Countervailing Duties (CVD) are import tariffs imposed under World Trade Organization (WTO) rules to neutralize the negative effects of subsidies provided by foreign governments to their exporters. These duties are intended to ensure a level playing field and protect domestic industries in the importing country from unfairly subsidized imports that could potentially cause harm to the local economy.

Purpose of Countervailing Duties

Offset Subsidies: CVD are specifically levied to offset the financial advantage that foreign producers receive from their government in the form of subsidies. These subsidies can include direct cash payments, tax exemptions, discounted loans, and other financial aids that allow them to sell goods at lower prices than domestic producers.

Protect Domestic Industries: By imposing these duties, a country aims to protect its domestic industries from the adverse effects of these subsidized imports, which might otherwise lead to unfair competition and potentially harm local manufacturers by driving down prices and market shares.