1. China Anti-Dumping & Countervailing Duties
US vs China:
China Anti-Dumping & Countervailing Duties
on US AutosAutos (WT/DS440/R) (Panel 2014) Team 9
Austin Toner & Tish Zone

2. Overview & Outline
The US challenged the anti-dumping duties China imposed on US cars and SUVs sold in China. This was the third US complaint to the WTO on auto trade disputes with China.
The US China Auto Industry
Complaint against China DS 440
Articles & Key Arguments
WTO Decision & Key Findings
Analysis & Arguments

3. China was the largest growth market for Global auto sales

4. China is a Capitalist Command Economy
Capitalism, Competition & Communism
State-owned companies like SAIC Motor (i.e. subsidies) and others state-sponsored enterprise (SOEs)
Joint Ventures: China requires foreign companies to join with China companies in China to manufacture
Restrict number of license plates distributed per year;
Tariffs & Anti-dumping duties on foreign cars.

5. Chinese new and growing domestic purchasing power:
China’s auto market a mix of domestic brands, Jt Venture products, and foreign imports:
China’s newly emerging middle class would rather take a taxi than buy a “Cherry” Chinese car of weak social status and poor brand name recognition.
Cheap Domestic Brands available because of government subsidies.
SOEs often have Poor Brand Quality & Mismanagement of their domestic manufacturing creating a lack of trust of the Chinese brands.
Safety: domestic cars are lowest ratings globally.
Save to buy a western brand name car known to last and comes with significant status.
Source: Financial Times China and Wall Street Journal
Source: GM China

6. Chinese Government Intervention in the Auto Market
State-owned automobile companies listed below were not doing well in 2013:
State-owned China Changan Group Co.: Two of its subsidiaries, Hafei Automobile Industry Group Co. and Jiangxi Changhe Automobile Co., can build as many as 700,000 small cars and minivans per year, yet they sold only 15,000 citing bad management and quality control issues.
Chery Automobile Co., China's largest vehicle exporter, has four assembly plants with a total manufacturing capacity of 900,000 vehicles. Sold less than 500,000 units.
FAW Car Co. can produce 400,000 vehicles annually, but sold only 205,000 cars.
Source: Yang Jian, Advertising Age

7. US States exporting Autos to China

8. MOFCOM Issued the following AD and CVD rates
Respondent AD Rate (%) CVD Rate (%)
GM USA
Chrysler USA
Mercedes-Benz USA
BMW USA
Honda USA
General Motors Co. (NYSE:GM): the best-selling brand in China with a 14.7 percent market share in Won on quality and brand recognition for foreign imports and joint ventures in China manufacturing.

9. WTO Complaint against China DS 440

10. Dispute Settlement Process & Procedure
Major Points of Procedural Dispute Before the Panel:
--Non-Confidential Summaries of Confidential Documents Submitted
--Proof of Injury to Domestic Industry: Providing both parties a fair opportunity to present accusatory and defensive evidence.
--MOFCOM refusal to communicate - Mercedes-Benz USA letter prior to WTO complaint.
--Prima facie evidence and an affirmative burden of proof.
--Communications and Response Times

11. Timeline of Dispute in the WTO
July 2012: the United States requested consultations with China with regard to Notices to 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.
September 2012, the United States requested the establishment of a panel. 
October 2012, the Dispute Settlement Body established a panel and Colombia, the European Union, India, Japan, Korea, Oman, Saudi Arabia and Turkey reserved their third party rights. 
February 2013, the Director-General composed the panel.
On 23 May 2014, the final panel report was circulated to Members.

12. Key Articles of Case:
Article 6: Anti-dumping Agreement (Article VI of GATT 1994): 6.1 All interested parties in an anti-dumping investigation shall be given notice of the information which the authorities require and ample opportunity to present in writing all evidence which they consider relevant in respect of the investigation in question.
Article 6.9 provides: Responsibilities of the Investigating Authority
[t]he 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.

13. Proprietary: Disclosing Business Details during a Dispute can determine whether or not your product methods are copied
ARTICLE: 6.5.1
ARTICLE 6.5
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.
Any information which is by nature confidential because its disclosure would be of significant competitive advantage to a competitor - must be provided on a confidential basis by parties to an investigation shall, upon good cause shown, be treated as such by the authorities. Such information shall not be disclosed without specific permission of the party submitting it.

14. Subsidies and Countervailing Duties Agreement:
Article 12.4: Any information which is by nature confidential (for example, because its disclosure would be of significant competitive advantage to a competitor or because its disclosure would have a significantly adverse effect upon a person supplying the information or upon a person from whom the supplier acquired the information), or which is provided on a confidential basis by parties to an investigation shall, upon good cause shown, be treated as such by the authorities. Such information shall not be disclosed without specific permission of the party submitting it. Article : The authorities shall require interested Members or 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 Members or 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.

15. The Smoking Gun: The Mercedes-Benz USA Letter Prior to the US WTO complaint MB requested information from MOFCOM who refused to respond.
Mercedes-Benz USA objected to the substance of the final disclosure provided to it by MOFCOM as a US respondent, maintaining that the disclosure was insufficient. The letter states in relevant part:
[f]inally, [Mercedes-Benz USA] reiterates MOFCOM did not provide sufficient information in the final disclosure. [Mercedes-Benz USA] cannot fully understand the related measures and methodology MOFCOM adopted in the final disclosure. Regarding the sufficiency of the information disclosure, MOFCOM says:
“The investigating authority determines that the investigating authority has already fully disclosed all the facts including data, source of data and detailed calculation in the disclosure after the preliminary determination. The investigating authority does not accept this position.”

16. Burden of Proof: 1) Complainant must show a level of proof to the claim 2) Defendant must prove that the accusations are false
--Any case brought before the DSB requires that any party claiming a violation must assert prima facie evidence to prove its claim in the absence of refutation.
--Therefore, as the Complainant Party, the United States initially bears the burden of proof to demonstrate that China’s anti-dumping and countervailing duty measures are inconsistent with the Anti-Dumping Agreement and Subsidies and Countervailing Measures Agreement.
--China refused to present additional information to supplement its initial non-confidential summaries of original confidential data submitted after the objection of U.S. respondents. As a result, the Panel found that China did not fulfill their burden of proof obligations. As a matter of law, this necessitated a ruling by the Panel in favor of the Complainant when the Defendant Party failed to effectively refute the Complainant petitioner’s case. In short, it is for each party asserting a fact to provide sufficient proof. (7.1.3)

17. Key Arguments of the Case: United States of America (Complainant)
Evidentiary Arguments:
The United States contended that China had failed to submit sufficient evidence of harm to domestic industry among Chinese car manufacturers to justify the countervailing measures imposed by MOFCOM following its independent dumping investigation.
Specifically, the United States argued that the Respondent Party failed to submit adequate non-confidential summarization of the “substance” of redacted industry data on 12 factors of alleged injury to Chinese automobile manufacturers: sales-to-output ratio, return on investment, salary, apparent consumption, product capacity, output, sales volume, inventory, pre-tax profit, number of employees, productivity, and cash flow.
The United States contended that MOFCOM’s non-confidential summaries of the aforementioned microeconomic indicators were lacking in the following respects: 1. Textual explanation of censored content was “peripheral to” the economic “substance” in dispute. 2. Non- confidential summaries reported only “year-on-year” percentage change in the redacted microeconomic data instead of giving an average of absolute values per year. 3. Other censored data tables supplemented missing data with trend lines that giving no record of wholly redacted year-on-year percentage change at all. 4. Trend lines for the censored data tables were labeled only by year and lacked indices to show the true scale of each manufacturer’s loss within the domestic industry, leaving interested parties to piece together the substance of confidential industry data in a manner inconsistent with Articles and
Procedural Arguments:
The United States contended that China acted inconsistently with Article 6.9 of the Anti-Dumping Agreement by failing to require “CAAM” to disclose “essential facts” to US Respondents pertaining to data and calculations for dumping margins when petitioning MOFCOM for anti-dumping duties. As the United States observed, it is the obligation of interested Complainant and Respondent Parties to prepare adequate non-confidential summaries of redacted information themselves when submitting a confidential version of the petition to the investigating authority. Otherwise, the submitting party must provide sufficient explanation why the censored information cannot be non- confidentially summarized.
Above all, the United States disagreed with China’s assertion that MOFCOM was only compelled to demand adequate non-confidential summary of redacted industry data where an interested opposing party objected to the sufficiency of summaries provided during the course of investigations. As the United States argued, it is the responsibility of the investigating authority (in this case MOFCOM) to ensure that adequate non-confidential summaries accompany any confidential information submitted by a petitioning party during the course of an investigation. For this reason, the United States argued that the fact that no US Respondent Party officially objected to the adequacy of the non-confidential summaries during the course of MOFCOM’s investigations was “immaterial” to any finding of a violation under Articles and of the WTO agreement.

18. Key Arguments of the Case: China (Respondent) Evidentiary Arguments: China contended that United State’s claims of inadequacy regarding the content of the non-confidential summaries of redacted domestic industry indicators failed to consider how the year-on-year percentage change tables, accompanying text, and trend lines showing redacted data may be read in combination to substitute for the lack of indices or general representation of scale for the purpose of sufficiently showing domestic industry damage according to the 12 factors of economic injury under consideration: sales-to-output ratio, return on investment, salary, apparent consumption, product capacity, output, sales volume, inventory, pre-tax profit, number of employees, productivity, and cash flow. Specifically, China submitted that its non-confidential summary of sales-to-output ratio could be read in combination with apparent consumption and inventory shifts alongside figures for total domestic demand to provide a reasonable understanding of the substance of confidential information at issue within the meaning of Articles and China contended that it did adequately meet the requirements of Articles and to convey the “substance” confidential data providing proof of harm its domestic automobile manufacturing industry in its non-confidential summaries when this obligation is interpreted in reference to Article 3.4 of the Anti-Dumping Agreement and Article 15.4 of the Subsidies and Countervailing Measures Agreement. Because these latter articles of the WTO Agreement require the investigating authority to evaluate industry indicators demonstrating the state of the domestic industry in terms of overall relevant trends rather than changes in the absolute underlying figures themselves (as was the Panel’s practice in EU - Footwear (China), China conteneded that the evidentiary content of the non-confidential summaries provided to Complainant parties and the Panel’s investigating authority was sufficient when weighed against other provisions of the Anti-Dumping Agreement. Here, however, the United States noted that Article 3.4 of the Anti-Dumping Agreement and Article 15.4 of the SCM Agreement contained no cross-reference to Articles and Procedural Arguments: China argued that it recorded no explanation of why the confidential information in dispute was not susceptible to summarization because MOFCOM decided that the non-confidential summaries submitted by the China Association of Automobile Manufacturers (“CAAM”) in order to petition for anti-dumping and countervailing duties were sufficient. China contended that neither Article nor Article set a “specific level of detail or format” for non-confidential summaries, likewise arguing that the adequacy of non-confidential summaries must be decided by the investigating authority in manner that balances the need to protect confidential information with the need for transparency on a case-by-case basis. China argued that because MOFCOM decided that the non-confidential summaries of “redacted domestic industry-wide aggregated figures per year” were adequately detailed to allow a reasonable understanding of the “substance” of the relevant confidential information, further US request for “averages of absolute values per year” was redundant because it sought to have MOFCOM disclose the very data which it reserved the right to grant confidential treatment. Lastly, China contended that any Respondent Party who felt that the information in the non-confidential version of the Complainant Party’s petition to MOFCOM was inadequate should have raised this objection during the course of prior investigations. Consequently, China argued that raising this issue for the first time before the Panel late into its proceedings should have disqualified the US’s claim (see Korea – Commercial Vessels). However, during the course of MOFCOM’s initial investigations, Mercedes-Benz USA submitted a letter to MOFCOM objecting that the investigating authority did not provide the relevant program language or formulas for calculating their dumping margin from Mercedes-Benz USA’s indirect sales costs and profits of exporting its cars to China in the final disclosure. MOFCOM dismissed this objection.
6.5.1
12.4.1

19. Third Party Arguments
The European Union contended that the actual data and calculations used to establish MOFCOM’s dumping margins were "essential facts" under Article 6.9 of the Anti-Dumping Agreement. Such data and calculations are an important, material component to any investigating authority’s final determination in a trade dispute because without this data affected exporters cannot contest the investigating authority’s calculations for errors that would distort of dumping margins. 7.1
Japan argued that because Article 6.9 mandates disclosure obligations wherever a fact is "related to" the calculation of dumping margin, and including transaction-specific price and adjustment data used by the investigating authority, the disclosure of only the finally-calculated export price and normal value of domestic market cars was insufficient for respondent parties to prepare their defense. 7.2
Saudi Arabia observed that because "essential facts" will vary with the factual circumstances in dispute, Defendant parties must disclose all economic elements of consideration used by an investigating authority in their implementation of definitive trade measure. These essential facts should include all evidence of dumping, injury and causation not only supporting the final decision of the investigating authority but also necessary to understand "the process of analysis and decision-making" used to reach that decision. 7.3
Turkey submitted the opinion that both the data and calculations used to establish dumping margins as well as the facts related to proof of injury to domestic industry from foreign imports were "essential facts" within Article 6.9 of the Anti-Dumping Agreement meaning. However, Turkey noted that the obligated disclosure of company-specific confidential information under Article 6.9 should only be made to the company whose confidential data is the subject of the disclosure. 7.4

20. WTO Arbitration Panel Findings
Procedural Reasoning:
While the submission of factual evidence should occur no later than the first Panel meeting, exceptions outside of the normal timeline for the Panel’s working procedures shall be granted if either party shows good cause and the other party is given opportunity to comment. The Mercedes-Benz USA letter was not submitted by the first Panel meeting from either party’s copies of MOFCOM's final disclosures to US Respondents because the United States didn’t possess them and China refused to do so. Although the Mercedes-Benz USA letter wasn’t submitted until the second Panel meeting, the letter was admitted as relevant probative evidence towards the question of whether China’s trade actions were inconsistent with Article 6.9 after China selected to refuse to submit MOFCOM’s final disclosures as evidence. 7.14
Because China was given adequate opportunity but refused to rebut the letter from Mercedes-Benz USA to MOFCOM under the argument that it was the United State’s responsibility as a Complainant to produce evidence of wrongdoing for a prima facie case against China, the Panel ruled that China’s due process rights were not violated by the Panel’s decision to use the letter in resolving the United State’s claim. Following the Appellate Body’s report in Japan - Agricultural Products II, the Panel acknowledged China’s objection that the Panel’s right under Article 13 of the DSU to seek information from any individual or body deemed appropriate may not always be correctly invoked during late stages of a Panel hearing. However, the Panel accepted the United State’s request to submit this new evidence at the Complainant's own initiative during the second Panel meeting because of the particular circumstances of the dispute.
Pivotal case fact: the Panel concluded the letter showed that Mercedes-Benz USA objected to the substance of the final disclosure it received, maintaining that it was insufficient. The letter stated in relevant part:
[f]inally, [Mercedes-Benz USA] reiterates MOFCOM did not provide sufficient information in the final disclosure. [Mercedes-Benz USA] cannot fully understand the related measures and methodology MOFCOM adopted in the final disclosure. Regarding the sufficiency of the information disclosure, MOFCOM says:
“The investigating authority determines that the investigating authority has already fully disclosed all the facts including data, source of data and detailed calculation in the disclosure after the preliminary determination. The investigating authority does not accept this position.”
Panel assessment of the letter submitted showed that although Mercedes-Benz USA “made great efforts” to obtain more detailed non-confidential summary of the disputed domestic industry data, MOFCOM chose not to provide a better account of the data it submitted or give a more detailed explanation of the information relevant to its dumping margin calculations. As a result, the Panel decided that MOFCOM did not meaningfully disclose its most important redacted industry data adjustment. The Panel found that Mercedes-Benz USA was of the view that MOFCOM's final disclosure of “essential facts” with respect to its position as a Respondent Party was inadequate and that Mercedes-Benz USA had objected to MOFCOM’s final disclosure on that basis, only to be dismissed by MOFCOM. As the Panel reasoned, while this alone did not demonstrate that China’s disclosure was inconsistent with the requirements of Article 6.9, the admitted evidence did lend support to the United State’s claim and was unrebutted by any evidence China submitted.
Procedural Conclusion:
The burden of proof in any WTO dispute settlement requires that the party claiming a violation of a WTO Agreement provision must prove its claim. As the Complainant, the United States carried the burden of demonstrating the violations it claimed, both legally and in fact. However, because it is also the responsibility of both the Complainant and Respondent parties to provide proof of any fact they assert, once the United States established a prima facie case through the Mercedes-Benz USA letter that MOFCOM had failed to disclose the “essential facts” behind its anti-dumping duties to US respondents this burden of proof shifted to the Defendant Party. Because China made no argument and provided no further evidence when faced with US Respondent’s complaint regarding the inadequate “substance” of the non-confidential summaries it disclosed other than to reference MOFCOM’s previous final determination as a national investigating authority, China failed to rebut the United State’s prima facie case. Consequently, the Panel found that China acted inconsistently with Article 6.9 of the Anti-Dumping Agreement when MOFCOM failed to disclose “essential facts” to US Respondents prior to making its final determination in the AD investigation at issue.

21. WTO Arbitration Panel Findings:
Evidentiary Reasoning: The Panel found that the inadequacy of China’s non-confidential disclosures was most apparent in MOFCOM’s adjustment of domestic industry data on indirect sales costs and profits in its calculation of US auto export price in Chinese markets as a key factor leading to the dumping margins implemented by China. Censored summaries for return on investment and salary in 2006, 2007, 2008, interim 2008, and interim 2009 that excluded year-on-year percentage change data for each injury factor and only included partially unlabelled trend lines from tables and text that didn’t provide a reasonable understanding of the “substance” of the redacted information and therefore were inconsistent with Articles and Non-confidential summaries of sales-to-output ratio were also determined to be inconsistent with Articles and where partially labelled trend lines and other accompanying redacted text alone didn’t give understanding of wholly redacted figures on year-on-year percentage change without reference to separate non-confidential summaries on inventory and apparent consumption, the latter of which also lacked percentage change figures for interim periods 2008 to 2009 despite this data being present in separate non-confidential summaries. As the Panel ruled, requiring investigation respondents to “piece together” insufficient non-confidential summaries with other incomplete data sources to infer a reasonable understanding of the confidential content of a trade dispute didn’t meet the disclosure expectations of Articles and
Evidentiary Conclusion:
The Panel found that the non-confidential summaries of confidential information concerning production capacity, output, sales volume, inventory, pre-tax profits, number of employees, productivity, and cash flow allowed a reasonable understanding of the substance of the confidential information where year-on year percentage change in the tables of redacted data was shown. However, the Panel found that the non-confidential summaries regarding apparent consumption, return on investment, salary, and sales-to-output ratio did not permit a reasonable understanding of the substance of the confidential information where data and therefore concluded that China’s trade actions failed to comply with Articles of the Anti-dumping Agreement and of the Subsidies and Countervailing Duties Agreement.
Relevant Monthly Trend in Sales-to-output Ratio (% )
Year-on-year Change in Sales-to-output Ratio:
Year
2006
2007
2008
1Q-3Q 2008
1Q-3Q 2009
Caution:
General Lack of Indices, Corresponding Years, or Overall Use of Scale is Purely Intentional!
Domestic like Product
9.97
10.72
10.74
8.80
13.49
Percentage Change from Prior Year
18.69
10.52
9.59
10.14
14.65
Caution: These Partially Redacted Percentages Are Wholly Fictitious, Much Like Their Wholly Redacted Underlying Figures!

22. MOFCOM: A Normal Chinese Court?
5. MOFCOM set a 20-day deadline for interested parties to register to participate in the AD and CVD investigations. 15 GM USA, Ford USA, Chrysler USA, Mercedes-Benz USA International Inc. and Daimler AG (collectively, "Mercedes-Benz USA"), BMW Manufacturing LLC ("BMW USA"), Honda of America Mfg. Inc. and American Honda Motor Co., Inc. (collectively, "Honda USA"), and Mitsubishi North America Inc. ("Mitsubishi USA") registered as respondent companies in both investigations prior to the closing date of 26 November
6. The Office of the United States Trade Representative ("USTR") registered to participate on behalf of the United States as a CVD respondent within the period for registration. 2.3.
7. Having failed to submit a response to the MOFCOM AD and/or CVD questionnaires responded to by all other parties, Mitsubishi USA subsequently withdrew from the investigations, on 28 December
8. Following MOFCOM’s November 6, 2009 issue of separate notices of invitation for interested parties to register in its AD and CVD injury investigations, The CAAM registered to participate in these investigations, but no other interested parties registered as domestic producers potentially injured by the anti-dumping issue in question. 2.4.
9. MOFCOM issued its preliminary determinations on 2 April It found that certain automobiles imported from the United States by the respondents in question were dumped and subsidized to cause material injury to the domestic industry of China. 2.6.
10. MOFCOM issued its final determination for AD and CVD rates on respondent companies in question on 5 May MOFCOM determined individual dumping margin rates for all but one of the six respondent auto companies, since Ford Motor Company did not export during the periods of investigation. 2.7 : 2.1
Quiz Questions:
Why was the China Association of Automobile Manufacturers (“CAAM”) the only interested party that registered to participate in MOFCOM’s AD and CVD injury investigations rather than any other individual domestic automobile producer given notice of invitation?
If more U.S. respondent parties had objected to the adequacy of MOFCOM’s non-confidential summary disclosures would the result of MOFCOM’s findings been different?
If the trade issue in dispute was resolved through a private Chinese arbitration court at an individual firm level rather than an international policy level would the result have been different?
MOFCOM: A Normal Chinese Court?
MOFCOM Investigation Timeline
On 9 September 2009, the 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 U.S. automobiles with an engine capacity equal to or greater than 2000cc. 2.2
On 8 March 2011, the petitioner applied to have the scope of the investigations amended to include only imports of certain US automobiles of a cylinder capacity equal to or greater than 2500cc. The petitioner submitted supplementary domestic industry data on such automobiles on 21 March MOFCOM accepted the petitioner's application, and adjusted the scope of the product under investigation to include only saloon cars and cross-country cars of a cylinder capacity equal to or greater than 2500cc. 2.5
The original petition identified General Motors LLC ("GM USA"), Ford Motor Company ("Ford USA") and Chrysler Group LLC ("Chrysler USA") as known exporters of the subject product. 2.2.
MOFCOM initiated AD and CVD investigations on 6 November 2009, setting the POI for the AD and CVD investigations as 1 September 2008 to 31 August 2009, and for the injury aspect of the investigations as 1 January 2006 to 30 September