The Scope of the Order: What To Expect in Commerce’s New Regulations

The Scope of the Issue

• The updated regulation (19 C.F.R. § 351.225) is effective November 4, 2021 and addresses procedures for Commerce’s inquiries into whether certain products are covered by the scope of AD/CVD orders and, thus, subject to additional duties.
• The updates change both Commerce’s substantive analysis and the procedural aspects of Commerce’s scope ruling process, impacting, importantly, the suspension and liquidation of entries at the U.S. border.
• Commerce’s regulations now “ensure that AD/CVDs are applied to all unliquidated entries of products found within the scope of the order, including entries that may pre-date the date of initiation of the scope inquiry.”
• Whether your product is covered by the scope of an AD/CVD order is not always obvious.  Commerce’s scope regulations allow parties to request and receive an official determination on whether a specific product is “in scope.”

What to Know

• Commerce now requires a “standardized scope ruling application,” in which companies provide:
  • A detailed description of the product, including physical characteristics; the country of export; HTS code; uses of the product; photographs; schematics; standards; marketing materials; descriptions of the parts, materials, and production processes;
  • A public summary of the description of the product;
  • Contact information;
  • A narrative history of the product;
  • The volume of annual production;
  • If the product is already imported into the United States, how it is declared at the border and any relevant documents;
  • Statement regarding additional processing, whether in the United States or a third country;
  • Any argument or additional factual information that will support an argument that the product is not or should not be covered by the scope of the AD/CVD orders.
• Commerce must accept or reject a scope application within 30 days and must complete a scope inquiry within a maximum of 300 days from the initiation.
• Previously, Commerce would conduct either a “formal” or “informal” scope ruling, depending on the complexity of the case.  Now, all scope rulings follow the “formal” proceeding, allowing for a preliminary scope ruling and a final scope ruling.  The preliminary scope ruling may be combined with Commerce’s initiation of the inquiry.
• Practically, this impacts when and how far back Commerce will instruct CBP to suspend liquidation of entries of the merchandise under its new regulation.  For inquiry requests submitted before November 4, 2021, if Commerce issued a preliminary ruling, it would instruct CBP to suspend liquidation and require cash deposits on or after the date of initiation. Now, Commerce will “normally” reach back to require suspension of and cash deposits on any unliquidated entries, even if they were made before the request or before initiation.
• Given the potential for significant overlap between a scope inquiry and a covered merchandise or anti-circumvention inquiries (which are governed by separate regulations), the new regulation is crafted to mirror these corresponding provisions (i.e., § 351.227 and § 351.226), with some exceptions.

How We Can Help

Arent Fox can help “walk” executives through questions of whether certain products are covered by the scope of an AD/CVD order, and, if necessary, navigating the formal inquiry process. We can discuss the timing of requests and how a request may impact entries of imported products, including potential duty liabilities.

Arent Fox is also here to help navigate how scope-related issues may overlap with any of your other import concerns, not limited to investigations at Commerce and inquiries with CBP.