WASHINGTON—The legal status of U.S. duties on certain OTR tire imports from China continues to be challenged in court, and the resolution of the case could become legal precedent, those involved in the case say.
One year after a trio of Chinese OTR tire manufacturers and importers sued to overturn a 2012 law applying retroactive countervailing duties to their products, the case awaits final adjudication before the U.S. Court of International Trade (CIT), which has jurisdiction of the case.
No matter which way CIT Judge Jane Restani decides the case, the plaintiffs still are likely to appeal it to the U.S. Court of Appeals for the Federal Circuit, according to attorney Daniel L. Porter with the Washington law firm of Curtis, Mallet-Prevost, Colt & Mosle L.L.P., who represents the plaintiffs.
This is because Judge Restani ruled last January against the plaintiffs' claim that the new law is unconstitutional, Mr. Porter said. She did find fault with the U.S. Department of Commerce's determinations of countervailing duties, however, and remanded them to the agency for re-evaluation.
Commerce has since submitted its new numbers to the court, and all the parties have commented on them, Mr. Porter said. Judge Restani is expected to rule on the countervailing duty issue soon, although there is no timetable for her to issue a ruling, he said.
The plaintiffs—Hebei Starbright Tire Co. Ltd., Tianjin United Tire & Rubber International Co. Ltd. and remnants of the bankrupt GPX International Tire Corp.—still believe adamantly that the law violates both the Ex Post Facto Clause of the U.S. Constitution, which forbids retroactive criminalization of behaviors or activities, and the Due Process Clause of the Fifth Amendment.
Mr. Porter also is a plaintiffs' attorney in Guangdong Wireking Housewares & Hardware Co. Ltd.'s case against the Commerce Department, which was filed in the Federal Circuit appeals court July 15.
The Guangdong case, which also challenges the retroactive countervailing duty law on constitutional grounds, cites the appeals court's December 2011 decision in the OTR tire case as a precedent.
“This court held unambiguously that countervailing duties cannot be applied to goods from non-market-economy countries,” the Guangdong brief states.
Unfortunately for the Chinese plaintiffs, the Federal Circuit decision also led directly to the countervailing duty law that Congress passed overwhelmingly in March 2012.
Titan International Inc. and the United Steelworkers (USW) union petitioned Commerce in 2007, claiming that certain 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.
Commerce ruled in their favor in February 2008, ordering countervailing duties of up to 210 percent against certain Chinese OTR tires.
Hebei Starbright Tire, Chinese OTR subsidiary for now-defunct GPX International Tire Corp., was ordered to pay duties of 43.9 percent. GPX claims having to pay these duties forced it to file for Chapter 11 reorganization in 2009, and eventually to sell most of its assets to Alliance Tire Co. (1992) U.S.A. Ltd.
MITL Acquisition Corp. purchased GPX's solid tire manufacturing business, which became Maine Industrial Tire L.L.C.
Judge Restani reversed and remanded Commerce's countervailing duty order in September 2009, ruling the agency was guilty of “double counting” in levying both countervailing and antidumping duties against Chinese OTR tire makers. She reaffirmed the ruling in August 2010. Her rulings, however, did not end the countervailing duties, pending appeals.
Commerce, Titan, Bridgestone and the USW appealed Judge Restani's decision to the Federal Circuit appeals court. In December 2011, the appeals court ruled that Commerce did not have the authority to levy countervailing duties against products from non-market-economy countries.
Urged by business and labor interests, Congress quickly decided to give Commerce that authority. The bill passed the Senate by unanimous consent on March 5, 2012, and the House by a 370-39 vote the next day. President Barack Obama signed it on March 13 that year.
GPX, Hebei Starbright and Tianjin United filed suit in the Court of International Trade Aug. 17, 2012, challenging the new law on constitutional grounds.
In her decision issued Jan. 7, 2013, Judge Restani noted the “fundamental disagreement” in the case.
“The government dismisses virtually all of the plaintiffs' challenges to the new law by arguing that it was merely a clarification rather than a modification of existing law,” she wrote.
While she said the government's contention was difficult to prove, Judge Restani nevertheless ruled that the plaintiffs failed to demonstrate the new law violates either the Ex Post Facto Clause or the Due Process Clause.
While the Constitution clearly prohibits ex post facto laws, it does not prohibit all retroactive laws, Judge Restani said.
“Both this court and the Court of Appeals for the Federal Circuit have consistently upheld the trade remedy laws as remedial and not punitive in nature,” she wrote. “Even if the laws have some broader societal purpose and can be considered to address a public harm in part, they remain remedial, not punitive.”
Similarly, regarding the Due Process Clause, “GPX has failed to demonstrate that the government did not have a rational basis in enacting the new law, or that the new law upended a vested right.”
However, Judge Restani found Commerce's countervailing duty determinations not fully consistent with applicable trade laws and to some extent unsupported by substantial evidence. She remanded that portion of the case to Commerce for redetermination.
Bryan Ganz, CEO of Maine Industrial Tire and former co-chairman of GPX, said he has dropped out of the case since Judge Restani's decision. Mr. Porter, however, said the “remains” of GPX are still a plaintiff in the case, as are Hebei Starbright and Tianjin.
In any case, the continuing relevance of the new law is open to question, according to Elliot J. Feldman and John J. Burke, partners in the Washington, D.C., office of the law firm Baker & Hostetler L.L.P.
In an article published last March in the American University Law Review, Messrs. Feldman and Burke said the whole question of retroactive countervailing duties against products from non-market-economy countries may become moot for China by 2016.
That is the year, they said, when the World Trade Organization Accession Protocol for China mandates the nation's recognition as a market economy.
“However, non-market-economy status will still apply to Vietnam, and likely to Cuba and North Korea, should the embargo of Cuba be lifted or commercially significant imports from North Korea occur,” they said.
According to Messrs. Feldman and Burke, the GPX countervailing duty cases touch on the most important issues of trade law today: “That the courts and agencies have been unable to resolve much, and that congressional intervention solved little, reflects the more general paralysis in the governing institutions of the United States,” they said.
“International trade, vital to economic recovery, has not benefited from the institutions created to guarantee the rule of law.”
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