WTO Rules Retroactive U.S. Countervailing Duty Law is Lawful, but that Commerce did not Properly Investigate Possible “Double Remedies” in Cases against Products from China and Vietnam

On March 27, 2014, the World Trade Organization (WTO) issued a Panel Report regarding “United States—Countervailing and Anti-Dumping Measures on Certain Products from China.”  The Panel upheld the validity of Section 1 of Public Law (P.L.) 112-99, a statute passed by the U.S. Congress with no debate and signed almost immediately by the President on March 13, 2012.  The WTO Panel, however, held unlawful certain investigations and reviews conducted by the U.S. Department of Commerce in relation to countervailing duties (CVD) against non-market economy (NME) countries, namely China and Vietnam.  Earlier this week, the Panel Report was appealed to the WTO Appellate Body which is reviewing the decision

Section 1 of P.L. 112-99 amended the United States Tariff Act of 1930 by adding a provision that provides a legal basis for the U.S. to impose CVD against imports from NME countries. The law was enacted to overturn a 2011 decision from the U.S. Court of Appeals for the Federal Circuit that ruled imposing CVD in addition to antidumping duties (ADD) on the same products from NME countries was contrary to U.S. trade law.  The amended law requires relevant U.S. administrative agencies and federal courts to apply CVD, if any, in all proceedings, resulting U.S. Customs and Border Protection (CBP) actions, and judicial proceedings initiated on or after November 20, 2006, involving products from NME countries.  In September, 2012, China submitted a Request for Consultations to the WTO.

China requested that the WTO Panel find that: (1) Section 1 of P.L. 112-99 is inconsistent with certain Articles of the General Agreement on Tariffs and Trade (the “GATT”) relating to transparency and notice; and (2) the U.S. failed to investigate and avoid double remedies in certain investigations and reviews initiated between November 20, 2006 and March 13, 2012, with the resulting CVD measures being inconsistent with certain Articles of the Agreement on Subsidies and Countervailing Measures (the “SCM Agreement”).  The WTO Panel rejected China’s challenges to Section 1 as being inconsistent with GATT requirements regarding the passage of legislation. 

In response to China’s “double remedies” claim, however, the Panel held that in 25 CVD  proceedings parallel to ADD investigations, initiated between November 20, 2006 and March 13, 2012, the U.S. has acted inconsistently with the SCM Agreement.  Specifically, the Panel found that the U.S. Commerce Department’s concurrent imposition of ADD and CVD calculated on the basis of an NME methodology on the same products, without investigating, in either the CVD investigations and reviews or in the parallel ADD investigations and reviews, whether double remedies arose from such concurrent duties.

The Panel concluded that to the extent that the measures at issue were inconsistent with the SCM Agreement, those measures had nullified or impaired benefits accruing to China under that Agreement.  Accordingly, the Panel recommended that the U.S. bring the investigations and reviews in 25 cases into conformity with its obligations under the SCM Agreement. 

The 25 cases include a broad range of products imported from China, including: Raw Flexible Magnets; Welded Austenitic Stainless Pressure Pipe; Oil Country Tubular Goods; Drill Pipe; and Aluminum Extrusions, which has an extremely broad Scope and captures components and finished goods in products used in the construction, medical device, and manufacturing sectors.

In light of this WTO Panel Report, producers and exporters in China and other NME countries, as well as U.S. importers, whose products are subject to ADD/CVD may consider taking steps to protect their legal rights.   

We would like to thank Ms. Yang Luan, Legal Intern, for contributing to this Client Alert.  Ms. Luan is from China and earned her LL.M. from Case Western Reserve University School of Law and is awaiting admission to the New York State Bar.  

For questions and assistance with issues involving antidumping and countervailing duty cases, including scope rulings, administrative reviews, and other proceedings, compliance with ADD/CVD orders, responding to CBP requests for information, demands for duties, investigations, penalties, preparing prior disclosures, as well as for assistance with other issues relating to international trade laws and regulations, please contact Managing Attorney, Jon P. Yormick, at jon@yormicklaw.com or by calling +1.866.967.6425 (Toll free in Canada & U.S.), Office: +1.216.928.3474, or Mobile: +1.216.269.5138.

Mexican Attorney Joins Firm as Counsel in Buffalo

Ms. Brenda A. Cisneros Vilchis has joined the Law Offices of Jon P. Yormick Co. LPA as Counsel in the firm’s Buffalo office.  Ms. Cisneros is licensed to practice law in Mexico and is awaiting admission to the bar in New York State.

Ms. Cisneros is a native of Monterrey, Mexico and earned her LL.M. from SUNY Buffalo Law School, where her classmates included students from Canada, Colombia, India, South Korea, and Ukraine.  The LL.M. program is designed for practicing lawyers who hold a law degree from outside the U.S. and wish to broaden their skills and knowledge by learning more about the U.S. legal system.   Ms. Cisneros earned her law degree from Facultad Libre de Derecho de Monterrey, A.C. and she also holds a Masters in Banking and Finance from Universidad de Alcala de Henares in Madrid, Spain.

“My international law practice assists private and publicly-traded companies on a wide-range of matters.  Brenda’s addition in Buffalo will help me to better serve middle market clients in Upstate New York and Ontario,” said Jon Yormick, founder of the international business law firm, based in Cleveland.  The firm also has an affiliation with the Mexican law firm Boutique Legal Internacional, based in Chihuahua, with an office in Ciudad Juárez.   “As more U.S. and Canadian companies focus attention on Mexico as a growing market and manufacturing location for sectors such as aerospace, Brenda and our affiliate firm will be able to serve the increasing needs of those companies,” added Yormick.     

Ms. Cisneros will be advising U.S. and Canadian clients on doing business in Mexico with private and state-owned companies and throughout Latin America.  She will also work with Boutique Legal Internacional to assist companies seeking to expand in the Mexican market, ensuring that companies with operations in Mexico are complying with customs and tax regulations, and maximizing the benefits of the maquiladora program, IMMEX.  Ms. Cisneros’s practice also includes advising foreign clients on U.S. business formation, drafting, reviewing, and negotiating international commercial agreements, and general corporate law.

For assistance, Ms. Cisneros can be reached at bcisneros@yormicklaw.com, Toll free:  +1.866.967.6425 (Canada & U.S.) or Mobile: +1.716.930.0594.

 

Vessel Certificate that Goods Allowed to Enter Oman Leads to Antiboycott Penalty Settlement

A recent Antiboycott penalty settlement serves as a reminder that U.S. parties have a dual obligation under the Antiboycott regulations and must diligently work with outside agents, such as document preparation specialists, to comply.

The Office of Antiboycott Compliance, Bureau of Industry and Security (OAC), alleged that in June, 2007, Polk Audio, Inc., a Maryland company, the company intended to “comply with, further or support an unsanctioned boycott” and failed to report the request that it “engage in a restrictive trade practice or boycott.” In the May 17, 2012 Proposed Charging Letter, the OAC alleged that Polk Audio’s “document preparation specialists” provided a vessel certificate to “persons in Oman” that certified the “vessel carrying the goods is allowed to enter the ports of Arab States/Oman.”

The second charge – failure to report – explained that the vessel certificate request originated in a letter of credit issued by HSBC Bank in Oman. By failing to report this request, Polk Audio allegedly violated the Antiboycott regulations a second time. The proposed charges were settled for a relatively minimal $8,000, not an uncommon amount for an OAC settlement.

This minimal settlement amount, however, should not be shrugged off by U.S. parties. First, exporting companies should confirm that their export compliance management program addresses the Antiboycott regulations; specifically, the dual duties – reporting a request to engage in a boycott, and not complying with that request. The OAC has all the details on the BIS website at, http://tinyurl.com/a6u8dd. As this settlement shows, companies that export on letters of credit need to carefully review the terms for language that requests actions that violate the Antiboycott regulations and when outside agents handle letter of credit review and preparation, exporters must be sure those agents are familiar with the regulations as well.

Also, the minimal settlement in Polk Audio was in connection with a single transaction occurring 5 years ago. Large volume exporters to and those bidding on tenders and responding to RFPs in Middle East countries should be particularly diligent in their compliance efforts. Just 2 years ago Daewoo Auto settled 59 Antiboycott violation charges for $88,500. So these penalties can add up quickly. Many companies may need to conduct an internal review of their transactions in the past 5 years and consider a voluntary self-disclosure regarding any Antiboycott violations that may be found.

At the recent BIS Update 2012 Conference, it was noted that the OAC tends to see over-reporting by some companies. It is not a violation to over-report questionable Antiboycott requests; rather it is a sign of a robust export compliance program. It was also noted that the OAC can assist U.S. companies by working with different governments to exclude offending language found in tenders, RFPs, and other documents.

For assistance with issues regarding the Export Administration Regulations, including the Antiboycott regulations, please contact Jon Yormick, jon@yormicklaw.com or call Toll Free (Canada & U.S.), +1.866.967.6425, or +1.216.928.3474.

 

Firm Co-Sponsoring Lithuanian Trade Office Program in Buffalo

On October 25 in Buffalo, New York, the Law Offices of Jon P. Yormick Co. LPA, with the Erie County Industrial Development Agency (ECIDA), International Division, is co-sponsoring a lunchtime program  “Lithuania: Gateway to Europe.”

The program will feature presentations from the Co-Directors of the Lithuanian Trade Office who will discuss opportunities for trade and investment in Lithuania, as well as its logistics strengths that provide access to the mature European Union market.  Co-Directors, Ingrida Bublys and Linas Klimavicius, will highlight some of the strong sectors in Lithuania, such as biotech, medical devices, clinical trials, and lasers and electronics.  International business and trade attorney, Jon Yormick, will also discuss cross-border contract issues for U.S. and Canadian companies to consider when establishing business relationships with Lithuanian partners.

Erie County Executive, Mark C. Poloncarz, will welcome those attending the meeting and kick-off the program which will be held from 12:00-2:00 pm on the Buffalo Niagara Medical Campus, at the D’Youville Center for Profession Studies, located in The Innovation Center, 640 Ellicott St., Buffalo 14203.  Supporting organizations include the Binational Alliance, Buffalo Niagara Medical Campus, Empire State Development, U.S. Department of Commerce, Export Assistance Center.  Moog Medical Devices Group has also been invited to attend and share comments on the company’s investment and operations in Lithuania.

For more information and registration, please contact Maryann Stein at +1.716.856.6525 or email at mstein@ecidany.com, or go to http://tinyurl.com/8ggp8q2.

 

 

Firm Co-Sponsoring Lithuanian Trade Office Program in Buffalo

On October 25 in Buffalo, New York, the Law Offices of Jon P. Yormick Co. LPA, the Erie County Industrial Development Agency (ECIDA), International Division, is co- sponsoring a lunchtime program, “Lithuania: Gateway to Europe.”

The program will feature presentations from the Co-Directors of the Lithuanian Trade Office who will discuss opportunities for trade and investment in Lithuania, as well as its logistics strengths that provide access to the mature European Union market. Co-Directors, Ingrida Bublys and Linas Klimavicius, will highlight some key sectors in Lithuania, such as biotech, medical devices, clinical trials, and lasers and electronics. International business and trade attorney, Jon Yormick, will also discuss cross-border contract issues for U.S. and Canadian companies to consider when establishing business relationships with Lithuanian partners.

Erie County Executive, Mark C. Poloncarz, will welcome those attending the meeting and kick-off the program which will be held from 12:00-2:00 pm on the Buffalo Niagara Medical Campus, at the D’Youville Center for Profession Studies, located in The Innovation Center, 640 Ellicott St., Buffalo 14203. Supporting organizations include the Binational Alliance, Buffalo Niagara Medical Campus, Empire State Development, and the U.S. Department of Commerce, Export Assistance Center. Moog Medical Devices Group has also been invited to attend and share comments on the company’s investment and operations in Lithuania.

For more information and registration, please contact Maryann Stein, phone: +1.716.856.6525, email: mstein@ecidany.com, or go to http://tinyurl.com/8ggp8q2.

 

Cleveland Metropolitan Bar Association, International Law Section Fall/Winter Schedule

As Chair of the Cleveland Metropolitan Bar Association, International Law Section, I am pleased to announce the upcoming Fall/Winter meeting schedule. 

I want to extend a thank you to each area practitioner (and a colleague from Toronto) who has given a presentation and led a discussion at our meetings this past year on topics ranging from doing business in China and Brazil to compliance with the FCPA, choice of law, and litigating Canada-U.S. disputes.  I chipped in with an update on economic sanctions.  I also want to thank each of you who have attended the ILS meetings and continue to support our growing Section, helping to make it a valuable and vibrant Section. 

The Fall/Winter meeting schedule kick off on September 6 with “What Every Lawyer Should Know About Export Controls:  From Compliance to Investigations.” The presenter will be Special Agent Jake Oakley, U.S. Department of Commerce, Bureau of Industry and Security, Office of Export Enforcement and the meeting will be at the CMBA offices.

On October 4, Michael Garvin, Partner at Hahn Loeser, will lead a discussion on “Global IP Enforcement Strategies:  A Litigator’s Perspective.”  The meeting will be held at Hahn Loeser. 

Larry Crowther, Partner at Wegman Hessler will give a presentation on “Preparing and Negotiating International Supply Agreements.”  The meeting will be held at Wegman Hessler on November 1

We will end 2012 with Rob Whittall, CPA, ACA, Partner at Dyke Yaxley, LLC, providing a unique presentation on “Navigating U.K.-U.S. Tax Issues.”  The meeting will be held on December 6 at the CMBA Offices.

Each meeting begins with lunch at noon, followed by a 1.0 CLE presentation and discussion.  Meeting notices and registration information will follow in the coming weeks  We will not have a January meeting and presentation on the first Thursday of the month due to the holidays.

Lastly, please save February 7, 2013 for a special half-day CLE morning program.  Details are being worked on, but 3 panel discussions are planned.  Anyone interested in helping to plan or present at the meeting, please should contact me early at jon@yormicklaw.com or calling at 216.928.3474.

I look forward to growing the International Law Section with your support and hope to see you at our upcoming meetings.

 

New York Court Recognizes English Judgment Where No Personal Jurisdiction Over Defendant Exists

This month a New York State court granted summary judgment in favor of Abu Dhabi Commercial Bank (ADCB) to recognize and enforce an English court judgment, despite acknowledging that the court has no personal jurisdiction over the defendant/judgment- debtor.

ADCB filed an action known in New York State as a motion for summary judgment in lieu of complaint, seeking to collect on its judgment of USD 33 million rendered by the High Court of Justice Queen’s Bench Division Commercial Court, against Saudi Arabian-based Saad Trading, Contracting & Financial Services Company. A motion for summary judgment in lieu of complaint is used in New York State to domesticate and enforce judgments rendered in other U.S. and foreign jurisdictions.

The English court action was for breach of contract and the underlying contract called for the parties to submit to the non-exclusive jurisdiction of the English courts. Saad did not challenge jurisdiction in England, failed to appear for trial, and did not appeal the judgment. In New York State Supreme Court (trial level court), however, Saad opposed the motion for summary judgment in lieu of complaint based on lack of personal jurisdiction over it and forum non conveniens.

In rendering its decision, the court acknowledged that there was no evidence indicating that Saad has any contact with New York State. The court noted that the key issue in the case was whether personal jurisdiction is a requirement to recognizing a foreign country money judgment. It turned to the only New York State appellate court decision that addressed the issue previously. In that case, the plaintiffs obtained a judgment in Ontario, Canada and filed a motion for summary judgment in lieu of complaint seeking to have the Ontario court judgment recognized in New York State, where the defendants/judgment-debtors had assets. The appellate court held that personal jurisdiction over the defendants/judgment-debtors was not a requirement before the Ontario judgment would be recognized and enforced. The court expressly found that neither due process nor the New York Civil Practice Law and Rules (CPLR) requires personal jurisdiction as a condition to recognizing a foreign country money judgment. The appellate court explained that the judgment-creditor was not seeking new relief against the judgment-debtor, but was merely requesting the court to perform a ministerial function by recognizing the foreign money judgment.

In ADCB, the court agreed with the appellate court’s reasoning and finding that once

enforcement of a recognized foreign court money judgment is sought, the court acquires in rem or quasi-in-rem jurisdiction over the judgment-debtor’s property. The court also summarily dismissed Saad’s forum non conveniens argument, finding there was no hardship to Saad since there was nothing to defend, the merits were decided in England, and ADCB sought no new relief.

This recent case reaffirms that New York courts will recognize and enforce a foreign court money judgment where they would otherwise not have personal jurisdiction over a defendant. For plaintiffs/judgment-creditors, this principle can be used successfully to collect on a foreign judgment when assets are located in New York State. Defendants/ judgment-debtors must be aware that their assets in New York State are at risk even when a judgment arises from proceedings in a foreign country or sister state.

For assistance with enforcement of foreign money judgments and arbitral awards in U.S. courts, please contact Jon P. Yormick, jon@yormicklaw.com, or by calling toll free (Canada & U.S.) +1.866.967.6425 or T: +1.216.928.3474.

Colorado Medical Equipment Manufacturer Settles Alleged Iranian Transactions Regulations Violations with OFAC

A Colorado medical equipment manufacturer has settled with the Office of Foreign Assets Control (OFAC) allegations that it violated the Iranian Transactions Regulations, commonly known as the Iran sanctions.

Sandhill Scientific, Inc. will pay $126,000 to settle the main allegations that in 2007 it exported medical equipment valued at approximately $6,700 to Dubai, UAE, knowing or having reason to know that the equipment would be transshipped and destined for Iran. OFAC alleged that Sandhill exported the goods to its exclusive distributor located in Iran, with which it had an agreement. OFAC also alleged that Sandhill failed to produce documents responsive to two administrative subpoenas issued by OFAC during its investigation.

Sandhill did not voluntarily disclose this or related reporting violations to OFAC. OFAC determined that the alleged violations were an egregious case because: the company’s management was directly involved in the transaction and acted willfully and recklessly; the company appeared to conceal that the equipment was destined for Iran; and it did not fully cooperate with the investigation. These determinations resulted in a base penalty amount of $250,000.

Additional factors considered in the case included: Sandhill not having an export compliance program in place; not taking any remedial action after the alleged violations came to its attention; the export may have been eligible for an OFAC license under Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA); and there was no prior sanctions enforcement actions against the company.

As pointed out in the settlement notice, exporters of medicines and medical devices have an opportunity to avoid an OFAC penalty action by determining whether they can export products to Iran (and Sudan) under a TSRA license. Had Sandhill the spent time, money, and effort to do so, it likely could have exported its equipment legally, making it very unlikely this penalty action and settlement would be known publicly.

For guidance on the various U.S. economic sanctions programs and OFAC licenses, please contact Jon P. Yormick, Esq., atjon@yormicklaw.com or by calling toll free, 1.866.967.6425 (Canada & U.S.).

 

Ohio Company Settles Case of Selling Chinese Products to USG

A Columbus company has settled a case with the Justice Department in which it knowingly sold products from China to U.S. Government agencies. The company falsely claimed the goods were manufactured in a list of designated countries that have been determined to trade fairly with the U.S. China is not a designated country. The Trade Agreements Act prohibits sales of products to federal agencies that are manufactured in countries that do not have a reciprocal trade agreement with the U.S.

The settlement calls for Direct Resource, Inc. to pay $450,000, although it admitted no wrongdoing. The settlement arose from a whistleblower lawsuit filed more than 2 years ago. The case involved allegations that the company knowingly sold office supplies from China to federal agencies. China does not have a reciprocal trade agreement with the U.S.

The settlement highlights the fact that companies selling to the U.S. Government must carefully review and fully understand their contractual obligations. The Government Services Agency (GSA) contracts involved in the case required that the products sold to the Government must be manufactured from one of the designated countries. Contractual compliance, understanding the applicable laws and consequences of violations, as well as careful planning are necessary for any company involved with international trade, particularly those that also sell to the Government. Following these principles will help companies avoid whistleblower lawsuits, Government audits, or even possible criminal charges.

U.S. Commerce Dept. to Reconsider Countervailing Duties on Aluminum Extrusions

An April 4 decision from the U.S. Court of International Trade has ordered the Department of Commerce to reconsider its 374.15% “all others” countervailing duty (CVD) rate on aluminum extrusions imported to the U.S. from China. Commerce is to complete the review and file its results with the Court on May 4, 2012.

One year ago, Commerce issued its Final Determination that the high “all others” CVD rate would apply to aluminum extrusions imported from China. The Court decision explained that in its investigation, Commerce found there were 114 potential exporters/producers (respondents) to investigate. Commerce identified the three largest respondents by volume as “mandatory respondents.” None of those respondents, however, answered Commerce’s initial questionnaire, leading to Commerce finding that these mandatory respondents withheld information and impeded the investigation. This led to an adverse inference and ultimate determination that the highest calculated subsidy rate applicable to the case was 374.15% for each of these three mandatory respondents (AFA rate). The Court noted that two other Chinese producers submitted voluntary responses. In its Final Determination, Commerce issued CVD rates of 8.02% and 9.94% for those companies’ products.

Having determined CVD rates for the mandatory and voluntary respondents, Commerce calculated the CVD rate for “all other” respondents and determined that rate would be 374.15% as well. After reviewing the pertinent statutory and regulatory sections and considering the arguments made by the importers and Department of Commerce, the Court concluded that the question became whether Commerce used a “reasonable method” for calculating the “all others” rate, as required by law.

The Court rejected Commerce’s argument that it chose to set the “all others” rate at the AFA rate because it had no other rates for the mandatory respondents, calling that a “situation of Commerce’s own making.” The Court pointed out that rates for voluntary respondents were on the record and that although Commerce was permitted to disregard those rates in setting the “all others” rate, it showed that the highest rate was not attributable to all respondents. The Court further found that Commerce’s decision did not show a “logical connection” between the AFA rate and “Commerce’s conclusion to apply that rate to the remaining parties.” Finally, the Court pointed out that the AFA rate is “to be remedial, not punitive.” Since the record did not indicate that Commerce considered how to set a remedial but not punitive “all others” rate, it failed to consider an important aspect of the case. In ordering a remand, the Court stated that it was giving Commerce an opportunity to explain why its decision “complies with the statutory reasonableness requirement.”

The anti-dumping duties/countervailing duties order against aluminum extrusions from China is broad in its scope. The order applies to aluminum alloys starting with series designation numbers 1, 3, and 6 that are produced and imported in a variety of shapes and forms such as hollow profiles, solid profiles, pipes, tubes, bars, and rods. The order also includes drawn aluminum products. Examples of products included in the scope are window and door frames, solar panels, curtain walls, furniture, as well as numerous components used in marine, consumer, and industrial products.

If you have questions or concerns regarding the scope of the order on aluminum extrusions from China or similar orders, please contact Managing Attorney, Jon P. Yormick, jon@yormicklaw.com, or by calling toll free (Canada & U.S.), 1.866.947.6425.

 

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