U.S. Antidumping and Countervailing Duty Laws

Why Do the Unfair Trade Laws Exist?

• Antidumping (AD) Law – remedies unfairly priced imports that injure or threaten to injure an American industry.

• Countervailing Duty (CVD) Law - remedies subsidized imports that injure or threaten to injure an American industry.

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Commerce vs. ITC

• Commerce determines whether and to what extent dumping or subsidization is occurring.

• ITC determines whether a U.S. industry competing with the allegedly dumped product has been materially injured, or threatened by such imports.

• Commerce and the ITC make their determinations independently

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What is an Antidumping Duty?

What is Dumping?

• “Dumping” occurs when a foreign producer sells its product at a lower price in the U.S. at less than normal value.

• Normal value may be prices in its home country, other third country markets, cost of production, or in cases involving non-market economy countries, factors of production.

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Overview of the Dumping Margin Calculation

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Determine Net

U.S. Price

Determine NormalValue

Compare NetU.S. Price toNormal Value

Calculate theDumping Margin

Fair Comparison

• In order to make a fair comparison, adjust the U.S. price and the price in the comparison market back to the point where both sales are ready to be shipped from the factory gate, i.e., the “ex-factory” price.

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Fair Comparison

• Making a "fair comparison" between normal value and U.S. price

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Market Economy vs. Nonmarket Economy Comparisons

• U.S. anti-dumping law applies differently to countries considered to have nonmarket economies (NME) than to those with market economies (ME).

• In NMEs prices and costs are presumed to be under government control rather than subject to market-based principles and, therefore, cannot be relied upon.

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NME – Factors to be considered

• The extent to which:– the currency of the foreign country is convertible

into the currency of other countries– wage rates in the foreign country are determined

by free bargaining between labor and management

– joint ventures or other investments by firms of other foreign countries are permitted in the foreign country

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NME – Factors to be considered

• The extent of:– government ownership or control of the means

of production– government control over the allocation of

resources and over the price and output decisions of enterprises

• Such other factors as Commerce considers appropriate

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Fair Comparisons - ME

• The dumping calculation is a comparison of the price at which subject merchandise is sold in the United States -- the U.S. price – with either the “normal value” of a sale of the same or similar product in the comparison market or a “constructed value” based on the cost of production of the product plus profit.

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Price-to-Price Margin Calculation

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(In HM$)Home Market Price= 200Less: Discounts & Rebates ( 5)Less: Movement Charges (31)

Direct Selling Expenses (11) Foreign Packing (5)

Less: Level of Trade Adjustment (5)Plus: U.S. Packing 9

Difference in Merchandise 2_ 154 a

Divided by Exchange Rate 114.07 HM$/US$ b

1.35 c=a/b

Plus: U.S. Direct Selling Expenses 0.10

= Normal Value in U.S. Dollars $1.45

(In US$)

U.S. Price = 2.00Less: Discounts & Rebates (0.10)Less: U.S. Movement Charges (0.25) Foreign Movement Charges

(0.40)= Net U.S. Price

1.25

(Normal Value - Net U.S. Price)Net U.S. Price

(1.45 - 1.25)1.25

Margin Calculation

= % Margin

= 16.0%

Based on a price-to-price comparison on an export price sale.

Fair Comparisons - NME

• The dumping calculation is a comparison of the price at which subject merchandise is sold in the United States -- the U.S. price -- with the “normal value” based on the factors of production (FOP) and surrogate values from a comparable market economy country.

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Factors of Production and Surrogate Value Information

• After selecting a surrogate country Commerce will collect factors of production information from respondents, and will use information regarding surrogate values from the following sources:– Publicly available trade data and publications– Financial statements of producers of the

subject merchandise in the surrogate country

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Costs Calculated Using Surrogate Values Raw Material Costs=$8.60

Plus Labor Costs

Plus Surrogate Energy Costs

Plus Surrogate Factory Overhead

Plus Surrogate Selling, General andAdministrative Expenses

Plus Surrogate Profit Expenses

Plus Packing Expenses

Equals Normal Value

Energy Costs=$1.50

Overhead=$1.50

SG&A Expenses=$2.15

Profit Expenses=$0.75

Packing expenses=$0.75

Normal Value=$16.00

Labor Costs=$0.75

Normal Value Calculation for a Non Market-Economy (NME) Investigation

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What is a Countervailing Duty?

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Countervailable Subsidies

• Must involve a “financial contribution”

• Must confer a “benefit”

• Must be “specific”

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Financial Contribution

Financial Contribution involves:• A direct transfer of funds (grants, loans, equity infusions)

or the potential direct transfer of funds or liabilities (loan guarantees);

• Foregoing or not collecting revenue that is otherwise due (tax credits, deductions from taxable income, import duties);

• Providing goods or services for less than adequate remuneration, other than general infrastructure;

• Purchasing goods for more than adequate remuneration.

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Benefit

• A benefit exists to the extent that the subsidy recipient gets financial or in-kind assistance on terms more favorable than those which would otherwise be available on the market.

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Specificity

• Broadly Available/Not SpecificGovernment subsidies are permissible under WTO and U.S. disciplines when they are generally available to and widely used by companies and industries within the jurisdiction of the subsidizing authority.

• Limited/SpecificWhen a government limits the availability of a subsidy to a smaller group of recipients, trade may be distorted and that subsidy becomes addressable under U.S. CVD law.

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• SUBSIDIES DEEMED SPECIFICTwo types of subsidies under the WTO are deemed to be specific for purposes of CVD. No demonstration of specificity is required.

Subsidies “Deemed” to be Specific

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• EXPORT SUBSIDIESThe first type is a subsidy that is, in law or in fact, contingent upon export performance, alone or as 1 of 2 or more conditions

Subsidies “Deemed” to be Specific

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• IMPORT SUBSTITUTION SUBSIDIESThe second type is a subsidy that is contingent upon the use of domestic over imported goods, alone or as 1 of 2 more conditions.

Subsidies “Deemed” to be Specific

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Calculation of the Countervailable Subsidy Rate

• Calculation of CVD RateThe ad valorem CVD rate is calculated by dividing the benefit (numerator) by the relevant sales that benefit from the subsidy (denominator).

Sample calculation of total countervailable benefit to exporter:

Subsidy Benefit from Program 1 + Subsidy Benefit from Program 2 = Ad Valorem Rate Relevant Company Sales Relevant Company Sales

Antidumping and Countervailing Duty

Proceedings

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Petitions

• Commerce and the ITC receive petitions from the affected U.S. industry simultaneously.

• U.S. law provides that an antidumping investigation shall be initiated whenever Commerce determines, from information available to it, that a formal investigation is warranted.

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Petition

A petition must contain:

• Evidence of dumping or countervailable subsidies. • Evidence of injury.• Demonstration of industry support.• Identify the domestic like product and scope.

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Timing of DOC Events in Investigations

Questionnaire Issued

Questionnaire Responses Due

Supplemental Questionnaire Issued

Supplemental Response Due

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DOC Initiation

Petition Analyzed

Issue Initiation Notice

ITCPreliminary

Decision

DOCPreliminary

Decision

Publication of F.R. Notice

Disclosure Ministerial

Error Correction

Suspension of Liquidation (if affirmative)

Verifications Conducted and Reports Issued

Case and Rebuttal Briefs

Hearings

DOCFinal

Decision

Publication of F.R. Notice

Disclosure Ministerial

Error Corrections

Suspension of Liquidation (continues or lifted)

ITCFinal

Decision

AD or CVD Order (if affirmative)

Suspension of Liquidation (continues or lifted)

DOC Preliminary

Determination*OrderIssued

DOC Final Determination**

* These dates may be extended under certain circumstances.** If negative determination, the investigation ends.

7 Days from ITC Final

ITC Final

Determination**

75 Days from

DOC Prelim 45 Days from

DOC Final45 Days from

Petition

CVD - 65 Days from Initiation

AD – 140 Days from Initiation

20 Days from Petition

Initiate Investigation

Day 0

Petition Filed

ITC Preliminary

Determination**

Statutory Time Frame for Investigations

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Period of Investigation

• Antidumping - The four most recently completed fiscal quarters (or, in an investigation involving merchandise imported from a non-market-economy country, the two most recently completed fiscal quarters) as of the month preceding the month in which the petition was filed.

• Countervailing Duty – The most recently completed fiscal year.

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AD Questionnaire Structure

Market Economy• Section A: General Information• Section B: Comparison-Market

Sales• Section C: U.S. Market Sales• Section D: Cost of Production &

Constructed Value• Section E: Further

Manufacturing in the United States

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Non- Market Economy• Section A: Separate Rates • Section B: Not Applicable• Section C: U.S. Market Sales• Section D: Factors-of-

Production Data• Section E: Further

Manufacturing in the United States

CVD Questionnaire Structure

Relevant Government (central, provincial, local)

• Description of alleged subsidy programs

• Terms and recipients of programs

Respondent Company• Amount of subsidies received• Relevant sales values

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Purpose of Supplemental Questionnaires

• To obtain information previously requested and not received

• To correct substantive deficiencies

• To clarify information submitted where the interpretation of the response is not readily clear

• To obtain more complete explanations or supporting documentation

• To obtain new information based on data submitted if a response raises new questions

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Commerce Preliminary Determination

• Preliminary margin/deposit rate for each respondent• Preliminary scope determination• Preliminary calculation methodologies• Preliminary “All-Others” rate• Suspension of liquidation (if affirmative)

• Commerce negative preliminary determination does not end the investigation.

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Bond/Deposit Requirements Imposed After Issuance of a Preliminary Determination

• On the date of the publication of an affirmative preliminary determination in the Federal Register and at the request of Commerce, U.S. Customs and Border Protection will suspend liquidation of entries of the product under investigation and begin collecting a deposit of estimated AD or CVD duties based on the preliminary margin Commerce published.

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Bond/Deposit Requirements Imposed After Issuance of a Preliminary Determination

• Until the publication in the Federal Register of an AD or CVD order following an affirmative determination by the ITC, the importer has the option of posting a bond or cash deposit for estimated AD duties.

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Verification

• Commerce conducts extensive examination of company books and records to confirm the accuracy and completeness of the submitted data:– All subject merchandise sold during the period of

investigation was reported.– Submitted sales are recorded in company accounts.– Data for individual transactions are correct.– Cost data and/or factors-of-production data are

complete.– Charges and adjustments are supported by

respondent’s records.– Confirm accuracy of reported subsidies received

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Activities Leading up to Final Determination

• Verifications conducted• Verification reports issued• Petitioners and respondents submit briefs and

rebuttal briefs• A hearing is conducted if requested

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Commerce Final Determination

• Notification of continuation of suspension of liquidation, if final determination is affirmative

• Notification of termination of suspension of liquidation, if final determination is negative

• Final decisions on issues and adjustments preliminarily decided in the preliminary determination

• Summary and statement of Commerce position on each issue raised by parties in briefs, rebuttal briefs, and hearing

• Department findings during investigation stage

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Bond/Deposit Requirements Imposed After Issuance of a Final Determination by Commerce

• Following an affirmative final determination, Commerce will instruct Customs to continue to suspend liquidation and collect bonds or deposits at the final rate.

• Commerce does not instruct Customs to apply the rate in the final determination retroactively to entries made between the preliminary and final determinations.

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AD/CVD Order

• What is an order?– Public announcement that Commerce will instruct CBP

to assess duties pursuant to the affirmative final determinations of Commerce and the ITC

• When are orders issued?– Within 7 days after the ITC notifies Commerce of its

affirmative injury determination

• What is the effect of an order?– Establishes date on which duty (cash deposit)

requirement becomes effective; provides notice to parties and CBP that duties will be imposed

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Recourse Following Final Determination and/or Order

• Seek correction of ministerial errors• Appeal decision to Court of International Trade (CIT) • Appeal to NAFTA panel in cases involving Mexico and

Canada• WTO Appeal• Request for administrative review• Request for new shipper review• Request for scope inquiry

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Administrative Reviews—How to Comply with the AD/CVD Law

• Purpose1. Determine amount of AD or CVD duties to assess on

entries during a specific period of review.

2. Establish new deposit rates for prospective application.

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Retrospective System

• The U.S. antidumping and countervailing duty regime is a retrospective system.

• The retrospective duty-assessment system allows the assessed duties to be calculated on the actual sales of the merchandise.

• The prospective system used by many countries assesses duties calculated from past sales

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Retrospective System

• Under a retrospective system, deposits for estimated AD/CVD duties are made on merchandise upon entry but no duties are “assessed” at the time of entry.

• Upon subsequent administrative review or upon the absence of a timely request for administrative review, the assessment of duties (a determination of the actual amount owed) takes place.

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Period Covered

Investigations

• Normally one year

• Normally the four most recently completed fiscal quarters up to the month preceding the receipt of the petition (AD) or recently completed fiscal year (CVD)

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Administrative Reviews

• 1st Review - Usually 16 to 18 months, covering the period between the preliminary determination in the original investigation and the one-year anniversary of the order

• 12 months for subsequent reviews

Injury, Assessment, and Cash Deposits

Investigations

• Determine whether injurious dumping or subsidization exists

• Do not assess duties on POI entries; only set a deposit rate for future entries

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Administrative Reviews

• No injury determination

• Determine actual duties to be assessed on POR entries and set a deposit rate for future entries

Who Can Request a Review?

• Petitioners can request a review of specific exporters or producers.

• Importers can request a review of their suppliers.

• Foreign producers or exporters can request a review of their own exports or sales of subject merchandise.

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When Can a Review Be Requested?

• Interested parties may request an administrative review of the order each year during the anniversary month of the order.

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What if no review is requested?

• If no review is requested for a company:

– An importer’s entries are assessed duties at the rate of deposit at the time of entry.

– Commerce sends “automatic-assessment” instructions to Customs.

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What if deposits are less than the review results?

• If the AD or CVD margins Commerce finds in the review exceed the amounts deposited on entries during the POR, then the importer must:

– Pay duties to make up for the difference between the deposit rate and the actual calculated assessment rate and

– Pay interest accumulated since the date of deposit (date of entry).

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What if deposits are higher than the review results?

• If the deposit rate is higher than the AD or CVD margin Commerce calculates for the review, then the importer typically

– Receives a refund and

– Receives interest on the refunded portion dating from the date of deposit

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Other Post-Order Reviews

• New Shipper Review: Commerce may conduct an expedited review of new exporters and producers if they did not export the merchandise subject to an AD/CVD order to the U.S. during the period of investigation, and they are not affiliated with any exporter or producer which exported the subject merchandise to the U.S. during that period.

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Other Post-Order Reviews

• Sunset Review (aka “Five-Year” Review): Every 5 years after the imposition of an order, Commerce and the ITC conduct a sunset review. Commerce looks at whether dumping or subsidization would likely continue or recur if the order were revoked. The ITC looks at whether injury would likely continue or recur if the order were revoked. If either agency finds “not likely”, the order is revoked.

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Other Post-Order Inquiries

• Scope Inquiry: Commerce may conduct an inquiry to determine whether or not particular products are within the scope of an AD/CVD order. Such inquiry can involve product descriptions that are more specific than the general description of the scope of the order, merchandise completed or assembled in the United States or foreign countries, minor alterations, or later-developed merchandise.

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Conclusion

• Commerce conducts AD and CVD investigations and reviews using an open and transparent process.

• The multi-step process allows for the collection of information and participation by the parties in the determination of the AD/CVD duties through preliminary and final determinations.

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Conclusion

• In investigations, Commerce determines whether dumping has occurred or countervailable subsidies exist.

• In reviews, Commerce determines the actual amount of AD or CVD duties due on entries of merchandise subject to an AD or CVD order.

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