Antidumping Laws and the U.S. Economy

Greg Mastel

• Publisher: Routledge
• Year: 2016
• eBook ISBN: 9781315292519
• Topic: Business
• Subtopic: Business General
• Index: Business

This volume reviews the goals, operation, and history of American antidumping laws coupled with a strategy for using those laws to promote U.S. trade policy and economic objectives in the post-Uruguay Round GATT talks.

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Antidumping Laws: Operation and History

Antidumping laws now have a history that stretches back nearly a century. The first step in any rational discussion of antidumping laws must begin with a careful look at that history. This chapter begins that process by analyzing three key questions: (1) How do antidumping laws function? (2) Why were antidumping laws created? (3) How do these laws relate to the international trading system?

The Operation of Antidumping Laws

The World Trade Organization (WTO) and modem antidumping laws require national authorities to make two separate findings before antidumping duties can be imposed on imported products. First, national authorities must determine that dumping is taking place or that imports are being sold at less than fair value (LTFV). Second, national authorities must also determine that imports are causing “material injury” to the domestic industry that produces a product similar to the imported product in question.

Less-than-fair-value Determinations

For imports to be sold at LTFV, one of three situations must be demonstrated to exist: (1) imports are priced at less than their price in the home market, (2) imports are priced at less than their price in a third market, or (3) if the above cannot be determined, imports are priced at less than their cost of production. In the United States, the U.S. Commerce Department’s International Trade Administration (ITA) is charged with making LTFV determinations.¹

In recent years, U.S. antidumping cases increasingly have been cases in which imported goods are found to have been sold at less than their cost of production; these are often referred to as “cost” cases. In some instances this is due to a lack of a significant domestic market for a product. Most of the increases, however, are due to new antidumping complaints involving non-market economies that frequently have no reliable domestic price. As a result, an increasing percentage of LTFV determinations are made on a cost basis instead of a price basis.

There are a number of controversies concerning “price” cases, mostly focusing upon whether an accurate apples-to-apples comparison of export sales and home market sales is being made. For example, is it appropriate to compare a single import sale (aka export sales price) with an average of home market prices, and what adjustments can be made to the home market price and the export sales price to exclude certain sales thought not to be representative for one reason or another (prices on special sales, etc.), distinguish wholesale from retail, and assess sales between related parties (i.e., foreign subsidiaries)? These issues are quite complex, and the definitive “right” answer on a specific issue can be difficult to determine. The most recent round of global trade negotiations, which is discussed later in this chapter, set credible standards on most of these difficult issues, and these standards are likely to form the basis of a consensus solution that will last for a number of years.

Cost cases, however, are substantially more controversial than price cases. The most potentially telling criticism leveled at cost cases—that selling below the cost of production is a rational business strategy—is addressed in great detail in Chapter 5. Two other critiques deserve a brief discussion. First, the U.S. methodology in cost cases is criticized for including arbitrary cost factors, such as a standard factor for profit. Of course, determinations on issues such as this are inherently arbitrary, but the determinations made by U.S. authorities have a rational basis drawn from actual experiences and are no more arbitrary than any other profit factor that could be chosen. Further, not including any factor for profit, as some critics have suggested, is certainly not in keeping with normal business practice and thus is far more unrealistic than including a reasonable factor for profit.

Critics have also focused upon the U.S. practice of using surrogate-market costs to determine the true cost in certain countries in which a true market does not exist and thus true market costs are elusive. For instance, in many cases this involves relying on costs in India as a surrogate for costs in China. Not surprisingly, a choice of a surrogate will always be a debatable choice, and the costs in the surrogate are not likely to be precisely the same as the costs in the country accused of dumping. Surrogates are used, however, only in those cases in which the alleged dumping country does not have an established market that would allow costs to be determined. Further, though they are only a rough approximation, as long as the surrogate chosen is reasonably similar to the alleged dumper, using a surrogate provides a reasonably close estimate of cost,² and this approach is the only real alternative to having U.S. authorities simply throw up their hands and allow nonmarket economies to dump.³ (European and Australian officials employ similar procedures; although both are seeking to refine their procedures.)

The evolution of current nonmarket economy dumping procedures, the controversy surrounding them, and their likely future application are considered in detail in Chapters 3 and 4.

Another sometimes controversial practice of the IT A in developing cost and price information is that of using the best information available (BIA) to set cost figures. If the respondent company does not participate in the investigation, this often means that the cost data will be drawn from that presented by the petitioner. A number of foreign commentators have called this process unfair. Critics, however, seem to ignore the reality that there is no practical alternative, since if the respondent refuses to participate, there is no alternative source of information.

The same commentators often complain that it is costly and difficult for foreign respondents to provide this information—the business confidentiality of which is protected by U.S. law. It is certainly true that gathering such data is a burden, but it does not seem a greater burden than that required to comply with various regulations or to respond to discovery proceedings on other matters, such as discrimination or environmental litigation. Most important, however, is that there is simply no alternative; critics would hardly be more satisfied if the ITA simply made up data, and the knowledge that BIA will be used if they do not cooperate is a powerful incentive for respondents to fully participate in proceedings.

Material-Injury Determinations

From the outset, U.S. antidumping laws have incorporated the concept that for antidumping duties to be applied, it must be demonstrated not only that imports are being sold at LTFV but also that those dumped imports are causing injury or threaten to cause injury to the domestic industry that is in competition with the dumped imports. As a result, an antidumping law is always, at best, a partial remedy; it offsets only future injury after injury has already taken place. The theory behind this linkage is simple: If the dumped imports are not causing injury, there is no need to incur the administrative expense or the potential trade costs of imposing duties. When antidumping laws were endorsed by the world trading system, the notion that both dumping and injury must be present before duties can be imposed was incorporated.⁴

In the United States, the material-injury determination is made by the U.S. International Trade Commission (ITC). The ITC is an unusual administrative body. It is an independent agency led by three Republican and three Democratic commissioners. Every two years, the chairmanship of the ITC rotates between the Republicans and Democrats. ITC commissioners are appointed by the president and confirmed by the U.S. Senate for a nine-year term. In addition to making material-injury determinations in antidumping and countervailing-duty cases, the ITC also performs various analytical tasks, such as assessing the potential impact of trade agreements.

The definition of what constitutes material injury is a matter of some debate. The statute itself is not of much help. It defines material injury as “harm that is not inconsequential, immaterial or unimportant.”⁵ From the outset, under both U.S. law and the world trading system, material injury included not only actual material injury but also the threat of material injury in the imminent future; threat was judged by examining factors such as the size of the dumping margin, economic trends in the industry, and the past behavior of the alleged dumper(s).⁶

Also, material injury was understood to be a lesser test than the serious-injury test, which was required for relief under the safeguards provisions of the GATT, and now the WTO, as well as under the U.S. Section 201 statute. A number of factors, including import market share, the rate at which imports are increasing, the impact of imports on domestic prices, the financial strength of the domestic industry, and the level of dumping found by the Commerce Department, are all considered in making material-injury determinations. The result is that there are no hard-and-fast rules as to when injury occurs and when it does not. Beyond the established minimum levels of imports in U.S. law and the WTO guidelines, there is no set level at which injury is certainly occurring or certainly not occurring.⁷

In practice, each ITC commissioner has his or her own personal standard for determining injury. One personal standard often is not the same as that of another commissioner and some commissioners vote that injury is occurring far more often than others. As the makeup of the commission shifts, the effective standard for injury shifts. Commissioners’ discretion does have some limits, however, since decisions of the ITC can be reviewed by U.S. courts and dispute settlement panels under both the North American Free Trade Agreement (NAFTA) and the WTO.

Further, if the U.S. Congress feels that U.S. laws are not being properly implemented, they can be changed, and if necessary the U.S. ITC can be changed (or not funded) by act of Congress. Various members of Congress have even suggested the possibility of eliminating the ITC and allowing the Commerce Department to make both the LTFV determination and the injury determination; in many other countries, including those of the European Union, a single administering authority makes both determinations. In short, the discretion of ITC commissioners in making injury determinations is wide but not unlimited. Inevitably, however, administering authorities will have considerable discretion in applying particular sets of facts to a general standard set by the WTO or U.S. law. The alternative of trying to specify in agreements or statutes all possible situations in which material injury may occur is unlikely to be preferable or even possible.

The Timetable for U.S. Laws

In the United States, the U.S. Commerce Department and the U.S. ITC function simultaneously in making LTFV and injury determinations. After a case is filed by a domestic industry, the Department of Commerce has 20 days to determine whether the petition meets the basic requirements for an antidumping petition. (It should be noted that, if it chooses, the Commerce Department can self-initiate an antidumping investigation without receiving a petition, but this power is rarely used.) If so, four separate administrative determinations must be made before duties are finally put in place. Within 45 days after the petition is filed, the U.S. ITC makes its preliminary determination of injury (see Table 1.1). At this point, the ITC is generally less rigorous in imposing the injury test, on the theory that this is only a preliminary determination and full rigor will be applied in the final determination, when more complete information is available. Nonetheless, as is noted in the next chapter, a number of petitions do fail this initial injury test and are terminated.

The next step is the Commerce Department’s preliminary LTFV finding, which must occur within 115 days of the preliminary injury finding or within 160 days after the petition was filed. A negative finding (a finding of no duty or a duty below the de minimis level of 2 percent) does not, however, terminate the case at this point. After the preliminary determination, the Commerce Department takes further information and comment on its preliminary finding and completes its final LTFV injury determination, which comes no more than 75 days after the preliminary LTFV determination or 235 days after the petition was filed. If the final LTFV determination is negative (zero duty or a duty less than the de minimis level), the case is terminated. If the finding is affirmative (a duty above de minimis) at the preliminary level, the importer is subject to a “suspension of liquidation,” which normally requires the importer to post a bond or otherwise guarantee payment of the duty from this point on, pending completion of the litigation. After a final LTFV affirmative, the suspension of liquidation is continued pending the final ITC injury determination.⁸

The ITC’s final determination is made within 45 days of the C...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Dedications
• Table of Contents
• List of Tables and Charts
• Acknowledgments
• Introduction: Antidumping and the World Economy
• 1. Antidumping Laws: Operation and History
• 2. The Record of U.S. Antidumping Laws
• 3. The Roots of Dumping
• 4. The Economic Case for Antidumping Laws
• 5. Responding to Critics
• 6. Current Issues
• 7. Conclusion
• Appendix A: Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994
• Appendix B: Foreign Antidumping Laws
• Bibliography
• Index
• About the Author