A Search for Economic and Financial Principles in the Administration of United States Countervailing Duty Law

Article excerpt

I. INTRODUCTION

The countervailing duty laws of the United States provide in pertinent part that when a foreign government,

is providing, directly or indirectly, a subsidy with respect to the manufacture, production, or exporation of a class or kind of merchandise imported . . . into the United States, . . . then there shall be imposed upon such merchandise a countervailing duty, in addition to any other duty imposed, equal to the amount of the net subsidy. (2)

The statute does not define the central term "subsidy," nor does it prescribe rules for establishing the amount of the duty to be imposed when a countervailable subsidy is identified. This responsibility falls on the agency designated to administer the statute, the International Trade Administration of the Department of Commerce (ITA). (3)

On May 31, 1989, ITA published in the Federal Register a Notice of Proposed Rulemaking, seeking "to estalish regulations codifying the methodology used to determine the existence and value of countervailable subsidies." (4) In the notice, ITA set out its reasons for seeking to "codify much of [its] existing practice." (5) First, ITA stated that it had "long . . . been the Department's intent to promulgate methodological regulations once the Department had gained sufficient experience with the administration of the CVD law" and that it "now [felt] confident in codifying certain administrative practices in the form of regulations." (6) Second, ITA indicated that precedent had grown and become "unwieldy," and that "while the writings of current and former Department officials provide useful summaries of the Department's CVD methodology, these writings are unofficial and parties cannot rely upon them with certainty. (7) Finally, ITA noted that,

in two recent decisions, the U.S. Court of International Trade . . . has criticized the Department for relying upon the methodological appendix attached to the final determination on Cold-Rolled Carbon Steel Flat Rolled Products from Argentina, . . . (hereinafter referred to as "Subsidies Appendix") without first engaging in rulemaking pursuant to the Administrative Procedure Act. (8)

The image projected is thus one of an administrative body, prompted by Court rulings and the need for consistency and ease of application, acting to codify a tested system for implementing U.S. countervailing duty statutes.

The history of U.S. countervailing duty law over the past ten years can be seen to paint a somewhat different picture. To conform U.S. law to the GATT Subsidies Code, (9) major statutory changes were made in 1979. (10) Immediately following passage of the new statute and before implementing procedures could be designed, a large number of countervailing duty cases were filed. (11) ITA's efforts to decide these cases were hindered by the new statute's short deadlines and a lack of existing analytic writing on countervailing duty law. Rather than explain individual procedures in detail in each case, ITA decided to proceed by attaching to one of its early decision an Appendix describing methodologies which were far broader than required to decide the specific case. (12)

Given the deadlines, the officials at ITA who wrote the Appendix did not have time to devise a consistent economic model which related the purpose of the statute to the behavior being regulated. This task was left to their successors. However, in the ensuing years, subsequent ITA officials, equally hampered by short time limits and a lack of economic analysis upon which to draw, did not perform the analytic review envisioned by those who wrote the original Appendix. Rather, the basic framework of the methodology was assumed to be correct, while various changes were made in peripheral matters. (13)

The authors of the later appendices were aware that, given the analytic framework chosen, answers to some important questions of implementation could not be derived. …