Proposed AD/CVD Rule Changes Met With Pushback, Praise in Comments

Proposed changes by the Commerce Department to its antidumping and countervailing duty regulations were met with a diverse array of responses from governments, producers, importers, lawyers and others, with particular focus on the agency's proposal to consider intellectual property, human rights and environmental protections in AD/CVD proceedings and proposed changes that would allow particular market situation adjustments to the sales-below-cost test.

Not only China and Vietnam, but also Mexico and the provincial governments of Ontario and Quebec criticized Commerce's proposal on government "inaction." Under the May proposed rule (see 2305080048), Commerce would consider the effect of weak, ineffective, or nonexistent property, intellectual property, human rights, labor, and environmental protections as potential subsidies, and factor those considerations into surrogate value and particular market situation decisions.

That proposal, among others, violates "the basic principles of international law and WTO rules," the Chinese government said in its comments. The inclusion of the domestic legislation of a WTO member country would "undoubtedly infringe the rights of other WTO members." If the proposed revisions enter into force, Commerce could impose its own standards on other countries and take measures "according to its own unilateral determination," China said. The changes would "irresponsibly increase the burden of proof" on respondents and infringe on the sovereignty of exporting countries, China said.

In a joint filing, the governments of Ontario and Quebec said the proposal fails to recognize "good faith efforts" of foreign governments to resolve matters in the best interests of their citizens. They also said they were concerned about the proposal to exclude third-country prices from a benchmark based on "unspecified, broad social and economic factors." In general, "several proposals appear to disregard Congress’s mandates to the agency, as well as [violate the] fundamental principles of fairness and due process," Ontario and Quebec said.

In its comments, the Vietnamese government said it would be inappropriate to apply the same intellectual property, human rights, labor and environmental protection benchmarks among countries. Commerce needed to square the proposal with American WTO commitments and clarify its ability to enforce the regulations, the country said.

The Mexican government worried that the inaction regulations would "invite DOC to make judgments about many areas of government policy in which it lacks expertise."

U.S. domestic industry and labor were largely in favor of the proposed changes, with the Aluminum Association saying the proposed regulations would advance the enforcement of the country's trade laws.

U.S. Steel said that "weak, ineffective, or nonexistent ... protections in foreign jurisdictions distort the operating and production costs of companies operating in such jurisdictions." The United Steelworkers labor union said that violations of human rights and core labor standards has created a "race to the bottom."

The Brazilian government expressed concerns that the proposed "inaction" regulations, particularly as applied to particular market situation determinations, could "significantly broaden the US investigating authority's discretion," saying the proposal incorporates concepts not embodied in the WTO trade remedies agreements.

Proposed changes to particular market situation (PMS) regulations were nearly as divisive, with domestic producers largely praising them and foreign manufacturers and governments opposing them.

The proposals are "a fundamental departure from longstanding understandings about the proper scope of the trade remedies laws and the reach of the Department’s authority," lawyer Jeffrey Winton said.

The Korean steelmakers were particularly adamant that Commerce should clarify that it would not consider arguments suggesting the consideration of PMS issues and cost adjustments in the sales-below-cost calculation context. The Vietnamese government even proposed that Commerce eliminate the current non-market economy list and use particular market situation assessments on a case-by-case basis.

Domestic producers were somewhat split on the proposed changes. U.S. Steel said it "applauds" Commerce's proposal, which it said would "make PMS practice in AD investigations and administrative reviews more organized, coherent, and predictable." Commerce should reconsider adopting a rebuttable presumption that a PMS found in one segment of a proceeding persists in future segments, the Committee to Support U.S. Trade Laws said, saying that "it is common sense that such entrenched and complex distortions are highly unlikely to disappear from one twelve-month period to the next."

However, the Aluminum Association said it is concerned that "identifying explicitly certain information that the Department will not consider" could chill the development of the administrative record by a party advancing the existence of a cost-based PMS.

The Retail Industry Leaders Association said that the changes would have a negative impact on the predictability of AD duty rate calculations. PMS significantly hinders the ability of respondents to make sure they are not dumping and should be used sparingly, the association said.

Another area that drew comments was the proposal to remove the rule preventing Commerce from investigating transnational subsidies, with the Mexican government saying there is "no support in the WTO Agreement on Subsidies and Countervailing Duties" for countervailing third-party subsidies and that the regulations are unclear on how Commerce could even investigate such a subsidy provided by a government not a party to the investigation.

Countervailing duty measures against transnational subsidies violate the jurisdiction requirements under the agreement, China said. Vietnam also "strongly opposes" the removal of the rule preventing consideration of transnational subsidy allegations, it said.

Domestic producers supported the proposed removal, with U.S. Steel arguing that transnational subsidies are "increasingly prevalent" and that there is already harm done to it and the broader commercial market by third-party subsidies. The updates are necessary to address "a critical loophole in Commerce’s current administration of the CVD law," the Iron and Steel Institute said, arguing that cross-border subsidization has become a very significant concern for the steel industry, in particular due to the expansion of Chinese steelmakers into other jurisdictions, ISI said.

Other comments touched on the proposal to allow interested parties to file rebuttal comments and factual information to a request for an anti-circumvention inquiry. Auxin Solar said the proposal would delay circumvention initiations and allow some imports to escape AD orders if the time extensions are allowed, and U. S. Steel said the proposal is unnecessary and potentially harmful, arguing that existing regulatory timelines are sufficient.