Caribbean Trade Law and Development

Tag: Anti-dumping

  • Trump’s Trade Executive Orders target deficit and uncollected AD/CV Duties

    Trump’s Trade Executive Orders target deficit and uncollected AD/CV Duties

    Alicia Nicholls

    United States (US) President Donald Trump has sent a warning signal to those countries which he accuses of engaging in ‘unfair trading practices’ argued to be costing American manufacturing jobs. Proclaiming that the “theft of American prosperity will end,” the President concluded the work week by signing two trade-focussed executive orders aimed respectively at identifying the causes of the US’ reported $500 billion dollar total trade deficit and the $2.3 billion dollars (as at May 2015) in uncollected anti-dumping and countervailing duties owed to the US government. Ultimately, the twinned measures are to “set the stage for the revival of US manufacturing” as noted in the President’s remarks at the signing ceremony.

    Presidential Executive Order Regarding the Omnibus Report on Significant Trade Deficits

    Taking aim at the US’ trade deficit  blamed for a decline in American prosperity and jobs, President’s Trump executive order mandates the Secretary of Commerce, Wilbur Ross, and the United States Trade Representative (USTR), Robert Lighthizer (yet to be confirmed) to prepare and submit to him an Omnibus Report on Significant Trade Deficits. This is to be done in consultation with relevant departments and agencies. The Secretary of Commerce and the USTR may hold public meetings and receive comments from relevant government and non-governmental stakeholders.

    Primarily, this report is to examine the US’ trading relationships country by country. It will identify those foreign trading partners with which the US had a significant trade deficit in goods in 2016, and seek to ascertain the reasons for the deficits, including whether it is because of trade abuses (or what President Trump has termed “cheating”) by these countries, assess the effects of the trade relationship on US employment and wage growth and identify imports and trade practices that may be impairing US national security.

    Most Caribbean countries can perhaps breathe a sigh of relief as the US has a trade surplus with the Region, as at the last report on the operation of the CBERA. The exception is the oil-rich Trinidad & Tobago which enjoys a merchandise trade surplus with the United States. According to US Census Bureau data, in 2016, the US imported $2,961 million in goods from the twin-island republic and exported $2,334 million, resulting in a deficit of $617 million. Natural gas, crude oil and petrochemicals comprise the majority of US imports from Trinidad & Tobago as this table shows.

    While it may appear that Trinidad & Tobago might potentially be in the Administration’s cross-hairs as it has a trade surplus with the US, it should be noted that (a) the US’ deficit with Trinidad & Tobago in 2016 was not ‘significant’ and has been declining since 2011 (b) the Report is supposed to consider other factors as well, including whether the country engages in ‘unfair trading practices’ which Trinidad & Tobago does not. (c) As the Trump Administration will seek to increase US onshore petroleum production, its imports from Trinidad & Tobago (and its deficit with that country) will continue to decrease.

    Presidential Executive Order on Establishing Enhanced Collection and Enforcement of Anti-dumping and Countervailing Duties and Violations of Trade and Customs Laws

    In a warning salvo to China, President Trump’s second executive order targets US importers which evade anti-dumping/countervailing duties by improving collection of these duties at the border. Dumping in the trade context refers to where an exporter sells a product in an export market at a price lower than in the home market. Under the WTO’s Anti-dumping Agreement, a country may, after investigation, impose extra duties (anti-dumping duties) on a “dumped” product from another country to ensure the price is close to the “normal value” or to offset injury to its domestic industry.

    Specifically, the executive order mandates the Secretary of Homeland Security, through the Commissioner of Customs & Border Patrol (CBP), to “develop and implement a strategy and plan for combating violations of US trade and customs laws for goods and for enabling interdiction and disposal”.

    The order also seeks to ensure the timely and efficient enforcement of laws protecting intellectual property rights holders from the importation of counterfeit goods. It therefore requires the Treasury Secretary and the Secretary of Homeland Secretary to take all appropriate steps to ensure that the CBP can share any information with rights holders which is necessary to determine whether there has been an IPR infringement or violation, and regarding merchandise voluntarily abandoned, once such information is shared consistent with the law.

    Memo on NAFTA

    In other news, last week a leaked draft memo to Congress signed by the Acting USTR revealed what appeared to be the Administration’s orientation towards the renegotiation of the North American Free Trade Agreement (NAFTA), an agreement which Trump had called the “worst trade deal ever signed by the US”. However, during a daily press briefing the White House Press Secretary, Sean Spicer, has said the memo is “not a statement of administration policy”.

    Trade had been a major plank of President Trump’s platform, which aimed to stop ‘bad trade deals’ and eradicate the US’ trade deficit. One of his earliest executive orders was mandating the Acting USTR to withdraw the US from the Trans-Pacific Partnership (TPP).

    Alicia Nicholls, B.Sc., M.Sc., LL.B., is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.

  • WTO Panel rules in Argentina’s favour in EU Biodiesel Anti-dumping Case

    Alicia Nicholls

    A World Trade Organisation (WTO) dispute settlement body panel has ruled primarily in Argentina’s favour regarding anti-dumping measures imposed by the EU on Argentine biodiesel exports to the EU. Inter alia, the panel found that the EU had contravened the Anti-dumping Agreement and the GATT 1994 by failing to calculate the cost of production of the product on the basis of the records kept by Argentine producers, and by imposing anti-dumping duties in excess of the margins of dumping that should have been established per the Anti-dumping Agreement and the GATT 1994.

    Background

    The dispute (DS473) European Union – Anti-dumping Measures on Biodiesel from Argentina surrounds two EU measures regarding biodiesel imports from Argentina and Indonesia, namely:

    • Article 2(5), second subparagraph, of Council Regulation (EC) No. 1225/2009 of 30 November 2009 on protection against dumped imports from countries not members of the European Community (the Basic Regulation)
    • Anti-dumping measures imposed by the European Union on imports of biodiesel originating in Argentina and Indonesia.

    The EU’s anti-dumping measures were implemented following an investigation by the European Commission after the European Biodiesel Board (EBB), which represents the interests of EU biodiesel producers, lodged a complaint on July 17, 2012, for anti-dumping against biodiesel imports from Argentina and Indonesia. The  EBB has argued that Argentine and Indonesian biodiesel producers were selling biodiesel at artificially low prices in the EU market thereby putting the EU biodiesel industry at a disadvantage, compromising jobs in the industry and the industry’s ability to contribute to sustainable green transport in the EU.

    In January 2013, the Commission made Argentine and Indonesian biodiesel imports in the EU subject to registration. Following its investigation, the Commission imposed provisional anti-dumping duties on May 29, 2013 and definitive anti-dumping duties on 27 November 2013. In the Definitive Regulation No 1194/2013, it was calculated that the injury margins ranged from 41.9% to 49.5% . The EU applied anti-dumping duties of 22.0% to 25.7% which took the form of specific duties expressed as a fixed amount in euro/tonne.

    Argentina, one of the world’s largest exporters of biodiesel, argued that the EU’s measures were protectionist and aimed at protecting inefficient European biodiesel producers. It has been reported in Argentine media that the measures are estimated to have cost Argentina almost the equivalent of 1,600 million dollars worth in biodiesel exports annually.

    The Dispute

    In December 2013, Argentina requested consultations with the EU and requested that a panel be established in March 2014. A panel was established in April 2014.

    Argentina based its claims on various articles of the Anti-Dumping Agreement, the General Agreement on Tariffs and Trade (GATT) 1994 and the WTO Agreement, arguing that “as applied” the EU’s measures were inconsistent with various articles of these agreements. Argentina also asked the Panel to find that Article 2(5), second subparagraph of the Basic Regulation was  “as such” inconsistent with Articles 2.2, 2.2.1.1 and 18.4 of the Anti-Dumping Agreement, Article VI:1(b)(ii) of the GATT 1994, and Article XVI:4 of the WTO Agreement.

    “As such inconsistent”, basically means that the measure is inconsistent in and of itself and is not solely inconsistent because of its application in a specific instance. “As such” challenges are therefore “serious challenges” as noted by the Appellate Body in US – Oil Country Tubular Goods Sunset Reviews particularly given the presumption that WTO Members act in good faith in the implementation of their WTO commitments.

    Additionally, the ruling’s contribution to the WTO’s body of jurisprudence should not be overlooked. As noted by the panel, Argentina’s claims “raise[d] complex questions pertaining to the interpretation of Articles 2.2 and 2.2.1.1 of the Anti-Dumping Agreement and Article VI:1(b)(ii) of the GATT 1994 that have not been addressed previously by panels or the Appellate Body”.

    Ruling

    In its panel report released yesterday (March 29), the panel found in favour of most of Argentina’s complaints. However, the Panel found that Argentina did not establish that Article 2(5), second subparagraph of the Basic Regulation was “as such” inconsistent with Articles 2.2.1.1 and 2.2 of the Anti-Dumping Agreement and Article VI:1(b)(ii) of the GATT 1994.The Panel also rejected  Argentina’s claim that the amount for profits established by the EU authorities (15% on turnover) was not based on a reasonable method  within the meaning of Article 2.2.2(iii) and also rejected Argentina’s claim that the EU had failed to meet the “fair comparison” requirement under Article 2.4 of the Anti-Dumping Agreement.

    However, the Panel did find in Argentina’s favour on several key issues. Argentina claimed that the EU had failed to calculate the cost of production of biodiesel on the basis of the records kept by the producers/exporter under investigation and had therefore acted inconsistently with Article 2.2.1.1 of the Anti-dumping Agreement.

    Article 2.2.1.1. of the Anti-dumping Agreement provides that:

    For the purpose of paragraph 2, costs shall normally be calculated on the basis of records kept by the exporter or producer under investigation, provided that such records are in accordance with the generally accepted accounting principles of the exporting country and reasonably reflect the costs associated with the production and sale of the product under consideration.

    One of the issues the Panel had to consider was whether an investigating authority’s belief that a producer/exporter’s records reflect costs that are artificially low due to an alleged distortion constitutes a legally sufficient ground under Article 2.2.1.1. for that authority to find that a producer/exporter’s records do not “reasonably reflect the costs associated with the production and sale of the product under consideration”.

    The EU authorities had argued that Argentina’s Differential Export Tax had artificially depressed the domestic price of soybeans and soybean oil (the inputs for Argentina’s biodiesel) and had distorted Argentine producers’ production costs.  They argued that this cost distortion should be taken into account in constructing Argentine producers’ normal value and chose  to rely on the average reference price of soybeans published by the Argentine Ministry of Agriculture for export as opposed to the actual price for soybeans reported in the Argentine producers/exporters’ records.

    The panel found that the EU’s argument for ignoring the producers’ costs  did not constitute a legally sufficient basis  for arguing that the producers’ records do not reasonably reflect the producers’ costs as required per Article 2.2.1.1 of the Anti-dumping Agreement.Because of its ruling on Article 2.2.1.1, the Panel did not see it necessary to rule on whether as a consequence, the EU had acted inconsistently with Article 2.2 of the Anti-Dumping Agreement and Article VI:1(b)(ii) of the GATT 1994 in this regard.

    The Panel also found that the EU did not use a cost that was the cost prevailing in the country of origin (i.e. Argentina) in the construction of the normal value and had therefore acted inconsistently with Article 2.2 of the Anti-Dumping Agreement and Article VI:1(b)(ii) of the GATT 1994.

    The Panel ruling also supported Argentina’s claim that the EU had imposed anti-dumping duties in excess of the margin of dumping per Article 2 of the Anti dumping argument and had therefore also acted inconsistently with Article 9.3 of the Anti-Dumping Agreement and Article VI:2 of the GATT 1994.

    The Panel upheld Argentina’s claim finding that as it relates to production capacity and capacity utilisation, the EU had acted inconsistently with Articles 3.1 and 3.4 of the Anti-Dumping Agreement. However, the Panel ruled that Argentina’s claims with respect to the EU authorities’ evaluation of return on investments fell outside of the Panel’s terms of reference.

    The Panel concluded that “to the extent that the measures at issue have been
    found to be inconsistent with the Anti-Dumping Agreement and the GATT 1994, they have nullified or impaired benefits accruing to Argentina under these agreements”. Pursuant to Article 19.1 of the DSU, the Panel recommended that the EU bring its measures into conformity with its obligations under the Anti-Dumping Agreement and the GATT 1994.

    Both parties have 60 days in which to file an appeal against the panel’s decision.

    Indonesia, which was also affected by these EU measures, was one of the third parties to this dispute. Indonesia also currently has a dispute pending against the EU on this matter (DS480 :  EU – Anti-dumping measures on biodiesels from Indonesia).

    A summary of the panel report and  the full panel report may be accessed on the WTO’s website here.

    Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. You can also read more of her commentaries and follow her on Twitter @LicyLaw.