The United States first classified China as a “nonmarket economy” country in _Preliminary determination of Sales at Less than Fair Value, Greige Polyester Cotton Print Cloth from China_ in 1982,<sup>39</sup> and recently reaffirmed the determination by ITA on May 15, 2006 ( and m ore comprehensively on August 30, 2006) in the context of an investigation on certain lined paper from China.<sup>40</sup> Since 1982 the US employs a special NME methodology to calculate AD duties on pr oducts from China. This m ethodology results usually in duty rates that are signifi cantly higher than thos e applied to m arket economy countries. The United States Gove rnment Accountability Office (GAO) has found that Commerce applied duties to the same product from both China and one or more market economies on 25 occasions fr om 1985 to 2004, and AD duties on Chinese products were on average over 20 percentage points higher than those applied to m arket economies. China country-wide AD duties were over 60 points higher than com parable market economy rates.<sup>41</sup>

# **B. Countervailing Duty Law and NMEs**

The United States has h ad some form of c ountervailing duty legislation in place since 1897. It was strengthened and elaborated in the Tariff Act of 1930, se ction 303, which authorized the Treasury Department to impose duties on imported merchandise to offset any subsidies. This applied only to dutiabl e imports, but was extended to non-dutiable imports in the Trade A ct of 1974. The Trade Agreem ent Act of 1979 im plemented the Tokyo Round Subsidies Code under U.S. la w, changed the count ervailing duty law dramatically and created procedures m uch like those applicable to antidum ping cases. The authority to investigate allegations of subsidization was transferred from DOT to DOC, International Trade Administration (ITA).<sup>42</sup> The CVD laws are designed to provide relief to U.S. industries that have been, or are threatened with, the adverse impact from imported goods that have been subsidized by a foreign government or public entity. Similar to AD law, f or an industry to obtain relief, both the ITC and the DOC must make affir mative conclusions. The DOC must find that the targeted imports have been subsidized, and the ITC must find that the industry has been materially injured or threatened with material injury due to the subsidized imports. Investigations are to be subjected to tight time limits. Both ITA and IT C determinations are made appealable to the Court of Intern ational Trade (CIT), and subsequently to the Federal Circuit.<sup>43</sup>

> 39 48 Fed. Reg. 9897 (1982)

> 40 ITA, _The People’s Republic of China (PRC) Status as a Non-Market Economy (NME)_ , Memorandum, May 15, 2006, and _Antidumping Duty Investigation of Certain Lined Paper Products from the People’s Republic of China (‘China”) – China’s Status as a Non-Market Economy (“NME”)_ , Memorandum, August 30, 2006.

> 41 GAO, _US-China Trade: Eliminating Non-market Economy Methodology Would Lower Antidumping Duties for Some Chinese Companies_ . GAO-06-231, Report to Congressional Committees, Washington, D.C.: January 2006.

> 42 Jackson, H. John, William J. Davey, and Alan O. Sykes, Jr., supra note 4.

> 43 Ibid.

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