1. FORM of REMEDY MEASURES
• Anti-Dumping - Additional import duties
• Countervailing - Additional import duties
• Safeguards - Additional import duties
or quotas
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Nisha Malhotra

2. Antidumping Legislation
What is dumping?
AD legislation under the WTO agreement
Spread of AD legislation
AD law in the United States
Softwood lumber
AD law in Canada
AD law in India (brief)-India has the largest AD complaints in the world.
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Nisha Malhotra

3. Dumping is defined as
When an exporter sells a product for export to the importing country at a lower price than the price at which the same (or similar) product is sold in its own domestic market
Domestic price of exporter > Export price
Dumping = Price discrimination between national markets
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Nisha Malhotra

4. AD and CVD legislation Dumping Injury to the domestic market
How is domestic market defined?
Relation between dumping and injury to the domestic market
Subsidy
Relation between subsidy and injury to the domestic market
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Nisha Malhotra

5. SUMMARY OF AD source : WTO
Year initiation Final measures
Total
NOTE: The two columns do not balance due to time periods to
complete investigations
Initiations Final measures
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Nisha Malhotra

6. Source: “The economic and Strategic motives for antidumping filing” by Thomas prusa and susan skeath
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Nisha Malhotra

7. US-Antidumping law
If a U.S. industry believes that it is being injured by unfair competition through dumping or subsidization of a foreign product, it may request the imposition of antidumping or countervailing duties by filing a petition with
Import Administration (department of commerce)
United States International Trade Commission
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Nisha Malhotra

8. US-Antidumping law Steps undertaken in an AD investigation
Petition filed by the firm/firms on behalf of the industry (petitioners must represent at least 25% of domestic production )
ITC preliminary finding
ITA preliminary finding
ITA final finding
ITC final finding
The duties are assessed as a percentage of the value of the imports and are equivalent to the dumping and subsidy margins.
For example, if Commerce finds a dumping margin of 35%, the U.S. Customs Service will collect a 35% duty on the product at the time of importation into the United States in order to offset the amount of dumping or subsidy.
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Nisha Malhotra

9. Some Statistics
ITC received a total of 1,430 petitions for AD and CVD during fiscal year
These cases involved 54 billion dollars in trade from countries subject to investigations.
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Nisha Malhotra

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13. Softwood lumber dispute
US Claim
Artificially low stumpage fees
(With lumber, the U.S. contends that provincial stumpage and, more recently, B.C.’s log export restrictions, provide a subsidy to lumber producers. Other provincial programs may also be alleged to provide subsidies. )
Countervailable subsidies.
Softwood Lumber I: 1982
US authorities decided no subsidy
Softwood Lumber II: 1986
15% provisional duty
Replaced by 15% export tax in MOU
Softwood Lumber III: 1991
Canada unilaterally terminates MOU
Countervailing case filed: Interim bonding requirement
Canada wins appeal against countervailing duty in CUSTA (1993 and 1994)
US revokes duties against Canadian lumber (Aug 1994)
Bilateral consultation process for softwood established
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Nisha Malhotra

14. Softwood Lumber April 1996-Softwood Lumber Agreement finalized.
First 14.7 Billion Board Feet (BBF) of softwood lumber exports from Alberta, British Columbia, Ontario, and Quebec would enter the US market duty free.
The first 650 million board feet over 14.7 BBF -tax of $50 per thousand board feet.
Any further exports were subject to a tax of $100 per thousand board feet.
Other provinces- Unrestricted access to the US market.
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Nisha Malhotra

15. “Estimating Export Response in Canadian Provinces to the US-Canada Softwood Lumber Agreement” by Sumeet Gulati & Nisha Malhotra
Provincial effect
Provinces paying tariff (SLA)
Alberta
British Columbia
Ontario
Quebec
Export Growth Rates
All Years ( )
Before SLA ( )
After SLA (
SLA Provinces
147%
119%
-8%
Non-SLA Provinces
513%
155%
56%
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Nisha Malhotra

16. Preliminary Test: A Gravity Model
A cross-section ‘gravity’ equation
xit is log exports from province i to the US (annual)
yit and yUSt are logs of GDP province and in US
disti is the log of distance from province i to the US
RUSt is the US rate of interest
SLA is dummy for SLA provinces
NSLA is a dummy for non-SLA provinces ,
Ext is the US-Canada exchange rate
Annual data used from
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Nisha Malhotra

17. Table 1: Gravity Model for Softwood Lumber Exports (Canadian provinces to the US)
(1)
(2)
Log Exports
Exchange
5.1427
4.3930
(1.27)
(1.06)
US r.o.i
0.0402 -
0.0488
(0.42)
(0.35)
ln(US GDP)
0.8144
(0.27)
(0.86)
ln(Prov. GDP)
1.1038
1.1052
(9.14)**
ln(distance)
1.1820
1.1823
(7.02)**
(7.02) **
SLA
0.1096
0.0820
(0.23)
(0.16)
NSLA
1.4264
1.2422
(3.48)**
(2.72)**
Year
0.9331
(0.90)
Observations
145 R
squared
0.83
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Nisha Malhotra

18. Users of Lumber and the US-Canada Softwood Lumber Agreement
Objective
The effect of protection for the US softwood lumber industry on users of lumber
Restrictions on Canadian lumber exports
Lumber using (or downstream) industries and consumers bear the burden
The U.S. Census Bureau :
Fees on additional shipments through the SLA amount to more than US$1,000 for the lumber in an average new home.
For every $50 increase in the price of 1,000 board feet of framing lumber, 300,000 potential homeowners are priced out of the housing market.
An event study is used to examine the reaction of investors to positive or negative news (also called events). A simple event study involves the following steps:
Identifying the event of interest and defining an event window
Selecting a set of firms to include in the analysis
Predicting a "normal" return during the event window in the absence of the event
Estimating the cumulative abnormal return within the event window, where the cumulative abnormal return is defined as the difference between the actual and predicted returns during the event window
Testing whether the cumulative abnormal return is statistically different from zero.
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Nisha Malhotra

19. The Current Softwood Lumber Dispute (Lumber IV)
Following the expiration of the Softwood Lumber Agreement, on April 2, 2001, the U.S. Coalition for Fair Lumber Imports filed a countervailing duty petition and its first anti-dumping petition against Canadian softwood lumber.
Forest Renewal BC grants and assistance under the Job Protection Commission (JPC) to lumber producers were found to be countervailable.
On April 25, 2002, Commerce :The final subsidy rate was determined to be 18.79%. Individual company dumping rates were set as follows: Abitibi 12.44%; Weyerhaeuser 12.39%; Tembec 10.21%; Slocan 7.71%; Canfor 5.96%; West Fraser 2.18%. All other companies will pay the average dumping rate of 8.43%. The combined CVD/AD rate is now set at 27.22%.
On May 2, (ITC): US producers are only threatened with material injury by Canadian lumber shipments to the U.S. Consequently, U.S. Customs are required to refund the bonds and cash deposits posted by Canadian softwood lumber companies prior to May 16, 2002.
On May 22, 2002, Commerce published its final orders in the countervailing duty and anti-dumping case. As a result, the U.S. Customs requires cash deposits for duties on all softwood lumber imported from Canada since May 22, 2002.
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Nisha Malhotra

20. WTO and NAFTA Challenges
The federal government, the provinces and industry have launched a number of challenges related to the lumber cases.
Challenges at the World Trade Organization (WTO) consider whether the U.S. has breached its obligations under the WTO.
North American Free Trade Agreement challenges consider whether the U.S. has applied its own trade laws correctly.
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Nisha Malhotra