I OVERVIEW OF TRADE REMEDIES
The following is a brief introduction to the various areas of US trade remedies law, including the anti-dumping (AD) and countervailing duty (CVD) laws as well as other statutes designed to address different types of trade violations.
i Anti-dumping/countervailing duty
The AD and CVD laws are the best-known and most frequently used trade remedies laws in the United States. The AD laws are designed to provide a remedy (in the form of an import duty) for domestic industries that have been injured or threatened with injury by imports of unfairly priced (dumped) merchandise, whereas the CVD laws are designed to provide a remedy (also in the form of an import duty) for domestic industries that have been injured or threatened with injury by imports of merchandise produced or exported by companies benefiting from impermissible subsidies. Thus, each type of case features two components: an injury evaluation,2 conducted by the US International Trade Commission (ITC), and an analysis of the alleged wrongdoing – namely dumping (in AD cases) or subsidisation (in CVD cases) – conducted by the US Department of Commerce (the Department, or Commerce). Only if the agencies find both injury and dumping does an AD order issue, and likewise only if the agencies find both injury and unlawful subsidisation does a CVD order issue.
Dumping and subsidisation
Under US AD law, 'dumping' means selling a class or kind of merchandise at 'less than fair value.'3 To evaluate whether an exporter to the United States is dumping, Commerce first calculates the fair or 'normal' value – typically, the price at which the producer sells the same merchandise in the home market.4 It then compares that value to the US price (as adjusted for differences in freight, selling expenses, etc.). If the export sale is to an unrelated party, then the export price serves as the US price; if the export sale is to a related party, then the US price is based on the first sale in the US to an unrelated party. Thus, where a foreign exporter sells to its US affiliate, the US price is based on that affiliate's sale to its unrelated customers. Note, however, that because the US AD law treats China and Vietnam as 'non-market economies', it presumes that pricing in those markets is distorted and cannot serve as a reasonable basis for comparison to US prices. So, in cases involving those countries, Commerce uses a complex and somewhat unpredictable 'surrogate value' methodology, whereby it takes the various inputs and cost elements required to produce the merchandise and then values them based on their market prices in a 'surrogate country'.5 A surrogate country must be a producer of the merchandise at issue and must also be at a level of economic development similar to that of Vietnam or China, depending on the case.6 The extent to which the 'normal value' exceeds the US price is known as the 'margin of dumping',7 and ultimately translates into the AD duty that must be deposited at the time of entry.
Subsidisation, as noted above, does not involve unfair pricing but rather the provision of unlawful subsidies. Such subsidies can take a variety of forms (e.g., tax holidays, export credits, debt forgiveness) provided that they confer a financial benefit on the recipients and that they are 'specific', meaning that they are provided to particular companies or industries either as a matter of law or as a matter of fact.8 The 'margin' of subsidisation is calculated by spreading some portion of the subsidy benefit amount over the exporter's production or export sales value.9
If Commerce calculates a margin of dumping or subsidisation above the de minimis level (typically 2 per cent in AD investigations and 1 per cent in CVD determinations), then it issues an affirmative determination.10
ITC's injury analysis focuses on a three-year snapshot of the performance of the domestic (US) industry and includes a variety of factors such as profitability, capacity utilisation, capital investment and R&D.11 It also evaluates pricing trends for the domestically produced and imported merchandise over time to examine the relationship between imports and the domestic industry's performance.12 If ITC finds a causal connection between imports and material injury (or threat of injury) to the domestic industry, it issues an affirmative determination.13
Investigation and review procedures
AD and CVD investigations typically are commenced by the filing of a petition by the domestic industry.14 Following that filing, Commerce must confirm that the petitioners and supporters represent a sufficiently large proportion of the industry to have standing;15 if so, then the case moves to ITC for a preliminary determination as to whether there is a 'reasonable indication' of injury or threat.16 If ITC makes a negative determination at this juncture then the case is dismissed, but in practice the 'reasonable indication' standard is a low one and it is quite rare for an AD and/or CVD case to conclude at this stage.
If ITC makes an affirmative determination that there is a reasonable likelihood of injury (or threat thereof), then the case moves to Commerce, which analyses whether and to what extent there is dumping or subsidisation, or both. Commerce issues comprehensive questionnaires to the largest two or three exporters of the subject merchandise seeking sales and production data, and it typically conducts an on-site audit of those data known as a 'verification'. If respondents provide incomplete or inaccurate data, or otherwise fail to cooperate, they may be subject to adverse findings that can result in extremely high margins and duties; recent cases have seen combined AD and CVD margins in excess of 500 per cent. Commerce makes a preliminary determination (typically about seven months after the investigation begins) as to whether there has been dumping or subsidisation;17 at that point, importers must begin paying duties at the rates that Commerce has provisionally calculated.18 After that, both Commerce and ITC begin their final investigatory phases, in which interested parties may submit briefs and provide testimony. To the extent that Commerce makes a final affirmative determination that there is dumping and ITC makes a final affirmative determination of injury or threat, Commerce issues an AD or CVD order, or both, and importers must continue making duty deposits at the final rates Commerce calculates.19 If either agency issues a negative determination, then the case ends and the US Customs and Border Protection (CBP) refunds any duties remitted between Commerce's preliminary and final determinations.
The initial rate at which importers deposit duties thus is based on past sales data.20 As such, AD and CVD deposit rates are subject to change via annual 'administrative reviews' that may be requested by any US producer, foreign producer or exporter, or US importer of the subject merchandise.21 If a producer's margin of dumping for a particular annual period is lower than the deposit rate, then the US importers of that producer's merchandise receive a refund of the difference (plus interest).22 If the margin is higher than the deposit rate, then the importers are invoiced for the difference (again plus interest).23 In addition, the rates calculated in these administrative reviews become the new deposit rates for importers going forward. But given that the reviews themselves frequently take in excess of a year to be completed, it may be several years after an import entry is made before the final assessment rate for that entry is established.
In addition to annual administrative reviews at Commerce, AD and CVD orders are subject to five-year 'sunset reviews'. Conceptually, AD and CVD orders are designed to be temporary measures; as such, the sunset review procedures are designed to verify that the industry still needs the orders. As a result, every five years ITC conducts a review to evaluate whether revocation of the orders would lead to the recurrence of injury, and Commerce conducts a review to consider whether revocation of the orders would lead to the recurrence of dumping or subsidisation, or both.24 If either agency concludes that an order is no longer necessary, then the order is 'sunset' (revoked).25 Revocations in the first five-year sunset review are rare, with results becoming more mixed in subsequent reviews.
Interested parties that participated in the agency proceedings may appeal AD and CVD determinations in reviews and investigations (including determinations as to the 'scope' of AD/CVD orders and what products do and do not fall within it) go to the US Court of International Trade (CIT), an Article III court that sits in Manhattan. The CIT has exclusive jurisdiction over AD/CVD matters as well as certain types of customs issues. The CIT acts in many respects like an appellate court – its judges may not re-weigh the evidence or substitute their own judgment for that of the agencies; instead, the role of the judge assigned to a case is limited to evaluating whether the agency decisions at issue were supported by 'substantial evidence on the record'. If so, then the judge must affirm those decisions (whether or not he or she would have reached the same ultimate conclusion); if not, the judge must remand the matter to the agency for further consideration. Appeals from CIT decisions go to the US Court of Appeals for the Federal Circuit (CAFC) in Washington, DC. Interestingly, that court has interpreted the AD/CVD statute as allowing the CAFC to conduct de novo reviews,26 which has been the cause of some consternation in the US trade bar since the CIT is a specialised trade court whereas the CAFC hears primarily patent matters, appeals of Veterans Administration determinations and other non-trade issues. Interested parties aggrieved by CAFC decisions may file a petition for certiorari with the US Supreme Court, but such petitions are rarely granted, and grants typically must involve a constitutional question.27
In cases involving Mexico or Canada, interested parties may opt to invoke NAFTA's dispute resolution provisions and conduct their appeal before a binational panel in lieu of filing in the CIT. The panel will include five panellists from a roster that the importing and exporting countries maintain, but it will apply the law of the importing country; so, in appeals of US AD/CVD determinations involving Canada or Mexico, the panel will apply US law.
ii Other trade remedies
There are several other types of US trade remedies proceedings that merit mention. They can roughly be divided into those involving purely executive branch action and those requiring some level of administrative, congressional, or quasi-judicial action.
Beginning with actions most similar to AD/CVD cases, 'safeguard' actions, commonly known as 'Section 201' actions in reference to their statutory underpinning at Section 201 of the Trade Act of 1974,28 are designed to address a situation where imports of a particular class or kind of merchandise are increasing to the point of being a 'substantial' cause of 'serious injury' to the US industry.29 These cases differ from AD/CVD proceedings in several important ways: first, the domestic industry need not allege any wrongdoing by the exporting countries. Second, the standard for making the 'serious injury' showing is substantially higher than the standard for 'material injury' applied in AD/CVD cases (which is the primary reason why 201 proceedings are comparatively rare). Third, even if petitioners successfully satisfy that standard, the president has the discretion to grant or deny relief. If relief is granted, it can take the form of duties or quotas, and it may not last longer than four years (though it can be extended for up to an additional four years). Though 201 was last successfully used by the steel industry in 2001,30 two new 201 proceedings are ongoing on solar cells, modules and panels and large residential washers.31
The United States also provides a remedy for US holders of IP rights that are alleged to be infringed by imports. These proceedings, known as '337' cases because of their statutory underpinning in Section 337 of the Trade Act of 1974,32 are heard by administrative law judges and ultimately the ITC. Although ITC cannot award monetary damages the way that a federal district court can, it has the power to exclude merchandise from being imported – as a result, 337 cases are often brought in parallel to infringement cases in federal court to increase the complainant's leverage and scope of relief. In addition to IP violations, Section 337 also covers imported products manufactured via the use of other unfair trade practices (e.g., child labour).
There are two additional and important authorities available to the executive branch to unilaterally restrict imports via duties, quotas or other action. Although historically the use of these authorities has been quite rare, in recent months the Trump administration has unearthed them as part of the President's implementation of his trade policy. The first is commonly known as a 'Section 232' case, so-called because of the underlying statute – Section 232 of the Trade Expansion Act of 1962.33 Under that statute, the Commerce Department – in consultation with the Department of Defense – undertakes an investigation to determine whether imports of a particular product or category of products constitute a threat to US national security. To the extent that the conclusion is affirmative, the statute gives the President broad authority to take steps to 'adjust' the volume of imports in order to ameliorate the threat. The second is known as a 'Section 301' case (derived from Section 301 of the Trade Act of 1974), which gives the President broad authority to respond to unfair trade practices by US trading partners in a variety of ways, including the assessment of tariffs or implementation of quotas. Within the Section 301 process, if the challenged act, policy or practice is not covered by a free trade agreement (FTA) or the World Trade Organization (WTO) rules, retaliation can be immediate. However, if the challenged act is covered by an FTA or WTO rules, the USTR cannot retaliate until the applicable dispute settlement process is complete, which can take years.
Finally there are several additional executive authorities summarised in the table below; these too are historically rarely used, though given the events of recent months we may see one or more of these provisions invoked as well in the months to come.
|Action and authority||Triggering event||Standard||Timing and duration||Relief|
|Import surcharge under Section 122 of the Trade Act of 1974 (19 USC §2132)||Presidential Proclamation||To address serious US trade deficit, significant dollar depreciation, or correct international balance of payments disequilibrium||Effective: immediately Duration: 150 days, can be extended by Congress||Up to 15 per cent import duties|
|Action under Trading with the Enemy Act of 1917 (50 USC §4305)||Presidential proclamation||Restrict trade with countries hostile to the US||Immediate and unlimited||Unlimited|
|Action under Int'l. Emergency Economic Powers Act of 1977 (50 USC §1701 et seq.)||Presidential declaration||Declaration of national emergency with respect to a foreign threat||Immediate and unlimited||Unlimited|
II LEGAL FRAMEWORK
US AD and CVD proceedings are subject to both US law and agency regulation: the law is set out in 19 USC §§1671 and 1673 (for AD and CVD investigations, respectively), and the regulations appear in 19 CFR §351 et seq. and 19 CFR §207 et seq. (for Commerce's and ITC's regulations, respectively). Importantly, both agencies' regulations provide for the creation of 'administrative protective orders' or 'APOs', which ensure that the sensitive data that parties are obliged to provide in AD/CVD proceedings remain confidential to foreclose any possibility of the cases being used opportunistically to troll for competitive information.
World Trade Organization (WTO) member states that conclude that a Commerce or ITC determination violates the US's obligations under the WTO may invoke the WTO's dispute resolution provisions. However, as a matter of US law the WTO's decisions are not legally binding on the US34 – following an adverse decision, the US may either opt to bring its practices into conformity on a prospective basis (in general no retroactive correction is required), or it may ignore the WTO's findings altogether (subject to the right of the aggrieved WTO member to retaliate within the bounds of what the WTO Agreements allow).
III TREATY FRAMEWORK
Although the WTO generally favours free trade, the WTO nevertheless allows member states to maintain trade remedies laws and regulations, subject to the WTO's parameters on methodology, transparency and fairness. This 'carve-out' for trade remedies proceedings reflects the desire of the United States and its colleague member states to be able to maintain trade remedies regimes notwithstanding the general movement towards free trade. That being so, the free trade agreements (FTAs) into which the United States has entered tend not to address AD/CVD and safeguard actions other than to reaffirm the legitimacy of such actions. As noted in Section I, NAFTA allows aggrieved party member states in trade remedies proceedings brought by another member state to appeal to a binational panel rather than to the CIT, but NAFTA is unique in this regard. On occasion, as a part of the FTA negotiatory process, the US will insist on certain trade remedies provisions; for example, during the negotiation of the Korea–US FTA, the parties agreed upon a provision creating a special 'safeguard' mechanism for shipments of automobiles.35 But aside from these sorts of sectorally targeted initiatives, the US's treaty arrangements have little impact on US trade remedies law other than to legitimise its continued application to imports from FTA partners.
IV SIGNIFICANT LEGAL AND PRACTICAL DEVELOPMENTS
i Reinvigoration of Section 232: steel, aluminium and automotive products
Prior to the Trump administration, Section 232 had not been deployed since President Ford levied 232 tariffs on oil import more than 40 years ago. But in April 2017, the Commerce Secretary H Wilbur Ross – at President Trump's direction – initiated Section 232 investigations to determine whether imports of steel and aluminium products represent a threat to US national security. Following a lengthy and politically charged investigatory process that included Department of Defense consultations, public hearings, and the submission of written comments, in January 2018 Secretary Ross transmitted his reports on the results of those investigations – in both cases, he concluded that the imports do indeed threaten US national security. In light of that finding, he recommended several alternative measures that in his view would mitigate that threat – those measures included quotas, tariffs and combinations of the two. Ultimately, President Trump announced (in early March) that he intended to apply tariffs of 25 per cent and 10 per cent respectively to steel and aluminium imports. The announcement was followed within a few weeks by formal presidential proclamations to that effect indicating that the tariffs would take effect in 15 days but exempting Canada and Mexico in order to facilitate ongoing discussions with those countries.36 Implementation of the tariffs subsequently was delayed to 1 June 2018, to allow for discussions and negotiations with trading partners.
Initially, those discussions were somewhat fruitful – on 28 March 2018, South Korea achieved a permanent exemption from the steel tariff by agreeing to an annual quota (which also included quarterly caps), and in early May Argentina, Australia and Brazil were granted similar exemptions – for Argentina and Brazil, the exemptions were conditioned on quotas similar to those negotiated with South Korea, whereas Australia's exemption was a function of certain security considerations and accommodations that have not been publicly specified. But negotiations with the European Union eventually came to an impasse, and on 1 June 2018 the tariffs went into effect as to the EU and all the other countries that had declined to negotiate quota arrangements. In the interim, a number of trading partners including Canada, the EU, India, Japan, Mexico, Russia and Turkey have filed complaints in the WTO or announced that they intend to impose retaliatory tariffs on imports from the US. The Trump administration's position to this point has been that the 232 tariffs are not 'safeguard' tariffs but rather national security measures and as such do not fall within the scope of the WTO agreements.
The potential for steel and aluminium tariffs had triggered a firestorm of critical responses in the months leading up to the President's proclamations – in particular, a large number of US manufacturers contended that there are numerous grades and categories of steel that US steel producers either do not produce or produce but in insufficient volumes to meet market demands. In response to that concern, the President issued follow-on proclamations directing the Secretary of Commerce to establish a procedure whereby US steel and aluminium purchasers and consumers could petition for the exclusion of products that are domestically unavailable or not available in sufficient quantities. In late March of 2018, the Commerce Department rolled out the procedures for requesting such exclusions and for objecting to such requests.37 Once the tariffs took effect in June, the Commerce Department was inundated with requests, particularly in the steel proceeding. As of this writing, interested parties have filed more than 16,000 exclusion requests for steel products and more than 3,000 requests for aluminium products; the vast majority of those requests remain pending. Requesting parties have alleged a number of procedural deficiencies in the request process – in particular, there is no opportunity to respond to domestic industry objections, and as such there is a fear among requestors that objections that are misplaced or factually incorrect nonetheless will foreclose the possibility of exclusion, and appeal avenues are as yet unclear.
On 23 May 2018, the Secretary of Commerce announced the commencement of another Section 232 investigation, this time to determine whether imports of automobiles (including cars, sport utility vehicles, vans and light trucks) and auto parts threaten US national security. A formal Federal Register notice followed, setting the schedule for the submission of comments and a public hearing on 19 and 20 July 2018.38 Some members of Congress have suggested that the President's use of 232 generally and in the automotive space in particular is unjustified, and at the time of writing there is a Senate bill pending that would require the President to secure Congressional approval prior to applying Section 232 tariffs; House Minority leader Mitch McConnell, however, has indicated that he will not bring such legislation up for vote.39
ii Section 301 and Chinese intellectual property practices
On 14 August 2017, President Trump issued a memorandum to the Office of the US Trade Representative stating, inter alia, that:
China has implemented laws, policies, and practices and has taken actions related to intellectual property, innovation, and technology that may encourage or require the transfer of American technology and intellectual property to enterprises in China or that may otherwise negatively affect American economic interests. These laws, policies, practices, and actions may inhibit United States exports, deprive United States citizens of fair remuneration for their innovations, divert American jobs to workers in China, contribute to our trade deficit with China, and otherwise undermine American manufacturing, services, and innovation.40
The USTR commenced its investigation shortly thereafter, eventually concluding that 'the acts, policies, and practices of the Government of China related to technology transfer, intellectual property, and innovation covered in the investigation are unreasonable or discriminatory and burden or restrict US commerce', and recommending that a tariff of 25 per cent be applied to approximately US$50 billion of Chinese exports to the US.41 Following a comment process, in late June the administration announced that it had modified the initial list of products that would be subject to the tariffs, cutting out roughly US$16 billion worth of imports, and was publishing a new list to bring the total back up to US$50 billion.42 The administration further announced that the US$34 billion worth of items remaining from the initial list would be subject to tariffs effective 6 July.43 Finally, the announcement indicated that USTR would set up an exclusion process – not unlike that deployed in the Section 232 cases – to allow for the exclusion from the tariffs of domestically unavailable products.
Despite extensive negotiations between the United States and China, the two countries were unable to reach an accord and the 301 tariffs went into effect as scheduled. In response, China announced that effective immediately it would assess retaliatory tariffs on an equivalent volume of US exports, targeting agricultural and automotive products, and China also has expressed its intention to bring a WTO action in response to the 301 action, which it argues is unlawful and disproportionate.
iii Third-country processing in AD/CVD proceedings: the Bell Supply case
The Bell Supply case has a somewhat tortured procedural history, but at its core it addresses the role of third-country processing and its impact on the status of merchandise otherwise subject to an AD/CVD order. The case involved the AD order on oil country tubular goods (OCTG) from Korea – that order covered both finished Korean OCTG and unfinished (non-heat-treated) Korean OCTG, commonly known as 'green tubes'.44 The Bell Supply company was sending Korean green tubes to a third country for finishing; in response to a scope ruling request filed by the US industry, the company argued that the third-country finishing removed the products from the scope of the AD/CVD order. The Commerce Department disagreed, finding that the finishing did not 'substantially transform' the tubes, which therefore remained products of China and were thus subject to the AD order.45
On appeal, the Court of International Trade disagreed, arguing that Commerce's use of the 'substantial transformation' analysis was inappropriate. In essence, the Court's position was that the language of the scope of the order controls; as a result, if the language does expressly include merchandise processed in a third country, then such merchandise is necessarily outside the scope.46 Moreover, the court held that insofar as imports of such merchandise thwart the AD order, the domestic industry has a remedy; namely, to invoke the anti-circumvention provisions of the AD/CVD statute.47
That decision was greeted with howls of protest from the US petitioner community, which argued that it created a massive loophole and would result in producers subjecting their goods to minor third-country processing to evade AD/CVD orders. Moreover, petitioners pointed out that anti-circumvention determinations are prospective only, in that duties can apply to circumventing products only once the Commerce Department has initiated an anti-circumvention inquiry – this, they argued, would be further incentive to engage in the aforementioned minor third-country processing.
In an April 2018 decision, the US Court of Appeals for the Federal Circuit reversed that decision, holding that the lower court had misconstrued the statute. The court held that Commerce was indeed entitled to make a threshold 'substantial transformation' inquiry to determine an imported product's country of origin prior to conducting any anti-circumvention analysis because the two analyses have different elements and are conducted for different purposes. Having held that the use of the substantial transformation test was permissible, the court remanded the case to the CIT to determine whether Commerce's application of that test on the merits passed muster. Notably, Commerce's original conclusion that the third-country processing did not substantially transform the green tubes squarely contradicted a US Customs and Border Protection administrative ruling on the same issue, so the question of whether these particular goods are subject to AD/CVD remains open.
iv Anti-circumvention: hot-rolling and galvanising as 'minor alterations'
Historically, US AD/CVD cases in the steel sector featured strong categorical distinctions between product segments – for example, hot-rolled sheet, cold-rolled sheet (which is produced by running hot-rolled sheet through a cold-rolling mill) and corrosion-resistant sheet (which is produced by running cold-rolled sheet through a galvanising or galvannealing line) were understood to be meaningfully different products with different physical characteristics and end uses. As a result, AD/CVD cases to date have never sought to consolidate these products as a single category. Recent developments, however, suggest that the dividing lines between these products may be blurring, which could have a significant impact on the way steel cases are brought and litigated down the road.
Both cold-rolled sheet and corrosion-resistant sheet (CORE) from China are subject to US AD orders. In the wake of those orders, a number of Chinese steel producers established a presence in Vietnam, where they set up cold-rolling mills and galvanising lines. Given the long-standing precedent that both cold-rolling and the combination of cold-rolling and galvanising represent 'substantial transformations' that result in the products' origin being the country where those operations take place, the resulting products were exported to the US as products of Vietnam and therefore not subject to the Chinese AD orders. Confronted with this import volume, in September 2016 the domestic industry requested that the Department of Commerce initiate anti-circumvention inquiries – that is, the domestic industry argued that the conversion of Chinese hot-rolled sheet into cold-rolled sheet and CORE in Vietnam was a relatively minor operation, and as such the products should remain subject to the AD/CVD orders on Chinese cold-rolled sheet and CORE. After an extensive back-and forth, in November 2016 the Commerce Department initiated those inquiries.48
Importers and non-US steel producers argued vigorously against the domestic industry's position, noting that an affirmative finding would blur the lines between product categories, thereby making the administration of existing and future cases profoundly difficult. Nonetheless, after a nearly 18-month investigation into the matter, in May 2018 the Commerce Department published determinations finding that the shipments of Vietnamese cold-rolled and CORE produced using Chinese hot-rolled sheet are circumventing the orders on Chinese cold-rolled and CORE.49 Some practitioners suspected that the determinations might be limited to their facts; more specifically, they might be limited to instances in which Chinese hot-rolled sheet was the input into the further-processed items. But in mid-June 2018, the domestic industry filed follow-on requests, asking that the Commerce Department investigate whether sheet that is being cold-rolled in Vietnam using hot-rolled sheet from Korea is circumventing the AD order on Korean cold-rolled sheet. To the extent that these sorts of inquiries proceed, they raise significant questions about future steel proceedings and what the scope of their coverage is likely to sweep in over time.
V TRADE DISPUTES
As noted in Sections IV.i and ii, above, the Trump administrations application of Section 232 tariffs to steel and aluminium imports and 301 tariffs to a variety of Chinese imports have triggered a series of WTO actions; to this point, however, those actions remain in their infancy, and as such we will focus on actions completed during the past year.
In United States – Conditional Tax Incentives for Large Civil Aircraft,50 the latest chapter in the long-running dispute between Boeing and Airbus about alleged subsidies, the EU argued that certain conditional tax incentives established by the State of Washington in relation to the development, manufacture, and sale of large civil aircraft were prohibited by the WTO Agreement on Subsidies and Countervailing Measures (the SCM Agreement). In late-2016, the WTO panel tasked with evaluating those incentives concluded that they were indeed prohibited.51 Both the United States and the EU appealed elements of that result to the WTO appellate body, and in September 2017 the appellate body reversed the panel's determination in large part.52 The US aviation industry argued that this was a major vindication, with Boeing's general counsel stating that 'The WTO has rejected yet another of the baseless claims the EU has made as it attempts to divert attention from the US$22 billion of subsidies European governments have provided to Airbus and that the WTO has found to be illegal.'53
In United States – Anti-Dumping Measures on Certain Oil Country Tubular Goods from Korea,54 Korea contended that the Department of Commerce's 'viability' test in AD cases is deficient. In AD investigations and reviews involving market economies, the Commerce Department typically calculates the margin of dumping based on a comparison of US prices with home market prices, both sets of prices being adjusted to yield a 'factory door to factory door' comparison. However, to the extent that home market sales volumes are small relative to US sales volumes, the Commerce Department has the discretion to conclude that home market pricing is not a 'viable' basis for comparison and therefore use other benchmarks. Typically, the first of these is sales to third countries; if they too are relatively small, then the agency will rely on a constructed value based on a build-up of costs plus a reasonable profit. In the OCTG case, the Commerce Department concluded that neither home market sales nor third country sales were viable benchmarks, and accordingly the agency derived and relied on a constructed value. Korea contested that finding, but the WTO panel largely upheld the Commerce Department's methodology.55 Although the panel took issue with certain of the Commerce Department's findings, including the profit rate that the agency used in deriving its constructed value, in general it supported the discretion of agencies to determine whether and when to toggle between third-country sales and constructed value.
Trade remedies proceedings in the US are active – AD/CVD petitions continue to appear on a regular basis, and the Trump administration's deployment of rarely used authority, including Sections 232 and 301, has had and will continue to have a seismic impact on US importers, manufacturers, and consumers. The administration continues to express the view that tariffs are the best, if not the only, way to force a global rationalisation of steel and aluminium production capacity, and to pressure China to make meaningful changes to its IP practices in a way that will allow for a more balanced trade relationship. Supporters of these positions argue that these measures are long overdue and will have a salutary effect on the US economy, including via the repatriation of jobs and reduction of the US trade deficit. Critics contend that the measures will ignite a trade war that needlessly alienates our closest trading partners and drives up consumer prices with no concomitant benefit to US industry. The President has tweeted that 'trade wars are good, and easy to win' – that proposition is likely to be tested in the months to come.
1 Alexander H Schaefer is a partner at Crowell & Moring LLP. The information in this chapter was accurate as at August 2018.
2 Technically, in addition to material injury and the threat of material injury, ITC may also evaluate whether the establishment of an industry in the US has been 'materially retarded'. In practice, however, this allegation is rarely made, and affirmative findings of material retardation of a US industry are exceedingly unusual.
3 19 USC §§1673(a) and 1677(34).
4 If the quantum of home market sales are too small relative to US sales, Commerce may consider other bases for 'normal value', including sales to third countries or, failing that, cost of production plus a reasonable profit.
5 19 USC §1677b(c).
6 There are several surrogate countries that Commerce typically identifies; of late the most frequently used are Thailand and Indonesia.
7 19 USC §§1677(35) and 1677b.
8 19 USC §§1677(5) and 1677(5A).
9 This 'spreading' process is dependent on the nature of the subsidy; for example, if the subsidy comes in the form of an export credit paid only on export sales, then the subsidy value will be spread across only those sales. But if the subsidy is, say, a tax benefit that is not tethered to export sales, then it will be spread over all sales of that merchandise.
10 19 USC §§1671d(a) and 1673d(a).
11 19 USC §1677(7).
13 19 USC §§1671d(b) and 1673d(b).
14 19 USC §§1671a(b) and 1673a(b).
15 19 USC §§1671a(c)(4) and 1673a(c)(4).
16 19 USC §§1671b(a)(1) and 1673b(a)(1).
17 19 USC §§1671b and 1673b.
18 19 USC §§1671b(d) and 1673b(d).
19 19 USC §§1671d(c)(2)–(c)(4) and 1673d(c)(2)–(c)(4).
20 19 USC §§1671d(c)(1)(B)(ii) and 1673d(c)(1)(B)(ii).
21 19 USC §1675(a)(1).
22 19 USC §1677g.
24 19 USC §§1675(c) and 1675a.
25 19 USC §1675(d).
26 See NSK Corp. v. US Int'l Trade Comm'n, 542 F. App'x 950 (CAFC 2013).
27 In the past decade, only one trade case has reached the Supreme Court. See United States v. Eurodif S.A., et al., 555 U.S. 305 (2009).
28 See 19 USC §2252 et seq.
30 See Steel, Inv. No. TA-201-73, USITC Pub. 3479 (Dec. 2001).
31 See Crystalline Silicon Photovoltaic Cells, Whether Or Not Partially or Fully Assembled Into Other Products, Inv. TA-201-75; Large Residential Washers, Inv. TA-201-76.
32 See 19 USC §1337.
33 See 19 USC §1862.
34 See 19 USC §3512(a)(1).
35 See Correspondence between US Trade Representative Ron Kirk and Korean Trade Minister Kim Jong-Hoon (10 February 2011), available at https://ustr.gov/sites/default/files/uploads/Countries%20Regions/africa/agreements/korus/2011_02_10_Kirk-Kim%20Letter.pdf.
36 See Presidential Proclamation 9705 of 8 March 2015, 'Adjusting Imports of Steel into the United States', 83 Fed. Reg. 11,625 (15 March 2018) and Presidential Proclamation 9710 of 22 March 2018, 'Adjusting Imports of Aluminum into the United States', 83 Fed. Reg. 13,355 (28 March 2018).
37 See Requirements for Submissions Requesting Exclusions From the Remedies Instituted in Presidential Proclamations Adjusting Imports of Steel Into the United States and Adjusting Imports of Aluminum Into the United States; and the Filing of Objections to Submitted Exclusion Requests for Steel and Aluminum, 83 Fed. Reg. 12,106 (19 March 2018).
38 See Notice of Request for Public Comments and Public Hearing on Section 232 National Security Investigation of Imports of Automobiles, Including Cars, SUVs, Vans and Light Trucks, and Automotive Parts, 83 Fed. Reg. 24,735 (30 May 2018)
39 See The Washington Post, 'McConnell will not bring up bill challenging Trump tariffs.' (5 June 2018), available at https://www.washingtonpost.com/news/business/wp/2018/06/04/corker-planning-bill-to-curb-trumps-tariffs/?noredirect=on&utm_term=.e9294724f0ec.
40 See Addressing China's Laws, Policies, Practices, and Actions Related to Intellectual Property, Innovation,and Technology, 82 Fed. Reg. 39,007 (17 August 2017).
41 See Notice of Determination and Request for Public Comment Concerning Proposed Determination of Action Pursuant to Section 301: China's Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, 83 Fed. Reg. 14,906 (6 April 2018).
42 See Notice of Action and Request for Public Comment Concerning Proposed Determination of Action Pursuant to Section 301: China's Acts, Policies, and Practices Related to Technology Transfer, Intellectual Property, and Innovation, 83 Fed. Reg. 28,710 (20 June 2018).
44 See Bell Supply Company LLC v. United States, 179 F.Supp.3d 1082 (CIT 2016).
45 id. at 1088.
46 id. at 1092.
47 id. at 1093–1094.
48 See Certain Cold-Rolled Steel Flat Products From the People's Republic of China: Initiation of Anti-Circumvention Inquiries on the Antidumping Duty and Countervailing Duty Orders, 81 Fed. Reg. 81,057 (16 November 2016), and Certain Corrosion-Resistant Steel Products From the People's Republic of China: Initiation of Anti-Circumvention Inquiries on the Antidumping Duty and Countervailing Duty Orders, 81 Fed. Reg. 79,454 (14 November 2016).
49 See Certain Cold-Rolled Steel Flat Products From the People's Republic of China: Affirmative Final Determination of Circumvention of the Antidumping Duty and Countervailing Duty Orders, 83 Fed. Reg. 23,891 (23 May 2018) and Certain Corrosion-Resistant Steel Products From the People's Republic of China: Affirmative Final Determination of Circumvention of the Antidumping Duty and Countervailing Duty Orders, 83 Fed. Reg. 23,895 (23 May 2018).
50 United States – Conditional Tax Incentives for Large Civil Aircraft, DS487.
51 See id., Doc. No. WT/DS487/R (28 November 2016).
52 See id., Doc. No. WT/DS487/AB/R (4 September 2017).
54 United States – Anti-Dumping Measures on Certain Oil Country Tubular Goods from Korea, DS488.
55 United States – Anti-Dumping Measures on Certain Oil Country Tubular Goods from Korea, DS488, Doc. No. WT/DS488/R (14 November 2017).