ITC explains its dumping decision

WASHINGTON – The International Trade Commission has released a 180-page report detailing its ruling in early February that dumping by Japanese outboard engine manufacturers had not caused injury to domestic manufacturers.

Although the ITC report – which can be downloaded by going to the ITC Web site, then scrolling down to the “OUTBOARD ENGINES FROM JAPAN” heading – has much of its relevant information expunged due to concerns about confidentiality, the document does explain why the six ITC Commissioners ruled as they did in their 4-2 decision.

The four commissioners, who ruled that dumping by Japanese outboard manufacturers had not injured domestic manufacturers, issued a majority opinion in the report in which they outlined some of their findings in the case. Some of those findings included:

  • “Japanese producers had more extensive four-stroke engine offerings than the U.S. producers over most of the period of investigation. As the market moved toward cleaner engines, U.S. producers, which dominated the two-stroke sector, were able to increase their shipments of two-stroke direct injection engines during the period of investigation.
    Not only was the increase in subject import market share concentrated in products not made domestically (four-stroke engines above 115 horsepower), but the domestic producers themselves were responsible for a large share of the increase … U.S. producers’ imports of subject merchandise accounted for virtually all of the increase in subject imports’ market share over the period of investigation … In sum, we find that certain market factors mitigate the significance of the volume and market share of subject imports during the period of investigation, particularly the increases in volume and market share.
    The domestic industry, in order to be able to offer four-stroke products which it did not produce, imported an increasing volume of subject imports and accounted for the entire increase in subject imports’ market share over the full years of the period of investigation. The market share gains by subject imports over the period appear to reflect in large part movement in the outboard engine market in favor of the types of engines made in Japan (four-stroke engines above 115 horsepower) but not, until recently, in the United States.”
  • ”Based on the record evidence, we find that subject imports undersold the domestic like product, more often than not, but did not depress or suppress domestic prices to a significant degree.
    Of the 180 price comparisons, subject imports undersold the domestic product in 63 percent of these comparisons. This percentage suggests that there was mixed underselling and overselling. However, we further find that the effect of any underselling on domestic prices was reduced by other factors. There generally is no correlation between underselling and price trends.
    Rather than import competition, the price trends may reflect other market dynamics. For example, consistent with the growing demand for four-stroke engines, domestic prices for four-stroke engines to OEMs did not decrease in the same manner as prices for two-stroke engines to OEMs. Also, in contrast to the pricing data that show mostly underselling, the majority of purchasers reported that the U.S. product was lower-priced than subject imports.
    We note that BRP aggressively priced its engines to recapture OMC’s market share. BRP had the *** in the market, and this placed some downward pressure on domestic prices. Further, the use of engine packages encompassing engines in a broad spectrum of horsepower and technologies in long-term contracts, reduces the significance of underselling shown in quarterly pricing comparisons of individual engines of specific horsepower and technology.”
  • ”We find that subject imports did not have a significant adverse impact on the domestic industry’s performance. There is no correlation between increased subject imports, underselling and any declines in the financial performance of the domestic industry.
    Although subject import volume has increased, the volume of subject imports in the U.S. market is mitigated by the limited capabilities of U.S. producers vis-a-vis Japanese producers to serve the growing four-stroke portion of the market during most of the period of investigation, and the U.S. producers’ own increased volume of subject imports over the period of investigation to enable them to broaden their product offering. Despite some underselling by subject imports, we have found no adverse price effects, and the condition of the domestic industry has improved in terms of increased production, shipments, sales, and gross profit.
    The domestic industry continues to operate at a loss, but that is due to increased selling, general and administrative costs that are being incurred by the domestic industry to develop four-stroke and other “clean” engine technologies.”
  • “In light of our finding that the domestic industry has had a somewhat limited ability to serve the market for four-stroke engines, the lack of significant adverse price effects, the lack of any significant correlation between subject imports and any financial performance declines, and positive trends with respect to the domestic industry’s sales, shipments, production and gross profit during the period of investigation, we do not find that subject imports have had a significant adverse impact on the domestic industry.”
  • Dissenting opinion
    Chairman Stephen Koplan and commissioner Charlotte R. Lane, the two ITC commissioners who found that dumping practices had harmed the domestic industry, issued a dissenting opinion in which they outlined their views.

    “While we join the Commission’s discussion of, and conclusions regarding, the legal standards in general and the definition of the like product and domestic industry, we write separately in order to set forth our analysis of conditions of competition in this market and material injury,” they wrote.

    Among their findings:

  • ”Based on the record in this investigation, we find that the volume of subject imports was large and increased significantly during the period examined, both in absolute terms and relative to production and consumption in the United States.
    Measured by value, the volume of U.S. shipments of subject imports (outboard engines and powerheads) increased from $535 million in 2001 to $745 million in 2002, and to $785 million in 2003. The increase between 2001 and 2003 was 46.7 percent. The value of U.S. shipments of subject imports was 12.7 percent higher in interim 2004 than in interim 2003.
    By quantity, U.S. shipments of subject imports also increased, from 151,989 units in 2001 to 190,443 units in 2002 and to 197,807 units in 2003. This resulted in an increase during 2001-03 of 30.1 percent. The quantity of U.S. subject import shipments in interim 2004 was 2.1 percent lower than in interim 2003.”
  • ”Overall, we believe that the pricing data show that underselling resulted in U.S. price reductions in order to compete against subject imports from Japan, and the overall downward trend in prices over the period examined in the OEM market, which is the largest market for domestic sales; and the trend for prices to increase in all markets after filing of the petition, indicate that there has been some degree of price depression.
    The data show that the domestic industry has not raised its prices by amounts sufficient to cover cost increases and meaningfully reduce its *** net operating losses … The domestic industry is clearly unable to raise its prices either to cover its cost increases or to make any significant movement toward profitability.
    While the record is mixed on the issue of price depression, the pricing information considered in conjunction with the profit sq

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