The Trade Preferences Extension Act of 2015 (H.R. 1295), which President Obama signed into law on June 29, extends Trade Adjustment Assistance (TAA) and trade preferences and also contains important modifications to U.S. antidumping (AD) and countervailing duty (CVD) procedures (trade remedies). Each of the changes to the trade remedies laws in the act will enable the U.S. Department of Commerce (Commerce) and the U.S. International Trade Commission (ITC) to more easily impose AD and CVD orders, to assess higher duty rates, and to examine fewer respondents. The act also will give Commerce even greater authority to act in a more punitive manner against companies that do not cooperate with the proceeding.
On the other hand, the act does not include proposed procedures for a federal agency (such as Commerce) or interested party to make allegations of a company’s evasion of AD and CVD orders to U.S. Customs and Border Protection (CBP). Those “evasion” proposals remain pending in Congress as part of the House and Senate Customs authorization bills and will likely be resolved in conference in the coming weeks.
We briefly summarize below the AD and CVD changes enacted in the act.
- Adverse Inferences Easier to Apply – Section 502 of the act will make it easier for Commerce to impose “adverse inferences” against interested parties (including foreign respondents) in the selection of margins of dumping or subsidization. The law states that Commerce does not need to account for information that the party would have provided in its response: “[Commerce] is not required to determine, or make any adjustments to, a countervailable subsidy rate or weighted average dumping margin based on any assumptions about information the interested party would have provided if the interested party had complied with the request for information.” This provision has been adopted in response to a spate of recent judicial decisions that overturned unrealistically high margins of dumping imposed on respondents where evidence suggested that actual rates were lower. The act also reduces Commerce’s obligations to corroborate its adverse inferences imposing higher rates when those are based on other programs, and gives Commerce more leeway to impose punitive rates based on its own discretion, specifically removing the requirement that Commerce prove its rates “reflect commercial reality.”
- Material Injury and Profitability – The act provides in Section 503 that, in ITC determinations regarding whether foreign imports materially injure the U.S. domestic industry, the ITC is not permitted to determine that material injury is not present solely because the domestic industry is profitable or because its performance has recently improved. Instead, the Act instructs the ITC to consider a number of broader economic factors, including “actual and potential decline in output, sales, market share, gross profits, operating profits, net profits, ability to service debt, productivity, return on investments, return on assets, and utilization of capacity.” The provision is intended to increase the likelihood of affirmative injury determinations, although its effect in practice is less certain.
- Cost of Production and Particular “Particular Market Situation” – The act in Section 504 and 505 gives Commerce additional discretion when determining costs of production and constructing normal value in order to calculate an applicable duty rate. The act provides that if Commerce determines that the cost of materials or processing reported “does not accurately reflect the cost of production in the ordinary course of trade, [Commerce] may use another calculation methodology under this subtitle or any other calculation methodology.” Further, Commerce may find that a sale or transaction is outside of the ordinary course of trade whenever “[Commerce] determines that the particular market situation prevents a proper comparison with the export price or constructed export price.” The act also makes it easier for Commerce to disregard prices or values it determines are below the cost of production or are related to export subsidies, subsidization, or subject to an AD order. These provisions may very well be intended to support continued application by Commerce of alternatives to market economy treatment for Chinese respondents after the expiration of WTO non-market economy authority at the end of 2016.
- Respondent Selection – The act in Section 506 enables Commerce to investigate fewer parties in its proceedings by making it easier for the agency to decline to review “voluntary” respondents who have requested to be reviewed and have their margins determined on an individual basis based on their own data. This provision, too, is in response to judicial decisions that have faulted Commerce for failing to investigate a sufficient number of respondents willing to participate in Commerce proceedings. The new law will likely perpetuate the practice of reviewing no more than two or three respondents in each review.
Each of these provisions, which Congress has characterized as “improvements” to the trade remedies laws, make it easier for Commerce and the ITC to impose AD and CVD duties on U.S. imports. It will be important for companies involved in trade remedy proceedings to monitor closely how Commerce and the ITC decide to implement these changes, as they could result in new and higher duties being imposed on imported products.