CAFC Says AD/CVD Double Counting Law Constitutional; Splits on Retroactivity
The U.S. Court of Appeals for the Federal Circuit on March 18 confirmed the legality of parts of a 2012 law allowing the imposition of countervailing duties on goods from non-market economy countries like China and Vietnam. The Appeals Court affirmed a year-old Court of International Trade decision, finding provisions for adjustment of “double counting” that only apply to CV duty cases decided after 2012 do not violate the Constitution.
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The double counting issue arises because, in antidumping duty cases involving non-market economy countries, Commerce often times uses “surrogate” prices from market economy countries to value actual Chinese or Vietnamese market sales. Commerce says the actual prices of domestic sales by Chinese and Vietnamese companies are unreliable because of the level of state control in those economies, so it pairs prices charged in a comparable country like Thailand or India with the quantity that the Chinese or Vietnamese company actually sold domestically.
But by using surrogate prices instead of the real thing, Commerce may be disregarding domestic price adjustments made because of Chinese or Vietnamese government subsidies. The Chinese or Vietnamese company may have lowered its prices because government subsidies gave the company room to do so. Those subsidies are in many cases already remedied by CV duties. So in cases where both AD and CV duties are in place, the same subsidies may be the basis for both CV duty rates and higher AD duty rates -- it’s double counted.
The 2012 law that silenced doubt over Commerce’s ability to impose CV duties on non-market economy countries also allowed adjustments for double counting (see 12031403. The provisions on double counting came on the back of a 2011 World Trade Organization decision (see 11031414). Although the provisions of the law allowing Commerce to impose CV duties on non-market economy countries were retroactive back to 2006, the provisions on adjustment for double counting only took effect upon passage of the law in 2012.
Guangdong Wireking, a Chinese exporter of kitchen appliance shelving and racks, said the new law is unconstitutional. AD and CV duties on Wireking’s kitchen appliance shelving and racks from China had been imposed before the new law in 2009, so Commerce didn’t adjust for double counting. Wireking said the double counting violated the Constitution because it was ex post facto. The Constitution prohibits retroactive penalties against actions that weren’t crimes at the time they were committed. Any duties imposed because of double counting were in effect penalties -- they didn’t reflect reality -- and the duties were in effect retroactive because, although they were imposed in 2009, they weren’t actually authorized until 2012.
The Court of International Trade in March 2013 rejected Wireking’s arguments (see 13031404). It found that AD and CV duties are remedial because they are meant to address unfair trading practices by foreign exporters, and are not imposed to punish companies. They can’t be penalties, much less retroactive penalties barred by the Constitution, said CIT.
The Appeals Court agreed with Wireking’s arguments that the duties were retroactive because they weren’t legally imposed until 2012. The law authorizing CV duties on non-market economy countries merely overturned the court decision that found CV duties on non-market economies illegal, and didn’t totally nullify it. But as had the trade court, CAFC said the duties were not penalties. Congress authorized AD/CV duties to remedy unfair trade practices, not punish unfair traders, it said. Regardless of whether double counting occurs, the AD/CV rates are still based on dumping and illegal subsidization that occurred in reality. The new provisions on adjustment for double counting don’t change that, it said. Those provisions were only included to satisfy the WTO.
In a concurring opinion, Circuit Judge Kathleen O’Malley went a step further. She agreed with the result of the court’s opinion, but not the logic. CV duties imposed between 2006 and 2012 aren’t retroactive, said O’Malley. The timing of Congress’ passage of the 2012 CVD law prevented the court ruling that prohibited CV duties on non-market economy countries from ever going final, she said. Because the decision never became law, Commerce was authorized to impose CV duties on non-market economies between 2006 and 2012, she said.
(Guangdong Wireking Housewares v. U.S., CAFC No. 13-1404, dated 03/18/14, Judges Dyk and Chen, Judge O’Malley concurring in result)