Affected Domestic Parties, Continued Dumping and Subsidy Offset Act of 2000

HQ H036700 April 6, 2009 LIQ-4 OT:RR:CTF:ER H036700 DCC Ms. Mari A. Boyd Executive Director, Financial Operations Office of Finance U.S. Customs and Border Protection 1300 Pennsylvania Avenue, N.W.Washington, D.C. 20229 RE: Affected Domestic Parties, Continued Dumping and Subsidy Offset Act of 2000 Dear Ms. Boyd: This is in response to a request for internal advice, dated August 21, 2008, from Assistant Commissioner Schied, pursuant to 19 C.F.R. § 177.11. The request seeks guidance regarding the distribution of funds under the Continued Dumping and Subsidy Offset Act (“CDSOA”) of 2000. FACTS: On May 29, 2007, U.S. Customs and Border Protection (“CBP”) published a notice in the Federal Register of its intent to distribute assessed antidumping and countervailing duties to certain U.S. businesses, individuals, and associations pursuant to the CDSOA for Fiscal Year 2006. See Distribution of Continued Dumping and Subsidy Offset to Affected Domestic Producers, 71 Fed. Reg. 31,336 (June 1, 2006). For Antidumping Order A-570-893, covering certain frozen warmwater shrimp and prawns from China, the list of affected domestic producers (“ADPs”) included Dean Blanchard Seafood (“DBS”). ISSUE: Whether Dean Blanchard Seafood is an affected domestic producer for purposes of the Continued Dumping and Subsidy Offset Act for Fiscal Year 2006. LAW & ANALYSIS: In 2000, Congress enacted the CDSOA as part of the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act of 2001, Pub. L. No. 106-387, §§ 1001-03, 114 Stat. 1549, 19 U.S.C. § 1675c (2000) (repealed 2006). As described in detail below, the CDSOA established a two-step process for the U.S. International Trade Commission (“ITC”) and CBP to administer the distribution of payments to domestic producers. First, the ITC prepares a list of potentially eligible affected domestic producers based on its review of the domestic industry in its original investigation. Second, CBP reviews the producers’ certifications to determine whether they are eligible to receive payments and, if so, the amount of their qualifying expenditures for reimbursement. Role of U.S. International Trade Commission For antidumping duty orders in effect for goods entered before October 1, 2007, the ITC must compile and forward to CBP a list of parties who meet the criteria as ADPs. Specifically, section 1675c provides as follows: (d) Parties eligible for distribution of antidumping and countervailing duties assessed (1) List of affected domestic producers The Commission shall forward to the Commissioner within 60 days after the effective date of this section [effective Oct. 1, 2000] in the case of orders or findings in effect on January 1, 1999, or thereafter, or in any other case, within 60 days after the date an antidumping or countervailing duty order or finding is issued, a list of petitioners and persons with respect to each order and finding and a list of persons that indicate support of the petition by letter or through questionnaire response. In those cases in which a determination of injury was not required or the Commission’s records do not permit an identification of those in support of a petition, the Commission shall consult with the administering authority to determine the identity of the petitioner and those domestic parties who have entered appearances during administrative reviews conducted by the administering authority under section 751 [19 U.S.C. § 1675]. The ITC’s role in preparing the list of potential ADPs is described further in CBP’s regulations implementing the CDSOA. 19 C.F.R. § 159.61(b) provides as follows: It is the responsibility of the U.S. International Trade Commission (USITC) to ascertain and timely forward to Customs a list of the domestic producers potentially considered “affected domestic producers” eligible to receive a distribution in connection with each order or filing. In this case, as part of its investigation into whether the U.S. shrimp industry was injured by imports from various countries for purposes of section 733(b) of the Tariff Act of 1930, the ITC reviewed the issue of what companies properly constituted the “domestic industry.” See Certain Frozen or Canned Warmwater Shrimp and Prawns From Brazil, China, Ecuador, India, Thailand, and Vietnam, Investigations Nos. 731-TA-1063-1068, Publication No. 3748 (Jan. 2005) (the “ITC Investigation”). At the time of the investigation, the petitioner challenged the inclusion of several shrimp processors that completed questionnaires. As reported in the ITC’s report: The Commission made several findings in the preliminary determination concerning whether certain activities conducted by processors constitute domestic production. The Commission found that processing activities such as deheading, grading, machine peeling, and deveining all constitute domestic production. It observed that these operations each require specialized equipment and that petitioner did not contest that these activities were sufficient to constitute domestic production. The Commission additionally found that cooking constitutes domestic production, because it typically requires specialized equipment and adds more value to the process than any preceding stage. By contrast, the Commission found that marinating and skewering do not constitute domestic production because they involve no specialized equipment and add relatively modest value to the processed shrimp product. Finally, the Commission concluded that breading could not constitute domestic production activity because breaded shrimp was not part of the domestic like product. We rely on these findings in our analysis below of the specific firms whose status as domestic producers petitioner challenges. ITC Investigation, pp. 13 -14, footnotes omitted. In conclusion, the ITC determined that, “Of the domestic processors that petitioner has targeted, we find that *** engage in insufficient production-related activity to be considered domestic producers. We conclude that *** do perform sufficient production-related activities to be considered domestic producers.” ITC Investigation, at 14 (redactions in original). Following its investigation, the ITC forwarded to CBP the list of affected domestic producers pursuant to 19 U.S.C. § 1675c(d)(1). The parties identified by the ITC as affected domestic producers were the same as the parties identified as domestic producers for purposes of the ITC Investigation. Role of U.S. Customs and Border Protection Under the CDSOA, CBP distributes antidumping and countervailing duties collected from foreign producers to certain members of the domestic industry as reimbursement for specified qualifying expenditures. Pursuant to 19 U.S.C. § 1675c(d)(2), CBP must publish the list of ADPs in the Federal Register, along with a notice of intent to distribute antidumping and countervailing duties collected during that fiscal year. In the Federal Register notice, CBP invites interested parties to submit a certification of their desire and eligibility to receive a distribution as an affected domestic producer. Potential ADPs must also certify that they previously did not claim the qualifying expenditures for which they seek reimbursement. After reviewing the certifications, CBP distributes the funds on a pro rata basis to eligible ADPs. See 19 U.S.C. § 1675c(d)(2) - (3). In addition to potential claimants identified on the ADP list prepared by the ITC, CBP may identify and add other parties to the list of potential ADPs provided they meet the regulatory criteria as a successor company or a member company of an association. Section 159.61(b) of the CBP Regulations provides as follows: § 159.61(b) General. (b) Affected domestic producer— (1) General rule. * * * In addition to the potential “affected domestic producers” set forth on the USITC list, the following parties also are potential “affected domestic producers”: (i) Successor company. In the case of a company that has succeeded to the operations of a predecessor company that appeared on the USITC list, the successor company may file a certification to claim an offset as an affected domestic producer on behalf of the predecessor company. In its certification, the company must name the predecessor company to which it has succeeded and it must describe in detail the duly authorized succession by which it is entitled to file the certification.(ii) A member company of an association. A member company of an association appearing on the USITC list for an order or finding may file a certification to claim an offset as an affected domestic producer, even though the member company does not itself appear on the USITC list, provided that the company also meets the other requirements of the statute. In its certification, the company must name the association of which it is a member and the company must specifically establish that it was a member of the association at the time the association filed the petition with the USITC. The regulations also describe how CBP may disqualify certain parties on the ITC’s ADP list when such parties no longer manufacture the goods that are the subject of the disbursement, or when the ADP is acquired by another company that opposed the original antidumping duty investigation that led to the order. See 19 C.F.R. § 159.61(b)(2). Finally, the regulations establish a procedure for CBP to verify whether an ADP is eligible to receive a CDSOA disbursement. Section 159.63 provides as follows: (d) Verification of certification; supporting records. Certifications are subject to verification. Parties, therefore, are required to maintain the accounting records used in developing their claims, for a period of five years after the filing of the certification. The records supporting certifications must be those that are normally kept in the ordinary course of business (see § 163.1(a)(1) and (a)(2)(vi) of this chapter). Parties must be able to demonstrate that their records specifically support each qualifying expenditure enumerated in a certification. In addition, the claimant must be able to support how qualifying expenditures are determined to be related to the production of the product covered by the order or finding. In addition to reviewing records used to substantiate a claimant’s qualifying expenditures, CBP may verify whether a particular company continues to meet the statutory definition of an “affected domestic producer.” In that regard, the statute provides that, “Companies, businesses, or persons that have ceased the production of the product covered by the order or finding or who have been acquired by a company or business that is related to a company that opposed the investigation shall not be an affected domestic producer.” 19 U.S.C. § 1675c(b)(1). The regulations do not provide, however, any role for CBP to review the ITC’s original determination of whether a party satisfies the criteria for inclusion on the ITC’s list of ADPs. A 2007 decision by the U.S. Court of International Trade (“CIT”) recognizes the roles of the respective agencies whereby the ITC makes the initial determination of potentially eligible affected domestic producers, and CBP verifies the eligibility and qualified expenditures claimed for reimbursement. In an earlier proceeding in the same case, the CIT decided PS Chez Sidney v. United States Int'l Trade Comm'n (Chez Sidney I), 442 F. Supp. 2d 1329, 1359 (Ct. Int’l Trade 2006), struck down, on constitutional grounds, the CDSOA provision allowing distributions only to those domestic producers who supported the original AD/CVD petitions. The court did not address remedies or whether the petition support requirement was severable from the CDSOA, but instead certified these issues for appeal to the Federal Circuit. In 2007, the CIT revisited the case in PS Chez Sidney v. United States Int'l Trade Comm'n (Chez Sidney II), 502 F. Supp. 2d 1318, 1323 (Ct. Int’l Trade 2007). In the later proceeding, the court held that unconstitutional portions of the CDSOA were severable from the remaining provisions of the statute. After severing the offending “petition support” requirement, the court found that plaintiff Chez Sidney was eligible to be included on the ITC’s list of “affected domestic producers” because it participated in an antidumping duty investigation, where the collected duties were subject to distribution pursuant to the CDSOA. The court remanded the case to the ITC and CBP, holding: First the ITC must determine if Chez Sidney meets all other requirements to qualify as an affected domestic producer. If it determines this question in the affirmative, then Customs shall assess the sufficiency of Chez Sidney’s claim and, if appropriate, include it among the eligible producers for fiscal year 2002. Chez Sidney II, 502 F. Supp. 2d at 1324-25. The ITC and CBP remand determinations were ultimately affirmed by the CIT. See PS Chez Sidney v. United States Int'l Trade Comm'n (Chez Sidney III), 558 F. Supp. 2d 1370 (Ct. Int'l Trade 2008) (“Customs’ decision to verify the amounts submitted by Chez Sidney as qualifying expenditures, wait until all appeals are exhausted in this case before furnishing payment to Chez Sidney, and follow its internal administrative process to secure the funds with which to do so is neither inconsistent with the court's remand instructions nor arbitrary and capricious”). Consequently, although the question of constitutionality of the support requirement in the CDSOA raised in Chez Sidney I is still pending, the CIT’s procedural framework for remanding issues regarding the list of affected domestic producers to the ITC and CBP for revision and verification, respectively, remains intact. HOLDING: Pursuant to express language of the Continued Dumping and Subsidy Offset Act (“CDSOA”) of 2000, as well as CBP’s regulations, CBP may not review an ITC determination that DBS is an “affected domestic producer.” CBP may verify, however, whether DBS continues to produce the subject merchandise, whether the company has been acquired by a company that was opposed to the original investigation, and whether DBS’ financial records support the claimed expenditures with respect to the production of the subject merchandise. Sixty days from the date of this letter, Regulations and Rulings will make the decision available to CBP personnel, and to the public on the CBP Home Page on the World Wide Web at www.CBP.gov, by means of the Freedom of Information Act, and other public methods of distribution. Sincerely, Myles B. Harmon, Director Commercial and Trade Facilitation Division