CIT Again Upholds Constitutionality of CVD in NME Law, Sustains ITA 'Authority' Definition for LTAR Programs
The Court of International Trade sustained a challenge to the countervailing duty investigation of kitchen appliance shelving and racks from China (C-570-942), again affirming the constitutionality of the 2012 law allowing application of CV duties to non-market economies. Beyond the constitutional questions raised by plaintiffs, the court also ruled in favor of the International Trade Administration’s affirmative subsidy determinations on government provision of cheap inputs (for less than adequate remuneration, or LTAR) through companies both majority- and minority-owned by the Chinese government, as well as a private trading company.
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Constitutional Challenge Fails on Past Precedent in GPX
Plaintiffs Guangdong Wireking Housewares & Hardware and the government of China said the March 2012 law allowing imposition of CV duties on non-market economies (NME) is unconstitutional because it violates prohibitions on ex-post facto laws, as well as the Fifth Amendment due process and equal protection clauses.
A challenge on the same constitutional issues had already been decided in January by CIT in GPX v. U.S. (see 13010830). Here, the court here ruled against plaintiffs for the same reasons: the ex post facto clause only applies to penal laws, while CV duty laws are remedial; the law didn’t violate the due process clause because it had a rational purpose and didn’t upset importers’ expectations; and it didn’t violate the equal protection clause because the structure of the effective dates was enacted for the rational purpose of the preserving finality of ITA CV duty determinations.
Plaintiffs had Faulty Understanding of 'Authority' Definition for LTAR
Wireking and the Chinese government also challenged the ITA’s inputs for less than adequate remuneration subsidy determinations. Under countervailing duty law, inputs used to make subject merchandise can be a state subsidy if they are so cheap as to provide a financial benefit, and are provided by government “authority.”
The plaintiffs said the ITA simply equated government ownership with government control, but recent reforms in China mean state-owned companies don't “exercise government authority.” The plaintiffs also said the ITA should have looked to factors beyond government ownership in determining whether companies majority-owned by the state are “authorities” for the purpose of CV duty law, and that inputs provided by a private trading company could not be government subsidies because they weren’t directly provided by the government.
According to CIT, plaintiffs’ arguments relied on the false presumption that state-owned companies need to “exercise government authority” to be “authorities” under CV duty law. Government ownership in itself is enough, the court said, because the government can exercise control over the company by appointing the majority of its board of directors. The ITA’s policy of a rebuttable presumption of government control in cases where a company is majority state-owned is therefore reasonable, CIT said, and the plaintiffs didn’t adequately rebut that presumption.
Finally, the court also said the ITA reasonably found cheap inputs from private trading companies to be subsidies. Despite the fact that the inputs didn’t come directly from the government, the inputs were only so cheap because the private trading companies had obtained them from government-owned companies. The benefit was effectively passed through by the private company, and the ITA didn’t need to perform an upstream subsidies analysis or determine whether the trading companies were “authorities.”
(Guangdong Wireking Housewares & Hardware Co., Ltd. v. United States, Slip Op. 13-31, dated 03/12/13, Judge Tsoucalas)
(Attorneys: William Darringer of Curtis Mallet-Provost for plaintiff Guangdong Wireking Housewares & Hardware Co., Ltd. and plaintiff-intervenor government of China; Stuart Delery for defendant U.S. government; Kathleen Cannon of Kelley Drye for defendant-intervenors Nashville Wire Products, Inc. and SSW Holdings Co., Inc.)