United States Court of International Trade

20-09

Before the Court in Nat’l Ass’n of Mfrs. et. al. v. United States, Slip Op. 20-09, Court No. 19-00053 (January 24, 2020) was a challenge to regulations promulgated by Customs and Treasury concerning federal excise tax (“FET”) and substitution duty drawback. FET is collected on “domestically consumed goods, regardless of origin, such as wine, beer, spirits, tobacco, and petroleum products.” Id. at 2. Substitution duty drawback is the refund of “the taxes, fees, and duties … paid on imports when other merchandise is exported under the same Harmonized Tariff Schedule of the United States (“HTSUS”) subheading in a one-to-one fashion.” Id. at 3. “Companies that both export and import wine have been claiming drawback on charges paid on the imported wine on the basis of their substituted exports … result[ing] in a near total refund of the excise taxes paid on the imported wine[,]” in addition to duties. Id. at 3-4. “Customs identified the issue and expressed concern … to Congress” but no statute was passed to curtail the practice. Id. at 4. As a result, Customs and Treasury “passed regulations to stop the wine industry from continuing to benefit from what the agencies refer to as double drawback and to ensure that other industries would not attempt to benefit from the same scheme” because of the substitution drawback requirements of the Trade Facilitation & Enforcement Act of 2015. Id. For the following reasons, the Court held the double drawback regulations passed by the agencies were unlawful.

“An agency final rule must be set aside if the Court holds it to be arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” Id. at 8. “In determining whether the Final Rule conflicts with the statute, the Court applies the two-step framework established in Chevron.” Id. “First, the Court must ascertain whether Congress has directly spoken to the precise question at issue.” Id. “If Congress’s intent is clear then that is the end of the matter, as the agency and the Court must give effect to the unambiguously expressed intent of Congress.” Id. The Court said the agencies’ new definition of drawback, to include FET, was “not supported by the statute, which almost exclusively uses the term drawback in relation to duties and fees imposed upon importation and then recovered.” Id. at 11. The Court also said 19 U.S.C. § 1313(d), “makes it clear that Congress intended excise taxes on certain alcohol to be recovered as long as the product was not for sale or consumption in the domestic market.” Id. at 11. As such, the regulation was contrary to the law and failed under the first part of the Chevron test. The Court also pointed out that “the agencies’ expanded definition makes no logical sense[,]” that the Courts decision was supported by legislative history and, even if a valid regulation, “the agencies’ attempt to apply the Final Rule to claims filed before its effective date runs afoul of fair notice.” Id. at 12, 20. Neville Peterson LLP represented Amicus Curiae Customs Advisory Services, Inc. in the case.

20-11

Before the Court in Jiaxing Brother Fastener Co. et. al. v. United States et. al., Slip Op. 20-11, Court No. 15-00313 (January 29, 2020) was a challenge to three aspects of the Commerce’s final determinations in the fifth administrative review of the antidumping duty (“ADD”) order covering certain steel threaded rod (“STR”) from China. Plaintiffs challenge as unsupported by substantial evidence Commerce’s selection of Thailand as the primary surrogate country, the selection of GTA data from Thailand to value STR inputs, the decision not to adjust the surrogate financial ratios. For the reasons that follow, the Court sustains Commerce’s selection of Thailand as the primary surrogate country and Commerce’s selection of GTA data from Thailand. However, the Court remanded Commerce’s determination regarding the calculation of surrogate financial ratios for further explanation or consideration.

“In an antidumping proceeding, if Commerce considers an exporting country to be an NME … it will identify one or more market economy countries to serve as a surrogate for that NME country in the calculation of normal value.” Id. at 6. Normal value is determined on the basis of Factors of Production (“FOPs”) from the surrogate country or countries used to produce subject merchandise. “Commerce must value FOPs to the extent possible in one or more market economy countries that are at a level of economic development comparable to that of the [NME], and significant producers of comparable merchandise.” Id. at 7. “When several countries are both at a level of economic development comparable to the NME country and significant producers of comparable merchandise, Commerce evaluates the reliability and completeness of the data in similarly situated surrogate countries and generally selects the one with the best data” Id. The Court said that “Commerce’s selection of Thailand, over Ukraine, as the primary surrogate country is supported by substantial evidence, because Thailand was the only country for which Commerce had steel-grade specific values that could be matched to Jiaxing’s low-carbon STR inputs[,] … as well as financial statements that were fully contemporaneous with the POR.” In regards to the Thai GTA data, the Court said “Commerce reasonably selected Thai GTA data to value Jiaxing’s STR inputs, because it was the only data on record that was fully contemporaneous with the POR and was the most specific to the diameter of wire rod and carbon content consumed by Jiaxing than other record data.” In regards to the surrogate financial ratios, the Court said “Commerce’s determination not to adjust the surrogate financial statements is inadequately explained and does not appear to be supported by record evidence,” and must be further explained or reconsidered.