On August 13, 2020, the US Department of Commerce (“Commerce”) published a proposed rule that seeks to modify the antidumping duty (“AD”) and countervailing duty (“CVD”) regulations in order to “strengthen the administration and enforcement” of AD/CVD laws by increasing efficiency and establishing new enforcement tools to assist Commerce in addressing “circumvention and evasion” of trade remedy actions. The proposed modifications, if adopted, will lead to more rigorous enforcement of the US AD/CVD laws and enable Commerce to more aggressively pursue parties that attempt to evade such laws. Commerce is seeking public comments on the proposed rule until September 14, 2020.

The new rule proposes several significant changes to the existing AD/CVD regulations in the United States. The following list highlights some of the more significant proposed changes:

  • Scope Inquiries – Commerce’s proposed modifications seek to bifurcate the current relevant provision, which governs both scope and circumvention proceedings. Among other changes, the proposed modifications would (i) eliminate all non-formal scope inquiry requests in favor of the proposed, standardized application for requesting a scope ruling; (ii) clarify the timing of each such proceeding (for example, unless Commerce rejects a scope ruling application within 30 days, a scope inquiry will be deemed initiated); and (iii) codify the long-standing “substantial transformation” test.
  • Circumvention Inquiries – A new regulation will cover the circumvention inquiries. Commerce also sets forth the information it will require to be included in a circumvention inquiry request, as well as relevant deadlines, including a shortened deadline for initiation of such inquiries.
  • New Shipper Reviews – In an effort to discourage potential abuses of the new shipper review process, Commerce proposes initiating a new shipper review only if/when a producer or exporter can demonstrate that a bona fide sale has been made. To this end, Commerce proposes modifications clarifying the factors it will consider when making a bona fide sale determination. In particular, under the proposed rule, a request for a new shipper review must contain (i) a certification from the unaffiliated customer in the United States that it did not purchase the subject merchandise from the producer or exporter during the period of investigation and (ii) a certification from the unaffiliated customer in the United States that it will provide information requested by Commerce regarding its purchase of subject merchandise. The specific documentation required under the proposed rule for Commerce to conduct a bona fide sale analysis includes, for example, (i) information related to whether shipments were made in commercial quantities; (ii) information related to the circumstances surrounding the sale (e.g., price, expenses, resale for profit, the arm’s-length basis of the sale); (iii) the producer’s or exporter’s offers to sell merchandise in the United States; and (iv) an explanation of any non-producing exporter’s relationship with its producer/supplier and identification of the producer’s or exporter’s relationship to the first unrelated US customer. As indicated by these requirements, and in line with the purpose of this modification, these proposed changes would significantly increase the burden of proof on the party requesting the initiation of a new shipper review.
  • Covered Merchandise Referrals – Under section 421 of the Enforce and Protect Act of 2015 (“EAPA”), US Customs and Border Protection (“CBP”) is authorized to conduct civil administrative investigations of potential evasion of AD/CVD orders on the basis of an allegation by an interested party or upon referral from another agency. In conducting EAPA investigations, CBP may seek a determination from Commerce regarding whether or not the merchandise at issue in the EAPA investigation is “covered merchandise.” Commerce proposes implementing a new regulation to govern its consideration and review of “covered merchandise” referrals from CBP.
  • Certification of Entries – Commerce seeks to codify its existing practice of requesting certifications from interested parties to establish whether merchandise is subject to an AD/CVD order, especially with respect to circumvention inquiries. Such proposed modifications will provide Commerce a remedy—specifically, the authority to instruct CBP to collect cash deposits from the importer—where any importer/interested party fails to provide the requested certification or any certification contains materially false, fictitious or otherwise fraudulent statements. Although the proposed rule acknowledges CBP’s own authority to address fraud in import documentation, it makes clear that this modification is not meant to supplant CBP’s authority. Moreover, the proposed rule states that a formal finding by CBP is not required for Commerce to determine that a certification is deficient. Rather, such a determination would be made by Commerce pursuant to its own authority.
  • Importer Reimbursement Certification – Commerce proposes updating the regulation that requires importers of merchandise covered by AD or CVD orders to file a certification with CBP, prior to liquidation, that specifies whether the importer has entered into an agreement for the payment/reimbursement of AD or CVD duties. Proposed modifications would allow such certification to be filed electronically, in accordance with CBP requirements. Commerce also proposes removing the requirement for specific certification language. Under the proposed rule, importers will instead be allowed to simply certify to the substance of the certification.

The proposed rule will also involve procedural modifications to the following:

  • Comments on Industry Support – Once an AD or CVD petition is filed, Commerce must determine whether the requirements for initiating an investigation have been met, including determining whether there is appropriate industry support. Currently, comments on industry support may be filed up to and including the date by which Commerce must initiate an investigation. This leaves Commerce with very little or even no time to review such comments before it must release its initiation determination. Commerce proposes modifying the relevant regulation to impose a deadline such that comments on industry support are due no later than five business days prior to the scheduled initiation date. Imposing such a deadline will provide Commerce with more time to consider and act on all comments.
  • Letters of Appearance and Public Service Lists – In implementing the proposed modifications discussed above, Commerce will need to make corresponding modifications to the regulations governing entries of appearance and public service lists. For example, the modifications include clarifying that an interested party submitting a scope ruling application (see above for more information on such application) would not need to file a separate entry of appearance.
  • Importer Access to Business Proprietary Information – As Commerce has proposed modifications that would effectually split scope inquiry regulations from circumvention inquiry regulations, Commerce will need to update the provisions governing access to business proprietary information for both types of inquiries.

Currently, there are well over 500 AD and CVD duty orders in effect. The Trump administration has made enforcement of US trade law a primary focus, as evidenced by the 281 new AD and CVD investigations initiated by Commerce under President Trump—a 260 percent increase over the same time period during the prior administration. The modifications detailed in the proposed rule are aimed at reinforcing the Trump administration's focus on using AD/CVD laws as a primary tool for protecting US industries from injurious imports by making the administration of such laws less burdensome for Commerce. At the same time, the proposed rule proposes the implementation of mechanisms that will promote heightened enforcement and the elimination of perceived loopholes that allow for abuse. Businesses that are impacted by AD/CVD proceedings and orders should closely monitor developments regarding these proposed changes as they could materially impact the AD/CVD process.