Today, February 4, 2015, the U.S. Department of Commerce (through the International Trade Administration or ITA, part of the U.S. Department of Commerce) published a notice initiating the 2nd annual Administrative Review for the 2012 antidumping duty (AD) and countervailing duty (CVD) Orders against Crystalline Silicon Photovoltaic (CSPV) products from China. These Orders focus on solar cells from China, and modules, panels and other CSPV products assembled with solar cells from China.
This Review will establish AD assessment rates for affected entries of CSPV products during the period of December 1, 2013 through November 30, 2014 and CVD assessment rates for such CSPV products during the period of January 1, 2013 through December 31, 2013. Those assessment rates will also be the new cash deposit rates for future entries of CSPV products from the 2012 Solar Trade Cases.
This 2nd Administrative Review process started with a notice of Opportunity to Request published on December 2, 2014. Interested parties were required to submit a request to participate by December 31, 2014. A number of parties requested review for themselves or others. Today’s notice sets out lists of 78 companies for the AD Review and 76 companies for the CVD review based on the requests received by the December 31 deadline.
The Administrative Review Process
The United States uses a retrospective AD and CVD assessment process. During the investigation phase, ITA establishes preliminary and final cash deposit rates calculated to offset the effects of dumping margins and unfair subsidies determined through the investigation process. If ITA makes affirmative final determinations of dumping and unfair subsidies and the U.S. International Trade Commission (USITC) makes an affirmative determination of material injury to a U.S. industry, ITA will issue AD and CVD orders that continue the suspension of liquidation (i.e., final duty assessment) of entries of subject imports and impose AD and CVD cash deposit rates for all such entries in addition to normal duty rates. However, these cash deposit rates may not be the final assessed rates of AD and CVD penalties. The cash deposit rates in the orders typically reflect dumping and subsidy estimates during the period of investigation (POI) which is a time period prior to the AD and CVD orders.
Subject imports entering the United States Customs territory after an affirmative preliminary determination, such as in the 2012 Solar Trade Cases, will be reviewed by ITA to recalculate the actual dumping margins and subsidy rates during the period of review (POR) through the Administrative Review process. The Final Results of the Review will become the assessed AD and CVD rates for the POR and the new cash deposit rates for future entries until the next Administrative Review resets them.
This “look-back” process means that an importer will not know the actual duties required to be paid on imported goods for a long time after the date of entry, normally a couple of years. If the assessed rates are lower than the cash deposit rates paid at the time of entry, the importer may request a refund of the difference (it’s not automatic). However, if the assessed rates exceed the previous cash deposits paid, then the importer will receive a duty deficiency notice from Customs and Border Patrol (CBP or U.S. Customs). This notice is automatic and can force the importer to pay a large, unexpected sum for goods imported and likely deployed or resold long ago. Failure to pay in full any additional assessed amount owed will likely result in an unpleasant enforcement action by U.S. Customs against the importer of record.
Administrative Reviews occur annually after the AD and CVD orders issue. The initial POR can vary, depending on the length of the original investigation, but thereafter the POR is normally a year in length.
1st Administrative Review for the 2012 Solar Trade Cases
The 1st Administrative Review process for the 2012 Solar Trade Cases is still underway. Preliminary Results were published on January 8, 2015 (see Preliminary Results of Antidumping Duty Administrative Review and Preliminary Determination of No Shipments; 2012-2013 and Preliminary Results of Countervailing Duty Administrative Review; 2012; and Partial Rescission of Countervailing Duty Administrative Review) and Final Results are expected sometime in Q2 of 2015. The AD rate proposed in the Preliminary Results stirred news and commentary in the Solar Industry because of the 1.82% rate proposed for about 20 Chinese exporters. This rate would be a significant decrease from the average 13.94% cash deposit rate assigned to a large number of Chinese producers and exporters. In contrast, the CVD rates in the Preliminary Results were relatively unchanged for most affected exporters, bumping up to 15.68% from 15.24%. Under normal circumstances, ITA has 120 days to issue Final Results after publication of Preliminary Results, but ITA recently extended the briefing schedule deadline indefinitely to a date to be announced for both the AD and CVD Reviews. This time extension could extend the 120-day period for Final Results.
2nd Administrative Review for the 2012 Solar Trade Cases
As mentioned, ITA published an Opportunity to Request participation in the 2nd Administrative Review on December 2, 2014. Requests submitted by the December 31, 2014, deadline resulted in 78 companies for the AD Review and 76 Companies for the CVD Review. Companies can be placed into Review in several ways, including by self-request, request of certain foreign governments, by the petitioner, SolarWorld Americas, or other U.S. parties. Companies with no exports, sales or entries during the POR will be dropped from the Review, and any party who made a request can withdraw it in whole or in part within 90 days after the initiation notice, i.e., today.
The AD POR for this 2nd Review is December 1, 2013 through November 30, 2014 and the CVD POR is January 1, 2013 through December 31, 2013. At this time, Preliminary Results are expected later in 2015 and Final Results are expected by the end of 2015. These estimates could change and be extended during the course of the Review.
There are two points to note about this Review process. First, China is considered non-market economy (NME) because of the influence and control of its government. For NMEs like China, the ITA presumes that all companies are subject to government control and are therefore subject to a single country-wide dumping rate unless a company proves independence and private control. Therefore, companies without a separate rate assignment in the 2012 Solar Trade Cases will be subject to the China-wide rate which will be set in the 1st Administrative Review. Currently, the Preliminary Results provide for an AD rate of 238.56% for the China-wide entity. Although it is too late to participate in the 2nd Administrative Review if not already involved, companies without a separate rate that have shipped or expect to ship subject CSPV products during the POR for the 3rd Administrative Review should strongly consider participating when the Opportunity notice is published in early December, 2015. The expected POR for the 3rd Administrative Review will be December 1, 2014 through November 30, 2015 for AD rates and January 1, 2014 through December 31, 2014 for CVD rates.
The second point to note is that the 2nd Administrative Review may involve a procedure to determine “duty absorption.” Duty absorption is the term used when a producer or exporter covers or “absorbs” the AD or CVD charges so the higher price will not be passed on to the U.S. customer. This set-off is seen as contrary to the purpose of adding AD and CVD to the price of the products in order to bring it to a “fair” price for the U.S. customer. ITA will commence a duty absorption review if requested by a U.S. party within 30 days of today’s date. If ITA determines that AD or CVD duties have been absorbed by any parties, ITA will take steps to penalize those parties with additional duty requirements.
Summary
Due to the nature of the U.S. AD and CVD assessment system, the Administrative Review process is of critical importance to exporters and importers. Often, initial news of Final Determinations occupies industry trade journal headlines and then is forgotten. Many parties seem to assume that the cash deposit rates set in AD and CVD orders are the end of the story. To the contrary, they are only the beginning. Much work remains to be done each year after the AD and CVD orders issue to set the final assessed AD and CVD rates and future cash deposit rates. Exporters and importers should plan for these reviews and the possibility of cash requirements changing significantly as a result.
Stoel Rives Updates
The Stoel Rives Energy Trade Team will monitor further developments in these Solar Trade Cases and report on events as they occur, including the progress of the 1st and 2nd Administrative Reviews. For more information, please contact a key contributor.