IBTBlog

The International Business Transactions Blog

New U.S. Regulations Enhance the Commerce Department’s Power in Antidumping and Countervailing Duties

By Kelsey McGillis
Law Student Editor

The U.S. Department of Commerce has recently amended its regulations to enhance enforcement of antidumping (AD) and countervailing duty (CVD) laws. The “Regulations Improving and Strengthening the Enforcement of Trade Remedies Through the Administration of the Antidumping and Countervailing Duty Laws” went into effect on April 24, 2024, following a public notice and comment period. The amendments introduce several changes to the regulations, including adjustments to the process of determining dumping and countervailable subsidies, enhanced enforcement mechanisms, and updates to the calculation methodologies for duties.  The amendments make the following specific changes: expanded scope of Particular Market Situations (PMS) and improved investigation into transnational subsidies, which are subsidies that a foreign government gives to a recipient outside its borders.

A Particular Market Situation (PMS) refers to market conditions allegedly affecting price accuracy in comparisons between a foreign market and the United States for antidumping and countervailing duty investigations. Under the 2015 Trade Preferences Extension Act, in considering the dumping margin or countervailable subsidy, Congress directed Commerce to consider sales to be outside the “ordinary course of trade” when there are situations in which Commerce “determines that the particular market situation prevents a proper comparison with the export price.”  Under the regulations now adopted, Commerce may consider factors such as weak property rights, inadequate intellectual property protection, poor human rights or labor standards, and ineffectual environmental regulations in assessing the dumping margin or countervailable subsidy, thereby increasing import duties to reflect putative advantages to foreign exporters caused by the identified practices. 

For example, if labor rights violations or unimpeded intellectual property infringement lower the cost of production in an exporting country, Commerce may consider this a PMS that justifies treating imports from that country as having an artificially low price and impose correspondingly increased import duties.

The changes also broaden the regulations’ scope, remove confusing language, adopt a more flexible approach to identifying price distortions, and include non-governmental entities in considerations of relevant factors in determining the export price. Commerce clarified that these changes are not intended to influence foreign policies (e.g., to impugn foreign labor, environmental, or human rights practices) but to evaluate whether prices or costs are distorted by the policies.

In addition, Commerce was previously constrained by a regulation, 19 C.F.R. § 351.527, which limited its ability to investigate transnational subsidies. Countervailable subsidies were primarily limited to those given a state government to business firms within that state.  With the removal of this restriction, Commerce is now empowered to delve into allegations of cross-border subsidies by foreign governments. This means that Commerce can scrutinize instances where foreign governments are suspected of providing subsidies in third states that unfairly benefit their own, or the third state’s, industries and distort international competition. By lifting this regulation, Commerce can more effectively address and combat allegedly unfair transnational trade practices that have emerged since the Uruguay Round Agreements. However, the lack of clear guidance or explicit text on how to address these investigations, leaves this change’s implementation somewhat uncertain.

According to the Commerce Department, the rationale for these changes is to strengthen the enforcement of antidumping and countervailing duty laws. The regulations align with the Biden administration’s “new story on trade”, emphasizing fairness and sustainability concerns. U.S. Secretary of Commerce Gina M. Raimondo has asserted that these changes demonstrate the Commerce Department’s commitment to safeguarding American workers and producers against unfair trade actions.  However, the compatibility of these new regulations with the WTO Agreements, especially the Agreement on Subsidies and Countervailing Measures, is open to debate.  It is possible, perhaps likely, that the new measures will be challenged under the WTO’s Dispute Settlement Understanding.

India Signs Historic Treaty with EFTA

By Kelsey McGillis
Law Student Editor
&
Prof. Aaron Fellmeth
Faculty Editor

After nearly two decades of negotiations, India has signed a landmark trade and investment treaty with the European Free Trade Association (EFTA), comprising Iceland, Liechtenstein, Norway, and Switzerland. This deal, the Trade and Economic Partnership Agreement (TEPA), is expected to bring investments worth $100 billion into India across various sectors over the next 15 years.

The TEPA is, first, a free trade agreement under Article XXIV of the GATT and Article V of the GATS.  It reaffirms GATT commitments, harmonizes customs regulations, and eliminate customs duties according to schedules of commitments in the annexes.  It also includes more detailed regulations on sanitary and phytosanitary measures, technical barriers to trade, and liberalization of trade in services.  In addition, the TEPA incorporates foreign direct investment protections between the EFTA states and India, and investment promotion obligations and expectations. 

Unlike free trade agreements negotiated by the United States, the TEPA includes no TRIPS-plus obligations.  However, consistent with recent EU practice, the TEPA does include obligations relating to trade and sustainable development, including some relating to climate change, compliance with International Labor Organization (ILO) standards, and cooperation in achieving and promoting sustainable development. 

The TEPA is anticipated to bring substantial investment, with the EFTA bloc committing $100 billion over 15 years in sectors like pharmaceuticals, food processing, engineering, and chemicals. Although this investment commitment, primarily sourced from provident funds in EFTA countries, is not expected to be legally binding, it is an expected result of the conclusion of the treaty.

Prime Minister Narendra Modi emphasized the importance of this agreement in boosting economic progress and creating opportunities for Indian youth. Ratification by both parties is required for the agreement to take effect, with Switzerland aiming to complete the process as soon as next year.

India’s decision to sign TEPA marks a significant departure from its historical stance on import substitution policies.  While political factors still influence some protectionist measures, economic imperatives may eventually lead to a more open trade approach in the future. The timing of these trade deals coincides with a need to address unemployment, which continues to pose a persistent challenge in India, despite economic growth. The TEPA is expected to generate 1 million jobs in participating countries over 15 years, aligning with the focus on job creation in India’s current election.

The TEPA paves the way for a similar deal between the much larger EU and India.  Although negotiations between these two parties had stalled in the past, they were re-launched in June 2022, along with negotiations for two additional treaties: a bilateral investment treaty and an agreement on geographical indications.  The European Commission maintains a website with the current drafts texts that form the basis of negotiations.

U.S. Supreme Court Confirms Presumption that Choice of Law Clauses Govern Federal Maritime Contracts

By Kelsey McGillis
Law Student Editor

On February 21, 2024, the U.S. Supreme Court issued a ruling in the case of Great Lakes Insurance SE v. Raiders Retreat Realty Co., LLC, emphasizing the robust enforcement of choice-of-law clauses in maritime insurance contracts. The central question in the case was whether, under federal admiralty law, a choice-of-law clause could be set aside if enforcing the clause would result in a violation of a state’s “strong public policy.”

The case involved a dispute between European insurance company, Great Lakes Insurance SE (“GLI”), and its client, Pennsylvania-based yacht owner, Raiders Retreat Realty Co., LLC (“Raiders”). The parties’ marine insurance contract contained a choice-of-law clause stating that disputes would be adjudicated according to well-established principles of U.S. federal admiralty law and, where no such precedent exists, the substantive laws of the state of New York.

Following damage to the yacht, GLI denied insurance coverage based on the fact that the yacht’s fire extinguishers had not been timely inspected and recertified.  Although no damage to the vessel was caused by fire, GLI sought a declaratory judgment of nonliability based on the claim that the misrepresentation regarding the fire equipment voided the insurance policy ab initio.  Raiders counterclaimed with various counts under Pennsylvania law, including breach of contract, breach of fiduciary duty, insurance bad faith, and unfair trade practices.  GLI rejoined that the policy’s choice-of-law clause barred Pennsylvania counterclaims.

In a unanimous opinion authored by Justice Kavanaugh, the court concluded that choice-of-law provisions in maritime contracts are presumptively enforceable under federal maritime law. The Court held that, while there are narrow exceptions, state public policy is not generally one of them.

Kavanaugh emphasized the need for strong choice-of-law enforcement to reduce uncertainty and facilitate maritime insurance. Although the opinion cited consistent decisions of federal courts of appeals, and precedents like M/S Bremen v. Zapata Off-Shore Co. and Carnival Cruise Lines v. Shute, which enforced maritime forum-selection clauses, it did not rely wholly on these precedents based on the view that choice of forum and choice of law clauses raise some different issues.

The Court rejected the proposal to use Section 187 of the Second Restatement of Conflict of Laws for deciding the enforceability of the choice-of-law clause. The Court argued that Section 187 was intended for interstate cases, not federal/state conflicts like those in maritime cases. Additionally, the Court  pointed out that applying Section 187 could be problematic for the overall development of the maritime industry, which requires predictability in the laws applicable to the agreement.  It appears that Section 187 remains good law outside the realm of maritime contracts.

The opinion concluded with Kavanaugh outlining narrow exceptions to the enforceability of choice-of-law clauses, such as contravention of a federal statute, conflict with established federal maritime policy, or the absence of a reasonable basis for the chosen jurisdiction. In this case, none of these exceptions applied, and New York law was deemed appropriate.

Blog Editors

Faculty Editor
Prof. Aaron Fellmeth
aaron.fellmeth@asu.edu


Law Student Editor
Kelsey McGillis
ibtblog.editor@asu.edu

IBT-Related Organizations

ABILA International IP Committee
ABILA International Investment Law Committee
ASIL Anti-Corruption Law Interest Group
ASIL Dispute Resolution Interest Group
ASIL Intellectual Property Law Interest Group
ASIL Private International Law Interest Group

Recent Posts
Subscribe
Rss Envelope
Categories