The U.S. Commerce Department’s two sets of duties on off-road tires imported from China was rejected by a trade court in a decision that may be a setback to American makers of steel, paper and pipes.

The U.S. Court of International Trade ruled that the Commerce Department’s use of both antidumping and countervailing duties against those imports results in double counting because the department considers China a non-market economy.

That means prices aren’t set by the market, so the U.S. uses prices in other countries, often India, to determine dumping rates. This often results in antidumping duties on China that are higher than they are for products from other countries, such as France or Canada, according to the General Accountability Office.

The department’s decisions “clearly demonstrate its inability, at this time, to use improved methodologies to determine whether, and to what degree, double counting occurs,” Judge Jane Restani wrote in an Aug. 4 decision.

The decision concerns a case brought by Titan International Inc., the biggest U.S. maker of off-road tires, and the AFL-CIO labor federation against imports of the tires from China. The Commerce Department under the Bush administration had reversed course on more than two decades of precedent and allowed both antidumping duties and countervailing duties against imports from China.

Antidumping duties apply to goods marketed overseas at or below the price they are sold for in the home country. Countervailing duties aim to offset the benefits of government subsidies.

GPX, Tianjin

The decision to levy both types of duties against Chinese products provoked protests from officials in Beijing, and China filed a complaint at the World Trade Organization in 2008 about that practice.

Because of the way antidumping duties are levied against countries deemed not to have a free market that sets prices, those subsidies are already figured into the duties imposed under the dumping rules, lawyers for GPX International Tire Corp. and Tianjin United Tire & Rubber International argued in court.

More than two dozen cases involving both dumping and countervailing duties have been imposed or proposed against imports from China, and will be affected by this decision, said Daniel Porter, a lawyer at Winston & Strawn LLP in Washington who argued in favor of the Chinese producers.

The decision “casts into doubt,” whether the Commerce Department can continue the practice, he said.

The decision can be appealed, and Congress has considered legislation that would explicitly allow the practice.

“The issue generally is huge, but I wouldn’t make too much of an issue about the case at hand,” said David Spooner, a former Commerce official who is now at Squire Sanders & Dempsey LLP in Washington. If the case gets upheld “I am confident Congress would step in, in a week and make it clear Commerce has the ability” to impose both sets of tariffs, he said.

Francisco Sanchez, the undersecretary of Commerce who administers these programs, said today that the department is reviewing the decision, and declined further comment.

By Mark Drajem - Aug 6, 2010 5:31 AM GMT+0700

Source: www.bloomberg.com