I don't think it's only in the US, but you probably see more of them from there simply because US print runs were 10x (or more) larger than any other country simply because of the size of the market.
The damage caused by the 'cut out' isn't what reduces the price, the cut out is effectively to indicate that the LP (or whatever media) is a cut out being sold at a reduced price, for a couple of reasons. One is so that the retailers couldn't buy up cut-out stock and sell it at full price, and the other was so that all sales were final, cutouts couldn't be returned for refund since the covers were physically damaged.
It wasn't so much a legal loophole as something that's written in to recording contracts of artists. I probably shouldn't have spoken so equivocally and said that all artists get zero royalties from cut-outs, because it'll depend on the contract they signed, but when a record is cut-out it generally becomes a 'promotional item' and the artist gets paid way less for it, which can be anywhere from a little bit down to zero.
From what I understand as well, a lot of record contracts have a 'spoilage' clause in them, which basically holds back some of the money due the artist to account for records that are mis-pressed, damaged, returned, or otherwise unsellable. It wouldn't surprise me if some labels try/tried to get rid of records without paying the artist for them by cutting them out and then classifying the stock as spoiled. I may be wrong on this however as I can't find the original information, but it's up there rattling around in my head with a million other useless facts. It seems plausible at the very least.