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Surrogate 3rd Country Data​: the Normal Value calculation

By January 6, 2022 No Comments

By Nikhita Pais, International Trade Law Associate

There is often debate whether China is a market or a non-market economy. While China wishes for its economy to be considered a market economy, it is sometimes difficult to assign it with this tag, given the country’s business conditions and the customary Government’s interaction in pricing determination.

Apart from the fact that producers and exporters in China may face a lot of State meddling, it was also observed that the Chinese government provides its producers and exporters with subsidies in some segments.

The trade war between the US and China is no hidden event and has resulted in both countries’ governments imposing high tariffs duties on the goods imported from each other. There are also instances when each of these nations has accused the other of ditching cheap products in their respective markets, leading to the imposition of steep antidumping duties.

In calculating the antidumping order to be imposed, it is essential to determine the product’s Normal Value and thereby determine its price in the exporter’s home country.

Given China’s particular situation, determining the normal price of the products considering China’s domestic market prices could be tricky and lead to an incorrect analysis in calculating the dumping margin. The practice adopted by many countries considers the “Normal Value” as the domestic prices in a third country, also known as a surrogate country.

It is also crucial that Chinese producers have the correct parameters to defend their interests and prove the absence of unfair trade practices, as the case may be.

The US International Trade Administration (ITA), vide the Memorandum dated August 2020, has designated a list of countries that qualify as surrogate economies to China, including Brazil, Malaysia, Mexico, Russia, Romania, and Turkey, as countries with free economies comparable to what could be occurring in China and, thus, suitable contexts for the normal value calculation.

However, obtaining data from these countries is no easy task and, most of the time, it requires a local presence with deep expertise and the knowledge necessary to map and extract the relevant data to determine the normal value.

Sidera Consult is an international trade strategy firm primarily based in Brazil, with offices spread across Latin America, South Africa, Israel, and the UK and unparalleled knowledge and experience of trade remedies in multiple jurisdictions.

While choosing the surrogate country is of the essence, especially given the stringent timelines to file contributions with the investigating authorities, it is vital to have someone ethical on board, familiar with the functioning of the pertinent markets, as well as the antidumping concepts and accepted methodologies.

Owing to the expertise we possess in international trade law and the relationship of mutual respect we have built with various authorities in assorted departments and ministries, obtaining the relevant data to determine the normal value can not only be feasible but rather a valuable tool for establishing the facts for either side of the table.

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