New AD/CVD Law Boosts Authority to Level Duties, Say Trade Lawyers

The legislation largely clarifies current Commerce practice on respondent selection in AD/CVD cases and aims to ensure the agency is able to maintain strict limitations on voluntary respondents, the lawyers said. “Commerce has lost some of those skirmishes, and this legislation is designed to give the [agency] a leg up,” said trade remedy lawyer Richard Ferrin of Drinker Biddle. “Companies that request permission to respond are self-selected and therefore likely to get lower rates," said Ferrin. Because both mandatory and voluntary respondents' rates are averaged to get the "all others" rate, which is applicable to all exporters that have never been reviewed, U.S. industry has argued those low-rate voluntary respondents artificially bias down rates for other companies as well.

The Court of International Trade and the U.S. Court of Appeals for the Federal Circuit have issued a set of decisions over recent years to require Commerce to accept voluntary respondents (see 14060405) and 12113029). The AD/CVD changes are likely a reaction to those decisions, said the lawyers. “I don’t view as a change, but a clarification that what Commerce is doing is fine,” said Terence Stewart, managing partner at Stewart and Stewart. “If Congress believes courts aren’t interpreting the laws correctly, then they modify the language.”

Commerce officials will now more easily apply “adverse facts available” in AD orders with the new language in place. High AFA rates are generally applied when Commerce finds companies are uncooperative. The law says Commerce is no longer required to set AFA rates at levels that resemble "commercial reality," potentially freeing the agency to impose higher rates. The legislation also says Commerce is not required to make adjustments to subsidy or dumping rates based on information interested parties would have provided but didn’t do so in the period of review.

The bill also clarifies the ITC’s approach to material injury determinations. Lawmakers struck one portion of AD/CVD statute on ‘captive production,’ a part of existing U.S. injury law that focuses on goods transferred internally at a company (here). Market share is one of the financial indicators the ITC considers in determining injury, and if a company’s share is large in a particular market, the ITC may act less favorably in reviews, said Ferrin. But the statutory change there also won’t make a material difference in the ITC practice, Stewart said. “Two of the three elements of ‘captive production’ remain, and the one that was more difficult to understand is eliminated,” said Stewart. “The statute is consistent with what the commission has long said.”

U.S. domestic petitioners will now have more options at their disposal to argue for Commerce to use certain surrogate countries and inputs when evaluating products from non-market economies, said Stephan Becker at Pillsbury Winthrop. In AD cases involving non-market economy countries like China and Vietnam, Commerce may not rely on actual prices, but instead may pick prices from another country to value an exporter's inputs. Selection of that surrogate country can be a contentious issue because of its ability to influence rates. “This law gives more ammunition to petitioners to argue that specific surrogate country inputs aren’t appropriate,” said Becker. “It gives more reasons to encourage the use as surrogates of alternative countries with higher costs, which will increase dumping margins.”

Obama signed the legislation in late June as part of the broader trade preferences bill (here) (see 1506290045). Sen. Sherrod Brown, D-Ohio, spearheaded efforts to advance the AD/CVD bill over past months. Brown initially floated the bill in late 2014, and then reintroduced the legislation this Congress (see 1504080013). The legislation ultimately made it into law after weeks of muscling trade legislation through both chambers.

The AD/CVD language indicates clear support and influence from the U.S. steel industry, said Ferrin, echoing an argument made by trade experts over recent weeks and months. “The steel industry uses these dumping laws more than any other industry, and they’ve been anxious to try to file cases as soon as they see things starting to look negative.” The captive production and material injury provisions in particular show signs of steel mill priorities, said Ferrin.

The Steel Manufacturers Association praised passage of the AD/CVD bill in late June (here). U.S. manufacturers have filed a number of steel-related AD/CVD petitions to the ITC recently (see 1506080026 and 1502230022). “There are rumors they’ll also file petitions on hot-rolled and cold-rolled carbon steel,” said Ferrin. “And they may be hoping this would be applicable to International Trade Commission decisions on these petitions.”

But in the end the law will impact all those industries that use trade remedy law, said Stewart. “The bill, as I understand it, would help all industries that support trade remedy laws, which is a broad array of industries; steel is not the only one,” he said.

There are no effective dates in the bill, so presumably the law is immediately binding, said the lawyers. “They’re likely to apply the statute on all their current and existing cases, more likely than not,” Ferrin said. “It’s a different ball game for anything that’s on appeal. It’s a thorny issue applying any of these things retroactively. That’s something that’s hotly debated.” A spokeswoman for Brown, the original sponsor of the bill, also said the law “took effect on the date of enactment” and “is being applied to cases currently.” A Commerce spokesman, though, said the department is still analyzing the changes. “We are not presently in a position to comment at this time as to how these statutory changes will affect our enforcement of the trade remedy laws,” he said.