The plaintiffs in a five-year-old OTR tire dumping case are challenging the constitutionality of a new law that allows the U.S. to impose countervailing duties retroactively.
Last March, spurred by a federal appeals court ruling in a case involving Chinese OTR tires, Congress passed a law allowing the Commerce Department to apply countervailing duties to products from non-market-economy (NME) countries, in some cases retroactively as far back as 2006.
Now, the plaintiffs in the OTR tire case, including the former GPX International Tire Corp.—which blamed the duties for its having to file bankruptcy in 2009—are challenging the constitutionality of the new law before the U.S. Court of International Trade.
Section 1(b) of the legislation, which allows Commerce to impose countervailing duties retroactively, is unconstitutional on its face, according to the brief filed Aug. 17 by GPX and other plaintiffs.
Specifically, the section violates the Constitution's Ex Post Facto clause, which forbids retroactive criminalization of behaviors or activities, the brief said.
It also violates both the Fifth Amendment's guarantee of due process and equal protection under the law as guaranteed by the Due Process Clause, it said.
GPX and its co-plaintiffs want the trade court to strike down both Section 1(b) and the countervailing duty order against Chinese OTR tires, which Section 1(b) made retroactive to 2006.
Bryan Ganz, CEO of Maine Industrial Tire L.L.C. and former co-chairman of GPX, said a victory in court won't benefit him or GPX materially. However, the application of Section 1(b) goes far beyond OTR tires, and the issue has become one of basic constitutional rights, he said.
“Even if you win in court, all Congress has to do is pass a law so that you lose,” Mr. Ganz told Tire Business. “What company in its right mind would take on any agency of government under those circumstances? This will have a chilling effect on American business.”
The issue's inception
The issue began in 2007, when Titan International Inc. and the United Steelworkers (USW) union petitioned Commerce claiming that Chinese OTR tire imports were causing material injury to U.S. OTR tire makers. Bridgestone Americas later joined Titan and the USW on the issue.
In February 2008, Commerce ruled in favor of the USW and the domestic tire makers. It ordered countervailing duties of up to 210 percent against certain Chinese OTR tires. Hebei Starbright Tire Co. Ltd., GPX's Chinese OTR subsidiary, was ordered to pay duties of 43.9 percent.
Largely because of the duties, GPX was forced to file for Chapter 11 reorganization late in 2009 and sell off most of its assets, the bulk of them to Alliance Tire Co. (1992) USA Ltd.
MITL Acquisition Corp. completed its $11 million acquisition of GPX's solid tire manufacturing business, paving the way for that business to become Maine Industrial Tire.
In September 2009, however, Judge Jane Restani of the trade court reversed and remanded the countervailing duty order. Commerce, she said, was guilty of “double counting” in levying both countervailing and antidumping duties against Chinese OTR tire makers.
Judge Restani reconfirmed her decision in August 2010. “(Commerce's) actions on remand clearly demonstrate its inability, at this time, to use improved methodologies to determine whether and to what degree double counting occurs when NME antidumping remedies are imposed on the same good,” she wrote.
However, the judge's ruling did not end the countervailing duties, pending appeals. Meanwhile, in March 2011, the World Trade Organization Appellate Body ruled Commerce erred when it levied both countervailing and antidumping duties against Chinese OTR tires.
Commerce, Titan, Bridgestone and the USW appealed to the U.S. Court of Appeals for the Federal Circuit. In December 2011, the appeals court ruled that Commerce did not have the authority to levy countervailing duties against products from NME countries.
Urged on by business and labor interests, Congress lost no time in acting to pass legislation countermanding the appeals court ruling. Identical bills were introduced in the House and Senate Feb. 29, 2012, according to the Aug. 17 brief.
The House bill had 129 co-sponsors, the Senate bill 22. The Senate version passed by unanimous consent March 5. The House version passed by a 370-39 vote the day after, under a suspension of the rules. President Barack Obama signed the legislation into law March 13.
“There was no debate at all in the Senate and only very limited debate in the House,” the brief said.
Mr. Ganz, a lawyer by training, said he had never before heard of passing an important bill under unanimous consent or a suspension of the rules.
“That's normally for bills naming bridges and parks, so they don't clutter the floor with debate,” he said. “It's a perversion of congressional procedure to pass substantive legislation without debate.”
Maurice Taylor Jr., president and CEO of Titan International, said he continues to believe the legislation was necessary to protect domestic manufacturing and jobs.
“I think it's a pretty easy situation,” Mr. Taylor said. “I'm not shedding any tears for our friends in China.”
Officials of the USW could not be reached for comment.
If GPX is ultimately victorious in court, the company stands to be repaid several million dollars in countervailing duties, according to Mr. Ganz. As it stands now, however, nearly all that money would go for legal fees, he said.
It is for reasons other than money that Mr. Ganz pursues the case now, he said.
“When GPX went out of business, it had a negative impact on my reputation,” he said. “People believed we had done something wrong, because no one believed the government would put a 92-year-old family–owned company out of business if we hadn't done something wrong.”
A victory in this case would protect U.S. businesses across the board from retroactive congressional retribution, Mr. Ganz said. “Everybody's acting like this case is a tariff case, and it's not,” he said.
The new case is now before Judge Restani. Daniel Porter, an attorney representing Mr. Ganz, said Titan and Bridgestone have 45 days from Aug. 17 to answer the brief, and then GPX will have 15 days to reply. After that, Judge Restani will schedule a court hearing, he said.