Constructed Export Price: Calculation, Adjustments, and CEP Offset

Constructed export price is the value the U.S. Department of Commerce calculates when a foreign producer’s American affiliate — rather than the producer itself selling directly across the border — makes the first sale of imported goods to an unrelated U.S. buyer. Commerce takes the resale price the affiliate charged, then subtracts the domestic selling costs, further-manufacturing costs, and share of profit the affiliate added on U.S. soil. The reconstructed number is what a clean export sale would have looked like, and Commerce compares it against the home-market price to decide whether the foreign producer is dumping goods below fair value.

Export Price and Constructed Export Price Are Not the Same

Federal law splits import pricing into two methods, and the difference turns on who makes the sale. Export price (EP) applies when the foreign producer or exporter sells directly to an unrelated U.S. buyer before the merchandise is imported.¹ No affiliated middleman touches the deal on American soil, so Commerce accepts the invoice price with only standard movement-cost adjustments.

Constructed export price (CEP) applies when the sale to the first unrelated American buyer is made in the United States by the producer, exporter, or a seller affiliated with either one.¹ The statute lets that sale happen “before or after the date of importation,” so timing alone doesn’t decide the question. What matters is who makes the sale and whether that seller is affiliated with the foreign producer.

When Commerce Reaches for CEP

Commerce uses the CEP method whenever the transaction chain runs through an affiliated party inside the United States. The classic pattern involves a foreign manufacturer that sets up a subsidiary or branch office here to handle distribution. The subsidiary imports the goods, warehouses them, finds customers, negotiates prices, and closes the deal. Because the subsidiary and the foreign producer are under common control, Commerce treats the resale price as potentially distorted and applies CEP to back out a reliable export value.¹

The same rule applies when a foreign producer sells through an agent or trading company that qualifies as affiliated, even if the agent never takes title to the merchandise. The test is whether the first sale to a genuinely unrelated buyer happened in the United States through an affiliated channel. If it did, EP can’t capture the true export value, and CEP is required.

Who Counts as an Affiliated Party

The affiliation rules cast a wide net. Under federal trade law, two parties are affiliated if any of these relationships exist:²

One person or entity directly or indirectly owns, controls, or holds voting power over 5 percent or more of the other’s outstanding stock.
An officer or director of an organization is treated as affiliated with that organization.
All partners in a partnership are affiliated with one another.
The employment relationship, by itself, creates affiliation between employer and employee.
Family members — siblings, spouses, ancestors, and lineal descendants — are treated as affiliated.
Two or more parties controlled by the same person, or any person who controls another, are affiliated.

The 5 percent ownership threshold is low, and even a small equity stake in a U.S. distributor can trigger CEP treatment. The statutory definition of “control” is broader still: a party is in control when it is “legally or operationally in a position to exercise restraint or direction” over another.² Contractual arrangements, supply agreements with restrictive terms, or informal operational influence can establish affiliation without any shared stock.

How Commerce Calculates CEP

The calculation starts with the gross price charged to the first unrelated U.S. buyer, then peels it back through two rounds of deductions. The first round applies to both EP and CEP transactions. The second round is unique to CEP.

Movement Adjustments That Apply to Both Methods

Commerce first adjusts for the costs of moving the goods from the foreign factory to the U.S. delivery point. The price is increased by packing costs if not already included, by any import duties the exporting country rebated because the goods were exported, and by any countervailing duties imposed to offset export subsidies.¹ The price is then reduced by international freight, insurance, U.S. customs duties, and any export taxes the home country imposed. These adjustments strip out costs that exist only because the product crossed a border.

Deductions That Apply Only to CEP

After the movement adjustments, Commerce makes further deductions that only apply under CEP. These remove everything the U.S. affiliate added:³

Commissions paid to agents or brokers for selling the product in the United States.
Direct selling expenses tied to a specific sale, such as credit expenses, warranties, and guarantees.
Other selling expenses that support U.S. sales operations more broadly, including office rent, staff salaries, and marketing.
Further manufacturing costs if the affiliate assembles, processes, or otherwise adds value to the imported goods before reselling. Material and labor for that work come out.

Commerce adjusts for expenses tied to the U.S. sale “no matter where or when paid,” so routing payments through a foreign office doesn’t shield them from deduction.⁴

The CEP Profit Deduction

Beyond the expense deductions, Commerce removes a share of profit attributable to the U.S. selling and manufacturing activities. The formula takes the company’s total actual profit across all sales (both U.S. and home market) and multiplies it by the ratio of total U.S. expenses to total expenses.⁵ The product is the slice of profit the U.S. affiliate earned through its domestic activities, which Commerce deducts because that profit wouldn’t exist in a straightforward export sale.

Commerce can draw the underlying profit figures from audited financial statements, internal management reports, or other records prepared in the ordinary course of business.⁴ Respondents don’t have to submit full cost-of-production data solely for the profit calculation, but if they do submit verifiable cost data, Commerce will use it.

When the U.S. Affiliate Adds Substantial Value

Sometimes the affiliate does so much processing that the finished product barely resembles what was imported. When the value added in the United States is likely to substantially exceed the value of the imported merchandise, the standard CEP calculation breaks down because there’s too little original export value left to isolate. In those cases, Commerce can set CEP by looking at the price the foreign producer charged an unrelated buyer for identical merchandise, or for other similar merchandise.¹ If neither benchmark is available in sufficient quantity, Commerce may determine CEP on “any other reasonable basis.”

The CEP Offset

Because CEP transactions go through more deductions than EP transactions, the resulting figure often ends up at a lower level of trade than the home-market price it gets compared against. That mismatch can inflate the dumping margin. Commerce addresses the problem through a CEP offset, but only when three conditions are met: the comparison involves CEP and normal value, the normal value is at a more advanced level of trade, and the company cooperated fully but the record doesn’t support a standard level-of-trade adjustment.⁶

The offset equals the indirect selling expenses included in normal value, capped at the amount of indirect selling expenses deducted from CEP.⁶ If Commerce can determine from the data whether the level-of-trade difference actually affects prices, it will make a direct adjustment instead and deny the offset. The offset is a fallback for situations where the data is incomplete despite the company’s best efforts.

Duty Reimbursement Reduces CEP

If a foreign exporter pays or reimburses antidumping or countervailing duties on behalf of the U.S. importer, Commerce deducts that amount from CEP (or EP). Absorbing the duties artificially inflates the net price the importer pays and masks the true dumping margin.⁴

Importers must file a reimbursement certification with U.S. Customs and Border Protection. If an importer fails to file, Commerce may presume the exporter reimbursed the duties and deduct them automatically. One narrow exception: if the exporter gave the importer a written warranty before the investigation began stating that antidumping duties would not apply, and the merchandise was both sold and exported before Commerce published its final determination, the deduction doesn’t apply.⁴

What CEP Gets Compared To

The point of calculating CEP is to compare it to “normal value,” the price the foreign producer charges for the same product in its home market. Commerce looks for sales of the foreign like product made in the ordinary course of trade, at a time reasonably close to the U.S. sale, and ideally at the same level of trade.⁷

If home-market sales are too small to be representative (generally less than 5 percent of the volume sold to the United States), Commerce can use the price of sales to a third country. If neither the home market nor a third country provides a usable benchmark, Commerce builds a “constructed value” from cost of production plus selling expenses and profit.⁷

Commerce typically compares the weighted average of CEP transactions against the weighted average of normal values for comparable merchandise. When CEP falls below normal value, the difference is the dumping margin, and that margin drives the antidumping duty rate.

What Happens if a Company Fails to Cooperate

Commerce has significant leverage over respondents who miss deadlines, withhold information, or submit data that can’t be verified. When necessary information is missing from the record, the agency first turns to “facts otherwise available” to fill the gap. If Commerce also finds that the company failed to cooperate to the best of its ability, it can draw an adverse inference from those facts, meaning it will choose the most unfavorable data on the record.⁸

In practice, adverse facts available often means Commerce assigns a dumping margin pulled from the highest rate alleged in the petition, a prior review, or any other information on the record. The resulting duty rate can be dramatically higher than what a complete, verified response would have produced. Commerce is not required to estimate what the company’s actual margin would have been; the adverse inference is deliberately punitive to discourage non-cooperation.⁸

Common triggers include submitting data after the deadline, providing information in a format Commerce didn’t request, impeding the proceeding through delays, and furnishing data that falls apart during verification. Extension requests must be filed as standalone submissions before the original deadline expires, and Commerce sometimes refuses to grant any extensions when statutory time constraints are tight.

Challenging Commerce’s CEP Determination

A party that disagrees with Commerce’s CEP calculation or final dumping margin can seek judicial review at the U.S. Court of International Trade. The court reviews antidumping determinations under the “substantial evidence” standard, overturning Commerce’s findings only if they are unsupported by substantial evidence on the record or otherwise not in accordance with law.⁹ Review is confined to the administrative record that was before Commerce, so parties can’t introduce new evidence in court.

The filing deadline is set by statute and runs from the date the determination is published in the Federal Register.¹⁰ Missing that window permanently bars the challenge, so companies monitoring an antidumping case need to track Federal Register publications closely. When the court remands a case, Commerce recalculates under the court’s instructions, and the revised margin can move up or down depending on what the court found deficient.

1
Office of the Law Revision Counsel. 19 USC 1677a – Export Price and Constructed Export Price
2
Office of the Law Revision Counsel. 19 USC 1677 – Definitions; Special Rules
3
Office of the Law Revision Counsel. 19 USC 1677a – Export Price and Constructed Export Price – Section: Additional Adjustments to Constructed Export Price
4
eCFR. 19 CFR 351.402 – Calculation of Export Price and Constructed Export Price; Reimbursement of Antidumping and Countervailing Duties
5
Office of the Law Revision Counsel. 19 USC 1677a – Export Price and Constructed Export Price – Section: Special Rule for Determining Profit
6
eCFR. 19 CFR 351.412 – Levels of Trade; Adjustment for Difference in Level of Trade; Constructed Export Price Offset
7
Office of the Law Revision Counsel. 19 USC 1677b – Normal Value
8
Office of the Law Revision Counsel. 19 USC 1677e – Determinations on Basis of Facts Available
9
Office of the Law Revision Counsel. 19 USC 1516a – Judicial Review in Countervailing Duty and Antidumping Duty Proceedings
10
Office of the Law Revision Counsel. 28 USC 2636 – Time for Commencement of Action