US Bill To Legitimize US Countervailing Duties

In a move that was said to be critical to levelling the playing field for United States businesses facing unfairly subsidized imports, bipartisan legislation has been introduced in Congress which confirms that the Commerce Department can continue to apply countervailing duties (CVDs) to non-market economies (NMEs), such as China.

CVDs are normally applied to maintain a competitive balance between the prices of domestically-produced and imported goods by offsetting any benefits of government subsidies to industries in the exporting country.

However, last December, the US Court of Appeals decided that Congress had determined that government payments cannot be characterized as ‘subsidies’ in an NME, and therefore that, as had originally been held in the Trade Court in October 2010, CVDs do not apply to NME countries. In particular, it ruled that the Commerce Department’s imposition of countervailing duties, of up to 210%, on Chinese-made tyres in 2008 was illegal.

While the Court of Appeals gave no judgement as to a timetable for removing the duties on tyres, or whether any remedies should be applied, it was noted that its decision could have forced the Commerce Department to terminate the 23 existing CVD orders against products from China (plus one from Vietnam) and the six on-going investigations against Chinese and Vietnamese products, which could also result in the possible refund of already-collected duties.

The proposed legislation specifically overturns the Court of Appeals’ decision, and preserves the validity of the existing CVDs against NME countries. It was noted that, as World Trade Organization (WTO) rules do not preclude the application of CVD laws to NMEs, the legislation is also fully compatible with US WTO obligations.

In addition, the proposed bill deals with the finding of the WTO Appellate Body in March 2011, that the imposition by the US of double remedies, that is, the offsetting of the same subsidization twice by the concurrent imposition of anti-dumping duties and countervailing duties, was inconsistent with its WTO obligations.

The bill provides for the Commerce Department to adjust antidumping duties to address any possible double remedy in these situations. Specifically, if a foreign exporter in a dumping case were able to demonstrate that there was an increase to its export prices due to a countervailed domestic subsidy and the use of anti-dumping methodology, the Commerce Department would determine whether it could make a reasonable estimate of the extent of the increase, and, if so, make a corresponding reduction to it.

It was emphasized that the legislation has bipartisan, bicameral support. Identical legislation will be introduced in both the House of Representatives and the Senate. Furthermore, the legislation has been developed with, and is fully supported by, the US government.

The Chairman of the House of Representatives Ways and Means Committee, Dave Camp (R – Michigan), said that: “This legislation preserves our ability to fight unfair subsidies granted by countries like China that injure our industries, cost US jobs, and distort the market. This targeted legislation does so by reaffirming that our CVD laws apply to unfairly subsidized imports from NMEs.”

“In addition,” he continued, “the legislation brings the US into compliance with its WTO obligations by addressing potential 'double remedies'. Finally, the legislation satisfies the three tests I set forth last month: it is narrowly tailored; it ensures that US application of its CVD laws complies with its WTO obligations; and I expect that it will be able to pass the House and Senate without complications.”

While introducing the legislation in the Senate, its Finance Committee Chairman, Max Baucus (D - Montana), added that “this bill will guarantee our ability to hold China responsible for unfairly subsidizing imports. Applying these countervailing duties has protected 80,000 jobs in the last five years, and we absolutely need to maintain that effort and protect US jobs while our economy continues to improve.”

“America’s job creators, especially manufacturers, need to have the ability to challenge unfair practices by our trading partners in a manner that is consistent with WTO obligations,” the Senate Subcommittee on International Trade Ranking Member, John Thune (R – South Dakota), concluded. “As we pursue new trade agreements that open foreign markets to American goods and services, including our agricultural products, we must also make certain that our trading partners are playing by the same rules and I believe this bill will help strike that importance balance.”

Source: Tax News