Deck 11: Regulating Import Competition and Unfair Trade

Question 1

Your firm is a paper converter. It converts paperboard into various articles for use in homes and restaurants for food preparation, sale, and storage. Its products include pizza boxes, ice cream boxes, bakery and deli boxes, and paper plates as well as boxes and trays for use in fast food operations. You purchase paperboard from both domestic and foreign sources. Recently, a Chinese supplier has begun offering paperboard at extremely low prices-far lower than what you have been paying domestically. One of your colleagues at your firm calls the offer "too good to be true." You have always had reliable sources of supply, but the offer is very tempting. Why might the foreign exporter be cutting prices to U.S. customers? What information do you think you need before committing to a purchase? Specifically, what pricing information do you need? If it turns out that the products are being "dumped" in the U.S. market, what would be the result and how might it affect your firm and your purchasing decision? Do you think it is fair or unfair for an exporter to dump its goods in a foreign market? Evaluate the statement, "Selling at a low price can't be unfair."

Answer 1

Export Price:
An export price refers to the price at which goods are sold to an importer in the domestic market by an exporter.
If the value of the goods is less than the fair price, then it is termed as the dumping margin.
Anti-Dumping Laws:
WTO had issued stringent guidelines in prohibiting member nations in pushing its products into foreign markets at lesser price than its competitors.
WTO prohibits such activities through its anti-dumping procedures.
A foreign importing company may reduce the prices to beat the competition in the foreign market and to gain an entry. They can compensate by selling in large volumes.
A local retailer needs information regarding the quantity of goods it is pushing into the local market and the prices at which it is offering in the local market.
The retailer or the contractor needs to know the price at which the importer is sealing the produce in the importing country and in other countries.
If it is a dumping decision then the U.S government will levy duties on the importing company and it will not be able to offer products at the same price.
It is unfair of an importing company to dump its goods in a foreign market because it is trying to bring down the value of the product down and thus causing a potential injury to the domestic producers.
The statement "selling at a low price cannot be unfair" is partially true because the end user gains from the low prices and more choices, however, the domestic producers will lose.

Question 2

Your firm is a U.S. manufacturer of optic transistors (OTs) for use in robotic applications. A few years ago the United States entered into an OT trade agreement with Asian countries reducing tariffs on most OTs made worldwide. Over the past two years foreign imports of OTs have risen by over $100 million per year, and now account for 60 percent of the U.S. market. During this time you noticed a drop in your firm's share of the U.S. market for OTs from more than 25 percent to less than 20 percent. In addition, your firm's total sales are in decline, its inventories are at their highest levels, and you have had to postpone hiring new employees. One of your better customers informs you that it can purchase comparable OTs for 25 percent less than yours from a supplier in Taiwan. Furthermore, you learn that the government of Taiwan assists OT manufacturers by rebating taxes on the value of OTs they export. To complicate your problems, you have been experiencing difficulty cracking export markets, and countries where robots are assembled, such as Korea, Singapore, and Taiwan, have been restricting your firm's imports through a maze of complex regulations. Also, to receive import licenses, these regulations require you to disclose important manufacturing and design techniques. You are also concerned that your design patents will not be protected there, because there is no enforcement of Korean patent protection laws. Korea has imposed quotas on OTs that make it virtually impossible to export to that market.
Considering your work in the last three chapters, what remedies are available to your firm under U.S. law that would help protect its U.S. market? What are the available remedies that the U.S. government has to help improve market access to your customers who manufacture robots in Asia? What factors (economic, political, or other) will affect the outcome of the case? How might these legal implications affect your global business strategy? Discuss.

Answer 2

General Agreement on Tariffs and Trade (GATT):
General agreement on Trade and Tariff is established to regulate the international trade between countries.
It stashed several regulations through which it abolishes unethical practices such as imposing quotas or higher tariffs.
Safe Guards:
Safe guards are trade restrictive mechanisms used by an importing nation to control excess imports of a particular goods or services into the country.
Levying of duties and fines:
An importing country can levy fines and duties on the exporter in the form of countervailing duties.
Section 301 U.S Trade Act:
The main purpose of the Section 301 of U.S Trade Act is to impose trade restrictions and sanctions on nations which do not allow their goods to be sold in their countries.
The Section 301 is understood as a retaliatory measure.
There are several remedies available for U.S government to implement either dumping activities by importing country or restrictive mechanisms used by the importing country. The remedies are given below:
1. Levy of countervailing duties:
Under this provision, the importing country can levy duties on the importing company so as to recover the difference in prices.
2. Implementing Section 301 of U.S Trade Act:
By using this regulation, the U.S Government can impose regulations in its own market restricting the goods from countries preventing its goods.
The U.S Company can use the provisions of the GATT regulations to enter into foreign markets. For example: use of Section XIX the country can enter into foreign markets.
The Loss of income to the domestic companies and the loss of income to the government are major factors which can influence the company.
The pressure from the Congress to enforce regulations or sanctions against such countries is also an impacting factor.
Affect of these implications on global business strategy:
The legal implications will impact the global positioning strategy as well as the domestic positioning strategy of the company because the company has to beat the restrictive mechanisms from other countries and the dumping activities from foreign companies.

Question 3

In an antidumping investigation the ITA finds that the dumping firm was experiencing a downturn in its domestic economic cycle, and that there had been no intent to harm a U.S. industry. Can antidumping duties still be applied?

Answer 3

Dumping:
Dumping is selling of goods in the other foreign market for the price less than a fair value of products. It has been considered as unfair trade practice as it may cause serious injury to the domestic industry.
Anti Dumping Laws:
WTO had issued stringent guidelines in prohibiting member nations in selling its products into foreign markets at lesser price than its competitors. WTO prohibits such activities through its anti dumping procedures. Such duties are additional duty imposed on dumped goods in order to offset low prices of dumped goods.
Goods are exported by any country at price lower than fair value for many reasons like to sell its excess production in order to cover its fixed assets and avoid cyclic layoff of labors.
Despite the fact that the company is facing economic turmoil in its domestic country it still dumped goods at a lower costs than the normal fair price of the goods. Even though its intention is not to harm the economy of country US, it still caused enough harm by artificially lowering the prices below the normal fair price.
Thus, the company is eligible for anti dumping duties.

Question 4

A foreign shoe manufacturer sells shoes to a wholly-owned subsidiary company in a foreign market at $20. The subsidiary sells to an independent distributor at $40, who sells to a retailer at $80.00. The retailer sells the shoes to a consumer for a price of $160. In comparing the export price to the normal value, which price should the ITA use, and why? Which allowances or adjustments to the export price, if any, can the ITA make? Give several examples.

Question 5

A country enacts a law that denies import privileges for five years to any firm that "dumps" products for sale in its markets at less than normal value. Do the WTO antidumping agreements permit such a remedy?

Question 6

Why does the U.S. Congress subsidize agriculture? What is the economic impact of subsidies on worldwide agricultural prices? Why are subsidies a subject of dispute between the United States, Europe, and the developing countries?

Question 7

What do you think of the results of the USITC report, The Economic Effects of Significant U.S. Import Restraints, Seventh Update , cited in the chapter conclusion? Considering the net effect of import restraints on the volume of imports and exports, and considering the costs incurred in administering all import restraint laws, do you have an opinion of their effectiveness?

Question 8

In this chapter we discuss U.S. safeguards on Chinese products in existence from 2001 to 2013. These safeguards protected American industries from injury due to increased Chinese imports after China was admitted to the WTO in 2001. Research the subject to determine how the records of President Bush and President Obama may have differed on this issue of safeguards. Did either president invoke safeguards against Chinese products, and under what conditions? What does your outside reading tell you were the arguments for and against imposing duties on Chinese imports? Describe the economic, political, and foreign policy implications of the safeguard laws. See, USITC Investigation of Pedestal Actuator Imports from the People's Republic of China , Inv. No. TA-421-1 (2002), USITC Publication No. 3557 and the USITC Investigation of Certain Passenger Vehicle and Light Truck Tires from China , Inv. No. TA-421-7, USITC Publication 4085. Also see, United States-Measures Affecting Imports of Certain Passenger Vehicle and Light Truck Tyres from China, Report of the WTO Appellate Body, WT/DS399/AB/R (2011).

Question 9

What makes an import practice "unfair"? What remedies are available under U.S. law to protect domestic industries from unfair import competition?

Question 10

Describe the different functions of the ITA and the ITC in regulating import competition.

Question 11

The plaintiff, Smith Corona, was the last remaining manufacturer of portable electric typewriters in the United States. An action was brought to challenge the method used by the International Trade Administration to determine whether the Japanese typewriter companies, Brother and Silver Seiko, had engaged in dumping in the United States. The typewriters in question were sold in Japan (the home market) under different circumstances of sale than in the United States. In Japan, Silver Seiko provided volume rebates to its customers based on total sales of all merchandise sold. Brother incurred advertising expenses in Japan, as well as expenditures for accessories that accompany typewriters sold in Japan but not in the United States. The ITA subtracted these amounts from foreign market value in calculating the dumping margin. Was the ITA correct? See Smith-Corona Group v. United States , 713 F.2d 1568 (Fed. Cir. 1983).

Question 12

The American Grape Growers alleged that imports of wine from France and Italy were being subsidized and sold in the United States at less than fair value. The ITC's preliminary review found that no U.S. industry was threatened with material injury. The American growers said the ITC decision did not include the imports from both France and Italy as it should have done. Instead it considered the two products different because the French wines were primarily white wines and the Italian wines were primarily red and effervescent. The growers also said the ITC was wrong to base its decision on whether an injury had been proved, as opposed to whether there was a possibility of injury. Do you agree with the grape growers that the ITC's preliminary decision was wrong?

Question 13

BACKGROUND AND FACTS
Argentina conducted a safeguard investigation into imports of footwear during the period from 1991-1996 and found the following data related to absolute levels of imports:

Argentina then imposed safeguard measures that increased import duties on footwear from the bound rate of 35 percent to 200 percent. The European Community (now EU) and the United States brought an action at the WTO claiming that the data do not show an increase in absolute levels of imports as required by GATT Article XIX and the WTO Agreement on Safeguards. Argentina compared the 1991 figures to 1996 to show an increase. The EU and U.S. argued that using end points only was improper because it ignored intervening, declining trends over the period. A WTO panel held that Argentina's safeguard investigation was inadequate, and Argentina appealed to the WTO Appellate Body.
REPORT OF THE APPELLATE BODY
* * * We note once again, that Article XIX:1(a) requires that a product be imported "in such increased quantities and under such conditions as to cause or threaten serious injury to domestic producers." [emphasis in Report] Clearly, this is not the language of ordinary events in routine commerce. In our view, the text of Article XIX:1(a) of the GATT 1994, read in its ordinary meaning and in its context, demonstrates that safeguard measures were intended by the drafters of the GATT to be matters out of the ordinary, to be matters of urgency, to be, in short, "emergency actions." And, such "emergency actions" are to be invoked only in situations when, as a result of obligations incurred under the GATT 1994, a Member finds itself confronted with developments it had not "foreseen" or "expected" when it incurred that obligation. The remedy that Article XIX:1(a) allows in this situation is temporarily to "suspend the obligation in whole or in part or towithdrawormodify the concession". Thus, Article XIX is clearly, and in every way, an extraordinary remedy. * * *
We agree with the Panel that Articles 2.1 and 4.2(a) of the Agreement on Safeguards require[s] a demonstration not merely of any increase in imports, but, instead, of imports "in such increased quantities…and under such conditions as to cause or threaten to cause serious injury." In addition, we agree with the Panel that the specific provisions of Article 4.2(a) require that "the rate and amount of the increase in import…in absolute and relative terms" [emphasis in Report] must be evaluated. Thus, we do not dispute the Panel's view and ultimate conclusion that the competent authorities are required to consider the trends in imports over the period of investigation (rather than just comparing the end points) under Article 4.2(a). As a result, we agree with the Panel's conclusion that "Argentina did not adequately consider the intervening trends in imports, in particular the steady and significant declines in imports beginning in 1994, as well as the sensitivity of the analysis to the particular end points of the investigation period used." * * *
Although we agree with the Panel that the "increased quantities" of imports cannot be just any increase, we do not agree with the Panel that it is reasonable to examine the trend in imports over a fiveyear historical period. In our view, the use of the present tense of the verb phrase "is being imported" in both Article 2.1 of the Agreement on Safeguards and Article XIX:1(a) of the GATT 1994 indicates that it is necessary for the competent authorities to examine recent imports, and not simply trends in imports during the past five years - or, for that matter, during any other period of several years. In our view, the phrase "is being imported" implies that the increase in imports must have been sudden and recent.
We recall here our reasoning and conclusions above on the meaning of the phrase "as a result of unforeseen developments" in Article XIX:1(a) of the GATT 1994. We concluded there that the increased quantities of imports should have been "unforeseen" or "unexpected." We also believe that the phrase "in such increased quantities" in Article 2.1 of the Agreement on Safeguards and Article XIX:1(a) of the GATT 1994 is meaningful to this determination. In our view, the determination of whether the requirement of imports "in such increased quantities" is met is not a merely mathematical or technical determination. In other words, it is not enough for an investigation to show simply that imports of the product this year were more than last year-or five years ago. Again, and it bears repeating, not just any increased quantities of imports will suffice. There must be "such increased quantities" as to cause or threaten to cause serious injury to the domestic industry in order to fulfill this requirement for applying a safeguard measure. And this language in both Article 2.1 of the Agreement on Safeguards and Article XIX:1(a) of the GATT 1994, we believe, requires that the increase in imports must have been recent enough, sudden enough, sharp enough, and significant enough, both quantitatively and qualitatively, to cause or threaten to cause "serious injury." * * *We…uphold the Panel's ultimate conclusion that "Argentina's investigation provides no legal basis for the application of the definitive safeguard measure at issue, or any safeguard measure."
Decision. The Appellate Body agreed with the conclusion (but not completely with the reasoning) of the Panel that Argentina's investigation was inadequate under the standards of the WTO safeguard provisions.
What is the role of a WTO panel in reviewing the safeguard investigations conducted by a national administrative agency?

Question 14

BACKGROUND AND FACTS
Argentina conducted a safeguard investigation into imports of footwear during the period from 1991-1996 and found the following data related to absolute levels of imports:

Argentina then imposed safeguard measures that increased import duties on footwear from the bound rate of 35 percent to 200 percent. The European Community (now EU) and the United States brought an action at the WTO claiming that the data do not show an increase in absolute levels of imports as required by GATT Article XIX and the WTO Agreement on Safeguards. Argentina compared the 1991 figures to 1996 to show an increase. The EU and U.S. argued that using end points only was improper because it ignored intervening, declining trends over the period. A WTO panel held that Argentina's safeguard investigation was inadequate, and Argentina appealed to the WTO Appellate Body.
REPORT OF THE APPELLATE BODY
* * * We note once again, that Article XIX:1(a) requires that a product be imported "in such increased quantities and under such conditions as to cause or threaten serious injury to domestic producers." [emphasis in Report] Clearly, this is not the language of ordinary events in routine commerce. In our view, the text of Article XIX:1(a) of the GATT 1994, read in its ordinary meaning and in its context, demonstrates that safeguard measures were intended by the drafters of the GATT to be matters out of the ordinary, to be matters of urgency, to be, in short, "emergency actions." And, such "emergency actions" are to be invoked only in situations when, as a result of obligations incurred under the GATT 1994, a Member finds itself confronted with developments it had not "foreseen" or "expected" when it incurred that obligation. The remedy that Article XIX:1(a) allows in this situation is temporarily to "suspend the obligation in whole or in part or towithdrawormodify the concession". Thus, Article XIX is clearly, and in every way, an extraordinary remedy. * * *
We agree with the Panel that Articles 2.1 and 4.2(a) of the Agreement on Safeguards require[s] a demonstration not merely of any increase in imports, but, instead, of imports "in such increased quantities…and under such conditions as to cause or threaten to cause serious injury." In addition, we agree with the Panel that the specific provisions of Article 4.2(a) require that "the rate and amount of the increase in import…in absolute and relative terms" [emphasis in Report] must be evaluated. Thus, we do not dispute the Panel's view and ultimate conclusion that the competent authorities are required to consider the trends in imports over the period of investigation (rather than just comparing the end points) under Article 4.2(a). As a result, we agree with the Panel's conclusion that "Argentina did not adequately consider the intervening trends in imports, in particular the steady and significant declines in imports beginning in 1994, as well as the sensitivity of the analysis to the particular end points of the investigation period used." * * *
Although we agree with the Panel that the "increased quantities" of imports cannot be just any increase, we do not agree with the Panel that it is reasonable to examine the trend in imports over a fiveyear historical period. In our view, the use of the present tense of the verb phrase "is being imported" in both Article 2.1 of the Agreement on Safeguards and Article XIX:1(a) of the GATT 1994 indicates that it is necessary for the competent authorities to examine recent imports, and not simply trends in imports during the past five years - or, for that matter, during any other period of several years. In our view, the phrase "is being imported" implies that the increase in imports must have been sudden and recent.
We recall here our reasoning and conclusions above on the meaning of the phrase "as a result of unforeseen developments" in Article XIX:1(a) of the GATT 1994. We concluded there that the increased quantities of imports should have been "unforeseen" or "unexpected." We also believe that the phrase "in such increased quantities" in Article 2.1 of the Agreement on Safeguards and Article XIX:1(a) of the GATT 1994 is meaningful to this determination. In our view, the determination of whether the requirement of imports "in such increased quantities" is met is not a merely mathematical or technical determination. In other words, it is not enough for an investigation to show simply that imports of the product this year were more than last year-or five years ago. Again, and it bears repeating, not just any increased quantities of imports will suffice. There must be "such increased quantities" as to cause or threaten to cause serious injury to the domestic industry in order to fulfill this requirement for applying a safeguard measure. And this language in both Article 2.1 of the Agreement on Safeguards and Article XIX:1(a) of the GATT 1994, we believe, requires that the increase in imports must have been recent enough, sudden enough, sharp enough, and significant enough, both quantitatively and qualitatively, to cause or threaten to cause "serious injury." * * *We…uphold the Panel's ultimate conclusion that "Argentina's investigation provides no legal basis for the application of the definitive safeguard measure at issue, or any safeguard measure."
Decision. The Appellate Body agreed with the conclusion (but not completely with the reasoning) of the Panel that Argentina's investigation was inadequate under the standards of the WTO safeguard provisions.
What kind of "increased quantities" of imports must be found by the investigating authority to impose safeguard measures?

Question 15

BACKGROUND AND FACTS
Argentina conducted a safeguard investigation into imports of footwear during the period from 1991-1996 and found the following data related to absolute levels of imports:

Argentina then imposed safeguard measures that increased import duties on footwear from the bound rate of 35 percent to 200 percent. The European Community (now EU) and the United States brought an action at the WTO claiming that the data do not show an increase in absolute levels of imports as required by GATT Article XIX and the WTO Agreement on Safeguards. Argentina compared the 1991 figures to 1996 to show an increase. The EU and U.S. argued that using end points only was improper because it ignored intervening, declining trends over the period. A WTO panel held that Argentina's safeguard investigation was inadequate, and Argentina appealed to the WTO Appellate Body.
REPORT OF THE APPELLATE BODY
* * * We note once again, that Article XIX:1(a) requires that a product be imported "in such increased quantities and under such conditions as to cause or threaten serious injury to domestic producers." [emphasis in Report] Clearly, this is not the language of ordinary events in routine commerce. In our view, the text of Article XIX:1(a) of the GATT 1994, read in its ordinary meaning and in its context, demonstrates that safeguard measures were intended by the drafters of the GATT to be matters out of the ordinary, to be matters of urgency, to be, in short, "emergency actions." And, such "emergency actions" are to be invoked only in situations when, as a result of obligations incurred under the GATT 1994, a Member finds itself confronted with developments it had not "foreseen" or "expected" when it incurred that obligation. The remedy that Article XIX:1(a) allows in this situation is temporarily to "suspend the obligation in whole or in part or towithdrawormodify the concession". Thus, Article XIX is clearly, and in every way, an extraordinary remedy. * * *
We agree with the Panel that Articles 2.1 and 4.2(a) of the Agreement on Safeguards require[s] a demonstration not merely of any increase in imports, but, instead, of imports "in such increased quantities…and under such conditions as to cause or threaten to cause serious injury." In addition, we agree with the Panel that the specific provisions of Article 4.2(a) require that "the rate and amount of the increase in import…in absolute and relative terms" [emphasis in Report] must be evaluated. Thus, we do not dispute the Panel's view and ultimate conclusion that the competent authorities are required to consider the trends in imports over the period of investigation (rather than just comparing the end points) under Article 4.2(a). As a result, we agree with the Panel's conclusion that "Argentina did not adequately consider the intervening trends in imports, in particular the steady and significant declines in imports beginning in 1994, as well as the sensitivity of the analysis to the particular end points of the investigation period used." * * *
Although we agree with the Panel that the "increased quantities" of imports cannot be just any increase, we do not agree with the Panel that it is reasonable to examine the trend in imports over a fiveyear historical period. In our view, the use of the present tense of the verb phrase "is being imported" in both Article 2.1 of the Agreement on Safeguards and Article XIX:1(a) of the GATT 1994 indicates that it is necessary for the competent authorities to examine recent imports, and not simply trends in imports during the past five years - or, for that matter, during any other period of several years. In our view, the phrase "is being imported" implies that the increase in imports must have been sudden and recent.
We recall here our reasoning and conclusions above on the meaning of the phrase "as a result of unforeseen developments" in Article XIX:1(a) of the GATT 1994. We concluded there that the increased quantities of imports should have been "unforeseen" or "unexpected." We also believe that the phrase "in such increased quantities" in Article 2.1 of the Agreement on Safeguards and Article XIX:1(a) of the GATT 1994 is meaningful to this determination. In our view, the determination of whether the requirement of imports "in such increased quantities" is met is not a merely mathematical or technical determination. In other words, it is not enough for an investigation to show simply that imports of the product this year were more than last year-or five years ago. Again, and it bears repeating, not just any increased quantities of imports will suffice. There must be "such increased quantities" as to cause or threaten to cause serious injury to the domestic industry in order to fulfill this requirement for applying a safeguard measure. And this language in both Article 2.1 of the Agreement on Safeguards and Article XIX:1(a) of the GATT 1994, we believe, requires that the increase in imports must have been recent enough, sudden enough, sharp enough, and significant enough, both quantitatively and qualitatively, to cause or threaten to cause "serious injury." * * *We…uphold the Panel's ultimate conclusion that "Argentina's investigation provides no legal basis for the application of the definitive safeguard measure at issue, or any safeguard measure."
Decision. The Appellate Body agreed with the conclusion (but not completely with the reasoning) of the Panel that Argentina's investigation was inadequate under the standards of the WTO safeguard provisions.
Locate the Agreement on Safeguards and read Article 2. Why did Argentina's exemption for footwear imported from MERCOSUR countries violate the WTO Agreements?

Question 16

BACKGROUND AND FACTS
Rhodia Pharma Solutions is one of the world's leading manufacturers of specialty chemicals, including acetylsalicylic acid (bulk aspirin). With corporate headquarters in France, it has about 25,000 employees in offices and manufacturing plants in the United States and throughout the world. In 1999, Rhodia filed a petition with the Department of Commerce (ITA) alleging that imports from the People's Republic of China (PRC) were being dumped in the United States for less than fair value. Based on industry information, Rhodia believed that their customers were paying less than half of Rhodia's price for the same product. No other firms joined the petition, and Rhodia was apparently the only producer of aspirin in the United States at the time. Rhodia's petition identified several potential Chinese exporters of bulk aspirin. Only two Chinese firms, Jilin and Shandong, responded to the petition. The ITA sent questionnaires to Jilin and Shandong and to the Chinese government, asking that it be forwarded to other Chinese producers. Jilin and Shandong responded with the price and market information requested by the ITA. No other Chinese firms responded. After an investigation, the agency issued this preliminary determination.
PRELIMINARY DETERMINATION
The ITA has treated the PRC as a nonmarket economy ("NME") country in all past antidumping investigations. A designation as an NME remains in effect until it is revoked by the ITA.
Separate Rates: Both Jilin and Shandong have requested separate company-specific rates. These companies have stated that they are privately owned companies with no element of government ownership or control. To establish whether a firm is sufficiently independent from government control to be entitled to a separate rate, the ITA analyzes each exporting entity. Under the separate rates criteria, the ITA assigns separate rates in NME cases only if the respondents can demonstrate the absence of both de jure and de facto governmental control over export activities.
Absence of De Jure Control: The respondents have placed on the record a number of documents to demonstrate absence of de jure government control, including the Foreign Trade Law of the People's Republic of China and the Company Law of the People's Republic of China. The ITA has analyzed these laws in prior cases and found that they establish an absence of de jure control…over export pricing and marketing decisions of firms.
Absence of De Facto Control: Shandong and Jilin have each asserted the following: (1) they establish their own export prices; (2) they negotiate contracts without guidance from any governmental entities or organizations; (3) they make their own personnel decisions; and (4) they retain the proceeds of their export sales and use profits according to their business needs without any restrictions. Additionally, these two respondents have stated that they do not coordinate or consult with other exporters regarding their pricing. This information supports a preliminary finding that there is no de facto governmental control of the export functions of these companies. Consequently, we preliminarily determine that both responding exporters have met the criteria for the application of separate rates.
Use of Facts Available: The PRC-Wide Rate: U.S. import statistics indicate that the total quantity of U.S. imports of aspirin from the PRC is greater than that reported by Jilin and Shandong…. Accordingly, we are applying a single antidumping deposit rate-the PRC-wide rate-to all exporters [other than Jilin and Shandong] based on our presumption that the export activities of the companies that failed to respond to the ITA's questionnaire are controlled by the PRC government. The PRC-wide antidumping rate is based on adverse facts available. The exporters that decided not to respond in any form to the ITA's questionnaire failed to act to the best of their ability in this investigation. Thus-we are assigning the highest margin in the petition, 144.02 percent, which is higher than any of the calculated margins. * * *
Normal Value in the Surrogate Country: [The Act] requires the ITA to value the NME producer's factors of production, to the extent possible, in one or more market economy countries that: (1) Are at a level of economic development comparable to that of the NME, and (2) are significant producers of comparable merchandise. The ITA has determined that India, Pakistan, Sri Lanka, Egypt, Indonesia, and the Philippines are countries comparable to the PRC in terms of overall economic development. We have further determined that India is a significant producer of comparable merchandise. Accordingly, we have calculated NV using mainly Indian values, and in some cases U.S. export values, for the PRC producers' factors of production. * * *
Factors of Production: [W]e calculated NV based on factors of production reported by the companies in the PRC which produced aspirin and sold aspirin to the United States. Our NV calculation included amounts for materials, labor, energy, overhead, SG A, and profit. To calculate NV, the reported unit factor quantities were multiplied by publicly available Indian and U.S. export price values.
Decision. Based on the calculations of normal value, two producers, Jilin and Shandong, were able to show that their export pricing was not under government control and received separate antidumping duty rates based on their individual dumping margins (which ranged from 4 to 42 percent). Bulk aspirin imports from all other Chinese exporters received the PRC-wide rate of 144 percent.
Comment. Shortly thereafter, the Court of International Trade reversed parts of the ITA's methodology of obtaining surrogate values for certain factors of production because it was not based on substantial evidence. Rhodia v. U.S. 240 F. Supp. 2d 1247 (CIT 2002). The ITA then changed its methods of calculating overhead and labor, with the result that Jilin and Shandong's antidumping duties were cut to zero, although the PRC-wide rate was not affected. In 2003, a Rhodia representative stated in testimony before the U.S. House of Representatives that at first the new duties had helped it regain customers and become profitable again, but when ITA changed its methodology and the antidumping duties disappeared, so did its customers. Rhodia's business in the United States had been devastated. And with that, Rhodia closed the last remaining aspirin plant in America and moved it to-you guessed it-China. A few years later another Chinese importer of bulk aspirin, Bimeda, petitioned for a review of the antidumping duty order, asking that the antidumping duties be removed. Its logic was that since Rhodia had closed its U.S. plant, and there was no longer any aspirin produced in the U.S., that there was no longer any "like domestic product"-and therefore antidumping duties were now inapplicable. The ITA agreed. (69 FR 35286; 69 FR 77726).
What are the special problems of determining the dumping margin of goods exported from an NME country?

Question 17

BACKGROUND AND FACTS
Rhodia Pharma Solutions is one of the world's leading manufacturers of specialty chemicals, including acetylsalicylic acid (bulk aspirin). With corporate headquarters in France, it has about 25,000 employees in offices and manufacturing plants in the United States and throughout the world. In 1999, Rhodia filed a petition with the Department of Commerce (ITA) alleging that imports from the People's Republic of China (PRC) were being dumped in the United States for less than fair value. Based on industry information, Rhodia believed that their customers were paying less than half of Rhodia's price for the same product. No other firms joined the petition, and Rhodia was apparently the only producer of aspirin in the United States at the time. Rhodia's petition identified several potential Chinese exporters of bulk aspirin. Only two Chinese firms, Jilin and Shandong, responded to the petition. The ITA sent questionnaires to Jilin and Shandong and to the Chinese government, asking that it be forwarded to other Chinese producers. Jilin and Shandong responded with the price and market information requested by the ITA. No other Chinese firms responded. After an investigation, the agency issued this preliminary determination.
PRELIMINARY DETERMINATION
The ITA has treated the PRC as a nonmarket economy ("NME") country in all past antidumping investigations. A designation as an NME remains in effect until it is revoked by the ITA.
Separate Rates: Both Jilin and Shandong have requested separate company-specific rates. These companies have stated that they are privately owned companies with no element of government ownership or control. To establish whether a firm is sufficiently independent from government control to be entitled to a separate rate, the ITA analyzes each exporting entity. Under the separate rates criteria, the ITA assigns separate rates in NME cases only if the respondents can demonstrate the absence of both de jure and de facto governmental control over export activities.
Absence of De Jure Control: The respondents have placed on the record a number of documents to demonstrate absence of de jure government control, including the Foreign Trade Law of the People's Republic of China and the Company Law of the People's Republic of China. The ITA has analyzed these laws in prior cases and found that they establish an absence of de jure control…over export pricing and marketing decisions of firms.
Absence of De Facto Control: Shandong and Jilin have each asserted the following: (1) they establish their own export prices; (2) they negotiate contracts without guidance from any governmental entities or organizations; (3) they make their own personnel decisions; and (4) they retain the proceeds of their export sales and use profits according to their business needs without any restrictions. Additionally, these two respondents have stated that they do not coordinate or consult with other exporters regarding their pricing. This information supports a preliminary finding that there is no de facto governmental control of the export functions of these companies. Consequently, we preliminarily determine that both responding exporters have met the criteria for the application of separate rates.
Use of Facts Available: The PRC-Wide Rate: U.S. import statistics indicate that the total quantity of U.S. imports of aspirin from the PRC is greater than that reported by Jilin and Shandong…. Accordingly, we are applying a single antidumping deposit rate-the PRC-wide rate-to all exporters [other than Jilin and Shandong] based on our presumption that the export activities of the companies that failed to respond to the ITA's questionnaire are controlled by the PRC government. The PRC-wide antidumping rate is based on adverse facts available. The exporters that decided not to respond in any form to the ITA's questionnaire failed to act to the best of their ability in this investigation. Thus-we are assigning the highest margin in the petition, 144.02 percent, which is higher than any of the calculated margins. * * *
Normal Value in the Surrogate Country: [The Act] requires the ITA to value the NME producer's factors of production, to the extent possible, in one or more market economy countries that: (1) Are at a level of economic development comparable to that of the NME, and (2) are significant producers of comparable merchandise. The ITA has determined that India, Pakistan, Sri Lanka, Egypt, Indonesia, and the Philippines are countries comparable to the PRC in terms of overall economic development. We have further determined that India is a significant producer of comparable merchandise. Accordingly, we have calculated NV using mainly Indian values, and in some cases U.S. export values, for the PRC producers' factors of production. * * *
Factors of Production: [W]e calculated NV based on factors of production reported by the companies in the PRC which produced aspirin and sold aspirin to the United States. Our NV calculation included amounts for materials, labor, energy, overhead, SG A, and profit. To calculate NV, the reported unit factor quantities were multiplied by publicly available Indian and U.S. export price values.
Decision. Based on the calculations of normal value, two producers, Jilin and Shandong, were able to show that their export pricing was not under government control and received separate antidumping duty rates based on their individual dumping margins (which ranged from 4 to 42 percent). Bulk aspirin imports from all other Chinese exporters received the PRC-wide rate of 144 percent.
Comment. Shortly thereafter, the Court of International Trade reversed parts of the ITA's methodology of obtaining surrogate values for certain factors of production because it was not based on substantial evidence. Rhodia v. U.S. 240 F. Supp. 2d 1247 (CIT 2002). The ITA then changed its methods of calculating overhead and labor, with the result that Jilin and Shandong's antidumping duties were cut to zero, although the PRC-wide rate was not affected. In 2003, a Rhodia representative stated in testimony before the U.S. House of Representatives that at first the new duties had helped it regain customers and become profitable again, but when ITA changed its methodology and the antidumping duties disappeared, so did its customers. Rhodia's business in the United States had been devastated. And with that, Rhodia closed the last remaining aspirin plant in America and moved it to-you guessed it-China. A few years later another Chinese importer of bulk aspirin, Bimeda, petitioned for a review of the antidumping duty order, asking that the antidumping duties be removed. Its logic was that since Rhodia had closed its U.S. plant, and there was no longer any aspirin produced in the U.S., that there was no longer any "like domestic product"-and therefore antidumping duties were now inapplicable. The ITA agreed. (69 FR 35286; 69 FR 77726).
What is the difference between de jure and de facto control by the government over Jilin and Shandong? Did either exist?

Question 18

BACKGROUND AND FACTS

Question 19

BACKGROUND AND FACTS
Rhodia Pharma Solutions is one of the world's leading manufacturers of specialty chemicals, including acetylsalicylic acid (bulk aspirin). With corporate headquarters in France, it has about 25,000 employees in offices and manufacturing plants in the United States and throughout the world. In 1999, Rhodia filed a petition with the Department of Commerce (ITA) alleging that imports from the People's Republic of China (PRC) were being dumped in the United States for less than fair value. Based on industry information, Rhodia believed that their customers were paying less than half of Rhodia's price for the same product. No other firms joined the petition, and Rhodia was apparently the only producer of aspirin in the United States at the time. Rhodia's petition identified several potential Chinese exporters of bulk aspirin. Only two Chinese firms, Jilin and Shandong, responded to the petition. The ITA sent questionnaires to Jilin and Shandong and to the Chinese government, asking that it be forwarded to other Chinese producers. Jilin and Shandong responded with the price and market information requested by the ITA. No other Chinese firms responded. After an investigation, the agency issued this preliminary determination.
PRELIMINARY DETERMINATION
The ITA has treated the PRC as a nonmarket economy ("NME") country in all past antidumping investigations. A designation as an NME remains in effect until it is revoked by the ITA.
Separate Rates: Both Jilin and Shandong have requested separate company-specific rates. These companies have stated that they are privately owned companies with no element of government ownership or control. To establish whether a firm is sufficiently independent from government control to be entitled to a separate rate, the ITA analyzes each exporting entity. Under the separate rates criteria, the ITA assigns separate rates in NME cases only if the respondents can demonstrate the absence of both de jure and de facto governmental control over export activities.
Absence of De Jure Control: The respondents have placed on the record a number of documents to demonstrate absence of de jure government control, including the Foreign Trade Law of the People's Republic of China and the Company Law of the People's Republic of China. The ITA has analyzed these laws in prior cases and found that they establish an absence of de jure control…over export pricing and marketing decisions of firms.
Absence of De Facto Control: Shandong and Jilin have each asserted the following: (1) they establish their own export prices; (2) they negotiate contracts without guidance from any governmental entities or organizations; (3) they make their own personnel decisions; and (4) they retain the proceeds of their export sales and use profits according to their business needs without any restrictions. Additionally, these two respondents have stated that they do not coordinate or consult with other exporters regarding their pricing. This information supports a preliminary finding that there is no de facto governmental control of the export functions of these companies. Consequently, we preliminarily determine that both responding exporters have met the criteria for the application of separate rates.
Use of Facts Available: The PRC-Wide Rate: U.S. import statistics indicate that the total quantity of U.S. imports of aspirin from the PRC is greater than that reported by Jilin and Shandong…. Accordingly, we are applying a single antidumping deposit rate-the PRC-wide rate-to all exporters [other than Jilin and Shandong] based on our presumption that the export activities of the companies that failed to respond to the ITA's questionnaire are controlled by the PRC government. The PRC-wide antidumping rate is based on adverse facts available. The exporters that decided not to respond in any form to the ITA's questionnaire failed to act to the best of their ability in this investigation. Thus-we are assigning the highest margin in the petition, 144.02 percent, which is higher than any of the calculated margins. * * *
Normal Value in the Surrogate Country: [The Act] requires the ITA to value the NME producer's factors of production, to the extent possible, in one or more market economy countries that: (1) Are at a level of economic development comparable to that of the NME, and (2) are significant producers of comparable merchandise. The ITA has determined that India, Pakistan, Sri Lanka, Egypt, Indonesia, and the Philippines are countries comparable to the PRC in terms of overall economic development. We have further determined that India is a significant producer of comparable merchandise. Accordingly, we have calculated NV using mainly Indian values, and in some cases U.S. export values, for the PRC producers' factors of production. * * *
Factors of Production: [W]e calculated NV based on factors of production reported by the companies in the PRC which produced aspirin and sold aspirin to the United States. Our NV calculation included amounts for materials, labor, energy, overhead, SG A, and profit. To calculate NV, the reported unit factor quantities were multiplied by publicly available Indian and U.S. export price values.
Decision. Based on the calculations of normal value, two producers, Jilin and Shandong, were able to show that their export pricing was not under government control and received separate antidumping duty rates based on their individual dumping margins (which ranged from 4 to 42 percent). Bulk aspirin imports from all other Chinese exporters received the PRC-wide rate of 144 percent.
Comment. Shortly thereafter, the Court of International Trade reversed parts of the ITA's methodology of obtaining surrogate values for certain factors of production because it was not based on substantial evidence. Rhodia v. U.S. 240 F. Supp. 2d 1247 (CIT 2002). The ITA then changed its methods of calculating overhead and labor, with the result that Jilin and Shandong's antidumping duties were cut to zero, although the PRC-wide rate was not affected. In 2003, a Rhodia representative stated in testimony before the U.S. House of Representatives that at first the new duties had helped it regain customers and become profitable again, but when ITA changed its methodology and the antidumping duties disappeared, so did its customers. Rhodia's business in the United States had been devastated. And with that, Rhodia closed the last remaining aspirin plant in America and moved it to-you guessed it-China. A few years later another Chinese importer of bulk aspirin, Bimeda, petitioned for a review of the antidumping duty order, asking that the antidumping duties be removed. Its logic was that since Rhodia had closed its U.S. plant, and there was no longer any aspirin produced in the U.S., that there was no longer any "like domestic product"-and therefore antidumping duties were now inapplicable. The ITA agreed. (69 FR 35286; 69 FR 77726).
What are the functions of U.S. antidumping duty laws? Explain.

Question 20

BACKGROUND AND FACTS
Rhodia Pharma Solutions is one of the world's leading manufacturers of specialty chemicals, including acetylsalicylic acid (bulk aspirin). With corporate headquarters in France, it has about 25,000 employees in offices and manufacturing plants in the United States and throughout the world. In 1999, Rhodia filed a petition with the Department of Commerce (ITA) alleging that imports from the People's Republic of China (PRC) were being dumped in the United States for less than fair value. Based on industry information, Rhodia believed that their customers were paying less than half of Rhodia's price for the same product. No other firms joined the petition, and Rhodia was apparently the only producer of aspirin in the United States at the time. Rhodia's petition identified several potential Chinese exporters of bulk aspirin. Only two Chinese firms, Jilin and Shandong, responded to the petition. The ITA sent questionnaires to Jilin and Shandong and to the Chinese government, asking that it be forwarded to other Chinese producers. Jilin and Shandong responded with the price and market information requested by the ITA. No other Chinese firms responded. After an investigation, the agency issued this preliminary determination.
PRELIMINARY DETERMINATION
The ITA has treated the PRC as a nonmarket economy ("NME") country in all past antidumping investigations. A designation as an NME remains in effect until it is revoked by the ITA.
Separate Rates: Both Jilin and Shandong have requested separate company-specific rates. These companies have stated that they are privately owned companies with no element of government ownership or control. To establish whether a firm is sufficiently independent from government control to be entitled to a separate rate, the ITA analyzes each exporting entity. Under the separate rates criteria, the ITA assigns separate rates in NME cases only if the respondents can demonstrate the absence of both de jure and de facto governmental control over export activities.
Absence of De Jure Control: The respondents have placed on the record a number of documents to demonstrate absence of de jure government control, including the Foreign Trade Law of the People's Republic of China and the Company Law of the People's Republic of China. The ITA has analyzed these laws in prior cases and found that they establish an absence of de jure control…over export pricing and marketing decisions of firms.
Absence of De Facto Control: Shandong and Jilin have each asserted the following: (1) they establish their own export prices; (2) they negotiate contracts without guidance from any governmental entities or organizations; (3) they make their own personnel decisions; and (4) they retain the proceeds of their export sales and use profits according to their business needs without any restrictions. Additionally, these two respondents have stated that they do not coordinate or consult with other exporters regarding their pricing. This information supports a preliminary finding that there is no de facto governmental control of the export functions of these companies. Consequently, we preliminarily determine that both responding exporters have met the criteria for the application of separate rates.
Use of Facts Available: The PRC-Wide Rate: U.S. import statistics indicate that the total quantity of U.S. imports of aspirin from the PRC is greater than that reported by Jilin and Shandong…. Accordingly, we are applying a single antidumping deposit rate-the PRC-wide rate-to all exporters [other than Jilin and Shandong] based on our presumption that the export activities of the companies that failed to respond to the ITA's questionnaire are controlled by the PRC government. The PRC-wide antidumping rate is based on adverse facts available. The exporters that decided not to respond in any form to the ITA's questionnaire failed to act to the best of their ability in this investigation. Thus-we are assigning the highest margin in the petition, 144.02 percent, which is higher than any of the calculated margins. * * *
Normal Value in the Surrogate Country: [The Act] requires the ITA to value the NME producer's factors of production, to the extent possible, in one or more market economy countries that: (1) Are at a level of economic development comparable to that of the NME, and (2) are significant producers of comparable merchandise. The ITA has determined that India, Pakistan, Sri Lanka, Egypt, Indonesia, and the Philippines are countries comparable to the PRC in terms of overall economic development. We have further determined that India is a significant producer of comparable merchandise. Accordingly, we have calculated NV using mainly Indian values, and in some cases U.S. export values, for the PRC producers' factors of production. * * *
Factors of Production: [W]e calculated NV based on factors of production reported by the companies in the PRC which produced aspirin and sold aspirin to the United States. Our NV calculation included amounts for materials, labor, energy, overhead, SG A, and profit. To calculate NV, the reported unit factor quantities were multiplied by publicly available Indian and U.S. export price values.
Decision. Based on the calculations of normal value, two producers, Jilin and Shandong, were able to show that their export pricing was not under government control and received separate antidumping duty rates based on their individual dumping margins (which ranged from 4 to 42 percent). Bulk aspirin imports from all other Chinese exporters received the PRC-wide rate of 144 percent.
Comment. Shortly thereafter, the Court of International Trade reversed parts of the ITA's methodology of obtaining surrogate values for certain factors of production because it was not based on substantial evidence. Rhodia v. U.S. 240 F. Supp. 2d 1247 (CIT 2002). The ITA then changed its methods of calculating overhead and labor, with the result that Jilin and Shandong's antidumping duties were cut to zero, although the PRC-wide rate was not affected. In 2003, a Rhodia representative stated in testimony before the U.S. House of Representatives that at first the new duties had helped it regain customers and become profitable again, but when ITA changed its methodology and the antidumping duties disappeared, so did its customers. Rhodia's business in the United States had been devastated. And with that, Rhodia closed the last remaining aspirin plant in America and moved it to-you guessed it-China. A few years later another Chinese importer of bulk aspirin, Bimeda, petitioned for a review of the antidumping duty order, asking that the antidumping duties be removed. Its logic was that since Rhodia had closed its U.S. plant, and there was no longer any aspirin produced in the U.S., that there was no longer any "like domestic product"-and therefore antidumping duties were now inapplicable. The ITA agreed. (69 FR 35286; 69 FR 77726).
While many U.S. jobs were unfortunately at stake in the proceedings, do you not see irony in the fact that U.S. laws were used to protect a French multinational (Rhodia) from low-cost dumping by a Chinese company, all while maintaining higher aspirin prices for American consumers?

Question 21

BACKGROUND AND FACTS
In 1982, the ITC instituted an investigation to determine if motorcycles having engines with displacement more than 700 cubic centimeters were being imported into the United States in such increased quantities as to be a substantial cause of serious injury, or threat thereof, to domestic industry producing like or directly competitive articles. The investigation was in response to a petition for relief filed by Harley-Davidson Motor Co., a U.S. firm. The investigation showed that from 1977 to 1981, U.S. shipments of motorcycles grew by 17 percent, with domestic production capacity increasing by nearly 82 percent (largely as a result of American Honda's increased production in the United States). During that same period, the number of U.S. jobs increased by 30 percent. In 1982, however, consumption fell, domestic shipments declined, and employment dropped. In the first nine months of 1982, domestic shipments fell by 13 percent and inventories rose, leaving large numbers of unsold motorcycles. Production during that period showed a decline of 36 percent, profits were down by 20 percent, and employment was down by 12 percent. Inventoriesof importedmotorcyclesdoubledinthatperiod, representing a tremendous threat to Harley-Davidson. The country as a whole was in the midst of a recession, and demand for heavyweightmotorcycles was depressed.
VIEWS OF CHAIRMAN ALFRED ECKES
* * *
It is evident that inventories of importedmotorcycles have increased significantly during the most recent period. These increases exceed growth in consumption and surpass historical shipment trends for importers. The mere presence of such a huge inventory has had and will continue to have a depressing effect on the domestic industry. Also, given the natural desire of consumers for current design and up-to-date performance capabilities, motorcycles cannot be withheld from the market indefinitely. They must be sold. And given the realities of the market place, there is a strong incentive to liquidate these inventories as quickly as possible. The impact of such a massive inventory build-up on the domestic industry is imminent, not remote and conjectural.
I have seen no persuasive evidence that would suggest imports of Japanese heavyweight motorcycles will decline in the near future. Instead, the Japanese motorcycle industry is export oriented…exporting in 1982 some 91 percent of the heavyweight motorcycles produced in Japan. Because motorcycles of more than 750cc, which include the merchandise under investigation here, cannot be sold in Japan under current law, Japanese producers cannot consider domestic sales as a replacement for exports. The other option, which they apparently pursued in 1982, is to push export sales in the face of declining demand in the U.S. market. This tactic helps to maintain output and employment in the producing country but it shifts some of the burden of adjustment to competitors in the importing country. Evidence that the Japanese producers will seek to maintain a high level of export sales to the U.S. is found in an estimate of the Japanese Automobile Manufacturer's Association. This organization estimated that exports of 700cc or over motorcycles to the United States for 1982 and 1983 would average 450,000 units or less for both years combined. That figure results in import levels higher than recent levels.
Finally, imports of finished heavyweight motorcycles pose a "substantial cause" of threat of serious injury. Under section 201(b)(4), a "substantial cause" is a "cause which is important and not less than any other cause." In my view, there is no cause more important than imports threatening injury to the domestic motorcycle industry.
In reaching this conclusion I have considered the significance of the present recession in my analysis. Without a doubt the unusual length and severity of the present recession has created unique problems for the domestic motorcycle industry. Without a doubt the rise in joblessness, particularly among blue-collar workers, who constitute the prime market for heavyweight motorcycles, has had a severe impact on the domestic industry. Nonetheless, if the Commission were to analyze the causation question in this way, it would be impossible in many cases for a cyclical industry experiencing serious injury to obtain relief under section 201 during a recession. In my opinion Congress could not have intended for the Commission to interpret the law this way.
There are other reasons for doubting the domestic recession is a substantial cause of injury or threat to the U.S. industry. During the current recession, imports from Japan have increased their market share from domestic producers, gaining nearly six percentage points. Imports have taken market share from the domestic facilities of Honda and Kawasaki as well as Harley-Davidson.
Moreover, while the current recession has undoubtedly depressed demand for heavyweight motorcycles, economic conditions are beginning to improve in this country…As demand responds to this improvement, the domestic industry will be pre-empted from participating in any growth because of the presence of a oneyear supply of motorcycles poised and ready to capture market share. Consequently, not the recession, but the inventory of motorcycles coupled with anticipated future imports constitute the greatest threat of injury in the months ahead.
Decision. The commission recommended that incremental duties be imposed for five years at the declining rates of 45, 35, 20, 15, and 10 percent, in addition to the existing rate of 4.4 percent ad valorem.
Comment. President Reagan followed the commission's recommendations, but added tariff-rate quotas of 5,000 units to keep the U.S. market open to European firms that exported to the United States in smaller quantities. The remedy has been considered one of the most successful uses of safeguards. Under protection, Harley- Davidson recapitalized, introduced quality control processes and just-in-time inventory control, and regained its competitiveness. The safeguards were discontinued in 1987. Within a few years, Harley was one of the most demanded motorcycles in the world, including in Japan. In 2012, 35 percent of Harley's saleswere outside the U.S.
In the early 1960s, Honda entered the U.S. motorcycle market with the slogan, "You meet the nicest people on a Honda." During the next two decades, the Japanese company not only made motorcycling acceptable and fun but it also introduced motorcycles known for quality, dependability, and easy starting. By 1982, Japanese motorcycles had reached their peak sales in the United States. In the meantime, Harley-Davidson was plagued with quality and image problems. Do you think this should have been considered in the ITC's recommendations or considered by President Reagan?

Question 22

BACKGROUND AND FACTS
In 1982, the ITC instituted an investigation to determine if motorcycles having engines with displacement more than 700 cubic centimeters were being imported into the United States in such increased quantities as to be a substantial cause of serious injury, or threat thereof, to domestic industry producing like or directly competitive articles. The investigation was in response to a petition for relief filed by Harley-Davidson Motor Co., a U.S. firm. The investigation showed that from 1977 to 1981, U.S. shipments of motorcycles grew by 17 percent, with domestic production capacity increasing by nearly 82 percent (largely as a result of American Honda's increased production in the United States). During that same period, the number of U.S. jobs increased by 30 percent. In 1982, however, consumption fell, domestic shipments declined, and employment dropped. In the first nine months of 1982, domestic shipments fell by 13 percent and inventories rose, leaving large numbers of unsold motorcycles. Production during that period showed a decline of 36 percent, profits were down by 20 percent, and employment was down by 12 percent. Inventoriesof importedmotorcyclesdoubledinthatperiod, representing a tremendous threat to Harley-Davidson. The country as a whole was in the midst of a recession, and demand for heavyweightmotorcycles was depressed.
VIEWS OF CHAIRMAN ALFRED ECKES
* * *
It is evident that inventories of importedmotorcycles have increased significantly during the most recent period. These increases exceed growth in consumption and surpass historical shipment trends for importers. The mere presence of such a huge inventory has had and will continue to have a depressing effect on the domestic industry. Also, given the natural desire of consumers for current design and up-to-date performance capabilities, motorcycles cannot be withheld from the market indefinitely. They must be sold. And given the realities of the market place, there is a strong incentive to liquidate these inventories as quickly as possible. The impact of such a massive inventory build-up on the domestic industry is imminent, not remote and conjectural.
I have seen no persuasive evidence that would suggest imports of Japanese heavyweight motorcycles will decline in the near future. Instead, the Japanese motorcycle industry is export oriented…exporting in 1982 some 91 percent of the heavyweight motorcycles produced in Japan. Because motorcycles of more than 750cc, which include the merchandise under investigation here, cannot be sold in Japan under current law, Japanese producers cannot consider domestic sales as a replacement for exports. The other option, which they apparently pursued in 1982, is to push export sales in the face of declining demand in the U.S. market. This tactic helps to maintain output and employment in the producing country but it shifts some of the burden of adjustment to competitors in the importing country. Evidence that the Japanese producers will seek to maintain a high level of export sales to the U.S. is found in an estimate of the Japanese Automobile Manufacturer's Association. This organization estimated that exports of 700cc or over motorcycles to the United States for 1982 and 1983 would average 450,000 units or less for both years combined. That figure results in import levels higher than recent levels.
Finally, imports of finished heavyweight motorcycles pose a "substantial cause" of threat of serious injury. Under section 201(b)(4), a "substantial cause" is a "cause which is important and not less than any other cause." In my view, there is no cause more important than imports threatening injury to the domestic motorcycle industry.
In reaching this conclusion I have considered the significance of the present recession in my analysis. Without a doubt the unusual length and severity of the present recession has created unique problems for the domestic motorcycle industry. Without a doubt the rise in joblessness, particularly among blue-collar workers, who constitute the prime market for heavyweight motorcycles, has had a severe impact on the domestic industry. Nonetheless, if the Commission were to analyze the causation question in this way, it would be impossible in many cases for a cyclical industry experiencing serious injury to obtain relief under section 201 during a recession. In my opinion Congress could not have intended for the Commission to interpret the law this way.
There are other reasons for doubting the domestic recession is a substantial cause of injury or threat to the U.S. industry. During the current recession, imports from Japan have increased their market share from domestic producers, gaining nearly six percentage points. Imports have taken market share from the domestic facilities of Honda and Kawasaki as well as Harley-Davidson.
Moreover, while the current recession has undoubtedly depressed demand for heavyweight motorcycles, economic conditions are beginning to improve in this country…As demand responds to this improvement, the domestic industry will be pre-empted from participating in any growth because of the presence of a oneyear supply of motorcycles poised and ready to capture market share. Consequently, not the recession, but the inventory of motorcycles coupled with anticipated future imports constitute the greatest threat of injury in the months ahead.
Decision. The commission recommended that incremental duties be imposed for five years at the declining rates of 45, 35, 20, 15, and 10 percent, in addition to the existing rate of 4.4 percent ad valorem.
Comment. President Reagan followed the commission's recommendations, but added tariff-rate quotas of 5,000 units to keep the U.S. market open to European firms that exported to the United States in smaller quantities. The remedy has been considered one of the most successful uses of safeguards. Under protection, Harley- Davidson recapitalized, introduced quality control processes and just-in-time inventory control, and regained its competitiveness. The safeguards were discontinued in 1987. Within a few years, Harley was one of the most demanded motorcycles in the world, including in Japan. In 2012, 35 percent of Harley's saleswere outside the U.S.
Assume that a domestic firm is not competitive in price and quality with foreign firms, but that competition by high tariffs protects it. What are the effects of the protection on the firm in the short term? How might it affect the firm's competitiveness in the long term?

Question 23

BACKGROUND AND FACTS
In 1982, the ITC instituted an investigation to determine if motorcycles having engines with displacement more than 700 cubic centimeters were being imported into the United States in such increased quantities as to be a substantial cause of serious injury, or threat thereof, to domestic industry producing like or directly competitive articles. The investigation was in response to a petition for relief filed by Harley-Davidson Motor Co., a U.S. firm. The investigation showed that from 1977 to 1981, U.S. shipments of motorcycles grew by 17 percent, with domestic production capacity increasing by nearly 82 percent (largely as a result of American Honda's increased production in the United States). During that same period, the number of U.S. jobs increased by 30 percent. In 1982, however, consumption fell, domestic shipments declined, and employment dropped. In the first nine months of 1982, domestic shipments fell by 13 percent and inventories rose, leaving large numbers of unsold motorcycles. Production during that period showed a decline of 36 percent, profits were down by 20 percent, and employment was down by 12 percent. Inventoriesof importedmotorcyclesdoubledinthatperiod, representing a tremendous threat to Harley-Davidson. The country as a whole was in the midst of a recession, and demand for heavyweightmotorcycles was depressed.
VIEWS OF CHAIRMAN ALFRED ECKES
* * *
It is evident that inventories of importedmotorcycles have increased significantly during the most recent period. These increases exceed growth in consumption and surpass historical shipment trends for importers. The mere presence of such a huge inventory has had and will continue to have a depressing effect on the domestic industry. Also, given the natural desire of consumers for current design and up-to-date performance capabilities, motorcycles cannot be withheld from the market indefinitely. They must be sold. And given the realities of the market place, there is a strong incentive to liquidate these inventories as quickly as possible. The impact of such a massive inventory build-up on the domestic industry is imminent, not remote and conjectural.
I have seen no persuasive evidence that would suggest imports of Japanese heavyweight motorcycles will decline in the near future. Instead, the Japanese motorcycle industry is export oriented…exporting in 1982 some 91 percent of the heavyweight motorcycles produced in Japan. Because motorcycles of more than 750cc, which include the merchandise under investigation here, cannot be sold in Japan under current law, Japanese producers cannot consider domestic sales as a replacement for exports. The other option, which they apparently pursued in 1982, is to push export sales in the face of declining demand in the U.S. market. This tactic helps to maintain output and employment in the producing country but it shifts some of the burden of adjustment to competitors in the importing country. Evidence that the Japanese producers will seek to maintain a high level of export sales to the U.S. is found in an estimate of the Japanese Automobile Manufacturer's Association. This organization estimated that exports of 700cc or over motorcycles to the United States for 1982 and 1983 would average 450,000 units or less for both years combined. That figure results in import levels higher than recent levels.
Finally, imports of finished heavyweight motorcycles pose a "substantial cause" of threat of serious injury. Under section 201(b)(4), a "substantial cause" is a "cause which is important and not less than any other cause." In my view, there is no cause more important than imports threatening injury to the domestic motorcycle industry.
In reaching this conclusion I have considered the significance of the present recession in my analysis. Without a doubt the unusual length and severity of the present recession has created unique problems for the domestic motorcycle industry. Without a doubt the rise in joblessness, particularly among blue-collar workers, who constitute the prime market for heavyweight motorcycles, has had a severe impact on the domestic industry. Nonetheless, if the Commission were to analyze the causation question in this way, it would be impossible in many cases for a cyclical industry experiencing serious injury to obtain relief under section 201 during a recession. In my opinion Congress could not have intended for the Commission to interpret the law this way.
There are other reasons for doubting the domestic recession is a substantial cause of injury or threat to the U.S. industry. During the current recession, imports from Japan have increased their market share from domestic producers, gaining nearly six percentage points. Imports have taken market share from the domestic facilities of Honda and Kawasaki as well as Harley-Davidson.
Moreover, while the current recession has undoubtedly depressed demand for heavyweight motorcycles, economic conditions are beginning to improve in this country…As demand responds to this improvement, the domestic industry will be pre-empted from participating in any growth because of the presence of a oneyear supply of motorcycles poised and ready to capture market share. Consequently, not the recession, but the inventory of motorcycles coupled with anticipated future imports constitute the greatest threat of injury in the months ahead.
Decision. The commission recommended that incremental duties be imposed for five years at the declining rates of 45, 35, 20, 15, and 10 percent, in addition to the existing rate of 4.4 percent ad valorem.
Comment. President Reagan followed the commission's recommendations, but added tariff-rate quotas of 5,000 units to keep the U.S. market open to European firms that exported to the United States in smaller quantities. The remedy has been considered one of the most successful uses of safeguards. Under protection, Harley- Davidson recapitalized, introduced quality control processes and just-in-time inventory control, and regained its competitiveness. The safeguards were discontinued in 1987. Within a few years, Harley was one of the most demanded motorcycles in the world, including in Japan. In 2012, 35 percent of Harley's saleswere outside the U.S.
President Reagan later rejected recommendations to place quotas on footwear because of estimates it would have cost American consumers $3 billion in increased tariffs, and because there was no indication it would have helped American manufacturers return to competitiveness. How important do you think cost is to a president's decision?

Question 24

BACKGROUND AND FACTS
In 1982, the ITC instituted an investigation to determine if motorcycles having engines with displacement more than 700 cubic centimeters were being imported into the United States in such increased quantities as to be a substantial cause of serious injury, or threat thereof, to domestic industry producing like or directly competitive articles. The investigation was in response to a petition for relief filed by Harley-Davidson Motor Co., a U.S. firm. The investigation showed that from 1977 to 1981, U.S. shipments of motorcycles grew by 17 percent, with domestic production capacity increasing by nearly 82 percent (largely as a result of American Honda's increased production in the United States). During that same period, the number of U.S. jobs increased by 30 percent. In 1982, however, consumption fell, domestic shipments declined, and employment dropped. In the first nine months of 1982, domestic shipments fell by 13 percent and inventories rose, leaving large numbers of unsold motorcycles. Production during that period showed a decline of 36 percent, profits were down by 20 percent, and employment was down by 12 percent. Inventoriesof importedmotorcyclesdoubledinthatperiod, representing a tremendous threat to Harley-Davidson. The country as a whole was in the midst of a recession, and demand for heavyweightmotorcycles was depressed.
VIEWS OF CHAIRMAN ALFRED ECKES
* * *
It is evident that inventories of importedmotorcycles have increased significantly during the most recent period. These increases exceed growth in consumption and surpass historical shipment trends for importers. The mere presence of such a huge inventory has had and will continue to have a depressing effect on the domestic industry. Also, given the natural desire of consumers for current design and up-to-date performance capabilities, motorcycles cannot be withheld from the market indefinitely. They must be sold. And given the realities of the market place, there is a strong incentive to liquidate these inventories as quickly as possible. The impact of such a massive inventory build-up on the domestic industry is imminent, not remote and conjectural.
I have seen no persuasive evidence that would suggest imports of Japanese heavyweight motorcycles will decline in the near future. Instead, the Japanese motorcycle industry is export oriented…exporting in 1982 some 91 percent of the heavyweight motorcycles produced in Japan. Because motorcycles of more than 750cc, which include the merchandise under investigation here, cannot be sold in Japan under current law, Japanese producers cannot consider domestic sales as a replacement for exports. The other option, which they apparently pursued in 1982, is to push export sales in the face of declining demand in the U.S. market. This tactic helps to maintain output and employment in the producing country but it shifts some of the burden of adjustment to competitors in the importing country. Evidence that the Japanese producers will seek to maintain a high level of export sales to the U.S. is found in an estimate of the Japanese Automobile Manufacturer's Association. This organization estimated that exports of 700cc or over motorcycles to the United States for 1982 and 1983 would average 450,000 units or less for both years combined. That figure results in import levels higher than recent levels.
Finally, imports of finished heavyweight motorcycles pose a "substantial cause" of threat of serious injury. Under section 201(b)(4), a "substantial cause" is a "cause which is important and not less than any other cause." In my view, there is no cause more important than imports threatening injury to the domestic motorcycle industry.
In reaching this conclusion I have considered the significance of the present recession in my analysis. Without a doubt the unusual length and severity of the present recession has created unique problems for the domestic motorcycle industry. Without a doubt the rise in joblessness, particularly among blue-collar workers, who constitute the prime market for heavyweight motorcycles, has had a severe impact on the domestic industry. Nonetheless, if the Commission were to analyze the causation question in this way, it would be impossible in many cases for a cyclical industry experiencing serious injury to obtain relief under section 201 during a recession. In my opinion Congress could not have intended for the Commission to interpret the law this way.
There are other reasons for doubting the domestic recession is a substantial cause of injury or threat to the U.S. industry. During the current recession, imports from Japan have increased their market share from domestic producers, gaining nearly six percentage points. Imports have taken market share from the domestic facilities of Honda and Kawasaki as well as Harley-Davidson.
Moreover, while the current recession has undoubtedly depressed demand for heavyweight motorcycles, economic conditions are beginning to improve in this country…As demand responds to this improvement, the domestic industry will be pre-empted from participating in any growth because of the presence of a oneyear supply of motorcycles poised and ready to capture market share. Consequently, not the recession, but the inventory of motorcycles coupled with anticipated future imports constitute the greatest threat of injury in the months ahead.
Decision. The commission recommended that incremental duties be imposed for five years at the declining rates of 45, 35, 20, 15, and 10 percent, in addition to the existing rate of 4.4 percent ad valorem.
Comment. President Reagan followed the commission's recommendations, but added tariff-rate quotas of 5,000 units to keep the U.S. market open to European firms that exported to the United States in smaller quantities. The remedy has been considered one of the most successful uses of safeguards. Under protection, Harley- Davidson recapitalized, introduced quality control processes and just-in-time inventory control, and regained its competitiveness. The safeguards were discontinued in 1987. Within a few years, Harley was one of the most demanded motorcycles in the world, including in Japan. In 2012, 35 percent of Harley's saleswere outside the U.S.
Although the administrative process is handled through a bipartisan, independent commission (the ITC), in what way might the process still be very political?

Question 25

BACKGROUND AND FACTS
In 1982, the ITC instituted an investigation to determine if motorcycles having engines with displacement more than 700 cubic centimeters were being imported into the United States in such increased quantities as to be a substantial cause of serious injury, or threat thereof, to domestic industry producing like or directly competitive articles. The investigation was in response to a petition for relief filed by Harley-Davidson Motor Co., a U.S. firm. The investigation showed that from 1977 to 1981, U.S. shipments of motorcycles grew by 17 percent, with domestic production capacity increasing by nearly 82 percent (largely as a result of American Honda's increased production in the United States). During that same period, the number of U.S. jobs increased by 30 percent. In 1982, however, consumption fell, domestic shipments declined, and employment dropped. In the first nine months of 1982, domestic shipments fell by 13 percent and inventories rose, leaving large numbers of unsold motorcycles. Production during that period showed a decline of 36 percent, profits were down by 20 percent, and employment was down by 12 percent. Inventoriesof importedmotorcyclesdoubledinthatperiod, representing a tremendous threat to Harley-Davidson. The country as a whole was in the midst of a recession, and demand for heavyweightmotorcycles was depressed.
VIEWS OF CHAIRMAN ALFRED ECKES
* * *
It is evident that inventories of importedmotorcycles have increased significantly during the most recent period. These increases exceed growth in consumption and surpass historical shipment trends for importers. The mere presence of such a huge inventory has had and will continue to have a depressing effect on the domestic industry. Also, given the natural desire of consumers for current design and up-to-date performance capabilities, motorcycles cannot be withheld from the market indefinitely. They must be sold. And given the realities of the market place, there is a strong incentive to liquidate these inventories as quickly as possible. The impact of such a massive inventory build-up on the domestic industry is imminent, not remote and conjectural.
I have seen no persuasive evidence that would suggest imports of Japanese heavyweight motorcycles will decline in the near future. Instead, the Japanese motorcycle industry is export oriented…exporting in 1982 some 91 percent of the heavyweight motorcycles produced in Japan. Because motorcycles of more than 750cc, which include the merchandise under investigation here, cannot be sold in Japan under current law, Japanese producers cannot consider domestic sales as a replacement for exports. The other option, which they apparently pursued in 1982, is to push export sales in the face of declining demand in the U.S. market. This tactic helps to maintain output and employment in the producing country but it shifts some of the burden of adjustment to competitors in the importing country. Evidence that the Japanese producers will seek to maintain a high level of export sales to the U.S. is found in an estimate of the Japanese Automobile Manufacturer's Association. This organization estimated that exports of 700cc or over motorcycles to the United States for 1982 and 1983 would average 450,000 units or less for both years combined. That figure results in import levels higher than recent levels.
Finally, imports of finished heavyweight motorcycles pose a "substantial cause" of threat of serious injury. Under section 201(b)(4), a "substantial cause" is a "cause which is important and not less than any other cause." In my view, there is no cause more important than imports threatening injury to the domestic motorcycle industry.
In reaching this conclusion I have considered the significance of the present recession in my analysis. Without a doubt the unusual length and severity of the present recession has created unique problems for the domestic motorcycle industry. Without a doubt the rise in joblessness, particularly among blue-collar workers, who constitute the prime market for heavyweight motorcycles, has had a severe impact on the domestic industry. Nonetheless, if the Commission were to analyze the causation question in this way, it would be impossible in many cases for a cyclical industry experiencing serious injury to obtain relief under section 201 during a recession. In my opinion Congress could not have intended for the Commission to interpret the law this way.
There are other reasons for doubting the domestic recession is a substantial cause of injury or threat to the U.S. industry. During the current recession, imports from Japan have increased their market share from domestic producers, gaining nearly six percentage points. Imports have taken market share from the domestic facilities of Honda and Kawasaki as well as Harley-Davidson.
Moreover, while the current recession has undoubtedly depressed demand for heavyweight motorcycles, economic conditions are beginning to improve in this country…As demand responds to this improvement, the domestic industry will be pre-empted from participating in any growth because of the presence of a oneyear supply of motorcycles poised and ready to capture market share. Consequently, not the recession, but the inventory of motorcycles coupled with anticipated future imports constitute the greatest threat of injury in the months ahead.
Decision. The commission recommended that incremental duties be imposed for five years at the declining rates of 45, 35, 20, 15, and 10 percent, in addition to the existing rate of 4.4 percent ad valorem.
Comment. President Reagan followed the commission's recommendations, but added tariff-rate quotas of 5,000 units to keep the U.S. market open to European firms that exported to the United States in smaller quantities. The remedy has been considered one of the most successful uses of safeguards. Under protection, Harley- Davidson recapitalized, introduced quality control processes and just-in-time inventory control, and regained its competitiveness. The safeguards were discontinued in 1987. Within a few years, Harley was one of the most demanded motorcycles in the world, including in Japan. In 2012, 35 percent of Harley's saleswere outside the U.S.
What do you think the role would be of the president's economic advisors in an unfair imports case?

Question 26

BACKGROUND AND FACTS
Pesquera Mares Australes, a Chilean salmon exporter, was accused of dumping salmon in the U.S.market at less than fair value. An antidumping petition was filed in 1997 by the Coalition for Fair Atlantic Salmon Trade. The U.S. Department of Commerce (ITA) conducted an investigation to compare the price of the salmon sold in the United States with its "normal value" in the home market. Finding no sales of Mares Australes' salmon in Chile during that time, ITA based normal value on the price of the salmon sold in Japan. However, while the salmon sold in the United States was of the "premium" grade, the salmon sold in Japan was of both "premium" and "super-premium" grades. ITA nevertheless found that the salmon sold in Japan and in the United States had "identical physical characteristics" and thus were "like products" as defined by the U.S. statute. ITA then included the price of the super-premium Japanese grade in its determination of normal value. This resulted in the ITA finding a larger dumpingmargin and imposing higher antidumping duties. The duties were affirmed by the Court of International Trade, and Mares Australes appealed to the Court of Appeals for the Federal Circuit.
DYK, CIRCUIT JUDGE * * *
[T]he antidumping statute specifically defines "foreign like product," as…merchandise which is identical in physical characteristics…. In this case ITA…sought to identify salmon sold by Mares Australes to Japan that was "identical in physical characteristics" to salmon exported by that company to the United States. It is ITA's interpretation of the phrase "identical in physical characteristics" that is at issue. * * *
Mares Australes argued that the super-premium salmon it sold to Japan could not be considered "identical in physical characteristics" to the premium grade salmon it sold to the United States. As evidence of this distinction, the company stressed…that certain physical defects (such as external lacerations to the salmon) were present in premium but not superpremium salmon; that super-premium salmon enjoyed a darker, redder color than premium salmon; and that its customers in Japan, recognizing these physical and color distinctions, paid higher prices for premiumgrade salmon…. But ITA noted that "the record also contains evidence that the distinctions between the two grades were, in practice, nominal…. "
As support for its conclusion that super-premium was not a commercially recognized separate grade, ITA also pointed to commercial practice in countries (other than Chile) exporting to Japan, whose salmon industries did "not recognize any grade higher than 'superior.'" [In its final determination] ITA stated: "… The Norwegian, Scottish, Canadian, and U.S. salmon industries do not recognize any grade higher than "superior." The "superior" grade is consistent with the premium grade and permits minor defects…. Nonetheless, all salmon in this range are graded equally, and are comparable products in the market place. [Notice of Final Determination of Sales at Less Than Fair Value: Fresh Atlantic Salmon From Chile, 63 Fed. Reg. 31411 (June 9, 1998)]. ITA thus determined that "salmon reported as super-premium are in fact of premium grade," and accordingly compared the sales of both super-premium and premium salmon to Japan to corresponding sales of premium salmon only in the United States. The practical consequences of ITA's decision to classify the two grades of salmon as "identical in physical characteristics" was to increase Mares Australes' dumping margin from the de minimis level (1.21%) to a final dumping margin of 2.23%. * * *
This case requires us to interpret the phrase "identical in physical characteristics" as that phrase appears in the definition of "foreign like product" [U.S. Code]. In order to ascertain the established meaning of a term such as the word "identical," it is appropriate to consult dictionaries. There are a variety of dictionary definitions of "identical." Some require exact identity. See, e.g., American Heritage Dictionary, 896 (3d ed. 1996) (defining "identical" as "being the same" and "exactly equal and alike")…. Others allow "minor differences" so long as the items are "essentially the same." See, e.g., The American Heritage Dictionary, 639 (2d ed. 1991)…. We find nothing in the statute to suggest that Congress intended to depart from the ordinary definition of the term "identical." But that leaves the question of which of the two common usages was intended by Congress: exactly the same or the same with minor differences?
We conclude that Congress intended the latter usage…. As Coalition for Fair Atlantic Salmon Trade points out, Congress could hardly have intended to require ITA in each and every instance to compare all the physical characteristics of the goods. It might not be possible, for example, with certain types of merchandise to "account for every conceivable physical characteristic" of that merchandise.
Despite our conclusion that Congress intended to allow identical merchandise to have minor differences, the phrase "identical in physical characteristics" [as used in the U.S. statute] remains ambiguous, and, as we learn from Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778 (1984), ITA has discretion to define the term.
The ITA has concluded that merchandise should be considered to be identical despite the existence of minor differences in physical characteristics, if those minor differences are not commercially significant. We conclude that this standard adopted by ITA constitutes "a permissible construction of the statute." We conclude that this finding is supported by substantial evidence, and that it has been adequately explained. * * *
Decision. The Chilean salmon exporter violated the antidumping laws of the United States by selling foreign salmon in the U.S. at less than fair value. The superpremium salmon sold by Mares Australes in Japan was similar enough to the premium grade sold in the United States to be considered a "foreign like product," the price of which should be included in determining the normal value for purposes of calculating the dumping margin.
What is the purpose of comparing the price of salmon sold in the United States to that sold in Japan?

Question 27

BACKGROUND AND FACTS
Pesquera Mares Australes, a Chilean salmon exporter, was accused of dumping salmon in the U.S.market at less than fair value. An antidumping petition was filed in 1997 by the Coalition for Fair Atlantic Salmon Trade. The U.S. Department of Commerce (ITA) conducted an investigation to compare the price of the salmon sold in the United States with its "normal value" in the home market. Finding no sales of Mares Australes' salmon in Chile during that time, ITA based normal value on the price of the salmon sold in Japan. However, while the salmon sold in the United States was of the "premium" grade, the salmon sold in Japan was of both "premium" and "super-premium" grades. ITA nevertheless found that the salmon sold in Japan and in the United States had "identical physical characteristics" and thus were "like products" as defined by the U.S. statute. ITA then included the price of the super-premium Japanese grade in its determination of normal value. This resulted in the ITA finding a larger dumpingmargin and imposing higher antidumping duties. The duties were affirmed by the Court of International Trade, and Mares Australes appealed to the Court of Appeals for the Federal Circuit.
DYK, CIRCUIT JUDGE * * *
[T]he antidumping statute specifically defines "foreign like product," as…merchandise which is identical in physical characteristics…. In this case ITA…sought to identify salmon sold by Mares Australes to Japan that was "identical in physical characteristics" to salmon exported by that company to the United States. It is ITA's interpretation of the phrase "identical in physical characteristics" that is at issue. * * *
Mares Australes argued that the super-premium salmon it sold to Japan could not be considered "identical in physical characteristics" to the premium grade salmon it sold to the United States. As evidence of this distinction, the company stressed…that certain physical defects (such as external lacerations to the salmon) were present in premium but not superpremium salmon; that super-premium salmon enjoyed a darker, redder color than premium salmon; and that its customers in Japan, recognizing these physical and color distinctions, paid higher prices for premiumgrade salmon…. But ITA noted that "the record also contains evidence that the distinctions between the two grades were, in practice, nominal…."
As support for its conclusion that super-premium was not a commercially recognized separate grade, ITA also pointed to commercial practice in countries (other than Chile) exporting to Japan, whose salmon industries did "not recognize any grade higher than 'superior.'" [In its final determination] ITA stated: "… The Norwegian, Scottish, Canadian, and U.S. salmon industries do not recognize any grade higher than "superior." The "superior" grade is consistent with the premium grade and permits minor defects…. Nonetheless, all salmon in this range are graded equally, and are comparable products in the market place. [Notice of Final Determination of Sales at Less Than Fair Value: Fresh Atlantic Salmon From Chile, 63 Fed. Reg. 31411 (June 9, 1998)]. ITA thus determined that "salmon reported as super-premium are in fact of premium grade," and accordingly compared the sales of both super-premium and premium salmon to Japan to corresponding sales of premium salmon only in the United States. The practical consequences of ITA's decision to classify the two grades of salmon as "identical in physical characteristics" was to increase Mares Australes' dumping margin from the de minimis level (1.21%) to a final dumping margin of 2.23%. * * *
This case requires us to interpret the phrase "identical in physical characteristics" as that phrase appears in the definition of "foreign like product" [U.S. Code]. In order to ascertain the established meaning of a term such as the word "identical," it is appropriate to consult dictionaries. There are a variety of dictionary definitions of "identical." Some require exact identity. See, e.g., American Heritage Dictionary, 896 (3d ed. 1996) (defining "identical" as "being the same" and "exactly equal and alike")…. Others allow "minor differences" so long as the items are "essentially the same." See, e.g., The American Heritage Dictionary, 639 (2d ed. 1991)…. We find nothing in the statute to suggest that Congress intended to depart from the ordinary definition of the term "identical." But that leaves the question of which of the two common usages was intended by Congress: exactly the same or the same with minor differences?
We conclude that Congress intended the latter usage…. As Coalition for Fair Atlantic Salmon Trade points out, Congress could hardly have intended to require ITA in each and every instance to compare all the physical characteristics of the goods. It might not be possible, for example, with certain types of merchandise to "account for every conceivable physical characteristic" of that merchandise.
Despite our conclusion that Congress intended to allow identical merchandise to have minor differences, the phrase "identical in physical characteristics" [as used in the U.S. statute] remains ambiguous, and, as we learn from Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778 (1984), ITA has discretion to define the term.
The ITA has concluded that merchandise should be considered to be identical despite the existence of minor differences in physical characteristics, if those minor differences are not commercially significant. We conclude that this standard adopted by ITA constitutes "a permissible construction of the statute." We conclude that this finding is supported by substantial evidence, and that it has been adequately explained. * * *
Decision. The Chilean salmon exporter violated the antidumping laws of the United States by selling foreign salmon in the U.S. at less than fair value. The superpremium salmon sold by Mares Australes in Japan was similar enough to the premium grade sold in the United States to be considered a "foreign like product," the price of which should be included in determining the normal value for purposes of calculating the dumping margin.
Why did Mares Australes not want the ITA to compare the price of salmon sold in the United States to the price of the "super-premium" salmon it sold in Japan?

Question 28

BACKGROUND AND FACTS
Pesquera Mares Australes, a Chilean salmon exporter, was accused of dumping salmon in the U.S.market at less than fair value. An antidumping petition was filed in 1997 by the Coalition for Fair Atlantic Salmon Trade. The U.S. Department of Commerce (ITA) conducted an investigation to compare the price of the salmon sold in the United States with its "normal value" in the home market. Finding no sales of Mares Australes' salmon in Chile during that time, ITA based normal value on the price of the salmon sold in Japan. However, while the salmon sold in the United States was of the "premium" grade, the salmon sold in Japan was of both "premium" and "super-premium" grades. ITA nevertheless found that the salmon sold in Japan and in the United States had "identical physical characteristics" and thus were "like products" as defined by the U.S. statute. ITA then included the price of the super-premium Japanese grade in its determination of normal value. This resulted in the ITA finding a larger dumpingmargin and imposing higher antidumping duties. The duties were affirmed by the Court of International Trade, and Mares Australes appealed to the Court of Appeals for the Federal Circuit.
DYK, CIRCUIT JUDGE * * *
[T]he antidumping statute specifically defines "foreign like product," as…merchandise which is identical in physical characteristics…. In this case ITA…sought to identify salmon sold by Mares Australes to Japan that was "identical in physical characteristics" to salmon exported by that company to the United States. It is ITA's interpretation of the phrase "identical in physical characteristics" that is at issue. * * *
Mares Australes argued that the super-premium salmon it sold to Japan could not be considered "identical in physical characteristics" to the premium grade salmon it sold to the United States. As evidence of this distinction, the company stressed…that certain physical defects (such as external lacerations to the salmon) were present in premium but not superpremium salmon; that super-premium salmon enjoyed a darker, redder color than premium salmon; and that its customers in Japan, recognizing these physical and color distinctions, paid higher prices for premiumgrade salmon…. But ITA noted that "the record also contains evidence that the distinctions between the two grades were, in practice, nominal…."
As support for its conclusion that super-premium was not a commercially recognized separate grade, ITA also pointed to commercial practice in countries (other than Chile) exporting to Japan, whose salmon industries did "not recognize any grade higher than 'superior.'" [In its final determination] ITA stated: "… The Norwegian, Scottish, Canadian, and U.S. salmon industries do not recognize any grade higher than "superior." The "superior" grade is consistent with the premium grade and permits minor defects…. Nonetheless, all salmon in this range are graded equally, and are comparable products in the market place. [Notice of Final Determination of Sales at Less Than Fair Value: Fresh Atlantic Salmon From Chile, 63 Fed. Reg. 31411 (June 9, 1998)]. ITA thus determined that "salmon reported as super-premium are in fact of premium grade," and accordingly compared the sales of both super-premium and premium salmon to Japan to corresponding sales of premium salmon only in the United States. The practical consequences of ITA's decision to classify the two grades of salmon as "identical in physical characteristics" was to increase Mares Australes' dumping margin from the de minimis level (1.21%) to a final dumping margin of 2.23%. * * *
This case requires us to interpret the phrase "identical in physical characteristics" as that phrase appears in the definition of "foreign like product" [U.S. Code]. In order to ascertain the established meaning of a term such as the word "identical," it is appropriate to consult dictionaries. There are a variety of dictionary definitions of "identical." Some require exact identity. See, e.g., American Heritage Dictionary, 896 (3d ed. 1996) (defining "identical" as "being the same" and "exactly equal and alike")…. Others allow "minor differences" so long as the items are "essentially the same." See, e.g., The American Heritage Dictionary, 639 (2d ed. 1991)…. We find nothing in the statute to suggest that Congress intended to depart from the ordinary definition of the term "identical." But that leaves the question of which of the two common usages was intended by Congress: exactly the same or the same with minor differences?
We conclude that Congress intended the latter usage…. As Coalition for Fair Atlantic Salmon Trade points out, Congress could hardly have intended to require ITA in each and every instance to compare all the physical characteristics of the goods. It might not be possible, for example, with certain types of merchandise to "account for every conceivable physical characteristic" of that merchandise.
Despite our conclusion that Congress intended to allow identical merchandise to have minor differences, the phrase "identical in physical characteristics" [as used in the U.S. statute] remains ambiguous, and, as we learn from Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S.Ct. 2778 (1984), ITA has discretion to define the term.
The ITA has concluded that merchandise should be considered to be identical despite the existence of minor differences in physical characteristics, if those minor differences are not commercially significant. We conclude that this standard adopted by ITA constitutes "a permissible construction of the statute." We conclude that this finding is supported by substantial evidence, and that it has been adequately explained. * * *
Decision. The Chilean salmon exporter violated the antidumping laws of the United States by selling foreign salmon in the U.S. at less than fair value. The superpremium salmon sold by Mares Australes in Japan was similar enough to the premium grade sold in the United States to be considered a "foreign like product," the price of which should be included in determining the normal value for purposes of calculating the dumping margin.
Explain the problem confronting the ITA in determining "foreign like product." How did the court define that term?

Question 29

BACKGROUND AND FACTS
During the 1960s and 1970s, the European steel industry was near financial collapse. With the support of labor groups, the largest firms were kept alive with government money, low-interest loans, and equity investments from European governments. Many mills became government owned. In the early 1980s, the equivalent of tens of billions of dollars of public money was used to keep the mills running. The money financed operations, revitalized equipment, lowered the firms' debt, trained steelworkers, and permitted the export of low-priced steel. The United States responded with a host of trade remedies, including countervailing duties. When the political climate changed in Europe, governments decided to sell off their interests to private investors in free-market stock sales. Since 1988, many large steel mills have been privatized, including British Steel (today Corus), Germany's Saarstahl, France's Usinor, and others. The new privately owned companies continued to sell steel in America.
The International Trade Administration imposed countervailing duties on European steel imports despite the fact that the Europeanmills had been privatized. The agency believed that the benefits granted while the companieswere government owned continued to "pass through" to the same steel companies (arguing that the companies were still the "same legal person") even after the change in ownership. After all, it was assumed, the new shareholders received the modern equipment, trained workers, and other assets paid for by the government. The European Communities maintained that the privatizations took place at arm's length and for fair market value, that the government no longer had any ownership interest or control, and thus that public monies were no longer subsidizing steel production. The EC argued that the U.S. "same person" rule violates the WTO Agreement on Subsidies and Countervailing Measures [SCMAgreement]. Consultations between the governments failed, and in 2001, the EC requested that the WTO Dispute Settlement Body convene a dispute panel. After the decision of the panel, the United States appealed to the Appellate Body.
REPORT OF THE APPELLATE BODY * * *
[W]e find that the Panel erred in concluding that "[p] rivatizations at arm's length and for fairmarket value must lead to the conclusion that the privatized producer paid for what he got and thus did not get any benefit or advantage from the prior financial contribution bestowed upon the state-owned producer." [emphasis Panel's] Privatization at arm's length and for fair market value may result in extinguishing the benefit. Indeed, we find that there is a rebuttable presumption that a benefit ceases to exist after such a privatization. Nevertheless, it does not necessarily do so. There is no inflexible rule requiring that investigating authorities, in future cases, automatically determine that a "benefit" derived from pre-privatization financial contributions expires following privatization at arm's length and for fair market value. It depends on the facts of each case. * * *
With all this in mind, we now turn to the administrative practice of the [ITA] that is the source and subject of this dispute…. Generally, the ITA applies the "same person" method to countervailing duty determinations following a change in ownership. * * *
The Panel stated, and the United States agreed before the Panel and on appeal, that the "same person" method requires the ITA to "consider that the benefit attributed tothe state-ownedproducer canbe automatically attributed to the privatized producer without any examination of the condition of the transaction" when the agency determines the post-privatization entity is not a new legal person. It is only if the ITA finds that a newlegal person has been created that the agency will make a determination of whether a benefit exists, and, in such cases, the inquiry will be limited to the subject of whether a new subsidy has been provided to the newowners. Thus, under the "same person" method, when the ITA determines that no new legal person is created as a result of privatization, the ITA will conclude from this determination, without any further analysis, and irrespective of the price paid by the new owners for the newly-privatized enterprise, that the newly-privatized enterprise continues to receive the benefit of a previous financial contribution. This approach is contrary to the SCM Agreement that the investigating authority must take into account in an administrative review "positive information substantiating the need for a review." Such information could relate to developments with respect to the subsidy, privatization at arm's length and for fair market value, or some other information. The "same person" method impedes the ITA from complying with its obligation to examine whether a countervailable "benefit" continues to exist in a firm subsequent to that firm's change in ownership. Therefore, we find that the "same person" method, as such, is inconsistent with…the SCM Agreement.
Decision. The Appellate Body found that in CVD actions, national administrative agencies must consider a broad range of criteria on a case-by-case basis in determining whether prior subsidies to a former governmentowned company have "passed through" to the newly privatized company. The "same person" test used by the U.S. Department of Commerce violated the SCM Agreement.
Comment. In 2003, the ITA announced a new rule based on the presumption that a government subsidy can benefit a company over a period of time, corresponding to the useful life of the assets. However, the presumption is rebuttable if it can be shown that the government sold its ownership of all or substantially all of a company or its assets, retaining no control, and that the sale was an arm's-length transaction for fair market value.
What is "privatization" and how might it affect a subsidies case?

Question 30

BACKGROUND AND FACTS
During the 1960s and 1970s, the European steel industry was near financial collapse. With the support of labor groups, the largest firms were kept alive with government money, low-interest loans, and equity investments from European governments. Many mills became government owned. In the early 1980s, the equivalent of tens of billions of dollars of public money was used to keep the mills running. The money financed operations, revitalized equipment, lowered the firms' debt, trained steelworkers, and permitted the export of low-priced steel. The United States responded with a host of trade remedies, including countervailing duties. When the political climate changed in Europe, governments decided to sell off their interests to private investors in free-market stock sales. Since 1988, many large steel mills have been privatized, including British Steel (today Corus), Germany's Saarstahl, France's Usinor, and others. The new privately owned companies continued to sell steel in America.
The International Trade Administration imposed countervailing duties on European steel imports despite the fact that the Europeanmills had been privatized. The agency believed that the benefits granted while the companieswere government owned continued to "pass through" to the same steel companies (arguing that the companies were still the "same legal person") even after the change in ownership. After all, it was assumed, the new shareholders received the modern equipment, trained workers, and other assets paid for by the government. The European Communities maintained that the privatizations took place at arm's length and for fair market value, that the government no longer had any ownership interest or control, and thus that public monies were no longer subsidizing steel production. The EC argued that the U.S. "same person" rule violates the WTO Agreement on Subsidies and Countervailing Measures [SCMAgreement]. Consultations between the governments failed, and in 2001, the EC requested that the WTO Dispute Settlement Body convene a dispute panel. After the decision of the panel, the United States appealed to the Appellate Body.
REPORT OF THE APPELLATE BODY * * *
[W]e find that the Panel erred in concluding that "[p] rivatizations at arm's length and for fairmarket value must lead to the conclusion that the privatized producer paid for what he got and thus did not get any benefit or advantage from the prior financial contribution bestowed upon the state-owned producer." [emphasis Panel's] Privatization at arm's length and for fair market value may result in extinguishing the benefit. Indeed, we find that there is a rebuttable presumption that a benefit ceases to exist after such a privatization. Nevertheless, it does not necessarily do so. There is no inflexible rule requiring that investigating authorities, in future cases, automatically determine that a "benefit" derived from pre-privatization financial contributions expires following privatization at arm's length and for fair market value. It depends on the facts of each case. * * *
With all this in mind, we now turn to the administrative practice of the [ITA] that is the source and subject of this dispute…. Generally, the ITA applies the "same person" method to countervailing duty determinations following a change in ownership. * * *
The Panel stated, and the United States agreed before the Panel and on appeal, that the "same person" method requires the ITA to "consider that the benefit attributed tothe state-ownedproducer canbe automatically attributed to the privatized producer without any examination of the condition of the transaction" when the agency determines the post-privatization entity is not a new legal person. It is only if the ITA finds that a newlegal person has been created that the agency will make a determination of whether a benefit exists, and, in such cases, the inquiry will be limited to the subject of whether a new subsidy has been provided to the newowners. Thus, under the "same person" method, when the ITA determines that no new legal person is created as a result of privatization, the ITA will conclude from this determination, without any further analysis, and irrespective of the price paid by the new owners for the newly-privatized enterprise, that the newly-privatized enterprise continues to receive the benefit of a previous financial contribution. This approach is contrary to the SCM Agreement that the investigating authority must take into account in an administrative review "positive information substantiating the need for a review." Such information could relate to developments with respect to the subsidy, privatization at arm's length and for fair market value, or some other information. The "same person" method impedes the ITA from complying with its obligation to examine whether a countervailable "benefit" continues to exist in a firm subsequent to that firm's change in ownership. Therefore, we find that the "same person" method, as such, is inconsistent with…the SCM Agreement.
Decision. The Appellate Body found that in CVD actions, national administrative agencies must consider a broad range of criteria on a case-by-case basis in determining whether prior subsidies to a former governmentowned company have "passed through" to the newly privatized company. The "same person" test used by the U.S. Department of Commerce violated the SCM Agreement.
Comment. In 2003, the ITA announced a new rule based on the presumption that a government subsidy can benefit a company over a period of time, corresponding to the useful life of the assets. However, the presumption is rebuttable if it can be shown that the government sold its ownership of all or substantially all of a company or its assets, retaining no control, and that the sale was an arm's-length transaction for fair market value.
Why did the ITA conclude that the EC steel mills were the "same legal person"?

Question 31

BACKGROUND AND FACTS
During the 1960s and 1970s, the European steel industry was near financial collapse. With the support of labor groups, the largest firms were kept alive with government money, low-interest loans, and equity investments from European governments. Many mills became government owned. In the early 1980s, the equivalent of tens of billions of dollars of public money was used to keep the mills running. The money financed operations, revitalized equipment, lowered the firms' debt, trained steelworkers, and permitted the export of low-priced steel. The United States responded with a host of trade remedies, including countervailing duties. When the political climate changed in Europe, governments decided to sell off their interests to private investors in free-market stock sales. Since 1988, many large steel mills have been privatized, including British Steel (today Corus), Germany's Saarstahl, France's Usinor, and others. The new privately owned companies continued to sell steel in America.
The International Trade Administration imposed countervailing duties on European steel imports despite the fact that the Europeanmills had been privatized. The agency believed that the benefits granted while the companieswere government owned continued to "pass through" to the same steel companies (arguing that the companies were still the "same legal person") even after the change in ownership. After all, it was assumed, the new shareholders received the modern equipment, trained workers, and other assets paid for by the government. The European Communities maintained that the privatizations took place at arm's length and for fair market value, that the government no longer had any ownership interest or control, and thus that public monies were no longer subsidizing steel production. The EC argued that the U.S. "same person" rule violates the WTO Agreement on Subsidies and Countervailing Measures [SCMAgreement]. Consultations between the governments failed, and in 2001, the EC requested that the WTO Dispute Settlement Body convene a dispute panel. After the decision of the panel, the United States appealed to the Appellate Body.
REPORT OF THE APPELLATE BODY * * *
[W]e find that the Panel erred in concluding that "[p] rivatizations at arm's length and for fairmarket value must lead to the conclusion that the privatized producer paid for what he got and thus did not get any benefit or advantage from the prior financial contribution bestowed upon the state-owned producer." [emphasis Panel's] Privatization at arm's length and for fair market value may result in extinguishing the benefit. Indeed, we find that there is a rebuttable presumption that a benefit ceases to exist after such a privatization. Nevertheless, it does not necessarily do so. There is no inflexible rule requiring that investigating authorities, in future cases, automatically determine that a "benefit" derived from pre-privatization financial contributions expires following privatization at arm's length and for fair market value. It depends on the facts of each case. * * *
With all this in mind, we now turn to the administrative practice of the [ITA] that is the source and subject of this dispute…. Generally, the ITA applies the "same person" method to countervailing duty determinations following a change in ownership. * * *
The Panel stated, and the United States agreed before the Panel and on appeal, that the "same person" method requires the ITA to "consider that the benefit attributed tothe state-ownedproducer canbe automatically attributed to the privatized producer without any examination of the condition of the transaction" when the agency determines the post-privatization entity is not a new legal person. It is only if the ITA finds that a newlegal person has been created that the agency will make a determination of whether a benefit exists, and, in such cases, the inquiry will be limited to the subject of whether a new subsidy has been provided to the newowners. Thus, under the "same person" method, when the ITA determines that no new legal person is created as a result of privatization, the ITA will conclude from this determination, without any further analysis, and irrespective of the price paid by the new owners for the newly-privatized enterprise, that the newly-privatized enterprise continues to receive the benefit of a previous financial contribution. This approach is contrary to the SCM Agreement that the investigating authority must take into account in an administrative review "positive information substantiating the need for a review." Such information could relate to developments with respect to the subsidy, privatization at arm's length and for fair market value, or some other information. The "same person" method impedes the ITA from complying with its obligation to examine whether a countervailable "benefit" continues to exist in a firm subsequent to that firm's change in ownership. Therefore, we find that the "same person" method, as such, is inconsistent with…the SCM Agreement.
Decision. The Appellate Body found that in CVD actions, national administrative agencies must consider a broad range of criteria on a case-by-case basis in determining whether prior subsidies to a former governmentowned company have "passed through" to the newly privatized company. The "same person" test used by the U.S. Department of Commerce violated the SCM Agreement.
Comment. In 2003, the ITA announced a new rule based on the presumption that a government subsidy can benefit a company over a period of time, corresponding to the useful life of the assets. However, the presumption is rebuttable if it can be shown that the government sold its ownership of all or substantially all of a company or its assets, retaining no control, and that the sale was an arm's-length transaction for fair market value.
What factors should be considered in determining whether the European mills were still benefiting from earlier subsidies?