On June 21, 2011, the Department of Commerce (“DOC”) published its decision to change the methodology of valuing the labor cost of non-market economy (“NME”) countries in antidumping proceedings. DOC announced that it would use industry-specific labor costs prevailing in the primary surrogate country to value the NME respondent’s labor input.
In NME cases, DOC compares the U.S. export price of the subject merchandise to its “normal value” to determine the dumping margin for a respondent. The DOC’s method for calculating a “normal value” is to multiply the actual consumptions of factors of production (“FOP”) of an NME respondent, e.g. raw materials, energy, labor, etc., with assumed surrogate prices, and then add the factors of surrogate overhead, SG&A, profit, etc., to the result of multiplication.
Two highlights in the changes are:
1. Single Surrogate Country Wage Rate
In the previous NME antidumping proceedings, DOC used the multinational regression-based wage rate as reported in the International Labor Organization Yearbook of Labor Statistics (“ILO Yearbook”) to calculate proper wage rates surrogate labor costs. In its public notice on June 21, DOC announced that the single surrogate country data would be used for calculating surrogate labor costs. India is usually selected as the surrogate country by DOC in antidumping cases against China. Considering that the wages in India are lower than most areas in China, this change may benefit Chinese respondents.
2. ILO Data Source
DOC determines the surrogate labor costs for NMEs on basis of the wage data published in the “ILO Yearbook”. In the past, DOC used the rates in Chapter 5B of the ILO Yearbook, which include basic wages, cost-of-living allowances and other guaranteed and regularly paid allowances, but exclude overtime payments, bonuses and gratuities, family allowance and other social security payments made by employers. Chapter 6A data, however, covers all costs incurred by employers with respect to employees, including such as the employer’s social security expenditures, bonuses and gratuities and all other miscellaneous items. According to the June 21st decision, DOC will adopt Chapter 6A data instead of Chapter 5B data to calculate the surrogate wage rates for NME respondents in the future. Since the Chapter 6A wage rates are higher than the Chapter 5B rates, the labor cost calculated on the basis of Chapter 6A will increase and accordingly the chance of a dumping finding will likely increase.
Given these new changes, it is anticipated that DOC may tend to interpret and implement the new labor valuation methodology to facilitate the findings of a higher dumping margin in coming antidumping cases against China.