	Introduction

Countervailing duty laws attempt to provide relief to domestic industries that have been, or are threatened with, material injury as a result of imported goods sold in the U.S. market that have been found to be subsidized by a foreign government or public entity. Prior to a 2007 CVD investigation on coated free sheet (CFS) paper from China, the ITA determined that it would not apply CVD laws to nonmarket economy (NME) countries, including China, because the agency believed that there was no adequate way to measure market distortions caused by subsidies in an economy that is not based on market principles. The 2007 subsidy decision was a China-specific determination, and thus is not applicable to other NME countries. The continuing U.S. trade deficit with China ($227 billion in 2009) and the alleged adverse impact of Chinese imports on competing U.S. industries and workers has led some in Congress to support increased use of U.S. trade remedy laws against Chinese products. Countervailing Duty Legislation

At the time the 1983-1984 investigations were initiated, the United States had in force two countervailing duty laws. ... "As a result ... the CVD law cannot be applied to the PRC fan industry" and the ITA issued final negative determination in the case. The CIT, in its detailed opinion, addressed each of the four grounds on which the ITA had based its determination of nonapplicability of countervailing procedure to NME countries: (1) the view that a subsidy cannot be conferred in a nonmarket economy "because a subsidy, by definition , means an act which distorts the operation of a [free] market " (both italics in the original); (2) congressional "silence" on the issue and the apparent preference for other trade remedial procedures; (3) consensus of academic opinion as to nonapplicability of CVD law to NME countries; and (4) the ITA's asserted broad discretion to determine the existence or nonexistence of subsidies. U.S. Court of Appeals for the Federal Circuit (801 F. 2d 1308-1318)

The U.S. government appealed the CIT decision to the U.S. Court of Appeals for the Federal Circuit, which—focusing on the potash cases—reviewed in detail the legislative history and development of relevant trade remedy laws and concluded that the CVD statute under which these investigations were conducted (Section 303 of the Tariff Act of 1930) had remained "substantially unchanged from the first general countervailing duty statute the Congress enacted [in 1897] ...."
Since Congress had not "defined the terms 'bounty' and 'grant' as used in section 303," the appellate court concluded it could not "answer the question whether that section applies to nonmarket economies by reference to the language of the statute" nor could it, on the other hand, answer it by concluding that, on the basis of the statutory language, "Congress has not attempted to exclude nonmarket economies from what the court believed to be the sweeping reach of the section." In the 110 th Congress, several bills that sought to apply countervailing duty law to NME countries were introduced: S. 364 (Rockefeller, introduced January 23, 2007); H.R. 496 , the "Trade Enforcement Act of 2009" (Rangel, introduced January 14, 2009 and H.R. Final subsidy amounts ranged from 7.40% to 44.25%. As of this writing, countervailing duties have been placed on 13 products from China, and at least 8 investigations are pending.
Concern regarding the level of low-cost imports from China and other countries and its impact on U.S. firms and workers, combined with China's limiting of the appreciation of its currency, have led some in Congress to introduce legislation proposing to make countervailing duty laws applicable to China and other nonmarket economy countries.
Countervailing duty laws provide for the assessment of additional duties on imports whose production and/or importation are found to be subsidized by a public entity in their country of origin and are injurious to a U.S. producer of similar merchandise. Antidumping, another kind of trade remedy action, addresses products sold in the United States at less than their fair value (as defined by law) in a similar manner. Although antidumping (AD) and countervailing duty (CVD) laws and procedures generally parallel each other, CVD laws contain no specific provisions for investigations on imports from nonmarket economy (NME) countries, while the AD statute does provide such guidelines.
Initial administrative attempts in 1983 to apply countervailing remedies to allegedly subsidized imports from several NME countries led to determinations by the International Trade Administration (ITA) of the Department of Commerce (the U.S. agency charged with determining the existence and extent of subsidies) that subsidies within the meaning of the countervailing law, cannot be found in nonmarket economies. These ITA determinations were challenged in the U.S. Court of International Trade (CIT), which held that they were "not in accordance with the law," reversed them, and remanded the cases to the ITA. On appeal, the U.S. Court of Appeals for the Federal Circuit reversed, and reinstated the ITA's original determinations—thus affirming that the ITA has the discretion not to apply the CVD law to NME countries.
The ITA reevaluated this decision, with respect to China only, during a countervailing investigation on coated free sheet (CFS) paper. On October 18, 2007, the ITA made a final affirmative determination of subsidies in the investigation, finding net countervailable subsidies ranging from 7.40% to 44.25%. Although the International Trade Commission (the U.S. agency charged with determining whether the U.S. industry suffered material injury as a result of the subsidy) made a negative injury determination in the investigation, meaning that no CVD duties were assessed, other industries pursued countervailing investigations as a result of the ITA's decision. As of this writing, countervailing duties have been placed on 13 products from China, and at least 8 investigations are pending.
Legislation seeking to apply CVD action to NME countries introduced in the 111th Congress includes H.R. 496 and H.R. 499, both introduced on January 14, 2009.