27 F.Supp.2d 1351 (CIT. 1998), 95-06-00782, Gerald Metals, Inc. v. United States

Docket Nº:Court No. 95-06-00782.
Citation:27 F.Supp.2d 1351
Party Name:GERALD METALS, INC., Plaintiff, v. UNITED STATES, Defendant, and Magnesium Corp. Of America, Int'l Union of Operating Engineers, Local 564, and United Steel Workers of America, Local 8319, Defendant-Intervenors. Slip Op. 98-148.
Case Date:October 20, 1998
Court:Court of International Trade
 
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Page 1351

27 F.Supp.2d 1351 (CIT. 1998)

GERALD METALS, INC., Plaintiff,

v.

UNITED STATES, Defendant,

and

Magnesium Corp. Of America, Int'l Union of Operating Engineers, Local 564, and United Steel Workers of America, Local 8319, Defendant-Intervenors.

Slip Op. 98-148.

Court No. 95-06-00782.

United States Court of International Trade.

Oct. 20, 1998

        Holland & Knight LLP (Frederick P. Waite andKimberly R. Young) and Joseph Brooks for Plaintiff.

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        Lyn M. Schlitt General Counsel; James A. Toupin, Deputy General Counsel; Andrea C. Casson, Michael Diehl, and Willis S. Martyn III, Office of the General Counsel, U.S. International Trade Commission, for Defendant.

        Baker & Botts, L.L.P. (William D. Kramer and Clifford E. Stevens, Jr.) for Defendant-Intervenor.

        OPINION

        POGUE, Judge:

        On April 28, 1998, the Court remanded this matter to the International Trade Commission ("Commission"). See Gerald Metals, Inc. v. United States Int'l Trade Comm'n, 8 F.Supp.2d 861 (CIT 1998). The remand was ordered pursuant to the decision (December 23, 1997) of the Court of Appeals for the Federal Circuit ("Federal Circuit") directing this Court to vacate its decision to affirm the Commission's finding of material injury. See Gerald Metals, Inc. v. United States, 132 F.3d 716 (Fed.Cir.1997). In particular, this Court ordered the Commission to reconsider its material injury finding in a way that is consistent with the legal standard articulated by the Federal Circuit and takes into account the existence and substitutability of fairly-traded Russian imports of pure magnesium and the increase in the market share of these imports during the period of investigation. Gerald Metals, 8 F.Supp.2d at 862.

        BACKGROUND

        Plaintiff Gerald Metals, Inc. ("Gerald Metals") commenced this action under section 516A of the Tariff Act of 1930 for review of the final affirmative determination of the Commission that less-than-fair-value ("LTFV") imports of pure magnesium from Ukraine are causing material injury to the domestic industry. Magnesium from China, Russia, and Ukraine, 60 Fed.Reg. 26,456-57 (Int'l Trade Comm'n, May 17, 1995)(final). 1 The Court exercised jurisdiction pursuant to 28 U.S.C. § 1581(c)(1994).

        Gerald Metals argued that there was no causal nexus between LTFV imports from Ukraine and material injury to the domestic industry. See Gerald Metals, Inc. v. United States, 20 CIT 1065, 937 F.Supp. 930, 934 (1996), vacated, 132 F.3d 716 (Fed.Cir.1997). Gerald Metals contended "that, absent any LTFV imports, domestic consumers would have purchased fairly-traded Russian imports," demonstrating that the LTFV imports did not cause any material injury to the domestic industry. Id.

        The circumstances surrounding the existence of fairly-traded Russian imports of pure magnesium were indeed unique. Only two producers were responsible for all Russian imports of pure magnesium. See Gerald Metals, 132 F.3d at 720. Whether the Russian imports arrived as fairly-traded or LTFV was determined solely by which trading company exported the product. 2 Id. Therefore, the fairly-traded and LTFV Russian imports of pure magnesium were found to be perfect substitutes for each other. Id.

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In addition, the record indicated that the Commission found both classes of Russian imports to be close substitutes with the LTFV Chinese imports and the LTFV Ukrainian imports. Id. at 721.

        Nevertheless, this Court affirmed the Commission's finding of material injury by reason of LTFV imports from Ukraine. See Gerald Metals, 20 CIT at ----, 937 F.Supp. at 942. Although the Commission's final determination did not account for the existence of fairly-traded Russian imports, see Magnesium from China, Russia, and Ukraine, USITC Pub. 2885, Inv. Nos. 731-TA-696-698 (May 1995)(Views of the Commission)("Determination") 3, the Court found that record evidence indicated that the Commission did consider them. See Gerald Metals, 20 CIT at ----, 937 F.Supp. at 935. Because "[t]he Commission considered the presence and effects of fairly-traded Russian imports [,]" the Court concluded, "its determination [was] in accordance with the law." Id. The Court then found substantial evidence to support the Commission's determination that the domestic industry was materially injured by reason of the LTFV Ukrainian imports. Id. at ----, 937 F.Supp. at 936.

        The Federal Circuit disagreed. On appeal by Gerald Metals, the Federal Circuit concluded that, "[g]iven the unique circumstances of this case [i.e., the presence and substitutability of fairly-traded Russian imports], the record, without more, does not show that LTFV imports were the reason for the harmful effects to the domestic magnesium industry." Gerald Metals, 132 F.3d at 722-23. The Federal Circuit held that this Court "erred by applying an incorrect legal test for the amount of contribution to material harm by LTFV goods necessary to satisfy the 'by reason of' standard." 4 Id. at 722. The Federal Circuit held that, by failing to adequately account for the presence and substitutability of fairly-traded Russian imports, this Court "followed the reasoning that any contribution [by LTFV imports] constitutes sufficient causation to satisfy the 'by reason of' test." Id. The Federal Circuit clarified that "evidence of de minimis (e.g., minimal or tangential) causation of injury does not reach the causation level required under the statute." Id.

        Thus, on April 28, 1998, this Court ordered the Commission,

to reconsider its material injury finding in away that is consistent with the legal standard articulated by the [Federal Circuit] and that takes into account the existence and substitutability of fairly-traded Russian imports of pure magnesium and the increase in the market share of said imports during the period of investigation[.]

Gerald Metals, 8 F.Supp.2d at 862. On remand, the Commission determined by a two to one majority that an industry in the United States was not materially injured or threatened with material injury by reason of imports of pure magnesium. See Magnesium from the People's Republic of China, Russia, and Ukraine, Inv. Nos. 731-TA-696-698 (June 30, 1998)(Final, Remand)("Remand"). 5 Upon review of the Commission's remand determination, this Court is presented with the following issues:

        1) Whether the Commission reconsidered its material injury finding in a way that is consistent with the legal standard articulated by the Federal Circuit; and

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        2) Whether the Commission's remand determination that an industry in the United States was not materially injured by reason of imports of pure magnesium from Ukraine is supported by substantial evidence and otherwise in accordance with law. 6

        MATERIAL INJURY BY REASON OF LTFV IMPORTS

         An affirmative injury determination by the Commission "requires both (1) present material injury and (2) a finding that the material injury is 'by reason of' the subject imports." Gerald Metals, 132 F.3d at 719 (citing 19 U.S.C. § 1673d(b); see supra note 4).

         According to the Federal Circuit, the "by reason of" standard "mandates a causal--not merely temporal--connection between the LTFV goods and the material injury." Gerald Metals, 132 F.3d at 720. The standard "requires adequate evidence to show that the harm occurred 'by reason of' the LTFV imports, not by reason of a minimal or tangential contribution to the material harm...." Id. at 722.

         In examining the causal connection between the LTFV imports and the material injury (i.e., whether material injury occurred by reason of the LTFV imports), the Commission is required by statute to consider three factors: "1) the volume of [LTFV] imports, 2) the effect of [LTFV] imports on prices of like domestic products, and 3) the impact of [LTFV] imports on domestic producers of like products." USX Corp. v. United States, 11 CIT 82, 84, 655 F.Supp. 487, 489 (1987)(citing 19 U.S.C. § 1677(7)(B)). The Commission evaluates the causal effects of the three factors on the harm to the domestic industry by applying the standards set forth in 19 U.S.C. § 1677(7)(C). See U.S. Steel Group v. United States, 96 F.3d 1352, 1360-61 (Fed.Cir.1996); Trent Tube Div. v. Avesta Sandvik Tube, 975 F.2d 807, 814 (1992) The relevant portions state:

(i) Volume

In evaluating the volume of imports of merchandise, the Commission shall consider whether the volume of imports of the merchandise, or any increase in that volume,

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either in absolute terms or relative to production or consumption in the United States, is significant.

(ii) Price

In evaluating the effect of imports of such merchandise on prices, the Commission shall consider whether-

(I) there has been significant price underselling by the imported merchandise as compared with theprice of like products of the United States, and (II) the effect of imports of such merchandiseotherwise depresses prices to a significant degreeor prevents price increases, which otherwise wouldhave occurred, to a significant degree.

(iii) Impact on affected domestic industry

In examining the impact required to be considered under subparagraph (B)(iii), the Commission shall evaluate all relevant economic factors which have a bearing on the state of the industry in the United States, including, but not limited to-

(I) actual and potential decline in output, sales, market share, profits, productivity, return on investments, and utilization of capacity,(II) factors affecting domestic prices,(III) actual and potential negative effects on cash flow, inventories, employment, wages, growth, ability to raise capital, and investment, and (IV) actual and potential negative effects on theexisting development and production efforts of the domestic industry, including efforts to develop aderivative or more advanced version of the like...

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