China’s steel sector wins in U.S. Section 337 investigation

Posted on 12 April 2018

Source: ECNS

China’s steel sector has won a major victory in a U.S. trade investigation that has been going on for the last two years.

This stops a proposed ban on Chinese steel exports to the U.S.. The final victory didn’t come until last month, when the U.S. International Trade Commission decided to terminate the Section 337 investigation into China’s steel products.

Back in April 2016, the United States Steel Corporation filed a case with the U.S. International Trade Commission. The company claimed Chinese steelmakers had conspired to fix prices, steal trade secrets and circumvent duties by using false labeling. The case involved about 40 Chinese steel companies, including Baosteel, which lawyer Ran Ruixue and her firm represented in the case.

Ran Ruixue, a partner of Covinton & Burling LLP, says the anti-trust claim was the last, and the most difficult, hurdle to get over. “The last time an anti-trust claim happened in the International Trade Commission (ITC) was in 1978 with Japan. So, current ITC members and judges don’t have experience in that. Although we won the preliminary ruling, the plaintiff demanded a review, with an open trial, which was very rare”, says the lawyer.

When the decision finally came on March 19, the commission ruled that the plaintiff hadn’t proved that it had suffered any injury, so it didn’t have the right to make the claim.

The other two claims – those of stealing trade secrets and circumventing duties – were dismissed in February and October 2017.

Ran says the key to winning was that China’s steel companies are firm and confident. “They found the best lawyers and pleaded together. They are also professional and persistent. Even when our first action against the anti-circumvention claim was rejected, we started all over again to get the proof we needed.”

Section 337 of the U.S. trade rules allows the U.S. ITC to exclude imports that infringe upon US intellectual property rights.

China’s Commerce Ministry says that, since 2016, the U.S. has filed over forty 337 investigations against Chinese products. Ran’s firm is helping several other Chinese companies in such investigations. The lawyer believes the unprecedented victory in this case by China’s steel sector may prevent further use of Section 337 investigations as a tool for anti-trust claims. But she expects there will be more Section 337 filings in China-U.S. trade disputes, saying that Chinese companies should stand firm.

What is a Section 337 investigation?

In recent years, the United States International Trade Commission, or the ITC, has become an important venue for resolving high-stakes patent disputes involving globally-traded products.

Compared with other investigations, which usually lead to additional tariffs, this ITC order is more fatal to an industry. Often, the cases are related to high-tech products.

Currently, the ITC is investigating China’s LED industry. Experts say many Chinese firms didn’t actively plead in previous cases, so the ITC considered them to be an automatic failure. Now Chinese companies are encouraged to stand firm in the investigations, though they are always time and money consuming.

Other U.S. trade investigations

President Donald Trump, on April 20, 2017 directed the Secretary of Commerce to conduct a Section 232 investigation on steel imports. That investigation led to the announcement late this March, of a 25 percent tariff on Chinese steel and a 10 percent tariff on aluminum.

The Section 301 investigation initiated last August has resulted in a 25 percent tariff on a broad range of Chinese manufacturing products. 

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