Wednesday, March 30, 2011

Last week the U.S. Department of Commerce (DOC) handed down the preliminary determination in its countervailing duty (CVD) investigation of engineered wood flooring from China. At least until November, products coming from about 127 Chinese engineered wood flooring manufacturers will be subject to a CVD rate of 27.01 percent—paid by the importer—upon entering U.S. customs. Yet, Jonathan Train—an importer and president of the Alliance for Free Choice and Jobs in Flooring (AFCJF), a group that opposes implementation of CVD rates—called the ruling "good news." Why is that?

By Train's math, only about 5 percent of wood flooring coming from China will be subject to a CVD rate of 27.01 percent. The other 95 percent of products will come from a pool of about 70 companies that were assigned a CVD rate of 2.25 percent or lower. So how did DOC arrive at their numbers?

In this case, DOC scrutinized quantity and value figures from about 70 Chinese manufacturers to determine whether the country's engineered wood flooring industry is subsidized by the government. It based most of its findings on information submitted by three "mandatory respondents," or the largest manufacturers by volume that sell product to U.S. importers.

Two of the mandatory respondents were found to have received no subsidies from the Chinese government, so they were given a CVD rate of zero; this means that when a U.S. importer purchases from this company, that importer will not pay any countervailing duties. The remaining mandatory respondent, and about 67 companies that also complied with the investigation, were given an "all others" CVD rate of 2.25 percent for allegedly receiving electricity and/or tax subsides from the government of China. "In the world of countervailing duties, 2.25 is … a fairly low number," explained Tom Trendl, an attorney whose client was assigned an "all others" rate.

The 127 companies that received a CVD rate of 27.01 percent were, in essence, punished by the DOC for not participating in the investigation, according to a DOC memo released the same day as the preliminary determination. "They may not have responded because they just didn't care about the market enough to go through this exercise," Trendl said. "They may not have responded because they just didn't understand the importance of putting in their response. Or they did not submit a full and complete response." Regardless, these companies basically turned their backs on the U.S. engineered wood flooring market, according to the AFCJF's Train.

Jeff Levin is counsel for the Coalition for American Hardwood Parity (CAHP), which petitioned DOC and International Trade Commission (ITC) to conduct the CVD investigation, along with an antidumping investigation. He views the DOC's most recent action a little differently. "The [CVD] investigation was not intended as the principal focus of the CAHP petition"; yet, it's an "important step forward" since all but two companies involved in the investigation will have countervailing duties assessed to their products when they arrive in the U.S.                       

(Edited from ww.hardwoodfloorsmag.com)