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On a bipartisan basis, both the United States Senate and the House of Representatives have passed a bill to confirm that the Commerce Department can continue to apply countervailing duties (CVDs) to non-market economies (NMEs), such as China.
The bill passed the Senate on March 5 on a voice vote without debate, before being approved by the House of Representatives the following day by a vote of 370-39. The bill will now be sent for his signature to President Barack Obama, whose government has previously expressed its support.
The approval of the legislation was seen as critical to levelling the playing field for US businesses facing unfairly subsidized imports. 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 originally 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.
It was expected that the Court of Appeal’s 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 bill that has now been passed 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, it 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 therefore also provides for the Commerce Department to make a reduction to antidumping duties in NME cases where countervailing duties are simultaneously being imposed, if it can be demonstrated that domestic subsidies have inflated the dumping margin, and if the Commerce Department is able to reasonably estimate an adjustment.
Senate Finance Committee Chairman Max Baucus (D - Montana) and Subcommittee on International Trade Ranking Member John Thune (R – South Dakota) have both applauded the Senate’s unanimous passage of the legislation.
“By passing this bill, we’re backing American workers and businesses in the fight against China’s unfair trade practices,” Baucus said. “We need to maintain these countervailing duties and strongly enforce our trade laws to level the playing field for US businesses and workers.”
“I commend the Senate’s swift passage of our bipartisan legislation to ensure that American job creators have the ability to challenge unfair practices by our trading partners, including China and Vietnam,” added Thune. “In our competitive global market, it is increasingly important that America’s trading partners play by the rules.”
In his speech on the floor of the House of Representatives, its Ways and Means Committee Chairman Dave Camp (R – Michigan) commented that: “This legislation reaffirms that our anti-subsidy or countervailing duty laws apply to subsidies from China and other NMEs. China distorts the free market by giving enormous subsidies to its producers and exporters, and our companies and workers should not be expected to compete against the deep pockets of the Chinese government.”
“In addition,” he added, “this legislation fully complies with our WTO obligations. China agreed to be subject to countervailing duty laws when it joined the WTO in 2001, and the WTO has reaffirmed our right to apply these laws to China.”
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