The Department of Commerce (“Commerce”) published a notice seeking comments from interested parties on steps Commerce should take to modify its application of a “particular market situation” (“PMS”) analysis in antidumping duty cases after a series of decisions by both the U.S. Court of Appeals for the Federal Circuit and the U.S. Court of International Trade curtailing Commerce’s discretionary authority. Commerce over the years has expanded its use of the PMS analysis but recently has had a series of pushbacks from the Courts, including several decisions where Commerce’s determinations were reversed.
Under the Tariff Act of 1930, as amended, Commerce has the authority to utilize a PMS analysis in instances where the record evidence indicates that the cost of inputs (including material inputs, labor, or energy) used in the production of a good subject to antidumping duties are not acquired based upon market principles of supply and demand. Examples of goods which are acquired by the manufacturer at prices not based upon market principles are when an input is sourced from a non-market economy supplier (e.g. China and Vietnam); a good is purchased from a supplier that has received government subsidies; or if goods are acquired through an affiliate who sourced the goods from a non-market economy country.
The statutory authority existed going back to the 1993 amendments to the Tariff Act, but were further refined under the 2015 with the Trade Preferences Extension Act, as it provided Commerce the explicit authority to find that “sales to be outside the ordinary course of trade” if it “determines that the particular market situation prevents a proper comparison with the export price or constructed export price.” As a result, starting in approximately 2017, Commerce started more actively using this section of the statute as part of its analysis to determine if exporters were selling below the cost of production. As more comparison market sales fell below cost using this approach, only higher priced home market sales remained to be compared to U.S. price, thereby increasing the antidumping duty margin.
In the Federal Register notice, Commerce specifically states that it is seeking public comment “as it considers revisiting its PMS methodology and issuing a new regulation that would identify information that Commerce should take into consideration and should not take into consideration in determining whether a PMS exists that distorts the cost of production.” Given the recent series of court decision, Commerce “also seeks comments as it considers adjustments to calculations when the amount of distortion in the cost of production caused by a PMS cannot be quantified based on the record before it.” The notice also references the Federal Circuit opinion in Nexteel v. United States, where the court had instructed Commerce to consider additional factors including cost deviations, specificity, evidence of subsidies, and the agency’s ability to quantity the cost distortion in making its determination as to whether a particular market situation exists. The deadline to submit comments is December 18, 2022.
By Nithya Nagarajan & Jeffrey Neeley on November 22, 2022