Since the World Trade Organization (WTO) was created in 1995, major developing countries such as India and China have been required to eliminate or reduce a number of the trade barriers - such as high normal duties and low quotas - they had used to protect their domestic industries from foreign import competition. While reducing these trade barriers, these countries have increasingly turned to imposing antidumping (AD) duties to protect their domestic producers.
Fortunately, U.S. exporters today have a much better chance than ten years ago of successfully defending themselves in developing-country AD investigations, thanks to the WTO's extensive AD-related reforms. This article describes developing countries' increased use of the AD remedy and the WTO's AD reforms, and presents strategic advice U.S. exporters can use to successfully defend themselves in developing-country AD investigations.
Developed Countries Are The Dominant Users Of The AD Remedy
In general, imports are "dumped" when they are sold in the importing country at prices lower than the prices charged in the exporting market, or lower than the product's cost of production. If dumped imports are causing injury to the competing producers in the importing market, the importing country may impose a duty on the import that either eliminates the margin of dumping, or increases the import's price to a non-injurious level. Of course, the higher the imposed AD duty, the more likely that the relevant import will be blocked from the imposing country's market.
While developed countries such as the United States and the European Community were the major users of the AD remedy through the end of the 20th Century, developing countries have become today's dominant users of that remedy. According to WTO statistics, 38 countries are currently maintaining 1804 AD orders on foreign imports. Twenty-eight of these countries - about three-fourths of the total - qualify as so-called "developing" countries, and account for 1,115 - or about two-thirds - of all AD orders.
India - a developing country of over one billion people - is by far the largest user of the AD remedy, having issued 316 AD orders through 2005, versus 234 for the United States and 219 for the EC. Other large developing countries that are heavy users of the AD remedy include Mexico (76 AD orders), South Africa (113), China (68), Turkey (86), and Brazil (66).
Further, developing countries' use of the AD remedy has greatly accelerated in recent years. Prior to 2000, developing countries had collectively issued 373 AD orders. In the last six years, these countries issued an additional 742 orders, or about 124 orders per year.
This accelerated use of the AD remedy has been particularly dramatic for India and China, by far the two largest potential markets for U.S. exports. India adopted its AD law in 1992, imposed 62 AD orders over the next seven years (about 9 orders per year), and then imposed an additional 254 orders in the last six years (about 42 orders per year). China, which issued its first AD order in 2002, has issued another 67 since then, for an average of about 17 orders per year.
U.S. exporters have not escaped the developing counties' expanding use of the AD remedy. Of the 95 AD orders now in force against U.S. imports, 67 orders - or over 70 percent - have been imposed by developing countries. Mexico leads the list, with 19 AD orders against U.S. exports, and is followed by India (15 orders), China (10), Brazil (8), Argentina (5) and South Africa (5).
The WTO's AD Reforms Have Improved The Fairness Of Developing Countries' AD Investigations
Historically, exporters around the world have claimed that all countries' AD investigations are unfairly biased against them. One major reason this perception took root is that prior to 1995, there was no effective international oversight of the individual countries' AD investigations. The General Agreement on Tariffs and Trade ("GATT"), which was the international trade organization that preceded the WTO, maintained a code of AD norms that was largely hortatory and vague. As a result, the various GATT "Members" (as the country-signatories of international trade organizations are called) over time developed an incongruent array of AD laws and procedures.
Further, while a GATT Member could appeal another Member's AD action against its exports to a GATT dispute resolution panel, this appeals process was cumbersome, and allowed for extensive evasion and delay by defending Members. In addition, a GATT panel decision that criticized the defending Member's AD action could not be adopted by the GATT unless the defending Member itself consented, which rarely, if ever, happened.
Thus, under the GATT each Member was free to conduct AD investigations as it saw fit, without fear of critical review. Developing countries in particular earned a reputation for conducting biased AD investigations that lacked the basic transparency and due process protections typically afforded in developed-country litigation. Given the high costs of defending against a dumping claim in a distant country and under opaque procedures, many U.S. exporters declined to defend themselves when accused of dumping in a developing country, and instead simply abandoned the relevant market.
The creation of the WTO in 1995 corrected the most significant defects of the GATT's dispute resolution system. For example, the GATT's AD Code was replaced with the WTO's AD Agreement, which spells out in reasonably clear language the parameters WTO Members must maintain in conducting AD investigations. Indeed, much of the AD Agreement is based on the United States' AD law and procedures. While this law and these procedures are still criticized by foreign exporters that become involved in U.S. AD investigations, they are generally recognized as having greater due process and transparency protections than those of any other country.
Further, since 1995 many developing countries have simply adopted the WTO AD Agreement as their national AD law. Others have declared that in any conflict between their law and that agreement, the latter will prevail. This increasing harmonization of developing countries' AD laws is resulting in increased predictability for exporters regarding how AD investigations will be conducted in those countries.
In addition, the WTO's dispute resolution process is a vast improvement over the GATT's. The WTO appeals procedures are reasonably clear and concise, and include enforceable deadlines. Further, final "panel" decisions can be adopted by majority vote of the Members, so a defending Member cannot by itself block a decision against it. Finally, the WTO can and has authorized prevailing Members to take approved compensatory action against a defending Member if that Member fails to take the specified corrective action.
In contrast with the GATT's negligible number of AD-related appeals, since 1995 WTO Members have pursued 63 challenges of other Members' AD actions to the panel-formation stage, 26 of which have involved challenges against developing countries. In addition, 22 final panel reports have been issued in AD-related challenges, nine of which have involved challenges against developing countries. These figures show that WTO Members are taking full advantage of their ability to appeal to the WTO what they view as unreasonable AD actions by other Members against their exporters. This, over time, should result in all Members taking greater care to ensure that their AD actions are in compliance with the WTO AD Agreement.
Advice To Exporters For Prevailing In A Developing-Country AD Investigation
Thus, under the WTO's significant AD reforms, AD investigations conducted today by developing countries are likely to be much fairer than those conducted prior to 1995. This means that a U.S. exporter's chances of successfully defending itself in developing country's AD investigation are significantly better today than ten to fifteen years ago.
The following points are intended to help a U.S. exporter that becomes embroiled in a developing-country AD investigation to design a successful defense.
1. A U.S. exporter must decide quickly whether it will participate in the AD investigation. All AD investigations are run under strict deadlines. The relevant enforcement agency will issue its first demand for the exporter's information within days of the investigation's initiation and will allow about 30 days for a response - every day of which will be needed to fully comply. Thus, an exporter must decide within days, and probably at a senior level, whether it will participate in the investigation.
2. A decision not to participate will likely bar the exporter from the relevant market for years. Once the investigating agency learns that an exporter will not participate in the investigation, it will deem the exporter to be non-cooperative and will impose a high, market-closing AD duty to its future imports. The exporter will not be allowed to change its mind later in the investigation.
3. If an exporter decides to participate, it should immediately retain competent, qualified trade counsel in the relevant country. There are relatively few attorneys in developing countries that are competent to represent exporters in local AD investigations. To avoid a bad hire, an exporter must carefully scrutinize each candidate's experience in local AD investigations. (An exporter should ask its U.S. international trade counsel for help in screening the "local" candidates, for that counsel will know what to look for, even if counsel is not familiar with the developing country's trade bar.) Given the likely paucity of competent candidates, an exporter must act quickly to retain local counsel, or risk losing the best candidates to the competing U.S. exporters who acted more quickly.
4. There are at least four ways for a U.S. exporter to "win" a developing-country AD investigation. An exporter's strategy for prevailing in such an investigation should incorporate all four strategies.
First, the investigating agency must exclude from any final AD order any exporter that demonstrates that its imports were not dumped during the period under investigation. Obviously, any exporter involved in an AD investigation should focus on convincing the agency that it did not dump.
Second, the investigation will be terminated without the imposition of any AD duties if the investigating agency determines that the relevant imports, even if dumped, are not injuring the domestic producers. While the technical aspects of a "no injury" finding are beyond the scope of this article, such findings are surprisingly common in AD investigations in most countries. Thus, all exporters involved in an AD investigation should work together to demonstrate the absence of any causal link between their imports and the domestic producers' alleged injury.
Third, the WTO AD Agreement allows for the "settlement" of dumping claims against individual exporters through an "undertaking" agreement, under which an exporter agrees to stop dumping by increasing its prices into the importing market, and to undergo periodic compliance audits by the investigating agency. That agency in turn agrees not to impose any AD duties on the exporter's ongoing imports. An exporter is typically much better off continuing its shipments to the relevant country under a negotiated undertaking than a final AD order. Thus, an exporter should always raise the possibility of an undertaking with the investigating agency.
Fourth, the exporters collectively should enlist the U.S. Trade Representative ("USTR") to convince the investigating country to reach an "appropriate" resolution of the investigation. The USTR has agreed to do this in past developing country AD cases where the investigating agency has flouted the WTO AD Agreement's procedural protections or substantive requirements, and where the continuation of the investigation is inconsistent with related concessions the investigating country is seeking from the United States. Granted, "intervention" by the USTR typically will not by itself result in the investigation's termination. However, in close cases where the exporters are otherwise fully participating in the investigation, the USTR's intervention can "tip the balance" in favor of the exporters.
5. An exporter should consider retaining experienced U.S. trade counsel who can find appropriate U.S. AD precedent that supports the exporter's position. As noted above, many developing countries have adopted the WTO AD Agreement as their national AD law. Further, the WTO AD Agreement incorporates many of the dumping and injury concepts developed over hundreds of U.S. AD investigations. Given the connection between U.S. AD precedent and the AD laws of developing countries through the WTO AD Agreement, U.S. precedent should be considered as persuasive (as opposed to binding) authority in developing-country AD investigations. U.S. AD precedent has already been raised effectively in recent Mexican AD investigations to support U.S. exporters' positions on both dumping and injury issues, and could be raised as well in other developing countries' AD investigations. Because local trade counsel in developing countries are unlikely to be familiar with U.S. precedent, an exporter should consider retaining experienced U.S. trade counsel to identify helpful U.S. precedent for use by the exporter's local counsel.
Michael J. Coursey is a Partner in the International Trade and Customs Law Section of Kelley Drye Collier Shannon. Mr. Coursey served in the second Reagan Administration as Deputy Assistant Secretary for Investigations in the U.S. Commerce Department's International Trade Administration. He has advised clients on antidumping investigations in Canada, China, the EC, India and Mexico, in addition to the United States. N.B.: All data discussed in this article, including statistics on antidumping, are available on the WTO's website at www.wto.org/english/tratop_e/adp_e/adp_e.htm.