Commerce Department's Proposed Changes to AD/CVD Policy and Procedures Likely to be Criticized by U.S. Trading Partners

The U.S. Department of Commerce announced today a number of proposed changes to U.S. antidumping (AD) and countervailing duty (CVD) policy and procedures intended to "strengthen trade enforcement and help keep U.S companies competitive." These measures, which are certain to be controversial and provoke criticism from China and other U.S. trading partners, will be reviewed by the Commerce Department during the next few months through a "transparent review" that will include an opportunity for public comments.

Most of the proposed changes are targeted at countries designated as non-market economies, which currently include China and Vietnam.

U.S. importers of products subject to AD/CVD investigations are likely to oppose the proposed change that would require importers to post cash deposits rather than bonds to secure entry of their products into the U.S. once a preliminary affirmative determination is made in an AD/CVD case.

A number of the proposed changes to current AD/CVD law and practice are also likely to generate a strong reaction by attorneys that handle AD and CVD cases on a regular basis. There will also be questions as to whether these changes are in compliance with the WTO Anti-dumping Agreement and the WTO Agreement on Subsidies and Countervailing Measures.

Another controversial aspect of this proposal is that the press release announcing these proposed changes claimed that these changes were being made in support of the President's National Export Initiative, which aims to double U.S. exports during the next five years. If implemented, these measures are likely to increase the AD and CVD duties paid by importers and the cost of certain imported products subject to such duties. However, it is unlikely that these measures will have any positive impact on the ability of the U.S. manufacturing sector to export their products.

If the Commerce Department chooses to go forward with these changes, revisions to the AD/CVD regulations (19 CFR Part 351) will be required in most cases.

The following is a summary of the 14 proposed changes:

1. Expanded use of random sampling to select companies as individual respondents in AD investigations and reviews rather than choosing the largest exporters;
2. Strengthening Commerce’s current practice regarding the issuance of company-specific AD rates in NME cases;
3. Clarification of Commerce’s current NME practice that when the Department uses import prices for valuing a production factor, such prices should include all applicable freight and handling costs;
4. Clarification of Commerce’s current NME practice to require companies to report production inputs for all products produced at each of their facilities – not just those facilities that produced merchandise destined for the United States – for use in the Department’s NME dumping calculations;
5. Clarification of Commerce’s current CVD practice to reiterate that Commerce considers state-owned enterprises (SOEs) as constituting a “specific” group when they are alleged to be receiving countervailable subsidies from the government;
6. Reconsidering the treatment of export taxes and value-added taxes (VAT) in Commerce’s NME AD methodology; and
7. Strengthening the treatment of resellers and other non-reviewed parties in NME cases to ensure that such parties pay the full amount of AD duties.
8. Adoption of a new methodology for valuing wage (labor) rates in NME cases by using surrogate wage rates that fully capture all labor costs (including benefits and taxes paid to workers by their employers) in the NME country;
9. Eliminating the practice of allowing individual companies to seek removal from an antidumping (AD) or countervailing duty (CVD) order based on their ability to show zero dumping margins or subsidy rates for three (AD) or five (CVD) consecutive years;
10. Tightening the rules in non-market economy (NME) cases for determining when the price of production inputs purchased from market economy countries will be substituted for the Department’s standard valuation for such inputs;
11. Considering whether importers will be required to post cash deposits rather than bonds for imports that fall within the scope of an AD/CVD investigation starting with the issuance of Commerce’s preliminary determination (rather than following the imposition of an AD/CVD order);
12. Strengthening the certification process for the submission of factual information to the Department;
13. Strengthening the accountability of attorneys and non-attorneys practicing before Commerce; and
14. Tightening the deadlines for submitting new factual information in AD/CVD cases.