Federal law authorizes the United States Department of Commerce to impose antidumping duties on imports "sold in the United States at less than … fair value" and countervailing duties on imports that receive a "countervailable subsidy" from a foreign government. Antidumping duties remedy unfair pricing by exporters/producers while countervailing duties remedy unfair government subsidies. The provisions are often concurrently applied to exports from a single exporting country. Until recently, however, Commerce refused to apply the subsidies provision to imports from "non-market economy" (NME) countries, including China. That policy was adopted in 1984, with Commerce reasoning that the unfair subsidies law did not explicitly apply to NMEs (unlike the antidumping provision) and that market distorting subsidies could not exist where all productive assets are government-owned. The Court of Appeals for the Federal Circuit (CAFC) affirmed the policy in a 1986 case called Georgetown Steel Corp. v. United States. Because the policy left U.S. producers powerless against subsidized imports from China and elsewhere, there were repeated but unsuccessful proposals for Congress to require Commerce to apply the law to NMEs. Commerce, however, reversed the policy in a 2007 case involving coated free sheet paper from China. Although China is an NME country, Commerce reasoned that the subsidy law nonetheless applies to China, because China's economy had evolved and was not like the Soviet-style economies at issue in Georgetown Steel. King & Spalding represented the U.S. domestic industry in that case.
A short time later, exporters in a case involving tires from China challenged application of the subsidies law to their U.S. imports. After numerous legal challenges, including a dispute taken to the World Trade Organization (WTO), in late 2011 the CAFC held that Commerce could not apply the subsidy law to imports from China. InGPX Int'l Tire Corp. v. United States (GPX I), the court found that, because Congress had "legislatively ratified" Commerce's policy by repeatedly amending the Tariff Act without modifying the NME subsidies policy, Commerce could not unilaterally reverse the policy. Instead, Congressional action was required. Three months later, Congress enacted legislation reversing GPX I and authorizing application of the subsidies law to NME countries. The amendment applied retroactively to November 20, 2006, when the China coated free sheet paper case was initiated. Without legislation reversing GPX I and retroactively applying the subsidy law to China, approximately thirty countervailing duty orders on goods from China would have been rescinded, which would have devastated numerous U.S. producers and their employees.
The GPX plaintiffs filed a new lawsuit challenging the retroactive application of this legislation, arguing that the amendment violated the Ex Post Facto and Due Process Clauses of the U.S. Constitution. The Ex Post FactoClause forbids punishing conduct that was lawful when undertaken and is typically reserved for concerns about criminal statutes. The Due Process Clause generally prohibits retroactive application of laws, unless a national economic policy is at issue and Congress had a "rational basis" for choosing retroactivity. Last month, a unanimous three-judge panel of the CAFC rejected plaintiffs' arguments, thus preserving the Chinese countervailing duty orders issued between November 2006 and March 2012.
Relying on long-standing U.S. Supreme Court precedents, the CAFC found that the Ex Post Facto Clause was not violated because the amendment did not concern a criminal statute and, as a civil law, it was remedial in nature and thus was not punitive. The court found that Congress had enacted a civil remedy that was intended to counteract anticompetitive action by foreign governments. The court found that the Due Process Clause was also not violated because Congress had a rational legislative purpose when enacting the new law. The court analyzed five factors considered in Supreme Court precedents. It found that (1) Congress merely extended the law to a new group of importers – those importing goods from NME countries; (2) the legislation clarified the subsidies provision by explicitly including imports from NMEs; (3) the five year retroactivity period was not unusually long; (4) the plaintiffs had notice that their imports would be subject to the subsidies provision, because Commerce had announced the policy change before plaintiffs' tires were imported; and (5) the amendment was remedial in scope, because it was intended to "preserve American industry."
Although the GPX plaintiffs may seek a rehearing before the full CAFC and also may appeal to the Supreme Court, the CAFC issued well-reasoned opinion that is unlikely to be overturned. Consequently, this important battle against injurious Chinese subsidies appears finally to be resolved. Thus, after nearly eight years, multiple judicial challenges, and exceptionally quick bipartisan Congressional action, U.S. producers can comfortably rely on the Tariff Act when facing injurious competition from subsidized imports from China.