In a groundbreaking December 2003 verdict, a US federal district court jury in Iowa awarded over $30 million in damages to a US printing press manufacturer for injuries caused by the illegal “dumping” of low-priced printing presses by a Japanese manufacturer and its U.S. subsidiary. The suit was brought in US federal district court under the Antidumping Act of 1916, an obscure federal law that authorizes civil and criminal penalties and treble damages for dumping as defined in the law (see below) with the intent to cause injury or restrain or monopolize trade. The jury found the dumping of Japanese-made printing presses by Tokyo Kikai Seisakusho (TKS) Ltd. and its US subsidiary TKS (USA) Inc. caused Goss Graphic Systems of Illinois to lose over $10 million of sales profits and related capital gains. Because of the 1916 Act’s trebling provision, unless the jury’s verdict is reversed, TKS and its subsidiary must pay Goss over $30 million in damages. Goss earlier had accepted settlement of its 1916 Act claims against three other Japanese and German newspaper printing press manufacturers.

Although enacted 88 years ago, the 1916 Act (15 USC § 72) has been used very rarely, and until the Iowa verdict never resulted in an actual damages award. Goss’ success, however, could increase interest in 1916 Act claims among US producers seeking a non-traditional avenue to blunt import competition. Congress, in response to a recent World Trade Organization ruling that the 1916 Act violates the WTO agreements, is considering legislation that would repeal the law but protect lawsuits filed before the repeal date. This legislation may perversely increase 1916 Act claim filings this year and next as U.S. companies rush to file claims before the repeal date.

The 1916 Act makes it unlawful to dump imported merchandise (defined as “commonly and systematically to import, sell or cause to be imported or sold” articles in the United States that are priced “substantially less” than the actual or wholesale price of the article in the foreign country where the article was produced or a third country where the article is commonly exported) with the intent to destroy, injure, or prevent the establishment of a U.S. industry, or to restrain or monopolize trade. The 1916 Act was originally intended to extend to import transactions Section 2 of the Clayton Antitrust Act, which prohibits a seller from discriminating as to price between two US purchasers of commodities of like grade and quality where the effect of the discrimination is to restrain or monopolize trade or injure or destroy competition. Courts originally interpreted the 1916 Act as requiring plaintiffs to demonstrate “predatory” pricing intent (i.e., pricing below the supplier’s average variable costs), which is required by domestic antitrust statutes. However, several courts recently ruled that “predatory” intent need not be shown, thus easing the burden of proving 1916 Act claims.

The 1916 Act was a predecessor statute to the Tariff Act of 1930 (“the 1930 Act”), which includes what is now commonly referred to as the US antidumping law. Congress passed the 1930 Act partly in response to difficulties U.S. companies encountered in obtaining relief under the 1916 Act. However, Congress failed to abolish the 1916 Act when it passed the 1930 Act. The 1930 Act eased and standardized the requirements for proving dumping claims. For example, a successful claim only requires proof of injury, not intent to injure. The 1930 Act also establishes exact guidelines for calculating whether an importer is dumping, and gives sole jurisdiction for resolving dumping claims to administrative agencies in Washington (currently, the Department of Commerce and International Trade Commission). 1930 Act investigations are also broader in that they cover all producers and an entire class of merchandise (e.g., all newspaper printing presses) from a designated country.

But the 1930 Act added other burdens and reduced the potential penalties on foreign producers found to be dumping. For example, instead of damages and civil or criminal penalties, the 1930 Act only allows for the imposition of antidumping duties on future entries equaling the margin by which a specific foreign producer/exporter is found to be dumping.1 Additionally, a petition for the imposition of antidumping duties must be filed on behalf of a U.S. industry (defined as those producers accounting for a certain percentage of the total value of merchandise produced in the United States) rather than by a single producer alleging injury.

While 1916 Act claims are viewed as more difficult to prove, the law has features that may be attractive for certain US producers. In addition to the treble damages provision, a US producer can recover profits and related damages from lost sales during the previous four years, which is the applicable statute of limitations. A single producer may also file suit, which is advantageous where dumping has caused injury to a specific company, but not to an entire U.S. industry. Finally, a 1916 Act suit can be brought in any federal district where jurisdiction can be established, allowing a plaintiff to select the most favorable venue.

As noted, in March 2000, a WTO dispute resolution panel ruled that the 1916 Act violates provisions of the WTO agreements, and called for its abolishment. The Bush Administration has announced its willingness to abide by the decision, and in late January 2004, the House Judiciary Committee approved a bill that would abolish the Act but allow lawsuits filed before the effective date of the act to continue. Similar legislation is pending before the Senate Finance Committee. Congress, however, is not likely to pass any such legislation this year.

The European Union, impatient with the failure of the United States to abide by the WTO’s decision, noted its intent to impose retaliatory measures. In December 2003, the European Commission adopted a “blocking” regulation that makes 1916 Act judgments unenforceable in EU jurisdictions, and allows EU companies to recover 1916 Act-related damages and costs from the EU-based assets of 1916 Act claimants. Other countries are contemplating similar blocking measures.

In a recent decision, a WTO arbitrator approved retaliation by the EU up to an amount equal to damages awarded under the 1916 Act or payments made to settle 1916 Act claims. The arbitrator, however, did not extend retaliation authority to recovery of litigation costs associated with defending against 1916 Act claims.

Endnotes

1 Although private damages are not available under the 1930 Act, the Continuing Dumping and Subsidy Offset Act of 2000, also known as the “Byrd Amendment” (19 USC § 1675c), authorizes the distribution of antidumping duties to members of the US industry. Previously, duties were paid to the U.S. Treasury. A dispute resolution panel of the World Trade Organization recently found the Byrd Amendment inconsistent with US WTO obligations and called for the United States to abolish the provision. The Bush Administration and several members of Congress have proposed alternatives to the Byrd Amendment that would end the direct payment of duties to industry members, but Congress has yet to consider any of the proposals.