International Trade Law News

Published by Jacobson Burton Kelley PLLC

NewPage Corporation of Dayton, Ohio recently petitions with the U.S. International Trade Commission (ITC) and U.S. Department of Commerce seeking the imposition of antidumping and countervailing duties on U.S. imports of coated free sheet paper from China, Indonesia, and South Korea. Coated free sheet paper is used by the commercial printing industry to produce high-quality books, gift wrap and advertising materials. The ITC's notice of initiation of this case, as published in the Federal Register on November 6, 2006, can be found here.

What makes this case unique is that the petitioner is requesting the U.S. to impose countervailing duties on China, a country designated as a non-market economy (NME). The petition states that the Government of China subsidizes the Chinese paper industry through a "host of government programs and special incentives both at the national and local levels." The petition also alleges that Chinese producers of coated free sheet paper benefit from China's exchange rate regime that substantially undervalues the between the Chinese Yuan (RMB) and the U.S. dollar.

Since 1984 it has been the policy and practice of the Commerce Department not to impose countervailing duties on NMEs, such as Vietnam and China, because government intervention in a NME is so pervasive that one cannot make meaningful comparisons between market-determined prices and those that have been distorted by government intervention. This decision was sustained by the the U.S. Court of Appeals for the Federal Circuit in Georgetown Steel Corp. v. United States, 801 F.2d 1308 (Fed. Cir. 1986).

The petitioners in this case, however, claim that "there is no statutory bar to applying countervailing duties to imports from China or any other NME country." They also state that "the Federal Circuit’s decision in Georgetown Steel . . . is no impediment to the [Commerce] Department’s conducting a CVD investigation on imports from an NME country" since Georgetown Steel involved a countervailing duty law that has since been repealed (section 303 of the Tariff Act of 1930)." The petitioners also note that the countervailing duty statute does not specifically provide that countervailing duties should not be applied to NME countries. They also noted that the Chinese economy is entirely different than the economies investigated in Georgetown Steel (Poland, East Germany, Soviet Union and Czechoslovakia) and thus "there is little reason to expect any special difficulties to arise in the identification and valuation of subsidies in an investigation involving China that would not arise in a market economy CVD investigation."

The petitioners face an uphill battle, which was recently confirmed in a report issued by the Government Accountability Office (GAO). The GAO report, entitled, "U.S.-China Trade: Challenges and Choices to Apply Countervailing Duties to China" notes that while the Commerce Department could reverse its previous decision not to impose countervailing duties on NME countries, that "absent a clear grant of authority from Congress, such a reversal could be challenged in court" and that "the results of such a challenge would be uncertain." The GAO also indicated that the Commerce Department would "face substantial practical challenges in identifying Chinese subsidies and determining appropriate CVD levels."

This case promises to be an interesting one . . . stay tuned.

Labels: Antidumping, Countervailing Duties