As part of the President’s National Export Initiative, the Commerce Department announced its intention of strengthening U.S. Trade Laws on August 26, 2010.[1] It identified fourteen different changes that it intended to make in its administrative practices. These are meant to improve the accuracy and efficacy of its administration of the trade laws. As of April 18, 2012 – nearly twenty months after the announcement, the Department has implemented just half of the proposals. Specifically, the Department has fully implemented seven of the 14 proposals, has published proposed changes for three proposals but has not yet implemented them, and has taken no action with respect to four proposals.
We present below (in italics) each of the Department’s proposals, immediately followed by text that discusses the current status of each. There does not appear to be any reason that the remaining trade law improvements cannot be implemented quickly at this point. Hopefully, the Administration will focus resources on doing exactly that in the coming weeks.
1. Expanded use of random sampling to select companies as individual respondents in AD investigations and reviews rather than choosing the largest exporters.
Under current practice, when the Department cannot review all companies for which reviews have been requested, it typically selects the company or companies accounting for the highest volume of imports. The Department has recognized that this approach means that companies with small export volumes are not likely to be reviewed. See Proposed Methodology for Respondent Selection in Antidumping Proceedings, 75 Fed. Reg. 78678 (Dep’t Comm. Dec. 16, 2010). Indeed, domestic parties have remained very concerned that Department’s practice denies them the opportunity to have exporters of concern examined and can lead to artificially low margins for many companies as the companies reviewed tend to be the same two or three from review to review which frees other companies to dump without regard to potential liability as they are almost certain not to be selected for review.
In its notice, the Department presented a random stratified sampling proposal for selecting respondents for review and solicited comments by January 31, 2011. It received 9 comments. Fifteen months later, the Department has not yet implemented its proposal.
2. Strengthening Commerce’s current practice regarding the issuance of company-specific AD rates in NME cases.
Under current practice, for reviews of imports from nonmarket economy countries, the Department treats all exporters as operating under state control unless they establish lack of state control both in law and in fact. Where lack of state control is established, the exporter is entitled to a rate separate from the country-wide rate otherwise applied. Commerce has recognized that its current de facto test may not take sufficient account of the government’s role and how it may impact the exporter’s activities, including price setting. See De Facto Criteria for Establishing a Separate Rate in Antidumping Proceedings Involving Non-Market Economy Countries, 75 Fed. Reg. 78676, 78677 (Dep’t Comm. Dec. 16, 2010). Domestic parties in many cases have been concerned that companies under potential state control are nonetheless receiving separate rates because of the type of review that has historically been undertaken. Coupled with the lack of review of many producers (previous item), this problem can significantly reduce the level of relief available under domestic law. In the cited notice, the Department has proposed establishment of a methodology which would include consideration of government control of activities in areas other than export. Id. The due date for comments was January 31, 2011. The Department received 9 comments. No final modification of the Department’s practice has been announced.
3. Clarification of Commerce’s current NME practice that when the Department uses import prices for valuing a production factor, such prices should include all applicable freight and handling costs.
On November 1, 2010, Commerce issued a policy bulletin affirming its practice of including international freight costs when using import statistics as surrogate values. See Policy Bulletin 10.2.
4. Clarification of Commerce’s current NME practice to require companies to report production inputs for all products produced at each of their facilities---not just those facilities that produced merchandise destined for the United States---for use in the Department’s NME dumping calculations.
On November 26, 2010, Commerce issued a policy bulletin affirming its practice of requiring NME producers/exporters to report production inputs for their total production of the merchandise that falls within the scope description, regardless of the ultimate country of destination, the location of the production facility, or the production process employed. See Policy Bulletin 10.3.
5. Clarification of Commerce’s current CVD practice to reiterate that Commerce considers state-owned enterprises (SOEs) as constituting a “specific” group when they are alleged to be receiving countervailable subsidies from the government.
On November 26, 2010, Commerce issued a policy bulletin confirming its practice of normally considering SOEs to be a group of enterprises and thus considering a subsidy that is limited to SOEs to be specific as a matter of law. See Policy Bulletin 10.1.
6. Reconsidering the treatment of export taxes and value-added taxes (VAT) in Commerce’s NME AD methodology.
The statute, section 772(c)(2)(B) of the Tariff Act of 1930 (19 U.S.C. § 1677a(c)(2)(B)), provides that the export price or constructed export price used in the dumping margin calculation shall be reduced by “the amount, if included in such price, of any export tax, duty, or other charge imposed by the exporting country on the exportation of the subject merchandise to the United States, other than an export tax, duty, or other charge described in section 771(6)(C) …” In NME antidumping proceedings, however, it had been the Department’s practice to not apply section 772(c)(2)(B) because the Department had believed that pervasive government intervention in NMEs prevented the identification and measurement of taxes paid by NME companies to NME governments.
In 2007, because present-day NMEs were sufficiently different from Soviet-style NMEs insofar as subsidies could be identified and measured, the Department changed its practice with respect to the application of CVD law to NMEs. Consistent with its change in position as to the application of CVD law to NMEs, the Department reconsidered its practice with respect to export taxes in NME AD proceedings and proposed a change in practice.
On January 27, 2011, Commerce issued a request for comments regarding a potential change to its treatment of export taxes and VATs in proceedings involving China and Vietnam. The Department proposed that in NME AD proceedings it would reduce the export price and constructed export price by the amount of the export tax, duty, or other charge imposed. See Proposed Methodology for Implementation of Section 772(c)(2)(B) of the Tariff Act of 1930, As Amended, In Certain Non-Market Economy Antidumping Proceedings, 75 Fed. Reg. 4866 (Dep’t Comm. Jan. 27, 2011). The deadline for comments to this proposal was February 28, 2011. Id. The Department received 15 comments to its proposal. It does not appear that the Department has implemented its proposal to date.
7. Strengthening the treatment of resellers and other non-reviewed parties in NME cases to ensure that such parties pay the full amount of AD duties.
Under current practice, if an NME entity is both a producer and an exporter of subject merchandise, that producer/exporter can be a respondent and its U.S. sales prices to the first unaffiliated U.S. purchaser will form the basis of Commerce’s margin calculation. If the NME producer sold subject merchandise to an NME exporter, the exporter can be a respondent and its U.S. sales prices to the first unaffiliated U.S. purchaser will form the basis of Commerce’s margin calculation. The decision becomes more complex if the NME producer or exporter sells to a third-country reseller who exports to the U.S. Then the Department determines whether, at the time of the sale to the third-country reseller, the NME producer or exporter knew that the goods were destined for export to the U.S. If so, then the NME producer or exporter will be treated as the respondent. If not, then the third-country reseller will be treated as the respondent.
On June 10, 2011, the Department proposed a change to its assessment rate practice for non-reviewed exporters in NMEs. See Non-Market Economy Antidumping Proceedings: Assessment of Antidumping Duties, 76 Fed. Reg. 34046 (Dep’t Comm. Jun. 10, 2011). Commerce explained the situation it proposed to address:
In administrative reviews of antidumping duty (“AD”) orders covering merchandise produced in NME countries, importers will sometimes declare in their entry documentation a cash deposit rate that is associated with a company which has a company-specific rate, as opposed to the NME-wide rate, but the sales underlying the particular entry are not reported to or reviewed by the Department in the course of the administrative review covering that company. As a result, there may be suspended entries to which the Department's final review results do not apply. Previously, in such situations, it was the Department's practice to instruct CBP to assess AD duties at the cash deposit rate in effect at the time of entry for such entries of merchandise.
Id. The Department proposed to instruct CBP to liquidate such entries at the NME-wide rate. Id. The Department noted that its proposal would apply “to merchandise produced in the NME country and exported to the United States either directly from the NME country or from a third-country reseller.” 76 Fed. Reg. at 34047.
After reviewing comments, the Department decided to implement the proposal. See Non-Market Economy Antidumping Proceedings: Notice of Policy Concerning Assessment of Antidumping Duties, 76 Fed. Reg. 65694 (Dep’t Comm. Oct. 24, 2011). The Department said that it will “instruct CBP to apply the NME-wide rate to entries suspended at a reviewed exporter's rate, but which are not reported to or reviewed by the Department during the administrative review process.” Id.
8. Adoption of a new methodology for valuing wage (labor) rates in NME cases by using surrogate wage rates that fully capture all labor costs (including benefits and taxes paid to workers by their employers) in the NME country.
For a number of years, the Department determined surrogate labor rates for an NME country by using a regression model that measured the correlation between ILO Chapter 5B data for “earnings” with the GNI of market economy countries. The Federal Circuit determined that this approach was contrary to the statute because it relied on data from countries that were not economically comparable to the NME country. SeeDorbest Ltd. V. United States, 604 F.3d 1363, 1372 (Fed. Cir. 2010). In June of 2011, the Department adopted a methodology for determining labor rates based on the use of ILO Chapter 6A information from a single-surrogate country. See Antidumping Methodologies in Proceedings Involving Non-Market Economies: Valuing the Factor of Production: Labor, 76 Fed. Reg. 36092 (Dep’t Comm. Jun. 21, 2011).
9. Eliminating the practice of allowing individual companies to seek removal from an antidumping (AD) or countervailing duty (CVD) order based on their ability to show zero dumping margins or subsidy rates for three (AD) or five (CVD) consecutive years.
Under current practice, an individual exporter or producer may request that the Secretary revoke an antidumping order or terminate a suspended investigation with regard to that person, if the person submits with the request its certification that (1) it sold the subject merchandise at not less than normal value for at least three consecutive years; (2) in the future it will not sell the merchandise at less than normal value; (3) during each of these consecutive years, it sold the subject merchandise to the United States in commercial quantities; and (4) it agrees to its immediate reinstatement in the order if Commerce decides that it, subsequent to the revocation, sold the subject merchandise at less than normal value. Similar conditions apply to an exporter’s or producer’s request to revoke a countervailing duty order. See 19 C.F.R. § 351.222(b),(c), and (e). To date the Department has not implemented this proposed change.
10. Tightening the rules in non-market economy (NME) cases for determining when the price of production inputs purchased from market economy countries will be substituted for the Department’s standard valuation for such inputs.
Under current practice, the Department normally presumes that market economy input prices are the best available information for valuing an entire input when the total volume of the input purchased from all market economy sources during the period of investigation or review exceeds 33 percent of the total volume of the input purchased from all sources during the period and Commerce will use the weighted-average market economy purchase price to value the entire input, unless case-specific facts provide adequate grounds to rebut this presumption.
If the volume of an NME firm’s ME purchases is below 33 percent with the remainder obtained from a source in the non-market economy, Commerce will weight-average the weighted-average market economy purchase price with the surrogate value for the NME purchases based on the respective shares of the total volume of purchases represented by the two.
Domestic parties have argued that Commerce should use surrogate values for any amount of product that is purchased from a non-market economy source since the market purchases could be limited in availability or otherwise not available for additional purchases at the same prices. Domestic parties are still awaiting Commerce action on this issue.
11. Considering whether importers will be required to post cash deposits rather than bonds for imports that fall within the scope of an AD/CVD investigation starting with the issuance of Commerce’s preliminary determination (rather than following the imposition of an AD/CVD order).
Under prior practice, importers were permitted to post a bond to ensure payment of any AD or CVD duties from the time of a preliminary affirmative determination in an investigation to the issuance of an order. Under the statute, the Department may modify this practice by requiring cash deposits as soon as a preliminary affirmative determination is made. In recent years, it was discovered that large amounts of dumping duties were not collected for various reasons. Domestic parties argued that requiring cash deposits would reduce the likelihood of undercollection.
On April 26, 2011, the Department proposed a modification to its regulations regarding the practice of accepting bonds for the provisional measures period (i.e., from the preliminary Commerce affirmative determination to the final ITC affirmative determination) in AD and CVD investigations. See Modification of Regulations Regarding the Practice of Accepting Bonds During the Provisional Measures Period in Antidumping and Countervailing Duty Investigations, 76 Fed. Reg. 23225 (Dep’t Comm. Apr. 26, 2011). The Department proposed “to establish that the provisional measures during an antidumping or countervailing duty investigation will normally take the form of a cash deposit.” Id. On October 3, 2011, after reviewing comments, the Department adopted this proposal and modified its regulation, 19 C.F.R. § 351.205(a) and (d), to provide that provisional measures during an AD or CVD investigation will normally take the form of a cash deposit. This change applies to all investigations initiated on the basis of petitions filed on or after November 2, 2011. See Modification of Regulations Regarding the Practice of Accepting Bonds During the Provisional Measures Period in Antidumping and Countervailing Duty Investigations, 76 Fed. Reg. 61042 (Oct. 3, 2011).
12. Strengthening the certification process for the submission of factual information to the Department.
On September 2, 2011, the Department increased and expanded the certification requirements for antidumping and countervailing duty proceedings. SeeCertification of Factual Information To Import Administration During Antidumping and Countervailing Duty Proceedings: Supplemental Interim Final Rule, 76 Fed. Reg. 54697 (Dep’t Comm. Sept. 2, 2011).
13. Strengthening the accountability of attorneys and non-attorneys practicing before Commerce.
Commerce has a long-standing practice of requiring company officials and their legal counsel and other representatives to certify to the accuracy and completeness of factual information submitted. However, there are no regulations that set forth internal procedures for the investigation of possible violations of the certification requirements. In 2004, the Department indicated that it might consider “proposing regulations to govern its investigation of allegations of false statements to the agency during antidumping and countervailing duty proceedings and the imposition of sanctions including possible disbarment from practice before the agency against those persons found to have certified and submitted false statements or engaged in any scheme to provide such statements.” See Certification and Submission of False Statements to Import Administration During Antidumping and Countervailing Duty Proceedings, 69 Fed. Reg. 3562, 3563 (Dep’t Comm. Jan. 26, 2004). Despite a number of cases in which major concerns have been raised concerning the integrity of the data provided in questionnaire responses to the Department, Commerce has taken no additional action on this issue beyond the September 2, 2011 Federal Register notice reviewed above.
14. Tightening the deadlines for submitting new factual information in AD/CVD cases.
Existing agency regulations specify filing dates for various factual information and/or allegations. See 19 C.F.R. § 351.301(b), (c), and (d). Petitioners have long been concerned that foreign producers may hold back information until late in the process for submission, making it difficult for domestic parties to protect their interests and difficult for Commerce to fully investigate issues that may be present in the data. Twenty months on, no change has been made in the deadlines for submitting new factual information.
Current Implementation Tally
Twenty months after the announced set of proposed improvements in trade law enforcement, only seven of fourteen proposals have been implemented by the Department. The Department has also published proposals and solicited comments for three of the other proposals, and has not yet taken any action on four.
With the challenges facing American manufacturers, their workers and America’s farmers and ranchers, it is important that our trade remedy laws work effectively and efficiently. The proposals that were announced in 2010 are long overdue. It is time for the Department of Commerce to complete the implementation steps domestic parties have been long awaiting.
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Trade Law Enforcement Improvements
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Implemented
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Proposal published
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No action taken
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1.
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Expanded use of random sampling to select companies as individual respondents in AD investigations and reviews rather than choosing the largest exporters.
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X
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2.
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Strengthening Commerce’s current practice regarding the issuance of company-specific AD rates in NME cases.
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X
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3.
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Clarification of Commerce’s current NME practice that when the Department uses import prices for valuing a production factor, such prices should include all applicable freight and handling costs.
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X
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4.
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Clarification of Commerce’s current NME practice to require companies to report production inputs for all products produced at each of their facilities---not just those facilities that produced merchandise destined for the United States---for use in the Department’s NME dumping calculations.
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X
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5.
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Clarification of Commerce’s current CVD practice to reiterate that Commerce considers state-owned enterprises (SOEs) as constituting a “specific” group when they are alleged to be receiving countervailable subsidies from the government.
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X
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6.
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Reconsidering the treatment of export taxes and value-added taxes (VAT) in Commerce’s NME AD methodology.
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X
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7.
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Strengthening the treatment of resellers and other non-reviewed parties in NME cases to ensure that such parties pay the full amount of AD duties.
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X
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8.
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Adoption of a new methodology for valuing wage (labor) rates in NME cases by using surrogate wage rates that fully capture all labor costs (including benefits and taxes paid to workers by their employers) in the NME country.
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X
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9.
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Eliminating the practice of allowing individual companies to seek removal from an antidumping (AD) or countervailing duty (CVD) order based on their ability to show zero dumping margins or subsidy rates for three (AD) or five (CVD) consecutive years.
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X
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10.
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Tightening the rules in non-market economy (NME) cases for determining when the price of production inputs purchased from market economy countries will be substituted for the Department’s standard valuation for such.
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X
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11.
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Considering whether importers will be required to post cash deposits rather than bonds for imports that fall within the scope of an AD/CVD investigation starting with the issuance of Commerce’s preliminary determination (rather than following the imposition of an AD/CVD order).
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X
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12.
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Strengthening the certification process for the submission of factual information to the Department.
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X
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13.
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Strengthening the accountability of attorneys and non-attorneys practicing before Commerce.
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X
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14.
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Tightening the deadlines for submitting new factual information in AD/CVD cases.
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X
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[1] Press Release, Department of Commerce, Obama Administration Strengthens Enforcement of U.S. Trade Laws in Support of President’s National Export Initiative (Aug. 26, 2010).
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