of products within quota at less than their fair value, can have a very
damaging effect on the domestic industry notwithstanding the otherwise
beneficial effects of the quantitative limitations.
This results from the fact that unfairly low prices injure
a domestic industry by depressing the domestic price structure, reducing
its sales revenue, and diminishing its profits. It is entirely foresee-
able that a well-defined segment of the textile industries could be
seriously injured by the price-depressing, profit-reducing effects of
the unfair pricing of foreign textiles imported within the quantitative
limits set forth or provided for in a bilateral or multilateral orderly
trade agreement.
Consequently, the suggestion by the Administration that the
Secretary be given the discretionary power not to obey the mandate of
the Congress and impose countervailing duties in a case where it has
been determined that exports to the United States are in fact the bene-
ficiary of bounties or grants should be rejected.
of goods for export in comparison with goods produced for
consumption in the home market.
- Responding to the second suggestion first, any
bona fide discrimination in the price of raw materials
of the nature described by Mr. Stewart presently would
be considered by the Treasury to constitute a bounty or
!
grant. No statutory amendment is necessary to accomplish
the result he proposes. With respect to the rebate or
remission of internal taxes upon exportation, the Treasury
has long considered the rebate or remission of any tax
not directly related to the exported product or its
components to be a bounty or grant. On the other hand,
!
for more than 70 years the Treasury has not considered
rebates or remissions of taxes directly related to the
exported product or its components to be bounties or
grants. Examples of such taxes are customs duties or
excise taxes, which the United States, as well as most
foreign countries, rebates upon the exportation of mer
Accordingly, subsection (d) set forth on page 59 of the bill
should be deleted in its entirety.
United States law does not require an investigation to deter-
mine whether the importation of goods subsidized by bounties or grants
is injuring a domestic industry, notwithstanding that Article VI of the
General Agreement on Tariffs and Trade subjects the imposition of counter-
vailing duties to an injury test.
The United States operates in accordance with a waiver which
was created when it executed GATT on the provisional basis clearly stating
that its becoming a Contracting Party would not be interpreted as over-
ruling any provision of domestic law then in effect.
In the Administration's trade bill, however, it is now proposed
to expand the application of the countervailing duty law to duty-free
imports, which are not within the scope of our statutory provision. For
In view of the fact that such taxes are traditionally
paid by the consumer of the product, they are normally
rebated or exempted upon exportation, since the products are
not consumed in the country of exportation, but in the
country of importation. In order to understand the thrust
of Mr. Stewart's proposal, it is reasonable to examine what
its impact logically would be on American exports. Alcoholic
. spirits are a typical example of a product subject to heavy
excise taxes. When bourbon is exported from the United
States, the consumer of the bourbon is in the importing
country, not the United States. Under Mr. Stewart's pro-
posal, bourbon alternatively would be subject to the normal
American excise tax, even though it is not consumed in the
United States, and then to an additional excise tax in the
country of importation. In other words, under this alter-
native, Mr. Stewart is proposing that exported bourbon be
that reason, it is necessary or at least desirable, in view of our
international obligations as expressed in GATT, that duty-free imports,
which are not subject to the provisional ratification of GATT by the
United States which is tantamount to the waiver described, be made subject
to an injury test before countervailing duties are imposed.
Accordingly, the bill in amending Section 303(b) of the Tariff
Act of 1930 in Section 330 at page 57 of the bill and following, undertakes
to provide the machinery for the application of an injury test. In setting
forth the determination which is to be made by the Tariff Commission, the
amendment fails to include some of the language of the GATT countervailing
duty article, and that failure results in the imposition of an unnecessarily
severe injury test - more severe than some aspects of the injury test set
forth in Article VI of GATT.
Accordingly, to conform such injury test in the bill to that stated in Article VI of GATT, it is recommended that the clause set forth
doubly taxed, for surely he cannot expect the country of
importation to exempt American bourbon from excise taxes to
which locally consumed spirits are subject. On the other
hand, if the United States continued to rebate excise taxes
on its bourbon exports while countervailing the rebate or
remission of excise taxes by foreign governments, we could
fully expect similar countervailings against our rebates
of excise taxes on bourbon. To put it differently, the
United States cannot unilaterally change the rules. This
example explains some of the problems that can occur when
simplistic, mandatory solutions are applied to complex issues.
The Administration recognizes that, depending upon
the particular circumstances, border tax rebates can some-
times be an area of concern. We oppose the amendment
suggested by Mr. Stewart, however, because we do not believe
it would advance efforts to redress the problems of which
he speaks, but, indeed, would exacerbate them.
on lines 20 to 22, page 57, be amended as follows:
"whether an industry in the United States is being or is
likely to be materially injured, or is being threatened
with material injury, or is materially retarded in its
establishment, or is prevented from being established, ".
As in the case of the Administration's Antidumping Act amend-
ments, however, its suggested amendments to the countervailing duty
statute omit any effort to correct the most important problems which
exist. Until very recently the Treasury Department has been reluctant
to impose countervailing duties with respect to the remission by foreign
countries of internal taxes paid with respect to products produced for
export, or with respect to the forgiveness of internal taxes in relation
to such products, or with respect to the discrimination in price on raw
materials sold for use in the production of goods for export in comparison
with goods produced for consumption in the home market.
As a result of this policy of the Department, which has been
in effect through this and prior Administrations, the countervailing duty
statute is the most underadministered of all of the tariff and customs laws.
The Treasury Department's policy ignores or refuses to follow
the literal language of the court decisions interpreting the scope of
the countervailing duty statute.
The commitment made by the State Department in the drafting of
the General Agreement on Tariffs and Trade ostensibly allowing other coun-
tries to impose a value added tax on domestic production and a border tax
on imports, and to rebate internal taxes on exports, appears to have been
taken by the Treasury Department as tantamount to a de facto repeal of
the countervailing duty statute as to the most common forms of bounties
or grants by which other countries unfairly subsidize their exports to
the United States.
Of course, the provisional protocol of application of GATT by
which the United States acceded to GATT clearly exempts the then-existing
United States domestic law from being affected by the provisions of GATT.
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