Anti-dumping

Anti-dumping Actions by the EU and the US

The US - Important Points to Note¹

General

• Basic Strategies

  Manufacturers and exporters should keep up with information on import trends and grumblings in the US industry regarding products important to your company. Always maintain good records in computerized formats, which are critical for a successful defense. You should also analyze the prices at which your exports are sold in the US, as compared to their normal value. By doing so, you will be able to develop estimated dumping margins on imported goods, to pinpoint problematic products and customers, and to revise selling practice accordingly if necessary.

  Time is of essence in any AD investigations, and traders concerned should respond actively and promptly to requests for information to enable a fair and comprehensive investigation. Parties may request extension of deadlines for replies but untimely filed or unsolicited information generally will not be considered or retained in the official record of the proceeding.

  The DOC selects voluntary respondents based on procedures set out in its memorandum identifying the companies it has selected for review.  An exporter should announce its interest in voluntary respondent status by stating its interest in response to the DOC memorandum and by timely filing the requested information (questionnaires) as if it were a mandatory respondent.

• Period of Investigation

  In an AD investigation, the DOC normally examines the merchandise sold during the four most recently completed fiscal quarters as of the month preceding the month in which the petition is filed. For cases involving non-market economies (NMEs), the period of investigation is the two most recently completed fiscal quarters. However, the DOC may examine merchandise sold during any additional or alternate period that the DOC concludes appropriate.

• Questionnaires

  Questionnaires are important vehicles through which the agencies collect information for their determinations.

  ITC

  The ITC sends questionnaires in both the preliminary and final phases of its investigation. At the preliminary phase, questionnaires are sent to US producers, US importers and producers from the subject economy (foreign producers) of the subject merchandise to solicit information required by the ITC in order to make its determination. Foreign producer questionnaires are composed of three parts. The first two parts consist of general questions about the company's operations in the subject economy and in the US. The third part requests data on the company's capacity, production, home-market shipments, exports to the US and other markets, and inventories of the subject merchandise. Although it is not a mandatory requirement for foreign producers to respond to questionnaires, failure to do so may result in an adverse inference by the ITC. The final phase questionnaires to collect information necessary for the final determination are sent to all US and foreign producers, and to US importers that reported production or imports of the subject merchandise in the preliminary phase of the investigation, as well as to any additional companies that the ITC believes may be producing or importing. The basic structure of these questionnaires is essentially the same as that of the questionnaires used in the preliminary phase, with modifications as appropriate. Another questionnaire asking for information on purchases and on market conditions is sent to US purchasers in the final phase.

  A sample of the generic ITC questionnaires can be found at the ITC's website (http://www.usitc.gov/trade_remedy/question.htm).

  DOC

  The DOC distributes two questionnaires in its preliminary phase of investigation. One is the Quantity & Value questionnaire to identify those companies that exported the subject merchandise during the period of investigation and to determine the quantity and value of their sales in order to select the largest ones for responses to its AD questionnaires in the investigation, i.e. mandatory respondents. Another is the AD questionnaire which is then sent to mandatory foreign producer/exporter respondents. The AD questionnaire consists of five sections:

  Section A:	Organization, Accounting Practices, Markets and Merchandise
  Section B:	Sales in the Home Market or to a Third Country
  Section C:	Sales to the US
  Section D:	Cost of Production and Constructed Value
  Section E:	Cost of Further Manufacture or Assembly Performed in the US

  A sample of the AD questionnaires is available at the DOC's website (http://enforcement.trade.gov/questionnaires/questionnaires-ad.html). (Note: A different AD questionnaire is adopted for NMEs. Please refer to the section on "AD Proceedings Targeted at the Mainland of China".)

  Should a need for further information arise anytime in the investigation process, the DOC issues supplemental questionnaires to the mandatory respondents.

• Co-operation/Non-co-operation

  If the DOC finds that an interested party fails to cooperate by not acting to the best of its ability to comply with a request for information, the DOC may use an inference that is adverse to the interests of that party in selecting from among the "facts otherwise available", such as the petition, secondary information, determinations in previous investigations or reviews, or other records. This would likely lead to the party being assigned the highest AD duty rate resulted in the investigation.

• Respondent Selection

  Even if there are multiple foreign producers/exporters, the DOC normally only requests responses from mandatory respondents. However, voluntary respondents are also accepted if these responses are timely filed and the number of respondents is not so large as to make the analysis of the voluntary responses unduly burdensome for the DOC. These companies are furnished with an AD questionnaire and are accorded the same treatment as all mandatory respondents in the investigations. Having collected and reviewed the information received, the DOC determines an estimated weighted average dumping margin for each respondent individually investigated. For all others not individually investigated, the DOC determines an estimated all-other rate, which shall be an amount equal to the weighted average dumping margins established for respondents individually investigated, excluding any zero and de minimis margins, and any margins determined entirely on the basis of the facts available.

The US Agencies' Considerations in AD Investigations

• The ITC's Injury Determination

  ITC must define the domestic industry at issue by determining the "like product". A "like product" is a product which is like, or in the absence of like, most similar in characteristics and uses with the imported articles. The determination of "like product" is a factual, subjective determination based upon factors such as physical characteristics, uses, interchangeability, channels of distribution, customer and producer perceptions, manufacturing facilities and employees, production processes and price.

  In deciding whether the subject imports have caused material injury to the US industry, the ITC considers:

  • the volume of imports, including any increase in volume in absolute terms or relative to production or consumption in the US;
  • the effect of the imports on prices in the US, including "underselling" and price "depression" or "suppression"; and
  • the impact of the imports on the domestic industry, including factors like output, sales, market share, profits, productivity, return on investment, employment, inventories, capacity utilization, research and development, and investment.

  In deciding whether the subject imports threaten to cause material injury to the US industry, the ITC considers factors such as:

  • unused or planned new capacity in the foreign country under investigation;
  • the rate of increase in the volume or market penetration of the imports;
  • the level of inventories and potential for "product shifting" in the foreign country; and
  • whether the imports are likely to have a "depressing" or "suppressing" effect on prices in the US.

  The ITC must find "causation" between dumping and injury, i.e., the material injury or threat is "by reason of" the dumped imports. The ITC considers all relevant economic factors within the context of the business cycle of the industry involved. However, the ITC may not "weigh" causes. If the dumped imports are one of the causes of material injury or threat, the standard is satisfied, even if other causes are present. However, the ITC may not attribute to the dumped imports injury that is caused by other factors (such as an economic downturn, competition from other types of merchandise, or imports from countries not under investigation).

  In addition, the ITC's injury decision is usually subject to "cumulation". In other words, if the AD petition is filed against imports from multiple countries, the impact of imports from all those countries on the US industry are cumulated if there is a "reasonable overlap of competition". This rule results in a higher likelihood of an affirmative determination, and encourages petitions against large numbers of countries. It is possible for individual countries to be "de-cumulated," but only under limited conditions, such as when its import share is negligible.

• The DOC's Calculation of Dumping Margins

  The DOC determines whether dumping exists and the margins of dumping. "Dumping" is also described as the sale of the subject merchandise at "less than fair value", which is measured by comparing the US sales price (the export price) to the normal value of the merchandise. Normal value generally refers to the price at which the subject merchandise is sold in the home market.

  In some situations the DOC will not use home market sales prices as the basis for normal value:

  • if the home market is not large enough (or "viable"), the DOC may use the price of sales by the same foreign producer/exporter to a third country;
  • if home market sales are at prices below the cost of production, the DOC will use the "constructed value" (i.e., cost of production plus selling, general and administrative expenses and profit); or
  • if there are no contemporaneous sales of comparable merchandise in the home market, the DOC will use constructed value.

  The DOC subtracts selling expenses, movement charges, discounts, rebates, etc. from the invoice prices in the US to determine the adjusted export price (roughly an ex-factory price). The DOC makes roughly the same adjustments from the invoice prices in the home (or third country) market to determine the adjusted normal value.

AD Proceedings Targeted at the Mainland of China

For NME countries, such as Mainland China, a different method is used to calculate normal value. (Note: China agreed to be treated as an NME by the US for AD purposes for 15 years until 11 December 2016 in its agreement with the US for accession to the WTO.  However, it should not be presumed that the US will automatically confer market-economy status on products of Mainland China after that time. The US interpretation of this provision of China's WTO accession protocol remains to be seen.)

• Calculation of Dumping Margins

  Home market prices of NMEs are considered subject to government manipulation and therefore unreliable. A "surrogate" normal value is calculated on the basis of the "factors of production" needed to produce a unit of the subject merchandise (labor, materials, factory overhead). These factors of production are then valued using their per-unit costs in a "surrogate" market economy country that is at a comparable level of economic development as the NME. Common surrogate countries for China have been India and Indonesia.

  General and administrative expenses, financing costs, and profit are added, valued on the basis of these items in the financial statements of producers of the same or similar merchandise in the surrogate country.

  That said, if inputs, subassemblies, or intermediate goods used to produce subject merchandise are sourced from a market economy, the DOC may value them based on the market economy price cost of those inputs if a certain minimum value for those inputs is met.  Specifically, if "substantially all" of a particular input is sourced from a market economy, the market economy purchase price will be used to calculate the normal value of that input. "Substantially all" is defined by the DOC's regulations as at least 85 percent. If less than 85 percent of the input is sourced in a market economy, the Department will weight average the actual price paid for the market economy portion and the surrogate value for the NME portion by their respective quantities.

  After calculating the adjusted export price and normal value, the two figures are compared to calculate the dumping margin. The DOC performs this calculation on a sale-specific basis, but it calculates a single weighted-average margin for each respondent company, based on all of its US sales.

All exporters in the NME then are assigned this single country-wide AD dumping rate, which tends to be very high. One way for exporters to protect themselves from the high AD rate is to apply for a separate rate.

• Separate Rate Tests

  Exporters in NME cases must pass a "separate rate" test to receive their own, individual dumping margins, i.e. they must prove that their export activities, on both de jure and de facto basis, are not subject to government control. They must make an application for separate rates to the DOC.

  Traders should note that the DOC announced via an FR notice dated 5 April 2005 that it was instituting two modifications in its NME practice in AD investigations: one on separate rates and one on combination rates. The new practices are effective in all NME AD investigations initiated on or after the date of publication of the FR notice. For separate rates, in lieu of the previous arrangement whereby companies are required to fill out the section A questionnaire, non-investigated companies which request a separate rate need to make an application. The application has been streamlined to focus on issues of relevance to separate rate eligibility. Companies are required to certify their eligibility for a separate rate together with the relevant supporting documents. Under the modified combination-rate practice, an exporter-producer combination rate is assigned and only applies to the merchandise produced by the suppliers that supplied subject merchandise to this exporter for export to the US during the period of investigation. This practice applies both to mandatory respondents receiving an individually calculated separate rate as well as the pool of non-investigated firms receiving the weighted-average of the individually calculated rates. A detailed explanation on these changes in practice can be found in Policy Bulletin 05.1 issued by the DOC (https://enforcement.trade.gov/policy/bull05-1.pdf). The new AD questionnaires for NMEs can be found at the DOC's website :

  Samples : http://enforcement.trade.gov/questionnaires/questionnaires-ad.html
  Specific cases : http://enforcement.trade.gov/nme/nme-sep-rate.html

  The DOC will determine, after reviewing the requesting companies' submissions, whether separate treatment is warranted. If these companies fulfill the above requirements and are not selected as mandatory respondents, they will be assigned a weighted-average of the individually calculated rates, excluding any rates that were zero, de minimis, or based entirely on facts available.

• NME Cases Involving Hong Kong Traders

  As Producers/Exporters

  While China is an NME, Hong Kong is recognized as a separate customs territory and thus enjoys a market-economy status. Hong Kong-owned producers/exporters of goods originated from Mainland China are treated as market-economy companies and thus entitled to company-specific rate though for subject merchandise produced in Mainland China, the separate rate will be based by DOC on NME procedures, i.e., based on surrogate values,even if it is exported to the US through Hong Kong.  As a prerequisite for a separate rate entitlement, an application must be made to DOC before the stated deadlines.  Although the DOC's practice is not to conduct a full-blown separate-rate analysis for market-economy companies, it still needs to analyze the company's application to determine their eligibility for separate rates.  As NME separate rates expressly identify producer-exporter combinations, subject merchandise exported by Hong Kong exporters may qualify for separate rates if the Chinese producers filed separate rate applications that identified the Hong Kong entities as exporters of the producers' merchandise.

  As Resellers

  In NME cases involving third-country resellers, under current practice, the DOC applies a knowledge test to determine the applicable rate. At issue is whether the third country reseller may claim as its own the specific rate applicable to the NME producer-exporter combination rather than the NME-wide rate.  Under current US policy, the answer depends on whether, during the course of an administrative review, the reviewed exporter identifies the entries covered by those reseller shipments.  If yes, the exporter’s rate applies.  If not, the NME-wide rate will apply.

Note:

1. While every effort is made to ensure the accuracy of the above information, the Department cannot guarantee this to be so and will not be held liable for any reliance placed on the same. Please refer to the US Tariff Act of 1930 (https://enforcement.trade.gov/regs/title7.pdf), 19 CFR Ch. II Part 207 and 19 CFR Ch. III Part 351 of the US Code of Federal Regulations (https://www.govinfo.gov/content/pkg/CFR-2014-title19-vol3/pdf/CFR-2014-title19-vol3.pdf) or seek legal advice for clarification of the US antidumping proceedings whenever necessary.