The imposition of antidumping and countervailing duty orders on a given class or kind of merchandise often causes producers of subject goods in the targeted countries to take action to avoid liability under the orders. This may involve changing the nature of the goods produced to remove them from the scope of the relevant order(s). It may involve moving some, or all, of the production of the goods to countries not covered by the orders. These actions, in turn, may prompt the domestic petitioners to seek scope rulings or anticircumvention determinations in an effort to bring these re-imagined or re-deployed goods within the scope of the existing AD or CVD orders.

In recent years, a number of domestic producers have sought to structure the scope of AD and CVD orders in an effort to anticipate, and dispense with the need for, scope and anticircumvention proceedings. These efforts may be in the form of petitions targeting “widgets produced in Country A, whether or not subjected to further processing in other countries,” or “widgets produced in Country A, whether or not combined with other items,” and the like.

In 2011, the Commerce Department issued AD and CVD orders on Aluminum Extrusions from the People’s Republic of China.  The scope of these orders was truly breathtaking: the orders covered everything from extruded aluminum tennis racket handles to “curtain walls” used to erect the exteriors of buildings. The Orders ingeminated more scope and anticircumvention determinations than any previous orders; scope litigation in the courts (were extruded aluminum refrigerator handles with plastic end-caps within the scope of the orders?); and even criminal prosecutions and convictions in very vague cases.

In retrospect, the breadth of the petitions reflected the unusual nature of the domestic industry which filed it. While most domestic industries in trade investigations produce and market discrete products, the domestic aluminum extrusion industry consisted of companies which had extrusion equipment that could make a near-infinite range of goods. In retrospect, it was as if a petition had been failed against “Goods Produced Using Table Saws.”

Not content with the level of protection achieved from the 2011 orders, the domestic aluminum extrusions industry recent filed some 16 new petitions—12 for antidumping duties, and 4 for countervailing duties—against aluminum extrusions from various countries. [Including new petitions against China, to pick up any goods that had been left out of the existing orders]. The scope of the proposed investigations, as set out in the petitions, is eye-wateringly broad; and as government agencies have indicated, incapable of being administrated should final AD or CVD orders issue on the basis of these petitions.

Recently, the Commerce Department published preliminary countervailing duty determinations with respect to four (4) countries—China, Mexico, Turkey, and Indonesia—directing Customs to begin collecting provisional duties on a striking, mind-bending, array of goods. These preliminary determinations don’t merely require the collection of duties on aluminum extrusions shipped from the named countries, but also on a vast array of other goods that happen to contain aluminum extrusions from the named countries. The scope of these determinations is largely indecipherable by importers and incapable of effective administration by US Customs and Border Protection, the agency charged with collecting provisional duties.

The scope language for these findings spans more than 2 full pages (triple-columned, small type) in the Federal Register. It identifies over 140 ten-digit tariff items as being subject to the determinations, but stresses, of course, that these tariff items are neither binding nor exclusive as to whether a good is “in scope,” because ultimately the scope language controls.

How absurd is the scope language in these determinations? Well, to begin with, these investigations somehow gain their own definition of country of origin: “The country of origin of the aluminum extrusion is determined by where the metal is extruded (i.e., pressed through a die).”

And what constitutes an “aluminum extrusion” is broadly defined, as follows:

The types of products that meet the definition of subject merchandise include but are not limited to, vehicle roof rails and sun/moon roof framing, solar panel racking rails and framing, tradeshow display fixtures and framing, parts for tents or clear span structures, fence posts, drapery rails or rods, electrical conduits, door thresholds, flooring trim, electric vehicle battery trays, heat sinks, signage or advertising poles, picture frames, telescoping poles, or cleaning system components.

But wait! There’s more! The investigations and duty collection directions include heat sinks and:

Merchandise that is comprised solely of aluminum extrusions or aluminum extrusions and fasteners, whether assembled at the time of importation or unassembled, is covered by the scope in its entirety.

Not only that, but the investigations also cover:

 … aluminum extrusions that are imported with non-extruded aluminum components beyond fasteners, whether assembled at the time of importation or unassembled, that are a part or subassembly of a larger product or system. Only the aluminum extrusion portion of the merchandise described in this paragraph, whether assembled or unassembled, is subject to duties. Examples of merchandise that is a part or subassembly of a larger product or system include, but are not limited to, window parts or subassemblies; door unit parts or subassemblies; shower and bath system parts or subassemblies; solar panel mounting systems; fenestration system parts or subassemblies, such as curtain wall and window wall units and parts or subassemblies of storefronts; furniture parts or subassemblies; appliance parts or subassemblies, such as fin evaporator coils and systems for refrigerators; railing or deck system parts or subassemblies; fence system parts or subassemblies; motor vehicle parts or subassemblies, such as bumpers for motor vehicles; trailer parts or subassemblies, such as side walls, flooring, and roofings; electric vehicle charging station parts or subassemblies; or signage or advertising system parts or subassemblies.

Whether any of the domestic petitioners actually make these items is unstated. The point is, apparently, they own extrusion equipment, and they could make these things if asked to do so.

Oh, and the scope of these investigations is not limited to the countries identified in the petitions. The scope language goes on:

The scope also includes aluminum extrusions that have been further processed in a third country, including, but not limited to, the finishing and fabrication processes described above, assembly, whether with other aluminum extrusion components or with non-aluminum extrusion components, or any other processing that would not otherwise remove the merchandise from the scope if performed in the country of manufacture of the in-scope product. Third country processing; finishing; and/or fabrication, including those processes described in the scope, does not alter the country of origin of the subject aluminum extrusions.

Clear as a bell, right? So, assume a door is made in Argentina and includes an aluminum extrusion from China. It’s imported into the United States as a door, and priced into the market for doors. For all other tariff and duty rate purposes, it’s a door from Argentina. But for purposes of these investigations and any AD or CVD orders which might result from same, it’s an aluminum extrusion from China. Of course, “Only the aluminum extrusion portion of the merchandise described in this paragraph, whether assembled or unassembled, is subject to duties.” But the countervailing duties are stated on an ad valorem basis, so a value for the Chinese extrusion in the aluminum door must be somehow determined. But Commerce’s notices provide no clue as to how this might be done.

Can Customs’ automated entry systems even accept an entry of a door from Argentina and apply a CVD or AD order on goods from China? Past experience with orders on solar cells indicate that CBP’s systems are not equipped to do this.

Are goods exempted from the scope of these orders? Sure. For example:

The scope excludes assembled merchandise containing non-extruded aluminum components beyond fasteners that is not a part or subassembly of a larger product or system and that is used as imported, without undergoing after importation any processing, fabrication, finishing, or assembly or the addition of parts or material, regardless of whether the additional parts or material are interchangeable.

The scope also excludes merchandise containing non-extruded aluminum components beyond fasteners that is not a part or subassembly of a larger product or system that enters unassembled as a packaged combination of parts to be assembled as is for its intended use, without undergoing after importation any processing, fabrication, or finishing or the addition of parts or material, regardless of whether the additional parts or material are interchangeable. To be excluded under this paragraph, the merchandise must be sold and enter as a discrete kit on one Customs entry form.

Got that, folks?  Ok, so let’s assume you import a replacement gate for a barrier control system. As imported, it’s a complete, assembled article, which doesn’t undergo any further fabrication after importation. So, seemingly, it’s not covered by the investigation/order. But a few months after importation, you attach the gate to the machine that raises and lowers it. Now, it appears to be subject to the investigation/order, as part of a larger article or system. So is Customs required to follow the gate post-importation to see if it’s going to be attached as a “part or subassembly of a larger product or system?

We could go on and on, but hopefully you get the point. While the Commerce Department has afforded great deference to domestic petitioners in determining the scope of AD and CVD investigations and orders, this seems to be a case of classic–well, perhaps extreme–overreach. A door imported from Argentina is an Argentine door; it is not a Chinese aluminum extrusion. To be fair, Commerce is still asking the petitioners questions regarding the scope of the investigations. But the fact is, Commerce should never have initiated investigations based on the scope language petitioners included in their petitions; and worse, the agency has now issued preliminary orders that CBP is supposed to administer and the public is expected to obey—when neither seems possible.

Another question is whether, in light of the purposes of the AD and CVD statutes, the domestic petitioners have exceeded the scope of the limited Noerr-Pennington antitrust exemption given to groups that petition the government for trade relief.

The problem is, Commerce has put in place provisional measures that almost certainly cannot be administered. Measures that place importers in danger of sanction for non-obedience. This is something that should never have happened. These truly are the trade remedy petitions targeting, Everything, Everywhere, All at Once.

For questions regarding this subject or other Customs and international trade issues, please contact a Neville Peterson professional.