Timing of investigation

 

The Commission's preliminary injury investigation proceeds very quickly. The preliminary injury determination must be made within 45 days after the petition is filed. Because of this strict statutory requirement, the work at this stage is quite rushed. The Commission staff begins work immediately after the petition is filed, and decides on a work schedule within one or two days.

 

Nature of preliminary investigation

 

Within a day or two after the petition is filed, the Commission will issue a 'Notice of Institution of Preliminary Investigation'. This notice provides the schedule that will be followed by the Commission during its preliminary investigation.

 

Even before this formal notice is published, the Commission begins its investigation. The Commission staff assembles a team to handle the case, including an investigator, an economist, an accountant, an industry analyst and a staff lawyer. The Commission staff then gathers data through questionnaires sent to domestic producers, foreign producers and importers of the merchandise under investigation, as well as meetings and telephone conversations with representatives of the United States industry and other industry experts.

 

The quality of the information collected at this stage can vary dramatically. If the petition involves an industry that the Commission has considered in the past and the particular investigators have personal experience with this industry, the quality can be quite high. The Commission may already have an extensive database with which to work and prior experience so it can understand the industry. If the petition involves a new industry, and especially if the industry structure is complex and changing, the quality of the information can be quite poor. The fault lies not with the staff, but with the severe time constraints for conducting a preliminary injury investigation.

 

Questionnaires

 

The Commission's main source of information about an industry is questionnaire responses. Separate questionnaires are sent to importers, domestic producers and foreign exporters. At the preliminary stage, these questionnaires are mailed within two to four business days after the petition has been filed. These questionnaires are mailed before the Commission has decided anything, including the key issue of the product under investigation. For this reason, questionnaires at the preliminary stage tend to follow the domestic industry's suggestions.

 

Although companies should be careful in how they complete these questionnaire responses, note that the Commission employs a different standard from that employed by the Commerce Department. Whereas the Commerce Department insists that all data being provided in response to its questionnaire be exactly accurate, the Commission is comfortable with best guess reasonable estimates being provided. In this regard, note also that the Commerce Department always conducts a verification of the information submitted by foreign companies. The Commission, however, does not have enough time to conduct verifications. Although the Commission has the legal authority to verify information, it rarely uses this authority.

 

Importers' questionnaire

 

Part I of the importers' questionnaire contains general questions. The main purpose of this section of the questionnaire is to obtain information about the structure of the industry, and the relationships among the various parties. The Commission staff wants to ensure that it has identified all the appropriate companies, and that everyone has received appropriate questionnaires.

 

Part II asks about trade and related information. This part asks the importer to provide data about imports, shipments and inventory levels. The Commission staff normally requests data for the three most recent calendar years, and year-to-date information for the current year and the immediately preceding year. It is important to provide the data on a calendar-year basis, even if the company's accounting records are kept on a different basis. The Commission. staff will ultimately aggregate the data from individual importers to obtain total imports from the foreign country. If importers present data on different bases, the Commission staff cannot accurately aggregate the data.

 

Part III asks about pricing and related information. In many ways, this is the most important part of the questionnaire. First, the Commission staff must study the relationship of import prices to prices charged by the domestic industry. If there is evidence of underpricing, the Commission is more likely to find a reasonable indication of material injury. The trends in price data are particularly important. The Commission tries to understand the dynamics of competition in the market, and therefore places a great deal of emphasis on the trends in relative prices over time. If the trend in prices is down, the Commission is more likely to find injury.

 

Second, the pricing section of the questionnaire is also important because of its difficulty. It is often difficult to provide data that allow for an appropriate comparison of prices, since different companies base their prices on different assumptions. When the Commission staff has incomplete or misleading data, the Commission is more likely to make an affirmative determination and to allow the investigation to continue. It is important, therefore, for companies to spend the time to develop and present this information carefully.

 

Companies should view the questionnaire as an opportunity to persuade the Commission staff, and ultimately the Commissioners themselves. Often companies are overly defensive, and try to hide information from the staff. Our experience has been that complete questionnaire responses are more persuasive, and more likely to succeed, than incomplete questionnaire responses.

 

Foreign exporters' questionnaire

 

The questionnaire submitted to foreign exporters is much less detailed. The Commission staff asks about production levels and shipments to various markets, and also about production capacity and inventory levels. The questionnaire is usually only several pages.

 

Information from exporters is most important for determining threat of injury. The Commission staff is looking for evidence that foreign exporters have excess capacity, and that they will increase their shipments to the United States. Evidence of significant markets other than the United States (and prior sales to those markets) is therefore very helpful. If the United States is the only major market, and the exporters have excess capacity, the Commission is more likely to find threat of injury.

 

Producers' questionnaire

 

United States domestic producers must also complete a questionnaire response. The questionnaire asks for information indicating whether the domestic industry is suffering injury because of imports. As discussed in chapter 10, a number of factors are considered by the Commission. The most important of them include:

 

- Market share of the United States domestic industry;

- Capacity utilization levels;

- Employment levels;

- Profitability;

- Price trends; and

- Allegations of lost sales.

 

These producers' questionnaires are very important, since they provide the data on which the Commission is to make its determination.

An individual company can file a petition, using estimates of what is happening to other companies in the domestic industry. Before making its determination, however, the Commission will try to obtain questionnaire responses from all the members of the domestic industry, not just the petitioner.

 

Any United States based producer can receive a questionnaire, whether the producer is owned by United States or foreign parties. All United States based producers are expected to complete the questionnaire. In some cases, however, the Commission has the authority to exclude certain producers from the domestic industry if the United States producers are related to the foreign producers who are the target of the investigation.

 

Other investigative techniques

 

Although the Commission relies primarily on questionnaire responses, it does use other investigative techniques. The most commonly used technique is a telephone interview. The Commission staff will usually call as many customers as possible, in an effort to explore in more detail why they made certain purchase decisions. The Commission staff is particularly interested in the reasons for buying imported products, and the role of price in the purchase decision. In addition, depending on the time available, and the professional commitment of individual staff assigned to a case, the staff may collect varying amounts of publicly available data from various sources.

 

Treatment of confidential information

 

The treatment of confidential information before the Commission has changed over the years. Prior to 1988, the Commission refused to release any confidential information to the lawyers for the domestic petitioners and foreign respondents. In 1988, however, Congress amended the law to require the Commission to begin releasing confidential data to the lawyers for the various parties under administrative protective orders. The lawyers are under strict obligations to protect the confidentiality of the information, and the Commission has been strict in enforcing these obligations.

 

Access to the confidential information of the other side has significantly changed the nature of arguments before the Commission. The lawyers now have reasonably complete data about the other side's arguments and factual information, and can respond more effectively.

 

Staff conference

 

As part of the investigation, the staff schedules an informal conference at which the parties may present their views to the Commission staff. The Commissioners do not attend this conference; its purpose is to help the staff understand the issues of the case. The domestic industry and the foreign respondents are each usually given one hour to present their arguments. Each side may present witnesses, but there is no opportunity to cross-examine witnesses presented by the other party. Both during and after the formal presentations, the Commission staff asks questions of both sides, to clarify the various issues involved in the investigation.

 

It is usually better to have businesspeople either company officials or customers, or both - testify as witnesses. The staff wants to understand how the industry works.

 

Businesspeople are more credible witnesses to discuss the industry, but sometimes if the time is very limited, or there are no appropriate company witnesses, the lawyers or other advisers make the presentation themselves. Because of the short time involved, it is often difficult to find and persuade appropriate witnesses for the staff conference.

 

Although the conference is the first opportunity for the foreign company to present its views, the company is at a great disadvantage. Although the domestic industry has been planning its presentation for months, the foreign company has only two or three weeks to prepare its presentation. Since it sometimes takes two or three weeks just to choose a lawyer, there is often very little time to prepare.

 

Post-conference submissions

 

After the conference, parties may file post-conference briefs containing additional arguments and information. These briefs should frame the issues. clearly for the Commission staff, and should explain why the available evidence supports the particular conclusions urged by the party. These briefs are usually due one week after the conference.

 

Informal consultations with staff

 

After the formal submissions, there is often an opportunity for informal consultations with the staff, who may have questions about the various questionnaire responses. Foreign companies should make every effort to cooperate and help the staff resolve any open questions. Open questions are an excuse for the Commission to make an affirmative determination and thus continue the investigation to find the answers to those questions.

 

Post-conference staff report

 

The staff reviews the briefs, collects all the available information, and prepares a preliminary report to the Commissioners. This report presents a first attempt by the staff to define the crucial issues in the investigation. It discusses the merchandise under investigation, the trends in imports and in the domestic market, and the condition of the domestic industry. This report is presented to the Commissioners and forms the basis for the preliminary injury decision. Note that the staff only presents data, and does not make any explicit recommendations about how the Commissioners should decide the various issues.

 

Decision by Commission

 

The Commissioners make their decision soon after receiving the staff report. Roughly 7 days after receiving the staff report, or about 7 days before the end of the 45-day period, the Commission votes to determine whether there is a reasonable indication of injury. Tie votes (when fully staffed the Commission has six Commissioners) are considered affirmative determinations. Based on this vote the staff drafts, and the Commissioners revise, an opinion explaining the views of the Commission. Eventually a formal notice is published in the Federal Register announcing the results.

 

As explained in chapter 2, the standard of proof at the preliminary stage is quite low. The Commission must decide only whether a 'reasonable indication' exists that the imports under investigation are causing or threatening to cause material injury. This low standard for finding material injury means that the Commission makes a negative preliminary injury determination only if: (1) there is convincing evidence that no material injury or threat of material injury exists; and (2) there is no likelihood of contrary evidence arising in a final investigation.

 

Although in theory the Commission can find that imports are not the cause of injury, it is unusual for the Commission to make a negative preliminary injury determination based on causation. In most cases the evidence about causation available at the preliminary stage is so limited that the Commission has no basis for a determination. Because the standard of proof is so low, it is difficult for foreign companies to win negative preliminary injury determinations.

 

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