Thursday, April 21, 2011

U.S. Can't Keep AD Duties

I don't usually cover trade remedies cases on this blog. Nevertheless, I feel like I am seeing more questions than ever from importers about dealing with trade remedies. And, this is just an interesting opinion, which hits both customs and trade issues.

In Canadian Wheat Board v. United States, the question was whether the United States could legally keep antidumping duty deposits on unliquidated entries Customs collected in the enforcement of an antidumping duty order that a NAFTA binational panel invalidated. In reality, the panel has no authority to invalidate an order. Rather, it ordered a remand to the ITC to reconsider injury. On remand, the ITC found no material injury. The NAFTA panel affirmed that finding and Commerce revoked the order. But, Commerce instructed Customs and Border Protection to stop collecting cash deposits as of the revocation date and stated that the revocation would not affect the liquidation of entries prior to that date. In effect, that was an instruction to liquidate prior entries with the cash deposits. Importers then went to the Court of International Trade seeking an injunction against liquidation and the return of the deposits.

On its face, this seems like a strange position for the government to have taken. According to the Federal Circuit, "[This] action is so bizarre and unfair that we would be most reluctant to sustain it unless we could say with complete assurance that there was no doubt that Congress intended that result." Further, the Court said that "Neither the statute nor its legislative history 'suggests the Congress intended to produce such an inequitable result.'" The Court characterized the action as "extraordinary and seemingly arbitrary . . . ."

It is clear how this is going to turn out. The interesting question for us in why the government pursued this position at all. I don't think it had much to do with the duties. It appears that if this were not a panel case but had been reviewed initially by the CIT, the government might have seen it differently. That is my speculation, but stick with me.

The government's first argument had nothing to do with the merits of retaining the deposits. Rather, it focused on whether this case was an attempt to enforce the decision of the NAFTA panel. The law is clear that a final NAFTA panel decision is not subject to judicial review (19 USC 1516a(g)(2)). If this case is about reviewing the substance of the NAFTA decision, then the case should be dismissed. The Court, however, found that the case now focused on the implementation rather than the substance of the panel decision and it was not barred.

Second, the government argued that NAFTA panels can only provide prospective relief (see 19 USC 1516a(g)(5)(B)). Granting a refund of unliquidated cash deposits would be retroactive relief. This also makes some sense, but the Court held that the treatment of unliquidated entries depends on what happens at liquidation and that is prospective in nature.

Thus, the government lost on the merits. But, if you look at it in the broader context, this seems like exactly the kind of argument the Justice Department should make. There is little law on the implementation of NAFTA panel decisions. This decision might impact future actions in dumping and countervailing duty cases not just in the U.S., but in Canada and Mexico as well. So, this might be an important step in understanding how panel decisions are to be implemented. And, the fact that it came out in a way that seems both logical and just, is a bonus.

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