Setting Standards at the United States Court of International Trade

Peter Tringali ’13 Block Fellow

This summer I worked as a judicial intern at the United States Court of International Trade (“the Court”). One of my responsibilities involved drafting an order and opinion on a Motion for Judgment regarding the Department of Commerce’s calculation of an antidumping duty for a “separate rate”1 company in a non-market economy investigation.

Antidumping duties are assigned to goods that are imported in to the United States and sold for less than fair value. Due to the fact that the Department of Commerce has limited resources, they cannot fully investigate each importer or producer of the merchandise at issue. The “separate rate” calculation is therefore necessarily imprecise to some extent. However, the Department still has an obligation to calculate an antidumping duty rate that is reasonably reflective of potential dumping margins, that is a rate that will ensure the goods are sold at fair market value.

The Court will hold unlawful any determination “unsupported by substantial evidence” or “not in accordance with the law.” Supporting a finding with substantial evidence essentially requires the Department of Commerce to make a rational connection between the facts found and the choice made. Here, the Department calculated the separate rate by using a simple average of the rates of the only two fully investigated parties (the mandatory respondents). A de minimis rate was assigned to one of the respondents, and an adverse facts available rate was assigned to the other for failing to cooperate with the investigation. An adverse facts available rate is calculated using facts that are adverse to the interests of that party when selecting among the facts otherwise available. The practical effect of using such an adverse facts available rate is that the uncooperative party is assigned the highest possible rate based upon the record.

To determine whether the Department’s decision was in accordance with law, the Court relies on the two-part Chevron test: 1) whether Congress directly spoke to the precise question at issue by expressing its purpose and intent in the statute; 2) if the first prong is not satisfied, whether the Department’s interpretation amounts to a permissible construction of the statute. Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984).

Analyzing this factual issue posed to be the most challenging aspect of the case in addition to raising interesting trade implications, particularly with regards to United States’ relationship with China (a country that is still considered a non-market economy by the Department of Commerce). The Department, with its limited resources, faced a difficult situation. While their decision to select only two mandatory respondents is permissible under the relevant statute, they are also obligated, statutorily, to calculate rates accurately, fairly, and realistically.

Ultimately, the Court held that the Department of Commerce failed to support their separate rate calculation with substantial evidence. There was no evidence indicating that the prohibitively high separate rate calculation (half of the adverse facts rate assigned to the non-cooperating respondent) was reflective of plaintiff’s commercial activity. Furthermore, the calculated separate rate was exceptionally higher than the rate calculated for the one cooperative respondent.

While balancing these considerations, I was struck by the economic implications of the decision. In particular, I realized the fine line between applying an antidumping duty that prevents the sale of imports for less than fair value and a rate that does not accurately reflect dumping margins. If the rate is too low, domestic industries cannot compete and are shut out of the market. Conversely, if the calculated rate is too high, smaller companies would be swiftly foreclosed from the market, thereby frustrating the theory of comparative advantage, one of the guiding principles promoting international trade.

Although calculating antidumping duty rates can be a technical and fact intensive inquiry, it is an important area of regulation that constantly implicates interesting policy concerns that can have significant affects on international trade.

1 “Separate rate” companies are parties to a non-market economy investigation that establish their de jure and de facto independence from government control, thereby avoiding the (likely) prohibitive adverse facts available rate that applies to companies that cannot establish their governmental independence.

Peter Tringali can be reached at peter.tringali@brooklaw.edu