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Refunds of Countervailing Duties Possible After Court Prohibits Use on NME Country Goods

Thursday, December 22, 2011
Sandler, Travis & Rosenberg Trade Report

The Court of Appeals for the Federal Circuit has affirmed that the Department of Commerce can no longer apply countervailing duties against imports from non-market economy countries such as China and Vietnam. The CAFC’s Dec. 19 ruling in GPX International Tire Corporation v. United States upholds a 2010 decision by the Court of International Trade but on different grounds. While the CAFC ruling is likely to be appealed to the Supreme Court, if it stands it could result in substantial refunds of CV duties. Importers of goods from NME countries that are currently subject to CV duties should therefore act now to protect their rights to refunds for entries still within the protest period.

The CIT found that Commerce cannot simultaneously impose antidumping and CV duties in NME country cases because doing so would result in a double remedy, which is prohibited by U.S. law and World Trade Organization rules. This decision goes against Commerce’s 2007 decision that it could investigate allegations of subsidies in NME countries and impose CV duties notwithstanding that the special AD methodology for NME countries is itself designed to address the subsidization of foreign producers. Where AD and CV duties are concurrently applied against imports from NMEs, the CIT said, double remedies can occur because each duty is designed to address the same underlying concern: price distortions resulting from government subsidies and influence. Accordingly, the CIT ruled that Commerce cannot impose both AD and CV duties in NME cases. Commerce, together with U.S. manufacturers favoring the imposition of CV duties, appealed to the CAFC.

The CAFC agreed with the CIT’s ruling but articulated different reasons for its decision. The CAFC found that the legislative history of the CV duty law demonstrates that Congress adopted Commerce’s then-prevailing position that CV duties cannot be imposed at all on NME exports and that Commerce no longer has discretion to change this interpretation.

Based on the CAFC decision, CV duties may not be applied to goods imported from NME countries absent legislative change. It is important to note, however, that Commerce has not yet officially changed its policy to reflect this decision. As a result, until otherwise instructed by Commerce, importers are still required to deposit CV duties when importing goods subject to a CV duty order from an NME country. At the same time, importers should protest entries still within the protest period to protect potential refunds resulting from this decision.

For further information about steps importers must take to preserve their potential recovery of CV duties, please contact Mark Ludwikowski or Kristen Smith at (202) 216-9307.

You can also stay up-to-date on the latest developments on this issue by subscribing to ST&R’s WorldTrade\INTERACTIVE daily e-newsletter.

Sandler, Travis & Rosenberg, P.A. (ST&R) is a customs and international trade law firm concentrating its practice in assisting clients with the movement of goods, personnel and ideas across international borders. ST&R provides governments, manufacturers, importers, exporters and retailers the advice and counsel they require to succeed amid the constantly changing demands of global trade.

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