[Federal Register: March 16, 2005 (Volume 70, Number 50)]
[Notices]               
[Page 12902-12905]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16mr05-109]                         

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DEPARTMENT OF LABOR

Employment and Training Administration

[TA-W-50,588]

 
Murray Engineering, Inc. Complete Design Service, Flint, MI; 
Notice of Negative Determination on Remand

    The United States Court of International Trade (USCIT) remanded to 
the Department of Labor for further investigation Former Employees of 
Murray Engineering v. U.S. Secretary of Labor, USCIT 03-00219. The 
Department concludes that the subject worker group does not qualify for 
eligibility to apply for Trade Adjustment Assistance (TAA) benefits. 
There was neither a shift of production, nor increased imports of 
articles like or directly competitive with those produced at the 
subject facility, as required under section 222(a) of the Trade Act of 
1974, as amended (Trade Act). The workers also do not qualify as 
adversely affected secondary workers under section 222(b) of the Trade 
Act.
    On January 15, 2003, a petition was filed on behalf of workers of 
Murray Engineering, Inc., Complete Design Service, Flint, Michigan 
(``Murray Engineering'') for TAA. The petition stated that workers 
design automotive gauges, tools, fixtures, and dies.
    The Department's initial negative determination for the former 
workers of Murray Engineering was issued on February 5, 2003. The 
Notice of Determination was published in the Federal Register on 
February 24, 2003 (68 FR 8620). The Department's determination was 
based on the finding that workers provided industrial design and 
engineering services and did not produce an article within the meaning 
of Section 222 of the Trade Act.
    In a letter dated February 19, 2003, the petitioner requested 
administrative reconsideration of the Department's negative 
determination. The petitioner alleged that Murray Engineering produced 
a ``tangible drawing essential and integral to the making or building 
of a product'' and that the Department was misled by the word 
``Service'' in the company's name.
    The Department denied the petitioner's request for reconsideration 
on March 31, 2003, stating that the engineering drawings, schematics, 
and electronically generated information prepared by the subject worker 
group were not considered production within the meaning of the Trade 
Act. The Department further stated that the fact that the information 
is generated on paper is irrelevant to worker group eligibility for 
TAA. The Department's Notice of Negative Determination Regarding 
Application for Reconsideration was published in the Federal Register 
on April 15, 2003 (68 FR 18264).
    By letter of April 30, 2003, the petitioner appealed the 
Department's denial of eligibility to apply for TAA to the USCIT, 
asserting that ``machine drawings (plans) are an article.'' The 
petitioner asserted that the subject worker group should be eligible to 
apply for TAA due to imports of like or directly competitive articles 
and, alternatively, because they are adversely affected secondary 
workers.
    The Department filed a motion requesting that the USCIT remand the 
case to the Department for further investigation, and the USCIT granted 
the motion.
    The Department issued its Notice of Negative Determination on 
Remand on August 20, 2003. The Notice was published in the Federal 
Register on September 10, 2003 (68 FR 53395). The remand determination 
stated that the workers did not produce an article and were not 
eligible for certification as workers producing an article affected 
either by a shift of production or by imports, or as adversely affected 
secondary workers.
    On May 4, 2004, the USCIT remanded the matter to the Department for 
further investigation, directing the Department to investigate: (1) The 
nature of the

[[Page 12903]]

designs provided by Murray Engineering to its customers; (2) how the 
designs are sold to Murray Engineering's customers; (3) what proportion 
of the designs are printed or embodied on CD-Rom/diskette; and (4) how 
the petitioner's eligibility to apply for TAA is affected by the 
different formats in which the designs are embodied. The USCIT reserved 
judgment whether the Murray Engineering workers are qualified for 
certification as adversely affected secondary workers.
    The Department's Notice of Negative Determination on Remand was 
issued on August 19, 2004, and was published in the Federal Register on 
August 30, 2004 (69 FR 52935). In the second remand determination, the 
Department affirmed its previous determination that workers at Murray 
Engineering do not qualify for eligibility to apply for TAA. The 
Department again concluded the subject firm does not produce an article 
for TAA purposes, and also found there was neither a shift of 
production from the subject facility nor increased imports of like or 
directly competitive articles as required by section 222(a) of the Act. 
Finally, the Department again concluded the subject firm does not 
supply a component part to a TAA-certified company as required by 
section 222(b) of the Act for certification of a worker group as 
adversely affected secondary workers.
    Although the Department determined that designs created by Murray 
Engineering are conveyed and transmitted via physical media, the 
Department concluded that rote application of HTSUS classification 
codes is not the sole arbiter in determining whether the designs in 
question constitute articles for TAA purposes, and relied on other 
sources of information in concluding designs are not articles.
    The second remand investigation also revealed that, even if one 
concludes that designs are articles, Murray Engineering did not shift 
design production abroad and did not import designs during 2001 or 
2002. The Department's survey of Murray Engineering's major declining 
customers also revealed no imports of designs like or directly 
competitive with those made at the subject firm during 2001 and 2002.
    In its November 15, 2004, decision, the USCIT concluded that 
designs are articles, remanded the case to the Department for further 
review, and deferred consideration of the claim that the subject worker 
group is eligible for TAA certification as adversely affected secondary 
workers.
    The USCIT, citing the definition of ``like or directly 
competitive'' in 29 CFR 90.2, stated that the ``the record fails to 
show the legal basis for Labor's finding that there were no imports of 
directly competitive articles.'' The relevant definition under 29 CFR 
90.2 (emphasis in original) states that:

    Like or directly competitive means that like articles are those 
which are substantially identical in inherent or intrinsic 
characteristics (i.e., materials from which the article are made, 
appearance, quality, texture, etc.); and directly competitive 
articles are those which, although not substantially identical in 
their inherent or intrinsic characteristics, are substantially 
equivalent for commercial purposes (i.e., adapted to the same sues 
and essentially interchangeable therefor).
    An imported article is directly competitive with a domestic 
article at an earlier or later stage of processing, and a domestic 
article is directly competitive with an imported article at an 
earlier or later stage of processing, if the importation of the 
article has an economic effect on producers of the domestic article 
comparable to the effect of importation of articles in the same 
stage of processing as the domestic article.

    The USCIT ordered the Department to interpret and apply this 
definition to determine whether or not ``designs for heavy machinery'' 
represent an ``earlier stage of processing'' of either the machinery or 
the products manufactured on such machines, and if designs are an 
``earlier stage of processing'' of machinery or manufactured products, 
whether the importation of such machinery or manufactured goods has an 
economic effect comparable to importation of articles in the same stage 
of processing as the domestic article, i.e., the designs.
    The issue is whether there were increased imports of articles 
directly competitive with the designs produced by Murray Engineering 
during the investigatory period of 2001 and 2002. The issue must be 
resolved by determining whether the Murray Engineering designs are 
directly competitive with either the machinery designed, or the 
products manufactured by such machinery. The USCIT suggested that 
Murray's designs might be ``directly competitive'' with ``items of 
manufacturing which formerly would have been built in the United States 
on machines produced by Murray's customers,'' on the ground that the 
designs might represent an ``earlier stage of processing'' of those 
goods under the 29 CFR 90.2 definition of ``directly competitive.'' 
Slip Op. at 11.
    Examples of what Congress meant by ``directly competitive'' are 
found in the legislative history of the first adoption of that term in 
the Trade Expansion Act of 1962 (which created the original worker 
adjustment assistance program that evolved into the current TAA 
program), as follows:

    Your committee has incorporated in the bill a provision which 
has the effect of permitting an extension of the scope of the term 
`directly competitive'. Under this provision, an imported article 
may be considered `directly competitive with' a domestic article, or 
vice versa, if the one is at an earlier or later stage of processing 
than the other, or if one is a processed and the other an 
unprocessed form of the same article, and if the economic effect of 
importation of articles in the same stage of processing as the 
domestic article.
    The term `earlier or later stage of processing' contemplates 
that the article remains substantially the same during such stages 
of processing, and is not wholly transformed into a different 
article. Thus, for example, zinc oxide would be zinc ore in a later 
stage of processing, since it can be processed directly from zinc 
ore. For the same reason, a raw cherry would be a glace cherry in an 
earlier stage of processing, and the same is true of a live lamb and 
dressed lamb meat. * * *

H.R. Rep. No. 1818, 87th Cong., 2d Sess. 24 (1962).

    This legislative history, whose language very closely mirrors the 
definition of ``directly competitive'' in 29 C.F.R. Sec.  90.2, 
supports that the phrase ``earlier stage of processing'' has a limited 
meaning as recognized later in TAA court decisions. The court in United 
Shoe Workers v. Bedell, 506 F.2d 174, 186 n.80 (DC Cir. 1974), quoted 
from the above House report in reinforcing that ``[t]he term 'earlier 
or later stage of processing' contemplates that the article remains 
substantially the same during such stages of processing, and is not 
wholly transformed into a different article.'' See also United 
Steelworkers v. Donovan, 632 F.Supp. 17, 22 (Ct. Int'l Trade 1986). 
Under this interpretation, even component parts of finished domestic 
products are not ``directly competitive'' with imported finished 
products, as explained with regard to component parts of television 
sets in Morristown Magnavox Former Employees v. Marshall, 671 F.2d 194, 
197-198 (6th Cir. 1982), cert. denied, 459 U.S. 1041 (1982). Also 
illustrating this point were the USCIT decisions in ACTWU Local 1627, 
AFL-CIO v. Donovan, 7 CIT 212, 587 F.Supp. 74 (1984), concerning 
automotive batteries for cars, and Gropper v. Donovan, 6 CIT 103, 569 
F.Supp. 883 (1983), concerning fabric for knit fabric garments.
    Other TAA court decisions further clarified the meaning of directly 
competitive. Sugar Workers Union v. Dole, 755 F.Supp. 1071, 1075 (Ct. 
Int'l Trade 1990), held that:


[[Page 12904]]


    Congress chose to make adjustment assistance available not to 
all persons or industries displaced by `imports', nor even to just 
those displaced by `competitive' imports, but instead to those 
displaced by `directly competitive' imports. It is not enough, then, 
that the imports compete with or affect the plaintiffs' product 
indirectly or circuitously. [Emphasis in original.]

    The point in the text quoted above from Sugar Workers Union was 
illustrated in an earlier case, Machine Printers and Engravers 
Association v. Marshall, 595 F.2d 860 (DC Cir. 1979) (per curium). 
There, the Secretary denied certification to workers who were employed 
by firms ``engaged in the business of engraving copper or plastic 
rollers and rotary screens for use by domestic textile manufacturers to 
print designs and fabrics.'' 595 F.2d at 861. The workers claimed that 
they were entitled to assistance ``because increased imports of textile 
fabrics have reduced the demand for the engraved rollers which are 
produced by their employers.'' Ibid. Affirming the Secretary, the DC 
Circuit Court noted that the imported textile fabrics that were harming 
the domestic textile industry were ``plainly'' not ``directly 
competitive'' with the engraved rollers and screens produced and 
engraved by the workers'' seeking assistance. Ibid. Another 
illustration of this point was in Kelley v. Secretary, United States 
Dep't of Labor, 626 F.Supp. 398, 402 (Ct. Int'l Trade 1985). In Kelley, 
the USCIT rejected the plaintiffs' argument that the Department should 
have considered the effect of imported finished articles and immigrant 
labor in determining whether imports caused a producer of cotton and 
synthetic thread to reduce its labor force.
    That component parts of an article are not directly competitive 
with the article itself is further reinforced by 2002 amendments to the 
worker adjustment assistance provisions of the Trade Act. The 2002 
amendments added paragraph (b) to Trade Act section 222 to authorize 
TAA certification of workers--referred to as adversely affected 
secondary workers--who, among other things, produce component parts for 
an article produced by another TAA-certified worker group. That 
Congress enacted this provision as an alternative basis for TAA 
certification supports that Congress believed that makers of component 
parts did not qualify for certification under the criteria of Trade Act 
section 222(a) because component parts of an article are not directly 
competitive with the article itself.
    The Department conducted the third remand investigation mindful of 
the above principles and also the CIT's November 15, 2004, orders. In 
the third remand investigation, the Department conducted a survey to 
determine the various uses of those designs purchased by Murray 
Engineering's major declining customers. The survey revealed that 
Murray Engineering's designs were used to make several types of dies (a 
type of machinery used in manufacturing) and other machinery related to 
dies. The Department surveyed five customers, one of whom did not 
conduct business with the subject firm during the relevant period (2001 
and 2002). Three customers purchased designs which were used to make 
dies used to produce automotive parts, and one customer used the 
designs purchased from the subject firm to make dies used to make 
machinery used to produce automotive parts. None of the customers 
surveyed imported dies or related machines.
    The Department also inquired into whether the subject firm's major 
declining customers' customers imported those automotive parts which 
were produced using machines or dies which were produced using designs 
created by the subject firm. The investigation revealed that the 
subject firm's major declining customers all produced their dies or 
other machines for the same single customer, which was the firm that 
made the automotive parts which were the finished product. According to 
this end-user customer, all of the automotive parts used in its 
domestic cars are made in the United States; therefore, there were no 
imports of automotive parts.
    Applying the principles in the legislative history and case law 
cited above to the Murray Engineering worker group, it is clear that 
the workers do not meet the certification criteria of Trade Act section 
222(a) because their designs are not, under the meaning of the 
definition of ``directly competitive'' in 29 CFR 90.2, directly 
competitive with either the machinery designed or the finished products 
made by such machinery.
    The Murray Engineering designs do not represent an earlier stage of 
processing, as that phrase is used both in the definition of ``directly 
competitive'' in 29 CFR 90.2 and in the legislative history discussed 
above. This is because the designs, machinery, and finished products do 
not constitute an article that remains substantially the same from the 
development of the design to the manufacture of the finished products. 
Rather, the designs are a wholly different article from both the 
machinery designed and the finished products--dies and automotive 
parts--made by such machinery.
    Nor can the designs in question be considered component parts of 
the machinery designed, let alone of the finished products made by such 
machinery. The Department interprets a component to be a physical part 
of an article that helps the article to function. A design is helpful 
to creating the machinery, but it is not incorporated into the 
machinery as a physical part and does not help the machinery function. 
A machine's design is a wholly separate thing from both the machine 
itself and the products made by the machine.
    Applying the USCIT decision in Sugar Workers Union, neither the 
machinery designed by Murray Engineering nor the automotive parts 
produced by such machinery directly competitive with Murray 
Engineering's designs. At most, imports--of which there were none in 
this case--of automotive parts or machinery to make such parts might 
affect design makers only indirectly or circuitously, which is not 
enough to consider either automotive parts, or machinery to make such 
automotive parts, directly competitive with designs under Sugar Workers 
Union. Applying the principle of the court decision in Machine 
Printers, the economic impact of imported dies or automotive parts--
again, of which there were none in this case--has no bearing on whether 
the makers of designs for machinery that makes those items are entitled 
to adjustment assistance. All that matters regarding imports is whether 
the importation of designs, or items that directly compete with 
designs, contributed importantly to the workers' layoffs. The 
Department addressed this question in a previous Murray Engineering 
remand investigation and found there were no such imports.
    In sum, the Department interprets the definition of ``directly 
competitive'' in 29 CFR 90.2 as meaning, consistent with Congressional 
intent and TAA case law, that an article, in order to be directly 
competitive with an article in a different stage of processing, remains 
substantially the same during such stages of processing, and is not 
wholly transformed into a different article. The Murray Engineering 
designs are not directly competitive with either the machinery designed 
or the finished products made by such machinery because the designs do 
not remain substantially the same but rather are wholly different 
articles from machinery and automotive parts.
    Regarding TAA eligibility as adversely affected secondary workers 
under section 222(b) of the Trade Act, the Department examined this 
issue in

[[Page 12905]]

previous investigation of this case. The subject worker group can be 
certified as eligible to apply for TAA as adversely affected secondary 
workers only if Murray Engineering either: (1) Supplied components or 
unfinished or semi-finished goods to a firm employing workers who are 
covered by a certification of eligibility for adjustment assistance; or 
(2) assembled or finished products made by such a firm. In the case at 
hand, neither criterion is met because Murray Engineering did no 
assembly or finishing work, nor did any of Murray Engineering's 
customers' workers receive a certification of eligibility to apply for 
TAA during the relevant time period.
    In order to be eligible as suppliers of components or unfinished or 
semi-finished goods, as petitioner claims the subject worker group to 
be, the subject worker group must have produced a component part of the 
product that is the basis of the TAA certification. Because Murray 
Engineering did not produce a component part of a final product, they 
were not secondary suppliers of a TAA-certified facility, as required 
by section 222(b) of the Trade Act. Even if the design specifications 
were sometimes mounted or affixed to their customers' manufacturing 
equipment, the display of the design specifications on the equipment is 
not necessary for the equipment to function properly and does not 
enhance the equipment's performance; thus, the designs are not 
component parts.
    Further, Murray Engineering did no business with a TAA-certified 
company during the relevant time period. The petitioning worker 
specifically claims that Murray Engineering provided designs to Lamb 
Technicon, a TAA-certified company (TA-W-40,267 & TA-W-40,267A). 
However, Murray Engineering did business with Lamb Technicon most 
recently in 1999, which is before the relevant time period for the 
Murray Engineering petition at issue in this case. Therefore, Lamb 
Technicon's certification (TA-W-40,267 & TA-W-40,267A) is not a valid 
basis for certifying Murray Engineering workers as adversely affected 
secondary workers eligible to apply for TAA.

Conclusion

    As the result of the findings of the investigation on remand, I 
affirm the original notice of negative determination of eligibility to 
apply for adjustment assistance for workers and former workers of 
Murray Engineering, Inc., Complete Design Service, Flint, Michigan.

    Signed in Washington, DC this 28th day of February, 2005.
Elliott S. Kushner,
Certifying Officer, Division of Trade Adjustment Assistance.
[FR Doc. E5-1134 Filed 3-15-05; 8:45 am]

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