G/ADP/Q1/USA/34  
G/SCM/Q1/USA/34  
 
12 May 2022  
(22-3703) Page: 1/7 
Committee on Anti -Dumping Practices  
Committee in Subsidies and Countervailing Measures  Original: English  
 
  
NOTIFICATION OF LAWS AND REGULATIONS UNDER  
ARTICLES 18.5 AND 32.6 OF THE AGREEMENTS  
REPLIES TO QUESTIONS POSED BY CHINA1 REGARDING  
THE NOTIFICATION OF THE UNITED STATES2 
The following communication , dated and received on 10 May 2022, is being circulated at the request 
of the delegation of the United States . 
 
_______________  
 
 
The United States thanks China for its questions regarding the notification by the United States, and 
provides the following responses : 
Question 1  
The new regulation makes bona fide sales a prerequisite of applying for new shipper  
review under  351.214(b)(1), and lists the specific requirements under 351.24(k).  
a) How could the new shippers who did not participate in previous proceedings and 
suffer the very high punitive rate meet the bona fide requirement?  
b) Does the requirement of bona fide sales have only paper value rather than real 
commercial value? How does the United States evaluate bona fide sales in real 
busines s scenario when there is very high rate?  
c) How does the United State reconcile its regulation with the WTO obligation so as 
not to impose extra burden to the exporters that should be entitled the new shipper 
status under the WTO rules?  
Reply : 
a) We disagree wit h China's characterization that certain new shippers may suffer a "punitive" 
rate. The United States notes that the U.S. Department of Commerce's antidumping and 
countervailing duty laws are remedial in nature, not punitive. Every determination is based 
on the evidence on the record, and where the use of facts available is necessary, Commerce 
ensures that its determinations are consistent with Article 6.8 of the Agreement on 
Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 
(AD Agreement) and 12.7 of the Agreement on Subsidies and Countervailing Measures 
(SCM  Agreement).  
Regarding the amended regulation, as explained in the Preamble to the Final Rule, 85 Fed. 
Reg. 49472, the revisions to the new shipper provisions (19 C.F.R. § 351.214) reflect 
Commerce's past twenty years of practice in this area, aid Commerce in developin g a 
consistent practice of evaluating typical behavior of the new shipper, and aim to ensure that 
the sales to be reviewed are, in fact, bona fide  sales. They also aim to address the concerns 
 
1 G/ADP/Q1/USA/33 - G/SCM/Q1/USA/33.  
2 G/ADP/N/1/USA/1/Suppl.31 - G/SCM/N/1/USA/1/Suppl.32 .  G/ADP/Q1/USA/34 • G/SCM/Q1/USA/34  
 
- 2 - 
 
  regarding circumvention, duty evasion, and abuse of procedures e xpressed by Congress in 
adopting amendments in 2016 to the new shipper review statute.  
In prior new shipper reviews, Commerce experienced an abuse of the new shipper 
procedures. In such cases, Commerce has found the importer purchased the merchandise 
at a price that was aberrationally high, the quantity was extremely low, and the importer's 
behavior was inconsistent with the business practices of the relevant industry. In particular, 
Commerce has found the new shipper's U.S. customer was not in the busines s of selling the 
merchandise, had no downstream customer, and was not involved in a business that would 
use the merchandise to produce a product of any kind. In such cases, the United States 
Court of International Trade has found that these circumstances s how an attempt by the 
new shipper to evade the antidumping duty law with a sale that was not a bona fide  sale for 
purposes of the AD law.3 Commerce's new regulation codifies its practice of addressing these 
types of situations where they arise.  
Namely, se ction 351.214(k) of Commerce 's amended regulations clarify the factors 
Commerce will consider in making a bona fide  sale determination during a new shipper 
review, consistent with its statutory obligations in 19 U.S.C. sec. 1675 (a)(2)(B). These 
factors pro vide that Commerce shall consider (1) whether the producer, exporter, or 
customer was established for purposes of the sale(s) in question after the imposition of the 
relevant antidumping or countervailing duty order; (2) whether the exporter, producer, or 
customer has lines of business unrelated to the subject merchandise; (3) the quantity of 
sales; and (4) and any other factor which Commerce determines to be relevant with respect 
to the future selling behavior of the producer or exporter, including any oth er indicia that 
the sale was not commercially viable. Commerce evaluates whether a sale is bona fide  on a 
case-by-case basis and based on the totality of the circumstances that indicate whether the 
sale was commercially viable, and thus, bona fide . Therefo re, Commerce may determine a 
sale is bona fide  if the totality of the circumstances, including the factors enumerated in the 
statute and amended regulations, demonstrate that the sale was commercially viable.  
b) As explained in the Preamble  to the Final Rule and identified in response to part (a) of this 
question, the bona fide  sale factors identified in Commerce 's regulations reflect both 
statutorily enumerated factors provided by U.S. Congress and factors that Commerce has 
historically used to determine whet her a sale is bona fide . The factors  assist Commerce in 
evaluating whether there are indicia that a sale is commercially viable. These factors guide 
Commerce 's bona fide  sales analysis irrespective of existing rates for other exporters and 
producers under a particular antidumping or countervailing duty order. In addition , as 
detailed in part (a), each review is conducted on a case -by-case basis, based on the 
individual facts and records before Commerce.  
As further detailed in the Preamble  to Commerce 's amended regulations, Congress added 
the statutory change that an individual margin for a new shipper must be based on a bona 
fide sale to the United States , because an abuse of new shipper review procedures had been 
identified. In such scenarios, a new s hipper would enter into a scheme to structure one or 
just a few sales to show little or no dumping when those sales are reviewed, resulting in a 
low or zero tariff rate. After obtaining such rate, an importer could then bring in that producer 
or exporter 's merchandise at highly dumped or subsidized prices with little or no cash 
deposit. The amended regulations aim to ensure that sales reviewed are bona fide  to address 
such abuse and are aimed at ensuring that calculated rates accurately reflect the pricing 
behavior of the seller .  
In addition, historically, new shipper reviews have involved very few sales. In such cases, 
Commerce must fully understand the circumstances surrounding these limited number of 
transactions as the y provide the basis for a new shipp er's future selling of subject 
merchandise into the United States and the level of dumping or subsidization, if any.  
c) The United States ' regulatory modification is consistent with its obligations under the AD and 
SCM Agreements. While Articles 9.5 and 19.3 of the AD and SCM Agreements, respectively, 
 
3 See e.g., Hebei New Donhua Amino Acid Co. Ltd. v. U.S., 374 F.Supp.2d 1333, 1343 (Ct. Int 'l Trade 
2005).  G/ADP/Q1/USA/34 • G/SCM/Q1/USA/34  
 
- 3 - 
 
  identify broad qualifications for conducting a new shipper review, the requirements identified 
in section  351.214(b)(2)(v)(D) through (E) are consistent with both U.S. law  and our 
obligations under the AD and SCM  Agreements. In addition, the question from China seems 
to imply that the AD and SCM Agreements require  an investigating authority to grant a new 
shipper review to a company that has contrived to make a sale aimed at nothing more than 
establishing a zero o r low cash deposit rate. The United States does not agree with the 
premise  of China 's question.  
The requirements provided for in the new shipper review regulations are consistent with 
Commerce 's statutory obligation to provide new shipper reviews to those exporters and 
producers with bona fide  sales of subject merchandise to the United States. Consistent with 
this, and in light of the concerns related to circumvention and abuse of new shipper review 
procedures expressed by Congress in enacting the new shipp er provision of the statute, the 
amended regulation  limits initiations of new shipper reviews to where there is a reasonable 
likelihood of bona fide  sales for Commerce to review. The documentation requirements in 
section  351.214(b)(2)(i) through (vi) assis t Commerce in determining whether a party 
qualifies as a new shipper and whether a new shipper review should, therefore, be 
conducted, consistent with Commerce 's statutory obligation to calculate a dumping margin 
or countervailing duty rate based solely on  bona fide  United States sales.  
Finally, a s explained in the Final Rule, Commerce crafted these amended regulations in as 
minimally  burdensome a manner as possible, while ensuring that it obtains all of the 
necessary information to conduct the bona fide  sale analysis intended by Congress.  
Question 2  
The new regulation requires an interested party, when applying for scope inquiry, to have 
a product which is or has been in actual production by the time of the filing of the 
application under section 351.225 (c). 
Please clarify whether a company, having finished designing a new product and having 
the sample of such product at hand, qualify for the application of scope inquiry. How does 
the United States define the term "is or has been in actual production"?  
Reply : 
As Commerce explained in the Preamble , it is Commerce 's policy to conduct "scope inquiries on 
merchandise that is already in commercial production but has not yet been exported to the United 
States. " Accordingly, 19 C .F.R. sec. 351.225( c)(2)(v) asks about the volume of annual production. 
Commerce does not conduct scope inquiries on sample products that have not yet been commercially 
produced.  
Question 3  
The new regulation lays out the time point for the suspension of liquidation and 
comm encement for the collection of cash deposit of estimated AD and/or CVD duties in 
scope ruling and anti -circumvention investigation respectively under section 
351.225(l)(2)  and 351.226(l)(2) and authorizes the investigating authority to collect cash 
deposit retrospectively.  
a) Please explain whether the retrospective collection of cash deposit prior to the 
initiation of the scope inquiry or the anti -circumvention investigation is 
inconsistent with the domestic court ruling of the United States in the cas e TRANS 
TEXAS TIRE, LLC and ZHEJIANG JINGU COMPANY v. UNITED STATES . 
b) Please explain how could the exporters who reasonably believed their products to 
be outside of the scope of the order to avoid ultimately paying for the punitive 
country -wide rate only be cause they had no chance to apply for a separate rate as 
if they had participated in the original AD or CVD investigation at the beginning.  G/ADP/Q1/USA/34 • G/SCM/Q1/USA/34  
 
- 4 - 
 
  Reply : 
a) The retroactive suspension of liquidation under 19 C .F.R. sec. 351.225(l)(2) and 
351.226(l)(2) is not inconsi stent with the U.S. Court of International Trade 's rulings in Trans 
Texas Tire, LLC, et al. v. United States, Court Nos. 19 -188 and 19-189. Those cases did not 
involve a scope ruling or a circumvention determination under the new regulations, but 
rather, a modification of the scope of the products being examined by Commerce during the 
investigation phase of the proceeding and prior to the issuance of AD and CVD orders. Thus, 
the Court 's holdings in those cases are neither relevant to nor inconsiste nt with the new 
regulations.  
b) If Commerce applies a scope ruling on a country -wide basis, it is specific to the product  and 
not the party. Thus, it is not punitive, but merely an analysis that any product that meets 
those physical descriptions would be cove red.  
That being said, even if Commerce determines that a product is covered by a scope and a 
scope ruling should be applied country -wide, that does not mean that an importer will 
necessarily pay duties on the importation of its merchandise. First, parties  always have an 
option under the U.S. system of getting their own administrative review or, at a minimum, 
getting a non -selected or separate rate in annual administrative reviews, if they request 
such a review.  
Moreover, to the extent that China is concern ed that Commerce 's circumvention 
determinations in particular will retroactively be applied to entries preceding the 
circumvention inquiry, the general rule set forth in the regulations is that no suspension of 
liquidation will occur until Commerce has iss ued a preliminary circumvention determination. 
Even then, in the Preamble to the final rule, Commerce explained that "retroactive 
application may not be appropriate in all instances. "  
To be clear, however, Commerce, in applying the relevant circumvention provisions, will be 
"cognizant of the purpose of the AD/CVD law…  to prevent parties from undermining the 
effectiveness of these trade remedies through circumvention measures. " Therefore, 
Commerce must emphasize that these provisions are intended in part to  deter parties from 
engaging in the circumvention practices in the first instance; and to encourage parties to 
maintain a reasonable awareness whether the product they are producing, exporting, or 
importing is subject to an AD/CVD order, and also to scruti nize the parties with which they 
do business.  
Question 4  
The new regulation delegates the USDOC to initiate anti -circumvention investigation at 
request under section 351.226, but does not require for the standing of the request, 
domestic support or the size of this applicant.  
Please explain the consideration and rationale of why the initiation of anti -circumvention 
does not require domestic support as it does for the initiation of AD and CVD investigation.  
Reply: 
China's  description of the regulation is incorrect. Commerce 's regulation, 19 C .F.R. sec. 351.226(c), 
only allows "interested parties " to make a circumvention inquiry request. That is a defined term in 
the statute and regulations. Under 19 C .F.R. sec. 351.102(b)(29), an inter ested party for the 
purposes of requesting a circumvention inquiry could be any of the following: the United States 
importer of subject merchandise; a trade or business association with a majority of the members of 
which are producers, exporters, or import ers of subject merchandise; a manufacturer, producer, or 
wholesaler in the United States of a domestic like product; a certified union or recognized union or 
group of workers which is representative of an industry engaged in the manufacture, production, or  
wholesale in the United States of a domestic like product; a trade or business association a majority 
of whose members manufacture, produce, or wholesale a domestic like product in the United States; 
an association, a majority of whose members is composed  of interested parties described in G/ADP/Q1/USA/34 • G/SCM/Q1/USA/34  
 
- 5 - 
 
  subparagraph (C), (D), or (E) of 19 U.S.C. sec. 1677 (9) with respect to a domestic like product; and 
a coalition or trade association as described in  19 U.S.C. sec. 1677 (9)(G).  
Question 5  
The new regulation may apply th e determination on a country -wide basis to all products 
from the same country regardless of producers, exporters or importers.  
a) Please explain the rationale of sampling in anti -circumvention cases and clarify the 
legal consequences for those companies that didn't circumvent the AD or CVD 
order but are not selected as mandatory respondent.  
b) How would the USDOC determine whether the rest of the companies in the 
investigated country had actually circumvented or not when one of the two 
selected respondents found to be circumventing and the other one not.  
c) Please clarify the legal consequences for the companies found to be circumventing. 
Shall they pay the cash deposit determined in the original investigation? Which 
rates will be applied for them?  
Reply : 
a) A determination of circumvention is rooted in the production process and products, not on 
the parties themselves. In accordance with 19 C .F.R. sec. 351.226 and 351.307, Commerce 
has the discretion to verify responses in a circumvention proceeding and may, i f there are a 
large number of exporters or producers, select a sample to examine and verify. Should 
Commerce determine that a particular product is circumventing an AD and/or CVD order, in 
certain circumstances, pursuant to 19 C .F.R. sec. 351.228, Commerce  may provide certain 
parties with an opportunity to certify that their product(s) is not covered under the 
circumvention inquiry. Also, as the Preamble notes, Commerce has multiple potential 
remedies available, and , if the facts warrant it, Commerce has th e ability to apply a remedy 
which is producer -specific, exporter -specific, importer -specific , or a combination of any of 
those remedies.  
b) A finding of circumvention is not based on the intent of the parties or the individual parties 
reviewed, but on the pro duction process and the products themselves. Should Commerce 
determine, for example, that a particular product assembled in a third country is 
circumventing the order, then a country wide application covering that product and assembly 
seeks to address the problems stemming from the product and assembly procedures, not 
the parties. Commerce explained that such a country -wide application should be based on 
"record evidence and to prevent future evasion concerns." Commerce has further 
implemented rules codifyi ng Commerce's existing practice of requiring certifications under 
19 C.F.R. sec. 351.228 for various reasons in certain proceedings such as circumvention 
inquiries. These certifications are directly referenced in 19 C.F.R. sec. 351.226(m) as a 
remedy that Commerce can choose to apply alongside a country -wide circumvention 
determination. For parties who are not using the product or particular procedure for 
assembly that is the subject of a circumvention determination, a certification requirement 
would not cr eate an undue burden, as those parties can certify that they did not use the 
product at issue or participate in those procedures.  
c) Companies importing merchandise covered by a company -specific or country -wide 
circumvention determination are required to pay cash deposits of estimated duties at the 
applicable rate,  unless a certification process is implemented and the requirements under 
that process are met. All final affirmative circumvention determinations made by Commerce 
are published in the Federal Regist er and specify the applicable cash deposit rate. The rate 
applicable will vary on a case -by-case basis. If a company has its own existing separate rate 
under the order at issue, then entries from the company may be entered at that rate. 
However, if a separ ate cash deposit rate is not available, the applicable rate will be the 
country -wide rate, as appropriate. In addition, parties may follow the normal administrative 
review process to seek review of the cash deposit rate and final liquidation rate for 
merch andise covered by the circumvention inquiry.  G/ADP/Q1/USA/34 • G/SCM/Q1/USA/34  
 
- 6 - 
 
  Question 6  
The new regulation lays out the procedure for covered merchandise referrals, authoring 
the U nited States' Customs to refer any unresolved covered merchandise issue to the 
USDOC  to make a determination under section 351.227.  
a) Please clarify whether it is the discretion of the US Customs to initiate scope 
inquiry and determine the scope order on its own.  
b) When an interested party does not agree with the determination made by the US 
Customs, will it be given a chance to request the US Customs to refer the issue to 
USDOC?  
c) Where will the United States publish all the case tables regarding EAPA cases ？Will 
the c ase information be  published online, for example, in ACCESS system or EDIS  
system, so as to enable the interested parties and their legal representatives to be 
informed of the latest progress and information?  
Reply : 
a) Scope inquiries are initiated and conduc ted by Commerce, not U.S. Customs and Border 
Protection (CBP). As explained in the Preamble, Commerce and CBP each have their own 
independent authorities under the AD/CVD statutory framework to address circumvention 
and evasion of AD/CVD orders. CBP has au thority to determine in the first instance whether 
goods are subject to an existing order. CBP's determination is final and conclusive unless an 
interested party seeks a scope ruling from Commerce.  
With respect to covered merchandise referrals specifically , if CBP is unable to determine 
whether the merchandise at issue in its evasion investigation is covered merchandise, it shall 
refer the matter to Commerce to make a covered merchandise determination.  
b) In 2015, a new law was adopted establishing a formal pr ocess for CBP to conduct civil 
administrative investigations of potential duty evasion of AD and CVD orders on the basis of 
an allegation by an interested party or upon referral by another Federal agency. If CBP is 
conducting such an investigation based on  an allegation from an interested party and is 
unable to determine whether the merchandise at issue is ''covered merchandise'' within the 
meaning of the law, it shall refer the matter to Commerce to make a covered merchandise 
determination. Commerce's amen ded regulations address procedures and standards specific 
to Commerce's consideration of such covered merchandise referrals. In particular, 19 C.F.R. 
sec. 351.227 governs Commerce's receipt of a covered merchandise referral, Commerce's 
initiation and condu ct of a covered merchandise inquiry, and Commerce's covered 
merchandise determination, pursuant to 19 U.S.C. sec. 1517(b)(4). As such, this regulation 
does not involve how CBP would handle scenarios where an interested party does not agree 
with a determina tion made by CBP.  
c) Commerce will publish a Federal Register notice after receiving a covered merchandise 
referral from CBP pursuant to 19 C .F.R. sec. 351.227. Such notice will either (a) announce 
that Commerce is initiating a covered merchandise inquiry in response to CBP 's referral 
pursuant to 19 C .F.R. sec. 351.227(b)(1); or (b) announce that Commerce will address CBP 's 
covered merchandise referral in  another ongoing segment of the proceeding, such as a scope 
inquiry or circumvention inquiry pursuant to section 351.227(b)(2). After initiation, all 
documents related to the referral can be found on ACCESS under the relevant segment of 
the proceeding. Cov ered merchandise referrals addressed in covered merchandise inquiries 
and circumvention inquiries will conclude with the publication of a final determination in the 
Federal Register, pursuant to 19 C .F.R. sec. 351.227(e)(2) and 351.226(g)(2), respectively.  
Covered merchandise referrals addressed in an ongoing scope proceeding will conclude with 
the issuance of a scope ruling on ACCESS. Additionally, pursuant to 19 C .F.R. sec. 
351.225(o), on a quarterly basis , Commerce will publish in the Federal Register a list of final 
scope rulings issued within the previous three months which will include the case name, and 
a brief description of the ruling.  G/ADP/Q1/USA/34 • G/SCM/Q1/USA/34  
 
- 7 - 
 
  Please note that not every EAPA investigation by CBP leads to a covered merchandise referral 
to Commerce. More info rmation regarding CBP 's EAPA investigations can be found on CBP 's 
website, https://www.cbp.gov/trade/trade -enforcement/tftea/eapa .  
 
__________