United States' Trade Remedy Laws and Non-market Economies: A Legal Overview

^Pr^ep^ar^{ed f}^o^r^M^e^m^b^ers^an^d^Com^mⁱ^t^t^ees^of^C^ong^r^e^ss

In the United States, there are two major forms of domestic trade remedy laws: antidumping law
(AD), which combats the sale of goods at less than their fair market value, and countervailing
duty law (CVD), which assess duties on imported goods to offset the amount of government or
other public entity subsidization. Both of these remedies are available when the imported goods
come from competitor countries that have free market policies. Since 1984, however, only AD
law has been applied to those imported goods that come from non-market or other “transitional”
economies. With the continued economic growth of some non-market and “transitional”
economies, such as China and Vietnam, pressure has increased on the U.S. government to more
aggressively utilize domestic trade remedy laws such as AD and CVD against unfair imports from
these countries.
AD law has been amended several times since its initial inception in 1921. Each modern
amendment has allowed for a new methodology for dealing with imports from non-market
economies. With Congress’s continued statutory guidance, the Department of Commerce (DOC)
has developed and implemented several different methodologies for applying AD law, even when
the fair market value in the originating country is not readily ascertainable.
CVD law, however, has not been used against non-market economies since the DOC concluded in
1984 that it could not determine subsidization in such situations. This decision by the DOC was
upheld as reasonable by the Court of Appeals for the Federal Circuit in Georgetown Steel
Corporation v. United States. Since that time, with the noted exception of a 1991 petition against
China, the DOC has refused to review CVD petitions against non-market economies. In
November 2006, however, the DOC accepted a petition seeking a countervailing duty against
imported “coated free-sheet paper” from China to offset alleged government subsidization. In
April 2007, the DOC published a preliminary determination levying duties against the Chinese
imports, as well as a memorandum distinguishing the Chinese economy from those economies
that were at issue in the Georgetown Steel case.
While such an action appears to be consistent with U.S. law, a review of U.S. international
obligations under the World Trade Organization’s (WTO’s) Agreement on Subsidies and
Countervailing Measures, as well as China’s accession agreement to the WTO is also required.
Both agreements appear to accept and sanction the use of surrogate country data in the
application of domestic AD or CVD law. As a result, while a challenge to its actions at the WTO
is always a possibility, the United States appears to have acted in a manner consistent with its
obligations.
Several pieces of legislation have been introduced in the 110^th Congress to specifically address
the application of CVD laws to non-market economies. These include, but are not limited to, H.R.
708, H.R. 910, H.R. 1127, H.R. 1229, S. 364, and S. 974. This report will be updated as events
warrant.

Introduc tion ............................................................................................................................... 1
Antidumping Law (AD) and Non-market Economies..............................................................1
Backgr ound ......................................................................................................................... 1
Application of AD Law to Non-market Economies: Various Approaches..........................2
Countervailing Duty Law (CVD) and Non-market Economies................................................4
Backgr ound ......................................................................................................................... 4
Application of CVD Law to Non-market Economies.........................................................4
Court of International Trade’s Decision..............................................................................6
Federal Circuit’s Georgetown Steel Decision.....................................................................7
Post Georgetown Steel Decisions..............................................................................................7
Recent Application of CVD Law to “Coated Free-Sheet Paper” Imports from China.............9
World Trade Organization Issues and Consistency..................................................................11
Author Contact Information..........................................................................................................13

In the United States, there are two major forms of domestic trade remedy laws: antidumping law
(AD), which combats the sale of goods at less than their fair market value, and countervailing
duty law (CVD), which assess duties on imported goods to offset the amount of government or
other public entity subsidization. Both of these remedies are available when the imported goods
come from competitor countries that have free market policies. Since 1984, however, only AD
law has been applied to those imported goods that come from non-market or other “transitional”
economies. With the continued economic growth of some non-market and “transitional”
economies, such as China and Vietnam, pressure has increased on the U.S. government to more
aggressively utilize domestic trade remedy laws such as AD and CVD against unfair imports from
these countries.
As generally applied, antidumping (AD) law considers dumping to have occurred when a foreign ¹
manufacturer charges a price that is “less than the fair market value” (LTFMV) for its product.
For dumping that is alleged from market-based economies, the Department of Commerce (DOC)
employs a standard methodology for determining a product’s fair market value. First, the DOC
determines whether a foreign manufacturer’s goods were sold in the United States for LTFMV by
comparing the U.S. price of the product with the fair market value similar merchandise in the
firm’s domestic market. If the product is not sold or offered for sale in the foreign firm’s domestic
market, the DOC identifies the price at which the product is sold or offered for sale in countries
other than the United States. Finally, if there are no sales in the home market or to third countries, ²
the statute authorizes the DOC to utilize a “constructed value.”
If the DOC finds that dumping has occurred, it establishes the “dumping margin” by calculating
the average amount by which the product’s fair market value exceeds the price of the product in ³
the United States. The finding of dumping and the fixing of the “dumping margin” establish the
first of the two prongs required to impose an AD duty. The final step in imposing an AD duty is
an affirmative determination that the dumping has caused or threatens to cause a material injury ⁴
to a U.S. industry. The injury determination is made by the International Trade Commission
(ITC), an independent agency.

¹^Se^e¹⁹^U^.^S.C^.^§¹⁶⁷⁷⁽²⁰⁰⁰⁾^.
²^Se^e¹⁹^U^.^S.C^.^§¹⁶⁷⁷^b(^a⁾⁽²⁾⁽²⁰⁰⁰⁾⁽^d^e^f^ining^the^us^e^of^c^ons^tr^uc^t^e^{d v}^a^lue⁾^{; 19}^U^.^S.C^.^§¹⁶⁷^7b(^e⁾⁽¹⁾⁽²⁰⁰⁰⁾
⁽^p^r^o^vⁱ^di^ng^the^m^e^thod^of^c^a^l^c^u^la^ting^a^c^ons^tr^uc^te^{d v}^a^lue⁾^.
³^{19 U}^.^S.C^.^§¹⁶⁷³^b(^b)⁽¹⁾⁽^A⁾⁽²⁰⁰⁰⁾^.
⁴^Se^e¹⁹^U^.^S.C^.^§¹⁶⁷⁷⁽⁷⁾⁽^A⁾⁽²⁰⁰⁰⁾⁽^s^ta^ting^t^h^a^t^“^[^t^]^he^te^rm^‘m^a^t^e^rⁱ^a^{l injury}^{’ m}^e^aⁿ^{s ha}^rm^w^h^ic^{h is n}^o^t
^inc^ons^e^q^ue^ntia^l^,^im^m^a^te^rⁱ^a^l^{, or}^uⁿ^im^por^ta^nt”⁾^{. T}^h^e^s^t^a^t^ute^r^e^q^u^ir^e^s^tha^t^f^o^r^“^t^hr^e^a^t^eⁿ^e^d^inj^u^rⁱ^e^s^”^the^I^T^C^s^uppor^t^its
^fⁱ^nding^s^by^e^v^ideⁿ^c^e^tha^t^“^t^he^thr^e^a^t^of^m^a^te^rⁱ^a^l^injur^y^is^r^e^a^l^a^{nd tha}^t^a^c^t^ua^{l in}^jur^y^is^im^mⁱ^ne^nt”^a^{nd “}^{not m}^e^r^e^l^y^ba^s^e^d
^{on c}^o^nje^c^t^ur^e^or^s^u^pp^os^iti^on.”^Se^e^{19 U}^.^S.C^.^§¹⁶⁷⁷⁽⁷⁾⁽^F⁾⁽ⁱⁱ⁾⁽²⁰⁰⁰⁾^.

As applied to non-market economies, the standard methodology described above causes problems
because non-market economies do not allocate resources according to traditional market concepts
of supply and demand, thereby making determinations of fair market value almost impossible. ⁵⁶
From the adoption of the Antidumping Act of 1921 until the passage of the Trade Act of 1974,
the application of AD law to non-market economies was devised and implemented exclusively
through administrative agency action, as the statutes were silent. In the 1960s, the Treasury
Department, which was, at the time, the agency with responsibility over domestic trade remedy
laws, developed and began using what was known as the “surrogate country” approach for
applying AD law to non-market economies. Under this approach, comparable prices and costs
from similarly situated third countries were substituted for the non-market economy to determine ⁷
fair market value. This approach was adopted and codified by Congress in the Trade Act of ⁸
1974. According to at least one legal scholar, “the surrogate methodology proved difficult to
apply because there were occasions when there was no available surrogate. Therefore, it was
necessary to devise an alternative methodology to use when an appropriate surrogate could not be ⁹
located.”
The Treasury Department responded to the concerns raised by the “surrogate country” approach
by adopting a new methodology in 1975. This methodology, known as the “factors of production”
approach, required that the amount of each factor input be taken from a market economy country ¹⁰
considered to be at a comparable stage of economic development. Congress expressly adopted
this approach in the Trade Agreements Act of 1979, as an alternative to be used in non-market ¹¹
economy cases where there was no available surrogate country.
In 1988, Congress again acted to adopt new AD provisions for dealing with non-market ¹²
economies. In the Omnibus Trade and Competitiveness Act of 1988 (OTCA), Congress enacted
numerous reforms to the antidumping laws, starting with a definition of a non-market economy,
as well as a set of standards that the DOC was to take into consideration when determining
whether a specific country is a non-market economy. According to the OTCA, a non-market
economy is a country that “does not operate on market principles of cost or pricing structures, so ¹³
that sales of merchandise in such country do not reflect the fair value of the merchandise.” The

⁵^Aⁿ^tidum^ping^A^c^{t of}^1921,^c^h^.¹⁴^{§ 2}⁰⁵^,⁴²^Sta^t^.^9,^{13 (}¹⁹²¹⁾^.
⁶^T^r^a^d^e^A^c^{t of}¹⁹⁷⁴^,^P^.^L^.^93-⁶¹^8,^{§ 3}^21,⁸⁸^Sta^t^{. 1}⁹⁷⁸^,²⁰⁷⁴⁽¹⁹⁷⁴⁾^.
⁷^Se^e^D^e^pa^r^t^m^e^{nt of}^C^o^m^m^e^r^c^e^,^Bⁱ^cycl^{es F}^r^o^m^Czech^o^s^l^o^va^ki^a^{, 25}^F^ED^.^R^EG^{. 6,6}^{57 (}¹⁹⁶⁰⁾^.
⁸^Se^e^T^r^a^d^e^A^c^{t of}¹⁹⁷⁴^,^sup^r^a^f^o^o^t^note^6.
⁹^R^obe^r^t^H^.^L^a^ntz^,^The^Se^ar^c^h^f^o^r^C^ons^is^te^nc^y^:^Tr^e^a^tm^eⁿ^t^of^N^o^nm^ar^k^e^t^Ec^on^om^ie^s^{in Tr}^ans^it^io^{n u}ⁿ^d^e^r^Uⁿ^ite^d^St^ate^s
^Antid^um^pi^ng^a^{nd C}^o^uⁿ^te^r^v^aili^ng^D^u^ty^Law^s^{, 10}^A^M^.^U.^J.^I^NT^’^L^L.^&^P^OL^’^Y^993,¹⁰⁰³⁽¹⁹⁹⁵⁾^.
¹⁰^Se^e^D^e^pa^r^t^m^e^{nt of}^C^o^m^m^e^r^c^e^,^Ele^c^t^ric^{Golf Cars From}^Pol^aⁿ^d^{, 4}⁰^F^ED^.^R^EG^{. 2}⁵^,4⁹⁷⁽¹⁹⁷^5).
¹¹^T^r^a^d^e^A^g^r^eem^eⁿ^ts^A^c^{t of}^1979,^P.L^.^96-^39,^§⁷⁷^6,⁹³^Sta^t^.¹^44,¹^{86 (}¹⁹⁷⁹⁾⁽^c^odifⁱ^e^d^a^s^a^m^e^nde^{d a}^t¹⁹^U^.^S.C^.^§
¹⁶⁷⁷^e^).^T^h^{e act}^al^so^t^r^an^sf^erred^ad^mⁱⁿⁱ^st^ratⁱ^v^{e au}^t^h^o^rⁱ^t^y^f^r^o^m^T^r^ea^su^ry^t^o^t^h^{e Dep}^a^rt^m^eⁿ^t^o^f^Co^mm^erce^w^h^oⁱ^ssu^ed
^r^e^g^u^la^tions^o^u^tliⁿⁱ^ng^the^hⁱ^e^r^a^r^c^h^y^o^f^m^e^thodol^og^ie^s^to^be^us^e^dⁱⁿ^de^te^r^m^ining^the^f^a^ir^m^a^r^k^e^t^v^a^lue^{in A}^D
^inv^e^s^tig^a^tions^inv^o^lvⁱⁿ^g^no^n-^m^a^r^k^e^t^e^c^onom^ie^s^.^A^c^c^o^r^d^ing^{to t}^h^e^D^O^C^{, m}^a^r^k^e^t^va^lue^s^houl^d^be^de^t^e^r^m^ine^d^acco^rdⁱⁿ^g
^t^o⁽¹⁾^t^h^e^h^o^m^{e market}^p^rⁱ^{ces o}^f^s^u^ch^o^r^si^mⁱ^l^a^r^m^e^rch^aⁿ^dⁱ^{se i}ⁿ^{a s}^u^rro^gat^e^co^un^t^r^y^;⁽²^{) t}^h^{e exp}^o^r^t^pri^{ce o}^f^su^ch^o^r
^si^mⁱ^l^a^r^merch^aⁿ^dⁱ^{se sh}ⁱ^p^p^e^d^f^r^o^m^{a su}^rro^gat^e^;⁽³^{) w}^h^en^act^u^a^l^o^r^accu^rat^e^p^rⁱ^{ces are n}^o^t^avai^l^a^b^l^e,^t^h^{e co}ⁿ^s^t^r^u^c^t^e^d
^v^a^lue^of^s^u^c^h^or^sⁱ^m^ila^r^m^e^r^c^ha^ndis^e^{in a}^s^u^r^r^og^a^t^e^c^ountr^y^{; a}^{nd (}⁴⁾^the^v^a^lueⁱⁿ^a^s^u^r^r^o^g^a^te^c^o^uⁿ^tr^y^of^the^f^a^c^t^or^s^of
^pr^o^duc^ti^on^us^e^dⁱⁿ^t^h^eⁿ^on-^m^a^r^k^{et e}^c^onom^y^f^o^r^s^u^c^h^or^sⁱ^m^ila^r^m^e^r^c^ha^ndis^e^.^Se^e¹⁹^C^.^F.R.^§³⁵³^.⁸⁽^a^{)-(c) (1}⁹⁷⁹⁾^.
¹²^O^m^nibus^T^r^a^d^e^a^{nd Com}^p^e^titiv^eⁿ^e^s^s^A^c^{t of}^1988,^P.L^.¹⁰^0-⁴¹^{8, 1}⁰²^Sta^t^.¹¹^{07 (}¹⁹⁸⁸⁾^.
¹³^{19 U}^.^S.C^.^§¹⁶⁷⁷⁽¹⁸⁾⁽^A⁾⁽²⁰⁰⁰⁾^.

factors the DOC must take into consideration when making a determination regarding a country’s
status as a non-market economy include
⁽ⁱ⁾^th^{e ex}^ten^t^to^w^h^ic^h^th^{e cu}^r^r^en^c^y^o^f^t^h^{e f}^o^r^e^igⁿ^co^uⁿ^tr^y^{is c}^oⁿ^v^e^r^tib^{le in}^to^th^{e c}^u^r^r^eⁿ^c^y^o^f
^o^t^h^e^r^co^uⁿ^t^rⁱ^e^s^{; (}ⁱⁱ⁾^th^{e e}^x^teⁿ^t^t^o^w^h^ich^w^a^g^e^r^a^tesⁱⁿ^t^h^e^f^o^r^e^igⁿ^co^uⁿ^t^r^y^ar^{e d}^e^ter^mⁱⁿ^ed^b^y
^f^r^{ee b}^a^r^g^ainⁱⁿ^g^b^e^t^w^eeⁿ^lab^o^r^an^d^m^aⁿ^a^g^e^m^eⁿ^{t; (}ⁱⁱⁱ⁾^th^{e ex}^t^eⁿ^t^to^w^h^ich^j^oⁱⁿ^{t v}^eⁿ^t^u^r^e^s^o^r
^o^t^h^e^rⁱⁿ^v^e^st^m^eⁿ^t^{s b}^y^fⁱ^r^m^{s o}^f^o^t^h^e^r^f^o^r^eⁱ^gⁿ^co^uⁿ^tr^ies^ar^{e p}^e^r^m^ittedⁱⁿ^th^e^f^o^r^e^igⁿ^co^uⁿ^tr^y^;
⁽ⁱ^v⁾^t^h^{e ex}^t^eⁿ^t^of^g^o^v^e^rnm^eⁿ^t^ow^nershⁱ^{p or con}^t^rol^of^t^h^{e m}^e^aⁿ^s^of^produ^c^tⁱ^oⁿ^;⁽^v⁾^t^h^e^ex^t^eⁿ^t
^of^g^o^v^e^rⁿ^m^eⁿ^t^con^t^{rol ov}^{er t}^h^{e allocation}^of^res^o^u^r^ces^a^{nd ov}^{er th}^{e price an}^{d ou}^tpu^t
^d^e^cⁱ^sioⁿ^{s o}^f^eⁿ^te^r^p^rⁱ^se^{s; a}ⁿ^d⁽^vⁱ⁾^suc^h^o^t^he^r^f^actors^as^th^{e ad}^mⁱⁿⁱ^s^t^ering^au^t^h^orit^y^cons^iders¹⁴
^appro^p^riate.
In addition, the OTCA provides the DOC with significant administrative discretion for
determining when a foreign country is an non-market economy. According to the statute, the
determination of non-market economy status may be made with respect to any foreign country at ¹⁵
any time, and remains effective until expressly revoked by the DOC. Moreover, the DOC’s ¹⁶
determinations are not subject to judicial review in any antidumping investigation.
With respect to AD methodologies, the OTCA amended the AD laws to require that the “factors
of production” approach was the preferred method of applying the law to non-market ¹⁷
economies. Despite this express statutory change, however, the DOC appears to have retained a
significant amount of discretion with respect to its application. The legislative history of the
OTCA seems to support the DOC’s broad claims of discretion, indicating that the DOC is to
determine on a case-by-case basis whether the available information permits the use of the ¹⁸
standard methodology or whether a different approach is warranted. As further evidence of its
discretion to determine which approach to use when determining fair market value, the DOC
stated that it would apply the various methodologies in the following order of priority:
⁽¹⁾^prices^paid^by^th^{e [n}^oⁿ^-m^ar^k^e^{t econ}^o^m^y^]^m^aⁿ^u^f^act^u^r^{er f}^o^{r ite}^m^s^im^p^o^r^t^e^d^f^r^om^a^m^a^rk^e^t
^econ^o^m^y^{; (2) prices}ⁱⁿ^t^h^{e prim}^ar^y^s^u^rrog^ate^co^uⁿ^t^r^y^{of do}^m^e^s^tⁱ^cal^l^y^produ^{ced or i}^m^port^e^d
^m^a^t^e^ri^al^s;^{(3) pri}^cesⁱⁿ^on^{e or m}^o^re^s^econ^d^ar^y^s^u^rrog^a^t^e^co^un^t^rⁱ^e^s^report^e^{d by}^t^h^{e i}ⁿ^dus^t^r^y
^produ^cin^g^th^e^s^u^bj^ect^m^e^rc^h^a^ndis^eⁱⁿ^th^e^s^ecoⁿ^d^ar^y^c^o^uⁿ^t^ry^or^c^o^uⁿ^t^rⁱ^e^s^,^o^r^;⁽⁴⁾^p^rⁱ^c^e^sⁱⁿ^oⁿ^e
^{or m}^o^{re s}^ecoⁿ^d^ar^y^s^u^rrog^{ate c}^o^uⁿ^t^ries^f^r^o^m^s^o^u^r^ce^s^oth^e^{r t}^h^an^t^h^{e in}^d^u^s^t^r^y^produ^cing^t^h^e¹⁹
^s^u^bj^{ect m}^e^rch^aⁿ^d^is^e.

¹⁴^{19 U}^.^S.C^.^§¹⁶⁷⁷⁽¹⁸⁾⁽^B⁾⁽²⁰⁰⁰⁾^.
¹⁵^{19 U}^.^S.C^.^§¹⁶⁷⁷⁽¹⁸⁾⁽^C⁾⁽²⁰⁰⁰⁾^.
¹⁶^{19 U}^.^S.C^.^§¹⁶⁷⁷⁽¹⁸⁾⁽^D⁾⁽²⁰⁰⁰⁾^.
¹⁷^Se^e¹⁹^U^.^S.C^.^§¹⁶⁷⁷^b(^c⁾⁽²⁰⁰⁰⁾⁽^s^ta^ting^tha^t^w^h^eⁿ^“⁽^A⁾^the^s^ubje^c^{t m}^e^r^c^ha^ndis^e^is^e^x^por^te^{d f}^r^om^a^nonm^a^r^k^e^t
^e^c^onom^y^c^ountr^y^{, a}^{nd (}^B⁾^t^h^e^a^d^mⁱ^nis^t^e^r^ing^a^u^thor^ity^fⁱ^nds^tha^t^a^v^a^ila^ble^inf^o^r^m^a^{tion doe}^s^not^pe^r^m^{it the}^nor^m^a^{l v}^a^lue
^of^the^s^ubje^c^t^m^e^rc^ha^ndis^e^to^be^de^te^rm^ine^d^{... t}^h^e^a^d^mⁱⁿⁱ^s^t^e^r^ing^a^u^th^ority^s^h^a^{ll de}^te^rm^ine^the^norm^a^{l v}^a^lue^of^the
^s^ubje^c^t^m^e^r^c^ha^ndis^e^{on t}^h^e^ba^sⁱ^s^of^the^v^a^lue^of^the^f^a^c^t^or^s^of^pr^od^uc^tio^{n ut}^iliz^e^dⁱⁿ^p^r^od^uc^ing^t^h^e^m^e^r^c^ha^ndis^e^aⁿ^d^to
^w^h^ic^{h s}^h^a^{ll be}^a^d^de^{d a}ⁿ^a^m^{ount f}^o^r^g^e^ne^r^a^{l e}^x^pe^ns^e^s^a^{nd pr}^of^{it pl}^u^s^the^c^o^s^t^of^c^ontaⁱ^ne^r^s^{, c}^o^v^e^rⁱ^ng^s^,^a^nd^ot^he^r
^e^x^pe^ns^e^s^.”⁾^.
¹⁸^Se^e^{S. R}^e^p^.^N^o^.¹^00-^71,¹⁰⁰^th^Co^ng^{., 1}^st^Se^s^s^.,¹⁰^{8 (}¹⁹⁸⁷⁾⁽^s^ta^ting^tha^t^the^bill^“^doe^s^not^pr^ohi^{bit t}^h^e^[^D^O^C^]^f^r^om
^us^ing^its^nor^m^a^{l m}^e^thodo^log^y^f^o^r^de^te^r^m^ining^f^o^r^e^igⁿ^m^a^r^k^e^t^v^a^{lue in c}^a^s^e^s^r^e^g^a^r^d^ing^no^nm^a^r^k^e^{t e}^c^o^nom^y^c^ountrⁱ^e^s^.
^If^inf^o^r^m^a^{tion s}^ubm^itte^{d by}^a^noⁿ^-^m^a^rk^e^t^ec^onom^y^c^ountry^{to the}^[D^O^C^]^pe^rm^its^f^o^re^igⁿ^m^a^rke^t^v^a^l^u^e^to^be
^d^e^t^e^rmⁱⁿ^ed^accu^rat^e^l^y^u^sⁱⁿ^{g t}^h^{e no}^rm^al^m^e^t^hodolog^y^,^theⁿ^t^h^e^Co^m^m^itte^e^e^x^pe^c^t^s^s^u^c^h^m^e^thodol^og^y^{to be}^us^e^d^by^the^th^d
^[^DOC^]^.^”);^{see a}^l^s^o^C^o^nf^{. R}^e^por^t^N^o^{. 1}^00-⁵⁷^6,¹⁰⁰^Cong^.,²^Se^s^s^{. 59}^{1 (}¹⁹⁸⁸⁾^.
¹⁹^D^e^pa^r^t^m^e^{nt of}^C^o^m^m^e^r^c^e^,^Final^D^e^te^r^m^inatio^{n of}^S^a^le^s^at^Le^s^s^Th^{an F}^a^ir^V^a^lue^:^Sp^ar^k^l^e^r^s^fr^om^the^Pe^ople^’^s
^Re^pub^lic^of^C^hⁱⁿ^a^{, 56}^F^ED^.^R^EG^.^20,⁵⁸^{8 (}¹⁹⁹¹⁾^.

The adoption by Congress of a specific statute authorizing the DOC to apply AD law to non-
market economies, as well as providing legislative guidance with respect to acceptable
methodologies—namely, authorizing various surrogate country approaches—has made AD law
the exclusive remedy for U.S. industries when confronting unfair trade practices from non-market
economies. As discussed below, however, the recent application—after a 23-year abstention by
the DOC—of countervailing duty law to China, a non-market economy, would appear to
potentially provide adversely affected industries with another option for combating unfair trade
practices from non-market economies.
Countervailing duty laws (CVD) are designed and intended to provide relief to domestic
industries that have been, or are threatened with, the adverse impact from imported goods sold in
the U.S. market that have been subsidized by a foreign government or other public entity.
Specifically, the relief provided takes the form of an additional import duty on the subsidized
imports. The duty levied is to be equal to the estimated amount of the government or other public
subsidization. Similar to AD law, for an industry to obtain relief, both the ITC and the DOC must
make conclusive determinations. The DOC must find that the targeted imports have been
subsidized, and ITC must find that the domestic industry has been materially injured or
threatened with material injury due to the subsidized imports.
Unlike the AD laws, however, U.S. CVD laws have not been traditionally applied to non-market
economies. This is largely as a result of a 1984 determination by the DOC that there is no
adequate way to measure market distortions caused by subsidies in an economy that is not based
on market principles. The first determination by the DOC regarding the application of CVD law
to non-market economies involved carbon steel wire rods manufactured in Czechoslovakia and ²⁰
Poland, both of which were non-market economies. At the time of the DOC’s decision, the ²¹
United States had two separate CVD statutes. The first, § 303 of the Tariff Act of 1930, applied
^[w^]^h^en^ev^e^r^any^co^uⁿ^t^r^y^{, d}^e^p^eⁿ^d^en^c^y^{, co}^loⁿ^y^{, p}^r^o^vⁱⁿ^{ce, o}^r^o^t^h^e^r^p^o^{litical su}^b^dⁱ^vⁱ^sioⁿ^o^f
^g^o^v^e^rnm^eⁿ^t^{, pers}^on^{, part}ⁿ^e^rshⁱ^{p, as}^s^o^ci^atⁱ^oⁿ^,^cart^e^l^,^{or cor}^poratⁱ^oⁿ^,^s^h^al^l^pa^y^{or bes}^t^o^w^,
^di^rect^l^y^{or i}ⁿ^di^rect^l^y^{, any}^boun^t^y^{or g}^r^ant^u^pon^t^h^e^m^a^nu^f^a^c^t^u^r^{e or pro}^d^u^c^tⁱ^oⁿ^{or ex}^port^of
^any^{article or}^m^e^rch^aⁿ^d^is^e^m^aⁿ^u^f^act^u^r^{ed or}^pr^odu^{ced i}ⁿ^s^u^{ch cou}ⁿ^t^r^y^{, depen}^d^en^c^y^{, col}^ony^,²²
^provⁱⁿ^{ce, or oth}^e^{r political s}^ubdivⁱ^sⁱ^on^o^f^g^o^v^e^rⁿ^m^eⁿ^t^.

²⁰^A^s^m^aⁿ^y^c^o^m^m^e^nta^t^{ors ha}^v^e^not^e^d^{, h}^o^w^e^ve^{r, this w}^a^{s not}^t^h^e^fⁱ^{rst pe}^titi^on^to^be^f^ile^{d a}^t^the^{DOC re}^la^ting^{to a}^no^n-
^m^a^rk^e^t^ec^onom^y^.^{In 19}⁸³^{, the}^r^e^w^a^s^a^CV^D^pe^titi^on^inv^o^lvⁱⁿ^g^te^x^tile^s^f^r^o^m^China^,^w^h^ic^{h w}^a^s^w^ithdra^w^{n prior t}^o^a
^ruling^by^the^DOC.^S^{ee e.}^g^.^,^Sa^ng^haⁿ^W^a^ng^,^U^.^S.^Tr^a^d^e^Law^s^C^oⁿ^c^e^r^{ning N}^onm^ar^k^e^t^Ec^o^nom^ie^s^R^e^vⁱ^s^ite^{d for}
^Fair^ne^s^s^a^{nd C}^ons^is^te^nc^y^{, 10}^E^MO^R^Y^I^NT^’^L^L.^R^EV^{. 593}^{, 5}⁹⁸^n.²⁷^(c^iting^Judi^{th Hi}^pple^r^Be^ll^{o &}^A^l^aⁿ^{F. H}^o^lm^e^r^{, T}^HE
^A^NT^I^D^U^M^P^I^NG^A^N^D^C^OUNT^E^R^V^A^I^L^I^NG^D^UT^Y^L^AW^S^:^K^EY^L^E^G^AL^A^N^D^P^OL^I^C^Y^I^SS^U^E^S^146-^{48 (}¹⁹⁸⁷⁾⁾^.
²¹^Se^e^T^a^rⁱ^f^f^A^c^{t of}¹⁹³⁰^{, c}^h^.⁴^79,^{§ 3}⁰³⁽¹⁹³⁰⁾^.^Se^c^tⁱ^on³⁰³^of^the^T^a^rⁱ^f^f^A^c^{t of}^{1930 w}^a^s^r^e^pe^a^l^e^d^w^h^eⁿ^the^Uⁿ^ite^d
^Sta^t^e^s^eⁿ^a^c^t^e^d^the^U^r^ug^ua^y^R^oun^{d A}^g^r^e^em^eⁿ^ts^A^c^{t of}¹⁹⁹⁴^aⁿ^d^s^u^bs^e^que^nt^ly^joine^d^t^h^e^W^o^r^l^{d T}^r^a^d^e^O^r^g^a^niz^a^tion.
^Se^e^U^r^ug^ua^y^R^{ound A}^g^r^e^em^eⁿ^ts^A^c^{t, P}^.^L^.¹⁰^3-⁴⁶⁵^,^§²⁶¹⁽^a⁾^,¹⁰⁸^Sta^t^{. 4}⁸⁰⁹⁽¹⁹⁹⁴⁾^.
²²^Se^e^T^a^rⁱ^f^f^A^c^{t of}¹⁹³⁰^{, c}^h^.⁴^79,^{§ 3}⁰³⁽¹⁹³⁰⁾^.

The second CVD statute, section 701(b) of the Tariff Act of 1930, was enacted as part of the
Trade Agreements Act of 1979 and intended to bring the United States into compliance with the
Agreement on the Interpretation and Application of Articles VI, XVI, and XXIII of the General
Agreements on Tariffs and Trade (Subsidies Code) that had been negotiated in Geneva under the ²³
auspices of the General Agreements on Tariffs and Trade (GATT). Section 701(b) applied CVD
law to “a country under the Agreement” and required that the United States first make a
determination that the subsidized imports either caused, or threatened to cause, material injury to
an industry in the United States, or caused the establishment of an industry in the United States to ²⁴
be materially retarded.
Because neither Poland nor Czechoslovakia were signatories to the 1979 Subsidies Code, the
DOC conducted its investigations of the alleged subsidization of carbon wire steel rod pursuant to ²⁵
section 303 of the Tariff Act. At the preliminary determination stage, the DOC found that the
phrase “any country” meant that no government entity could be excluded on a per se basis from ²⁶
the CVD law. At the final determination stage, however, the DOC indicated that it had failed to
address a second jurisdictional element, namely, “whether government activities in a [non-market ²⁷
economy] confer a ‘bounty or grant’ within the meaning of section 303.” In evaluating this
element, the DOC determined that countervailable subsidies cannot, conceptually speaking, be
found within a non-market economy and, therefore, cannot be included within the scope of the ²⁸
phrase “bounty or grant.”
To justify its final determinations, the DOC relied on the rationale that a subsidy is an action
taken by a government or other public entity that distorts or subverts the operation of the free
market. Since all costs, prices, and profits in non-market economies are centrally controlled (i.e.,
by the state), the concept of subsidization is arguably meaningless as there are no market forces to
subvert or distort. In other words, because a subsidy is essentially a market phenomena, it has no ²⁹
meaning or purpose in a non-market economy. In addition, according to the DOC, while
resources may in fact be allocated inefficiently relative to a similarly developed market economy,
it is impossible to state with any degree of certainty whether the misallocation results from ³⁰
subsidization, or from central planning. Furthermore, the DOC noted a practical problem with
determining the amount of subsidization from a non-market economy. Specifically, the DOC
stated that because all economic activity in a non-market economy is centrally controlled, there
exists no way to practically “disaggregate government action in such a way as to identify the ³¹
exceptional action that is a subsidy.”
The DOC, in determining that its conclusion was consistent with its statutory authority, conducted
a review of the applicable CVD statutes and their legislative histories. Based on this review, the
DOC held that “Congress has never confronted directly the question of whether the

²³^Se^e^T^r^a^d^e^A^g^r^e^em^eⁿ^ts^A^c^t^of^{1979, P.L}^.⁹⁶^-³^{9, §§ 10}^{3, 10}⁵⁽^a⁾^{, 93}^Sta^t^{. 19}^{0, 19}³⁽¹⁹⁷⁹⁾^.
²⁴^Id^.
²⁵^D^e^pa^r^t^m^e^{nt of}^C^o^m^m^e^r^c^e^,^Car^bon^Ste^e^l^Wⁱ^r^e^Rod^Fr^om^Cz^e^c^hos^l^o^v^a^kⁱ^a;^Fin^a^{l Ne}^g^a^tiv^e^Co^unte^r^v^a^ilin^{g D}^u^ty
^De^te^rminatioⁿ^{, 49 F}^ED^.^R^EG^{. 19,}³^70,¹⁹^,3^{71 (}^M^a^y^{7, 19}⁸⁴⁾^.
²⁶^Id^.
²⁷^Id^.
²⁸^Id^.
²⁹^S^{ee i}^d^.
³⁰^Id^.
³¹^Id^.^a^t¹⁹^,3^72.

countervailing duty law applies to [non-market economy] countries.”³² The DOC pointed to
amendments to U.S. trade remedies law made by Congress in both 1974 and 1979 to justify its
determination. The DOC noted in particular that, while Congress addressed import violations by
non-market economies by adopting section 406 of the Trade Act of 1974 and by making changes ³³
to the antidumping laws, it declined to make corresponding changes to CVD law. Therefore, in
light of Congress’s silence with respect to the application of CVDs to imports from non-market
economies, the DOC concluded that, as the administering agency, it possessed broad
discretionary authority with respect to the question of whether a countervailable subsidy could ³⁴
exist in a non-market economy situation.
Reviewing the DOC’s final determinations, the Court of International Trade (CIT), in Continental ³⁵
Steel Corp. v. United States, disagreed with the agency’s conclusion that subsidies cannot by
definition exist within a non-market economy. As a result, the CIT reversed and remanded the
case back to the DOC for further investigation.
The CIT took specific issue with two of the DOC’s holdings. First, the CIT noted that the DOC
committed a “fundamental error” in its premise that a subsidy can only exist in a market ³⁶
economy. Second, the CIT argued that the DOC’s determination was “at odds with the plain
meaning and purpose of the law,” “contradicts judicial interpretations of the law,” and is ³⁷
“inconsistent with past administration of the law.” Regarding its second point, the CIT noted
that section 303 of the Tariff Act of 1930 “makes no distinctions based on the form of any
country’s economy,” and “on its face shows a meticulous inclusiveness and an unwavering ³⁸
intention to cover all possible variations of the acts sought to be counterbalanced.” According to
the CIT, the DOC’s adoption of a per se rule that subsidies cannot exist in non-market economies
served to effectively amend CVD law by administrative fiat and, therefore, was irrational, ³⁹
arbitrary, and contrary to law.
Regarding the DOC’s determination that subsidies are purely a market phenomena and thus not
applicable to non-market economies, the CIT argued that the problem is essentially one of ⁴⁰
measurement and not one of meaning. The CIT pointed to the application of antidumping law to
non-market economies and noted that the use of surrogate or other substitute values for free
market values does not deter the DOC from determining dumping margins; therefore, the absence
of free market values similarly should not serve to deter or prevent the DOC from being able to ⁴¹
calculate subsidy margins.

³²^Id^.^a^t¹⁹^,3^73.
³³^Id^.
³⁴^Id^.^a^t¹⁹^,3^{74 (}^c^it^ing^Uⁿ^ite^{d S}^t^ate^s^v^.^Ze^nit^h^R^adi^{o C}^o^r^p^.^{, 56}²^F^.²^d¹²⁰^{9, 13}¹⁶⁽^F^e^d^.^Cⁱ^r^.¹⁹⁷⁷⁾^,^a^ff’d^{, 43}^{7 U}^.^S.⁴⁴³
⁽¹⁹⁷⁶⁾^.
³⁵^Coⁿ^tⁱⁿ^en^t^a^l^S^t^eel^Co^r^p^.^v.^Uⁿⁱ^t^e^{d S}^t^at^es^{, 6}¹⁴^{F. S}^u^p^p^.⁵⁴^{8 (}^C^t^.^Iⁿ^t’^{l T}^r^a^d^e¹⁹⁸⁵⁾^.
³⁶^Id^.^a^t⁵⁵^0.
³⁷^Id^.
³⁸^Id^.^a^t⁵⁵^1.
³⁹^Id^.^a^t⁵⁵^2.
⁴⁰^Id^.^a^t⁵⁵^4.
⁴¹^Id^.^a^t⁵⁵^5.

Subsequently, in Georgetown Steel Corp. v. United States,⁴² the Court of Appeals for the Federal
Circuit reversed the CIT and reinstated the DOC’s conclusions. The court, focusing first on the
DOC’s holding that the terms “bounty and “grant” as contained in section 303 of the Tariff Act of

1930 were not intended to apply to non-market economies, held that the question could not be ⁴³

answered by relying on the statute’s plain language. The court noted that when the statute was
initially enacted in 1897, there were no non-market economies; therefore, Congress had no reason ⁴⁴
to have addressed the issue. According to the court, the fact that in the six subsequent
amendments to the CVD statute Congress made no attempt to address the issue of the statute’s
application to non-market economies “strongly suggests that Congress did not intend to change ⁴⁵
the scope or meaning of the provision that it had first enacted in the last century.”
The court then discussed the two most recent amendments to the CVD laws and observed
Congress’s belief, as evidenced by both the acts themselves and their legislative histories, that
^ch^ang^e^sⁱⁿ^th^{e antidum}^ping^la^w^w^e^{re n}^eces^s^a^r^y^to^m^a^k^e^th^at^la^w^m^o^{re eff}^ecti^v^{e in}^dealing
^wⁱ^t^h^e^x^p^o^r^{ts f}^r^o^mⁿ^oⁿ^m^ar^k^e^t^ecoⁿ^o^mⁱ^{es, co}^u^p^led^wⁱ^t^h^it^{s si}^len^{ce ab}^o^u^{t ap}^p^licatioⁿ^o^f^t^h^e
^c^o^unt^e^r^vaⁱ^lⁱ^{ng d}^u^t^y^l^a^w^t^o^suc^h^e^x^p^o^r^t^s^,^st^r^o^ng^l^yⁱⁿ^dⁱ^c^a^t^e^s^t^h^a^t^Co^ngr^e^{ss di}^dⁿ^o^t^belⁱ^e^v^e^t^h^a^t⁴⁶
^th^{e latter}^la^w^co^v^e^r^e^dⁿ^oⁿ^m^ar^k^e^{t eco}ⁿ^o^mⁱ^es.
In other words, according to the court, Congress intended to deal with imports from non-market ⁴⁷
economies being sold at unreasonably low prices under antidumping law, not CVD law.
In conclusion, the court, relying on accepted principles of administrative law, afforded the DOC
substantial deference with respect to its decisions regarding the application of CVD law to non-
market economies. Specifically, the court held that the DOC has broad discretion in determining ⁴⁸
the existence of a subsidy under U.S. CVD law, and that the DOC’s conclusion that subsidies
cannot be found in non-market economies was reasonable, in accordance with the law, and not an ⁴⁹
abuse of discretion.
As a result of the Federal Circuit’s decision in Georgetown Steel, there were no other
countervailing duty investigations of allegedly subsidized imports from non-market economies
until 1991. That year, the DOC did have occasion to examine a petition alleging the subsidization ⁵⁰
of ceiling and oscillating fans imported from China. Although China is considered a non-market

⁴²^G^e^or^ge^towⁿ^Ste^e^l^C^o^r^p^{. v}^.^Uⁿ^ite^{d St}^ate^s^,⁸⁰^{1 F.}^2d¹³⁰⁸⁽^F^e^d^{. C}ⁱ^r^.¹⁹⁸⁶⁾^.
⁴³^Id^.^a^t¹³¹⁴^.
⁴⁴^Id^.
⁴⁵^Id^.^(c^iti^ng^S.^Re^{p. N}^o^.²⁴⁹^{, 9}⁶^th^Cong^.,¹^st^Se^s^s^.⁴³⁽¹⁹⁷^9),^r^e^pr^int^e^{d in}¹⁹⁷⁹^U^.^S.C^.^C^.^A^.^N^.³⁸^1,⁴²^{9 (}¹⁹⁷⁹⁾⁾^.
⁴⁶^Id^.^a^t¹³¹⁷^.
⁴⁷^Id^.^a^t¹³¹⁸^.
⁴⁸^S^{ee i}^d^.^at¹³¹⁸⁽^cⁱ^tⁱⁿ^g^Uⁿ^ite^d^St^a^t^e^s^v^.^Ze^nith^Ra^di^{o C}^o^r^p^.^,⁵⁶^{2 F}^.²^d¹²⁰⁹^,¹²^{19 (}^F^e^d^{. C}ⁱ^r^.¹⁹⁷⁷⁾^.^aff^’^d⁴³^{7 U.}^S^.⁴⁴³
⁽¹⁹⁷⁸^)).
⁴⁹^Id^.^a^t¹³¹⁸^(c^iting^C^h^e^v^r^{on U}^.^S.^{A., I}ⁿ^c^.^v^.^N^a^t^u^r^a^l^Re^s^our^c^e^s^D^e^fe^ns^e^C^ounc^il^{, I}ⁿ^c^.^{, 4}⁶⁷^U^.^S.⁸^37,⁸⁴²^-⁴^{5 (}¹⁹⁸⁴⁾^;
^Mel^a^miⁿ^e^Ch^emi^c^a^l^s,^Iⁿ^c.^v.^Uni^t^ed^S^t^a^t^es^{, 7}³²^F.^2d⁹²^4,⁹²^{8 (}^F^e^d^{. C}ⁱ^r^.¹⁹⁸⁴⁾⁾^.
⁵⁰^D^e^pa^r^t^m^e^{nt of}^C^o^m^m^e^r^c^e^,^Final^Ne^gativ^e^Co^unte^r^v^a^ili^ng^Duty^De^te^rmi^natio^{ns: Osc}^illa^tin^{g a}ⁿ^d^Ceⁱ^ling^Fa^{ns From}
⁽^c^onti^nue^d.^..)

economy, the petition was based on the theory that this particular industry was sufficiently
market-oriented that the DOC could reliably use the economic data provided by the industry itself ⁵¹
consistent with the standards utilized for CVD investigations in market economies.
According to the DOC, to determine whether an industry is sufficiently market-oriented, a three-
part test is utilized. First, “there must be virtually no government involvement in setting prices or ⁵²
amounts to be produced.” Second, the industry “should be characterized by private or collective
ownership. There may be state-owned enterprises in the industry, but substantial state ownership ⁵³
would weigh heavily against finding a market-oriented industry.” Finally, “[m]arket-determined
prices must be paid for all significant inputs, whether material or non-material (e.g., labor and
overhead), and for an all-but-insignificant proportion of all the inputs accounting for the total ⁵⁴
value of the merchandise under investigation.” The DOC ultimately concluded that, while some
of the inputs for the ceiling and oscillating fans were in fact obtained from market sources, there
remained a significant portion of the inputs that were not and, therefore, the industry as a whole ⁵⁵
did not qualify as a market-oriented industry. As a result of this determination, the DOC held ⁵⁶
that CVD law did not apply to the Chinese ceiling and oscillating fan industry.
Some commentators and scholars have objected to this so-called market-oriented industry
approach because the test, especially the third prong, almost guarantees that no such industries ⁵⁷
will be found. In addition, some critics have contended that the DOC’s determination that
“significantly all” factor input prices must be market-driven is ambiguous and may lead to
arbitrary results. Such arbitrary results, according to critics, arguably play a role in creating ⁵⁸
uncertainty for non-market economy producers with respect to U.S. trade remedy laws.
Furthermore, it appears possible to argue that under this approach, a non-market economy can ⁵⁹
enact substantial market based reforms while remaining immunized from CVD investigations.
Although the DOC’s determination in Oscillating and Ceiling Fans From the People’s Republic
of China appears to have opened the door to the potential application of CVD law to non-market

^(...c^on^tin^ue^d)
^the^Pe^o^p^le^{’s Re}^pu^blic^{of Ch}ⁱⁿ^a^{, 5}⁷^F^ED^.^R^EG^.²⁴^,0¹⁸⁽^J^un^{e 5}^,¹⁹⁹²⁾^.
⁵¹^Id^.^a^t²⁴^,0^18.
⁵²^Id^.
⁵³^Id^.
⁵⁴^Id^.
⁵⁵^Id^.^(s^ta^ti^ng^tha^t^“^[^b^]^a^s^e^d^oⁿ^o^u^{r v}^e^rifⁱ^ca^tion^of^the^re^s^pons^e^s^s^u^bm^itte^{d in}^th^is^pr^o^ceedⁱⁿ^g,^w^e^d^e^t^e^r^mⁱⁿ^{e t}^h^at^t^h^{e f}^aⁿ^s
^ind^u^stry^{in the}^P^RC^doe^s^not^m^e^e^t^the^t^h^ird^of^the^s^e^c^r^ite^ria^”⁾^.
⁵⁶^Id^.^a^t²⁴^,0^{19 (}^c^onc^lu^di^ng^tha^t^“^w^e^ha^v^e^de^te^r^m^ine^d^tha^t^t^h^e^P^R^C^f^a^ns^ind^u^s^t^r^y^is^not^[^a^m^a^r^k^e^t^-^o^rⁱ^ente^{d i}ⁿ^d^u^s^t^r^y^]^.^A^s
^a^r^e^s^u^{lt, w}^e^de^te^r^m^ine^tha^t^the^C^V^D^la^w^c^a^nnot^be^a^p^p^lie^{d t}^o^t^h^e^P^R^C^f^a^{n i}ⁿ^d^u^s^t^r^y^.”⁾^.
⁵⁷^L^a^w^r^eⁿ^c^e^{J. Bog}^a^{rd &}^Lⁱ^nda^{C. Me}^ng^he^tti,^T^h^e^Tr^e^a^tm^eⁿ^{t o}^f^N^oⁿ^-^M^a^r^k^e^t^Ec^onom^ie^s^Uⁿ^de^r^U^.^S.^Aⁿ^tid^um^pi^ng^a^nd
^Coun^te^rv^ailin^{g Du}^ty^Law:^{A Pe}^tit^ione^{r’s Pe}^rspe^c^tiv^e^,^P^L^I^C^o^r^p^.^L^a^w^a^{nd P}^r^a^c^tic^e^C^o^ur^s^e^H^a^nd^bo^ok^{, Se}^rⁱ^e^s^N^o^.⁷⁸^9,
^6-^{7 (}¹⁹⁹²⁾^;^{see a}^l^so^Jam^e^{s K.}^Ke^arn^e^y^{& Ji}^m^Wan^g^,^T^h^{e Dep}^a^r^t^m^en^t^o^f^Co^{mmerce’s Ma}^rket^-Ori^en^t^e^d^In^du^st^ry
^M^e^thodo^lo^gy^for^N^onm^ar^k^e^t^Ec^o^nom^ie^sⁱⁿ^An^tid^um^pi^{ng I}ⁿ^v^e^s^tiga^t^ions^:^The^Re^s^p^on^din^g^P^a^r^t^y^’^s^Pe^r^s^p^e^c^tiv^e^{, P}^L^{I Cor}^p^.
^L^a^w^&^P^r^a^c^tic^e^H^a^ndbo^ok^Se^rⁱ^e^s^N^o^{. 7}⁸⁹^,²⁵⁵^,²^66-⁶⁷⁽¹⁹⁹²⁾^.
⁵⁸^Se^e^{James K.}^Kearn^e^y^{& Ji}^m^W^aⁿ^g^,^The^D^e^p^a^r^t^m^e^nt^{of C}^o^m^m^e^r^c^e’^s^M^a^r^k^e^t^-^O^rⁱ^eⁿ^te^{d I}ⁿ^d^u^s^t^r^y^M^e^thodo^lo^gy^for
^N^onm^ar^k^e^t^Ec^o^nom^ie^sⁱⁿ^Aⁿ^tid^u^m^ping^Iⁿ^v^e^s^tig^ati^ons^:^T^h^e^Re^s^p^on^din^g^P^a^r^t^y^’^s^Pe^r^s^p^e^c^tiv^e^,^P^L^{I Co}^r^p^.^L^a^w^{& P}^r^actⁱ^ce
^H^a^ndb^ook^Se^rⁱ^e^s^N^o^.⁷^89,²^55,²^66-^{67 (}¹⁹⁹²⁾^.
⁵⁹^Se^e^L^a^w^r^eⁿ^c^e^J^.^B^o^g^a^r^d^&^Lⁱ^nda^C^.^Me^ng^he^tti^,^T^h^e^Tr^e^a^tm^eⁿ^t^of^N^on-^M^a^r^k^e^t^Ec^o^nom^ie^s^Uⁿ^de^r^U^.^{S. A}ⁿ^tid^um^pi^ng
^and^Co^unte^r^v^a^ilⁱⁿ^{g Duty}^{Law: A}^Pe^titio^ne^{r’s Pe}^rspe^c^tiv^e^{, P}^L^I^C^o^r^p^{. L}^a^w^a^{nd P}^r^a^c^tic^e^C^o^ur^s^e^H^a^nd^book^,^Se^rⁱ^e^s^N^o^.
⁷⁸⁹^{, 9}^-¹¹⁽¹⁹⁹²⁾^.

economies, the DOC did not accept another CVD petition against a non-market economy until

2006.

On November 27, 2006, the DOC announced that it had initiated a CVD investigation against ⁶⁰
China with respect to “coated free-sheet paper.” On April 9, 2007, the DOC announced, via
publication in the Federal Register, that it had made an affirmative preliminary determination of
subsidy in the CVD investigation with respect to imports from China. The DOC calculated ⁶¹
preliminary estimated net countervailable subsidy rates ranging from 10.9% to 20.35%.
Between the initiation of the investigation and the DOC’s preliminary findings, the Government
of the People’s Republic of China sought an injunction from the United States Court of ⁶²
International Trade to prevent the DOC from conducting the CVD investigation. China argued
that the court had proper jurisdiction to hear the claim for an injunction and that the DOC was ⁶³
prohibited by Georgetown Steel from conducting CVD investigations. Therefore, according to
the Government of China, Congress is required to pass a statute expressly authorizing the ⁶⁴
application of CVD law against non-market economies. The United States responded by
asserting that the court did not have appropriate jurisdiction to hear the claim until DOC issues its ⁶⁵
final determination in the CVD investigation; therefore, this case was not ripe for adjudication.
Further, the United States argued that there is no statutory or other legal prohibition on the
application of CVD law on non-market economies; therefore, China’s request for an injunction ⁶⁶
should be denied.

⁶⁰^Se^e^D^e^pa^r^t^m^e^{nt of}^C^o^m^m^e^r^c^e^,^N^o^tic^e^{of I}ⁿ^iti^ati^on^{of C}^o^uⁿ^te^r^v^aili^{ng D}^u^ty^Iⁿ^v^e^s^tig^ati^ons^:^C^oate^d^F^r^e^e^She^e^t^Pape^r
^Fr^om^the^Pe^ople^’^s^Re^p^u^b^lic^of^C^hⁱⁿ^{a, I}ⁿ^d^one^sⁱ^a^a^{nd t}^h^e^Re^p^ubl^ic^{of K}^o^r^e^a^{, 7}¹^F^ED^.^R^EG^.^68,⁵⁴^{6 (}^N^ov^em^be^r^27,
²⁰⁰⁶⁾^.
⁶¹^Se^e^I^m^por^{t A}^d^mⁱ^nis^t^r^a^{tion, I}ⁿ^te^rⁿ^a^tio^na^{l T}^r^a^d^e^A^d^mⁱ^nis^t^r^a^{tion, D}^e^pa^r^t^m^e^{nt of}^C^o^m^m^e^r^c^e^,^Co^a^t^ed^F^r^{ee S}^h^eet^P^a^p^e^r
^Fr^om^the^Pe^ople^’^s^Re^p^u^b^lic^of^C^hⁱⁿ^a:^Am^eⁿ^de^{d Pr}^e^limⁱ^nar^y^Affⁱ^r^m^ativ^e^C^o^uⁿ^te^r^v^aili^{ng D}^u^ty^D^e^te^r^m^inati^oⁿ^{, 72}^F^ED^.
^R^EG^.¹⁷^,⁴⁸^{4 (}^A^p^rⁱ^l⁹^,²⁰⁰⁷⁾^.
⁶²^Se^e^G^o^v^e^r^nm^eⁿ^{t o}^f^the^Pe^ople^’^s^Re^pub^lic^of^C^hⁱ^{na v}^.^Uⁿ^ite^{d St}^ate^s^{, __}^{_ F}^.^S^u^p^p^.^2d^__^__^{, 2}⁰⁰⁷^W^L⁹⁵¹⁸⁰⁸^,^*¹⁽^C^t.
^Iⁿ^t’^{l T}^r^a^d^e²⁰⁰⁷⁾^.
⁶³^Id^.^at^*²^(arguⁱⁿ^g^t^h^at^“[2⁸^U.^S^.^C.^§]¹⁵⁸¹⁽ⁱ⁾ⁱ^s^avai^l^a^b^l^{e t}^o^t^h^em^b^ecau^{se t}^h^{e o}^t^h^e^{r po}^t^eⁿ^tⁱ^a^l^vehⁱ^cl^{e f}^o^{r j}^u^dⁱ^ci^al
^re^vⁱ^ew^of^theⁱ^{r c}^l^aⁱ^m^s^-^f^iling^s^u^it^unde^r²⁸^U^.^S.C^.^§¹⁵⁸¹^(c^{) FN}^{5 a}^f^te^{r Com}^m^e^r^c^e^c^o^m^p^le^te^s^the^inv^e^s^tig^a^tion-is
^m^a^nif^e^s^t^l^y^ina^d^e^qua^te^.”⁾^.
⁶⁴^Id^.^a^t^*^{3 (a}^s^s^e^rting^tha^t^“^C^om^m^e^rc^e^doe^s^no^{t ha}^v^e^the^dis^c^re^tion^t^o^a^p^p^l^y^c^ounte^r^v^a^iling^du^ty^law^t^o^[ⁿ^on-m^a^rk^e^t
^e^c^onom^ie^s^]^b^ecau^{se th}^e^[^C^o^u^r^t^o^f^A^p^p^{eals f}^o^{r th}^{e Fed}^e^{ral Circu}ⁱ^t^]^“d^efⁱⁿ^itiv^el^y^ru^led^”^th^{at th}^{e c}^o^uⁿ^t^e^rv^ailin^g^d^u^t^y
^s^t^a^t^ute^“^m^ay^{not be}^a^p^plie^d^to^im^por^ts^f^r^om^N^M^{E c}^oun^tr^ie^s^.^”⁾^.
⁶⁵^Id^.^a^t^*⁴⁽^a^r^g^uing^tha^t^“^{it is}^not^p^o^s^sⁱ^ble^t^o^s^e^pa^r^a^te^the^m^e^{rits of}^the^de^cⁱ^sion^f^r^om^those^re^la^ting^to^jurisd^ic^tio^{n ..}^.
^b^ecau^{se i}ⁿ^o^r^d^e^{r f}^o^{r t}^hⁱ^s^C^o^u^r^t^t^o^d^e^t^e^rmⁱⁿ^e^w^h^et^h^e^{r t}^hⁱ^sⁱⁿ^vestⁱ^g^atⁱ^oⁿⁱ^s^u^l^t^r^{a vi}^res,ⁱ^t^w^o^u^l^d^h^a^{ve t}^o^d^e^t^e^rmⁱⁿ^e^w^h^et^h^e^r
^C^V^D^la^w^c^ould^be^a^p^plie^d^{to a}ⁿ^[non^-m^a^r^k^e^{t e}^c^onom^ie^s^]^....”^...^M^o^re^ov^e^r^{, the}^G^o^v^e^rn^m^e^{nt a}^dds^{, t}^h^is^C^ourt^la^c^k^s
^j^u^ri^sdⁱ^c^tⁱ^oⁿ^on^ri^p^eⁿ^e^{ss gro}^uⁿ^d^s^becau^{se [}^DOC]^h^a^{s no}^t^y^e^t^t^a^ken^fⁱⁿ^a^l^agen^c^y^actⁱ^oⁿ^.^{”) (i}ⁿ^t^erⁿ^a^l^ci^t^a^tⁱ^oⁿ^s^and
^quo^ta^tio^{n m}^a^rk^{s o}^m^itte^d).
⁶⁶^Id^.^a^t^*⁵^(a^sse^rting^tha^t^“ⁿ^e^ithe^r^t^h^e^c^o^uⁿ^te^rv^a^iling^du^ty^st^a^t^ute^nor^[^DOC’s^]^r^u^le^{s lim}^{it the}^a^g^eⁿ^c^y^’s^pow^e^r^{to in}^itia^te
^c^ounte^r^v^a^iling^duty^inv^e^s^tig^a^tions^of^[noⁿ^-m^a^r^k^e^{t e}^c^onom^ie^s^]^{. ...}^G^e^or^ge^towⁿ^Ste^e^l^did^no^{t h}^o^l^d^tha^t^the^CV^D^la^w
^c^ould^ne^v^e^r^a^pply^to^[ⁿ^on-^m^a^r^k^e^t^e^c^onom^ie^s^]^u^nde^r^aⁿ^y^cⁱ^r^c^um^s^t^aⁿ^c^e^s^{, but}^only^tha^t^[^D^O^C^’^s^]^de^cⁱ^sⁱ^on^not^to^a^pply^it
ⁱⁿ^t^h^at^{case was reaso}ⁿ^a^b^l^e.^”).

The Court of International Trade declined to issue the injunction. Focusing primarily on the
jurisdictional issues, the court held that the Government of China and the other plaintiffs will
have a “sufficient opportunity” to seek judicial review of their claims after the DOC completes its ⁶⁷
investigation and issues a final determination. While the court did address the applicability of
Georgetown Steel—concluding that “it is not clear that Commerce is prohibited from applying
countervailing duty law to [non-market economies]. Nothing in the language of the ⁶⁸
countervailing duty statute excludes [non-market economies]”—its holding with respect to
Georgetown Steel and its meaning is arguably dicta, as it does not appear to have been necessary
to the conclusion that the court lacked jurisdiction.
In publishing its preliminary findings, the DOC also issued a memorandum that directly confronts ⁶⁹
the Georgetown Steel precedent. The memorandum provides a justification as to why China’s
economy in 2005, the period for which the investigation is concerned with, and the so-called
“Soviet-style economies” are distinguishable, such that it is now possible to apply CVD law to ⁷⁰
some non-market economies.
It is important to note that the memorandum and preliminary CVD determination do not in any ⁷¹
way change or alter China’s formal status as a non-market economy. Rather, the memorandum
and justification focus on whether the rationale used to prevent CVD law from applying to non-
market economies in 1984 remains true for modern-day China. The memorandum concerns itself
with five major areas of the Chinese economy: wages and prices, access to foreign currency,
personal property rights and private entrepreneurship, foreign trading rights, and allocation of ⁷²
financial resources. While the specific economic analysis and details are beyond the scope of
this report, the memorandum concludes that, unlike the so-called “Soviet-style economies” at
issue in Georgetown Steel, China’s present economy does not contain the same obstacles to
determining the existence of subsidies. According to the memorandum,
^priv^{ate in}^dus^tr^yⁿ^o^w^do^mⁱⁿ^a^te^s^m^a^ny^s^ectors^of^t^h^{e C}^hⁱⁿ^e^s^{e econ}^o^m^y^,^an^d^eⁿ^t^r^e^p^r^eⁿ^e^u^r^s^hⁱ^p
ⁱ^s^f^l^ou^ri^s^hⁱⁿ^g^.^F^o^rei^gⁿ^t^r^adiⁿ^g^ri^g^h^t^s^h^a^v^e^been^gⁱ^v^eⁿ^t^o^ov^{er 200,0}⁰⁰^fⁱ^r^m^s^.^Ma^ny^busⁱⁿ^e^s^s
^en^titie^{s in}^p^r^esen^t^-^d^a^y^Chⁱⁿ^{a ar}^{e g}^eⁿ^e^r^a^ll^y^f^r^{ee to}^dⁱ^r^{ect m}^o^st^asp^{ects o}^f^t^h^eⁱ^r^o^p^e^r^a^tⁱ^oⁿ^s^,^aⁿ^d
^{to res}^pon^{d to (albeit li}^m^ited)^m^a^rk^et^f^o^rces^{. T}^h^e^{role of}^cent^r^{al plan}ⁿ^e^rs^is^v^a^s^t^l^y^s^m^aller....
^Giv^eⁿ^t^h^{ese d}^e^v^e^lo^p^m^en^ts,^{we b}^e^liev^e^t^h^{at it i}^s^p^o^ssib^l^{e to}^d^e^ter^mⁱⁿ^e^w^h^et^h^e^r^t^h^{e P}^R^C
^G^o^v^e^rnm^e^nt^h^a^s^best^o^w^{ed a}^ben^e^fⁱ^t^u^{pon a}^C^hⁱⁿ^es^e^produ^{cer (i}^{.e., t}^h^e^su^bsⁱ^d^y^can^be
ⁱ^d^eⁿ^tⁱ^fi^e^d^aⁿ^d^m^e^a^s^ur^e^d⁾^aⁿ^d^wh^e^t^he^r^aⁿ^y^s^u^c^h^b^e^ne^fⁱ^tⁱ^s^s^p^e^c^if^ic.^B^ecau^s^e^w^e^are^capable^o^f
^ap^p^l^yⁱⁿ^g^th^{e n}^ece^ssar^y^cr^iterⁱ^aⁱⁿ^th^{e C}^{VD la}^w^,^th^{e Dep}^a^r^t^m^eⁿ^t^’^s^p^o^lic^y^th^a^t^g^a^v^e^rⁱ^{se to}^t^h^e

⁶⁷^S^{ee i}^d^.^a^t^*⁶^.
⁶⁸^S^{ee i}^d^.^a^t^*⁷^.
⁶⁹^Se^e^Me^m^o^ra^ndum^title^{d Co}^unte^r^v^a^iling^D^u^ty^Inv^e^s^tiga^{tion of}^Coa^t^e^d^Fre^e^She^e^t^P^a^pe^{r f}^r^om^the^P^e^ople^’^s^Re^p^ublic^of
^Chⁱⁿ^{a - W}^h^et^h^e^r^t^h^{e A}ⁿ^al^y^tⁱ^c^al^E^l^emen^t^s^o^f^t^h^e^G^e^or^ge^towⁿ^Ste^e^l^Opⁱⁿⁱ^oⁿ^{are A}^p^p^lⁱ^cab^l^e^t^o^C^hⁱⁿ^a’^{s P}^r^esen^t^-^Day
^Ec^onom^y^,^f^r^o^m^Sha^una^L^e^e^-^A^l^aⁱ^a^&^L^a^w^r^eⁿ^c^e^N^o^r^t^{on, O}^f^fⁱ^c^e^of^Polic^y^,^I^m^por^{t A}^d^mⁱ^nis^t^r^a^{tion t}^o^D^a^vⁱ^{d M. S}^p^o^one^r^,
^A^s^sⁱ^s^t^aⁿ^{t Se}^c^r^e^t^a^r^y^f^o^r^I^m^por^{t A}^d^mⁱ^nis^t^r^a^{tion, Ma}^r^c^h²⁹^{, 2}⁰⁰⁷^,^av^a^ilable^at^,^htt^p^://^ia^.ita^.d^oc^.g^ov^/dow^nloa^d^/^pr^c^-^c^f^s^p^/
^CFS%^20C^hina^.G^e^o^rg^e^t^ow^n%^20a^pplic^a^bⁱ^lity^.pdf^(he^r^eⁱ^na^f^t^e^r^G^e^orge^towⁿ^Ste^e^l^Me^m^o^).
⁷⁰^S^{ee i}^d^.
⁷¹^S^{ee i}^d^.^at²^-⁴^(no^tⁱⁿ^{g t}^h^at^t^h^{e DO}^{C’s recen}^t^revi^e^w^o^f^Chⁱⁿ^a’s^non-^m^a^r^k^e^t^ec^onom^y^s^t^a^t^us^c^onc^lude^d^tha^t^“^w^hile
^Chⁱⁿ^a^h^a^{s en}^act^ed^si^gnⁱ^fⁱ^can^t^an^{d su}^st^aiⁿ^e^d^econ^o^mⁱ^c^ref^o^r^m^s,^t^h^{e P}^{RC G}^o^vern^m^eⁿ^t^h^a^{s p}^r^eserved^{a si}^gnⁱ^fⁱ^can^t^ro^l^e
^f^o^{r t}^h^{e st}^at^{e i}ⁿ^t^h^{e eco}^no^my^.^In^d^eed^,^t^h^{e l}ⁱ^mⁱ^t^s^t^h^e^P^{RC G}^o^vern^m^eⁿ^t^h^a^s^p^l^aced^on^t^h^{e ro}^l^e^o^f^marke^t^f^o^{rces are}
^s^u^f^f^ic^ie^{nt to pr}^e^c^l^ude^C^h^ina^’^s^de^sⁱ^gⁿ^a^{tion a}^s^a^m^a^r^k^e^t^e^c^onom^y^unde^r^the^U^.^S^.^aⁿ^ti^dum^ping^la^w^.^”⁾^.
⁷²^Se^e^ge^ne^r^a^lly^,^id^.

^G^e^or^get^o^wⁿ^St^eel^liti^g^a^tioⁿ^d^o^e^{s n}^o^t^p^r^ev^en^t^u^s^f^r^o^m^coⁿ^c^l^u^dⁱⁿ^g^t^h^{at t}^h^{e P}^R^C^Go^v^e^rⁿ^m^eⁿ^t⁷³
^h^a^s^bes^t^o^w^{ed a cou}ⁿ^terv^ailabl^{e s}^u^bs^id^y^u^pon^{a C}^hⁱⁿ^es^{e produ}^cer.
Neither federal agencies nor the federal courts are the exclusive forum for legal challenges to the
application of U.S. countervailing duty and antidumping laws. Adversely affected countries may
also have the right to challenge both preliminary and final antidumping and countervailing duty
determinations before the Dispute Settlement Body of the World Trade Organization (WTO). The
ability to initiate a dispute at the WTO, should U.S. CVD law be applied to a non-market
economy, requires an analysis of the compatibility of such a requirement on U.S. WTO
obligations under the WTO Agreement on Subsidies and Countervailing Measures (SCM
Agreement). Based on not only the plain language of the SCM Agreement, but also the language
of a recent Appellate Body (AB) decision, the use of what the WTO refers to as “substitute
benchmarks” (which would appear to include the surrogate country methodology, as well as the
factors of production, or market oriented industry approach) would in general appear to be
consistent with U.S. international obligations. That being said, however, it may be the case that a
specific application of a substitute benchmark may be found to be incompatible with U.S. WTO
obligations on an “as applied” basis.
It would appear that the operative provision with respect to the use of substitute benchmarks is
Article 14(d) of the SCM Agreement. Article 14(d) states, in relevant part, that
^...^{any m}^e^t^h^o^d^us^ed^b^y^th^{e i}ⁿ^v^e^stig^a^tin^g^a^u^t^h^o^r^it^y^to^calc^u^la^{te th}^{e b}^eⁿ^e^f^it^to^th^{e r}^ecipⁱ^eⁿ^t
^con^f^{erred pu}^rs^u^aⁿ^t^t^o^parag^r^ap^h^{1 of}^A^r^tⁱ^c^l^e^{1 s}^h^al^l^{be prov}ⁱ^d^e^d^f^o^rⁱⁿ^t^h^eⁿ^a^tⁱ^oⁿ^a^l^l^e^gⁱ^s^l^a^tⁱ^oⁿ
^{or i}^m^ple^m^eⁿ^ti^ng^regu^latioⁿ^s^{of th}^e^Me^m^b^{er co}ⁿ^cerⁿ^e^{d an}^{d i}^t^s^application^{to each particu}^l^ar
^cas^{e s}^h^a^{ll be tran}^s^p^areⁿ^{t an}^{d a}^d^equ^a^tel^y^e^x^plain^e^{d. F}^u^rth^e^r^m^{ore, any}^s^u^ch^m^e^t^h^{od s}^h^a^{ll be}
^co^nsis^tent^wⁱ^t^h^t^h^{e f}^o^llo^wⁱ^ng^g^u^id^eline^s^{: ... (}^d⁾^th^e^pr^ovⁱ^sⁱ^oⁿ^of^g^oods^or^s^e^r^vⁱ^c^e^s^or^pu^r^c^h^a^s^e
^of^g^oods^by^{a g}^o^v^e^rⁿ^m^eⁿ^t^sh^al^lⁿ^o^t^{be con}^sⁱ^d^{ered as}^c^oⁿ^f^erriⁿ^g^a^b^eⁿ^e^fⁱ^t^uⁿ^l^es^s^t^h^e^p^r^o^vⁱ^sⁱ^oⁿ
^is^m^a^d^e^f^o^r^{less t}^h^an^ad^eq^u^a^{te r}^e^m^uⁿ^e^r^a^tioⁿ^,^o^r^th^{e p}^u^r^c^h^a^{se is}^m^a^d^e^f^o^r^m^o^r^e^th^aⁿ^a^d^e^q^u^a^t^e
^re^m^uⁿ^e^ratⁱ^oⁿ^.^Th^{e a}^d^e^q^u^a^cy^o^f^remuⁿ^e^ra^tioⁿ^sh^a^{ll b}^e^d^e^termin^edⁱⁿ^rela^tioⁿ^to^p^r^eva^ilin^g
^m^a^r^ket^condi^tⁱ^ons^f^o^r^t^h^e^go^od^or^s^e^r^vⁱ^{ce i}ⁿ^ques^tⁱ^{on i}ⁿ^t^h^{e c}^o^unt^r^y^of^pr^ovi^sⁱ^oⁿ^o^r^p^u^r^c^h^a^s^e
⁽ⁱⁿ^c^lu^dⁱⁿ^g^p^r^{ice, q}^u^a^{lity, a}^v^a^ila^b^{ility, ma}^rketa^b^{ility, tra}ⁿ^s^p^o^r^ta^tioⁿ^aⁿ^d^o^t^h^e^{r co}ⁿ^d^itioⁿ^s^o^f⁷⁴
^pur^chas^{e or}^s^a^l^e⁾^.
The SCM Agreement’s use of the phrase “any method used” would appear to encompass not only
existing U.S. practice regarding the use of surrogates in the “factors of production” methodology,
but also the artificial pricing method discussed above. In addition, a recent Appellate Body (AB)
ruling interpreting the scope of Article 14(d) concluded that “an investigating authority may use a
benchmark other than private prices of the goods in question in the country of provision, when it
has been established that those private prices are distorted, because of the predominant role of the ⁷⁵
government in the market as a provider of the same or similar goods.” The AB went on to
establish a limitation on the use of such benchmarks, requiring that their use must “relate or refer
to, or be connected with, the prevailing market conditions in that country, and must reflect price,

⁷³^Id^.^a^t¹⁰^.
⁷⁴^W^T^{O Ag}^re^e^m^eⁿ^{t on S}^ubsi^d^ie^{s a}^{nd C}^o^uⁿ^te^rv^a^iling^Me^a^s^ure^s^{, A}^r^{t. 14(}^d),^av^ail^able^at^,^htt^p^://w^ww^.^w^to.org^/e^ng^lish/
^doc^s^_^e^/^le^g^a^l_e^/²⁴^-^s^c^m^.pdf⁽^e^m^pha^sⁱ^s^a^dde^d)^.
⁷⁵^R^e^por^t^of^the^A^ppe^lla^te^B^ody^,^Unite^d^Sta^t^e^s^—Fin^{al C}^o^uⁿ^te^rv^ailin^{g Duty}^De^te^rmina^tio^{n wit}^h^Re^spe^c^{t to Ce}^rtaiⁿ
^Softw^oo^{d L}^u^m^b^e^r^fr^om^C^aⁿ^a^d^a^,^WT^/D^S257/A^B^/R^¶¹⁰³⁽²⁰⁰⁴⁾^.

quality, availability, marketability, transportation and other conditions of purchase or sale, as ⁷⁶
required by Article 14(d).” Nevertheless, the AB expressly refused to suggest or rule upon
specific alternative methods that might be available to countries, noting that such a review would ⁷⁷
be appropriate only on a case-by-case basis.
Further evidence suggesting the consistency of the use of either surrogate countries, factors of
production, or other “substitute benchmarks” with respect to non-market economies may be ⁷⁸
derived from China’s Accession Agreement to the WTO. Adopted in November of 2001, the
Agreement governs China’s accession to the WTO and has become an integral part of the WTO
Agreement. Because China is currently classified by the United States and other countries as a ⁷⁹
non-market economy, the language with respect to the application of the SCM Agreement
appears to be relevant to any discussion of the application of trade remedy laws to non-market
economies. Article 15(b) of China’s Accession Agreement indicates that when applying the
relevant provisions of the SCM Agreement,
^if^th^er^{e ar}^{e sp}^{ecial d}ⁱ^f^f^icu^l^{ties i}ⁿ^th^{at ap}^p^licatioⁿ^,^th^{e i}^m^p^o^r^tin^g^W^T^{O Mem}^b^er^m^a^y^th^eⁿ^u^s^e
^m^e^t^h^odol^ogⁱ^e^s^f^o^{r i}^d^en^tⁱ^fyⁱⁿ^g^an^d^m^easu^rⁱⁿ^g^t^h^{e s}^u^bsi^d^y^benefⁱ^t^w^hⁱ^c^h^t^a^k^eⁱⁿ^t^o^acco^uⁿ^{t th}^e
^p^o^ssib^ilit^y^t^h^{at p}^r^ev^ailⁱⁿ^g^ter^m^s^an^d^coⁿ^d^itioⁿ^sⁱⁿ^C^hⁱⁿ^a^m^a^yⁿ^o^{t al}^w^a^y^s^b^e^av^ai^lab^l^e^as
^appro^p^ri^at^{e ben}^c^hm^ar^k^s^{. In}^ap^pl^yⁱ^ng^su^c^h^m^e^t^h^odol^ogⁱ^e^s^,^w^h^{ere pract}ⁱ^cabl^e^{, t}^h^{e i}^m^portⁱⁿ^g
^W^T^{O M}^e^m^b^e^r^s^h^o^u^l^d^a^d^j^u^s^t^s^u^c^h^p^r^e^v^aⁱ^lⁱⁿ^g^t^e^r^m^s^aⁿ^d^coⁿ^d^itioⁿ^s^b^e^f^o^r^e^coⁿ^s^id^erⁱⁿ^g^th^{e u}^s^e⁸⁰
^o^f^ter^m^{s a}ⁿ^d^coⁿ^d^itioⁿ^s^p^r^ev^ai^lin^g^o^u^ts^id^{e Ch}ⁱⁿ^a.
This language appears to recognize the inherent difficulties in calculating a subsidy or dumping
margin using values obtained from non-market economies. Moreover, the language seems to
indicate that, provided that the use of benchmarks can be adjusted to meet the prevailing
economic terms and conditions, their use is both acceptable by China and permissible under WTO
obligations. It should be noted, however, that while it may be possible to argue that the use of
benchmarks is not a violation of WTO obligations on their face, their application to a specific
industry or imported product may still be subject to challenge on an “as applied” basis.

⁷⁶^Id^.
⁷⁷^Id^.^a^t^¶¹^{06 (}^s^ta^ti^ng^tha^t^“^[ⁿ^]^or^a^r^e^w^e^r^e^quir^e^{d t}^o^de^te^r^mⁱⁿ^e^the^c^onsiste^nc^y^w^{ith A}^r^tic^le^{14(d) of}^a^l^l^the^a^lte^rna^tiv^e
^m^e^thods^m^e^ntione^d^by^the^pa^rticⁱ^p^aⁿ^ts^aⁿ^{d t}^h^ird^pa^rtic^ipaⁿ^ts^{; s}^u^c^h^a^s^s^e^s^s^m^e^{nt w}^{ill de}^pe^nd^on^how^aⁿ^y^s^u^c^h^m^e^{thod is}
^ap^p^lⁱ^e^dⁱⁿ^{a p}^a^rtⁱ^c^u^l^ar^case.^”).
⁷⁸^Se^e^P^r^ot^oc^ol^on^the^A^c^c^e^s^sⁱ^{on of}^the^P^e^o^p^le^’^s^R^e^pu^blic^of^C^h^ina^,^WT^/L^/432,^av^aila^ble^at^{, http}^://w^ww^.^w^to.org
⁽^N^ov^em^be^r^23,²⁰⁰¹⁾^.
⁷⁹^P^u^rsu^aⁿ^t^t^o^Chiⁿ^{a’s W}^T^{O ac}^cessⁱ^oⁿ^p^r^ot^o^c^o^l^,^t^h^{e Un}ⁱ^t^e^{d S}^t^at^{es and}^o^t^h^e^{r W}^T^O^m^e^m^b^er^{s are al}^l^o^we^d^t^o^t^r^eat^Chⁱⁿ^a
^a^s^a^non-^m^a^r^k^e^t^e^c^onom^y^f^o^r^pur^pos^e^s^of^tr^a^d^e^r^e^m^e^d^y^law^s^thr^oug^{h the}^y^e^a^r^2016.^S^{ee i}^d^.^{at A}^r^{t. 1}⁵^(d^).^A^cco^rdⁱⁿ^g^to
^U^.^{S. la}^w^,^de^cⁱ^sⁱ^ons^t^o^c^h^aⁿ^g^e^C^hⁱⁿ^a^’^s^c^l^a^s^sⁱ^fⁱ^ca^{tion to}^a^m^a^r^k^e^t^e^c^onom^y^m^u^s^t^be^m^a^de^s^ubje^c^t^{to th}^e^s^t^a^t^utor^y
^r^e^quir^e^m^e^nts^e^s^ta^blis^he^{d by}^{§ 7}⁷¹⁽¹⁸⁾⁽^b⁾^of^the^T^a^rⁱ^f^f^A^c^{t of}¹⁹³⁰^a^s^a^dde^d^by^the^T^r^a^d^e^A^g^r^e^em^eⁿ^ts^A^c^{t of}^1979.^Se^e
^T^r^a^d^e^A^g^r^e^em^eⁿ^ts^A^c^{t of}^1979,^P^.^L^.^96-³⁹^{§ 7}⁷¹^,⁹³^S^t^a^t^{. 1}⁴⁴⁽¹⁹⁷⁹⁾⁽^c^od^if^ie^{d a}^s^am^e^nde^{d a}^t¹⁹^U^.^S^.^C^.^§¹⁶⁷⁷⁽¹⁸⁾⁽^b⁾
⁽²⁰⁰⁰^)).
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^http:^//w^w^w^.^w^to.or^g⁽^N^ov^e^m^be^r^{23, 2}⁰⁰¹⁾^.

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