November, 2016
Remands
Mark K. Neville, Jr.
We discussed the subject of judicial review some months back.1 The lesson then was that an importer could have an impartial arbiter review his complaint about the actions of a customs authority or other administrative agency.
We return to the judicial review process in this discussion and specifically we answer the question that may arise in the context of a trade remedy case, what does a reviewing court do when it finds that (i) the agency has been cryptic in its explanation for why it reached a particular determination or took a certain action or if there is no explanation or (ii) has not considered an important fact or statutory provision or (iii) has failed to undertake an investigation into an important element? To put it another way, how can a court review whether there is substantial evidence supporting an agency determination when the record is incomplete?
The answer, of course, is that the court cannot make an informed review in such a case and it will send the issue back to the agency to “fill in the gaps” and answer any specific open questions. The courts rely on a procedure called “remand” to send the case back to the administrative agency.
Where Commerce has the choice between two fairly conflicting views, “[t]he court may not substitute its judgment for that of the [agency] . . . even though the court would have justifiably made a different choice had the matter been before it de novo.”6 The CIT has also observed that, “the possibility of drawing two inconsistent conclusions from the evidence …does not mean that an agency’s finding is not supported by substantial evidence.” Finally, where substantial evidence exists on both sides of an issue, “the statutory substantial evidence standard compels deference to the [agency].”7
It is also important to recognize that the US Court of Appeals for the Federal Circuit reviews International Trade Commission (ITC) legal determinations in Section 337 cases8 without deference and its factual findings for substantial evidence.9 Direct judicial review of these ITC final determinations is assigned to the Federal Circuit.10
Commerce must use the “best available information” in selecting surrogate data for which to value FOPs.13 The surrogate data must “to the extent possible” be from an ME country that is “at a level of economic development comparable to that of the NME and is a “significant producer of comparable merchandise.” 14
Also in the NME context, Commerce has adopted a rebuttable presumption that all companies within the NME country are subject to government control and, thus, should be assessed a single antidumping duty (AD) rate.15 For a Chinese case, this “PRC-wide” rate tends to be much higher than the separate rates assigned to those other respondents who are eligible for a separate rate, i.e., for whom control by the PRC government has not been shown.
One feature of these trade remedy cases, not limited to the NME designation, is that Commerce will select those respondents, usually two in number, who must respond to questionnaires and participate in the investigation or administrative review. These are known as mandatory respondents and they must incur a significant cost to participate lest they be assigned a punitive rate for their lack of full cooperation. In addition, respondents can volunteer to participate but Commerce will normally not select additional respondents. Often there will be disputes over the status of companies as respondents and the quality of their cooperation.
Given the welter of determinations that Commerce must make in its investigations or reviews, as illustrated by its recent decisions, the CIT will often remand to Commerce for such reasons as to
.
While it is certainly true that some of these cases are amenable to a CIT resolution without the need for a remand,24 it would be interesting to survey the question, how many of these cases do generate a remand? I am confident that it is a high percentage.
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We return to the judicial review process in this discussion and specifically we answer the question that may arise in the context of a trade remedy case, what does a reviewing court do when it finds that (i) the agency has been cryptic in its explanation for why it reached a particular determination or took a certain action or if there is no explanation or (ii) has not considered an important fact or statutory provision or (iii) has failed to undertake an investigation into an important element? To put it another way, how can a court review whether there is substantial evidence supporting an agency determination when the record is incomplete?
The answer, of course, is that the court cannot make an informed review in such a case and it will send the issue back to the agency to “fill in the gaps” and answer any specific open questions. The courts rely on a procedure called “remand” to send the case back to the administrative agency.
Substantial Evidence Rule
We often see these remand actions in Court of International Trade (CIT) trade remedy cases, under the antidumping and countervailing duty laws.2 In such cases, parties will often seek a resolution by filing a motion on the agency (Commerce Department) record.3 The standard of review for the CIT is the “substantial evidence” rule. CIT sustains Commerce’s “determinations, findings, or conclusions” unless they are “unsupported by substantial evidence on the record, or otherwise not in accordance with law.”4 This substantial evidence standard differs from the “de novo” review under which CBP decisions that led to denied protests are reviewed anew and in full by the CIT.5Where Commerce has the choice between two fairly conflicting views, “[t]he court may not substitute its judgment for that of the [agency] . . . even though the court would have justifiably made a different choice had the matter been before it de novo.”6 The CIT has also observed that, “the possibility of drawing two inconsistent conclusions from the evidence …does not mean that an agency’s finding is not supported by substantial evidence.” Finally, where substantial evidence exists on both sides of an issue, “the statutory substantial evidence standard compels deference to the [agency].”7
It is also important to recognize that the US Court of Appeals for the Federal Circuit reviews International Trade Commission (ITC) legal determinations in Section 337 cases8 without deference and its factual findings for substantial evidence.9 Direct judicial review of these ITC final determinations is assigned to the Federal Circuit.10
Reasons for Remand
The CIT will remand to Commerce over a variety of perceived gaps that arise in antidumping and countervailing duty cases, especially those arising from imports from non-market economy (NME) countries, principally China but including such others as Vietnam. In calculating a dumping margin for products from an NME country, there are a number of determinations to be made. Commerce compares the goods’ normal value,11 in broad terms the “home market price,” derived from “factors of production” (FOPs) as valued in a “surrogate” market economy (ME) country, to the goods’ export price.12Commerce must use the “best available information” in selecting surrogate data for which to value FOPs.13 The surrogate data must “to the extent possible” be from an ME country that is “at a level of economic development comparable to that of the NME and is a “significant producer of comparable merchandise.” 14
Also in the NME context, Commerce has adopted a rebuttable presumption that all companies within the NME country are subject to government control and, thus, should be assessed a single antidumping duty (AD) rate.15 For a Chinese case, this “PRC-wide” rate tends to be much higher than the separate rates assigned to those other respondents who are eligible for a separate rate, i.e., for whom control by the PRC government has not been shown.
One feature of these trade remedy cases, not limited to the NME designation, is that Commerce will select those respondents, usually two in number, who must respond to questionnaires and participate in the investigation or administrative review. These are known as mandatory respondents and they must incur a significant cost to participate lest they be assigned a punitive rate for their lack of full cooperation. In addition, respondents can volunteer to participate but Commerce will normally not select additional respondents. Often there will be disputes over the status of companies as respondents and the quality of their cooperation.
Given the welter of determinations that Commerce must make in its investigations or reviews, as illustrated by its recent decisions, the CIT will often remand to Commerce for such reasons as to
- reconsider or provide further explanation of its mandatory respondent selection and its calculation of the constructed value profit margin (“CV Profit”) used in determining the AD duty margin for the selected mandatory respondents,16
- evaluate record evidence regarding respondent’s independence from government control to determine whether respondent is entitled to a separate rate17
- either to further explain how respondent has failed to substantiate having met its burden under the PRC VAT regulations to qualify for the VAT exemption, or to reconsider the issue anew, with, as always, the discretion to re-open the record if that is a necessary consequence of this opinion18
- reconsider its determination that imports of one type of article are within the scope and in so doing must be mindful that its responsibility is to interpret, and not to enlarge, the scope language it previously placed in final form upon promulgation of the Orders19
- reconsider its method of accounting for selling, general, and administrative (“SG&A”) labor costs in its calculation of normal value and, as necessary, revise the antidumping duty margins for both the investigated and separate rate respondents20
- reconsider its use of the surrogate country (Thai) import data to value the steel coil input and reopen the record to admit additional data21
- reconcile Commerce’s final scope determinations in two cases regarding solar panels, from China and Taipei, where solar panels were treated differently depending on their country of assembly, and failed to consider or discuss either the proportion of production necessary to determine a solar panel’s country of origin or the reasonableness of applying duties to the entire value of solar panels assembled in the PRC when only a small percentage of the cost of production actually occurs there. 22
.
While it is certainly true that some of these cases are amenable to a CIT resolution without the need for a remand,24 it would be interesting to survey the question, how many of these cases do generate a remand? I am confident that it is a high percentage.
Agency Requests
It is not only a private party litigant who can request a remand. The government can also ask for a remand and, where an agency requests a remand to reconsider its previous position, without confessing error, “the reviewing court has discretion over whether to remand.”25 While the court may refuse a remand if the agency’s request is “frivolous or in bad faith,” a remand is usually appropriate if the agency’s concern is “substantial and legitimate.”26Federal Circuit Remands
Finally, as we have noted, the Federal Circuit is assigned judicial review of ITC determinations in Section 337 matters. The Federal Circuit can also remand a matter back to the ITC, and this is often simply for the ITC to issue a new ruling in light of the vacating of the original ITC ruling by the court.27 But we can also find, although far fewer in number, remands by the Federal Circuit in Section 337 cases that are similar to CIT remands insofar as the agency is directed to undertake a new analysis. Thus, we find in a 2013 decision in a case brought by Apple the following order, “We thus vacate the ITC’s decision that Motorola does not infringe the ’828 patent claims and remand the case to allow the ITC to consider in the first instance whether the accused products infringe under the correct construction of “mathematically fitting an ellipse.”28 Beyond the construction of a patent, where the ITC has determined that there is no domestic industry, a predicate for a finding of infringement under Section 337, the Federal Circuit may reverse the ITC ruling and remand for further proceedings.29Conclusion
As you will have seen, the remand procedure lives up to its name. The courts will “send back” a case to the agency for further action whenever it is warranted....................................................................................................................
1. Neville, “Court of International Trade: Getting it Right,” 27 JOIT 24 (June 2016).
2. The court has jurisdiction pursuant to Section 516A(a)(2)(B)(iii) of the Tariff Act of 1930, as amended, 19 USC § 1516a(a)(2)(B)(iii), and 28 USC § 1581 (c).
3. USCIT Rule 56.2.
4. 19 USC § 1516a(b)(1)(B)(i).
5. 28 USC § 1581 (a).
6. Catfish Farmers of America v. United States, Slip Op. 16-29 (CIT 2016) (Catfish Farmers) citing Timken Co. v. United States, 26 CIT 590, 592, 209 F. Supp. 2d 1373, 1375 (2002), quoting Universal Camera v. NLRB, 340 U.S. 474, 488 (1951).
7. Catfish Farmers at 6 (citations omitted).
8. Section 337 of the Tariff Act of 1930, 19 USC § 1337, is another trade remedy statute; it prohibits acts that constitute unfair competition and various forms of infringement in the importation of articles.
9. Crocs, Inc. v. ITC, 598 F.3d 1294, 1302 (Fed. Cir. 2010).
10. 19 USC § 1337 (c).
11. Defined at 19 USC § 1677b(a)(1)(A),(B)(i)
12. 19 USC § 1677a(a).
13. Id.
14. 19 USC §§ 1677b(c)(4)(A)–(B). See Calgon Carbon Corporation v. United States, Slip Op. 16-4 (CIT 2016).
15. Ad Hoc Shrimp Trade Action Comm. v. United States, 802 F.3d 1339, 1353 (Fed. Cir. 2015) as cited in Shenzen Xinboda Industrial Co. Ltd. V. United States, Slip Op. 16-74 at 6, n. 7(CIT 2016) (Shenzen Xinboda).
16. Husteel Co. v. United States, 98 F. Supp. 3d 1315, 1325–32, 1337–49 (CIT 2015).
17. Shenzen Xinboda.
18. Golden Dragon Precise Copper Tube Group et al. v. United States, Slip Op. 16-73 (CIT 2016) (Commerce practice is to deduct VAT from export price, which would have the effect of creating or increasing a dumping margin, unless the respondent can prove that the export price did not include an amount for VAT)
19. Meridian Products, LLC v. United States, 39 CIT __, 125 F. Supp. 3d 1306 (2015). Parenthetically, two orders that have spawned a significant number of scope requests and disputes about scope are (i) Aluminum Extrusions from the People’s Republic of China: Antidumping Duty Order, 76 Fed. Reg. 30,650 (Int’l Trade Admin. May 26, 2011) And (ii)Aluminum Extrusions from the People’s Republic of China: Countervailing Duty Order, 76 Fed. Reg. 30,653 (Int’l Trade Admin. May 26, 2011).
20. Elkay Mfg. Co. v. United States, 38 CIT __, 34 F. Supp. 3d 1369 (CIT 2014) (Elkay).
21. Id.
22. SunEdison, Inc. v. United States, Slip Op. 16-59 (CIT 2016).
23. Since Hardware (Guangzhou) Co., Ltd. v. United States, Slip Op. 16-42 (CIT 2016) (issues were eligibility for separate rate and amount of the rate assigned).
24. See, e.g., Fushun Jinly Petrochemical Carbon Co., Ltd. v. United States, Slip Op. 16-25 (CIT 2016).
25. SFK USA Inc. v. United States, 254 F.3d 1022, 1029 (Fed. Cir. 2001).
26. Id. See also Elkay.
27. See, e.g., UPI Semiconductor v. ITC, 767 F.3d 1372 (Fed. Cir. 2014) (“We reverse the ruling of no violation as to the “post-Consent Order” products. The case is remanded for further proceedings in accordance with our rulings herein.”)
28. Apple Inc. v. ITC, 725 F.3d 1372 (Fed. Cir. 2013.)
29. General Electric Company v. ITC, Case No. 2010-1223 (Fed. Cir. 2012).
2. The court has jurisdiction pursuant to Section 516A(a)(2)(B)(iii) of the Tariff Act of 1930, as amended, 19 USC § 1516a(a)(2)(B)(iii), and 28 USC § 1581 (c).
3. USCIT Rule 56.2.
4. 19 USC § 1516a(b)(1)(B)(i).
5. 28 USC § 1581 (a).
6. Catfish Farmers of America v. United States, Slip Op. 16-29 (CIT 2016) (Catfish Farmers) citing Timken Co. v. United States, 26 CIT 590, 592, 209 F. Supp. 2d 1373, 1375 (2002), quoting Universal Camera v. NLRB, 340 U.S. 474, 488 (1951).
7. Catfish Farmers at 6 (citations omitted).
8. Section 337 of the Tariff Act of 1930, 19 USC § 1337, is another trade remedy statute; it prohibits acts that constitute unfair competition and various forms of infringement in the importation of articles.
9. Crocs, Inc. v. ITC, 598 F.3d 1294, 1302 (Fed. Cir. 2010).
10. 19 USC § 1337 (c).
11. Defined at 19 USC § 1677b(a)(1)(A),(B)(i)
12. 19 USC § 1677a(a).
13. Id.
14. 19 USC §§ 1677b(c)(4)(A)–(B). See Calgon Carbon Corporation v. United States, Slip Op. 16-4 (CIT 2016).
15. Ad Hoc Shrimp Trade Action Comm. v. United States, 802 F.3d 1339, 1353 (Fed. Cir. 2015) as cited in Shenzen Xinboda Industrial Co. Ltd. V. United States, Slip Op. 16-74 at 6, n. 7(CIT 2016) (Shenzen Xinboda).
16. Husteel Co. v. United States, 98 F. Supp. 3d 1315, 1325–32, 1337–49 (CIT 2015).
17. Shenzen Xinboda.
18. Golden Dragon Precise Copper Tube Group et al. v. United States, Slip Op. 16-73 (CIT 2016) (Commerce practice is to deduct VAT from export price, which would have the effect of creating or increasing a dumping margin, unless the respondent can prove that the export price did not include an amount for VAT)
19. Meridian Products, LLC v. United States, 39 CIT __, 125 F. Supp. 3d 1306 (2015). Parenthetically, two orders that have spawned a significant number of scope requests and disputes about scope are (i) Aluminum Extrusions from the People’s Republic of China: Antidumping Duty Order, 76 Fed. Reg. 30,650 (Int’l Trade Admin. May 26, 2011) And (ii)Aluminum Extrusions from the People’s Republic of China: Countervailing Duty Order, 76 Fed. Reg. 30,653 (Int’l Trade Admin. May 26, 2011).
20. Elkay Mfg. Co. v. United States, 38 CIT __, 34 F. Supp. 3d 1369 (CIT 2014) (Elkay).
21. Id.
22. SunEdison, Inc. v. United States, Slip Op. 16-59 (CIT 2016).
23. Since Hardware (Guangzhou) Co., Ltd. v. United States, Slip Op. 16-42 (CIT 2016) (issues were eligibility for separate rate and amount of the rate assigned).
24. See, e.g., Fushun Jinly Petrochemical Carbon Co., Ltd. v. United States, Slip Op. 16-25 (CIT 2016).
25. SFK USA Inc. v. United States, 254 F.3d 1022, 1029 (Fed. Cir. 2001).
26. Id. See also Elkay.
27. See, e.g., UPI Semiconductor v. ITC, 767 F.3d 1372 (Fed. Cir. 2014) (“We reverse the ruling of no violation as to the “post-Consent Order” products. The case is remanded for further proceedings in accordance with our rulings herein.”)
28. Apple Inc. v. ITC, 725 F.3d 1372 (Fed. Cir. 2013.)
29. General Electric Company v. ITC, Case No. 2010-1223 (Fed. Cir. 2012).
Mark K. Neville, Jr., LL.M. (International Legal Studies), NYU, is a long-time member of the Board of Advisors. He is Principal of International Trade Counsellors and may be reached at mkneville@itctradelaw.com. He has served as an adjunct professor at The University of California, Berkeley’s Haas School of Business and NYU’s Stern School. He is The Journal’s Customs & Trade correspondent.