Obama Administration Strengthens Trade Reform Rules Good For US Manufacturing?

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Last week (admittedly I was on vacation) a major development occurred with potentially large ramifications on metal buying organizations as well as industrial product manufacturers. Specifically, last Thursday, US Commerce Secretary Gary Locke announced a series of trade measures that, “¦will strengthen trade enforcement and help keep U.S companies competitive. In addition, these rules coincide with a major plank of the Obama Administration’s trade policies to double exports within 5 years.

Of course doubling exports within 5 years won’t make a bean of difference from a trade perspective or an overall GDP perspective if the US doesn’t also cut its imports or rather, grow its exports while implementing some discipline in curbing some of its imports. The trade reform rules released last week address one portion of trade law, anti-dumping and illegal import practices. From a macro perspective, though the trade deficit narrowed during the recession, but since then, the numbers have moved in the opposite direction as, “imports have been rebounding faster than exports. In addition, “because exports add to the US gross domestic product, and imports subtract from it, this trend represents a headwind to the US economic recovery, according to the Christian Science Monitor.

In our opinion, most of the rules will impact countries like China more than other exporting nations. What specific changes within US anti-dumping law will importers see? Here is the list of the 14 measures (we have bolded those that we feel will have a more significant impact):

  • Expanded use of random sampling to select companies as individual respondents in AD investigations and reviews rather than choosing the largest exporters;
  • Strengthening  Commerce’s current practice regarding the issuance of company-specific AD rates in NME cases; [editor’s note: NME refers to non-market economies]
  • Clarification of Commerce’s current NME practice that when the Department uses import prices for valuing a production factor, such prices should include all applicable freight and handling costs;
  • Clarification of Commerce’s current NME practice to require companies to report production inputs for all products produced at each of their facilities not just those facilities that produced merchandise destined for the United States for use in the Department’s NME dumping calculations;
  • Clarification of Commerce’s current CVD practice to reiterate that Commerce considers state-owned enterprises (SOEs) as constituting a “specific group when they are alleged to be receiving countervailable subsidies from the government;
  • Reconsidering the treatment of export taxes and value-added taxes (VAT) in Commerce’s NME AD methodology; and
  • Strengthening the treatment of resellers and other non-reviewed parties in NME cases to ensure that such parties pay the full amount of AD duties.
  • Adoption of a new methodology for valuing wage (labor) rates in NME cases by using surrogate wage rates that fully capture all labor costs (including benefits and taxes paid to workers by their employers) in the NME country;
  • Eliminating the practice of allowing individual companies to seek removal from an antidumping (AD) or countervailing duty (CVD) order based on their ability to show zero dumping margins or subsidy rates for three (AD) or five (CVD) consecutive years;
  • Tightening the rules in non-market economy (NME) cases for determining when the price of production inputs purchased from market economy countries will be substituted for the Department’s standard valuation for such inputs;
  • Considering whether importers will be required to post cash deposits rather than bonds for imports that fall within the scope of an AD/CVD investigation starting with the issuance of Commerce’s preliminary determination (rather than following the imposition of an AD/CVD order);
  • Strengthening the certification process for the submission of factual information to the Department;
  • Strengthening the accountability of attorneys and non-attorneys practicing before Commerce; and
  • Tightening the deadlines for submitting new factual information in AD/CVD cases.

Other press accounts have tended to focus on measures such as the posting of cash deposits rather than bonds when a particular import category falls into an AD/CVD investigation as well as the reconsideration of treatment with regard to export taxes and VAT rebates. We’d concur on both of those but would add that most significantly, the tightening of rules around NMEs (non-market economies, of which China is probably the largest example), represent the most significant and perhaps the most important features of the new rules. They begin to get at “leveling the playing field, so to speak.

We will run a follow-up post on this story later this week.

–Lisa Reisman

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