Changes Afoot for US Trade Remedies

Two recent developments at the United States Department of Commerce (DOC) could have rather significant implications for American manufacturers, importers and consumers.  One move strongly favors domestic manufacturers who might want government protection through US anti-dumping (AD) or anti-subsidy ("countervailing duty" or CVD) laws, while the other benefits the importers and consumers who are typically harmed by these same laws.

First up is news that the DOC has begun "zeroing" again in original AD investigations through a seldom-used form of dumping analysis called "targeted dumping."  As I've discussed many times, zeroing inflates dumping margins (and thus the remedial tariffs imposed on the imports targeted in AD investigations) and is very controversial - despite having been repeatedly ruled illegal by the WTO, zeroing is still used by the United States in annual reviews (much to the consternation of our trading partners).  The US had, however, abandoned zeroing in original investigations several years ago.  Well, DOC's new targeted dumping case - Polyethylene Retail Carrier Bags from Taiwan: Final Determination of Sales at Less than Fair Value, 75 Fed. Reg. 14569 (Mar. 26, 2010) ("Taiwan Bags") - changes that and resurrects the practice, as a good summary article by Bob LaFrankie and Alicia Winston explains:

Commerce has refused on numerous occasions and under different scenarios to fully abide by the WTO's decisions declaring zeroing unlawful. In fact, Commerce has used several legal technicalities to evade compliance with adverse WTO zeroing decisions. One such tactic has been its use of a "targeted dumping" analysis, like that employed in the Taiwan Bags decision. "Targeted dumping" is when an exporter is not dumping to all customers or during all time periods, but is instead limiting (i.e., targeting) its dumping to a specific region, time period, or customer. The theory behind a targeted dumping analysis is that an exporter can use targeted dumping on a few sales to hide or "mask" its overall dumping.

Importantly, if Commerce uses its targeted dumping methodology, it calculates dumping rates with zeroing; this calculation typically increases the dumping margins. Commerce used its targeted dumping methodology in Taiwan Bags, thereby enabling it to use zeroing to increase the exporter's amount of dumping. In Taiwan Bags, however, Commerce went a step further. In that decision, Commerce revised its targeted dumping methodology to use zeroing on virtually every sale, regardless of the extent of any actual targeted dumping. This is in contrast to its past practice of zeroing only the identified targeted sales. Through its expanded zeroing practices, Commerce appears to have essentially resumed its use of zeroing in dumping calculations without regard to WTO decisions declaring the practice unlawful.

While Commerce has used targeted dumping previously, it has never used it as broadly as was done in Taiwan Bags. This is a sharp departure from Commerce's past practice and it remains to be seen whether this new targeted dumping methodology survives any legal challenges....

It is not yet clear whether Commerce will use the Taiwan Bags targeted dumping methodology in other antidumping cases. Nevertheless, this decision provides Commerce with a potential avenue to resume its use of zeroing in virtually all new antidumping investigations in the future.... A concerted effort by Commerce to use the Taiwan Bags methodology in other antidumping cases would greatly increase the chances that Commerce would find that a company had engaged in dumping, and such an effort would likely increase overall antidumping duty rates. U.S. importers and foreign exporters should remain mindful of this possibility in future antidumping cases and be prepared to challenge both the U.S. industry and Commerce when such a methodology is used or considered.

This is something definitely worth watching over the next several months.  As you may recall, the Obama administration has repeatedly hinted that it would soon abandon zeroing in annual AD reviews.  Although they haven't officially done that yet (and thus the WTO-sanctioned retaliation threats keep mounting), it's quite odd that administration officials are proposing to close one zeroing door there, while opening a new one with the targeted dumping case here. Obvious exit question: Is this a case of crossed wires at the White House, or a cynical game of misdirection?

Next up is the "good news" for US importers and consumers.  On April 26 DOC finally completed its remand redetermination resulting from the US Court of International Trade (CIT) case, GPX International Tire Corp. v. United States, which found that DOC had illegally calculated antidumping and countervailing duties for off-road tires from China.  In its final remand results, DOC announced that it was complying with the CIT’s order (under protest) and issuing amended AD and CVD final determinations that would "offset" the CVDs against GPX’s calculated AD duty deposit rate.

This is obviously pretty complicated stuff, but the basic gist is that it's a very good development for US importers and consumers by dramatically shrinking AD/CVD duties on Chinese imports.  For those of you who are masochistic enough to want to know more, keep reading.  After an affirmative AD/CVD ruling in 2008, GPX appealed the determination to the CIT, arguing that the application of both the CVD and AD law using the Department's "non-market economy" (NME) methodology resulted in a double-counting of duties. Essentially, GPX argued that the NME AD methodology already takes subsidies into account, so anti-subsidy duties (CVDs) on subject imports that are also part of a concurrent AD investigation would result hitting those imports twice with some of the same remedial tariffs.

The CIT agreed. On September 18, 2009, CIT Chief Judge Jane Restani sided with GPX and found that DOC must account for the possibility of such double counting against the same imports or ditch the whole CVD NME thing altogether.

DOC in its remand determination reluctantly calculated revised AD and CVD rates for GOX by subtracting the CVD rate from the AD rate. In GPX's case, the AD rate for its Chinese producer (Starbright) was adjusted to include an "offset" for the calculated CVDs (14%). As a result, GPX’s AD rate was reduced from 29.93 percent to 15.93 percent.

The result of DOC's remand is pretty clear: GPX's potential import liability dropped from 44% to 30% - still a big number but a whole lot better than what they previously faced.  If the remand holds up, and if other US importers and Chinese exporters demand similar offsets, the impact could be quite a significant improvement for their bottom lines in any future AD/CVD investigation.  There are still a lot of hurdles to clear before that becomes a reality, but this is certainly a good start for them... and, of course, for US consumers.

Ok, that's it with the arcane trade remedies stuff for now.  I promise to get back to blogging on simpler and more entertaining issues tomorrow.