A flickering flame for US candle producers

On Dec. 14, U.S. candle producers fired off the latest salvo in their ongoing 20-year campaign against Chinese imports. The weapon this time is a new petition seeking to apply high anti-dumping duties on something that is not even a candle under U.S. customs rules.

Mainly, the target is wax forms exported from China but wicked elsewhere. This petition on "wickless" candles is the third such anti-circumvention request filed by U.S. producers against Chinese candles within a year. The first two, initiated last February, targeted palm and vegetable wax candles. In all three instances, petitioners have claimed that the targeted products are designed to get around, or circumvent, the existing anti-dumping duty order on Chinese petroleum wax candles.

The U.S. candle industry has made a hefty income lately from its trade actions targeting Chinese imports, thanks in part to the so-called Byrd Amendment, formally known as the Continued Dumping and Subsidy Offset Act. Becoming law in 2000, it provides for the distribution of anti-dumping and countervailing duties - historically reserved for the U.S. Treasury - to the domestic companies that brought or supported the original trade cases.

One petitioner, the Candle-Lite Division of Lancaster County Corp., made $83 million in Byrd Amendment distributions between 2001-2004, according to a recent report from the Government Accountability Office.

But the bountiful days of Byrd proceeds are numbered. In December, the U.S. Senate and House approved legislation to repeal the Byrd Amendment. The legislation followed threats from U.S. trading partners of retaliatory duties on U.S. exports after the World Trade Organization ruled the Byrd Amendment illegal under global trade rules. According to the repeal legislation, the Byrd Amendment will stay on the books until Oct. 1, 2007. Any anti-dumping or countervailing duties collected on goods entered until then will be distributed to U.S. producers, even if final assessment of those duties does not come until later.

The timing of the latest petition on wickless candles has a deeper significance. If left unchallenged, the petition will prompt the Department of Commerce to begin a 300-day-long proceeding. Once this proceeding is initiated, all imports of candles made from Chinese wax but wicked elsewhere could be subject to the current 108 percent anti-dumping duty. For the U.S. candle industry, this means Byrd distributions from duties on imports of these candles could begin well in advance of the Oct. 1, 2007, repeal date.

Duties on wickless candles could come in addition to those on palm and vegetable wax candles that were targeted in earlier anti-circumvention petitions last year. Those proceedings are nearing conclusion, and the Commerce Department has asked for further input from producers and importers on the commercial availability and production of palm and vegetable candles before it issues a decision on April 3.

If successful, the three anti-circumvention petitions for all intents and purposes will eliminate a significant category of Chinese-produced candles from the U.S. market. The remaining Byrd Amendment distributions also will increase the petitioners' windfall, making it increasingly difficult for importers to compete and defend future trade actions directed at candles or imports from countries other than China.

Despite these developments, Chi-nese producers and U.S. importers have several remedial options to minimize their anti-dumping exposure. Any Chinese candles that meet the "novelty" or "identifiable object" exemptions can continue to be imported free of dumping duties. This is because these two exemptions apply to all Chinese candles, regardless of their chemical composition or where they are wicked.

Despite what happens in the anti-circumvention proceedings, Chinese palm, vegetable and wickless candles can be imported free of dumping duties if those candles qualify for either the novelty or identifiable object exemption. Chinese producers also can request an annual review to lower their existing dumping rate, which could make their products significantly more competitive regardless of the anti-circumvention outcome.

Although the battle over imports of Chinese candles has waged on for two decades, Byrd distributions appear to have recently inspired the U.S. industry to cast its net more widely to capture products never intended to be covered by the original case.

However, with the Byrd Amendment expiring in 2007, there is light at the end of the tunnel, especially if importers and Chinese producers limit Byrd proceeds by minimizing their dumping exposure through proactive measures.

Mark Ludwikowski is an international trade and customs attorney at Sonnenschein Nath & Rosenthal LLP in Washington. He can be contacted at (202) 408-3954 or at mludwikowsk@sonnenschein.com.

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