United States Court of International Trade

Remand Determination Not Supported by Substantial Evidence

Before the court in Bell Supply Co. v. United States, Court No. 14-66, Slip Op. 16-41 (published May 4, 2016),  is the U.S. Department of Commerce’s (“Commerce” or “Department”) remand redetermination filed pursuant to the court’s decision in Bell Supply Co. v. United States, 39 CIT __, 83 F. Supp. 3d 1311 (2015) (“Bell”). Final Results of Redetermination Pursuant to Remand, Nov. 9, 2015, ECF No. 88-1 (“Remand Results”). On February 7, 2014, Commerce issued a final scope ruling determining that green tubes manufactured in the People’s Republic of China (“PRC” or “China”) used to process finished oil country tubular goods (“OCTG”) in countries other than the United States and China are not substantially transformed and, therefore, OCTG finished in third countries that use such green tubes are within the scope of the antidumping and countervailing duty orders covering certain OCTG from China.

While the court held in its previous opinion that Commerce failed to interpret actual words from the Orders to include Chinese green tubes finished in third countries within the scope, Commerce nonetheless on remand has determined that green tubes sourced from China that are later finished in third countries are covered by the Orders based on its interpretation of the scope language of the Orders.

However, the scope language makes no mention of whether green tubes manufactured in China remain subject to the Orders even if the green tubes undergo further processing in a third country. Commerce has not identified any specific language from the Orders that supports such a broad reading of the scope. Commerce recognized that the final scope language does not make any reference to third country processing.  While the Orders here expressly cover unfinished and finished OCTG, the language of the Orders only expressly includes such merchandise from China. Commerce had erroneously focused its inquiry on Chinese green tubes and has not answered the question of whether Chinese green tubes are nevertheless covered by the Orders if subsequently processed into finished OCTG in third countries. Thus, the evidence Commerce relied upon from the petition does not lend support to Commerce’s interpretation because it does not make any reference to third country processing of Chinese green tubes. For these reasons, the court again remands Commerce’s determination on remand.

Motion to Stay Granted

Before the court, in Jiaxing Brother Fastener Co., Ltd. v. United States, Slip Op.  Court No. 15-313 (May 6, 2016) was Plaintiffs’ Motion to Stay Proceedings, which sought to hold this case in abeyance pending a determination in another action, court no. 14-316, involving all of the same parties. Plaintiffs Jiaxing Brother Fastener Co., Ltd., et al. (collectively “Brother”) challenge various aspects of the Final Results of the U.S. Department of Commerce (“Commerce”) in the fifth administrative review of the antidumping duty order covering certain steel threaded rod from the People’s Republic of China. Because there are overlapping issues concerning this case and the other action, and the case is on the administrative record, there is no prejudice to the government for staying proceedings.  As the court stated, “. . . international trade cases like this one are litigated on the administrative record. As such, all of the evidence that can be considered in this action already has been submitted and preserved.”   Because Court No. 14-316 may dispose of all the issues in that action which will affect the case here, and for the other reasons already mentioned, the court granted the motion to stay. 

District Court Upholds Customs’ Regulation on Valuing “Counterfeit Goods” for Penalty Purposes

 A United States District Court has upheld Customs’ regulation defining the basis on which Customs and Border Protection (CBP) is to calculate the value of counterfeit merchandise for purposes of imposing civil fines under Section 526(f) of the Tariff Act of 1930. The Court’s decision, however, provides guidance concerning the application of the definition, and leaves open the possibility that future litigants might be able to challenge the validity of the regulation “as applied” to particular assessments.

Jindeli Jewelry Inc., v. United States, No. 14-CV-0314 (May 4, 2016) involved a facial challenge to the validity of Section 133.27 of the Customs Regulations, which implements Section 526(f) of the Tariff Act.  Section 526(f) provides that in addition to seizing and forfeiting merchandise bearing counterfeit marks, Customs may assess a civil fine on anyone involved in trafficking such goods based on “the Manufacturers’s Suggested Retail Price the goods would have if they were genuine, to be determined under regulations issued by the Secretary of the Treasury”. Initially, Treasury issued regulations using “domestic value” – a well-defined statutory term – as the basis for calculating the fine. Later, CBP amended the regulations so that it merely parrots the language of the statute, without giving any guidance concerning how the “MSRP” of counterfeit goods should be calculated.

Jindeli was accused of importing $283 worth of costume jewelry bearing an allegedly counterfeit mark. Given the low value, the company let the government forfeit the goods. CBP later imposed a penalty of $139,000 under Section 526(f) of the Tariff Act. Jindeli held that since the regulations provided CBP with no guidance concerning how to determine the MSRP of a counterfeit good – a theoretical concept – it was unreasonable, and did not carry out the statutory command to define the term.

The District Court, in an opinion by Senior Judge Nina Gershon, disagreed, holding that the regulation conformed to statutory directions. Rejecting the plaintiff’s contention that the regulation merely parrots the statutory language, Judge Gershon noted that the regulation requires CBP to determine the MSRP of comparable goods “in the United States at the time of seizure”. She also indicated that CBP’s regulations and guidelines on mitigation of fines, if “read into” the regulation, provide definitional context, showing that the statutory formulation is not absolute. While agreeing that the regulations do not define “the value that the merchandise would have, according to Manufacturer’s Suggested Retail Price, if it were genuine”, but found no legal error from this lack of definition. She said the statute merely indicated a maximum level for the penalty, not the penalty itself.

The court left open the possibility that the regulation might be challenged “as applied” in particular cases, but held that a facial challenge to the regulation as an absolute matter must fail.