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Guest Post by Devin S. Sikes

For the international trade bar, the U.S. Court of Appeals for the Federal Circuit (Federal Circuit) remains as important as ever because it so often has the final say on issues arising under U.S. international trade law. In 2020, the Federal Circuit issued thirty opinions in appeals from the U.S. Court of International Trade (CIT).[1] The Federal Circuit deemed nineteen of those thirty opinions worthy of “precedential” status.[2] To be sure, each of those nineteen precedential opinions addressed important antidumping, countervailing duty, and customs questions. Even the Federal Circuit’s non-precedential opinion in American Institute for International Steel v. United States concerned a significant issue: whether Section 232 of the Trade Expansion Act of 1962 (Section 232), which President Trump invoked more often than any of his predecessors, unconstitutionally delegates legislative authority to the President. Nevertheless, the Federal Circuit’s en banc decision in Sunpreme Inc. v. United States stands head-and-shoulders above the rest in terms of its importance and potential impact.

First, a primer on the Federal Circuit sitting en banc. The Federal Circuit infrequently does so, which makes its decision to address international trade issues en banc all the more rare. Indeed, since its inception, the Federal Circuit has issued just four en banc opinions on international trade matters.[3] Prior to its decision in Sunpreme, the Federal Circuit last sat en banc to resolve an international trade law question in 2015,[4] when in Suprema, Inc. v. International Trade Commission it addressed the scope of the U.S. International Trade Commission’s authority under Section 337 of the Tariff Act of 1930.

Returning to Sunpreme, the Federal Circuit there addressed an issue at the increasingly important intersection of the trade remedy and customs laws: whether U.S. Customs and Border Protection (Customs) possesses “authority to preliminarily suspend liquidation of goods based on an ambiguous antidumping or countervailing duty order, such that the suspension may be continued following a scope inquiry by” the U.S. Department of Commerce (Commerce). Sunpreme, Slip Op. at 3. Reversing an earlier panel opinion, the Federal Circuit en banc concluded that Customs has such authority. The Federal Circuit’s en banc opinion includes broad descriptions of Customs’s authority that could embolden Customs to enhance its trade remedy enforcement activities at the border. Most notably, as a consequence of Sunpreme, importers of goods not clearly covered by the scope of an antidumping or countervailing duty proceeding should be prepared for the possibility that Customs will order the suspension of liquidation and posting of cash deposits, even in the absence of a clarifying Commerce scope ruling.

Background

Sunpreme concerns the interplay between Commerce and Customs on issues arising from the scope of antidumping and countervailing duty proceedings. The dispute arose when Sunpreme filed suit at the CIT to challenge a ruling by Commerce that certain goods fall within the scope of antidumping and countervailing duty orders on certain solar products from China. Sunpreme also challenged Commerce’s decision to issue instructions to Customs suspending the liquidation of entries of merchandise covered by the ruling that entered the United States prior to the initiation of the scope inquiry.[5]

Judge Kelly of the CIT upheld Commerce’s scope ruling, but struck Commerce’s instructions to Customs. She ruled that Customs had exceeded its authority when it decided on its own that the merchandise fell within the scope of the relevant orders, such that under Commerce’s regulations the suspension of liquidation could not occur until the date that Commerce initiated the scope inquiry. Sunpreme and Commerce appealed, and a split Federal Circuit panel upheld the CIT.

Commerce subsequently sought rehearing en banc. Sunpreme opposed. Amici provided views. Without additional briefing or a hearing, the Federal Circuit en banc granted Commerce’s request and issued its en banc opinion.

The Decision

Chief Judge Prost, who had dissented from the panel decision, authored the unanimous en banc opinion. As a member of the original panel, Senior Judge Clevenger could have participated when the dispute moved en banc, but he declined to do so. Judge Lourie had joined Judge Clevenger to form the panel majority, but he reversed course en banc. Judge Wallach, who President Obama elevated to the Federal Circuit from the CIT in 2011, did not participate in the en banc rehearing for undisclosed reasons.

Chief Judge Prost’s en banc opinion consists of two parts. The first portion concerns whether substantial evidence supports Commerce’s scope ruling that the goods in question fall within the scope of the relevant antidumping and countervailing duty orders on certain solar products from China. Sunpreme, Slip Op. at 13–24. The en banc court did not disturb the panel’s conclusion that substantial evidence supports Commerce’s ruling and, thus, repeats this portion of the panel’s opinion verbatim. Id.

The second portion of the en banc opinion concerns whether Customs may initially suspend the liquidation of an entry based on its own assessment that the entry falls within the scope of an ambiguous antidumping and/or countervailing duty order. Id. at 24–36. The en banc court unequivocally concluded that Customs has the authority to do so, reasoning that

Customs has a statutory responsibility to fix the amount of duty owed on imported goods. . . . As part of that responsibility, Customs is both empowered and obligated to determine in the first instance whether goods are subject to existing antidumping or countervailing duty orders. While Customs may not expand or alter the scope of such orders, its authority and responsibility to determine whether they apply does not dissipate simply because an order lacks perfect clarity. Contrary to the CIT’s conclusion, Customs’s yes-or-no answer to whether an order applies does not invade the interpretive province of Commerce. Any other result would significantly limit Customs’s ability to perform its statutory role and would encourage gamesmanship by importers hoping to receive the type of windfall that Sunpreme seeks here.

Id. at 27–28 (cleaned up); see id. at 28–29 (similar). Elsewhere, the en banc court doubled down on its view of Customs’s action under these circumstances as a mere “yes-or-no” exercise, holding that answering whether Customs believes a product falls within the scope of an ambiguous order “does not transform Customs’s yes-or-no question into an interpretative act that would ‘modify Commerce’s determinations’ or otherwise impinge upon Commerce’s authority to issue and set the scope of duty orders.” Id. at 34.

The en banc court concludes its opinion by distinguishing its prior decisions on which the CIT relied (id. at 30–35) and discussing certain policy considerations (id. at 35–36). Notably, the en banc court reasons that its decision here aligns with “the policy declared in the Tariff Act . . . to provide, to the maximum extent practicable, for the protection of revenue. . . . Barring Customs from suspending liquidation based on ambiguous orders would create perverse incentives for importers, contrary to the remedial and revenue-driven policy of the statute.” Id. at 35.

Conclusion

The en banc opinion in Sunpreme contains broad passages that could encourage Customs to increase its trade remedy enforcement efforts at the border. A closer review of the en banc opinion reveals, however, that Sunpreme may in fact have limited application.

As an initial matter, the en banc court’s opinion applies to the limited scenario in which Customs interprets the scope of an ambiguous antidumping and/or countervailing duty order. Spartan in her writing, Chief Judge Prost several times in the en banc opinion conditions Customs’s authority on the existence of an ambiguous scope. See, e.g., id. at (“When the order is ambiguous, Customs is nonetheless called upon to answer the question.” (emphasis added)).

The en banc opinion, however, leaves an important question unanswered: does Customs get to decide in the first instance whether the scope of an order contains an ambiguity? Or does that ultimate authority belong exclusively to Commerce, as has long been accepted? In the end, answering that question may amount to nothing more than an academic exercise. After all, Customs may attempt to maximize the authority conferred on it by the en banc opinion in Sunpreme by declaring that the scope of a particular order is ambiguous, such that it may suspend the liquidation of entries that it deems subject to a trade remedy order.

A final observation warrants discussion. As with a few other recent opinions from the Federal Circuit, the en banc opinion in Sunpreme contains dicta expressing concern with the potential for “gamesmanship by importers hoping to receive {a} windfall.” Id. at 28; see id. at 35 (seeking to avoid the creation of “perverse incentives for importers”). This statement, like others before it, reflects an unfortunate trend of characterizing certain market participants as predisposed to bending (or even breaking) the rules. Those statements often come without references to record support. In the absence of supporting record facts, it seems inappropriate to single out one group and assume bad faith. Still less does it seem just to attribute certain behavior (without support) to an entire class of companies. Indeed, just six days after issuing Sunpreme, the Federal Circuit in United Steel & Fasteners v. United States declined to find the potential for gamesmanship in that particular case, which also addressed the suspension of liquation following a scope inquiry. Writing on behalf of a unanimous panel, Judge Reyna observed that the importer had acted in good faith because it promptly sought a scope ruling request from Commerce shortly after receiving a notice of proposed action from Customs. United Steel & Fasteners, Slip Op. at 14. Thus, rather than extend the problematic trend of assigning a particular mode of behavior to market participants without record support, the Federal Circuit’s decision in United Steel & Fasteners properly focuses on the facts before it in deciding whether, in fact, the threat of gamesmanship is legitimate.

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Looking ahead, the Federal Circuit has nearly forty open appeals that concern a broad range of significant international trade matters. Chief among them is Transpacific Steel LLC v. United States, which will address the scope of the President’s authority under Section 232 to address imports that allegedly threaten to impair the national security. Stay tuned.

Devin S. Sikes is Counsel at Akin Gump Strauss Hauer & Feld LLP, where he practices as an international trade and appellate litigator.  By appointment of the U.S. Trade Representative, he also serves on the U.S. roster of panelists who resolve trade disputes arising under Chapter 10 of the United States-Mexico-Canada Agreement. Earlier in his career, Devin worked as a senior attorney in the U.S. Department of Commerce’s Office of the Chief Counsel for Trade Enforcement and Compliance. He also served as a judicial law clerk to the Honorable Evan J. Wallach of the U.S. Court of Appeals for the Federal Circuit and to the Honorable Judith M. Barzilay of the U.S. Court of International Trade.

  1. See FedCircuitBlog, Opinions and Orders (last visited Feb. 2, 2021), available at https://fedcircuitblog.com/opinions/?action=search-opinion&keyword=&origin=CIT&type=&date=&subject=. ↑

  2. See id. ↑

  3. See FedCircuitBlog, En Banc Cases (last visited Feb. 2, 2021), available at https://fedcircuitblog.com/en-banc/cases/?action=search-en-banc-cases&keyword=&date=&subject=Trade. ↑

  4. See id. ↑

  5. “Liquidation means the final computation or ascertainment of duties on entries for consumption or drawback entries.” 19 C.F.R. § 159.1. ↑