When faced with U.S. antidumping or countervailing duties that threaten to exclude their products from the U.S. market, foreign producers and exporters sometimes agree to reimburse their U.S. importers for the extra duties imposed as a result of these actions. But the U.S. Department of Commerce views such reimbursement as improper (unfair to U.S. producers who are supposed to be protected by such duties). Thus, Commerce’s regulations provide that, if such reimbursement occurs, the amount of the reimbursement must be deducted from the export price or constructed export price in the dumping margin calculation. This effectively doubles the antidumping duty imposed on the imported product.

In a recent decision, a judge of the U.S. Court of International Trade questioned the validity of this rule. See Ta Chen Stainless Steel Pipe Co. Ltd. v. United States, Slip Opinion No. 04-46, Ct. Int’l Trade (2004). (We were pleased to successfully represent the foreign exporter in the case.) In that case, the judge struck down a reimbursement penalty imposed by Commerce, finding that the reimbursement agreement at issue was, by its own terms, not in effect during the period of review. More importantly, the judge also questioned whether the reimbursement regulation is consistent with U.S. law and U.S. obligations to the World Trade Organization. The judge specifically questioned whether Commerce has authority to impose duties that exceed the actual amount of dumping found. The judge did not answer the question, since she had already found that there was no reimbursement in the case at hand. But the fact that she chose to address the subject despite finding no reimbursement suggests that her doubts are serious. It is also noteworthy that, after the underlying Commerce decision was appealed to the court, Commerce quickly sought a remand of the matter, admitting that it had no evidence that reimbursement actually occurred. It may be that Commerce did so to avoid having the court address whether the reimbursement regulation was legally valid. Still, the court proceeded to do so.

Commerce will certainly not stop enforcing its reimbursement regulation and will appeal any future decision challenging the regulation. Still, the court’s language may give courage to some foreign producers and exporters who are willing to take a risk in order to hold onto particular customers or to U.S. market share generally despite the imposition of duties. Foreign companies for whom continued U.S. sales are important may wish to examine this decision carefully and should monitor the court decisions for future developments.

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