[author: Brian E. McGill]
Given the long history of the material injury standard and the numerous determinations made over the years using the standard in antidumping and countervailing duty investigations, one might expect that the nature of the material injury standard and the threshold for establishing material injury had been definitively established long ago. Recent developments, however, make clear that the injury standard remains a matter of contention and that unresolved questions persist.
Recent legislative amendments to the injury portion of the statute that were enacted in June 2015 as part of the legislative package of trade related bills that included Trade Promotion Authority have been reported as changing the injury standard. More accurately, the amendments provide guidance to the International Trade Commission (Commission) with respect to particular aspects of the injury analysis. The actual statutory definition of material injury was unchanged and remains "harm which is not inconsequential, immaterial, or unimportant." 19 U.S.C. 1677(7)(A). On its face, this appears to be a low standard, but the Commission has made negative determinations where domestic industry profitability improved as unfair imports increased. This can happen during upturns in a business cycle or when the economy improves subsequent to a recession.
One key statutory change seeks to address such scenarios by stating that merely because the industry is profitable or profitability is improving does not mean that subject imports are not causing material injury. Rather, injury to the domestic industry may be masked by improvements to profitability resulting from price increases made possible by increased demand and improving economic conditions. The new provision may have been a factor in a recent 3-3 affirmative determination in an antidumping investigation regarding passenger tires.
Similarly, in a change particularly relevant to the current steel trade cases—covering corrosion resistant, cold-rolled, and hot-rolled steel—the statutory provision regarding "captive production" by the domestic industry was revised in a manner that requires the Commission to focus on merchant market competition and to address situations where significant production for captive production of downstream products might mask the significance of the volume of subject imports by understating the market share of those imports.
In addition, the U.S. Court of Appeals for the Federal Circuit recently considered the appropriate methodological approach for applying the injury standard. Parties opposing relief from unfair imports of multi-layered flooring lost their appeal of the Commission's affirmative injury determination. See Swiff-Train v. United States, Ct. No. 15-1814 (July 13, 2015). Plaintiffs contended that an affirmative injury determination required a finding that "but for" the subject imports the domestic industry would not have experienced the observed material injury. The Federal Circuit found that the statute did not generally require such an analysis and that the Commission has significant methodological discretion in determining whether the material injury observed was "by reason of" the subject imports. See 19 U.S.C. 1673. Nevertheless, the Federal Circuit left open the possibility that a "but for" approach to causation might be required if the merchandise at issue is a commodity product. As a result, arguments over the nature of the product and whether it might be characterized as sufficiently commodity-like to require a stricter approach to causation analysis are likely in the future.
