Trends in Unfair Import Competition

• Publication year: 2024
• Citation: Vol. 1 No. 4

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Brooke M. Ringel and Matthew T. Martin ^*

In this article, the authors explain the legal mechanisms available to U.S. manufacturers to combat unfair import competition. They pay particular attention to petitions and investigations before the U.S. Department of Commerce and the U.S. International Trade Commission for antidumping and countervailing duties and circumvention inquiries. In addition, the authors explain the tools administered by U.S. Customs and Border Protection to address circumvention and duty evasion and they examine recent trends in the use of these mechanisms.

This article discusses how U.S. manufacturers are combatting unfair import competition through the use of antidumping and countervailing duty petitions and circumvention inquiries, as well as Enforce and Protect Act investigations and e-Allegations. It assesses current trends in the use of these mechanisms and how recent events, including the COVID-19 pandemic and ensuing global supply chain disruptions, have shaped their use. Many domestic industries may be facing increased supply and decreased demand due to greater import penetration and downward pricing pressure and should be aware of all of the legal remedies available to them.

Trends in Competition with Unfairly Traded Imports

Antidumping and countervailing (AD/CVD) duties are a common form of relief available to U.S. manufacturers in response to unfair import competition, meaning products sold at less than fair value (dumped) or unfairly subsidized by a foreign government. ¹ To request that these duties be applied, manufacturers, trade associations, or labor unions can file a petition simultaneously with the U.S. Department of Commerce (DOC) and the U.S. International Trade Commission (the Commission), triggering concurrent and separate investigations. A single petition can request relief from

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imports from multiple countries, and may request either antidumping or countervailing duties, or both. The Commission determines if the petition shows material injury, or threat of such injury, to the domestic industry by reason of dumped or subsidized imports. ² The DOC determines whether and to what extent imports are dumped or subsidized. If both agencies reach affirmative determinations, then the DOC will issue an order to offset the level of unfair pricing from the investigated imports. The order lasts for five years, and is renewable every five years and subject to annual reviews before the DOC.

As of March 2024, there are 678 antidumping and countervailing duty orders in place on imports from 59 countries. ³ American manufacturers and labor unions petitioned the U.S. government for this type of relief at an increasing rate through 2020. The number of petitions filed increased from 16 in 2018 and 2019 each, to 25 in 2020. Petitions then fell to 14 in 2021 and seven in 2022, but ticked up slightly to 12 in 2023. ⁴ As shown in Figure 1, this led to a significant increase in trade orders imposed in recent years (as, again, a single petition brought against multiple countries can translate into numerous orders). ⁵ So, what explains this trend?

Before the COVID-19 pandemic, the strength of the U.S. economy and concomitant high pricing for goods attracted foreign companies to compete in the U.S. market with large volumes of

Figure 1. New AD/CVD Orders Imposed

Source: International Trade Administration.

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products at prices that undercut American producers. For sales of price-sensitive commodity-type manufactured goods in particular, foreign suppliers used low pricing to make substantial market share gains in an environment of high demand. Despite strong demand, the sales, market share, and revenue lost by U.S. manufacturers in competition with low-priced imports caused material injury across entire industries. The result was a flurry of trade petitions as domestic producers sought to impose price discipline on unfairly traded imports, and for an opportunity to recover from the financial harm that those imports had caused.

The pandemic, however, significantly impacted the global trade landscape. In the United States, after a brief lockdown period, most manufacturers were deemed essential firms and returned to near-normal operations. At the same time, demand quickly increased for goods utilized in supply chains for infrastructure, residential construction, and medical equipment (including plastics and textiles). Surging demand was fueled by a contraction—sometimes deep—in the supply of imports due to the global container shortage and supply chain disruptions, port closures, export restrictions, labor shortages, and high ocean freight rates. Imports that did reach U.S. ports were often higher priced, given the inflated cost of freight. As a result, market unpredictability abounded: U.S. manufacturers ramped up production to meet demand, but customers over-ordered, over-bought, and stockpiled inventory due to uncertainty.

AD/CVD investigations are retrospective in nature. The Commission examines evidence of injury over the three years plus any quarterly interim period prior to the petition filing date, while the DOC examines dumping by and subsidies to foreign producers generally over the immediate 12-month pre-petition period. Accordingly, while domestic industries sought trade relief at a growing pace in the years leading up to the pandemic, the number of petitions filed and the number of new AD/CVD orders imposed decreased with the onset of the pandemic and related (and anomalous) competitive market conditions.

Trends in Circumvention and Evasion Activity

For industries benefiting from existing trade orders, the macroeconomic story of the pandemic period meant shifting attention toward enforcing those orders. As manufacturing in foreign

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countries came back online after the first few months of the pandemic, foreign producers with massive production capacity found much of that capacity sitting idle. The need for new sales outlets—especially for suppliers that had long depended on export markets, but faced new bottlenecks due to global supply chain constraints—forced many to find creative ways to avoid existing trade restrictions like AD/CVD orders. The result has been an uptick in circumvention and evasion activity by imported goods.

One way for U.S. manufacturers to address circumvention of trade remedies is to request that the DOC examine attempts by foreign producers to avoid paying duties on an existing order. As with original investigations into dumped or subsidized imports, the DOC may self-initiate circumvention inquiries, but typically, the initial petitioner for the duties will request that the DOC open a circumvention inquiry. Compared to investigations by U.S. Customs and Border Protection (CBP) into circumvention or duty evasion, these proceedings before the DOC are generally more transparent, subject to a more stringent process and timeline, and involve more exchanges of confidential information between interested parties, their counsel, and the agency.

The DOC investigates essentially three types of duty circumvention. One form of circumvention is when merchandise has been completed or assembled in the United States or a third country from parts or components that are (1) themselves subject to an order, or (2) produced in a country subject to an order on the finished imported merchandise. ⁶ For...