TARGETING TARGETED DUMPING

An interesting op-ed was published yesterday on Forbes.com by Dan Ikenson, Director of the Herbert A. Stiefel Center for Trade Policy Analysis at The CATO Institute about the U.S. Commerce Department's use of the targeted dumping methodology in anti-dumping cases.

In his piece Protectionist Antidumping Regime is A Pox on America's Glass House, Ikenson writes that the U.S. makes a strong case for itself as the worst international trade scofflaw.  He points to the current anti-dumping case on large residential washers that pits Whirlpool against Samsung and other foreign competitors as evidence "that the United States is actively seeking that ignominious distinction."

Ikenson explains that U.S. anti-dumping rules have been found to violate U.S. obligations under the WTO Antidumping Agreement dozens of times. "In 12 of the 45 cases in which ADA violations were alleged by U.S. trading partners, the methodological trick know as 'zeroing' was at least one of the subjects of controversy." 

'Zeroing' refers to the treatment of export sales to the U.S. when they are compared to “normal value” -- or the foreign value -- of similar goods in antidumping proceedings.  Goods that are sold for less than their normal value have “positive” comparisons.  However, when the Commerce Department finds transactions in the U.S. that occur at prices higher than normal value, it chooses to ignore those sales (“zeroing” them) rather than averaging them into the final calculations as the WTO requires.  By reducing the impact of those transactions on the final calculations, Commerce’s zeroing practice leads to artificially inflated dumping margins.  (For more, check out the CITAC press releases on zeroing here, here and here.) An analysis by the Cato Institute found that in a sample of 18 actual antidumping case records reviewed, zeroing artificially inflated antidumping duties by 44 percent.

The WTO ruled the practice of zeroing illegal with one possible tiny exception - if "targeted dumping” is found.  Targeted dumping is found when Commerce looks back at the prices that a foreign producer charged in a particular period and then concludes, in retrospect, that it charged lower prices than it should have to certain customers, or in certain months, or in certain regions of the country.

To no one’s surprise, petitioners are now including allegations of targeted dumping in most trade petitions. Ikenson writes that "the Commerce Department is ...making this tiny, rarely-ever-used exception the new rule so that it has license to engage in zeroing and inflate antidumping duty rates on behalf of certain domestic producers."  Ikenson continues "Ultimately, this issue is the motivation behind the Commerce Department’s shenanigans in the case involving imported washing machines, targeted dumping, and Black Friday sales.

In the Whirlpool case, to evaluate alleged dumping of washers, Commerce is using the Post-Thanksgiving holiday “Black Friday” sales prices to prove that the respondents “targeted” the this time period, even though -- surprise, surprise - lots of companies grant deeper discounts on selected models during these holiday promotion periods.   So is the message from Commerce to any non-U.S. company that if they participate in holiday sales they risk being accused of dumping?  How can they know what price is safe to sell their product to avoid such an accusation?  As you can see, it's a slippery slope.

Ikenson concludes:  “The United States is definitely one of the world’s biggest trade scofflaws and the antidumping regime remains fertile ground for more mischief.”

In the Whirlpool case, Commerce published final dumping margins in December.  The final action is with the ITC and a vote is expected on January 23.