Anti-dumping is not a new term to Vietnam. Since 2002, anti-dumping investigations initiated against imports from Vietnam have been a huge problem causing headache to Vietnamese exporters. It is, however, not easy for companies to fully understand all aspects of an anti-dumping investigation and to be able to develop an effective defending strategy. This fact is evidenced by relatively high antidumping margins in many anti-dumping cases.  Having experiences for more than 10 years of defending Vietnamese and foreign companies in antidumping cases, in this article, we will identify fundamental problems within investigated companies, which have been the main causes of high (deadly) anti- dumping duties and suggest solutions for those problems.

Technically, Anti-Dumping investigation is the process of calculating and comparing between exported prices against normal value of the product subject to investigation. The results of this process, i.e., dumping margins, are technically extracted from manufacturing data, sales data recorded in accounting system of investigated companies. Therefore, the success of an investigation significantly depends on how companies prepare, report data and provide supporting evidences to investigating authority. In recent years, more than 50% of the cases in which exporters were imposed high dumping margins (more than 10% and can go up to as high as 100% or more) were caused by failure in reporting “proper” data and providing supporting documents. While this result is partly contributed by the competency of law firm and data analysts hired by investigated companies, fundamental issues were the quality of data and records (mostly accounting records) kept by those companies. Experience showed that many exporters from Viet Nam having difficulties in reporting the required data because of their accounting and records systems, which make their defense risky and challenging in anti-dumping proceedings.

Weaknesses in accounting system and software

In any anti-dumping investigation, dumping margin which is difference between exported price and normal value of a product, which is normally determined by a “code”, which can be “Product code” or “PCN” as used by EU in- vestigating authority or “Connum” as used by the U.S. Department of Commerce. This code essentially represents physical and chemical characteristics of the product, its processing style, technical specifications, and sometimes, packing style of the product, which might be created by the investigated company or be generated as required in the Questionnaires issued by the investigating authority.

 The preparation of sales and costing reports categorized by markets, product codes requires detailed breakdown of data so that they could be used to calculate exported price and normal value of each product. The calculations would be more complicated if the investigating authority applies Non-economy market methodology, as in anti- dumping cases against Viet Nam initiated by the United States, EU, Turkey or India, because it will require the investigated company to provide detailed costing report by product codes. This methodology makes it more difficult to prepare and prove the reliability of data if companies do not maintain an accounting system capable of extracting detailed reports on each inputs used for producing each product, which may include: direct raw materials, packing materials, direct labor cost, delivery cost, electricity and water, cost of warehousing and other costs. Furthermore, companies must develop or use a “reasonable” cost allocation method to accurately and reasonably allocate production cost to individual product code. This method also needs to be proved as acceptable in accordance with anti-dumping laws, rules and practices adopted by investigating authority. In recent anti-dumping cases on steel and seafood products, proper and decent cost allocation method has resulted in low rate of anti- dumping duties for exporters (0%-4%)

Accounting systems and software used by most Vietnamese exporters, or even FDI companies are not fully capable of reporting data required in an antidumping investigation. Many companies in Viet Nam used accounting software simply to record accounting entry and to prepare annual financial statement. As a result, when they are subject to an AD investigation, they have to prepare data reports required by the investigating authority manually instead of having those reports automatically generated from their records and systems. Problem with manual reporting is that their reports often have many mistakes that could not be fully detected and corrected within the short deadline given by investigating authority (from 30 to 45 days). For example, packing style report for a unit of a product code in excel requires information from production departments, accounting departments, warehouse departments so that the data could be processed to calculate consumption quantity of packing materials on a unit basis. After that, the report must be reconciled to accounting value recorded in accounting software. Mistakes in data could make significantly adverse impact on anti-dumping duty, for example: mistake in raw material data could affect to 80% of the final results in anti-dumping cases on frozen warm-water shrimp.

With the existing weaknesses of accounting system and software as above-mentioned, defending Vietnamese exporters in antidumping cases become risky because there is not enough time to extract, analyze, report and reconcile data as required by the investigating authority during  verification, even with the supporting from lawyers and data analysts. Besides, when correct data is not fully provided, lawyers and analysts will not be able to evaluate data and to decide the most beneficial reporting method to achieve lower rate for companies.

Difficulties in reconciling process under verification period

In an anti-dumping investigation, investigating authority will visit factories of investigated companies being mandatory respondents to verify their questionair responses. Verification process is essentially for checking the submitted data and information against the companies’ actual accounting and production records as well as their normal operations. The purpose of verification is to prove the reliability of information and data that company submitted. For example, to verify a sale transaction, the investigated company must provide a full package of sale document, normally including: contract, invoice, payment note, detailed accounting ledger with explanation as well as financial statements and other relating documents as requested by investigating authority. A mandatory respondent has only 3 to 5 days for verification process. If verification fails, companies will get a “fact available” or punishment anti-dumping rate, which is very high.

As mentioned above, may companies have accounting systems that fail to match data from raw materials to production process to finished products. This problem makes the reconciling process during verification more difficult, timeconsuming and sometimes impossible due to the differences in data generated from different systems. Many Vietnamese companies maintain two separate systems: one system is used to track actual production record in quantity and one system is used to record accounting value. Especially, there was case when the company manually records data in hardcopy or excel which make the reconciling process highly risky. It is important to remember that if a company cannot prove the reliability of submitted data by providing supporting documents, the submitted data will be rejected. In that case, investigating authority will, instead, calculate anti-dumping duty using adverse facts which always results in very high dumping duty rate.

Limitations in preparation and reporting

Trade remedy cases in general and anti-dumping cases in particular require information reported in certain formats and ways as specified in Questionnaires issued by investigating authorities. Furthermore, all information must be presented in foreign language (English and/or languages of investigating countries). Thus, to prepare responses, ones must have ability to prepare data files in excel (and/or other software as required by the investigating authorities) and expertise in data analysis to detect and correct possible mistakes and to meet short deadlines. In addition, responses in general and data reports in particular need to be prepared with full understanding of the trade remedy law and practices of the investigating country, relevant WTO rules as well as accounting rules and relevant laws of the country of the investigated companies.

Companies therefore need helps from lawyers and professional AD data analysts to prepare responses to the questionair issues by investigating authorities because those requirements make it too difficult even for big companies with decent internal system and human resources, even for those having experiences in anti-dumping defenses. Generally, companies are incapable of preparing necessary documents for verification and do not have sufficient knowledge for determining whether certain information is favorable or adverse to them in antidumping cases. In addition, most companies in Viet Nam do not keep proper and detailed production and accounting records relating to important production factors such as packing standards or actual production yields as required in antidumping investigations. To solve these problems, companies need to use a team of professional lawyers and analysts specializing in trade remedies, who have knowledge and experiences of trade remedy law and practices of investigating countries, relevant law and accounting rules of Viet Nam to effectively and timely prepare responses and defend them.

Solutions and recommendation for Vietnamese exporters

In order to improve the accounting system and records in order to get better results in antidumping cases, Vietnamese exporters should have pay more attention and investments to their accounting and records systems to assure that the systems can meet the technical requirements as discussed above.

Specifically, companies should update and maintain their accounting software to make sure that data is fully recorded and could be extracted accurately when necessary. It will help to reduce mistakes as well as the time in preparation of questionair responses and verification. Manual records make it risky, difficult and sometimes impossible to survive, in defending antidumping investigations.

In addition, companies should improve internal control system by training and monitoring compliance of their staff and systems in order to make the reporting and reconciling data process more efficient and accurate.

In anti-dumping case in market that is “life-to-death” to companies, it is very important that companies use experienced and reputable lawyers and data analysts from credible law firms in investigating countries, who have partnership firms in Viet Nam. Lawyers and data analysts will help to ensure that responses and data submitted not only accurate but also be presented for the best interests of the companies and to help companies passing verification. Lawyers will also prepare legal brief to defend the companies before investigating authorities and to help in other related activities such as media campaigns or lobbying to properly defend the companies during investigations and related legal proceedings. Moreover, reputation of law firms will add more creditability to the companies’ responses and make it easier in verification. Support and advice from local lawyers and accounting experts having knowledge and experiences in antidumping cases are also important because they will help to resolve specific local issues and practices of the companies and their accounting systems, to provide quality translation and to support foreign experts and companies’ staff in preparing responses and during verification. In many cases, experienced lawyers can help companies from being passive in just responding to questionnaires to investigating authorities, to actively develop effective strategy, to guide and convince investigating authority to the advantages of the investigating companies.
 

Dinh Anh Tuyet, Nguyen Tuan Vu from IDVN
Source: Newsletter on Trade Remedies No 7, Quarter III/2015