HOMEPAGE CVDPOSITION PAPER BLANK CVD PETITION SPEEA MOTION ON CVD
Countervailing Duties What Are They?
In today's global marketplace, the lack of a level playing
field can make it difficult for American businesses to compete.
Unfair foreign pricing and government subsidies distort the free
flow of goods and adversely affect American business. Import Administration,
within the International Trade Administration of the Department
of Commerce, enforces laws and international agreements to protect
U.S. businesses from unfair competition within the U.S. resulting
from unfair pricing by foreign companies and trade distorting
subsidies to foreign companies by their governments.
This article provides a brief overview of how Import Administration
provides a way for firms to seek relief from unfairly traded imports
by filing a petition seeking the imposition of countervailing
duties on imports of the unfairly traded merchandise. Countervailing
duties offset the effect of unfair subsidies. Countervailing duty
trade remedies have been successfully pursued by a variety of
domestic industries, including producers of steel, industrial
equipment, computer chips, agricultural products, textiles, chemicals,
and consumer products.
What is a Countervailable Subsidy?
Foreign governments subsidize industries when they provide financial
assistance to benefit the production, manufacture or exportation
of goods. Subsidies can take many forms, such as direct cash payments,
credits against taxes, and loans at terms that do not reflect
market conditions. The amount of subsidies the foreign producer
receives from the government is the basis for the rate by which
the subsidy is offset, or "countervailed," through higher
import duties. While governments can take many actions which could
be said to confer benefits on their producers, not all of these
actions are viewed as countervailable subsidies. Generally, the
benefit must be limited to a specific group of firms or industries
or to a firm's export activities in order to be a countervailable
subsidy. The U.S. statute and regulations establish standards
for determining when an unfair subsidy has been conferred.
How is Subsidization Remedied?
If a U.S. industry believes that it is being injured by unfair
competition through subsidization of a foreign product, it may
request the imposition of countervailing duties by filing a petition
with both Import Administration and the United States International
Trade Commission (ITC). While Import Administration determines
whether and to what extent unfair subsidization is occurring,
the ITC determines whether the domestic industry is suffering
material injury as a result of the imports of the subsidized products.
The ITC considers all relevant economic factors, including the
domestic industry's output, sales, market share, employment, and
profits. Both the ITC and Commerce must make affirmative preliminary
determinations for an investigation to go forward.
How Long Does it Take for Countervailing Duty Orders to be Issued?
The investigation begun by a petition proceeds as follows. Import Administration will review the petition and determine within 20 days of the date of filing whether the petition meets the statutory requirements for initiating an investigation. If the petition is accepted, within 45 days of the date the petition was filed the ITC will make a preliminary determination of whether there is a reasonable indication that the domestic industry is injured or threatened with injury by reason of unfairly traded imports. If the ITC believes there is no indication of injury, the investigation is terminated. If the ITC's preliminary determination is affirmative, Import Administration will make its preliminary determination of whether unfair subsidization is occurring by analyzing sales information provided by foreign producers and exporters in response to detailed questionnaires that Import Administration sends to them.
If both the ITC and IA make affirmative preliminary determinations
(within 190 days of an initiation of the antidumping investigation,
or 130 days for a countervailing duty investigation) importers
are required to post a bond or cash deposit with the U.S. Customs
Service to cover an estimated amount of duties which will be collected
if a countervailing duty order is issued upon the completion of
the investigation.
After the preliminary determination, the investigation proceeds
with on-site verification of the data submitted by the foreign
party doing the subsidizing. A final determination is announced
within 75 days of the preliminary ruling. If the finding is negative
the investigation is terminated. If it is affirmative, the investigation
continues. The ITC typically makes its final determination on
injury within 45 days of Import Administration's final ruling.
Typically, the final phases of the investigations by Import Administration
and the International Trade Commission are completed within 12
to 18 months of initiation.
What Relief is the End Result of a Countervailing Duty Investigation?
If both Import Administration and the ITC make affirmative findings
of injury, Import Administration instructs the U.S. Customs Service
to assess duties against imports of that product into the United
States. The duties are assessed as a percentage of the value of
the imports and are equivalent to the subsidy margins, described
above. For example, if Commerce finds a subsidy margin of 25%,
the U.S. Customs Service will collect a 25% duty on the product
at the time of importation into the United States in order to
offset the amount of subsidization.
How Are Subsidy Rates Calculated?
Subsidy margins are calculated using information collected from
the foreign producers and exporters of the subject merchandise.
Subsidy rates are calculated by determining the value of the benefit
provided by subsidies for the manufacture or export of the subject
merchandise. Import Administration calculates the value of the
benefits on a company-specific basis using the information obtained
from the companies and the government in response to Import Administration's
questionnaires and from other sources. Subsidy rates may also
be revised in an annual review process.
What are the Requirements for Filing a Countervailing Duty
Petition?
Petitions may be filed by a domestic interested party, including
a manufacturer or a union within the domestic industry producing
the product which competes with the imports to be investigated.
To ensure there is sufficient support by domestic industry for
the investigation, the law requires that the petitioners must
represent at least 25% of the domestic production of the product
that competes with the imports to be investigated. The statute
requires the petition to contain certain information, including
data about conditions of the U.S. market and the domestic industry,
as well as evidence of dumping or unfair subsidization.
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The Import Administration Can Seek Relief for U.S. Firms from
Unfairly Traded Imports
(First Published in Business America, August 1998)By Andrew Stephens,
Office of Policy Import Administration and Lauren Baker Office
of Public Affairs, International Trade Administration Additional
information can also be found at the Import Administration web
site: www.ita.doc.gov/import_admin/records/
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