DISPUTE SETTLEMENT: DISPUTE DS437

United States — Countervailing Duty Measures on Certain Products from China


This summary has been prepared by the Secretariat under its own responsibility. The summary is for general information only and is not intended to affect the rights and obligations of Members.

  

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Current status  back to top

 

Key facts  back to top

Short title:
Complainant:
Respondent:
Third Parties:
Agreements cited:
(as cited in request for consultations)
Request for Consultations received:
Panel Report circulated: 14 July 2014

  

Summary of the dispute to date  back to top

The summary below was up-to-date at

Consultations

Complaint by China.

On 25 May 2012, China requested consultations with the United States concerning the imposition of countervailing duty measures by the United States on certain products from China.

China challenges various aspects of certain identified countervailing duty investigations, including their opening, conduct and the preliminary and final determinations that led to the imposition of countervailing duties.  China also challenges the “rebuttable presumption” allegedly established and applied by the US Department of Commerce that majority government ownership is sufficient to treat an enterprise as a “public body”.

China claims that the challenge measures are inconsistent with:

  • Article VI of the GATT 1994;
     
  • Articles 1.1, 2, 11.1, 11.2, 11.3, 12.7 and 14(d) of the SCM Agreement; and
     
  • Article 15 of the Protocol of Accession of China.

On 20 August 2012, China requested the establishment of a panel.  At its meeting on 31 August 2012, the DSB deferred the establishment of a panel.

 

Panel and Appellate Body proceedings

At its meeting on 28 September 2012, the DSB established a panel.  Australia, Brazil, Canada, the European Union, India, Japan, Korea, Norway, the Russian Federation, Turkey and Viet Nam reserved their third party rights.  Subsequently, Saudi Arabia reserved its third party rights.

On 14 November 2012, China requested the Director-General to determine the composition of the panel.  On 26 November 2012, the Director-General composed the panel. On 29 April 2013, the Chair of the panel informed the DSB that the timetable adopted by the panel after consultations with the parties envisaged that the final report would be issued to the parties by January 2014. On 18 November 2013, the Chair of the panel informed the DSB that due to the complexity of the issues raised by the parties in this dispute, the panel expected to conclude its work in May 2014.

On 14 July 2014, the panel report was circulated to Members.

Summary of key findings

The dispute concerns several initiation decisions, as well as preliminary and final determinations in 17 countervailing duty investigations conducted by the United States' Department of Commerce (USDOC) from 2007 through 2012. The Chinese products concerned by these investigations consist of solar panels; wind towers; thermal paper; coated paper; tow behind lawn groomers; kitchen shelving; steel sinks; citric acid; magnesia carbon bricks; pressure pipe; line pipe; seamless pipe; steel cylinders; drill pipe; oil country tubular goods; wire strand; and aluminum extrusions.

China requested the Panel to find that the United States' investigating authority, the USDOC, acted inconsistently with the following obligations set forth in the Agreement on Subsidies and Countervailing Measures (SCM Agreement) when initiating countervailing duty investigations, and making preliminary and final determinations in these investigations:

  1. In connection with the alleged provision of input goods for less than adequate remuneration:
    1. That the USDOC's findings of financial contribution are inconsistent with Article 1.1(a)(1) of the SCM Agreement, because the USDOC incorrectly determined, or did not have a sufficient basis to determine, that certain State-owned enterprises (SOEs) are “public bodies” within the meaning of that provision in certain investigations;
    2. That the “rebuttable presumption” established and applied by the USDOC in respect of whether SOEs can be classified as “public bodies” is, as such, inconsistent with Article 1.1(a)(1) of the SCM Agreement;
    3. That the USDOC's initiation of countervailing duty investigations in respect of allegations that SOEs confer countervailable subsidies through their sales of inputs to downstream producers, in the absence of sufficient evidence in the petition to support an allegation that SOEs constitute “public bodies” within the meaning of Article 1.1(a)(1) of the SCM Agreement, and in the absence of a sufficient review of the petition by the USDOC in respect of this allegation, is inconsistent with Articles 11.2 and 11.3 of the SCM Agreement in certain investigations;
    4. That the USDOC's findings of benefit are inconsistent with Article 1.1(b) and Article 14(d) of the SCM Agreement, because the USDOC improperly found that the alleged provision of goods for less than adequate remuneration conferred a benefit upon the recipient, and improperly calculated the amount of any benefit allegedly conferred, including, inter alia, its erroneous findings that prevailing market conditions in China were “distorted” as the basis for rejecting actual transaction prices in China as benchmarks in certain investigations;
    5. That the USDOC's findings of specificity are inconsistent with Articles 2.1 and 2.4 of the SCM Agreement, because the USDOC failed to make a proper determination on the basis of positive evidence that the alleged provision of inputs for less than adequate remuneration was specific to an enterprise or industry or group of enterprises or industries in certain investigations;
    6. That the USDOC's initiation of countervailing duty investigations in respect of the alleged provision of inputs for less than adequate remuneration, in the absence of sufficient evidence in the petition to support an allegation that any such subsidy would be specific under Article 2 of the SCM Agreement, and in the absence of a sufficient review of the petition by the USDOC in respect of this allegation, is inconsistent with Articles 11.2 and 11.3 of the SCM Agreement in certain investigations.
  2. In connection with all of the identified countervailing duty investigations in which the USDOC has issued a preliminary or final countervailing duty determination:
    1. That the USDOC's use of so-called “adverse facts available” to support its findings of financial contribution, specificity, and benefit is inconsistent with Article 12.7 of the SCM Agreement in certain instances because the USDOC did not rely on facts available on the record.
  3. In connection with the alleged provision of land and land-use rights for less than adequate remuneration:
    1. That the USDOC's findings of specificity are inconsistent with Articles 2.2 and 2.4 of the SCM Agreement, because the USDOC failed to make a proper determination on the basis of positive evidence that the alleged subsidy was specific to an enterprise or industry or to a group of enterprises or industries in certain land specificity investigations.
  4. In connection with export restraints allegedly maintained by China:
    1. That the USDOC's initiation of countervailing duty investigations in respect of these allegations is inconsistent with Articles 11.2 and 11.3 of the SCM Agreement in certain investigations;
    2. That the USDOC's determination that export restraints provided a “financial contribution” is inconsistent with Article 1.1(a) of the SCM Agreement in certain investigations.

The United States requested that the Panel reject China's claims in this dispute. It also requested that the Panel to disregard China's claims pertaining to the preliminary determinations in Wind Towers and Steel Sinks. According to the United States, as China did not request consultations on these determinations, such determinations should be outside the terms of reference of this panel proceeding.

Regarding China's claims made on an “as applied” basis, the Panel upheld China's claims against the USDOC's findings (i) that certain Chinese State-owned enterprises were public bodies within the meaning of Article 1.1(a)(1) of the SCM Agreement, capable of providing financial contributions; (ii) that alleged subsidies were regionally specific; and (iii) on the existence of financial contributions in light of export restraints maintained by China. The Panel partially rejected China's claims against the USDOC's findings that alleged subsidies were specific to certain enterprises. The Panel rejected China's claims against the USDOC's findings (i) that there was “market distortion” justifying the use of an out-of-country benchmark in the benefit calculation; (ii) that there was sufficient evidence of financial contributions by public bodies and of specificity to justify the initiation of countervailing duty investigations; and (iii) on the use of “adverse facts available”.

Regarding China's claims made on an “as such” basis, the Panel upheld China's claim challenging the USDOC's “rebuttable presumption” that majority State-owned enterprises are public bodies within the meaning of Article 1.1(a)(1) of the SCM Agreement, and thus capable of conferring a financial contribution.

As a consequence of the inconsistencies of the USDOC's actions with Articles 1, 2 and 11 of the SCM Agreement, the United States has acted inconsistently with Articles 10 and 32.1 of the SCM Agreement.

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.

The Panel found the preliminary determinations in Wind Towers and Steel Sinks not to be within its terms of reference.

On 22 August 2014, China notified the DSB of its decision to appeal to the Appellate Body certain issues of law and legal interpretation in the panel report.  On 27 August 2014, the United States filed an other appeal in the same dispute.

 

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