Commerce Issues Final Rule Overhauling AD/CVD Regulations: Part 1 (Scope Rulings)

The final rule modifies Commerce’s regulations on scope proceedings, allowing the agency to suspend liquidation prior to a scope inquiry’s initiation date but adding provisions that allow for requests to suspend liquidation at an “alternative date.” It also amends the agency’s regulations on new shipper reviews and the treatment of business proprietary information in AD/CVD proceedings; creates new provisions on importer certifications, covered merchandise referrals and anti-circumvention inquiries; and establishes deadlines for industry support comments at the beginning of AD/CVD investigations.

Some provisions of the final rule are set to take effect Oct. 20, including those on industry support comments, new shipper reviews, and importer certification and reimbursement, while others would be effective Nov. 4, such as those on scope and anti-circumvention inquiries and covered merchandise referrals.

(This is Part 1 of Trade Law Daily’s summary of Commerce’s final rule, covering changes to the agency’s regulations of scope rulings. See future editions for a summary of the rest of the final rule.)

Extensive Scope Changes Affect Suspension of Liquidation Dates, (k)(1) Factors

­­The final rule adopts extensive changes to Commerce’s scope regulations at 19 CFR 351.225. Among other changes, Commerce is codifying that scope rulings apply back to the date liquidation was originally suspended under an AD/CVD order (i.e., usually back to the preliminary determination in an AD/CVD investigation). The final rule also addresses initiation procedures, submission deadlines and how Commerce applies its (k)(1) factors when making scope decisions.

Retroactive application of scope rulings. As proposed, with minor modifications, Commerce is adopting the following language in 19 CFR 351.225(a) on the application of scope rulings: “A scope ruling that a product is covered by the scope of an order is a determination that the product has always been covered by the scope of that order.”

In the same vein, Commerce’s final rule provides that, at the time of a preliminary or final scope ruling determining that the product is covered by the scope of an order, “Commerce normally will direct CBP to begin the suspension of liquidation of unliquidated entries not yet suspended, which entered before the date of initiation of the scope inquiry, and collect applicable cash deposits.” Courts have interpreted Commerce’s previous regulations to mean the agency can only suspend liquidation back to the date a scope inquiry was initiated.

‘Alternative’ suspension of liquidation date. However, in a change from its proposed rule, Commerce will allow for exceptions to retroactive suspension of liquidation when it determines it is “appropriate to do so,” the agency said.

“Under this framework, Commerce may consider upon timely request of an interested party or at its discretion whether such suspension of liquidation and application of cash deposits, also referred to as retroactive suspension, should not be applied to certain entries which pre-date the date of initiation,” Commerce said. “In response to a timely request from an interested party, Commerce will only consider directing CBP to begin suspension of liquidation and application of cash deposits to merchandise entering at an alternative date based on a specific argument by the interested party supported by evidence establishing the appropriateness of that alternative date.”

The ability to request an alternative date is meant for “limited instances,” such as “situations in which Commerce issues a scope ruling that a product is covered by the scope of an order, and the affected importers have no opportunity, for no reason other than the timing of the scope ruling, to request an administrative review to potentially lower their liability for entries that pre-date the date of initiation of the scope inquiry,” Commerce said.

The changes apply to scope inquiries initiated by requests filed on or after Nov. 4, or self-initiated scope inquiries that begin on or after that date. However, Commerce will not apply this authority to unliquidated entries that were entered prior to Nov. 4, it said.

Self-initiated scope inquiries. Commerce’s final rule includes provisions on the agency’s authority to self-initiate a scope ruling. In a change from the proposal, the agency says that it will publish a notice in the Federal Register when it self-initiates a scope inquiry.

Standardized scope applications. The new regulations also set requirements for interested parties to submit standardized scope ruling applications. “This is a significant change from Commerce’s current procedures, which do not require a detailed standardized application,” the agency said. Scope applications will be deemed accepted and a scope inquiry commenced after 30 days if the application is not rejected by Commerce.

In the final rule, Commerce said it will start publishing a monthly list of scope applications filed with Commerce.

Deadlines. Commerce is extending its deadline for issuing final scope rulings. Currently, the agency is required to issue its final ruling within 45 days, which it says is “difficult and frequently unworkable” and forces Commerce to issue multiple extensions. The final rule provides that Commerce “shall issue a final scope ruling within 120 days after the date on which the scope inquiry was initiated, although it may be extended up to an additional 180 days for good cause (for a fully-extended total of 300 days).”

Commerce is also setting deadlines for interested parties to provide responses and new factual information. See Commerce’s notice for the revised deadlines.

(k)(1) and (k)(2) factors. Commerce is revising 19 CFR 351.225(k)(1) to codify the hierarchy in which it will consider these sources when making scope determinations. The paragraph now says that, “if Commerce determines that the language of the scope is not itself dispositive (i.e., it is not dispositive using no interpretive tools whatsoever), Commerce may take into account the identified primary interpretive sources,” which are the traditional (k)(1) sources, in determining if the language is dispositive and the scope covers the product at issue.”

Only if those primary interpretive sources are not sufficient will Commerce “consider secondary interpretive sources such as other Commerce or ITC determinations not included in the primary interpretive sources, Customs rulings or determinations, industry usage, dictionaries, and any other relevant record evidence,” the final rule said.

“Absent such codification, a court might rely on a secondary source, such as a dictionary definition, to interpret a word or phrase in a manner which is inconsistent with the meaning used by the injured domestic industry in drafting the proposed scope and petition, and the collective interpretation of Commerce, the industry, and the ITC of that term expressed in the underlying investigation,” Commerce said.

Commerce also amended 19 CFR 351-225(k)(2) to say that it will only consider these additional factors if the (k)(1) factors are not dispositive. The agency also changed the factor “expectations of ultimate purchasers” to “expectations of ultimate users,” because “we have found in our practice that there are sometimes cases in which it is not the expectations of purchasers, but the expectations of the ultimate users of a product which inform whether or not a product was intended to be included in the scope of an order,” Commerce said.

New (k)(3) ‘mixed media’ factors. Commerce is adding a new 19 CFR 351.225(k)(3) to codify its analysis of component parts of larger products, also known as a mixed media analysis. First, under paragraph (k)(3)(i), Commerce analyzes whether the component is subject to the scope of an AD/CVD order. If not, then the inquiry ends. If it is, Commerce proceeds under section (k)(3)(ii) to determine whether the component’s inclusion in the merchandise as a whole would result in the component’s exclusion from the order. If not, then under paragraph (k)(3)(iii), Commerce will consider additional relevant factors on a product-specific basis, Commerce said.

Negative preliminary rulings. In a departure from the existing regulations, Commerce’s final rule says the agency will no longer inform CBP of a negative preliminary scope ruling and direct it to end suspension of liquidation for relevant entries. Instead, suspension of liquidation will continue until Commerce issues its final scope ruling, the final rule said.

Application of rulings to identical products. In its proposed rule, Commerce said it would in some circumstances apply a previous scope ruling issued for a particular product to “all products with the identical physical description from the same country of origin as the particular product at issue, regardless of producer, exporter, or importer, without initiating or conducting a new scope inquiry under this section.” Commerce eliminated that provision from its final rule.

“Commerce agrees with the concerns expressed that if Commerce does not initiate or conduct a new scope inquiry based upon the filing of a scope application, but instead automatically issues a scope ruling that is applicable to all producers, exporter, or importers of that merchandise, such a procedure would not provide potential interested parties with adequate procedures to protect their interests,” it said.

Nonetheless, Commerce said it may issue “scope clarifications” after an order is issued to address repeated, identical or similar scope requests, adding new 19 CFR 351.225(q) to address this authority. “[T]he scope clarification may take the form of an interpretive footnote to the scope when the scope is published or issued in instructions to CBP,” Commerce said.

The agency also said it may self-initiate scope inquiries based upon scope rulings applicable to an order covering one country to apply it to other countries subject to identical or similar AD/CVD orders, and may also choose to apply scope rulings on a country-wide basis for all products from the same country with the same relevant physical characteristics.