By Kelsey McGillis
Law Student Editor
The U.S. Department of Commerce has recently amended its regulations to enhance enforcement of antidumping (AD) and countervailing duty (CVD) laws. The “Regulations Improving and Strengthening the Enforcement of Trade Remedies Through the Administration of the Antidumping and Countervailing Duty Laws” went into effect on April 24, 2024, following a public notice and comment period. The amendments introduce several changes to the regulations, including adjustments to the process of determining dumping and countervailable subsidies, enhanced enforcement mechanisms, and updates to the calculation methodologies for duties. The amendments make the following specific changes: expanded scope of Particular Market Situations (PMS) and improved investigation into transnational subsidies, which are subsidies that a foreign government gives to a recipient outside its borders.
A Particular Market Situation (PMS) refers to market conditions allegedly affecting price accuracy in comparisons between a foreign market and the United States for antidumping and countervailing duty investigations. Under the 2015 Trade Preferences Extension Act, in considering the dumping margin or countervailable subsidy, Congress directed Commerce to consider sales to be outside the “ordinary course of trade” when there are situations in which Commerce “determines that the particular market situation prevents a proper comparison with the export price.” Under the regulations now adopted, Commerce may consider factors such as weak property rights, inadequate intellectual property protection, poor human rights or labor standards, and ineffectual environmental regulations in assessing the dumping margin or countervailable subsidy, thereby increasing import duties to reflect putative advantages to foreign exporters caused by the identified practices.
For example, if labor rights violations or unimpeded intellectual property infringement lower the cost of production in an exporting country, Commerce may consider this a PMS that justifies treating imports from that country as having an artificially low price and impose correspondingly increased import duties.
The changes also broaden the regulations’ scope, remove confusing language, adopt a more flexible approach to identifying price distortions, and include non-governmental entities in considerations of relevant factors in determining the export price. Commerce clarified that these changes are not intended to influence foreign policies (e.g., to impugn foreign labor, environmental, or human rights practices) but to evaluate whether prices or costs are distorted by the policies.
In addition, Commerce was previously constrained by a regulation, 19 C.F.R. § 351.527, which limited its ability to investigate transnational subsidies. Countervailable subsidies were primarily limited to those given a state government to business firms within that state. With the removal of this restriction, Commerce is now empowered to delve into allegations of cross-border subsidies by foreign governments. This means that Commerce can scrutinize instances where foreign governments are suspected of providing subsidies in third states that unfairly benefit their own, or the third state’s, industries and distort international competition. By lifting this regulation, Commerce can more effectively address and combat allegedly unfair transnational trade practices that have emerged since the Uruguay Round Agreements. However, the lack of clear guidance or explicit text on how to address these investigations, leaves this change’s implementation somewhat uncertain.
According to the Commerce Department, the rationale for these changes is to strengthen the enforcement of antidumping and countervailing duty laws. The regulations align with the Biden administration’s “new story on trade”, emphasizing fairness and sustainability concerns. U.S. Secretary of Commerce Gina M. Raimondo has asserted that these changes demonstrate the Commerce Department’s commitment to safeguarding American workers and producers against unfair trade actions. However, the compatibility of these new regulations with the WTO Agreements, especially the Agreement on Subsidies and Countervailing Measures, is open to debate. It is possible, perhaps likely, that the new measures will be challenged under the WTO’s Dispute Settlement Understanding.