Commerce Properly Based Countervailing Duty Rate on Currency Undervaluation, US Tells CIT

The Commerce Department lawfully imposed countervailing duties on Vietnam's undervaluation of currency, DOJ said in a March 21 reply brief at the Court of International Trade. Defending Commerce's recent practice to include currency undervaluation as a countervailable benefit, DOJ argued that the currency undervaluation was specific to traders and that the agency's decision to countervail the currency undervaluation is permitted under the statute (Kumho Tire (Vietnam) Co. v. United States, CIT #21-00397).

The case concerns the countervailing duty investigation on passenger vehicle and light truck tires from Vietnam in which exporter Kumho Tire (Vietnam) Co. served as a mandatory respondent. In the investigation, KTV was assigned a 7.89% CVD rate based on Vietnam's currency practices. KTV then filed suit at CIT to contest this claim.

According to DOJ, countervailing duty law says to counteract any and all subsidies that injure the domestic industry -- there is no exception for subsidies created through currency undervaluation, the brief said. Further, even though other agencies have an overlapping interest in currency undervaluation -- namely, the Treasury Department -- Commerce still has a mandate to investigate alleged subsidies, the government argued.

The U.S. argued the currency undervaluation was de facto specific and thus could be marked as a countervailable subsidy. In the investigation, Commerce said that since the group of enterprises constituting the traded goods sector is the predominant user of the undervalued currency subsidy, the program is specific to the traded goods industry and thus eligible for use in the CVD matter. Trading companies accounted for nearly 72% of the U.S. dollar inflows into Vietnam, making them the dominant user of the undervaluation scheme, the U.S. said.

DOJ said that the purpose of the specificity test is to weed out only the foreign subsidies that are truly broadly available and used throughout the economy. "Thus, '[e]ven if exchanges of USD for VND are broadly available in Vietnam, when nearly 72 percent of those exchanges benefit one particular sector of the economy, it cannot be said that the subsidy is widely used throughout the economy,'" the brief said. DOJ then said that groups that buy or sell goods internationally are indeed a set of enterprises since they make up a subset of economic actors in a country, and KTV's arguments to the contrary notably don't cite any legislative history or court precedents to show that this decision was unreasonable.

Commerce's approach to analyzing whether the traded goods sector was the prominent user of the subsidy is also justified, the brief said. The U.S. said it based its position on data from the Vietnamese government and the State Bank of Vietnam, calculating the total portion of U.S. dollar inflow to the Vietnamese economy through four channels of exchange: exports of goods, exports of services, direct investment and earned income from abroad. Running the analysis, with some caveats, Commerce determined that the trading sector primarily benefited from the currency undervaluation.

DOJ lastly touched on whether enough evidence backed the position that the undervaluation of Vietnamese currency conferred a benefit. Commerce based its position on a key Treasury report that lays out how it determined that Vietnam undervalued its currency. KTV contested the use of the report in the investigation but DOJ stuck by it. "Here, obtaining Treasury’s report on undervaluation is similar to other instances in the antidumping or countervailing duty laws where Commerce relies on expertise or advice from other agencies as part of its determinations and otherwise does not require placement of the underlying data on the record," the brief said. DOJ then backed Treasury's Global Exchange Rate Assessment Framework model that was used to uncover the undervaluation.