US China Trade War–Developments Trade, Solar Cells, 337 Patent, Customs and Securities

Wushu in Park, Practicing Tai Chi, Temple of Sun pavilionDear Friends,

There have been some major developments in the trade, solar cells, 337/patents, and securities areas.

TRADE

SOLAR CELLS NEGOTIATIONS—PRICE UNDERTAKING/SETTLEMENT IN EC CHINA CASE

The Chinese government and the EU Trade Commission announced on July 27th an agreement to settle the EC antidumping and countervailing duty case on solar cells from China.  But that agreement was immediately attacked by both sides.  Attached are the official announcements of the Agreement.  EC COMM ANNOUNCESEC OFFICIAL ANNOUNCE SOLAR DEAL PRO SUN REACTION SOLAR CELLS FACTS

The settlement— known as a “price undertaking” —replaces EU antidumping (AD) and countervailing duty (CVD) duties with a minimum floor price for solar panels, cells and silicon wafers imported from China, which is valid as long as those imports do not exceed 70 percent of the EU market for those products. Above that, the normal AD duty of 47.6 percent would apply.

The European Commission, which brokered the deal, has not yet disclosed the floor price, but informed sources said it will start at 0.56 euros per watt. Given that prices for solar products have been steadily declining, observers also said the floor price would likely be gradually reduced to respond to market shifts before the deal’s expiration at the end of 2015.

Commentators have stated that the floor price would amount to an increase of about 0.10 euros per watt over the prices that Chinese producers were selling at in early 2013. But according to one analyst, that price is still significantly below what EU competitors, who sell at between 0.60 and 0.80 euros per watt, are typically able to offer.  At the price of 55-56 euro cents, many European manufacturers are not yet competitive.

The main outcome of the deal, the analyst said, is that Chinese exporters will be able to pocket additional profit rather than paying it in duties, making large producers even stronger. The analyst also said that the price undertaking’s cap of 70 percent of the EU market will not act as a barrier to Chinese exports to Europe. Not all of China’s suppliers are participating in the price undertaking — only about 70 percent of all Chinese solar companies.

All of this points to the new deal having limited spillover effect on the U.S. market. Chinese solar panels already face antidumping and countervailing duties in the U.S., although the scope of those trade remedies is more limited because of the third country loophole.  If the Chinese panels and modules contain third country solar cells, they are not cover by the US antidumping and countervailing duty order.  But see information about Commerce Department investigation below.

The EC case already had Chinese solar companies looking elsewhere — including the U.S. — but also increasingly to other Asian markets like Japan. By individual country, the largest consumers of solar panels this year are expected to be China (6.9 GW), Japan (5.3 GW), the U.S. (4.9 GW), Germany (4.3 GW), and Italy.

Meanwhile, the U.S. government and China have held informal discussions about a potential settlement of the U.S. solar case, so the EU-China deal could influence a potential agreement between the U.S. and China. However, because the nature and scope of their cases are different, there is no indication that the U.S. would be party to the EU-China deal.

Sen. Ron Wyden (D-OR), who chairs the Senate Finance Committee, Subcommittee on Trade, criticized the EU settlement in a statement. “It’s hard to see how this decision helps anyone except companies in China and Taiwan,” Wyden said. “In the end, the E.U. will not have just sold out its workers and companies that produce solar panels, but U.S. workers and employers as well.”

An aide to Wyden said the senator believed that the EU had failed to exert maximum leverage over China by not including the U.S. at the negotiating table. In addition, by agreeing to a “low bar” deal, the EU has weakened the chances that the U.S. will be able to secure a meaningful agreement in its own negotiations with China.

U.S. Trade Representative Michael Froman said in a statement that the U.S. is still aiming for some kind of world-wide deal to end the Solar Cells trade problems but did not elaborate on how that could be achieved. “We believe there needs to be a global solution, consistent with our trade laws, that creates stability and certainty in the various components of the solar sector,” Froman said. “We look forward to working toward that objective.”

 Meanwhile, on July 20, 2013 the Chinese government imposed preliminary antidumping duties ranging from of 53.3 to 57% on US imports of Polysilicon.  See the attached notice form MOFCOM. MOFCOM POLYSILICON ENGLISH ANNOUNCEMENT

In addition, the Press is reporting major problems in the Chinese polysilicon industry with three-quarters of Chinese polysilicon producers facing closure.  As Reuters reports:

“As smaller polysilicon producers, with average annual capacity of a few thousand metric tons, are pushed out, the likely winners will be larger producers such as GCL Poly, TBEA Co Ltd, China Silicon Corp and Daqo New Energy Corp. The shake-out is already underway as polysilicon prices have plunged to below $20 per kg from a 2008 peak of almost $400, forcing some producers in the northwestern province of Ningxia and eastern China’s Zhejiang province to file for bankruptcy.”

“Their plight is made worse by cheaper, and better quality, imports from producers such as MEMC Pasadena Inc and Michigan-based Hemlock Semiconductor Group – a venture of Dow Corning, Shin-Etsu Handotai and Mitsubishi Materials Corp – and Norway’s Renewable Energy.”

See http://www.reuters.com/article/2013/07/31/us-china-solar-polysilicon-idUSBRE96U1CD20130731.  From the face of it, this looks like a domestic industry in China facing material injury, which makes it a potentially more dangerous case for antidumping and countervailing duties against Korean and US imports.

The EC has indicated that the Solar Cells agreement is linked to other EU-China talks on Chinese plans to impose AD duties against EU polysilicon exports and wine. The preliminary date for imposition of antidumping duties on polysilicon from the EC is February 2014, with final duties due out two months later. For wine, a decision on provisional duties is due out at the end of April 2014, and final measures are due in June 2014.

On the US side, one of the key technical issues is the legal basis under which the Obama administration can seek a settlement given that the AD and CVD orders are now in effect. The time for negotiating a suspension agreement in a case is legally set between a preliminary and a final determination, which has now passed.

In the preliminary explorations of a potential settlement, the U.S. has discussed the option of a changed circumstances review as a legal basis. Such a review would assess whether the existing U.S. trade remedy cases are still needed or could be replaced with a settlement. But that option would require the consent of the U.S. industry.

As indicated in past posts on this blog, the US Solar Cells Trade case has not worked and has not protected the US domestic industry. Prices for solar cells in the US have only gone up by $3. Also in response to the US case, the Chinese Government has brought an antidumping and countervailing duty cases against $2 billion of imports of US produced polysilicon, which goes into the Chinese solar cells.

A negotiated deal would also close the third country loophole in the US Solar Cells case, although there is no third country loophole with regards to the EC. The third country loophole allows China to export solar cells produced in third countries, such as Taiwan, in panels and modules produced in China to the United States. A negotiated settlement would also result in the removal of Chinese antidumping and countervailing duties on US produced polysilicon.

COMMERCE CRACKS DOWN ON THIRD COUNTRY SOLAR CELLS

On August 6, 2013, the Commerce Department initiated an inquiry into whether major Chinese solar panel manufacturers selling to the United States have evaded trade remedy orders by falsely claiming that their panels are assembled from cells made in third countries.

If Chinese produced solar panels and modules contain solar cells from third countries, such as Taiwan or Malaysia, the solar panels and modules are considered not within the scope of the Solar Cells antidumping and countervailing duty orders and out of the case.  As a result of this decision, many Chinese solar companies developed tolling operations under which Chinese companies produce the polysilicon wafers and ship them to another country for transformation into solar cells.  Commerce is now investigating to what degree those solar cells were actually produced in a third country.

In the attached August 6th letter from Commerce to Renesola Ltd., one of the Chinese solar companies, DOC Second Letter to Renesola Commerce states:

“As stated in the required importer and exporter certifications introduced in the underlying investigations, any failure to substantiate a claim that panels/modules imported into the United States do not contain solar cells produced in the PRC will result in suspension of all unliquidated entries for which these requirements were not met and the requirement that the importer post an AD cash deposit or, where applicable, a bond, on those entries equal to the PRC-wide rate in effect at the time of the entry and a CVD cash deposit, or where applicable, a bond rate equal to the all-others rate in effect at the time of the entry. Furthermore, as noted in the required importer and exporter certifications, records pertaining to such certifications may be subject to verification by Department of Commerce officials.”

Petitioners allege that in many instances Chinese companies are shipping almost completed cells, rather than simple wafers, for minimal processing outside of China.  In certain extreme cases, the allegation is that a Taiwanese company may just stamp its name on a solar cell before shipping it back to a Chinese firm for final assembly. Chinese companies may be tempted to undertake such practices because the majority of the value in creating a solar panel comes from the manufacturing of the cell.

If Commerce finds that this kind of circumvention is taking place, it could mean that new duties would be leveled against the imports of modules and panels with the third country cells in them.  Apparently Petitioners have provided evidence of these practices to Customs.  In the spring Commerce sent out inquiries to six Chinese companies — Trina Solar, Yingli, Wuxi Suntech, Renesola, Talesun and LDK — asking them for detailed information about their sales and supply chains. Some of those companies have already responded, while others have until early August to do so.  Rensola and Talesun are facing antidumping rates of 250% on their imports.

In theory, Chinese exporters and U.S. importers of solar panels and cells should have all of the information on hand already. Commerce instituted a certification requirement at the time it issued the final trade remedy orders which required them — if they believed the goods were not subject to the orders — to state that “that these solar panels/modules do not contain solar cells produced in the People’s Republic of China.”

Importers and exporters also had to acknowledge in their certification that relevant records may be requested by CBP at any time, and that failure to be able to substantiate the claims that they were not shipping subject merchandise could result in the processing of customs paperwork — or liquidation — being suspended for further scrutiny.

COMMERCE CHANGES THE ANTIDUMPING RULES AGAIN TO MAKE IT TOUGHER—MARKET ECONOMY INPUTS AND SEPARATE RATES

One would think that since the US-China WTO Agreement provides that China is to be made a market economy country by November 2016, just about three years away, Commerce would set up a transition period.  Just the opposite is happening as Commerce is doubling down on its nonmarket economy methodology.

On August 1st, Commerce published in the Federal Register its final regulation regarding using imports from market economy countries to value factors of production in nonmarket economy antidumping cases, especially against China and Vietnam.  See the attached notice.  DOC REGS NME INPUT PRICES

In prior cases, if the Chinese company imported inputs from a market economy country, Commerce would use the actual market price, rather than surrogate values to value the specific input if the percentage of imports of the specific input were “meaningful”, more than 33%.  Under the new regulation, the percentage of imports of the specific input must account for substantially all of the input used or 85% or more of the input.  This rule will be effective as of September 3rd, meaning that all investigations or reviews that are initiated after September 3rd will be subject to the new rule.

COMMERCE DEPARTMENT SEPARATE RATES REGULATIONS

On July 5th the Commerce Department issued the attached final rule regulatory announcement in the Federal Register stating that in determining whether Chinese or other companies in Nonmarket Economy Countries were entitled to a separate rate in antidumping cases, it would examine more closely whether the company meets certain de facto criteria for obtaining a separate rates. See the attached Federal Register notice.  COMMERCE DE FACTO REGULATION

Commerce specifically stated that it will examine on a case by case basis certain issues related to a respondent’s separate rate status in nonmarket economy dumping cases. This action is part of its Trade Enforcement initiative.

In determining whether a Chinese or other nonmarket economy company is entitled to a separate rate, Commerce looks at the following criteria, whether the Chinese/NME company:

• has export prices set by or subject to approval of a governmental agency;

• has authority to negotiate and sign contracts and other agreements on the company’s behalf;

• has autonomy from the government in decision making on management;

• retains proceeds of its export sales and makes independent decisions regarding disposition of profits or financing of losses.

Since respondents generally possess information on their day-to-day operations, Commerce will consider, on a case-by-case basis, issuing supplemental questionnaires to identify and review additional documentation and information relating to de facto government control by any level of government in cases where the respondent’s initial questionnaire responses are insufficient to support its separate rate claim. Supplemental questions might address:

• selection and removal of directors and managers at the producing/exporting company;

• identification of parties with authority to approve contracts and bank transactions on behalf of the company;

• ownership, including individual and corporate;

• whether any corporate owners are state-owned, state-controlled, or otherwise affiliated with the state, at the national or sub-national levels; and,

• whether any managers hold government positions at the national or sub-national levels.

Consistent with comments urging Commerce to conduct more separate rate verifications, Commerce said it would continue to consider verification of separate rate information where warranted, on a case-by-case basis.

This new regulation may make it harder for Chinese companies to obtain separate rates in antidumping investigations at the Commerce Department.

ALUMINUM EXTRUSIONS—QV QUESTIONNAIRES ISSUED IN AD AND CVD REVIEWS

On August 6, 2013, the Commerce Department issued quantity and value questionnaires in the Aluminum Extrusions Antidumping and Countervailing Duty cases to Chinese exporters to be used to determine the mandatory respondents in the new Antidumping and Countervailing Duty review investigations.  There could easily be 50 respondents in the review investigation and yet the Commerce Department will look at only 2 to 3 companies as mandatory respondents.  Only those companies have the right to prove that they are not dumping or receiving subsidies.  The other 48 plus Chinese companies will get affirmative rates.

These review investigations have also become very complicated because of the Commerce Department’s decision in many instances to expand the scope of the orders and include finished products, such as curtain walls, the sides of buildings, auto and refrigerator parts, in the scope of the antidumping and countervailing duty orders.

IMPORTERS’ LOBBYING COALITION/AMERICAN IMPORT COALITION

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.  Our first organizational meeting was held on July 24th in Washington DC.  Sixteen US importer/end user companies have agreed to join the Coalition and were at the meeting in person or on a conference call.

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 and working against retroactive liability for US importers. 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.

If anyone is interested in the Coalition, please feel free to contact me.

CHINESE ANTIDUMPING AND COUNTERVAILING DUTY LAW

US WTO VICTORY AGAINST CHINA IN CHICKEN WARS

On August 2, 2013, the WTO agreed with the US in most aspects of its challenge against antidumping and countervailing duties imposed by the Chinese government on US exports, Chinese imports, of US chicken broiler products.  In the attached announcement, the USTR announced that it won on most of the important issues.  USTR STATEMENT CHICKEN  See also the attached WTO conclusions in the Chicken case.  WTO CHICKEN CONCLUSIONS

USTR pointed to several reasons why the victory is important.  First, the WTO sided with the United States in arguing that the Chinese government should not have used the “average cost of production” methodology to calculate AD duties on poultry products.

“For years, we’ve been concerned about other countries rejecting costs based on U.S. producers books and records [and] instead using the weight of a product to allocate production costs,” USTR Mike Froman said at an Aug. 2 press conference, in reference to this methodology. “This methodology artificially inflates and creates antidumping margins.”

The United States argued that China’s methodology dramatically overestimated the cost of production for relatively cheap parts of a chicken, such as the chicken feet. The panel agreed that the approach China took to estimate the cost for producing chicken feet factored additional costs not actually associated with production of feet –such as skinning and removal of bones and veins from breast meat — into the cost of producing feet. Therefore, China’s straight, weight-based allocation does not meet the obligation to arrive at a “proper allocation of costs” for the products under investigation, the panel concluded.

Second, USTR stressed that this was the second convincing win against China’s use of antidumping and countervailing duty investigations against the US.  USTR stated that it hoped that this would force Beijing to fundamentally re-evaluate how it proceeds in AD and CVD investigations.

Third, Commerce Secretary Penny Pritzker suggested that this case underscores the U.S. resolve to not allow China to get away with throwing up unjustified trade remedies in response to U.S. trade policy actions. ”

Fourth, a USTR attorney noted that the panel sided with the U.S. in many aspects of the challenge related to the transparency of China’s procedures for calculating trade remedies.

China now has 60 days to determine whether it wants to appeal the ruling. The U.S. also has a chance to appeal any aspects of the panel ruling with which it disagrees, and a USTR attorney declined to say if the U.S. would exercise this right.

As the attached WTO Conclusions from its decision states, in part:

“China acted inconsistently with the first sentence of Article 2.2.1.1 of the Anti-dumping Agreement when MOFCOM declined to use Tyson and Keystone’s books and records in calculating the cost of production for determining normal value. With respect to Pilgrim’s Pride, the United States has not established that China acted inconsistently with the first sentence of Article 2.2.1.1.”

“v. China acted inconsistently with the second sentence of Article 2.2.1.1 because: (i) there was insufficient evidence of its consideration of the alternative allocation methodologies presented by the respondents; (ii) MOFCOM improperly allocated all processing costs to all products; and (iii) MOFCOM allocated Tyson’s costs to produce non-exported products to the normal value of the products for which MOFCOM was calculating a dumping margin.”

The WTO concluded:

“Pursuant to Article 19.1 of the DSU, we recommend that China bring its measures into  conformity with its obligations under the Anti-Dumping Agreement and the SCM Agreement.”

Although the US government has been able to prevail at the WTO, it should be noted that the Chinese government imposed the very high antidumping and countervailing duties on imports US chicken for three years with a potential loss to US producers of $3 billion.  The WTO recommendation is that China bring its Chicken case into conformity with its obligations under the WTO Anti-Dumping Agreement.  That does not mean that Chinese antidumping and countervailing duties on US chicken will be lifted tomorrow. There is still a long way to go in this case and US chicken will continue to be pushed out of the Chinese market.

The Chicken case is an outgrowth of the US government’s decision to use the special 421 investigation to block lower cost Chinese tires from being imported into the United States.  In addition, since Commerce considers China to be nonmarket economy country, Commerce refuses to use actual prices and costs in China to determine whether a Chinese company is dumping so one can understand why the Chinese government might play around with prices and costs in the US with regard to Chinese antidumping and countervailing duty cases against US companies. Both governments are firing the trade guns in this war.

SILICON STEEL—GOES

The limitation on the US pressure on the Chinese government’s implementation of its antidumping and countervailing duty laws is indicated by the August 6th announcement by the Chinese government that it has fully complied with the WTO rulings against the Chinese government’s determinations in the antidumping and countervailing duty case aimed at imports of US grain-oriented flat rolled electrical steel (GOES).  The US industry disagrees.

In response to the WTO decision, China lowered the CVD rate facing AK Steel from 11.7 percent to 3.4 percent, sources said. One source said Beijing also lowered the CVD rate facing ATI Allegheny Ludlum, the other main company affected by the case, down from its previous rate of 12 percent.

Concerning AD rates, China did not alter the AD duties of 7.9 percent and 19.9 percent on steel exports from AK Steel and Allegheny Ludlum, respectively, although it did lower the “all others” AD rate from 64.8 percent to 13.8 percent.

China maintains that the Appellate Body ruling did not require it to alter the AD rates facing the two primary steel companie.

This dispute between the US and China on US exports of GOES has been going on for years.  Meanwhile, however, the United States has imposed numerous antidumping and countervailing duties on imports of Chinese steel.

In addition, because US importers are exposed to retroactive liability on Chinese imports under the US antidumping and countervailing duty laws, no US importer dares to keep importing Chinese steel once cases are filed.  So the real effect of steel antidumping and countervailing duty cases against China is to shut out Chinese steel imports into the United States.

No other country exposes its importers to retroactive liability under the antidumping and countervailing duty laws.  Only the United States.

When viewed in this context, it is easier to understand why the Chinese government is playing the trade game in the GOES case.

CUSTOMS

JOINT CHINA US STING COUNTERFEIT GOODS

On July 31st, Customs and Border Protection (“CBP”) announced the first joint intellectual property enforcement action.  See the attached announcement.  The month-long operation resulted in the seizure of over 243,000 counterfeit consumer electronics products including popular trademarks such as Apple, Beats by Dr. Dre, Blackberry, Samsung, Sony, and UL.

“The success of this joint operation fully proves that earnest and effective cooperation cross the border is needed to curb the movement of counterfeit products”, said Zou Zhiwu, Vice Minister of the General Administration of China Customs (GACC). “IPR infringement is a global issue involving not only the process of production and export, but also that of import and circulation. It not only harms the order of global trade, but also threatens the health and safety of consumers. Enforcement agencies around the world should work more closely to crack down on these illegal activities. China Customs has been making unremitting efforts to promote international cooperation in this field. The results of this joint operation are very inspiring and have consolidated our confidence and resolve to jointly fight against IPR violations under the framework of Memorandum of Cooperation on Strengthened Cooperation in Border Protection Enforcement of IPR between GACC and CBP.”

PATENTS

ITC MAKES DOMESTIC INDUSTRY REQUIREMENT MORE TOUGH IN 337 CASES

The US International Trade Commission (“ITC”) has created a new procedure to deal with the situation of Patent Trolls or Non Practicing Entities (NPEs).  That is companies that do not practice the patent in the United States.

Section 337, 19 USC 1337, provides that for there to be a violation the unfair acts, such as infringement of a US patent, the threat or the effect of the importation of articles into the United States must “be to destroy or substantially injure an industry in the United States.”  Thus 1337 has an injury to a US industry requirement in the statute.  The economic part of section 1337, however, has not been as important because 1337(a)(3) provides that an industry in the United States is considered to exist “if there is in the United States, with respect to the articles protected by the patent, copyright, trademark or mask work concerned—(A) significant investment in plant and equipment; (B) significant employment of labor or capital; or (C) substantial exploitation in its exploitation, including engineering, research and development or licensing. . . .”

Many companies that do not practice the patent in the United States have brought 337 cases under Subpart C arguing that licensing or research and development in the United States was enough to be a domestic industry.  Because 337 cases can be privately settled, cases could be filed and then settlements reached before there was an ITC decision on the domestic industry.

US high tech companies, such as Apple, Intel and IBM, have been very concerned about NPEs bringing section 337 cases and then obtaining settlements before the domestic industry issue was decided.  Section 337 proceedings can be very costly because the entire litigation is over in just over a year, which puts substantial pressure on the respondent companies.

Recently in the Laminated Packaging 337 case, in March 2013 the Commission initiated a 337 Patent case but ordered the Administrative Law Judge (“ALJ”) to hold an expedited proceeding on domestic industry.  On July 5, 2013, under protest about the procedures in the case, the ALJ issued an expedited initial determination in the Laminated Packaging case, in effect, dismissing the section 337 case because there was no domestic industry.

In the attached decision, LAMINATED PACKAGING DOMESTIC INDUSTRY ID  the ALJ stated on pages 39-40 of his decision:

“In addition, as Staff and Respondents have noted, even if the ALJ were to accept that Lamina’s licensees made certain expenditures in the purchase of the laminated packaging, there is no evidence that those laminated packages were made here in the United States. . . . Absent evidence that the laminated packages purchased by Lamina’s licensees were made here in the United States, any such expenses cannot be considered in the economic prong analysis.”

“Thus, for the foregoing reasons, the ALJ finds that Lamina has failed to show that its licensees have made significant investments in labor and capital in the United States.”

In response to the argument of Petitioner that its domestic industry is licensing, the Administrative Law Judge determined at pages 42-44:

“However, the ALJ finds that Lamina has failed to establish a sufficient nexus to licensing. As an initial note, the ALJ does not find the nexus to licensing as weak as Respondents and Staff assert. Respondents and Staff make much of the fact that Lamina’s licenses with its licensees resulted from litigation. However, the Commission has explicitly stated that such activities can constitute licensing activities. . . .”Depending on the circumstances, such activities may include, among other things, drafting and sending cease and desist letters, filing and conducting a patent infringement litigation, conducting settlement negotiations, and negotiating, drafting and executing a license .” . . . The evidence is clear that Lamina has filed and conducted patent infringement litigation, conducted settlement negotiations, and negotiated drafted and executed a license agreement. As such, those activities, while not necessarily focused on “putting the patent to productive use,” are the type of “licensing activities that ‘take advantage of the patent, i.e., solely derive revenue. . . .”

“The Commission further noted, however, that “[t]he mere fact[] that a license is executed does not mean that a complainant can necessarily capture all prior expenditures to establish a substantial investment in the exploitation of the patent.” . . . It appears that this is exactly what Lamina has sought to do, i.e., capture “all prior expenditures” to establish a domestic industry. Lamina did so without “clearly link[ing] each activity to licensing efforts” and instead made general assertions that its activities related to licensing . . . Thus, there is insufficient evidence before the ALJ clearly showing that all of the investments made by Lamina were costs that were clearly linked to licensing efforts and the ALJ cannot make a finding that Lamina’s investments have a nexus to licensing.”

“Even assuming that Lamina had established a nexus to licensing, the ALJ further finds that Lamina has failed to show that its own investments in exploiting the Asserted Patents are substantial. Specifically, while Lamina has shown that, as a small company, it has made substantial monetary investments relating to the Asserted Patents, it is not clear whether such investments are substantial relative to the industry. Indeed, even assuming that the “industry” is not “manufacturing” laminated packages but is the licensing industry for laminated packaging, Lamina has set forth no evidence as to the type of efforts taken in that industry. . . . Here, there is no evidence on the licensing industry for laminated packaging, but only evidence of Lamina’s own expenditures. Consequently, the ALJ cannot make a determination as to whether Lamina’s investments are substantial.”

On August 6, 2013, the Commission affirmed the ALJ’s initial determination and dismissed the 337 Laminated Packaging case because there was no domestic industry.  In the attached notice, COMMISSION DECISION PACKAGING  the Commission determined that procedurally it could have an expedited domestic industry proceeding, reversing that part of the ALJ’s decision, but then going on to affirm the ALJ’s decision as to no domestic industry.

The decision in the Laminated Packaging case will make it much more difficult for Non Practicing Entity to bring 337 cases in the future.

APPLE CASE—PRESIDENTIAL VETO

On August 3, 2013, the United States Trade Representative (“USTR”) on behalf of the President vetoed an exclusion order in a 337 Patent case that was issued against Apple and would have resulted in the exclusion of earlier versions of the Iphone.  The last time the President overturned an ITC exclusion order was in 1987.

The President/USTR overturned the exclusion order because the Samsung Patents used to attack Apple were “Standard Essential Patents Subject to Voluntary FRAND Commitments.  In the attached announcement, USTR Order USTR stated:

“Under section 337, the President . . . may disapprove an order on policy grounds, approve an order, or take no action and allow the order to come into force upon the expiration of the 60-day review period. This authority has been assigned to the United States Trade Representative. . . .”

“In addition, on January 8, 2013, the Department of Justice and United States Patent and Trademark Office issued an important Policy Statement entitled “Policy Statement on Remedies for Standard-Essential Patents Subject to Voluntary FRAND Commitments” (“Policy Statement”). The Policy Statement makes clear that standards, and particularly voluntary consensus standards set by standards developing organizations (“SDO”), have incorporated important technical advances that are fundamental to the interoperability of many of the products on which consumers have come to rely, including the types of devices that are the subject of the Commission’s determination. The Policy Statement expresses substantial concerns, which I strongly share, about the potential harms that can result from owners of standards-essential patents (“SEPs”) who have made a voluntary commitment to offer to license SEPs on terms that are fair, reasonable, and non-discriminatory (“FRAND”), gaining undue leverage and engaging in “patent hold-up”, i.e., asserting the patent to exclude an implementer of the standard from a market to obtain a higher price for use of the patent than would have been possible before the standard was set, when alternative technologies could have been chosen. At the same time, technology implementers also can cause potential harm by, for example, engaging in “reverse hold-up” (“hold-out”), e.g., by constructive refusal to negotiate a FRAND license with the SEP owner or refusal to pay what has been determined to be a FRAND royalty.”

“As the Policy Statement makes clear, whether public interest considerations counsel against a particular exclusion order depends on the specific circumstances at issue. The statement also explains that, to mitigate against patent hold-up, exclusionary relief from the Commission based on FRAND-encumbered SEPs should be available based only on the relevant factors described in the Policy Statement. The courts are also engaged on the issue of appropriate remedies for infringement of SEPs and we look forward to the development of appellate jurisprudence on this issue. The SEP Policy Statement is one part of the Administration’s continuing efforts to consider the scope of appropriate remedies for owners of SEPs, and encourage the development of strong, innovative standards.”

“The Administration is committed to promoting innovation and economic progress, including through providing adequate and effective protection and enforcement of intellectual property rights. Relief available to the owners of intellectual property rights through section 337 is an important facet of achieving that objective. At the same time, standards, and particularly voluntary consensus-based standards set by SDOs, have come to play an increasingly important role in the U.S. economy. Important policy considerations arise in the enforcement of those patents incorporated into technical standards without which such standards cannot be implemented as designed, when the patent holder has made a voluntary commitment to offer to license these SEPs on FRAND terms. Licensing SEPs on FRAND terms is an important element of the Administration’s policy of promoting innovation and economic progress and reflects the positive linkages between patent rights and standards setting. . . .”

“After extensive consultations with the agencies of the Trade Policy Staff Committee and the Trade Policy Review Group, as well as other interested agencies and persons, I have decided to disapprove the USITC’s determination to issue an exclusion order and cease and desist order in this investigation. This decision is based on my review of the various policy considerations discussed above as they relate to the effect on competitive conditions in the U.S. economy and the effect on U.S. consumers.”

“I would like to underscore that in any future cases involving SEPs that are subject to voluntary FRAND commitments, the Commission should be certain to (1) to examine thoroughly and carefully on its own initiative the public interest issues presented both at the outset of its proceeding and when determining whether a particular remedy is in the public interest and (2) seek proactively to have the parties develop a comprehensive factual record related to these issues in the proceedings before the Administrative Law Judge and during the formal remedy phase of the investigation before the Commission, including information on the standards essential nature of the patent at issue if contested by the patent holder and the presence or absence of patent hold-up or reverse hold-up. In addition, the Commission should make explicit findings on these issues to the maximum extent possible. I will look for these elements in any future decisions involving FRAND-encumbered SEPs that are presented for policy review. The Commission is well-positioned to consider these issues in its public interest determinations.”

SECURITIES

SEC V. CHINA INTELLIGENT LIGHTING AND ELECTRONICS

Attached is a complaint filed on July 13th by the SEC against China Intelligent Lighting and Electronics alleging that  China Intelligent Lighting & Electronics, Inc. and its offices engaged in fraudulent schemes to raise and divert money received from stock offerings.  CHINA LIGHTING SEC COMPLAINT

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

Best regards,

Bill Perry

 

POLITICS OF CHINA TRADE/COALITIONS, TRADE, 337/IP, PATENTS, CFIUS

Commerce Department After the Snow Pennsylvania Avenue WashingtoPOLITICS OF CHINA TRADE, DEVELOPMENTS–TRADE, 337/IP, PATENTS AND CFIUS

Dear Friends,

There have been many recent important developments in the trade and intellectual property areas, but before getting to the developments, set forth below is the second article in our series on the US Politics of China Trade—the Importance of Coalitions.

If you have any questions about the politics article or the developments listed below, please feel free to contact me.

Best regards,

Bill Perry

THE POLITICS OF CHINA TRADE—IMPORTANCE OF COALITIONS

As previously mentioned, the serious political situation regarding China Trade in Washington DC warrants greater attention so I have asked former Congressmen Don Bonker to author a series of articles on the political situation in Washington DC and what can be done to change the discussion.  Our next article is on the importance of Coalitions of Chinese companies with interested US companies.

The Chinese emperor had a famous saying, “Use a foreigner to deal with a foreigner”  When Americans go to China to do business, they often need a Chinese face, an interface, who can help bridge the gap between Chinese and US language and culture.

Many foreigners believe they do not need the US counterpart because they see the United States as an easy country to understand and do business in, because many foreigners speak English.  But this is a mistake because there are vast differences in the US, especially in its political system.

Under the US Constitution, there are three co-equal branches—the Executive Branch/President and the Administration, Legislative Branch/the Congress and the Judicial Branch/the Courts.  In contrast to China, therefore, political power is more diffuse and not concentrated in any one group.

In China, Governors of Provinces are appointed by the Central Government.  Political power in the United States, however, is even more diffuse because of Federalism.  Under the US Constitution, power not specifically given to the Federal Government, is reserved to the States.  Because of the multiple power bases in the United States, Coalitions with US companies become essential to making the political argument.

A key reason for the US China Trade problems, I believe, is the failure of Chinese companies and even the Chinese government to understand the importance of working with the US importers and end user companies in Coalitions that have common interest in trade and investment disputes.  For many Chinese companies the “go it alone” approach is simply not working.  It does not take into account the political realities that exist in many trade cases.

Simply responding to US Antidumping, Countervailing Duty and other Trade cases is often not sufficient to obtain a favorable result.  Trade cases are not an application process.  This is litigation, fighting with the US industry, and the objective of the US producers in a trade case is to throw the Chinese companies out of the US market.

The same can be said on the investment side of the case.  When Chinese companies attempt to acquire sensitive companies in the US, they are competing, fighting, with US companies for that business, and the US companies will use the investment laws under CFIUS and the political process in the US to change the nature of the debate.

In Trade Cases, although the major target of US trade disputes may appear to be Chinese companies, in reality it is the importer, the first US company that purchases the products, that  is legally liable for antidumping and countervailing duties. In fact, they can be  retroactively liable if the rates go higher in antidumping and countervailing duty review investigations.

This punitive aspect of antidumping and countervailing cases, which are supposed to be remedial statutes, is unfair and needs to be addressed.  Many US importers do not realize that when they import a product from China under an antidumping and/or countervailing duty order, they do not post the antidumping or countervailing duty, but the cash deposit.  If duties go up in subsequent review investigations, the US importers are retroactively liable for the difference plus interest.

In one case that I am involved in, Ironing Tables from China, the antidumping rates went from 0 to 157% because Commerce determined in a review investigation that the Chinese company had played with its documents and committed fraud.  This decision exposed the US importers to $25 to $50 million in retroactive liability.  In the Wooden Bedroom Furniture, US importers have been exposed to an estimated $1 billion in retroactive liability.  I have met with a good old boy company in High Point, North Carolina, that had its entire $60 million furniture importing company go up in flames because it imported from China under an antidumping order.

When Chinese companies go it alone, because of potential retroactive liability, US importers vote with their feet and go to third countries.  Thus the US importers are now importing ironing tables from India, and Vietnam has become the largest exporter of wooden bedroom furniture.

When US importers and Chinese companies work together in antidumping and countervailing duty cases, however, the US importer keeps importing because he knows what is going on behind the scenes at the Chinese company.  In my Sebacic Acid case, for example, I had a coalition of Chinese exporters, a US importer and US distributor go on for more than 10 years importing sebacic acid into the United States under an antidumping order because the importer felt it was safe to import.

The point here is that Chinese companies and even the Chinese government need to work with US companies in Coalitions to win trade argument.  Part of these cases is the political argument.

THE POLITICS OF CHINA TRADE—IMPORTANCE OF COALITIONS

By Hon. Don Bonker

The U. S. – China economic relationship, particularly its growing dependence on investment and trade, is being tested as never before.  Both countries have legal mechanisms for dealing with unfair trade practices, to be sure, but there is no guarantee they will be fairly applied.

On the American side, our laws were crafted to protect American companies from foreign competitors who benefited from government subsidies, engaged in dumping activity or otherwise were doing injury to their U. S. counterparts.  No one can take issue with the purpose of such laws.

But they can question the application of the government’s trade laws (whether they are fairly applied) and if the public interest is truly being served.

A Commerce Department and an International Trade Commission (ITC) ruling in an antidumping and countervailing duty case has the appearance of targeting a foreign entity, but its punitive effects are felt by the importing U. S. companies who are liable for the higher tariffs, which can even be applied retroactively plus interest.  The costs, often totally unexpected, can run into the tens of millions, even causing bankruptcies of US companies.

In such cases, the public interest is not being properly served.  Congress needs to address this problem to insure more fairness and balance in the application of U. S. trade laws.  For Chinese companies, they will loose large market shares given that U. S. importers may opt to purchase similar products from Vietnam, India, Brazil and other developing countries.

Meanwhile, Chinese companies and American importers must cooperate to offset the “imbalance” that exists today.  To offset the imbalance, Chinese companies and US importers/end users have to collaborate to counter their American competitors’ political activity that is affecting their businesses and harming our trade relationship.  For Chinese companies it is difficult to engage in lobbying activity because US laws, such as Foreign Agents Registration Act, strictly regulate such a situation.  US companies, however, can and do lobby their Senators and Congressmen recognizing that it is their fundamental right as U. S. citizens.

Despite the ongoing trade cases against Solar Cells and Wind Towers from China, the Obama Administration has made renewable energy a top priority, providing tax credits and other incentives that are contributing to making this a growth industry.

To many American producers they see Chinese imports as a threat given the quality and price of imported products, which they attempt to counter  by establishing coalitions.  The Coalitions share the cost and boost their effectiveness by  retaining lobbying, public relations and law firms so as to give them an advantage before the respective government agencies.

The different firms work together.  The law firm gives legal advice on the various trade and investment cases, and the lobbying/public relations firm gives political advice on how to change the debate in Washington DC.  This collaborative approach is what’s gaining the other side distinct advantages in cases before government agencies.

Here are a few notable examples:

1.         Coalition for American Solar Manufacturing (CASM).  A consortium of U. S. domestic producers of conventional solar panels whose central purpose is “to hold China accountable by filing cases before government agencies.”  The Coalition consists of seven domestic producers, led by Solar World, a global company based in Bonn, Germany.  There is also the Solar Energy Industries Association that spent nearly $400,000 to retain lobbying and law firms in support of higher tariffs on Chinese products.

2.         The Wind Tower Trade Coalition (members consist of US Wind Tower Producers).  This Coalition’s mission is to obtain prohibitive tariffs on wind turbines and other products, which is widely reported in the news.  Also the American Wind Industry Association reportedly spent over $600,000 retaining lobbying and law firms.

This is what goes on in the nation’s capitol.  It is about law, economics and politics and how they all come together to influence policy and agency decisions.

As it relates to current trade cases on renewable energy imports, it has been regrettably one-sided. The U. S. producers are politically active and apparently quite effective.  The other side, which includes the US importers and end users, is paying a heavy price for remaining passive and conceding the argument.

There is a common refrain on Capitol Hill that says it best:  “The only thing that keeps decision-makers upright is equal pressure on all sides.”

China’s exporters and their American importers, distributors and end users must be more politically engaged if they expect to keep the US political leaders, Commerce Department officials and even ITC Commissioners and other U. S. officials “upright” to insure more favorable outcomes on cases they are considering. .

Such coalitions, not uncommon in America’s political system, are often necessary to develop greater public awareness and political support when trade cases and other actions are brought before these agencies.  The US importers, distributors and end-users of Chinese-made products with the help of their Chinese suppliers would do well to put together their own coalitions and adopt strategies that will leverage their respective positions, as follows:

•           The Coalition will consist of the affected U. S. companies, including US importers and the affected US down user producers, and adopt a strategy and plan that will demonstrate to the Administration, including the interested government agencies, Congress, and the Media, the public support and economic benefits the imports from China bring to the local economy.

•           Provide information on the economic benefits (and the loss of those benefits) should the imposition of prohibitive tariffs affect the operations of the US companies involved by shutting the Chinese products out of the US market.

•           In the local regions involved, including States and local city and county governments, mobilize public and political support that can be conveyed to Members of Congress and the particular government agencies.

•           In Washington, D. C., engage the Congressmen (representing the regions and serving on important committees) to enlist their support of the Coalition member cases when they appear before the agencies.

•          Develop a media package for distribution on Capitol/ government agencies, and media outlets (local, national, including trade publications); also be proactive on social media to insure the positive matches the negatives on Google and other internet venues.

The purpose is to insure the Coalition members’ cases by educating the public and the Politicians as to the other side of the argument so as to demonstrate strong public and Congressional support when the Department of Commerce and ITC are considering the trade cases.  Taking a collective approach helps to share the cost and be more effective in Washington, D. C.

 

 

DEVELOPMENTS TRADE, 337, PATENT/IP, AND CFIUS

TRADE LAW–GPX CASE

On January 7, 2013, Judge Restani of the Court of International Trade issued her new decision in GPX Tires case, which is attached. 2013 CIT DECISION GPX  In her decision, Judge Restani found the new law passed by Congress making the US Countervailing Duty law retrospectively applicable to China effective November 20, 2006 is Constitutional and did not violate the Ex Post Facto Clause of the Constitution.  Judge Restani stated:

“Article I Section 9 of the Constitution provides that “No Bill of Attainder or ex post facto Law shall be passed.” This clause, however, does not prohibit the imposition of all retrospective laws.  Instead, the clause only prohibits the imposition of retrospective penal legislation, which often, though not always, takes the form of criminal law. . . .By contrast, retroactive remedial laws are not prohibited by the clause.”

Judge Restani then determined that since the countervailing duty law is a remedial statute, retrospective laws, such as this provision, are constitutional.  Judge Restani then threw out the other Constitutional arguments against the law.

Judge Restani did raise questions with some of the issues in the Commerce Department’s initial determination and remanded the case back for further clarification from Commerce.

CHINESE TRADE CASES—PULP CASE AGAINST THE UNITED STATES, CANADA AND BRAZIL

There are strong rumors in China that the Chinese government will soon initiate an antidumping case against cellulose pulp from the United States, Canada and Brazil.  If anyone wants more information about the situation, please feel free to contact me.

With the strong rumors of a pulp case against the United States and an ongoing Chinese case against Paperboard, we are starting to see another trade war in the Wood Products, Pulp and Paper Sector.  This war started with the US cases on Coated Paper, Wooden Bedroom Furniture and Wood Flooring and now the Chinese government has reacted with cases on Pulp and Paperboard.  The trade war continues.

SECTION 337 PATENT CASES—DOJ AND USPTO OBJECTIONS TO EXCULSION ORDERS ON STANDARD-ESSENTIAL PATENTS

In contrast to the US antidumping and countervailing duty law, section 337, which deals with violations of intellectual property, in particular, patents, does have a public interest provision.  If the US International Trade Commission (“ITC”) determines that imported products infringe a US patent, the ITC can issue an exclusion order to exclude the infringing products at the border.  In deciding whether to issue an exclusion order, the ITC is to take public interest into account, and based on public interest grounds can refuse to issue the exclusion order.

On January 8, 2013, the Department of Justice Antitrust Division and the US Patent and Trademark Office (“USPTO”), filed a report at the ITC questioning whether the ITC should issue exclusion orders in section 337 cases where the banned imports are found to infringe standard-essential patents (“SEP”).  The DOJ and the USPTO argued that where SEP owners have agreed to license their patents on fair, reasonable and nondiscriminatory terms and the respondents have agreed to those terms, the ITC should not allow the threat of an import ban to result in the extraction of unfairly high royalty rates for these patents.

Recently, antitrust authorities have become focused on how companies whose patent have been incorporated into industry standards should be allowed to enforce their IP and Patents.  Much of the debate has centered on the so-called “FRAND or RAND licensing commitments.”  In the proposal, the DOJ and the USPTO defined these licensing agreements as follows:

“ a patent is RAND- or FRAND-encumbered where a patent holder has voluntarily agreed to license the patent on reasonable and non-discriminatory (RAND) terms or fair, reasonable, and non-discriminatory (FRAND) terms while participating in standards-setting activities at a standards-developing organization (SDO).  In the United States, SDO members may commit to license all of their patents that are essential to the SDO standard on RAND terms.  In other jurisdictions, SDO members may commit to license such patents on FRAND terms.  For the purposes of this letter, F/RAND refers to both types of licensing commitments. Commentators frequently use the terms interchangeably to denote the same substantive type of commitment.”

The report goes on to state:

“Voluntary consensus standards serve the public interest in a variety of ways, from helping protect public health and safety to promoting efficient resource allocation and production by facilitating interoperability among complementary products.  Interoperability standards have paved the way for moving many important innovations into the marketplace, including the complex communications networks and sophisticated mobile computing devices that are hallmarks of the modern age. Indeed, voluntary consensus standards, whether mechanical, electrical, computer-related, or communications-related, have incorporated important technical advances that are fundamental to the interoperability of many of the products on which consumers have come to rely.”

The report then goes on to state:

“A patent owner’s voluntary F/RAND commitments may also affect the appropriate choice of remedy for infringement of a valid and enforceable standards-essential patent.  In some circumstances, the remedy of an injunction or exclusion order may be inconsistent with the public interest. This concern is particularly acute in cases where an exclusion order based on a F/RAND-encumbered patent appears to be incompatible with the terms of a patent holder’s existing F/RAND licensing commitment to an SDO.  A decision maker could conclude that the holder of a F/RAND-encumbered, standards-essential patent had attempted to use an exclusion order to pressure an implementer of a standard to accept more onerous licensing terms than the patent holder would be entitled to receive consistent with the F/RAND commitment—in essence concluding that the patent holder had sought to reclaim some of its enhanced market power over firms that relied on the assurance that F/RAND-encumbered patents included in the standard would be available on reasonable licensing terms under the SDO’s policy.  Such an order may harm competition and consumers by degrading one of the tools SDOs employ to mitigate the threat of such opportunistic actions by the holders of F/RAND-encumbered patents that are essential to their standards.”

“This is not to say that consideration of the public interest factors set out in the statute would always counsel against the issuance of an exclusion order to address infringement of a F/RAND-encumbered, standards-essential patent.  An exclusion order may still be an appropriate remedy in some circumstances, such as where the putative licensee is unable or refuses to take a F/RAND license and is acting outside the scope of the patent holder’s commitment to license on F/RAND terms.”

For further details, read the attached letter and report.  DOJ PROPOSAL ITC PUBLIC STANDARD DOJ PTO LTR

337 ROBOTIC TOY TRADE SECRETS CASE

On January 4, 2013, a 337 complaint was filed on robotic toys at the ITC alleging theft of trade secrets by a Chinese company.

According to the complaint filed by Innovation First International Inc., CVS Pharmacy Inc. is importing a robotic toy fish incorporating trade secrets stolen by a former IFI employee and taken to a Chinese company, Zuru Inc.  See the notice below.

Pending Institution

Docket No: 2930

Document Type: 337 Complaint

Filed By: Lauren A. Degnan

Firm/Org: Fish & Richardson

Behalf Of: Innovation First, International, Inc., Innovation First, Inc., and Innovation First Labs, Inc.

Date Received: January 4, 2012

Commodity: Robotic Toys

Description: Letter to Lisa R. Barton, Acting Secretary, USITC; requesting that the Commission conduct an investigation under section 337 of the Tariff Act of 1930, as amended regarding Certain Robotic Toys and Components Thereof . The proposed respondent is CVS Pharmacy Inc., Woonsocket, Rhode Island.

PATENT CASE AGAINST HANGZHOU COMPANY

On January 4, 2013, TP Orthodontics Inc. sued Hangzhou Shinye Orthodontic Products Co. Ltd. and Global Orthodontics LLC in the Federal Court in Illinois for patent infringement for imports of orthodontic brackets, which allegedly infringe TP’s US patent.

CRIMINAL COPYRIGHT CASE AGAINST CHINESE CITIZEN

On January 7, 2013, it was revealed that a Chinese citizen has pled guilty in Delaware federal court to criminal conspiracy charges for operating websites in China through which he sold more than $100 million worth of pirated computer software to buyers around the world.  Attached are copies of the Indictment and the Plea Agreement.  INDICTMENT PLEA AGREEMENT

In June of 2011, a Xiang Li of Sichuan was arrested in Saipan for criminal violations of US copyright laws.  The pirated programs that Xiang Li was selling were sensitive technology.  Mr. Li now faces a possible sentence of 25 years in Federal prison.  Li was lured to a US territory, the Pacific island of Saipan, by undercover agents, where he was arrested.

ANNUAL CFIUS REPORT TO CONGRESS

In the attached December 20, 2012 annual report to Congress, CFIUS REPORT TO CONGRESS the Committee on Foreign Investment in the United States (CFIUS) states:

“Based on its assessment of transactions identified by CFIUS for purposes of this report, the U.S. Intelligence Community (“USIC”) judges with moderate confidence that there is likely a coordinated strategy among one or more foreign governments or companies to acquire U.S. companies involved in research, development, or production of critical technologies for which the United States is a leading producer. Information supporting this assessment is provided in the classified version of this report. Indications of other coordinated strategies may go unobserved due to limitations on intelligence collection, or may be hidden or misconstrued because of foreign denial and deception activities.”

This finding could affect future transactions from identified companies or governments, which could include China.

If you have any questions about these developments or wish copy of the 337 complaint or other documents, please feel free to contact me.

Best regards,

Bill Perry

DEVELOPMENTS–TRADE, CUSTOMS/TARIFFS, 337/IP/PATENT, DRYWALL PRODUCT LIABILITY, ARBITRATION

Zhengyang Gate from Walking Street Tiananmen Square Beijing Chin There have been major developments in the Trade, Customs, 337/IP, Patent, Products Liability and Arbitration areas.

TRADE DEVELOPMENTS

SHRIMP FROM CHINA, VIETNAM, INDIA AND OTHER COUNTRIES

A new countervailing duty case has been filed against Shrimp from China and a number of other countries.  See the announcement below.  If anyone wants a copy of the complaint, please feel free to contact me.

Docket No: 2928 

Document Type: 701 Petition

Filed By: Elizabeth J. Drake

Firm/Org: Stewart and Stewart

Behalf Of: Coalition of Gulf Shrimp Industries (COGSI)

Date Received: December 28, 2012

Commodity: Frozen Warmwater Shrimp

Country: People’s Republic of China, Ecuador, India, Indonesia, Malaysia, Thailand, and the Socialist Republic of Vietnam

Description: Letter to Lisa R. Barton, Secretary, USITC; requesting the Commission to conduct an investigation under section 701 of the Tariff Act of 1930 regarding the imposition of countervailing duties on U.S. imports of Certain Warmwater Shrimp from the People’s Republic of China, Ecuador, India, Indonesia, Malaysia, Thailand, and the Socialist Republic of Vietnam.

Status: 701-TA-491-497

XANTHAN GUM FROM CHINA–COMMERCE DEPARTMENT PRELIMINARY ANTIDUMPING DETERMINATION

Today, the Commerce Department announced its preliminary antidumping duty determination in the Xanthan Gum from China.  Fufeng Biotechnologies Co., Co., Ltd.  received 21.69% and Deosen Biochemical Ltd. 127.65%.  The separate rate companies received 74.67%, and the rate for the rest of China is 154.07%.

Attached are the preliminary Federal Register notice and fact statement. Xanthan Gum Prelim FR (signed)  Xanthan Gum FS Prelim

CURTAIN WALL DECISION APPEALED TO THE COURT OF INTERNATIONAL TRADE

The Commerce Department’s decision to extend the Aluminum Extrusions antidumping and countervailing duty orders to cover imports of Chinese curtain wall/sides of buildings has been appealed to the Court of International Trade.  See the attached complaint.  Complaint and Aluminum Extrusion and Curtain Wall (2)

WOODFLOORING REVIEW INVESTIGATION STARTS UP

The US wood flooring industry has requested an antidumping and countervailing duty review investigation of numerous Chinese exporters.  If anyone wants a list of the Chinese companies named in the letter, please feel free to contact me.

CHINESE ANTIDUMPING AND COUNTERVAILING DUTY ON PULP FROM THE US, CANADA AND BRAZIL

Possibly in response to the numerous US cases against Chinese wood products, we have learned that the Chinese government is on the verge of initiating a major antidumping case against imports of wood pulp, cotton pulp, and bamboo pulp from the US, Canada and Brazil.  If anyone wants a copy of the target companies in the US, Canada or Brazil, please feel free to contact me.

CUSTOMS—NEW TARIFF BILL

On January 1, 2013, The House of Representatives introduced this week a major tariff reduction bill, The U.S. Job Creation and Manufacturing Competitiveness Act of 2013.  Attached is a copy of the bill, which must still go to the Senate.  TARIFF BILL  The bill represents a bipartisan effort to lower costs for US manufacturers by lowering tariff rates to zero on hundreds of products, including numerous chemical products.  Since both Republicans and Democrats sponsor the bill, it will pass the House.  According to the attached announcement by the House Ways and Means Committee, the Senate Finance Committee has reviewed the same proposals in the House Bill so this bill should eventually pass the Senate and go to the President for his signature.  HOUSE ANNOUNCEMENT

 NEW 337 PATENT CASE AGAINST HUAWEI AND ZTE

On January 2, 2013, a new 337 patent case was filed at the International Trade Commission against Huawei and ZTE.  See notice below.

Docket No: 2929 

Document Type: 337 Complaint

Filed By: Bert C. Reiser

Firm/Org: Latham and Watkins

Behalf Of: Inter Digital Communications, Inc., Inter Digital Technology Corporation, IPR
Licensing, Inc. and Inter Digital Holdings, Inc.

Date Received: January 2, 2013

Commodity: Wireless Devices with 3G and/or 4G Capabilities and Components

Description: Letter to Lisa R. Barton, Acting Secretary, USITC; requesting that the Commission conduct an investigation under section 337 of the Tariff Act of 1930, as amended regarding Certain Wireless Devices with 3G and/or 4G Capabilities and Components Thereof . The proposed respondents are Samsung Electronics Co., Ltd., Korea; Samsung Electronics America, Inc., Ridgefield Park, NJ; Samsung Telecommunications America, LLC, Richardson, TX; Nokia Corporation, Finland; Nokia Inc., White Plains, NY; ZTE Corporation, China; ZTE (USA) Inc., Richardson, TX; Huawei Technologies Co., Ltd., China; Huawei Device USA, Inc., Plano, TX; and Future Wei Technologies, Inc., d/b/a Huawei Technologies (USA), Plano, TX.

Status: Pending Institution

If anyone wants a copy of the complaint, please feel free to contact me.

MORE PATENT CASES AGAINST HUAWEI AND ZTE

Attached are the companion complaints filed in Federal District Court by Interdigital against Huawei and ZTE.  INTERDIGITAL HUAWEI INTERDIGITAL ZTE

In addition, Steelhead Licensing has filed a new patent case against ZTE.  See attached complaint.  STEELHEAD ZTE 

 DRYWALL PRODUCTS LIABILITY LEGISLATION

On Tuesday, January 1, 2013, the House of Representatives passed legislation banning the sale of contaminated drywall imported from China.  In the bill, Congress insisted that the Chinese government force Chinese manufacturers to compensate American homeowners who have faced property damage and health problems caused by the tainted product.

The U.S. House of Representatives voted 378-37 in favor of the Drywall Safety Act.  On December 21, 2012, the same bill went through the US Senate on a unanimous, 100 to 0, vote so the bill is on President Obama’s desk for signature.

The bill stipulates that contaminated drywall be treated as a banned hazardous substance under the Federal Hazardous Substances Act and as an imminent hazard under the Consumer Product Safety Act. 

Attached is a copy of the bill going to the President for signature.  US LEGISLATION

Section 2 of the Bill reads as follows:

SEC. 2. SENSE OF CONGRESS.

“It is the sense of Congress that—

(1)  the Secretary of Commerce should insist that the Government of the People’s Republic of China, which has ownership interests in the companies that manufactured and exported problematic drywall to the United States, facilitate a meeting between the companies and representatives of the United States Government on remedying home owners that have problematic drywall in their homes;

and

(2)  the Secretary of Commerce should insist that the Government of the People’s Republic of China direct the companies that manufactured and exported problematic drywall to submit to jurisdiction in United States Federal Courts and comply with any decisions issued by the Courts for home owners with problematic drywall.”

As mentioned in a previous post on this blog, there is a major multidistrict litigation, which includes 10,000 or more cases ongoing in the Eastern District of Louisiana.  Recently, in September, the Court rejected an effort by a Chinese company to lift a default judgment in the case and the Court found jurisdiction over the Chinese company.

One Chinese drywall manufacturer Knauf Plasterboard Tianjin Co., a subsidiary of a German company, in December 2011 settled the personal injury and other claims in a settlement worth between $800 million and $1 billion. This settlement covers about 4,500 homes.

ENFORCEMENT OF ARBITRATION AWARD BY CHINESE COMPANY AGAINST US COMPANY

Attached is a complaint filed January 2, 2013 by Chongqing Hengsheng Xintai Trade Co., Ltd. against Baja, Inc. a/k/a Baja Motorsports, LLC, a Delaware Corp., in the US District Court of South Carolina seeking to enforce an arbitration award from the China International Economic and Trade Arbitration Commission (“CIETAC”) against a US company.  CHONGQING CIETAC AWARD COMPLAINT

If anyone wants any information about these complaints, developments or general information on US Trade, Customs, antitrust, securities, products liability or arbitration law, please feel free to contact me. 

Best regards,

Bill Perry

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