warehouse, for consumption, on and after the date 120 days
before the question of dumping was raised by or presented
to the Secretary or any person to whom authority under
section 201 has been delegated, and as to which no appraise-
ment has been made before such finding has been so made
public, if the purchase price or the exporter's sales price
is less than the foreign market value (or, in the absence
of such value, than the constructed value), there shall be
levied, collected, and paid, in addition to any other duties
imposed thereon by law, a special dumping duty in an amount
equal to such difference.
CRITIQUE OF A RECENT DETERMINATION BY THE TREASURY
DEPARTMENT THAT EXPORT SALES AT LESS THAN THE COST
OF PRODUCTION ARE NOT NECESSARILY LESS THAN FAIR VALUE
There is an additional substantive problem in the administra-
tion of the Antidumping Act which urgently requires correction. The
Treasury Department has concluded that it will not adopt as a matter
of policy an interpretation of the Act which regards sales for export
to the United States at prices which are below the cost of production
of the merchandise as necessarily being below fair value. The Department
reached this conclusion in the context of a study of cases involving
the importation of sulphur from Canada and of papermaking machinery from
Finland. In these cases, data available to the Department indicated that
the merchandise exported to the United States was sold at a price which
was in fact below fully developed costs of producing the merchandise
and necessarily, therefore, below the constructed value of the merchandise
as defined in section 206 of the Antidumping Act.
In those cases, however, the Treasury Department was evidently
Second, Mr. Stewart criticized the Treasury for a
recent decision, announced on April 23, 1973 (38 F.R. 1026)
that in making fair value determinations under the
Antidumping Act, sales of foreign merchandise in the home
market or for exportation to third countries which are at
prices less than the cost of producing the merchandise will
not be disregarded in determining fair value simply because
they are made at less than cost of production. Pursuant
to a Federal Register notice raising this question, which
was published nearly a year earlier, Treasury received many
comments from interested persons and deliberated carefully
before reaching its conclusion.
Since Treasury has considerable discretion under the
Act in determining fair value (as opposed to the general
absence of discretion in determining foreign market value
for purposes of the actual assessment of dumping duties)
it could have been decided to disregard sales at less than
persuaded that similar merchandise was sold in the country of production
The Department decided to follow the simplistic notion that
fair value is always and everywhere equal to the home market price when
sales have been made in the home market, whether or not that price is
inherently unfair as shown by the fact that it is less than the fully
developed cost of producing the merchandise in question.
It ought to be abundantly clear that regardless of any special
circumstances that may apply in a foreign producer's home market, if he
sells merchandise to the United States at prices which are below the
cost of producing that merchandise, such sales are in fact below the
fair value of the merchandise. Under our economic system it is inherently
impossible for any producer to continue to make sales below cost of
production. Hence, as a rule, prices which are below the cost of production
cannot be regarded as representing the fair value of the merchandise,
cost for purposes of determining fair value, and resort
instead to the constructed value of the merchandise as defined
in section 206 of the Act (19 U.S.c. 165). Following
consistent policy, however, the Treasury determined that
it would be unwise to adopt a method of comparison, for
fair value purposes, which could result in determinations
of sales at less than fair value in situations where, under
the statutory standards, there would be no legal
authority to assess dumping duties. The Antidumping Act
as currently phrased, does not permit sales at less than
cost of production to be disregarded in determining foreign
market value solely because such sale prices were below
cost. And, if foreign market value can be found, there is
no authority under the Antidumping Act to assess dumping
duties unless sales prices to the United States are less
than such value. This does not mean that below cost
sales will automatically be taken into account, however.
Section 205 of the Act (19 U.S.C. 164) sets forth certain
since the latter term would contemplate the value of the goods produced
in the ordinary course of trade and sold at prices which recover all
costs including an addition for overhead plus an addition for profit.
Because the Department has backed away from an intention which
it once tentatively held to amend its regulations so as to make clear
that export prices which are below the cost of production would, per se,
be regarded as being at less than fair value, it is necessary that this
matter be corrected by the Congress. It can be done by amending Sec-
tion 201(a) of the statute by adding a sentence to the end of subsection (a)
as follows:
"Foreign merchandise shall be regarded as being or likely
to be sold in the United States or elsewhere at less than
its fair value if the price at the time of exportation of
such merchandise to the United States is less than the con-
structed value of the merchandise as defined in section 206
of this Act."
standards which any sales in question must meet in order
to be used in determining foreign market value. Among
other criteria, such sales must be in the "ordinary course
of trade" and not intended to create a "fictitious market.
In many instances, sales at less than cost of production
would be in other than the ordinary course of trade or
might, in certain circumstances, be designed to create a
fictitious market for purposes of avoiding the Antidumping
In the absence of meeting statutory requirements such
as these, Treasury
feels it is obligated under the law, as currently
phrased, to take into account below cost sales for
purposes of making the necessary comparisons under the Act.
The Treasury has not, as Mr. Stewart alleged, "backed
away from an intention to amend its regulations so as to
make clear that" merchandise sold to the United States at
less than cost of production is, per se, sold at less than
Treasury recognized that a valid issue
existed as to whether below cost sales in the home market
or to the third countries must be disregarded, under the
law, gave public notice of this pending issue, received
comments, and deliberated carefully before making its
decision.
The Administration believes it would be unwise to
amend the statute, as Mr. Stewart suggests, so as to require
that any below cost sales to the United States be
considered at less than fair value. Situations exist in
which below cost sales are normally made in all markets by
all manufacturers, foreign or domestic. For example,
manufacturers may typically sell damaged or "second"
merchandise, obsolete or year-end models, or highly
perishable merchandise at prices less than their fully
allocated cost of production for limited periods of time.
The Administration believes that selling practices such
as these with regard to particular types of merchandise
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