A significant recent ruling from the U.S. Court of Appeals
Federal Circuit temporarily concludes the U.S.-China tire wars in
the case of GPX International Tire Corporation and Hebei
Starbright Tire Co., Ltd et al v. United States et al. The
U.S. Federal Court held that existing U.S. countervailing duty law
cannot be applied to non-market economy (NME) countries including
China, affirming the U.S. International Trade Court's decision
but on different grounds.
Shortly thereafter, China's Ministry of Commerce (MOFCOM)
highlighted the U.S. Federal Court's decision by issuing a
statement to the United States to not impose countervailing duties
on Chinese imports because to do so would violate the rules of the
World Trade Organization and prevailing U.S. law.
The issue was whether duties can be imposed on goods imported
from non-market economy countries such as China. Two types of
duties may be applied on imports into the U.S from market economy
countries (non-NMEs): 1) antidumping duties on goods sold in the
U.S. at less than fair value; and 2) countervailing duties on goods
that receive a "countervailable subsidy" from a foreign
government. See 19 U.S.C. Section 1673 (2006).
The fight began in 2007 when U.S. tire manufacturer Titan Tire
Co. petitioned the U.S. Department of Commerce to impose both
antidumping duties and countervailing duties on certain Chinese
tires including those manufactured by the plaintiffs (Hebei
Starbright and Tianjin United Tire) in the present case. Prior to
this petition, the U.S. Department of Commerce had maintained the
position that countervailing duties did not apply to NMEs because
by virtue of definition, subsidy being a "market"
phenomenon. Under pressure, the U.S. Department of Commerce
responded by imposing both antidumping and countervailing duties on
the imported Chinese tires. Complaints were filed by the Chinese
tire manufacturers and the cases consolidated by the U.S.
International Trade Court, which after a series of rulings and
remands, ultimately found for the Chinese manufacturers ordering
the U.S. Department of Commerce to not impose the countervailing
The U.S. and the U.S. tire manufacturers appealed in the instant
action and the U.S. Federal Court affirmed the U.S. Trade
Court's ruling but on different grounds. In summary, the U.S.
Federal Court's decision was based on the principle of
"legislative ratification" finding that the U.S. Congress
had effectively ratified prior interpretations that countervailing
duties did not apply to NMEs, China included.
The result is a current win for Chinese manufacturers - for now,
no countervailing duties will be imposed on Chinese products based
on the allegation that they are "subsidized" by the
Chinese government. Only if and when China or certain industries
within China are declared as "market oriented" will U.S.
countervailing duty law apply. We will wait to see if the decision
is appealed and further down the road, whether U.S. legislative
change to the contrary occurs.
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