2022 was another eventful year for customs and trade law. This article describes key legal developments at the U.S. Customs and Border Protection (CBP or Customs), U.S. Department of Commerce (DOC or Commerce), U.S. International Trade Commission (ITC), and significant rulings issued by the U.S. Court of International Trade (CIT) and the U.S. Court of Appeals for the Federal Circuit (CAFC).
On December 23, 2021, President Biden signed the Uyghur Forced Labor Prevention Act (UFLPA) into law. Since the issuance of additional guidance on June 21, 2022, the UFLPA required the CBP Commissioner, absent an exception being made by an importer successfully rebutting the presumption of forced labor (discussed infra), to “apply a presumption that, with respect to any goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in the Xinjiang Uyghur Autonomous Region [XUAR] of the People’s Republic of China [China] or produced by an entity on a list . . . the importation . . . is prohibited under 19 U.S.C. 1307.”
The UFLPA supports enforcement of 19 U.S.C. § 1307, which prohibits importation of all “goods, wares, articles, and merchandise mined, produced, or manufactured wholly or in part in any foreign country by convict labor or/and forced labor or/and indentured labor under penal sanctions.” While UFLPA’s prohibition against entry of goods wholly or partially produced with forced labor is not new, its presumption of forced labor imputed on goods with nexus to a region or list of entities is a new feature. The UFLPA does not require CBP to issue Withhold Release Orders and Findings pursuant to the regulations promulgated under 19 U.S.C. § 1307.
For specific enforcement actions such as detention, exclusion, or seizure of shipments, CBP will identify shipments through a variety of sources, including the UFLPA Entity List. CBP will provide importers with notice when enforcement actions are taken. If an importer believes its importation is outside of the scope of the UFLPA, the importer may provide information that the imported goods and their inputs are not sourced, to any extent, from XUAR and have no nexus to entities on the UFLPA Entity List, thus obviating an exception. If there is a geographic sourcing nexus to XUAR or nexus to any entity on the UFLPA Entity List, importers must request an exception to the UFLPA’s presumption, which then necessitates clear and convincing evidence that no forced labor was used—thus rebutting the presumption, leading to an exception. Importers may also identify additional shipments with identical supply chains to broaden the scope of their rebuttal.
If an importer of record successfully rebuts the presumption, the CBP Commissioner will grant an exception to the presumption. The CBP Commissioner is subsequently required to submit, within 30 days of the determination granting the exception, a report to Congress and make available to the public a report outlining the evidence warranting the exception. To rebut the UFLPA’s presumption, importers must do the following:
CBP provided specific guidance for supply chain documentation for cotton, polysilicon, and tomatoes—all of which CBP considers to have a “high-risk of forced labor.” For all three sensitive commodities, CBP emphasized documentation (e.g., transaction records), flow charts of the production processes, production maps, and lists of entities involved at each step of the production processes. Recently, the impact of the UFLPA has widened with the discovery that certain materials used in producing batteries for electric vehicles were produced in the XUAR. As the reach of UFLPA widens, companies have responded with new supply chain tracing initiatives since the UFLPA encompasses all products of which the raw materials were initially sourced from the XUAR. These efforts—even if unsuccessful in tracing the product and obtaining a formal exception to the presumption—are likely to constitute a mitigating factor demonstrating due diligence in any CBP enforcement or penalty investigation.
In 2022, CBP continued its increased level of activity under the Enforce and Protect Act (EAPA). CBP initiated four more investigations into evasion of antidumping duty (ADD) and countervailing duty (CVD) orders than in 2021, for a total of sixteen investigations. CBP rendered fourteen affirmative determinations as to evasion, including those for ADD/CVD orders on wooden cabinets and vanities, hardwood plywood, quartz surface products, aluminum extrusions, and aluminum sheet from China. Negative determinations were issued for the ADD orders on malleable cast iron pipe fittings from China and glycine from Thailand. The investigations primarily involved alleged transshipment of Chinese products through Southeast Asian countries.
The CIT rendered notable EAPA decisions in 2022. In Norca Industrial Co. v. United States, the CIT in March 2022 remanded for CBP to reconsider its determination of evasion because of an incomplete administrative record. Due process concerns were raised in another case, Ad Hoc Shrimp Trade Enforcement Committee v. United States. There, the CIT in May 2022 remanded for CBP to reconsider its findings as to non-evasion, which had been reversed on administrative appeal because CBP’s Office of Regulations and Rulings had not reviewed the entire administrative record and CBP’s Trade Remedy & Law Enforcement Directorate did not adequately explain how it determined public summaries of confidential documents complied with CBP’s regulations.
In its November 2022 EAPA ruling, Aspects Furniture International, Inc. v. United States, the CIT addressed for the first time whether CBP may retroactively apply the EAPA statute (19 U.S.C. § 1517) and regulation (19 C.F.R. § 165.2) to entries made prior to the EAPA statute coming into force. The CIT held that an EAPA investigation may not include merchandise entered prior to the EAPA statute’s date of entry into force on August 22, 2016, because the language is clear that the EAPA statute entered into force on that day—i.e., 180 days after the Trade Facilitation and Enforcement Act of 2015 was enacted.
The CAFC, in its August 2022 ruling, Meyer Corp. v. United States, reversed the CIT in a case involving the importation of pots and pans manufactured in Thailand from steel discs manufactured in China. The importer, Meyer, sought to establish the dutiable value of its imported cookware using the “first sale” price from the manufacturer to the distributor. The CIT in March 2021 required Meyer to prove not only that the sales were conducted at arms-length, but also that the sales were unaffected by China’s status as a non-market economy. Finding that the importer did not prove the absence of “non-market influences,” the CIT did not allow the importer to rely on the first sale prices.
The CAFC overruled the CIT and held that there is no basis in the value statute for CBP or the CIT to consider the effects of a non-market economy (NME) on transaction value. The CAFC found that the statute requires only that the goods are clearly destined for export to the United States and “the relationship between [the] buyer and seller did not influence the price actually paid or payable.” The CAFC further held that the CIT misinterpreted its Nissho Iwai American Corp. v. United States decision by requiring an importer to prove an exporting country’s nonmarket economy does not prohibitively influence the price actually paid or payable—particularly as “[t]here is no basis in the statute for Customs or the court to consider the effects of a nonmarket economy on the transaction value. The statute requires only that ‘the relationship between [the] buyer and seller did not influence the price actually paid or payable.’” The CAFC remanded for the CIT to reconsider Meyer’s qualifications for first sale duty savings treatment. This CAFC decision is significant as it resolves an open question regarding the valuation of goods imported from China (and other nonmarket economies) and the viability of the first sale duty savings program in connection with those purchases.
Two subsequent CBP rulings highlight the need for importers to review their first sale transactions for compliance with CBP requirements. In HQ H316892, issued in July 2022, a U.S. importer attempted to use the first sale between its related Hong Kong middleman/vendor and an unrelated factory in China. The importer intended for title and risk of loss to pass from the factory to the middleman at the port of export and then from the middleman to the importer at the international date line. The middleman’s purchase order to the manufacturer indicated “[Free on Board (FOB)]-ocean freight” Incoterms and the manufacturer’s invoice stated “FOB Taiwan.” A supply agreement between the importer and middleman provided that title and risk of loss were to pass from the middleman to the importer at the international date line. However, the importer’s purchase order to the middleman indicated “FOB-ocean freight,” and the importer paid the applicable international freight and insurance charges. CBP found that even though the supply agreement provided that risk of loss passed from the middleman to the importer at the international date line because the importer was responsible for the international freight and insurance costs, the middleman bore no risk of loss, and risk of loss transferred from the manufacturers directly to the U.S. importer at the foreign port of shipment.
Regarding the passage of title, CBP again disregarded the supply agreement and pointed out that the commercial documents did not provide information regarding the passage of title since Incoterms do not themselves establish when title passes. CBP looked for guidance from the [Uniform Commercial Code (U.C.C.)], which states that “[u]nless otherwise explicitly agreed, title passes to the buyer at the time and place at which the seller completes his performance with reference to the physical delivery of the goods.” Since the manufacturers delivered the goods when the merchandise was placed on board the vessel at the foreign port of export for delivery to the U.S. importer, CBP found that title transferred from the manufacturers to the U.S. importer at that point. Accordingly, CBP ruled that title and risk of loss transferred directly from the foreign manufacturers to the U.S. importer. Accordingly, CBP did not find a bona fide “first sale” and the merchandise could not be appraised based on the price paid by the middleman. As the only sale that occurred was the sale between the U.S. importer and the unrelated foreign manufacturer, the merchandise was appraised based on the price paid by the U.S. importer.
The second CBP ruling, HQ H323585, issued in August 2022, implicated similar facts with the CBP rejecting the first sale, reasoning that the middleman never took proper title or risk of loss.
These rulings in the wake of Meyer reveal that CBP’s interpretation of the first sale rule of appraisement is not static and is subject to change as new fact patterns are presented for analysis. These rulings demonstrate that importers utilizing the first sale rule should periodically review their import transactions to ensure the company is maximizing its benefits. Periodic compliance reviews can help companies to ensure that legal requirements are being met and that the company is not at risk of non-compliance due to changing aspects of the transactions or of changes in CBP’s interpretation of the requirements of the program.
On April 1, 2022, the CIT three-judge panel hearing the challenge to the United States Trade Representative’s (USTR) imposition of List 3 and List 4A Section 301 additional duties on certain goods from China (In re Section 301 Cases) issued an initial decision on the merits of the case. The CIT rejected Government arguments that judicial review was precluded as the imposition of Section 301 duties was either a presidential action or, alternatively, a political question doctrine, and held that the decision to impose List 3 and List 4A were agency actions subject to the Court’s review and that Plaintiffs’ claims regarding statutory interpretation and compliance with procedural requirements are well-within the Court’s authority to review.
On the issue of statutory interpretation, Plaintiffs’ position is that USTR exceeded its statutory authority by imposing List 3 and List 4A in response to retaliatory actions taken by China following the imposition of the List 1 and List 2 tariffs. Plaintiffs’ view is that the statute only permits USTR to impose Section 301 duties in response to the practices that were the subject of the Section 301 investigation, which centered on China’s theft of U.S. intellectual property. On this question, the CIT found that China’s retaliatory actions were linked to the investigated practices. Having found such a link, the CIT ruled that USTR’s modification of the original Section 301 duties was within the scope of its statutory authority.
Plaintiffs also argued that USTR failed to follow the procedural requirements of the Administrative Procedure Act (APA) when it promulgated List 3 and List 4A. On this issue, the CIT agreed with Plaintiffs. Prior to imposing List 3 and List 4A, USTR received thousands of comments, many of which opposed the additional tariffs. The CIT held that USTR failed to provide an adequate explanation of its decision to impose the additional tariffs or how it considered the comments that it received, and did not explain its decision to remove certain tariff subheadings from the initial versions of List 3 and List 4. Having found that USTR violated the APA, the CIT remanded List 3 and List 4A, ordering that USTR further explain its decision to impose the additional tariffs, how it considered the comments that it received and provide an explanation of why certain provisions were included on these lists and why others were removed. The CIT also noted that it was declining to vacate List 3 and List 4A (for the time being), pending USTR’s filing of further explanations.
The Government filed USTR’s remand report on August 1, 2022. The report purports to explain the process that USTR employed in its decision to impose the final versions of List 3 and List 4. Plaintiffs filed comments on September 14, 2022, arguing that the remand report failed to address significant comments opposing the tariffs and that the report largely consisted of post hoc explanations for the agency’s actions. The Government filed a response to Plaintiffs’ brief on November 4, 2022. Finally, Plaintiffs filed a reply brief on December 5, 2022. The CIT affirmed the USTR’s remand report in its entirety on March 17, 2023. An appeal of this final CIT decision to the CAFC is nearly certain.
On November 6, 2022, the CAFC issued ARP Materials, Inc. v. United States, a decision impacting importers’ ability to obtain refunds of additional duties assessed under Section 301 of the Trade Act of 1974 (19 U.S.C. § 2411) on excluded products. Two importers, ARP Materials, Inc. and The Harrison Steel Castings Company, filed nearly identical Complaints in the CIT seeking refunds of Section 301 duties. Each Complaint asserted claims for refunds on the basis that the USTR had retroactively rescinded the duties on the subject merchandise by granting exclusions covering the subject merchandise. Both Plaintiffs imported merchandise that was subject to Section 301 tariffs at the time of entry. Subsequently, USTR granted exclusion requests that covered Plaintiffs’ imported merchandise. Those exclusions were retroactive, meaning that Plaintiffs’ previously imported merchandise was also excluded from the Section 301 tariffs, forming the basis for the importers’ refund claims. However, in certain instances, Plaintiffs failed to file an administrative protest with CBP.
The CAFC considered the issue of whether an importer must file a protest in order to recoup duties paid prior to the issuance of a retroactive Section 301 exclusion. The CAFC found that Plaintiffs had “simply and regrettably dropped the ball” when they failed to timely file protests. The CAFC affirmed the CIT’s decision that the failure to file a timely protest precluded jurisdiction and was a bar to judicial relief. In reaching its decision, the CAFC stated that Plaintiffs had an adequate opportunity to file protests that would have preserved their claim for refunds. The CAFC also noted that CBP had published clear instructions regarding how and when importers could obtain refunds of previously paid Section 301 duties. Finally, the CAFC determined that Plaintiffs’ failure to file timely protests did not trigger the CIT’s residual subject matter jurisdiction under 28 U.S.C. § 1581(i).
This decision highlights the importance for importers to monitor the status of their customs entries to ensure that any needed protest is filed within the statutory time limit. In the context of Section 301 duties, it is also important for importers to monitor USTR decisions regarding the dutiable status of specific merchandise.
On November 9, 2022, as part of the agency’s antidumping duty investigation of Emulsion Styrene-Butadiene Rubber from the Russian Federation, Commerce determined to treat Russia as a NME in forthcoming proceedings. Following Russia’s invasion of Ukraine, Commerce reassessed Russia’s market economy status pursuant to six statutory conditions and determined that Russia is an NME because: the Russian ruble is no longer freely convertible; Russia’s Labor Code was amended to increase the Government of Russia’s (GOR) control over the labor market; market conditions for joint ventures and foreign investments deteriorated in Russia; the GOR exercises a high degree of control over the Russian economy; the GOR has growing control over price setting; and corruption, rule of law, and freedom of information have all worsened. Because Commerce’s NME decision applies only to forthcoming proceedings, Commerce relied on its market economy methodology to calculate ADD margins ranging from 8.15 to 17.47 percent in its final determination in this investigation.
In August 2022, the ITC issued its final determination in the five-year reviews of cold-rolled steel (CRS) from six countries. The ITC unanimously voted to consider all countries, except Brazil, on a cumulated basis. With a 3-2 vote, the ITC decumulated Brazil when considering the likely effect of the orders in the event of revocation. While all Commissioners found that imports from Brazil were likely to have a discernible adverse impact and reasonable overlap in competition, three Commissioners reasoned that imports from Brazil competed under different conditions of competition “given the distinguishing circumstances of the Section 232 measures with respect to CRS from Brazil.” Two dissenting Commissioners observed that differing Section 232 measures would not result in imports from the subject countries “competing differently in the marketplace.” As a result, the ITC continued the orders on all countries except Brazil.
In October 2022, the ITC issued its final determination in the five-year review of hot-rolled steel from eight countries. Again, the ITC voted 3-2 not to continue the order on imports from Brazil but voted unanimously to continue the orders on imports from all other countries.
The CAFC reversed the CIT in its 2022 ruling, YC Rubber (North America) LLC v. United States, in a case with potentially far-reaching consequences for DOC. In the second administrative review (AR2) of the ADD order on passenger vehicle and light truck tires from China, DOC initially selected two mandatory respondents. With one Chinese exporter declining to participate, DOC individually examined only the other exporter—whose ADD margin was assigned to all exporters being reviewed. Appeals to the CIT followed, claiming that DOC was required by statute to review more than one respondent. Although the CIT in late 2020 affirmed DOC’s decision to select a single respondent, the CAFC in August 2022 reversed that ruling and found that DOC had violated its statutory obligation to review multiple respondents: “The statute generally requires that the ‘reasonable number’ is greater than one.” This ruling could have a far-reaching impact on DOC’s workload and resource allocation. Indeed, DOC has received two extensions of time into 2023 to file a motion for CAFC reconsideration, but ultimately declined to do so.
The CAFC, in several 2022 rulings, affirmed DOC’s application of statutory adverse facts available (AFA), and the CIT’s affirmance thereof, including two reviews of the ADD order on steel nails from China in which DOC had changed its practice. The CAFC, in its July 2022 ruling, Shanxi Hairui Trade Co. v. United States, affirmed the CIT finding that DOC properly applied AFA in the ninth administrative review. There, one mandatory respondent was found to have properly been assigned the 118.04% AFA rate because of a fraudulent transshipment scheme by its supplier. The non-selected respondents were found to have properly been assigned a 43.26% ADD rate, which was the weighted average of that AFA rate and the 3.94% rate assigned to the cooperating mandatory respondent. Although DOC had changed its practice that previously excluded AFA rates when assigning non-selected rates, the CAFC found DOC acted reasonably and consistently with the ADD statute. The CAFC, in its September 2022 ruling, Xi’an Metals & Minerals Import & Export Co. v. United States, affirmed the CIT finding that DOC properly applied AFA in the subsequent, tenth administrative review to a mandatory respondent who was unable to report its factor of production data on a control-number (CONNUM)-specific basis. Although DOC had previously accepted data that was not CONNUM-specific, the CAFC found that the policy refinement did not constitute formal rulemaking; DOC properly explained “that CONNUM-specific data is essential for the accurate calculation of costs;” and DOC’s decision was otherwise supported by substantial evidence.
The CAFC likewise affirmed DOC’s application of AFA in the CVD investigation of corrosion-resistant steel products from India because the respondent failed to disclose an affiliated company. The CAFC, in its May 2022 ruling affirming the CIT, Uttam Galva Steels Ltd. v. United States, found DOC acted properly and rejected arguments that the affiliation could not have resulted in additional subsidies. However, the CAFC reversed the CIT and invalidated DOC’s AFA application in its May 2022 ruling, Hitachi Energy USA Inc. v. United States. In that case, on remand in AR2 of the ADD order on large power transformers from Korea, DOC revised its methodology for determining service-related revenue. Since DOC found mandatory respondent Hyundai’s original submissions inadequate to determine service-related revenue in the revised manner, Hyundai asked DOC for permission to provide additional information. Commerce denied that request and applied partial AFA in calculating Hyundai’s ADD rate, which was affirmed by the CIT. Yet the CAFC found that DOC violated 19 U.S.C. § 1677m(d) by disallowing Hyundai the opportunity to cure a deficiency with its submitted data. The CAFC further found that DOC had misapplied the AFA statute and acted without the requisite substantial evidence.
The past year saw several significant developments in particular market situation (PMS) jurisprudence and administration, especially cost-based PMS in the context of constructed value (CV). This PMS authority was bestowed upon DOC by the Trade Preferences Extension Act (TPEA) of 2015, codifying that a “particular market situation exists [when] the cost of materials and fabrication or other processing of any kind does not accurately reflect the cost of production in the ordinary course of trade.” Consequently, when computing CV, DOC may replace the producer’s actual costs using “any other calculation methodology.”
Pursuant to TPEA, DOC in steel pipe cases routinely affirmed cost-based PMS, allegedly arising from a global phenomenon: Chinese oversupply of steel manifesting uniquely in the foreign exporting countries in terms of its collective and cumulative consequences. These include trade remedy measures undertaken against Chinese hot-rolled coil (HRC) imports, government subsidies to HRC producers, government involvement in the electricity market, government-led restructuring of the steel industry, and strategic alliances between HRC and pipe producers. To compute PMS adjustments in steel pipe cases, DOC employed a complex statistical ordinary least square regression methodology, which was premised on a set of assumptions.
In recent years, the CIT aggressively pushed back against DOC’s cost-based PMS overreach on several fronts. First, as a matter of law, the CIT ruled against PMS adjustment in building up the “cost of production” for a below-cost sales analysis. Second, as a matter of substantial evidence, the CIT probed DOC as to how a global phenomenon of Chinese oversupply of cheap HRC could be uniquely particular to one exporting country or how subsidies absent a pass through analysis could be presumed to distort the cost of production of the subject merchandise. Consequently, DOC, in remand proceedings, began dropping its PMS findings. In 2022, this trend firmly crystallized with all eight CIT PMS decisions on steel pipe cases (of ten PMS decisions) either remanding DOC’s affirmative PMS findings or affirming its negative PMS findings. The CIT underscored that the alternative methodology in 19 U.S.C. § 1677b(e)(1) conceives both a comparative and a causal requirement. Specifically, besides finding PMS, DOC must demonstrate that those unique market phenomena prevented the cost of materials and fabrication from accurately reflecting the cost of production. Likewise, pursuant to CIT questioning the assumptions behind the regression methodology and data used for PMS adjustment, DOC entirely dropped the PMS adjustments.
In all nine new determinations on steel pipe cases (of thirteen PMS determinations) issued in 2022, DOC issued negative PMS findings because they could not be supported by substantial evidence. Even in the other four non-steel cases, DOC predominantly issued negative PMS findings. As such, despite its initial hawkish post-TPEA years, DOC in 2022 recognized the judicial scrutiny and demonstrated extreme restraint in its PMS analysis.
A tipping point was reached in 2022 with the first decision regarding the substantive merits of PMS issued by the CAFC, which found DOC’s findings unsupported by substantial evidence. Specifically, the CAFC reached four important conclusions. First, a PMS which distorts costs must cause costs to deviate from what they would have otherwise been in the ordinary course of trade. Second, a PMS must be particular to certain producers or exporters, inputs, or the market where the inputs are manufactured. Third, if there is a claim of a subsidy or government interference, there should be evidence of receipt of benefit and the resulting impact on the price of the input. Finally, while quantification of a distortion in costs by the PMS is not required to prove the existence of a PMS, such a quantification may help support an affirmative PMS finding. In the ensuing remand proceeding, DOC reversed itself and found the record evidence insufficient to support a PMS finding.
Ultimately, DOC wisely saw the writing on the wall. Pursuant to an unremitting judicial onslaught compounded by the inherent uncertainty surrounding the scope of PMS, which is not defined either in the statute or the regulation, DOC decided to revisit the PMS issue. In an advanced notice of proposed rulemaking published on November 18, 2022, Commerce invited comments on three issues: (1) information which DOC should consider in determining if a PMS exists which distorts the costs of production; (2) information DOC should not be required to consider when determining if a PMS exists, regardless of the PMS allegation; and (3) comments on PMS adjustment calculations, where the record does not allow for the quantification of cost distortions. DOC’s forthcoming PMS regulations, expected in 2023, should help streamline the criteria and factors applied for PMS finding and providing transparent methodology(ies) for computing PMS adjustments.
The CIT began 2022 by continuing its 2021 trend of invalidating DOC actions in CVD proceedings to countervail the Government of China’s (GOC) Export Buyer’s Credit Program (EBCP). The CIT had, in several cases before and during 2021, invalidated DOC’s decision to apply AFA to countervail the EBCP, based on the GOC providing all requested EBCP information without at least trying to verify the respondents’ claims not to have used the EBCP. The CIT in May 2022 affirmed DOC’s redetermination, under protest, to recalculate subsidy rates without including a CVD rate for the EBCP in the fifth administrative review (AR5) of the CVD order on crystalline silicon photovoltaic (solar) cells from China. In that review, DOC had not elected to attempt verification on remand. The CIT in May 2022 further granted DOC’s request for a voluntary remand to reconsider its decision to countervail the EBCP in the sixth administrative review (AR6) of the CVD order on solar cells from China. Finally, in May 2022, the CIT also ordered DOC to reconsider its application of AFA to respondents who claimed EBCP non-usage in the CVD investigations of wooden cabinets and vanities (WCV) from China rather than attempt verification.
Unlike solar cells CVD AR5, DOC on remand in solar cells CVD AR6 and in the WCV CVD investigation re-opened the record to verify EBCP non-usage. In the final WCV remand filed in August 2022, DOC found that neither mandatory respondent provided complete information requested concerning potential EBCP usage by their customers and accordingly continued to countervail EBCP. The WCV respondents have challenged that redetermination, and a CIT ruling is expected next year. In the final remand in solar cells CVD AR6, issued in October 2022, DOC verified non-usage by one mandatory respondent based on complete information provided by its sole customer, eliminating its EBCP CVD rate—but was unable to do so for the other mandatory respondent, whose EBCP CVD rate was maintained. Briefing on this redetermination continues into next year.
Just as the CIT and DOC were coalescing on an approach towards EBCP whereby mandatory respondents would be verified as to whether they or their customers used EBCP, the CIT in September 2022 affirmed DOC’s decision to countervail the EBCP by applying AFA based on GOC non-cooperation. The CIT, in that appeal of the CVD investigation of wood mouldings and millwork products from China, affirmed the DOC rationale that had largely been rejected in prior cases—that verification was reasonably not pursued on account of the information deficit caused by the GOC’s unwillingness to provide all requested EBCP details. Now that there is a split on this issue within the CIT, it is likely that DOC’s ability to countervail the EBCP will eventually be resolved by the CAFC.
The CIT in 2022 adjudicated several challenges to instances where DOC applied AFA based on untimely submissions. In Ajmal Steel Tubes & Pipes Industries v. United States, the CIT in October found it unreasonable for DOC to refuse to accept a Section A Questionnaire Response (AQR), which was untimely due to COVID-19 related issues, even though DOC had tolled all deadlines in response to the same issue. Ajmal, a mandatory respondent in an administrative review of the ADD order on circular welded carbon-quality steel pipes from the United Arab Emirates, submitted extension requests for its AQR, citing delays “due to the COVID-19 global pandemic.” DOC granted both of these requests. However, on the due date, Ajmal failed to submit their documents before the 5:00 p.m. deadline and submitted a third extension request at 6:10 p.m. and its AQR at 6:42 p.m. DOC denied both the extension request and the AQR, as well as requests to reconsider. Yet during the review, “Commerce tolled all deadlines in AD and [CVD] investigations by 50 days . . . [but this decision] . . . did not apply to deadlines that had already passed.” Two weeks later, DOC further tolled all administrative review deadlines by another 60 days. DOC nonetheless considered Ajmal’s AQR untimely and instead applied AFA to assign a 54.27% ADD rate.
The CIT first found the issues Ajmal experienced on the day of filing alone should not have prevented the filing of a timely extension request. However, because “Commerce unilaterally tolled the deadlines for all AD and CVD administrative reviews by 50 days . . . in response to the operational adjustments due to COVID-19,’” the CIT found that DOC recognized “operational adjustments due to COVID-19” during the spring of 2020 as extraordinary circumstances. The CIT highlighted the fact that “[t]he total delay to the investigation by Ajmal, caused by its operational issues due to COVID-19, consisted of less than two hours . . . [while] [t]he total delay to the review by Commerce, [also] in response to operational adjustments due to COVID-19 consisted of 50 days or 1,200 hours, plus a subsequent additional 60 days.” Thus, the CIT concluded that “[i]t was an abuse of discretion for Commerce, with both delays before it, to reason that filing issues due to COVID-19 are so different from operational adjustments due to COVID-19 that they do not constitute sufficient extraordinary circumstances to permit a slightly late filing here to avoid serious consequences.” The CIT remanded for DOC “to accept and consider” Ajmal’s AQR.
The CIT reached the same outcome in a pair of February 2022 rulings, Celik Halat Ve Tel Sanayi A.S. v. United States, involving late filings submitted by the same mandatory respondent in the ADD/CVD investigations of prestressed concrete steel wire stand from Turkey. On the ADD side, DOC assigned a margin of over 50% because Celik Halat’s Sections B and C Questionnaire Response (BCQR) included a single exhibit filed 21 minutes after the 5:00 p.m. deadline on account of formatting errors. DOC denied requests for reconsideration, finding that Celik Halat had notice of formatting requirements and failed to show that an extraordinary circumstance prohibited it from timely filing an extension request before the deadline. On appeal, the CIT determined that “Commerce abused its discretion to impose a draconian penalty upon plaintiff for a minor and inadvertent technical error by its counsel that had no appreciable effect on the antidumping duty investigation.” First, the CIT found that DOC’s use of AFA was predicated “on what was no more than a minor incident of non-compliance . . . that had no appreciable effect on the antidumping duty investigation.” The CIT recognized that “Commerce has broad discretion in establishing its own rules governing the administrative procedure,” but found that “in applying those rules to an individual circumstance, Commerce lacked the discretion to impose a draconian and punitive sanction in the circumstance represented.” As a result, the CIT ordered DOC to calculate a new ADD margin for Celik Halat using the BCQR instead of AFA.
On the CVD side, the CIT likewise invalidated DOC’s application of an AFA rate to Celik Halat as a result of an untimely filed Section III response to the initial questionnaire. Through DOC’s “lag rule,” Celik Halat had to file the “not Final” business proprietary information (BPI) version of the response by 5:00 p.m. on the due date and the final BPI version by 5:00 p.m. the following business day. Celik Halat submitted the BPI Not Final version on time. However, its counsel, who was recovering from surgery in a different time zone, submitted the final BPI version at 6:27 p.m.. DOC rejected the submission and applied AFA by assigning Celik Halat a 158.44% CVD rate, finding that Celik Halat withheld requested information and impeded the investigation. Yet the CIT rejected this position, emphasizing that because Celik Halal was only able to edit bracketing between the BPI versions and not the substantive material, DOC had all the information it needed in the timely filed BPI Not Final version. Thus, the CIT determined that DOC exceeded its statutory authority in applying AFA and remanded for a new DOC CVD determination that does not rely on AFA.
The CIT reached a different outcome in its late 2021 ruling, affirmed in early 2023 by the CAFC, Trinity Manufacturing, Inc. v. United States. There, the CIT affirmed DOC’s unwillingness to accept an untimely Substantive Response from petitioner that led to revocation of the ADD order on chloropicrin from China. One week after the deadline passed, DOC revoked the ADD order, and the petitioner subsequently asked DOC to grant a retroactive extension for the Substantive Response deadline based on the medical condition of petitioner’s counsel that allegedly caused the deadline to be missed. After DOC denied this request and reconsideration, the petitioner appealed to the CIT.
The CIT highlighted that in the retroactive extension request, petitioner’s counsel explained that he realized for the first time that he may not have filed the Substantive Response upon receiving notice of the untimely filing. The CIT agreed that DOC properly found the absence of the requisite extraordinary circumstance, finding that “an extraordinary circumstance is not demonstrated when the person attempting to make a filing did not know, and could not say, why the attempt at filing did not succeed.” The CIT further reasoned that “the extension request did not demonstrate that the filing could not have been accomplished through ‘reasonable measures’ and ‘reasonable means,’ including ordinary measures to confirm that the document had . . . been filed.” The CIT agreed with DOC’s conclusion that these medical issues did not constitute an extraordinary circumstance because petitioner’s counsel had not established a medical emergency or otherwise being unable to file an extension request on time.
The COVID-19 pandemic caused disruptions to Commerce’s ability to conduct on-site verifications, triggering the choices of alternative procedures to verify the information. In February 2022, the CIT asked Commerce to explain why a petitioner’s request for virtual verification was not possible in an antidumping investigation into forged steel fittings from India in light of COVID travel restrictions. The Court found that the agency’s failure to consider the possibility of virtual verification was unsupported by substantial evidence, noting that although Commerce had not resumed on-site verification due to the pandemic, senior administration officials had made recent trips to India. Commerce’s remand redetermination arguing that questionnaires constituted verification is currently pending before the CIT.
In M S Int’l, Inc. v. United States, the CAFC upheld Commerce’s authority to modify the scope during ADD/CVD investigations. The underlying investigations involved quartz surface products from China. The scope in the petitions described quartz surface products as “slabs and other surfaces created from a mixture of materials that includes predominantly silica (e.g., quartz, quartz powder, cristobalite) as well as a resin binder . . . .” In response to Commerce’s request for clarification, the petitioner explained that while covered products may contain a certain quantity of crushed glass, the scope was not intended to cover products in which the crushed glass content is greater than any other single material. Commerce adopted the petitioner’s revision of the scope to exclude crushed glass products—“surface products in which the crushed glass content is greater than any other single material, by actual weight.”
Later in the investigations, the petitioner requested that Commerce further clarify the scope to limit the exclusion to crushed glass products with visible large pieces of glass. The petitioner explained that it had intended for the exclusion to cover crushed glass products that display visible pieces of crushed glass, giving them a distinct appearance. The petitioner explained that Chinese producers were offering quartz glass products visibly similar to quartz products but containing higher amounts of glass, suggesting that they had begun offering the products in response to tariffs. Commerce modified the exclusion as requested for the final determination.
The CAFC emphasized that Commerce was not bound to the preliminary scope, noting that the agency found it to be problematic because Chinese producers/exporters could evade the orders by selling “quartz glass.” The CAFC rejected arguments that Commerce should have treated the clarification request as a request to amend the petition and that the modification was unlawful for being contrary to the petitioner’s intent. Notably, the CAFC found that the evidence of potential evasion justified Commerce’s departure from its decision in a separate investigation, where the agency denied the petitioners’ request to expand the scope without filing an amended petition.
