Attn: Byrd Amendment
Dear Ms. McKinzy:
This letter is submitted by the Consuming Industries Trade Action Coalition (CITAC) in response to the Federal Register notice published by the Office of the U.S. Trade Representative, 66 Fed. Reg. 3641 (January 16, 2001). We appreciate the opportunity to provide these comments for the consideration of the U.S. Trade Representative.
We believe that the requests for consultations by eleven countries raise the very serious issue that the Byrd Amendment violates U.S. obligations under the WTO agreements on dumping and subsidies. Further, the Byrd Amendment sets a policy of giving away government funds in a way that distorts the operation of our nation's antidumping and countervailing duty laws, encouraging petitions and discouraging trade, whether fair or unfair. This raises serious concerns for consuming industries such as steel users, retailers, farmers and others, who rely on imports as components, raw materials and merchandise for sale to other businesses and individual consumers.
The antidumping and countervailing duty (AD/CVD) laws of the United States provide for the imposition of duties to offset sales at less than normal value(AD) and subsidies (CVD) that injure or threaten to injure a U.S. industry. The laws do not limit the amount of these duties to the injury found to exist. Rather, the Department of Commerce calculates duties without regard to the level of injury suffered. This approach distorts trade to the disadvantage of CITAC members and all downstream industries. Foreign producers in a number of industries (e.g., fertilizers, textiles, hot-rolled steel, oil and gas drill pipe, line pipe, electrical steel) have departed the U.S. market because of the imposition of excessive AD/CVD duties.
The Byrd Amendment dramatically aggravates this problem. In addition to paying uncertain and often excessive AD/CVD duties, U.S. importers and their foreign suppliers are now faced with the prospect that duties collected will be turned over, dollar for dollar, to their U.S. competitors. We are very concerned that the Byrd Amendment will further discourage exports to the United States. Downstream industries in the United States will face shortages and a total lack of specialized materials available only from foreign sources (the numerous exemptions from the recent steel wire rod 201 relief provide a clear example of the gaps in U.S. production in that industry). These side effects of the Byrd Amendment will hurt America's downstream industries.
Eleven countries have requested consultations, alleging several points of conflict between the Byrd Amendment and international obligations of the United States. The Byrd Amendment appears to be vulnerable to these attacks. It provides a subsidy to petitioners and supporters of a petition. The subsidy is effectively unconditional, because each beneficiary company need only certify that it has made qualifying expenditures. Virtually any company will have such expenditures, which include purchases of production inputs, plant and equipment, research and development expenditures, pension payments and other expenditures. The total amount collected (which could be several hundred million dollars) will be paid over to petitioners and supporters based on a formula not yet devised by the Customs Service, but which could benefit most the companies that need the subsidies the least.
Moreover, it is likely that the WTO would find such payments specific to enterprises or industries, or groups thereof, within the meaning of the WTO Agreement on Subsidies and Countervailing Measures (ASCM). See id., art. 2.1(c). The Commerce Department would almost certainly find such payments to be specific if the issue were presented in a CVD proceeding under U.S. law with respect to a foreign steel producer. See, e.g., Stainless Steel Sheet and Strip in Coils from Rep. of Korea, 64 FR 30636, 30646 (June 8, 1999).
In addition, because foreign producers would be discouraged from exporting products to the United States if by so doing they subsidized their U.S. competitors, the complaining countries could demonstrate serious prejudice under the ASCM. See ASCM., art. 6.3(a).
Perhaps of even greater significance, the Byrd amendment is subject to challenge under the WTO Antidumping and ASCM agreements because it provides a remedy for dumping and subsidies beyond the exaction of an offsetting duty. This was a basis for the recent WTO decision that found the Antidumping Act of 1916 to be inconsistent with the Antidumping Agreement.
We also believe that the Byrd amendment distorts the standing function of the antidumping and countervailing duty laws. It creates a financial incentive for domestic producers to support petitions as a condition for collecting duties later. Thus, it distorts rational decision-making by making it financially risky to oppose or remain neutral concerning a petition. Increasing the number of AD/CVD petitions is not necessarily in the best interest of the United States.
We urge the USTR to consult with all potentially affected government agencies, including the Treasury and State Departments, the Commerce Department and the Labor Department, the Council of Economic Advisors, all appropriate private sector advisory committees and others before determining the appropriate course of action in this matter before the WTO. We doubt whether, after full consideration of all the aspects of this unhappy piece of legislation, a vigorous defense would be successful. We also believe that the repeal of the Byrd Amendment is in the best interests of the Nation's economy.
We would be pleased to discuss this matter further with you and your colleagues