This is a guest post is from Zhiguo Yu, a former MOFCOM official and Georgetown Law graduate, and Sandeep Thomas Chandy, a Georgetown Law graduate.
On 17 July, China’s Ministry of Commerce (MOFCOM) released its preliminary ruling on the imposition of anti-dumping duties on imported n-propanol originating in the United States. As noted by Henry Gao in this blog, buried in this ruling is a finding by the MOFCOM that non-market conditions exist in the US energy and petrochemical sector. Although this is the first time MOFCOM is making such finding, it seems that MOFCOM has previously dealt with such an argument while investigating imports of styrene from the United States, but decided against making a finding. Oil, natural gas and electricity sectors were discussed in both rulings, but a petrochemical like ethylene was found affected by non-market conditions only in the recent ruling.
In this particular ruling, MOFCOM held non-market conditions to exist in the US “crude oil, natural gas, electricity, and coal, as well as their direct downstream industries, ethylene, hydrogen, and syngas”. The factors which led to this finding are (1) energy policy of the US government from the energy safety standpoint; (2) the stimulus effects in promoting the production of crude oil and natural gas of the relevant industrial policies by the US government; (3) the production of shale incentivized by the energy policies; (4) the market and price distortion by the longtime enforced policy of energy export control; (5) large amount subsidies received by the crude oil and natural gas industries from governments; (6) large amount subsidies received by the coal industry from governments; (7) price distortion in ethylene, hydrogen, and synthesized gas; (8) distorted price of electricity as a result of government subsidies; (9) the capacity of the respondent in maneuvering the prices of the subject products and the like products as well as that of ethylene; and (10) systemic distortion of the chemical market by longtime governmental financial aid.
There seems to be no particular legal reason for finding non-market conditions in this ruling, apart from maybe using the finding to establish the existence of a Particular Market Situation (PMS). However, there is no mention of PMS anywhere in the ruling. It may be the case that for a change China wanted to call the US a non-market economy. Despite the finding, the investigators have largely relied on Facts Available to determine dumping margins from 254.4% to 267.4%.
Another interesting point in this ruling is the timeline of events. Petitioners in Chinese AD investigations rarely bring additional claims after filing of the original claims. In this case, the additional claims relating to the non-market conditions were brought 5 months after the initiation of the investigation. Also, preliminary rulings are normally issued 6-8 months after initiation of the investigation. But in this case, the ruling was issued 12 months after the initiation. Since the Chinese AD Regulation requires a final ruling within 18 months (normally 12 months but may be extended to 18 months), the final ruling can be expected within 6 months.
