Handling an anti-dumping investigation

Although China is not yet among this new group of aggressive users of trade remedy laws, there is no question that China has begun to initiate more AD/CVD cases over the past few years. Hence, exporters to China should definitely understand the trade case process.

The basics

In general, there are three types of trade cases that could make things more difficult for exporters: (1) anti-dumping, (2) countervailing duties, and (3) safeguards. AD cases investigate whether exporters are selling their product in the export market at unfairly low prices. Prices are considered unfair if they are below “normal value,” which typically means below prices in the home country or full costs of production. CVD cases investigate whether the exporter has received impermissible subsidies from its own government. AD and CVD cases can be brought against export shipments from a single country or multiple countries.

Safeguard cases are fundamentally different. Unlike AD and CVD, safeguard cases do not involve allegations that the export shipments are “unfair” in some way. Rather, safeguard cases are essentially a complaint by local producers that there is simply too much volume of imports, and the local producers need time to take actions in order to be better able to compete with the imports. Safeguard cases thus allow restraints on imports for a few years. Safeguard cases can only be brought against all imports.

For all three types of cases, no extra import duties will be imposed unless the domestic industry that initiated the case has demonstrated that they have been injured from the targeted imports. Analysing “injury from imports” is thus a very important part of all trade cases.

How to cope

Suggestion #1: Know your local competitors

Trade cases are designed to assist only local producers. Generally, foreign exporters cannot initiate trade cases against other foreign exporters. Hence, if your particular market segment does not have local producers, there is little risk of a trade case.

Suggestion #2: Plan to act quickly

Unlike other types of litigation, trade cases move very quickly. By law, trade cases generally have to be completed in a year to 18 months. Exporters should therefore not procrastinate when faced with a trade case. The sooner you begin to act, the more options you will have for the defence.

Suggestion #3: Understand the scope

Technically, trade cases are against products, not companies. That is, if a trade case is initiated against widgets from the United States, then all US exporters of widgets are potentially subject to the case, even if they are not the largest exporter and even if they are not named in the original petition.

Suggestion #4: Do not be afraid of data

Trade cases will require lots of data about your company, your sales, your costs and the products being shipped. Such data will be requested in government questionnaires issued by those agencies (for example in China, the Bureau of Fair Trade for Imports and Exports (BOFT) and the Investigation Bureau of Industry Injury (IBII)) that are responsible for investigating trade cases. Those exporters that have good systems in place to access this data tend to have better outcomes in trade cases.

Daniel L. Porter, Partner
James P. Durling, Partner
Winston & Strawn

The domestic perspective

Under World Trade Organization (WTO) rules, a country is entitled to apply anti-dumping measures to a product originating from a foreign country which, when introduced into the domestic market is sold at a lower price than its normal value. Therefore, it is normal that the Chinese government initiates anti-dumping investigations against other countries for certain products. In fact, China's government promulgated its PRC Anti-dumping Regulations (中华人民共和国反倾销条例) on November 16 2001 soon after it became a WTO member, and authorised the Ministry of Commerce (Mofcom) to be in charge of anti-dumping investigations.

According to China's anti-dumping law, Mofcom will initiate an anti-dumping investigation within 60 days after accepting an application paper filed on behalf of the domestic industry regarding a certain subject product. Before the official initiation of an investigation, Mofcom will normally send a diplomatic notification to the embassy of the subject country in China. For a foreign company, it may either receive this information through the website of Mofcom, or through its Chinese importers.

In deciding whether the subject product shall be imposed an anti-dumping duty, Mofcom normally will consider three key elements: first, whether the subject product is dumped (or sold less than its normal value), if yes, how much the dumping margin is; second, whether the domestic industry is materially injured, or threatened, or materially retarded on its establishment; third, whether the injury of the domestic industry is caused by the importation of the subject product. If the conclusion of an anti-dumping investigation meets the above three requirements concurrently, then an anti-dumping order shall be issued pursuant to the law. Mofcom generally carries out the above investigation via methods such as releasing related questionnaires, arranging public hearings, on-the-spot investigations, samplings, and so on. This will last 12 months pursuant to the law, with the exception of a six-month extension if necessary. Once an anti-dumping order is issued by Mofcom, China Customs shall impose the anti-dumping duty on the imported subject product. An anti-dumping order shall remain five years from the date of enforcement.

After the enforcement of an anti-dumping order, Mofcom may initiate annual review proceedings upon the application of interested parties. A sunset review may also be initiated upon the request of interested parties in the fifth year of the enforcement period of the anti-dumping order.

Hongwei (David) Jia
Senior partner
LongAn Law Firm