International Trade Update
December 27, 2010

The U.S. Department of Commerce (the Department) is seeking public comment on two proposed policy changes that could significantly impact how the Department conducts antidumping (AD) proceedings, with possible consequences for both U.S. and non-U.S. companies. One contemplated change would affect the selection of “mandatory respondents” in antidumping investigations and annual reviews, which would increase the likelihood that small as well as large exporters could be selected as respondents. The second planned change would impact only exporters participating in AD proceedings involving products of non-market economies (NMEs), such as China or Vietnam, requiring more information in support of claims that companies are independent of government control. Both proposals could have the effect of increasing the level of antidumping duties imposed on imported products.

While the requests for public comment were issued on December 16, 1 the planned changes were actually previewed earlier this year, as part of the Obama Administration’s “National Export Initiative.” According to a statement issued by the Administration in August, 2 these changes, and a dozen others, are intended to “strengthen trade enforcement and help keep U.S. companies competitive.”

Statistical Sampling for Respondent Selection Would Subject More Companies to the Possibility of Investigation

The first proposal would expand the use of random sampling to select companies as individual respondents in AD investigations and reviews, rather than choosing the largest exporters, which the Department has elected to do “in virtually every one of its proceedings.” Current law permits either method. The selection process is important because not every company that exports a product subject to an AD proceeding will actually be investigated, either at the time of an original investigation or during any subsequent annual reviews. In many cases, there are many foreign respondents, but the Department’s resources are limited, so generally only between two and four respondents are investigated. How the selected – or “mandatory” – respondents fare in that process will determine the dumping duties that will be imposed on the rest of the exporters of the product from the country at issue.

The Department has statutory authority to examine a sample of exporters, producers, or products, as long as the sample is “statistically valid” based on the information available to the Department at the time of selection. 3 Under the proposed sampling methodology, the Department says it would employ a sampling technique that (1) is random, (2) is stratified, and (3) uses “probability-proportional-to-size” (PPS) samples. The Department explains that it believes that random selection would ensure that every company has a chance of being selected as a respondent, that stratification by import volume would ensure the participation of companies with different levels of import volumes, and that PPS samples ensure that the probability of each company being chosen “is proportional to its share of imports in its respective stratum.”

To use stratified PPS samples, the Department would (1) sort all companies in the population from largest to smallest, based on import volumes, (2) segregate companies into strata, with each stratum accounting for approximately the same share of import volume, and (3) select one company from each stratum. The Department anticipates that it will typically divide the universe of exporters into three strata, each of which would include exporters accounting for one-third of the total import volume. Thus, if a single company accounted for more than 33 percent of total imports, it would be assigned its own stratum, and the remaining companies would be divided into two strata, with one mandatory respondent selected from each.

In an NME investigation or review, however, the Department says, the relevant population should not include companies that are considered to be under government control. Therefore, in NME cases, the Department proposes to include in the relevant population only companies that submit “separate rate” applications, asserting that they are independent of government control.

In addition, the Department states that after conducting the investigation or review of the selected respondents, it would assign to the non-selected companies a “sample rate,” which would be an average of the individual rates calculated for the selected respondents, weighted by the import share of their corresponding strata.

Under this proposal, the Department would still continue its current practice of selecting the largest respondents if (1) due to resources constraints, the Department decides to examine fewer than three companies, (2) the largest companies account for at least 75 percent of total imports, or (3) characteristics of the underlying population make it highly likely that the results obtained from the largest possible sample would be unreasonable to represent the population.

The Department contends that the proposed change from selecting only the largest respondents to selecting a sample could result in the selection of a more diverse group of companies as mandatory respondents. Small and medium-sized exporters, who previously would not have been selected, would face the possibility of being chosen as respondents in AD proceedings. The proposed change could also result in the exclusion of some larger exporters who otherwise would have been selected as respondents and who may be among the most motivated to cooperate with the Department. Conversely, the change in practice could lead to the selection of smaller companies as mandatory respondents, and those smaller companies may have fewer financial resources and personnel capable of meeting the substantial administrative burdens of participation. The inability of smaller companies to participate fully in an investigation or review has the potential to lead to more instances in which, by default, “adverse facts available” are applied to calculate dumping margins.

The Department seeks comments on its proposed sampling methodology, including (1) how to address a situation in which a selected respondent needs to be replaced (e.g., because of its withdrawal from the proceeding or its disqualification), (2) how to treat voluntary respondents, and (3) how to treat adverse-facts-available, de minimus, and zero AD duty rates in calculation of the sample rate.

Expanding the Criteria Used to Determine Which Companies are Independent of Government Control in NME Cases Could Result in Fewer Qualifying Exporters

In AD proceedings, the pricing of products produced in and exported from NMEs, such as China and Vietnam, is presumed to be subject to government control. Therefore, antidumping duties on exports of merchandise from these economies are set at a single country-wide “NME-entity” rate, except for those individual exporters who can demonstrate sufficient independence from government control so as to be entitled to their own “separate rate.”

A separate rate applicant proves independence by demonstrating the absence of both de jure and de facto governmental control over their sales and export activities. To decide whether a firm is under de facto government control, the Department considers criteria that focus on direct government involvement in a firm’s export activities. The criteria are:

  • whether export prices are set by or are subject to the approval of a governmental agency;
  • whether the respondent has authority to negotiate and sign contracts and other agreements;
  • whether the respondent has autonomy from the government in making decisions regarding the selection of management; and
  • whether the respondent retains the proceeds of its export sales and makes independent decisions regarding the disposition of profits or the financing of losses.

The Department contemplates expanding this list of criteria to include other ways of assessing de facto government control. Thus, a separate rate applicant may have to prove more than just an absence of direct government involvement in decisions relating to export activities. Depending on what new criteria are added, the expansion could make it substantially more difficult for respondents to prove de facto independence from government control and, consequently, more respondents could be subject to the higher NME-entity rate.

If the Department adds new criteria beyond direct government control, it may also need to expand the list of questions that it currently asks separate rate applicants, examine additional or different company documents, and institute new procedures to verify the information it receives. The Department has previously indicated that the separate rates application process can be quite burdensome to the agency, particularly in AD proceedings involving many producers. The volume of information the Department requires from separate rate applicants and closely scrutinizes is already quite voluminous and is subject to very tight – and inflexible – deadlines for completion, so the additional information may lead to fewer companies satisfying that burden.

The Department is seeking public comments and suggestions, including the specific criteria it should examine, questions it might ask separate rate applicants, documents it should review, and procedures it should follow at verification.


Neither of these proposed changes requires amendment of the Department’s regulations. Both may be implemented through administrative action. Nevertheless, the Department is seeking public comment before making the changes. Companies currently or potentially involved in antidumping proceedings who may be impacted by the implementation of either of the proposed changes should consider making their views known by submitting comments to the Department of Commerce. Comments on these issues will be accepted through January 31, 2011.