New Law Allows CV Duties to Continue for 24 China & Vietnam Orders

On March 13, 2012, President Obama signed H.R. 4105 into law, amending 19 USC 1671 so that the countervailing duties on non-market economy (NME) countries, such as China and Vietnam, can continue to apply and adjustments of antidumping margins for double counting can be made. These changes were needed in light of certain court and WTO rulings.

(According to the Senate Finance Committee, the U.S. government began the practice of applying CV duties to NMEs in 2007, but the Court of Appeals for the Federal Circuit (CAFC) ruled in December 2011 that Congress never explicitly authorized the International Trade Administration (ITA) to do so. The USTR has stated that this would have meant that the U.S. would have had to revoke 24 existing CV duty orders for China and Vietnam, as well as stop pending CV investigations for NME countries. The provisions allowing adjustment for double counting were needed to implement a March 2011 Appellate Body 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.)

Explicitly Allows Imposition of CV Duties on NMEs Retroactive to 2006

The new bill amends 19 USC 1671 to add a subsection that explicitly and retroactively allows the imposition of countervailing duties on NMEs, except when subsidies cannot be identified or measured. Specifically, the new subsection states:

“…[M]erchandise on which countervailing duties shall be imposed…includes a class or kind of merchandise imported, or sold (or likely to be sold) for importation, into the United States from a nonmarket economy country….[However] a countervailing duty is not required to be imposed…if [ITA] is unable to identify and measure subsidies provided by the government of the [NME] country or a public entity within the territory of the [NME] country because the economy of that country is essentially comprised of a single entity.”

This subsection is effective for all proceedings initiated on or after November 20, 2006,¹ all resulting actions by U.S. Customs and Border Protection, and all civil actions, criminal proceedings, and other proceedings before a Federal court relating to the issue of imposition of CV duties in NMEs.

Provides for Adjustments of Margins to Avoid Double Counting in Certain Situations

The bill also amends 19 USC 1677(f)(1) to provide for the adjustment of AD margins in cases where CV duties would lead to “double counting” if three requirements are met. The new paragraph states:

If the ITA determines, with respect to merchandise from an NME, that:

(1) a countervailable subsidy² has been provided with respect to the class of merchandise;

(2) the countervailable subsidy has been demonstrated to have reduced the average price of imports of the merchandise during the relevant period; and

(3) the ITA can reasonably estimate the extent to which the countervailable subsidy, in combination with the use of normal value, has increased the AD margin for the merchandise;

then the ITA shall reduce the AD duty by the amount of the increase in the AD margin estimated to have occurred due to the subsidy. The ITA may not reduce the AD duty by more than the portion of the CV duty rate attributable to the subsidy in question.

This paragraph is effective for all investigations and reviews initiated, and all section 129 determinations issued³, on or after March 13, 2012.

Allows CV Duties to Continue for 24 China and Vietnam Orders

The new law allows CV duties to continue for the 24 CV orders imposed on products from China and Vietnam, which include:

¹The November 20, 2006 effective date makes this bill retroactive to cover all CV duties against NMEs, as the first CV duty proceeding against an NME was initiated on November 27, 2006.

²Other than an export subsidy referred to in 19 U.S.C. 1677A(c)(1)(C).

³As the bill is immediately effective for section 129 determinations, the ITA will be able to comply with the WTO’s ruling against the practice of double counting in four U.S. AD and CV investigations of products from China (DS379), which must be implemented by April 25, 2012.

(See ITT’s Online Archives 12030727 for summary of House passage of H.R. 4105. See ITT’s Online Archives 12030618 for summary of Senate’s passage of identical companion measure, S. 2153. See ITT’s Online Archives 12030129 for summary of the introduction of the House and Senate bills.

See ITT’s Online Archives 11122210 for summary of CAFC ruling. See ITT’s Online Archives 12012015 for summary of USTR letter stating that all China CV orders must be revoked soon after February 2, 2012 because of the CAFC ruling, absent a new law. See ITT’s Online Archives 12012713 for summary of Ways and Means statement that the CAFC was giving the Administration more time to file for a rehearing of the 2011 decision.

See ITT’s Online Archives 11051209 for summary of U.S. stating that it would implement the WTO’s ruling (DS379) that was adverse to the ITA’s AD/CV “double counting” of China’s subsidies in AD and CV investigations for certain products from China. See ITT’s Online Archives 11071137 for summary stating that U.S. would implement the ruling by February 25, 2012, and 12012418 for summary stating that the deadline was extended to April 25.)

Text of H.R. 4105 is available here.

March 13, 2012 Remarks by President Obama on signing the legislation, among other things, available here.