Petitioner Says 'Verification' of Indian Import Duty Exemption Let Respondent 'Game the System'
The Commerce Department has let respondents "game the system" and avoid countervailing duty liability for an otherwise countervailable program "simply by requesting a 'verification' after the fact from a willing foreign government," petitioner Titan Tire Corp. argued in a March 28 reply brief at the Court of International Trade. Titan Tire said this system "creates a loophole that threatens to eviscerate the regulation through significant potential gamesmanship" (Titan Tire Corp. v. United States, CIT # 23-00233).
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At issue is India's Advanced Authorization Scheme, which Commerce found to be countervailable in the original CVD investigation on new pneumatic off-the-road tires, given that it provides import duty exemptions to Indian exporters. The agency based this finding on the Indian government's failure to show at verification that the state's Norms Committee uses an adequate procedure to ensure that respondent Balkrishna Industries' norms show actual consumption.
Commerce reversed course in the 2021 review of the CVD order, finding that the Indian government conducted a sufficient verification of the inputs involved to confirm which inputs are consumed in the production of the subject merchandise and in what amounts. Titan Tire sued, alleging that the finding was rooted in the Indian government's "flawed examination" (see 2502140034).
Responding to claims from the Indian government and Balkrishna, the petitioner emphasized that the Indian government doesn't have a "system or procedure to confirm which inputs are consumed in the production of the exported products and in what amounts" with respect to the Advanced Authorization Scheme under Commerce's regulation 19 C.F.R. § 351.519(a)(4)(i).
Under this regulation, Commerce says it will consider the "entire amount of an exemption, deferral, remission or drawback to confer a benefit, unless" the government in question has a "system or procedure to confirm which inputs are consumed in the production of the exported products and in what amounts." In addition, the system or procedure must be "reasonable, effective for the purposes intended" and based on "generally accepted commercial practices in the country of export."
Titan Tire said that without an adequate system, as required by the regulation, all of Balkrishna's import duties that were exempted under the Advanced Authorization Scheme are countervailable, unless Commerce finds that the foreign government has conducted a sufficient verification. While the agency said the Indian government conducted such an examination by referencing a 2022 verification report and "other documents," the petitioner said it wasn't clear to it that these "other documents" relate to the verification.
Balkrishna and the Indian government said Titan Tire didn't exhaust its administrative remedies on this point. In response, the petitioner said it wasn't required to, since the argument "involves a pure question of law," though it added that it did make the argument before Commerce. Nevertheless, the claim isn't dispositive, since the U.S. clarified that Commerce said the "verification" was the examination that satisfies the regulation and not the other documents, the brief said.
Regarding the verification itself, Titan Tire said Commerce is allowing Balkrishna to use this verification to game the system. The verification was "conducted post hoc" at the respondent's request "solely for the purposes of this review." This lets the respondent evade CVD liability by merely finding a "willing foreign government," the brief said.