Many importers will discover at some point that products they import may be subject to anti-dumping duties (“ADD”) or countervailing duties (“CVD”). With Washington’s continued aggressive approach toward unfair trade practices by foreign competitors, particularly China, importers must prepare for additional ADD/CVD orders and enforcement by U.S. Customs and Border Protection (“Customs” or “CBP”). This article seeks to explain the options an importer has if it discovers that any of its products are potentially subject to ADD/CVD.
“Dumping” occurs when foreign manufacturers sell goods in a country for less than fair value, resulting in injury to the industry for those goods in the country in which the foreign product is being dumped. ADD cases are company specific. The U.S. calculates anti-dumping duties to bridge the gap between the unfair price of the dumped goods and the goods’ fair market value. On the other hand, countervailing duties are established when a foreign government provides assistance and subsidies to manufacturers so that the foreign manufacturers are able to sell goods cheaper than domestic manufacturers. CVD cases are country specific; duties are calculated to “duplicate the value of the subsidy.” Duty rates of ADD/CVD are set by the Department of Commerce International Trade Administration (“ITA”).
To determine whether a product is subject to ADD or CVD, an importer should first review the scope of ADD/CVD orders, which can be found on the ITA website. Sometimes an importer will quickly be able to establish if its products are within the scope of the ADD/CVD orders, but this is often a difficult determination to make. ADD/CVD orders reference the U.S. Harmonized Tariff Schedule (“HTS”) classification of the goods subject to the orders, and the HTS classification of a product can sometimes help in making that determination. However, HTS classifications are listed in the scope of ADD/CVD orders for convenience only and do not determine whether a product falls under the scope of an ADD/CVD order. Instead, the written description of the order’s scope is dispositive. It may also be helpful to discuss the application of ADD/CVD orders with a Customs Import Specialist or an ITA International Trade Compliance Analyst, but this will also not produce a binding determination.
The only method for obtaining a binding determination to confirm whether goods are subject to an ADD/CVD order is a scope ruling. A scope ruling is issued by the ITA to clarify the scope of an ADD/CVD order. Some scope rulings are self-initiated by the ITA, but generally an “interested party” initiates an inquiry by applying for a scope ruling. An “interested party” is defined in the Tariff Act of 1930 (as amended) and includes 1) a foreign manufacturer, producer, or exporter, or the U.S. importer, of subject merchandise; 2) the government of a country in which the merchandise is produced, manufactured, or exported; 3) a U.S. manufacturer, producer, or wholesaler of a domestic like product; and 4) unions, trade associations, and business associations that represent industry engaged in the manufacture, production, or wholesale of a domestic like product in the U.S. For an interested party, the scope ruling application is a mechanism to explain and describe the characteristics of a product and argue why the product is outside the scope of the ADD/CVD order. Preparing and submitting a scope ruling request can be very technical and procedurally complicated, and certain aspects of the process were revised pursuant to a final rule published by the ITA on September 20, 2021. A simplified outline of a scope ruling request follows.
Scope ruling requests must contain the following:
- A detailed description of the product and its uses, including its physical characteristics and uses, country(ies) of production and export, its current U.S. HTS classification number, photographs and drawings, and a description of parts, materials, and production process;
- The name and address of the producer, exporter, and importer of the product;
- A narrative history of the product’s production;
- The volume of annual production of the product for the most recent fiscal year; and
- A statement of the interested party’s position as to whether the product is within the scope of an order, including:
- A summary of the reasons for this conclusion,
- Citations to any applicable statutory authority, and
- Any factual information supporting this position, including relevant prior scope rulings.
At the same time an interested party submits a scope ruling request to the ITA, it must also serve a copy of the scope ruling request to all parties on the annual inquiry service list for the relevant ADD/CVD order. The scope ruling request must be submitted electronically via the Antidumping and Countervailing Duty Centralized Electronic Service System (“ACCESS”), found at https://access.trade.gov. After receiving the scope ruling request through ACCESS, the ITA has a 30-day deadline to accept or reject the scope ruling application. If the scope ruling application is accepted, the ITA will initiate a scope inquiry. At the time of initiation of the scope inquiry, the ITA may issue a preliminary scope ruling based on the information available at the time.
The ITA will issue a final scope ruling within 120 days of the initiation of the inquiry, unless the ITA extends the deadline for good cause; such extension may not exceed an additional 180 days. Within 30 days of the initiation of the scope inquiry, interested parties other than the applicant may submit comments to rebut, clarify, or correct factual information in the scope ruling application. Within 14 days of submission of any such rebuttal comments, the applicant may submit response comments.
If a final ruling determines that the product falls within the scope of the ADD/CVD order, then any suspension of liquidation will continue or, if there has been no suspension of liquidation, CBP will suspend liquidation and require a cash deposit of estimated duties pursuant to the ADD/CVD order. If a final ruling holds that the product is not subject to the ADD/CVD order, then CBP will terminate the suspension of liquidation on the subject product, and any cash deposits related to the product will be refunded.
Scope ruling requests often involve difficult questions of fact and law.
