Laws, Regulations and Methodology for Calculating Dumping Margins Zeroing United States Trade Representative

In such cases, the normal value may be determined on the basis of the price of the product in the country of origin, and not the price in the exporting country. Dumping is, in general, a situation of international price discrimination, where the price of a product when sold in the importing country is less than the price of that product in the market of the exporting country. In India, it is the consistent practice of the DGTR not to terminate investigations against a party but instead assign a ‘nil’ duty against such party having de-minimis dumping margin. Some of these investigations are Electronic Calculator from China PR[1], 2-Ethyl Hexanol from EU, Indonesia, Korea RP, Malaysia, Taiwan and USA[2], Caustic Soda from China PR and Korea RP[3]. The European Commission in investigations such as Stainless Steel Cold-Rolled Flat Rolled Products from the People’s Republic of China and Taiwan[4] and Certain Stainless-steel Tube and Pipe Butt-Welding Fittings, whether or not finished, from the People’s Republic of China and Taiwan[5] and the Turkish investigating authority have also followed the same practice[6]. At a later date, aggrieved by alleged dumping of subject goods produced by Kim Tin, the domestic industry filed an original anti-dumping application with the DGTR.

• The other alternative method for determining normal value is to look at the comparable price of the like product when exported to an appropriate third country, provided that price is representative.
• The revised regulations coupled with the descriptions contained in this Final Modification for Reviews and the Department’s responses to comments are sufficient.
• It is not necessary, appropriate or desirable for the Department, in this Final Modification for Reviews, to go beyond the findings made in the WTO dispute settlement reports at issue by adopting a total prohibition of zeroing regardless of comparison method or case-specific circumstance.

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.

Calculation of dumping margins

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.

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.

Another commentator points out that when the Proposed Modification for Reviews speaks of applying the new methodology pursuant to section 129, it only references disputes brought by the European Union, Japan and Mexico. This commentator contends, however, the Appellate Body’s finding in US-Zeroing (EC) makes clear that the United States’ obligations to remedy zeroing extend to reviews even though a Member may only have challenged the Department’s use of zeroing in the antidumping investigation. Thus, the Department must recalculate dumping margins and antidumping duty assessment rates for subsequent reviews of those orders. Other commentators urge the Department to apply the new methodology to reviews subject to all ongoing and future WTO proceedings in which zeroing is an issue before a panel or the Appellate Body. One commentator is concerned that the Department has not adequately explained why it is necessary to alter its current dumping calculation methodology in reviews from an A-T methodology to one using monthly weighted averages in both markets. Some request that the Department clarify whether it will grant offsets for negative dumping margins only against positive dumping margins found in the same month or apply negative dumping margins to offset positive dumping margins across the entire period of review (POR).

• 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.
• Importing countries have thus exercised significant discretion in the calculation of normal value of products exported from non-market economies.
• 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.
• These parties further argue that the Department’s Proposed Modification for Reviews methodology has afforded adequate notice to the public that the methodology might change.
• Some parties argue that because the provision of offsets is an entirely administrative practice, the modification can be applied immediately, and there is no need for further delay.
• The DGTR in the instant investigation has not treated de-minimis dumping margin as termination of investigation against Kim Tin.

Some commentators suggest that the Department implement the final rule and modification for all reviews where the final results are expected to be issued 30 business days or later after the publication date. Some other commentators contend that, in accordance with section 123(g)(2) of the URAA, the 60-day period should begin when the Department begins its consultation with Congress unless the President determines an earlier effective date. One commentator argues that the effective date should be either the date of the publication of the final rules or 60 days after the Department begins its consultation, whichever is later. Some other commentators request that the Department implement this new policy immediately but do not suggest any specific date as the effective date. Several commentators urge that the Department should stop relying on dumping margins that contain zeroing in sunset reviews immediately. One commentator argues that, for sunset reviews, there is no reason to delay implementation until 60 business days after the date of publication of the Final Modification for Reviews because the proposed change is only to the Department’s practice, and no change is proposed to its regulation.

De-minimis dumping margin: Termination of an anti-dumping investigation?

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.

Article 12 sets forth detailed requirements for public notice by investigating authorities of the initiation of investigations, preliminary and final determinations, and undertakings. The public notice must disclose non-confidential information concerning the parties, the product, the margins of dumping, the facts revealed during the investigation, and the reasons for the determinations made by the authorities, including the reasons for accepting and rejecting relevant arguments or claims made by exporters or importers. These public notice requirements are intended to increase the transparency of determinations, with the hope that this will increase the extent to which determinations are based on fact and solid reasoning. The Agreement provides that, in examining the impact of dumped imports on the domestic industry, the authorities are to evaluate all relevant economic factors bearing upon the state of the domestic industry.

Assessment Rates

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.

The revised regulations coupled with the descriptions contained in this Final Modification for Reviews and the Department’s responses to comments are sufficient. Furthermore, as more fully explained in the Explicit Total Prohibition of Zeroing section of this notice, above, the Department disagrees that it is either necessary or appropriate to adopt a total prohibition—either explicit or implicit—of zeroing, regardless of the comparison methodology or case-specific circumstance. The methodologies and preferences set forth in this Final Modification for Reviews and the revised regulations, fully address the findings of WTO inconsistency. The Agreement sets forth the general principle that both provisional and final anti-dumping duties may be applied only as of the date on which the determinations of dumping, injury and causality have been made. However, recognizing that injury may have occurred during the period of investigation, or that exporters may have taken actions to avoid the imposition of an anti-dumping duty, Article 10 contains rules for the retroactive imposition of dumping duties in specified circumstances.

Provisional measures and price undertakings

Some other commentators argue that any dumping margins with present effects should be revised and applied prospectively from the effective date. The Department finds the commentator’s request that it commit to implementing “as applied” findings of inconsistency through a section 129 proceeding in certain sunset reviews to be beyond the scope of this section 123 determination. See Implementation through Section 129 Proceedings and Application to Completed Reviews section of this notice. The purpose of this Final Modification for Reviews is not to address or fix how the Final Modification for Reviews is to be applied in the specific proceedings that were challenged, but rather is to address the broad elements of the prior practice that were found WTO-inconsistent. The Department has addressed the inconsistencies found with respect to sunset reviews by including a modification of the methodology that will be applied in future sunset reviews.

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.

Several commentators argue that the proposal to move to an A-A comparison methodology in reviews is unnecessarily complex. These commentators suggest that compliance can be achieved by simply eliminating the use of zeroing in the A-T comparison methodology. These include the rate of increase of dumped imports, the capacity of the exporter(s), the likely effects of prices of dumped imports, and inventories. The Agreement does, however, specify that a determination of threat of material injury shall be based on facts, and not merely on allegation, conjecture, or remote possibility, and moreover, that the change in circumstances which would create a situation where dumped imports caused material injury must be clearly foreseen and imminent. In the situation where products are not imported directly from the country of manufacture, but are exported from an intermediate country, the Agreement provides that the normal value shall be determined on the basis of sales in the market of the exporting country. However, the Agreement recognizes that this may result in an inappropriate or impossible comparison, for instance if the product is not produced in the exporting country, there is no comparable price for the product in the exporting country, or the product is merely transshipped through the exporting country.

The Department’s regulations specifically describe three types of comparison methodologies that might be used to determine margins of dumping and antidumping duty assessment rates. Although the Final Modification for Reviews adopts the A-A method as the default method in reviews, the Department may determine to use any of the alternative comparison methodologies when deemed appropriate in a particular case. A number of commentators argue that the Department should state explicitly that it will grant offsets when the export price exceeds the normal value, and specifically eliminate the zeroing methodology. 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. These commentators note that the proposed regulations do not explicitly state that the Department will provide offsets when calculating the dumping margin. Some commentators suggest that the Department include explicit text in the Final Modification for Reviews, the regulations, or both, that unequivocally eliminates zeroing regardless of the comparison methodology employed, and regardless of any case-specific circumstances.

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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.

Other commentators argue that the Department’s proposed effective date is too long and takes unnecessary time to implement the new policy. Some commentators cite to the Final Modification for Investigations (71 FR 77722), as precedent, and note that in that instance, the Department applied the new methodology to all investigations that were pending before the Department. Other commentators suggest that the Department apply the new method to all reviews where the final results are scheduled to be issued more than 60 days after the date of publication. Some commentators remind the Department that if it is considering the use of the targeted dumping methodology as an alternative methodology, this methodology is to be employed as an exception, in very limited circumstances.

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The purpose of the regulation is to describe in general terms the comparison methodologies available, and the default methodology to be employed in different contexts. Greater specificity as to when offsets will be provided under each comparison methodology is beyond the intended purpose of the regulation, and is unnecessary for purposes of adopting a methodology that is WTO-consistent. The Department has already made clear that its revised methodology for reviews will parallel the WTO-consistent methodology the Department currently applies in original investigations, and that offsets will be provided when using this methodology. The Department has been granting offsets in original investigations since 2007 without specific regulatory language directing it to do so. The Department has further explained, above, how assessment rates will be determined for individual importers.

It provides that the level
of home market sales is sufficient if home market sales constitute 5 per cent or
more of the export sales in the country conducting the investigation, provided
that a lower ratio “should” be accepted if the volume of domestic sales
nevertheless is “of sufficient magnitude” to provide for a fair comparison. The “average-to-average” method involves a comparison of the weighted average of the normal values with the weighted average of the export prices (and constructed export prices) for comparable merchandise. The Department is adopting this Final Modification for Reviews in response to several WTO dispute settlement findings, pursuant to section 123(g)(1) of the URAA. 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. While the statute establishes the manner of determining the effective date of any final rule or modification adopted pursuant to section 123, the statute does not specify whether the final rule or modification must apply only to new segments of proceedings initiated after the effective date, or may apply to any segments pending as of the effective date.