Trade Updates for Week of July 10, 2019

United States Court of International Trade

String Lights Not Classifiable as “Christmas Tree Lights”

Before the Court in Target Gen. Merch. Inc. v. United States, Slip Op. 19-80, Court No. 14-00331 were cross motions for summary judgment regarding the classification of stringed light sets. “The Government relies solely on its contention that the articles at issue … are commercially fungible with other light sets that the parties agree are Christmas tree lights” to classify the lights as a kind used for Christmas trees Id. at 1-2. The Court said “an examination of the principal use of the subject articles as well as of their commercial fungibility with other products leads the court to conclude that Customs’ classification is incorrect.” Id. at 2. “There can be no genuine issue of material fact that the lighting sets at issue are not principally used as Christmas tree lights.” Id. The Court explained that black corded lights were primarily used as Halloween lights, and white corded lights were used in general lighting. As such, the court granted Target’s motion and classified the lights accordingly.

Court Sustained Commerce’s Redetermination Results

Before the Court in Thuan An Prod. Trading & Serv. Co. et. al. v. United States et. al., Slip Op. 19-83, Court No. 17-00056 (July 8, 2019) were Commerce’s remand determinations pursuant to the Court’s previous decision regarding the assignment of the Vietnam-wide rate to Thuan An Production Trading and Service Co., Ltd. (“Tafishco”) in the twelfth administrative review of the antidumping duty (“ADD”) order covering certain frozen fish fillets from Vietnam.

The Court had previously “rejected Commerce’s application of something called a single country-wide rate” Id. at 2. On remand, Commerce acknowledged “the NME-entity rate in the underlying investigation was an individually investigated rate.” Id. at 3. For the following reasons, the Court sustained Commerce’s remand results.

19 U.S.C. § 1673d(c) “contemplates two types of rates: rates for producers and exporters individually investigated, and the all-others rate for producers and exporters not individually investigated.” Id. at 7-8. On remand, Commerce acknowledged “that the NME-entity rate in the underlying investigation was an individually investigated rate.” Id. at 8. “Characterizing the Vietnam wide rate as an individually investigated rate reasonably grounds Commerce’s determination in statutory authority,” see id., the Court sustained the redetermination.

Court Resolved Classification Dispute Regarding WeeRide Child Bike Seat

Before the Court in Kent International, Inc. v. United States, Slip Op. 19-85, Court No. 15-00135 (July 9, 2019) were cross motions for summary judgment regarding the classification of imported WeeRide Kangaroo Ltd. Center-Mounted Bicycle-Child Carrier (“WeeRide”) under the Harmonized Tariff Schedule. (“HTS”). Customs classified the subject merchandise under HTS 8714.99.80: “Parts and accessories of vehicles of heading 8711 to 8713: . . . Other: . . . Other, with a 10% duty rate. Plaintiff claimed that the subject merchandise was properly classified as “Seats (other than those of heading 9402), whether or not convertible into beds, and parts thereof: … Other seats: Of rubber or plastics: … Other,” under HTS 9401.80.40, with a duty free rate. The “purpose of the WeeRide is to allow a child to ride on an adult’s bicycle, situated between the adult seat and the front handlebars.” Id. at 2. The WeeRide “attaches to a bicycle via a supporting bar, which is attached to the handlebar and seat post of an adult bicycle.” Id. at 3. For the following reasons, the Court granted the Government’s motion and denied plaintiff’s motion.

“Classification disputes under the HTSUS are resolved by reference to the General Rules of Interpretation (“GRIs”) and the Additional U.S. Rules of Interpretation.” Id. at 4. “Interpretation of the HTSUS begins with the language of the tariff headings, subheadings, their section and chapter notes, and may also be aided by the Explanatory Notes (“ENs”).” Id. Under GRI 1, classification is determined by “the terms of the headings and any relevant section or chapter notes.” Id. Plaintiff argued the product was prima facie classifiable under both competing provisions, and that the Court must apply the relative specificity analysis of GRI 3.

Defendant argued no GRI 3 analysis was required as Note 1(h) of Chapter 94 prevents classification of the subject merchandise under heading 9401. The Court agreed with Defendant and said Plaintiff failed “to demonstrate that the court must conduct a relative specificity analysis under GRI 3 prior to applying an exclusionary note.” Id. at 8. The court determined that Note 1(h) excluded the subject merchandise from being classified under HTS 9401 and classified the product under HTS 8714.99.80.

Trade Updates for Week of June 24,2019

United States Court of International Trade

Court Denied Government’s Motion to Dismiss Regarding Protest Jurisdiction

In Aspects Furniture International, Inc. v. United States, Case No. 18-222, Slip Op. 19-78 (June 18, 2019), the government argued that Aspects Furniture International, Inc.’s (AFI’s) protest was not valid because it provided a lead entry in the protest and listed additional entries on the Automated Commercial Environment (ACE). The Government’s motion was based on a factually incorrect notion that AFI never protested the liquidation of the eight Contested Entries.

See Def.’s Mot. at 2 (“The protest did not seek relief for any other entry. . . . [T]he liquidation of [the Contested Entries] were [sic] never protested.”); id. at 3 (A protest that expressly covers the liquidation of a single entry cannot be expanded to cover liquidations that never challenged or even mentioned in the protest.”)

However, the Court disagreed. “Here, AFI adhered to Customs’ regulatory provisions regarding protesting multiple entries together when it included Entry No. W69-3325900-5 as the “lead entry” and manually added the Contested Entries in the ACE system along with their respective dates of entry and liquidation.” See id. at 12. The government’s motion to dismiss was denied and the Court has jurisdiction to hear this case under 28 U.S.C. §1581(a).

Trade Updates for Week of June 12, 2019

United States Court of International Trade

Court Denies Restraining Order Against Commerce Continuing 1996 ADD Investigation

Before the Court in Confederación de Asociaciones Agrícolas del Estado de Sinaloa, A.C. et. al. v. United States et. al., Slip Op. 19-69, Court No. 19-00059 (June 6, 2019) was plaintiff’s motion for a temporary restraining order against (“TRO”) and preliminary injunction (“PI”) “to enjoin Commerce from (1) ordering a suspension of the liquidation of entries of fresh tomatoes from Mexico, (2) resuming its antidumping investigation into those tomatoes, and (3) instructing the U.S. Customs … to require a cash deposit or bond for each entry of those tomatoes.” Id. at 4. In 1996, Commerce initiated the investigation in question, and the U.S. International Trade Commission (“ITC) issued an affirmative preliminary injury determination. “On the same day, Commerce signed an agreement with producers, who accounted for substantially all imports of fresh tomatoes from Mexico, and suspended the antidumping duty investigation.” Id. at 3. The agreement was renewed for twenty three years, but was suspended by Commerce in 2019, resulting in the agency intending to resume the investigation. For the following reasons the Court denied plaintiffs motion for a TRO and injunction.

“The court considers four factors when evaluating whether to grant a temporary restraining order or preliminary injunction: (1) whether the party will incur irreparable harm in the absence of such injunction; (2) whether the party is likely to succeed on the merits of the action; (3) whether the balance of hardships favors the imposition of the injunction; and (4) whether the injunction is in the public interest.” Id. at 10. The Court said “because Commerce is required to take each of the actions challenged by Plaintiffs following an affirmative preliminary determination” and it was within Commerce’s ability to withdraw from the agreement plaintiffs were not likely to succeed on the merits. Although the Court acknowledged “the potential disruptions to the fresh tomato market and supply chain,” “Plaintiffs’ evidence fails to meet the high burden required to show irreparable harm.” Id. at 24. The Court said the “issuance of the requested relief in an injunction would suspend the effect of the statute in this matter,” resulting in the hardships of this issue falling onto the Government. Finally, the Court said the public interest in the manner was neutral and because three of the four factors favored the defendant the TRO and PI were denied.

Court Sustains Commerce Anticircumvention Determination

Before the Court in Tai-Ao Aluminium (Taishan) Co. et. al. v. United States et. al., Slip Op. 19-70, Court No. 17-00216 (June 7, 2019) was a challenge to Commerce’s scope interpretation in an anticircumvention investigation of Tai-Ao Aluminum Company and Regal Ideas, Inc., importers of heat-treated 5050-grade aluminum extrusions from China. Commerce had previously issued antidumping and countervailing duty orders on extrusions made from aluminum alloys with the Aluminum Association designations of series 1xxx, 3xxx, and 6xxx.

The order specifically excluded series 5xxx. Commerce determined, pursuant to an anticircumvention inquiry, that imports of 5050-grade extrusions exported were later-developed merchandise circumventing the orders and ordered Customs to suspend liquidation on heat-treated 5050-grade extrusions retroactive to the initiation of the anticircumvention inquiry.

Plaintiffs contend that Commerce’s determination was unsupported by substantial evidence They also argued the anticircumvention inquiry’s initiation notice did not provide adequate notice to all Chinese exporters. For the following reasons the Court sustained Commerce’s anticircumvention determinations but concluded that retroactive suspension of liquidation was impermissible.

“When determining whether a product is later-developed, Commerce considers whether the merchandise was commercially available at the time the order was issued.” Id. at 4. The court said the record supported Commerce’s commercial availability determinations because “industry catalogs contained in the record did not offer the 5050-grade alloy as an alternative to the series 6 alloy until after the Orders were issued and an importer stated that heat-treated 5050-grade extrusions were developed after the Orders were issued for the purpose of replacing in-scope merchandise” Id. at 13. In regards to the retroactive suspension of liquidation and notice issue, “What the statutory and regulatory notification provisions require is that any reasonably informed party should be able to determine, from the published notice of initiation read in light of announced Commerce Department policy, whether particular entries in which it has an interest may be affected by the administrative review.” Id. at 18-19. The Court said “the language in the Initiation Notice here was not sufficient to provide Chinese exporters of heat-treated 5050-grade extrusions other than the named company with reasonable notice, and “liquidation should have been suspended from the date of the Preliminary Determination when Plaintiffs first received notice that their products were subject to the anticircumvention inquiry.” Id. at 20.

Trade Updates for Week of June 5, 2019

United States Court of International Trade

Court Sustained Commerce’s Determinations in CVD Investigation

Before the Court in Rebar Trade Action Coal. et. al. v. United States et. al., Slip Op. 19-65, Court No. 17-00202 (May 31, 2019) was a challenge to the affirmative final determination of  Commerce in the countervailing duty investigation of  Steel Concrete Reinforcing Bar From Turkey. Plaintiffs challenged Commerce’s application of the adverse facts available (“AFA”) against Habas, one of the consolidated plaintiffs, and Commerce’s natural gas benchmark selection. For the following reasons, the Court sustained Commerce in full.

Commerce may draw an adverse inference against a respondent “when it finds that a respondent has failed to cooperate by not acting to the best of its ability.” Id. at 4. Commerce applied the AFA against Habas for failing to report export related incentives received from Turkey’s Domestic Processing Regime. Habas argued application of AFA was not warranted because the company reasonably believed the program was not countervailable because Commerce had examined the program before and found it not countervailable. Habas also argued even if warranted the 14.01% rate applied was unreasonable. The Court said “Commerce’s determination as to whether a duty drawback program is countervailable is a fact-intensive examination that the agency is entitled to undertake, and Habas cannot unilaterally foreclose it by refusing to respond to the agency.” Id. at 8. The Court also explained that Commerce provided “a reasonably discernable path for how the agency selected of the 14.01% AFA rate” and sustained all AFA determinations.  Id. at 18. In regards to the benchmark selection, the Court said plaintiff “has failed to establish that a reasonable mind would have to credit Habas’ position as the one and only correct position on the administrative record” and sustained Commerce’s data selection. Id. at 22.

Court Sustained Commerce’s Antidumping Determinations in Part and Remanded in Part

Before the Court in Linyi Chengen Imp. & Exp. Co. et. al. v. United States et. al., Slip Op. 19-67, Court No. 18-00002 (June 3, 2019) was a challenge to Commerce’s  final determination in the antidumping duty investigation of certain hardwood plywood products from China, in which Commerce found that the subject merchandise is being sold for less than fair value. The Court reviewed several issues, if Commerce’s actions regarding the administrative record were arbitrary and capricious, if Commerce’s determination to apply adverse facts available (“AFA”) to Bayley was supported by substantial evidence, if Commerce’s determination not to verify certain submissions was in accordance with the law, and Commerce’s actions regarding Bayley’s affiliation with Company D was in accordance with the law and not arbitrary and capricious. For the following reasons, the Court sustained in part and remanded in part.

Plaintiff, Linyi Chengen, argued that Commerce mishandled the administrative record and acted in an arbitrary and capricious manner. The Court found the final determination was arbitrary and capricious in light of perceived inconsistencies on the record, such as, Commerce claiming record documents provided no indication that Linyi Chengen used the China National Standard in the company’s logs, while plaintiff argued untranslated Chinese characters on the same document showed the company did. The Court did not rule on other arguments from Linyi because of this issue. The Court then moved on to Bayley’s arguments. The Court said in regards to the AFA “it was reasonable for Commerce to suspect that Bayley failed to provide Commerce with information at the outset of the investigation, based on the evidence on the record.” Id. at 24. The court concluded  Commerce’s decision not to verify both Bayley’s questionnaire responses and the evidence the Petitioner put on the record was in accordance with the law because “the evidence that Petitioner placed on the record was not their own” and Commerce could not request Petitioner to verify it. Id at 25. The Court also found Commerce’s rejection of Company D’s information was reasonable because of Bayley’s failure to cooperate and comply with Commerce’s requests.

Trade Updates for Week of May 29, 2019

United States Court of International Trade

Court Remands Commerce’s Final Results

Before the Court in Guizhou Tyre Co. et. al. v. United States, Slip Op. 19-65, Court No. 17-00100 (May 24, 2019) was a consolidated action in which eight plaintiffs challenged Commerce’s determinations in a periodic review of an antidumping duty order on off-the-road (“OTR”) tires from China. Two of the plaintiffs, GTC and Aeolus, claimed Commerce erred in determining the companies failed to rebut the presumption of de facto control by the government of China.   Xugong claimed Commerce erred in making deductions from the prices used to determine export price (“EP”) and constructed export price (“CEP”) of Xugong’s subject merchandise to account for China’s value-added tax (“VAT”). Four other plaintiffs, Full World, Qingdao Qihang, Trelleborg, and Zhongwei, each claimed entitlement to a revised antidumping duty rate. For the following reasons the Court remanded to Commerce to reconsider its determinations.

 “To establish the absence of de facto control, Commerce requires an exporter to demonstrate that it (i) sets its prices independently of the government and other exporters, (ii) negotiates its own contracts, (iii) keeps the proceeds of its sales (apart from taxation), and (iv) selects its management autonomously.” Id. at 9. The Court remanded the determination involving Aeolus because Commerce failed to address in the final determination, a report placed on the record concerning the ownership of the company. In regards to GTC, Commerce requested a remand to reconsider the issue, which the Court granted. The next issue the court considered was the VAT. The governing statute “reduces the starting price for determining EP or CEP by the amount, if included in such price, of any export tax, duty, or other charge imposed by the exporting country on the exportation of the subject merchandise to the United States, other than an export tax, duty, or other charge.” Id. at 17. At issue was a domestic production tax in China, rebated to plaintiff after exportation. After reviewing case law, and legislative history the Court said “A tax applied to materials used in the domestic production of a good subsequently exported, whether or not rebated or avoided, is by definition not a tax on the exportation of the finished merchandise.” As such, Commerce’s determinations to lower EP and CEP based on the rebate were not in accordance with law. Finally, the Court granted remaining plaintiffs’ request to revise duty rates applicable to Xugong or to an individually-determined rate for GTC.

United States District Court for District of New Mexico

Violating Customs Regulations Constitutes Criminal “Smuggling”, District Court Holds.

Violation of a Customs regulation regarding marking of country of origin – or violation of any government regulation affecting imports – constitutes a criminal violation of 18 U.S.C. § 545, and can be prosecuted as such, according to a disturbing new decision from United States District Court for New Mexico.

In United States v. Sterling Islands, Inc., No. CR18-4176 JB (May 20, 2019), the defendants were charged with violating 18 U.S.C. § 545 (“smuggling goods into the United States”) on the ground that they had imported or brought into the United States merchandise in a manner which was “contrary to law”, exposing them to as much as twenty years in prison. The defendants were charged with importing native American style jewelry without proper country of origin marking, in violation of Section 134.43 of the Customs Regulations. The question for the Court was whether importing goods in violation of the regulation caused the importation to have been “contrary to law” for purposes of Section 545. The District Court held that it did, and held broadly that the violation of any published law or regulation can constitute an act contrary to “law” for purposes of the statute. The Court concluded that “the statute’s text and legislative history unambiguously indicate that ‘contrary to law’ encompasses all laws and regulations.” Thus, the defendants could be made to face criminal charges for mismarking the jewelry.

Adding to the defendant’s woes is the provision in 18 U.S.C. § 545 that “proof of defendant’s possession of such goods [imported ‘contrary to law’], unless explained to the satisfaction of the jury, shall be deemed evidence sufficient to authorize conviction for violation of this Section.”

The New Mexico court thus came down on the far end of a “circuit split” on whether violating a regulation carrying civil penalties should also be considered conduct “contrary to law” for purposes of Section 545. In United States v. Izurieta, a case involving importers of misbranded food, the Eleventh Circuit that 18 U.S.C. Section 545 contained grievous ambiguities which “creates a strong perception that a violation of the regulation will give rise to civil remedies only.” Using the “principle of lenity” the Eleventh Circuit held that violation of the regulation did not charge crime. On the other end of the spectrum, the Fourth Circuit, in United States v. Mitchell, had concluded that the “contrary to law” provision of Section 545 encompasses substantive or legislative regulations that have the force and effect of law. Thus, Section 545 was not limited to statutory violations.

The Ninth Circuit in United States v. Alghazouli, concluded that the term “law” as used in Section 545, “does not have a plain meeting that necessarily included a regulation.”

The Sterling Islands decision will likely be appealed to the Tenth Circuit Court of Appeals, which will add its voice to the split among circuits. There is a possibility that the United States Supreme Court may take up the issue at some time in the future in an attempt to resolve the circuit split and clarify the conduct that may give rise to criminal charges under Section 545.

 

Trade Updates for Week of May 22, 2019

United States Court of International Trade

Court Sustained Commerce’s Determinations in Part and Remands in Part

Before the Court in Guizhou Tyre Co. Ltd. et. al. v. United States, Slip Op. 19-59, Court No. 18-00100 (May 15, 2019) was a challenge by plaintiffs to certain aspects of Commerce’s determinations in the 2015 administrative review of the countervailing duty order on off-the-road tires from China. Specifically, plaintiffs challenge: “(1) Commerce’s benchmark calculations to determine the extent of subsidies received by Guizhou; (2) Commerce’s application of adverse facts available (“AFA”) to the Export Buyer’s Credit Program; and (3) Commerce’s decision to countervail the Processing Trade Program. For the following reasons the Court sustained Commerce in part and remanded in part. 

In regards to the Export Buyer’s Credit Program issue, “Commerce may select from facts otherwise available when necessary information is not available in the record or when a party to a proceeding: (A) withholds information that is requested; (B) fails to provide such information in the form and manner requested; (C) significantly impedes a proceeding; or (D) provides information which cannot be verified.” Id. at 7. Both plaintiff and the Government of China (“GOC”) argued that none of plaintiffs’ customers benefited from the program, and this was shown through declarations and information provided that importers did not use the Credit Program. The Court said “because Commerce failed to explain what information the GOC has failed to provide and how that information was required for verification of the respondent’s claims” the determination was not supported by substantial evidence. Id. at 6. 

The next issue handled by the Court was the benchmark calculations. “Where available, Commerce prefers to compare prices to actual transactions in the country in question.” Id. at 12. “But if the market in that country is distorted by government involvement … the Department will then consider the prices paid in that country as not an appropriate basis of comparison and will instead look to world market prices.” Id. In this case, Commerce used a non-distorted benchmark on synthetic rubber. Plaintiffs argued Commerce’s benchmark on synthetic rubber was not supported by substantial evidence. The Court agreed saying “Commerce’s barebones explanation … leaves the parties with an arbitrary decision” regarding the benchmark, the issue was remanded Id. at 15. Plaintiffs then argued against the agency’s application of AFA in the benchmarks because of government controlled domestic suppliers failed to cooperate. The Court said “there is no indication—either in the record or briefed by the parties—that the Department’s AFA finding was not properly applied,” as such the determinations were upheld.

The final issue was Commerce’s decision to find that the Processing Trade Program provided countervailable subsidies. When “analyzing whether a program for exemption of import charges upon export results in a countervailable benefit, Commerce is to consider whether the government in question maintains controls adequate to ensure that any remission or exemption of import duties does not extend to duties on inputs not consumed in production for export.” Id. at 20. The Court said Commerce’s determination was reasonable because “the GOC failed to specifically explain or document how it determined the quantity of rubber, nylon cord or carbon black consumed in the production process.” Id. at 22.   Thus, Commerce’s decision in this instance was supported by substantial evidence.

Court Sustained ITC’s Affirmative Injury Determination

Before the Court in Arlanxeo USA LLC et. al. v. United States et. al., Slip Op. 19-60, Court No. 17-00247 (May 17, 2019)  was a challenge to U.S. International Trade Commission’s (“ITC”) final affirmative material injury determination in the antidumping duty investigation of emulsion styrene-butadiene rubber (“ESBR”) from Brazil, Mexico, the Republic of Korea, and Poland. The Court reviewed whether the ITC’s findings on the volume of subject imports, price effects, the impact of subject imports and that Poland was not a negligible source of subject imports were all supported by substantial evidence. For the following reasons the Court sustains the ITC in full.

Regarding the volume of imports, the Court said because the ITC considered market supply disruptions in its volume analysis and other conditions of competition such as the oversupply of ESBR in the global market,” the volume determination was supported by substantial evidence. The next issue the Court considered was the ITC’s price effect determinations. The ITC needs to consider whether “there has been significant price underselling by the imported merchandise as compared with the price of domestic like products of the United States, and the effect of imports of such merchandise.” Id. at 13.  The Court sustained the ITC’s determinations because they were made based “on evidence that the subject imports undersold the domestic like product in 150 of 218 quarterly price comparisons and 85.6 percent of the quantity of subject imports covered by the pricing data was sold during quarters in which the average price of these imports was less than that of the comparable domestic product.” Plaintiffs also raised a “swap” price argument because of a contract between Arlanxeo and Goodyear. The Court sustained the ITC, saying evidence showed the swap was the result of a negotiation between two unrelated companies. In regards to the price depression arguments, the ITC’s conclusions were sustained because of substantial evidence that indicated subject imports depressed the conversion fee.

The next issue before the Court was the ITC’s impact determination. The ITC “must consider the impact of subject imports on domestic producers of domestic like products, but only in the context of production operations within the United States.” Id. at 18. The Court said the ITC “adequately addressed the intra-industry competition and its analysis is supported by substantial evidence” Id. at 19. The final issue was the negligibility determination about Poland. “Imports are negligible if such imports account for less than 3 percent of the volume of all such merchandise imported into the United States in the most recent 12–month period for which data are available that precedes the filing of the petition.” Id. Plaintiffs argued the determination was wrong because some imports were misclassified. However, the court found “that the Commission’s negligibility determination is supported by substantial evidence because it included the misclassified ESBR.” Id. at 21.

Court Partially Grants Motion for Reconsideration

Before the Court in POSCO et. al.  v. United States et. al., Slip Op. 19-61, Court No. 17-00137 (May 20, 2019) was a motion by plaintiff for reconsideration of the court’s previous opinion. The Court had previously sustained Commerce’s determinations in the countervailing subsidy investigation of certain carbon and alloy steel cut-to length plate from Korea.  Plaintiff specifically requested for the court to reconsider its “affirmance of (1) Commerce’s application of the 1.05 percent adverse facts available (“AFA”) rate to POSCO M-Tech for unreported government subsidies received by Ricco Metal and Nine-Digit, both companies acquired by POSCO M-Tech; and (2) Commerce’s application of the 1.05 percent AFA rate to Hyundai and attribution of this rate to POSCO.” Id. at 2. In regards to the rate for unreported government subsidies, the court concluded Commerce did not make the requisite factual findings to proceed to the second step of its AFA analysis and remanded the issue. The Court continued to affirm the application of the AFA rate to Hyundai.

Trade Updates for Week of May 15, 2019

United States Court of International Trade

Court Sustained Commerce’s Surrogate Country and Factors of Production Determinations Products in Part and Remanded in Part

Before the Court in Jiaxing Brother Fastener Co. et. al. v. United States et. al., Slip Op. 19-55, Court No. 14-00316 (May 9, 2019) was a challenge to Commerce’s final determination in the fourth administrative review of the 2009 antidumping duty order on certain steel threaded rod from China.  Plaintiffs argued Commerce’s selection of Thailand as the primary surrogate country for Jiaxing’s STR products was unlawful, that the valuation of Jiaxing’s steel wire rod factor of production (“FOP”), brokerage and handling (“B&H”) costs, and surrogate financial ratios related to labor, were unsupported by substantial evidence. For the following reasons the Court sustained Commerce in part and remanded in part.

“Where the exporting country has a nonmarket economy … Commerce identifies one or more market economy countries to serve as a surrogate … on the basis of the value of the factors of production in the relevant surrogate country.” Id. at 7. “Commerce must value the factors of production through the best available information.” Id. The Court sustained Commerce’s determination because “Thailand was the only country for which there was specific steel input data as well as contemporaneous financial statements from producers of comparable merchandise.” Id. at 9. The next issue the Court considered was the specific surrogate valuation issues raised by plaintiff. In regards to the steel wire rod FOP, the Court sustained Commerce because the agency was unable to accurately use plaintiffs suggested basis. In regards to the labor cost, the Court remanded the issue because Commerce failed to consider record evidence of the labor divisions within the industry. The Court sustained the use of Doing Business 2014: Thailand as the basis for the B&H cost because plaintiff failed to find better data to use. However, the Court remanded Commerce’s decisions not to make adjustments to the cost because the letter of credit and shipping container cost determinations needed further explanation in light of record evidence.

 

Court Grants Joint Motion to Dismiss Litigation

Before the Court in One World Techs., Inc.  v. United States et. al., Slip Op. 19-56, Court No. 19-00017 (May 9, 2019) was a joint motion to dismiss or stay the litigation before the Court. The case involved Customs determination that One World’s redesigned garage door openers (“GDO”) infringed on a patent. The United States International Trade Commission (“ITC”) and the Chamberlin Group joined the litigation as defendant-intervenors.  The Court had previously issued a temporary restraining order and preliminary injunction directing Defendants not to seize shipments of the GDO. The plaintiff has since notified the court of the ITC’s Chief Administrative Law Judge’s determination that the Redesigned GDOs do not infringe on any patent.  On May 1, 2019 plaintiffs and defendants reached an agreement to settle the case.  However, Chamberlin Group, did not agree to the dismissal. For the following reasons the Court approved the dismissal of the case.

Under USCIT Rule 41(a)(2) “an action may be dismissed at the plaintiff’s request only by court order, on terms that the court considers proper.” Id. at 12. “Legal prejudice to the defendant is the foremost factor for the court to consider in exercising its discretion over a Rule 41(a)(2) motion to dismiss.” Id. The Court said that there was no prejudice against the United States and ITC because they consented to the motion. The Court found Chamberlain could not be prejudiced because its interests were limited as the company filed no crossclaims or counterclaims, and because the company failed to demonstrate any prejudice to the Court. The Court said Chamberlain benefits, in a way, because the dismissal grants Chamberlain’s previous motion to dismiss. The Court also exercised “its discretion to retain jurisdiction over enforcement of and compliance with the Settlement Agreement.” Id. at 15.

Trade Updates for Week of May 8, 2019

United States Court of International Trade

Court Sustained Commerce’s Determination Not to Grant a Separate Rate Application

Before the Court in Shanghai Sunbeauty Trading Co. v. United States et. al., Slip Op. 19-51, Court No. 18-0002 (April 29, 2019) was a challenge to Commerce’s determination that plaintiff was not entitled to a separate rate application during an administrative review of the antidumping order on honey from China. Commerce determined that plaintiff was not entitled to a separate rate application because “the record showed that Sunbeauty’s entries of subject merchandise were reported to U.S. Customs and Border Protection as not being subject to antidumping duties, and thus, Sunbeauty had no suspended entries during the period of review.” Id. at 2. It is Commerce’s practice “to require respondents seeking a separate rate in an administrative review to show that they have a suspended entry during the period of review,” and by plaintiffs own admission no such suspended entry existed Id. at 9. The Court sustained “Commerce’s finding that Sunbeauty did not show it had a reviewable entry during the period of review as supported by substantial evidence and otherwise” supported by plaintiff’s own admission. Id. at 10.            

Court Sustained Commerce Remand Determinations Regarding use of AFA

Before the Court in POSCO et. al. v. United States et. al, Slip Op. 19-52, Court No. 16-00227 (May 1, 2019) was the remand results filed by Commerce regarding the methodology used by the agency when selecting the highest calculated rate after applying adverse facts available (“AFA”)  against plaintiff in the countervailing duty investigation of certain hot-rolled steel flat products from Korea. The Court had previously remanded the issue with directions for Commerce to explain the basis for its decision. On remand Commerce continued to apply the AFA against plaintiff but recalculated its subsidy rate. For the following reasons the Court sustained Commerce’s remand determinations.

“Commerce may apply AFA if a respondent does not cooperate to the best of its ability, regardless of motivation or intent.” Id. at 5.  “Commerce reiterated the factors that led to the application of AFA to POSCO, including POSCO’s failure to report information about its affiliated input suppliers, to provide information about its facility located in a free economic zone, and to report certain loans that its affiliated trading company received.” Id. at 6. As such, the AFA determinations were sustained. “When relying on secondary information to select an AFA rate, Commerce has a statutory duty to corroborate the selected rate to the extent practicable.” Id. at 7. Commerce must demonstrate that secondary information used to calculate a rate has probative value by showing that the selected rate is both reliable and relevant. Commerce originally applied two rates against plaintiff but on remand, decided to only apply one rate due to separate litigation involving the dropped rate. For the selected 1.05% rate, Commerce explained that it found the rate based on actual usage by Korean companies and was calculated in the context of an administrative proceeding. The Court concluded Commerce’s corroboration is supported by substantial evidence.

Court Denied International Trade Commission’s Motion to Stay

Before the Court in One World Techs., et. al. Inc.  v. United States et. al., Slip Op. 19-53, Court No. 19-00017 (May 2, 2019) was a motion by the United States International Trade Commission (ITC) to stay the preliminary injunction and all further proceedings. The litigation involves garage door openers that were redesigned to avoid infringing a registered patent. The Court previously granted a preliminary injunction “directing that the entries of redesigned garage door openers could not be seized.” Id. at 2. The ITC motioned to stay the case, pending an appeal to the Court of Appeals for the Federal Circuit, which denied the ITC’s motion for a stay pending appeal on April 17, 2019. For the following reasons, the court denied the ITC’s motion.

“The court considers four factors in evaluating a motion for a stay pending appeal: “(1) whether the stay applicant has made a strong showing that he is likely to succeed on the merits; (2) whether the applicant will be irreparably injured absent a stay; (3) whether issuance of the stay will substantially injure the other parties interested in the proceeding; and (4) where the public interest lies.”  Id. at 3-4. The court found the ITC failed to meet its burden of making a strong showing of likelihood of success on the merits, and found this factor did not weigh in favor of granting a stay pending appeal. The Court said the ITC did not explain how the claimed injury would be irreparable if the ITC is able to seek relief from the Federal Circuit and found that this factor also did not weigh in favor of the agency. The Court said “seizure of the merchandise at issue would cause substantial injury to One World, a party interested in the proceeding.” Id. at 6. This factor could not support the granting a stay. In regards to the final factor, the Court found that the public interest was neutral and denied the motion overall.

 

U.S. Court of Appeals for the Federal Circuit

Santa Claus Costume is Not Festive but Fancy Dress

In Rubies Costume Company v. United States, Court No. 2018-1305 (April 29, 2019), the Federal Circuit affirmed the Court of International Trade’s decision regarding the classification of a Santa costume.  The Santa Claus costume is customarily worn in connection with the celebration of the Christmas holiday. The parties argue as to the implications of the “festive” nature of the costume. The merchandise, according to the Federal Circuit is excluded from classification as “festive articles” by the notes to chapter 95 of the Harmonized Tariff Schedule of the United States.

Because the costumes are considered “fancy dress” pursuant to Note 1(e) of Chapter 95, they are excluded from classification under Chapter 95.  Thus, according to the Federal Circuit, the costumes are classified under HTSUS 6110.30.30, 6103.43.15, 6116.93.94, and 4209.92.30.

 

Trade Updates for Week of May 1, 2019

United States Court of International Trade

Court Sustained Commerce’s Remand Determinations

Before the Court in Aristocraft of America, LLC v. United States, Slip Op. 19-48, Court No. 15-00307 (April 17, 2019) were remand determinations made by Commerce in regards to the sixth administrative review of the antidumping duty order covering steel wire garment hangers from China. Plaintiffs challenged Commerce’s calculation regarding irrecoverable value-added tax (“VAT”), arguing the determinations were not supported by substantial evidence. The Court had previously remanded Commerce’s determinations “due to Commerce’s failure to reconcile the relevance of the admitted link between the input VAT paid and the aggregate tax paid or refunded.” Id. at 5. For the following reasons, the Court sustained Commerce’s determinations.

“When addressing a substantial evidence issue raised by a party, the court analyzes whether the challenged agency action was reasonable given the circumstances presented by the whole record.” Id. at 4.  The Court said “on remand, Commerce addressed these concerns, explaining how the Chinese VAT regulations direct the calculation of an amount of irrecoverable VAT that is to be added to the price of the subject merchandise exports, without reference to the exporter’s input VAT paid.” Id. at 5. Commerce directly responded to the court’s request for additional detail as to how and why Commerce was applying its irrecoverable VAT policy generally, as well as how its eight percent irrecoverable VAT adjustment was supported by the record.

Court Sustained Commerce’s Determinations in Review of Duty Order Covering Freshwater Crawfish Tail Meat from China

Before the Court in Xiping Opeck Food Co. v. United States, Slip Op. 19-50, Court No. 17-00260 (April 26, 2019) plaintiffs challenged Commerce’s final results in the administrative review of the antidumping duty order covering freshwater crawfish tail meat from China. Plaintiff specifically challenged Commerce’s rejection of untimely filed surrogate country financial statements from Thailand and Commerce’s reliance on South African financial statements as the basis for a normal value calculation. For the following reasons, the Court sustained Commerce’s determinations.     

“The regulatory deadline for surrogate value information used in calculating normal value was no later than 30 days before the scheduled date of the preliminary results, in accordance with 19 C.F.R. § 351.301.” Id. at 9. Plaintiff argued Commerce should have exercised its discretion to allow the Thai financial statements on the record, or should have placed Thai data on the record itself. The Court said the record “indicated that Thai financial statements were available … at least two weeks prior to the initial deadline … therefore … Commerce did not abuse its discretion by not accepting” late submissions. In regards to the issues with the South African financial statements, “the Court shall, where appropriate, require the exhaustion of administrative remedies.” Id. at 13. The Court said plaintiff “had ample opportunity to raise their concerns before the Department throughout the administrative proceedings,” but failed to do so. Therefore, the court would not reach the merit of the argument regarding the South African financial statements and sustained Commerce.

 

U.S. Court of Appeals for the Federal Circuit

Santa Claus Costume is Not a Festive Article

In Rubies Costume Company v. United States, Court No. 2018-1305 (April 29, 2019), the Federal Circuit affirmed the Court of International Trade’s decision regarding the classification of a Santa costume.  The Santa Claus costume is customarily worn in connection with the celebration of the Christmas holiday. The parties argued as to the implications of the “festive” nature of the costume. The merchandise, according to the Federal Circuit, is excluded from classification as “festive articles” by the notes to chapter 95 of the Harmonized Tariff Schedule of the United States.

Because the costumes are considered “fancy dress” pursuant to Note 1(e) of Chapter 95, they are excluded from classification under Chapter 95.  Thus, according to the Federal Circuit, the costumes are classified under HTSUS 6110.30.30, 6103.43.15, 6116.93.94, and 4209.92.30.

Trade Updates for Week of April 24, 2019

United States Court of International Trade

Court Imposes Penalty on Importer  

Before the Court in The United States v. Titan Metals Corporation, Slip Op. 19-49, Court No. 13-00398 (April 22, 2019) was an action by the government to collect unpaid antidumping duties and a civil penalty under 19 U.S.C. § 1592 for negligent tariff misclassification against Titan Metals, a small business engaged primarily in buying domestic origin forging scrap and selling it to India. At issue was a “onetime importation of stainless steel flanges from India, which Titan Metals declared as free from antidumping duties on its entry summary.” Id. at 2. The Government alleged the merchandise was subject to antidumping duties and Titan Metals violated 19 U.S.C. § 1592 by making materially false statements and omissions in its entry documentation. For the following reasons, the Court ordered “Titan Metals to pay $146,368.64 in antidumping duties and a penalty,” 50% of the statutory maximum.” Id.

“19 U.S.C. § 1592 imposes a monetary penalty for negligent tariff misclassification. The Government has the burden of proof to establish the act or omission constituting the violation, and the alleged violator shall have the burden of proof that the act or omission did not occur because of negligence.” Id. at 10. When considering imposing a penalty, the Court considers 14 non-exclusive factors. Titan Metals argued the merchandise was American Goods Returned and therefor no antidumping duties were owed. Titan Metals acknowledged that fraudulent entry documents were submitted, but argued any penalties should be below the statutory maximum because of mitigating factors. The court said that Titan Metals’ shipment was subject to the order because the order definitively covered the merchandise and because Titan Metals has not met the regulatory requirements for declaring its merchandise as American Goods Returned. In regards to the penalty amount, the Court said “because Titan Metals is a one-time importer, a small business, and has no history of prior violations, but nonetheless falsified CBP documents and failed to cooperate fully with CBP, the court imposes a penalty amount of 50% of the statutory maximum.” Id. at 21.

Trade Updates for Week of April 17, 2019

United States Court of International Trade

Court Sustained Commerce’s Use of Adverse Facts Available

Before the Court in Shandong Dongfang Bayley Wood Co. v. United States et. al., Slip Op. 19-45, Court No. 18-00020 (April 12, 2019) was plaintiff’s objections to Commerce’s determinations in the countervailing duty investigation of certain hardwood plywood products from the China.  Plaintiff specifically argued that Commerce’s determination to apply facts available with an adverse inference (“AFA”) to plaintiff was not supported by substantial evidence, that Commerce’s determination not to verify certain submissions was not in accordance with the law and that Commerce’s determination to disregard Plaintiff’s submitted information was not in accordance with the law and was arbitrary and capricious. For the following reasons, the Court sustained Commerce’s determinations.

If Commerce “finds further that an interested party has failed to cooperate by not acting to the best of its ability to comply with a request for information from the agency, then Commerce may use an inference that is adverse to the interests of that party in selecting from among the facts otherwise available.” Id. at 6. Commerce found that Bayley “failed to cooperate by not acting to the best of its ability to comply with the Department’s requests for information by not disclosing the full extent of its affiliations as required by the initial questionnaire.” Id. at 7. The Court said based on this that “Commerce’s decision to apply AFA was reasonable.” Id. at 9. In regards to Commerce’s determination not to verify plaintiff’s questionnaire responses, “Commerce need not consider information submitted by an interested party if the information is so incomplete that it cannot serve as a reliable basis for reaching the applicable determination.” Id. at 9-10.  The Court said “it was reasonable to suspect Bayley’s responses were so incomplete as to not serve as a reliable basis for reaching the applicable determination.” Id. at 10. The final issue was Commerce’s decision not to consider information submitted y plaintiff. If Commerce determines that a response to a request for information does not comply with the request, Commerce “shall promptly inform the person submitting the response of the nature of the deficiency and shall, to the extent practicable, provide that person with an opportunity to remedy or explain the deficiency.” Id. The Court said “Commerce satisfied its burden … both to inform Bayley that Bayley’s affiliation response was deficient and to allow Bayley to correct its response after Commerce issued the first supplemental questionnaire.” Id. at 12.

Court Denied Motion for Reconsideration

Before the Court in ABB, Inc. v. United States et. al., Slip Op. 19-46, Court No. 16-00054 (April 12, 2019) was a motion for reconsideration filed by Hyundai Heavy Industries, Co., Ltd. and Hyundai Corporation, USA (collectively “Hyundai”), the defendant-intervenors involved in the case. Hyundai requested the court reconsider its decision sustaining Commerce’s use of facts available (“AFA”) in applying the agency’s capping methodology to service-related revenue with respect to transactions based on communications between Hyundai and Hyundai’s unaffiliated customers. For the following reasons, the motion was denied.

Under USCIT Rule 59(e), “the court may consider a motion to alter or amend a judgment, which is served no later than 30 days after the entry of the judgment.” Id. at 3. “Judgment includes a decree and any order from which an appeal lies. As a general rule, an order remanding a matter to an administrative agency for further findings and proceedings is not final, and therefore, not appealable.” Id. at 3-4. In addition, the Court has the discretion to reconsider a prior decision under USCIT Rule 54(b) “as justice requires, meaning when the court determines that reconsideration is necessary under the relevant circumstances.” Id. at 5. The Court said its prior judgement was an interlocutory order, and therefore not final under Rule 59(e). The Court also dismissed further arguments under rule 54(b), saying “Hyundai’s argument lacks merit because Commerce requested and was granted a remand to reconsider the record on this issue and ensure that it was properly applying its revenue-capping methodology.” Id. at 8. The motion was denied.

Trade Updates for Week of April 10, 2019

United States Court of International Trade

Generalized Claim Dismissed by Court

Before the Court in Husteel Co., Ltd. et. al.  v. United States et. al., Slip Op. 19-42, Court No. 18-00169 (April 5, 2019) was the defendant’s motion for a partial dismissal of the case. The case involved consolidated claims filed by Husteel and SeAH. Defendant seeks dismissal of paragraph ten of SeAH’s complaint under USCIT Rule 12(b)(6) for failure to state a claim upon which relief can be granted. Paragraph ten of SeAH’s complaint stated “Finally, Plaintiff believes that Commerce’s determination may have contained other errors of law and fact that will become more apparent after a full review of the administrative record.” Id. at 3. For the following reasons the Court granted the defendant’s motion to dismiss.

USCIT Rule 8(a)(2) “requires that a claim for relief contain a short and plain statement of the claim showing that the pleader is entitled to relief.” Id. at 4. To survive a motion to dismiss, a claim in a complaint must contain sufficient factual material to “state a claim to relief that is plausible on its face.” Id. at 5.  The Court said “paragraph ten of SeAH’s complaint states no specific errors of law or fact. SeAH simply claims there may be other errors of law and fact that will become more apparent after a full review of the administrative record.” Id. The Court dismissed SeAH’s argument that it did not have access to the record at the time of filing its complaint because it has subsequently been given access to the record index. “The vague and open-ended nature of paragraph ten of SeAH’s complaint denies the other parties fair notice of the scope of SeAH’s claims.” Id. at 5. As such, the claim was dismissed.

Plaintiff’s Claims Dismissed for Lack of Injury and Failure to State a Claim

Before the Court in Perry Chem. Corp. v. United States, Slip Op. 19-43, Court No. 15-00168 (April 5, 2019) was defendant’s motion for a partial dismissal of the case. Plaintiff brought the action to seek a writ of mandamus compelling the Commerce to issue modified liquidation instructions to CBP directing reliquidation without regard to antidumping duties of all entries of polyvinyl alcohol (“PVA”) from Taiwan produced and exported by Chang Chun Petrochemical Co. Ltd. Defendant moved to dismiss, pursuant to USCIT Rules 12(b)(1) and 12(b)(6) by arguing Perry sustained no injury and failed to state a claim.  For the following reasons the partial motion to dismiss was granted.

“To establish standing, a plaintiff must satisfy three elements. First, it must have suffered an injury in fact, that is, an invasion of a legally protected interest that is concrete and particularized and actual or imminent, not conjectural or hypothetical. Second, a causal connection must exist between the injury and the conduct complained of. Third, the plaintiff must show a likelihood that the injury can be redressed by a favorable court decision.” Id at 11-12. The Court said in regards to the imports from March 2013 - December 2013, plaintiff was not the importer of record and lacked standing, plaintiff could not “maintain a claim for which it suffered no particularized injury nor faced imminent threat of such injury.” Id. at 12.  Perry failed to state a claim for which relief should be granted with respect to the entries from the second administrative review. The Court said Commerce lawfully instructed CBP to liquidate the entries and that plaintiff should have participated in the underlying antidumping investigation with Commerce in order to delay liquidation. As such, the claims regarding entries from the second review, and entries where Perry was not the importer of record were dismissed.

 

Trade Updates for Week of April 3, 2019

United States Court of International Trade

 

Sustained Determination in Hot-Rolled Steel Case

Before the Court in Severstal Exp. GmbH, et. al. v. United States, Slip Op. 19-39, Court No. 17-00209 (March 27, 2019) was plaintiffs’ challenge to Commerce’s application of the adverse facts available (“AFA”) against the plaintiff in the administrative review of the antidumping duty order on hot-rolled steel from the Russian Federation. Plaintiffs argued “that Commerce wrongfully (1) denied an extension request and (2) rejected its revised databases, applied facts otherwise available, and used total AFA with an adverse inference.” Id. at 2.  For the following reasons, the Court sustained Commerce’s use of AFA.

In regards to the extension request issue, the Court said plaintiff argued “that despite being aggrieved by Commerce’s handling of its April 14 extension request, it timely, completely, and accurately provided all information requested.” Id. at 4.  This shows that there really was no disadvantage. The Court said plaintiff had admitted “it left itself only two days to prepare,” and thus sustained Commerce on the issue.  Turning to the AFA issue, “Commerce follows a two-step process to apply facts available with an adverse inference. First, Commerce must use facts otherwise available to fill gaps in the record if, among other things, an interested party withholds information requested by Commerce, fails to provide such information in the form and manner requested, significantly impedes the proceeding, or provides information that cannot be verified. Second, Commerce may apply an adverse inference in selecting among the facts available if an interested party fails to cooperate to the best of its ability.” Id. at 6.  Commerce argued that discrepancies in plaintiff’s questionnaires were discovered regarding reported home market sales. To address the issue, Commerce issued further questionnaires. In answering the additional questionnaires “Severstal failed to inform Commerce that it had made additional, unrequested changes by changing all CONNUMs in the home market sales databases” and to the U.S. sales database, Commerce rejected the data and applied the AFA Id. at 9. The Court said “Commerce reasonably explained its application of facts otherwise available and an adverse inference against Severstal.” Id. at 11.

 

Pet Carriers are Classified under Heading 6307

Before the Court in Quaker Pet Grp., LLC v. United States, Slip Op. 19-40, Court No. 13-00393 (March 29, 2019) was the question of the tariff classification of plaintiff’s  pet carrier products. The court had previously held that the pet carriers could not be classified under HTSUS heading 4202, which comprises containers that organize, store, protect, and carry various items, because pets are living beings. The parties continued discovery, to enable to Court to decide if the pet carriers were properly classifiable under HTSUS 6307, a provision containing made up articles of textile that are not included under another tariff category, or some other HTSUS heading.  For the following reasons the Court held that Quaker Pet’s carriers should be classified under HTSUS 6307.

“Tariff classification is determined according to the General Rules of Interpretation (“GRIs”), and, if applicable, the Additional U.S. Rules of Interpretation,” and are applied in numerical order. Id. at 3.  “Under GRI 1, classification shall be determined according to the terms of the headings and any relative section or chapter notes.” Id. In interpreting the Section Notes for Chapter 67, the Court determined “for merchandise to be classified under heading 6307, it must be an assembled textile article that fits under no other HTSUS heading.” Id. at 10.  The Court determined that the merchandise could not be classified under competing Chapter 4201 as saddlery and harness because the “products do not share the unifying characteristic of fastening to the animal that the imports included under heading 4201 share,” in accordance with common meaning of the phrase “saddlery and harness.” Id. at 12. Therefore, the Court classified the goods under HTSUS 6307 because they did fit in any other HTSUS heading.

 

Commerce Decision Regarding Welded Carbon Steel Pipe Sustained and Remanded in Part

Before the Court in Tosçelik Profil ve Sac Endüstrisi A.S. v. United States et. al., Slip Op. 19-41, Court No. 17-00018 were Commerce’s remand redeterminations in the 2014–2015 administrative review of the antidumping duty order on welded carbon steel standard pipe and tube products from Turkey. The court had previously remanded the Final Results for Commerce to reconsider its calculation of Tosçelik’s duty drawback adjustment and its grant of a circumstances of sale adjustment to Tosçelik for warehousing expenses. For the following reasons the Court sustained Commerce in part and remanded in part.

In regards to the duty drawback adjustment, Toscelik challenged Commerce’s subsequent circumstances of sale adjustment, and argued that increase to normal value nullifies duty drawback adjustment.  Commerce continued to rely on precedent which the Court specifically determined was misinterpreted and misplaced.  As such, the Court remanded the issue. The next issue was Commerce’s grant to Tosçelik of a circumstances of sale adjustment for Tosçelik’s warehousing expenses. The Court said “Tosçelik’s requested adjustment was based on data reflecting the greatest level of detail maintained in Tosçelik’s accounting records.  The accounting records showed the total quantity of goods shipped at the warehouse.” Id. at 8. The Court also noted that “Tosçelik removed scrap generation expenses that related exclusively to cut-to-length services, which do not qualify as warehousing expenses, from its requested adjustment.” Id. As such, the determination was based on substantial evidence and was sustained by the Court.

United States District Court

District Court Denies Summary Judgment in Antidumping Duty Dispute

A dispute between a New Jersey-based importer and a German supplier of glycine regarding the assessment of antidumping duties cannot be resolved by summary judgment and will proceed to trial, according to a recent decision of the United States District Court for the District of New Jersey.

In Pharm-Rx Corp. v. B.M.P., Bulk Meds. & Pharms. Prod. GMBH, 2019 U.S. Dist. LEXIS 54931 (March 31, 2019), Pharm-Rx sued its German Supplier B.M.P. for breach of contract, misrepresentation, Lanham Act violations and other claims with respect to shipments of glycine that were supplied to it. The glycine was represented to be a product of Germany, and B.M.P. held itself out to be a manufacturer, the plaintiff contends. However, Customs and Border Protection questioned the origin of the glycine and subsequently determined it to be of Chinese origin, assessing antidumping duties in the amount of 479.35 percent ad valorem – more than $700,000. Pharm-Rx paid the duties, then sued B.M.P. for recompense.

BMP moved for summary judgment, alleging that “choice of forum” clause in the contract between the two companies required an action to be brought in Germany and further alleging that there was no basis to hold it liable for misrepresentation of the origin of the product. The Court, per Judge Katherine Hayden, disagreed. She noted that B.M.P., in seeking summary judgment on the forum choice issue, had completely failed to follow the Court’s rules for supporting a summary judgment motion with factual allegations, leaving it to the Court to pick through a thicket of facts in an attempt to make a determination. B.M.P. had failed to meet its burden, so that aspect of the action could not be resolved on summary judgment.  

With respect to the question of misrepresentation, the Court noted that the two parties had conflicting views of what actually occurred in their negotiations, and in discussions after CBP questioned the origin of the glycine. It appears that at one point, B.M.P. counseled the plaintiff to represent the glycine as a product of India.

Holding that the parties’ motion established contested issues of fact requiring trial, the Court denied the motion for summary judgment. The case will now proceed to trial.

Trade Updates for Week of March 27, 2019

United States Court of International Trade

Plaintiff Fails to File Response to Commerce’s Remand Results

Before the Court in Jinxiang Huameng Imp. & Exp. Co. et. Al. v. United States et. al., Slip Op. 19-36, Court No. 16-00243 (March 21, 2019) was a remand redetermination made by Commerce concerning a new shipper review of imported fresh garlic from China. The action was filed to contest Commerce’s determination to rescind the new shipper review of plaintiff, Jinxiang Huameng Imp. & Exp. Co.’s (“Huameng”) because the company’s single sale of fresh garlic was not bona fide. Previously, the Court remanded the issue due to a lack of sufficient information to support the determination under statutory requirements. On remand, “Commerce reopened the record on remand and analyzed Huameng’s single sale of single-clove garlic according to all the factors set forth in the statute.” Id. At 4. The Court sustained the results because they were supported by substantial evidence, in comport with statue, and because plaintiff failed to file a response to Commerce’s remand results and redetermination.

Court of International Trade Upholds Section 232 Tariffs on Steel and Aluminum Products

The United States Court of International Trade has rejected a Constitutional challenge to the “national security” tariffs imposed by the President on certain steel and aluminum products, pursuant to Section 232 of the Trade Expansion Act of 1962.

In American Institute for International Steel, Inc. v. United States, Slip Op. 19-37 (March 25, 2019), a three-judge panel of the CIT held that it was bound by the Supreme Court’s decision in Fed. Energy Administration v. Algonquin SNG Inc., 426 U.S. 548 (1976), which held that Section 232 contains an “intelligible principle” for the delegation of Congressional trade powers to the Executive, and therefore did was not offensive to constitutional “separation of powers” requirements.

Writing the opinion for the Court, Judge Claire A. Kelly, joined by Judge Jennifer Choe-Groves, turned aside the contention of the plaintiff steel importers that Algonquin had concerned only whether the specific type of relief (restraints on exports of foreign oil to the United States) was permissible under Section 232, and not the question of whether the statute itself represented an improper delegation of Congress’ powers over imports. But the Court noted that the Supreme Court in Algonquin had reached both the remedy issues and delegation issues, so that the CIT was bound by the Supreme Court’s determination that Section 232 did not contain an impermissible delegation.

The CIT also held that, because Section 232 commits the decision whether to “adjust imports” to the President’s discretion, his decision was “not subject to review for rationality, findings of fact, or abuse of discretion”. This must be distinguished from cases where the claim is that the President lacks power to act under the statute.

Rejecting the plaintiff’s claim that Section 232 was unconstitutional because the discretion granted the President was seemingly unlimited, the CIT acknowledged that “the broad guideposts of subsections (c) and (d) of section 232 bestow flexibility on the President and seem to invite the President to regulate commerce by way of means reserved for Congress, leaving very few tools beyond his reach”. The Court suggested that Section 232 actions “plainly unrelated to national security” would be in excess of the President’s authority. But the Court declined to delve into the gray areas which might exist.

Judge Gary Katzmann filed an opinion dubitante, meaning that he disagreed with aspects of Judges Kelly’s and Choe-Groves’ decision, but joined in the decision because he was bound by the Supreme Court’s Algonquin precedent. But he clearly has some concerns with the breadth of prior interpretations of Section 232.

First, he noted that the Constitution vests only in Congress the power to “Lay and collect . . . Duties”, which he defined as a “core legislative function”. While he seemed to agree that a President might impose quotas or import licensing requirements, Judge Katzmann expressed “grave doubts” about whether Section 232 could constitutionally grant the President the power to impose duties themselves. He noted that in other tariff cases involving the question of delegation, Congress had set the basis for assessing duties (e.g., cost equalization under Section 336 of the Tariff Act), and left it to the President to act as fact-finder, to determine how those duties shall be calculated. Where Congress imposes a duty, but needs assistance (for example of the Tariff Commission) to obtain data, this is acceptable, because the imposition of the tariff was made by the Congress.

While acknowledging that Section 232 grants broad powers, Judge Katzmann noted that the President is free under Section 232, to disregard the findings of the Secretary of Commerce and to impose tariffs without an explanation. [“There is no rationale provided for how a tariff of 25% was derived in some situations, and 10% in others”. He suggested the Supreme Court might want to revisit some of its assumptions, noting that Algonuin’s holding was a limited one. “If the delegation permitted by section 232, as now revealed, does not constitute an excessive delegation in violation of the Constitution, what would?”

Trade Updates for Week of March 20, 2019

United States Court of International Trade

Summary Judgment Granted for Defendant

Before the Court in Apple Inc. v. United States Slip Op. 19-32, Court No. 13-00239 (March 13, 2019) were cross motions for summary judgment regarding the proper HTS classification of imported two IPad 2 Smart Covers, one made from leather and another made from plastic. When imported, CBP liquidated the plastic Smart Cover under subheading 6307.90.98, HTSUS, dutiable at seven percent, and the leather Smart Cover under subheading 4205.00.80, HTSUS, duty-free. Plaintiff then filed a protest to argue both covers were properly classified within subheading 8473.30.51, as “parts and accessories (other than covers, carrying cases and the like) suitable for use solely or principally with machines of headings 8469 to 8472: Parts and accessories of the machines of heading 8471: Other,” duty free. Id. at 4. CBP issued a ruling rejecting plaintiffs classification and ruled that the plastic iPad Smart Cover is properly classified subheading 3926.90.99, HTSUS, as an “Other articles of plastics and articles of other materials of headings 3901 to 3914: Other: Other,” dutiable at a rate of 5.3%. Id. at 4. Plaintiff filed this action to contest CBP’s denial of the protest. Before the Court, defendant also argued the Court lacked jurisdiction because CBP’s classification of the leather covers were liquidated duty-free and Plaintiff can claim no injury. For the following reasons the defendant’s summary judgment motion was granted.

“Plaintiff must demonstrate that its claim represents an injury in fact. An injury in fact is concrete and particularized and actual or imminent, not conjectural or hypothetical, fairly traceable to the challenged action, and likely to be redressed by a favorable decision.” Id. at 10. The Court said because “the leather Smart Covers were liquidated duty-free,” “plaintiff does not have standing to challenge Customs’ classification of the leather Smart Covers and therefore its claim is non-justiciable.” Id. at 11. In regards to the classification of the plastic cases, “Classification of merchandise under the HTSUS is governed by the principles set forth in the General Rules of Interpretation” (“GRIs”) applied in numerical order. Id. at 13. The Court may also use the nonbinding explanatory notes to provide guidance. Using the explanatory note for Heading 8473, the Court excluded the cover from the chapter because the note “affirmatively excludes parts or accessories that are “covers, carrying cases and the like.” Id. at 16.  The Court then said based on the undisputed facts the cover was “a composite good that is prima facie classifiable under either subheading 3926.90.99 … or subheading 6307.90.98.” Id. at 24. Turing to GRI 3b, the Court said the plastic outer layer gives the cover its essential character because “The plastic layer protects the screen and is the backing onto which the microfiber lining is attached,” “encapsulates the magnets that align with the sensor in the iPad 2 that prompt the machine to enter or exit sleep mode,” and “is folded to create the two different positions that prop up the iPad 2 to facilitate video watching and typing.” Id. at 24-25. As such the good was properly classifiable within subheading 3926.90.99.

 

Trade Updates for Week of March 13, 2019

United States Court of International Trade

Motion for Reconsideration Denied

Before the Court in Stupp Corp. et. al. v. United States et. al., Slip Op. 19-30, Court No. 15-00334 (March 7, 2019) was defendant intervenors, SeAH Steel Corporation, motion of reconsideration of the Court’s previous decision sustaining Commerce’s application of its differential pricing analysis in the less than fair value (“LTFV”) investigation of imported welded line pipe from Korea, which resulted in an antidumping order. SeAH argued “Commerce’s differential pricing analysis is merely a policy, necessitating Commerce to, on a case-by-case basis, justify and support with substantial evidence, any factual findings embodied in the Differential Pricing Analysis.” Id. at 3. For the following reasons, the Court denied the motion for reconsideration.

“A court should not disturb its prior decision unless it is manifestly erroneous.” Id. at 4. “Grounds for finding a prior decision to be manifestly erroneous include “an intervening change in the controlling law, the availability of new evidence, the need to correct a clear factual or legal error, or the need to prevent manifest injustice.” Id. at 4-5. The Court said that despite the defendant intervenors many arguments, they had “failed to demonstrate manifest error with the court’s reasoning for sustaining Commerce’s application of the differential pricing analysis” because the Court had applied the correct legal standard to the issue, and no new facts or controlling law had come forward. Id. at 10.

Decision Remanded in Polyethylene Terephthalate Film Case

Before the Court in Jindal Poly Films Ltd. of India v. United States, Slip Op. 19-31, Court No. 18-00038 (March 11, 2019) were challenges to Commerce’s final results in the administrative review of the antidumping duty order on polyethylene terephthalate film, sheet, and strip from India. Plaintiff argued Commerce’s decision to deny Jindal two post-sale price adjustments to its home market sales was contrary to law; Commerce unlawfully failed to issue a supplemental questionnaire to Jindal to seek additional information on the two post-sale price adjustments that Commerce denied; and Commerce violated Jindal’s due process rights by depriving it of an opportunity to meaningfully comment on Commerce’s preliminary results. For the following reasons, the Court remanded the results to Commerce for reconsideration.

Price adjustment is defined as “a change in the price charged for . . . the foreign like product, such as a discount, rebate, or other adjustment, including, under certain circumstances, a change that is made after the time of sale, that is reflected in the purchaser’s net outlay.” Id. at 8.

“Commerce does not accept a price adjustment that is made after the time of sale unless the interested party demonstrates . . . its entitlement to such an adjustment.” Id. The Court said “Commerce’s entire analysis for denying the two post-sale price adjustments is comprised of conclusory statements,” not supported by evidence. Id. at 11. In regards to the supplemental questionnaires, the Court said it could not rule on the issue because Commerce failed to articulate a reason for denying the post sales adjustments. The Court remanded the issues back to Commerce and said because of its remand on the first issue the due process claims were moot.

Reconsideration of Remand Results in Certain Corrosion-Resistant Steel Case

Before the Court in Uttam Galva Steels Ltd. et. al. v. United States et. al., Slip Op. 19-34, Court No. 16-00162 (March 12, 2019) was Commerce’s remand redetermination following an antidumping duty investigation on certain corrosion-resistant steel products from India. Plaintiff Uttam Galva Steels Limited (“Uttam Galva”) initiated this action to challenge the final determination in the antidumping duty investigation, in which the Commerce found that certain corrosion-resistant steel products from India are being, or are likely to be, sold in the United States at less-than-fair value. Plaintiff argued the drawback adjustment made on remand was made moot by the circumstance of sale adjustment to normal value. For the following reasons, the Court remands the results back to Commerce for reconsideration.

“If Commerce finds that merchandise is being sold at less than fair value, Commerce issues an antidumping duty order imposing antidumping duties equivalent to the amount by which the normal value exceeds the export price for the merchandise.” Id. at 4. A duty drawback adjustment is an adjustment to export price by “the amount of any import duties imposed by the country of exportation which have been rebated, or which have not been collected, by reason of the exportation of the subject merchandise to the United States.” Commerce may make certain price adjustments, to “ensure that there is no overlap or double-counting of adjustments.” Id. at 5. The Court said “Commerce’s action on remand here negates the statutory duty drawback adjustment that Uttam Galva earned by exporting its finished product to the United States and impinges on the agency’s ability to make a fair comparison.” As such, the results were remanded again.

Court of Appeals for the Federal Circuit

Solar Panels Country of Origin Test Altered to Reflect Differences in Scope and Harm Alleged

In Canadian Solar, Inc. et al. v. United States, SolarWorld Americas, Inc., plaintiff –appellee, Ct. No. 2017-2577 (March 12, 2019), SolarWorld, initiated the trade remedy investigations from which this appeal arises. The appellants – Canadian Solar, Inc., Changzhou Trina Solar Energy Co., Ltd., Hefei JA Solar Technology Co., Ltd., Shanghai JA Solar Technology Co., Ltd., Yingli Green Energy Holding Company Limited, and Yingli Green Energy Americas, Inc., -- export and or produce the class or kind of merchandise within the scope of the orders. Appellants argued that there should be only one type of origin rule – substantial transformation. However, the Federal Circuit affirmed the Court of International Trade’s decision for the alteration of the origin rule in the investigation before the Courts.

According to the CIT, the classes or kinds of merchandise in Solar I China, Solar I Taiwan, and Solar II China, previous decisions regarding solar cells and modules, laminates, and/or panels, are distinct because the scopes of those orders are distinct. SunPower, 253 F. Supp. 3d at 1287–88. It also found that Commerce had sufficiently explained why it departed from the substantial transformation test in Solar II China. Slip Op., pg. 10 Commerce also provided “good reasons for” departing from the substantial transformation test where such an analysis would be insufficient for determining the country-of origin of this specific product because reliance on that analysis alone would not provide relief to the domestic industry. In these investigations, “Commerce determined that the harm to domestic industry was caused, not by Chinese solar cells or solar panels containing Chinese cells, but by Chinese pricing and subsidization of solar panels assembled in China using non-Chinese cells.” See id. at 14.

Moreover because of the change of the industry practice to source cells from other countries, the industry was circumventing the duties imposed by the orders. That was the reason propounded by the Courts for a change in the country of origin test.

Trade Updates for Week of March 6, 2019

United States Court of International Trade

Commerce Decision Regarding Surrogate Country Remanded in Certain Activated Carbon Case

Before the Court in Jacobi Carbons AB et. al. v. United States et. al. Slip Op. 19-27, Court No. 15-00286 (March 4, 2019) and Jacobi Carbons AB et. al. v. United States et. al. Slip Op. 19-28, Court No. 16-00185 (March 5, 2019) were challenges to Commerce’s remand determinations in the seventh and eight administrative reviews of the antidumping duty order on certain activated carbon from China. “Plaintiffs challenged Commerce’s selection of Thailand as the primary surrogate country  … and Commerce’s adjustment to Jacobi’s constructed export price (“CEP”) to account for irrecoverable value-added tax (“VAT”).” Id. at 3. For the following reasons, the Court in both cases remanded with respect to the agency’s surrogate country selection and sustained with respect to the agency’s value-added tax adjustment.

When an antidumping investigation involves a nonmarket economy, “Commerce determines normal value by valuing the factors of production in a surrogate country.” Id. at 7-8. “Commerce must use the best available information that is, to the extent possible, from a market economy country or countries that are economically comparable to the nonmarket economy” are significant producers of comparable merchandise. Id. at 8. In both cases, the Court said Commerce failed support its determination that Thailand was a significant producer with substantial evidence. As such, the determination that Thailand was an appropriate surrogate was remanded. In regards to the CEP, “when calculating export price and constructed export price, Commerce may deduct the amount … of any export tax, duty, or other charge imposed by the exporting country on the exportation of the subject merchandise.”  Id. at 17. Commerce concluded that it previously erred in adjusting Jacobi’s CEP. The Court said “Commerce did not impermissibly base its adjustment on the contemporaneous Chinese law while ignoring evidence of Jacobi’s net VAT payment.” Id. at 35. As such, Commerce’s determination to deduct output VAT from the CEP was based on substantial evidence and was accordance with law.        

 

Commerce Scope Decision Regarding End Use and Further Processing of Certain Light-Walled Rectangular Pipe Remanded for Further Consideration

Before the Court in Stein Indus. Inc. v. United States, Slip Op. 19-29, Court No. 18-00150 (March 5, 2019) was a challenge to scope determination based on the antidumping and countervailing duty orders on light-walled rectangular (“LWR”) pipe and tube from China. Plaintiff challenged Commerce’s determination that its merchandising bar and adjustable welded mounted bar kit were within the scope of the Orders. Plaintiff argued the imported products were not LWR pipes or tubes but instead were finished downstream components made from LWR pipes or tubes. Commerce argued that all four parts in their original form were described by the scope language. For the following reasons, the scope determination was remanded to Commerce for reconsideration.

When dealing with a scope determination “Commerce’s inquiry must begin with the relevant scope language.” Id. at 4. If the language is ambiguous, Commerce “considers the description of the merchandise in the petition and initial investigation, and prior determinations by Commerce and the International Trade Commission” and factors specified in regulations. The Court said that although the agency was correct saying the products met the description of subject merchandise in the scope, Commerce failed “to consider whether the scope contained exclusionary language based on further processing or end use.” Id. at 13-14.  Specifically, the Court questioned whether Commerce considered the extent to which products must exhibit a rectangular or square cross-section to be covered by the scope of the order.  “Without more, the court cannot ensure that Commerce has not interpreted the scope of the Orders in a manner contrary to its terms.” Id. at 14. As such, the determination was remanded for further consideration.

Composite Pharmacy Machine Held Classifiable as “Packaging Machinery”

A composite machine used to store, measure and package pharmaceuticals for use by patients in hospitals and pharmacies derived its “essential character” from its packaging machinery component and is classified under Harmonized Tariff Schedule (HTS) Heading 8422, free of duty.

In McKesson Canada Corp. v. United States, Slip Op. 19-26 (February 28, 2019), the product was a “Pacmed” machine, used to dispense medications in pharmacies and hospitals. The upper part of the machine contained a number of bar-coded hoppers into which various medications were packaged. The lower part of the machine contained a printing mechanism which dispensed plastic material which was sealed around collections of medications, in bags which were then imprinted with patient identification and other information.

Customs had classified the Pacmed device under HTS Heading 8479, as other machines having single function not identified in Chapter 84. The government argued that the principal and controlling function of the machine was “dispensing” drugs to customers. The Court rejected this argument, noting that “dispensing” was a process which involved delivery to the patient or ultimate consumer – something the Pacmed did not do. [Packaged drugs were carried from the machine to patients by nurses, pharmacists or other health care personnel].

The Court also rejected a government suggestion that the principal function of the machine was “compliance” with hospital practices and standards designed to ensure that each patient received his or her correct medication, noting that “compliance” was more an aspiration than a function which could be used as a basis for classification. Noting that the device’s holding, measuring and other functions were in service of the packaging function, the court held the Pacmed device to be classifiable as packaging machinery of Heading 8422.

United States District Court

Customs Seizure Decisions Not Reviewable Prior to Forfeiture Proceedings, District Court Rules

A Federal District Court will not review petitions filed with Customs regarding seizure of merchandise, according to a recent decision from the United States District Court for the District of Delaware.

In LKQ Corporation et al. v. Department of Homeland Security et al., No. 18-225-MN (D. Del)(February 22, 2019), which an importer of “repair grilles” for cars challenged determinations by Customs and Border Protection to seize imported grilles as either bearing counterfeit or “confusingly similar” versions of registered trademarks which have been recorded with Customs for import protection. The importer had previously sought to challenge exclusions of its merchandise in the Court of International Trade. The dispute subsequently spilled over into Federal District Courts, where forfeiture cases against certain grilles are pending in California and Georgia.

The importer filed suit in the Federal District Court in Delaware in an attempt to get comprehensive review of all of CBP’s various seizure actions (some 165 in total), which are the subject of some 81 petitions for mitigation of seizures. It also sought to consolidate the California and Georgia seizure cases with its Delaware challenge.

Not surprisingly, the Court in Delaware has now dismissed the plaintiffs’ case in its entirety, for a variety of reasons. First, it held that the courts have no jurisdiction to review Customs’ “discretionary” review of petitions for mitigation, which it characterized as requests for “executive pardons of the property based on the petitioner’s innocence”. It declined to interfere with Customs’ seizures of various entries of goods, noting that the exclusive remedy was to have the government file a case to forfeit the property, in which case the importer could assert a claim to the goods. If the government delayed too long in bringing forfeiture cases, the importers could bring an equitable action seeking to have forfeitures commenced or the property released.

The court also noted that there was no due process right to pre-forfeiture hearings with respect to goods seized at the border.

Trade Updates for Week of February 27, 2019

United States Court of International Trade

Remand Determination Sustained in Cold-Rolled Steel Flat Products Case

Before the Court in Hyundai Steel Co. v. United States et. al., Slip Op. 19-24, Court No. 16-00228 (February 26, 2019) was Commerce’s remand redetermination in the antidumping duty investigation of certain cold-rolled steel flat products from Korea. The court had previously remanded for Commerce to reconsider some of the agency’s decisions regarding the use if adverse facts availbe (“AFA”) and constructed export price (“CEP”).  On remand, Commerce found that the use of AFA for U.S. sales where Plaintiff did not incur domestic inland freight was inappropriate; and found that the use of AFA for U.S. sales for which Plaintiff incurred domestic inland freight, regardless of the use of an affiliated or unaffiliated freight provider-- was warranted because it was not possible to distinguish freight providers. In addition, Commerce continued to deny Plaintiff a CEP offset.

“The court will uphold an agency determination that is supported by substantial evidence and otherwise in accordance with law.” Id. at 5. “The results of a redetermination pursuant to court remand are also reviewed for compliance with the court’s remand order.” Id. The Court said “the record did not allow Commerce to determine the percentage of freight charges provided by unaffiliated providers” because of this, the agency “was unable to reduce the AFA freight adjustment to account for unaffiliated domestic inland freight.” Id. at 6-7. In regards to the offset issue, “when Commerce is unable to find sales in the home market at the same level of trade as the sales in the U.S. market, it will compare sales at different levels of trade and account for that difference by making a level of trade adjustment or granting a CEP offset.” Id. at 10. Commerce re-examined the record and concluded that all three of Plaintiff’s U.S. sale channels represent the same level of trade in the home market. The court said “Substantial evidence supports that finding.” Id. at 13. In addition, the Court also said Commerce complied with the court’s remand order.

Commerce Decision Remanded Regarding Application of State Wide Duty Rate

Before the Court in Hubbell Power Sys., Inc. v United States et. al., Slip Op. 19-25, Court No. 15-00312 (February 27th, 2019) was Commerce’s results in the administrative review of an antidumping (“AD”) duty order on certain steel threaded rod from China. Plaintiff challenges Commerce Commerce’s rejection of Gem-Year’s, a Chinese exporter, application for separate rate status and assignment of the 206% country-wide rate. During the review, Commerce found that Gem-Year had failed to cooperate by not acting to the best of its ability. Particularly, Commerce took issue with the late disclosure that affiliate, Jinn-Well Auto Parts Co. Ltd. (“JinnWell”), had likely produced in-scope merchandise. As such, Commerce applied the China-wide rate against Gem-Year. For the following reasons, the matter is remanded for Commerce for reconsideration.

Courts have “consistently upheld Commerce’s use of a rebuttal presumption of state control such that entities in NMEs are assigned the state-wide AD duty rate unless they demonstrate eligibility for a separate rate.” Id. at 7. “If an entity demonstrates a lack of de jure and de facto government control, Commerce will assign it a separate rate.” Id. The Court said “the imposition of China’s total rate in response to Gem-Year’s failure to timely reveal Jinn-Well’s production of some small amount of subject merchandise appears unduly punitive or arbitrary given the extensive factual information that remained on the record.” Id. at 10. The Court said Commerce failed to consider an “indication that Gem-Year may not have understood the Jinn-Well products to be within the scope of the AD duty order and that these products were not sold in the United States.” Id. at 11. Therefore, the issue was remanded.

United States District Court

Customs Seizure Decisions Not Reviewable Prior to Forfeiture Proceedings, District Court Rules

A Federal District Court will not review petitions filed with Customs regarding seizure of merchandise, according to a recent decision from the United States District Court for the District of Delaware.

In LKQ Corporation et al. v. Department of Homeland Security et al., No. 18-225-MN (D. Del)(February 22, 2019), which an importer of “repair grilles” for cars challenged determinations by Customs and Border Protection to seize imported grilles as either bearing counterfeit or “confusingly similar” versions of registered trademarks which have been recorded with Customs for import protection. The importer had previously sought to challenge exclusions of its merchandise in the Court of International Trade. The dispute subsequently spilled over into Federal District Courts, where forfeiture cases against certain grilles are pending in California and Georgia.

The importer filed suit in the Federal District Court in Delaware in an attempt to get comprehensive review of all of CBP’s various seizure actions (some 165 in total), which are the subject of some 81 petitions for mitigation of seizures. It also sought to consolidate the California and Georgia seizure cases with its Delaware challenge

Not surprisingly, the Court in Delaware has now dismissed the plaintiffs’ case in its entirety, for a variety of reasons. First, it held that the courts have no jurisdiction to review Customs’ “discretionary” review of petitions for mitigation, which it characterized as requests for “executive pardons of the property based on the petitioner’s innocence”. It declined to interfere with Customs’ seizures of various entries of goods, noting that the exclusive remedy was to have the government file a case to forfeit the property, in which case the importer could assert a claim to the goods.  If the government delayed too long in bringing forfeiture cases, the importers could bring an equitable action seeking to have forfeitures commenced or the property released.

The court also noted that there was no due process right to pre-forfeiture hearings with respect to goods seized at the border.

Trade Updates for Week of February 20, 2019

United States Court of International Trade

Scope Determination Regarding Flanges Remanded for Reconsideration

Before the Court in Star Pipe Prods. v. United States et. al., Slip Op. 19-20, Court No. 17-00236 (February 13, 2019) was a 2017 Final Scope Ruling issued by Commerce interpreting the scope of an antidumping duty order on non-malleable cast iron pipe fittings from China to include certain ductile iron flanges imported by Star Pipe. Notice of Antidumping Duty Order: Non-Malleable Cast Iron Pipe Fittings From the People’s Republic of China, 68 Fed. Reg. 16,765 (Apr. 7, 2003) (the “Order”).  Plaintiff argued that their product was outside the scope of the Order, and in the alternative, that if the ruling was sustained Commerce acted unlawfully in issuing liquidation instructions to Customs directing the assessment of antidumping duties on entries of Plaintiff’s product that were made prior to issuance of the Final Scope Ruling. For the following reasons, the Court remanded the scope determination back to Commerce.

“Scope orders may be interpreted as including subject merchandise only if they contain language that specifically includes the subject merchandise or may be reasonably interpreted to include it.” Id. at 4. Because the products at issue are made of ductile cast iron rather than non-malleable (“gray”) cast iron, the Court found that they are not described by the first paragraph of the scope language. The Court said that “the analysis portion of the written determination … makes no mention of analyzing the merchandise descriptions in the petition and, to the contrary, indicates that Commerce did not consider the petition at all.” Id. at 9. In addition, the Court found “that no portion of the petition has been placed on the administrative record of this case, indicating further that Commerce failed to consider it.” Id.  Therefore the Court ordered “Commerce to consider the merchandise descriptions in the petition and the arguments Star Pipe made regarding them.” Id. at 10.

 

Remand Redetermination Sustained in Certain Frozen Warmwater Shrimp Case

Before the Court in Soc Trang Seafood Joint Stock Co. et. al. v. United States et. al., Slip Op. 19-23, Court No. 16-00205 (February 19, 2019) was Commerce’s remand redetermination in the tenth administrative review of the antidumping (“ADD”) order on certain frozen warm-water shrimp from Vietnam. The remand redeterminations were filed in response to the Court’s previous remand in order for Commerce to further explain or reconsider  its decision to value frozen shrimp using Bangladeshi UN Comtrade data for Harmonized Tariff Schedule (“HTS”) 0306.13,  and (ii) its decision to deny an offset for excess/scrap packaging. On remand the agency decided to use Indian data to value the frozen shrimp, and to continue its denial of the offset. For the following reasons the Court sustained Commerce’s remand determinations.

“In antidumping proceedings involving non-market economies, Commerce generally calculates normal value using the factors of production . . .” Id. at 7. “Commerce will value respondents’ factors of production using the best available information.” Id. The Court said “Commerce’s decision, on remand, to value the frozen shrimp input using Indian GTA import data is reasonable” because the agency explained that the Indian data was more specific to the input utilized by respondents, because it was limited in scope to warm-water shrimp and the data was more contemporaneous with the relevant period of review. Id. at 8. In regards to the offset issue, “Commerce has the discretion to set the standards by which items qualify for a byproduct offset, so long as Commerce’s selection satisfies the overall purpose of the antidumping statute, to calculate accurate dumping margins and is reasonable.” Id. at 11. The Court said Commerce adequately explained it reasoning and that “Commerce complied with the court’s order.” Id. at 12.

United States Court of Appeals for the Federal Circuit

Door Knobs with Locks are Composite Goods, Federal Circuit Rules

Door knobs with integral locks, of a kind used to protect the outer entry doors of homes, are “composite goods” and must be classified according to that component which imparts their “essential character,” according to a recent decision of the United States Court of Appeals for the Federal Circuit.

In Home Depot U.S.A., Inc. v United States, No. 2018-1206 (February 15, 2019), the merchandise at question consisted of door knobs having integral locks. They were typically made of steel and consisted of an interior knob assembly, an exterior knob assembly, a key cylinder, a latch mechanism assembly, a flanged strip plate and mounting hardware. Customs liquidated the articles under HTS subheading 8301.40.6030, as “locks (key, combination or electrically operated) of base metal” and specifically as “door locks, lock sets and other locks suitable for use with interior or exterior doors (except garage, overhead or sliding doors).” Home Depot asserted that the articles were properly classified under HTS subheading 8302.41.60 as “base metal… fittings and similar articles for… interior and exterior doors.”

On cross motions for summary judgment, the Court of International Trade upheld Customs’ classification of the products as “locks” under HTS Heading 8301. In its ruling, the CIT explained that “knobs can be, and are here, a part of a lock” and found that “in some types of locks, the lever is a door knob.” The Federal Circuit vacated the CIT’s judgment, and remanded for further findings.

The Federal Circuit held that the products were prima facie classified under both heading 8301 because the goods did contain locks. “[T]he fact that door knobs make up part of the overall locking mechanism does not alter the fact that the products, viewed as a whole, are locks”.

The Court also held that the products were classifiable as “fittings and similar articles suitable for doors, and for “interior or exterior doors.” Home Depot argued that the knobs at issue were not only correctly covered by the classification for “fittings” for “interior and exterior doors” but were also “similar articles” to privacy and passage knobs that the Government acknowledges are classifiable under HTS heading 8302. Finding the Explanatory Notes to the HTS not to be decisive for either party, the Court held that the products were “composite goods” which under General Rule of Interpretation 3(b) to the HTS must be classified as if they consisted of that component or material which imparts the “essential character” to the item.  Determining which component imparts the “essential character” is a fact-driven exercise, and the Federal Circuit remanded the case to the CIT with instructions for that court to conduct further proceedings and identify the essential character component of the goods.   

 

Infrared Modules for Fiber Data Networks Classifiable as “Optical Instruments”

Various “Value Added Modules” utilized to make connections in fiber data networks were properly classified by Customs as “optical instruments” of HTS subheading 9013.90.80 of the Harmonized Tariff Schedule, a provision for "other optical appliances”. The modules, used with home fiber optic networks to transmit images and data, consisted of (1) splitter modules, which “take individual signals from a single optical fiber and divide them, enabling that single signal to reach multiple telecommunication network subscribers,” (2) monitor modules, which “allow access to signaling and control functions of a communications network in order to evaluate performance and detect problems,” and (3) wavelength division multiplexer (“WDM”) modules, which “permit infrared signals of two different wavelengths to travel simultaneously on a single fiber,  All of the product operated using infrared light, using frequency ranges which made the light undetectable by human eyes.

In ADC Telecommunications Inc. v. United States, No. 2018-1306 (Fed. Cir. February 19, 2019), the Federal Circuit held that the definition of optical appliances did not require the appliances to operate in the human-visible range of the electromagnetic spectrum. Turning to legislative history, including the 1929 Summaries of Tariff Information, the Court held that an “optical instrument” was one which used light waves in a non-subsidiary function. “Optical instruments are primarily used to aid or supplement human vision; they also include apparatus which depends for its operation on the passage of light through prismatic or lenticular optical glass. Lenses and prisms are the fundamental parts of optical instruments”. Summary of Tariff Information, 552 (1929). While optical devices normally aid or supplement human vision, the Federal Circuit noted, this was not a necessary feature of being classified as an optical instrument. What is required, the Federal Circuit held, is that the appliance operate by means of transmitting or bending light – functions which the “value added modules” performed.

Finding the goods to be prima facie classifiable under the HTS subheading 9013.90.80 provision for other optical instruments, the court held that the importer’s proffered classification under HTS subheading 8517.62, as “ Machines for the reception, conversion and transmission or regeneration of voice, images or other data, including switching and routing apparatus” was precluded by an exclusionary note to the tariff.

Trade Updates for Week of January 30, 2019

United States Court of International Trade

 

TAA Decision Remanded for Further Explanation

Before the Court in Former Employees of Honeywell Int'l, Inc. v. United States Secretary of Labor, Slip Op. 19-11, Court No. 17-00279 (January 23, 2019) was the final negative determination of the Department of Labor (“Labor”)  denying the eligibility of the former employees of Honeywell International, Inc. for benefits under the Trade Adjustment Assistance (“TAA”) program.  The Court had previously granted Labor a voluntary remand to reconsider their determinations regarding the number of employees separated during the applicable period. For the following reasons Labor’s remand results and negative determination regarding Plaintiffs’ eligibility for benefits were remanded for further consideration.

“Eligibility for TAA requires Labor to find that a significant number or proportion of the workers in such workers' firm have become totally or partially separated, or are threatened to become totally or partially separated” within the one year time period prior to the submission of the petition. Id. at 5.  29 C.F.R. § 90.2 “defines significant number or proportion of the workers as follows: … at least three workers in a firm … with a work force of fewer than 50 workers would ordinarily have to be affected.” Id. at 6. In this case, Labor concluded in its investigation that Honeywell-Procurement, a subdivision of a subdivision consisting of only three employees was the appropriate subdivision for evaluation for TAA eligibility, and that a significant number of workers were not affected or separated from their work. The Court said it was “having trouble sustaining as reasonable Labor’s reliance on its three-person minimum requirement when applied to a subdivision consisting of only three employees,” where the entire sourcing department was outsourced to Mexico. Thus, the results would be remanded for further reconsideration Id. at 10.   

 

Commerce’s Decision is Sustained in Part

Before the Court in Clearon Corp. et. al. v. United States et. al., Slip Op. 19-13, Court No. 17-00171 (January 25, 2019) were challenges to two determinations made by Commerce in the administrative review of the countervailing duty order on chlorinated isocyanurates from China. First, was the decision to use adverse facts available to determine that the Export Buyer’s Credit Program was countervailable because the Chinese Government withheld information that Commerce insisted it needed. Second was Commerce’s selection of 0.87 percent as the adverse facts available rate for the Export Buyer’s Credit Program. For the following reasons the Court sustained in part and remanded in part Commerce’s determinations.

“A foreign government may be found to be a non-cooperating party.” Id. at 18. “The application of adverse facts available may adversely impact a cooperating party, although Commerce should seek to avoid such impact if relevant information exists elsewhere on the record.” Id. The Court said “Commerce must resort to facts available only when necessary information is not available on the record,” and that in this case Commerce must “provide an adequate answer as to why the information it seeks to fully understand the operation of the program is necessary to fill a gap.” In addition the Court said all determinations made by Commerce regarding the 0.87 percent rate were based on substantial evidence.