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Friday, March 23, 2012

U.S. Trade Remedy Laws and Nonmarket Economies: A Legal Overview

Jeanne J. Grimmett
Legislative Attorney

Two major U.S. trade remedies are antidumping (AD) law, which combats the sale of imported products at less than their fair market value, and countervailing duty (CVD) law, which aims to offset foreign government subsidization of imported goods. If dumped or subsidized imports are found to cause or threaten material injury to a domestic industry, antidumping or countervailing duties will be imposed. Both remedies are available when goods are imported from competitor countries with free market policies. As of 1984, however, only AD law had been applied to goods from nonmarket or “transitional” economies. With the continued economic growth of some of these economies, such as China and Vietnam, pressure increased on the U.S. government to use both trade remedies more aggressively against unfair imports from these countries.

AD law has been amended several times since its inception in 1921. With Congress’s continued statutory guidance, the Department of Commerce (DOC) has implemented several different methodologies for applying AD law, including using surrogate country data when the fair market value of a product in the originating country is not readily ascertainable. CVD law had not been used against NMEs, however, since DOC concluded in 1984 that it could not determine subsidization in such situations. In 1986, the U.S. Court of Appeals for the Federal Circuit (CAFC), in Georgetown Steel Corp. v. United States, upheld DOC’s interpretation of the CVD statute as reasonable. While DOC had generally refused to review CVD petitions against NME countries following this determination, it accepted a petition seeking a CVD on imports of coated free-sheet paper from China in 2006. DOC distinguished the current Chinese economy from the Soviet-style economies at issue in Georgetown Steel and found that the imported Chinese paper was subsidized. Because the U.S. International Trade Commission did not make the requisite final affirmative material injury determination, CVDs were not imposed. Other CVD petitions were successful, however, resulting in the imposition of 24 CVD orders on NME country merchandise.

World Trade Organization (WTO) agreements, together with the WTO Accession Protocols of China and Vietnam, acknowledge that AD and CV duties may be imposed on these countries’ goods, and that surrogate country data may be used to calculate dumping margins or subsidization. In a WTO case brought by China, however, the WTO Appellate Body found in April 2011 that the simultaneous imposition by the United States of AD and CV duties on the same Chinese merchandise, where surrogate country data was used to establish the fair market value of the goods in the AD case, remedied the same subsidization twice or “double counted” in violation of U.S. WTO obligations. The United States is expected to comply with this decision by April 25, 2012. More broadly, the U.S. Court of Appeals for the Federal Circuit, on December 19, 2011, held that CVDs may not be imposed on NME goods under any circumstance, finding in GPX Intl Tire Corp. v. United States that Congress had legislatively ratified DOC’s 1984 statutory interpretation and thus DOC may no longer interpret the statute to permit such duties and must seek a statutory amendment if it wishes to impose such duties in the future. The CAFC affirmed a lower court decision that also prohibited DOC from imposing CVDs on NME goods, but did so on the ground that DOC had failed to eliminate double counting, the same practice at issue in the WTO case. DOC is preparing a new WTO-compliant determination in the investigations challenged by China in the WTO. The executive branch has also asked Congress to enact legislation to remedy the court’s ruling and, on March 5, 2012, requested that the CAFC rehear the case en banc. H.R. 4105 (Camp), introduced February 29, 2012, would generally authorize the application of CVDs to NME products, make this authority effective as of November 20, 2006, and prospectively amend antidumping law to address double counting issues. S. 2153 Baucus), an identical Senate bill, was passed in the Senate by unanimous consent March 5, 2012.

Date of Report: March 6, 2012
Number of Pages: 3
Order Number: RL3
Price: $29.95

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