Trade remedies as trade policy tools
Credit to Author: MARK ANTHONY TAMAYO| Date: Wed, 17 Apr 2019 16:13:36 +0000
(Second of three parts)
In last week’s article, we discussed briefly Republic Act (RA) No. 8800 (Safeguard Measures Act) as a protection tool to address the unexpected surge in imports that cause (or threaten to cause) serious injury to the domestic industry.
In this article, we shall discuss the key features of Republic Act (RA) No. 8752 (Anti-dumping Act) and RA No. 8751 (Countervailing duty Act) as trade protection instruments. These instruments can be used against unfair trade practices through the imposition of special duties that may be levied, in addition to the ordinary import duties, taxes and charges imposed by law on imported products.
An anti-dumping (AD) duty may be imposed when a Philippine domestic industry is being (or likely to be) materially injured by the “dumping” of like or comparable articles imported into (or sold in) the Philippines. If the injury is caused by the “assistance or subsidization” of articles by the country of export, a countervailing duty (CVD) may be imposed.
AD cases are company specific and the duty is generally calculated to bridge the gap back to the normal value (market price) of the dumped articles.
On the other hand, CVD cases are country specific. Duties are calculated to more or less duplicate the value of the subsidy.
Commonality of elements
Dumping and subsidization are not per se illegal. Exporters will normally set their prices lower than the domestic prices to be more competitive. It is when they injure domestic producers where an actionable protest praying for additional protection can be imposed.
The fact of dumping or subsidization is subjected to an independent evaluation and not just unquestioningly accepted.
An AD and CVD petition or application may be filed by, or on behalf of, the domestic industry with the Department of Trade and Industry-Bureau of Import Services (DTI-
BIS), for industrial products or Department of Agriculture (DA), for agricultural products. In special circumstances, DTI-BIS or DA may, on its own motion, initiate an investigation.
The concerned department shall initially determine the existence of a prima facie case to warrant a formal investigation by the Tariff Commission (TC), as well as the imposition of a provisional duty relief in the form of cash bond.
The TC, on the other hand, conducts the formal investigation and submits its report of findings and decision to the concerned Secretary.
During the formal investigation, the TC shall essentially determine the following:
Determination of Like Product
The determination essentially involves examining the alleged dumped or subsidized products, and then establishing what domestically produced products are the appropriate “like product”. The term “like products” refers to products that are “identical or alike” in all material respects or at least closely resembling those of the product under consideration.
In a previous decision, the TC ruled that if the domestically produced and imported products fall under the same Asean Harmonized Tariff Nomenclature subheadings, undergo the same manufacturing process, use the same raw materials, possess the same physical characteristics and generally have the same uses and applications, they are considered “like products”.
The decision regarding the “like product” is important because it is the basis of determining which companies constitute the domestic industry. That determination, in turn, governs the scope of the investigation of injury and causal link.
Determination of material injury
There must be actual or threatened material injury to a domestic industry. The injury test must be based on positive evidence showing, among others, that 1) the volume of the dumped or subsidized imports is not in negligible quantity; 2) actual or potential decline in sales, market share, profits, etc.; 3) price undercutting is significant as a consequence of a very much lower price of import; and 4) actual or potential effects on cash flow, inventories, employment, wages, growth and ability to raise capital or investments.
Determination of causal link
The material injury suffered by the domestic industry must be the direct result of the importation of the dumped product. Needless to state, it must be clear, evidence taken together, that the injury suffered is directly attributable to the alleged dumping or subsidization.
Specific elements
For dumping protests, there must be proof that the exporters sell their product to an importer in the Philippines, at an export price lower than its market price in the country of export (country from where the alleged dumped product was shipped to the Philippines, regardless of the location of the seller) or origin (where the alleged dumped product was wholly obtained or where the last substantial transformation took place).
Generally, one identifies dumping simply by comparing prices in two markets. However, the situation is not often that simple. In most cases, it is necessary to undertake a series of complex analytical steps to determine the “normal value” and the “export price” to undertake an appropriate comparison.
“Normal value” is the foreign producer’s domestic selling price of the article. It is the comparable price in the ordinary course of trade for the like product when destined for consumption in the country of export or origin.
The determination of whether said sales are made in the “ordinary course of trade” or not is one of the most complicated questions in anti-dumping investigations.
Under certain conditions, the normal value could be the comparable price (domestic price of the product in the exporting country at the same level of trade which is sold or offered for sale at wholesale) of the like product when it is exported to the Philippines, or the total cost of production in the country of export or origin.
If at any stage of the proceedings, the provisionally estimated margin of dumping is less than 2% of the export price, the TC shall consider the case a de minimis margin of dumping and shall motu proprio terminate the investigation.
In next week’s article, the author shall continue to discuss the similarities and differences between AD and CVD.
(Mark Anthony P. Tamayo is a CPA-Lawyer and a Partner at Mata-Perez, Tamayo & Francisco (MTF) Counsel. He will conduct a comprehensive training on Best Practices in Effectively Managing Customs Compliance hosted by the Center for Global Best Practices (www.cgbp.org) on June 7, 2019 at the EDSA Shangri-La Hotel, Mandaluyong City) This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. If you have any question regarding this article, you may email the author at info@mtfcounsel.com or visit MTF website at www.mtfcounsel.com.
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