The U.S. Department of Commerce (the “Department”) is required by statute to, upon request, conduct a review and establish an individual dumping or countervailing duty margin for an exporter or producer of subject merchandise that did not export the subject merchandise during the period of investigation, and is not affiliated with any exporter or producer who exported the subject merchandise to the United during that period.  See 19 U.S.C. § 1675(a)(2)(B).  These reviews are commonly referred to as “new shipper reviews.”  Recently enacted legislation provides the Department with explicit authority to reject requests by foreign producers to benefit from a “new shipper” review if the imports in question are not bona fide sales.

New shipper reviews pose an inherent risk to a domestic industry that has obtained relief from unfairly traded imports through the imposition of an antidumping and/or countervailing duty order.  As is often the case, an exporter or producer requests a new shipper review based on one or a handful of high priced U.S. sales.  As the U.S. Court of International Trade (“CIT”) has explained,

the combination of a high “all others” rate and the {new shipper’s} high price compared to other import prices could mean two things: either {the new shipper} truly means to replicate the high price sale upon which it predicated the review, or, {the new shipper} will take advantage of one high price sale to secure a lower-than-average dumping margin, and then typically charge a far lower price (low enough to undercut the competition that has a higher dumping margin, but still high enough to make a hefty profit which would otherwise be unavailable).

Tianjin Tiancheng Pharm. Co. v. United States, 366 F. Supp. 2d 1246, 1252 n.7 (Ct. Int’l Trade 2005).  The “lower-than-average” dumping margin serves as the cash deposit rate for the new shipper until the new shipper’s sales are reviewed in an administrative review, often more than a year after the new shipper receives its individual dumping margin.  Accordingly, a new shipper has the ability to ship large quantities of subject merchandise pursuant to its “lower-than-average” cash deposit rate for an extended period of time thereby undermining the remedial effect of the antidumping or countervailing duty order.

To avoid the above-situation, the Department developed a “totality of the circumstances” test, also known as the bona fide sales test, to determine whether the sale under consideration is typical and will be representative of the new shipper’s future sales.  SeeHebei New Donghua Amino Acid Co. v. United States, 374 F. Supp. 2d 1333, 1337-38 (Ct. Int’l Trade 2005).  Where the Department finds that none of the exporter’s or producer’s sales are bona fide, it will decline to calculate an individual dumping margin and rescind the review.  Tianjin Tianchemg Pharm. Co., 366 F. Supp. 2d at 1249.   In the past the Department has considered such factors as: (1) the timing of the sale; (2) the price and quantity; (3) the expenses arising from the transaction; (4) whether the goods were sold at a profit; and (5) whether the transaction was at an arms-length.  Hebei New Donghua Amino Acid Co., 374 F. Supp. 2d at 1339 (citation omitted).

The Trade Facilitation and Trade Enforcement Act of 2015 (the “Act”), signed into law by the President of the United States on February 24, 2016, now makes clear that a new shipper will not receive an individual dumping margin based on a sale that is not bona fide.  Specifically, section 433 of the Act, titled, “Addressing Circumvention By New Shippers,” provides that “{a}ny weighted average dumping margin or individual countervailing duty rate determined for an exporter or producer” in a new shipper review “shall be based solely on the bona fide United States sales of an exporter or producer, as the case may be, made during the period covered by the review.”  19 U.S.C. § 1675(a)(2)(B)(iv).  In other words, the Department is required to consider whether the sales made by an exporter or producer requesting a new shipper review reflect that exporter’s or producer’s future sales. 

Additionally, the amended statute provides that in determining whether the sales under consideration are bona fide, the Department “shall consider, depending on the circumstances surrounding such sales” (1) “the prices of such sales;” (2) “whether such sales were made in commercial quantities;” (3) “the timing of such sales;” (4) “the expenses arising from such sales;” (4) “whether the subject merchandise involved in such sales was resold in the United States at a profit;” (5) “whether such sales were made on an arms-length basis;” and (6) “any other factor the administering authority determines to be relevant as to whether such sales are, or are not, likely to be typical of those the exporter or producer will make after completion of the review.”  Id.  Accordingly, the Department has wide latitude in examining the circumstances of an exporter’s or producer’s sales to determine if the sales are bona fide.