Recent Amendments in US CVD investigations: What changed?

Recent Amendments in US CVD investigations: What changed? Currency Manipulation This month the U.S. Department of Commerce (DoC) published its final rule on the treatment of currency manipulation as an actionable subsidy in countervailing duty (CVD) investigations, which will go into effect on April 6, 2020. It (i) introduces a new definition of specific industry to include companies predominantly international trade oriented, (ii) clarifies the role of the Department of Treasury (DoT) in CVD investigations, (iii) sets out its methodology to calculate the subsidy margin for currency undervaluation. The final rule is available here. The specific industry change was necessary in order to comply with the legal requirement that actionable subsidies must be specific to an industry, in addition to the requirements of being a financial contribution and conferring a benefit. The new rule now allows the DoC to consider firms engaged in international trade as a group for that purpose. Given its expertise on matters of currency, the DoC will rely on the DoT's “evaluation and conclusion as to undervaluation, government action and the bilateral U.S. dollar rate gap during a CVD proceeding.” However, the DoC “will not delegate to Treasury the ultimate determination of whether currency undervaluation involves a countervailable subsidy in a given case.” The undervaluation is measured by taking a reference exchange rate - which can be a real equilibrium exchange rate (REER) or equivalent - and comparing it with the nominal exchange rate used by the companies under investigation. On the subsidy margin calculation, the DoC follows a benefit approach by measuring how much more domestic currency was the investigated company able to obtain from export sales as a result of the undervaluation subsidy. Special and Differential Treatment Also this month, the USTR changed the list of developing countries entitled to special and differential (S&D) treatment in CVD cases, by reclassifying the more advanced among those as developed countries. All countries that satisfied any of the following criteria are no longer eligible to S&D treatment: (1) per capita GNI of $12,975 or above, (2) share of world trade of 0.5% or above, and (3) other factors such as Organization for Economic Co-operation and Development (OECD) membership or application for membership, European Union (EU) membership, and Group of Twenty (G20) membership. This measure directly affects Argentina, Brazil, India and many other countries by lowering the thresholds for de minimis subsidy margins (from 2% to 1%) and negligible volume of imports (from 4% share of total imports individually and 9% collectively to 3% and 7%, respectively) in CVD cases. This change has no impact on CVDs in force, but will affect new investigations and possibly sunset reviews. The text released by the USTR is available here. We do not expect the amendments above to drastically change the Administration’s approach towards Brazilian exporters and their outcomes in U.S. CVD investigations. See also: • U.S. Congress issues report on Brazil and U.S. relations • USTR Issues Report on the WTO Appellate Body • USTR Announces Formation of Bilateral Evaluation and Dispute Resolution Office Pursuant to U.S.-China Phase One Agreement • USTR Revises $7.5 Billion Award Implementation Against EU in Airbus Case • CIT Bars Collection of New 232 Duties on 'Derivatives' of Steel and Aluminum from two Importers. See here and here.