CIT Holds Oral Argument in Case Challenging Consecutive ITC Rail Coupler Injury Investigations

The ITC initially unanimously determined in July 2022 that freight rail couplers imported from China in 2019-21 weren’t injuring the domestic industry. But petitioners McConway and Torley and Amsted Rail Co. (at the time, the two members of the Coalition of Freight Rail Coupler Producers) filed new AD/CVD petitions in September 2022 seeking another injury investigation on couplers imported from both China and Mexico in 2020-21. The ITC took up the inquiry and made an affirmative injury determination (see 2309130033), while Commerce calculated AD/CVD rates for the products.

The importers discussed fraud allegations against the domestic industry and made arguments regarding both the procedural and substantive elements of the ITC’s injury investigations.

Wabtec representative David Morrell argued that, procedurally, the ITC’s second injury investigation raises the specter of petitioners forcing “an endless cycle of re-investigations when they're dissatisfied with the results of a prior investigation,” something that would strike “at the heart of finality” in judicial and administrative decisions.

He said that holding for the importers, on the other hand, wouldn’t be “some watershed, big ruling” because the facts in this particular case are “unprecedented.”

“It was, I think, about seven weeks between the prior determination in the refiling of this case,” he said. “To our knowledge -- I think we went back 13 or 14 years -- we never saw any evidence of something refiled that quickly. And so if the court enforces the plain meaning of 1675, it's really kind of good for this case only.”

If the court were to allow the new investigation in this case without a finding of fraud, that ruling would “operate asymmetrically” in favor of petitioners, he claimed. In other words, “the petitioners only have to win once,” while “the respondents have to run the table and win every time.”

ITC attorney Garrett Peterson said that the two investigations are distinct. They had different periods of review, even if they did overlap, he said -- especially as the two petitions were filed a year apart. He also said importers were failing to mention the impact cumulation of both Chinese and Mexican rail couplers had on the injury investigation.

Morrell argued that, according to AD/CVD law, imports that were subject to terminated investigations can’t be cumulated with other imports for another investigation.

He and Jay Smith, representing Strato, also said that the determinations that resulted from the concurrent investigations were unlawfully inconsistent. In particular, they said, Commerce refused to make use of testimony provided by Antonio Wellmaker, an Amsted Rail worker, in its first determination, but then twice used it to support its second.

But regardless, Smith said, the ITC’s determination must be remanded because the agency needs to address fraud allegations lodged against the domestic industry’s sales of freight rail couplers (see 2412240003). He said that the importers weren’t “seeking to add fraud allegations to this claim.” Rather, they are just arguing the ITC is required to address the Association of American Railroads’ finding that fraud occurred, he said.

Smith said they have a “home run” case supporting the argument in Home Products v. United States. The cases offered in opposition to remand by the U.S. and a domestic petitioner were inapposite, and tellingly so, Smith said, as they all deal with situations in which one party attempted to add a fraud claim to its case or failed to exhaust its administrative remedies. But Wabtec and Strato were only arguing that the AAR’s allegations made out a prima facie case of fraud that needed to be addressed by the ITC, Smith said.

Peterson said that the importers weren’t seeking to add the fraud claim to the proceeding, but that they acknowledge that the issue is “connected to the core issues of their complaint,” consideration of which would require broadening the scope of the present proceeding.

He also said that the importers sat on the fraud claim “for at least 15 months” without clear explanation.

“The delay is unreasonable and equated to an ambush on the parties in this proceeding,” he said.

Smith disagreed that the importers waited too long to raise the issue. Home Products held otherwise, he said. And he claimed that the “implications” of an unapproved change in rail car coupler design -- the focus of the AAR’s fraud investigation and charge -- wasn’t fully realized by the industry because the new design hadn’t been tested.

The government and Dan Picker, representing the petitioner, also disagreed that a prima facie case could be made out that the domestic rail industry engaged in fraud. Picker said that the producers were informed by AAR that the couplers were certified, despite AAR’s later claim that they hadn’t been. Picker also noted that Amsted Rail, a Mexican importer/exporter, also was among those in the industry accused by AAR of selling uncertified couplers.

He also said that it wasn’t in contention that the domestic industry reported to AAR years ago that it would be changing its coupler design; that the design had been patented publicly; and that the design was promoted at conferences, not concealed.

Combined, Wabtec, Strato and Mexican importer/exporter Amsted Rail have brought at least seven cases challenging the ITC’s and Commerce’s second investigations.

Wabtec's and Strato’s first cases, brought in 2023 against the ITC’s determination, were joined, Wabtec’s case taking the lead (see 2403250051). The July 2 oral argument was held for this case. Wabtec filed two more cases that year against, respectively, Commerce’s AD and CVD determinations following the September 2022 petitions (see 2309130033 and 2502280058).

Amsted Rail’s first two cases challenging the ITC and Commerce, each raising a conflict of interest claim, were filed in 2022 under what the U.S. Court of Appeals for the Federal Circuit eventually determined was the wrong jurisdictional provision of 28 U.S.C. 1581 (see 2307050052 and 2307190021). It filed two more cases challenging the agencies’ determinations in 2023, later voluntarily dismissing the one challenging Commerce’s and amending the one challenging the ITC’s to shift its focus from its conflict of interest argument to the substance of the ITC’s investigations (see 2502070064 and 2409090028). This last surviving case has been stayed pending the result of Wabtec’s and Strato’s ITC case.