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WTO Rejects US Appeal In Countervailing Duty Dispute With China

by Ulrika Lomas,, Brussels

29 December 2014

On December 18 a World Trade Organization's Dispute Settlement Body Panel announced rulings in favor of China in a complex case dealing with countervailing duty (CVD) determinations and anti-dumping duties, mostly resulting from US treatment of China as a "non-market economy" (NME).

The case had originated in 2012, and most of China's complaints had already been upheld by the WTO last May.

The Panel was established on December 17, 2012 to address China's concern that the US was not administering its trade remedy laws in a uniform, impartial and reasonable manner and that the US Public Law 112-99 was inconsistent with the GATT 1994, the SCM Agreement and the Anti-Dumping Agreement. The US regretted the China had chosen to pursue its request for panel establishment and noted that its measures were consistent with its WTO obligations. Australia, Canada, the European Union, Japan, Viet Nam and Turkey reserved their third-party rights to participate in the Panel's proceedings.

In November the Chinese Ministry of Commerce (MOC) had disclosed that, in accordance with WTO rules, China and the United States had held unsuccessful consultations in Geneva on the latter's amendment to the Tariff Act (GPX Act). China had previously requested consultations on the US imposition, since 2006, of both countervailing duties (CVDs) and anti-dumping duties (ADs) at the same time on 30 of its products which it is said to subsidize - worth some USD7.2bn of its annual exports into the US market.

In March 2011, the WTO Appellate Body had found that the imposition by the US of double remedies, that is, the offsetting of the same subsidization twice by the concurrent imposition of ADs and CVDs, and, indeed, the application of CVDs, against a "non-market economy" (NME) such as China, was inconsistent with WTO obligations.

In addition, last December, the US Court of Appeals decided that the US Congress had also determined in the past that government payments cannot be characterized as "subsidies" in an NME, and therefore that, as had originally been held in the Trade Court in October 2010, CVDs should not apply to NME countries.

It was expected that the Court of Appeal's decision could have forced the US Commerce Department to terminate the existing CVD orders against products from China, but, in March 2012, the passage of the GPX Act specifically overturned that decision, and tried to preserve the validity of the existing CVDs against NME countries.

The Act also deals with the finding of the WTO Appellate Body concerning the imposition by the US of double remedies, by providing for the Commerce Department to make a reduction to anti-dumping duties in NME cases where countervailing duties are simultaneously being imposed, if it can be demonstrated that domestic subsidies have inflated the dumping margin, and if the Commerce Department is able to reasonably estimate an adjustment.

However, according to the MOC, in a call for consultations in September 2012, concerning the passing of the GPX Act, the US had still not resolved those issues. The MOC indicated, on the contrary, that the passage of retroactive legislation in Congress to counteract a previous court decision and try to legitimize the imposition of countervailing duties on NMEs, is a form of trade protectionism, is not in line with WTO rules, and should be rectified.

The dispute concerns several initiation decisions, as well as preliminary and final determinations in 17 countervailing duty investigations conducted by the United States' Department of Commerce (USDOC) from 2007 through 2012. The Chinese products concerned by these investigations consist of solar panels; wind towers; thermal paper; coated paper; tow behind lawn groomers; kitchen shelving; steel sinks; citric acid; magnesia carbon bricks; pressure pipe; line pipe; seamless pipe; steel cylinders; drill pipe; oil country tubular goods; wire strand; and aluminum extrusions.

On August 22, 2014, China filed an appeal covering most of the issues on which the Panel did not rule in its favor in May. On August 27, 2014, the United States filed a cross-appeal of the Panel's preliminary determination relating to the consistency of one section of China's panel request with Article 6.2 of the DSU. The United States did not appeal the Panel's finding that the USDOC's application of a "rebuttable presumption" to determine whether certain entities can be characterized as "public bodies" was inconsistent "as such with Article 1.1(a)(1) of the SCM Agreement. Nor did the United States challenge on appeal the Panel's finding that the "public body" determinations made by the USDOC in 14 countervailing duty investigations were inconsistent with the same provision 1, or the Panel's findings regarding the USDOC's treatment of certain export restraints in two of the investigations at issue.

It appears that China has comprehensively won this tussle with the US; but it is not clear whether the US will readily give in.

TAGS: court | tax | export duty | law | anti-dumping | Australia | China | excise duty | legislation | Canada | United States | import duty | trade | Japan | Turkey | Europe

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