The Court of Appeals for the Federal Circuit in Washington, D.C., ruled Monday that the U.S. Commerce Department’s imposition of so-called countervailing duties on China-made OTR and ag tires in 2008 was illegal under U.S. law.

Those duties – as high as 210% in some cases – severely damaged the small OTR and ag tire market and led to the bankruptcy and dismantling of GPX International Tire. Countervailing duties are designed to maintain price competitiveness between domestic and imported goods by offsetting any benefits of government subsidies to industries.

However, the three-judge panel offered no remedies or a specific timeline for eliminating the duties.

The court ruled that U.S. law does not permit the government to apply those added duties on products from “non-market economies” such as China. According to a Bloomberg report, “In laws passed in 1988 and 1994, ‘Congress adopted the position that countervailing duty law does not apply to non-market economy countries,’ Judge Timothy Dyk wrote in the unanimous decision posted on the court’s website. ‘If Commerce believes that the law should be changed, the appropriate approach is to seek legislative change.’”

A three-judge panel upheld an October 2010 U.S. Court of International Trade decision that found the Commerce Department’s duty calculations constituted “double counting,” which was forcing some China tiremakers to pay twice. Despite that ruling, Judge Jane Restani would not order the Commerce Department to discontinue collecting the countervailing duties, setting the stage for the latest court challenge to the 2008 ITC ruling.

The court decision case stems from a 2007 case filed by Titan International, the USW and Bridgestone Americas. Some market observers said this latest court decision could hurt a range of American producers of commodity goods, such as steel and paper.

“The court decision essentially throws out more than two dozen countervailing duty cases filed at the Commerce Department since 2007, said Daniel Porter, a lawyer at Winston & Strawn LLP in Washington who argued in favor of the Chinese producers,” Bloomberg reported.

On the tire question, the countervailing duties have been ruled illegal numerous times by both U.S. courts and the World Trade Organization.

Just this past March, the WTO Appellate Body ruled that the Commerce Department had been charging both "antidumping" and "countervailing" duties on the tires, agreeing with Chinese tiremakers that the levying antidumping duty based on non-market-economy methodology coupled with countervailing duties was a violation of WTO regulations.

After Monday’s ruling, China’s Ministry of Commerce called on the U.S. to halt similar duties imposed on other Chinese products.

“The U.S. has for years imposed anti-subsidy investigations on Chinese goods that violate World Trade Organization rules and have no basis in U.S. law,” the fair trade department of China’s Ministry of Commerce said in a statement. “As the U.S. does not recognize China’s market-economy status, we hope the U.S. will quickly redress other cases where it has improperly engaged in anti- subsidy investigations into Chinese imports.”