Department of Commerce Expands Scope of Antidumping Order on Aluminum Extrusions From China

On November 3, 2016, the United States Department of Commerce issued a Memo that found Chinese aluminum manufacturers have been circumventing the U.S. antidumping and countervailing duty orders on aluminum extrusions from China (the Orders).  The Memo is in response to a Petitioner’s request for an investigation as they correctly believed that Chinese aluminum exporters were manipulating the blend of alloys to circumvent the Orders.  As a result of the Memo, the scope of the antidumping order is now expanded to include the metallurgic alterations that were previously not subject to antidumping and countervailing duties.  The Memo comes as welcome support to the U.S. aluminum industry’s ability to adequately enforce the Orders.

The respondent of the investigation, or the Chinese companies accused of circumventing the Order, is China Zhongwang Holdings Ltd. and its affiliates (collectively, Zhongwang).  Zhongwang did not respond to Commerce’s circumvention questionnaire, leading Commerce to apply an “adverse facts” standard to determine that Zhongwang was circumventing the order.

The exact type of aluminum investigated is known as “5050 grade” aluminum.  Prior to the implementation of the Orders 5050 grade aluminum had not been used for extrusion purposes and thus was initially not subject to the Orders.  However, when the Orders were issued in 2012 and over 400 percent in total duties began to be assessed on subject merchandise, Zhongwang began extruding 5050 grade aluminum and exporting it to the United States as a substitute for aluminum that was subject to the duties.   Furthermore, Commerce found that 5050 grade aluminum has the same general physical characteristics as products subject to the Order and thus expanded the scope of the Order to now include 5050 grade aluminum.  As such, imports of 5050 grade extruded aluminum from China will now be subject to a 33.28 percent antidumping duty rate and 374.15 percent countervailing duty rate under the Orders.

Importers of merchandise, such as 5050 grade aluminum extrusions, that is subject to antidumping and countervailing duty orders must pay the respective duties on those products under United States law.  Evasion of such duties can subject importers to False Claims Act liability.  The qui tam or whistleblower provisions of the False Claims Act allows private entities, including competitors of importers, to bring a lawsuit alleging evasion of such duties on behalf of the United States.  If the United States recovers duties evaded through fraud, the whistleblower who originally brought the case is entitled to 15-30 percent of the United States’ recovery.  The is the scenario that led to Frohsin Barger & Walthall client Graphite Electrode Sales recovering $480,000 as a reward for exposing a competitor’s evasion of antidumping duties.