The U.S. government has changed an administrative rule making it easier for it to impose countervailing duties (CVDs) on goods from India and certain other countries. The Office of the United States Trade Representative (USTR) has published a notice amending lists of developing and least-developed countries that are eligible for preferential treatment with respect to CVD investigations.
To harmonize U.S. law with the Word Trade Organization’s (WTO) Subsidies and Countervailing Measures (SCM) Agreement, the USTR had, in 1998, come up with lists of countries classified as per their level of development. These lists were used to determine whether they were potentially subject to U.S. countervailing duties. The 1998 rule is now “ obsolete” as per the USTR notice.
Countries not given special consideration have lower levels of protection against a CVD investigation. A CVD investigation must be terminated if the offending subsidy is de minimis (too small to warrant concern) or if import volumes are negligible. The de minimis thresholds and import volume allowance are more relaxed for developing and least-developed countries.
India was, until February 10, on the developing country list and therefore eligible for these more relaxed standards. It has now been taken off of that list. The new lists consist of 36 developing countries and 44 least developed countries.
Differential Treatment
The de minimis standard is usually a subsidy of 1% or less ad valorem and 2% for special cases.
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. For special cases it is 4%.
Imports do not meet the standard, if , individual volumes are less than 3% (special cases: 4%) but the aggregate volume of imports into the U.S. is 7% of all such goods.
The USTR used the following criteria to determine whether a country was eligible for the 2% de minimis standard:
- Per capita Gross National Income or GNI
- share of world trade
- other factors such as Organization for Economic Co-operation and Development (OECD) membership or application for membership, EU membership, and Group of Twenty (G20) membership
Why India Was Taken off the Preferential List
India, along with Brazil, Indonesia, Mayalsia, Thailand and Vietnam were taken off the list since they each have at least a 0.5% share of global trade, despite having less than $12,375 GNI (the World Bank threshold separating high income countries from others).
India was taken off the list also because – like Argentina, Brazil, Indonesia and South Africa – it is part of the G20.
“Given the global economic significance of the G20, and the collective economic weight of its membership (which accounts for large shares of global economic output and trade), G20 membership indicates that a country is developed,” the USTR notice said.
Timing not linked to Trump visit
U.S. President Donald Trump has repeatedly complained about the WTO’s classification of developing countries.
On July 26, he had issued a memorandum to the USTR titled, ‘Reforming Developing-Country Status in the World Trade Organization’. In it, Mr. Trump had asked the USTR to, among other things, “no longer treat as a developing country for the purposes of the WTO any WTO Member that in the USTR’s judgment is improperly declaring itself a developing country,” if the WTO had not changed its approach to flexibilities associated with developing country status within ninety days of the memorandum being issued.
Mr. Trump is due to visit India on February 24 and 25 and the U.S. and India are trying to finalise a trade package before the U.S. President’s arrival. The timing of the USTR announcement is not linked to the visit, a former trade official told The Hindu. “ The timing is mostly coincidental and mostly related to dynamics at the WTO on developing country treatment,” the official said.
