US China Trade Disputes: How to Respond to US Antidumping and Countervailing Cases William Perry, Partner Dorsey & Whitney Formerly Office of General Counsel, U.S. International Trade Commission and Office of Chief Counsel and Office of Antidumping Investigations, U.S. Commerce Department See blog, www.uschinatradewar.com and www.importallianceforamerica.com

Trade Cases Increase in US and China US 121 Outstanding antidumping / countervailing orders against Chinese products 75 Metals, Chemicals and Steel—Injuring and in some cases destroying US downstream industries New US AD and CVD cases—Solar Cells/Solar Products, Tires and now Office Paper—billions of dollars in imports In China, Antidumping and Countervailing Duty cases against US Chicken, Polysilicon, and automobiles billions of dollars in exports

Overview of US AD and CVD Law To win an antidumping or countervailing duty case, the Petitioner(s), usually the US Industry: Must prove dumping or subsidization at the Commerce Department Injury or Threat of Material Injury at the U.S. International Trade Commission (“ITC”)—Entire Domestic Industry Year long Proceeding and Jurisdiction—In Rem Because of its methodology, Commerce must find dumping and subsidization in cases against China Recently 20 years of practice overturned and more difficult for Chinese state-owned companies to get their own antidumping rates

What is Dumping? Market economy—US Sales below Normal Value—home market prices or Fully Allocated Cost of Production China—Nonmarket Economy Country—Do not Use Actual Prices and Costs in China Construct Cost—Factors of Production Surrogate Values from Surrogate Country—Used to be India now 5 to 10 surrogate countries, such as Thailand, Indonesia, Philippines, Ukraine, Bulgaria and Columbia Hardwood Plywood—Philippines 0 Bulgaria 57% CVD Duties to Countervail a subsidy, a benefit, money, given by the government to a Chinese company for exporting products OR to a specific industry

China WTO Agreement – NME Dec 11, 2016—15 Years after WTO Agreement Section 15 of China WTO Accession Agreement provides: 15. Price Comparability in Determining Subsidies and Dumping… (a)(ii) The importing WTO Member may use a methodology that is not based on a strict comparison with domestic prices or costs in China… (d) In any event, the provisions of subparagraph (a)(ii) shall expire 15 years after the date of accession. Section 15 of the China WTO Agreement came from the US China WTO Agreement and a US demand But US Government’s position in a treaty and not the law so no change

Retroactive Liability for US Importers US Importers pay AD/CVD duties, not Chinese companies Retroactive liability—Cash Deposits versus Duties Actual liability determined during annual review investigations Total missing retroactive AD duties well over $1billion $800 million in AD Duties on Just Four Products—mushrooms, garlic, crawfish and honey. Intense Political Pressure by Congress on Customs to Enforce AD and CVD orders

Action Versus Inaction – Chinese Exporters Need to Participate Must participate in Initial Investigation and Review Submit Separate Rates Applications AD and CVD Orders 5 to 30 years If Chinese companies shut out, should do the review investigation—Solar cells vs PVA, Saccharin, Indigo If the Chinese company keeps fighting eventually the rates come down Have driven AD rates from over 200 to 300% to 0% and made Chinese companies exclusive exporters But Importers must make sure Chinese companies participate because importer liable

Importers Must Act Do not say this is the foreign exporter’s problem. Importer is liable, not the foreign exporter, and can face millions, if not 10s of millions in retroactive liability. AD and CVD Orders 5 to 30 years Cover Chinese imports Have Chinese accountants running US Legal Cases with significant legal issues Importers Must be active at the Commerce Department and the ITC and Must Have Some Control over the situation in China because the importer is liable, not the Chinese company Court appeals are important. AFA rate of 157% cut in half at Court Political Problem—Many importers have abandoned the political field in Washington DC in AD and CVD cases But not only US importers being smashed but also downstream US industries—US Magnesium Dye Casting Industry