Overview
Last week, the Federal Circuit issued a landmark precedential opinion holding that the economic industry analysis at the International Trade Commission (ITC) should not exclude consideration of US expenses for sales, marketing, warehousing, quality control, and distribution. These factors have historically been excluded from the analysis.
19 U.S.C. § 1337(a)(3) lays out three potential ways an ITC complainant may establish economic industry:
(A) significant investment in plant and equipment;
(B) significant employment of labor or capital; or
(C) substantial investment in its exploitation, including engineering, research and development, or licensing.
The second requirement, "significant employment of labor or capital," was at issue in Lashify v. ITC (CAFC 23-1245), an appeal from ITC Investigation No. 337-TA-1226. Lashify sells artificial eyelash extensions and related products—conducting research, design, and development in the United States but manufacturing products abroad before shipping them to US customers who can purchase them through a website. In the ITC investigation, the administrative law judge (ALJ) excluded expenses relating to sales, marketing, warehousing, quality control, and distribution from its analysis under § 1337(a)(3)(B) because there were "no additional steps required to make these products saleable" upon arrival to the United States; the quality-control measures were "no more than what a normal importer would perform upon receipt;" and because "Lashify did not meet its burden to establish significant qualifying expenses in other areas." The ALJ therefore determined that Lashify had not satisfied the economic industry requirement, and the commission affirmed.
The Federal Circuit, however, vacated this determination, holding it was error to interpret § 1337(a)(3)(B) as excluding expenses related to sales, marketing, warehousing, quality control, and distribution to the extent they relate to labor and capital. Its opinion analyzes the legislative history of § 1337(a), determining that "labor" and "capital" should be interpreted to carry broad, ordinary meanings. In particular, the opinion interprets "capital" as referring not only to money but also to "a stock of accumulated goods," and that, in the context of the statute, "[t]here is no requirement that a 'stock of accumulated goods' be manufactured domestically." The Federal Circuit therefore remanded the economic industry determination back to the ITC, so the ITC can assess economic domestic industry under an interpretation of § 1337(a)(3)(B) that includes capital and labor for sales, marketing, warehousing, quality control, or distribution. The Federal Circuit affirmed the commission’s decision on technical industry.
The Federal Circuit's interpretation of § 1337(a)(3)(B) significantly expands the universe of what can satisfy the economic industry prong. As a result, it broadens the potential scope of parties that may qualify for relief under § 1337 by including these previously excluded categories—namely expenses related to sales, marketing, warehousing, quality control, and distribution—in the economic domestic industry analysis.
