Thursday, December 13, 2012

Migrant Workers: Echoes of Modern Day Slavery

Kenya Dillon ‘14

            Migrant workers around the world are in garment factories sewing clothing to be sold in stores around the world. They are behind the scenes of hotels and financial conference centers in Dubai. They are construction workers in Qatar, building the 2022 World Cup facilities. On boats in seas across Southeast Asia, they are supplying our markets with fish. They are domestic workers who leave their homes and families for the households of employers across Europe. These are the migrant workers of the world.
            You see their faces in fields across America; bandanas and hats shield them from the hot sun as they harvest vegetables and fruits to fill grocery stores and feed the American population. They are changing the sheets in hotel rooms, bussing tables and cooking in restaurants. They are camp counselors, and nannies pushing children in strollers through the park. They are selling wristbands and operating carnival rides. They are computer programmers filling the offices of Silicon Valley. These are the migrant workers of America.
             A dearth of economic opportunity in their home countries drives migrant workers abroad in search of work. While some migrant workers are able to earn a livable wage, the majority of migrant workers experience something vastly different. The U.S. Department of State has cataloged the exploitation of migrant workers worldwide as “forced labor” and “a form of modern day slavery” in the 2012 Trafficking in Person’s Report.[1] As many reports have documented, migrant workers are utilized as a cheap and exploitable workforce.[2] Forced labor “…encompasses the range of activities – recruiting, harboring, transporting, providing, or obtaining – involved when a person uses force or physical threats, psychological coercion, abuse of the legal process, deception or other coercive means to compel someone to work…”[3]
             Currently, the U.S. has sixteen temporary visa work or “guestworker” programs[4], which are overseen by the Departments of Labor, Homeland Security, and State. In the summer of 2012, I conducted a detailed study of the U.S. temporary worker programs. I found that these work visa programs form an intricate web of U.S. labor law, administrative law, and immigration law. What I discovered in researching the temporary work programs was appalling. The forced labor endured by migrant workers has been recently characterized as a form of modern day slavery.[5]
The most prominent temporary work visa program is the H-2 temporary foreign worker program, a result of the Immigration and Nationality Act (INA) of 1952.[6] The H-2 program encompasses both the H-2A and the H-2B temporary work visa programs. The H-2A work visa program is for seasonal agricultural work and the H-2B visa program authorizes U.S. employers to bring guest workers to the U.S. to fill temporary, seasonal, or peak load nonagricultural jobs.[7] H-2A visas are usually valid for less than one year, and can be extended for up to 12 months.[8] U.S. Citizenship and Immigration Services usually does not authorize an H-2B visa for longer than one year, with the possibility of one-year extensions.[9]
            In 2012, the Department of Labor certified 62,743 H-2A positions and 63,724 H-2B positions.[10] The top five H-2A positions were for work with Valencia Orange crops, in farm worker positions, peach crops, tobacco crops, and lettuce crops.[11] The top five positions certified for H-2B workers were for positions as a laborer or landscaper, forest worker, amusement park worker, cleaner, housekeeper, and industrial or commercial groundskeeper.[12]
            Migrant workers search for work outside of their country of origin and recruiters and agents operating in the workers’ home countries waste no effort in manipulating and capitalizing on their desperation. Recruiters deceive workers into thinking that they must pay fees directly to the recruiter in order to secure work in the U.S.; this is a purely fraudulent practice.[13] Recruiters prey on foreign workers desperate for work and income by charging the workers manifestly excessive fees. These exorbitant fees include inflated costs, causing workers to arrive in the U.S. deeply in debt. It is not uncommon for workers to mortgage their property and homes in order to pay these fraudulent fees. Yet, in fact, recruiter fees are banned under U.S. regulations. U.S. government agencies maintain fixed rates for visa application fees. Unfortunately, it is nearly impossible for the U.S. federal agencies to monitor the activities of foreign recruiters, because the abuse is so widespread. Moreover, the fact that recruiters operate abroad seriously impedes the ability of U.S. monitors to enforce the regulations. The exploitation of vulnerable migrant workers has become a profitable engagement:

Given the paucity of effective international norms on labor migration, the exploitation of workers is growing at an alarming rate. Recruiters, labor brokers, sponsors, and employers have found that they can abuse migrants. With little risks and huge financial rewards, labor recruitment fraud often earns a guilty party little more than a fine (in the few countries that criminalize it). The practice of deceiving migrants into traveling abroad for work – including the prevalent requirement of large recruitment fees – is a high-profit form of exploitation in many major labor sending countries. In its 2009 study titled Cost of Coercion, the [International Labor Organization] estimated that up to $20 billion can be extorted annually from these workers worldwide.[14]

            The exploitation does not end with the visa application and entry process. The flaws in the visa programs are exascerbated by the fact that once workers are in the U.S., they are bound to maintain exclusive employment with the employer listed in their visa application and registered with the U.S. federal agencies. To the worker’s detriment, the visa does not operate as a general license to seek U.S. employment. Even if they are experiencing exploitation or abuse, under the H-2A and H-2B programs migrant workers are not able to change jobs to work for new employers. As a result, unscrupulous employers take advantage of the legal and financial dependence of migrant workers. After workers have acquired such high debt during the entry process, they rely heavily on the opportunity to make U.S. wages that can only be provided by their listed employer.

            The most common form of exploitation is in labor and wages. Often migrant workers are forced to work long hours and are paid unreasonably low wages, usually less than minimum wage, in violation of the program’s rules.[15] This is due not only to flaws in the program regulations, but is attributable to a lack of enforcement as well. When it comes to protections for workers the mandates on paper are not typically adhered to in practice.[16] Regulations require that H-2A workers must be paid at least the highest of the following: the adverse effect wage rate (AEWR); the prevailing wage; the prevailing piece rate; the agreed-upon collective bargaining wage; or the federal or state minimum wage.[17] H-2B employers must pay throughout the approved employment period a wage that is equal to or is above the highest wage out of the prevailing wage, applicable federal minimum wage, or the state minimum wage.[18] Wages cannot be based on commissions, bonuses, or other incentives unless the worker is guaranteed to receive a regularly paid wage that equals or is above the prevailing wage, the federal minimum wage, or the state or local minimum wage.[19] While these guarantees seemingly ensure an equitable exchange of labor for wages, the practical reality is less than convincing. The 2012 Trafficking in Persons Report prepared by the U.S. Department of State describes the situation common to many migrant workers.

                        For a Guatemalan, the cost of a job could include becoming an undocumented worker in the United States when he or she is forced by traffickers to perform labor that is not covered by the visa provided by his or her labor broker. He or she would then have to repay the broker and travel fees, all while working nearly 80 hours a week for less than minimum wage.[20]  

            In addition to the abuse resulting from the meager pay and long hours, there have been reports of women suffering rape and sexual abuse at the hands of their employers.[21] If workers speak out or complain about the abuse, they risk deportation, blacklisting, and retaliation by employers. Again, recruiters deprive workers of their rights by manipulating workers’ understandings of their available protections pursuant to U.S. law. According to the Department of State’s 2011 Trafficking in Persons Report:

            Recruiters discouraged former workers from reporting labor violations, claiming that U.S. embassies or consulates would not grant future visas for those who complain –assertions that are false and contrary to U.S. law. Workers also feared seeking assistance because of blacklisting and other retaliation against workers who complain about their conditions. [22]

            These common abuses continue to occur because of the looming threat of deportation that holds the workers under their employer’s thumb. Because workers are licensed only to work for the particular employer in their visa application, once an employer fires the worker and informs government agencies that the worker has violated their visa contract, the worker becomes eligible for deportation.[23]
            In addition to the financial and legal dependence that migrant workers are confronted with when coming to the U.S. on an H-2A or H-2B visa, the abuse takes many forms such as: a lack of medical treatment, discrimination, degradation, poor housing facilities, and purposeful isolation. The combined effect of the threat of deportation and legal and financial dependence on their employers prevents migrant workers from turning to law enforcement for help. Community service and non-profit programs exist, but it is difficult to inform migrant workers of the assistance available. Abusive employers work hard to keep their migrant workers isolated and afraid of both law enforcement and outside organizations. Any migrant worker lucky enough to learn of the assistance available and who is not restrained by fear, often has to seek help secretively.

            Legal remedies do exist for migrant workers in the U.S., but they vary from program to program. Migrant workers are largely dependent on the government to enforce their rights. For instance, agricultural workers under the H-2A program are not covered by the Migrant and Seasonal Agricultural Protection Act (MSPA), but are protected by the Fair Labor Standards Act (FLSA), enforced by the U.S. Department of Labor, and the Immigration and Nationality Act.[24] Additionally, although agricultural work is routinely documented as among the most dangerous jobs in the U.S., many farms are exempt from Occupational Safety and Health Administration inspections.[25] H-2B program workers are covered by the Fair Labor Standards Act.[26]
             Unlike H-2A workers, H-2B workers are not permitted to access federally funded legal services.[27] With limited financial resources, they are restricted to obtaining either private pro bono legal assistance or dependent upon non-profit legal service providers.[28] While several cases, especially class actions, have been successfully litigated, migrant workers face many barriers in utilizing the judicial system to enforce their rights.[29] More often than not, before a case can be brought, the migrant worker’s visa has expired and they must return to their home country. Luckily, non-profit legal service providers have found ways to overcome this challenge with transnational litigation techniques in which U.S. attorneys work with migrant workers via the internet, teleconferencing, email, and video depositions to facilitate legal claims.

             Although not all employers exploit migrant workers, the occurrences of exploitation are too widespread to be deemed incidental. While the U.S. temporary foreign work programs provide foreign workers with an income unavailable in their home countries, they should not act to facilitate the human rights abuses and labor law violations. In 2012, the U.S. Departments of Labor, State, and Homeland Security recognized the need to tighten the program regulations and step up enforcement.[30]

            The U.S. Government’s recognition of the need for increased regulation and change begs the question of whether the International Convention on Migrant Workers might be a good steering mechanism to eradicate modern day slavery and forced labor in our economy. The Preamble of the Convention on Migrant Workers identifies the gravity of the issues faced by migrant workers and the importance of internationally recognized principles in this area.

…Aware of the impact of the flows of migrant workers on States and people concerned, and desiring to establish norms which may contribute to the harmonization of the attitudes of States through the acceptance of basic principles concerning the treatment of migrant workers and members of their families…Considering the situation of vulnerability in which migrant workers and members of their families frequently-find themselves owing, among other things, to their absence from their State of origin and to the difficulties they may encounter arising from their presence in the State of employment, Convinced that the rights of migrant workers and members of their families have not been sufficiently recognized everywhere and therefore require appropriate international protection… Convinced, therefore, of the need to bring about the international protection of the rights of all migrant workers and members of their families, reaffirming and establishing basic norms in a comprehensive convention which could be applied universally…[31]

        The International Convention on Migrant Workers provides the safeguards necessary to prevent the continued exploitation of migrant workers and ratifying the convention would be a suitable beginning for the U.S. in addressing the human rights violations occurring under its own temporary work programs. Recent news developments regarding abuses occurring on U.S. soil and committed by U.S. businesses overseas have further illustrated that it is imperative that the U.S. join the international community’s effort to protect migrant workers.[32]


[1] U.S. Dep’t of State, Trafficking in Persons Report, at 1 (2012), available at http://www.state.gov/documents/organization/192587.pdf.
[2] See generally U.S. Dep’t of State, Trafficking in Persons Report, (2012), available at http://www.state.gov/documents/organization/192587.pdf; Mary Bauer, Southern Poverty Law Center, Close to Slavery: Guestworker Programs in the United States (2007), available at http://cdna.splcenter.org/sites/default/files/downloads/Close_to_Slavery.pdf.
[3] U.S. Dep’t of State, Trafficking in Persons Report, at 33 (2012), available at http://www.state.gov/documents/organization/192587.pdf.
[4] For a description of each program see U.S. Dep’t of State, Temporary Workers, http://travel.state.gov/visa/temp/types/types_1275.html.
[5] U.S. Dep’t of State, Trafficking in Persons Report, at 13 (2012), available at http://www.state.gov/documents/organization/192587.pdf (“The old way of slavery was that the boss really owned you…But now legal recruiters and employers work in tandem to deceive workers who, vulnerable and isolated in a strange culture, are forced to accept harsh terms. It is in that context that you have endemic forced labor today.”).
[6] Immigration and Nationality Act of June 27, 1952, ch. 477, codified at 8 U.S.C.§1101 et seq.
[7] U.S. Dep’t of Labor, Employment and Training Administration, Foreign Labor Certification, H -2B Certification for Temporary Non-Agricultural Work, (June 2012), http://www.foreignlaborcert.doleta.gov/h-2b.cfm.
[8] U.S. Dep’t Homeland Security, U.S. Citizenship and Immigration Services, H-2A Temporary Agricultural Workers, (January 17, 2012), http://www.uscis.gov/portal/site/uscis/menuitem.eb1d4c2a3e5b9ac89243c6a7543f6d1a/?vgnextoid=889f0b89284a3210VgnVCM100000b92ca60aRCRD&vgnextchannel=889f0b89284a3210VgnVCM100000b92ca60aRCRD.
[9] 8 C.F.R. §214.2(h)(6)(ii)(B)(2012).
[10] U.S. Dep’t of Labor, Employment and Training Administration, Office of Foreign Labor Certification, H-2A Temporary Agricultural Visa Program- Selected Statistics, FY 2012 YTD, http://www.foreignlaborcert.doleta.gov/pdf/h_2a_select_statis_oct2011_may_2012.pdf (last visited Nov. 9, 2012); U.S. Dep’t of Labor, Employment and Training Administration, Office of Foreign Labor Certification, H-2B Temporary Non-Agricultural Visa Program- Selected Statistics, FY 2012 YTD, http://www.foreignlaborcert.doleta.gov/pdf/h_2b_temp_non_agricultural_visa.pdf (last visited Nov. 9, 2012).
[11] U.S. Dep’t of Labor, Employment and Training Administration, Office of Foreign Labor Certification, H-2A Temporary Agricultural Visa Program- Selected Statistics, FY 2012 YTD, http://www.foreignlaborcert.doleta.gov/pdf/h_2a_select_statis_oct2011_may_2012.pdf (last visited Nov. 9, 2012).
[12] U.S. Dep’t of Labor, Employment and Training Administration, Office of Foreign Labor Certification, H-2B Temporary Non-Agricultural Visa Program-Selected Statistics, FY 2012 YTD, http://www.foreignlaborcert.doleta.gov/pdf/h_2b_temp_non_agricultural_visa.pdf (last visited Nov. 9, 2012).
[13] 20 C.F.R. § 655.15(a)(2012) (H-2B) (explaining that employers must file applications for foreign workers directly to the government agencies); and 20 C.F.R. § 655.130(a)(2012) (H-2A) (explaining that employers must file applications for foreign workers directly to the government agencies).
[14] U.S. Dep’t of State, Trafficking in Persons Report, at 23 (2012), available at http://www.state.gov/documents/organization/192587.pdf.
[15] Mary Bauer, Southern Poverty Law Center, Close to Slavery: Guestworker Programs in the United States 18 (2007), available at http://cdna.splcenter.org/sites/default/files/downloads/Close_to_Slavery.pdf.
[16] See generally Michael P. Tremoglie, OSHA Cites La. company for safety and wage violations, Legal Newsline, July 26, 2012, http://www.legalnewsline.com/news/236843-osha-cites-la.-company-for-safety-and-wage-violations.
[17] U.S. Dep’t of Labor, Adverse Effect Wages - Year 2012, (last visited Nov. 9, 2012) http://www.foreignlaborcert.doleta.gov/adverse.cfm.
[18] 20 C.F.R. § 655.22(e)(2011).
[19] 20 C.F.R § 655.22(g)(1)(2011).
[20] U.S. Dep’t of State, Trafficking in Persons Report, at 11 (2012), available at http://www.state.gov/documents/organization/192587.pdf.
[21] See generally Human Rights Watch, Cultivating Fear: The Vulnerability of Immigrant Farmworkers in the US to Sexual Violence and Sexual Harassment (May 16, 2012), http://www.hrw.org/reports/2012/05/16/cultivating-fear-0.
[22] U.S. Dep’t of State, Trafficking in Persons Report, at 378 (2011), available at http://www.state.gov/documents/organization/164458.pdf.
[23] Mary Bauer, Southern Poverty Law Center, Close to Slavery: Guestworker Programs in the United States 15 (2007), available at http://cdna.splcenter.org/sites/default/files/downloads/Close_to_Slavery.pdf.
[24] U.S. Dep’t of Labor, A Summary of the Major Laws of the Department of Labor, http://www.dol.gov/opa/aboutdol/lawsprog.htm#migrant (last visited Nov. 9, 2012); U.S. Dep’t of Labor, Employment Law Guide, Work Authorization for Non-U.S. Citizens: Temporary Agricultural Workers (H-2A Visas), (Sept. 2009), http://www.dol.gov/compliance/guide/taw.htm.
[25] U.S. Dep’t of Labor, Employment Law Guide, Work Authorization for Non-U.S. Citizens: Temporary Agricultural Workers (H-2A Visas), (Sept. 2009), http://www.dol.gov/compliance/guide/taw.htm; Internal Revenue Services, Foreign Agricultural Workers, (August 2, 2012), http://www.irs.gov/businesses/small/international/article/0,,id=96422,00.html.
[26] U.S. Dep’t of Labor, Employment Law Guide, Work Authorization for Non-U.S. Citizens: Temporary Nonagricultural Workers (H-2B Visas), (Sept. 2009), http://www.dol.gov/compliance/guide/tnw.htm#EmplRights.
[27] Mary Bauer, Southern Poverty Law Center, Close to Slavery: Guestworker Programs in the United States 28 (2007), available at http://cdna.splcenter.org/sites/default/files/downloads/Close_to_Slavery.pdf.
[28] Id.
[29] See generally Arriaga v. Florida Pacific Farms, LLP, 305 F.3d 1228, 1241-45 (11th Cir. 2002); James Gilbert, Migrant Workers Settle Lawsuit Against Monsanto, Yuma Sun, June 6, 2011, http://www.yumasun.com/articles/workers-70515-monsanto-lawsuit.html.
[30] For recent developments in new H-2B regulations see U.S. Dep’t of Labor, Wage and Hour Division, WHD Side-By-Side Comparison of the 2009 and 2012 Rules, (Feb. 2012), http://www.dol.gov/whd/immigration/H2BFinalRule/H2BSideBySide.htm; for examples of regulation enforcement see Michael P. Tremoglie, OSHA Cites La. Company for Safety and Wage Violations, Legal Newsline, July 26, 2012, http://www.legalnewsline.com/news/236843-osha-cites-la.-company-for-safety-and-wage-violations.
[31] International Convention on the Protection of the Rights of All Migrant Workers and Members of Their Families, G.A. Res. 45/158, U.N. Doc. A/RES/45/158 (Dec. 18, 1990).
[32] See generally Charles Kernaghan, Institute for Global Labour and Human Rights, Sexual Predators and Serial Rapists Run Wild at Wal-Mart Supplier in Jordan, (2007) http://www.globallabourrights.org/admin/reports/files/Content-Classic-0607-final.pdf; David Barboza and Charles Duhigg, China Contractor Again Faces Labor Issue on iPhones, N.Y. Times, Sept. 10, 2012, http://www.nytimes.com/2012/09/11/technology/foxconn-said-to-use-forced-student-labor-to-make-iphones.html?pagewanted=all&_r=0; Mark Fainaru-Wada and Justine Gubar, The Unseen Faces of Sports Apparel, ESPN, Jan. 9, 2012, http://espn.go.com/espn/otl/story/_/id/7435424/dallas-cowboys-dip-sports-apparel-business-comes-allegations-sweatshop-labor

Wednesday, October 3, 2012

INTERNATIONAL LAW SOCIETY HALLOWEEN PARTY

INTERNATIONAL LAW SOCIETY partners up with various student organizations at BLS to host their annual HALLOWEEN PARTY

WHEN: Thursday, October 25th
TIME: 7-10pm
WHERE: Geraldo's in Feil Hall
BRING: $10 for the cover charge and enjoy endless food and drinks from various countries



Thursday, February 23, 2012

An Opportunity for the Department of Commerce

By: Tyler Korff

It seems that China has won the latest round in its prolonged trade war with the U.S. The Federal Circuit issued a decision on December 19, 2011 that effectively precludes the Department of Commerce (“Commerce”) from imposing countervailing duties (“CVDs”) on non-market economies (“NMEs”). Back in October 2010, the U.S. Court of International Trade (“Trade Court”) ordered Commerce not to apply CVDs on pneumatic off-the-road tires from China due to the likelihood of double counting when both CVDs and antidumping duties (“ADs”) were imposed on the same good.[1] The Federal Circuit affirmed the Trade Court’s opinion, but for different reasons. In GPX Int’l Tire Corp., the appellate court held that Commerce could not apply CVDs on any goods from China even in cases where Commerce has not already imposed ADs.[2]
[1] GPX Int’l Tire Corp. v. United States, 715 F.Supp.2d 1337 (U.S. Ct. Int’l Trade 2010).
[2] GPX Int’l Tire Corp. v. United States, 2011 WL 6371903 (Fed. Cir. 2011).

The chief issue for the Federal Circuit was with Commerce’s NME methodology. In Georgetown Steel Corp. v. United States, the American manufacturers’ 1983 case against Czechoslovakia, Commerce determined and the Federal Circuit agreed that Commerce could not impose CVDs on NME countries.[3] This remained the status quo until 2007, when Commerce issued a memorandum stating that the department could apply CVDs on goods from China, an NME country, since the modern Chinese economy was “significantly different from the Soviet-style economies at issue in Georgetown Steel.”[4] For the last four years, then, the U.S. has essentially pretended that China is a market economy for trade purposes, and Commerce has used that determination in order to gain the upper hand in the two countries’ economic feud.
[3] Georgetown Steel Corp. v. United States, 801 F.2d 1308 (Fed. Cir. 1986).
[4] Shauna Lee-Alaia and Lawrence Norton, “Countervailing Duty Investigation of Coated Free Sheet Paper from the People's Republic of China—Whether the Analytical Elements of the Georgetown Steel Opinion Are Applicable to China's Present–Day Economy” (Mar. 29, 2007), available at http://ia.ita.doc.gov/download/nme-sep-rates/prc-cfsp/china-cfs-georgetown-applicability.pdf.

Yet while courts ought to give considerable deference to Commerce’s CVD and AD determinations, Commerce itself cannot act in a way that contradicts Congressional intent. In particular, the Federal Circuit found that in passing CVD laws in 1988 and 1994, Congress legislatively ratified the position that CVDs could not be applied to NMEs; therefore, government payments “cannot be characterized as ‘subsidies’ in a non-market economy context.”[5] In the final analysis, Commerce may regret ever appealing the Trade Court’s decision, since the Federal Circuit decision is now binding on future cases (while the Trade Court order was not necessarily precedential). Absent an appeal to the Supreme Court, if Commerce hopes to reinstate its CVD policies, it needs Congress to amend the law.
[5] GPX Int’l Tire Corp. v. United States, 2011 WL 6371903, at *1 (Fed. Cir. 2011).

But perhaps the Federal Circuit decision may be a blessing in disguise. The U.S. media has reported extensively on China’s unwillingness to revalue the Yuan; indeed, if American politicians are to be believed, the controversy with China’s currency is the main reason why relations with China have hit a stumbling block. At the same time, however, these American tariffs are seen, to some, as equally unfair. And China is not alone. In 2009, the U.S. began to pursue CVD investigations against Vietnam, another NME country. If continued, use of CVDs against NMEs may threaten the integrity of the WTO system. More importantly, CVDs pose significant implications for Sino-American trade relations. In the 1980s, a cooperative Sino-American relationship was seen as America’s chief foreign policy success.

While CVDs may help American businesses stay competitive, the Federal Circuit opinion provides the perfect opportunity for Commerce to reevaluate its policies with respect to Vietnam and China.

Shifts in U.S.-China Countervailing Duty Law

By: Hang Liu '13

In December 2011, the Court of Appeals for the Federal Circuit handed down its opinion in GPX International Tire Corporation v. United States (“GPX IV”), ruling that the U.S. Department of Commerce (“Commerce”) improperly imposed countervailing duties on tires imported by a group of Chinese manufacturers.[1] The Court’s decision appeared in the midst of ambiguous signals from Congress and the executive branch regarding the future of U.S.’ customs policies regarding the People’s Republic of China. While GPX IV upheld a traditional view of American countervailing duty law, the decision may be short lived. Considering America’s current political climate, the federal government may soon implement a considerable shift in its policies toward Chinese imports.

To better understand GPX IV, it is useful to explore existing law regarding China’s current classification as a non-market-economy (“NME”) by Commerce. The Tariff Act of 1930, as currently amended, provides two types of duties for imports injuring domestic industries: countervailing duties (“CVDs”) and antidumping duties (“ADs”). First, Commerce can impose countervailing duties on goods that receive “a countervailable subsidy” from the importer’s
foreign government. Second, Commerce can impose antidumping duties on goods “sold in the United States at less than [their] fair value.”[2] Antidumping duties are supposed to address actions taken by the foreign importer, while countervailing duties are designed to remedy government conduct. While countervailing duty law makes no references to NMEs, antidumping
law deals directly with the problem of exports from NME countries.[3]

Until 2007, Commerce adhered to the policy that countervailing duties were inapplicable to NMEs because subsidies do not exist in economies lacking ordinary market principles.[4] A subsidy (also known as a “bounty” or “grant”)is defined as any action that distorts or subverts the market process, resulting in a misallocation of resources and inefficient production. Due to the fact that the governments of NMEs retain centralized control over the market and extensively involve themselves in price planning, these economies are supposed to lack both a true market and freely allocated resources.[5]

Then, in 2007, Commerce re-evaluated the applicability of this policy toward China. On one hand, Commerce retained China as an NME for the purposes of antidumping law because of the Chinese government’s continued control over the economy through its state-owned enterprises, restriction of worker movement, and insulation of the Chinese currency from market forces. Yet, on the other hand, Commerce also concluded that substantial economic reforms in China now made it possible to identify and measure subsidies for the purposes of countervailing duty law.[6] It then levied both countervailing and antidumping duties against several Chinese companies importing tires into the U.S.

Commerce’s decision sparked a series of litigation. After seven Chinese importers contested the new Commerce policy, the Court of International Trade (“CIT”) consolidated their separate cases into its GPX I and GPX II decisions. The CIT held that Commerce's 2007 interpretation of countervailing duty law was “unreasonable” because of the high likelihood of “double counting” duties for NMEs.[7] The Court of Appeals, while affirming the CIT’s decision, overturned the tire
duties on different grounds; the Court ruled that Congress, in passing and then renewing the Omnibus Trade and Competitiveness Act in 1988 and 1994, had ratified Commerce’s pre-2007 policy of not applying countervailing duty laws to NME countries.[8]

In ruling on GPX IV, the Court of Appeals explicitly acknowledged recent Congressional actions signaling a shift in American policies toward Chinese imports. In 2010, the House of Representatives passed the Currency Reform for Fair Trade Act (the Act), a bill which seeks to implement punitive trade tariffs on countries that obtain an unfair competitive advantage by taking measures as currency manipulation.[9] A House committee report noted that the legislation authorized the imposition of countervailing duties for foreign governments that provide a subsidy by artificially undervaluing its currency.[10]

Commerce, in making its case in GPX IV, raised the Act as evidence of a change in Congressional attitudes toward countervailing duties in regards to China. The Federal Circuit downplayed the argument by stating that the Act lacked sufficient legal weight until the Senate votes on the bill.[11] Yet the Court’s decision recognizes the potential for a considerable shift in American countervailing duty law if the Currency Reform for Fair Trade Act is eventually passed as law. Such action would essentially reverse the Court’s ruling in GPX IV.

The current executive branch has indicated its support for the Act’s policies regarding China. In 2008, then-Senator Barack Obama supported legislation that would have also classified currency manipulation as a countervailable subsidy. Treasury Secretary Timothy Geithner, in his 2009 confirmation hearing, accused the Chinese government of undervaluing its currency to keep Chinese manufacturing costs artificially low, thus underselling American products and injuring
American manufacturing industries.[12] Additionally, the House cited Commerce’s 2007 decision to apply countervailing duties towards China as support for voting in favor of the Act in October 2011.[13]

Furthermore, as the 2012 general election approaches, GPX IV may face continued scrutiny from the executive branch. President Obama’s policy proclamations toward the Chinese economy bear watching. Some observers believe that during the 2008 Democratic primary Obama played to his labor base by downplaying free trade in advocating the renegotiation of the North American Free Trade Agreement and opposing the proliferation of regional and bilateral free trade agreements under George W. Bush.[14]

Currently, trade policy is not listed among the twenty-four priority issues on the White
House website.[15] However, as Americans continue to hear accounts of the U.S.’ trade deficit and of China’s significant holdings of American debt, Obama is likely to face questions concerning his future policies towards the Chinese economy. Presumptive Republican candidate Mitt Romney has already criticized the Obama administration’s “timid complaints” regarding Chinese currency manipulation and has vowed to impose countervailing duties on Chinese imports if elected.[16]

Therefore, despite GPX IV’s decision to overturn a recent policy shift by the Department of Commerce, the nature of American countervailing duty law, particularly with respect to the People’s Republic of China, may experience a fundamental shift. As the U.S. continues to grapple with its trading partnership with the People’s Republic of China as well as address allegations of currency manipulation by the Chinese government, it is clear that the issues raised by GPX IV are far from settled.

[1] GPX Int'l Tire Corp. v. United States, 2011 WL 6371903, 1 (Fed. Cir. Dec. 19, 2011). [hereinafter GPX IV].
[2] Id.
[3] Id.
[4] See Georgetown Steel Corp. v. United States, 801 F.2d 1308 (Fed. Cir. 1986).
[5] Lauren W. Clarke, The Market-Oriented Enterprise Approach: The Best Response to the Questionable United States Trade Practices Scrutinized in GPX International Tire Corp. v. United States, 60 Cath. U. L. Rev. 809, 815-16 (2011). [hereinafter Clarke].
[6] Clarke, 821-22.
[7] See GPX Int'l Tire Corp. v. United States, 645 F. Supp. 2d 1231 (Ct. Int'l Trade 2009) [hereinafter GPX I]; GPX Int'l Tire Corp. v. United States, 715 F. Supp. 2d 1337 (Ct. Int'l Trade 2010) aff'd, 2011-1107, 2011 WL 6371903 (Fed. Cir. Dec. 19, 2011) [hereinafter GPX II].
[8] GPX IV, 1.
[9] H.R. 2378, 111th Cong. (2010).
[10] GPX IV, 7.
[11] Id.
[12] Alexis Early, Where the Rubber Meets the Road: What Chinese Tires Mean for Obama's Trade Policy, 6 Bus. L. Brief (Am. U.) 63, 66 (2010). [hereinafter Early].
[13] GPX IV, 7.
[14] Early, 63.
[15] See The White House, http://www.whitehouse.gov/issues (last visited Feb. 15, 2010) (listing civil rights, defense, education, fiscal responsibility, immigration, taxes and technology as some of the issues).
[16] See Mitt Romney, “China must respect the free-trade system,” Opinion published in the Washington Post, October 13 2011, online at .