It was a long hot summer in Washington, DC, but that did not stop the US Department of Commerce from quietly floating proposals that would significantly alter the landscape in administering US antidumping and countervailing duty (AD/CVD) rules. Cloaked in the guise of enhancing US “competitiveness” and supporting the National Export Initiative, these new proposals would make it more difficult for foreign companies, especially those based in so-called non-market economies (e.g., China) to avoid costly AD/CVD measures. The question is, how do these measures do anything to enhance US exports?

Non-Market Economy Changes. The proposals cover 14 specific measures, half of which are directed at non-market economy (NME) cases. For NMEs, the proposals expand Commerce’s authority to account for certain additional costs and taxes in a manner that will bias antidumping margins higher than under current practice, and would change current rules for items such as the valuation of wages with the objective of increasing this cost element, again creating a bias towards higher antidumping margins.

General Changes. The seven proposals of general application covering both market and NME cases touch some key items including:

  1. Expanded use of random sampling in the selection of respondents (i.e., who must respond to an intrusive questionnaire seeking price and cost data) rather than choosing a few of the largest producers. This means Commerce could pick very small companies as the basis for calculating dumping margins that will apply countrywide and to large producers and exporters. Since small companies generally have fewer resources and systems to cope with AD cases, this will likely lead to higher AD margins in future cases.  
  2. No more company – specific AD/CV order revocations. Foreign producers subject to a AD/CVD order would no longer be allowed to obtain revocation of an order after obtaining three successive zero dumping margins (or five successive zero subsidy findings) in annual reviews. Instead, companies will remain under order until a case is revoked as to the whole country. This would make it more costly for foreign companies to deal with AD/CVD orders, as the only method to get out would be the five-year sunset review process. Orders would tend to stay in place longer, and the costs of administering annual reviews would continue indefinitely.  
  3. Tightened deadlines for submitting new factual information. This means less time for foreign parties to respond to information requests, increasing the probability of inadequate responses being deemed filed, more (and more intensive) supplemental questionnaires, and a need for more rigorous preparation.  
  4. Greater accountability. Commerce would “strengthen the accountability of attorneys and non-attorneys” and impose more stringent certification requirements for submissions. It is not clear how they would do this as the current rules are pretty clear, but whatever they do will involve greater costs to foreign companies as more work is required to prove the accuracy of a submission prior to counsel or consultants certifying submissions.  
  5. No more bonds in lieu of cash deposits. Commerce would undo 30 years of settled practice and require any imports potentially subject to AD/CVD orders to post cash deposits for the estimated duties owed, rather than post a bond, following issuance of a preliminary finding of dumping or subsidization. Again, this raises the cost of importing any product under an AD/CVD order as the entire amount of estimated duties would have to be paid immediately upon importation and before final agency decisions establishing violations are made.

A detailed listing of the proposals can be found at: http://www.commerce.gov/news/press-releases/2010/08/26/obama-administration-strengthens-enforcement-us-trade-laws-support-pr

Some of these proposals raise questions per our obligations under the World Trade Organization and the North American Free Trade Agreement. Some are not consistent with current US law. But at this point what we have is a trial balloon being floated in the name of export enhancement to see how far Commerce can tighten the rules in trade litigation disputes. We expect to see a significant amount of commentary as more detailed regulatory proposals are published and considered. We will be watching for developments.