A US trade-law judge has ruled that the Commerce Department made several errors when it imposed anti-dumping tariffs on imports of Chinese photographic paper in 2010 and must reassess the duties.

The errors included ignoring a rule on "targeted dumping" that the department should have been enforcing at the time, Judge R. Kenton Musgrave of the US Court of International Trade said in his ruling this week.

US law defines targeted dumping as a practice in which an exporting company "dumps", or sells its products at below cost, in a particular region of the United States or during specific time periods.

Two Chinese makers of coated photo paper, and a California company that outsourced to them, sued the Commerce Department, claiming the duties were based in part on flawed assessments of State subsidies to the Chinese operations. The Chinese companies are Ningbo Zhonghua Paper Industry Co, a subsidiary of Indonesia's Asia Pulp & Paper Group, and Gold East Paper (Jiangsu) Co; both are based in the eastern province of Zhejiang. Global Paper Solutions of Anaheim, California, sourced its products from the other two firms.

After an investigation, the department's International Trade Commission voted 6-0 in November 2010 to impose duties ranging from 7.6 percent to 136 percent on coated free sheet paper and paperboard, which are used in printing and graphics.

Musgrave found other problems with the Commerce Department investigation, such as how the Chinese companies' manufacturing inputs were valued, thus establishing rates for the so-called anti-dumping and countervailing duties. Department officials erred, the judge said, in calculating duties when less than 33 percent of a Chinese manufacturer's total raw-material input costs were at "market economy" (non-subsidized) prices.

"That Commerce improvidently enacted rules without adequate experience of how they would work, that the rules apply to ongoing investigations, and the rules could deny relief to domestic industries, do not rise to the level required for it to avoid the [law's] requirements," the judge wrote. "Indeed, those justifications could apply to almost any rule promulgated by the agency."

The judge homed in on what he said were improper calculations of targeted dumping. It's an alternative the US has used to replace the controversial trade remedy of "zeroing", in which non-dumped sales aren't allowed to offset dumping.

"The duties are still being imposed, but what we hope to happen is that now that the case is going back to Commerce, our anticipation is that [the duties] will go to zero," said Daniel Porter, a lawyer in Washington for Curtis, Mallet-Prevost, Colt & Mosle LLP, who is representing the Chinese companies in their lawsuit.

Porter told China Daily that the finding against targeted dumping is significant because it could affect the outcome of other anti-dumping cases. He has written a law review article critical of the measure because it can produce even higher duties than zeroing, which has been banned by the World Trade Organization.

The ITC investigation was prompted by complaints filed in September 2009 by three US paper companies - Appleton Coated LLC, NewPage Corp and Sappi Fine Paper North America - that subsidized imports of coated paper from China and Indonesia had caused material harm.

Appleton Coated declined to comment on the ruling.

josephboris@chinadailyusa.com

(China Daily USA 06/20/2013 page2)