ITA Proposes More Use of 3rd-Country Prices in Calculating AD Rates for China & Vietnam
The International Trade Administration issued a proposed rule that would allow it greater use of prices from “surrogate countries” in valuing inputs for its calculations of normal value for non-market economy country (i.e., China and Vietnam) producers and exporters in antidumping proceedings. Currently, the ITA uses the actual purchase price of an input paid by the producer to value all of that input if 33% or more of the total volume of the input was purchased by that producer from a market economy. However, the ITA’s proposed rule would establish requirements that to use actual purchase price to value all of the input, (1) the input at issue must be produced in one or more market economy countries, and (2) “substantially all,” or 85% of the total purchased volume of an input be purchased from one or more market economy suppliers.
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Comments on the ITA’s proposed rule are due by July 30.
(AD rates are determined by the extent to which the weighted-average sales price of exports to the U.S. (export price) is below the normal value, which is usually the weighted-average sales price in the home country of the producer or exporter. The ITA doesn’t rely on home market prices in non-market economies (China and Vietnam) because, according to the ITA, these prices are distorted. Instead, it calculates a normal value using information on the quantity of inputs used by the producer and either (i) the prices paid by the producer for these inputs in a market economy country, or (ii) a weighted-average of the actual prices paid, if available, and the prices of these inputs in an ITA-selected “surrogate country” at a similar level of economic development. The ITA calls these inputs “factors of production,” which include materials, labor, energy and other utilities, and representative capital cost, plus an amount for general expenses and profit, plus the cost of containers, coverings, and other expenses.
The ITA’s proposed rule would allow the ITA to rely more heavily on the prices in a surrogate country instead of actual purchase prices of inputs by the producer from a market economy country. As the ITA chooses the surrogate country, it could have more discretion to use a country where inputs are more expensive, possibly increasing normal value and therefore AD rates for merchandise from non-market economy producers and exporters.)
Current Regs Have 33% Threshold for Use of Market Purchase Price for All Inputs
Currently, when a portion of an input is purchased from a market economy supplier and the remainder from an NME country supplier, the ITA will use the price paid for the input sourced from market economy suppliers to value all of the input, provided that the total volume of the input purchased by the respondent from all market economy sources during the period of investigation or review is more than 33% of the total volume of the input purchased from all sources during the period.
Alternatively, when the volume of an NME company’s purchases of a particular input from market economy suppliers is below 33%, the ITA weight-averages the market economy purchase price and an appropriate surrogate value from a market economy country at a similar level of development, using as weights the relative quantities of the input imported and purchased from domestic sources.
ITA’s Proposed Rule Would Increase Threshold to 85%, Create Add’l Requirement
The ITA is proposing to amend 19 CFR 351.408(c)(1) to increase this threshold for use of the market economy price to value all of an input to 85% of total purchases of the input from market economy suppliers. Where this threshold is not met, the ITA said it would weight-average the market economy purchase price and an appropriate surrogate value.
The ITA would also add a requirement to 19 CFR 351.408(c)(1) that, in order to use the market economy purchase price paid by the producer to value all of the input, the market economy input at issue actually be produced in one or more market economy countries, and not just sold through market economy countries, to address concerns that the pricing of an NME-produced input by a market economy supplier (or reseller) can be distorted by NME cost or supply factors.