US Dept of Commerce Announces Market Economy Status for Russian Federation

THE FOLLOWING CONTAINS:

1. Public Announcement
2. Secretary of Commerce statement
3. Fact Sheet

1. PUBLIC ANNOUNCEMENT

   "DEPARTMENT OF COMMERCE ANNOUNCES MARKET ECONOMY STATUS FOR THE RUSSIAN FEDERATION"

   Today the Department of Commerce's Import Administration announced its determination that the Russian Federation has made the transition to a market economy for purposes of the U.S. antidumping and countervailing duty laws. This decision is the culmination of a nine-month, public investigation conducted under U.S. law.

   The effective date for Russia's graduation is April 1, 2002. As a result of the Department's finding, the U.S.-countervailing duty law will now apply to Russia. Furthermore, the Department will now use the standard market economy methodology in antidumping cases once a sufficient period of time has passed so that adequate market economy data is available.

2. STATEMENT BY SECRETARY OF COMMERCE DONALD EVANS

   Statement by Secretary Evans on Russia's Transition to a Market Economy

   "I congratulate Russia for their designation as a market economy under U.S. law. This decision by the Commerce Department was made in accordance of the law and reflects the tremendous economic changes that Russia has made over the last decade."

3. FACT SHEET: RUSSIA TRANSITION TO MARKET ECONOMY STATUS UNDER US TRADE REMEDY LAWS

   Fact Sheet: Russian Transition to Market Economy Status Under U.S. Trade Remedy Laws

   Background on Request for Review of Non-Market Economy Status

   • This past year, two Russian steel companies, Novolipetsk Iron and Steel Corporation and JSC Severstal, with the support of the Russian government, requested a review of Russia's status under the trade remedy laws.
   • On September 26, 2001, the U.S. Department of Commerce initiated a review as allowed by U.S. law. There was no applicable statutory deadline for the Department's determination because the request was not made in the context of an ongoing unfair investigation or review.
   • Over the course of the last nine months, the Department has, pursuant to the statutory criteria noted below, conducted a review of Russia's non-market economy status. That review offered interested parties the opportunity to participate and provide their views with respect to the application of the statutory criteria to the Russian economy. The review included the following procedural steps:
   • On October 26, 2001, the Department published a Federal Register notice inviting public comments on the Russian request for a change in Russia's status under the trade remedy laws.
   • The Department established a deadline for the first round of comments of December 10, 2001. The Department made those comments a part of the public record of the proceeding and offered interested parties an opportunity to comment on or rebut information that had been entered into the record during the first round of comments. Rebuttal comments were due February 7, 2002.
   • The Department held a public hearing on March 27, 2002, so that parties could present their arguments on the Russian request.
   • The Department allowed interested parties a final opportunity to be heard in the form of written comments on statements and information submitted at the hearing. Final comments were due April 8, 2002.
   • In the course of its review, the Department received extensive information from all interested parties, including U.S. industries supporting and opposing any change in Russia's status under the trade remedy laws, as well as comments from Russian industry and the Russian government. The Department also obtained information from a number of other sources including the European Bank for Reconstruction and Development, the International Monetary Fund, the World Bank, the Organization for Economic Cooperation and Development, and academic journals.

   Procedures for Review of Russia's Status

   • U.S. law gives foreign parties the right to petition for a change in a non-market economy country's status to a market economy country for purposes of the trade remedy laws. In response to such a request, the Import Administration is obligated to conduct a legal proceeding to evaluate the request.
   • By law, the Commerce Department must consider six criteria in determining whether to change Russia's status to that of a market economy. Those criteria include
     1. currency convertibility,
     2. free bargaining for wages,
     3. foreign investment,
     4. government ownership or control of production,
     5. government control over the allocation of resources, and
     6. other appropriate factors.
   • When a request for review is made in the context of an antidumping investigation or administrative review of an existing antidumping order, the deadlines in the investigation or review normally dictate the timing of a decision regarding a country's non-market economy status. Where the request is not made in the context of an ongoing investigation or review, the statute does not impose a specific deadline for making a determination.

   Effect of the Commerce Department's Determination

   • First, the decision obligates the Department to begin using Russian prices and costs in future antidumping investigations, rather than relying on surrogate country price and cost information. Second, the decision would subject Russia to the U.S. countervailing duty law.
   • The U.S. antidumping law imposes duties to offset the material injury caused to U.S. industry by the dumping of foreign goods on the U.S. market. Dumping is defined as sales in the U.S. market below those charged in the exporter's home market or as sales below the producer's costs of production. Russia's status as a non-market economy meant that the Commerce Department did not use Russian price or cost data in determining the margin of dumping in actions brought against Russian exports. Instead, the Department substituted price and cost information from a comparable surrogate market economy country in making its calculations.
   • The U.S. countervailing duty law is designed to provide relief from material injury to U.S. producers from subsidized foreign competition. Russia's non-market economy status exempted it from the scope of the U.S. countervailing duty law. Non-market economies are exempted from the countervailing duty law on the theory that pervasive state control in non-market economies makes it impossible to establish an effective benchmark against which the Commerce Department could measure whether a particular government action created a countervailable subsidy.
   • The decision only affects future antidumping and countervailing duty determinations that concern time periods after April 1, 2002. It has no immediate effect on existing antidumping orders or investigations already under way under the non-market economy methodology.