The U.S. Department of Commerce today published a Final Rule in the Federal Register establishing a framework for declaring a foreign country’s “currency devaluation” a government subsidy in U.S. countervailing duty proceedings. Commerce’s new rule applies to all new countervailing duty proceedings initiated on or after April 6, 2020.
Commerce’s rule effectively allows affected U.S. companies and industries to allege that a foreign government’s currency valuation decisions are trade-distorting subsidies. Commerce’s rule establishes a framework for Commerce to consult with the U.S. Department of the Treasury and obtain Treasury’s expertise to determine whether the undervalued currency subsidizes specific companies. In ascertaining the benefit conferred by undervalued currency, Commerce will examine the difference between a country’s actual real effective exchange rate and a model of a medium-term equilibrium real effective exchange rate. Commerce also promulgated a rule that allows for a finding that currency undervaluation provides a specific benefit to companies that buy or sell goods internationally.