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Will Trump-era CVD Currency Undervaluation Rule Hold up Under Biden?


A Trump-era rule allowing the Commerce Department to treat currency undervaluation as a subsidy in countervailing duty proceedings leaves the U.S. open to a deluge of petitions -- potentially against some U.S. allies -- staked on weak claims, Brady Mills tells Inside U.S. Trade.

Mills said in an interview last week that the new administration’s view of the rule remains unclear, but contended an affirmative final ruling by Commerce invoking the modified regulation could set off a challenge at the U.S. Court of International Trade to the agency’s authority to promulgate the rule. Mills represents Vietnam and China in CVD proceedings in which Commerce has made preliminary determinations that the countries’ currency practices constitute unfair subsidization.

Last February, Commerce published a new rule modifying regulations for countervailing duty proceedings to count currency undervaluation as a form of subsidy. The rule lays out changes that “clarify how Commerce will determine the existence of a benefit when examining a subsidy resulting from currency undervaluation and clarify that companies in the traded goods sector of the economy can constitute a group of enterprises for purposes of determining whether a subsidy is specific.” Past efforts to legislate such a rule have failed in Congress.

Mills said an affirmative decision from Commerce in one of the cases could signal to U.S. industry “there’s sort of blood in the water” -- emboldening companies to add currency undervaluation to their claims in CVD petitions.

Mills went on to discuss the potential for increased litigation at the U.S. Court of International Trade, the challenges in allowing Commerce to calculate precise subsidies based on currency valuation, and the distinctions between Commerce’s analysis of currency valuation and the Treasury Department’s determinations of currency manipulation.

Because currency matters are “very broad political issues,” countries might prefer to settle such disputes at the World Trade Organization. But such a route is unlikely so long as the organization does not have a working Appellate Body.

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