PROMOTING INTERNATIONAL BUSINESS DEVELOPMENT WHILE PROTECTING DOMESTIC MARKETS: AN ANALYSIS OF THE NEW SHIPPER REVIEW POLICY OF THE UNITED STATES

Georgetown Journal of International Law, Winter 2005 by Fandl, Kevin J

I. ABSTRACT

The World Trade Organization (WTO) encourages the reduction or elimination of barriers to trade in order to facilitate fairness and equal access to markets for all member States. Recognizing that some exporters take advantage of open markets by flooding them with below-marketvalue goods and injuring domestic industry (dumping), the WTO permits countries to apply antidumping measures to damaging imports. These orders initially apply to all exporters of a certain product from a certain country. In the United States, the Department of Commerce (Commerce) is the government agency responsible for implementing these duties, and U.S. Customs and Border Protection is responsible for enforcing them.

These duties are intended to raise the price of imported goods to that of domestic goods so that they are on equally competitive market ground. If Commerce determines that particular commodities are entering the U.S. market at a price that is below market value, they will compensate domestic industry by establishing a percentage margin that the importer must pay to bring his goods into the stream of commerce.

Since these orders apply to every exporter regardless of their trade practices, some exporters that are subject to the order challenge the order in an effort to establish a lower individual rate, because the increase in price resulting from the duties cuts into their profit margin. This challenge can be raised in one of three ways: an administrative review, an expedited review, or a New Shipper Review (NSR). In each case, the exporter files a petition with Commerce requesting an investigation and an individual duty rate. After a stringent review, the exporter hopes to receive an exception to the order that permits it to export to the United States at a special, lower duty rate than other exporters of the subject merchandise from its country.

The process for a standard administrative review is lengthy, and the period in which a request can be made only begins a year after the duty order was established. Equally troublesome is an expedited review, which has very strict requirements that must be met before an investigation is opened. A more efficient method to evade these high duties is to utilize the NSR process. Any exporter that can establish that it did not export during the period of review in the antidumping investigation and which did make some reasonable sales to the United States at market value is entitled to an expedited investigation, potentially leading to an individual duty rate. During the investigation, the exporter is able to post a bond rather than a cash deposit for any goods it enters, allowing much easier market access.

The WTO and its member States support this policy because it allows exporters that should not have been swept into the broad antidumping order a method for quickly re-opening the door to the target country's market. In many cases, if this exporter were forced to wait a full year and then to endure the standard administrative review process, its company could go bankrupt for lack of market access.

In the United States, antidumping duties are applied retroactively, meaning that they are collected after the goods have already been imported and entered into the U.S. stream of commerce. Exporters undergoing an NSR are permitted to post only a bond during their review period. This Article analyzes the soundness of that policy and concludes that it is the cause of significant abuse by fraudulent exporters that may result in injury to U.S. industry and that may impede the facilitation of legitimate world trade.

II. INTRODUCTION

This Article analyzes a small component of antidumping law and policy called a New Shipper Review. The discussion begins with a brief refresher on antidumping law according to the World Trade Organization (WTO) and how it is implemented in the United States. It then explores the NSR policy and its intended use in international trade. This discussion is divided between application of the policy under the WTO and implementation of the policy in the United States. Next is an analysis of how the new shipper policy can be and has been abused by some exporters to the United States. This section is followed by a few case studies of NSR by possibly fraudulent exporters. Finally, there is a discussion about the potential reasons for abuse of this policy and how it can be changed to continue facilitating trade while protecting domestic industry from unfair trading practices.

III. A BRIEF OVERVIEW OF ANTIDUMPING POLICY AND PRACTICE

International trade rules seek to equalize the access that each country has to global markets by facilitating reductions in tariffs and unfair trading practices. This is most substantially accomplished through the work of the General Agreement on Tariffs and Trade (GATT) and the WTO. Complete elimination of tariffs and non-tariff barriers by all member States is the primary goal of the WTO. To encourage member States to lower their tariffs, the WTO utilizes several "carrots" and "sticks." The carrots, which are conveyed through WTO membership, provide access to new markets, most favored nation status, protection of intellectual property, and access to a thus-far successful international dispute resolution mechanism for member States. Sticks are most evident in the recommendations that the Dispute Settlement Body (DSB) issues against member States that do not adhere to fair trading rules. Although the DSB itself cannot enforce its recommendations, it permits the complaining country to do so through the use of sanctions and retaliatory measures that seek to equalize the playing field once again.