As exports from China to the United States have increased dramatically in recent years, so too has the percentage of anti-dumping cases filed against Chinese products. US companies blame their economic problems on Chinese imports and allege that such imports are being sold in the US for less than the cost of production. The numbers are telling. Since January 1, 2005, over 60% of the anti-dumping cases filed in the United States have involved imports from China. Of the products targeted: the activated carbon petition was withdrawn; Chinese companies won the carbon and alloy steel wire rod case; and the cases concerning lined paper school supplies, artists' canvas, and diamond saw blades are still ongoing.
The high percentage of anti-dumping cases filed against imports from China since the beginning of 2005 is in stark contrast to what was happening just a quarter of a century ago. From January 1, 1981 to December 31, 1984, for example, less than 10% of the anti-dumping cases initiated by the US government involved imports from China.
In fact, in this entire four year period, only seven anti-dumping cases were initiated against Chinese products. These involved greige polyester/cotton print-cloth, shop towels of cotton, canned mushrooms, potassium permanganate, chloropicrin, barium chloride, and barium carbonate. The Chinese companies won on only canned mushrooms and barium carbonate as the United States Department of Commerce determined that these particular products were not being sold at less than fair value. But even then the victory was short-lived: within a few years China had lost subsequent anti-dumping cases filed against both products.
Today, Chinese products subject to anti-dumping orders cover a broad range of products: from natural produce such as mushrooms and garlic, to basic commodities like folding metal tables, hand trucks, and wooden bedroom furniture to high-tech products such as color television receivers. No product is immune from an anti-dumping case.
It is impossible for Chinese companies to price their products at a level that is greater than the cost of production, and thus, be able to avoid being subject to an anti-dumping case in the first instance. This is because the cost of production is not based on the Chinese companies' own data. The Department of Commerce considers China to be a "non-market economy," and refuses to accept Chinese producers' cost of production information on the basis that these cost figures are inherently unreliable.
Instead, Commerce determines the cost of production by using surrogate values based on data from a country it considers to be at a level of economic development comparable to that of China and a significant producer of comparable merchandise. Commerce often uses data from Indian companies as surrogate values, although Indonesian and Pakistani data has also featured. Selection of a surrogate country depends on a case-specific analysis of the facts and the information available.
Although it is not possible for Chinese companies to avoid being subject to an anti-dumping case, by actively participating in these cases, they can prevail. There are two ways for Chinese companies to win a US anti-dumping case. The first is for the United States International Trade Commission (USITC) to rule that Chinese imports are not causing material injury, or threatening to cause material injury, to the US domestic industry producing the product, or a comparable product. Chinese companies won the case recently filed against carbon and alloy steel wire rod as the USITC found that imports from China neither depressed nor suppressed US prices to a significant degree, which meant there was no reasonable indication of imports having an adverse impact on the US domestic industry.
The second way Chinese companies can win a US anti-dumping case is for Commerce to determine that the companies are not actually dumping their product in the US. Although few Chinese firms have won cases in this fashion, it is possible. For example, in a 1996 case involving polyvinyl alcohol, one company – Sichuan Vinylon Works – received a 0% dumping margin and was excluded from the case, although the dumping margin for all other Chinese exporters was 116.75%. As mentioned earlier, Chinese companies won the canned mushrooms and barium carbonate cases filed in the early 1980s in this manner.
So why the dramatic increase in the percentage of anti-dumping cases filed in the United States against Chinese products? It seems to be the result of Commerce's treatment of China as a "non-market economy" combined with anti-China backlash that has come in response to the country's vast increase in exports. There are currently more than 20 anti-China bills in the US Congress. Because Commerce uses surrogate values in anti-dumping cases involving Chinese companies, it is not too difficult for US companies to allege that their Chinese counterparts are dumping. And for US firms facing economic difficulties, the political environment exists for them to blame their problems on Chinese imports.
As long as exports from China to the United States continue to rise, so too will the number of anti-dumping cases filed in the US against Chinese products. But as case history shows, through active participation in these cases, it is possible for Chinese companies to prevail.
Mark Leventhal is an associate at Adduci, Mastriani & Schaumberg, LLP, a Washington, DC international trade law firm. Mr. Leventhal handles anti-dumping matters, and has spoken on anti-dumping in Guangzhou, Shenzhen and Zhongshan. He will be on a speaking tour in Shanghai in early April 2006 and can be reached at email@example.com