No Countervailing Duties on Chinese Imports: Possibility of Refunds

Since 2007, the U.S. Department of Commerce has imposed countervailing duties on a variety of products imported from China (see full list below). At the same time, the Commerce Department has considered China to be a non-market economy country, which meant that Chinese goods were subject to additional antidumping duties calculated with the use of a special methodology. Countervailing duties are additional duties designed to remedy government conduct and, as such, offset government subsidies. Antidumping duties are additional duties to remedy unfair pricing, and are directed to the exporter.

On December 19, 2011, the U.S. Court of Appeals for the Federal Circuit in the case of GPX International Tire Corp. v. U.S., ruled that the countervailing duty law does not apply to non-market economy countries such as China. The GPX case involved an appeal of a Commerce decision to impose antidumping and countervailing duties on off-the-road tires imported from China. The decision is not limited to tires and essentially means that the Commerce Department does not have legal authority to impose countervailing duties on any imports from China.

The case raise a number of questions for any company that imports or has imported goods from China and raises the possibility of refunds for any duties paid. Key questions and answers are presented below.

Is the decision limited to goods from China? No. The decision affects goods from any non-market economy country. To date, China is the only non-market economy country impacted by countervailing duties.

Should importers continue to enter goods subject to countervailing duties? Yes. Until Customs advises otherwise, goods covered under the scope of a countervailing duty order should be entered as such and importers should continue to pay countervailing duties owing. It is possible that the case will be overturned either by a rehearing by the Court of Appeals or appealed to the U.S. Supreme Court. If so, importers do not want to be caught in a position whereby they need to file prior disclosures and/or voluntary tenders to correct Customs entries. In that regard, Customs has not issued guidelines as to how to proceed and companies failing to pay countervailing duties on goods covered under the scope of a countervailing duty order may find themselves the target of increased Customs scrutiny or enforcement actions.

When do you expect we will know the final results? It is highly likely that Customs will wait for instructions from commerce, which could take six to nine months to provide the necessary information. In the event that the government seeks a rehearing or an appeal, then we believe that a final decision within six months is possible in a best case scenario, but that importers should not expect a decision until well into the second half of 2012 or beyond.

Are there refund opportunities? Yes. Going forward and retroactively. Affected importers should be taking action and filing protests with Customs on any entries that have liquidated wherein less than 180 days have elapsed from the date of liquidation. Moreover, importers should be proactively monitoring entries scheduled to liquidate so that protests may be filed, as required. The protest need not be an in-depth submission, but instead should designate a “lead protest” and thereafter, merely reference the lead protest on subsequent protests filed in order to protect the importer’s right to a refund. Refunds, of course, will be issued with interest. It is possible that procedures for refunds will also be available for importers on entries wherein more than 180 days have run since the date of liquidation. However, that is speculative at this time and this possibility will depend on future litigation as well as discussions involving both Customs and Commerce.

Should importers take action with Commerce as well? Yes. Affected importers should take part in the annual administrative review process involving the assessment of countervailing duties on goods from China to prevent the liquidation of any entries and collection of any countervailing duties.

Assuming that the GPX decision is not overturned, it is unclear how the decision will be implemented. Commerce will be barred from imposing any new countervailing duties, but the question remains as to whether the government will stop collecting countervailing duties from past cases and refund all such duties paid to date. We believe that it would be improper for Commerce and Customs to refuse refunding all countervailing duties, but the agencies may resist doing so, at least at the outset, which could trigger additional lawsuits.

To date, countervailing duties have been collected on the following goods imported from China:

• Circular welded steel pipe (case no. C-570-911)
• Laminated woven sacks (case no. C-570-917)
• Light-walled rectangular pipe and tube (case no. C-570-915)
• Raw flexible magnets (case no. C-570-923)
• Pneumatic off-the-road tires (case no. C-570-913)
• Lightweight thermal paper (case no. C-570-921)
• Sodium nitrate (case no. C-570-926)
• Circular welded austenitic stainless pressure pipe (case no. C-570-931)
• Circular welded steel line pipe (case no. C-570-936)
• Citric acid and certain citrate salts (case no. C-570-938)
• Tow behind lawn groomers (case no. C-570-940)
• Kitchen appliance shelving and racks (case no. C-570-942)
• Oil country tubular goods (case no. C-570-944)
• Prestressed concrete steel wire strand (case no. C-570-946)
• Steel grating (case no. C-570-948)
• Narrow woven ribbons with woven selvedge (case no. C-570-953)
• Magnesia carbon bricks (case no. C-570-955)
• Seamless steel standard, line and pressure pipes (case no. C-570-957)
• Coated paper (case no. C-570-959)
• Steel fasteners (case no. C-570-961)
• Potassium phosphate salts (case no. C-570-963)
• Drill pipe (case no. C-570-966)
• Aluminum extrusions (case no. C-570-968)
• Multilayered wood flooring (case no. C-570-971)
• Steel wheels (case no. C-570-974)
• Galvanized steel wire (case no. C-570-976)
• High pressure steel cylinders (case no. C-570-978)

Importers of any of the above goods from China should contact their customs or international trade attorney for further guidance and appropriate action.