Ruling on Countervailing Duties for Nonmarket Economies
March 17, 2015
On March 13, 2015, the U.S. Court of Appeals for the Federal Circuit ruled that the Department of Commerce has the authority to impose countervailing duties (CVD) on nonmarket economies (NME). In the appeal, GPX International Tire Corp. and Hebei Starbright Tire Co. claimed that the retroactive enforcement of countervailing duties was unconstitutional and violated their right of due process. However, the court found that the countervailing duties, which were retroactively applied to cases after November 20, 2006, were “remedial , rather than punitive.” In 2012, Congress enacted a law that allowed CVDs imposed on NMEs “both prospectively and retrospectively”, which overturned the Court of International Trade’s decision to prohibit CVDs from being applied to NMEs.
The Federal Circuit used the Supreme Court’s five considerations for analyzing “rational basis under the due process clause: (1) whether the retroactive provision is “wholly new”; (2) whether the retroactive action resolves uncertainty in the law; (3) the length of the period of retroactivity; (4) whether the affected party had notice of the potential change prior to the conduct that was retroactively regulated; and (5) whether the retroactive provisions are remedial in nature”. The decision asserted that the law was not “wholly new”, but it allowed Commerce “to impose countervailing duties to a new group of importers.” The panel also concluded that the law “resolved uncertainty” and that the retroactivity was only five years, which was shorter than other cases where those involved were forced to pay retroactive fees. Additionally, the decision stated that GPX was aware that Commerce would impose CVDs to NMEs, since they were notified back in 2006. Finally, the panel found that the “new law is directed to the remedial administration of trade duties, as opposed to raising government revenue.”