The U.S. Department of Commerce (“Commerce”) announced in a Federal Register notice that it is proposing significant changes to its antidumping and countervailing duty regulations. The last time such sweeping changes were undertaken were in 1997 after the WTO went into effect. Commerce is requesting comments on the proposed changes by September 14, 2020.
Among the most significant changes outlined in Commerce’s proposal are the changes to its conduct of scope proceedings, which determine whether a certain product is subject to the scope of an AD or CVD order; and to circumvention proceedings where importers are alleged to be avoiding duties, often by using components from the subject country to assemble the product in another country not subject to the relevant AD/CVD order. Currently, both types of proceedings are governed by the same set of regulations in 19 C.F.R. §351.225. Commerce’s proposal would separate the two proceedings into unique regulatory frameworks.
The proposed modifications also affect the following areas of analysis which are often contentious in the context of scope rulings and circumvention proceedings:
Proposed Changes to Scope Rulings/Proceedings
-The proposed changes to the scope would “codify and clarify” Commerce’s analysis with respect to mixed media products that involve commingled goods where a single item in a commingled product may be subject to an AD/CVD order. Mixed media products generally refer to a set of packaged goods that contain multiple products (g. a plastic toolbox with nails, screws, a level, a hammer, and a couple of screwdrivers where only the nails and screws are potentially subject to an AD/CVD order and the remaining items when examined individually are not).
-The changes would codify Commerce’s longstanding “substantial transformation” test or analysis, which is used to determine the country of origin of a product or products.
-The changes would codify the analytic framework in which the primary analysis in any scope inquiry is the language of the scope itself.
Proposed Changes to Circumvention Proceedings
-The proposed changes to the circumvention regulations would grant Commerce the authority to self-initiate anti-circumvention proceedings without the filing of a request or petition by the U.S. domestic industry.
-The changes would enhance Commerce’s ability to make circumvention determinations that would apply to the exporting country as a whole rather than on a company-specific basis.
-The changes would codify Commerce’s current practice with respect to various issues including the valuation methodology for parts and components; the criteria for determining whether a product is “later developed,” and the criteria for determining whether any alterations to the merchandise at issue are “minor.”
Proposed Changes to Both Scope Proceedings and Circumvention Proceedings
-The proposed regulations would also make other changes, including modifications of the deadlines in scope and circumvention proceedings and modifications to the information a party must provide in any request for initiation of a scope or circumvention proceeding.
-Perhaps most importantly, the proposed modifications to both the scope and circumvention regulations would retroactively impose duties on any unliquidated entries, dating back to the date on which the preliminary determination was issued during the original investigation, rather than to the date that the scope or circumvention inquiry was initiated, as is the case under the current regulations.
-The proposal also creates a new regulation to address procedures and standards related to Commerce’s consideration of covered merchandise referrals from Customs and Border Protection (“CBP”) in Enforce and Protect Act (“EAPA”) investigations.
Proposed Changes to New Shipper Reviews
-In addition to the proposed scope changes, Commerce also has proposed major changes with respect to new shipper reviews. These include: (1) requiring more detailed information at the outset of a request for a new shipper review so that Commerce can “expend its resources in conducting a new shipper review only where there is a reasonable likelihood that there ultimately will be a bona fide sale for Commerce to review;” (2) limit requests for new shipper reviews to only those producers or exporters who can demonstrate the existence of a bona fide sale by providing certain documentation, including a certification from an unaffiliated U.S. customer that it did not purchase subject merchandise from the relevant producer or exporter during the period of investigation and that the customer will provide information requested by Commerce. The proposed regulations would also codify some of the factors Commerce will consider in determining if a sale is bona fide.
Proposed Other Changes Affecting AD/CVD Procedural Filings
-Other changes in the proposal include allowing Commerce to impose a certification requirement on importers to ensure subject merchandise is properly classified as subject to AD/CVD duties.
-Commerce also proposes to amend the regulations governing reimbursement certifications to account for updated procedures.
-Commerce also proposes to set a deadline for parties to comment on industry support in investigations.
Additionally, the proposed rules make modifications to entry of appearance filing requirements and clarify or codify practices which Commerce has adopted as a matter of practice. For example, Commerce proposes to amend the rules to reflect that an interested party that submits a scope ruling application does not need to file an entry of appearance. Similarly, for circumvention inquiries, Commerce proposes to amend the rules to reflect that an interested party that submits a request for circumvention inquiry need not file an entry of appearance.
The proposed changes to the AD/CVD laws, especially the changes to scope and circumvention proceedings and new shipper reviews, will make it more difficult for foreign exporters and U.S. importers to reduce or eliminate potential antidumping and countervailing duties.
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.
Stephen Brophy is an attorney in Husch Blackwell LLP’s Washington, D.C. office focusing on international trade.