	Introduction

Two major U.S. trade remedies, each set out in Title VII of the Tariff Act of 1930, are antidumping (AD) law, which combats the sale of imported goods at less than their fair market value, and countervailing duty (CVD) law, which is aimed at offsetting foreign government subsidization of imported items. If dumped or subsidized imports are found to cause material injury, or threat, to a domestic industry, and the dumping margin or the net subsidy is not de minimis , antidumping or countervailing duties will be imposed. Both remedies are available when goods are imported from competitor countries that have free market policies. Since 1984, however, only AD law had been applied to goods from nonmarket or other "transitional" economies. With the continued economic growth of some of these economies, such as China and Vietnam, pressure has increased on the U.S. government to utilize both domestic trade remedies more aggressively against unfair imports from these countries. This report (1) discusses the application of antidumping and countervailing duty law to the goods of nonmarket economy (NME) countries, including the decision of the Department of Commerce (DOC) in 2007 to change its long-standing policy and apply CVD law to such goods; (2) reviews China's successful case in the World Trade Organization challenging the U.S. application of CVDs to Chinese products and the status of U.S. compliance efforts in the case; (3) examines the December 2011 decision of the U.S. Court of Appeals for the Federal Circuit in GPX Int'l Tire Corp. v. Un i ted States holding that the U.S. CVD law does not authorize DOC to apply CVDs to NME country goods; (4) summarizes the subsequently enacted P.L. The injury determination is made by the U.S. International Trade Commission (ITC), an independent agency. Application of CVD Law to Imports from China: Coated Free Sheet Paper and Beyond

On November 27, 2006, DOC announced that it had initiated a CVD investigation against China with respect to coated free-sheet paper. While the text of Article VI does not itself distinguish between the products of market and nonmarket economy countries, an interpretative note to Article VI recognizes that AD duties may be imposed on the products of countries with government-controlled economies and that surrogate country data may possibly be used in making price comparisons involving normal value in such cases. In this case the benefit shall be the difference between these two amounts. Among other claims, China alleged the following:
that in connection with U.S. findings that the alleged provision of goods for less than adequate remuneration fulfilled the definition of a subsidy under the SCM Agreement, DOC erroneously determined that certain state-owned enterprises (SOEs) were public bodies for purposes of the definition, that DOC failed to find that the alleged benefits that trading companies had received from SOE-provided goods were passed on to the producers of the merchandise that was the subject of the CVD investigations, and, in an argument analogous to that used in challenges to the use of "zeroing" in antidumping cases, that DOC improperly included in subsidy benefit calculations only those transactions that produced a positive benefit, while excluding transactions that yielded no benefit; that the United States had failed to demonstrate that the alleged provision of land and land use rights for less than adequate remuneration was specific to an industry or group of industries; that in connection with finding that the government had provided loans on preferential terms, the United States had erroneously determined that certain state-owned commercial banks were public bodies, and also failed to find specificity; that although Article 15 of China's Accession Protocol permitted the United States choose a benchmark outside of China in order to determine the existence and amount of any subsidy benefit, the United States had improperly rejected the prevailing terms and conditions in China as the basis for making its determinations; that the United States had imposed a "double remedy" by using its nonmarket economy (NME) methodology for determining dumping and imposing antidumping duties simultaneously with a determination of subsidization and imposition of CVDs on the same product, resulting in the United States levying CVDs in excess of the subsidy found to exist in violation of the SCM Agreement; that the levied antidumping and countervailing duties were in excess of the "appropriate" amounts, as called for in Article 9.2 of the AD Agreement and Article 19.3 of the SCM Agreement; that the United States failed to make a "fair comparison" between export price and normal value in its antidumping determination as required under the WTO Antidumping Agreement; that the United States imposed antidumping duties in excess of the amount of dumping found to exist; and that the United States failed to grant China the most-favored-nation (MFN) treatment required under Article I of the GATT by not according it "the same unconditional entitlement to the avoidance of a double remedy for the same unfair trade practice that it accords to imports of like products from the territories of other WTO Members"; and that in conducting the antidumping and countervailing duty investigations in question, the United States made various procedural errors involving notification and transparency and improperly made adverse inferences from available information without having requested information from interested parties regarding the factual issue involved. As discussed in the next section of this report, the U.S. Court of Appeals for the Federal Circuit ruled in December 2011 in GPX Int'l Tire Corp. v. United States that CVDs could not be imposed on NME goods under the existing CVD statute. 112-99 , signed on March 13, 2012, which authorizes DOC to impose CVDs on such merchandise effective November 20, 2006 (thus covering the investigations at issue in the WTO dispute), and establishes procedures for the department to address double counting as of the date of enactment. Notwithstanding its compliance activity, the United States did not fully comply by the April 25 deadline in the case. The new statute generally authorizes the application of CVDs to NME products; makes this authority effective as of November 20, 2006; and prospectively amends antidumping law to provide a mechanism for the department to address double counting in simultaneous AD and CVD investigations. 112-99 and remanded a number of issues to DOC. GPX challenged the constitutionality of P.L. The court did not explicitly consider the final Nachman factor but ultimately concluded that Congress did not act irrationally.
Two major U.S. trade remedies are antidumping (AD) law, which combats the sale of imported products at less than their fair market value, and countervailing duty (CVD) law, which aims to offset foreign government subsidization of imported goods. If dumped or subsidized imports are found to cause or threaten material injury to a domestic industry, antidumping or countervailing duties will be imposed. Both remedies are available when goods are imported from competitor countries with free market policies. As of 1984, however, only AD law had been applied to goods from nonmarket or "transitional" economies (NMEs). With the continued economic growth of some of these economies, such as China and Vietnam, pressure increased on the U.S. government to use both trade remedies more aggressively against unfair imports from these countries.
AD law has been amended several times since its inception in 1921. With Congress's continued statutory guidance, the Department of Commerce (DOC) has implemented several different methodologies for applying AD law, including using surrogate country data when the fair market value of a product in the originating country is not readily ascertainable. CVD law had not been used against NMEs, however, since DOC concluded in 1984 that it could not determine subsidization in such situations. In 1986, the U.S. Court of Appeals for the Federal Circuit (CAFC), in Georgetown Steel Corp. v. United States, upheld DOC's interpretation of the CVD statute as reasonable. While DOC had generally refused to review CVD petitions against NME countries following this determination, it accepted a petition seeking a CVD on imports of coated free-sheet paper from China in 2006. DOC distinguished the current Chinese economy from the Soviet-style economies at issue in Georgetown Steel and found that the imported Chinese paper was subsidized. Although the U.S. International Trade Commission did not make the requisite final affirmative material injury determination in this case, subsequent CVD petitions were successful, resulting more than 20 CVD orders on NME merchandise.
World Trade Organization (WTO) agreements, together with the WTO Accession Protocols of China and Vietnam, acknowledge that AD and CV duties may be imposed on these countries' goods, and that surrogate country data may be used to calculate dumping margins or subsidization. In a WTO case brought by China, however, the WTO Appellate Body found in an April 2011 report that the simultaneous imposition by the United States of AD and CV duties on the same Chinese merchandise, where surrogate country data was used to establish the fair market value of the goods in the AD case, remedied the same subsidization twice or "double counted" in violation of U.S. WTO obligations. More broadly, the CAFC held in December 2011 that CVDs may not be imposed on NME goods under any circumstance, finding in GPX Int'l Tire Corp. v. United States that Congress had legislatively ratified DOC's 1984 statutory interpretation and thus DOC could not interpret the statute to permit such duties. The CAFC affirmed a lower court decision that also prohibited DOC from imposing CVDs on NME goods, but did so because DOC had not eliminated double counting, the practice at issue in the WTO dispute. The Administration asked Congress to enact remedial legislation and, on March 5, 2012, requested that the CAFC rehear the GPX case. Congress responded quickly, enacting P.L. 112-99, signed March 13, 2012, which generally authorizes CVDs for NME goods, makes this authority effective as of November 20, 2006, and prospectively amends AD law to address double counting issues. DOC is preparing WTO-compliant determinations in China's WTO case and has stated that implementation of the new law will be a factor in this compliance effort. The United States did not fully comply by the April 25 deadline in the case, however, and has agreed to facilitate any WTO compliance review requested by China. In the GPX case, on January 13, 2013, the U.S. Court of International Trade upheld the constitutionality of P.L. 112-99, but remanded certain issues to DOC.