Legal Q & A keys to trade case success.

When the options available to the foundry industry to fight low-cost foreign casting suppliers are explored, the method on the tip of everyone's tongue is increased tariffs on imported castings. But what does that option entail?

The U.S. metalcasting industry doesn't have the clout to have the federal government impose tariffs on all foreign castings brought into this country. U.S. foundries, like all other domestic industries that feel as if its product pricing is being undercut by "dumped" products from offshore competitors, must pursue the proper channels through the U.S. Dept. of Commerce's International Trade Commission (ITC) and file a trade case.

In the May 2002 MODERN CASTING, the article "Searching for Answers to Global Trade Questions" examined some of the specifics of filing trade cases such as Antidumping and Countervailing Duties and Section 201. This article takes a different approach by relaying an interview MODERN CASTING had with an expert on trade cases in the casting industry--Paul Rosenthal, the managing partner of the Washington D.C. law firm Collier Shannon Scott, PLLC, who has worked with both the municipal and water fitting segments of the casting industry on trade cases.

This interview provides practical advice to foundry groups that might be considering the pursuit of legal action against low-cost, offshore casting suppliers.

Q Who can bring a trade case before the ITC?

Rosenthal: A case has to be brought by the industry as a whole (25-50% of an industry by production must be represented to constitute the whole). An industry is defined as producers of "like" products such as the municipal casting industry or the water fitting casting industry.

This group must then develop aggregate industry statistics that show imports are a cause of the current poor economic condition of the industry. If imports are going down while industry profits are increasing, it is difficult to win a trade case. The ITC has heard casting cases before (municipal castings, water fittings, brake drums and rotors, etc.), so there is some familiarity with the manufacturing process.

Editor's Note: According to Rosenthal, between 1980-2000, 833 Antidumping Duty cases were filed (by a variety of domestic industries including steel, agriculture, electronics and chemical) with 347 affirmatives (41%). Between 1980-1999, 271 Countervailing Duty cases were filed with 141 affirmatives (52%).

Q How does a foundry group with like product interest begin a trade case process?

Rosenthal: The key is to first sit down with an expert--a trade lawyer or an economist. With the expert, the foundry group can work through the similar product markets that are being injured by imports. At this point, it is critical to focus on where the imports are coming from and whether domestic producers can get relief under the law. The questions to ask, answer and have the facts to prove include:

* Is domestic production in the market in question up or down?

* Are the U.S. casting prices for the market up or down?

* What is the import castings' share of the U.S. market demand?

* Are the import castings undercutting U.S. producers' prices?

* If the foreign competition is undercutting U.S. producer prices, are the U.S. foundries losing sales?

* Are market prices being suppressed?

Q What legal action has the municipal casting industry against foreign casting competitors?

Rosenthal: Through its trade actions, the Municipal Casting Trade Council (made up of several domestic municipal casting foundries) has secured a series of antidumping and countervailing duties over the last 20 years (10 total successful cases) against specific foreign foundries in China, India, Brazil, Mexico and Canada. These duties have covered a range of products in the municipal casting market.

This segment of the foundry industry (has been successful because it) has had the proper factual foundation to pursue a legal case. They have had the facts and information to illustrate that clumping of cast products is occurring and the foreign sources are receiving unfair subsidies. Often, firms that are seeking relief through legal action are so anxious to secure help that they bring the case at the wrong time--either too early or too late.

The trade laws are not easy to use. Jobbing foundries that produce a multitude of products can not file hundreds of cases at once. They must be able to file in a way that the trade agencies--the U.S. Dept. of Commerce and the ITC--will recognize as legitimate. My message isn't that foundries can't file trade cases, they must just focus on what is injuring the U.S. industry--and have the facts to prove it.

Editor's Note: According to sources, in the early 1980s, penetration of the municipal casting markets by foreign sources was increasing. The U.S. municipal casting industry had strong suspicions that the imported castings were being unfairly subsidized or dumped. This was a cost-based issue because foreign firms were selling products at prices below their production costs.

In response, the Municipal Casting Trade Council hired a group of trade attorneys and began an investigation through the U.S. Dept. of Commerce to obtain comprehensive information on the foreign producers' costs, prices and government subsidies.

As Rosenthal stated, the Council has had success with its trade actions. Initially, duties were assessed against a country's industry as a whole and then they became foundry specific.

Q What are the keys to success when compiling a trade case against low-cost foreign competition?

Rosenthal: Foundries must understand that if you are asking for relief from the federal government, a proper case has to be made. The foundry group has to pull together all the data and then be persistent to get what it wants. Once an initial case is won, the group then must be persistent to monitor the imports month after month for future cases. The municipal casting industry has been at it for 20 years and appeals from foreign producers come up every couple of years.

The water fitting casting market had early success with its case but didn't have the stick-to-it-tiveness that the municipal group did and, as a result, the tariffs weren't as enforced as well on the imported castings.

Q How does the present trade situation with China compare to past import situations with Mexico, Brazil and India?

Rosenthal: China is a totally different animal. I would lose sleep at night if I were a foundry executive competing against imports from China. The Chinese appear determined to increase market share in every arena possible. With our downturn in the economy, there is greater vulnerability than there was 10 years ago and the foundry industry isn't as able to withstand a surge of imports. The best thing the municipal casting industry did was go after China and Chinese producers when they did (in the early to mid-80s). To believe Congress is going to do anything with tariffs is unrealistic--this isn't how the federal government operates. It is up to the individual foundry markets to assess their situation and develop a plan.

For More Information

U.S. International Trade Commission, Office of External Relations, Washington, D.C. Tel: [phone], Website: www.usitc.gov.

Summary of Statutory Provisions Related to Import Relief, U.S. International Trade Commission, Washington D.C. (1998).