The Ghost of CDSOA Still Haunts Us

For the better part of a decade, the United States waged an ugly dispute with the WTO over a U.S. antidumping and countervailing duty law enacted in October of 2000 called the Continued Dumping and Subsidy Offset Act (CDSOA).[1]  It became known more informally as the Byrd Amendment in recognition of its sponsor, Senator Robert Byrd of West Virginia.[2]  Antidumping duties (AD) are assessed when imported goods are, or are likely to be, sold in the United States at prices below their “normal” fair market value.  Countervailing duties (CVD), in contrast, are levied against the importation of goods produced with the benefit of a foreign governmental subsidy.

The standard practice among countries with AD and CVD laws is to deposit all revenue collected from dumping- or subsidy-related remedies into the national treasury for use by the government just as it would typically use any other source of unrestricted revenue, such as for general operating costs, agency appropriations, expenditures, and debt service.  This was how the U.S. always handled AD and CVD revenue—but then along came Byrd.  In hindsight, the circumstances of its passage by Congress was a clear warning of the rocky road ahead.  After failing in 1999 to garner support as a stand-alone piece of legislation,[3] Byrd was quietly inserted into a larger agricultural appropriations bill in 2000, going unnoticed by many of Senator Byrd’s Senate and House colleagues, hence the wisdom of the legislation—not to mention its validity under the United States’ WTO obligations—was never challenged.  President Clinton was opposed to Byrd because it subverted America’s WTO obligations, but he decided that the larger appropriations bill was too important to be vetoed.[4]  Although the “Findings of Congress” in § 1002 of Byrd—namely that “injurious dumping is to be condemned and actionable subsidies which cause injury to domestic industries must be effectively neutralized”—was consistent with existing law, we then find, in § 1003(a), the controversial premise behind Byrd, a premise so simple that it’s surprising it had not been finagled into law sooner: it required that all revenue from AD and CVD orders must be redistributed to the injured U.S. parties instead of going into the general account of the U.S. Treasury.  It was the pinnacle of legislated avarice.  It is not hyperbole to say that similar redistributive activities conducted under different circumstances would earn a federal RICO indictment.[5]

The Robin Hood-like premise of Byrd changed long-standing U.S. practice by funneling AD and CVD revenue directly into special accounts.  The funds in these accounts were—and still are—annually redistributed to the affected domestic producers allegedly injured by the dumped or subsidized imports.  The effect was clear: U.S. industries directly profited from Byrd.  The supposed prima facie intent of U.S. antidumping law, in concert with the WTO Antidumping Code, is to create a level playing field for all parties—whatever a level playing field means in the context of the various legal trade barriers a country can employ, like general duties or quotas.  But Byrd turned this purported intent upside-down by providing to the injured parties an unearned financial windfall that was no different from, well, a subsidy.[6]  One who notes the irony and hypocrisy of Byrd may be forgiven.  It was effectively a one-two punch that assessed AD and CVD against foreign imports (Pow!) and then gave the duties to the aggrieved industry (Wham!).  A fact typically glossed over in any discussion of AD and CVD (or tariffs generally) is that these duties are paid by U.S. importers, not by the foreign exporter.  This means that the Byrd funds given to the affected domestic producers actually come directly out of the pockets of other U.S. companies (which is why I’ve been calling it redistribution rather than distribution).  And to make matters even worse, ambulance-chasing became a predictable consequence of Byrd, as the law encouraged U.S. firms to file claims of injury—petitions that likely never would have been contemplated pre-Byrd—in the hope that such claims might result in free money.  What was the downside of claiming injury, of asking the golden goose for one of her golden eggs?  And because the law required that a firm must be actively producing an affected product to benefit from a claim of injury, Byrd inspired some firms to produce goods that they otherwise wouldn’t have chosen to produce, or to revert to producing goods that had been discontinued due to rational and market-driven business decisions.  Byrd thus encouraged unwise and wasteful diversions of resources, and less innovation.[7]

It seemed for several years that the hullabaloo would not be quieted, as Byrd was “derided almost universally by international economists and U.S. trade partners.”[8]  Taking relatively swift action, the WTO’s Dispute Settlement Body (DSB) convened a panel that in 2002 found Byrd to be “inconsistent with Articles 5.4, 18.1 and 18.4 of the Anti-Dumping Agreement; Articles 11.4, 32.1 and 32.5 of the SCM Agreement; Articles VI:2 and VI:3 of the GATT 1994; and Article XVI:4 of the WTO Agreement.”[9]  Despite the WTO’s findings, the growing volume of angry offshore complaints, and the hypocritical premise of Byrd, Congress demonstrated a number of times that it had no intention of repealing or amending this law.  Several bills aimed at repeal were introduced in both the House and the Senate (such as S. 1299 in 2003, and H.R. 3933 and H.R. 1121 in, respectively, 2004 and 2005), but support for these repeal efforts was lukewarm.  President Bush, although powerless because of statutory restrictions, on several occasions expressed his opposition to Byrd.  The following paragraph was included in a Statement of Administration Policy issued on November 17, 2005, by the Executive Office of the President: “The Administration strongly supports the provision that would repeal the [CDSOA] and thereby terminate an unwarranted diversion of funds from the Treasury, while leaving in place [AD & CVD] remedies.  Repeal would also enable the [U.S] to fulfill its [WTO] obligations and avoid retaliatory tariffs from our trading partners.”[10]

Congress’ reluctance to repeal Byrd put both the U.S. and the WTO in difficult positions.  By ignoring the findings of the DSB (and Appellate Body) the U.S. made the WTO look weak, highlighting to the world that the WTO, despite its de facto role as the binding arbiter of trade issues under its dispute settlement protocols, lacked the legal means to force the U.S. to repeal Byrd.[11]  Further, the U.S. stance publicly undermined the authority of an organization that needed American fealty to maintain legitimacy.[12]  By refusing to rescind Byrd, the U.S. was seen by many critics as an arrogant and hypocritical bully that, on one hand, punished illegally subsidized imports in order to foster “fairness” and a “level playing field”, but on the other hand disregarded its obligations as a WTO member by continuing to administer a law that brazenly subsidized U.S. industry.  The U.S. Government Accountability Office (GAO) noted the significant consequences of Byrd in a 2005 report:[13]

Some U.S. industries are facing the imposition of additional tariffs by key U.S. trading partners as authorized by the WTO because CDSOA does not comply with WTO agreements.  In response to separate complaints about CDSOA by 11 WTO members, the WTO ruled in January 2003 that CDSOA violated U.S. WTO obligations.  The rationale for the WTO’s ruling was that CDSOA was not among the allowed trade remedy responses to injurious dumping and subsidies specifically listed in the applicable WTO agreements.  The United States pledged to comply with the adverse ruling, but it did not do so by the December 2003 deadline.  Although the President proposed CDSOA’s repeal, no change has been enacted by Congress.  Three countries agreed to give the United States more time to come into compliance; the other eight members requested and received WTO authorization to retaliate by imposing additional tariffs on imports from the U.S.  WTO arbitrators found that each of the eight members would be entitled to suspend concessions against U.S. exports in an amount equal to 72 percent of the CDSOA disbursements associated with AD/CV duties on that member’s products each year.  The total suspension authorized for 2005 could be up to $134 million based on the fiscal year 2004 CDSOA disbursements.  Specifically, for the fiscal year 2004 disbursements, the WTO arbitrators authorized the imposition of additional duties covering a total value of trade not exceeding $0.3 million for Brazil, $11.2 million for Canada, $0.6 million for Chile, $27.8 million for the European Union (EU), $1.4 million for India, $52.1 million for Japan, $20.0 million for Korea, and $20.9 million for Mexico.  On May 1, 2005, Canada and the EU began the imposition of additional duties on various U.S. exports.  On August 18, 2005, Mexico began imposing additional duties on U.S. exports.  On September 1, 2005, Japan began imposing additional duties on U.S. exports as well.  The remaining four members say they might suspend concessions.

As the international acrimony over Byrd continued to grow, Senate and House support for the law eventually eroded to the point where, in late 2005, a negotiated repeal was passed by slim margins in both chambers as an add-on to the Deficit Reduction Act of 2005 (DRA).[14]  To gain inclusion in the DRA, the pro-repeal side agreed to an almost two-year push-out of the effective date of repeal.  The House voted in favor of the DRA (and so for repeal of Byrd) by a 212–206 vote on December 19, and then two days later the Senate, deadlocked at 50–50, was forced to call upon Vice President Dick Cheney to cast the deciding vote to authorize repeal.  Following a House resolution to concur with a final amendment, the legislation was sent to the White House for the President’s signature.[15]  President Bush signed the DRA into law on February 8, 2006, at an official White House signing ceremony—but without saying a word in his prepared remarks about the repeal of Byrd.[16]

It’s hardly surprising that Byrd caused (and continues to cause nearly two decades after its formal repeal) a firestorm of criticism and retaliation from the WTO and many of America’s largest trading partners, including Canada, Mexico, Japan, and the EU.[17]  On top of the unabated external condemnation, Byrd became even more of a domestic soap opera.  Few trade laws have created more incentive for litigious behavior than Byrd, not because of the unprecedented nature of the law but because of the boatloads of cash at stake.[18]  To this day CBP continues to earmark funds for redistribution under Byrd; in 2024, nearly $6M was slated for redistribution to parties who claimed injury pursuant to a handful of AD and CVD orders.[19]  And litigation over the redistribution of the “golden goose” funds continues to be heard by the CIT and, on appeal, by the CAFC.[20]

The law has been attacked multiple times on constitutional grounds.  Shortly after repeal, the CIT reviewed the constitutionality of Byrd’s disbursement requirements, which granted payouts only to parties that had affirmatively supported an AD or CVD investigation.  In SKF USA, Inc.,[21] the plaintiff argued that AD and CVD laws were intended to protect all affected domestic industries—not to discriminate against an individual company based on whether it had stepped forward to actively support a petition.  The court agreed, ruling that “requirement that an entity had to ‘support’ an antidumping petition to be included as an ‘affected domestic producer’ as defined in the CDSOA, 19 U.S.C. § 1675c(b)(1)(A), is a violation of the Equal Protection guarantees under the Fifth Amendment to the Constitution.”  But the CIT’s decision was reversed early in 2009 by the CAFC.[22]  SKF USA tried to resurrect the case later in 2009 with a request for an en banc (full court) rehearing.  The CAFC denied the rehearing, but three of the judges joined in a dissent that attacked Byrd on First Amendment free speech grounds.[23]

Congress, which had surely grown tired of its problem child, took action to forestall the future reach of Byrd with language inserted into the Claims Resolution Act of 2010:[24]

SEC. 822.  LIMITATION ON DISTRIBUTIONS RELATING TO REPEAL OF CONTINUED DUMPING AND SUBSIDY OFFSET.

Notwithstanding section 1701(b) of the Deficit Reduction Act of 2005 (Public Law 109–171; 120 Stat. 154 (19 U.S.C. 1675c note)) or any other provision of law, no payments shall be distributed under section 754 of the Tariff Act of 1930, as in effect on the day before the date of the enactment of such section 1701, with respect to the entries of any goods that are, on the date of the enactment of this Act—

(1) unliquidated; and

(2)(A) not in litigation; or

(B) not under an order of liquidation from the Department of Commerce.

Byrd was a bad law, the ultimate poster child for those who support restoration of the line-item veto.  Congress deserves much criticism for allowing H.R. 4461 to include an eleventh-hour provision that wasn’t sufficiently debated, but they also deserve some (but truly not much) credit for taking action to correct their blunder.  The ghost of Byrd still haunts us nearly twenty years after its repeal, as there continue to be disbursements and litigation—although we are seeing fewer disbursements and less litigation with each passing year.  We can look forward to that day in the not-too-distant future when the impact of Byrd becomes a lesson in history rather than current events.

[1]  See Continued Dumping and Subsidy Offset Act of 2000 (as Title X of H.R. 4461, the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act), Pub. L. 106–387, §§ 1001–1003, 114 Stat. 1549A-72 (October 28, 2000); 19 U.S.C. § 1675c.  See also 19 C.F.R. §§ 159.61–64.

[2]  In this article we will call the Byrd Amendment simply “Byrd”.  Senator Robert Byrd, of West Virginia, held the distinction of serving longer than any other senator in American history (serving, I think—but I could be wrong if fact-checked—for almost 150 years from 1863 until his death in 2010).

[3]  Senator Mike DeWine (R-OH) introduced the CDSOA bill, S. 61, in January of 1999.  The bill had the support of twenty-six bipartisan co-sponsors in the Senate (among them Orrin Hatch (R-UT), Olympia Snowe (R-ME), and, yes, Robert Byrd (D-WV)), but it was unable to gain enough additional support, and so the bill died in committee.  But then, Senator Byrd took it upon himself to stealthily negotiate CDSOA into H.R. 4461.  Another House version of CDSOA, H.R. 842, was introduced by Rep. Ralph Regula (D-OH) a few weeks after S. 61, but it also stalled in committee.

[4]  The line-item veto is dead—at least for the foreseeable future.  It briefly became the law of the land in 1996 (Line Item Veto Act, Pub. L. 104–130, 110 Stat. 1200 (April 9, 1996); 2 U.S.C. § 681) but the law was invalidated as unconstitutional by the Supreme Court in Clinton v. City of New York, 524 U.S. 417 (1998).  Byrd likely never would have become law had the line-item veto still been available to President Clinton in 2000. 

[5]  See 18 U.S.C. § 1961–1968.  The Racketeer Influenced and Corrupt Organizations Act (a.k.a. RICO) was enacted as part of the larger Organized Crime Control Act, Pub. L. 91–452, 84 Stat. 922 (October 15, 1970).
[6]  In a tangential issue that arose out of Byrd, a surety company asked the CIT to invalidate its obligations under a bond that required the surety to guarantee antidumping duties to the government.  The surety claimed, with irrefutable logic, that a payment mandated by Byrd would constitute a subsidy to private industry, and therefore such payment exceeded the scope of the surety’s legal obligations under the bond.  However, the CIT refused to render a decision because of jurisdictional preclusion (i.e., as a prerequisite to a grant of jurisdiction, all administrative avenues for relief must be exhausted, which evidently hadn’t occurred).  See Hartford Fire Insurance Co. v. United States, 507 F. Supp. 2d 1331 (Ct. Int’l Trade 2007), affirmed by 544 F.3d 1289 (Fed. Cir. 2008).
[7]  For example, Elkton Sparkler Company had closed its factory in Maryland in 1999, but resumed production after CDSOA became law to satisfy the eligibility requirements for receiving Byrd funds.  Neil King, Jr., Host of Companies Pocket Windfalls From Tariff Law, The Wall Street Journal (December 5, 2002).

[8]  Benjamin H. Leibman and Kara M. Reynolds, The returns from rent-seeking: campaign contributions, firm subsidies, and the Byrd Amendment (Canadian Journal of Economics, Vol. 39, No. 4 (November 2006)), 1346 (footnote 2).

[9] WTO Report of the Appellate Body: United States–Continued Dumping and Subsidy Offset Act of 2000, AB-2002-7 (WT/DS217/AB/R, WT/DS234/AB/R (16 January 2003)), 2.

[10]  George W. Bush: “Statement of Administration Policy: H.R. 4241—Deficit Reduction Act of 2005,” November 17, 2005.  See The American Presidency Project at https://www.presidency.ucsb.edu/documents/statement-administration-policy-hr-4241-deficit-reduction-act-2005.

[11]  The WTO’s dispute settlement process can be found at https://www.wto.org/english/thewto_e/whatis_e/tif_e/disp1_e.htm.  The U.S. notably has undermined the WTO by questioning the impartiality of Appellate Body Members, who are effectively judges tasked with adjudicating appeals of rulings issued by the Dispute Settlement Body.  For instance, in 2016 the U.S. rejected the reappointment of a South Korean, Seung Wha Chang, to the AB because the U.S. believed that Chang’s record as an AB Member showed evidence of judicial activism that impermissibly exceeded his powers.  And in 2011 the U.S. took unprecedented action by blocking reappointment of its own AB Member, Jennifer Hillman.

[12]  The United States is the WTO’s largest financial benefactor.  The WTO Annual Report for 2024 showed that U.S. contributions represented 11.426% of the WTO’s 2024 budget, followed by China at 11.179%, Germany at 7.154%, Japan at 3.688%, France at 3.675%, and the UK at 3.653%.  See https://www.wto.org/english/res_e/booksp_e/anrep_e/ar24_chap4_e.pdf.

[13]  Government Accountability Office, Issues and Effects of Implementing the Continued Dumping and Subsidy Offset Act (GAO 05–979), (Washington DC: Government Printing Office, September 2005).

[14]  See S. 1932, Title VII, Subtitles F-G, §§ 7601–7701.  See also the House version, H.R. 4241, Title VIII, Subtitles G-H, §§ 8701–8801.

[15]  See H. Res. 653 (February 1, 2006), which passed by a 216–214 margin (with 5 members not voting).

[16]  Deficit Reduction Act of 2005, Pub. L. 109–171, 120 Stat. 4 (February 8, 2006), which repealed 19 U.S.C. § 1675c.

[17]  For maximum political and economic effect, foreign retaliation often targets U.S. products that aren’t necessarily covered by any U.S. dumping or countervailing orders.  According to a report published on August 22, 2005, by the Congressional Research Service, The Continued Dumping and Subsidy Offset Act (“Byrd Amendment”), CRS Code RL33045, “Canada and the European Union began retaliating on May 2, 2005, by placing a 15% additional import duty on selected U.S. exports.  Mexico imposed higher tariffs on U.S. milk products, wine, and chewing gum as of August 18 and Japan has announced that it will place an additional tariff of 15% on 15 steel and industrial products effective September 1, 2005.”  The EU’s retaliation is codified in Council Regulation (EC) No. 673/2005 (April 25, 2005) and Regulation (EU) 2018/196 (February 7, 2018), which, despite Byrd’s repeal, remain in force, subject to annual modification.  For example, in 2013, based on the volume of EU trade affected by the prior year’s Byrd redistributions, Council Regulation (EC) No. 349/2013 (April 17, 2013) increased the retaliatory duties to 26% on corn, eyeglass frames, crane trucks, and women’s jeans.  The retaliatory rate on these four disparate goods was reduced to only 0.35% in 2014, per Commission Implementing Regulation (EU) No. 303/2014 (March 25, 2014), followed in successive years by respective rates of 1.5% per Commission Delegated Regulation (EU)  2015/675 (February 26, 2015), 0.45% per Commission Delegated Regulation (EU) 2016/654 (February 26, 2016), 4.3% per Commission Delegated Regulation (EU) 2017/750 (February 24, 2017), 0.3% per Commission Delegated Regulation (EU) 2018/632 (February 19, 2018), 0.001% per Commission Delegated Regulation (EU) 2019/673 (February 27, 2019), 0.012% per Commission Delegated Regulation (EU) 2020/578 (February 21, 2020). 0.1% per Commission Delegated Regulation (EU) 2021/704 (February 26, 2021), 0.001% per  Commission Delegated Regulation (EU) 2022/682 (February 25, 2022), and 0.164% per Commission Delegated Regulation (EU) 2023/858 (February 23, 2023).  These retaliatory duties were finally eliminated due to the administrative cost outweighing the collected duties, per Commission Delegated Regulation (EU) 2024/1239 (February 22, 2024).

[18]  Even without Byrd–related disputes, the most common trade litigation involves AD and CVD orders.

[19]  See https://www.cbp.gov/sites/default/files/2024-05/fy2024_cdsoa_preliminary_amounts_available.pdf.

[20]  See, e.g., Adee Honey Farms v. United States, 107 F. 4th 1322 (Fed. Cir. 2024).

[21]  SKF USA, Inc. v. United States, 451 F. Supp. 2d 1355 (Ct. Int’l Trade 2006).

[22]  SKF USA, Inc. v. United States Customs and Border Protection, 556 F.3d 1337 (Fed. Cir. 2009).

[23]  SKF USA, Inc. v. United States Customs and Border Protection, 583 F.3d 1340 (Fed. Cir. 2009).  SKF USA wasn’t the only challenge to the constitutionality of Byrd.  In a 2013 decision, for instance, the CIT disagreed with the First Amendment and Fifth Amendment claims put forth by Giorgio Foods, a U.S. mushroom producer, regarding redistributions related to dumping orders issued in 1998 and 1999 on imports of preserved mushrooms from China, Chile, India, and Indonesia.  See Giorgio Foods, Inc. v. United States, 898 F. Supp. 2d 1370 (Ct. Int’l Trade 2013), which was affirmed in a split decision, 785 F.3d 595 (Fed. Cir. 2015), a decision that included a compelling dissent by Judge Jimmie Reyna.

[24]  Claims Resolution Act of 2010, Pub. L. 111–291, 124 Stat. 3064 (December 8, 2010).  And more recently, Section 605 of the Trade Facilitation and Trade Enforcement Act of 2015, Pub. L. No. 114–125, 130 Stat. 122 (Feb. 24, 2016) prescribed the administration of interest assessments against Byrd-controlled entries.