|(United States Of America)|
The US Department of Commerce's International Trade Administration has issued a final rule modifying its method of valuing the price of inputs in antidumping duty proceedings involving non-market economy countries. The rule will apply to all AD proceedings or segments of proceedings initiated on or after 3 September 2013.
It generally appears that this change will make it easier for the ITA to calculate higher AD duty rates on goods from NME countries such as mainland China and Vietnam. In AD proceedings involving NME countries, the ITA calculates normal value by valuing the NME producer's factors of production, to the extent possible, using prices from a market economy that is at a comparable level of economic development and is also a significant producer of comparable merchandise.
When an NME producer purchases inputs from market economy suppliers and pays for those purchases in a market economy currency, the ITA normally uses the weighted-average price paid by the NME producer for these inputs to value the input in question. When a portion of the input is purchased from a market economy supplier and the remainder from an NME supplier, the ITA will normally use the price paid for the input sourced from market economy supplier to value all of the input provided that the volume of the market economy input as a share of total purchases from all sources exceeds 33 percent.
If that threshold is not met the ITA weight-averages the market economy purchase price and an appropriate surrogate value, using as weights the relative quantities of the input imported and purchased from domestic sources.
The ITA has now decided to increase from 33 percent to 85 percent the share of total purchases of the input (both foreign and domestic) that must be made from market economy suppliers from one or more market economy countries during a particular period of investigation or administrative review in order for the weighted-average purchase price paid to the market economy supplier to be used to value all of the input.
When the 85 percent threshold is not met the ITA will weight-average the market economy purchase price(s) and an appropriate surrogate value using the respective quantities of the input sourced from market economy and NME suppliers. The ITA has also added a requirement that the market economy input at issue actually be produced in one or more market economy countries, not just sold through them, to address concerns that the pricing of an NME-produced input by a market economy supplier (or reseller) can be distorted by NME cost or supply factors.
Several commenters questioned the ITA's decision to raise the 33 percent threshold to 85 percent. One commenter, for example, argued that there does not appear to be a reason for this change when the agency had been using it for years. The ITA responded that, upon review of its past practice, it determined that when a company's purchases from market economy suppliers represent only 33 percent of its total purchases that amount does not constitute a sufficient quantity to be representative of the input prices that the company would pay to source all of its purchases from market economy suppliers.This is because, when a company purchases an input from multiple sources in multiple economies at different prices, some type of constraint is usually at work; otherwise, the company would likely meet all of its needs more efficiently by sourcing from the single, lowest-price input supplier. For example, if certain imports represent the lowest prices available but are limited in quantity, then the company has no option but to purchase the remainder of its input needs from higher-priced domestic sources.
On the other hand, if domestic sources represent the lowest prices but are limited in quantity, then the company might have no choice but to complete its purchases using higher-priced imports. In both cases, because of the supply constraint at work valuing all of the input at the market price paid for less than the vast majority of total purchases of that input would either overstate or understate the company's input costs. Further, the ITA believes that the meaning of "supply constraint" can be broadened to cover logistics problems and movement costs, and the outcome would be the same — an overstatement or understatement of the company's costs.
Other commenters argued that the ITA must undertake an analysis to determine the best available information for use in an NME case on a case-by-case basis, whether it is actual market economy purchase prices or surrogate values. One of these commenters said that the new rule would result in market economy purchase prices being excluded in favour of surrogate values when the 85 percent threshold is not met, which is contrary to the best available information requirement.
Another commenter contended that U.S. World Trade Organisation obligations with respect to mainland China demonstrate a preference for using primary information (where market economy prices exist) and require that secondary information (e.g., surrogate values) must be shown to be more reliable and accurate than primary information (e.g., market economy purchase prices) in order to be used.
The ITA responded by re-asserting its belief that the amendments implemented through this final rule comport with U.S. law and, by extension, with U.S. WTO obligations because they are designed to ensure that the ITA is using the best available information to value the factors of production. The ITA has issued at least two other final rules over the past year, in addition to other similar regulations issued in previous years, that could potentially increase the duty liability in AD investigations and administrative reviews involving mainland Chinese goods.
Effective 19 June 2012, the ITA made a change in methodology that reduced the export price or constructed export price in AD proceedings involving mainland China and Vietnam by the amount of an export tax, duty or other charge.
The ITA also implemented on 5 July 2013 policy revisions that could make it more difficult for individual exportersin NMEs to obtain separate rates in AD proceedings. Separate rates are generally lower, sometimes substantially, than the entity-wide rate that applies to most other exporters in those countries. Earlier this year a U.S. trade court also upheld the constitutionality of a federal law allowing the application of countervailing duties on NME goods.
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