The procedures applicable in a countervailing duty (CVD) investigation are complex, and strict time limits set out in the statute and regulations must be adhered to. In general, the procedures follow the framework set forth in chapter 2 for both anti-dumping and countervailing duty investigations. A few important differences are highlighted here.

 

Initiation

 

Once it receives a petition, the United States Government must decide whether to initiate the CVD investigation. First, within 20 days the Government must decide whether the petition is in the proper form with the necessary allegations and information. The Commerce Department must also determine that the domestic industry supports a countervailing duty petition before it initiates an investigation.

 

The main difference is that the Commerce Department will not automatically initiate investigations against every programme named in the petition. It is quite common for the Commerce Department to decide there is insufficient evidence that a programme is a subsidy, or that it has in fact been used by any company. If the evidence is insufficient, the Commerce Department will not initiate on that programme. In light of the new WTO standards for the evidence necessary to initiate an investigation, the Commerce Department has become somewhat more careful.

 

There are no immediate business implications associated with the initiation. Imports can continue without additional deposits or duties. Formal initiation should, however, serve to warn United States importers and overseas exporters of possible CVD duties on future imports of subject merchandise into the United States.

 

Preliminary injury determination

 

Forty-five days after the petition is filed, the Commission must make a preliminary determination of whether there is a reasonable indication that causal injury exists. If there is such a reasonable indication, the case continues. The finding has no direct business implication. It simply means the Commission has preliminarily determined that there is a reasonable indication' of injury. If there is a negative determination, however, the case ends.

 

Questionnaires

 

The Commerce Department sends a questionnaire to the foreign government and exporters seeking information regarding subsidization. Unlike anti-dumping cases, in which the foreign company controls its own destiny, in countervailing duty investigations the foreign government and the agencies that administer the programmes in question play an equally important role in the Commerce Department questionnaire process.

 

The questionnaires request detailed information about the various types of subsidies provided by the government and utilized by the exporters. Although questionnaires vary by country and by industry, they often request detailed information about a range of potentially countervailable programmes, including: tax incentives; duty exemptions; corporate income tax exemptions; tax deductions and value-added tax; various types of subsidy programmes existing in the home market; debt restructuring activities of specific companies; loans and loan guarantees from banks owned, controlled or influenced by the central government; export promotion programmes; other government-sponsored financing programmes; and any specific subsidy programmes known to be provided in the country involved in the proceeding. This process moves very quickly. Responses are due within 30-45 days, with little flexibility on extensions. Since the timeline for countervailing duty investigations is shorter than that for anti-dumping investigations, the Commerce Department feels more pressure to move the investigation quickly.

 

Commerce Department preliminary determination

 

Eighty-five days after the petition is filed the Commerce Department must make a preliminary determination of whether there is a reasonable indication that a subsidy exists and, if so, the estimated value of the subsidy. The decision is based upon the questionnaire responses of the foreign government and the exporters. Importantly, this is the first decision that directly affects importers. If the Commerce Department makes an affirmative determination, then Customs will suspend liquidation on goods entered on or after publication of preliminary results, and the importer will be required to post a bond equal to the estimated subsidy on all entries made after the publication of the preliminary determination.

 

Verification

 

The Commerce Department sends a team to the foreign country to verify the information in the response. The team reviews the books of the companies involved and the foreign government's records to ensure accuracy. If a response is incomplete or its accuracy cannot be verified, the Commerce Department will calculate countervailing duties based on the facts available, which normally means accepting the petitioner's allegations and results in extremely high countervailing duties.

 

Verification is discussed in depth in chapter 11. Those general principles apply here, but in CVD investigations the involvement of the government raises some special problems. First, the foreign government is sometimes less committed to the defence than the exporters involved. Although the case may be a major issue for the exporters, the foreign government officials usually have numerous other jobs, and simply cannot devote as much time to the investigation. It is particularly important to make sure the team handling the case at the various government agencies understands the magnitude of the task and is committed to spending the time necessary to succeed.

 

Second, the foreign government often has difficult problems with national laws involving the secrecy of certain types of information. For example, central bank officials are often reluctant or unable to disclose certain types of company-specific information. These secrecy laws can pose real problems for investigations. It is usually possible to work something out, but it can take time, and parties to a countervailing duty investigation are well advised to begin this process early.

 

Final Commerce Department subsidy determination

 

Seventy-five days after its preliminary determination, the Commerce Department makes a final determination of subsidization. This decision is based upon the verified information, public hearing, and briefs submitted by counsel involved in the case. The Commerce Department announces the final CVD margin. If there is no subsidy (i.e. in the aggregate less than 1.0% for developed countries or 2.0% for developing countries), the investigation ends. Importers are now required to make cash deposits equal to the countervailing duties on entries made on or after the date of the order. The new cash deposit rate establishes the maximum potential liability on these entries.

 

If the Commerce Department final determination is negative, the case ends. There is no liability, all cash deposited is refunded, with interest, and any bonds necessary as a result of the preliminary determination are terminated.

 

There is a special rule for countervailing duty cases. Since there is an upper limit on the time for which provisional measures can be imposed under the WTO rules, an extended Commerce Department final determination in a countervailing duty case creates a problem, since the preliminary determination comes so early and an extended final goes beyond the 120 days for provisional measures allowed under Article 17.4 of the Agreement on Subsidies and Countervailing Measures. United States law deals with this situation by allowing the liability for duties to lapse during the gap period, and then having liability resume once the final decision is made. This rule is not triggered very often, but when it applies it can create a significant commercial benefit for those importers liable for duties.

 

Suspension agreement

 

It is possible to enter into a settlement with the United States Government known as a suspension agreement. Under such an agreement, the foreign government and the exporters undertake certain commitments. In return, the United States Government suspends its investigation and will not require deposits or collection of countervailing duties. Although this can be a worthwhile solution, the United States Government rarely allows suspension agreements. Recent United States court decisions have further limited the viability of suspension agreements as an option, finding that such an agreement must be in the demonstrated interest of the petitioning industry. Since petitioners typically oppose suspension agreements as against their interest, the chances of securing a suspension agreement are very small. Suspension agreements are discussed in more detail under 'Settlement of anti-dumping and countervailing duty cases' in chapter 15.

 

International Trade Commission final injury determination

 

Forty-five days after an affirmative Commerce Department final decision, the Commission must make a final injury determination. If this decision is affirmative, the United States Government will issue an order and require cash deposits equal to the estimated net subsidy upon entry of the subject merchandise. If the decision is negative, no duties can be collected even if subsidies were found to exist.

 

This Commission decision must meet this deadline. If both countervailing duty and anti-dumping duty investigations are proceeding simultaneously, the deadline in the countervailing duty case hits first. Unless the domestic parties agree to align the two cases, and thus push back the CVD deadline, the CVD drives the timing of the Commission investigation and decision. This shorter time frame can pose real problems for the defence effort, if the parties have not anticipated it.

 

Countervailing duty order

 

The final phase of the proceeding is the publication of the final CVD order. Subject merchandise entered on or after publication of the CVD order is subject to a cash deposit equal to the estimated subsidy. Typically, the amount of the cash deposit is equal to the calculated CVD rate multiplied by the entered value of the merchandise.

 

The cash deposit is just an estimate. The final CVD duty assessed is ultimately calculated and levied only after participation in an annual administrative review. There is theoretically no limit to the importer's liability on such entries as a result of subsequent reviews. Importers receive a refund with interest for the difference if the review rate is less than the deposit rate, however.

 

Court appeals

 

Commission and Commerce Department decisions in CVD investigations and reviews can be appealed to the United States Court of International Trade. Subsequent appeals to the United States Court of Appeals for the Federal Circuit and the United States Supreme Court are possible. Judicial review is discussed in more detail under 'Review in United States courts' in chapter 17.

 

Administrative review

 

During the anniversary month of the underlying order, any interested party can request an administrative review of the previous period. If no party requests a review, the entries during the past period are liquidated at the bond rate or cash deposit rate. If a review is requested, the Commerce Department conducts an investigation into the value of the subsidy during the review period.

 

An administrative review has two purposes. The first is to determine the exact amount of the subsidy provided during the review period. The second is to establish a new CVD deposit rate that will be applied against all imports of subject merchandise in the future. Calculation of the new deposit rate is made in the manner discussed above, using. the appropriate numerator and denominator for the review period.

 

Such annual CVD administrative reviews can be conducted every year until the countervailing duty order is revoked.

 

Sunset reviews

 

Five years after a CVD order is issued, the Commission and Commerce Department must determine whether revocation of the order would likely lead to continuation or recurrence of a countervailable subsidy and of material injury. If the Commission or the Commerce Department make negative determinations, the order is revoked. Both agencies must make affirmative findings for the order to be continued. Sunset reviews are discussed in more detail under 'Sunset reviews' in chapter 16.

 

In making its sunset determination, the Commerce Department will not consider company or industry-specific renunciations of countervailable subsidies, by themselves, as indication that continuation or recurrence is unlikely.

 

Source: Business Guide to Trade Remedies in the United States: Anti-dumping, countervailing and safeguards legislation practices and procedures