By Doug Palmer
WASHINGTON (Reuters) - The U.S. Commerce Department, in a decision that could provoke congressional action, said on Tuesday it did not see strong enough legal grounds to investigate if China's currency practices subsidize its exports.
It made the decision in separate trade cases involving imports of coated paper and aluminum "extrusions" from China.
In both cases, U.S. petitioners argued China effectively subsidized exports by keeping its currency at an artificially low value to the dollar and asked the department to impose countervailing duties in response.
"The allegations made by domestic producers do not meet the statutory standard for initiating an investigation," deputy assistant secretary for import administration Ronald K. Lorentzen said in a statement.
However, the department did announce it has set preliminary countervailing duties ranging from 6.18 to 137.65 percent on aluminum extrusions from China to offset other subsidies alleged in the case. The United States imported more than $500 million of the goods from China last year.
Many U.S. manufacturers and lawmakers believe China's currency is undervalued by as much as 40 percent, which they say gives Chinese companies an unfair trade advantage.
Senator Charles Schumer, a New York Democrat, who has been pushing for action on China's currency in the Senate, criticized the Commerce Department's "incomplete" decision.
"Once again, even when the opportunity is thrust into its hands, the administration has refused to take action," Schumer said.
The House of Representative Ways and Means Committee will hold a hearing September 15 on the concern and is expected to hear testimony from lawmakers and groups supporting legislation to address the situation.
The United Steelworkers union and aluminum extrusion producers in nine states asked the Commerce Department in April to impose countervailing duties over China's yuan as part of a broader case alleging a long list of government subsidies and unfair pricing practices.
Since then, agency officials had been mulling whether they had strong legal grounds to launch a formal investigation into the charge China effectively subsidizes its exports by keeping its currency undervalued against the dollar.
Under both U.S. and WTO law, a subsidy is defined as a financial contribution from the government which provides a benefit to a specific industry.
In the aluminum case and a separate one involving coated paper, U.S. petitioners have argued the benefits that come from the Chinese government controlling its currency are specific to Chinese exporters since they account for about 70 percent of the country's foreign exchange transactions.
But Lorentzen said department officials determined the currency allegation did not meet "the requirement that benefits provided under China's unified foreign exchange regime be specific to the enterprise or industries being investigated."
(Editing by Jerry Norton)
