In an historic reversal of policy, the US Department of Commerce (DOC) is moving ahead with plans to invoke countervailing duties (CVD) on Chinese imports that it believes are being illegally subsidized. It is the first time in 23 years that the US government has applied this anti-subsidy law against a nonmarket economy’s products.

The case involves a Dayton, Ohio-based glossy paper manufacturer NewPage Corp. that the United States believes has been harmed by Chinese exports, which the government contends were subsidized by 10.90 percent to 20.35 percent. While the action is being taken in the coated paper case, US textile representatives in Washington believe the action is a breakthrough, and similar action could be taken against illegally subsidized apparel imports.

The DOC has the legal authority to apply the CVD law to non-market economies, and it is legal under World Trade Organization regulations, but the United States has been reluctant to use CVDs in the past. In announcing the change, DOC Secretary Carlos M. Gutierrez said it is necessary because of the changing nature of the Chinese economy.

“The administration has aggressively enforced our anti-dumping laws to combat unfair Chinese trade,” Gutierrez said. “China’s economy has developed to the point that we can add another trade remedy tool such as the countervailing duty law. The China trade of today is not the China trade of years ago. Just as China has evolved, so has the range of our tools to make sure Americans are treated fairly.”

He said the administration will continue to “vigorously enforce” US trade laws with respect to China, and he pointed out that since 2001, the administration has issued 31 anti-dumping orders against China compared to the 24 orders put into place between 1993 and 2000.

The DOC is scheduled to make its final determination in the coated paper case on or about June 13, although the deadline could be postponed until mid-October.