National Public Radio's "Talk of the Nation" Discusses Solar Panels Dumping Case

The November 18, 2011 edition of National Public Radio's "Talk of the Nation--Science Friday" program addressed the solar panels antidumping case, as well as the state of the U.S. photovoltaic cell industry.  Follow this link to listen to the streamed mp3 or download the podcast:  http://www.sciencefriday.com/program/archives/201111182

Antidumping and Countervailing Duty Investigations of Crystalline Silicon Photovoltaic "Solar" Cells and Panels from China

On October 19, 2011, Solar World Industries America Inc., with the support of the Coalition for American Solar Manufacturing, filed a petition, with the U.S. International Trade Commission and U.S. Department of Commerce, requesting the initiation of antidumping and countervailing duty investigations of crystalline silicon photovoltaic ("CSPV") cells—better known as "solar cells," the building blocks of solar panels—from China.  The petitioner alleges that Chinese companies are dumping CSPVs with margins in excess of 250%.  The petitioner also alleges that Chinese CSPV cell producers and exporters illegally benefited from approximately thirty-nine different government subsidy programs. 

The U.S. International Trade Commission has initiated its investigation into injury to the domestic U.S. CSPV industry.  It will have forty-five days to make its preliminary injury determination.  U.S. importers, producers, and exporters can participate in the U.S. International Trade Commission’s evaluation of whether CSPV imports are injuring the U.S. domestic CSPV industry by filling out and sending in a questionnaire response concerning their production, importation, and sales of CSPVs. 

The U.S. Department of Commerce will evaluate the petition to determine whether it contains sufficient evidence that CSPVs from China are being illegally subsidized and dumped (sold at less than fair value) in the United States.  If the Department of Commerce determines that the petition is sufficient, it will initiate antidumping and countervailing duty investigations twenty days from the date of the filing of the petition.  Once theses investigations are initiated, Chinese exporters will have sixty days to file separate rate applications.  If an exporter does not file a separate rate application, or if the application is rejected, that exporter will be assigned a punitive antidumping duty rate—in this case, likely to be an additional import duty in excess of 232.56%. 

Merchandise covered by these proceedings is classified in the Harmonized Tariff System of the United States ("HTSUS") under subheadings 8501.61.00.00, 8507.20.80, 8541.40.60.20, and 8551.40.60.30.  However, the written description of the scope of these proceedings, as contained in the petition, is dispositive. 

Renewed Assault on New Shipper Benefits

Under AD/CVD law, a "New Shipper" -  an exporter who has not previously sold to the United States - has the right to request a "new shipper review."  This review will let the new shipper escape the high default "all-others" rate that otherwise applies to companies who haven't been through the review process.  

Any company can request a review of its sales in order to revise its rate, but under present law a "new shipper" has benefits not available to other exporters.  That is, the new shipper review option provides three potential advantages over participation in a normal administrative review.  First, the new shipper review process is on a shorter schedule, and can be started six months earlier, potentially resulting in applicability of the new low rate 3 to 12 months prior to participants in a normal administrative review.  Second, a new shipper will (almost always) be individually reviewed, meaning that its new rate will be based on its actual sale prices, costs or benefits, and its success will depend on its own work and effort.  By contrast, in a normal administrative review, only the largest 3 or 4 companies are individually reviewed, with the average rate of those individual respondents being assigned to all of the other companies in the review.  Third, and potentially of most beneficial, an importer from a new shipper does not have to wait to the end of the review to start importing, but can import without having to pay the duty deposit that is otherwise required on entry.  The importer posts a "bond" or promise to pay the duty ultimately determined in the subsequent review of those entries, rather than having to pay the duty deposit at the high rate, in advance.  The idea of this provision is that an innocent new shipper, who was not part of the exporting community that was found to be dumping in the original investigation, should not be saddled with the high duty deposit.  Rather the bonding option gives the new shipper the "benefit of the doubt" and greatly facilitates the new shipper's entry into the U.S. market.
 
This last benefit has been under attack in recent years, particularly because of allegations that Chinese importers have used the new shipper bonding benefits to import massive amounts of goods, afterwords "skipping town" and never paying the ultimately identified duties, leaving the U.S. government and/or the bond issuer holding the bag.  In 2006, in response to such concerns Congress suspended the bonding option for 5 years.  In 2010 the suspension expired, and the option again became possible. 
 
However there are reasons to believe the new shipper bonding option may not provide much benefit to new shippers as a practical matter.   First, having been burned by many deadbeat importers, bond issuers are very reluctant to issue the necessary bond guarantee, unless the importer is both a U.S. company and has very strong financials.  Therefore, its is virtually impossible for a new shipper exporter itself to import the goods and avail itself of the bonding option.  Secondly, Congress again has the new shipper benefit in the sights.  The Senate is considering legislation that is supposed to address supposedly renewed abuses of the new shipper bonding option.  A bit of legislation called (absurdly) the Fighting for American Industry's Right to Enforcement Against Duty Evasion Act would make it harder for a foreign exporter to act as importer of record, with brokers being obligated to essentially guarantee that their clients would be available to satisfy future assessments, or face fines or de-licensing.  The bill would permanently eliminate the provision allowing new shippers to post a bond for duties owed, and instead would require the same cash deposit the importer from any other exporter must pay.

No one can predict where this bill might end up, since it might be so much anti-imports posturing with no practical future.  But it does indicate the continued congressional resistance to the special benefits the long-standing AD/CVD law has accorded new shippers.


By Marco Davis

SEPARATE RATES PRIMER

In U.S. antidumping investigations or reviews involving non-market economies (NME) such as Vietnam or the People's Republic of China, exporters must each participate in a separate rate test to receive a rate that is separate from the NME-wide rate.  Any exporters that fail to demonstrate that they are separate from the government entity are assigned the NME-wide rate under the involved antidumping duty order, which is invariably the highest possible rate, and which, as often as not, effectively bars the involved exporter from the U.S. market.

Exporters are awarded separate, company-specific duty rates if they can demonstrate an absence of government control, both in law and in fact, over export activities.  Evidence supporting a finding of de jure absence of government control includes: 1) an absence of restrictive stipulations associated with an individual exporter’s business and export licenses; 2) any legislative enactments decentralizing control of companies; and 3) any other formal measures by the central and/or local government decentralizing control of companies.

With respect to de facto government control, the U.S. Department of Commerce (the Department) considers four factors:  (1) whether export prices are set by, or subject to the approval of, a governmental authority; (2) whether a respondent has authority to negotiate and sign contracts and other agreements; (3) whether a respondent has autonomy from the government in making decisions regarding the selection of management; and (4) whether a respondent retains the proceeds of its export sales and makes independent decisions regarding the disposition of profits or financing of losses.

All NME exporters wishing to obtain a separate rate in an antidumping investigation or administrative review must complete a separate rate application form.  However, only those NME exporters selected as mandatory respondents are required to respond to the full antidumping questionnaire.  In other words, NME exporters wishing to obtain a separate rate do not necessarily need to participate in a full investigation or review proceeding, unless otherwise required to do so by the Department.  Consequently, an NME exporter may do much to secure or improve its access and competitive position with respect to the U.S. market by taking the simple step of applying for a separate rate.

U.S. DEPARTMENT OF COMMERCE LAUNCHES INVESTIGATION OF CHINESE DRILL PIPE MANUFACTURER FOR ALLEGED EVASION OF ANTIDUMPING DUTY ORDER

As previously noted on this web site, there are many indicators that the United States is stepping up its efforts to combat circumvention of its antidumping, countervailing duty, and general customs laws.  Such circumvention has been drawing unprecedented attention on Capitol Hill.  As a result of the consequent political pressure, federal agencies have noticeably increased the number of active enforcement actions related to antidumping and countervailing duty orders. 

Most recently, on August 12, 2011, the U.S. Department of Commerce reported the initiation on an investigation into whether Chinese drill pipe and tool joint manufacturer Hilong Group, Ltd. is evading a U.S. antidumping duty order by finishing its product assembly, via friction welding, in the United Arab Emirates, prior to shipping its products to the United States.  The Department of Commerce will determine whether or not the involved Chinese-manufactured drill pipe and tool joint products are, for purposes of U.S. antidumping law, to be considered of Chinese origin, despite the fact that they are being friction welded together in the United Arab Emirates.  Such products from China are currently subject to an antidumping duty rate of nearly 430 percent. 

Firms involved in international trade face ever-growing risks for attempting to circumvent U.S. antidumping and countervailing duty laws.  Such criminal activities invite the seizure of shipments, fines, indictment and imprisonment of U.S.-based personnel, and tremendous loss of money.  To avoid such consequences, companies trading in goods subject to antidumping or countervailing duty investigations and orders can elect to participate in the involved antidumping investigation and administrative review proceedings of the U.S. Department of Commerce and U.S. International Trade Commission.  In so doing, manufacturers and exporters may obtain company-specific or separate duty rates, thereby securing their access to the U.S. market, in full compliance with U.S. fair trade law. 

Once Again the WTO Reprimands the US From Employing Zeroing in Antidumping Administrative Reviews

The World Trade Organization (WTO) judges announced on July 11, 2011, that the United States is violating global trade rules in using its controversial "zeroing" method to continue impose anti-dumping tariffs on shrimp from Vietnam.

The decision by a three-member panel was the latest of a series in which zeroing — a framework for calculating duties on goods sold at less than their price on the exporter's home market — has been found illegal under WTO agreements.

The case which has been percolating since the beginning of 2010, finally confirmed what the trade community has known for a considerable length of time that the US’s continued use of zeroing is deliberately violating its obligations under the Antidumping Agreement.  Why the US continues to zero when it has been repeatedly told not to is a question not only for this trade practioner but to the rest of the trade community as well.

Vietnam's claims with respect to zeroing were upheld by the WTO Panel in that (1) The Panel upheld Viet Nam's claim that the USDOC's use of zeroing to calculate the dumping margins of respondents selected for individual examination in the second and third administrative reviews was inconsistent with Article 2.4 of the Anti-Dumping Agreement. And (2)    The Panel upheld Viet Nam's claims that the United States' “zeroing methodology”, as it relates to the use of simple zeroing in administrative reviews, is inconsistent with Article 9.3 of the Anti-Dumping Agreement and Article VI:2 of the GATT 1994. The Panel first concluded that Vietnam had established the existence of the “zeroing methodology” as a rule or norm of general and prospective application. The Panel then relied on prior Appellate Body rulings to conclude that simple zeroing in administrative reviews is, “as such”, inconsistent with these two provisions.

Thus the Panel recommended that the United States brings its measures into conformity with its obligations under both the Antidumping Agreement as well as the Dispute Settlement Understanding.  The problem is that this is not the first nor will it  be the last of the cases before the WTO where it has found the U.S. to be in violation of its international obligations when it comes to zeroing.  When will the U.S. learn from its repeated reprimands, the readers’ guess is as good as this practioners.  However, one thing is certain the U.S. will not stop its use of zeroing unless and until it harms their overall trade strategy.

The U.S. continues to zero in reviews because it hides behind the U.S. statute governing trade remedies and specifically antidumping remedies which permits it to ignore WTO obligations unless and until there is a change in the actual language of the statute.  Here, the U.S. keeps finding the existence of dumping in a multitude of cases because it is able to under its own statute.  Thus, the question becomes, why change a statute when it helps the sovereign nation to apply it in the manner that helps it?  The answer is that the statute will change when the U.S. no longer sees a benefit to zeroing in reviews and it no longer benefits it.

COMMERCRE PROPOSES CHANGE TO RULES FOR LIQUIDATION OF ENTRIES FROM NON-REVIEWED NON-MARKET ECONOMY EXPORTERS IN ANTIDUMPING DUTY ADMINISTRATIVE REVIEWS

            The U.S. Department of Commerce (Commerce) is proposing to change its rules with respect to its procedure for issuing liquidation instructions, to U.S. Customs and Border Protection (CBP), for certain entries subject to antidumping duty orders.  See 76 FR 34046 (June 10, 2011): http://www.gpo.gov/fdsys/pkg/FR-2011-06-10/pdf/2011-14446.pdf.  More specifically, Commerce proposes to change its rules such that it will instruct CBP to liquidate "certain entries," suspended under antidumping duty orders, for "non-reviewed" non-market economy exporters--i.e., non-market economy exporters that are not involved in an antidumping administrative review for a particular period of review (POR)--at the country-wide antidumping duty rate.  Id. 

            As Commerce explains in its published Federal Register notice on the matter, in an antidumping administrative review involving a non-market economy (NME) country, importers "enter subject merchandise at a company-specific cash deposit rate, a separate rate, or the NME-wide rate.  Entries of subject merchandise are subject to cash-deposit requirements and are suspended from liquidation until the Department instructs CBP to liquidate the entries.  See section733(d)(2) of the Act.  When no review is requested for a particular AD order for a given review period, the Department instructs CBP to liquidate all entries of subject merchandise for that period at the cash-deposit rate that was required at the time of entry."  Id.  That is, the entries are liquidated a rate determined in a prior antidumping proceeding--an investigation, an administrative review, or a new shipper review.  "When a review is requested for a firm for a given review period, entries that have been identified by an importer as that firm’s merchandise remain suspended from liquidation during the pendency of the administrative review."  Id.  At the end of the administrative review proceeding, Commerce instructs CBP to liquidate the entries based on its findings relevant to the involved POR.  That is, it instructs CBP to liquidate the entries based on the company-specific or other rate found, in the final results of review, applicable to each reviewed respondent. 

            Under most, if not all, NME antidumping orders, the "NME-wide" rate is, in reality, punitive, effectively blocking access to the U.S. market for exporters to which it is applied.  In fact, many NME antidumping orders have NME-wide duty rates exceeding one-hundred percent. 

            The apparent concern is that Commerce is discovering, in the course of its antidumping administrative review proceedings, that certain U.S. importers are falsely claiming that their entries originated with a firm that is participating in an administrative review, when in fact the entries originated with an exporter not being reviewed for the POR during which the entries were made. 

            The exact form of the proposed rule change is not entirely clear from the Federal Register notice, and its rather ambiguous wording provides more confusion than guidance with respect to several important issues.  For example, Commerce does not explain what it means by "certain entries."  Taken by themselves, these words seem to suggest that Commerce does not intend to apply the NME-wide rate to all entries from non-reviewed exporters.  But if that is the case, the notice offers no clear guidance concerning where Commerce might draw the line. 

            Furthermore, other language in the notice seems to suggest that Commerce indeed intends to liquidate all entries from non-reviewed exporters, regardless of whether or not those exporters were reviewed previously, and regardless of whether or not those exporters have long track records of low, de minimis, or even zero antidumping duty rates, and regardless of whether or not those exporters have long-established reputations for complying with the letter and spirit of U.S. fair trade law.  To wit, the notice indicates that Commerce "is proposing to refine its practice with respect to the rate at which it instructs CBP to liquidate certain entries from non-reviewed exporters.  Specifically, the Department proposes to instruct CBP to liquidate such entries at the NME-wide rate."  This language implies that there will be no exceptions: if an exporter is not reviewed, its entries will be liquidated at the NME-wide rate, end of story. 

            Needless to say, an exporter can hardly be expected to remain competitive in the U.S. market if its U.S. sales are being assessed duties that match or exceed the sales prices of its goods.  Thus, if Commerce truly intends to apply NME-wide rates to all non-reviewed exporters, it can expect an unprecedented surge in requests for review on the part of NME exporters wishing to retain access to the U.S. market.  Certainly hundreds--perhaps even thousands--of NME exporters that were content to sit out annual administrative reviews would feel compelled to participate in Commerce's proceedings each and every POR.  Commerce has neither the personnel nor the funding to manage such a spike in its active caseload.  One is left to wonder, then, what exceptions the proposed rule might ultimately contain by which Commerce may have the option to decline to review certain exporters without having to impose punitive NME-wide duty rates on those exporters for their being "non-reviewed."  It remains to be seen.   

            Adding to the confusion over Commerce's intended direction with respect to this rule change, toward the end of its Federal Register notice, Commerce states that "when a party does not file a separate-rate application, the Department lacks necessary information on the record to determine whether it is entitled to a separate rate."  Id.  In context, this phrase seems like a non sequitur.  However, it could be read as a hint of Commerce's intent to leave a loophole through which parties to antidumping proceedings could engage in the sorts of activities highlighted in a February 11, 2011 Wall Street Journal Article by James R. Hagerty, titled Cash Softens Trade Blow: Payments to U.S. Rivals Lets Chinese Furniture Makers Skirt Import-Duty Review.  Does Commerce intend to allow an exporter that engages in activity of the sort described in the aforementioned article--even if the involved antidumping petitioner eventually retracts its request for review of that exporter, and that exporter is consequently not reviewed--to continue selling its goods in the U.S. market via its previously-established company-specific rate, as long as that exporter applied for a separate rate for the POR at issue?  In other words, will a separate rate application allow a "non-reviewed" exporter to avoid the NME-wide rate, in effect giving it the green light to dump its goods, at prices less than fair value, with utter abandon, and without fear of repercussions in the form of higher antidumping duty rates?  It seems unlikely that Commerce would knowingly do anything to encourage activity of the sort described in the Wall Street Journal article.  But, again, it remains to be seen.       

WHY IS DOC STILL ZEROING IN ADMINISTRATIVE REVIEWS? THERE IS NO EXPLANATION AND THE COURTS ORDER COMMERCE TO EXPLAIN WHY

The Federal Circuit on June 29, 2011, overturned a ruling that affirmed anti-dumping duties on Japanese ball bearing imports, saying the U.S. Department of Commerce must explain why it continues to use zeroing in administrative reviews but not in investigations.  Japanese companies JTEKT Corp. and NTN Bearing Corp. appealed to the Federal Circuit after the U.S. Court of International Trade upheld Commerce’s administrative review of the anti-dumping duty orders on ball bearings from France, Germany, Italy, Japan and the United Kingdom.

One of the core issues in the appeal was the subject of “zeroing” or in more common terms – the disregarding of negative dumping margins to offset the overall dumping margin calculation.  Zeroing is the practice where the values of positive dumping margins are used in calculating the overall margin, but negative dumping margins are included in the sum of margins as zeroes.  What this means is that a company can be found to have been dumping even though the majority of its sales were not dumped simply because the Department of Commerce has decided that the non-dumped sales must be disregarded in the overall margin calculation. Dongbu Steel Co. Ltd. v. United States, 635 F.3d 1363, 1366 (Fed. Cir. 2011).  Historically, Commerce used zeroing in both the initial investigation to determine whether dumping occurred, and in the subsequent administrative reviews of its dumping determination. But this practice has changed. In response to pressure from the World Trade Organization (WTO), Commerce changed its practice with respect to investigations and no longer zeroes in investigations, but still continues to zero in administrative reviews.

Antidumping investigations and administrative reviews are two very different types of proceedings with different purposes. Specifically, in antidumping investigations, the statute  specifies particular types of sale comparisons and Commerce generally uses average-to-average comparisons whereas in administrative reviews Commerce generally uses average-to-transaction comparisons (which means that individual transactions which are not dumped or have negative margins are more easily identifiable).  Furthermore, the purpose of the dumping-margin calculation also varies significantly between antidumping investigations and reviews. In antidumping investigations, the primary function of the dumping margin is to determine whether an antidumping duty order will be imposed on the subject imports. In administrative reviews, in contrast, the dumping margin is the basis for the assessment of antidumping duties on entries of subject merchandise subject to the antidumping duty order.

While Commerce continues to point to differences between investigations and administrative reviews, it has repeatedly continued to fail to address the relevant question— which is why is it a reasonable interpretation of the statute to zero in administrative reviews, but not in investiga-tions?   The Federal Circuit did not buy Commerce’s very simplistic argument that during an investigation “uses average-to-average comparisons” while administrative reviews “uses average-to-transaction comparisons”.  The question still remains why these (or other) differences between the two phases make it reasonable to continue zeroing in one phase, but not the other.    As a result, the court found that because Commerce continued to stall and not provide any justification for using zeroing in administrative reviews and not in investigations, the court determined that Commerce’s continuing practice of zeroing in administrative reviews, but not in investigations, is unreasonable.  The court has not ordered Commerce to provide an explanation as to why they continue to practice this dichotomous methodology.

By Nithya Nagarajan

RISKS GROW FOR COMPANIES ATTEMPTING TO CIRCUMVENT U.S. TRADE LAW IN LIEU OF PARTICIPATING IN ANTIDUMPING AND COUNTERVAILING DUTY PROCEEDINGS

There are numerous indicators that the United States is stepping up its efforts to combat circumvention of its antidumping, countervailing duty, and general customs laws, and all signs point to even more vigorous enforcement on the horizon. 

The past few months alone have seen several notable criminal law enforcement actions related to antidumping orders.  For example, in March, a Baltimore-area importer was arrested by U.S. Customs and Border Protection (CBP) agents, at the behest of the U.S. Department of Justice (DOJ), for allegedly undervaluing and misclassifying entries of plastic grocery bags from China in order to avoid antidumping duties.  The importer faces a maximum of seventy-seven years in prison, as well as $2.5 million in fines in addition to the $1.15 million in antidumping duties already owed.  In May, following an investigation coordinated by CBP and DOJ, two individuals were sentenced to several years in prison, and ordered to pay penalties, for, among other things, falsely labeling seafood products in order to avoid roughly $146 thousand in antidumping duties on catfish from Vietnam.

All signs point to the likelihood that this is the mere tip of the iceberg.  As anyone with a passing familiarity with antidumping proceedings knows, the two aforementioned cases involve relatively small quantities of money.  Many antidumping orders involve the assessment of hundreds of millions of dollars in duties each year.  Given the willingness of CBP and DOJ to coordinate criminal investigations, and eventual indictments and arrests, over unpaid duties amounting to a mere $146 thousand, it stands to reason these agencies will be all the more motivated to pursue cases involving larger sums.         

Circumvention of U.S. antidumping and countervailing duty laws is also drawing unprecedented attention on Capitol Hill.  For example, in May, the powerful Senate Finance Committee heard testimony from high-ranking business officials, as well as Mr. Allen Gina, Assistant Commissioner of CBP's Office of International Trade, concerning the harm caused to the U.S. economy by such circumvention, as well as the challenges faced by CBP and U.S. Department of Commerce officials under the current anti-circumvention enforcement scheme.  Furthermore, Senators Ron Wyden and Olympia Snowe have introduced a bill specifically designed to boost the effectiveness of the enforcement of antidumping and countervailing duty laws.  The Enforcing Orders and Reducing Circumvention and Evasion (ENFORCE) Act is intended to address such common circumvention techniques as transshipping goods through third countries, and re-labeling shipments with false countries of origin or false descriptions of goods.

This focus on circumvention isn't likely to go away in the current international trade environment.  As a consequence, companies involved in international trade will no doubt face increasing risks for any attempts to circumvent antidumping and countervailing duty laws.  To wit, engaging in circumvention exposes companies to the risk of seizures of shipments, imprisonment of U.S.-based associates, monetary penalties, and being banned from exporting to the United States altogether. 

To avoid such trouble, companies trading in goods subject to antidumping or countervailing duty investigations and orders can simply elect to participate in the investigation and administrative review proceedings run by the U.S. Department of Commerce and U.S. International Trade Commission.  In obtaining a company-specific or separate duty rate through such proceedings, companies may secure their access to the U.S. market, in full compliance with U.S. fair trade law.