After nearly 100 years, it’s time to change the system the U.S. government uses to collect anti-dumping duties. The process, importers say, leaves them hanging for too long, wondering how much they will have to pay. The Government Accountability Office, which has recommended change since 2008, agrees, and Customs’ influential Advisory Committee for Commercial Operations recently joined the chorus.
Any change, however, must come through Congress, and nothing moves too quickly there, regardless of how unfair a law seems.
Still, groups supporting a new system believe momentum is gathering. “It’s one of those reforms that really needs to happen,” said Stephanie Lester, vice president for international trade at the Retail Industry Leaders Association. “The GAO has been making this recommendation repeatedly, and now another group has taken a look and said, ‘This is crazy.’ ”
The anti-dumping world is relatively small, but the duties importers owe aren’t small change. Customs collected $298 million in anti-dumping duties in fiscal 2010, but $551 million remained uncollected. Members of Congress are keen to know how Customs can step up its collections, but Lester said Customs is using too many resources to chase down revenue that’s virtually impossible to capture.
“CBP says, ‘You’re criticizing us, but you’re giving us an impossible task,’ ” she said. “There is a collective voice that is saying our system is wrong. It’s bad for importers, it’s bad for American competitiveness, and it’s time to change. And by the way, it’s too resource-intensive for CBP.”
The system has been around for nearly a century. Anti-dumping duties sanction importers when they bring in goods at prices below fair value. They are intended to make up the difference, taking away an importer’s incentive for buying goods that a foreign manufacturer is willing to sell for less than what it cost to make in the United States.
The U.S. uses a retrospective system. The process starts when a U.S. company complains to the Department of Commerce about being harmed by foreign products dumped on the U.S. market. While Commerce launches an investigation, it orders Customs to collect a cash deposit from companies that import goods subject to an anti-dumping order.
The deposit is intended to cover the additional duties the importer will have to pay when Commerce completes its investigation and determines the fair value of the product in question. If the deposit is more than the fair value, the importer gets a refund. If the deposit doesn’t cover the anti-dumping duties, Customs must collect the additional revenue.
And that’s the problem, Lester said. Commerce may take three years or longer, leaving importers in limbo, not knowing if they will have to pay the government more money. The revenue an importer owes can run into millions of dollars, which can push small companies out of business.
Customs also faces diminishing returns the longer it takes to collect. Of the $551 million importers owed in 2010, $316 million were receivables more than 3 years old. Michael Walsh, Customs’ director of anti-dumping and countervailing duty policy, said the revenues only count for honest companies that pay what they owe. The flipside are the importers that go out of business when handed a bill for duties owed, or companies are based in foreign countries where collecting is impossible.
“We’re the only country in the world to use this system,” Walsh said. The rest of the world uses various prospective systems that collect anti-dumping duties at the time that goods are entered. Canada, for example, determines the “normal value” of a product. If an importer brings in the goods at a lower price, it pays the anti-dumping premium above the standard duty rate.
Critics of the retrospective system are many, but it also has some supporters. Some Commerce employees believe the system lets them compute the anti-dumping margin more accurately. Some U.S. industries use anti-dumping laws as a shield against foreign competition. The steel and seafood industries are frequent filers, but Lester said companies from furniture makers to those that stamp metal parts for the automobile industry must deal with the system.
“When you think about American competitiveness, a lot of the products that are subject to anti-dumping orders, like steel, go into other manufactured goods,” Lester said. “So it’s our downstream manufacturers that can’t budget rationally because they don’t know what their costs will be, or what their ultimate duty liability will be.
“For retailers, a prospective system would affect their sourcing decisions at the time it matters, and would be more effective in stopping dumping because they know what their costs are,” Lester said. “We’re not trying to cheat, but what can we do when no one tells us what the fairly traded price is until three years later?”
Lawmakers, facing a weak economy and wanting to create jobs, may be ready to switch to a prospective system, she said.
“I think a lot of members of Congress get it,” Lester said. “They understand that the system is fundamentally unfair.”