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ANTIDUMPING
May 13, 2015--KUFS, Seoul, Korea
Professor Sung-Eun Stephan Kim
Prof. Sung-Eun S. Kim
Law & Policy of International Trade
Korea University of Foreign Studies
Spring, 2015
ANTIDUMPING
What’s dumping?
Dumping as sales below cost
Intense competition in a market. Price can be below marginal
cost
A decline in demand increases fixed cost b/c production falls.
Forward pricing—semiconductor industry. High development
cost which cannot be recouped immediately.
Predatory pricing. Enterprise with mkt power to sell below cost
to drive out competition Commonly illegal in many countries,
but more than sale below cost must be proved. (p.398 US
example)
Dumping as international price discrimination
Another form of dumping is int’l price discrim. Different prices in
diff areas or diff customers. Diff prices in dom market and an
export market.
This can occur if the two markets are isolated (high tariff,
quotas, tie-in boycotts, etc) Re-export to exporting country? P
399.
Or if there are significant differences in elasticity of demand
btwn different countries.
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Duration
Sporadic, intermittent or continuous. If for long period, misallocation of
resources especially in the exporting country.
Cost analysis
P 399 5 prices.
Welfare effects—mixed. Overprice in exporting country; but helps
consumers in the importing country, hurts producers in importing
country, and exporters of third countries.
Measures to counteract dumping
To impose AD duties, must prove:
Products sold at a price in the importing market below the price at which
they are sold in the domestic market of the exporting country
A domestic industry in the importing country is materially injured
Causal relationship btwn dumping and the material injury
Max duty the price differences btwn exporting & importing countries
Q is antidumping a good policy? Controversial. Some argue measures
are necessary to counteract unfair trade; others argue the AD
measures are often used to protect domestic industries from
competition and are themselves unfair.
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The regulation of antidumping duties
The legal framework of antidumping in the GATT/WTO regime
--a consensus among economists and lawyers that the AD laws are
seriously flawed; but serious reform has proved difficult. GATT AD
Code of 1979 introduced new procedural and substantive stds both for
calculating dumping margins and wh/ a domestic industry is materially
injured, but abuses by protectionist interest increased during ’80s.
Uruguay Round a new AD Agmt, but abuses continued (US and EU).
Even developing countries’ use increased.
--Art VI of GATT 1994 (gen provisions) and the AD Agmt (implementation
of Art VI).
GATT Article VI
1. export price < price in the dom market (normal value) of the exporting
country.
2. export must (i) cause or threaten to cause mat injury to a dom industry or
(ii) mat’ly retard the establishment of dom industry
3. must be a causal rel btwn dumping and the injury or retardation
The Antidumping Agreement
“Agmt on implementation of Art VI of GATT 1994” to clarify some of the
key concept of GATT and to provide practical guide for the enforcers of AD
legislation in Member countries and for exporters who may be subject to AD
duties.
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ANTIDUMPING
Institution and notifications
ADA establishes a Committee on AD Practices—all Members of WTO.
Seek info and provide a forum for consultation among members– All prelim
and final AD actions must be promptly notified to the Committee
Developing countries—special needs of dev countries—”constructive”
remedies to be explored before imposing AD duties. Unclear as to the
application.
Investigation
Initiating an investigation
National AD authorities may initiate an AD investigation when domestic
industry files a petition or can do so on their own. The petition must have
evidence of dumping, material injury, and causation that is reasonably
available (Art 5.2. ADA). The petition must be made by a domestic industry
(if supported by 50%+ od dom producers expressing views “either for or
against the petition’; if less than 25%, cannot initiate an investigation)—why?
 petitioner must properly represent the domestic industry injured by
dumping.
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Evidential issues
“sufficient evidence” req’d. Art 6 AD. Interested parties (exporters, importers,
dom producers) are guaranteed to receive information, notices. Evidence
must be open to public, but the provider can request confidentiality, need to
submit a summary.
If respondents refuse to provide information or do not cooperate, the AD
authorities may proceed w/ the investigation and decide on the basis of
“facts available” which includes information provided by the petitioner.
The duties of the investigating authority
Onerous to exporters and importers and impedes trade Must generally
finish investigation within 1 yr, and may not exceed 18 months. (≈SCM
unilateral option)
Determination of dumping
Diff btwn the export price and normal value (domestic price) of the
product. If the diff < 2%, no go—must terminate investigation. If the
volume < 3 % of imports of like product, must terminate investigation
[de minimis rule]
Comparing normal value and the export price— must be comparable—e.g.
ex factory price. Also various circs—e.g. l/c at sight or promissory note in 6
mos.? GATT Art IV –”Due allowance shall be made in each case for
differences in conditions and . . . terms of sale, taxation, [any factors]
affecting price comparability”
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Like product
This is an important issue but so far, no actual WTO AD case on
this, but a determination will have to be made on a case-by-case
basis.
3 context
» 1. “dumping” involves comparison of the prices of “like” products
in the domestic market of the exporting country and the export
market. If there are some differences are they b/c (1) products
modified to suit individual markets? (2) or modified to
circumvent a previous AD order or investigation? (3) sold
finished in one market and in a “kit” form for assembly by buyer
in another market?
» 2. “downstream dumping” manufacturer buys from
UNRETALED party components at below-cost price and
assembles the finished products for resale in domestic and
export markets. The components are not “like” products to the
finished products, so technically does not violate AD. No case
on this so far. But this may have to be considered by the
Committee on AD Practices.
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» 3. defining the domestic industrya case-by-case determination. ADA
defines the “like products” as “ identical or has characteristic closely
resembling the product under consideration.” vague. ≈ to SCM
definition and ≠ as GATT definition. Different AD authorities have diff.
determination. E.g. EC says all PSF (polyester staple fibers) are same.
US divides PSF into diff end-use categories. No WTO AD case on this
issue, but in SCM case, in Indonesia—Automobiles case, considered
other factors (e.g tariff classification, substitutable? Brand loyalty and
reputation.) A wide discretion to AD authorities of each country. Can
only be resolved through future negotiation by WTO members.
Comparison of third-country prices
Used when there are no sale of like products in the home country; or where
the volume is too low for a meaningful comparison. [both ADA 2.2]
Constructed value
If no domestic sale or small volume, but mainly for export, or e.g. NASA
places order for sophisticated equipment, the AD authorities may use
“constructed value.” cost + SG&A + profit.  p410; need to use actual data
of the exporter or producer.
Q: Can data from only one firm be used for “weighted average”? EC—Bed
Linen: the EU AD authorities used data from 1 firm in India b/c no other
producer of like products. The Panel held Art 2.2.2 (ii) “weighted average”
includes the singular and data from one exporter in India was permissible.
AB reversed and held that “weighted average” cannot be used only in some
cases and not others. [criticized by authors maybe constructed value
cannot be used if there is only one exporter.]
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Arm’s length transactions and transactions between affiliated parties
Price at which the product is first sold to an independent purchaser must be
used for comparison. Art 2.3. E.g Japanese car mfr sells to its US
subsidiary then the US Sub sells to independent dealers. It is the price the
US Sub sells to independent dealers that should be used in comparing with
Japanese domestic sale by the manufacturer to Japanese independent
dealers.
Sales below cost
When comparing the export price and the domestic price of the exporter
country, AD authorities may disregard the domestic sale price if it is below
cost. [b/c it is not rational to sell below cost.] in the ’80s this rule was abused
and the Japanese government complained. In Semiconductor chips, the
development cost is so high that the initial price is generally set below cost
and the mfrs expect to make up for the lost profit at a later point when the
production cost is dramatically reduced. Normal in semiconductor industry.
The Uruguay rounds agreed and new rules:
» 1. may disregard below-cost price if (a) made in an extended period (b) in
substantial quantity and (c) at price which would make recovery at a later
point almost impossible.
» 2. extended period normally w/in one year. In no case shorter than 6
months.
» 3. substantial quantity sale below cost is > 20% of the total sale, or
where weighted average sale price of the product in q is below the
weighted average of the cost of producing one unit.
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Fair price comparisons
Exchange rates could be a problem in comparing the prices. At
which point? (“Technical dumping margin” issue.) Date of sale to the
independent dealer (e.g the Japanese automaker). D of K, d of p
order, d of confirmation, or invoice. A 6 month period is allowed if
exchange rate causes a “technical dumping.”
» If there is a sharp fluctuation in exchange rates? US—Stainless
Steel Imports . . . from Korea (2001), whether to use average or
disregard the period when exchange rate fluctuated too much.
Averaging
Abuse by EC and US in the past. Average prices (e.g. UK $110,
France $120, Germany $80, Italy $90, the ave price would be $100).
If the export price to a country is lower than the ave domestic price
of the exporter, dumping. If higher, the domestic price was ignored,
before averaging—unfair.
Uruguay rounds produced ADA which provides that the AD
authorities must choose between averaging of all domestic and
export prices or normal value of export prices on a transaction-bytransaction basis. AD authorities are allowed to deviate from this
rule if the exporter has manipulated prices between domestic and
export prices for weighted average prices.
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Zeroing
A variation of averaging. National AD authorities count the dumping
margin as 0 when the normal value < export price.
EC—Bed Linen Case: the EC calculated the negative dumping
margin as 0 and when added the dumping margins from the
transactions where normal value < export price, the end result was
an inflated dumping margin. The panel stated that Art 2.4.2 of ADA
required weighted average of “all” comparable export transactions.
Held “zeroing” inconsistent with Art 2.4.2. AB upheld the panel’s
decision. The issue is whether there was dumping w/r/t a “product,”
not a type or a model of product.
US—Softwood Lumber held similarly that the “product’ should be
considered as a whole and not a type or model of product and
rejected the use of zeroing of negative dumping margins.
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Determination of injury
Material injury or threat of material injury
“Material injury” is not defined, but AB has concluded that the “material
injury” std is lower than “serious injury” std for safeguard measures.
“threat of” m. i. and “material retardation” also not defined.
M.I must be based on (1) the quantity of dumped product and its effect
on the price of like domestic products; (2) its effect on the producers of
such domestic products.
Factors to be considered when determining injury
Art 3.4: All relevant economic factors and indices having a bearing on
the state of the industry. . . Actual/potential decline in sales, profits,
output, market share, r o i, capacity utilization; magnitude of dumping
margin. Effect on cash flow, inventories, employment, wages, growth,
etc. . . .”
AB held that the AD authorities must consider all factors listed in Art 3.4
when examining a material injury b/c of dumping.
Factors to be considered when determining threat
Art 3.7 requires an AD autho to consider specific factors when
determining a threat of material injury exists. In Mexico—Corn Syrup
(HFCS) the Mexican AD authorities only considered Art 3.7 factors. US
argued that Art 3.4 factors also must be considered b/c Art 3.4 is the
general provision for finding injury and applies to both injury and threat of
injury. AB held both 3.4 and 3.7 factors must be considered.
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Cumulation of injuries
National AD authorities may cumulate injuries if > 1 exporting country is
involved and all of them are engaged in dumping. [p419-420]. But an import
from each country must be more than de minimis and the cumulation must be
appropriate in light of the competitive relationship btwn imports from these
countries and btwn imported product and domestic product.
Causation
A causal link btwn dumping and injury must be established.
Art 3.5– “all relevant factors” causing material injury to domestic industry must
be considered– including those other than dumping (e.g., domestic
competition, decline of demand, change in consumer preference, restrictive
business practice.) “shall examine any known factors other than the dumped
imports. Non-attribution rule applies. “Any known factors” are only those that
have been brought to the attention of the national AD authorities by the
interested parties. No duty on the part of the authorities to seek out “any
known factors.” Thailand—H-Beams.
Confidential information Thailand—H-Beams held that “totality of evidence”
should be considered and Art 3.1 does not require that AD authorities base
their finding only on non-confidential information. Both confidential and nonconfidential information should be considered.
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Domestic industry
Related party to the exporter included in “domestic industry”? They could be
related to the exporter or are importers of the product in question. “Related” and
not “affiliated”– controls or controlled by the exporter; or under common control;
and likely to act differently if not related thus excluded. In US—Hot Rolled Steel,
the AB dealt with the questions wh/ the domestic industry for “in-house
consumption” should be included in the domestic industry. AB held that an injury
must be based on the totality of the domestic industry, not simply one part of the
industry included.
The imposition of antidumping measures
Provisional measures
Imports may suddenly increase in anticipation of antidumping ruling. So the AD
authorities may provisionally impose measures after making a preliminary determination
of dumping under Art 7—to prevent injury that may occur during the period of
investigation.
4 months– 6 months if requested by exporters accounting for a substantial portion of the
transactions in question.
Definitive measures
Max diff btwn domestic price (of the importing country) and export price. Lesser duty is
preferred if this can effectively eliminate the harm. (But this is hortatory, not mandatory)
Product X in country Y is selling at 150; export to country Z is 100 The dumping margin
is 50. But if in country Z, the domestic producers of the like product sells the product at
120, then the imposition of AD duty can be 20 b/c that would make the price 120, the
same as the domestic producers of country Z. Called “injury margin.”
Retroactivity
Not allowed. But provisional measures can be retroactively adjusted if the final margin is
higher. Otherwise, a refund is due.
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Duration and review
So long as and to the extent “necessary.” wh/ the injury is likely recur if the
duty is removed.
Obligation to review wh/ there is a need for continued imposition of AD duties
after “a reasonable period of time.” no later than 5 years from imposition or
last review. (=SCM)
Price undertakings (suspension of antidumping duty investigations)
AD litigation is costly and exporters can offer price undertaking to AD
authorities. If accepted suspension of AD investigations, but only after
the authorities make a preliminary affirmative determination of dumping.
Anti-circumvention
If dumping duty imposed by country A, the exporter may set up a factory
in A and import components and parts. Or may shift production to third
countries. But is this bad? It’s a direct investment to country A or the third
countries. Helps economy by employing local workers and paying taxes.
No agreement on this during Uruguay rounds. US and EC enforces anticircumvention measures. Japan does not. Only one pre-WTO case. (p.
425). Violative of national treatment obligation b/c a discriminatory
internal tax imposed on foreign-made components. An important issue
yet not decided.
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Dispute settlement
A WTO Member that believes a benefit accruing to it under the ADA is
impeded can refer the matter to the WTO DSB. A Panel will hear the
dispute. The Panel can review only 1. a definitive AD duty; 2. a price
undertaking or 3. a provisional measure. Art 17.4
Art 17.6 deferential principle
Assessment of the facts– must accept the findings of an AD authorities if the
establishment of the facts were “proper” and the evaluation was “unbiased
and objective.” If so, can’t overturn the fact findings.
Customary rules of the interpretation of public int’l law should be followed. If
more than one permissible interpretation, DSB must find the authorities’
measure to be in conformity if it rests upon one of those permissible
interpretation.
More deferential if fact finding is involved. Less so on matters of
interpretation of law.
Art 31 and 32 of VCLT to be followed. Preparatory work to be considered
only if the meaning is obscure or ambiguous Art 32 VCLT. But Art 17.6 (ii)
says must give deference to AD authorities if more than one interpretation is
permissible. This is in contradiction. But since ADA is more specific
agreement on AD matters, the contradiction is resolved in favor of ADA and
WTO panel is thus restricted. It must still decide if the finding of facts was
“proper” and the evaluation was “unbiased and objective.”
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Criminal penalties and private remedies
National AD law must conform to Art VI of GATT 1994 and ADA.
US 1916 Antidumping Act provides criminal sanctions and treble
damages. Also competition laws predatory pricing and price
discrimination. Should they apply?
The U.S. 1916 Antidumping Act
The Dept of Justice never applied this act to AD case but could have.
EC and Japan brought a complaint in 1999 that the very existence of
this law was contrary to Art VI of GATT 1994 and ADA. The WTO
panel agreed and US appealed. On appeal, AB agreed with the panel.
Does US 1916 AD Act come within the purview of Art VI of GATT 1994
and ADA? Yes. And the only allowable remedies under Art VI of GATT
1994 and ADA is AD duties. B/c the 1916 Act has treble damages and
criminal penalties, it is inconsistent with Art VI of GATT 1994 and ADA.
Is US 1916 AD Act discretionary legislation that unless applied, cannot
be held to infringe upon Art VI of GATT 1994 or ADA? No. Does not
amount to discretionary legislation.
Does the ruling make sense?
Art 17.6 says: challenge to an AD measure cannot be made in WTO unless
1. a provisional AD measure 2. a final AD measure or 3. a price undertaking
settlement. This was not the case here.
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1916 Act covers not only AD but also a situation in which trade is restrained
and monopolized by that import.
In 2004 US abolished 1916 AD Act but the amendment is not retroactive and
previously decided cases remain unaffected.
Several cases remain pending. Goss v. Tokyo Kitkai Seisakusho Ltd. jury
awarded 3x damage to plaintiff. Japan and EC enacted clawback statutes
which allowed defendants who had to pay treble damages in US sue in their
country to recover treble damages paid to US plaintiff.
Future implications of the panel and the Appellate Report on the
1916 Act case
Many countries have competition laws similar to the US 1916 AD Act.
What is their future under US—Antidumping Act of 1916? Questionable.
It leaves private injured party w/o remedy if the ruling continues to be
upheld.
The U.S. Offset Act
The Byrd Amendment allows the US to distribute the AD duties collected
to domestic AD or subsidy complainants.
EC and Japan filed complaint that Byrd Amend was inconsistent with Art
18.1 of ADA and Art 32.1 of SCM. The Panel agreed. On appeal AB
interpreted the meaning of “specific action against dumping,” and held
that the Byrd Amend was a “specific action” against dumping (or
subsidies).
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Also it was > dumping. But the distribution is after the dumping (ex
post facto remedy). Is this “against” dumping?
Conclusions
AD measure to <->“unfair export.” AD covers only price differences.
AD defines dumping too broadly that it includes “normal” behavior. E.g.
elasticity in the export market greater than elasticity in domestic
market of the exporting country; sales below cost may occur if the
market price is below the cost of production. But If predatory pricing,
this may be to drive out competition. In the long run, it should be the
goal to replace AD with measures developed in competition law, e.g.
control of predatory pricing. But for now, b/c differences in competition
policies and market conditions of different countries, AD is needed.
But proposal to amend AD:
1. AD duty be less than the dumping margin if doing so will do the job.
Lesser duty is preferred if this can effectively eliminate the harm. Product X
in country Y is selling at 150; export to country Z is 100 The dumping
margin is 50. But if in country Y, the domestic producers of the like product
sells the product at 120, then the imposition of AD duty can be 20 b/c that
would make the price 120, the same as the domestic producers of country
Z This should be mandatory, not discretionary. Collect AD duties only to
the extent of “injury margin.” This principle ≈ “meeting competition”
defense in US antitrust laws.
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2. include public interest requirement. Now, only interest of
domestic producers. How about consumer interest or interest
of importers.
3. Also, cartels or a market dominating enterprise can use AD
to block competition from abroad. A bridge btwn AD authorities
and competition authorities is needed.
4. if export engaged in dumping is charging high dom price b/c
the domestic market is closed, it is using the monopoly profit
from its dom market to offset losses from sales below cost in
the export market. This would be unfair. Need a requirement of
finding that the dom market of the exporting country is
relatively closed to imports before AD duty is to be imposed.
But who will make that finding? AD authorities of the importing
country or the competition authority of the exporting country?
Close communication is desired between comp autho and AD
autho in both exporting and importing countries.
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