United States Court of International Trade

Commerce Decision Remanded in Part

In Özdemir Boru San. Ve. Tic. Ltd. Sti., v. United States, Court No. 16-00206, Slip Op. 17-142, (October 16, 2017), Plaintiff, Özdemir Boru San. ve Tic. Ltd. Sti (“Özdemir”), a Turkish producer and exporter to the United States of heavy walled rectangular welded carbon steel pipes and tubes (“HWR pipes and tubes”), brought this action against Defendant, the United States (“the Government”), to challenge Commerce’s final determination in Heavy Walled Rectangular Welded Carbon Steel Pipes and Tubes from the Republic of Turkey: Final Affirmative Countervailing Duty Determination, 81 Fed. Reg. 47,349 (Dep’t Commerce July 21, 2016) (final results of investigation) Özdemir argues that Commerce’s application of adverse facts available (“AFA”) to Özdemir regarding the Turkish Exemption from Property Tax (“EFPT”) program, and Commerce’s inclusion of two particular land parcels in the Land for Less-than-Adequate-Remuneration (“LTAR”) benchmark, are actions unsupported by record evidence and contrary to law.

Because Özdemir withheld information as shown by Özdemir’s brief, its incorrect QR statement, and explicit requests for information by Commerce, applied AFA was supported by substantional evidence.  Specifically, Commerce’s Questionnaire asked for detailed responses regarding its history with the EFPT program. When Özdemir responded that it did not have plants located in regions for the EFPT program, Commerce discovered this response was not accurate as Özdemir did take advantage of the EFPT program with facilities in the designated region. Thus full and complete answers to Commerce’s questionnaire warranted the application of AFA. Despite Özdemir’s arguments that Commerce could have used additional tax information provided at verification to ascertain participation in the EFPT, the Court was not persuaded by Özdemir’s arguments that it complied when it did not provide accurate responses.  Additionally, Commerce reasonably determined the AFA rate and correctly corroborated that rate.

As for the LTAR benchmarks, the Court remanded the decision finding that Commerce’s selection of land price data in Istanbul and Yalova Altinova are highly priced and anomalous compared to other areas in Turkey. Commerce must consider relevant record evidence to compare land parcels and provide a reasonable benchmark to alleviate the distortive pricing.  For these reasons, Commerce’s decision was remanded in part.

Personal Liability Tested in Footwear Case

In United States v. Sterling Footwear Inc., et. al. Slip. Op. 17-140, Court No. 12-00193, (October 12, 2017) the Court heard summary judgment arguments regarding Customs and Border Protection’s (CBP) attempts to collect unpaid duty and monetary penalties from entries of shoes imported by the defendant.  From 2007 and 2009, Sterling Footwear Inc. (“Sterling”) imported rubber tennis shoes into the United States which were classified under HTSUS 6402.91.40 described as “tennis shoes” with a “textile upper, rubber sole and foxing band.” Id. at 9. Starting in May 2009, Customs import specialists began to examine the shoes.  After a meeting in July, Sterling agreed to submit post entry amendments.  However, this was never done and CBP reviewed all of Sterling’s past entries.  CBP also issued notices to Alex Ryan Ng and Ng Branding involving the entries because they felt Ng actions as the president, CEO, and majority stake holder of both companies made him liable and that the two companies were operated as continuation of each other. For the following reasons the Court granted the Government’s motion for summary judgment against Sterling and denied the motion for summary judgment against Alex Ryan Ng and Ng Branding.

The first issue was whether Alex Ryan Ng could be personally liable for the unpaid duties. Under United States v. Trek Leather, Inc., 767 F.3d 1288 (Fed. Cir. 2014) individuals may be held liable for violating § 1592(a)(1)(A) if that individual engages in conduct proscribed by the statutory provision. However, the Court said summary judgment was inappropriate because there was “conflicting evidence regarding Ng’s role in determining the tariff provision pursuant to which Sterling’s footwear would be entered.” Id. at 30. Mr. Ng’s testimony regarding his role in selecting the tariff classifications conflicts with that of employees and other evidence on the record.  For this reason, the Court denied the motion.  The Court then reviewed the tariff classification used by Sterling.  HTSUS 6402.91.40 describes “tennis shoes” with a “textile upper, rubber sole and foxing band.” Id. at 9.  Using photos submitted by plaintiff the Court says it is obvious the goods were misclassified. “Several of the photographs depict boots, one with tassels, that clearly are not tennis shoes, rubber or otherwise.” Id. at 38.  The next issue was the culpability of Sterling and Ng Branding for the misclassification.  The government sought to prove gross negligence or that the companies acted “with actual knowledge of or wanton disregard for the relevant facts” and obligations under the statute. Id. at 41. The Court said the record indicated “Sterling had knowledge of the footwear it imported, because it had designed it. It knew that it was responsible for correctly classifying its footwear. Yet, Sterling repeatedly described the footwear as rubber tennis shoes.” Id. at 44. As a result, Sterling was found to have been grossly negligent. The government sought to hold Ng Branding liable for gross negligence because it was a mere continuation of Sterling. However, “In the absence of undisputed evidence that a purchase or transfer of assets occurred” the Court could not hold Ng Branding liable.  Id. at 50. The final issue was the amount of penalties to be collected from Sterling.  Under statute the government is entitled to collect at maximum four times the revenue lost by grossly negligent defendants.  However, the Court said that in order to decide the penalties further briefing on the 14 factor test from Complex Mach. Works Co., 23 CIT 942, 949–50, 83 F. Supp. 2d 1307, 1315 (1999) was required. This issue will be decided upon consideration of these factors.

Optical Fibers for Telecommunications Network Classified as Other Optical Appliances

In ADC Telecommunications, Inc. v. United States, Court No. 13-400, Slip Op. 17-144 (October 18, 2017), plaintiff ADC challenged the liquidation of “value added modules” or  VAMS are under Harmonized Tariff Schedule Subheading as 9013.80.90 “other optical appliances and instruments” and argued that they were more accurately classifiable under  Harmonized Tariff Schedule of the United States (“HTSUS”), subheading 8517.62.00, as “machines for the reception, conversion and transmission or regeneration of voice, images or other data”, duty-free. The VAMS are intended to ease installation of articles into the plaintiff’s telecommunications network operator customers’ fiber optic network using optical fibers.  Plaintiff argued that the VAMs are not classifiable as optical appliances or optical instruments of Chapter 90 because they do not aid or enhance human vision, and that the VAMs are more appropriately classified under HTS Subheading 8517.62 as apparatus used for transmission of voice, images, or other data, including for communication in a wired or wireless network.  However, because the Court more closely associated “optical fibers” with “other optical appliances,” as per defendant’s reiteration of the definition “optical,” it classified the VAMs under Heading 9013. The Court therefore granted defendant’s motion for summary judgment and denied plaintiff’s motion.