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NOW THAT BORDERS ARE RE-OPENING, COMMERCE SHOULD CEASE ITS “QUESTIONNAIRES IN LIEU OF VERIFICATION"

Updated: Nov 12


November 11, 2021

By: James E. Ransdell and Thomas M. Beline, Cassidy Levy Kent (USA) LLP


The COVID-19 pandemic caused massive disruptions to global trade that are still reverberating today, with supply chain issues domestically and internationally dominating the news cycle. Largely overlooked in the macro-economic ramifications of the pandemic is the impact that COVID-19 had to the administration of the nation’s trade remedy laws. COVID-19 largely shuttered the U.S. Department of Commerce’s Office of Enforcement and Compliance, forcing analysts to wade through thousands of pages of questionnaire responses and data remotely, and cancelling verifications of these questionnaire responses.

But does Commerce have the authority to avoid in-person verification?


The Tariff Act of 1930, as amended, does not appear to support wide-ranging authority for Commerce to avoid verification – even in a global pandemic. The statute requires that Commerce “verify all information relied upon” in reaching certain specified determinations, including final determinations in investigations and final determinations of every third administrative review. See 19 U.S.C. § 1677m(i)(1), (3). The statute does not detail what such verification must entail, but the Statement of Administrative Action (the “SAA”) accompanying the 1994 Uruguay Round Agreements Act, which Congress designated an “authoritative expression” of the proper interpretation of the law, does provide some guidance. See 19 U.S.C. § 3512(d). For example, the SAA provides that “employees of the Department will visit” the respondents for purposes of verification and that Commerce will issue a verification report concerning the “methods, procedures, and results” of the process. Commerce’s regulations echo these two requirements. See 19 C.F.R. §§ 351.307(b)(1)(i), (c), (d). Thus, whereas Commerce may modify its verification procedures, at least certain requirements must be followed to comply with the statute.


Traditionally, Commerce’s verification has involved on-site visits by a team of Commerce personnel who meet with representatives of the respondent for several days, review documentation and computer programs based on a “verification outline,” and pursue follow-up lines of inquiry as needed. The days are long, the process is intense, and there are generally no extensions granted for a respondent to provide requested information. As any participant in an antidumping or countervailing duty proceeding well knows, verification is a crucial part of any investigation or review. The standard instructions accompanying Commerce’s initial and supplemental questionnaires remind all respondents that any information provided may be subject to verification. It is through verification that Commerce is able to test a foreign producer’s prepared questionnaire responses against documentation that is maintained in the ordinary course of business. The foreign producer may also tender minor corrections as part of this process, in order that Commerce may calculate as accurate an AD/CVD margin as possible.


Verification is, in short, essential to ensuring the integrity of the data relied upon in AD/CVD proceedings.


Commerce has previously taken significant and meaningful steps to as closely replicate on-site verification as possible.


Given the importance of such procedures to the integrity of its process, Commerce has scrupulously observed these requirements, even where there were serious impediments to in-person verification. In Polyethylene Terephthalate Resin From Pakistan, 83 Fed. Reg. 48,281 (Sep. 24, 2018), Commerce conducted verification using “standard verification procedures, including an examination of relevant accounting and production records, and original source documents” with representatives of a Pakistani company in Washington, D.C. when Commerce determined that travel in Pakistan was not possible due to a State Department travel advisory. In Stainless Steel Bar From Italy, 67 Fed. Reg. 3,155 (Jan. 23, 2002), Commerce tolled the final determination deadline in this and companion investigations of SSB from Germany, France, the United Kingdom, and Korea in order to conduct a modified verification that “met the {verification} standard” in the wake of “security concerns and logistical difficulties brought about by the events of September 11 {2001}.” In Brake Rotors From the People’s Republic of China, 64 Fed. Reg. 61,581 (Nov. 12, 1999), Commerce conducted off-site verification at a Beijing hotel rather than on-site verification at the respondent’s production facilities due to security concerns associated with travel in China following a NATO bombing of the Chinese Embassy in Belgrade, Yugoslavia.


Commerce appeared to forget these examples in 2020, however, with the onset and intensification of the COVID-19 pandemic. Commerce ceased all in-person verification activities. Instead, without formal rulemaking or policy guidance, Commerce opted to replace verification in an ad hoc manner with a “questionnaire in lieu of verification.” Unlike traditional verifications, it is not uncommon for Commerce to grant respondents extensions to respond to such questionnaires. And, unlike typical supplemental questionnaires, domestic interested parties are afforded no opportunity to supply rebuttal factual information in response. This practice continues today. See, e.g., Letter from Commerce, “2019-2020 Antidumping Duty Administrative Review of Corrosion-Resistant Steel Products from Taiwan: Request for Documentation in Lieu of On-Site Verification, Prosperity,” Case No. A-583-856, POR: 7/1/19–6/30/21, ACCESS Barcode: 4179191-01 (Nov. 5, 2021).


Other investigating authorities conducted verification during the COVID-19 pandemic


Insofar as the World Trade Organization agreements on anti-dumping (Art. 8.6) and countervailing measures (Art. 18.6) contemplate verifications, other jurisdictions have likewise been forced to innovate substitutes to verification in response to the operational difficulties imposed by the COVID-19 pandemic. But these investigating authorities have hewed more closely to replicating in-person verification than has Commerce. For example, the European Union required detailed submissions of information, followed by “remote cross-checking of the data,” i.e., real-time system access, using tools like Skype® for business. See European Commission’s 39th Annual Trade Remedies Report, Doc. No. COM(2021) 496 final (Aug. 30, 2021) at 4. Similarly, the Government of Canada conducted “desk audit verifications,” which occurred over multiple days and involved videoconferencing with follow-up questions on a quick turnaround. See, e.g., Statement of Reasons––Final Decisions: Certain Corrosion-Resistant Steel Sheet from Turkey, the United Arab Emirates, and Vietnam (Oct. 30, 2020) at [31]. In comparison to these approaches, our own Department of Commerce’s “questionnaires in lieu of verification” are a stark departure from traditional verification.


Without verification, dumping and subsidy rates have been depressed, including a few occasions of respondents being excluded from AD/CVD orders.


The results have been disappointing, and have created unnecessary barriers to import relief for domestic producers at a time of historic economic volatility. For example, Commerce’s acceptance of substantial new factual information in connection with the “questionnaires in lieu of verification” issued to foreign producers in antidumping investigations of forged steel fluid end blocks (“FEBs”) depressed margins for Germany and Italy, and precipitated the exclusion of Indian producers altogether. In response, domestic producers filed three suits before the U.S. Court of International Trade (“USCIT”), contending that remand of these final determinations was necessary because Commerce’s “questionnaires in lieu of verification” unlawfully shirked the agency’s statutory duty to verify. See Ellwood City Forge Co. v. United States, USCIT Ct. No. 21-00007l; Ellwood City Forge Co. v. United States, USCIT Ct. No. 21-00073; Ellwood City Forge Co. v. United States, USCIT Consol. Ct. No. 21-00077.

These appeals remain pending. In one, however, the government sought a voluntary remand, to which domestic producers consented. The court’s order granting the government’s request observed that Commerce would be “allow{ed}…to perform on-site verification, which would moot all procedural issues created by the agency’s decision to short-circuit verification,” and further proposed that “Commerce may wish to consider seeking voluntary remand in similar cases to comply with its verification obligations.” Ellwood City Forge Co. v. United States, USCIT Ct. No. 21-00007, ECF No. 28 (Oct. 29, 2021) at 5. This signals skepticism by domestic courts reviewing Commerce’s short-circuited “verification” procedures.


Commerce should prioritize in-person verifications.


The European Union has already resumed in-person verifications in AD682, the anti-dumping proceeding concerning imports of certain corrosion resistant steels originating in Russia and Turkey.


As vaccination rates increase, so too does cross-border travel with initial flights having entered the United States from the United Kingdom earlier this week. Moreover, federal employees must provide proof of vaccination.


To the extent in-person verification can be imminently resumed, Commerce should prioritize its reinstatement. But, even to the extent Commerce continues to adopt workaround procedures instead of traveling to countries with draconian quarantine requirements in place, like China, something more robust than a “questionnaire in lieu of verification” is needed to live up to the statutory mandate.

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