Stretching a point
Thai rubber bands hit with US anti-dumping investigation
On Jan 30, a major US rubber band manufacturer, acting on behalf of the American rubber band industry, filed a petition with the US International Trade Commission (ITC) and the Department of Commerce (DoC), the joint administrators of the Tariff Act of 1930, accusing Thai rubber-band exporters of unfair trade practices.
The US companies allege that, because of subsidies from the Thai government, 22 Thai companies that export rubber bands to the United States sell their products in the country at prices lower than fair value, thus materially injuring or threatening material injury to their US counterparts.
Both the antidumping and countervailing duty petitions were filed in a single document. The antidumping duties of 29% to 79% that the US firms are seeking on Thai rubber bands would effectively remove the products from the US market.
The petition cited trade figures from Dataweb, which showed an increase of 23% in the value of US imports of Thai rubber bands, from $12.6 million in 2014 to $15.5 million in 2016.
The complaint also details the subsidies that benefit the Thai producers, and the less-than-fair-value US prices, which are within the powers of the DoC to investigate.
If the investigation finds the allegations are true and some critical criteria are met, such as a surge in imports in a short period as reported, retroactive duties can be applied to the Thai merchandise, inevitably raising its prices.
The petitioner must also demonstrate that US importers — 44 of them are named in the petition — were aware or should have been aware that the Thai exporters were selling at less than fair value and that US manufacturers would be materially injured by such sales.
In the petition, prices quoted by a named Thai exporter to a US rival were alleged to be intentionally higher than prices quoted to importers in general.
Thai laws and regulations that provide specific subsidies, financial contributions and benefits to the rubber band exporters are expressly stated. Among them are several sections of the Investment Promotion Act, generally known as the BoI Act as it is administered by the Board of Investment. These relate to import duty exemptions on machinery and raw materials for BoIpromoted companies, corporate income tax exemptions, reduced tax rates in certain zones, and exemptions of export duties.
Other subsidies alleged by US producers include Thai government assistance to enhance production efficiency, low-interest loans to the rubber band industry, incentives for renewable energy including biomass and biogas, tax coupons for exported rubber products, tax benefits for factories in industrial estates, and more.
To prove material injury, the US petitioner must demonstrate how it loses income and profits on an accounting year or calendar year basis, reveal production volumes and employee figures, net sales, cost of goods sold, gross profit or loss, operating profit or loss, general and administrative expenses, and more.
Lost sales and lost revenue are easy to define. If the petitioner loses a sale because an importer changes from the petitioner to buy from a Thai exporter, that’s a lost sale. If the US manufacturer had to reduce prices or postpone a price increase in order to prevent a customer from switching to Thai products, that’s lost revenue.
The Antidumping and Countervailing Duty Handbook of the Office of Investigations of the ITC says there are five stages of investigation for a case:
Initiation of the investigation by the Department of Commerce.
Preliminary phase of the ITC investigation.
Preliminary phase of the DoC investigation.
Final phase of the DOC investigation. Final phase of the ITC investigation. Each stage has a deadline and the entire process takes about a year to complete. The Thailand case is at stage 1: the initiation of the DoC investigation. The deadline for this stage is 20 days after the filing of the petition, meaning that the department should decide on Feb 19 whether the petition should proceed.
The following day, the ITC preliminary conference is scheduled, at which the 22 Thai companies or their representatives are expected to appear.
An ITC investigation team of eight people is likely to consider the Thai case, comprising an investigator, lawyer, industry analyst, economist, accountant/auditor, and statistician.
As the role of the Thai government is limited out of concern over the appearance of providing a further subsidy, it remains to be seen how the Thai rubber band industry will participate in the investigation and respond to the allegations.
Wirot Poonsuwan is a practising lawyer and can be reached at wirot.poonsuwan@gmail.com