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 Front Cover
 Center information
 Introduction
 The Byrd Amendment
 Implications
 Reference






Group Title: Policy Brief Series - International Agricultural Trade and Policy Center. University of Florida ; no. 04-03
Title: Producer and processor rents under the Byrd Amendment
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Title: Producer and processor rents under the Byrd Amendment
Series Title: Policy Brief Series - International Agricultural Trade and Policy Center. University of Florida ; no. 04-03
Physical Description: Book
Language: English
Creator: Schmitz, Andrew
Schmitz, Troy
Seale, James
Publisher: International Agricultural Trade and Policy Center, Institute of Food and Agricultural Sciences, University of Florida
Institute of Food and Agricultural Sciences, University of Florida
Place of Publication: Gainesville, Fla.
Publication Date: 2004
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Table of Contents
    Front Cover
        Page i
    Center information
        Page ii
    Introduction
        Page 1
    The Byrd Amendment
        Page 2
        Page 3
        Page 4
        Page 5
        Page 6
    Implications
        Page 7
    Reference
        Page 8
Full Text

PBTC 04-03


i -ional Agricultural Trade and Policy Center



PRODUCER AND PROCESSOR RENTS UNDER THE BYRD
AMENDMENT
By
Andrew Schmitz, Troy Schmitz, and James Seale

PBTC 04-03 June 2004


POLICY BRIEF SERIES


i~fr


UNIVERSITY OF
FLORIDA


Institute of Food and Agricultural Sciences


"j_









INTERNATIONAL AGRICULTURAL TRADE AND POLICY CENTER


The International Agricultural Trade and Policy Center (IATPC) was established in 1990
in the Food & Resource Economics Department (FRED) of the Institute of Food and
Agricultural Sciences (IFAS) at the University of Florida. Its mission is to provide
information, education, and research directed to immediate and long-term enhancement
and sustainability of international trade and natural resource use. Its scope includes not
only trade and related policy issues, but also agricultural, rural, resource, environmental,
food, state, national and international policies, regulations, and issues that influence trade
and development.

The Center's objectives are to:

Support initiatives that enable a better understanding of U.S. and international
trade policy issues impacting the competitiveness of Florida agriculture and all
specialty crops and livestock nationwide;
Serve as a nationwide resource base for research on international agricultural
trade policy issues on all specialty crops and livestock;
Disseminate agricultural trade related research results and publications;
Interact with researchers, business and industry groups, state and federal agencies,
and policymakers to examine and discuss agricultural trade policy questions.

Programs in the IATPC have been organized around five key program areas.

Risk Management and Capital Markets
Agricultural Labor
Regulatory Policy and Competitiveness
Demand Systems and International Trade
State and Local Government Policy and Agricultural Competitiveness.

There are 10 faculty from the Food & Resource Economics Department who conduct
research in these program areas for the IATPC. Each of these program areas has a set of
projects that have been undertaken to address these critical areas of need. Faculty have
acquired additional grant funds of more than one million dollars over the last three years
to augment these programs.









Producer and Processor Rents Under the Byrd Amendment

Andrew Schmitz, Troy Schmitz, and James Seale*



I. Introduction

The Continued Dumping and Subsidy Offset Act (CDSOA) of 2000 allows

producers and processors who successfully petition the U.S. government to impose

antidumping (AD) or countervailing (CV) tariffs on competing imports to keep the

proceeds of those tariffs. Also known as the Byrd Amendment, it has already provided

benefits to a variety of producers and processors in the United States, including more

than $7 million1 to Louisiana crayfish producers and processors and $65 million to U.S.

candle makers. These benefits originated from AD duties imposed on U.S. imports of

Chinese products (King 2002). One U.S. candle company, Candle-Lite, received $38

million in fiscal year 2002, while a ball-bearings company, Torrington, received $37

million in 2002 (U.S. Customs Service, 2003). The Byrd Amendment also has financial

implications for commodities, including citrus, steel, rubber, pencils, pineapple, and pasta

(King, 2002). In fiscal year 2002 alone, the U.S. government wrote checks totaling

nearly $320 million to companies that could prove they were involved in any AD or CV

duty case that eventually led to imposed tariffs (U.S. Department of Treasury, 2002).

The Byrd Amendment effectively allows U.S. producers and processors to collect

the resulting import-tariff revenue that would otherwise accrue to the U.S. government.

Furthermore, even though CDSOA was passed in 2000, there is a grandfather clause that

allows U.S. producer and processor groups to collect tariff revenues from certain AD and

* Andrew Schmitz, Professor, University of Florida; Troy Schmitz, Associate Professor, Arizona State
University; and James Seale, Professor, University of Florida.
1 All dollar amounts are given in U.S. dollars.









CV duties that were implemented prior to the CDSOA. The CDSOA has serious present

and future welfare implications in terms of transfers of Ricardian rent among consumers,

producers, and taxpayers. It also provides an even greater incentive for a proliferation of

future AD lawsuits.

II. The Byrd Amendment

The Continued Dumping and Subsidy Offset Act of 2000, also called the CDSOA

or Byrd Amendment, was enacted on October 28, 2000, as Title X of the 2001

Agriculture, Rural Development, Food and Drug Appropriations Act (Act), Public Law

106-387.2 The CDSOA modified Title VII of the Tariff Act of 1930 by instructing U.S.

Customs to put all collected AD and CV tariffs into special accounts, one for each case,

and to pay out these collected revenues directly to companies that successfully petition

the U.S. Government for these monies (U.S. Department of the Treasury, 2002).

Previously, the collected tariff revenues accrued to the general U.S. Treasury. In order

for a company to be eligible for payouts, it must prove that it successfully litigated an

AD- or CV-duty case against a specific industry in a specific country. If a company is

eligible, it shares all past and future collected AD and CV duties with the other original

litigating companies. Companies that did not participate in the original AD- or CV-duty

case do not receive any of the collected funds (eBearing.com, 2000).

The CDSOA went into effect in 2001 and was controversial from its inception.

President Clinton signed the Act but asked Congress to revisit and repeal the CDSOA

before adjournment. Congress, however, neither revisited nor repealed the Act. In

industries that receive protection from imports under U.S. AD- and/or CV-duty laws,


2 Senator DeWine (Ohio) was the original author of the CDSOA, but it was Senator Byrd (West Virginia)
who added the CDSOA to the Agriculture Spending Bill of 2000.









ineligible companies for CDSOA payouts complain that eligible companies receive an

unfair advantage derived from these subsidies. Small companies complain that their

industry is harmed by unfair imports, but they do not have the money to hire expensive

lawyers to litigate AD and/or CV cases. The budget report of the U.S. Treasury

Department states that the CDSOA allows 'double dipping' because eligible companies

not only receive protection from imports through increased import prices due to AD

and/or CV tariffs, but now they also receive corporate subsidies from the collected AD

and/or CV revenues (Thomas, 2003).

U.S. trading partners have also reacted vigorously against the CDSOA. Eleven

World Trade Organization (WTO) member countries asked the WTO to form a panel to

investigate the CDSOA with respect to U.S. obligations under the WTO Antidumping

Agreement and the WTO Subsidies Agreement. The WTO formed a panel on September

10, 2001. On September 16, 2002, that panel ruled against the United States on the

CDSOA payments and recommended that the CDSOA be repealed (U.S. Department of

State, 2003). On October 18, 2002, the United States appealed the ruling to the WTO

Appellate Body. On January 16, 2003, the Appellate Body confirmed that the CDSOA

was incompatible with WTO rules (Lamy, 2003).

President Bush's budget for fiscal year 2004 also calls for a repeal of the CDSOA.

In spite of this repeal and the ruling of the WTO, as of February 4, 2003, 67 U.S. senators

had signed a letter to the U.S. President requesting that he resist the WTO action and

maintain the CDSOA. With such strong support in the U.S. Senate for the CDSOA, it is

still not clear that the law will be repealed.










In fiscal year 2001, which was the first year of U.S. government CDSOA payouts,

900 claimants received $230 million dollars (Table 1). For the second year of payouts in

2002, more than 1,200 claimants received approximately $330 million. Although most

of the payouts went to non-food companies, food companies received more than $22

million in 2001 and nearly $20 million in 2002. In 2001, there were 9 food-industry AD

cases and 4 food-industry CV cases for which companies received tariff revenues under

the CDSOA; whereas in 2002, there were 12 food-industry AD cases and 4 food-industry CV

cases for which companies received payouts.




Table 1. Continued Dumping and Subsidy OffsetAct, fiscal years 2001 and 2002
disbursements for food products.


Case Number Case Name
A-570-848 Crawfish tail meat/China
A-475-818 Pasta/Italy
C-475-819 Pasta/Italy
A-533-813 Preserved mushrooms/India
A-351-605 Frozen concentrated orange juice/Brazil
A-570-831 Fresh garlic/China
A-549-813 Canned pineapple/Thailand
A-560-802 Preserved mushrooms/Indonesia
A-337-803 Fresh Atlantic salmon/Chile
A-403-801 Fresh and chilled Atlantic salmon/Norway
C-403-802 Fresh and chilled Atlantic salmon/Norway
A-570-851 Preserved mushrooms/China
C-408-046 Sugar/European Union
C-489-806 Pasta/Turkey
A-489-805 Pasta/Turkey
A-570-855 Non-frozen apple juice concentrate/China
A-301-602 Fresh cut flowers/Columbia
Food Total
Grand Total for all Products
i, i.Si Year
Source: U.S. Customs Servic i,_'c~ll).


FYa 2001
1,000 US$
0
17,533
2,480
171
0
25
1,792
83
0
46
18
0
8
7
11
0
33
22,209
231,202


FYa 2002
1,000 US$
7,469
4,674
2,528
2,155
1,175
536
531
443
173
59
29
20
17
9
4
1
0
19,824
329,871


In some cases, the same company that received payouts under an AD-duty case

also received payouts under a CV-duty case. As an example, eligible U.S. pasta firms









shared $17.5 million and $4.7 million under AD case #A-475-818 in 2001 and 2002,

respectively. They also shared $2.5 million under CV-duty case #C-475-810 in both

2001 and 2002. In another AD case (#A-540-843), Maui Pineapple received the entire

portion of the $1.8 million in 2001 and $0.5 million in 2002 that originated from duties

collected on canned pineapple imports from Thailand.

In fiscal year 2002, crayfish firms received the largest food-industry CDSOA

payouts (Table 2). Of the 27 eligible firms, Atchafalaya Crawfish Processors received

payouts of $800,000. Four companies received payouts of over $500,000, and another 17

firms received over $100,000. On average, the 27 crayfish firms received $300,000. In

total, CDSOA payouts (Column 3) amounted to 21 percent of the total production and

operating costs (Column 4) of these firms. Also, in fiscal year 2002, three citrus

processors received $1.18 million in CDSOA payouts. Citrus World received 67 percent

of the payouts for a total of $800,000 (Table 3).













Table 2. Continued Dumping and Subsidy OffsetAct, Disbursements for Crawfish Tail Meat
from China, Fiscal Year 2002


Claim Filed
Claimant 1,000 US$
Atchafalaya Crawfish Processors 3,758
Seafood International Distributors 3,347
Catahoula Crawfish 2,937
Prairie Cajun Wholesale Seafood Dist. 2,449
Bayou Land Seafood 1,990
Crawfish Enterprises, Inc. (CPA)a 1,892
C.J.'s Seafood & Purged Crawfish 1,773
Riceland Crawfish 1,517
Cajun Seafood Distributors 1,511
Acadiana Fishermen's Co-Op 1,508
Bonanza Crawfish Farm 1,482
Randol's Seafood & Restaurant (CPA)a 1,445
L.T. West 1,126
Sylvester's Processors 1,036
Carl's Seafood 1,037
Choplin Seafood 999
Blanchard Seafood, Inc (CPA)a 990
Louisiana Seafood 947
Harvey's Seafood 783
Louisiana Premium Seafoods 771
Bellard's Poultry & Crawfish 502
Phillips Seafood 450
A&S Crawfish 330
Becnel's Meat & Seafood 324
Teche Valley Seafood 225
Arnaudville Seaford 171
Lawtell Crawfish Processors 80
Total for Case #A-570-848 35,380
a CPA indicates member of the Crawfish Processors Alliance.
Source: U. S. Customs Service. (2003).


Amount Paid
1,000 US$
793
707
620
517
420
399
374
320
319
318
313
305
238
219
219
211
209
200
165
163
106
95
70
68
48
36
17
7,469


Allocation
Percentage
10.6
9.5
8.3
6.9
5.6
5.3
5.0
4.3
4.3
4.3
4.2
4.1
3.2
2.9
2.9
2.8
2.8
2.7
2.2
2.2
1.4
1.3
0.9
0.9
0.6
0.5
0.2
100.00


Table 3. Continued Dumping and Subsidy OffsetAct, Disbursements for Frozen Concentrated
Orange Juice from Brazil, Fiscal Year 2002.

Claim Filed Amount Paid Allocation
Claimant 1,000 US$ 1,000 US$ Percentage
Citrus World 277,335 784 66.7
A. Duda & Sons dba Citrus Belle 75,817 214 18.2
LD Citrus, Inc. 62,553 177 15.0
Total for Case #A-351-605 414,705 1,175 100.00
Source: U.S. Customs Service. (2003).









III. Implications

Under the Byrd Amendment, producers of import competing commodities gain

from an antidumping duty in two ways. First, internal prices rise from the tariff. Second,

they obtain the tariff revenue, which normally would go to the government. This

provides extra money to lobby governments for protection. Interestingly, when the

processor collects the duty, not only is the processor better off than under free trade, but

so are the domestic competing producers with whom the processor deals. In the absence

of the Byrd Amendment, processors usually lobby for free trade.









References

eBearing.com. (2000). "Continued Dumping and Subsidy Offset Act of 2000 (CDSOA):

The Byrd Amendment." http://www.ebearing.com/legislation/2000act.htm.

King, Jr., Neil. (2002). "Trade Imbalance: New Dumping Law Lines the Pockets of

Manufacturers." The Wall Street Journal. Dow Jones & Company.

(December 5: 1).

Lamy, Pascal. (2003). "WTO Appellate Body Condemns the 'Byrd Amendment' The US

Must Now Repeal It." Delegation of the European Commission to the United

States. http://www.eurunion.org/news/press/2003/2003003.htm.

Thomas, Bob. (2003). "Bush Budget Slashes Byrd Amendment, Alters Byrd Bill." The

Intelligence TTheeling News Register. http://www.news-

register.net/news/story/025202003_new03.asp (February 5).

U.S. Customs Services. (U.S. Department of Homeland Security) (2003). "CDSOA

FY2001 and FY2002 Disbursements, Final."

http://www.customs.ustreas.gov/xp/cgov/import/add_cvd/.

U.S. Department of State, Office of International Information Programs. (2003). "USTR

Seeks to Comply with WTO Ruling on Byrd Amendment: Underlying antidumping laws

not affected, USTR emphasizes." http://usinfo.state.gov/topical/econ/wto/03011601.htm

(January 16).

U.S. Department of Treasury, Customs Service. (2002). "Distribution of Continued

Dumping and Subsidy Offset to Affected Domestic Procedures; Notice." Federal

Registry 67, No. 128 (Wednesday, July 3). http://frwebgate.access.gpo.gov/cgi-

in/getdoc.cgi?dbname=2002 register&docid=02-16693-filed.pdf




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