CHAPTER XXII Antidumping, Countervailing

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CHAPTER XXII Antidumping, Countervailing
Safeguard Measures

• Dumpings by a Foreign Manufacturer
• Subsidies by a Foreign Government
• Antidumping Duties (ADs) Countervailing Duties
  (CVDs)
• Procedures for ADs and CVDs
• Safeguard Measures

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Dumpings by a Foreign Manufacturer

• When products are sold in the U.S. at a price
  less than the fair market value
• Sold to purchasers in the U.S. at a price lower
  than a domestic price of exporter
• Sold to purchasers in the U.S. at a price less
  than the manufacturing cost plus overhead
  expenses normal profit margin
• Sold to purchasers in the U.S at a price lower
  than price sold to purchasers in another country
• Market Economy Comparison FOB export price and
  FOB domestic price
• Non-market Economy (NME) Surrogate
  pricing-India, Pakistan, Thailand, Bangladesh or
  Indonesia

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Market Economy Status of China

• On 11/15/2005, Korea gave Market Economic Status
  (MES) to China as the 43rd country.
• As of 5/2009 97 countries
• Chinas major trading partners-the U.S., the EU,
  Japan India-have yet to acknowledge Chinas
  MES.
• WTO members are allowed to treat China as a
  non-market economy in dumping and subsidy cases
  for 15 years after its entry on December 11, 2001
  (2016)
• Prices of products exported from a non-market
  economy can be disregarded and the costs in a
  third country (Surrogate country) are used to
  measure the normal value of the products

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Subsidies by a Foreign Government

• Financial contributions to a countrys exporters
  by a government or any public body.
• Grants, loans, equity infusions, loan guarantees,
  tax credits, provision of goods or services, or
  purchase of goods.
• Dumpings and subsidies allow foreign
  manufacturers to sell their products to the
  United States below a fair market value
• Subsidy is subject to the Subsidies and
  Countervailing Measure (SCM) Agreement of the WTO

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Subsidies by a Foreign Government

• Export-related Subsidies Classified by the WTO
• (1) Prohibited Subsidies
• a. Export subsidies
• Contingent on export performance
• Tax remission or deferral on export earnings,
  favorable export credit below governments cost,
  a bonus on export, etc.
• b. Import substitution subsidies
• Contingent on the use of domestic goods
• Also called local content subsidies
• No need for the complaining WTO member to show
  adverse trade effect.

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Subsidies by a Foreign Government

• (2) Actionable Subsidies
• Given to specific industries or enterprises.
• Production subsidies
• Not prohibited, but subject to challenge
• Adverse effect
• Rebuttable presumption of serious adverse effect
• Subsidies of greater than 5 ad valorem
• Covering operating losses
• Direct forgiveness of debt
• Complaining country must show the adverse effect
  on its industry, i.e., injury to a domestic
  industry caused by subsidized imports

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Subsidies by a Foreign Government

• (3) Non-actionable Subsidies
• Cannot be challenged multilaterally
• Cannot be subject to countervailing action
• Basic research pre-competitive development
  subsidies
• Assistance to disadvantaged regions
• Assistance to adapt existing facilities to new
  environmental requirements

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Agricultural Subsidies

• Special rules regarding agricultural subsidies
  are contained in the Agreement on Agriculture
• Export subsides domestic supports that are
  consistent with reduction commitments are not
  prohibited, but subject to countervailing duties

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Antidumping Duties (ADs) Countervailing
Duties (CVDs)

• Antidumping duties Extra duties for dumping
  margin collected to offset the effect of dumping
• Countervailing duties Extra duties to counter
  the effect of foreign government's subsidies
• Must injure a U.S. industry except prohibited
  subsidies

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Procedures for ADs and CVDs

• A domestic industry or an interested party files
  a petition with
• (a) USDC alleging unfair competition by
  foreign manufacturers
• (b) ITC claiming serious and material injury
  to a domestic industry or hamper in its
  startup
• (2) ITC investigates whether there is reasonable
  indication that the U.S. industry has been or is
  likely to be, harmed, or hampered in its startup
  by the alleged dumping or subsidies (Preliminary
  determination).

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Procedures for ADs and CVDs

• (3) USDC investigates the merits of the
  allegations to determine whether dumping or
  unfair subsidization has indeed occurred
• (4) USDC calculates the dumping or
  countervailing margin, the difference between
  prices at which the merchandise is being sold in
  the U.S. and its fair market value (Preliminary
  determination)

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Procedures for ADs and CVDs

• (5) USDC directs U.S. Customs to
• (a) Assess cash deposits or require bonds for
  possible AD or CVD liabilities
• (b) Suspend liquidation of entries until final
  determination on AD or CVD
• (6) USDC sends its fact-finding team to foreign
  manufacturers against which dumping or subsidies
  are alleged and makes a final determination on
  dumping or countervailing margins (Final
  determination).

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Procedures for ADs and CVDs

• (7) If ITC decides that U.S. industry has been
  materially injured or hampered in its startup
  (Final determination)
• (a) USDC publishes an Antidumping or
  Countervailing Duty Order in the Federal
  Register.
• (b) USDC directs Customs to collect only cash
  deposits. Bonding is no longer permitted for
  AD or CVD deposits.

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Procedures for ADs and CVDs

• (8) USDC conducts an annual review and
  publishes result in the Federal Register
• (9) A party disagreeing with AD or CVD decisions
  can file a law suit with the U.S. Court of
  International Trade.

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Safeguard Measures

• A WTO member has a right to restrict imports of a
  product temporarily as a safeguard measure to
  protect a specific domestic industry, when a
  surge in imports is causing or is threatening to
  cause, a serious injury to the industry.
• Emergency action
• Quantitative import restriction or Duty increases
  to higher than bound rates
• In principle, cannot be targeted at imports from
  a particular country alone

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Safeguard Measures

• However, quotas can be allocated among supplying
  countries
• Member imposing them must give something in
  return to affected members.
• Affected exporting countries can seek
  compensation through consultation.
• If no agreement within 30 days, exporting
  countries can retaliate by taking equivalent
  action, but not during the first 3 years.

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Safeguard Measures

• Exemption
• Imports from a developing country less than 3 of
  total imports or from several developing
  countries less than 9 of total import
• Must be serious injury-Significant impairment
• WTO Dispute Settlement Understanding applies

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Safeguard Measures

• WTO Safeguard Agreement prohibits gray area
  measures voluntary export restraint arrangements
  or orderly marketing arrangements in cars, steel,
  semiconductors
• Can be a real increase in imports (an absolute
  increase) or an increase in imports share of a
  shrinking market (a relative increase)
• Have time limits (sunset clause)
• Maximum duration 4 years unless extended. Cannot
  be more than 8 years with extensions