Companies involved with or affected by U.S. import trade should be aware of some potentially seismic changes in the U.S. antidumping (“AD”) and countervailing duty (“CVD”) regimes that are taking shape in Washington. At issue are fundamental revisions to the way remedial duties are calculated and, later, definitively assessed.
- Overall structure for duty assessment: The U.S. Department of Commerce (“DOC”) has asked for public comment (initial due date: April 20, 2010) on changing from a retrospective to a prospective system of collecting AD/CV duties.
- Price comparisons in antidumping cases: The U.S. government has signaled that it will, in recognition of adverse World Trade Organization (“WTO") dispute settlement decisions, terminate the longstanding practice of “zeroing” negative dumping margins. However, a recent DOC antidumping determination points the way to continued or even expanded use of the practice in cases where “targeted dumping” is found to exist.
Retrospective vs. Prospective System of Collecting AD/CV Duties
Under the United States’ current “retrospective” system, a U.S. importer of products subject to an AD/CVD order must deposit the expected amount of AD/CV duties at the time of entry; the final amount of duties owed is determined only later, usually after an assessment review. Most other jurisdictions (including the EU, Canada, and Australia) use a prospective system whereby each investigation or review establishes a floor price or a fixed duty rate that is definitively assessed upon each entry until the next review concludes.
A retrospective system is said to be more accurate, since it allows administering authorities to look back and confirm how much dumping or subsidization actually occurred in respect of each batch (usually a year’s worth) of entries. Such a system also allows exporters and importers to adjust their conduct and, by doing so, avoid any definitive assessment of AD/CV duties; duty deposits can be recovered if the companies involved curtail the dumping/subsidy behaviors that triggered those deposits. However, a retrospective system is unpredictable -- especially for importers unable to determine at the time of entry what the final duty liability will be -- and is labor-intensive both for respondents and for the administering authority. In addition, some importers may default rather than pay when final duties exceed what has been deposited. Under a prospective system, there are generally fewer annual reviews, and they may be simpler and less intrusive because the purpose is only to set a new non-dumped/subsidized price. Moreover, all parties know the definitive non-dumped floor price or AD/CV duty prior to concluding sales.
There has long been interest in harmonizing the United States’ and other jurisdictions’ approaches in this area, and DOC recently requested public comment on shifting to a prospective system. The DOC notice asks commenters to focus on which system would best: (1) remedy injurious dumping and subsidization of imported products; (2) minimize uncollected duties; (3) reduce incentives and opportunities for evasion of AD/CV duties; (4) target high-risk importers; (5) address the impact of retroactive rate increases on U.S. importers and their employees; and (6) minimize administrative burdens.
Companies affected by the U.S. AD/CVD system should consider whether changing to a “prospective” approach would improve the system’s operation.
The second area of ferment involves only antidumping proceedings and more specifically the part of those proceedings where DOC compares products’ “normal values” to their “export prices.”
Zeroing refers to the practice of not giving a respondent the benefit of sales with negative dumping margins -- that is, the practice of looking only at dumped sales during the final stage of weighted-average margin calculations. This practice typically results in higher final margins. For example, consider an exporter with two similarly-sized U.S. sales, one at $5 below normal value and the other at $10 above normal value. Straight addition would yield a finding of no dumping; zeroing would yield a finding of dumping in the amount of $5, the -$10 having been disregarded.
Decisions adopted by the WTO Dispute Settlement Body have ruled that zeroing violates the rules in the WTO Antidumping Agreement. The United States has criticized these rulings and, until recently, has agreed to cease zeroing only in original AD investigations. However, the Office of the USTR recently announced a decision to drop zeroing in assessment reviews as well.
An exception, however, is cases where DOC observes “targeted dumping” -- a pattern of export prices that differs significantly among particular customers, regions, or time periods. In such instances, DOC reverts from the “average-to-average” calculation method to an “average-to-transaction” method that, in effect, zeroes out negative margins on individual sales.
DOC officials have recently been focusing considerable attention on how to apply the “targeted dumping” concept. In past cases, when presented with a pattern constituting targeted dumping, DOC used the average-to-transaction method for targeted sales only; it used the average-to-average method for sales falling outside the “pattern,” and then aggregated the results. In its latest targeted dumping decision, however, involving Polyethylene Retail Carrier Bags from Taiwan, DOC applied the average-to-transaction methodology to all of the pertinent exporter’s U.S. sales, both within and outside the targeted dumping pattern. While the details are not publicly-available, it appears this approach may have significantly increased the company’s final/overall dumping margin.
Aggressive approaches like this may tempt petitioners to allege targeted dumping more frequently, as they seem already to have begun doing. Time will tell whether the PRCBs from Taiwan result is indicative of DOC’s broader intentions in the wake of the U.S. government’s formal abandonment of zeroing. In the meanwhile, exporters are well-advised to monitor their U.S. sales to avoid any pattern that, under close examination, could be labeled as targeted dumping.
U.S. companies facing competition from imports, as well as importers and foreign manufacturers bringing goods into the United States, have reason to stay abreast of these emerging changes in U.S. AD/CVD practice. For many, the stakes are high enough to justify participating -- directly or through counsel -- in the policy debate.
For more information, please contact:
Claire Rickard Palmer, firstname.lastname@example.org, 202-626-1575