ITA Proposes to Reduce Export Prices in China and Vietnam AD Proceedings, Could Increase Rates

Comments are on this proposed change in methodology are due by February 28, 2011.

(This is one of 14 proposed changes to AD/CV practices that the Commerce Department previously announced in support of the President's National Export Initiative (NEI). See ITT's Online Archives or 08/27/10 news, 10082711, for BP summary.)

China/Vietnam Export Prices Would be Reduced by Export Charges/Taxes/VAT

The ITA proposes to reduce the export price and constructed export price used in non-market economy (NME) dumping margin calculations based upon export taxes and similar charges, including value added taxes (VAT) applied to export sales, imposed by the Chinese and Vietnamese governments in future less-than-fair-value investigations and administrative reviews of AD duty orders.

Method Change Could Apply to Other NMEs Later

According to the ITA, this methodology may later be applied to other NMEs, pursuant to a determination that the NME at issue is dissimilar from Soviet-style economies.

Proposed Methodology Would Increase AD Margins if Export Taxes Imposed

The ITA is proposing the following methodology in future AD duty investigations and administrative reviews involving merchandise from China and Vietnam.

Determination of tax imposed. The ITA would determine whether, as a matter of law, regulation, or other official action, the NME government has imposed “an export tax, duty, or other charge” upon the subject merchandise during the period of investigation or the period of review (e.g., export tax or value-added tax (VAT) that is not fully refunded upon exportation).

(The ITA anticipates that parties would place upon the record copies of laws, regulations, other official documents, or similar publicly available information that is demonstrative of government action in this regard. The ITA would also consider evidence as to whether the particular respondent(s) was, in some manner, exempted from the requirement to pay the export tax, duty, or other charge. The ITA anticipates that such evidence would include official documentation of the respondent’s exemption.

Export price reduced if export charge imposed. Provided that the NME government imposed an export tax, duty, or other charge on subject merchandise as contemplated by section 772(c)(2)(B), and the respondent was not exempted from it, the ITA would reduce the respondents’ export price and constructed export price accordingly.

The ITA anticipates that, in most instances, the export tax, VAT, duty, or other charge will be assessed as a percentage of the price. In such cases, it would adjust the export price or constructed export price downward by the same percentage.

In instances where the tax or charge is a flat fee or similar charge denominated in NME currency, the ITA would determine the ratio of the flat fee to the respondent’s export price or constructed export price as denominated in its domestic currency, and would then adjust the export price or constructed export price downward by the same ratio.

(Note that the reduction in export price lowers "fair value," which increases the dumping margin.)

ITA Recently Determined that NME Subsidies Can be Identified and Measured

The ITA states that it has not been able to follow the existing statute¹ and reduce the export price or constructed export price in NME AD proceedings, as in cases involving market economy countries, because pervasive government intervention in NMEs has precluded proper valuation of taxes paid by NME respondents to NME government, which has been upheld by court rulings in a prior NME AD investigation².

However, the ITA states that it has recently changed its practice with respect to application of the countervailing duty law to subsidized merchandise from China and Vietnam, which the ITA continues to designate as NMEs, pursuant to its determination that subsidies from certain NME governments to NME companies can be identified and measured.

¹Pursuant to Section 772(c)(2)(B) of the Tariff Act of 1930, the Commerce Department must reduce the export price or constructed export price used in the dumping margin calculation by “the amount, if included in such price, of any export tax, duty, or other charge imposed by the exporting country on the exportation of the subject merchandise to the United States, other than an export tax, duty, or other charge described in section 771(6)(C).”

²The case, which began in 1995 and was eventually upheld by appeals court in 1999, involved pure magnesium and magnesium alloy from the Russian Federation, which the ITA then considered to be an NME (Magnesium Corp. of America v. U.S.).

(See ITT's Online Archives or 10/25/10 news, 10102509, for BP summary of Commerce's reversal of its practice of not applying CV duty laws to NMEs and a WTO panel report approving U.S. application of CV duties on Chinese goods

See ITT's Online Archives or 12/16/10 news, 10121635, for BP summary of ITA's recent request for comments on its reassessment of policy and practice which would make it harder for NME exporters to get separate rate status.)

ITA contact - Albert Hsu (202) 482-4491

(FR Pub 01/27/11)