DEPARTMENT OF LABOR

Employment and Training Administration

TA-W-50,588

MURRAY ENGINEERING, INC.
COMPLETE DESIGN SERVICE
FLINT, MICHIGAN

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 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 C.F.R. § 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 C.F.R. § 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 C.F.R. § 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. §
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 (D.C. 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:
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 (D.C. 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 D.C.
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
§ 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 § 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 § 222(a) because their designs are not, under the
meaning of the definition of "directly competitive" in 29 C.F.R.
§ 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 C.F.R. § 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 C.F.R. § 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 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 at Washington, D.C. this 28th day of February 2005.
/s/ Elliott S. Kushner
_______________________________
ELLIOTT S. KUSHNER
Certifying Officer, Division of
Trade Adjustment Assistance