Norsk Hydro Canada, Inc. v. U.S.

• Decision Date: 14 December 2006
• Docket Number: No. 06-1052.,No. 06-1044.,06-1044.,06-1052.
• Parties: NORSK HYDRO CANADA, INC., Plaintiff-Appellee, v. UNITED STATES, Defendant-Appellant, and U.S. Magnesium LLC, Defendant-Appellant.
• Court: U.S. Court of Appeals — Federal Circuit

472 F.3d 1347

NORSK HYDRO CANADA, INC., Plaintiff-Appellee, v. UNITED STATES, Defendant-Appellant, and U.S. Magnesium LLC, Defendant-Appellant.

No. 06-1044.

No. 06-1052.

United States Court of Appeals, Federal Circuit.

December 14, 2006.

Eric C. Emerson, Steptoe & Johnson LLP, of Washington, DC, argued for plaintiff-appellee. With him on the brief were Gregory S. McCue and Michael T. Gershberg. Of counsel was Meredith A. Rathbone.

Stephen C. Tosini, Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendant-appellant United States. With him on the brief were Peter D. Keisler, Assistant Attorney General; David M. Cohen, Director; and Jeanne E. Davidson, Deputy Director. Of counsel on the brief was Ada E. Bosque, Attorney, Office of Chief Counsel for Import Administration, United States Department of Commerce, of Washington, DC.

Jeffrey M. Telep, King & Spalding LLP, of Washington, DC, argued for defendant-appellant U.S. Magnesium LLC. With him on the brief was Stephen A. Jones. Of counsel was Joseph W. Dorn.

Before MICHEL, Chief Judge, PROST, Circuit Judge, and ELLIS,^* District Judge.

ELLIS, District Judge.

This appeal concerns the interpretation of the countervailing duty laws and the division of authority between the two entities responsible for implementing these laws—the Department of Commerce ("Commerce") and the U.S. Customs and Border Protection ("Customs"). In this case, Customs collected duties on 1997 magnesium and magnesium alloy imports at too high a rate from appellee Norsk Hydro Canada, Inc. ("NHC"). Rather than liquidate countervailing duties against NHC at the proper 2.02% rate, Customs allowed some duties to be "deemed liquidated" at cash deposit rates ranging from approximately 3% to 7%. The government pocketed the difference, and as permitted by law, redistributed some of this amount to NHC's American competitors. NHC did not attempt to protest this overcharge by Customs at the time, choosing instead to wait several years until Commerce held an annual administrative review of the amount of the net countervailable subsidy provided to NHC, at which time NHC sought a setoff of the overcharge against duties due on its imports for a later year. Commerce rejected this request on the ground that it lacked legal authority to grant the setoff. NHC appealed this decision to the Court of International Trade, which agreed with NHC and remanded the matter to Commerce with instructions to grant the setoff. Following the remand, Commerce made the setoff under protest,¹ and the matter then returned to the Court of International Trade, which granted judgment for NHC on the administrative record. This appeal followed. We now reverse.

I. Statutory Background

As an aid to understanding the issues presented, we summarize briefly the law governing the setting and collection of countervailing duties.

A. Countervailing Duties and Subsidies

If the production of goods abroad is subsidized by a foreign government, the goods can be subject to a countervailing duty ("CVD") when imported² to the United States. 19 U.S.C. § 1671. In general, the goal of these duties is to protect American firms from unfair competition by setting off the amount of certain export subsidies foreign firms selling goods in the United States receive from their government. The Secretary of Commerce administers the countervailing duty laws. Id. § 1677(1). Two showings must be made before a CVD can be imposed: (i) that a government subsidy was received, and, (ii) that the subsidy resulted in, or threatens, material injury to American industry. Id. § 1671(a). These two determinations are made by separate bodies. The International Trade Commission determines whether material injury to American industry has occurred, while Commerce determines whether a subsidy was received.³ Subsidies from certain nations may trigger a CVD even in the absence of a material injury determination. Id. § 1671(c) ("In the case of any article of merchandise imported from a country which is not a Subsidies Agreement country, no determination by the Commission under section 1671 b(a) . . . or 1671 d(b) of this title shall be required.").

A countervailing duty investigation may be initiated at the request of an interested party or on Commerce's own motion. Id. § 1671a. In the course of such an investigation, Commerce under 19 U.S.C. § 1671 b(b) makes a preliminary determination concerning whether a foreign government provided a countervailable subsidy, and the International Trade Commission under 19 U.S.C. § 1671 b(a) makes a preliminary determination concerning whether the foreign subsidy resulted in, or threatens, material injury to American industry. If the preliminary investigation discloses that a foreign subsidy was provided, Commerce must suspend liquidation of duties, id. § 1671 b(d)(2), and must require the importer to furnish cash deposits as security for duties that may be due pending a final determination of the amount of a CVD. Id. § 1671 b(d)(1)(B). Once Commerce makes a final determination that a countervailing subsidy was provided by a foreign government, id. § 1671d(a), and once the International Trade Commission has reached a final determination that U.S. industry was materially injured as a result, id. § 1671 d(b), Commerce then issues an order setting the countervailing duty, which is typically expressed ad valorem—that is, as a percentage of the value of the imported goods. Id. §§ 1671 d(c)(2), 1671e.

The countervailing duty imposed by Commerce must equal the "net countervailable subsidy," 19 U.S.C. § 1671(a), which is calculated by subtracting certain enumerated fees and setoffs from the amount of the subsidy provided by the foreign government. 19 U.S.C. § 1677(6).⁴ Countervailable subsidies may be divided further into "recurring" and "non-recurring" benefits. When an importer receives a non-recurring benefit, as occurred here, the benefit must be amortized over the "average useful life" of the subsidy. 19 C.F.R. § 351.524(b)(1)-(d).

Although countervailing duties must be "equal to" countervailing subsidies, the two concepts are not functionally interchangeable.⁵ The procedures for determining the amount of a countervailable subsidy are different from those for collecting the countervailing duty; indeed, as noted, the two tasks are undertaken by two different entities, Commerce and Customs. More importantly for our purposes, the procedures for contesting an erroneous subsidy calculation are different from those for contesting an erroneous duty assessment. Compare 19 U.S.C. § 1675 (Commerce administrative review of subsidy determination) with id. § 1514(a)(5) (Customs protest for liquidation error). The procedure for contesting a Customs assessment or liquidation essentially involves lodging a timely protest with Customs, the disposition of which is reviewable in the Court of International Trade, see infra Section I.B. By contrast, the procedure for contesting an erroneous subsidy or CVD determination by Commerce requires an objecting party to raise the objection during an administrative review of the CVD order. More specifically, Commerce must, upon request, undertake an annual administrative review of any issued CVD order. 19 U.S.C. § 1675(a)(1). During the administrative proceeding, Commerce must "review and determine the amount of any net countervailable subsidy," which is the basis for a CVD determination, id. § 1675(a)(1)(A), and it is during this review that parties may raise objections, present evidence, and submit written arguments relating to the countervailable subsidy determination, including submission of written arguments. See 19 C.F.R. §§ 351.221, 351.301, 351.309. In this respect, during its annual review, Commerce typically restricts its consideration to entries made during the one year period of review (or "POR"). 19 C.F.R. § 351.213(e)(2)(i). Judicial review of the results of these administrative proceedings is available in the Court of International Trade, 28 U.S.C. § 1581(c); 19 U.S.C. § 1516a(2), with appeal to this Court. 28 U.S.C. § 1295(a)(5).

B. Liquidation

While a CVD's ad valorem rate is determined administratively by Commerce, the duty itself is collected by Customs.⁶ Commerce dictates to Customs the proper countervailing duty rate, 19 U.S.C. § 1671e(a), and Customs "liquidates" the duty, that is, it makes the "final computation or ascertainment of duties . . . accruing upon entry" of the goods. 19 U.S.C. § 1500(d); 19 C.F.R. § 159.1. In other words, Commerce sets the CVD rate and Customs "liquidates" and collects the duty by applying the ad valorem rate to the value of the entered goods. In those instances where a preliminary determination of material injury and countervailable subsidy is made, liquidation is suspended pending completion of the investigation. 19 U.S.C. § 1671 b(d)(2). In these instances, Customs will not know the exact amount of the CVD to collect when the goods are actually imported; the CVD is necessarily determined retrospectively, some time after the goods enter the United States. See 19 C.F.R. § 351.213(a). Accordingly, to secure payment of a CVD, an importer of goods subject to countervailing duties must make cash deposits of the estimated duties at the time of entry. 19 U.S.C. §§ 1671 b(d)(1)(B), 1671 d(c)(1)(B)(ii), 1671 e(a)(3). To be sure, the cash deposit rate and the actual countervailing duty rate, as ultimately determined by Commerce, may vary substantially.

As noted, liquidation of a duty is suspended while a countervailing duty investigation is underway. Id. § 1671 b(d)(2). At the conclusion of the investigation, Commerce instructs Customs on the appropriate countervailing duty rate. Once this occurs, the suspension of liquidation is removed and Customs, in general, is required to "liquidate the entry ... within 6 months of receiving notice of the removal." Id. § 1504(d). Yet, the time frame shortens...