Commerce Requests Input on How to Address Distorted Production Costs Affecting Dumping Margin Accuracy

One party argues that the arbitrariness of the effective date would provide an incentive for respondents to create complexity to slow the process or for domestic parties to neglect inadequacies to expedite the process. They contend that the statute intends for neither scenario and many of these concerns can be mitigated by applying the final rules to newly initiated reviews. A few commentators requested clarification concerning the Department’s use of the T-T comparison methodology in original antidumping duty investigations.

Whether any particular section 129 proceeding will be requested by the Office of the USTR for certain sunset reviews is beyond the scope of this Final Modification for Reviews. The Department has always retained discretion under its regulations to apply any of the three comparison methodologies in any context, and has exercised this discretion only in a limited number of circumstances. It would be inappropriate to further speculate as to which case-specific circumstances might warrant the use of an alternative comparison methodology in future reviews as this determination would be highly dependent on the facts of the individual proceeding. Because any description of such circumstances would be speculative, at best, the revised regulations do not specify the exceptional circumstances that might trigger the use of an alternative comparison methodology. As is the case with all proceedings, interested parties would have the opportunity to comment on whether an alternative comparison methodology is warranted during the normal course of the proceeding.

A Commerce Department notice forthcoming in the Federal Register provides interested parties until Sunday, December 18, 2022, to provide comments concerning the future of the particular market situation (“PMS”) provision added to the antidumping duty statute in 2015 that enables Commerce to account for distorted production costs in foreign markets. This comment period is likely one of the last opportunities for interested parties to inform Commerce’s practice in calculating accurate dumping margins that account for foreign market distortions in advance of potential formal rulemaking by the agency. The Department has further clarified that this Final Modification for Reviews will apply to all sunset reviews pending before the Department for which either preliminary results of sunset review, or expedited final results of sunset review are issued more than 60 days after the date of publication of the Department’s Final Modification for Reviews. The 60-day period will allow sufficient time Start Printed Page 8110prior to issuance of a preliminary sunset determination, or a final expedited sunset determination, for parties to provide comments within the context of each individual proceeding.

Calculation of dumping margins

Another commentator proposes that the Department conduct a changed circumstances review to determine whether dumping would be likely to continue or recur if the order were revoked upon a showing that the dumping margins without zeroing in three reviews completed after January 23, 2007, are zero or de minimis. One other commentator requests that the Department both recalculate dumping margins in a sunset review to eliminate zeroing, effective immediately, and then transmit to the ITC the non-zeroed dumping margins that are likely to exist if an order were revoked effective for sunset reviews initiated after the publication of the proposed rules. One commentator concerned about sunset reviews contends that the Department only suggests it will use section 129 to implement the DSB’s recommendations and rulings in US—Continued Zeroing (EC), WT/DS350/R, para. This commentator asks the Department to state clearly that it will implement DS 350 under section 129 when making its determination. This commentator also contends that there is no impediment to reopening prior sunset determinations under section 129.

The European Communities considered that there was a disagreement as to the existence or consistency with a covered agreement of the measures taken to comply with the rulings and recommendations of the DSB. At its meeting on 25 September 2007, the DSB agreed to refer, if possible, the matter raised by the European Communities to the original panel. On 26 May 2008, the Chairman of the Panel informed the DSB that it would not be able to circulate its report within 90 days after the date of referral given the delays in the composition of the Panel and the schedule adopted after consultations with the parties. The “particular market situation” provision has been the subject of substantial legal action before the U.S. Court of Appeals for the Federal Circuit recently issued its first opinion discussing what Commerce must do to apply this provision, NEXTEEL Co., Ltd. v. United States, 28 F.4th 1226 (Fed. Cir. 2022). One signals a narrowing of Commerce’s approach, but the remaining three are susceptible to significantly varying interpretations, making interested party comments all the more imperative.

The application

For reasons fully set forth in response to comments on the Effective Date of Implementation section of this notice, the Department finds this to be an adequate amount of time to permit parties and the Department to respond to novel and complex issues that arise as a result of implementing the modified regulations. The Department determines that it would be inappropriate to further speculate as to either the case-specific circumstances that would warrant the use of an alternative methodology in future reviews, or what type of alternative methodology might be employed. However, as is the case with all administrative proceedings, interested parties will have the opportunity to comment on whether an alternative comparison method is warranted during the normal course of the review. If there are sales below cost that meet the criteria set out in the Agreement,
they can simply be ignored in the calculation of normal value, and normal value
will be determined based on the remaining sales.

If the Constitutional law of a Member precludes the collection of duties on imports to the region, the investigating authorities may levy duties on all imports of the product, without limitation, if anti-dumping duties cannot be limited to the imports from specific producers supplying the region. However, before imposing those duties, the investigating authorities must offer exporters an opportunity to cease dumping in the region or enter a price undertaking. This order also supports the understanding that invocation of Rule 14(c) of the AD Rules for termination of an investigation where a de-minimis dumping margin is determined, does not pertain to an individual party but a country which is under investigation, at least as far as India is concerned. Further, in no case has the DGTR terminated an investigation only in respect of an individual party where a de-minimis dumping margin has been determined for such party.

Fair comparison of normal value and

A few commentators suggest that before issuing a final section 123 determination, the Department should consider issuing a separate notice identifying any proposed changes in its calculation of importer-specific assessment rates necessitated by the proposed change in the Department’s methodology to permit additional public comments. It is further suggested that the Department release for public comment the standard calculation program that it intends to use in reviews. Several commentators suggest that the Department should consider all three possible comparison methodologies when conducting reviews, and select whichever method captures the maximum amount of dumping. Some argue that the T-T method would capture the greatest amount of dumping, and that recent technology permits greater use of this comparison methodology.

• The European Communities considered that there was a disagreement as to the existence or consistency with a covered agreement of the measures taken to comply with the rulings and recommendations of the DSB.
• Some of these commentators suggest that the Department should clearly state that it will grant offsets equal to the full difference between normal value and export price when calculating dumping margins using the A-A comparison methodology in reviews.
• The Agreement also contains time limits for the imposition of provisional measures— generally four months, with a possible extension to six months at the request of exporters.
• To conduct a trends analysis of this sort, it is necessary that the dumping margins be calculated in a consistent manner over time, which can only be done by eliminating the zeroing methodology from all calculations.
• The normal value is generally the price of the product at issue, in the ordinary course of trade, when destined for consumption in the exporting country market.

Moreover, the Agreement requires that exchange rate fluctuations be ignored, and that exporters be allowed at least 60 days to adjust export prices for sustained exchange rate movements. The key issue is whether an investigation initiated against a party having de-minimis dumping margin is to be terminated. Reference is made to Rule 14(c) of the AD Rules, which provides for immediate termination of an investigation in a scenario where, inter alia, it determines that the dumping margin is less than two per cent of the export price. Kim Tin MDF Joint Stock Company was a producer/exporter of the subject goods from Vietnam which had participated in the original investigation. On examining Kim Tin’s data, the DGTR had determined that the dumping margin of this party was de-minimis. However, it is important to note that the DGTR had not terminated the original investigation against this party.

Investigation

These include the requirement that authorities make a preliminary affirmative determination of dumping, injury, and causality before applying provisional measures, and the requirement that no provisional measures may be applied sooner than 60 days after initiation of an investigation. Provisional measures may take the form of a provisional duty or, preferably, a security by cash deposit or bond equal to the amount of the preliminarily determined margin of dumping. The Agreement also contains time limits for the imposition of provisional measures— generally four months, with a possible extension to six months at the request of exporters.

Accordingly, the DGTR terminated the subject investigation vide its Termination Order dated 7th May 2021. (e) Application of the average-to-transaction method—In applying the average-to-transaction method in a review, when normal value is based on the weighted average of sales of the foreign like product, the Secretary will limit the averaging of such prices to sales incurred during the contemporaneous month. One commentator argues that the 2008 rescission of the targeted dumping regulation violates the Administrative Procedures Act (“APA”) because it was repealed without notice and comment. Another commentator suggests that the Department should take this opportunity to address and clarify several aspects of the targeted dumping methodology it claims are deficient. Several commentators argue that allowing offsets for non-dumped comparisons will reduce the effectiveness of U.S. trade laws because it would reduce or eliminate the amount of dumping that would otherwise be fully captured in the absence of any offsets. In so doing, the proposal would go against the current law’s mandate that 100 percent of the dumping be fully captured.

Article

The Department interprets this statutory structure as mandating certain criteria for selecting a comparison methodology in original antidumping duty investigations, but leaving the Department considerable discretion in selecting an appropriate comparison methodology in reviews. It is, therefore, within the Department’s discretion to establish criteria for the selection of an appropriate comparison methodology in reviews, including criteria that differ from, or are similar to, the criteria mandated for use in original antidumping duty investigations. Numerous other commentators argue that the calculation and assessment of antidumping duties using zeroing should have ceased when the reasonable period of time (“RPT”) for compliance ended for the various WTO rulings. These commentators claim that dumping margins should be recalculated for the reviews involved in each of the WTO proceedings as well as any determinations or antidumping duty assessments arrived at using zeroing after the end of the applicable RPT. In this Final Modification for Reviews, the Department clarifies that because the methodology being applied will parallel the WTO-consistent methodology that the Department currently applies in original investigations, it will necessarily include any exceptional or alternative comparison methods determined appropriate to address case-specific circumstances.

• A regional industry may be found to exist in a separate competitive market if producers within that market sell all or almost all of their production of the like product in that market, and demand for the like product in that market is not to any substantial degree supplied by producers of the like product located outside that market.
• Section 123(g)(2) of the URAA provides that a final rule or modification may not go into effect before the end of the 60-day period after the consultations described in section 123(g)(1)(E) begin, unless the President determines that an earlier effective date is in the national interest.
• Where the comparison of normal value and export price requires conversion of currency, the Agreement provides specific rules governing that conversion (Article 2.4.1).
• If a Member, in its administration of anti-dumping duties, imposes duties lower than the margin of dumping when these are sufficient to remove injury, the period of provisional measures is generally six months, with a possible extension to nine months at the request of exporters.

These commentators also encourage the Department to narrowly tailor the circumstances under which an alternative comparison methodology is used. One commentator notes its concern that the reference to an alternative methodology in the Proposed Modification for Reviews is ambiguous, and will lead to parties manipulating the system for a certain preferred comparison methodology. The Agreement makes provision for the assessment of anti-dumping duties on exports from producers or exporters who were not sources of imports considered during the period of investigation.

Some argue that only a complete POR-wide offset will be consistent with the Department’s current offset methodology applied in original antidumping duty investigations and with WTO obligations. For these reasons, the Department disagrees that it is necessary to adopt a practice or methodology which assumes that previously determined dumping margins will always need to be recalculated in the context of sunset reviews. The Department does not anticipate that it will need to recalculate the dumping margins in the vast majority of future sunset determinations to avoid WTO inconsistency, apart from the “most extraordinary circumstances” provided for in its regulations. Instead, the Department will limit its reliance to margins determined or applied during the five-year sunset period that were not determined in a manner found to be WTO-inconsistent in these disputes. Future dumping margins in reviews will be determined in accordance with this Final Modification for Reviews.

To illustrate this point, some draw on the “speeding ticket” analogy, whereby a driver caught exceeding the speed limit could nevertheless avoid the fine by submitting evidence that he or she drove below the speed limit on another occasion. One commentator noted that the EU and Japan have acknowledged that dumping can be masked completely through the provision of offsets by asserting that dumping would not exist but for the denial of offsets. These commentators also argue that, if the Department decides to provide offsets, it should allow itself the greatest flexibility to account for the maximum amount of dumping. A few argue that nothing in the statute provides discretion for the Department to use either A-A or T-T in reviews, and that the statutory construction would make no sense if Congress intended for any of the three methods to be used in both investigations and reviews. Congress envisioned and required the Department to determine an individual margin of dumping for each U.S. entry, and nowhere indicated that margins should be calculated for averaging groups.

In this circumstance, the investigating authorities are required to conduct an expedited review to determine a specific margin of dumping attributable to the exports of such a “new shipper”. While that review is in progress, the authorities may request guarantees or withhold appraisement on imports, but may not actually collect anti-dumping duties on those imports. The normal value is generally the price of the product at issue, in the ordinary course of trade, when destined for consumption in the exporting country market. In certain circumstances, for example when there are no sales in the domestic market, it may not be possible to determine normal value on this basis.