United States — Countervailing and Anti-dumping Measures on Certain Products from China Bijou, Promito, Vasily

Participant Overview Complainant: China Respondent: United States Third Parties: Australia; Canada; European Union; Japan; Turkey; Viet Nam; India; Russian Federation

Background After making it illegal to apply countervailing duty (CVD) against non-market economics for two decades, the U.S. Congress passed legislation stipulating that the application of CVD law to NMEs starting in 2006 was legal. This measure initiated after the United States opened a CVD investigation against China in 2006. The US started to determine whether to impose CVD and anti-dumping measures on China.

US Public Law 112-99 (GPX Legislation) The law, enacted in March 2012 and commonly referred to as “the GPX Legislation,” directly authorizes the use of CVDs against imports from non- market economy (“NME”) countries. China challenged this legislation at the WTO.

Complaints by China China claimed that the GPX Legislation violated three parts of Article X of the GATT China claimed that the United States’ failure to avoid the application of double remedies in 26 investigations violated the SCM Agreement. The United States challenged the consistency of China’s panel request with the requirement that parties must provide a brief summary of the legal basis of their claim. China asked for consultation with the U.S at the WTO

China’s Position China considers the U.S actions as inconsistent with: Articles 10, 15, 19, 21 and 32 of the SCM Agreement;   Articles VI, X:1, X:2 and X:3 of the GATT 1994; and   Articles 9 and 11 of the Anti-Dumping Agreement.

From Consultation to Panel After the consultation failed to resolve the issue, China asked for the formation of a panel with the WTO The panel investigated whether the GPX legislation breach Article X:1,X:2 and X:3 of the GATT 1994 and whether the U.S. failed to investigate “double remedies” from 25 CVDs and anti-dumping proceedings

Article 10 Application of Article VI of GATT 1994 Members shall take all necessary steps to ensure that the imposition of a countervailing duty on any product of the territory of any Member imported into the territory of another Member is in accordance with the provisions of Article VI of GATT 1994 and the terms of this Agreement. Countervailing duties may only be imposed pursuant to investigations initiated and conducted in accordance with the provisions of this Agreement and the Agreement on Agriculture.

Article X:1,X:2 and X:3 Article X: Publication and Administration of Trade Regulations. Article X: 1: Every law and regulations affecting trades must be published promptly so that other governments and traders can be acquainted. Article X:2: Prohibit countries from imposing any duties on imports before the measure is officially published. Article X:3 (b): Countries must have independent tribunals to review and correct administrative actions relating to custom matters. China’s claim that section 1 of the US Public Law violated Articles X:1, X:2 and X:3(b)

Subsidies and Countervailing Measures Agreement, also called SCM China also brought up part of the SCM agreement against the U.S. Under Article 10 – CVDs may only be imposed pursuant to an investigation and if they are in accordance with an agreement.

Panel Ruling The Panel rejected all three of China’s claims that the GPX Legislation was inconsistent with Article X of the GATT. The Panel found that U.S. failed to investigate and avoid double remedies in 25 anti-dumping and countervailing duties investigations The Panel concluded U.S. did not violate any of Articles under GATT 1994.

Panel Rule on Article X:1 China’s claim that section 1 of the US Public Law was made effective in 2006 and it violated Articles X:1, X:2 and X:3(b) of GATT 1994. However, the Panel ruled that Section 1 was made effective from 2012, the day it was published. Thus according to the Panel, the US did not violate Article X:1 of GATT 1994

Panel Rule on X:2 Regarding China’s claim of the US violating Article X:2 of GATT 1994, the Panel in majority ruled that although Section 1 is a measure of general application that has been “enforced” prior to its official publication, Section 1 falls outside the scope of Article X:2 because: it neither effects an “advance” in a rate of duty or other charge on imports under an established or uniform practice nor imposes a “new” or “more burdensome” requirement or restriction on imports.  Thus, the majority of the Panel ruled that the US had not violated Article X:2 of GATT 1994, contrary to China’s claims. One panel member however disagreed with fellow members, observed that Section 1 does fall within the scope of article X:2, and thus, ruled that the US had violated Article X:2 of GATT 1994.

Panel Rule Article X:3 As to China’s claim of the US violating Article X:3 of GATT 1994, the Panel ruled that the Article does not restrict enacting laws like PL 112-99. According to the Panel, the requirement in Article X:3 that tribunals “shall be independent of the agencies entrusted with administrative enforcement and their decisions shall be implemented by, and shall govern the practice of, such agencies unless an appeal is lodged” does not prohibit legislation superseding decisions of domestic courts or tribunals that are pending when the legislation comes into force. Thus, the Panel’s view was that the US did not violate Article X:3(b) of GATT 1994.

The Panel Rule on Double Remedy Regarding China’s claims relating to “double remedies”, the Panel decided that the US did not investigate whether “double remedies” arose in the proceedings at issue; Thus, the Panel declared that the US had not acted accordingly with Articles 19.3, 10 and 32.1 of the SCM Agreement.

The Appellate Body Ruling China and the United States both appealed parts of the Panel report. The AB overruled the Panel’s interpretation of one part of Article X of the GATT, and ruled that the GPX Legislation may have advanced rates prior to their publication. The AB rejected the United States’ argument that China’s panel request was deficient because it failed to specifically identify which aspects of the SCM Agreement had been violated. The AB instead ruled that the panel request was acceptable because it was possible to identify the relevant portions of the SCM based on the narrative of China’s complaint.

Observation of the Appellate Body The Appellate Body changed the Panel's finding under Article X:2 of the GATT 1994 that “the United States had not acted inconsistently with Article X:2 of the GATT 1994”, however could not prove that U.S. violated Article X:2 due to lack of proof that the Public Law 112-99 effected an “advance” in a rate of duty or imposed a “new or more burdensome” requirement or restriction on imports. U.S. did not appeal the decision that the U.S. failed to investigate 25 cases of “double remedies”.

Final Outcome U.S. did not violate Article X:3 U.S. failed to investigate and avoid double remedies in 25 anti-dumping and countervailing duties investigation Measuring of burdens within the meaning of Article X:2 requires a comparison between the new measure of general application in municipal law and the prior published measure that it replaced or modified

Implication for Businesses In US-Countervailing and Anti- Dumping Measures (China), the AB ruled that the United States have to search whether double remedies had been applied in 25 U.S Department of commerce reviews of Chinese exports opened between November 20, 2006 and March 13, 2012. The relatively limited direct consequences of the dispute masks the range of important issues that this case speaks to in terms of U.S-China trade relations. The arguments and analysis raised in US-CVD and AD Measures (China) may have implications for businesses and debates on the reforming the WTO for years to come.

Recommendation Countries should make clear as to which authoritative body is in charge of trade laws and regulations. Therefore, WTO and other members can know which representative body and legislation they must address in terms of trades.