Things are hopping in the ever-exciting world of antidumping and countervailing duties. First we got an Executive Order requiring tightened enforcement, after that an appellate court decision regarding aluminum extrusions, and then a possible change to the Commerce Department’s treatment of China as a non-market economy country.
Executive Order Requires Tightening of Trade Law Enforcement
On March 31, 2017, President Trump issued Executive Order 13785, “Establishing Enhanced Collection and Enforcement of Antidumping and Countervailing Duties and Violations of Trade and Customs Laws”. It leads off with a requirement that trade agencies develop stricter rules to guarantee collection of AD/CVDs. Importers that are identified as risky, based on “no record of previous imports”, “failure to fully pay antidumping or countervailing duties” or “failure to pay antidumping or countervailing duties in a timely manner”, may be required “to provide security for antidumping and countervailing duty liability through bonds and other legal measures.”
Since Customs and Border Protection already can require cash payments or single term bonds to cover AD/CVD liability, it will be interesting to see what additional revenue-protection measures are proposed. The EO also calls for CBP to “identify other appropriate enforcement measures” for deadbeat importers. Sounds ominous, as does the directive for the Justice Department to develop a program for “prosecuting significant offenses related to violations of trade laws.” We’ll keep you informed of how these initiatives unfold.
Federal Circuit Cuts Back on Aluminum Extrusions
The AD/CVD orders on Aluminum Extrusions from China pose two difficulties for importers. First, aluminum extrusions and products incorporating them are ubiquitous, resulting in many different items getting caught by the orders; and second, the scope language setting forth coverage, exclusions from coverage and exceptions to exclusions, leaves much room for differing interpretations. We covered some of the twists and turns here.
The “finished goods kit” exclusion has proven particularly controversial. The orders provide an exclusion for:
. . . 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 . . . merely by including fasteners such as screws, bolts, etc., in the packaging with an aluminum extrusion product.
The Federal Circuit applied this language to a kit consisting entirely of extruded aluminum articles and attachment hardware in Meridian Products, LLC v. United States. Commerce had determined that the kits did not qualify for the exclusion. The CIT disagreed, on the ground that the exclusion was broad enough to encompass kits consisting entirely of otherwise-subject aluminum extrusions plus hardware. This left Commerce with little choice than to reverse its position and exclude the merchandise.
On appeal, the Federal Circuit disagreed with the CIT’s analysis, finding that Commerce’s initial interpretation was correct. The scope language was clear that placing fasteners in a kit otherwise consisting of aluminum extrusions would not trigger the exclusion; indeed, doing so would mean that items individually covered could avoid the orders simply by being packaged together. This outcome was reiterated in Districargo, Inc. v. United States.
The consequence of the Meridan Products decision is that kits consisting of aluminum extrusions and attachment hardware, but no other pieces, are subject to the orders. While this has been Commerce’s position all along, exporters and importers should take heed that it now has the appellate court’s imprimatur.
Commerce Department Asks: Is China Now a Market Economy Country?
As anyone who has dealt with an antidumping case involving products from China is aware, Commerce’s “Nonmarket Economy Country” methodology for calculating AD margins is different than that for other countries. Instead of a price to price comparison, Commerce compares prices charged by an exporter to the U.S. market with the cost of producing the goods in China. The methodology uses the producer’s actual “factors of production”, but determines a value for them from sources in other, “market economy” countries. Calculation of general expenses and profit is made the same way.
As part of the new AD investigation of Certain Aluminum Foil from China, Commerce is considering whether that country’s status should change, and plans to issue its conclusion before the preliminary results are announced. The agency invites public comments as part of the inquiry, particularly on the following points:
- The extent to which China’s currency is convertible into the currency of other countries.
- The extent to which wage rates in China are determined by free bargaining between labor and management.
- The extent to which joint ventures or other investments by firms of other foreign countries are permitted in China.
- The extent of government ownership or control of the means of production.
- The extent of government control over allocation of resources and over price and output decisions of enterprises.
- Any other appropriate factors.
Comments are due by May 3, 2017. This is a big deal; if Commerce does determine that China is now a market economy country, the way in which antidumping margins are calculated on merchandise produced there will be radically changed.
