The Court of Appeals for the Federal Circuit (the “Federal Circuit” or the “court”) recently underscored the importance of either participating in Antidumping/Countervailing Duty (AD/CVD) rate litigation or requesting Administrative Review by the U.S. Commerce Department (“Commerce”) of entries that might be affected by the litigation. In Capella Sales & Servs. Ltd. v. United States (Capella), the court affirmed the U.S. Court of International Trade (“CIT”) and held that the unambiguous language of 19 USC § 1516a required that entries made on or before the date Commerce published its Timken notice regarding AD/CVD rate litigation were to be liquidated at the AD/CVD cash deposit rates effective at the time of entry, unless liquidation of the entries was enjoined by the litigation or the importer had requested Administrative Review of the entries. Accordingly, the court held, entries made by importer Capella prior to publication of the Timken notice were to be liquidated at the 374.15% Countervailing Duty (CVD) cash deposit rate in effect at the time of entry rather than at the 7.37% CVD rate established in the litigation.
Capella argued that its entries should be liquidated at the “all others” CVD rate established in litigation that followed Commerce’s issuance of the CVD Order rather than automatically liquidated at the “all others” cash deposit rate set by the Order. The litigation resulted in an “all others” rate of 7.37%, a significant decrease from the Order’s rate of 374.15%. Capella’s entries were made prior to Commerce’s publication of its Timken notice regarding the rate litigation, and Capella did not participate in the litigation.
The court’s opinion notes that Capella also did not seek Administrative Review of its entries. Had Capella sought Administrative Review, its entries would not have been subject to automatic liquidation at the rate effective at the time of entry.
Capella serves as a reminder to importers whose imported goods might be subject to AD/CVD that effective management of AD/CVD compliance is essential, including to benefit from AD/CVD rate litigation. We suggest the following, regular “best practices” for importers in managing AD/CVD compliance, as part of an overall, comprehensive import compliance program:
- Maintain internal AD/CVD expertise and compliance management, rather than relying on brokers; brokers play an essential role in compliance, but are dependent on information provided by importers and suppliers.
- Monitor AD/CVD petitions, investigations, Orders, Administrative Reviews, scope rulings, and other post-Order proceedings to ensure that all imported goods subject to AD/CVD are flagged and that applicable AD/CVD rates are understood.
- Work closely and regularly with brokers to ensure that they understand the AD/CVD Orders that apply or might be considered to apply to the importer’s imported goods, and if and why any such goods are subject to an exclusion provided by an AD/CVD Order.
- Be aware of all litigation related to relevant AD/CVD investigations, including as to AD/CVD rates that may apply to imported goods; monitor the Federal Register for Timken
- Assess the extent to which participation in any litigation is necessary or desirable.
- Assess annually whether it is necessary or desirable to request Administrative Review of the previous year’s entries subject to AD/CVD, including consideration of the outcome or potential outcome of any AD/CVD litigation.
Importers should consult with counsel as needed regarding these activities. Expert advice may be needed about participating in litigation or requesting Administrative Review.
Import compliance is ultimately the importer’s responsibility. Importers should seek the advice of counsel to assess the sufficiency of their import compliance programs and for any assistance needed in conducting regular internal compliance reviews.
Background: AD/CVD Rate Litigation & Timken Notices
AD/CVD rates are often subject to litigation, which enjoins the liquidation of the subject entries. When litigation results in a court decision conflicting with Commerce’s determination of an AD/CVD rate, Commerce is required to publish notice in the Federal Register of “a court decision not in harmony” with the determination. This is known as a Timken notice, in reference to the Federal Circuit’s opinion in Timken v. United States, 893 F.2d 337, 341 (Fed. Cir. 1990), regarding the notice requirement of 19 USC § 1516a.
For purposes of the AD/CVD rate at which entries are to be liquidated, § 1516a distinguishes between entries made on or before the date of publication of a Timken notice and entries made after the date of publication. Entries made after the date of publication are ultimately liquidated at the AD/CVD rate finally established as a result of the litigation.
Entries made before the date of publication are liquidated at potentially different AD/CVD rates depending on whether they were subjects of litigation and enjoined from liquidation. Entries made on or before the date of publication that were subjects of litigation and enjoined from liquidation are ultimately liquidated at the rate finally established as a result of the litigation. Other entries made on or before the publication date are liquidated at the rate in effect at the time of entry.
AD/CVD rates established in AD/CVD Orders are subject to change as a result of litigation and annual Administrative Reviews. Rates set in an AD/CVD Order are cash deposit rates. If an Administrative Review is requested following the anniversary of an AD/CVD Order, that Review establishes the rates at which the previous year’s entries subject to the Review are liquidated, and those rates become new cash deposit rates. If no Administrative Review is requested for an AD/CVD year, that year’s entries are automatically liquidated at the cash deposit rate effective at the time of entry—unless and to the extent that AD/CVD litigation has enjoined liquidation. Each subsequent Administrative Review, if any, sets final rates for the previous year’s entries and the new cash deposit rates.