Chinese companies won a recent law suit but Commerce, Congress still want to get tough By Peter A. Buxbaum, AJOT President Barack Obama promised to get tough with China on trade earlier this year, particularly on the issue of China’s artificial currency valuation. But the Court of International Trade recently ruled that Obama’s Commerce Department got too tough with China when it came to imposing anti-dumping sanctions and countervailing duties on certain imported Chinese tires. The case originated in 2007 when Commerce announced that a host of Chinese tire manufacturers sold off-the-road (OTR) tires in the United States at unfair prices and had received direct or indirect subsidies from the government of China. “After a thorough investigation, the Department of Commerce has found that Chinese exporters of off-the-road tires have received government subsidies and sold at below the cost of production in the United States,” the original announcement read. These findings subjected the imports to both anti-dumping measures as well as countervailing duties, which Commerce imposed at various rates for different companies, following a finding by the International Trade Commission that the OTR trade practices injured the domestic industry. Dumping refers to the practice of selling products in an export market below the prices prevailing in an exporters domestic market. Countervailing duties are meant to level the playing field in the U.S. market when there is a finding of export subsidies. Several of the Chinese manufacturers appealed Commerce’s OTR ruling to the Court of International Trade (CIT). Imposing sanctions against China presents problems because, as a non-market economy (NME), it is difficult to determine the normal domestic price for a product. This is usually done by examining pricing in surrogate market economies such as India. A further complication in this case is that Commerce sought to impose both anti-dumping and countervailing measures against the Chinese. This raised the question of whether an unlawful double sanction was imposed on some of the imports, and it is on this issue that the Chinese companies won. The CIT ruling involves highly technical issues and does not necessarily represent a blow to the administration’s program to counter alleged unfair Chinese trade practices. Within a day of the CIT ruling, Commerce imposed new sanctions on imports of Chinese steel tubing. Meanwhile, lawmakers are pushing legislation to give the Commerce Department greater authority to investigate trade cases. In another wrinkle, private organizations, including labor unions, are entering the fray, attempting to provide China with both carrots and sticks in an effort to normalize and equalize U.S.-China trade relations. The CIT ruling issued on August 4, 2010 was actually the second time the court heard the case involving OTR tires. In an earlier ruling the CIT instructed Commerce either to “do all of its remedying though the [non-market economy anti-dumping] statute,” or “apply methodologies that make such parallel remedies reasonable,” referring the combination of anti-dumping and countervailing measures the department was pursuing. Commerce reconsidered its original actions and attempted once again to coordinate the two kinds of sanctions, after which the Chinese companies brought the case back to the CIT. In its ruling, the court found that Commerce was unable to successfully apply a methodology which would ensure the prevention of double counting for the purposes of imposing sanctions and would have to forfeit the imposition of countervailing duties in this case. “Commerce must forgo the imposition of the countervailing duty law on the non-market economy (NME) products,” the court ruled, “because its actions clearly demonstrate its inability to use improved methodologies to determine whether, and to what degree, double counting occurs when NME anti-dumping remedies are imposed on the same good…” The court also found that the combinati