Morris Manning & Martin, LLP

Proposed Legislation May Reverse Prior Court Decisions, Increase AD/CVD Margins, and Impose New Requirements on U.S. Importers

04.28.2021

On April 15, 2021, Senators Sherrod Brown and Rob Portman from Ohio introduced the Eliminating Global Market Distortions to Protect American Jobs Act. The proposed bill would make significant revisions to the U.S. antidumping (AD) and countervailing duty (CVD) law by allowing for new types of AD/CVD investigations, giving Commerce authority to countervail cross-border subsidies and currency undervaluation, imposing asset requirements on non-resident importers, as well as new certification requirements for all importers. The bill would also reverse recent favorable decisions from the U.S. Court of International Trade (CIT) with respect to cost-based particular market situations.

Currently, this legislation is just a proposal, and it has not moved past the Senate Finance Committee. However, the proposed legislation could potentially make its way into the infrastructure package that Congress is currently working on, or it could also be included within work-in-progress China-related legislation. Senator Portman has framed the legislation as an opportunity to "make it easier for manufacturers to win cases" against China. Below, we have highlighted the key provisions of the proposed bill. The full proposed bill can be viewed here, and a section-by-section summary of the bill prepared by Senator Brown's office is accessible here.

Finally, we note that if this proposed bill is enacted, the effective dates are quite troubling, especially with regard to particular market situation cases. The legislation will apply to investigations and administrative reviews that have already been initiated in which a preliminary determination was made 45 or fewer days earlier than the date of enactment of the legislation. For example, if the bill were enacted today, then it would apply to any case where a Preliminary Determination has been made or Preliminary Results have been issued within the last 45 days. The modifications to the sales-below-cost provisions (PMS) would be retroactive to all antidumping investigations or reviews initiated on or after June 29, 2015, and to all cases at the CIT/CAFC for which final judgment has not been entered on by the date of the enactment of this legislation.

Particular Market Situation & Revisions to Cost of Production

Section 204: This provision will provide Commerce with the authority to make a PMS adjustment for purposes of the sales below cost test. We have previously prevailed at the CIT because the Court has determined that the statute does not allow for a PMS adjustment for purposes of the sales-below-cost test. The proposed legislation would allow Commerce to make such an adjustment if it found that a PMS exists.

Section 205: This provision will allow Commerce to disregard costs for inputs as outside the course of ordinary trade, which are produced by or acquired from 1) any person/entity in a nonmarket economy country, 2) any person/entity found to be receiving a subsidy, 3) any person/entity found to have sold the input for less than fair market value, 4) a government authority, or 5) a group of government authorities that collectively account for a meaningful share of the production of the input. If Commerce disregards the costs for one of these reasons and no other transactions are available for consideration, Commerce will determine the amount to be used to value the input based on the information available with respect to what the amount would have been but for the participation of the person/entity described above or based on any other calculation methodology.

Importers of Record (Resident and Non-resident)

Section 302: This provision will give Commerce and Customs the authority to require importers of products not subject to AD/CVD duties to include a certification that 1) the merchandise is not subject to an AD/CVD proceeding and 2) inputs used in production, transformation or processing of the merchandise are not subject to AD/CVD duties. Failure to provide the certification could result in Customs demanding cash deposits of AD/CVD duties and/or other penalties.

As currently drafted, the legislation provides no guidance as to under what circumstances under which this requirement would apply, and seems to provide almost unlimited discretion to Commerce and Customs. There may be instances in which an importer would not know whether inputs used by its supplier in producing the merchandise would be subject to and AD/CVD order. It is also unclear what is meant by inputs being "subject" to AD/CVD duties, or how the standard applies in light of traditional substantial transformation rules. For example, it is not clear how this provision is intended to apply in a situation where an importer imports pipe and tube manufactured in a country for which there is no AD or CVD order on that pipe product, but the supplier of the pipe uses hot-rolled steel produced in a country that is under an order that covers hot-rolled steel exported to the United States. It is also unclear how Customs and/or Petitioners in AD/CVD or Enforce and Protect Act ("EAPA") cases will try to use this new certification requirement as evidence of wrongdoing. These questions are all left unanswered by the proposed legislation.

Section 304: This provision imposes an asset requirement on non-resident U.S. importers. Specifically, this provision will require a nonresident importer to maintain assets in the United States that will be sufficient to pay all duties that may potentially be applied to imported merchandise. The Commissioner of Customs is provided with authority to calculate the amount of assets required to be maintained, and the calculation will be based on the fair market value of the merchandise plus all duties, fees, interest, taxes or other charges that would apply if the merchandise were subject to the highest rate of duty applicable to such merchandise imported from any country.

However, this provision will not apply if the nonresident importer is a validated Tier 2 or Tier 3 participant in the Customs Trade Partnership Against Terrorism Program (CTPAT) or if Customs, after reviewing certified information supplied by the importer, is satisfied that it has the same or equivalent ability to collect all duties that may potentially be applied to the imported merchandise. It is unclear exactly how this second exception would work at this time and what "certified information" Customs will accept to meet the exception, but the proposed legislation directs Customs to establish procedures for this new asset requirement for nonresident importers.

Successive Investigations

Sections 101-103: This provision will provide Commerce and the ITC with the authority to initiate successive investigations. Successive investigations are defined as a concurrent investigation (an ongoing investigation of the same product from different countries) or a recently completed investigation (not more than 2 years before the date of initiation of the successive investigation).

Cross-Border Subsidies

Section 201: This provision will allow Commerce to countervail subsidies offered to producers in the country under investigation by a government located in another country. The section-by-section summary uses the example of Chinese companies operating in other countries who may have received subsidies through the Belt and Road Initiative.

Currency Undervaluation

Section 401-402: These provisions will provide Commerce with the authority to countervail currency undervaluation and prescribe a manner for calculating the benefit for alleged currency undervaluation. While Commerce has established regulations to countervail currency and initiated on allegations filed in several cases, Commerce has been acting without any statutory authority for doing so. The proposed provision would give Commerce the authority it is currently lacking to countervail currency. Many other attempts have been made before to give Commerce this authority, but all have previously failed.

Duty Drawback

Section 203: This provision will modify the law related to the duty drawback adjustment for export price/constructed export price by capping the amount of the duty drawback adjustment at the per unit amount of such duties contained in the weighted average cost of production. Since a duty drawback adjustment is an increase in the U.S. price, capping the adjustment at the amount of such duties contained in the cost of production will limit the total upward adjustment to U.S. price.

Please contact MMM's International Trade Group if you have any questions or would like to further discuss the proposed legislation.