RECOMMENDATIONS OF THE WORKING GROUP

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85-01156R000100090001-7
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 83
• Document Creation Date: December 21, 2016
• Document Release Date: August 20, 2008
• Sequence Number: 1
• Publication Date: October 7, 1983
• Content Type: MEMO

STAT
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 ..^ Irrr u/11 ICG
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0 WASHINGTON W
CABINET AFFAIRS STAFFING MEMORANDUM
Date:
Subject:
OMB.
CIA
10/7/83
ALL CABINET MEMBERS
Vice President
State
Treasury
Defense
Attorney General
Interior
Agriculture
Commerce
Labor
HHS
HUD
Transportation
Energy
Education
Counsellor
Number: CM 379 Due By:
Trade Law Rev_i sion-Chi nP+-
GSA
EPA
OPM
UA
SBA
REMARKS:
CCCTIGunn
CCEA/Porter
CCFA/
CCHR/Carleson
CCLP/Uhlmann
CCMA/Bledsoe
CCNRE/
The Cabinet Council on Commerce and Trade will meet to discuss
Trade Law Revision on Wednesday,, October 12 at 8:45 AM in the
Roosevelt Room.
RETURN TO: ^ Craig L. Fuller ^ Katherine Anderson
L",
Assistant to the President ^ Tom Gibson
^ Don Clarey
Larry Herbolsheimer
for Cabinet Affairs Associate Director
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(,nnnr?i 1 nn ('nmmome ~?rl m--A-
Action... FYI
?r,^
CEA
CEQ
OSTP
Baker
Deaver
Clark
Darman (For WH Staffing)
NOW SuiH J
Jenkins.
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0
oW I UNWD STATES DEPARTMENT OF COMMERCE
1114C1'1101.IY1101 I1-au /'~Y11111RS N'04tNIt
'~ . Washington. D.C. 20230
MEMORANDUM FOR: The Cabinet Council on Commerce and Trade
FROM: Alan F. Holmer
Chairman, Working Group on Trade Law Revision
..SUBJECT: Recommendations of the Working Group
At its September 1'+ meeting, the Cabinet Council directed that a
working group be formed to develop recommended Administration
positions on (1) Congressman Gibbons' proposals to reform the
antidumping (AD) and countervailing-duty (CVD) laws (Tab A) and (2)
proposals developed by the Department of Commerce (Tab B).
As discussed on the following pages, the Working Group reached a
consensus recommendation with respect to each aspect of Congressman
Gibbons' proposals. It also developed consensus recommendations on
the proposals suggested by the apartment of Commerce. In general,
the Working Group supported proposals which would serve to promote
the aims of more efficient, more equitable, more predictable, and
less costly administration of the AD and CVD laws. The Working
Group also reviewed and approved a package of 45 technical
amendments-to the AD/CVD laws suggested by Commerce (Tab C).
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Gibbons Proposals
Each of Congressman Gibbons' proposals will be briefly described,
followed by the recommended position on that proposal. (Except as
noted, there was consensus in the Working Group on the recommended
Administration position). Starting on page 9, the additional
proposals presented by Commerce are discussed.
A. Trade Remed Assistance Office: This proposal would establish
an office within the International Trade Commission (ITC)
to answer inquiries on available trade remedies; and direct ITC
and Commerce to assist small business. petitioners in preparing
and filing petitions under the AD and CVD laws.
o Oppose. Commerce and ITC are sensitive to small business
concerns and already provide-much assistance to them.
o" The provision probably would be ineffective and very costly.
o However, the proposal has considerable support in the
Congress. Strong opposition probably is not advisable.
I. Targeting Monitoring Program: This proposal would require the
ITC to establish a program to monitor, analyze, and report -on ILLEGIB
whether foreign governments have planned or implemented
targeting programs.
o Oppose. This would duplicate a program already established
in 'Commerce.
o It would add significant burdens for our economic reporting
offices overseas.
o However, the proposal is likely have strong Congressional
support. Strong opposition probably is not advisable.
C. Inclusion of T~~argeti.ng Schemes Within Scope of CVD Law: This
proposal would ce ine as subsidies specie targeting practices
(such as protect-_~d home markets and loose antitrust standards)
and would make them actionable under the CVD law.
o Strong opposition. There is no domestic or international
consensus on what is targeting.
o CVD is the wrong law to address targeting because
quantification of any benefits provided would be exceedingly
arbitrary and therefore could be challenged in the GATT and
U.S. courts.
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o Many U.S. practices probably could be considered targeting by
foreign governments.
o Even if the Administration succeeds in convincing the Hill
that CVD is not the right law, it must be prepared either to
take the initiative or to react to Hill proposals for
responding to targeting practices under other U.S. trade laws.
D. Include U stream Subsidies in CVD Law: This proposal has two
poin s. The first would provide a the CVD law would apply to
any benefit bestowed on a product "upstream" from the product
under investigation (i.e., a part or component) if the benefit
is available only to specific industries or groups of industries
(i.e., is not generally available within the economy) and if the
benefit is passed through to and affects the price of the
product under investigation.
The second part of the proposal is intended to overturn the
standard used by the Commerce Department in the Mexican ammonia
case. It would consider as an upstream subsidy the sale by a
government of natural resources at regulated prices when foreign
purchasers were not allowed to purchase the resource at the same
low price. (Congressman Gillis Long, D.-La., has introduced the
same proposal).
o Support first part of proposal to the extent it codifies
current Commerce practice; oppose the second.
o The first part principally codifies existing Commerce
practice.
o The second part would radically alter the essence of the CVD
law, which counters distortions of resource allocations
within a cointry. (Thus, as long as the same price is
charged to all domestic purchasers, there is no subsidy).
o The U.S. would be vulnerable in areas such as regulated
natural gas if our trading partners adopt the same standard.
This could affect our textile and chemical industries'
exports.
o There is much dissatisfaction with the Commerce ammonia
decision and thus strong political pressure for change. On
the other hand, there is growing concern that the change, if
any, not affect petrochemical exports from Saudi Arabia.
o We need to explore whether there is some middle ground
between Gibbons proposal and the Commerce decision that is
acceptable to both the Administration and the Hill.
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E. Limited Prohibition of Downstream Dumping: This proposal would
expand the law to cover the sale at ess than fair value (or
below cost) of a part or component used to produce the
merchandise under investigation. (An example would be basic
steel products sold below cost to foreign fabricators who
exported their semi-finished steel products to the U.S.)'.
o Oppose. Where an international sale (one third country into
another) was involved -- e.g., Korean basic steel used by
Japanese fabricators -- such a provision would violate the
GATT.
-Even where the sale occurred within one country, an AD argon
against the exporter would not affect the party engaged 1:o
the unfair trade practice, the supplier of the input.
o In addition, it would be directed at foreign domestic
commerce rather than international trade, thus calling into
question the propriety of coverage by a trade remedy law.
F. Revision of Standards for Calculating Dumping from State-
a`on ro a Economies s The proposal wou create an
y artificial pricing test to replace the current standard of using
third country market surrogates in AD investigations of SCE
exporters. Dumping duties would be assessed to the extent-SCE
exports were cheaper than the lowest average price of competitive
products from market economies (including the U.S.). This is
the same proposal as introduced by Senator Heinz in S.1351.
o Support concept but urge additional thinking as to the injury
test and the appropriate pricing standard.
o Virtually all (including Commerce administrators) concede
that the current standard is arbitrary, costly, and very
difficult to administer.
o Gibbons/Heinz woul.d promote more certainty and would be less
costly and easier to administer.
o Last year the Administration supported the basic concept of
then-current version of the Heinz bill (S.958), though it
noted problems with particular provisions. This revised
version responds to several Administration concerns.
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o Despite the significant improvement over prior versions,
there still are areas where change is needed. In particular,
several agencies expressed major concern about the granting
of an injury test only to SCE's which were GATT members.
(They argued that it also should apply where required by
bilateral commitments). There also was some concern about
the level of the artificial pricing standard. Using the
lowest market price would permit inefficient SCE exporters to
dump with impunity down to the price of the most efficient
market competition; it also would preclude efficient SCE
exporters from pricing below less efficient market
competition.
o Administration efforts to reach consensL"s-on technical
details should continue at the staff level.
G. Improve Injury Standards:
1. Cumulation of Injury Determinations -- This proposal would
require the ITU to consider the combined injury effect from two
or more sources when the petitions were filed simultaneously.
o 0 ose cumulation being mandatory; su ort continuation ~f
1TL discretion. The appropriateness (or lack thereof) yr
cumu ation can only be judged on a case-by-case basis. -ITC
discretion is crucial.
2. ITC Consideration of Causal Link: This proposal would direct
the to consider the level of dumping or subsidization in its
determinations of whether a U.S. industry is being injured by
reason of the unfairly traded imports.
o Support. Where the import would undersell domestic
coition even if AD or CVD duties were imposed, one cannot
seriously argue that there is injury by reason of the imports.
3. Permit Findin of Injury Before Actual Im ortation: This
proposal would clari, y that an injury finding could be based on
sales (or offers for sale) for future delivery, rather than
having to await actual. importation.
o Support as to sales; suggest further study as to offers.
o The proposal is designed to ensure ability to act where (as
in the recent CVD proceeding on Railcars from Canada) sale
c-cur:, years before actual importation. Loss of the bid.
(sale to a foreign competitor) is the point at which injury
occurs in such cases.
o To avoid GATT inconsistency and a very protectionist measure,
support for coverage of offers should be withheld unless
language is narrowly drawn to include only bona fide,
.irrevocable offers.
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4. Criteria for Threat of Injury: The proposal would elaborate.
standards for threat of injury. The focus would be on assessing
the probability of imports causing-actual injury, based on
factors including the nature of the unfair trade practice and
likelihood of increased exports to the U.S. (Commerce proposed
an alternate change, based on forecasted price effects of
increased imports).
o Support principle of codifying and clarifying current
standards nd overturning limiting -Judicial decisions, but
oppose any extension in scope.
o There was wide agreement that expanding the scope of the
threat concept would- bey high-ly protectionist. -
o While agreeing in concept to the principle of codifying
current standards, there was-widespread agreement that
drafting of appropriate standards would be a difficult task.
o Administration efforts to reach consensus on technical
details should continue at the staff level.
5. Special Threat of Injury Standards for Targeting Cases: This
provision would specify special criteria- D determining threat
of injury in cases involving targeting subsidies.
o Oppose, based on recommended opposition to treatment of
targeting under CVD law.
H. Reform of Settlement Agreements: This proposal would eliminate
Commerce' s a ity to suspend CVD investigations on the
basis of an export tax imposed by the foreign country (in the
amount of, and to offset, the level of subsidization as
determined by Commerce), (2) to suspend CVD investigations on
the basis of quantitative restraints, and (3) to suspend AD
investigations on the basis of agreements to eliminate injurious
effect.
o Oppose. Commerce should maintain the ability to suspend on a
Mad variety of bases. Different situations call for
different responses.
o There is significant political opposition to continuing to
allow suspensions based on export taxes, principally because
of the feeling that lack of price increases on certain
suspended Brazilian cases proves that the U.S. Government
cannot ensure that export taxes actually are implemented and
not evaded.
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o The Administration should consider offering 'a fallback.
o There is no significant political opposition to continued
ability to use QR's as basis for suspension or to base AD
suspensions on elimination of injurious effect. (Chairman
Gibbons, however, strongly opposes use of QR's). Neither
basis has been used to date.
I. Procedural Improvements to Reduce Costs and Delay: -
1.' Shorter AD Timetables: This proposal would reduce AD time
limits those now applied to CVD investigations.
o Strongly oppose. The deadlines already are too short.
o Compressing the same work into shorter deadlines will
increase the potential for mistakes. This will lead to more
judicial review and therefore more cost -- the very opposite
of what Gibbons says he wants.
o We expect private sector support for our position.
2. Limit Extension Authoiity: This proposal would limit the
ability to extend inves Tgations and the length of extensions.
o Oppose. Complicated cases need to be extended; there is too
much data to gather and analyze within normal deadlines.
o There is strong support for limiting extensions, caused
principally by the large number of extensions granted by
Commerce in 1982 and early 1983.
o Extensions now are seldom granted.
3. Eliminate Interlocutory A eals: This provision would eliminate
interlocutory judicial review, concentrating it in one
proceeding at the end of the administrative process.
o Support. This would significantly reduce the cost of
prove dings. It wal first proposed by Commerce Under
Secretary Olmer.
Eliminate Presumption of Administrative Regularity: This
proposal would end a presumption that administrative
determinations in AD and CVD proceedings are presumed correct in
judicial review and the plaintiff must prove they were inc^rrect.
o Strongly oppose. The presumption of administrative
regularity applies to all agency decisions. There is no
reason to make AD and CVD determinations an exception.
o The concept of administrative regularity is fundamental to
.effective functioning of the administrative process.
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5. Provide Standards for Releasing Proprietary Information Under
Administrative Protective Orders tAFU'S): This proposal would
provide standards that would shorten a time it now takes to
process requests for release of proprietary business information
under an APO.
oS__uppp~ort. It would speed up the process of making critical
information available to representatives of interested
parties, thus making the process more fair. - This was first
proposed by Under Secretary Olmer.
Allow Sampling and Averaging: The proposal would allow Commerce
To -use sampling and averaging techniques in determining U.S.
price calculations in AD proceedings. (Currently sampling and
averaging are permissible only with respect to foreign market
transactions).
o Support. It would greatly improve admi ni strabi l i ty of the laws.
It is another proposal first made by Under Secretary Olmer.
7. Require Verification in Administrative Reviews: The proposal
wou require Commerce to verify information submitted by foreign
companies or governments in.all administrative review proceedings
wherever there is a significant issue of-law or fact or where
revocation is sought.
o Oppose. The significant issue standard is very imprecise and
certain to lead to argument and litigation.
o Commerce practice is to verify where there are controversial
issues, significant changes in methodology, or requests for
revocation. Currently, over 4,000 companies are under AD or
CVD orders. A stricter standard would create administrative
nightmares.
8. Preclude Offset Arrangements from Being Basis for Revocation:
o Oppose for reasons' expressed in response to proposal H on page
bi.Not allowing offsets like export taxes in revocations is
similar to not allowing them as basis for suspending an
investigation).
o Refusal to grant revocation based on an export tax almost
certainly would violate our GATT obligations.
9.? Standing for Labor-Industry Coalitions: This 1.ropusal would
overturn a court ecision and would a low coalitions of labor and
industry to file AD and CVD petitions (i.e., to have standing as
petitioners) where the coalition members were representative of
the greater part of the affected U.S. industry.
o Support. No valid purpose served by not allowing such groups
standing.
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J. Study of Adjustments in AD Proceedings: This provision would
require Commerce to prepare a study o current practices of making
adjustments to prices in AD cases and of recommended reforms to
those practices.
o Support. The idea was first proposed by Commerce. The area is
complex and is not amenable to easy solutions. Careful study
is preferable to piecemeal legislation.
Commerce Proposals A roved by Working Group (Those Not Also
AddresseE by Gibbons)
A. Simplify Administrative Reviews by Permitting Use of Sampling and
Averaging Techniques in Reviews: Commerce proposed perms ting
use of averaging and sampling techniques in administrative reviews
of AD orders. (This proposal is broader than the Gibbons proposal
discussed in section 1.6 above.)-. Currently, this is permissible
only during the pre-or.der investigative phase of the case. During
reviews, a dumping calculation. must be made for each entry and a
corresponding foreign market value must be calcuTad. (There can
be tens of thousands of transactions during a review period).
o Suggest addition. The small decline in accuracy would be
vastly outweighed by the reduced burden.
B.- Simplify Administrative Reviews by Permitting Assessment of CVD
13-5 ties on a Country-Wide Basis as Appropriate: Commerce proposed
that, countervailing duties be assessed on a country-wide basis; at
present rates often must be calculated for individual companies.
o Suggest addition in modified form. Justice dissents.
o Have a-presumption that rates will be calculated on a
country-wide basis but enable an exporter to establish
entitlement to-a company-specific rate where its rate was
significantly different from the average.
o Justice was concerned about the anti-competitive effect of
using country-wide rates.
C.. Enhance Coverage of CVD Law to Cover "Sham" Leases: Commerce
propose clarifying that e GVD law could be applied against
transactions which, although denominated as "leases," were in
substance sales.
o Suggest addition to cover "sham" leases. (Several agencies
noted that extreme care would be requi red to draft appropriate
statutory language).
o More study is necessary about whether the law should apply to
pure leases. The Administration should not propose coverage at
this time.
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D. Simultaneous AD and CVD Investigations: Commerce proposed that
where a petition er lied AD and V titions simultaneously, it
could elect to have the AD time limits apply to the CVD
proceeding. This would enable both cases to proceed
simultaneously throughout the investigation, thus eliminating
current complaints about the different deadlines.
o Suggest addition. (Approved without discussion).
E.. Pre-Revocation Classification as Inactive Case: Commerce
suggested that where exports of a product covered by an order
cease for a number of years, interested parties vo not exercise
their rights to comment on determinations or tce'.eguest hearings
for several years, or there are other indicia t:at the case has
ceased to be of interest to the U.S. industry, such proceedings
would be classified as inactive. Detailed administrative reviews
would cease to be conducted and unless the domestic industry came
forward with evidence that reinstatement of the order was
appropriate, the case would be revoked after two years in inactive
status.
o Suggest addition. This would save resources on cases of ?=ttle
continue interest. It also avoids the charge that orders =re
maintained longer than necessary.
F." Automatic ITC Injury Review: Commerce suggested consideration of
having the ITC conduct injury reviews automatically every five
years. The purpose would be to revoke orders where there no
longer was injury.
o Do not suggest addition, but instead sugest an amendment to
allow Commerce to petition the IT to begin a "changed
circumstances" injury review.
o There was general rejection of the suggestion as unduly
burdensome to the domestic industry.
o The alternate suggestion would give Commerce standing to as!:
the ITC to review whether injury was still being caused. The
ITC would retain its discretion on whether to conduct such a
review and, if conducted, whether injury still was being caused.
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G. Eliminate Minimum Values in Constructed Value AD Calculations:
Commerce suggested considering elimination of statutory minimum
values for general and administrative (G&A) expenses (10%) and
profit (8%) in AD calculations based on constructed value.
Instead, actual amounts should be used whenever available. (The
minimums could be retained for use where actual amounts were not
provided).
Suggest addition. The minimum values are inconsistent with the
GATT and have been a major and long-standing source of
international irritation.
o Because we have this provision that is-`widely viewed .
internationally as GATT inconsistent, J.S. ability to take the
high ground in. complaining abou-t the GATT inconsistent
practices of others is undercut.
They are very unfair to exporters and importers. They
artificially inflate (or create) dumping margins.
o Political opposition is likely to be intense because this
charge will reduce dumping margins in certain cases.
o Administrations have tried (so far without success) t
eliminate this provision in every major trade bill since 1958.
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Commerce Proposals Not Approved by Working Group
A. Implement Third-Country Dumping Provision of GATT AD Code:
Commerce . propose implementation of GATT Article 12 into U.S.
law to enable U.S. producers to allege that imports were being
dumped into a third-country market, thereby causing material
injury to the U.S. industry. The third country would be asked
to conduct an investigation of such allegations.
Do not suggest addition to Gibbons package. There was
general concern about overnment involvement and,
because of standing requirement in U.S. law, U.S. inability
to reciprocate and commence a similar-_-al tion here on behalf
of a third-country requester.
o The provision is unnecessary. The Administration could
always use section 301 as the vehicle for such an action.
B. Prospective Establishment of AD and CVD Duties: Commerce
suggested consideration of radically altering the AD and CVD
assessment process so that a rate established in an
administrative review would be assessed against entricZ until,
as the result of the next review, a new rate was set.
Currently, estimated duties are deposited upon entry and there
is a contingent liability for definitive duties that ultimately
will be assessed. Eighteen to twenty-four months later, an
administrative review covering that entry will be completed.
The definitive duty will be calculated. If the deposit was
less, the shortfall will be collected; if the deposit was more,
the excess will be refunded.
o Do not suggest addition. There was widespread feeling that
t e proposa needed to be studied in greater detail. Various
agencies expressed concerns about due process and potentially
excessive protective effects stemming from assessing at a
rate higher than that actually experienced; others stressed
vulnerability to continued dumping and subsidization ii.e.,
exporters and importers always being one step ahead of the
prospective rate).
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 DESCRIPTION OF POSSIBLE TRADE REMEDY BILL
Introdction
-- 3i11, would -make several reforms in our basic unfair-.-trade remedy
?a