Two recent decisions from the Court of Appeals for the Federal Circuit put this nicely in focus.
The first is Capella Sales & Services Ltd. v. United States. This is one of those cases with a relatively straight-forward analysis that leads to a bad result. Capella entered aluminum extrusions from China. At the time its entries liquidated, Commerce had determined the countervailing duty deposit rate to be 374.15%. Capella did not challenge the rate and, as a result, there was no injunction preventing the liquidation. Subsequently, other importers did challenge the rate, which was found to be grossly incorrect. The correct rate was determined to be 7.37%. After that decision, Commerce, as it is required to do, published a notice of the judicial determination "not in harmony with" its determination. Subsequent liquidations would be at the lower rate.
If you have any empathy, you feel for Capella. It had terrible timing. Earlier imports might have escaped the preliminary determination entirely. Later imports would have benefited from the lower rate. More legally, it appears that Customs and Border Protection liquidated entries at a rate that was determined to be unlawful. Surely, Capella should have some way to recoup the difference.
Unfortunately, that is not how the law is written. The statute requires that entries be liquidated in accordance with the determination of the Commerce Department. 19 USC 15106a(c)(1). The only exceptions are (1) where a court has ordered an injunction against liquidation and (2) where the entry is after the Federal Register Notice of a decision contrary to Commerce's determination. Alternatively, (3) an interested party can request an administrative review of the applicable rate under 19 USC 1675(A)(2)(C). There is no factual dispute that Capella's entries do not fit into one of these categories.
Capella basically argued for a writ of rachmones. It asked the court to take note of the unusual circumstances of a 375% deposit rate compared to a roughly 7% assessment rate. In light of that, it asked the Court to find that the statutory scheme was ambiguous, giving the Commerce Department discretion (and presumably a mandate) to liquidate at the lower, "correct" rate. The textual basis for that conclusion was reed thin.
Citing the Chevron doctrine, Court noted that where Congress has specifically addressed a question, the Court's role is to give effect to the law as written. Here, it found that Congress made no exception for the bad circumstances of this case despite knowing exactly how to draft such exemption. Given the lack of ambiguity, the Federal Circuit affirmed the liquidations at the higher rate.
The second case is Glycine & More, Inc. v. United States. Here, the issue is whether Commerce can change the meaning of a regulation by publishing an informal interpretation in a "guidance" document. The regulation at issue is 19 CFR 351.213(d)(1) which explains what Commerce is supposed to do when an interested party requests an administrative review and subsequently withdraws the request.
The regulation states:
The Secretary will rescind an administrative review under this section, in whole or in part, if a party that requested a review withdraws the request within 90 days of the date of publication of notice of initiation of the requested review. The Secretary may extend this time limit if the Secretary decides that it is reasonable to do so.
In this case, a party that requested review submitted a notice of the withdrawal and requested an extension of the 90 days to complete the request after the 90-day period had run. Commerce refused to extend the period and, therefore, continued the reviews. The requesting party refused to participate and was assigned a 453.79% deposit rate on the basis of facts otherwise available and an adverse inference. That certainly hurt.
Commerce did so based on an interpretive notice from 2011 stating that Commerce will not grant extensions "unless the requestor demonstrates that an extraordinary circumstance has prevented it from submitting a timely withdrawal request." The Court of International Trade held that Commerce's interpretation of its regulation was unreasonable and defeated the purpose of the regulation.
On appeal, the Federal Circuit applied the same analysis it applies to an agency interpretation of a statute, which is what we discussed above. If the regulation is clear, "it is the duty of the courts to enforce it according to its obvious terms and not to insert words and phrases so as to incorporate therein a new and distinct provision."
The Federal Circuit found no ambiguity. It found that prior to the 2011 Notice, the regulation was understood to provide Commerce with wide discretion to exercise its judgment to grant extensions in reasonable circumstances. After the 2011 Notice, the regulation was interpreted to limit that discretion to "extraordinary circumstances." No such limitation exists in the text. According to the Court, that is an "incompatible departure from the clear meaning of the regulation." Commerce cannot re-write the regulation through an informal guidance notice. It must follow the formal notice-and-comment rulemaking process.
Consequently, Commerce must reconsider its denial of the requested extension as if the 2011 Notice did not exist.
And that is an administrative law two-for-one post.