Countervailing Duty

Countervailing Duty

Countervailing Duty (CVD) and the GATT Policy Negotiations

In relation to the GATT Policy Negotiations, Christopher Mark (1993) provided the following explanation and/or definition of Countervailing Duty (CVD): A special duty levied on imports to enable domestic producers to compete on an equal footing with subsidized foreign producers. CVDs are levied in addition to normal tariffs, in an amount necessary to offset government subsidies in the exporting country .US trade law empowers the President to levy CVDs equal in amount to any “bounties or grants” extended by other governments to exporters, although the law does not specify what kinds of government practices should be considered actionable; see export subsidies. GATT Article 6 permits and regulates the use of CVDs; additionally, signatories to the GA 1T Subsidies Code are required to meet an injury test before levying CVDs on imports from another signatory nation. Because foreign subsidies usually reflect broader government policies and programs, countervailing duties are frequently the object of intense and sometimes acrimonious bilateral diplomacy. CVDs are not used as a remedy to dumping,which refers to pricing practices by foreign firms.


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