The Department of Justice (“DOJ”) filed comments in the U.S. International Trade Commission’s (“ITC”) investigation on whether imports of mattresses from multiple countries are causing injury to the domestic mattress industry. The petition was filed on March 31, 2020, and the Commerce Department initiated the investigations on April 22, 2020. In an unusual step, the DOJ filed a letter with the ITC questioning the appropriateness of the filing and continuation of these cases, given the fact that the current COVID-19 crisis has significantly increased demands for mattresses for both hospitals and consumers. DOJ expressed concern that the existing U.S. domestic industry may not be able to supply the burgeoning demand at hospitals amid the COVID-19 pandemic.
The petitioners in this case, which include Brooklyn Bedding, Corsicana Mattress Company, Elite Comfort Solutions, FXI, Inc., Innocor, Inc., Kolkraft Enterprises; and Leggett & Platt Incorporated have alleged antidumping and countervailing duties up to 1000% on imports of mattresses from Cambodia, China, Indonesia, Malaysia, Serbia, Thailand, Turkey, and Vietnam. The DOJ is urging the ITC to consider “all relevant economic factors which have a bearing on the state of the [relevant] industry in the United States.” Further, the “Department urges the Commission to consider the consumer and healthcare demands caused by COVID-19 as a ‘relevant economic factor’ here because COVID-19 will likely have a significant impact on the domestic mattress industry along with many other industries.”
According to the DOJ, the COVID-19 pandemic will “likely” increase demand for mattresses as hospitals expand capacity at a pace with which the domestic industry will not be able to handle. “This demand may outpace domestic supply,” the filing said. “If demand outpaces supply, it is possible that American industry will be able to thrive, but additional supplies will be needed, at least in the short term, to fill the gap and immediate need until American manufacturers can ramp up production.”
The concern articulated by the DOJ was that the financial burdens associated with the risk of duties ranging from 48 to 1000 percent “could potentially affect the supply of mattresses needed in hospitals and other health care facilities.” While there is a chance that the “Commission’s investigation ultimately might find it appropriate to impose duties in this case, it should take the exigent circumstances of COVID-19 and its immediate aftermath into account in crafting a tailored remedy that balances current healthcare needs with the equally important need to protect American industry and workers from unfair imports.” More importantly, the DOJ urges the Commission to consider for example, the specific and unique circumstances arising out of the pandemic because importers and other companies may in fact make “’massive imports’” of mattresses not to circumvent the antidumping laws but to respond to COVID-19.”
In an even more unusual twist, the DOJ warned against a preliminary affirmative ITC finding because while in normal situations the institution of a case has a limited negative impact, in these unusual circumstances, any affirmative finding (even preliminary) could have an exacerbated effect on the market due to COVID-19. Should the ITC make an affirmative preliminary finding, then the case would proceed on its normal course back to Commerce to make its finding on the margin of dumping and/or subsidization. Once the case continues after the ITC preliminary decision, there is no stopping until both agencies reach a final decision. The risk which was identified by DOJ is that if the ITC makes an affirmative finding, then the next step is Commerce’s preliminary determinations which would require importers to post a cash deposit on the imported goods, and while this would be ultimately refunded in the event the final determinations are negative, these are risks which would harm the U.S. economy. During the pandemic, however, mattress exporters could simply opt to supply another market and hinder U.S. efforts to fight the coronavirus, the DOJ said. “Given the immediate and ongoing demands of COVID-19, this harm cannot as easily be undone as in other instances, by eventually, and later, refunding an aggrieved party.” “Thus, it is critical to evaluate the domestic injury here, if any, and the appropriate remedy in light of COVID-19.”
Husch Blackwell’s Trade Remedies practice is comprised of partners who have been working in this field for over 30 years, and this is the first time in our careers that we have seen the DOJ weigh in on a trade remedies investigation at its inception. Normally, the DOJ’s role is to litigate any appeals at the conclusion of the investigatory process on behalf of either the Department of Commerce or the International Trade Commission. The filing of such a letter on the record of a brand new investigation which is in its infancy is extremely unusual.
Husch Blackwell’s International Trade and Supply Chain team will continue to monitor the situation and provide updates as new information becomes available.