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U.S. Cannot Impose Countervailing Duties on Chinese Goods

By Dyanna Quizon, Esq. on December 29, 2011 | Last updated on March 21, 2019

In a ruling that has critics prophesying doom for American industries, a three-judge panel of the Federal Circuit Court of Appeals held that the government cannot impose countervailing duties against China's subsidized tires.

Because China is a non-market economy, the Federal Circuit upheld the U.S. Court of International Trade's order that U.S. countervailing duty law does not apply to Chinese imports. However, the federal court of appeal unanimously affirmed the Trade Court's ruling on a different ground.

The Trade Court initially held that imposing countervailing duties on non-market economy goods could lead to "double counting" since antidumping duties are already assessed on such goods. The Federal Circuit, on the other hand, held that Congress did not intend for government payments to companies in non-market economies be characterized as subsidies.

And if the U.S. government isn't happy about that legislative interpretation, the "appropriate approach is to seek legislative change," the judges wrote.

The Federal Circuit's decision stems from a case filed by Titan International Inc., the biggest U.S. maker of off-the-road tires and the AFL-CIO labor federation. U.S. corporations have been struggling to compete with cheaper imports from China.

Criticism of the federal appeals court's ruling has been swift and harsh:

"The Court's decision undermines the integrity of our trade laws and the ability to address Chinese unfair and predatory trade practices," said United Steelworkers International President Leo W. Gerard in a statement. "The sounds of applause coming from Tiananmen Square greeted the court's decision to legalize its cheating."

Ohio - which is home to Titan's tire production facilities - has been especially vocal about its opposition to the Federal Circuit's ruling, calling it a "step backward for Ohio workers and families seeking relief from unfair trade practices."

Thus far, the U.S. Commerce Department has said it is considering further judicial and legislative options and will take action in response to the ruling soon.

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