US CHINA TRADE WAR–DEVELOPMENTS–TRADE, SOLAR CELLS, WINE, PATENTS, ANTITRUST AND SECURITIES

Dear Friends,

Mao Tomb from Qianmen Gate Tiananmen Square Beijing China NightThere have been some new developments in the trade, solar cells, 337/patents, antitrust and securities areas.

TRADE

SOLAR CELLS NEGOTIATIONS

The Solar Cell case has really heated up as the EC issued on June 4th a preliminary antidumping decision on Solar Cells from China with a preliminary antidumping rate of 11% that would escalate by August 5th to a rate as high as 67.9%.  See the attached decision by the EC in the Solar Cells case. EC PRELIMINARY ANTIDUMPING DECISION SOLAR CELLS

In response, the Chinese government initiated an antidumping and countervailing duty case against Wine from the EC.  See article below.

In the United States, on June 6th, Deputy National Security Adviser Michael Froman testified on Capitol Hill at his nomination hearing that he supports a global settlement to the Solar Cell war.  Froman testified that the Administration had reached out to China and the European Union to explore a possible negotiated settlement.  Apparently, any agreement would involve the whole supply chain of the solar industry, ranging from the polysilicon producers to the manufacturers of solar panels and solar installers who are using the products.

After the hearing, Wyden said it is critical to have a global solution because the “whole future of solar production [in the United States] is on the line.”

The USTR nominee conveyed a similar message in a written response to a question on this topic from Sen. Maria Cantwell (D-WA). “I assure you that this [solar dispute] is an urgent matter and that if confirmed, USTR will explore all avenues to attempt to address this matter,” he wrote.

Cantwell, in her question, noted that China plans to make a decision in its trade remedy case against U.S. exports of polysilicon, a raw material used in the production of solar cells, “in the coming weeks.” Some industry observers say the push for a negotiated solution comes from the U.S. makers of polysilicon, which are hurt by the Chinese trade case.

EC officials have stated that this phased in approach of antidumping duties in their Preliminary Antidumping determination avoids disruption in the EC market, but also provides China with a clear incentive to negotiate.  In the past, EU officials have shown little enthusiasm for including the U.S. in any negotiated settlement on the solar cases for fear it will dilute their leverage over China to negotiate an acceptable deal.

On June 5th, Coco Liu in an article in Climate Wire, entitled “TRADE: E.U. softens its tone in Chinese solar case, but trade tensions remain” stated:

“Although the European Commission has the final say on trade issues, it does not want to be seen as acting against the interests of member states.  The lower initial tariff also reflects the European Union’s desire to avoid a trade war with its second largest trade partner, China. As the solar trade case will affect Chinese exports worth more than $20 billion and more than 400,000 domestic jobs, the Chinese government made it clear that it won’t stand by without reacting. . . .

Chinese politicians and industry groups have been in talks with their European counterparts since the trade dispute was sparked, but their negotiations often turned into mutual recriminations. If both sides fail to reach an agreement this time, the tariff will be raised to 47.6 percent on Aug. 6. That means the Chinese solar industry will face a killing blow from its biggest customer.

“Chinese solar manufacturers have a chance to compete in the European market as long as the tariff is below 15 percent,” said Steven Han, analyst at U.S.-based consultancy Solarbuzz. “But if the tariff is being raised, their market access to the E.U. market will cease to exist.”

Another chance for the Chinese to talk off the tariffs is December 2013, when the European Union makes its final decision whether or not to set the punitive tariffs for five years and at what rate. But Han doubts Chinese solar companies could survive into that time.

Overcapacity and a ferocious price war as a result have already driven the Chinese solar industry to a breaking point, forcing many small factories out of business and leaving industry giants with red ink in their financial reports  . . .The E.U. decision is seen as the straw that broke the camel’s back.

The Alliance for Affordable Solar Energy, a coalition of more than 400 companies in the European solar industry, says that its members’ already thin profit margins are also at risk due to the E.U. decision.

“We need to be clear about one thing: The current market development leaves no room for price increases. Therefore already duties as low as 11.8 percent will put a halt to most of the PV projects in the E.U. and cause severe damage to the European solar value chain,” the association said in its statement issued yesterday.”

See article at www.eenews.net/cw.

 

As indicated in past posts on this blog, in a March 2013 hearing of the Senate Finance Committee, Subcommittee on Trade, Senator Ron Wyden, the Chairman and the political supporter of Solar World, pressured Acting USTR Demetrios Marantis for a global agreement in the Solar Cells situation. 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. So Senator Wyden has created a fire storm.

In response, the US and EC have decided to try and negotiate settlements with China in the Solar Cells case involving roughly $30 billion a year in solar panel shipments to both the US and the EC. The strategy is to essentially carve up the global solar panel market into regional markets. This would have the effect of driving up the prices for Chinese solar panels by requiring Chinese companies to charge higher prices and limit the total number of solar panels that they ship. In return, the Chinese companies would no longer be charged the steep antidumping and countervailing duties against their solar cells.

Francisco Sanchez, the under secretary of commerce for international trade, recently visited Beijing to discuss this issue along with a number of other issues. The US Administration is just in the early stages of sounding out Congress on the terms of a possible settlement.

A negotiated deal would close the third country loophole, 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 and EC produced polysilicon.

Negotiations with China are still in a very early stage, so it may take several months before a final deal, if any, is struck. It is also possible that no deal will emerge at all.

Both Chinese, EC and US officials indicate that they want a deal, but any negotiated settlement could be difficult. EC negotiators have already met three times with Chinese officials at the request of the Chinese side, but at none of these meetings has China put forward any plan to limit export volumes or raise prices.  According to EC officials, however, the negotiations could not really start until the Preliminary Determination was issued, which just happened on June 4th.

In the EC when the Solar Cells case was first brought, Chancellor Merkel indicated that this trade fight should end in a negotiated settlement.  Thus, Germany and a number of other EC countries have indicated their opposition to antidumping and countervailing duty orders against solar cells from China.  France, however, supports the EC antidumping and countervailing duty cases against Solar Cells from China.

In US Antidumping and Countervailing Duty cases, however, an agreement is usually struck before the orders are issued–called a Suspension Agreement. As a result of the negotiated deal, the antidumping and countervailing duty investigations are “suspended” before the orders are issued. In the Solar Cells case, therefore, normally any Agreements would have had to be negotiated before the orders were issued. Thus, it will be interesting to see if the US government goes forward, how it will craft a settlement with China in this situation.  The US government might have the Petitioners withdraw their petition in return for a negotiated settlement.

With the US Congress involved, however, anything is possible.

ALUMINUM EXTRUSIONS

The Commerce Department on Tuesday, June 7th, issued preliminary determinations in the first review investigations on Aluminum Extrusions from China.  See the Attached Determinations.  AluminumExtrusions.PrelimNotice.signed   FR UNPUBLISHED SIGNED OCR PUBLIC This case has become very important because Commerce has expanded the antidumping and countervailing duty orders on aluminum extrusions to cover many downstream products, including jungle gyms, auto parts and curtain walls, the sides of buildings.

In the initial investigation, the Commerce Department set a countervailing duty cash deposit rate of 374%, but through a series of appeals in the McLain Fogg case that cash deposit rate was reduced to 137%.

As US importers know, however, the really important decision is the Commerce Department’s final determination in the review investigations, because that decision determines the actual antidumping and countervailing duties that US importers have to pay.  If the rates go up in an antidumping or countervailing duty review investigation, the US importers are retroactively liable for the difference plus interest.  If the rates go down, however, the US importers get back the difference plus interest.

These June 7th preliminary determinations by the Commerce Department are the first indication of what the actual liability for US importers will be and there is some good news.

As indicated in the attached preliminary determinations, the Antidumping rate basically stayed the same as the rate in the initial investigation at 32.79%, but the countervailing duty rates for most Chinese companies fell from 137% to 12.57% in 2010 and 20.75% in 2011.  There will be a set off between the antidumping and countervailing duty rates so there will be some changes later on.

This means that a US importer that imported $100 of aluminum extrusions in 2011, will probably owe a final amount of $32 plus to the US government.

It should be noted that some Chinese companies received antidumping and countervailing duty rates as low as 0 to 1%, where certain Chinese companies were hit with a countervailing duty rate as high as 170%.  A US importer, therefore, should look at the attached notices to figure out which company has which rate.

These rates also will change in the Commerce Department final determinations and those rates then can be appealed to the Court of International Trade and Court of Appeals for the Federal Circuit.

Keep in mind these new rates only apply to the Chinese companies that requested a review investigation.  If there was no request for the review investigation, the China wide CVD rate will be the rate from the Initial Investigation, which is still on appeal to the Court of Appeals for the Federal Circuit.

In the first review investigation, probably because of the high 374% CVD rate, the Petitioner did not request review investigations of many Chinese companies.

In contrast to the first review, however, in the 2012-2013 Antidumping and Countervailing Duty Review Investigations that just started, the Petitioners have requested a review of almost all the Chinese companies that were involved in exporting products to the United States.

IMPORTERS’ LOBBYING COALITION AGAINST EXPANSION OF ANTIDUMPING AND COUNTERVAILING DUTY LAWS AGAINST CHINA

We continue to put together a US importers/end users lobbying coalition to lobby against the expansion of the antidumping and countervailing duty laws against China.  In particular, we will be trying to educate the US Congress and Administration on the damaging effects of the US 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.

13 US importers in a number of different industries have joined the Coalition, but we continue to search for additional members.  If anyone is interested in such a Coalition, please feel free to contact me.

CHINESE ANTIDUMPING AND COUNTERVAILING DUTY CASES

WINE FROM THE EC

On June 5th, the Ministry of Commerce in Beijing (“MOFCOM”) announced that it was initiating an antidumping and countervailing duty case against wine from the EC.  Coming just after the EC preliminary antidumping determination in the Solar Cells from China case, many commentators speculated that the Wine case against the EC was retaliation against the EC Solar Cells decision.

Thus the UK Telegraph stated in an article on June 5, 2013:

“China has launched a trade probe against European Union wine imports, a day after Brussels imposed stinging duties on its solar panels, as it emerged that the commissioner leading the EU probe could personally be hit by any Chinese penalties. . . .

In a move that will increase tensions between two of the world’s biggest trading blocs, the commerce ministry in China said the government had begun an anti-dumping and anti-subsidy probe into EU wines at the request of Chinese wine manufacturers.

The Chinese move targets France, one of the countries that supported the commission’s tariffs on Chinese solar panels, levies that were opposed by Germany and Britain. . . .

In an added twist, Karel de Gucht, the EU trade commissioner who hit China with the solar panel levies, is himself a wine producer. He owns the Tuscan vineyard that produces “La Macinaia”, a Chianti Classico that retails in Belgium at €22,49 a bottle.

Italy and Spain, which both supported the solar panel tariffs, will have exports worth €77 million and €89m potentially covered by any Chinese measures against European wines. . . .

The French trade ministry has condemned the Chinese move and warned of an escalating trade war if Beijing did not follow WTO rules procedures. . . .”

On June 6th, a Chinese newspaper, Xinhua, reported that the Chinese trade investigation of EC wine imports was not retaliation against EC because of the EC Solar Cells determination:

“China’s trade investigation of wine imports from Europe is not retaliation against European Union’s (EU) decision to impose punitive tariffs on China’s solar panels, a spokesperson of the Chinese Mission to the EU said Thursday.

“China has long been exercising restraint in adopting trade remedy measures despite of clear evidence for the EU dumping and subsidizing certain exports to China,” the spokesperson said in a statement.

The investigation launched by the Ministry of Commerce (MOC) of China is in response to requests and complaints from Chinese wine producers, the spokesperson said.

“The decision complies with the World Trade Organization (WTO) rules and China’s anti-dumping and countervailing regulations. Such regular investigation should not be regarded as retaliation,” the spokesperson stressed.

The statement came a day after China decided to begin an anti-dumping and anti-subsidy investigation into wines imported from the EU.

China’s wine producers filed a petition to the ministry last year, calling for probes into the EU’s dumping of wine that received unfair government subsidies and was damaging China’s wine industry, according to the ministry Wednesday.

The MOC said China has always been cautious about the use of trade remedy measures, and the ministry has observed that wine imports from the EU has (sic) risen at a high speed in recent years and will carry out a strict investigation according to relevant laws.”

CUSTOMS FRAUD

On June 10, 2013, Hartford Insurance filed a complaint against one of the US Honey companies involved in the Honey Antidumping Evasion Scheme, asking the Illinois Court for a declatory judgement that it does not have to pay for the class action lawsuit from the duty-evasion scheme.  Hartford argues that Groeb Farms, the defendant, breached various aspects of the insurance policies it signed, because it knew about the fraud problems when it signed the insurance policies.

See attached complaint.  HARTFORD COMPLAINT

PATENTS

 337

On June 7th the Court of Appeals for the Federal Circuit issued the attached decision in Interdigital Communications v. ITC reversing the Commission’s decision in the 337 Case in Certain Wireless Devices.  In that case, the ITC dismissed the 337 Case against LG based on an arbitration clause.  CAFC DECISION LG

CRAWLER CRANES NEW 337 CASE AGAINST CHINA

On June 12th, a new section 337 case we filed against Crawler Cranes from China.  See the notice below.  A short form of the Complaint is attached. Certain Crawler Cranes Short Version PUB Complaint-6-14-13

Docket No: 2960

Document Type: 337 Complaint

Filed By: Mark. L. Whitaker

Firm/Org: Baker & Botts

Behalf Of: Manitowoc Cranes LLC

Date Received: June 12, 2013

Commodity: Crawler Cranes

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 Crawler Cranes and Components Thereof. The respondents are: Sany Heavy Industry Co, Ltd., China and Sany America Inc., Peachtree City, Georgia.

PATENT CASES

SUPREME COURT HOLDS THAT GENES CANNOT BE PATENTED

Attached is the June 13th decision of the Supreme Court holding unanimously that Myriad cannot patent DNA itself, because that falls within the law of nature exception, but that cDNA is not a product of nature and can be patented.  SUPREME COURT GENE OPINION

PATENT COMPLAINTS

Two patent complaints have been recently filed against Chinese companies—a May 31, 2013 case—Emerson Electric Co. v. Suzhou Cleva Electric Appliance Co. and another  June 4, 2013 case filed by Patentmarks Communications v. ZTE (USA).  SUZHOU PATENT CASE ZTE PATENT CASE

ANTITRUST

VITAMIN C

On June 3, 2013, North China Pharmaceutical Group and Hebei Welcome filed the attached reply brief in an attempt to toss out the $153 million damages award in the Vitamin C price fixing case.  The companies argued that the Act of State doctrine was designed to block the kind of case made by Plaintiffs at the trial.  This argument was previously rejected by the Court in a September 11, 2011 Summary Judgment determination by the Court.

See the attached reply brief and September 11th decision by the Court. vitamin c response  SEPT 11 VITAMIN C DECISION

It should be noted that a jury in March awarded plaintiffs $54.1 million in damages, which was tripled to $162 million, but former defendants had paid the remaining $9 million in settlement of the trebled award lowering the total amount due from the remaining defendants from $162 million to $153 million.

SECURITIES

CHINA ELECTRIC MOTOR

On June 3, 2013, a California Federal District Court agreed to a $3.7 million settlement of a securities class action alleging China Electric Motor Inc. made misleading statements in its initial public offering documents.  The Court found the deal was fair and reasonable for investors.

The agreement resolves one of numerous securities fraud suits filed against U.S.-Iisted Chinese companies since 2010.

See the attached settlement. CHINA ELECTRIC SETTLEMENT

SHELL COMPANIES

On June 3, 2013, the US Securities and Exchange Commission (“SEC”) suspended trading in 16 dormant shell companies, whose stocks could be used in fraud schemes.  See attached announcement.  SHELL COMPANIES ORDER  This was the second-largest suspension in SEC history.  One of the companies was China Renyuan International, Inc.

The SEC said an analysis by its Microcap Fraud Working Group found that the companies were delinquent in their public filings and appeared to no longer be in business, raising the risk that their securities could be used in pump-and-dump schemes.

In a pump-and-dump scheme, fraudsters will purchase shares of a thinly traded company, tout the firm to investors through false and misleading statements, and sell the stock for significant profit once investors buy in.

“Stock manipulators crave empty shell companies that they can use to conduct pump-and dump schemes and line their pockets with illicit trading profits by taking advantage of unsuspecting investors,” said Andrew J. Ceresney, co-director of the SEC’s Division of Enforcement. “We will aggressively suspend trading in such empty shells to take away a tool of their trade and help rid our markets of fraud.”

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

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