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An extract from The International Trade Law Review, 8th Edition
For the better part of the last century, the United States has been among the least restrictive markets for imports of foreign products. US normal customs duties are quite low compared with other nations around the world, and customs procedures generally permit the free, fast-9 and reliable flow of goods to consuming industries and retail businesses. Combined with the country's culture of consumerism, the US market is a magnet for foreign goods. Yet, despite the generally free flow of goods across US borders, anyone doing business with the United States must be aware of the risks associated with various US laws that can impose additional and sometimes prohibitive special duties on US imports.
Anti-dumping (AD) and countervailing duty (CVD) cases have long been a tool used by US industries to combat alleged unfair competition from imports and are the most common trade remedy practice under US law. The United States is by far the largest user of AD and CVD remedies, and the scale of recent cases is notable. For example, investigations of common alloy aluminium sheet involved imports from a record 18 countries.2 The investigation of passenger vehicle and light truck tyres from South Korea, Thailand, Taiwan and Vietnam involved almost US$4.5 billion in imports in a US market of US$20 billion.3 A 2022 allegation that imports of solar panels and cells from Cambodia, Malaysia, Thailand and Vietnam are circumventing the AD and CVD orders against China would impact over US$5 billion in trade. A similar allegation with respect to imports of wooden cabinets and vanities from Malaysia and Vietnam could affect a similar value. These kinds of cases are affecting a greater volume of US trade than ever before.
The prevalence of international trade remedy proceedings has steadily increased in recent years, with approximately 497 AD orders and 174 CVD orders in place against myriad products from 59 countries.4 The number of AD and CVD orders has more than doubled since 2015. Since 2017, the US government has further expanded multiple AD and CVD orders through circumvention inquiries; imposed Section 201 safeguard measures on washers and solar products; conducted an unprecedented number of Section 232 investigations; and implemented Section 301 actions against the majority of products imported from China. This chapter discusses noteworthy developments in the US imposition of import restrictions in recent years and provides prospects for the future.
Title VII, Subtitle B of the Tariff Act of 1930, as amended (the Tariff Act) sets forth the applicable standards governing determinations by the US Department of Commerce (Commerce) and the US International Trade Commission (the Commission).5 These agencies are tasked with administering AD and CVD proceedings to provide protection against unfair trade practices, including injurious dumping and subsidisation of products.
At its most basic level, dumping occurs when a foreign firm sells merchandise in the United States at a price lower than what the firm charges for a comparable product in its home market, other primary markets or below a cost-based constructed value.6 For a subsidy to be actionable under CVD law, there must be a financial contribution provided by an 'authority'7 that benefits the recipient and is limited (or 'specific') in nature.8 Examples of countervailable subsidies are tax benefits related to export activities or government-provided low-cost loans targeted to specific companies or industries. However, as explained below, dumping and subsidisation are only remediable if the Commission also concludes that the subject imports are a cause of injury to the domestic industry.
Most AD and CVD proceedings are commenced by the filing of a petition by an interested party on behalf of a domestic industry.9 If Commerce initiates an investigation following a petition, the process takes approximately one year and proceeds in four separate, but interrelated and sometimes overlapping, phases.10
Commerce conducts its investigations through use of questionnaires that seek information to calculate each company's dumping margin or subsidisation rate, or both. Commerce also requests information from the foreign government in CVD investigations about relevant government programmes. When many companies ship to the United States, only the margins or rates of 'mandatory respondents' are calculated, which are then applied to imports from other firms (with additional processes required for respondents in non-market economies, including China and Vietnam).
If Commerce initiates parallel AD and CVD investigations for the same product and country or countries of origin, the Commission typically will conduct a single investigation of all subject imports to determine whether a domestic industry is materially injured, or threatened with imminent material injury, by reason of subject imports.11 The statute directs the Commission to analyse the effect of subject imports on volume and prices in the US market and the impact on the performance of the domestic industry in terms of production, shipments, employment, financial performance and other relevant factors.12 The Commission issues questionnaires to US producers, US importers, foreign producers from the subject countries and US purchasers. The Commission holds public hearings to hear testimony and ask questions of industry participants and parties submit briefs. The Commission makes its determination based on a majority vote of the commissioners.
If both agencies issue affirmative determinations, Commerce will publish AD or CVD orders (or both), but the proceedings are not over. The United States uses a 'retrospective system' in assessing duties on imports of subject merchandise.13 Rates established during an investigation establish the amount of cash deposits for AD or CVD duties, or both, at the time of entry. Commerce determines final duty liability during an administrative review of the order. Interested parties can request a review of particular foreign exporters or producers covered by AD or CVD orders.14 'New shippers' of subject merchandise, who are exporters or producers that did not export subject merchandise to the United States during the original period of investigation, can also request a separate individual AD margin or CVD rate on an expedited basis.15
Additionally, the US regulatory system allows for a 'scope inquiry' process, through which Commerce considers whether a particular product is included within the scope of an AD or CVD order.16 Petitioners can also request an 'anti-circumvention inquiry' if they believe that foreign producers or importers are circumventing an existing AD or CVD order. Circumvention may occur by completing or assembling merchandise in the United States, completing or assembling merchandise in foreign countries not subject to the order, making minor alterations to merchandise that technically removes a product from the scope of an investigation or selling later-developed merchandise with the same general characteristics as the subject merchandise.17 On 20 September 2021, Commerce issued a final rule in which it implemented procedural and substantive changes to its regulations concerning scope inquires, and promulgated a new regulation regarding circumvention of AD and CVD orders.18 The final rule contained the most significant changes to Commerce's regulations in decades.
The Tariff Act follows the general framework of the World Trade Organization (WTO) Anti-Dumping Agreement (the AD Agreement) and the WTO Agreement on Subsidies and Countervailing Measures (the SCM Agreement). Differences between the agreements and US law sometimes create questions as to whether the United States is in compliance with WTO law, but the US trade remedy statutes themselves have rarely been found to be inconsistent with WTO law. On the other hand, the application of US AD/CVD laws in particular cases has often been challenged at the WTO, and in most instances the US government has agreed to adjust its determinations to comply with adverse decisions issued by a Panel or the Appellate Body. Section 129 of the Uruguay Round Agreements Act allows Commerce or the Commission to amend, rescind, or modify a determination found to be inconsistent with US international obligations, but changes are prospective in nature, applying only to unliquidated entries.
The US government conducts numerous other inquiries focused on imports. In the past, these tools have been used far less often than the AD and CVD laws, but their expanded use during the Trump administration may be a harbinger of things to come.
It is useful to start with a primer on the structure of the US government and where these tools fit within that framework. The US Constitution establishes a tripartite form of government consisting of the legislative branch (Congress), the executive branch (the President and the subordinate agencies) and the judicial branch (the Supreme Court and lower tribunals).19 The Constitution confers authority on Congress to 'lay and collect Taxes, Duties, Imposts and Excises' as well as to 'regulate Commerce with foreign Nations'.20
Congress has delegated a portion of these authorities to agencies within the executive branch to address imports that harm or threaten the United States and its commerce. In recent years, despite rarely invoking them for decades, the executive branch has increasingly relied on three tools to address such imports: Section 201 of the Trade Act of 1974;21 Section 232 of the Trade Expansion Act of 196222 and Section 301 of the Trade Act of 1974.23
Consistent with the WTO Agreement on Safeguards, Section 201 of the Trade Act of 1974 authorises the Executive Branch to address imports of 'an article [that] is being imported into the United States in such increased quantities as to be a substantial cause of serious injury, or the threat thereof, to the domestic industry producing an article like or directly competitive with the imported article'.24 Unlike AD and CVD cases, safeguard proceedings cover imports into the United States regardless of country of origin and there is no allegation or investigation of unfair trade practices. If the Commission makes an affirmative injury determination, it will offer recommendations to the President on what remedy should be imposed, such as tariffs or quotas.25 An inter-agency committee reviews the Commission's remedy recommendations and gathers additional input from stakeholders.26 However, only the President decides whether to impose a remedy and, if so, what form the remedy may take.27 Or the President may decide that no remedy is warranted.
Tariffs, tariff-rate quotas, or quotas that are effective for more than one year must be phased down at regular intervals.28 A safeguard measure is temporary, generally effective for four years,29 but in rare circumstances may be extended to no more than eight years.30 If the initial safeguard measure exceeds three years, the Commission must conduct what is known as a 'mid-term' review to determine what changes, if any, should be made to the measure.31 Although no statute requires the President to grant an exclusion from a safeguard measure, the President may direct the US Trade Representative (USTR) to provide such an exclusion if appropriate.32
Section 232 addresses imports that raise national security concerns. Initially promulgated in the 1950s, Section 232 in its current form authorises the President to take measures against imports found to threaten to impair the national security of the United States.33 Commerce has 270 days to conduct an investigation to determine whether a threat exists.34 Commerce considers a range of factors, including some that tie directly to the health of the US economy.35 If Commerce makes an affirmative threat determination, and the President concurs with that finding within 90 days, the President may impose a remedy on imports.36 Alternatively, the President may attempt to reach a negotiated solution, but the President retains the authority to impose such a measure if negotiations (or the negotiated solution) fails.37
Section 301 bestows on the executive branch broad authority to investigate and respond to the unfair acts, policies and practices undertaken by foreign governments. Within the executive branch, the USTR conducts the investigation and takes action when appropriate.38 Section 301 requires the USTR to take action when there is a violation of a trade agreement by a foreign government or when that government's act, policy or practice is 'unjustifiable' and 'burdens or restricts' US commerce.39 The USTR has the discretion to take action when the foreign government's act, policy or practice 'is unreasonable or discriminatory', 'burdens or restricts United States commerce' and action by the USTR 'is appropriate'.40 If the USTR finds that the foreign nation has engaged in actionable conduct, it may impose a remedy, which may include a tariff, a quota or other forms of relief.41 If the investigated act, policy or practice is subject to a rule established in a free trade agreement or in a multilateral agreement administered by the WTO, the USTR must first seek dispute settlement before imposing a remedy, a process that can take years; however, if no such agreement covers the investigated act, policy or practice, the USTR is free to retaliate immediately.42 As such, Section 301 is not traditionally considered as a statute aimed at remedying action associated with imports, but imposition of duties on US imports has been used as a cudgel to convince foreign countries to open their markets to US goods or otherwise to prevent unfair treatment of or reduce limitations placed on US commercial interests.
The United States maintains agreements with various countries that touch upon the import-related laws discussed above. For example, the United States, Mexico and Canada signed a trilateral agreement (USMCA) in November 2018, covering various aspects of cross-border trade. Concerning trade remedies in particular, Article 10.12 of the USMCA affords parties the opportunity to appeal final AD and CVD determinations to a binational panel as an alternative to domestic judicial review, but does not change the substantive rules or procedures of such cases.
A number of free trade agreements with the United States include provisions related to safeguard proceedings.43 For example, under Article 10.2.1 of the USMCA, parties to the agreement must exclude imports of goods from other USMCA countries from a safeguard action unless: (1) imports from a USMCA country, considered individually, account for a 'substantial share of total imports'; and (2) imports from a USMCA country, considered individually, 'contribute importantly' to the serious injury caused by imports. Both criteria must be satisfied to impose a safeguard measure on imports from a USMCA country. In contrast, under Article 8.6.2 of the Peru–United States Trade Promotion Agreement, the United States may (but is not required to) exclude imports from Peru if the investigating authority finds that the 'imports are not a substantial cause of the material injury or threat thereof'. These are separate requirements in addition to the provisions of the US safeguard statute.
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