On August 13, 2020, the U.S. Department of Commerce (Commerce) proposed changes to its regulations governing antidumping duty (AD) and countervailing duty (CVD) proceedings.1 As drafted, the proposals would establish important new requirements and procedures for AD/CVD proceedings, including new shipper reviews, scope inquiries, and circumvention inquires.2 Commerce is accepting comments on these proposed changes through September 14, 2020.3
If these proposed changes are adopted, the revised regulations will pose several new challenges for importers and exporters of merchandise that is or could be subject to AD or CVD orders. The most significant of these challenges are discussed in detail below.
1. New Certification and Enhanced Documentation Requirements in Requests for New Shipper Reviews
The first challenge posed by Commerce’s proposal is related to new shipper reviews. Exporters and foreign producers that begin exporting or producing merchandise subject to an AD or CVD order after the order is implemented are entitled to request a new shipper review to obtain their own individual AD and/or CVD rates on an expedited basis. Currently, requests for new shipper reviews require requestors to prove that they have exported, or sold for export, subject merchandise to the United States after the period of investigation.
Under the proposed regulations, a requestor would also need to provide documentation to prove that its sales were “bona fide.”4 Specifically, a request for a new shipper review would need to contain documentation establishing:
- the date on which the subject merchandise of the requestor was first entered or withdrawn from warehouse for consumption
- the volume of the shipments and whether their shipments were made in commercial quantities
- the date of the first sale, and any subsequent sales, to an unaffiliated customer in the United States
- the circumstances surrounding the sale (such as price, expenses, and whether the merchandise was resold at arm’s length and at a profit)
- the business activities of the producer or exporter, including (i) the producer/exporter’s offer(s) to sell merchandise in the United States, (ii) the complete circumstances surrounding the producer/exporter’s sales in all markets, (iii) the producer/exporter’s relationship with any third-party producer/supplier, and (iv) the producer/exporter’s relationship to its first unrelated U.S. customer
Further, to discourage meritless requests for new shipper reviews and to preserve Commerce’s resources in conducting new shipper reviews where there is a reasonable likelihood that the unaffiliated customer will participate in the review, Commerce’s proposal would require the requestor to provide two new types of certifications:
- a certification from the unaffiliated customer in the United States that it did not purchase the subject merchandise during the investigation period
- a certification from the unaffiliated customer that it will provide information requested by Commerce regarding the purchase
2. New Rules and Procedures for Scope Inquiries
Another challenge posed by Commerce’s proposal is related to scope inquiries. A party may file a scope inquiry to seek a determination from Commerce as to whether a product is subject to an existing AD/CVD order. Under current regulations, the scope ruling request must contain a detailed description of the product (including its technical characteristics and uses and the product’s classification under the U.S. tariff schedule) and an explanation of whether the product is within the scope of an order.
In the proposed regulations, Commerce explains that it will be developing a single, standardized scope application that will be available on Commerce’s website. In addition to the information currently required in scope ruling requests, the new application will request several new and more detailed types of information, including (1) a narrative history of the production of the product at issue, (2) the volume of annual production of the product for the most recently completed fiscal year, (3) schematic drawings and marketing materials, and (4) entry summary forms and other commercial documents (e.g., invoices and contracts).
Importantly, the proposed rule also explains that an affirmative scope ruling is a determination that the product has “always” been within scope. As such, following an affirmative scope ruling under the proposed rule, Commerce would instruct CBP to suspend liquidation of all unliquidated entries dating back to the earliest suspension date under the order — normally the date of publication of the preliminary determination during the investigation. This revision would expand the reach of an affirmative scope determination because the current rules do not allow suspension of liquidation for entries that were not already suspended before the date the scope inquiry was initiated.5
3. Countrywide Application of Circumvention Findings
A final challenge posed by Commerce’s proposal is related to circumvention inquiries. Current regulations allow Commerce to apply existing AD/CVD orders to merchandise that has been found to be circumventing an order. In particular, Commerce may make such a finding on merchandise completed in a third country or the United States using parts and components from the country subject to the order, merchandise that is altered in form or appearance in minor respects, or merchandise that is developed after the issuance of the AD/CVD order.
Commerce generally initiates a circumvention inquiry in order to investigate claims made by the domestic industry that a particular exporter, foreign producer, or importer is engaged in circumvention of an AD/CVD order. However, in recent years, Commerce has initiated circumvention reviews of, and ultimately applied AD/CVD duties on, entire countries without clear authority to do so. For example, Commerce did so in the recent anticircumvention determinations in Certain Corrosion-Resistant Steel Products from China and Aluminum Extrusions from China.6 The proposed regulations would codify Commerce’s authority to make circumvention determinations on a countrywide basis if there is a possibility of subsequent circumvention by other exporters, foreign producers, or importers following the issuance of an affirmative company-specific circumvention determination. Consequently, future anticircumvention inquiries may implicate more companies and have broader effects, placing additional burdens on exporters, foreign producers, and importers to submit information to Commerce similar to the information required during an AD/CVD investigation or administrative review.