US launches investigation of alleged subsidies to VN plastic bag exports

June 24, 2009

LookAtVietnam – The US Department of Commerce’s upcoming decision on plastic bag imports will significantly impact Vietnam’s exports to the US. Miller & Chevalier law firm senior lawyers Jay Eizenstat and John Magnus talked about this case.  

Mr Jay Eizenstat & Mr John Magnus
VietNamNet Bridge – A pending US Department of Commerce (DoC) decision on plastic bag imports may significantly impact Vietnam’s exports to the US.  An adverse finding could impact many Vietnamese other exports as well.  International trade policy experts Jay Eizenstat and John Magnus of the Miller and Chevalier law firm discuss this case.  They emphasize that Vietnamese ministries must work hard and cooperate closely to prepare a defense.

In late April, the US Commerce Department announced it would initiate a countervailing duties (CVD) case against plastic bag imports from Vietnam, Indonesia and Taiwan at the request of two American manufacturers. What are the possible consequences of this first CVD case against Vietnam’s exports?

Eizenstat: This CVD case has enormous significance for Vietnam, because it is the first case in which US petitioners have asked, and the DoC has provisionally agreed to apply US countervailing duty law to goods from Vietnam.   It will have great importance as a precedent.

To give you an example, in 2007 DoC made a threshold judgment involving Chinese goods, the so-called Coated Free Sheet Paper case.  Since that landmark 2007 case, the DoC has accepted more than 10 CVD petitions involving goods from China, deciding against the Chinese exporters in all completed cases. Thus, the DoC’s decisions in this first CVD investigation involving Vietnam will probably have significant consequences reaching far beyond retail carrier bag exports.

If the DoC makes affirmative findings with respect to the subsidies alleged in the petition, other highly competitive Vietnamese export industries, including wooden furniture, textiles and apparel, footwear, and aquaculture products, will be at risk in subsequent CVD cases.

In addition, it is noteworthy that Canada has just issued a preliminary affirmative dumping determination on waterproof footwear from Vietnam. The US footwear industry might want to follow suit, but allege that Vietnamese footwear producers are both dumping and receiving government subsidies on their footwear.

In addition, the Commerce Department will be making choices about how to measure (benchmark) the subsidies analysed in this first case. Those choices of measurment methodology are likely to be followed in future cases. Such decisions would include whether to use, and how to construct, out-of-country benchmarks, as the DoC has done for land and loan subsidy programmes in China.

How long will the investigation take? What has the DoC done so far?

Magnus: The Commerce Department’s investigation will take approximately one year, perhaps a little longer. Thus far, the DoC has reviewed the petition, found it to be satisfactorily pleaded, and opened a CVD investigation that includes all of the subsidy programmes identified in the petition. It has also developed questionnaires for the various respondents, including the Vietnamese government. These questionnaires are lengthy and complicated.  Responding to them will require considerable government resources and input from ministries and a high level of inter-ministry coordination.

In parallel, the DoC has invited public comments on whether the US’ CVD Law should apply to Vietnam. However, notwithstanding the comment period, DoC’s investigation is continuing in its normal manner. The petitioners may make new subsidy allegations, which if timely filed and satisfactorily pleaded, DoC will include in the investigation.

Is there any possibility that Vietnam will win this case?

Magnus: An outright win would entail a finding that Vietnam is not yet subject to the US countervailing duty law, or that Vietnam is subject to the law, but none of the subsidy allegations put forward by petitioners here is meritorious [i.e., the net countervailable subsidy in this case is zero or trivial].

The likelihood of one of these outcomes is low. [Vietnam could still avoid countervailing duties on plastic bags if it prevails in the injury investigation, as happened in the first China-CVD case involving coated free sheet paper, but based on the data we have seen, the likelihood of a final negative injury determination here seems low as well.] On the commercial side, Vietnam could still count as a partial success an outcome in which some of the more significant investigated programmes are found to be non-countervailable, e.g. on specificity grounds.

What should the Vietnamese government and enterprises do now to prepare for the case?

Eizenstat: The Vietnamese government and the private sector respondents should develop the information in the areas identified in the DoC’s standard CVD questionnaires. For the Vietnamese government, since this is the first-ever CVD case, responding to the CVD questionnaires will require considerable allocation of resources and interagency coordination.

Among other things, this effort will involve identifying the decision-making process by which applications for subsidy benefits are approved or denied, and the actual distribution across industries and companies of benefits bestowed under each of the investigated subsidy programmes. Compiling and disclosing such data will be challenging, and perhaps uncomfortable, for the government.

*Jay Eizenstat served as a former director for Customs Affairs at the United States Trade Representative office in Washington.
*John Magnus is a high-profile trade litigator and policy practitioner who has served as the Chair of the American Bar Association’s International Trade Law Committee.


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