1 outline of us trade remedies antidumping and cvd law presented by nithya nagarajan law offices of...

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Outline of US Trade Remedies

Antidumping and CVD Law

Presented by

Nithya Nagarajan

Law Offices of Nithya Nagarajan, LLCInternational Trade Law and Consulting

Law Offices of Nithya Nagarajan, LLC

I. Trade Remedies - Overview

I. Trade Remedies – Safeguards II. Trade Remedies – Section 337 (IP) III. Trade Remedies – Antidumping (AD) IV. Trade Remedies – Antisubsidies (CVD) V. Policy Questions

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Theory of Free Trade/Fair Trade The GATT-WTO process assumes that open borders and no or

minimum import restrictions creates greatest overall global prosperity

Periodic negotiated lowering of national tariffs, aiming at zero In exchange, some basic rules were agreed, and national remedies

were authorized to catch “cheaters” to don’t play fair Rules include:

• No flooding of newly opened markets with an injurious surge• No infringing on the Intellectual Property rights of the importing

country• No selling at unfairly low prices – either below the cost of

production or below the prices in other markets (anti-discrimination)

• No use of government subsidies to give an unfair advantage to particular industries or products, or to favor exports

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I. Trade Remedies – Safeguards No flooding of newly opened markets with an injurious surge

GATT, Art. XIX contained an “escape clause” permitting reimposition of tariffs or quotas as a result of increasing imports causing serious injury to domestic producers

Aimed at “unforeseen circumstances,” i.e, unexpected import surges as a result of tariff concessions.

WTO Agreement on Safeguards provides detailed procedural and substantive requirements for initiation of safeguard measures

Essentially, President can impose increased duty, quotas or a combination, if the ITC finds both a surge and injury to the US industry


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I. Safeguards, cont’d.

Investigation initiated by petition by the US Industry to the International Trade Commission

Requires a showing of a “surge” of imports, that the surge was an “unforeseen development” (caught off guard), and that the surge caused “Serious” injury to the US industry.

President (USTR) then decides whether measures are in the national interest.

Looser standards if the imports are from China• Only “market disruption” meaning “material injury or a threat of injury”

rather than the high “serious injury” standard. (In six tries, disruption was found 4 times, but duties imposed only once: safeguard duties of 25% - 35% imposed on Chinese tire imports in 2009)


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I. Safeguards, cont’d.

A recent imposition was Steel Safeguards in 2002, adding duties of 8% and 30% to all imports from all countries (except NAFTA) for three years.

The EU Japan, Korea, China, Switzerland, Norway, New Zealand and Brazil all challenged as unlawful.

The WTO Dispute Settlement Body agreed:• It was wrong of the US to exclude Mexico and Canada• US hadn’t proven the “surge” was “unforeseen” – 5 decades

after the GATT process began• US hadn’t made the causal connection between the imports

and the injury

Relief is entirely within the President’s discretion


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II. Section 337 – IP Protection No infringing on the Intellectual Property rights of the importing country

Section 337 (of the Tariff Act of 1930) prohibits “unfair acts and unfair methods of competition involving imports”

Used to stop the importation of goods that infringe US patents and other IP rights like trademarks or copyrights.

Remedy is exclusion (of particular goods) and/or “cease and desist” order (against particular infringers). No monetary damages or penalties.

Administered by the International Trade Commission, in formal proceedings before an ALJ, subject to the APA.

Decision deadline is 15 months (or longer); always fast-tracked proceedings, short deadlines, high pressure.


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II. Section 337, cont’d A Section 337 action is initiated by complaint by a US or

foreign company Complainant must establish

• Unfair competition or an unfair act, e.g., patent infringement• Importation, sale for importation, or sale after importation into the

United States of the accused products• The existence of a domestic industry relating to the products or IP in

question. • Injury to the complainant, which is presumed for infringement of a US

patent or other federally registered IP rights.

Decision of ALJ is subject to approval by full ITC Appeal to Federal Circuit Recent Cases: Optoelectronic Devices for Fiber Optic Communications;

Integrated Circuit Chips; Devices With Secure Communication Capabilities; Reduced Folate Nutraceutical Products and L-Methylfolate Ingredients; Wireless Portable Music and Data Processing Devices; Sintered Rare Earth Magnets; Two-Way Global Satellite Communication Devices


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III. Trade Remedies - Antidumping

No selling at unfairly low prices , i.e., discriminatory or below-cost prices

Antidumping is the most common of trade remedies, both by US and by other WTO members against US exports

Theory: Avoid protected industry in a country with a closed market from targeting a US industry for destruction by below-cost sales.

Reality: Normal test is not predatory pricing or below-cost sales, but is rather a non-discrimination rule.

Dumping margin is the difference between the US price and the price of the same product in the home market (or largest 3rd market)

The AD law is a safety valve, to provide some trade protection and avoid backlash against free trade


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III. Antidumping, cont’d.

Antidumping Investigation starts by filing of Petition by US Industry showing proof both of price discrimination and injury to the US industry that makes the same thing.

Two parts to the investigation: • 1. Calculation of the level of dumping and calculation of a duty,

carried out by Department of Commerce • 2. Investigation of existence of material injury to the US industry,

caused by the dumped imports, carried out by the ITC Must have both dumping and injury: if either DOC finds

no dumping (or margin less than 2%) OR if ITC finds no injury, or no causal link between injury and imports, investigation is terminated.

Dumping Investigation lasts 18 months with a series of questionnaires, on-site visits, arguments, briefs, and hearings. Very informal – not APA decision-making.


Export Price

Normal Value

Price DUMPING

Difference:Dumping Margin Anti Dumping Duty

Cause & Effect

Definition of DumpingDumping is defined as selling at prices in the United States at less than the price charged in the home market (i.e., the Indian domestic market). The “dumped” subject imports cause – or threaten to cause – material injury to the U.S. domestic industry filing the complaint. Injury to the domestic industry is determined by the International Trade Commission (ITC) and the amount of dumping is determined by Department of Commerce(DOC)

Industry Injury

DOCDOC ITCITC

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Injury Phase before the ITC: Series of questionnaires

• To US purchasers and importers, foreign producers/exporters, and domestic producers

• Information about sales, imports, production, employment, inventories, productive assets, etc. over 3 year POI.

Injury = loss of sales, lower profits, lost jobs, price differentials, etc.

Cause = Import trends up while domestic trends down.• Cause is satisfied if imports are “a” cause of material injury, not

necessarily only or most important cause. 6 Commissioners: a 3-3 tie goes to the domestic industry Entire country (or cumulated group) wins or loses together


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III. Antidumping, cont’d. Dumping Margin Phase before the DOC: Series of questionnaires

• Respondent Selection: usually just 2 or 3 largest exporters• Information about every sale in US and foreign comparison

market: product characteristics, price, cost of production, selling and movement expenses, etc. over the 6-18 month POI.

• A non-cooperative respondent gets a default high rate – the highest rate alleged in the petition.

• Individual net (“ex factory”) price difference identified for each product/month; if US price is lower than comparison price, that’s the amount of dumping amount, converted to a percentage margin

• Below cost sales can be removed from the comparison Multiple supplemental questionnaires, On-site verification Preliminary determination, then briefs and hearing Final determination within 18 months of petition filing


U.S. Export Price

Normal Value

Price

Dumping Measure

Dumping Margin

Home Market Price Cost of Production Third Country Export Price

Definition of DumpingDumping occurs when a product is sold by a foreign exporter / producer in the US for less than the “normal value” fair value. The Department determines normal value based (1) on the prices charged for comparable products by the foreign producer / exporter in its domestic market or (2) on the cost of production plus an amount for profit.

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III. Antidumping, cont’d. Non-Market Economy Rules

• China and Vietnam get special, unfavorable treatment• Since the currency and prices are not trustworthy, the DOC says it

cannot do price to price comparison• Instead, the analyisi is based on cost of production, and the imputed

cost of producing the product is compared to the US prices• However, costs are also not trustworthy, so instead the “factors” of

production are collected, for each product• The factors are valued by “surrogate values” found by “shopping” for

the input list in a “similar” country. India – or now Thailand, Indonesia, Philippines, Ukraine, or South Africa.

• Surrogate SG&A and profit margins are also added to get the “price”• The unpredictability of the surrogate country, and the imprecision of

the values chosen (by HTS category) means it is hard to predict or plan, and can lead to high, irrational (??) results

Expiration of NME rules (2015, maybe, under WTO)


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Annual Administrative Reviews by DOC Each year the investigation process is repeated US dumping duties are always “provisional – estimated” at

the time of entry, and are always subject to review On review, the actual rate is determined – and can be

higher or lower• The importer of record will have to pay the difference, plus interest• Or (if lower) will get a refund of excess paid, plus interest• Problem: the Importer bears all the risk, but the exporter has all

the information and must actively participate or get an adverse rate Not everybody can get reviewed – and so you might get

the “all others” rate based on the active respondents’ pricing or production costs; can be hard to be a good citizen


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Five-year Sunset Reviews – DOC and ITC In theory antidumping orders last only five years, “unless

there is proof that terminating the order will result in the resumption of injurious dumping

DOC always finds that dumping will resume Real action is at ITC

• ITC does essentially the same injury investigation as in original investigation

• Except it is entirely hypothetical: what “will happen” in future• Usually orders are renewed unless there is some strong reason to

suspect the exporters have no interest in the US market• Or if US industry is doing so well it would not be injured by future

dumping (or if it cannot meet demand)

Practical result: dumping orders can last forever


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Contested issues in Antidumping cases:• Respondent selection: in reviews DOC used to do 10-12 companies,

now will only review two or three.• Zeroing out of negative margins – targeted dumping• Status of China and Vietnam as NMEs (concurrent CVD problem)• “Settlements” and coercion – payment to US industry as a “License to

Dump”• Adverse facts available – what rate to give a non-responsive company,

or responsive company who can’t handle the burden• Pro-se companies• Diversion and fraud (transshipping)• Separate Rates for NME cases, where non-reviewed companies must

prove they are “separate” from the deemed “China-wide” government-controlled producer of the merchandise


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IV. Trade Remedies – Anti-Subsidies (Countervailing Duties – CVD)

No use of government subsidies to give an unfair advantage to particular industries or products, or to favor exports

Countervailing Duties are imposed to compensate for unlawful government subsidies on imported goods

CVD cases follow the same pattern as antidumping – dual investigations by the ITC (for injury) and DOC (for identification and quantification of subsidies)

Same pattern of provisional duties, annual administrative reviews, and 5-year sunset reviews.

Same appellate process: CIT and NAFTA panels, and WTO compliance


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IV. Subsidies/CVD, continued

Subsidy Margin Phase before the DOC: Series of questionnaires

• Respondent Selection: usually just 2 or 3 largest exporters• Information about every government program alleged by the

petition, as well as any other that are later described• A non-cooperative respondent gets a default high rate – the

highest rate alleged in the petition. Questionnaires given to both producer/exporters and to

government (local, regional, and national) One amount of subsidy is identified, a ratio is calculated,

which becomes the provisional duty Multiple supplemental questionnaires; On-site verification Often AD and CVD are both alleged and investigated


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IV. Subsidies/CVD, continued Generally available benefits are OK

• Infrastructure, highways, university education• Must apply equally to everyone and everywhere• Must be non-specific and not export oriented

Countervailable subsidies are domestic subsidies that are “specific” to an industry or location or subset • Tax breaks available only to some industries• Favorable utility rates or access to natural resources at low rates• Loans or loan guarantees, or real estate at below market rates• Grants, “stimulus,” price supports • Sales of raw materials at low price or purchases of goods at high• Regional-specific programs

Export subsidies and buy-local programs are prohibited Some easier rules for developing countries


IV. Subsidies/CVD, continued

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Common Countervailable Subsidies Offered by the GOI• Advanced License Program• Duty Drawback• Export Promotion Capital Goods Program• Pre-Shipment and Post-Shipment Export Financing• Income Tax Exemptions Under Section 80-IA of the Income Tax Act• Various Programs Offering Steel at Less Than Adequate

Remuneration• State Government Programs

• Tax Incentives• Exemptions from Utility Payments or Reduced Rates• Exemption from Stamp Duty• Entry Tax Exemptions• Provision of Land for Less Than Adequate Remuneration• VAT Refunds

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V. Policy Questions If a country wants to give low-priced goods to US

consumers by dumping or subsidizing exports, isn’t that a good thing?• Favors upstream (raw materials) US industries over downstream

US manufacturers (value added)

Does putting the impetus for trade protections on individual complainants result in rational economic policy?• Favors concentrated or monolithic industries over more diffuse

industries Is the underling economic scenario (predatory and

injurious pricing) viable, since no predator would ever be able to establish a monopoly?• Prices will stay low as long as other foreign competitors exist


1 outline of us trade remedies antidumping and cvd law presented by nithya nagarajan law offices of...

Documents

trade remedies safeguards

llc international trade

llc slide

surge of imports

trade remedies overview

trade remedies section

cvd law

national remedies