Wednesday, February 25, 2009

Byrd Part I: The Majority

SKF USA, Inc. v. Customs and Border Protection is a hefty opinion, so I am going to blog it in two parts. Here is the majority opinion.

The issue is whether the Court of International Trade properly held that the Continued Dumping and Subsidy Offset Act of 2000 is unconstitutional. The Act, more commonly known as the Byrd Amendment, provides that petitioners and interested domestic producers who supported the initiation of a dumping or countervailing duty case may receive collected AD or CV duties in an amount equal to their expenses associated with the investigation.

The plaintiff in this case had not supported the petition. Nevertheless, it sought "Byrd money." Customs denied the request on the ground that SKF did not qualify under the terms of the statute. The Court of International Trade made two holdings. First, the requirement that a domestic company support the petition violates the equal protection clause of the fifth amendment. Second, that the unconstitutional support requirement could be severed from the remainder of the Act. According to the CIT, when the support requirement is removed, the statute permits SKF to recover.

Before we get into the Federal Circuit's analysis. Let me address a comment to a previous post. Yes, I understand that there is lots of money involved in this case. There are lots of potential plaintiffs out there waiting to see what happens. So, it was an overstatement for me to call this issue "academic." On the other hand, the Byrd Amendment was repealed effective October 1, 2007. So, the issue is not likely to arise again. This might be a one-shot issue, but it is more like a cannon than a .22.

On appeal, SKF pursued two constitutional arguments. First, that the support requirement violates the equal protection clause. Second, that the support requirement violates the first amendment by compelling commercial speech.

The first question to be addressed was whether the CIT had jurisdiction. The government and a U.S. interested party argued that the action was time barred. There were several theories presented on when the two-year statute of limitation began to run. The Court treated the timeliness question was jurisdictional and held that the earliest point at which SKF could have filed its action was when the 2005 notice of intent to distribute funds was published. Prior to that, it was not certain that a SKF could have made a claim for funds. Based on this date, the action was not time barred.
On the merits, the Federal Circuit first considered the first amendment argument. It conducted its constitutional analysis with the understanding that courts are to construe statutes as constitutional whenever possible. Next, the court found that it must determine the purpose of the Byrd Amendment to properly review its constitutionality. If the purpose is to suppress speech, the law will have to survive stricter scrutiny.

The Court agreed that the primary purpose of the Byrd Amendment was to compensate domestic parties for injuries resulting from dumping. However, the fact that only domestic parties who supported the petition are compensated indicates a possible subsidiary purpose of rewarding those companies that express a certain point of view. The government disagreed and argued that the support requirement is only used as a means of identifying those domestic companies that were injured. The government had previously argued in a WTO proceeding that the statute was not intended to compensate injured parties.

Despite the government's position, the majority held that the constitutional construction of the law was that it was intended to reward those parties that assisted the government by supporting the initiation of the investigation. Remember, it is a necessary step in the initiation process for there to be support from the domestic industry. This is the 25/50 rule my students love so well.

Having established the purpose of the Byrd Amendment, the Federal Circuit noted that opposing the initiation of an antidumping case is speech protected by the first amendment. Therefore, the question is whether the government's purpose and the means used to further that purpose are appropriate. To be constitutional, the regulation imposed by the law (1) must be in furtherance of a substantial government interest, (2) must directly advance that interest, and (3) must be no more restrictive than necessary.

The Court held that the Byrd amendment meets this test. The enforcement of trade laws is a substantial governmental interest. The rewarding of private parties who assist in that effort directly advances that interest. Finally, petitioners and those supporting the petition provide substantial support to the government through questionnaire responses, briefs, and hearings. While other domestic parties may provide some support, it is generally less. Because the law does not require a perfect correlation between support and reward, the Court held that the Byrd Amendment was not overly broad. Thus, it was constitutional.

It follows from the first amendment analysis that there is a legitimate purpose behind the law. It also follows that the law is rationally related to the governmental purpose. Thus, the law passes equal protection muster as well.

That's the majority. I need to quite now because I am having flashbacks to law school. It is not pretty. Susan Conner, if you are out there, please feel free to grade this blog post as if it were in a blue book.


Anonymous said...

Where is the 2nd part? Also, did they apply for a writ?

Larry said...

OK, I admit that I never got around to the dissent. Here's a nutshell review:

The majority put undue focus on trying to avoid a constitutionality issue by finding a constitutional purpose for the Act. However, that focus was too broad as the Court should have focused narrowly on the support requirement. Looking only at the support requirement, the dissent finds that the constitutional purpose of rewarding parties that assist the government in the investigation is not evident from the statute nor was it argued by the parties.

Analyzing the law without grafting on this constitutional purpose, the dissent finds that strict scrutiny applies to the support requirement. The requirement discriminates on the basis of viewpoint and affects political speech. As a result, absent a compelling state need, the statute is unconstitutional.

I hope that helps. To the best of my knowledge no subsequent action has been taken.