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US Commerce Department Considers Revising “Particular Market Situation” Methodology

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Seeking public comments

On November 18, 2022, the US Department of Commerce (“DOC”) published a notice of a proposed change to its particular market situation (“PMS”) methodology.

Since the 2015 expansion of the DOC’s PMS authority, the DOC has been using the PMS methodology in the calculation of antidumping duty rates when it considers that there is a market distortion in the exporting country under investigation, such as the availability of low-priced energy, which reduces exporters’ costs of production. PMS methodologies have been used against imports from countries like Argentina, South Korea, and Turkey. Costs deemed to be distorted by the PMS are adjusted, which inflates the antidumping margin. US antidumping law does not prescribe a specific method for calculating the adjustment.

The revisiting of the PMS methodology arises, in part, from a recent decision by the US Court of Appeals for the Federal Circuit (“CAFC”). The CAFC criticized, in particular, the apparent lack of evidence in the DOC’s use of the PMS methodology. In doing so, CAFC reached four conclusions.

  1. A PMS that distorts costs must cause costs to deviate from what they would have otherwise been in the ordinary course of trade.
  2. A PMS must be particular to certain producers or exporters, inputs, or the market where the inputs are manufactured.
  3. If there is a claim of a subsidy or government interference, there should be evidence that the producer or seller of the input at issue received, or should have received, that subsidy or government assistance, and that there is some form of impact on the price of the input as a result of that subsidy or government interference.
  4. The DOC is not required to quantify a distortion in costs by the PMS to find the existence of a PMS, but if the DOC is able to quantify the distortion, such a quantification may help support a finding of the existence of a PMS.

In light of the CAFC decision, the DOC considers that changes to its policies and practices may be needed to ensure that allegations of a PMS are vetted in a manner consistent with the CAFC’s conclusions. The DOC now seeks comments on three issues, asking the public to:

  1. Identify information that the DOC should consider in determining if a PMS exists which distorts the costs of production, if that information is reasonably available and relevant to the PMS allegation;
  2. Identify information that the DOC should not be required to consider when determining if a PMS exists, regardless of the PMS allegation; and
  3. Provide comments on adjustments that the DOC may make to its calculations when it determines the existence of a PMS, but the record before it does not allow for the quantification of cost distortions.

As context, investigating authorities around the world use PMS methodologies in various ways, making the use of PMS a key live issue in global antidumping law. Australia’s use of PMS in a case against A4 copy paper from Indonesia resulted in a World Trade Organization (“WTO”) Panel Report that leaves open important questions on the scope of PMS. The newly established UK Trade Remedies Authority has relied on the notion of PMS to adjust costs in its first case targeting imports from China, concerning aluminum extrusions. Further, PMS has been proffered to be a likely legal basis under WTO law for the European Union’s “significant distortions” methodology. Comments on the DOC’s proposed change are due no later than December 18, 2022. If you are interested in filing comments, please reach out to the authors or the Baker McKenzie attorney with whom you work.

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Author

Christine Streatfeild is a Partner in the Washington DC Office and on the Steering Committee for the North America Trade Secrets Practice. She focuses on trade remedies and unfair competition cases, including forced labor investigations, antidumping and countervailing duty cases, safeguard measures, duties imposed for national security purposes (Section 232 duties), and Section 337 intellectual property and trade secrets disputes. She appears before the US International Trade Commission (ITC), US Department of Commerce (DOC), and in state and federal courts. Prior to joining Baker McKenzie, Christine served as the acting deputy director of the Generalized System of Preferences (GSP) and in the Environment and Natural Resources division of the Office of the United States Trade Representative. She has also served as an adjunct professor at the Krieger School, Johns Hopkins University, where she taught Global Trade, Policy and Competition. She is also on the 2021 USMCA Dispute Settlement Panels Roster (on behalf of the United States), a position she has held since 2019 (under the NAFTA). Christine focuses her practice on matters related to trade regulatory and intellectual property matters, including economic injury and damages, import duty compliance, and unfair competition allegations.

Author

Arnoud Willems is a partner in the International Commercial & Trade Practice Group in the Brussels office. He joined Baker McKenzie in 2022. He has an extensive network, built over 25 years as a trusted advisor of entrepreneurs, executives, and diplomats. Arnoud has a deep understanding of how trade rules shape global flows of capital, investment, goods, technology, and services.

Author

Dr. Bregt Natens is a counsel in the International Commercial & Trade Practice Group in the Brussels office. He joined Baker McKenzie in 2022. Bregt advises clients on EU and international trade law and regulations, with a focus on trade remedies, customs rules, market access and regulatory barriers. Bregt has significant experience representing clients in litigation before the EU courts and the World Trade Organization (WTO), and before EU and EU member state authorities in the context of trade remedies and customs matters.
Bregt also regularly teaches trade law, and his research has been published in leading journals.

Author

Michael Kyle Kondrad is an associate in the IP Tech Practice Group in the Washington DC Office. His focus areas include intellectual property litigation, prosecution, trade regulations, trade secrets, transactional matters, and various matters related to the importation of goods into the United States including economic injury and damages, import duty compliance, and unfair competition. He has drafted memos, pleadings, patents, infringement charts, presentations, reports, client updates, legal articles, harmonized tariff schedule classifications, scope inquiries, country of origin determinations, administrative and sunset review narratives, penalty protests, and cease and desist letters. Michael has also helped manage proceedings before the United States Department of Commerce, U.S. International Trade Commission, and U.S. Customs and Border Protection, including managing documents, evidence, deadlines, research, drafting, and filing. In addition, he has performed extensive email and document review of client's records to assess past practices and trade compliance risks, performed intellectual property due diligence on contracts, documents, and patents from both the seller and buyer perspective, as well as reviewed client confidential information practices and drafted revised company trade secret policies and practices. Prior to working with Baker McKenzie, he worked as a Summer Associate for a consulting group where he researched, reviewed, and edited client documents regarding; non-disclosure agreements, indemnifications, damages, non-compete clauses, hiring contracts, defined technical terms, subcontracting, know-how licensing, and IP confidentiality (e.g. non-reverse engineering clause). Michael also conducted searches within the USPTO for third party patents to identify potential Freedom to Operate risks.

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