Basic concepts

 

Before reviewing the various strategic considerations involving a court appeal, two basic concepts need to be reviewed. First, the foreign company should understand the limited standard of review that applies to court appeals - the court generally defers to the agency decision.

 

Second, the company should understand the problem of timing - if the appeal does not proceed quickly enough, the court may dismiss the appeal for 'mootness'.

 

Under United States law, the court generally defers to agency decisions. The presumption is that agencies have expertise in the matters entrusted to them, and the court should reverse the agency decision only in limited circumstances. Thus, the standard of review limits the court to two situations. First, the court can reverse decisions where the agency action is contrary to law (ignores the clear instructions of the statute). Second, the court can reverse decisions where the agency action is not supported by 'substantial evidence on the record' - in other words, if the decision is inconsistent with the factual information that has been collected. The court is not supposed to replace the agency's judgement with its own. If the agency decision is a reasonable interpretation of the evidence, the judge must accept that interpretation, even if the judge would have made a different decision.

 

It is important to note that the International Trade Committee of the American Bar Association is proposing to amend the statutory standard of review with respect to appellant review of lower court decisions. The Committee intends to introduce this proposed legislation to the United States Congress in the middle of 2005. Under the proposed legislation the 'substantial evidence on the record, or otherwise in accordance with the law' standard of review will apply only to cases before CIT. The standard of review applied to appeals before the Federal Circuit will be amended to conform with the traditional appellant court standard of review. Under the federal appellant courts' traditional standard of review, the appellant courts consider whether the lower court 'misapprehended or grossly misapplied the applicable legal standard'.

 

The 'misapprehended or grossly misapplied' legal standard is a much more rigorous standard of review and would make it less likely that the Federal Circuit would overturn previous decisions by CIT. The current standard of review requires the Federal Circuit to apply anew (i.e. de novo) the CIT's substantial evidence standard to all anti-dumping and countervailing duty appeals from CIT. The proposed 'misapprehended or grossly misapplied' test would only be applicable to appellate reviews of factual issues examined by CIT. Interpretations of law by CIT would still be subject to de novo review by the Federal Circuit.

 

Beyond this standard of review, the unusual structure of the duty assessment process creates a timing problem. Recall that the original investigation only sets a deposit rate of estimated duties, and the Section 751 administrative review determines the actual duties owed. This difference has created a special legal problem for foreign companies that seek judicial review of Commerce Department final determinations.

 

The problem results because of the long delays that usually occur in CIT litigation. Often the appeal drags on so long that the Commerce Department finishes its first Section 751 review of the anti-dumping order before the court makes a decision concerning the original Commerce Department. determination. Finishing the Section 751 review means that the actual anti-dumping duties owed on the prior shipments have been determined in accordance with the results of the Section 751 review, and the deposit rate on future shipments is based on the margin found in the Section 751 review. Under these circumstances, what is the role of the original dumping determination?

 

Several court decisions have said that there is no role for the original determination. Since whatever decision the court makes concerning the original determination has no effect - either on the assessment of duties, or on the setting of the deposit rate - these decisions have said the original appeal is 'moot' - in other words, it has no legal effect. Therefore, there is no need for the lawsuit to continue. (The one exception would be if the issues raised in the appeal could lower the original dumping margin below de minimis - in which case the anti-dumping order itself would be dismissed.)

 

None of these problems apply to appeals of either Commission final determinations or Section 751 determinations. If the court overturns an affirmative Commission final determination, the anti-dumping order must be revoked. Under both United States and international law, an anti-dumping order cannot remain in effect unless there has been a finding of injury to the domestic industry. The court decision therefore determines whether there is any legal basis for the order to continue. Similarly, if the court overturns some aspect of the final decision in the Section 751 investigation, that decision affects the amount of anti-dumping duties that the foreign company must pay. Again, the court decision is outcome determinative. In both cases, the court will proceed with the appeal.

 

These court decisions mean that if a company cannot proceed quickly enough, there is a serious risk that the court will dismiss the appeal. The company will receive no benefit for its efforts.

 

Suggested strategies

 

Anticipate a possible court appeal while defending the case before the agencies

 

Because of the special nature of judicial review, it is crucial that the foreign company begin anticipating the possibility of a court appeal from the beginning of the investigation. The court's review is limited to what has been submitted to the agency during the investigation. If certain facts or factual arguments have not already been submitted to the agency, they cannot be raised in the court appeal. Companies must therefore plan ahead.

 

During the investigation, the company and its lawyers should consider whether the necessary information is being made part of the administrative record. There are two major opportunities to submit information. First, most of the basic information is submitted as part of the response. Second, the company is able to elaborate on this basic information during the verification. For purposes of the appeal, it does not matter when the agency receives the information, as long as the information becomes part of the administrative record.

 

Waiting until the verification to submit crucial information, however, can be a risky strategy. It has the advantage of delaying the release of the information to the lawyers for the other side, but there is no guarantee that the Commerce Department will accept the information as a verification exhibit. The Commerce Department staff has almost complete discretion to decide what documents to take as exhibits. Documents shown at the verification but not taken as exhibits are not part of the administrative record and cannot be used in court.

 

Decide whether to pursue an appeal

 

Many factors will enter into the decision to appeal the Commerce Department or Commission decision. The foreign company should evaluate the following considerations.

 

How important is the issue to the company? The more important the issue, the greater the potential benefit of a court appeal. The company should consider both the importance of the issue to this case, and to possible Section 751 reviews. Moreover, the Commerce Department is likely to treat the same issue the same way in investigations against the same company of other products.

 

The importance of the issue must be evaluated in light of the great uncertainty, however. In Section 751 reviews, the issues are often treated differently by the new Commerce Department staff than they were in the initial investigation. Therefore, even without a court appeal, it may be possible to persuade the Commerce Department to decide an issue differently.

 

Moreover, the company may be able to restructure its sales in such a way as to make the issue irrelevant, or at least to increase the likelihood that the new staff will decide the issue in the company's favour.

 

Because of these opportunities for changing the adverse decision, the company should not overestimate the value of the court appeal for future cases. The only certain benefit is that the court may order the agency to reverse its decision in this particular investigation.

 

How likely is the company to succeed? This judgement can be difficult, but is an important part of any litigation strategy. Is the issue legal or factual? Courts are more likely to overturn agencies on legal than factual issues. How complete is the record? Depending on the issue, the completeness of the record could help or hurt the likelihood of success.

 

Can the agency defend itself? Depending on the issue, the foreign company may be willing to play a more or less active role in helping the agency. Although particular cases depend on those circumstances, two rules of thumb are useful. First, the Commission tends to be better at defending itself than the Commerce Department. The Commission staff attorneys who work on the cases are allowed to defend them when they go to court. The Commerce Department staff attorneys, however, must turn their cases over to the Department of Justice when they go to court. Since the Department of Justice attorneys have less experience with the details and nuances of trade law - and since they did. not 'live' the case during the agency proceedings, they are usually less effective. Second, the government attorneys usually do a better job with legal rather than factual issues. For factual issues, there is no substitute for having been actively involved in building the factual record at the agency level. The Government often does not have lawyers with that advantage.

 

What is the estimated cost? Court appeals are not cheap. Since the process is more formal, and the stakes are often high, the cost can be substantial. The actual cost, of course, varies depending on the case.

 

If the company decides to appeal, decide whether to push the appeal or delay it

 

If the company decides to pursue an appeal, the company and its lawyers should push the case as quickly as they can. Much of the process is beyond the control of the parties. But a commitment to move a case quickly can help speed the process.

 

Note, however, there may be cases where the foreign company wants to delay. If the Commerce Department has made an adverse decision, and the company now owes a large amount of additional duties, the company may want to delay the process. There are ways to delay the litigation, if that is the company objective.

 

Source: Business Guide to Trade Remedies in the United States: Anti-dumping, countervailing and safeguards legislation practices and procedures