The United States Court of Appeals for the Federal Circuit (CAFC) ruled on Dec. 19, 2011, that the US Countervailing Duty law (CVD Law) cannot be applied against non-market economy countries and, in the particular case in issue, against China.1

Imports from China have been subjected to numerous U.S. countervailing duty and antidumping duty complaints and the resulting orders have often imposed substantial and prohibitive countervailing and antidumping duties on imports into the U.S. of affected Chinese origin products.

The CVD Law is designed to apply a duty (countervailing duty) to offset government subsidies affecting products exported to the U.S. Until 2007, the U.S. Commerce Department, which administers the CVD Law, consistently held that the CVD Law did not apply to imports from non-market economy countries, such as China. In 2007, Commerce reversed its policy and began imposing countervailing duties against imports from China. The CAFC decision concludes that the 2007 change in policy was not permissible under the statute, either based on legislative history, or based on consistent prior administrative interpretations of the CVD Law.

(Source: Bingham)