Last week in GPX Intl. Tire Corp. v. U.S., the Federal Circuit decided whether both antidumping and countervailing duties may be imposed on a non-market economy (“NME”) country like China. The Federal Circuit affirmed the International Court of Trade’s (“ITC”) ruling that countervailing duty law does not apply to an NME country, but for different reasons than the ITC. Earlier, the ITC had reasoned that the U.S. Department of Commerce’s (“Commerce”) 2007 interpretation of the law was “unreasonable” because of the high probability of “double counting.” Alternatively, the Federal Circuit came to its decision by looking at the statute’s Congressional intent. Specifically, when Congress amended and reenacted countervailing duty law in 1988 and 1994, the Federal Circuit concluded that government payments could not be characterized as “subsidies” in an NME context. Therefore, countervailing duty law does not apply to NME countries.

In his opinion for the court, Justice Dyk first provided background on the two types of duties arising from imports: antidumping and countervailing duties, stemming from the Tariff Act of 1930. Pursuant to 19 U.S.C. §§ 1673 and 1671(a), antidumping duties are placed on goods that are sold in the U.S. for less than fair value and countervailing duties are placed on goods that receive “a countervailable subsidy.” The subsidy in this case arises from a “domestic subsidy,” where the subsidy benefits both domestic and exported goods. Conversely, an “export subsidy” benefits only exports, and both antidumping and countervailing duties may be forced by market economy countries.

Additionally, the Federal Circuit also provided a history on countervailing duties. The issue of whether Commerce should impose countervailing duties on goods from NME countries was first considered in 1983 and in 1984 when Commerce concluded that countervailing duties should not be imposed on NMEs. After U.S. manufacturing companies appealed to the ITC and were successful, Commerce then appealed to the Federal Circuit. The Federal Circuit then reinstated Commerce’s decision in Georgetown Steel Corp. v. U.S. that countervailing duties should not be imposed on NMEs.

Procedurally, the case began in 2007 when Commerce issued a memo stating that it could apply countervailing duties to merchandise from China, an NME country. U.S. tire manufacturer Titan Tire Co. then petitioned that Commerce impose both duties on certain Chinese tires. The following year, Commerce issued an order stating that both duties should be imposed. In response, seven complaints were filed and consolidated by the ITC.

In making its determination that countervailing duty law does not apply to NME countries, the Federal Circuit discussed the statutory interpretation of these two duty statutes. Commerce had argued primarily that the plain statutory language required it to impose countervailing duties when there is a subsidy, regardless of whether or not the country was a NME. The Federal Circuit disagreed because it did not find the countervailing duty statute to be clear on its face and the statute also did not explicitly require imposing countervailing duties on NME countries. Commerce then made three additional arguments and the Federal Circuit rejected each of the three arguments. Instead, the Federal Circuit looked at the Congressional intent of these duty statutes and found that when it amended and reenacted the trade laws in 1988 and 1994, Congress adopted the position that countervailing duty law does not apply to NME countries. In conclusion, the Federal Circuit stated that although Commerce may have a wide range of discretion, Commerce cannot act contrary to the congressional intent of the statute. As a result, the Federal Circuit held that countervailing duties should not be imposed on NMEs.