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201 VS. ANTIDUMPING |
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SECTION
201 VS. ANTIDUMPING
HOW DO THEY DIFFER?
Published
on February 1, 2001
In a September-October 1996 issue of
The Agricultural Law Letter, published by the Law Office
of McLeod, Watkinson & Miller, a U.S. law office that
specializes in Agricultural Law, John E. Sheeley, stated
that U.S. industry creatively utilizes U.S. laws to try
and keep out foreign products. He further stated that, "where
international competitors have a real or perceived comparative
advantage, there has been an increasing use of U.S. trade
laws aimed at keeping out foreign commodities." Two
trade laws to be particularly cautious of are Section 201
of the Trade Act of 1974 and Title VII of the U.S. Tariff
Act of 1930. Let's take a closer look at how these laws
have affected Thai food exports.
Section 201
and Thai Crabmeat
Commonly known as "trade relief",
Section 201 of the Trade Act of 1994 permits the President
to grant temporary import relief, by raising import duties
or imposing nontariff barriers on goods entering the United
States that injure or threaten to injure domestic industries
producing like goods. This provision is the analog of GATT
Article 19, which allows GATT contracting parties to provide
relief from injurious competition when temporary protection
will enable the domestic industry to make adjustments to
meet the competition.
Under Section 201 no one is being accused of breaking
laws; rather, domestic processors argue that a surge in
imports is the core cause of an industry crisis. Seeking
Section 201 "federal trade relief" allows U.S.
industry to file a petition with the International Trade
Commission and further seek approval of the incumbent U.S.
President to apply increased tariffs or quotas on an import.
The act provides for relief in cases where a product is
being imported in such quantities as to be substantial cause
of serious injury or threat therefore to the domestic industry.
In order to bring a successful case under Section 201, a
petitioning party must show, and the ITC must find 1) imports
of the subject article are in increased quantities; 2) the
domestic industry is seriously injured or threatened with
serious injury; and 3) such increased imports are a substantial
cause of the serious injury or threat of serious injury.
In March 2000, a group called the Blue Crab Coalition, made
up of U.S. crabmeat processors and fisherman (a.k.a. watermen),
represented by the Washington D.C. law firm of Ablondi,
Foster, Sobin & Davidow, p.c., filed a Section 201 petition,
against all blue crab imports to temporarily restrict crabmeat
imports into the U.S. Preceding 2000, crabmeat imports,
specifically from Thailand, Philippines and Indonesia had
tripled from 9.2 million pounds in 1994 to more than 27.2
million pounds in 1999. During the years between 1994 and
2000, sales of U.S.-produced crabmeat dropped 38 percent.
The U.S. industry's market share dropped from 67 percent
to 27 percent.
In response, Akin Gump's international trade, public law
and policy practice groups, led by partners Warren E. Connelly
and S. Bruce Wilson, worked with lead client Phillips Foods,
Inc. of Baltimore, Maryland, to assemble a alliance of opponents
to the petition that included the National Restaurant Association;
the Food Marketing Institutes; the American Frozen Foods
Institute; and the nation's crabmeat importers, wholesalers,
distributors, retailers and value-added processors. Working
closely with this alliance, Warren E. Connelly and S. Bruce
Wilson lobbied to convey to the Clinton administration the
extensive degree of domestic opposition to the petition
for import restrictions.
On July 11, 2000 the commissioners of the ITC voted 4-2
to reject an effort by the Blue Crab Coalition to impose
trade restrictions, through additional tariffs and quotas,
on Asian crabmeat imports. The ITC's negative determination
on July 11th was the first time in over five years that
it rejected a petition seeing relief under Section 201.
The case is now over because the law does not authorize
a judicial appeal. As a result, Thai processors will continue
to export crabmeat free of any import restrictions, apart
from a possible regulation that will require Thai crab exporters
to specifically label their crab blue swimming crab, therefore
setting Asian crab and U.S. domestic crab clearly apart
to the consumers.
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Antidumping Duty and Thai Pineapple
An antidumping duty is a duty or levy imposed under authority
of Title VII of the U.S. Tariff Act of 1930. Title VII states
that if the U.S. Department of Commerce determines that an
imported product is being sold at less than its fair value,
and if the International Trade Commission determines that
a U.S. producer is thereby being injured, the Commerce Department
shall apply antidumping duties equivalent to the dumping margin.
Pre-antidumping Charges: Maui Pineapple Company Vs. Thai
Pineapple Producers
Thai Pineapple producers
In 1992-1993, premium world prices for pineapple stimulated
investments in the Thai pineapple industry. High prices for
pineapple encouraged producers to increase their pineapple
production. By the end of 1993 a huge surplus of pineapple
had accumulated. The pineapple surplus depressed prices and
severely affected many Thai pineapple companies during this
time. However, in 1994, Thailand was able to export most of
the surplus, allowing Thai exporters to capture 46% of the
U.S. import market for canned pineapple. In 1994 Thailand's
exports of canned pineapple to the U.S. amounted to 79.2 million
baht.
Maui Pineapple Company
As sales volumes were increasing for Thai producers of canned
pineapple, they were significantly decreasing for the U.S.
producer Maui Pineapple Co., Ltd (Maui). In 1993 the company
recorded a net loss of 11 million dollars, and in 1994 the
company improved only slightly with a recorded net loss of
3.9 million U.S. dollars. Maui was struggling to compete with
the depressed world pineapple price, caused by the flood of
Thai pineapple. In order to level the playing field, Maui
felt forced to file an antidumping petition with the U.S.
Department of Commerce (DOC) against the Thai producers in
1994.
DOC Investigation
During the initial antidumping investigation, the DOC
requested accounting information from Thai pineapple producers.
However, Thai pineapple producers argued that their methodologies
should not be used to determine the cost of production (COP)
and cost value (CV). Thai pineapple producers admitted that
their finished priced-based accounting cost allocations
were based on certain managerial and tax goals, and thus,
were not reflective of actual production costs. To determine
an accurate COP and CV, Thai producers argued that the DOC
would need to apply raw material cost-based or non-output
price-based cost allocation.
Weight-based allocation, used by the Thai producers, resulted
in a raw material cost for canned pineapple fruit that was
less than the cost shown in their financial accounting records.
If the DOC applied a weight-based allocation, a lower material
cost would be realized, therefore explaining the lower selling
price. Thailand's canned pineapple would not have appeared
to be sold at less than fair value, had this been the case.
However, weight-based allocation was unfamiliar to the U.S.
industry.
Thai pineapple production varies greatly from that of Maui's.
Thai producers manufacture canned pineapple fruit, pineapple
juice and pineapple juice concentrate. Maui, however, processes
only the solid fruit for canned pineapple and discharges the
juice as waste. Thai producers actual raw material
costs differ from Maui's as Thais use separate parts of the
same fresh whole and peel pineapple fruit and distribute the
raw material costs among the final products by weight. However,
until the DOC investigated, Thai pineapple producers continued
to apply price-based accounting, to achieve tax and managerial
goals. The price-based method was audited and kept in accordance
with generally accepted accounting principles (GAAP) in Thailand.
The DOC's Final Determination
In May of 1995, the DOC announced their final determination
rejecting the weight-based raw material fruit cost allocation
for both COP and CV. The DOC then based the dumping margins
on the financial accounting price and allocation records,
which utilized the priced-based accounting cost allocations.
Under this accounting method, the DOC found that a large part
of the Thai producers' canned pineapple fruit sales - more
than 90% for certain types of canned fruit - were below the
COP.
Post-antidumping Charges: Thai Producers File an Appeal
Soon after the final determination, Thai producers filed legal
actions in the U.S. Court of International Trade (USCIT) challenging
the DOC's to adopt a price-based fruit cost allocation. The
case was heard in November of 1996. During this trial the
Thai pineapple producers were able to prove that the allocation
price-based formulas were unrelated to actual COP. In the
final decision the USCIT ordered the case to the DOC to accept
the weight-based, not price-based, methodologies. The DOC
calculated fruit costs for the Thai producers using the weight-based
fruit cost allocation. However, later in July of 1999, the
U.S. Court of Appeals reversed the ruling of the USCIT, reapplying
the DOC's original decision to use price-based accounting.
Annual Reviews
The antidumping duties on pineapple imports from Thailand
are subject to annual administrative reviews by the DOC. Either
a single company or Thai producers as a whole can make requests
for a review. If the cost of production changes relative to
the selling price of the product in the U.S., the duties would
then be adjusted, the amount of duties collected on those
entries will then be revised and a new cash deposit rate for
future entries will be established. Some of the Thai pineapple
companies have significantly reduced their antidumping duties
through the annual review process. Present antidumping duties
on imports of canned pineapple fruit from Thailand range from
less than 1% to 51%. Examples are shown below.
|
Company
|
1995
|
1996
|
1997
|
1998
|
1999
|
2000
|
| Siam Food Products Company Ltd (SFP) |
24.64
|
.
|
13.25
|
.
|
12.85
|
.
|
| The Thai Pineapple Public Company, Ltd (TIPCO) |
38.68
|
.
|
33.06
|
.
|
27.85
|
.
|
| Thai Pineapple Canning Industry (TPC) |
24.64
|
.
|
06.54
|
.
|
21.54
|
.
|
| Siam Agro Industry Pineapple Co. |
51.60
|
.
|
16.48
|
.
|
16.48
|
.
|
| Malee Sampran Public Co., Ltd |
43.43
|
.
|
16.48
|
.
|
16.48
|
.
|
| Dole |
01.73
|
.
|
01.73
|
.
|
01.73
|
.
|
Sunset Review
Five years after a dumping determination has been made (and
duties have been announced) against the offending country,
the ITC will conduct a review to determine whether revocation
of the antidumping duty order is likely to lead to a continuation
or recurrence of dumping and of material injury within a reasonably
foreseeable time. The review is specifically called the "Sunset
Review" and in the case of Thai pineapple will be completed
before June 30, 2001. If a ruling is made to keep the
antidumping duties in place, they will be renewed for an additional
five years.
The situation surrounding the current case shows growing imports
from Thailand combined with aggressive pricing and promotional
activity, resulting in Maui realizing lower sales volume and
lower average prices for canned pineapple products. In Maui's
annual report to shareholders there is a section that contains
forward-looking statements. According to the report, one factor
that will seriously affect the future of Maui is the result
of the DOC's 4th annual review of antidumping duties on canned
pineapple fruit imports. Maui therefore, suggests that if
the antidumping duties are not renewed at the end of the Sunset
Review, it is likely that Thailand will continue to dump pineapples
on the U.S. market.
Maui is no longer an efficient producer of pineapple, unlike
its Asian competitors who have the advantage of low labor,
production and packaging costs. Furthermore, the DOC recently
issued preliminary antidumping duty margins against Japanese
producers of tin mill products in April of 2000. Maui uses
the tin-coated steel imported from Japan to manufacture the
cans that they use to package pineapple. The antidumping duty,
if upheld in the final ruling, due around March 2001, would
further increase Maui's costs of production and lower their
competitiveness.
As the five-year antidumping duties come to an end, it appears
that Maui was able to capture profits as long as dumping duties
as high as 51% were placed on their major competitors overseas
competitors. It is speculated that as world competition grows,
there will be greater pressure on the DOC to protect domestic
industry, like Maui, by renewing antidumping duties for another
five years at the conclusion of their sunset review.
Do you have any questions
or comments contact
us !
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