E5-3352. Gateway Country Store, Whitehall Mall, Whitehall, PA; Notice of Negative Determination on Remand

The United States Court of International Trade (USCIT) granted the Department of Labor's motion for voluntary remand for further investigation in Former Employees of Gateway Country Stores, LLC. v. Elaine L. Chao, United States Secretary of Labor (Court No. 04-00588) on January 3, 2005.

On August 5, 2004, the Department of Labor (Department) issued a negative determination regarding eligibility to apply for Trade Adjustment Assistance (TAA) for the workers of Gateway Country Stores, LLC, Whitehall Mall, Whitehall, Pennsylvania (hereafter “the subject facility”). The negative determination was based on the investigation's finding that the workers at the subject facility were engaged in retail sales of computers and providing technical support to buyers, and thus, did not produce an article in accordance with Section 222 of the Trade Act of 1974. On August 20, 2004, the Notice of Negative Determination Regarding Eligibility to Apply for Worker Adjustment Assistance for the subject facility was published in the Federal Register (69 FR 51715).

In a letter dated September 9, 2004, the petitioner requested administrative reconsideration of the Department's negative determination. The Department affirmed its finding that the workers of the subject firm were not eligible to apply for TAA on the basis that they did not produce an article within the meaning of Section 222 of the Trade Act. In a letter dated September 16, 2004, the Department dismissed the petitioner's request for reconsideration. A Dismissal of Application for Reconsideration was issued on September 17, 2004. The Notice of Dismissal of Application for Reconsideration was published in the Federal Register on September 23, 2004, (69 FR 57091).

By letter dated November 18, 2004, the petitioner requested judicial review by the USCIT. In that letter, the petitioner asserts that the workers produce an article since retail sales should be “recognized as an intrinsic service, bundled and inseparable from the Gateway computer” and alleges that the workers' separations are due to a shift of production abroad.

On January 3, 2005, the USCIT remanded the matter to the Department for further investigation of the subject workers' eligibility to apply for worker adjustment assistance benefits.

During the remand investigation, the Department carefully reviewed previously submitted information, contacted Gateway officials to obtain new and additional information regarding the work done by the subject worker group and solicited information from the petitioners.

The remand investigation revealed that the Gateway Country Stores (“Stores”) operated as a showroom and retail outlet for Gateway computers and related products, such as monitors, and as a service shop. (Supp. AR 93, 105) The Stores, which opened in the United States during the late 1990s, operated on the basis of a European marketing strategy. (Supp. AR 105) By April 9, 2004, Gateway had closed all the Stores. (Supp. AR 1, 100, 105)

Customers would enter the Store and view/test-try the floor models. (Supp. AR 105) Customers could purchase prepackaged computers (“cash and carry”) or place an order with the Store's personnel. (Supp. AR 2, 93) Prepackaged computers were shipped from an off-site manufacturing plant to a Store's inventory room, then sold “as is” to the customer. (Supp. AR 91, 93) Aside from 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. (Supp. AR 8, 93) Customers who sought service or repair for their units brought them to the Stores after receiving it at the pre-selected mailing addresses. (Supp. AR 91, 93, 96)

In the January 31, 2005 submission, the petitioner asserts that workers at the subject facility “were involved in the rework, upgrade, and final assembly of the pc solution * * * Most sales were customized orders with some piece of extra software, hardware, peripherals, or additional component as part of the solution” and infers that the extra components transform the computer into something different and improved and, therefore, the workers are producing an article—the pc solution.

In the February 22, 2005 submission, the petitioner asserts that the pc solution included “continued customer service, and manufacture/rework/upgrade tasks that are bundled with the sale.” The petitioner also asserts that in many occasions, “the service and sale then concluded with assembly of hardware and external components to construct the system desired, and the installation of a customer selected software systems * * * performed by store personnel.”

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. (Supp. AR 91) 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. (Supp. AR 8-41)

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 an article within the meaning of the Trade Act of 1974.

The petitioner also asserts that Gateway used the Stores to distinguish itself from its competitors in the personal computer market and that the Stores' closures were caused by the shift of computer production abroad.

Contrary to the petitioner's allegations, 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. (Supp. AR 105)

Like other companies facing strained economic conditions, Gateway undertook a large-scale business plan to change its direction. Information obtained from Gateway show 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. (Supp. AR 3, 100, 101, 105, 106) Further, those functions which took place in the Stores were revised over several years and shifted to other domestic venues. For example, sales and customer service are handled via telephone (Supp. AR 1) and the Internet (Supp. AR 3); Gateway products are sold and serviced in national retail outlets. (Supp. AR 3, 101)

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 Gateway Country Stores, LLC, Whitehall Mall, Whitehall, Pennsylvania.

Signed at Washington, DC this 17th day of June 2005.

Elliott S. Kushner,

Certifying Officer, Division of Trade Adjustment Assistance.