Commerce Issues Final Rule Overhauling AD/CVD Regulations

The final rule modifies Commerce’s regulations on scope proceedings, allowing the agency to suspend liquidation prior to a scope inquiry’s initiation date but adding provisions that allow for requests to suspend liquidation at an “alternative date.” It also amends the agency’s regulations on new shipper reviews and the treatment of business proprietary information in AD/CVD proceedings; creates new provisions on importer certifications, covered merchandise referrals and anti-circumvention inquiries; and establishes deadlines for industry support comments at the beginning of AD/CVD investigations.

Some provisions of the final rule are set to take effect Oct. 20, including those on industry support comments, new shipper reviews, and importer certification and reimbursement, while others would be effective Nov. 4, such as those on scope and anti-circumvention inquiries and covered merchandise referrals.

Extensive Scope Changes Affect Suspension of Liquidation Dates, (k)(1) Factors

­­The final rule adopts extensive changes to Commerce’s scope regulations at 19 CFR 351.225. Among other changes, Commerce is codifying that scope rulings apply back to the date liquidation was originally suspended under an AD/CVD order (i.e., usually back to the preliminary determination in an AD/CVD investigation). The final rule also addresses initiation procedures, submission deadlines and how Commerce applies its (k)(1) factors when making scope decisions.

Retroactive application of scope rulings. As proposed, with minor modifications, Commerce is adopting the following language in 19 CFR 351.225(a) on the application of scope rulings: “A scope ruling that a product is covered by the scope of an order is a determination that the product has always been covered by the scope of that order.”

In the same vein, Commerce’s final rule provides that, at the time of a preliminary or final scope ruling determining that the product is covered by the scope of an order, “Commerce normally will direct CBP to begin the suspension of liquidation of unliquidated entries not yet suspended, which entered before the date of initiation of the scope inquiry, and collect applicable cash deposits.” Courts have interpreted Commerce’s previous regulations to mean the agency can only suspend liquidation back to the date a scope inquiry was initiated.

‘Alternative’ suspension of liquidation date. However, in a change from its proposed rule, Commerce will allow for exceptions to retroactive suspension of liquidation when it determines it is “appropriate to do so,” the agency said.

“Under this framework, Commerce may consider upon timely request of an interested party or at its discretion whether such suspension of liquidation and application of cash deposits, also referred to as retroactive suspension, should not be applied to certain entries which pre-date the date of initiation,” Commerce said. “In response to a timely request from an interested party, Commerce will only consider directing CBP to begin suspension of liquidation and application of cash deposits to merchandise entering at an alternative date based on a specific argument by the interested party supported by evidence establishing the appropriateness of that alternative date.”

The ability to request an alternative date is meant for “limited instances,” such as “situations in which Commerce issues a scope ruling that a product is covered by the scope of an order, and the affected importers have no opportunity, for no reason other than the timing of the scope ruling, to request an administrative review to potentially lower their liability for entries that pre-date the date of initiation of the scope inquiry,” Commerce said.

The changes apply to scope inquiries initiated by requests filed on or after Nov. 4, or self-initiated scope inquiries that begin on or after that date. However, Commerce will not apply this authority to unliquidated entries that were entered prior to Nov. 4, it said.

Self-initiated scope inquiries. Commerce’s final rule includes provisions on the agency’s authority to self-initiate a scope ruling. In a change from the proposal, the agency says that it will publish a notice in the Federal Register when it self-initiates a scope inquiry.

Standardized scope applications. The new regulations also set requirements for interested parties to submit standardized scope ruling applications. “This is a significant change from Commerce’s current procedures, which do not require a detailed standardized application,” the agency said. Scope applications will be deemed accepted and a scope inquiry commenced after 30 days if the application is not rejected by Commerce.

In the final rule, Commerce said it will start publishing a monthly list of scope applications filed with Commerce.

Deadlines. Commerce is extending its deadline for issuing final scope rulings. Currently, the agency is required to issue its final ruling within 45 days, which it says is “difficult and frequently unworkable” and forces Commerce to issue multiple extensions. The final rule provides that Commerce “shall issue a final scope ruling within 120 days after the date on which the scope inquiry was initiated, although it may be extended up to an additional 180 days for good cause (for a fully-extended total of 300 days).”

Commerce is also setting deadlines for interested parties to provide responses and new factual information. These deadlines are generally extended from those in Commerce's proposed rule, as follows:

• 30 days to submit comments and factual information after Commerce self-initiates a scope inquiry;
• 14 days to submit comments and factual information to rebut, clarify, or correct factual information submitted by the other interested parties;
• 30 days to submit comments and factual information after Commerce initiates a scope inquiry pursuant to a scope application;
• 14 days for the applicant to submit comments and factual information to rebut, clarify, or correct factual information in response to the interested parties' submissions;
• 14 days to submit comments and factual information to rebut, clarify, or correct factual information contained in a questionnaire response;
• Seven days for the original submitter to submit comments and factual information to rebut, clarify, or correct factual information submitted in the interested party's rebuttal, clarification, or correction;
• 14 days after the preliminary scope ruling to submit comments; and
• Seven days to submit rebuttal comments thereafter.

(k)(1) and (k)(2) factors. Commerce is revising 19 CFR 351.225(k)(1) to codify the hierarchy in which it will consider these sources when making scope determinations. The paragraph now says that, “if Commerce determines that the language of the scope is not itself dispositive (i.e., it is not dispositive using no interpretive tools whatsoever), Commerce may take into account the identified primary interpretive sources,” which are the traditional (k)(1) sources, in determining if the language is dispositive and the scope covers the product at issue.”

Only if those primary interpretive sources are not sufficient will Commerce “consider secondary interpretive sources such as other Commerce or ITC determinations not included in the primary interpretive sources, Customs rulings or determinations, industry usage, dictionaries, and any other relevant record evidence,” the final rule said.

“Absent such codification, a court might rely on a secondary source, such as a dictionary definition, to interpret a word or phrase in a manner which is inconsistent with the meaning used by the injured domestic industry in drafting the proposed scope and petition, and the collective interpretation of Commerce, the industry, and the ITC of that term expressed in the underlying investigation,” Commerce said.

Commerce also amended 19 CFR 351-225(k)(2) to say that it will only consider these additional factors if the (k)(1) factors are not dispositive. The agency also changed the factor “expectations of ultimate purchasers” to “expectations of ultimate users,” because “we have found in our practice that there are sometimes cases in which it is not the expectations of purchasers, but the expectations of the ultimate users of a product which inform whether or not a product was intended to be included in the scope of an order,” Commerce said.

New (k)(3) ‘mixed media’ factors. Commerce is adding a new 19 CFR 351.225(k)(3) to codify its analysis of component parts of larger products, also known as a mixed media analysis. First, under paragraph (k)(3)(i), Commerce analyzes whether the component is subject to the scope of an AD/CVD order. If not, then the inquiry ends. If it is, Commerce proceeds under section (k)(3)(ii) to determine whether the component’s inclusion in the merchandise as a whole would result in the component’s exclusion from the order. If not, then under paragraph (k)(3)(iii), Commerce will consider additional relevant factors on a product-specific basis, Commerce said.

Negative preliminary rulings. In a departure from the existing regulations, Commerce’s final rule says the agency will no longer inform CBP of a negative preliminary scope ruling and direct it to end suspension of liquidation for relevant entries. Instead, suspension of liquidation will continue until Commerce issues its final scope ruling, the final rule said.

Application of rulings to identical products. In its proposed rule, Commerce said it would in some circumstances apply a previous scope ruling issued for a particular product to “all products with the identical physical description from the same country of origin as the particular product at issue, regardless of producer, exporter, or importer, without initiating or conducting a new scope inquiry under this section.” Commerce eliminated that provision from its final rule.

“Commerce agrees with the concerns expressed that if Commerce does not initiate or conduct a new scope inquiry based upon the filing of a scope application, but instead automatically issues a scope ruling that is applicable to all producers, exporter, or importers of that merchandise, such a procedure would not provide potential interested parties with adequate procedures to protect their interests,” it said.

Nonetheless, Commerce said it may issue “scope clarifications” after an order is issued to address repeated, identical or similar scope requests, adding new 19 CFR 351.225(q) to address this authority. “[T]he scope clarification may take the form of an interpretive footnote to the scope when the scope is published or issued in instructions to CBP,” Commerce said.

The agency also said it may self-initiate scope inquiries based upon scope rulings applicable to an order covering one country to apply it to other countries subject to identical or similar AD/CVD orders, and may also choose to apply scope rulings on a country-wide basis for all products from the same country with the same relevant physical characteristics.

New Section on Anti-Circumvention Inquiries Similar to Scope Provisions

Commerce’s final rule also adds new elements to 19 CFR 351.226 on anti-circumvention inquiries. The new section has many parallels with the agency’s updated regulations on scope rulings, although, in a change from Commerce’s proposal, the agency will not retroactively suspend liquidation after an affirmative finding of circumvention unless it approves a request to do so.

Suspension of liquidation. The final rule says that, upon a preliminary or final determination of circumvention, CBP will normally direct CBP to suspend liquidation back to the initiation date of the anti-circumvention inquiry. That’s no change from Commerce’s existing regulations, but a reversal from Commerce’s proposed rule, which had, similar to the new scope regulations, applied suspension of liquidation to all unliquidated entries back to the original suspension of liquidation under the AD/CVD order.

“Depending on the circumstances of a given case, prior to the notice of initiation of the circumvention inquiry, certain exporters, producers, and/or importers of products alleged to be circumventing may not be aware that Commerce could apply AD/CVDs to such products -- which ‘do not fall within the order’s literal scope’ -- through an affirmative circumvention determination,” Commerce said, explaining its decision.

However, Commerce still left the door open for parties to request retroactive suspension of liquidation. “If Commerce determines that it is appropriate to do so, Commerce may direct CBP to begin the suspension of liquidation of certain unliquidated entries not previously suspended, which entered before the date of publication of notice of initiation of the inquiry, and collect the applicable cash deposits. This includes any unliquidated entries back to the first date of suspension under the order that remain unliquidated at the time of the preliminary or final circumvention determination,” Commerce said.

“In certain instances, we disagree that it would be unfair to all parties or that all parties would have ‘no notice’ or lack due process in every case before potential duty liability attaches to entries that pre-date the date of initiation of the inquiry pursuant to an affirmative circumvention determination. In fact, we believe that there are scenarios in which parties will certainly have notice before potential duty liability attaches to entries that pre-date the date of initiation,” Commerce said.

Commerce also considered a proposal that Commerce should immediately begin suspending liquidation of unliquidated entries following the initiation of an anti-circumvention inquiry, but decided against it. “After consideration of the parties’ arguments and based on current practical and administrability concerns, we have decided to continue to order suspension of liquidation and collection of cash deposits for such entries only after Commerce’s first (preliminary or final) affirmative circumvention determination.”

Inquiry requests. Commerce’s final rule sets new requirements for interested parties to request circumvention inquiries. “In many respects, they parallel much of the information required of a party filing a scope ruling application, pursuant to § 351.225(c),” Commerce said. The new regulations set a deadline of 30 days -- up from 20 in the proposal -- to accept or reject the request. That period is extendable by 15 days to a total of 45 days. Unlike with scope ruling requests, Commerce denied a request to publish requests for circumvention inquiries in the Federal Register.

Deadlines. Commerce set deadlines for a preliminary circumvention determination within 150 days of the publication of the initiation notice, and 300 days for the final determination of circumvention, extendable to 365 days. “Commerce received praise from commenters on these new regulatory deadlines, with commenters stating that such time limits will provide all interested parties with a better and more predictable understanding of the duration of a circumvention inquiry.”

The agency also set new deadlines, modified from its proposed rule, for interested parties to provide responses and new factual information. These deadlines mirror those newly established for scope inquiries, as follows:

• 30 days to submit comments and factual information after Commerce self-initiates a circumvention inquiry;
• 14 days to submit comments and factual information to rebut, clarify, or correct factual information submitted by the other parties;
• 30 days to submit comments and factual information in response to the request after Commerce initiates a circumvention inquiry;
• 14 days for the requestor to submit comments and factual information to rebut, clarify, or correct factual information submitted by the interested parties;
• 14 days to submit comments and factual information to rebut, clarify, or correct factual information contained in a questionnaire response;
• 7 days for the original submitter to submit comments and factual information to rebut, clarify, or correct factual information submitted in the interested party's rebuttal, clarification or correction;
• 14 days after the preliminary circumvention determination to submit comments; and
• 7 days to submit rebuttal comments thereafter.

Negative preliminary determinations. Whereas under Commerce’s previous regulations, Commerce would notify CBP when there was a negative preliminary circumvention determination and direct the customs agency to end suspension of liquidation for any suspended entries, under the final rule this is no longer the case. Instead, entries will remain suspended until Commerce issues its final determination in the inquiry.

New Regulations Define Procedures for Covered Merchandise Referrals

The final rule includes new regulations setting Commerce’s procedures for covered merchandise received from CBP to support the customs agency’s Enforce and Protect Act investigations. Though not required by Congress when it enacted EAPA, the Commerce regulations under 19 CFR 351.227 will “address procedures and standards specific to Commerce’s consideration of covered merchandise referrals,” and in particular “govern Commerce’s receipt of a covered merchandise referral, Commerce’s initiation and conduct of a covered merchandise inquiry, and Commerce’s covered merchandise determination.”

Initiation. Commerce’s final rule gives the agency 20 days to decide what action to take when it receives a referral from CBP, up from 15 days in the proposal. By that time, Commerce must decide whether to begin an inquiry using either its scope ruling or its circumvention inquiry procedures, or to address the referral in an ongoing scope circumvention inquiry. A third option included in the proposal, to self-initiate an anti-circumvention inquiry, is absent from the final rule.

“While timeliness continues to be a significant consideration in drafting this final rule, increasing the proposed 15-day deadline to 20 days will give Commerce the time it needs at this initial stage while also ensuring that Commerce takes swift action after receiving a sufficient covered merchandise referral,” Commerce said.

Deadlines. The final rule sets a 120-day deadline for Commerce to make its covered merchandise determination, extendable to a total of 270 days for “good cause.” The proposed rule had only provided for a maximum of 180 days if an inquiry was “extraordinarily complicated.”

The final rule also sets deadlines for comments and the submission of factual information by parties to the inquiry. “Much of this provision tracks the procedures provided for scope inquiries under § 351.225(f) and circumvention inquiries under § 351.226(f),” Commerce said. As with its final scope and circumvention provisions, Commerce added additional time from its proposed rule.

Liquidation. Like with new provisions on circumvention inquiries, the final rule provides that, at the time of an affirmative preliminary or final covered merchandise determination, Commerce will direct CBP to suspend liquidation for unliquidated entries beginning on the date of the notice initiating the covered merchandise inquiry. However, “Commerce maintains the flexibility in covered merchandise inquiries to apply, depending on the nature of the product at issue in the covered merchandise referral, rules for the suspension of liquidation and cash deposits in a manner appropriate to the situation. This includes establishing a specific alternative retroactive suspension date. If Commerce considers an alternative date for not yet suspended entries predating the date of initiation, Commerce may consult with CBP,” it said.

Criteria for New Shipper Reviews Clarified

The final rule modifies Commerce’s regulations on new shipper reviews to clarify the circumstances under which Commerce will grant new shipper reviews, and also to establish specific factors that the agency will consider when determining whether the sales at issue are bona fide, as required under TFTEA.

In a change from the proposed rule, Commerce is doing away with proposed requirements to obtain certifications from the exporter’s unaffiliated U.S. customer. Instead, the exporter or producer must certify that it will “provide during the course of the new shipper review, and to the fullest extent possible, necessary information related to the unaffiliated customer in the United States.”

The final rule also requires that the “exporter/producer will provide a certification by the unaffiliated customer of its willingness to participate in the new shipper review and provide information relevant to the new shipper review, if such information is requested by the Secretary,” Commerce said. “To the extent the unaffiliated customer cannot provide its certification, the exporter/producer is required to provide, in the alternative, an explanation of why the unaffiliated customer cannot provide its certification.”

Final Rule Sets Deadlines for Comments on Industry Support in AD/CVD Investigation

The final rule adds new deadlines for the submission of comments on industry support to inform the agency’s decision on whether to initiate an AD/CVD investigation. Industry support comments will be due no later than five business days before the scheduled date of initiation, which is 20 days following receipt of the petition, extendable to 40 days in some circumstances. Rebuttal comments will be due no later than two calendar days thereafter.

New Provisions ‘Codify’ Commerce’s Importer Certification Requirements

New 19 CFR 351.228 is intended to “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.

The new section “itself does not impose any additional requirements on parties. Instead, this provision adopts existing practice and enhances that practice to clarify the consequences for failure to provide certifications to all parties subject to any current or future certifications,” Commerce said. “To the extent that parties are faced with any additional burdens pursuant to such certifications, such potential burdens are directly related to the proceeding itself in which Commerce adopted the certification and relevant requirements.”

Final Rule Allows for Electronic Submission of Reimbursement Certificates

Commerce is amending its regulation on importer reimbursement certifications filed with CBP to provide for electronic submission of certifications. The final rule also clarifies that, “although the certification is required prior to liquidation, CBP could also accept the reimbursement certification in accordance with its protest procedures.”

APO Procedures Streamlined in Some Circumstances

Finally, Commerce is modifying its regulations on service lists, entries of appearance and importer filing requirements for access to business proprietary information in AD/CVD proceedings.

In one change, the final rule provides that “an interested party filing a scope ruling application or a circumvention request, as well as any publicly identified parties in a covered merchandise referral from CBP, under section 517 of the Act, need not file an entry of appearance,” Commerce said.

Another change adds specific reference to importers involved in circumvention inquiries in Commerce’s regulations on importer access to business proprietary information (BPI) in Commerce proceedings, and exempts importers identified by CBP in a covered merchandise referral from such filing requirements.