As per this order of the USITC, the non-consideration of certain factors while making a business plan were used as a reason for rejecting the Domestic industry’s claim of material retardation. It was basically held that due to the non-consideration of certain factors, the intended advantage was not achieved, hence the domestic producers were not at any disadvantage leading to material retardation. The order said the following with respect to material retardation and projected performance report – “In examining the question of material retardation, the commission determines whether the performance of the domestic industry reflects merely the normal start-up conditions of a company entering an admittedly difficult market or whether the performance is worse than what could reasonably be expected and is therefore evidence of material retardation2”. “Petitioner’s business plan, calling for the capture of the entire independent market for the ERMT within three years of initial production, failed to take into account the lack of an extensive, national distribution network that is necessary to compete on a national level with Canon and other independent suppliers. Based upon this information, we cannot conclude that the domestic producers are performing worse than could be reasonably expected. In fact the opposite is true. Thus, we conclude that there is no reasonable indication that the domestic industry ins materially retarded”3.
2. REFILLABLE STAINLESS-STEEL KEGS FROM MEXICO4
In antidumping and countervailing duty investigations, the statute provides that as an alternative to material injury and threat of material injury determinations, the Commission may make a determination concerning whether “the establishment of an industry in the United States is materially retarded” by reason of subject imports. The Commission has previously found that material retardation and material injury/threat forms of injury are mutually exclusive standards, whereby a determination concerning whether the domestic industry is materially retarded is appropriate only when the Commission finds that the domestic industry is not yet established. If a domestic industry is found to be established, however, then it no longer qualifies as a “nascent” industry, and the analysis instead turns on the issues of material injury or threat thereof5.
THE USITC considers following factors while determining Material Retardation 6 –
a) The length of Domestic Production Operations 1 *pub1960.pdf (usitc.gov) 2 Page 10, *pub1960.pdf (usitc.gov) 3 Page 11, *pub1960.pdf (usitc.gov) 4 pub4976.pdf (pkrllp.com) 5 Page 8, pub4976.pdf (pkrllp.com) 6 Page 13, pub4976.pdf (pkrllp.com) b) Nature of Domestic Productions c) The Size of Domestic Operations d) Whether the proposed Domestic Industry has reached a Reasonable Financial “Break- even” point e) Whether the Start-Up Production Is More in the Nature of the Introduction of a New Product Line by an Already Established Business Under the “Whether the proposed Domestic Industry has reached a Reasonable Financial “Break-even” point” head, the USITC has analysed considered the projections, which states as follows – “American Keg provided financial projections from February 2016 that estimated the firm’s likely financial results based on different levels of production by keg type, and these projections estimated that it would need to produce *** units per year to generate a modest gross profit, or to produce *** units per year to recover both cost of goods sold (“COGS”) and selling, general, and administrative expenses (“SG&A”). Similarly, based on American Keg’s 2018 actual product mix and corresponding variable and fixed costs as a baseline, with adjustments to reflect higher production volume, the firm estimated it would need a sales volume of *** units to break even. Because neither American Keg’s production nor sales ever approached these levels, the record indicates that it has not achieved a reasonable break-even point by 2019, and this factor accordingly supports finding that the domestic industry is not established7.” A similar approach was adopted in the USTIC case of Laminated Woven Sacks from China8