Reform, Reality, and Recognition: Reassessing U.S. Antidumping Policy toward China

Article excerpt

I. Introduction

Since 1979, the Department of Commerce (Commerce) has modified its antidumping duty policies toward imports from non-market economy countries(1) (NMEs) several times in an effort to recognize the changing economic reality in these countries.(2) Although Commerce has made progress, its policies still do not properly recognize the modern economic reality in NMEs. This Article focuses on Commerce's antidumping "separate rates" policy. Under current policy, all Chinese exporters receive a single country-wide antidumping duty rate unless they can establish an absence of government control. Exporters that do demonstrate an absence of such control receive an individual exporter-specific antidumping duty rate - referred to as a separate rate.(3) Because the majority of all NME cases at Commerce involve imports from the People's Republic of China (China), this Article will center on the application of Commerce's separate rates policy toward China.(4)

This Article analyzes Commerce's separate rates policy in light of criticism that its current practice is unfair to NME exporters because the policy results in excessively high antidumping duty margins. This Article will show that the separate rates policy no longer reflects economic reality in China in that it presumes central government control over all exporters and then fails to adequately consider control exerted by other entities, such as private shareholder entities.

This Article will proceed as follows. Part II will provide a brief description of U.S. anti-dumping law, specifically contrasting Commerce policies toward market economies and NMEs. Part III will address the separate rates policy applied to China and how it has evolved over time. Part IV will set forth the reforms and fundamental changes that have occurred in China over the last twenty years and will address the failure of the separate rates policy to properly account for the changes. In Part V, this Article will conclude that the current practice requires modification and will suggest a shift toward the test employed for market economies as a possible alternative to the current separate rates test.

II. An Overview of U.S. Antidumping Law

Like other countries, the United States has developed antidumping laws to protect U.S. domestic industries from unfair trade practices.(5) Dumping occurs when a foreign producer or exporter charges a price for its product in the United States market that is lower than the product's fair market value.(6) The theory is that the exporter takes advantage of its position in the home or third country markets to raise the price for the merchandise in that market. The excess profits in that market then enable the exporter to cut prices in other markets, such as the United States.(7) As early as 1914, Congress recognized such price discrimination as "manifestly unfair and unjust, not only to competitors who are directly injured thereby but [also] to the general public...."(8)

If merchandise sold in the United States at a price less than its fair market value injures an industry in the United States,(9) an antidumping duty or surtax is levied upon that merchandise. The duty is the difference between the price charged for the merchandise in the exporting country(10) and the price charged for the merchandise in the United States.(11) The duty imposed is intended to raise the U.S. price for the merchandise to fair market value(12) and thereby prevent competitive injury to the U.S. producers of the same or similar merchandise. As explained below, a significant issue in the calculation of antidumping margins in market economics and NMEs is whether exporters of subject merchandise within the same country are related or affiliated.(13)

A. Market Economies

In market economy cases, Commerce typically calculates an antidumping duty for each individual exporter investigated.(14) The underlying economic principle for calculating separate antidumping duty margins in market economy cases is that private actors, guided by the profit motive and free market forces of supply and demand, control the marketplace and are free to bargain for product inputs, make decisions on production, and set their own prices. …