- September 01, 1995, MacArthur, Malcolm D.
As defined under international trade agreement and current US law, dumping (sales at below fair value) is price discrimination between national markets - the practice of selling the same or similar merchandise at different prices in different countries.
Proof of dumping requires a showing of two elements. First, the Department of Commerce (DOC) must find the existence of a dumping margin, generally a difference between the price of the product sold in the country of exportation (the normal value) and the price of the product sold in the US (the US price). If appropriate under the law, there are instances when either third-country or constructed value is used instead of the sales price in the country of exportation.
A number of complex adjustments are made to the prices in both countries in order to make the prices comparable. In analyzing whether there is dumping, the DOC makes a determination on the basis of each exporter's home market and US prices. Thus, dumping margins will differ for various exporters.
In addition, a determination may be made on the relationship between the cost of production of the product exported to the US and the sales price, which will affect the sales that are compared and, ultimately, the margin.
Second, the US International Trade Commission (USITC) must find that the US industry has been materially injured or threatened with material injury, or that the establishment of a US industry has been materially retarded by reason of imports of the foreign merchandise. If dumping margins and injury exist, the DOC will issue an antidumping order requiring that at the time of entry of the goods in question, importers deposit cash equal to the dumping margin.
The filing of an antidumping petition often results in importers shifting their purchases from companies that are subject to the antidumping investigation to companies not involved in the investigation or to US suppliers. Also, some importers may attempt to accelerate their purchases to avoid the consequences of a possible preliminary dumping determination, which generally occurs 160 days from the filing of the antidumping petition.
Importers are required to file a bond equal to the amount of the dumping margin from the date of the preliminary dumping determination. Importers also run the risk of being required to post bond for earlier sales if critical circumstances have been shown - a history of dumping or massive import over a relatively short time period. Thus, the filing of a dumping petition often has an immediate impact on a market.
If the DOC finds dumping and the USITC finds injury, importers will be required to make cash deposits equal to the dumping margin effective within seven days of the final determination. A final affirmative dumping determination may make it impractical for a foreign company to export to the US, because the price of the imported goods is increased due to cash deposits that importers pay.
Antidumping orders apply not only to the companies that were exporting to the US during the investigation but also to new companies exporting from the same country.
The cash deposits are security for the estimated antidumping duties. The amount of duties is determined by the DOC if an administrative review is requested, i.e., a DOC dumping investigation for the period of time in which the deposits were made. Absent an administrative review, the DOC will assess the duties owed based on the estimated duties determined during the investigation.
The administrative review can result in importers being required to pay more antidumping duties if the dumping margin during the annual review is greater than it was during the investigation. On the other hand, if the estimated duties are higher than the actual duties required, the importer receives a refund with interest.
Finally, under the Sunset provision, antidumping orders automatically come up for review every five years. However, stringent statutory requirements continue to make it difficult to revoke an antidumping order. Thus, once an antidumping order is issued, it is likely to remain in effect for the foreseeable future.
The US law has important consequences for US manufacturers, importers and foreign exporters. In addition, the major trading partners of the US have antidumping laws similar to that of the US, and some of those countries have become very active in initiating antidumping cases. Consequently, US companies that export must be sensitive to the risks of antidumping actions against their products in foreign countries.
Companies that believe they have been injured by possible dumping activities should consult counsel experienced in international trade law.
Malcolm D. MacArthur is legal counsel to the Flexible Packaging Association, other trade groups and corporations.