The United States Court of Appeals for the Federal Circuit on May 9, 2012 sent the case titled GPX International Tire Corp. v. United States back to the United States Court of International Trade for the lower court to consider the constitutionality of legislation passed earlier this year overturning the Federal Circuit’s earlier ruling that countervailing duties may not be imposed on non-market economies. The Federal Circuit, as previously reported on this blog, ruled on December 19, 2011 that U.S. law forbids the application of countervailing duties to non-market economies.
Not willing to accept judicial defeat, the U.S. Department of Commerce, and other interests who support imposing countervailing duties on China while treating China as a non-market economy, convinced the United States Congress to rewrite the law and overturn the Federal Circuit’s December ruling.
The new law, also discussed in detail in a previous article posted on this blog, provides that “the merchandise on which countervailing duties shall be imposed . . . includes a class or kind of merchandise imported, or sold (or likely to be sold) for importation, into the United States from a nonmarket economy country.” It provides in a separate section that the Department of Commerce should try to avoid double counting when imposing both countervailing and antidumping duties on the same merchandise from a non-market economy, which means Commerce should not count an alleged subsidy in a countervailing duty determination as a cost of production in the antidumping proceeding, thereby assessing duties on the same alleged program or conduct twice. The first provision, that countervailing duties should be applied to merchandise from non-market economies, was made retroactive to November 20, 2006, but the second provision, to avoid double counting, applies only to new cases initiated on or after March 13, 2012.
GPX argued to the Federal Circuit that the new legislation is unconstitutional because (1) the retroactive effect of the first section would change the outcome of the GPX case after the Federal Circuit already had rendered its decision in favor of GPX last December based on the law as it was when GPX had been investigated; and (2) the new law improperly creates a special rule applicable only to GPX and to a few other cases in which Commerce may impose both countervailing and antidumping duties on the same merchandise from a non-market economy without attempting to avoid double counting. In effect, GPX argued that the different treatment it and a few other companies whose cases were initiated between the two effective dates would receive, as compared to all other companies for which investigations will be initiated after March 13, 2012, violated the Equal Protection Clause of the U.S. Constitution because GPX and those few other companies will be treated differently and for no reason. Although the Equal Protection Clause itself applies only to the states, the courts have long interpreted the Due Process Clause of the Fifth Amendment to the U.S. Constitution as imposing an equal protection obligation on the Federal Government. The Federal Government, which includes Congress as well as the Executive Branch, must treat everyone equally or have a powerful rationale for doing otherwise. That the merchandise happens to be Chinese is not such a powerful rationale for such discrimination.
The Federal Circuit quickly rejected the first argument because the GPX case still was pending when Congress acted and, therefore, the constitutional prohibition on Congress changing the outcome of a decided court case did not apply. The Federal Circuit must have concluded that the second argument might have merit, however, because it sent the case back to the Court of International Trade with instructions to the lower court to make “a determination of the constitutionality of the new legislation and for other appropriate proceedings.”
The case now goes back to the Court of International Trade to consider the constitutionality of the new law. Should that court conclude that the new law is unconstitutional, Commerce can be expected to appeal that decision back to the Federal Circuit. However, even were the Federal Circuit to agree that the new law is unconstitutional, based on GPX’s second argument, that decision would apply only to the GPX case and the few other cases in which Commerce applied both countervailing and antidumping duties to the same merchandise from non-market economies between November 20, 2006 and Match 13, 2012. It would apply only to those cases because that argument is limited to the unequal treatment afforded to GPX and the few other companies whose investigations were initiated between the two effective dates.
To win its first argument, that GPX was being treated differently because a judicial decision in its favor was being overturned by legislation, GPX would have needed a judicial decision that would have had to be final before the new law had been passed. But the second argument is not so limited by the facts: GPX would be one of only a small number of companies treated differently from all other companies in non-market economies.
The Federal Circuit’s remand order is broad enough that it might be possible for GPX to argue, and for the Court of International Trade to agree, that the new legislation is unconstitutional on other grounds that would apply more generally. Such broader arguments are unlikely to succeed, however, because Congress has extensive authority under the U.S. Constitution to regulate international trade. Consequently, GPX may prevail, but only on the narrow grounds of unequal treatment with respect to double counting.