On August 7, the U.S. International Trade Commission (ITC) announced it had found enough evidence to support recent claims of three U.S. fiber producers that China is "dumping" certain polyester fibers used in stuffing for furniture, sleeping bags, pillows and more in the U.S. market. Dumping is generally defined as selling product in the U.S. market at less than fair value, and the ITC Commissioners voted 6-0 to allow an "antidumping" investigation to move into the next phase.
This action came in response to a July 23 antidumping petition filed by DAK Americas, LLC, Nan Ya Plastic Corp. and Wellman, Inc. alleging that polyester fibers categorized under Harmonized Tariff Schedule heading 5503.20.00 that are three denier or higher exported from China are unfairly priced and, therefore, are causing material injury to U.S. producers of the same fiber. Pointing to the fact that imports of these fibers from China have surged from 75 million pounds in 2003 to 195 million pounds in 2005, the petitioners further argued that the U.S. government should provide protective relief, in the form of restrictive antidumping duties on these imports, for the domestic industry.
By issuing its preliminary determination, ITC set the wheels in motion for a complex antidumping investigation process that will involve both the Commission and the U.S. Department of Commerce (DOC). And considering the issues involved, it is expected that this effort will continue for at least the next year before it can be resolved. At the end of this process, however, there is a possibility that Chinese exports of these fibers could face punitive tariffs—perhaps as high as 88 to 109%—when imported to the U.S.
The right of any country to use defensive measures to protect against dumped imports is well established at the global trade level and is specifically provided for in Article 6 of the General Agreements of Tariffs and Trade and the 1994 Uruguay Round Agreement. The sum of the anti-dumping text in these two treaties essentially says that governments may take actions against dumping when there is genuine injury to the competing domestic industry. To do so, however, the accusing government must "�be able to show that dumping is taking place, calculate the extent of dumping (how much lower the export price is compared to the exporter's home market price), and show that the dumping is causing injury or threatening to do so."
In the U.S., dumping occurs when a foreign producer sells a commodity in the U.S. at a price that is "less than fair value" as defined by either: 1) the price of the same or a similar product in the foreign exporter's home market or 2) the cost to produce the product plus an acceptable amount of profit. "Dumping margins" measure the extent to which an item has been dumped and are calculated by subtracting the export price from normal value and dividing the difference by the export price. Moreover, under U.S. law, even if dumping margins are found, dumping is not considered to have taken place unless it can be proven that the affected industry has suffered material injury or faces the threat of material injury.
The process for determining if any product has been dumped in the U.S. market involves both separate investigations by ITC and DOC, each of which must make a series of mutually interdependent decisions over a highly detailed timeline. Specifically, DOC must determine whether dumping has occurred and ITC must calculate whether claims of material injury are valid.
In initiating an antidumping investigation, the first step is for members of the domestic industry to file a petition with ITC and DOC. This petition must have the support of producers representing at least 25% of domestic production by volume and should include detailed information substantiating the dumping and injury claims including things such as import/ export statistics, data on capacity, production volumes, prices, etc.
Once ITC determines that a petition contains all of the necessary elements (typically within 20 days of receipt), it publishes a notice in the Federal Register announcing the institution of the investigation and allowing interested parties a chance to become involved in the process. ITC then has 45 days to issue a preliminarily determination as to whether any reasonable chance exists of finding injury.
A negative determination from ITC would halt the entire process but, if the determination is affirmative, DOC is allowed up to 115-days to investigate and make a preliminary determination as to whether dumping margins exist. At the end of this phase of the investigation, DOC must also calculate dumping margins. From that point forward, foreign exporters of the commodity in question must pay cash deposits on possible antidumping duties, which are designed to offset the dumping margins found in Commerce's preliminary determination.
From there, DOC enters the final phase of its investigation, which can last 75-135 days and requires staff to travel abroad to verify various facts, such as the foreign market price. At the end of this phase, DOC will issue its final determination as to whether a margin of dumping exists. Assuming the determination is affirmative, ITC typically has 45 days to make a final injury finding. If it does, an antidumping order is issued, and all Customs officials at all U.S. ports of entry must begin collecting duties equal to the final calculated rates of dumping.
And while the dumping margin calculations themselves have the potential to be revised on an annual basis, an antidumping order remains in effect for five years. According to ITC, after that, the order must undergo a sunset review, "to determine whether revocation of the order would be likely to lead to continuation or recurrence of dumping and of material injury within a reasonably foreseeable time. If both agencies make affirmative determinations, the order is continued for another five years. If not, it is revoked."
With the above timeline in mind, final determinations of injury and dumping from ITC and Commerce are expected around mid-2007. And while it is difficult to predict exactly what they will decide, the fact that antidumping orders have already been issued for shipments of these same polyester fibers from Korea and Taiwan, the petition against China may be pretty strong.
What does all this mean for the nonwovens industry? Some industry members indicate that an antidumping order would probably not have a direct impact on their operations because these particular fibers are not often used to make nonwovens due to their size. That said, however, if the petition is eventually successful, it could have an impact on INDA members who use these fibers in other applications.
Some observers have also speculated that, taken together, polyester antidumping cases involving Korea, Taiwan and now China might represent the beginning of a trend for U.S. textile producers who are looking for any and all protective measures in an effort to ward off imports following the abolition of all textile quotas in 2005.
It is for these reasons that INDA, Association of the Nonwoven Fabrics Industry, will continue to track this issue very closely. Even though our industry may not be directly impacted by this particular petition, members of our International Trade Advisory Board are particularly interested in the outcome since it could ultimately prove to be a harbinger of things to come.