SMU found an interesting article in the most recent American Institute for International Steel (AIIS) newsletter which came out today. In this month’s issue AIIS takes a look at the results of the Chinese dumping suit against AK Steel and Allegheny Ludlum who were accused of dumping grain-oriented electrical steel. What should be of interest to our readers is the existences of U.S. subsidies which we take for granted but are considered by the international community as “protectionist.”

Here is the article from the AIIS publication:

By Gary Horlick, AIIS Trade Counsel

On April 14, 2010, China’s Ministry of Commerce (MOFCOM) released its Final Determination that two U.S. companies, AK Steel, and Allegheny Ludlum, were dumping Grain-Oriented Electrical Steel (GOES) by 7.8% and 19.9%, respectively, in China, and are subsidized by 11.7% and 12%. MOFCOM also found dumping of GOES by two Russian companies, NLMK and VIZ-STAL, by 6.3% each, and was not asked to investigate subsidies to them.

While the case was quite limited in terms of the subsidies to the two U.S. companies (it does not appear that the Chinese petitioners did a very full search), it was notable for several aspects that might apply in other cases:

The BUY AMERICA requirements of using iron and steel in U.S.

Government and Pennsylvania projects were found to be countervailable subsidies, even though the steel is purchased by private contractors rather than the U.S. Government, because the U.S. legislation (and Pennsylvania legislation) requires the use of U.S. steel.

MOFCOM demanded massive amounts of data, and applied “best information” adverse inferences when the U.S. Government did not submit some of its questionnaires on time (and disregarded responses that the U.S. Government submitted late).

AK Steel was countervailed for the Ohio Steel Development initia¬tive, notably a $16 million industrial development bond (tax-free) because there was no formalized procedure by the Ohio Economic Development Authority – this would likely be the case for many other state and local programs.

The Indiana tax increment revenue bonds for AK Steel were also countervailed because Spencer County could not demonstrate a formal, public, standard application and approval procedure. Again, this is likely to be the case for many other state and local programs.

Similarly, a tax holiday by Kentucky for AK Steel was counter¬vailed for the same reasons.

Many of the subsidies to the U.S. steel industry, such as the 1999 Byrd Emergency Steel Guarantee Loan Act, and the Byrd Amendment payments, the U.S. Clean Coal Technology Program, and other alleged subsidies were found not to be used by AK Steel, or by Allegheny in the relevant time period, but would likely to be found to be subsidies for other steel companies which used them.

The U.S. will presumably challenge these findings in the WTO, but may run into issues of challenging the same sorts of procedures the U.S. applies to Chinese imports. (Source: AIIS)