US District Court, District of Columbia

“Buy America” Exemptions Invalid, District Court Rules

The Secretary of Transportation, acting through the Federal Highway Administration, improperly waived application of “Buy America” restrictions for iron and steel products purchased for Federal highway projects, according to a recent decision of the United States District Court for the District of Columbia.

In United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union v. Federal Highway Administration, No. 13-cv-01301 (December 22, 2015), the District court ruled that the waivers constituted “legislative” rules which the FHA could not implement without first undertaking “notice and comment” rulemaking proceedings pursuant to the Administrative Procedure Act (APA).

In 2012, the FHA had issued a two page Memorandum, in which it indicated that it would not apply statutory “Buy America” requirements to two categories of goods: (1) steel or iron “manufactured” products and (2) “miscellaneous” steel and iron products. The first category was defined as iron and steel manufactured products containing less than 90 percent steel or iron. The second category covered “off-the-shelf” steel products and products “necessary to encase, assemble and construct” manufactured products.  A coalition of unions sued, claiming that these exemptions were “substantive” or “legislative” rules which could not be implemented without first undertaking the “notice and comment” rulemaking proceedings of the Administrative Procedure Act (APA). The Court agreed.

With respect to the “manufactured goods” exemption, the court ruled that the “90%” standard was not an “interpretive” rule, but rather a substantive or legislative type rule requiring formal rulemaking. The court noted that when a numerical standard is adopted, the rule is normally legislative, and must undergo rulemaking to avoid being considered “arbitrary or capricious”.  The 90% level did not follow from a previous pronouncement, and no logical path for its adoption could be discerned.

Similarly, the “miscellaneous products” exemption could not be discerned from earlier exemptions granted under the Buy America program. It had the effect of rolling back the coverage of the FHA regulations, which were intended to include “all steel products” within the Buy America program.  Because there was no notice and comment rulemaking performed, the regulations were invalid, the court held.

 

United States Court of International Trade

No Jurisdiction Over Action to Recover Duties on Bunker Fuels

The Court of International Trade lacked subject matter jurisdiction over a bunker fuel operator’s request for a refund of Harbor Maintenance Taxes, according to a recent ruling.

In The Jankovich Company v. United States, Slip Op. 15-146 (December 30, 2015), a company engaged in transporting bunker fuel between Los Angeles and San Diego challenged the assessment of HMT on its cargoes, claiming that the bunker fuel was not “commercial cargo”. Customs ruled against its claim in 2010, and declined to reconsider the ruling in 2014. The company thereafter filed suit in the CIT, seeking to challenge the refusal to refund the taxes. The government moved to dismiss, holding that the plaintiff had not filed a proper protest, and had not exhausted administrative remedies.  The government also declined to treat the company’s reconsideration request as a protest, holding that it did not conform to the requirements of a protest, and was not intended as a protest when filed.

The CIT declined to exercise its 28 U.S.C. §1581(i) “residual” jurisdiction, holding that the plaintiff needed to challenge application of a ruling, rather than a ruling itself.

At the same time, the Court noted that the plaintiff could pursue its claims for HMT refund as to future tax payments by using the refund mechanism set out in Swisher International Inc., v. United States, 205 F.3d 1358, 1365 (Fed. Cir. 2000). Actually, the Swisher Mechanism might allow the plaintiff to seek refund of all HMTs paid in the past and the future, depending on the facts of the case.

 

Plaintiff and its Subsidiary are Interested Parties and Parties to the Proceeding

The Court of International Trade denied Defendant’s and Defendant-Intervenor’s motion to dismiss Plaintiff’s complaint.

In SunPower Corporation v. United States, Case Nos. 15-67 and 15-90, Slip Op. 15-147 (December 30, 2015), plaintiff SunPower Corp. (“SunPower”) contested aspects of the final affirmative determinations made by the U.S. Department of Commerce (“Commerce”) in its antidumping and countervailing duty (“AD” and “CVD,” respectively) investigations of solar cells and panels from the People’s Republic of China.  Before the court were ten motions, all of which concerned the standing of SunPower and that of its wholly owned subsidiary, SunPower Corporation, Systems (“Systems”) in these matters.  Defendant and defendant-intervenor argued that SunPower and Systems do not have standing to challenge the final affirmative determinations made by Commerce in the AD and CVD investigations of solar cells and panels.  However, because SunPower has satisfied the definition of an “interested party” under 19 U.S.C. § 1677, and because it has provided factual information regarding exports and sales of goods it has is a party to the proceeding and has the requisite standing to make the challenges provided in its complaint.

Moreover, plaintiff SunPower may add Systems to the complaints in both Case Nos. 15-67 and 15-90, where Systems was the importer of record of solar cells and panels from the PRC.  Likewise, Systems is a party to the proceeding where it provided factual information in the proceeding. 

Finally, the preliminary injunctions in both cases were expanded to cover entries made by Systems and of the subject merchandise.  For these reasons, the motions to dismiss were denied; the motions to amend were granted; and the motions to expand the preliminary injunctions were also granted.

 

Methodology for Purposes of Targeted Dumping Applied Regardless of Reasons for Fluctuations in U.S. Sales

In Nan Ya Plastics Corporation, Ltd. v. United States, Court No. 13-97, Slip Op. 15-148 (December 31, 2015), plaintiff’s Motion for Judgment on the Agency Record, in which Nan Ya Plastics Corporation, Ltd. (“Nan Ya”) – a Taiwanese producer and exporter of polyethylene terephthalate film, sheet, and strip (“PET film”) challenged Commerce’s application of the “average-to-transaction” (“A-T”) comparison methodology in its review of Nan Ya’s U.S. sales, based on the agency’s finding that Nan Ya engaged in “masked” or “targeted” dumping.   Statute authorizes Commerce to use the A-T comparison methodology as an exception to the other two methodologies. See 19 U.S.C. § 1677f-1(d)(1)(B). Specifically, Commerce may use the A-T methodology in cases involving “masked” or “targeted” dumping – that is, where a respondent sells its goods in the United States at dumped prices “to particular customers or regions [or at particular times], while selling at higher prices to other customers or regions [or at other times].” See Uruguay Round Agreements Act, Statement of Administrative Action, H.R. Doc. No. 103-316, vol. 1 at 842-43, reprinted in 1994 U.S.C.C.A.N. 4040, 4177-78.  The A-T methodology unmasks the dumping, determining a dumping margin for each individual sale.  This methodology may be used where (i) “there is a pattern of export prices (or constructed export prices) for comparable merchandise that differ significantly among purchasers, regions, or periods of time, and (ii) [Commerce] explains why such differences cannot be taken into account” using one of the other methodologies.

Because there was no time to do a targeted dumping analysis before the issuance of the Preliminary Results, Commerce calculated Nan Ya’s preliminary dumping margin at 5.20% using the A-A comparison methodology. However, Commerce in its Post-Preliminary Analysis, decided to use the A-T methodology because it encountered a pattern of significant difference in prices that varied by time period.  The dumping margin was revised to 9.5% using the A-T methodology. Nan Ya argued that the differences in price correlated with the fluctuations of raw materials which Commerce confirmed.  Yet, the Final Results also used the A-T methodology where Commerce found a pattern of differences in U.S. sales that differed significantly by time period and purchaser.

Because Federal Circuit Court precedent confirmed Commerce’s application of the methodology, namely that Commerce does not have to take the extra step in analyzing why the differences in prices occurred in deciding whether to use the methodology for targeted dumping. Therefore, Nan Ya’s motion for judgment on the agency record was denied. 

 

United States Court of Appeals for Federal Circuit

Federal Circuit Affirmed Customs’ Remand Determination Regarding NAFTA Waivers and Reconciliation Process

 In a dissenting opinion, Circuit Judge Reyna disagreed with applying Chevron deference to a Customs’ explanation on remand.

In Ford Motor Company v. United States, Court No.  2104-1581 (January 6, 2016) – , plaintiff challenged Customs and Border Protection’s (“Customs”) decision to treat Ford Motor Company’s (“Ford”) duty refund claims under the North American Free Trade Agreement (“NAFTA”) differently depending on whether those claims were filed traditionally or through an electronic process known as “reconciliation.” This dispute arose from Customs’ decision to waive the requirement for Ford to present certificates of origin for refund claims filed through reconciliation but not to waive the requirement for similar claims filed traditionally.

Ford argued that § 1520(d) was the exclusive authority for NAFTA’s post-entry duty refund claims process where a variety of legal and regulatory authorities have repeatedly affirmed that fact. Thus, all claims should be treated similarly.  However, according to the majority opinion of the Federal Circuit, which affirmed the lower court’s application of “Chevron” deference to Customs’ explanation, those authorities do not state that § 1520(d) exclusively governs the procedure for claiming refunds through the reconciliation program, including the ability to obtain a waiver of certificates of origin. Section 1520(d) explicitly delegates authority to Customs to prescribe regulations to govern the refund claims process and thus Customs exercised that authority by promulgating 19 C.F.R. § 181.22 to govern the traditionally filed duty refund claims process.  Likewise, section 1484(b) implements the reconciliation program which provides a means for processing imports.

Thus, Customs justified the reconciliation program’s certificate filing waiver based on “numerous procedural safeguards” or enforcement tools. For example, the reconciliation program requires a continuous bond, which alone, provides a reasonable explanation for treating traditional claims differently from reconciliation based claims. On this basis, the Federal Circuit affirms Customs’ explanation for treating reconciliation claims differently from traditional claims made under section 1520(d). 

Circuit Judge Reyna, in his dissenting opinion, found that there was no reason to treat traditional claims differently from reconciliation claims. Under 19 CFR § 181.22, Customs generally waives “possession” of the certification of origin on a case-by-case basis, and that under the reconciliation program, while the certificate does not need to be presented, the filer must retain the certificate to be presented upon request.  Ford was allowed to present certificates for all reconciliation entries after one year of entry. But for traditional NAFTA claims, Customs did not waive the one-year presentation of the certificate of origin.

First and foremost, Circuit Judge Reyna disagreed with the majority’s opinion to apply Chevron deference to a remand decision from Customs. Moreover, there is no instance where Customs interpreted its authority to waive certificates of origin for refund claims as stemming from reconciliation statutes.  In fact, Circuit Judge Reyna strongly found that this decision to treat claims differently was a convenient litigation position.  The Dissent stated, “An interpretation that a court finds unpersuasive, however, as I find Customs’ interpretation, is not entitled to deference, particularly when the interpretation emerges during litigation with no opportunity for public comment.” Dissent, Slip Op. pg. 13.  Finally, the Dissent found that reconciliation statutes did not authorize § 1520(d) refund claims or certificate of origin waivers, and that Customs could have waived the presentation requirement for the Ford’s traditional NAFTA claims.  For all these reasons, Circuit Judge Reyna dissented from the majority’s opinion.