As discussed in previous chapters, when calculating anti-dumping margins the Commerce Department seeks to compare prices of identical (or similar) products, but wants to use only those prices in the foreign market that are above cost. The question then becomes which of these two objectives is more important.

 

Until the mid-1990s, the Commerce Department had a practice of employing its model-matching methodology (see 'Establishing the model-match methodology' in chapter 3) before applying the 'cost test' (see 'When cost information is necessary' in chapter 4) to determine whether home market sales were made at prices below the cost of production. That is, the Commerce Department would first determine which home market model was the best choice to match to the United States model (i.e. identical or most similar), and then analyse whether the home market prices of that model were above cost.

 

Under the Department's prior practice, if the home market prices of the selected home market match were below cost, then the Commerce Department would not engage in a price-to-price comparison, but rather would compare United States price to constructed value. The Commerce Department would not search for the next most similar model.

 

In the mid-1990s, however, the courts ruled that this practice violated the law, and so ordered the Commerce Department to change its practice.

 

Essentially, the courts ruled that the Commerce Department must exhaust all opportunities to use a price-to-price comparison in the dumping calculation before resorting to constructed value. To comply with the courts' mandate, the Commerce Department now examines whether home market sales are below cost prior to applying the model-match methodology. Under this approach, all below-cost sales are excluded from the 'universe' before the model-match methodology is employed. This will result in more dumping margin calculations being based on price-to-price comparisons, rather than on price-to-constructed value.

 

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