alleged that several Chinese paper com panies were recipients of governm ent subsidies such as grants, policy loans, and tax breaks. 50 NewPage’s petition m arks the first CVD investigation against C hina since 1991 when a U.S. company for mally requested the DOC to initiate a CVD investiga tion of _Ceiling and Oscillating Fans Imported from China_ .<sup>51</sup> According to the DOC statistics, from 2005 to 2006, imports of CFSP products from China increased by approxim ately 177 percent in volume, and were valued at an estimated $224 million in 2006.<sup>52</sup> On November 20, 2006, the DOC announced its decision to initiate CVD and AD investigations against China, Indonesia and Korea with re spect to “coated free sheet paper,” which altered its longstanding policy of not applying the countervailing duty law to NME countries.<sup>53</sup> Then the ITC issued its af firmative preliminary determination on December 29, 2006, considered that there is a reasonable indication that an industry in the United States is materially injured by reason of allegedly subsidized import of CFSP from China, Indonesia, and Korea.<sup>54</sup> The case was delayed when the Chinese Gove rnment and one of the Chinese exporters filed in the U.S. Court f or International Trade (CIT) arguing that the DOC lacked the legal authority to levy CVD against Chin a and should cease its in vestigation. The Department of Commerce m aintained that the 1986 court decision m erely affirmed its authority to determine whether to apply c ountervailing duties to non-m arket economies. The U.S. CIT formally rejected China’s motion on March 29, 2007.

On March 30, 2007, the U.S. DOC announced its preliminary decision to apply U.S. CVD law t o imports from China. This is the first tim e countervailing duties will be imposed on i mports from a non- market economy. The decision alters a 23-year old bipartisan policy of not applying the count ervailing duty law to non-m arket economy countries.<sup>55</sup> The prelim inary decision determined that Chinese producers and exporters of coated free sheet paper received ac tionable subsidies ra nging from 10.90 to 20.35 percent (Table 6).

There have been several reactions to th e DOC’s prelim inary decision. Som e U.S. Congress Members welcomed the Commerce Department’s decision to impose duties on certain kinds of Chinese paper imports, an d adhered that Congr ess should still pass

> 50 ITA, “Commerce Initiates Countervailing Duty Investigation on Coated Free Sheet Paper from the People’s Republic of China,” <u>http://www.ita.doc.gov/press/press_releases/2006/paper_china2_112106.asp,</u> November 21, 2006.

> 51 56 Fed. Reg. 57616 (1991). The petitioner claimed that China’s fans sector was a market-oriented industry (MOI) and the CVD law should be applied. However, the ITA concluded that the PRC fans industry was not a MOI, and issued final negative determination in the case. See 57 Fed. Reg. 24018 (1992).

> 52 Commerce News, United States Department of Commerce, “China CVD Fact Sheet,” March 30, 2007.

> 53 DOC, _Notice of Initiation of Countervailing Duty Investigations: Coated Free Sheet Paper from the People’s Republic of China, Indonesia and the Republic of Korea_ , 71 Fed. REG. 68546 (November 27, 2006).

> 54 ITC, Coated Free Sheet Paper China, Indonesia, and Korea, 71 Fed. Reg. 78464 (December 29, 2006). 55 Commerce News, United States Department of Commerce, “Commerce Applies Anti-Subsidy Law to China,” March 30, 2007.

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