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US trade: The rise of benefit corporations and stakeholder - capitalism businesses

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Companies focused on broader public benefits and ESG principles face unique issues in international trade disputes


By Walter Spak and Jessica Lynd

*Gregory Spak, Jay Campbell and Allison Kepkay contributed to the creation of this report.

Increasingly, companies worldwide are expanding the focus of their business models beyond maximizing shareholder profits to include other stakeholder values, such as: 

  • Operating in a more sustainable and responsible way to minimize harmful business effects on the natural environment, individuals and communities 
  • Incorporating objectives that benefit society and deliver value to a broader set of stakeholders (workers, community members and others) 
  • Providing environmental, social and governance (ESG) and other public benefits beyond their primary products and services

This movement has implications for companies, shareholders, workers and the public at large.

The impact of this movement on the international trading system and the ability of existing trade laws and agreements to account for it has not received much attention yet. But it should.

The agreements and laws that regulate international trade largely presume that companies operate only to make a profit. For example, US trade remedy laws focus on practices such as "dumping": selling at prices below production cost and a reasonable profit. Imports can be considered to 'injure" a domestic industry if that industry’s profit margins are sagging. Companies that receive inducements to achieve economic or social goals could be penalized for receiving "subsidies." Key terms like "dumping," "injury," and "subsidy" all presume a free market orientation in which companies act with the primary focus of achieving and maintaining profits.

Our current notions of fair/unfair competition and fair/unfair trade derive from the power of the free market. According to free market theory, every company should have its chance to compete in a marketplace governed by rules, including the need to sell above the cost of production and to avoid "dumping" into foreign markets, unfair government subsidization and other activities that thwart competition.

But what happens when "benefit corporations" commit themselves to taking on additional costs in order to comply with enhanced environmental or labor standards? Should they be disadvantaged or conversely required to compete with imports that do not assume these additional costs?  Should governments push companies to achieve broader societal goals? If so, then we may need to re-think the current agreements, laws and regulations that define fair and unfair trade.

Under current trade rules, US importers could be at risk of paying higher duties and other trade remedies, due to differences in how foreign benefit corporations produce goods and conduct their businesses—or could potentially leverage an ESG business model to eliminate or reduce trade remedies against them. Similarly, US benefit corporations could be forced to compete against foreign corporations exporting to the US that do not abide by stakeholder-capitalism values.  

Until trade laws in the US or at the World Trade Organization (WTO) adapt to account for the unique role that benefit corporations play in international competition, those businesses should be mindful of how their socially conscious business model could be bolstered or hampered by existing trade laws.

This report examines challenges and opportunities that may arise as companies pursuing societal benefit motives engage in international trade. We provide an overview of what board members, general counsel and other leaders of benefit corporations should consider when addressing allegations or pursuing their own petitions in US trade disputes in order to maintain competitiveness while pursuing ESG objectives, as well as suggestions for how the trade laws could change to accommodate the rise in stakeholder capitalism.

“Benefit corporations should be mindful of how their socially conscious business model could be bolstered or hampered by trade laws”

The rise of stakeholder capitalism

Amid a growing movement towards corporations that "do good while doing well," many countries and US states are creating legal structures that allow businesses to establish themselves as different types of benefit corporations and stakeholder-capitalism companies.

upward tree view

Opportunities and risks for benefit corporations in US trade proceedings

Stakeholder-capitalism businesses and benefit corporations need to pay special attention to certain key considerations in US international trade remedy cases, to ensure that their unique missions are not overlooked or considered "unfair" trading practices. 

cargo containers

Q&A: The case for a market-wide approach to sustainable business

The CEO and founder of the Shareholder Commons—a nonprofit focused on structures for a sustainable, just economy— discusses with us how systemic changes can help companies create value, while prioritizing the long-term health of capital markets and shareholder profits.

lettuce farm

Q&A: A global movement to use business as a "force for good"

The Director of Stakeholder Governance and Policy for B Lab—a nonprofit that certifies companies as B Corporations—discusses with us the benefits added when a company’s operations and business model include its entire social and environmental performance.

pedestrians walking in the street of New York


As businesses increasingly adapt to a new stakeholder-capitalism approach and seek to add value through benefit corporation registration and similar certifications, they should craft trade law arguments that support their approach and protect their vulnerabilities.

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cargo containers

Opportunities and Risks For Benefit Corporations in US Trade Proceedings

20 min read

Due to their unique operating principles, stakeholder-capitalism businesses and benefit corporations can face different challenges and opportunities under various areas of US law that regulate competition. 

In particular, international trade remedies cases in the US—namely antidumping duty (AD) cases and countervailing duty (anti-subsidy, CVD) cases—examine key issues of competition between: 

  1. Foreign businesses that export goods into the US and 
  2. US industries that compete within US markets against those foreign companies.  

To ensure that their unique missions are not overlooked or considered "unfair" trading practices, stakeholder-capitalism businesses and benefit corporations should pay special attention to certain key considerations examined in trade remedy cases.

Stakeholder capitalism businesses can face unique challenges and opportunities in US antidumping duty and countervailing duty cases


Key considerations for AD and CVD cases

The actions of benefit corporations can affect certain key considerations relevant to important types of US trade disputes, including:  

1.  The US International Trade Commission (USITC)'s determinations of 

a. Which goods manufactured by the US industry are "like" —or competitive with—the imported goods 

b. The "conditions of competition" within an industry to determine whether an imported product is truly competing against a domestic product

c. Whether the allegedly unfairly traded imports are causing injury to the US producers of the "like" products or whether the injury is the result of something else

2. The DOC's "fair comparisons" and other considerations in AD cases

3. The DOC's examination of government-conveyed financial benefits in CVD cases 

In AD investigations, a US company or industry petitions the DOC to impose antidumping duties on foreign products that are allegedly sold in the US market at a lower price than the sale price for the goods in the foreign producer's home country (i.e., alleging that the goods are "dumped" in the US), thus causing "injury" to the US industry. The DOC then determines whether the dumping occurred, while the USITC determines whether the imports are injuring the US industry.

In CVD investigations, a US company or industry alleges that foreign goods imported into the US are being unfairly subsidized in their home country (i.e., the foreign exporter or producer is receiving a financial contribution from the foreign government that benefits the foreign exporter or producer). The DOC then determines whether the alleged subsidization is happening and, if so, the amount of the subsidy, while the USITC determines whether the imports are injuring the US industry. 

Pay attention to key considerations examined in trade remedy cases, so that unique business missions are not overlooked or considered "unfair" trading practices


Benefit corporations may merit unique product comparability, conditions of competition and causation analyses in AD and CVD cases 

In both AD and CVD investigations, the USITC analyzes whether a domestic industry is materially injured or threatened by reason of the imports under investigation. 

To do this, it must first define the US industry, by identifying the US producers of "like" products, which include identical products and those with similar characteristics and uses as the imported goods under investigation.19

Similarly, the USITC will analyze the "conditions of competition" within an industry to determine whether an imported product is truly competing against a domestic product when it assesses the impact of imports on the affected domestic industry.20 Among other considerations (such as business cycles or growing seasons), conditions of competition can include substitutability issues and distinctive market considerations. An industry that includes significant competition from benefit corporations could merit its own condition of competition analysis for that reason.

Finally, in its causation analysis, the USITC must assess whether any injury suffered by the US industry is the result of the unfairly dumped/subsidized goods or if other factors are causing that injury. That is, it is not enough that the US market is injured; it must be injured as a result of the dumping or subsidization specifically, and the USITC must determine whether other causes of the injury exist. 

Product comparability in AD and CVD cases at the USITC 

The question arises whether a good produced by a conventional company is truly "like" the same good produced by a benefit corporation. Under existing case law, the relevant considerations include: 

  • The manner of production 
  • Consumers' views of the two products' interchangeability 
  • Whether separate markets exist for the two products  

For example, there is a distinction between organic agricultural goods and conventional agricultural goods. Organic and conventional corn can both be used to make tortillas, but they are produced differently (one may be grown with synthetic pesticides, the other cannot and may instead employ no-till farming methods and a more diverse eco-system to help increase production). Moreover, the prices for organic and conventional corn differ, because organic-product consumers are generally willing and able to pay more for organic food products than conventional food products. At the extreme, producers might even recognize unique markets for organic and conventional corn due to consumer preference (some prefer tortillas with organic or non-GMO corn). In a recent USITC case, the subject product was explicitly defined as organic.21

Similar conclusions could be drawn regarding goods produced by benefit corporations. That is, the business form of the benefit corporation, with its mandate to achieve a social good in addition to generating profit, could require it to manufacture goods a certain way, even though the end-product may appear similar to a conventionally produced good. The "how" of production matters to the benefit corporation, and could be relevant to product comparability, just as the "how" of organic farming matters to some farmers and has already been considered relevant to product comparability at the USITC. 

Moreover, if one company minimizes environmental impact, uses recyclable materials and guarantees "living wages" to its workers, there is an argument that consumers might not perceive its goods as similar to those of a conventional company that does not value those considerations, even if the end-products are functionally similar.

In a case involving both US producers operating as benefit corporations and conventional US producers, how the USITC defines the "like" product could have significant implications for the agency's injury analysis. If, for example, the US benefit corporations and stakeholder-capitalism companies were performing worse than their conventional counterparts, the US companies petitioning for AD/CVD duties might argue that goods produced by the benefit corporations are different than the goods produced by the conventional US producers. The USITC could then find separate like products—one consisting of the goods produced by US benefit corporations, and the other consisting of goods produced by conventional US producers. In such a case, the USITC might be more inclined to find that the imported goods injured an industry consisting of poorly performing benefit corporations than it would  if it had considered the impact on all US producers in the industry—ESG minded or not."

Conditions of competition analysis in AD and CVD cases at the USITC

The USITC's "condition of competition" analysis is not strictly defined by statute, but is nonetheless required.  Its aim is to ensure that a domestic product and a foreign product are actually competing with one another in order to assess injury to the US market as a result of imports of the dumped or subsidized foreign product.  To that end, the USITC can consider nearly any factor relevant to competition between the goods, including issues of substitutability.  For purposes of benefit corporations, substitutability factors would include whether consumers consider the producing company's form or values when making purchases.  A purchaser committed to environmental sustainability, for example, might be more likely to purchase from a producer that is also committed to environmental sustainability practices in its production process. 

Moreover, given that a benefit corporation considers profit in conjunction with other social values, while its non-benefit corporation competitor prioritizes only profit, then to the extent the two are competing, they may not be doing so on price.  Thus, the USITC would have to determine on what basis the seemingly similar products did compete, if at all, and factor that into its injury analysis. 

Injury causation in AD and CVD cases at the USITC

Benefit corporation or stakeholder-capitalism business values might also affect the USITC's causation analysis.22

US AD and CVD laws require the USITC to determine not just whether a US industry is injured, but specifically whether: 

  1. The dumped/subsidized imports are causing the injury, or 
  2. Other factors are causing the injury  

It is not difficult to imagine that conventional suppliers and benefit corporation suppliers within the same industry might perform differently in terms of sales and profits.

For example, foreign benefit corporation producers could argue that their success in the US market at the expense of conventional US businesses is because consumers prefer sustainably produced products, even if those products are functionally the same—not because of dumping or subsidization. 

On the other hand, US benefit corporations might seek to downplay the higher value consumers attribute to sustainably produced goods in an effort to demonstrate injury from lower-priced conventional products that are imported.

The advent of benefit corporations also raises questions about how injury is measured in the first place. Under the existing statute, the USITC examines a US industry's performance based on economic indicators only (output, sales, market share, profits, productivity, capacity utilization, wages and others).23 However, the metrics of the US industry's performance arguably should be broadened if the US producers are structured to further ESG or similar aims, rather than simply to maximize profits.

These issues will have to play out in the data and details of individual cases, as they arise, and potentially in US policy as it evolves. 

One question is whether a good produced by a conventional company is truly ‘like' the same good produced by a benefit corporation


Fair comparisons of foreign and US prices and other considerations in AD cases at the DOC 

Another legal inquiry in an AD analysis that might become relevant in cases involving benefit corporations is the "fair" comparison of the foreign exporter's home market and US export prices. Under US law, the DOC is required to determine whether the foreign producer/exporter has engaged in "dumping" based on a fair comparison of the exporter's price in its home market (or comparison market) with the same exporter's price in the US market.  

To make a fair comparison, the DOC will adjust the US price and the price in the comparison market back to the point where both sales are ready to be shipped from the factory gate (the "ex-factory" price). The differences between benefit corporations/stakeholder-capitalism businesses and conventional businesses could be relevant to achieving a fair comparison, because the necessary adjustments arguably could extend beyond mere transportation expenses (as one example) to include price adjustments created by benefit corporation endeavors.

Fair comparison: Recent example

Although not involving benefit corporations specifically, the AD case for Biodiesel from Argentina involved an environmental regulation that was effectively monetized in the US market, but not in the foreign producer's home country. Consequently, the DOC adjusted the responding foreign producer's US price of biodiesel in order to make what it called an "apples to apples comparison" with the comparison-market price.  

The US Renewable Fuel Standards program at issue in that case requires US fuel blenders to meet an annual renewable fuel volume obligation. They meet that obligation by reporting Renewable Fuel Identification number credits (RINs), which can be sold either together with the biodiesel that generates the RINs or "detached" from the biodiesel and traded on a separate RINs market. The DOC determined that because the US had a special market for detached RINs, which it alleged added value to the biodiesel when sold in the US market, the US price—left unadjusted—was not comparable to the foreign price. Consequently, the DOC deducted what it claimed was the additional RIN value from the US price before comparing that price to the comparison-market price.

A similar approach could apply if benefit corporations create a certain product value or unique market in the US that does not also exist in the foreign exporter's home market. If that value could be quantified, it could conceivably be factored into the fair comparison required by the dumping analysis. For example, if the US industry for a product is dominated by US benefit corporations that have been able to generate a premium on their products because consumers care about their sustainable production methods and are willing to pay more, and a foreign non-benefit corporation could potentially take advantage of that premium in its US sales simply because the market prices are generally higher, then the DOC might deduct that premium from the US price in the dumping calculation. This adjustment would effectively lower the foreign producer's US price relative to its home-market price, and thereby increase the likelihood of a dumping finding. As a policy matter, such an adjustment would support the benefit corporation or stakeholder capitalism values.

Level of trade adjustment 

In AD cases, foreign producers often argue that their home-market prices are high because in their country, they have to include services that in the US are performed by distributors. This issue speaks to what the Tariff Act of 1930 calls the "level of trade."24 Different levels of trade are based upon the different stages in the chain of distribution and sellers performing qualitatively and/or quantitatively different selling activities. The law allows for an adjustment when normal value is based on sales in the home market at a level of trade that is different from the sale in the US. If the goods are sold at different levels of trade in the two markets and that affects price, then the DOC can either limit the comparison to sales made at the same level of trade, or make an adjustment for the difference in value corresponding to the different levels of trade.  

While not a "selling function," a benefit corporation arguably provides a societal service that affects the product's value and the DOC's ability to compare that product with a product produced without regard to that societal service. Taken further, a benefit corporation's "neutralization of externalities"—choosing to use business practices that reduce harm to stakeholders, instead of ignoring that harm and focusing on profit only—could be seen even as additional services. For example, if a product is made in an environmentally sustainable way, then the producer is providing not just the product, but also services that decrease wasteful energy use, reduce greenhouse gases and prevent plastic pollution, none of which would occur in a conventionally produced product.

These ideas may seem like a stretch under current trade laws, but they are exactly the types of issues that will arise as more businesses make commercial decisions based on the interests of various stakeholders, instead of only shareholders. 

Particular market situations: An alternate approach

If a unique market for a benefit corporation's product exists in a foreign country but not in the US, then the foreign producer might argue that a "Particular Market Situation" exists (pursuant to 19 U.S.C. § 1677b) in the foreign producer's home market, requiring the DOC to disregard the company's home-market sales in favor of its sales to a third market or constructed value for comparison with the foreign producer's sales in the US.25

In this scenario, a foreign benefit corporation would be advantaged in the dumping calculation by having its higher-priced home market sales replaced with lower-priced third-country sales. As a result, when the lower-priced sales (i.e., third-country sales) are compared to the exporter's US prices, it is less likely that the DOC would find dumping than if the higher-priced home-market sales were used for normal value. 

Cost analysis impact: Another factor to consider

Benefit corporation and stakeholder-capitalism considerations could also affect the cost analysis in a dumping calculation.  

In AD cases, the DOC collects the foreign producer's cost of production for the merchandise under investigation. The DOC uses the foreign producer's cost-accounting information in various ways, including to eliminate from the comparison certain below-cost sales in the home market, and to calculate a "constructed value" for the foreign-market price when there are no usable comparison-market prices.  ("Constructed value" equals the sum of the cost of production for the goods sold in the US market, selling and administrative expenses, and profit.)

A foreign benefit corporation or stakeholder-capitalism producer might incur higher production costs by using more expensive, yet sustainable, inputs or production methods. If that were true in a case where the DOC relied upon constructed value for comparison with the US price, then the producer would be prejudiced in the calculation and the DOC would be more likely to find dumping. That is, the stakeholder-capitalism exporter's high costs might make the constructed value side of the comparison appear to be a higher price than the US price side of the comparison, thereby providing the illusion of dumping even if in reality the foreign producer's home-market and US prices were the same.

As businesses adapt their models to a stakeholder capitalism approach, they should be careful to craft trade law arguments that protect their vulnerabilities


CVD considerations at the DOC  

Benefit corporations should also be aware of potential implications under US CVD law.  

US law permits government subsidies when they are widely available to companies or industries within the subject country (i.e., the country whose exports are under investigation by the DOC). However, when a government limits the availability of a subsidy to a smaller group of recipients, it is assumed to distort trade and becomes countervailable under US CVD law. This analysis is known as whether a government subsidy is "specific" or not.  In addition to this "specificity" analysis, CVD law assesses whether an exporter has received: (i) a financial contribution (ii) from the foreign government (iii) that confers a benefit.26

In the US and most other countries, incorporation as a benefit corporation does not give rise to a special tax benefit from the government. Therefore, it seems unlikely that simply existing as a benefit corporation or stakeholder-capitalism business could make the company vulnerable to subsidy allegations and correspondingly to countervailing duties. 

However, one could imagine that a company with a social mission might engage in "impact litigation" —intentional legal disputes designed to change the law with the goal of fostering similar social values across companies in the industry—or to eliminate competition from businesses not sharing the mission,  and use CVD law to do so.  Cases not involving benefit corporations have creatively used the CVD law already to decrease competition from foreign exporters in instances where foreign governments were not enforcing environmental regulations.27

Moreover, if as a policy matter in the future, governments confer some sort of financial benefit in order to incentivize the creation and work of benefit corporations, then that benefit could be considered a countervailable subsidy by other jurisdictions. If governments do adjust laws to reflect a more pro-benefit corporation or stakeholder-capitalism business policy, then a policy of maintaining legal consistency between those laws and the competition laws, such as international trade laws, might require exceptions in the CVD law in order to protect mission-driven businesses from countervailing duties. Such exceptions would not be the first under the WTO agreements.  

If the Biden-Harris administration or other WTO member country were to propose an amendment to the WTO Agreement on Subsidies and Countervailing Measures (CVD Agreement) or the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (Antidumping Agreement), then they could rely on a precedent. When the CVD agreement was signed, it included a carve-out for certain "greenlight" subsidies that would otherwise have been impermissible. That is, although the named subsidies met the definition of a countervailable subsidy, the WTO members agreed to permit (i.e., consider "non-actionable") certain specific subsidies for policy reasons, including: 

  • "Assistance to promote adaptation of existing facilities to new environmental requirements imposed by law and/or regulations" 
  • "Assistance for research activities conducted by firms or by higher education or research establishments on a contract basis with firms" 
  • "Assistance to disadvantaged regions within the territory of a member given pursuant to a general framework of regional development"28

Although the carve-out lasted only eight years, the environmental support, research and development incentives, and regional economic development assistance could serve as a model for making topical exceptions to the free trade regime, including certain exceptions for stakeholder capitalism values and methods. 


19 Material injury may be considered as material injury itself, threat of material injury or material retardation of the establishment of a domestic industry. The USITC is required to examine the volume and price effects of dumped/subsidized imports and the consequent impact of the imports on the domestic industry. The “domestic industry,” in turn, consists of the US producers of the products “like” the imports subject to investigation. See generally 19 U.S.C. § 1677.  See also 19 U.S.C. § 1677(10) (“Domestic like product” means “a product which is like, or in the absence of like, most similar in characteristics and uses with, the article subject to an investigation….”).
20 19 U.S.C. § 1677(7)(C)(iii).
21 Organic Soybean Meal from India, USITC Pub. 5198 (Prelim) (May 2021) (excluding conventional soybean meal from the scope of investigation and distinguishing organic soybean meal as the subject merchandise).
22 19 U.S.C. § 1671d(b) Final determination by Commission.
(1) In general. The Commission shall make a final determination of whether
(A) an industry in the United States—
(i) is materially injured, or
(ii) is threatened with material injury, or
(B) the establishment of an industry in the United States is materially retarded, by reason of imports, or sales (or the likelihood of sales) for importation, of the merchandise with respect to which the administering authority has made an affirmative determination under subsection (a). If the Commission determines that imports of the subject merchandise are negligible, the investigation shall be terminated.  (See also identical language for determining injury in the context of a CVD investigation at 19 U.S.C. § 1673d(b)). 
23 See 19 U.S.C. § 1677.
24 See sections 773(a)(1) and 773(a)(7)(A) of the Tariff Act of 1930. See also 19 C.F.R. § 351.412(a)-(c).
25 Constructed value generally uses the cost of production, selling and general/administrative expenses, and profit in order to calculate a normal value price to compare to US prices. See 19 C.F.R. § 351.405.
26 See 19 U.S.C. § 1677(5), (5A).
27 See Phosphate Fertilizers From Morocco And Russia Petitions For The Imposition Of Countervailing Duties Pursuant To Section 701 Of The Tariff Act Of 1930, As Amended On Behalf Of The Mosaic Company, Petition Vol II (June 26, 2020) (C-714-001) at II-16 ("The GOM’s granting of permission to OCP to dump phosphogypsum waste from its phosphate fertilizer operations in bodies of water constitutes a financial contribution in the form of the provision of a good or services within the meaning of section 771(5)(D)(iii) of the Act."); see also Issues and Decision Memorandum for the Final Affirmative Determination of the Countervailing Duty Investigation of Phosphate Fertilizers from the Kingdom of Morocco (Feb 8, 2021) (C-714-001) at Comments 25 and 26 (finding that the program was properly initiated as countervailable but that for this period of investigation, the respondent did not use the program), available at https://enforcement.trade.gov/frn/summary/morocco/2021-03011-1.pdf.
28 WTO Agreement on Subsidies and Countervailing Measures, Article PART IV: NON-ACTIONABLE SUBSIDIES Article 8.2



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