Currency manipulation by foreign countries could be deemed an export subsidy and subject to countervailing duties under a new proposed rule from the International Trade Administration. Comments on this proposal are due by June 27.

U.S. law provides for the imposition of CV duties on subsidized imports to offset the portion of the subsidy attributable to the imported goods. Subsidies include financial contributions and income or price support from government or public entities and must be specific and provide a benefit to a foreign producer or exporter to be countervailable.

This proposed rule would provide one way to analyze whether the exchange of an undervalued currency results in a countervailable subsidy. The ITA states that it would generally only make such a determination if the Treasury Department has first concluded that foreign government action on the exchange rate has resulted in currency undervaluation. Treasury’s most recent semiannual report made no such determinations but did include several countries on a monitoring list.

The ITA estimates that between $3.9 million and $16.6 million in CV duties might be collected annually if currency-related subsidies are countervailed in future proceedings. The ITA does not believe the proposed rule would lead to an increase in the number of CV petitions filed or dramatically change the total volume of imports subject to CV duties but does believe it likely to increase the number of CV allegations in such petitions.

For more information on this proposal, please contact trade attorney Kristen Smith at (202) 730-4965.

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