This article outlines the most important developments in international trade law during 2021. It summarizes developments in U.S. trade policy, U.S. trade cases at the U.S. Department of Commerce (Commerce or DOC), the International Trade Commission (ITC), and the reviewing courts, as well as Section 337 and enforcement investigations.
Commerce published a Final Rule on September 20, 2021, modifying its regulations governing antidumping duty (AD) and countervailing duty (CVD) proceedings. These changes constitute the most comprehensive overhaul since 1997, covering scope ruling requests, anti-circumvention inquiries, covered merchandise referrals from Customs and Border Protection (CBP) under the Enforce and Protect Act (EAPA) of 2015, new shipper reviews (NSR), petition sufficiency, and certification requirements. The Final Rule’s provisions concerning industry support, NSR, and certifications took effect on October 20, 2021, while those concerning scope, circumvention, and EAPA covered merchandise inquiries applicable to inquiries for which a party filed a request (or DOC self-initiated, in the case of scope and circumvention inquiries) on or after November 4, 2021. These regulations provide an important framework that DOC will develop over time on a case-by-case basis.
DOC Regulations now separate out those governing scope inquiries (19 C.F.R. § 351.225) from other governing statutory circumvention inquiries (19 C.F.R. § 351.226). The Regulations are effective for scope ruling applications or circumvention requests filed or self-initiated by DOC, on or after November 4, 2021. For both scope and circumvention, suspension of entries whose liquidation was already suspended continues after initiation of the proceedings. In companion AD/CVD proceedings, the filings are to be made only in the AD segment.
First, Commerce now requires that scope rulings be requested following a detailed and standardized application. Second, Commerce retains its authority to self-initiate scope inquiries. Third, Commerce now has thirty days to accept or reject a scope ruling application or else that application is deemed accepted. Upon scope inquiry initiation, DOC will direct CBP to continue the suspension of liquidation of previously suspended entries and to apply the applicable cash deposit rate. Most significantly, the Regulations codify—and expand upon—DOC’s existing practice to retroactively collect duties upon a determination that imports are within the scope of an existing AD or CVD order. After an affirmative preliminary scope ruling, DOC will instruct CBP to continue suspension of entries that were already suspended and will direct CBP to suspend entries if they were not already suspended, including unliquidated entries that are not yet suspended which entered before the date of the initiation of the scope inquiry. But DOC may consider an alternate date for suspension of liquidation if requested. In case of a negative preliminary scope ruling, while DOC will not direct CBP to suspend liquidation of unsuspended entries, any existing suspension (such as ordered by CBP pursuant to its own authority) will be left undisturbed to preserve the status quo until the conclusion of the inquiry.
In comments, DOC expressly provides that it will not instruct CBP to suspend liquidation for shipments entered prior to November 4, 2021. Significantly, DOC also states that this framework does not affect CBP’s authority to take any additional action with respect to the suspension of liquidation or related measures where CBP on its own finds it appropriate to suspend liquidation.
The Regulations maintain the factors to determine scope as set forth in 19 C.F.R. § 351.225(k), but eliminate the prior distinction between informal inquiries with k-1 factors alone being considered without initiation, which had conferred retroactive liability, and formal inquiries with k-2 factors being considered after initiation, which had conferred prospective liability. Further, the Regulations codify a four-part hierarchy of interpretive sources:
(1) language of scope (if dispositive);
(2) primary sources (petition, DOC/ITC initial investigation, prior scope rulings);
(3) secondary sources (customs rulings, trade usage, dictionaries, etc.); and
(4) k-2 factors, with emphasis on physical characteristics.
DOC also codified its “mixed-media analysis” (i.e., subject merchandise assembled or packaged with non-subject merchandise), in a new § 351.225(k)(3). Yet DOC provides only general guidance. First, whether the component subject merchandise considered separately is within scope. If not, the inquiry ends. Second, if the component is within scope, DOC analyzes the scope language, to determine if mixed-media issue is directly addressed. Third, DOC uses a case-by-case factor analysis looking at practicality of separating, value comparison, and ultimate use comparison.
DOC also codified in § 351.225(j) its country of origin analysis, and in particular provided the factors considered when applying its “substantial transformation” test. These include differences between upstream and processed downstream products in terms of “different class or kind,” physical characteristics, end-use, cost of production/value, sophistication of processing and level of investment in the third country. But DOC has flexibility to choose another test, for example, where the essential component of the product is produced or where the essential characteristics of the product are imparted.
The Regulations also provide that DOC can publish scope clarifications which will be incorporated in the scope language. DOC gets discretion to treat scope determinations as producer-specific, exporter-specific, importer-specific, a combination thereof, or cover all products from the same country with the same relevant physical characteristics.
DOC has codified its practice to self-initiate anticircumvention proceedings when it is reviewing information during a scope inquiry, if the product is not already covered by the scope of the order.
The Regulations codify DOC’s current practice that affirmative findings do not apply to shipments entered prior to initiation, but provide an exception based on the same criteria as for the scope exception (through which AD/CVD liability could attach before or after the date that an anticircumvention inquiry is initiated, whereas the scope exception would be to change the liability date prospectively after November 4, 2021). While such case-specific discretion to retroactively suspend pre-initiation entries and require cash deposits has potential to create uncertainty for the importing community, it is still more fair than the retrospective application proposed in the draft Regulations that DOC withdrew following comments from Respondents. The Regulations also codify Commerce’s ability to apply circumvention determinations on a country-wide basis to products that are similar or identical to those subject to the inquiry and to also require a certification requirement.
DOC will continue using the value of parts and cost of processing added in United States or another foreign country when determining whether to consider in-scope: (1) parts/components that are imported from a country to which the order applies and then completed into finished products in United States; or (2) where imported merchandise is completed in another foreign country from parts/components produced in the country subject to the order applies. But the Regulation removes specific reference to major input rule in constructed value context under 19 U.S.C. § 1677b(e) for market economies and also references surrogate value methodology under 19 U.S.C. § 1677b(c) for nonmarket economies (NME).
Finally, under its statutory “later developed” analysis, DOC will examine whether the merchandise at issue was “commercially available” at the time of the initiation of the underlying AD/ CVD investigation.
In 2015, Congress amended U.S. law through EAPA, establishing a new framework by which CBP investigates and refers to DOC, potential AD/CVD duty evasion upon receipt of a complaint from an interested party. The Regulations in § 351.227 create formal procedures including key deadlines.
Upon publishing notice of initiation, DOC will direct CBP to continue the suspension of liquidation of entries comprising the covered merchandise inquiry, and to require AD/CVD cash deposits. DOC also will direct CBP to begin suspending the liquidation and require applicable cash deposits for each unliquidated entry not yet suspended, whether entered after or before initiation (DOC’s Regulations provide that suspension for pre-initiation entries will be the “normal” procedure).
DOC will consider whether the covered merchandise determination should be applied on a producer-specific, exporter-specific, importer-specific basis, or some combination thereof; or to all products from the same country with the same relevant physical characteristics, as the product at issue, on a country-wide basis.
The Regulations in § 351.228 codify and enhance DOC’s existing authority and practice to require that an importer or other interested party maintain and/or provide particular certifications. It also sets out consequences for a party’s failure to so certify. Section 351.228 certifications serve a different purpose from CBP’s existing requirements for importers regarding the “reasonable care” standard by affording an additional tool for DOC/ CBP to evaluate whether entries should be filed as either subject to an AD/CVD order (Type 03) or not subject (Type 01).
The longstanding requirement that importers certify they are not being reimbursed for AD/CVD (or else liability can be doubled) under § 351.402(f)(2) is modified to conform to CBP’s existing procedure of allowing electronic filing (prior to liquidation) and as an exception, its acceptance through CBP protests (post-liquidation). The certification must contain specific information necessary to link it to the relevant entry or entry line number(s).
DOC’s modified provisions for new shipper review proceedings under § 351.214 codify DOC’s long-standing practice requiring an exporter/producer to establish that the transactions constitute bona fide sales. In turn, the NSR application documentation establishing the circumstances of the sale should include price, sales expenses, whether arm’s length sales, whether such merchandise was resold at a profit, additional documentation concerning the producer’s or exporter’s offer to sell the merchandise to the United States, circumstances surrounding sales to the United States, any home market or third-country sales, relationship with the unaffiliated U.S. customer, and any nonproducing exporter’s relationship with the supplier.
Notably, DOC will consider whether an exporter, producer, or customer has lines of business unrelated to the subject merchandise. DOC can also require information about the future selling behavior of the producer or exporter, to examine whether the NSR sales were commercially viable. Absent full or inadequate bona fide sales information, DOC may rescind the NSR.
Section 351.203(g) establishes a deadline for comments on industry support no later than five business days before the scheduled date of initiation, and rebuttal comments no later than two calendar days after.
2021 continued to be an active year for AD/CVD proceedings at DOC and ITC. Commerce initiated a plethora AD and CVD investigations, involving several countries and a variety of products. Commerce also issued decisions in several review proceedings. A selection of Commerce and ITC proceedings are discussed below.
In the final determinations of the AD/CVD investigations of chassis and subassemblies from the People’s Republic of China (China or PRC), Commerce calculated a final subsidy rate of 44.32 percent, and a final dumping margin of 188.05 percent.
Notably, in the AD investigation, Commerce applied adverse facts available (AFA) based 188.05 percent dumping margin as alleged in the petition to CIMC, the largest Chinese chassis producer. In a cautionary tale, Commerce based its AFA determination on an untimely filed questionnaire response reasoning that computer/technical issues do not constitute “extraordinary circumstance” within the meaning of agency regulations, finding instead that CIMC’s late submission occurred because of its choice to begin filing close to the deadline.
In October 2021, Commerce issued an affirmative final determination in the CVD investigation on Mobile Access Equipment and Subassemblies Thereof from China. Notably, in what may be a trend in AD/CVD investigations involving further processed, downstream products, and like the Chassis cases described above, the scope covered not just finished units, but also the major subassemblies that comprise mobile access equipment, such as chassis and boom assemblies. The final subsidy margins range from 11.95 percent to 448.70 percent.
Throughout the course of this year, Commerce issued affirmative determinations in the AD/CVD investigations into Utility Scale Wind Towers from India, Malaysia, and Spain. Notably, the mandatory respondent in the Spain AD investigation, Vestas Eolica, declined to participate, warranting the application of AFA and yielding a dumping margin of seventy-three percent. Commerce also applied AFA to mandatory respondent Vestas India in the India AD case, after filing errors by the respondent.
This was the third round of successful petitions on wind towers, with extant AD orders on China, Canada, Indonesia, Korea, and Vietnam and CVD orders on China, Canada, Indonesia, and Vietnam.
In a remarkable turnaround from prior reviews, Commerce found no dumping for both mandatory respondents as well as separate rate companies in its October 2021 final results in the 2018-19 administrative review of the AD Order on solar cells and modules from China. This outcome, which has wide ramifications, was propelled by a few key surrogate value choices, especially silver paste, where Commerce applied a relatively more product specific HTS heading (articles of silver) from Turkey instead of a hybrid category HTS heading (articles of silver and gold) from Malaysia, the primary surrogate country.
On April 6, 2021, ITC unanimously determined that small vertical shaft engines from China materially injured the U.S. industry. Significantly, four of the five Commissioners also found “critical circumstances.” This appears to be the first ITC affirmative critical circumstances determination since 2001, and the third ever affirmative critical circumstances determination, and it allows for the retroactive collection of AD/CVD duties to a period prior to Commerce’s preliminary determination.
ITC made affirmative final determinations in its AD/CVD investigations of Chinese chassis and subassemblies. These investigations were instituted in July 2020, following petitions by the Coalition of American Chassis Manufacturers. In May 2021, ITC issued its final CVD determination, finding that imports of chassis and subassemblies subsidized by the Chinese government caused material injury to the U.S. industry, after a significant surge in Chinese imports during the period of investigation apparently related to the imposition of the Section 301 China tariffs. Following an affirmative determination in Commerce’s AD investigation, ITC made a similar affirmative finding of material injury with respect to dumped imports in July 2021. AD/CVD orders were published in May and July 2021, and imports of Chinese chassis and subassemblies are now subject to combined duty rates of 221.37 percent.
In December 2021, ITC made an affirmative final determination in its CVD investigations of imports of Chinese mobile access equipment and subassemblies. These investigations were instituted in February 2021, following petitions by the Coalition of American Manufacturers of Mobile Access Equipment. ITC made affirmative preliminary determinations in April 2021, and, in November, ITC voted unanimously in the affirmative in the final determination. Notably, the determination was based on a finding that subject imports subsidized by the Chinese government threatened to cause material injury to the domestic industry. The agency also made a finding of a single like product for scissor lifts, boom lifts and telehandlers, coextensive with the scope, consistent with the petitioner’s arguments. ITC reached the same threat-only determination in the companion AD investigation in April 2022.
Also in November 2021, ITC announced its determination that import relief under safeguard duty provisions beginning in 2018 to the U.S. industry producing crystalline silicon photovoltaic cells, whether or not partially or fully assembled into other products, continued to be necessary to prevent or remedy serious injury to the U.S. industry. ITC also found evidence that the domestic industry is making a positive adjustment to import competition. The President will make the final decision on whether to extend the import relief.
The U.S. Court of Appeals for the Federal Circuit (CAFC) and the U.S. Court of International Trade (CIT) decided several notable cases in 2021, with important implications for the United States’ administration of its trade laws.
In one of the largest cases ever brought before CIT, over 6,500 plaintiffs filed actions challenging the United States Trade Representative’s (USTR) imposition of certain additional duties on goods from China. At stake is over $100 billion in duties that have been and continue to be assessed upon certain goods imported from China.
The duties were imposed under the Trump Administration pursuant to Section 301 of the Trade Act of 1974, which grants USTR the authority to investigate foreign trade practices and to take certain actions in response to the findings of such investigations. Prior to the Trump Administration, Section 301 investigations were relatively rare and the imposition of retaliatory tariffs following a Section 301 investigation was even rarer. The last such imposition of duties occurred in 2009 (involving Canada’s compliance with the 2006 U.S.-Canada Softwood Lumber Agreement).
In August 2017, USTR initiated a Section 301 investigation of China’s policies on IPR, subsidies, technology, and innovation. The investigation concluded in March 2018 with findings that China was engaged in discriminatory trade practices in these areas. In response to those findings, USTR imposed additional tariffs on the majority of goods produced in China, rolled out in a series of tranches, commonly referred to as List 1–List 4.
Due to the scope of this litigation, a test case (In Re Section 301 Cases) was established. That case is being heard by a three-judge panel at CIT and the Court has appointed a plaintiffs’ steering committee to act on behalf of the hundreds of law firms that have filed actions to date.
Plaintiffs allege that USTR exceeded its statutory authority in imposing the Section 301 “List 3” and “List 4A” additional duties and that the process under which the List 3 and List 4A additional duties were promulgated violated the Administrative Procedure Act (APA). The government has moved to dismiss the case, largely on the grounds that the challenge does not present justiciable issues. Plaintiffs cross-moved for judgment on the agency record.
Briefing of the case was completed in November 2021. Oral argument was conducted on February 1, 2022. On April 1, 2022, CIT remanded the Final List three and four to U.S. Trade Representative for “reconsideration or further explanation consistent with this opinion.”
Notably, only importers that have filed actions in CIT will be eligible to receive duty refunds in the event that plaintiffs ultimately prevail on the merits. CIT issued a narrow remand on April 1, 2022.
CAFC, in Hyundai Steel Co. v. United States, Order No. 2021-1748, affirmed CIT’s invalidation of Commerce’s cost of production based PMS adjustments in the below cost sales analysis (19 U.S.C. § 1677b(b)) of home market sales, based on Chevron step one, narrowing the ambit of the PMS adjustment solely to constructed value in 19 U.S.C. § 1677b(e).
Challenges to national security tariffs imposed under Section 232 of the Trade Expansion Act of 1962 continued to fail in 2021. In Transpacific Steel LLC v. United States, CAFC upheld doubling of duties on Turkish steel, reversing CIT finding that the expansion was unlawful being violative of the law’s statutory deadlines and the equal protection clause of the U.S. Constitution. CAFC concluded that the President had the powers to increase import restrictions and that the action survives rational basis review and satisfies the Fifth Amendment’s due process guarantee. The challengers filed a petition at the Supreme Court asking for review of the decision, which was denied on March 28, 2022.
In Borusan v. United States, CIT sustained Commerce’s decision to remove Section 232 duties from U.S. price as U.S. import duties in AD proceedings, distinguishing Section 232 duties from Section 201 duties, which CAFC had previously found should not be reduced from U.S. price.
CIT in November invalidated government actions in the protracted litigation over “bifacial” solar modules. President Trump in January 2018 assessed Section 201 safeguard tariffs on solar products, and in June 2018 authorized exclusions including bifacial modules. But the USTR in October 2019 withdrew that exclusion. This withdrawal was challenged and resulted in CIT issuing a Preliminary Injunction (PI) in December 2019 against the collection of 201 tariffs on bifacial modules, after finding a likelihood that plaintiffs would succeed on their claim that USTR withdrawal violated the APA.
Undeterred, the USTR in April 2020 again withdrew the bifacial exclusion – this time through a notice and comment period. The government requested dissolution of the PI on account of this USTR action, but CIT declined to do so. Consequently, President Trump in October 2020 issued Proclamation 10101 that: (1) assessed Section 201 on bifacial solar cells; and (2) increased the Section 201 tariff rate from 15 percent to 18 percent for the fourth year—from February 7, 2021, to February 6, 2022. CIT in November 2020 ruled that plaintiffs would have to bring a separate appeal challenging Proclamation 10101, declining to extend the PI against Section 201 tariffs on bifacial modules from the appeal of USTR actions to the separate presidential actions.
Challenge to Proclamation 10101 was initiated at CIT in late 2020 and was resolved in favor of plaintiffs in November. CIT found that, although Proclamation 10101 complied with the statutory procedural requirements, it violated the substantive requirements because Section 201 intends to liberalize trade over time; making bifacial tariffs subject and increasing the tariff rate “constituted both a clear misconstruction of the statute and action outside the President’s delegated authority.” The following day, CIT vacated the second USTR action because: USTR lacked statutory authority to withdraw an exclusion once granted; and that subsequent action was arbitrary and capricious in violation of APA requirements.
Reviewing courts have recently found that scope and anti-circumvention determinations of the DOC could only apply prospectively, reversing agency decisions that would have retroactively extended AD and CVD liability. CAFC in late 2020 affirmed CIT decision to reverse DOC’s decision to apply AD/CVD retroactively to when the agency published notice initiating an anti-circumvention inquiry in “5050-grade” aluminum extrusions from China on one specific exporter. CIT agreed that DOC properly found these products subject as “later developed merchandise”—but that DOC could only assess AD/CVD on other exporters from the date of the preliminary determination, when the inquiry was expanded to cover all exports from China. CAFC agreed that before such time, DOC had not provided the requisite “fair warning” for AD/CVD liability. Building on this CAFC precedent, CIT in May ruled that DOC could not assess AD/CVD liability on “PVD chrome” steel trailer wheels until DOC’s final determination that clarified the scope exclusion for “chrome” wheels: before that time, “Commerce did not provide adequate notice” that it must afford to “any reasonably informed importer that their product is subject to duty before any retroactive assessment of duties may obtain.”
Courts this year reviewed the DOC practice of granting rates separate from that of the government in AD proceedings for exports from NME countries. Most notably, CAFC reversed CIT to reinstate DOC’s 2015 denial of a separate rate for Double Coin Holdings Ltd. in the fifth administrative review of the AD order on diamond sawblades from China. DOC had preliminarily assigned Double Coin a de minimis AD rate calculated using its own data, but subsequently found that it was part of the “China-wide” entity for failure to demonstrate independence from government control. Whereas CIT found that DOC lacked the statutory authority to assign such an NME-wide rate to Double Coin, CAFC reversal found that the 105.31 percent “PRC-wide rate in this case qualifies as individually investigated.”
CIT in 2021 affirmed DOC’s authority to deny separate rates in other contexts. CIT, in June, affirmed the separate rate denial based on nominal ownership of majority shareholder rights by a labor union in an administrative review of tapered roller bearings from China. This affirmance followed CIT in 2020 remanding for DOC to accept a revised translation it had improperly rejected as untimely factual information, and has been appealed to the CAFC. CIT in July affirmed the DOC’s denial of a separate rate for a respondent, and found part of the NME-wide entity in an administrative review of fish fillets from Vietnam. DOC’s finding, “that the Vietnamese government . . . controls the selection of IDI’s management,” was affirmed due to Communist party members serving on the boards of IDI and its corporate parent.
In 2021, CIT also invalidated DOC’s separate rate denials for respondents who were in prior segments found independent from government control. In April, CIT invalidated the DOC’s separate rate denial in an administrative review of a multi-layered wood flooring company from China for a mandatory respondent having a majority of shares indirectly controlled by the government. DOC was faulted for not addressing “how ‘majority equity ownership’ translates into control of export functions”—the historic focus of DOC’s analysis. Likewise, in May, CIT on this basis invalidated separate rate denials for companies having minority shares indirectly controlled by the government in an administrative review of the AD order on off-the-road tires from China. “The critical flaw” identified by the CIT “was the Department’s failure to . . . determine whether the Chinese government . . . controlled the prices” of subject merchandise “that was sold for export to the United States.” Remand proceedings are ongoing in both of these CIT appeals.
Reviewing Courts continued to challenge DOC’s presumed masterly expertise of sophisticated statistical tests in the context of their actual application, where the agency has traditionally been accorded an unfettered deference. CAFC endorsed the following elements of DOC’s Cohen’s d test applied for differential pricing analysis—(1) “effect-size test” comparing means of test and comparison subgroups to identify divergent sales (i.e., 0.8 Cohen’s d cutoff); (2) “ratio test” (i.e., total passing transactions percentage cutoffs, 33 percent & 66 percent); (3) “meaningful difference test” cutoffs (i.e., average-to-transaction (A-T) instead of average-to-average (A-A) is applied to a passing transaction if A-T margin moves across the de minimis threshold, or when both A-A and A-T are above de minimis, the difference is 25 percent or above); and (4) zeroing A-T results—as embodying interpretive and discretionary rules to implement the statutory directive.
But CAFC then questioned if DOC’s “determination of whether the average-to-transaction method is appropriate in a particular case is not solely within its discretion, because that determination is confined by the statutory language of 19 U.S.C. § 1677f-1(d)(1)(B),” which is premised on a pattern of significantly varying export prices among purchasers, regions, and time periods that cannot be accounted for by A-A results. Even while requiring DOC to establish that the statutory factual preconditions existed prior to invoking Cohen’s d test, CAFC nonetheless reiterated that “the relevant standard for reviewing Commerce’s selection of statistical tests and numerical cutoffs is reasonableness, not substantial evidence.”
Applying the reasonableness test, CAFC concluded that “there are significant concerns relating to Commerce’s application of the Cohen’s d test . . . in adjudications in which the data groups being compared are small, are not normally distributed, and have disparate variances.” Thus, Cohen’s d test results are unreliable in situations where any one of the three criteria are violated.
CIT followed CAFC in a subsequent case, remanding to DOC because it “applied the Cohen’s d test to data that showed differences that were not large in absolute terms, because the overall differences for five of the CONNUMs were less than one percent” and also “did not explain whether the data applied to the Cohen’s d test were normally distributed or contained roughly equal variances.” Given the three restrictive threshold conditions, DOC will increasingly find it hard to support its Cohen’s d test in the current form.
Finally, CAFC is due to adjudicate whether to weight average or simple average the group variances for obtaining the pooled standard deviation, the denominator in Cohen’s d formula. In its 2019 remand, CAFC, relying upon academic literature, had expressed concerns about DOC’s current practice of simple averaging. CAFC recently remanded, noting that simple averaging departed from all cited statistical literature. If ultimately CAFC endorses weighted averaging, it will further dilute Cohen’s d test by yielding a significantly lesser number of passing transactions and A-T comparisons, which would result in relatively lower dumping margins.
In July 2021, CAFC overturned a CIT judgment, holding that Commerce’s final determination concerning its post-sale price adjustment calculation in Large Diameter Welded Pipe from Turkey was supported by substantial evidence. In the underlying proceeding, the plaintiff (Turkish pipe producer Borusan) and joint-venture partners incurred late delivery fees. Each partner initially agreed to pay a third of the penalty, but later agreed that the plaintiff would pay a higher share. In the AD proceeding, Commerce explained its five-factor analysis for determining entitlement to a post-sale price adjustment and found that the plaintiff was entitled to only the one-third amount adjustment, because it was known at the time of the sale. Commerce noted that using the final, higher share amount would give the plaintiff an opportunity to manipulate the adjustment and its dumping margin.
CIT overturned Commerce, finding that the plaintiff was due the entire amount of the post-sale price adjustment. CAFC upheld Commerce’s initial determination to grant the partial adjustment, agreeing that the circumstances surrounding the timing weighed against valuing the post-sale price adjustment based on the later, higher amount—especially in light of the potential for post hoc manipulation.
Throughout 2021, CIT continued invalidating various DOC actions to countervail the Government of China’s Export Buyer’s Credit Program (EBCP), without having either conducted verification or provided a sufficient justification for declining to do so. But for the first time in October 2021, DOC conducted EBCP verifications confirming EBCP non-usage by the mandatory respondents and their U.S. customers in the CVD investigation of mobile access equipment and subassemblies thereof from China. This turn of events may signal the end for EBCP litigation that has featured prominently on CIT docket in recent years.
In August, CIT invalidated the 2019 DOC decision to conduct a CVD review of Softwood Lumber from Canada. Last year, CIT remanded after finding that the DOC had not provided statutory authority to enact the CVD expedited review regulation under 19 C.F.R. § 351.214(k). This regulation had for decades allowed for respondents not individually examined in CVD investigations to have their own rates calculated quickly after CVD order issuance, and become eligible for exclusion if those CVD rates were de minimis. CIT in August sustained DOC’s redetermination that it lacked statutory authority to promulgate the CVD regulation and vacated both 19 C.F.R. § 351.214(k) and the softwood lumber expedited CVD review. As a result, Canadian companies excluded through the expedited review were reinstated under the CVD order, and those receiving reduced CVD rates in the expedited review were assigned higher cash deposit rates. CIT expressly declined to provide retroactive relief, meaning softwood lumber from those companies which had already entered the United States was unaffected. This CIT ruling was appealed to CAFC.
The CIT issued several noteworthy decisions in 2021 relating to ITC proceedings, sustaining ITC’s negative injury determinations in a number of cases. For example, in an appeal brought by domestic producers on ITC’s negative injury determination in the AD/CVD investigation of polytetrafluorethylene (PTFE) resin from China and India, CIT upheld ITC’s reconsideration on remand of the weight it accorded to post-petition price data, and sustained ITC’s decision. CIT also sustained ITC’s negative injury determinations in appeals relating to polyethylene terephthalate (PET) resin from Brazil, Indonesia, Korea, Pakistan, and Taiwan, and fabricated structural steel from Canada, China, and Mexico. CIT also sustained ITC’s final affirmative injury determination of PET sheet from Korea and Oman, rejecting plaintiff’s arguments relating to volume, price, and impact.
Also in 2021, LG Electronics USA, Inc. and LG Electronics, Inc. (collectively, LG) appealed a denial by ITC to an application filed by LG’s attorneys for access to business proprietary information under the administrative protective order (APO) in ITC’s Section 201 safeguard extension proceeding regarding Crystalline Silicon Photovoltaic Cells, Whether or Not Partially or Fully Assembled (Inv. No. TA-201-075 (Extension)). LG’s counsel was denied access due to their role in representing China in a dispute settlement case at the World Trade Organization. Plaintiffs argued that ITC’s delay in rendering a decision on the APO application filed by LG’s attorneys was in violation of the procedural controls governing applications for APO access, which infringed on LG’s rights to be represented by their chosen counsel. Plaintiff also said that any denial of the APO application was without authority. Ultimately, the parties stipulated dismissal of the case, but this case is notable as a rare instance in which access to the APO was not granted, and a party appealed that decision to CIT.
In 2021, CBP continued its increased level of activity under EAPA. CBP initiated twelve investigations into evasion of AD and CVD orders on products such as quartz and glycine. CBP rendered eleven determinations as to evasion, with affirmative determinations for AD/CVD orders on aluminum extrusions, cast iron soil pipe, steel grating, and lightweight thermal paper from China. Negative determinations were issued for the AD orders on activated carbon and wooden cabinets from China. The investigations primarily involved alleged transshipment of Chinese products through Southeast Asian countries.
CIT rendered notable EAPA decisions in October 2021. After initially denying the foreign producer/exporter from participating in EAPA appeal of its U.S. importer, CIT reconsidered and authorized such participation because the Plaintiff-Intervenor had an interest in the transaction at issue that had a direct and immediate relationship to the litigation and was not adequately represented by the existing parties. In another case, after remanding last year for CBP to address due process concerns, CIT affirmed CBP’s finding of transshipment of Chinese origin pencils through the Philippines based on sufficient public summarization of confidential data and a verification report that did not constitute new factual information.
Due process concerns were similarly rejected in CIT appeal challenging EAPA determination on diamond sawblades from China, based on sufficient public summarization. Although CBP had not acted within its statutory timeframe, CIT found no penalty because “the deadline is precatory, not mandatory.” The Thai sawblades using Chinese cores and segments at issue were referred by CBP to DOC, who found them in-scope after conducting an anti-circumvention inquiry. CBP was found to have properly applied that DOC determination retroactively to the sawblades covered by EAPA investigation that entered before the matter was referred to DOC. But CIT remanded because CBP did not explain its “evasion” finding—as the sawblades apparently entered in accordance with prior DOC findings, despite EAPA not having a mens rea requirement.
In 2021, several significant Section 337 developments occurred relating to matters concerning the misappropriation of trade secrets. These developments included a seminal determination by ITC and proposed legislation that, if implemented, would affect treatment of Chinese-related theft of trade secrets.
In Certain Foodservice Equipment and Components Thereof, ITC affirmed a final initial determination (Final ID) by an administrative law judge (ALJ) in which the ALJ concluded that there had been no violation of Section 337. In the Final ID, although the ALJ found that the China-based respondents had misappropriated certain trade secrets of the complainants and used them in the manufacture of certain allegedly infringing products that were imported and sold in the United States, the ALJ concluded that the complainants had not shown that the importation and sale of the allegedly infringing products threatened or had the effect of destroying or substantially injuring a domestic industry. In affirming the ALJ’s Final ID, ITC held that payments made by complainants to third parties for warranty services provided in the United States were not quantitatively or qualitatively significant enough to demonstrate the existence of a domestic industry, and that, therefore, the complainants did not establish that an industry in the United States exists as required by Section 337(a)(1)(A)(i)—and thus did not establish a substantial injury to a domestic industry.
Shortly after the ALJ’s Final ID was issued in early June 2021, Senator John Cornyn (R-TX), along with co-sponsors Senator Christopher Coons (D-Del.), and Senator Todd Young (R-Ind.), introduced the Stopping and Excluding Chinese Rip-offs and Exports with United States Trade Secrets Act of 2021 (the SECRETS Act of 2021) on June 15, 2021. If enacted, the SECRETS Act of 2021 would create an Interagency Committee on Trade Secrets (Committee) that would be chaired by the Attorney General and would include the heads of the Treasury, Commerce and Homeland Security Departments, the U.S. Trade Representative, and the Office of the Intellectual Property Enforcement Coordinator, as well as “[t]he head of such other Federal agency or other executive office as the President determines appropriate, generally or on a case-by-case basis.” The Committee would, upon complaint submitted by the owner of a trade secret or on its own, initiate a review of any allegations that an import meets the criteria for exclusion. If the Committee determines no more than thirty days after notification of an allegation that an import “more likely than not” meets the criteria, the Committee would direct that the article be kept from entry into the United States and would notify the President of the determination, although the President could disapprove of such determination within fifteen days of notification, which would result in the Committee’s determination having no force or effect.
The committee editor of this article is Dharmendra N. Choudhary. The views expressed in this section do not necessarily reflect the views of the authors’ respective employers.
