|
|
|
ETA
Notices
Mortgage Guaranty Insurance Corporation, Concord, California; Notice of Negative Determination on Remand
[ 10/31/2007]
[ PDF]
FR Doc E7-21354
[Federal Register: October 31, 2007 (Volume 72, Number 210)]
[Notices]
[Page 61686-61689]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr31oc07-126]
-----------------------------------------------------------------------
DEPARTMENT OF LABOR
Employment and Training Administration
[TA-W-61,266]
Mortgage Guaranty Insurance Corporation, Concord, California;
Notice of Negative Determination on Remand
On August 9, 2007, the United States Court of International Trade
(USCIT) granted the Department of Labor's request for voluntary remand
to conduct further investigation in Former Employees of Mortgage
Guaranty Insurance Corporation v. United States Secretary of Labor
(Court No. 07-00182).
On April 19, 2007, the Department of Labor (Department) issued a
Negative Determination regarding eligibility to apply for Trade
Adjustment Assistance (TAA) and Alternative Trade Adjustment Assistance
(ATAA) applicable to workers and former workers of Mortgage Guaranty
Insurance Corporation, Concord, California (the subject firm).
(Administrative Record (``AR'') 64). The Department's Notice of
negative determination was published in the Federal Register on May 9,
2007 (72 FR 26425). (AR 76). The determination stated that, because the
workers did not produce an article, and did not support a firm or
appropriate subdivision that produced an article domestically, the
workers cannot be considered import impacted or affected by a shift of
production abroad. (AR 64-65).
Administrative reconsideration was not requested by any of the
parties pursuant to 29 CFR 90.18.
The complaint alleges that the subject workers are eligible to
apply for worker adjustment assistance due to a shift of production to
India followed by increased imports (``our work was sent to Bangalore,
India * * * our daily contract underwriting work was retrieved
electronically by this team * * * then sent electronically back to * *
* the United States'').
In order for the Secretary to issue a certification, petitioners
must meet the group eligibility requirements under section 222 of the
Trade Act of 1974, as
[[Page 61687]]
amended. The applicable requirements can be satisfied in one of two
ways:
I. Section (a)(2)(A)--
A. 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
B. The sales or production, or both, of such firm or subdivision
have decreased absolutely; and
C. Increased imports of articles like or directly competitive
with articles produced by such firm or subdivision have contributed
importantly to such workers' separation or threat of separation and
to the decline in sales or production of such firm or subdivision;
or
II. Section (a)(2)(B)--
A. 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
B. There has been a shift in production by such workers' firm or
subdivision to a foreign country of articles like or directly
competitive with articles which are produced by such firm or
subdivision; and
C. One of the following must be satisfied:
1. The country to which the workers' firm has shifted production
of the articles is a party to a free trade agreement with the United
States; or
2. The country to which the workers' firm has shifted production
of the articles is a beneficiary country under the Andean Trade
Preference Act, African Growth and Opportunity Act, or the Caribbean
Basin Economic Recovery Act; or
3. There has been or is likely to be an increase in imports of
articles that are like or directly competitive with articles which
are or were produced by such firm or subdivision.
In order to determine whether the subject workers meet the TAA
group eligibility requirements, the Department must first determine
whether or not an article was produced at the subject firm, then
determine whether the workers are adversely impacted by increased
imports of articles like or directly competitive with those produced by
the subject firm or by a shift in production abroad of articles like or
directly competitive with articles which are produced by the subject
firm.
Mortgage Guaranty Insurance Corporation (``MGIC'') is a mortgage
guaranty insurance provider. (AR 58, AR 63, Supplemental Administrative
Record (``SAR'') 17). A mortgage insurance provider is a company that
provides household and business customers with mortgage insurance as
protection from credit losses. (AR 52, AR 58).
MGIC uses its affiliate, MGIC Investor Services Corporation
(``MISC''), to perform contract underwriting services. (SAR 17). MGIC
owns and operates loan processing centers in Concord, California; the
Troy/Detroit metropolitan area, Michigan; and Atlanta, Georgia. (AR 57,
AR 63, SAR 18, SAR 28, SAR 37). Financial lenders send loan
applications to MISC to be reviewed and for MISC to render an opinion
as to whether or not the loan applications meet the lenders'
requirements. (SAR 17-18, SAR 28, SAR 37, SAR 46). Applications are
scanned at a processing center and entered into the main database. (SAR
28, SAR 37, SAR 46). Underwriters located in the various processing
centers pull files from a queue of applications to process. (SAR 28,
SAR 37, SAR 46). Their duties include entering data, loan indexing, and
data validation. (AR 3, AR 44, AR 58, AR 62-63, AR 64, SAR 18, SAR 28,
SAR 46).
When a loan application is approved, the underwriter will issue a
Notice of Loan Approval (NOLA). (AR 3-5, SAR 17, SAR 28, SAR 37, SAR
46). The NOLA is a letter issued to the applicant that indicates that
the application is approved. (AR 3-5, AR 63, SAR 17-18, SAR 28, SAR
37). MGIC states that ``[t]he NOLA is a written document that
memorializes MISC's opinion regarding the loan. It is not a tangible
product. It is merely a piece of paper indicating that MISC has
determined that a specific loan meets the designated underwriting
requirements.'' SAR 17. Each NOLA provides a MISC point of contact for
customer service purposes. (SAR 18, SAR 28, SAR 37, SAR 46).
In August 2005, MISC entered into an agreement with another U.S.
company (hereafter referred to as ``the contractor'') that provided for
a team in India to perform contract underwriting services. (AR 50, SAR
18, SAR 29, SAR 37). The contractor's creation of a team in India would
take advantage of the time difference between the U.S. and India,
thereby enabling the subject firm to meet its customer service
processing requirement (forty-eight hours to process a loan
application). (SAR 18, SAR 29, SAR 37).
The Plaintiffs allege that the team in India was created for cost
reduction purposes (SAR 37) and that Plaintiffs were informed of this
new team in September 2005. (SAR 29, SAR 37, SAR 46).
Under a pilot program that began in January 2006, the team in India
processed loans for MISC. (SAR 18, SAR 29, SAR 38, SAR 46). The
Concord, California center ceased to operate in April 2006 (AR 2, AR
44, SAR 30, SAR 37, SAR 42, SAR 46), and the work performed at that
center was shifted to other locations. (AR 51, AR 57, AR 63, AR 64, SAR
18, SAR 30).
In June 2006, the contractor's team in India was fully incorporated
into the loan processing operation and began reviewing files from all
MISC centers. (SAR 18). MISC then contacted customers (SAR 18) and
employees (SAR 19-24) regarding the arrangement with the contractor.
In order to be considered eligible to apply for adjustment
assistance under section 223 of the Trade Act of 1974, the worker group
seeking certification must work for a firm or appropriate subdivision
that produces an article and there must be a relationship between the
workers' work and the article produced by the workers' firm or
appropriate subdivision. Here, the workers' firm reviewed loan
applications on behalf of financial lenders to determine whether the
applications met the lender's requirements. Approval of a loan
application was evidenced by a document called a NOLA. The threshold
issue is whether the workers' firm produces an ``article'' for the
purpose of certification.
The Department consulted the North American Industry Classification
System (``NAICS'') in order to properly characterize the type of
company that is at issue. The NAICS Web site states that ``The North
American Industry Classification System * * * was developed as the
standard for use by Federal statistical agencies in classifying
business establishments for the collection, analysis, and publication
of statistical data related to the business economy of the U.S.''
http://www.naics.com/faq.htm#q1. That reference classifies a mortgage
guaranty firm under sector 52--Finance and Insurance, Subsector 534--
Insurance Carriers and Related Activities, entry No. 524126--Direct
Property and Casualty Insurance Carriers (SAR 57-58). This category is
comprised of firms that are ``primarily engaged in initially
underwriting (i.e., assuming the risk and assigning premiums) insurance
policies that protect policyholders against losses that may occur as a
result of property damage or liability'' (SAR 58). Under the NAICS,
MGIC, as a mortgage guaranty insurance provider, is a service provider
under sector 52 and is not classified as a manufacturing company under
sector 31-33, which are industries that produce an article. While such
a designation is not controlling on whether an article is produced by
the firm, the primary activity of the company is useful in
understanding what a firm does for its customers,
[[Page 61688]]
which aids in determining whether a firm produces an article, or
provides services, for those customers.
MGIC is clearly a service provider which did not produce an article
for its customers. MGIC provides loan review services that may
incidentally result in a document evidencing the services provided, the
NOLA. Issuance of a NOLA by MGIC cannot be considered production of an
article under the Act. As noted by the workers themselves, the affected
group ``produces'' ``data entry support and the completion of Notice of
Loan Approvals (`NOLAS') by validators and underwriters.'' AR 3. No
article is produced, merely a portion of a ``loan package'' for the
approval or denial of a loan application. The NOLA itself is not a
marketable commodity. It has no commercial value to the firm's
customers and only memorializes the expertise and analysis of the firm
in determining whether a loan should be approved or denied.
MGIC is not in the business of producing an article as a
manufacturing firm does and then selling it, nor does it receive
revenue from the selling the NOLA. MGIC's revenue flows from the
decision and analysis of whether mortgage guaranty insurance should be
issued and the revenue from selling that insurance. The NOLA merely
memoralizes that decision and the analysis that went into it.
Therefore, it is not an article under the Act.
Even if the Department accepts the Plaintiff's allegation that the
NOLA is an ``article'', the issuance of a NOLA is merely incidental to
the service provided by MGIC. It is not an ``article'' that is covered
under the Act. In the Notice of Revised Determination on Remand for
Lands' End, A Subsidiary of Sears Roebuck and Company, Business
Outfitters CAD Operations, Dodgeville, Wisconsin, TA-W-56,688 (issued
March 24, 2006, published at 71 FR 18357), the Department acknowledged
that a firm may produce an intangible article, software that is
transmitted electronically, that may be covered by the Act. However,
the Department emphasized that those workers who provide services are
not engaged in the production of an article for the purposes of the
Act, even if a written record is generated in the provision of those
services. In Lands' End, the Department noted:
The Department stresses that it will continue to implement the
longstanding precedent that firms must produce an article to be
certified under the Act. This determination is not altered by the
fact [that] the provision of a service may result in the incidental
creation of an article. For example, accountants provide services
for the purposes of the Act even though, in the course of providing
those services, they may generate audit reports or similar financial
documents that might be articles on the Harmonized Tariff Schedule
of the United States.
Such is the case here.
Just like the accounting firm example in Lands' End, a tax
preparation firm is not selling its customers a tax return; rather, it
is selling its expertise in correctly organizing the customer's data
into the proper form to meet Internal Revenue Service requirements.
Similarly, MGIC is in the business of providing mortgage guaranty
insurance for a fee. It receives a loan application from a client (the
financial lender) and evaluates the data against a lending requirement
established by the client. It then determines, based on the facts in
the documentation, whether the loan qualifies for the issuance of
insurance. The fact that the services it provides may result in a
written document, such as a NOLA, which memorializes its analysis, does
not mean that MGIC is in the business of supplying forms or otherwise
producing an article. Most businesses, including service firms,
generate written records (i.e., records, prescriptions, receipts,
bills, timecards, etc.) as part of its operations. Since the Act's
requirement that the workers' firm produce an article was intended to
limit certification to workers for manufacturers, the Department does
not consider the mere existence of these NOLAs as evidence that the
firm produces an article and that the workers who generate the
documents for the firm fall within the scope of the TAA program.
Applying the Department's methodology of determining the
classification of the subject firm and the statutory requirement that
the firm produce an article to the facts of the case at hand, the
Department determines that the NOLAs and any other incidental documents
generated by the subject workers of MGIC do not constitute production
of an article for purposes of the Trade Act. Such incidental documents
are generated as a result of activities that are incidental to the
services provided. Therefore, these workers are not covered under the
Act. The fact that a written record is generated does not make the
service firm a production firm.
The Department's policy to provide TAA benefits to workers who
support a domestic production facility that is import-impacted is
supported by current regulation. 29 CFR 90.11(c)(7) requires that the
petition includes a ``description of the articles produced by the
workers'' firm or appropriate subdivision, the production or sales of
which are adversely affected by increased imports, and a description of
the imported articles concerned. If available, the petition should also
include information concerning the method of manufacture, end uses, and
wholesale or retail value of the domestic articles produced and the
United States tariff provision under which the imported articles are
classified.
The Department operates the program in accordance with current law,
including coverage of secondary workers and workers in the oil and gas
industry. When the other statutory requirements are met, the Trade Act,
as amended, authorizes the Secretary to certify groups of workers at a
firm producing an article, as well as workers engaged in services
supporting production of an article, including oil and gas production,
or the final assembly or finishing of articles that were the basis for
a certification of eligibility. Workers at MGIC do not fall within any
of these categories. A shift to a foreign country of work unrelated to
the production of an article, by a firm that does not produce an
article, cannot be a basis for TAA certification. While the Department
has discretion to issue regulations and guidance on the operation of a
program that it is charged with implementing, the Department cannot
expand the program to include workers that Congress did not intend to
cover.
This is in accord with the Congressional mandate that requires the
production of an article by workers in order for a company to be
covered under the Act. In 2002, while amending the Trade Act, the
Senate explained the purpose and history of TAA:
Since it began, TAA for workers has covered mostly manufacturing
workers, with a substantial portion of program participants being
steel and automobile workers in the mid- to late-1970s to early
1980s, and light industry and apparel workers in the mid- to late-
1990s. In fiscal years 1995 through 1999, the estimated number of
workers covered by certifications under the two TAA for workers
programs averaged 167,000 annually, reaching a high of about 228,000
in 1999, despite a falling overall unemployment rate. During the
same period, approximately 784 firms were certified under the TAA
for firms program. Participating firms represent a broad array of
industries producing manufactured products, including auto parts,
agricultural equipment, electronics, jewelry, circuit boards, and
textiles, as well as some producers of agricultural and forestry
products.
S. Rep. 107-134, S. Rep. No. 134, 107th Cong., 2nd Sess. 2002, 2002 WL
221903 (February 4, 2002) (emphasis added). Clearly, the language
suggests the focus
[[Page 61689]]
of TAA is the manufacture of marketable goods.
Congress has recognized the difference between manufacturers and
service firms and that an amendment to the Trade Act is needed to cover
workers in service firms. It has recently rejected at least two
attempts to amend the Trade Act to expand TAA coverage to service
firms. It did not pass either the ``Trade Adjustment Assistance Equity
for Service Workers Act of 2005'' or the ``Fair Wage, Competition, and
Investment Act of 2005.'' Most recently, Senator Baucus introduced the
``Trade and Globalization Adjustment Assistance Act of 2007,'' which
provides for an expansion of coverage to workers in a ``service sector
firm'' when there are increased imports of services like or directly
competitive with articles produced or services provided in the United
States, or a shift in provision of like or directly competitive
articles or services to a foreign country.
Thus, the definition of ``article'' continues to distinguish
between firms that manufacture articles and those that provide
services. Clearly, Congress has specifically allowed TAA eligibility
for specific service industries. See, section 222(c)(2)(A), workers in
the oil or natural gas drilling or exploration field. Omnibus Trade and
Competitiveness Act of 1988, Pub. L. No. 100-418, Sec. 421(a)(1988).
It has not done so here.
While the Plaintiffs assert that the findings of Former Employees
of Electronic Data Systems Corporation v. United States Secretary of
Labor, Court No. 03-00373, and Former Employees of Gale Group, Inc. v.
United States Secretary of Labor, Court No. 04-00374, and Former
Employees of Tesco Technologies, LLC v. United States Secretary of
Labor, Court No. 05-00264, support their position that the subject
workers are eligible to apply for TAA, Department believes that the
cases do not support certification here.
In Former Employees of Electronic Data Systems Corporation and
Former Employees of Gale Group, Inc., the Department certified the
workers based on the findings that the workers produced an article,
that there were increased imports of articles like or directly
competitive with the software code produced by the subject firm, and
the increased imports contributed importantly to the workers'
separations. In Former Employees Tesco Technologies, LLC., the
Department certified the workers based on the findings that there was a
shift in production abroad of articles like or directly competitive
with articles which are produced by the subject firm followed by
increased imports of such articles contributed importantly to the
subject workers' separations. Those cases are not relevant because the
workers in the case at hand do not produce an article for purposes of
the Trade Act.
In order for the Department to issue a certification of eligibility
to apply for ATAA, the subject worker group must be certified eligible
to apply for TAA. Since the subject workers are denied eligibility to
apply for TAA, the workers cannot be certified eligible for ATAA.
Conclusion
After careful reconsideration, I affirm the original notice of
negative determination of eligibility to apply for worker adjustment
assistance and alternative trade adjustment assistance for workers and
former workers of Mortgage Guaranty Insurance Corporation, Concord,
California.
Signed at Washington, DC this 23rd day of October 2007.
Elliott S. Kushner,
Certifying Officer, Division of Trade Adjustment Assistance.
[FR Doc. E7-21354 Filed 10-30-07; 8:45 am]
BILLING CODE 4510-FN-P
| |
|
|