U.S. Trade Remedy Laws and
Nonmarket Economies: A Legal Overview
Jeanne J. Grimmett
Legislative Attorney
April 23, 2012
Congressional Research Service
7-5700
www.crs.gov
RL33976
CRS Report for Congress
Pr
epared for Members and Committees of Congress
U.S. Trade Remedy Laws and Nonmarket Economies: A Legal Overview
Summary
Two major U.S. trade remedies are antidumping (AD) law, which combats the sale of imported
products at less than their fair market value, and countervailing duty (CVD) law, which aims to
offset foreign government subsidization of imported goods. If dumped or subsidized imports are
found to cause or threaten material injury to a domestic industry, antidumping or countervailing
duties will be imposed. Both remedies are available when goods are imported from competitor
countries with free market policies. As of 1984, however, only AD law had been applied to goods
from nonmarket or “transitional” economies (NMEs). With the continued economic growth of
some of these economies, such as China and Vietnam, pressure increased on the U.S. government
to use both trade remedies more aggressively against unfair imports from these countries.
AD law has been amended several times since its inception in 1921. With Congress’s continued
statutory guidance, the Department of Commerce (DOC) has implemented several different
methodologies for applying AD law, including using surrogate country data when the fair market
value of a product in the originating country is not readily ascertainable. CVD law had not been
used against NMEs, however, since DOC concluded in 1984 that it could not determine
subsidization in such situations. In 1986, the U.S. Court of Appeals for the Federal Circuit
(CAFC), in Georgetown Steel Corp. v. United States, upheld DOC’s interpretation of the CVD
statute as reasonable. While DOC had generally refused to review CVD petitions against NME
countries following this determination, it accepted a petition seeking a CVD on imports of coated
free-sheet paper from China in 2006. DOC distinguished the current Chinese economy from the
Soviet-style economies at issue in Georgetown Steel and found that the imported Chinese paper
was subsidized. Because the U.S. International Trade Commission did not make the requisite final
affirmative material injury determination, CVDs were not imposed. Other CVD petitions were
successful, however, resulting in the imposition of 24 CVD orders on NME country merchandise.
World Trade Organization (WTO) agreements, together with the WTO Accession Protocols of
China and Vietnam, acknowledge that AD and CV duties may be imposed on these countries’
goods, and that surrogate country data may be used to calculate dumping margins or
subsidization. In a WTO case brought by China, however, the WTO Appellate Body found in
April 2011 that the simultaneous imposition by the United States of AD and CV duties on the
same Chinese merchandise, where surrogate country data was used to establish the fair market
value of the goods in the AD case, remedied the same subsidization twice or “double counted” in
violation of U.S. WTO obligations. The United States is expected to comply with this decision by
April 25, 2012. More broadly, the U.S. Court of Appeals for the Federal Circuit, on December 19,
2011, held that CVDs may not be imposed on NME goods under any circumstance, finding in
GPX Intl Tire Corp. v. United States that Congress had legislatively ratified DOC’s 1984 statutory
interpretation and thus DOC may no longer interpret the statute to permit such duties and must
seek a statutory amendment if it wishes to impose such duties in the future. The CAFC affirmed a
lower court decision that also prohibited DOC from imposing CVDs on NME goods, but did so
on the ground that DOC had failed to eliminate double counting, the same practice at issue in the
WTO case. The executive branch asked Congress to enact legislation to remedy the court’s ruling
and, on March 5, 2012, requested that the CAFC rehear the case en banc. P.L. 112-99, signed by
the President March 13, 2012, generally authorizes the application of CVDs to NME products,
makes this authority effective as of November 20, 2006, and prospectively amends antidumping
law to address double counting issues. DOC is preparing new WTO-compliant determinations in
the investigations challenged by China in its WTO case and has informed the WTO that
implementation of the new law will be a factor in this compliance effort.
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U.S. Trade Remedy Laws and Nonmarket Economies: A Legal Overview
Contents
Introduction...................................................................................................................................... 1
Antidumping (AD) Law and Nonmarket Economies ...................................................................... 1
Background................................................................................................................................ 1
Application of AD Law to Nonmarket Economies: Various Approaches ................................. 2
Countervailing Duty (CVD) Law and Nonmarket Economies (NMEs).......................................... 4
Background................................................................................................................................ 4
Application of CVD Law to Nonmarket Economies................................................................. 5
Judicial Decisions on Department of Commerce 1984 Statutory Interpretation That
CVD Law Does Not Apply to NME Countries ...................................................................... 7
U.S. Court of International Trade Decision: Continental Steel Corp. v.
United States (1985)......................................................................................................... 7
U.S. Court of Appeals for the Federal Circuit Decision:
Georgetown Steel v. United States (1986) ........................................................................ 7
Post-Georgetown Steel Determinations............................................................................... 8
Application of CVD Law to Imports from China: Coated Free Sheet Paper and
Beyond ................................................................................................................................. 10
Simultaneous Imposition of AD and CVD Orders on Same Nonmarket Economy
Merchandise: Possible “Double Counting” of Subsidization ..................................................... 12
World Trade Organization (WTO) Issues ...................................................................................... 14
WTO-Consistency of Imposing Antidumping and Countervailing Duties on Goods
from NME Countries............................................................................................................ 14
General Agreement on Tariffs and Trade 1994 ................................................................. 14
Agreement on Antidumping .............................................................................................. 15
Agreement on Subsidies and Countervailing Measures.................................................... 16
WTO Accession Protocols....................................................................................................... 19
China’s WTO Challenge: United States—Anti-Dumping and Countervailing Duties
on Certain Products from China (DS379)............................................................................ 21
Panel Report ...................................................................................................................... 23
Recent U.S. Judicial Decisions: CVDs May Not Be Applied to NME Country Goods ................ 27
U.S. Court of International Trade Decisions: GPX Int’l Tire Corp. v. United States
(2009-2010).......................................................................................................................... 27
U.S. Court of Appeals for the Federal Circuit Decision: GPX Int’l Tire Corp. v.
United States (December 2011)............................................................................................ 28
Subsequent Legislative and Judicial Developments ...................................................................... 30
Earlier Legislation Addressing CVDs and NMEs ......................................................................... 33
Contacts
Author Contact Information........................................................................................................... 34
Acknowledgments ......................................................................................................................... 34
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U.S. Trade Remedy Laws and Nonmarket Economies: A Legal Overview
Introduction
Two major U.S. trade remedies, each set out in Title VII of the Tariff Act of 1930, are
antidumping (AD) law, which combats the sale of imported goods at less than their fair market
value, and countervailing duty (CVD) law, which is aimed at offsetting foreign government
subsidization of imported items. If dumped or subsidized imports are found to cause material
injury, or threat, to a domestic industry, and the dumping margin or the net subsidy is not de
minimis, antidumping or countervailing duties will be imposed.1 Both remedies are available
when goods are imported from competitor countries that have free market policies. Since 1984,
however, only AD law had been applied to goods from nonmarket or other “transitional”
economies. With the continued economic growth of some of these economies, such as China and
Vietnam, pressure has increased on the U.S. government to utilize both domestic trade remedies
more aggressively against unfair imports from these countries.
This report discusses the application of antidumping and countervailing duty law to the goods of
nonmarket economy (NME) countries, including the decision of the Department of Commerce
(DOC) in 2007 to change its long-standing policy and apply CVD law to such goods; reviews
China’s successful case in the World Trade Organization (WTO) challenging the U.S. application
of CVDs to Chinese products; examines the December 2011 decision of the U.S. Court of
Appeals for the Federal Circuit in GPX Int’l Tire Corp. v. United States holding that the U.S.
CVD law does not authorize DOC to apply CVDs to NME country goods; summarizes the
subsequently enacted P.L. 112-99, signed March 13, 2012, a statute authorizing DOC to apply
CVDs to such products; discusses recent developments in the GPX litigation; and identifies
earlier proposals to expressly include goods from NME countries within the scope of the U.S.
countervailing duty statute.
Antidumping (AD) Law and Nonmarket Economies
Background
As generally applied, antidumping (AD) law considers dumping to have occurred when a foreign
manufacturer charges a price for its product that is “less than its fair value” (LTFV).2 For
dumping that is alleged from market-based economies, DOC employs a standard methodology for
determining a product’s fair value. First, DOC determines whether a foreign manufacturer’s
goods were sold in the United States for LTFV by comparing the U.S. price of the product with
“normal value,”3 which is generally the price of the merchandise in the firm’s domestic market.4
If the product is not sold or offered for sale in the foreign firm’s domestic market, DOC identifies
the price at which the product is sold or offered for sale in countries other than the United States.5
1 19 U.S.C. §§1671, 1673 (2006). The general de minimis rate for subsidies is less than 1 percent, 19 U.S.C.
§§1671d(a)(3), 1671b(b)(4)(A) (2006); for dumping margins, less than 2 percent, 19 U.S.C. §§1673d(a)(4),
1673b(b)(3)(2006).
2 See 19 U.S.C. §1673 (2006).
3 See 19 U.S.C. §1677b(a) (2006).
4 See 19 U.S.C. §1677b(a)(1)(B)(i) (2006).
5 See 19 U.S.C. §1677b(a)(1)(B)(ii) (2006).
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Finally, if there are no sales in the home market or to third countries, the statute authorizes DOC
to utilize a “constructed value.”6
If DOC finds that dumping has occurred, it establishes the “dumping margin” by calculating the
average amount by which the product’s fair market value exceeds the price of the product in the
United States.7 The finding of dumping and the fixing of the “dumping margin” establish the first
of the two prongs required to impose an AD duty. The final step in imposing an AD duty is an
affirmative determination that the dumped imports have caused or threaten to cause material
injury to a U.S. industry, or materially retard the establishment of an industry in the United
States.8 The injury determination is made by the U.S. International Trade Commission (ITC), an
independent agency.
Application of AD Law to Nonmarket Economies:
Various Approaches
As applied to nonmarket economies (NMEs), the standard methodology described above causes
problems because nonmarket economies do not allocate resources according to traditional market
concepts of supply and demand, thereby making determinations of fair market value almost
impossible. From the adoption of the Antidumping Act of 19219 until the passage of the Trade Act
of 1974,10 the application of AD law to nonmarket economies was devised and implemented
exclusively through administrative agency action, as the statutes were silent on the matter. In the
1960s, the Treasury Department, which at the time was the agency with responsibility over
domestic trade remedy laws, developed and began using what was known as the “surrogate
country” approach for applying AD law to NME countries. Under this approach, comparable
prices and costs from similarly situated third countries were substituted for the NME country to
determine fair market value.11 This approach was adopted and codified by Congress in the Trade
Act of 1974.12 According to at least one legal scholar, “the surrogate methodology proved
difficult to apply because there were occasions when there was no available surrogate. Therefore,
it was necessary to devise an alternative methodology to use when an appropriate surrogate could
not be located.”13
The Treasury Department responded to the concerns raised by the “surrogate country” approach
by adopting a new methodology in 1975. This methodology, known as the “factors of production”
approach, required that the amount of each factor input be taken from a market economy country
6 See 19 U.S.C. §1677b(a)(4) (2006) (defining the use of constructed value); 19 U.S.C. §1677b(e) (2006) (providing the
method of calculating a constructed value).
7 19 U.S.C. §1677(35) (2006).
8 See 19 U.S.C. §1677(7)(A) (2006) (stating that “[t]he term ‘material injury’ means harm which is not inconsequential,
immaterial, or unimportant”). The statute requires that for threatened injuries the ITC may not base its determination on
“mere conjecture or supposition.” See 19 U.S.C. §1677(7)(F)(ii) (2006).
9 Antidumping Act of 1921, ch. 14 §205, 42 Stat. 9, 13 (1921).
10 Trade Act of 1974, P.L. 93-618, §321, 88 Stat. 1978, 2074 (1974).
11 See Bicycles From Czechoslovakia, 25 Federal Register 6,657 (1960).
12 See Trade Act of 1974, supra note 10.
13 Robert H. Lantz, The Search for Consistency: Treatment of Nonmarket Economies in Transition under United States
Antidumping and Countervailing Duty Laws, 10 AM. U. J. INT’L L. & POL’Y 993, 1003 (1995).
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considered to be at a comparable stage of economic development.14 Congress expressly adopted
this approach in the Trade Agreements Act of 1979, as an alternative to be used in NME cases
where there was no available surrogate country.15
In 1988, Congress again acted to adopt new AD provisions for dealing with nonmarket
economies. In the Omnibus Trade and Competitiveness Act of 1988 (OTCA),16 Congress enacted
numerous reforms to the antidumping laws, starting with a definition of a nonmarket economy
country, as well as a set of standards that DOC was to take into consideration when determining
whether a specific country qualified as such. According to the OTCA, a “nonmarket economy
country” is a country that DOC determines “does not operate on market principles of cost or
pricing structures, so that sales of merchandise in such country do not reflect the fair value of the
merchandise.”17 The factors DOC must take into consideration when making a determination
regarding a country’s status as a nonmarket economy include
(i) the extent to which the currency of the foreign country is convertible into the currency of
other countries; (ii) the extent to which wage rates in the foreign country are determined by
free bargaining between labor and management; (iii) the extent to which joint ventures or
other investments by firms of other foreign countries are permitted in the foreign country;
(iv) the extent of government ownership or control of the means of production; (v) the extent
of government control over the allocation of resources and over the price and output
decisions of enterprises; and (vi) such other factors as the administering authority [i.e., DOC]
considers appropriate.18
In addition, the OTCA provides DOC with significant administrative discretion for determining
when a foreign country is a nonmarket economy. According to the statute, the determination of
NME status may be made “with respect to any foreign country at any time,” and remains
effective until expressly revoked by DOC.19 Moreover, DOC’s determinations are not subject to
judicial review in any antidumping investigation.20
With respect to AD methodologies, the OTCA amended the AD laws to require that the “factors
of production” approach was the preferred method of applying the law to nonmarket economies.21
14 See Electric Golf Cars From Poland, 40 Federal Register 25,497 (1975).
15 Trade Agreements Act of 1979, P.L. 96-39, §776, 93 Stat. 144, 186 (1979) (codified as amended at 19 U.S.C.
§1677e). The act also transferred administrative authority from Treasury to the Department of Commerce (DOC),
which issued regulations outlining the hierarchy of methodologies to be used in determining the fair market value in
AD investigations involving nonmarket economies. According to DOC, market value should be determined according
to (1) the home market prices of such or similar merchandise in a surrogate country; (2) the export price of such or
similar merchandise shipped from a surrogate; (3) when actual or accurate prices are not available, the constructed
value of such or similar merchandise in a surrogate country; and (4) the value in a surrogate country of the factors of
production used in the nonmarket economy for such or similar merchandise. See 19 C.F.R. §353.8 (a)-(c) (1979).
16 Omnibus Trade and Competitiveness Act of 1988, P.L. 100-418, 102 Stat. 1107 (1988).
17 19 U.S.C. §1677(18)(A) (2006).
18 19 U.S.C. §1677(18)(B) (2006).
19 19 U.S.C. §1677(18)(C) (2006).
20 19 U.S.C. §1677(18)(D) (2006).
21 See 19 U.S.C. §1677b(c)(2006) (stating that when “(A) the subject merchandise is exported from a nonmarket
economy country, and (B) the administering authority finds that available information does not permit the normal value
of the subject merchandise to be determined ... the administering authority shall determine the normal value of the
subject merchandise on the basis of the value of the factors of production utilized in producing the merchandise and to
which shall be added an amount for general expenses and profit plus the cost of containers, coverings, and other
expenses.”).
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Despite this express statutory change, however, DOC appears to have retained a significant
amount of discretion with respect to its application. The legislative history of the OTCA seems to
support DOC’s broad claims of discretion, indicating that DOC is to determine on a case-by-case
basis whether the available information permits the use of the standard methodology or whether a
different approach is warranted.22 As further evidence of its discretion to determine which
approach to use when determining fair market value, DOC stated at the time that it would seek to
value factors in the following order of priority:
(1) prices paid by the NME manufacturer for items imported from a market economy; (2)
prices in the primary surrogate country of domestically produced or imported materials; (3)
prices in one or more secondary surrogate countries reported by the industry producing the
subject merchandise in the secondary country or countries; and (4) prices in one or more
secondary surrogate countries from sources other than the industry producing the subject
merchandise.23
The adoption by Congress of a specific statute authorizing DOC to apply AD law to nonmarket
economies, as well as the provision of legislative guidance with respect to acceptable
methodologies—namely, authorizing various surrogate country approaches—had made AD law
the exclusive remedy for U.S. industries when confronting unfair trade practices from nonmarket
economies. As discussed below, however, the recent application—after a 23-year abstention by
DOC—of countervailing duty law to China, a nonmarket economy, potentially provided
adversely affected industries with another option for combating unfair trade practices from NME
countries.
Countervailing Duty (CVD) Law and
Nonmarket Economies (NMEs)
Background
Countervailing duty (CVD) laws are designed and intended to provide relief to domestic
industries that have been materially injured, or are threatened with material injury, by imported
goods that have been subsidized by a foreign government or other public entity. Specifically, the
relief provided takes the form of an additional import duty on the subsidized imports. The duty
levied is to be equal to the estimated amount of the government or other public subsidization.
Similar to AD law, for an industry to obtain relief, both the ITC and DOC must make conclusive
determinations.24 DOC must find that the targeted imports have been subsidized, and ITC must
find that the subsidized imports have caused material injury, or the threat of material injury, to a
22 See S. Rep. No. 100-71, 100th Cong., 1st Sess., 108 (1987) (stating that the bill “does not prohibit the [DOC] from
using its normal methodology for determining foreign market value in cases regarding nonmarket economy countries.
If information submitted by a nonmarket economy country to the [DOC] permits foreign market value to be determined
accurately using the normal methodology, then the Committee expects such methodology to be used by the [DOC].”);
see also Conf. Report No. 100-576, 100th Cong., 2d Sess. 591 (1988).
23 Final Determination of Sales at Less Than Fair Value: Sparklers from the People’s Republic of China, 56 Federal
Register 20,588, 20,590 (May 6, 1991). The department stated that “this ranking of data sources reflects the
Department’s desire to use to the greatest extent possible factor prices in a single surrogate country,” but that that it was
unable to do so for all inputs in the instant case. Id. at 20,590; see also 19 C.F.R. §351.408 (c)(2)(2011).
24 19 U.S.C. §1671 (2006).
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domestic industry or have materially retarded the establishment of an industry in the United
States.
Application of CVD Law to Nonmarket Economies
Unlike the AD laws, U.S. CVD laws had not been traditionally applied to nonmarket economies.
This is largely as a result of a 1984 determination by DOC that there was no adequate way to
measure market distortions caused by subsidies in an economy that is not based on market
principles. The first determination by DOC regarding the application of CVD law to nonmarket
economies involved carbon steel wire rods manufactured in Czechoslovakia and Poland, both of
which were nonmarket economies at the time.25 At the time of DOC’s decision, the United States
had two separate CVD statutes. The first, Section 303 of the Tariff Act of 1930,26 applied:
… [w]henever any country, dependency, colony, province, or other political subdivision of
government, person, partnership, association, cartel, or corporation, shall pay or bestow,
directly or indirectly, any bounty or grant upon the manufacture or production or export of
any article or merchandise manufactured or produced in such country, dependency, colony,
province, or other political subdivision of government.27
Section 303, which was applicable except in cases of merchandise imported from countries
“under the Agreement” (see below), did not generally require a showing that the subsidized
imports caused injury to a domestic industry.28
The second CVD statute, Section 701 of the Tariff Act of 1930, was enacted as part of the Trade
Agreements Act of 1979 and was intended to bring the United States into compliance with the
Agreement on the Interpretation and Application of Articles VI, XVI, and XXIII of the General
Agreements on Tariffs and Trade (Subsidies Code), an agreement that had been negotiated in the
1970s during the Tokyo Round of Multilateral Trade Negotiations conducted under the auspices
of the General Agreements on Tariffs and Trade (GATT).29 Section 701(b) applied CVD law to “a
country under the Agreement,” meaning a country that was party to the Subsidies Code or other
related agreements with the United States, and required that the United States also make a
determination that the subsidized imports either caused, or threatened to cause, material injury to
an industry in the United States, or materially retarded the establishment of an industry in the
United States.30
25 As many commentators have noted, however, this was not the first petition to be filed at DOC relating to a
nonmarket economy. In 1983, there was a CVD petition involving textiles from China, which was withdrawn prior to a
ruling by DOC. See, e.g., Sanghan Wang, U.S. Trade Laws Concerning Nonmarket Economies Revisited for Fairness
and Consistency, 10 EMORY INT’L L. REV. 593, 598 n. 27 (citing Judith Hippler Bello & Alan F. Holmer, THE
ANTIDUMPING AND COUNTERVAILING DUTY LAWS: KEY LEGAL AND POLICY ISSUES 146-48 (1987)). For additional
discussion of administrative action in CVD cases involving NME countries, see also CRS Report RL33550, Trade
Remedy Legislation: Applying Countervailing Action to Nonmarket Economy Countries, by Vivian C. Jones.
26 See Tariff Act of 1930, ch. 479, §303 (1930). Section 303 of the Tariff Act of 1930 was repealed when the United
States enacted the Uruguay Round Agreements Act of 1994 and subsequently joined the World Trade Organization.
See Uruguay Round Agreements Act, P.L. 103-465, §261(a), 108 Stat. 4809 (1994).
27 See Tariff Act of 1930, ch. 479, §303(a), as amended, 19 U.S.C. §1303(a) (1982).
28 See Tariff Act of 1930, §303(a)-(b), as amended, 19 U.S.C. §1303(a)-(b) (1982).
29 See Trade Agreements Act of 1979, P.L. 96-39, §§101, 103, 105(a), 93 Stat. 190, 193 (1979).
30 Id.
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Because neither Poland nor Czechoslovakia were signatories to the 1979 Subsidies Code, or
fulfilled other related statutory criteria, DOC conducted its investigations of the alleged
subsidization of carbon wire steel rod pursuant to Section 303 of the Tariff Act.31 At the
preliminary determination stage, DOC found that the phrase “any country” meant that no
government entity could be excluded on a per se basis from the CVD law.32 At the final
determination stage, however, DOC indicated that it had failed to address a second jurisdictional
element, namely, “whether government activities in a [nonmarket economy] confer a ‘bounty or
grant’ within the meaning of section 303.”33 In evaluating this element, DOC determined that
countervailable subsidies cannot, conceptually speaking, be found within a nonmarket economy
and, therefore, cannot be included within the scope of the phrase “bounty or grant.”34
To justify its final determinations, DOC relied on the rationale that a subsidy is an action taken by
a government or other public entity that distorts or subverts the operation of the free market.
Since all costs, prices, and profits in nonmarket economies are centrally controlled (i.e., by the
state), the concept of subsidization is arguably meaningless as there are no market forces to
subvert or distort. In other words, because a subsidy is essentially a market phenomena, it has no
meaning or purpose in a nonmarket economy.35 In addition, DOC maintained that, while
resources may in fact be allocated inefficiently relative to a similarly developed market economy,
it is impossible to state with any degree of certainty whether the misallocation results from
subsidization, or from central planning.36 DOC stated that because all economic activity in a
nonmarket economy is centrally controlled, there exists no way practically to “disaggregate
government action in such a way as to identify the exceptional action that is a subsidy.”37
DOC, in determining that its conclusion was consistent with its statutory authority, conducted a
review of the applicable CVD statutes and their legislative histories. Based on this review, DOC
concluded that “Congress has never confronted directly the question of whether the
countervailing duty law applies to [nonmarket economy] countries.”38 DOC pointed to
amendments to U.S. trade remedy law made by Congress in both 1974 and 1979 to justify its
determination. DOC noted in particular that, while Congress addressed trade disruption caused by
surges of imports from NME countries by adopting Section 406 of the Trade Act of 1974 and
addressed unfair competition from NME imports by making changes to the antidumping laws, it
declined to make corresponding changes to CVD law.39 Therefore, in light of Congress’s silence
with respect to the application of CVDs to imports from nonmarket economies, DOC concluded
that, as the administering agency, it possessed broad discretionary authority with respect to the
question of whether a countervailable subsidy could exist in a nonmarket economy situation.40
31 Carbon Steel Wire Rod From Czechoslovakia; Final Negative Countervailing Duty Determination, 49 Federal
Register 19,370, 19,371 (May 7, 1984).
32 Id.
33 Id.
34 Id.
35 See id.
36 Id.
37 Id. at 19,372.
38 Id. at 19,373.
39 Id.
40 Id. at 19,374 (citing United States v. Zenith Radio Corp., 562 F.2d 1209, 1316 (C.C.P.A. 1977), aff’d, 437 U.S. 443
(1978)).
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Judicial Decisions on Department of Commerce 1984 Statutory
Interpretation That CVD Law Does Not Apply to NME Countries
U.S. Court of International Trade Decision: Continental Steel Corp. v.
United States (1985)
In Continental Steel Corp. v. United States, the U.S. Court of International Trade reviewed DOC’s
negative final subsidy determinations in the Czechoslovakian and Polish wire rod investigations
and disagreed with the agency’s conclusion that subsidies cannot by definition exist within a
nonmarket economy.41 As a result, the CIT reversed and remanded the case back to DOC for
further investigation.
The CIT took specific issue with two of DOC’s holdings. First, the CIT noted that DOC
committed a “fundamental error” in its premise that a subsidy can only exist in a market
economy.42 Second, the CIT found that DOC’s determination was “at odds with the plain meaning
and purpose of the law,” “contradicts judicial interpretations of the law,” and is “inconsistent with
past administration of the law.”43 Regarding its second point, the CIT noted that Section 303 of
the Tariff Act of 1930 “makes no distinctions based on the form of any country’s economy,” and
“on its face shows a meticulous inclusiveness and an unwavering intention to cover all possible
variations of the acts sought to be counterbalanced.”44 According to the CIT, DOC’s adoption of a
per se rule that subsidies cannot exist in nonmarket economies served to effectively amend CVD
law by administrative fiat and, therefore, was irrational, arbitrary, and contrary to law.45
Regarding DOC’s determination that subsidies are purely a market phenomena and thus not
applicable to nonmarket economies, the CIT found that the problem is essentially one of
measurement and not one of meaning.46 The CIT pointed to the application of antidumping law to
nonmarket economies and noted that the use of surrogate or other substitute values for free
market values does not deter DOC from determining dumping margins; therefore, the absence of
free market values similarly should not serve to deter or prevent DOC from being able to
calculate subsidy margins.47
U.S. Court of Appeals for the Federal Circuit Decision:
Georgetown Steel v. United States (1986)
Subsequently, in Georgetown Steel Corp. v. United States,48 the U.S. Court of Appeals for the
Federal Circuit (CAFC) reversed the CIT and reinstated DOC’s conclusions. The court, focusing
first on DOC’s holding that the terms “bounty and “grant” as contained in Section 303 of the
41 Continental Steel Corp. v. United States, 614 F. Supp. 548 (Ct. Int’l Trade 1985).
42 Id. at 550.
43 Id.
44 Id. at 551.
45 Id. at 552.
46 Id. at 554.
47 Id. at 555.
48 Georgetown Steel Corp. v. United States, 801 F.2d 1308 (Fed. Cir. 1986).
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Tariff Act of 1930 were not intended to apply to nonmarket economies, held that the question
could not be answered by relying on the statute’s plain language.49 The court noted that when the
statute was initially enacted in 1897, there were no nonmarket economies; therefore, Congress
had no reason to have addressed the issue.50 According to the court, the fact that in the six
subsequent amendments to the CVD statute Congress made no attempt to address the issue of the
statute’s application to nonmarket economies “strongly suggests that Congress did not intend to
change the scope or meaning of the provision that it had first enacted in the last century.”51
The court then discussed the two most recent amendments to the CVD laws and observed
Congress’s belief, as evidenced by both the acts themselves and their legislative histories, that
changes in the antidumping law were necessary to make that law more effective in dealing
with exports from nonmarket economies, coupled with its silence about application of the
countervailing duty law to such exports, strongly indicates that Congress did not believe that
the latter law covered nonmarket economies.52
In other words, according to the court, Congress intended to deal with imports from nonmarket
economies being sold at unreasonably low prices under antidumping law, not CVD law.53
In conclusion, the CAFC, relying on accepted principles of administrative law, afforded DOC
substantial deference with respect to its decisions regarding the application of CVD law to
nonmarket economies. Specifically, citing the Supreme Court’s 1984 decision in Chevron U.S.A.,
Inc. v. Natural Resources Defense Council, Inc., which instructs courts faced with a statute that
does not expressly speak to the issue at hand, or is ambiguous on the matter, to defer to an
agency’s interpretation of the statute provided it is reasonable and permissible, held that DOC had
broad discretion in determining the existence of a subsidy under U.S. CVD law,54 and
consequently that DOC’s conclusion that subsidies cannot be found in nonmarket economies was
reasonable, in accordance with the law, and not an abuse of discretion.55
Post-Georgetown Steel Determinations
As a result of the CAFC’s decision in Georgetown Steel, there were no other countervailing duty
investigations of allegedly subsidized imports from nonmarket economies until 1991. That year,
DOC did have occasion to examine a petition alleging the subsidization of ceiling and oscillating
fans imported from China.56 Although China was considered a nonmarket economy, the petition
was based on the theory that this particular industry was sufficiently market-oriented that DOC
49 Id. at 1314.
50 Id.
51 Id. (citing S. Rep. No. 249, 96th Cong., 1st Sess. 43 (1979), reprinted in 1979 U.S.C.C.A.N., v. 2, at 381, 429 (1979)).
52 Id. at 1317.
53 Id. at 1318.
54 See id. at 1318 (citing United States v. Zenith Radio Corp., 562 F.2d 1209, 1219 (Fed. Cir. 1977). aff’d 437 U.S. 443
(1978)).
55 Id. at 1318 (citing Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-45 (1984);
Melamine Chemicals, Inc. v. United States, 732 F.2d 924, 928 (Fed. Cir. 1984)).
56 Final Negative Countervailing Duty Determinations: Oscillating and Ceiling Fans From the People’s Republic of
China, 57 Federal Register 24,018 (June 5, 1992).
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could reliably use the economic data provided by the industry itself consistent with the standards
utilized for CVD investigations in market economies.57
According to DOC, to determine whether an industry is sufficiently market-oriented, a three-part
test is utilized. First, “there must be virtually no government involvement in setting prices or
amounts to be produced.”58 Second, the industry “should be characterized by private or collective
ownership. There may be state-owned enterprises in the industry, but substantial state ownership
would weigh heavily against finding a market-oriented industry.”59 Finally, “[m]arket-determined
prices must be paid for all significant inputs, whether material or non-material (e.g., labor and
overhead), and for an all-but-insignificant proportion of all the inputs accounting for the total
value of the merchandise under investigation.”60 DOC ultimately concluded that, while some of
the inputs for the ceiling and oscillating fans were in fact obtained from market sources, there
remained a significant portion of the inputs that were not and, therefore, the industry as a whole
did not qualify as a market-oriented industry.61 As a result of this determination, DOC held that
CVD law did not apply to the Chinese ceiling and oscillating fan industry.62
Some commentators and scholars have objected to this so-called market-oriented industry
approach because the test, especially the third prong, almost guarantees that no such industries
will be found.63 In addition, some critics have contended that DOC’s determination that
“significantly all” factor input prices must be market-driven is ambiguous and may lead to
arbitrary results. Such arbitrary results, according to critics, arguably play a role in creating
uncertainty for nonmarket economy producers with respect to U.S. trade remedy laws.64
Furthermore, it appears possible to argue that under this approach, a nonmarket economy can
enact substantial market-based reforms while remaining immunized from CVD investigations.65
Although DOC’s determination in Oscillating and Ceiling Fans From the People’s Republic of
China appeared to have opened the door to the potential application of CVD law to nonmarket
economies, DOC did not accept another CVD petition against a nonmarket economy until 2006.
57 Id. at 24,018.
58 Id.
59 Id.
60 Id.
61 Id. (stating that “[b]ased on our verification of the responses submitted in this proceeding, we determine that the fans
industry in the PRC does not meet the third of these criteria”).
62 Id. at 24,019 (concluding that “we have determined that the PRC fans industry is not [a market-oriented industry]. As
a result, we determine that the CVD law cannot be applied to the PRC fan industry.”).
63 Lawrence J. Bogard & Linda C. Menghetti, The Treatment of Non-Market Economies Under U.S. Antidumping and
Countervailing Duty Law: A Petitioner’s Perspective, PLI Corp. Law and Practice Course Handbook, Series No. 789,
6-7 (1992); see also James K. Kearney & Jim Wang, The Department of Commerce’s Market-Oriented Industry
Methodology for Nonmarket Economies in Antidumping Investigations: The Responding Party’s Perspective, PLI Corp.
Law & Practice Handbook Series No. 789, 255, 266-67 (1992).
64 See James K. Kearney & Jim Wang, The Department of Commerce’s Market-Oriented Industry Methodology for
Nonmarket Economies in Antidumping Investigations: The Responding Party’s Perspective, PLI Corp. Law & Practice
Handbook Series No. 789, 255, 266-67 (1992).
65 See Lawrence J. Bogard & Linda C. Menghetti, The Treatment of Non-Market Economies Under U.S. Antidumping
and Countervailing Duty Law: A Petitioner’s Perspective, PLI Corp. Law and Practice Course Handbook, Series No.
789, 9-11 (1992).
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Application of CVD Law to Imports from China:
Coated Free Sheet Paper and Beyond
On November 27, 2006, DOC announced that it had initiated a CVD investigation against China
with respect to coated free-sheet paper.66 Following an affirmative preliminary injury
determination by the U.S. International Trade Commission,67 DOC announced, via a notice
published in the Federal Register on April 9, 2007, that it had made an affirmative preliminary
subsidy determination in the CVD investigation with respect to these imports. DOC calculated
preliminary estimated net countervailable subsidy rates ranging from 10.9% to 20.35%.68
Between the initiation of the investigation and DOC’s preliminary findings, the government of the
People’s Republic of China sought an injunction from the U.S. Court of International Trade to
prevent DOC from conducting the CVD investigation.69 China argued that the court had proper
jurisdiction to hear the claim for an injunction and that DOC was prohibited by Georgetown Steel
from conducting CVD investigations.70 Therefore, according to the government of China,
Congress was required to pass a statute expressly authorizing the application of CVD law against
nonmarket economies.71 The United States responded by asserting that the court did not have
appropriate jurisdiction to hear the claim until DOC issued its final determination in the CVD
investigation; therefore, this case was not ripe for adjudication.72 Further, the United States argued
that there was no statutory or other legal prohibition on the application of CVD law to nonmarket
economies; therefore, China’s request for an injunction should be denied.73
The Court of International Trade declined to issue the injunction. Focusing primarily on the
jurisdictional issues, the court held that the government of China and the other plaintiffs would
have a “sufficient opportunity” to seek judicial review of their claims after DOC completed its
investigation and issued a final determination.74 While the court did address the applicability of
Georgetown Steel—concluding that “it is not clear that Commerce is prohibited from applying
countervailing duty law to [nonmarket economies]. Nothing in the language of the countervailing
66 Notice of Initiation of Countervailing Duty Investigations: Coated Free Sheet Paper From the People’s Republic of
China, Indonesia and the Republic of Korea, 71 Federal Register 68,546 (November 27, 2006).
67 Coated Free Sheet Paper from China, Indonesia, and Korea, 71 Federal Register 78464 (December 29, 2006).
68 See Coated Free Sheet Paper From the People’s Republic of China: Amended Preliminary Affirmative
Countervailing Duty Determination, 72 Federal Register 17,484 (April 9, 2007).
69 See Government of the People’s Republic of China v. United States, 483 F. Supp. 2d 1274 (Ct. Int’l Trade 2007).
70 Id. at 1277 (arguing that “[28 U.S.C. §] 1581(i) is available to them because the other potential vehicle for judicial
review of their claims—filing suit under 28 U.S.C. § 1581(c) after Commerce completes the investigation—is
manifestly inadequate.”)(internal citations omitted).
71 Id. at 1278 (asserting that “Commerce does not have the discretion to apply countervailing duty law to NMEs
because the CAFC ‘definitively ruled’ that the countervailing duty statute ‘may not be applied to imports from NME
countries.’”).
72 Id. at 1279 (arguing that “it is not possible to separate the merits of the decision from those relating to jurisdiction ...
because in order for this Court to determine whether this investigation is ultra vires, it would have to determine
whether CVD law could be applied to an NME....”; further arguing that court lacked jurisdiction on ripeness grounds
because final agency action had not yet been taken)(internal citations and quotation marks omitted).
73 Id. at 1279-80 (asserting that “neither the countervailing duty statute nor Commerce’s rules limit the agency’s power
to initiate countervailing duty investigations of NMEs. ... Georgetown Steel did not hold that the CVD law could never
apply to NMEs under any circumstances, but only that Commerce’s decision not to apply it in that case was
reasonable.”).
74 See id. at 1281.
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duty statute excludes [nonmarket economies]”75—its holding with respect to Georgetown Steel
and its meaning is arguably dicta, as it does not appear to have been necessary to the conclusion
that the court lacked jurisdiction.
In publishing its preliminary findings, DOC also issued a memorandum that directly confronted
the Georgetown Steel precedent.76 The memorandum provides a justification as to why China’s
economy in 2005, the period with which the investigation was concerned, and the so-called
“Soviet-style economies” are distinguishable, such that it is now possible to apply CVD law to
some nonmarket economy countries.77
It is important to note that the memorandum and preliminary CVD determination did not in any
way change or alter China’s formal status as a nonmarket economy.78 Rather, the memorandum
and justification focused on whether the rationale used to prevent CVD law from applying to
nonmarket economies in 1984 remained true for modern-day China. The memorandum concerned
itself with five major areas of the Chinese economy: wages and prices, access to foreign currency,
personal property rights and private entrepreneurship, foreign trading rights, and allocation of
financial resources.79 While the specific economic analysis and details are beyond the scope of
this report, the memorandum concluded that, unlike the so-called “Soviet-style economies” at
issue in Georgetown Steel, China’s present economy does not contain the same obstacles to
determining the existence of subsidies. According to the memorandum,
private industry now dominates many sectors of the Chinese economy, and entrepreneurship
is flourishing. Foreign trading rights have been given to over 200,000 firms. Many business
entities in present-day China are generally free to direct most aspects of their operations, and
to respond to (albeit limited) market forces. The role of central planners is vastly smaller....
Given these developments, we believe that it is possible to determine whether the PRC
Government has bestowed a benefit upon a Chinese producer (i.e., the subsidy can be
identified and measured) and whether any such benefit is specific. Because we are capable of
applying the necessary criteria in the CVD law, the Department’s policy that gave rise to the
Georgetown Steel litigation does not prevent us from concluding that the PRC Government
has bestowed a countervailable subsidy upon a Chinese producer.80
75 See id. at 1272 (court stated that “[a]lthough Plaintiffs allege that ‘[t]he CAFC has definitively ruled that the CVD
law was not intended to be applied against NMEs’ … the Georgetown Steel court did not go so far as Plaintiffs claim
and find that the countervailing duty law is not applicable to NMEs.... Rather, the Georgetown Steel court only
affirmed Commerce’s decision not to apply countervailing duty law to the NMEs in question in that particular case and
recognized the continuing ‘broad discretion’ of the agency to determine whether to apply countervailing duty law to
NMEs.”).
76 See Countervailing Duty Investigation of Coated Free Sheet Paper from the People’s Republic of China - Whether
the Analytical Elements of the Georgetown Steel Opinion are Applicable to China’s Present-Day Economy,
Memorandum from Shauna Lee-Alaia & Lawrence Norton, Office of Policy, Import Administration, to David M.
Spooner, Assistant Secretary for Import Administration, March 29, 2007, available at, http://ia.ita.doc.gov/download/
prc-cfsp/CFS%20China.Georgetown%20applicability.pdf (hereinafter Georgetown Steel Memo).
77 See id.
78 See id. at 2-4 (noting that DOC’s recent review of China’s nonmarket economy status concluded that “while China
has enacted significant and sustained economic reforms, the PRC Government has preserved a significant role for the
state in the economy. Indeed, the limits the PRC Government has placed on the role of market forces are sufficient to
preclude China’s designation as a market economy under the U.S. antidumping law.”).
79 See generally, id.
80 Id. at 10.
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Because the U.S. International Trade Commission made a negative final determination on
injury,81 CVDs were not imposed on the investigated merchandise.82 Other CVD petitions were
successful, however, resulting in the imposition of CVDs on NME country goods, beginning with
a CVD order on Chinese carbon quality steel pipe in July 2008.83 Twenty-four such CVD orders,
covering goods from China and Vietnam, are now in place.84
Simultaneous Imposition of AD and CVD Orders
on Same Nonmarket Economy Merchandise:
Possible “Double Counting” of Subsidization
In most cases involving NME goods, petitioners have sought both antidumping and
countervailing duty orders on the imports in question and thus most CVD orders are accompanied
by an AD order on the same merchandise.85 As discussed earlier, the treatment of China and
Vietnam as nonmarket economy (NME) countries for purposes of antidumping investigations
triggers a provision of U.S. law permitting DOC to use a “surrogate country” methodology to
determine the fair market or “normal” value of products imported from the NME country.
Assuming that an NME product is subsidized and the domestic sales price reflects the subsidy, the
“surrogate country” methodology generally produces a higher normal value for the item than
would result if the actual sale price in the NME country were used.
In determining an export or constructed export price of an item in any antidumping
investigation—the price to which normal value is compared to determine the dumping margin—
DOC is required under Section 772(c) and (d) of the Tariff Act of 193086 to make certain
adjustments to the price, including increasing it by “the amount of any countervailing duty
imposed on the subject merchandise … to offset an export subsidy.”87 Neither this provision,
which was added to the Tariff Act of 1930 in the Trade Agreement Act of 1979,88 nor other
provisions of antidumping law, expressly provide for an upward adjustment for CVDs imposed as
the result of a domestic subsidy, that is, a government subsidy that is not tied to exportation but
that may nonetheless benefit exported merchandise. The Commerce Department described the
difference in treatment between the two as follows, referencing Article VI:5 of the General
Agreement on Tariffs and Trade (GATT), which states that an imported product may not be
“subject to both anti-dumping and countervailing duties to compensate for the same situation of
dumping or export subsidization”:
81 Coated Free Sheet Paper from China, Indonesia, and Korea, 72 Federal Register 70892 (December 13, 2007).
82 See Coated Free Sheet Paper from China, Indonesia and Korea, 72 Federal Register 70892 (December 13, 2007).
83 Circular Welded Carbon Quality Steel Pipe from the People’s Republic of China: Notice of Amended Final
Affirmative Duty Determination and Notice of Countervailing Duty Order, 73 Federal Register 42545 (July 22, 2008).
84 See U.S. Int’l Trade Comm’n, Antidumping and Countervailing Duty Orders in Place as of October 11, 2011, by
Date of Order, at http://www.usitc.gov/trade_remedy/731_ad_701_cvd/investigations/active/index.htm (click on
“AD/CVD Orders”)[hereinafter, List of Current U.S. AD/CVD Orders]; Multilayered Wood Flooring From the
People’s Republic of China: Countervailing Duty Order, 76 Federal Register 76693 (December 8, 2011).
85 See id.
86 19 U.S.C. §1677a(c),(d)(2006).
87 19 U.S.C. §1677a(c)(1)(C)(2006)(emphasis added).
88 Trade Agreements Act of 1979, P.L. 96-39, §101, adding Tariff Act of 1930, Title VII, §772, 19 U.S.C. §1677a.
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Domestic subsidies presumably lower the price of the subject merchandise both in the home
and the U.S. markets, and therefore have no effect on the measurement of any dumping that
might also occur. Export subsidies, by contrast, benefit only exported merchandise.
Accordingly, an export subsidy brings about a lower U.S. price, which could be ascribed to
either dumping or export subsidization, as well as the potential for double remedies.
Imposing both an export-subsidy CVD and an AD duty, calculated with no adjustment for
that CVD, would impose a double remedy specifically prohibited by Article VI ¶5 of the
GATT. Thus, the only reasonable explanation for Congress’ decision to provide for the …
[addition to] U.S. prices of export-subsidy CVDs is protection against double remedies.89
The Commerce Department later expanded on the statutory distinction in this way:
The treatment of CVDs that arise out of domestic subsidies contrasts with the statutory
treatment of CVDs that relate to export subsidies. The reason for the difference in treatment
is that export subsidies are assumed to increase dumping margins by lowering the export
price, but not the domestic price in the exporting country. Consequently, collecting both a
CVD on an export subsidy and also the increase in the dumping margin resulting from that
subsidy would constitute a double remedy for the export subsidy. Adding the CVD to the
initial U.S. price lowers the margin by the amount the subsidy is presumed to have increased
it, thereby preventing a double-remedy. On the other hand, domestic subsidies are assumed
not to affect dumping margins, because they lower prices in both the U.S. market and the
domestic market of the exporting country equally. As a result, there is no need for an
adjustment to prevent a double remedy. Thus, in the most general germs, the statute stands
for the proposition that dumping margins should not be calculated so as to double-collect
CVDs.90
While the situation described may hold true with regard to AD investigations involving goods of
market economy countries, it may not necessarily do so in AD investigations involving NME
products where the surrogate country methodology is used to establish normal value of the
merchandise in question and where a CVD order is imposed to remedy a domestic subsidy on the
same merchandise. The U.S. Court of International Trade explained the distinction in GPX Int’l
Tire Corp. v. United States, the 2009 decision involving CVDs on Chinese imports discussed later
in this report:
Here, the export price is not being compared with the price of the good in the PRC in which
case both sides of the comparison would be equally affected, but rather, export price,
however it is affected by the subsidy, is compared with the presumptively subsidy-free
constructed normal value. Without some type of adjustment for this, the imposition of AD
duties could very well result in a double remedy.91
89 Certain Cold-Rolled and Corrosion-Resistant Carbon Steel Flat Products From Korea: Final Results of Antidumping
Duty Administrative Reviews, 62 Federal Register 18,404, 18,422 (April 15, 1997). Regarding the issue of GATT-
consistency, see Trade Agreements Act of 1979, Statement of Administrative Action, H.Doc. 96-153, Part II, at 412, as
reprinted in 1979 U.S.C.C.A.N., v. 2, at 683.
90 Notice of Final Results of Antidumping Duty Administrative Review: Low Enriched Uranium From France, 69
Federal Register 46,501, 46,506 (August 3, 2004).
91 GPX Int’l Tire Corp. v. United States, 645 F.Supp.2d 1231, 1242 (Ct. Int’l Trade 2009). The court referenced a
report of the U.S. Government Accountability Office, which observed that “when the [constructed] normal value is
compared with the export price, the difference will, at least in theory, reflect the price advantages that the exporting
company has obtained from both export and domestic subsidies.” Id., quoting U.S. Gov’t Accountability Office, GAO-
05-474, U.S.-China Trade: Commerce Faces Practical and Legal Challenges in Applying Countervailing Duties 28
(June 2005), at http://www.gao.gov/products/GAO-05-474.
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As explained in more detail below, the issue of double counting (or double remedies) arose not
only in the court decision referenced above, but also in China’s successful WTO challenge of
several U.S. CVD orders on Chinese products, each case posing limitations on the ability of DOC
to impose CVDs on NME imports.
World Trade Organization (WTO) Issues
WTO-Consistency of Imposing Antidumping and Countervailing
Duties on Goods from NME Countries
The imposition of antidumping and countervailing duties by WTO Members on the products of
NME countries implicates a variety of WTO agreements: the General Agreement on Tariffs and
Trade 1994 (GATT 1994), particularly GATT Article VI; the Agreement on Antidumping; the
Agreement on Subsidies and Countervailing Measures (SCM Agreement); and the WTO
Accession Protocols of NME countries, such as China and Vietnam.
General Agreement on Tariffs and Trade 1994
Article VI of the GATT 1994 governs the imposition of AD and CV duties by WTO Members on
the goods of all other WTO Member countries. It requires, inter alia, that any antidumping or
countervailing duty imposed by a WTO Member on such products not exceed, respectively, the
“margin of dumping”92 or the amount of subsidization.93 For purposes of Article VI, the dumping
margin is the price difference that is determined when normal value and export price are
compared.94 As noted earlier, GATT Article VI:5 provides that no product of a WTO Member
may “be subject to both anti-dumping and countervailing duties to compensate for the same
situation of dumping or export subsidization.” Article VI also generally requires that material
injury be found before either type of duty may be imposed.95
While the text of Article VI does not itself distinguish between the products of market and
nonmarket economy countries, an interpretative note to Article VI recognizes that AD duties may
be imposed on the products of countries with government-controlled economies and that
surrogate country data may possibly be used in making price comparisons involving normal value
in such cases. The note states that
It is recognized that, in the case of imports from a country which has a complete or
substantially complete monopoly of its trade and where all domestic prices are fixed by the
State, special difficulties may exist in determining price comparability for the purposes of
paragraph 1 [of Article VI] and in such cases importing contracting parties [i.e., WTO
92 General Agreement on Tariffs and Trade 1994 (GATT 1994), art. VI:2. at http://www.wto.org/english/docs_e/
legal_e/gatt47_e.pdf.
93 GATT 1994, art.VI:3.
94 GATT 1994, arts. VI:1, VI:2.
95 GATT 1994, art. (Art. VI:6)
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Members] may find it necessary to take into account the possibility that a strict comparison
with domestic prices in such a country may not always be appropriate.96
As recently explained by the WTO Appellate Body, this provision “allows investigating
authorities to disregard domestic prices and costs of such an NME in the determination of normal
value and to resort to prices in a market economy third country.”97 The Appellate Body also
remarked that the note “appears to describe a certain type of NME, where the State monopolizes
trade and sets all domestic prices” and “would thus not on its face be applicable to lesser forms of
NMEs that do not fulfil both conditions, that is, the complete or substantially complete monopoly
of trade and the fixing of all prices by the State.”98
GATT Article XVI addresses subsidization itself, placing a notification requirement on WTO
Members and containing specific obligations on the use of export subsidies. It provides that
Members should seek to avoid the use of subsidies on primary products, that is, “any product of
farm, forest, or fishery, or any mineral” in its natural or minimally processed form,99 but that, if a
party grants an export subsidy on such a product, the subsidy must not be applied in a manner
which results in the grantor “having more than an equitable share of world export trade in that
product” (Art. XVI:3). Article XVI also prohibits Members from granting, directly or indirectly,
“any form of subsidy on the export of any product other than a primary product which results in
the sale of the product for export at a price lower than the comparable price charged for the like
product to buyers in the domestic market” (Art. XVI:4). Article XVI does not address
subsidization by the types of NMEs referred to in GATT Article VI interpretative note.
Agreement on Antidumping
The WTO Agreement on Antidumping governs the application of GATT Article VI in actions
taken under national antidumping laws or regulation.100 The Agreement provides that
antidumping measures may be applied “only under the circumstances” provided for in Article VI
and “conducted in accordance with the provisions” of the Antidumping Agreement.101 With
regard to dumping by nonmarket economy countries, Article 2.7 expressly states that Article 2 of
the Agreement, which sets forth obligations regarding the determination of dumping by national
authorities in antidumping investigations, “is without prejudice to” the GATT Article VI
interpretative note discussed above.102 As stated by the WTO Appellate Body, this provision “thus
incorporates … [the note] into the Anti-Dumping Agreement.”103
96 GATT 1994, ad art. VI, para.1, subpara. 2.
97 Appellate Body Report, European Communities—Definitive Anti-Dumping Measures on Certain Iron or Steel
Fasteners from China, para. 285, WT/DS397/AB/R (July 15, 2011)[hereinafter EC Fasteners AB Report].
98 Id. para. 285, n.460.
99 See GATT 1994, ad art. XVI, sect. B, para. 2.
100 WTO Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994
(Antidumping Agreement), art. 1, at http://www.wto.org/english/docs_e/legal_e/19-adp.pdf.
101 Id.
102 Id. art. 2.7.
103 EC Fasteners AB Report, supra note 97, para. 285.
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Agreement on Subsidies and Countervailing Measures
The WTO Agreement on Subsidies and Countervailing Measures (SCM Agreement), which
expands considerably on obligations in GATT Articles VI and XVI, sets out obligations, rights,
and remedies regarding the government subsidization of goods and the imposition of
countervailing duties on subsidized imports.104 The Agreement defines a subsidy as “a financial
contribution by a government or any public body” within the territory of a WTO Member, or any
form of income or price support, that confers a benefit. A financial contribution may take the form
of (1) a direct or potential direct transfer of funds such as a loan or loan guarantee; (2) the
foregoing of revenue “otherwise due”; (3) government provision of goods of services other than
general infrastructure or government purchase of goods; or (4) government payments to a funding
mechanism, or entrustment or direction of a private body to carry out one of the functions
described above.105
The Agreement prohibits export subsidies and subsidies that are contingent on the use of domestic
over imported products.106 While the Agreement does not prohibit domestic subsidies, it requires
that such a subsidy be shown to be specific to an industry and to cause adverse effects to the
interests of a WTO Member to be remediable.107 These are referred to as “actionable” subsidies.
WTO Members may respond in two ways to subsidies that meet the Agreement’s definition: (1) a
direct challenge of the subsidy in a WTO dispute settlement proceeding, and (2) the imposition of
countervailing duties on subsidized goods as the result of a domestic trade remedy proceeding.108
While the SCM Agreement does not expressly address the imposition of countervailing duties on
the goods of NME countries,109 it does provide an avenue for using cross-border benchmarks in
measuring the benefit from a governmental financial contribution, the second portion of the
Agreement’s subsidy definition, in CVD proceedings involving these countries. In measuring
such a benefit, WTO Members generally refer to market-based rates and prices in the subsidizing
country. At the same time, a market-based benchmark may not be available in an NME country
and thus, in such cases, the United States has used benchmarks based on rates or prices from one
or more foreign market economy countries to make its benefit determinations.110
104 The Agreement Establishing the World Trade Organization (WTO Agreement) provides that in the event of a
conflict between a provision of the GATT 1994 and a provision of the SCM Agreement (or any other multilateral WTO
agreement on trade in goods), the provision of the SCM Agreement (or the other WTO agreements) “shall prevail to the
extent of the conflict.” Agreement Establishing the World Trade Organization (WTO Agreement), Annex 1A, General
interpretative note to Annex 1A.
105 Agreement on Subsidies and Countervailing Measures (SCM Agreement), art. 1, at http://www.wto.org/english/
docs_e/legal_e/24-scm.pdf.
106 SCM Agreement, art. 3.
107 SCM Agreement, arts. 1.2, 2, 5. Prohibited subsidies are considered specific per se. Id. art. 2.3.
108 The SCM Agreement allows WTO Members to invoke the two mechanisms at the same time, but “with regard to
the effects of a particular subsidy in the domestic market of the importing Member,” the Agreement provides that only
one form of relief is available: either a countervailing duty or a countermeasure (e.g., a tariff surcharge) imposed in the
event that a defending subsidizing Member does not comply with a WTO decision against it. SCM Agreement, art. 10,
n.35.
109 Note that SCM Agreement did recognize that NME countries may be WTO Members, generally requiring WTO
Members “in the process of transformation from a centrally-planned into a market, free-enterprise economy” to phase
out prohibited subsidies, or make them conform with Article 3, within seven years from the date the WTO Agreement
entered into force (by January 1, 2002), SCM Agreement, art. 29.
110 See, e.g., Coated Free Sheet Paper from the People’s Republic of China: Amended Preliminary Affirmative
Countervailing Duty Determination, 72 Federal Register at 17487-89.
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Article 14 of the SCM Agreement, which addresses how a WTO Member may calculate a subsidy
in terms of the benefit to the recipient, provides that “any method used by the investigating
authority to calculate the benefit to the recipient … shall be provided for in national legislation or
implementing regulations of the Member concerned and its application to each particular case
shall be transparent and adequately explained,” provided that the method is consistent with
Agreement guidelines applicable to specified types of subsidies.111 These subsidies are: (a)
government provision of equity capital; (b) government loans; (c) government loan guarantees;
and (d) government provision of goods and services or government purchase of goods. With
regard to the fourth category, Article 14(d) provides that
the provision of goods or services or purchase of goods by a government shall not be
considered as conferring a benefit unless the provision is made for less than adequate
remuneration, or the purchase is made for more than adequate remuneration. The adequacy
of remuneration shall be determined in relation to prevailing market conditions for the good
or service in question in the country of provision or purchase (including price, quality,
availability, marketability, transportation and other conditions of purchase or sale).112
In January 2004, the WTO Appellate Body (AB) found in United States—Final Countervailing
Duty Determination with Respect to Certain Softwood Lumber from Canada (U.S.—Softwood
Lumber IV) that, under Article 14(d), “an investigating authority may use a benchmark other than
private prices of the goods in question in the country of provision, when it has been established
that those private prices are distorted, because of the predominant role of the government in the
market as a provider of the same or similar goods.”113 The AB went on to establish a limitation on
the use of such benchmarks, requiring that their use must “relate or refer to, or be connected with,
the prevailing market conditions in that country, and must reflect price, quality, availability,
marketability, transportation and other conditions of purchase or sale, as required by Article
14(d).”114 Nevertheless, the AB expressly refused to suggest or rule upon specific alternative
methods that might be available to countries, noting that such a review would be appropriate only
on a case-by-case basis.115
More recently, the AB, citing its findings in U.S.—Softwood Lumber IV, found further scope in
Article 14 for the use of cross-border benchmarks. In China’s challenge to U.S. CVDs discussed
later in this report, the AB upheld a 2010 WTO panel decision finding that the United States had
acted consistently with Article 14(d) in two CVD investigations in rejecting in-country private
prices in China for calculating the benefit conferred by the provision, by state-owned enterprises,
of hot-rolled steel inputs to Chinese companies. The AB ruling, which was partially adverse to the
United States, set the following parameters for using a cross-border benchmark under Article
14(d):
111 SCM Agreement WTO Agreement on Subsidies and Countervailing Measures, Art. 14, available at,
http://www.wto.org/english/docs_e/legal_e/24-scm.pdf (emphasis added).
112 Id. art. 14(d).
113 Appellate Body Report, United States—Final Countervailing Duty Determination with Respect to Certain Softwood
Lumber from Canada, para. 103, WT/DS257/AB/R (January 19, 2004).
114 Id.
115 Id. para. 106 (stating that “[n]or are we required to determine the consistency with Article 14(d) of all the alternative
methods mentioned by the participants and third participants; such assessment will depend on how any such method is
applied in a particular case.”).
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In sum, we are of the view that an investigating authority may reject in-country private prices
if it reaches the conclusion that these are too distorted due to the predominant participation of
the government as a supplier in the market, thus rendering the comparison required under
Article 14(d) of the SCM Agreement circular. It is, therefore, price distortion that would
allow an investigating authority to reject in-country private prices, not the fact that the
government is the predominant supplier per se. There may be cases, however, where the
government’s role as a provider of goods is so predominant that price distortion is likely and
other evidence carries only limited weight. We emphasize, however, that price distortion
must be established on a case-by-case basis and that an investigating authority cannot, based
simply on a finding that the government is the predominant supplier of the relevant goods,
refuse to consider evidence relating to factors other than government market share.116
The AB further upheld the panel finding validating DOC’s decision in these particular CVD
investigations, finding that, in the dispute before it, “given the evidence regarding the
government’s predominant role as the supplier of the goods, that is, the 96.1 per cent market
share, and having considered evidence of other factors, the Panel properly concluded that the
USDOC could, consistent with Article 14(d) of the SCM Agreement, determine that private prices
were distorted and could not be used as benchmarks for assessing the adequacy of
remuneration.”117
In addition to its evaluation of Article 14(d), the AB also ruled on the use of cross-border
benchmarks under Article 14(b) of the SCM Agreement, a guideline for WTO Members
calculating the benefit of a government loan in a CVD investigation. Article 14(b) provides that
a loan by a government shall not be considered as conferring a benefit, unless there is a
difference between the amount that the firm receiving the loan pays on the government loan
and the amount the firm would pay on a comparable commercial loan which the firm could
actually obtain on the market. In this case the benefit shall be the difference between these
two amounts.
Again considering USDOC determination in CVD investigations involving Chinese goods, the
AB stated that
[it saw] no inherent limitations in Article 14(b) that would prevent an investigating authority
from using benchmark interest rates on loans denominated in currencies other than the
currency of the investigated loan, or from using proxies instead of observed interest rates, in
situations where the interest rates on loans in the currency of the investigated loans are
distorted and thus cannot be used as benchmarks. … In the absence of an actual comparable
commercial loan that is available on the market, an investigations authority should be
allowed to use a proxy for what ‘would’ have been paid on a comparable commercial loan
that ‘could’ have been obtained on the market.118
116 Appellate Body Report, United States—Definitive Anti-Dumping and Countervailing Duties on Certain Products
from China, para. 446, WT/DS379/AB/R (March 11, 2011)(italics in original)[hereinafter U.S. CVDs AB Report].
117 Id. para. 456.
118 Id. para. 487.
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The AB also upheld the panel’s determination that the United States had acted consistently in
rejecting domestic interest rates in this case:
We do not consider, therefore, that the USDOC or the Panel was required to determine
whether factors such as the government’s predominant role as a lender, government
regulation of interest rates, evidence of undifferentiated interest rates, and government
influence over … [state-owned commercial bank]-lending decisions, each resulted in interest
rates that were lower than they otherwise would have been. In our view, it was, as the Panel
found, sufficient for the USDOC to establish that all of these factors taken together distorted
the commercial lending market such that comparing the interest rates of the investigated
loans with observed rates in the same market would not be meaningful for the purposes of
Article 14(b).119
At the same time, the AB found that the panel had not adequately determined whether the actual
proxy benchmark used by the United States was consistent with Article 14(b), but could not
complete the analysis due to an insufficient factual record in the WTO case.120
WTO Accession Protocols
The WTO Accession Protocols of NME countries, such as China and Vietnam, contain provisions
governing price comparisons by other WTO Members in antidumping and countervailing duty
investigations that support the use of surrogate countries, factors of production, or other
“substitute benchmarks” in proceedings involving the goods of these countries.121 The Protocols
govern the countries’ accession to the WTO and are an integral part of the WTO Agreement.
While the language of Article 14 of the SCM Agreement is relevant to any discussion of the
application of trade remedy laws to nonmarket economies, the Accession Protocols provide
further guidance as to use of alternate methodologies with respect to particular WTO Member
countries.
Article 15 of the WTO Accession Protocol of China, which is currently classified by the United
States and other countries as a nonmarket economy,122 states as follows:
(a) In determining price comparability under Article VI of the GATT 1994 and the Anti-
dumping Agreement, the importing Member shall use either Chinese prices or costs for the
industry under investigation or a methodology that is not based on a strict comparison with
domestic prices or costs in China based on the following rules:
119 Id. para. 508.
120 Id. paras. 510-537.
121 See Protocol on the Accession of the People’s Republic of China, WT/L/432 (November 23, 2001), available at,
http://www.wto.org. Note also, e.g., the WTO Accession Protocol of Vietnam, WT/L/662 (November 15, 2006), which,
at para. 2, incorporates language on antidumping and subsidy methodologies from the report of the WTO Working
Party on the Accession of Viet Nam which is in may respects similar that in China’s Accession Protocol. See
WT/ACC/VNM/48, paras. 255, 527 (October 27, 2006).
122 According to U.S. law, decisions to change China’s classification to a market economy must be made subject to the
statutory requirements established by §771(18)(B) of the Tariff Act of 1930, as added by the Trade Agreements Act of
1979. See Trade Agreements Act of 1979, P.L. 96-39 §771, 93 Stat. 144 (1979) (codified as amended at 19 U.S.C.
§1677(18)(B) (2006)).
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(i) If the producers under investigation can clearly show that market economy
conditions prevail in the industry producing the like product with regard to the
manufacture, production and sale of that product, the importing WTO Member shall use
Chinese prices or costs for the industry under investigation in determining price
comparability;
(ii) The Importing Member may use a methodology that is not based on a strict
comparison with domestic prices or costs in China if the producers under investigation
cannot clearly show that market economy conditions prevail in the industry producing
the like product with regard to manufacture, production and sale of that product.
(b) In proceedings under Parts II, III and V of the SCM Agreement [i.e., WTO subsidy
disputes and domestic CVD proceedings], when addressing subsidies described in Articles
14(a), 14(b), 14(c), and 14(d), relevant provisions of the SCM Agreement shall apply;
however, if there are special difficulties in that application, the importing WTO Member may
then use methodologies for identifying and measuring the subsidy benefit which take into
account the possibility that prevailing terms and conditions in China may not always be
available as appropriate benchmarks. In applying such methodologies, where practicable, the
importing WTO Member should adjust such prevailing terms and conditions before
considering the use of terms and conditions prevailing outside China.
…
(d) Once China has established, under the national law of the importing WTO Member, that
it is a market economy, the provisions of subparagraph (a) shall be terminated provided that
the importing Member’s national law contains market economy criteria as of the date of
accession. In any event, the provisions of subparagraph (a)(ii) shall expire 15 years after the
date of accession [i.e., December 11, 2016]. In addition, should China establish, pursuant to
the national law of the importing WTO Member, that market economy conditions prevail in
a particular industry or sector, the non-market economy provisions of subparagraph (a) shall
no longer apply to that industry or sector.
This language recognizes the inherent difficulties in calculating a subsidy or dumping margin
using values obtained from nonmarket economies.123 Focusing on CVD proceedings, the
language indicates that, provided the use of cross-border benchmarks in CVD proceedings can be
adjusted to meet the prevailing economic terms and conditions, the use of such benchmarks is
both acceptable by China and permissible under WTO obligations. Indeed, the WTO Appellate
Body has stated that Section 15(b) “affords importing WTO Members investigating Chinese
imports additional flexibility in the methodology used to identify and measure subsidy benefits”
123 Regarding antidumping proceedings, see, e.g., EC Fasteners AB Report, supra note 97, para. 285. The WTO
Appellate Body has made clear, however, that Section 15(a) applies only to determinations of normal value: “We do
not consider that the references in paragraph 15(a)(i) to producers having to show that ‘market economy conditions
prevail … with regard to the manufacture, production and sale’ of a product means that paragraph 15(a) permits any
derogations also with respect to the determination of export prices. … Section 15 of China’s Accession Protocol does
not authorize WTO members to treat China differently from other Members except for the determination of price
comparability in respect of domestic prices and costs in China, which relates to the determination of normal value. We
consider that, while Section 15 … establishes special rules regarding the domestic price aspect of price comparability,
it does not contain an open-ended exception that allows WTO Members to treat China differently for other purposes
under the Anti-Dumping Agreement and the GATT 1994, such as the determination of export price or individual versus
country-wide margins.” Id. paras. 288, 290 (emphasis in the original)(footnotes omitted). See also Panel Report, United
States—Anti-Dumping Measures on Certain Shrimp from Viet Nam, paras. 7.246-7.251 (WT/DS404/R (July 11,
2011)(adopted September 2, 2011).
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in the situation described in that section.124 While the use of cross-border benchmarks would thus
not be a violation of WTO obligations on their face, the application of such benchmarks to a
specific industry or imported product may still be subject to challenge on an “as applied” basis. It
should also be noted that China’s challenge to the U.S. application of CVD law to Chinese
products, discussed above (and below), did not address the application of Article 15(b) to the
disputed U.S. benefit analysis, but instead, as intended by the parties, focused solely on U.S.
compliance with the guidelines set out in Article 14 of the SCM Agreement.125
China’s WTO Challenge: United States—Anti-Dumping and
Countervailing Duties on Certain Products from China (DS379)
China requested consultations with the United States in September 2008 regarding U.S. law and
practice in antidumping and countervailing duty investigations involving Chinese imports.126 In
its subsequent panel request in December of that year, China made both “as applied” and “as
such” claims, that is, it argued that both the application of U.S. antidumping and CVD law in
particular investigations and, where the issue of double remedies was concerned, that the law in
itself violated WTO obligations.127 A panel was established in January 2009. In its “as applied”
claims, China cited inconsistencies with the GATT articles, the WTO Agreement on Subsidies
and Countervailing Measures (SCM Agreement), the WTO Antidumping Agreement, and Article
15 of China’s WTO Accession Protocol, which sets out methodologies that WTO Members may
use in determining price comparability in establishing whether and the extent to which dumping
and subsidies exist, in four antidumping and four CVD investigations involving Chinese goods.
Among other claims, China alleged the following:
• that in connection with U.S. findings that the alleged provision of goods for less
than adequate remuneration fulfilled the definition of a subsidy under the SCM
Agreement, DOC erroneously determined that certain state-owned enterprises
(SOEs) were public bodies for purposes of the definition, that DOC failed to find
that the alleged benefits that trading companies had received from SOE-provided
goods were passed on to the producers of the merchandise that was the subject of
the CVD investigations, and, in an argument analogous to that used in challenges
to the use of “zeroing” in antidumping cases, that DOC improperly included in
124 See U.S. CVDs AB Report, supra note 116, para. 436, note 401.
125 Id.
126 Request for Consultations by China, United States—Definitive Anti-Dumping and Countervailing Duties on Certain
Products from China, WT/DS379/1 (September 22, 2008).
127 Request for the Establishment of a Panel by China, United States—Definitive Anti-Dumping and Countervailing
Duties on Certain Products from China, WT/DS379/2 (December 12, 2008). “As such” challenges have broader
implications than “as applied” claims, which focus on the application of a statute, regulation, or practice to an
individual situation, rather than on the norm itself. As explained by the WTO Appellate Body:
By definition, an “as such” claim challenges laws, regulations, or other instruments of a Member
that have general and prospective application, asserting that a Member’s conduct—not only in a
particular instance that has occurred, but in future situations as well—will necessarily be
inconsistent with that Member’s WTO obligations. In essence, complaining parties bringing “as
such” challenges seek to prevent Members ex ante from engaging in certain conduct. The
implications of such challenges are obviously more far-reaching than “as applied” claims.
Appellate Body Report, United States—Sunset Review of Anti-Dumping Measures on Oil Country Tubular
Goods from Argentina, para. 172, WT/DS268/AB/R (November 29, 2004).
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subsidy benefit calculations only those transactions that produced a positive
benefit, while excluding transactions that yielded no benefit;
• that the United States had failed to demonstrate that the alleged provision of land
and land use rights for less than adequate remuneration was specific to an
industry or group of industries;
• that in connection with finding that the government had provided loans on
preferential terms, that the United States had erroneously determined that certain
state-owned commercial banks were public bodies, and also failed to find
specificity;
• that in each case where the United States chose a benchmark outside of China in
order to determine the existence and amount of any subsidy benefit, an action
permitted under Article 15 of China’s Accession Protocol, the United States had
improperly rejected the prevailing terms and conditions in China as the basis for
making its determinations;
• that in using its nonmarket economy (NME) methodology for determining
dumping and imposing antidumping duties simultaneously with a determination
of subsidization and the imposition of CVDs on the same product, the United
States levied CVDs in excess of the subsidy found to exist in violation of the
SCM Agreement, that is, an impermissible “double remedy”; that the levied
antidumping and countervailing duties were in excess of the “appropriate”
amounts, as called for in Article 9.2 of the AD Agreement and Article 19.3 of the
SCM Agreement; that the United States failed to make a “fair comparison”
between export price and normal value in its antidumping determination as
required under the WTO Antidumping Agreement; that the United States imposed
antidumping duties in excess of the amount of dumping found to exist; and that
the United States failed to grant China the most-favored-nation (MFN) treatment
required under Article I of the GATT by not according it “the same unconditional
entitlement to the avoidance of a double remedy for the same unfair trade
practice that it accords to imports of like products from the territories of other
WTO Members”; and
• that in conducting the antidumping and countervailing duty investigations in
question, the United States made various procedural errors involving notification
and transparency and used improperly made adverse inferences from available
information without having requested information from interested parties
regarding the factual issue involved.
China also argued that U.S. law is inconsistent “as such” with U.S. obligations under the WTO
Antidumping and SCM Agreements because it does not provide DOC with authority to avoid
imposing an impermissible “double remedy” on goods from China when it uses surrogate country
values for determining costs of production of goods made in a country designated a NME.
Because imports from WTO Members with market economies are not subject to this treatment,
China also considered this situation to be a violation of the GATT Article I, the GATT most-
favored-nation article.
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Panel Report
In a report publicly circulated on October 22, 2010,128 the WTO panel rejected most of China’s
claims, as follows:
• Regarding the WTO-consistency of DOC’s determinations in cited investigations
that there was a financial contribution for purposes of the SCM Agreement’s
definition of a subsidy, the panel found that China had not established that the
United States violated the SCM Agreement in determining that state-owned
enterprises and state-owned enterprises (SOEs) and state-owned commercial
banks (SOCBs) were “public bodies,” agreeing with the United States that the
term “public body” means “any entity that is controlled by the government.”129
The panel also rejected China’s claim that the United States had violated the
Agreement in determining that certain trading companies were “entrusted” or
“directed” by the government to provide goods and services to producers of the
investigated products.
• Regarding DOC’s determinations of specificity, the panel rejected China’s claims
that DOC had improperly determined that lending by SOCBs to the off-the-road
(OTR) tire industry was de jure specific, but also found that the United States had
not acted consistently with the SCM Agreement in determining that the
government provision of land-use rights in one investigation was regionally
specific.
• Regarding U.S. benefit determinations, the panel found that China had not
established that DOC violated the SCM Agreement by failing to conduct a “pass
through” analysis in the OTR investigation to determine whether any subsidy
benefits received by trading companies selling rubber inputs were passed on to
OTR tire producers who purchased those inputs; by failing to “offset” positive
with “negative” benefit amounts in the same investigation; and by rejecting
Chinese prices and interest rates as benchmarks in various investigations. At the
same time, the panel determined that DOC had acted inconsistently with the
SCM Agreement in the OTR investigation (1) by not ensuring that the
methodology used to determine the benefit to tire producers from purchases of
SOE-manufactured inputs from trading companies did not result in a benefit that
exceeded that conferred by the government’s provision of the inputs, and (2) by
using average annual interest rates as benchmarks for one company’s U.S. dollar-
denominated loans from SOCBs.
• Regarding China’s double remedy claims, the panel rejected China’s “as such”
challenge, and reviewing its “as applied” claim, found that, while the panel did
not doubt that in general the simultaneous imposition of an antidumping order
based on NME methodology and a CVD order on the same merchandise likely
results in the same subsidization being offset twice, China did not establish that
double remedies were inconsistent with the SCM Agreement, Article VI:3 of the
GATT, which prohibits the imposition of CVDs in excess of the amount of
subsidization, or the GATT MFN article.
128 Panel Report, United States—Definitive Anti-Dumping and Countervailing Duties on Certain Products from China,
WT/DS379/R (October 22, 2010).
129 Id. para. 8.79.
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• Regarding alleged procedural violations, the panel found that China had not
established that the United States violated the SCM Agreement by not granting
China and various Chinese producers extra time to respond to certain
questionnaires in the CVD investigations, but that the United States did violate an
obligation under the SCM Agreement in using “facts available,” that is, facts not
provided by China or its companies, in determining the amount of SOE-provided
hot-rolled steel that investigated producers purchased from trading companies.
Appellate Body Report
In an appeal by China,130 the WTO Appellate Body (AB), on March 11, 2011, reversed the panel
on two especially significant issues: the interpretation of the term “public body” and the
permissibility of “double remedies.”131 The AB reversed the panel’s finding that the term “public
body” means an entity controlled by the government and thus its consequent finding that the
United States had not violated the SCM Agreement in finding that certain SOEs and SOCBs
qualified as such. The AB also completed the analysis on this point and concluded that DOC’s
determinations in the four CVD investigations that SOE input suppliers were public bodies were
inconsistent with the Agreement, on the ground that a public body “must be an entity that
possesses, exercises or is vested with governmental authority” and not merely an entity that is
owned or controlled by the government.132 The AB also concluded, however, that China had not
established that DOC’s determination that the SOCBs in the OTR investigation constituted public
bodies was improper.
The AB upheld panel findings on specificity appealed by China. The AB also upheld two of the
appealed findings approving DOC’s use of foreign benchmarks in determining the subsidy
benefit. The AB reversed the panel’s rejection of China’s claim that the foreign benchmark
actually used by DOC to calculate the benefit from RMB-denominated SOCB loans in three
investigations was inconsistent with Article 14(b) of the SCM Agreement, a provision governing
the calculation of loan benefits, but, at the same time, found that it could not complete the
analysis of China’s claim under this article. The AB’s reversal was based on its finding that the
panel had not made an “objective assessment” of the issue, as required under Article 11 of the
WTO Dispute Settlement.
In reversing the panel on the issue of “double remedies,” the AB found that offsetting the same
subsidization twice by the simultaneous imposition of antidumping duties based on NME
methodology and countervailing duties is inconsistent with Article 19.3 of the SCM Agreement,
which requires that, when a CVD is imposed on a product, it be levied “in the appropriate amount
in each case.” The AB also reversed related panel findings and found that, in the four sets of
challenged antidumping and CVD investigations, because the United States had imposed duties
concurrently without having assessed whether “double remedies” arose, the United States acted
inconsistently with Article 19.3. As result, the AB also found that the United States was in
violation of two other provisions of the SCM Agreement: Article 10, which requires WTO
Members, inter alia, to ensure that the imposition of CVDs is consistent with Article VI of the
130 Notification of an Appeal by China, United States—Definitive Anti-Dumping and Countervailing Duties on Certain
Products from China, WT/DS379/6 (December 6, 2010).
131 Appellate Body Report, United States—Definitive Anti-Dumping and Countervailing Duties on Certain Products
from China, WT/DS379/AB/R (March 11, 2011).
132 Id. para. 317.
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GATT, and Article 32.1, which prohibits WTO Members from imposing a “specific action”
against the subsidy of another Member except in accordance with the GATT, as interpreted by the
SCM Agreement.
Implementation of WTO Reports
The Appellate Body report and modified panel report were adopted by the WTO Dispute
Settlement Body (DSB) at its March 25, 2011, meeting. The United States and other WTO
Members expressed considerable concern over both the AB’s approach to the term “public
body”133 and to the legal reasoning and implications of the AB’s finding on double remedies. As
described in the DSB minutes, the United States noted that no provision of the Antidumping
Agreement or the SCM Agreement restricted a WTO Member’s ability to apply antidumping
duties based on NME methodology and countervailing duties concurrently.134 The United States
further maintained that Article 19.3 of the Agreement, on whose language the AB based its
conclusion, was not concerned with the definition and calculation of CVDs and “still less” with
the concurrent application of antidumping and countervailing duties, but rather with the
imposition and collection of CVDs, with the phrase “appropriate amounts” referring “simply to
the fact that the CVD on particular imports may vary, even though a CVD should be imposed in a
non-discriminatory manner.”135 The United States further stated that the report gave Members “no
certainty in determining what would constitute an ‘appropriate’ amount of a CVD in a given
situation” and that it “appeared to impose the entire burden of proving that there was no ‘double
remedy’ on the importing Member.”136
The United States added that the Appellate Body “appeared to impose significant administrative
burdens on Members’ trade remedy administrators in the situation of concurrent application of
CVDs and NMEs,” since [“[i]f required, measuring the effect of a subsidy on the export price of a
good and other components of the dumping margin may involve highly complex economic and
econometric analysis,” a measurement that may entail “significant” difficulties.137 In the U.S.
view, this situation “raised serious questions about whether Members would be able to address
trade-distorting subsidies by NME Members.”138
The United States stated at the following DSB meeting that it intended to comply with the
decision and that it would need a reasonable period of time in which to do so.139 In July 2011, the
United States and China agreed on a compliance deadline of February 25, 2012, currently
extended to April 25, 2012.140 In its January 2012 status report to the DSB, the United States
133 Dispute Settlement Body, Minutes of Meeting, March 25, 2011, at 18-19 (United States), 21 (Mexico), 22-23
(Turkey), 23-24 (European Union), 25 (Canada), 25-26 (Australia), 26-29 (Japan), 29-30 (Argentina), WT/DSB/M/294
(June 9, 2011).
134 Id. at 19.
135 Id. at 20.
136 Id.
137 Id. at 21.
138 Id.
139 Dispute Settlement Body, Minutes of Meeting, April 21, 2011, at 9, WT/DSB/M/295 (June 30, 2011). For further
discussion of WTO dispute settlement procedures at the compliance phase, as well as the rights and obligations of the
parties to the dispute at this phase, see CRS Report RS20088, Dispute Settlement in the World Trade Organization
(WTO): An Overview, by Jeanne J. Grimmett.
140 Agreement under Article 21.3(b) of the DSU, United States—Definitive Anti-Dumping and Countervailing Duties
(continued...)
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stated that the United States Trade Representative (USTR) “made a written request to the
Secretary of Commerce to issue determinations under section 129(b) of the Uruguay Round
Agreements Act that would render US Department of Commerce (“Commerce”) determinations
in four original antidumping investigations and four original countervailing duty determinations
of products from China—circular welded pipe, light-walled rectangular pipe, certain new
pneumatic off-the-road tires, and laminated woven sacks—not inconsistent with the
recommendations and rulings of the DSB.”141 The United States continued:
Commerce has been actively working on this matter and has issued questionnaires to
Chinese respondents and to the Government of China, seeking additional information related
to the issues on which the DSB adopted recommendations and rulings. Respondents have
requested and Commerce has granted additional time for the submission of responses to the
questionnaires. Commerce is analyzing responses provided to date and awaiting further
responses from Chinese respondents and the Government of China.142
Section 129(b) of the Uruguay Round Agreements Act (URAA) authorizes DOC to issue new
WTO-compliant dumping and subsidy determinations in response to adverse WTO reports, if
requested in writing by the USTR.143 DOC must issue the new determination or determinations
within 180 days after receiving the USTR’s written request. After a determination is issued and
the USTR consults with DOC and congressional committees, the USTR may direct the
Commerce Department to implement the determination, in whole or in part.144 Implemented
determinations are prospective, that is, they apply to unliquidated entries of the subject
merchandise (i.e., entries for which final duties have not yet been assessed) that are entered on, or
withdrawn from warehouse, for consumption on or after the date on which the USTR directs
Commerce to implement the determination.145 Section 129 determinations are subject to judicial
review in the U.S. Court of International Trade.146 The court’s decisions may be appealed to the
U.S. Court of Appeals for the Federal Circuit, whose decisions are reviewable by the U.S.
Supreme Court.147
(...continued)
on Certain Products from China, WT/DS379/11 (July 8, 2011); Modification of the Agreement under Article 21.3(b)
of the DSU, United States—Definitive Anti-Dumping and Countervailing Duties on Certain Products from China,
WT/DS379/13 (January 19, 2012).
141 Status Report by the United States, United States—Definitive Anti-Dumping and Countervailing Duties on Certain
Products from China, WT/DS379/12 (January 10, 2012).
142 Id.
143 Uruguay Round Agreements Act of 1994 (URAA), P.L. 103-465, §129(b)(2), 19 U.S.C. §3538(b)(2)(2006).
144 URAA, §129(b)(4), 19 U.S.C. §3538(b)(4)(2006).
145 URAA, §129(c)(1)(B), 19 U.S.C. §3538(c)(1)(B)(2006). For additional discussion of Section 129 determinations,
see CRS Report RL32014, WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases, by Jeanne J.
Grimmett.
146 Tariff Act of 1930, §516A(a)(2)(B)(vii), 19 U.S.C. §1516a(a)(2)(B)(vii) (2006).
147 Tariff Act of 1930, §516A(a)(2)(B)(vii), 19 U.S.C. §1516a(a)(2)(B)(vii) (2006).
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Recent U.S. Judicial Decisions: CVDs May Not Be
Applied to NME Country Goods
U.S. Court of International Trade Decisions: GPX Int’l Tire Corp. v.
United States (2009-2010)
As the WTO case was proceeding, the U.S. Court of International Trade (USCIT), in a case
involving CVDs on Chinese off-the-road tires, ruled in August 2010 in GPX Int’l Tire Corp. v.
United States, that the application of CVDs on these imports concurrently with antidumping
duties calculated under the NME methodology without making adjustments to avoid double
counting was unreasonable and inconsistent with U.S. law.148 In an earlier ruling involving the
same CVD order, the USCIT stated that “[if] there is a substantial potential for double counting,
and it is too difficult for Commerce to determine whether, and to what degree double counting is
occurring, Commerce should refrain from imposing CVDs on NME goods until it is prepared to
address this problem through improved methodologies or new statutory tools.”149 The court
instructed Commerce that it “has a choice,” explaining as follows:
... The unfair trade statutes ... give Commerce the discretion not to impose CVDs as long as
it is using the NME AD methodology. Thus, Commerce reasonably can do all of its
remedying though [sic] the NME statute, as it likely accounts for any competitive advantages
the exporter received that are measurable. If Commerce now seeks to impose CVD remedies
on the products of NME countries as well, Commerce must apply methodologies, including
methodologies that will make it unlikely that double counting will occur.150
DOC considered in the remand that it had three options—not to apply the CVDs, to apply the
market economy antidumping methodology to either the company involved or the PRC, or to
offset the CVD against the duty deposit rate for the NME ADs—and chose the third option.151 In
its August 2010 ruling, the USCIT held that the offset was “unreasonable” because it would
always result in the unaltered NME AD margin and thus render concurrent AD and CVD
investigations unnecessary.152 The court also found that, “[p]erhaps even more importantly,” this
practice was inconsistent with Section 772(c)-(d) of the Tariff Act of 1930, 19 U.S.C. 1677a(c)-
(d), which lists the specific offsets in dumping margin calculations that are “permissible” and held
that the offset “does not comply with the statute.”153 The court further stated that it found DOC’s
tripartite list to be “exhaustive” and as such “a tacit admission that, at this time, it is too difficult
for Commerce to determine, using improved methodologies and in the absence of new statutory
tools, whether and to what degree double counting is occurring.”154 The court remanded again,
ordering DOC not to apply CVD law to the goods of the exporter that had challenged the duties
148 GPX Int’l Tire Corp. v. United States, 715 F.Supp.2d 1337 (Ct. Int’l Trade 2010)[hereinafter GPX II]. The use of
double remedies by DOC on goods from China has also been challenged in a second case, Guang Ya Aluminum
Industries Co., Ltd. v. United States, No. 11-00197 (Ct. Int’l Trade filed June 20, 2011).
149 GPX Int’l Tire Corp. v. United States, 645 F.Supp.2d 1231, 1243 (Ct. Int’l Trade 2009)[hereinafter GPX I].
150 Id.
151 GPX II, 715 F.Supp.2d at 1344.
152 Id. at 1345-46.
153 Id. at 1345.
154 Id. at 1346.
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on this basis as well as to the goods of a second company even though it had not raised the issue
in the litigation.155
U.S. Court of Appeals for the Federal Circuit Decision:
GPX Int’l Tire Corp. v. United States (December 2011)
The U.S. government and domestic industry defendants appealed the GPX decision to the U.S.
Court of Appeals for the Federal Circuit (CAFC). On December 19, 2011, a three-judge panel of
the CAFC affirmed the lower court ruling, but on the ground that Congress had legislatively
ratified the earlier agency and judicial interpretations that CVD law did not apply to NMEs and
that, as a result, the Commerce Department may no longer interpret the statute as providing such
authority.156 The ruling thus prohibits DOC from imposing CVDs on the imports in question even
if it were able to reasonably resolve the double counting issue or if there is no concurrent
antidumping order on the merchandise under investigation. As a result, the department must seek
legislative authority to apply CVDs to NME countries if it believes that the law should be
changed.157 The decision does not affect the authority of the Commerce Department to impose
antidumping duties on NME country goods.
The CAFC, which engages in de novo review where statutory interpretation is involved, noted
that “if after applying the traditional tools of statutory construction, the statute is ambiguous,
‘statutory interpretations articulated by Commerce during its adjudications are entitled to Chevron
deference.’”158 In this case, however, the court found the CIT’s reasoning on double remedies
“problematic both because the extent to which the statute may prohibit double remedies is
unclear, and because Commerce has determined that it is far from clear that double counting has
in fact occurred.”159 In terms of Chevron, the court concluded that Congress had effectively
spoken to the issue at hand and thus only one statutory interpretation was now allowed.
The court disagreed with the Commerce Department’s contention that the plain statutory language
mandating that a countervailing duty be imposed if DOC and ITC make the requisite subsidy and
injury findings “requires that it impose countervailing duties when it can identify a subsidy, even
in an NME country.”160 The court found that the statute is not “clear on its face” and “does not
explicitly require” that CVDs be imposed on NME country goods.161 Instead, the court viewed
the question as whether “government payments in an NME economy constitute ‘countervailable
subsidies’ within the meaning of the statute.”162 The court noted that its decision in Georgetown
Steel had involved Section 303 of the Tariff Act of 1930, and that, although Congress had
replaced the term “bounty or grant” as used in Section 303 with the term “countervailable
subsidy” in the Uruguay Round Agreements Act of 1994 (URAA), Congress intended that the
155 Id. at 1346-47.
156 GPX Int’l Tire Corp. v. United States, 666 F.3d 732 (Fed.Cir. 2011), at http://www.cafc.uscourts.gov/images/
storeis/opinions-orders/11-1107.pdf [hereinafter GPX III].
157 Id. at 745.
158 Id. at 737 (citing Magnolia Metallurgy, Inc. v. United States, 508 F.3d 1249, 1355 (Fed.Cir. 2007); Pesquera Mares
Australes Ltda. v. United States, 266 F.3d 1372, 1379 (Fed.Cir. 2001)).
159 Id. (footnote omitted).
160 Id. at 737-38.
161 Id. at 738.
162 Id.
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latter term be interpreted in the same way as the former, thus making Georgetown Steel applicable
to the case at hand.163 Further, while the Commerce Department had argued that Georgetown Steel
did not independently interpret the statute but had accorded Chevron deference to what the court
viewed as an ambiguous statute, the CAFC found that, even if Georgetown Steel did rest on
Chevron, “the problem is that … Congress thereafter ratified the prevailing interpretation by
amendment and reenacting the countervailing duty statute in 1988 and 1994, thereby requiring
that we construe the statute as barring countervailing duties in the NME context.”164
Noting that the principle of legislative ratification comes into play when Congress reenacts or
amends a statute with awareness of a particular agency or judicial interpretation involving the
statute involved and thus adopts that interpretation, the court found support for the principle in a
variety of Supreme Court opinions, particularly FDA v. Brown & Williamson Tobacco Corp.,165
the 2000 decision holding that the Food and Drug Administration lacked statutory authority to
regulate tobacco.166 Regarding the countervailing duty law, the court found evidence of
congressional awareness of the earlier DOC interpretation of CVD law and the subsequent CAFC
decision in Georgetown Steel upholding the DOC interpretation in (1) 1984 congressional
hearings and, as Congress enacted changes to trade law in the Trade and Tariff Act of 1984,
Congress’s rejection of legislation that would have affected trade remedies involving NME
imports; (2) the passage of the Omnibus and Competitiveness Act of 1988, during which
Congress omitted in conference a provision that would have expressly applied CVD law to NME
imports in direct response to Georgetown Steel; and (3) the reenactment of CVD law in the
URAA of 1994, in which Congress changed the term “bounty or grant” to “countervailable
subsidy” but did not make any changes to the law that “substantively affected countervailing duty
law as it applies to this case.”167
The court rejected DOC arguments that (1) Commerce’s past practice did not extend to all NMEs,
only to those for which subsidies could not be identified; (2) Congress made clear that CVD law
should apply to NME countries when it enacted an appropriation in 2000 for “defending United
States antidumping and countervailing duty measures with respect to the products of the People’s
Republic of China,” the court finding instead that Congress intended this result only if Commerce
found that China was no longer an NME country or that it had a market-oriented industry; and (3)
the history of 2010 House-passed legislation providing that currency undervaluation may confer a
countervailable subsidy evidenced Congress’s understanding that CVD laws would apply to
China.168 Regarding the 2010 legislation, which was not enacted into law, the court stated that “it
is well established that statements made in connection with unenacted legislation generally shed
little light on the proper interpretation of a prior statute” and that “[i]f anything, the rejection of
this proposal weighs against Commerce’s argument that Congress intended countervailing duty
law to apply to China.”169
163 Id. at 738-39.
164 Id. at 739.
165 FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120 (2000).
166 GPX III, 666 F.3d at 740.
167 Id. at 740-43.
168 Id. at 744-45.
169 Id. at 745.
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Subsequent Legislative and Judicial Developments
The Administration did not change its policy of treating China and Vietnam as nonmarket
economy countries as a result of the GPX decision and instead sought legislation authorizing the
Commerce Department to impose CVDs on NME products with regard to existing CVD orders as
well as pending and future CVD investigations.170 Legislation to respond to the GPX decision was
introduced on February 29, 2012, and was quickly enacted by both Houses. H.R. 4105 (Camp)
passed the House on March 6 and the Senate on March 7. The legislation was signed by the
President March 13, 2012, and designated P.L. 112-99.
Important considerations in the proposal were not only its temporal scope, but also whether it
needed to deal with double counting of subsidization, the issue that arose in China’s WTO case
and that was also the focus of the U.S. Court of International Trade in its GPX rulings. As
discussed in greater detail below, P.L. 112-99 generally authorizes the application of CVDs to
NME products; makes this authority effective as of November 20, 2006; and prospectively
amends antidumping law to provide a mechanism for the department to address double counting
in simultaneous AD and CVD investigations.
While the legislation was pending, the U.S. government, on March 5, 2012, petitioned the U.S.
Court of Appeals for the Federal Circuit (CAFC) for a rehearing of the case en banc, that is, a
hearing by the full appeals court.171 Federal appellate rules disfavor rehearings and a petition to
the CAFC must state counsel’s belief that the court’s decision is contrary to specific U.S.
Supreme Court decisions or CAFC precedents, that the appeal “requires an answer to one or
more” enumerated “precedent-setting questions of exceptional importance,” or both.172 The
170 Secretary of Commerce Bryson and USTR Kirk wrote to the Senate Finance Committee and the House Ways and
Means Committee in January 2012 that the Administration was continuing to review “all options” in the litigation,
“including a request for a rehearing by the full appellate court,” but that it also wished to pursue legislation amending
the CVD statute. See Letter to Hon. Max Baucus, Chairman, Senate Committee on Finance, from John Bryson,
Secretary of Commerce, and Ron Kirk, U.S. Trade Representative, at http://insidetrade.com/iwpfile.html?file=
jan2012%2Fwto2012_0129.pdf; USTR Kirk, Bryson Tell Key Lawmakers Overriding GPX Ruling of ‘Utmost
Urgency,’ Daily Report for Executives (BNA), January 25, 2012; Kirk, Bryson Urge Congress to Fix GPX Decision in
Parallel to Judicial Review, INSIDE U.S. TRADE, January 20, 2012, at 1; Congress urged to ease China tariff rules,
FIN.TIMES, January 19, 2012, at http://www.ft.com. The letter stated that without legislation “should the decision of the
court become final, Commerce will be required to revoke all CVD orders and terminate all CVD proceedings involving
nonmarket economy countries, including 24 existing CVD orders on imports from China and Vietnam, as well as five
pending investigations and two recently filed petitions.” According to the letter, the Administration was seeking
legislation “clarifying that the CVD law can be applied to subsidized goods from non-market economies, that CVD
proceedings Commerce has already initiated on products from non-market economies are to continue, and that CVD
determinations Commerce has made with respect to such products are to remain in effect.” The United States had noted
the potential economic effect of the decision in its January 2012 request to the CAFC to the extend the deadline for
petitioning for a rehearing, stating that the existing countervailing duty orders on products of NME goods “represent[]
billions of dollars in imports and … [have] an effect upon producers in over 30 states.”170 U.S. Motion, infra note 171,
at 2.
171 GPX Int’l Tire Corp. v. United States, Corrected Petition for Rehearing en Banc of Defendant-Appellant, United
States, No. 2011-1107, at 1 (filed March 5, 2012)[hereinafter U.S. Corrected Petition for Rehearing]. The United States
had requested an extension of the original February 2, 2012, deadline for such a petition to April 2, 2012. Defendant-
Appellant United States’ Motion for an Extension of Time to File a Petition for Rehearing and for Expedited
Consideration, GPX Int’l Tire Corp. v. United States, No. 2011-1107 (Fed. Cir. January 20, 2012)[hereinafter U.S.
Motion]. On January 24, the court granted the United States a one-time extension of the deadline to March 5, 2012.
Case Summary, U.S. Court of Appeals for the Federal Circuit, GPX Int’l Tire Corp. v. United States, No. 2011-1107,
Motions and Other Entries, Entry 127, filed January 24, 2012.
172 FED. R. APP. P. 35(a); FED. CIR. R. PRACTICE 35(b)(2), at http://www.cafc.uscourts.gov/images/stories/rules-of-
(continued...)
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petition states that the decision is contrary to several Supreme Court decisions, including
Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., and identifies the following two
key questions for the court:
(1) Whether the Court must defer to the Department of Commerce’s reasonable
interpretation of the countervailing duty statute when a prior Panel found the relevant
statutory term to be ambiguous.
(2) Whether the Department of Commerce is “locked in” to its putative 1980’s interpretation
of an ambiguous statute, based on upon a theory of congressional ratification, because
Congress reenacted the statute without expressly abrogating that interpretation or affirming it
as reasonable.173
If the petition for a rehearing is denied, any petition for a writ of certiorari to the U.S. Supreme
Court review would need to be filed within 90 days after the appellate court judgment is
entered.174
As explained earlier, Section 701(a) of the Tariff Act of 1930, 19 U.S.C. Section 1671(a), directs
that countervailing duties be imposed on imported merchandise if (1) DOC determines that the
“government of a country” or “any public entity within the territory of a country” is subsidizing
the imports into the United States and (2) the U.S. International Trade Commission determines
that the subsidized imports cause material injury or threat to a domestic industry. P.L. 112-99
amends Section 701 to add a new subsection providing that merchandise imported, or sold for
importation, into the United States from a nonmarket economy (NME) country is covered by
Section 701(a). The statute does not require DOC to impose CVDs on NME merchandise,
however, if it cannot identify and measure government subsidies in an NME country “because the
economy of the country is essentially comprised of a single entity.” These provisions apply to all
CVD proceedings initiated by the Commerce Department on or after November 20, 2006; all
resulting actions by U.S. Customs and Border Protection (CBP); and all civil actions, criminal
(...continued)
practice/rules.pdf.
173 U.S. Corrected Petition for Rehearing, supra note 171, at 1.
174 SUP. CT. R. 13.1, at http://www.supremecourt.gov/ctrules/2010RulesoftheCourt.pdf. The U.S. Supreme rarely
reviews decisions involving trade remedies. In 2009, however, the Court held in United States v. Eurodif, S.A., 555
U.S. 305, that the Commerce Department’s treatment of certain low enriched uranium transactions as sales of goods
rather than sales of services, and thus subject to U.S. antidumping law, was a permissible interpretation and application
of the antidumping statute. The Court reversed a decision of the CAFC, which had affirmed a U.S. Court of
International Trade ruling against the department.
The United States stated in its motion for an extension of time to petition for a rehearing that a waiver of its right to file
such a petition would “thereby trigger[] the issuance of this Court’s mandate that could immediately affect many other
existing countervailing duty orders relating to NME products.” U.S. Motion, supra note 171, at 3. The CAFC decision
would presumably become final if and when all appeals are exhausted and the decision is not overturned. See, e.g., Co-
Steel Raritan, Inc. v. International Trade Commission, 357 F.3d 1294, 1302, n.3 (Fed. Cir. 2004); Fujitsu Gen. Am.,
Inc. v. United States, 283 F.3d 1354, 1379 (Fed. Cir. 2003); Hosiden Corp. v. Advanced Display Mfrs. of Am., 85 F.3d
589, 591 (Fed.Cir. 1996); SNR Roulements v. United States, 521 F.Supp.2d 1395, 1397 (Ct. Int’l Trade 2007).
Note that legislation that reopens a final judgment of an Article III court has been held to violate constitutional
separation of powers. Plaut v. Spendthrift Farm, Inc., 514 U.S. 211 (1995). Congressional negation of a final
unreviewable court judgment may also raise a Fifth Amendment takings issue. See, e.g., Ileto v. Glock, 565 F.3d 1126
(9th Cir. 2009). See also the district court decision in the same case, Ileto v. Glock, 421 F.Supp.2d 1274 (C.D.Cal.
2006)(“every circuit to have addressed the issue has … concluded that no vested property right exists in a cause of
action unless the plaintiff has obtained a final, unreviewable judgment”).
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proceedings and other federal court proceedings relating to the initiated CVD proceedings or
resulting CBP actions.
The statute also creates authorities and requirements aimed at addressing the double counting of
domestic subsidization that occurs when simultaneous antidumping and CVD orders are imposed
on the same NME merchandise and subsidization is captured both by the CVD and the dumping
margin based on the higher normal value determined by use of surrogate country methodology.
The bill amends U.S. antidumping law, as codified at 19 U.S.C. Section 1677f-1, to direct the
Commerce Department to reduce an antidumping duty imposed on NME merchandise calculated
by using surrogate-based normal value if the department determines that (1) a countervailable
domestic subsidy “has been provided” with respect to the merchandise at issue; (2) the subsidy
“has been shown” to have reduced the average price of imports of that merchandise “during the
relevant period”; and (3) DOC can “reasonably estimate” the extent to which the countervailable
domestic subsidy, in combination with the use of surrogate country methodology to determine
normal value, has increased the weighted average dumping margin for the merchandise.175 The
duty is to be reduced by the amount of increase in the dumping margin estimated by DOC. The
bill also provides that the reduction in the antidumping duty may not exceed the portion of the
CVD rate attributable to the countervailable subsidy that is provided with respect to the
merchandise at issue and that meets the three above-stated conditions.
The double counting provision applies to (1) all CVD proceedings initiated on or after the date of
enactment and (2) all Section 129 dumping determinations, that is, new DOC dumping
determinations issued under Section 129 of the Uruguay Round Agreements Act, to comply with
WTO decisions, issued on or after enactment. Application to Section 129 dumping determinations
would be subject to Section 129(c), which provides that such any such determination applies to
unliquidated entries of goods, that is, entries for which final duties have not been assessed, that
enter the United States, or are withdrawn from warehouse, on or after the date that USTR directs
DOC to implement the determination.
The day after the new legislation was signed, the CAFC requested the GPX litigants to submit
arguments on the effect of P.L. 112-99 on further proceedings in the government’s petition for a
rehearing. The United States has asked that the appellate decision be vacated, arguing that it is not
final and has been superseded by the new law, and that the case be remanded to the U.S. Court of
International Trade for further proceedings in light of the new statute.176 Importers are primarily
arguing that the effective date for the new CVD authority is unconstitutionally retroactive and
that the court should affirm its earlier decision.177
175 A summary of H.R. 4105 issued by the House Ways and Means Committee indicates that the foreign exporter
would demonstrate that the requisite reduction in export prices had occurred. House Committee on Ways and Means,
Summary of “A Bill to Apply the Countervailing Duty Provisions of the Tariff Act of 1930 to Nonmarket Economy
Countries, and For Other Purposes, at http://waysandmeans.house.gov/UploadedFiles/FINAL_CVD_One_Pager.pdf.
176 Defendant-Appellant United States’ Letter Brief in Response to Court Order, GPX Int’l Tire Corp. v. United States,
No. 2011-1107, -1108, -1109 (Fed. Cir. March 23, 2012).
177 Response of Plaintiffs-Appellees GPX International Tire and Hebei Starbright to Court’s Request for Letter-Brief on
New Legislation, GPX Int’l Tire Corp. v. United States, No. 2011-1107, -1108, -1109 (Fed. Cir. March 23, 2012);
Plaintiff-Appellee Tianjin United Tire & Rubber Int’l Co., Ltd’s Response to Court’s Request for Letter-Brief, GPX
Int’l Tire Corp. v. United States, No. 2011-1107, -1108, -1109 (Fed. Cir. March 23, 2012).
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In addition, the United States made note of the new law in its April 2012 status report to the WTO
Dispute Settlement Body regarding China’s WTO case, mentioning the potential role of the
statute in resolving the impermissible “double counting” that had been found by Appellate Body:
The new legislation makes clear that where countervailing duties are applied to exports from
a nonmarket economy country at the same time that anti-dumping duties, calculated using a
“surrogate value” methodology, are applied to the exports, and evidence is presented that this
has resulted in an increase in the dumping margin, Commerce may reduce the antidumping
duty to avoid what has been referred to as a “double remedy.” Commerce is currently
working to implement this new law, including as part of US efforts to implement the
recommendations and rulings of the DSB in connection with this dispute.178
Earlier Legislation Addressing CVDs and NMEs
The application of countervailing duties to NME country goods arose in earlier Congresses with
the introduction of a number of bills proposing to amend Section 701(a) of the Tariff Act of 1930
to add the parenthetical “(including a nonmarket economy country)” after the term “country,”
wherever it appears in this section. Some of these earlier bills consisted solely of an amendment
to Section 701(a)(1), while others contained other related amendments to CVD law as it applies to
NME countries; included the NME amendment or amendments as one of a number of other
amendments or additions to U.S. trade law; or employed countervailing duty law as one of
several vehicles in the bill to address possible undervaluation or misalignment of foreign
currency.179 These bills had varying effective dates: for example, some provided that the proposed
CVD amendment would have applied upon enactment, while others provided that the amendment
would have applied on or after October 1, 2006, reflecting the timeframe during which the
Commerce Department began to accept CVD petitions involving NME goods. No action was
taken on any of these bills.
178 Status Report by the United States, United States—Definitive Anti-Dumping and Countervailing Duties on Certain
Products from China, WT/DS379/12/Add.3 (April 13, 2012). As discussed in the body of this report, in the GPX
proceedings in the U.S. Court of International Trade, where statutory authority to impose CVDs on NME products had
been assumed, the Commerce Department believed that it had three options for addressing double counting: not to
apply CVDs; to apply a market economy methodology in the concurrent antidumping investigation; or to offset the
CVD against the duty deposit rate for the NME ADs. GPX II, 715 F.Supp. 2d at 1344. The court found the
department’s choice of the third option to be unreasonable and not in compliance with the U.S. antidumping statute. Id.
at 1345-46. The court also deemed the department’s list to be “exhaustive” and “a tacit admission that, at this time, it is
too difficult for Commerce to determine, using improved methodologies and in the absence of new statutory tools,
whether and to what degree double counting is occurring.” Id. at 1346. The experience of the Commerce Department in
responding to the portion of the WTO ruling in DS379 that faulted double counting may provide an indication of the
department’s ability to make the determination that the Court of International Trade assumed was too difficult for the
department to make earlier.
179 These bills include the following:
109th Congress (2005-2006)—S. 593 (Collins); S.Amdt. 568 (Bayh);
110th Congress (2007-2008)—H.R. 708, §113 (English); H.R. 782, §102 (Tim Ryan); H.R. 1229, §102 (Artur Davis);
H.R. 2942, §102 (Tim Ryan); H.R. 6530, §201 (Rangel); S. 364, §301 (Rockefeller); S. 796, §102 (Bunning); S. 974
(Collins); S. 1919, §401 (Baucus);
111th Congress (2009-2010)—H.R. 496, §201 (Rangel); H.R. 499 (Artur Davis).
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Author Contact Information
Jeanne J. Grimmett
Legislative Attorney
jgrimmett@crs.loc.gov, 7-5046
Acknowledgments
This report is an updated version of a report originally prepared by Todd B. Tatelman, a former legislative
attorney with the American Law Division, CRS.
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