Automobile Antidumping Case JaVon, Monica, Katim China-US WTO Automobile Antidumping Case JaVon, Monica, Katim

DS 440 Case Intro: On December 2011, China’s Ministry of Commerce (MOFCOM), imposed duties on American-made cars and SUVs using Notice No. 20 and Notice No. 84. China claimed that the US engaged in dumping and subsidization practices harming its domestic automobile industry. Complaint: The US claims concern various aspects of the anti-dumping ("AD") and countervailing duty ("CVD") measures imposed by China on certain automobiles from the United States with engine displacements equal to or greater than 2500 cubic centimeters

Preface Historically China and US has always been at odd with each other with regard to trade disputes: 10 cases as complainant 21 cases as respondents

Prequels to the Automobile Showdown September 2009, DS399, Measures Affecting Imports of Certain Passenger Vehicle and Light Truck Tires from China, Complainant: China, Respondent: US March 2006, DS340, Measures Affecting Imports of Automobile Parts, Complainant: US, Respondent: China July 2012, DS440, Anti-Dumping and Countervailing Duties on Certain Automobiles from the United States, Complainant: US, Respondent: China September 2012, DS450, Certain Measures Affecting the Automobile and Automobile-Parts Industries, Complainant: US, Respondent: China

DS399 - Measures Affecting Imports of Certain Passenger Vehicle and Light Truck Tires from China4 Products: Certain passenger vehicle and light truck tires from China Action Taken: US imposed 35 per cent ad valorem in the first year, 30 per cent ad valorem in the second year and 25 per cent ad valorem in the third year (the tyres measure). This measure took effect on 26 September 2009. Key Panel/AB Findings: USITC has properly established that China’s said imports significantly impact its domestic industry. China failed to establish remedy or prevent the market disruption as the result of the imports US acts consistently in accordance to terms and conditions its WTO obligations in imposing product-specific safeguard measures on the subject products.

DS340 - Measures Affecting Imports of Automobile Parts5 Products: Imported auto parts Action Taken: China imposed a 25 percent “charge” on import auto parts characterized as complete motor vehicles” based on specified criteria and prescribe administrative procedures associated with the imposition of that charge. Key Panel/AB Findings: China measures violated: (i) Arts. III:2 because they imposed an internal charge on imported auto parts that was not imposed on like domestic auto parts; and (ii) Art. III:4 because they accorded imported parts less favorable treatment than like domestic auto parts by, inter alia , subjecting only imported parts to additional administrative procedures.

Timeline December 15, 2011: MOFCOM authorized the levying of AD and CVD rates on certain US automobiles. July 5, 2012: The United States requested consultations with China on the imposed anti-dumping and countervailing duties on certain automobiles from the United States. August 23, 2012: Consultations were held. No mutual agreed solution was reached. September 17, 2012: The United States requested the establishment of a Panel. February 1, 2013: The Panel established. June 25, 2013: First substantive meeting held. October 15, 2013: Second substantive meeting held. May 23, 2014: Report of the Panel issued. June 18, 2014: DSB adopted the Panel report

China’s Political Context The Trade dispute started in 2009 with WTO Dispute DS3994. China complained that the US placed a 35% tariff on Chinese tires, but WTO ruled in favor of the US in 2011. On September 2009, China Association of Automobile Manufacturers (CAAM), an association of Chinese domestic automobile manufacturers, filed a petition seeking the imposition of anti-dumping and countervailing duties on imports of certain automobiles with an engine capacity equal to or greater than 2000cc from the United States. CAAM identified General Motors LLC (GM USA), Ford Motor Company (Ford USA) and Chrysler Group LLC (Chrysler USA) as known exporters of the subject product. On November 2009, MOFCOM invited interested parties to register to participate in the AD/CVD injury investigations. CAAM and several foreign manufacturers registered to participate. On November 2010, MOFCOM initiated investigations and requested supplemental responses from the respondents (US Manufacturers, CAAM, etc.) On March 2011, CAAM requested a change in scope to limit to automobiles of cylinder capacity of 2500 cc and greater. MOFCOM’s final determinations in December 2011 with AD and CVD rates as shown below:

US’s Political Context2 An estimated $5.1 billion of U.S. auto exports were covered by China’s unjustified AD/CVD duties in 2013, which ranged up to 21.5 percent. The United States exported a total of $64.9 billion of autos in 2013, of which $8.5 billion of autos were exported to China. China accounted for 11 percent of U.S. auto exports in 2013 (based on quantity) and 13 percent of U.S. auto exports (based on value). China is now the second-largest export market for U.S. autos (after Canada). Nine companies in ten U.S. States produce autos that are exported to China. In 2013, annual wages in motor vehicle and auto parts manufacturing were estimated at $37 billion. In 2013, the U.S motor vehicle parts and manufacturing sector employed 849,400 American workers.

Business Context In 2010 President Obama executed the National Export Initiative (NEI)3 enabling public and private entities to work together to create jobs to expand exports. In June 2011 SelectUSA Initiative3 was also implemented to attract and retain business investment in the United States. US and foreign automobile manufacturers invested $46 billion in investments from beginning of 2010 through end of 2014. Complemented with high productivity and favorable investment climate. 3“Trends in U.S. Vehicle Exports”, International Trade Administration, US Department of Commerce, Office of Transportation and Machinery, August 2015.

The Case: On 5 July 2012, the United States requested consultations with China with regard to Notice No. 20 [2011] and Notice No. 84 [2011] of the Ministry of Commerce of the People's Republic of China (“MOFCOM”) imposing anti-dumping and countervailing duties on certain automobiles from the United States, including any and all annexes. Measure at issue: Anti-dumping and countervailing duties imposed by China on certain automobiles from the United States. Product at issue: Certain automobiles from the United States with engine displacements equal to or greater than 2500 cubic centimeters (“cc”).

Products Impacted U.S.-produced cars and SUVs with an engine capacity of 2.5 liters or larger. Makers: GM, Chrysler, Mercedes, BMW, Honda, Ford, *Others Models: Well known cars and SUVs such as Jeep Compass, Jeep Grand Cherokee, Explorers, Mustangs, Cadillacs, Escalades *

U.S.’s Position CHINA…. Held Investigations without sufficient evidence *** Failed examinations of the evidence mostly objectively. Made unsupported findings of injury to china’s domestic industry (FAKE EVIDENCE) Failed to disclose essential facts underlying its conclusions Failed to provide an adequate explanation of its conclusions (MISSING DATA) Failed to require non confidential summaries to Chinese company submissions

China’s Position Fully consistent with China's WTO rights and obligations. The United States does not cite any specific evidence or legal argument in support of its claim. In China's view, the United States has thus failed to make out a prima facie case regarding these consequential claims.

Specific Agreements Involved Anti Dumping: GATT 1994: Art. VI “The contracting parties recognize that dumping, by which products of one country are introduced into the commerce of another country at less than the normal value of the products, is to be condemned if it causes or threatens material injury to an established industry in the territory of a contracting party or materially retards the establishment of a domestic industry” China's substantive obligations, the United States raised claims under Articles 3.1, 3.2, 3.5, 4.1, 6.8 and Annex II of the Anti-Dumping Agreement. Subsidies and Countervailing Measures: Articles 12.7, 15.1, 15.2, 15.5, and 16.1 of the SCM Agreement.

Contested Issues China’s Antidumping and Countervailing Duty … DID NOT…. Align with the AD & CVD Laws Under the Tariff Act of 1930 WERE NOT… Consistent with Article VI of GATT 1994 WERE NOT… Consistent with WTO Trade Regulations

Consistency of the contested national act with WTO obligations China acted inconsistently with Articles 6.5.1 of the Anti-Dumping Agreement and 12.4.1 of the SCM Agreement in failing to require the submission of adequate non-confidential summaries of confidential information contained in the petition; China acted inconsistently with Article 6.9 of the Anti-Dumping Agreement because MOFCOM failed to disclose the essential facts under consideration which formed the basis of its decision to impose the AD duties; China acted inconsistently with Article 6.8 and paragraph 1 of Annex II of the Anti- Dumping Agreement with respect to the determination of the residual AD duty rate for unknown US exporters; China acted inconsistently with Article 12.7 of the SCM Agreement with respect to the determination of the residual CVD rate for unknown US exporters;

China acted inconsistently with Articles 3. 1 and 3 China acted inconsistently with Articles 3.1 and 3.2 of the Anti-Dumping Agreement and Articles 15.1 and 15.2 of the SCM Agreement in connection with MOFCOM's analysis of price effects; China acted inconsistently with Articles 3.1 and 3.5 of the Anti-Dumping Agreement and Articles 15.1 and 15.5 of the SCM Agreement in connection with MOFCOM's causation determination; and China acted inconsistently with Article 1 of the Anti-Dumping Agreement and Article 10 of the SCM Agreement as a consequence of the foregoing violations of these Agreements.

The Panel Decision MOFCOM acted inconsistently with several provisions of the Anti-Dumping and SCM Agreements, with respect to the requirement for non-confidential summaries of confidential information, the disclosure of essential facts, the determination of the residual AD and CVD rates, the determination of price effects, and the determination of causation. Which means …. China has, acted inconsistently with Article 1 of the Anti-Dumping Agreement and Article 10 of the SCM Agreement.

Implementation & Sanctions There were no Sanctions imposed on China. However; Pursuant to Article 19.1 of the Dispute Settlement Understanding, the Panel recommended that the Dispute Settlement Body request China to bring its relevant measures into conformity with its obligations under the Anti-Dumping and SCM Agreements.

Observations The United States has not established that China acted inconsistently with Articles 6.9, 12.2 and 12.2.2 of the Anti-Dumping Agreement with respect to the disclosure of the essential facts and public notice regarding MOFCOM's determination of the residual AD duty rate for unknown US exporters; The United States has not established that China acted inconsistently with Articles 12.8, 22.3 and 22.5 of the SCM Agreement with respect to the disclosure of the essential facts and public notice regarding MOFCOM's determination the residual CVD rate for unknown US exporters; and The United States has not established that China acted inconsistently with Articles 3.1 and 4.1 of the Anti-Dumping Agreement and Articles 15.1 and 16.1 of the SCM Agreement in connection with MOFCOM's definition of the domestic industry.

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References and Footnotes “China- Anti-Dumping and Countervailing Duties on Certain Automobiles from United States”, Report of the Panel, World Trade Organization, WT/DS440/R, 23 May 2014. “Fact Sheet: WTO Case Challenging Chinese Antidumping and Countervailing duties on Certain American-Made Automobiles”, Office of the United States Trade Representative, Executive Office of the President, May 23, 2014. “Trends in U.S. Vehicle Exports”, International Trade Administration, US Department of Commerce, Office of Transportation and Machinery, August 2015. “United States – Measures affecting imports of certain passenger vehicle and light truck tires from China”, World Trade Organization, WT/DS399/R, December 13, 2010. “China - Measures Affecting Imports of Automobile Parts”, World Trade Organization, WT/DS450/R, March 30, 2006.