Court of International Trade Rejects Importer’s Efforts to Collaterally Challenge Application of China Countrywide Antidumping Duty Rate

News & Insights
Nov 28, 2018

In Northern Tool & Equipment Company, Inc. v. United States, an importer (Northern Tool) challenged U.S. Customs and Border Protection’s (CBP) assessment of a 383.6 percent antidumping duty assessment rate on eight entries of hand trucks from the People’s Republic of China brought into the United States between December 2007 and June 2008. Northern Tool believed that the hand trucks should have been subject to the 26.49 percent antidumping rate applicable to Qingdao Taifa Group Co., Ltd. (Taifa), the producer of the merchandise. After CBP denied the importer’s administrative protest in 2013 because Taifa was not also the exporter of the hand trucks, Northern Tool brought suit at the U.S. Court of International Trade (CIT).

Before the CIT, Northern Tool explained that there was no disagreement as to who produced the hand trucks (Taifa) and that the only issue in question was the identity of the exporter of these goods. Northern Tool argued that CBP should have applied Taifa’s rate because the exporter of the Taifa-produced hand trucks was located in a market economy country (Taiwan) or, alternatively, that Taifa should be considered the exporter because Taifa had knowledge at the time of sale that the hand trucks were destined for the United States.

In response, CBP observed that its role in the application of antidumping duties was “merely ministerial” and that it was required to “precisely” apply the instructions given by the U.S. Department of Commerce (Commerce). CBP asserted that Northern Tool was improperly attempting to use the court’s jurisdictional authority under 28 U.S.C. § 1581(a) to challenge the applicability of the antidumping duty assessment rate assigned to entities that had been unable to demonstrate that they operated independently of the Chinese government, otherwise known as the People’s Republic of China (PRC)–wide rate. CBP claimed that Northern Tool’s arguments should have been raised to Commerce in the context of the relevant administrative review. In its decision issued on November 23rd, the CIT agreed with CBP and rejected Northern Tool’s appeal. The CIT held that the court did have jurisdiction to hear the appeal, but not under 28 U.S.C. § 1581(a). Instead, the CIT’s jurisdiction over the case came from 28 U.S.C. § 1581(i)(4) and, accordingly, the relevant review standards are those set forth in the Administrative Procedures Act (APA) at 5 U.S.C. § 706. Under the APA, CBP’s application of the PRC-wide rate to Northern Tool’s imports was subject to review under the arbitrary and capricious standard of 5 U.S.C. § 706(2)(A). Using this standard, the CIT found that CBP had explained how the evidence on the record supported its conclusions regarding the exporter of the merchandise and that Northern Tool’s “arguments and evidence are, at best, only a different interpretation of what CBP concluded on the case . . . .”

The CIT’s decision effectively halts what would otherwise have been an additional substantial loophole in the application of antidumping duties on Chinese imports. As the CIT explained, “[w]hen non-market economy merchandise is exported by an exporter from a market economy third country, the applicable rate is that of the non-market economy supplier. . . . The purpose of this is to ensure that high-rate suppliers do not funnel their products through market economy exporters and to ensure that market economy resellers ‘bear the consequences’ of using non-market economy suppliers” (citations omitted). In its appeal, Northern Tool did not dispute this approach, but instead argued that where sales to the United States were made through a market economy reseller, CBP is obligated to apply the antidumping duty assessment rate assigned to the Chinese company that the reseller claims was responsible for producing that merchandise. If this approach were allowed, high-rate suppliers could funnel their products through market economy exporters in a manner that would fall entirely outside of Commerce’s administrative review process. This is because the market economy reseller need only identify a low-rate supplier as the producer of the goods in sales documentation presented to CBP in order to avail itself of that low rate. By rejecting Northern Tool’s appeal, the CIT has made clear that importers using market economy resellers to source Chinese goods must appear before Commerce in the context of an open, public administrative proceeding in order to ensure the applicability of an individual Chinese company’s rate. If an importer fails to do so, it will find no back door through which to avail itself of such a rate through CBP’s black box administrative protest procedures.