a

GAO

United States Government Accountability Office

Report to Congressional Committees

January 2006 U.S.-CHINA TRADE

Eliminating 

Nonmarket Economy 

Methodology Would 

Lower Antidumping 

Duties for Some 

Chinese Companies

GAO-06-231

The Web version of this report was reposted on April 21, 2006, to provide a Web 

link to the data that GAO collected on U.S. antidumping and countervailing duty 

investigations. To access these data, click on the following link:

www.gao.gov/cgi-bin/getrpt?GAO-06-652SP. This link can also be found 

in the Highlights page and on page 36.
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

January 2006

U.S.-CHINA TRADE

Eliminating Nonmarket Economy 

Methodology Would Lower Antidumping 

Duties for Some Chinese Companies 

Highlights of GAO-06-231, a report to 

congressional committees 

U.S. companies adversely affected 

by unfair imports may seek a 

number of relief measures,

including antidumping (AD) duties.

The Department of Commerce 

(Commerce) classifies China as a 

nonmarket economy (NME) and 

uses a special methodology that is 

commonly believed to produce AD

duty rates that are higher than

those applied to market economies.

Commerce may stop applying its 

NME methodology if it finds that 

China warrants designation as a

market economy. 

In light of increased concern about 

China’s trade practices, the 

conference report on fiscal year

2004 appropriations requested that

GAO review efforts by U.S. 

government agencies responsible 

for ensuring free and fair trade with

that country. In this report, the last 

in a series, GAO (1) explains the

NME methodology, (2) analyzes AD

duties applied to China and 

compares them with duties applied 

to market economies, and (3)

explains circumstances in which

the United States would stop 

applying its NME methodology to 

China and evaluates the potential

impact of such a step. 

Commerce agreed with our

findings, commenting that our 

report provides timely and helpful 

information on the NME

methodology and its application to 

China. 

Commerce’s methodology for calculating AD duties on nonmarket economy 

products differs from its market economy approach in that (1) since NME 

prices are unreliable, it uses price information from surrogate countries, like 

India, to construct the value of the imported products and (2) it limits 

eligibility for individual rates to companies that show their export activities 

are not subject to government control. Companies that do not meet the 

criteria or do not participate in Commerce investigations receive “countrywide” rates. 

China has been the most frequent target of U.S. AD actions. On 25 occasions, 

Commerce has applied duties to the same product from both China and one 

or more market economy. China (NME) duties were over 20 percentage 

points higher than those applied to market economies, on average. This is 

because average China country-wide rates were over 60 points higher than 

comparable market economy rates. Individual China company rates were 

similar to those assigned to market economy companies, on average. 

Comparison of China and Market Economy Antidumping Rates for 25 Products (1985-2004) 

0 20 40 60 80 100

Source: GAO AD database.

Average rate

98% China country-wide

37% Market economy all-others

53% China individual company

55% Market economy individual company

Commerce can declare China a market economy if the country meets certain 

criteria, thus ending the use of surrogate price information and country-wide 

rates in China AD actions. These changes would have a mixed impact. 

Duties would likely decline for Chinese companies not assigned individual 

rates. Individual company rates would likely diverge, with those that do not 

cooperate with Commerce receiving rates that are substantially higher than 

those that do cooperate. In any case, it appears that the actual trade impact 

of the NME methodology will decline as the portion of total export trade 

conducted by Chinese companies assigned individual rates increases and as 

the country-wide rates that largely account for the comparatively high 

average rates applied to China decline in importance.

www.gao.gov/cgi-bin/getrpt?GAO-06-231.

To view the full product, including the scope 

and methodology, click on the link above. 

To view the database on antidumping case 

information against Chinese companies, click 

on the following link: www.gao.gov/cgibin/getrpt?GAO-06-652SP. For more 

information, contact Loren Yager at (202) 

512-4347 or yagerl@gao.gov. 
Page i GAO-06-231 U.S.-China Trade

Contents

Letter 1

Results in Brief 3

Background 5

Commerce Employs a Special Methodology to Calculate China AD 

Duties 8

Commerce Has Applied AD Duties to China Frequently at Varied 

Rates 13

Ceasing to Apply NME Methodology Would Have Mixed Results 25

Concluding Observations 33

Agency Comments and Our Evaluation 34

Appendixes

Appendix I: Scope and Methodology 36

Appendix II: Additional Information on Duty Rates Applied to China and 

Market Economy Countries 39

Appendix III: Regression Analysis Results 48

Appendix IV: Comments from the Department of Commerce 54

GAO Comments 56

Appendix V: GAO Contact and Staff Acknowledgments 57

Tables Table 1: Products Affected by AD Duty Orders against China, 1980–

2004 15

Table 2: Comparison of China, Market Economy AD Duty Rates, 

Methodological Changes, and Potential Effects 29

Table 3: Summary Data on China AD Duty Orders, 1980–2004 40

Table 4: Average Duty Rates for 68 Orders against China, 

1980–2004 43

Table 5: Average Duty Rates for 25 Products with Orders against 

both China and Market Economies, 1980–2004 46

Table 6: Results of Multivariate Regression Analysis of Duty Rates 

on Explanatory Variables for China, Country-Wide Rates, 

and Year 49

Table 7: Results of Multivariate Regression Analysis of Duty Rates 

on Explanatory Variables for China, Country-Wide Rates, 

and Individual Products 50
Contents

Page ii GAO-06-231 U.S.-China Trade

Table 8: Results of Multivariate Regression Analysis of Duty Rates 

on Explanatory Variables for China, Country-Wide Rates, 

Adverse Inferences, Other Facts Available, and Individual 

Products 52

Figures Figure 1: Different Approaches to Determining AD Duty Rates 11

Figure 2: U.S. AD Orders in Place by Country as of December 31, 

2004 14

Figure 3: Results of AD Petitions, 1980-2004 16

Figure 4: AD Duty Rates Applied against Imported Polyethylene 

Retail Carrier Bags (2004) 18

Figure 5: Differences between Overall Average Duty Rates—China 

and Market Economies, 1980–2004 20

Figure 6: Differences between China Country-Wide and Market 

Economy All-Others Duty Rates, 1980–2004 21

Figure 7: Differences between Average Individual Company Duty 

Rates—China and Market Economy Countries, 1980–

2004 24

Figure 8: Average Number of Individual Rates per Case per Year, All 

Orders against China, 1980–2004 33

Figure 9: Average Country-Wide and Individual Rates, All Orders 

against China, 1980-2004 42

Abbreviations

AD antidumping

HTS Harmonized Tariff Schedule

ITC U.S. International Trade Commission

NME nonmarket economy

WTO World Trade Organization

This is a work of the U.S. government and is not subject to copyright protection in the 

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Page 1 GAO-06-231 U.S.-China Trade

United States Government Accountability Office

Washington, D.C. 20548

A

January 10, 2006 Letr

The Honorable Richard C. Shelby 

Chairman 

The Honorable Barbara A. Mikulski

Ranking Minority Member

Subcommittee on Commerce, Justice, and Science

Committee on Appropriations

United States Senate 

The Honorable Frank R. Wolf 

Chairman

The Honorable Alan B. Mollohan 

Ranking Minority Member

Subcommittee on Science, State, Justice, and 

Commerce and Related Agencies 

Committee on Appropriations

House of Representatives 

Imports from China have grown rapidly over the last decade, from a total 

value of about $42 billion in 1995 to over $196 billion in 2004.1

 While the 

prices of these Chinese goods are often lower than U.S. prices and, 

therefore, benefit consumers, this growth has presented a major challenge 

for U.S. producers that compete with Chinese products in the U.S. market. 

Some U.S. companies adversely affected by this growth have alleged that 

Chinese success in the U.S. market has come partly as a result of unfair 

trade practices.

U.S. companies that are adversely affected by unfair imports from China 

(or other countries) may avail themselves of a number of relief measures, 

including antidumping (AD) duties. The United States has classified China 

as a “nonmarket economy” (NME) country since 19812

 and employs a 

special NME methodology to calculate AD duties on unfairly traded 

1

Both values are expressed in constant 2004 dollars.

2

In U.S. law, an NME is a country that does not operate on market principles “so that sales of 

merchandise in such country do not reflect the fair value of the merchandise.” 19 U.S.C. 

§1677(18). China is one of 12 countries that Commerce has determined is an NME. 

Commerce classified China as an NME in Final Determination of Sales at Less than Fair 

Value: Natural Menthol from the People’s Republic of China, 46 Fed. Reg. 24614 (May 1, 

1981). 
Page 2 GAO-06-231 U.S.-China Trade

products from that country. This methodology is commonly believed to 

result in duty rates that are significantly higher than those applied to 

market economy countries. 

In light of increased concern about China’s trade practices, the conference 

report on fiscal year 2004 appropriations legislation requested that GAO 

monitor the efforts of U.S. government agencies responsible for ensuring 

free and fair trade with that country.3

 In subsequent discussions with staff 

from the House Appropriations Committee’s Subcommittee on Science, 

State, Justice, and Commerce and Related Agencies, we agreed to provide a 

number of reports on import relief mechanisms and the manner in which 

these mechanisms have been applied to China. To date, we have issued 

three such reports, focusing on textile safeguards, safeguards applicable to 

other products, and countervailing duties.4

This fourth and final report on China import relief mechanisms focuses on 

AD duties. In this report, we 

• explain the special methodology that the United States employs to 

calculate AD duties on products from China and other NME countries,

• analyze the application of AD duties to China over the last 25 years and 

compare the duty rates applied to Chinese products with the duty rates 

applied to products from market economy countries, and

• explain the circumstances in which the United States would stop using 

its NME methodology to calculate AD duties on Chinese products and 

evaluate the potential impact of this step.

To conduct our review, we examined applicable U.S. laws and regulations 

and World Trade Organization (WTO) agreements, including relevant 

portions of the agreement through which China acceded to WTO 

membership in 2001. We reviewed scholarly literature and consulted with 

3

H.R. Rep. No. 108-401, at 574 (2003), accompanying the Consolidated Appropriations Act, 

2004, Pub. L. No. 108-199, 118 Stat. 3, 65.

4

GAO, U.S.-China Trade: Textile Safeguard Procedures Should be Improved, GAO-05-296

(Washington, D.C.: Apr. 4, 2005); GAO, U.S.-China Trade: Commerce Faces Practical and 

Legal Challenges in Applying Countervailing Duties, GAO-05-474 (Washington D.C.: June 

17, 2005); GAO, U.S.-China Trade: US-China Trade: The United States Has Not Restricted 

Imports Under the China Safeguard, GAO-05-1056 (Washington, D.C.: Sept. 29, 2005).
Page 3 GAO-06-231 U.S.-China Trade

trade and legal policy experts from the U.S. government, private sector 

trade associations, consulting and law firms, and academic institutions, as 

well as representatives of the WTO, the government of China, and other 

governments. In order to analyze U.S. application of AD duties to China and 

compare the duties applied to China with those applied to market economy 

countries, we used information from the Department of Commerce 

(Commerce) and the U.S. International Trade Commission (ITC), including 

notices of Commerce determinations appearing in the Federal Register, to 

construct a database on all U.S. antidumping investigations from 1980 

through 2004. We verified this database to the official sources. Our analyses 

focused on the 68 AD duty orders that Commerce issued against Chinese 

products during this period and especially on the 25 cases in which 

Commerce also imposed duties on the same products from market 

economy countries.5

 We performed additional (multivariate regression) 

analyses to determine the extent to which duty rate variations could be 

attributed to differences between China and these other countries, or to 

other factors, such as the type of product involved. Appendix I contains a 

detailed description of our scope and methodology. 

We conducted our work from June 2005 through December 2005 in 

accordance with generally accepted government auditing standards.

Results in Brief Commerce’s special methodology for calculating the AD duties that it 

applies to China and other NME countries differs from its usual (market 

economy) approach in two key respects. First, since prices in NME 

countries do not reliably reflect the fair value of the merchandise, 

Commerce uses price information from surrogate countries (like India) to 

construct the value of NME products—and thus provide an appropriate 

basis for calculating AD duty rates—rather than relying entirely on 

information from the exporting country itself. Second, Commerce requires 

NME companies to demonstrate that their export activities are not subject 

to government control in order to be considered eligible for individually 

determined duty rates, rather than considering all companies eligible for 

such rates, as it does in market economy cases. NME companies that do 

not meet these criteria, or do not participate in Commerce’s investigations 

receive “country-wide” rates.

5

We also collected and examined data on duties imposed against other NME countries. 

Appendix III briefly discusses our analyses of this data.
Page 4 GAO-06-231 U.S.-China Trade

Over the last 25 years, the United States has applied AD duties against 

China more often than against any other country. On 25 occasions, 

Commerce applied duties to the same products from both China and at 

least one market economy country. The duty rates assigned in these cases 

varied greatly. On average, however, the rates applied to China were over 

20 percentage points higher than those applied to market economy 

countries. This difference is attributable primarily to the comparatively 

high country-wide duty rates applied to Chinese companies not eligible for 

individual rates. These country-wide rates averaged about 98 percent—

over 60 percentage points higher than the average duty rates assigned to 

market economy companies not receiving individual rates. In contrast, 

when Commerce calculated individual rates for Chinese companies, these 

rates were not substantially different, on average, from those assigned to 

individual market economy companies.

Commerce has administrative authority to declare China a market 

economy, or find individual Chinese industries to be “market-oriented” in 

character—provided that China overall or individual Chinese industries 

meet certain criteria. Such a declaration would end application of the NME 

methodology to China, in whole or in part. This would (1) eliminate 

country-wide duty rates against China and (2) eliminate use of surrogate 

country information to calculate AD duty rates on Chinese products. These 

changes would have a mixed impact. Eliminating country-wide rates would 

likely reduce duty rates applied to companies not receiving individual 

rates. Individually determined rates would likely diverge into two distinct 

groups, with companies that do not cooperate in Commerce investigations 

receiving rates that are substantially higher than those that do cooperate. 

The impact of applying Chinese price information would likely vary by 

industry, and AD rates applied against China would continue to vary widely, 

both within and among cases. However, it appears that the significance of 

the NME country-wide rates is declining as more Chinese companies 

receive individual rates, although data that would permit quantification of 

the potential trade impact of these changes is not available. This suggests 

that the trade significance of the NME methodology now applied to China 

will likewise decline over time.

Commerce provided written comments on a draft of this report, which are 

reprinted in appendix IV. Overall, Commerce agreed with our findings. In 

addition, Commerce, the Department of Homeland Security, and the Office 

of the U.S. Trade Representative, provided technical comments. We took 

these comments into consideration and made revisions throughout the 

report as appropriate to make it more accurate and clear.
Page 5 GAO-06-231 U.S.-China Trade

Background Dumping refers to a type of international price discrimination wherein a 

foreign company sells merchandise in a given export market (for example, 

the United States) at prices that are lower than the prices that the company 

charges in its home market or other export markets. When this occurs, and 

when the imports have been found to materially injure, or threaten to 

materially injure, U.S. producers, U.S. law permits application of 

antidumping duties to offset the price advantage enjoyed by the imported 

product.6

Any domestic industry that believes it is suffering material injury, or is 

threatened with material injury, as a result of dumping by foreign 

companies may file a petition requesting imposition of AD duties. 

Interested domestic industries file petitions simultaneously with 

Commerce and ITC. If Commerce determines that the petitioning parties 

meet certain eligibility requirements,7

 ITC determines whether the 

domestic industry has suffered material injury as a result of the alleged 

dumping (or is threatened with material injury).8

 While ITC is completing 

its work, Commerce conducts an investigation to establish the duty rates, if 

any, that should be applied.

To determine the duty rates to apply in an antidumping investigation, 

Commerce identifies (1) the foreign product’s export price entering the 

U.S. market and (2) its “normal value.”Commerce then compares these 

6

U.S. antidumping duty laws are found in 19 U.S.C. §§1673 et seq. The general international 

framework for application of antidumping duties can be found in the WTO Agreement on 

Implementation of Article VI of the General Agreement on Tariffs and Trade 1994—

commonly known as the “Antidumping Agreement”—and in article VI of the General 

Agreement.

7

For example, 19 U.S.C. §1673a sets forth criteria for initiating an AD investigation. It calls 

for petitions to be filed “by or on behalf of” the affected domestic industry and requires 

petitioners to submit “reasonably available” information to support their allegations that 

dumping has occurred and that they have suffered injury as a result. 

8

U.S. law defines material injury as harm that is “not inconsequential, immaterial, or 

unimportant.” 19 U.S.C. §1677(7)(A).
Page 6 GAO-06-231 U.S.-China Trade

prices to determine whether—and by how much—the product’s export 

price is less than its normal value. AD duty rates are based on these 

differences, which are called dumping margins.9

To establish a product’s export price, Commerce generally refers to the 

prices charged in actual sales of that product to purchasers in the United 

States.10 To establish its normal value, Commerce generally refers to the 

prices charged for the product in the exporting company’s home market. In 

the event that the product is not sold in the exporter’s home market, 

Commerce may refer to prices charged for the product in another export 

market or construct a normal value based on costs of production in the 

exporting country, together with selling, general and administrative 

expenses, and profit.11 The two agencies make preliminary and, after 

additional investigation, final determinations as to whether injury has 

occurred (ITC) and the size of the duty, if any, that should be imposed 

(Commerce). When warranted, Commerce issues “duty orders” instructing 

Customs and Border Protection to apply duties against imported products 

from the countries under investigation. Both ITC and Commerce publish 

their decisions in the Federal Register.

Since AD duties address unfair pricing practices, and pricing decisions are 

generally made by individual companies, Commerce generally calculates 

and assigns AD duty rates on an individual company basis. As a result, AD 

investigations generally produce a number of individually determined, 

company-specific rates, reflecting differences in the extent to which 

companies have dumped their products—that is, exported them at less 

9

Under U.S. law, Commerce sets antidumping duties equivalent to dumping margins. 19 

U.S.C. §1673. WTO rules encourage, but do not require, member states to apply antidumping 

duty rates that are less than the identified dumping margins if such lower rates are found 

sufficient to remedy the injury suffered by the domestic industry. WTO, Agreement on 

Implementation of Article VI of the General Agreement on Tariffs and Trade 1994, Art. 9.1.

1019 U.S.C. §1677a(a).

1119 U.S.C. §1677b establishes Commerce’ authority to apply these approaches to 

establishing normal value. Article 2.2 of the WTO antidumping agreement also provides that 

normal value determinations shall generally be based on a product’s sales price in its home 

market but permits investigating officials to refer to prices in another export market or to 

“constructed” prices, in certain circumstances. 
Page 7 GAO-06-231 U.S.-China Trade

than their normal value.12 In addition, AD duty orders also generally specify 

a duty rate for other companies that have not been assigned an individually 

determined rate.

In principle, Commerce bases its AD duty determinations on information 

obtained from interested parties—including foreign producers and 

exporters. Commerce obtains needed information from foreign companies 

by sending them questionnaires and following up with additional questions, 

as needed, and with on-site visits.13

However, both U.S. law and WTO rules recognize that, in some cases, 

officials charged with completing these investigations will be unable to 

obtain sufficient information. In such cases, Commerce officials apply facts 

available to complete their duty determinations.14 This may include 

secondary information, subject to corroboration from independent 

sources.

Moreover, if Commerce finds that an interested party, such as a foreign 

company under investigation, “has failed to cooperate by not acting to the 

best of its ability to comply with a request for information” then, in 

selecting among the facts available, Commerce may apply an inference that 

is adverse to the interests of that party. In applying adverse inferences, 

Commerce can use (among other things) information contained in the 

petition filed by the domestic industry seeking imposition of AD duties, the 

results of a prior review or determination in the case, or any other 

information placed on the record.15

1219 U.S.C. §1677f-1(c)(1) provides that, as a general rule, Commerce shall determine a 

dumping margin for each known exporter and producer of the subject merchandise. Article 

6.10 of the WTO antidumping agreement is similar. 

13Commerce is required to verify all of the information that it employs in making its final AD 

determinations. 19 U.S.C. §1677m(i). 

1419 U.S.C. §1677e provides that if necessary information is not available on the record, or an 

interested party withholds requested information, fails to provide it by the deadline for 

submission, submits information that cannot be verified, or otherwise significantly impedes 

an investigation, then Commerce shall use “facts otherwise available” to make its 

determinations. Article 6.8 of the WTO Antidumping Agreement specifies that when an 

interested party “refuses access to, or otherwise does not provide, necessary information 

...or significantly impedes the investigation” the importing country may base AD duty rates 

on the facts available. Annex II of the agreement elaborates on this basic point.

1519 U.S.C. §1677e(b).
Page 8 GAO-06-231 U.S.-China Trade

This authority provides an incentive for foreign companies to provide the 

information that Commerce needs to complete its work. For example, in a 

1993 case that involved two Brazilian companies, one company attempted 

to cooperate in the investigation but nonetheless was unable to provide the 

information that Commerce needed, while the other declined to provide 

any information at all. Commerce used facts available to determine that the 

first company should be subject to a duty rate of 42 percent. For the second 

company, Commerce selected adverse inferences from among the facts 

available and applied these to calculate a duty rate of 109 percent.16

Commerce Employs a 

Special Methodology to 

Calculate China AD 

Duties

The methodology that Commerce employs in NME cases differs from 

Commerce’s usual (market economy) approach in two key ways. First, 

rather than rely entirely on information from the exporting country itself to 

establish a product’s normal value, Commerce uses price information from 

surrogate countries to construct these values. Second, rather than consider 

all companies eligible for individually determined duty rates, Commerce 

requires NME companies to meet certain criteria to be considered eligible 

for such rates. Commerce generally employs different approaches to 

calculate duty rates for companies that do and do not meet these criteria. 

AD Calculations for NME 

Products Employ Third 

Country Information

In AD investigations involving products from NME countries, U.S. law 

requires Commerce to use a special methodology to calculate duty rates in 

view of the absence of meaningful home market prices and information on 

production costs. When a product from China or another NME country is 

the target of an AD investigation, Commerce officials use price information 

and financial data from an appropriate market economy country to 

construct a normal value for the product under investigation.17 India is the 

most commonly used surrogate for China.

16Final Determination of Sales at Less Than Fair Value: Certain Hot–Rolled Carbon Steel 

Flat Products, Certain Cold-Rolled Carbon Steel Flat Products, Certain CorrosionResistant Carbon Steel Flat Products, and Certain Cut-to-Length Carbon Steel Plate from 

Brazil, 58 Fed. Reg. 37091 (July 9, 1993).

1719 U.S.C. §1677b(c). This provision specifies that surrogate countries should be (1) at a 

level of economic development comparable to the NME in question and (2) a significant 

producer of the product being examined. Wage rates are determined by reference to wages 

prevailing in market economy countries at the per capita income level of the NME country 

being investigated. 19 C.F.R. §351.408(3). 
Page 9 GAO-06-231 U.S.-China Trade

To apply this methodology, Commerce (1) identifies and quantifies the 

factors of production (e.g., various raw materials) used by the NME 

producers, (2) identifies market prices for each factor in a surrogate 

country; (3) multiplies volume times cost for each factor; and (4) adds the 

results, together with a reasonable margin for selling, general and 

administrative expenses, and profit (based on surrogate country financial 

data), to produce a constructed normal value.18 The dumping margin—and 

consequently the AD duty rate—is then determined by comparing this 

normal value with the NME company’s export price to the United States. 

NME Companies Must Meet 

Certain Criteria to Be 

Considered Eligible for 

Individual Duty Rates

While all companies from market economy countries are eligible for 

individually determined or weighted average AD duty rates, companies 

from China and other NME countries must pass a separate rates test to be 

eligible for such rates. This test requires NME companies to meet two 

closely related criteria: they must demonstrate that their export activities 

are free from government control both in law and in fact.19 To provide a 

basis for deciding whether companies meet these criteria, Commerce 

requires these companies to submit information regarding 

• whether there are restrictive stipulations associated with an individual 

exporter’s business and export licenses,

• any legislative enactments decentralizing control of companies,

• any other formal measures decentralizing government control of 

companies,

• whether export prices are set by or subject to approval by the 

government,

1819 U.S.C.§1677b(c)(2) states that if the available information does not permit Commerce to 

apply this methodology, Commerce may base its normal value determination on the price at 

which a comparable product, produced in a market economy country at a level of 

development similar to the exporting country, is sold in other countries, including the 

United States. In practice, however, Commerce has never resorted to this alternative. 

19Commerce first developed and applied this test in a 1991 case involving sparklers from 

China—Final Determination of Sales at Less Than Fair Value: Sparklers from the People’s 

Republic of China, 56 Fed. Reg. 20588, (May 6, 1991). Commerce elaborated further upon its 

criteria in Final Determination of Sales at Less than Fair Value: Silicon Carbide from the 

People’s Republic of China, 59 Fed. Reg. 22585 (May 2, 1994). 
Page 10 GAO-06-231 U.S.-China Trade

• whether the company has authority to negotiate and sign contracts,

• whether the company has autonomy in selecting its management, and

• whether the company retains the proceeds of its export sales and makes 

independent decisions regarding disposition of profits or financing of 

losses.20

Commerce Employs 

Different Approaches to 

Determine Duty Rates for 

Eligible and Ineligible NME 

Companies

As shown in figure 1, Commerce uses fundamentally different approaches 

to calculate duty rates to be applied against companies that do and do not 

pass the separate rates test.

20Department of Commerce, Import Administration Policy Bulletin Number 05.1

(Washington, D.C.: Apr. 5, 2005). 
Page 11 GAO-06-231 U.S.-China Trade

Figure 1: Different Approaches to Determining AD Duty Rates 

Eligible NME Companies 

Receive Individually Determined 

or Weighted Average Duty Rates

As shown in figure 1, Commerce treats companies from China and other 

NME countries that pass Commerce’s separate rates test like market 

economy countries when assigning duty rates. When practical, Commerce 

fully investigates and establishes individually determined duty rates for 

each eligible NME company, just as it does for each market economy 

company. To the extent that fully investigated NME companies cooperate 

with Commerce, they receive rates based on the information that they 

provide. As explained in the background section of this report, Commerce 

uses facts available, and may use adverse inferences, to calculate duty rates 

when the companies under investigation cannot or will not provide the 

information that Commerce needs.

Nonmarket 

economy 

companies

Market 

economy 

companies

Eligible for 

individual rate

Individually determined 

rate assigned

Weighted average 

rate assigned

Country-wide 

rate assigned

Companies

that pass

“separate rates” test

Companies selected 

for full investigation

All other companies

All companies

Companies selected 

for full investigation

Companies that 

pass separate rates

test but are not fully 

investigated

Companies that 

• fail test 

• do not participate 

in Commerce 

investigations

Source: GAO analysis of Commerce information.
Page 12 GAO-06-231 U.S.-China Trade

In both NME and market economy cases, Commerce may limit the number 

of companies it fully investigates when it is faced with a large number of 

companies. In such situations, Commerce generally calculates individual 

rates for the companies that account for the largest volume of the subject 

merchandise.21 In market economy cases, Commerce then calculates a 

weighted average of these rates and applies the resulting “all others” rate to 

companies that it has not fully investigated.22 Commerce does not routinely 

calculate weighted average duty rates in NME cases. However, when the 

number of NME companies eligible for individually determined rates 

exceeds the number that Commerce can fully investigate, Commerce 

calculates a weighted average rate and informs Customs of the companies 

entitled to this rate.23

Other NME Companies Receive 

Country-Wide Duty Rates

In cases involving China or other NME countries, Commerce calculates a 

country-wide duty rate for companies that could not (or did not attempt to) 

pass Commerce’s separate rates test. In NME cases, Commerce assumes 

that all exporters and producers of a given product are subject to common 

government control and that all of these companies should, therefore, be 

subject to a single country-wide duty rate. Commerce begins its NME 

antidumping investigations by requesting information from the government 

of the country in question and from known producers and exporters. If 

Commerce cannot identify all relevant producers and exporters, or if one 

or more of the identified companies refuses to cooperate in the 

investigation, Commerce relies on adverse inferences to calculate a 

2119 U.S.C. § 1677f-1(c)(2) provides that if it is not practicable to establish individual rates 

for all known exporters or producers, Commerce may limit its individual examinations to a 

statistically valid sample of companies or to those companies that account for the largest 

volume of the subject merchandise. Article 6.10 of the WTO Antidumping Agreement 

provides that when large numbers of exporters are involved, authorities may limit their 

examination to a reasonable number of parties. 

2219 U.S.C. §1673d(c)(5)(A). This section also specifies that in making such calculations 

Commerce shall exclude any duty rates that were determined entirely by applying facts 

available, as well as any rates that are zero or de minimis (less than 2 percent). Article 9.4 of 

the WTO antidumping agreement is similar.

23Commerce did this in 15 of the 68 China cases that we examined. For example, in one 

recent case Commerce calculated individual rates for 7 Chinese companies and also 

assigned a weighted average duty rate to 19 other Chinese companies that passed 

Commerce’s separate rates test but were not fully examined. See Notice of Final 

Determination of Sales at Less Than Fair Value: Polyethylene Retail Carrier Bags from 

the People’s Republic of China, 69 Fed. Reg. 34125 (June 18, 2004). As in market economy 

cases, weighted average calculations exclude individual duty rates that are determined 

entirely by applying facts available, or that are or de minimis.
Page 13 GAO-06-231 U.S.-China Trade

country-wide rate. Commerce then instructs Customs to apply the countrywide rate against shipments from any company other than those 

specifically listed as eligible for an individually determined or weighted 

average rate.24

Commerce Has 

Applied AD Duties to 

China Frequently at 

Varied Rates 

Over the last 25 years, the United States has applied AD duties against 

Chinese products more often than against products from any other country. 

While AD duty rates have varied widely, on average the rates assigned to 

Chinese products have been higher than the rates assigned to the same 

products from market economy countries. We found that this is 

attributable primarily to the comparatively high country-wide rates applied 

to Chinese companies not eligible for individually determined or weighted 

average rates. When Commerce has calculated rates for individual Chinese 

companies, the average rates assigned to these companies have not been 

substantially different from those assigned to market economy companies.

China Has Been the Most 

Frequent Target of U.S. 

Antidumping Orders 

Over the last 25 years, Commerce has both considered and actually applied 

AD duties against China more often than against any other country. From 

1980 through 2004, Commerce processed 1,046 AD petitions and issued 455 

AD duty orders. One hundred and ten of these petitions (11 percent) and 68 

of these orders (15 percent) focused on China—both are the largest 

number against any U.S. trade partner.25

The number of orders applied to China varied from year to year. For 

example, Commerce issued no AD duty orders against China in 1998 but 

issued 9 in 2003. Commerce had 272 orders in place as of December 31, 

2004. Fifty-five of these (20 percent) apply to China. As figure 2 shows, this 

is also the highest percentage of any country. As shown in table 1, these 

duty orders have targeted a wide variety of products but have been 

24When Commerce identifies all NME exporters and producers, when all of these companies 

cooperate, and when Commerce can establish individual rates for each company, 

Commerce establishes country-wide rates that are weighted averages of the individual 

company rates. However, such cases are not common. Commerce employed this alternative 

in only 5 (about 7 percent) of the 68 AD orders it issued against China from 1980 through 

2004. For an example, see Notice of Final Determination of Sales at Less than Fair Value: 

Furfuryl Alcohol from the People’s Republic of China, 60 Fed. Reg. 22544 (May 8, 1995).

25During the 1980s, Japan was the single most frequently targeted country. About 17 percent 

of all the AD orders that Commerce issued during the decade applied to Japan.
Page 14 GAO-06-231 U.S.-China Trade

concentrated in chemicals and plastics, metal products, and agricultural 

products.

Figure 2: U.S. AD Orders in Place by Country as of December 31, 2004

Note: From 1980 through 2004 Commerce applied 68 orders against China. Thirteen of these were 

revoked, leaving 55 in place as of the end of 2004.

11% 7%

20%

6%

19%

All others (53 orders)

2%

Indonesia (5 orders)

Ukraine (6 orders)

Argentina (6 orders)

3%

Thailand (7 orders)

Canada (8 orders)

Mexico (9 orders)

Germany (9 orders)

4%

France (10 orders)

India (12 orders)

5%

Italy (13 orders)

Brazil (14 orders)

Taiwan (17 orders)

South Korea (19 orders)

Japan (29 orders)

China (55 orders)

Source: GAO AD database.
Page 15 GAO-06-231 U.S.-China Trade

Table 1: Products Affected by AD Duty Orders against China, 1980–2004

Source: GAO AD database.

Note: Product categories based on the Harmonized Tariff Schedule of the United States, Annotated. 

See appendix I for more information.

Moreover, petitions for AD duties against China have resulted in 

application of duties more often than those against other countries. As 

shown in figure 3, 62 percent of the petitions filed against China over the 

last 25 years resulted in duty orders, while the equivalent figure for all 

countries was about 43 percent.26

Type of product Examples of affected products Number of orders

Chemicals, plastics, 

pharmaceuticals

Barium chloride

Polyethylene retail carrier bags

Bulk aspirin 

26

Steel, other metals Carbon steel butt-weld pipe fittings

Chrome-plated lug nuts

Pure magnesium

20

Agricultural products Crawfish

Garlic

Honey

5

Other products Brake rotors

Hand tools

Cotton shop towels

Automotive replacement glass windshields

Folding gift boxes

17

26China had the highest percent of investigations that resulted in orders (62 percent of 110 

investigations) of any country subject to more than 15 AD orders. Japan (58 percent), Korea 

(51 percent), Taiwan (47 percent), and Germany (38 percent) followed China. Some 

countries, such as Latvia and Bangladesh, were subject to only one or two investigations 

and all of them resulted in orders, giving them a 100 percent rate. Ukraine, another NME, 

was subject to 13 antidumping orders, and 69 percent of them resulted in orders.
Page 16 GAO-06-231 U.S.-China Trade

Figure 3: Results of AD Petitions, 1980-2004

Note: Petitions may not result in an AD order for several reasons. For example, if ITC does not find the 

domestic industry to be materially injured, or threatened with material injury, or if Commerce does not 

find that dumping has occurred, then the case is terminated. Also, Commerce may suspend a case if 

the United States reaches an agreement with the foreign government that would eliminate the impact 

of dumping (e.g., restrictions on exports). In addition, the petitioners may decide to withdraw their 

petition before ITC and Commerce have completed their work.

China, Market Economy 

Rates Varied Widely

Over this 25 year period, Commerce issued duty orders against the same 

products from China and at least one market economy country on 25 

occasions.27 In 18 of these cases, Commerce calculated individual rates for 

companies from China and at least one market economy country. Fifteen of 

these cases involved more than one market economy country. In all, the 

orders applying to these 25 products contained a total of 243 individual, 

6%

62% 32%

Petitions for which investigation

was incomplete as of 12/04

Petitions that resulted in an

AD order

Source: GAO AD database.

54% 43%

3%

Petitions that did not result in an

AD order

110 petitions against China 1,046 petitions against all countries

27We reviewed all antidumping orders between 1980 and 2004 and identified, from the 68 

orders put in place against China, any in which there was also a corresponding order against 

the same product from at least one market economy within one year of the order against 

China. We found similar market economy orders for 25 of the 68 orders against China. See 

appendix I for more information.
Page 17 GAO-06-231 U.S.-China Trade

weighted average, and country-wide duty rates. Appendix II provides 

detailed information on the rates applied in each of these cases, as well as 

another 43 cases that we identified wherein Commerce applied duty rates 

to China but not to any market economy country.

These rates varied a great deal—both among the orders applied to different 

products and within the orders applied to the same products. Overall, these 

duty rates varied from zero to 218 percent for China and from zero to about 

244 percent for market economy countries. Figure 4 shows the extent to 

which duty rates applied to a single product can vary.28

28For details on this case, see the duty orders as follows: 69 Fed. Reg. 48201 (China), 69 Fed. 

Reg. 48203 (Malaysia), and 69 Fed. Reg. 48204 (Thailand), all published on Aug. 9, 2004. 
Page 18 GAO-06-231 U.S.-China Trade

Figure 4: AD Duty Rates Applied against Imported Polyethylene Retail Carrier Bags (2004) 

Note: In addition to the five individual Chinese companies shown above, two Chinese companies 

received de minimus rates and were excluded from the order.

Percentage points

Countries

Thailand

(Market economy)

Malaysia

(Market economy)

China

(Nonmarket economy)

0 10 20 30 40 50 60 70 80 90 100 110 120 130

Source: GAO analysis of Commerce data.

Individual company duty rates

All-others or country-wide duty rates

Company 1

Company 2

Companies 3, 4, and 5

(adverse inferences)

All others

Companies 1-5

(adverse inferences)

All others

Company 1

Company 2

Company 3

Company 4

Company 5

Companies 6-24

(weighted average)

Country-wide
Page 19 GAO-06-231 U.S.-China Trade

Overall, China Rates Were 

Higher Than Market 

Economy Rates

The average AD duty rates imposed on Chinese (NME) exporters over the 

last 25 years have been significantly higher than those imposed on market 

economy exporters of the same products. Taking all rates into 

consideration (including those calculated for individual companies, 

weighted averages of these rates, and country-wide rates applied to China) 

the average rate applied to Chinese companies in the 25 cases we examined 

was about 67 percent—over 20 percentage points higher than the average 

rate of 44 percent applied to market economy companies. As figure 5 

shows, the overall average rates applied against China were higher for 18 of 

the 25 products in which there were AD orders against both China and at 

least one market economy.
Page 20 GAO-06-231 U.S.-China Trade

Figure 5: Differences between Overall Average Duty Rates—China and Market Economies, 1980–2004

Difference in Average Rates 

Due Primarily to High China 

Country-Wide Rates

The difference between average China and average market economy duty 

rates was due primarily to the fact that the NME country-wide duty rates 

applied to China were substantially higher than the comparable all-others 

duty rates applied against market economy countries. In contrast, the 

individually determined duty rates assigned to Chinese companies in these 

cases were not substantially different, on average, from the individually 

determined rates assigned to market economy companies.

-120 -90 -60 -30 0 30 60 90 120 150 180 210

Product (year)

Ferrovanadium (2003)

Sulfanilic acid (1992)

Polyethylene retail carrier bags (2004)

Polyvinyl alcohol 2 (2003)

Tapered roller bearings (1987)

Sulfur chemicals (1991)

Melamine institutional dinnerware (1997)

Iron construction castings (1986)

Polyvinyl alcohol 1 (1996)

Collated roofing nails (1997)

Potassium permanganate (1984)

Chrome-plated lug nuts (1991)

Honey (2001)

Furfuryl alcohol (1995)

Industrial nitrocellulose (1990)

Carbazole violet pigment 23 (2004)

Porcelain-on-steel cooking ware (1986)

Certain hot-rolled carbon steel flat products (2001)

Helical spring lock washers (1993)

Preserved mushrooms (1999)

Steel concrete reinforcing bars (2001)

Silicon metal (1991)

Carbon steel butt-weld pipe fittings (1992)

Silicomanganese 1 (1994)

Ferrosilicon (1993)

Percentage points

Cases in which rates

against China were 

higher than against 

market economies

Cases in which rates

against market 

economies were higher 

than against China

Difference between China and market economy average duty rates

Source: GAO AD database.
Page 21 GAO-06-231 U.S.-China Trade

Country-Wide Duty Rates 

Substantially Higher Than 

Market Economy All-Others 

Rates

On average, the country-wide rates applied to China in these 25 cases were 

substantially higher than the comparable all-others rates applied to market 

economy countries. The country-wide duty rates applied against China 

averaged about 98 percent—over 60 percentage points higher than the 

average 37 percent all-others duty rate applied to market economy 

exporters of the same products. Figure 6 shows that the China countrywide rate was higher than the market economy all-others rate in 21 of 25 

cases. As explained below, this difference was due largely to the use of 

different methodologies to calculate country-wide and all-others rates.

Figure 6: Differences between China Country-Wide and Market Economy All-Others Duty Rates, 1980–2004

-120 -90 -60 -30 0 30 60 90 120 150 180 210

Product (year)

Tapered roller bearings (1987)

Ferrovanadium (2003)

Sulfur chemicals (1991)

Sulfanilic acid (1992)

Iron construction castings (1986)

Melamine institutional dinnerware (1997)

Polyethylene retail carrier bags (2004)

Potassium permanganate (1984)

Chrome-plated lug nuts (1991)

Furfuryl alcohol (1995)

Industrial nitrocellulose (1990)

Polyvinyl alcohol 2 (2003)

Porcelain-on-steel cooking ware (1986)

Certain hot-rolled carbon steel flat products (2001)

Polyvinyl alcohol 1 (1996)

Silicon metal (1991)

Steel concrete reinforcing bars (2001)

Helical spring lock washers (1993)

Ferrosilicon (1993)

Collated roofing nails (1997)

Silicomanganese 1 (1994)

Preserved mushrooms (1999)

Carbon steel butt-weld pipe fittings (1992)

Honey (2001)

Carbazole violet pigment 23 (2004)

Percentage points

Cases in which rates

against China were 

higher than against 

market economies

Cases in which rates

against market 

economies were higher 

than against China

Difference between China and market economy average duty rates

Source: GAO AD database.
Page 22 GAO-06-231 U.S.-China Trade

Note: In several cases, Commerce issued orders against several market economy countries, and we 

calculated an average all-others rate for all of the affected market economy countries.

Country-wide rates were nearly always equal to or higher than the highest 

individually determined rate applied to any Chinese company, due to 

application of adverse inferences.29 According to Commerce, NME country 

governments themselves have never provided the information that 

Commerce needs to establish an appropriate country-wide duty rate. In 

addition, Commerce officials stated that, in most cases, participating NME 

companies have accounted for only a portion of known exports to the U.S. 

market from their country, indicating that others had not come forward. In 

most cases, therefore, Commerce has used adverse inferences to determine 

country-wide rates. For example, in its investigation of carbazole violet 

pigment, Commerce assigned three fully investigated Chinese companies 

individually determined rates of about 6, 27, and 45 percent. However, since 

other known Chinese producers did not respond to Commerce’s request for 

information, Commerce used adverse inferences to determine that all other 

Chinese producers should be subject to an NME country-wide rate of about 

218 percent.30

In contrast, the comparable market economy all-others rates were lower 

than the highest individual company rates assigned in any given case (if 

more than one other individual rate was assigned).31 This is because, as

discussed earlier, Commerce generally calculates all-others rates by 

averaging individually determined rates—excluding those derived entirely 

through application of facts available and those that are de minimis or zero. 

29This was not the case in two of the 25 cases that we examined in detail. In these cases, 

Commerce calculated individual rates for two Chinese companies and, since these 

companies represented all known exports of the subject products to the United States, 

calculated a weighted average of these two rates. See, for example, Notice of Final 

Determination of Sales at Less Than Fair Value: Furfuryl Alcohol From the People’s 

Republic of China, 60 Fed. Reg. 22544 (May 8, 1995). In addition, in 3 of the other 43 orders 

against China Commerce calculated a weighted average of individual rates rather than a 

country-wide rate.

30See Notice of Final Determination of Sales at Less Than Fair Value: Carbazole Violet 

Pigment 23 from the People’s Republic of China, 69 Fed. Reg. 67304 (Nov. 17, 2004). In 

some cases, Commerce has set a country-wide rate equivalent to the duty rate that it 

calculated for one fully investigated company. Appendix II provides more information on 

these cases.

31In certain cases, Commerce has used facts-available-based individual company rates to 

establish all-others rates. 19 U.S.C. §1673d(c)(5)(B) provides that if all of the individual rates 

in a case were determined through application of facts available (or are zero or de minimis) 

then Commerce may use “any reasonable method” to establish the all-others rate.
Page 23 GAO-06-231 U.S.-China Trade

With regard to carbazole violet pigment, for example, Commerce 

investigated not only China but also India. Commerce assigned two fully 

investigated Indian companies rates of about 10 and 50 percent and weightaveraged these rates to determine that shipments from all other Indian 

producers should be subject to a duty rate of about 27 percent.

Individual Company Rates in 

China and Market Economy 

Countries Not Substantially 

Different on Average

On average, there was little difference between the individually determined 

rates applied to companies from China and those applied to market 

economy companies. The average individually determined rate applied to 

Chinese companies in these cases was 53 percent—a little less than the 

average rate of 55 percent applied to market economy companies.32 The 

median rate for Chinese companies was 42 percent—the same as the 

median rate for market economy companies. Figure 7 displays the average 

individual company rates assigned to Chinese and market economy 

companies in the 18 cases in which Commerce assigned individual rates to 

both. As the figure shows, the rates assigned to Chinese companies were 

higher than the market economy rates in ten of these cases and lower in the 

other eight.

32These averages are based on a subset of the 25 products in which individual company rates 

were calculated for both China and at least one market economy. We found 18 products in 

which this was the case. However, the average duty rates for individual companies from 

China and market economies are still similar for the full set of 25 products—the average 

duty rate for individual Chinese companies was 52 percent compared with 48 percent for 

market economy companies. 
Page 24 GAO-06-231 U.S.-China Trade

Figure 7: Differences between Average Individual Company Duty Rates—China and Market Economy Countries, 1980–2004

Our statistical analyses provided additional support for the importance of 

the country-wide rates in accounting for the overall difference between the 

duty rates applied to China and to market economy countries. Using 

multivariate regression analysis, we found that a number of variables, such 

as the type of product involved, accounted for some of the overall variation 

in duty rates. However, after accounting for the China country-wide rates 

there was no statistically significant difference between the duty rates 

applied to China and those applied to market economy countries. As 

explained in more detail in appendix III, we found essentially the same 

-120 -90 -60 -30 0 30 60 90 120 150 180 210

Product (year)

Polyvinyl alcohol 2 (2003)

Ferrovanadium (2003)

Polyethylene retail carrier bags (2004)

Tapered roller bearings (1987)

Collated roofing nails (1997)

Melamine institutional dinnerware (1997)

Polyvinyl alcohol 1 (1996)

Carbazole violet pigment 23 (2004)

Honey (2001)

Chrome-plated lug nuts (1991)

Potassium permanganate (1984)

Furfuryl alcohol (1995)

Helical spring lock washers (1993)

Industrial nitrocellulose (1990)

Preserved mushrooms (1999)

Certain hot-rolled carbon steel flat products (2001)

Steel concrete reinforcing bars (2001)

Carbon steel butt-weld pipe fittings (1992)

Percentage points

Cases in which rates

against China were 

higher than against 

market economies

Cases in which rates

against market 

economies were higher 

than against China

Difference between China and market economy average duty rates

Source: GAO AD database.
Page 25 GAO-06-231 U.S.-China Trade

results when we expanded our analyses to include data on AD actions 

against NMEs other than China.33

Ceasing to Apply NME 

Methodology Would 

Have Mixed Results

In certain circumstances, Commerce may stop using its NME methodology 

in China cases—and thus begin applying its market economy methodology 

to determine AD duty rates against that country. Such a step would lead to 

important changes in the methods that Commerce employs to determine 

China AD duty rates and in the duty orders resulting from these 

proceedings. These changes would have mixed results. Eliminating 

country-wide duty rates would likely reduce duty levels for Chinese 

companies that are not assigned individually determined rates. Individually 

determined rates would likely diverge into two distinct groups, with 

companies that do not cooperate in Commerce investigations receiving 

rates that are substantially higher than those assigned to companies that do 

cooperate. The impact of applying Chinese price information to calculate 

the normal value of Chinese products would likely vary by industry. In any 

case, rates would continue to vary widely based on the circumstances of 

each case. While trade data that would permit analysis of the potential 

trade impact of these changes is not available, it appears that the trade 

significance of country-wide duty rates is declining.

Commerce May Stop 

Applying NME Methodology 

to China in Certain 

Circumstances

Commerce has administrative authority to reclassify China and other NME 

countries as market economies or individual NME country industries as 

market-oriented in character. Such reclassifications would end 

Commerce’s authority to apply its NME methodology to such countries or 

industries. Also, China’s WTO accession agreement specifies that members 

may apply third-country information to calculate AD duty rates against that 

country, but this provision expires in 2016.

33To determine whether our results held for all NMEs, we collected and performed 

regression analyses including data on all AD actions from 1980 through 2004 in which 

Commerce applied duties to both a nonmarket economy other than China—such as 

Ukraine—and at least one market economy country. This increased the number of products 

we analyzed from 25 to 31. 
Page 26 GAO-06-231 U.S.-China Trade

Commerce Has Administrative 

Authority to Change China’s 

NME Status

Commerce has the authority to reclassify China as a market economy 

country, in whole or in part. As we explained in more detail in a prior 

report,34 U.S. trade law authorizes Commerce to determine whether 

countries should be accorded NME or market economy status and specifies 

a number of criteria for Commerce to apply in making such 

determinations.35 Countries classified as NMEs may ask for a review of 

their status at any time.36 China has actively sought market economy status 

among its trading partners, and a number of them have designated China as 

a market economy. However, Commerce informed us that Chinese officials 

have not yet officially requested a determination as to whether their 

country merits reclassification under the criteria specified in U.S. law. In 

April 2004, the United States and China established a Structural Issues 

Working Group under the auspices of the U.S.-China Joint Commission on 

Commerce and Trade. This group is examining structural and operational 

issues related to China’s economy that may give rise to bilateral trade 

frictions, including issues related to China’s desire to be classified as a 

market economy.37

Commerce also has the authority to designate individual NME industries as 

market oriented in character, but has denied all such requests to date. 

Commerce determined in a 1992 case against China that, short of finding 

that an entire country merits designation as a market economy, it could 

find specific industries within such countries to be market oriented in 

character.38 Commerce officials noted that on several occasions Chinese 

industries responding to antidumping duty petitions have requested 

34GAO-05-474, pages 10-15.

3519 U.S.C. § 1677(18). The criteria include the extent to which the country’s currency is 

freely convertible and the extent to which wage rates are determined by free labormanagement bargaining.

36Since 1993, Commerce has reclassified Russia and nine other formerly communist 

countries as market economies.

37According to Commerce, the working group has held two meetings—in July 2004 and May 

2005. The United States and China established the Joint Commission in 1983 to serve as a 

forum for high-level dialogue on bilateral trade issues.

38For details, see Sulfanilic Acid from the Peoples Republic of China, 57 Fed. Reg. 9409 

(Mar. 18, 1992). Commerce’s criteria for designation as a market-oriented industry are (a) 

virtually no government involvement in setting prices or amounts to be produced, (b) 

industry characterized by private or collective (not state) ownership, and (3) marketdetermined prices for all significant inputs whether material or nonmaterial (e.g., labor and 

overhead).
Page 27 GAO-06-231 U.S.-China Trade

designation as market-oriented industries. To date, Commerce has denied 

such requests—primarily on the grounds that the Chinese companies in 

question submitted information that was insufficient or was provided too 

late in Commerce’s process to allow an informed decision. 

China’s WTO Commitment 

Allowing the Use of ThirdCountry Information Expires in 

2016

When joining the WTO, China agreed that other WTO members could use 

third-country information to calculate normal values in antidumping 

actions against Chinese companies. Specifically, China’s WTO accession 

agreement provides that in determining price comparability in antidumping 

investigations WTO members may use “a methodology that is not based on 

a strict comparison with domestic prices or costs in China.”39 However, the 

accession agreement also specifies that this provision will expire 15 years 

after the date of the agreement—that is, by the end of 2016.40 

After 2016, the ability of WTO members to continue using third-country 

information in AD calculations involving China would be governed by 

generally applicable WTO rules, according to officials at the Office of the 

U.S. Trade Representative. These rules recognize that when dumping 

investigations involve products from a country that “has a complete or 

substantially complete monopoly of its trade and where all domestic prices 

are fixed by the state,” importing country authorities may have difficulty 

making the price comparisons through which AD duty rates are normally 

established. In such situations, importing countries may “find it necessary 

to take into account the possibility that a strict comparison with domestic 

prices in such a country may not always be appropriate.”41 WTO rules do 

not provide any specific guidance about how this provision should be 

implemented; such decisions appear to be left up to individual members. 

39WTO Protocol on the Accession of the People’s Republic of China, Art. 15(a).

40WTO Protocol on the Accession of the People’s Republic of China, Art. 15(d). China 

acceded to the WTO in December, 2001. The protocol also specifies that countries 

determining that market economy conditions prevail in China as a whole or in individual 

Chinese industries will cease applying third-country information in AD duty investigations 

against the country as a whole or against such industries. This provision is similar to U.S. 

trade law.

41The General Agreement on Tariffs and Trade, Annex I, Ad Art. VI, para. 1.2.
Page 28 GAO-06-231 U.S.-China Trade

Transition to Market 

Economy Methodology 

Would Bring Significant 

Procedural Changes

Ending application of the NME methodology to China would bring two 

significant procedural changes in AD duty investigations against Chinese 

products. First, such a step would eliminate NME country-wide duty rates 

from China AD orders. Commerce would instead assign an individually 

determined rate to every relevant Chinese producer or exporter. If the 

number of companies involved were too great to allow full investigation of 

all relevant companies, Commerce would apply an all-others rate—a 

weighted average of the individually determined rates to all other Chinese 

companies (excluding those rates based entirely on facts available or that 

are de minimis or zero). However, Commerce would retain its authority to 

use facts available to determine the rates that it applies to individual 

Chinese companies. Second, transition to the market economy 

methodology would end Commerce’s use of surrogate country information 

to calculate the normal value of Chinese products. Application of the 

market economy methodology would generally require Commerce to set 

the normal value of Chinese products equal to their sales price in China. If 

the product were not sold in China, Commerce could refer to prices 

charged for the product in another export market or construct the 

product’s normal value, or it could continue to construct the product’s 

normal value—using factor prices from the Chinese companies under 

investigation rather than from surrogate countries.

Eliminating Country-Wide 

Rates Would Likely Reduce 

Duty Levels for Companies 

Not Assigned Individually 

Determined Rates

The elimination of country-wide duty rates against China would likely 

reduce the duty rates applied to some Chinese companies. If Commerce 

applied its market economy approach to China, duty rates for companies 

not receiving individually determined rates would, in most cases, no longer 

be determined by applying facts available. Rather, Commerce would, for 

the most part, determine these rates by averaging the rates applied to fully 

investigated Chinese companies, with some exclusions. The default rate for 

uninvestigated Chinese companies would move, in most cases, from being 

the highest rate found to the average rate found among companies that 

cooperate in Commerce investigations.

Though not predictive, available evidence suggests that the all-others rates 

that Commerce would apply to China under the market economy 

methodology would be significantly lower than the country-wide rates 

currently applied to that country. As already shown, China country-wide 

rates have generally been significantly higher than the all-others rates that 

Commerce has assigned to market economy sources of the same products. 

As shown in table 2, the average country-wide rate for the 25 cases in which 
Page 29 GAO-06-231 U.S.-China Trade

Commerce assigned duties to both China and one or more market 

economies was 98 percent, while the average market economy all-others 

rate was 37 percent. The average rate assigned to individual Chinese 

companies was 53 percent, and Commerce calculates all-others rates by 

weight averaging individually determined rates, excluding those that are 

derived entirely through application of facts available and those that are de 

minimis or zero.

Table 2: Comparison of China, Market Economy AD Duty Rates, Methodological Changes, and Potential Effects

Source: GAO analysis of Commerce data.

a

Averages based on 25 products with comparable China and market economy cases (1985-2004).

b

Averages based on subset of 18 products with comparable China and market economy cases in 

which individual rates were applied. However, averages are nearly identical for full group of 25 

products. 

c

Commerce applied adverse inferences only three times, for an average rate of 78 percent.

Individually Determined 

Rates Would Vary, 

Depending Upon 

Cooperation

A simple comparison of the average individually determined duty rates 

calculated under the NME and market economy methodologies suggests 

that a change in methodology would not result in any significant overall 

change in duty rates applied to individual Chinese companies. For the 

comparable cases, individual AD duty rates for Chinese companies 

averaged 53 percent and were not substantially different from individual 

market economy company rates, which averaged 55 percent.

Individual rates b

Overall a Group a All Cooperative Adverse inferences

Average China (NME) 

rates

67% 98% 

(Country-wide)

53% 51% (Rarely applied)c

Average market 

economy rates

44% 37%

(All others)

55% 16% 77%

Change from NME to 

market economy 

methodology for China 

companies

Chinese price 

information 

replaces surrogate 

price information

Country-wide rates 

eliminated, 

uninvestigated 

companies receive 

all others rate

Separate rates 

test eliminated 

Potential effect on 

average China rates

Effect unknown

but likely to vary 

by industry

Rates likely to be 

significantly lower

Rates likely to 

fall into two 

distinct groups

Rates likely to be 

relatively low for 

cooperative 

companies

Rates likely to be 

relatively high for 

uncooperative 

companies
Page 30 GAO-06-231 U.S.-China Trade

However, a more detailed examination of the data indicates that the impact 

of a change in methodology on individual Chinese company duty rates 

would depend on the extent to which Commerce applies adverse 

inferences to calculate these rates. The rates assigned to individual 

companies under the market economy methodology fell into two distinct 

groups, depending on whether the companies cooperated with Commerce 

investigations. In the 25 cases that we examined in detail, about half of the 

fully investigated market economy companies cooperated with Commerce. 

On average, Commerce assigned a duty rate of about 17 percent to these 

companies.42 Commerce found the other half of the fully investigated 

companies uncooperative and, therefore, applied adverse inferences to 

determine the duty rates to be applied to these companies. On average, 

Commerce assigned a duty rate of about 77 percent to these uncooperative 

market economy companies.43

 Though not predictive, this suggests that a change from the NME 

methodology for China would result in a significant number of 

(cooperative) companies receiving relatively low rates, while another 

significant group of (uncooperative) companies would receive relatively 

high rates.44 Our regression analysis confirmed the importance of adverse 

inferences as a determinant of variation in duty rates. As explained in 

appendix III, we found that application of adverse inferences tends to 

increase duty rates by a large margin.

42The duty rate reported here (17 percent) differs slightly from the rate reported in table 2 

(16 percent) since this statement refers to the full 25 cases and the table refers just to the 18 

cases in which individual rates were calculated for both China and at least one market 

economy.

43Companies may decline to cooperate, at least in part, because analysis of their own pricing 

practices leads them to conclude that cooperation will only result in AD duty rates that are 

as high, or higher, than those that would be imposed by application of adverse inferences. 

44While Commerce may apply adverse inferences to calculate individual rates in China 

cases, it does so infrequently. For example, in the 25 comparable cases Commerce applied 

adverse influences in only 3 of 50 individual rate determinations for Chinese companies. 

Commerce officials stated that this may be due to Chinese companies that might otherwise 

have adverse inferences applied to them declining to participate in the investigation, and 

thus accepting application of the country-wide rate.
Page 31 GAO-06-231 U.S.-China Trade

Impact of Applying Chinese 

Price Information Would 

Vary By Industry and Is 

Likely to Decline over Time

The impact of using Chinese price information on China AD duty rates 

would likely vary from one industry to another under the market economy 

methodology. Chinese prices are widely viewed as distorted to varying 

degrees. Where prices for key inputs are artificially low, relying on Chinese 

price information would produce an artificially low normal value. The 

result would be an AD duty that is lower than would be obtained by 

applying surrogate country input prices. Conversely, where Chinese prices 

are artificially high, AD duty rates may be higher if based on Chinese prices. 

To the extent that Chinese economic reforms bring Chinese prices more 

into line with world markets, the impact of abandoning the use of surrogate 

country information can be expected to decline. At any point in time, 

however, the probable effect of such a methodological change in an 

individual industry investigation would depend on the particular facts 

applying to that industry. The net impact of changing the source of price 

information on overall China duty rates cannot be estimated with 

confidence.

Duty Rates Will Continue to 

Display Great Variation

Our multivariate regression analyses suggest that, regardless of changes in 

methodology, there will continue to be a great deal of variation among the 

AD duty rates applied to products from China and other countries. Our 

analyses showed that application of country-wide duty rates to China 

largely explained the difference between the overall average duty rates 

applied to China and to market economy countries. Eliminating these rates 

would likely have a substantial overall reducing effect on China rates. 

However, a number of other factors, such as the type of product involved, 

also helped to account for differences among rates overall, and these 

factors will continue to have an impact on duty rates, regardless of whether 

Commerce applies country-wide rates to China. Furthermore, even after 

taking these factors into account, our analyses still explained only about 

half of the total variation in duty rates.45 This means that about half of the 

45Regression analyses employing variables to account for (1) application of a country-wide 

rate, (2) whether or not the duty was applied to China or a market economy, (3) the year of 

application, (4) whether or not Commerce applied adverse inferences, and (5) the type of 

product involved, taken together, accounted for 50 percent of the variation in duty rates. 

Appendix III provides more information on these results.
Page 32 GAO-06-231 U.S.-China Trade

variation in duty rates is attributable either to idiosyncratic factors or to 

systematic factors that we did not capture in any of our variables.46

Trade Significance of 

Country-Wide Rates 

Appears to Be Declining

Available evidence suggests that the volume of trade affected by countrywide rates is declining and that, consequently, the trade impact of China 

duty orders will in the future depend increasingly on the magnitude of the 

individually determined rates. Commerce officials observed that in the 

early 1980s it was not unusual for China AD duty investigations to produce 

only a country-wide rate. However, as the Chinese economy has evolved, 

individual Chinese companies have become more likely to request—and 

receive—individually determined or weighted average rates. Since 1980, 

Commerce has applied country-wide rates alone in only 15 of 68 Chinese 

AD orders, and the last of these occasions was in 1995. The majority of all 

Chinese AD orders (about 78 percent), and all such orders issued over the 

last 10 years, have included at least one individual company rate.

Neither Commerce nor Customs and Border Protection maintain trade data 

that would permit analysis of changes over time in the relative volume or 

value of products imported into the United States under the country-wide 

or various individual duty rates listed in AD duty orders. However, as figure 

8 shows, the average number of Chinese companies assigned individually 

determined rates (or assigned a weighted average rate) has been growing, 

though there continues to be variation from year to year. For example, in 

2004 Commerce placed duties on six Chinese products and in doing so 

assigned individually determined or weighted average rates to 53 Chinese 

companies. Anecdotal evidence suggests that along with this rise in 

company interest in obtaining individual rates has come an increase in the 

volume of trade covered by these rates. For example, in one recent case 

Commerce fully investigated and assigned individually determined rates to 

four companies accounting for more than 90 percent of Chinese exports to 

the U.S. market. Commerce then assigned a weighted average of these 

rates to 9 additional companies, leaving only a very small portion of all 

Chinese exports to be covered by the country-wide rate.47

46One factor that remains poorly documented and is not reflected in our analysis is the effect 

that any Chinese government subsidies may have on Chinese export prices. For more 

discussion on this topic see GAO-05-474, pages 18-19.

47For details, see Notice of Final Determination of Sales at Less than Fair Value and 

Negative Final Determination of Critical Circumstances: Certain Color Television 

Receivers from the People’s Republic of China, 69 Fed. Reg. 20594 (Apr. 16, 2004).
Page 33 GAO-06-231 U.S.-China Trade

Figure 8: Average Number of Individual Rates per Case per Year, All Orders against China, 1980–2004

Notes: This table includes only the companies assigned individually determined or weighted average 

rates in initial AD duty orders. Other companies may be assigned such rates in subsequent reviews of 

these orders. The annual figures are the number of individual companies granted such rates divided by 

the number of AD duty orders. Commerce did not issue any individual company duty orders against 

China in 1980, 1981, 1982, 1985, 1987, 1988, 1989, or 1998. In the tapered roller bearings cases, 

Commerce originally put an order in place in 1987, but amended it in 1990. We use the information 

from the 1990 amendment in the above graphic.

Concluding 

Observations

On average, Commerce’s application of its NME methodology has 

produced AD duties on Chinese products that are substantially higher than 

those applied to the same products from market economy countries. 

Changing China’s NME status—and thus eliminating the application of this 

methodology—would have a variety of impacts. The duty rates applied to 

companies that do not receive individual rates would likely decline. 

Chinese companies that cooperate in Commerce investigations may also 

receive comparatively low rates. However, the impact of these lower rates 

on overall China averages may be offset, to some extent, by application of 

0

2

4

6

8

10

12

200

2004

3

199

1999

2000

2001

2002

8

199

1994

1995

1996

1997

3

19

1990

1991

1992

89

1988

1987

1986

1985

1984

1983

1982

1981

1980

Average number

Source: GAO AD database.

Average individual companies

per case

Total number of cases

1.0

2

1.0

3

0.2

5

1.5

2

1.7

7

3.5

2

2.6

3

2.2

5

0.6

3

3.0

2

5.3

6

12

1

6.5

4

3.6

5

4.3

3

2.4

9

8.8

6
Page 34 GAO-06-231 U.S.-China Trade

adverse inferences to assign relatively high rates to individual Chinese 

companies that do not cooperate in Commerce investigations.

The net effect of these changes cannot be predicted. Such a prediction 

would require knowledge of price distortions in diverse Chinese industries, 

changes in these distortions over time, pricing decisions by Chinese 

companies in reaction to these changes, and decisions by U.S. companies 

about whether they should seek relief. Nonetheless, while the NME 

methodology is applied, it appears that the actual trade impact of using this 

methodology will decline as the portion of total export trade conducted by 

Chinese companies assigned individual rates increases, and as the countrywide rates that largely account for the comparatively high average rates 

applied to China decline in importance.

Agency Comments and 

Our Evaluation

The Department of Commerce provided written comments on a draft of 

this report. These comments are reprinted in appendix IV. Overall, 

Commerce agreed with our findings, observing that the report provided 

timely and helpful information on the NME methodology and its 

application to China.

Commerce identified a small number of apparent errors in our database. 

We re-examined our data, making corrections when necessary, and updated 

our analyses; these corrections did not have any significant impact on our 

findings. Commerce also made a number of technical comments, focusing 

primarily on our description of its NME methodology. We took these 

comments into consideration and made changes throughout the report to 

insure its clarity and accuracy. We also made a number of technical 

corrections suggested by the Department of Homeland Security and the 

Office of the U.S. Trade Representative.

We are sending copies of this report to the Secretaries of Commerce and 

Homeland Security, the International Trade Commission, the U. S. Trade 

Representative, appropriate congressional committees, and other 

interested parties. We also will make copies available to others upon 

request. In addition, the report will be available at no charge on the GAO 

Web site at http://www.gao.gov.
Page 35 GAO-06-231 U.S.-China Trade

If you or any of your staff have any questions about this report, please 

contact me at 202-512-4347 or yagerl@gao.gov. Contact points for our 

Offices of Congressional Relations and Public Affairs may be found on the 

last page of this report. GAO staff who made major contributions to this 

report are listed in appendix V.

Loren Yager

Director, International Affairs and Trade
Page 36 GAO-06-231 U.S.-China Trade

Appendix I

Scope and Methodology AAppenednxidexiIs

To address our objectives, we examined and summarized applicable U.S. 

laws and regulations, as well as relevant World Trade Organization (WTO) 

agreements. These included the Agreement on Implementation of Article 

VI of the General Agreement on Tariffs and Trade 1994—commonly 

known as the “antidumping agreement”—and China’s WTO accession 

agreement. We conducted a literature search and reviewed relevant 

scholarly and legal analyses and Department of Commerce (Commerce) 

determinations.1

 In order to corroborate and broaden our understanding, 

we consulted with trade and legal policy experts from the U.S. government, 

private sector trade associations, consulting firms, academic institutions, 

law firms with broad experience in trade actions involving China, as well as 

representatives of the WTO, the government of China, and other 

governments concerned about Chinese trade practices, including the 

European Union and Canada.

In order to analyze the application of antidumping (AD) duties to China and 

compare duty rates applied to China with those applied to market economy 

countries (our second objective) and to evaluate the potential impact of 

ceasing to apply the nonmarket economy (NME) methodology to China 

(our third objective), we collected information from the Department of 

Commerce and the International Trade Commission, including notices of 

Commerce determinations appearing in the Federal Register. We used this 

information to construct a database on all U.S. AD investigations from 1980 

through 2004. In addition to information on the countries and products 

involved and the status of each investigation, our database included the 

duty rates applied upon completion of each new antidumping investigation 

against China during this period, as well as the duty rates applied against 

any producers of the same products from other countries. This database is 

accessible on-line at www.gao.gov/cgi-bin/getrpt?GAO-06-652SP. We 

verified this database to the official sources and found the data to be 

sufficiently reliable for the purposes of this report. 

Our analyses focused on the 68 cases during this time period wherein 

Commerce imposed AD duties on Chinese products, and especially on the 

subset of 25 cases in which Commerce imposed duties against a similar 

1

Commerce provides internet access to all of its determinations since July, 1995, and to 

detailed information on its antidumping procedures at http://ia.ita.doc.gov/ia-decisions-anddata.html.
Appendix I

Scope and Methodology

Page 37 GAO-06-231 U.S.-China Trade

product from one or more market economy countries.2 Specifically, the 25 

cases included all market economy cases that had the same product name 

and were initiated within 1 year of an AD investigation against China. In all, 

we assembled data on 303 company-specific, weighted average, and 

country-wide duty rate determinations on Chinese products, and an 

additional 168 duty rate determinations on market economy products. 

Appendix II provides additional analyses of this data.

As part of our examination, we also performed multivariate regression 

analyses to determine the extent to which duty rate variations could be 

attributed to differences between China and these other countries, or to 

other factors, such as the type of product involved. Appendix III provides 

more information on these analyses and their results.

In addition to comparing China and market economies, we also collected 

information on duty rates that Commerce applied to products from other 

NME countries at the same time as it applied them to similar products from 

either China or a market economy. Appendix III provides information on 

the results of our analyses of this data. 

We did not collect or analyze information on duty rates applied against 

market economy countries in cases where no parallel action was taken 

against China or any other NME country. Therefore, our analyses of market 

economy duty rates are specific to the sample of market economy orders in 

which a corresponding NME order was also in effect. Inclusion of other 

market economy product duty rates may have produced different results. 

However, we determined that the appropriate comparison between China 

and market economy countries was between the 25 similar products. We 

found through our regression analyses (discussed in app. III) that the 

product being investigated does help explain the variation among rates and 

it is, therefore, important to make an appropriate comparison. In addition, 

duty rates for the 43 remaining orders against China alone followed a 

similar pattern as those contained in the 25 cases where we drew 

comparisons with market economy duty rates. The average country-wide 

rate for these 43 orders against China was higher than the country-wide 

rate for the 25 orders (118 percent compared to 98 percent), and the 

average individual rate was lower (41 percent compared to 53 percent) for 

2

The 68 cases resulted in 72 individual orders since the hand tools case included four 

separate types of hand tools and the ceiling and oscillating fans case involved orders against 

both ceiling and oscillating fans.
Appendix I

Scope and Methodology

Page 38 GAO-06-231 U.S.-China Trade

the 18 orders with individual rates. These results were consistent with our 

findings that the country-wide rates tend to be significantly higher than 

individual rates.

In order to group specific products subject to AD orders into groups of 

similar products, we used the Harmonized Tariff Schedule (HTS) 

classifications for each product, as reported in the Federal Register

announcement of the order. The HTS is the official U.S. classification of 

goods imported into the United States and includes 99 chapters covering all 

goods imports. In addition, the HTS chapters are grouped into larger 

sections that cover broad types of related products. The categories we used 

in this report are based on these HTS sections and chapters. Specifically, 

the category “Chemicals, plastics, pharmaceuticals” comprises HTS 

chapters 28 through 40 (which includes all chapters under the section 

“Chemical or allied industries”). The category “Steel, other metals” 

comprises HTS chapters 72 through 81 (which includes most chapters 

under the section “Base metals and articles of base metals” except those 

chapters covering articles of base metals). The category “Agricultural 

products” comprises HTS chapters 1 through 24 (which includes all 

chapters under the sections “Live animals; animal products,” “Vegetable 

products,” “Animal or vegetable fats, etc.,” and “Prepared foodstuffs, 

beverages, spirits, and vinegar; tobacco and manufactured tobacco 

substitutes”). The category “Other products” comprises all other HTS 

chapters. 

We conducted our work from June 2005 through December 2005 in 

accordance with generally accepted government auditing standards.
Page 39 GAO-06-231 U.S.-China Trade

Appendix II

Additional Information on Duty Rates Applied 

to China and Market Economy Countries ApendxiI

This appendix provides additional information on the antidumping (AD) 

duty rate data that we assembled for this report and provides some 

additional analytical information, including brief discussions of variation in 

the duty rates applied to China over time, Department of Commerce 

(Commerce) determinations on whether Chinese companies should be 

considered eligible for individual rates, and duty rates applied to selected 

market economy countries. 

Duty Rates Imposed on 

China

The overall average duty rate for all 68 orders against China from 1980 

through 2004 was 65 percent. This was the result of 72 country-wide rates 

(on 68 products) with an average duty of 111 percent and 158 individual 

company rates with an average duty of 44 percent.1

 These rates ranged 

from zero to about 384 percent (see table 3). In our analysis, we identified 

25 orders against China in which there was also an order against a market 

economy country on the same product put in place within 1 year from the 

order against China. Table 3 shows overall average duty rates from the 25 

orders against China that were matched to market economy cases and the 

43 orders in which no market economy order was identified. Table 4 at the 

end of this appendix provides information on each of the 68 orders against 

China, and table 5 provides comparative information for each of the 25 

cases in which duties were also applied against market economy 

producers.

1

There were more than 68 country-wide rates because in two cases Commerce calculated 

more than 1 country-wide rate for China. For hand tools (1991), Commerce calculated 4 

separate country-wide rates based on the four different types of hand tools under 

investigation. Similarly, for oscillating and ceiling fans (1991), Commerce issued 2 separate 

country-wide rates—1 for oscillating fans and 1 for ceiling fans. Technically, these two cases 

resulted in six separate orders, although we count them as two orders. Since our analysis 

includes all of the rates in these six orders, the results are not affected either way.
Appendix II

Additional Information on Duty Rates 

Applied to China and Market Economy 

Countries

Page 40 GAO-06-231 U.S.-China Trade

Table 3: Summary Data on China AD Duty Orders, 1980–2004

Source: GAO AD database.

Note: The overall average individual duty rates listed in this table for the “matching” orders are for the 

25 products with both China and market economy orders. However, only 18 of these products had 

individual rates imposed on both China and at least one other market economy. We use these 18 

products for our comparison of individual company duty rates imposed on China and market 

economies, rather than the 25 products, in the rest of the report. The average individual company duty 

rate imposed on China for these 18 products is 53 percent, rather than 52 percent.

About 78 percent (53 AD orders) of the 68 AD orders included not only 

country-wide rates but also individually calculated rates for at least one 

Chinese company. Of these, about 54 percent (37 orders) included 

company-specific rates that were lower than the country-wide rates 

imposed in the same cases. With regard to nonmalleable cast iron pipe 

fittings, for example, two Chinese companies submitted detailed 

information and met Commerce’s criteria for assignment of individually 

determined rates. Other Chinese pipe fitting companies, however, did not 

provide any information. Commerce assigned the two cooperating 

companies duty rates of between 6 and 8 percent—a fraction of the 76 

percent country-wide duty rate applied in this case.2

Only 15 orders issued against China during this period included just a 

country-wide rate. Most of these orders date from the period before 1991 

when Commerce had not yet begun applying its separate rates test. 

However, from 1991 through 1995 Commerce issued six orders that 

contained only a country-wide rate. In most of these cases, Chinese 

Type of rate

Number of 

rates

Mean

(%)

Minimum

(%)

Maximum

(%)

25 orders matched to similar 

market economy orders

Individual company rates 50 52 0 162

Country-wide rate 25 98 3 218

Total 75 67 0 218

43 orders not matched to similar 

market economy orders

Individual company rates 108 41 0 292

Country-wide rate 47 118 1 384

Total 155 64 0 384

All 68 orders Individual company rates 158 44 0 292

Country-wide rate 72 111 1 384

Grand total 230 65 0 384

2

Notice of Final Determination of Sales at Less Than Fair Value: Non-Malleable Cast Iron 

Pipe Fittings from the People’s Republic of China, 68 Fed. Reg. 7765 (Feb. 18, 2003).
Appendix II

Additional Information on Duty Rates 

Applied to China and Market Economy 

Countries

Page 41 GAO-06-231 U.S.-China Trade

companies failed to respond to Commerce requests for information. For 

example, in one case Commerce solicited information through both the 

Chinese government and the relevant Chinese industry association. 

However, the industry association responded that no Chinese producer or 

exporter wanted to participate in Commerce’s investigation. Commerce, 

therefore, used facts available to establish a country-wide duty rate of 

about 156 percent.3

In 12 of the 68 orders, all the individual rates issued were equal to the 

country-wide rate. In some cases, Commerce specified an individual rate 

for one company and then used this rate as “facts available” to establish a 

country-wide duty rate at the same level.4

 For example, in its investigation 

of refined brown aluminum oxide from China, Commerce requested 

information from the government of China and more than 20 Chinese 

companies. Only one of these companies responded. Commerce found that 

this company qualified for its own duty rate and determined that this rate 

should be about 135 percent. Commerce determined that the failure of the 

other companies to provide requested information justified application of 

an adverse inference to determine the country-wide rate. Since the rate 

established for the lone cooperating company was higher than any of the 

rates suggested in the petition requesting imposition of duties on this 

product, Commerce set the country-wide rate equal to the rate applied to 

the one cooperating company—135 percent.5

3

Notice of Final Determination of Sales at Less than Fair Value: Glycine from the People’s 

Republic of China, 60 Fed. Reg. 5620 (Jan. 30, 1995). In two cases, Chinese companies did 

provide information but nonetheless did not receive an individually determined rate. In the 

first case, Chinese companies did not request consideration for an individual rate. In the 

second, Commerce denied eligibility on the grounds that the company in question was a 

state-owned enterprise. See Notice of Final Determination of Sales at Less than Fair 

Value: Pure Magnesium and Alloy Magnesium from the People’s Republic of China, 60 

Fed. Reg. 16437 (Mar. 30, 1995) and Final Determination of Sales at Less than Fair Value: 

Certain Compact Ductile Iron Waterworks Fittings and Accessories Thereof from the 

People’s Republic of China, 58 Fed. Reg. 37908 (July 14, 1993).

4

Commerce officials clarified they have recently stopped including in duty orders the names 

of individual companies that have been assigned the country-wide rate because they have 

failed the separate rates test. However, Commerce still lists individual companies that pass 

the separate rates test but for other reasons receive an adverse inference-based rate—which 

may be the same as the country-wide rate.

5

Notice of Final Determination of Sales at Less than Fair Value: Refined Brown 

Aluminum Oxide from the People’s Republic of China, 68 Fed. Reg. 55589 (Sept. 26, 2003). 

No other countries were included in this investigation.
Appendix II

Additional Information on Duty Rates 

Applied to China and Market Economy 

Countries

Page 42 GAO-06-231 U.S.-China Trade

Duty Rates against China 

Have Fluctuated over Time 

We found that there was a slight tendency for duty rates applied against 

Chinese products to rise over the period of our analysis, as well as to 

fluctuate over time. As figure 9 shows, individual company and countrywide duty rates tended to be larger from 1992-2004 than from 1980-1991. In 

addition, the individual company rates demonstrate a cyclical pattern over 

time. In our regression analysis, we found that there was a small positive 

trend in AD duty rates against China over time that was statistically 

significant. This result is consistent with research that has shown that 

overall U.S. AD margins have increased over time.6

Figure 9: Average Country-Wide and Individual Rates, All Orders against China, 

1980-2004

6

See Bruce Blonigen, “Evolving Discretionary Practices of U.S. Antidumping Activity” 

National Bureau of Economic Research, Working Paper #9625 (April 2003).

0

50

100

150

200

250

Country-wide rates

Individual rates

200

2004

3

2002

199

1999

2000

2001

8

1997

1996199

1994

1995

3

191990

1991

1992

89

1988

1987

1986

1985

1984

1983

1982

1981

1980

Percentage

Year

Source: GAO AD database.
Appendix II

Additional Information on Duty Rates 

Applied to China and Market Economy 

Countries

Page 43 GAO-06-231 U.S.-China Trade

Note: Commerce did not issue any new AD duty orders against China in 1980, 1981, 1982, 1985, 

1987, 1988, 1989, or 1998. In the tapered roller bearings cases, Commerce put an order in place in 

1987 but amended it in 1990. We use 1990 information in the above graphic. 

Average Duty Rates on 68 

Orders against China and 

Subset of 25 Orders 

Matched to Market 

Economy Orders

Table 4 shows the duty rates on the 68 orders imposed on China between 

1980 and 2004. Table 5 then shows the duty rates on the 25 orders imposed 

on China in which we also found matching orders imposed on market 

economies. 

Table 4: Average Duty Rates for 68 Orders against China, 1980–2004

Individual company rates

Year and product

Average (all 

rates) (%)

Average countrywide rate (%)Number 

of rates Average (%) Minimum (%) Maximum (%)

(1983) Cotton shop towels 35 36 2 34 30 37

(1983) Greig polyester cotton print 

cloth 22 22

(1984) Barium chloride 15 15 1 15 15 15

(1984) Chloropicrin 58 58 1 58 58 58

(1984) Potassium permanganate 40 40 1 40 40 40

(1986) Iron construction castings 12 12

(1986) Paint brushes 127 127

(1986) Porcelain-on-steel cookware 67 67

(1986) Steel wire nails 6 6

(1986) Wax candles 54 54 1 54 54 54

(1990) Industrial nitrocellulose 78 78 1 78 78 78

(1990) Tapered roller bearings 3 3 2 3 1 5

(1991) Chrome-plated lug nuts 42 42 1 42 42 42

(1991) Hand tools 36 36

(1991) Oscillating fans and ceiling fans 1 1 8 1 0 2

(1991) Silicon metal 139 139

(1991) Sparklers 59 76 3 54 2 94

(1991) Sulfur chemicals 28 28

(1991) Tungsten ore concentrates 151 151

(1992) Carbon steel butt-weld pipe 

fittings 114 183 6 102 35 155

(1992) Sulfanilic acid 52 85 1 19 19 19
Appendix II

Additional Information on Duty Rates 

Applied to China and Market Economy 

Countries

Page 44 GAO-06-231 U.S.-China Trade

(1993) Compact ductile iron 

waterworks 127 127

(1993) Ferrosilicon 138 138

(1993) Helical spring lock washers 89 129 2 70 70 70

(1994) Cased pencils 14 45 4 6 0 17

(1994) Garlic 377 377

(1994) Paper clips 73 127 3 55 46 61

(1994) Sebacic acid 98 243 4 61 44 85

(1994) Silicomanganese 150 150

(1995) Furfuryl alcohol 46 45 2 47 44 50

(1995) Glycine 156 156

(1995) Pure magnesium 1 108 108

(1996) Manganese metal 33 143 4 6 1 12

(1996) Polyvinyl alcohol 1 78 117 2 58 0 117

(1997) Brake rotors 10 43 6 5 0 16

(1997) Collated roofing nails 39 118 2 0 0 0

(1997) Coumarin 87 161 2 51 31 70

(1997) Crawfish 133 202 5 120 92 157

(1997) Melamine dinnerware 2 7 4 1 0 3

(1997) Persulfates 55 119 3 34 32 35

(1999) Mushrooms 155 199 4 144 121 162

(2000) Apple juice 19 52 7 14 0 28

(2000) Bulk aspirin 57 144 2 14 11 17

(2000) Creatine 47 154 6 30 0 58

(2000) Synthetic indigo 96 130 2 80 80 80

(2001) Certain hot-rolled carbon steel 

flat products 76 91 4 73 64 91

(2001) Foundry coke products 109 215 4 83 49 106

(2001) Honey 72 184 4 45 26 57

(2001) Pure magnesium 2 165 306 1 25 25 25

(2001) Steel concrete reinforcing bars 133 133 1 133 133 133

(2002) Automotive replacement glass 

windshields 37 125 3 8 4 12

(2002) Certain folding gift boxes 58 165 2 5 2 9

(2002) Folding metal tables and folding 

metal chairs 28 71 2 7 0 14

(2003) Barium carbonate 58 81 1 34 34 34

(Continued From Previous Page)

Individual company rates

Year and product

Average (all 

rates) (%)

Average countrywide rate (%)Number 

of rates Average (%) Minimum (%) Maximum (%)
Appendix II

Additional Information on Duty Rates 

Applied to China and Market Economy 

Countries

Page 45 GAO-06-231 U.S.-China Trade

Source: GAO AD database.

Note: The average (all rates) is calculated as the average of the country-wide rate and each of the 

individual company rates that Commerce issued in its order.

(2003) Certain malleable iron pipe 

fittings 31 111 4 11 7 16

(2003) Cut to length carbon steel plate 62 129 5 49 17 129

(2003) Ferrovanadium 40 67 1 13 13 13

(2003) Lawn and garden steel fence 

posts 6 16 3 2 0 7

(2003) Non-malleable cast iron pipe 

fittings 30 76 2 7 6 7

(2003) Polyvinyl alcohol 2 52 98 1 7 7 7

(2003) Refined brown aluminum oxide 135 135 1 135 135 135

(2003) Saccharin 288 330 3 274 249 292

(2004) Carbazole violet pigment 23 74 218 3 26 6 45

(2004) Certain color television 

receivers 27 78 5 17 5 26

(2004) Hand trucks 105 384 4 35 26 46

(2004) Ironing tables 99 158 3 80 9 158

(2004) Polyethylene retail carrier bags 27 78 8 21 0 41

(2004) Tetrahydrofurfuryl alcohol 137 137 1 137 137 137

Total 65 111 158 44 0 292

(Continued From Previous Page)

Individual company rates

Year and product

Average (all 

rates) (%)

Average countrywide rate (%)Number 

of rates Average (%) Minimum (%) Maximum (%)
Appendix II

Additional Information on Duty Rates 

Applied to China and Market Economy 

Countries

Page 46 GAO-06-231 U.S.-China Trade

Table 5: Average Duty Rates for 25 Products with Orders against both China and Market Economies, 1980–2004

Individual company rates

Product and year

Country and number 

of orders

Average

(all rates)

(%)

Average 

country-wide 

or all- others 

rate

(%)

Number 

of rates

Average

(%)

Minimum

(%)

Maximum

(%)

Carbazole violet 

pigment 23 (2004)

China 74 218 3 26 6 45

Market economies (1) 29 27 2 30 10 50

Carbon steel butt-weld 

pipe fittings (1992)

China 114 183 6 102 35 155

Market economies (1) 25 39 3 21 0 51

Certain hot-rolled 

carbon steel flat 

products (2001)

China 76 91 4 73 64 91

Market economies (7) 24 23 11 25 3 48

Chrome-plated lug nuts 

(1991)

China 42 42 1 42 42 42

Market economies (1) 8 7 2 9 6 11

Collated roofing nails 

(1997)

China 39 118 2 0 0 0

Market economies (1) 22 3 3 28 3 40

Ferrosilicon (1993) China 138 138 0

Market economies (2) 27 23 4 29 3 89

Ferrovanadium (2003) China 40 67 1 13 13 13

Market economies (1) 116 116 2 116 116 116

Furfuryl alcohol (1995) China 46 45 2 47 44 50

Market economies (2) 10 10 2 10 8 12

Helical spring lock 

washers (1993)

China 89 129 2 70 70 70

Market economies (1) 32 32 3 32 32 32

Honey (2001) China 72 184 4 45 26 57

Market economies (1) 36 30 3 38 27 55

Industrial nitrocellulose 

(1990)

China 78 78 1 78 78 78

Market economies (6) 37 37 6 37 4 66

Iron construction 

castings (1986)

China 12 12 0

Market economies (3) 11 12 10 11 0 59

Melamine institutional 

dinnerware (1997)

China 2 7 4 1 0 3

Market economies (2) 18 6 6 22 0 53

Polyethylene retail 

carrier bags (2004)

China 27 78 8 21 0 41

Market economies (2) 81 44 10 88 2 123

Polyvinyl alcohol 1 

(1996)

China 78 117 2 58 0 117

Market economies (2) 63 48 6 68 19 77
Appendix II

Additional Information on Duty Rates 

Applied to China and Market Economy 

Countries

Page 47 GAO-06-231 U.S.-China Trade

Source: GAO AD database.

Notes: 

The average (all rates) is calculated as the average of the country-wide rate and each of the individual 

company rates that Commerce issued in its order.

The overall average individual duty rates listed in this table are for the 25 products with both China and 

market economy orders. However, only 18 of these products had individual rates imposed on both 

China and at least one other market economy. We use these 18 products for our comparison of 

individual company duty rates imposed on China and market economies, rather than the 25 products, 

in the rest of the report. The average individual company duty rate imposed on China for these 18 

products is 53 percent and for market economies it is 55 percent.

Polyvinyl alcohol 2 

(2003)

China 52 98 1 7 7 7

Market economies (2) 103 54 5 123 39 144

Porcelain-on-steel 

cooking ware (1986)

China 67 67 0

Market economies (2) 15 17 8 15 2 57

Potassium 

permanganate (1984)

China 40 40 1 40 40 40

Market economies (1) 5 5 1 5 5 5

Preserved mushrooms 

(1999)

China 155 199 4 144 121 162

Market economies (3) 86 57 7 98 6 244

Silicomanganese 1 

(1994)

China 150 150 0

Market economies (1) 41 18 1 65 65 65

Silicon metal (1991) China 139 139 0

Market economies (2) 58 50 3 63 9 93

Steel concrete 

reinforcing bars (2001)

China 133 133 1 133 133 133

Market economies (4) 57 37 12 64 17 102

Sulfanilic acid (1992) China 52 85 1 19 19 19

Market economies (1) 115 115 0

Sulfur chemicals (1991) China 28 28 0

Market economies (2) 75 75 2 75 50 100

Tapered roller bearings 

(1987)

China 3 3 2 3 1 5

Market economies (3) 54 65 2 36 36 37

Total China 67 98 50 52 0 162

Market economies 

(54) 44 37 114 48 0 244

(Continued From Previous Page)

Individual company rates

Product and year

Country and number 

of orders

Average

(all rates)

(%)

Average 

country-wide 

or all- others 

rate

(%)

Number 

of rates

Average

(%)

Minimum

(%)

Maximum

(%)
Page 48 GAO-06-231 U.S.-China Trade

Appendix III

Regression Analysis Results ApendxiI

In order to examine the difference between duty rates applied to China and 

those applied to market economy countries, we performed multivariate 

regression analyses on the cases in which the Department of Commerce 

(Commerce) applied duties to both China and at least one market economy 

country. These involved 25 different products, affected by 25 duty orders 

against China, and 54 duty orders against market economies. Multivariate 

regression analysis makes it possible to examine the simultaneous effect of 

several different factors on the duty rates and to determine the extent to 

which these factors, taken together, explain variation in these rates. To 

determine whether our analytical results for China held true for all 

nonmarket economy (NME) countries, we also identified six instances in 

which Commerce applied duties to a nonmarket economy other than 

China, and at least one market economy country, and reran our analyses 

using data for all 31 products. 

Table 6 shows the results of our multivariate regression analysis of 

variation in the dependent variable (the antidumping [AD] duty rate) 

attributable to the following independent variables:

• China (a variable indicating whether the AD duty rate is for China or 

not)

• the country-wide rate (a variable indicating whether the AD duty rate is 

a country-wide rate), and

• year (a variable indicating the year in which the duty went into affect).

We also included a constant term. The regression involved 25 products 

covered by 25 orders against China and 54 orders against market 

economies and included a total of 243 duty rates (the dependent variable) 

from these 79 orders. 

The results show that the variable for China as the target country had a 

coefficient of 3.002 percent, indicating that duty rates against China tended 

to be about 3 percentage points higher than those against market 

economies, on average. However, this coefficient is not statistically 

significant, meaning that there was no statistically significant difference 

between the rates assigned to China and market economy countries, when 

the other factors in the regression are included. The coefficient for the 

country-wide rate, on the other hand, shows that there is a 52 percentage 

point difference between country-wide rates against China and other rates. 

This result is statistically significant at above the 99 percent level. The 
Appendix III

Regression Analysis Results

Page 49 GAO-06-231 U.S.-China Trade

variable for the year of the order is also statistically significant, but it has a 

small coefficient.1 The adjusted R-square measure shows that about 15 

percent of the overall variation in duty rates is explained by the 

independent variables included here.

Table 6: Results of Multivariate Regression Analysis of Duty Rates on Explanatory 

Variables for China, Country-Wide Rates, and Year

Source: GAO analysis of Commerce data.

Note: R-square = 0.164; Adjusted R-square = 0.154; Observations = 243.

We then included additional variables for product groups, such as 

agriculture and steel, and, in separate regressions, individual product 

variables for each type of product. The additional variables generally 

improved the overall “fit” of the regression; the adjusted R-square measure 

with the individual product variables included showed that the regression 

explained between 24 and 31 percent of the overall variation in duty rates 

across the sample compared with 15 percent in the regression above. Also, 

certain types of products, such as agriculture products, tended to have 

higher duty rates relative to other types.

Table 7 shows the regression results when individual product variables are 

included. Once again the coefficient for China is insignificant, while the 

coefficient for the country-wide rate is significant at the 99 percent level. 

Some coefficients for individual products are significant (e.g., carbon steel 

butt-weld pipe fittings), but many are not. The overall adjusted R-square 

measure shows that this regression model explains about 31 percent of 

total variation in the duty rates.

1

In other analyses in which we added variables for the types of product involved, the 

variable “year” becomes insignificant. Overall, we found mixed evidence of whether there is 

a positive trend over time in duty rates for this group of cases. (See appendix II.)

Dependent variable = AD duty rate

Independent 

variables

Unstandardized 

coefficients

(B)

Standard 

error

Standardized 

coefficients 

(Beta) t-statistic

Significance 

of t-statistic

China 3.002 7.511 .028 .400 .690

Year 2.095 .497 .252 4.218 .000

Country-wide 

rate 52.050 11.398 .316 4.567 .000
Appendix III

Regression Analysis Results

Page 50 GAO-06-231 U.S.-China Trade

Table 7: Results of Multivariate Regression Analysis of Duty Rates on Explanatory Variables for China, Country-Wide Rates, and 

Individual Products

Source: GAO analysis of Commerce data.

Note: R-square = 0.386; Adjusted R-square = 0.309; Observations = 243.

In order to examine the effect of applying adverse inferences and facts 

available (other than adverse inferences) on the duty rates, we added 

Dependent variable = AD duty rate

Independent variables

Unstandardized 

coefficients

(B)

Standard 

error

Standardized 

coefficients 

(Beta) t-statistic

Significance of 

t-statistic

China 2.055 7.302 .019 .281 .779

Year -6.022 20.636 -.726 -.292 .771

Country-wide rate 50.928 10.609 .309 4.801 .000

Carbazole violet pigment 23 (2004) 113.617 269.338 .380 .422 .674

Carbon steel butt-weld pipe fittings (1992) 70.893 30.579 .294 2.318 .021

Certain hot-rolled carbon steel flat 

products (2001) 82.479 207.275 .482 .398 .691

Collated roofing nails (1997) 46.480 126.162 .155 .368 .713

Ferrosilicon (1993) 40.090 58.403 .134 .686 .493

Ferrovanadium (2003) 136.023 249.034 .386 .546 .585

Furfuryl alcohol (1995) 30.585 86.044 .102 .355 .723

Helical spring lock washers (1993) 49.701 47.927 .166 1.037 .301

Honey (2001) 98.896 207.608 .373 .476 .634

Industrial nitrocellulose (1990) 21.805 30.079 .101 .725 .469

Iron construction castings (1986) -33.870 105.554 -.158 -.321 .749

Melamine institutional dinnerware (1997) 32.449 125.663 .146 .258 .796

Polyethylene retail carrier bags (2004) 122.291 268.962 .686 .455 .650

Polyvinyl alcohol 1 (1996) 81.135 105.532 .337 .769 .443

Polyvinyl alcohol 2 (2003) 147.492 248.661 .556 .593 .554

Porcelain-on-steel cooking ware (1986) -25.756 105.698 -.107 -.244 .808

Potassium permanganate (1984) -44.131 147.104 -.112 -.300 .764

Preserved mushrooms (1999) 141.530 163.666 .680 .865 .388

Silicomanganese 1 (1994) 67.142 69.110 .148 .972 .332

Silicon metal (1991) 51.868 25.308 .161 2.049 .042

Steel concrete reinforcing bars (2001) 111.738 207.339 .584 .539 .591

Sulfanilic acid (1992) 51.956 41.151 .115 1.263 .208

Sulfur chemicals (1991) 44.355 26.424 .126 1.679 .095

Tapered roller bearings (1987) -7.471 85.958 -.027 -.087 .931
Appendix III

Regression Analysis Results

Page 51 GAO-06-231 U.S.-China Trade

additional variables indicating when Commerce used these approaches. 

The results show that application of adverse inferences is a significant 

variable and has a large effect on the duty rates, but that application of 

facts available (other than adverse inferences) is not. When adverse 

inferences are introduced, this results in the country-wide rate variable 

becoming insignificant (see table 8). However, this is likely due to the fact 

that the adverse inferences variable is highly correlated with the countrywide rate. Therefore, it is not surprising that the country-wide rate is no 

longer significant since the adverse inferences variable is already 

accounting for much of the variation. In addition, the variable for China 

once again becomes significant. As we discuss in the body of this report, 

Commerce uses adverse inferences in very few determinations for Chinese 

companies granted their own rates. Adverse inferences were applied in 

making only 3 out of the 50 individual determinations used in this analysis. 

However, Commerce used adverse inferences in nearly half of its 

determinations against individual market economy companies. 

Since adverse inferences are already factored into this model, as is the 

country-wide rate, the remaining differences accounted for by the China 

variable in table 3 are between individual (noncountry-wide) Chinese rates 

and individual market economy rates in which adverse inferences are not 

used. Table 8 shows that there is a statistically significant 27 percentage 

point difference between these rates. However, because there are 

methodological differences between the NME and market economy 

methodologies for individual companies, it is not clear how often adverse 

inferences would be used against individual Chinese companies should 

they move to a market economy methodology. In other words, we cannot 

predict the extent to which, under a market economy methodology, 

individual Chinese companies would cooperate with Commerce or 

Commerce would find it necessary to use adverse inferences in its 

determinations against Chinese companies. It is possible that some 

Chinese companies that currently have an individually determined rate 

under the NME methodology would face adverse inferences under a 

market economy methodology, whereas others would not. This could 

produce a result similar to the market economy cases we have examined in 

which the overall average (for example, 55 percent) is the result of some 

companies receiving comparatively high duty rates (e.g., 77 percent) when 

adverse inferences are used and others receiving comparatively low rates 

(e.g., 16 percent) when adverse inferences are not used (see table 2). In any 

case, these results show that there is a remaining difference between these 

two groups after accounting for the use of adverse inferences and the 

country-wide rate. 
Appendix III

Regression Analysis Results

Page 52 GAO-06-231 U.S.-China Trade

Table 8: Results of Multivariate Regression Analysis of Duty Rates on Explanatory Variables for China, Country-Wide Rates, 

Adverse Inferences, Other Facts Available, and Individual Products

Source: GAO analysis of Commerce data.

Note: R-square = 0.562; Adjusted R-square = 0.502; Observations = 243. 

Dependent variable = AD duty rate

Independent variables

Unstandardized 

coefficients

(B)

Standard 

error

Standardized 

coefficients 

(Beta) t-statistic

Significance of 

t-statistic

China 27.342 6.856 .252 3.988 .000

Year 4.831 17.572 .582 .275 .784

Country-wide rate 9.910 10.064 .060 .985 .326

Adverse inferences 60.196 6.845 .587 8.794 .000

Facts available 10.135 8.495 .069 1.193 .234

Carbazole violet pigment 23 (2004) -40.728 229.493 -.136 -.177 .859

Carbon steel butt-weld pipe fittings (1992) 39.749 26.189 .165 1.518 .131

Certain hot-rolled carbon steel flat 

products (2001) -57.704 176.678 -.337 -.327 .744

Collated roofing nails (1997) -45.478 107.679 -.152 -.422 .673

Ferrosilicon (1993) -3.176 49.788 -.011 -.064 .949

Ferrovanadium (2003) -40.348 212.436 -.114 -.190 .850

Furfuryl alcohol (1995) -13.868 73.344 -.046 -.189 .850

Helical spring lock washers (1993) -18.938 41.354 -.063 -.458 .647

Honey (2001) -31.946 176.875 -.121 -.181 .857

Industrial nitrocellulose (1990) 8.668 25.589 .040 .339 .735

Iron construction castings (1986) 25.459 89.838 .118 .283 .777

Melamine institutional dinnerware (1997) -53.825 107.215 -.242 -.502 .616

Polyethylene retail carrier bags (2004) -55.280 229.336 -.310 -.241 .810

Polyvinyl alcohol 1 (1996) -5.196 90.169 -.022 -.058 .954

Polyvinyl alcohol 2 (2003) -22.256 211.996 -.084 -.105 .916

Porcelain-on-steel cooking ware (1986) 32.037 89.998 .133 .356 .722

Potassium permanganate (1984) 33.392 125.194 .085 .267 .790

Preserved mushrooms (1999) 32.301 139.519 .155 .232 .817

Silicomanganese 1 (1994) 3.633 59.124 .008 .061 .951

Silicon metal (1991) 39.950 22.201 .124 1.799 .073

Steel concrete reinforcing bars (2001) -41.334 176.900 -.216 -.234 .815

Sulfanilic acid (1992) -1.893 35.427 -.004 -.053 .957

Sulfur chemicals (1991) -8.757 23.151 -.025 -.378 .706

Tapered roller bearings (1987) 12.952 73.025 .046 .177 .859
Appendix III

Regression Analysis Results

Page 53 GAO-06-231 U.S.-China Trade

In order to examine whether the above results hold for all NMEs, we ran 

the same regressions for a larger set of 31 products (compared with the 25 

products above) in which we found matching cases between nonmarket 

economies other than China and market economies. The data set on these 

31 products included rates from 128 orders (26 on China, 82 on market 

economies, and 20 on NMEs other than China) that contained 355 duty 

rates (dependent variable).

These analyses confirmed our China-market economy only analyses but 

also showed that other NME countries tend to have duty rates that are 

statistically higher than market economy rates for this sample of matching 

cases. (Note that the number of additional products—six—is relatively 

small.) Controlling for both the NME designation and the country-wide 

rate, the NME designation itself is a significant variable at the 97 percent 

level of confidence with a coefficient of 23 percent (the coefficient for 

China is not statistically significant). The country-wide variable is also 

significant (99 percent level) and larger with a coefficient of 48 percent. As 

additional variables are added for individual products, the NME 

designation continued to be significant along with the country-wide rate 

variable. 

There may be other systematic factors not accounted for in this regression 

model that would explain some of the variability not accounted for by the 

variables we included. As shown in table 7, our model accounted for about 

50 percent (half) of the variation in rates. Some of this variation may be 

idiosyncratic and related to differences in individual companies’ practices, 

other may relate to how Commerce has implemented its analysis. However, 

these unexplained factors do not appear to be systematically related to 

whether the case involved China or a market economy since the regression 

analysis already controls for that difference.
Page 54 GAO-06-231 U.S.-China Trade

Appendix IV

Comments from the Department of 

Commerce ApendxiIV

Note: GAO comments 

supplementing those in 

the report text appear 

at the end of this 

appendix.

See comment 1.
Appendix IV

Comments from the Department of 

Commerce

Page 55 GAO-06-231 U.S.-China Trade

See comment 2.
Appendix IV

Comments from the Department of 

Commerce

Page 56 GAO-06-231 U.S.-China Trade

The following are GAO’s comments on the Department of Commerce’s 

letter dated December 8, 2005.

GAO Comments 1. We re-examined our data, making corrections as appropriate, and 

updated our analyses. The report reflects these corrections, though 

they did not have a significant impact on any of our findings.

2. As discussed in the report, the overall difference between the duty rates 

applied to China and those applied to market economy countries is 

largely explained by the application of comparatively high countrywide rates to China. Therefore, the model allows us to conclude that 

elimination of the NME methodology—and thus these country-wide 

rates—would result in lower duties for some Chinese companies. 

Nevertheless, there would still be variation in duty rates among 

companies and products due to a range of other factors.
Page 57 GAO-06-231 U.S.-China Trade

Appendix V

GAO Contact and Staff Acknowledgments ApendxiV

GAO Contact Loren Yager (202) 512-4347

Staff 

Acknowledgments

In addition to the individual named above, Adam R. Cowles, Monica Ghosh, 

R. Gifford Howland, Michael McAtee, Richard Seldin, Ross Tuttleman, 

Roberto Walton, and Timothy Wedding made significant contributions to 

this report.

(320327)
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