Industry News

Commerce Rejects Anticircumvention Proceedings to Overcome Negative ITC Injury Determinations

Aug. 26, 2020
By: Mert Ermen Arkan

On August 19, 2020 the Department of Commerce (the “Department”) rejected a novel litigation strategy adopted by the Domestic Interested Parties (“DIPs”) in their effort to expand the Order on HFC Blends to encompass HFC Components. The rejected occurred in the Final Determination concerning the Anti-Circumvention Inquiry of Antidumping Duty Order on Hydrofluorocarbon Blends (“HFC Blends”) From the People’s Republic of China—HFC Components (85 Fed. Reg. 51,018). The Department concluded, in a reversal of its Preliminary Determination (85 Fed. Reg. 20,248), that “the merchandise subject to [the] anti-circumvention inquiry should not be included within the scope of the Order.”

On June 14, 2016. DIPs filed a Petition simultaneously at the International Trade Commission (“ITC”) and the International Trade Administration alleging dumping of HFC from China. The original Petition included five HFC Blends and three HFC Components. For its Final Injury Determination, the ITC found that HFC Blends and HFC Components constituted two distinct like products, and, unlike for HFC Blends, the domestic industry for HFC Components was neither materially injured nor threatened with material injury. Because the ITC reached a negative injury determination for HFC Components, the Department, which otherwise found affirmatively in favor of DIPs in its antidumping investigation, revised the scope set forth in the Order so that it encompassed only the five enumerated HFC Blends. DIPs appealed the determination (specifically, the removal of HFC Components from the scope of the Order)to the Court of International TradeThe Court ultimately upheld the removal of components from the scope of the Order.  

On April 4, 2019 DIPs filed an Anti-Circumvention Inquiry request. In its Anti-Circumvention Inquiry request, DIPs alleged that while imports of in-scope HFC Blends from China declined after the imposition of the Order, imports of out-of-scope HFC Components had surged. HFC Components imported into the United States were allegedly subsequently being blended (i.e. completed or assembled) into in-scope HFC blends in circumvention of the Order. DIPs further alleged that the process of blending was “minor or insignificant” and “the value of [HFC Components] is a significant portion of the total value of the merchandise.” Notably, and in seeming contradiction to DIPs allegations, ITC had previously concluded in its injury determination that the “[p]rocess to transform HFC Components into HFC Blends are not insubstantial . . .we find the value added by transforming HFC Components into HFC Blends…to be significant.”

On April 4, 2020, the Department issued its Preliminary Determination and found that the Order was being circumvented. However, this decision had not taken into account the International Trade Commission’s statutory obligation to evaluate injury to the DIP by the allegedly circumventing imports. On July 6, 2020 the ITC determined that “an affirmative final determination by Commerce on HFC Components from China would raise a serious injury issue.” As a result, the Department’s Final Determination stated that “[b]ased on the ITC’s advice we determine that…HFC Components…from China that are further processed in the United States to produce subject HFC Blends [are not] within the scope of the Order.”

In short, the Department concluded that DIPs may not use an Anti-Circumvention Inquiry to otherwise include merchandise in the scope of an Order where it was previously removed by a negative ITC injury determination. This decision remains subject to potential appeal.

Please contact any Barnes, Richardson & Colburn attorney if you have any questions about the potential expansion of the scope of an antidumping or countervailing duty order pursuant to an anti-circumvention inquiry.