Commerce Proposes Overhaul of AD/CVD Regulations With Major Changes for Scope Rulings

The Commerce Department is proposing an overhaul of its regulations on antidumping and countervailing duties “to strengthen the administration of enforcement of AD/CVD laws, make such administration and enforcement more efficient, and create new enforcement tools for Commerce to address circumvention and evasion of trade remedies,” the agency said in a notice released Aug. 12. One key change would allow Commerce to retroactively suspend liquidation and require AD/CVD cash deposits as a result of scope rulings. Comments are due Sept. 14.

In a series of court cases stretching back nearly a decade (see 13121321), the U.S. Court of Appeals for the Federal Circuit affirmed in January that, based on Commerce’s current regulatory scheme, formal scope rulings only apply to goods entered on or after the initiation date of the scope inquiry (see 2001140056).

Commerce’s proposed rule would amend that regulatory scheme to clarify that “a scope ruling that a product is within the scope of the order is a determination that the product has always been within the scope,” Commerce said. “Put another way, if a party has imported merchandise and declared that merchandise as not covered by the scope of an order, and then Commerce issues a scope ruling finding that such merchandise is subject to an order, under these proposed regulations Commerce’s scope ruling would apply to all unliquidated entries of the merchandise,” it said.

Scope rulings would apply back to the first date that liquidation was originally suspended under the AD/CV duty order. That would normally be the preliminary determination from the original AD/CVD investigation, Commerce said. The proposal would apply the same approach to anti-circumvention inquiries.

According to the proposed rule, importers are already under notice that their products are potentially covered by AD/CVD duties from the time that Commerce issues its preliminary and final determinations in the relevant AD/CVD investigations. The current system encourages “gamesmanship” by importers, in that they are incentivized to enter potentially subject goods without declaring them subject to AD/CV duties, and import as much as possible before any request for a scope ruling is filed, Commerce said.

“Under the proposed approach, importers have an incentive to seek a determination as soon as possible whether a particular product is subject to the scope of an existing AD/CVD order,” Commerce said. “If they fail to do so, then they may be liable for AD/CVD duties if Commerce eventually determines that the products are covered by the scope of an existing AD/CVD order.”

Commerce said it is aware of the “potential unfairness to certain importers who genuinely may not be aware that their products are within the scope of an order until Commerce issues a ruling,” but it said it can’t distinguish honest misunderstandings from attempts to avoid AD/CV duties. The practical effect of the ruling is limited because, generally, given CBP liquidation time frames, it’s unlikely that there will be any unliquidated entries covered by a scope ruling that are more than a year old.

The policy change would not take effect until 30 days after any final rule, and would only apply to scope rulings that begin after that date. Commerce said it will “carefully consider all public comments before issuing a final rule that revises the existing regulation.”

In another change related to scope rulings, Commerce would no longer direct CBP to end suspension of liquidation when it issues a preliminary scope ruling that a product is not covered by the scope of an AD/CVD order. Instead, suspension of liquidation would continue despite the negative preliminary determination, until the final scope ruling is issued. If the final scope ruling finds the product out-of-scope, it would then direct the end to suspension of liquidation.

The revised scope regulations would also provide for uniform scope ruling applications, to be made available on Commerce’s website. Commerce would also be able to, in lieu of a regular scope ruling, notify a party that requested a scope ruling that the agency is applying a previous scope ruling issued to a different importer about merchandise with an identical physical description from the same country of origin. Commerce would also be able to address scope issues in the context of other proceedings, including administrative reviews.

Other Changes Cover Anti-Circumvention Inquiries, Importer Certifications

The proposed rule also creates a new section in its regulations for anti-circumvention inquiries, in many ways mirroring its proposed revised regulations on scope rulings. Suspension of liquidation would apply to all unliquidated entries, rather than just those after initiation of the inquiry, and negative preliminary circumvention determinations would not end suspension of liquidation. The new section, 19 CFR 351.226, would also set deadlines and procedures for anti-circumvention inquiries, which were previously included under the section for scope rulings.

Commerce would also create new 19 CFR 351.227 for covered merchandise referrals for scope rulings from CBP in the context of Enforce and Protect Act investigations.

A new section of the regulations would be created for importer certifications, which would “codify and enhance Commerce’s existing authority and practice to require certifications by importers and other interested parties as to whether merchandise is subject to an AD/CVD order,” Commerce said. Commerce would give itself the authority to instruct CBP to collect AD/CVD cash deposits from importers that fail to provide certifications or make false statements.

The proposed rule would also provide for the electronic filing of importer reimbursement certificates, in addition to in paper form. “Moreover, for ease of administration, Commerce proposes to clarify that a certification is required for each entry of merchandise subject to AD duties imported on or after the date of the first suspension of liquidation,” Commerce said. “Furthermore, although such certification is required prior to liquidation, Commerce proposes to clarify that CBP may also accept the reimbursement certification in accordance with its protest procedures … .”

The proposed rule would also make procedural changes, including for deadlines in AD/CVD investigations and filing requirements in AD/CVD cases, as well as changes to Commerce’s regulations on new shipper reviews.