First, the U.S. Department of Commerce just announced that it has instituted a countervailing duty (CVD) investigation of imports of Coated Free Sheet Paper from China. This is the first CVD case instituted against China in more than 15 years. As most members are probably aware, a CVD investigation examines the provision of subsidies by a foreign government to an industry in that country. Because China is considered a “non-market economy” for purposes of U.S. trade laws, and because the Department has long held to the principle that it can not accurately quantify the value of subsidies in a non-market economy, CVD cases against such countries have been off-the-table for some time. However, this petition, filed by a paper manufacturer in Ohio, is widely viewed as a “test” of that principle in light of China’s incredible emergence on the global stage over the past several years. Commerce specifically noted that “we have not at this time made any determination regarding the applicability of CVD law to our initiation. We will make this determination in the context of this investigation.” Notwithstanding this disclaimer, the very fact that it instituted this investigation guarantees that it will be closely watched by a wide array of trade observers and private sector interests. This investigation could have vast ramifications for other industries down the line if the Department indeed finds that China has provided countervailable subsidies. (On this point, it should be noted that the Commerce Department instituted its investigation on most – but not all – subsidies alleged in the petition. The one subsidy for which Commerce did not institute was the allegation that China’s fixed exchange rate system constitutes a countervailable subsidy.)

Second, the U.S. Court of International Trade (CIT) has issued a preliminary finding that the additional bonding requirements imposed by the U.S. Customs and Border Protection (CBP) for importers of shrimp products subject to antidumping duties is contrary to law. A preliminary injunction has been issued which stops the CBP practice of requiring onerous continuous bond requirements on imports of agricultural and aquacultural products subject to antidumping or CVD orders. Members may recall that this continuous bond requirement was imposed in 2004, in reaction to the assertion that millions of dollars in antidumping and CVD duties were lost when the U.S. importers involved in the transactions either disappeared or declared bankruptcy by the time the final duty obligation was settled by Commerce (for example, through the administrative review process). Most, if not all, of the scofflaw importers were “fly-by-night” operations established by Chinese exporting companies. The value of the continuous bond requirement was typically established at a value equal to the importer’s duty liability over the prior 12-months periods. A final decision by the CIT in this case is expected sometime in mid or late 2007.

We will, of course, keep Members advised as to developments on both these matters. In the interim, do not hesitate to contact Jeff Levin or Bob Bauer if you have any questions.