In reviewing whether improperly collected countervailing duties can be set off during a later period of review by U.S. Department of Commerce, Federal Circuit offers comprehensive overview of countervailing duty law and concludes that it is reasonable that setoffs cannot be granted during later review period
In the following opinion, the U.S. Court of Appeals for the Federal Circuit provides a comprehensive overview of the current U.S. countervailing duty laws and the division of authority between the two agencies in charge, the U.S. Department of Commerce ("Commerce"), and the U.S. Customs and Border Protection ("Customs").
After an investigation, Commerce determined in 1992 that Norsk Hydro Canada, Inc. (NHC) received grants from the governments of Canada and Quebec that were countervailable subsidies of its magnesium products. See 57 Federal Register 30,946 (July 13, 1992). Since then, Canadian magnesium products have been subjected to countervailing duties in the U.S., which are reviewed annually.
Customs collected duties on NHC's 1997 magnesium and magnesium alloy imports at improperly high rates. Instead of collecting at the proper 2.02 percent rate, Customs collected between 3 percent and 7 percent. NHC did not protest until Commerce reviewed the countervailable subsidy in 2001. Commerce denied a setoff of the overcharge against the duties due. NHC appealed to the Court of International Trade, which remanded to Commerce with instructions to permit the setoff. Commerce did the setoff under protest, and when the matter again came before the Court of International Trade, it again found for NHC. Commerce appealed.
The U.S. Court of Appeals for the Federal Circuit reverses.
At the outset, the Court comprehensively outlines the current countervailing duty law:
"If the production of goods abroad is subsidized by a foreign government, the goods can be subject to a countervailing duty ("CVD') when imported ... to the United States. 19 U.S.C. Section 1671. In general, the goal of these duties is to protect American firms from unfair competition by setting off the amount of certain export subsidies foreign firms selling goods in the United States receive from their government. The Secretary of Commerce administers the countervailing duty laws. Id. Section 1677(1). Two showings must be made before a CVD can be imposed: (i) that a government subsidy was received, and, (ii) that the subsidy resulted in, or threatens, material injury to American industry. Id. Section 1671(a). These two determinations are made by separate bodies. The International Trade Commission determines whether material injury to American industry has occurred, while Commerce determines whether a subsidy was received. ... Subsidies from certain nations may trigger a CVD even in the absence of a material injury determination. Id. Section 1671(c) ("In the case of any article of merchandise imported from a country which is not a Subsidies Agreement country, no determination by the Commission under section 1671b(a) . . . or 1671d(b) of this title shall be required.')."
"A countervailing duty investigation may be initiated at the request of an interested party or on Commerce's own motion. Id. Section 1671a. In the course of such an investigation, Commerce under 19 U.S.C. Section 1671b(b) makes a preliminary determination concerning whether a foreign government provided a countervailable subsidy, and the International Trade Commission under 19 U.S.C. Section 1671b(a) makes a preliminary determination concerning whether the foreign subsidy resulted in, or threatens, material injury to American industry. If the preliminary investigation discloses that a foreign subsidy was provided, Commerce must suspend liquidation of duties, id. Section 1671b(d)(2), and must require the importer to furnish cash deposits as security for duties that may be due pending a final determination of the amount of a CVD. Id. Section 1671b(d)(1)(B). Once Commerce makes a final determination that a countervailing subsidy was provided by a foreign government, id. Section 1671d(a), and once the International Trade Commission has reached a final determination that U.S. industry was materially injured as a result, id. Section 1671d(b), Commerce then issues an order setting the countervailing duty, which is typically expressed ad valorem -- that is, as a percentage of the value of the imported goods. Id. Sections 1671d(c)(2), 1671e."
"The countervailing duty imposed by Commerce must equal the "net countervailable subsidy,' 19 U.S.C. Section 1671(a), which is calculated by subtracting certain enumerated fees and setoffs from the amount of the subsidy provided by the foreign government. 19 U.S.C. Section 1677(6). ... Countervailable subsidies may be divided further into "recurring' and "non-recurring' benefits. When an importer receives a non-recurring benefit, as occurred here, the benefit must be amortized over the "average useful life' of the subsidy. 19 C.F.R. Section 351.524(b)(1)-(d)."
"Although countervailing duties must be "equal to' countervailing subsidies, the two concepts are not functionally interchangeable. ... The procedures for determining the amount of a countervailable subsidy are different from those for collecting the countervailing duty; indeed, as noted, the two tasks are undertaken by two different entities, Commerce and Customs. More importantly for our purposes, the procedures for contesting an erroneous subsidy calculation are different from those for contesting an erroneous duty assessment. Compare 19 U.S.C. Section 1675 (Commerce administrative review of subsidy determination) with id. Section 1514(a)(5) (Customs protest for liquidation error). The procedure for contesting a Customs assessment or liquidation essentially involves lodging a timely protest with Customs, the disposition of which is reviewable in the Court of International Trade ... By contrast, the procedure for contesting an erroneous subsidy or CVD determination by Commerce requires an objecting party to raise the objection during an administrative review of the CVD order. More specifically, Commerce must, upon request, undertake an annual administrative review of any issued CVD order. 19 U.S.C. Section 1675(a)(1). During the administrative proceeding, Commerce must "review and determine the amount of any net countervailable subsidy,' which is the basis for a CVD determination, id. Section 1675(a)(1)(A), and it is during this review that parties may raise objections, present evidence, and submit written arguments relating to the countervailable subsidy determination, including submission of written arguments. See19 C.F.R. Sections 351.221, 351.301, 351.309. In this respect, during its annual review, Commerce typically restricts its consideration to entries made during the one year period of review (or "POR'). 19 C.F.R. Section 351.213(e)(2)(I). Judicial review of the results of these administrative proceedings is available in the Court of International Trade, 28 U.S.C. Section 1581(c); 19 U.S.C. Section 1516a(2), with appeal to this Court. 28 U.S.C. Section 1295(a)(5)." [Slip op. 2-4]
The Court then turns to the decision of the Court of International Trade that Commerce had both the power and the obligation to make the requested setoffs. The standard of review is that Commerce's determinations of fact must be sustained unless they are unsupported by substantial evidence in the record. Its legal conclusions must be sustained unless not in accordance with law. 1516a(b)(1)(B)(I).
First, NHC argues that countervailing duties are "imposed" when "assessed" and that they are "assessed" when liquidated. In the context of countervailing duties, the imposition and assessment or liquidation of duties are distinct events. An assessment error as to one entry does not cause an imposition error as to a future entry or period of review (POR), unless Commerce is required by law to take account of errors from prior PORs.
Second, the Court must resolve whether Commerce is legally required to consider entries outside the POR to implement the statutory mandate that countervailing duties should equal countervailable subsidies. If Commerce's review based on Section 1675(a) is limited to 2001 issues, then Commerce correctly concluded that there cannot be a setoff.
Section 1675 does not state the length of a POR, and Commerce has interpreted it to mean that only entries received during the one-period under review can be considered. The pertinent regulation, 19 C.F.R. Section 351.213(e)(2)(I), provides that in general administrative review covers entries during the most recently completed calendar year.
Under Chevron v. Natural Res. Def. Council, 467 U.S. 837, 842-43 (1984), Commerce is entitled to deference in its interpretation of Section 1675 unless Congress has expressed a contrary view, or the interpretation is unreasonable. Here, Congress has not expressed any view, so the Court must address the reasonableness of Commerce's interpretation.
"We are persuaded that Commerce's interpretation is reasonable, indeed invited by the statute. This is so because the statute contemplates annual reviews, and hence limiting Section 1675 review to entries made during the POR in issue reasonably serves important goals of finality and efficiency. Given that Commerce undertakes annual reviews, it would be duplicative and wasteful for later reviews to revisit matters subject to review in prior PORs. Revisiting issues that were resolved in prior review proceedings would impair the finality of any one annual review, potentially prolonging a CVD dispute far beyond the year to which it relates. The same potential exists with respect to issues relating to entries from a prior year that were not raised for Commerce review during the appropriate POR. With respect to these issues there is also the risk that, owing to the passage of time, relevant evidence might be lost. The reasonableness of Commerce's interpretation finds further support in the reported decisions, which while not directly on point, are nonetheless persuasive. These decisions upheld as reasonable Commerce's decision to confine its review to entries made during the POR by permitting discretionary recision of administrative reviews where no entries were made during the POR. ... For these reasons, we believe Commerce's construction of Section 1675 is reasonable." [Slip op. 15]
Therefore, Commerce's refusal to consider the 1997 entries during the 2001 POR is a permissible interpretation of Section 1675. The setoff issued by Commerce at the direction of the Court of International Trade is vacated.
Citation: Norsk Hydro Canada, Inc. v. United States, No. 06-1044 (Fed. Cir. December 14, 2006).
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