U.S. manufacturers face many challenges, but they do not do so alone. An entire system of trade laws and enforcement exists to help “level the playing field” and respond to competition from unfairly priced imports. Sometimes the decision not to take advantage of trade laws and to allow foreign competition to take away sales or induce lower prices or inhibit price increases is in itself a monumental decision. In short, the U.S. government – primarily the Department of Commerce International Trade Administration (“Commerce”) and the International Trade Commission (“ITC”) – are available to facilitate a more fair trade environment. As with any litigation, bringing an antidumping (“AD”) and/or countervailing duty (“CVD”) case can cause uncertainty and divert attention from the primary goal of producing, marketing, selling and distributing products. But a successful petitioner reaps the financial rewards of a successful case for years after U.S. Customs and Border Protection (“Customs”) starts to collect the AD/CVD tariffs on all imported goods.

Not all trade cases are the same and how they are managed and pursued can make a difference. This article focuses on ten things to know about successful antidumping and countervailing duty cases for U.S. manufacturers to consider in deciding whether to file and how to litigate a trade case.

1. Although a majority of U.S. producers should support the petition for it to be accepted by the U.S. government, it is not necessary that all domestic manufacturers join together to bring the case.

It is a practical reality that U.S. producers of consumer and industrial goods not only compete vigorously with foreign competition but also with their domestic rivals. In addition, some U.S. manufacturers face a conflict in an antidumping or countervailing duty case because they also import from the targeted nation(s). Fortunately, U.S. law allows only a portion of the U.S. industry to file a case. The petitioner(s) should account for at least 50% of that portion of the U.S. industry that is not conflicted because of imports from the targeted nation(s).

2. Just because the domestic industry is profitable does not mean it is not materially injured or threatened with material injury by reason of the subject imports.

Well-managed companies in the United States may experience material injury or the threat of material injury by reason of unfairly traded imports but take measures to alleviate the harm and even show positive financial results. Fortunately, we do not penalize good management by denying trade remedies to such industries. To the contrary, U.S. law expressly allows profitable companies to bring antidumping and countervailing duty cases and to prevail before the ITC regardless of their profitability.

The term “material injury” means “harm which is not inconsequential, immaterial, or unimportant.” 19 U.S.C. § 1677(7)(A). The Tariff Act provides additional specificity with respect to the price effect of imports. Specifically, 19 U.S.C. § 1677(7)(C)(ii) provides that:

In evaluating the effect of imports of such merchandise on prices, the Commission shall consider whether

(I) there has been significant price underselling by the imported merchandise as compared with the price of domestic like products of the United States, and 

(II) the effect of imports of such merchandise otherwise depresses prices to a significant degree or prevents price increases, which otherwise would have occurred, to a significant degree.

However, the “Commission may not determine that there is no material injury or threat of material injury to an industry in the United States merely because that industry is profitable or because the performance of that industry has recently improved.” 19 U.S.C. § 1677(7)(J).

3. The unfairly traded imports do not need to be sole or even primary cause of the material injury or threat of material injury experienced by the U.S. industry.

Trade cases are not the same as auto crash litigation. Liability in a trade case is not dependent on the unfairly traded imports being the “proximate cause” of all of the injury experienced by the domestic industry. Rather, the subject imports need to make some contribution to the financial experience of the U.S. manufacturers. But there could be a host of other reasons for economic challenges confronting the U.S. producers, and they can still prevail at the ITC and receive the benefit of the trade case in the form of AD or CVD tariffs. In addition, Congress, the Court of International Trade, and the ITC have repeatedly recognized that it is the significance of a quantity of imports, and not absolute volume alone, that must guide ITC’s analysis under 19 U.S.C. § 1677(7).” USX Corp. v. United States, 655 F. Supp. 487, 490 (CIT 1987) (citing Atlantic Sugar, Ltd. v. United States, 519 F. Supp. 916, 921-22 (CIT 1981)). This view is reflected in the legislative history of the Trade Agreements Act of 1979, in which Congress acknowledged that, “For one industry, an apparently small volume of imports may have a significant impact on the market; for another, the same volume might not be significant.” H.R. Rep. 317, 96th Cong., 1st Sess. 46 (1979).

4. For imports from a non-market economy nation like China, the countervailing duties imposed by the U.S. government may be based on government subsidies provided to industries other than the industry that is the target of the countervailing duty investigation.

Countervailing duties seek to offset the financial benefit that foreign producers and exporters receive from their home government in the form of a subsidy. However, a closed, non-market economy, such as China, does not get the benefit of the murky nature of the national and provincial laws in a manner that would render it difficult if not impossible for the U.S. industry to demonstrate to Commerce that there is in fact a foreign government subsidy which is being enjoyed by the targeted foreign producers and exporters. The “shell game” perpetrated by such governments cannot be allowed to let them off the hook from various laws and programs which shore up exports. Instead, if the foreign government, manufacturers and exporters fail to cooperate with the Commerce investigation or otherwise provide verifiable information relating to their laws and programs, Commerce has at its disposal various tools to render the foreign government and its industry culpable for such lack of transparency. In particular, Commerce may base the amount of CVD tariffs on subsidy programs that Commerce previously has found to be countervailable, even if they involved different types of imported goods.

5. Failure of the foreign government or exporters to cooperate with the Commerce Department investigation may result in a finding of dumping or unlawful subsidies and higher margins, which means more significant import duties.

The trade remedies laws do not provide for evidentiary trials or depositions. Rather, voluntary compliance with information requests is crucial. When a foreign government or its manufacturers or exporters decide to disregard information requirements from Commerce, the law allows for Commerce to draw adverse inferences from such lack of cooperation and apply “facts available” which rightfully inure to the benefit of the U.S. producers and may result in higher duties than otherwise. Notably, it is not enough for the foreign government or entities to cooperate in some ways but not others. Even if the foreign government provides a significant amount of the information requested by Commerce, its refusal to be comprehensive or timely in its responses harms the ability of Commerce to do its job, and consequences must result. Otherwise, foreign players will come to believe that the best way to beat a trade case is not to cooperate fully.

6. The ITC decides whether the domestic industry is materially injured as of the day of the Commission’s determination.

Sometimes, U.S. manufacturers that experience injury because of unfairly traded imports wait too long to file a petition for AD or CVD tariffs, and during the delay the volume or significance of the targeted imports changes, and by the time the ITC takes a careful look at the marketplace, conditions have materially changed and what had been a clear case of material injury or threat is diluted. Unlike a typical civil litigation involving breach of contract or tort claims, trade litigation focuses on what is happening now. The ITC will examine the three-year period preceding the date of determination but will place the greatest amount of weight on the more recent timeframe, as well as a comparison of year-to-date market statistics compared to the same period during the most recent year. However, a direct causal relation between the lost sales and present injury to the domestic injury does not need to be proven, so long as the ITC finds that the lost sales “indicate” a threat to future sales, production and profit.

7. Timing is also important in that it is better to file the case against the predominant exporter of subject imports before other countries get into the act and the changes increase that the ITC will find that injury experienced by the U.S. producers is caused by “non-subject” country imports rather than the nation(s) found by Commerce to be dumping or subsidizing the imported goods.

The simpler and easier to win cases are those involving imports primarily from a single country – which is found to engage in dumping or unlawful subsidies. Complexity arises when imports are from several countries, especially if the case involves commodities. Special care should be taken to be able to sort the injury-causing (or threatening) imports from the countries which are not part of the investigation.

8. In deciding whether the U.S. industry is materially injured or threatened with material injury by reason of subject imports, the ITC will consider “conditions of competition,” including whether the products at issue in the case experience “seasonality” or other marketplace circumstances.

Unlike a civil jury or even a federal judge, the experts at the ITC will not make their decisions based on a superficial understanding of the relevant facts. Rather, the ITC commissioners and the ITC staff will exhaustively investigate the domestic market, the foreign competition and the “conditions of competition” so as to fully understand all aspects of the marketplace. Attorneys for the parties will get access to the confidential administrative record and can make arguments based on all of the considerable data that the Commission obtains and analyzes. One aspect of this situation is that the ITC will delve deeply into how the market works, the nature of customers, the distribution systems, the allegations of lost sales and price suppression and depression and seasonality of the industry. They also will ask whether the domestic industry is suffering from self-inflicted harm because of business decisions (e.g., facility expansion, acquisitions, additional staffing) rather than the targeted imports.

9. Prospective petitioners should document all communications with actual and prospective customers that help to establish that unfairly priced imports are causing the material harm or threat of material injury to the domestic producers.

In trade cases, like all litigation, proof matters. The fact that the U.S. industry believes that it is losing sales or revenues because of subject imports is not sufficient to prevail at the ITC. Rather, allegations of lost sales or price suppression or depression should be documented and supported. Moreover, domestic companies that resort to the targeted imports have incentives to color the facts, if not outright lie when it comes to why they chose imports over domestic goods. And, as stated, the petitioner(s) will not have the opportunity to conduct discovery or subject the purchaser executives to depositions. The ITC commissioners and staff may question witnesses at the ITC hearing with regard to their protestations of why they chose imports (e.g., claims that domestic producers have quality problems or are not responsive) and petitioners’ counsel may even have some latitude to ask questions, but a scintillating cross-examination will likely not be permitted. For this reason it is imperative that the petitioners and their employees timely and contemporaneously document conversations with customers, as well as follow-up emails and letters, so that there is a clear record of the impact that imports have had on the marketplace.

10. Counsel for the petitioner should involve Commerce Department and ITC staff before the petition is filed, to help ensure that the petition meets key requirements and will be fully and fairly considered by the U.S. government.

The fine professionals at Commerce and the ITC are in place to assist the U.S. industry where warranted, but they are busy and do not have access to all of the resources that petitioners and their counsel can call up to prepare a case. It is vital that the U.S. industry that plans to bring an AD or CVD case engage the Commerce and ITC staff early in the process, before the petition is filed, in order to receive the benefit of the agencies’ experience so that shortcomings and problems can be addressed fully before the petition for duties is filed with the government.