The comment window for the Department of Commerce’s (“the Department”) proposed rules for Antidumping and Countervailing Duty (“ADCVD”) Regulations closed on July 10, 2023. Pursuant to its authority under Title VII of the Tariff Act of 1930, the Department proposed to amend its regulations to strengthen its enforcement of trade remedies by revising many of its procedures, codifying many areas of its practice, and enhancing certain areas of its methodologies and analyses to address price and cost distortions in different capacities. The proposed rules touched on 22 different topics related to ADCVD procedures including transnational subsidies, CVD calculations (such as loan, benefit, equity, debt forgiveness, and direct taxes), the CVD adverse facts available (“AFA”) hierarchy, procedures for placing previous analysis on the record, extensions of time, scope inquiries of merchandise not yet imported, and clarifications about references and citations. The full list of proposed regulations can be found here.

Following the one-month comment window, a total of 49 interested parties submitted comments to the Department with a wide array of opinions and proposed modifications. The filing parties included 20 trade associations and coalitions, 7 governments, and handful of law firms and private companies. Among the submitted comments, 31 parties expressed concerns about the new regulations, 12 declared support for the initiative as a whole while proposing their own modifications, and 6 offered full support of the regulations as written. In general, the U.S. steel and aluminum industry supported the proposed rules while foreign governments, foreign producers, and certain trade groups commented against several of the more contentious amendments.

Supporters of the proposed regulations praised the Department for making an effort to bolster the U.S.’s trade remedy mechanisms so that that distortive costs do not result in diluted dumping margins, depriving domestic industries of much needed relief. In particular, most of the interested parties supporting the changes made specific mention of the Department’s proposal to eliminate the regulatory prohibition on examining transnational subsidies. In their comments the American Institute of Steel Construction (“AISC”) asserted that, “it is critical that the Department examine these increasingly frequent subsidy schemes, which create significant distortions to fair competition.” AISC points out that the Chinese government supports the production of fabricated structural steel in third countries that can then be imported to the United States and avoid paying AD/CVD duties. Under the proposed rules, the Department will be allowed to examine subsidies provided to companies by third-party governments.

While the U.S. industry largely supported the proposed modifications, commenters still offered solutions to the Department to solve potential issues that could arise under new rules. Wiley Rein LLP, who represented at least 5 of the parties submitting comments, shared concern about the current language for codifying the CVD AFA hierarchy. Their letter states that, “the proposed rule incorporates an unreasonable inconsistency in the Department’s CVD AFA practice that actually encourages respondents to withhold information and piggyback on de minimis or even non-measurable subsidy rates applied to other respondents.” In response, Wiley Rein LLP suggests that the Department should clarify that it will not apply lower AFA rates in response to the same types of uncooperative responses from one proceeding to another.

Foreign governments including Brazil, China, Vietnam, Korea, certain provinces in Canada, and Mexico all voiced concerns regarding the Department’s proposed rules. While many of the foreign governments strongly opposed the issue of transnational subsidies, several parties also commented against the proposed regulations on Government Inaction. As written, the proposed regulations would allow the Department to decide whether lax enforcement of laws such as environment, labor, human rights, and intellectual property could lead to a rejection of an in-country benchmark. As the Government of Mexico points out, “this could lead to a wide range of new allegations in trade remedy proceedings and invite DOC to make judgments about many areas of government policy in which it lacks expertise.” Under new regulations, ADCVD could become a new avenue to impede imports based on issues such as labor and human rights.

Other groups commented that the new proposed regulations could lead to unintended consequences that would harm American companies and consumers. The Retail Industry Leaders Association (“RILA”) explained that the proposed regulation for determining the existence of a Particular Market Situation (“PMS”) could cause unpredictability for AD rates since it “significantly negates the ability of respondents to make sure they are not dumping by monitoring their prices.” The Department proposes that a PMS will be declared if there is evidence that a distortion is “likely” to contribute to price or cost distortions, however several commenters such as RILA argue that this lowers the standard to an unreasonable level and directly contradicts the wording of 19 U.S. Code § 1677b(e)(3). In addition, a group of around 20 food agricultural trade associations submitted comments arguing that the proposed amendments would “(i) jeopardize the supply of inputs critical to agriculture and food product manufacturing in the United States, (ii) threaten U.S. exports by inviting legal challenges and retaliation from trading partners, and (iii) threaten U.S. exports by prompting other countries to make similar changes to their own AD/CVD rules.”

The Department will have no shortage of viewpoints to consider as they work on finalizing this significant overhaul of ADCVD regulations.  Based on previous amended proceedings, it may take the Department around a year to issue and implement the final rules however there is no statutory deadline. Until then, interested parties will have to wait and see how the Department will weigh the comments submitted on several of these contentious changes.