Outline of US Trade Remedies
Antidumping and CVD Law
Presented by
Nithya Nagarajan
Law Offices of Nithya Nagarajan, LLC
International Trade Law and Consulting
Law Offices of Nithya Nagarajan, LLC
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I. Trade Remedies - Overview
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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
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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 (antidiscrimination)
• 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
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No flooding of newly opened markets with an injurious surge
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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.
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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
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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.
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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:
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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
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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 fasttracked proceedings, short deadlines, high pressure.
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II. Section 337, cont’d
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A Section 337 action is initiated by complaint by a US or
foreign company
Complainant must establish
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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
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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.
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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:
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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.
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Definition of Dumping
Dumping 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)
DOC
ITC
DUMPING
Price
Normal
Value
Difference:
Dumping Margin
Anti Dumping Duty
Industry
Injury
Export
Price
Cause & Effect
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III. Antidumping, cont’d.
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Injury Phase before the ITC:
Series of questionnaires
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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.
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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.
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Dumping Margin Phase before the DOC:
Series of questionnaires
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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
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Definition of Dumping
Dumping 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.
Dumping Measure
Price
Normal
Value
 Home Market Price
 Cost of Production
 Third Country Export
Price
Dumping Margin
U.S. Export
Price
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III. Antidumping, cont’d.
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Non-Market Economy Rules
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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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III. Antidumping, cont’d.
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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
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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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III. Antidumping, cont’d.
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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
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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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III. Antidumping, cont’d.
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Contested issues in Antidumping cases:
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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” governmentcontrolled 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
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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
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Subsidy Margin Phase before the DOC:
Series of questionnaires
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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
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Generally available benefits are OK
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Countervailable subsidies are domestic subsidies that
are “specific” to an industry or location or subset
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Infrastructure, highways, university education
Must apply equally to everyone and everywhere
Must be non-specific and not export oriented
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
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IV. Subsidies/CVD, continued
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Common Countervailable Subsidies Offered by the GOI
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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
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If a country wants to give low-priced goods to US
consumers by dumping or subsidizing exports, isn’t that
a good thing?
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Does putting the impetus for trade protections on
individual complainants result in rational economic
policy?
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Favors upstream (raw materials) US industries over downstream
US manufacturers (value added)
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?
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Prices will stay low as long as other foreign competitors exist
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