[Federal Register Volume 85, Number 23 (Tuesday, February 4, 2020)]
[Rules and Regulations]
[Pages 6031-6044]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-02097]
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DEPARTMENT OF COMMERCE
International Trade Administration
19 CFR Part 351
[Docket No. 200128-0035]
RIN 0625-AB16
Modification of Regulations Regarding Benefit and Specificity in
Countervailing Duty Proceedings
AGENCY: Enforcement and Compliance, International Trade Administration,
Department of Commerce.
ACTION: Final rule.
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SUMMARY: The Department of Commerce (Commerce) is modifying two
regulations pertaining to the determination of benefit and specificity
in countervailing duty proceedings. These modifications 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.
DATES:
Effective date: April 6, 2020.
Applicability date: This rule will apply to all segments of
proceedings initiated on or after April 6, 2020. FOR
FOR FURTHER INFORMATION CONTACT: Gregory Campbell at (202) 482-2239 or
Matthew Walden at (202) 482-2963.
SUPPLEMENTARY INFORMATION:
Background
On May 28, 2019, we published the Modification of Regulations
Regarding Benefit and Specificity in Countervailing Duty Proceedings;
Proposed Rule and Request for Comments.\1\ In the proposed rule, we
explained that neither the Tariff Act of 1930, as amended (the Act) nor
Commerce's existing countervailing duty (CVD) regulations specify how
to determine the existence of a benefit or specificity when Commerce is
examining a potential subsidy resulting from the exchange of currency
under a unified exchange rate system. We initiated this rulemaking
process to fill that gap.
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\1\ 84 FR 24406 (proposed rule).
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We received numerous comments on the proposed rule, and we address
those comments below. The proposed rule, comments received, and this
final rule can be accessed using the Federal eRulemaking portal at
http://www.regulations.gov under Docket Number ITA-2019-0002. After
analyzing and carefully considering all of the comments that Commerce
received, we have adopted the modifications described below and amended
Commerce's regulations accordingly.
Explanation of Regulatory Provisions and Final Modifications
Commerce is modifying 19 CFR 351.502, which addresses specificity
of domestic subsidies, and is adding new 19 CFR 351.528, to govern the
determinations of undervaluation and benefit when examining potential
subsidies resulting from the exchange of an undervalued currency. The
modification to 19 CFR 351.502 adds new paragraph (c), which explains
that enterprises that buy or sell goods internationally (i.e.,
enterprises in the traded goods sector of an economy) can comprise a
``group'' of enterprises for specificity purposes. In essence, this
modification fills a gap in section 771(5A)(D) of the Act, which states
that a subsidy can be specific if provided to ``a group'' of
enterprises or industries, but does not define the word ``group.''
Existing 19 CFR 351.502 makes clear that in determining whether there
is a ``group,'' Commerce is not required to determine whether there are
shared characteristics among the enterprises or industries that are
eligible for, or actually receive, the subsidy. Moreover, Commerce's
Policy Bulletin 10.1, issued in 2010, clarifies that state-owned
enterprises can constitute a ``group'' of enterprises within the
meaning of section 771(5A)(D) of the Act.\2\ The addition of 19 CFR
351.502(c) is intended to provide further clarification, this time for
the traded goods sector, regarding the entities that may comprise a
``group.''
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\2\ See Import Administration Policy Bulletin 10.1,
``Specificity of Subsidies Provided to State-owned Enterprises,''
2010, available at https://enforcement.trade.gov/policy/PB-10.1.pdf.
Commerce has also addressed the issue of the definition of ``group''
in certain CVD proceedings. For example, we found foreign-invested
enterprises to comprise a ``group'' under the Act. See, e.g., Citric
Acid and Certain Citrate Salts From the People's Republic of China:
Final Affirmative Countervailing Duty Determination, 74 FR 16836
(April 13, 2009), and accompanying Issues and Decision Memorandum at
Comment 16.
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New 19 CFR 351.528 provides guidance for Commerce's determinations
of undervaluation and benefit when examining a potential subsidy
resulting from the exchange of an undervalued currency. Paragraph
(a)(1) specifies that Commerce normally will consider whether a benefit
is conferred from the exchange of U.S. dollars for the currency of the
country under review or investigation only if that country's currency
is undervalued during the relevant period. In other words, a
determination of undervaluation is a prerequisite to proceeding to an
analysis of whether a benefit is conferred. To determine whether there
is undervaluation, Commerce normally will consider the gap between the
country's real effective exchange rate (REER), on the one hand, and the
REER that achieves an external balance over the medium term that
reflects appropriate policies--otherwise known as the equilibrium
REER--on the other hand. Paragraph (a)(2) specifies that Commerce
normally will make an affirmative finding of currency undervaluation
only if there has been government action on the exchange rate that
contributes to an undervaluation of the currency. In assessing whether
there has been such government action, Commerce will not normally
include monetary and related credit policy of an independent central
bank or monetary authority. In making its assessment of government
action on the exchange rate, Commerce may consider the relevant
government's degree of transparency regarding actions that could alter
the exchange rate.
Paragraph (b) of Sec. 351.528 states that once Commerce has made
an affirmative finding of currency undervaluation, we normally will
determine the existence of a benefit after examining the difference
between (i) the nominal, bilateral U.S. dollar rate consistent with the
equilibrium REER, and (ii) the actual nominal, bilateral dollar rate
during the relevant time period, taking into account any information
regarding the impact of government action on the exchange rate. If
there is a difference between (i) and (ii), then the amount of the
benefit normally will be determined by comparing the amount of the
domestic currency \3\ that the recipient received to the amount it
would have received absent the difference between (i) and (ii). In
short, under paragraph (b), the benefit normally will be equal to the
[[Page 6032]]
extra amount of domestic currency received by a firm because of the
undervaluation.
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\3\ The term ``domestic currency,'' as used throughout this
notice, means the currency of the country under investigation or
review.
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Information regarding the amount of domestic currency that the
recipient actually received from an exchange of U.S. dollars normally
will come from the recipient itself, through Commerce's normal
questionnaire process. In this sense, a currency-related subsidy does
not differ from the other types of subsidies that Commerce normally
investigates. However, paragraph (c) of new 19 CFR 351.528 clarifies
that in determining undervaluation (including government action) and
the bilateral U.S. dollar rate gap, Commerce will request that the
Department of the Treasury (Treasury) provide its evaluation and
conclusion regarding these issues during a CVD proceeding.
Response to Comments on the Proposed Rule
Commerce received 47 comments on the proposed rule. The majority of
these comments expressed support for a regulation that addresses
subsidies resulting from currency undervaluation.
As a result of the comments, we made changes (primarily additions)
to the regulatory text, which are summarized in the ``Changes from the
Proposed Rule'' section below. Many of these additions to the
regulatory text--for example, the additions describing in greater
detail the steps of the benefit determination and the additions
regarding the role of government action on the exchange rate--are
consistent with how we described the rule in the preamble to the
proposed rule. In light of the comments received, we have decided to
include greater detail in the regulatory text itself, rather than in
the preamble alone. Other changes to the regulatory text--for example,
the technical changes in 19 CFR 351.502--respond to comments received.
Below is a summary of the comments, grouped by issue, followed by
Commerce's response.
1. Whether the CVD Law is an Appropriate Tool To Remedy Subsidies From
Currency Undervaluation
While many of the comments Commerce received on the proposed rule
were focused on technical or legal aspects of the methodologies
described, several commenters also opined more generally on whether it
is appropriate and effective, as a policy matter, for Commerce to
involve itself in an area of analysis in which other U.S. government
agencies and international institutions have historically been viewed
as having primary jurisdiction and competence. These commenters argued
that the CVD law is not the appropriate vehicle for remedying the
effects of currency undervaluation. Some of these commenters presumed
that Commerce would impose a single, across-the-board duty that (i)
assumes full exchange rate pass through, (ii) is applied to all
exporters and all U.S. imports of the subject merchandise, and (iii) is
totally divorced from ``on-the-ground,'' company-specific circumstances
and experience.
Response: Congress gave Commerce the authority to remedy injurious
subsidies, regardless of what form they take. The CVD law gives U.S.
domestic producers the right to petition Commerce to investigate
allegedly injurious foreign subsidies, and it requires Commerce to
conduct such investigations (provided that the applicable requirements
for initiation are met). This is true even with respect to issues in
which other U.S. Government agencies or international bodies may have
an overlapping interest. For example, if the domestic industry
petitions Commerce alleging that a foreign agricultural product or a
foreign energy resource is subsidized and injures a domestic industry,
Commerce generally must investigate the allegations, even though other
U.S. government agencies have expertise with respect to such products.
Commerce routinely investigates programs involving, e.g., export
credits and equity infusions, which are potential forms of
subsidization that may also be practices monitored by other
governmental and international entities. So too with currency: If the
domestic industry petitions Commerce alleging that a foreign currency
is a mechanism for subsidizing an imported product, Commerce generally
must investigate the allegations, despite the fact that other agencies
have an interest in U.S. policy towards foreign currencies. This is
true even before the adoption of the rule in this notice.
This interpretation of Commerce's obligations is consistent with
the intent behind the Trade Agreements Act of 1979, which transferred
the authority for administering CVD investigations from Treasury to
Commerce. The House Ways and Means Committee explained that this shift:
``will give these functions high priority within a Department whose
principal mission is trade. In the past, agencies have arbitrarily set
a course of administration of these statutes contrary to congressional
intent.'' Thus, Congress has already decided that because Commerce's
principal mission is trade, it is Commerce that should administer the
CVD laws with respect to foreign imports and foreign subsidies of all
types.
However, Commerce cannot administer the CVD law to counteract
currency undervaluation per se. Contrary to some of the commenters, and
as these regulatory modifications make clear, Commerce did not propose
an across-the-board CVD in the amount of any currency undervaluation
found to exist. The CVD law can only counteract countervailable
subsidies--i.e., financial contributions that confer a benefit and meet
the specificity requirement of the Act--provided with respect to
specifically defined categories of imported goods that injure or
threaten injury to a U.S. industry.
To do this, Commerce will follow a two-step approach. First, we
will conduct a REER-based analysis to determine if there is potentially
actionable currency undervaluation. We will normally not find such
currency undervaluation unless there has been government action on the
exchange rate that contributes to the undervaluation. Such government
action will not normally include monetary and related credit policy of
an independent central bank or monetary authority. The second step will
be an analysis of ``on-the-ground,'' firm-specific circumstances and
experience to determine the extent of any countervailable benefit,
after taking into account the U.S. dollar rate gap with respect to the
undervalued currency. This approach will ensure that Commerce's
analysis of currency undervaluation adheres to the principles and
conforms to the requirements of the U.S. CVD law, and that it fits
squarely within the financial contribution-benefit-specificity
framework. Thus, the benefit calculation for any exchange or transfer
involving an undervalued currency will follow the same principles as
for any other countervailable subsidy. It will generally be based on
the firm-specific value of the benefit, i.e., the extra domestic
currency units received as a result of the undervaluation, conferred on
the firm.
Commerce recognizes that implementation will raise a variety of
issues, but these should be addressed incrementally and over time,
through Commerce's experience in individual cases--which are informed
by arguments put forward by the interested parties as well as the
underlying administrative record.
This approach is consistent both with Commerce's practice in other
areas, as well as general principles of administrative law. In SEC v.
Chenery Corporation, the Supreme Court recognized that rulemaking is
often
[[Page 6033]]
essential to an agency's processes, but then also explained, ``the
agency may not have had sufficient experience with a particular problem
to warrant rigidifying its tentative judgment into a hard and fast
rule.'' \4\ In such situations, ``the agency must retain power to deal
with the problems on a case-to-case basis if the administrative process
is to be effective. There is thus a very definite place for the case-
by-case evolution of statutory standards.'' \5\ The Supreme Court
explained that ``the choice made between proceeding by general rule or
by individual, ad hoc litigation is one that lies primarily in the
informed discretion of the administrative agency.\6\
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\4\ SEC v. Chenery Corp., 332 U.S. 194, 202 (1947).
\5\ Id. at 203.
\6\ Id.
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Likewise, the Court of International Trade (CIT) has recognized
that ``[a]bsent statutory restraints, agencies are generally free to
develop policy through either rulemaking or adjudication.'' \7\ In
Apex, the CIT found that Commerce's differential pricing methodology in
antidumping duty proceedings was not required to be implemented through
rulemaking.\8\
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\7\ Apex Frozen Foods Private Ltd. v. United States, 144 F.
Supp. 2d 1308, 1319 (CIT 2016).
\8\ See id. at 1319-22.
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In fact, when Commerce promulgated its current CVD regulations in
1998, we repeatedly noted that it was not appropriate to set forth
precise rules on every detail of CVD methodology for every type of
subsidy.\9\ Thus we stated that if Commerce at that time had little or
no experience with a particular issue, we would not issue a regulation
on that issue, but rather would resolve it on a case-by-case basis or
further refine our treatment of it in the future.\10\
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\9\ See Countervailing Duties; Final Rule, 63 FR 65348 (November
25, 1998) (1998 Final Rule).
\10\ See, e.g., id. at 65378, 65394, 65397.
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Therefore, these regulatory modifications do not resolve all
potential complex issues that will arise. That these case issues can
only be resolved over time is true not just for currency
undervaluation, but for any new type of subsidy Commerce investigates.
Commerce's analytical approach, as structured in these regulatory
modifications, will ensure that CVD actions against subsidies resulting
from currency undervaluation remain measured, deliberate, and
predictable.
2. Statutory Authority To Promulgate This Rule
One commenter asserted that Commerce has the statutory authority to
evaluate currency undervaluation within the CVD law. On the other hand,
two commenters argued that Commerce's proposed rule is unlawful because
Congress failed to approve legislation that would specifically deem
currency undervaluation as a countervailable subsidy. Therefore, these
commenters claimed that Commerce lacks the statutory authority to alter
its approach without Congressional change to the Act. Further, one
commenter argued that Commerce has consistently held that ``an
allegedly undervalued unified exchange rate does not constitute a
countervailable subsidy,'' citing to Carbon Steel Wire Rod from Poland:
Preliminary Negative Countervailing Duty Determination, 49 FR 6768,
6771 (February 23, 1984). This commenter argued that, in light of
Commerce's alleged practice and Congress's subsequent amendments to the
Act that failed to establish that Commerce can countervail currency
undervaluation, Congress, in effect, ratified Commerce's alleged
practice. Accordingly, citing GPX,\11\ this commenter argues that this
Congressional acquiescence in Commerce's longstanding practice
precludes Commerce from unilaterally altering its approach.
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\11\ GPX Int'l Tire Corp. v. United States, 666 F.3d 732, 740
(Fed. Cir. 2011).
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Response: To the extent that a currency exchange involving an
undervalued currency meets the statutory definition of a
countervailable subsidy, Commerce has the authority to administer the
CVD law, countervail such a program and write regulations to effectuate
the statute.
First, contrary to the allegation of one commenter, Commerce does
not have an established practice that it does not find currency
undervaluation to be countervailable. Although this commenter points to
the preliminary determination of Carbon Steel Wire Rod from Poland to
indicate such a practice, Commerce's finding in that 1984 investigation
dealt with multiple currency exchange rates, not the type of unified
exchange rate system at issue in this regulation. Therefore, Commerce's
statement that ``an allegedly undervalued unified exchange rate does
not constitute a countervailable subsidy'' can be viewed as dicta given
that a unified exchange rate was not the program at issue in that
investigation. Moreover, in the final determination of Carbon Steel
Wire Rod from Poland, Commerce ultimately determined that it cannot
apply the CVD law to non-market economies (NMEs) such as Poland (at
that time), rendering moot Commerce's initial statements in the
preliminary determination.\12\
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\12\ Carbon Steel Wire Rod from Poland; Final Negative
Countervailing Duty Determination, 29 FR 19374, 19375 (May 7, 1984).
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Further, contrary to this commenter's claims that this alleged
``practice'' was further upheld in subsequent determinations by
Commerce not to initiate on currency undervaluation allegations,
Commerce determined not to initiate on subsequent currency
undervaluation subsidy allegations because we determined that the
petitioners' allegations in those particular proceedings were
unsupported by reasonably available information regarding the statutory
elements for imposition of a CVD.\13\ Commerce's determinations not to
initiate were not based on any practice regarding currency-related
subsidies.
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\13\ See, e.g., Certain Coated Paper Suitable for High-Quality
Print Graphics Using Sheet-Fed Presses from the People's Republic of
China: Final Affirmative Countervailing Duty Determination, 75 FR
59213 (Sept. 27, 2010), and accompanying Issues and Decision
Memorandum at cmts. 5-7; Aluminum Extrusions From the People's
Republic of China: Preliminary Affirmative Countervailing Duty
Determination, 75 FR 54302 (September 7, 2010) (unchanged in
Aluminum Extrusions From the People's Republic of China: Final
Affirmative Countervailing Duty Determination, 76 FR 18521 (April 4,
2011)); and Notice of Initiation of Countervailing Duty
Investigations: Coated Free Sheet Paper from the People's Republic
of China, Indonesia, and the Republic of Korea, 71 FR 68546
(November 27, 2006).
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Additionally, since the publication of Carbon Steel Wire Rod from
Poland in 1984, Commerce's CVD law has undergone substantial changes,
most significantly in the Uruguay Round Agreements Act.\14\ For
example, the law underwent a significant change that replaced the term
``bounty or grant'' with the current statutory definition of a
``subsidy'' as being a financial contribution that confers a
benefit.\15\ Thus, given the substantial changes to the CVD law since
1984, Commerce's statements regarding subsidy programs in 1984 are not
binding on its current application of the law.
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\14\ See, e.g., Uruguay Round Agreements Act of 1994, Pub. L.
103-465, 108 Stat. 4809 (1994).
\15\ Id.
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Moreover, even if Commerce's alleged practice was binding--despite
its consistent subsequent practice indicating otherwise--Commerce is
always free to change its practice, provided that it explains its
decision, which we have done here.
Contrary to one commenter's reliance on GPX to assert that
Congressional acquiescence in Commerce's longstanding practice
precludes us from unilaterally altering our approach, the GPX case is
distinguishable.
[[Page 6034]]
In GPX, the Federal Circuit determined that because Commerce had
previously interpreted the Act such that CVDs could not be assessed on
imports from NMEs and, because Congress had subsequently amended the
Act without disturbing Commerce's interpretation, Congress had, in
effect, ratified the agency's interpretation of the statute.\16\ In
evaluating whether Commerce had interpreted the statute to determine
CVDs could not be assessed on imports from NMEs, the court looked to
prior agency briefs that defended its interpretation of the statute,
Congressional rejection of provisions to amend the law to include
subsidies in NMEs as countervailable, and Congressional testimony by
Commerce asserting that CVDs cannot be assessed on NMEs.\17\ Further,
the court looked to a past Federal Circuit case \18\ which upheld
Commerce's interpretation of the Act that CVDs could not be assessed on
imports from NMEs.\19\
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\16\ GPX Int'l Tire Corp., 666 F.3d at 737-45.
\17\ Id. at 737-740.
\18\ Georgetown Steel Corp. v. United States, 801 F.2d 1308
(Fed. Cir. 1986).
\19\ GPX, 666 F.3d at 741-745.
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Contrary to the situation in GPX, Commerce does not have a practice
that subsidies related to currency undervaluation are not
countervailable, and there certainly has been no Federal Circuit case
affirming that alleged ``practice,'' as there had been prior to the GPX
decision. Rather, Commerce in the past did not initiate on currency
undervaluation allegations because the petitioners' allegations in
those particular proceedings were unsupported. Finally, contrary to
these commenters' arguments, the Supreme Court has stated that ``failed
legislative proposals are ```a particularly dangerous ground on which
to rest an interpretation of a prior statute.' '' \20\ Therefore, we
disagree that Commerce does not have statutory authority to promulgate
this final rule.
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\20\ Central Bank, N.A. v. First Interstate Bank, N.A., 511 U.S.
164, 187 (1994) (quoting Pension Benefit Guaranty Corp. v. LTV
Corp., 496 U.S. 633, 650 (1990)).
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3. Financial Contribution
Several commenters argued that currency undervaluation and
exchanges of currency do not constitute financial contributions under
either section 771(5)(D) of the Act or Article 1.1(a)(1) of the WTO
Agreement on Subsidies and Countervailing Measures (SCM Agreement).
They argued that an exchange of currency is neither a ``direct transfer
of funds,'' as indicated in the proposed rule, nor any other type of
listed financial contribution. One commenter argued that the conversion
of one currency into another is a purchase and sale of items of
equivalent value and also that the sale of something to the
government--unless it is the sale of a ``good,'' which currency is
not--is not a financial contribution. This commenter also noted that
when an exporter earns foreign currency on an export sale, it might
never convert that foreign currency into domestic currency. According
to this commenter, even when the exporter does convert that foreign
currency, it may be impossible to link the currency exchange back to
the export sale.
Other commenters urged Commerce to take a broad view of the types
of entities that can constitute ``authorities'' capable of providing
financial contributions within the meaning of section 771(5)(B) of the
Act. Some commenters also urged Commerce to take a broad view of the
``entrustment or direction'' standard in section 771(5)(B)(iii) of the
Act during investigations of currency-related subsidies. They argued
that there may be a large variety of government actions that amount to
entrustment or direction when a government undervalues its currency and
that an express government mandate that banks purchase foreign currency
is not a prerequisite to a finding of entrustment or direction.
Response: These regulatory modifications do not address financial
contribution under section 771(5)(B) and section 771(5)(D) of the Act.
In fact, none of Commerce's existing CVD regulations directly address
financial contribution. Accordingly, we do not consider it necessary to
respond in detail to these comments, many of which are more
appropriately made in the context of a particular CVD proceeding than
in this rulemaking process.
As we stated in the proposed rule, ``[t]he receipt of domestic
currency from an authority (or an entity entrusted or directed by an
authority) in exchange for U.S. dollars could constitute the financial
contribution under section 771(5)(D) of the Act.'' \21\ We maintain
this view, but of course any such finding will depend upon the facts on
the record of the proceeding. We disagree that an exchange of currency
can never be a ``direct transfer of funds'' within the meaning of
section 771(5)(D)(i) of the Act. The word ``transfer'' suggests a
conveyance, passing or exchange of something from one person to
another. The word ``funds'' suggests money or some monetary resource.
Further, contrary to one commenter, we disagree that the question of
whether ``equivalent value'' was exchanged is relevant to a financial
contribution analysis. If anything, this relates to the determination
of benefit.
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\21\ Proposed Rule, 84 FR at 24408.
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With respect to the commenters that raised issues regarding
interpretations of the statutory terms ``authority'' and ``entrusts or
directs,'' we find that these issues are more appropriately raised in
the context of an actual CVD proceeding. The issue of whether a
provider of a financial contribution is an authority arises frequently
in our CVD proceedings, and our practice is well-developed and known by
interested parties. With respect to the ``entrusts or directs''
language in section 771(5)(B)(iii) of the Act, we explained in the 1998
Final Rule that ``we do not believe it is appropriate to develop a
precise definition of the phrase for purposes of these regulations''
and that it was not necessary to provide an ``illustrative list'' of
actions that could constitute entrustment or direction.\22\ At the same
time, we explained that we would examine entrustment or direction on a
case-by-case basis, that we would ``enforce this provision
vigorously,'' and that the statutory language could encompass a ``broad
range of meanings.'' \23\ We reiterate these points here.
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\22\ See 1998 Final Rule, 63 FR at 65349.
\23\ See id., 63 FR at 65349, 65351.
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4. Determination of Undervaluation
Several commenters claimed the proposed rule needs to have more
objective and clear criteria. Some commenters were in support of the
proposed rule but advocated for a more clear and concise decision-
making process, including a predetermined set of objective criteria,
for determining if a currency is manipulated to avoid uncertainty and
charges of arbitrariness. Other commenters argued that since there is
no one agreed-upon methodology for calculating currency undervaluation,
any such estimate would unavoidably be subjective. One such comment
claimed Commerce's proposed methodology is too broad to be understood,
properly applied and transparent, and is therefore arbitrary and
unenforceable. According to the commenter, although Commerce claimed
that ``[i]n determining whether there has been government action on the
exchange rate that undervalues the currency, [it does] not intend in
the normal course to include monetary and related credit policy of an
independent central bank or monetary authority . . .,'' it did not
define ``the normal
[[Page 6035]]
course.'' This, the commenter claimed, opens the door to a wide range
of actions and could lead to unpredictability. Similarly, the comment
expressed concern that Commerce does not define ``external balance''
that an equilibrium REER would achieve or ``the relevant time period''
that Commerce would consider.
Another commenter argued that even if Commerce used the
International Monetary Fund's (IMF)'s approach for estimating the
equilibrium REER, since the IMF utilizes a wide range of methods to
make its determinations, Commerce should not use the IMF's estimation
of the equilibrium REER as a stand-alone determination but rather as
one component of its overall assessment. This commenter also pointed
out a discrepancy related to the second step of Commerce's methodology:
Estimating the nominal, bilateral U.S. dollar exchange rate consistent
with the equilibrium REER that would have prevailed but for the
undervaluation. The commenter contended that the equilibrium REER
estimated does not provide any information on bilateral exchange rates.
Various commenters urged Commerce to consider methods for
calculating the equilibrium REER other than those commonly used by the
IMF and other third parties, claiming that these methodologies, unlike
the one described by Commerce in the proposed rule, will produce a REER
that causes a true zero-balance in the current account (i.e., neither a
trade surplus nor a trade deficit). Other commenters recommended that,
in addition to considering the equilibrium REER as defined in its
proposed methodology, when measuring the extent of undervaluation,
Commerce should also consider the equilibrium REER as defined in either
the IMF's macroeconomic balance approach (which has effectively been
replaced with the External Balance Assessment approach--the IMF's
preferred methodology) or the purchasing power parity approach.
Alternatively, Commerce could focus not on the REER but on the
fundamental equilibrium exchange rate (FEER) in accordance with the
methodology proposed by the Peterson Institute for International
Economics (PIIE). The commenters argued, among other points, that the
right approach varies by country and that in some cases these
alternatives may better capture economic conditions and provide more
accurate estimates of undervaluation for the currencies of certain
countries.
Response: Commerce recognizes the challenges in countervailing
subsidies resulting from exchanges of undervalued currencies and the
variation in the analytical methods used and the REER gap estimates
produced. However, these are measurement and valuation problems not
unlike those that arise in many CVD proceedings, and Commerce will
therefore follow standard procedure for CVD proceedings in the currency
context. All information and evidence on the administrative record will
be reviewed, and all estimates of REER gaps, U.S. dollar exchange rate
gaps and the underlying methodologies and data will be assessed after
receiving any input from Treasury and in light of interested party
comments. Commerce's ultimate determination will be fully documented
and supported by evidence on the administrative record, and the general
analytical approach will be that described in the final rule.
Commerce agrees with the commenters that multiple valid
methodologies may exist for calculating the equilibrium REER and that
no single definition or formula necessarily fully captures a country's
appropriate medium-term external balance. Section 358.528 of this final
rule states that Commerce normally will examine the gap between the
country's real effective exchange rate (REER) and the real effective
exchange rate that achieves an external balance over the medium term
that reflects appropriate policies (equilibrium REER) and will carry
out its analyses based on the determinations and information from
Treasury and other relevant record information. Specifically, an
assessment of the appropriate level for countries' external balances
and REERs that takes into account macroeconomic fundamentals,
demographics, cyclical factors, and desired medium-term macroeconomic
policies, and which generates multilaterally consistent estimates,
would not necessarily indicate that a zero balance for the current
account would be ``appropriate'' for all countries. As such, if the
facts on the record for a case indicate circumstances warranting the
use of an alternative methodology to calculate the equilibrium REER,
the rule preserves Commerce's flexibility to do so in exceptional
cases. However, in most cases, we intend to follow the normal rule set
forth in new Sec. 351.528.
In light of the comments received, and to provide more guidance to
the public and interested parties in our CVD proceedings, these final
modifications to our regulations specify in greater detail than did the
proposed rule the process we will follow in examining an alleged
subsidy relating to the exchange of an undervalued currency. We also
note that many of the comments evinced a misunderstanding of the exact
type of subsidy at issue, the benefit calculation proffered in the
proposed rule, and the process for calculating a CVD rate more
generally. Therefore, this final rule adds new Sec. 351.528 to our
regulations to specifically address the exchange of undervalued
currencies. Paragraph (a) of Sec. 351.528 provides the criteria
Commerce will follow in determining whether a currency is undervalued.
Paragraph (b) describes how Commerce will determine the existence and
amount of any benefit resulting from the exchange of an undervalued
currency. Given Commerce's lack of experience with examining this type
of subsidy, we disagree that more detail is warranted at this time. As
we stated in the 1998 Final Rule with respect to similar issues for
which we had little experience, we intend to follow the general
principles set forth in this final rule, and we may develop more
detailed criteria as we gain experience.\24\
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\24\ See, e.g., 1998 Final Rule, 63 FR at 65378.
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5. Government Action on the Exchange Rate
Several commenters urged greater clarity on how ``government action
on the exchange rate'' would factor into the assessment of currency
undervaluation. They argued that a foreign government should be engaged
in activity purposefully aimed at undervaluing its currency for
Commerce to find undervaluation. In other words, Commerce should limit
its application of the proposed new rule to currency undervaluation
caused by official actions that target the exchange rate for
competitive purposes and not to currency fluctuations caused by
monetary and fiscal policies or any non-policy factors. Some commenters
claimed that, due to strong economic growth and higher interest rates
than other advanced economies, the U.S. dollar is arguably overvalued
on a purchasing power parity (PPP) basis, but that this situation
should not constitute grounds for imposing countervailing duties
against our major trading partners.
Response: We have added language in a new Sec. 351.528(a)(2)
stating that Commerce normally will make an affirmative finding of
currency undervaluation only if there has been government action on the
exchange rate that contributes to an undervaluation of the currency.
Such government action will not normally include monetary and related
credit policy of an independent central bank or monetary authority. In
[[Page 6036]]
making its assessment of government action on the exchange rate,
Commerce may also consider the relevant government's degree of
transparency regarding actions that could alter the exchange rate.
The scope of government action under this final rule will
necessarily become more clear as Commerce considers a range of
government actions over time and the institutional settings in which
they are undertaken. This could potentially include whether and how
meaningful distinctions can be made between government action and
market action.
6. Calculation of the Benefit
One commenter argued that Commerce's benefit formula of ``X percent
duty for X percent undervaluation'' will significantly over-penalize a
producer because the notion that ``X percent duty'' counteracts ``X
percent undervaluation'' is only true under certain circumstances. This
commenter provided several examples to illustrate its point.
Furthermore, the commenter claimed that determining the tariff duty
that accurately countervails the extent of undervaluation is a
difficult and imprecise process that varies considerably from industry
to industry and from firm to firm.
Some commenters stated that the proposed rule suggested that
Commerce will only calculate a benefit from sales to the United States
that occur in U.S. dollars; however, these commenters suggested that it
is also possible that sales to third countries could be denominated in
dollars and thus benefit from the same undervaluation when converted to
the domestic currency. Moreover, a government's currency undervaluation
practices may also impact goods traded in other international
currencies. In order to capture the full benefit from currency
undervaluation, these commenters argued that dollar-denominated sales
to third countries should also be included in the benefit calculation.
Some commenters also argued that Commerce should countervail the
benefit that exporters receive from converting all currencies into the
domestic currency, instead of only countervailing the benefit received
from converting U.S. dollars into the domestic currency. These
commenters believed that doing so would capture the full benefit of the
undervaluation, which is calculated on a REER-basis (i.e., the domestic
currency is undervalued relative to a basket of currencies, and not
simply bilaterally undervalued relative to the dollar).
Response: The first comment misunderstands the benefit analysis set
forth in the proposed rule and adopted in this final rule. Nowhere in
the proposed rule did we suggest, and nowhere in this final rule do we
suggest, that ``X percent undervaluation'' will lead to ``X percent
duty.'' A ten percent undervaluation will not automatically lead to a
duty of ten percent. This is not the approach to benefit and duty
calculation promulgated in this final rule.
Rather, this final rule makes clear that when Commerce determines
under Sec. 351.528 that a country's currency is undervalued, there may
be a benefit to a particular firm when that firm exchanges U.S. dollars
for domestic currency and receives more domestic currency than it
otherwise would have absent the undervaluation. Commerce agrees with
this commenter's argument that this calculation must be firm-specific.
With respect to the argument that we should account for dollar-
denominated sales to third countries in our benefit calculation, Sec.
351.528(b)(2) of the regulatory text in this final rule states that the
amount of any benefit from a currency exchange normally will be based
on the difference between the amount of domestic currency the firm
received in exchange for U.S. dollars and the amount of domestic
currency the firm would have received absent the difference between (i)
the nominal, bilateral U.S. dollar rate consistent with the equilibrium
REER and (ii) the actual nominal, bilateral U.S. dollar rate during the
relevant time period, taking into account any information regarding the
impact of government action on the exchange rate. We do not find it
necessary, in this final rule, to specify or anticipate the manner in
which the firm earned the U.S. dollars that it is converting. The
relevant point is that there may be a benefit at the point of the
conversion of those U.S. dollars into the undervalued domestic
currency. There might be a variety of means by which the firm earned
the U.S. dollars and, to the extent that is relevant, we will assess
the facts on a case-by-case basis consistent with sections 701 and
771(5)(B) of the Act and the provisions of this final rule.
Regarding the comments that we should calculate the benefit after
taking into account conversions of all currencies (not just the U.S.
dollar) into the domestic currency, we have not adopted this position
in this final rule. Although the determination of undervaluation, as
outlined in Sec. 351.528(a), is made with respect to a basket of
currencies, Sec. 351.528(b) specifies that Commerce will determine the
existence of a benefit after examining the difference between (i) the
nominal, bilateral U.S. dollar rate consistent with the equilibrium
REER and (ii) the actual nominal, bilateral U.S. dollar rate during the
relevant time period, taking into account any information regarding the
impact of government action on the exchange rate. In other words, this
final rule only addresses conversions of U.S. dollars into domestic
currency that might give rise to a countervailable subsidy. Given
Commerce's lack of experience with determining the benefit from
exchanges of currency, we find that conversions of U.S. dollars are the
appropriate focus at this time. Once Commerce gains more experience in
investigating and analyzing this type of subsidy, there may come a time
to adopt the approach advocated by these commenters.
7. Other Calculation Issues
One commenter stated that if the benefit from an undervalued
currency is limited to the excess domestic currency a firm receives in
exchange for U.S. dollars, the sales denominator should also be limited
to sales in U.S. dollars. To allocate the excess domestic currency over
a firm's total sales revenue to determine the subsidy rate for the
currency program would understate the benefit conferred by currency
undervaluation.
A second commenter argued that the existence of a net benefit to an
exporter from an undervalued exchange rate cannot be presumed due to
the fact that an individual exporter may engage in a variety of
transactions in a foreign currency. This commenter stated that the
costs for imported goods such as materials and machinery that may be
used by the exporter would increase with an undervalued exchange rate.
As a result, the measurement of the net impact of an undervalued
currency is necessarily a complex undertaking that requires a
comprehensive analysis of the effect of the exchange rate not only on
the exports of the finished product, but also on the cost of all inputs
used by the producer and its upstream suppliers. In a similar vein, a
third commenter argued that the determination of the duty rate that
accurately countervails any undervaluation is very difficult and will
vary from industry to industry and from firm to firm. This commenter
stated that firms with the same level of sales revenue will have
different subsidy rates from the currency undervaluation based on their
level of imported goods used in the production of its merchandise and
provided three examples to demonstrate the argument.
[[Page 6037]]
Response: The essential concept, with which we agree, behind the
argument of the first commenter is that the numerator and the
denominator for our subsidy calculations must be on the same basis.
This is the fundamental premise of our attribution regulation codified
at 19 CFR 351.525. This regulation sets forth how we calculate the ad
valorem subsidy rate and attribute a subsidy to the sales value of the
product or products that benefit from the subsidy. In any future CVD
proceeding involving a subsidy resulting from the exchange of an
undervalued currency, the appropriate numerator and denominator will be
based upon the facts on the record of that proceeding consistent with
the application of the attribution rules in 19 CFR 351.525. While the
first commenter cited to our attribution regulation, the second and
third commenters did not reference any statutory or regulatory support
for their arguments with respect to the calculation of an alleged
subsidy resulting from currency undervaluation. The second commenter
has argued that an undervalued currency may increase certain costs to a
firm, which supposedly would negate or offset any benefits received by
that firm due to an undervalued exchange rate. The commenter argued
that an undervalued exchange rate will increase the firm's costs for
imported raw materials and equipment, which should be considered in
determining whether the firm received a benefit from exchanges of the
undervalued currency.
We disagree with this commenter that these modifications to our
regulations should include this concept. We note that section 771(6) of
the Act provides for only a limited number of adjustments to the gross
countervailable subsidy in order to calculate the net countervailable
subsidy. These are: (a) Any application fee, deposit, or similar
payment paid in order to qualify for, or to receive, the benefit of the
countervailable subsidy; (b) any loss in value of the countervailable
subsidy resulting from its deferred receipt, if the deferral is
mandated by government order; and (c) export taxes, duties, or other
charges levied on the export of merchandise to the United States
specifically intended to offset the countervailable subsidy received.
The adjustment proposed by this commenter is not included within the
list in section 771(6) of the Act, and therefore we are not including
it in this final rule.
Likewise, we disagree with the third commenter that the cost of
imported inputs is relevant to the benefit calculation for a subsidy
resulting from a firm's exchange of U.S. dollars for the undervalued
domestic currency. In effect, this commenter is suggesting an offset to
the benefit conferred through exchanges of undervalued currency.
However, such an offset is not contemplated by section 771(6) of the
Act. Nevertheless, we agree with this commenter that the subsidy rate
calculation will be firm-specific. Except with respect to the
calculation of the all-others rate under section 705(c)(5) of the Act,
a country-wide rate under section 777A(e)(2)(B) of the Act or a ``non-
selected'' respondent rate in an administrative review, all of our
subsidy rates are firm-specific. The identical subsidy provided to
three different firms could produce different subsidy rates given a
number of factors such as sales revenue, whether the subsidy is untied
or tied (and to which product or products it is tied), and the presence
of cross-owned companies. In fact, it would be unusual to have
identical subsidy rates for different firms.
8. The Role of Treasury
Comments fell across a wide spectrum with respect to the role
Treasury should play in a determination that undervalued currency gives
rise to a countervailable subsidy. Some commenters argued that Treasury
holds the primary expertise, reflecting its role historically as the
lead U.S. government agency with responsibility for exchange rate
policy, in assessing whether foreign government actions result in
currency manipulation, and therefore Commerce should ultimately defer
to Treasury's judgment in making the decision as to whether
undervaluation exists in a given CVD proceeding. Other commenters
recognized that Treasury has relevant experience that Commerce should
take into account, but that Commerce should ultimately make any
determination regarding undervaluation subsidies for CVD purposes.
Commenters also stated that Commerce should clarify the difference
between ``currency manipulation,'' as Treasury investigates in its
semi-annual reports on exchange practices of U.S. trading partners, and
``currency undervaluation'' in Commerce's proposed rule. Still other
commenters argued that Treasury should not be involved, or should only
be involved to the extent that it is treated similarly to that of any
objective, third party source of data and analysis, in making the
relevant determination. The latter group tended to emphasize the point
that Commerce should use a different standard from Treasury's
manipulation standard. Treasury, they argued, has not utilized its own
statutory authority to the fullest, as evidenced by the fact that it
has not found any country to be a currency manipulator since the mid-
1990s. Commenters argued that strong enforcement of the trade remedy
laws will require relying on stronger, less-discretionary statutory
authority than that which governs Treasury's findings.
Four commenters objected to the language in the preamble to the
proposed rule that Commerce would ``defer'' to Treasury on the issue of
undervaluation. Three commenters suggested that we replace the word
``defer'' in the preamble of the proposed rule with the phrase ``confer
with, and seek advice from,'' Treasury. Two commenters objected to the
statement in the proposed rule that Commerce ``will request that the
Secretary of the Treasury provide Treasury's evaluation and conclusion
as to'' undervaluation, and suggested that the rule simply state that
Commerce ``will determine'' the issue of undervaluation. Another
commenter argued that Commerce's deference to Treasury in the proposed
rule is an inappropriate delegation of Commerce's statutory authority
to determine CVDs under the Act. This commenter argued that federal
courts have ruled that an agency with delegated authority from Congress
may not sub-delegate that authority to another entity. Two commenters
argued that Commerce did not provide sufficient explanation in the
preamble to the proposed rule as to when it would depart from
Treasury's recommendation regarding undervaluation.
Other commenters raised concerns that Treasury's involvement in
Commerce's investigatory process, which is governed by tight statutory
timelines, could cause disruption to that process and potentially delay
relief to the petitioning U.S. industry. These commenters request that,
if Treasury is to be involved, Commerce should specify clear dates by
which Treasury's views and supporting information would be put on the
record of a given proceeding, to ensure that all parties have
sufficient time to submit rebuttal factual information and to comment.
Other commenters suggested that any Treasury input should not go on the
record until after Commerce issues a preliminary finding, given the
very short statutory deadline (e.g., 65 days from initiation) for
issuing such preliminary decisions in a CVD investigation.
Response: Commerce recognizes that Treasury has considerable
experience and data that are relevant to an analysis of currency
undervaluation as envisioned in this regulation. That said, Commerce
makes its determination regarding CVDs pursuant to a different
[[Page 6038]]
legal authority from Treasury's statutory currency determinations, and
for a different statutory purpose. The purpose of the CVD remedy is to
provide redress to particular domestic industries that are found by the
U.S. International Trade Commission (ITC) to be injured (or threatened
with injury) by imports that Commerce determines to benefit from
specific subsidies. Under the CVD law, the petitioning U.S. industries
have a right to relief--because section 701 of the Act mandates that
duties ``shall be imposed''--where Commerce and the ITC make these
requisite findings. A determination that the foreign subsidizing
government is intending to provide its subsidized industries a
competitive advantage vis-[agrave]-vis their U.S. and international
competitors, or to otherwise manipulate the playing field, is not a
required element of a CVD determination under U.S. law.
In contrast, pursuant to the Omnibus Trade and Competitiveness Act
of 1988 and the Trade Facilitation and Trade Enforcement Act of 2015,
Treasury is responsible for completing and releasing a semiannual
Report to Congress on Macroeconomic and Foreign Exchange Policies of
Major Trading Partners of the United States. In its analysis, Treasury
assesses a range of developments in international economic and exchange
rate policies of selected trading partners, including currency
developments. The 1988 statute directs Treasury to determine whether
countries manipulate the rate of exchange between their currency and
the United States dollar for purposes of preventing effective balance
of payments adjustments or gaining unfair competitive advantage in
international trade. The 2015 statute requires Treasury to assess the
macroeconomic and currency policies of major trading partners and
conduct enhanced analysis of and engagement with those partners if they
trigger certain objective criteria that provide insight into possibly
unfair currency practices.\25\
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\25\ Following the closing of the comment period for the
proposed rule, Treasury designated a country (China) as a currency
manipulator for the first time. See Press Release, Treasury
Designates China as a Currency Manipulator (Aug. 5, 2019), https://home.treasury.gov/news/press-releases/sm751.
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We therefore agree with those commenters who argue that the
statutory provisions pursuant to which Treasury conducts its analysis
differ from the statutory provisions governing Commerce's CVD analysis.
Accordingly, whereas the analysis in Treasury's semiannual reports
examining possible currency manipulation may have relevance to
Commerce's determination, Treasury's analysis in its semiannual reports
is distinct from the analysis as to whether there is undervaluation for
purposes of a CVD proceeding. In other words, Treasury conducts a
different analysis, pursuant to a different statutory authority and
subject to different statutory criteria, in its semiannual reports.
Nonetheless, these statutes reflect Congress' recognition that Treasury
has expertise in currency-related matters.
With respect to the comments arguing that Commerce cannot legally
``defer'' decision-making authority to Treasury under principles of
administrative law, section 771(1) of the Act designates the Secretary
of Commerce as the administering authority of the CVD law. This means
that Congress has delegated to Commerce, and no other agency, the
authority to determine the existence of countervailable subsidies,
impose duties, and otherwise administer the CVD law. Commerce's
authority under the CVD law is distinct and independent from Treasury's
authority to consider whether countries manipulate their currency
pursuant to 22 U.S.C. Sec. 5305 and 19 U.S.C. 4421.
We agree with the commenters who argued that it is important for
Commerce to retain ultimate authority on administering the CVD law,
including determining whether exchanges of an undervalued currency
constitute countervailable subsidies in a given case. We acknowledge
that federal courts have found that when Congress delegates authority
to an agency, that agency cannot redelegate that authority to a
separate entity.\26\ However, this final rule does not delegate any
decision-making authority from Commerce to Treasury, but rather
provides that Commerce will request and expect to receive Treasury's
evaluation and conclusion as to undervaluation, government action and
the bilateral U.S. dollar rate gap during a CVD proceeding. In any such
future CVD proceeding involving currency undervaluation, we intend to
place Treasury's evaluation and conclusion on the record and allow the
submission of factual information to rebut, clarify or correct
Treasury's evaluation and conclusion, as required by 19 CFR
351.301(c)(4). In recognition of Treasury's experience in the area of
evaluating currency undervaluation, Commerce will defer to Treasury's
expertise, but we will not delegate to Treasury the ultimate
determination of whether currency undervaluation involves a
countervailable subsidy in a given case. It is lawful for one federal
agency to turn to another for ``advice and policy recommendations'' in
an area where that other agency might have particular expertise.\27\
Accordingly, we intend to defer to Treasury's expertise with respect to
currency undervaluation. Therefore, we disagree with the commenters
that objected to the proposed rule on this basis. We further disagree
with the commenters that suggested that we need to describe in detail
when we will depart from Treasury's evaluation and conclusion regarding
undervaluation. We expect that we will normally follow Treasury's
evaluation and conclusion regarding undervaluation, and any departure
from Treasury's evaluation and conclusion will be based on substantial
evidence on the administrative record.
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\26\ See G.H. Daniels III & Associates v. Perez, 626 Fed. Appx.
205, 210-12 (10th Cir. 2015) (holding that the Department of
Homeland Security's subdelegation of its authorities under the H-2B
visa program to an outside agency, the Department of Labor, was
improper); see also U.S. Telecom Ass'n v. FCC, 359 F.3d 554, 565-66
(D.C. Cir. 2004) (prohibiting the FCC from delegating its decision-
making authority to state commissions); Shook v. D.C. Fin.
Responsibility & Mgmt. Assistance Auth., 132 F.3d 775, 783-84 and
n.6 (D.C. Cir. 1998) (forbidding the Control Board in the Department
of Education from redelegating its delegated powers to a Board of
Trustees); and ETSI Pipeline Project v. Missouri, 484 U.S. 495, 511,
517 (1988) (holding that the Army was not permitted to redelegate to
the Department of the Interior power to contract to remove water for
industrial use that Congress delegated to the Army). But see
Louisiana Forestry Ass'n Inc. v. Sec'y U.S. Dep't of Labor, 745 F.3d
653, 671-75 (3rd Cir. 2014) (determining that the Department of
Homeland Security did not delegate its authority under the H-2B visa
program to the Department of Labor).
\27\ See U.S. Telecom Ass'n v. Federal Comm'ns Commission, 359
F.3d 554, 568 (D.D.C. 2017) (``[A] federal agency may turn to an
outside entity for advice and policy recommendations, provided the
agency makes the final decisions itself''); see also Bellion Spirits
v. United States, 393 F. Supp. 3d 5, 15-17 (D.D.C. 2019) (upholding
the Alcohol and Tobacco Tax and Trade Bureau's reliance on the
scientific fact-finding and analysis of the Food and Drug
Administration because the Bureau retained ultimate decision-making
authority).
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Regarding the comments expressing concern about the impact of
Treasury's role on the deadlines of CVD proceedings, Sec. 351.528
states that Commerce will request from Treasury its evaluation and
conclusion as to the issues of undervaluation, government action and
the U.S. dollar rate gap. Commerce intends to do so well before the
deadline for a preliminary determination on the alleged currency
subsidy. We will place on the record any information timely received
from Treasury and intend to follow all normal procedures in Commerce's
regulations--such as those in 19 CFR 351.301--with respect to that
information. It is Commerce's intention that, normally, such
information will be placed on the record prior to a
[[Page 6039]]
preliminary determination regarding the alleged currency subsidy so
that, where possible and appropriate, Commerce can take it into account
in its preliminary findings. Regardless of when the information is
placed on the record, however, and as with all record information in a
CVD proceeding, interested parties will have adequate opportunity to
rebut any information provided by Treasury with factual information of
their own. All interested parties and U.S. government agencies also
have the opportunity to submit case briefs and rebuttal briefs to
Commerce, pursuant to 19 CFR 351.309, after Commerce issues its
preliminary determination.
9. Specificity
Several commenters argued that the proposed addition of paragraph
(c) to 19 CFR 351.502 would contravene U.S. law and WTO rules. They
argued that the traded goods sector is too diverse of a sector to
constitute a ``group'' of enterprises under the Act and SCM Agreement.
One commenter, citing to prior CVD investigations of aluminum
extrusions and coated paper suitable for high-quality print graphics
using sheet-fed presses from the People's Republic of China, claimed
that treating exporters as a ``group'' for purposes of specificity for
domestic subsidies is contrary to Commerce's past practice. Other
commenters, on the other hand, generally supported the proposed
modification. They argued that defining the traded goods sector as a
``group'' is a positive step toward addressing specificity for certain
types of subsidies.
More broadly, some commenters went beyond the proposed regulatory
text and argued that currency undervaluation and exchanges of currency
are not ``specific'' under U.S. or international law. Specifically,
these commenters claimed that such subsidies, which are all-
encompassing and broadly available throughout the economy, cannot be
deemed specific under the statute or satisfy the ``known or
particularized'' requirement of specificity under Article 2.1 of the
SCM Agreement. One commenter cited to Commerce's past determinations in
this regard, and subsequent affirmance by the CIT, as demonstrative of
the agency's historical understanding of the term ``specific.'' Because
the provisions of the SCM Agreement mirror those of the Act, several
commenters also claimed that the proposed rule would conflict with WTO
rules.
Some commenters argued that Commerce should not limit its
specificity analysis to that under the proposed rule alone (i.e., a
domestic subsidy), because currency-related subsidies could also be
viewed as export subsidies. One commenter further urged Commerce to
allow domestic industries to allege currency undervaluation as an
export subsidy. In contrast, one commenter claimed that treating
currency undervaluation as an export subsidy is never proper under WTO
rules, because the mere fact that such subsidies are provided to
enterprises that export is not, in itself, enough to be found to be
specific.
Other commenters requested revisions to the proposed language
regarding specificity. For purposes of defining the relevant ``group''
of enterprises, several commenters requested that Commerce elaborate on
its interpretation of the term ``primarily.'' According to these
commenters, that term (i.e., primarily), if left undefined, would be
restrictive, and even critical to effective implementation. As one
possible solution, some of these commenters proposed that Commerce
replace the term with the phrase ``actively engaged in,'' thereby
establishing a more discretionary basis for assessment. Separately, one
commenter suggested that Commerce replace the phrase ``may consider''
with ``will consider'' for purposes of consistency with other CVD
regulations.
Response: As described above, Commerce is modifying 19 CFR 351.502
to add new paragraph (c), which clarifies that in analyzing
specificity, Commerce normally will consider enterprises that buy or
sell goods internationally to comprise a ``group'' of enterprises
within the meaning of section 771(5A)(D) of the Act. Therefore, under
this regulation, if a subsidy is limited to enterprises that buy or
sell goods internationally, or if enterprises that buy or sell goods
internationally are the predominant users or receive disproportionately
large amounts of a subsidy, then that subsidy may be specific. This
regulatory modification is similar to prior interpretations of the
statutory term ``group.'' For example, we have found state-owned
enterprises and foreign-invested enterprises to comprise ``groups''
under the Act.\28\
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\28\ See Import Administration Policy Bulletin 10.1, supra note
2; Citric Acid and Certain Citrate Salts From the People's Republic
of China: Final Affirmative Countervailing Duty Determination, supra
note 2.
---------------------------------------------------------------------------
We agree with the commenters who suggested removing the word
``primarily'' from the proposed rule, because the use of this word may
raise problems with administrability due to its ambiguity. We also
agree with the commenters who suggested changing the phrase ``may
consider.'' New section 351.502(c) now states that Commerce ``normally
will consider enterprises that buy or sell goods internationally to
comprise such a group.'' This phrase (``normally will'') is more
consistent with the terminology used in most of our CVD regulations.
We disagree that this regulatory modification runs afoul of U.S.
law or WTO rules. Section 771(5A)(D) of the Act does not define the
word ``group.'' Therefore, it is within Commerce's authority to adopt a
permissible interpretation of that term.\29\ The interpretation adopted
by paragraph (c) is permissible, because enterprises that buy or sell
goods internationally are certainly an identifiable set of enterprises,
and they constitute a subset of all economic actors within a country.
Moreover, as mentioned above, this type of interpretation of the term
``group'' is consistent with our practice. Regarding the argument that
enterprises that buy or sell goods internationally could come from a
variety of different industries, we do not disagree. But this is
irrelevant under our existing regulations, because 19 CFR 351.502(b)
states that there need not be shared characteristics among the
enterprises that comprise a group.\30\
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\29\ See Chevron, U.S.A., Inc. v. Natural Res. Def. Council,
Inc., 467 U.S. 837 (1984).
\30\ In any event, enterprises that buy or sell goods
internationally clearly do share a characteristic, namely, that they
buy or sell goods internationally.
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We further note that section 771(5A)(A) of the Act deems export
subsidies and import-substitution subsidies to be specific per se,
without regard to whether there is a narrow or diverse array of
industries or companies reflected by the recipients of those two
categories of subsidies, or whether there are any other common
characteristics among those recipients. The SCM Agreement not only
likewise deems these two categories of subsidies to be specific, but
also prohibits them outright.\31\ Specifically in the context of
undervalued currency, moreover, we note that if an exchange rate is too
low or undervalued, it underprices exports and overprices imports. This
directly distorts international trade on a systemic basis with the same
direct adverse impact on trade as the simultaneous provision of import-
substitution and export subsidies. Accordingly, treating importers and
exporters of goods as a group for specificity purposes is entirely
consistent with the international trade focus and remedial purposes of
the trade remedy laws.
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\31\ See Article 3 of the SCM Agreement.
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With respect to any statements Commerce may have made in prior
investigations regarding issues that are
[[Page 6040]]
squarely addressed and clarified in this final rule, it is a
fundamental principle of administrative law that an agency is allowed
to change its practice, provided the change is reasonable and
explained.\32\ Not only have we explained any such changes, but we are
also adopting them through this notice-and-comment rulemaking.
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\32\ See FCC v. Fox Television Stations, Inc., 556 U.S. 502, 515
(2009); see also Huvis Corp. v. United States, 570 F. 3d 1347, 1354
(Fed. Cir. 2009).
---------------------------------------------------------------------------
Some of the commenters stepped beyond the text of the proposed
regulatory provision to argue the specificity of currency-related
subsidies per se. This regulatory modification to 19 CFR 351.502 only
concerns the definition of the term ``group,'' and cannot possibly
address the specificity of a particular type of subsidy per se. Rather,
an affirmative or negative finding of specificity for a particular type
of subsidy can only occur in a CVD proceeding. Nonetheless, we offer
the following observations. Under section 771(5) of the Act, a
countervailable subsidy must be one that is found specific under
section 771(5A) of the Act. Section 771(5A)(D)(iii) of the Act, in
turn, permits a finding of specificity as a matter of fact (de facto)
where, inter alia, ``(a)n enterprise or industry is a predominant user
of a subsidy'' or ``receives a disproportionately large amount of the
subsidy.'' The Federal Circuit has held that determinations of
``dominance'' and ``disproportionality'' for the purposes of de facto
specificity must be made on a fact-specific, case-by-case basis.\33\
The CIT has further held that one enterprise or industry may in fact
``predominantly'' benefit from a subsidy even though that subsidy is
nominally available to many different enterprises or industries.\34\
Accordingly, there is no bright line rule at which an enterprise or
industry or group of enterprises or industries would be deemed a
predominant user or a disproportionate beneficiary. Indeed, in
determining whether an enterprise or industry (or group thereof) is a
disproportionate or predominant beneficiary of a subsidy, Commerce
evaluates the relative share of the benefits received as opposed to the
absolute share of the benefit. Thus, an inquiry into whether an alleged
subsidy is all-encompassing or broadly available throughout an economy,
requires case-by-case analysis, which Commerce intends to perform for
currency undervaluation allegations, consistent with its statutory
obligation. Moreover, because U.S. law is consistent with our
international obligations, we disagree with commenters that the
proposed rule conflicts with WTO rules, specifically the requirements
of the SCM Agreement.
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\33\ AK Steel Corp. v. United States, 192 F. 3d 1367, 1382-1385
(Fed. Cir. 1999).
\34\ Royal Thai Gov't v. United States, 441 F. Supp. 2d 1350,
1364 (CIT 2006).
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We also disagree with commenters that the proposed rule limits the
domestic industries' ability to bring certain allegations (such as
export subsidy allegations) regarding such subsidies, or that it limits
Commerce's specificity analysis with respect to such allegations. This
final rule only addresses the definition of the term ``group'' for
domestic subsidy purposes; it does not address export subsidies.
Indeed, Commerce, will continue to consider allegations concerning
currency undervaluation and exchanges of currency--as well as all
subsidy allegations--consistent with its statutory and regulatory
obligations, including this final rule. And Commerce's evaluation of
the facts of the proceeding, on a case-by-case basis, will serve to
facilitate its analysis, and decisions on how to proceed with
allegations concerning currency undervaluation and exchanges of
currency. Because Commerce's evaluation of each allegation will be
based on the facts of each case and consistent with U.S. law, there is
no need to opine on the one commenter's statement that treating
currency undervaluation as an export subsidy is never proper under
international law.
10. General Comments
Commerce's Proposal Infringes on the IMF's Authority
We received comments from various parties arguing that our proposed
rule infringes upon the jurisdiction of the IMF. One commenter stated
that under Article XV of the GATT, the IMF is the appropriate venue to
handle currency-related issues and that to countervail currency
undervaluation could violate that GATT Article. Another commenter also
argued that the IMF is the appropriate forum to deal with exchange
rates and currency manipulation. This commenter argued that this is
clear from the provisions of Article XV:2 of GATT 1994, which indicate
that it is the IMF, and not the WTO, that has authority over problems
concerning monetary reserves, balance of payments and foreign exchange
arrangements. Another commenter argued that individual members of the
IMF do not have the right to assess whether another member is involved
in exchange rate manipulation or whether the member's exchange rate is
undervalued. Finally, another commenter also argued that the proposed
rule attempts to supersede the leading role played by the IMF on
currency and exchange rate issues.
Response: We find the arguments made by these commenters to be
without legal foundation. There is nothing under U.S. law or the IMF
Articles of Agreement that prevents a sovereign member of the IMF from
analyzing whether an exchange involving an undervalued currency
constitutes a countervailable subsidy under a nation's CVD law. These
commenters have cited to no provision under U.S. law or within the IMF
Articles of Agreement that prohibits the remedies set forth under the
CVD law to be applied against imports that benefit from countervailable
subsidies resulting from an undervalued currency. In addition, the
proposed rule does not infringe upon any rights or obligations set
forth under the IMF Articles of Agreement. There is no language in the
proposed rule that restricts in any manner the actions undertaken by
the IMF, nor have the commenters referenced any language in the
proposed rule that infringes on any actions of the IMF. Moreover, we
note that the SCM Agreement explicitly includes certain currency-
related practices in item (b) of the ``Illustrative List of Export
Subsidies'' in Annex I, and therefore it is incorrect to suggest that
the IMF is the only international organization with jurisdiction over
currency matters.
Moreover, under the section 771(1) of the Act, Commerce is
designated as the administering authority of the CVD law. As such,
under section 701 of the Act, we are legally mandated to determine
whether any government or public entity of a country is providing,
directly or indirectly, a countervailable subsidy with respect to the
manufacture, production, or export of a class or kind or merchandise
imported into the United States. Therefore, we are legally required to
address, and--if the ITC finds injury--provide a remedy for, any action
of a government or public entity that results in a subsidy that meets
the definition of a countervailable subsidy defined under section
771(5) of the Act and is specific as defined under section 771(5A) of
the Act. Indeed, Commerce has previously investigated exchange rate
regimes.\35\ Furthermore, at the time of the adoption of the SCM
Agreement and the subsequent enactment of the
[[Page 6041]]
Uruguay Round Agreements Act, there was only a narrow list of
government actions that, notwithstanding the provisions of sections
771(5) and 771(5A) of the Act, would be treated as non-countervailable.
This list was set forth under section 771(5B) of the Act. This list of
exempted practices did not include exchange rate regimes, and, in
addition, has long-since expired.
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\35\ See, e.g., Final Negative Countervailing Duty
Determination: Pork Rind Pellets from Mexico, 48 FR 39105 (August
29, 1983); Final Affirmative Countervailing Duty Determination:
Certain Electrical Conductor Aluminum Redraw Rod from Venezuela, 53
FR 24763 (June 30, 1988). These cases involved dual exchange rate
regimes.
---------------------------------------------------------------------------
Possible Retaliation by U.S. Trading Partners
Some commenters argued against implementing the proposed regulation
on the grounds that, should the United States begin to apply its CVD
law against imports that allegedly benefit from undervalued currencies,
this would result in disruption of international trade of goods and
services, and could also lead U.S. trading partners to retaliate
through the imposition of CVDs of their own, or through some other
similar actions, especially in light of recent statements from the U.S.
Administration about possible actions to lower the U.S. dollar value.
This would have an adverse impact on U.S. exports of manufactured goods
and agricultural products, and potentially reduce economic growth,
especially if the WTO were to rule adversely against this practice.
Similarly, one commenter notes that the IMF was originally created to
avoid the risks of politicization of bilateral exchange rates disputes
and a return to beggar-they-neighbor currency policies, which are risks
that implementation of the proposed regulation may recreate.
Response: As noted elsewhere in this notice, under the CVD statute,
the petitioning U.S. industries have a right to relief where Commerce
determines that countervailable subsidies exist and the ITC determines
that any such subsidies that benefit the imports in question cause, or
threaten to cause, injury to those petitioning industries. Commerce
must fully enforce the CVD law regardless of whether doing so may
prompt trading partners to attempt to retaliate through the improper
imposition of CVDs against U.S exports or through other means. Having
previously received and addressed allegations that exchange rate
regimes result in countervailable subsidies that injure U.S. industry,
it is entirely consistent with the U.S. countervailing duty law that
Commerce provide additional guidance on such matters through this
rulemaking. When it comes to Commerce's attention that other countries
are imposing retaliatory trade remedies or other trade barriers in a
manner inconsistent with their international obligations, Commerce will
work with the U.S. Trade Representative's office and other interagency
partners to ensure that U.S. rights are fully protected.
Other Methods To Combat Currency Manipulation/Misalignment May Be More
Effective
A few commenters argued that the proposed rule is not the most
effective method to address currency manipulation because it would
simply countervail imports from a specific industry (instead of all
exports from the country under investigation or review) and because any
duties would be contingent upon an affirmative injury ruling from the
ITC. Others opined that the proposed rule is inappropriate because it
fails to address the root cause of the currency misalignment (i.e., the
dollar's overvaluation due to years of excessive global demand for
dollar-denominated assets and financial capital). Some of these
commenters suggested potentially more effective alternatives that would
better address the issue, such as countervailing currency intervention
(CCI), Market Access Charge (MAC), and naming China a currency
manipulator. However, all three of these commenters supported
Commerce's proposed rule and believed that it was an important (albeit
imperfect) first step towards fully addressing the issue. One commenter
noted that Commerce should coordinate with Treasury to implement CCI,
which would reduce bureaucratic problems that would likely occur under
Commerce's proposed countervailing duty approach.
Response: While the alternatives proposed by commenters for
combating currency misalignment and manipulation may or may not be more
effective than the modifications proposed by Commerce, Commerce cannot
implement any of them, because: (1) Concerning the option to label
China a currency manipulator, Treasury, and not Commerce, possesses the
sole statutory authority to label a country a currency manipulator; and
(2) both the other two proposed alternatives (CCI and MAC) also fall
outside of Commerce's purview and have no connection to subsidies or
CVDs.
Relationship to the Antidumping Law
Some commenters argued that Commerce should or could use the
antidumping law to address currency undervaluation. For example, one
commenter suggested that currency undervaluation could be one factor
that leads to a finding of a particular market situation in an
antidumping proceeding. This commenter argued that currency
undervaluation can distort costs in the comparison market by distorting
the costs of input products.
Response: This final rule addresses only CVD proceedings. Nothing
in this final rule should be construed as affecting Commerce's
antidumping duty regulations or practice in any way. The issue of what
constitutes a particular market situation in an antidumping proceeding
is a case-by-case determination, and interested parties are permitted
to make a timely allegation of a particular market situation in
antidumping proceedings.
11. Economic Impact
Some commenters noted that there is a large difference in the
estimates produced by the two economic impact assessments included in
the proposed rule, with the first estimating an economic impact of $3.9
to $16.6 million in duties collected annually and the second estimating
a range of $1.71 to $3.14 billion in new duties collected annually on
Chinese imports alone. These comments claimed that this suggests
Commerce lacks a reliable or well-developed methodology for imposing
CVDs for currency undervaluation.
Some comments predicted the impacts the duties would have. One
commenter argued that linking the well-known undervaluation issue with
the more obscure CVD law will increase public awareness of the latter
and result in a greater number of CVD allegations from a variety of
U.S. industries demanding that CVDs be enforced to remedy the amount of
benefit provided to foreign producers. The commenter therefore
contended that the proposed rule will likely increase its economic
impact to a level well beyond Commerce's estimations. Another commenter
claimed that there has been a significant cost to overall U.S.
employment and GDP as a result of the U.S. government not effectively
addressing the trade effects of undervalued foreign currencies and that
eliminating this cost could increase U.S. GDP by between $288 billion
and $720 billion and create 2.3 to 5.8 million jobs.
Other commenters argued that imposing CVDs to offset the benefit of
currency-related subsidies to imported goods would likely have
relatively little impact overall to the U.S. economy, although it could
provide much-needed relief to the industries and workers that have been
specifically impacted by currency undervaluation. While some other
commenters agreed that the overall impact was likely to be relatively
small, they suggested that this was an argument against implementing
this
[[Page 6042]]
proposed regulation because the likely positive impact does not justify
the significant risks involved. Still other commenters expressed
concern that countervailing undervalued currencies would have a
negative impact on the U.S. economy because it will force U.S.
producers to switch to other foreign suppliers. They claimed the
resulting shift in supply chains will have a widespread effect on U.S.
prices of the relevant merchandise.
Response: The significant divergence in the estimates produced by
the two alternative approaches reflects the nature of this exercise,
which involves numerous variables and several simplifying assumptions
that must be made for analytic tractability, as well as data
constraints. Under the Alternative 1, ``bottom-up'' approach, Commerce
estimated the total value of additional duties that would be collected
on all imports of the relevant merchandise if currency-related
subsidies were countervailed in future proceedings using standard
benefit-to-the-recipient calculation methodologies. In contrast, under
Alternative 2, Commerce followed a ``top-down'' approach to estimate
total additional duties on the basis of market price effects. Thus,
both approaches attempted to quantify the economic impact of the
implementation of this regulation in terms of total additional duties,
but necessarily involved different variables and assumptions made,
which in large part explains the divergent economic impact estimates.
Since each estimate involves a margin of error, Commerce provided both
assessments to give a sense of the dollar range of the possible
economic impact of implementing this regulation.
Alternative 1 is based on Commerce's experience and practice, as
well as with the requirements of the Act and Commerce's regulations.
Under the law, CVDs are calculated and applied to offset benefits that
accrue at the firm level. Although countervailing subsidies resulting
from currency undervaluation may increase the number of allegations
brought forth by petitioners and investigated by Commerce in a given
case, any resulting CVDs would still be contingent on an affirmative
injury finding by the ITC, thereby significantly limiting the economic
impact of the proposed rule. No commenters argued specifically for the
adoption of Alternative 2 over Alternative 1 as the appropriate
economic impact analysis, although at least one commenter argued,
without citing to any specific data for support and without specifying
which alternative it was addressing, that the economic impact could be
higher than the estimate in the proposed rule.
Commerce agrees with commenters who argue that currency
undervaluation has adversely affected the U.S. economy. Although, as
discussed above, it is not possible to determine the economic impact of
implementing this rule with certainty, the collection of appropriate
duties will have a significant positive impact on the specific U.S.
industries harmed by undervalued currencies. Some commenters objected
that Commerce's economic impact estimates fail to account for what they
believe will be a vast number of currency allegations and additional
CVD cases (and presumably orders) that will result from the proposed
rule. While the number of allegations in future CVD proceedings is
almost certain to increase by at least one, it is unlikely currency
allegations would increase the total number of cases, since that would
be contingent upon an affirmative injury finding, which, as we
discussed in the proposed rule at 24412, depends on a host of factors
other than whether the currency is undervalued. Furthermore, currency-
related duties in terms of their magnitude and scope of application
would reflect subsidy benefits calculated under the same benefit-to-
the-recipient framework that governs all of Commerce's subsidy benefit
calculations. Currency-related duties would apply to foreign exporters
in a CVD proceeding that receive a benefit by converting U.S. dollars
to their domestic currency. The duties would not be applied across the
board to all imports of the subject merchandise in an equal amount, but
rather would reflect on-the-ground company-level circumstances. With
respect to the trade-diversion effects that some commenters argue
currency-related duties could have, Commerce notes that currency-
related duties in this regard would be no different than duties
associated with other subsidies and (as explained above) are unlikely
to increase the number of orders under which duties are collected. As
Commerce noted in the proposed rule at 24411, at the time of drafting
Commerce had 58 CVD orders on China, the most for any single country.
Each CVD order typically involves multiple subsidy programs. Yet
despite the increasing number of orders (starting with zero in 2006),
U.S. imports from China have continued to rise significantly over the
last several years to $540 billion in 2018.
As we explained in the proposed rule,\36\ Commerce's CVD
determinations are made on a case-by-case basis, and each determination
is based solely on the administrative record of that case, as well as
on the Act and Commerce's regulations. Commerce's economic assessment
of this final rule is not meant to serve as a predictor of the results
of future CVD proceedings in which currency-related subsidies are
alleged. Rather, our economic assessment is done solely to comply with
Executive Order 12866.
---------------------------------------------------------------------------
\36\ See Proposed Rule, 84 FR at 24409.
---------------------------------------------------------------------------
Changes From the Proposed Rule
As noted in the previous ``Response to Comments on the Proposed
Rule'' section, in this final rule, and as a result of the comments on
the proposed rule, we made changes (primarily additions) to the
regulatory text. Many of these additions to the regulatory text--for
example, the additions describing in greater detail the steps of the
benefit determination and the additions regarding the role of
government action on the exchange rate--are consistent with how we
described the rule in the preamble to the proposed rule. In light of
the comments received, we have decided to include greater detail in the
regulatory text itself, rather than in the preamble alone. Other
changes to the regulatory text--for example, the technical changes in
19 CFR 351.502--respond to comments received.
In particular, Commerce has made certain modifications to the
proposed rule's regulatory text for 19 CFR 351.502(c) with respect to
specificity. In particular, in response to comments, we removed the
word ``primarily'' from the description of the enterprises that buy or
sell goods internationally that may comprise a group of enterprises. We
also changed the phrase ``may consider'' to ``normally will consider,''
in response to comments.
Additionally, we have created new 19 CFR 351.528 to contain the
rules governing the determination of benefit for subsidies resulting
from exchanges of undervalued currencies. We determined that it is more
appropriate to put these rules in their own regulatory provision,
rather than adding language in a paragraph of the general provisions of
19 CFR 351.503. Additionally, in response to comments received, we have
provided additional detail on the various steps in the benefit
determination. New Sec. 351.528(a)(1) makes clear that a determination
of undervaluation normally is a prerequisite to proceeding with the
benefit determination. New Sec. 351.528(a)(2) makes clear that a
finding of government action on the exchange rate that contributed to
the undervaluation normally is a prerequisite to the finding of
[[Page 6043]]
undervaluation in paragraph (a)(1). New Sec. 351.528(b)(1) explains
that Commerce normally will calculate the benefit after taking into
account the U.S. dollar rate gap. New Sec. 351.528(b)(2) explains that
Commerce normally will determine the amount of the benefit by comparing
the amount of domestic currency a firm received to the amount it would
have received absent the U.S. dollar rate gap. New Sec. 351.528(c) is
similar to language in the proposed rule, in that it specifies that
Commerce will seek an evaluation and conclusion from Treasury regarding
the issues of undervaluation, government action, and the U.S. dollar
rate gap.
Classifications
Executive Order 12866
It has been determined that this rule is economically significant
for purposes of Executive Order 12866.
Executive Order 13771
This rule constitutes regulatory action within the meaning of
Executive Order 13771.
Economic Impact
In the proposed rule at 24409, Commerce presented two alternative
approaches to estimating the economic impact of the adoption of this
rule. Under Alternative 1, Commerce estimated an economic impact
ranging from $4 million to less than $17 million. Under Alternative 2,
Commerce estimated an impact in the range of between $1.71 billion and
$3.14 billion. We received a small number of limited public comments on
these estimates, which we have addressed above. None of the comments
contained a detailed argument that one of the alternatives is more
accurate than the other.
As we stated in the proposed rule, this economic impact analysis is
done solely to conform with the requirements of Executive Order 12866
and is not meant to serve as a predictor of the facts in any potential
future cases, nor to indicate the likelihood of any particular future
determinations, should we receive currency-related subsidy allegations
in the future. Commerce's CVD determinations are based solely on the
administrative record of the proceeding at hand, consistent with the
Act and Commerce's regulations.
Paperwork Reduction Act
This rule contains no new collection of information subject to the
Paperwork Reduction Act, 44 U.S.C. Chapter 35.
Congressional Review Act
This rule is subject to the Congressional Review Act provisions of
the Small Business Regulatory Enforcement Fairness Act of 1996 (5
U.S.C. 801, et seq.) and will be transmitted to the Congress and to the
Comptroller General for review in accordance with such provisions.
Executive Order 13132
This rule does not contain policies with federalism implications as
that term is defined in section 1(a) of Executive Order 13132, dated
August 4, 1999 (64 FR 43255 (August 10, 1999)).
Regulatory Flexibility Act
The Chief Counsel for Regulation for the Department of Commerce has
certified to the Chief Counsel for Advocacy of the Small Business
Administration under the provisions of the Regulatory Flexibility Act,
5 U.S.C. 605(b), that this final rule would not have a significant
economic impact on a substantial number of small business entities. The
factual basis for this certification was published with the proposed
rule and is not repeated here. No comments were received regarding the
Regulatory Flexibility Act. As a result, the conclusion in the
certification memorandum for the proposed rule remains unchanged and a
final regulatory flexibility analysis is not required and one has not
been prepared.
List of Subjects in 19 CFR Part 351
Administrative practice and procedure, Antidumping, Business and
industry, Cheese, Confidential business information, Countervailing
duties, Freedom of information, Investigations, Reporting and
recordkeeping requirements.
Dated: January 29, 2020.
Jeffrey I. Kessler,
Assistant Secretary for Enforcement and Compliance.
For the reasons stated, 19 CFR part 351 is amended as follows:
PART 351--ANTIDUMPING AND COUNTERVAILING DUTIES
0
1. The authority citation for part 351 continues to read as follows:
Authority: 5 U.S.C. 301; 19 U.S.C. 1202 note; 19 U.S.C. 1303
note; 19 U.S.C. 1671 et seq.; and 19 U.S.C. 3538.
0
2. In Sec. 351.502, redesignate paragraphs (c) through (f) as
paragraphs (d) through (g), and add paragraph new (c) to read as
follows:
Sec. 351.502 Specificity of domestic subsidies.
* * * * *
(c) Traded goods sector. In determining whether a subsidy is being
provided to a ``group'' of enterprises or industries within the meaning
of section 771(5A)(D) of the Act, the Secretary normally will consider
enterprises that buy or sell goods internationally to comprise such a
group.
* * * * *
0
3. Add Sec. 351.528 to subpart E to read as follows:
Sec. 351.528 Exchanges of undervalued currencies.
(a) Currency undervaluation--(1) In general. The Secretary normally
will consider whether a benefit is conferred from the exchange of
United States dollars for the currency of a country under review or
investigation under a unified exchange rate system only if that
country's currency is undervalued during the relevant period. In
determining whether a country's currency is undervalued, the Secretary
normally will take into account the gap between the country's real
effective exchange rate (REER) and the real effective exchange rate
that achieves an external balance over the medium term that reflects
appropriate policies (equilibrium REER).
(2) Government action. The Secretary normally will make an
affirmative finding under paragraph (a)(1) of this section only if
there has been government action on the exchange rate that contributes
to an undervaluation of the currency. In assessing whether there has
been such government action, the Secretary will not normally include
monetary and related credit policy of an independent central bank or
monetary authority. The Secretary may also consider the government's
degree of transparency regarding actions that could alter the exchange
rate.
(b) Benefit--(1) In general. Where the Secretary has made an
affirmative finding under paragraph (a)(1) of this section, the
Secretary normally will determine the existence of a benefit after
examining the difference between:
(i) The nominal, bilateral United States dollar rate consistent
with the equilibrium REER; and
(ii) The actual nominal, bilateral United States dollar rate during
the relevant time period, taking into account any information regarding
the impact of government action on the exchange rate.
(2) Amount of benefit. Where there is a difference under paragraph
(b)(1) of this section, the amount of the benefit from a currency
exchange normally will be based on the difference between the amount of
currency the firm received in exchange for United States dollars and
the amount of currency that firm would have received absent the
difference
[[Page 6044]]
referred to in paragraph (b)(1) of this section.
(c) Information sources. In applying this section, the Secretary
will request that the Secretary of the Treasury provide its evaluation
and conclusion as to the determinations under paragraphs (a) and (b)(1)
of this section.
[FR Doc. 2020-02097 Filed 2-3-20; 8:45 am]
BILLING CODE 3510-DS-P