President Obama Signs Legislation Applying Anti-Subsidy Trade Law to Imports from Non-Market Economies Such As Vietnam and China

Originally published March 13, 2012

Keywords: anti-subsidy trade law, imports, Vietnam, China, non-market economy, NME, countervailing duties, CVD

On March 13, 2012, President Obama signed legislation that explicitly authorizes the United States to apply countervailing duties (CVD), defined as tariffs on imports that benefit from subsidies, to imports from non-market economy (NME) countries.

By way of background, in December 2011 the US Court of Appeals for the Federal Circuit (CAFC) ruled that current CVD law did not apply to NME imports (chiefly from Vietnam and China).1 The bill signed into law by the President, designated H.R. 4105 and titled "Application of Countervailing Duty Provisions to Nonmarket Economy Countries," effectively reverses the CAFC ruling, which would have invalidated more than two dozen CVD orders and investigations against goods from China and Vietnam. The law also attempts to address concerns that concurrently applying antidumping (AD) and CVD tariffs against the same imported goods unfairly double-counts subsidies.

In its decision, the CAFC rejected the US Department of Commerce (Commerce) challenge to a more narrow Court of International Trade (CIT) decision known as the GPX cases, which overturned Commerce's concurrent application of AD and CVD duties against certain Chinese exports to the United States. The CAFC affirmed the CIT, but on separate – and much broader – grounds: namely, that current US CVD law does not apply to exports from an NME country under any circumstances. The CAFC reasoned that the US Congress had implicitly ratified earlier administrative decisions declining to apply the CVD law to NME imports. Mayer Brown analyzed the court rulings and underlying issues in a previous legal update.

H.R. 4105 also attempts to bring the United States into compliance with a 2011 ruling against the United States by the World Trade Organization (WTO) Appellate Body.2 There, the Appellate Body ruled that concurrent application of CVD and AD duties to an NME can create a "double remedy" prohibited by the WTO Subsidies and Countervailing Measures Agreement.

The new law directly addresses the CAFC's rationale that Congress did not mean to apply CVD law to NME imports—by explicitly authorizing it. The legislation also attempts to address the CIT rulings on double-counting and, by extension, the WTO ruling on the same subject.

However, the law creates uncertainty about how Commerce will address possible...