By George W. Thompson
Importers of merchandise covered by anti-dumping and countervailing duty orders have exciting lives. While they must pay AD/CVD deposits at the time of entry, that number is only an estimate. The final duty liability is uncertain until either a Section 751 administrative review has been completed, including any court appeals, or the Commerce Department announces that no review was requested and that covered entries are to be liquidated without a change in the deposit amount. Alfred Hitchcock couldn’t have come up with a more suspenseful plot line.
Adding to the uncertainty, the language of AD/CVD orders describing the covered imports does not always provide a model of clarity. When there is a “grey area” in coverage, U.S. Customs and Border Protection frequently assumes the goods are covered, and requires the importer to obtain a Commerce scope ruling that they are not to avoid coverage.
Even if the language of an order is clear on what products are covered, Commerce has statutory authority to expand coverage to include additional items that are not within the stated scope. This breadth of this “anti-circumvention” authority was just explored by the U.S. Court of Appeals for the Federal Circuit. The decision, Deacero S.A. de C.V. v. United States (see here), will give importers yet another cause for worry.
Commerce Department: Products Outside of Order’s Size Range May Be Included
The case involves the AD order on Steel Wire Rod from Mexico, which describes the products within its coverage as “certain hot-rolled, carbon steel and alloy steel products, in coils, of approximately round cross section, between 5.00 mm (0.20 inch) and 19.0 mm (0.75 inch), inclusive, in solid cross-sectional diameter.” Deacero, an enterprising exporter began shipping steel wire rod with a diameter of 4.75 mm, indisputably below the minimum threshold for coverage
Commerce conducted an anti-circumvention proceeding under 19 U.S.C. § 1677j(c)(1), concluding that the 4.75 mm product was a “minor alteration” of the covered merchandise, and therefore was covered by the AD order as well. The agency noted that this sized product was commercially available during the initial AD investigation.
Court of International Trade: No, They Can’t
Deacero successfully appealed Commerce’s determination to the U.S. Court of International Trade. The CIT reasoned that the 5.00 mm cutoff meant that products below that diameter were affirmatively excluded from coverage. Given their commercial availability at the time of the original AD investigation, Commerce was precluded from now including them under the “minor alterations” provision.
Federal Circuit: Oh Yes They Can
The appellate court reversed the CIT and reinstated the original Commerce determination. It disagreed with the lower court that the order’s identification of a size range constituted an explicit exclusion of articles outside that range; instead, an exclusion must be explicitly couched as such. Moreover, there is no statutory requirement that merchandise have been commercially unavailable at all during the original investigation for Commerce’s minor alteration authority to be triggered. Because Commerce acted within the scope of its authority by including the 4.75 mm product, the Federal Circuit ordered reinstatement of that administrative determination.
Importers Should Beware of Potential Retroactive Liability
The Deacero decision does not really break new ground, at least in in my opinion. The Commerce Department’s ability to expand an AD order’s coverage beyond its stated bounds was already established in the abominable decision in Target Corp. v. United States, 609 F.3d 1352 (Fed. Cir. 2010), which upheld amendment of the AD order on Petroleum Wax Candles to include candles made of other materials.
What Deacero does do is remove limits on Commerce’s ability to expand an order’s scope in the absence of an affirmative statement that particular merchandise is excluded. Moreover, there is no requirement to show that merchandise proposed for inclusion did not exist when the order was initially imposed. Rather, the decision seems to indicate, it suffices that merchandise was not available at that time in the country covered by the investigation.
The Deacero decision thus removes an importer’s ability to rely on an AD or CVD order’s affirmatively-stated coverage to determine what products are excluded and hence safe to import.
Sure, there is a formal Commerce proceeding that must take place before out-of-scope merchandise can be roped in under the minor alterations provision. Commerce’s regulations provide it with the authority to impose suspension of liquidation on entries of such merchandise, retroactive to the date on which the anti-circumvention proceeding was initiated. If that proceeding reaches an affirmative determination, suspended entries would then be subject to retroactive assessment of AD or CVD duties.
Accordingly, transactions that were properly considered to be outside the order’s scope at the time they occurred can later be brought into coverage, with no need to show wrongdoing or improper intent.
Pleasant dreams, importers.
