Appeals Court Bars Countervailing Duties for China, Other NMEs
The Court of Appeals for the Federal Circuit ruled that countervailing duties may not be imposed on goods from China or other non-market economies1, upholding a decision by the Court of International Trade, but on different grounds than the lower court, and overturning the attempts by the International Trade Administration since 2007 to apply CV duties to goods from China (a reversal of its earlier policy of not applying CVD law in NMEs).
Appellate Decision Based on “Congressional Intent”
The CIT previously ruled that imposing CV duties in NMEs was unreasonable because of the high risk of double-counting when both AD and CV duties are assessed against NME goods, but the appeals court reasoned instead that the intent of Congress, in amending the CVD law in 1988 and 1994, was to put into law or “ratify legislatively“ the principle that government payments cannot be characterized as subsidies in NMEs, and therefore CVD law does not apply to NMEs.
(The World Trade Organization has also ruled against the U.S. practice of imposing CV duties on NMEs for other reasons, and the U.S. has stated it will comply with the ruling.)
Congress Had “Approved” ITA Prior Practice of Not Applying CVD to NMEs
The court reasoned that Congress “is presumed to be aware” of such administrative practices as the ITA’s previous, long-established practice of not applying CVD law in NMEs (until 2007), so Congress’s reenactment of countervailing duty law in 1988 and 1994 showed that it approved of, and adopted into law, the ITA’s then-prevailing position that countervailing duties cannot be imposed on NME exports.
The appeals court also noted that the ITA had previously argued that subsidies by definition do not exist in NMEs, because “the notion of a subsidy is, by definition, a market phenomenon.”
Then ITA Changed its CVD Policy in 2007 for China
In 2007, the CAFC noted, the ITA made an exception for China, in the investigation of coated free sheet paper, followed in 2008 by the investigation of off-road tires, in which the ITA calculated both AD and CVD duties for two Chinese producers (GPX International Tire Corp. and Tianjin United Tire & Rubber International Co.), giving rise to the case at issue.
CIT Faulted NME CV Investigation as “Useless”
On remand from the CIT, the ITA offset the CV duties it calculated for Chinese off-road tire producers against their AD duties to avoid double counting; however, the CIT found that the ITA’s proposed CVD offset did not comply with the trade statute and that performing dual investigations was “unreasonable due to the expense associated with conducting an additional investigation that is essentially useless.” The CAFC acknowledged these arguments but based its decision on its interpretation of Congressional intent instead.
ITA’s Arguments on Changed “Congressional Intent" Unpersuasive
The appeals court found unpersuasive the ITA’s arguments that 1) Congress did not intend for the past practice of excluding CVDs to apply to all NMEs, 2) Congress made clear in 2000 that CVD law should be applied to China and 3) unenacted legislation in 2010 (the Currency Reform for Fair Trade Act, H.R. 2378) also supported the change in practice.
ITA Currently Imposes 22 CVD Orders on China, 1 on Vietnam
According to a June 9, 2011 ITA list of AD and CV duty orders, there are 22 CV orders imposed on products from China and one CV order imposed on products from Vietnam (Polyethylene Retail Carrier Bags, C-522-805).
The 22 CV orders imposed on products from China are for:
| Light-walled rectangular pipe and tube | C-570-915 |
| Laminated woven sacks | C-570-917 |
| Sodium nitrite | C-570-926 |
| New pneumatic off-the-road tires | C-570-913 |
| Raw flexible magnets | C-570-923 |
| Lightweight thermal paper | C-570-921 |
| Circular welded carbon quality steel line pipe | C-570-936 |
| Circular welded austenitic stainless pressure pipe | C-570-931 |
| Citric acid and certain citric salts | C-570-938 |
| Tow behind lawn groomer | C-570-940 |
| Kitchen appliance shelving and racks | C-570-942 |
| Oil country tubular goods | C-570-944 |
| Prestressed concrete steel wire strand | C-570-946 |
| Potassium phosphate salts | C-570-963 |
| Steel grating | C-570-948 |
| Narrow woven ribbons with woven selvedge | C-570-953 |
| Certain magnesia carbon bricks | C-570-955 |
| Seamless carbon and alloy steel standard, line, and pressure pipe | C-570-957 |
| Coated paper suitable for high-quality print graphics using sheet-fed presses | C-570-959 |
| Seamless refined copper pipe and tube | C-570-964 |
| Drill pipe and drill collars | C-570-966 |
| Aluminum extrusions | C-570-968 |
(Following the court’s ruling, reaction from Capitol Hill included a press release from Senator Brown (D-OH), who announced plans to introduce a bill that would allow the Commerce Department to legally apply tariffs and other countervailing duties to Chinese imports that benefit from illegal export subsidies. Senator Brown press release available here.)
1CV duties have also been imposed on another NME, Vietnam.
(Currently the ITA’s list of NMEs is: China, Vietnam, Armenia, Azerbaijan, Belarus, Georgia, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, and Uzbekistan.
See ITT’s Online Archives 10080911 for summary of CIT decision disallowing CV duties for NMEs (the decision which lead to this appeals court decision).
See ITT’s Online Archives 11051209 for summary stating that the U.S. will implement an adverse WTO ruling against the U.S. imposition of “double remedies” which it described as the offsetting of the same subsidization twice by the concurrent imposition of AD duties calculated on the basis of an NME methodology and CV duties.)
(Appeal 2011-1107, -1108, -1109 decided 12/19/11)