For most companies, it’s not that hard to know whether a sale has been lost to a competitor. If the customer tells you that someone else has quoted a lower price and your company can’t meet it, with the result that the customer chooses the competitor’s product, then that sale is lost. Your company might not know the specific price that your competitor quoted, but still – your company didn’t get that sale.
Unfortunately for U.S. industries petitioning for trade relief, it’s often tricky to prove “lost sales” to the satisfaction of the U.S. International Trade Commission (ITC). The agency considers lost sales allegations in determining whether a U.S. industry has been injured by foreign import competition, but generally requires details that customers may not share – such as the specific quantity and price quoted by the competitor. Worse, in some past cases, the agency has used a domestic industry’s inability to provide the requested level of detail as evidence of a lack of injury.
A recent opinion issued by the Court of International Trade may go some way to changing this. In JMC Steel Group v. United States, Judge Mark Barnett ordered the ITC to reconsider its lost sales analysis in a recent investigation into steel pipe. The domestic industry argued that selling practices in the steel pipe industry made it impossible to provide the level of detail that the ITC required in lost sales allegations.
The judge found that the agency had to address these arguments, and also determined that holding the lack of confirmable lost sales allegations against the industry amounted to an impermissible “adverse inference” on the agency’s part.
Judge Barnett is not alone in recognizing problems with the ITC’s lost sales analyses. The agency itself has taken steps toward reform in recent years, relaxing outdated practices like that of investigating lost sales only by faxing the allegations to relevant customers – at a time when many companies no longer maintain fax machines. Indeed, the ITC recently issued a survey regarding parties’ experience of the lost sales process, in an effort to better understand the difficulties that parties have faced. With any luck, the lost sales allegation process will better reflect business realities in the future.