The GATT implementing legislation has resulted in several significant changes to U.S. laws concerning Section 337 proceedings. The term Section 337 is a shorthand way of referring to Section 1337 of the Tariff Act of 1930, as amended. 19 U.S.C. § 1337. Section 337 is administered by the United States International Trade Commission (Commission) which under Section 337, has power to investigate and issue relief against unfair methods of competition and unfair acts in the importation and/or sale of imported articles. In addition to major changes to Section 337 made by the GATT implementing legislation several amendments to title 28 of the United States Code were made to accommodate the GATT legislation changes to Section 337.
Elimination of Time Limits on Investigations
Prior to amendment of Section 337 by the GATT legislation, the Commission was usually required to complete a Section 337 investigation within twelve (12) months after the Notice of Investigation was published in the Federal Register. There was, however, an exception to the strict twelve-month time limit. Where an investigation was determined to be "more complicated" by the Commission, the investigation had to be concluded within eighteen (18) months. According to the Commission's Rules, at 19 C.F.R. § 210.59(a), a "more complicated investigation" was an investigation that was of "an involved nature owing to the subject matter, difficulty in obtaining information, the large number of parties involved, or other significant factors."
Pursuant to the GATT legislation, the Commission is only required to conclude an investigation "at the earliest practicable time after the date of publication of notice of such investigation." There are no pre-established time limits. On the other hand, the GATT legislation requires that, "[t]o promote expeditious adjudication," the Commission must establish a "target date" for completion of the investigation. The target date must be established within forty-five (45) days after initiation of an investigation. Therefore, it is clear that Congress still places a high premium on rapid determinations in Section 337 investigations, and will monitor the compliance of the Commission with this "non-mandatory" aspect of Section 337 procedure. Moreover, it is probable that the Commission will still rely on its previous criteria for a "more complicated" investigation to determine if an investigation should take more than a year.
Counterclaims
Although Respondents in previous Section 337 investigations had the right to raise all legal and equitable defenses, they were not permitted to raise counterclaims against Complainants. The GATT legislation changes this. Now, under the GATT legislation, counterclaims can be asserted by Respondents. However, once a counterclaim is asserted by a Respondent, the Respondent must remove it to the appropriate federal district court. According to Section 321(a)(2)(B) of the GATT legislation, "[i]mmediately after a counterclaim is received by the Commission, the Respondent raising such a counterclaim shall file a notice of removal with a United States district court in which venue for any of the counterclaims raised by the party would exist under section 1391 of title 28, United States Code." However, Section 321(b)(3)(A) of the legislation also amends Chapter 85 of title 25, United States Code to provide that "[t]he district courts shall have original jurisdiction of any civil action based on a counterclaim raised pursuant to Section 337(c) . . . to the extent that it arises out of the transaction or occurrence that is the subject matter of the opposing party's claim in the proceeding under section 337(a) . . ." (emphasis added).
While the Respondent's counterclaims will not be considered in the course of the Section 337 investigation, the Respondent will have the benefit of the filing date of the Complaint as the filing date of the counterclaims for, e.g., statute of limitations and choice of forum considerations. Moreover, payment of a filing fee shall not be required in such cases. Further, the Act states that the action on the counterclaims shall not affect the proceedings at the Commission, including the legal and equitable defenses that may be raised by Respondents. Therefore, to the extent that there are "overlaps" in the factual bases for a party's defenses and counterclaims, the Section 337 investigation will still involve a rapid determination of the merits of the allegations that are common to the defenses and counterclaims.
Stay of Parallel District Court Actions; Use of Commission Record
Section 337 proceedings and relief are, according to the statute, "in addition to any other provision of law." Accordingly, Complainants can file a "parallel" action in a federal court against the same respondents who are named in a Section 337 complaint or an ongoing Section 337 investigation. Prior to the amendments made by the GATT legislation, a Respondent in a Section 337 action was faced with the possibility of simultaneous litigation at the ITC and in the judicial system. The GATT legislation offers Section 337 Respondents some relief from the prospect of simultaneous litigation.
The GATT legislation amends title 28 to provide that a Respondent who is also a party to a civil district court action can seek a mandatory stay of district court proceedings with respect to any claim that involves the same issues involved in the proceedings before the Commission. The stay of district court proceedings will last until the Commission determination becomes final. However, in order to invoke the automatic stay of district court proceedings, the request for the stay must be made within either (a) thirty (30) days after the requesting party is named as a Respondent at the Commission, or (b) thirty (30) days after the district court action is filed.
The GATT legislation also addresses the use of the Commission record in related district court proceedings. After dissolution of the stay of district court proceedings, the record from the Section 337 proceedings shall be transmitted to the district court for use, under a suitable protective order, to the extent permitted by the Federal Rules of Evidence and the Federal Rules of Civil Procedure. This provision ensures that the parties' efforts in the Section 337 proceeding, and the Commission's determinations, will have an impact on the parties' efforts and strategies in the district court proceeding.
Exclusion Orders
Under Section 337, the Commission has the power to issue exclusion orders that bar importation of goods into the United States. An exclusion order can be limited to specific parties' products or can be directed generally to a broad class of imported goods, irrespective of the source. For example, an exclusion order can be directed to imported DRAM computer memory chips made by a specific foreign manufacturer or to imported DRAMs from any foreign source.
In essence, for the purpose of showing that general exclusion orders will only be issued when necessary to achieve an effective remedy against violations of Section 337, the GATT legislation codifies and clarifies the criteria that the Commission must use to determine if a general exclusion order is appropriate.
Bond Issues
An exclusion order can be temporary or permanent. A temporary exclusion order may be issued during the course of an investigation upon a showing that there is reason to believe that Section 337 has been violated and that other statutory criteria has been met. In essence, a temporary exclusion order resembles a preliminary injunction. On the other hand, a permanent exclusion order is a form of final relief, and because exclusion orders can have an effect on international trade relations, are subject to a limited review by the President of the United States.
The Commission is also empowered to issue temporary or permanent cease and desist orders against domestic Respondents. Cease and desist orders proscribe activities by U.S. entities that constitute or contribute to a violation of Section 337.
The GATT legislation provides that, upon issuance of a temporary exclusion order, the Secretary of the Treasury shall establish a bond amount under which the articles will be permitted to be imported during the remaining term of the Section 337 investigation. The amount of the bond shall be the amount that the Commission determines is "sufficient to protect the Complainant from any injury." Importantly, the legislation expressly provides that if the Commission later determines that the Respondent has, in fact, violated Section 337, the Respondent's bond may be forfeited to the Complainant."
The Commission can also require a Complainant to post a bond to protect the Respondent's interests during the term of a temporary exclusion order, Unlike the provisions regarding the Respondent's bond, it is not mandatory that a Complainant be required to post a bond. However, the GATT legislation provides that, if the Respondent is later determined not to have violated Section 337, the Complainant's bond may be forfeited to the Respondent. The legislation also provides a similar mechanism with respect to domestic Respondents against whom a temporary cease and desist order has issued.
The GATT legislation provides that, upon issuance of a permanent exclusion order, the Secretary of the Treasury shall establish a bond amount under which the articles will be permitted to be imported during the Presidential review of the order. The amount of the bond shall be the amount that the Commission determines is "sufficient to protect the Complainant from any injury." If the order becomes final, i.e., the president does not disapprove it, the Respondent's bond may be forfeited to the Complainant."
Summary
The changes to Section 337 are directed to substantive and procedural issues. Also, the Commission is expected to promptly issue proposed rules that implement the changes. Therefore, future Complainants and Respondents in Section 337 proceedings will face significant changes that must be considered in accessing the parties' respective approaches to litigation at the ITC.