Timing of the determination

 

Within 85 days (countervailing duty) or 160 days (anti-dumping duty) after the petition is filed, the Commerce Department must make its preliminary determination of whether sales have occurred at less-than-fair-value or whether impermissible subsidies exist. The statutory deadline for this preliminary determination by the Commerce Department can be extended up to the 150th day (countervailing duty) or 210th day (anti-dumping duty) after the petition is filed in cases that are deemed to be 'extraordinarily complicated' by the Commerce Department, or where the petitioner requests an extension. If the Commerce Department decides to extend the preliminary determination, it must notify the parties before the scheduled date of the determination.

 

An 'extraordinarily complicated' case is one that presents a large number of complex transactions or adjustments, raises novel issues, or involves a large number of firms under investigation. An additional practical consideration, although not specifically mentioned in the statute or regulations, is the workload of the Commerce Department at the time. If other investigations are absorbing all of the available personnel, it is more likely that the Commerce Department will decide that a case is complicated and extend the deadline.

 

Legal significance

 

The date of the preliminary dumping determination is legally significant. The date an affirmative preliminary determination is published in the Federal Register is the date on which the United States Customs Service (Customs) 'suspends liquidation' of all future imports of the product under investigation. `Suspension of liquidation' means that Customs will not make a final decision about the import duties that are owed on the merchandise, because the question of whether special anti-dumping or countervailing duties should be added to the normal customs duties is now at issue.

 

This date also has business significance. With the suspension of liquidation, Customs begins to require a bond (a legal promise to pay the duties) to cover estimated duties. The importer (often a United States subsidiary related to the parent company) must pay for this bond, and must bear the risk of future anti-dumping duty. The legal responsibility to pay the duties falls to the so-called 'importer of record', which is often the United States subsidiary of the parent company.

 

Suspension of liquidation takes place only if the preliminary determination is affirmative. A negative preliminary determination allows merchandise to continue entering the United States without any risk of future duty liability as the case proceeds. A negative preliminary determination by Commerce Department, however, unlike a negative preliminary injury determination, does not end the case. It will continue at least to the Commerce Department's final determination, at which time the case will end if the determination is still negative.

 

Recently, in cases involving agricultural products the United States Customs and Border Protection agency (Customs) has instituted a continuous bond requirement. In essence, importers of the foreign agricultural product will now have to purchase a bond for the full amount of the estimated anti-dumping or countervailing duty. In cases that do not involve agricultural products, importers normally only have to pay a premium on the bond, which is a fraction of the estimated duties.

 

The estimated duties set in the preliminary determination represent the maximum liability for the importer until the Commerce Department's final determination. The actual liability (to be determined later in the investigation) can be lower, but it cannot be higher. This cap on liability changes after the final dumping determination, and again after the final injury determination is issued. Note that the 'importer of record' must pay any duties, not the foreign exporter. In many cases exporters ship to related companies in the United States, who serve as importers of record, so the liability is still within the corporate family.

 

De minimis rules

 

The Commerce Department's threshold for making an affirmative preliminary determination is a margin of 2.0% in anti-dumping cases and 1.0% in countervailing duty cases. Margins below these levels are regarded as de minimis by the Commerce Department and result in a negative determination. Margins at or above these levels result in an affirmative determination. The same thresholds apply to both the Commerce Department's preliminary and final determinations. (Note that a somewhat lower threshold — 0.5% — applies in administrative reviews of both anti-dumping and countervailing duty orders)

 

 Note that there is a special rule for developing countries in countervailing duty cases, but not anti-dumping cases. Countries certified by the United States Trade Representative as 'developing countries' are entitled to a special 2.0% or 3.0% level for de minirnis subsidies, depending on their level of development. This special rule applies only in original investigations, however, not in the so-called administrative reviews that take place annually after a countervailing duty has been imposed.

 

The Commerce Department's preliminary determination (and ultimately the final determination) is company-specific. The Commerce Department estimates dumping margins for each company that participates in the anti-dumping investigation. In addition, the Commerce Department calculates an 'all others' rate which applies to any company not involved in the investigation that decides later to begin exporting to the United States.

 

Basis of the determination

 

The Commerce Department generally bases its preliminary determination on the information provided by the foreign company in the questionnaire response. Although the Commerce Department is permitted to conduct a `verification' of the response before the preliminary dumping determination, as a practical matter such an early verification virtually never takes place. The Commerce Department thus takes all of the company's claims at their face value. Usually the claims are accepted as long as they nominally satisfy the Commerce Department's standards; sometimes the Commerce Department misunderstands the claims and rejects them.

 

The Commerce Department explains how it reached its preliminary determination in two ways. First, a notice summarizing the methodologies and results is published in the Federal Register approximately a week after the preliminary determination is made. This notice is usually too general to be very useful, but does set forth the basic methodology used by the Commerce Department. In the past the full rationale was published in the Federal Register. Now the published version is much shorter, but the full decisional memoranda are published on the Commerce Department website.

 

Second, the Commerce Department holds separate disclosure conferences for both the attorneys for the foreign company and the attorneys for the United States industry. At these disclosure conferences, the Commerce Department discusses the methodologies in more detail, and provides the actual calculation sheets and computer printouts.

 

The disclosure conference often reveals errors in the Commerce Department's calculations, but these errors are difficult to correct. The Commerce Department leaves the preliminary determination as it was published and tells the parties to make their arguments for corrections in written submissions later in the investigation. The predominant attitude at the Commerce Department is that since 'it is only a preliminary determination', there is no urgency to correct errors that can be corrected in the final determination. Generally, the Commerce Department will not make any adjustments to the preliminary margins unless the errors result in at least a 5% change in the preliminary margins. The fact that the preliminary determination has legal significance (i.e. it is the date on which liquidation is suspended) has not persuaded the Commerce Department to make corrections. In at least one case, for example, the Commerce Department refused to correct clerical errors in a preliminary determination that would have changed the result from an affirmative determination (with suspension of liquidation) to a negative determination (with no suspension of liquidation).

 

Critical circumstances

 

In most cases, the publication date of an affirmative preliminary determination is the first time the importer of the merchandise becomes potentially liable for anti-dumping duties. The one exception is when a petitioner successfully argues that 'critical circumstances' exist. If the Commerce Department and Trade Commission both find critical circumstances, then suspension of liquidation can be retroactive as far back as 90 days prior to the date of the affirmative preliminary dumping determination.

 

The two agencies apply different standards to determine whether 'critical circumstances' exist. The Commerce Department must find first either that there has been a history of dumping, whether in the United States or elsewhere, or that the importer should have known it was receiving dumped merchandise. The Commerce Department will assume that the importer knew the merchandise was dumped if the dumping margins are greater than 20%. For countervailing duty cases, the parallel requirement is a finding that the subsidy is inconsistent with the Subsidies Agreement, a requirement easily met in most cases.

 

The Commerce Department must also find that there have been massive imports over a short period of time. To make this determination, it will examine the extent to which imports have gained market share in the United States market and the historical pattern of imports. If imports have increased at least 15% over the period immediately preceding the petition, the Commerce Department will usually find 'massive' imports.

 

The period of time analysed by the Commerce Department became contentious in the late 1990s. Largely as a favour to the United States steel industry, it adopted a new policy that allows it to examine earlier time periods to find a `surge' whenever it decides that the exporters knew the unfair trade case was coming, and thus may have begun moderating their behaviour. With the flexibility to pick and choose different time periods for the comparison, it is now much easier to find the necessary increase.

 

This particular Commerce Department policy was challenged by Japan in a recent WTO case involving hot-rolled steel, but the panel upheld the WTO consistency of the United States practice.

 

The Commission considers whether retroactive dumping duties are necessary to prevent the reoccurrence of injury. Recent changes to the United States law specify the various factors the Commission is to review in making this determination: the condition of the domestic industry; whether there have been massive imports to evade the effect of the anti-dumping or countervailing duties (in other words, did the exporter increase shipments before the Commerce Department's preliminary determination to avoid duties); and whether the massive imports will have a lingering effect in the marketplace after the duty liability comes into effect.

 

The domestic industry is free to make allegations of critical circumstances throughout the investigation. Allegations are often made in the petition. The allegations can be made as late as 21 days before the Commerce Department's final determination. Petitioners have an incentive to raise the allegations before the preliminary determination, however, to obtain protection more quickly.

 

The effect and timing of a critical circumstances determination is intertwined with the Commerce Department's determination of dumping or subsidization. If the Commerce Department makes an affirmative preliminary determination of dumping or subsidization, a finding of critical circumstances means that suspension of liquidation can be retroactive for 90 days prior to the preliminary determination. Even if the preliminary critical circumstances determination itself is negative, and thus there is no retroactive suspension of liquidation after the preliminary dumping determination, the Commerce Department can still reach back 90 days prior to the preliminary dumping determination if the final critical circumstances determination is affirmative. If the Commerce Department makes a negative preliminary determination of dumping, however, any retroactive suspension of liquidation can only go back 90 days from the date the suspension of liquidation was first ordered the date of the Commerce Department's final determination.

 

Source: Business Guide to Trade Remedies in the United States: Anti-dumping, countervailing and safeguards legislation practices and procedures