Countervailing duties applied to illegally subsidized Chinese paper imports.

The U.S. Department of Commerce (DOC) announced in a March press release its preliminary decision to apply U.S. anti-subsidy law to a select group of imports from China.

Metal casting imports will not directly be affected by the one-time application of the law. However, this is the first time anti-subsidies, or countervailing duties (CVDs), will be imposed on imports from a non-market economy, altering a 23-year-old policy and opening the door to the possibility of CVD use on other foreign imports, such as metal castings. According to a press release from the office of Commerce Secretary Carlos M. Gutierrez, the policy shift reflects significant economic growth in China.

"China's economy has developed to the point that we can add another trade remedy tool, such as the countervailing duty law," said Gutierrez. "The China of today is not the China of years ago."

The preliminary decision represents a case-specific order to apply 10.9-20.35% duties to producers and exporters of glossy free sheet paper. The order will not necessarily apply CVDs to other imported goods, such as metal castings.

"This Administration has aggressively enforced our anti-dumping laws to combat unfair Chinese trade," Gutierrez said. "Just as China has evolved, so has the range of our tools to make sure Americans are treated fairly. By acting on the petition filed last October, the U.S. today is demonstrating its continued commitment to leveling the playing field for American manufacturers, workers and farmers."

Still, advocates for the metalcasting industry believe Congressional legislation is needed to put Chinese manufacturers on like footing with those in the U.S. With several items of legislation that would address Chinese imports currently in various stages of the lawmaking process, the American Foundry Society (AFS) issued a statement in support of the Fair Currency Act of 2007 several weeks after the DOC announced its order. That bill would address the alleged undervaluation of China's currency as a trade subsidy.

"Domestic manufacturers should be afforded all means available under international agreements to force China to live up to its obligations," said Jerry Call, AFS executive vice president.

According to the DOC release, high-gloss paper was chosen for CVDs because from 2005 to 2006, imports from China increased by approximately 177% in volume and were valued at an estimated $224 million in 2006. The DOC also cited a petition filed by a U.S. manufacturer of glossy paper, Newpage Corp., Dayton, Ohio. The petition, which the DOC called the first of its kind since 1991, made reference to specific Chinese competitors that received tax breaks, debt forgiveness and low-cost loans.

Upon publication of the decision in the Federal Register, U.S. Customs and Border Protection will collect a cash deposit or bond from importers of coated free sheet paper subject to the investigations.

Prior to the recent order, with CVDs off limits, antidumping laws have been the only instrument in place to address unfair trade practices.

"Since 2001, we have issued 31 antidumping orders against China, compared to the 24 orders put into place between 1993 and 2000," said Gutierrez, which he said now represents 25% of all dumping orders.

Antidumping trade rules and CVD trade rules are both tools that are sanctioned by the World Trade Organization to deal with unfair pricing and subsidization of imports. 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 considerations. The statute and regulations establish standards for determining when an unfair subsidy has been conferred. The amount of subsidies the foreign producer receives from the government is the basis for the subsidy rate by which the subsidy is offset or "countervailed."

DOC commonly applies antidumping and CVD law at the same time; 30 out of 35 current countervailing orders are paired with a dumping order. Antidumping and CVDs offset distinct and different unfair trade practices.