October, 2015
Be careful what you wish for!
Mark K. Neville, Jr.
I am sure that we have all heard this old adage whose central irony has been expressed in countless other languages. I am just as sure that almost all of us can look back with regret to the times when certain hoped-for developments in our personal or professional lives took place and only then did we discover all of that striving was either entirely for nought or not worth half the effort.
There have been times when we would have been far better off leaving things as they were. Sometimes that “I should have let it lie” plaint will arise because unforeseen, indeed unforeseeable, events have intervened.
But we cannot freeze ourselves into inertia. Instead, our task, whether managing our personal or our professional lives, is to try to anticipate all eventualities and to make the best possible decisions after factoring in all the variables. Sometimes we should sit and wait and sometimes we should act.
And that brings us to this month’s lesson, where a foreign producer who was working under the weight of an Antidumping Order tried to jump out of the frying pan and wound up in the fire, to use another reliable expression. It’s all laid out in a recent decision of the US Court of International Trade (CIT), Viet I-Mei Frozen Foods Co., Ltd. v. United States.1 That we are dealing with the process underlying trade remedy statutes in the US is an automatic clue that the discussion is going to demand close attention—as you shall see.
One of those special NME rules is that, to prevent the rampant circumvention in NME cases, the special duties can be quite specific—they may be pegged to a combination of a specific producer and a specific shipper (exporter). Another characteristic with NME cases is that the duty rates that apply to any given producer/exporter combination will depend on the status of the entities, i.e., whether they have been granted separate rate status or they are lumped into a country-wide category, the last category invariably carrying the highest antidumping duty rates. Note that the presumption is that companies in NME countries are subject to government control, and a company that seeks to rebut that presumption must earn it by showing independence and freedom of government control. Such independence will justify a separate rate.
Those producers or exporters, or importers who are buying from those producers or exporters, who want to make out a case for their separate rate must request that status from the Commerce Department, which opens them up to all of the risks of being named a mandatory respondent--having to compile production and other cost data and submit responses to lengthy questionnaires and being open to on-site verification. The process is fraught with considerable costs for the producer or importer that may be measured in management time devoted to this distraction, interruptions and attention diverted from business goals and professional fees. The process has been termed procrustean, with the numerous deadlines strictly enforced.5 The applicants’ participation must not only be timely but full participation and cooperation of the applicants is required. If that is not forthcoming, the dreaded sanction of “adverse facts available” (AFA) can come into play with the invariable result being that the highest possible special duty rate will be applied to entries from that producer/exporter.
Of course, if the applicant puts in a request for a separate rate but is not selected for the full review, then the applicant will not be given an individual rate but may still be able to benefit as it will be assigned an “all others separate rate.” In this connection, you should recognize that in the ordinary course Commerce ultimately reviews only two respondent companies as mandatory respondents, often the largest two by volume of exports to the US.6 That is not always the case, however, and even a very small volume importer or producer may find itself being selected as a mandatory respondent. If the producer or importer is confident that its data will support a lower special duty rate, the company may still ask for its individual data to be reviewed as a “voluntary respondent.”7
So there is a certain degree of judgment involved in these cases—should the company stay in the country-wide rate or should the company apply for a separate rate? If not selected as a mandatory respondent then should the company apply for “voluntary respondent” status?
Grobest
Second Review—0.00%
Third Review—0.00%
Fourth Review—4.27% originally
25.76% after reconducted review
First, and obviously, be careful what you wish for—you may get it. The second and more important lesson is that stuff happens, and sometimes there is precious little we can do about it. We have learned that no amount of close monitoring, careful planning and astute analysis, no amount of engaged dialogue and prudent client counseling sessions can prevent some of these unpleasant surprises. There are a lot of moving parts in the customs and trade law world, with clients stretched across the globe and often as much in play as their products. Over the course of a long career you will found yourself surprised—if that has not happened yet, it is only because you have not practiced long enough. When it does, look back to Grobest.
.......................................................................................................................................
There have been times when we would have been far better off leaving things as they were. Sometimes that “I should have let it lie” plaint will arise because unforeseen, indeed unforeseeable, events have intervened.
But we cannot freeze ourselves into inertia. Instead, our task, whether managing our personal or our professional lives, is to try to anticipate all eventualities and to make the best possible decisions after factoring in all the variables. Sometimes we should sit and wait and sometimes we should act.
And that brings us to this month’s lesson, where a foreign producer who was working under the weight of an Antidumping Order tried to jump out of the frying pan and wound up in the fire, to use another reliable expression. It’s all laid out in a recent decision of the US Court of International Trade (CIT), Viet I-Mei Frozen Foods Co., Ltd. v. United States.1 That we are dealing with the process underlying trade remedy statutes in the US is an automatic clue that the discussion is going to demand close attention—as you shall see.
Vietnamese Shrimp
There is an Antidumping Order in place against Frozen Warmwater Shrimp from Viet Nam.2 As you may know, the modus operandi of the US trade remedy regime for antidumping and countervailing duty is that, once the Order is in place, subsequent entries are made and estimated duty, both normal duty and the remedial duty, the latter often in the form of cash deposits, is paid at the time of entry.3 The final accounting that comes with liquidation of the entry is suspended until the Department of Commerce has conducted its annual review for the year in which the entry was made. The additional duty may stay the same, or it may be lower or higher—dramatically so--as a result of the facts gathered in the investigation and the rates assigned as a result.4 This means that there is a lot riding on the results of the annual review. One of the peculiarities of these statutes is that there are special rules for imports from Non Market Economy (NME) countries, such as China and Viet Nam. Our discussion is about an NME case.One of those special NME rules is that, to prevent the rampant circumvention in NME cases, the special duties can be quite specific—they may be pegged to a combination of a specific producer and a specific shipper (exporter). Another characteristic with NME cases is that the duty rates that apply to any given producer/exporter combination will depend on the status of the entities, i.e., whether they have been granted separate rate status or they are lumped into a country-wide category, the last category invariably carrying the highest antidumping duty rates. Note that the presumption is that companies in NME countries are subject to government control, and a company that seeks to rebut that presumption must earn it by showing independence and freedom of government control. Such independence will justify a separate rate.
Those producers or exporters, or importers who are buying from those producers or exporters, who want to make out a case for their separate rate must request that status from the Commerce Department, which opens them up to all of the risks of being named a mandatory respondent--having to compile production and other cost data and submit responses to lengthy questionnaires and being open to on-site verification. The process is fraught with considerable costs for the producer or importer that may be measured in management time devoted to this distraction, interruptions and attention diverted from business goals and professional fees. The process has been termed procrustean, with the numerous deadlines strictly enforced.5 The applicants’ participation must not only be timely but full participation and cooperation of the applicants is required. If that is not forthcoming, the dreaded sanction of “adverse facts available” (AFA) can come into play with the invariable result being that the highest possible special duty rate will be applied to entries from that producer/exporter.
Of course, if the applicant puts in a request for a separate rate but is not selected for the full review, then the applicant will not be given an individual rate but may still be able to benefit as it will be assigned an “all others separate rate.” In this connection, you should recognize that in the ordinary course Commerce ultimately reviews only two respondent companies as mandatory respondents, often the largest two by volume of exports to the US.6 That is not always the case, however, and even a very small volume importer or producer may find itself being selected as a mandatory respondent. If the producer or importer is confident that its data will support a lower special duty rate, the company may still ask for its individual data to be reviewed as a “voluntary respondent.”7
So there is a certain degree of judgment involved in these cases—should the company stay in the country-wide rate or should the company apply for a separate rate? If not selected as a mandatory respondent then should the company apply for “voluntary respondent” status?
Revocation
There is yet another decision that a company might make—should it try to get a revocation of the Order?8 A revocation would allow the company to get out from under the Antidumping Order altogether. But the rub here is that revocation will only be considered for a respondent which has had an individual review.9 And that leads us back to “voluntary respondent” status, which we now learn is a pre-requisite not only to being assessed antidumping duty based on the company-specific data if the Antidumping Order remains in effect for those imports but also to being able to escape the antidumping case entirely via revocation of the Order.10Annual Review
In the case of the Shrimp from Viet Nam that is relevant to this discussion, the period of review for the Commerce Department annual review was February 1, 2008 though January 31, 2009. This was the 4th Administrative Review, which was formally concluded in August 2010.11 The producer in question was Grobest, who had participated in the second and third reviews and assigned a dumping margin of 0.00% as that rate had been recently calculated on its own data.12 For the 4th review, Grobest applied for revocation, asking that the Order be revoked for them. It appears that Grobest also did not specifically request voluntary respondent status but they nonetheless undertook to act like a voluntary respondent in every way. In the challenged review, Grobest filed a separate rate certification, and filed responses to Section A, C and D questionnaires, within Commerce's deadlines, and before Commerce issued the Preliminary Results.13 Commerce declined to grant revocation, but Commerce found Grobest to be eligible for a rate separate from the countrywide entity, and accordingly assigned to Grobest the “all others separate rate” of 4.27%. Importantly, the Viet Nam-wide antidumping rate that applied to “all others” was 25.76%.Judicial Review at CIT
Grobest was not satisfied with its 4.27% rate and sought judicial review at the US Court of International Trade of the Commerce Department decision, seeking that Commerce engage in “reconducting the review,” a “do over” to use a playground term, and one where Grobest was the only company under review. Apparently, Grobest must have assumed that it would be able to attain the same 0.00% rate which would then support revocation or at the very least be assigned a rate lower than 4.27%. In fact, Grobest insisted that Commerce go forward and conduct that all-important individual review which would lead to an individual weighted average dumping margin that was Grobest-specific. Grobest succeeded14 twice in overcoming strong Commerce Department objections which were based on Commerce’s discretionary authority and avoiding burden.Grobest I
Grobest prevailed in the first case, with the CIT noting that the statutory scheme anticipated two separate determinations by Commerce for the selection of respondents, one for mandatory respondents15 and a separate determination for voluntary respondents.16 The CIT remanded the matter to Commerce, inter alia, in order to reconsider the Grobest’s request. We might conclude, in effect, the CIT was deeming the actual Grobest participation as a voluntary respondent as a de facto request for that status.17Grobest II
After remand, the matter was back at the CIT again because Commerce again refused to begin an investigation, with Commerce explaining that individual review of Grobest would have been unduly burdensome and inhibited the timely completion of the review. The CIT, in a well-reasoned opinion, decided against Commerce in Grobest II, holding its action was an abuse of discretion. As for the administrative burden which would excuse Commerce from a review of a voluntary respondent, the Grobest II court noted,When Commerce can show that the burden of reviewing a voluntary respondent would exceed that presented in the typical antidumping or countervailing duty review, the court will not second guess Commerce’s decision on how to allocate its resources.
The CIT took Commerce to task. When the Grobest II decision was issued on July 31, 2012, Commerce was ordered to (i) reconduct its fourth administrative review of this antidumping duty order with respect to Grobest as a voluntary respondent and (ii) if appropriate, to consider Grobest’s revocation request. Commerce duly initiated a proceeding to reconduct in October, 2012.Reconducted Review
Just two months later, and after the much sought after investigation had begun, Grobest sent a letter to Commerce seeking “to withdraw Grobest’s request for examination as a voluntary respondent in the fourth administrative review of the order on frozen warmwater shrimp from Vietnam,” and asking Commerce to “rescind its October 17, 2012 notice announcing that it would reconduct the 2008-2009 administrative review for Grobest.” This was due tosignificant management, personnel significant management, personnel and accounting changes that have occurred at [Grobest] since the period of review (which dates back to February 2008) [have made it such that] the administrative and legal costs of this examination are greater than the company wishes to incur at this time.18
Something momentous must have happened—or perhaps the change in circumstances may have been revealed only after the victory of Grobest II. We can only speculate about this abrupt change of heart.19 Not surprisingly, given the history here, Commerce refused to abort the process, and sent supplemental questionnaires to Grobest, warning that failing to properly respond could lead to adverse consequences, a reference to the dreaded AFA. However, in the event, Grobest noted that “[t]he administrative and legal costs of this examination are greater than the company wishes to incur at this time” and again failed to provide the requested information.”20 In response, Commerce determined that Grobest had withheld information requested of it and impeded the proceeding, within the meaning of 19 U.S.C. §§ 1677e (a)(2)(A) and (C), and concluded that Grobest failed to cooperate, within the meaning of 19 USC § 1677e(b), by not acting to the best of its ability to comply with Commerce’s requests. Accordingly, the agency employed adverse inferences when selecting from among the facts otherwise available to establish Grobest’s individual dumping margin for this proceeding. This way led back to the CIT.Grobest III
Grobest now challenged the actions taken by Commerce in its reconducted review. To be clear about the policy justification underlining the agency action here, we should look to the Grobest III opinion,Accordingly, the agency employed adverse inferences when selecting from among the facts otherwise available to establish Grobest’s individual dumping margin for this proceeding. Explaining that its practice in this regard is to ensure that the dumping rate established for the non-cooperative respondent is “sufficiently adverse ‘as to effectuate the statutory purpose of the adverse facts available rule to induce respondents to provide [Commerce] with complete and accurate information in a timely manner,’”as well as to ensure “that the party does not obtain a more favorable result by failing to cooperate than if it had cooperated fully,” Commerce assigned to Grobest a rate of 25.76 percent, which represents “the highest dumping margin on the record of any segment of this proceeding.21 (footnotes omitted)
Grobest challenged Commerce’s decision to deny its request to terminate its individual examination as a voluntary respondent and reinstate the final results of the fourth review as originally conducted, which would have reinstated the 4.27% rate. The state of the law on the ability of a respondent, whether mandatory or voluntary in nature, to withdraw is outside the scope of this treatment, but suffice it to note for this purpose that the Grobest III court noted that there is no authority which requires Commerce to accept the request to withdraw and, further, on these facts it was reasonable for Commerce not to have done so. Finally, the court approved the AFA rate of 25.76%. Not only is Grobest no closer to revocation, its products are now subject to much higher antidumping duties. You will have seen the progression in antidumping duty rates forGrobest
Second Review—0.00%
Third Review—0.00%
Fourth Review—4.27% originally
25.76% after reconducted review
Conclusion
There may be two lessons here for us all.First, and obviously, be careful what you wish for—you may get it. The second and more important lesson is that stuff happens, and sometimes there is precious little we can do about it. We have learned that no amount of close monitoring, careful planning and astute analysis, no amount of engaged dialogue and prudent client counseling sessions can prevent some of these unpleasant surprises. There are a lot of moving parts in the customs and trade law world, with clients stretched across the globe and often as much in play as their products. Over the course of a long career you will found yourself surprised—if that has not happened yet, it is only because you have not practiced long enough. When it does, look back to Grobest.
.......................................................................................................................................
1. Slip Op. 15-82 (July 30, 2015) (Grobest III). Note that this company is the successor in interest to Grobest & I-Mei Industrial (Vietnam) Co., Ltd, hence the continuation of the “Grobest” caption.
2. See Certain Frozen Warmwater Shrimp from the Socialist Republic of Vietnam, 70 Fed. Reg. 5,152 (Dep’t Commerce Feb. 1, 2005) (amended final determination and antidumping duty order).
3. For more detail on the complexity of antidumping and countervailing duty legislation and administrative practice, refer to Chapter 10 (authored by Stuart M. Rosen) of my treatise, International Trade Laws of the United States: Statutes and Strategies, published in 2012 by Thomson Reuters.
4. For an example, see United States v. American Home Assurance Co., 964 F.Supp. 2d 1342 (CIT 2014) (surety contesting increase in antidumping duty rate from 0.00% to 223.01%).
5. For a refreshing instance where the applicant, Amanda Foods, was able to overcome Commerce Department refusal to accept an out of time filing, in this case a request for separate rate status, see the Grobest I and Grobest II decisions cited in note 8 infra. The CIT held the Commerce Department refusal to accept the application was an abuse of discretion.
6. See 19 USC § 1677f-1(c)(2)(B).
7. 19 USC § 1677m (a), 19 CFR § 351.204.
8. Pursuant to 19 USC § 1675 (d).
9. Amanda Foods (Vietnam) Ltd. v. United States, 35 CIT __, Slip Op. 11-155 (Dec. 14, 2011) (Commerce free to make change in its policy on the point of eligibility for revocation).
10. In the latter case, participation as a mandatory respondent will also meet the criterion of an individual review.
11. Certain Frozen Warmwater Shrimp from the Socialist Republic of Vietnam: Final Results and Partial Rescission of Antidumping Duty Administrative Review , 75 Fed. Reg. 47,771 (Dep’t Commerce Aug. 9, 2010).
12. For the third review, see Certain Frozen Warmwater Shrimp from the Socialist Republic of Vietnam: Final Results and Final Partial Rescission of Antidumping Duty Administrative Review, 74 Fed. Reg. 47,191, 47, 195 (Dep’t Commerce Sept. 15, 2009).
13. In order to be eligible for voluntary respondent status, the exporter or producer must also submit the relevant information on the same schedule as the mandatory respondents. 19 USC § 1677m(a)(1)(A).
14. Grobest & I-Mei Indus. (Vietnam) Co. v. United States, __ CIT __, 815 F. Supp. 2d 1342, 1360-63 (2012) (“Grobest I”); Grobest & I-Mei Indus. (Vietnam) Co. v. United States, __ CIT __, 853 F. Supp. 2d 1352, 1362-65 (2012) (“Grobest II”).
15. Under 19 USC § 1677f-1 (c) (2).
16. Pursuant to 19 USC § 1677m (a).
17. In its brief, Grobest counsel had made the point(at pp. 47-48) that Commerce could have timely reviewed Grobest's data and asked the Court to find Commerce's failure to do so to be an abuse of discretion and otherwise not in accordance with law. That is precisely what the court did.
18. Grobest III, Slip Op. at 10-11.
19. In this connection, for the timing of the change of ownership of the production facilities see Grobest III, Slip Op. at 22-23.
20. Grobest III, Slip Op. at 15.
21. Grobest III, Slip Op. at 16-17.
2. See Certain Frozen Warmwater Shrimp from the Socialist Republic of Vietnam, 70 Fed. Reg. 5,152 (Dep’t Commerce Feb. 1, 2005) (amended final determination and antidumping duty order).
3. For more detail on the complexity of antidumping and countervailing duty legislation and administrative practice, refer to Chapter 10 (authored by Stuart M. Rosen) of my treatise, International Trade Laws of the United States: Statutes and Strategies, published in 2012 by Thomson Reuters.
4. For an example, see United States v. American Home Assurance Co., 964 F.Supp. 2d 1342 (CIT 2014) (surety contesting increase in antidumping duty rate from 0.00% to 223.01%).
5. For a refreshing instance where the applicant, Amanda Foods, was able to overcome Commerce Department refusal to accept an out of time filing, in this case a request for separate rate status, see the Grobest I and Grobest II decisions cited in note 8 infra. The CIT held the Commerce Department refusal to accept the application was an abuse of discretion.
6. See 19 USC § 1677f-1(c)(2)(B).
7. 19 USC § 1677m (a), 19 CFR § 351.204.
8. Pursuant to 19 USC § 1675 (d).
9. Amanda Foods (Vietnam) Ltd. v. United States, 35 CIT __, Slip Op. 11-155 (Dec. 14, 2011) (Commerce free to make change in its policy on the point of eligibility for revocation).
10. In the latter case, participation as a mandatory respondent will also meet the criterion of an individual review.
11. Certain Frozen Warmwater Shrimp from the Socialist Republic of Vietnam: Final Results and Partial Rescission of Antidumping Duty Administrative Review , 75 Fed. Reg. 47,771 (Dep’t Commerce Aug. 9, 2010).
12. For the third review, see Certain Frozen Warmwater Shrimp from the Socialist Republic of Vietnam: Final Results and Final Partial Rescission of Antidumping Duty Administrative Review, 74 Fed. Reg. 47,191, 47, 195 (Dep’t Commerce Sept. 15, 2009).
13. In order to be eligible for voluntary respondent status, the exporter or producer must also submit the relevant information on the same schedule as the mandatory respondents. 19 USC § 1677m(a)(1)(A).
14. Grobest & I-Mei Indus. (Vietnam) Co. v. United States, __ CIT __, 815 F. Supp. 2d 1342, 1360-63 (2012) (“Grobest I”); Grobest & I-Mei Indus. (Vietnam) Co. v. United States, __ CIT __, 853 F. Supp. 2d 1352, 1362-65 (2012) (“Grobest II”).
15. Under 19 USC § 1677f-1 (c) (2).
16. Pursuant to 19 USC § 1677m (a).
17. In its brief, Grobest counsel had made the point(at pp. 47-48) that Commerce could have timely reviewed Grobest's data and asked the Court to find Commerce's failure to do so to be an abuse of discretion and otherwise not in accordance with law. That is precisely what the court did.
18. Grobest III, Slip Op. at 10-11.
19. In this connection, for the timing of the change of ownership of the production facilities see Grobest III, Slip Op. at 22-23.
20. Grobest III, Slip Op. at 15.
21. Grobest III, Slip Op. at 16-17.
Mark K. Neville, Jr., LL.M. (International Legal Studies), NYU, is a long-time member of the Board of Advisors. He is Principal of International Trade Counsellors and may be reached at mkneville@itctradelaw.com. He has served as an adjunct professor at The University of California, Berkeley’s Haas School of Business and NYU’s Stern School. He is The Journal’s Customs & Trade correspondent.