CBP Can't Collect AD/CV Duties Without Commerce Ruling if Scope Ambiguous, CAFC Says

CBP can’t collect antidumping or countervailing duties when the scope of the AD or CV duty is still unclear as to whether the entries are covered by duties, the U.S. Court of Appeals for the Federal Circuit said in a May 16 decision. Affirming a 2018 decision from the Court of International Trade, CAFC held CBP should have waited for Commerce’s scope ruling on Sunpreme’s hybrid cells before requiring cash deposits, and ordered a refund of cash deposits collected before Commerce began the underlying scope inquiry.

Under Commerce’s regulations, when the agency issues a ruling finding a product is covered by AD/CV duties, it may direct CBP to “continue to suspend liquidation” only if liquidation had already been suspended before the beginning of the scope inquiry. Otherwise, suspension of liquidation may only extend back to the initiation date of the scope inquiry.

For Sunpreme, CBP had on its own made the determination that the importer’s hybrid cells, consisting of a polycrystalline silicon substrate with a layer of amorphous silicon “thin-film” cell, were likely covered by the AD/CV duty orders on solar cells from China. It suspended liquidation for the hybrid cells and told Sunpreme to file future entries as “Type 03.” When Commerce later issued a scope ruling that definitively found the hybrid cells were covered by duties, Commerce told CBP to “continue suspending liquidation," including for entries before it began its scope proceeding.

CAFC upheld the scope ruling, but found CBP’s original suspension of liquidation overstepped its authority and was premature. As a result, Commerce should have ordered suspension of liquidation only back to the initiation date of its scope inquiry, because the suspension of liquidation prior to that date was improper.

“Although Commerce, unlike Customs, can interpret the scope of unclear or ambiguous duty orders, our case law is clear that even Commerce cannot order suspension of liquidation of merchandise covered by such orders before the scope inquiry was initiated,” CAFC said. “Based on our existing case law, we can see no reason why Customs, which we have recognized plays a ministerial role in the liquidation process and lacks the authority in the first instance to interpret the scope of unclear or ambiguous duty orders, should have more power than its charging agency -- Commerce -- to order suspension of liquidation,” it said.

CAFC Chief Judge Sharon Prost dissented from that portion of the decision. CBP is “responsible for fixing the amount of duty owed,” which “necessarily requires a decision from Customs as to whether the goods fall within an AD/CVD order,” she said. Restricting CBP’s ability to make this decision unless goods are unambiguously covered “significantly limits Customs’ ability to perform its role in applying and enforcing Commerce’s AD/CVD orders,” she said.

The practical effect of the decision is that “importers will have no incentive to request a scope inquiry from Commerce,” Prost said in the dissent. “[I]f Customs cannot suspend liquidation and collect cash deposits where it is unclear if merchandise falls within an AD/CVD order, importers will be incentivized to delay or avoid requesting scope rulings from Commerce. As the result in this case shows, the longer an importer delays, the less it will ultimately pay in antidumping or countervailing duties.”

(Sunpreme, Inc. v. U.S., CAFC # 2018-1116, -1117 and -1118; dated 05/16/19; Judges Lourie and Clevenger in majority; Prost dissenting)