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May 1, 2003

23 Min Read
Crossroads: Crisis or Opportunity: Free trade or restricted trade?

crossroads100x38greyTrans.gifThe Bush administration is unlikely to act on behalf of manufacturers, but molders and moldmakers still have governmental options.

Exports from as well as into the U.S. are critical to molders. Open and free trade with other nations should facilitate the export of injection molded products or parts containing such products. At the same time, the web of global trade safeguards should—at least in theory—afford domestic molders some measure of protection against low-cost goods “dumped” on the U.S. market.

In reality, neither is the case. Exports from the U.S. are not growing as fast as the declining dollar and the free trade rhetoric of the Bush administration might suggest. U.S. molders continue to face import barriers in all major markets. Imports from Asia in particular are growing at an ever-increasing rate, forcing many U.S. molders to abandon once-lucrative markets.

So how do you make sense of the official U.S. free trade policy and what it means for molders? Consider:

  • The U.S. government has never pushed for any significant relief from imported molded products. This is unlikely to change with President Bush.

  • U.S. molders are unlikely to see any meaningful support for expanded export opportunities.

  • The troubling trade deficit with China—in 2002 exceeding $100 billion—is likely to grow (see Tables 1, 2, and 3). Geopolitical considerations made it unpalatable for Clinton and now the Bush administration to take on China on trade issues. The result: Many more molding applications will migrate to China from the U.S., Canada, and Mexico.

  • Molders are pretty much on their own in fighting imports. However, a wealth of trade weapons are at their disposal (see sidebar).

    Table 1. U.S. domestic exports, plastics and articles thereof
    *USITC country groupsAPEC: Asia-Pacific Economic CooperationCBTPA: Caribbean Basin Trade Partnership ActATPA: Andean Trade Preference Act


    The Bush Trade Policy
    Since President George W. Bush’s decision on March 5, 2002 to initiate steel tariffs under Section 201 of the 1974 Trade Act, the question has arisen as to how this administration will stand on issues of free trade and domestic safeguards.

    While at first glance the steel tariff ruling would seem to suggest that this president might be sympathetic toward other protectionist policies, a more detailed investigation of his administration appears to imply just the opposite.

    From the first days of his administration, President Bush has been a strong advocate of liberalized trade. This commitment is evident in his avid support for new free trade agreements, as well as multilateral efforts to expand market access, efforts to improve global trading regulations, and reduced agriculture tariffs.

    Considering the nature of President Bush’s agenda it seems unlikely that the administration will be anxious to enact many import relief programs that could be interpreted by the international community as contrary to his more customary free trade mantra.

    So how can we rectify this obviously liberal trade agenda with last March’s steel tariff decision? To start, the Office of the U.S. Trade Representative (USTR) has long been critical of the global steel industry for what it felt was the unfair and inappropriate application of antidumping actions, subsidies, and other market-distorting policies.

    Yet even with the current steel relief program—which in late March was ruled as illegal by the WTO—the U.S. government has provided significant opportunities for foreign producers to petition and receive enforcement exclusions under the law.

    Last year 727 steel products were excluded from this safeguard relief, and in 2003 there are already 295 products that have been granted exclusion orders. These actions do not appear to lend much credence to the idea that the current administration is likely to implement more import relief programs.

    Recent presidential decisions following other U.S. International Trade Commission (USITC) investigations would seem to strongly support this line of reasoning. In a recent case involving an import relief petition filed under Section 312 of the NAFTA Implementation Act, the president chose not to authorize new import relief measures (despite a commission determination that a surge of imports from Canada and Mexico was undermining existing import relief efforts).

    Again, following an affirmative Section 421 import injury ruling involving pedestal actuators, the president once more declined to impose protective relief measures.

    While there have not been a sufficient number of import relief cases to truly define Bush’s position on the use of safeguard measures, these two cases should call into question any assumptions that people may have made following the steel ruling. Several trade officials questioned for this story seem to agree that these two cases were more representative of the president’s position on safeguards than was his steel tariff ruling.

    Trade data online
    1. The United States International Trade Commission (USITC) provides a wide range of useful trade information covering U.S. exports, imports, and trade balances. This information and data can be requested for specific products by entering either their HTS, SITC, or SIC numbers. To reach this USITC site, visit http://dataweb.usitc.gov, and then choose ITC Trade Dataweb. (You will first need to create your own password to access this site.)
    2. Similar international trade information can also be found through the U.S. Census Bureau’s Foreign Trade Statistics site at www.census.gov/foreign-trade/www/.
    3. For information on specific U.S. trade cases, visit the USITC’s Electronic Document Imaging System (EDIS) at http://dockets.usitc.gov/eol/public/. However, for information since mid-January 2003, researchers will need to use the updated site, EDIS-II, at https://edis.usitc.gov/hvwebex//.
    4. Further information on the Trade Adjustment Assistance for Firms (TAA) programs can be found at www.taacenters.org.
    5. Information on USTR and WTO dispute settlement processes can be obtained through the USTR site at www.ustr.gov/enforcement/dispute.shtml.

    What Can You Expect?
    If the president’s actions do not necessarily reflect an aggressive protectionist policy, what can U.S. producers expect in the way of support from this administration?

    First, firms can be confident that the Bush administration will try to take the offensive in confronting nations and industries that deny or limit market access, unfairly subsidize production, dump goods, or violate U.S. intellectual property rights.

    While the number of safeguard orders that have been imposed by this administration may be limited to one case, the picture is quite different when you look at antidumping, countervailing duty, market access, and patent infringement cases. For example, since February 2001, 78 antidumping and countervailing duty orders have been placed; and in March 2001, following a USTR investigation of intellectual property rights violations, the president’s trade representative office suspended Ukraine’s duty-free treatment under the Generalized System of Preference (GSP).

    This pattern of behavior is also reflected in our multilateral relations. The U.S. has filed 61 injury grievances with the WTO Dispute Settlement panel; and as was earlier mentioned, the U.S. actively campaigned for the adoption of reforms that would dramatically lower trade barriers, curb protectionist trade practices, and significantly improve transparency in the dispute settlement process.

    In October of last year, the U.S. formally presented papers to the WTO Negotiating Group on Rules as well as to the Organization for Economic Co-operation & Development (OECD), expressing its desire to see a stricter adherence to due process and greater transparency and public participation in the creation and application of trade remedy decisions.

    Second, U.S. businesses can also be assured that the current administration will continue to support economic development and Trade Adjustment Assistance for Firms (TAA) programs. The current TAA program offers technical support to qualified U.S. businesses attempting to adapt to increasingly competitive markets.

    Congress and the administration have recently reauthorized this program for another five-year cycle. Manufacturers can reasonably expect that as the current government moves to establish ever-freer trade around the world, governmental agencies like the Dept. of Commerce (DOC), USITC, the Export Development Agency (EDA), USTR, and the Import Administration (IA) will continue to expand their assistance to U.S. industries.

    Yet U.S firms struggling with import competition should not expect too much in the way of direct import relief. What firms can rely on is the continued prosecution of unfair trade practices, an intensified lobbying for international trade remedy reform, an expansion of government funding for trade adjustment assistance programs, and a growing shift toward “green light” subsidies.

    Do You Want to Fight Imports?
    If you feel that your molding or moldmaking business is being seriously harmed by foreign imports or market restrictions, there are a variety of trade laws and government programs that may help you to overcome your trade woes. Deciding which law(s) and programs to employ depends on the nature of the foreign competition that you face. It also depends on how much money you want to spend.

    Table 2. U.S. general imports, plastics and articles thereof



    If you have been injured by unfair competition, statutes such as Title VII of the 1930 Tariff Act and Section 301 of the 1974 Trade Act could offer hope of remedy. If, on the other hand, your company is having a difficult time adapting to legitimate foreign imports, Section 201 or Section 421 of the 1974 Trade Act and the TAA program may offer more useful strategies.

    Here are some of the more relevant statutes suitable for U.S. molders and moldmakers.

    The most common complaints involving unfair imports and competition tend to focus on illegal dumping and subsidies; violations of U.S. patent, copyright, and trademark laws; and unfair restrictions to foreign markets. The U.S. government offers recourse for the victims of each of these grievances.

  • Countervailing duties, antidumping. Title VII, Subtitles A and B of the Tariff Act of 1930 allows the government to impose Countervailing Duty (CVD) and Antidumping (AD) orders. Two conditions must be met before one or both of these orders can be imposed. First, the DOC needs to affirm that an article is either being subsidized or dumped. Second, the USITC must rule that either a U.S. industry has been or is likely to be “materially injured” as a result of the importation and sale of the subsidized or dumped article, or that the establishment of a same or similar industry in the U.S. would be “materially injured” from the sale, or likely sale, of such unfair merchandise. The minimum duration for a CVD investigation is 205 days; the maximum is 300 days. AD investigations can last between 280 and 420 days.

  • Injury by unfair policies. If your firm has been “injured” as a result of a foreign government’s unfair policies and deliberate actions, including market access restrictions, you can invoke Sections 301-310 of the 1974 Trade Act. It outlines the powers and procedures necessary to enforce U.S. rights under international trade agreements and obliges the USTR to investigate all legitimate allegations of economic injury resulting from a foreign government’s machinations or its general unwillingness to uphold existing trade laws. In such cases, the USTR has been granted the “discretionary authority to take all appropriate and feasible action, subject to the specific direction, if any, of the president, to obtain the elimination of the act, policy, or practice.”

  • Injury by infringement. If your firm has been “injured” as a result of foreign infringement of patents, copyrights, trademarks, mask works, or other unfair practices, you can invoke the second half of Section 337 of the 1930 Tariff Act. It declares “unlawful the importation and sale of products that have been produced in violation of valid U.S. patents or copyrights, trademarks, and mask work of a semiconductor chip product or protective design.” As such, the overwhelming majority of Section 337 cases involve alleged patent and copyright violations. Importantly, Section 337 does not require U.S. industries to necessarily show injury as a result of the importation of these unlawfully produced articles. While the USITC has no authority to level damages, it does have the authority to issue limited exclusion orders, cease and desist orders, and in the cases of repeat offenders, seizure and forfeiture orders. (Note that in China in particular the theft of trade secrets and proprietary molding know-how is prevalent.)

    Table 3. Trade balance, plastics and articles thereof



    Relief from Legitimate Competition
    Many U.S. industries also face serious threats from a sudden escalation of legitimate foreign imports, and while the burden of proving injury and its cause are considerably higher in these cases, there are still potential statutory relief measures available to U.S. businesses. Here are a few of the possible options for businesses struggling with a rapid influx of legal imports.

  • Sections 201-204 of the 1974 Trade Act give the president the authority to provide temporary import relief so as to facilitate the efforts of injured U.S. industries to make the necessary adjustments to compete with foreign industries. Before the president can act, the USITC must first establish “whether an article is being imported in such increased quantities as to be a substantial cause of serious injury, or the threat thereof, to a domestic industry.” Possible remedies include new or increased duties, tariff rate quotas (TRQs), quantitative restrictions, auctioning import licenses, initiating international negotiations, trade adjustment assistance, or a combination of two or more of these remedies.

  • Sections 421-423 of the 1974 Trade Act allow the government to provide temporary import relief to U.S. industries and workers when a sudden surge in competitive imports causes or threatens to cause market disruptions. The statute directs the USITC to conduct investigations to determine if market disruptions exist or are likely to develop and what the actual or potential injuries are to U.S. firms. Trade remedy options are similar to those under Section 201.

  • The TAA for Firms program, authorized by Sections 251-264 of the 1974 Trade Act, offers technical and financial assistance to small businesses attempting to adjust to new international competition. The program itself is designed to help firms become more competitive by improving marketing, manufacturing, engineering, information technology, and quality operations. Note that to be eligible firms must qualify as a small business by U.S. Small Business Administration standards. For the plastics and rubber industries a company must not employ more than 500 workers and must demonstrate that it has been significantly damaged by foreign imports.

    Burden of Proof
    The biggest challenge a molder, moldmaker, or trade association faces when invoking any of the above sections, statutes, or acts is proving the injury and its cause. Clearly identifying direct cause-and-effect relationships in manufacturing trade is difficult and time consuming. You may believe that your business has suffered because of overseas competition, but can you prove a coordinated, intentional effort by another country or government to dump products, hinder fair trade, or illegally subsidize the manufacture of competitive goods?

    While the government provides a variety of potential remedies for seeking redress of grievances, you must choose your battles carefully. And remember that a coordinated effort of your peers is more effective than the single-manufacturer approach.

    Contact information
    The Repton Group, New York, NY
    Agostino von Hassell and Mark C. Bella
    (212) 750-0824; [email protected]

    WEB ONLY
    Details on Trade Relief

    If you feel that your business is being seriously harmed by foreign imports or foreign market restrictions there are a variety of trade laws and government programs that may help you to overcome your trade woes. The decisions concerning which law(s) and programs to utilize will largely depend on nature of the foreign competition that you face. If you have been injured by unfair competition, statutes such as Title VII of the 1930 Tariff Act and Section 301 of the 1974 Trade Act could offer hope of remedy. If, on the other hand, your company is having a difficult time adapting to legitimate foreign imports, Section 201 or Section 421 of the 1974 Trade Act and the Trade Adjustment Assistance program may offer more useful strategies. To help clarify your options, we will take a quick look at some of the most commonly utilized statutes and examine the manner and degree of assistance that they potentially represent for U.S. producers.

    Relief from Unfair Competition
    The most common complaints involving unfair imports tend to focus on illegal dumping and subsidies, violation of U.S. patent, copyright, and trademark laws, and unfair restrictions to foreign markets. The U.S. government offers recourse for the victims of each of these grievances.

    Problem: Injured as a result of foreign dumping and/or unfair subsidies (including direct, indirect and upstream subsidies(1)).

    Domestic Recourse- Subtitle A of Title VII of the Tariff Act of 1930, outlines the Countervailing Duty (CVD) Law; and Subtitle B covers Antidumping (AD) legislation(2) .

    Subtitle A(3), allows the government to enforce a countervailing duty to off set the adverse effects of countervailing subsidies. Two conditions must be met to initiate this trade remedy. First, the Department of Commerce (DOC) needs to make an affirmative determination that an actual countervailable subsidy, either direct or indirect, is being provided(4). Second, the ITC must rule that either a U.S. industry has been, or is likely to be "materially injured" as a result of the importation of the subsidized article, or that the establishment of a same or similar industry in the U.S. would be "materially injured", from the sales, or likely sales, of that subsidized merchandise(5). The minimum duration for a CVD investigation is 205 days, the maximum time limit is set at 300 days.

    (1) Upstream subsidies are defined as subsidies bestowed on inputs that are then incorporated into the manufacture of a final product, which is then imported into the U.S.
    (2) In 2000,Congress passed the Continued Dumping and Subsidy Offset Act, commonly referred to as the Byrd Amendment, this amendment inserted section 754 into the Title VII. Section 754 directed the Commissioner of Customs to annually distribute all antidumping and countervailing subsidy duties assessed, to the "affected U.S. producers", which are defined as both the petitioners and other interested parties that supported the petition.
    (3) As added by the Trade Agreement Act of 1979 and amended by the Trade and Tariff Act of 1984, the Omnibus Trade and Competitiveness Act of 1988, and the Uruguay Round Agreements Act of 1994.
    (4) The Department of Commerce has the additional responsibility of calculating the dollar amount of the subsidy being provided.



    Subtitle B(6), allows the government to implement and enforce antidumping duties in an attempt to offset injuries from imports sold at a less-than-fair prices. As in CVD investigations, Commerce determines whether an illegal activity has occurred while the Commission is charged with the responsibility of determining whether "material injury" has or will likely result. AD investigations can last between 280 and 420 days.

    Procedure - Investigations are initiated when a petition is filed with the ITC and DOC by an affected party(7), or when the DOC independently feels an investigation is warranted. Once a petition has been filed(8), both agencies begin their separate investigations. If the DOC makes an affirmative preliminary determination, it must immediately suspend liquidation(9) of the article(s) and require importers to post bonds or cash deposits equal to estimated net subsidy or dumping margin(10) for each entry of said merchandise. In the event of an affirmative final ruling Commerce has seven days to issue a CVD or AD order, and the impose duty equal to the amount of injury. If requested, Commerce must review, as frequently as every 12 months, the net amount of its trade equalizing AD or CVD decisions. Based on these reviews countervailing subsidies and dumping margins can be adjusted.

    (5) If the CVD case does not involves a Subsidies Agreement country , a countervailing duty can be imposed even if there has been no proof of "material injury". A Subsidies Agreement country is defined here as, a WTO member, or a country, which the President has determined has assumed substantially equivalent subsidies obligations.
    (6) As added by the Trade Agreement Act of 1979 and amended by the Trade and Tariff Act of 1984, section 1318 of the Omnibus Trade and Competitiveness Act of 1988, and section 232 of the Uruguay Round Agreements Act of 1994.
    (7) The ITC Office of Investigations, will generally offer informal advice on the application process, however many firms choose to solicit more comprehensive assistance from experienced private consultant agencies.
    (8) In the case of a petition, the DOC has 20 days to rule on whether the petition has satisfied the requirements to warrant an investigation.
    (9) As defined by the ITC, "liquidation" completes the transaction of entry of goods and includes a final determination of the amount of duties on the goods.
    (10) The ITC calculates the weighted-average "dumping margin" of an import by measuring the difference between the normal cost of the foreign like product and the "constructed export price" or dumping price of the subject merchandise.

    Interested parties dissatisfied with the final AD or CVD ruling or review have the option to file an action with the U.S. Court of International Trade (CIT) for judicial review. Complaints must be filed with the CIT within 30 days after the publication of the final AD and/or CVD determination. In cases that involve merchandise from either Mexico or Canada, interested parties may take their appeals to a binational panel review pursuant to the North American Free Trade Agreement.

    Change of Circumstances Reviews can be requested or be preformed proactively by either DOC or ITC. If the review concludes that the circumstances that caused the injury or threat of injury no longer exist, DOC can revoke part or all of the original order. Furthermore, the Uruguay Round Agreement Act, has created the a Five-year Sunset Review process, which requires the DOC and ITC to conduct reviews no later than five years after it issues a AD or CVD order. These reviews determine whether a termination of the AD/CVD orders would result in a return to the material injury caused by the original dumping or countervailing subsidies. If the review determines that no likely or foreseeable injury would result, then the orders or investigations are terminated.

    Problem: Injured as a result of a foreign governments unfair policies and deliberate actions, including market access restrictions.

    Domestic Recourse - Sections 301-310 of the 1974 Trade Act(11), outlines the powers and procedures necessary to enforce US rights under international trade agreements and to respond to certain unfair and unjustifiable foreign governmental practices that burden or restricts United States commerce. This statute obliges the USTR to investigate and rule on, all legitimate allegations, of economic injury resulting from a foreign governments machinations or its unwillingness to uphold existing trade laws. In such cases, the USTR has been granted the "discretionary authority to take all appropriate and feasible action, subject to the specific direction, if any, of the President, to obtain the elimination of the act, policy, or practice". This authority includes the ability to (1) suspend, withdraw, or prevent foreign countries from receiving U.S. trade agreement benefits (2) impose duties and other import restrictions (3) the withdrawal of preferential duty treatment under the Generalized System of Preferences Act (GSP), the Caribbean Basin Initiative, or the Andean Trade Preference Act; or (4) enter into binding agreements with the violating government to remedy the problem.

    Procedure - Any interested person may file a 301 petition with the USTR, specifically outlining their allegations of injury. Investigations can also be initiated by USTR itself after appropriate consultations with the proper private sector groups and committees. When the USTR agrees to launch 301 investigations, section 303 of the statute, requires that they simultaneously attempt to address the problem through international procedures, including direct consultations with the foreign country concerned and if the case involves a WTO country, to initiate a WTO Dispute Settlement case. WTO Dispute Settlement rulings can overturn USTR 301decissions.

    (11) As modified by the Trade Agreements act of 1979, the Trade and Tariff Act of 1984, sections 1301-1303 of the Omnibus Trade and Competitiveness Act of 1988, and the Uruguay Round Agreement Act of 1994.

    301 investigations can take between 6 and 18 months (while WTO Dispute Resolution cases can take much longer). Affirmative rulings are effective for a four-year period where upon the original filer can be petitioned the USTR to renewed the decision following an USTR review(12).

    Problem: Injured as a result of foreign infringement of patents, copyrights, trademarks, or mask works, and other unfair practices.

    Domestic Recourse - The first part of section 337 of the 1930 Tariff Act, "declares unlawful unfair methods of competition and unfair acts of in the importation or sale of articles", when such importation threatens, or potentially threatens, to "destroy or substantially injury a U.S. industry; prevent the establishment of such an industry; or restrain or monopolize trade and commerce in the United States." The second part of the statute, goes on to declare "unlawful the importation and sale of products that have been produced in violation of valid U.S. patents or copyrights, trademarks, and mask work of a semiconductor chip product or protective design." Despite the apparently broad jurisdiction implied by the first half of this statute, the overwhelming majority of section 337 cases involve alleged patent and copyright violations(13). However, please note that all Intellectual Property Rights infringement cases that involve a foreign government fall under USTR section 301 jurisdiction. While the ITC has no authority to level damages, the Commission does have several tools that it may use to encourage compliance and punish violators. If the ITC finds that an industry has violated 337, they have the discretion to issue limited exclusion orders(14); cease and desist orders; and in the cases of repeat offenders - seizure and forfeiture orders(15).

    Procedure - The ITC is responsible for administering section 337 cases, and as such, is obligated to investigate any alleged violation(16). ITC also has the authority to self initiate 337 investigations. Importantly, statute 337 does not require U.S. industries to necessarily show injury as a result of the importation of these unlawfully produced articles. The Uruguay Round Agreements Act eliminated any deadline for 337 investigations, however within 45 days of initiation it must establish a target completion date. Within 60 days of receiving an ITC affirmative ruling, the President can overrule its decision for (unspecified) "policy reasons."

    (12) Industries usually will choose to file unfair subsidies cases with the DOC and ITC both to avoid the jurisdiction of the WTO and to benefit the from their generally faster investigation process.
    (13) Among the few non-patent cases brought under section 337, involved group boycotts, price fixing, predatory pricing, false labeling, false advertising, and trademark infringement.
    (14) Limited exclusion orders only affect merchandise from those persons found to be at fault.
    (15)The ITC also has the power to issued temporary exclusion orders during the course of an investigation if it determines that a violation is probable. Under a temporary exclusion order, merchandise can only enter the U.S. market under bond. Bonds are subject to forfeit if the firm is ultimately determined to be in violation.
    (16) The ITC Office of Unfair Import Investigations, will generally offer informal advice on the application process, howeve

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