U.S. COUNTERVAILING DUTY LAW AGAINST NONMARKET ECONOMIES: LEGAL ANALYSIS AND CASE STUDIES OF VIETNAM
Posted with the author's permission.
Abstract
Since 2006, the United States has imposed countervailing duty, in addition to antidumping duty, on imports from Vietnam. This application of countervailing duty has been paradoxical: in order to apply the duty, the U.S. Department of Commerce must recognize that market forces exist in Vietnam, which are distorted by government intervention; at the same time, however, the Department of Commerce (“Commerce”) uses a “nonmarket economy” (“NME”) methodology to calculate the amount of countervailing duty.
This NME methodology looks to surrogate country prices to approximate the extent of government distortion of market forces, and thus the amount of countervailable subsidies, in Vietnam. The NME methodology poses problems for Vietnamese enterprises, the Government of Vietnam, and global trade more generally. First, the methodology provides discretion for Commerce to impose unpredictable duty rates. Second, Commerce has taken an all-or-nothing approach to recognizing market-oriented industries within Vietnam; as it stands, unless all significant inputs within an industry are subject to market-driven prices, Commerce looks to surrogate-country prices as benchmarks to calculate countervailable subsidies. This paper analyzes a series of countervailing duty cases against Vietnam to determine which government programs are most frequently treated as providing countervailable subsidies, to make recommendations for Vietnamese enterprises and the Government of Vietnam, and to analyze trends in the development of Commerce’s practice of imposing countervailing duty against Vietnam as a nonmarket economy country. The author recommends that Commerce adopt a “mix and match,” or “bubbles of capitalism,” approach to calculating countervailing duty that makes greater use of in-country benchmarks to impose countervailing duty more justly and predictably.