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Compendium of Antidumping and Countervailing Duty Laws in the Western Hemisphere
I. Legal Authority to Impose Antidumping and Countervailing Duties
Article VI of the GATT 1995, the WTO Antidumping Agreement ("AD Agreement") and the Agreement on Subsidies and Countervailing Measures ("SCM Agreement").
These Agreements apply to all WTO signatories.
The U.S. law pertaining to antidumping and countervailing duties is the Tariff Act of 1930, as amended by the Trade Agreements Act of 1979, the Trade and Tariff Act of 1984, the Omnibus Trade and Competitiveness Act of 1988, and the Uruguay Round Agreements Act of 1994 ("URAA").
The statute pertaining to antidumping duties may be found in volume 19 of the U.S. Code at 1673; the statute pertaining to countervailing duties may be found in volume 19 of the U.S. Code at 1671; the statute pertaining to judicial review may be found in volume 19 of the U.S. Code at 1516a and volume 28 of the U.S. Code at 1581 et seq.
The Commerce Department issued interim final regulations which were published in the Federal Register on May 11, 1995 (60 Fed. Reg. 25,130).
These regulations, which are currently in effect, are limited to certain new or revised procedures and obligations required by the Uruguay Round Agreements Act and which Commerce viewed as having an immediate impact on the orderly administration of the AD/CVD laws.
These regulations cover such issues as:
(1) new petition requirements concerning industry support;
(2) extension of the time limit to initiate an investigation if polling of the industry is necessary to determine standing;
(3) new deadlines and extensions for Commerce's preliminary and final AD and CVD determinations in investigations and reviews; and
(4) procedures for conducting "new shipper" reviews.
On February 16, 1996, the Commerce Department issued draft regulations on antidumping and countervailing duty proceedings and antidumping methodological issues to implement the Uruguay Round Agreements Act ("URAA").
The public will have an opportunity to comment on these draft regulations before they are issued in final form.
The Commerce Department is currently drafting substantive regulations on countervailing duty methodology. It is not know when these regulations are expected to be issued.
The ITC issued amended final regulation on July 22, 1996 (61 Fed. Reg. 37818). The amendments conform with the Commission's rules, on a permanent basis, to the requirements of the URAA.
Under the amended regulations, the ITC conducts a single, continuous antidumping or countervailing duty investigation, in contrast to the discrete preliminary and final investigations it previously conducted. The amended regulations also address issues such as:
(1) content of petitions;
(2) service of petitions;
(3) treatment of confidential information; and
(4) the ability of industrial users and consumer groups to participate in ITC proceedings.
On October 3, 1995, the ITC issued additional rules in proposed form and which are therefore not yet in effect, (60 Fed. Reg. 51,748). These proposed rules address issues such as:
(1) requiring petitioners to serve promptly confidential versions of petitions on representatives of interested parties;
(2) provisions specifying particular information that must be included in a petition (i.e., identification of products and complete listings of U.S. producers and importers of the products subject to the petition);
(3) provisions permitting public discussion of trends in confidential statistics;
(4) deadlines for filing applications for access to information under Administrative Protective Order ("APO") for additional applicants;
(5) provisions that specifically permit industrial users and consumer groups to submit information on material injury in AD/CVD proceedings;
(6) provisions specifying investigative activity the ITC will conduct between the time of its preliminary determination and the Commerce preliminary determination; and (7) provisions concerning page limits on submissions.
The Import Administration of the Department of Commerce maintains an Antidumping Manual, which describes the Department's procedures for conducting investigations and its methodologies for calculating dumping margins.
This manual is, in large part, out of date because of changes in the law resulting from the URAA.
II. Authorities Responsible for Conducting Investigations
The U.S. system is a bifurcated system, whereby two distinct agencies play different roles.
The U.S. Department of Commerce conducts investigations to determine whether foreign producers of a like product are receiving countervailable subsidies or are selling in the U.S. market at less than fair value ("dumping").
The U.S. International Trade Commission ("ITC") concurrently investigates whether there is material injury or threat of material injury to a domestic industry by reason of dumped or subsidized imports.
An affirmative finding by both agencies is required before an antidumping or countervailing duty order may be imposed.
The U.S. International Trade Commission ("ITC") is an independent, federal agency responsible for conducting investigations to determine whether the domestic industry is being materially injured, or threatened with material injury, by reason of dumped or subsidized imports.
The ITC is composed of six Commissioners who are appointed by the President with the advice and consent of the Senate.
No more than three of the Commissioners may be members of the same political party. The Commissioners serve overlapping terms of nine years each, with a new term beginning every 18 months. A Chairman and Vice Chairman serving two year terms are appointed by the President from among the current Commissioners. The Chairman and Vice Chairman must be from different political parties, and the Chairman cannot be from the same political party as the Chairman of the preceding term.
B. Antidumping and Countervailing Duties
The Import Administration within the International Trade Administration of the U.S. Department of Commerce is responsible for determining whether alleged countervailable subsidies or dumping of imports is occurring and, if so, the amount of the antidumping or countervailing duty to be imposed.
The Commerce Department's Import Administration is headed by an Assistant Secretary appointed by the President and confirmed by the U.S. Senate.
A. Like Product
The U.S. statute defines the term "domestic like product" as a product which is like or, in the absence of like, most similar in characteristics and uses with the merchandise subject to investigation.
B. Domestic Producers
The U.S. statute defines the domestic industry as the producers as a whole of the like product, or those producers whose collective output constitutes a major proportion of the total domestic production of the subject merchandise.
In order for Commerce to initiate an investigation, the petition must be filed by or on behalf of the domestic industry.
Under U.S. law, either the Commerce Department or the ITC may (but need not) exclude a domestic producer of a like product from the industry if the producer is itself related to exporters or importers, or where the producer is itself an importer of the products subject to investigation.
Under U.S. law, the Commerce Department is responsible for determining whether a petition is filed by or on behalf of the U.S. industry producing a like product.
The U.S. statute reflects the standards set forth in the WTO Agreements.
That is, a petitioner is determined to have standing if:
(1) the domestic producers or workers who support the petition account for at least 25 percent of the total domestic production of the like product; and
(2) the domestic producers or workers who support the petition account for more than 50 percent of domestic production of the like product produced by that portion of the industry expressing support for or opposition to the petition.
Commerce presumes the requisite industry support exists if a petition provides sufficient evidence that domestic producers or workers accounting for more than 50 percent of total domestic production of the like product expressly support the petition.
U.S. law expressly recognizes that industry support for a petition may be expressed by either management or workers.
Commerce considers labor support or opposition to a petition as being equal to the production of the like product of the firms in which the workers are employed.
If workers are represented by a union, Commerce counts the production of those firms whose workers are represented by the union as being for or against the petition in accordance with the workers' position.
If the management of a firm expresses a position in opposition to the views of the workers in that firm, Commerce discounts the production of that firm altogether in its determination.
The U.S. statute contains a special rule for determining industry support if the petition is filed on behalf of a regional industry.
In such cases, Commerce applies the 50 percent and 25 percent requirements on the basis of the domestic production in the region.
Thus, the petitioner is only required to show that a majority of domestic production in the relevant region, as opposed to the entire United States, support the petition.
Interested parties may submit comments on the issue of industry support.
However, once Commerce makes a determination with respect to initiating an investigation, the determination regarding industry support will not be reconsidered.
Only if the requisite support is not established in the petition will Commerce poll the industry or rely on other information to determine whether the domestic industry supports the petition.
If there is a large number of producers, the statute authorizes Commerce to use statistically valid samples to determine whether the required level of support exists.
If the Commerce Department has to poll the industry to determine standing, an additional 20 days (for a total of 40 days from the date the petition is filed) is permitted for determining whether there is a sufficient basis for initiating the investigation.
E. Normal Value
The normal value is the reference against which U.S. sales prices of imported merchandise are compared to determine whether dumping is occurring.
Normal value is based upon one of three methods:
1) if an adequate volume of the foreign like product is sold in the exporting country for home consumption, then normal value is based on the exporter's home market prices;
2) if home market sales do not exist or are too few to provide an adequate comparison, then normal value is the price at which the foreign like product is sold for exportation to third countries; or
3) if neither home market sales nor third country sales form an adequate basis of comparison, then normal value is based on the constructed value of the imported merchandise.
Constructed value consists of the cost of production, plus the actual amount for profit and for selling, general, and administrative expenses.
In certain circumstances, home market or third country sales at prices below the cost of production may be disregarded in the calculation of normal value.
Commerce will initiate a cost of production ("COP") investigation if it has "reasonable grounds to believe or suspect" that below-cost sales have occurred.
Commerce will exclude below-cost sales from the calculation of normal value if such sales occurred
(1) in substantial quantities, which is defined as 20 percent or more of the sales of a discrete product or model;
(2) within an extended period of time; and
(3) at prices which do not permit the recovery of all costs within the period of investigation.
The U.S. statute limits the period for cost recovery to the period of investigation or review.
The U.S. statute states that if prices which are below the per unit cost of production at the time of sale are above the weighted average per unit cost of production for the period of investigation or review, such prices will be considered to provide for recovery of all costs within a reasonable period of time.
U.S. law permits, but does not require, the Commerce Department to base normal value on sales to affiliated parties in the home or third country markets.
Commerce ignores sales to affiliated parties that are not shown to be at arm's length prices.
The statute also provides for Commerce to calculate normal value, to the extent practicable, on the basis of home market (or third country, if applicable) sales at the same level of trade as the U.S. comparison sale. U.S. law prohibits Commerce from calculating normal value based on home market sales which were made to establish a "fictitious market".
That is, Commerce will not base normal value on pretended sales or offers intended to establish a fictitious market.
Adjustments: The following elements are deducted from normal value:
(1) the cost of packing for shipment in the exporting country or to a third country;
(2) if included in the starting price, transportation, insurance and other expenses incurred in bringing the merchandise from the original place of shipment in the exporting country (e.g., the factory) to the place of delivery in the exporting country or third country (e.g., customer's warehouse);
(3) the amount of any indirect taxes imposed on the foreign like product or components thereof that have been rebated or not collected, but only to the extent that such taxes are added to or included in the price of the merchandise sold in the exporting country or to a third country. In addition, normal value is increased to include U.S. packing costs, which permits a comparison of prices in the home or third country market on the basis of a packed, ready for shipment price to the U.S. Commerce also adjusts normal value to account for other differences between the export price (or the constructed export price) and normal value that are either entirely or partly due to differences in quantities, physical characteristics of the merchandise (limited to differences in the variable costs of manufacture), or other differences in the circumstances of sale.
Under the new statute, Commerce will only deduct indirect selling expenses from normal value when a claimed level of trade adjustment cannot otherwise be made.
If Commerce is unable to compare sales in the normal value market with U.S. sales at the same level of trade, a level of trade adjustment may be made to normal value.
This adjustment may either increase or decrease normal value. Commerce will make this adjustment only when:
(1) there is a difference in the level of trade (as demonstrated by a difference between the actual functions performed by the seller at different levels of trade in the two markets), and
(2) the difference is shown to affect price comparability.
F. Calculation of Cost of Production
Commerce normally will calculate costs on the basis of records kept by the exporter or producer of the merchandise, provided such records are kept in accordance with generally accepted accounting principles of the exporting country and reasonably reflect the costs associated with the production and sale of the merchandise. Commerce will consider all available evidence submitted by the exporter on a timely basis regarding the proper allocation of costs.
The exporter will be expected to demonstrate that it has historically utilized such allocations, particularly with regard to the establishment of appropriate amortization and depreciation periods and allowances for capital expenditures and other development costs.
Commerce will adjust costs appropriately for those non-recurring costs that benefit current or future production, or both.
In addition, Commerce will adjust costs appropriately for circumstances in which costs incurred during the time period covered by the investigation or review are affected by startup operations.
As a general rule, Commerce will base amounts for profit and for selling, general, and administrative expenses on the actual amounts incurred and realized in connection with sales in the ordinary course of trade.
If actual data are not available, U.S. law establishes alternative methods for calculating profit and selling, general, and administrative expenses:
(1) actual amounts incurred or realized by the same producer on home market sales of the same producer on home market sales of the same general category of products;
(2) the weighted-average of actual amounts incurred or realized by other investigated companies on home market products in the ordinary course of trade; or
(3) any other reasonable method, provided that the amount for profit does not exceed the profit normally realized by other companies on home market sales of the same general category of products.
G. Export Price
The "export price" is the price at which the subject merchandise is first sold to a U.S. purchaser unrelated to the foreign manufacturer prior to the date of importation into the U.S.
When the foreign exporter and the U.S. purchaser are affiliated, a "constructed export price" is generally used.
The "constructed export price" is the price at which merchandise is sold in the U.S. either before or after importation, by the producer or exporter to the first unrelated purchaser.
H. Export Price - Adjustments
The price of merchandise sold in the U.S. market is referred to as either "export price" or "constructed export price" depending on the nature of the sales transaction. (See the discussion under "Export Price", above).
Different adjustments are made to the U.S. price depending on whether the sale is an export price transaction or a constructed export price transaction.
Commerce will calculate the export price and the constructed export price by adding the following elements to the starting price (i.e., the price to the first unaffiliated purchaser):
(1) packing costs for shipment to the U.S., if not included in the price;
(2) import duties that are rebated (duty drawback) or not collected due to the exportation of the merchandise; and
(3) any countervailing duties attributable to export subsidies.
The following elements are deducted from the export price:
(1) transportation and other expenses, including warehousing expenses, incurred in bringing the merchandise from the original place of shipment in the exporting country (e.g., the foreign producer's factory) to the place of delivery in the United States; and
(2) if included in the price, export taxes or other charges imposed by the exporting country.
In addition, the constructed export price is reduced by the following additional elements associated with economic activities occurring in the United States:
(1) any commissions paid;
(2) any direct selling expenses incurred in the U.S.;
(3) any indirect selling expenses associated with economic activity in the United States;
(4) any costs and expenses resulting from further manufacturing activities in the U.S.; and
(5) an amount for profit allocable to the selling, distribution and further manufacturing expenses incurred in the U.S.
U.S. law contains a special rule for determining the constructed export price when the merchandise undergoes extensive further manufacturing in the U.S. prior to sale to the first unaffiliated party.
If the value-added costs after importation are likely to "exceed substantially" the value of the imported product, then Commerce may rely on an alternative methodology for determining the export price, rather than calculating and deducting the value-added costs from the price of the further manufactured good.
While the statute does not define "exceed substantially," the Statement of Administrative Action indicates that the term means that the value added in the U.S. is estimated to be more than half of the price of the finished product sold in the U.S.
The alternative methodologies for determining the export price in the case of extensive further manufacturing in the U.S. are:
(1) the price of identical products sold by the exporter or producer to an unaffiliated party;
(2) the price of similar products sold by the exporter or producer to an unaffiliated party; or any other reasonable method, including the transfer price, if the Commerce Department determines it is appropriate.
The U.S. statute defines material injury as harm which is not inconsequential, immaterial, or unimportant.
In making a material injury determination, the ITC evaluates the following factors:
(1) the volume of imports of the subject merchandise;
(2) the effect of imports on U.S. prices of the like product; and
(3) the impact of such imports on the affected domestic industry.
In evaluating the volume of imports, the ITC considers whether the volume of imports, or any increase in that volume, either in absolute terms or relative to production or consumption in the U.S., is significant.
In evaluating the effect of imports on prices, the ITC considers whether there has been significant price underselling by the imported merchandise as compared with the price of domestic like products in the U.S., and whether the effect of imports of such merchandise otherwise significantly depresses prices or prevents price increases which otherwise would have occurred.
In examining the impact on the U.S. industry, the ITC is required to evaluate all relevant economic factors which have a bearing on the state of the U.S. industry, including:
(1) actual and potential decline in output, sales, market share, profits, productivity, return on investments, and capacity utilization;
(2) factors affecting domestic prices;
(3) actual and potential negative effects on cash flow, inventories, employment, wages, growth, ability to raise capital, and investment;
(4) actual and potential negative effects on the existing development and production efforts of the domestic industry, including efforts to develop a derivative or more advanced version of the domestic like product; and in AD proceedings
(5) the magnitude of the dumping margin.
U.S. law includes a special provision, referred to as the "captive production" provision, to assess import penetration and financial performance in situations where
(1) U.S. producers sell a significant volume of their production of the domestic like product to U.S. customers (i.e., the merchant market) and internally transfer a significant volume of their production of that same like product for further internal processing into a distinct downstream product (i.e., captive production)
(2) the captively consumed products does not enter the merchant market for the domestic like product;
(3) the domestic like product is the predominant material input in the downstream article; and
(4) the production of the domestic like product sold in the merchant market is not generally used in the production of the downstream article.
If the ITC determines that the captive production provision applies, the ITC will focus primarily on the merchant market in determining the market share and in analyzing the financial performance of the U.S. industry.
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