NCIEC WTO Conference March 11, 2004 Willkie Farr & Gallagher LLP Case Studies: Catfish and Shrimp Antidumping Cases Presented by Kenneth J. Pierce and

NCIEC WTO Conference

March 11, 2004

Willkie Farr & Gallagher LLP

Case Studies:Case Studies:Catfish and ShrimpCatfish and ShrimpAntidumping CasesAntidumping Cases

Presented by Kenneth J. Pierce and Matthew R. NicelyWillkie Farr & Gallagher

for the Georgetown University Law CenterNCIEC WTO Conference

sponsored by the U.S. – Vietnam Trade Council11 March 2004

NCIEC WTO ConferenceMarch 11, 2004

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Willkie Farr & Gallagher LLP204880.2

The Antidumping LawThe Antidumping Law

The Effect of the Byrd Amendment (“The Continued Dumping and Subsidy Offset Act of 2000”):

The Lure of Big Cash Awards

Attorney Contingency Arrangements


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Congressional Budget Office – Economic Analysis of Congressional Budget Office – Economic Analysis of the Byrd Amendment (March 2, 2004) the Byrd Amendment (March 2, 2004) (emphasis added)(emphasis added)

“The law subsidizes the output of some firms at the expense of others, leading to inefficient use of capital, labor, and other resources of the economy. It discourages settlement of cases by U.S. firms and will lead to increased expenditure of economic resources on administration, legal representation of parties, and various other costs associated with the operation of the antidumping and countervailing-duty laws. To the extent that other countries adopt comparable policies, the law may lead to further interference in the ability of U.S. exporters to compete in the global trading system. Finally, the World Trade Organization (WTO) Appellate Body has ruled that the act violates the WTO agreement, leaving the United States vulnerable to retaliation against its exports, although the amount of that retaliation has not yet been determined.”


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The Lure of Big PayoutsThe Lure of Big PayoutsByrd Money Fosters Antidumping Actions . . . Catfish and ShrimpByrd Money Fosters Antidumping Actions . . . Catfish and Shrimp

$231

$329

$240

0

100

200

300

400

Mill

ions

of D

olla

rs2001 2002 2003

Byrd Disbursements

Hundreds of millions of dollars in Byrd disbursements have been made each year

Examples of “Big Winners” Ball Bearings from Japan $51

million (2001)

Crawfish from China $7 million (2002)

Pipe and Tube from Thailand $4 million (2002)

Wax Candles from China $69 million (2002)

2004 – hundreds of millions (Canadian lumber CVD)


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The Lure of Big PayoutsThe Lure of Big PayoutsByrd Money Fosters Anti-dumping Actions . . .Byrd Money Fosters Anti-dumping Actions . . .

About $2.5 billion in shrimp imports enter the United States from countries subject to the antidumping investigation

Hypothetical: $2.5 billion X 10% AD = $250 million in cash rewards

SSA Petition Support Survey letter to shrimpers: “You must register to participate in any monetary benefits that

may accrue through duties levied on imported shrimp if the domestic industry prevails.”

LSA’s positions in shrimp case


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Byrd Amendment is Illegal Under WTO Byrd Amendment is Illegal Under WTO Rules, But Difficult to RepealRules, But Difficult to Repeal WTO Appellate Body declared the Byrd Amendment

inconsistent under both the WTO Anti-dumping and SCM Agreements as an impermissible action against dumping and subsidies

U.S. already beyond reasonable period of time to implement; complainants preparing to retaliate

U.S. politics, need for Act of Congress, make repeal difficult: Bush FY2004 softly supports repeal Strong anti-WTO sentiment on Capitol Hill; February 2003 letter from

68 Senators to the President expressed opposition to repeal Election year politics


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An Ineffective DOC Defense: The Catfish An Ineffective DOC Defense: The Catfish LessonLesson Integrated Producer vs. Processor – Unprecedented –

Locked in with Bangladesh; Defense Narrowed to Single Issue (whole fish valuation) Bangladesh unchallenged post preliminary Surrogate Company Financials Inaccuracy of upstream data (e.g., species yields) Problems of formatting – forcing a square peg into a round hole

(e.g., yield factors)

Exporters Ultimately Paid Heavily: AD margins of 36.84% to 53.68% for mandatory respondents; 45.55% for “separate rate” companies; and 63.88% for “country-wide”


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Vietnam Surrogate Country And Value Vietnam Surrogate Country And Value SelectionSelection

India, Bangladesh, Kenya, Pakistan, and Guinea India and Bangladesh major catfish (and shrimp) producers Must consider and argue fully at company level for comparability

(aquaculture vs. wild, integrated vs. processors) – labor, materials, energy (utilities – water?), capital costs (including depreciation), factory overhead, SG&A, profits and packing

Imports from ME (e.g., antibiotics? feed?) -- Thailand, Korea, and Indonesia


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Catfish ITC InvestigationCatfish ITC Investigation

Example of misuse of “like product” rules Congress passes law against labeling imports from

Vietnam as “catfish” But ITC decision assumed no competitive difference

between imported tra/basa and domestic catfish

However, too much emphasis placed on this issue in defense; detailed alternative cause theories needed development


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Avoid Punitive “Facts Available”Avoid Punitive “Facts Available”

Catfish Facts Available Facts available but for Processors Decision: FOPs – parent fish

depreciation, river water, plastic bags, oxygen, rubber bands, electricity, syringes, rice bran and broken rice, vitamins, gasoline, lubricants, coal consumption, and soya waste

Partial Facts Available FOPs: By-product offset for fish waste, by-product water consumption, and ice consumption

Multiple responses, many errors, many changes, many facts could not be verified


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U.S. Shrimp ImportsU.S. Shrimp Imports

COUNTRY 2000 2001 2002 2002 2003Thailand 276,557,398 296,421,828 247,651,001 165,872,254 180,527,465China 38,908,278 59,886,689 105,953,621 58,727,356 102,358,588Vietnam 34,312,353 72,817,861 96,996,029 66,263,576 88,008,329India 62,098,130 71,794,406 96,653,945 76,053,528 72,962,222Ecuador 40,971,021 56,585,305 63,351,346 50,576,348 59,972,322Mexico 63,752,213 65,694,798 53,219,505 16,043,026 19,830,421Brazil 12,997,565 21,637,547 39,074,057 30,346,498 42,021,938Indonesia 36,660,946 34,611,649 37,918,392 30,558,708 37,877,746Venezuela 32,815,043 20,968,398 22,738,884 17,896,394 17,988,046Honduras 17,371,119 20,877,405 21,272,457 13,914,403 14,926,247Guyana 19,003,866 25,771,013 21,290,814 17,415,892 21,018,773Bangladesh 22,531,971 19,238,052 18,815,714 15,556,270 11,993,635Canada 18,609,904 13,983,103 16,821,457 12,894,123 9,733,697Panama 10,886,194 12,689,922 12,019,199 9,416,859 10,140,851Nicaragua 10,641,426 11,097,253 10,406,768 7,156,255 7,027,480Subtotal 698,117,426 804,075,231 864,183,189 588,691,492 696,387,761

All Others 51,981,915 63,155,271 62,496,206 46,166,720 48,768,129

Grand Total 750,099,341 867,230,502 926,679,395 634,858,212 745,155,889

U.S. Shrimp Imports

Quantity(in pounds)

January - September


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U.S. Shrimp ImportsU.S. Shrimp Imports

COUNTRY 2000 2001 2002 2002 2003Thailand 1,487,700,627 1,253,321,999 956,439,633 627,936,063 631,355,920China 129,163,918 181,492,512 285,277,518 154,913,160 254,133,661Vietnam 234,082,401 380,531,228 476,536,555 324,126,666 417,685,613India 234,434,164 257,010,029 354,430,254 273,499,238 297,803,014Ecuador 186,464,293 215,295,629 192,328,302 154,642,788 171,149,985Mexico 401,866,621 379,963,494 263,265,906 77,840,648 113,964,441Brazil 53,131,390 63,623,487 87,651,186 69,060,249 85,760,061Indonesia 189,759,506 153,960,583 150,957,160 121,699,694 136,364,005Venezuela 141,495,437 78,581,522 65,411,895 50,852,071 51,174,016Honduras 84,173,159 70,953,907 63,083,245 40,763,724 41,340,763Guyana 40,326,066 53,188,322 36,586,136 30,907,482 32,503,169Bangladesh 145,302,759 92,243,934 87,625,984 69,549,680 55,733,546Canada 55,304,239 38,402,203 45,066,678 35,166,025 28,505,088Panama 57,170,642 60,884,984 49,683,978 39,640,913 38,462,764Nicaragua 44,137,291 36,266,417 30,970,614 21,859,295 17,696,230Subtotal 3,484,512,513 3,315,720,250 3,145,315,044 2,092,457,696 2,373,632,276

All Others 229,190,593 249,930,112 205,986,039 151,690,089 156,643,299

Grand Total 3,713,703,106 3,565,650,362 3,351,301,083 2,244,147,785 2,530,275,575

Value(in U.S. dollars)

January - September


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Vietnam’s Common Defense Postures Among Vietnam’s Common Defense Postures Among All Shrimp RespondentsAll Shrimp Respondents – ITC Cumulation – ITC Cumulation

ITC cumulation for injury is mandatory if “reasonable overlap” in competition with domestic product and other subject imports: countries win or lose together (one vote) Need common, consistent, mutually supportive defense themes among all

subject countries (blaming other subject imports is suicidal) ITC staff conference (hearing) only 60 minutes presentation, plus Q&A Joint lead counsel role – cumulated causation focus; common brief Like product arguments (size, species, prepared – not determinative if

U.S. does not produce) Negligibility (3%/7% (AD) test) ITC preliminary – low legal threshold (“reasonable indication”) Key is to control Vietnam not being singled out for blame


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Vietnam’s Vietnam’s SeparateSeparate CountrywideCountrywide Shrimp Shrimp Defense Issues: ITC Decumulation and ThreatDefense Issues: ITC Decumulation and Threat

Decumulation (separate votes by country or country subgroups) for threat of injury Completely discretionary to each of six Commissioners

for threat (tie vote?) Different import volume or value trends Different products Different markets


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ITC Decumulation and ThreatITC Decumulation and Threat

ITC foreign producer questionnaires – key for threat Issued within two days of petitions being filed (before initiation) About 10 days to complete

ITC questionnaire information – annual data, 2000 through 2003, 1Q-3Q 2002 and 1Q-3Q 2003 (interims), and 2004 and 2005 projections Production capacity, inventories, production, shipments (Vietnam,

U.S., other exports), internal reconciliation, use of estimates Expansion plans, affiliations, (DOC impact) U.S. operations


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ITC Shrimp Preliminary Determination: 6 ITC Shrimp Preliminary Determination: 6 to 0 Affirmative all Six countriesto 0 Affirmative all Six countries Cumulated all six countries (reasonable overlap in competition

based on injury (not threat)) Single like product: rejected “Value Added Shrimp,” “Salad

Shrimp,” “Giant Shrimp,” “Breaded Shrimp,” and Canned Shrimp (revisit canned in final) physical characteristics and end uses interchangeability channels of distribution production processes, facilities, employees price

Like product included fresh shrimp (LSA and Byrd Amendment)

Volume, Price, Impact


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Vietnam’s Vietnam’s SeparateSeparate CountrywideCountrywide Shrimp Shrimp Defense Issues: DOC “All Others” RateDefense Issues: DOC “All Others” Rate

Selection of mandatory respondents – Vietnam’s 4 largest U.S. exporters (2Q and 3Q 2003) – date of sale issues; volume Separate company-specific rates for mandatory respondents, but

significant countrywide impact “All Others” rate – weighted average of mandatory respondents

(w/o de minimis (< 2%) or total adverse facts available or “voluntary respondents”)

Each exporter must qualify to receive All Others separate rate or else “Countrywide” rate (based on petition’s allegations of up to 99%)

State ownership not necessarily a disqualification for separate rate (de facto can trump de jure)


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DOC’s “All Others” RateDOC’s “All Others” Rate

Section A DOC response – company specific facts but with common law, supplemental questionnaires, attacks by petitioners, DOC verification, hearing, legal briefs U.S. sales value and volume? U.S. sales processes? Company ownership (foreign?), structure, affiliations, control,

government relations, relations with other producers and exporters, management? Loss financing? Legal control – centralized? Export activities, regulations, and earnings? Licenses (allocations or quotas)? Pricing?

Accounting/Financial practices?


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DOC “All Others” RateDOC “All Others” Rate

Other Section A issues with especially significant impact for mandatory respondents: Date of sale Product descriptions Affiliated importer (EP vs. CEP – U.S. expenses (direct and

indirect)) U.S. further manufacturing (e.g. processing) – triggers Section E

questionnaire Suppliers – key question, linkages (through, e.g., feed or input

supplies, such as antibiotics, sole supply), destination knowledge HLSO equivalent


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Vietnam’s Vietnam’s SeparateSeparate CountrywideCountrywide Shrimp Shrimp Defense: Section A and Mandatory RespondentsDefense: Section A and Mandatory Respondents

Model match criteria (Day 24) (NME impact) Basis for normal value – NME? Catfish precedent Market Oriented Industry? (ME price for all inputs

– No) Surrogate country – Bangladesh/India; public data

values (other than import statistics?) All market economy inputs and services


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Government of VietnamGovernment of Vietnam Antidumping Antidumping Defense RolesDefense Roles Must be targeted, statute designed to limit involvement ITC – industry-wide information for hearing/brief (e.g.,

limitations on capacity, standards) DOC – standing, NME, MOI DOC – verification observer/monitoring: demarche DOC – suspension agreement (Day 175) DOC – sometimes specific substantive issues (HLSO)


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Vietnam’s Vietnam’s Company-SpecificCompany-Specific Antidumping Antidumping Defense Issues: DOC Mandatory RespondentsDefense Issues: DOC Mandatory Respondents

Normal value minus U.S. price/U.S. sales = AD margin Every detail rests on complex legal arguments, each of

which is fact bound by company-specific operations Section A – Same as all Section A Respondents, with added

emphases Section C – U.S. sales Section D – Factors of Production Section E – U.S. Further Manufacturing

Computer-intensive: IBM-compatible PC, data encoded in ASCII, PC SAS, Access, dBase, Excel, or Lotus 1-2-3 format


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DOC Mandatory RespondentsDOC Mandatory Respondents

Section C – U.S. price (same as ME) POI U.S. sales list (delineated by date of sale, non-affiliates)

– By model (product code and CONNUM)

– By sale

– Approximately 50 fields for every sale of each model, each with narrative and exhibits

Fields include product characteristics (packing); dates of sale; invoice, shipment, payment; quantity; price (discounts, rebates); price adjustments (net expenses to ex-factory, e.g., movement); agents (commissions); warranty; imputed credit


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Factors of production – Quantitative Normal Value (based on products sold to U.S. – allocation issues) – actual per unit (NOT STANDARD – but variances okay) POI based Weighted average if multiple facilities DOC not yet demanding shrimp farm production

(catfish lesson)


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Factors of Production – production process, with segregation of all inputs, delineated by product, +50 fields Material inputs consumed (monthly – 6 month POI) If ME (materials and services), source, price, amount (Q and V) –

Delivery details (mode, distances) – except imports from Korea, Thailand, Indonesia.

Time (processing and actual labor) Number, function, and skill levels of labor (direct and indirect G&A

impact) Energy, water Co-products, by-products, waste, yield (per unit) Total production Packing (materials and labor), freight out


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Factors of Production Valuation Surrogate country Available public data (often import statistics) Independent research

Factory Overhead (depreciation), General and Administrative Expenses Ratios Valuation Surrogate company ratio – catfish lesson Other country (levels of integration) Independent research Avoid double counting with FOP

Profit – surrogate company ratio – independent research


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Common FOP surrogate value data bases Import statistics United Nations Comtrade Statistics U.S. Department of Labor PPI (wage inflation) International Financial Statistics (IMF inflators) DOC daily currency exchange rates Surrogate country public corporate financial statements Asian Development Bank ILO Yearbook of Labor Statistics On-site research in India and Bangladesh


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Main Risk for Vietnam Respondents – Main Risk for Vietnam Respondents – DOC Information DemandsDOC Information Demands

Catfish experience and adverse facts available Fish depreciation, plastic bags, oxygen, bands, electricity,

syringes, rice bran and broken rice, vitamins, gasoline, lubricants, coal consumption, soya waste – CIT implications

Many responses – many errors

Accurate, complete, timely, and verifiable China crawfish experience and adverse facts

available End of factual submissions (Day 181)


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Politics Engrained in Administration of the Politics Engrained in Administration of the LawLaw The 1979 transfer from Treasury to

Commerce:“The move reflected a Congressional desire for more zealous enforcement of AD/CVD laws and for less concern about their being used in a protectionist manner. Its significance goes beyond the difference in institutional sympathies. One of DOC’s functions is to serve as an advocate for U.S. firms. Thus, the move placed responsibility for deciding AD/CVD cases in the hands of an advocate of U.S. parties to those cases.”

- U.S. Congressional Budget Office (1994)


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Consumer/Importer Coordinated Response Consumer/Importer Coordinated Response with Vietnamwith Vietnam

ASDA to SSA Olive Branch – joint marketing: no traction Public Relations (economic study regarding U.S. job

losses, net national economic harm, and White Paper; Vietnam and ASDA)

Lobbying? Often misunderstood with unrealistic expectations: specific targets – need convincing message, not simply access

SSA strategy is to “demonize” all who sell or support imports (e.g., ASDA members)


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Politics Inherent in the DetailsPolitics Inherent in the Details

DOC makes political decisions on technical issues that affect the outcome Example: HLSO “Equivalents” Example: Surrogates – in NME, what surrogate

values get used for determining antidumping margins?

Example: DOC verifications – demand the impossible and then penalize party for not meeting demands


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Working the ProcessWorking the Process

Department of Commerce. Because the law’s administration is political, DOC makes choices on technical matters that dramatically affect the margin calculation. Must have pressure on DOC to make fair choices. USTR – State – Treasury – White House – Congress.

International Trade Commission. More objective, but also politically sensitive. Budgets and staff are threatened by lawmakers. Must make it politically safe for the ITC to consider the merits.

Press and American interests (jobs).

Documents

NCIEC WTO Conference March 11, 2004 Willkie Farr & Gallagher LLP Case Studies: Catfish and Shrimp Antidumping Cases Presented by Kenneth J. Pierce and