Anti-dumping (AD) and Countervailing Duty (CVD) Risks
Anti-dumping (AD) and countervailing duty (CVD) investigations can have a significant impact on businesses that import products into the United States, either directly 0r indirectly. These investigations, initiated by domestic industries, aim to protect against unfairly traded imports. Understanding the factors that trigger such inquiries is crucial for companies seeking to mitigate risks and navigate the complex landscape of global trade. In this post, I set out the common indicators of potential AD/CVD petitions, empowering businesses to proactively identify and address potential challenges.
Every year U.S. producers file 10-15 petitions asking the U.S. government to investigate whether certain products imported into the US are sold at unfair prices (antidumping or AD) or are unfairly subsidized (countervailing duty or CVD). Odds are good that at least two new AD/CVD petitions will be filed by Halloween and as many as five by year end.
Our clients often ask our international trade lawyers how they can determine the likelihood of an AD/CVD petition that could adversely affect their ability to compete in the US market. Each AD/CVD petition is unique to the product and industry it covers, but most of AD/CVD investigations fall within a handful of categories. Understanding what has led to the filing of previous AD/CVD petitions can help you as a producer, exporter, or importer, recognize if and when to expect a new AD/CVD petition that could directly affect you. The following are some of the indicators you should be checking to determine whether your imported into the USA product will be next.
The Regulars
Certain domestic industries have been frequent filers of AD/CVD actions. Companies in these industries are veterans of AD/CVD actions; they don't ask if a new petition will be filed, only when it will be filed.
- Steel of all types (carbon steel, stainless steel, flat products, pipe, rebar, wire rod, wire, etc.) from all over the world. The latest wave of steel AD/CVD investigations are being completed with high AD/CVD margins in most cases.
- Softwood Lumber from Canada. The latest round of the US-Canada Lumber wars is set to begin as new AD/CVD petitions are likely to be filed in October 2016. Filing a new AD/CVD petition may be necessary to push US-Canada negotiations to a meaningful level.
The Big Box Effect
When Walmart, Lowes, or Target switch their sourcing of a product from a domestic manufacturer to a foreign (read Chinese) one, it is quite common for the jilted domestic supplier to file an AD/CVD petition in an effort to save their business. Boltless steel shelving units, wood flooring, ironing tables, and candles are all examples of this, and all involving products from China.
US Products Squeezed by Imports
It is not uncommon for an AD/CVD petition to be filed by a US producer that makes a higher quality product but is starting to lose out to foreign producers with lower quality but cheaper products. Frozen shrimp from multiple countries, garlic from China, and wooden bedroom furniture from China are some examples of this.
Pressure from Downstream Customers
Many AD/CVD petitions involve products that are material inputs used to make a downstream finished product. Petitions can be triggered by larger downstream producers switching to, or just threatening to switch to imports to pressure smaller upstream suppliers to lower prices. Many chemical products from China, tire products from China and other countries, kitchen racks from China are examples of this.
AD/CVD Actions on Upstream Products
Sometimes AD/CVD actions filed by other domestic industries trickle down and harm downstream domestic industries. For example, US wire rod producers filed AD/CVD petitions that resulted in AD/CVD duties against imported wire rod. But these wire rod duties ended up hurting US wire producers, who in turn filed their own AD/CVD duties against imported wire.
Dying Dinosaurs/Last Survivors
Some AD/CVD petitions are filed by the remaining members of a nearly extinct domestic industry dealing with decreasing demand and increased import pressure. Sometimes the AD/CVD actions allow the surviving US producers to stay in the US market protected from import competition. Examples of this are wooden bedroom furniture and innersprings from China.
Other Countries' AD/CVD actions
The US is not the only country that acts to protect its domestic industries from unfair foreign trade. AD/CVD actions filed in Canada, India, the EU, Brazil, and even China are warning signs of industries facing tight competitive pressure. Imports blocked from one market are often diverted to other available markets. A primes example of this are products from China which first had AD/CVD filed in the EU before the US took action.
Conclusion
By understanding the common patterns behind AD/CVD petitions, you can enhance your ability to anticipate potential risks and develop proactive strategies. By staying informed and prepared, you can mitigate the potential negative impacts of these investigations and maintain a competitive edge in the global marketplace.
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