United States Court of International Trade

Cross Motion for Summary Judgment Granted in Favor of Defendant

In Tyco Fire Products L.P. (“Tyco”) v. United States, Court No.  08-190, Slip Op. 15-74 (July 10, 2014),  Tyco argued that its products, filled glass bulbs, should be classified under Chapter 84 of the Harmonized Tariff Schedule of the United States (“HTSUS”), as parts of either fire sprinklers or water heaters.  The government argued in its second cross-motion for summary judgment, that the products were properly classified under Chapter 70, as articles of glass. After denying the parties’ original cross-motions for summary judgment due to insufficient evidence as to material facts, the court denied Tyco’s motion, and granted the government’s cross motion holding that the filled bulbs were properly classified under subheading 7020.00.60, as other articles of glass.

From July 2004 to July 2006, Tyco imported forty-two models of filled glass bulbs from two German producers, Geissler Glasinstrumente GmbH (“Geissler”) and Job GmbH (“Job”) through the port of Dallas-Fort Worth, Texas, for use in fire sprinklers and water heaters. Each of these filled bulbs was made from glass and had an inner tube which contained an air bubble and colored liquid. According to the Customs’ Laboratory Report, the colored liquid was triethylene glycol.  Laboratory Report No. NY20131574, DE 75-6 (“Customs’ Lab Report”). The filled bulbs function as thermal activation devices because when the bulbs are exposed to heat, the glass exterior transfers the heat to the liquid contained in the inner tube of the bulb, causing the liquid to expand. As the liquid expands, the pressure in the bulb builds.  Once the bulb reaches its activation temperature, which is determined partially by the size of its air bubble, the pressure inside the bulb becomes too strong and the bulb shatters.  For bulbs used in water-based fire sprinklers, when the bulb shatters, the valve which previously had been held closed by the bulb is released and water is dispersed. For the filled bulbs used in water-heaters, when the bulb shatters, a door that was previously held open by the bulb closes, cutting off the air supply to the combustion chamber, thereby preventing an explosion.

Tyco protested Customs’ classification of the filled bulbs under subheading 7020.00.60 of the HTSUS as “other articles of glass.” Tyco filed suit and eventually moved for summary judgment. Tyco argued that either all forty-two models of filled bulbs should be classified under HTSUS 8424.90.90 as “other parts” of goods covered by Heading 8424 or three of Tyco’s forty-two bulb models should be classified under HTSUS 8419.90.10 as parts of water-heaters, with the remainder being classified under HTSUS 8424.90.90, as parts of fire-sprinklers. Tyco argued that thirty-nine models of its filled bulbs derive their essential character from the liquid that they contain and that the sole or principal use of the bulbs was as parts of fire sprinkler systems.  As to the remaining three models, Tyco argued that the sole or principal use of the bulbs was as parts of water-heaters. The government filed a cross-motion for summary judgment, claiming that the bulbs could be classified only under HTSUS 7020.00.60 and rejecting plaintiff’s arguments, because statutory Note 1(c) of Chapter 84 excludes parts made of glass. The government argued that the bulbs derive their essential character from their glass component and alternatively that Tyco had not established the sole or principal use of the bulbs.

According to the court, because Tyco had not established the principal use of the bulbs and because the bulbs were comprised from mainly glass, plaintiff’s motion for summary judgment was denied.  The court held that Note 1(c) excludes the filled bulbs from Chapter 84 because the filled bulbs are “of glass.” 16–31% of liquid combined with the glass in the filled bulbs was not a sufficiently high proportion of another material to cause the filled bulbs to lose their character of glass. Although “high proportion” is not defined elsewhere in the HTSUS or ENs, the history behind the ENs shows that a high proportion requires a greater percentage than 31% of a total amount. In a previous case the Nomenclature Committee of the Customs Co-Operation Council (“the Council”), determined that for Note 1(c) of Chapter 84 not to apply, the merchandise had to be mainly made from other materials to lose its character of glass.  Moreover, the filled bulbs also remain of glass because the liquid contained in the bulbs was not a mechanical non-glass component combined with a static glass component, which would cause the bulbs to lose their character of glass. “Mechanical” means “of machinery” and the liquid in the bulb does not fit the “mechanical non-glass component” to not be considered of glass. Finally, the court held because the glass component was of higher value and comprises 69-84% of the bulbs, and that because the merchandise was referred to as “glass bulbs” that they be classified as “of glass.” 

Court Affirmed Amended Remand Redetermination

Before the court in NTN Bearing Corporation et al. v. United States and the Timken Company, Court No. 10-286, Slip Op. 15-76 (July 14, 2015), was the amended determination on remand (“Amended Remand Redetermination”) issued by the International Trade Administration, U.S. Department of Commerce (“Commerce” or the “Department”). Am. Results of Remand Redetermination (May 7, 2015), ECF No. 101 (“Am. Remand Redetermination”).  The court concluded that the Amended Remand Redetermination complied with the court’s opinion and order in NTN Corp. of America v. United States, 39 CIT __, 46 F. Supp. 3d 1375 (2015) (“NTN”), to reconsider the final determination in Ball Bearings and Parts Thereof From France, Germany, Italy, Japan, and the United Kingdom: Final Results of Antidumping Duty Administrative Reviews, Final Results of Changed-Circumstances Review, and Revocation of an Order in Part, 75 Fed. Reg. 53,661 (Int’l Trade Admin. Sept. 1, 2010) (“Final Results”). During the remand proceeding, Commerce revised its calculation of NTN’s U.S. credit expenses to correct the errors and recalculated the weighted-average dumping margin for NTN.   However, the changes to the calculation did not result in a change in the weighted-average dumping margin calculated for NTN, which Commerce continued to determine to be 13.46%. While defendant-intervenor filed comments in support of the Amended Remand Redetermination, no other party filed comments.  Given that no party disputed that the Amended Redetermination complied with NTN, the court affirmed the Redetermination. 

United States Court of Appeals for the Federal Circuit

Decision on Material Injury from Subject Imports Affirmed

In Swiff-Train Co., Metropolitan Hardwood Floors, Inc., BR Custom Surface, Real Wood Floors, LLC, Galleher Corp., and DPR International, LLC (collectively, “Appellants” or “U.S. Importers”) v. United States and the Coalition for American Hardwood Parity, Court No. 2014-1814 (July 13, 2015), the Appellants appealed the opinion and final judgment of the United States Court of International Trade (“CIT”) affirming the United States International Trade Commission’s (the “Commission”) finding of material injury to a domestic industry. See Swiff-Train Co. v. United States (Swiff-Train II), 999 F. Supp. 2d 1334 (Ct. Int’l Trade 2014); Swiff-Train Co. v. United States (Swiff- Train I), 904 F. Supp. 2d 1336 (Ct. Int’l Trade 2013). According to the court, because the Commission’s remand determination was supported by substantial evidence and was in accordance with law, it affirmed the lower court decision.

After receiving antidumping and countervailing duty petitions from Appellee the Coalition for American Hardwood Parity (the “Coalition”), an ad hoc association of United States manufacturers of multilayered wood flooring, the Commission initiated investigations of imports of multilayered wood flooring (“subject imports”) from the People’s Republic of China (“China”) on October 21, 2010. See Multilayered Wood Flooring from China, Inv. Nos. 701-TA-476, 731-TA-1179 (Int’l Trade Comm’n Nov. 2011) (Final), Pub. 4278, at 1 (J.A. 492–584) (“Initial Views”); Multilayered Wood Flooring from China, 76 Fed. Reg. 76,435 (Int’l Trade Comm’n Dec. 7, 2011) (final affirmative injury determination). 

Generally, the United States imposes duties on foreign-produced goods sold in the United States at less-than-fair value (“antidumping duties”), 19 U.S.C. § 1673(1), or that benefit from subsidies provided by foreign governments (“countervailing duties”), id. § 1671(a)(1). Commerce is responsible for investigating whether there have been, or are likely to be, sales at less-than-fair value or whether a countervailable subsidy has been provided, while the Commission determines whether “an industry in the United States . . . is materially injured, or . . . is threatened with material injury . . . by reason of imports” of the subject merchandise. Id. §§ 1671d(a)(1), (b)(1),1673d(a)(1), (b)(1) (emphasis added). “If both inquiries are answered in the affirmative, Commerce issues the relevant antidumping and countervailing duty orders.”

Appellants argued that the Commission erred in failing to conduct a counterfactual analysis to determine whether the subject imports were a “but-for” cause of material injury to the domestic industry. Under the proper but-for test, Appellants contended, that the Commission is required “to conduct an analysis comparing the actual state of the domestic industry during the Period of Investigation . . . with what the state of the industry would have been absent the subject imports.” However, the court held that the Commission performed a proper but-for analysis in making its affirmative injury determination and fully complied with applicable law. Specifically, the Commission considered the statutory factors of the volume of subject imports, their price effects, and their impact on the domestic industry, 19 U.S.C. § 1677(7)(B)(i), and found that substantial record evidence established a causal link between subject imports and material injury to the domestic industry. The Commission considered the role of other factors in the market that may have injured the domestic industry, and concluded these factors did not break the causal link between subject imports and material injury to the domestic industry. Further, there was no support for U.S. Importers’ assertion that a strict counterfactual analysis was required, nor was it necessary to show that the subject imports were the sole cause of the material injury. As long as the Commission conducted an analysis to determine the cause of the injury, then the court held that such actions were in accordance with the law.

Appellants argued the Commission erred in asserting that by statute the proper test for causation falls within its discretion. The court held however that the Commission did not improperly exercise its discretion in making its causation analysis.  Instead, the Commission adhered to the statutory requirements as interpreted by the Statement of Administrative Action, the legislative history, and this court’s cases discussing the statutory causation standard.

Finally, the CIT did not bypass the “counterfactual analysis” but merely discussed the relationship between “substantial factor” versus “but-for” analysis in terms of causation. When reviewing whether a domestic industry is materially injured “by reason of” subject imports, the Commission considered the volume of subject imports, their price effects, and their impact on the domestic industry, 19 U.S.C. § 1677(7)(B)(i), (C)(i)–(iii), and must support its ultimate conclusion with substantial evidence. Here, the Commission examined each of these factors and explained in detail why substantial evidence supports both its findings and its ultimate affirmative injury determination. It also identified substantial record evidence establishing a causal link between subject imports and material injury to the domestic industry. For all these reasons the court affirmed the CIT’s findings.