Date of publication: 19 May 2015
Olena Omelchenko, Partner, Attorney at Law, Head of International Trade Practice
Recently, the mass media have disseminated information concerning arrangements between Ukraine and the United States to suspend the anti-dumping duties by conclusion of the relevant Agreement (Suspension Agreements). Such agreements are common practice of reaching compromise on issues of bilateral trade and are concluded between the U.S. Department of Commerce and companies during the anti-dumping investigation.
The mere existence of such arrangement is a significant political signal of support to the Ukrainian government at the highest level in the US. It is essential for promoting Ukrainian exports and diversification of sales market of Ukrainian goods subject to anti-dumping duties.
Currently, the anti-dumping measures are in force for seven types of Ukrainian products in the USA: dry urea (68.26%), ammonium nitrate (156%) ferro silico maganese (163%), armature (41.69%), hot rolled flat products in coils (90.33%), hot rolled flat carbon products not in coils (81.4% – 237.9%, which is currently subject to a five-year review), and oil and gas pipelines (7,47%, for which the Suspension Agreement in place was concluded in 2014).
It had been impossible to cancel the anti-dumping duties for years. The difficulty lies in anti-dumping procedures and significant amount of duty charged for Ukraine before entry into the WTO as a non-market economy and with the possible use of the zeroing methodology. Such a large amount of duty is inherently “forbidden”, and, thus, resulted in the final loss of the US market for Ukrainian exporters and suspension of supplies to this market. By contrast before introduction of anti-dumping measures the annual supplies to the market reached approximately USD 288.6 mln.
At the same time, according to the US anti-dumping procedures, it is only possible to review the amount of duty in case of regular supplies that were economically unprofitable for Ukrainian business. Thus, the situation reached a deadlock, which seemed to have no practical solution without political will.
However, we must not expect that anti-dumping duties will be canceled tacitly – for this it is necessary to review duties as provided in the US laws and the WTO Agreement on Implementation of Article VI of the GATT. The US laws envisage several types of reviewing duties, including a five-year review, administrative review and review by the new circumstances. Each type of review has its characteristics and legal requirements.
The procedure for entering into the Suspension Agreements is envisaged in the U.S. Tariff Act of 1930. In fact, it means setting voluntary price commitments on the part of foreign industry. Such Agreement must necessarily be of public interest and requires effective monitoring of its implementation.
If there are political arrangements, liberalization of anti-dumping measures is a quite real prospect taking into account the last year trends, when for the first time in the history of independence of our state the five-year review resulted in cancellation of the anti-dumping duty for Ukrainian bar and wire of 116.37%. Although during the same review the U.S. International Trade Commission left duties in force for all other countries: Brazil, Indonesia, Mexico, Moldova, Trinidad and Tobago. The Suspension Agreement signed between the U.S. Department of Commerce and the company Interpipe last year was also positive for Ukraine.
However, we should not expect tacit conclusion of such agreements based on the political agreements as suspension of the anti-dumping duties is a complex process associated with observation of legal procedures. It depends directly on the business activity and takes time for implementation. At the same time, the risk of appealing against the agreements concluded by the results of court review on the part of American industry remains high.
Therefore, major efforts on coordination of actions of governments and business are still in progress. Firstly, it is necessary to define exactly the procedures for addressing the United States competent authorities and prepare a work flow chart to achieve this goal.