United States: the anti-dumping procedure (Fr)
1993 Export Legal and Tax Notebooks
The anti-dumping law constitutes an important element of the legal arsenal available to American industrial companies, to protect themselves from foreign competition which sells on the American market at a price considered as not reflecting the fair value of the product (" prices below fair value ”).
The law provides that an "anti-dumping" tax will be added to normal customs duties, if two conditions are met:
1. that the goods are sold in the United States below their 'fair value'
2. that an industry in the United States is suffering, or is threatened with, real injury as a result of its imports.
Dumping cases therefore have two aspects:
A determination by the Department of Commerce (hereafter DOC) as to whether the sales are made in the United States below the "fair value" of the product and a determination of the existence of injury suffered by the complainant by the International Trade Commission (hereinafter ITC).
A) DETERMINING THE DOC ON THE EXISTENCE OF SALES BELOW THE FAIR VALUE OF THE PRODUCT: "SALES AT LESS THAN FAIR VALUE"
The law defines 'fair value' as being, in order of preference:
1. the selling price on the producer's national market, or goods,
2. the selling price on third country markets, or goods,
3. the reconstituted value.
If there are sufficient sales in the home market, the DOC will not look into sales in third countries. On the other hand, if the sales on the original market or in third countries prove to be below the production cost, the DOC will have recourse to the reconstituted value which is equal to the production cost plus a minimum of 10 % for overhead and 8 % profit.
In general, for sales in the United States, the DOC takes into consideration the price made by the exporter to the American importer. There are, however, special rules when sales are made by the exporter to American affiliated companies.
To establish its basis for comparing the sale price, the DOC details all the elements of the price such as transport, insurance, packaging costs, etc., in order to obtain an ex facto price for each market in a consistent manner.
To this end, the DOC obtains the information it needs by sending a detailed questionnaire to the main exporters in the designated country. Essentially, exporters must describe all of their sales to the United States and to designated foreign markets over a period of time, which is generally six months. This list must be established invoice by invoice and each item of each invoice is individualized on the list.
The exporter has the obligation to submit this information in paper and computer form, according to the software model established by the DOC.
When the DOC requires cost of production information, the exporter must provide details of its costs for each type or model of product under investigation.
In addition, the exporter must allow the members of a DOC investigative committee to visit its offices and factories to verify the accuracy of the information provided.
If a foreign company does not respond to the DOC questionnaire, or if a response cannot be verified, DOC will then use the best information available criterion to calculate the margin of dumping. This best available information almost always corresponds to the figures alleged in the complaint.
Knowing this, the complainants always report the highest credible margin, so that if the foreign exporter does not cooperate, the customs penalty will be very high.
B) THE DETERMINATION OF INJURY BY THE ITC (INTERNATIONAL TRADE COMMISSION)
The ITC is an administrative agency separate from DOC, which is responsible for deciding whether an American industry is affected by the discriminatory practice.
The law defines material damage as damage which is not negligible.
To establish material injury, the Commission analyzes the volume of imports, the effect of these imports on prices, lost sales, market share, profits and productivity of domestic companies, profitability, capacity of use, employment, stocks…
If a complaint is made against two or more countries, the Commission will determine the volume and effect of these imports cumulatively.
C) THE PROCEDURE
The law and regulations provide for very strict and short procedures and time limits for each phase of the procedure.
It is therefore essential that the defendant company prepare its responses as quickly and as completely as possible, because failure to meet deadlines can be fatal.
When a dumping proceeding is initiated, the investigation covers specific products from a particular country. The national nature of the dumping procedure means that all producers and exporters in this country are affected by this procedure, whether or not they are named in the complaint. If a dumping decision is finally made, it will apply to all companies in the country concerned, whether or not they participated in the information.
1. Opening of information by DOC
Within 20 days of the filing of the complaint, the DOC must decide whether to open the information. If so, the information is opened on the 20th day.
2. Prior determination of ITC
The ITC must complete its preliminary injury determination within 45 days of the filing of the complaint. In order to respect this deadline, the Commission fixes the first date of public hearing practically immediately after the opening of the information, generally the 21st or the 22nd day after the filing of the complaint.
Because of this very short delay, the foreign industry must decide, before the information is opened, whether it intends to participate in this hearing. If this is the case, she must immediately take advice, gather the evidence and prepare her defense.
If she waits until the information is actually opened, she will not have the time necessary to prepare for this hearing.
The Commission having to examine the injury suffered by the American industry, it is the United States market which will be the object of its main attention. Companies that import and sell the product on the American market can be of great help in this regard since they know the market much better than the foreign producer. Their participation as well as that of their client is therefore, at this stage of the procedure, very important.
Within 45 days of the filing of the complaint, the Commission must decide whether there is a reasonable indication of material damage, based on the best information available to the Commission at that time. If the ITC rules in the affirmative then, the DOC investigation procedure begins. If the Commission's preliminary determination is negative, the matter is closed.
3. Preliminary determination of the DOC
Within 160 days of filing the complaint, if the ITC issued an affirmative injury opinion, the DOC must make a "preliminary determination" as to whether the products are sold below their "fair value" value ”.
As soon as it receives the green light from the ITC, the DOC sends a questionnaire to all the main producers in the country under investigation. Each producer has 30 days to respond and can, in general, obtain an additional 15 days. These questionnaires require a considerable volume of general information about each company and further request that a detailed list be made of all sales made one by one in the United States and in the foreign market during the period under investigation. . This is generally a period which covers the 5 months preceding the filing of the complaint. The answers to the questionnaire must be given on a computer diskette in the format proposed by the DOC. Most of the time, the computerized answers to this sales questionnaire will be several hundred pages long and contain several thousand lines of information.
In a case concerning the cost of production and the reconstituted value, the DOC questionnaire will also ask for information concerning the cost of production of each sample of model or type of product under investigation. This information is generally required in chronological order for a full year, divided into quarters, plus information for the period up to the month of the filing of the complaint. For example, If a complaint is made in July 1987, cost information will likely be required for each quarter of 1986 plus the first two quarters of 1987.
If the DOC receives the replies to the questionnaires in good time, it will base its preliminary determination on these replies. Otherwise, it will use its "best available information source".
4. Effects of the DOC's Prior Determination
If this pre-determination is affirmative and the DOC considers that there are margins of dumping, the determination will tell what percentage of the price of the foreign product has been exceeded by the price of the foreign product.
This preliminary determination has two consequences:
a) The DOC orders the suspension of the liquidation of all imports in progress for the products subject to this determination and requires importers to deposit an amount equal to the said margin for any new imports.
b) ITC begins its final injury investigation.
5. Final determination of the DOC
Within 75 days of its preliminary determination, the DOC must make its final determination, determining whether the sales have taken place below fair value.
Before making this final decision, the DOC teams will visit the offices or factories of all the companies that replied to the questionnaires to verify the accuracy of their responses. Any response that has not been verified will be rejected and the DOC will generally rely on the margins alleged in the complaint as the best source of information available.
If the final determination is affirmative, the DOC will maintain the suspension of the liquidation of the rights and modify the margin initially estimated, in accordance with its final result.
If the final determination of DOC is negative (zero margin), the investigation will be terminated and the monies returned will be refunded. A negative final determination is a victory for the exporting country. However, sometimes one or more investigated countries receive a negative final decision from DOC and others an affirmative decision. In this case, the first companies are no longer concerned by the case which is continuing against the others.
It is also important to note that the DOC only has the obligation to investigate and issue its questionnaire for companies which represent a substantial amount of exports for the product concerned in each country involved.
According to the DOC interpretation, this applies to companies responsible for at least 60 % of these exports. If a company does not receive a questionnaire, it will however be subject to a dumping rate corresponding to the average of the rates used against the companies which received the questionnaire.
Therefore, it is important to determine in advance what the particular margin of a company is likely to be, and, if it is low or non-existent, to ensure that the company in question receives a DOC questionnaire. This will allow this company to obtain its own rate (to wish for zero) and thus to protect itself from the consequences of the average rate which is likely to be much higher than that which would concern it. If this company's current rate is zero, it will be free from the consequences of the subsequent dumping determination.
6. Retroactive application of dumping rates
In addition to the above, it is possible that dumping duties may be imposed retroactively up to 90 days before the date of the decision ordering the suspension of the assessment of the duties. This happens If the DOC determines that there are "critical circumstances". Such a decision requires:
I) - a history of dumping of this goods in the United States or elsewhere or that the importer knew that the goods were sold below their fair value and
II) - that there was a massive importation of this commodity during a short period. If these two conditions are met. dumping duties can be imposed retroactively.
7. Final determination of ITC
If the DOC makes a final determination of dumping, the ITC will have to make a final determination of injury. The time limits for this depend on whether the DOC's prior determination was affirmative or negative. In this final decision, the Commission decides whether the domestic industry has in fact suffered material injury or If it is threatened by material injury as a result of the dumped imports.
If the ITC's final determination is affirmative, the DOC will issue a dumping order. From this moment, the importer will have to enter the estimated amount of duties in the amount of the margin when the goods are imported.
These rights are then subject to liquidation during the following annual verifications, which may take place at the request of an importer, exporter or domestic producer.
If the final ITC determination is negative (no harm). The matter is closed. Such a decision clearly constitutes a complete victory for the exporting party.
In general, a dumping case is completed within 1 month of the filing of the complaint. The time available to the foreign party to submit the required information is very short, only a few days in the initial phase to prepare for the Commission's hearing and only 30 to 45 days to respond to the DOC's questionnaire.
Therefore, it is in the interest of the country under investigation to start preparing its defense as soon as possible. This means that decisions about how to proceed should be made soon after the complaint is made and well before the information is opened. This advance preparation involves both the ITC audience and the preparation of the information necessary to respond to the DOC questionnaire. Companies that are able to secure an additional 4 to 6 weeks of preparation by preparing their responses in advance will have the greatest chance of success in the final outcome.
On the other hand, for the reasons explained above, each exporter has an interest in protecting its own position by taking steps as soon as possible, after a complaint has been filed against a company in its country, or even before, s 'he is informed that such a complaint is about to be lodged.