AFI Association of Food Industries


AFI Serving the U.S. Food Import Sector

2020: Some Things Exporters Should Know About USA Antidumping Law and Practice 

AFI Staff Report

When an antidumping petition is filed against companies in a certain country or countries exporting a food product to the U.S., it will be a first-time experience for many of them and it will be confusing. They may look on the case as being political and then waste time trying to find a political solution. Instead, they need a lesson on antidumping from an expert. They need legal representation and they need to know the costs associated with legal representation. They need to understand the importance of working together so they can share the legal bills in some equitable and economical way, with appropriate procedures for protecting confidential information of each individual company.

Chaos to Be Expected

Antidumping cases throw the industry into chaos. They threaten the ability of an exporter to sell any longer in the U.S. market. They put the importer in a very vulnerable position because he/she is the one who will have to pay any dumping duty that is assessed and the rate of duty is always calculated retroactively.

The initiation of an antidumping case tells the importer in effect he/she can only safely do business for about two months. After that his/her vulnerability begins and he/she may not know the duty for which he will be liable until two years later. He/she may think the duty liability will be the fixed percentage the DOC sets in its final determination of the dumping margin but subsequent investigation during an administrative review can retroactively set that duty much higher.

Filing an Antidumping Petition

Antidumping petitions are filed with the Department of Commerce by U.S. companies against overseas companies exporting to the U.S. The charge is that the overseas companies are selling product to the U.S. at less than its fair market value; that is, below the price of the product in the exporter’s home market. The petitioners also must show the less-than-fair-market pricing is causing unfair injury to U.S. companies. 

Where there are minimal or no sales in the home market of the companies being investigated, the comparison may be made with sales to another market comparable to the U.S., e.g. the EU market.

When the dumping charges are against companies in non-market economies such as China or some of the still-somewhat newly independent states of Eastern Europe, dumping margins may be calculated on the basis of sales in a surrogate country that has a “market economy” and a similar standard of living or on the basis of the cost of production in the surrogate country when it also has no home market sales of the product. The cost of production calculation may be based on publicly available data that does not give a true picture of cost but that is one of the many risks exporters face in an antidumping investigation.

It is quite possible that in a non-market economy, companies survive via government help; profit may not part of the system. However, in DOC calculations, a reasonable profit and overhead costs are factored in to determine a fair market value.

Cannot Estimate Dumping Margin

No one is really in a good position to ascertain what dumping margin may result from an antidumping investigation. The petitioners will indicate a dumping margin they think exists but the findings of the DOC may be much higher or lower. 

One cannot compare U.S. import prices with domestic prices and estimate the dumping margin. If one, for example, knew the U.S. domestic price for an item was $1 a pound and the price for the import was $0.75 a pound, one could not conclude the dumping would be no more than 25 cents a pound and the dumping margin no more than 33 percent. The investigation may determine the dumping margin was 180 percent, meaning the imported product should have been priced at $1.35. The lesson one should draw from this is: never base business decisions on estimates of what one thinks the highest dumping margin will be.

One may expect the U.S. to be the high-cost producer on items under investigation in antidumping cases but after the technical analysis is done by the DOC, it often appears the high-cost producers are in the countries targeted for dumping, as unlikely as that may often seem.

Coordinating Defense

Once an antidumping petition is filed, there is little time for exporters to learn what’s involved, to coordinate their defense and engage suitable legal representation. 

Trade intelligence may indicate the likelihood of an impending antidumping action. If exports have increased dramatically to the U.S. while prices have declined significantly over a period of a couple of years and there are reports the domestic industry in the U.S. is not operating profitably, then the conditions are ripe for an antidumping case. 

Crisis Management

The threat of an antidumping case really calls for a crisis management plan to keep damage to a minimum should an antidumping investigation actually get under way. This plan should include:

  • an assembling of the exporters to explore what is involved in an antidumping case. This should include an orientation by an attorney experienced in antidumping law.
  • an understanding of the legal costs likely to be faced in an initial investigation as well as in subsequent investigations carried out while an antidumping order is in place.
  • a mechanism should be agreed upon for establishing a legal defense fund.
  • a law firm in the U.S. should be retained to begin preparations for defense against a possible antidumping petition.
  • a relationship between the exporters as a group and the importers as a group in the U.S. should be established to better coordinate the defense.
  • the service the firm will provide to the respondents
  • the technical nature of the investigation
  • the role of the DOC
  • the role of the U.S. International Trade Commission
  • the important time frames in the investigation and their affect on business decisions
  • the consequences of not cooperating fully in the investigation.

Cost Factors

Antidumping cases require legal expertise. The cost can vary depending on the law firm and the number of exporters being represented by the law firm. 

As antidumping cases are technical and not political in nature, attorneys with big political profiles such as former Congressmen or cabinet members are not necessary but could be useful if they also happen to be experts in antidumping law.

What is needed is a law firm that deals in trade matters and has considerable experience in antidumping law. The firm needs to know the current personnel, procedures and practice of the Department of Commerce and the U.S. International Trade Commission. 

The cost of engaging a law firm with good antidumping credentials would have at least the following approximate fees (these are very conservative estimates):

$30,000 for a lawyer to visit the foreign country for an orientation session with the companies likely to be the respondents in the antidumping case. One needs to fully explain in layman’s language U.S. antidumping law, how an antidumping investigation is conducted and what risks are involved with ongoing business.

$180,000 representation of an exporting company in an antidumping case. This will require two visits to the company in the foreign country: 1.) when it is preparing its response to a quite burdensome questionnaire used by the DOC at the start of its investigation; and 2.) when a team from the DOC visits the company to verify the accuracy of its response. The attorney will also monitor the case in the U.S. and may coordinate the defense with an importer group.

$425,000 for a joint representation of four companies. Some economies, particularly in regard to travel time and time spent in the foreign country, can be achieved in a joint representation, bringing the individual company cost down to about $90,000.

$175,000 for company representation during an administrative review, which is a subsequent investigation to determine the levels of dumping, if any, after an antidumping order has been in effect.

In addition to legal fees, there is frequently the need for the services of an economist, who will try to show that any injury suffered by U.S. companies is due to factors other than imports. The cost of the economist’s services can vary widely, but it can easily reach $90,000.

Legal Services

The law firm will provide essential information on how an antidumping case is conducted. It will explain:

The law firm should review all submissions by the exporters to the DOC so they will be consistent with other information available to the DOC and so the data is presented in the clearest possible way so as to fairly represent the business of the exporters. That will also help to avoid ambiguities that will allow the DOC to draw a negative inference when a positive one should be drawn.

The law firm must also be present when the DOC visits the exporters and verifies the accuracy of the information they have supplied in the investigation. Defense lawyers will understand the mindset of the DOC technicians and make sure the exporters have a clear idea of what they are being asked and will attempt to make sure their answers are not misconstrued by the investigators.

Roles of DOC and ITC

There are two parts to the dumping case, both of which are very technical but involve different agencies of the U.S. government. The Department of Commerce makes determinations as to the level of dumping margins. The U.S. International Trade Commission makes injury determinations. It determines the answer to the question: have the dumped imports actually caused injury to the like industry in the U.S. or do they threaten injury to the like industry? 

Dumping Margins to Be Expected

Once a petition for an antidumping case has been initiated, exporters should expect there will be a dumping margin. They should not feel they have lost the case because the DOC establishes dumping margins. However, they must do their best to keep the margins to a minimum by fully cooperating in the investigation. Nothing can substitute for the failure of a company to supply the complete information being sought by the DOC. Such failure will lead to an extremely punitive dumping margin by the DOC. It will be based upon whatever information is available and is always harmful to the company.

As long as there is likely to be a dumping margin, the objective must be to keep that margin to the lowest possible level so business can continue even after an antidumping order has been issued. To meet this objective there must be a very professional, comprehensive and skillful presentation of the facts.

Exporters need to know that in 95 percent of the antidumping cases the U.S. Department of Commerce determines there has been dumping during the period under investigation.

Proving Injury Is More Difficult

Even when the DOC determines there has been dumping, that dumping may not necessarily cause injury. Even if a domestic U.S. industry can show it has been unprofitable during the period being investigated, the reason may not be due to lower-priced imports but to very aggressive competition by their U.S. competitors or to crop failure or to poor business decisions. 

When antidumping petitions are denied it is usually on the basis that injury has not occurred. Some reports indicate that as many as 40 percent to 50 percent of petitions are denied because there has been no finding of injury or threat of injury to the U.S. domestic industry. 

Preliminary Determination

120 days after the petition has been filed, the DOC will normally make a preliminary determination as to the dumping margin. Sometimes the deadline for a determination is extended up to 60 days. 

The level of the dumping margin is different for each company examined, because each has its own unique cost structures and selling price both in the local market as well as in the U.S. market. Only a limited number of companies get investigated, provided they represent a substantial part of the exports to the U.S. Those not investigated fall into an “all other group”. Weighted averages of the dumping margins on the companies investigated serve as the basis for the dumping margin for the “all other” group.

Duty Deposits

If dumping margins are established at the preliminary determination, importers must begin to make duty deposits or post bonds equal to the antidumping margins.

If the margins change at the final determination, as is likely, the duty deposits are adjusted.

Final Determinations

A final determination will be made by the DOC 120 days after the preliminary determination is published. In order to make a final determination as to what the dumping margin should be, a team of auditors from the DOC will visit each company under investigation and examine its records. It will have already examined the completed questionnaires that were received from the companies earlier on in the investigation and will know exactly what it wants to verify through the audit. The audit often results in some adjustments to the preliminary margins. Deposit rates put in place with the preliminary determination will be adjusted accordingly.

About a year after the petition was originally filed, the ITC will make a final determination as to whether the U.S. industry is suffering material injury or is threatened with material injury. The ITC's determination is based on a factual record consisting primarily of responses to a second round of questionnaires issued to U.S. producers, importers and purchasers and to foreign producers as well as on briefs submitted to the ITC by interested parties and testimony presented during an extensive, day-long hearing conducted by the ITC.

If the ITC issues a final negative determination, the investigation is terminated, the deposit requirement is lifted and the deposits previously made by importers are refunded.  If the ITC issues a final affirmative determination, an antidumping order is issued.

Duration of Antidumping Order

Antidumping orders are in effect until revoked. It takes several consecutive administrative reviews showing an absence of dumping to terminate the antidumping order. There is also a five-year sunset provision for an antidumping order, meaning that at the end of five years the DOC must do an investigation to determine if there is still need for the order. Only if the dumping has ceased will the order be revoked.

Suspension Agreement

If in the preliminary determination of the DOC large dumping margins are set, the exporters should immediately consider the possibility of having their country enter into a suspension agreement with the Department of Commerce. Under a suspension agreement, minimum prices and/or quotas will be set. Suspension agreements last for five years. 

When minimum prices are set, the exporters can continue to do business as long as the minimum prices are low enough for them to still sell competitively in the U.S. When China entered into a suspension agreement on honey in 1995, the agreement coincided with a run up in prices due to world shortages. The high prices allowed China to sell at prices much higher than the minimum prices it had agreed to. The minimum prices were based on an average of world prices over a six-month period that ended three months before the minimum prices went into effect. In the rising market, this helped the Chinese exporters. However, when the market declined in the following year, China’s minimum prices were always higher than world prices. Therefore, it could not compete.

Administrative Review 

In the anniversary month of an antidumping order, an administrative review may be requested for one or more of the exporters. The petitioner can request an administrative review for any exporter, thus submitting that exporter to a costly investigation which may lead to a new and higher dumping margin. An exporter can also request an administrative review for the period covered by the order if it believes an investigation will lower the dumping margin. This frequently happens.

If no administrative review is requested for a particular year in which an antidumping order is in effect, duty deposits made during the year are liquidated at the duty deposit level.

It can take a year or more for an administrative review to be concluded. Only when it is concluded does an importer know what the dumping margin has been for the period under review. At least two years will have passed before he learns what his/her retroactive exposure to duties is.

Administrative reviews can be requested in each anniversary month of an antidumping order to cover the prior year or in the case of the first review to cover a period of approximately 18 months.

The failure of an exporter to cooperate fully in an antidumping investigation is likely to result in a very high dumping margin, because it will be based upon the most negative inference that can be drawn from the evidence before the DOC. This is not only damaging to the individual exporter but also to other exporters in the “all other group”. The high dumping margin calculated against it will also be used in calculating an average margin affecting companies not investigated. They are placed in a category for “all others” and all have the same dumping margin.

Importer Is at Mercy of Exporter

The importer is at the mercy of the exporter. As noted above, if an exporter fails to cooperate with the DOC in an investigation during an administrative review, the worst possible duty that can be set will be set. In the 1990s, in an antidumping case on canned pineapple imported from Thailand, an exporter was given a 24-percent dumping duty based upon the initial investigation. In a subsequent investigation during an administrative review covering the time period when the dumping order was in effect, the exporter did not cooperate fully because it was no longer planning to export to the U.S. As a result, the DOC increased the duty to 55 percent retroactively for a two-year period. The duty liability for that 31-percent increase in the duty fell on the importers. Such an increase could force an importer into bankruptcy. The exporter didn’t realize the consequences its lack of cooperation would have but did its best to cooperate in later stages because it wanted to have the ability to get back into the U.S. market at a later point.

In a pasta antidumping case, a dumping margin was set in the initial investigation. The exporter continued to ship to the United States for a period of time but then ceased doing business in the U.S. In a subsequent investigation during an administrative review the exporter refused to participate in the investigation. Therefore, the DOC raised the dumping margin retroactively from 21 percent to 71 percent. This is a risk of which the importer must be aware whenever there is an antidumping duty.

Association of Food Industries: Serving the U.S. Food Import Trade Since 1906
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