Material Injury Standard For Antidumping And Countervailing Duty Investigations Still Subject To Active Debate In The Courts

by King & Spalding
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The injury standard in antidumping and countervailing duty investigations is still being debated in the courts. Recent court decisions indicate that injury and causation thresholds will be contested matters for years to come.

Antidumping and countervailing duty investigations involve distinct proceedings before two different federal agencies. Imposition of remedies against unfair trade practices requires affirmative findings of (1) unfair pricing ("dumping") or subsidization by Commerce, and (2) material injury or threat of material injury by reason of the unfairly traded imports by the International Trade Commission ("ITC"). The statute defines material injury as "harm which is not inconsequential, immaterial, or unimportant."

The injury standard can be characterized as having two components. First, the domestic industry must exhibit the necessary quantum of injury. Second, it must be established that the harm is "by reason of" the unfair imports. The second component requires the ITC to assess which factors caused the observed injury. Two recent decisions by the courts demonstrate that implementation of the causation standard and the quantum of evidence necessary to support a finding that unfair imports caused material injury remain very much in dispute.

An opinion recently released by a senior judge of the Court of International Trade (Swiff-Train Co. v. United States, CIT 12-00010) (Musgrave, J.), holds that the ITC has been making decisions using an insufficiently rigorous injury standard. The court ordered the ITC to "reconsider its findings" and employ a "but for" test that requires a replacement benefit analysis. In several years of litigation extending to the Federal Circuit, the parameters of the "but for" test have been debated, but the test always had been understood to apply only in situations involving commodity products and an abundant availability of fairly traded imports that could have substituted for unfair imports in the U.S. market (Bratsk Aluminum Smelter v. United States, 444 F.3d 1369(2006)). The culmination of this litigation in the Federal Circuit was interpreted by the ITC as an endorsement of the ITC's pre-existing causation analysis and a repudiation of any more stringent, judicially imposed causation requirement (Mittal Steel Point Lisas v. United States, 542 F.3d 867 (2008)). The Court of International Trade's decision in Swiff-Train reopens the causation standard issue and extends the issue to all injury investigations, not just to investigations that involve commodity products and alternative sources of imports of substitutable merchandise.

Not long after the Swiff-Train decision, the Federal Circuit issued an opinion that ended other long-running injury standard litigation (NSK Corporation v. United States, Fed. Cir. 2011-1362, 1382, 1383, 1454). NSK admonished the Court of International Trade for involving itself too deeply in the ITC's assessment of potential alternative causes of injury. The Federal Circuit found that the Court of International Trade "erred in repeatedly remanding the case." The Federal Circuit reinstated the ITC's affirmative determination (reached as result of the second remand) and vacated the ITC's negative determinations reached pursuant to the third and fourth remands. Although NSK involved a five-year sunset review of an existing order, not an original injury investigation as was involved in Swiff-Train, the Federal Circuit made clear that the presence of fairly traded imports that undersell the domestic industry did not invalidate the ITC's assessment that continued relief was justified.

In sum, the ITC is almost certain to view Swiff-Train and NSK as providing mixed signals respecting the proper administration of the causation standard. Given that two new Commissioners recently joined the six-member Commission, arguments over the appropriate implementation of the injury and causation thresholds will be hotly contested matters before the ITC and the courts for several years to come.

By Brian McGill

 

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