In a move with potentially hundreds of millions of dollars in impact on U.S. manufacturers, importers and the U.S. Treasury Department, Congress is asking the International Trade Administration to consider new ways of collecting anti-dumping duties.
As part of its 2010 appropriations, Congress ordered the agency of the Commerce Department to report on the relative merits of the two types of collection systems in use worldwide, prospective and retrospective.
The U.S. uses a retrospective system. Here’s how it works: The ITA determines the financial damage a foreign manufacturer owes for harming domestic companies by dumping, or selling their goods at below-production prices, in the United States. It orders Customs and Border Protection to collect the penalties — the anti-dumping duties — on all goods entered since the anti-dumping claim was filed. The rate may exceed 300 percent of a product’s regular duty rate.
In fiscal 2009, Customs assessed more than $544.6 million in anti-dumping duties and $12.7 million in related countervailing duties. The agency also left $294 million uncollected. Between 2001 and 2008, Customs left $600 million uncollected, according to the Government Accountability Office, and that may have attracted the attention of a revenue-hungry Congress.
The U.S. system has existed since the 1930s. Most of the rest of the world, including Canada, the European Union and Australia, uses the prospective system. Under a prospective system, countries assess a penalty when an anti-dumping investigation ends and keep the penalty in force for a number of years, usually five.
U.S. importers are divided on the merits of the two systems, according to written comments and oral testimony the ITA gathered from the trade community in April. Retail importers generally favor a prospective system. Manufacturers that import goods or raw materials for processing support the retrospective system.
“RILA members strongly support a prospective anti-dumping and countervailing duty assessment system. It’s time for a change in the law to reflect the changing times in our globally competitive economy,” said Stephanie Lester, vice president for international trade at the Retail Industry Leaders Association. “Our position is simply this: Tell U.S. retailers what a fairly traded price is and we will pay it. Supporters of strong trade remedies stress the importance of leveling the playing field. We agree.”
The nation’s largest retailer also supports a prospective system. “To be very clear, Wal-Mart strongly supports a fair, rules-based trading system which includes a robust trade remedy regime administered by the Commerce Department,” Adam Hemphill, director of federal government relations for the Bentonville, Ark.-based giant, wrote in the company’s comments. “We are willing to pay the appropriate duties . . . but the current retroactive system of assessment runs counter to sound financial planning for both importers and the government.”
ITA investigations may take three years, he wrote, forcing companies to hold money in reserve to settle anti-dumping charges.
But Joseph W. Golowski, a division vice president of Innophos, a Cranbury, N.J.-based manufacturer of specialty-grade phosphates, said a retrospective system is more accurate and fair in determinations of dumping.
Critics of a prospective system say dumping violators can factor in the additional duties as a cost of doing business and continue to push goods into the market. “They say that the duties are set, and people can plan more accordingly than they can in a retrospective system. We see that as less fair to the foreign exporters, because if they decrease their level of dumping, they get no reward for it,” said Gilbert B. Kaplan, a Chicago attorney specializing in anti-dumping claims.
“It’s mainly importers and foreign exporters who want a prospective system, because it will make it easier to engage in unfair trade practices, though that’s not the reason they give,” Kaplan said. “The reason they give is that they think it will provide greater certainty. Our response is that they’re speaking out both sides of their mouth. They’re making many arguments about fairness, when the retrospective system is incredibly fair.”
Kaplan said the retrospective system accurately gauges the level of unfair trade each year. It rewards violators that mend their ways with fewer penalties, or punishes them with additional penalties if they continue dumping.
Customs officials wince at leaving revenue uncollected, but the agency’s hands are frequently tied. Many importers, especially smaller ones, may go out of business or shut down and reopen under another name if they hear their goods may be subject to anti-dumping duties.
Don Yando, executive director for commercial targeting and enforcement, said Customs could adapt to collecting antidumping duties under either system. What’s frustrating is how long the ITA takes to investigate a claim.
“It takes years, and therein lies the problem,” he said. “One of the reasons we have problems with our collections is the time period between the instigation of the investigation and final issue of orders by Commerce.”
Yando said the largest part of the $600 million in uncollected penalties was caused by a handful of companies that have bought heavily into dumped goods. Food and aquaculture producers in China recently caused a large portion of the U.S. dumping headache.
“I would say the majority of people are legitimate businesspeople who didn’t know or made a mistake. When they get the bill, they pay,” Yando said. “It’s unfortunate that it’s the few who know how to game the system that take it for all its worth that are going to have the biggest bills.”
Customs also has an anti-dumping paperwork crisis. Port directors, Yando said, must keep paper entry summaries on file when they have line items subject to antidumping duties. They can’t discard the entry until the ITA orders the liquidation of each item in question.
Customs or the ITA alone can’t reform the anti-dumping system. “I don’t think anybody likes it the way it is,” said Joseph Rees, chief of staff for Customs’ Office of International Trade. “But how do you make a retrospective system work? That’s going to take some changes in the law, to give us some additional authority, or streamline the process, whatever they can do. It’s not just a bureaucratic issue, it’s a complex political issue.”
Contact R.G. Edmonson at email@example.com.