1. U.S. - Countervailing Measures (China) Dispute Settlement 437
By: Ian Nicholson, Chris Schmid, Liz Sihombing
Ian

2. Complaint by China “The imposition of countervailing duty measures
May 25, 2012:
China requests consultations with the U.S. concerning…
“The imposition of countervailing duty measures
by the United States on certain products from China.”
IAN: reference Team 3 + USDOC starting to do CVD investigations on Chinese imports (2006)

3. China Asserts: U.S. Inconsistencies
Article VI of the GATT 1994 (ADD/CVD);
Articles 1.1, 2, 11.1, 11.3, 12.7, and 14(d) of the SCM Agreement;
Article 15 of the Protocol of Accession of China
Ian

4. What are we really talking about?
Mostly focused on 17 CVD investigations conducted by the U.S. Department of Commerce (USDOC) from
190 Different Subgroups
Ian

5. Total U.S. Imports from China vs. Products under Duty Measures
Chris

6. Products under Duty Measures (ex. Solar Panels)
Chris

7. Products under Duty Measures (ex. Solar Panels) cont.
Chris

8. Economic Impact of Duty Measures
Products affected by duty measures accounted for only ~ 0.9% - 1.8% of China’s exports to the United States between 2007 and 2012
No significant economic implication
Products under duty measures, however, performed significantly worse than products traded freely
Issue grows in importance as solar panels could possibly be affected by adverse effects
Chris

9. Timeline: 2012 - 2014 2012 May 25 = China requests consultations
August 20 = China requests the establishment of a panel
September 28 = DSB established the panel
November 26 = Director-General composed the panel
2014
July 14 = Panel report circulated
August 22 = China appeals panel decisions NOT in its favor
December 18 = Appellate Body report circulated
Ian

10. Third Parties
Ian

11. Review of China’s Complaints
Article VI of the GATT 1994 (ADD/CVD);
Articles 1.1, 2, 11.1, 11.3, 12.7, and 14(d) of the SCM Agreement;
Article 15 of the Protocol of Accession of China
Ian

12. Agreement on Subsidies and Countervailing Measures (SCM)
Part of the Uruguay Round ( ) Family of Agreements
Subsidies may play an important role in economic development
Establishes three categories of subsidies:
Prohibited, Actionable, Non-actionable
Prohibited subsidies:
Subject to new dispute settlement procedures; expedited timetable for action
If found to be “prohibited,” must be immediately withdrawn.
If not, complaining member is authorized to take countermeasures.
Actionable subsidies:
“No member should cause, through the use of subsidies, adverse effects to the interests of other signatories, i.e. injury to domestic industry of another signatory…”
“Sets out disciplines on the initiation of countervailing cases”
“Ensure that all interested parties can present information and argument”
Ian

13. Breakdown of Dispute: SCM Agreement#1
Breakdown of Dispute: SCM Agreement
WTO Language
Article 1: Definition of Subsidy
Financial contribution by a gov’t/public body; benefit conferred.
Article 2: Specificity
Whether a subsidy is specific to an industry, or group of enterprises; substantiated w/positive evidence.
Article 11: Initiation and Subsequent Investigation
Sufficient evidence/complete description of subsidy, injury, causal link, etc.
China’s Beef
Article 1: SOE’s as “public bodies”
Article 1: Insufficient evidence for USDOC to initiate CVD’s
Article 1(b): USDOC improperly found a conferred benefit, and improperly calculated the amount of alleged benefit
Article 2: USDOC failed to make determination based on positive evidence
Article 11: Absence of sufficient review of the petition by the USDOC
Ian. Article 1: U.S. incorrectly determined that SOE’s are public bodies within the meaning of that provision
Alleged provision of input goods for less than adequate remuneration

14. Breakdown of Dispute: SCM Agreement#2
Breakdown of Dispute: SCM Agreement
WTO Language
Article 12: Evidence
12.7: Interested Member/party refuses access to, or doesn’t provide, necessary information…
...within a reasonable period or significantly impedes the investigation…
...preliminary/final determinations, affirmative or negative, may be made on the basis of the facts available
China’s Beef
Article 12.7
USDOC’s use of “adverse facts available” to support its findings
Ian
USDOC CVD investigations and a preliminary or final CVD determination

15. Breakdown of Dispute: SCM Agreement#3
Breakdown of Dispute: SCM Agreement
WTO Language
Article 2: Specificity
2.2: Subsidy limited to certain enterprises shall be specific
2.4: Positive evidence
China’s Beef
Article 2: USDOC failed to make a proper determination…
No basis of positive evidence
Ian
Alleged provision of land and land-use rights for less than adequate remuneration

16. Breakdown of Dispute: SCM Agreement#4
Breakdown of Dispute: SCM Agreement
WTO Language
Articles & 11.3: Initiation and Subsequent Investigation
Article 1: Definition of a Subsidy
China’s Beef
Article 11: USDOC’s initiation of CVD investigations inconsistent
Article 1: USDOC’s determination that export restraints provided a “financial contribution” is inconsistent with Article 1.1(a)
Ian
Export restraints allegedly maintained by China

17. Response from the United States?
Ian

18. Panel’s Findings Upheld China’s claims:
USDOC findings that certain Chinese SOE’s were “public bodies;”
Alleged subsidies were regionally specific;
Existence of financial contributions in light of Chinese export restraints.
Partially rejected China’s claim:
USDOC findings that alleged subsidies were specific to certain enterprises
Rejected China’s claims:
USDOC citing “market distortions” to justify use of an out-of-country benchmark in calculations
USDOC finding sufficient evidence of → financial contributions by public bodies and specificity to justify the initiation of CVD investigations
Use of “adverse facts available”
Liz

19. Refresher + China’s Appeal
2012
May 25 = China requests consultations
August 20 = China requests the establishment of a panel
September 28 = DSB established the panel
November 26 = the Director-General composed the panel
2014
July 14 = panel report circulated
August 22 = China appeals panel decisions NOT in its favor
December 18 = Appellate Body report circulated
Liz

20. Appellate Body Findings
Regarding the Panel’s finding concerning the private “benchmarks”: AB reverses (siding with China)
Regarding the Panel’s finding concerning the USDOC’s determinations of “specificity”:
AB upholds: USDOC acted inconsistently
AB reverses: China had not established that USDOC acted inconsistently, by failing to identify “subsidy programme”  & “granting authority.”
AB finds it is unable to complete the legal analysis in this regard
Regarding the Panel’s finding concerning the USDOC’s “adverse facts available”:
AB reverses it, siding with China.
AB and Panel recommend the United States remedies inconsistencies
AB Report was signed December 12, 2014
Liz

21. Timeline: Present
2015
January 16 = DSB adopted Appellate Body report/panel report (modified)
February 13 = U.S. informs DSB of intention to implement DSB’s recs
June 26 = China requests the “reasonable period of time” to be determined by arbitration
2016
April 1 = date when “reasonable period” expires
Liz

22. Statement by the United States
Two main complaints:
Proper role of panels and the Appellate Body;
Appellate Body’s findings
Fundamental role: consider evidence/arguments; make objective assessment
Instead, AB Report suggests independent investigations and applying new legal standards is okay, “regardless of what either party actually argues to the panel.”
Panel did its job; AB developed legal interpretations of SCM and applied them to U.S. measures w/o regard to the case made by China
Determining market benchmarks:
AB departed from finding in US - Softwood Lumber IV re: private prices
AB provided “no meaningful explanation about how a price by a government entity could be used to establish a market-based benchmark.”
Ian

23. Key Observations
Affected goods ~ $7.2 billion in export sales (significant to China)
China’s inclination to continue participating in the DSU process
China pursues settlement through WTO due to the failure of bilateral talks
Double duties because Chinese’s status of NME
Mixed feelings from the AB rulings for the third parties:
Due to Chinese export subsidies, it can hurt the competing manufacturers;
Increased CVD’s on Chinese solar panels (slowing Chinese production) encourages fair competition;
German-US solar manufacturer (SolarWorld) asks EU Commission to do investigations
Canada and SEIA: CVDs is disruptive and damage solar energy industry
Mistrust in Chinese government’s economic data and subpar panel quality
Chris/Liz: SEIA --- data from articles, see what they have reports on Chinese subsidies ( )

24. The Road Ahead April 1 = date when “reasonable period” expires
Though China “won” this case, the AB decision did not meaningfully restrict the application of CVD’s to solar panel goods in future cases
Economic view: DSB recommendations are not strong enough to combat the impact to the clean energy industry
Move away from a reliance on the AB and focus on possible cooperation (e.g., Environmental Goods Agreement). Move from litigation to negotiation.
Chris/Liz: Environmental goods agreement (is Chinese a part of this agreement)