Posted by: mulrickillion | January 18, 2012

U.S. Appeals Court Rules against Application of CV Duties on Imports from Non-Market Economies

Hong Kong Trader,  13 Jan 2012 —

The U.S. Court of Appeals for the Federal Circuit has ruled that the Department of Commerce does not have the statutory authority to apply countervailing duties against imports from non-market economy countries such as mainland China and Vietnam. The CAFC’s 19 December 2011 ruling in GPX International Tire Corporation v. United States upholds and expands a 2010 decision by the U.S. Court of International Trade. While the CAFC ruling is likely to be appealed to the Supreme Court, if it stands it could result in substantial refunds of CV duties and the termination of the 23 CV duty orders currently in place on the following mainland Chinese products:circular welded carbon quality steel pipe, light-walled rectangular pipe and tube,laminated woven sacks, sodium nitrite, new pneumatic off-the-road tyres, raw flexible magnets, lightweight thermal paper, circular welded carbon quality steel line pipe, circular welded austenitic stainless pressure pipe, citric acid and certain citrate salts, tow-behind lawn groomers and certain parts thereof, kitchen appliance shelving and racks, oil country tubular goods, pre-stressed concrete steel wire strand, potassium phosphate salts, steel grating, narrow woven ribbons with woven selvedge, magnesia carbon bricks, coated paper suitable for high-quality print graphics using sheet-fed presses, drill pipe and drill collars, aluminium extrusions, multilayered wood flooring, and seamless, carbon and alloy steel standard, line and pressure pipe.

The original court case addressed the DOC’s final affirmative determinations in the AD and CV duty proceedings involving certain mainland Chinese new pneumatic off-the-road tyres classified under HTSUS 4011.20.1025, 4011.20.1035, 4011.20.5030, 4011.20.5050, 4011.61.0000, 4011.62.0000, 4011.63.0000, 4011.69.0000, 4011.92.0000, 4011.93.4000, 4011.93.8000, 4011.94.4000 and 4011.94.8000. Two mainland Chinese producers/exporters of subject tyres challenged the DOC’s decision to impose both AD and CV duties on these tyres partially on the grounds that the imposition of both AD and CV duties in this case punished mainland Chinese companies twice for the same allegedly unfair trading practice. The CIT essentially agreed with this claim and ruled that if the DOC wanted to continue imposing both AD and CV duties on goods from NME countries it had to develop additional policies and procedures for doing so. Among other things, the CIT said that the DOC is not statutorily barred from applying CV duty law to imports from mainland China and other NMEs but that its approach in the proceeding involving mainland Chinese tyres was unreasonable. The DOC, together with U.S. manufacturers favouring the imposition of CV duties, appealed the decision to the CAFC.

The CAFC, however, concluded that the DOC may not impose CV duties on imports from NME economies at all. The court found that the legislative history of the U.S. CV duty law demonstrates that when amending and re-enacting that statute in 1988 and 1994 Congress adopted the DOC’s then-prevailing position that CV duties cannot be imposed on NME exports and that as a result Commerce no longer has discretion to change this interpretation. The CAFC indicates that the DOC itself argued in the landmark Georgetown Steel Corp. v. United Statescase, which served as the basis for the DOC’s previous policy of not applying CV duties to NMEs, that the legislative history of the 1984 law demonstrated “congressional ratification of and acquiescence in [Commerce]’s interpretation.” The DOC argued at the time that this congressional acquiescence was “persuasive evidence” that the DOC’s construction of the CV duty statute was the one intended by Congress.

Whether or not Congress’ actions in 1984 amounted to legislative ratification, the CAFC believes that the actions that led to the approval of the Omnibus Trade and Competitiveness Act of 1988 and the Uruguay Round Agreements Act in 1994 “clearly did.” The court observes that the legislative history of the Omnibus Trade Act indicates that Congress was well aware of Georgetown Steel and that it specifically rejected a statutory provision to supersede it and give the DOC the authority it now claims. The CAFC further states that Congress again ratified the Georgetown Steel decision and the DOC’s existing CV duty policy when it overhauled U.S. trade law by ratifying the URAA in 1994.

The court points out that once Congress has ratified a statutory interpretation through re-enactment, government agencies no longer have discretion to change this interpretation. The court cites a decade-old example where the Food and Drug Administration went through a notice-and-comment rulemaking to conclude that it had jurisdiction to regulate cigarettes under the Food, Drug and Cosmetic Act contrary to its longstanding position, but the Supreme Court subsequently held that Congress had ratified the FDA’s prior position that it lacked jurisdiction and thus that the agency could not change its interpretation.

The CAFC indicates that the DOC could seek legislative change if it believes that the CV duty law should be changed to apply to NMEs. The last significant attempt at modifying the CV duty statute took place in 2010 when the House of Representatives approved the Currency Reform for Fair Trade Act, which would have modified the definition of a countervailable subsidy to clarify that CV duties can be imposed to offset the effects of an undervalued currency. The legislation would have precluded the DOC from dismissing allegations of currency manipulation on the basis that such manipulation results in a subsidy that is not limited exclusively to circumstances of export and would have instead required the agency to consider all the facts in making its determination of export contingency. The legislation was not considered by the Senate and the CAFC observes in its ruling that “if anything, the rejection of this proposal weighs against Commerce’s argument that Congress intended countervailing duty law to apply to China.”

Based on the CAFC decision, CV duties may not be applied to goods imported from NME countries absent legislative change. It is important to note, however, that the DOC has not yet officially changed its policy to reflect this decision. As a result, until otherwise instructed by Commerce, importers are still required to deposit CV duties when importing goods subject to a CV duty order from mainland China or another NME country.

The CAFC decision could also have an impact on the CV duty investigations on mainland Chinese products that are currently on-going (involving crystalline silicon photovoltaic cells whether or not assembled into modules, utility scale wind towers, certain steel wheels, galvanised steel wire and high pressure steel cylinders). For example, a U.S. law firm on 3 January sent a letter to the DOC on behalf of the government of China requesting the termination of the CV duty investigation on crystalline silicon photovoltaic cells. The Chinese government asserts in the letter that it would be “improper” for the DOC to “continue to impose the burden and expense of exhaustive factual inquiries on the parties (such as the questionnaire responses in the countervailing duty investigation), or for the Department to proceed to a preliminary determination that could interrupt trade.” The Chinese government further argues that it is “improper for the Department to pose extensive factual requests to the GOC when it is evident that the Department has no legal basis do to so.” – U.S. Appeals Court Rules against Application of CV Duties on Imports from Non-Market Economies


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