As far as the number of sets sold, are you selling more sets each year that were produced and manufactured in Japan? Mr. TANAKA. I don't understand the question. Mr. JENKINS. I don't know what your figures are, but if you sold one-half a million sets in 1972, I am assuming that you were producing less than 60 percent domestically at that time. Mr. TANAKA. Certainly at the time the San Diego plant was established, we were a small factor, but with the increase in the production of the San Diego plant to the extent that the product output of that plant constitutes approximately 60 percent of our sales in the United States, clearly these sales have displaced our imports. Mr. JENKINS. They have displaced your imports? Mr. TANAKA. Certainly. Mr. JENKINS. Thank you for your testimony. The record will remain open until Thursday, October 6, for any additional statements any witness wishes to have made part of the record. Thank you. Mr. TANAKA. Thank you. Mr. JENKINS. The meeting stands adjourned. [Whereupon, at 5:25 p.m., the subcommittee adjourned, to reconvene subject to the call of the Chair.] [The following was submitted for the record:] STATEMENT OF ANDREW J. BIEMILLER, DIRECTOR OF LEGISLATION, AMERICAN FEDERATION OF LABOR AND CONGRESS OF INDUSTRIAL ORGANIZATIONS SUMMARY The failure to enforce U.S. antidumping law robs Americans of jobs and production. GAO found that even where dumping has been proved, Treasury lacks accurate statistics and information on the value of the imports and the penalties. Only 74 cases, involving an estimated $700 million in uncollected penalties are active despite imports of about $700 billion in the past decade. This shows that antidumping law is not a deterrent to injury. Even where injury has been proved, if the violator reduces prices in the home country, no penalty will be assessed. AFL-CIO urges the subcommittee to recommend action that effectively collects penalties from all violators. But the major problem of dumping for most injured workers and producers is that the determination of sales at less than fair value and the finding of injury-proof of dumping-is almost impossible. AFL-CIO has recommended improvement in the antidumping law: speedy determination, an effective interim deterrent, changing the burden of proof from the injured, government initiation of investigations. Two recent problems-dumping of steel and the changes in Treasury regulations on dumping by communist countries-show that much more effective action is needed. While revising antidumping laws will not solve trade problems, both the administration of current antidumping law and the law itself need to be improved. STATEMENT The AFL-CIO continues to support fair international trade. We therefore welcome this subcommittee's effort to learn precisely why the Treasury Department does not effectively enforce dumping duties even after the finding of dumping has taken place. The failure to enforce the U.S. dumping law makes the U.S. the receipient of the world's excess production. Such unfair trade robs Americans of jobs and production in contravention of existing law. Dumping means selling a product in the United States at less than fair value or less than the market price in the exporting country's market. When a United States industry is hurt by dumping of imports, the law directs the Treasury to put on a tariff to offset the unfair and illegal dumping price. Thus the injured U.S. industry must meet two tests-proof of dumping prices and proof of injury. Dumping is an illegal practice under the United States Antidumping Act of 1921, as amended, and international agreements. Out of the hundreds of billions of dollars of imports flooding into America in recent years, there were only 74 dumping findings in effect in the Treasury Department in August 1978, according to the September 5, 1978 GAO report prepared especially at the request of the Committee on Ways and Means. Some 74 industries had been able to go through the whole tedious procedure, pay the expenses and meet the requirements of law to prove both the unfair price and the injury to the U.S. industry. And even if the duties had been collected, with almost $700 billion worth of imports in the years in question, 1968-1977, the $700 million to $1 billion in duties would not deter much dumping or other injury. Neither the GAO nor the Treasury seems to know how much money is owed the U.S. government even on the 74 cases still "active." The rough estimate of $700 million owed as of June 1, 1978 is not a realistic figure. The GAO states that the actual assessment against the dumped merchandise "is apt to vary from the estimate considerably." Thus the actual collection and effective penalty amount to a haphazard affair-a game of chance for the foreign exporter and U.S. importer and a major loss for American workers and producers. The GAO1 found many reasons for lack of enforcement. Among these are: "Customs is 3 to 31⁄2 years behind in providing its district offices with the information needed to make comparisons to determine the actual dumping margin. "U.S. import statistics lumped together similar commodities in 16 cases so that the volume of the commodities subject to dumping cannot be isolated; while 3 of these showed increased imports, only 1 resulted in a finding of dumping. "In addition, the validity of import statistics appeared questionable.” There is not, therefore, even the pretense of enforcing the law on dumping. Even a fair count of the volume of imports-much less the value is not available to the U.S. government or the injured American producers. American workers do not find dumping a theoretical problem. The best known case to them is the black and white TV case. Ten years after the injury, the unfair trade practice has had no substantial remedy. The jobs are gone, and so is the American industry. In 1968, the case was brought up. The industry proved both sales at less than fair value and injury by 1971. It took three years to get a finding. Meanwhile, imports flooded in. From 1971 to 1978, most Japanese TV set shipments were subject to antidumping duties on a finding that the sets were sold in the United States at prices below those in Japan. No penalties were charged until 1978. In March of 1978, Treasury estimated the accumulated potential anti-dumping duties at $400 million. But actual penalties were charged on only $46 million-the assessment on shipments entering from 1971 until mid-1973. The Customs Service is now testifying to this subcommittee about whether their new method of assessment-which might exempt three Japanese set manufacturers will take care of the backlog of assessments after 1973 most expeditiously and legally. The government is reportedly in a dispute about whether to use the Japanese commodity tax to compute the home market value of Japanese sets. This could ease the backlog most rapidly. We urge this subcommittee to recommend action that effectively collects penalties against all violators. But this is not the only type of procedural problem in meeting an unfair trade practice. In some cases, after a finding of injury, all that the foreign exporter needs to do is to reduce his prices in the home market-and all will be forgiven. The product will not be considered dumped-because it is no longer sold at less than fair value in the United States. But the injury will have been proved; U.S. jobs and production sacrificed. 1 Report B-114898, Letter from Comptroller General of the U.S. to the Honorable Al Ullman, Chairman, Committee on Ways and Means, September 5, 1978. But the major problem of dumping for most injured workers and producers is that the determination of sales at less than fair value and the finding of injury-proof of dumping—is almost impossible. Three years of legal proceedings in the TV case are merely one example. The cost alone would stop most actions. The petitioner is asked to give proof of foreign prices when Treasury is peti tioned. For example, when the Iron Workers sought dumping action on imported fabricated steel in 1977, the Treasury would not pursue the case. No injured group of workers and few industries can afford trips abroad to gather information for government departments. Furthermore, anytime the foreign exporter "promises" to stop dumping, the U.S. agences find no injury. This has been shown in the Romanian sheet glass and the Romanian welt work shoe cases. In a slow-moving world with very little trade, such detailed concern about the needs of foreign exporters and the desires of U.S. importers may have made sense. But in the last part of the twentieth century, the United States cannot afford to let its industries go down while lawyers and bureaucrats haggle about pennies. In January 1978, the AFL-CIO therefore recommended specific actions to this subcommittee to improve the anti-dumping laws: (1) Speedy determinations of dumping; (2) an effective interim deterrent to stop the unfair practice; (3) changing the burden of proof from the injured; and (4) Government initiation of investigations. In the meantime, two urgent dumping problems have captured the attention of American labor: First, the dumping of steel which led to massive shutdowns and layoffs last year. In the third quarter of 1977, four major American steel producing facilities were permanently shut down. Thousands of steelworkers lost their jobs. The unions called for quotas. The Administration Task Force set up a system of "trigger pricing" for the anti-dumping laws-a kind of self-enforcing antidumping mechanism. No cases have been brought to a finding of injury under this system. But steel imports for the first seven months were 12.6 million tons, well above the 1977 level of 9.6 million tons-up 30.6 percent. Imports of basic steel from Japan for the first 7 months were down 13.9 percent, but imports from Europe were very high-59.9 percent higher in July 1978 than in July 1977. Fabricated steel has not been affected by the trigger price mechanism. Further layoffs and plant close downs in steel can occur if action is not forthcoming. It is clear from the procedural review before this subcommittee that the Treasury Department cannot or will not act expeditiously. A second urgent matter is the August 4, 1978 Treasury Regulation for valuing merchandise from state controlled economies. This would allow the same people who have been unable to assess dumping duties in ten years for black and white TV sets from market economies to make theoretical judgments about the proper dumping assessments in the non-market or communist countries. The Congress made a decision in Section 321(d) of the Trade Act of 1974, which sets forth the means of determining dumping values for imports from communist countries. Now, however, a new regulation would allow the Treasury Department "to take into account any advantages (and disadvantages) in its production abilities and allows the resources used to be valued in a market economy that is approximately comparable to the economy in which the goods are produced." The AFL-CIO has opposed the new regulations that weakens implementation of existing law. These new regulations are entirely theoretical and subjective. They would allow Treasury officials, who have been unable to assess dumping duties in market economies and to collect penalties expeditiously, to make their own subjective determinations of the comparable levels of development between countries and the costs of production in communist countries. The AFL-CIO letter on this regulation is attached. Imports of shoes, axles, glass, lightbulbs, suits, tractors, golf carts--and a host of other products-are now flooding in from state-controlled economies. They are the pay-back in production for the loans or technology transfer from the capitalist countries. This "pay-back" has a cost for the United States produetion system that cannot be ignored. We urge this subcommittee to use the knowledge it has gleaned from its examination of Treasury procedures to require a strict regulation of imports from nonmarket economies. As this statement indicated earlier, the AFL-CIO does not believe that merely tinkering with the nation's dumping laws will solve the trade problems of the United States. Nonetheless, a need for revision of the antidumping law to modernize both law and practice is clearly evident. There is, therefore, a need to improve both the administration and the antidumping law to make sure that, so far as possible, dumping, a predatory and unfair trade practice, is ended. Attention: Regulations and Legal Publications Division. Mr. ROBERT E. CHASEN, 1301 Constitution Avenue, FEBRUARY 22, 1978. DEAR MR. CHASEN: The AFL-CIO opposes Treasury's proposed changes in the regulations for enforcement of the Antidumping Act against imports of products from Communist countries. These changes, published in the Federal Register on January 9, 1978, would allow Treasury to set lower charges against imports dumped by Communist countries in the United States than those now required by law. The AFL-CIO recommends that this unfair proposed change be withdrawn. Dumping means selling a product in the United States at less than fair value or less than the market price in the exporting country's market. When a United States industry is hurt by dumping of imports, the law directs Treasury to put on a tariff to offset the unfair and illegal dumping price. Dumping is an illegal practice under the United States Antidumping Act of 1921, as amended, and international agreements. Communist countries have no equivalent of "fair market value" in a market pricing system, because their prices are set by government regulation. To determine dumping values, therefore, the Treasury established a practice of using prices charged for a similar product in a non-communist country where market prices exist. In section 321 (d) of the Trade Act of 1974, Congress made this practice part of the United States antidumping law. In 1976, Customs amended the regulation, 19 CFR Part 153.7, to conform with that law. Now Treasury seeks to modify that ruling and allow Treasury officials to construct the appropriate value abroad in one of three ways: First, actual sales price in a country with "comparable" economic development to the communist country. AFL-CIO opposes this because no realistic comparisons of economic development levels between market and non-market economies can be objectively established. Furthermore, a product can be dumped in the United States from an underdeveloped country. The level of economic development does not determine whether or not an unfair or illegal price is established. Second, if no "comparable country" exists which produces the product, Treasury could set up a "constructed value" based on costs of the product in a non-state controlled country. But that value could be "adjusted for differences in economic factors" to meet the "comparable" country standard. The AFL-CIO opposes this because it would call for non-objective determinations by Treasury. The price in a dumping case is a market price of a product— not a constructed or theoretical price. Third, if no "comparable country exists," Treasury can set up hypothetical costs for "constructed value" which then can be adjusted for differences on the basis of "specific objective components" or factors of production. "Such specific components or factors of production, including, but not limited to, hours of labor required, quantities of raw materials employed, and amount of energy consumed, will be obtained from the state controlled economy under consideration." Then the Secretary of the Treasury would be empowered to determine whether or not "verification" of these figures in the "state-controlled economy" meet his "satisfaction," and, if so, these would be "valued in a non-state-controlled economy determined to be comparable in economic development. . . ." (153.7(b) (2)) The AFL-CIO opposes this because it is non-objective and because it would set up an ever-larger bureaucracy to determine hypothetical information. Again, dumping is sale in a market economy and must relate to real market prices. Dumping is not a theoretical problem for American workers. It is a hard, unassailable, job destroying fact. Imports of glass, shoes, golf carts, bicycles, have been dumped at the expense of the United States workers. Now more sophisticated equipment such as aircraft engines, computer parts, etc., are coming in from com munist countries and costing United States jobs. Any regulation to reduce the penalties for illegal dumping of these products is against the best interests of the United States and a mockery of United States' law. The Treasury Department has not justified any change in the current regulation 153.7 and 153.27 which now conform with United States law. The AFL-CIO urges withdrawal of the proposed changes. STATEMENT OF THE AMERICAN IMPORTERS ASSOCIATION, INC. These comments are filed by the American Importers Association, a non-profit organization formed in 1921 to represent the common interests of the United States importing community. AIA is the only association of national scope not limited to specific commodities or product lines. As such it is the recognized spokesman for American companies engaged in the import trade. At present, AIA is composed of nearly 1,300 American firms directly or indirectly involved with the importation and distribution of goods produced outside the United States. Its membership includes importers, exporters, import agents, brokers, retailers, domestic manufacturers, customs brokers, attorneys, banks, steamship lines, insurance companies, and others connected with foreign trade. In many recent discussions of the problem of dumping and the Antidumping Act of 1921, as amended, strong feelings have served to foster many misunderstandings of the concepts underlying the Act and its administration by the Treasury Department. We would like to address briefly two points which we feel have been distorted or forgotten. First, that because the Antidumping Act is a preventive, not a penal statute, the size of the dumping margin established prior to Treasury's issuance of a dumping finding is intended to be a warning to the foreign exporter and the importer that price adjustments need to be made and should not be seen as an indication of the amount of dumping duties ultimately to be assessed on future importations. If importers are not to be allowed to take actions to reduce the margin on future importations, the Act will have served no purpose. Second, delay of assessment of dumping duties subjects the importer to enormous cost and uncertainties. The fundamental purpose of the Antidumping Act is preventive and remedial; it was not written to penalize past actions. As stated in the Senate Report on the Emergency Tariff Bill of 1921, which included the Antidumping Act of 1921: "It is believed that the dumping of merchandise into the United States can be prevented by imposing the dumping duty upon the merchandise. . . ." (emphasis added) 1 1 This conclusion is further supported by Jacob Viner in his treatise on dumping, wherein he states with respect to the disclosure requirement of the Antidumping Act of 1921 that: "it makes the measure a preventive rather than a penal one.. 1 Report of the Senate Committee on Finance on the Emergency Tariff Bill, Report No. 16, at p. 10. 2 Viner, Jacob Dumping, A Problem In International Trade Reprinted 1966, at p. 262. The Treasury Department has consistently adopted this view as is evidenced by the statement of Assistant Secretary of the Treasury MacDonald during hearings before this Committee in 1975 on Customs Administration and Valuation of Imports to the effect that "thestatute is not punitive, it is remedial." |