Trade Updates for Week of September 11, 2019

United States Court of International Trade

19-116

Before the Court in Nexteel Co. et. al. v. United States et. al., Slip Op. 19-116, Court No. 17-00091 (September 4, 2019) were remand redeterminations, made pursuant to a previous Court order, concerning the administrative review of the antidumping order on oil country tubular goods (“OCTG”) from the Republic of Korea. The remand redeterminations dealt with three issues, (1) Commerce’s finding of a particular market situation, (2) Commerce’s classification of proprietary products of plaintiff, SeAH Steel, (3) Commerce’s decision to deduct SeAH’s general and administrative expenses as selling expenses. For the following reasons, the Court sustained in part and remanded in part.

The first issue the Court dealt with was the finding of a particular market situation. Initially, “Commerce did not find the existence of a particular market situation in its preliminary results, but later relied on the same administrative record to reverse its position and conclude that a particular market situation existed in the final results.” Id. at 5. On remand, Commerce recalculated the dumping margin, without the particular market situation adjustment for plaintiffs, SeAH and NEXTEEL, as well as non-examined companies. The Court said the determination was “consistent with the Court’s remand order and opinion.” Id. at 7.  The next issue was Commerce’s classification of SeAH’s proprietary products. During the investigation Commerce, combined SeAH’s proprietary OCTG under reporting code 075 with reporting code 080, the Court remanded for explanation. On remand, the agency “explained that the model match methodology used to determine dumping margins in this action contained a hierarchy of criteria designed to reflect differences between products, and that Commerce ranked those differences in order of importance.” Id. at 8. The Court concluded the determinations were based on substantial evidence. The final issue was Commerce’s decision to deduct SeAH’s general and administrative expenses as selling expenses. Previously, “Commerce deducted general and administrative (“G&A”) expenses from constructed export price (“CEP”) related to resold United States products for SeAH’s U.S. affiliate.” Id. at 11. The Court had previously remanded Commerce’s decision as unsupported by substantial evidence. On remand, Commerce explained that “Commerce did not apply all of the affiliates G&A expenses to directly resold products” and Commerce allocated the affiliates G&A expenses proportionally to all of the products sold.  The Court said “Commerce’s explanation on remand does not explain adequately what evidence specifically supports the treatment of G&A expenses as selling expenses or why Commerce may treat G&A expenses as selling expenses,” and remanded for further consideration.  Id. at 13-14.

19-117

Before the Court in American Cast Iron Pipe Co. et. al. v. United States, Slip Op. 19-117, Court No. 19-00083 (September 4, 2019) was a motion for a preliminary injunction, in an action contesting Commerce’s final determination in an antidumping duty investigation on large diameter welded pipe from the Republic of Korea. Plaintiffs requested a preliminary injunction, to enjoin the government from causing or permitting liquidation of certain unliquidated entries of welded pipe from Korea that are subject to the final determination.

To succeed on a motion for an injunction a moving party must demonstrate “(1) that it will be immediately and irreparably injured; (2) that there is a likelihood of success on the merits; (3) that the public interest would be better served by the relief requested; and (4) that the balance of hardship on all the parties favors the petitioner.” Id. at 4. “No one factor, taken individually is necessarily dispositive.” Id. at 4. In regards to the injury, the Court noted that the threat of injury does not need to be imminent. The Court said “liquidation would permanently deprive plaintiff of its ability to challenge the rate with regard to affected entries,” and found this factor weighed in favor of the injunction. In regards to the likelihood of success on the merits, the Court noted “in the face of irreparable harm, plaintiff’s burden to show likelihood of success on the merits is lessened.” Id. at 8.  The Court said “neither party has discussed the merits of the case, the Court will assume that this is a normal unfair trade case in which there are close, difficult issues that may be resolved in either party’s favor.” Id. at 8-9.  In regards to the public interest, the Court said “the public interest is best served by the accurate assessment of duties,” which weighed in favor of the plaintiff. Id. at 9. The final factor was the balance of hardships, the Court said “suspension of liquidation is at most an inconvenience to the government … as it will ultimately collect the full amount owed with interest and in the meantime will collect cash deposits at the rate,” this factor weighed in favor of plaintiff. Id. Overall three of the four factors weighed in favor of the injunction and the Court granted the motion.

19-118

Before the Court in Sumecht NA, Inc. v. United States et. al., Slip Op. 19-118, Court No. 17-00244 (September 6, 2019) was a case of first impression involving a challenge to Commerce’s late publication of a Timken Notice after the statutory deadline had passed, which applied a change in antidumping duty deposit rates retroactively from the antidumping investigation of Crystalline Silicon Photovoltaic Cells from the China. “A Timken Notice is a notice issued by Commerce if this Court or the U.S. Court of Appeals for the Federal Circuit renders a decision that is not in harmony with Commerce’s prior determination.” Id. at 2. In this case, Commerce was supposed to publish a Timken Notice by October 15, 2015, but failed to do so. Commerce published the Timken Notice on November 23, 2015 setting a retroactive date for the changed antidumping duty rate to October 15, 2015. Plaintiff alleged that Customs unlawfully assessed duties by the retroactive application of the China-wide entity rate to merchandise that entered after the Court’s decision of October 5, 2015 but before the publication of the Timken Notice.   The Court examined whether Commerce’s decision to retroactively set the effective date of the Timken Notice was not in accordance with law. For the following reasons, the Court granted Plaintiff’s motion for judgement on the agency record.

“Under 19 U.S.C. § 1516a(c), Commerce must publish a notice of a decision by the United States Court of International Trade or United States Court of Appeals for the Federal Circuit that is not in harmony with Commerce’s previous determination. The statute directs that such notice of a decision shall be published within ten days from the date of the issuance of the Court decision.” Id. at 10. “Under 19 U.S.C. § 1516a(c)(1), subject merchandise is liquidated in accordance with Commerce’s determination until the date of publication in the Federal Register of notice of a Court decision not in accordance with the underlying determination.” Id. at 13 The Court said “Commerce’s untimely notice was not in accordance with Commerce’s statutory obligation under 19 U.S.C. § 1516a(c) to issue notice within ten days of a Court decision not in harmony with its prior determination” and found “Commerce’s failure to publish notice within ten days of a triggering Court decision pursuant to 19 U.S.C. § 1516a(c)(1) was not in accordance with law.” Id. at 12.    The Court concluded “plaintiff’s entries that were entered, or withdrawn from warehouse, for consumption on or before the date of Commerce’s Timken Notice publication in the Federal Register on November 23, 2015 were entitled to a rate in accordance with Commerce’s prior determination.” Id. at 13. The Court also found that Commerce’s unlawful delay was not harmless error because Plaintiff’s entries were subject to liquidation at the significantly higher rate.     

Trade Updates for Week of September 4, 2019

United States Court of International Trade

Before the Court in China Mfrs. Alliance, LLC et. al. v. United States, Slip Op. 19-115, Court No. 15-00124 (September 3, 2019) were remand redeterminations, made pursuant to a previous Court order, in regards to a challenge to the final results of an administrative review of the antidumping duty order on pneumatic off-the-road tires from the People’s Republic of China (“PRC”). Plaintiffs, Guizhou Tyre Co., Ltd. and Guizhou Tyre Export and Import Co., Ltd., (collectively, “GTC”) were the mandatory respondents in the review. On the second remand in the case, Commerce recalculated GTC’s export price (“EP”) and constructed export price (“CEP”) by eliminating deductions for irrecoverable VAT, reconsidering its calculations of GTC’s brokerage and handling and ocean freight costs, and eliminating additional cost elements it determined to have been double counted. For the following reasons the Court sustains Commerce’s remand redeterminations.

On remand, “the Court directed Commerce to recalculate EP and CEP without making a reduction in the EP and CEP starting prices for irrecoverable VAT. Commerce, in response, eliminated its irrecoverable VAT deduction,” despite protesting the Court’s order. Id. at 8. The Court had also ordered Commerce to ensure that no costs were double counted for seven specific charges between(1) brokerage and handling charges and ocean freight charges or (2) ocean freight charges and U.S. inland freight charges. On remand, the agency reopened the record and determined four of the charges only appeared on one out of twenty four quotes Commerce used and therefore were not double counted. Commerce determined the three remaining charges, Automated Manifest System (“AMS”) Charges, Documentation Charges, and Traffic Mitigation Fees, could have been duplicated in the data. Citing a surrogate company’s logistics and supply chain glossary and half of the quotes gathered by the agency, Commerce determined that the AMS charges and Documentation charges were not double counted with U.S. freight charges.

However, the agency did find that Traffic Mitigation Fees were related to domestic freight charges and therefore removed from calculations on ocean freight.

Trade Updates for Week of August 14, 2019

United States Court of International Trade

Court Sustains Commerce’s Determination in Countervailing

Before the Court in Rebar Trade Action Coalition v. United States et. al., Slip Op. 19-107, Court No. 18-00160 (August 8, 2019) was a challenge to Commerce’s final negative determination in the countervailing duty (“CVD”) order on steel concrete reinforcing bar (“rebar”) from Turkey. In November of 2014, Commerce issued a countervailing duty order on rebar from Turkey. Upon review of its order finding a countervailable subsidy for the provision of natural gas to Turkish rebar producers, Commerce calculated a CVD rate using only Azerbaijani domestic prices because those prices represented the most reliable world market price on the record with an inflow pipeline connection to Turkey. Id. at 8. Rebar Trade Action Coalition (“RTAC”) challenged that determination as not supported by substantial evidence and not in accordance with law. RTAC attacked Commerce’s implicit finding that the record did not support a determination that there was an inflow pipeline connection from Greece to Turkey as such a connection would have enabled Commerce to utilize different prices. Id. at 10. For the following reasons, the Court sustained Commerce’s determinations in full.

Substantial evidence “is something less than the weight of the evidence,” but “is more than a mere scintilla,” Id. at 7. Ultimately, “the agency must examine the relevant data and articulate a satisfactory explanation for its action including a rational connection between the facts found and the choice made.” Id. “Commerce may, based on its experience in administering the statute, make justifiable inferences on the record before it,” so long as those inferences are supported in the record and logically related to the facts found. Id. In this case, RTAC argued that the evidence did not definitively eliminate the possibility that the pipeline flowed from Greece to Turkey. Id. at 11. However, the Court found that the record did not allow for an inference that there is an inflow connection with Greece. Id. at 10. The Court reasoned that “[a]lthough Commerce has authority to place documents in the administrative record that it deems relevant, the burden of creating an adequate record lies with [interested parties] and not with Commerce.” Id. at 11. The time to submit information regarding the Turkey-Greece pipeline flow had passed, and the Court found that RTAC had not presented evidence supporting its desired outcome, and thus it failed to meet its burden. Id. at 12. The Court also found that Commerce’s decision to calculate a Tier 2 benchmark using only the Azerbaijani prices was supported by substantial evidence because Commerce cited sufficient evidence and made permissible inferences in finding that only certain countries have an inflow pipeline connection with Turkey.” Id. at 15.

Court Denies Defendant’s Motion to Dismiss and Grants Plaintiff’s Motion to Consolidate in Antidumping Case

Before the Court in Oman Fasteners, LLC v. United States et. al., Slip Op. 19-108, Court No. 18-00244 (August 8, 2019) was a challenge to certain aspects of the final results of Commerce’s second administrative review of the antidumping duty order on certain steel nail from the Sultanate of Oman. Before the Court are two motions: (1) the Government’s motion to dismiss the complaint for lack of subject-matter jurisdiction, and (2) Oman’s motion to consolidate this action with the Mid Continent case challenging the same determination. Id. at 2. Defendant claimed that Oman lacks constitutional standing to bring a lawsuit challenging the Final Results because it received a zero percent margin in the administrative review. Id. at 3.

Plaintiff alleged sufficient injury for constitutional standing purposes, namely, “a concrete procedural injury—the potential for permanent loss of its right to challenge Commerce determinations that Oman Fasteners believes were unlawful.” Id. at 3. For the following reasons, the Court denied Defendant’s motion to dismiss and granted Plaintiff’s motion to consolidate.

Injury in fact is one of the three elements that must be present before a plaintiff can be found to have constitutional standing. Id. at 7. Though often stated as requiring a “concrete and particularized” injury, economic harm is not a standing requirement. Id. at 11. Neither “is present injury a standing requirement. Rather, the threat of injury may suffice for standing purposes, so long as it is not conjectural or hypothetical.” Id. at 11. The Court found Oman had standing because the determinations challenged by Plaintiff were also before the Court in Mid Continent, where Plaintiff is a defendant-intervenor. The Court said status as an intervenor argued in favor of plaintiff being granted standing in this case. Id. The Court found it was likely that unless Plaintiff was permitted to pursue the claims in its complaint through this action, it would never have the opportunity to do so in the context of Mid Continent because Plaintiff could not bring crossclaims in Mid Continent without “impermissibly expanded the scope of [Mid Continent] beyond the issues raised by Mid Continent’s complaint. Id. The Court also found Plaintiff’s complaint would have been sufficient for it to have standing were its claims being heard under the procedures of the Declaratory Judgment Act. While the injury that might befall Oman was not imminent, it is not more remote than those found to fall within Article III in other contexts. Id. at 16. As such, the Court found Oman had standing to bring its case and consolidated the case with Mid Continent.

Court Remands Commerce’s Scope Ruling in Antidumping and Countervailing Case

Before the Court in TMB 440AE, Inc. v. United States, Slip Op. 19-109, Court No. 18-00095 (August 13, 2019) was a challenge to Commerce’s final scope ruling regarding certain seamless carbon and alloy steel pipe from the People’s Republic of China imported by TMB 44AE, Inc., formerly known as Advance Engineering Corporation (“AEC”). AEC contested Commerce’s finding that the plain scope language of the antidumping and countervailing duty orders was unambiguous and included plaintiff’s product in the orders without considering other regulatory factors. For the following reasons, the Court remanded Commerce’s final scope determination for reconsideration.

“Whether the order is ambiguous or not, Commerce’s regulations are unambiguous– it will take into account” the (k)(1) criteria in conducting a scope determination.” Id. at 9.

Commerce must consider “the descriptions of the merchandise contained in the petition, the initial investigation, and the determinations of the Secretary (including prior scope determinations) and the Commission.” Id. at 4. If these “(k)(1) sources” are dispositive, Commerce can end its inquiry and issue a final ruling. Id. at 5. If not, Commerce must conduct a formal scope inquiry and consider “(k)(2) factors.” Id. The Court found that “AEC sufficiently challenged the inclusion of its pipe in the Orders based on (k)(1) sources and so Commerce was not free to ignore these sources.” Id. The Court said “by not considering the (k)(1) sources, as required by regulation, Commerce created a situation in which duties might be assessed against products without an injury determination.” Id. at 12. As such, the case was remanded for consideration of the regulatory factors.

Trade Updates for Week of August 7, 2019

United States Court of International Trade

Attempt by Plaintiffs to Initiate Minor Alterations Inquiry Fails

Before the Court in Columbia Forest Products, et. al. v. United States, et. al., Slip Op. 19-98, Court No. 18-00098 (July 30, 2019) was a challenge to Commerce’s determination not to initiate a minor alterations anticircumvention analysis on softwood veneered plywood, under the antidumping duty and countervailing duty orders covering certain hardwood and decorative plywood products (“hardwood plywood”) from the People’s Republic of China. Id. at 3. After publishing preliminary determinations, Commerce clarified “that plywood with both a face and back veneer of coniferous wood (softwood) was not included within the scope of the investigations.” Id. at 5.  After the International Trade Commission (“ITC”) found material injury because imports of certain hardwood plywood products, plaintiffs requested that Commerce initiate an anticircumvention inquiry, “to determine whether imports of plywood with both face and back veneers of softwood involve a minor alteration to the subject merchandise such that it would be subject to the Orders.” Id. at 8. Commerce refused to initiate a minor alterations inquiry on the faulty premise that Commerce had already determined that the merchandise fell outside the plain language of the Orders. Id. at 13. For the following reasons, the Court granted the government’s motion for summary judgment.

 “The purpose of the minor alterations provision is to include merchandise that would have been included within the scope of an order but for minor alterations removing the merchandise from the order’s literal scope.” Id. at 19. The Court found that this reasonably includes an intent that the merchandise as altered would have been included in the scope of the investigation, if Commerce and the ITC had had reason to consider it at the outset of the investigation. Id. at 19. The Court found that the allegedly altered merchandise at issue was specifically considered during the investigation, was well-known at the outset of the investigation, and is different from the subject merchandise. Id. at 13. Accordingly, Commerce’s decision that an anti-circumvention inquiry was unnecessary was supported by substantial evidence.

 

Court Remanded Commerce’s Decision in Antidumping Case

Before the Court in Deacero S.A.P.I. De C.V., et. al. v. United States, et. al., Slip Op. 19-99, Court No. 17-00183 (August 1, 2019) was Commerce’s remand redetermination filed pursuant to the Court’s previous order.  Previously, in Deacero  S.A.P.I de C.V. v. United States, 42 CIT __, __, 353 F. Supp. 3d 1303, 1314-1315 (2018) (“Deacero I”),  the Court explained that Commerce failed to corroborate the 40.52% petition rate assigned to respondent using the “adverse facts available” (“AFA”) from the 2014–2015 administrative review of the antidumping duty (“ADD”) order covering carbon and certain alloy steel wire rod from Mexico and remanded the decision to Commerce for further explanation or reconsideration. Id. at 2. On remand, Commerce explained the “evidence it placed on the record on remand demonstrates the probative value of the assigned rate and satisfies the statutory corroboration requirement.” Id. at 2-3. Plaintiffs argued that Commerce’s corroboration analysis did not rely upon independent sources and failed to demonstrate that the petition rate was probative, relevant, and reliable. Id. at 6. For the following reasons, the Court found the Remand Results did not comply with the remand order, the results were remanded for further explanation or reconsideration consistent with this opinion. Id. at 7.

“Whenever Commerce relies on information not obtained in the course of an investigation or review, such as allegations in a petition, it is relying on secondary information and is required, to the extent practicable, to corroborate that information from independent sources.” Id. at 7. Commerce corroborates secondary information by “examining whether the secondary information to be used has probative value.” Id. at 7. The independent nature of a source depends on who originates the information provided and not by who files the information. Id. at 8. In this case, Commerce’s explanation revealed that it merely drew on the conclusions stated in the Initiation Notice and Initiation Checklist. The Court said none of the documents Commerce referenced to support its calculations as to export price and normal value were placed on the record. Id. at 10. The Court reasoned that “if the obligation to demonstrate the probative value of a rate is to have any meaning, Commerce must do more than refer to conclusions of calculations it carried out previously.” Id. at 11. The Court also reasoned that “Defendant cannot claim that Commerce used independent sources to corroborate the 40.52% AFA-rate … without identifying which independent sources Commerce relied upon, placing all such sources on the record, and explaining how such sources corroborate the AFA rate”. Id. at 12.

Court Granted Motion for a Preliminary Injunction in Antidumping Case

Before the Court in Nexteel Co., Ltd. et. al. v. United States, et. al., Slip Op. 19-101, Court No. 19-00092 (August 2, 2019) was a motion for preliminary injunction to enjoin the United States from liquidating, Plaintiff-Intervenor, Hyundai Steel Company’s entries subject to the final results of an antidumping order administrative review (“Final Results”). For the following reasons, Plaintiff-Intervenor’s motion for a preliminary injunction is granted. 

 The Court considered four factors when evaluating whether to grant a preliminary injunction: whether the party would incur irreparable harm in the absence of such injunction; whether the party was likely to succeed on the merits of the action; whether the balance of hardships favored the imposition of the injunction; and whether the injunction was in the public interest. Id. at 6. The Court concluded that Plaintiff-Intervenor would suffer irreparable harm absent injunctive relief, because absent injective relief Plaintiff-Intervenor would lose the ability to protect its entries from being liquidated at the challenged rate. Id. at 6. The Court found that Plaintiff-Intervenor showed a likelihood of success on the merits because this Court ruled against Commerce on the merits twice in related litigation. Id. at 6. Lastly, Plaintiff-Intervenor may have suffered hardship if its entries were liquidated before the conclusion of this case, whereas Defendant was unlikely to suffer hardship because Plaintiff-Intervenor’s entries are subject to cash deposits. Id. at 7.The public interest factor was neutral between the parties. As such, the Court granted the requested injunctive relief.

Court Sustains Commerce’s Final Negative Determination in Countervailing Case

Before the Court in Archer Daniels Midland Company et.al. v. United States, Slip Op. 19-103, Court No. 18-00160 (August 2, 2019) was a challenge to Commerce’s final negative determination in the countervailing duty investigation of citric acid and certain citrate salts from Thailand. Plaintiffs’ argument was centered around Commerce’s selection of the ASEAN-CHINA FTA as a benchmark to compare possible benefits received by COFCO Biochemical (Thailand) Co., Ltd. (“COFCO”); Niran (Thailand) Co., Ltd. (“Niran”); and Sunshine Biotech International Co., Ltd. (“Sunshine”) (collectively, “Respondents”) when importing machinery duty-free into Thailand pursuant to Section 28 of  Investment Promotion Act (“IPA Section 28”), a subsidy program exempting certain imported machinery from payment of import duties when used in specified projects. Id. at 2. Commerce determined using the benchmark, that no benefit was received by respondents from the IPA Section 28 program. Plaintiffs contend that Commerce’s determination was unsupported by substantial evidence because the record showed Respondents did not import the machinery pursuant to the ASEAN-China FTA and could not have complied with its requirements. Id. at 3. Defendant argued Commerce’s determination was supported by substantial evidence because the record was “replete” with documents demonstrating that Respondents’ machinery “originated from China.” Id. at 3. For the following reasons, the Court sustained Commerce’s final negative determination.

“Commerce is required to impose countervailing duties on merchandise that is produced with the benefit of government subsidies when it causes material injury to a domestic industry.” Id. at 3. “Such a subsidy exists when (1) a foreign government provides a financial contribution (2) to a specific industry and (3) a recipient within the industry receives a benefit as a result of that contribution.” Id. at 3. “A party benefits from the contribution when taxes or import charges paid by a firm as a result of the program are less than the taxes the firm would have paid in the absence of the program.” Id. at 4. “Commerce must establish a benefit calculation benchmark, or more precisely, determine what tariff rate would have applied absent the alleged subsidy. Once this benchmark is established, Commerce will have a reference point from which it can determine the amount of benefit that has been conferred.” Id. at 4. In this case, the parties dispute whether it was reasonable for Commerce to select the ASEAN-China FTA duty-free rate as the benchmark against which to measure whether Respondents received a countervailable benefit for imports of machinery through the IPA Section 28 program. Id. at 11. The Court found that, as Commerce explained, there is no support in its regulations or practice for requiring evidence of parallel compliance with ASEAN-China FTA procedural requirements as part of its identification of a suitable benchmark. Id. at 11. The Court reasoned Plaintiffs failed to identify any legal authority or record evidence suggesting that Commerce’s refusal was unreasonable.  Id. at 15. Thus, Commerce’s decision to use the ASEAN-China FTA tariff rate as the benchmark tariff rate is supported by substantial evidence. Id. at 15.

Court Sustains Commerce’s Redetermination Upon Remand in Antidumping Case

Before the Court in Hyundai Heavy Industries, Co. Ltd. v. United States et. al., Slip Op. 19-104, Court No. 17-00054(August 2, 2019) was a challenge to certain aspects of Commerce’s final results in the third administrative review of the antidumping duty order on large power transformers (“LPT”) from the Republic of Korea. Specifically, plaintiff challenged Commerce’s decision to assign plaintiff a weighted-average dumping margin of 60.81 percent based on the use of total adverse facts available (“AFA”). Id. at 2. On remand, Commerce determined that plaintiff had properly reported accessories, consistent with the scope of the antidumping duty order, but that plaintiff selectively reported certain sales information and provided unreliable data. Id. at 4. Because of this, Commerce again determined use of the AFA was appropriate. Id. For the following reasons, the Court sustained Commerce’s remand results.

“The mere production of a substantial volume of documents does not, ipso facto, demonstrate that a respondent acted to the best of its ability. The inquiry is whether a respondent has put forth its maximum effort to provide Commerce with full and complete answers to all inquiries in an investigation.” Id. at 12. “In general, use of partial facts available is not appropriate when the missing information is core to the antidumping analysis and leaves little room for the substitution of partial facts without undue difficulty.” Id. at 14. Commerce uses “total AFA” when it concludes “that all of a party’s reported information is unreliable or unusable. The Court found the record adequately supports Commerce’s decision to make an adverse inference because “despite a specific and comprehensive request for sales and expense documentation, plaintiff selectively reported what it considered necessary and sufficient.” Id. at 13. The Court reasoned that plaintiff’s ability to provide supporting documentation for some commission expenses indicates that additional documents existed, but plaintiff failed to provide them. Under these circumstances, “it is reasonable to conclude that” plaintiff demonstrated “less than full cooperation.” Id. at 14. Thus, the Court concluded that Commerce reasonably determined that the use of partial AFA was not practicable. Id. In addition, the Court also sustained Commerce’s use of the total AFA in regards to missing documents, finding plaintiff was not entitled to endless opportunities to cure deficiencies in its reporting. Id. at 10.

Trade Updates for Week of July 31, 2019

United States Court of International Trade

Court Granted Customs’ Motion For Summary Judgment in Tariff Classification Case  

Before the Court in FANUC Robotics Am., Inc. v. United States, Slip Op. 19-94, Court No. 04-00197 (July 26, 2019) was a challenge by plaintiff to contest Customs tariff classification of its imported printed circuit assemblies (“PCAs”), which were manufactured for use as components in FANUC’s programmable “controllers.” The controllers are then used in conjunction with FANUC’s industrial robots. Ten general types of PCAs were at issue in this case, each of which was manufactured for use as a component within a programmable “controller” The particular PCAs at issue in at issue in this case were imported for use as spare parts for incorporation into FANUC controllers. For the following reasons, the Court granted defendant’s summary motion.  

“Tariff classification under the Harmonized Tariff Schedule of the United States (“HTSUS”) is governed by the General Rules of Interpretation (“GRIs”) and the Additional U.S. Rules of Interpretation.”  Id. at 5-6. “Classification shall be determined according to the terms of the headings and any relative section or chapter notes.” Id. at 6. The Court found that FANUC’s controllers conform to the terms of Heading 8537 because the controllers contain a “circuit breaker, switches, and backplane.” Id. at 9-10. The PCAs were described by the terms of Heading 8538 because the PCAs at issue were imported for use as spare parts to be incorporated into FANUC controllers, and their interfaces made them unsuitable for installation in any other type of machine. Id. at 11. Thus, “whatever else they may be, these PCAs are parts suitable for use solely with an apparatus of Heading 8538, HTSUS. The Court found that the “ADP parts” do not constitute an “automatic data processing machine” for purposes of tariff classification because they perform a function beyond data processing. Id. at 12 Thus, the Court eliminated Heading 8471, HTSUS from consideration. Id. at 22. The Court concluded that the subsequent subheading 8538.90.30 is correct, and subject to duty at 3.5% ad val. Id. at 24.


Court Grants Plaintiff’s Motion for Voluntary Dismissal

Before the Court in Moen, Inc. v. United States, Slip Op. 19-95, Court No. 15-00161 (July 26, 2019) was plaintiff’s motion for voluntary dismissal under USCIT Rule 41(a). Plaintiff moved to dismiss its action against the United States challenging the denial by Customs of its protest pertaining to the tariff classification of various models of showerheads imported from the People’s Republic of China. Defendant opposes plaintiff’s motion for voluntary dismissal, noting its expenditure of resources and its pending summary judgment motion. For the following reasons, the Court granted plaintiff’s motion to dismiss and entered judgment dismissing this action.

 “Where the motion for voluntary dismissal was not filed before the opposing party served its answer to the complaint and there is no stipulation of dismissal signed by all parties, dismissal requires a Court order, and the Court may order dismissal on terms that the Court considers proper.” Id. at 4. “Unless otherwise stated, such dismissal is without prejudice. Id. Plaintiff argued Section 301 duties imposed by the U.S. Government have “significantly changed the importing landscape for showerheads manufactured in China” Id. at 4.  The Court reasoned because plaintiff has multiple protests that have been administratively suspended, if a new action similar to the present case is filed, then at least some of the effort the government devoted to discovery and the summary judgment motion may be useful. Id. at 6. The Court also said, defendant will not suffer clear legal prejudice because the liquidation of the entries that are the subject of this motion will stand. Thus, the Court granted plaintiff’s motion for voluntary dismissal because the “just, speedy, and inexpensive” requirement of Rule 1 does not “require the Court to deny the motion to dismiss where a plaintiff does not wish to proceed with its classification claim and defendant cannot establish that it will be legally prejudiced by dismissal. Id.

Court Vacated Temporary Restraining Order and Denied Plaintiff’s Motion for a Preliminary Injunction in Countervailing Duty case

Before the Court in Committee Overseeing Action for Lumber Int’l Trade Investigations or Negotiations v. United States, Slip Op. 19-88, Court No. 19-00122 (July 26, 2019) was a challenge to Commerce’s final results in the expedited countervailing duty review of certain softwood lumber products from Canada. This matter was before the Court on Plaintiff’s motion for a temporary restraining order “TRO” and preliminary injunction (“PI”). Plaintiff sought to enjoin Defendant from: (1) liquidating “any unliquidated entries of softwood lumber from Canada that” were subject to the Final Results, and were produced or exported by seven of the eight companies that received de minimis or reduced rates in the review; (2) revoking the relevant countervailing duty order on five companies that received de minimis rates in the review; and (3) collecting cash deposits at the rates established in the Final Results on entries which were produced or exported by the eight companies subject to the review. For the following reasons, the Court vacated the TRO and denied Plaintiff’s motion for a preliminary injunction,

To obtain a preliminary injunction, a party must demonstrate “(1) likelihood of success on the merits, (2) irreparable harm absent immediate relief, (3) the balance of interests weighing in favor of relief, and (4) that the injunction serves the public interest.” Id. at 9. “In evaluating irreparable harm, the Court must consider the magnitude of the injury, the immediacy of the injury, and the inadequacy of future corrective relief.” Id. “Immediacy of the injury and the inadequacy of future corrective relief may be weighed more heavily than magnitude of harm.” Id. at 10 In this case, plaintiff unsuccessfully attempted to analogize the effect of liquidation on the Coalition to the effect of liquidation during the pendency of a challenge to an administrative review. The Court found that “liquidation of entries—without more—generally does not constitute irreparable harm in a challenge brought by a domestic producer to an investigation determination”. Id. at 13. Liquidation of entries during the interim period would not moot Plaintiff’s claims and, absent evidence demonstrating specific, irreparable harm from liquidation of those entries, Plaintiff is not entitled to an injunction barring liquidation of such entries. Id. at 13. Thus, Plaintiff’s request for injunctive relief was denied because Plaintiff failed to demonstrate irreparable harm.

Court Sustained Commerce’s Remand Redetermination in Countervailing Duty Investigation

Before the Court in ArcelorMittal USA LLC et. al. v. United States et. al., Slip Op. 19-97, Court No. 16-00168 (July 29, 2019) was a challenge to Commerce’s final affirmative determination in the countervailing duty investigation of certain cold-rolled steel flat products from the Russian Federation. ArcelorMittal argued Commerce’s remand determinations did not comply with the Court’s remand order because Commerce’s explanation for its selection of the .03% AFA rate remained inadequate. NLMK argued Commerce impermissibly rejected its untimely comments on the draft remand redetermination and that Commerce failed to sufficiently justify its AFA decision. For the following reasons, the Court sustained Commerce’s final remand redetermination in its entirety.

The first issue the Court dealt with was if Commerce adequately explained why the .03% AFA rate was sufficiently adverse. Commerce did explain that the rate would best balance the statutory purposes of deterring non-cooperation and using a corroborated rate that reflects the subsidization behavior of the Russian government.  Id. at 9. Thus, it was reasonable for Commerce to use the only available rate which was also explicitly permitted by statute. Id.

Secondly, the Court reviewed whether Commerce abused its discretion by rejecting NLMK’s untimely comments. “Strict enforcement of time limits and other requirements is neither arbitrary nor an abuse of discretion when Commerce provides a reasoned explanation of its decision.” Id. at 13.  In this case, Commerce set deadlines consistent with the procedures established for similar circumstances and explained its rationale for rejecting NLMK’s untimely submission. Id. at 15. Commerce set a clear deadline for comments on the draft remand redetermination. Id. NLMK failed to meet that deadline, without sufficient explanation, and did not even seek an extension of time to submit comments before the deadline had expired. Id. The Court found that “NLMK has not demonstrated an unexpected event that could not have been prevented and that precluded them from timely filing an extension request through all reasonable means.” Id. at 17. Finally, nothing in the record of this case suggests that Commerce’s rejection of the untimely request resulted in a disproportionately punitive margin. Id.

The final issue was whether NLMK failed to exhaust its administrative remedies. A party who fails to exhaust their administrative remedies in this manner therefore may not raise an issue for the first time before the trial Court. Id. The Court reasoned that because Commerce rightly rejected NLMK’s untimely comments and removed them from the record, NLMK’s objections to the draft remand redetermination were never properly before Commerce. Id. Thus, NLMK failed to exhaust its administrative remedies in challenging the draft remand redetermination. Id. at 19. The Court found that Commerce’s Remand Redetermination complied with the Court’s instruction and sustained the results.

Trade Updates for Week of July 24, 2019

United States Court of International Trade

Court Sustained Commerce’s Final Remand Results in Antidumping Case

Before the Court in Dillinger France S.A. v. United States et. al., Slip Op. 19-88, No. 17-00159 (July 17, 2019) was a challenge to Commerce’s affirmative less-than-fair value sales determination in the antidumping investigation of carbon and alloy steel cut-to-length plate from France. In its previous decision, the Court sustained most of Commerce’s determination but remanded to Commerce to reconsider and explain how it applied partial adverse facts available (“AFA”) to Dillinger’s affiliated service center sales. On remand, Commerce modified and explained its application of partial AFA. Dillinger’s antidumping margin remained unchanged. Commerce and Dillinger jointly requested that the Court sustain Commerce’s remand results. However, Defendant-Intervenor, Nucor Corporation (“Nucor”), argued Commerce’s remand results were unsupported by substantial evidence and contrary to law. For the following reasons, the Court sustained Commerce’s remand results.

“An AFA rate selected by Commerce must reasonably balance the objectives of inducing compliance and determining an accurate rate.” Id. at 5. “Commerce may apply AFA only to informational gaps in the record” Id. at 5. In this case, the Court said Commerce “permissibly applied partial AFA to replace information missing from the record -- the manufacturer of some of the plate in the disputed transaction -- by attributing all sales to Dillinger.” Id. Nucor argued Commerce “should have substituted the highest non-aberrational net price for the reported sales data to adequately deter future noncooperation by Dillinger.” Id. However, Nucor provided “no evidence that the rate selected was not sufficiently adverse” Id. The Court reasoned that Commerce’s decision to use the sales prices balanced the objectives of inducing compliance and determining an accurate rate because the “reliability of the reported sales prices has not been called into question.” Id. at 6. The Court found that Commerce’s detailed explanation fulfilled the Court’s directive to justify its method of applying partial AFA in this case.

Court Granted Defendant’s Motion for Summary Judgment and Denied Plaintiff’s Motion for Summary Judgment.

Before the Court in New Image Global, Inc. v. United States, Slip Op. 19-90, Court No. 15-00175 (July 23, 2019) were cross -motions for summary judgment concerning the amount of Federal Excise Tax (“FET”) assessed on tobacco products imported by plaintiff. Plaintiff imported “roll your own” tobacco products, subject to FET. Plaintiff declared the weight of the tobacco wraps, used to determine the FET, as .75 grams per a wrap. Customs opened an investigation into the weight of the product. Initially, Customs used the “direct” weighing method in the investigation. The products were removed from packaging and dried for 24 hours before weighing. The average weight under the “direct” method was .71 grams per a wrap. Customs later used second weighing method known as the “indirect” method. Under this method, the packaged product is initially weighed, and then separately all material minus the tobacco wrap was weighed. The weight of the tobacco wrap was calculated by subtracting the weight all the materials, except the tobacco wrap, from the weight of the total package. Customs found an average weight of 0.915 grams per wrap using the “indirect” method. In November 2014, Customs issued a notice of action against plaintiff assessing the FET at 0.915 grams per a wrap. The Court reviewed several issues, including, the Customs authority to tax non tobacco components of the product, and the validity of Customs’ “indirect” method used to weigh tobacco wraps. For the following reasons, defendant’s motion for summary judgment was granted and plaintiff's motion denied.

“It is part of Customs’ revenue function to assess and collect excise taxes on imports, which includes classifying and valuing merchandise for purposes of such assessment.” Id. at 12. The statute authorizing the FET “refers to tobacco products not just tobacco.” Id. at 13. The Court said, “Had Congress intended to tax only the tobacco itself, and not the entire processed tobacco product, then the excise tax statute would have been written so that the tax is determined on the basis of raw tobacco.” Id. at 14. The Court also ruled that despite plaintiff’s objections it was within Customs’ authority to consider an Alcohol and Tobacco Tax and Trade Bureau ruling as part of the agency’s function to collect excise tax.

The next issue the Court dealt with was the validity of Customs’ procedures used to weigh the tobacco wraps. Plaintiff argued that Customs indirect method of weighing was biased against plaintiff and that the test did not conform to the Daubert standards of scientific reliability. The Court found that Customs was correct in deciding not to let the product dry out for twenty-four hours before weighing it, as was done in the “direct” method, because product should be weighed in the condition in which it would be “released from Customs custody.” Id. at 15. In regards to the Daubert issue. Customs employed a method described by the U.S. Pharmacopeia and National Formulary in weighing the tobacco wraps. The Court said “there is simply no support beyond bare assertions that this method lacks support in the scientific community.” As such, summary judgement was granted for the defendant.

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?”