US CHINA TRADE WAR–ANTIDUMPING DEVELOPMENTS AND US GOVERNMENT REPORT
A new antidumping petition has been filed against China–Silica Bricks. Please see ITC notice below. If anyone wants a copy of the complaint, please feel free to contact me.
Docket No: 2920
Document Type: 731 Petition
Filed By: Samuel C.Straight
Firm/Org: Ray Quinney & Nebeker
Behalf Of: Utah Refractories Corporation
Date Received: November 15, 2012
Country: People’s Republic of China
Description: Letter to Lisa R. Barton, Secretary, USITC; requesting the Commission to conduct an investigation under sections 731 of the Tariff Act of 1930 regarding the imposition of antidumping duties on Silica Bricks and Shapes from the People’s Republic of China
ANTIDUMPING MYTH– COMMERCE DOES NOT USE ACTUAL CHINESE COSTS TO DETERMINE DUMPING
One of the great antidumping myths created by US producers and trade lawyers is that Commerce is actually determining that Chinese companies have engaged in an unfair trade practice–dumping. As many trade practitioners, Chinese producers, Chinese government officials and US importers in antidumping cases against China know, Commerce does not use actual Chinese prices and costs in China to determine dumping.
Dumping is generally defined as a foreign producer/exporter selling products in the United States below the foreign producer/exporter’s prices in the home market or the fully allocated cost of production. Thus, in a market economy case against foreign companies in Japan, Taiwan, South Korea, Russia, Ukraine and even Iran, Commerce will use actual prices and costs in the home/foreign market to determine whether the foreign producer/exporter is dumping.
But not China. As former Communist countries, China and Vietnam are treated differently as nonmarket economy countries. Instead of using actual prices in China to detemine whether a Chinese company is dumping, Commerce constructs a cost using consumption factors for raw materials, labor and electricity multiplied by values from public information in a third surrogate country. From that constructed cost, Commerce adds percentages, which sometimes can be a high as 100%, from public financial statements of companies in a third surrogate country for overhead, SG&A and profit so as to construct a total cost. Commerce then compares this total constructed cost to Chinese export prices to the United States to determine whether the Chinese company is dumping.
The key issue is the values from third countries. Do they have any relationship to Chinese prices? Often they do not. The values have simply no relationship with reality. In one chemical case I worked on, Commerce used a surrogate value for the chemical used to clean the boiler that was equivalent to the price of gold, creating a huge dumping margin for the Chinese company.
In another metals case on Silicomanganese, where the key input was electricity, the Chinese price for electricity was about 3 cents a kilowatt hour because it was from hydropower. The US price for electricty as set by the Tennessee Value Commission was 6 cents a kilowatt hour. What did Commerce use? 13 cents a kilowatt hour from India, creating a huge dumping rate and shutting the Chinese companies out of the US market. Indian electricity rates, however, are distorted because the Indian electricity commission sets very high rates for industry to subsidize Indian farmers.
In the recent Solar Cells case, the key issue was which surrogate country to use. The Chinese companies argued that Commerce should use surrogate values in India because it has a mature solar industry. Commerce refused and used Thailand, which the Petitioners were advocating, that does not have a mature solar industry. Higher values lead to high dumping margins.
In case after case, Commerce uses distorted surrogate values that have no relationship to reality and then say the Chinese are dumping.
In a recent Civil litigation, a US law firm representing US producers argued that Chinese companies have an obligation to inform the Commerce Department when their costs have increased. In fact, there is no such obligation under US antidumping law, but more importantly, Commerce does not use actual prices and costs in China to determine whether the Chinese companies are dumping.
With such distorted surrogate values are used by Commerce to calculate antidumping rates, can one really conclude that Commerce has truly determined that the Chinese companies are dumping? The answer, I believe, is simply no. The Commerce Department calculations are simply another way to artificially increase antidumping rates for Chinese companies and throw them out of the US market. This is simple protectionism and it is time for someone to say the Emperor has no clothes. The antidumping rates for Chinese companies are artificial and have no relationship to reality.
The sad part of these calculations is the impact on US importers and US end users. In one case on Electrolytic Manganese Dioxide, I remember vividly the investigator smiling at verification because in reality they intended to use the highest priced surrogate values they could find in India for the key raw material inputs. Commerce did use the highest surrogate values and shut the Chinese electrolytic manganese dioxide out of the US market with high dumping rates. But what was the Chinese raw material used to produce in the United States? Batteries.
I asked the US importer whether it wanted to do an antidumping review investigation and try again for a low rate. The importer responded–“There are no longer any customers; they have closed down and moved”. In fact, Panasonic closed down its US battery plant and moved to China.
Pursuant to the US China WTO Agreement, Commerce must make China a market economy country in 2016. I have argued that Commerce should make China a market economy country sooner–not for the Chinese, but for the US importers. If Chinese companies are actually dumping, then they should be hit with antidumping duties. But if Commerce uses actual prices and costs in China, the Chinese producer/exporter can reduce its costs and change its Chinese prices to eliminate dumping margins.
If the problem is subsidies from the Chinese government, then hit the Chinese company with countervailing duties, but do not create distorted dumping rates that have no relationship to reality. See my attached article from Furniture World. REVISEDPERRYMAGARTFURNWORLD
US CHINA COMMISSION REPORT SMASHES CHINA
The US China Economic and Security Commission, which is a part of the US Government, has just issued its report to Congress and it makes a number of very tough recommendations to the US Congress in the trade and economics areas, including:
a mandatory requirement that all transactions between China and the United States involving state-owned companies be reviewed by the Committee on Foreign Investment;
the SEC should develop unique country risks to assure that US investors are aware of the risks in investing in Chinese companies;
give Senate and House Committees along with State and Local governments the right to be petitioners in antidumping and countervailing duty cases; and
provide for a private right of action for US producers injured by antidumping by Chinese State-Owned companies.
Some of the specific recommendations are as follows:
The Commission recommends that:
- Congress examine foreign direct investment from China to the United States and assess whether there is a need to amend the underlying statute (50 U.S.C. app 2170) for the Committee on Foreign Investment in the United States (CFIUS) to (1) require a mandatory review of all controlling transactions by Chinese state-owned and state-controlled companies investing in the United States; (2) add a net economic benefit test to the existing national security test that CFIUS administers; and (3) prohibit investment in a U.S. industry by a foreign company whose government prohibits foreign investment in that same industry.
2. Congress direct the U.S. Securities and Exchange Commission (SEC) to revise its protocols for reviewing filings by foreign entities listed on or seeking to be listed on the U.S. stock exchanges. The SEC should develop country-specific data to address unique country risks to assure that U.S. investors have sufficient information to make investment decisions. The SEC should focus, in particular, on state-owned-and -affiliated companies and subsidies and pricing mechanism that may have material bearing on the investment.
3. Congress examine the access of small- and medium-sized enterprises to the remedies contained in the U.S. antidumping and countervailing duty laws. As part of this examination, Congress should consider whether to (1) grant enhanced authority to initiate antidumping and countervailing duty cases to the Senate and House Committees most responsible for international trade; and (2) include state and local governments as interested parties under the U.S. trade laws.
4. Congress adopt legislation that would provide a private right of action for domestic producers who suffer injury from antidumping and countervailing duty violations from the operations of Chinese state-owned or –affiliated firms operating in the U.S. market.
Attached is the entire report. 2012 US COMMISSION REPORT This report will definitely throw gasoline on the US China Trade War fire.