On March 13, 2012, President Obama signed legislation that allows the U.S. Department of Commerce (Commerce) to impose countervailing duties (CVDs) on imports from China and other non-market economy (NME) countries. The legislation, which was quickly and overwhelmingly passed by both the House of Representatives and the Senate, effectively overturns the December 19, 2011 decision of the U.S. Court of Appeals for the Federal Circuit in GPX International Tire Corporation et al. v. United States.
In GPX, the Federal Circuit ruled that U.S. law prohibits CVD cases against imports from NME countries and found that Commerce's 2007 decision to allow such cases was "contrary to congressional intent." The Federal Circuit suggested that "if Commerce believes that the law should be changed, the appropriate approach is to seek legislative change." (For more information on GPX, please see our December 2011 International Trade & Customs Update.)
The new law preserves 24 active CVD orders against imported products from China and Vietnam, as well as six ongoing investigations involving imports from China and Vietnam. It also addresses a 2011 World Trade Organization (WTO) Appellate Body ruling against "double counting" the subsidy remedy, in which Commerce imposes both anti-dumping (AD) duties and CVDs on the same import from an NME country. Where a foreign exporter demonstrates that a reduction in its U.S. prices was due to a subsidy, Commerce would then determine whether it could estimate the subsidy's contribution to the NME company's dumping margin and, if so, reduce the dumping margin accordingly.
The new law confirms Commerce's current practice that allows U.S. companies considering trade remedy actions to file both AD and CVD cases against NME countries like China and Vietnam. It also provides a mechanism by which foreign exporters whose products are targeted by both AD and CVD cases can seek a reduction in the dumping margin by eliminating any portion of the CVD that is already captured by the AD duty.