China-U.S. Trade Law : International Trade Lawyer & Attorney : Baker Hostetler Law Firm : Trade Remedies, Customs & Export Controls

The United States Court of Appeals for the Federal Circuit on May 9, 2012 sent the case titled GPX International Tire Corp. v. United States back to the United States Court of International Trade for the lower court to consider the constitutionality of legislation passed earlier this year overturning the Federal Circuit’s earlier ruling that countervailing duties may not be imposed on non-market economies. The Federal Circuit, as previously reported on this blog, ruled on December 19, 2011 that U.S. law forbids the application of countervailing duties to non-market economies.

Not willing to accept judicial defeat, the U.S. Department of Commerce, and other interests who support imposing countervailing duties on China while treating China as a non-market economy, convinced the United States Congress to rewrite the law and overturn the Federal Circuit’s December ruling.

The new law, also discussed in detail in a previous article posted on this blog, provides that “the merchandise on which countervailing duties shall be imposed . . . includes a class or kind of merchandise imported, or sold (or likely to be sold) for importation, into the United States from a nonmarket economy country.” It provides in a separate section that the Department of Commerce should try to avoid double counting when imposing both countervailing and antidumping duties on the same merchandise from a non-market economy, which means Commerce should not count an alleged subsidy in a countervailing duty determination as a cost of production in the antidumping proceeding, thereby assessing duties on the same alleged program or conduct twice. The first provision, that countervailing duties should be applied to merchandise from non-market economies, was made retroactive to November 20, 2006, but the second provision, to avoid double counting, applies only to new cases initiated on or after March 13, 2012.

GPX argued to the Federal Circuit that the new legislation is unconstitutional because (1) the retroactive effect of the first section would change the outcome of the GPX case after the Federal Circuit already had rendered its decision in favor of GPX last December based on the law as it was when GPX had been investigated; and (2) the new law improperly creates a special rule applicable only to GPX and to a few other cases in which Commerce may impose both countervailing and antidumping duties on the same merchandise from a non-market economy without attempting to avoid double counting. In effect, GPX argued that the different treatment it and a few other companies whose cases were initiated between the two effective dates would receive, as compared to all other companies for which investigations will be initiated after March 13, 2012, violated the Equal Protection Clause of the U.S. Constitution because GPX and those few other companies will be treated differently and for no reason. Although the Equal Protection Clause itself applies only to the states, the courts have long interpreted the Due Process Clause of the Fifth Amendment to the U.S. Constitution as imposing an equal protection obligation on the Federal Government. The Federal Government, which includes Congress as well as the Executive Branch, must treat everyone equally or have a powerful rationale for doing otherwise. That the merchandise happens to be Chinese is not such a powerful rationale for such discrimination.

The Federal Circuit quickly rejected the first argument because the GPX case still was pending when Congress acted and, therefore, the constitutional prohibition on Congress changing the outcome of a decided court case did not apply. The Federal Circuit must have concluded that the second argument might have merit, however, because it sent the case back to the Court of International Trade with instructions to the lower court to make “a determination of the constitutionality of the new legislation and for other appropriate proceedings.”

The case now goes back to the Court of International Trade to consider the constitutionality of the new law. Should that court conclude that the new law is unconstitutional, Commerce can be expected to appeal that decision back to the Federal Circuit. However, even were the Federal Circuit to agree that the new law is unconstitutional, based on GPX’s second argument, that decision would apply only to the GPX case and the few other cases in which Commerce applied both countervailing and antidumping duties to the same merchandise from non-market economies between November 20, 2006 and Match 13, 2012. It would apply only to those cases because that argument is limited to the unequal treatment afforded to GPX and the few other companies whose investigations were initiated between the two effective dates.

To win its first argument, that GPX was being treated differently because a judicial decision in its favor was being overturned by legislation, GPX would have needed a judicial decision that would have had to be final before the new law had been passed. But the second argument is not so limited by the facts: GPX would be one of only a small number of companies treated differently from all other companies in non-market economies.

The Federal Circuit’s remand order is broad enough that it might be possible for GPX to argue, and for the Court of International Trade to agree, that the new legislation is unconstitutional on other grounds that would apply more generally. Such broader arguments are unlikely to succeed, however, because Congress has extensive authority under the U.S. Constitution to regulate international trade. Consequently, GPX may prevail, but only on the narrow grounds of unequal treatment with respect to double counting.
 

 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

This blog reported on August 30, 2009 that Chief Judge Jane Restani of the U.S. Court of International Trade (“CIT”) ordered the U.S. Department of Commerce (“Commerce”) to revoke the countervailing duty ("CVD") order on pneumatic off-the-road tires from the People’s Republic of China in a case titled GPX International Tire Corporation v. United States.  Her reasoning was that Commerce was unable to eliminate the double-counting inherent in imposing CVDs while at the same time imposing antidumping duties calculated by using Commerce's non-market economy ("NME") methodology. Commerce appealed the CIT’s decision to the U.S. Court of Appeals for the Federal Circuit (“Federal Circuit”). On December 19, 2011, the Federal Circuit upheld the CIT’s decision but for different reasons than those offered by Chief Judge Restani. 

The Federal Circuit held that the U.S. CVD statute prohibits applying countervailing duties to NMEs. It found:

that when amending and reenacting [the] countervailing duty law in 1988 and 1994, Congress legislatively ratified earlier consistent administrative and judicial interpretations that government payments cannot be characterized as “subsidies” in a non-market economy context, and thus that countervailing duty law does not apply to [non-market economy] countries.

This finding, as a matter of U.S. law, definitively prohibits Commerce from applying CVDs even in cases without a companion antidumping investigation where there is no risk of double-counting. It has much broader impact than the CIT decision that Commerce appealed because the CIT would have permitted CVD investigations and orders, denying only CVD investigations and orders simulaneous and on the same goods as antidumping orders. It also has much broader impact than the WTO ruling in China’s favor on the application of countervailing duties in non-market economy cases, as reported on this blog on April 25, 2011, because the WTO challenge was based exclusively on the issue of double-counting.

Commerce determined that the CVD law could not apply to NMEs in a 1983 steel case against Czechoslovakia.  The petitioners appealed.  The Federal Circuit agreed with Commerce and established the rule that CVD petitions could not be filed against NMEs in Georgetown Steel Corp. v. United States.

In GPX Tire Corporation, the Federal Circuit reviewed the legislative history and concluded that Congress was well aware that Commerce and the courts were interpreting the CVD law as being inapplicable to NMEs when Congress amended the CVD law in 1984, 1988 and again in 1994. The Federal Circuit held that congressional awareness of this interpretation, when it amended the statute, constitutes legislative ratification of that interpretation. The court reasoned that in the face of this legislative ratification of Commerce’s previous determination that the CVD laws do not apply to NMEs, Commerce is no longer free to change its mind. The Federal Circuit concluded that:

Although Commerce has wide discretion in administering countervailing duty and antidumping law, it cannot exercise this discretion contrary to congressional intent. We affirm the holding of the Trade Court that countervailing duties cannot be applied to goods from [non-market economy] countries. As we concluded in Georgetown Steel, if Commerce believes that the law should be changed, the appropriate approach is to seek legislative change.

Commerce must now wish it had never appealed Judge Restani’s decision. Under the U.S. judicial system, Judge Restani’s decision only bound Commerce in the specific case that she had decided. Commerce was free to continue to apply countervailing duties in other NME cases because the CIT does not set precedent and its decsions only govern specific cases. By contrast, the Federal Circuit’s decision is precedent that binds the lower courts and Commerce not only in the specific case before the court, but in all future cases. 

Judge Restani’s decision was based on the double-counting problem and had left Commerce free to use the CVD law in any cases in which there was not a companion antidumping case. It also had left open the possibility that Commerce, in a future case, might find a solution to the double-counting problem and impose both antidumping and countervailing duties on the same product. Because the Federal Circuit’s decision is based on its finding that the U.S. statute prohibits applying countervailing duties to NMEs, it will take an act of Congress before Commerce can again impose countervailing duties on a non-market economy.

 

 

 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

The World Trade Organization’s Appellate Body issued a report on March 11, 2011 in which the People’s Republic of China broke a skein of legal losses by recovering some of the ground taken by a WTO panel last autumn. The Chinese Government loudly celebrated a major victory, while U.S. Trade Representative Ron Kirk denounced a “clear case of overreaching” in a “deeply troubling” decision of the Appellate Body.

Were one to listen to the rhetoric of the two governments too closely, one might perceive the WTO proceedings as more of a political than legal affair. The Chinese did not win that much, and the United States did not lose that much. There had to have been powerful political motivations for the over-wrought pronouncements of the two sides.

China elected to consolidate complaints regarding the final Department of Commerce (“Commerce”) determinations in four different antidumping/countervailing duty investigations – hence, eight investigations into four different products – into one WTO complaint. It did not appeal any of the determinations to the U.S. Court of International Trade (“CIT”), and did not challenge any of the four final determinations of the U.S. International Trade Commission in any forum. Hence, what could have been twelve WTO cases and a like number of CIT cases came down to one WTO case.

Double Counting

China complained of many things in the WTO case, but here, too, there was selectivity. The only objection raised regarding the four antidumping final determinations was that Commerce was double-counting remedies, applying duties twice on the same cost or expense. Allegedly subsidized electricity, for example, was countervailed, but also compared to an external surrogate value as an inflated cost in the dumping case and assigned part of the antidumping margin. Meanwhile, China challenged virtually all of the subsidy findings.

The CIT already had ruled that Commerce could not investigate simultaneously for the same merchandise, over the same time period, both antidumping and subsidy allegations, because applying a non-market economy methodology in the antidumping investigation yields a double remedy. Commerce had concluded, in 2007, that it could investigate subsidy allegations in a non-market economy, notwithstanding the definition of subsidies as government financial contributions that are market-distorting.

The CIT did not deny Commerce its desire to conduct subsidy investigations of non-market economies. Instead, it ruled that Commerce would have to figure out how to avoid double-counting when conducting antidumping and countervailing duty investigations simultaneously.

The CIT decision, in the OTR case (GPX Intern. Tire Corp. v. United States, No. 08-00285, 715 F.Supp.2d 1337 (Ct. Int’l Trade 2010)), is on appeal before the Court of Appeals for the Federal Circuit (“CAFC”). The Appellate Body decision ought to strengthen China’s hand in that appeal, albeit that the Chinese Government is not a party. U.S. courts have never treated WTO decisions as dispositive, nor even necessarily persuasive, but a NAFTA panel did apply the Charming Betsy doctrine to require Commerce to interpret U.S. law compatibly with international obligations whenever possible.  The CIT here has said subsidy investigations of non-market economies are permissible, but not in conjunction with dumping investigations. The CAFC, were it to uphold the CIT, would rule consistently with the international obligation articulated in the Appellate Body report. There is no U.S. court ruling putting U.S. law at variance with the international obligation.

This Chinese victory, then, already had been won. The CAFC could have, and still could, overturn the CIT. The CAFC could do so without reference to the Charming Betsy doctrine and applicable precedent unless the doctrine were invoked and well-argued by counsel for the Chinese party. Even then, the CAFC ruling, not the Appellate Body report, will determine U.S. law on this question.
Chinese authorities often still insist that the United States cannot investigate subsidies allegations while denying China market economy status. That issue, however, is not in play in the Appellate Body report. Nor would its resolution solve China’s problem with respect to Commerce’s methodology.

Extending a cramped WTO Appellate Body report interpreting Article 14(d) of the Subsidies and Countervailing Measures Agreement in Canada’s complaint against the United States over the use of cross-border benchmarks for analyzing softwood lumber prices, Commerce has treated China in countervailing duty cases the way it attempted to treat Canada. Inasmuch as Canada could not be accused of being a non-market economy, Commerce there established that the methodology of using prices from outside a country in a subsidies case is not exclusive to non-market economies. China did not seem to argue at the WTO any defect in Commerce’s interpretation of the Appellate Body’s softwood lumber report. By accepting the interpretation, it sealed its own fate.

The recognition now of China as a market economy would change very little, if anything, for China in countervailing duty cases. Applying the reasoning applied to Canada, Commerce would continue to select price benchmarks from outside China, thereby utilizing the same methodology it uses now. Indeed, China’s pleading for market economy recognition could lead to Commerce’s solution to the puzzle it was presented by the CIT: as with any other market economy, Commerce could bring dumping and subsidies cases simultaneously against a China recognized as a market economy, and nonetheless could use a countervailing duty methodology founded on the same principles as the NME dumping methodology.

For these reasons – that the CIT already had delivered this victory; that recognition as a market economy could solve Commerce’s problem more than China’s – both China and the United States have exaggerated the significance of the Appellate Body report. There may be powerful political reasons on both sides for the exaggeration, not to be found in a reasoned interpretation of the law.

The Other Chinese Victory

The other Chinese victory accorded by the Appellate Body on March 11 is little more revolutionary than the decision on double-counting, but it may have a greater impact. Commerce has been treating automatically all Chinese state-owned enterprises (“SOE”) as “public bodies,” controlled and directed by the government. This operating assumption enabled Commerce to treat the provision of inputs in the manufacturing process from SOEs as financial contributions because they automatically came from the government. Then Commerce only had to show that the price of the input, when compared to a price from outside China, was less in order to measure the size of the subsidy.

Notwithstanding the automatic treatment of SOEs as public bodies, Commerce already was completing the analysis as to whether SOEs provided inputs at prices that would make them countervailable. The Appellate Body decision will require a more complete analysis every time. Instead of assuming government control, such that the SOE is acting as a public body, Commerce will have to develop evidence that the provision of the input is not a purely economic or commercial act.

The Uruguay Round Agreements recognized that state-owned enterprises could be commercial and had to be treated without assumptions about state direction or control. Commerce’s automatic judgment was at variance with this recognition; the Appellate Body corrected Commerce by requiring it to respect the proposition that state-owned enterprises are legitimate entities in the world trading system. Were it otherwise, the United States would have a very difficult time dealing with General Motors and Chrysler, among other examples. Consequently, the Appellate Body did not take a position that could be considered very remarkable.

The United States pretends that other countries have SOEs, but that all enterprises in the United States are private. As long as that fiction is maintained, the United States will continue to treat SOEs as different and as state-controlled, whether to greater or lesser degrees. Beyond trade, the Appellate Body report theoretically could have additional impact were the definition of the SOE as a non-public body to evolve and become more accepted in the United States, but the Appellate Body report, as a legal matter, pertains only to trade, and only to subsidies disputes, nothing more.

The Losses

China lost everything else. All bank loans from state-owned banks automatically are suspect and subject to comparison for loan terms with banks outside China. There was no effective challenge to the U.S. use of out-of-country benchmarks because China’s complaint was focused on the principle rather than the particulars. The principle of comparing land values to property outside China was endorsed by the panel and left untouched by the Appellate Body; the absurdity of comparing rural Shandong Province to urban Bangkok was permitted without comment. Every other Commerce judgment about subsidies was upheld.

Because none of these issues has been adjudicated in U.S. courts, they all remain subject to challenge. The WTO did not specifically adjudicate them. However, Commerce will continue its practice with respect to all of them, and over the next cases will establish administrative practice difficult for China, as a result of neglect, to overcome.

Winning And Losing Less Than Imagined

The WTO’s decisions have only prospective effect. In addition, the United States treats every defeat as sui generis, applicable to the immediate case and no others. The United States likely will ignore the decision on double remedies, preferring the decision of the Court of Appeals. It may ignore the decision on SOEs except for the administrative reviews in the four cases brought through the WTO appeals process. It likely will promise implementation, take the maximum “reasonable period of time” possible, fail to implement to China’s satisfaction, and oblige China to request a Section 21.5 compliance panel. Consequently, it could take China years to achieve compliance from the Appellate Body decision, and then may enjoy a very limited victory. All the while, the United States Congress will decry the Appellate Body and seek to build pressure against adverse decisions like a bench coach harassing basketball referees. It was not inappropriate, as seen from Congress, that the Appellate Body Report came with March Madness.

Such a limited outcome will be the product of Chinese decisions to rely on the WTO instead of U.S. courts; to consolidate cases instead of appealing them separately; of exaggerating publicly its victory so as to arouse public (and consequently political) resistance in the United States. It will also be the product of the WTO’s institutional weakness, limited to prospective and indirect enforcement, and then only with the cooperation of the parties.

It will be important for both parties to reduce popular expectations and to manage disappointments. Otherwise, in their competition to celebrate the virtues of the WTO, they will undermine the very institution upon which both, for political if not legal and economic reasons, have decided to rely.
 

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

Sophocles wrote, " The keenest sorrow is to recognize ourselves as the sole cause of all our adversities,” which probably applies to the Watanabe Group Companies of China in a recent antidumping determination by the U.S. Department of Commerce (“DOC”).

DOC published in an October 18, 2010 Federal Register notice its preliminary results in Certain Lined Paper Products (“CLPP”) from the People’s Republic of China, for the third administrative review of that antidumping order. DOC imposed a 258.21% dumping rate on Watanabe, based on “adverse facts available,” because DOC believed that Watanabe submitted false documentation at verification.

DOC explained the reasons for the results as follows:

“…petitioner supplied invoices which they claimed correspond to invoices related to third-country sales reviewed at verification and provided as verification exhibits. Specifically, petitioner points to the similarity between the products listed, quantities and other details in the two sets of invoices. However, they note the significant differences in payment amounts between the two sets of invoices. Additionally, petitioner provided documentation demonstrating payment in the amount listed on the petitioner-provided invoice and receipt of that amount as recorded in Watanabe supplied payment documentation at Verification Exhibit 14 at page 1. For three of Watanabe's third-country sales, petitioner provided documentation demonstrating payment in the amount listed on the invoices petitioner provided and not those provided by Watanabe. This raises a fundamental question about the reliability of the documents reviewed at verification.”

“Regardless of the motives of either party, we preliminarily determine that petitioner has provided credible evidence of misreporting of sales values by Watanabe. The fact that the total revenue associated with the invoiced amounts petitioner submitted tied to the company book and records tends to show that the prices on the invoices reviewed at verification are incorrect, thus fundamentally calling into question the reliability of Watanabe's records.”

“To ensure that the margin is sufficiently adverse so as to induce cooperation, we have preliminarily assigned to the PRC-wide entity, including Watanabe, the rate of 258.21 percent, the highest rate on the record of this proceeding. This rate was assigned to the PRC-wide entity in the investigation of CLPP from the PRC.”

Background

An antidumping case was filed against Certain Lined Paper Products (“CLPP”) from the People’s Republic of China on September 9, 2006. Lined paper is used as school supplies, such as notebooks, composition books, loose leaf, filler paper, graph paper, and laboratory notebooks, for writing reports and doing homework. The Watanabe Group participated in the original investigation and received a margin of 134%.

In the First Administrative Review, DOC obtained Customs and Border Protection (“CBP”) quantity and value data for the parties for which a review was requested. After assessing its resources, DOC determined that it could reasonably examine only one of the four exporters subject to the review.

On November 7, 2007, DOC selected Lian Li as a mandatory respondent, not the Watanabe Group. Lian Li succeeded in explaining its accounting system and reconciling most of its costs to its financial statement. As a result, Lian Li received an antidumping margin of 22.35%, which was shared by the Watanabe Group, dropping its margin from the 134% of the original investigation

In the Second Administrative Review, DOC determined that facts available with an adverse inference were warranted for Watanabe because Watanabe had submitted an incomplete response to DOC’s initial questionnaire. Watanabe had claimed that, because it did not sell subject merchandise to the United States during the period of review (“POR”), it would not respond to Sections A, C and D of the questionnaire. However, entries of its merchandise in fact had been made during the POR. Because Watanabe refused to supply the requested information and the record contradicted its representations, DOC assigned Watanabe a punitive facts available rate of 258.21 percent in its final results of the Second Administrative Review. Nonetheless, Watanabe still had a chance to turn its situation around, as it had sales during the period to be examined in the Third Administrative Review.

Verifying The Preliminary Results Of The Third Administrative Review

DOC conducted the Third Administrative Review for the period September 1, 2008, through August 31, 2009 with respect to four producers/exporters. This time, Watanabe was examined and everything seemed to be going well, until the petitioners submitted third country invoices (invoices the petitioner obtained from other buyers of the product), which caused DOC to doubt the accuracy of Watanabe’s records. As DOC reported in its Federal Register Notice of the preliminary results:

- Petitioner-submitted invoices appear to establish that the sales and payment values do not tie to Watanabe's own internal records.

-Watanabe argued the petitioner refers to third country sales, which it claims are irrelevant to the Department's inquiry into U.S. sales and the mere allegation that such third country sales were diverted to the United States is insufficient.

-Specifically, petitioner points to the similarity between the products listed, quantities and other details in the two sets of invoices. However, they note the significant differences in payment amounts between the two sets of invoices.

-For three of Watanabe's third-country sales, petitioner provided documentation demonstrating payment in the amount listed on the invoices that were not those provided by Watanabe. This raises a fundamental question about the reliability of the documents reviewed at verification.

-The fact that the total revenue associated with the invoiced amounts petitioner submitted tied to the company books and records tends to show that the prices on the invoices reviewed at verification are incorrect, thus fundamentally calling into question the reliability of Watanabe's records.

Hence, after the petitioners saw the verification exhibits and compared them to documents they had collected from third parties, they called conspicuous differences to DOC’s attention. They pointed out that verification documents that tied to the third party invoices agreed in total, but the quantities and prices did not. The Petitioners also pointed out that the payment amounts shown on the third country invoices did not match the amounts shown as being paid on those invoices in the accounting records that the respondent presented to DOC at verification.

For a company to improve its margin, it would need to prove higher U.S. sales prices for subject merchandise. In a period of review, the company would have to be selling, therefore, at higher prices than during a prior period. Companies trying to manipulate their records, without in fact making such sales, should expect to be caught and to face the consequences.

It seems that some companies have tried to manipulate their records by appearing to have prices for third country sales that are lower than U.S. sales prices by an equivalent amount (i.e., lowering the reported price on the third country sales by the same amount that they increase the price on the US sale, such that the total remains the same). The total then appears reconciled in the summary totals of the financial statements. Financial statements and invoices appear to reconcile; the antidumping margin falls. The exercise, however, is fraudulent, and the lawyers’ certifications are false. When petitioners present contrary third country prices, the perpetrating companies are caught.

For a successful verification, where DOC officials do not think they are being deceived, financial records must be reconcilable internally and with the answers respondent companies have provided in questionnaires. CLPP is not the first case in which a Chinese company failed in a cloud of distrust generated by inconsistencies exposed in their own documents, but with a growing DOC concern about Chinese respondents generally, it is surprising that Watanabe was apparently not at least more alert about its own records.

The most celebrated and very public example of verification failure involved Crawfish from the People’s Republic of China. DOC officials became suspicious of the documents offered at verification and went to the respondents’ preparation room (typically, respondents will make a well-organized presentation of documents in one room while sorting and assembling them in another) . Although the Crawfish respondent had told the DOC verifiers previously that “the company did not maintain computer records of customers of [sic] business transactions,” the officials found business documents on the computer in use in the preparation room. Following this discovery, things only got worse for the Chinese company. DOC concluded that the respondents were being deceptive and applied punitive adverse facts available, as they did in CLLP. The details of this episode are described in the Crawfish Verification Report.

The respondent Chinese company gave DOC the impression in Crawfish that something was “odd” at verification by its own actions, particularly claiming that computers were not used for maintaining business records while business transactions were found on company computers. In addition, the company’s “accountant” did not have a National “identity” card and apparently was an employee of another crawfish exporter who had been involved in a previous verification for that other company. If these dramatic and unexplained discrepancies were not enough, the electricity did not function during verification in the rooms where DOC was trying to access the company’s computer, leaving DOC officials with little choice but to believe that they were being deceived, as other DOC officials concluded in CLPP.

Trouble Of Watanabe’s Own Making, But In A More Challenging Legal Environment
In the past several months, a pattern has begun to emerge in which DOC has been applying, more often than in the past, “facts available,” and with adverse inferences, to respondents from China. The application of the rules seems to be changing. The DOC and petitioners are more and more suspicious that Chinese companies are falsifying records shown at verification and, therefore, are seeking to confirm the accuracy of those records whenever possible through outside sources. Some petitioners are using former FBI and Scotland Yard investigators to contact companies who supposedly are market economy suppliers of inputs to respondents in China, in order to discredit respondents’ claims of market prices.

CLPP is now one of several cases contributing to DOC’s apparently deep and growing mistrust of Chinese data. The Watanabe Group may, or may not, have been trying to deceive DOC, but in the presence of discrepant data, subsequent to misrepresentation in a previous review, and in a developing context of doubts about the veracity of Chinese verification presentations in other cases, the impression governed. The more Chinese companies rely on deception, or appear to be doing so, to get through verifications, the more they can expect to be exposed and find themselves with prohibitive results. Worried about the expense of legal defense, they are finding themselves having wasted both their money and their time because of an apparent lack of due diligence and care in preparing and hosting verifications. To prevail in trade disputes now, before an ever-more vigilant DOC and ever-more suspicious and skeptical petitioners, Chinese respondents will need to rely on facts they can verify, not fabrication or supposition, and they will need legal counsel with sterling reputations before U.S. agencies to avoid regrettable presumptions.

Winning At All Costs

Unfortunately, as the number of trade disputes has diminished, Chinese and U.S. legal counsel have been promising prospective Chinese clients the impossible, and then have done whatever it seems to take to achieve it. Some routinely promise zero margins in antidumping cases before they have seen company books, and base their fees largely on the contingency of such results. Some have represented more than one company, promising each one a better result than the other with both guaranteeing a fee bonus should it get the best result. One of the companies must lose, but the lawyers in such circumstances have to win.

There may not have been a lawyering issue in the CLPP case. The Watanabe Group’s experience may have arisen from simple misunderstandings. Nonetheless, DOC concluded, as manifested by the application of adverse facts available, that there was deception. When there may be doubt, DOC is now sending a signal that benefits of doubts will not be going to Chinese companies, and the troubles Chinese companies face may be all the more painful for being of their own making.
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

The U.S. Department of Commerce ("Commerce") reported to the U.S. Congress in November 2010 on the Relative Advantages and Disadvantages of Retrospective and Prospective Antidumping and Countervailing Duty Collection Systems. Commerce made no recommendations. It also is unlikely that Congress would have the appetite anytime soon to consider the wholesale revisions to U.S. trade laws that changing to a prospective duty assessment system would entail. Nevertheless, there are several noteworthy items in the report.

All other countries, unlike the United States, rely on prospective systems in their trade laws, as does the WTO. These systems require changes going forward, following an investigation and findings, but do not reach back for penalties. Congress instructed Commerce to address how prospective systems compare to the U.S. retrospective system on the following criteria:
(1) Remedying injurious dumped or subsidized imports;
(2) Minimizing uncollected duties;
(3) Reducing incentives to evade antidumping (“AD”) and countervailing duties (“CVD”);
(4) Targeting high risk importers;
(5) Considering the impact of retrospective rate increases on importers and their employees; and
(6) Minimizing administrative burdens.
Commerce received comments from 40 interested parties, including comments that the editors of this blog submitted on April 20, 2010. Those commentators represented a wide range of industries, petitioning U.S. producers, foreign producers, importers and customers. The U.S. Department of the Treasury and the U.S. Department of Homeland Security ("DHS"), which enforces AD and CVD orders at the ports, previously submitted comments for a study by the Government Accountability Office. Commerce summarizes some of those earlier agency comments in its report.

Commerce noted that the United States is the only country that uses a retrospective system for collecting AD and CVD duties. Advocates of keeping the retrospective system, mostly U.S. petitioners, emphasized the greater accuracy of the system because duties are assessed based on the amount of dumping or subsidization found for the actual imports in question. Commerce acknowledged that advocates of prospective systems argued that such claims of superior accuracy are not achieved consistently in practice because Commerce in recent years has not reviewed more than a couple of companies in administrative reviews, even when many companies requested reviews. Commerce has said it lacks the resources to review all the companies making requests. Commerce also noted the arguments of some commentators that retrospective duties are not very good at remedying the actual injury caused by dumping or subsidies because the duty rates cannot be known when importers and customers are making their pricing and purchasing decisions.

It appears from Commerce's Report that DHS would prefer a switch to a prospective system. Commerce quoted DHS as saying that "its preferred option would be 'for Congress to fundamentally alter the United States system by eliminating its retrospective component and make it prospective. This approach would …. [a]lleviate the collection issue faced by DHS due to substantial rate increases since the amount of duties assessed at entry would be the final amount owed.' "

Advocates of prospective systems emphasized that the retrospective system is bad for business, particularly small business, because it deprives companies of critical information on the full costs of their products before they have to make pricing decisions. Commerce responded to this criticism by pointing out that, because of due process rights in U.S. law, a prospective duty assessment system would not eliminate this uncertainty: the parties to AD and CVD proceedings have a due process right to appeal administrative determinations of Commerce and the United States International Trade Commission to the United States Court of International Trade and eventually to the United States Court of Appeals for the Federal Circuit. The courts routinely enjoin liquidation of the customs entries for the duration of these proceedings. The final duty rates, which could go up as well as down as a result of court decisions, can take years to be known.

Commerce, thus, is correct in questioning the advantage of a prospective system, in light of U.S. legal rights, to achieve accuracy and predictability. The United States is famously a litigious society; trade cases often take many years to work their way through the Court of International Trade, through possible remands by the court back to the agencies (Commerce or the International Trade Commission), and possible further judicial review by the Court of Appeals for the Federal Circuit (with possible remands to the Court of International Trade).

Any party appealing an agency decision would want the court to enjoin the final assessment of antidumping or countervailing duties pending the appeal’s outcome. Otherwise, much of the economic benefit, should the party succeed in the appeal, would be lost. Because of separation of powers and due process requirements of the U.S. Constitution, Congress would not be able to strip the courts of the power to issue such injunctions through a change from a retrospective to a prospective system of duty assessment. Therefore, even were Congress to legislate such a change, the U.S. system would retain retrospective aspects. Under a prospective system, duties could be assessed and collected at the time of importation, but for any case on appeal -- for those companies whose shipments are the subject of the appeal, and with respect only to the issues under appeal -- the final duty owed would not be known until the court process would reach final decisions.

A prospective system may still be better. In many cases, the potential effect of a judicial reversal of Commerce’s determination can be quantified at the time of the appeal. Companies would be able to account for the risk of judicial reversal when making purchasing and pricing decisions. For example, if the only issue on appeal for a particular respondent were whether to allow a particular adjustment in the dumping calculation, the effect on the margin of allowing or disallowing that adjustment could be calculated at the time when the appeal would first be taken; importers could price their products accordingly. By contrast, under the current U.S. system, at the time of importation, when importers make their pricing decisions, most of the data necessary for a dumping calculation are unknown because Commerce has not yet performed any calculations, verification has not yet occurred, and a myriad of other variables remains undetermined. Thus, even for cases subject to judicial appeal, a prospective system provides more certainty than the current U.S. retrospective system.

Although a switch to a prospective system would not be the panacea that some proponents claim it would be, it would represent an improvement over the uniquely cumbersome U.S. system of retrospective duty assessment for the following reasons:
• Defenders of the status quo claim superiority for the retrospective system because, they say, duty rates are based on a comparison of actual import prices to normal values or subsidies calculated for a contemporaneous period. However, because the prospective system allows the importer to account fully for the antidumping or countervailing duties when making pricing decisions (i.e., where the imports compete with the domestic product), a prospective system may, in fact, do a better job of remedying the injurious effect of dumping or subsidization.
• Prospective systems are better at collecting duties because they collect upon importation. Injured parties do not have to wait through years of administrative and legal reviews and proceedings before unfair competition can be offset.
• Prospective systems are more likely to reduce incentives and opportunities for the evasion of duties because they are clearer in their expectations: normal values or fixed duty rates advise importers in advance of the prices they should apply to goods, information known to authorities with certainty at the time of importation.
• The retrospective system has no reliable way to "target high-risk importers," as it is focused on the prices of goods after they are imported. The prospective system, focused on the price of the goods when they arrive at port, makes the relative "risk" of the importer less relevant.
• The American retrospective system, by creating much more uncertainty in the marketplace, creates competitive advantages for U.S. petitioners (through the advantages of market disruption occasioned by the very filing of trade remedy petitions), but the costs and consequences are visited upon importers, their employees, downstream businesses and their employees, and ultimately U.S. consumers, an inherently unfair distribution of the burdens arising from unfair trade.
• The retrospective system is by far more administratively cumbersome and expensive than the prospective system adopted by every other country and reflected in the principles governing the remedy system of the WTO.
The United States has maintained an expensive and inefficient system unlike any other
country's. The case for the status quo, the Commerce report shows, is weak and biased in favor of petitioners, against importers, consumers, and rational markets. The systematic analysis of retrospective and prospective duty assessment systems that Congress has invited has been overdue. This report, unfortunately, is not likely to lead to warranted change.

 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

The US Department of Commerce (“DOC”) initiated 731 antidumping investigations between 1988 and 2008. Three hundred (or 41%) of those investigations did not result in an antidumping order because the International Trade Commission (“ITC”) determined that the imports in question were not the cause of material injury or threat of imminent material injury to a US Industry. Another 81 (or 11%) of those investigations did not result in an antidumping order because DOC terminated or suspended the investigation or found no dumping. Thus, historically, slightly more than half of all antidumping petitions did not result in the imposition of antidumping duties, and about 80 percent of those escaped an antidumping order because of the findings and conclusions of the ITC. These historical results demonstrate that it pays for respondents to defend their interests before the Commissioners.

The benefits of participating at the ITC can be shown by comparing the statistics for cases involving Chinese merchandise (whose respondents typically do not participate actively) to cases involving merchandise from all other countries (whose respondents generally do participate actively). During the same 20 year period indicated above (1988-2008), DOC initiated 124 antidumping cases against products from the People’s Republic of China. The ITC made negative injury and threat of injury determinations in 26 of those cases (or 21%). By contrast, 45% of the antidumping investigations brought against non-Chinese merchandise in those same years resulted in negative ITC determinations and no antidumping order. Although there undoubtedly are many reasons contributing to this disparity, one that cannot be denied is that a party has a better chance to succeed when it participates actively than when it remains on the sidelines.

Appreciation Of The Full Process: There Are Benefits To Be Had At The ITC

Most Chinese respondents seem to believe that they must participate at the DOC when confronted with dumping or subsidy allegations, but that they can ignore the ITC. This belief, which may be based on a misunderstanding of the U.S. trade remedies system (or a reflection of China’s own), is self-defeating. DOC participation is important, but participation at the ITC is no less so, assuming the objective of participation at all is to retain access to the U.S. market. DOC is part of the executive branch of the U.S. government, created primarily to promote and protect domestic industry. The ITC, by contrast, is an agency wholly independent of the executive branch, bipartisan by law, charged with studying world markets for Congress and therefore staffed with competent professionals generally free of protectionist biases.

To initiate an investigation, DOC has a check-off list to make sure a petition makes the required claims as to dumping or subsidies, and injury. DOC undertakes no serious analysis as to whether a U.S. industry is injured or threatened with injury, which is left entirely to the ITC. US law and WTO rules provide that findings of dumping or subsidies do not permit the imposition of duties without a finding of injury (or threat of injury) to an industry in the importing country caused by the dumped or subsidized imports.

The ITC does not assume that, because the U.S. producers may be losing sales or profits (typical indicia of injury), the allegedly dumped or subsidized imports are a cause of the apparent injury. Instead, the ITC must by law consider whether other factors are the cause, including changes in technologies, customer requirements, market conditions, domestic industry efficiency and competitiveness, and third-country competition.

The ITC depends on information provided by the parties to determine causes of injury. When Chinese companies fail to participate at the ITC, or participate with little effort and energy, the ITC is constrained to base its determinations on a record shaped predominantly by the petitioners seeking to impose an order. Notwithstanding views we commonly hear from outside the United States, and especially in China, the ITC has proved in its procedures and results that it wants to hear from both sides in a trade dispute. Even as the law contains its own biases (an evenly split 3-3 vote in the Commission, for example, is awarded to the petitioner), the Commission and its staff generally want to protect domestic industries only when they need protection.  However, it is very difficult for them to reach even-handed conclusions when they hear from only one side.

Participation Should Begin At The Beginning

The ITC conducts its investigations in two phases. In the preliminary phase, the ITC must decide within 45 days of the filing of the petition whether there is a reasonable indication that the US industry is injured or threatened with injury by reason of the imports in question. The ITC, thus, must decide within 45 days whether there is enough evidence indicating injury (or threat of injury) to be worth investigating further and requiring DOC to investigate further. A negative determination here would end the case.

The threshold for finding a likelihood of injury if more evidence were gathered is low, but the Commission and its staff frame the issues during this preliminary phase and identify most of the sources from which they will gather evidence. Absence from the proceedings during this phase means failing to help the Commission organize and structure its investigation. Unfortunately, Chinese industry rarely reacts quickly enough to a petition to appear and participate effectively at the ITC before the Commission is required by statute to issue its preliminary determination.

Although few investigations end in the preliminary phase at the ITC, it has happened, in the recent Certain Steel Fasteners From China and in Steel Wire Form China but, in both cases the petitions were filed against multiple countries which probably helped the Chinese cause in that those countries likely hired counsel to defend at the ITC. When it does, everything ends, including especially the greatest expense, which is in responding to DOC questionnaires and participating in verification. All that activity is mooted by a negative preliminary determination at the ITC. So, although such an outcome is improbable, the relative investment is small for the potential gain.

The ITC continues with its investigation, following an affirmative preliminary determination, even while DOC is still deciding whether subject merchandise is being subsidized or dumped, but the ITC will not finish its investigation unless DOC issues final affirmative determinations. The ITC then issues additional questionnaires (much more extensive and tailored to the specific product than those used in the preliminary phase), to the domestic manufacturers, importers, purchasers and foreign producers. These questionnaires are heavily influenced by the parties, on both sides when both sides participate, by the petitioners when they alone invest in the process. The ITC also considers the interested parties' comments submitted during a briefing and hearing, but based on the record evidence.

Chinese Companies Have Prevailed At The ITC

In Manganese Sulfate from the People’s Republic of China, DOC found a margin of about 32%, entirely the result of a very high surrogate value assigned to ocean freight. All international shipping is purchased in US dollars and does not generally vary much by carrier; DOC, nonetheless, assigned a surrogate value much higher than the amount actually paid, an example of the “engineering” of a result that has not been uncommon historically at DOC. The story was different at the ITC, where both the foreign respondent and the U.S. importer participated actively, beginning with the preliminary phase and the development of the factual record. They persuaded the ITC that their product did not compete with the domestic product, not through a conventional argument that the Chinese product was cheaper and sold to a different buyer, but because it was superior and could be used, unlike the domestic product, for both fertilizer and as a nutritional additive for animal feed. The result in the judgment of the ITC: different product, different markets, no injury.

In Refined Antimony Trioxide from the People’s Republic of China. the largest Chinese respondent cooperated with DOC and actively participated at the ITC. DOC found a margin of 13% for the primary Chinese respondent; the ITC, however, found that those imports did not cause injury to a US industry. As a result of the ITC finding, no antidumping order was imposed.

These cases are old, and there are few examples. The problem is not in the impossibility of winning, nor in any particular bias against China. The problem is in the failure to accept and participate in the process. Had the Chinese companies not participated at the ITC, in these cases, the ITC would have heard only the petitioner and dumping orders likely would have been imposed. In the case of antimony trioxide, the domestic U.S. industry was very profitable; its complaint against Chinese imports was unjustified. The domestic industry did not expect the Chinese to defend themselves at the ITC, and thought it would be easy, therefore, to shut the Chinese out of the U.S. market by relying on protectionist impulses at DOC. Petitioners’ counsel remarked privately, following the final negative ITC determination, that it was the first case they had lost against China, principally because Chinese companies routinely abandoned the U.S. market rather than rely on legal proceedings.

Some Chinese companies have made recent ITC appearances, but they remain exceptional. The Chinese Government, in subsidies cases, has not appeared, even as other foreign governments appear at the ITC when their programs are alleged to be the source of injury to a domestic U.S. industry. And even when the outcome at the ITC is not favorable to respondents, a solid evidentiary record can matter. In perhaps the most celebrated trade dispute of all, a NAFTA panel and the Court of International Trade reversed the ITC and found neither injury nor threat of injury to American softwood lumber producers, based on the record compiled by Canadian industry the Canadian and provincial governments at the ITC.
 

• Email This
• Print
• Comments
• Trackbacks
• Share Link

中文请点击这里

Chief Judge Jane A. Restani of the United States Court of International Trade (“CIT”) on August 4, 2010 ordered the United States Department of Commerce (“DOC”) to forego the imposition of countervailing duties on pneumatic off-the-road tires from the People’s Republic of China. Her decision, in GPX International Tire Corporation v. United States, was based on her ruling that US law prohibited DOC from imposing duties higher than the amount needed to offset subsidies on imported products.

The problem for DOC, inherent in the case and as posed by Judge Restani, is that DOC uses surrogate values presumed to be unsubsidized, rather than a company’s actual production costs, to calculate Normal Values. DOC compares these Normal Values in its non-market economy antidumping methodology to the export price, a methodology that should, at least in theory, offset any subsidies on the production of the merchandise (because the comparison has been taken against unsubsidized inputs through surrogate values). If DOC were to impose countervailing duties to offset subsidies that benefit the production of the merchandise, then it would be offsetting the same subsidies twice.

Double counting of subsidies does not occur with DOC’s market economy dumping methodologies (19 C.F.R. §§ 351.405 & 351.406) because, in those cases, Normal Value is calculated based on actual prices in the foreign market and actual costs incurred in that market. Thus, if there were any subsidies imbedded in those prices or costs, they would not be offset by the antidumping methodology and would need to be addressed separately in a countervailing duty investigation.

Judge Restani’s August 4, 2010 decision followed an earlier decision in the GPX case where she sent the matter back to DOC to find a way to avoid the double counting problem. In the earlier case, Judge Restani found that, while DOC had discretion to impose countervailing duties on Chinese merchandise while still considering China to be a non-market economy (the central issue in dispute), DOC had to avoid double counting of subsidies when it applied the countervailing duty law and the antidumping non-market economy methodology to the same products at the same time.

DOC interpreted Judge Restani’s earlier decision as giving it three options: (a) not apply the countervailing duty law; (b) apply the market economy antidumping methodology in that case; or (c) lower the cash deposits imposed in the antidumping case by the amount of cash deposits imposed in the countervailing duty case. DOC decided to lower the antidumping deposits by the amount of the countervailing duty deposits. Judge Restani found that option contrary to US law because there is no provision in the antidumping statute to lower duties by the amount of countervailing duties and because that option is unreasonable as it requires the parties to go through the expense of countervailing duty proceedings that are essentially useless.

Judge Restani ordered DOC to forego imposing countervailing duties on off-the-road tires from China because DOC demonstrated in that case that it did not have the ability to determine the degree to which double counting was occurring in its non-market economy language and offset it directly within that methodology. Thus, the CIT has left open the option in future cases for DOC to try new methodologies to eliminate the double counting within the antidumping nonmarket economy methodology. DOC continues to have the option of imposing countervailing duties to products from China in cases without a companion antidumping case on the same products, or in cases in which it uses its discretion to recognize a market-oriented industry (“MOI”). In that latter instance, considering MOI status, it could continue its general policy of not recognizing China as a market economy while using a market economy methodology for a particular industry. DOC has never recognized an industry in China as “market-oriented,” but it does have the statutory authority to decide to apply market economy methodologies on a case-by-case basis.

DOC, or the petitioners in the GPX case, have the right to appeal Judge Restani’s decision to the Court of Appeals for the Federal Circuit (“CAFC”). Should they do so, that higher court could overturn Judge Restani’s decision, affirm it, or modify it. Were the CAFC to overturn the decision, DOC would be free to apply countervailing duties to the same products on which it used the non-market economy antidumping methodology. In deciding whether to appeal, however, DOC must consider the risk of appealing and losing. Right now Judge Restani’s decision is binding on DOC only in the GPX case: it does not set precedent that DOC would be forced to follow in all future cases. Were DOC to appeal and have the CAFC affirm Judge Restani’s decision, that affirmation would be binding precedent, prohibiting DOC from applying both the CVD law and the non-market economy methodology to the same merchandise.

Judge Restani’s decision was based solely upon US law. However, China has challenged at the World Trade Organization, on the same grounds of double-counting, the application to China of the countervailing duty law while DOC refuses to recognize China as a market economy. Judge Restani’s decision in GPX demonstrates the value, at least to the companies involved, of appealing to the US court, rather than relying solely on WTO challenges. As we noted in earlier articles on this blog (US Court Decision Ought to Change Chinese Thinking and WTO Challenges Not Always a Panacea for Respondents in Trade Litigation), the WTO process is designed to vindicate governmental interests, but does not often provide much comfort or relief for commercial interests. Appeals in the US courts, by contrast, are a right belonging to the companies themselves that have been hurt by the agency’s challenged actions and, when those companies win in U.S. courts,, the remedy can provide immediate retroactive relief.
 

Click here for Chinese translation

• Email This
• Print
• Comments (1)
• Trackbacks
• Share Link

China Is A Target

China has been the primary target of anti-dumping measures around the world for a very long time. More than 30 countries have initiated roughly 600 antidumping cases against 4000 different types of Chinese products during the last two decades. The United States alone has conducted 122 investigations (excluding withdrawals and terminations), and imposed 101 orders against Chinese goods. Approximately 30 percent of all WTO-member anti-dumping investigations have been directed against China.

The Chinese Government and Chinese companies have not consistently cooperated with U.S. authorities or participated fully in investigations. History shows, however, that cooperation and participation matter and that results enabling Chinese merchandise to remain competitive in the U.S. market are always possible.

It Is Possible To Win

For many Chinese companies, the United States is an indispensable market and their very existence depends on retaining access to it. Good legal defenses can be expensive, but not nearly as expensive as having to abandon the market, or sell at non-competitive prices. Failing to participate in antidumping or countervailing duty investigations under the assumption that winning is impossible, either because the American system must be rigged or competent counsel is not affordable, is particularly unfortunate because many companies that do participate fully and with competent counsel can, and often, do prevail.

Historically, Chinese companies have won few antidumping and countervailing duty cases, not because it was impossible to win, but because the Chinese companies were not familiar with the legal and operational procedures of the US antidumping and countervailing duty laws, have hired low cost counsel without the experience or resources to defend them effectively, and failed to cooperate fully with the United States Department of Commerce (“DOC”) or participate at the United States International Trade Commission (“ITC”). These reasons for failure are far more important than anything that might be supposed about the political environment or anti-Chinese prejudice in the United States.

Before petitions seeking investigations of Chinese steel products began being filed in 2007, the largest case against China (by volume of exports) was Bicycles from the People’s Republic of China. Hundreds of millions of dollars of exports and thousands of jobs across China, Hong Kong and Taiwan were at stake. Chinese exporters hired talented lawyers who led them through multiple submissions and verifications, in China, Hong Kong and Taiwan. Millions of dollars were spent in legal fees, but more than 100 million dollars of exports were threatened. Paying for competent counsel paid off. Of the nine exporters found dumping, the highest antidumping margin was only 13.67%. Several companies were not found to be dumping at all. The ITC, applying these margins in the analysis of whether a U.S. industry was materially injured or threatened with material injury by Chinese exports of bicycles to the U.S., found none, leading to dismissal of the case.

It Pays To Pay

Chinese respondents in Ball Bearings from the People’s Republic of China spent nearly a million dollars in legal fees, but the leading company, with a multi-million dollar investment in a state-of-the-art manufacturing facility outside Shanghai, received a zero margin and was free from duties. There is no guarantee, of course, that when a Chinese company spends more money on legal services it will necessarily get better results, but there are market reasons why some lawyers command higher rates than others: their time is in more demand, which means the market for services is recognizing their value. It may seem to a company an important savings to hire lawyers for $50,000 or even $100,000 less than lawyers from firms with greater reputations, but when a $100 million market is at stake, the savings on legal fees suddenly does not amount to that much and do not make sound commercial sense.

There are additional considerations. Chinese companies typically want fixed fees for legal services, no matter what may happen in a case. In some instances, petitioners may not want to spend very much themselves and therefore do not apply a great deal of legal pressure on respondents. However, when the opposite is true and petitioners press their case hard, there is much more legal work necessary on the defense. A budgeted commitment for a questionnaire response and perhaps one supplemental questionnaire could turn into multiple supplemental questionnaires. Legal briefing that might have appeared to be routine could require enhanced legal skills and knowledge of the law.

A company may be confident that its records are kept well, only to learn during an investigation that the company standards will not satisfy DOC. In these instances, counsel may require much more time and effort to prepare the company for the audit DOC officials will conduct (called “verification”), which will be a full inspection of the company’s books.

When the fee is fixed and additional legal services are required because of the circumstances of the case, one of three things can happen. The lawyers can do all that is required for the fixed fee and take a financial loss on the case. The company can agree that it will need to pay more for the additional services. Or, the lawyers, without saying much to the company about it, can simply do less, providing less than optimal services because they effectively are not being paid to do all that is required.

It may be unethical not to do all that is needed when payment may not be forthcoming, but in most instances that is what happens. Chinese companies insist upon the fixed fee and will not pay more; the lawyers cannot afford to do a great deal more. The lawyers then do the minimum necessary to get through the case, and the company suffers without ever being told that the lawyers are doing less than they should be doing.

For all these reasons (and there are many others), it pays to pay: participation and cooperation in the case is always better than refusing or limiting participation. Paying for the best available legal services is always better than trying to get through the case on the cheap, particularly when the cost is compared to what is at stake. It is always better to be flexible about fees because every possible contingency in the case cannot be anticipated in advance, and because there will always be unscrupulous lawyers (as there are unscrupulous businessmen) who will promise more than they can deliver, and will do as little as possible to earn their fees.

The Bigger Picture In Trade Remedy Disputes

Many Chinese businessmen and government officials, in our experience, seem to believe that the antidumping and countervailing duty investigations initiated by the United States (and Europe) are part of a larger, undeclared China-US (or China-West) trade war, and that the U.S. Government is behind the scenes controlling the outcome of the cases to the detriment of Chinese companies. There are undoubted protectionist biases in the trade laws that the U.S. government is required to respect, but trade remedy investigations and reviews are more conflicts between companies in different countries competing for the same market share than they are contests between nations. Americans are not unaware that, should they play unfair at home, their own exports may face unfair practices in China and elsewhere, which is why they subscribe to the WTO and a common rule worldwide.

There is little or no benefit for a company to conjure world trade as a conspiracy, and there is ample contrary evidence that respect for laws and institutions can pay off. Chinese companies would benefit more by participating and cooperating fully, fighting as hard as possible according to the legal rules, hiring competent American counsel and participating fully in all phases of the DOC and ITC investigations, instead of blaming or speculating on political motivations behind poor results.

Summary: Improving The Chinese Prospects Of Winning

How can Chinese companies win antidumping and countervailing duty cases? They first need to hire competent U.S. lawyers with experience and proven track records. The homework necessary to choose counsel is not simple, but again not impossible. They cannot listen to lawyers touting their own credentials without proof. They need to ask questions. Their focus, however, should be on the quality of the lawyers and their services, their reputation and their experience. It should not be only on price. Until recently, many trade remedy petitions were brought against merchandise from other countries. Respondents in other countries have never depended so much on the price of legal services the way Chinese companies have done, and there is a contrast in results that suggests powerfully that it pays to pay.
Second, Chinese companies need to commit to cooperation with the investigating agencies and participation in every phase of the investigations. They need to commit resources and devote themselves to fighting hard to win. They need to consider the potential expense of defending their interests in the U.S. market against the potential value of losing access to the market. They need to think in the medium and long term, for once shut out of the market by an adverse outcome, it could take five years or more (the period awaiting a sunset review of an antidumping or countervailing duty order) to get back in. And they must know that, when their market access is challenged in the U.S., a challenge in Europe likely will follow, and vice versa. The global market means global challenges, and a problem in one place inevitably becomes, sooner or later, a problem in another.

 

• Email This
• Print
• Comments
• Trackbacks
• Share Link