Defense of an Antidumping (or CVD) Investigation

An antidumping investigation is unlike any other litigation that most companies will have experienced.  The tight deadlines, unusual information requests, and particular data requirements are unique to this kind of proceeding.  In addition, these cases involve on-site scrutiny by US government officials with a low tolerance for error or misstatement and present an ever-present possibility of punitive assumptions being made where data is incomplete or insufficiently verifiable.

The defense of an antidumping duty investigation requires substantial effort and substantial expense.  It involves investigations by two separate US government agencies.  The first is an investigation of sales and prices in the United States and the home market to establish whether US prices are below “normal” value -- which is the definition of dumping.  This phase of the proceeding is done by the Department of Commerce (DOC).  The second is an investigation of whether the imports at issue cause material injury to the US industry. This phase of the investigation is done by the International Trade Commission (ITC). 
Defending such a complex and unconventional investigation requires the assistance of US legal counsel familiar with the peculiarities of US antidumping law.  The foreign respondent must dedicate a considerable amount of managerial time and attention to the multiple data requests that are involved.  Depending on need, a case might also involve outside consultants, such as economists, computer specialists, or cost accountants familiar with DOC practice.
The following outline describes the primary tasks that a company and its legal counsel must complete at each stage of the antidumping investigation.
A.            DOC Dumping Investigation 
The US Department of Commerce decides whether a company is dumping, and if so, imposes the dumping rate that must be deposited for future imports.  DOC carries out a two-phase investigation into the pricing and sales practices of the company in the United States and in its home market (or if there are few home-market sales, in third-country markets).  The DOC issues questionnaire which require submission of an extensive computer listing of each individual sale the company made during a 1-year investigation period, together with detailed supporting documentation and explanations.  
Not every manufacturer or exported in a country need be selected for the investigation, however.  Usually the DOC tries to cover 80 percent of total US sales volume from each country, and if it can do so with just a few large companies, it will issue questionnaires only to those companies.  All other companies will receive the average rate of those companies who are investigated.  A company that is not required to submit a response may nevertheless wish to volunteer for the investigation, since a company that proves to have a dumping rate of less than 2 percent is excluded from the dumping case forever, while all other companies, whether investigated or not, are subject to the order and may have to participate in annual review investigations in the future. 
On the basis of the submitted information (and taking into account any objections by the petitioning US industry), the DOC will establish a preliminary dumping rate, which is the percentage by which US prices are found to be lower than the normal value (usually the home market price).  From that time forward, all imports of the product under investigation are subject to an antidumping duty deposit in the amount of the preliminary dumping rate.
After the company has submitted its questionnaire response, the DOC then conducts an extensive on-site verification of the data submitted, normally taking 5 to 10 days.  Each item of information submitted must be verified from the company's records, and the DOC must assure itself as well that the company's accounting system, its purchasing and selling practices, and its cost accounting all meet the DOC's standards.  Failure to satisfy the DOC in this verification can result in punitive assumptions being imposed, which can significantly increase the dumping margin.  After the verification the DOC permits the parties to submit legal argumentation in the form of briefs and a hearing.  Thereafter the DOC publishes its final dumping margin, which is substituted for the preliminary margin.   
As noted above, if a company’s final margin is less than 2 percent, the case is terminated with respect to that company.  Otherwise all future entries are subject to a duty deposit at the rate found.  Each year thereafter, an annual review may be requested in which entries in the past year are examined in order to establish the actual dumping margin.  The deposit rate is adjusted to reflect the new rate, and excess deposits may be refunded.
In responding to the DOC dumping investigation, the central tasks to be performed by a foreign company's legal counsel include the following:
Internally review the company's selling and pricing practices to identify potentially important issues regarding product characteristics, selling practices, market differences, movement and sales expenses, and pricing;
Provide the DOC with information and proposals regarding product matching and other issues relevant to the case;
Prepare a detailed work plan to guide the company in collecting, checking, and formatting the data required in the investigation;

Establish and maintain open dialogue with the DOC investigators in order to ensure their understanding of the data and encourage favorable determination of discretionary issues; 
Prepare for and respond to the DOC's initial dumping questionnaire.  This will include a detailed narrative response providing information on the company's sales to the United States and the reference market;  
Prepare computer files which provide details of the company's sales, selling expenses, and other relevant data for the markets being investigated;
Perform computer analysis of the data before submission to the DOC to ensure it is accurate and to determine how best to present various issues;
Establish an estimate of the potential duty that can be anticipated under various scenarios, to identify significant issues in the case;
Respond to one or more supplemental questionnaires requesting additional data and clarification;
Assist in collecting and reporting cost of production information if a petitioner's allegation of sales in the home market at below the cost of production is accepted, ; 
Prepare for on-site verification at the company's home office as well as at its U.S. importer or subsidiary (if any), including thorough review and internal audit to ensure that all submitted information is verifiable, organized, and presented in the required manner;
Assist with verification, including responses to data and evidence requests and provision of supplemental information;
Review the DOC's verification report for indications of issues requiring legal argumentation;
Review preliminary determination as well as computer program used the DOC to identify legal, factual, or programming errors; 
Assist in complying with customs regulations if dumping margins are found in preliminary determination;
Prepare and submit legal briefs and participate in oral hearing advocating the legal position of the company;
Assist in strategic analysis of future marketing and pricing decisions if final antidumping margins are found.
The DOC's investigation normally takes 7-8 months (if there are no postponements).

B.            ITC Investigation
The ITC’s task is to establish the existence of injury to the US industry caused by the imports of the product into the United States.  The essential issues in the ITC's investigation are whether the US industry is materially injured (or threatened with material injury) and whether the allegedly dumped imports are a cause of that injury. The ITC performs its investigation in two stages: a preliminary stage, which begins immediately after a case is initiated, and a final stage, which takes place after the DOC has done its investigation.  

Participation in the ITC’s investigation is optional; often the foreign respondent combine their resources to engage a single representative or to present a unified position.  Smaller companies can sometimes rely on the efforts of larger companies to carry the day, since each country’s impact is considered together.  If the ITC finds that the imports complained of do not cause injury to the US industry, the entire investigation is dismissed.

The central tasks to be performed by a foreign company's legal counsel in this phase of the proceeding include the following:
Collect data on the US market for the subject product and the levels of domestic production, consumption, and imports;
Develop theories of the case to refute petitioners' allegations that the US industry is materially injured and that imports are a cause of injury, including consultations with the foreign manufacturer, its U.S. importers, and its customers;
Help shape the kinds of questions the ITC will ask of US importers and producers in consultation with ITC staff in order to ensure that the questionnaire will elicit information that will support a favorable view of the evidence; 
Assist the foreign producer and its importers to respond to ITC questionnaires;
Evaluate data submitted by US producers and compare their responses with foreign producers' data to further develop and support theories of case;
Prepare presentation for ITC hearings, including coordinating with other respondents' counsel, working with economists, and preparing witnesses to support theories; participate in the ITC hearings; 
Draft and file post-hearing briefs to the ITC, which may require preparation of affidavits of company officials, importers, and/or customers.



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