Suspension Agreements

Suspension Agreements Judith Wey Rudman Director for Bilateral Agreements U.S. Department of Commerce Suspension Agreements Suspension agreements allow the Department of Commerce (DOC) and exporters/producers or foreign governments to suspend antidumping (AD) or countervailing duty (CVD) investigations in favor of an agreement (undertaking) that provides for elimination of the unfair pricing or subsidies, or of the injury caused by the imports under investigation. Suspension Agreements Suspension agreements may only be reached in the investigation phase of an AD or CVD proceeding. Suspension Agreements Under a suspension agreement, merchandise enters free of AD and CVD cash deposits and assessments, provided the parties meet the requirements of the agreement. DOC monitors and enforces the agreement, to ensure compliance with these requirements. Suspension Agreements The negotiation of suspension agreements is rare in AD and CVD investigations. Suspension Agreements The decision to enter into negotiations for a suspension agreement or to sign an agreement is discretionary. The WTO AD and SCM Agreements expressly recognize that authorities may decline to enter into undertakings where acceptance would be impractical, (e.g., if the number of actual or potential exporters is too great) or for other reasons, including reasons of general policy. Suspension Agreements If DOC does decide to enter into negotiations, any agreement reached must be consistent with the Tariff Act of 1930, as amended, the governing U.S. statute. The agreement must be in the public interest and effective monitoring of the agreement must be practicable. Suspension Agreements Suspension agreements are also subject to judicial review. Parties have challenged DOC in the courts on whether past suspension agreements were consistent with the law. Suspension Agreements Suspension agreements are also subject to the AD/CVD administrative review and termination procedures, and the sunset review procedures provided for in the law and regulations. Types of Suspension Agreements 1. Suspension Agreements for Market Economy Antidumping Investigations 2. Suspension Agreements for Non-Market Economy Antidumping Investigations 3. Suspension Agreements for Countervailing Duty Investigations Suspension Agreements--Market Economy AD Investigations 734 (b) “Normal Value” suspension agreements where parties agree: “to revise their prices to eliminate completely any amount by which the normal value of the merchandise which is the subject of the agreement exceeds the export price (or the constructed export price) of that merchandise.” Suspension Agreements--Market Economy AD Investigations Current examples of section 734 (b) agreements are the agreements on lemon juice from Argentina and Mexico. Suspension Agreements--Market Economy AD Investigations Essentially, this type of agreement requires signatories to the agreement to sell at prices above their normal values for each product sold in the United States. These normal values are calculated by the DOC quarterly, semi-annually, or annually, based on cost and sales information provided by respondents. Suspension Agreements--Market Economy AD Investigations Suspension agreement cost and sales data is subject to disclosure to petitioner’s counsel under protective order, comment from the interested parties and verification, as in antidumping investigations and reviews. Suspension Agreements--Market Economy AD Investigations Since the producer’s costs are proprietary, the normal values above which they must sell are also proprietary. DOC monitors signatories’ sales to ensure that they are at or above the normal values. Suspension Agreements--Market Economy AD Investigations 734 (c) “Elimination of Injurious Effect” suspension agreements where parties agree: “for each entry of each exporter the amount by which the estimated normal value exceeds the export price (or the constructed export price) will not exceed 15 percent of the weighted average amount by which the estimated normal value exceeded the export price (or the constructed export price) for all less-than-fair-value entries of the exporter examined during the course of the investigation.” Suspension Agreements--Market Economy AD Investigations Section 734(c) agreements do not seek to eliminate all dumping, but rather attempt to eliminate only the injurious effects of dumping, to prevent the suppression or undercutting of domestic prices, and to limit dumping to 15% of the amount by which the normal value exceeds the U.S. market price. Suspension Agreements--Market Economy AD Investigations Section (c) agreements may only be used in cases where “extraordinary circumstances” exist. Suspension of the investigation must be more beneficial to the domestic industry than continuation of the investigation. The investigation must be complex (e.g., involving a large number of firms or transactions or novel issues). Suspension Agreements--Market Economy AD Investigations Tomatoes from Mexico is a suspension agreement negotiated under this provision. Suspension Agreements--Non-Market Economy AD Investigations 734 (l) provides for a “Special Rule” for nonmarket economy cases, where the DOC may negotiate an agreement to restrict quantities imported, as long as the agreement also prevents “the suppression or undercutting of price levels of domestic products by imports of the merchandise under investigation.” Suspension Agreements--Non-Market Economy AD Investigations These agreements generally include both export limits and a “reference price” above which the subject merchandise must be sold. Suspension Agreements--Non-Market Economy AD Investigations These agreements are concluded with the government of the non-market economy country. The government of the non-market economy country works with the Department to monitor and enforce the provisions of the suspension agreement. Suspension Agreements--Non-Market Economy AD Investigations The government and foreign producers generally must provide information such as export license reports or sales reports, but they do not provide the company-specific cost and sales information used in the calculation of antidumping margins. Suspension Agreements--Non-Market Economy AD Investigations Government-to-government consultations are provided for under these agreements to ensure that the provisions of the agreement are enforced throughout the life of the agreement. Suspension Agreements - CVD Investigations There are two types of CVD suspension agreements: 704(b) agreements where the DOC and the foreign government or exporters accounting for substantially all of the imports of the subject merchandise agree to eliminate or offset completely a countervailable subsidy, or to cease exports to the United States within 6 months after the date on which the investigation is suspended; and Suspension Agreements - CVD Investigations 704(c) agreements to eliminate the injurious effects of exports of the subject merchandise to the United States. Like 734(c) agreements, these agreements may only be used in cases where “extraordinary circumstances” exist, the agreement must prevent suppression or undercutting of prices, and at least 85 percent of the countervailable subsidy must be offset. Procedures for Suspension Agreements General Statutory and Regulatory Provisions Section 734 of the Trade Act of 1930 (the Act) governs antidumping suspension agreements. Section 704 of the Act governs countervailing duty suspension agreements. Sections 351.208 and 351.209 of the Department’s regulations also provide for specific suspension agreement procedures. Procedures: Requests for Suspension Agreements A request for a suspension agreement must follow an affirmative preliminary determination by DOC. Procedures: Requests for Suspension Agreements The window of opportunity to request a suspension agreement is very short. The government or producers, as appropriate, have only 15 days after the date of issuance of the Department’s preliminary determination in an antidumping case. Procedures: Requests for Suspension Agreements In a countervailing duty investigation, the government or producers have only 7 days after the date of issuance of the preliminary determination to request a suspension agreement. Procedures: Negotiation of Agreements and Comment If the parties negotiating an agreement reach a preliminarily accepted agreement, the law requires DOC to provide a copy of the proposed agreement to the petitioners and to allow all interested parties to comment. Procedures: Negotiation of Agreements and Comment A preliminary agreement must be released to the petitioner no later than 30 days before the investigation is suspended. Procedures: Negotiation of Agreements and Comment Parties can request that the investigation be “continued” and that DOC and the ITC issue their final determinations. Procedures: Negotiation of Agreements and Comment If the DOC or ITC determination is negative, then the suspension agreement shall have no force or effect and the investigation is terminated. No further antidumping or countervailing duty remedy is imposed. Procedures: Violations of Suspension Agreements If DOC determines that a material violation of a suspension agreement has occurred, it must cancel the agreement. If the original investigation was continued and the ITC found injury, then DOC issues an AD or CVD order. If the original investigation was not concluded , the suspension agreement is cancelled and the investigation resumes.