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COVID-19 and the Future of Actions Against Unfairly Traded Imports

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COVID-19 and the Future of Actions Against Unfairly Traded Imports

The first half of 2020 has presented unanticipated and unique challenges to businesses, both in the United States and worldwide, due to public health-related restrictions on customers and the consequent economic effects. The challenges are likely to continue throughout 2020 and well into 2021. In a world trading system where supply chains often have been disrupted and competition for U.S. companies from foreign suppliers changes frequently, clients report that top management teams are seeking ways to address these challenges both through business actions and, when necessary, through legal action.

Foreign producers are facing many of the same challenges that U.S. companies are. As demand in their home markets decline, these foreign companies often look to the United States, a relatively open market, as a place to sell their goods. Sometimes these sales are at prices that under the law are considered unfairly low. Manufacturers at times even make loss-making transactions in order to cover their variable costs and make some contribution to fixed costs, in an effort to keep their businesses afloat. At other times, foreign government subsidies prop up foreign companies and allow them to sell products in the U.S. market. For U.S. companies faced with this kind of business challenge from overseas competition, there are legal means to help address the problem.

The nature of the cases

In the last few months, we have seen an uptick in cases filed with U.S. government agencies under the antidumping (AD) and countervailing duty (CVD) laws. The relief that can be granted from success in these cases are additional duties, and duties in the range of 25-35 percent are not at all unusual. AD and CVD cases may be filed separately or simultaneously.

The legal basis for AD cases is that a foreign product is being sold at unfairly low prices in the U.S. and that imports of the product are injuring the U.S. industry producing that product. The test for unfairly low pricing is complex, but the pricing of the foreign product need NOT be below cost, despite some news stories that misstate the standard. The legal basis for a CVD case is that foreign companies are being subsidized by foreign governments and the importation of such products into the U.S. are injuring the U.S. industry producing that product.

Market weakness likely explains rise in cases

The AD and CVD laws have been on the books for many years, and such cases tend to be filed more often in times of economic downturns and distress, when U.S. companies are feeling the injurious effects of the imports most acutely. Given the current economic turmoil—the Organization for Economic Co-operation and Development reported a 13 percent decrease in global gross domestic product during the first half of 2020—it is not surprising that the current economic environment has led several companies to consider this option.

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Jeffrey Neeley is a Washington-based partner with the law firm Husch Blackwell LLP. He leads the firm’s International Trade Remedies team.

US Trade Deficit Surges to Two-Year High

Washington, DC – The volume of US imports surged and exports declined in April, pushing the US trade deficit to a two-year high of $47.2 billion, according to the latest figures released by the US Department of Commerce.

The trade deficit for the month climbed by 6.9 percent from an upwardly revised March deficit of $44.2 billion with imports growing by 1.2 percent to an all-time high of $240.6 billion and exports falling for the fourth month in a row by a rate of 0.2 percent to $195.4 billion.

In 2013, the trade deficit declined by 11.4 percent to $476.4 billion. Some analysts feel the decline in exports can be pegged on the extreme cold weather in the eastern and southern US coupling with the continuing drought in California’s agricultural Central Valley to impact the country’s manufacturing capability and, at the same time, increase the volume of imported foodstuffs.

The same analysts, though, are guardedly forecasting a bounce back with economic growth reaching around 3 percent in the second half of the year as a boom in the nation’s energy sector could well narrow the trade gap. Stronger domestic petroleum production cut oil imports by 10.9 percent during the first quarter of the year, while oil imports in April fell 2.2 percent to $29.8 billion, while conditional US petroleum exports rose 3.1 percent to $11.8 billion.

The US trade deficit with the 28-member European Union hit a monthly record of $14 billion in April as imports from that region hit an all-time high, while the trade gap with China, the largest the US has with any trading partner, jumped 33.7 percent to $27.3 billion in April, the largest gap since January.

The US-China trade relationship has come under scrutiny on Capitol Hill with some lawmakers charging that Beijing is manipulating its currency to keep it undervalued against the dollar. That manipulation, they have said, makes imported Chinese goods cheaper in the US and American-made products more expensive in China.

06/09/2014