The U.S. Tax Duties Against China Tire Subsidies Ruled Illegal

The U.S. Commerce Department's imposition of duties against China for subsidizing its tire industry was rejected by a U.S. appeals court.

The ruling could hurt American makers of products from steel to paper.

The Court of Appeals for the Federal Circuit in Washington said U.S. law does not permit the Commerce Department to apply what would be called countervailing duties against products from non-
market economies such as China.

In laws passed in 1988 and 1994, "Congress adopted the position that countervailing duty law does not apply to non-market economy countries," Judge Timothy Dyk wrote in the unanimous decision posted on the court's website. "If Commerce believes that the law should be changed, the appropriate approach is to seek legislative change."

A three-judge panel upheld a U.S. Court of International Trade decision that found the action on the Chinese tires was illegal.

In what are called non-
market economies, prices aren't set by the market. So, the United States uses prices in other nations, often India, to help determine when products are "dumped," or sold at a discount to their fair value or cost in the home market.

"I've always felt that if the courts were to ultimately declare that the administration cannot apply the anti-subsidy law to China, Congress will act within about a week to make it clear that the administration can," said David Spooner, a former Commerce official now at the law firm Squire Sanders & Dempsey LLP in Washington.

The decision stems from a case filed by Titan International Inc., the biggest U.S. maker of off-the-road tires, and the AFL-CIO labor federation against imports of tires from China.

The Commerce Department under the Bush administration had reversed course on more than two decades of precedent and allowed both anti-dumping duties and countervailing duties against imports from China.

The court decision essentially "throws out" more than two dozen countervailing duty cases filed at the Commerce Department since 2007, said Daniel Porter, a lawyer at Winston & Strawn LLP in Washington who argued in favor of the Chinese producers.

Anti-dumping duties apply to goods sold overseas at or below the price in the home country. Countervailing duties aim to offset the benefits of government subsidies to industries.

On a separate issue of what they said were new anti-dumping duties by China on imported American-made autos, Sens. Sherrod Brown, D-Ohio, and Rob Portman, R-Ohio, sent a letter to U.S. Trade Representative Ron Kirk asking him to investigate the new tariffs and "to use all available tools to address the issue."

Brown said in a statement: "If China's flagrant currency manipulation and hoarding of rare earth materials wasn't enough to hurt Ohio manufacturers, now comes the news that its government has decided to impose new, unwarranted tariffs on American-made automobiles."

Portman's statement said: "Ohio auto manufacturers should not be subjected to unfair tariffs imposed by China and deserve to compete on a level playing field."

The solar power industry has been among those petitioning for tariffs on Chinese imports. The U.S. International Trade Commission on Dec. 2 took the first step toward imposing added duties on Chinese solar cells, saying subsidies for the products harm equipment makers such as SolarWorld AG.