By Dan Pickard
For U.S. manufacturers who have been harmed by competition with low priced imports, the U.S. trade remedies laws can provide meaningful relief. This article will provide an introduction to one specific trade remedy law – the antidumping statute.
Under the antidumping (AD) statute, members of a particular domestic industry may petition the U.S. government to investigate imports of similar foreign goods and to impose compensating duties where two threshold requirements are met: (1) the imports are sold in the United States at less than fair value; and (2) the low-priced imports are a cause of (or threaten) material injury to the domestic industry.
Imports are Sold Below Fair Value
The Commerce Department is responsible for calculating whether there is dumping. Commerce first calculates normal value, which is based on prices in the foreign companies’ home market. Alternatively, if there are insufficient sales of comparable merchandise in the home market, Commerce will use the foreign producer’s price on sales of the product to third countries. If all home market (or third country) sales are below cost, normal value is based on the fully distributed cost of production plus profit. There are special rules in calculating normal value in China cases as the country is deemed to be a “non-market economy.”
The export price into the United States is determined using a downward adjustment to reflect transportation costs (both foreign and local), importation expenses, U.S. processing, and other such costs. Additional adjustments are made for differences in quality, credit, and other circumstances of sale unique to the foreign producers.
After these adjustments to normal value and U.S. price (officially called the “export price” or “constructed export price”), the Department then makes its dumping calculation. The product is considered dumped if the export price – the price of the good in the U.S. market – is lower than the normal value of that product in the producer’s home market. The difference between the two prices is the margin of dumping, which is then divided by the U.S. price to determine the dumping duty percentage.
Imports Cause or Threaten Material Injury
Before imposing the relevant antidumping duties, the International Trade Commission (ITC) must find that the imports are a cause of material injury (or threat thereof) to the U.S. industry. In this regard, injury is defined as harm that is more than inconsequential, insignificant, or immaterial. Indeed, the domestic industry can demonstrate injury in a number of ways, typically through downward trends in financial data (production, shipments, profits, etc.). Operating losses are not a necessary component of material injury if it is otherwise clear that the industry would have been better off absent the subject imports. As long as the dumped imports are found to be a cause of material injury or threat thereof, the ITC will make an affirmative determination, even if there are other, more important causes of such injury or threat.
Relief Provided to U.S. Companies
A successful trade remedy investigation will result in the issuance of an antidumping order. The order will require payment of duties for all covered imports from all producers in the subject countries in an amount to offset the unfair pricing. The antidumping order is issued for a five-year period but which can be re-issued for subsequent five-year periods through a “sunset review” process. Antidumping orders frequently result in U.S. manufacturers regaining lost market share, increased pricing levels in the United States, and improved operating profits and profit margins.
For more information regarding the U.S. antidumping laws, please do not hesitate to contact Daniel B. Pickard, a partner in the International Trade practice of Wiley Rein LLP, in Washington DC. He can be reached at 202.719.7285 or via email at [email protected].