Antidumping duties and the U.S. pigment industry.The U.S. Department of Commerce recently announced antidumping an·ti·dump·ingadj. Intended to discourage importation and sale of foreign-made goods at prices substantially below domestic prices for the same items. duties on imports of Carbazole Carbazole is an aromatic heterocyclic organic compound. It has a tricyclic structure, consisting of two six-membered benzene ring fused on either side of a five-membered nitrogen-containing ring. Violet violet, common name for some members of the Violaceae, a family of chiefly perennial herbs (and sometimes shrubs, small trees, or climbers) found on all continents. Pigment pigment, substance that imparts color to other materials. In paint, the pigment is a powdered substance which, when mixed in the liquid vehicle, imparts color to a painted surface. 23 from China and India as well as countervailing duties Countervailing duties are a means to restrict international trade in cases where imports are subsidized by a foreign country and hurt domestic producers. According to WTO rules, a country can launch its own investigation and decide to charge extra duties, provided such additional against India. This came after the U.S. International Trade Commission voted unanimously that the domestic industry was injured in·jure tr.v. in·jured, in·jur·ing, in·jures 1. To cause physical harm to; hurt. 2. To cause damage to; impair. 3. because of the dumped imports. Table i identifies the producers and exporters subject to the new duties and cash deposits. There are several antidumping duties in effect for chemicals, but this is the first for the pigment industry. But the large increase in imports of pigments from China and India suggests it may be just the beginning. Both China and India now have well established industries for the production of chemicals, dyes and pigments and have targeted the U.S. for increased market share. Imports of organic pigments from these two countries have increased almost three-fold during the past five years, as shown by data published by the Trade Commission (see Table 2). (1) [GRAPHIC OMITTED] These increases have come at the expense of the domestic industry. A total of eight North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. organic pigment plants have closed in the last 10 years. (2) The industry has reduced costs by consolidating plants, increasing efficiencies and downsizing (1) Converting mainframe and mini-based systems to client/server LANs. (2) To reduce equipment and associated costs by switching to a less-expensive system. (jargon) downsizing . But there is a limit to how much further these savings can go due to high labor and regulatory expenses in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. . It is natural for the industry to consider what more can be done to retain existing market share and stay in business. * Antidumping Protection: The antidumping laws are administered by the U.S. Department of Commerce and U.S. International Trade Commission. Antidumping duties are a form of trade protection against unfair imports sold in the export market below the home market price, or "normal value." For example, if India exports pigment to the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. at $5.00 while its home market price is $10.00, the dumping margin will be 100% ($10-$5 = $5/$5 = 100%). Simply put, the dumping margin is the amount the export price should be increased to be the same as the home market price. * Benefits to the Domestic Industry: Antidumping duties have been of enormous benefit to domestic producers that have been injured or threatened with injury by dumped imports. Carus Chemical, the sole domestic producer of potassium permanganate potassium permanganate n. A dark purple crystalline compound used as an oxidizing agent and disinfectant and in deodorizers and dyes. , pioneered the first antidumping case against China in 1983. Nation Ford Chemical (NFC NFC abbr. National Football Conference ) followed in 1992 with a successful case against imports of sulfanilic acid Noun 1. sulfanilic acid - a crystalline acid made from aniline and used as a dye sulphanilic acid acid - any of various water-soluble compounds having a sour taste and capable of turning litmus red and reacting with a base to form a salt from China and India. Neither of these companies would be in business today were it not for the antidumping laws. DuPont and affiliated companies Affiliated Companies A situation that occurs when one company owns a minority interest (less than 50%) in another company. Also refers to companies that are related to each other in some way. Notes: An affiliated company is sometimes referred to as a subsidiary. have 10 orders in effect against various countries for imports of Neoprene neoprene: see rubber. neoprene Any of a class of elastomers (rubberlike synthetic organic compounds of high molecular weight) made by polymerization of the monomer 2-chloro-1,3-butadiene and vulcanized (cross-linked, like rubber), by sulfur, , Teflon, PET films and polyvinyl alcohol polyvinyl alcohol, n a complex alcohol that is soluble in water and is used as an emulsifier and adhe-sive. . U.S. Steel The United States Steel Corporation (NYSE: X) is an integrated steel producer with major production operations in the United States and Central Europe. The company is the world's seventh-largest steel producer ranked by sales (see list of steel producers). has 88 orders in effect covering a variety of steel products. Antidumping duties against furniture from China have been recently announced. Chlorinated chlorinated /chlo·ri·nat·ed/ (klor´i-nat?ed) treated or charged with chlorine. chlorinated charged with chlorine. chlorinated acids some, e.g. isocyanurates from China and Spain are now under investigation. Use of the antidumping laws should be seriously considered by any domestic industry that is injured or is threatened with injury due to unfairly traded imports. * China a Special Case: The antidumping definition of selling in the export market at below home market prices works well for market economies such as India, but not for state-controlled economies such as China. To solve this problem, Commerce calculates what the price would be in China as if it were a market economy. The Chinese producers receive questionnaires asking for the unit amounts of raw materials, labor and energy used to produce the product. These "factors of production" are then valued in a market economy, usually India. Commerce values these factors using public prices in India found in import statistics, magazines and annual reports of companies producing the same or similar products. With the factors from China and values from India, Commerce calculates the "normal value" in China and compares it with the China export price to determine the cash deposit rate for future imports. Different deposit rates are established for each exporter and producer responding to the questionnaires. In addition, an "all others" rate is derived from the petition. * Cash Deposits: The purpose of cash deposits is to protect against importers not paying the duties once assessed by Commerce. Unlike other countries, the U.S. assesses antidumping duties retroactively ret·ro·ac·tive adj. Influencing or applying to a period prior to enactment: a retroactive pay increase. [French rétroactif, from Latin , using what is known as the "annual administrative review." The cash deposits are only an estimate of what the assessed duties will be for imports occurring after the effective date of the order and one year after the order is issued. The review itself will take at least one year, so actual duties will not be assessed until two and a half years after the effective date. * Adsorption adsorption, adhesion of the molecules of liquids, gases, and dissolved substances to the surfaces of solids, as opposed to absorption, in which the molecules actually enter the absorbing medium (see adhesion and cohesion). of Cash Deposits: The objective of antidumping duties is not to penalize pe·nal·ize tr.v. pe·nal·ized, pe·nal·iz·ing, pe·nal·iz·es 1. To subject to a penalty, especially for infringement of a law or official regulation. See Synonyms at punish. 2. dumped imports, but to cause import prices to rise so that dumping does not occur. It is ironic that while the duties are meant to cause export prices to rise, Chinese exporters usually respond immediately by cutting prices further to "absorb" the cash deposit. But if an exporter with an existing 5% deposit rate reduces its price by 5%, it will cause the actual duty to increase to 10.3% as shown in Table 3. (3) * Underselling: In the violet case, the Commission found that Chinese exports were underselling domestic dry color by 50.8 percent. (4) This underselling suggests that the Chinese exporters have plenty of room to raise prices and avoid paying any antidumping duties. If the exporters increase prices, their cash deposits would be returned to them through the annual administrative review and they would no longer be required to make deposits for future shipments. The record shows exactly the opposite. Cash deposits have proven grossly inadequate to cover the final duties. * Uncollected Duties: Nowhere is the inadequacy of cash deposits better illustrated than in the 2004 Annual Report for the Continued Dumping and Subsidy Offset Act of 2000. (5) This report reveals that uncollected Chinese antidumping duties now stand at $224 million, or 86 percent of the total uncollected amount from all countries. This act, commonly referred to as the Byrd Amendment The Byrd Amendment is also known as the Continued Dumping and Subsidy Offset Act of 2000 (CDSOA). The act is American legislation closely associated with its chief sponsor, Democratic Senator Robert Byrd of West Virginia. , requires that antidumping duties be paid to the domestic industry supporting the original petition. * Funneling of Exports: In addition to the practice of reducing the export price to absorb the cash deposit, there are several other causes of these uncollected duties. By far the most important is what Commerce refers to as "funneling," where the lowest cash deposit exporter becomes the exporter of choice for Chinese producers. The annual administrative reviews eventually will "correct" this practice, resulting in huge additional billings to many importers with no ability to pay. Bankruptcy of these small players is of little comfort to the industry that lost the sales initially, and certainly does not compensate them since the Byrd refunds also are lost. * Cost of Production: As discussed, the Chinese normal value is derived from production costs experienced during the antidumping investigation. The long period between the investigation and final assessment of duties is another reason that actual duties are higher than deposits. For example, in the violet case there already have been major raw material and energy increases since the period of investigation in 2003. But it will take two more years before final duties are assessed through the first annual administrative review. These increases automatically will cause the actual duties to be much higher than the cash deposits. * Appeals: It is common for the domestic industry to appeal Commerce rulings to the U.S. Court of International Trade. Petitioners already have appealed the violet case because of mistakes made by Commerce in valuing the factors of production; the most obvious being the use of incorrect Indian import classifications to value chemicals used to make crude violet. These corrections alone will add at least 10 percent to the final duties assessed. * Tariff Misclassification: The import tariff An import tariff or import duty is a schedule of duties imposed by a country on imported goods. It is paid at a border or port of entry to the relevant government to allow a good to pass into that government's territory. for printing inks has long been 1.8%, while the Uruguay Rounds
The World Trade Organization conducts negotiations through what are called rounds. decreased tariffs for organic pigments from 20% in 1995 to 6.5% at present. This large, albeit decreasing difference between the ink and pigment tariffs has been an open invitation for exporters to misclassify mis·clas·si·fy tr.v. mis·clas·si·fied, mis·clas·si·fy·ing, mis·clas·si·fies To classify incorrectly. mis·clas pigments as inks. For example, in 2000, at the request of Indian importers, New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of Customs classified "blue flushes" as printing ink. This error was corrected by Customs in a notice published Jan. 23, 2004. (6) This corrected classification has caused Indian imports of blue pigment as reported by the Bureau of Census Bureau of Census A division of the federal government of the United States Bureau of Commerce that is responsible for conducting the national census at least once every 10 years, in which the population of the United States is counted. to increase from 0.5 mm-lbs, in the first half of 2004 to 3.5 mm-lbs, in the second half. Of equal significance is that reported imports of Red Pigment 57:1 increased from 0.2 to 3.7 mm-lbs, and Yellow Pigment 12 increased from 0.0 to 2.5 mm-lbs, over these same periods. (7) These increases lead to the obvious conclusion that with the "blue flush" misclassification in their favor, Indian exporters used this incorrect ruling to also misclassify red and yellow flushes as printing inks. These misclassifications, initiated by Indian and Chinese importers, have injured the domestic industry by reducing the trade protection intended by the tariff laws and have caused the loss of millions of dollars of income to the U.S. Treasury U.S. Treasury Created in 1798, the United States Department of the Treasury is the government (Cabinet) department responsible for issuing all Treasury bonds, notes and bills. Some of the government branches operating under the U.S. Treasury umbrella include the IRS, U.S. . * Corrective Action A corrective action is a change implemented to address a weakness identified in a management system. Normally corrective actions are instigated in response to a customer complaint, abnormal levels if internal nonconformity, nonconformities identified during an internal audit or : Both Commerce and Customs have been embarrassed by the Byrd Amendment revelation of uncollected duties. Commerce is presently revising its rules for collecting cash deposit to prevent funneling of imports through the low cash deposit exporter. (8) Commerce also has established a special team for enforcement of the Chinese antidumping orders. Customs has increased its bonding requirements for certain types of imports that represent a large part of the unpaid duties. Exporters may find it increasingly difficult to find importers willing to take the risk that the cash deposit will be the maximum liability. In response, they may set up "joint ventures" with importers to share the risk, or simply act as both exporter and importer. In either case, there is a great temptation to simply reduce the "transfer price" as a means of reducing the regular duties and cash deposit. Customs is now closely monitoring all Chinese imports subject to antidumping duties, and is well aware of the practices designed to circumvent cir·cum·vent tr.v. cir·cum·vent·ed, cir·cum·vent·ing, cir·cum·vents 1. To surround (an enemy, for example); enclose or entrap. 2. To go around; bypass: circumvented the city. the objective of such duties, that is simply, to cause Chinese exporters to raise prices and stop dumping. Of course, it is illegal for an exporter to reduce the Customs value below a legitimate transaction value for purposes of minimizing duty deposits. Importers also must certify cer·ti·fy v. cer·ti·fied, cer·ti·fy·ing, cer·ti·fies v.tr. 1. a. To confirm formally as true, accurate, or genuine. b. that they have not been reimbursed for the antidumping duty. (9) If the declared value for imports from China suddenly drops after an order is issued, it will signal to Customs to begin an investigation, possibly leading to both criminal and civil penalties for undervaluing imports and false certification. Conclusion The antidumping laws have been of great benefit to U.S. industries, protecting manufacturing companies and their employees. Many would no longer be in business if it were not for these laws. The objective of antidumping is to cause exporters to raise their prices and avoid dumping all together. It is ironic that Chinese exporters react just the opposite, by lowering prices, thereby increasing the amount of final duties owed. This irony is evident by the Byrd Amendment data showing cash deposits have been grossly insufficient to cover the final duties. The U.S. government authorities are well aware of this practice and are closely monitoring all imports from China subject to antidumping duties. The rules are being revised to eliminate the practice of funneling exports through the exporter with the lowest deposit rate. It is illegal to lower the legitimate value of exports for the purpose of reducing duties. Organic chemicals, including pigments, are especially vulnerable to imports because of U.S. high labor, energy, safety and environmental costs. The Chinese labor advantage is well documented, causing the near extinction of the U.S. textiles industry. Less well known is that China's main energy source is cheap low-grade coal, burned without effective pollution control. And finally, the Chinese and Indian governments give a "free-pass" to producers with respect to safety and the environment. Plant closures and consolidations, capital improvements and downsizing of pigment plants have helped retain a viable domestic industry, but antidumping protection may be the only other tool remaining to fight unfair imports. It already has proved successful in protecting parts of the chemical industry. The violet case shows it also can be used to protect organic pigments.
U.S. Department of Commerce
Antidumping and Countervailing Order
Carbazole Violet Pigment 23
Date of Order December 29, 2004
Effective Date June 24, 2004
Antidumping Duties
China
Exporter Producer Deposit Rate
GoldLink Industries Multicolor 5.51%
Trust Chem Co Nantong 27.19%
Longteng
Nantong Haidi Nantong Haidi 44.50%
All others All others 217.94%
Antidumping Duties
India
Alpanil Industries Alpanil Industries 9.66%
Pidilite Industries Pidilite Industries 49.57%
All others All others 27.48%
Countervailing Duties
India
Alpanil Industries AlpanilIndustries 17.57%
Pidilite Industries Pidilite Industries 17.33%
AMI Pigments AMI Pigments 33.61%
All others All others 20.55%
Sources: China & India Antidumping Duty Orders, 69FR77987 &
69FR77988, December 29, 2004 & India Countervailing Duty
Order, 69FR7795, December 29, 2004.
Petition filed November 19, 2003 by Nation Ford Chemical
Company and Sun Chemical Corporation on behalf of the Carbazole
Violet Pigment 23 domestic industry.
Table 3: Increase in duty caused by reduction in export price.
Cash deposit Increase in duty
absorbed by reduction caused by reduction in
in export price export price
5.0% 10.3%
10.0% 21.1%
20.0% 45.0%
30.0% 72.9%
40.0% 106.7%
50.0% 150.0%
References (1.) http://dataweb.usitc.gov/. (2.) Faulkner, Edwin B., "The Organic Pigment Industry: Where it's Been and Where it's Going."Ink World, May 2003, p.50. (3.) Derived from the dumping margin formula; Dumping Margin = (Normal Value--Export Price)/Export Price. (4.) Carbazole Violet Pigment 23 from China and India, U.S. International Trade Commission, Publication 2744, December 2004, p. V-44. (5.) http://www.customs.ustrea.gov/xp/ cgov/import/add_cvd/. (6.) HQ 966462, Jan. 23, 2004 CLA-2RR: CR:GC 966462 DBS (Direct Broadcast Satellite) A one-way TV broadcast service from a communications satellite to a small round or oval dish antenna no larger than 20" in diameter. , effective 60 days after publication in the Customs Bulletin. (7.) Pigment Blue 15:3, Pigment Red 57.1 and Pigment Yellow 12 are properly classified under USTS USTS Uplink Synchronous Transmission Scheme USTS United States Training Ship USTS UHF Satellite Terminal System USTS United States Technical Services 3204.17.90, Suffix suf·fix n. An affix added to the end of a word or stem, serving to form a new word or functioning as an inflectional ending, such as -ness in gentleness, -ing in walking, or -s in sits. tr.v. 05, 20 & 45 respectively. Printing inks are properly classified under HSTS HSTS High-Speed Transport Service 3215.11.00, Suffixes 10-60 and HSTS 3215.19.00, Suffixes 10-60. (8.) Federal Register, (69 FR 77722), Dec. 28, 2004. (9.) Federal Register, (62 FR 2741), May 19, 1997, Rules and Regulations, [section] 351.402 (f). John A. Dickson is the CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Nation Ford Chemical Company, Fort Mill, SC, a producer of organic pigments, dyes, intermediates and custom chemicals. In addition to carbazole violet pigment, NFC has dumping orders in effect for sulfanilic acid from China, India, Portugal and Hungary. Mr. Dickson also assisted the European Commission European Commission, branch of the governing body of the European Union (EU) invested with executive and some legislative powers. Located in Brussels, Belgium, it was founded in 1967 when the three treaty organizations comprising what was then the European Community in establishing antidumping orders against sulfanilic acid imports from China and India. |
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