Understanding U.S. Anti-Dumping and Countervailing Duty

By Maurice Deslauriers, U.S. Regulatory Affairs

You have received a telephone call, or an e-mail from your people or broker telling you that the product you have imported into the U.S. for years without problems or issues may be subject to an
“antidumping” duty; the mention was even made of a “countervailing” duty.  What happened here?

It’s important to realize that this question didn’t arise due to any action on the part of U.S. Customs and Border Protection (CBP). CBP is not the Agency who determines either measure.

If a U.S. industry believes that it’s being injured by unfair competition through dumping or subsidization of a foreign product, it may request the imposition of antidumping or countervailing duties by filing a petition with both the Department of Commerce (DOC) and the United States International Trade Commission (ITC).

Petitions are filed simultaneously with the two departments; both play separate but dependent roles during the course of the investigation. The ITC is responsible for determining whether a domestic industry is materially injured or threatened with material injury as a result of the individual and cumulated impact of the allegedly dumped imports.

To initiate an investigation, the Department of Commerce must determine that a petition is filed by an interested party and has the support of the industry producing the domestic like product in the United States (“industry support”).

“Dumping” occurs when imported merchandise is sold in the U.S. at less than the normal value of the merchandise or at a price that is below the foreign company’s cost of production.  The difference between the price or cost in the foreign market and the price in the U.S. market is called the dumping margin.

Imports of foreign merchandise are liable for special dumping duties only after two things occur:

(1) A determination is made by the Assistant Secretary of Commerce for Enforcement and Compliance that there are, or are likely to be, U.S. sales of the merchandise subject to the investigation at below fair value, and

(2) A determination is made by the ITC that an industry in the United States is materially injured or threatened with material injury, or that the establishment of an industry in the United States is materially retarded, by reason of imports of such merchandise.

The Department of Commerce (DOC) compares the adjusted prices sold in the U.S. to the adjusted price of the foreign like product in the home or third country market or to the constructed value of the subject merchandise to calculate the dumping margin.

It (the DOC) has the sole authority to initiate or not initiate an investigation, and analyze sales and costs from the perspective period of investigation to determine whether dumping occurred.

The specific detail of any order that emanates from an investigation is called a “Scope”.

The “scope of the investigation” is the detailed description of the imported merchandise that is being unfairly dumped or subsidized and injuring the U.S. industry.

This description should include the technical and physical characteristics of the merchandise and the current U.S. tariff classification number(s).

The scope description should be an accurate reflection of the product for which the domestic industry is seeking relief, but should not be defined so narrowly that obvious circumvention issues could arise in the future should an antidumping or countervailing duty order be imposed.

  1. The scope determines the price and cost information the Department of Commerce collects in its dumping analysis. In addition, the scope defines the exact products to which any antidumping or countervailing duties may be applied.
  1. Following the initiation of an investigation, the Department of Commerce designates a period for interested parties to raise issues regarding the scope. Usually, this comment period is the twenty day period following publication of the Notice of Initiation in the Federal Register.

What is a Countervailable Subsidy? 

Countervailing Duty (CVD) proceedings determine whether foreign governments are unfairly subsidizing their producers/exporters.

Foreign governments subsidize industries when they provide financial assistance to benefit the production, manufacture or exportation of goods. Subsidies can take many forms, such as direct cash payments, credits against taxes, and loans at terms that do not reflect market conditions.

The statute and regulations establish standards for determining when a subsidy has been conferred. The amount of subsidies the foreign producer receives from the government is the basis for the subsidy rate by which the subsidy is offset, or “countervailed,” through higher import duty.

In closing, please don’t think that CBP is simply “taking orders” from the Department of Commerce in these cases, for CBP has created a new Task Force, born as a result of the Trade Facilitation and Trade Enforcement Act of 2015 (the “Trade Enforcement Act”), which became law in February of this year.  The Trade Enforcement Act includes several provisions that elevate Antidumping and Countervailing duty enforcement by requiring CBP to investigate allegations of Antidumping or Countervailing order evasion within strict deadlines, and developing and acting on duty evasion risk assessments regarding cargo destined for the United States.

Both of these duty types have become paramount, and deserve your immediate and full attention.

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