The United States - Brief Outline of the Anti-dumping Proceedings ¹

General

The United States (US) AD law is laid down in the Tariff Act of 1930 to protect the US domestic industry against injurious price discrimination in international (import) trade. It imposes a duty on imports equal to the difference between the price at which the goods are sold in the US and their "normal value" (generally, prices in the home market of the foreign producer/exporter).

Two aspects of an AD investigation are handled by two different US government agencies:

• The Department of Commerce (DOC) investigates the existence of dumping and the measure of the dumping margins.
• The International Trade Commission (ITC) investigates material injury or threat of material injury to the domestic industry caused by the imports.

Initiation of Proceedings

Filing of Petitions

While an AD proceeding can be initiated by the DOC itself, with rare exception, AD cases start with petitions by the US domestic industry. To initiate an AD investigation, any US producer, wholesaler, trade union or trade association may file a petition simultaneously with the DOC and the ITC. A petition should normally contain, inter alia, the name of the country in which the subject merchandise is manufactured and, if the merchandise is imported from a country other than the country of manufacture or production, the name of any intermediate country from which the merchandise is imported; the names and addresses of each person the petitioner believes sells the subject merchandise at less than fair value and the proportion of total exports to the US that each person accounted for during the most recent 12-month period; and for the merchandise found to be from a non-market economy country, factual information relevant to the calculation of normal value. The petition must be supported by domestic producers or workers accounting for at least 25% of the total production of the domestic like products and at least 50% of the production represented by those members of the domestic industry who express either support or opposition to the petition.

The petition would allege that:

• a class, or a kind of foreign merchandise is being, or is likely to be, sold in the US at less than its fair value; and
• an industry in the US is materially injured, or is threatened with material injury, or the establishment of an industry in the US is materially retarded by reason of imports of that merchandise or by reason of sales (or the likelihood of sales) of that merchandise for importation.

The petition must be accompanied by information reasonably available to the petitioner supporting these allegations.

As soon as an investigation is initiated, the public version of the petition will be delivered to all known exporters or a trade association of the exporters. Alternatively, the DOC may deliver a public version of the petition to the government of the exporting country.

Time Limit for Decision of Rejection or Acceptance of Petitions

The DOC must decide whether to initiate an investigation within 20 days after a petition is filed. The deadline can be extended an additional 20 days if the DOC has questions as to the extent of domestic industry supporting for the petition. If the DOC deems the petition legally sufficient, it publishes a notice of initiation of investigation in the Federal Register (FR) (https://www.gpo.gov/fdsys/browse/collection.action?collectionCode=FR). On the other hand if the DOC considers the petition insufficient, it will dismiss the petition, terminate the proceeding, notify the petitioner in writing of the reasons for the determination, and publish a notice of dismissal of petition in the FR.

Investigation

Initiation

The DOC's notice of initiation contains, inter alia, the identification of the petitioner, the scope and period of investigation, and a list of economies subject to investigation. Separately, the ITC also publishes an FR notice of initiation. They serve as notices to all parties concerned. Relevant parties wishing to participate in the investigation must file an application by a time specified in the notices.

Preliminary Phase Investigation

• Injury Investigation

  Within 45 days after the filing of the petition, the ITC must issue a preliminary determination on whether there is a "reasonable indication" that the US industry is materially injured or threatened with material injury by the imports of the subject merchandise.

  At the preliminary phase of investigation, the ITC sends questionnaires to US producers, US importers and producers from the subject economy (foreign producers) of the subject merchandise identified in the petition to solicit information required by the ITC in order to make its determination. If the number of such entities is large, the ITC may send questionnaires only to the largest entities of each type. The foreign producer questionnaires are sent to the foreign producers identified in the petition. The identification of those relevant producers depends on the scope proposed by the petitioner and ITC industry research. In the case of products subject to multi-country production, ultimately the Department of Commerce has the final say on what process is origin-conferring.

  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. Typically, a deadline of 10 to 14 days is provided for responding to the questionnaire.

  Apart from questionnaires, the ITC also holds a staff conference at this stage, where parties in support of and in opposition to the petition present their case. Interested parties may also submit written briefs containing information and arguments pertinent to the petition. An entry of appearance in the conference must be filed and briefs must be submitted by a time specified by the ITC.

  With the information collected, the ITC makes a preliminary determination. The ITC rarely makes a negative preliminary determination since the "reasonable indication" standard is low, and the short deadline allows little time for respondents to assemble information and organize a strong defense.

  The ITC will publish its determination in the FR. If the determination is affirmative, the ITC will include with its determination a notice of commencement of the final phase of the ITC investigation. If the determination is negative, or if the ITC finds that the volume of imports are negligible, proceedings by both agencies are terminated.

• Sales at Less than Fair Value Investigation

  Within 140 days (may be extended to 190 days) after initiation, the DOC must issue its preliminary determination of dumping margins.

  The DOC obtains most of its factual information in AD proceedings from submissions made by interested parties during the courses of the proceedings. During this phase, the DOC sends out Quantity & Value questionnaires (Q&V) to identify those companies that exported the subject merchandise during the period of investigation and to determine the quantity and value of their sales to unaffiliated customers in the US. The DOC generally selects the largest-volume exporters as mandatory respondents. AD questionnaires are then sent to the mandatory respondents. The deadline for Q&V questionnaire responses is set by the DOC when it issues the questionnaire, which typically is approximately two weeks from when the questionnaire is issued.

  If there are multiple foreign producers/exporters, the DOC normally requests responses from mandatory respondents only. However, voluntary respondents may also be 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. Untimely and improperly filed submissions are not considered. A request for extension of deadline, with the reasons for the request, may be made in writing. Should a need for further information arise anytime in the investigation process, the DOC may issue supplemental questionnaires.

  Responses to Q&V questionnaires may include only sales exported by the responding company directly to the US. However, if the responding company made sales to third-countries which it knows ultimately were destined for the US, the company must separately identify those sales quantities and the intermediate countries to which those sales were made. In a Mainland China case, there may be instances in which an affiliated trading company is based in Hong Kong and the Chinese manufacturer sells to the Hong Kong affiliate and then the Hong Kong affiliate will sell the merchandise to the US. In that instance, it is still the manufacturer of goods sold in the US that should respond to the Q&V questionnaire.

  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 established in the investigation.

  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 rates for them, 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. (Please refer to the section on "Calculation of Dumping Margins" in "The US Anti-dumping Proceedings - Important Points to Note" for the methodology for determination of AD rates.)

  The DOC's preliminary determination is published in the FR and the investigation proceeds to the final phase. If the preliminary determination is affirmative, provisional measures are imposed, i.e., the US Customs and Border Protection suspends liquidation of entries of the subject merchandise. Importers must then make cash deposits, at the ad valorem dumping margin rate calculated by the DOC, on all subsequent entries of the subject merchandise.

Final Phase Investigation

• Sales at Less than Fair Value Investigation

  Within 75 days (may be extended to 135 days) after its preliminary determination, the DOC must issue its final determination of dumping margins.

  The DOC conducts verification of the information it relies upon (including questionnaire responses) in making its final determination in the investigation. The purpose of verification is to establish the accuracy of the data submitted in the responses and that relevant data was not omitted from the responses. Verification is conducted in a specified process at the respondent's offices and plants. Entities subject to verification may include producers, exporters, importers, persons affiliated with the above persons, or where applicable, unaffiliated purchasers.

  As part of the verification procedure, the DOC notifies the government of the affected economy that the DOC employees will visit the above persons in order to verify the accuracy and completeness of submitted factual information. If the person or government objects to verification, the DOC will not conduct verification and may disregard any or all information submitted by the person in favor of the use of facts available. Verification typically lasts for a week, during which the DOC requests access to all files, records, and personnel the DOC considers relevant to submitted factual information of the entities subject to verification.

  At this stage, the parties may request a public hearing to present their views. Case briefs and rebuttal briefs may also be submitted. Case briefs must contain all arguments which parties still believe are relevant so that the DOC has the opportunity to address these issues in the final determination. Rebuttal briefs may only address issues raised in the case briefs.

• Injury Investigation

  Within 45 days after the DOC's final determination, the ITC must issue its final injury determination.

  During this phase, questionnaires to collect information necessary for the final determination are sent to all US producers, foreign producers, and 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 is sent to US purchasers asking for information on their purchases and on US market conditions.

  A hearing is held to afford the interested parties an opportunity to express their views and to permit the ITC to ask questions and solicit information useful for it to reach a determination. Parties are encouraged to file prehearing and posthearing briefs to assert their arguments and present information revealed during the hearing accordingly. Nonparties, with permission, may also present a brief statement of their position at the hearing and file a written submission on information pertinent to the investigation.

  The ITC then makes the final determination on whether the subject imports have caused, or threaten to cause, material injury to the domestic industry, or the establishment of an industry in the US is materially retarded, and that the material injury or threat is caused "by reason of the dumped imports". The legal standard is higher than in the preliminary phase, as it is not just limited to a "reasonable indication" consideration. If the ITC finds that there is no material injury or threat of material injury by reason of the subject imports, or if the DOC finds the final dumping margin to be "de minimis" (2% or less), the investigation is terminated.

Time Limit for Investigation

The whole process, from filing of petition to the ITC's final determination, takes 280 days - 420 days, depending on whether any extension of time limit applies.

Determinations

There are three possible outcomes of an AD investigation: termination of investigation, suspension of investigation, or issuance of an AD order.

Termination of Investigation

Situations leading to termination of an investigation without the imposition of AD measures include:

• the ITC's preliminary determination is negative;
• either the ITC or the DOCs' final determination is negative;
• the DOC finds the final dumping margin to be "de minimis" (2% or less); or
• the petitioner withdraws the petition.

Suspension of Investigation

An investigation may be suspended if the exporters of the subject merchandise who account for substantially all of the imports of that merchandise agree:

• to cease exports of the merchandise to the US within 6 months after the date on which the investigation is suspended and to not increase exports during the interim period before suspension takes effect;
• to revise prices to eliminate completely any amount by which the normal value of the subject merchandise exceeds the export price or constructed export price of that merchandise; or
• if "extraordinary circumstances" are present, to revise prices to eliminate completely the injurious effect of exports, subject to the conditions that adverse price-effects are eliminated and that the dumping margin for each exporter's entries will not exceed 15 percent of its weighted-average margin found in the investigation.

However, such agreements must be in the public interest and effective monitoring of the agreements by the US must be practicable. Such agreements are also subject to reviews and the investigation may resume if the US is not satisfied with the implementation of the agreement.

Special rules apply for a suspension agreement with a country designated as a non-market economy (NME) country, such as Mainland China. The DOC may suspend an investigation upon the acceptance of an agreement with the NME country to restrict the volume of imports, and on finding that such an agreement is in the public interest and that it will prevent the suppression or undercutting of price levels of domestic products by imports of the merchandise under investigation.

Issuance of AD Order

If both the ITC and DOC reach affirmative final determinations, the DOC publishes an AD order in the FR listing the dumping margins for the individual respondents. Following publication of an AD order, parties have the right to appeal the DOC's and the ITC's decisions to the US Court of International Trade.

AD Duties

Upon publication of an AD order in the FR, importers must pay cash deposits of the estimated duties on subsequent entries at the ad valorem dumping margin rate (listed in the order) on the value of the imports for the individual foreign producer/exporter or all-other rates, whichever is appropriate, at the time of importation into the US. This deposit rate remains in effect until the completion of an administrative review or the order is revoked.

Reviews

Administrative Reviews

In the 12th month following the publication of an AD order, any party, including the petitioner, may ask the DOC to conduct an administrative review on the AD duty rates. The AD duty rate that applies to an exporter's goods is the rate first determined for that exporter, e.g., in the investigation, unless and until that exporter is subject to an administrative review giving rise to a different AD duty rate. If an exporter decides not to seek a review, this will not affect its right to seek a review of its AD rate in subsequent annual reviews. If a review is requested, liquidation¹ of the exporter's entries of the subject merchandise into the US (i.e., the final computation of duties) for the review period will be suspended until the DOC calculates the dumping margins and issues instructions to US Customs to liquidate the entries in accordance with its determination.

The DOC conducts its administrative reviews in generally the same manner as investigations, comparing US prices to normal value to calculate margins. It takes approximately 12-18 months to complete an administrative review. However, unlike in an investigation, under a newly established methodology, the DOC may now use sampling to select respondents for review. If, among other things, the top 3 exporters by volume do not account for 50 percent or more of exports subject to a review, the DOC may divide those exporters into three tiers by their export volumes and select one company from each tier. The chance of selection within a tier would be proportional to a company's exports. When sampling is used, the all-others rate will be based on rates of the companies selected by sampling. If sampling is applied, it will result in the selection of one or more companies that are not among the top two companies in export volume.

As a result of an administrative review, the antidumping duties applicable to the entries during the period reviewed is finalized, allowing the suspension of liquidation to be terminated (unless the results of the review are the subject an appeal to the US courts). At liquidation, the US importer may owe additional dumping duties, plus interest, or may be entitled to a refund of dumping duties, plus interest, on the entries during the period that was reviewed, depending upon whether the margin calculated under the review is higher or lower than the originally calculated rate. Further, the newly calculated margin will serve as the cash deposit rate for entries thereafter.

In subsequent years, administrative reviews can be requested on an annual basis as long as the AD order remains in effect.

New Shipper Reviews

New shippers can receive an expedited new shipper administrative review if they did not:

• export the merchandise subject to an AD order to the US during the period of investigation; or
• if they are not affiliate with any exporter or producer who exported the merchandise subject to an AD order to the US during the period of investigation.

The request for review must be made within one year of the date of sale or exportation of the merchandise. If the above criteria are met, the DOC can commence a new shipper review. When the DOC initiates a new shipper review, the US Bureau of Customs and Border Protection suspends liquidation of unliquidated entries of the subject merchandise from the relevant exporter or producer, and to allow, at the option of the importer, the posting, until the completion of the review, of a bond or security in lieu of a cash deposit for each entry of the subject merchandise. It takes approximately 9-15 months to complete a new shipper review. A company that meets these requirements gets the benefit of an individual dumping margin at the completion of the review. As with regular administrative reviews, the results of new shipper reviews serve as the basis for assessment for merchandise entered during the review period and for prospective cash deposits.

Changed Circumstances Reviews

A changed circumstances review may not be initiated less than 24 months after the date of publication of notice of a final injury/sales at less than fair value determinations or suspension, unless good cause exists. Basis for a changed circumstances review at the DOC include:

• A lack of interest in continuing the order (in whole or with respect to certain subject merchandise) by a sufficient share of the domestic industry
• A change of name for an exporter related to a corporate reorganization or change of ownership and there is a question of whether the "new" company should succeed the previous company with respect to the applicable duty rate
• The use of information in a prior proceeding newly-discovered to be inaccurate or fraudulently submitted.

An interested party can request a changed circumstances review of an AD order. The ITC may also institute a changed circumstances review on its own initiative. The DOC or ITC determines on a case-by-case basis whether changed circumstances sufficient to warrant a review exist. Such a review will be initiated only if the factors underlying its initial determination have changed sufficiently to warrant a review. For example, the ITC may grant a changed circumstance review based on an alleged change in market conditions related to an extreme event such as a natural disaster or when the basis of the ITC's original determination is fundamentally altered in a way that could lead to a different outcome upon review.

A changed circumstances review must be completed within 270 days after initiation. An AD order may be revoked in whole or in part through a changed circumstances review.

Expiry of AD Orders

Five-Year (Sunset) Reviews

Five year after the publication of an AD order or a five-year (sunset) review, the DOC and ITC initiate a review to determine whether revocation of an AD order would be likely lead to continuation or recurrence of dumping. Interested parties may participate in the review and submit relevant information. Unless the DOC and ITC determine that expiration would be likely to lead to a recurrence of dumping and injury to the US industry, an AD order will be revoked after the review. If, within 15 days of the initiation of the review, no domestic party files a statement with the DOC that it will participate in the review, the review will be terminated and the related order will be revoked.

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 (https://access.trade.gov/Resources/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://www.trade.gov/policy-bulletin-051. The new AD questionnaires for NMEs can be found at the DOC's website :

  Samples: https://access.trade.gov/Resources/questionnaires/questionnaires-ad.html
  Specific cases: https://access.trade.gov/Resources/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.

The US' Anti-dumping Proceedings - Frequently Asked Questions (FAQ) ¹