Wednesday, August 20, 2014

New US Trade Case Against Oman

On May 29, 2014, one of the largest producers of steel nails requested that the US Department of Commerce (“Commerce”) and the International Trade Commission (“ITC”) impose antidumping and countervailing duties (“CVD”) on imports of steel nails from seven countries, including Oman. This trade case comes two years after Commerce imposed antidumping duties on imports of steel nails from the United Arab Emirates and five years after such duties were imposed on steel nail imports from China. US manufacturer Mid-Continent Steel and Wire Inc. (“Mid-Continent”) filed a CVD and antidumping petition (the “Petition”) alleging that unfairly traded imports from the seven countries are materially injuring the US industry. The ITC on July 11, 2014 rendered an affirmative preliminary injury determination in relation to this trade case. Accordingly, such an affirmative determination means that this trade case will now pass to Commerce for an investigation as to whether or not the Omani Government has bestowed countervailing subsidies to Omani exporters.

The argument for the Petition

The Petition says that the margins of dumping for Oman are 166.81 per cent. It also identifies foreign government programmes that likely provide unfair subsidies to producers of steel nails in such countries, including Oman. Further, the Petition says that the unfairly priced and subsidised imports of steel nails are hurting US manufacturers by undercutting prices and taking sales through unfair trading practices.

Antidumping duties are intended to offset the amount by which a product is sold at less than fair value in the United States. More specifically, it is the amount by which the product is sold below the price charged in a comparable market. By contrast, CVDs are intended to offset the amount by which a product is improperly subsidised by a foreign government.

orts of steel nails from Oman and the other identified countries constitute a large and increasing share of the US market. Imports of steel nails from these countries surged nearly 90 per cent from 2011 – 2013 and accounted for 51.2 per cent of all nail imports in 2013.

The timeframe for determination of the Petition and CVD

The Petition starts the process by which Commerce will determine whether imports are being dumped and unfairly subsidised. It is anticipated that Commerce will issue its CVD questionnaire to the Omani Government (and Omani exporters) in a matter of weeks. The ITC will determine whether the US nail industry has been injured in a material way within 45 days. Commerce must announce preliminary countervailing duties in 85 days and preliminary antidumping duties in 160 days, although both deadlines can be extended.

Trade cases are dictated by statutory deadlines, resulting in a rapid succession of events following Commerce’s initiation of a proceeding. The entire trade case process takes approximately one year. Final determinations of injury and dumping and unfair subsidies should occur in mid-2015. More specifically, Commerce will render its final antidumping and CVD determinations and rates in May 2015. The ITC will render its final injury determination on June 23, 2015.

The impact of the CVD and Petition for the Omani producers and exporters concerned

This trade case puts at risk more than US$55 million of exports from Oman and is made against eight Omani producers or exporters identified in the Petition.

This case is both (i) an antidumping case which, under US law, requires mandatory and active participation from Omani exporters and producers and (ii) a countervailing duty case which requires active participation from the Government of Oman. In addition, producers and exporters are required to participate in the CVD proceedings.

Subsidy programmes investigated

Commerce may investigate the following alleged subsidy programmes in connection with the CVD case at issue:

  1. tariff exemptions on imported equipment, machinery, raw materials and packaging materials;
  2. government provision of land and buildings for less than adequate remuneration;
  3. provision of utilities (electricity, water and natural gas) at less than adequate remuneration;
  4. soft loans for industrial projects;
  5. post-shipment financing loans;
  6. pre-shipment export credit guarantees; and
  7. profit/tax exemptions.

As a result of the ITC’s affirmative preliminary injury determination in the trade case against Oman and the short time scale to which a determination of such Petition and CVD must be made it is likely that an imminent investigation by Commerce will be conducted. Accordingly, as an investigation that has the scope to examine a wide array of alleged subsidised areas and with an outcome that has the potential to severely impact Omani producers and exporters, this trade case is likely to feature prominently in news in early 2015.