Commerce Finds China Still a Non-Market Economy for AD Duty Purposes
The Commerce Department declared that China remains a non-market economy for antidumping duty purposes, ending a long-awaited review of the country sparked by changes to China’s World Trade Organization membership terms. The agency’s Oct. 26 memo, issued in the context of an AD duty investigation on aluminum foil from China, says China “does not operate sufficiently on market principles to permit the use of Chinese prices and costs” in Commerce AD duty cases. That means Commerce will continue to use contentious “surrogate” prices and costs that can result in higher or less predictable AD rates.
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According to Commerce’s memo, Chinese government ownership of key economic actors and institutions “pervades China’s economy, including the largest financial institutions and leading enterprises in manufacturing, energy, and infrastructure. Because of the significant distortions arising from China’s institutional structure and the control the government and the [Chinese Communist Party (CCP)] exercise through that structure, [Commerce] finds that China remains a [non-market] country for purposes of the U.S. antidumping law.”
Commerce initiated the review in May (see 1703300022), following the expiration in December 2016 of parts of China’s WTO 2001 membership agreement that allowed countries to treat China as an non-market economy. China argued expiration of those provisions meant WTO members were obligated to treat it as a market economy, but others, including many in the U.S., argued that after expiration countries would still have the choice to continue treating China as non-market for AD duty purposes.
As part of its non-market methodology, Commerce uses “surrogate” third-country prices and costs to set artificial “home country” prices for Chinese companies, which are then compared to those companies’ U.S. sales prices to set AD rates. Use of surrogate prices from richer countries can make those U.S. sales appear relatively cheaper, inflating AD rates. Trade lawyers have also said Chinese companies find it difficult under the current regime to avoid dumping, because they have no idea what prices and costs Commerce will eventually compare to their U.S. sales (see 1602290025).
Commerce says its decision is final, and will not be revisited in the final determination of the aluminum foil investigation. The finding is likely to trigger a contentious WTO dispute that could run into the next decade, trade lawyers have said. China already filed WTO cases against the U.S. and the European Union the day after the WTO agreement provisions expired (see 1612120019), though it has so far only requested formal adjudication of its case against the EU (see 1703130037). If the WTO eventually finds against the U.S., the WTO could authorize massive tariff retaliation, given the value of goods affected, an EU official has said.
Email ITTNews@warren-news.com for a copy of Commerce’s memo.