Gutierrez told CNBC that the decision followed a suit filed by American paper maker NewPage, which alleged unfair trade practices. The commerce chief said that after investigation, his team was able to "identify specific illegal subsidies" in this case and decided to take action.
The case was being closely watched by a number of other U.S. industries from steel to furniture.
For two decades, the U.S. government has held that American companies did not have a right to challenge government subsidies granted to their foreign competitors if those companies were in "nonmarket economies" such as China.
However, last year, the administration let it be known that it was ready to consider reversing that policy.
President Bush is facing heavy political pressure from Congress, now in the hands of Democrats, to deal with soaring U.S. trade deficits, including a record $232.5 billion imbalance with China.
Officials at the United Steel Workers union, which represents many of the workers at U.S. paper plants, hailed the administration's decision, saying it would help protect jobs for workers at 22 paper mills in 13 states who produce the glossy paper being covered by the sanctions.
China suffered a defeat on Thursday in an effort to derail the administration's change in policy when the U.S. Court of International Trade, a federal court which handles trade matters, ruled that the administration did have the right to proceed with sanctions.
Judge Gregory W. Carman, who heard the case for the trade court, rejected China's request to grant an injunction to stop the U.S. government from proceeding.
This trade dispute is being followed closely by a number of other American industries -- from steel to furniture -- that have been battered in recent years by a flood of imports from China.
U.S. companies have always had the right to file dumping cases against China, which can result in penalty duties if Chinese companies are found to be selling products in the United States below cost.