Commerce AD/CVD Rule Revisions Released

The Commerce Department has announced significant updates to its antidumping and countervailing duties (AD/CVD) regulations.

In voluminous revisions to the proposed rule of May 2023, Commerce is revising some of its procedures, codifying certain areas of its practice, and enhancing certain areas of its methodologies and analyses to address price and cost distortions, as well as certain countervailable subsidies, in different capacities.

“The Commerce Department is serious about defending American workers and producers from illegal trade actions,” said U.S. Secretary of Commerce Gina M. Raimondo. “We will continue to enforce U.S. trade law and remedy actions that undermine fair competition and U.S. companies.”

These final regulations come after the Department published proposed regulatory changes in the Federal Register in May 2023 and subsequently evaluated comments from a wide range of stakeholders including labor unions, businesses, and foreign governments. The final regulations will take effect on April 24, 2024, 30 days following publication.

The new regulations apply to various aspects of AD/CVD proceedings, including:  

• Strengthening the Department’s ability to counter transnational subsidies that undercut domestic U.S. industry;
• Addressing market distortions that undermine U.S. manufacturers; and
• Ensuring that weak labor, environmental, human rights, or intellectual property protections abroad do not provide an unfair advantage over U.S. producers. 

On May 9, 2023, Commerce proposed amendments to its existing regulations, 19 CFR part 351, to improve, strengthen and enhance its enforcement of the AD and CVD laws.

 Relevant to this final rule are the AD/CVD statutory and regulatory provisions in general, as well as those pertaining to filing requirements, scope, circumvention, and covered merchandise inquiries, the use of new factual information, the CVD facts available hierarchy, surrogate value and CVD benchmark selections, particular market situations (PMS), and certain types of countervailable subsidies.

The purpose of these modifications and additions to the regulations is to improve, strengthen and enhance the enforcement and administration of the AD/CVD laws, make such enforcement and administration more efficient, and to address factors which distort costs and prices—factors that make the “playing field” less “level” for domestic interested parties and can contribute to unfair trade.

In order to achieve the purpose of those regulations, Commerce may at times need to request further documentation from interested parties that clarifies the record to better understand the facts of a particular case.

Other times, Commerce may need to extend the deadline to issue a determination so that its decision is fully informed and complete.

To address unfair trade adequately and appropriately, Commerce may need to remove unnecessary restrictions in its regulations to address updated challenges, like the agency's withdrawal of the prohibitive transnational subsidies regulation.

In the Proposed Rule, Commerce invited the public to submit comments..  Commerce received 53 submissions from interested parties, including domestic producers, domestic industrial users, exporters, importers, foreign governments, and foreign entities.

Summary of Changes From the Proposed to the Final Rule

The following changes to the regulatory text in the Proposed Rule that are reflected in the final regulatory text and preamble of this final rule include the following::

Commerce has revised § 351.102(b)(14) to define the term “days” to explain that the term generally means calendar days and not business days, and if Commerce wishes for business days to be applied, it will explicitly state as such.

Commerce revised § 351.104(a)(1) and added § 351.104(a)(3) through (7) to identify the information sources that may be cited in submissions without submitting them on the official record and the information sources that must be submitted on the official record for Commerce to consider them in the ongoing segment of a proceeding. All citations to public documents from other segments and proceedings which may be cited without submitting them on the record must include the ACCESS barcode in the citation.

Commerce determined to not revise § 351.301(c)(4) as was presented in the Proposed Rule, in agreement with the commenters who expressed concerns that the proposed revision would not provide interested parties with sufficient opportunity to respond to information placed by Commerce on the record late in a segment of a proceeding.

Commerce revised §§ 351.225(f), 351.226(f), and 351.227(d) to reflect that only the filing and timing restrictions set forth in § 351.301(c) do not apply to the filing deadlines set forth in the scope, circumvention, and covered merchandise regulations. Further, in response to comments and concerns from outside parties, the proposed amendments to § 351.225(q) have been revised to limit and further clarify the situations in which a scope clarification may be applied, and the means by which it may be issued.

Commerce also made minor edits to the terminology proposed in §§ 351.225(m)(2), 351.226(m)(2), and 351.227(m)(2) to clarify what preliminary and final documents from scope, circumvention, and covered merchandise segments should be placed on the CVD record once a proceeding covering companion orders is completed on the AD record.

Commerce revised certain language in the newly proposed § 351.301(c)(6), clarifying that Commerce can only guarantee that it will address Notices of Subsequent Authority filed within 30 days of the issuance of the alleged authority and 30 days before a final determination or final results deadline (and 25 days before a final determination or final results deadline for rebuttal comments), but removed proposed language which would have stated that Commerce would not consider and address submissions after the pre-final determination and results deadlines. 

With respect to the proposed amendments to § 351.308, Commerce revised the lettering to have the CVD AFA hierarchy appear at paragraph (j), reserving paragraphs (g), (h), and (i) for future rulemaking to codify, in part, additions Congress made to section 776 of the Act in 2015. Furthermore, in response to multiple comments, Commerce removed its “above-zero” threshold in the first step of the CVD AFA hierarchy for investigations, and instead replaced it with a “above- de minimis” threshold to better reflect the statutory purpose of AFA to induce cooperation by interested parties.

Commerce made minor changes to its regulations addressing government inaction which distorts prices or costs through weak, ineffective, or nonexistent property (including intellectual property), human rights, labor, and environment protections. Specifically, Commerce modified § 351.416(d)(2)(v) of the PMS regulation to clarify that if Commerce looks to the actions of governments in other countries to analyze the cost effects of government inaction, it will normally consider only the actions of governments in comparable economies.

Furthermore, Commerce revised the proposed language for § 351.408(d)(1)(i) and (ii) to clarify that it is Commerce who determines as part of its surrogate value analysis if a proposed value on the record “was derived” from a country that provides broadly available export subsidies,” that particular instances of subsidization occurred with respect to a proposed surrogate value, and that a proposed surrogate value was subject to an AD order, or was derived from a facility, party, industry, intra-country region or a country with weak, ineffective, or nonexistent protections.

Commerce substantially revised its proposed PMS regulation, § 351.416, in response to many outside comments on the regulation. Such revisions include the following:

1.  addition and revision of terminology throughout the regulation for consistency and clarification;
2.  clarification in § 351.416(a) that the regulation is defining both sales-based particular market situations and cost-based particular market situations;
3.  the removal of the terms “distinct” and “considerably” from proposed § 351.416(a), (b), (c), (d), and (e), so as not to create any confusion that further standards or tests are required as part of Commerce's PMS analysis;
4.  revisions to § 351.416(c) to explain that Commerce's sales-based PMS analysis is limited to certain period of investigation or review;
5.  revisions to § 351.416(d) to clarify that Commerce's analysis is limited to the relevant period of investigation or review, and is divided into three parts—a finding of a circumstance or set of circumstances that impacts costs or prices, a finding that costs were distorted, and a finding that it is more likely than not that the circumstances or set of circumstances at issue contributed to the distortion of the costs of production of the subject merchandise;
6.  additional changes to § 351.416(d) to clarify Commerce's analysis of a cost-based PMS allegation, including a listing of information in § 351.416(d)(4) that will not preclude it from finding the existence of a PMS;
7. modifications to § 351.416(e) to explain that a market situation's particularity is not determined by the number of impacted parties, but only if it applies to certain parties and products, and that the provision applies equally to both sales-based and cost-based PMS determinations;
8. extensive changes to § 351.416(f)—explaining that if Commerce determines the existence of a cost-based PMS, it can adjust its calculations of the cost of production, and if it cannot precisely quantify the distortions in the cost of production caused by the PMS, then it can use any reasonable methodology to adjust its calculations based on record information. Furthermore, the regulation provides that even if Commerce determines the existence of a cost-based PMS, it may determine to make no adjustment if it believes an adjustment is not warranted, and the regulation provides guidance on factors which Commerce may consider in determining if an adjustment is appropriate;
9.  revisions to certain language used in its proposed examples of cost-based particular market situations in § 351.416(g), a refinement of the circumstances described in § 351.406(g)(9), and provision of more extensive descriptions of nongovernmental actions in § 351.416(g)(12) that could become a PMS which distorts a producer's costs of production; and
10.  certain minor revisions to § 351.416(h) to bring that provision into conformity with the language of other provisions of the PMS regulation.

Commerce modified the proposed amendment to § 351.505(d), the loan regulation, to state that Commerce will normally treat a loan as a grant if no “payments on the loan” have been made in three years unless the loan recipient can demonstrate that nonpayment is consistent with the terms of a comparable commercial loan it could obtain on the market or “the payments on the loan are consistent with the terms of the loan contract.”

Commerce made the modifications to allow for parties to show that the payments on the loan were consistent with the terms of a contract, and not to treat accrued, unpaid interest in every case as a grant, as proposed in the Proposed Rule, in response to comments filed on the record addressing “balloon” loans and the case-specific nature of the inclusion, or exclusion, of accrued, unpaid interest in Commerce's benefit calculations.

Commerce also made a small change to its proposed amendments to § 351.507(c), its equity regulation, adding the word “outside” to the term “private investor,” to clarify that the sentence was meant only to apply to outside private investors, and not private investors within a company.

Lastly, the Customs Service was integrated into a new agency, the U.S. Customs and Border Protection, in 2003. Commerce amended its regulations in this final rule to remove the term “the Customs Service,” wherever it appears, and to replace it with the correct agency name—U.S. Customs and Border Protection. In furtherance of that modification, Commerce has also added a definition of U.S. Customs and Border Protection at § 351.102(b)(53)

For more information on the new regulations, please refer to the Federal Register notice.  [89 FR 20766]