Export Compliance Daily is a Warren News publication.

Importer Says AD/CV Duties Violate Eighth Amendment on Excessive Fines

Rimco, a steel importer, challenged the antidumping and countervailing duties assessed on its steel wheel imports from China as being excessive fines in violation of the Eighth Amendment to the U.S. Constitution, in a Sept. 22 complaint at the Court of International Trade. Rimco said that the extremely high and excessive AD/CVD rates were not remedial but in fact penal in nature, leading to the deprivation of property when CBP imposed the AD/CV duties (Rimco, Inc. v. United States, CIT #21-00537).

Sign up for a free preview to unlock the rest of this article

Export Compliance Daily combines U.S. export control news, foreign border import regulation and policy developments into a single daily information service that reliably informs its trade professional readers about important current issues affecting their operations.

The steel wheel imports in question were hit with a 457.10% countervailing duty rate and a 231.70% China-wide antidumping duty rate. Both rates were determined with adverse inferences.

Rimco says the AD/CV duties were penal in intent, because the CVD rate for non-cooperative respondents was based on assigning a subsidy rate for every Chinese government program ever found to bestow countervailable subsidies, including programs mutually exclusive in coverage. The agency also assigned the 457.10% CVD rate for "All Other" respondents, including those that didn't fail to cooperate, such as Rimco.

On the antidumping side, the 231.70% rate is not based on a comparison of normal values with export prices or constructed export prices of the steel wheels from China, the complaint said. "[The International Trade Administration's] refusal to direct CBP to make an adequate offset to antidumping duty margins to prevent double counting of certain subsidies is not in accordance with law and constitutes further evidence of penal intent."

The Eighth Amendment is a rarely litigated part of the Constitution, and as such, does not have an extensive precedential history from which Rimco can derive its case against the AD/CV duties. Nevertheless, Rimco tapped three Supreme Court cases in its complaint to help make its case -- Kennedy v. Mendoza-Martinez from 1963, Helwig v. United States from 1903 and United States v. Bajakajian from 1997.

In Helwig, the court identified the factors needed for a fine to be considered penal as opposed to remedial. The court said that if an import duty was so large as to "show beyond doubt that it was a sum imposed not, in fact, as a duty upon an imported article, but as a penalty and nothing else," then it violates the Eighth Amendment. Rimco said that a 2015 statutory change eliminating Commerce's need to consider whether the calculated rates would have approximated the "commercial reality" of the interested party creates the possibility that the determined rates are penal in nature and therefore excessive fines.

In the most recent ruling on the Eighth Amendment, the Supreme Court in U.S. v. Bajakajian said that when considering whether a CBP forfeiture violated the amendment, the question of proportionality is at the center. "The amount of the forfeiture must bear some relationship to the gravity of the offense that it is designed to punish," the opinion said. Rimco's AD/CV duties are not proportional, the importer said.