Adduci, Mastriani & Schaumberg LLP

United States Antidumping Law and Practice

 

I. INTRODUCTION

For the past twenty years, the U.S. antidumping law has been frequently relied upon by various and diverse U.S. industries in order to restrict the entry of low priced imported goods. Under the U.S. antidumping law, the administrative agencies have been given considerable discretion by the U.S. Congress in interpreting the law.
The recent Uruguay Round involved extensive negotiations concerning the GATT antidumping code, especially as it applied to U.S. antidumping practice, as well as the rapidly increasing and aggressive use of antidumping proceedings by developing and newly industrialized countries. The recent amendments to the U.S. antidumping law in order to implement the changes under the Uruguay Round Agreement have fortified the U.S. antidumping law, notwithstanding certain fundamental changes.
As part of my brief discussion, I would like to give you a brief overview of antidumping proceedings in order to familiarize you with U.S. antidumping procedures. Then I would like to discuss with you the more significant changes to the U.S. antidumping law by reason of the recent Uruguay Round Agreements Act.

II. AN OVERVIEW OF ANTIDUMPING PROCEEDINGS


A. Dumping is most often described as price discrimination between national markets. The provisions of the U.S. antidumping law are intended to prevent such price discrimination or below-cost pricing in the United States.
B. Antidumping proceedings in the United States involve separate, but simultaneous, investigations by the Department of Commerce ("Commerce") and the U.S. International Trade Commission.

1. Commerce, on one hand, is responsible for determining whether dumping exists, that is to say, whether a "class or kind" of foreign merchandise is or is likely to be sold in the U.S. at "less than fair value." To the extent that dumping exists, it is expressed in the form of a "dumping margin."

2. The U.S. International Trade Commission, ("ITC") on the other hand, determines whether a U.S. industry has suffered or is threatened with material injury by reason of the dumped imports.

3. In the event that Commerce and the Commission affirmatively find dumping and injury, the result is the issuance of an antidumping order which provides for the imposition of antidumping duties on the subject imported goods.

· The final duty imposed equals the dumping margin — the amount by which the foreign market price exceeds the U.S. price for the merchandise.


C. Conduct of a Typical Investigation


An antidumping proceeding begins with simultaneous filing of a petition with Commerce and the Commission by a U.S. industry producing a product like the dumped product.
1. Upon initiation of the investigation by Commerce, the ITC must preliminarily determine, based on information collected from U.S. industry, imports and foreign producers, whether there is a reasonable indication that the U.S. industry has been materially injured or is threatened with material injury by the allegedly dumped imports. A negative ITC determination terminates the case in its entirety.

2. If the ITC's preliminary injury determination is affirmative, Commerce begins its own investigation.

a. This involves the issuance of questionnaires to foreign producers, which elicit detailed information on the selling and pricing practices by these manufacturers for their goods in the U.S. and foreign markets.

b. Under certain circumstances, Commerce may also require responses to cost of production questionnaires, where sales at less than cost of production is at issue.

3. Commerce determines dumping margins based on sales of comparable merchandise in the relevant markets during a specific period, and then calculates a preliminary weighted-dumping margin for each respondent and publishes these in a preliminary determination.

a. In the event that a respondent responds inadequately or is refuses to cooperate, Commerce will use the "best information available" in order to determine the dumping margin for that particular exporter.

4. Where Commerce issues an affirmative preliminary determination of dumping, it continues its investigation and directs the U.S. Customs Service to "suspend liquidation" of all subsequent imports of the product in question, and to collect a cash deposit or bond equal to the preliminary margin.

a. Even where Commerce issues a negative preliminary determination, it will continue its investigation but Customs will not suspend liquidation of subsequent shipments.

5. Before making a final determination, the investigative staff of Commerce will conduct verifications at the foreign manufacturers' facilities in order to examine company records for the purpose of verifying the accuracy of the information provided to Commerce in response to questionnaires.

6. If Commerce's final determination is negative, the antidumping proceedings are terminated in their entirety.

a. If Commerce's final determination is affirmative, then the ITC must, within a prescribed statutory time, make a final determination of whether a domestic industry is being materially injured or threatened with material injury by reason of the dumped imports.

b. A negative final injury determination terminates the investigation in its entirety.

7. If the final determination of the Commission is affirmative, then an antidumping order is issued imposing antidumping duties equal to the amount of the dumping margin.

a. At this point, the U.S. Customs Service will collect cash deposits only in the amount of the antidumping margin.


D. Administrative Reviews


1. One year after publication of an antidumping order, as well as during each subsequent year, any exporter of the goods which is subject to that order may request that Commerce conduct a review of the previous year's imports.

a. The purpose of these administrative annual reviews is

(1) to calculate and assess the exact amount by which the foreign market value exceeded the U.S. price of each importation during that year and,

(2) to recalculate the estimated duty rate for deposits on future entries of the goods.

E. An administrative review is conducted in essentially the same manner as Commerce's initial antidumping investigation, and generally must be completed within one year.

(a) Commerce issues a questionnaire similar to that used in the original investigation and will calculate preliminary and final antidumping margins.

(b) Depending on the new margin calculation an importer can receive a refund plus interest if the estimated duty deposit was too high or pay additional sum plus interest if the estimated duty previously paid was too low.


III. HIGHLIGHTS OF AMENDMENTS TO U.S ANTIDUMPING LAW


As you know, there have been a number of significant changes to the U.S. antidumping statute because of the recent enactment of legislation in order to implement the GATT Uruguay Round Agreement.


A. Amendments Affecting Antidumping Investigations


1. Adequacy Of The Petition


In its review of the adequacy of the petition, Commerce must determine whether there is sufficient support by the domestic industry for the petition.

· Commerce must find that the petition was filed by or on behalf of the domestic industry if:
a. the domestic producers or workers that support the petition account for at least twenty-five percent (25%) of the total production of the domestic product, and

b. the domestic producers or workers that support the petition account for more than fifty percent (50%) of the production of the product produced by that portion of the domestic industry expressing support for or opposition to the petition.
Note: Commerce will normally determine the existence of domestic industry support based on the volume and value of domestic production.

· If the petition, on its face, does not establish the support of domestic producers or workers that account for more than fifty percent (50%) of the total production of the domestic product, Commerce must then poll the industry or rely on other information to determine if there is adequate support for the petition.

· The amendments to the statute also provide that, as a general rule, Commerce should not include as members of the domestic industry those domestic producers that oppose the petition and who are related to exporters of the subject merchandise, in determining the level of domestic industry support for the petition.


B. De Minimis Dumping margins


Under current regulations and prior practice, Commerce disregards any weighted-dumping margin that is less than 0.5%.
· The new legislation directs Commerce to disregard as de minimis any weighted average dumping margin that is less than 2%. This is similar to the antidumping law of the European Economic Community.

· It should be noted that this 2% de minimis standard only applies to antidumping investigations, and not to administrative reviews. Commerce will continue to use the de minimis rate of 0.5% and below for administrative reviews.


C. Critical Circumstances


1. Under prior U.S. antidumping law, critical circumstances exist if Commerce determines that

a. there have been massive imports of the merchandise over a relatively short period of time prior to the suspension of liquidation and

b. there is either a history of dumping or the importer knew or should have known that the exporter was selling the merchandise at dumped prices.

· If Commerce determines that critical circumstances exist, then the ITC determines whether retroactive application of the antidumping duties is necessary to prevent the reoccurrence of material injury.

2. The new legislation generally requires Commerce to engage in the same analysis as carried out under the prior law.

a. However, the ITC is required to determine whether the surge of imports prior to the suspension of liquidation, rather than the failure to provide retroactive relief, is likely to seriously undermine the remedial effect of the order.

b. The amendments direct the ITC to evaluate the following factors to make its final critical circumstances determination:

(1) the timing and the volume of the imports;
(2) a rapid increase in inventories of the imports; and
(3) any other circumstances indicating that the remedial effect of the antidumping order will be seriously undermined.


D. Determination Of All Others Rate


Under prior U.S. antidumping law, companies which were not individually investigated and did not receive a company specific rate were assigned by Commerce an "all others" rate for duty deposit purposes. This all others rate was calculated by weight averaging all company specific rates.

· Under prior U.S. antidumping law, Commerce determined an all others rate by including margins determined on the basis of best information available (BIA) and excluding margins that were de minimis, or zero.

· The new legislation requires Commerce to exclude from the calculation of the all others rate all BIA margins, as well as the de minimis or zero margins. .

NOTE: There is an exception to the general rule if all of the company specific rates are determined entirely on BIA or are zero or de minimis. In this case, the new law authorizes Commerce to use any reasonable method to calculate the all others rate.


E. Amendments Affecting Administrative Reviews


1. Time Limits for Completion of Administrative Reviews


Prior U.S. antidumping law did not contain time limits for the completion of administrative reviews. The new statute requires Commerce to complete an administrative review within one year after its initiation.

· Commerce may extend this period up to a total of 545 days.


2. New Shipper Administrative Reviews


Under U.S. antidumping law, antidumping duty orders apply on a country-wide basis and include merchandise from new shippers that were not involved in the original investigation and prior administrative reviews.

· The new legislation directs Commerce to initiate and conduct accelerated administrative reviews of new shippers, if requested to do so. The Department must ordinarily complete these reviews within 270 days unless the case is extraordinarily complicated.


3. 5 Year ("Sunset") Reviews


As you know, the antidumping law of the European Economic Community provides for the expiration or so-called "sunset" of an antidumping order after five years. Prior U.S. law did not contain any similar provision.

· Under the new legislation, Commerce and the ITC must conduct a review no later than five (5) years after the issuance of an antidumping duty order to determine whether revocation of the order, or termination of a suspended investigation, would be likely to lead to a continuation or recurrence of dumping and injury.

· The new legislation contains the specific factors that both agencies must examine in making these determinations.

· Commerce must ordinarily make its final sunset determination within 240 days after initiation of the review. If Commerce makes an affirmative determination, then the ITC will make its final sunset determination within 360 days after initiation of the review.


4. Consideration of Duty Absorption


Under the new statute, during an administrative review initiated either two or four years after the issuance of an antidumping order, Commerce will examine, if requested, whether antidumping duty absorption has taken place.

· Duty absorption typically occurs where the U.S. subsidiary of a foreign producer subject to an antidumping order is the importer of record and deposits and pays the antidumping duties. Under these circumstances, the U.S. subsidiary pays the antidumping duties and absorbs them as a cost of doing business in order to maintain market share, as opposed to passing the duties along to the customer through price increases.

· The duty absorption inquiry does not affect the calculation of margins in administrative reviews.

· However, if Commerce makes an affirmative finding of duty absorption, it will make it more difficult for an importer to obtain revocation or termination of the antidumping order. Additionally, Commerce will inform the ITC of its finding regarding duty absorption and the ITC must take into account these findings in determining whether injury is likely to continue or reoccur if an order were revoked.


F. Amendments Affecting ITC Injury Determinations


1. Consideration of the Dumping Margin


The ITC is now required under the new antidumping statute to consider the magnitude of the final dumping margins to determine the impact of the dumped imports on domestic producers of the relevant products.


2. Captive Production


Under the previous antidumping law, captive production of the relevant product was not differentiated from products which were sold in the merchant market. This resulted in the rather notorious negative injury findings in the recent antidumping investigations involving steel.

· Captive production refers to production of the domestic like product that is not sold in the merchant market, but is processed into a higher valued downstream product by the same producer. Selling in the merchant market refers to sales of the domestic like product to unrelated customers.

· Under the new law, if the captive production provision applies, the ITC will focus primarily upon the merchant market in analyzing the market share and financial performance of the domestic industry.

· The ITC is also to determine whether the imported goods accused of being dumped are to be captively consumed by the related party importer in the production of a downstream article. If such imports do not compete with sales of the domestic like product in the merchant market, the ITC will include these imports in the total import share of the industry's total production, but not in the import penetration ratio.


3. Negligible Imports


The new legislation requires the termination of investigations where the volume of dumped imports is negligible. Imports are negligible if they account for less than 3% of the volume of all such merchandise imported into the U.S. in the most recent twelve-month period prior to the filing of the petition.

· The exception to this rule is that imports will not be deemed negligible when countries, which individually account for less than 3% of total imports, collectively account for more than 7% percent of total imports. This applies only to those countries as to which investigations were simultaneously filed.


G. Amendments Affecting the Commerce
Department's Antidumping Determinations


1. Market Viability Tests


The new legislation changes the viability test used by Commerce for determining whether home market sales are viable for calculating normal value (foreign market value).

· Under prior antidumping law, Commerce considered home market sales viable for calculating normal value if the home market sales constituted at least 5% of the respondent's export sales to countries other than the United States.

· The new legislation provides that the home market will not be viable for calculating normal value if the exporter's home market sales constitute less than 5% of the volume of the exporter sales of the subject merchandise in the U.S.


2. Calculation of Dumping Margin


Under the previous law, it was the general practice of Commerce to compare an average of home market prices to individual U.S. sales of comparable merchandise.

· The new legislation requires the Department to determine dumping margins in an investigation based upon a comparison of a weighted average of normal values with a weighted average of export prices of comparable merchandise.

· The new antidumping law does, however, permit the calculation of dumping margins on a U.S. transaction specific basis where targeted dumping may be occurring, or where there are very few sales and the merchandise is identical or very similar or is custom made.

· It should be noted that in antidumping reviews, the methodology for calculation for antidumping margins will continue to compare average home market prices to individual U.S. transaction prices.


3. Definition of Sales Made at Below Cost of Production


Under the prior antidumping law, there was no definition of when Commerce should determine that sales below cost of production have occurred in substantial quantities over an extended period of time.

· The new legislation has provided definitions on this important issue. The new law defines the term "extended period of time" as being normally 1 year, but not less than 6 months.

· Below cost sales will be considered to be in substantial quantities when below cost sales constitute at least 20% of the volume sold in the home or third country market.

· The Commerce is also permitted to consider below cost sales to be in substantial quantities if the weighted average per unit price of the sales under consideration is less than the weighted average per unit cost of production for such sales.

· Significantly, the new law requires Commerce to use above cost sales if they exist, and if such sales are in the ordinary course of trade. Only where there are no above cost sales in the ordinary course of trade in the foreign market under consideration will Commerce be permitted to resort to constructed value as a substitute for the falling market value.


4. Startup Costs


Under the new amendments, Commerce may make an adjustment for startup costs by the foreign producer only where two conditions are met:
(1) A company is using new production facilities or producing a new product that requires substantial additional investment and,

(2) Production levels are limited by technical factors associated with the additional phase of commercial production.

· It should be noted that mere improvements to existing products or ongoing improvements to existing facilities will not qualify for a startup adjustment.

· Finally, startup will be considered to end at the time the level of commercial production characteristic of the merchandise, producer or industry concerned is achieved.


5. Anticircumvention


Under prior law and Commerce regulations, proceedings regarding circumvention of antidumping orders were encouraged and vigorously pursued.

· Under the new statute, anticircumvention is accorded significant importance and the Department is to consider certain factors in anticircumvention proceedings to determine whether the process of assembly or completion in the U.S. or a third country is minor or insignificant.

· The two mandatory factors Commerce must consider are whether:
(1) Minor or insignificant assembly or completion is occurring in the U.S. or a third country and

(2) The value of the parts imported into the U.S. or a third country from the country subject to the antidumping order is a significant proportion of the total value of the finished product.

· To determine whether the assembly activities are minor or insignificant, Commerce must consider:
(1) the level of investment in the U.S.;
(2) the level of research and development in the U.S.;
(3) the nature of the production process in the U.S;
(4) the extent of production facilities in the U.S.; and
(5) whether the value of the processing performed in the U.S. represents a small proportion of the value of the merchandise sold in the U.S.

· Finally, to determine whether to include parts or components within the scope of an antidumping order, Commerce must consider the following factors:

(1) the pattern of trade, including sourcing patterns;

(2) whether the manufacturer or exporter of the parts or components is affiliated with the person who assembles or completes the merchandise sold in the U.S.;

(3) whether imports into the U.S. or the parts or components produced in the foreign country have increased after the initiation of the antidumping investigation which resulted in the issuance of an antidumping order.

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