A recent decision from the US Court of International Trade answers some questions and raises others regarding the breadth of the antidumping and countervailing duty orders covering Chinese aluminum extrusions. Commerce Department scope rulings have significant consequences for US importers – if the product is determined to be within the scope of the order, then it is not only subject to steep duties, but the final duty rate is subject to change and may be unknown for years after import. Further, for the life of the duty orders, suppliers and US importers may be subject to time-consuming and burdensome administrative reviews with high stakes.
This litigation began in 2014 as a challenge to the Commerce Department’s decision to include two types of door handles as subject to the orders. The case has now had several phases, including a remand to the Commerce Department and an appeal to the US Court of Appeals for the Federal Circuit.
The case highlights the overall complexity and confusion that has resulted from the scope’s exclusion of “finished merchandise” and “finished goods kit” – but inclusion of extruded aluminum subassemblies that are welded or fastened – with duties applying only to the aluminum-extrusion component of such subassemblies. Numerous companies have struggled to determine what these terms mean and how to design and engineer the product to fit within the exclusions at the time of import. Indeed, since the antidumping and countervailing duty orders issued in 2011, 148 scope ruling requests have been filed, more than for any other active order.
There are several takeaways for U.S. importers and foreign manufacturers or exporters to help manage the risk of duty exposure:
- Scope rulings are a proper and proven method to seek to avoid antidumping or countervailing duties. Where the product as currently imported raises a potential scope exclusion argument, companies should consider presenting the exclusion to Commerce for confirmation. This is a particularly important strategy in the context of scope language that is ambiguous or subject to interpretation.
- If the product does not lend itself to a strong scope exclusion argument, companies should consider possible operational engineering to properly fit within an exclusion or to take the product completely out of the scope of the order.
- If an exclusion is not possible, U.S. importers or downstream users of subject products should carefully monitor applicable rates for their Chinese suppliers and deadlines for requesting review to capitalize on any opportunity to reduce duties.
Where it is possible to use operational engineering to fit within an exclusion, U.S. importers should consider it and obtain confirmation from Commerce through a binding scope ruling.
If an exclusion is not possible, U.S. importers or downstream users of aluminum extrusions should carefully monitor applicable rates for their Chinese suppliers and deadlines for requesting review to capitalize on any opportunity to reduce duties.
Companies should consider these strategies, particularly when dealing with antidumping and countervailing duty orders like those covering aluminum extrusions, given the breadth and uncertainty of the scope of the order. Baker McKenzie would be happy to assist interested companies in assessing these strategies and preparing scope ruling requests.