DS: United States — Countervailing and Anti-dumping 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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Summary of the dispute to date
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Complaint by China.
On 17 September 2012, China requested consultations with the United States concerning the following measures:
(i) a new piece of legislation (Public Law 112-99) that explicitly allows for the application of countervailing measures to non-market economy countries;
(ii) countervailing duty determinations or actions made or performed by US authorities between 20 November 2006 and 13 March 2012 in respect of Chinese products;
(iii) anti-dumping measures associated with the concerned countervailing duty measures as well as the combined effect of these anti-dumping measures and the parallel countervailing duty measures; and
(iv) the United States’ failure to provide the US Department of Commerce (USDOC) with legal authority to identify and avoid the double remedies in respect of investigations or reviews initiated on or between 20 November 2006 and 13 March 2012.
China considers that these measures are inconsistent with:
- Articles 10, 15, 19, 21 and 32 of the SCM Agreement;
- Articles VI, X:1, X:2 and X:3 of the GATT 1994; and
- Articles 9 and 11 of the Anti-Dumping Agreement.
On 19 November 2012, China requested the establishment of a panel. At its meeting on 30 November 2012, the DSB deferred the establishment of a panel.
Panel and Appellate Body proceedings
At its meeting on 17 December 2012, the DSB established a panel. Australia, Canada, the European Union, Japan, Turkey and Viet Nam reserved their third party rights. Subsequently, India and the Russian Federation reserved their third party rights. On 21 February 2013, China requested the Director-General to determine the composition of the panel. On 4 March 2013, the Director-General composed the panel. On 11 September 2013, the Chair of the panel informed the DSB that it expects to issue its final report to the parties by December 2013, in accordance with the timetable adopted after consultation with the parties.
This dispute concerns two different US measures: (1) Section 1 of US Public Law (PL) 112‑99 entitled “An act to apply the countervailing duty provisions of the US Tariff Act of 1930 to nonmarket economy countries, and for other purposes”, which was enacted on 13 March 2012; and (2) the United States’ alleged failure to investigate whether so-called “double remedies” arose from 25 parallel countervailing duty (CVD) and anti-dumping proceedings, initiated over the period 2006‑2012, involving imports from China as a nonmarket economy country under US law.
In respect of Section 1, China raised claims under Articles X:1, X:2, and X:3(b) of the GATT 1994. The Panel disagreed with China that Section 1 was made effective in 2006 and determined that it was made effective in 2012. The Panel thus concluded that Section 1 was published promptly after it had been made effective because it was made effective and published on the same date. Accordingly, the United States did not act inconsistently with Article X:1 of the GATT 1994.
As regards Article X:2, the majority of the Panel determined that although Section 1 is a measure of general application that has been “enforced” prior to its official publication, Section 1 falls outside the scope of Article X:2 because it neither effects an “advance” in a rate of duty or other charge on imports under an established or uniform practice, nor imposes a “new” or “more burdensome” requirement or restriction on imports. According to the Panel majority, the United States did not therefore act inconsistently with Article X:2 of the GATT 1994.
One panelist disagreed in part, finding that Section 1 does effect an advance in a rate of duty or other charge on imports under an established and uniform practice, and imposes a new or more burdensome requirement or restriction on imports, and that therefore, Section 1 falls within the scope of Article X:2. The dissenting panelist thus concluded that the United States had acted inconsistently with Article X:2 of the GATT 1994.
Finally, the Panel ruled that Article X:3(b) does not prohibit legislation similar in nature to PL 112‑99. In other words, the requirement in Article X:3 that tribunals “shall be independent of the agencies entrusted with administrative enforcement and their decisions shall be implemented by, and shall govern the practice of, such agenciesunless an appeal is lodged” does not prohibit legislation superseding decisions of domestic courts or tribunals that are pending when the legislation comes into force. In the Panel’s view, the United States did not therefore act inconsistently with Article X:3(b) of the GATT 1994.
As regards China’s claims relating to “double remedies”, the Panel determined thatthe United States did not investigate whether “double remedies” arose in the proceedings at issue, and that it was therefore acting inconsistently with Articles 19.3, 10 and 32.1 of the SCM Agreement.
On 8 April 2014, China notified the DSB of its decision to appeal to the Appellate Body certain issues of law covered in the panel report and certain legal interpretations developed by the panel. On 17 April 2014, the United States notified the DSB of its decision to appeal to the Appellate Body certain issues of law covered in the panel report and certain legal interpretations developed by the panel.
On 6 June 2014, the Chair of the Appellate Body informed the DSB that due to the time required for completion and translation of the report, it had not been able to circulate the report by the end of the 60-day period. It is estimated that the Appellate Body report would be circulated no later than 7 July 2014.
On 7 July 2014, the Appellate Body circulated its report in United States – Countervailing and Anti‑Dumping Measures on Certain Products from China (WT/DS449/AB/R) within the 90-day deadline.
Article 6.2 of the DSU
While the United States did not appeal the Panel's findings under Articles 10, 19.3, and 32.1 of the SCM Agreement that it had failed to investigate and avoid double remedies1 in 25 anti-dumping and countervailing duties investigations, the United States claimed on appeal that the Panel erred in finding that China's panel request was consistent with Article 6.2 of the DSU, and that the claims under Articles 10, 19.3, and 32.1 of the SCM Agreement were within its terms of reference.
The Appellate Body upheld the Panel's finding that claims under Articles 10, 19.3, and 32.1 of the SCM Agreement were identified in China's panel request consistently with Articles 6.2 of the DSU, and were thus within the Panel's terms of reference. As a consequence of this Appellate Body finding, the Panel's findings and recommendations under Articles 10, 19.3, and 32.1 of the SCM Agreement stand.
Article X:2 of the GATT 1994
On 13 March 2012, the US Congress enacted Public Law (PL) 112-99, which in Section 1 adds a new paragraph (f) to Section 701 of the United States Tariff Act of 1930, expressly providing for the application of countervailing duties to non-market economy (NME) countries. Section 1 of PL 112-99 further specifies that it applies to all countervailing duty proceedings initiated by the US authorities on or after 20 November 2006, as well as to all pending court proceedings relating to such countervailing duty proceedings.
Article X:2 stipulates that no measure of general application that (i) increases a rate of duty or (ii) imposes a new or more burdensome requirement shall be enforced before such measure has been officially published. The Panel concluded that Article X:2 prohibits an administrative agency or court not only from enforcing a measure prior to its official publication, but also from enforcing or applying such measure in respect of events or circumstances that occurred before it has been officially published. The Panel found that Section 1 had been enforced before its publication, and this finding was not appealed. The Panel, however, found that Section 1 was not a measure covered by Article X:2 and, ultimately, found that Section 1 was not inconsistent with Article X:2 of the GATT 1994.
China challenged on appeal the Panel's interpretation of Article X:2 of the GATT 1994, and its finding that PL 112-99 is consistent with Article X:2 because it did not effect an “advance in a rate of duty or other charge on imports under an established and uniform practice” or impose “a new or more burdensome requirement, restriction or prohibition on imports” within the meaning of that provision.
The Appellate Body indicated that determining whether the measure at issue increases the duty or imposes a new or more burdensome requirement within the meaning of Article X:2 requires a comparison between the new measure of general application in municipal law and the prior published measure that it replaced or modified. Thus, Article X:2 requires the identification of a “baseline” of comparison in municipal law applicable prior to the new measure. China's appeal focused on the Panel's interpretation and application of that baseline of comparison.
In the light of this, the Appellate Body concluded that the Panel erred in finding that the phrase “under an established and uniform practice” “serve[d] to define the relevant prior rate that [was] to be used to establish whether or not an advance in a rate [of duty] ha[d] been effected”, and that the relevant comparison contemplated by Article X:2 of the GATT 1994 was “between the new rate effected by the measure at issue and the rate that was previously applicable under an established and uniform practice”.
The Appellate Body thus reversed the Panel's finding under Article X:2 of the GATT 1994 that “the United States ha[d] not acted inconsistently with Article X:2 of the GATT 1994, as Section 1 d[id] not 'effect an advance in a rate of duty or other charge on imports under an established and uniform practice, or impos[e] a new or more burdensome requirement, restriction or prohibition on imports'”.
Article 11 of the DSU
Having reversed the Panel's interpretation and application of Article X:2 of the GATT 1994, the Appellate Body did not consider it necessary to rule on China's claims under Article 11 of the DSU, which concerned the same findings by the Panel.
Completion of the analysis under Article X:2 of the GATT 1994
Having reversed the Panel's interpretation and application of Article X:2 of the GATT 1994, the Appellate Body examined whether it was in a position to complete the analysis in order to determine whether Section 1 of PL 112‑99 effected “;an advance in a rate of duty or other charge on imports” or imposed “a new or more burdensome requirement [or] restriction” within the meaning of Article X:2. The Appellate Body noted that such analysis required a comparison between the measure at issue (Section 1 of PL 112‑99) and the US countervailing duty law applicable prior to Section 1. In conducting this comparison, the Appellate Body examined whether the US countervailing duty law was changed by Section 1, as argued by China, and thereby effected an “advance” in a rate of duty or imposed a “new or more burdensome” requirement. The United States contended that Section 1 merely clarified prior applicable law and thus effected no such change.
The Appellate Body's examination revealed that the various relevant elements of US countervailing duty law on the Panel record (i.e. the text of the relevant legal instruments, the relevant judicial pronouncements of US courts, and the opinions of legal experts presented by the participants) are amenable to different readings. Moreover, the USDOC's practice in interpreting and applying the US countervailing duty law with respect to imports from NME countries was not consistent over time, and aspects of the legal basis upon which the USDOC was acting remain ambiguous. The Appellate Body emphasized that its task had been made difficult because the Panel did not adequately examine all relevant elements of US countervailing duty law, which would have been required to arrive at a conclusion on the basis of the correct interpretation of Article X:2.
For these reasons, the Appellate Body was unable to complete the analysis and arrive at a conclusion as to whether Section 1 had changed the US countervailing duty law and therefore determine whether Section 1 of PL 112-99 effected an “advance” in a rate of duty or imposed a “new or more burdensome” requirement or restriction on imports within the meaning of Article X:2 of the GATT 1994.
1 The term “double remedies” does not refer simply to the fact that both an anti-dumping and a countervailing duty are imposed on the same product. Rather, the term “double remedies”, also referred to as “double counting”, refers to circumstances in which the simultaneous application of anti-dumping and countervailing duties on the same imported product results, at least to some extent, in the offsetting of the same subsidization twice. Double remedies may arise when both countervailing duties and anti-dumping duties are imposed on the same imported product and a non-market economy (NME) methodology is used to calculate normal value for the purposes of establishing the margin of dumping. Under an NME methodology, prices or costs in a surrogate country, rather than domestic prices, are used to calculate normal value.
At its meeting on 22 July 2014, the DSB adopted the Appellate Body report and the panel report, as modified by the Appellate Body report.
Reasonable period of time
On 21 August 2014, the United States informed the DSB that it intended to implement the DSB recommendations and rulings in a manner that respects its WTO obligations and that it would need a reasonable period of time to do so. On 20 February 2015, China and the United States informed the DSB that they had agreed that the reasonable period of time for the United States to implement the DSB recommendations and rulings shall be 12 months from the date of adoption of the Appellate Body and panel reports. Accordingly, the reasonable period of time expired on 22 July 2015. On 23 July 2015, China and the United States informed the DSB that they had mutually agreed to modify the reasonable period of time so as to expire on 5 August 2015.
On 21 August 2015, China and the United States informed the DSB of Agreed Procedures under Articles 21 and 22 of the DSU.
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