Feb 05, 2020
The U.S. Department of Commerce announced on Tuesday (Feb. 4th, 2020) that, considering the numerous comments received on a rulemaking process, it will amend its domestic regulation on subsidies and countervailing measures to allow the imposition of such remedies on exchange undervaluation practices adopted by foreign governments. According to the document released by Commerce, undervalued currencies are those in which the real effective exchange rate is inferior to the real exchange rate “that achieves an external balance over the medium term that reflects appropriate policies”. According to the new rule, a conclusion on the existence of undervaluation will depend on a finding of government actions that impact exchange rates.
In order to meet the requirements for characterization of a subsidy, Commerce will change its specificity rules to allow the understanding that exporting and importing companies can be considered as a “group” of companies. For the difficult task of measuring the benefits conferred to exporting companies by such practices, USDOC should calculate it as “equal to the extra amount of domestic currency received by a firm because of the undervaluation”.
Since it is an amendment to the current subsidy regulations, investigations must follow the rules for the imposition of countervailing duties – especially regarding the need of a positive finding of injury and causal link to the domestic industry for the application of trade remedies. Therefore, the measure should not, in principle, affect all exports of a country, but rather only of the investigated products.
The changes become effective on April 6, 2020.