Creative Leisure News

Answers to your troubling and tricky legal questions.

Questions About "Dumping"

What it is and how it works.

by Tara Materials (May 2, 2005)

Q. What is dumping?

A. Dumping occurs when a foreign producer sells a product in the United States at a price that is below that producer�s sales price in the country of origin ("home market"), or at a price that is lower than the cost of production. Foreign manufacturers typically sell at below market value in order to accelerate growth in a foreign market and to attract U.S. dollars. Dumping is considered to be an "unfair" trade practice as defined by U.S. trade laws.

Q. How is dumping remedied?

A. If a U.S. industry believes that it is being injured by unfair competition through dumping, it may request the imposition of antidumping duties by filing a petition with both the Department of Commerce and the International Trade Commission. If both Commerce and the ITC make affirmative findings of dumping, Commerce instructs the U.S. Customs Service to assess duties against imports of that product into the U.S.

Q. Will this mean higher prices from China?

A. Although no determination can be made until Commerce completes its investigation, their preliminary findings (called "preliminary margin analysis") indicated that significant dumping was evident. Based on this initial assessment, it appears likely that tariffs on artist canvas imported from China could be significant. Consequently, selling prices of Chinese made canvas are likely to increase accordingly.

Q. Who ultimately determines whether dumping is occurring and how much duty will be assessed?

A. The International Trade Commission (ITC) and the U.S. Department of Commerce conduct separate investigations. Investigations will include, but are not limited to, visits to American and Chinese factories, a review of information in the petition, and any other information pertaining to the case as presented. The ITC�s primary focus is on whether or not the domestic industry is suffering material injury as a result of imports of the dumped or subsidized products. The Commerce Department will focus its investigation on determining whether or not dumping is occurring and to what degree. The final decision in dumping matters is decided solely and exclusively by the Commerce Department and the ITC.

Q. How long does it take before a decision is made?

A. The review process for a "Countervailing Duty Investigation" must be completed within a prescribed time frame set by law. Therefore, approximately 160 days (about September in this case) following the filing of the formal petition (petition filed 3/31/2005), and assuming both the Department of Commerce and the ITC make affirmative preliminary determinations, all importers of artist canvas from China will be required to post a bond or pay a cash deposit in the amount of the anticipated duty. Approximately 280 days (about January 2006) following the filing, a final decision will be issued. If these duties are lower than in the preliminary decision, monies will be refunded. If higher, the new duties will go into effect, but will not be retroactive.

Q. What products are covered under the petition (called "SCOPE")?

A. The petition includes all artist canvas products, including, but not limited to, stretched canvas, roll canvas, canvas panels, archival boards and canvas pads.

Letter to customers.

(Note: On March 31, Tara Materials President Michael Benator and Sales VP Paul Straquadine sent the following letter/press release to customers:

Domestic Artist Canvas Industry files anti-dumping petition with U.S. Department of Commerce

TARA MATERIALS, INC., manufacturers of Fredrix Artist Canvas, with the support of other domestic manufacturers of artist canvas has filed a petition with the U.S. Government for the imposition of anti-dumping duties on artist canvas imported from the Peoples Republic of China.

Artist canvas has been imported in massive quantities and at extraordinarily low prices. The impact on our company and the domestic industry has been harmful, and we believe that canvas made in China is being sold at unfairly low (dumped) prices. We have provided the U.S. Commerce Department with information supporting our case and they have agreed to investigate, and impose offsetting duties if dumping is found.

The U.S. Unfair Trade Laws are designed to address precisely this type of situation. We are not seeking any undue advantage, but merely wish to eliminate unfair pricing from China. We will do everything we can to keep you informed about the progress of the investigation so that you will be in a position to make sound business decisions as it relates to this matter. More detailed information is attached.

We value you as a customer and appreciate your patience and support. If you have any questions about this decision, please do not hesitate to contact us at the phone numbers and emails provided.

(Note: To read previous Legal Q. & A. columns, click on the titles in the right-hand column. To comment on this or any other industry issue, email your thoughts � on or off the record � to mike@clnonline.com.)

xxx