General International Trade News and Developments

In a recent decision, the Federal Circuit reversed a holding by the US Court of International Trade (“ITC”) and held that the US Department of Commerce (“Commerce”) should perform a substantial transformation analysis to determine the country of origin before applying circumvention analysis.

The case centered on 2010 Antidumping (“AD”) and Countervailing Duties (“CVD”) Orders (the “Order”) regarding the importation of oil country tubular goods (“OCTG”) from China. Generally, OCTG are steel tubes used in the drilling and extracting oil.  The Orders expressly referenced both unfinished, “green” tubes and those that had been finished through heat treating, threading, or other processes.

In subsequent evaluations, United States Customs and Border Protection (“Customs”) determined that OCTG that had left China as green tubes but had been subject to heat treatments in third countries had been “substantial transformed” so as to assume the country of origin of the finishing country and not be subject to the AD and CVD. Nevertheless, in a 2014 Scope Ruling Commerce determined that heat treating did not substantially transform the OCTG and, therefore green tubes finished other countries were subject to the Orders.

Bell Supply, a U.S. steel importer which arranges for the heat treatment and finishing of OCTG in Indonesia of green tubes from China challenged the 2014 Scope Ruling before the ITC.  Bell Supply argued that Commerce was improperly expanding the scope of the Orders which contained no reference to tubes finished in third countries such as Indonesia.  Bell Supply asserted that Commerce should be conduct an inquiry as to whether the Indonesian tubes were an effort to circumvent the AD or CVD under 19 U.S.C. 1677j, but not otherwise evaluate the country of origin.  The ITC agreed that Commerce’s reading expanded the scope of the Orders beyond their express text. Moreover, the ITC held that Commerce should not have applied a substantial transformation test on the tubes from Indonesia and should only have performed a circumvention inquiry if it believed the foreign producers were indeed attempting to evade AD or CVD.

On remand, Commerce again determined that the OCTG fell within the purview of the Orders.  This time, Commerce focused on the specific language of the Orders which assess AD and CVD on both finished and unfinished OCTG.  The ITC again rejected Commerce’s determination, finding that the Orders were silent with respect to the circumstances at issue — a green tube finished in third country.

In the Final Results of Second Redetermination Pursuant to Remand (the “Second Redetermination”), Commerce concluded that OCTG finished in third countries, despite their initial production in China, were not subject to the Orders.  Commerce also performed a circumvention inquiry and found no evidence of circumvention.

A group of U.S. domestic steel producers appealed Commerce’s subsequent scope ruling sustaining the Second Redetermination.  Consistent with its prior determinations, the ITC found that Commerce’s revised approach correctly determined that the the OCTG from third countries are not covered by the Orders.  On appeal the domestic steel producers argued that: (1) the OCTG were covered by the Orders from the time they were produced in China through their importation into the United States; and (2) that the OTCG should be considered “finished” OTCG “from China”.

The Federal Circuit quickly dispensed with the first argument, finding that OTCG were imported as finished products and, therefore, could not still be considered unfinished products as they left China.

With regard to the second argument, the Federal Circuit found that Commerce’s determination should begin with a determination – under the substantial transformation analysis –  as to the origin of the finished products.  The Federal Circuit rejected the argument that this constitutes an expansion of the scope of the Orders.  Instead, the Court held that the determination of origin is the first step because if a product is not substantially transformed in a third country, the origin may remain in a country subject to AD and CVD.  If the product is determined not to originate from a country subject to an AD or CVD Order, however, Commerce should then perform a circumvention analysis pursuant to section 1677j.

The Federal Circuit’s holding appears to have established a two part evaluation for products which originate from countries subject to AD and CVD.  One potential limitation on the broad application of this new test may be the specific reference in the Orders to both finished and unfinished OTCG which set up a central dispute regarding the intended scope of the Orders.  Nevertheless, any company involved in the importation of goods which are modified in third countries needs to be aware of this holding and evaluate its products under the analysis announced.

 

 

On March 19, 2018, the Department of Commerce published procedures for product-specific exclusions from the Section 232 tariffs on steel and aluminum products, and has begun to accept exclusion requests.  Each exclusion request will be available for public comment for 30 days after filing. After the 30-day public comment period, the Department of Commerce will review the exclusion request and any objections, and will make a determination. According to Commerce, processing of exclusion requests will normally not exceed 90 days.  Determinations will also be posted for public review on regulations.gov. In evaluating exclusion requests, the Department of Commerce, in consultation with other Administration officials, will consider whether a product is produced in the U.S. of a satisfactory quality or in a sufficient and reasonably available amount.

Only individuals and organizations operating in the U.S. that use steel or aluminum in business activities (e.g., construction, manufacturing, or supplying steel or aluminum to users) in the U.S. may request an exclusion. Separate requests must be submitted on each distinct type and dimension of steel or aluminum product to be imported. The request must include a full factual description of the specific product, including: 1) the single type of steel or aluminum product required using a 10-digit HTSUS code, including specific dimensions; 2) the quantity of product required (in kilograms) under a one year exclusion; and 3) a full description of the properties of the steel or aluminum product, including chemical composition, dimensions, strength, toughness, ductility, etc. Only fully completed exclusion requests will be considered.

Any individual or organization in the U.S. may file objections, but Commerce will only consider information directly related to the exclusion request. Organizations submitting objections must provide specific information on the product that their company can provide that is comparable to the steel or aluminum product that is the subject of the exclusion request. Such information should include the steel or aluminum products manufactured in the U.S., their production capabilities in the U.S., a discussion on the suitability of their products for the application(s) identified by the exclusion requestor, and the delivery time and availability of the products they manufacture relative to the specifications provided.

Approvals will be made on a product basis and are limited to the applicant, unless the DOC approves a broader application.

The forms for submitting steel and aluminum exclusion requests, and objections to specific exclusion requests, are available on regulations.gov.  The steel docket number is BIS-2018-0006 and the aluminum docket number is BIS-2018-0002.

Please contact Brittney Powell or Lizbeth Levinson for questions about applying for an exclusion from the steel or aluminum tariffs.

On March 8, 2018, the President of the United States issued two Presidential Proclamations announcing the imposition of tariffs on imported steel and aluminum products under Section 232 of the Trade Expansion Act of 1962.  This law allows the President to impose additional tariffs on imports when national security is impacted.

The proclamations impose worldwide tariffs on all countries (with a few exceptions as noted below) of 10% on aluminum imports and 25% on steel imports.  These tariffs apply in addition to any antidumping or countervailing duties collected on affected imports.  The tariffs are imposed on imports of steel mill products, which are defined at the 6-digit level of the Harmonized Tariff Schedule (“HTS”) as: 7206.10 through 7216.50, 7216.99 through 7301.10, 7302.10, 7302.40 through 7302.90, and 7304.10 through 7306.90, including any subsequent revisions to these HTS codes.  The tariffs are imposed on imports of the following aluminum articles: (a) unwrought aluminum (HTS 7601); (b) aluminum bars, rods, and profiles (HTS 7604); (c) aluminum wire (HTS 7605); (d) aluminum plate, sheet, strip, and foil (flat rolled products) (HTS 7606 and 7607); (e) aluminum tubes and pipes and tube and pipe fitting (HTS 7608 and 7609); and (f) aluminum castings and forgings (HTS 7616.99.51.60 and 7616.99.51.70), including any subsequent revisions to these HTS classifications.

The Customs and Border Protection (“CBP”) will begin to collect tariffs on goods entered, or withdrawn from warehouse for consumption, on or after 12:01 a.m. eastern daylight time on March 23, 2018, and the tariffs will continue unless actions are expressly reduced, modified, or terminated.  There is no set duration for tariffs; however, the Department of Commerce will monitor and review the status of imports with respect to national security on an ongoing basis.  Importers of record are liable for the payment of tariffs to CBP.  CBP has instructed importers to report the following HTS classifications for imported merchandise subject to the additional duty (in addition to the regular HTS classifications): HTS 9903.80.01 (25 percent ad valorem additional duty for steel mill products) and 9903.85.01 (10 percent ad valorem additional duty for aluminum products).

Country-Wide Exemptions

Certain countries have been granted exemptions from the tariffs at the President’s discretion, which apply to imports based on the country of origin, not the country of export.  As of the date of this post, imports from the following countries have been exempted until April 30, 2018: Canada, Mexico, Australia, Argentina, South Korea, Brazil and  member countries of the European Union (Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom).  As of May 1, 2018, imports from all countries will be subject to the tariffs.  Additional countries may be exempted, and the status of the currently exempted countries may change after May 1, 2018.

Please contact Brittney Powell or Lizbeth Levinson for the latest developments regarding the Section 232 steel and aluminum tariffs.

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) recently sanctioned six individuals, twenty-four entities, and seven vessels for their role in the exportation, refining, brokering, and sale of oil from Libya.

As set forth in OFAC’s press release regarding the implementation of sanctions, the six individuals who were Maltese, Libyan, and Egyptian nationals, engaged in a scheme to export petroleum products from Libya to Europe.  The group moved the Libyan petroleum products to ports in Malta and Italy, and then sold the products through the use of falsified fuel certificates which concealed the origin of the oil.  The group also used a shell Maltese company to transport the illicit fuel through Europe.  OFAC acknowledged reports that the scheme had earned the group over 30 million euros.

OFAC’s statutory basis for issuing the sanctions is Executive Order 13726, an EO made by President Obama in April 2016. EO 13726 was designed to block property and individuals who are “contributing to the situation in Libya.” EO 13726 was itself and expansion of EO 13566 which declared a state of emergency in Libya in 2011 based on the ongoing violence, human rights violations, and violations of existing arms embargoes by Libya.  EO 13726 contains broad language prohibiting, among other specific provisions, any “actions or policies that threaten the peace, security, or stability of Libya.  Accordingly, OFAC needed only to determine that the groups activities threatened peace in Libya to issue sanctions under the authority of EO 13726.  In issuing sanction, OFAC also noted that the group’s alleged conduct was condemned by United Nations Security Counsel Resolution 2146 (2014) as modified by 2362 (2017).

 

As a result of the sanctions, the individuals, entities, and vessels have been added to OFAC’s list Specially Designated Nationals.  Accordingly, U.S. citizens and U.S. companies are prohibited from transacting business with the individuals, entities, and vessels.

In a recent opinion, the U.S. Court of International Trade (“CIT”) found, at least in part, in favor of the producer of pet carriers, by excluding the items from a catch-all baggage classification.

Since 2013, Quaker Pet Group, LLC (“QPG”)  has been challenging the government’s classification of various styles of cloth carriers for dogs, cats, and other animals.  The government has classified the carriers under subheading 4202.39 for “travel, sport and similar bags” and assessed a 17.6% duty rate.  QPG argues that the carriers are not “bags” and should be classified as textiles under Chapter 63.

According to the CIT, the classification turns on the fact that the items at issue are designed to carry living things, not inanimate objects.  Citing Additional U.S. Note 1 to HTSUS Chapter 42, the CIT noted that “travel, sport and similar bags” are defined as being “of a kind designed for carrying clothing and other personal effects during travel.”  Because pets are not clothing, the CIT turned to a determination of whether pets are properly considered “personal effects.”

The CIT noted that HTSUS does not define “personal effects” and, therefore, it relied on definitions gathered from various dictionaries. Among the definitions cited was commonality in the fact that “personal effects” are inanimate items, such as keys or a wallet, which are regularly worn or carried by a person.  The government, relying on numerous cases finding pets to be personal property in the context Fourth and Fourteenth Amendment analyses, argued that pets can fall within the definition of personal property or effects.  The CIT found the government’s argument unpersuasive, holding that even if pets are considered personal property, they do not meet the definition of “personal effects” which is the express language used in the explanatory Note for Chapter 42.

The government also argued that even the carriers did not fall withing Section 4202.39, they were still properly classified under Chapter 42 as another type of bag.  The CIT relied on the Federal Circuit’s decision in Avenues in Leather, Inc. v. United States, 423 F.3d 1326, 1332 (Fed. Cir. 2005), which held that “the common characteristic or unifying purpose of the goods in heading 4202 consist[s] of organizing, storing, protecting, and carrying various items.”  The CIT again relied on dictionary definitions to determine that pets are not “items” or “things,” and, therefore do not meet the general criteria announced in Avenues in Leather for classification under Chapter 42.

Although the CIT determined that the carriers are not properly classified under Chapter 42, the CIT found that the record was not sufficient for it to determine whether the carriers should be classified under hearing 6307 for “other made up articles, including dress patterns” of textile, as QPG proposed. Specifically, the CIT stated that it did not have sufficient information regarding the “predominant material” from which each of the styles of carrier was constructed or the procedures for assembling the carriers.  Accordingly, the CIT directed further proceeding to determine the proper classification of the carriers.

 

 

 

On January 30, 2018, the Alliance Rubber Co. filed antidumping (“AD”) and countervailing duty (“CVD”) petitions on rubber bands from China, Sri Lanka, and Thailand. The petitioner alleges that the subject merchandise from these countries is being sold in the U.S. at less than fair value. The petitioner also alleges the governments of China, Sri Lanka, and Thailand are subsidizing the foreign producers, giving them an advantage in the U.S. market. Importers of subject merchandise are liable for any potential antidumping or countervailing duties imposed.

The U.S. International Trade Commission (“ITC”) will investigate to determine whether the U.S. industry is being materially injured or threatened with material injury due to imports of subject merchandise from China, Sri Lanka, or Thailand. The U.S. Department of Commerce will determine whether the foreign companies are selling at less than fair value, or whether the foreign exporters are being subsidized by the foreign governments. Affirmative findings from both agencies are required for either AD or CVD duties to be imposed. The ITC will issue its preliminary determinations in the AD/CVD investigations by March 16, 2018. Unless extended, the Department of Commerce must issue its preliminary CVD determinations by April 26, 2018, and its preliminary AD determinations by July 10, 2018. The deadlines for the Department of Commerce’s preliminary determinations are subject to postponement.

The petitioner alleges the following dumping margins:

  • Thailand: 60.82 percent
  • China: 27.16 percent
  • Sri Lanka: 48.63 percent

Scope

Merchandise covered by these proceedings is currently classified in the Harmonized Tariff System of the United States (“HTSUS”) under sub-heading 4016.99.35.10 (Rubber Bands Made of Vulcanized Rubber, Except Hard Rubber, of Natural Rubber). Notably, this sub-heading pertains only to vulcanized rubber bands. The written description of the scope, provided below, is dispositive.

The products subject to the AD/CVD investigations are bands made of bands made of vulcanized rubber, with a flat length, as measured end-to-end by the band lying flat, no less than 1/2 inch and no greater• than 10 inches; with a width, which measures the dimension perpendicular to the length, of at least 3/64 inch and no greater than 2 inches; and a wall thickness from .020 inch to .125 inch. Vulcanized rubber has been chemically processed into a more durable material by the addition of sulfur or other equivalent curatives or accelerators. Subject products are included regardless of color or inclusion of printed material. The scope includes vulcanized rubber bands which are contained or otherwise exist in various forms and packages, such as, without limitation, vulcanized rubber bands included within a desk accessory set or other type of set or package, and vulcanized rubber band balls, but excludes Bedford Elastitags®, and bands that are being used at the time of import to fasten an imported product.

Projected Schedule

Petition is Filed – January 30, 2018
DOC Initiates Investigations – February 20, 2018
ITC Staff Conference – February 20, 2018
ITC Post-Conference Briefs – February 23, 2018
ITC Preliminary Determinations Issued – March 16, 2018
DOC Preliminary CVD (un-extended) – April 26, 2018
DOC Preliminary AD (un-extended) – July 10, 2018
DOC Preliminary CVD (extended) – July 2, 2018
DOC Preliminary AD (extended) – August 29, 2018

For more information, please contact Lizbeth Levinson  or Brittney Powell.

In an Opinion made public last week, the U.S. Court of International Trade (CIT) sustained the U.S. Commerce Department’s (“Commerce”) change of opinion with regard to antidumping duties assessed on frozen fish fillets from Vietnam.  Ultimately, the CIT found that Commerce had “reasonably explained” its shift in position based on Commerce’s new understanding of the evidence presented to it and the company in question’s failure to present evidence to rebut the assumption Commerce had applied.

In January 2017, the CIT granted in part and remanded in part Commerce’s final determination of the tenth administrative review of its antidumping duty order for frozen fish fillets from the Socialist Republic of Vietnam.  As part of its tenth administrative review, Commerce assigned a $2.39 per kilogram duty on pangasius fish fillets.  The antidumping duty was based on the presumption that all respondent companies in a non-market economy, such as Vietnam, are subject to government control and assigned the same duty rate.  Nevertheless, the CIT questioned Commerce’s basis for its determination of a “broad-market advantage” in the production of the fillets based on the affidavit of an Indonesian fisheries official.

In addition, one company, Can Tho Import-Export Joint Stock Co. (“Casemax”) disputed the assignment of antidumping duty rate to its products. Casemax asserted that, based on the structure of its articles of formation, it was not subject to control of the communist government.  In its January 2017 decision, the CIT found that Commerce had not sufficiently explained why it denied Casemax’s assertions and assigned it the same duty rate as other pangasius exporters.

As set forth in the CIT’s most recent opinion, Commerce has now sufficiently explained the two questions that required remand.

First, Commerce subsequently came to learn that the assertions contained in the Indonesian official’s affidavit applied to the three provinces in Indonesia which accounted for 99.8% of Indonesia’s pangasius production during the relevant period.  Learning that the affidavit provided essentially nation-wide data, Commerce gave the affidavit greater credence than an Indonesian magazine article on which it had relied on as part of its prior administrative reviews.

Second, the application of anti-dumping duties to Casemax was largely a result of Casemax’s failure to present evidence to rebut the presumption that it was subject to government control.  Despite Casemax’s assertions, Commerce properly presumed government control in the absence of evidence demonstrating that the communist government had neither de jure or de facto control over the company.  Accordingly, the CIT found that Commerce was not unreasonable in applying the presumption and denying Casemax’s request for a separate duty rate.

Any U.S. company which believes it is facing unfair completion from foreign producers should explore whether a petition for protective duties may be appropriate. As here, the antidumping duties were originally instigated by a complaint from U.S. producers in 2002 and Commerce has continued to ensure appropriate protections over the past fifteen years.

Last week, the U.S Department of Commerce announced that it was revising the definition of solar panels from China which are subject to countervailing and antidumping duties to exclude educational solar energy kits which had been lumped in with panels designed for industrial and other applications in a recent Order.

Earlier this month, the Commerce Department announced the preliminary results of an administrative review of countervailing and antidumping duties originally ordered in December 2012.  The Commerce Department began its initial investigation in November 2011 after it received a petition from U.S. solar cell manufacturers which suggested that solar cells imported from China were being sold at unfair value.  The investigation broadly examined crystalline silicon photovoltaic cells, regardless of whether the cells had been assembled into modules, such as solar panels.  The initial investigation found evidence of improper subsidies and the December 2012 Orders imposed countervailing and antidumping duties against Chinese manufacturers.

In February 2017, members of the solar energy industry and other interested parties requested that the Commerce Department undertake an administrative review of the 2012 countervailing and antidumping Orders.  As a result of the administrative review, the Commerce Department announced countervailing duties of between approximately 11% and 14% against mandatory and non-selected Chinese companies.  In addition, the Commerce department announced preliminary antidumping margins of 61.61% against Trina Solar Energy based on an adverse inference resulting from Trina’s failure to provide necessary information.

Caught up among these industrial and mass market solar cell producers was Pitsco Inc., based in Pittsburg, Kansas. Pitsco produces small, low voltage solar cells in China for use in educational classroom science sets.  Accordingly, Pitsco filed a request for a changed circumstances review revocation pursuant to section 751(b)(1) of the Tariff Act of 1930 and 19 CFR 351.216(b).  Notably, neither the lead petitioner nor any other entity opposed Pitsco’s request that its products be carved out of the countervailing and antidumping duty Orders.   Accordingly, the Commerce Department announced the Final Results of its Changed Circumstances Reviews, and Revocations of the Orders, in Part to reflect a particularized exclusion for solar cells of between approximately 5 and 50 square inches, with one black and one red wire of specified gauge and length, which do not exceed minimal voltage, amp, and wattage outputs, and not containing a battery or computer peripheral port.

Quite rightfully, this educational David was able to avoid the fight between international solar energy Goliaths.  Nevertheless, the labors undertaken to petition and develop appropriate and well-drafted exclusion language were necessary to bring about the result.

On January 12, 2018, President Trump issued a statement announcing that he will approve certain sanctions waivers necessary in order to preserve the Iran nuclear deal. At the same time, he called on the U.S.’s European allies to work with the U.S. to fix the flaws of the Iran nuclear deal (the Joint Comprehensive Plan of Action or the JCPOA), or he would terminate the deal.

President Trump began his statement by condemning the Iranian regime as the world’s leading state sponsor of terror. He also added 14 more Iranian individuals and entities to the Specially Designated Nationals and Blocked Persons List.

In his statement, President Trump explained that he is open to working with Congress on bipartisan legislation dealing with Iran. However, any bill must include four critical components. First, the bill must allow immediate inspection by international inspectors at all nuclear sites. Second, it must demand that Iran not come close to possessing nuclear weapons. Third, there must be no expiration date on these requirements. Finally, the bill must subject Iran’s long-range missile program to the same sanctions imposed on its nuclear weapons program.

Although President Trump waived the application of certain nuclear sanctions, he stated that “this is a last chance.” He called on the U.S.’s European allies to fix the Iran deal and made it clear that if the allies cannot agree on a new supplemental JCPOA, President Trump will not waive sanctions again to stay in the deal. The President also reserved the right to withdraw from the deal immediately if he determines that an agreement is not within reach.

The President’s full statement can be found here.