Federal Circuit Upholds the Application of Countervailing Duties to Subsidies in Nonmarket Economies
March 30, 2015

The Federal Circuit has again upheld the constitutionality of a 2012 statute affirming the U.S. Department of Commerce’s (“Commerce”) ability to apply countervailing duty laws to subsidies granted in nonmarket economies (“NMEs”).  The ruling, issued on March 16 in GPX International Tire Corp. v. United States (“GPX”),  found that the statute did not violate the ex post facto or due process clauses of the U.S. Constitution.  The unanimous panel decision also highlighted the importance of this trade remedy, noting that it was designed by Congress to level the playing field for American manufacturers and “to preserve American industry.”

Until Commerce announced a change in policy in 2006, U.S. countervailing duty laws were not applied to subsidies in NMEs.  That change in policy was challenged in the courts, and Congress passed legislation in 2012 in support of Commerce’s authority.  This law led to further litigation, culminating in the Federal Circuit’s recent rulings upholding the statute. 

This case was the second time in two years that the Federal Circuit addressed the application of the countervailing duty statute to NMEs such as China and Vietnam.  In Guangdong Wireking Housewares & Hardware Co. v. United States (“Wireking”), the Court found that the 2012 law was intended to remedy unfair trade practices and not punitive in nature, and thus could not be declared a prohibited ex post facto measure under the Constitution.  The Federal Circuit’s opinion in GPX  reaffirmed its rejection of the ex post facto challenge to the statute, holding that its decision in Wireking as to the ex post facto issue was not fact-specific.

In GPX, the Court also examined whether the 2012 law violated the due process clause of the Constitution.  The panel found that the 2012 law did not infringe upon due process, holding that Congress possessed a “rational legislative purpose” in enacting this statute with retroactive application.  The Court concluded that this law “simply extends Commerce’s ability to impose countervailing duties to a new group of importers,” and “resolved uncertainty in the law with respect to whether countervailing duties applied to NME countries.”

The judges were not persuaded by GPX’s arguments regarding the period of retroactivity conferred by the 2012 law, finding that while it is “substantial,” it is nevertheless “shorter than that in other cases where the Supreme Court has rejected due process challenges.” The Court noted that GPX had ample notice that Commerce would apply countervailing duties to nonmarket economies since the Department announced its policy to do so in 2006, well before the earliest date of GPX’s imports. 

The three-judge panel consisted of the Hon. Kathleen M. O’Malley, the Hon. Richard G. Taranto, and the Hon. Timothy B. Dyk, who issued the opinion.