USTR Says All China CV Orders to Be Revoked Soon, Absent New Law

U.S. Trade Representative Kirk and Commerce Secretary Bryson sent a letter to the Senate Finance Committee warning that without new legislation, the International Trade Administration (ITA) will soon be forced to revoke its 24 existing countervailing duty (CVD) orders on imports from China and Vietnam and halt five similar pending investigations. The officials state that a legislative solution is needed to address the recent appeals court ruling against ITA’s five year old practice of imposing CVDs on subsidized imports from countries with non-market economies (NMEs) like China and Vietnam.

(Prior to 2007, the ITA had reasoned that it could not apply CVD law to NMEs because the existence of a centrally controlled economy in an NME made it difficult to identify specific actions as subsidies. However the ITA reversed course in 2007 and began imposing both AD and CV duties on NMEs¹, especially on China.)

Appeals Court Found ITA Lacks Authority to Impose CVDs on NMEs

In August 2010, the Court of International Trade ruled against the ITA’s change in practice because of the risk of “double counting” the same subsidy twice. In December 2011, the U.S. Court of Appeals for the Federal Circuit (CAFC) also ruled against the ITA’s changed practice but based its decision on “Congressional intent.” The CAFC said that ITA lacked authority because Congress had indicated its intent by approving ITA’s prior, long-standing practice of not applying CV duties to NMEs through several reenactments of CVD laws. (See ITT’s Online Archives 10080911 and 11122210 for summaries of the CIT and CAFC rulings.)

CAFC Ruling to Take Effect Soon after Feb 2, Absent Action

Bryson and Kirk state that absent legislative or judicial action, the CAFC's ruling will take effect shortly after February 2, 2012 and will have substantial adverse economic implications for the U.S.

ITA Will Have to Revoke 24 CV Orders on NMEs, Halt 5 Pending Investigations

This is because absent legislative or judicial action, ITA will be required to revoke all CVD orders and terminate all CVD proceedings involving NMEs, including 24 existing CVD orders on imports from China and Vietnam, as well as five pending investigations and two recently filed petitions. They state that this would seriously undermine the ability of the U.S. to remedy the harmful effects of unfairly subsidized imports, and would impair ITA’s ability to ensure that U.S. manufacturers and workers have the opportunity to compete on a level playing field with its trading partners.

Believe Court’s Ruling Was Flawed, Misread Congressional Intent, Etc.

Bryson and Kirk believe that the CAFC ruling was flawed and misread the CVD statute, precedent, and Congressional intent and historic bipartisan support of strong CVD laws.

Seek Legislative Fix Allowing Application of CV Duties to NMEs

Accordingly, they state that the Administration stands ready to work with Congress to enact legislation clarifying that the CVD law can be applied to subsidized goods from NMEs, that CVD proceedings ITA has already initiated on products from non-market economies are to continue, and that CVD determinations ITA has made with respect to such products are to remain in effect.

May Also Ask for Rehearing by CAFC

Kirk and Bryson add that the Administration is currently reviewing all options, including a request for a rehearing by the full appellate court.

Cites Int’l Obligations, but Unclear How USTR Will Address Related WTO Ruling

While the letter states that the U.S. is fully committed to enforcing U.S. trade laws and to addressing unfair trade practices in accordance with U.S. statutes, regulations, and international obligations, it does not specifically mention a related March 2011 World Trade Organization Appellate Body determination, which ruled against the U.S.’ imposition of AD/CV “double remedies” in certain investigations involving NMEs.

The U.S. has said it will comply with this ruling and was given until February 25, 2012 to do so, but it is unclear from the letter whether or how the Administration’s sought legislative “fix” would address the WTO ruling. USTR sources declined to comment on this issue.

(See ITT’s Online Archives 11051209 and 11071137 for summaries of U.S. statements on implementing the WTO ruling, with links to ruling summaries.)

¹Currently the ITA’s list of NMEs is: China, Vietnam, Armenia, Azerbaijan, Belarus, Georgia, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, and Uzbekistan.

Copy of the January 18, 2012 letter available by emailing a request to documents@brokerpower.com