Pencil Anti Dumping Duties: Are Changes in the Air?

This post continues a series of Timberlines articles discussing the impact various world trade issues and practices have upon the Pencil Industry. In my previous Primer on Pencil Anti-Dumping duties I covered the basic aspects and issues involved with Anti-dumping duties here in the U.S. against Chinese pencils. As previously noted pencil imports to the US have steadily increased over the past 15 years despite the anti-dumping duties in place for the past 10 years.

So what’s new afoot in the world of US Pencil anti-dumping Vis a Vis China? In fact there are three main areas of current activity.

First, the U.S. Department of Commerce has just published the amended final results of its 8th review which covers pencil imports from China during the period from December 1, 2002 through November 30, 2003. Most notable in this review was the virtual elimination of anti-dumping duty on imports from China First Pencil Co., Ltd. & Shanghai Three Star Stationary Industry Corp. Previously these companies which share a common dumping margin rate had a 15.2 % dumping margin rate established during the 7th Review. The amended final result now drops this to 0.15%. Meanwhile, Shandong Rongxin Import & Export Co, Ltd. achieved a reduction from 27.87% to 22.63% and Orient International Holding Shanghai Foreign Trade Co., Ltd. has had their dumping margin. The China wide rate for other manufactures/exporters remained at 114.9%.

But is final, final? This result was quickly challenged by a group of US producers who have filed an appeal with the Court of International Trade. As China First and Shanghai Three Star together account for the largest Chinese production and importation of pencils to the US the virtual elimination of anti-dumping duties going forward on their pencils could have a significant impact on US imports. Of course, China First has been increasing export prices over the past few years and as such it’s calculated dumping margins might be expected to come down. Also recent decisions by the Chinese government to move towards floating the Yuan have resulted in a 2% revaluation along with other inflationary factors in the raw materials arena might indicate that at least some of the reduced dumping margins are likely to be offset by further export price increases on Chinese pencils as we look towards 2006 and beyond.

The second important development is that the Anti-Dumping Order against cased pencils from Peoples Republic of China is currently undergoing its 2nd 5 year Sunset review. This review is conducted by the US International Trade Commission (ITC) which originally put the duties in place ever five years to determine the continuing need or not for anti dumping duties. In the recent “Domestic Producers Response to Notification of Institution” of the review the US producers argue the following key effect of imports if the duty were to be revoked.
– material injury would recur if the dumping Order were revoked
– Price effect would be significant
– Post revocation import volumes would be significant
– Claims the domestic industry has contracted since the original order put in place and has become more vulnerable to material injury
– Claims the order has supported the decorator pencil segment as the decorator segment is higher cost pencils
– Revocation would lead to continuance or recurrence of material injury to the US industry within a foreseeable time

The Domestic Industry has asked for an expedited review. The deadline for comments by Chinese or other interests that would wish to see the pencil dumping duty revoked is September 13, 2005. Determination of full or expedited rule is expected by October 3, 2005.

The Final issue currently under consideration by the Department of Commerce for all anti-dumping orders regarding China is whether to change from current Non-Market Economy (NME) treatment on certain value of production factors to Market Economy status. This is essentially a determination of methodology used to value production inputs purchased from a market economy country. Currently, the DOC uses NME methodologies for all inputs on pencils produced in China whether the materials all come from China which is considered a NME or not. The Department now proposes to use market economy prices for all of the input if the existing tests for such use is met and if the majority of the input is purchased from a market economy country. Any comments are due by September 6th.

The next post in this series will cover key trade practices and policies in China that impact the pencil industry globally.