Tít ulo del Trabaj o:
THE UNI TED STATES- ARGENTI NA HONEY CASE AND
THE CASE AGAI NST ANTI DUMPI NG LAWS
Aut or:
Nora C. Luzi
1Ponencia present ada en el
I I Congreso en Relaciones I nt ernacionales del I RI
La Plat a, Provincia de Buenos Aires, Argent ina
11 y 12 de noviem bre de 2004
1
I I N TROD UCTI ON
The failure of t he Fift h Minist erial Conference in Cancun2 was not only a set back for t he Doha Round, but also for t he World Trade Organizat ion’s effort s t o enhance int ernat ional t rade as m eans t o growt h and developm ent . The group of developing count ries led by Brazil, China, I ndia and Sout h Africa, known as G- 22, m ade t he first st ep t owards a new balance in t he m ult ilat eral t rading syst em . Agricult ure was considered a key issue if t he new Round was m eant t o succeed.
I t will cert ainly t ake t im e and a great deal of polit ical will t o get count ries back t o t he negot iat ing t able, but t he benefit s will out weigh t he cost s. Subst ant ial povert y reduct ion in t he world will be achieved by t ackling agricult ural prot ect ion. Poor count ries m ainly produce agricult ural product s and int ensive labor product s such as t ext iles usually facing prot ect ive – developed m arket s. Subsidies in t he OECD account for m ore t han US$ 300,000 m illion t arget ed at agricult ural product s originat ingin developing count ries. Annual subsidies at t he OECD are equivalent t o six t im es t he direct econom ic aid t hose count ries provide for t he poor count ries.3 Developing count ries are responsible for seriously com m it t ing t hem selves and reducing agricult ural barriers – t ariff and non- t ariff – in order t o facilit at e t rade liberalizat ion t owards an equit y free t rade world.
Ant i- dum ping4 laws and it s enforcem ent cont inue t o be a m aj or problem when it com es t o int ernat ional t rade relat ionships as t hey t urn int o non- t ariff barriers.5 Even when t he WTO syst em provides guidelines and som e discipline t o AD laws, it fails t o prevent t heir abuse by cert ain count ry m em bers. Therefore, AD laws rem ain an im port ant issue, not only at t he m ult ilat eral level, but alsoat t he bilat eral t rade level.6
Argent ina and t he US have a conflict ing t rade agenda. Agricult ural product s are at t he cent re of disput es because Argent ina is a very com pet it ive count ry and t he US heavily prot ect s it s dom est ic indust ries.7 I n one of t he m ost recent cases brought against Argent ine export s, Argent ine beekeepers faced t he powerful and well organized Am erican Honey indust ry. I n spit e of a worldwide
2
Mexico, September 2003
3
Alieto A. Guadagni, Executive Director at the World Bank, World Trade Liberalization and the Millennium Development Goals, Conference at the Colegio de España, Paris, France (September 2003)
4
Hereinafter AD
5
We will not address subsidies and countervailing duties (CVD) but most of the critics of AD laws apply to subsidies and CVD
6
Even when we advocate for a successful multilateral trade negotiations we are completely aware of the risks of stagnation in the multilateral process. The US is willing to pursuit bilateral o regional trade agreements instead. Robert Zoellick made it perfectly clear when he argued that while WTO country members analyze the future, the US would not wait; and it would pursuit free trade with countries willing to do things. See article in La Nacion, Argentine newspaper, September 24th, 2003; available at:
http:/ / www.lanacion.com.ar (last visited 9/ 24/ 03)
7
recognit ion of t he Argent inean honey indust ry’s com pet it iveness, st eep ant idum ping dut ies were im posed against honey from Argent ina by t he US Depart m ent of Com m erce on Decem ber 10t h, 2001.8
This paper will focus on t he Ant i- dum ping honey case bet ween Argent ina and t he US, highlight ing som e t rade and developm ent aspect s of t hose m easures against Argent ina as well as problem s wit h t he law enforcem ent - m ainly at t he US Depart m ent of Com m erce level.9 General conclusions will be drawn from t he honey case t o argue t hat t he US has abused it s AD laws and t hat t hey lack econom ic and polit ical sense.
For a bet t er underst anding, t his paper is divided as follows: Part I I cont ains a general overview on int ernat ional t rade, developm ent and ant idum ping laws; Part I I I is dedicat ed t o t he US- ARGENTI NA AD honey- disput e and com m ent s on t rade and legal aspect s of t he case; Part I V addresses t he im pact s of t he ant idum ping m easures of t he US- ARGENTI NA honey case; Part V assesses t he US ant idum ping law considering t he: ( i) Ant idum ping law and it s adm inist rat ion by t he Federal Governm ent ; ( ii) m ain flaws in AD law enforcem ent ; ( iii) dum ping m argin calculat ion, m et hodology, t he ‘fact s available’ st andard, t he ext ent and form of request ed inform at ion by t he adm inist rat ive agencies t o foreign com panies and dum ping vs. price discrim inat ion; Part VI includes few recom m endat ions t o im prove t he Ant idum ping law enforcem ent ; and t he conclusion is in Part VI I .
I I GEN ERAL OVERVI EW ON I N TERN ATI ON AL TRAD E, DEVELOPM EN T AN D AN TI D UM PI N G LAW S
Broadly defined, ant idum ping is int ernat ional price discrim inat ion. I t happens when an export er sells m erchandise in t he im port ing count ry at a price significant ly below t hat at which it sells like m erchandise in it s hom e count ry. A st rict er definit ion st at es t hat ant idum ping occurs when t he export er sells it s m erchandise in t he im port ing count ry at a price below it s cost s of product ion. For t he pract ice t o be punished im port s m ust cause or t hreat en t o cause m at erial inj ury t o an est ablished indust ry in t he im port ing count ry or ret ard t he est ablishm ent of a dom est ic indust ry.10 The im port ing count ry m ay im pose an ant idum ping dut y on t he dum ped m erchandise in t he form of a dum ping m argin.11
8
Julio J. Nogues, US Contingent Protection against Honey I mports: Development Aspects and the Doha Round, revised draft, World Bank Policy Research Working Paper 3088, June 2003, p.1, available at:
http:/ / www.worldbank.org (last visited September 18th, 2003.
9
Even when the I nternational Trade Commission has an important role in the process – to determine the existence of injury to domestic industries caused by exports – most troublesome aspects of enforcement are at the DOC level.
10
Raj Bhala, Rethinking Antidumping Law, 29 GW J. I nt’l L. & Econ. 1, 4,9 (1995)
11
The underlying philosophy of AD policy has been support ed by argum ent s t hat AD laws are: ( i) “ vit al t o t he m aint enance of fair t rade because t hey det er and offset t he value of predat ory dum ping and subsidizat ion in t he US m arket by foreign governm ent s or export ers” ; 12 ( ii) useful as a bargaining chip t o count ries wit h t rade barriers t o t he Am erican product s; ( iii) useful t o st op Am erican j ob losses due t o foreign – cheaper – im port s; et c.
However, t he evidence does not t o support t hese argum ent s. As it will be discussed lat er in t his paper, t he predat ory argum ent is a weak one, and even weaker at t he int ernat ional level, and t he m et hodology for t he calculat ion of dum ping m argin is inaccurat e and in m any aspect s divorced from basic account ing pract ices. Because of t hese inaccuracies and t he idiosyncrasies of t he laws, com pet it ive com panies are oft en found guilt y even when t hey were not dum ping in t he US m arket .
Wit h regard t o t he use of AD laws as a bargaining chip, evidence suggest s t hat t hey have not been an effect ive dissuasive t ool so far. To t he cont rary, em pirical evidence dem onst rat es t hat t he t radit ional users – such as t he US, Aust ralia, t he EU and New Zealand- , are facing a growing group of new users – nam ely Sout h Africa, Mexico, Brazil, Argent ina.. “ As t he num ber of users of AD cases filed annually grow, it is increasingly difficult t o ident ify t he m ot ives of t he users of AD and t o argue t hat increased usage signals m erely an increase in unfair t rade” .13 Moreover, an analyt ical st udy including AD cases filed t o t he GATT/ WTO during t he 80’s and 90’s, rej ect s t he not ion t hat t he rise in AD act ivit y can be solely explained by an increase in unfair t rade.
I n fact , st rat egic m ot ives are significant in t he explanat ion for t he upward t rend in t he use of AD laws .14 Specifically, t hree- quart ers of all AD filings pat t erns for t he 1980 – 1998’s period are consist ent wit h t he ‘club effect ’ and wit h ‘ret aliat ion m ot ives’. Moreover for t radit ional users bot h econom ic and st rat egic m ot ives are im port ant but for t he new users st rat egic m ot ives are m ore im port ant t han t he econom ic ones.15
Act ually, ant idum ping is t he m ost prevalent inst rum ent for im posing new im port rest rict ions. I n t he 1980’s AD laws were used by developed count ries; however aft er WTO agreem ent s cam e int o force in 1995, developing count ries
12
Robert W. McGee, The Case to Repeal the Antidumping Laws, 13 NW. J. I nt’l L.& Bus. 491, 24 (Spring 1993)
13
Thomas J. Prusa – Susan Skeath, The Economic and Strategic Motives for Antidumping Filings, Working paper 8424, National Bureau of Economic Research, p. 1 (August 2001) Available at:
http:/ / www.nber.org/ papers/ w8424
14 I d. Strategic motives such as being part of the ’club’(the country has previously used AD protection)
and ‘retaliation’(referred to a country filing AD specifically against those countries that had previously named it in the past)
15
have been frequent ly using t hem .16 Furt herm ore, per dollars of im port s, t en developing count ries have init iat ed at least five t im es m ore AD cases t han t he US, hist orically one of t he m ost frequent users. When com paring count ries, t ransit ion econom ies are t he ones wit h t he highest int ensit y of AD cases against t hem while developed econom ies t he least int ensit y. “ As com pared t o developed econom y export ers, developing econom y export ers are alm ost t hree t im es m ore int ensely t arget ed” .17
The AD usage has been under great crit icism from bot h econom ic and legal point s of view. I n a significant num ber of AD cases, t he act ual problem is a loss of com parat ive advant age and econom ist s generally agree t hat - except for predat ion - dum ping is basically harm less for t he im port ing count ry. Moreover “ consum ers in t he im port er count ry benefit from t he lower price of im port ed goods. Em pirical evidence suggest s t hat t hese gains out weigh t he cost s t o producers in t he im port ing count ry, m easured by reduced profit s and t o t heir em ployees in t erm s of reduced em ploym ent ” .18
Many scholars advocat e for a repeal of AD laws, assert ing t hat t he laws are unnecessary: inj ury t o an indust ry caused by im port s can be bet t er addressed by safeguard or escape laws; AD laws creat e perverse incent ives for t he export ers and t hey have a chilling effect on com pet it ion.19
I n addit ion, t here is st rong evidence of abuse in t he law enforcem ent and inconsist ency wit h t he rat ionale of ant it rust law and econom ic t heory.20 Specifically a biased adm inist rat ive m et hodology usually finds dum ping when a fair account ing even of pricing below cost would not and m ost of t he im port sales allegedly unfair under AD rules would have never been quest ioned under com pet it ion law if t he case involved a dom est ic com pany selling in t he dom est ic m arket .21 I n ot her words, m ost of cases would have failed t he m ost
16
Developing countries since the Ururguay Round (1995-99) initiated 559 cases, developed countries 463 and even transition economies entered cases: Poland, Czech Republic and Slovenia. See, J. Michael Finger, Francis Ng and Sonam Wangchuk, Antidumping as Safeguard Policy, December 2001, available at:http:/ / www.worldbank.org (last visited September 14th, 2003)
17 I d., p.6 – Underlined is mine.
18 Raj Bhala, Rethinking Antidumping Law, 29 GW J. I nt’l L. & Econ. 1, p 4, (1995)
19
When an AD case is filed, customers and importers face uncertainty on possible liability and importers who might be harmed by dumping penalties hesitate to do business with a foreign supplier under investigation. Not to mention the additional obstacle posed by the lack of due process and few chances to successfully counter argue the dumping charges.
20
AD policy triggers incentive for foreign producers to raise the prices to lower the probability of being hit by AD action and allows domestic producers to increase their prices. I t also result in efficiency losses since investigated companies must shift their resources from productive activities to defensive, asset protecting activities. For detailed explanation See, Robert W. McGee, The Case to Repeal the Antidumping Laws, 13 NW. J. I nt’l L.& Bus. 491 (Spring 1993) pp 20-24, available at Lexis Nexis (last visited August 10th, 2003)
21
rigorous st andards of evidence applicable under t he ant it rust law. Moreover, t here is evidence t hat const ruct ed cost m et hodology overst at es profit s rat es, t hat dat a on selling below cost s is based on quest ionable m easures of cost s and when accurat e dat a is available t here is no proof of sam e low prices available in t he hom e m arket s.
All t hese findings support t he st at em ent t hat t he Uruguay Round Agreem ent did not change t he nat ure of t he AD pract ice. Even when t he WTO Agreem ent set out som e guidelines t o count ry m em bers and AD is perm it t ed not a m andat ory pract ice, t he abuses of t hese laws m ake neit her econom ic nor polit ical sense.22 Specifically, t he t ext of post Uruguay Round AD law is am biguous, and pays no at t ent ion t o t he cost st ruct ure of pet it ioners and respondent s. I t has been acknowledged t hat pet it ioners in an AD case have num erous opport unit ies t o m anipulat e a dum ping m argin calculat ion t o obt ain t he m axim um m argin, t hat t he inj ury provisions allow pet it ioners t o successfully claim t hat inj ury was caused by dum ped im port ed m erchandise, and t hat revocat ion of an AD order is difficult t o obt ain.23
The Doha Round and it s Developm ent Agenda should be t he appropriat e forum t o discuss and - if not abandon – t he int roduct ion of am endm ent s t o AD laws aim ed at significant ly reducing t he discret ionary pract ices of t he count ry m em bers when enforcing t he AD rules as well as t o m ake t hem consist ent wit h t he econom ic t heory.
This st ep will be a good st art ing point t o enhance a freer t rade m ult ilat eral syst em consist ent wit h a Developm ent – Pro- Poor - Agenda. There is sufficient cross – count ry evidence t hat t rade liberalizat ion and openness t o t rade increases t he growt h rat e of incom e and out put . Moreover som e st udies suggest t hat ‘t rade does seem t o creat e, even sust ain higher growt h’.24 Last but not least , t here is a relevant link bet ween t rade, growt h and t he poor. ‘Trade liberalizat ion can be expect ed t o help t he poor overall given t he posit ive associat ion bet ween openness and growt h’.25
The Doha Round and it s prom ise for developm ent are at st ake so far. Unless t rade barriers in t he agricult ural sect or are slashed subst ant ial reduct ion in global povert y will not be achieved.26 The explanat ion is pret t y st raight forward: m ost of t he world’s poor work in agricult ure, 70% of t he world’s poor live in rural areas and earn t heir incom e from agricult ure and m ost of t he world’s prot ect ion is aim ed at agricult ure which is am ong t he m ost
competition. Moreover, “as long as trade barriers are non-existent, it is impossible to drive out all competitors and capture the market”, For details See: Robert W. McGee, op.cit.
22
Economically they harm consumers and import and job related industries. From a public policy point of view they are inappropriate as they just benefit small powerful group of interest.
23
Raj Bhala, Rethinking Antidumping Law, 29 GW J. I nt’l L. & Econ. 1, p 19 and subseq (1995)
24
Bernard Hoekman, Constantin Michalopoulos, Maurice Schiff and David Tarr, Trade Policy, p.2, available at: http:/ / www.worldbank.org (last visited August 14th, 2003)
25
I d.
26
dist ort ed sect ors in int ernat ional t rade. “ Reducing prot ect ion in agricult ure alone would produce roughly t wo- t hirds of t he gains from full global liberalizat ion of all m erchandise t rade27…
Prot ect ion m easures include: subsidies, t ariffs and non- t ariff barriers. The abuse of AD laws is clearly a non- t ariff barrier in all t he econom y sect ors including t he agricult ure sect or which - by t he way - is one com pet it ive area for various developing count ries.
I n fact , developing count ries not only are highly com pet it ive in t heir agricult ural sect or but also t hey do not dum p t heir product s posing a challenge t o prot ect ed indust ries in developed count ries; as is t he case wit h Argent ina. Because t he real concern wit h dum ping is t he prot ect ion of dom est ic indust ry from int ernat ional com pet it ion28 AD laws t urn int o t he perfect t ool t o drive efficient export ers out of t he developed m arket s.
To set an exam ple, t he U.S. is one of t he world’s leading sources of dum ped agricult ural com m odit ies such as: wheat , corn ( m aize) , soybean, rice and cot t on. St udies show t hat t he levels of dum ping hover around 40% for wheat , bet ween 25% and 30% for corn ( m aize) , 30% for soybeans, 20% for rice and - in 2001 - 57% for cot t on. I n ot her words, t his m eans t hat wheat is sold 40% less t han it cost s t o produce and cot t on 57% less!29
There is no doubt t hat developing count ries are not likely t o succeed in t heir effort s t o com pet e in t he world m arket s if all t hese rest raint s st ay in place.
I t is t im e for developed count ries t o t ake t he leadership and m ove forward on t he int ernat ional t rade agenda. As it has correct ly been point ed out : “ Despit e t he fact t hat prot ect ion, t ariff peaks and ant idum ping m easures shield powerful lobbies, rich count ry leadership in reducing t his prot ect ion is a prerequisit e for a pro- poor developm ent out com e” .30
Realit y –however- seem s t o go t he opposit e way. The U.S. – Argent ina honey case is a valid exam ple.
I I I TH E US- ARGEN TI N A H ON EY CASE31 I I I . 1 . TRAD E ASPECTS OF TH E CASE
I I I . 1 . a ) Ar gent ine honey a nd globa l m a r k et s.
27
Keep in mind that protection facing developing country exporters in agriculture is 4 to 7 times higher than in manufactures in the North and 2 to 3 times higher in developing countries. For details see, GEP, note 7. Underlined is mine.
28
I d.
29
I nstitute for Agriculture and Trade Policy, Unites States Dumping on Agricultural Markets, pp 2-3; available at: http:/ / www.iatp.org (last visited September, 2nd, 2003)
30
I d.
31
Argent ina holds one of t he leading posit ions in t he honey product ion indust ry. The Lat in Am erican count ry had been considered as t he world’s largest export er as far as back in 1974. Hist orically, Argent ina has been a qualit y supplier due part ly because of it s experience in t he European and Japanese honey m arket s.32
For t he year 2000, Argent ina was t he m aj or export ing count ry – 93,000 t ons- am ong t he leaders; nam ely Canada, China, Germ any, Mexico and t he US.33 I t s int ernat ional com pet it iveness has been acknowledged by several st udies and st at ist ical dat a.34 Argent ina account ed for 14% of honey supply in t he int ernat ional m arket in 1990 and increased it s export s up t o 24% of t he world m arket in 2000. This increase is higher t han China’s35 for t he sam e period, as Chinese export s only increased 17% . 36 Moreover, in 2002 – in t he first part of t he year - t he t onnage export ed by Argent ina surpassed t hat of China by 74% .37
Argent ine honey export s growt h accelerat ed from 1996. According t o one expert , it can not be exclusively explained by t he 1995 AD m easure im posed by t he US on t he Chinese export s, but also t o t he com pet it iveness of t he indust ry.38
On t he ot her hand, t he US has becom e m ore dependent on im port s, despit e Governm ent support ed program s being in place for decades, in addit ion t o AD m easures against China.
According t o FAO st at ist ics, t he average im port - product ion rat io was 41% during 1989- 1991 and for 1998- 2000 period t hat figure went up t o 80% . The increase occurred against a st agnant out put . I n t erm s of product ion quant it ies, for t he 1989- 1991 period, product ion was 90,000 t ons while in 1998- 2000 product ion was 96,423 ( 7% increase) . “ The US st agnat ion occurred in spit e of subsidies and prot ect ionist policies while Argent ina’ growt h happened quit e nat urally”.39
I n t erm s of qualit y, differences in nat ural com parat ive advant age can explain t he relat ive t rade perform ance bet ween t he US and Argent ina: t he overall score for Argent ina is 9.0 and for t he US is 4.5, t aking int o considerat ion t ast e, color, drum s, purit y and cryst allizat ion.40 According t o US im port ers, Argent ine honey is of a very high qualit y and som e packers prefer it t o
32
Alberta, Agriculture, Food and Rural Development, Competition for World Honey Markets, Alberta, Canada, April, 2001, p.51, available at: http:/ / www.agric.gov.ab.ca (last visited October 8th, 2003) Hereinafter, Alberta Study
33
Supra note 7, p.3
34
See FAO data base
35
China was the most important world exporter in 1990-2000 accounting for one third of world exports.
36
Supra note 7 pp2-3
37
I d.
38
For details see, Julio Nogues, op.cit.
39
Supra note 7, p.5
40
dom est ic honey as it is clearer.41 I n conclusion, Argent ina is cost com pet it ive, produces good qualit y honey and m arket s it s product very well.
I I I 1 . b) The US honey indust r y.
Honey product ion is a declining indust ry in t he US and has enj oyed governm ent al prot ect ion for over 50 years. Prot ect ion has t aken m any form s, including loan program s, and guarant eed purchase program s. These program s have int roduced great m arket inst abilit y because t he m ain goal of t he program s was t o dim inish risks t o producers by elim inat ing t he risks so t hat t hey could sell t heir product even when prices were declining. The 1995 Farm Bill, t he 2002 Farm Bill and t he Agricult ure Appropriat ion Act ( 2001) cont ain prot ect ion m easures t o support Am erican honey producers at t he expense of Am erican consum ers and j obs in im port – relat ed businesses. The Agricult ure Appropriat ion Act est ablished an im plicit subsidy, at t he rat e of 25% , at t he t im e of t he program ’s int roduct ion.
I n addit ion t o t he aforem ent ioned st at ut ory prot ect ion, in 1994, t he Am erican Beekeeping Federat ion ( ABF) and t he Am erican Honey Producers Associat ion ( AHPA) request ed an invest igat ion against China’s im port s alleging dum ping pract ices. Aft er a prelim inary affirm at ive inj ury det erm inat ion, China and t he US concluded an ‘agreem ent ’ and t he invest igat ion was suspended. As a consequence, China rest rict ed it s export s t o t he US m arket t o a m axim um of 20,000 t ons of honey per year. A quick look at st at ist ical dat a from t he previous t hree years support s t he st at em ent t hat t he agreem ent m eant 30% less Chinese honey export s t o t he US. The five - year agreem ent expired on August 1st , 2000. I n Sept em ber 2000, t he indust ry request ed anot her ant idum ping invest igat ion against China and Argent ina42 .43 At t hat t im e Argent ina and China’s export s account ed for 79% of US honey im port s.44
I I I 2 . LEGAL ASPECTS OF TH E CASE I I I 2 a ) Ba ck gr ound:
Following t he dom est ic indust ry request , t he AD invest igat ion against honey from Argent ina was init iat ed.45 On May 11, 2001 t he DOC issued t he Prelim inary Det erm inat ion of sales at less t han fair value against t he Argent ine export s.46 days aft er t he publicat ion of t he prelim inary det erm inat ion in t he
41
Larry Rother, US and Argentina Fight over Honey, New York Times, March 5, 2002 available at
www.globalpolicy.org (last visited October 9th, 2003)
42
As mentioned, a subsidy investigation of the Argentine product was also requested.
43
For a historical overview see, Julio Nogues, op. cit, pp 7-10
44
Data available at http:/ /www.beekeeping.com
45
The applicable and cited Statutes and Regulations are those provisions in the Tariff Act of 1930 - with amendments effective January 1, 1995- and regulations codified at 19 CFR part 351 (2000)
46
Federal Regist er.47 The period of invest igat ion ( POI ) was July 1, 1999 t hrough June 30, 2000 covering t hree m ain honey export ers: Radix S.R.L. ( Radix) , Asociacion de Cooperat ivas Argent inas ( ACA) and ConAgra Argent ina48 and 12 random ly select ed beekeepers unaffiliat ed wit h t he export ers.
The product s covered by t he invest igat ion were: nat ural honey, art ificial honey cont aining m ore t han 50% nat ural honey by weight , preparat ions of nat ural honey cont aining m ore t han 50% nat ural honey by weight and flavored honey.49 The subj ect m erchandise included all colors and grades of honey whet her in liquid, cream ed, com b, cut com b or chunk form and whet her packed for ret ail or in bulk form .
Aft er t he Depart m ent of Com m erce ( DOC)50 issued t he prelim inary det erm inat ion, t he pet it ioners, ACA and Radix51 subm it t ed case briefs. Rebut t als from all t he part ies were also subm it t ed t o t he DOC for considerat ion, and a public hearing was held on August 28, 2001. Specifically on June 11, 2001 and June 18, 2001 respondent s ACA and Radix subm it t ed addit ional fact ual inform at ion regarding t he cost of product ion of honey in Argent ina, which was disput ed by t he pet it ioners. The DOC verified responses subm it t ed by ACA and Radix at t heir respect ive headquart ers in Buenos Aires during June 2001. On August 24, 2001 a proposed agreem ent of suspension was init ialed by t he respondent s and a represent at ive of t he DOC. Aft er com m ent s On Novem ber 21, 2001 t he DOC issued t he Am ended Final Det erm inat ion of Sales at Less t han Fair Value on Honey from Argent ina.52
I I I 2 b) M a in issues disput ed a t t he D OC
As in m ost of t he ant idum ping invest igat ions, t he DOC’s assessm ent of t he dum ping m argin is t roublesom e, part icularly when it com es t o est im at ing t he cost s of product ion ( COP) . The m ain issues in t his case were: ( i) t he use of fact s available and adverse fact s st andards; ( ii) t he calculat ion of COP; ( iii) t reat m ent of t he m iddlem en reseller expenses; ( iv) calculat ion of t he general and adm inist rat ive ( G&A) and indirect expenses; ( v) calculat ion of t he t est ing expenses; ( vi) account ing for differences in physical charact erist ics in m erchandise; ( vii) t he Germ an warrant y expenses; ( viii) t he invent ory
47
66 FR 30143 (June 6th, 2001)
48
Others were: Honey Max SA, Nexco SA, Cia Europea Americana SA, Foodway SA, Cia I nversora Platense SA, Miel Ar, Miel Gibbons and Times SA.
49
Memorandum to Faryar Shirzad Assistant Secretary from Joseph A. Spetrini Deputy Assistant Secretary AD/ CVD Enforcement Group I I I ; 2001 WL 1172645 (I TA). Pages are not available for the public version of the document. Hereinafter, Memorandum
50
Hereinafter DOC
51
Radix was allowed to re-enter the investigation on June 12, 2001 after having withdrawn on May 1, 2001
52
carrying cost s; and ( ix) t he level of t rade ( LOT) adj ust m ent .53 Following is a m ore det ailed discussion of each issue.
The use of fa ct s a va ila ble a nd a dver se fa ct s a va ila ble54
Pet it ioners request ed t he DOC t o draw an adverse inference against respondent s regarding t he COP dat a used in t he calculat ion of dum ping m argin alleging t hat respondent s: ( i) willfully wit hheld cost inform at ion dem anded from t he Agency; ( ii) unt im ely filed request ed inform at ion, and ( iii) subm it t ed unreliable inform at ion t hat was prepared at t he request of t he Argent ine Secret ary of Agricult ure. Respondent s rebut t ed t hose allegat ions. ACA cont ended t hat t hey fully cooperat ed wit h t he DOC by responding wit hin t he applicable deadlines t o t he Agency’s num erous request s and by facilit at ing t he verificat ion process in Buenos Aires.55 Moreover, ACA argued t hat even when ACA had no cont rol over t he beekeepers and could not oblige t hem t o keep verifiable records and respond t o t he DOC, ACA assist ed t he DOC’s at t em pt s t o acquire COP inform at ion from t he select ed beekeepers. I n ot her words, ACA st at ed t hat it had act ed t o t he best of it s abilit y, as required by law. The DOC acknowledged t hat independent beekeepers are m em bers of a highly fragm ent ed indust ry and t hat export ers have no cont rol over t hem , and t hat ACA and Radix fully part icipat ed in t he invest igat ion.56 This was crucial t o t he respondent s in order t o be exem pt ed from t he applicat ion of an adverse fact s inference. Respondent s argued t hat it was im possible t o gat her reliable, verifiable and consist ent inform at ion from t he t welve unaffiliat ed beekeepers.57 However, adverse fact s were at t ribut ed t o ConAgra pursuant t o
53
Other issue was the tax reimbursement. We will not discuss it since it is part of the CVD outside the scope of this paper.
54
Section 776 (a) of the Trade Act 1930 provides that: “if any interested party or any other person—(A) withholds information that has been requested by the administering authority, (B) fails to provide such information by the deadlines for the submission of the information or in the form and manner requested, subject to subsections (c) (1) ands (e) section 782, (C) significantly impedes a proceeding under this title, or (D) provides such information but the information can not be verified as provided in section 782 (i), the administering authority and the Commission shall, subject to section 782 (d), use the facts otherwise available in reaching the applicable determination under this title”. The statute also requires that certain conditions be met before the Department may resort to the facts otherwise available. Where the Department determines that a response to a request for information does not comply with the request, section 782 (d) of the Act provides that the Department will so inform the party submitting the response and will, to the extent practicable, provide that party the opportunity to remedy or explain the deficiency. I f the party fails to remedy the deficiency within the applicable time limits, the Department may, subject to section 782 (e) of the Act disregard all or part of the original and subsequent responses, as appropriate. Section 782 (e) of the Act provides that the Department “shall not decline to consider information that is submitted by an interested party and is necessary to the determination but does not meet all the appropriate requirements established by the administering authority” if the information is timely, can be verified, is no so incomplete that can not be used and if the interested party acted to the best of its ability in providing the information. Where all these conditions are met, and the Department can use the information without undue difficulties, the statute requires it to do so.
55
Over 200 pages in responses
56
2001 WL 1172645 (I TA); A- 357-812 I nvestigation, Public Document, Comment 1, October 4,2001
57
sect ion 776 ( b) of t he Act , as t he record did not reflect cooperat ion by t hat part icular respondent .
( ii) The calculat ion of COP
Following t he st at ut ory proceedings, t he DOC first at t em pt ed t o est im at e cost s by obt aining inform at ion direct ly from honey producers. The m ain obst acle t o doing t his in t he inst ant case was locat ing t he producers, because in Argent ina honey producers are “ independent , fam ily – business, locat ed in inaccessible areas of t he count ry” .58
Not surprisingly, m any of t he producers were difficult t o locat e. The DOC, however, at t em pt ed t o est ablish a sam ple of t welve beekeepers by sending it s sophist icat ed, det ailed quest ionnaire in English t o t he beekeepers, requiring specific inform at ion about each business and sales of honey. I t m ust be not ed t hat beekeepers, for t he m ost part , are ordinary people who live in t he rural areas of Argent ina and do not have foreign language skills or account ing knowledge.59 Needless t o say, t he DOC’s at t em pt t o gat her beekeeper COP dat a failed.
Unable t o obt ain inform at ion direct ly from t he beekeepers t o est im at e t he COP, t he DOC, used it s discret ionary powers t o reconst ruct cost s and assess a dum ping m argin While t he DOC could have used m arket - orient ed approaches such as export prices t o m arket s ot her t han t he US – specifically t o Germ any, where Argent ina export s heavily, 60
The DOC used inst ead an inaccurat e m et hodology and based it s num bers on an unreliable st udy of honey product ion t o com e up wit h a const ruct ed value ( CV) of t he subj ect m erchandise. The DOC based it s COP est im at ions on a “ second rat e j ournal called Gest ión Apicola t hat had been print for a brief num ber of m ont hs before t he pet it ion was filed and has by now gone out of print ” .61 Nonet heless, t hat j ournal was not only charact erized as ‘best available evidence’ by t he DOC, but also t he only piece of evidence t hat t he DOC used. The Agency charact erized t he st udies published by t he Journal as ‘independent ’ evidence, prepared by an independent aut hor; and not in ant icipat ion or response t o an AD invest igat ion.
However; it is fairly obvious t hat t he st udies present ed in Gest ion Apicola had been conduct ed for t he Pet it ioner’s purposes: t he Journal’s est im at ions present ed serious account ing flaws aim ed at finding dum ping m argin. This
adverse facts applied to ACA because of unaffiliated beekeepers lack of compliance with questionnaires, would have been perverse.
58
Honey from Argentina, I nvestigation No.a-357-812, Case brief on Behalf of Asociacion Cooperativas Argentinas, Public Version, p. 1, Wilmer, Cutler & Pickering (August 27, 2001) Hereinafter Case Brief ACA
59
The complexity of questionnaires and the lack of understanding to the beekeepers that were able to locate was confirmed by the ACA’s legal defense.
60
See Julio Nogues op cit.
61
was t he evidence t hat t he DOC relied on t o est im at e COP. This decision raises serious concerns about t he DOC’s im part ialit y during AD invest igat ions for t he following reasons.
First , t here was a change in t he account ing m et hodology used in t he cost st udies done by Gest ión Apícola in 1997, and t he st udies prepared and published in 1999. The 1997 st udies applied a st andard by- product calculat ion t o beekeeper nuclei product ion.62 . Revenue from nuclei was subt ract ed from t ot al cost and t he honey cost of product ion was calculat ed by dividing t he rem aining cost s by kilogram s of honey produced.63 Suddenly, and wit hout any explanat ion, a new calculat ion m et hodology was applied t o t he st udies. The m ain consequence of t his new claculat ion was t o exclude t he nuclei and not consider t hem at all. This new calculat ion suspiciously coincided wit h t he pet it ioner’s int erest .
The DOC accept ed est im at es of cost s published in t he m agazine, such as US$ 0.58 dollars per lb, in Sept em ber 1999. An independent Canadian st udy had est im at ed t he sam e cost s at US$ 0.47 dollars. But t here was no at t em pt on behalf of t he Agency t o look at any ot her evidence except t he Journal wit h t he higher cost est im at es. Dat a present ed in t he st udies published in Gest ion Apicola, invariably led t o an increased likelihood of finding a dum ping m argin because it overst at ed t he cost s and im properly assessed t he beekeeping pract ice in Argent ina. “ Separat ing t he cost s of product ion of honey and ot her product s inst ead of assigning all cost s t o honey would have reduced t he cost s of product ion from US$1.36 dollars per kilogram s t o US$1.04 dollars per kilogram s or US$0.47 dollars per lb which coincides wit h t he est im at e present ed in t he Albert a st udy ( 2001, page 57) ” .64 Gest ion Apicola overest im at ed several t im es t he cost s of wax replacem ent s and feeding cost s ( over est im at ed by 51% ) and t he cost s of healt h care of t he beehives ( over est im at ed by 33% ) . 65
Moreover, t he DOC by virt ue of considering Gest ión Apícola an independent st udy wort hy of t he fact s available st andard, relied com plet ely on it – even when t he st udies lacked t he logic of m odern m at hem at ics. “ I n t he March 1999 st udy, for exam ple, revenues of $3,000 from nuclei, $180 from virgin wax and $4357 from honey are sum m ed and report ed as t ot al incom e. When calculat ing cost of product ion, however, t he pet it ioners’ st udies appeared t o disregard t he nuclei ent irely” .66
62
Explain what a nuclei is
63
Case Brief ACA, p.3
64
Supra note 7, p.13
65
I d
66
For t he purpose of t he final det erm inat ion and despit e t he quest ions raised by respondent s, t he DOC used t he Journal and based COP and profit for const ruct ed value ( CV) on t he average of t he 1999 st udies from Gest ión Apícola. The Agency st at ed t hat a change in t he cost allocat ion m et hodology did not appear unreasonable as t he value of t he nuclei product ion changed significant ly from 1997 t o 1999. I n it s language: “ We do not have any reason t o conclude t hat t he cost provided and t he allocat ion m et hodologies used in t he cost st udies are not reflect ive of som e producer’s cost s in Argent ina, or t he indust ry in Argent ina as a whole” .67 There is no evidence in t he public record t hat t he DOC at least at t em pt ed t o develop a logical explanat ion for t he calculat ion problem s point ed out in t he ACA Case Brief. I n fact , from t he public record, it can be concluded t hat t hose quest ions rem ained unanswered.
The DOC decided on t he m erit s by sim ply st at ing t hat t here was no reason t o doubt t hat t hose were not t he cost s of t he Argent ine producers. This unfort unat e lack of legal soundness did not consider t he negat ive econom ic consequences of t he ruling on t he respondent s
Second, as m ent ioned before, st udies published by Gest ión Apícola overest im at ed wax cost s by assum ing t hat beekeepers would annually renew one t hird of t he wax in each hive and would pay t o purchase t he full am ount of t hat wax. They also overest im at ed t he percent age of queens replaced each year by a t ypical beekeeper. Beekeeping pract ice in Argent ina is t o replace only one t hird of t he fram e wax in t he breeding boxes and t o renew wax in t he honey boxes every eight years.68
I t would have been appropriat e for t he Agency t o use it s inquisit orial powers t o find t he t rut h, since it is pret t y clear t hat t he accuracy of t he inform at ion was st rongly cont est ed. Unfort unat ely, t he DOC rest ed it s decision on t he failure of t he Argent ine honey producers t o provide t he Depart m ent wit h t he COP inform at ion. The DOC insist ed on relying on t he Gest ion Apicola st udies by m erely st at ing t hat : “ We cont inue t o believe t hat t hese st udies represent t he m ost relevant , cont em poraneous, and specific dat a available on t he record of t his proceeding for purposes of det erm ining t he cost of product ion for honey. As t he st udy appears t o capt ure all cost s relat ing t o producing honey, and appears t o allocat e t hese cost s t o all product s produced using a reasonable m et hodology, we have relied on t he st udy as non- adverse fact s available for t he final det erm inat ion” .69
67
2001 WL 1172645 (I TA), October 4,2001 – A 357-812 I nvestigation, Public Document provided by the respondents
68
The DOC disregarded the affidavit presented by ACA regarding this facts. The agency based its decision solely on the circumstance that it was prepared by a government official – therefore assuming bias of the Argentine Government and implicitly questioning the good faith of the Foreign Government. Moreover, the author of this paper is familiar with the honey production in Argentina and agrees with the respondents in the sense that the affidavit reflects what the beekeeping practice in Argentina is.
69
( iii) The Middlem en reseller expenses
There was also a disput e over t he m iddlem en reseller expenses for purposes of t he COP and CV calculat ions. According t o t he Pet it ioners, t he DOC prelim inary det erm inat ion underest im at ed t he average COP and CV of Argent ine honey because it failed t o include t he selling, general and adm inist rat ive expenses and profit s of ‘m iddlem en’ resellers.70 They cont ended t hat t he sm all num bers of export ers in Argent ina com pared t o t he vast num ber of honey producers confirm ed t he export er’s reliance upon m iddlem en. They argued t hat t he COP and CV calculat ions t herefore should reflect all t he expenses act ually incurred on honey export ed t o t he U.S., including t he expenses and profit s of t hese brokers.71 On t he ot her hand, respondent s cont ended t hat Pet it ioner’s posit ion on t his issue exaggerat ed t he role of t he m iddlem en, which was only t o negot iat e a sale t o t he export er and inst ruct t he beekeepers t o deliver a cert ain quant it y of honey. The DOC included t he cost s of m iddlem en as expenses incurred by producers and export ers and allocat ed t hem in t he G&A and selling expenses of ACA and Radix when calculat ing t he COP.72
( iv) General and adm inist rat ive ( G&A) and indirect expenses
Allocat ion m et hodology for indirect selling expenses and account abilit y for G&A expenses was also cont est ed. Regarding Radix’s account abilit y, t he DOC accept ed Radix’s m et hodology, because Radix had allocat ed it s indirect selling expenses t o honey and ot her product s in it s own account ing records. Moreover, t he m aj orit y of expenses report ed were properly verified by t he DOC. As for ACA, t he disput e was over a volum e- based m et hodology used in calculat ing indirect selling expenses. Pet it ioners argued t hat t he volum e- based m et hodology t ook away from honey and t hat a value- based m et hodology would result in a m ore fair m at ch bet ween expenses and sales revenue. ACA‘s defended using a volum e- based m et hodology for calculat ing indirect selling expenses because a significant am ount of t he work perform ed by t he export depart m ent is volum e dependent . The DOC adopt ed t he volum e based m et hodology and recalculat ed - in it s final det erm inat ion - t he indirect selling expenses m erely st at ing t hat “ [ t ] he Depart m ent ’s norm al pract ice is t o calculat e indirect selling expenses based on a value- based rat her t han volum e- based m et hodology” , wit hout any furt her explanat ion.73
I n addit ion, t here was a cont roversy over t he G&A expenses calculat ion in ACA’s records. Pet it ioners claim ed t hat ACA’s count ry- wide G&A expenses were not included in t he DOC prelim inary analysis and t hat it should be done based on t he respondent ’s audit ed financial st at em ent s. ACA argued t hat t he
70
Also referred as brokers and collectors (acopiadores in Spanish)
71
Memorandum, comment 3.
72
However no adjustment was made in the Final Determination.
73
DOC in it s prelim inary det erm inat ion correct ly not ed t hat G&A expenses had been included in t he t ot al cost calculat ed by Gest ion Apicola. ACA’ s selling expenses had been added t o t he average COP of t he five st udies published in Gest ion Apicola. Moreover, t he respondent claim ed t hat , as it had dem onst rat ed during t he verificat ion process, t he indirect selling expenses included adm inist rat ive expenses relat ed t o sales, nam ely real est at e, secret arial support , gas, elect ricit y, t elephone and supplies.
Nonet heless; t he DOC’ s posit ion was t o agree wit h pet it ioner’s 74 I t seem s t hat t he DOC, for t he sake of easy m argin calculat ions, decided t hat “ ACA begins and ends wit h it s export depart m ent” .75
( v) Test ing expenses
As for t he t est ing expenses disput e, t he issue was whet her t o classify t hem as indirect or direct selling expenses in all t he m arket s or j ust in t he Germ an m arket . 76 I n spit e of evidence t hat t est ing expenses were direct ly relat ed t o sales t o Germ any – as a required condit ion of t he Germ an buyers- t he DOC decided t hat t est ing expenses should be considered as indirect selling expenses allocat ed over sales t o all m arket s, based on t he DOC ’s pract ice.77
( vi) Differences in physical charact erist ics in m erchandise
ACA request ed a norm al value adj ust m ent based on differences in t he subj ect m erchandise sold in t he U.S. and in Germ any. Honey which m eet s t he Germ an requirem ent s is not an ident ical product t o t hat sold by ACA t o t heir U.S. cust om ers. I n ot her words, Germ an st rict sanit ary st andards m ake a difference in t he product and involve addit ional variable selling cost s.78 That m eans t hat t he m arket value of ant ibiot ic and phenol free honey is, at a m inim um , $80 per m et ric t on higher t han t he m arket value t hat is not cert ified ant ibiot ic and phenol free.79
74
ACA’s administrative departments on which G&A calculations were based earned substantial income from provision of various services to member cooperatives and others. These earnings and expenses associated with such earnings are not recorded in ACA’s financial statement. The income if not offset expenses associated with the respondent’s administrative departments, should have been properly accounted for in the denominator use to calculate the G&A and interest expense ratios.
75
For a detailed explanation See, Re: Honey from Argentina Ministerial Errors, I nvestigation No. A-357-812, Document submitted to the Honorable Donald Evans, Secretary of Commerce by Wilmer, Cuttler & Pickering. (October 22, 2001)
76
Honey exported to Germany should be tested against antibiotic and phenol. Those expenses and its characterization were in dispute.
77
I t seems that the evidence on tested honey -not meeting the German requirements and re sold in the US market- was enough to conclude that ‘ record does not unequivocally demonstrate expense associated with this activities’. See Memorandum, Comment 14
78
Laboratory testing
79
The DOC agreed wit h t he pet it ioner’s posit ion. They ruled t hat because all t hird count ry sales were sold at prices below t he COP80 t hey based NV on CV; and CV by definit ion is a const ruct ion of t he product as sold in t he U.S.; t herefore no adj ust m ent was proper 81
( vii) Germ an warrant y expenses
There was an issue regarding ACA’ s warrant y worksheet and it s int erpret at ion. Basically t he pet it ioners argued t hat t he respondent in it s calculat ion of Germ an warrant y expenses incorrect ly included expenses t hat were not relat ed t o ret urns. ACA cont ended t hat claim ed warrant y expenses were lim it ed t o t hose addit ional expenses incurred as a direct result of t he rej ect ion of honey by Germ an cust om ers. The DOC re- calculat ed ACA’s Germ any warrant y expenses and included only t hose expenses associat ed wit h ACA’s original sales t o Germ any ret urned t o Argent ina, and excluded freight and m ovem ent expenses associat ed wit h t ransport ing t he resold honey t o t he U.S.
( viii) I nvent ory carrying cost s
Radix disput ed t he pet it ioner’s request t o include invent ory carrying cost s in t he CV arguing t hat t he pet it ion was an out dat ed DOC policy. The DOC did not include t he invent ory carrying cost s in t he final det erm inat ion since t he Agency acknowledged t hat t hat was not t he current DOC pract ice.
( ix) Level of t rade( LOT)
ACA cont ended t hat because all of it s cust om ers in Germ any are packers and all cust om ers in t he U.S. are im port ers, t he im pact on price com parabilit y can not be seen by exam ining ACA’s prices at different levels of t rade ( “ LOT” ) in a single m arket . Respondent argued t hat t hey provided im port ant addit ional selling services t o t he Germ an cust om ers, which are honey packers, and t ook on t he funct ions norm ally perform ed by im port ers in t he U.S. m arket . The respondent subm it t ed an affidavit t o provide for an adequat e proxy for t he LOT different ial and pursuing sect ion 773 ( a) ( 1) ( B) of t he Trade Act , request ed for a LOT adj ust m ent .
One m ore t im e t he DOC sided wit h t he pet it ioners because t hey were not convinced – based on record- t hat t he varying degree t o which warrant y
80
There is no economic rationale on this statement considering that there is over 25,000 beekeepers in Argentina, it is a family business, the industry is a highly fragmented one and most of the beekeepers have few hives. There is no way for them to sell below cost without being out of business in just few months.
81
services had been provided were sufficient t o det erm ine t he exist ence of different m arket st ages.82
I n conclusion, adm inist rat ive proceedings and t he DOC adm inist rat ion of AD laws were int ended t o benefit t he pet it ioners. I n ot her words, rules and pract ice are neit her aim ed at seeking t he t rut h nor t oward guarant eeing due process. I t was alm ost im possible for respondent s t o successfully count er act t he dom est ic indust ry’s allegat ions.
I V) I M PACTS OF TH E AD M EASURES I V) a ) PRI CE I M PACTS I N TH E US
As a result of t he dum ping m argin, wholesale prices went up rapidly in t he U.S. According t o U.S. im port ers, in a few m ont hs, t he cost of a pound of whit e honey went from US$0.50 dollars a pound t o US$0.80 dollars as an im m ediat e consequence of t he gap in honey availabilit y, due t o t he disappearance of Argent ine honey from t he m arket . Needless t o say, Am erican consum ers were direct ly affect ed by t he prot ect ion m easure.
On t he ot her hand, t he I nt ernat ional Trade Com m ission ( I TC) when det erm ining if inj ury t o dom est ic indust ry was being caused by ‘dum ped and subsidized im port s’ it considered t he: ( i) recent behavior of im port volum es; ( ii) effect of im port s on dom est ic prices and; ( iii) ot her fact ors t hat m ight account for any inj ury t hat is being experienced by t he indust ry. During t he period under invest igat ion, im port s had an im port ant increasing t rend: from 60,000 t ons in 1998 t o 83,000 t on in 1999, t o 90,000 t ons in 2000 and cont inued increasing during t he first sem est er ( quart er?) of 2001 while t he I TC was running t he invest igat ion. I f slow growt h in dom est ic product ion is considered, t he part icipat ion of im port s in apparent consum pt ion increased from 28.4% in 1998 t o 36.8% in 1999, t o 37.7 in 2000.
The I TC decided t o cum ulat e im port s from Argent ina and China, t herefore increasing t he probabilit y of finding inj ury in t he dom est ic indust ry.83 The Agency decided t hat t he effect s of im port s in dom est ic prices had a negat ive im pact .
Lower prices from 1995 can be part ially explained by Argent ina’s presence in t he int ernat ional m arket s as well as by evidence of declining profit s and problem s in repaym ent s of loans by beekeepers. Nonet heless t he I TC issued a posit ive det erm inat ion of dom est ic inj ury due t o t he Argent ine honey im port .
However, it m ust be st ressed t hat t he I TC findings are in fact t he consequence of bad econom ics such as t o consider whet her im port s are having an im pact on t he fiscal cost s of honey support ing program s and norm al effect s of declining indust ries unable t o m at ch int ernat ional com pet it ion.
82
Memorandum, Comment 18
83
Cit ing an experienced businessm an: “ We really don’t have a clue how we are going t o m eet t he requirem ent s of t he U.S packing indust ry over t he next 12 m ont hs What we have now is a sit uat ion I have never seen before in 27 years of business, on t hat in t he long run is going t o benefit nobody” , Nicholas Sargeant son, president of Sunland I nt ernat ional, an im port er in New Canaan, Conn. said.84
I n conclusion, t he AD invest igat ion drove out t he Argent inean honey from t he Am erican m arket – in spit e of it s qualit y and bet t er price – provoking price increasing and harm ing consum ers as well as im port –relat ed j obs and business.
I V) b) I M PACTS OF TH E AD M EASURES I N ARGEN TI N A
There are im port ant t rade effect s following t he AD and CVD invest igat ion and t he subsequent im posit ion of dut ies on Argent ine honey. Alt hough t here are t wo m ain causes of disrupt ion t o t he honey m arket , nam ely t he im posit ion of dut ies and findings of ant ibiot ics in Chinese honey in 2002, t his paper will focus on t he form er.85
Devast at ing effect s on Argent ina’s honey export s st art ed when t he U.S. Adm inist rat ion began t he AD invest igat ion proceedings. I n 2001, U.S. honey im port s from Argent ina declined by 55% . Even when t here was an apparent m arket subst it ut ion wit h honey im port s from Viet nam , Mexico and Uruguay, overall U.S. im port s during 2001 were 26% below t he 2000 recorded level.86
There is a direct cause bet ween t he AD invest igat ion and declining honey im port s from Argent ina: “ st art ing in May 2001, short ly aft er t he prelim inary affirm at ive det erm inat ion by t he DOC and six m ont hs in advance of t he final decision, im port s began t o crawl down t hrough t he zero axis line raising t he fears of a m aj or collapse of Argent ina’s honey indust ry” .87 This is a t ypical effect of an AD invest igat ion: during t he period of invest igat ion im port s are reduced by roughly half t he decrease t hat m ight be expect ed if AD dut ies would have been im posed from t he beginning of t he invest igat ion.88
Even when dut ies im posed on Argent ina’s honey benefit ed ot her export m arket s – such as Germ any – t he prot ect ive m easure and ban on Chinese export s creat ed a supply short age t hat “ led t o a process of accelerat ed increases in honey prices around t he world.”89
84
Larry Rother, US and Argentina Fight over Honey, New York Times, March 5, 2002 available at
www.globalpolicy.org (last visited October 9th, 2003)
85
For an analysis on trade impacts in 2002 following the sanitary induced import ban on China, see Julio Nogues, op.cit.
86
Supra note 7, pp.25-26 citing USI TC source.
87
I d.
88
Supra note 7, pp 27-28 citing Staiger and Wolak
89
There is no doubt t hat under t hese circum st ances consum ers are harm ed. I t is not easy t o calculat e t he t rade prot ect ive m easures against Argent ina and t he price increase isolat ing China’s ban on im port s. However, t aking int o account t hat in t he year 2000, honey consum pt ion in t he U.S. was 179,143 t ons and t he ret ail price was $7 per kilo, it was est im at ed t hat t he ext ra cost s t hat U.S. consum ers would pay on account of AD and CV dut ies was $238 m illion dollars.90
Last but not least at all, t here are im port ant negat ive social im pact s of t he AD m easures on Argent ina, nam ely t he increasing povert y effect s on t he Argent ine honey indust ry. 91
As m ent ioned before, Argent ina is t he leading export er of honey, largely benefit ing from low cost product ion, plent iful floral sources, reliable and int ernally com pet it ive m arket ing channels and good honey qualit y.
However, at t he t im e of t he im posit ion of AD dut ies, due t o t he price levels t he incom e of Argent ine beekeepers –and even som e export ers- had declined significant ly. “ High int erest rat es and t axat ion levels exacerbat ed t he problem ” .92 I t was pret t y unclear how well producers could survive in low- priced m arket s. Producers wit h high fixed cost s and subst ant ial debt were under great financial st ress wit h high int erest prevailing. I n fact , som e prelim inary report s acknowledged t hat beekeepers were exit ing t he m arket by abandoning t heir hives.93
The honey indust ry in Argent ina is com posed m ainly of sm all producers. Most of t hem own a low num ber of bee colonies; “ only 11% of beekeepers m aint ained over 300 hives and t he vast m aj orit y of Argent ina’s 18,000 beekeepers appear t o approach beekeeping as a sideline affair” .94 Sm all producers have less t han 50 beehives95.
I n Argent ina, only 3% of producers are big producers while t he rest of t he producers are dist ribut ed as follows: 12% own from 350 t o 500 beehives; 75% own bet ween 20 and 350 beehives and 10% own less t han 20 beehives.96 The honey indust ry in Argent ina, according t o t he Albert a St udy, provides em ploym ent t o around 60,000 people, m ost of t hem being fam ily m em bers. Sim ple m at h- calculat ion indicat es t hat for m ost Argent ine producers, honey sales allow an ext rem ely low st andard of living: I n 1998 annual net incom e for honey producer was US$0.30 dollars per kilo. Assum ing
90
For details on the assumptions and calculations, See Julio Nogues, op. cit. pp.31-33
91
The consequence of the American market shut down to the Argentine honey has not only trade and social related effects but political impact on the bilateral relationship between the US and Argentina. Growing Anti-Americanism feelings and an increasing popular demand for results from the alignment to the US foreign policy in the 1990’s are the most obvious manifestations of the Argentines’ discontent.
92
Alberta Study, p.72
93
I d.
94
Alberta Study, p.51
95
Big producers are those who have more than 500 beehives
96
t hat each beehive produces 35 kilos of honey, a 300 - beehive producer m akes net US$3,150 dollars or US$300 dollars per m ont h.97
Argent ine honey producers - as in m any ot hers part s of t he world - m ake t heir living from honey product ion. A free com pet it ive world is inst rum ent al t o raising t heir living st andards. I t seem s t hat t he U.S. – one of t he biggest honey im port ers – will cont inue t o hit developing count ries in spit e of t heir fair, com pet it ive agricult ural indust ry. Moreover, one lesson t o be learned from t he last decade is t hat : “ becom ing a successful honey export er98 is m ore likely t o m ake beekeepers from export ing count ries poorer rat her t han richer. I n t his way an indust ry t hat is very close t o poor people all over t he world and t hat should be fost ered and st abilized, is in fact being severely harm ed by discrim inat ory t rade policies” .99
V. TH E US AN TI D UM PI N G LAW
V. 1 ) TH E AD LAW AN D I TS AD M I N I STRATI ON
The AD laws have been part of U.S. law for decades.100 The current law is based in t he 1979 Act101 wit h m inor m odificat ions.102 The m ost im port ant am endm ent is t hat of 1984 t hat requires inj uries t o be assessed by cum ulat ing im port s from com pet ing count ries t hat are being subj ect t o invest igat ion.103 This am endm ent allowed t he I TC t o cum ulat e Argent ine and Chinese honey im port s for t he purpose of t he inj ury t o t he dom est ic indust ry det erm inat ion.
The US st at ut ory prohibit ion of dum ping reads as follows:
“ I t shall be unlawful for any person im port ing or assist ing im port ing any art icles from any foreign count ry int o t he Unit ed St at es, com m only and syst em at ically t o im port , sell or cause t o be im port ed or sold such art icles wit hin t he Unit ed St at es at a price subst ant ially less t han t he act ual m arket value or wholesale price of such art icles, at t he t im e of t he export at ion t o t he
97
Buenos Aires, Santa Fe, Cordoba, Entre Rios and La Pampa, are the most important provinces for honey production.
98
As mentioned before Argentina is extremely export –oriented with production over 93,000 tons and consumption only at 5,000 tons. Top exporter in 2000 was the Association of Argentine Coops (ACA), followed by Conagra and Honey Max – 24,000 tons, 9,650 tons and 8,950 tons respectively
99
Supra note 7,p.34
100
For an historical review of the AD legislation in the USA, See: Robert W. McGee, The Case to Repeal the Antidumping Laws, 13 NW. J. I nt’l L.& Bus. 491, 2,3 (Spring 1993) Available at Lexis Nexis (last visited August 10th, 2003).
101
The Trade Agreements Act of 1979 incorporated the 1930 Tariff Act’s dumping provisions. I t took effect January 1, 1980 the same day the GATT Antidumping Code entered into force in the USA.
102
One important consequence of the AD revision was the government’s decision to shift the administration of the AD laws from the Treasury Department to the Commerce Department. I t increased the imposition of AD penalties on foreign companies.
103
Unit ed St at es, in t he principal m arket s of t he count ries of t heir product ion, or of ot her foreign count ries t o which t hey are com m only export ing aft er adding t o such m arket value or wholesale price, freight , dut y, and ot her charges or expenses necessarily incident t o t he im port at ion and sale t hereof in t he Unit ed St at es: Provided, That such act or act s be done wit h t he int ent of dest roying or inj uring an indust ry in t he Unit ed Sat es, or of prevent ing t he est ablishm ent of an indust ry in t he Unit ed St at es, or of rest raining or m onopolizing any part of t rade and com m erce in such art icles in t he Unit ed St at es” .104
Two governm ent al adm inist rat ive agencies are in charge of enforcing t he AD and CV laws as enact ed by Congress: I nt ernat ional Trade Adm inist rat ion ( I TA)105, a division of t he Depart m ent of Com m erce ( DOC) and t he I nt ernat ional Trade Com m ission ( I TC) . Bot h have different roles. On one hand, t he DOC det erm ines whet her im port s are ‘dum ped’ int o t he US m arket106 and also det erm ines t he m argins of dum ping. The DOC focuses on individual businesses in order t o com put e dum ping m argins unique t o t hose sit uat ions. Quest ionnaires are det ailed regarding product ion by individual producers or an associat ion’s individual m em bers.107
On t he ot her hand, t he I TC m akes one det erm inat ion based on t he effect s t hat im port s have on t he dom est ic indust ry as a whole.108 I n order t o issue an affirm at ive det erm inat ion, t he I TC findings m ust support t he argum ent t hat im port s have m at erially inj ured t he dom est ic indust ry; t hat im port s are t hreat ened wit h m at erial inj ury or t hat im port s are ret arding t he est ablishm ent of dom est ic indust ry.109 The I TC usually relies on com parisons of indicat ive or charact erist ic dat a t o reach it s final decision.110
Norm ally an AD proceeding involves five st ages. The first one includes t he DOC, which decides whet her t o st art an invest igat ion. This decision is cont ingent on a pet it ion alleging t he required elem ent s for im plem ent ing an AD dut y based on inform at ion “ reasonably available t o t he pet it ioner support ing t he allegat ions”.111 This st age also includes t he pet it ioner’s st anding issue.
104
15 U.S.C. 72 (1988)
105
Hereinafter we will make reference to the DOC.
106
I n the case of Subsidies, it determines whether imports are benefiting from subsidies implemented by the importing country’s government.
107
Steven Thuesen, Sustainable Production Agriculture in the face of Foreign Commodity Dumping: Achieving Effective Anti Dumping and Countervailing Duty Determinations, 77 N. Dakota L. Rev. 453, 2, (2001) Available at Lexis Nexis, last visited August 14th, 2003)
108
I TC does not make determinations regarding specific companies.
109
19, U.S.C. 1671 d (b) (1), 1673 d (b) (1)
110
The investigation must be completed in 235 days from the date the petition was filed. Under certain circumstances preliminary AD investigation can be extended for 50 more days and the final determination for 60 more days.
111
I f t here is an affirm at ive prelim inary det erm inat ion by t he DOC, t he I nt ernat ional Trade Com m ission ( I TC) m akes a prelim inary det erm inat ion on whet her t here is a reasonable indicat ion t hat dom est ic indust ry is being m at erially inj ured, t hreat ened wit h m at erial inj ury or it s est ablishm ent is being ret arded.112 This is t he second st age of t he proceedings.
The t hird st age follows an affirm at ive finding by t he I TC. I t consist s of t he “ DOC’ s prelim inary det erm inat ion as t o whet her t here is a reasonable basis t o believe or suspect t hat t he im port ed goods are being sold, or are likely t o be sold, at less t han fair m arket value”.113 Even when final dut ies will not be collect ed unt il t he dum ping invest igat ion is finished t he im port er will be required t o post som e t ype of bond t o guarant ee against possible adverse dum ping dut y det erm inat ion at t he end of t he proceedings.
The fourt h st age is conduct ed wit hin 75 days of t he prelim inary invest igat ion and involves a final det erm inat ion by t he DOC regarding t he sale of im port ed goods.
I f final det erm inat ion is affirm at ive, t he fift h st ep is for t he I TC t o m ake it s final det erm inat ion of m at erial inj ury and finally t he DOC issues t he AD order.
I f eit her t he DOC or I TC det erm inat ions are insufficient t o support t he allegat ions of t he pet it ioner or findings are negat ive, t he invest igat ion is over.114
The DOC has a decisive role in t he AD invest igat ions. I t decides whet her t o st art t he adm inist rat ive procedure and t he st anding issue as well as t he dum ping m argin. A sufficient pet it ion is t o be filed by an int erest ed part y; t hat m eans it m ust be filed on behalf of an indust ry t hat alleges t he necessary elem ent s of unfair t rade coupled wit h inform at ion reasonable available t o t he pet it ioner. St anding includes analyzing if t he dom est ic indust ry produces a “ like product ” ( like t hose being im port ed) as well as if t he int erest ed part y filing t he pet it ion represent s115 indust ries t hat m anufact ure t he “ like product ” in t he dom est ic m arket .116 However t his is a sim ple pet it ion and no high evidence st andards t o support t he pet it ion are required.
The I TC has t he final word t o det erm ine which dom est ic product or product s are m ost like t he im port ed art icle defined by t he DOC. Six fact ors are considered by t he I TC in order t o det erm ine t he ‘like product ’: ( i) physical charact erist ics and uses; ( ii) int erchangeabilit y; ( iii) channels of dist ribut ion; ( iv) cust om er and producer percept ions; ( v) com m on m anufact uring facilit ies and product ion em ployees; and ( vi) when appropriat e, price.117 There is no
112
The I TC has 45 days from the date of the petition was filed to make the preliminary decision.
113 I d .Note 113
114
Id.
115
I ndividual petitions must represent at least 25% of the total domestic production of the like product. This also applies to petitions filed by associations or organizations.
116
19, U.S.C. 1677(10) . Like or most similar in characteristics and uses to the article imported and subject to investigation.
117
clear definit ion on what const it ut es ‘like product ’ and decisions are m ade on a case by case basis, int roducing a great deal of uncert aint y.
As for t he m at erial inj ury det erm inat ion, t he I TC m ust assess whet her t here is ‘a reasonable indicat ion’ t hat a dom est ic indust ry is being or is t hreat ened by m at erial inj ury because of t he im port s alleged in t he pet it ion. The reasonable indicat ion st andard requires t he I TC t o issue a negat ive det erm inat ion only if: ( i) t he record as a whole cont ains a clear and convincing evidence t hat t here is no m at erial/ t hreat of inj ury and ( ii) t here is no likelihood t hat cont rary evidence will arise in t he final invest igat ion. I n addit ion, t he I TC,like t he DOC, uses t he ‘fact s available’ inform at ion’ st andard.
When t he I TC prelim inary and affirm at ively concludes t hat t here is a reasonable indicat ion of m at erial inj ury,118 t he DOC prelim inary det erm ines119 whet her t he subj ect goods are being/ likely t o being sold at less t han fair m arket value.120 As m ent ioned, t he DOC is in charge of calculat ing t he dum ping m argin.
The final inj ury det erm inat ion by t he I TC is basically a reconsiderat ion of t he prelim inary decision. The sam e fact ors considered in t he previous det erm inat ion are considered and t he dum ping m argin calculat ion by t he DOC is included in t he analysis.
I f final inj ury det erm inat ion is affirm at ive as t o m at erial/ t hreat inj ury t he I TC cont inues ret roact ively t he suspension of liquidat ion and t he post ing of cash deposit or ot her securit ies previously ordered by t he DOC when det erm ined t hat sales where m ade at less t han fair m arket value.121
V. 2 ) M AI N FLAW S I N TH E EN FORCEM EN T OF TH E AD LAW S
Main crit ics t o t he adm inist rat ion of AD laws are relat ed t o t he lack of due process in t he adm inist rat ive proceedings and t he broad discret ionary power grant ed by t he Congress t o t he agencies.
The AD proceeding has been described as a process wit h a m assive discovery request t o t he respondent s consist ing of a burdensom e product ion of docum ent s wit h det ailed inform at ion; where t he sole aut horit y of t he serving part y- t he DOC- decides t he deadline, t he ext ent and t he form at of t he request ed inform at ion; where t he serving part y is at t he sam e t im e t he j udge t o rule on t he adequacy of t he response, on t he m erit s of t he obj ect ions t hat m ight be raised by t he required part y and t he ult im at e decision m aker in t he issue on which t he inform at ion was request ed. Moreover, even when t he decision m aker m ay hold hearings at t he request of t he part ies prior t o final
118
The I TC is not bounded by its previous decisions
119
The DOC has 160 days within the petition’ filing date.
120
Steven Thuesen, op. cit, p 11
121
