General considerations

In every case the first task of the Commission is to define and identify the domestic industry to be examined. The United States anti-dumping statute defines the domestic industry to be examined as those companies that produce a 'like product' - that is, a domestically produced product which most closely resembles the imported product under investigation. Defining the like product is not always easy, and the parties sometimes argue a great deal about the proper definition.

The definition of the like product can have a significant impact on the injury analysis. The parties therefore argue for the most favourable definition. The petitioner attempts to define it to include the domestic industry's weakest sector and to exclude the strongest sector, to maximize the appearance of injury. For example, if an industry contains product sectors A, B and C - with sector A badly injured and sectors B and C thriving - the petitioner may argue to isolate sector A's product as the like product. If sectors B and C were included, they might compensate for the conditions of sector A to such a point. that the Commission would find no material injury.

The foreign company may seek the opposite result in such situations, but the company's strategy depends on its position in the market. Combining thriving sectors with injured sectors usually reduces the risk of an affirmative finding of injury. Of course, if the company happens to produce a product in a sector not suffering injury, it may want to isolate that sector. For example, if the domestic industry sells merchandise assembled from certain components, and the foreign company exports only components, the company might argue that two like products (the assembled products and the components) are present.

Factors to consider

In determining what products are included as the 'like product', the Commission traditionally looks to whether the products have:

- Interchangeable uses;

- Similar physical appearances;

- Common manufacturing and distribution;

- Similar prices;

- Similar customer perceptions.

No one of these factors is determinative, and some of the factors overlap. The foreign company should structure its like product arguments according to these five characteristics.

Arguments about the like product inevitably become a balancing of each of these factors. These arguments are extremely fact-specific, and it is difficult to anticipate how the Commission will define the scope of a particular like product. Because of this flexibility, the foreign company should define the like product in the most favourable way during the preliminary injury investigation. Even if the effort is unsuccessful at the preliminary determination stage, the company will have framed the debate in its favour and the Commission may accept the argument in the final determination.

There is one important exception to this general rule of defining the like product in the most favourable way during the preliminary investigation. If the defence team believes there is a realistic chance of winning the case at the preliminary stage, then it sometimes makes sense not to contest the like product. The simple reality is that a challenge to the petitioner's definition of the like product at the preliminary stage virtually guarantees an affirmative preliminary determination. Since the Commission will not have the necessary data to make a decision based on the alternative like product the questionnaires collecting data in the preliminary stage almost always adopt the like product suggested by the petitioners - the Commission has no choice but to make an affirmative preliminary determination and then collect the necessary information during the final investigation.

Interchangeability of use

The Commission investigates whether the two products being considered have the same or similar uses. Take, for example, a steel nail, an iron nail and an aluminium nail. Although they are similar in a sense, they all have somewhat different applications. If a product is wholly 'dedicated' to a specific use and cannot be adapted to another use, one can argue that it constitutes a distinct like product from merchandise wholly dedicated to a different use. Such a situation is an easy case, and the Commission finds two separate like products.

Where a product may be adapted to various uses, the Commission must undertake the difficult task of deciding whether the products are similar enough. The Commission considers the cost of adapting the product to a particular use, and the probability of so adapting the product. If the final user of a product is a household consumer, the Commission may find that the cost of adapting a given product to a new use, even if low, distinguishes the products into two separate like product categories. On the other hand, if the final user is an industry, the Commission may well find that the cost of adaptation, if not higher than the cost of purchasing the merchandise requiring no adaptation, is not prohibitive, and the two products may be found to be the same 'like' product.

Physical characteristics

The Commission also considers the physical characteristics of the product. The more physically similar the two products, the more likely the Commission is to find a single like product. In its analysis, the Commission looks to that part the product representing the majority of the product's value. Unessential attachments that change the appearance of a product do not create a separate like product. Rather, if the most important elements of two products are physically similar, the two products are probably 'like' for purposes of the Commission analysis. This essential element, however, cannot be defined so broadly as to create an over-inclusive category.

Common manufacturing

The Commission also examines the methods of producing the product. The more similar the methods, the more likely the Commission is to find a single like product. Similar production employees and manufacturing facilities alone do not determine that two products are 'like'. These factors could, however, influence the outcome in a close case. For example, consider two chemical compounds serving exactly the same purpose, but of vastly different quality. If the chemicals share common manufacturing facilities and are produced by the same group of employees, these factors could tip the balance and lead the Commission to find that the two chemicals are a single like product.

Common distribution

The Commission also considers common distribution channels. If two products are sold through common distribution channels, by the same people, to the same customers, then the Commission is more likely to find the products to be 'like'.

Price

Price is a partial gauge of consumer perception and can be used to distinguish between two products, if the price differential is great enough. Price alone is not a determining factor for like product determinations, but rather serves as a proxy for other determining factors such as interchangeability, quality, and consumer perceptions. The greater the price differential, the greater the difference in some other, more determinative factor.

Consumer perceptions

Consumer perceptions also reinforce the other factors that serve to differentiate products. Even if consumers think that two products are different, if the uses and composition of the products are the same, the Commission will probably find a single like product. In a close case, however, this factor could tip the balance, especially if the evidence of differing consumer perceptions is compelling enough. Since it is difficult to collect reliable data on this issue - other than differences in the prices people are willing to pay - its importance is often limited in Commission investigations.

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