China — Anti-Dumping and Countervailing Duties on Certain Automobiles from the United States WTO DISPUTE SETTLEMENT: DISPUTE DS440 By: Joanna Zaffaroni & Dilan Wickrema 1

Background In 2011 Ministry of Commerce of the People's Republic of China (MOFCOM) published Notice No. 20 and Notice No. 84 Imposed anti dumping and countervailing measures on certain automobiles from the United States – Engine displacements equal to or greater than 2500 cubic centimeters, or 2.5 liters 2

Mostly sedans and sport-utility vehicle: -Chrysler 200 -Chrysler 300 -Dodge Charger -Ford Fusion -Ford Escape -Chevy Impala Autos with V8 engines 3

Timeline July 5, 2012: the United States requested consultations with China imposing anti-dumping and countervailing duties on certain automobiles from the United States. September 17, 2012: the United States requested the establishment of a panel. September 28, 2012: the DSB deferred the establishment of a panel. 23 October 2012: the DSB established a panel. (Mr. José Graça Lima, Members: Mr. Donald Greenfield, Mr. Arie Reich) 4

Timeline, concluded February 1, 2013: the United States requested the Director-General to determine the composition of the panel. February 11, 2013: the Director-General composed the panel. September 25, 2013: the Chair of the panel informed the DSB that its expects to issue its final report to the parties by March May 23, 2014: the panel report was circulated to Members. June : the DSB adopted the panel report. 5

Business Context Sales of US made cars have grown in the last 5 years, due to the strengthening of the US auto industry and a stronger dollar. Auto parts are already produced in China 6

China’s Position and Political Context The Trade dispute started in 2009 with WTO Dispute DS399. China complained that the US placed a 35 percent tariff on Chinese tires, but WTO ruled in favor of the US in MOFCOM led an investigation in May 2011 and found that US automakers (GM, Chrysler Group) received government subsidies only to “dump” vehicles on the Chinese market. That same year, China imposed CVD and AD duties on US made automobiles. – Tariffs didn’t slow or hurt US auto exports. 7

US Position The US felt that China’s December 2011 decision to impose anti-dumping (AD) and countervailing (CVD) duties on American- made cars and SUVs was unjustified. The anti-dumping duties ranged from 2.0 to 21.5 percent, while the countervailing duties were between 6.2 and 12.9 percent. 8

US Position GM and Chrysler faced some of the harshest duties among the companies named in MOFCOM's investigation. The ministry assigned GM an 8.9 percent dumping margin and countervailing duties at 12.9 percent. Chrysler's dumping margin was 8.8 percent, and it had a 6.2 percent countervailing duty rate. The Chinese ministry applied an all-others dumping margin of 21.5 percent to Ford Motor Co., but Ford did not face countervailing duties. In all, the duties covered more than $3 billion in exports, or some 92,000 vehicles, according to the USTR in

WTO Panel Findings & Decision United States Rejected the US claim that MOFCOM's definition of the domestic industry in the investigations at issue was inconsistent with Article 4.1 Anti-Dumping Agreement and Article 16.1 of the SCM Agreement. Rejected the US claims that MOFCOM's public notices failed to disclose the essential facts and findings and conclusions reached on all issues of fact and law considered material by MOFCOM in relation to the determination of the residual duty rates. Found that the US failed to establish that China acted inconsistently with Articles 6.9, 12.2, of the Anti-Dumping Agreement, and Articles 12.8, 22.3 and 22.5 of the SCM Agreement. 10

WTO Panel Findings & Decision China MOFCOM erred in its determination of the residual anti-dumping and countervailing duty rates for unknown exporters of the subject product. Panel concluded that these residual duty rates did not conform to the requirements of Article 6.8 and Annex II of the Anti-Dumping Agreement, and Article 12.7 of the SCM Agreement. MOFCOM erred in failing to provide interested parties with adequate non- confidential summaries of certain confidential information in the petition, contrary to the requirements of Article of the Anti-Dumping Agreement and Article of the SCM Agreement. MOFCOM failed to disclose to US respondents the essential facts which formed the basis of its decision to impose definitive anti-dumping duties, as required under Article 6.9 of the Anti-Dumping Agreement. China acted inconsistently with the general obligation set forth in Article 1 of the Anti-Dumping Agreement and Article 10 of the SCM Agreement to conduct investigations consistently with the provisions of these Agreements. 11

WTO Provisions Cited 12

Specific Provisions ADA Art /ASCM Art (evidence – confidential information) The authorities shall require interested parties providing confidential information to furnish non-confidential summaries thereof. These summaries shall be in sufficient detail to permit a reasonable understanding of the substance of the information submitted in confidence. In exceptional circumstances, such parties may indicate that such information is not susceptible of summary. In such exceptional circumstances, a statement of the reasons why summarization is not possible must be provided. 13

Specific Provisions ADA Art. 6.9 (evidence – essential facts) The authorities shall, before a final determination is made, inform all interested parties of the essential facts under consideration which form the basis for the decision whether to apply definitive measures. Such disclosure should take place in sufficient time for the parties to defend their interests. 14

Specific Provisions ADA Art. 6.8 and Annex II para. 1/ASCM Art (evidence – facts available) ADA Art. 6.9/ASCM Art (evidence – essential facts) and ADA Arts /ASCM Arts and 22.5 (evidence – findings and conclusions on material issues of fact and law) 15

Specific Provisions ADA Art. 3.1/ASCM Art (injury determination – positive evidence and objective examination) ADA Art. 4.1/ASCM Art (definition of domestic industry) 16

Specific Provisions ADA Art. 3.2/ASCM Art (injury determination – price effects) ADA Art. 3.5/ASCM Art (injury determination – causation) 17

Implementation of the Panel's Decision “The message is clear: China must follow the rules, just like other WTO Members. [The U.S.] will keep pressing for China to change its trade remedies practices that unfairly restrict U.S. exports.” -USTR Rep. Michael Froman 18

The Dispute In The Context of The Global Trading System The United States and China have committed to: Strengthening the multilateral development financing system Strengthening their cooperation in the IMF Releasing release economic data following the IMF’s Special Data Dissemination Standards (China) Continuing to discuss mechanisms to facilitate renminbi trading and clearing in the United States. Affirming the positive role that Select Reverse Trade Missions play 19

Questions? 20