Fed. Circuit Reverses ITC On Substantial Transformation For AD And CVD Goods

by Fox Rothschild LLP
Contact

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.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Fox Rothschild LLP | Attorney Advertising

Written by:

Fox Rothschild LLP
Contact
more
less

Fox Rothschild LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.