United States Court of International Trade

Denied Motion for Judgment on Agency Record Regarding Scope Ruling

In Kam Kiu Aluminum Prodcuts Sdn. and Taishan City Kam Kiu Aluminum Extrusion Co. Ltd. v. United States et al., Court No. 13-402, Slip Op. 15-101 (September 3, 2015), plaintiffs Kam Kiu Aluminum Products Sdn. Bhd. (collectively,“Kam Kiu”) challenged a final determination (“Scope Ruling”) by the International Trade Administration, U.S. Department of Commerce (“Commerce” or the “Department”) that certain merchandise exported to the United States by Kam Kiu is within the scope of antidumping and countervailing duty orders (the “Orders”) on aluminum extrusions from the People’s Republic of China (“China”). Commerce published the Orders on May 26, 2011. See Aluminum Extrusions from the People’s Republic of China: Antidumping Duty Order, 76 Fed. Reg. 30,650 (Int’l Trade Admin. May 26, 2011) (“AD Order”); Aluminum Extrusions from the People’s Republic of China: Countervailing Duty Order, 76 Fed. Reg. 30,653 (Int’l Trade Admin. May 26, 2011) (“CVD Order”).  Kam Kiu is a Chinese producer and exporter of the merchandise at issue in this case, which consists of aluminum-alloy articles intended for use after importation as component parts in the manufacturing of elastomeric aluminum bushings for automotive applications. Before the court was Kam Kiu’s motion for judgment on the agency record, in which Kam Kiu sought a determination that the Scope Ruling was unlawful and an order remanding the matter to Commerce.   As described in the Scope Ruling Request, elastomeric aluminum bushings produced from the imported Subparts are used in automobile suspension systems, in which they reduce vibrations and control movements of mechanical parts. The finished Subparts are manufactured “in various sizes and shapes, each designed for a particular automobile model,” and are produced from aluminum billets that have been subjected to an extrusion process. After importation, the aluminum components are grit-blasted to clean the surface, coated with a paint primer, and top-coated with adhesive paint to facilitate attachment to a rubber filler that is added between the Subparts in the assembly of a finished bushing.  The Orders apply to “aluminum extrusions which are shapes and forms, produced by an extrusion process, made from aluminum alloys having metallic elements corresponding to the alloy series designations published by The Aluminum Association commencing with the numbers 1, 3, and 6 (or proprietary equivalents or other certifying body equivalents).”

In the Scope Ruling, Commerce found as a fact that the Subparts “are produced from aluminum billets, of aluminum alloy covered by the scope, through an extrusion process.” Slip Op. pg. 4.   The finding that the Subparts were made from aluminum extrusions, according to the court, was supported by the record and, in particular, by the Scope Ruling Request itself.  Record evidence also supported the finding that the Subparts were made from an alloy covered by the scope language. While Kam Kiu took the position that the Subparts were not aluminum extrusions but rather were subparts of metal bushings for automotive vehicles, a final finished good exported to the U.S. to be used only in the particular motor vehicles for which each subpart is specifically manufactured, the court held that the Orders construe aluminum extrusions broadly.  According to the court, scope language provides expressly that the covered “[a]luminum extrusions may also be fabricated, i.e., prepared for assembly,” and that “[s]uch operations would include, but are not limited to, extrusions that are cut-to-length, machined, drilled, punched, notched, bent, stretched, knurled, swedged, mitered, chamfered, threaded, and spun.” AD Order, 76 Fed. Reg. at 30,650; CVD Order, 76 Fed. Reg. at 30,654. The scope language further clarifies that “[s]ubject aluminum extrusions may be described at the time of importation as parts for final finished products that are assembled after importation . . . ” See id.   The court stated, “ . . . fabrication performed on an aluminum extrusion to produce a finished component ready for assembly does not result in the exclusion of that component from the scope of the Orders merely because no further machining or other further fabrication is required prior to assembly of the finished good. Commerce, therefore, was correct in rejecting these arguments upon issuing the Scope Ruling.”  Moreover, plaintiffs argued that the subparts were subject to the finished goods exclusion.  However, after comparing plaintiffs’ subparts with other merchandise excepted as being finished goods, it was clear that plaintiffs’ subject subparts required further assembly and were distinguishable. Given the language of the scope, and the information on the subparts, the court denied plaintiff’s motion for judgment.

L-Carnitine was More Specifically Described as an Ammonium Salt

In Sigma-Tau HealthScience, Inc., a.k.a, Sigma-Tau HealthScience, LLC v. United States, Court No. 11-93, Slip Op. 15-102 (September 3, 2015), plaintiff Sigma-Tau HealthScience, Inc., a.k.a, Sigma-Tau HealthScience, LLC (“Sigma-Tau” or “Plaintiff”) moved for summary judgment on the classification of two products at issue in this case—(1) Acetyl L-Carnitine Taurinate Hydrochloride with 1.5% Silica and (2) Glycine Propionyl L-Carnitine Hydrochloride USP with 1.5% Silica (hereinafter collectively “products at issue” or “L-Carnitine”).  Plaintiff asserted that these products were vitamins and properly classified as “vitamins” under the Harmonized Tariff Schedule of the United States (“HTSUS”) subheading 2936.29.50, which carries duty free treatment. Defendant U.S. Customs and Border Control (“Customs” or “Defendant”) cross-moved that the products at issue were not vitamins and were properly classifiable as “quaternary ammonium salts” under HTSUS subheading 2923.90.00. For the reasons stated below, the products at issue were properly classified under HTSUS subheading 2923.90.00, and accordingly, Defendant’s motion for summary judgment was granted and Plaintiff’s motion for summary judgment was denied.

According to the court, it was undisputed that L-Carnitine was a quaternary ammonium salt. Accordingly, L-Carnitine is classifiable in HTSUS heading 2923. Further, a review of Customs rulings showed that Customs had previously classified other L-Carnitine products under this heading. Court finds that since L-Carnitine was chemically known as a quaternary ammonium salt it is prima facie classifiable in HTSUS heading 2923; moreover the court also found that L-Carnitine is commonly known as Vitamin Bt and was classifiable under 2936. Applying the rule of relative specificity under General Rule of Interpretation 3(b), to the terms “quaternary ammonium salts” and “vitamins,” the Court found that the term “quaternary ammonium salts” more specifically described L-Carnitine than “vitamins” because the chemical name wholly described the products and was specifically enumerated as the first item in the heading.  Finally, L-Carnitine was not duty free under the Pharmaceutical Appendix because it was not found on the requisite tables in the appendix to the HTSUS.  For these reasons, the court denied plaintiff’s motion for summary judgment and granted defendant’s motion for summary judgment. Additionally, plaintiff’s motion to strike certain expert testimony was denied as moot where the court did not rely on such testimony in making its decision.

Canadian International Trade Tribunal

Secondary Evidence Accepted to Establish NAFTA “Originating” Status of Imported Tires

In a very interesting new decision, the Canadian International Trade Tribunal (CITT) recently ruled that secondary and testimonial evidence could be used to establish an importer’s claim for NAFTA-originating status for imported tires.

In DeRonde Tire Supply, Inc. v. President of the Canada Border Services Agency, Appeal No. 2011-014, the Canada Border Services Agency conducted a verification of NAFTA claims made by an importer and distributor of tires. The tires had been manufactured by a number of North American producers, including Goodyear, Goodrich, Firestone and Michelin, and NAFTA Certificates of Origin had been prepared by DeRonde, as the exporter, based on its own knowledge of the origin of the goods.

When the Canada Border Services Agency (CBSA) conducted a formal NAFTA verification of DeRonde’s tire imports, it sought statements from the tire manufacturers, as well as manufacturing records, to substantiate the claims to NAFTA-originating treatment. When DeRonde could not provide manufacturer information, CBSA denied its NAFTA claims. DeRonde petitioned for a re-determination.

Before the CITT, DeRonde argued that while it could not provide certificates or production records from the tire manufacturers, it had completed the NAFTA Certificates as “exporter”, on the basis of its own knowledge of the origin of the tires. To demonstrate where the tires originated, DeRonde introduced testimony before the CITT, concerning photographs of the models of tires concerned, information concerning origin marks on the tires, and US Department of Transportation (DOT) markings on the tires which identify the plants in which the tires were made. It also introduced an expert witness with knowledge of tire manufacturing, who testified that the tires would not have been manufactured from materials from which, under the applicable rule of origin, a change in tariff classification would not have been allowed.

The CITT rejected CBSA’s claim that the agency’s denial of NAFTA treatment should have been upheld as an acceptable exercise of the agency’s “discretion”. The CITT conducts reviews de novo, on the basis of the evidence before the Tribunal, not the evidence presented to the agency. While the CITT agreed that the evidence presented to CBSA would not have been sufficient to support the NAFTA claim, the evidence produced before the Tribunal was sufficient.

The CITT also held that the testimony of DeRonde’s expert witness, a tire engineer who had worked for tire firms and private testing laboratories, was sufficient to support the company’s claims, as were photographs showing the markings on tires identical to those imported.  Based on the totality of the evidence, the Tribunal held that the NAFTA claims could be upheld on the basis of photographic evidence, testimony regarding origin and DOT markings on the tires, and information concerning the general process of making tires.  It was a remarkably liberal reading of NAFTA origin rules and proof requirements, and likely will engender further appeals by CBSA.

Hotels Are Not “Domestic” Settings for Purposes of Classifying Furniture

If you spend a lot of nights on the road, and don’t think that hotel rooms are a “domestic” setting like home, well the Canadian International Trade Tribunal agrees with you.

Recently, in Stylus Sofas Inc. v. President, Canada Border Services Agency, Inc., Appeal No. 2013-021 et al, the question was whether certain furniture, designed for use in hotels and similar facilities, was furniture “for domestic purposes” under Canada’s Tariff Schedule.  The Tribunal found that furniture made to a more durable standard intended for hotels and similar institutionswere not “for domestic purposes”, as they were designed to be stronger and more durable that similar furniture designed for residences. That particular consumers might purchase them for domestic use was not relevant to the principal use analysis regarding the furniture, the Tribunal held.