DISPUTE SETTLEMENT: DISPUTE DS427
China — Anti-Dumping and Countervailing Duty Measures on Broiler Products from the United States
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(as cited in request for consultations)
|Request for Consultations received:|
|Panel Report circulated:||2 August 2013|
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Summary of the dispute to date
The summary below was up-to-date at
See also: One-page summary of key findings of this dispute
Complaint by the United States.
On 20 September 2011, the United States requested consultations with China concerning China's measures imposing anti-dumping and countervailing duties on broiler products from the United States.
The United States claimed that the measures appear to be inconsistent with various provisions of the Anti-Dumping Agreement related to the process of the anti-dumping investigation as well as the anti-dumping duty determination at issue (including improper dumping and injury determination, improper reliance on the facts available, failure to provide access to relevant information, insufficient explanation of the basis for the determinations, absence of proper analysis of the effects of imports under investigation, and absence of objective determination of causality). The United States alleges violations of Articles 1, 2.2, 3.1, 3.2, 3.4, 3.5, 4.1, 5.1, 6.2, 6.4, 6.5, 6.8, 6.9, and 12.2 of the Anti-Dumping Agreement.
The United States further claimed that the measures appear to be inconsistent with various provisions of the SCM Agreement related to the process of the subsidy investigation as well as the countervailing duty determination at issue (including improper reliance on the facts available, insufficient explanation of the basis for the determinations, and imposition of countervailing duties in excess of the subsidy found to exist). The United States alleges violations of Articles 10, 11.1, 12.3, 12.4, 12.7, 12.8, 15.1, 15.2, 15.4, 15.5, 16.1, 19.4, 22.3, 22.4, and 22.5 of the SCM Agreement.
The United States considered that the measures are also inconsistent with Article VI of the GATT 1994 as a consequence of the alleged violations of the Anti-Dumping Agreement and SCM Agreement.
On 8 December 2011, the United States requested the establishment of a panel. At its meeting on 19 December 2011, the DSB deferred the establishment of a panel.
Panel and Appellate Body proceedings
At its meeting on 20 January 2012, the DSB established a panel. The European Union, Japan, Norway, Saudi Arabia and Thailand reserved their third party rights. Subsequently, Chile and Mexico reserved their third party rights. On 14 May 2012, the United States requested the Director‑General to determine the composition of the panel. On 24 May 2012, the Director-General composed the panel. On 23 November 2012, the Chairman of the panel notified the DSB that it would not be able to issue its report within six months. The panel expects to conclude its work by the end of June 2013, consistent with the timetable adopted by the panel after consultations with the parties to the dispute.
Summary of key findings
The dispute concerns China's imposition of anti-dumping and countervailing measures on broiler chicken products from the United States. The United States challenged before the Panel both the substantive analysis of China's Ministry of Commerce (“MOFCOM”) under several provisions of the Anti-Dumping and SCM Agreements and the GATT 1994, as well as the manner in which MOFCOM conducted its investigations.
United States' claims on MOFCOM's conduct of its investigations:
The United States claimed that China acted inconsistently with Article 6.2 of the Anti-Dumping Agreement as, despite a specific request from the United States Government, MOFCOM did not provide an opportunity for the interested parties with adverse interests to meet and present their views. The Panel upheld the claim as it found that no evidence on the record supported China's assertion that MOFCOM had contacted these Chinese interested parties, and MOFCOM had taken no other action to organize a meeting between the US Government and these parties.
The United States also claimed that MOFCOM did not require non-confidential summaries of information in the Petition and thus hampered the US interested parties' ability to defend their interests. The Panel upheld the United States' claims that to the extent that the non-confidential version of the Petition constituted non-confidential summaries, these summaries did not satisfy the requirement in Articles 6.5.1 of the Anti-Dumping Agreement and 12.4.1 of the SCM Agreement to provide a reasonable understanding of the information submitted in confidence.
The United States claimed that MOFCOM failed to disclose certain essential facts under Article 6.9 of the Anti-dumping Agreement to the individual US respondents and under both Article 6.9 of the Anti-dumping and 12.8 of the SCM Agreement with respect to the calculation of the “all others” rates. The Panel upheld these claims.
United States' claims on the calculation of the anti-dumping and countervailing duties:
The United States claimed China acted inconsistently with Article 18.104.22.168 of the Anti-Dumping Agreement in its determination of the cost of production of the foreign like product for the purposes of constructing normal value, by (i) improperly rejecting the cost allocations kept in the normal books and records of the US respondents; (ii) applying its own allocation methodology that did not reflect the costs associated with the production and sale of the products under consideration; and (iii) allocating the costs of producing certain products (blood and feathers) to the other products one of the respondents produced.
The Panel upheld the complaint, with respect to two of the US respondents, as it found no explanation on the record for why MOFCOM rejected the cost allocations contained in the respondents' normal books and records. For one respondent, the Panel concluded that MOFCOM had provided a sufficient explanation of its reasons for rejecting the cost allocations contained in the respondent's normal books and records.
The Panel also found that the allocation methodology MOFCOM adopted was inconsistent with Article 22.214.171.124, because MOFCOM allocated processing costs to products that were not actually associated with their production and sale. Finally, the Panel found that China had not rebutted the United States' prima facie case that MOFCOM had allocated the costs of producing certain products (blood and feathers) to the other products produced by the particular respondent concerned.
The United States claimed that MOFCOM failed to make a fair comparison between export price and normal value under Article 2.4 of the Anti-Dumping Agreement when it improperly adjusted one respondent's export price to account for freezer storage expenses incurred by that respondent. China objected to the United States' claim on the grounds that Article 2.4 was not mentioned in the US request for consultations. The Panel upheld China's objection and found that the United States' claim was outside its terms of reference.
The United States claimed that MOFCOM improperly calculated the amount of per unit subsidization in the subject imports and as a result acted inconsistently with Articles 19.4 of the SCM Agreement and VI:3 of the GATT 1994. In particular, the United States claimed that MOFCOM improperly allocated subsidies received for the production of all chicken products only to the production of subject products. The Panel concluded MOFCOM had not explained how its subsidy calculation ensured that it only countervailed those subsidies bestowed on the production of subject products and thus upheld the United States' claim.
United States' claims on the “all others” rate
The United States claimed that China acted inconsistently with Article 6.8 of the Anti-Dumping Agreement and 12.7 of the SCM Agreement when it used “facts available” to determine the anti-dumping and countervailing duty rates for unknown US producers and exporters. Specifically, the United States argued that MOFCOM could not apply facts available to unknown producers and exporters because MOFCOM had failed to notify them of the initiation of the investigations and of information required of them and of the fact that failure on their part to provide that information would result in a determination based on facts available. Furthermore, the United States argued that the rates selected by MOFCOM were improper as they were significantly higher than the rates of the investigated companies or those that had registered and not been investigated and that MOFCOM had failed to explain how it had determined the rates.
The Panel rejected the United States' argument that MOFCOM had failed to fulfil the conditions for resorting to facts available under Article 6.8 and Annex II. However, the Panel concluded that the United States made a prima facie case, not rebutted by China, that rates applied were in contravention of the two provisions. As a result, the Panel upheld the United States' claims.
United States' claims on the injury determinations:
The definition of the “domestic industry”
The United States claimed that MOFCOM improperly defined the domestic industry, contrary to Article 4.1 of the Anti-Dumping Agreement and Article 16.1 of the SCM Agreement, because MOFCOM did not seek to define the domestic industry as the “domestic producers as a whole” before defining it as those producers representing a “major proportion” of total domestic production. The United States also claimed that MOFCOM's process for defining the domestic industry involved a self-selection process introducing a “material risk of distortion” into the injury analysis that was also inconsistent with the obligations in Article 3.1 of the Anti-Dumping Agreement and Article 15.1 of the SCM Agreement to conduct an objective examination of injury based on positive evidence.
The Panel concluded that there was no obligation in Article 4.1 of the Anti-Dumping Agreement or Article 16.1 of the SCM Agreement to first attempt to define the “domestic industry” as the domestic producers as a whole before an investigating authority can define the domestic industry as those producers representing a “major proportion” of total domestic production. As the obligation posited by the United States did not actually exist, the Panel rejected the United States' claim. The Panel also concluded that the United States had not adduced evidence that MOFCOM's process for defining the domestic industry involved a self-selection process that introduced a material risk of distortion into the injury analysis. Therefore, the Panel found no inconsistency with either Articles 4.1/ 16.1 or with Articles 3.1 /15.1.
United States' claims with respect to MOFCOM's price effects analysis
The United States claimed that MOFCOM's price effects analyses were inconsistent with Articles 3.1 and 3.2 of the Anti-Dumping Agreement and 15.1 and 15.2 of the SCM Agreement. The United States argued that MOFCOM's findings of price undercutting resulted from a comparison of subject import and domestic average unit values: (i) at different levels of trade; and (ii) included different product mixes. The Panel upheld the United States' arguments with respect to differences in product mix.
The United States also claimed that MOFCOM's finding of price suppression in each of the investigations were inconsistent with the same provisions, because they were based on the WTO-inconsistent finding of price undercutting. The Panel upheld the claims.
United States' claims on other aspects of the injury determinations
The Panel exercised judicial economy with respect to the United States' claims regarding MOFCOM's analyses of the “impact” of subject imports on the domestic industry and on MOFCOM's causation analyses.
United States' claims on the sufficiency of the public notices
The United States claimed that MOFCOM's public notice of the Preliminary and Final Anti-Dumping and Countervailing Duty Determinations were inconsistent with the requirement in Articles 12.2 of the Anti-Dumping Agreement and 22.3 of the SCM Agreement to disclose “the findings and conclusions reached on all issues of fact and law considered material by the investigating authorities”.
The Panel upheld the claim with respect to the Final Determinations and exercised judicial economy with respect to the Preliminary Determinations.
Furthermore, the United States claimed that the public notices of the Final Determination were also inconsistent with Articles 12.2 and 12.2.2 of the Anti-Dumping Agreement and Articles 22.3 and 22.5 of the SCM Agreement, because they failed to explain the reasons for MOFCOM's rejection of the arguments of the US industry association during the investigations, that (1) US imports had taken market share from third country imports, not the domestic industry; and (2) that the effect that US imports of paws (which accounted for 40% of subject imports) could not injure the Chinese domestic industry as that industry was unable to satisfy demand for paws.
The Panel rejected the claim with respect to the first argument, but upheld the claim with respect to the second argument.
Finally, the United States made an additional claim under Articles 12.2.2 of the Anti-Dumping Agreement and 22.5 of the SCM Agreement with respect to MOFCOM's failure to explain, in its public notice of the Final AD and CVD Determinations, the reason for its rejection of the US argument on “level of trade”.
The Panel rejected an objection by China that the claims fell outside its terms of reference because they were not identified in the request for establishment of a panel, and upheld the US claim on the merits.
At its meeting on 25 September 2013, the DSB adopted the panel report.
Reasonable period of time
On 22 October 2013, China informed the DSB that it intended to implement the DSB recommendations and rulings in a manner that respects its WTO obligations and that they would need a reasonable period of time to do so. On 19 December 2013, China and the United States informed the DSB that they had agreed that the reasonable period of time for China to implement the DSB recommendations and rulings shall be 9 months, 14 days from the date of adoption of the panel report. Accordingly, the reasonable period of time expired on 9 July 2014. At the DSB meeting of 22 July 2014, China informed the DSB that it had fully implemented the DSB recommendations and rulings. The United States disagreed with China's assertion that it had fully complied.
Implementation of adopted reports
On 15 July 2014, China and the United States informed the DSB of Agreed Procedures under Articles 21 and 22 of the DSU.
On 10 May 2016, the United States requested consultations pursuant to Article 21.5 of the DSU, in connection with China's measures continuing to impose antidumping and countervailing duties on broiler products from the United States. On 27 May 2016, the United States requested, pursuant to Article 21.5 of the DSU, the establishment of a compliance panel. At its meeting on 22 June 2016, the DSB agreed to refer to the original panel, if possible, the matter raised by the United States. Brazil, Ecuador, the European Union, and Japan reserved their third party rights. On 18 July 2016, the compliance panel was composed.
On 18 October 2016, the Chairperson of the panel informed the DSB that the panel expected to issue its report before the end of 2017.
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