Tariffs by Fiat: The Widening Chasm between U.S. Antidumping Policy and the Rule of Law

Abstract

Constitutional scholars, lawyers, and policy analysts have long raised concerns about executive branch overreach on trade policy. The issue exploded into prominence in 2018 when President Trump authorized tariffs on imported steel and aluminum, which his Department of Commerce had identified as a national security threat under Section 232 of the Trade Act of 1962. The justification for the finding was widely perceived as frivolous, the tariffs as politically inspired, and the whole process as an abuse of executive power.

But long before the row over Section 232, Commerce was routinely abusing the vast discretion afforded to it while administering the anti-dumping law. Oddly, Commerce is given the role of judge, jury, and executioner, and it also acts as a consultant to the domestic industries filing petitions — the complainants seeking duties on imports. Dozens of remands per year from U.S. courts instructing Commerce to change its assumptions, methodologies, or calculations speak to a routine abuse of this discretion.

In 2015, in keeping with the tradition that legislation to liberalize trade be considered in conjunction with legislation to make the trade laws more accessible to domestic industry, Congress changed the antidumping law anticipating the passage of legislation to implement the Trans‐​Pacific Partnership (TPP). Although the partnership never came to fruition, the changes to the anti-dumping law went forward, giving Commerce carte blanche to exercise discretion in a number of areas while remaining beyond the reach of the courts.

Among the changes was a new provision authorizing Commerce to adjust or recalculate a foreign company’s submitted cost data if it determines that “a particular market situation exists such that the cost of materials and fabrication or other processing of any kind does not accurately reflect the cost of production in the ordinary course of trade.” Under such circumstances, “the administering authority may use another calculation methodology under this subtitle or any other calculation methodology.”

The changes authorized by the Trade Preferences Extension Act of 2015 gave Commerce much broader discretion to decide whether, when, and to what extent it could reject, revise, and recalculate a respondent’s submitted cost data. As a rule of thumb, higher production costs mean higher anti-dumping duty rates. Alas, this is a huge problem Congress must fix.

Keywords: Trade, Tpea, Trade Preferences Extension Act, Commerce, DoC, Department of Commerce, Tariffs, Trade Act of 1962, Trans-Pacific Partnership, Tpp

JEL Classification: F1, F10, F12, F13, F16