government affairs blog

Making Sense of Antidumping and Countervailing Duty Investigations

Posted by Andres Castrillon on November 17, 2014

From bearings to tires to chemicals, automotive parts and products are often the subject of antidumping and countervailing duty investigations. Auto Care Association members who sell or buy imported products need to be aware of the existence of any antidumping or countervailing duty investigations or outstanding orders affecting their imported products. How do these investigations work? Who is involved? And what is the association’s role in these investigations? We provide basic guidance on these questions below.


What are Antidumping and Countervailing Duties?


Antidumping and countervailing duties are types of remedial duties used to offset the effects of two types of trade practices that are determined by U.S. federal agencies to give imports an unfair advantage over domestic U.S. competitors. The antidumping law provides for the assessment of duties on imported merchandise that is sold to purchasers in the U.S. at a price less than its fair market value. Fair market value of merchandise is the price at which it is normally sold in the foreign manufacturer’s home market. The antidumping duty is assessed in an amount equal to the amount by which the manufacturer’s home market value of the merchandise exceeds the export price to the U.S. purchaser.


The countervailing duty law provides for the assessment of countervailing duties on imported merchandise that is sold to purchasers in the U.S. if the government of a country is providing a subsidy with respect to its manufacture, production or export. The countervailing duty is assessed in an amount equal to the net countervailable subsidy.


Both laws require an agency determination that an industry in the United States is materially injured, or is threatened with material injury, by reason of imports of such merchandise.


Agencies Involved in Investigations and Enforcement


Three government agencies enforce the antidumping and countervailing duty laws. First is the International Trade Administration (ITA), an agency of the Department of Commerce. Through its Import Administration business unit, the ITA has the responsibility to investigate foreign producers and governments to determine (i) whether dumping or subsidizing has occurred and (ii) if so, the margin of dumping or amount of the subsidy.


Second, the International Trade Commission (ITC) determines whether the relevant U.S. industry is suffering material injury or the threat of material injury caused by the subject imports.


Third, U.S. Customs and Border Protection (CBP) is the enforcer. Once the ITA and the ITC have made the necessary determinations, ITA instructs CBP to assess the duties on importers. The duties are normally assessed as a percentage of the value of the imports of the dumped or subsidized product.


How Long Does it Take for Antidumping or Countervailing Duty Orders to Be Issued?


Once a petition is filed, if both the ITC and ITA make affirmative preliminary determinations (within 190 days of initiation of the antidumping investigation, or 130 days for a countervailing duty investigation), importers are required to post a bond or cash deposit to cover an estimated amount for the duties which would be collected in the event that an antidumping or countervailing duty order is issued upon the completion of the investigations. Typically, the final phases of the investigations by the ITA and ITC are completed within 12 to 18 months of initiation.


What is the Association’s Role in an AD/CVD Investigation?


Antidumping and countervailing duty investigations are legal proceedings to determine whether foreign producers and exporters are breaking U.S. law by dumping or by benefiting from illegal government subsidies. These investigations are highly fact- and data-intensive, involving several rounds of questionnaires and briefs, and focusing on confidential sales and cost data, or confidential subsidy information in the case of a countervailing duty investigation. Unlike regulatory matters, an association cannot intervene to “lobby” on behalf of an industry to make the case go away. Instead, “interested parties” (namely, foreign and domestic manufacturers, exporters and importers of subject merchandise) must present evidence to substantiate or rebut the dumping and/or subsidy allegations.


Associations sometimes get involved and testify or file briefs in these cases supporting or opposing the imposition of duties by discussing the “injury” side of the investigation, providing information on the overall health of the industry and whether or not relief is needed. However, in order to participate as an “interested party” in one of these cases, the majority of an association’s members must be producers, importers or exporters of the subject merchandise. In most cases, the Auto Care Association’s role has been to keep our members informed of developments and their options and answer any questions we can to help make sense of this complicated process.


Conclusion


These are very complicated and technical investigations. Auto Care Association members who may be impacted by one of these investigations should consult with experienced international trade counsel to determine their potential liability and understand their options. The ITA and ITC websites provide additional information and resources for these investigations. Be sure to also review a comprehensive list of resources for importers and exporters on the Auto Care Association’s website here.

Keywords: Trade