Garlic, More Garlic, China Trade and Fairness: An Update

Earlier this month I wrote about it was not clear whether the U.S. antidumping order on garlic from China helped domestic garlic producers. One of the unusual consequences of this garlic antidumping order was that the California garlic producers had worked out an arrangement that allowed Chinese garlic to be imported from one “fair” supplier (Harmoni), while blocking the vast majority of all other Chinese garlic sourced from “unfair” suppliers.

The latest Department of Commerce (DOC) annual administrative review threatened to destroy that cozy arrangement between the California garlic growers and Harmoni because a couple of New Mexico garlic growers had filed a request seeking DOC review of Harmoni. The DOC had accepted the New Mexico growers’ review request and had initiated a review of Harmoni. Harmoni did not respond to the DOC’s questionnaires, so DOC issued a preliminary determination finding Harmoni would be subject to a 376% dumping rate. But the DOC was still considering arguments that the New Mexico garlic grower’s review request for Harmoni was invalid and should not have been accepted by DOC in the first place.

Last week, the DOC issued its final determination for this garlic review, and concluded that the review request filed by the New Mexico garlic growers was not legitimate and therefore its review for Harmoni and its 375% dumping rate would be rescinded. As a result, Harmoni is able to maintain its zero dumping rate and continue supplying California garlic growers with Chinese garlic.

The DOC rejected the New Mexico garlic growers’ review request because new information submitted after the preliminary determination called into question the credibility of their assertion that they were actually domestic garlic producers. For example, contrary to specific statements made on behalf of the New Mexico garlic growers, the DOC pointed to the record information showing Chinese garlic growers were in fact extensively involved in planning the New Mexico growers’ review request and had both directly and indirectly compensated the New Mexico growers and the U.S. attorney for participating in this review. One of the two New Mexico garlic growers dropped his support for the Harmoni review request and then submitted a bombshell statement admitting that his small garlic farm in New Mexico did not really compete with Chinese garlic. “Our stated moral high ground – ‘leveling the playing field,’ etc., etc. – inevitably came with a ‘wink, wink’ whenever we talked about it.” DOC concluded that “material misrepresentations” by the New Mexico garlic growers had tainted all their statements and information submitted by them and so it could not rely on any of the garlic production information demonstrating the New Mexico garlic growers were in fact domestic producers.

So in the end, the California garlic growers got the DOC decision they wanted, which was to keep Harmoni out of the DOC review process. This allows Harmoni, to continue reaping the benefits from being the only remaining Chinese garlic company with a zero dumping rate. This also allows the California garlic growers to remain protected by incredibly high dumping rates that block most “unfair” Chinese garlic from sold in the United States, while still giving them direct access to cheaper Chinese garlic from the sole “fair” Chinese garlic supplier — Harmoni. In the end though, U.S. consumers bear the cost of protecting the handful of California fresh garlic producers still surviving.

I’m sure there will be other attempts to break down the antidumping barriers that block most Chinese garlic from the U.S. market and keep U.S. garlic prices the highest in the world. Perhaps garlic growers in Minnesota or some other state will file another review request targeting Harmoni.

Someone should.

We will be discussing the practical aspects of Chinese law and how it impacts business there. We will be telling you what works and what does not and what you as a businessperson can do to use the law to your advantage. Our aim is to assist businesses already in China or planning to go into China, not to break new ground in legal theory or policy.