On September 20, 2021, the U.S. Department of Commerce (“DOC”) published a Final Rule, promulgating new regulations which govern inquiries regarding the circumvention of antidumping and countervailing duty (“AD/CVD”) orders. These new regulations govern any circumvention inquiries for which a circumvention request is filed, as well as any circumvention inquiry self-initiated by DOC, on or after November 4, 2021. In addition to clarifying the procedures for anticircumvention inquiries, the Final Rule also significantly expands the potential impact of these proceedings, including by expanding the potential imposition of AD/CVD cash deposits, which may now even reach entries prior to the initiation of the anticircumvention inquiry.
Previously, the rules related to circumvention proceedings were contained within Section 351.225 of Title 19, which was the portion of the DOC’s regulations concerning scope inquiries. The Final Rule puts these anticircumvention regulations in a new section of the AD/CVD regulations, Section 351.226, thus drawing a distinction between anticircumvention and scope inquiries. The prior regulations had also provided little guidance regarding the procedures for an anticircumvention inquiry, and instead focused principally on the substantive factors that DOC should evaluate when making its determination. The new regulations provide much more detail regarding the DOC’s process when conducting anticircumvention inquiries.
By way of background, under Section 781 of the Tariff Act, there are four scenarios under which the DOC may conduct an inquiry into the alleged circumvention of an AD/CVD order. Two of these scenarios are when the type of product that is subject to the order is completed or assembled in the United States or a third country from parts and components imported from the country subject to the order. In these two scenarios, the DOC determines if the process of assembly or completion in the United States or the third country is minor or insignificant. The third scenario is when there has been only a minor alteration in form or appearance to the merchandise subject to the AD/CVD order. Finally, a circumvention inquiry can be initiated with regard to “later-developed merchandise” Which is defined as a product that was developed after the original order was initiated and has the same general physical characteristics and use, and also meets the same customer expectations as the merchandise under the scope of the AD/CVD order. If DOC makes an affirmative finding of circumvention in any of these scenarios, it will then extend the scope of the order to include the product that was subject to the inquiry.
Consistent with the prior regulations, the DOC can initiate a circumvention inquiry after receiving a request from an interested party, or the agency can self-initiate an inquiry. However, the new regulations also provide the DOC with additional flexibility if it believes that a scope inquiry is warranted prior to conducting a circumvention inquiry. This may occur if, for example, the DOC is unclear if the merchandise under inquiry is already within the scope of the AD/CVD order. In such instances, the DOC can either address the scope issue within the proceeding, or defer initiation of the circumvention inquiry pending the completion of any new or ongoing segment of the proceeding addressing the scope issue.
The Final Rule also establishes certain rules regarding the development of the factual record for these proceedings. The Final Rule codifies the DOC’s existing practice of issuing questionnaires to selected respondents, also noting that the DOC can “verify” submissions, where appropriate. The regulations also set deadlines for submitting factual information in response to the initiation of a proceeding, and to rebut, clarify, or correct questionnaire responses, generally following the same timelines as Section 351.301, which governs the submission of factual information during AD/CVD proceedings. The timing of briefs (called “comments” in the regulations) is also addressed. Unless otherwise specified by the DOC, interested parties have 14 days after a preliminary determination to submit a case brief, with a rebuttal case brief being due seven days thereafter. This diverges from the DOC’s prior practice in anticircumvention inquiries, which generally would establish a deadline for submitting a case brief 30 days after the preliminary determination.
The new regulations also impose deadlines on the DOC for the issuance of the preliminary and final determinations of 150 and 300 days from the date of publication of the initiation notice, respectively. However, if the DOC determines that a circumvention inquiry is extraordinarily complicated, it may extend the final determination by up to 65 days, for a fully-extended total of 365 days. Many commentators supported these new deadlines because the DOC previously did not have any firm deadlines for the issuance of determinations in these inquiries. The prior regulations had merely stated that such proceedings would “normally” take 300 days, but in practice, final determinations were often delayed far beyond the 300-day period.
As to the issue of remedies, which were not addressed in the prior rule, the Final Rule lists examples of possible appropriate remedies following an affirmative determination. This includes: (1) applying the determination on a producer-specific, exporter-specific, or importer-specific basis, or some combination thereof; (2) applying the determination on a country-wide basis to all products from the same country as the product at issue with the same relevant physical characteristics, regardless of producer, exporter, or importer of those products; or (3) applying the determination on a country-wide basis to all products from the same country as the product at issue with similar relevant physical characteristics, regardless of producer, exporter, or importer of those products. In practice, this means that exports from companies that are not directly involved in the anticircumvention proceeding could be subject to future AD/CVD cash deposits and duty liability. In addition to the remedies described above, the Final Rule also allows the DOC to impose a certification requirement under Section 351.228.
Notably, the new regulations also clarify the DOC’s ability to impose provisional measures on products potentially subject to an anticircumvention inquiry. The statute and prior regulations had provided no guidance on this issue, and the DOC’s practice was inconsistent. An affirmative preliminary determination could lead to cash deposits being collected on entries after that date of initiation, but at times, it only covered entries after the preliminary determination. With the new regulations, at the time of initiation, the DOC will direct U.S. Customs and Border Protection (“CBP”) to continue the suspension of any entries of products that are subject to the circumvention inquiry which for whatever reason, already had their liquidation suspended, and to apply the cash deposit rate that would apply if they were found to be covered by the scope of the AD/CVD order. If there is then an affirmative preliminary determination, the DOC will begin the suspension of liquidation and require a cash deposit of estimated duties, at the applicable rate, for entries on or after the date of publication of the notice of initiation of the inquiry if their liquidation has not otherwise been suspended. Furthermore, if the DOC finds it appropriate, it will direct CBP to suspend liquidation and collect cash deposit rates for entries prior to initiation. Interested parties can request that the DOC collect cash deposit rates prior to the date of initiation, but must provide evidence establishing why the DOC should use an alternative date.