The US amended the anti-dumping (AD) duty and countervailing duty (CVD) rules under the Tariff Act of 1930 by means of the American Trade Enforcement Effectiveness Act on 29 June. The changes brought about by the amendments and their effects on producers in the countries subject to an investigation are highlighted below.
Consequences of failure to cooperate with a request for information in an AD/CVD proceeding: Section 776 of the Tariff Act, which allows the Department of Commerce (DOC) or the International Trade Commission (ITC) to make determinations on the basis of facts available, has been amended. The amendment removes the obligation on the ITC or DOC to determine, adjust or corroborate missing information in case of non-cooperation.
The US imposes the duties to the full extent of dumping. This is an existing practice of the DOC. Codification of this practice is an attempt to legitimize the unfettered discretion exercised by the DOC in applying a higher rate of duties.
Definition of material injury for AD/CVD investigations: Section 771(7) of the Tariff Act has been amended to incorporate a greater emphasis on profitability in terms of the following changes: (1) profitability or recent improvement in the performance of the domestic industry will not preclude a finding of material injury or threat of material injury by the ITC; (2) for the evaluation of impact on domestic industry in determination of material injury, the ITC is required to consider additional factors relating to profitability.
The segregation of profitability factors is to identify which component of profits is specifically related to injury. There is a higher possibility that one or some of the injury parameters such as output, sales, market share, productivity, etc., may lead to a determination of material injury. However, an affected parameter has to be impacted by alleged dumped or subsidized imports and not due to any other reason.
Exclusion of costs or prices pertaining to a particular market situation in an AD investigation: Section 771(15) of the Tariff Act, which defines “ordinary course of trade”, has been amended to exclude from its scope costs or prices pertaining to a particular market situation. Also, section 773(e) of the act has been amended to give the DOC discretion to use another calculation methodology where the cost of production in the ordinary course of trade is not accurately reflected because of the existence of a particular market situation. This methodology will facilitate a proper comparison of normal value with export price so as to calculate a fair dumping margin.
Although the concept of “particular market situation” was already recognized under the Tariff Act for the purposes of dumping margin calculation, this recognition did not explicitly translate into its exclusion from the ordinary course of trade. The amendment now excludes the costs and prices of a particular market situation to avoid distortion. This change is expected to be used against non-market economies such as China when they would be recognized as market economy countries under the WTO accession treaty.
Thorough investigation prior to excluding below-cost sales in an AD investigation: Below-cost home-market sales in an AD investigation need to be excluded to avoid distortion in normal value calculation. Section 773(b)(2) of the Tariff Act has been amended creating an obligation on the DOC to ask for information to investigate below-cost sales. The amendment provides guidance to determine whether there are reasonable grounds to suspect that sales have been made below cost. While the previous practice in the US was to accept information provided by an interested party, the amendment requires that such information be scrutinized in detail.
Article 2.2.1 of the WTO Anti-Dumping Agreement allows disregarding of below-cost sales for normal value calculation but it does not outline a set methodology to determine what percentage of below-cost sales can be excluded, in spite of the 80:20 test.
Limitation on the number of voluntary respondents: Section 782(a) of the Tariff Act has been amended to reduce the number of voluntary respondents in a review where it would be unduly burdensome for the DOC to treat them on an individual basis. The amendment also defines the scope of the term “unduly burdensome” in relation to the number and complexity of the investigation, prior experience of the DOC and factors affecting timely completion. The practice of reduction of voluntary respondents is recognized under the Tariff Act and by the WTO for the purposes of an AD/CVD investigation.
All the above changes may fall within the corners of the practices followed by the US authorities. However, the widening of the discretionary powers provided to the authorities may restrict the options for the defending parties at both the original and appellate levels.
Sanjay Notani is a partner and Ambarish Sathianathan is an associate manager at Economic Laws Practice. Tanaya Sethi, an associate, assisted with research and input. This article is intended for informational purposes and does not constitute a legal opinion or advice.
109 A Wing, Dalamal Towers
Free Press Journal Road
Nariman Point, Mumbai – 400 021, India
Tel: +91 22 6636 7000
Fax: +91 22 6636 7172
Mumbai | New Delhi | Ahmedabad | Pune | Bengaluru | Chennai