INTERNATIONAL TRADE LAW - ANTIDUMPING INVESTIGATION TURNS ON COLLAPSING ANALYSIS - PROSPERITY TIEH ENTER. CO. V. UNITED STATES, 965 F.3D 1320 (FED. CIR. 2020).

• Author: Roberts, Marguerite

Lowering barriers to trade encourages the smooth operation of a global trading system. (1) "Dumping" occurs when a producer sells goods in a foreign market at a price lower than it sells the same goods in its home market. (2) Governments may combat dumping by imposing antidumping duties on certain imports; however, the global trading system is potentially distorted because it is not always clear whether a government seeks to target unfair trade practices or to engage in a form of protectionism when imposing such duties. (3) In Prosperity Tieh Enter. Co. v. United States, (4) the Court of Appeals for the Federal Circuit considered whether, during an antidumping investigation, the United States Department of Commerce (Commerce) must consider the factors under 19 C.F.R [section] 351.401(f)(2) between all foreign entities for purposes of its collapsing analysis. (5) The court held that Commerce failed to consider the totality of the circumstances between all entities when it decided to collapse three Taiwanese steel producers, and thus, reversed the United States Court of International Trade (Trade Court)'s judgment affirming Commerce's collapsing determination. (6)

On June 3, 2015, AK Steel Corporation (AK Steel) filed a petition with Commerce to initiate an antidumping duty investigation regarding imports of corrosion-resistant steel products (CORE) from Taiwan. (7) Commerce began an investigation into CORE sold in the United States and selected the two largest exporters of CORE from Taiwan as mandatory respondents: Prosperity Tieh Enterprise Co., Ltd. (Prosperity) and Yieh Phui Enterprise Co., Ltd. (Yieh). (8) When it was disclosed during the investigation that Prosperity and Yieh were affiliated with another CORE-exporting company, Synn Industrial Co. Ltd. (Synn), Commerce collapsed all three entities, meaning that they would be treated as a single entity for the purposes of its investigation. (9)

In its Preliminary Determination, Commerce found that CORE imported from Taiwan had a dumping margin of zero percent and therefore was not being sold in the United Sates at less than fair value. (10) In its Final Determination, however, Commerce collapsed Prosperity, Yieh, and Synn (Prosperity-Yieh-Synn), resulting in a dumping margin of 10.34%, and an affirmative finding that CORE from Taiwan was being sold in the United States at less than fair value. (11) Prosperity and Yieh appealed this determination to the Trade Court, which vacated the determination and remanded for Commerce to re-perform its collapsing analysis. (12)

On remand, Commerce reasoned the totality of circumstances showed a "significant potential for manipulation of price or production," and collapsed the three entities pursuant to 19 C.F.R. [section] 351.401(f). (13) When considering this factor, Commerce only analyzed the relationship between Prosperity and Synn and not the relationship between either Prosperity and Yieh, or Prosperity and Yieh/Synn. (14) Prosperity and Yieh appealed the remand determination to the Trade Court which affirmed that Commerce's decision to collapse Prosperity, Yieh, and Synn was reasonable and supported by substantial evidence. (15)

Trade and foreign policy share a strong bond. (16) Following World War II, the General Agreement on Tariffs and Trade (GATT), a series of multinational trade agreements aimed at the liberalization of global trade through the reduction of barriers like tariffs, took effect. (17) The GATT paved the way for the World Trade Organization (WTO), which included the GATT's provisions while establishing a stronger institutional framework to govern global trading. (18) One of the many goals of the WTO is to facilitate multilateral trade agreements that reduce tariffs and encourage the elimination of discriminatory trade practices. (19) Dumping contravenes this goal, and the WTO offers a potential remedy to affected nations. (20) Member nations can impose antidumping duties on certain imports if an investigation reveals that the goods are being sold at less than fair value and are causing or likely to cause injury to the like-domestic industry. (21)

In the United States, the legal process of imposing antidumping duties is controlled by the Tariff Act of 1930, codified in 19 U.S.C. [section][section] 1673 et seq. (22) Section 1673--titled "[i]mposition of antidumping duties"--provides specific roles for both Commerce and the United States International Trade Commission (ITC) in an antidumping proceeding. (23) When an interested party, such as a U.S. manufacturer, believes that a foreign product is being dumped, the party may petition Commerce to begin a dumping investigation. (24) If Commerce determines that the product is being sold in the United States at less than fair value, then the ITC must determine whether the related U.S. industry is injured or likely to be injured because of the imports. (25) If an affirmative finding results, then Commerce issues an order compelling U.S. Customs and Border Protection to collect cash deposits at the dumping margin rates calculated for the imports. (26) All WTO members are required to conform their antidumping legislation with the WTO's provisions and to notify the Committee on Anti-Dumping Practices about any antidumping actions taken. (27)

The antidumping investigation process involves complex calculations used to determine the dumping margin, meaning the extent to which the import is being sold at less than fair value. (28) If Commerce fears that related entities might attempt to avoid antidumping duties, Commerce may treat them as a single entity in a process known as "collapsing" when it calculates the dumping margin. (29) Three requirements must be met for Commerce to collapse two or more entities: they (1) must be "affiliated," (2) must have "production facilities for similar or identical products that would not require substantial retooling of either facility in order to restructure manufacturing priorities," and (3) Commerce must find "a significant potential for the manipulation of price or production." (30) When analyzing the third element, Commerce may consider "[t]he level of common ownership," the extent of intermingled board members among the affiliated companies, and "[w]hether operations are intertwined." (31) If all three requirements are met, then Commerce may collapse the entities and calculate a single, weighted-average dumping margin to be assessed against the collapsed entity. (32)

In Prosperity Tieh Enter. Co. v. United States, the Federal Circuit Court resolved whether Commerce must consider the factors under 19 C.F.R. [section] 351.401(f)(2) between all entities being collapsed when determining that there is a possibility for price or production manipulation. (33) The court concluded that Commerce failed to perform its collapsing analysis correctly because Commerce only considered the factors as between Prosperity and Synn and did not consider the factors as between Prosperity and Yieh or between Prosperity and Yieh/Synn. (34) The court reasoned that Commerce must consider the totality of the circumstances between all entities when it evaluates the prospect of manipulation by considering all available evidence to "explain how each factor weighs in the balance and why." (35)

Commerce relied on evidence that Prosperity owned twenty percent of Synn and that they had overlapping members on their boards, performed certain CORE-manufacturing processes for each other, shared access to books and records, and transacted with one another. (36) Commerce failed to "explain[ ] how Prosperity, Yieh, and Synn could potentially manipulate pricing and production to the entity with the lowest antidumping duty rate." (37) Therefore, the Court held that the Trade Court erred when it affirmed Commerce's collapsing determination in its Final Determination. (38)

The danger of antidumping law is that it functions as a veiled form of protectionism. (39) Governments may use their antidumping laws to impose high duties on imports even when no unfair trade practices are occurring. (40) Part of the reason behind this is that governments enjoy considerable discretion in ascertaining whether goods sell below fair market value. (41)

The Federal Circuit Court's decision in Prosperity Tieh Enter. Co. v. United States highlights the unique price calculations and comparisons that Commerce is confronted with in an antidumping investigation. (42) The court correctly held that Commerce must consider the relationships between all entities involved when evaluating the third element of a collapsing analysis--the potential for price or production manipulation. (43) This totality of the circumstances approach adds a layer of predictability to the complicated antidumping investigation process because moving forward mandatory respondents will have a better sense of when Commerce will collapse affiliated entities to calculate an accurate dumping margin. (44)

Although the clarity established in Commerce's collapsing analysis represents a positive step towards ensuring a more predictable investigative process, antidumping law is still in need of large-scale reform. (45) Antidumping law must return to its original state by restoring genuine, healthy competition and by avoiding the temptation of personifying a protectionist device. (46) In the meantime, Commerce should continue to expect more challenges to their findings and determinations, as an increasing number of countries are utilizing their antidumping laws to punish certain imports. (47)

In Prosperity Tieh Enter. Co. v. United States, the Federal Circuit Court reconciled the myriad of calculations Commerce is confronted by within an antidumping investigation. Specifically, the Court considered whether Commerce must analyze the relationships between all entities before deciding to collapse them into a single entity for purposes of computing a single, weighted-average dumping margin. The court held that Commerce...