DS: China — Countervailing and Anti-Dumping Duties on Grain Oriented Flat-rolled Electrical Steel from the United States

1. This dispute concerned measures imposing countervailing and anti-dumping duties on grain oriented flat-rolled electrical steel (“GOES”) from the United States.  The measures were imposed by China's Ministry of Commerce (“MOFCOM”) and the United States claimed that they were inconsistent with China's commitments and obligations under the Anti-Dumping Agreement, the SCM Agreement and the GATT 1994. 

The United States' claims with respect to initiation of certain countervailing duty investigations

2. The United States claimed that China acted inconsistently with Articles 11.2 and 11.3 of the SCM Agreement because MOFCOM initiated countervailing duty investigations into 11 programmes without sufficient evidence to justify this.  The Panel concluded that the obligation upon Members in relation to the sufficiency of evidence in a countervailing duty investigation finds expression in Article 11.3 of the SCM Agreement, which provides that an investigating authority must assess the accuracy and adequacy of the evidence in an application to determine whether it is sufficient to justify initiation.  The Panel reached its conclusions by reference to the requirements for “sufficient evidence” set forth in Article 11.2, but did not consider it necessary to reach separate conclusions under this provision.  With respect to each of the 11 programmes at issue, the Panel concluded that China had acted inconsistently with Article 11.3 of the SCM Agreement.

The United States' claims with respect to the non-confidential summaries

3. The applicants for initiation sought and obtained from MOFCOM confidential treatment in relation to a number of categories of information.  The United States claimed that MOFCOM acted inconsistently with Articles 12.4.1 of the SCM Agreement and 6.5.1 of the Anti-Dumping Agreement by failing to require the applicants to submit adequate non-confidential summaries of the information.  The Panel upheld the United States' claim.  The Panel concluded that the purported summaries did not provide a reasonable understanding of the substance of the information submitted in confidence. 

The United States' claim with respect to public notice of the calculations used to determine the dumping margins

4. The United States claimed that MOFCOM did not disclose the data and calculations it used to arrive at the dumping margins for the two respondent companies and that this was inconsistent with Article 12.2.2 of the Anti-Dumping Agreement.  The Panel rejected the United States' claim.  The Panel could not find within the text of Article 12.2.2 an obligation to include in the relevant public notice or separate report the confidential data and calculations underlying a dumping margin. 

The United States' claim with respect to public notice of the findings and conclusions leading to MOFCOM's benefit determination under the government procurement statutes

5. The United States claimed that MOFCOM did not adequately explain, in either the preliminary or final determinations, why the exclusion of foreign producers from the competitive bidding process under the United States Government procurement statutes led to the conclusion that the resulting prices were not market prices for the purposes of the benefit determination.  According to the United States, this was inconsistent with Article 22.3 of the SCM Agreement.  The Panel rejected the United States' claim.  The Panel held that Article 22.3 does not discipline the substantive adequacy of an investigating authority's reasoning.  In the Panel's view, MOFCOM included in its public notice the findings and conclusions on matters of law that it considered material, and also referred to the material facts it was relying upon to reach those conclusions.

The United States' claims with respect to the use of facts available

6. The United States brought a number of claims regarding MOFCOM's resort to facts available in calculating certain dumping and subsidy rates.  Although the Panel rejected the United States' claim that MOFCOM improperly resorted to facts available to calculate the subsidy rates for the two known respondent exporters, the Panel concluded that the manner in which MOFCOM applied facts available was inconsistent with Article 12.7 SCM Agreement.

7. The Panel upheld the United States' claim that China had acted inconsistently with Article 6.8 and paragraph 1 of Annex II of the Anti-Dumping Agreement and Article 12.7 of the SCM Agreement because MOFCOM improperly resorted to facts available in calculating the dumping and subsidy rates for exporters that were unknown to it. 

8. The United States also brought claims under Articles 6.9, 12.2 and 12.2.2 of the Anti-Dumping Agreement and Articles 12.8, 22.3 and 22.5 of the SCM Agreement, arguing that China did not disclose the essential facts, or provide in sufficient detail in its final determination the findings and conclusions leading to the application of facts available to “unknown” United States exporters.  The Panel upheld the United States' claims in this regard. 

The United States' claims with respect to MOFCOM's price effects analysis

9. The United States challenged MOFCOM's finding that the dumped and subsidized imports had significant price effects.  The United States contended that MOFCOM's analysis of these price effects was conclusory, failed to reflect an objective examination of the evidence, and was not based on positive evidence.  The Panel upheld the United States' claims, finding that China had acted inconsistently with Articles 3.1 and 3.2 of the Anti-Dumping Agreement, and Articles 15.1 and 15.2 of the SCM Agreement.

10. The United States also claimed that China did not disclose the essential facts supporting its price effects analysis and did not offer an adequate explanation for its price effects findings, in violation of Articles 6.9 and 12.2.2 of the Anti-Dumping Agreement and 12.8 and 22.5 of the SCM Agreement.  The Panel also upheld these claims.

The United States' claims with respect to MOFCOM's causation analysis

11. The United States claimed that MOFCOM's causation analysis was inconsistent with Articles 3.5 of the Anti-Dumping Agreement and 15.5 of the SCM Agreement, on the basis that MOFCOM erroneously concluded that the rapid increase in the capacity of the domestic GOES industry during the period of investigation could not have been a cause of injury to the domestic industry.  The United States also claimed that MOFCOM's analysis was inconsistent with Articles 3.1 of the Anti-Dumping Agreement and 15.1 of the SCM Agreement because it did not comply with the “objective examination” and “positive evidence” requirements embodied in those provisions.  The Panel upheld the United States' claims.

12. The United States also claimed that China acted inconsistently with Articles 6.9 and 12.2.2 of the Anti-Dumping Agreement and 12.8 and 22.5 of the SCM Agreement, on the basis that China failed to disclose the essential facts supporting its analysis and did not provide an adequate explanation for its causation findings.  The Panel upheld these claims.

China’s appeal was limited to the Panel’s findings in relation to MOFCOM’s price effects finding and the related disclosure of underlying facts.  China claimed that the Panel erred in the interpretation and application of Article 3.2 of the Anti-Dumping Agreement and Article 15.2 of the SCM Agreement in finding that China acted inconsistently with Articles 3.1 and 3.2 of the Anti-Dumping Agreement and Articles 15.1 and 15.2 of the SCM Agreement.  China also claimed that the Panel erred in finding that China acted inconsistently with Articles 6.9 and 12.2.2 of the Anti-Dumping Agreement, and Articles 12.8 and 22.5 of the SCM Agreement, in relation to MOFCOM’s final disclosure, and public notice and explanation, of the facts underlying its price effects finding.

The Appellate Body upheld the Panel’s finding that MOFCOM’s price effects finding was inconsistent with Articles 3.1 and 3.2 of the Anti-Dumping Agreement and Articles 15.1 and 15.2 of the SCM Agreement.  The Appellate Body interpreted Article 3.2 of the Anti-Dumping Agreement and Article 15.2 of the SCM Agreement as requiring an investigating authority to consider the relationship between subject imports and the prices of the like domestic products so as to understand whether the volumes and/or prices of subject imports provide explain the occurrence of significant depression or suppression of domestic prices.  Like the Panel, the Appellate Body rejected China’s interpretation that Articles 3.2 and 15.2 merely require an investigating authority to consider the existence of price depression or suppression, and do not require the consideration of any link between subject imports and these price effects.

With regard to the Panel’s application of the legal standard under Articles 3.2 and 15.2, read together with Articles 3.1 and 15.1, the Appellate Body found that the Panel was correct to conclude that MOFCOM’s finding as to the “low price” of subject imports referred to the existence of price undercutting, and that MOFCOM relied on this factor to support its finding of significant price depression and suppression. The Appellate Body also found that the Panel did not improperly disregard the parallel price trends of subject imports and domestic products, or the role that the increase in the volume of subject imports played in MOFCOM’s price effects finding.  Although the Appellate Body considered that the Panel did not properly examine the effect of a policy aiming at undercutting domestic prices, it found no basis to reverse the Panel’s price effects finding in this case.  Moreover, the Appellate Body found that the Panel did not act inconsistently with its duty to make an objective assessment under Article 11 of the DSU.

The Appellate Body upheld the Panel’s finding that China acted inconsistently with Article 6.9 of the Anti-Dumping Agreement and Article 12.8 of the SCM Agreement.  The Appellate Body agreed with the Panel that MOFCOM failed to disclose in its preliminary determination and its final injury disclosure document all the “essential facts” relating to the “low price” of subject imports on which it relied for its price effects finding.  The Appellate Body also upheld the Panel’s finding that China acted inconsistently with Article 12.2.2 of the Anti-Dumping Agreement and Article 22.5 of the SCM Agreement because MOFCOM failed to disclose in its final determination “all relevant information on the matters of fact” relating to the “low price” of subject imports on which it relied for its price effects finding.  In both instances, the Appellate Body found that MOFCOM was required to disclose under Articles 6.9 and 12.2.2 of the Anti-Dumping Agreement and Articles 12.8 and 22.5 of the SCM Agreement the price comparisons of subject imports and domestic products that were necessary to understand MOFCOM’s finding regarding the “low price” of subject imports.

A WTO Arbitrator, Mr. Claus-Dieter Ehlermann, on 3 May 2013, issued his Award regarding the “reasonable period of time” for the implementation of Dispute Settlement Body recommendations and rulings in the dispute China — Countervailing and Anti-Dumping Duties on Grain Oriented Flat-Rolled Electrical Steel from the United States (DS414). The Arbitrator determined that the “reasonable period of time” for China to implement the recommendations and rulings of the DSB in this dispute is 8 months and 15 days from the adoption of the Panel and Appellate Body Reports, that is, until 31 July 2013.

This compliance dispute concerned measures taken by China to implement the DSB's recommendations and rulings in China — Countervailing and Anti-Dumping duties on Grain Oriented Flat-rolled Electrical Steel from the United States, as set forth in the redetermination issued by the Ministry of Commerce of the People's Republic of China (MOFCOM) on 31 July 2013. Pursuant to this redetermination, China continued to impose anti-dumping and countervailing duties on imports of GOES from the United States. The United States claimed that MOFCOM's redetermination violated various substantive and procedural provisions of the Anti-Dumping Agreement and the SCM Agreement.

The United States' claim with respect to adverse impact

The United States claimed that, in its redetermination, MOFCOM failed to properly examine the impact of the subject imports on the domestic industry and to evaluate all relevant economic factors and indices having a bearing on the state of the domestic industry, consistently with China's obligations under Articles 3.1 and 3.4 of the Anti-Dumping Agreement and Articles 15.1 and 15.4 of the SCM Agreement. The Panel found that the United States' claim regarding adverse impact pertained to those aspects of the redetermination that were essentially unchanged from the original determination, and that were not challenged by the United States in the original proceedings. Therefore, the Panel concluded that this claim of the United States was not properly before it, and accordingly did not rule on this claim.

The United States' claim regarding price effects of subject imports

The United States claimed that MOFCOM's conclusion that the subject imports had a suppressive and depressive effect on the prices of the domestic like product was not based on an objective examination of positive evidence, in violation of China's obligations under Articles 3.1 and 3.2 of the Anti-Dumping Agreement and Articles 15.1 and 15.2 of the SCM Agreement. The Panel upheld the United States' claim, particularly because upon review of MOFCOM's finding that the increased volume of subject imports and the consequential loss in the domestic industry's market share to the subject imports had a suppressive and depressive effect on the domestic like product prices, the Panel found serious errors in MOFCOM's analysis of the underlying evidence. In the Panel's view, these errors called into question whether MOFCOM's conclusion regarding price effects was supported by reasoned explanations and was such as could have been reached by an objective investigating authority considering the evidence.

The United States' claim with respect to causation

The United States claimed that MOFCOM's finding of causation was inconsistent with China's obligations under Articles 3.1 and 3.5 of the Anti-Dumping Agreement and Articles 15.1 and 15.5 of the SCM Agreement because it was not based on an “objective examination” and “positive evidence”. In particular, the United States argued that because MOFCOM's causation determination relied on a defective price effects analysis, MOFCOM's causation analysis must also fail. The United States also questioned other aspects of MOFCOM's causation analysis such as MOFCOM's conclusion that the Chinese domestic industry was unable to benefit from the economies of scale, and argued that MOFCOM failed to properly consider the effects of other causes of injury, such as the effect of the expansion and increased production of the Chinese domestic industry as well as the effect of non-subject imports on the domestic industry. The Panel agreed with the United States' arguments and upheld its claim on causation.

The United States' claim with respect to disclosure

The United States claimed that MOFCOM's failure to disclose certain facts under consideration that formed the basis of MOFCOM's redetermination was inconsistent with China's obligations under Article 6.9 of the Anti-Dumping Agreement and Article 12.8 of the SCM Agreement. Regarding the United States' claim that MOFCOM failed to disclose essential facts regarding its finding on price effects, the Panel found that MOFCOM acted inconsistently with Article 6.9 of the Anti-Dumping Agreement and Article 12.8 of the SCM Agreement to the extent it failed to even attempt to provide a non-confidential disclosure of essential facts regarding domestic prices that formed the basis of its consideration of parallel pricing. However, the Panel rejected the United States' claim that MOFCOM failed to disclose the essential facts under consideration on the basis of which it made its findings that the domestic industry's loss in market share in 2008 led it to slash prices in Q1 2009, noting that MOFCOM did disclose the facts that it actually relied upon to make that finding.  The Panel also rejected the United States' claim that MOFCOM failed to disclose facts underlying its finding that the price-cost differential of one of the two Chinese domestic producers decreased in 2008.

Regarding the United States' claim that MOFCOM failed to disclose essential facts regarding its causation determination, the Panel found that MOFCOM failed to comply with the relevant obligations because it saw nothing in MOFCOM's redetermination disclosure that could be understood to constitute the essential facts concerning the sales obstacles that MOFCOM considered the domestic industry was facing. However, the Panel saw no basis for a finding that MOFCOM failed to comply with the obligation to disclose the essential facts under consideration with respect to MOFCOM's substantively inadequate determinations regarding the domestic industry's inability to achieve economies of scale and the domestic industry's inventory overhang. The Panel also saw no basis for a finding that MOFCOM failed to comply with the obligation to disclose essential facts regarding capacity, output and demand.

The United States' claim with respect to public notice

The United States claimed that MOFCOM's public notice, i.e. MOFCOM's redetermination finding, was inconsistent with China's obligations under Articles 12.2 and 12.2.2 of the Anti‑Dumping Agreement and Articles 22.3 and 22.5 of the SCM Agreement. In support of its claims, the United States asserted that MOFCOM, in the public notice of the redetermination, explained neither the matters of fact and law nor the reasons that led it to maintain anti-dumping and countervailing duties.

Turning to the specific assertions of the United States regarding the allegedly inadequate public notice, the Panel noted that each of these related to aspects of MOFCOM's redetermination that it found, in its report, to be substantively inconsistent with China's obligations under the Anti-Dumping Agreement and the SCM Agreement. For that reason, Panel applied judicial economy and made no findings on these public notice claims under Article 12 of the Anti-Dumping Agreement and Article 22 of the SCM Agreement.