Accuracy of Duties Could Be a Virus Casualty (Corrected)

March 20, 2020, 8:00 PM; Updated: March 23, 2020, 4:02 PM

Commerce Department officials’ inability to travel internationally to verify foreign manufacturers’ data, a restriction imposed to stem the spread of the new coronavirus, raises the possibility that dumping and subsidy duties will be skewed, attorneys say.

Duties could potentially be less accurate because there’s no opportunity for Commerce to carefully check that the data foreign companies file in response to questionnaires match their official books and records, something that has been done in person, said trade attorney Tim Brightbill of Wiley Rein LLP.

Because that information is used to calculate dumping and subsidy margins, it needs to be accurate. Without the ability to travel, Commerce officials must find creative ways to ensure that accuracy, he said.

The inability to conduct on-site verification of foreign manufacturers has other implications in addition to the possibility of less accurate duties, said Nithya Nagarajan of Husch Blackwell LLP. Foreign companies charged with unfair trade practices now lack the opportunity to explain their business practices in person, she said.

Commerce could offer videoconference opportunities, “but we haven’t seen that yet,” she said.

Commerce personnel won’t conduct verifications outside the U.S. in certain cases because of new restrictions to safeguard health, a Commerce spokesman said. Commerce is making case-by-case decisions about whether and where to conduct verification, he said in an email.

‘Arcane’ Regulations

As of Thursday, Commerce hadn’t issued guidance on whether service of documents containing business confidential information of other parties could be conducted electronically in response to the virus, Nagarajan said.

By contrast, the International Trade Commission early in the week established new procedures for electronic service, which trade attorneys say isn’t interfering with their work.

Commerce’s regulations are “arcane” and could be contributing to the delay, Nagarajan said.

Agency rules prohibit parties from serving documents containing the proprietary information of other parties via electronic means, even with the other party’s consent, Brightbill said. This has been a challenge, but Commerce could be close to a solution, he said.

For now, however, attorneys need to continue using express delivery or other physical means, Brightbill said.

An official said Commerce will soon be providing further guidance regarding service of documents in unfair trade cases.

Looming Deadlines

The pandemic response also is taking its toll on trade lawyers’ ability to meet statutory deadlines in dumping and subsidy cases.

It will be difficult to assemble the voluminous data required by Commerce, said Bernd Janzen, a former Commerce official-now with Akin Gump Strauss Hauer & Feld.

Valerie Ellis, a trade lawyer with Curtis, Mallet-Prevost, Colt & Mosle LLP, believes all deadlines should be tolled.

If the administrative proceedings keep moving forward, private sector attorneys must travel, or may be limited in their ability to effectively advocate for a client, she said.

Lawyers must visit their clients to prepare the extremely detailed information that Commerce requires, not just during the verification process, Ellis said in an email.

But cases are all moving ahead, and there’s no need for a blanket “tolling” of deadlines like what happened during the U.S. government shutdown that started in 2018, Brightbill said.

There have been many individual deadline extension requests from respondents in China, and parties have tried to be accommodating, he said.

(Updates March 20 story to correct a reference in the fourth paragraph to on-site verification of foreign manufacturers.)

To contact the reporter on this story: Rossella Brevetti in Washington at rbrevetti@bloomberglaw.com

To contact the editors responsible for this story: Seth Stern at sstern@bloomberglaw.com; Jerome Ashton at jashton@bloomberglaw.com

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