On March 7, 2013, three separate three-judge panels of the Federal Circuit conducted oral argument on important international trade cases. Union Steel v. United States is the latest in the long line of challenges to the “zeroing” methodology in which the Department of Commerce calculates antidumping duty (AD) dumping margins without offsetting sales above normal value. Yangzhou Bestpak Gifts & Crafts Co. v. United States involves Commerce’s assignment of an AD margin when the individually examined respondents received either no dumping margin or that of the China-wide entity. Almond Bros. Lumber Co. v. United States challenges a term of the 2006 Softwood Lumber Agreement (SLA). In each, the Court of International Trade (CIT) upheld the agency action. International trade jurisprudence would benefit from the Federal Circuit affirming these decisions that give the government needed flexibility to negotiate and administer our international trade laws.
The Federal Circuit has ruled that Commerce has discretion to calculate margins with or without zeroing, because the statute does not compel any particular methodology. United States Steel Corp. v. United States, 621 F.3d 1351 (Fed. Cir. 2010). Yet the Federal Circuit required Commerce to explain why it zeroed in AD administrative reviews after 2006 when the agency ceased doing so in AD investigations to placate the World Trade Organization (WTO). Dongbu Steel Co. v. United States, 635 F.3d 1363 (Fed. Cir. 2011). The CIT upheld the Commerce justification based on the differences between reviews that assess transaction-specific margins and investigations that assess industry-wide pricing behavior. Union Steel v. United States, 823 F. Supp. 2d 1346 (CIT 2012). At oral argument, the appellant claimed that Commerce failed to base its explanation in the statute. Judge Wallach, who was elevated from the CIT, responded that the requisite reasoned basis is not a matter of statutory interpretation.
Yangzhou Bestpak, a respondent in the AD investigation of narrow woven ribbons from China, was neither selected for individual examination nor requested such treatment. Of the two respondents individually examined, one was found not to be dumping and the other assigned the 247.65% China-wide margin based on its failure to cooperate. Commerce assigned Yangzhou Bestpak a dumping margin of 123.83% by simple averaging. While the CIT initially ordered remand, the margin was eventually affirmed as reasonable. Yangzhou Bestpak Gifts & Crafts Co. v. United States, 783 F. Supp. 2d 1343 (CIT 2011). At oral argument, Federal Circuit Chief Judge Rader expressed that the 123.83% margin was neither reasonable nor accurate and Commerce could have acted to avoid this result. Almond Bros. is a challenge to the SLA term that Canada distribute funds to members of a domestic softwood lumber industry group brought by lumber companies that were not members. The Office of the U.S. Trade Representative (USTR) negotiated this term as part of a comprehensive settlement of the longstanding dispute over Canadian softwood lumber practices. Although the CIT initially dismissed for lack of jurisdiction, the Federal Circuit reversed and ordered the case to proceed. Almond Bros. Lumber Co. v. United States, 651 F.3d 1343 (Fed. Cir. 2011). The CIT thereafter dismissed on multiple bases including a non-justiciable political question. Almond Bros. Lumber Co. v. United States, 2012 Ct. Intl. Trade LEXIS 53 (Apr. 19, 2012). At oral argument on the appeal, Judge Reyna – a former international trade practitioner – questioned why courts should upset the balance of a negotiated agreement that gives the United States and Canada reciprocal benefits and obligations.
The Federal Circuit should affirm the CIT in Almond Bros. to ensure that the executive branch has the necessary discretion to fashion agreements that resolve complicated and contentious trade disputes. Requiring USTR to provide compensatory trade benefits to all members of affected industries on an equal basis presents an unworkable system that is not contemplated by statute. Similarly, the Federal Circuit should affirm the CIT in Union Steel so that Commerce has the necessary discretion to administer the AD laws. Given the absence of a statutorily mandated methodology, Commerce should be able to take different approaches in different AD proceedings. Commerce should also be able to incrementally comply with WTO obligations, having now ceased zeroing as a matter of course in both investigations and reviews.
The Federal Circuit appears ready to properly resolve longstanding issues in Almond Bros. and Union Steel. Yangzhou Bestpak is an unsettling instance where AD liability greater than the import price is achieved through averaging two data points. However, by not asking to be individually examined, Yangzhou Bestpak knew that its margin would be calculated based on those respondents who were. The CIT correctly found that the 123.83% margin “may be unfortunate and even frustrating, but it is not unreasonable on this limited administrative record.” Yangzhou Bestpak, 783 F. Supp. 2d at 1353. Commerce will be unduly burdened if it must – late in an investigation, upon finding the lone cooperative respondent examined to not be dumping – obtain and analyze sales data of companies that have not asked to be examined. Reversing the CIT in Yangzhou Bestpak will hinder Commerce’s ability to administer the AD laws.