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DOJ Takes Unusual Step to Submit Comments in Antidumping and Countervailing Duty Investigation on Mattresses from Vietnam, Thailand, Turkey, Serbia, Malaysia, Indonesia, and Cambodia, and China

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DOJ Takes Unusual Step to Submit Comments in Antidumping and Countervailing Duty Investigation on Mattresses from Vietnam, Thailand, Turkey, Serbia, Malaysia, Indonesia, and Cambodia, and China

Update: On April 30, 2020, the Department of Justice (DOJ) withdrew its “statement of interest” in the ongoing antidumping and countervailing duty investigations on mattresses from various countries.  In their filing, the DOJ stated that it, “hereby withdraws that Statement of Interest as not yet ripe.” Currently, the U.S. International Trade Commission (“ITC”) is still set to make its preliminary injury determination on May 15, 2020.

The Department of Justice (“DOJ”) filed comments in the U.S. International Trade Commission’s (“ITC”) investigation on whether imports of mattresses from multiple countries are causing injury to the domestic mattress industry. The petition was filed on March 31, 2020, and the Commerce Department initiated the investigations on April 22, 2020. In an unusual step, the DOJ filed a letter with the ITC questioning the appropriateness of the filing and continuation of these cases, given the fact that the current COVID-19 crisis has significantly increased demands for mattresses for both hospitals and consumers. DOJ expressed concern that the existing U.S. domestic industry may not be able to supply the burgeoning demand at hospitals amid the COVID-19 pandemic.

The petitioners in this case, which include Brooklyn Bedding, Corsicana Mattress Company, Elite Comfort Solutions, FXI, Inc., Innocor, Inc., Kolkraft Enterprises; and Leggett & Platt Incorporated have alleged antidumping and countervailing duties up to 1000% on imports of mattresses from Cambodia, China, Indonesia, Malaysia, Serbia, Thailand, Turkey, and Vietnam. The DOJ is urging the ITC to consider “all relevant economic factors which have a bearing on the state of the [relevant] industry in the United States.” Further, the “Department urges the Commission to consider the consumer and healthcare demands caused by COVID-19 as a ‘relevant economic factor’ here because COVID-19 will likely have a significant impact on the domestic mattress industry along with many other industries.”

According to the DOJ, the COVID-19 pandemic will “likely” increase demand for mattresses as hospitals expand capacity at a pace with which the domestic industry will not be able to handle. “This demand may outpace domestic supply,” the filing said. “If demand outpaces supply, it is possible that American industry will be able to thrive, but additional supplies will be needed, at least in the short term, to fill the gap and immediate need until American manufacturers can ramp up production.”

The concern articulated by the DOJ was that the financial burdens associated with the risk of duties ranging from 48 to 1000 percent “could potentially affect the supply of mattresses needed in hospitals and other health care facilities.” While there is a chance that the “Commission’s investigation ultimately might find it appropriate to impose duties in this case, it should take the exigent circumstances of COVID-19 and its immediate aftermath into account in crafting a tailored remedy that balances current healthcare needs with the equally important need to protect American industry and workers from unfair imports.” More importantly, the DOJ urges the Commission to consider, for example, the specific and unique circumstances arising out of the pandemic because importers and other companies may, in fact, make “’ massive imports’” of mattresses not to circumvent the antidumping laws but to respond to COVID-19.”

In an even more unusual twist, the DOJ warned against a preliminary affirmative ITC finding because while in normal situations the institution of a case has a limited negative impact, in these unusual circumstances, any affirmative finding (even preliminary) could have an exacerbated effect on the market due to COVID-19.  Should the ITC make an affirmative preliminary finding, then the case would proceed on its normal course back to Commerce to make its finding on the margin of dumping and/or subsidization. Once the case continues after the ITC preliminary decision, there is no stopping until both agencies reach a final decision. The risk which was identified by DOJ is that if the ITC makes an affirmative finding, then the next step is Commerce’s preliminary determinations which would require importers to post a cash deposit on the imported goods, and while this would be ultimately refunded in the event the final determinations are negative, these are risks which would harm the U.S. economy.

During the pandemic, however, mattress exporters could simply opt to supply another market and hinder U.S. efforts to fight the coronavirus, the DOJ said. “Given the immediate and ongoing demands of COVID-19, this harm cannot as easily be undone as in other instances, by eventually, and later, refunding an aggrieved party.” “Thus, it is critical to evaluate the domestic injury here, if any, and the appropriate remedy in light of COVID-19.”

Husch Blackwell’s Trade Remedies practice is comprised of partners who have been working in this field for over 30 years, and this is the first time in our careers that we have seen the DOJ weigh in on a trade remedies investigation at its inception. Normally, the DOJ’s role is to litigate any appeals at the conclusion of the investigatory process on behalf of either the Department of Commerce or the International Trade Commission. The filing of such a letter on the record of a brand new investigation which is in its infancy is extremely unusual.

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Nithya Nagarajan is a Washington-based partner with the law firm Husch Blackwell LLP. She practices in the International Trade & Supply Chain group of the firm’s Technology, Manufacturing & Transportation industry team.

Cortney O’Toole Morgan is a Washington D.C.-based partner with the law firm Husch Blackwell LLP. She leads the firm’s International Trade & Supply Chain group.

aluminum

Commerce Department Proposes New Aluminum Import Licensing System

On April 29, 2020, the Commerce Department (“Commerce”) published a notice in Federal Register announcing that it is proposing new regulations that would establish an Aluminum Import Monitoring and Analysis System. The program appears to be modeled after the Steel Import Monitoring and Analysis (“SIMA”) System, which has been in place since 2005. Under the new monitoring system, importers of aluminum products or their customs brokers will be required to submit information via Commerce’s online portal to obtain an auto-generated license after which the license number must accompany the entry documentation. Commerce is requesting comments from interested parties regarding this new scheme by May 29, 2020.

Commerce has indicated this new system is intended to allow the Department to monitor aluminum import levels and this data would be made available to the public. This new monitoring approach goes hand in hand with the Department’s continued multi-prong approach on tackling trade issues. An important aspect of the new program is that Commerce is permitted to review imports as part of the exemptions from Section 232 aluminum tariffs for Canada and Mexico. As part of the Section 232 exemption process, the U.S. may monitor for import surges and limit imports to historic quantities “without meaningful increases,” according to Commerce. Furthermore, the new system will “facilitate the monitoring of imports of aluminum articles, including monitoring for import surges,” according to Commerce.

Commerce plans for the proposed aluminum licensing and monitoring system to “operate in a similar way as the existing SIMA system and will be codified under 19 CFR 361.” The program will apply to all “basic aluminum products,” including “all-aluminum products currently subject to Section 232 tariff.” After registering, importers or their Customs brokers will be asked to provide for the following data elements for each shipment prior to filing the entry summary:

-Filer company name and address

-Filer contact name, phone number, fax number and email address

-Entry type (i.e., Consumption, Foreign Trade Zone)

-Importer name

-Exporter name

-Manufacturer name (filer may state “unknown”)

-Country of origin

-Country of exportation

-Expected date of export

-Expected date of import

-Expected port of entry

-Current HTS number (from Chapters 76)

-Country where aluminum was smelted and poured

-Quantity (in kilograms)

-Customs value (in U.S. $ amount).

Once submitted, the system will likely automatically generate an aluminum import license number. This number will have to accompany every entry for aluminum products covered by the licensing requirement. A single license can cover multiple products provided that certain pertinent information is the same for the entire shipment. If certain key information is deemed to not be sufficiently similar then separate licenses may be required for a single shipment. Commerce has already posted a sample copy of the proposed aluminum import license on its website.

Exemptions. There is also an exemption or modified reporting requirements for low-value entries. As of the drafting of this update, no import licenses would be required on informal entries of aluminum products which are normally entries under $2500. In addition, for those shipments containing less than $5,000 in aluminum, importers or brokers would be able to apply for a “Low-Value License”. This “Low-Value License” would be reusable and could be used in place of a single-entry license, according to Commerce.

FTZ Entries. There are no exceptions from license requirements under the aluminum licensing program. Even though FTZ entries are not considered a full CBP entry, Commerce would still require a license for aluminum shipped into a foreign-trade zone under this program. “Because a CBP entry number would not be available for shipments entering the FTZ, the license required for entry into the zone will not require the CBP entry number. As with steel, a separate license will not be required upon withdrawal from the FTZ.”

Validity: Aluminum import licenses can be applied for up to 60 days before the anticipated date of importation up to the date of filing of the entry summary and would be valid for 75 days. Commerce’s announcement clarifies that “The aluminum import license is valid for up to 75 days; however, import licenses that were valid on the date of importation but expired prior to the filing of entry summary data will be accepted”

Record Maintenance: The proposed rule indicates that “[t]here is no requirement to present physical copies of the license forms at the time of entry summary; however, copies must be maintained in accordance with CBP’s normal requirements.”

Non-Confidential Data: At this juncture, Commerce is soliciting comments on how to make available to the public the data it collects. Currently, it plans to only share “certain aggregate information” collected from license applications on its “aluminum import surge monitoring website,” including data on country of origin, country of smelt and pour, and import quantity and value. In addition, Commerce is going to consider all “other information including copies of the licenses and the names of importers, exporters, and manufacturers will be considered business proprietary information and will not be released to the public.” This would be consistent with the treatment of data under the steel monitoring program and in general with the treatment as business proprietary, all information collected as part of the entry summaries filed by importers.

Husch Blackwell recommends that companies that are engaged in the business of importing aluminum products categorized as “basic aluminum” or if the products are subject to section 232 duties that such companies analyze those imports and consider submitting comments. The time period to submit comments is extremely short, only 30 days, and therefore time is of the essence to ensure that comments can be prepared and filed on behalf of any interested party.

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Nithya Nagarajan is a Washington-based partner with the law firm Husch Blackwell LLP. She practices in the International Trade & Supply Chain group of the firm’s Technology, Manufacturing & Transportation industry team

Cortney O’Toole Morgan is a Washington D.C.-based partner with the law firm Husch Blackwell LLP. She leads the firm’s International Trade & Supply Chain group.