Washington Monument Vietnam Memorial Black Wall, Night Washingto“TRADE IS A TWO WAY STREET”




Dear Friends,

There have been major developments in the trade, solar cells, tires, banking, US/Chinese antitrust, and securities areas. In addition to the trade area, the banking and China antitrust areas have had important developments this month.



On June 3, 2014, Commerce issued its preliminary countervailing duty determination against China in the Solar Products case. The fact sheet and preliminary Federal Register notice are attached.  CVD PRELIM FED REG factsheet-prc-crystalline-silicon-photovoltaic-prod-cvd-prelim-060314

The Countervailing Duty Rates were much higher than expected with Trina getting 18.56%, Wuxi Suntech 35.21% and all other Chinese companies getting 26.89%. In the Solar Cells case, the average preliminary countervailing duty rate was only 3.61%.

Contrary to articles in the Press, however, this was just the countervailing duty/anti-subsidy determination against China. At the present time, Commerce has issued no determination regarding Taiwan. The Antidumping Preliminary determinations against China and Taiwan are not due to come out until July 24th.

The big issue, however, right now is Scope of the imported products covered by the preliminary determination. What specific products are covered by this decision? It is simply not clear yet. Clearly Chinese Solar Cells and Chinese products with solar cells that are partially produced in China and Taiwan are covered.

What is not clear is whether Chinese solar panels and modules with solar cells that are totally produced in Taiwan or solar cells that are produced in third countries are out of the case. Commerce issued a supplemental questionnaire to all the companies in the China case asking them whether the Solar Cells are partially produced in China. Many Chinese companies have their solar cells totally produced in Taiwan. Apparently, Chinese modules and panels with solar cells totally produced in Taiwan may be out of the China case.

If the modules and panels are produced in Taiwan or Third Countries with Taiwan solar cells, those products are not covered yet, because the Taiwan prelim has not come out yet. Taiwan is not covered until July 24th or slightly thereafter.

Another question is whether Chinese modules and panels that have solar cells from third countries, such as Korea or European countries, are covered by the Chinese case or not. We have heard of companies in China producing modules and panels using solar cells from Solar World in Germany. Are those Chinese modules and panels covered by the case? Not clear at the present time.

Recently, while in China, I met with Hanergy, a Chinese Photovoltaic Film producer. Hanergy told us that they can produce solar panels with the same power as the Polysilicon solar cell panels. If true, that is a game changer because the film is totally out of the case. Technology may be what makes the Solar World antidumping and countervailing duty actions against China irrelevant over time. For more information on Hanergy, see the video at

Finally, as mentioned in my last blog, in April seven US Senators from Montana, Washington State and other States sent a letter to Vice President Biden asking for help in settling the Solar Cells and Solar Products antidumping and countervailing duty cases against China. As mentioned, however, although there have been efforts to negotiate a settlement with the Chinese government, to date the effort has failed.

Under US Antidumping and Countervailing Duty Law, the petitioner, SolarWorld, would ultimately have to agree to any settlement/suspension agreement reached between the U.S. and China. Moreover, in contrast to the EU, Canada and China, there is no public interest test in US antidumping and countervailing duty law. Thus, the U.S. government cannot legally compel SolarWorld to accept the Agreement.

Persuading Solar World to agree to a suspension agreement in the US cases, however, is going to become much more difficult because of a filing on June 5th by the European Union solar panel manufacturers in the European Solar case alleging that over a hundred Chinese companies are violating the terms of a price undertaking arrangement, negotiated by the European Commission. EU ProSun President Milan Nitzschke said he believed every one of the Chinese exporters is breaching the undertaking.

One US Industry source reportedly stated, “It’s certainly raises concerns about the ability of the Chinese government or the Chinese producers to guarantee they will abide by any kind of an agreement. It would emphasize the need for very strong monitoring provisions and very strong enforcement by all of the U.S. government agencies.”


On June 3, 2014, a union, the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL-CIO, filed an antidumping and countervailing duty case aimed at $2 billion in imports of automobile and truck tires from China. The case is specifically described as Certain Passenger Vehicle and Light Truck Tires from the People’s Republic of China.

Attached is a short form of the petition.  USITC PUB Petition Tires-Shortest Version-6-4-14 (2) The case targets about 60 to over 100 Chinese tire producers and exporters and well over 1,000 US importers. Under US antidumping and countervailing duty law, unions have standing to file cases, not just producers.

The Commerce Department preliminary countervailing duty determination will come out as soon as October 31, 2014, exposing the US importers to liability for Chinese tire imports, followed by the antidumping preliminary determination on December 30, 2014.


In the recent Tires case, the rumors are that Chinese law firms are charging as low as $6,000 to $10,000 for a separate rates application (“SRA”) at the Commerce Department for Chinese companies that are shipping $10s, if not 100s, of millions of dollars of tires to the United States. The problem with these legal fee quotes is that SRAs in antidumping and countervailing duty cases in the United States are not a fill in the form exercise. This is litigation against hard-nosed US trade litigators, who have been paid more than $1 to $3 million to throw as many Chinese companies as possible out of the US market.

Under the US antidumping law, the Commerce Department issues two questionnaires to Chinese producers and export companies. One questionnaire is a quantity and value questionnaire listing the total quantity and value of the Chinese company’s exports to the United States during the period of investigation, which in the Tires case is October 1, 2013 to March 31, 2014.

From the Chinese companies’ responses to the quantity and value questionnaires, the Commerce Department will create a list and will chose the top 2 to 5 companies out of the more than 50 to 100 companies in the investigation as “mandatory” respondents. In the Tires case, there will probably be more than 50 companies, but in the Wooden Bedroom Furniture case, it was close to 200 companies.

The 2 to 5 companies selected as mandatory respondents must respond to the entire 100 page antidumping questionnaire from Commerce, respond to numerous supplemental questionnaires, and be subject to verification. Chinese companies selected as mandatory respondents must pay very high legal fees in the $100,000 to $300,000 range depending upon the nature of the product subject to investigation. But there is a benefit to being a mandatory respondent. Only mandatory respondents can prove that they are not dumping and get completely out of the antidumping investigation.

The rest of Chinese companies must submit a separate rates application (“SRA”), which is long and detailed, to prove that the Chinese company is separate and independent from the Chinese Government. Based on the SRA, if accepted, the Commerce Department will give the Chinese company a separate dumping margin, which will usually be the weighted average rate of the Chinese companies selected as mandatory respondent.

If all mandatory companies are 0%, however, pursuant to section 735(c)(5) of the US antidumping law, 19 USC 1673d(c)(5), the Department excludes any rates that were zero when calculating the weighted-average rate assigned to non-mandatory respondents. If all the mandatory respondents get 0, the Commerce Department gets to pick an antidumping rate out of thin air. In preliminary Wood Flooring initial investigation, all three mandatory respondents received dumping rates of 0. What did the separate rate companies get–22.14%.

But if a Chinese company does not get a separate rate, Commerce assumes that it is part of the Chinese entity and gets the highest dumping rate. In the Wood Flooring case, the China wide rate is 63.96%, but in the Solar Cells case, the China wide rate is 250%, and in Wooden Bedroom Furniture the China wide rate is 216%

More importantly, preparing a SRA is not a fill in the forms exercise. The Commerce Department can reject SRAs. The SRA is reviewed by the law firm representing the US industry or union, and the lawyers will look for a reason to attack the SRA and throw the Chinese company out of the US market.

From comments on the SRA, Commerce will issue supplemental questionnaires to the separate rate companies and even conduct verification of the separate rate companies. In almost every single antidumping and countervailing duty case, the Commerce Department throws out a number of Chinese companies and refuses to give them separate rates. So in the Solar Cells case, those companies denied a separate rate or that simply did not get around to filing a SRA got a rate of 250% and were excluded from the US market for at least 2 and a half years.

The problem is the mindset. For the Chinese companies the SRA is a simple form that has to be filed out so the lowest price is the better price. Lawyers, however, do not sell commodities; they sell a service. I talked with one Chinese company in an antidumping case, who hired a very low cost Chinese lawyer to do the SRA. The Chinese law firm sent a young associate to do the SRA and then the Chinese company never saw or talked to the Chinese lawyer again. If a Chinese company that is selling 10s or 100s of millions of dollars in products to the US does not talk/meet with a US lawyer, it should start asking questions.

Meanwhile, US lawyers representing the US industry in antidumping and countervailing duty cases look at the case very differently. Recently, an article was published on how US lawyers look at representing the US industry in antidumping and countervailing duty cases. As one US lawyer stated: “You can’t cut corners . . . . The key to having as much control as you can in the case is knowing the record of evidence better than anyone in the case. You’ve got to take the time and put in the time to sit down and really soak in and understand the record.”

So US lawyers are paid enough to take the time to learn about the record and attack the Chinese companies, when the Chinese companies think this is a fill in the forms exercise and they are buying a commodity. The US lawyers representing the domestic industry are bringing cannons/big guns to the trade war when the Chinese companies are bringing pop guns/ toy guns to the trade war. No wonder so many Chinese companies get killed in US antidumping and countervailing duty cases creating enormous liability for US importers.

Old Chinese saying—This is truly picking up the sesame and losing the watermelon.


Another problem for the non-mandatory Chinese companies and their US importers is the Aluminum Extrusions case. In the Aluminum Extrusions initial investigation, in the Countervailing duty (“CVD”) case, Commerce used Customs statistics to determine the mandatory respondents. Aluminum extrusions, however, is a very difficult commodity and imports come into the United States in basket tariff categories. All three Chinese mandatory respondent companies refused to respond to the Commerce Department CVD questionnaire, possibly because they were not exporting the product in question.

But two Chinese companies submitted voluntary responses and Commerce gave them 8 to 9% CVD rates. What did the rest of China get as the China Wide Countervailing Duty Rate—374%!!

Commerce took the position that it would not take the CVD rates for voluntary respondents into account in determining the CVD China Wide rate. Since the three mandatory respondents refused to respond, the rest of China got 374%.

This has become extremely dangerous because as explained in past blog posts, Commerce is expanding the Antidumping and Countervailing Duty orders to apply to downstream products and US importers of these downstream products could be exposed to retroactive liability or as much as 374% CVD rates on past imports.

Importers appealed, and on appeal the Court of International Trade forced China wide CVD rate down to about 137%, arguing that the All Facts Available Rate by Commerce was punitive and simply not commercially reasonable.

On June 3, 2014, in Maclean-Fogg Company v. United States, the Court of Appeals for the Federal Circuit (“CAFC”) in the attached 2-1 split decision reversed, holding that the Commerce Department must use the countervailing duty rates assigned to voluntary respondent companies to determine the China-wide rate.  MACLEAN FOGG

As the CAFC stated:

“The statute is clear that voluntary respondents are “exporters or producers” subject to “individual examination.” The rates calculated for them are “individual countervailable subsidy rate[s].” Within the countervailing duty statute, “investigation”/”examination” and “investigated”/“ examined” are used interchangeably. . . .

This reasoning lacks support because the general rule itself specifies its own exclusions: “any zero and de minimis margins, and any margins determined entirely on the basis of the facts available.” § 1671d(c)(5)(A)(i). The existence of exclusions means that Congress intended all “weighted average countervailable subsidy rates established for exporters and producers individually investigated” be factored into the calculation unless the conditions for exclusion are met. . . .

We thus conclude that the Court of International Trade erred in holding that the statute is ambiguous on the question of whether the countervailing duty rates (other than zero or de minimis) of voluntary respondents must be included in the general rule for calculation of the all-others rate. Because the statute is clear that such voluntary respondent rates must be included in the general all-others rate calculation, Commerce’s regulatory interpretation to the exact contrary is invalid. Commerce’s rationale for its regulation is therefore irrelevant and cannot serve to create ambiguity where none exists.

Accordingly, “exporters and producers individually investigated” in the context of 19 U.S.C. § 1671d(c)(5)(A) must be read to encompass the voluntary respondents. On the current facts, the precondition for invoking the exception provision, that “the countervailable subsidy rates established for all exporters and producers individually investigated are zero or de minimis rates, or are determined entirely under section 1677e of this title,” has not been met. §1671d(c)(5)(A)(ii). We reverse the decision of the Court of International Trade and remand for determination of the all-others rate under the general rule, § 1671d(c)(5)(A)(i).


In commenting on this decision, several trade lawyers have stated that since the Commerce Department takes so few voluntary respondents in cases, this decision will not have that much effect on future Commerce Department antidumping and countervailing duty cases. Commerce is simply individually investigating so few respondent companies these days that this decision will simply not have any impact.


In May and June, the Commerce Department lifted antidumping orders against front seating valves and 1-Hydroxyethiylidene-1,1-Diphosphonic Acid (HEDP) from China. See the attached notices.  FRONT SEATING VALVES ORDER REVOKED HEDP REVOKED


As mentioned in past blog posts, in the trade world, the most important developments may be the WTO negotiations in Bali and the Trans Pacific Partnership (TPP) and Trans-Atlantic (TA)/ the Transatlantic Trade and Investment Partnership or TTIP negotiations.  These trade negotiations could have a major impact on China trade, as trade issues becomes a focal point in Congress and many Senators and Congressmen become more and more protectionist.

This is particularly a problem because the protectionism is coming from the Democratic side of the aisle. Democratic Senators and Congressmen are supported by labor unions. To date, President Obama cannot get one Democratic Congressman to support Trade Promotion Authority (“TPA”) in Congress. Without bipartisan/Democratic support for these Trade Agreements, Republicans will not go out on a limb to support President Obama and risk being shot at by the Democrats during the mid-term elections as soft on trade.

As mentioned in the February post, on January 29th, the day after President Obama pushed the TPA in the State of the Union, Senate Majority leader Harry Reid stated that the TPA bill would not be introduced on the Senate Floor.

To summarize, on January 9, 2014, the Bipartisan Congressional Trade Priorities Act of 2014, which is attached to the February post on my blog, was introduced into Congress. The TPA bill gives the Administration, USTR and the President, Trade Promotion Authority or Fast Track Authority so that if and when USTR negotiates a trade deal in the TPP or the Trans-Atlantic negotiations, the Agreement will get an up or down vote in the US Congress with no amendments.

Under the US Constitution, Congress, not the President has the power to regulate trade with foreign countries. Article 1, Section 8, Clause 3, of the Constitution empowers Congress “to regulate Commerce with foreign nations” Thus to negotiate a trade agreement, the Congress gives the Executive Branch, the Administration/The President and United States Trade Representative (“USTR”), the Power to negotiate trade deals.

Because trade deals are negotiated with the foreign countries, the only way to make the system work is that under the TPA law when the Trade Agreement is negotiated, the Congress will agree to have an up or down vote on the entire Agreement and no amendments to the Agreement that has already been negotiated will be allowed.

On April 9, 2014, the new Senate Finance Committee Chairman Senator Ron Wyden announced at a speech to the American Apparel & Footwear Association Conference that he was introducing a new TPA bill, what Senator Wyden calls Smart Track. But to date no details have been given about exactly what Smart Track will mean, other than more oversight by Congress and input by the Public in the trade negotiations.

Now the story continues . . . .

As the negotiations continue, there appear to be major differences between the United States, Japan and Canada on various agricultural products. On June 3, 2014, representatives of 39 Dairy Companies stated that they would withdraw their support for a Trans-Pacific Partnership deal if Canada and Japan do not open their markets to more US dairy products. As stated in the attached June 3rd letter, Dairy_Letter_0603:

“ It is clear, however, that Japan, as well as Canada, continues to strongly resist living up to the ambitious trade goals it obligated itself to undertake upon joining TPP negotiations. The U.S. dairy industry has been a leading and long‐standing advocate for comprehensive market access and the inclusion of Japan and Canada in TPP.

Yet, we have held realistic expectations and recognize that the perfect should not be the enemy of the good. However, as reported in the media, Japan’s recent comments on market access progress show appallingly little substantive movement, and come nowhere close to our expectations. Canada will likely try to base its decisions on dairy market access off of what Japan commits to do for its most sensitive agricultural sectors, thus heightening the importance of achieving meaningful dairy market access to Japan.

We urge you to insist that TPP must remain a high standard trade agreement that can be used as a model for future U.S. free trade agreements. All TPP countries must do their part to ensure this undertaking lives up to its founding goals of comprehensive and meaningful market access. We are prepared to match the level of ambition of Japan and Canada, and urge you to press both to provide a very strong dairy package. Our industry must not provide any new access in this agreement that has not been given by those countries.

In addition, it is vital that TPP address serious non‐tariff policies by the New Zealand government that have uniquely advantaged the largest dairy exporting company in both the TPP region and the world. Tariffs are a critical component of this agreement, but not the only element.

It remains our hope that TPP negotiations with Japan and Canada can be concluded in a manner that will allow for strong support across our industry. However, our support for TPP is not unconditional. The elements cited here, which largely remain unresolved, must be concluded in a positive manner or our industry will find it difficult to support the final agreement.

Similarly, our industry has been a strong supporter of Trade Promotion Authority (TPA) and would expect to continue to support it in the future. However, should Japan and Canada not commit to minimum standards and basic market‐based principles as many other TPP countries have done, we would need to re‐examine our support for TPA.”

On June 10th, Hiroyuki Ishige, chairman of the Japanese External Trade Organization, a Japanese trade official, reportedly told a Washington think tank that resolving the issues keeping the pact from moving forward would take compromise on both sides, and that there was no such thing as a “perfect” TPP.

On June 11, 2014, Congressman Devin Nunes, a Republican Congressman from California, who is Chairman of the House Ways and Means Committee, Subcommittee on Trade, responded Nunes Opening Statement_ Hearing on Advancing the U.S. Trade Agenda_ Benefits of Expanding U.S. Agriculture Trade and Eliminating Barriers to U.S. Exports:

“Third, we must tear down tariff and non-tariff barriers to U.S. agriculture. Tariffs must be eliminated without exclusion. In negotiations for the Trans-Pacific Partnership, or TPP, I am concerned that the Administration is not holding Japan and Canada to the level of ambition that Congress has demanded. In some cases a long time frame may be warranted, but there has to be a path to zero. If any countries insist on retaining tariffs, then we must complete the negotiations without them and allow them to rejoin when they can commit to full tariff elimination.

A growing concern is non-tariff barriers, particularly unwarranted sanitary and phytosanitary or SPS measures. While countries can implement measures to protect human, animal, and plant health, many measures are actually thinly veiled protectionist barriers that ignore science and international standards, and do not enhance food safety in any way. I’m pleased that the Administration has heard Congress’s message that only strong, enforceable rules will ensure that SPS measures are transparent, science-based, and are not unduly restrictive. I am particularly concerned by European restrictions on the use of generic food names, which the EU improperly designates as geographical indications. This threatens the U.S. dairy industry and cannot be tolerated. The TPP and U.S.-EU trade negotiations are good opportunities to reduce both tariff and non-tariff barriers. To gain support in Congress, these agreements must result in complete market access.

Fourth, to strengthen USTR’s position in trade negotiations, we must pass Trade Promotion Authority without delay. The Bipartisan Congressional Trade Priorities Act introduced earlier this year would establish clear direction to open agriculture markets and address unwarranted SPS measures and other trade barriers. If the Administration finishes these negotiations before TPA is granted, it will not get the best deal for our farmers or other exporters. Therefore, I call on the Administration to focus on passing TPA in Congress before completing TPP.”

On June 10, 2014, after a trip to China, Congressman Aaron Shock, Republican from Illinois, stated that the Trans-Pacific Partnership (TPP) is the best way to motivate China to make reforms needed for it to be ready to join the deal. Schock said negotiating a “level playing field” with China would be a good thing, but Beijing is not yet ready to meet the standards of the TPP deal under negotiation. Shock further stated at a Washington DC think tank, “But there’s nothing like competition to get your act in order.”

On June 16,2014, Ways and Means Committee Chairman Dave Camp (R-MI) and Trade Subcommittee Chairman Devin Nunes (R-CA) released the following statements on the 80th anniversary of Trade Promotion Authority (TPA) WAYS AND MEANS ANNOUNCE:

Chairman Camp stated, “This month marks the 80th anniversary of the enactment of the Reciprocal Trade Agreements Act. Since its passage, every President, until now, has partnered with Congress to have this powerful tool to negotiate the best possible trade deals for America. I urge the Administration to pull out the stops to assure passage of the Bipartisan Congressional Trade Priorities Act of 2014, which strengthens the role of Congress in trade negotiations and gives the President the ability to negotiate the very best deals for U.S. exporters, creating good jobs that pay well.”

Chairman Nunes added, “History is on our side. TPA-style legislation has worked for 80 years to produce high quality agreements that create U.S. jobs. But this President doesn’t have this valuable tool. Unless he acts quickly to work with us to pass the Bipartisan Congressional Trade Promotion Authority Act of 2014, he will be unable to deliver ambitious trade agreements that benefit our economy.”


On June 2, 2014, Commerce published in the Federal Register the attached notice JUNE REVIEWS COMMERCE regarding antidumping and countervailing duty cases for which reviews can be requested in the month of June. The specific antidumping and countervailing duty cases against China are: Artist Canvas, Chlorinated Isocyanurates, Furfuryl Alcohol, High Pressure Steel Cylinders, Polyester Staple Fiber, Prestressed Concrete Steel Wire Strand, Silicon Metal, and Tapered Roller Bearings (TRB).

For those US import companies that imported chlorinated iscocyanurates, polyester staple fiber, silicon metal and TRBs and the other products listed above from China during the period June 1, 2013-May 31, 2014 or if this is the First Review Investigation, for imports imported after the Commerce Department preliminary determinations in the initial investigation, the end of this month is a very important deadline. Requests have to be filed by the Chinese suppliers, the US importers and US industry by the end of this month to participate in the administrative review.

This is a very important month for US importers because administrative reviews determine how much US importers actually owe in Antidumping and Countervailing Duty cases. Generally, the US industry will request a review of all Chinese companies. If a Chinese company does not respond in the Administrative Review, their antidumping and countervailing duty rate could well go to the highest level and for certain imports the US importer will be retroactively liable for the difference plus interest.

In my experience, many US importers do not realize the significance of the administrative review investigations. They think the antidumping and countervailing duty case is over because the initial investigation is over. Many importers are blindsided because their Chinese supplier did not respond in the administrative review, and the US importers find themselves liable for millions of dollars in retroactive liability.

In the recent final determination in the Wood Flooring Case, for example, although the rates were very low for many Chinese exporters, only 5%, 20 Chinese exporters had their rates go to 58% because they did not participate in the review investigation and did not file a no shipment certification, separate rate application or separate rate certification at the Commerce Department.


As mentioned in prior newsletters, we are working with APCO, a well-known lobbying/government relations firm in Washington DC, on establishing a US importers/end users lobbying coalition to lobby against the expansion of the antidumping and countervailing duty laws against China for the benefit of US companies.

On September 18, 2013, ten US Importers agreed to form the Import Alliance for America. The objective of the Coalition will be to educate the US Congress and Administration on the damaging effects of the US China trade war, especially US antidumping and countervailing duty laws, on US importers and US downstream industries.

We will be targeting two major issues—Working for market economy treatment for China in 2016 as provided in the US China WTO Agreement and working against retroactive liability for US importers. The United States is the only country that has retroactive liability for its importers in antidumping and countervailing duty cases. The key point of our arguments is that these changes in the US antidumping and countervailing duty laws are to help US companies, especially US importers and downstream industries. We will also be advocating for a public interest test in antidumping and countervailing duty cases and standing for US end user companies.

Two Congressmen have now agreed to meet importers in the New Jersey/NY area and in the Long Beach area to listen to their grievances regarding the US antidumping and countervailing duty laws. We are now contacting many Chinese companies to ask them to contact their US import companies to see if they are interested in participating in the Alliance.

At the present time, Commerce apparently takes the position that it will not make China a market economy country in 2016 as required by the WTO Accession Agreement. Changes to the US antidumping and countervailing duty law against China can only happen because of a push by US importers and end user companies. In US politics, only squeaky wheels get the grease.

At the end of July, we plan an organizational meeting in Beijing, China with interested Chambers of Commerce and Chinese companies to explain the project in more detail and to seek help contacting US importers about the Alliance.


On May 15, 2014, in the attached decision, ORDER 2 SOUTHEASTERN in United States, ex rel and James Valenti vs. Robert Wingfield, Northeastern Aluminum Corp., William Ma, Southeastern Aluminum Products, Waterfall Group and C. R. Lawrence, a Federal District Judge denied a motion to dismiss in a false claims act targeting imports of Chinese aluminum extrusions transshipped through Malaysia. U.S. District Judge Brian J. Davis denied the motion from C.R. Laurence Company Inc. and Southeastern Aluminum Products Inc., which had argued that the government failed to sufficiently allege that they knowingly submitted false statements to U.S. Customs and Border Protection to avoid paying duties on imports of aluminum extrusions.

As Judge Davis stated, “These facts, accepted as true, provided a sufficient basis for the government’s claim that CRL conspired … to avoid duties on the aluminum exports and imports in violation of the [False Claims Act].”

In a separate order, the judge issued a similar denial of Southeastern’s dismissal motion, finding that the company’s claims that it was merely a buyer did not shield it from the government’s allegations.

According to the government and whistleblower James Valenti, who helps U.S. companies find foreign sources of aluminum extrusions, C.R. Laurence, Southeastern and several other companies and individuals conspired to ship Chinese-made aluminum extrusions through Malaysia in order to avoid the duties. Valenti filed his suit under seal in April 2013, and the government chose to intervene roughly six months later, although it dropped several defendants.

In its intervening complaint, the government alleged that a sales director for Chinese manufacturer Tai Shan Golden Gain Aluminum Products Ltd. conspired with C.R. Laurence, Southeastern and Waterfall Group LLC to avoid the countervailing duties by shipping the aluminum extrusion products though Malaysia.

A purportedly Malaysian subsidiary of Tai Shan also allegedly undervalued the imported aluminum, causing the amount of declared duties to be lower. According to the government, by submitting inaccurate country of origin and import value information to Customs, the companies committed Customs fraud and violated the FCA.



With regards to the Chinese ban on shellfish from the West Coast, on June 10, 2014, the Washington State Department of Health announced that China recently advised the NOAA at Commerce that it was lifting the ban on imports of live shellfish from Washington and Alaska stating:

June 10, 2014 update

Areas Cleared for Geoduck Export to China

Officials from China recently advised NOAA that they lifted the ban on imports of live shellfish from Washington and Alaska. The Department of Health provided NOAA with a summary of the results of inorganic arsenic testing in Washington State to date and NOAA has agreed to “clear” [certain] areas for geoduck export to China.  See



On June 13, 2014, the US International Trade Commission (“ITC”) issued a notice in the 337 patent enforcement proceeding, Certain Two-Way Global Satellite Communication Devices, System and Components Thereof, announcing the issuance of a civil penalty of $6,242,500 for violation of the Consent Order on 227 separate days by a US importer.  VIOLATION OF CONSENT ORDER 337 $6 MILLION FINE


On May 13, 2014, SAWT Inc. and Shanghai Aeolus Windpower Technology Co. sued Joe Moore Construction Inc. d /b/a Wind Sun Energy Systems and Urban Green Energy Inc. for infringement of US patents.  CHINA WIND CASE

On May 13, 2014, SHM International Corp. sued Chant Heat Energy Science & Technology (Zhongshan) Co., Ltd. and Guangdong Chang Group Inc. for breach of contract, breach of a confidentiality agreement, interference with customers, and unfair competition.  GRILL EQUIPMENT

On June 12, 2014, Parthenon Unified Memory Architecture LLC sued Huawei Technologies Co., Ltd., Huawei Technologies USA, Inc. and Huawei Device USA, Inc. for patent infringement.  HUAWEI


On June 16, 2014, the US U.S. Supreme Court issued a 7-1 decision in Republic of Argentina v. NML Capital Ltd., which will send a shiver through many foreign banks, including Chinese banks. In the atthached decision, SUPREME COURT ARGENTINA CASE the Supreme Court held no provision in the Foreign Sovereign Immunities Act (“FSIA”) immunizes a foreign-sovereign judg­ment debtor from post judgment discovery of information concerning its extraterritorial assets. In other words, third parties can engage in broad discovery of a foreign sovereign’s assets in third countries.

Specifically, the Supreme Court upheld lower court rulings allowing hedge fund, NML Capital Ltd. to engage in broad discovery as part of its long-running case dispute with the Republic of Argentina over a 2001 bond default, including allowing the fund to review Argentine military records. The Supreme Court affirmed decisions at the district court and Second Circuit levels that required two third-party banks to comply with subpoenas related to Argentina’s assets held outside of U.S. courts’ jurisdiction as part of the discovery process in the dispute between Argentina and NML. As Justice Scalia writing for the Court majority stated “The prospect that NML’s general request for information about Argentina’s worldwide assets may turn up information about property that Argentina regards as immune does not mean that NML cannot pursue discovery of it.” Although discovery of Argentine assets in third countries may turn up property that Argentina regards as immune, according to the Supreme Court, that is an issue for the relevant Federal district lower court to settle.

It is interesting to note that the Court rejected the position of the US government, which had backed Argentine’s position. The US fears that if U.S. courts are allowed to call for broad discovery rulings against assets held by foreign governments held outside of U.S jurisdiction, then foreign courts may attempt the same with U.S. assets around the world. According to the Court, these areas of law are to be left for Congress to change, if it chooses, not the courts.

At the same time, the Supreme Court denied Argentina’s attempt to appeal of a lower court’s ruling that it has to pay $1.4 billion owed to hedge fund NML, despite the country’s warning that the payment could force it into another default.  In its cert petition, Argentina argued the high court must intervene in its dispute with NML because the lower court decisions violate Argentina’s sovereignty.

The Second Circuit Court of Appeals had found that Argentina, which has repeatedly said it will not pay the holdout bondholders no matter what the U.S. courts decide, was bound by the terms of the original bond offering and had to pay debt holders that didn’t participate in the restructuring in full whenever it made payments to those bondholders that had agreed to the restructuring.  Argentina argued that it “must reward NML with a massive litigation windfall or face a court-ordered default, which could trigger a renewed economic catastrophe with severe consequences for millions of ordinary Argentine citizens.”

In response to the Court decision, Argentina’s President Kirchner stated that Argentina will respect its debt, but will not accept any extortion by holdout bond holders.


In the attached series of antitrust cases, companies are suing banks, including the Hong Kong Exchanges & Clearing Ltd, for triple damages under Section 1 and Section 2 of the Sherman act for conspiring to drive up prices of aluminum and zinc through the London Metal Exchange.  IOWA HK EXCHANGE HONG KONG EXCHANGE

On June 16th, the Hong Kong Exchange filed the attached motion, HKEX BRIEF OUT OF LITIGATION arguing that the New York Federal District Court should throw out the complaint against the Hong Kong Exchange because the court has no jurisdiction because the Exchange has little to no connections with the United States.

Reportedly the US Justice Department is also looking at the alleged price fixing scheme.

On June 12, 2014, Leslie Overton, the Deputy Assistant Attorney General of the Antitrust Division at the US Justice Department gave the attached speech Leslie C Overton – International Antitrust Engagement -Benefits and Opportunities 6-12-14 on international antitrust engagement, benefits and opportunities.  In that speech Overton stated:

“Both older and newer antitrust agencies have come to regard cooperation with their international counterparts as an important tool in ensuring effective competition enforcement. . . . Similarly, in the cartel context, the interaction between U.S. antitrust enforcers and their international counterparts continues to increase as more countries – including emerging economies – have come to understand the significant harm inflicted by hard core cartels, such that international cartels are likely to be pursued and prosecuted by more than one antitrust authority.

What explains this trend towards increased cooperation in antitrust enforcement?  For the antitrust agencies, the benefits of cooperation are significant. Cooperation increases the efficiency of enforcement efforts by facilitating the ability of agencies to exchange information and evidence. . . . Open and candid dialogue among enforcers helps us better understand competitive dynamics worldwide, and provides opportunities to discuss theories of harm and best practices.  It facilitates the transfer of knowledge and experience from more established agencies to newer agencies, and may help newer agencies avoid reinventing the wheel when confronting issues for the first time.

The growing incidence of effective case cooperation strengthens close ties between many enforcement agencies, at both the staff and senior manager levels.  Additionally, many of our international counterparts have told us they value having “front office” to “front office” contacts.  To this end, the Antitrust Division’s Director of Civil Enforcement, Patty Brink, is responsible for day-to-day international case cooperation in the civil context. Her direct, sometimes daily, contact with her international counterparts has helped keep several investigations on track to successful conclusion. . . .

Turning to the Antitrust Division’s criminal antitrust enforcement program, as former Deputy Assistant Attorney General (DAAG) Scott Hammond explained last fall, the Division has cooperated extensively in recent years with the Japanese Fair Trade Commission (JFTC) on investigations and prosecutions of Japanese companies and executives accused of fixing prices for auto parts installed in U.S. cars, including seat belts, air bags and steering wheels.  The JFTC has substantially assisted the Antitrust Division in its investigation, which has thus far resulted in 24 individuals and 27 companies agreeing to plead guilty and more than $2 billion in criminal fines.  Former DAAG Hammond noted that “[w]e are grateful for [the JFTC’s] assistance [in this investigation] as it has benefitted both Japanese and American businesses and consumers.”

We also engage in important international cooperation beyond the case-specific context.  We have a number of bilateral cooperation agreements where the U.S. government or U.S. antitrust agencies are parties. For example, in 2011, the DOJ and the FTC entered a memorandum of understanding (MOU) with the three agencies that enforce the Chinese anti-monopoly law, as well as an MOU with the Indian competition agencies in 2012.

We had our second annual bilateral consultation with the Chinese anti-monopoly law agencies in Beijing this past January, and planning is well underway for the third later this year in Washington.  This past November, the U.S. agencies had their first official bilateral consultation with the Indian agencies.

We and the FTC have had valuable bilateral discussions with these and other counterparts about a number of issues, such as the importance of sound economics-based analysis, transparency, and procedural fairness, which are in the interest of our consumers and theirs.  I can tell you that such bilateral discussions are quite candid, and where we have concerns we raise them with our international counterparts, while still respecting appropriate confidentiality regarding such enforcer-to-enforcer exchanges.”


Recently, this international cooperation was on display in Beijing on May 21-23, 2014 at an ABA Conference on Antitrust in Asia: China, at which speakers from the US FTC, Justice Department, the Chinese government’s NDRC and Ministry of Commerce and Competition Agencies from Japan, Korea, Singapore, and Australia to name a few spoke about various antitrust issues, including cartels. The point is that international cartels are now the target of not only US antitrust actions, but antitrust actions all over the world and the various competition agencies in a number of different countries are talking to each other. Companies can run, but they can no longer hide from antitrust cases.


On May 30, 2014, Viewsonic filed the attached antitrust case against a number of Japanese, Korean and Chinese companies alleging that the companies had created a cartel to fix the prices of cathode ray tubes.   Some of the Chinese target companies are Chunghwa Picture Tubes, Beijing Matsushita and Samsung China Companies.  TELEVISIONS ANTITRUST


As US antitrust cases have been on the rise in the United States, they are also rising in China. On June 17, 2014, in direct contrast to the US and EC, which had approved the merger, China’s Merger Office in the Ministry of Commerce known as MOFCOM blocked a proposed alliance among Danish shipping giant A.P. Moller-Maersk A/S and two of its partners to pool ships used on Eurasian trade routes.

MOFCOM declared that the merger agreement violated China’s anti-monopoly law because it excludes the effect of restricting competition in the European container liner shipping routes services market.  As a result, Maersk and its partners agreed to stop work on the merger.

MOFCOM’s decision to not allow the alliance marked the culmination of a review under China’s merger-control rules over the effect the agreement would have on trade routes that involve Chinese ports. Other shipping routes that did not involve ports in China were not considered as part of the review.  The Chinese regulatory body said that the proposed deal would have significantly enhanced the market power of Maersk and its partners, led to greater concentration in the relevant market and raised barriers to companies seeking to enter the market.

Maersk and its partners announced the agreement to establish the P3 network in June 2013.  The overall aim of the alliance was to make container liner shipping more efficient and improve service quality for the shippers due to more frequent and reliable services.

MOFCOM’s decision to block the merger marks the first time it has stopped a merger since 2009, when it stopped Coca-Cola Co.’s $2.5 billion bid to buy Chinese juice and beverage company Huiyuan Juice Group Ltd., which was the first time China had halted any proposed acquisition after the country’s antimonopoly law took effect in 2008.

On June 9, 2014, MOFCOM reported that China has launched a review into potential anticompetitive behavior across 80 major industries, including autos, pharmaceuticals and alcoholic drinks. Beijing last year stepped up a crackdown on antitrust practices. The Commerce Ministry’s review is part of a campaign launched last December targeting practices that hinder free market competition, such as setting up protectionist policies against companies from other cities and provinces, and granting unfair subsidies.

On June 16, 2014, it was reported that in reviewing the Microsoft Nokia merger, MOFCOM had revealed 310 Microsoft patents used in Android licensing Agreements. Up to that date Microsoft had never revealed the patents and fees in the licensing deals, unless required to do so in a courtroom. However, documents posted on the Chinese Ministry of Commerce (MOFCOM)’s website detail the full range of patents ( included within licensing agreements. A list detailing all 310 patents can be found here

Attached is the May Antitrust Report by T&D Associates, a Chinese law firm.  TD Monthly Antitrust Report of May 2014 One article in the report states that the NDRC has suspended its antitrust investigation of the US company, Interdigital:

“The NDRC decided to suspend the price monopoly investigation of IDC Co., US, and is continuing to supervise the fulfillment of the IDC’s promises to eliminate monopolistic conduct and its results.

According to reports, the NDRC initially launched an antitrust investigation of IDC in June 2013, and obtained evidence of IDC’s monopolistic price conduct. The related persons in charge of IDC came to the NDRC to participate in the inquiry twice, in July 2013 and January 2014. IDC was suspected of being involved in abusing their dominant position in the wireless communication standard-essential-patent market. This monopolistic conduct included setting unfair high licensing fees for Chinese corporations, requiring the reverse free licensing of corporations patents, bundling non standard-essential-patents licenses, and bundling standard-essential-patents, etc.

In the period of the investigation, the IDC actively cooperated with the authorities and reached a settlement agreement with Hua Wei on licensing fees and other clauses, and stated that it would negotiate with other Chinese corporations using the conditions agreed upon with Hua Wei as a standard. IDC submitted a petition to suspend the investigation and presented the specific measures for eliminating the results of monopolistic conduct, including not setting unfairly high licensing fees for Chinese corporations, not bundling the licensing of non standard-essential-patents and standard-essential-patents, not requiring the reverse licensing of patents of the corporations freely and not forcing Chinese corporations to accept unreasonable licensing conditions through direct lawsuits.

Concerning that the measures submitted by IDC can eliminate the results of the monopolistic conduct that originally invited suspicion, ensuring that Chinese corporations can compete fairly in the market and market competition order can be restored, the NDRC made the decision to suspend the investigation pursuant to Article 45 of the Antitrust Law and will ensure that IDC will fulfill its promises. NDRC will resume the investigation if IDC fails to fulfill its promises or other legal conditions occur.”

In the United States, in the attached response to written questions from the Senate Finance Committee, FROMAN RESPONSE specifically Senator Sherrod Brown, who raised questions about Chinese government’s enforcement of its anti-monopoly laws as a tool to pursue its industrial policy, USTR Froman stated recently:

“Sen. Sherrod Brown:

Question 6

The government of China is increasingly using its anti-monopoly laws as a tool for pursuing its nationalist industrial policies. As noted in USTR’s most recent National Trade Estimates report, China’s NDRC has in the past year significantly increased its anti-monopoly activity especially against foreign companies. As the report notes, there is significant concern about abuses of the antimonopoly law by the NDRC, including intimidation and pressure on U.S. companies to cooperate in the face of unspecified allegations, steep fines, and other forms of coercion. Does USTR have adequate legal authority and tools to address such forms of unfair competition, which do not fall neatly into the categories of prohibited activities embodied in the WTO agreements? What other tools would you find useful to address such practices?


USTR is working intensively, in cooperation with other U.S. government agencies and key trading partners, via both bilateral and multilateral engagement, to combat China’s use of the anti-monopoly law as a tool for pursuing industrial policies. We are pressing China hard, building on China’s leaders’ stated commitments to a level playing field and the rule of law. We are committed to continued intensive engagement on this important concern.”


It is interesting to note that Shang Ming, DJ Shang, the present Director-General of the Anti-Monopoly Bureau of MOFCOM’s merger office, used to be the Director of the Bureau of Treaties and Law at MOFCOM. Treaties and Law at one point in time was in charge of the Chinese government’s response to US and other foreign antidumping and countervailing duty cases. In other words, Shang Ming had to deal with the protectionist policies of the US Commerce Department in antidumping and countervailing duty cases. What goes around does indeed come around.



In the the attached May edition of the FCPA Digest, May_2014_Digest_052814 Dorsey lawyers report on several corruption investigations involving China and Hong Kong stating:

“Johnson Controls Discloses FCPA Investigation in China

In a recent SEC filing, Johnson Controls, Inc. announced that it had self-reported to the United States Department of Justice and the Securities Exchange Commission that it commenced an internal investigation in July of 2013 into possible FCPA violations in China. The possible violations date back to 2007.

Johnson Controls is one of the world’s largest manufacturers of building maintenance systems and controls, which include temperature and air regulation controls found in most large-scale buildings and industrial facilities. The company also manufactures temperature control systems for vehicles and boats, among others.  According to Johnson Control’s disclosure, the focus of the investigation is Johnson Control’s “Building Efficiency marine business in China, dating back to 2007,” which reported annual sales ranging from $20 million to $50 million during this period. No further information has been provided regarding the nature of the possible FCPA violations.

Avon Settles FCPA Allegations for $135 Million

On May 1, the beauty products company Avon announced that it had “reached an understanding” with the Department of Justice and SEC to resolve allegations that the company had violated the FCPA. Of the $135 million, $68 million will go to the DOJ, and $67 million to the SEC. The deal includes a three-year deferred prosecution agreement with the DOJ, and the institution of a compliance monitor for at least 18 months.

The agreement resolves charges relating to alleged bribes of Chinese foreign officials as evidenced by a 2005 internal audit report that concluded Avon employees may have been engaging in conduct in China that violated the FCPA relating to dollars spent on “travel, entertainment and other expenses” in convincing Chinese officials to allow the door-to-door direct marketer to enter the Chinese market.

By the end of 2013, Avon had reportedly spent approximately $300 million on its internal FCPA investigation, and as a result of the fallout after its initial disclosure in 2012, CEO Andrea Jung was asked to leave the company in 2012.

SEC Threatens Enforcement Action against Qualcomm

On April 24, Qualcomm, Inc., the world’s largest mobile chipmaker, disclosed in an SEC filing that it was the subject of an SEC investigation relating to allegations that the microchip giant had bribed officials in China’s state-owned firms. The disclosure announced that Qualcomm had received a Wells Notice from the SEC on March 13, recommending an enforcement action against the company.

The Wells Note stems from an SEC investigation that started in 2012 after a whistleblower complaint informed the SEC that Qualcomm had conducted an internal investigation and unearthed evidence of “special hiring consideration, and gifts or other benefits” provided to Chinese officials. Qualcomm’s disclosure estimates the value of the possible benefits in question to be “less than $250,000, excluding employment compensation.”

Goldman Sachs Being Probed For Hiring Practices

Earlier this month Goldman Sachs Group, Inc. disclosed in its Form 10-Q that it was the subject of an ongoing FCPA investigation by the SEC regarding its hiring practices outside the United States. The investigation centers around Goldman’s practice of hiring relatives of well-connected officials in Asia, and whether such hiring may run afoul of the FCPA.

The inquiry into Goldman’s hiring practices is part of a larger investigation into the hiring practices of other international banks, including Credit Suisse, Morgan Stanley, Citigroup, and UBS AG. In 2013, several news reports surfaced regarding the hiring practices of Wall Street banks in China.

A recent example is JP Morgan’s hiring of Wen Ruchun, the daughter of Wen Jiaboa, a former Chinese prime minister. Wen Ruchun allegedly received $75,000 per month from JP Morgan via a consulting company – Fullmark Consultants. Last year, The New York Times reported that the “practice of hiring the children of government officials was so widespread that banks competed to see who could hire the most politically connected recent college graduates.” . . . .

Hong Kong

According to reports, two of Hong Kong’s wealthiest tycoons went on trial on Thursday 8 May 2014 in the city’s biggest corruption case to date.

Brothers Thomas and Raymond Kwok, who jointly chair the development company Sun Hung Kai Properties, and Hong Kong’s former chief secretary Rafael Hui were arrested in connection with alleged bribes payments and unsecured loans amounting to HK$34 million (c.$4.38 million).

According to reports, five people were arrested in connection with the payments. The others include another Sun Hung Kai director, Thomas Chan, and Francis Kwan, the former non-executive director of the investment company, New Environmental Energy Holdings.

As stated in a Department of Justice indictment, Sun Hung Hui, faces eight charges, some of which relate to receiving payments in return for being “favourably disposed to Sun Hung Kai Properties… and Thomas Kwok and Raymond Kwok” while in office. The charges against Sun Hung Hui reportedly also relate to rent-free use of luxury apartments and acceptance of unsecured loans.

Thomas Kwok, is reported to face three charges of conspiracy to commit misconduct in public office and his brother Raymond to have been charged with four offences including furnishing false information, according to the document.

The arrests have renewed discussion on links between wealthy tycoons and officials in the Asian financial centre that have raised public suspicion for some time. The head of Social Sciences at the Hong Kong Institute of Education told AFP is quoted saying: “This case will reinforce the public perception that the Hong Kong government has been vulnerable to the possible influence of the capitalist class”.

It is said that former Hong Kong chief executive Donald Tsang ended his term in June 2012 after admitting to accepting gifts from tycoons such as trips on luxury yachts and private jets. According to reports, Hong Kong billionaire Joseph Lau was found guilty in March of this year of bribing a former minister in the gambling district of Macau in an attempt to purchase a prime development site.

The hearing took place at Hong Kong’s High Court on 8 May 2014.”


On May 7, 2014, a class action securities complaint was filed by Jeffrey Grodko versus Lihua International Inc., Jianhua Zhu, and Daphne Yan Huang.  LIHUA COMPLAINT

On May 25, 2014, a class action securities complaint was filed by Ming Yang against Tibet Pharmaceuticals, Hong Yu, Taylor Z. Guo, Sabrina Y. Ren, Wenbo Chen, Youhang Pen, Solomen Chen, Anderson & Strudwick Inc., Sterne Agee Group, Inc., Hayden Zou and L. McCarthy Downs III. TIBET PHARMACEUTICALS

If you have any questions about these cases or about the US trade, customs, 337, patent, US/China antitrust or securities law in general, please feel free to contact me.

Best regards,

Bill Perry

Leave a comment

Your email address will not be published.