501 F.3d 1291 (Fed. Cir. 2007), 2007-1036, Cleo Inc. v. United States

Docket Nº:2007-1036, 2007-1037.
Citation:501 F.3d 1291
Party Name:CLEO INC. and Crystal Creative Products, Inc., Plaintiff-Appellants, and Target Corporation, Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee, and Seaman Paper Company of Massachusetts, Inc., Defendant-Appellee.
Case Date:September 10, 2007
Court:United States Courts of Appeals, Court of Appeals for the Federal Circuit
 
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501 F.3d 1291 (Fed. Cir. 2007)

CLEO INC. and Crystal Creative Products, Inc., Plaintiff-Appellants,

and

Target Corporation, Plaintiff-Appellant,

v.

UNITED STATES, Defendant-Appellee,

and

Seaman Paper Company of Massachusetts, Inc., Defendant-Appellee.

Nos. 2007-1036, 2007-1037.

United States Court of Appeals, Federal Circuit.

Sept. 10, 2007

Appealed from United States Court of International Trade Judge Judith M. Barzilay

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Frederick L. Ikenson, Blank Rome LLP, of Washington, DC, argued for plaintiffs-appellants, Cleo Inc and Crystal Creative Products, Inc. With him on the brief were Larry Hampel and Roberta Kienast Daghir.

Marguerite E. Trossevin, Mayer, Brown, Rowe, & Maw LLP, of Washington, DC, argued for plaintiff-appellant, Target Corporation. With her on the brief were James J. Jochum and Kristy L. Balsanek.

Mark B. Rees, Attorney, Office of the General Counsel, United States International Trade Commission, of Washington, DC, argued for defendant-appellee, United States. With him on the brief were James M. Lyons, General Counsel, and Neal J. Reynolds, Assistant General Counsel for Litigation.

Kathleen W. Cannon, Kelley Drye Collier Shannon, of Washington, DC, argued for defendant-appellee, Seaman Paper Company of Massachusetts, Inc. With her on the brief was David A. Hartquist. Of counsel was Adam H. Gordon.

Before RADER, BRYSON, and MOORE, Circuit Judges.

BRYSON, Circuit Judge.

Cleo Inc. and its subsidiary, Crystal Creative Products, Inc., (collectively, "Cleo") join Target Corporation in appealing a decision of the Court of International Trade. That court upheld a determination by the International Trade Commission that imports of bulk and consumer tissue paper from China are materially injuring the domestic tissue paper industry. Although this case is a complex one that is close on several issues, we are persuaded that the Commission's decision is supported by substantial evidence, and we therefore affirm.

I

This case began with an investigation instituted in response to allegations that imports of tissue paper from China are materially injuring the domestic tissue paper industry. On February 14, 2005, the Department of Commerce issued a final determination that tissue paper from China is being sold at less than fair value in the United States. Notice of Final Determination of Sales at LTFV: Certain Tissue Paper Prods. from the People's Republic of China, 70 Fed.Reg. 7475 (Feb. 14, 2005). Shortly thereafter, the Commission issued its final determination that the domestic industry is being materially injured by the dumped imports. Certain Tissue Paper Products from China, 70 Fed.Reg. 15,350 (Mar. 25, 2005); Certain Tissue Paper Prods. from China, Inv. No. 731-TA-1070B (Final), USITC Pub. 3758 (Mar.2005). Because the commissioners were evenly divided on the issue, the Commission was deemed by statute to have made an affirmative determination of material injury. 19 U.S.C. § 1677(11). On appeal, Cleo and Target challenge the Commission's material injury determination. Both Cleo and Target are domestic companies that import tissue paper from China.

After the Department of Commerce makes a determination that certain articles under investigation are being sold in the United States at less than fair value, i.e., being "dumped," the Commission must

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determine whether a domestic industry is being materially injured or threatened with material injury by the importation of those dumped goods. 19 U.S.C. § 1673. The term "industry" is defined by statute to mean the producers of a "domestic like product," id. § 1677(4)(A), and the term "domestic like product" is defined to mean "a product which is like, or ... most similar in characteristics and uses" to the relevant imported products, id. § 1677(10). The Commission's determination of what goods constitute "like products" therefore defines the scope of a domestic industry and, in turn, the scope of the Commission's material injury analysis. See Allegheny Ludlum Corp. v. United States, 287 F.3d 1365, 1368 (Fed.Cir.2002). Commerce's designation of the class or kind of merchandise that is sold at less than fair value does not control the Commission's "like product" determination and therefore does not control its definition of the industry to which its material injury analysis must be applied. Hosiden Corp. v. Advanced Display Mfrs. of Am., 85 F.3d 1561, 1568 (Fed.Cir.1996). It is thus possible that the class or kind of merchandise identified by Commerce in its less than fair value determination may encompass more than a single domestic industry under the "like product" standard applied by the Commission. Id.

The "like product" determination is a factual issue that the Commission resolves by weighing six factors relating to the products in question: (1) physical characteristics and uses; (2) common manufacturing facilities and production employees; (3) interchangeability; (4) customer perceptions; (5) channels of distribution; and, where appropriate, (6) price. See Torrington Co. v. United States, 938 F.2d 1278, 1280 (Fed.Cir.1991), (adopting 14 Ct. Int'l Trade 648, 747 F.Supp. 744 (1990)); NMB Singapore Ltd. v. United States, 288 F.Supp.2d 1306, 1313 (Ct. Int'l Trade 2003); Timken Co. v. United States, 913 F.Supp. 580, 584 (Ct. Int'l Trade 1996). When weighing those factors, the Commission disregards minor differences and focuses on whether there are any clear dividing lines between the products being examined. Nippon Steel Corp. v. United States, 19 Ct. Int'l Trade 450, 455 (1995). The legislative history of the Trade Agreements Act of 1979, which added the "like product" provision, explains that the requirement that a product be "like" the imported article "should not be interpreted in such a narrow fashion as to permit minor differences in physical characteristics or uses to lead to the conclusion that the product and article are not 'like' each other, nor should the definition of 'like product' be interpreted in such a fashion as to prevent consideration of an industry adversely affected by the imports under investigation." S.Rep. No. 96-249, at 90-91 (1979), reprinted in 1979 U.S.C.C.A.N. 381, 476-77.

Once the Commission has defined the domestic industry at issue, it must determine whether that industry is being materially injured by the subject imports. When doing so, the Commission evaluates, among other things, the volume of imports and their effect on the domestic industry. See 19 U.S.C.§ 1677(7)(B). "An affirmative injury determination requires both (1) present material injury and (2) a finding that the material injury is 'by reason of' the subject imports." Gerald Metals, Inc. v. United States, 132 F.3d 716, 719 (Fed.Cir.1997).

In this case, the Commission first considered whether bulk tissue paper and consumer tissue paper constitute a single like product. The Commission defined bulk tissue paper as tissue paper sold in bulk to stores and manufacturers, generally for use in their own businesses to wrap customer purchases. It defined consumer tissue paper as tissue paper sold in packages

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for retail sale. After evaluating the six like product factors and examining whether there are any clear dividing lines between bulk and consumer tissue paper, the Commission determined that the two types of tissue paper constitute a single like product for purposes of the material injury analysis.

The Commission then considered whether the domestic tissue paper industry is being materially harmed by reason of the imports of dumped tissue paper. It determined that the volume of tissue paper imports has been steadily and quickly rising at the expense of the domestic industry. It also found that imports have undercut the price of the domestic product, resulting in a significant decline in the health of the domestic industry. Based on those subsidiary findings, the Commission determined that dumped tissue paper is materially harming the domestic industry.

The three dissenting commissioners found that consumer and bulk tissue paper are separate products and therefore analyzed the domestic bulk tissue paper industry and the domestic consumer tissue paper industry separately. They found that the U.S. bulk tissue paper industry was...

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