General overview of Commerce Department anti-dumping administrative review process

Under United States law a final Commerce Department determination at the conclusion of an anti-dumping investigation does not establish an exporter's ultimate anti-dumping liability. Rather, the anti-dumping rate announced in the Commerce Department's final determination is simply an estimated rate used for purposes of setting the cash deposit amount applicable to imports after an anti-dumping duty order is issued. The actual amount of anti-dumping duties paid is based on the results of an administrative review, which is commenced one year after the anti-dumping duty order is issued. Consequently, no one can know with absolute certainty what the ultimate anti-dumping liability will be until the Commerce Department issues a final administrative review determination.

The United States process is very different from other countries' laws. For example, under Canadian law anti-dumping duties are applied on a prospective basis. Accordingly, under Canadian law, following a final determination by Revenue Canada, an exporter is able to know what its ultimate liability will be before the export shipment is made to Canada. In contrast, under United States law, an exporter does not know what its anti-dumping liability will be until long after it makes its shipments to the United States. United States law establishes final anti-dumping liability only after the shipments have already been made. The United States system is best illustrated by way of example. Assume the following situation:

On 28 April 2000, the Commerce Department issues a final anti-dumping determination establishing a 15% anti-dumping rate. On 15 June 2000 an anti-dumping duty order is issued after a final affirmative injury determination by the Commission. The order requires a cash deposit of estimated anti-dumping duties equal to the amount stated in the Commerce Department final determination.

A review is requested in June 2001 (the anniversary month of the order). The Commerce Department begins an administrative review on 1 July 2001 for all shipments made from the preliminary determination of the previous year, i.e. from 19 February 2000 to 31 May 2001. The administrative review is based on a comparison of home market and United States prices between 19 February 2000 and 31 May 2001.

The Commerce Department completes its administrative review by June 2002. The Commerce Department's final determination for the administrative review establishes an anti-dumping rate of 5%.

The Commerce Department would then instruct the United States Customs Service to refund the difference between the cash deposits received on the imports subject to the administrative review (i.e. imports on which cash deposits of 15% have been made) and the rate found in the final determination in the administrative review (i.e. 5%). In addition, interest on the overpayment (i.e. the difference between the amount of cash deposits paid based on 15% margins and the actual amount of duties owing as a result of the 5% margins found in the review) will be paid. The current interest rate on overpayment is about 7%, and varies with market rates.

Assuming that a single importer had imported merchandise worth $1 million between 1 February 2000 and 31 May 2001, it would have paid $150,000 in cash deposits of estimated anti-dumping duties. The Commerce Department's final determination in the administrative review finding a 5% margin would reduce the importer's actual liability to $50,000. The importer would be refunded the difference, $100,000 and would also receive interest on the $100,000.

The final determination in the administrative review would also change the cash deposit rate for estimated dumping duties effective as of the date of that determination - 1 June 2002. Thus, all entries after this date would pay a 5% cash deposit rate, not a 15% cash deposit rate.

On each subsequent anniversary date of the order, an administrative review may be commenced; when completed it will provide the basis for ultimate duty liability. For example, if a review is commenced in June 2002, and the result is a final determination of a 10% margin, the importer would have to pay the difference between the cash deposits made (5%) and the 10% margin found in the review, plus interest on the underpayment.

As is evident from the above discussion, the importer's actual anti-dumping liability will not be determined until after the Commerce Department completes its administrative review process. Because the Commerce Department always applies the law in effect at the time it makes its determination, the administrative review process could very well be based on a different law from the determination which established the cash deposit rate for estimated anti-dumping duties. The review will always be based on facts for a different period of time. In other words, it is possible the cash deposit rate could have little relationship with the actual amount of anti-dumping duties ultimately assessed.

Note that the Commerce Department's current practice is to calculate importer-specific anti-dumping assessment rates. The Commerce Department does this by using the database submitted by the exporter during the administrative review process. In this database, the exporter is required to identify the name of the importer and the entered quantity and entered value for each United States transaction. The Commerce Department calculates total PUDD (potential uncollected anti-dumping duties) for each importer and divides the total importer-specific PUDD by the total entered value of the shipments imported by that importer. The resultant dumping ratio is then applied against the entered value of each entry of that importer to derive the anti-dumping assessment amount for the shipment. Accordingly, if an exporter ships to several United States importers, it is possible, depending on type of product and price, that the actual assessment rates for individual importers are very different from the new overall margin found for the exporter (e.g. one importer-specific rate could be 20%, and another 1%, while the overall margin for the exporter is 5%).

Finally, it is important to note that for the time period from the start of the administrative review period until the Commerce Department's final determination, importers can take advantage of the application of a cap on ultimate liability. In conformity with the WTO Anti-Dumping Agreement, United States law imposes a cap on the actual anti-dumping assessment of those shipments entered from the start of the review period until the date of the Commerce Department's final determination. The cap is equal to the anti-dumping rate set forth in the Commerce Department's preliminary determination. For example, if the Commerce Department found a 15% margin in its preliminary determination, but one of the importer-specific assessment rates determined in the administrative review was 20%, then that importer would be able to limit to 15% the assessment of those entries made from the start of the review period until the date of the Commerce Department's final determination.

For shipments between the Commerce Department's final determination and the date of the Commission's final determination, a cap equal to the rate found in the final determination applies. For shipments made after the Commissions' final affirmative injury determination, there is no cap on ultimate anti-dumping liability.

Special dumping margin calculation rules applicable to administrative reviews

Although for the most part the Commerce Department's approach during an administrative review is very similar to that followed during an investigation, there are two particularly important differences. (There are other differences, but they relate more to the degree to which the Commerce Department enforces other policies.)

Comparison of average home market prices to individual United States prices

During an administrative review, the Commerce Department resorts to its prior dubious practice of calculating the applicable anti-dumping margin by comparing monthly average home market prices to individual United States prices. After employing its model-match methodology (described below), the Commerce Department compares an individual United States transaction sales price to a monthly average of home market prices of the matching control number (CONNUM). This means that it is quite possible for the Commerce Department to find dumping margins when no such margins were found in the original investigation. Consider the following simple example, with three sales that total $600:

Dumping margin in original investigation: 0.0%

Dumping margin for administrative review 16.7%: [(100)/600)]

Although this practice is dubious in light of WTO standards, the practice continues. The Appellate Body has declared 'zeroing' to be WTO-inconsistent, but has considered this issue only in the context of an original investigation. The applicability of this same logic in the context of an administrative review has not yet been tested. Given the wording of Article 2 of the Anti-Dumping Agreement, however, it may be difficult to challenge such practices in administrative reviews. There have been other WTO panel decisions accepting the idea that different rules should apply to original investigations and administrative reviews.

Modification in model-matching methodology

During an administrative review, the Commerce Department will follow the same practice of using the applicable CONNUM to find identical or most similar home market matches. In an administrative review, however, there is also a time element that does not exist during an original investigation. During an administrative review, the Commerce Department limits its search for an identical or similar match to a six-month period which includes the month of the individual sale plus three months before and two months after. In short, the six-month period becomes part of the model-match test.

For example, for a United States transaction in April 1999, the Commerce Department would limit its search for the most similar CONNUM to home market sales from 1 January 1999 through 30 June 1999. If no identical or similar match (which passes the 'difmer' test) can be found in this six-month period, then the Commerce Department will use constructed value to calculate the dumping margin for that transaction.

Source: Business Guide to Trade Remedies in the United States: Anti-dumping, countervailing and safeguards legislation practices and procedures