Newly proposed legislation by Ohio Sens. Rob Portman (R) and Sherrod Brown (D) takes aim at “country-hopping,” whereby foreign companies shift production to third countries in order to evade U.S. antidumping and countervailing duties (AD/CVDs).

The bipartisan “Eliminating Global Market Distortions to Protect American Jobs Act” presented last week is just the latest volley in an ongoing battle by senior U.S. trade officials to counteract China’s expanding Belt & Road Initiative.

AD/CVD investigations are bifurcated between the International Trade Commission (ITC), which analyzes injury to the domestic industry, and the Department of Commerce, which determines the extent of necessary remedial measures, i.e., the amount of duties ultimately imposed.  The ITC’s injury analysis is currently limited to an examination of import data of the particular product at issue from the specific country in question, in light of key U.S. market indicators and domestic industry financial performance over the period of investigation.  The bill introduces the concept of “successive investigations,” which establishes additional injury criteria that may be examined by the ITC under two scenarios: (1) the same class or kind of merchandise investigated at the same time, or (2) the same class or kind of merchandise for which the ITC made an affirmative injury finding within the last two years.  The additional criteria essentially allow the ITC to consider the cumulative effects of dumped and subsidized imports of a specific product on a domestic industry across multiple countries and time periods, with respect to both the volume of imports and underpricing.

Commerce, for its part, generally undertakes a comparatively lengthy examination of foreign exporter data, including subsidies, costs of production, and sales over the period of investigation.  The earliest a petitioner may see relief is at the preliminary determination, 85 days after the date of initiation, at which point cash deposits reflecting the estimated duties owed are collected.  A final determination is not due for another 75 days.  These deadlines are subject to lengthy extensions at the discretion of the Secretary, and in the case of affirmative final determinations, at the request of exporters.  However, with respect to the two new scenarios outlined above, the bill would block such extensions absent a request by the petitioner.

The bill also proposes a series of measures to address “market distortions,” specifically with respect to Commerce’s analysis of foreign production costs in “particular market situations.”  Chinese producers are increasingly accused of leveraging Belt & Road Initiative infrastructure to effectively offshore operations to other countries, including subsidized inputs.  In such cases, the bill would require adjustments to a foreign producer’s reported cost data to reflect market value.  In other scenarios, even absent a finding of a “particular market situation,” a foreign producer’s reported cost data may be entirely substituted for market data if found “not reasonably reflective of market costs of production.”

Other proposals include –

  • Authorizing Commerce to consider and address subsidies offered to a producer in a country under investigation by a government located elsewhere.
  • Adjusting the definition of “ordinary course of trade” to increase scrutiny of and potentially disqualify reported home market sales if made in insufficient quantities at unusually high prices.
  • Reducing allowable duty drawback adjustments to export prices to reflect only the actual amount of duties rebated or not collected on inputs in fact incorporated into the merchandise under consideration.
  • Updating the process by which Commerce initiates a circumvention inquiry; shorten the period by which Commerce must respond to such inquiries; suspend liquidation and require cash deposits for all merchandise subject to a circumvention inquiry; and, make the findings of such inquiries applicable on a country-wide basis, subject to specific exceptions.
  • Requiring Commerce to investigate allegations of currency undervaluation as a countervailable subsidy if those allegations meet the statutory requirements, and further, standardize the comparison method used to determine the extent of the alleged currency undervaluation.

The full text is available here.