The Impact of the New Policy on Steel Export on Anti dumping

2021 08/25


1New Policy for Steel Export and Its Reasons

 

On August 1, 2021, the State Council raised the export tariffs on ferrochrome and high-purity pig iron products to 40% and 20% respectively, and canceled the export tax rebates for 23 types of steel products such as cold rolled and oriented silicon steel. As early as May 1, 2021, China had raised the export tariffs on products such as ferrosilicon, ferrochromium, and high-purity pig iron to 25%, 20%, and 15%, respectively, while canceling the export tax rebates for 146 types of steel products, including hot-rolled plates, tubes, and so on.

 

It is understood that the purpose of the two export tax policy adjustments is to reduce the export of semi-finished and finished steel products, in line with the policy of energy conservation and carbon reduction in the steel industry. Due to the fact that the steel industry is the industry with the largest carbon emissions in the manufacturing industry, in order to achieve the goals of "carbon peak" in 2030 and "carbon neutral" in 2060, the country has adjusted the export policies of some steel products, with the aim of compressing steel production and reducing exports. It can be inferred that if the future export volume remains high, further adjustment measures may be introduced in the future. The following will analyze the impact of this policy on anti-dumping investigations and provide preliminary strategic suggestions for enterprises.

 

2The Impact of the New Steel Export Policy on Foreign Anti dumping Investigations

 

The adjustment of export tax policies for various steel products will have the following impacts in the future anti-dumping investigations initiated by foreign countries against China.

 

First, the implementation of the new policy may increase export prices, thereby reducing the extent of damage.

 

The damage margin usually refers to the price difference between the export product in the importing country's market and the product produced domestically in the importing country. The higher the price of an export product, the lower the extent of damage; When the price of an exported product is equal to or higher than the local product price in the importing country, there is no harm and the importing country cannot take remedial measures. After export tariffs have been raised or export tax rebate policies have been cancelled, enterprises must increase the export price of their products if they want to make profits, objectively narrowing the price difference between Chinese products and domestic products of the importing country, and reducing the extent of damage. If the investigation authority of the importing country applies the low tax principle, when the damage margin is lower than the dumping margin, reducing the damage margin can lower the anti-dumping tax rate. However, since the low tax principle is not a mandatory requirement of the WTO, the investigating authority can determine the anti-dumping tax rate based on the dumping margin rather than the injury margin. In this case, the anti-dumping duty will not be correspondingly reduced due to the new policy reducing the damage margin.

 

Secondly, the implementation of the New Deal may increase the dumping margin.

 

The dumping margin refers to the extent to which the export price of a product is lower than its normal value. Generally speaking, the higher the export price, the lower the dumping margin. However, when calculating the dumping margin, the investigating authority usually compares the export price with the normal value at the factory price level, that is, after deducting various taxes, freight, and other sales expenses from the export price, then compares it with the normal value.

 

For the export tax refund policy, the investigating authority deducts the non deductible value-added tax from the export price, and then compares it with the normal value. With the export price unchanged, the lower the export tax rebate rate, the higher the non deductible value-added tax, and the lower the export price at the factory price level. Assuming that the export price before the export tax refund is 100 yuan, the normal value of the factory price level is 95 yuan. When the export tax rebate rate of the investigated product is 13%, the export price at the factory price level=the export price before the tax rebate - non deductible input tax=100-100 × (17% - 13%)=100-4=96 yuan. If the export price at the factory price level (96 yuan) is higher than the normal value (95 yuan), there is no dumping. After the export tax refund for the investigated product is cancelled, the export price at the factory price level=the export price before the tax refund - non deductible input tax=100-100 × 17%=100-17=83 yuan. The export price at the factory price level (83 yuan) is lower than the normal value (95 yuan), constituting dumping. Dumping margin=(price difference/export price) × 100=95-83)÷100 × 100=12%

 

For export tariff policies, when calculating the dumping margin, the investigating authority usually deducts the export tariff from the export price before comparing it with the normal value. With the export price unchanged, the higher the export tariff, the lower the export price at the factory price level. Assuming an export price of 100 yuan, the normal value of the factory price level is 95 yuan. When the export tariff of the investigated product is zero, the export price at the factory price level (100 yuan) is higher than the normal value (95 yuan), and there is no dumping. If the export tariff is 20%, the export price at the factory price level=price including tax × (1-Export Tariff Rate)=100 × 80%=80 yuan. The export price at the factory price level (80 yuan) is lower than the normal value (95 yuan), constituting dumping. Dumping margin=(price difference/export price) × 100=95-80)÷100 × 100=15%

 

The above calculation results indicate that after the implementation of the new policy on steel exports, if Chinese enterprises maintain their original export prices, it is easy to constitute dumping. On the other hand, even if an enterprise raises the export price of steel products in the future, if the price increase is lower than the increase in export tariffs or the cancellation of export tax rebates, it is still easy to draw a dumping investigation conclusion.

 

3Corporate coping strategies

 

The policy of increasing export tariffs and canceling export tax rebates introduced under the dual carbon target (i.e., achieving carbon peak by 2030 and carbon neutral by 2060) will have a profound impact on the steel industry, especially export enterprises. In this case, relevant enterprises can adopt the following strategies to maintain a certain export share.

 

Firstly, actively responding to lawsuits in anti-dumping investigations and striving for price commitments can avoid being subject to high anti-dumping duties. Price commitment refers to the commitment made by the exporter to the investigating authority in the anti-dumping investigation that the future export of related products will not fall below the minimum price. If the investigation agency accepts the price commitment proposed by the enterprise, the enterprise can obtain exemption from anti-dumping duties. The prerequisite for securing price commitments is for enterprises to actively respond to lawsuits, participate in the non damaging defense organized by industry associations while conducting dumping defenses, and establish effective communication channels with the investigation authorities. For example, in the 2015 anti-dumping investigation of oil well pipes by the Eurasian Economic Union and the 2019 anti-dumping investigation of galvanized steel plates, Gaopeng Law Firm, on behalf of the China Iron and Steel Industry Association, conducted a harmless defense to help several leading enterprises secure price commitments that were exempted from anti-dumping duties to a certain extent, preserving the export market.

 

Secondly, optimizing the structure of export products, improving the technical content of products, and exporting high value-added products can maintain the original profit level. According to the carbon reduction action plan of the steel industry, exporting low-end steel products is equivalent to exporting resources and energy in disguised form, not only consuming limited energy, but also leaving pollutants and carbon dioxide emissions to the local production enterprises. To this end, the steel export adjustment policies introduced twice this year aim to reduce the export of low-end products and encourage the export of high value-added and high-tech products. In this situation, enterprises can maintain their original profit level only by increasing export prices and exporting high-end products that are scarce in overseas markets. At the same time, they can effectively reduce the dumping margin and damage margin in anti-dumping investigations, and avoid severe anti-dumping measures.

 

In addition, China can use WTO rules to crack down on unfair trade practices by foreign enterprises. The transformation and adjustment policy of the steel industry under the dual carbon goal requires reducing production and exports, which will reduce the development speed of the entire industry for a certain period of time. In this case, if it can be proved that: (1) foreign enterprises dump at low prices, receive a large amount of government subsidies, or export a large amount to China in the short term, and (2) the aforementioned actions have a negative impact on the development of our domestic industry, relevant enterprises can consider initiating anti-dumping, countervailing, or safeguard investigations to safeguard the legitimate rights and interests of the domestic industry.

 

conclusion

 

Overall, the steel product adjustment policies introduced twice this year have posed significant challenges to export producers. In the long run, enterprises need to optimize their export structure and increase export prices in order to maintain their original profits and achieve sustainable development. In addition, in the future anti-dumping investigations initiated by foreign countries against China, if enterprises can secure price commitments, they can also obtain exemption from anti-dumping duties within a certain range, and maintain part of their export share.

 

[1] Announcement of the State Council Tariff Commission on Further Adjusting the Export Tariff of Iron and Steel Products (No. 6, 2021)

 

[2] Announcement No. 25 of the Ministry of Finance and the State Administration of Taxation on the Cancellation of Export Tax Rebates for Steel Products (2021)

 

[3] "Announcement of the State Council Tariff and Tariff Commission on Adjusting the Tariff of Certain Iron and Steel Products" (No. 4, 2021)

 

[4] Announcement No. 16 of 2021 of the Ministry of Finance and the State Administration of Taxation on the Cancellation of Export Tax Rebates for Some Iron and Steel Products

 

[5] Research Center of SASAC, "Development Situation and Suggestions for the Steel Industry under the" Double Carbon Goal ", August 2, 2021, from:

 

https://info.lgmi.com/html/202108/02/9735.htm

 

[6] Article 9 (1) of the WTO Anti dumping Agreement stipulates that if a lower tax rate (lower than the dumping margin) is sufficient to eliminate harm to the domestic industry, then the investigation agency may levy a lower tax.

 

(This article is translated by software translator for reference only.)