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6 June, 2017
Three draft revisions on international trade remedy regulations were announced on April 14, 2017 by the MOFCOM for public comment: <Regulations on Midterm Review1 of Dumping and Dumping Margins>, <Regulations on Hearings for Anti-Dumping and Countervailing Investigations> and <Regulations on Disclosure Questionnaires During Anti-Dumping Investigations>. These drafts are significant revisions from their 2002 versions2 and embody an important shift in Chinese trade remedy regulations.
Those drafts reflect the experience of previous anti-dumping and countervailing investigations. At the same time, they offer some radical changes to some particular rules, especially the rules relating to midterm review. Here we provide a brief introduction to the three draft revisions, as well as our comments with respect to their potential impact on future international trade remedy practices.
I.Revisions to ‘Regulations on Midterm Review of Dumping and Dumping Margins’
A Overview
An anti-dumping investigation is normally concluded with a final determination of the levy on the amount of anti-dumping duty upon future imports of the product under investigation, provided that the investigating authority finds the foreign export producers had dumped the products, the Chinese domestic industry has been materially injured and there are causal links between the dumping and the injury. The anti-dumping duty shall last not more than five years, except with the sunset review initiated five years later finds that the termination of the anti-dumping duty will result in continuance or re-occurrence of the dumping and the injury3 .
Within those five years, the petitioner of the original investigation, the domestic industry, export producers of the country or region involved as well as the Chinese importers are entitled to apply for midterm review if they can prove there are significant changes in the normal value, export price and dumping margin. Regulations on Midterm Review of Dumping and Dumping Margins are legal rules in this respect, which regulate the form and all aspects of midterm review.
B Major revisions and their impact
There are three major revisions to Regulations on Midterm Review of Dumping and Dumping Margins: the representation requirement to the original petitioner, the criteria to establish a midterm review in the application, and the rules on midterm review of export producers with anti-dumping margins measuring zero. Those three major revisions shall lead to significant changes to future midterm review practices.
i.Evidence about the representativeness of original petitioner is no longer required
One current condition of initiating an anti-dumping investigation is the representativeness of the petitioner. The legal criteria thereof are as follows: the application is supported by those domestic producers whose collective output in volume constitutes more than 50% of the total production of the like product produced by those domestic producers with expressly supportive opinions to the investigation and by those with expressly adverse opinions. However, no investigation shall be initiated when the output of those domestic producers expressly supporting the application accounts for less than 25% of the total production of the like domestic products. According to these legal criteria, the petitioner must be large enough to produce a minimum volume of the like products, or be powerful enough to persuade other larger producers to agree on the initiation of an investigation.
However, this operational status of the original petitioner may decline after the anti-dumping duty is levied. This can make it impossible to any longer meet the above criteria.
Can the petitioner apply for midterm review against a foreign exporter with respect to their dumping and dumping margin? The answer is “no” according to the 2002 version of the midterm review regulation, since there were clear legal requirements for the representativeness of the original petitioner. But the answer is “yes” according to the draft reversion 2017 because this requirement is lifted. This means the new rules make it easier for the original petitioner to apply for a midterm review.
ii.There is significant change to the legal standard for the application of midterm review
As we explained above, the factual basis of initiating a midterm review is that the normal value and/or export price has changed and it is necessary to review the margin of original anti-dumping measures. The legal standard set forth in Regulations on Midterm Review of Dumping and Dumping Margins for the application of a midterm review reflects this factual basis. In the other words, the applicant should provide evidence in this regard when submitting an application for a midterm review.
The key relevant evidence required in the 2002 version for all applicants, either foreign export producers or for the domestic industry, is the evidence relating to the change in the normal value, export price and dumping margin compared with the level of original anti-dumping measure. However, in the 2017 version, one more item is added – evidence that this significant change will continue into the future.
This revision indicates the applicant not only needs to prove that the dumping margin has changed significantly in last 12 months before the filing date, but the applicant also needs to explain the reasons for such a change. Moreover, based on those reasons, it also needs to prove the changes did not just happen in last 12 months, but also shall continue into the future.
In our opinion, this revision makes it more difficult for all relevant parties to try to initiate a midterm review. First, the applicant needs to prepare more evidence. Second, the midterm review shall not be initiated even if the normal value, export price and dumping margin do change significantly, provided that the applicant cannot investigate the market situation effectively and fails to explain the reasons for such changes, or fails to prove the changed situation will continue into the future after they investigate the relevant market situations.
Furthermore, we think the revision leaves more room for the investigating authority‘s discretion in initiating or not initiating a midterm review. The reason leading to significant change to a situation is a factual issue. However, under the circumstances of the Regulations on Midterm Review it is a legal issue to judge if the change shall continue into the future. If there is only one reason for the change in one particular circumstance, this single influence will continue in the future, it is reasonable to conclude that the change will continue into the future. However, in a market economy is much more likely to conclude that there are multiple reasons for an economic result. If there are multiple forces at work in varying degrees and they are in anyway competing, and if the possibility of these different forces continuing into the future varies largely from one another, how can a reasonable conclusion be made as to the future situation of the change which has happened? We understand the investigating authority is entitled to exercise their discretion in such cases. And it remains to be seen how this discretion shall be exercised.
iii.Rules on midterm review of export producers with anti-dumping margins measuring zero
Competitive suppliers in China tend to push the investigating authority to review the dumping margin of foreign export producers, whose anti-dumping duty rate is zero after the original investigation and continue their sales on the Chinese market, in order to try once again to block their products with an anti-dumping duty.
For this purpose, a midterm review may be initiated against those export producers according to the 2002 version of the Regulations. In this review investigation, the export producers shall be required to file a response to a request for a disclosure questionnaire and cooperate with an on-site verification, based on which the renewed normal value, export price and dumping margin shall be determined. No injury issues shall be involved in such review investigation.
However, the revised draft provides a new anti-dumping investigation, which involves both dumping margin examination and injury evaluation, may be initiated against those export producers with anti-dumping margins measuring zero, and no midterm review shall be initiated.
If the investigating authority determines in a midterm review investigation that the anti-dumping margin measures for a foreign export producer is zero, then according to the revised draft, this zero margin may be reviewed in another midterm review.
For the domestic industry, this revision means it needs to comply with the rules for new investigations rather than the rules for midterm reviews when filing its petition, which shall include a claim and evidence regarding both the dumping margin and the injury caused to the domestic industry.
For the investigating authority, the investigation shall be conducted according to the rules for new investigation as well.
For example, the investigation shall be completed within 18 months4 instead of 12 months. And there will be two stages in the determination of the investigation, a preliminary determination and a final one, rather than only a single stage of final determination. The investigation will cover both a dumping and an injury component, instead of only a dumping component.
For those foreign export producers with anti-dumping margins measuring zero, once a new investigation is initiated and if they find the anti-dumping duty for the foreign export producer is above zero, the original zero duty order shall be terminated and a new anti-dumping duty of a given amount shall be levied on future imports. The new duty order shall expire five years later if no expiry review is initiated at that time, or if such expiry review finds the measure shall be terminated. Considering the fact that the foreign export producer should cooperate with the investigating authority by submitting responses to the disclosure questionnaire and by passing an on-spot verification, the time period during which this foreign export producers shall be impacted by the anti-dumping investigation will be more prolonged than the process in the 2002 version of the Regulations.
iv.The time limits for each party to file comment on the initiation of a midterm review are reduced
When a midterm review is initiated, each relevant party is entitled to file their comments on the initiation. If the applicant under review is a foreign export producer, then the petitioner of the original investigation shall enjoy these rights, while if the applicant represents Chinese domestic industry, then the foreign export producer holds these rights. In rare occasions Chinese importers may be the applicant, and Chinese domestic industry shall have the right to comment. In each case, the time limit to file the comment is reduced from 21 days to 10 days in the revised draft. We can see the determination of the investigating authority accelerates the formal initiation of midterm review.
II.Revisions to ‘Regulations on Hearing for Anti-Dumping and Countervailing Investigations’
The most significant change to rules on hearings for anti-dumping and countervailing investigations is in the form of the rules. Before the latest revision, there are three rules in this regard: Preliminary Regulations on Hearings for Anti-Dumping Investigations, Preliminary Regulations on Hearings for Countervailing Investigations, and Preliminary Regulations on Hearings for Industry Injury Investigations (herein after referred as “the 2002 Regulations on Hearings”).
The contents of these three regulations are incorporated into the new rules: Regulations on Hearings for Anti-Dumping and Countervailing Investigations (herein after referred as “New Draft Regulations on Hearings”). In April 2014, the two former investigating institutions, Fair Trade Bureau of MOFCOM and Industry Investigation Bureau of MOFCOM, which are in charge of dumping investigations and injury investigations, were incorporated into a single investigating institution – the Trade Remedy and Investigation Bureau. We understand the change to the form of the rules on hearings – consolidating the three regulations into one regulation – reflects the change of the investigating institutions. As for the changes to content of the rules on hearings, they are explained below.
i. Time limit for submission of hearing application
No time limit is set for submission of the hearing application in the 2002 Regulations on Hearings. The New Draft Regulations fill in this omission by providing that for a hearing which is intended to be held before the preliminary determination, the application should be submitted within four months of the case being initiated; while for a hearing which is intended to be held after the preliminary determination, the application should be submitted within 30 days of the publication of the preliminary determination.
ii. Legal Circumstances for the investigating authority to reject a hearing application and subsequent procedures
The 2002 Regulations on Hearings did not provide the legal circumstances for the investigating authority to reject a hearing application. New Draft Regulations remedy this omission by providing three legal circumstances where the investigating authority may reject the hearing application: (1) the application is not prepared in accordance with the legal requirements, (2) the investigating authority thinks a hearing is not necessary, and (3) the investigation procedures will be significantly impeded if a hearing is held.
We can infer from the above that a hearing application may be legally rejected even if it has sound reasoning, provided that the investigating authority thinks such a hearing is not necessary. In this case, the New Draft Regulations provide supplemental rules for the investigating authority, requiring that they provide the interested party with further opportunities to present oral statements of their opinion before the authority. We understand these supplemental rules protect the interested party’s right to present their opinion before the authority.
iii.Each party’s rights and obligations relating to the hearing is further confirmed
Each party’s rights and obligations relating to the hearing are further confirmed in two main aspects. Firstly, each interested party is entitled to be enrolled and participate in a hearing, but it has no obligation for doing so. For any interest party who does not attend a hearing, its right to present its opinion and supporting reasoning in other ways to the investigating authority shall not be impaired.
Secondly, specific provisions as applied during the progress of hearing are supplemented in the New Draft Regulations. For example, the chairperson of the hearing has the right to issue a warning to those who violate hearing procedures. They have the authority to halt the violator and expel them from the hearing. The chairperson may stop the presentation if it goes beyond the scope of the hearing.
Moreover, references to the cancellation and delay of a hearing are deleted in the New Draft Regulations.
III.Revisions to ‘Regulations on the Disclosure Questionnaire for Anti-Dumping Investigations’
Most revisions in the draft Regulations on the Disclosure Questionnaire for Anti-Dumping Investigations (hereinafter referred as the Draft Regulations) reflect the existing practices and requirements of the investigating authority, which normally appear in the “General Introduction” part of the anti-dumping disclosure questionnaire. We think those revisions shall not give rise to significant changes to the anti-dumping disclosure questionnaire practices. Besides, there are still some revisions as follows which will significantly impact the future disclosure questionnaire.
First, the Draft Regulations set out a supplemental provision that the investigating authority may not investigate an interested party’s disclosure questionnaire responses individually if it was not enrolled officially before the responses were due to be submitted.
Second, the investing authority may reject the documents whose non-confidential summary is not supplemented or amended within the required time limits, or the supplemental or amended non-confidential summary fails to meet the requirement thereof, except the information which may be proven to be true by the investigating authority according to other proper sources. This means the investigating authority has some discretion about rejecting or accepting the non-confidential summary not properly prepared.
Thirdly, as to the number of copies of the disclosure questionnaire responses, the former requirement is one original copy of the public version and one original copy of the confidential version as well as duplicate copies of the public and confidential versions individually. The Draft Regulations require only two duplicate copies of the public and confidential versions.
1.Midterm review is referred as interim review in the 2002 version. We understand this is only a wording change.
2.MOFCOM has published it draft for comments version of those three category of regulations on August 25, 2015. But after the comment period is closed, no further action was observed and no final official version is published. So we think the 2015 reversion has not been completed. So we treat the draft revision on April 14, 2017 as the revision to the 2002 version of regulations, even this draft reversion of 2017 has changed somewhat if comparing with the 2015 revision.
3.In such circumstance, the anti-dumping duty shall be effective for another five years.
4.It is provided that the original anti-dumping investigation should be completed within 12 months and may be extended 6 months at most.
Yong (Z.) ZHOU, Jun He
zhouyong@junhe.com
