http://online.wsj.com/public/article/0,,SB114011262038776078-pOrXkbdi0Dy3t__7fv8j0q89iKM_20060223,00.html?mod=regionallinks
BEIJING
-- Markor International Furniture Manufacture Co., a Chinese company, was
charged by U.S. furniture producers in 2003 with harming their businesses by
selling products below the fair cost of production. That's when the company
hired the respected U.S. law firm of Wilmer Cutler Pickering Hale & Dorr to
defend itself.
The result, announced in January of last year by the U.S. International Trade
Commission of the Commerce Department, amounted to a big victory for Markor. The
company escaped with a 0.83% tariff on its products. More than 100 Chinese
furniture companies that, like Markor, hired American lawyers, also received
relatively light tariffs. Thousands of other companies that didn't respond to
the accusations were levied devastating tariffs of 198%, essentially putting
them out of that business.
"We paid a lot of money in this case, but I think it is deserved," says
Steven Wu, international-affairs manager of Markor, which is based in the
eastern Chinese city of Tianjin. Mr. Wu won't say how much the law firm billed
his company, but lawyers familiar with such cases estimate that they typically
cost at least several hundred thousand dollars.
Chinese firms are going to war against so-called dumping charges -- and U.S.
lawyers are a chief beneficiary of the fighting.
As Chinese exports surge, U.S. producers have brought an increasing number of
antidumping suits against Chinese exporters of a wide range of products, such as
steel rods, lined paper and artists' canvases. They argue that Chinese factories
are able to sell products at unfairly low prices, thanks to an undervalued
currency and government subsidies.
The number of cases against Chinese exporters has grown to roughly half of
the total U.S. antidumping probes launched against foreign firms. After long
ignoring trade investigations or trying to challenge them on the cheap -- and
getting slammed with huge penalties -- officials in Beijing say more Chinese
corporations are looking for help from top U.S. lawyers. "Big Chinese companies
want to make sure they hire the best legal firms [because this gives them] the
highest chance of success in an investigation," says Wang Shouwen, deputy
director general of the Chinese Commerce Ministry's Bureau of Fair Trade for
Imports and Exports. "If they don't defend themselves forcefully...their market
could be impaired."
U.S. law firms are learning that there's money to be made in representing
Chinese companies. "When antidumping cases are announced, you can see companies
receiving hundreds of pages of faxes pitching different law firms," says
U.S.-trained lawyer Zhang Yuqing. Mr. Zhang headed the legal department in
China's Commerce Ministry before setting up his own firm in Beijing several
years ago.
The rise in cases has prompted U.S. law firms to expand their rosters of
antidumping experts. James Jochum joined the law firm Mayer Brown Rowe & Maw
last year after stepping down as the U.S. Commerce Department's top antidumping
official.
"Companies have begun to realize that they can get better results if they
hire the right lawyers," says Mr. Jochum, who sees the furniture case as a
"turning point" for Chinese firms. A Chinese company hired Mr. Jochum to fight a
lined-paper antidumping suit brought by U.S. paper producers. Mayer Brown Rowe
also recently hired Linda Chang, a former Commerce Department attorney who
speaks Chinese; she now works in Beijing on antidumping cases.
The big-name U.S. lawyers retained by Chinese companies help them navigate
the paper labyrinth surrounding the antidumping cases. "Only American firms know
the rules of the game, so who else should we hire?" asks Liao Yuanhuang, deputy
manager of Lacquer Craft Manufacturing Co., another furniture firm that hired
Wilmer Hale.
But retaining lawyers to resolve legal disputes is still a fairly new concept
in China. "Culturally in China people used to try to avoid litigation," says Mr.
Wang, the Commerce Ministry official.
Another factor complicating Chinese cases is China's designation as a
"nonmarket" economy, which was a condition for it joining the World Trade
Organization in 2001. This designation allows the U.S. and other countries to
use estimates of production costs in a surrogate third country -- often India --
to determine how much it should cost China to produce an item.
As a result, antidumping margins levied against Chinese firms are often much
higher than they would be if China were treated as a market economy.
In the furniture case that included Markor, Wilmer Hale lawyer John Greenwald
sought to use Indonesia as the surrogate instead of India, which doesn't have a
strong wooden furniture industry. Because such items cost less to produce in
Indonesia, that country's prices make China's seem more justified. But Mr.
Greenwald failed and is now appealing the case to the Court of International
Trade in New York.
One of the Chinese companies that has enlisted U.S. help to fight the current
U.S. suit over lined paper is Zhejiang Guangbo Group. Lin Xiaofan, assistant to
the firm's general manager, says that its Washington-based lawyers, Miller &
Chevalier, have helped it get quick updates in the case.
Augustine Tantillo, executive director of the American Manufacturing Trade
Action Coalition, a textile trade group, doesn't begrudge Chinese companies
their representation. "It's part of our system of allowing interested parties to
have their say," he says. But he is concerned that "many high-level former U.S.
government trade officials" end up "working for offshore entities." Says Mr.
Tantillo, "Where I would draw the line is that there should be prohibitions on
U.S. government officials leaving government and immediately going to represent
Chinese interests here in Washington."
Mr. Lin says that hiring U.S. lawyers is now "a must" even if they are
expensive. "This is money worth spending, if you want to continue exporting to
the U.S. market," says Mr. Lin. "And if we win a favorable tariff [rate], it
will help us gain some edge against our rivals."
