Recently the practice of antidumping and countervailing duty (anti-subsidy) law in the United States has included an increasing focus on the scope of AD/CVD orders and allegations of circumvention of such orders. Over the past 14 months, the U.S. Department of Commerce has undertaken to revise and update its regulations governing AD/CVD proceedings, leading to the recent publication of the most significant revisions to the regulations since they were promulgated in 1997. See Regulations to Improve Administration and Enforcement of Antidumping and Countervailing Duty Laws, 86 Fed. Reg. 52300 (Sept. 20, 2021).
The revisions affect several areas of AD/CVD practice, but those concerning scope and anti-circumvention inquiries have been particularly significant. This note will consider three important (though by no means the only important) aspects of the revised regulations – (i) the re-organization of the regulatory architecture governing scope and anti-circumvention inquiries; (ii) the more precise procedural structures imposed upon these inquiries; and (iii) the temporal impact on liquidation of entries subject to such inquiries.
Reorganization of the Regulatory Architecture. In the prior version of the regulations, scope and anti-circumvention proceedings coexisted, somewhat uneasily, in the same section, 19 C.F.R. § 351.225, entitled simply “Scope Rulings”. But the simple title of this section belied its contents, in that several of its subsections extensively discussed anti-circumvention proceedings, following the roadmap set out in the governing statute (19 U.S.C. § 1677j). The important, but distinct, concept of scope determinations – clarifying ambiguous boundaries of AD/CVD orders and addressing unanticipated situations that inevitably arise in the real world – was relegated to a single subsection (351.225(k)), entitled “Other scope determinations”, as if an afterthought. This composite structure also created some ambiguities in the description of the procedures that applied in the two distinct types of proceedings.
The revised regulations reorganize and clarify the structure by setting out two separate sections governing the two types of inquiries. Section 351.225 now governs scope inquiries alone. Anti-circumvention inquiries have been moved to a new section 351.226, in which the statutory categories are described and the process, although similar to that of scope inquiries in many respects, is separately presented. Although this reorganization may be viewed as simply moving words around on the page (something appreciated only by lawyers), in fact the increased clarity in the governing regulations should be welcomed by interested parties as well as their counsel.
Revisions to the Process. For scope inquiries, Commerce has set out, in Section 351.225(c), a format for applications, to help ensure that Commerce receives the information it needs to determine whether to initiate a scope inquiry. This application form has since been posted on Commerce’s website at https://access.trade.gov/Resources/ADCVD_Resources.aspx. The pre-structured application format should prove to be valuable for parties requesting scope rulings, because it should obviate Commerce’s increasingly common practice in recent years of taking considerable time to review scope requests, only to reject them because of some deficiency and instruct the requester to resubmit with additional information or to respond to additional questions. This practice has delayed the process far beyond the regulatory timeline.
Moreover, under the revised regulations, Commerce will have 30 days to decide whether to accept or reject a scope ruling application; if it takes no action within that time period, the application will be “deemed accepted” and the inquiry deemed initiated on Day 31 (Section 351.225(d)). The deadline for Commerce to issues its scope ruling is 120 days from the date of initiation, which may be extended to 300 days (Section 351.25(e)).
For anti-circumvention inquiries Commerce has set out a parallel request format in Section 351.226(c), and Commerce must decide whether to accept or reject the request within 30 days, which may be extended to 45 (Section 351.226(d)). The preliminary determination is due 150 days after initiation, and the final determination must issue 300 days after initiation, which may be extended for another 65 days (Section 351.226(e)). The regulations also provide for detailed deadlines for parties, during the course of a proceeding, to submit factual information and rebuttals.
The key point for the purpose of this note is not the fact that there are deadlines, which existed in the previous version of the regulations. Rather, the significance is in Commerce’s apparent intent to live within time limits. The deadlines are self-imposed and therefore unilaterally waivable, so it will be interesting to see if Commerce is able to live within those temporal constraints. But parties to these proceedings can be sure that their filing deadlines will be scrupulously imposed, so they demand careful attention.
Although this note does not engage in a review of the substantive issues involved in scope and anti-circumvention proceedings, two significant developments are worth mentioning: First, in Section 351.225(k), Commerce has reorganized the hierarchy and has described more precisely the sources to which it will refer in making scope determinations. The famous “Diversified Products” criteria, over which practitioners have ruminated for decades, have been retained, but their role in the hierarchy has been redefined. Second, Commerce has added a specific subsection governing scope inquiries involving “mixed media” – in which scope merchandise is imported as part of a “kit” or larger package that includes non-scope items (Section 351.225(k)(3)). Such cases have led to disputes and litigation for many years. It will be interesting to see if the addition of a regulatory provision will provide much-needed clarity for such situations.
Temporal Impact on Liquidation. The prior version of the regulations created some confusion regarding the retroactive impact of scope rulings and affirmative anti-circumvention determinations. This uncertainty led to litigation, reflected, for example, in the Court of Appeals’ simultaneous decisions in Sunpreme, Inc. v. United States, 946 F.3d 1300 (Fed. Cir. 2020) (en banc), and United Steel & Fasteners, Inc. v. United States, 947 F.3d 794 (Fed. Cir. 2020). The revised regulations clarify the point that was sorted out through litigation – namely that entries whose liquidation has previously been suspended by Customs (for whatever reason) may be covered by a scope ruling or anti-circumvention determination, and hence subject to AD/CVD duties, even if the entries occurred prior to the date of initiation of the inquiry. See Sections 351.225(l) and 351.226(l).
In addition, Commerce has revoked the final sentence of the previous version of section 351.225(l)(2), which explained that, if a preliminary scope determination was negative, Commerce would direct Customs to cease the suspension of liquidation and refund any previous cash deposits. The revocation of that provision means that in future scope proceedings, a preliminary negative scope determination will have no “real life” impact. Rather, the status quo will remain in effect – cash deposits on prior entries will remain with the Treasury and cash deposits will continue to be required on subsequent entries until Commerce issues its final scope ruling.
As a coda, on September 27, Commerce published a notice in the Federal Register explaining that parties wishing to receive notices of scope inquiries under specific AD/CVD orders must file requests to be included on the relevant “annual inquiry service list”. See Scope Ruling Application; Annual Inquiry Service List; and Informational Sessions, 86 Fed. Reg. 53205 (Sept. 27, 2021). The September 27 notice provides specific deadlines for the filing of such requests. This process will eliminate the automatic inclusion, in scope service lists, of all parties from prior segments of AD/CVD proceedings, which had the effect of creating long, stale, burdensome service lists. Although the filing requirement creates another deadline to be watched, the streamlining of service lists in scope proceedings is to be welcomed.
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Through his 38 years of experience in the international trade regulatory field, Neil Ellis has worked extensively on issues involving the scope of AD/CVD orders and anti-circumvention inquiries. Please contact us at neil@neilellislaw.com for more information on such proceedings and on other important regulatory revisions recently enacted by Commerce.
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