CIT Denies Challenges on Relevance of AD Duty Payments to Future Rate Calculations on Indian Shrimp
The Court of International Trade denied challenges from both sides of a dispute over the 2009-10 antidumping duty administrative review on frozen warmwater shrimp from India (A-533-840). Indian companies Apex Exports and Falcon Marine Exports argued that refunds it received on prior AD duty payments should offset certain costs that had resulted in a higher AD duty rate for the companies. On the other hand, domestic petitioners said past AD duty payments should be deducted from U.S. prices for the purposes of the duty calculation. In a recently released opinion dated Dec. 31, the court rejected both arguments and sustained Commerce’s final results.
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To calculate antidumping duty rates, Commerce compares the prices of merchandise the company sells in the U.S. (export price) with the prices of goods the company sells in a home or third-country market (normal value). Sales made in the home market at prices below the cost of production are disregarded if they make up a large enough portion (20%) of total home market sales. This determination of whether to disregard below-cost sales in normal value is called a “cost of production” analysis. It’s performed to make sure companies don’t artificially sell at low prices in their home country in an effort to make their U.S. prices seem higher and mask dumping.
The level at which Commerce sets the cost of production can be a point of contention between domestic industry and foreign exporters. If that level is set too low, foreign exporters can get away with artificially driving down their AD duty rate. Conversely, if the level is set too high, then honest home market sales made at lower prices may be disregarded, raising the company’s normal value and AD duty rate. The cost of production set by Commerce doesn’t only include the costs of materials, but also administrative and financial expenses. Realizing that companies need to keep cash on hand to satisfy short-term obligations, Commerce allows interest from short-term investments to offset financial expenses for the purposes of calculating cost of production.
Apex and Falcon Marine argued that interest they received because they overpaid AD duties on certain entries qualified as a short-term investment. The cash deposit rate on some of their earlier entries was higher than the eventual assessment rate, so CBP had refunded the excess. Because Apex and Falcon Marine had also acted as the U.S. importer on the entries, they were refunded the difference, with interest. The companies said the interest should be applied as an offset to the cost of production, which would lower the level of the cost of production and presumably allow more low-price sales from the companies to be included in normal value. That would have lowered the AD duty rates calculated for the companies.
As had Commerce, the court ruled that interest from AD duty overpayments is not a short-term investment from which interest can be used to offset financial expenses in the cost of production. Short-term deposits are intended to be used to meet daily cash requirements, said CIT. That doesn’t apply to AD duty payments, which are required by the government and are not used as cash reserves. So interest from those payments don’t qualify, said the court.
The two exporters won a minor victory, however, as the court denied a challenge from domestic industry that argued for AD duty payments to be deducted from export prices. The deduction would have made U.S. sales seem cheaper in comparison, raising the companies’ AD duty rates. But it would also have resulted in double counting. Higher AD duty rates assessed in one administrative review would result in higher deductions from export price in the next. In other words, higher AD duty rates during one period would directly result in higher AD duty rates in the next. “This would result in circular calculations and impermissible double-counting of the dumping margins,” said CIT. “It was reasonable for Commerce to interpret the statute to avoid this absurd result.”
(Apex Exports v. U.S., dated 12/31/13, public version 01/09/14, Judge Goldberg)