United States Court of International Trade

 

Default Judgment Granted in Favor of U.S.

In Jacobi Carbons AB & Jacobi Carbons, Inc. v. United States et al, Court No. 15-286, Slip Op. 17-39 (April 7, 2017), plaintiffs Jacobi Carbons AB and Jacobi Carbons, Inc. (together, Jacobi”), and Plaintiff-Intervenors (collectively, with Jacobi, “Plaintiffs”), moved pursuant to United States Court of International Trade (“USCIT”) Rule 56.2, for judgment on the agency record, challenging the United States Department of Commerce’s (“Defendant” or “Commerce”) Final Results in the seventh administrative review (“AR7”) of the antidumping duty order on certain activated carbon from the People’s Republic of China (“PRC”). Plaintiffs argued that Commerce erred in (1) rejecting the Philippines and selecting Thailand as the primary surrogate country, (2) using Thai import data as the surrogate value for carbonized material, and (3) reducing Jacobi’s constructed export price (“CEP”) by an amount for Chinese value added tax (“VAT”). For the following reasons, the court remanded the determination to Commerce to clarify and, if necessary, revise its findings on the issues of the economic comparability and significant production of Thailand, and the irrecoverable VAT calculation.

The Court held that Commerce has discretion to develop a reasonable methodology to implement its surrogate country selection criteria. However, Commerce’s Office of Policy (OP) did not list the criteria reviewed to make the surrogate country selection.  Moreover, if Gross National Incomes (GNI) of potential surrogate countries were considered, there was no discussion of GNI in the Final Results. Reasoning that was offered post hoc, in briefing to the court or during oral argument, was not properly part of this court’s review of the agency’s underlying determination when such reasoning is not discernable from the record itself. Therefore, Commerce, in a remand, was to provide a reasoned explanation as to why the range of GNI data reflected on OP’s list demonstrates economic comparability to the PRC, including why Philippines’ GNI did not.

As for significant producer, Commerce did little in providing what substantiated its choice.  Commerce did not explain whether Thailand actually imports more higher-valued goods than it exports. Nor did it provided any basis for disfavoring net value as a measure of significant production.  Finally, Commerce’s reasoning failed to persuade that reliance on total exports, devoid of evidence of influence on world trade is a permissible method.  Again, more explanation and possible reconsideration was needed for this decision. Because the surrogate country selection was remanded, the Court defers the issue of the surrogate value until the redetermination.

As for reducing the constructed export price (CEP) by the VAT paid, the PRC levies a 17% VAT on inputs and raw materials used in the production of activated carbon, for which there is no VAT rebate. According to the Court since the VAT was irrevocable, Jacobi will be always burdened with such a payment . Thus, it was reasonable for Commerce to deduct the VAT as an export charge. However, the irrevocable VAT deducted must be equal to the actual amount of VAT paid on each transaction.  The Court remanded this decision to determine whether the 17% flate VAT rate did not overstate the amount of VAT Jacob paid.

For these reasons Commerce’s determinations were remanded in part.

 

Sustained Remand Results

In RZBC Group Shareholding, Co., Ltd., RZBC Co., Ltd., RZBC Imp. & Exp. Co., Ltd., RZBC (Juxian) Co., Ltd. v. United States, Court No. 15-22, Slip Op. 17-40 (April 10, 2017), plaintiffs RZBC Group Shareholding Co. and related companies (“RZBC”) moved for judgment on the agency record under USCIT Rule 56.2. This case concerned challenges to the fourth administrative review of a countervailing duty order on citric acid and certain citrate salts from the People’s Republic of China (the “PRC”). See Citric Acid and Certain Citrate Salts from the People’s Republic of China, 79 Fed. Reg. 78,799 (Dep’t Commerce Dec. 31, 2014) (final admin. review) (“Final Results”) (covering imports from January 1, 2012 to December 31, 2012). To ascertain the 10.54% AFA rate, “Commerce adversely inferred that RZBC benefited from the Buyer’s Credit program, a concessional-loan program instituted by the Government of China (“GOC”) owned EXIM Bank, and based the decision to apply AFA on the GOC’s noncooperation in refusing to allow Commerce to access information necessary for verifying non-use of the program.” Slip Op. pg. 2.

First the Court sustained the AFA finding as to whether RZBC benefitted from the credit program, because the “decree governing the Buyer’s Credit program” was “ambiguous” in its terms not making the $2,000,000 contract minimum or 50% Chinese components threshold mandatory. Commerce offered substantial evidence to support a decision to apply AFA that was consistent with the law and the remand order.

Second, as to the 10.54 rate, Commerce has a calculation method where no verified usage information was provided. Based on that program, which no party challenged, Commerce calculated the 10.54 rate. The Court rejected all four reasons proffered by RZBC as to why Commerce’s rate was incorrect, and found that Commerce’s AFA rate was consistent with the law and has the support of substantial evidence.

 

Remanded Labor Decision Declining Certification for TAA Benefits

In Former Employees of Geokinetics, Inc. v. United States Secretary of Labor, Court No. 16-57 (published April 11, 2017), the Court held that the Department of Labor’s (Labor) Remand Results were not supported by substantial evidence where the Court remanded Labor’s determination that Plaintiffs are not entitled to certification for TAA benefits as primary workers.

Labor had not explained why its practice for comparing a firm’s sales data is reasonable where Labor failed to consider whether like imports increased absolutely within additional periods as suggested by plaintiff, or explain why it was reasonable not to examine whether like imports had increased. Moreover, Labor failed to consider whether like imports had shifted to foreign countries, or explain why it was reasonable not to examine whether like imports had shifted to foreign countries. In addition, the court remanded Labor’s determination not to certify Plaintiffs as secondary workers eligible for TAA benefits. On remand, Labor must further explain its determination in light of these concerns or reconsider its determination consistent with this decision.

 

Commerce’s Antidumping Calculation Respecting Diamond Sawblades Remanded

Aspects of the Commerce Department’s dumping calculation in an annual review of the order against Diamond Sawblades from the People’s Republic of China were not supported by substantial evidence, or were insufficiently explained, prompting the United States Court of International Trade to remand the case for further proceedings.

In Diamond Sawblades Manufacturers’ Coalition v United States, Slip Op. 17-    (April 11, 2017),  the domestic petitioners took exception with certain aspects of Commerce’s calculation. In particular, the petitioners questioned Commerce’s’ decision to go outside the list of potential “surrogate” countries (Thailand was selected as the surrogate in this case), and to use data from a Philippine manufacturer to determine overhead and general expenses amounts for the calculation. The court found that Commerce had not satisfactorily explained its decision to use data from a Philippine supplier and remanded for further explanation.

Commerce also failed to explain its choice for selecting a surrogate value for steel “cores” used in making sawblades, having rejected certain value data as being “unreasonably high”, without pointing to a criterion for making that determination. The Court compared the determination to asking the question “How high is up?”

Finally, the Court rejected an argument from one respondent that it should not have been subjected to the “China wide” dumping rate, noting that the status of the entity – which previously had been accorded an individual zero rate – had changed, and that the “PRC-wide” entity had not been reviewed, even conditionally, in the administrative review in suit.

 

 

United States District Court 

Customs Failed to Adequately Respond to FOIA Request Regarding Seizures of Counterfeit and “Parody” Merchandise

At the 2015 Super Bowl, United States Customs and Border Protection announced seizures of large quantities of allegedly “counterfeit” NFL merchandise, including goods which were claimed to “parody” or “defame” team logos and mascots. Concerned that Customs appeared to be exceeding its legal mandate, and seizing “parody” goods which are not counterfeit, but governed by the doctrine of “fair use”, law Professor Rebecca Tushnet filed a Freedom of Information Act request with CBP, seeking information regarding the agency’s seizures of allegedly counterfeit goods.

Although Professor Tushnet received more than 4,500 pages of material in response, including over 3,000 photographs of seized goods, she was concerned that Customs had not conducted an adequate search of relevant terms and database systems, and that the agency had redacted far too much information based on cursory invocation of FOIA’s law enforcement records exception. Federal District Court Judge Christopher Cooper of the District of Columbia agreed with the professor, and ordered CBP to expand its FOIA search and review its redactions, in Tushnet v. United States Immigration and Customs Enforcement, No. 1:15-c-00907 (March 31, 2017).

The case is of potentially great interest to importers who have believed that CBP has used an overbroad definition of “counterfeit” in seizing imported goods.

 

 

Canadian International Trade Tribunal

Infant bottles and ‘sippy cups’ with a valve system are not “machines or mechanical appliances” and cannot be classified in Heading 8479 of the Customs Tariff, the Canadian International Trade Tribunal (CITT) recently held in a newly-released opinion,

In Phillips Electronics Ltd. v. President, Canada Border Services Agency (CBSA), AP 2016-003, the importer asserted that certain AVENT baby bottle “systems”, consisting of a bottle or cup housing, a teat or deformable spout, and connected to an incorporated anti-colic valve should be classified as “other” machines or mechanical appliances” of Heading 8479, rather than as household articles of rubber or plastic under Customs Tariff Heading 3924.

The Tribunal first held that the claims were not barred by “issue estoppel”, as a prior appeal regarding the classification of the valve assemblies alone had turned on specific facts, and not on binding legal interpretations. The Tribunal then held that the spouts were not properly considered “valves” of heading 8481, because the cups and bottles at issue were not “similar” to the pressure vessels described in that note and the Explanatory Notes thereto. Turning to the importer’s Heading 8479 claim, the Tribunal held that the cups, bottles and incorporated valves could be considered a “device, apparatus or instrument”, and that they were a “more or less complex combination of moving and stationary parts. Ultimately, however, the Tribunal lfound that the goods did not “act on something extraneous to themselves”, as all of the motion was generated by the child using the bottle, and the effects of air pressure.

The Tribunal upheld the Canada Border Services Agency (CBSA) classification of the articles in Heading 3924.

 

Certain High Definition Flat Panel Televisions Entitled to Duty-Free Treatment as “Articles for Use in or With Automatic Data Processing Machines or Units Thereof”

Certain high definition flat panel televisions were intended for use with automatic data processing machines and units thereof, and thus duty free treatment under Heading 9984 of Canada’s Customs Tariff, according to a recent Canadian International Trade Tribunal decision.

In Best Buy Canada Ltd. et al. v. President, Canada Border Services Agency, AP No. 2015-034, 2015-036 and 2016-001, the Tribunal addressed the question of whether duty-free classification of goods was dependent on the importer’s compliance with the Imported Goods Recordkeeping Regulations (IGRR), enacted pursuant to the Customs Act. Those regulations required every importer of goods released duty free to retain records showing, in this case, the use of the goods by the users. The Tribunal rejected this argument on two grounds. First, it found that the IGRR, implemented under authority of the Customs Act, was distinct from the provisions of the Customs Tariff. Compliance or non-compliance with the IGRR might have several consequences, but a change in tariff classification was not among them. Failure to keep or produce records would not preclude the plaintiffs from proving classification of the televisions under Heading 9984 of the Customs Tariff.

Second, the IGRR applies to goods released without payment of duty. Since the subject televisions in this case had been imported duty-paid, the IGRR by their terms did not apply to them. The Tribunal ordered that refunds be issued to the plaintiffs.