There have been developments in the US trade, customs law/false claims act, antitrust and securities cases against Chinese companies.


Attached is the Commerce Department Notice just issued December 6, 2012 stating that the new cash deposit for the Aluminum Extrusions from China countervailing duty case is 137%.  PUBLISHED TIMKEN NOTICE


The Commerce Department has just issued the quantity and value questionnaire to Chinese exporters that want to participate in the antidumping investigation on Silica Bricks from China.  The response requires Chinese exporters to report their sales of Chinese silica bricks to the United States from April 1, 2012 through September 30, 2012.  The response is due at the Commerce Department by December 26, 2012. 

If a Chinese silican brick exporter does not file the response to the questionnaire by December 26, it will be shut out of the US market for a minimum of two and a half years with the highest dumping rate from the date of the Commerce Department’s antidumping preliminary determination.  Attached is a copy  of the quantity and value questionnaire.  If anyone has questions about the case, please feel free to contact me.  SILICA BRICKS QV 

CUSTOMS–FALSE CLAIMS ACT–$45 Million Dollar Settlement in Violet Pigment Case

On December 17, 2012, the US Department of Justice announced a $45 million dollar payment from Japan-based Toyo Ink SC Holdings Co. Ltd. and various affiliated entities (collectively, Toyo Ink)  to settle allegations that they violated the False Claims Act by knowingly failing to pay antidumping and countervailing duties on imports of violet pigment from China.

As the Department of Justice states in the attached announcement, 45 MILLION SETTLEMENT FCA CASE, the government alleged that Toyo Ink knowingly misrepresented, or caused to be misrepresented, the country of origin on documents presented to U.S. Customs and Border Protection to avoid paying duties, particularly antidumping and countervailing duties, on imports of the colorant carbazole violet pigment number 23 (CVP-23) between April 2002 and March 2010.  Although Toyo Ink’s CVP-23 from the PRC and India underwent a finishing process in Japan and Mexico before it was imported into the United States, the government alleged that this process was insufficient to constitute a substantial transformation to render these countries as the countries of origin. 

The announcement further states:

“Importers seeking access to United States markets must comply with the law, including the payment of customs duties meant to protect domestic companies from unfair competition abroad,” said Stuart F. Delery,Principal Deputy Assistant Attorney General for the Justice Department’s Civil Division. “This settlement demonstrates that the Department of Justice will zealously guard the public fisc – taking action not only against those who fraudulently obtain government funds, but also against those who inappropriately avoid paying money owed to the United States.”

“Anne M. Tompkins, U.S. Attorney for the Western District of North Carolina, stated that, “Fair and lawful trade requires importers to truthfully identify their products and pay the appropriate duties.  Our office will vigorously investigate and prosecute importers who make false representations and claims designed to avoid the payment of lawful import duties.”

“The allegations resolved by today’s settlement were initially alleged in a whistleblower lawsuit filed under the False Claims Act by John Dickson, president of a domestic producer of CVP-23. Under the False Claims Act, private citizens can sue on behalf of the United States and share in any recovery.” “Mr.Dickson will receive more than $7,875,000 as his share of the government’s recovery.” 

“The False Claims Act suit was filed in the U.S. District Court for the Western District of North Carolina, and is captioned United States ex rel. Dickson v. Toyo Ink Manufacturing Co., Ltd., et al., No. 09-CV- 438 (W.D.N.C.).”


Attached is a brief the Justice Department filed against two executives in the Au Optronics Taiwan LCD Cartel Case.  DENY BAIL FOR TAIWAN INDIVIDUALS In the case, two Taiwan Chinese executives were convicted and sentenced to three years in Federal Prison.  The two executives tried to persuade the Court to give them bail and stop them from going to jail this November.

The Justice Department opposed their motion for bail and said they should directly go to prison, because parts of the cartel activity took place in the United States and directly affected US consumers.  The brief is interesting reading to show how foreign defendants have a difficult time arguing that the criminal activities took place in foreign countries and, therefore, they should get out of the case.

The brief illustrates the long reach of the US law and how it can apply to citizens in foreign countries.


On December 12, 2012, billion-dollar international hedge fund US Company Tiger Asia Management LLC pled guilty to civil and criminal charges of insider trading of Chinese bank stocks on the Hong Kong exchange in New Jersey federal court Wednesday, agreeing to pay a combined $60 million in disgorgement and penalties for using insider information to short Chinese bank stocks.

Tiger Asia founder Sung Kook “Bill” Hwang, 48, pled guilty to one criminal count of wire fraud on behalf of the company, according to the U.S. Department of Justice. U.S. District Judge Stanley R. Chesler sentenced the company to one year of probation and ordered Tiger Asia to forfeit $16 million in criminal proceeds.

The company also agreed to settle insider trading charges in a parallel action brought by the U.S. Securities and Exchange Commission, agreeing to pay $44 million in disgorgement and penalties, according to the SEC.  “Hwang today learned the painful lesson that illegal trading offshore is not off-limits from U.S. law enforcement, and tomorrow’s would-be securities law violators would be well-advised to heed this warning,” said Robert Khuzami, director of the SEC’s Division of Enforcement.

The criminal and civil complaints alleged that Tiger Asia used non-public information from investment bankers to short-sell stock in three Chinese bank stocks traded on the Hong Kong Stock Exchange, according to the government.

Attached is a copy of the SEC complaint that was filed on December 12, 2012.  TIGER ASIA COMPLAINT 


On December 11, 2012, the Securities and Exchange Commission (“SEC”) filed a complaint against Huakang/David Zhou and Warner Investments for multiple securities violations, including fraud.  Zhou and Warner Investments acted as an advisor to over 20 Chinese companies that used a reverse merger to go public.  These Chinese  include China Yingxia International and American Nano Silicon Technologies, which, in turn, have been convicted of fraud.

In paragraph 3 of the Complaint, the SEC states’ “From at least 2007 through 2010, Defendants engaged in varied misconduct involving some of the same clients, ranging from nondisclosure of certain holdings and transactions to outright fraud in violation of federal securities laws.”  Attached is a copy of that SEC complaint. SEC ZHOU WARNER

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




A new antidumping petition has been filed against China–Silica Bricks.  Please see ITC notice below.  If anyone wants a copy of the complaint, please feel free to contact me.

Docket No: 2920

Document Type: 731 Petition

Filed By: Samuel C.Straight

Firm/Org: Ray Quinney & Nebeker

Behalf Of: Utah Refractories Corporation

Date Received: November 15, 2012

Country: People’s Republic of China

Description: Letter to Lisa R. Barton, Secretary, USITC; requesting the Commission to conduct an investigation under sections 731 of the Tariff Act of 1930 regarding the imposition of antidumping duties on Silica Bricks and Shapes from the People’s Republic of China

Status: 731-TA-1205


One of the great antidumping myths created by US producers and trade lawyers is that Commerce is actually determining that Chinese companies have engaged in an unfair trade practice–dumping.  As many trade practitioners, Chinese producers, Chinese government officials and US importers in antidumping cases against China know, Commerce does not use actual Chinese prices and costs in China to determine dumping.

Dumping is generally defined as a foreign producer/exporter selling products in the United States below the foreign producer/exporter’s prices in the home market or the fully allocated cost of production.  Thus, in a market economy case against foreign companies in Japan, Taiwan, South Korea, Russia, Ukraine and even Iran, Commerce will use actual prices and costs in the home/foreign market to determine whether the foreign producer/exporter is dumping.

But not China.  As  former Communist countries, China and Vietnam are treated differently as nonmarket economy countries.  Instead of using actual prices in China to detemine whether a Chinese company is dumping, Commerce constructs a cost using consumption factors for raw materials, labor and electricity multiplied by values from public information in a third surrogate country.  From that constructed cost, Commerce adds percentages, which sometimes can be a high as 100%, from public financial statements of companies in a third surrogate country for overhead, SG&A and profit so as to construct a total cost.  Commerce then compares this total constructed cost to Chinese export prices to the United States to determine whether the Chinese company is dumping.

The key issue is the values from third countries.  Do they have any relationship to Chinese prices?  Often they do not.  The values have simply no relationship with reality.  In one chemical case I worked on, Commerce used a surrogate value for the chemical used to clean the boiler that was equivalent to the price of gold, creating a huge dumping margin for the Chinese company.

In another metals case on Silicomanganese, where the key input was electricity, the Chinese price for electricity was about 3 cents a kilowatt hour because it was from hydropower.  The US price for electricty as set by the Tennessee Value Commission was 6 cents a kilowatt hour.  What did Commerce use?  13 cents a kilowatt hour from India, creating a huge dumping rate and shutting the Chinese companies out of the US market.  Indian electricity rates, however, are distorted because the Indian electricity commission sets very high rates for industry to subsidize Indian farmers.

In the recent Solar Cells case, the key issue was which surrogate country to use.  The Chinese companies argued that Commerce should use surrogate values in India because it has a mature solar industry.  Commerce refused and used Thailand, which the Petitioners were advocating, that does not have a mature solar industry.  Higher values lead to high dumping margins.

In case after case, Commerce uses distorted surrogate values that have no relationship to reality and then say the Chinese are dumping.

In a recent Civil litigation, a US law firm representing US producers argued that Chinese companies have an obligation to inform the Commerce Department when their costs have increased.  In fact, there is no such obligation under US antidumping law, but more importantly, Commerce does not use actual prices and costs in China to determine whether the Chinese companies are dumping.

With such distorted surrogate values are used by Commerce to calculate antidumping rates, can one really conclude that Commerce has truly determined that the Chinese companies are dumping?  The answer, I believe, is simply no.  The Commerce Department calculations are simply another way to artificially increase antidumping rates for Chinese companies and throw them out of the US market.  This is simple protectionism and it is time for someone to say the Emperor has no clothes.  The antidumping rates for Chinese companies are artificial and have no relationship to reality.

The sad part of these calculations is the impact on US importers and US end users.  In one case on Electrolytic Manganese Dioxide, I remember vividly the investigator smiling at verification because in reality they intended to use the highest priced surrogate values they could find in India for the key raw material inputs.  Commerce did use the highest surrogate values and shut the Chinese electrolytic manganese dioxide out of the US market with high dumping rates.  But what was the Chinese raw material used to produce in the United States?  Batteries.

I asked the US importer whether it wanted to do an antidumping review investigation and try again for a low rate.  The importer responded–“There are no longer any customers;  they have closed down and moved”.  In fact, Panasonic closed down its US battery plant and moved to China.

Pursuant to the US China WTO Agreement, Commerce must make China a market economy country in 2016.  I have argued that Commerce should make China a market economy country sooner–not for the Chinese, but for the US importers.  If Chinese companies are actually dumping, then they should be hit with antidumping duties.  But if Commerce uses actual prices and costs in China, the Chinese producer/exporter can reduce its costs and change its Chinese prices to eliminate dumping margins.

If the problem is subsidies from the Chinese government, then hit the Chinese company with countervailing duties, but do not create distorted dumping rates that have no relationship to reality.  See my attached article from Furniture World.  REVISEDPERRYMAGARTFURNWORLD


The US China Economic and Security Commission, which is a part of the US Government, has just issued its report to Congress and it makes a number of very tough recommendations to the US Congress in the trade and economics areas, including:

a mandatory requirement that all transactions between China and the United States involving state-owned companies be reviewed by the Committee on Foreign Investment;

the SEC should develop unique country risks to assure that US investors are aware of the risks in investing in Chinese companies;

give Senate and House Committees along with State and Local governments the right to be petitioners in antidumping and countervailing duty cases; and

provide for a private right of action for US producers injured by antidumping by Chinese State-Owned companies.

Some of the specific recommendations are as follows:

The Commission recommends that:

  • Congress examine foreign direct investment from China to the United States and assess whether there is a need to amend the underlying statute (50 U.S.C. app 2170) for the Committee on Foreign Investment in the United States (CFIUS) to (1) require a mandatory review of all controlling transactions by Chinese state-owned and state-controlled companies investing in the United States; (2) add a net economic benefit test to the existing national security test that CFIUS administers; and (3) prohibit investment in a U.S. industry by a foreign company whose government prohibits foreign investment in that same industry.

2. Congress direct the U.S. Securities and Exchange Commission (SEC) to revise its protocols for reviewing filings by foreign entities listed on or seeking to be listed on the U.S. stock exchanges.  The SEC should develop country-specific data to address unique country risks to assure that U.S. investors have sufficient information to make investment decisions. The SEC should focus, in particular, on state-owned-and -affiliated companies and subsidies and pricing mechanism that may have material bearing on the investment.

3. Congress examine the access of small- and medium-sized enterprises to the remedies contained in the U.S. antidumping and countervailing duty laws. As part of this examination, Congress should consider whether to (1) grant enhanced authority to initiate antidumping and countervailing duty cases to the Senate and House Committees most responsible for international trade; and (2) include state and local governments as interested parties under the U.S. trade laws.

4. Congress adopt legislation that would provide a private right of action for domestic producers who suffer injury from antidumping and countervailing duty violations from the operations of Chinese state-owned or –affiliated firms operating in the U.S. market.

Attached is the entire report.  2012 US COMMISSION REPORT This report will definitely throw gasoline on the US China Trade War fire.