1. Presented by Group 7: Luyu Yang Michael Vitagliano Mariam Wamee
DS437 United States – Countervailing Duty Measures on Certain Products from China
Presented by Group 7:
Luyu Yang
Michael Vitagliano
Mariam Wamee

2. History and Context
Dispute dates back to May 25, 2012 when China requested the WTO for consultations in regards to countervailing measures imposed on them by the United States.
China alleged that the investigations made WTO-inconsistent findings with respect to, inter alia, benefit, specificity, adverse facts available, and “public bodies”
Australia, Brazil, Canada, the European Union, India, Japan, Korea, Norway, the Russian Federation, Saudi Arabia, Turkey and Vietnam notified their interest in participating in the Panel proceedings as third parties

3. Products under Dispute

4. Impact of Products under Dispute
Thermal Paper:
During last decade, the import of thermal paper products has been increased greatly in the U.S. In detail, the annual total import value of LWTP products in the U.S. increased from 160 million U.S. dollars to more than 350 million U.S. dollars in 2012.

5. Solar Panels:
Top solar companies such as SolarWorld Americans and Suniva were struggling to compete with cheap solar panels from China
The US has a $29 billion dollar solar industry, which has grown rapidly in the last decade-- there were 10 times as many large-scale solar projects in 2014 as there were in 2004.

6. Wind Turbines:
China has become a world leader in manufacturing wind turbines
In 2016, Chinese company Xinjiang Goldwind Science & Technology overthrew U.S General Electric as the leading producing

7. Steel Cylinders:
The United States is the world's largest steel importer. In 2015, the U.S. imported 35.3 million metric tons of steel, a decline from the near- record high of 40.3 million metric tons in U.S. imports represented about 9 percent of all steel imported globally.
China makes up small percentage, but still relevant with regard to overall trade relations.

8. Aluminum Extrusions
extrusions are used to create objects of a fixed cross-sectional profile. A material is pushed through a die of the desired cross-section.
The two main advantages of this process over other manufacturing processes are its ability to create very complex cross-sections, and to work materials that are brittle
they are used in industrial manufacturing, food processing, and pharmaceutical products
The US imported 33 percent of the aluminum metal used in Aluminum is a significant industry in the US worth about billion dollars in 2014

9. What is actually happening?
USDOC conducted a bunch of countervailing duty investigations from 2007 to 2012 – 17 to be exact
Upon imposition of those duties, China challenged the investigations
They challenged these USDOC’s findings:
Chinese SOEs are public bodies*
the provision of certain inputs by Chinese SOEs conferred a benefit
subsidies arising from the provision of inputs for less than adequate remuneration are specific
there was sufficient evidence with respect to the specificity of the alleged subsidies to justify the initiation of the underlying countervailing duty investigations

10. Panel Findings
USDOC acted inconsistently with the obligations of the United States under Article 1.1(a)(1) of the SCM Agreement when it determined that SOEs are public bodies
that a majority government-owned entity is a public body is inconsistent "as such“ with Article 1.1(a)(1) of the SCM Agreement
What is Article 1.1(a)(1)?
1.1(a)(1) there is a financial contribution by a government or any public body within the territory of a Member (referred to in this Agreement as “government”), i.e. where:
a government practice involves a direct transfer of funds (e.g. grants, loans, and equity infusion), potential direct transfers of funds or liabilities (e.g. loan guarantees);
government revenue that is otherwise due is foregone or not collected (e.g. fiscal incentives such as tax credits)
a government provides goods or services other than general infrastructure, or purchases goods
a government makes payments to a funding mechanism, or entrusts or directs a private body to carry out one or more of the type of functions illustrated in (i) to (iii) above which would normally be vested in the government and the practice, in no real sense, differs from practices normally followed by governments;

11. Even more Panel Findings
The USDOC acted inconsistently with the obligations of the United States under Article 2.1(c) of the SCM Agreement
Hmm, what does Article 2.1(c) state?
In order to determine whether a subsidy, as defined in paragraph 1 of Article 1, is specific to an enterprise or industry or group of enterprises or industries (referred to in this Agreement as “certain enterprises”) within the jurisdiction of the granting authority, the following principles shall apply:
Where the granting authority, or the legislation pursuant to which the granting authority operates, explicitly limits access to a subsidy to certain enterprises, such subsidy shall be specific.
Where the granting authority, or the legislation pursuant to which the granting authority operates, establishes objective criteria or conditions(2) governing the eligibility for, and the amount of, a subsidy, specificity shall not exist, provided that the eligibility is automatic and that such criteria and conditions are strictly adhered to. The criteria or conditions must be clearly spelled out in law, regulation, or other official document, so as to be capable of verification.
If, notwithstanding any appearance of non‑specificity resulting from the application of the principles laid down in subparagraphs (a) and (b), there are reasons to believe that the subsidy may in fact be specific, other factors may be considered. Such factors are: use of a subsidy programme by a limited number of certain enterprises, predominant use by certain enterprises, the granting of disproportionately large amounts of subsidy to certain enterprises, and the manner in which discretion has been exercised by the granting authority in the decision to grant a subsidy(3). In applying this subparagraph, account shall be taken of the extent of diversification of economic activities within the jurisdiction of the granting authority, as well as of the length of time during which the subsidy programme has been in operation.

12. You probably thought they found it all by now…me too
USDOC acted inconsistently with the obligations of the United States under Article 2.2 of the SCM Agreement by making positive determinations of regional specificity while failing to establish that the alleged subsidy was limited to certain enterprises located within a designated geographical region within the jurisdiction of the granting authority
What might Article 2.2 tell us?
A subsidy which is limited to certain enterprises located within a designated geographical region within the jurisdiction of the granting authority shall be specific. It is understood that the setting or change of generally applicable tax rates by all levels of government entitled to do so shall not be deemed to be a specific subsidy for the purposes of this Agreement.

13. …
The USDOC acted inconsistently with the obligations of the United States under Article 11.3 of the SCM Agreement by initiating investigations in respect of certain export restraints
Let’s take a look at Article 11.3 then
The authorities shall review the accuracy and adequacy of the evidence provided in the application to determine whether the evidence is sufficient to justify the initiation of an investigation.

14. One more finding! Cause why not?
The Panel further found that, as a consequence of the inconsistencies of the USDOC's actions with Articles 1, 2, and 11 of the SCM Agreement, the United States also acted inconsistently with Articles 10 and 32.1 of the SCM Agreement
Of course you know what that means
10 Members shall take all necessary steps to ensure that the imposition of a countervailing duty(36) 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(37)and conducted in accordance with the provisions of this Agreement and the Agreement on Agriculture.
32.1 No specific action against a subsidy of another Member can be taken except in accordance with the provisions of GATT 1994, as interpreted by this Agreement.

15. Lets throw a little GATT at you while we’re at it
Article VI: Anti-dumping and Countervailing Duties
1. 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. For the purposes of this Article, a product is to be considered as being introduced into the commerce of an importing country at less than its normal value, if the price of the product exported from one country to another…
That goes on for a minute – but that’s the gist

16. Panel Findings, China inconsistencies
China had failed to establish that the USDOC acted inconsistently with the obligations of the United States under Article 11 of the SCM Agreement by initiating the investigations without sufficient evidence of a financial contribution
Article 11
Except as provided in paragraph 6, an investigation to determine the existence, degree and effect of any alleged subsidy shall be initiated upon a written application by or on behalf of the domestic industry.
An application under paragraph 1 shall include sufficient evidence of the existence of (a) a subsidy and, if possible, its amount, (b) injury within the meaning of Article VI of GATT 1994 as interpreted by this Agreement, and (c) a causal link between the subsidized imports and the alleged injury. Simple assertion, unsubstantiated by relevant evidence, cannot be considered sufficient to meet the requirements of this paragraph.
The authorities shall review the accuracy and adequacy of the evidence provided in the application to determine whether the evidence is sufficient to justify the initiation of an investigation.

17. China’s inconsistencies cont.
China had failed to establish that the USDOC acted inconsistently with the obligations of the United States under Article 14(d) or Article 1.1(b) of the SCM Agreement by rejecting in-country private prices in China in its benefit analysis
Remember 1.1? Lets hit 14(d)
14(d) the provision of goods or services or purchase of goods by a government shall not be considered as conferring a benefit unless the provision is made for less than adequate remuneration, or the purchase is made for more than adequate remuneration. The adequacy of remuneration shall be determined in relation to prevailing market conditions for the good or service in question in the country of provision or purchase (including price, quality, availability, marketability, transportation and other conditions of purchase or sale).

18. There’s a few of these
China had failed to establish that the USDOC acted inconsistently with the obligations of the United States under Article 2.1 of the SCM Agreement:
i.  by failing to apply the first of the "other factors" under Article 2.1(c) – that is, "use of a subsidy program by a limited number of certain enterprises" – in the light of a prior "appearance of non-specificity" resulting from the application of subparagraphs (a) and (b);
ii.  by failing to identify a "subsidy program"; or
iii.  by failing to identify a "granting authority”

19. 3 More
China had failed to establish that the USDOC acted inconsistently with the obligations of the United States under Article 11 of the SCM Agreement by initiating the investigations without sufficient evidence of specificity

20. 2 More
China had failed to establish that, in 42 instances, the USDOC acted inconsistently with the obligations of the United States under Article 12.7 of the SCM Agreement by not relying on facts available on the record
Article 12.7 – You can all be trade lawyers after this presentation
In cases in which any interested Member or interested party refuses access to, or otherwise does not provide, necessary information within a reasonable period or significantly impedes the investigation, preliminary and final determinations, affirmative or negative, may be made on the basis of the facts available.

21. Last 1!
 China had failed to establish that the USDOC acted inconsistently with the obligations of the United States under Article 2.2 of the SCM Agreement by making a positive determination of regional specificity while failing to establish that the alleged subsidy was limited to certain enterprises located within a designated geographical region within the jurisdiction of the granting authority
Only gave you 2.1 before. Obviously you want to know what 2.2 says
A subsidy which is limited to certain enterprises located within a designated geographical region within the jurisdiction of the granting authority shall be specific. It is understood that the setting or change of generally applicable tax rates by all levels of government entitled to do so shall not be deemed to be a specific subsidy for the purposes of this Agreement.

22. OK, So after all that, where do we stand?
in the light of the very limited argumentation provided by China in support of its claims, the Panel declined to make findings on whether the USDOC acted inconsistently with the obligations of the United States under the SCM Agreement when it determined that export restraints constituted financial contributions.
Having found that the United States acted inconsistently with certain provisions of the SCM Agreement, the Panel recommended, pursuant to Article 19.1 of the DSU, that the United States bring its measures into conformity with its obligations under that Agreement.

23. AND…
On 22 August 2014, China notified the Dispute Settlement Body (DSB), pursuant to Articles 16.4 and 17 of the DSU, of its intention to appeal certain issues of law covered in the Panel Report and certain legal interpretations developed by the Panel, and filed a Notice of Appeal39 and an appellant's submission pursuant to Rule 20 and Rule 21, respectively, of the Working Procedures for Appellate Review40 (Working Procedures) . On 27 August 2014, the United States notified the DSB, pursuant to Articles 16.4 and 17 of the DSU, of its intention to appeal certain issues of law covered in the Panel Report and certain legal interpretations developed by the Panel, and filed a Notice of Other Appeal41 and an other appellant's submission pursuant to Rule 23 of the Working Procedures. On 9 September 2014, the United States and China each filed an appellee's submission.42 On 15 September 2014, Brazil, Canada, the European Union, and Saudi Arabia each filed a third participant's submission

24. Panel conclusions, after appeals
 We recall that we have reversed the Panel's finding, in paragraph of the Panel Report, upholding the USDOC's rejection of private prices as potential benchmarks in the investigations at issue on the grounds that such prices were distorted. We also reverse the Panel's conclusion, in paragraph of the Panel Report, that China had not established that the USDOC acted inconsistently with the obligations of the United States under Article 14(d) or Article 1.1(b) of the SCM Agreement by rejecting in-country private prices in China as benchmarks for the relevant challenged investigations. Similarly, we have reversed the Panel's ultimate finding, in paragraph 8.1.iv of the Panel Report, that China had failed to establish that the USDOC acted inconsistently with the obligations of the United States under Article 14(d) or Article 1.1(b) of the SCM Agreement by rejecting in-country private prices in China in respect of the OCTG, Solar Panels, Pressure Pipe, and Line Pipe countervailing duty investigations. We find, instead, that the USDOC acted inconsistently with the obligations of the United States under Article 14(d) and Article 1.1(b) of the SCM Agreement by rejecting in-country prices in China as benefit benchmarks in the context of the OCTG, Solar Panels, Pressure Pipe, and Line Pipe countervailing duty investigations.

25. The Most Recent Proceeding
On 14 July 2014, the panel report was circulated to Members in regards to the most recent proceedings of this dispute.
The position of the main parties
In the most recent proceeding, China requested consultations with the United States concerning the imposition of countervailing duty measures by the United States on certain products from China.
The main WTO issue
The Panel reversed the finding, in paragraph of the Panel Report
They also reversed the conclusion, in paragraph of the Panel Report
they have reversed the Panel's ultimate finding, in paragraph 8.1.iv of the Panel Report

26. Panel Conclusions (of most recent proceeding)
The Panel concluded that, to the extent that the measures at issue are inconsistent with certain provisions of the SCM Agreement, they have nullified or impaired benefits accruing to China under that agreement. Pursuant to Article 19.1 of the DSU, the Panel recommended that the United States bring its measures into conformity with its obligations under the SCM Agreement.

27. Implementation
On 15 April 2016, China and the United States informed the DSB of Agreed Procedures under Articles 21 and 22 of the DSU.
Article 21: Surveillance of Implementation of Recommendations and Rulings
Article 22: Compensation and the Suspension of Concessions

28. Proposal for Resolution
Has not yet been resolved, On 15 November 2016, the Chairperson of the compliance panel informed the DSB that the compliance panel expected to issue its final report to the parties in the second half of 2017
Our proposal for resolving the trade issues in the context of the global trading system is that:
if the U.S claims are in line with WTO articles on countervailing duties, then they should continue to implement
additionally, the government can in turn provide subsidies to those domestic industries most negatively affected by Chinese imports due to subsidies (they do this for solar power industry, among others)
this would keep domestic producers competitive against Chinese imports
additionally the U.S. could file petitions for separate products they feel are being impacted most negatively (like they have with solar panels as of May 2017, they filed a petition with the WTO to institute emergency import tariffs on solar panels following a huge solar company filing for bankruptcy)

29. Thank you !