The government has condemned a US attempt to apply countervailing duties on Chinese goods after the US alleged unfair trade practices by Chinese coated paper makers.

The US Commerce Department will decide whether to change trade rules to apply such duties to imports from "non-market economies" like China. The move follows the first countervailing petition filed by US companies.

The Chinese commerce ministry said in comments filed with its US counterpart that the US proposal is illegal under US law and would violate world trade rules.

China's arguments against the policy change assert that the US Commerce Department "does not have the legal authority to initiate a countervailing duty investigation against China as long as China is designated a non-market economy".

At a minimum, the US government would have to issue new rules before it levies countervailing duties on Chinese products. Failure to first change the rules would violate the World Trade Organization's subsidy agreement, the Chinese commerce ministry's Bureau of Fair Trade for Imports and Exports said.

The US government launched a probe last November into Chinese coated free sheet paper after US paper maker New Page Corp claimed a dozen Chinese makers might receive subsidies from central or local governments. It is the first US anti-subsidy case against a Chinese industry.

Applying countervailing duties is a standard tool US firms use against alleged unfair foreign trade, but under current US trade remedy rules it is impossible to determine subsidy levels for countries not granted market economy status.

US reports said the decision is expected by early April.

Experts said that the proposed change could lead to unfair double duties on Chinese goods if companies with complaints also sought protection under US anti-dumping laws.