CHAPTER XXII Antidumping, Countervailing & Safeguard Measures

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Dumpings by a Foreign Manufacturer

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Subsidies by a Foreign Government

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Antidumping Duties (ADs) & Countervailing Duties (CVDs)

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Procedures for ADs and CVDs

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Safeguard Measures

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Dumpings by a Foreign Manufacturer

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When products are sold in the U.S. at a price less than the fair market value (1) (2) (3) 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): pricing-India, Pakistan, Thailand, Bangladesh or Indonesia Surrogate

2

Market Economic Status of China

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On 11/15/2005, Korea gave Market Economic Status (MES) to China as the 43 rd country.

As of 5/2009: 97 countries China’s major trading partners-the U.S., the EU, Japan & India have yet to acknowledge China’s 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 are used to measure the normal value of the products

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Subsidies by a Foreign Government

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Financial contributions to a country’s exporters by a government or any public body.

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Grants, loans, equity infusions, loan guarantees, tax credits, provision of goods or services, or purchase of goods.

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Dumpings and subsidies allow foreign manufacturers to sell their products to the United States below a fair market value

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Subsidy is subject to the Subsidies and Countervailing Measure (SCM) Agreement of the WTO

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Subsidies by a Foreign Government

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Export-related Subsidies Classified by the WTO (1) Prohibited Subsidies : a. Export subsidies:

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Contingent on export performance

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Tax remission or deferral on export earnings, favorable export credit below government’s cost, a bonus on export, etc.

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b. Import substitution subsidies:

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Contingent on the use of domestic goods

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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:

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Given to specific industries or enterprises. Production subsidies Not prohibited, but subject to challenge Adverse effect Rebuttable presumption of serious adverse effect

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Subsidies of greater than 5% ad valorem

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Covering operating losses Direct forgiveness of debt

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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:

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Cannot be challenged multilaterally

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Cannot be subject to countervailing action

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Basic research & pre-competitive development subsidies

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Assistance to disadvantaged regions Assistance to adapt existing facilities to new environmental requirements

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Agricultural Subsidies

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Special rules regarding agricultural subsidies are contained in the Agreement on Agriculture

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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)

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Antidumping duties : Extra duties for dumping margin collected to offset the effect of dumping

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Countervailing duties : Extra duties to counter the effect of foreign government's subsidies

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Must injure a U.S. industry except prohibited subsidies

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Procedures for ADs and CVDs

(1) 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

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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.

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Emergency action

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Quantitative import restriction or Duty increases to higher than bound rates

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In principle, cannot be targeted at imports from a particular country alone

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Safeguard Measures

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However, quotas can be allocated among supplying countries

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Member imposing them must give something in return to affected members.

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Affected exporting countries can seek compensation through consultation.

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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

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Exemption:

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Imports from a developing country less than 3% of total imports or from several developing countries less than 9% of total import

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Must be serious injury-Significant impairment

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WTO Dispute Settlement Understanding applies

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Safeguard Measures

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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)

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Maximum duration 4 years unless extended. Cannot be more than 8 years with extensions

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