ITC member scrutinizes settlement agreements
Heath E. Combs -- Furniture Today, January 18, 2011
WASHINGTON — Commissioner Daniel Pearson of the U.S. International Trade Commission said the issue of off-the-books settlement payments raised "troubling questions" during a sunset review of furniture antidumping duties.
He made the comments in a portion of a 201-page report released last month, which detailed why the ITC chose to leave the antidumping duties on Chinese wooden bedroom furniture in place for another five years. Pearson said he concurred with the commission's decision but that "additional costs and distortions" have been added to the case through off-the-books "settlements" between importers and the domestic manufacturers who initiated the case.
Some Chinese manufacturers have paid "settlement fees" to escape the reviews or negotiate a better rate during the annual administrative review process. The fees have gone to the group of U.S. manufacturers that originally petitioned to have the antidumping fees imposed in 2004, who organized as the American Furniture Manufacturers Committee for Legal Trade. Under trade law, that group can suggest which Chinese factories are subject to review - and can withdraw specific factories from review.
The annual administrative review is an audit process that determines if Chinese factories should receive a higher retroactive duty rate beyond the initial cash deposit rate that U.S. importers pay on goods from those factories.
Some importers have said the settlements help their factories remain at competitive duty rates. Others have likened it to extortion that violates the legitimacy of the review process.
The ITC report addresses concerns that the settlements may raise antitrust issues, by distorting trade information and skewing the accuracy of rates assigned by the DOC to other importers.
Pearson said that the lawyers for the U.S. petitioners have been successful in "generating substantial legal activity" by requesting that many factories be subject to administrative reviews, then negotiating settlements and withdrawing the requests for factories that pay up.
Typically, requests for an administrative review in the case have numbered well over 150 factories. During the first administrative review in 2007, 41 factories were taken off the review list, according to the DOC.
Until last year, lawyers for the U.S. manufacturers neither confirmed nor denied the existence of settlements since the antidumping order was initiated. Although the settlement process was formally recognized by the ITC in its report last month, the entity that sets the duty rates, the U.S. Department of Commerce, in response to repeated inquiries from Furniture/Today, has continued to deny knowledge of the settlement agreements.
Pearson said in the report1 that while the petitioners argued that the settlements reduced the volume of wood bedroom furniture exported by China to the U.S. and offered financial support to the struggling industry, he did not find that to be the case.
The effects of the settlements on the volume of wooden bedroom furniture being imported by U.S. companies were unclear, a footnote to his comments said. He also said the settlement funds were not distributed to alleviate industry distress or help the industry as a whole.
Petitioners have argued that factories willingly enter into the agreements. They have previously stated that they wanted the settlement funds to cover the case's legal expenses.
The ITC said 20 U.S. producers reported receiving settlement funds. Since 2006, domestic producers said they'd received $13.3 million in funds distributed through settlement agreements, the ITC report said.
Twenty-four petitioners supported the original antidumping case, but the discrepancy in the numbers was not explained.
The total distributed or received could be greater. The ITC censored the portion of its report showing gross settlement going to amounts received by the American Furniture Manufacturers Committee for Legal Trade, whose counsel is King and Spalding.
The ITC sidestepped the legality of settlements by saying that its task was to assess what would happen if the antidumping order were revoked, and that it isn't mandated to investigate antitrust issues that may arise from the settlement payments.
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Why antidumping duties stand
Jan 7, 2011 -
Settlements emerging as issue in review
Nov 24, 2010 -
Settlement payments an issue in antidumping case
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