On March 19th,the US International Trade Commission(ITC)announced that it would terminate the review of antitrust litigation points in the US 337 investigation of China Steel.So far,after nearly two years of hard defense,the case has ended with the comprehensive victory of the Chinese responding enterprise.

The 337 investigation includes three prosecution points:antitrust,trade secrets,and origin.Among them,the Chinese side wins in the evidence at the point of origin litigation,and the Chinese responding enterprise proves through the evidence exchange process that it does not have the behavior of evading the"double counter measures"against China alleged by the plaintiff American Steel.However,in the origin investigation,ITC did not challenge the practice of obtaining evidence from American Steel fishing.In other words,ITC allowed Meigang to launch the 337 investigation through fishing and evidence collection,which left a huge hidden danger for Chinese export enterprises.In the future,American companies may easily exclude Chinese products from the US market through the 337 survey,following the example of American Steel.

It should be noted that the issue of origin/anti circumvention is not a routine litigation point in the 337 investigation,and the relevant legal risks have only emerged through the Steel 337 case.It is necessary for Chinese export enterprises to understand the accusation of the origin of the case,the strategy of Meigang,and the way the US side obtains evidence through fishing,and take risk prevention measures.

337 Origin Survey

In the Steel 337 investigation,American Steel accused Chinese steel companies of illegally evading US anti-dumping and countervailing duties against China by changing the certificate of origin through entrepot trade in Malaysia,Thailand,Vietnam,and other places(referred to as"false origin allegations").American Steel claims that the Chinese defendant's misrepresentation of the origin of the product violated the United States trademark law,the"Langham Act.".

As for the allegation of false origin,Meigang's strategy is to first provide indirect evidence such as dealer emails and import data in the indictment to prove that Chinese steel companies are likely to participate in illegal transshipment.After the investigation is officially launched,Meigang will mine more direct evidence through the evidence discovery process.This view is supported by ITC investigation lawyers.The investigation lawyer believes that the evidence in the Meigang indictment is sufficient and meets the filing criteria for the 337 investigation;Whether Chinese steel companies are indeed involved in illegal transshipment can only be proven through evidence disclosure.Due to the high cost of responding to the 337 investigation,which often involves millions of dollars,many Chinese companies cannot afford it.Therefore,even if all responding enterprises win the lawsuit at the litigation point,enterprises that do not respond to the lawsuit will also face the risk of losing the lawsuit due to the default judgment.

How did the US side obtain evidence by fishing

Based on the analysis of the origin allegations and strategies of American Steel and the ITC ruling,we believe that American companies can adopt the following channels

Obtaining evidence of its alleged illegal Chinese transshipment:

American enterprises arrange for importers to sign export contracts with illegal traders,while traders sign domestic sales contracts with Chinese exporters.Subsequently,traders arranged for illegal transshipment of steel.

American enterprises arrange for importers to contact illegal traders.Through the introduction of the traders,the importers sign export contracts with the export producers,agreeing to export the steel to a third country.The importer then replaces the certificate of origin and exports it to the United States.

American enterprises arrange for importers to directly contact Chinese exporters and sign export contracts to agree to export steel to a third country.However,in fact,some products are replaced with the origin label without processing and value-added,and are transported from a third country to the United States.

In any of the above scenarios,as long as the trader(regardless of nationality and registered address)or Chinese steel producer has signed a third country export contract with the importer arranged by American Steel,and such contract is used together with the email from the importer/trader proposing illegal transshipment,a complete chain of evidence can be formed to support American Steel's allegations of origin.In the above circumstances,the Chinese steel producer may not be aware that the steel will be transported to the United States through a third country,but this cannot exempt it from the burden of proof.After the launch of the 337 investigation,the Chinese enterprises involved in the case need to actively respond to the lawsuit and prove through the evidence discovery process that they were not aware of or involved in illegal transshipment,otherwise they will face the risk of losing the lawsuit and will be permanently excluded from the US market.

Risk prevention measures for Chinese enterprises

According to the methods and characteristics of phishing and evidence collection by American companies,Chinese companies can strengthen prevention from three aspects:transaction review,contract terms setting,and internal training.

Strengthen the identification of illegal traders and suspicious importers.

The purpose of US fishing evidence collection is only to collect evidence,while limiting the time and cost of evidence collection.Therefore,phishing forensics transactions often have the following characteristics:the background of the transaction party is unknown or belongs to the first cooperation;The sales volume and amount are not large;Insensitive to sales prices and other trading conditions;Eager to sign the contract;Mention of transit trade or circumvention of"double counter measures";If export is involved,the destination may be Southeast Asia,Canada,or other regions close to China or the United States.

If a potential transaction meets more than three conditions at the same time,it is necessary to strictly review the background and qualifications of the counterparty before signing a sales contract.

Add a clause prohibiting illegal transshipment to domestic and export contracts.As indicated in the indictment and its evidence,for the purpose of obtaining evidence,American Steel may designate importers to negotiate transshipment matters with traders,regardless of whether Chinese steel producers are aware of or involved in the transshipment,and regardless of whether Chinese steel producers have signed domestic sales or export contracts.In this case,if a Chinese enterprise adds a clause prohibiting transshipment to its domestic sales or export contract,clarifying the rights and responsibilities of the enterprise and the other party in the contract on transshipment issues,even if it encounters importers or traders arranged by the United States,the contract terms can also play a certain protective role for the Chinese enterprise,proving that it does not understand or participate in the transshipment arrangement.

Strengthen anti circumvention training to clarify the difference between legal processing trade and illegal transshipment.

The risk of anti circumvention widely exists in export trade,and countries adopt different standards for circumvention and the identification of product origin

accurate Therefore,export enterprises should provide targeted training to sales personnel to clarify the difference between legitimate processing trade and illegal transshipment,and avoid unnecessary misunderstandings in daily work and communication.

In addition,the scope of circumvention defined in the United States'anti circumvention legislation is very broad,and the standards for determining the origin used in practice are not clear.This has led to the right of the United States Department of Commerce to make interpretations and decisions on rules of origin that are different from those of the United States Customs in anti circumvention investigations.Therefore,if Chinese enterprises intend to engage in U.S.related export processing trade,they should consult professional lawyers in this field to control and avoid potential legal risks.

In summary,the 337 Steel Case against China by the United States shows that ITC allows American companies to obtain evidence by fishing and initiates the 337 investigation through such evidence,leading to the vulnerability of Chinese export companies to be involved in deliberately arranged illegal transactions.In this regard,Chinese enterprises should strengthen prevention to avoid falling into traps.

(The author represented Shougang Group in the US 337 Steel Case against China)

(This article is translated by software translator for reference only.)