China v. U.S. (Various Products from China) (DS 449) (AB 2014). Prepared by Ronni Grinam, Michael Ferry, and Jeff Franz

Topics of Discussion History and Context of U.S. PL 112-99 (the law in question for this WTO hearing) Chinese Allegations against U.S. PL 112- 99 & WTO Proceedings Panel and AB Findings and Implications Our observations and takeaways

History and Context US opens countervailing duty (CVD) investigation against China in 2006. Tariff Act of 1930 allows for CVD investigations against market economies, not necessarily for non-market economies (NMEs) such as China US Appeals Court rules that it is illegal to apply CVD law to NMEs. US enacts PL 112-99 as amendment to Tariff Act of 1930

History and Context US enacts PL 112-99 on March 13th, 2012: “An act to apply the countervailing duty (CVD) provisions of the Tariff Act of 1930 to nonmarket economy countries, and for other purposes.” US enforces CVD and anti-dumping measures resulting from investigations during period from Nov 20th, 2006 and March 13th, 2012 Paper, Steel pipes, woven sacks, tires, magnets, sodium nitrite, citrate salts and potassium phosphate salts, lawn groomers, kitchen shelving, steel wire and grating, carbon bricks, wood flooring, photovoltaic cells, wind towers, stainless steel sinks US enacts PL 112-99 as amendment to Tariff Act of 1930

Amendments to PL 112-99 Section 1 of PL 112-99: Amends section 701 of the Tariff Act of 1930 (US law governing imposition of CVDs), providing for imposition of CVDs on non- market economies Applies to proceedings initiated on or after Nov 20th, 2006 Section 2 of PL 112-99: Amends section 777A of the Tariff Act of 1930, providing for imposition of antidumping duties on non-market economies. Applies to proceedings initiated on or after publication of Section 2, i.e. March 13th, 2012

History and Context (cont.) Related Case: United States – Definitive Anti-dumping and Countervailing Duties on Certain Products from China (DS379) 4 sets of parallel AD/CVD investigations were excluded in DS 449 since included in DS379 Delegation of China requests consultation with Delegation of US on Sept 17th, 2012

History and Context (cont.) China alleges that: PL 112-99 Section 1 was not published until March 13th 2012, so the US applied measures retroactively, and measures were enforced prior to publication Inconsistent with GATT Articles X:1, X:2, X:3 PL 112-99 Section 1 and Section 2 are impartial since Section 1 applies retroactively and Section 2 applies after publication. Inconsistent with GATT Article X:3 Difference in effective dates between Section 1 and 2 results in US having no basis to identify and avoid double remedies. Inconsistent with SCM Articles 10, 19,and 32 US also failed to investigate and avoid double remedies. Inconsistent with SCM Articles 10, 19, and 32

Agreements Pertaining to Case GATT Article X = Publication and Administration of Trade Regulations X:1 = must publish promptly to allow governments and traders to become acquainted with them. X:2 = cannot enforce before the measure has been published X:3a = laws must be administered in a uniform, impartial, and reasonable manner X:3b = must institute tribunals or procedures for review and correction of administrative action relating to customs matters

Agreements Pertaining to Case ASCM 10 = members must ensure imposition of countervailing measures are in accordance with GATT article 6, and that they may only be imposed pursuant to investigations initiated and conducted in accordance with ASCM. ASCM 19.3 = countervailing measures must be levied at appropriate rate and on a nondiscriminatory basis, and there must be an investigation determining the appropriate amount of CVDs to be levied ASCM 32.1 = cannot take action against a subsidy of another member unless it is in accordance with the GATT, as interpreted by the ASCM.

Main WTO Issue CVDs, anti-dumping measures, and double remedies, or the potential for imposing double remedies when enacting CVDs and AD measures simultaneously Prompt publication of legislation and enforcement

Panel Decision Panel rejects China’s claims that Public Law 112-99 was inconsistent with GATT Article X. Applies to GATT Article X:1, X:2, and X:3 Panel rules in favor of China’ s allegation that US did not investigate and avoid double remedies. Applies to SCM Articles 10, 19, and 32

Appeal and AB Ruling Panel’s ruling that US P.L. 112-99 does not GATT violate Article X:1 was not appealed. Panel’s ruling that US P.L 112-99 does not violate GATT Article X:2 was appealed and reversed AB found that the US may have enforced rates prior to publication of PL 112-99 However, AB could not complete its analysis and make a recommendation due to insufficient information regarding US laws proceeding PL 112-99 Panel’s ruling that US P.L. 112-99 does not GATT violate Article X:3 was not appealed. US appeals Panel’s decision on SCM, arguing that China did not identify which relevant portions of SCM were violated AB rejects appeal because it was possible to identify relevant portions of SCM, i.e. SCM 10, 19, and 32.

DSU Recommendation US must put PL 112-99 into conformity with WTO obligations Specifically SCM Articles 10,19,32 regarding CVDs and Antidumping measures AB ruled that it was “likely” that the US did not investigate and avoid double remedies. US must investigate and avoid double remedies in the future. No sanctions imposed; same result as similar case DS 379.

Implementation in a “Reasonable Period of Time” The DSB adopted its recommendations and rulings for the US at their meeting on July 22, 2014. The US requested a reasonable period of time to do so. “The United States intends to implement the recommendations and rulings of the DSB in this dispute in a manner that respects its WTO obligations, and we have begun to evaluate options for doing so. The United States will need a reasonable period of time for implementation...” - Message from the US, August 8, 2014 Agreement between US and China: Recommendations were to be implemented 12 months from July 22, 2014. February 2015: the US requests more time. July 2015: Deadline extended to August 25, 2015.

Procedures for Implementation The US and China established procedures for the resolution of this case on August 25, 2015. Articles 21 and 22 of the Dispute Settlement Understanding: The Parties shall cooperate to enable the Article 21.5 panel to circulate its report within 90 days of the panel's establishment, excluding such time during which the panel's work may be suspended pursuant to Article 12.12 of the DSU. The Parties will continue to cooperate in all matters related to these agreed procedures and agree not to raise any procedural objection to any of the steps set out herein. These agreed procedures in no way prejudice other rights of either Party to take any action or procedural step to protect its rights and interests, including recourse to the DSU.

Observations Disputes can be settled efficiently and in a timely manner. US and China were able to resolve issue in a timely manner. When the US needed more time, an extension was agreed upon and detailed by both parties. This case contributes to discussion of binding precedence of Appellate Body rulings within the DSB. Appellate Body interpretations aren’t binding precedent, but in similar cases, the AB comes to similar rulings.

Timeline of Events The process of this dispute settlement lasted approx. 35 months. 2006-2012 US enforces CVD and anti-dumping measures resulting from investigations July 2014 Circulation of Appellate Body Report and Adoption of Recommendations December 2012 Establishment of Panel September 2012 Consultation Requested March 2014 Circulation of Panel Report August 2015 Implementation Measures Established by the US and China

Our Opinion No real resolution came about US did enforce rates prior to publication of the law, especially since investigations started in ‘06 and law did not come into effect until ‘12. Agree with WTO on ruling that US imposed CVDs and AD measures simultaneously - “double remedies” Concern with lack of corrective action against US No punitive measures were taken even though they should have been.

Our Opinion AB found US was not acting in accordance with GATT Article X:2, but was “unable to complete their analysis” as they required more information. This is an insufficient response to the potential violation and the WTO did not address the underlying issue(s). This is due to the fact that the AB is unable to request or research additional information beyond what is available in the panel report.

Questions/Comments? We so appreciate your time and attention

Works Consulted Beshkar, Mostafa, and Adam S. Chilton. “Revisiting Procedure and Precedent in the WTO:” University of Chicago Law School, 2015, chicagounbound.uchicago.edu/cgi/viewcontent.cgi?article=2418 &context=law_and_economics. “US – COUNTERVAILING AND ANTI-DUMPING MEASURES (CHINA).” World Trade Organization, 2014, www.wto.org/english/tratop_e/dispu_e/cases_e/1pagesum_e/ds4 49sum_e.pdf. “WORLD TRADE ORGANIZATION.” WTO | Dispute Settlement - the Disputes - DS449, World Trade Organization, www.wto.org/english/tratop_e/dispu_e/cases_e/ds449_e.htm. UNITED STATES-COUNTERVAILING AND ANTI-DUMPING MEASURES ON CERTAIN PRODUCTS FROM CHINA, Request for Consultations by China, WTO, 2012