Editor: Please tell our readers about

your practice area.

Cannon: My practice focuses on trade
remedy actions, primarily antidumping and
countervailing duty cases. I represent U.S.
manufacturers and agricultural producers
having problems due to unfairly traded
imported goods. I generally practice before
the Commerce Department and the Inter-
national Trade Commission. Cases on
appeal are brought before the Court of
International Trade and the Court of
Appeals for the Federal Circuit. In addi-
tion, I work on international trade policy
issues with the U.S. Trade Representatives
ofce.
Editor: In recent years, there has been
an increase in trade actions against
China, in particular targeting imports of
wire products from China. In represent-
ing a number of U.S. wire products man-
ufacturers, you recently led trade rem-
edy actions against China. Is there some
reason for the increasing focus on China
and on wire products?
Cannon: Many Chinese industries have
experienced surging growth in the past
decade and are expanding their capacity
beyond what their home market can con-
sume. Chinese industries, such as the wire
decking industry, will target the U.S. mar-
ket for their excess production. In fact,
wire decking is produced in China almost
entirely for export, generally to the United
States. These sales occur at very low
prices, injuring competing U.S. producers
and giving rise to trade remedy cases.
Wire products, in particular, have
become increasingly the focus of these
cases because of recent changes in Chinese
tax policies. The Chinese government has
created tax incentives for its companies to
retain raw materials in China while
increasing the production and exportation
of value-added products such as wire deck-
ing, thereby causing injury to our compet-
ing domestic industries. That is why there
has been an increase in wire products
cases.
Editor: How do U.S. producers know
when a trade action is warranted? What
factors cause a company to consider
pursuing an antidumping or counter-
vailing duty case?
Cannon: A trade action should be consid-
ered when a U.S. manufacturer is experi-
encing some or all of the following prob-
lems: 1) lost sales due to lower-priced
imports; 2) an inability to increase prices to
cover costs due to the low-priced imports;
3) production cutbacks or unused capacity
due to sales being displaced; 4) layoffs of
workers; or 5) nancial declines due to
competition from lower-priced imports.
The question of dumping for China
generally involves showing that prices at
which a product is being sold in the U.S.
market are lower than what reasonable
costs should be to produce that product in
China. Because China is a non-market
economy country, dumping isnt based on
the actual costs in China because those are
considered to be articial. Instead it is
based on costs in what is called a surro-
gate country. Generally, India is the coun-
try that the agency
looks to as the surro-
gate.
Unfair trade alle-
gations also can be
based on evidence
that the government
of China is providing
subsidies to Chinese
producers. We have
developed a large
database identifying
many types of subsidies that the govern-
ment provides to different industries, and
we will review that depending on the spe-
cic product at issue.
Editor: If the trade action is successful,
what kind of relief is provided? What
effect does that relief have on imports
generally? How does a U.S. manufac-
turer benet from the trade remedy?
Cannon: If the trade action is successful,
the Commerce Department imposes
antidumping or countervailing duties on
imports of the product. The amount of the
duty is the margin of dumping or the mag-
nitude of the subsidies bestowed. The
result of the duty payment is generally an
increase in the import price, beneting
U.S. producers who had been forced to
compete with low-priced imports. The U.S.
importer is the party required to pay the
duty. The point of imposing the duties is to
offset the unfair trading practice, so the
duties are remedial and not punitive. The
whole idea is to restore a level playing eld
for the U.S. producers.
Editor: Allegations have been made that
Chinese producers have been attempt-
ing to circumvent duties that are
imposed as a result of trade action reme-
dies. Are you seeing that in your cases,
and what actions can be taken to address
the circumvention problem?
Cannon: We are seeing a disturbing trend
by Chinese producers who are attempting
to evade the imposition of these duties. As
soon as we led our trade action on PC
strand from China, we heard that the Chi-
nese producers were planning to circum-
vent the imposition of any duties through
the unlawful transshipment of products
that are manufactured in China via third
countries. Then they are repackaged and
labeled as a product of that third country
before being sent to the United States. We
are working actively with Customs and
Border Protection to address these circum-
vention schemes. Customs takes these
fraudulent activities seriously and has pun-
ished companies and individuals in the past
who engage in such schemes.
Editor: Is China generally complying
with its WTO obligations on trade?
Cannon: China is now at the table during
the WTO trade discussions and is engaged
in the dialogue on trade, so that is a good
thing. But China has not eliminated its
extensive subsidies. China complains
about subsidy cases led against its prac-
tices, despite agreeing in its protocol of
accession with the United States that the
U.S. could apply the countervailing duty
law to China. The Obama administration
has recently led a WTO challenge against
China for its export restraints on raw mate-
rials in violation of WTO obligations.
China continues to violate the WTO agree-
ment on intellectual property and other
issues as well.
Editor: What is the Obama administra-
tion doing to address some of the unfair
trade practices and policy concerns that
you have just identied, and what do
you think the administration should be
doing?
Cannon: To date, the Obama administra-
tion has been focusing on its export policy
and has not articulated a policy regarding
the enforcement of trade remedies. The
administration has set a goal of doubling
exports, but has said little about what steps
could be taken to strengthen the trade laws
to help U.S. manufacturers compete with
imports in the trade actions I have been
describing.
That has been a bit frustrating, particu-
larly given the increase in circumvention
activities that I have mentioned. When the
unfair imports displace sales by U.S. com-
panies, the companies go out of business
and the employees lose their jobs.
Editor: In other words, what you are
saying is that the administration is tak-
ing a proactive stance in terms of dis-
tributing U.S. goods throughout the
world, but they are not involved in min-
imizing unfair imports?
Cannon: Exactly. They are very active in
terms of saying we are going to try to take
actions that will get our goods exported
and into other countries, which is great.
But you have to also look at the ip side of
that coin, and that is an area that they really
havent seemed to address to date.
Editor: Are there actions other than
antidumping or countervailing duty
trade remedies that are available to
companies concerned with unfair trad-
ing practices or injury caused by
imports from China?
Cannon: The other major trade remedy
action available to address imports from
China is called a Section 421 action. That
type of action only requires an industry to
prove that it has been injured by imports
from China, not that the goods are unfairly
traded. Basically, it is designed to provide
quick relief to an industry that has suffered
injury due to a rapid surge in imports from
China. Relief can be provided in the form
of a temporary quota or some type of tariff.
A Section 421 action is subject to the
discretion of the President. For many
years, although the International Trade
Commission found merit with section 421
cases, President Bush refused to provide
relief. There were a string of cases in which
the ITC recommended relief, but the Presi-
dent would not provide it. The rst and
only Section 421 case led under the cur-
rent administration involved the import of
tires from China. In that case, President
Obama did provide relief for the rst time
in a Section 421 context. It is unclear,
though, whether Section 421 will continue
to be relied upon by very many other
industries because of the highly political
nature of the process.
Editor: Why do think that he did grant
relief in this one situation with tires?
Was there anything particularly unusual
about this case?
Cannon: The failure of President Bush to
grant relief under Section 421 had gotten a
lot of attention before President Obama
was elected, so this became a high-prole
The Art Of Managing Trade Remedy Cases Involving China
Page 24 The Metropolitan Corporate Counsel May 2010
The Editor interviews Kathleen W.
Cannon, Partner in the International
Trade and Customs Division of Kelley
Drye & Warren LLP.
case. President Obama stated before he
was elected that he would enforce the trade
laws, and he would look at providing relief
in a 421 case. The tires case was the rst
one that came along, so it was subject to a
lot of political scrutiny, particularly given
the involvement of the unions. People were
asking if the President was going to step up
and provide relief as he stated during the
campaign. He did, and then the question
became whether there was going to now be
a ood of Section 421 cases. To date, that
has not occurred, likely because the matter
is very political. Antidumping and subsidy
cases, on the other hand, do not involve
presidential discretion, so often those are a
preferred means of seeking relief from
imports.
Editor: The government of China has
become increasingly outspoken in
objecting to the U.S. imposition of trade
remedies against Chinese products. As a
practitioner involved in ling a number
of recent trade actions against China,
how do you respond to these objections?
Cannon: We led antidumping and coun-
tervailing duty actions when we found evi-
dence that China is engaging in unfair trade
practices that cause injury to U.S. produc-
ers and workers. Duties are only imposed
against China when the evidence indicates
that China is dumping or receiving unfair
subsidies and that the U.S. industry is
being injured by those unfairly traded
imports. The right to pursue such actions is
fully consistent with the international
agreements to which the U.S. and China
are parties. It is also important to recognize
that these duties are not punitive. They are
merely trying to level the playing eld for
U.S. companies, which is critical if we
want to preserve our manufacturing base.
Editor: Given the enormous investment
that China has in U.S. securities, is it
short-term thinking to ood our markets
and cripple our economic base?
Cannon: China is trying to promote its
own industries without necessarily consid-
ering the broader effects that this build-up
is going to have on the United States. On
the other hand, to put this in perspective,
trade remedy cases affect only a small per-
centage of U.S. trade with China. So, per-
haps that is a trade-off that is simply worth
it to China.
Editor: To what extent do the activities
of human rights activists or environmen-
talists impact the work that you do and
the policies that the United States has
developed toward China and trade?
Cannon: Human rights or environmental
policies are not specically considered as
part of these trade remedy laws. They are
not factors examined by the agencies in
determining whether to provide trade
remedies.
There are other means beyond the trade
remedies that can be used to deal with
those situations. One law, for example, pro-
vides a remedy against the importation of
goods produced by prison labor, but it has
not been used against China to date.
Human rights and environmental policies
are something that I think this administra-
tion considers when looking at the new free
trade agreements it is negotiating. It wants
to make sure that some of these other fac-
tors are taken into account.
Please email the interviewee at kcannon@kelleydrye.com with questions about this interview.
Kathleen W.
Cannon