CIT Upholds Constitutionality of New Law Allowing Imposition of CV Duties on China, Vietnam

The ITA had not historically imposed CV duties on NMEs, saying subsidies could not be defined in countries where the government controls production. But in 2007, the ITA changed tack and issued its first CV duty order on a NME country. Two companies subject to the CV duty order on off-the-road tires from China -- TUTRIC, a Chinese exporter, and GPX International, the U.S. parent company of a Chinese exporter -- challenged the ITA’s actions. CIT ruled against the ITA in 2010, finding that the law did not allow imposition of CV duties on NME countries, because Congress understood CV duties only applied to market economies when it enacted the governing statute. CAFC upheld the ruling in 2011.

Faced with the revocation of 24 CV duty orders due to the court decisions, Congress moved quickly to pass legislation specifically allowing imposition of CV duties on NMEs. During a one-week period in March 2012, both houses of Congress passed, and President Obama signed the law. The law was divided into two sections. The first allowed imposition of CV duties on NME countries retroactive to Nov. 20, 2006. The second provided for adjustments to antidumping duties in cases where concurrent CV duties would lead to “double counting,” in response to adverse World Trade Organization rulings, and was effective March 13, 2012.

Challenge Based on Ex-Post Facto, Due Process, Equal Protection Clauses

GPX and TUTRIC challenged the constitutionality of the new law on three bases. First, they said the new law violates the ex-post facto clause (which prohibits laws that change consequences for past actions) because it is retroactive in application. Second, the law violates the due process clause of the Fifth Amendment by retroactively altering the two companies’ legitimate expectations of duty treatment for their products, they argued. Finally, GPX and TUTRIC challenged the different effective dates for the two sections of the new law on equal protection grounds, because between the 2006 and 2012 effective dates of the CV duties on NME countries and double counting adjustment provisions, respectively, imports from NMEs are subject to CV duties but not given the benefit of the adjustment.

The court upheld the constitutionality of the retroactive effective date for the first section allowing CV duties on NMEs. The ex-post facto clause only applies to legislation imposing penalties for past actions, CIT said. As CV duties are remedial, not penal, the clause does not apply.

The new law doesn’t violate the due process clause either, said CIT, because it was enacted on a rational basis and did not upset a settled expectation by GPX that the company would not have to pay CV duties. Because of the U.S.' retrospective system for determining AD and CV duties, "neither exporters nor importers have any real certainty as to the final rate on the imported product at the time of entry," CIT said. As such, GPX cannot show that they had a settled expectation of the amount of CV duties on their merchandise. Furthermore, "although Plaintiffs understandably may have assumed that the CVD law would not be applied to their imports from China while Commerce continued to treat the country as an NME, they also knew at the time of entry into the United States of the goods at issue here that China’s status was in a state of flux, and they should have known that their imports might be subject to increased remedial duties," CIT said.

Finally, the court ruled against GPX and TUTRIC's argument that the law was unconstitutional on equal protection grounds because it treated a “single class of persons" differently than others. Although importers and exporters subject to investigations and reviews initiated between November 2006 and March 2012 would indeed get different treatment, this “single class of persons” is not a suspect class. Additionally, the structure of the effective dates was rational, because making imposition of CV duties on NMEs proactive from 2012 would have resulted in the refund of all CV duties collected during that period, while making the adjustment for double counting retroactive would have reopened all of those proceedings to claims that double counting occurred. Also, the double counting provisions were put in place to comply with WTO obligations, the court said.

Despite upholding the law’s constitutionality, CIT also remanded several issues specific to investigations and administrative reviews of the CV duty order on off-the-road tires from China related to GPX and TUTRIC.

(GPX Int'l Tire Corp. v. United States, Slip Op. 13-02, dated 01/07/12, Judge Restani)

(Attorneys: On constitutional issues, James Durling of Curtis Mallet-Prevost for plaintiffs GPX and Hebei Starbright; Mark Lehnardt of Lehnardt and Lehnardt for plaintiff TUTRIC; Alexander Sverdlov for defendant U.S. government; Wesley Caine of Stewart and Stewart for defendant-intervenors Titan Tire and United Steel Workers; Joseph Dorn of King & Spalding for defendant-intervenors Bridgestone Americas Tire Operations and Bridgestone Americas. On proceeding-specific issues, William Barringer of Winston & Strawn for plaintiffs GPX and Hebei Starbright; Philippe Bruno of Greenburg Traurig and Francis Siler of Grunfeld Desiderio for plaintiff TUTRIC; John Todor for defendant U.S. government; Terrance Stewart of Stewart and Stewart for defendant-intervenors Titan Tire and USW; Joseph Dorn of King & Spalding for defendant-invervenors Bridgestone Americas Tire Operations and Bridgestone Americas)