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30 August 20209 minute read

Proposed changes to US Department of Commerce antidumping and countervailing duty regulations: Consequences for exporters and US importers

On August 13, 2020, the US Department of Commerce (DOC) published a proposed rule and request for comments on Regulations to Improve Administration and Enforcement of Antidumping and Countervailing Duty Laws.  The proposed rule makes revisions to six sections of the current regulations and adds three new sections.  The proposed changes are intended to further the “objective to enforce the AD/CVD laws rigorously, and to aggressively pursue parties who seek to skirt them.”  The proposed modifications are discussed in more detail below.  Exporters, US importers, and other interested parties have until September 14, 2020 to file comments on the proposed changes.

New shipper reviews 

The proposed regulations contain substantial modifications to address the “abuse” of the existing regulations regarding the conduct of “new shipper” reviews.

A new shipper is a foreign exporter or producer that did not export, and is not affiliated with an exporter or producer that did export, to the United States during the period of the original antidumping (AD) or countervailing duty (CVD) investigation.  US law permits new shippers to obtain their own dumping margin or countervailing duty rate on an expedited basis.  However, the law requires that the US sales subject to a new shipper review be bona fide sales that reflect normal commercial considerations.

Under the current regulations, an exporter or producer may request a new shipper review if it has exported, or sold for export, merchandise subject to an AD or CVD order to the United States.  Under the proposed regulations, the exporter or producer would also have to demonstrate that its US sales were bona fide sales in order to request a new shipper review.

Consistent with this new requirement, the proposed regulations would require an exporter or producer to submit with its new shipper review request a significant amount of documentation to demonstrate the bona fide nature of its US sales, including (but not limited to) documentation that (1) the sales were made in commercial quantities, (2) the merchandise was resold in the United States for a profit, and (3) the sales were made on an arm’s length basis.  Because the DOC determines whether a sale is bona fide based in part on the disposition of the imported merchandise in the United States, the proposed regulations would also require that a new shipper request contain a certification from the unaffiliated US customer that it will provide information to DOC in the course of a new shipper review.

When merchandise subject to an AD or CVD order is imported into the United States, the importer must pay deposits of estimated AD or CVD duties.  In most cases, the deposits must be paid in cash.  However, current DOC regulations permit US importers to post bond or other security in lieu of cash deposits on imports of merchandise subject to a new shipper review.  The proposed regulations would eliminate the ability to post bond or other security in new shipper reviews, requiring cash deposits instead.

Scope inquiries 

The proposed regulations also make substantial changes to the existing regulations regarding the conduct of scope inquiries.

Because the written description of the products covered by an AD or CVD order (scope) is put in general terms, it can be unclear whether a particular product is covered by an order.  In such cases, DOC can conduct a scope inquiry at the request of an interested party or on its own initiative.

Under DOC’s current regulations, an interested party can request a scope ruling by submitting a request containing a description of the product’s technical characteristics, end uses, and US tariff classification; and a statement as to whether the product is covered by the scope of an order.  Under the proposed regulations, interested parties will have to complete a standardized scope ruling application and provide a significant amount of additional information, including (but not limited to) schematic drawings; specifications; marketing materials; a narrative history of the production of the product; and contracts and invoices for the sale of the product.

The current scope regulations permit DOC to render a scope ruling within 45 days if it determines that a ruling can be made based solely on the information contained in the request.  The proposed regulations eliminate such informal scope rulings, and require all scope inquiries to be conducted according to formal procedures that can take up to 300 days.

Currently, a ruling that a product is included within the scope of an AD or CVD order is effective only from the date on which DOC initiated the scope inquiry.  However, under the proposed regulations an affirmative determination is a determination that a product always has been within the scope of the order.  As a result, the scope ruling can be applied retroactively to any entries of the product that remain unliquidated (i.e., entries for which US Custom and Border Protection (CBP)  has yet to determine the final amount of duties due) at the time of the affirmative scope determination.

Circumvention inquiries and covered merchandise referrals 

Under US law, circumvention of an AD or CVD order can occur in several ways, such as when a product subject to an order is completed or assembled in a country other than the country to which the order applies, or when a subject product undergoes minor alterations in form or appearance.

Under DOC’s current regulations, the procedures for conducting circumvention inquiries are included in the regulations governing scope inquiries.  The proposed regulations include a new section setting forth procedures for conducting circumvention inquiries, which largely mirror the proposed regulations for scope inquiries.

Under the Enforce and Protect Act of 2015, CBP is empowered to conduct investigations of AD and CVD duties.  If it is unable to determine whether a product is subject to AD or CVD duties, it can refer the matter to DOC.  The proposed DOC regulations contain a new section establishing procedures for conducting such “covered merchandise inquiries” from CBP, which largely mirror the proposed regulations for scope inquiries.

For both circumvention and covered merchandise inquiries, the proposed regulations provide for the retroactive imposition of AD or CVD duties if a product is determined to be subject to an AD or CVD order, in the same manner as provided for in the proposed scope regulations discussed above.

Sufficiency of petitions 

US law requires DOC to determine whether an AD or CVD petition meets the requirements for initiation of an investigation, including whether there is sufficient US industry support for the petition, within 20 days of the date of filing of the petition.  Under current DOC practice, comments on US industry support for a petition can be filed up to the date of initiation.  Under the proposed regulations, comments on industry support for a petition would be due no later than 15 days after the filing of a petition, with rebuttal comments due two days later.

Importer certifications 

The proposed regulations contain a new section that codifies DOC’s ability to require importers or other parties to AD and CVD proceedings to certify whether a product is or is not covered by an AD or CVD order.  If a party fails to provide the requested certification or provides a false certification, DOC can require the US importer to make cash deposits of AD and/or CVD duties for imports of the product in question.

The proposed regulations also contain modifications to DOC’s existing regulation regarding the requirement that US importers certify whether they have received reimbursement of AD or CVD duties.  The proposed regulations facilitate the filing of such certifications by enabling US importers to file them in either electronic or paper form, by eliminating the requirement for specific certification language, and by allowing the certification to be submitted after the time of entry in certain circumstances.

Procedural amendments 

The proposed regulations also contain modifications to existing regulations regarding entries of appearance and access to business proprietary information by US importers in AD and CVD proceedings.

Consequences for exporters and US importers 

As described above, the proposed regulations will make it more difficult to obtain new shipper reviews and to challenge the level of US industry support for AD and CVD petitions.  As a result, the ability of exporters to mitigate or eliminate their exposure to US AD and CVD duties will be significantly restricted.

At the same time, the retroactive application of affirmative scope and circumvention determinations, and the elimination of the ability to post bond in lieu of cash deposits in new shipper reviews may result in US importers facing significantly higher financial exposure to AD and CVD duties, particularly because many exporters who would typically seek new shipper reviews or scope rulings do not have company-specific AD or CVD rates and are subject to very high “all others” or “country wide” rates.

Overall, the focus of the proposed changes is on increased enforcement of AD and CVD orders and is likely to increase the risk of importers to be exposed to unexpected additional duties.  In addition, foreign producers and exporters could be forced to reduce or cease shipping to the United States because their merchandise could become subject to AD and/or CVD duties.  Thus, interested parties (including foreign producers, exporters, and importers) should consider whether to submit comments on the proposed regulations.  In addition, they should monitor the status of the proposed changes and evaluate the impact of the changes on their operations.

To learn more, please contact any of the authors.