Sunday, May 13, 2012

Game On: New CVD/NME Law Faces Early Constitutional Challenge

When we last checked in on the fate of the new US law applying countervailing duties to imports from "non-market economies" like China and Vietnam, the plaintiffs in the court case that started the whole legislative scramble (GPX Int'l Tire Corp v. United States) had filed a brief constitutional challenge to the new law before the Court of Appeals for the Federal Circuit.  The CAFC had requested a response from the parties to the case as to the effects that the new law would have on the proceedings, and the plaintiffs - GPX and Tianjin United Tire & Rubber International Co. - argued, among other things, that the new law's retroactive application to (in some cases) five year-old CVD proceedings violated the Constitution's due process protections.

Even though I expressed extreme sympathy with the plaintiffs' concerns regarding the new CVD/NME law and also have questioned its constitutionality, I noted at the time that it seemed unlikely that the CAFC would actually rule on their claims.  It turns out that I was right on that score, but what I didn't expect was that, instead of dismissing the case outright, the CAFC would remand the case to the lower court that first decided the GPX case - the US Court of International Trade - to hear plaintiffs' constitutional challenge.

But that's just what the CAFC did last week.

The court's ruling is here, if you're interested.  After summarizing the CVD/NME law's scope (overruling the court's decision in GPX and prospectively applying a new "prohibition" against double-counting), the court addressed the plaintiffs' constitutional challenge, which it said had two parts:
(1) it attempts to prescribe a rule of decision for this case after our decision in GPX was rendered; and (2) it improperly creates a special rule applicable only to this case (or perhaps a few others) due to the different effective dates in the two provisions; it thus creates a situation in which both antidumping and countervailing duties may be imposed, without providing a mechanism to account for potential double counting.
The court quickly dismissed the first argument as "without merit," but not the second:

The second issue, however, is a question of first impression as to which we have received only cursory briefing. The government urges that “[t]o the extent that appellees . . . argue that the new law is unconstitutional, such an argument should be decided by the trial court in the first instance.” ... We agree that this issue should be considered by the Trade Court in the first instance.
The CAFC thus ordered that the case be "remanded to the [CIT] for a determination of the constitutionality of the new legislation and for other appropriate proceedings."  In short, the CAFC refused to do what the US government wanted (vacate its earlier decision and effectively end the GPX case), and instead sent the case back to the CIT for a full constitutional hearing.


There are some other interesting things going on in this ruling (for example, the CAFC rules in footnote 3 that the CIT's theory that Commerce's "double counting" in prior AD/CVD cases violated US law was "not correct" - oops), but the constitutional remand is, in my opinion, the biggest deal.  I honestly have no idea what the CIT will decide, but assuming the same judge (Restani) who heard GPX's earlier iterations - and expressed extreme skepticism of (and frustration with) Commerce's CVD/NME actions - hears the constitutional challenge, we could be in for a very, very interesting decision.  It'll be several months before that ruling is issued, but, in the meantime, one thing is abundantly clear:

The new CVD/NME law has done very little to clean-up the mess that is the United States' trade remedies policies toward China and other non-market economies.

But I guess we already knew that, now didn't we?

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