Stick to Trade, Not Consumer Advocacy, CIT Tells Commerce Department

The fact that a foreign manufacturer misrepresented facts to consumers, while representing them accurately to the Commerce Department’s International Trade Administration (ITA) in an antidumping investigation, does not allow ITA to use “Adverse Facts Available” to determine dumping margins, the Court of International Trade recently held.

In Dalian Meisen Woodworking Co. Ltd. v. United States, Slip Op. 21-158 (November 28, 2021) Judge M. Miller Baker put a quick and definitive end to ITA’s attempt to act as a consumer protection agency.

Dalian Meisen, a producer of Wooden Cabinets from the People’s Republic of China, falsely advertised its cabinets as being made of maple, when they were in fact made from birch, a less-expensive, lower quality wood. These misrepresentations were contained in marketing materials that were sent to consumers, and which were submitted to ITA in the course of that agency’s investigation of Chinese wooden cabinets. But, in reporting sales information and “factors of production”, Dalian Meisen correctly reported to Commerce that its cabinets were made of birch.

Citing the inconsistency between Dalian Meisen’s representations to consumers and the data reported to ITA, the agency decided to reject the company’s accurate submissions and assign the company an “Adverse Facts Available” rate – effectively, the highest rate that ITA could impose.

Not so fast, the Court of International Trade indicated. ITA’s use of “facts available” is designed to allow the agency to fill “gaps” in information reported to the Department concerning a respondent’s sales or factors of production – matters relevant to the calculation of an antidumping margin. While Dalian Meisen might have disclosed false advertising information to ITA, it did not withhold information necessary to the calculation of accurate antidumping margins. The CIT quickly put the agency in its place, explaining that “the Department [ITA] lacks any authority to investigate whether antidumping respondents engage in false advertising,

just as it lacks the authority to ask respondents why they violate environmental or antitrust laws, or why their executives are disreputable people”. Because Dalian Meisen provided complete and accurate information needed by ITA to calculate antidumping margins, the use of AFA was not authorized here. Thus, held Judge Baker,

The court accordingly remands so that Commerce can rethink this one. In the meantime, the Federal Trade Commission, state Attorneys General, and the plaintiffs’ class action bar may wish to take a close look at the producer’s swindling of its U.S. customers.

President’s Power to “Modify” Safeguards Relief Does Not Allow Him to Increase Measures, CIT Holds

The President’s power to “modify” import relief offered in a safeguards proceeding allows him to reduce the level of relief, but not to increase it, according to a pair of new decisions by the United States Court of International Trade.

In Solar Energy Industries Association v. United States, Slip Op. 21-154 (November 16, 2021), the Court held that the President could not increase safeguard measures after they had been imposed. A safeguards investigation of imports of solar cells and panels led to the imposition of increased tariffs and quotas on imports of these goods. However, the United States Trade Representative, in selecting the remedies to be imposed, exempted “bifacial solar panels” from the relief.

Subsequently, a domestic producer of bifacial solar panels urged the Administration to repeal the exemption and make bifacial solar panels subject to the safeguards measures. There followed a series of fractious lawsuits which challenged the expansion of the safeguard relief to include bifacial panels, but ultimately the USTR expanded the relief to include them. The plaintiffs in Solar Energy Industries Association challenged the extension of relief.

The CIT, per Judge Gary Katzmann, framed the issues for the Court as follows:

This case raises a number of questions regarding the interface of Proclamation 10101 with Sections 201–204 of the Trade Act. For example: (1) Do three letters (reflecting a majority of the domestic industry production) which seek the modification of safeguards constitute a petition as required by statute? (2) Is the requirement that a petition be submitted to the President satisfied by submission to the United States Trade Representative (“USTR”)? (3) Does the Proclamation’s withdrawal of the exclusion for bifacial modules violate the statutory temporal restrictions which must be met before new presidential action may be taken? (4) Was Proclamation 10101 issued in violation of the requirement that the President determine that an action will “provide greater economic and social benefits than costs”? (5) Can the word “modify” in Section 204(b)(1)(B) be read to permit increased restrictions on trade? The court concludes that with respect to the first four questions, the answer is “Yes.” With respect to the fifth question, the answer is “No.”

The final question formed the crux for the court’s decision.

The Court determined that Section 204(b) of the Trade Act of 1974, which authorizes the President to “reduce, modify, or terminate” actions taken pursuant to the safeguards statute, only allowed the President to liberalize safeguard measures, not increase them. The court focused on the meaning of the term “modify”, which it determined to mean “the limiting of a statement”. It concluded that the President could reduce safeguard measures, but not increase them. While the parties seeking to include bifacial solar panels in the safeguards measures had followed all the procedural requirements for seeking a modification, in the end, they were seeking a form of relief the President could not grant.

The Court issued a parallel determination in Invenergy Renewables Inc. v. United States, Slip Op. 21-155 (November 17, 2021).

The determination gives hope to plaintiffs who are urging the CIT to find that the President’s expansion of Section 301 retaliatory tariffs to new goods, long after his Section 301 investigation has concluded, was also beyond his statutory powers.