China VS. U.S. DS 449 – Various Products from China Laureen Cepeda, Darien Contu, Brenea Gordon

Definitions Countervailing duties: a penalty that a WTO member may assess upon an import pursuant to a finding that its price is artificially low because of government subsidies that the producer received in its home country Anti-dumping measures: a penalty that a member state may assess upon an import originating from another member state pursuant to a showing that the price of the import is less than its fair value. Double remedy: means both anti-dumping and countervailing duties – are imposed upon the same imported products, also referred to as “double counting”. *B

Prior Proceedings DS 212 - United States — Countervailing Measures Concerning Certain Products from the European Communities DS 213 - United States — Countervailing Duties on Certain Corrosion-Resistant Carbon Steel Flat Products from Germany DS 257 - United States — Final Countervailing Duty Determination with respect to certain Softwood Lumber from Canada DS 296 - United States — Countervailing Duty Investigation on Dynamic Random Access Memory Semiconductors (DRAMS) from Korea DS 336 - Japan — Countervailing Duties on Dynamic Random Access Memories from Korea DS 379* - United States — Definitive Anti-Dumping and Countervailing Duties on Certain Products from China DS 437 - United States — Countervailing Duty Measures on Certain Products from China DS 471 - United States — Certain Methodologies and their Application to Anti-Dumping Proceedings Involving China *D

Prior Proceedings - DS 379 China’s claim in case DS 449 relies heavily on the AB’s ruling in US-AD and CVD (China), DS 379. AB ruled that imposing both CVDs and ADs calculated using an NME methodology is inconsistent with Article 19.3 of the SCM Agreement, and that the burden is on the investigating authority to investigate whether the same subsidies are being offset twice. China argued that the US had not complied with this ruling. USDOC failed to investigate the double remedies The US objected to the interpretation of Article 19.3 that had been adopted by the AB in DS379 & argued that the Panel was not obligated to adopt the same interpretation of Article 19.3 that the AB adopted in DS 379. Instead, the United States argued that panels are not bound to follow prior AB precedent when the findings are not persuasive or based on a valid understanding of the relevant agreements. The Panel of DS 449 rejected the United States request that it reconsider the interpretation of Article 19.3 that the AB had adopted in DS 379. *D

The Issues Presented by China China claims that the United States failed to investigate and avoid double remedies in 26 countervailing duty investigations and reviews initiated between November 20th, 2006 and March 13th, 2012 *L

Business Context: Examples of Affected Products Off-the-road tires Sodium Nitrite Citric Acid Lawn Groomers Kitchen Shelves Stainless Steel Sinks ETC. *B

Political Context Case filed in 2012, and resolved in 2015 Obama’s Second Term as President He filed 13 cases in his Second Term 9 against China GPX law enacted by Congress Department of Commerce - failure to investigate *D

Legal Historical Context Year Event 1984 U.S. Dept of Commerce creates policy decision that states U.S. countervailing duty (CVD) laws will not be applied non-market economies. 1986 & 1992 U.S. upholds Commerce policy on CVD law in Georgetown Steel Corp V. United States (1986), Chrome-Plated Lug Nuts and Wheel Locks from the People’s Republic of China (1992) and Oscillating and Ceiling Fans from the People’s Republic of China (1992). 1994 The Agreement on Subsidies and Countervailing Measures (SCM) is established at the Uruguay Round. 2001 China joins the WTO – accepting all that comes with its accession to the WTO *L

Legal Historical Context Year Event 2006 U.S. decides to apply CVDs to China 2011 Federal Circuit determines that Commerce’s application of CVDs to China went against existing policy. 2012 Congress enacts new legislation (PS 112-99 of GPX) that allows Commerce to apply CVDs on imports from NME’s, retroactively to 2006. In addition, this new law includes provision that says that application of both CVD and AD law results in double counting of duties. *L

Dispute Timeline Dates December 7, 2012 Panel is established March 27, 2014 Circulation of the Panel report April 8, 2014 China notifies Dispute Settlement Body of its decision to appeal to the Appellate Body April 17, 2014 US notified DSB of its decision to appeal to the AB July 7, 2014 Circulation of the AB report July 22, 2014 Adoption of resolutions by DSB *B

Contested Issues as Presented by China In 2012, China requests for consultations regarding PS 112-99 against the U.S. China says the U.S. is inconsistent with elements of the SCM Agreement and GATT 1994. Agreement Articles in Question SCM Agreement 10, 19, 32 GATT 1994 VI, X:1, X:2, X:3 *L

China’s Defense GATT 1994 X1: Prompt publishing X2: Advance in duties and the imposition of new barriers against imports X3: Retroactive law SCM Agreement Articles 10, 19 and 32 – lack of investigating 26 investigations *L

U.S. Defense GPX legislation did not violate GATT 1994 PL 112-99 was not enforced before it was published PL 112-99 does not apply to all cases between 2006-2012 PL 112-99 validated CVD law after Federal Court decision in 2011 Actions by US between 2006 and 2012 were lawful Accession terms for China meant that special rules could be applied by trading partners *L

Panel Decision December 7, 2012 - Panel Established March 27, 2014 - Panel Report circulated Declined to rule on consistency with Article 6.2 & Articles 10, 19 & 32 of the SCM Agreement are consistent with Article 6.2 of DSU The US did not act inconsistently with Article X:1, 2, 3 of the GATT 1994 In 1 of 26 proceedings on stainless steel sinks brought by China against the US, China failed to demonstrate the US acted inconsistently with Articles 19.3, 10, and 32.1 of the SCM Agreement In 25 of 26 proceedings, the US acted inconsistently with Article 19.3 of the SCM Agreement, and consequently Article 10 because of the USDOC’s imposition of 32.1 CVDs and ADs calculated on the basis of an NME methodology on the same products without investigation. US must bring investigations of 25 proceedings of various products into conformity with its obligations under the SCM Agreement *D

Appeals by China & US China: United States: April 17, 2014 Panel’s interpretation of Article XII:1 of Marrakesh Agreement - request AB to reverse Panel findings in paragraphs 7.80, 7.89, and 7.93 Panel’s findings that China’s export quotas on Rare Earths and Tungsten don’t relate to conservation under Article XX(G) of the GATT 1994 - request AB to reverse Panel’s interpretation because they were inconsistent with Article 11 of the DSU Panel’s findings that China’s export quotas on rare earths, Tungsten, and Molybdenum are not “made effective in conjunction with” domestic restrictions under Article XX(G) of the GATT 1994 - request AB reverse Panel decision United States: April 17, 2014 Panel’s conclusion that Section D of China’s request was not inconsistent with Article 6.2 of the DSU - request to reverse Panel’s interpretation Therefore, reversing the US’s inconsistency with Articles 10, 19.3, and 32.1 of the SCM Agreement as well because the claims are outside the terms of reference of the dispute *D

Appellate Body Decision July 7, 2014 - Appellate Body report circulated Reversed the Panel’s interpretation of Article X:2 of GATT 1994 and concludes that the US has acted inconsistently by imposing a new, more burdensome requirement, restriction, or prohibition on imports. Declared moot & no legal effect the Panel’s findings regarding the lawfulness of the USDOC’s practice and considers it unnecessary to examine China’s claim under Article 11 of the DSU Recommends the US bring the investigations and reviews identified in AB & Panel reports into conformity with SCM Agreement August 21, 2014 - The US informed the DSB of its intentions of implementing its rulings in a manner that respected WTO obligations. July 22, 2015 - Date agreed upon by US & China for an adoption period to bring laws into conformity. Allowed for twelve months from the AP report circulation. August 5, 2015 - Final adoption deadline date *D

Implementation Procedures “UNDERSTANDING BETWEEN CHINA AND THE UNITED STATES REGARDING PROCEDURES UNDER ARTICLES 21 AND 22 OF THE DSU” Should China consider that the situation described in Article 21.5 of the DSU exists, China will request that the United States enter into consultations with China. The Parties agree to hold such consultations within 15 days from the date of receipt of the request. After this 15-day period has elapsed, China may request the establishment of a panel pursuant to Article 21.5 of the DSU at any time. *B

Implementation Procedures Continued In the event that the DSB, following a proceeding under Article 21.5 of the DSU, rules that a measure taken to comply does not exist or is inconsistent with a covered agreement, China may request authorization to suspend concessions or other obligations pursuant to Article 22.2 of the DSU. The United States shall not assert that China is precluded from obtaining such DSB authorization on the grounds that the request was made outside the 30-day time-period specified in Article 22.6 of the DSU. This is without prejudice to the right of the United States to have the matter referred to arbitration in accordance with Article 22.6 of the DSU. *B

Implementation Procedures Continued 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. If, during the application of these procedures, the Parties consider that a procedural aspect has not been properly addressed in these procedures, they will endeavor to find a solution within the shortest time possible that will not affect the other aspects and steps agreed herein *B

Observations U.S. can be seen as unfairly treating China China’s actual status in the WTO is not clear (or rather clearly accepted) When China joined the WTO, it was seen by many as a developing country but today it is seen as a competitor From the stand point of China’s competitors, the NME treatment for China ended in December 2016. Special treatment should no longer be allowed From the stand point of China, they have been discriminated against because of the terms of their accession and still rely on central planning (therefore still qualifying as MNE) *L

Observations Continued In line with the aims of the DSU - this case provided a prompt settlement and a positive solution for China Although it brought the security and predictability of the trading system into question with the NME discrimination This case makes double remedies a prominent issue on the WTO stage *D

References Agreed Procedures under Articles 21 and 22 of the Dispute Settlement Understanding, World Trade Organization, https://docs.wto.org/dol2fe/Pages/SS/directdoc.aspx?filename=q:/WT/DS/449-15.pdf Beshkar, Mostafa and Adam S. Chilton, “Revisiting Procedure and Precedent in the WTO: An Analysis of US – Countervailing and Anti-Dumping Measures (China),” EUI Working Papers, October 2015, http://cadmus.eui.eu/bitstream/handle/1814/37425/RSCAS_2015_68.pdf Challenges and Choices to Apply Countervailing Duties to China, GAO, https://www.gao.gov/products/GAO-06-608T Cho, Sungjoon and Thomas H. Lee, “Double Remedies in Double Courts,” European Journal of International Law, Volume 26, Issue 2, September 2015, https://academic.oup.com/ejil/article/26/2/519/423075 Dispute Cases, World Trade Organization, https://www.wto.org/english/tratop_e/dispu_e/dispu_status_e.htm Malawer, Stuart, “U.S.-China Trade Relations – Litigation in the WTO 2001 - 2014,” International Law Practicum, 2014, http://globaltraderelations.net/images/Malawer.U.S._-_CHINA_LITIGATION_IN_THE_WTO_2001-2014_NYSBA,_International_Law_Practicum_Spring_2014_.pdf Stewart, Terrence P., “China’s WTO Challenge to its Treatment as a Non-Market Economy under Antidumping Laws – Briefing Underway Paints a Much Different Picture than the Claims Made by China,” http://www.stewartlaw.com/article/ViewArticle/1120 United States — Countervailing and Anti-dumping Measures on Certain Products from China, World Trade Organization, https://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 (WT/DS 449) - First Written Submission of the United States of America, United States Trade Representative, https://ustr.gov/sites/default/files/DS449.US_.Sub1_.Public.pdf *D