US CHINA TRADE WAR–TRADE, SOLAR CELLS, LOBBYING 337

Washington Monument Vietnam Memorial Black Wall, Night WashingtoDear Friends,

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

TRADE

SOLAR CELLS NEGOTIATIONS

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 did not work and did not protect 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, has visited Beijing to discuss this issue along with a number of other issues.  The Commerce Department is also deferring to the USTR as to the message that was sent.  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.

In the EC when the the Solar Cells case was first brought,  Chancellor Merkel indicated that this trade fight should end in a negotiated settlement.

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.  I personally have never seen such an agreement, but with Congress involved, anything is possible.

CAFC REVERSES COMMERCE DECISION IN RIBBONS CASE

On May 20, 2013, in the Yangzhou Bestpak Gift & Crafts Co. Ltd. v. United States, the Court of Appeals for the Federal Circuit reversed the Court of International Trade’s determination affirming the Commerce Department final determination in the Narrow Woven Ribbons from China case to provide separate rate companies, the cooperating respondents, over 100% dumping rate.  In that case, the only cooperating Chinese company that the Department investigated individually received a 0% dumping rate.  RIBBONS CAFC BESTPAK  Commerce used an average of the 0% and the China wide rate for a mandatory company that refused to respond to the Commerce Department’s questionnaire of 247.65% for an average rate of 123.83% for more than 20 Chinese companies that cooperated with the Commerce Department and submitted separate rate applications, but were not chosen as mandatory respondents for the full investigation.

The effect of the Commerce Department decision was to wipe all Chinese ribbon out of the US market, but for Yama, the mandatory respondent, which received the 0% rate.  Only one separate rate company, Bestpak, appealed.  The CAFC stated:

“The record here is so thin that Commerce could neither have reached a valid decision nor reasonably have found evidence to support the determination that Bestpak deserves a margin that more than doubles the import’s sales price. The 123.83% rate assigned to Bestpak is far in excess of the de minimis rate assigned to the only cooperating, non-government controlled, and mandatory respondent: Yama. It is worth noting that similar to Yama, Bestpak successfully proved that it was independent of government control. However, Commerce ultimately assigned Bestpak a margin that was exactly half of the China-wide rate—a rate for those presumed to be under foreign government control. Assigning a non-mandatory, separate rate respondent a margin equal to over 120% of information is unjustifiably high and may amount to being punitive, which is not permitted by the statute.  . . .”

“The reasoning of Gallant Ocean is applicable here. In Gallant Ocean, this court found that the high rate determined for the Thai respondent—a rate that was more than ten times higher than the dumping margin for cooperating respondents—was unsupported by substantial evidence because there was nothing in the record that tied that rate to the respondent’s actual dumping margin.  The Thai respondent was unresponsive and application of adverse facts was warranted, the AFA rate assigned was required to reflect commercial reality and thus, to be “a reasonably accurate estimate” of actual dumping rates.   Even with determinations of an AFA-rate, Commerce may not select unreasonably high rates having no relationship to the respondent’s actual dumping margin. . . .”

“Likewise, rate determinations for nonmandatory,cooperating separate rate respondents must also bear some relationship to their actual dumping margins.”

ALUMINUM EXTRUSIONS

This is the anniversary month for the Aluminum Extrusions antidumping and countervailing duty orders and we are finding more and more US importers and Chinese exporters caught by this case.  Commerce apparently has interpreted the scope of merchandise in the orders very broadly as covering downstream aluminum products.  Requests for review are due by the end of May, and US importers and Chinese exporters of aluminum products, especially auto parts or auto part subassemblies, should be watching this case very closely.

CONCRETE STEEL RAIL TIE WIRE

Commerce has initiated a new antidumping case against imports of Concrete Steel Rail Tie Wire from China, Mexico and Thailand.  Attached is the Commerce Department’s Initiation Notice that came out May 14th.  factsheet-china-mexico-thailand-prestressed-concrete-steel-rail-tie-wire-initiation-051413

The Chinese company respondents are Silvery Dragon Group and Technology, Wuxi Jinyang Metal Products Co., Ltd, and Shanxi New Mile International Trade Co., Ltd.  The alleged antidumping rates in the petition are 54%

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

We are working with APCO, the most powerful lobbying organization in Washington DC, 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 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 the proposed changes to the US antidumping and countervailing duty laws are to help US companies, especially US importers and downstream industries.  If anyone is interested in such a Coalition, please feel free to contact me.

CHINESE ANTIDUMPING CASES AGAINST THE US

The Chinese government is bringing more antidumping and countervailing duty cases against the United States, including Alloy Steel Seamless Tubes against the US, EU and Japan and another chemical case.  The Alloy Steel Seamless Tubes case is against Wyman Gordon Forgings, SMC, Allegheny Technologies International and Hastelloy Alloy.

There are strong rumors that the Chinese government is going to bring another Chemical antidumping and countervailing duty case against Tetrochloroethylene or Perchloroethylene from the US and the EU.  The target companies in the US are PPG and Oxychem.  The target companies in the EU are Dow Chemical and Solvay.

What goes around in a trade war comes around.

PATENTS

337 CASES

On May 13, 2013, the Court of Appeals for the Federal Circuit in the attached Motiva LLC v. International Trade Commission and Nintendo made it much more difficult for Patent Trolls to bring 337 cases at the US International Trade Commission by raising the domestic industry standard.  CAFC MOTIVA DECISION  In the attached decision, the CAFC affirmed the ITC’s decision that Motiva did not meet the domestic industry standard because Motiva’s investment in litigation was not directed at adopting Motiva’s patented technology, but at financial gains.  As the CAFC stated in the Motiva decision:

“Motiva’s investment in the litigation against Nintendo could indeed satisfy the economic prong of the domestic industry requirement if it was substantial and directed toward a licensing program that would encourage adoption and development of articles that incorporated Motiva’s patented technology. . . .”

“And Motiva was never close to launching a product incorporating the patented technology—nor did any partners show any interest in doing so, for years before or any time after the launch of the Wii.  Motiva’s only remaining prototype was a product far from completion, and a multitude of development and testing steps remained prior to finalizing a product for production. Moreover, the evidence demonstrated that Motiva’s litigation was targeted at financial gains, not at encouraging adoption of Motiva’s patented technology. The inventors looked forward to financial gains through Motiva’s litigation, not hopes of stimulating investment or partnerships with manufacturers. . . .”

“Thus, on the record here, substantial evidence supports the Commission’s finding that Motiva’s litigation against Nintendo was not an investment in commercializing Motiva’s patented technology that would develop a licensing program to encourage adoption and development of articles that incorporated Motiva’s patented technology. . . . There is simply no reasonable likelihood that, after successful litigation against Nintendo, Motiva’s patented technology would have been licensed by partners who would have incorporated it into “goods practicing the patents.”

The CAFC further stated that it affirmed the Commission’s use of “the date of filing of Motiva’s complaint in the case as the relevant date at which to determine if the domestic industry requirement of section 337 was satisfied.”

HUAWEI

Attached is a new patent complaint filed by Relay IP against Huawei Technologies, USA Inc, Huawei Device USA Inc, and Futurewei Technologies Inc. on May 3, 2013.  RELAY HUAWEI CASE

SECURITIES

On May 17, 2013, Rich Antoun filed a class action securities case against Nam Tai Electronics in Shenzhen and two Chinese individuals for making materially false and misleading statements in press releases about its financial results.  See the attached complaint.  NANTHAI

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