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.