drilling applications, and is manufactured in three stages: first, seamless tubes called “green tube” are produced from raw steel; second, the manufacturer uses complex processes to “upset” and heat-treat green tube to thicken the ends and increase the yield strength to the desired American Petroleum Institute (“API”) grade; third, the manufacturer friction-welds a specialized “tool joint” to the ends of the heat-treated and upset tube to complete the drill pipe. While green tube is the primary input in the production of drill pipe, it can also be processed into other “oil country tubular goods.” Oil country tubular goods, which consist primarily of casing and tubing, are used in connection with the transport of oil and gas, while drill pipe is primarily used in drilling. 

In the Final Results, Commerce narrowed the scope of Commerce’s determinations to green tube: (1) that is seamless; (2) that has a certain outer diameter; and (3) that contains specific percentages of molybdenum and chromium.  The court below affirmed this scope finding but remanded Commerce’s decision as to the surrogate values for the green tube.  In particular, the CIT found Commerce had failed to address the InfoDrive India (“InfoDrive”) import data Appellants had placed on the administrative record that called into question Commerce’s finding that green tube entered India under Harmonized Tariff Schedule of India (IHTS) subheadings 7304.23 and 7304.29. The CIT acknowledged data from the IHTS subheadings might be the best available information, but it could not affirm the Final Determination on the basis of the explanation provided by Commerce. 

On remand, Commerce made the necessary examinations of all other potential surrogate values for green tube on the record, including: (1) import statistics for goods imported into India under IHTS categories 7304.23, 7304.29, and 7304.59; (2) Metal Bulletin Research price data for J/K 55 and for “P110”; (3) adjusted value data for alloy steel billets processed into green tube provided by Appellants; and (4) adjusted value data for seamless tubes provided by Appellants.

Commerce found the price data for products entered  under IHTS 7304.59 (as opposed to IHTS 7304.23 and 7304.29) was the best available information on the record because it was most representative of the green tube used for drill pipes, contemporaneous with the period of investigation, duty and tax exclusive, publicly available, and represented a broad market average.  The court sustained the remand results and Downhile Pipe appealed.

In its appeal Downhole Pipe argued that substantial evidence did not support the three criteria for green tube which are already in the scope of another investigation.  Appellants argued, “[b]ecause these three criteria do not distinguish drill-pipe green tube from [oil country tubular goods] green tube, the same green tube is impermissibly covered by two antidumping duty orders.”  Yet, the court reiterated the findings of Commerce in establishing support for the criteria.  The Federal Circuit stated, “the first criterion (that green tube for drill pipe must be seamless) was “based on Petitioners’ comments and submission of technical specifications.” As to the second criterion, that the drill pipe green tube must have a certain outer diameter, Commerce explained this was “based on DP-Master Group’s submission of [API] specifications for drill pipe.” As to the final criterion regarding the green tube’s chemical composition, this was “based on Petitioners’ submission of declarations from experienced drill pipe engineers who direct the purchase of green tubes for drill pipe based on specific physical and chemical requirements.” Slip Op. pg. 14 (citations omitted). All three of these criteria do not apply to oil country tubular goods.

Additionally, Downhole Pipe challenged Commerce’s selection of the surrogate value for green tube on three grounds. First, Appellants contended Commerce improperly rejected the alternative surrogate values on the record, and that its legal analysis in support of selecting IHTS 7304.59.20 was insufficient.  Second, Appellants argued that the values selected were unrealistically high and does not represent commercial reality, and third Commerce erred in relying on a memo from an import specialist in selecting 7304.59. 

As to the first argument, the Federal Circuit is never required to reweigh evidence, and will only decide if a reasonable mind would concur that Commerce applied the best available information. In light of Commerce’s well-reasoned explanation of its selection process, the Federal Circuit found that Commerce’s selection of data from IHTS 7304.59.20 was supported by substantial evidence.  As to the second argument, Appellants provided no evidence to support it contention that the selected values were high or not commercially real. Finally, none of Appellants’ allegations regarding the memo were supported by evidence.   For all these reasons, the Federal Circuit affirmed the CIT’s findings.


Note: The information contained in this memorandum is for general information only, and is not intended as advice or counsel regarding any specific situation. If you have an issue relating to the subject matter discussed in this memorandum, you should consult with counsel or your customs advisers concerning the proper course of action to be followed in your case.

Entire contents copyright 2015 by Neville Peterson LLP.

For additional information concerning the subjects discussed in this Neville Peterson LLP background memorandum, please contact our offices at (212) 635-2730 or (202) 861-2959, or e-mail using the mailbox on this Website.

Trade Courts Updates for Week of January 28, 2015

United States Court of International Trade

Third Redetermination Remanded to Commerce

Changzhou Hawd Flooring Co., Ltd. v. United States, Court No. 12-200, Slip Op. 15-7 (January 23, 2015), was before the court following a second redetermination and a voluntary partial third redetermination. In the third redetermination, the Department of Commerce (“Commerce”) reaffirmed the second redetermination of the final results of the antidumping (“AD”) duty investigation of multilayered wood flooring from the People’s Republic of China (“PRC” or “China”). Still at issue were the AD duty rates assigned to eight separate rate respondents – the Plaintiffs and Plaintiff- Intervenors here (collectively, “Plaintiffs”) – for the underlying AD duty investigation. Specifically,  Plaintiffs challenged Commerce’s decision to assign seven of  eight separate rate respondents, an unspecified, non-de minimis AD duty rate for the investigation, to provide for liquidation of their entries at the rates established for them in the first administrative review (as limited by the provisional measures deposit cap), and to initiate a full investigation of the remaining eighth Plaintiff, Changzhou Hawd Flooring Co. (“Changzhou Hawd”), as it had certified no shipment of subject merchandise in the first administrative review and therefore otherwise lacks any relevant calculated rate

While the assignment of a non-de minimis AD rate for seven rate respondents was supported by substantial evidence, the initiation of a full investigation against Changzhou Hawd, the court held, was arbitrary and capricious. The court held that Commerce’s decision to infer a more than de minimis but otherwise unspecified separate rate for the investigation, using instead the cash deposit rates from the first administrative review, as limited by the provisional measures deposit cap, was within a reasonable construction of the statute.  As for the individual investigation, the court held that it was arbitrary and capricious to initiate an investigation of a single separate rate respondent in the third reiteration of a contested proceeding where Commerce has declined to investigate separate rates for voluntary respondents citing lack of resources.  Here Commerce had both an investigation and first administrative review, each with three fully cooperative individually investigated respondents.  To the court, this was more than enough information available in a typical investigation.  For this reason, the court remanded the third redetermination.

Relaxed Origin Marking Requirements of 19 C.F.R. '134.47 Apply Only When Federally Registered Trademark is Involved

In a perplexing new decision, the United States Court of International Trade has ruled that the relaxed country of origin marking requirements set out in Section 134.47 of the Customs Regulations, which deal with geographic references other than a product=s country of origin  apply only in cases where the importer has a Federally-registered trademark. 

In the opinion, the CIT also appears to write out of Customs= marking regulations a protection for importers which was inserted a few years ago.

The issue in JBLU, Inc. v. United States, Slip Op. 15B8 (January 28, 2015) was whether certain jeans were correctly marked with country of origin. The front of the jeans= waistbands contained labels bearing the terms AC>Est Toi Jeans Los Angeles@ACT Jeans USA@ and AC=est Toi Jeans USA@. The rear of the waistbands contained a label showing the jeans to originat in China. Customs demanded redelivery of various entries of the goods claiming that they were subject to the special marking requirements of 19 C.F.R. '134.46, which states that when imported goods bear a geographic reference other than the country of origin, and the reference is likely to cause confusion as to the origin of the goods, there must appear, in Aclose proximity@ to the reference, and in letters of Acomparable size@ a reference to the country of origin of the product.

The importer claimed that its jeans were subject to the more liberal origin rule set out in Section 134.47 of the Customs Regulations, which covers situations where, Aas part of a trademark or trade name or as part of a souvenir marking@, there appears a geographic reference other than the country of origin, the country of origin shall be marked Ain close proximity@ to the reference, Aor in some other conspicuous location@.

Customs granted the importer=s protest with respect to one type of label, which was the subject of a Federal trademark registration with the Patent and Trademark Office (PTO), but denied the protest with respect to jeans bearing two other types of labels for which the importer had, at the time of entry, only a common law trademark designated by use in commerce, and not a Federally registered mark.  The issue for the CIT was whether 19 C.F.R. '134.47's relaxed marking rule for goods bearing a Atrademark@ with a geographic reference applies only to trademarks which are the subject of a Federal registration.

The Court ruled that only federally-registered trademarks were eligible for the relaxed marking rule of 19 C.F.R. '134.47. The Court relied on Customs rulings which held that a Federal registration is evidence that a trademark exists, expanding those rulings to preclude protection for common law trademarks recognized by the Lanham Act. The Court based its decision solely on deference to Customs= interpretation of its regulations.

The Court struck a second blow against importers in deciding whether there were triable issues of fact regarding the adequacy of marking. In particular, the Court held that there was no need for introduction of proof concerning whether the geographic references in the importer=s trademarks were likely to cause consumer confusion, ruling that Aby displaying text representing a locality different than from the merchandise=s country of origin, the text may >mislead or deceive the ultimate purchaser as to the actual country of origin of the merchandise=@. This appears to introduce a per se rule that a geographical reference is likely to deceive or mislead. While this was the case years ago, the relevant regulation, 19 U.S.C. '134.46, was amended some years ago to introduce the Amislead or deceive@ test. Since consumer confusion is clearly a question of fact, the CIT=s decision that no factual issue was presented appears to strip that language from the regulation B resulting in a double blow for importers.

The court also found no need to have a trial on whether the origin marking was in Aclose proximity@ to the trademark references, holding Bremarkably B that spacing of a few inches did not meet the regulations= Aclose proximity@ test.

This decision is likely to be appealed, and will bear close watching, as it appears to strip away protections which importers fought for in the marking regulations.


Golf Glub Covers are AGolf Equipment of HTS Heading 9506

 Textile golf club covers are Agolf equipment of HTS Heading 9506, rather than Amade up textile articles of Heading 6307, according to the Canadian International Trade Tribunal (CITT).

In G&G Golf Company v. President, Canada Border Services Agency, AP 2013-061, the Tribunal, relying largely on the Rules of Golf, held that the club covers were equipment for the sport of golf, as they protected clubs from damage which might be caused if they knocked together during a golf round. Because the covers were considered Aequipment@ in the Rules of Golf, this provided persuasive evidence of their classification for tariff purposes.

Note: The information contained in this memorandum is for general information only, and is not intended as advice or counsel regarding any specific situation. If you have an issue relating to the subject matter discussed in this memorandum, you should consult with counsel or your customs advisers concerning the proper course of action to be followed in your case.

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