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April 08, 2007 

Commerce Department Publishes Countervailing Duty Determinations on Coated Groundwood Paper from China, Korea and Malaysia

The Commerce Department published in Monday's Federal Register the preliminary countervailing duty determinations on coated free sheet paper from China, South Korea and Indonesia. While the decision to impose countervailing duties on China received a great deal of press, overlooked in the reporting is the fact that three of the four Korean respondents received a de minimis CVD rate and the "all others rate" for Korea was only 1.76%. This is significant, since imports of coated free sheet paper from South Korea exceeded those from China and Indonesia combined. According to information issued by the Commerce Department, in 2006 the U.S. imported $362 million worth of coated free sheet paper from South Korea. Imports of coated free sheet paper from China and Indonesia in 2006 were valued at $224 million and $40 million, respectively. The lone Indonesian respondent received a preliminary CVD rate of 21.24%.

The preliminary determination applied a 20.35% CVD to Gold East Paper (Jiangsu) Co., Ltd and a 10.90% CVD rate to Shandong Chenming Paper Holdings Ltd. These CVD rates were comprised of a number of Chinese Government programs that were deemed to provide countervailable subsidies. The largest subsidy program found for each company was a government program that provided loans at a discount to the forestry and paper industry in China (3.15% for Shandong Chenming and 14.02% percent for Gold East). Other programs that were deemed to provide countervailable benefits included a grant program, income tax savings and credits programs and VAT and duty exemptions. Commerce found one program not be be countervailable and several other programs that were not used by the respondents.

Compared to the typical antidumping rates applied to Chinese respondents resulting from the application of the non-market economy methodology, these CVD rates are relatively low. It will be interesting to see the antidumping rates found on the Chinese respondents once those results are released later this year. In 2006, the Government Accountability Office issued a report finding that the Commerce Department's application of the nonmarket methodology to China has produced antidumping duties on Chinese products that are substantially higher than those applied to the same products from market economy countries.

It will also be interesting to see if the Chinese Government will permit the Commerce Department to conduct a verification. In CVD cases the Commerce Department not only conducts a verification at the respondent's offices in the foreign country, but also conducts a verification at the government ministries that oversee and implement the subsidy programs. If the Chinese Government does not cooperate or otherwise permit the U.S. Government to conduct a verification, U.S. law authorizes the Commerce Department to apply the "facts available" to the final determination which is often based on adverse information supplied by the petitioners.

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