During the Kennedy Round an International Antidumping Agreement (hereinafter referred to as "the Code") was negotiated which describes the conditions under which the signatory countries, including the United States, agreed that dumping duties will be permitted. The Code was signed on June 30, 1967, and later that year Senate Concurrent Resolution 38 was introduced, stating that it is the sense of Congress that the provisions of the Code are inconsistent with the Act; that the President should submit the Code to the Senate for advice and consent in accordance with the treaty provisions of the Constitution; and that the provisions of the Code should become effective in the United States only at the time specified in enabling legislation. In due course the Resolution was referred to the Finance Committee and the Committee asked the Tariff Commission to report on it. On March 8, 1968, the Commission filed its report which contained three separate statements. The report of the majority, made up of Vice Chairman Sutton, Commissioner Culliton, and myself, indicated that there are, in our judgment, important differences between the Code and the Act. Moreover, the majority stated that in any event the Code could not alter domestic law. In this connection the report states that "It is well settled that the Constitution does not vest in the President plenary power to alter domestic law. The Code, no matter what are the obligations undertaken by the United States thereunder internationally, cannot, standing alone without legislative implementation, alter the provisions of the Antidumping Act or of other United States statutes. As matters presently stand, we believe that the jurisdiction and authority of the Commission to act with respect to dumping of imported articles is derived wholly from the Antidumping Act and 19 U.S.C. 1337." I filed additional comments setting out the legal basis for the majority's position on this issue, the effect of which was that without legislative implementation of the Code the Commission was powerless to either apply the Code itself domestically, or to torture the construction of the Act so that it would be consistent with the Code. In a minority statement Chairman Metzger and Commissioner Thunberg stated in effect that, while there are differences in language between the Act and the Code, these differences do not appear obviously or patently to call for differing results in future cases coming before the Commission. The minority also differed with the majority on the question of what effect should be given by the Tariff Commission to the Code in the absence of any action by Congress. The minority Commissioners took the position that the Commission had a responsibility to construe the Act in accordance with the Code. To do this it should . . . apply the principles of American law to the task of interpretation of the Act as it affects the facts of the investigation, including those principles relating to interpreting the Act so as to avoid inconsistency between it and the international obligations of the United States." The minority further noted that if it was impossible to avoid an inconsistency between the Act and the Code, then the Act should prevail. Subsequently, these hearings were scheduled, and I was requested to appear and give testimony on the question of whether the Code is sufficiently consistent with the provisions of the Act that it can be implemented by the United States without enabling legislation. I will attempt to comply with this request by identifying for the Committee some of those differences between the Act and the Code which are mentioned in the majority report to the Committee on Senate Concurrent Resolution 38. These are differences which the majority felt were important, and which in my judgment could affect the outcome of cases before the Commission. Before identifying differences between the Act and the Code, however, I think it is only prudent to remind you that I do not speak for the Commission in this matter, nor do I speak for the majority. The Commission's report on Senate Concurrent Resolution 38, including both majority and minority views, is the official position of the Commission. I appear here as an individual Commissioner, and what I will give you is my own interpretation of portions of the report and what I believe to be the substance of the majority view. With that in mind, let me begin by noting that the Act and the Code are entirely different documents. Not only is the terminology different, but also concepts expressed in one or two words in the Act, are sometimes the subject of lengthy and often limiting definitions in the Code. Accordingly, if one were attempting to determine what the differences are he would have to say that in a technical sense the documents are different in almost every respect. In the Commission's report on Senate Concurrent Resolution 38, however, we attempted to identify those differences which seemed most important, and which might call for a different result depending upon whether the Act or the Code were applied. The Commission report notes a number of such instances. I will highlight only a few of them here. A. The injury test THE ACT The Act requires that the Commission shall determine "whether an industry in the United States is being, or is likely to be, injured . . . by reason of the importation of such merchandise . . .”. THE CODE The Code states that before dumping duties can be imposed it must be found that the dumped merchandise is "demonstrably the principal cause of material injury or threat of material injury to a domestic industry," (Article 3) and that the authorities must "weigh, on the one hand, the effect of the dumping and, on the other hand, all the other factors taken together which may be adversely affecting the industry." One difference here appears to be that the Code requires a weighing procedure while the Act does not, requiring the Commission to evaluate all factors adversely affecting the industry and determine whether other factors were more responsible for the injury to the industry than are the sales at less than fair value. Under the Act it is merely necessary to focus on one factor, dumped imports, and determine whether an industry is being injured by them. The Code requires that in evaluating the effect of the dumped imports on the industry the Commission must consider all factors having a bearing on the state of the industry, and such as "development and prospects with regard to turnover, market share, profits, prices . . . export performance, employment, volume of dumped and other imports, utilization of capacity of domestic industry, and productivity; and restrictive trade practices." (Article 3) This appears to say that if the industry is otherwise healthy, then an injury finding cannot be made. The Commission majority noted, however, that— "The Act does not authorize the forgiveness of a material injury caused by less than fair value imports in those cases where consideration of 'all [other] factors having a bearing on the state of the industry in question' shows that the industry is in a healthy condition despite the effect of the less than fair value imports." Moreover, if I may add a personal view which does not appear in the majority report, if the language of the Code relating to restrictive trade practices means that under it a dumping charge can be defended on the ground that the domestic industry is engaging in restrictive trade practices, then it is clearly different from the Act, which provides no such defense. First, the Act permits the Commission to find injury to an industry other than that producing a like article. The Code would not. For example, if apples were being dumped and were being processed into applesauce, the Act would permit the application of dumping duties if the domestic applesauce producers were being injured. The Code apparently would permit the production of dumping duties only if there were injury to the apple producers, but not if there were injury to applesause producers. THE ACT The Commission shall determine "whether an industry in the United States is being, or likely to be injured" by the dumped imports. THE CODE "in exceptional circumstances a country may, for the production in question, be divided into two or more competitive markets and the producers within each market regarded as a separate industry, if, because of transport costs, all the producers within such a market sell all or almost all of their production of the product in question in that market, and none, or almost none, of the product in question produced elsewhere in the country is sold in that market or if there exist special regional marketing conditions (for example, traditional patterns of distribution or consumer tastes) which result in an equal degree of isolation of the producers in such a market from the rest of the industry, provided, however, that injury may be found in such circumstances only if there is no injury to all or almost all of the total production of the product in the market defined." The Act requires that injury to "an industry in the United States" must be found before dumping duties can be applied. The Commission has sometimes found that the producers in a particular area or those serving a particular market are "an industry" for this purpose. The Code would also permit a "Segmentation" of the industry for purposes of determining injury, but would so restrict it that it could not be employed as it has in the past. Thus, the Code would permit segmentation of the market only when all producers within a market (Paragraph 4(a)) sell all or almost all of their production of the product in that market. The Commission in the past has included in such a regional industry producers who were adjacent to the competitive market area. The Commission majority noted that the circumstances under which the Code would permit the employment of the regional industry concept are so narrowly defined that "four out of five affirmative determinations by the Tariff Commission might not have been made had the Code been in effect when the determinations were made." The Code also requires that in order to find injury in a segmented market it must be found that “all or almost all" of the producers in the segmented market area are injured. The Act has no such requirement. In fact, under the Act the Commission can find that an injury to one of the producers is sufficient to sustain a determination of injury to the industry. Under the Act the Treasury Department normally receives a complaint from a domestic producer and is then required to make the "arithmetical computation" necessary to determining whether sales at less than fair value are being made. If they are, then theoretically Treasury "automatically" refers the matter to the Tariff Commission for an injury determination. Under the Code, Treasury would not only have to make the LTFV determination, but would have to make a preliminary injury determination as well. The present division of responsibility between the Treasury and the Commission was established by the 1954 Amendment which transferred the injury determination function to the Commission. The apparent reason for the transfer was that the Treasury Department was not staffed to handle it, and did not feel that it was competent to do so. The Code requires the Treasury Department again to make injury determinations by requiring it to receive evidence of injury in order to determine whether to proceed with the investigation. This requires the Treasury Department to determine (a) what constitutes evidence of injury, and (b) what is the minimum amount of injury and evidence required for an injury determination. Not only might the thinking of the Treasury officials be different from that of the Tariff Commission on such matters, but also, as noted above, there are differences between the Code and the Act on what constitutes injury and, indeed, what constitutes evidence of injury. If the Treasury officials apply the provisions of the Code on the injury question, while the Commission applies only the Act, there might well be cases which would be dismissed by the Treasury Department on the grounds that no evidence of injury (which would satisfy the Code) had been received, in spite of the fact that, had the matter been referred to the Tariff Commission for an injury determination, a positive finding would have been made under the Act. Even if there were no other objection, however, it seems clear that by requiring a preliminary injury determination at Treasury, another obstacle not contemplated by the Act is placed in the path of a domestic producer seeking relief. It might be argued that in fact the Treasury Department makes such “de minimis" determinations on the injury question even now, and has done so for some time under the Act. If so, my answer would be that this practice, too, is inconsistent with the Act. Conclusion I have attempted to point out some of the material differences between the Code and the Act which in specific cases could provide different results under the Code than would be reached under the Act. There are other instances whereby the Code can be made consistent with the Act only by the most tortured interpretation of the Act. Some of these are noted in the Commission's majority report on S. Con Res. 38. I should say in conclusion that in making the report on Senate Concurrent Resolution 38 and in presenting this testimony the Commission and I have no desire to embarrass the President or his representatives or further to confuse international trade negotiations. We were merely asked whether there are inconsistencies between the Code and the Act, and our answer is yes. The majority of the Commission went further and said that, whether or not there are inconsistencies between the Act and the Code, the Code is not the law in the United States, and until the Commission is otherwise instructed by a proper authority, we will not apply it as such. The Commission did not attempt to pass judgment on the value of an international dumping agreement, or the desirability of this one. (The following letter, with attachments, was received for the record, by the committee:) Representative WILBUR D. MILLS, Chairman, Committee on Ways and Means, AMERICAN MINING CONGRESS, DEAR MR. MILLS: With the International Anti-Dumping Code scheduled to come into effect on July 1, may I respectfully ask you and your Committee to give timely consideration to whatever action might be taken to prevent, or at least postpone the implementation of the Code, until the Congress has had an opportunity to review the present shortcomings of the United States Antidumping Act and the further weakening of the U.S. law, which would be required by conformity to the International Anti-Dumping Code. The American Mining Congress at its annual convention in Denver, Colorado on September 7, 1967 gave its support to Senate Con. Res. 38. An identical resolution, H. Con. Res. 447, has been introduced this session and is before your Committee. Enclosed is a copy of the anti-dumping portion of the AMC Declaration of Policy. The Tariff Commission's recent report to the Senate Finance Committee on S. Con. Res. 38 points out significant areas of conflict between the International Anti-Dumping Code and the United States Antidumping Act. The report makes the very telling point that in four out of five cases in which dumping was found to be injurious to U.S. industry, no finding of injury would have been made had the standards of the International Code been followed. Of particular interest to the Committee will be the revisions to the antidumping regulations which Treasury has said it will put into effect on July 1, to implement the Code. Under these regulations, the Treasury Department would take back a portion of the injury determination in dumping cases, in spite of the fact that in 1954 the Congress specifically withdrew the injury function from Treasury and placed it with the Tariff Commission. Requiring a dumping complainant to document for Treasury a prima facie case of injury will make the Tariff Commission's functions a dead letter-many cases will never even reach the Tariff Commission for a determination of injury to United States industry. For your convenient reference in evaluating the many areas of disparity between the United States Antidumping Act and the International Anti-Dumping Code, enclosed is a staff study prepared by the American Mining Congress and a one page summary of the significant basic policy questions raised by these conflicts. I offer it to show both the full scope of the massive uncertainty which may be expected and that implementation of the International Code in July will seriously undermine the basic import price floor of United States trade policy provided by the United States Antidumping Act. Noting that Canada will not have implemented the International Code by July 1, it may also be more appropriate for the United States to postpone hasty implementation of the International Code, rather than go through the more painful processes of revoking United States implementation of the Code at a later date. With warmest personal regards, Sincerely, J. ALLEN OVERTON, Jr., DECLARATION OF POLICY, 1967-68, AMERICAN MINING CONGRESS, ADOPTED AT DENVER, COLO., SEPTEMBER 10, 1967 Antidumping-Foreign manufacturers who sell their goods in the United States at discriminatory prices-below the prices prevailing in the countries of origin— are engaging in a practice which is clearly contrary to the principles embodied in our domestic fair-trade laws and the intent of Congress as expressed in the Antidumping Act of 1921. After 46 years, legislative amendment of this Act is now urgently needed; not as protection against fair international trade, but as a necessary countermeasure against the unfair trade practice of dumping. Experience has shown that Congressional guidelines are necessary to clarify basic concepts. There is an immediate need to eliminate loopholes revealed in administrative practices and to provide greater speed and certainty in the handling of dumping cases. Bills designed to accomplish those objectives were introduced in the 89th and 90th Congresses under broad legislative sponsorship and with significant and substantial support from both industry and labor. The recent negotiation of an International Antidumping Code (referred to below) has stimulated further interest in antidumping legislation. As a consequence, additional bills-similar to the foregoing ones-may be introduced in the near future for the purpose of dealing comprehensively with this important subject. We urge Congress to assign a high priority to such legislation. The International Antidumping Code, drawn up in Geneva during tariff negotiations under the Trade Expansion Act of 1962 and scheduled to become effective July 1, 1968, has been agreed to by the President and was made public on June 30, 1967. The code is inconsistent with the provisions of the Antidumping Act of 1921 and, we believe, could expose American industry to increased unfair competition from foreign manufacturers. Because implementation of the International Antidumping Code may produce this result, its acceptance is clearly a usurpation of the legislative functions of our government and is contrary to Senate Concurrent Resolution 100, adopted in 1966. Therefore, we consider it essential that the code negotiated in Geneva be submitted to Congress for study, hearings and action as proposed in Senate Concurrent Resolution 38, 90th Congress, before it is made effective. 95-159 0-68-pt. 5-11 |