Yesterday the US Department of Commerce (Commerce) published the most comprehensive revisions to its regulations for enforcing trade remedy laws since the 1990s—the completion of a rulemaking process that started under the Trump Administration.¹ The regulations establish entirely new procedures for three types of proceedings (scope, circumvention and covered merchandise inquiries), and make a variety of other substantive and technical revisions. Overall, the changes are intended to strengthen enforcement and deter avoidance of trade remedies by foreign producers and exporters as well as US importers, and also to make the administration of the trade remedy laws more efficient.

As background, the trade remedy laws authorize Commerce to issue antidumping and countervailing duty (AD/CVD) orders on particular products. The purpose of such duties is to level the playing field for US producers, workers, farmers and ranchers who are injured by imports that are dumped (i.e., sold at less than fair value) or unfairly subsidized. Commerce conducts scope inquiries to determine whether a particular product is within the scope of an AD/CVD order. Commerce conducts circumvention inquiries to determine whether a product, although not within the scope of an AD/CVD order, should nonetheless be subject to the order because the statutory definition of circumvention applies.² Covered merchandise inquiries are a new type of proceeding that Commerce can initiate based on a referral from US Customs and Border Protection (CBP) to determine whether a particular product is within the scope of an AD/CVD order.³ The Enforce and Protect Act of 2015 (EAPA) established a framework for CBP to investigate AD/CVD evasion and make referrals to Commerce in that context.⁴

In broad strokes, the new rules for scope, circumvention and covered merchandise inquiries are similar. They establish timelines for the initiation of the proceeding and the issuance of a final determination, and they provide that Commerce may, but need not, issue a preliminary determination prior to the final determination. The rules provide that Commerce may initiate scope and circumvention inquiries either based on a request from an interested party or by self-initiation (which Commerce used on several occasions under the prior administration). By contrast, under the current regulations, Commerce performs either a formal or informal scope inquiry, each with its own procedures—a distinction eliminated by the new regulations. In addition, the current regulations contain no stand-alone regulation on circumvention inquiries,⁵ no explicit recognition of Commerce’s authority to self-initiate circumvention inquiries and no regulations on covered merchandise inquiries.⁶

One controversial aspect of the new rules is the possibility of retroactive application of AD/CVD duties. Specifically, for scope and covered merchandise inquiries, at the time of an affirmative preliminary or final scope ruling, Commerce “normally will” direct CBP to begin the suspension of liquidation of unliquidated entries not yet suspended, which entered before the date of initiation of the scope inquiry, and collect applicable cash deposits (with possible exceptions).⁷ This is based on the principle that “a scope ruling that a product is covered by the scope of an order is a determination that the product in question has always been covered by the scope of that order.”⁸ By contrast, under Commerce’s current practice, the date of initiation of the scope inquiry functions as a cutoff date, before which no unsuspended entries are subject to duties (even if they involve merchandise subsequently determined to be within the scope of an AD/CVD order).⁹ The new circumvention rules also state that Commerce “may” apply duties retroactively “if the Secretary determines that it is appropriate to do so.”¹⁰ In effect, this new retroactive element increases the incentive for foreign producers and exporters, as well as importers, to seek scope rulings earlier—rather than seeking to postpone the applicable cutoff date.

Other changes to Commerce’s regulations include:

• Bona fide sales requirement for initiating new shipper reviews: New shipper reviews allow foreign producers/exporters to obtain a company-specific AD/CVD rate, if they did not produce/export the relevant merchandise to the United States during the time period covered by the original AD/CVD investigation (and are not affiliated with any such producer/exporter). Under the new regulations, an exporter or producer may only request a new shipper review if it is able to establish the existence of a bona fide sale.¹¹ No such requirement exists under the current regulations.¹² This change may result in Commerce declining to initiate new shipper reviews in situations where it believes the inquiry is unwarranted.
• Time limit on industry support challenges to petitions: Commerce normally has 20 days from the submission of a petition to decide whether to initiate an AD/CVD investigation. The new rules require challenges to petitions—on the basis of inadequate domestic industry support¹³ —to be submitted no less than five business days prior to the 20th day.¹⁴ By contrast, the current rules contain no deadline for industry support challenges.¹⁵ The new rules are intended to give Commerce additional time to consider industry support challenges, and they will also require opponents of a petition to mobilize more quickly.
• Importer certifications: The new regulations codify Commerce’s authority to require importers and other interested parties to certify whether a particular product is subject to an AD/CVD order. If a party fails to provide the certification upon request, or the certification is false, then the regulations provide that Commerce may order CBP to collect AD/CVD duties from the importer at the applicable rate.¹⁶

The new regulations apply to Commerce proceedings initiated 30–45 days from today (depending on the particular provision). This includes proceedings related to AD/CVD orders that have already been issued.

Footnotes -

1. Regulations To Improve Administration and Enforcement of Antidumping and Countervailing Duty Laws, 86 Fed. Reg. 52,300 (Dep’t Commerce Sept. 20, 2021); see also Regulations To Improve Administration and Enforcement of Antidumping and Countervailing Duty Laws, 85 Fed. Reg. 49,472 (Dep’t Commerce Aug. 13, 2020) (proposed rule).
2. See 19 U.S.C. § 1677j.
3. 19 U.S.C. § 1517.
4. EAPA is Title IV of the Trade Facilitation and Trade Enforcement Act of 2015, signed into law in 2016. Public Law 114-125, 130 Stat. 122, 155 (2016).
5. Circumvention inquiries are referenced in the current regulation on scope rulings. See 19 C.F.R. § 351.225.
6. 19 U.S.C. § 1517 provides that if CBP is conducting an EAPA investigation and is unable to determine whether the merchandise at issue is covered by an AD/CVD order, it shall refer the matter to Commerce to make a covered merchandise determination. The resulting Commerce proceeding is the covered merchandise inquiry described in the new 19 C.F.R. § 351.227.
7. See new 19 C.F.R. §§ 351.225(l)(2)(iii) and (l)(3)(iii), and 351.227(l)(2)(iii) and (l)(3)(iii).
8. Regulations To Improve Administration and Enforcement of Antidumping and Countervailing Duty Laws, 86 Fed. Reg. at 56,312.
9. See Regulations To Improve Administration and Enforcement of Antidumping and Countervailing Duty Laws, 86 Fed. Reg. at 52,327.
10. See new 19 C.F.R. §§ 351.226(l)(2)(iii) and (l)(3)(iii).
11. See new 19 C.F.R. § 351.214(b). EAPA added a provision to the AD/CVD statute providing that the individual AD/CVD rate determined for a new shipper must be based on bona fide sales in the United States, and it codified the factors that Commerce has historically used to determine whether a sale is bona fide. See 19 U.S.C. § 1675(a)(2)(b)(iv).
12. See 19 C.F.R. § 351.214(b).
13. Commerce initiates AD/CVD investigations based on petitions only if it determines that the petitions are filed on behalf of the domestic industry, as defined by statute. See 19 U.S.C. §§ 1671a, 1673a.
14. See new 19 C.F.R. § 351.203(g).
15. See Regulations To Improve Administration and Enforcement of Antidumping and Countervailing Duty Laws, 85 Fed. Reg. at 49,473.
16. See new 19 C.F.R. § 351.228(b).