US DoC Completes New Currency Manipulation Rules

The US Department of Commerce has finalized new rules to impose countervailing duties on countries believed to underestimate their currencies, which could lead to further duties on steel imports. The new currency rule clarifies how the Commerce Department will apply CVD duties to subsidies resulting from currency underestimation. According to the rule, it can determine whether there is a countervailing subsidy if there is a multilateral underestimation and any corresponding bilateral underestimation against the dollar. In addition, duties on cardiovascular disease may be imposed if government exchange rate action contributes to the depreciation or if the merchandise trading sector uses a predominant or disproportionate use of a foreign exchange subsidy. Commerce Secretary Wilbur Ross said: “This exchange rule is an important step in ensuring that unfair trading practices are properly corrected. While subsequent administrations have objected to countervailing foreign exchange subsidies, the Trump administration is taking action to level the playing field for American businesses and workers.

US law defines a compensable subsidy as a financial contribution from a government or government agency that is specific and provides a benefit to a foreign manufacturer or exporter. The final regulation sets out the criteria that the Department will use to determine whether countervailing duties should be imposed on subsidies in the form of currency undervaluation as a result of government action on the exchange rate during the relevant period. In assessing whether such action has been taken by the government, commerce usually does not include the monetary and related lending policies of an independent central bank or monetary authority. Commerce will seek and generally rely on Treasury expertise in currency matters.

The Commerce Department currently maintains 516 anti-dumping and countervailing duty orders, with many of these orders affecting steel products as US factories successfully deploy trade remedies.