High Cost of AD/CVD Proceedings Discourages Requests from Domestic SMEs, Reports GAO
Small and medium-sized businesses (SMEs) only made up about a quarter of the domestic companies that petitioned for antidumping and countervailing duties from 2007 to 2012, said a June 25 Government Accountability Office report. Only about a third of AD/CVD petitions during that time included an SME, the report said. According to GAO, small businesses are discouraged from involvement because of high legal costs, difficulties in obtaining necessary data, and the sometimes formidable challenge of assembling a large enough coalition to demonstrate industry support.
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
Between 2007 and 2012, 56 petitions were filed for AD/CV duties, GAO said. Of those, 21 petitions included an SME petitioner, and eight petitions were filed only by SMEs. And most of the SMEs involved in requesting AD/CV duties were on the larger side -- the 21 of the 37 total SME petitioners during the period had annual revenue of over $10 million, while only three had revenue under $1 million, the report said.
Three factors make it difficult for small companies to request AD/CVD duties. First, legal services are often necessary, but costly. The report said the average legal costs of an AD/CVD petition and investigation was between $1 million and $2 million. Companies could choose to forego legal representation, but they would lose access to confidential business information that other companies have placed on the record only for other lawyers to see, so that their competitors don’t have direct access. And AD/CV duties may end up being even more costly, GAO said. If the Commerce Department or International Trade Commission’s final determinations are appealed, then a company may have to keep paying lawyers to fight a Court of International Trade or Court of Appeals for the Federal Circuit challenge. Annual administrative reviews after the AD/CVD order is issued are also costly, GAO said.
Putting together the data required by Commerce and the ITC during the petition and investigation phases is also difficult and costly, GAO said. A small company gathering the data on its own would face a heavy burden on its employees. Even after the petition is filed, the ITC’s investigation questionnaire alone takes about 50 hours to complete, the report said. The alternative is to hire a lawyer, which also carries monetary costs, GAO said.
Finally, small producers can face difficulties cobbling together enough industry support to launch an AD/CVD investigation. The Commerce Department requires, as a condition of beginning an AD/CVD investigation, that “domestic producers or workers who support the petition account for (1) at least 25 percent of the total production of the domestic like product, and (2) more than 50 percent of the production of the domestic like product produced by that portion of the industry expressing support for, or opposition to, the petition.” When there are many domestic producers of a given product, an SME can find it difficult to organize a group that would meet that threshold. In some industries, such as shrimp, it has been necessary to create a coalition spanning hundreds of companies to get the required domestic support, which can be a costly and time-consuming endeavor, GAO said.