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;