U.S. Industry and China at Odds on Non-Market Economy Input Prices in AD Cases
China criticized the International Trade Administration’s proposal to increase the threshold at which market economy prices can be used to value inputs for antidumping investigations and reviews involving China and Vietnam, but domestic industry representatives were in favor of the change, and even suggested more-stringent requirements, in comments submitted in response to the ITA’s June 28 proposed rule. Comments were due July 30.
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(Currently, in antidumping proceedings involving non-market economy (NME) countries, the ITA uses the actual purchase price of an input paid by the producer, as opposed to a “surrogate value” calculated using third-country prices, to value all of that input if 33% or more of the total volume of the input was purchased by that producer from a market economy. However, the ITA’s proposed rule would establish requirements that to use actual purchase price to value all of the input, (1) the input at issue must be produced in one or more market economy countries, and (2) “substantially all,” or 85% of the total purchased volume of an input be purchased from one or more market economy suppliers. See ITT’s Online Archives 12062728 for summary of the proposed rule.
China Says Motivation is to Maximize Dumping Margins for NMEs
China’s Ministry of Commerce (MOFCOM) questioned the ITA’s motivation for the change, and argued that the proposal is contrary to U.S. law and WTO rules. The ITA’s concern about distortions to the prices of inputs sourced from market suppliers is unfounded because the ITA has acknowledged that “market prices now determine the prices of more than 90 percent of products traded in China.”. Remarkably, this concern has grown notwithstanding the lack of any evidence that market economy suppliers have provided inputs at other than market prices to Chinese respondents in any prior AD investigation, MOFCOM said.
Furthermore, said MOFCOM, the governing statute requires that valuation of inputs be based on the best available information. Automatically excluding market prices if market economy inputs are less than 85% of the total value of inputs would eliminate the required evaluation of what constitutes the best available information. Similarly, the WTO also requires use of the best available information, and presumes that secondary sources, such as the surrogate values that would be used in lieu of market economy prices in more cases as a result of the proposed change, are inherently flawed, said MOFCOM.
“Indeed, there appears to be no rationale for the change in practice other than to increase uncertainty for exporters in nonmarket economies and to maximize the margins of dumping in nonmarket economy investigations,” MOFCOM said.
Domestic Industry Likes the Change, Wants Tougher Requirements
But domestic industry was more amenable to the proposal. The Committee to Support U.S. Trade Laws (CSUSTL) and a collection of sector-specific fair trade committees expressed clear support for the proposal, and even wanted stricter requirements.
The ITA’s current practice of using market economy purchase prices to value 100% of inputs where only a third of total input purchases were from market economies gives AD investigation respondents a way to manipulate AD calculations, CSUSTL said. “So long as market economy purchases represent at least one third of a respondent’s purchases, the respondent can obtain the benefit of market economy prices for all of its purchases of a given input, regardless of whether it could obtain all of its needs from market economy sources,” it said.
While in agreement with the change, CSUSTL said the proposal would be strengthened if the ITA required that respondents demonstrate and provide evidence on the country of origin of their inputs.
King and Spalding, which filed comments on behalf of the domestic industry fair trade committees, said the proposed rule should also explicitly say that purchases of dumped, subsidized, or otherwise unreliable purchases of inputs would not be relied upon to determine any threshold for the use of market economy pricing.
Chinese Want Prospective Effect Should Change go Forward
Should the change go forward, said MOFCOM and representatives for Peer Bearing, the change in practice should not apply to proceedings that have been requested or initiated, or to administrative reviews covering periods of review that have begun but are not yet complete, at the time of the effective date of the final rule. “Respondents have relied on the 33 percent test in planning their market economy purchases and are now unable to rebut the new presumption that surrogate values represent the best available information unless a respondent has purchased 85 percent of an input from market economy sources,” noted Peer Bearing. Applying the proposed rule to reviews that have already been requested or initiated would alter the legal consequences of past market economy purchases and be impermissibly retroactive, Peer Bearing said.
Comments on the proposed rule are available at regulations.gov here (docket # ITA-2012-0002). -- Brian Feito