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Bloomberg: House Bill Would Preserve Tariffs to Offset China Subsidies

February 29, 2012

The U.S. Commerce Department would be allowed to apply duties to offset government subsidies in nations such as China  and Vietnam under bipartisan House legislation to be introduced today, congressional aides said.

The measure marks a response to a Dec. 19 decision by a U.S. appeals court in Washington that said existing law doesn’t authorize the agency to set tariffs on goods from countries lacking a domestic market to set prices.

The court ruling challenged a Commerce Department policy in place since the administration of former President George W. Bush that led to duties on undervalued imports of two dozen Chinese products. Companies that have benefited from the duties include U.S. steel and paper manufacturers.

The House bill will be introduced by Representative Dave Camp of Michigan, Republican chairman of the House Ways and Means Committee, and Kevin Brady, a Texas Republican on the panel, as well as Sander Levin of Michigan, the ranking Democrat on the committee, and Jim McDermott, a Washington Democrat, according to the congressional aides, who spoke on condition of anonymity before today’s scheduled announcement.

In December, the U.S. Court of Appeals for the Federal Circuit ruled unanimously that congressional action would be needed to grant the agency power to set tariffs on subsidized goods from nations that lack a domestic market. The three-judge panel upheld a U.S. Court of International Trade decision that found a Commerce Department action on Chinese tires was illegal.

Subsidized Products

Under laws passed in 1988 and 1994, “Congress adopted the position that countervailing duty law,” which applies to subsidized products, “does not apply to non-market economy countries,” Timothy Dyk wrote in the decision in the case, GPX International Tire Corp. v. U.S.

“If Commerce believes that the law should be changed, the appropriate approach is to seek legislative change,” Dyk wrote. The appeals court rejected arguments by Titan International Inc. (TWI), the top U.S. maker of off-road tires, Bridgestone Americas Inc., a unit of Tokyo-based Bridgestone Corp. (5108), and the AFL-CIO labor federation.

The bill that the lawmakers plan to introduce today would accomplish that change, according to the aides.

A bipartisan group of legislators plans to introduce a similar bill in the Senate, the congressional aides said.

Anti-dumping duties apply to goods sold overseas at or below the price in the home country. Countervailing duties aim to offset the benefits of government subsidies to industries.

The U.S. uses more than 300 anti-dumping and countervailing duty orders to shield American-made goods, from honey to bedroom furniture, against global competition it deems unfair and damaging to U.S. companies. About half the orders target iron and steel products.

China accounts for a third of all U.S. unfair trade cases, the most of any country, including about 100 anti-dumping and two dozen countervailing duty orders, according to the U.S. International Trade Commission.