Former Employees of Spinnaker Coating Maine, Inc. v. Chao

Slip Op. 03-9

United States Court of International Trade

FORMER EMPLOYEES OF SPINNAKER
COATING MAINE, INC.

Plaintiffs, Before: Pogue, Judge

v. Court No. 02-00203

ELAINE L. CHAO, UNITED STATES
SECRETARY OF LABOR,

Defendant.

[Plaintiffs’ motion for judgment on the agency record denied.
Plaintiffs’ motion for remand for further investigation granted.]

Decided: January 28, 2003

Provost Umphrey, L.L.P. (Daniel A. Bailey) for Plaintiffs.

Robert D. McCallum, Jr., Assistant Attorney General, David M.
Cohen, Director, Lucius B. Lau, Assistant Director, Brent M.
McBurney, Attorney, Commercial Litigation Branch, Civil Division,
U.S. Department of Justice, Jayant A. Reddy, Attorney, Office of
the Solicitor, U.S. Department of Labor, Of Counsel, for Defendant.

Opinion
Pogue, Judge: This matter is before the Court on the motion of

Former Employees of Spinnaker Coating Maine, Inc. (“Plaintiffs”)

for judgment on the agency record pursuant to USCIT Rule 56.1, or

in the alternative, for remand of the action for further

investigation. Plaintiffs challenge the negative eligibility
Court No. 02-00203 Page 2

determination for trade adjustment assistance benefits of the

United States Department of Labor, Office of Trade Adjustment

Assistance (“Labor” or “Department”). Plaintiffs claim Labor

failed to: (1) support its decision that increased imports did not

contribute importantly to the separation of Plaintiffs from their

employment by substantial evidence; (2) conduct its investigation

within the relevant time period; and (3) adequately investigate the

contribution of imports to the separation of Plaintiffs from their

employment. The Court exercises jurisdiction pursuant to 19 U.S.C.

§ 2395(c) (2000) and 28 U.S.C. § 1581(d)(1) (2000). For the

reasons that follow, the Court remands this action to Labor for

further investigation.

I. Background

The purpose of the trade adjustment assistance program is “to

offer unemployment compensation, training, job search and

relocation allowances, and other employment services to workers who

lose their jobs because of import competition.” Former Employees

of Kleinerts, Inc. v. Herman, 23 CIT 647, 647, 74 F. Supp. 2d 1280,

1282 (1999) (quoting Former Employees of Parallel Petroleum Corp.

v. United States Sec’y of Labor, 14 CIT 114, 118, 731 F. Supp. 524,

527 (1990)).

Labor is required to certify petitioning plaintiffs as

eligible for assistance benefits if it determines, in accordance
Court No. 02-00203 Page 3

with section 222 of the Trade Act of 1974 (“Trade Act”),1 as

amended, 19 U.S.C. § 2272(a):

(1) that a significant number or proportion of the
workers in such workers’ firm or an appropriate
subdivision of the firm have become totally or partially
separated, or are threatened to become totally or
partially separated,
(2) that sales or production, or both, of such firm or
subdivision have decreased absolutely, and
(3) that increases of imports of articles like or
directly competitive with articles produced by such
workers’ firm or an appropriate subdivision thereof
contributed importantly to such total or partial
separation, or threat thereof, and to such decline in
sales or production.

19 U.S.C. § 2272(a). Plaintiffs seeking trade adjustment

assistance benefits must satisfy all three of the requirements

contained in § 2272(a). See, e.g., Former Employees of Kleinerts,

Inc., 23 CIT at 648, 74 F. Supp. 2d at 1282; Former Employees of

Bass Enter. Prod. Co. v. United States, 13 CIT 68, 70, 706 F. Supp.

897, 900 (1989); Abbott v. Donovan, 8 CIT 237, 239, 596 F. Supp.

472, 474 (1984). Thus, trade adjustment assistance can only be

certified “if it can be established that an important causal nexus

exists between increased imports of like or directly competitive

articles, declines in sales or production and the workers’

1
Although Congress recently amended the Trade Act, Trade
Adjustment Assistance Reform Act of 2002, Pub. L. No. 107-210, §
113, 116 Stat. 933, 937 (Aug. 6, 2002), those revisions do not
apply to the instant matter, as Plaintiffs’ petition predates the
application of the amended statute. See Pub. L. No. 107-210, §
151, 116 Stat. at 953. Accordingly, all references to the Trade
Act denote the pre-amendment version of the statute. See 19
U.S.C. § 2272 (2000).
Court No. 02-00203 Page 4

separation from employment.” Former Employees of Hewlett-Packard

Co. v. United States, 17 CIT 980, 985 (1993) (internal citation

omitted).

Spinnaker Coating Maine, Inc. (“Spinnaker”), a subsidiary of

Spinnaker Industries, produced pressure sensitive papers, including

among others, EDP, Thermal transfer, and Semi-gloss type products

in Westbrook, Maine.2 Admin. Rec. at 2, 6. On May 22, 2001,

Plaintiffs filed their petition with Labor for trade adjustment

assistance pursuant to Section 221(a) of the Trade Act of 1974 on

behalf of 91 workers. Id. at 1-2. Plaintiffs represent both union

and non-union former employees of Spinnaker; specifically, the non-

union employees are joined by the Paper, Allied-Industrial,

Chemical and Energy Workers International Union (“PACE”), Local

169. Admin. Rec. at 2, 23. The petition asserted that a “price

war” with a foreign competitor caused the company to close and

dismiss 91 employees. Id. at 2. On July 15, 2001, Spinnaker

permanently closed. See Admin. Rec. at 6.

Labor published notice of Plaintiffs’ filing and the

Department’s initiation of an investigation to determine

2
As both parties concede that Spinnaker produced these
specific types of pressure sensitive papers, the Court will
consider discussion of purchases of a specific type as purchases
of the relevant product, pressure sensitive papers. Pls.’ Mot.
J. Agency R. or Remand Further Investig. at 2 (“Pls.’ Br.”);
Spinnaker Coating Maine Incorporated Westbrook, ME, 67 Fed. Reg.
4,756, 4,756 (Dep’t Labor Jan. 31, 2002) (notice of negative
determination regarding application for reconsideration) (“Neg.
Determ.”).
Court No. 02-00203 Page 5

eligibility for assistance on July 5, 2001. Investigations

Regarding Certifications of Eligibility to Apply for Worker

Adjustment Assistance, 66 Fed. Reg. 35,465, 35,465 (Dep’t Labor

July 5, 2001). To investigate Plaintiffs’ petition, Labor sent a

request to Allen Hooper (“Hooper”), Director of Operations at

Spinnaker, seeking information relating to sales, production, and

employment at Spinnaker’s Maine facility, as well as Spinnaker’s

“major declining customers.” Admin. Rec. at 7-9.

In response to the information provided by Hooper, Labor sent

surveys to six of Spinnaker’s “major declining customers.” See

Admin. Rec. at 9, 12-13, 16-17, 19. Five customers responded. Id.

at 12-13, 16-17, 19. Question One requested that the customers

specify their total purchases of pressure sensitive papers from

Spinnaker and other domestic and foreign sources for the years 1999

and 2000, and for the period January through March 2000 and 2001

(collectively the “surveyed periods”). Id. Three customers,

Customer A, Customer B, and Customer C, responded that they did not

purchase pressure sensitive papers from foreign sources during the

surveyed periods. Admin. Rec. at 16, 17, 19. The survey responses

provided by Customer B and Customer C also indicate that the amount

of most domestic purchases increased in 2000 compared to 1999,

while the dollar “value” or cost of the product decreased. Id. at

17, 19. A fourth customer, Customer D, indicated that it had

purchased pressure sensitive papers from foreign sources. Id. at
Court No. 02-00203 Page 6

12. That customer indicated a decrease in dollar value or cost of

the imported product purchased from its 2000 total compared to

1999, as well as for the period January through June 2001 compared

to the same period in 2000. Id. The last customer, Customer E,

also indicated that it had not purchased any pressure sensitive

papers from foreign sources during the surveyed periods, facsimile

dated July 18, 2001. Id. at 13. Customer E’s survey indicated

however that it purchased EDP type papers from Spinnaker at

decreasing dollar values or costs in 2000 compared to 1999 and for

the period January through March 2001 compared to the same period

in 2000. Id. It further stated that Customer E purchased Thermal

transfer type papers from other domestic sources at increasing

dollar values or costs in 2000 compared to 1999 and for the period

January through March 2001 compared to the same period in 2000.

Id.

Question Two asked the customers to identify the percentage of

pressure sensitive papers purchased from other domestic firms but

wholly manufactured in a foreign country. See id. at 12, 13, 16,

17, 19. All five surveys noted that none of their purchases from

other domestic sources were manufactured in a foreign country. Id.

Customer E’s survey also noted under Question Two, without further

explanation, a substantial percentage. Id. at 13.

A handwritten note dated December 17, 2001 accompanied

Customer E’s survey. The note states that Customer E began
Court No. 02-00203 Page 7

importing Thermal transfer type papers from the foreign competitor

in February 1999 continuing until late in 2001. Admin. Rec. at 14.

It further specifies that Customer E continued to purchase EDP type

papers from Spinnaker during the surveyed periods. Id. The note

states that a substantial percentage of Thermal transfer type paper

purchases from the other domestic sources was imported. See id.

Customer E also commented that Thermal transfer type papers were

not purchased from Spinnaker during the relevant period. Id.

Labor concluded in its investigation findings that Spinnaker’s

sales, production and employment decreased in 2000 compared to

1999, and for the period January through March 2001 compared to the

same period in 2000. Trade Adjustment Assistance Investigative

Report (“Investigative Report”), Admin. Rec. at 20-21. The

investigation also revealed that layoffs began in January 2000 and

continued through July 2001, when the plant closed permanently.

Id. In denying Plaintiffs’ petition on September 11, 2001, the

Department found that the investigation failed to prove the

“contributed importantly” requirement. Notice of Determinations

Regarding Eligibility to Apply for Worker Adjustment Assistance and

NAFTA Transitional Adjustment Assistance, 66 Fed. Reg. 47,242,

47,242 (Dep’t Labor Sept. 11, 2001). Specifically, Labor stated

that the investigation did not reveal that during the surveyed

periods the customers increased their purchases of imports while

decreasing their purchases from Spinnaker. See Spinnaker Coating
Court No. 02-00203 Page 8

Maine Incorporated, Westbrook, Maine, (Dep’t Labor Aug. 23, 2001),

Admin. Rec. at 23-24 (notice of negative determination regarding

eligibility to apply for worker adjustment assistance) (unpublished

determination) (“Initial Determ.”). Labor also concluded that U.S.

imports of pressure sensitive papers decreased during the period of

January through May 2001 when compared to the same period in 2000.

Id.

On September 28, 2001, PACE, Local 169 sought reconsideration

of Labor’s negative determination and presented new evidence

supporting its contentions. Admin. Rec. at 30-62. Plaintiffs

argued that the statutory criteria had been satisfied, because

imports contributed importantly to the absolute decline in

Spinnaker’s sales dollars. See Admin. Rec. at 30. In particular,

Plaintiffs claimed that the Department’s decision was erroneous

because Labor improperly identified the relevant time period, and

because Labor failed to adequately survey Spinnaker’s “major

declining customers.”3 Id. Because Labor failed to evaluate the

entire years of 1999 and 2000, Plaintiffs claimed Labor did not

examine the proper relevant time period. See Admin. Rec. at 31.

3
A third argument was presented for reconsideration.
Plaintiffs contested Labor’s classification of the like product.
Admin. Rec. at 30. Rather than producing Pressure Sensitive
Labels (HTS-4821902000), Plaintiffs argued Spinnaker produced
Pressure Sensitive Papers (HTS-4811210000). Id.; see also Neg.
Determ., 67 Fed. Reg. at 4,756. Labor agreed, but found that the
improper classification had no effect on its initial negative
eligibility determination. Id.
Court No. 02-00203 Page 9

To support their contention, Plaintiffs attached evidence stating

that prior to Customer E’s switch to importing Thermal transfer

type papers from the foreign competitor in February 1999, Customer

E annually purchased $2,250,000.00 worth of Thermal transfer type

papers and $1,620,000.00 worth of EDP type papers from Spinnaker.

See Admin. Rec. at 60, 62; see also Pls.’ Br. at 3-4. Plaintiffs

also included two pages of a seven-page report prepared by Fred

Forstall, International Trade Analyst at the United States

International Trade Commission (“ITC Report”), which report

describes an annual quantitative increase in imports of the like

product for U.S. consumption from 1996 through 2000. Admin. Rec.

at 54-55. The data revealed however a decline in imports of the

like product for the period January through June 2001 compared to

the same period in 2000. Id. at 55. Plaintiffs further argued

that foreign competition caused Spinnaker to lower prices to

maintain sales volume. Id. at 32. Such evidence, Plaintiffs

contended, demonstrated that Spinnaker’s sales of pressure

sensitive papers decreased while imports increased. See Admin.

Rec. at 31.

Upon finding that the data collected from customer surveys in

the initial investigation demonstrated an “overwhelming reliance on

domestic customer purchases of pressure sensitive papers . . .

during the relevant period,” Labor denied Plaintiffs’

reconsideration request on January 31, 2002. Neg. Determ., 67 Fed.
Court No. 02-00203 Page 10

Reg. at 4,756. Labor stated that the survey approach was primarily

relied on to determine if imports “‘contributed importantly’ to the

declines [sic] in sales and/or production and employment at the

subject firm.” Id. Labor also found that the “pertinent time

periods of 1999, 2000 and the January through June 2001 over the

corresponding 2000 period” were examined while investigating the

petition. Id. As such, Labor concluded that Customer E’s decision

to import Thermal transfer type papers from the foreign competitor

in February 1999 was beyond the relevant time period of its

investigation. Id.

In affirming its prior decision, Labor again concluded that

the “contributed importantly” requirement had not been met, as none

of the customers increased their purchases of imported pressure

sensitive papers while decreasing such purchases from Spinnaker

during the relevant period. See id. at 4,756-57. Labor attributed

Spinnaker’s financial loss to domestic, rather than foreign,

competition, since “only small amounts of imports (and declining)

were purchased during the relevant period.” Id. The Department

further held that price was not a factor considered in evaluating

the “contributed importantly” requirement of Section 222(3) of the

Trade Act of 1974, as amended. Id. at 4,757. Based on the survey

results, Labor found that price suppression caused by competition

with the foreign competitor was not a major factor contributing to

the decline in Spinnaker’s sales, production and employment. See
Court No. 02-00203 Page 11

id.

II. Standard of Review

In reviewing the Secretary’s decision to deny Plaintiffs’

petition for certification of eligibility for trade adjustment

assistance benefits, the Court must determine whether that decision

is supported by substantial evidence and in accordance with law.

United Steelworkers of Am. v. United States Sec’y of Labor, 17 CIT

1188, 1190 (1993) (internal citation omitted); Woodrum v. Donovan,

5 CIT 191, 193, 564 F. Supp. 826, 828 (1983), aff’d, 737 F.2d 1575,

1576 (Fed. Cir. 1984); see also 19 U.S.C. § 2395(b) (“The findings

of fact by [Labor] . . . if supported by substantial evidence,

shall be conclusive.”).

“Because of the ex parte nature of the certification process,

and the remedial purpose of the [benefits] program, [Labor] is

obligated to conduct [its] investigation with the utmost regard for

the interest of the petitioning workers.” Local 167, Int’l Molders

v. Marshall, 643 F.2d 26, 31 (1st Cir. 1981).

The Court “for good cause shown, may remand the case to

[Labor] to take further evidence.” 19 U.S.C. § 2395(b). “Good

cause exists if the [Department’s] chosen methodology is so marred

that [its] finding is arbitrary or of such a nature that it could

not be based on substantial evidence.” Former Employees of Linden

Apparel Corp. v. United States, 13 CIT 467, 469, 715 F. Supp. 378,
Court No. 02-00203 Page 12

381 (1989) (internal citations omitted).

III. Discussion

There are three issues presented. The Court must determine

whether: (1) Labor’s finding that imports did not contribute

importantly to the separation of Spinnaker’s employees is supported

by substantial evidence; (2) Labor conducted its investigation

during the appropriate “representative base period” or relevant

period; and (3) Labor adequately investigated the contribution of

imports to the separation of Plaintiffs from their employment.

A. Contributed Importantly

Plaintiffs contest Labor’s findings that only one customer,

Customer D, imported “small amounts” of the like product at

declining levels during the relevant period and that “[n]one of the

other [surveyed customers] imported pressure sensitive papers

during the relevant period.” Pls.’ Br. at 5, 7 (quoting

Investigative Report, Admin. Rec. at 21-22); see also Neg. Determ.,

67 Fed. Reg. at 4,756-57. Plaintiffs argue that those conclusions

are contrary to the evidence in the record for two reasons. First,

the survey responses provided by Customer B and Customer C indicate

an increase in the amount of product purchased in 2000 compared to

1999, even though the annual dollar value or cost of the product

decreased. Pls’. Br. at 8. Second, Customer E admitted that it
Court No. 02-00203 Page 13

began importing the like product from the foreign competitor in

February 1999 and that a substantial percentage of the product

purchased from the other domestic sources was imported. Id. at 3-

5. In other words, Plaintiffs challenge Labor’s conclusion that

import penetration did not contribute importantly to the separation

of Plaintiffs from their employment as unsupported by substantial

evidence on the record. See Pls.’ Br. at 5.

“Contributed importantly” is statutorily defined as “a cause

which is important but not necessarily more important than any

other cause.” 19 U.S.C. § 2272(b)(1). According to Labor’s

regulations, “increased imports” means “imports have increased

either absolutely or relative to domestic production compared to a

representative base period.” DOL Certification of Eligibility to

Apply for Worker Adjustment Assistance, 29 C.F.R. § 90.2 (2001).

“‘In determining whether increased imports contributed

importantly to the separation of the workers, [Labor] often employs

a “dual test” which looks to whether the subject company’s

customers reduced purchases from that company and at the same time

increased purchases of competitive imports.’” Int’l Union v.

Reich, 22 CIT 712, 719, 20 F. Supp. 2d 1288, 1295 (1998) (quoting

United Steelworkers of Am., 17 CIT at 1190). Even though the dual

test “‘is not . . . very sophisticated,’” the Court has found it

“‘a reasonable means of ascertaining a causal link between imports

and separations.’” Id.; see also Local 167, 643 F.2d at 30-31;
Court No. 02-00203 Page 14

United Glass and Ceramic Workers v. Marshall, 584 F.2d 398, 405-06

(D.C. Cir. 1978). The causal link required is “‘a direct and

substantial relationship between increased imports and a decline in

sales and production.’” Id.; see also Estate of Finkel v. Donovan,

9 CIT 374, 382, 614 F. Supp. 1245, 1251 (1985).

Here, Labor surveyed six “major declining customers”

identified by Plaintiffs as purchasers of Spinnaker’s pressure

sensitive papers. Admin. Rec. at 9; Initial Determ., Admin. Rec.

at 24. Upon receiving five responses, Labor evaluated the surveys

to determine whether any of those customers increased import

purchases of the like product while decreasing purchases from

Spinnaker. See Investigative Report, Admin. Rec. at 21-22.

Customer A, Customer B, and Customer C did not import the like

product during the surveyed periods. Admin. Rec. at 16-17, 19.

The survey responses provided by Customer B and Customer C,

however, indicate that the amount of most domestic purchases

increased in 2000 compared to 1999, while the dollar value or cost

of the product decreased. Id. at 17, 19. Customer D imported the

like product, but at decreasing dollar values or costs during the

surveyed periods. Admin. Rec. at 12. Customer D’s survey does not

contain any data detailing the amount of the like product purchased

from foreign sources. Id. Customer E’s survey states that it also

did not import the like product during the surveyed periods. Id.

at 13. Its survey indicates that Thermal transfer type papers were
Court No. 02-00203 Page 15

purchased from other domestic sources at increasing dollar values

or costs in 2000 compared to 1999 and for the period January

through March 2001 compared to the same period in 2000. Id. The

survey further reveals that Customer E purchased EDP type papers

from Spinnaker at decreasing dollar values or costs in 2000

compared to 1999 and for the period January through March 2001

compared to the same period in 2000. Id. The handwritten note

accompanying the survey, dated December 17, 2001, however, states

that Customer E imported Thermal transfer type papers from the

foreign competitor beginning in February 1999 until late in 2001.

Id. at 14, 60. The note further states that a substantial

percentage of the purchases from the other domestic sources was

imported. Id. at 14.

On the basis of this evidence, Labor concluded that Customer

D only imported “small amounts” of the like product at declining

levels during the relevant period. See Neg. Determ., 67 Fed. Reg.

at 4,757. The record, however, is devoid of any evidence

illustrating that the amount of Customer D’s import purchases

decreased during the surveyed periods. Instead, the record

contains evidence demonstrating that the dollar value or cost of

Customer D’s import purchases decreased during the surveyed

periods. Nothing in the record connects this fact to Labor’s

conclusion that Customer D imported “small amounts” of the like

product. Accordingly, Labor’s conclusion is unsupported by
Court No. 02-00203 Page 16

substantial evidence.

Customer E’s responses indicate that it decreased purchases of

EDP type papers from Spinnaker while increasing purchases of

imported Thermal transfer type papers from the foreign competitor.

Admin. Rec. at 13-14, 62. Its handwritten note further states that

a substantial percentage of the product purchased from the other

domestic sources was imported. Id. at 14. Despite this evidence,

Labor found that “none of the [surveyed customers] increased their

purchases of imported pressure sensitive papers, (including EDP,

thermal transfer, semi[-]gloss etc.) importantly, while decreasing

their purchases from [Spinnaker] during the relevant period.” Neg.

Determ., 67 Fed. Reg. at 4,756. Labor’s conclusion that none of

the surveyed customers increased purchases of imported pressure

sensitive papers while decreasing purchases from Spinnaker is

directly contradicted by the note to Customer E’s response.

Accordingly, the Court finds Labor’s contributed importantly

determination is not supported by substantial evidence, and remands

the instant action to Labor for further investigation.

B. The Relevant Time Period

As discussed above, Labor’s surveys produced data from five of

Spinnaker’s “major declining customers,” detailing each customer’s

total purchases from Spinnaker and other domestic and foreign

sources in 1999, 2000, and the period January through March of 2000
Court No. 02-00203 Page 17

and 2001. Admin. Rec. at 12-13, 16-17, 19. Plaintiffs contend

that Labor erred in dismissing as outside the relevant period for

the petition and investigation data showing that in February 1999

Customer E switched its purchases of Thermal transfer type papers

from Spinnaker to the foreign competitor. Pls.’ Br. at 3-4. Labor

argues that the determination of the relevant period is a matter

left to the discretion of the agency. Def.’s Mem. Opp’n to Mot. J.

Agency R. at 19 (“Labor’s Mem.”).

To determine whether increased imports have contributed

importantly to the separation of Plaintiffs, Labor is directed to

use a “representative base period” for comparison, which is defined

in the agency’s regulations as “one year consisting of the four

quarters immediately preceding the date which is twelve months

prior to the date of the petition.” 29 C.F.R. § 90.2. Because

Plaintiffs’ petition was filed on May 22, 2001, the representative

base period under the regulations appears to be the four quarters

prior to May 22, 2000. In other words, the representative base

period would be the last three quarters of 1999 and the first

quarter of 2000.

Labor’s surveys, however, appear to consider data throughout

the entire years of 1999 and 2000, as well as for the period of

January through March of 2000 and 2001. In particular, the

customer surveys ask for total purchases or percentages of the like

product purchased in 1999 and 2000. Admin. Rec. at 12-13, 16-17,
Court No. 02-00203 Page 18

19. Labor’s Investigative Report also refers to the period of

investigation as 1999 and 2000. Investigative Report, Admin. Rec.

at 21 (“The Department conducted a survey of six major declining

customers . . . of [Spinnaker] regarding their purchases of

pressure sensitive papers in 1999, [and] 2000. . . ."); see also

Initial Determ., Admin. Rec. at 24. Finally, in its

reconsideration determination, Labor stated without further

specification that the “pertinent time periods” of 1999 and 2000

were examined during the investigation. Neg. Determ., 67 Fed. Reg.

at 4,756. Because Labor collected data reaching back to the first

quarter of 1999, the Department’s conclusion that Customer E’s

purchases of imported Thermal transfer type papers beginning in

February 1999 are outside the relevant period of Plaintiffs’

petition and investigation is inconsistent with the investigation

undertaken by the Department. Although Labor “has considerable

discretion in conducting its investigations, it is required to

comply with its own regulations,” United Steelworkers of Am., 17

CIT at 1194, and provide an explanation of the investigative

measures undertaken. See Former Employees of Marathon Ashland

Pipeline, LLC v. Chao, 26 CIT __, __, 215 F. Supp. 2d 1345, 1352

(2002) (holding that Labor’s investigation fell below the threshold

requirement of reasonable inquiry because it failed to explain how

the plaintiffs’ work did not satisfy the “producing” an article

requirement under 19 U.S.C. § 2272); Former Employees of Hawkins
Court No. 02-00203 Page 19

Oil & Gas, Inc. v. United States Sec’y of Labor, 17 CIT 126, 129,

814 F. Supp. 1111, 1114 (1993) (finding that Labor had a duty to

provide an explanation of the criteria used to support its

conclusion). Here, Labor’s investigation is inconsistent with the

agency’s regulatory definition of a representative base period, and

the Department has not provided an explanation for the

inconsistency.

Labor argues that a determination of the relevant period is a

matter left to the discretion of the agency. Labor’s Mem. at 19.

Labor supports its contention by relying on Smith v. Brock, 12 CIT

1009, 1014, 698 F. Supp. 938, 942 (1988). Labor’s reliance on

Smith is misplaced, however, because the investigation undertaken

in that case occurred prior to the amendment of the regulatory

definition of the terms “increased imports” and “representative

base period.” More specifically, Labor investigated the Smith

petition in 1984 under the prior and more deferential definition of

“increased imports,”4 while the instant matter was investigated

according to the amended regulations which became effective on June

19, 1987. Final Rule: Certification of Eligibility to Apply for

4
“Increased imports” was previously defined as meaning
“imports have increased either absolutely or relatively, and
would generally mean those increases have occurred from a
representative base period subsequent to the effectiveness of the
most recent trade agreement concessions proclaimed by the
President beginning in 1968.” Final Rule: Certification of
Eligibility to Apply for Worker Adjustment Assistance, 42 Fed.
Reg. 32,771, 32,773 (Dep’t Labor June 28, 1977).
Court No. 02-00203 Page 20

Worker Adjustment Assistance, 52 Fed. Reg. 23,400, 23,400 (Dep’t

Labor June 19, 1987). In the amended regulations, Labor explicitly

defined the term “representative base period” as stated above. See

id. at 23,401. Thus, in the instant case, Labor is required to

comply with its regulatory limitations defining the representative

period, and provide an explanation for the investigative measures

undertaken. United Steelworkers of Am., 17 CIT at 1194 (holding

that Labor is required to comply with its regulations); Former

Employees of Marathon Ashland Pipeline, LLC, 26 CIT at ____, 215 F.

Supp. 2d at 1352 (finding that Labor is required to provide an

explanation of the investigation undertaken).

Here, Labor’s conclusion to exclude Customer E’s import

purchases beginning in February 1999 from the representative base

period is inconsistent with the investigation undertaken, because

Labor’s surveys seek data encompassing the entire years of 1999 and

2000. Labor has also failed to explain the inconsistency.

Accordingly, the Court must remand.

C. Labor’s Methodology

Plaintiffs advance four arguments to support their contention

that Labor “ignored and/or failed to completely analyze and follow-

up” on data received during the investigation. See Pls.’ Br. at 3.

First, Plaintiffs argue that Labor should have applied “a more

sophisticated analysis” than the dual test under the facts of this
Court No. 02-00203 Page 21

case, because that test overlooks the effects of foreign price

suppression in the U.S. marketplace. See Pls.’ Br. at 11-12.

Second, Plaintiffs claim that Labor should have considered the

effects of price suppression caused by foreign imports on Spinnaker

and its product line in rendering its eligibility determination.

See Pls.’ Br. at 10, 12. Plaintiffs’ third argument is that the

investigation failed to include a trade and industry analysis,

“despite such studies routinely being relied upon in prior cases.”

Id. at 9. Finally, Plaintiffs claim that Labor failed to

investigate the “source of the product received from other domestic

firms and the possible indirect influence of imports” on Spinnaker

and the U.S. marketplace. Id. at 7.

It is well established that “‘the nature and extent of the

investigation are matters resting properly within the sound

discretion of the administrative officials.’” Former Employees of

CSX Oil and Gas Corp. v. United States, 13 CIT 645, 651, 720 F.

Supp. 1002, 1008 (1989) (quoting Cherlin v. Donovan, 7 CIT 158,

162, 585 F. Supp. 644, 647 (1984)); see also Estate of Finkel, 9

CIT at 381, 614 F. Supp. at 1250. As stated above at page 13, the

Court has approved Labor’s use of the dual test as a “reasonable

means of ascertaining the existence of a causal nexus between

increased imports and a firm’s lost sales, and thus the resultant

layoff of its employees,” even though the Court recognizes the test

is “not . . . very sophisticated.” Cherlin v. Donovan, 7 CIT at
Court No. 02-00203 Page 22

162, 585 F. Supp. at 647 (citing Local 167, 643 F.2d at 30). In

applying the dual test in the instant case, Labor’s investigation

attempts to reveal whether the requisite causal link exists. As

such, Labor’s chosen methodology was reasonable.

Plaintiffs’ second argument is that Labor should have

considered the effects of price suppression caused by foreign

imports on Spinnaker and its product line. Pls.’ Br. at 10.

Plaintiffs contend that two customer surveys indicating an increase

in the quantity of the like product purchased, but also a decrease

in the dollar value or cost, Admin. Rec. at 17, 19, a statement by

Hooper indicating in his opinion that “extreme price pressure”

caused by the foreign competitor created price and volume erosion,

Admin. Rec. at 57, and a statement by a former salesman indicating

the difference between Spinnaker’s and the foreign competitor’s

prices during the surveyed periods, Admin. Rec. at 62, support

their contention. Pls.’ Br. at 12-13.

“The legislative history of Section 222(3) of the Trade Act

‘clearly indicates that any separation resulting from a factor

other than import penetration . . . does not warrant

certification.’” W. Conference of Teamsters v. Brock, 13 CIT 169,

182, 709 F. Supp. 1159, 1170 (1989) (quoting Estate of Finkel, 9

CIT at 383, 614 F. Supp. at 1252). “It is also clear that the

Trade Act was not intended to provide trade adjustment assistance

to all workers who lose their jobs due in some way to imports.” W.
Court No. 02-00203 Page 23

Conference of Teamsters, 13 CIT at 182, 709 F. Supp. at 1170

(internal citation omitted). Moreover, “this Court must give

substantial weight to the [Department’s] interpretation of a

statute [the agency] is charged with administering as long as it is

sufficiently reasonable.” W. Conference of Teamsters, 13 CIT at

181, 709 F. Supp. at 1169 (citing Bunker Ltd. Partnership v. Brock,

12 CIT 420, 422, 687 F. Supp. 644, 646 (1988)). Nonetheless,

“[t]he legislative histories of section 222 and its predecessor the

Trade Expansion Act, also show that Congress intended the

[Department] to engage in a broad examination of economic factors

in determining whether there was a ‘causal nexus’ between imports

and layoffs or plant closings under section 222(3).” W. Conference

of Teamsters, 13 CIT at 182, 709 F. Supp. at 1170 (internal

citations omitted).

Here, Labor concluded without authority or explanation that

“[p]rice is not a factor that is considered in meeting the

‘contributed importantly’ group eligibility requirement of section

222(3) of the Trade Act of 1974.” Neg. Determ., 67 Fed. Reg. at

4,757. The price of foreign imports which are directly comparative

with the articles Plaintiffs produced is not a factor which can

rationally be ignored. See Former Employees of Hawkins Oil & Gas,

Inc., 17 CIT at 128-29, 814 F. Supp. at 1114 (finding Labor’s

investigation inadequate because the agency disregarded a customer

list showing a decline in the relevant product’s prices during the
Court No. 02-00203 Page 24

relevant period as “not significant” without further explanation

and failed to evaluate the connection between imports and the

decline in the prices of the relevant product). Rather, Labor’s

decision to ignore price is directly contradicted by the

legislative history’s mandate of a broad causal analysis. W.

Conference of Teamsters, 13 CIT at 182, 709 F. Supp. at 1170.

Moreover, the Court also is troubled by the fact that Labor had the

domestic price data for pressure sensitive papers during the

relevant period available to it, as the Department publishes this

information, and failed to evaluate it. Former Employees of

Hawkins Oil & Gas, Inc., 17 CIT at 129, 814 F. Supp. at 1114 (“The

fact that [Labor] had the information available to it and didn’t

even bother to look at it is inexcusable.”). Accordingly, the

Court cannot find Labor’s conclusion to disregard price in its

contributed importantly analysis reasonable. The Court therefore

remands for further investigation and explanation.

Third, Plaintiffs argue that Labor’s investigation lacked

thoroughness because the Department did not conduct a trade and

industry investigation. See Pls.’ Br. at 3, 9-10. As discussed

above, Labor has discretion with regard to the conduct of such an

investigation. See Former Employees of CSX Oil and Gas Corp., 13

CIT at 651, 720 F. Supp. at 1008 (quoting Cherlin v. Donovan, 7 CIT

at 162, 585 F. Supp. at 647) (“‘The nature and extent of the

investigation are matters resting properly within the sound
Court No. 02-00203 Page 25

discretion of the administrative officials.’”); see also Estate of

Finkel, 9 CIT at 381, 614 F. Supp. at 1250 (same). Even though

Plaintiffs presented the ITC Report demonstrating a general

increase in imports of the like product in the U.S. marketplace in

2000 as compared to 1999 and Customer E’s note indicating that a

substantial percentage of the like product received from the other

domestic firms was imported, Pls.’ Br. at 10, this evidence alone

does not demonstrate that a trade and industry investigation would

be crucial to determine whether increased imports contributed

importantly to the separation of Plaintiffs from their employment.

While the legislative history’s mandate of a broad causal analysis

would support a trade and industry investigation, the Court cannot

conclude that Labor’s decision to omit such an investigation in

this case is clearly unreasonable.

Plaintiffs’ fourth argument is that Labor should have

considered the source of the like product purchased by Spinnaker’s

customers from other domestic plants in its contributed importantly

conclusion. See Pls.’ Br. at 7. Plaintiffs direct the Court to

consider Customer E’s handwritten note admitting that a substantial

percentage of its purchases from the other domestic sources was

imported, and the ITC Report indicating a general increase of the

like product in 2000 as compared to 1999. Id. at 6. The record

however also contains four customer responses stating that none of

their purchases from other domestic sources were imported. Admin.
Court No. 02-00203 Page 26

Rec. at 12, 16-17, 19. On remand, Labor will have the opportunity

to reconsider the adequacy of the record here and the credibility

of the responses received. Cf. Former Employees of Kleinerts,

Inc., 23 CIT at 652-53, 74 F. Supp. 2d at 1286-87 (finding Labor’s

reliance on unverified responses reasonable because the evidence on

the record did not conflict with the responses).

IV. Conclusion

In accordance with the foregoing, it is hereby ORDERED that

Labor’s negative eligibility determination is remanded for Labor to

further investigate whether increased imports contributed

importantly to the separation of Plaintiffs from their employment

in accord with the Court’s opinion; and it is further ORDERED that

the issue of the relevant period is remanded for investigation and

explanation in accord with the Court’s opinion; and it is further

ORDERED that Labor further investigate and explain the effects of

price in its contributed importantly determination in accord with

the Court’s opinion.

__________________________
Donald. C. Pogue
Judge

Dated: January 28, 2003
New York, New York