Antidumping As An International Corporate Strategy

Antidumping As An International Corporate Strategy A Rare But Lethal Weapon?
by Catherine Curtiss
Market intelligence, capital investment, research and development, advertising, quality control, joint
venture partners ... and antidumping? Most companies think of antidumping – if they think of it at all
– as a type of legal case in which they might one day, if their luck is bad enough, be a defendant. With
few exceptions, multinational corporations do not perceive antidumping as a competitive strategy.
Antidumping, in the conventional viewpoint, is a hit and run – not a sustained corporate weapon.
The most notable exception is steel. “Big steel” producers – integrated U.S. steel companies like
Bethlehem, U.S. Steel, and National Steel – have made antidumping cases a cornerstone of their antiimport strategy since the mid-1970s. In more recent years they have been joined by “mini-mills” such
as Nucor. The U.S. Commerce Department is currently enforcing over 80 antidumping orders on steel
products from around the world.
These orders cover carbon and stainless steel, and semi-finished and finished products. At least 20
countries are targets. And the cases keep on coming: Calendar year 1999 saw 19 new steel antidumping orders and 2000 saw eight, numbers that do not include some 34 new steel antidumping petitions
filed in 2000 that are still pending.1 For example, U.S. mini-mills filed new antidumping petitions in
November 2000 against hot-rolled carbon steel from 11 countries.
What Is Antidumping, Anyway?
Dumping is generally defined as selling a product in the export market at a price below that for which
it is sold in the home market. Dumping can also, in some circumstances, be defined as export prices
below costs. Investigations can be requested by the domestic industry, and if the investigating authority finds that dumping is occurring, it can enforce an order to counteract the dumping by charging a
duty upon customs entry.2
Other Arrows in the Corporate Quiver
Antidumping cases are certainly not the only anti-import competitive strategy of the integrated steel
mills. “Big steel” producers have surrounded their antidumping cases with other anti-import efforts.
Among those have been countervailing duty trade actions, alleging unfair foreign government subsidies (producing the 20+ countervailing duty orders on steel now in effect),3 and “safeguards” measures
imposing special duties on line pipe and wire rod.4 Currently U.S. steel producers are pushing the U.S.
Government to impose quotas or surcharges on steel imports, through a new safeguard action.
That said, the antidumping cases have been the most frequent, most prominent, and arguably most
successful of the “big steel” trade actions. Cumulatively, big steel trade actions have probably contributed more than any other industry to the perception outside the U.S. of antidumping as a rare but lethal
weapon.
Appearances Can Be Deceiving
But how successful have these antidumping orders really been? What U.S. steel producers want,
presumably, is to bar or reduce imports, and increase U.S. prices. The very fact of recurring steel cases,
however, suggests the opposite of success – that each order is but a finger in the dike, and a small finger
at that. A report by the U.S. Commerce Department on global steel trade can be read as suggesting the
same view; despite the many antidumping orders, the U.S. steel industry suffered a crisis in 1998,
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The track record of the steel cases in the so-called “sunset” reviews is also informative. Under U.S. law
implementing the WTO Antidumping Agreement,6 the Commerce Department and International Trade
Commission (ITC) must determine every five years whether to revoke (that is, “sunset”) or maintain
antidumping (and countervailing duty) orders. For example, in December 2000 the ITC voted to continue antidumping orders entered in 1993 on cut-to-length carbon steel plate and on galvanized (corrosion resistant) steel and to revoke the 1993 orders on cold-rolled steel. In discussing its reasoning the
ITC reviewed the effects these various orders had on imports from the countries subject to the orders,
imports from other sources, and pricing.
The orders on plate, it seemed, had reduced imports from the subject countries, but had not led to price
increases, or prevented waves of imports from other suppliers throughout the world. The orders on
galvanized steel had significantly reduced imports from the subject countries. Import levels of coldrolled steel, in a third variation, were low both before and after the antidumping orders were imposed.
The ITC found that even after seven years of a protected market, the U.S. cut-to-length plate and
galvanized steel producers continued to require the protection of antidumping orders.7
All told, to date the ITC has found it necessary to continue 46 of the steel antidumping orders it has
reviewed so far (albeit some of them uncontested), voting to revoke only 17.
Whether the steel cases have accomplished their goals is something only the steel producers can say.
However, their track record suggests a mixed result – and one at a very high cost.
Boon for Lawyers
To pause there a moment, legal fees to bring an antidumping case can easily run over US$1 million for
a large and complex case, just for the original investigation. As the case moves through subsequent
phases – appeals, NAFTA binational panel reviews, administrative reviews –fees mount accordingly.
High costs stem from use of a fleet of lawyers, economists, and computer experts; long and detailed
questionnaires and responses (the Department of Commerce’s typical antidumping questionnaire, for
example, is over 155 pages – and that is just the questions, and the first set of them at that); and intense
litigation over highly technical points. To ensure the highest possible antidumping duties, petitioner’s
representatives typically delve into every detail that is asked and answered. It is reasonable to speculate that the U.S. steel industry’s sunk costs in the steel cases since 1976 are greater than the GDP of
many countries.
Hidden Drawbacks for Companies
For industries other than steel, the cost-benefit assessment of antidumping cases may be even more
daunting. Antidumping as a corporate strategy has unquestionable drawbacks, especially for those
industries with many more participants than “big steel,” more complex ownership relationships or
sourcing patterns, or less money to spend on legal fees.
First, the outcomes of these cases are hard to predict. To obtain an antidumping order, not only must
dumping be shown, but also actual or threatened material injury from the dumped imports. That injury
must, furthermore, be to the U.S. industry as a whole – and not just the companies most harmed by
import competition.
The counter-intuitive calculation of dumping contributes to the uncertainty. Dumping exists with
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reference to each producer’s own pricing as between the home market and the U.S.; that imports may
be priced with or even above U.S.-made products is not factored into the duty calculation.
Evaporation of “Wins”
Second, an initial win may turn to a loss. Agency decisions in antidumping cases can be appealed to
U.S. domestic courts (the Court of International Trade, and the Court of Appeals for the Federal Circuit), or to a binational panel under Chapter 19 of the NAFTA. These appeals can alter or even reverse
an antidumping order. The availability of WTO dispute settlement has also become an additional
avenue of appeal, and potential source of (in effect) retroactive modification of a national antidumping
order.
Similarly, initially high antidumping rates can come down over time. An annual “administrative review” process allows the Commerce Department to update and adjust antidumping rates each year.
Many non-U.S. producers and exporters exploit that opportunity, relying on internal pricing audits and
adjustments before requesting such a review, to ensure that their rates will indeed go down. And since
the signing of U.S. legislation implementing the WTO agreements in 1995, Commerce is required to
examine each order every five years, in what is know as a “sunset review.” If the U.S. industry is found
to be no longer threatened, then the antidumping order will be revoked.
All For One
Another hidden drawback is that cases must be brought on behalf of an industry; companies acting
alone (in a multi-producer industry) cannot obtain an antidumping order. More U.S. producers must
support than oppose a petition, and they must represent at least a quarter of total U.S. production –
requiring a collaboration among competitors who may have very different views about the desirability
of imports and import restraints. Industry collaboration is further complicated by the right of the
Commerce Department to disqualify companies related to importers, or who import themselves, from
being counted.
Invisible Victories
Moreover, even if petitioners win an order, there is not necessarily any direct effect on prices in the
U.S. Importers must pay the antidumping duties, and they may not be the ultimate customer. If they
are not, they may or may not pass the duties along to the U.S. customers in the form of higher prices.
Nor is there necessarily a direct effect on import volumes. As the sunset reviews illustrate, imports
may shift to countries not covered by the order, or U.S. customers may continue to demand the foreign
product notwithstanding any higher antidumping duty-related cost that may be passed on to them from
the importers.
Sauce for the Goose
In some cases, there may even be a backlash. Some 62 countries now have antidumping laws –nearly
half of them brand new. Industries that bring antidumping actions must thus be prepared to defend
their own exports against similar actions in the markets to which they export. Steel and some other
industries have in fact experienced mirror or reciprocal actions of this sort.
Finally, unlike diamonds, antidumping orders are not forever. The new rules on five-year sunset reCanadian International Lawyer - Vol. 4, No. 3
2001
views have put a limit on the formerly open-ended lives of these actions.
Conclusion
In short, antidumping may not be for everyone. All that said, antidumping is still used as a weapon in
the U.S. by not only steel but many other industries. Clearly, offsetting considerations regularly outweigh the list of drawbacks. On the “plus” side (from a petitioner’s perspective), antidumping cases
are indeed more trouble to defend than to bring. The element of surprise, coupled with tight response
deadlines, can prejudice the outcome before the first responsive paper has been filed. Uncertainty of
outcome and contingent liability alone can disrupt customer relationships. The ultimate prize of high
antidumping margins can keep imports out of the US. market – at least from the producers and countries with those rates.
At the end of the day, antidumping warrants examination as an international corporate strategy, but
with a clear-eyed understanding of attendant risks, limitations, and costs.
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Le droit antidumping comme stratégie corporative internationale — une arme rare mais fatale?
L’application du droit antidumping constitue-t-il une stratégie corporative viable? Les compagnies sidérurgiques
américaines ayant intégré l’application de ces règles à leur stratégie anti-importation, peut-il être pertinent
compte tenu de l’expérience vécue dans ce domaine, d’intégrer cette stratégie aux activités de compagnies
oeuvrant dans d’ autres secteurs industriels? Une compagnie qui envisage de présenter une requête en vue
d’obtenir l’imposition de droits antidumping devrait prendre en considération plusieurs des inconvénients que
cette pratique suppose, à savoir : (i) les frais juridiques très élevés; (ii) la difficulté de prévoir la conclusion de
tels dossiers; (iii) les ordonnances d’imposition de droits antidumping sont sujets à être portées en appel; (iv)
les taux élevés de dumping peuvent chuter au fil du temps et entraîner la révocation des ordonnances; (v) des
poursuites peuvent être intentées au nom d’une industrie donnée; (vi) les prix et la quantité des importations ne
sont pas nécessairement altérés; et (vii) de nombreux autres pays ont adopté des lois antidumping impliquant la
réciprocité desdites mesures. Certes, i1 existe aussi des avantages qu’il ne faut pas négliger, notamment l’élément
de surprise, les échéances serrées imposées aux compagnies objet de l’enquête pour fournir leur réponse, la
rupture des relations d’affaires entre les clients et la compagnie soumise a 1’enquête et dans les cas les plus
favorables, des frais de douane antidumping élevés. Ceci étant dit, si la stratégie antidumping mérite qu’ on
1’envisage, i1 faut cependant demeurer vigilant quant aux risques, aux coûts, et aux risques qu’elle présente.
Catherine Curtiss (B.A. en 1972, de l’Université du Michigan; mâitrise avec mention en 1973 à
1’Université du Michigan, doctorat obtenu avec mention en 1980 au Law Center de l’Université de
Georgetown) est avocat associée au cabinet HUGHES HUBBARD & REED, LLP, à Washington (D.C.).
Madame Curtiss est également la présidente du Groupe commerce international du cabinet. Elle se
spécialise en droit antidumping, sur les droits compensateurs ainsi que dans la réglementation du
commerce international et de l’importation. Mme Curtiss a acquis une solide expérience en matière de
conseils juridiques dispensés à des sociétés multinationales faisant affaires au Canada et aux ÉtatsUnis. Courriel: curtiss @ hugheshubbard.com
1.
See Department of Commerce, (“Antidumping Agreement”), International Trade Administration – Import Administration, Statistics, www.ita.doc.gov.
2. 19 U.S.C. § 1673 et. seq.; WTO Agreement and Implementation of Article VI of the General Agreement on Tariffs and
Trade.
3. Countervailing duty actions employ a similar process to antidumping actions, but involve the allegation that a foreign
government is unfairly subsidizing imports. See 19 U.S.C. § 1671 et. seq.; WTO Agreement on Subsidies and
Countervailing Measures.
4. Proclamation No. 7274, 65 Fed. Reg. 9193 (2000); Proclamation No. 7273, 65 Fed. Reg. 8621 (2000).
5. See Global Steel Trade: Structural Problems and Future Solutions, Report of the President, International Trade
Administration, U.S. Department of Commerce (July 2000) at iv (available on the Commerce Department’s web site).
6. Antidumping Agreement, Art. 11.3; 19 U.S.C. 1675(c).
7. See Certain Carbon Steel Products From Australia, Belgium, Brazil, Canada, Finland, France, Germany, Japan,
Korea, Mexico, The Netherlands, Poland, Romania, Spain, Sweden, Taiwan and the United Kingdom, USITC Pub.
3364 (Nov. 2000) , at 25, 26, 29 (cut-to-length plate); 43 (cold-rolled); 51-52 (galvanized).
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