Antidumping and Countervailing Duty Investigations of Crystalline Silicon Photovoltaic "Solar" Cells and Panels from China

On October 19, 2011, Solar World Industries America Inc., with the support of the Coalition for American Solar Manufacturing, filed a petition, with the U.S. International Trade Commission and U.S. Department of Commerce, requesting the initiation of antidumping and countervailing duty investigations of crystalline silicon photovoltaic ("CSPV") cells—better known as "solar cells," the building blocks of solar panels—from China.  The petitioner alleges that Chinese companies are dumping CSPVs with margins in excess of 250%.  The petitioner also alleges that Chinese CSPV cell producers and exporters illegally benefited from approximately thirty-nine different government subsidy programs. 

The U.S. International Trade Commission has initiated its investigation into injury to the domestic U.S. CSPV industry.  It will have forty-five days to make its preliminary injury determination.  U.S. importers, producers, and exporters can participate in the U.S. International Trade Commission’s evaluation of whether CSPV imports are injuring the U.S. domestic CSPV industry by filling out and sending in a questionnaire response concerning their production, importation, and sales of CSPVs. 

The U.S. Department of Commerce will evaluate the petition to determine whether it contains sufficient evidence that CSPVs from China are being illegally subsidized and dumped (sold at less than fair value) in the United States.  If the Department of Commerce determines that the petition is sufficient, it will initiate antidumping and countervailing duty investigations twenty days from the date of the filing of the petition.  Once theses investigations are initiated, Chinese exporters will have sixty days to file separate rate applications.  If an exporter does not file a separate rate application, or if the application is rejected, that exporter will be assigned a punitive antidumping duty rate—in this case, likely to be an additional import duty in excess of 232.56%. 

Merchandise covered by these proceedings is classified in the Harmonized Tariff System of the United States ("HTSUS") under subheadings 8501.61.00.00, 8507.20.80, 8541.40.60.20, and 8551.40.60.30.  However, the written description of the scope of these proceedings, as contained in the petition, is dispositive. 

SEPARATE RATES PRIMER

In U.S. antidumping investigations or reviews involving non-market economies (NME) such as Vietnam or the People's Republic of China, exporters must each participate in a separate rate test to receive a rate that is separate from the NME-wide rate.  Any exporters that fail to demonstrate that they are separate from the government entity are assigned the NME-wide rate under the involved antidumping duty order, which is invariably the highest possible rate, and which, as often as not, effectively bars the involved exporter from the U.S. market.

Exporters are awarded separate, company-specific duty rates if they can demonstrate an absence of government control, both in law and in fact, over export activities.  Evidence supporting a finding of de jure absence of government control includes: 1) an absence of restrictive stipulations associated with an individual exporter’s business and export licenses; 2) any legislative enactments decentralizing control of companies; and 3) any other formal measures by the central and/or local government decentralizing control of companies.

With respect to de facto government control, the U.S. Department of Commerce (the Department) considers four factors:  (1) whether export prices are set by, or subject to the approval of, a governmental authority; (2) whether a respondent has authority to negotiate and sign contracts and other agreements; (3) whether a respondent has autonomy from the government in making decisions regarding the selection of management; and (4) whether a respondent retains the proceeds of its export sales and makes independent decisions regarding the disposition of profits or financing of losses.

All NME exporters wishing to obtain a separate rate in an antidumping investigation or administrative review must complete a separate rate application form.  However, only those NME exporters selected as mandatory respondents are required to respond to the full antidumping questionnaire.  In other words, NME exporters wishing to obtain a separate rate do not necessarily need to participate in a full investigation or review proceeding, unless otherwise required to do so by the Department.  Consequently, an NME exporter may do much to secure or improve its access and competitive position with respect to the U.S. market by taking the simple step of applying for a separate rate.

U.S. DEPARTMENT OF COMMERCE LAUNCHES INVESTIGATION OF CHINESE DRILL PIPE MANUFACTURER FOR ALLEGED EVASION OF ANTIDUMPING DUTY ORDER

As previously noted on this web site, there are many indicators that the United States is stepping up its efforts to combat circumvention of its antidumping, countervailing duty, and general customs laws.  Such circumvention has been drawing unprecedented attention on Capitol Hill.  As a result of the consequent political pressure, federal agencies have noticeably increased the number of active enforcement actions related to antidumping and countervailing duty orders. 

Most recently, on August 12, 2011, the U.S. Department of Commerce reported the initiation on an investigation into whether Chinese drill pipe and tool joint manufacturer Hilong Group, Ltd. is evading a U.S. antidumping duty order by finishing its product assembly, via friction welding, in the United Arab Emirates, prior to shipping its products to the United States.  The Department of Commerce will determine whether or not the involved Chinese-manufactured drill pipe and tool joint products are, for purposes of U.S. antidumping law, to be considered of Chinese origin, despite the fact that they are being friction welded together in the United Arab Emirates.  Such products from China are currently subject to an antidumping duty rate of nearly 430 percent. 

Firms involved in international trade face ever-growing risks for attempting to circumvent U.S. antidumping and countervailing duty laws.  Such criminal activities invite the seizure of shipments, fines, indictment and imprisonment of U.S.-based personnel, and tremendous loss of money.  To avoid such consequences, companies trading in goods subject to antidumping or countervailing duty investigations and orders can elect to participate in the involved antidumping investigation and administrative review proceedings of the U.S. Department of Commerce and U.S. International Trade Commission.  In so doing, manufacturers and exporters may obtain company-specific or separate duty rates, thereby securing their access to the U.S. market, in full compliance with U.S. fair trade law. 

COMMERCRE PROPOSES CHANGE TO RULES FOR LIQUIDATION OF ENTRIES FROM NON-REVIEWED NON-MARKET ECONOMY EXPORTERS IN ANTIDUMPING DUTY ADMINISTRATIVE REVIEWS

            The U.S. Department of Commerce (Commerce) is proposing to change its rules with respect to its procedure for issuing liquidation instructions, to U.S. Customs and Border Protection (CBP), for certain entries subject to antidumping duty orders.  See 76 FR 34046 (June 10, 2011): http://www.gpo.gov/fdsys/pkg/FR-2011-06-10/pdf/2011-14446.pdf.  More specifically, Commerce proposes to change its rules such that it will instruct CBP to liquidate "certain entries," suspended under antidumping duty orders, for "non-reviewed" non-market economy exporters--i.e., non-market economy exporters that are not involved in an antidumping administrative review for a particular period of review (POR)--at the country-wide antidumping duty rate.  Id. 

            As Commerce explains in its published Federal Register notice on the matter, in an antidumping administrative review involving a non-market economy (NME) country, importers "enter subject merchandise at a company-specific cash deposit rate, a separate rate, or the NME-wide rate.  Entries of subject merchandise are subject to cash-deposit requirements and are suspended from liquidation until the Department instructs CBP to liquidate the entries.  See section733(d)(2) of the Act.  When no review is requested for a particular AD order for a given review period, the Department instructs CBP to liquidate all entries of subject merchandise for that period at the cash-deposit rate that was required at the time of entry."  Id.  That is, the entries are liquidated a rate determined in a prior antidumping proceeding--an investigation, an administrative review, or a new shipper review.  "When a review is requested for a firm for a given review period, entries that have been identified by an importer as that firm’s merchandise remain suspended from liquidation during the pendency of the administrative review."  Id.  At the end of the administrative review proceeding, Commerce instructs CBP to liquidate the entries based on its findings relevant to the involved POR.  That is, it instructs CBP to liquidate the entries based on the company-specific or other rate found, in the final results of review, applicable to each reviewed respondent. 

            Under most, if not all, NME antidumping orders, the "NME-wide" rate is, in reality, punitive, effectively blocking access to the U.S. market for exporters to which it is applied.  In fact, many NME antidumping orders have NME-wide duty rates exceeding one-hundred percent. 

            The apparent concern is that Commerce is discovering, in the course of its antidumping administrative review proceedings, that certain U.S. importers are falsely claiming that their entries originated with a firm that is participating in an administrative review, when in fact the entries originated with an exporter not being reviewed for the POR during which the entries were made. 

            The exact form of the proposed rule change is not entirely clear from the Federal Register notice, and its rather ambiguous wording provides more confusion than guidance with respect to several important issues.  For example, Commerce does not explain what it means by "certain entries."  Taken by themselves, these words seem to suggest that Commerce does not intend to apply the NME-wide rate to all entries from non-reviewed exporters.  But if that is the case, the notice offers no clear guidance concerning where Commerce might draw the line. 

            Furthermore, other language in the notice seems to suggest that Commerce indeed intends to liquidate all entries from non-reviewed exporters, regardless of whether or not those exporters were reviewed previously, and regardless of whether or not those exporters have long track records of low, de minimis, or even zero antidumping duty rates, and regardless of whether or not those exporters have long-established reputations for complying with the letter and spirit of U.S. fair trade law.  To wit, the notice indicates that Commerce "is proposing to refine its practice with respect to the rate at which it instructs CBP to liquidate certain entries from non-reviewed exporters.  Specifically, the Department proposes to instruct CBP to liquidate such entries at the NME-wide rate."  This language implies that there will be no exceptions: if an exporter is not reviewed, its entries will be liquidated at the NME-wide rate, end of story. 

            Needless to say, an exporter can hardly be expected to remain competitive in the U.S. market if its U.S. sales are being assessed duties that match or exceed the sales prices of its goods.  Thus, if Commerce truly intends to apply NME-wide rates to all non-reviewed exporters, it can expect an unprecedented surge in requests for review on the part of NME exporters wishing to retain access to the U.S. market.  Certainly hundreds--perhaps even thousands--of NME exporters that were content to sit out annual administrative reviews would feel compelled to participate in Commerce's proceedings each and every POR.  Commerce has neither the personnel nor the funding to manage such a spike in its active caseload.  One is left to wonder, then, what exceptions the proposed rule might ultimately contain by which Commerce may have the option to decline to review certain exporters without having to impose punitive NME-wide duty rates on those exporters for their being "non-reviewed."  It remains to be seen.   

            Adding to the confusion over Commerce's intended direction with respect to this rule change, toward the end of its Federal Register notice, Commerce states that "when a party does not file a separate-rate application, the Department lacks necessary information on the record to determine whether it is entitled to a separate rate."  Id.  In context, this phrase seems like a non sequitur.  However, it could be read as a hint of Commerce's intent to leave a loophole through which parties to antidumping proceedings could engage in the sorts of activities highlighted in a February 11, 2011 Wall Street Journal Article by James R. Hagerty, titled Cash Softens Trade Blow: Payments to U.S. Rivals Lets Chinese Furniture Makers Skirt Import-Duty Review.  Does Commerce intend to allow an exporter that engages in activity of the sort described in the aforementioned article--even if the involved antidumping petitioner eventually retracts its request for review of that exporter, and that exporter is consequently not reviewed--to continue selling its goods in the U.S. market via its previously-established company-specific rate, as long as that exporter applied for a separate rate for the POR at issue?  In other words, will a separate rate application allow a "non-reviewed" exporter to avoid the NME-wide rate, in effect giving it the green light to dump its goods, at prices less than fair value, with utter abandon, and without fear of repercussions in the form of higher antidumping duty rates?  It seems unlikely that Commerce would knowingly do anything to encourage activity of the sort described in the Wall Street Journal article.  But, again, it remains to be seen.       

RISKS GROW FOR COMPANIES ATTEMPTING TO CIRCUMVENT U.S. TRADE LAW IN LIEU OF PARTICIPATING IN ANTIDUMPING AND COUNTERVAILING DUTY PROCEEDINGS

There are numerous indicators that the United States is stepping up its efforts to combat circumvention of its antidumping, countervailing duty, and general customs laws, and all signs point to even more vigorous enforcement on the horizon. 

The past few months alone have seen several notable criminal law enforcement actions related to antidumping orders.  For example, in March, a Baltimore-area importer was arrested by U.S. Customs and Border Protection (CBP) agents, at the behest of the U.S. Department of Justice (DOJ), for allegedly undervaluing and misclassifying entries of plastic grocery bags from China in order to avoid antidumping duties.  The importer faces a maximum of seventy-seven years in prison, as well as $2.5 million in fines in addition to the $1.15 million in antidumping duties already owed.  In May, following an investigation coordinated by CBP and DOJ, two individuals were sentenced to several years in prison, and ordered to pay penalties, for, among other things, falsely labeling seafood products in order to avoid roughly $146 thousand in antidumping duties on catfish from Vietnam.

All signs point to the likelihood that this is the mere tip of the iceberg.  As anyone with a passing familiarity with antidumping proceedings knows, the two aforementioned cases involve relatively small quantities of money.  Many antidumping orders involve the assessment of hundreds of millions of dollars in duties each year.  Given the willingness of CBP and DOJ to coordinate criminal investigations, and eventual indictments and arrests, over unpaid duties amounting to a mere $146 thousand, it stands to reason these agencies will be all the more motivated to pursue cases involving larger sums.         

Circumvention of U.S. antidumping and countervailing duty laws is also drawing unprecedented attention on Capitol Hill.  For example, in May, the powerful Senate Finance Committee heard testimony from high-ranking business officials, as well as Mr. Allen Gina, Assistant Commissioner of CBP's Office of International Trade, concerning the harm caused to the U.S. economy by such circumvention, as well as the challenges faced by CBP and U.S. Department of Commerce officials under the current anti-circumvention enforcement scheme.  Furthermore, Senators Ron Wyden and Olympia Snowe have introduced a bill specifically designed to boost the effectiveness of the enforcement of antidumping and countervailing duty laws.  The Enforcing Orders and Reducing Circumvention and Evasion (ENFORCE) Act is intended to address such common circumvention techniques as transshipping goods through third countries, and re-labeling shipments with false countries of origin or false descriptions of goods.

This focus on circumvention isn't likely to go away in the current international trade environment.  As a consequence, companies involved in international trade will no doubt face increasing risks for any attempts to circumvent antidumping and countervailing duty laws.  To wit, engaging in circumvention exposes companies to the risk of seizures of shipments, imprisonment of U.S.-based associates, monetary penalties, and being banned from exporting to the United States altogether. 

To avoid such trouble, companies trading in goods subject to antidumping or countervailing duty investigations and orders can simply elect to participate in the investigation and administrative review proceedings run by the U.S. Department of Commerce and U.S. International Trade Commission.  In obtaining a company-specific or separate duty rate through such proceedings, companies may secure their access to the U.S. market, in full compliance with U.S. fair trade law.