Duest

The merchandise covered by the Orders is certain steel nails having a nominal shaft length not exceeding 12 inches.  Certain steel nails include, but are not limited to, nails made from round wire and nails that are cut from flat-rolled steel.  Certain steel nails may consist of a one piece construction or be constructed of two or more pieces.  Certain steel nails may be produced from any type of steel, and may have any type of surface finish, head type, shank, point type and shaft diameter.  Finishes include, but are not limited to, coating in vinyl, zinc (galvanized, including but not limited to electroplating or hot dipping one or more times), phosphate, cement, and paint.

OMG imported zinc anchors into the United States. The Court described the zinc anchors as follows:

Each Zinc Anchor consists of two components: (1) a zinc alloy body, which comprises approximately 62% of the total weight of the complete Zinc Anchor; and (2) a zinc plated steel pin, which comprises approximately 38% of the Zinc Anchor’s total weight.  The zinc body and zinc plated pin are produced in Vietnam, and then assembled together in Vietnam, resulting in a one-piece article of commerce: a Zinc Anchor. While it may be physically possible to separate the zinc body from the steel pin after the Zinc Anchor has been created, disassembly is not commercially realistic, in light of the Zinc Anchor’s cost and use, as well as the likelihood that the components will be damaged and rendered useless by the disassembly process.

The controversy here surrounds the zinc-plated steel pin. The pin is arguably a nail, though it seems unlikely that the pin will be separated from the remainder of the anchor. The value of the pin is about 17% of the value of the anchor.  Based on the OMG website, I am pretty certain this is what we are talking about:

I have trying to get to this one, and now is the time. Bell Supply Co, LLC v. United States is an important decision from the Court of Appeals for the Federal Circuit.

The issue presented is whether, when making a scope determination, Commerce should apply the traditional substantial transformation test to determine the origin of the merchandise that was partially manufactured in a country subject to the order and partially manufactured outside that country. In this case, the question was whether unfinished oil country tubular goods initially fabricated in China and finished in Indonesia are within the scope of the order covering OCTG from China.

Bell purchased "green tubes" from China and sent them to Indonesia where they were heat treated and finished. In 2014, the Department of Commerce issued a scope ruling finding that the OCTG shipped from China as green tubes and then finished in third countries remain products of China for purposes of the application of the antidumping duty order. To get there, Commerce applied the substantial transformation test. Contrary to Customs and Border Protection rulings on similar facts, Commerce found that heat treating and finishing did not change the country of origin of the merchandise.



Bell challenged that decision in the Court of International Trade. There, it argued that the antidumping laws have a regulatory process designed to resolve exactly this kind of question. That process is a "circumvention" inquiry, which does not involve substantial transformation. 19 USC 1677j(b).

The Court of International Trade agreed. It held that the circumvention analysis is the specific standard for determining whether foreign producers are trying to evade an AD order by completing merchandise in a third country. The CIT remanded the matter to Commerce for the application of the circumvention analysis.

On remand, Commerce took a closer look at the language of the order, which is always a good thing. There, it noticed that the order covers unfinished OCTG from China. Commerce divined in that language guidance that unfinished OCTG exported from China is always unfinished OCTG, even when sent to Indonesia to become finished OCTG.

The Court of International disagreed again and remanded. On the second remand, Commerce found that finished OCTG imported from Indonesia were outside the scope of the order. First, it found no indication that the order covered unfinished OCTG from China finished in a third country. Second, it found that the operations in Indonesia did not constitute circumvention. The CIT sustained this conclusion.

Two questions were presented to the Court of Appeals. First, does the order cover unfinished OCTG from China that are finished in a third country? On this, the Federal Circuit held that absent language to the contrary, the order should be applied to merchandise at importation. In this case, the imported merchandise is not unfinished OCTG from China. It is finished OCTG. Thus, to the extent the order applies to unfinished OCTG from China, that does not describe the applicable merchandise.

The next question was whether the merchandise was finished OCTG from China. To decide that, the Court was asked to pick between substantial transformation and circumvention as the appropriate analysis. The Federal Circuit did not take that bait.

Rather than pick one means of analysis, the Federal Circuit instructed Commerce and the Court of International Trade to use both. Substantial Transformation should be used first to determine the country of origin of the imported article. Using that test, Commerce would seek to determine whether the subsequent processing results in an article of commerce with a new name, character or use. In doing so, Commerce can consider (1) the class or kind of merchandise; (2) the nature and sophistication of processing in the country of exportation; (3) the properties, essential components, and end-use of the product; (4) the cost of production compared to the value added; and (5) the level of investment.

If it turns out that the merchandise is not of the country subject to the order, the question remains whether it should be treated as within the scope of the order. That is the function of the circumvention test. Commerce can find the merchandise to be in scope if:

(1) “the process of assembly or completion in the foreign country . . . is minor or insignificant,” (2) the value added in the country subject to the AD and CVD order is a significant portion of the total value of the merchandise, and (3) “action is appropriate under this paragraph to prevent evasion of such order or finding.”  § 1677j(b)(1)(C)–(E).

If the merchandise is from a country not covered by the order but the further processing meets the circumvention test, then the goods remain in scope.

Based on this reasoning, we now know that origin for scope purposes is a two part test. First, use substantial transformation to determine whether subsequent processing changed the country of origin. If so, and assuming the second country is not covered by the order, determine whether the further processing is circumvention. If not, then the imported product is not subject to the order.

The Federal Circuit vacated the decision of the Court of International Trade and remanded.

Yes, I know it has been a while. Trust me, I feel the guilt of not posting. At the Georgetown update last month, someone actually asked me "What happened to the Customs Law Blog?" That hurt. Like most people in the customs and trade field, it has been an extraordinarily busy time. But I digress and wallow in self pity.

The Court of International Trade has denied a motion for a preliminary injunction seeking to prevent the U.S. from imposing a 25% duty on imported steel under Section 232 of the Trade Expansion Act of 1962. The case is Severstal v. U.S. This is the first of what will likely be many challenges to the 232 duties in U.S. courts and at the WTO.

Under the Act, the Commerce Department studied whether imported steel presented a threat to U.S. national security. A similar study on aluminum was running on a parallel track. The report found that the availability of steel is important to national security and that the combination of imports and excess foreign capacity weakens the domestic economy. The report concluded that national security would be improved if U.S. steel production was running at 80% of capacity. To achieve that level of capacity utilization, Commerce recommended, among other things, tariffs on imported steel to encourage the consumption of domestic steel. That Commerce Department conclusion was despite a finding by the Department of Defense that U.S. steel production was sufficient to meet U.S. military needs.

Relying on the Commerce Department findings, the President announced duties in Proclamation 9711, which modified an earlier version of the order. The proclamation proposed to assess a 25% duty on certain steel products imported into the U.S. The duties came into effect on March 23, 2018. One of the reasons for the amended proclamation was to increase the number of exemptions from Canada and Mexico to those countries plus, South Korea, Australia, Argentina, Brazil and the EU.

The plaintiffs in this case are a Swiss steel trader and its related Miami-based affiliate. The Swiss entity is an exporter to the U.S. The Miami-based entity is an importer. Both companies are wholly owned by a Russian company. The company had entered into contracts to sell steel in the U.S. prior to the imposition of the duties. With the additional 25% duty, those contracts will be far less lucrative, if there is a profit at all.

There are a bunch of interesting legal problem for the plaintiffs in this case. The first is jurisdiction, which the Court quickly found it had under 28 USC 1581(i). That law gives the Court of International Trade exclusive jurisdiction over cases brought against the United States challenging "tariffs, duties, fees, or other taxes on the importation of merchandise for reasons other than the raising of revenue." Clearly this is that.

The next question is whether the plaintiffs had standing. In this case, standing is defined as a person who is “adversely affected or aggrieved by agency action within the meaning of section 702 of title 5." That is a reference to the Administrative Procedure Act. The government argued that there is no standing because the Supreme Court has held that the President is not an agency and his actions are not agency actions by which some can be aggrieved. The CIT rejected this argument and found that Congress, by granting exclusive jurisdiction to the CIT to review tariffs, must have also intended that a change in tariffs provide standing in the Court. Otherwise, there is an absurd result of the CIT having exclusive jurisdiction and the district courts being the only place where the plaintiff has standing.

The next question is whether the Plaintiffs could show that they are entitled to injunctive relief. Consistent with this being Passover, that raises four questions. To qualify for an injunction, the plaintiffs needs a "Yes" to the following:

1. Will the plaintiffs suffer irreparable harm unless the Court grants the requested injunction?
2. Are the plaintiffs likely to succeed on the merits of the case?
3. Who will suffer the greater hardship?
4. Is the requested relief in the public interest?

Plaintiffs . . . argue that the Section 1862 Steel Tariff is being used in trade negotiations to draw concessions from other countries unrelated to steel imports. Such a mismatch – harm to domestic industry (A) threatens to impair national security, import-restricting actions favoring domestic industry (A) are taken under Section 1862, such restrictions are then lifted in exchange for concessions favoring unrelated domestic industry (B) – would raise a credible question as to whether the President misapprehended the authority granted by Section 1862.

In the administration of this section, the Secretary and the President shall further recognize the close relation of the economic welfare of the Nation to our national security, and shall take into consideration the impact of foreign competition on the economic welfare of individual domestic industries; and any substantial unemployment, decrease in revenues of government, loss of skills or investment, or other serious effects resulting from the displacement of any domestic products by excessive imports shall be considered . . . .

Here is the lowdown on President Trumps action on steel and aluminum.

Someday, when I am done practicing and looking for a final way to stay engaged, I would like to teach Administrative Law to JD students. I often tell student that, for what I do, the single most important class I took in law school was not any class with "international" in the course description. It was Administrative Law. My practice is all about what the federal government can and cannot require of importers and exporters and what must be required of the federal government. That is administrative law.

Two recent decisions from the Court of Appeals for the Federal Circuit put this nicely in focus.

The first is Capella Sales & Services Ltd. v. United States. This is one of those cases with a relatively straight-forward analysis that leads to a bad result. Capella entered aluminum extrusions from China. At the time its entries liquidated, Commerce had determined the countervailing duty deposit rate to be 374.15%. Capella did not challenge the rate and, as a result, there was no injunction preventing the liquidation. Subsequently, other importers did challenge the rate, which was found to be grossly incorrect. The correct rate was determined to be 7.37%. After that decision, Commerce, as it is required to do, published a notice of the judicial determination "not in harmony with" its determination. Subsequent liquidations would be at the lower rate.

If you have any empathy, you feel for Capella. It had terrible timing. Earlier imports might have escaped the preliminary determination entirely. Later imports would have benefited from the lower rate. More legally, it appears that Customs and Border Protection liquidated entries at a rate that was determined to be unlawful. Surely, Capella should have some way to recoup the difference.

Unfortunately, that is not how the law is written. The statute requires that entries be liquidated in accordance with the determination of the Commerce Department. 19 USC 15106a(c)(1). The only exceptions are (1) where a court has ordered an injunction against liquidation and (2) where the entry is after the Federal Register Notice of a decision contrary to Commerce's determination. Alternatively, (3) an interested party can request an administrative review of the applicable rate under 19 USC 1675(A)(2)(C). There is no factual dispute that Capella's entries do not fit into one of these categories.

Capella basically argued for a writ of rachmones. It asked the court to take note of the unusual circumstances of a 375% deposit rate compared to a roughly 7% assessment rate. In light of that, it asked the Court to find that the statutory scheme was ambiguous, giving the Commerce Department discretion (and presumably a mandate) to liquidate at the lower, "correct" rate. The textual basis for that conclusion was reed thin.

Citing the Chevron doctrine, Court noted that where Congress has specifically addressed a question, the Court's role is to give effect to the law as written. Here, it found that Congress made no exception for the bad circumstances of this case despite knowing exactly how to draft such exemption. Given the lack of ambiguity, the Federal Circuit affirmed the liquidations at the higher rate.

The second case is Glycine & More, Inc. v. United States. Here, the issue is whether Commerce can change the meaning of a regulation by publishing an informal interpretation in a "guidance" document. The regulation at issue is 19 CFR 351.213(d)(1) which explains what Commerce is supposed to do when an interested party requests an administrative review and subsequently withdraws the request.

The regulation states:

The Secretary will rescind an administrative review under this section, in whole or in part, if a party that requested a review withdraws the request within 90 days of the date of publication of notice of initiation of the requested review. The Secretary may extend this time limit if the Secretary decides that it is reasonable to do so.

In this case, a party that requested review submitted a notice of the withdrawal and requested an extension of the 90 days to complete the request after the 90-day period had run. Commerce refused to extend the period and, therefore, continued the reviews. The requesting party refused to participate and was assigned a 453.79% deposit rate on the basis of facts otherwise available and an adverse inference. That certainly hurt.

Commerce did so based on an interpretive notice from 2011 stating that Commerce will not grant extensions "unless the requestor demonstrates that an extraordinary circumstance has prevented it from submitting a timely withdrawal request." The Court of International Trade held that Commerce's interpretation of its regulation was unreasonable and defeated the purpose of the regulation.

On appeal, the Federal Circuit applied the same analysis it applies to an agency interpretation of a statute, which is what we discussed above. If the regulation is clear, "it is the duty of the courts to enforce it according to its obvious terms and not to insert words and phrases so as to incorporate therein a new and distinct provision."

The Federal Circuit found no ambiguity. It found that prior to the 2011 Notice, the regulation was understood to provide Commerce with wide discretion to exercise its judgment to grant extensions in reasonable circumstances. After the 2011 Notice, the regulation was interpreted to limit that discretion to "extraordinary circumstances." No such limitation exists in the text. According to the Court, that is an "incompatible departure from the clear meaning of the regulation." Commerce cannot re-write the regulation through an informal guidance notice. It must follow the formal notice-and-comment rulemaking process.

Consequently, Commerce must reconsider its denial of the requested extension as if the 2011 Notice did not exist.

And that is an administrative law two-for-one post.

Apparently, the administration has pivoted to its trade agenda. Yesterday, we saw the draft letter to Congress outlining the modest goals for NAFTA renegotiations. I also tweeted the announcement that Kevin McAleenan would be nominated to Commissioner of Customs and Border Protection. The last recent action is the Executive Order issued yesterday "Establishing Enhanced Collection and Enforcement of Antidumping and Countervailing Duties and Violations of Trade and Customs Laws."

What's this about?

The Executive Order notes that as of May 2015, the United States has failed to collected $2.3 billion in antidumping and countervailing duties. Often, the liable importer is a foreign entity without assets in the U.S. or is insufficiently capitalized to pay the duties. Either way, the duties are uncollectable. To address this, Customs imposes bond requirements and, in certain cases, Commerce requires cash deposits of duties. As is, the bonding requirements can be onerous. In some cases, the surety requires cash collateral to issue the bond, meaning the surety is taking no risk and the importer may as well pay the duties up front (if it can). I have personally seen companies put out of business because they could not secure sufficient bonds. That, of course, is the nature of doing business in merchandise that is allegedly unfairly traded and, as they say, a risk of doing business.



What the Executive Order does is require that the Secretary of Homeland Security must develop a plan to require certain importers of merchandise subject to an antidumping or countervailing duty order and who pose a risk to the revenue of the United States to provide security through a bond or other legal measure. The plan must be developed within 90 days of the date of the order.

The new part of this might turn out to be the risk assessment for certain importers. The Order specifies that it applies to "covered importers." These are defined as new importers or importers for which Customs and Border Protection has a record of incomplete or late payment of antidumping or countervailing duties. One obvious concern this raises is that an honest importer who discovers a failure to deposit antidumping or countervailing duties might be penalized for making a disclosure and voluntary tender. The penalty would come in the form of increased bond requirements. The reasonable response to that might be that the importer benefitted from an artificially low bond during the time it was withholding the duties. For similar reasons, this will raise the stakes in post-entry audits where unpaid dumping and countervailing duties are discovered. Clearly, the biggest burden will fall on new importers who will likely see increased bonding requirements.

Also within 90 days, the Secretary must develop a plan "for combatting violations of United States trade and customs laws for goods and for enabling interdiction and disposal, including through methods other than seizure, of inadmissible merchandise . . . ." I am curious what interdiction and disposal methods the government might deploy other than seizure (and the forfeiture that generally follows). There is exclusion and re-exportation, but that does not lead to "disposal."

Regarding the protection of intellectual property rights at the border, the Executive Order requires that the government share, to the extent permitted by law, with rights holders information necessary to determine whether there has been an IPR rights infringement and information regarding merchandise that has been abandoned before seizure. Right now, that information is withheld because CBP treats it as commercial proprietary information. The impact of this might be to allow the rights holders to sue infringers in U.S. courts or to seek exclusion orders from the International Trade Commission.

Finally, the order tells the Attorney General to recommend prosecution practices and allocate appropriate resources to "ensure that Federal prosecutors accord a high priority to prosecuting significant offenses related to violations of the trade laws." This is interesting in that is appears to be focused on criminal violations. I say this because the trade enforcement lawyers who deal with penalty cases are not "prosecutors;" they are in the Civil Division at Justice. Even the Assistant U.S. Attorneys who handle seizures do so in civil matters. Does that mean we can expect more prosecutions of individuals for trade-related fraud and false statements? It seems so.

Keeping in mind that the collection of antidumping and countervailing duties has been a priority enforcement issue for years and that the United States has put significant resources toward the interdiction of products violating U.S. intellectual property rights, this Order seems to be telling CBP: "Keep at it." There is some specific instructions to apply risk assessments to importers of goods subject to antidumping and countervailing duty orders. I suspect, but can't prove, that people at CBP would tell you that the agency was already doing that.

Understanding the scope of antidumping and countervailing duty orders is critically important for customs compliance professionals. It does a company no good whatsoever to find a low-cost producer of some product somewhere outside the U.S. only to later discover after importation that the merchandise is subject to an antidumping or countervailing duty. Given that antidumping and countervailing duties are often in excess of 30% and have been as high as 300%, this is a potentially serious concern. If Customs and Border Protection discovers the error and the error resulted from negligence, it can collect the unpaid duties plus penalties covering a five-year period. In some cases, that can be enough to bankrupt a small importer.

Before we get into this case, let me dispel a common misunderstanding. CBP "flags" HTSUS classifications that are potentially subject to an ADD or CVD order. As a result, many brokers and importers manage AD and CVD compliance through tariff classification. If the classification is not flagged, then the assumption is that the product is outside the scope of the order. If it is flagged, ADD and CVD (or both) must be deposited. The worst decision is to assign a different tariff classification to the merchandise in an effort to avoid an ADD or CVD order. That might constitute fraud and probably won't work anyway.

The real question is whether the imported item falls within the description of the merchandise subject to the order in the order itself. Tariff classification numbers are provided as a courtesy, for reference. They do not control scope determination.

That brings us to Meridian Products, LLC v. United States, a recent decision of the U.S. Court of Appeals for the Federal Circuit. The case involves the order covering aluminum extrusions from China. This is a broad order that covers any product of the specified kinds of aluminum provided that the product is made by an extrusion process. It generally covers parts and semi-finished articles. The order specifically excludes some finished goods and finished good kits that contain aluminum extrusions. Relevant to this case, the exclusion for finished good kits states that the order:

excludes finished goods containing aluminum extrusions that are entered unassembled in a “finished goods kit.”  A finished goods kit is understood to mean a packaged combination of parts that contains, at the time of importation, all of the necessary parts to fully assemble a final finished good and requires no further finishing or fabrication, such as cutting or punching, and is assembled “as is” into a finished product.  An imported product will not be considered a “finished goods kit” and therefore excluded from the scope of the [Orders] merely by including fasteners such as screws, bolts, etc. in the packaging with an aluminum extrusion product.

Meridian imported "trim kits" consisting of a decorative frame that surrounds, but does not attach to, large appliances like refrigerators and freezers. The imported kit includes the trim pieces, which are aluminum extrusions, a hexagonal wrench, fasteners, and assembly instructions. I think the trim around the oven in this picture is what we are contemplating:

From MeridianProduct.com

Whether this combination of goods is subject to the orders went to the Court of International Trade not once but four times. The CIT ordered three remands to the  Commerce Department for reconsideration. The CIT interpreted the finished goods kit exclusion as meaning that finished goods are excluded even if those finished goods consist only of aluminum extrusions and fasteners. According to the Court, the overall context of the order indicates that the inclusion of fasteners in the packaging of an unassembled finished good does not void the exclusion. Commerce disagreed, but felt constrained to follow the Court, which is why the issue went to the Court of Appeals.

On appeal, the Federal Circuit disagreed with the Court of International Trade. The primary reason being that the order explicitly limits the finished goods kit exemption. The petitioner and Commerce included that language about fasteners to accomplish something, so the Court needed to apply it. In this case, the application of that language indicates that the finished item to be assembled with the fasteners is not excluded because it is nothing more than the aluminum extrusions and fasteners.

The Federal Circuit also said that ignoring the fastener language renders the order meaningless. Similarly, the Court said that the CIT created inconsistency by reading the order to apply to aluminum parts imported individually but not to the same parts when imported as a kit with fasteners.

Personally, I think the source of the disagreement between the CIT and Federal Circuit is how the order treats finished goods. Before talking about kits, the order says:

The scope also excludes finished merchandise containing aluminum extrusions as parts that are fully and permanently assembled and completed at the time of entry, such as finished windows with glass, doors with glass or vinyl, picture frames with glass pane and backing material, and solar panels. 

This means that aluminum extrusions will not be subject to the orders when entered fully assembled as part of something else, like a picture frame. I think, and this is based on nothing other than trying to reconcile the two opinions, that the CIT viewed this as an indication that finished goods are outside the order whether imported assembled or disassembled. Given the language above, would a disassembled picture frame fall within the scope of the order? Yes, because it is not "fully and permanently assembled." The CIT saw the finished goods kit exclusion as taking care of that issue by permitting the disassembled picture frame to enter as non-scope merchandise, just like the assembled picture frame. I don't think the Federal Circuit would disagree with that result.

The problem is how to treat products that are finished goods consisting of nothing but aluminum extrusions and fasteners. Note that the examples above are all more than just aluminum extrusions. They are windows with glass, doors with glass or vinyl, and picture frames with glass and backing. Based on that, it appears Commerce would find Meridian's trim pieces to be within the scope of the order even if imported assembled. Reading the finished goods kit to exclude the disassembled article that would be in the scope of the orders if imported assembled, creates an anomaly that the Federal Circuit has avoided.

This is an important decision for two reasons. First, if you have scope issues, this decision provides an excellent primer on the scope process and how to analyze orders. Second, if you have been importing finished goods kits, you should reconsider your position. To fall within the exception, there should be more than aluminum extrusions and fasteners necessary to complete the product and everything should be in the box. Note that because the tool and instructions and not part of the finished product, they don't count toward the analysis of the exception.

Apparently there is some kind of festival of TV commercials starting in a few minutes. I understand it will be punctuated by grown men playing football for millions of dollars. Consequently, I will make this quick.

Consistent with my New Years Resolution to cover scope and other trade-related issues that closely impact customs compliance, here is a note on IKEA Supply AG v. United States. This is a request for a rehearing of a prior decision in which the Court of International Trade held that certain IKEA towel bars are within the scope of the antidumping and countervailing duty orders on aluminum extrusions from China. The bars are indisputably aluminum extrusions. In each box, there is mounting hardware that does not constitute aluminum extrusions, but which, according to Commerce, are fasteners. Finished goods are excluded from the scope of the orders. In a scope determination, Commerce held that because the finished towel bars are extrusions and that the only non-extrusion parts of the kits are fasteners, the bars fall within the order. In the first IKEA case, the Court of International Trade affirmed that decision.

This opinion involves an effort by IKEA to have the court reconsider its prior decision. Motions to reconsider are not easy to win. The moving party needs to show that there was an intervening change in the law, newly discovered evidence, clear error, or a need to prevent a manifest injustice.

The CIT did not see any of those reasons here. IKEA's first argument was that the Court failed to consider additional non-extruded components of the towel bar sets. The CIT basically said, "too late." These components were not discussed anywhere in the prior record or court proceedings. Thus, the Court would not consider them now. Moreover, there is no reason to believe that IKEA was not aware of these facts.

The second, and more interesting point, is that the CIT did not have the benefit of the CIT decision in Meridian Products LLC v. United States. In that case, another judge of the CIT held that Commerce needs to consider all of the non-extruded part of the kit, including those it considers to be fasteners. Under that test, there is a likelihood that IKEA might have won.

Sadly for IKEA, but legally correct, CIT judges are co-equal and the prior decision of any one CIT judge does not bind a subsequent judge. Technically, one judge does not even bind himself or herself in a later unrelated case. Thus, the intervening change in law raised by IKEA is really not a change in the law, until the Federal Circuit speaks on the issue. Then, it will be a change in the law.

Here, we continue our dive into the intersection of customs and trade law. The Court of International Trade decision in United Steels and Fasteners, Inc. v. United States, raises interesting issues about how scope decisions from the Department of Commerce impact customs entries awaiting liquidation. If you are a traditional customs compliance professional who does not often delve into trade questions, buckle up. This will be bumpy.

This case involves the antidumping duty order on Helical Spring Lock Washers from China. The scope of this particular order covers:

circular washers of carbon steel, of carbon alloy steel, or of stainless steel, heat-treated or non-heat-treated, plated or non-plated, with ends that are off-line. HSLWs are designed to: 1) function as a spring to compensate for developed looseness between the component parts of a fastened assembly; 2) distribute the load over a larger area for screw or bolts; and 3) provide a hardened bearing surface. The scope does not include internal or external tooth washers, nor does it include spring lock washers made of other metals, such as copper. The lock washers subject to this investigation are currently classifiable under subheading 7318.21.0000 of the Harmonized Tariff Schedule of the United States (HTSUS). Although the HTSUS subheadings are provided for convenience and customs purposes, our written description of the scope of this investigation is dispositive.

The order was first published in 1993.

In 2013, American Railway Engineering and Maintenance-of-Way Association ("AREMA") submitted a scope clarification request to Commerce concerning a specialized type of washer made to its own standards. These washers have modest helicality, a square or rectangular cross section, do not meet the ASME standards referenced in the ITC Report in this case, are specifically for railway use, and (among other things) are 50% to 130% thicker than typical helical spring lock washers. Shakeproof Assembly, the petitioner in the original dumping case and a defendant intervenor in the CIT, responded to the scope request arguing that the washers are within the scope of the order and, furthermore, requesting that Commerce instruct Customs to suspend liquidations and request cash deposits for all unliquidated entries back to the start of the administrative review.

Commerce ultimately held that the washers are within the scope of the order. Commerce also ordered Customs to retroactively suspend liquidations back to the date of the order.

This raises two obvious questions. First, is Commerce right about the scope? Second, should Customs have retroactively suspended liquidations?

The Scope Part

Petitioners and Commerce cannot always specify exactly what merchandise comes within the scope of an antidumping (or countervailing duty) order. Orders tend to specify some products and include general terms to catch similar products. When an interested party needs certainty about a product, it may apply to Commerce for a scope clarification under 19 CFR 351.225. In some cases, Commerce will decide the scope issue on the basis of the language of the order under 19 CFR 351.225(d) without commencing a formal inquiry. If that is not possible, Commerce can initiate a formal scope inquiry under 19 CFR 351.225(e).

If an interested party disagrees with the scope determination, it can challenge the decision in the Court of International Trade. The Court will uphold a scope determination that is supported by substantial evidence on the record. That is a highly deferential standard that means the Court may have to uphold a Commerce Department decision even if the judge disagrees with the result. Generally, these decisions can only be overturned where there is a lack of evidence in the administrative record to support them.

Commerce found that the AREMA washers are helical spring lock washers and that the distinguishing characteristics were not sufficient to remove them from the scope of the order. According to Commerce, the design and function of the AREMA washers minimalize helicality [Note: that is a phrase to consider] but did not strip them of their helical function. Commerce was helped in this regard by language in the petition noting that a "significant portion of the larger sizes [of helical spring lock washers] are used for installation of railroad tracks." That seems to be directly addressed at AREMA's product.

Plaintiff raised a number of arguments to show that Commerce's decision was not supported by substantial evidence. First, the fact that these washers are made to AREMA standards, rather than the more common ASME standard. This was not sufficient given that the administrative record shows no requirement that in-scope washers be made to any industry specification. Similarly, the fact that helical spring lock washers generally have a trapezoidal cross-section is not an exclusion of washers with other cross-sections. The Court also found that record evidence supports Commerce's finding that the unique thickness-to-diameter ratio of the AREMA washers did not remove them from the order. In the end, the Court rejected Plaintiff's arguments and found that Commerce's determination was based on substantial evidence in the record. So, the AREMA washers are in scope.

The Liquidation Part

To a degree, that is all background to the second question. To my mind, this is the more interesting part.

Having found the washers to be in scope, Commerce instructed Customs to suspend liquidation of unliquidated entries of AREMA washers as far back as 1993, when the order was first entered. As a practical matter, that means newish entries that have not liquidated and entries subject to an existing injunction. According to the Court, this means entries between October 1, 2011 and September 30, 2013. If this retroactive application of the scope determination is correct, this is the kind of unanticipated potential liability that keeps importers awake at night.

Under the Commerce regulations, specifically 19 CFR 351.225(l)(3), if products are found to be within the scope of the order, Commerce is to instruct Customs to suspend liquidation and to require a cash deposit of estimated duties, "for each unliquidated entry of the product entered, or withdrawn from warehouse, for consumption on or after the date of initiation of the scope of inquiry." In this instance, there was no formal scope inquiry initiated under § 351.225(3). Commerce decided the issue on its own under § 351.225(d). According to Commerce, that means the regulation does not address this exact fact pattern and Commerce can instruct Customs to suspend liquidation back to the date of the order.

The CIT disagreed. First, the history of the regulation makes it clear that suspension of liquidation is a serious step that can have significant consequences for importers and foreign exporters and producers. But, the domestic industry is entitled to the protection of the order for all in-scope merchandise. To balance these interests, Commerce set the date of potential suspension as the date of initiation of the scope inquiry. Thus, while not addressing this circumstance, it is clear that Commerce intended the potential period of subject entries to be limited. Looking to a prior CIT decision, the Court found that Commerce is limited in its authority to request the suspension of duties, regardless of the formality of the proceeding. The Court of Appeals similarly limited Commerce's authority in scope inquiries to after the date of initiation. Without these limits, Commerce would always be able to request suspension retroactive to the date of the order simply by choosing to forgo a formal scope inquiry under 351.225(e) in favor of an informal proceeding under 351.225(d).

Commerce made a good argument that its decision in this scope case was the equivalent of a finding that the AREMA lock washers were always within the scope of the order. By limiting the ability of Commerce to request suspension back to the date of the order, the Court is allowing in-scope merchandise to escape the lawful order. That is true. But, the Court noted, Customs had not identified these products as in-scope. The importer saw the question as uncertain and, therefore, took the correct step of seeking a scope clarification. Under these circumstances, the importer is entitled to rely on Customs' treatment and not have liquidations suspended and cash deposits collected until after the (admittedly informal) scope inquiry was commenced. The exact timing of which remains to be seen. The Court remanded to Commerce to issue new instructions consistent with this decision.

This is a good result for importers of merchandise that is found to be within the scope of an order after entry. The potential liability for antidumping and presumably countervailing duties is limited to unliquidated entries made on or after the date of the scope inquiry. But, do not read too much into that. This is not a Customs penalty case. In theory, Customs can still find that the importer's failure to deposit dumping duties was the result of negligence, gross negligence, or fraud and impose a penalty in addition to collecting duties. Given that customs penalty can be two times the amount of the duties owed for simple negligence, it is possible that a customs penalty will fair outstrip the unpaid duties to be owed as a result of a properly timed suspension of liquidation. On the other hand, if the importer exercised reasonable care (and can prove it), then liquidated entries are final and no penalty would be appropriate.

It is a new year and a lot has changed in the world. People in my field are either excited about the possibilities of major changes in trade policy or are horrified by the possibilities of major changes in trade policy.

I have had several calls about whether the U.S. will withdraw from NAFTA, impose new duties on goods made in Mexico by U.S.-based companies, and raise tariffs on goods from China. My answer so far has been, "I wish I knew." The new President and the new Congress will have a lot of authority under domestic law. The bigger questions will relate to how our trading partners respond. The U.S. has agreed many times to hold or lower duties. Going back on those promises will mean violating WTO obligations and multiple free trade agreements. Some people may not care. The U.S. remains fully sovereign and can violate any international agreements it choses. As a former partner used to say, "The WTO has no army."

But, the WTO has the ability to authorize trade retaliation. That means our trading partners will likely raise tariffs on U.S. goods in retaliation for stiffer U.S. tariffs. That makes it harder for U.S. companies to export. Add to that the impact of U.S. tariffs making it harder to import. We could end up with a situation in which domestic producers face higher costs for imported raw materials and components and then can't export their finished goods. That is a bad scenario.

Despite those two paragraphs, I tend to be an optimistic person by nature. I don't really expect the professionals who will be running White House trade policy and Congress to brazenly flout trade agreements and obligations. I don't think anyone wants to start an old fashioned trade war. But, as I said, I can't see the future. It's possible.  We all need to be watching closely. No matter your business needs and policy desires, this is a good time to make sure you have your Senators and Representative on speed dial.

Happy New Year. 2017 will be interesting.

Which brings me to the ruling of the week, N126516 (Oct. 19, 2010), in which we learn that human beings will eat just about anything. In this case, we are talking about snacking on arthropods.

Item 1: Giant toasted leafcutter ants.

Via Wikipedia

Item 2: Oven-baked tarantula spiders.

Also Via Wikipedia

According to the importer, the ants are "grown specially for human consumption" and have a "nutty, bacon-like taste." The spiders, on the other hand are "crisp, crunchy, ready-to-eat snacks." The importer also requested a ruling on scorpions that have been farm raised, detoxified, and are uncooked. For whatever reason, CBP decided it was lacking the necessary information to rule on that tasty snack.

The actual classification of the ants and spiders did not seem to controversial. These are food items prepared and packaged for human consumption. There not being a more specific place these delicacies, CBP classified them as "other prepared or preserved meat, meat offal, or blood." When canned, the classification would be 1602.90.9080; un-canned it is 1602.90.9080.

The importer here is a company called Think Geek Inc. I believe this is its website. Let me just say that this is right in my wheelhouse. I would like one of these and this and this (XL) and even this. Take all my money. I might even trade tariff classifications for gift cards. What I don't want is to eat tarantulas. And, yes, I am fully aware that arthropods provide a valuable source of protein and calories. The fact of the matter is that I get too many calories as it is. Unlike Chicago-mix popcorn and frozen yogurt, I can pass up the spiders and ants.

In real life, I represent importers and exporters who need to maintain compliance with U.S. laws and regulations concerning international trade. For the most part, that means customs law and export controls. As Bryan Garner once said at a seminar I attended, "hence the title" [of my blog].

One of the more complicated and potentially troublesome areas of compliance for importers involves antidumping and countervailing duty orders. The financial consequences of such an order can be dire for companies that entered into purchase contracts prior to the order or without knowing that an order applied to the goods. Often, the latter happens when suppliers assure the buyer that merchandise is either outside the scope of the order or from a source other than the subject country. Unfortunately, suppliers may be uninformed on the scope of the order, too happy to falsely state the origin of the product, or willing to misrepresent that it is otherwise outside the scope of an order. An unwary importer who ends up receiving a rate advance of 200%, for example, may be in for a world of financial and legal trouble.

Moreover, the scope of orders is becoming increasingly complex. The cases involving aluminum extrusions, tires, and solar products are good examples of complicated case scopes.

As a result, I am spending increasing time on scope and related questions for importer clients. My assumption is that readers of this blog are also seeing more of these issues arise. Consequently, I plan to address more of these cases here. I will not be getting into the weeds of determining subsidy and margin rates. But, to the extent the application of an antidumping or duty order impacts import compliance, I will make more of an effort to note it here.

That said, I give you Kyocera Solar, Inc. v. United States International Trade Commission. This case from the Court of Appeals for the Federal Circuit involves the antidumping and countervailing duty orders on Certain Crystalline Silicon Photovoltaic Products from The People's Republic of China and Taiwan. A common strategy for compliant importers facing the imposition of AD or CV duties is to re-source the product from a country not covered by the order. That can be a successful way to mitigate the impact of the order.

The problem for Kyocera in this case is that the Commerce Department defined the scope of the investigation as covering cells and modules produced in Taiwan and modules "completed or partially manufactured" in other countries from cells produced in Taiwan. Kyocera was importing solar modules from Mexico that incorporate solar cells from Taiwan.

Separate and apart from this case, Kyocera is challenging the scope of the order as it applies to its imports from Mexico. Leave that aside for now. In this case, Kyocera raises the more interesting question of whether the International Trade Commission was required to treat the source of these products as Mexico or as Taiwan for purposes of its investigation of possible injury to the domestic industry.


The root of this question is 19 USC 1671d(b) (for countervailing duties) and 1673d(b) (for antidumping duties), which require that the ITC terminate an investigation if it determines that "imports of the subject merchandise are negligible . . . ." Negligible is defined in 19 USC 1677(24) as follows (with exceptions and details omitted here):

For some reason, I have been asked what it would take for the U.S. to withdraw from NAFTA or another trade agreement. Funny how that comes up today, the day after the U.S. presidential election.

The answer is not 100% clear.

In Article 2205, the NAFTA says the US can withdraw with 6-months written notice. If that happens, the agreement stays in place between Mexico and Canada. How that happens is a question.

The US would certainly be out of the agreement going forward, but most of the implementation of NAFTA was through legislation. That legislation might still be in place until Congress removes it.

Arguably, the legislation might automatically repeal itself. 19 USC 3451 says that if a country withdraws, the amendments made to implement NAFTA “cease to have effect with respect to that country.” It is not clear whether “that country” can be the US or whether that implies that Canada or Mexico has left NAFTA. There would be much litigation. Other trade agreements likely work the same way, but I have not looked.

Also, should the US pull out of NAFTA, the pre-existing US-Canada Free-Trade Agreement comes back from the dead. We would need to brush up on those rules.

Also, if the President tries to impose new duties, he runs up against WTO tariff bindings. US law, specifically so-called Section 301, lets the US increase duties or take other actions to address violations of trade agreements or unfair practices by our trading partners. Countries that feel increased duties are not consistent with WTO obligations can seek relief through the WTO dispute settlement process and, of authorized, retaliate. The potential for serial grievances and retaliation is what we call a "trade war."

This being the Customs Law Blog, I don't often wade into the related area of antidumping and countervailing duty law. But, the two areas often bump into each other for my clients and for other importers. Sometimes the issues are generally applicable and require attention, which is the case with Guangzhou Jangho Curtain Wall v. United States.

The important issue for our purposes is the impact of a scope clarification issued by the Department of Commerce. People often refer to these as scope rulings, and importers who are used to dealing with Customs and Border Protection rulings might make some incorrect assumptions about how they apply to imported merchandise. This case shows that the Department of Justice also had some incorrect assumptions about scope clarifications.

The order in question covers aluminum extrusions from China. The full scope is here. The scope specifically excludes finished merchandise. According to the order:

The scope also excludes finished merchandise containing aluminum extrusions as parts that are fully and permanently assembled and completed at the time of entry, such as finished windows with glass, doors with glass or vinyl, picture frames with glass pane and backing material, and solar panels. The scope also excludes finished goods containing aluminum extrusions that are entered unassembled in a "finished goods kit." A finished goods kit is understood to mean a packaged combination of parts that contains, at the time of importation, all of the necessary parts to fully assemble a final finished good and requires no further finishing or fabrication, such as cutting or punching, and is assembled "as is" into a finished product. An imported product will not be considered a "finished goods kit" and therefore excluded from the scope of the investigation merely by including fasteners such as screws, bolts, etc. in the packaging with an aluminum extrusion product.

In this case, the merchandise was curtain walls. A curtain wall system is commonly used as the exterior of a modern building. The curtain wall is not load bearing and merely blocks weather, adds design, and keeps people inside. The building is supported by structural elements in the core of the building. Often, curtain walls are glass with extruded aluminum members supporting the glass. If you have seen a modern skyscraper, you have seen a curtain wall.

Prior to this case, there had been two Commerce Department scope rulings on curtain walls. The first ruling held that curtain wall components are not finished goods for purposes of the scope exclusion. That decision was affirmed by both the Court of International Trade and the Court of Appeals for the Federal Circuit. The second ruling initially held that complete curtain wall systems sold pursuant to a contract for the entire system as also within the scope of the order. The CIT twice remanded that ruling to Commerce, and at the time of this decision, the issue remains before the CIT.

When Commerce announced the opportunity for the second administrative review of this order, Jangho requested review. At that time, whether complete curtain wall systems were within the scope of the order was (and still is) unresolved. Jangho responded to the questionnaire noting that it was doing so to cooperate, but stating that the curtain wall systems are outside the scope of the order. Jangho then pulled out of the process and did not participate any further. When Commerce finished the preliminary review, it found that Jangho's products are subject to the PRC-wide rate and did not explicitly address the scope issue. In the final determination, Commerce noted the scope question but held Jangho's products to be within the scope of the order because Jangho had not followed procedures to request a scope clarification. A similar result occurred in the countervailing duty case. Jangho appealed to the CIT.

Since we don't often talk about antidumping and countervailing duty law, we should review how this litigation is different from a customs case. First, the role of the CIT is to review the administrative decision on the agency record, rather than on the evidence presented to it. That means in ADD/CVD cases, there is no discovery, no testimony from witnesses, and no findings of fact. The judge must uphold the Commerce Department determination unless it is not supported by substantial evidence on the record or otherwise not in accordance with law. That is true even if he or she would have reached a different conclusion.

The first question before the Court was whether Commerce acted according to law when it held the curtain wall units to be within the scope of the order because of the lack of a scope clarification request from Jangho. The regulation on this is clear that when there is information indicating that a scope clarification is warranted, Commerce "will initiate" an inquiry. 19 CFR 351.225(b). That language does not give Commerce a lot of room to subject merchandise to ADD and CVD when it knows that there is a question as to whether the merchandise is within the scope of the order. Commerce knew there was a scope question and it did not self-initiate a scope inquiry.

What Commerce did was argue that Jangho was obligated to request a scope ruling. According to the Court of International Trade, that is not correct. Rather, an interested party can alert Commerce to a scope issue in the course of an administrative review. If Commerce determines that there is a genuine question, it must investigate the scope issue. That is what Jangho did when it requested review, was made a mandatory respondent, and then provided data while indicating that its curtain wall systems are outside the scope of the order. Thus, according to the Court, the Jangho was not obligated to initiate a formal scope inquiry through a separate request.

So far, so good. Now we get to the part that I think is most relevant to the average importer trying to be compliant. Many importers know that a classification, value, or other ruling issued by Customs and Border Protection is binding on Customs and on the requesting party for the subject merchandise. A ruling is technically not binding on another importer, even if the merchandise is similar. That does not mean that subsequent importers should not follow published rulings; it should. But, it does mean that the ruling is technically limited in scope.

In this case, the Department of Justice argued that a prior scope ruling covering curtain wall units imported pursuant to a contract for a full curtain wall was not applicable to the similar merchandise at issue in this case. According to Justice, that prior scope ruling (as modified by subsequent litigation) is only applicable to the requesting party. Looking at the regulations, the Court of International Trade found that scope rulings are applicable to merchandise, not to the company that requested the ruling. This is consistent with Commerce's ability to self-initiate an inquiry when it sees a scope question with respect to a particular product. Furthermore, the regulation allows interested parties to make scope requests with respect to "a particular product." As a whole, the regulations make it clear that scope rulings address products, not parties. In that way, they are different from Customs rulings which address specific merchandise imported by specific a specific party.

Commerce was wrong to hold this merchandise to be within the scope of the order. Jangho raised the question during the administrative review. From there, Commerce should have self initiated an inquiry. In completing that inquiry, Commerce should have taken note of applicable rulings issued on similar products. Having failed to do that, Commerce's determination was not in accordance with law and, therefore, was remanded. The Court did affirm a part of the administrative decision concerning window wall units on the grounds that Jangho failed to properly raise the issue and, therefore, failed to exhaust the administrative process.

I have previously pointed out the few cases that I see as ending in an injustice, even where the result is legally correct. These cases always lead me to ask whether anyone in a position of power in the United States Government asked whether the ultimately successful litigation position was actually the right thing to do. Sometimes, it is not. Capella Sales & Services Ltd. v. United States, is one of those cases.

The background you need to understand this case is that there has been a long-running dispute over the proper calculation of the countervailing duty deposit rate imposed on aluminum extrusions from China. In May of 2011, Commerce initially calculated the all-others rate applicable to companies in China that were not assigned their own or a separate rate as 374.15%. Following some litigation, Commerce reduced the deposit rate to 137.65%. Finally, after additional litigation, the deposit rate was reduced to 7.37% in October of 2015.

At the time of entry, importers of aluminum extrusions subject to the order are required to deposit estimated countervailing duties based on the prevailing rate stated in Commerce Department instructions to Customs and Border Protection. Importers who are unsatisfied with the applicable rate are permitted to request administrative review of the order and can have the liquidation of their entries suspended pending a final determination of the proper rate of the CVD.

Capella, the plaintiff in this case, did not do that. While all that trade litigation was happening, Capella made four entries of merchandise. At the time of entry, Capella was not aware that the merchandise it was imported was subject to the CVD order. As a result, it did not deposit any countervailing duties. It also did not participate in the case, despite being notified by Customs that its merchandise was subject to the order. As a result, Customs liquidated the entries with 374.15% CVD, which was the then-current rate in the Commerce Department instructions. After the rate was determined to be 137.65%, Capella filed a case in the Court of International Trade seeking to recover the CVD it deposited in excess of the amount ultimately found to be correct.

Let's recap. Capella made some mistakes. It failed to recognize that it was importing merchandise covered by a countervailing duty order. It also failed to participate in the investigation or take any steps to prevent the liquidation of its entries. But, the United States Government also made some mistakes. Whatever it did wrong, it collected roughly 367% of excess CVD from Capella and other companies.

The question in this case is whether Capella has a means of recovering the excess CVD it paid. Sadly, the answer is no.

The Court of International Trade first had to resolve the question of whether it had jurisdiction to review the case. Here, Capella was not challenging the substance of the deposit calculation. In fact, it was happy with the final calculation. Capella's complaint was that Commerce failed to modify its instructions to Customs to retroactively modify the deposit rate. A challenge to Commerce's instructions falls within the Court's grant of subject matter jurisdiction in 28 USC 1581(i). So, jurisdiction is not the problem.

However, the government also moved to dismiss the case under rule 12(b)(6) on the grounds that Capella failed to plead a cause of action. Capella's argument was that by keeping money to which it was not entitled, the government was acting in a manner that is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. This makes sense. The Court already determined that the higher rate was not in accordance with law. What right should the government have to keep that money?

Unfortunately, there are procedural steps that need to be followed to preserve the right to recovery. As mentioned above, Capella did not participate in the investigation. It did not seek review of the deposit rate applicable to its products. Most important, it did not have the liquidation of its entries suspended or judicially enjoined. According to the statute, unless liquidation is suspended or enjoined, the entries will be liquidated in accordance with the Commerce Department instructions. If liquidation is enjoined pending litigation, the entries will liquidate in accordance with the final court decision.

Because Capella did not prevent the liquidation of its entries, Commerce acted properly when it liquidated the entries at the higher rate.

That, is a tough break for Capella, even if the result is not wrong. There is a principle of administrative law that requires parties to exhaust the administrative process to gain access to the Court. This is useful in most cases because it allows the agency to fully and completely review the matter and it creates a complete record for judicial review. There is also the rule that a statute means what it says. Both of these rules of law work against Capella.

But, most importers in this same situation and even those who made deposits at the time of entry did not envision such a dramatic change in the deposit rate. Participating the case is expensive and time consuming. Not enough importers will do it. The lesson of this case may be that importers should always participate in the reviews and always seek to have liquidations suspended as the only way to preserve the right to a refund should someone succeed in securing a lower deposit rate. That hardly seems efficient.

As it is, many importers have paid far too much and the domestic industry has received market protections far in excess of what the correct analysis would have mandated. No, the right, just, and efficient thing is for Commerce to amend its instructions to refund excess deposits paid. Since that will never happen, Congress should pass a bill refunding the excess duties paid by importers. Unfortunately, there may not be anyone in Congress who will stand up for the importers of aluminum extrusions.

Interesting court decisions are piling up.

The first is American Power Pull Corp. v. United States. This case involves two entries of hand trucks from China, which are subject to an antidumping duty order. At the time of entry, the importer deposited 26.49% of the value of the merchandise as a dumping duty deposit and Customs issued a notice of suspension of liquidation. A periodic review covering the entries followed and Customs continued the suspension of liquidation. After the review, and no doubt much to the disappointment of the plaintiff, the assessment rate was set at 383.60%. The producer filed suit to challenge that determination, no doubt making the plaintiff in this case happy. The Court granted an injunction against liquidation of the entry. Eventually, the rate was reduced to 145.90% and Commerce issued liquidation instructions to Customs and Border Protection. When CBP liquidated the entries with the additional assessment, American Power Pull protested, asserting that the entries had liquidated by operation of law at the rates asserted at the time of entry. Customs denied the protests and American Power Pull filed suit in the Court of International Trade.

The issue here is whether liquidation of the entries was properly suspended. If not, then the entries liquidated by operation of law at the 26.49% deposit rate. If they were properly suspended, then the dumping assessment can be properly applied.

The plaintiff argued that there is no statutory authority for the suspension of liquidation. This is premised on there having been no affirmative determination at the time of the suspension. Absent an affirmative determination, Commerce lacks authority to suspend the liquidation of entries. The United States moved to dismiss.

The Court of International Trade disagreed. The statutory authority for suspension begins with the affirmative preliminary determination by Commerce. 19 USC 1673b(d)(2). This suspension can stay in place for six months. After the final determination, Commerce publishes an order, which instructs Customs to assess the antidumping duties and to collect deposits of antidumping duties on current and future entries. The liquidation of the entries requires that Commerce tell Customs the assessment rate, which is determined in a periodic review under 19 USC 1675 (if review is requested). According to the Court of International Trade, this retrospective system of making deposits against future assessment rates has been interpreted as implying that the suspension of liquidation continues until the review (if requested) if finally resolved.The publication of the final results is the notice Customs needs to lift the suspension, at which time, Customs has six months to liquidate the entries. If litigation challenging the results follows, the Court of International Trade can issue an injunction to preserve the status quo and prevent liquidations prior to final determination of the correct assessment rates.

All of that means that the question to be decided was whether the entries were liquidated within six months of the lifting of a lawful suspension. This is where the dates become important.

• The dumping order was issued on November 17, 2004 with a deposit rate of 26.49%. Entries from that point on were automatically suspended.
• The entries were made on May 24 (my birthday for future reference) and June 14, 2006.
• The second periodic review commenced, continuing the suspension.
• On July 28, 2008, Commerce published the final results of the review, raising the assessment rate to 383.60%.
• The producer commenced a challenge in the CIT and the court enjoined liquidations (effectively continuing the suspension).
• The litigation ended and the injunction dissolved June 15, 2012 when Commerce published notice of the amended final results setting the assessment rate at 145.90%.
• The entries were liquidated on August 10, 2012 (about two months later).

Because liquidation was within the permitted six-month period, the Court of International Trade found the liquidations to be proper. Thus, the Court dismissed plaintiff's claims.

This case is a sterling example of the lunacy that is the retrospective system used in the U.S., and in no other country (as far as I know). Look what happened to the importer here and, more important, what might have happened. At the time of entry, the importer should have known that its total landed cost should include antidumping duties of 26.49%. Its purchase price and subsequent resale price should have been calibrated to reflect that cost. Keep in mind that the rule against reimbursement by the producer/exporter means this cost cannot be passed back to the producer.

Granted, the importer should have known that there is a risk, even a substantial risk, that the assessment rate will be higher than the deposit rate. But how high? When will it be assessed? There is almost no way to know that. A sophisticated producer might be able to run simulations of the dumping calculations and predict its assessment rates at various pricing levels, but that is not the usual circumstance and does not help for past entries.

Instead, importers in the U.S. are faced with an ill defined risk that can wipe out profits on these products and cost substantially more. In this case, these entries were in 2006. If we assume they were sold at a nice profit of 15%, that means that by virtue of a collection in 2015 (following this decision), the importer will be in the whole to the tune of 130% of the purchase price (more or less, I know I am simplifying the math). There was no way to predict this at the time of entry. This makes it nearly impossible for the importer to manage the risk of importing products subject to a dumping or countervailing duty case.

Imagine what might have happened had the rate stayed at 383%. In some cases, assessments like that are financially untenable and the importer is forced out of business. The absurdity of this is that it was entirely out of the importer's control. The only option seems to be to stop purchasing from the subject country from the date of the preliminary affirmative determination. It can be worse if there is a finding of "critical circumstances," which pushes the effective date back 90 days earlier.

There are more rational approached. In other countries (again, so I am told), a change in rate is applied prospectively rather than to past entries. This makes the administration of process much simpler. It also means that liability can be evaluated with a far greater degree of certainty.

Another, possibly more theoretical problem, is that a dumping order can have such negative consequences for the consuming industries, workers, and consumers that it is against the larger economic public interest. What would happen, for example, if a dumping order on sheet steel made it all but impossible for auto makers in the U.S. to have an adequate supply of steel? If the American industry could not ramp up to supply the auto makers, would there be layoffs? Would factories be idled and production moved out of the U.S? It is, at least theoretically, possible. The way to resolve that is to include a public policy analysis in dumping and countervailing duty cases. Something similar happens in Section 337 cases involving intellectual property violations. If enforcement of the order is not in the public interest, the Commission can refuse to grant relief to the petitioner. If the Commission does grant relief, the President has the authority to order it be withheld. Something like that makes sense in the trade context as well.

Don't walk away from this mini rant thinking I have no sympathy for domestic producers. I do. Dumping is an unfair trade practice for a reason. It hurts domestic industries and workers. I support their efforts to seek a fair free market. I also understand that the reason dumping works is usually that the producer is able to use high prices in the home market or a third market to subsidize lower prices in the U.S. That is unfair to the U.S. industry and to the consumers in the higher priced markets. Without completely frictionless exports to those countries, the U.S. industry cannot respond by selling into the higher priced markets, possibly undercutting the high local prices. I get all that.

But, the law should also recognize the rights and interests of the importers, who are almost always bystanders to the trade cases. A prospective system that takes into consideration the larger public interest would go a long way toward balancing the impact and value of trade cases.