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The Import Administration Can Seek Relief for 
U.S. Firms from Unfairly Traded Imports
(First Published in Business America, August 1998)

By Andrew Stephens
Office of Policy Import Administration and 
Lauren Baker Office of Public Affairs, International Trade Administration 

Imagine owning and operating a widget company in Small Town, USA. For years you have run a tight ship, you track your costs with a keen eye, and consider your company the most efficient manufacturer of widgets - bar none - either in the US or worldwide. However, despite your efficient operations and fair prices, you find that you are consistently being under-priced by a foreign competitor. Knowing the market as you do, you know that your competitor is charging far less than it costs to produce the item, is charging more for it in its home market, and is receiving financial assistance from their government to compete in the US What do you do? 
The Commerce Department's efforts to help US firms to develop new export markets and maintain equal access to those markets are well known to many U.S. companies. However, firms may not realize that the Commerce Department also enables them to take an active part in addressing unfair import competition.

In today's global marketplace, the lack of a level playing field can make it difficult for American businesses to compete. Unfair foreign pricing and government subsidies distort the free flow of goods and adversely affect American business. Import Administration, within the International Trade Administration of the Department of Commerce, enforces laws and international agreements to protect U.S. businesses from unfair competition within the U.S. resulting from unfair pricing by foreign companies and trade distorting subsidies to foreign companies by their governments. 

This article provides a brief overview of how Import Administration provides a way for firms to seek relief from unfairly traded imports by filing a petition seeking the imposition of antidumping duties or countervailing duties on imports of the unfairly traded merchandise. Antidumping duties counter unfair pricing practices while countervailing duties offset the effect of unfair subsidies. Antidumping and countervailing duty trade remedies have been successfully pursued by a variety of domestic industries, including producers of steel, industrial equipment, computer chips, agricultural products, textiles, chemicals, and consumer products. 

If your business is facing unfair foreign competition, you may wish to assess whether the filing of an antidumping or countervailing duty petition is appropriate for your industry. Import Administration can provide information about the antidumping and countervailing duty laws and the process by which a case is initiated. Import Administration may also assist eligible small businesses with the filing process by identifying sources of information, explaining the dumping calculation process, and by reviewing a draft petition before it is formally submitted for filing.
 



What is Dumping? 
Dumping occurs when a foreign producer sells a product in the United States at a price that is below that producer's sales price in the country of origin ("home market"), or at a price that is lower than the cost of production. Essentially, when firms engage in dumping, they are maximizing their profits through price discrimination - charging different prices for the same product in two different markets. The difference between the price (or cost) in the foreign market and the price in the U.S. market is called the dumping margin. Unless the conduct falls within the legal definition of dumping as specified in U.S. law, a foreign producer selling imports at prices below those of American products is not necessarily dumping.
 


What is a Countervailable Subsidy?
Foreign governments subsidize industries when they provide financial assistance to benefit the production, manufacture or exportation of goods. Subsidies can take many forms, such as direct cash payments, credits against taxes, and loans at terms that do not reflect market conditions. The amount of subsidies the foreign producer receives from the government is the basis for the rate by which the subsidy is offset, or "countervailed," through higher import duties. While governments can take many actions which could be said to confer benefits on their producers, not all of these actions are viewed as countervailable subsidies. Generally, the benefit must be limited to a specific group of firms or industries or to a firm's export activities in order to be a countervailable subsidy. The U.S. statute and regulations establish standards for determining when an unfair subsidy has been conferred. 


How is Dumping or Subsidization Remedied?
If a U.S. industry believes that it is being injured by unfair competition through dumping or subsidization of a foreign product, it may request the imposition of antidumping or countervailing duties by filing a petition with both Import Administration and the United States International Trade Commission (ITC). While Import Administration determines whether and to what extent dumping or unfair subsidization is occurring, the ITC determines whether the domestic industry is suffering material injury as a result of the imports of the dumped or subsidized products. The ITC considers all relevant economic factors, including the domestic industry's output, sales, market share, employment, and profits. Both the ITC and Commerce must make affirmative preliminary determinations for an investigation to go forward.
 



How Long Does it Take for Antidumping or 
Countervailing Duty Orders to be Issued?
The investigation begun by a petition proceeds as follows. Import Administration will review the petition and determine within 20 days of the date of filing whether the petition meets the statutory requirements for initiating an investigation. If the petition is accepted, within 45 days of the date the petition was filed the ITC will make a preliminary determination of whether there is a reasonable indication that the domestic industry is injured or threatened with injury by reason of unfairly traded imports. If the ITC believes there is no indication of injury, the investigation is terminated. If the ITC's preliminary determination is affirmative, Import Administration will make its preliminary determination of whether dumping or unfair subsidization is occurring by analyzing sales information provided by foreign producers and exporters in response to detailed questionnaires that Import Administration sends to them.
 

If both the ITC and IA make affirmative preliminary determinations (within 190 days of an initiation of the antidumping investigation, or 130 days for a countervailing duty investigation) importers are required to post a bond or cash deposit with the U.S. Customs Service to cover an estimated amount of duties which will be collected if an antidumping or countervailing duty order is issued upon the completion of the investigation. 
After the preliminary determination, the investigation proceeds with on-site verification of the data submitted by the foreign party doing the dumping and/or subsidizing. A final determination is announced within 75 days of the preliminary ruling. If the finding is negative the investigation is terminated. If it is affirmative, the investigation continues. The ITC typically makes its final determination on injury within 45 days of Import Administration's final ruling. Typically, the final phases of the investigations by Import Administration and the International Trade Commission are completed within 12 to 18 months of initiation.
 
 

What Relief is the End Result of an Antidumping 
or Countervailing Duty Investigation?
If both Import Administration and the ITC make affirmative findings of dumping and injury, Import Administration instructs the U.S. Customs Service to assess duties against imports of that product into the United States. The duties are assessed as a percentage of the value of the imports and are equivalent to the dumping and subsidy margins, described above. For example, if Commerce finds a dumping margin of 25%, the U.S. Customs Service will collect a 25% duty on the product at the time of importation into the United States in order to offset the amount of dumping. 
 


How are Dumping Margins and Subsidy Rates Calculated?
Dumping margins are calculated using information collected from the foreign producers and exporters of the subject merchandise. Based on the transactions of a firm, Import Administration makes a price comparison measuring the difference between the U.S. price of the allegedly dumped imports and the "Normal Value" to which it is being compared. Generally, Normal Value is defined as the price of the merchandise in the firm's home market or its cost of production. Adjustments are made to account for physical differences in merchandise and differences in levels of trade between the Normal Value and the imports, to ensure that the comparison is made on an "apples to apples" basis. Therefore, to make certain that the comparison is not distorted by factors extraneous to the central issue of price discrimination between markets, Import Administration adjusts the "starting" price of the product in each market to account for any differences in prices resulting from verified differences in physical characteristics, quantities sold, levels of trade, circumstances of sale, applicable taxes and duties, and packing and delivery costs. 
 

The comparison between Normal Value and the U.S. price is normally done by creating a computer program that compares model-specific weighted-average prices. The difference in the two prices is the dumping margin which is calculated and applied on company-specific terms for all firms investigated. A weighted-average of these margins is calculated and applied as an "all others rate" to firms which were not investigated. Exporters continue to receive the "all others rate" until a review is requested for that company during an annual review process. In an annual review, Import Administration examines the transactions of each company for which a review is requested to determine whether and to what degree dumping is continuing. If the results of the annual review indicate that the dumping margin has changed, the amount of duties collected on those entries will be revised, and a new cash deposit rate for future entries will be established. 
Subsidy rates are calculated by determining the value of the benefit provided by subsidies for the manufacture or export of the subject merchandise. Import Administration calculates the value of the benefits on a company-specific basis using the information obtained from the companies and the government in response to Import Administration's questionnaires and from other sources. Subsidy rates may also be revised in an annual review process. 
 


What are the Requirements for Filing an Antidumping or Countervailing Duty Petition?
Petitions may be filed by a domestic interested party, including a manufacturer or a union within the domestic industry producing the product which competes with the imports to be investigated. To ensure there is sufficient support by domestic industry for the investigation, the law requires that the petitioners must represent at least 25% of the domestic production of the product that competes with the imports to be investigated. The statute requires the petition to contain certain information, including data about conditions of the U.S. market and the domestic industry, as well as evidence of dumping or unfair subsidization. 


How Can I Learn More about Filing a Petition?

Contact the Import Administration, 
Office of Policy at (202) 482-4412 or by e-mail at ImportPolicy_Support@ITA.DOC.GOV

Additional information can also be found at 
the Import Administration web site:
trade.gov/import_admin/records/
 
 


 
 
 

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