The United States Court of International Trade recently surprised many by indicating that it will take a look of the controversial practice whereby certain domestic petitioners in antidumping and countervailing duty cases seek “settlement payments” from foreign companies in exchange for excluding them from annual Commerce Department reviews of outstanding antidumping and countervailing duty orders.  In Itochu Building Materials Inc. v. United States, Slip Op. 17-73 (June 21, 2017), Senior Judge Jane A. Restani ordered a domestic petitioner to furnish the Commerce Department (and by, extension, the Court) with information concerning the circumstances under which the producer requested Commerce to review a large number of foreign producers, but then withdrew its request as to most of those entities. In directing submission of the information, the Court expressed concern that the process of extracting settlement payments might injure the integrity of the antidumping and countervailing duty review process. 

Settlement payments have been controversial for some time, particularly since the 2007 repeal of the so-called “Byrd Amendment”, which distributed antidumping and countervailing duty collections to domestic producers who had supported the petitions seeking imposition of the special duties.   

While importers subject to antidumping or countervailing duties deposit estimated duties when they enter goods into the United States, their final liability is not determined until the CommerceDepartment conducts an annual review of the antidumping or countervailing duty order involved. Commerce reviews foreign producers and shippers of these goods only if requested to do so by a domestic producer, or by the foreign producer or shipper itself.  Final duty margins determined in these reviews often vary significantly – up or down – from the cash deposits collected at entry.  If no review is requested, entries liquidated “as entered”

The practice of soliciting “settlement payments” in antidumping review proceedings received some prominence a few years ago in connection with the antidumping order against Wooden Bedroom Furniture from China.  In hearings before the US International Trade Commission, it became known that some law firms representing domestic interests would request Commerce Department reviews of a large number of foreign entities, and then agree to withdraw their request to review given producers based on “settlement payments” by those producers. At the time, some ITC Commissioners expressed doubts over the legality of the practice. 

Proponents of “settlement payments” compare them to settlements in civil litigation between private parties. But there is one important difference: while trade remedy proceedings can sometimes take on an adversarial tone, they are not litigations, but “investigations” by government bodies.

In the Itochu case, the domestic producer had requested the Commerce Department review some 222 producers and exporters of Steel Nails from the People’s Republic of China.  On the last day for withdrawing requests, the petitioner withdrew its request for review in respect of 159 producers, including one which had been selected as a “mandatory respondent” in the case (and which, on the same day, withdrew its own petition for review).  Judge Restani, apparently acting on her own initiative, expressed some suspicion over the sequence of events.  Remanding the case to the Commerce Department for correction of various errors in the calculation of margins, the Court also directed the domestic petitioner to provide Commerce with information concerning the circumstances under which the review request for 222 firms was made, and then retracted in respect of 159 firms.  The Court indicated that Commerce could, if it wished, reopen the administrative record to solicit comments from other affected parties. 

In making this unprecedented request, the Court noted that settlement payments might undermine the integrity of the antidumping law’s administration and result in shifting into private pockets of monies which otherwise might have been paid to the government as antidumping duties. 

If settlement payments were solicited and received, and the Court concludes that such payments were improperly solicited, the conduct of antidumping and countervailing proceedings could be significantly changed.  There could be other consequences, particularly in cases where competing domestic producers have collaborated to seek the imposition of special duties on goods made by foreign competitors. Such joint anticompetitive action is generally frowned upon under the antitrust laws. But petitioners who file a meritorious request for governmental relief receive a limited Noerr-Pennington antitrust immunity, based on the fact that they are invoking a legal procedure.  If domestic producers are determined to instead be using the trade laws to exact payments from competitors, conceivably this immunity could be lost, and domestic petitioners might find themselves subject to suit.

Trade observers, buckle up. It could be a wild ride.