On November 10, 2022, the U.S. Department of Commerce (“Commerce”) announced that it has reclassified Russia as a nonmarket economy, meaning that it will no longer treat Russia as a market economy in antidumping (AD) proceedings. This is an unprecedented move because it is the first time that Commerce upgraded a country to market economy and then downgraded it to nonmarket status. Commerce had been treating Russia as a market economy since 2002. Commerce’s decision to downgrade Russia’s market economy status means that it will have the ability to apply the “full force of the U.S. AD law to address the market distortions caused by increasing interference from the Russian government in their economy.” Specifically, the application of Commerce’s “non-market methodology” in antidumping proceedings is essentially a summary finding that the Department cannot rely on the costs reported by Russian manufacturers in the dumping calculation. This generally results in significantly higher duty rates through the use of surrogate costs from comparable market economy producers. Russia joins 11 other countries classified as nonmarket economies by the Department of Commerce, including China, Vietnam, and nine former Soviet republics.
In October 2021, Commerce had reviewed Russia’s market economy status and decided to maintain Russia’s market economy status, although it had expressed disappointment with Russia’s lack of progress toward a more market-oriented economy since attaining the designation in 2002. Russia’s new nonmarket economy status was triggered in large part by petitions submitted on June 30, 2022, from CF Industries Nitrogen LLC, an Illinois-based fertilizer producer and its subsidiaries. The company claimed that both Russia and Trinidad and Tobago “are exporting illegally subsidized fertilizer to the U.S. at unfairly low prices and underpricing their goods by as much as 433.37%”. In its petition, CF Industries highlighted Russian President Vladimir Putin’s two-decade hold on power and stated that Russia’s “move from a centrally planned economy toward a market-based system has stalled and, in many areas, reversed in recent years.” In response, Commerce launched an investigation to assess whether the Russian Federation operates as a nonmarket economy, which concluded with its announcement on Thursday.
Russia’s new nonmarket economy status is likely to significantly raise tariffs for Russian imports such as aluminum, steel, and chemicals into the United States, which have already fallen drastically following U.S. sanctions and trade restrictions in response to Russia’s invasion of Ukraine. According to official data from Commerce, the United States imported $12.5 billion worth of Russian goods in between January and September of this year, which is roughly half the level achieved during the same time period in 2021.