On December 31, 2014, the Court of International Trade issued an opinion approving a Department of Commerce (Commerce) decision to abrogate antidumping (AD) duties on lightweight thermal paper imported from Germany by Papierfabrik August Koehler (Koehler).  The decision to abrogate the AD duties was based on Commerce’s acquiescence with a Court of International Trade decision issued in March 2014 (Papierfabrik I).  In the March decision, the Court ruled that in calculating the home market price Commerce could not disregard monthly rebates given by Koehler to customers in its’ home market of Germany.  As a result of accounting for the rebates, Koehler’s dumping margin was reduced from the initial margin of 3.77 percent to 0.03 percent, which qualifies as de minimis and thus does not implicate antidumping duties. 

However, the primary issue in the December 31, 2014 ruling was a contest to the adjustment by domestic petitioner Appvion Inc.  Appvion advanced two primary arguments: 1) Commerce improperly applied the Court’s order in Papierfabrik I by recognizing the monthly rebates as price adjustments  to home market sales. 2) Commerce improperly failed to consider whether Koehler applied the rebates for the sole purpose of manipulating its dumping margin.  The Court rejected both of these arguments and ruled in favor of Koehler.

At the center of the dispute is the proper definition and application of the term ‘price adjustment.’ Commerce has traditionally interpreted and applied the definition of ‘price adjustment’ to exclude price adjustments where the terms and conditions were not established and known to the customer at the time of sale. However, contrary to Commerce’s traditional definition, the Court ruled the customer’s knowledge of the price adjustment at the time of the sale is immaterial and the customer’s net outlay is the pertinent consideration.   The definition applied by the Court in this opinion and in Papierfabrik I  is “‘price adjustment’ means any change in the price charged for the subject merchandise or the foreign like product, such as discounts, rebates, and post-sale price adjustments, that are reflected in the purchaser’s net outlay.”

In response, Commerce has already commenced proceedings to modify the relevant regulations to conform to the definition traditionally applied by Commerce.  The proposed definition, which Commerce argued for in Papierfabrik I, states Commerce “will not consider a price adjustment that reduces or eliminates a dumping margin unless the party claiming such price adjustment demonstrates, to the satisfaction of the Department, through documentation that the terms and conditions of the adjustment were established and known to the customer at the time of sale.”  The comment period for this proposal ends January 30, 2015.

If you have questions about the Court of International Trade opinion or the proposed regulations please contact Frohsin & Barger at (205) 933-4006 ext. 5.