Updated on 14 February, 2020
Recently USA Amended lists of developing and least-developed countries eligible for preferential treatment with respect to CVD investigation.
- India was on the developing country list and therefore eligible for these more relaxed standards.
Need for such amendment:
- To impose countervailing duties: The U.S. government has changed an administrative rule. USTR held that the 1998 rule is obsolete now.
- To harmonize U.S. law with the World Trade Organization’s (WTO) Subsidies and Countervailing Measures (SCM) Agreement.
1998 rule: USA came up with lists of countries and classified them as per their level of development. These lists were used to determine whether they were potentially subject to U.S. countervailing duties.
- Countries not given special consideration have lower levels of protection against a CVD investigation.
- If import volumes are negligible and the offending subsidy is de minimis (too small to warrant concern), the CVD investigation must be terminated.
- The de minimis thresholds and import volume allowance are more relaxed for developing and least-developed countries.
- The de minimis standard is usually a subsidy of 1% or less ad valorem and 2 percent for special cases.
The USTR used the following criteria to determine whether a country was eligible for the 2? minimis standard:
- Per capita Gross National Income or GNI
- share of world trade
- Other factors such as Organisation for Economic Co-operation and Development (OECD) membership or application for membership, EU membership, and Group of Twenty (G20) membership.
USA’s decision to delist India:
- If a country’s goods constitute less than 3% of all imports of that good into the U.S, it meets the ‘negligible import volumes’ standard.
- Along with India, Brazil, Indonesia, Malaysia, Thailand, and Vietnam were also taken off the list.
- They each have at least a 0.5% share of the global trade.
- However, the World Bank threshold separating high-income countries from others is having less than $12, 375 GNI.
- G20 membership indicates that a country is developed: Due to global economic significance of the G20, and the collective economic weight of its membership.
Countervailing duties (CVDs), also known as anti-subsidy duties
- CVDs are trade import duties imposed under the World Trade Organization (WTO) rules to neutralize the negative effects of subsidies.
- CVDs are imposed after an investigation finds that a foreign country subsidizes its exports, injuring domestic producers in the importing country. According to World Trade Organization rules, a country can launch its own investigation and decide to charge extra duties, provided such additional duties are in accordance with the GATT Article VI and the GATT Agreement on Subsidies and Countervailing Measures.
Also read: WTO's Dispute Settlement Mechanism