                                                06-32

 UNITED STATES COURT OF INTERNATIONAL TRADE
____________________________________
                                    :
FORMER EMPLOYEES OF GATEWAY :
COUNTRY STORES LLC,                 :
                                    :
                  Plaintiffs,       :
                                    :
            v.                      :                   Before: MUSGRAVE, Judge
                                    :                   Court No. 04-00588
ELAINE L. CHAO, UNITED STATES       :
SECRETARY OF LABOR,                 :
                                    :
                  Defendant.        :
____________________________________:

[Labor’s determinations on voluntary remand that plaintiffs were not separated from their
employment either due to their jobs shifting overseas or due to parent company shifting its domestic
production overseas are supported by substantial evidence and otherwise in accordance with law;
case dismissed]

                                                               Decided: March 3, 2006

          Law Firm of Herrick Nikas LLP (Peter S. Herrick) for the plaintiffs.

        Peter D. Keisler, Assistant Attorney General; David M. Cohen, Director, Patricia M.
McCarthy, Assistant Director, United States Department of Justice, Civil Division, Commercial
Litigation Branch (Stephen C. Tosini); of counsel, Office of the Solicitor, United States Department
of Labor (Peter Nessen) for the defendant.

                                              OPINION

          This action is before the court after a voluntary remand to the United States Department of

Labor (“Labor” or “Department”). For the following reasons the Court finds that Labor’s remand

determination is supported by substantial evidence and otherwise in accordance with law and

dismisses this action. The Court has jurisdiction over this matter pursuant to 19 U.S.C. § 1581(d)(1)

(2000).
Court No. 04-00588                                                                             Page 2


                                            Background

       Plaintiffs are former employees of the Gateway Country Store that was located in Whitehall

Pennsylvania (the “Whitehall Location”). After separation from their employment in April 2004,

plaintiffs petitioned Labor for certification of eligibility to apply for Trade Adjustment Assistance

(“TAA”) benefits. See Pet. for Trade Adjustment Assistance of 7/28/04 (“Petition”), Application

for Recons., Attach.1 In the Petition plaintiffs responded to a question asking for the “[p]roducts

produced by [the] affected group” by stating they had performed “customer service, retail sales, and

training.” Id. at 1. Plaintiffs further averred that they were “secondarily affected” workers because

they lost their jobs due to the closure of Gateway’s manufacturing operations in the United States.

See id. In response to questions regarding their being “secondarily affected” workers plaintiffs stated

that they neither supplied “components/unfinished or semifinished goods to the TAA certified

company” nor “[a]ssemble[d]/finish[ished] products made by the TAA certified company.” See id.

       After review of the Petition, Labor denied plaintiffs’ request for certification. See Notice of

Determinations Regarding Eligibility To Apply for Worker Adjustment Assistance, 69 Fed. Reg.

51,714 (Dep’t Labor Aug. 20, 2004). Labor determined that plaintiffs did not meet the eligibility

requirements because they “[did] not produce an article as required for certification under section

222 of the Trade Act of 1974.” Id. at 51,715. In a letter sent to plaintiffs Labor explained that they

could not be certified because they were “engaged in retail sales of computers and providing

technical support to buyers.” Letter from Labor of 8/5/04, Compl., Attach. at 1. Labor further

explained that plaintiffs were not eligible to be certified for TAA benefits because



       1
               Plaintiffs filed these documents in support of their complaint.
Court No. 04-00588                                                                               Page 3


        the worker group . . . must work for a “firm” or appropriate subdivision that produces
        an article domestically and there must be a relationship between the workers’ work
        and the article produced by the workers’ firm or appropriate subdivision. The
        investigation revealed that although production of an article(s) occurred within the
        parent firm or appropriate subdivision, the retail sales and technical support workers
        described above do not support production. Thus, the worker group cannot be
        considered import impacted or affected by a shift in production of an article.

Id. at 1–2.

        Plaintiffs then timely requested administrative reconsideration of Labor’s determination and

submitted additional information in support of their claim. Plaintiffs alleged that they should be

certified for TAA benefits because

        in order to meet a customers [2] needs, a computer must first have the correct
        hardware components, operating system software that will support their environment,
        and additional software to perform the tasks that a client requires for the home,
        office, or educational institution. These finished products were both ordered online,
        over the phone or at the store and assembled at our various manufacturing facilities
        before being sent to the customer. This was not the only location for assembly of
        technology fit to meet a customers needs. Products were also assembled by sales and
        service staff at the Country Store locations prior to customer purchase. Floppy
        drives, network cards, graphics cards, hard drives, media drives, tuner cards, and
        additional input devices were installed as customers could not use a computer to fit
        their needs without such items. Operating systems needed for business and college
        systems were installed by the staff at the Whitehall location. Additional software and
        drivers were also installed by the staff on location to meet a customers needs.

Application for Recons. at 2.

        After reviewing the information submitted by plaintiffs, Labor determined that

reconsideration was not warranted as plaintiffs’ “application contained no new substantial

information which would bear importantly on the Department’s determination.” See Gateway

Country Store, Whitehall Mall, Whitehall, PA; Dismissal of Application for Recons., 69 Fed. Reg.


        2
               Text of plaintiffs’ submissions are transcribed verbatim herein with minor alterations
to improve clarity.
Court No. 04-00588                                                                               Page 4


57,091, 57,091 (Dep’t Labor Sept. 23, 2004). In a letter sent to plaintiffs, Labor explained that

       [t]he workers of [the Whitehall Location] were engaged in the sale and service of
       computers. While the workers did engage in install, repair, and upgrade work, the
       work performed was on a customer by customer basis and the computers were
       actually manufactured elsewhere. As such, the work performed at the subject
       location is considered [a] service and not production or in support of production.

Letter from Labor of 9/16/04, Compl, Attach. at 2.

       Plaintiffs then timely commenced this action on November 18, 2004. By their complaint

plaintiffs alleged that they should be certified as eligible for TAA benefits because they lost their

jobs due to an increase in imports and, in addition, that they were involved in production. See

complaint at 1–2. Specifically, plaintiffs alleged that Labor “wrongly interprets the commerce of the

retail operation as separated from the actual product, and that no product was produced, assembled

or serviced at the Whitehall location, in turn falsely concluding that our work was unrelated to or did

not support production. . . .” Id., at 1. Plaintiffs explained that

       the retail salesperson for Gateway was in effect both the last guy on the assembly line
       and also the first part of the actual product. The retail experience and availability
       from follow-up and tech support was an integral part of the domestic manufacturing
       strategy for Gateway.

               The local retail presence and support service of Gateway Country Stores was
       not just a branding strategy for Gateway, but very much in itself part of a “holistic
       package” Gateway was selling. The retail operations cannot be reduced to only a
       purchase experience enhancement, but were to be recognized as an intrinsic service,
       bundled and inseparable from the Gateway computer which the TAA previously has
       recognized as an “article.”

Id.3 After reviewing plaintiffs’ allegations, defendant requested a voluntary remand so that Labor

could “further investigate whether retail sales and technical support personnel were involved in the


        3
              After filing their complaint plaintiffs requested, and were assigned, court-appointed
counsel. See Motion for Leave to Proceed In Forma Pauperis of 12/1/04.
Court No. 04-00588                                                                               Page 5


‘support of production.’” Def.’s Mem. in Supp. of Consent Mot. for Voluntary Remand at 1.

       Labor, during the course of its remand investigation, requested additional information from

plaintiffs. In a letter dated January 31, 2005, plaintiffs responded to Labor’s questions about whether

they “completed production or directly supported production” of any articles at the Whitehall

Location. See letter to Labor of 1/31/05, Pub. R. at 42. In their response, plaintiffs stated that

       [p]ersonnel at the Whitehall location were involved in the rework, upgrade, and final
       assembly of the pc solution. Hardware sales with no solution accounted for a very
       small percentage of total sales. Most sales were customized special orders with some
       piece of extra software, hardware, peripherals, or additional component as part of the
       solution. These new photo solutions, digital audio solutions, home office solutions,
       gaming solutions, digital video solution[s], or home theater pc solutions were often
       installed in the service center, or put together by a solutions representative. Even if
       a solution was sold over the phone, quite often [customers] were instructed to go to
       the store to have their solution installed/assembled.

Letter to Labor of 1/31/05, Attach. at 2, Pub. R. at 45. After reviewing this response Labor requested

clarification of plaintiffs’ allegations that they “were involved in the rework, upgrade, and final

assembly of the pc solution,” and what exactly constituted “final assembly” of products. See email

from Labor of 2/16/05, Pub. R. at 84 (quoting letter to Labor of 1/31/05. Attach at 2, Pub. R. at 45)

(emphasis in original). In response, plaintiffs presented further detail about their work at the

Whitehall Location. Plaintiffs stated that “the PC SOLUTION approach bears elements that are

supportive of the claim that the retail employees completed the final products assembly in-store, to

custom requirements.” Letter to Labor of 2/22/05, Attach. at 1, Pub. R. at 87. Plaintiffs explained

that

       PC SOLUTION is the term used by Gateway representing the sales strategy of the
       company putting focus on the actual work completed by the employees and the value
       given to the sale presented to a client. Responsibilities included much more than the
       sale of goods and services at the Whitehall location, but in fact included many
Court No. 04-00588                                                                              Page 6


       interactions before, during, and after the sale. This was in fact a distinct advantage
       in the computer industry Gateway offered by having a domestic presence. This
       domestic strategy was packaged and marketed to customers in order to compensate
       for a handicap Gateway possessed by manufacturing and assembling their pc’s in the
       US.

               The pc solution is the Gateway Advantage for a customer seeking technology
       needs, both the ‘personal computer’ and the ‘accessories’ needed to make that pc do
       what the customer required. 97% of pc sales at the Whitehall location were
       customized solutions to meet each individuals needs. Only a very small percentage
       of clients came to the location to purchase box products without discussing a solution
       with a sales representative or a technician.

               The pc solution is the very cornerstone of Gateway’s Sales Presentation. The
       very first step of any customer interaction is to first identify to the customer why
       choosing Gateway is going to be the best possible experience, an experience they will
       not get from any other computer retailer. The idea was to point out why Gateway
       offered such a value to its customers. This way, when the pc solution was presented,
       it was almost impossible to compare Gateway with its competition, because no one
       else offered the same ‘package’. Since no one else offered the same ‘package’, it is
       also impossible to compare Gateway on price alone. This was how Gateway
       distinguished itself from its competition. We were at a price disadvantage, but now
       we could offer a customer a sales consultant, onsite support, a point of contact for
       post-sale advice and support, instant sale items without waiting for shipping, and a
       place to return or exchange items. . . .

               A computer does not magically complete everything a customer needs right
       out of the box. Some customers purchase it for games requiring specific graphic
       cards, special software, gaming accessories, and of course the games. Some clients
       required business components, office software, virus and firewall software,
       networking components, financial software, etc. Some clients required older
       technology such as floppy drives which were not standard on our pc. A few clients
       required specific ‘training’ on what a computer does, how to turn it on, and parental
       controls, all of which [were] taught at the location in Whitehall. There are countless
       reasons why a customer needed a pc and limitless different solutions that were
       created for clients at the location.

Id. at 87–88. Plaintiffs further explained what they meant by their allegation that they were involved

in “final assembly” of products:

       Final assembly was not just a rarity when creating a pc solution, but rather happened
Court No. 04-00588                                                                                Page 7


       on virtually every sale. It may have been done physically by a technician or the sales
       representative or as part of the sales process by the sales representative. Final
       assembly represents the idea that many components are collected and put together
       in such a way as to create a finished product for sale. Every sale consisted of
       identifying the clients needs, gathering the components, software or hardware or
       training, putting them together in such a way that the final solution sold to a customer
       was a finished product that completed all of the requirements initially stated by the
       customer. A customer could go into any retail location and purchase a computer, but
       that ‘package’ may not do what the customer needs. It might turn on, or perform the
       functions of a basic computer, but it won’t complete the business tasks, or have a
       specific graphic card to run a game that the client wants. A client can then go out
       [and] purchase these required accessories, but they may not work with a specific
       motherboard the client just purchased or it may not have enough memory to handle
       the complicated nature of video editing. A computer is very complex and all of the
       components from the hard drive to the memory to even the number of PCI slots need
       to be evaluated in order to complete the solution for a customer. Even if all of the
       hardware and the software is collected correctly, the customer may still not know
       how to install these components or how to complete these tasks or how to fix a
       problem should one arise. All of these things were solved in the final package
       assembled by the Gateway representative and sold as a final pc solution to the
       customer.

Id. at 88–89. Finally, plaintiffs identified which workers had the primary responsibility for which

tasks at the Whitehall Location:

       [The Whitehall Location] team worked together to present an overall customer
       experience bundled into each sale and delivered as a value to each customer. A sales
       representative not only created a pc solution and completed the sale, but also
       provided after the sale consultation and demonstration. The sales rep might also help
       his clients work through problems they were having with their new solution or
       provide advice on how to complete tasks. Part of the sale also included onsite
       support and training (completed at the Whitehall location), which may be completed
       by any one of the other employees of the location, but all of which was part of the
       overall Gateway Sales Experience and explained to the customer at the time of
       sale . . . .

               Rework, upgrade, and final assembly were 97% of all solutions completed by
       sales representatives and technicians in the sales process in order to provide a
       finished product for sale. Solution sales were about 66% of the time spent by sales
       representatives followed 33% after the sale support/trouble-shooting and product
       demonstration. The technicians completed more of the hardware support and
Court No. 04-00588                                                                             Page 8


        customer service as part of the solution which was sold by the sales representative.
        They would also provide upgrades and installation support, before, during and after
        the solution was sold to a customer. You can not split these tasks up by percentage
        when all customers required some portion of the equation in order to create a final
        product sold as the ‘pc solution’.

Id. at 89.

        Labor filed the results of its remand investigation on June 20, 2005. See Gateway Country

Store, Whitehall Mall, Whitehall PA; Notice of Negative Determination on Remand (“Negative

Determination”), 70 Fed. Reg. 37,114 (Dep’t Labor June 28, 2005); Pub. R. at 107. In the Negative

Determination Labor again found that plaintiffs did not meet the eligibility requirements for

certification. Id., 70 Fed. Reg. at 37,115; Pub. R. at 112. Specifically, Labor determined that,

pursuant to 19 U.S.C. § 2272(a)(2)(B), plaintiffs had not manufactured an article within the meaning

of the statute and that their jobs had not been shifted overseas. See id., 70 Fed. Reg. at 37,114–15;

Pub. R. at 111. Labor also determined that plaintiffs were not eligible to be certified for TAA

benefits pursuant to 19 U.S.C. § 2272(a)(2)(A) as plaintiffs did not lose their jobs due to Gateway

shifting its domestic production to a foreign country. See id., 70 Fed. Reg. at 37,115; Pub. R. at 111.

                                        Standard of Review

        The Court will not find Labor’s determinations to be proper unless they are supported by

substantial evidence and otherwise in accordance with law. 19 U.S.C. § 2395(b) (2000); Former

Employees of Stanley Smith, Inc. v. United States Sec’y of Labor, 20 CIT 201, 203, 967 F. Supp. 512,

515 (1996). As stated by the Court of Appeals for the Federal Circuit:

        The Supreme Court has defined “substantial evidence” as “such relevant evidence as
        a reasonable mind might accept as adequate to support a conclusion.” Universal
        Camera Corp. v. NLRB, 340 U.S. 474, 477 (1951) (quoting Consol. Edison Co. v.
        NLRB, 305 U.S. 197, 229 (1938)). Although substantial evidence must be more than
Court No. 04-00588                                                                                 Page 9


        a “mere scintilla,” it is “something less than the weight of the evidence, and the
        possibility of drawing two inconsistent conclusions from the evidence does not
        prevent an administrative agency’s finding from being supported by substantial
        evidence.” Consolo v. Fed. Mar. Comm’n, 383 U.S. 607, 620 (1966).

Former Employees of Barry Callebaut v. Chao, 357 F.3d 1377, 1380–81 (Fed. Cir. 2004) (“Barry

Callebaut”). This Court reviews whether Labor’s determinations are “in accordance with law”

pursuant to the standard set out in the Administrative Procedure Act. See Former Employees of Elec.

Data Sys. Corp. v. United States Sec’y of Labor, 28 CIT __, __, 350 F. Supp. 2d 1282, 1286 (2004)

(“EDS”) (citing 5 U.S.C. § 706; Former Employees of Rohm & Haas Co. v. Chao, 27 CIT __, __,

246 F. Supp. 2d 1339, 1346 (2003); Woodrum v. Donovan, 5 CIT 191, 193, 564 F. Supp. 826, 828

(1983); Alaska Dep’t of Envtl. Conservation v. EPA, 540 U.S. 461, 496–97 (2004)).

                                                Discussion

        I.         Labor’s Determination Pursuant to 19 U.S.C. § 2272(a)(2)(B)4

        Section 222 of the Trade Act of 1974, as amended, 19 U.S.C. § 2272 (2002), provides, in

relevant part:

        (a) In general. A group of workers . . . shall be certified by the Secretary as eligible
        to apply for adjustment assistance under this chapter pursuant to a petition filed under
        section 221 if the Secretary determines that--

                   (1) 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; and

                   (2) . . . (B)   (i) there has been a shift in production by such
                                   workers’ firm or subdivision to a foreign
                                   country of articles like or directly competitive


        4
                   The Court addresses the parties’ arguments in the order in which they are presented
in their papers.
Court No. 04-00588                                                                          Page 10


                               with articles which are produced by such firm
                               or subdivision . . . .

To be certified as eligible for TAA benefits pursuant to section 2272(a)(2)(B) workers must produce

an “article.” As stated by this Court, “[w]hile the definition of the statutory term ‘article’ is a

question of law, the question of whether particular items produced by Plaintiffs would fall into this

definition is factual.” EDS, 28 CIT at __, 350 F. Supp. 2d at 1291 (citing Former Employees of

Marathon Ashland Pipeline, LLC v. Chao, Sec’y of Labor, 370 F.3d 1375, 1381 (Fed. Cir. 2004)

(“Marathon”)); Former Employees of Merrill Corp. v. United States, 29 CIT __, __, 387 F. Supp.

2d 1336, 1342 (2005) (“Merrill”) (citing EDS, 28 CIT at __, 350 F. Supp. 2d at 1291). While the

term “article” is not defined by statute, the meaning of that term has been reviewed extensively by

this Court. See e.g., Merrill, 29 CIT at __, 387 F. Supp. 2d at 1342–43 (presenting overview of the

Court’s examination of the term article). Workers can be certified for TAA benefits where they

produce a tangible commodity. Nagy v. Donovan, 6 CIT 141, 145, 571 F. Supp. 1261, 1264 (1983).

Workers may also produce an article where an existing commodity is transformed into something

new. Pemberton v. Marshall, 639 F.2d 798, 800 (D.C. Cir. 1981) (“Pemberton”); Former

Employees of Shaw Pipe, Inc. v. United States Sec’y of Labor, 21 CIT 1282, 1287, 988 F. Supp. 588,

592–93 (1997). Finally, in order to be eligible for certification, workers must satisfy every element

of the statute. See Merrill, 29 CIT at __, 387 F. Supp. at 1342 (citing Shaw, 21 CIT at 1285, 988 F.

Supp. at 591).

       In the Negative Determination Labor found that plaintiffs did not produce an article within

the meaning of the statute. Labor stated that:

       [T]he Gateway Country Stores (“Stores”) operated as a showroom and retail outlet
Court No. 04-00588                                                                               Page 11


       for Gateway computers and related products, such as monitors, and as a service shop.
       The Stores, which opened in the United States during the late 1990s, operated on the
       basis of a European marketing strategy.

               Customers would enter the Store and view/test-try the floor models.
       Customers could purchase prepackaged computers (“cash and carry”) or place an
       order with the Store’s personnel. Prepackaged computers were shipped from an off-
       site manufacturing plant to a Store’s inventory room, then sold “as is” to the
       customer. Aside from the display models, the prepackaged computers were not
       removed from their boxes by Store personnel. Orders placed by the customer are
       assembled and packaged by off-site Gateway manufacturing plants, then shipped
       directly from the plant to the customer’s mailing address. Customers who sought
       service or repair for their units brought them to the Stores after receiving it at the pre-
       selected mailing addresses. . . .

               According to Gateway company officials, workers at the subject facility did
       not install programs or devices unless it was post-sale and the customer brought the
       unit into a Store for service. Further, a careful review of the position descriptions of
       the workers at the subject facility show that the workers were not engaged in
       production work but performed sales and marketing, sales/product training, store
       opening/closing, human resources, budgeting, customer service, inventory control,
       and management functions.

               The Department has consistently held that the performance of installation,
       repair and customer service is not production for the purposes of the Trade Act.
       Thus, the Department determines that petitioners do not produce and article within
       the meaning of the Trade Act of 1974.

Negative Determination, 70 Fed. Reg. at 37,114, Pub. R. at 109–110 (citations omitted).

       As a preliminary matter, the record supports Labor’s determination that plaintiffs were almost

entirely involved in sales or other activities not related to the physical assembly of computers.

Evidence supporting this determination includes the following: first, in their initial petition for

benefits plaintiffs indicated that they were involved in “customer service, retail sales, and training”

(Petition at 1); second, all of the job descriptions submitted to Labor by Gateway indicate that

plaintiffs’ jobs involved either sales, management, training, or other store operations not related to
Court No. 04-00588                                                                          Page 12


physically working on computers (see Conf. R. at 11–41); third, training documents submitted by

plaintiffs in response to Labor’s requests for information are all related to sales (see Pub. R. at

46–63); finally, plaintiffs themselves state that nearly all of their work at the Whitehall Location

involved sales or other activities not related to assembly (see Pub. R. at 89 (“Solution sales were

about 66% of the time spent by sales representatives followed [by] 33% after the sale

support/trouble-shooting and product demonstration.”)).

       The record also supports Labor’s determination that the computers assembled at Gateway’s

domestic manufacturing facilities were always fully-functional units that could be used without

further modification right out of the box. Evidence that supports this determination includes: first,

in the Application for Reconsideration plaintiffs state that the computers were “finished products

[that] were both ordered online, over the phone, or at the store and assembled at our various

manufacturing facilities before being sent to the customer” (Application for Recons. at 2 ); second,

a Gateway official stated that “[c]omputers were assembled at our various manufacturing locations”

(email from Gateway to Labor of 1/25/05, Pub. R. at 8); third, a Gateway official stated that “The

Country [S]tores displayed our products. The customer could place the order at the store [and then]

the product, which would be assembled in our manufacturing plant, [was] shipped directly to the

customer’s home” (email from Gateway to Labor or 2/28/05, Pub. R. at 93).

       While the record supports Labor’s determinations that plaintiffs were almost entirely

involved in sales and that Gateway always shipped fully-functional computers directly from its

manufacturing facilities to its customers, plaintiffs nevertheless argue that they created an article

within the meaning of the statute because they were part of a “team” that assembled products at the
Court No. 04-00588                                                                           Page 13


Whitehall Location. In other words, even though plaintiffs themselves did not create an article, there

were other employees—identified as technicians—who did and, so, plaintiffs should be certified for

TAA benefits.5 Plaintiffs argue that using the factors outlined in Pemberton, Labor should have

determined that the workers at the Whitehall Location produced an article. See Pls.’ Brief in Supp.

of Their Objection to the Def.’s Remand Results at 4–5 (“Pls.’ Mem.”) (citing Pemberton, 639 F.

2d at 800). Plaintiffs contend that

       Labor states “According to Gateway officials, workers at the subject facility did not
       install programs or devices unless it was post-sale and the customers brought the unit
       into a Store.” Labor’s statement does recognize that a “computer solution” or a
       “new” computer system was entering the stream of commerce pursuant to the
       Pemberton factors.

               The remaining administrative record does not reflect that Labor properly
       reviewed and addressed the “new” computer system that Plaintiffs were producing
       in the Whitehall facility. In fact, a majority of the administrative records are those
       documents provided by the Plaintiffs and correspondence between Gateway and
       Labor.

Id. at 4–5 (referencing Negative Determination, 70 Fed. Reg. at 37,114, Pub. R. at 110). In response,

defendant argues that Labor’s determination that plaintiffs did not produce an article is proper.

Defendant argues that:

       under every sales channel available at the Gateways stores, the computers were
       prepackaged at the factory, and customers took possession of their computers in that
       exact prepackaged condition. Likewise, although the plaintiffs did install programs
       and peripherals, Labor confirmed that all such activity took place post-sale.
       Accordingly, this post-sale servicing activity cannot be considered the production of
       a good.

Def.’s Resp. to Pls.’ Brief Concerning the Voluntary Remand Results (“Def.’s Resp.”) at 4 (citations



       5
               There is no indication or argument that the Whitehall Location employees identified
as technicians were either certified for—or even sought certification for—TAA benefits.
Court No. 04-00588                                                                           Page 14


omitted; emphasis as in original).

       The Court does not agree that Labor’s determination is improper. While arguing this Court’s

decision in Pemberton controls this matter, plaintiffs do not explain how that decision compels a

result different than that reached by Labor. In Pemberton the plaintiffs argued that workers who

“remanufactured” ships should be certified as eligible for TAA benefits. The Court rejected that

argument stating

       [t]he Act requires the manufacture of an article the demand for which is decreased
       by the importation of a like article. The legislative history of the Act offers no
       specific guidance on the interpretation of the term “article,” but a reading of the
       entire statute, its purposes and goals, leaves no doubt that Congress contemplated an
       equalization of markets for domestic goods. The repair and maintenance of a ship is
       clearly a service to an existing commodity. Even if the repair necessitates the use of
       new materials, it cannot be said to be the creation of a new ship any more than
       overhauling an automobile can be said to be manufacturing a car. Semantics do not
       overcome the reality that nothing new is entered into the stream of commerce.

Pemberton, 639 F.2d at 800 (footnote omitted). Here, plaintiffs seize upon the Court’s observation

that a group of workers might be certified for TAA benefits where something “new is entered into

the stream of commerce” and, in this case, that “something new” would be the fully-functional

computers that Gateway manufactured at its domestic production facilities and shipped directly to

customers that then had additional hardware, software, or other accessories installed at the Whitehall

Location. See Pls.’ Mem. at 4–5. The Court allows that part of plaintiffs’ argument—that Labor

may not have fully addressed the issue of whether post-sale work on computers created a new

article—may have some merit6; on the other hand, plaintiffs do not explain how something


       6
                The Court notes that Labor, in the Negative Determination, did not follow the two-
step analysis set out by this Court for determining whether plaintiffs manufactured an article. See
EDS, 28 CIT at __, 350 F. Supp. 2d at 1291. Labor did not define the legal term “computer” and
                                                                                     (continued...)
Court No. 04-00588                                                                             Page 15


completely new is entered into the stream of commerce—rather than “a service to an existing

commodity”—by the installation of standard hardware, off-the-shelf software, or other accessories7

into an otherwise fully-functioning computer. Pemberton, 639 F.2d at 800. Furthermore, plaintiffs

do not explain how the introduction of these types of components alter an existing article in such a

fundamental manner so that it is transformed into a different article. Shaw, 21 CIT at 1287, 988 F.

Supp. at 592–93 (“[M]inor alterations to or repairs made on more complex and intricate products

are unlikely to result in the alteration or transformation of the underlying product.”); letter to Labor

of 2/22/05, Attach. at 2, Pub. R. at 88 (stating that “A computer is very complex . . . .”). In any

event, even though Labor’s determination in this regard is flawed, there remains Labor’s further

determination that plaintiffs were not separated from their employment at the Whitehall Location

due to their jobs being shifted to a foreign country. See 19 U.S.C. § 2272(a)(2)(B)(i). In the

Negative Determination Labor stated that “those functions which took place in the Whitehall

Locations were revised over several years and shifted to other domestic venues. For example, sales

and customer service are handled via telephone and the Internet; Gateway products are sold and

serviced in national retail outlets.” Negative Determination, 70 Fed. Reg. at 37,115, Pub. R. at 111

(citing Conf. R. at 1, 3, 101). Plaintiffs make no argument that this determination is in error and

plainly admit that their jobs were not shifted to a foreign country. See letter to Labor of 1/31/05,



        6
        (...continued)
then assess the evidence to determine whether plaintiffs work, as a factual matter, was related to
creating that article.
       7
                Plaintiffs characterize the various components that could be installed into computers
at the Whitehall Location as “additional hardware and software” or “accessories.” See letter to Labor
of 1/31/05 at 3, Pub. R. at 44; letter to Labor of 2/22/05 at 3, Pub. R. at 88.
Court No. 04-00588                                                                           Page 16


Attach. at 2, Pub. R. at 45 (“[M]anufacturing of the pc’s shifted overseas . . . . Gateway Country

employees jobs however were not shifted to a foreign country. Instead they were eliminated

completely.”). Therefore, because plaintiffs’ argument, based in part on their contention that they

created an article at the Whitehall Location as part of a “team” that assembled computers, does not

satisfy all the requirements of 19 U.S.C. § 2272(a)(2)(B), that claim must fail. Merrill, 29 CIT at

__, 387 F. Supp. 2d at 1342. Therefore, Labor’s determination that plaintiffs were not eligible to be

certified for TAA benefits pursuant to 19 U.S.C. § 2272(a)(2)(B) is supported by substantial

evidence and otherwise in accordance with law.

       II.     Plaintiffs’ 19 U.S.C. § 2272(a)(2)(A) Argument

       Pursuant to section 2272, workers may be certified for TAA benefits where:

       (1) 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; and

       (2)     (A)     (i) the sales or production, or both, of such firm or
                       subdivision have decreased absolutely;

                       (ii) imports of articles like or directly competitive
                       with articles produced by such firm or subdivision
                       have increased; and

                       (iii) the increase in imports described in clause (ii)
                       contributed importantly to such workers’ separation or
                       threat of separation and to the decline in the sales or
                       production of such firm or subdivision . . . .

19 U.S.C. § 2722(a)(2)(A).

       As part of its remand investigation Labor contacted Gateway and requested information as

to whether plaintiffs were separated from their employment due to Gateway shifting its domestic
Court No. 04-00588                                                                          Page 17


manufacturing to a foreign country. In response, a Gateway company official stated that Gateway’s

decision to close all of the County Stores was based on several factors, the two main of which being

that the stores were unprofitable and that Gateway shifted its sales to other channels. See letter to

Labor of 4/20/05, Conf. R. at 101. Based upon this information Labor determined that plaintiffs

were not eligible for certification of TAA benefits pursuant to 19 U.S.C. § 2272(a)(2)(A). Labor

explained that

       Gateway’s creation of the Stores was not to distinguish itself from its competitors as
       an effort to secure and/or maintain its market. Rather, the Stores were based on a
       revenue channel that Gateway was already using in Europe and Gateway had hopes
       that its domestic Stores would also be profitable.

               Like other companies facing strained economic conditions, Gateway
       undertook a large-scale business plan to change its direction. Information obtained
       from Gateway show[s] that the business plan started several years before the
       investigatory period (July 2003 through July 2004), that the change of revenue
       sources was part of its dynamic business revolution, and that the Store closures were
       but one form of corporate cost-reduction, as was the independent decision to shift
       some manufacturing to foreign countries. The Stores were closed because they were
       unprofitable.

Negative Determination, 70 Fed. Reg. at 37,115, Pub. R. at 111 (citations omitted).

       Plaintiffs argue that Labor’s determination is not supported by substantial evidence or

otherwise in accordance with law. Plaintiffs state that Labor did not “make a reasonable inquiry into

Gateway’s allegations that imports and outside production did not hurt its sales.” Pls.’ Mem. at 5

(citing EDS, 28 CIT at __, 350 F. Supp. 2d at 1291; Former Employees of Sun Apparel of Tex. v.

United States Sec’y of Labor, 28 CIT __, __, Slip Op. 04-106 at 22–23 (Aug. 20, 2004)). Plaintiffs

argue that they

       requested that Labor inquire as to how Gateway’s sales diminished by over 60% in
       three years due to competition from all of the major competitors who had already
Court No. 04-00588                                                                            Page 18


       switched to an import cost structure and how this drove Gateway to adopt an import
       based structure just like all of its competition[]. Labor forwarded Plaintiffs’ inquiry
       to Gateway on April 4, 2005. Gateway responded that “The decision by Gateway to
       close the Stores was not in anyway based on the fact that Gateway moved its
       computer assembly/production outside the United States.” Gateway did not provide
       any further explanation or reasoning to back its answer. Gateway did not provide any
       financial documentation to support its answer and conclusions. Labor did not request
       an explanation to the answer. Labor did not request any financial documentation as
       to . . . Gateway’s reasoning or restructuring at this time.

Pls.’ Mem at 5–6 (citations omitted). In other words, plaintiffs are arguing that, without further

factual development, it was improper for Labor to rely on the statement “[t]he decision by Gateway

to close the Country Stores was not in anyway based on the fact that Gateway moved its computer

assembly/production outside the United States.”

       Defendant responds Labor’s determination is proper, that:

       [T]here is no evidence upon the record that “increases of imports” of computers
       “contributed importantly” to the workers’ separation. 19 U.S.C. § 2272(a)(2)(A)(iii).
       Specifically, the record reflected that the employees’ dislocation was the result of a
       business decision by Gateway to close an unprofitable sales channel, with the
       functions of the stores shifted to other channels. Furthermore, the business plan that
       resulted in the store closures was begun several years before the period of
       investigation. Indeed, there is simply no evidence upon the record indicating that
       Gateway closed its stores due to foreign competition.

               Plaintiffs’ claims here are insufficient. Specifically, plaintiffs merely allege
       that Labor’s reliance upon company representatives’ representations was erroneous.
       However, the appellate court has explained that Labor may rely upon representations
       of the former employer in TAA cases, where there is no contradictory evidence
       demonstrating the representations are inaccurate.

Def.’s Resp. at 6 (emphasis in original); see id. at 7 (citing Barry Callebaut, 357 F.3d at 1383).8 As


       8
               In their papers filed in response to defendant’s voluntary remand, the parties focus
their argument on subsection (iii) of 19 U.S.C. § 2272(a)(2)(A). As Labor’s determination in this
regard is supported by substantial evidence and otherwise in accordance with law, the Court does
not examine whether Labor’s determinations as to subsections (i) or (ii) were proper. Merrill, 29
CIT at __, 387 F. Supp. 2d at 1342.
Court No. 04-00588                                                                              Page 19


pointed out by defendant, the Court of Appeals for the Federal Circuit has held that Labor “is entitled

to base an adjustment assistance eligibility determination on statements from company officials if

the Secretary reasonably concludes that those statements are creditworthy and are not contradicted

by other evidence.” Marathon, 370 F.3d at 1385 (citing Barry Callebaut, 357 F.3d at 1383).

Furthermore, it is reasonable for Labor to rely on information supplied by a company official where

that information is not disputed by either party or, if there is a dispute, if Labor conducts an adequate

investigation into the reliability of that information. See Former Emples. of Ericsson, Inc. v. United

States Sec’y of Labor, 28 CIT __, __, Slip Op. 04-130 at 9–10 (Oct. 13, 2004) (“Ericsson”)

(discussing Marathon, 370 F. 3d at 1381, Barry Callebaut, 357 F.3d at 1383). The Court does not

agree that, here, Labor’s reliance on the company official’s statement was improper because there

is no real disagreement as to accuracy of the statement. Specifically, documents filed by plaintiffs

in support of their claim in this action buttress the company official’s statement by showing that the

reason Gateway decided to close all of the Country Stores was due to the stores’ high overhead costs

and due to the fact that selling products through the Country Stores had the potential to create

conflicts with the domestic retail outlets where Gateway planned to sell its products. See

Application for Recons., Attach., Charles Smulders et al., Gateway Closes Retail Stores in Push for

Greater Profitability, Gartner.com (April 5, 2004) (“Despite Gateway’s success in higher-margin

consumer electronics, most of its revenue flows from low-margin PCs. Gateway has been unable

to drive enough revenue via its stores to justify their costs.”); Id., Richard Shim & John G. Spooner,

Gateway to shutter stores, cut staff, CNET News.com (“Analysts, who had been theorizing that the
Court No. 04-00588                                                                            Page 20


retail outlets were on the chopping block for weeks, said the stores could have been a liability for

Gateway’s efforts to form relationships with third-party retailers.”). As plaintiffs’ own documents

support the company official’s statement, there can be no serious dispute as to its accuracy or that

it was reasonable for Labor to rely on it. Marathon, 370 F.3d at 1385. Therefore, because Labor’s

determination that plaintiffs, as salespeople at the Whitehall Location, did not lose their jobs due to

Gateway shifting its domestic production to a foreign country is supported by substantial evidence

and otherwise in accordance with law, Labor’s determination that plaintiffs were not eligible to be

certified for TAA benefits pursuant to 19 U.S.C. § 2272(a)(2)(A) is proper.

                                             Conclusion

         Because the Court finds Labor’s determinations on voluntary remand to be supported by

substantial evidence and otherwise in accordance with law, this action is dismissed. Judgment shall

enter accordingly.


                                                              /s/ R. Kenton Musgrave
                                                               R. Kenton Musgrave

Dated:          March 3, 2006
                New York, NY
