United States: Countervailing and Anti-Dumping Measures on Certain Products from China

ITRN 603 - Adam Diament, Zuleima Hanson, and Ryan Gardiner

China argued that U.S. Public Law 112-99, allowing for countervailing duties on subsidized imports from China, in addition to anti-dumping measures against these same products, were in violation of several Articles of the GATT 1994 and of the SCM Agreement . The WTO decided in favor of the United States, but against the U.S. on the issue of “double remedies.”

2001 – China joins the WTO as a “non-market economy” WTO members can use other countries to

determine production costs in anti-dumping cases

Status set to expire on 12 December 2016

In early 1980s USDOC responded to a series of petitions to impose CVDs on imports from NME countries saying that under the Tariff Act provisions on CVD were inapplicable to countries that the US designates as NME.

This interpretation was affirmed by the United States Court of Appeals for the Federal Circuit in 1986 (George Steel Corp. v. United States)

Congress tried in several occasions to enact new legislation that would allow the application of CVD on NME countries, but none of these initiatives resulted on the enactment of a new law.

The U.S. Government Accountability Office (GAO) issued a report in June 2005 describing the United States options in this matter:

1. To designate China as market economy and apply normal market economy methodologies in anti-dumping investigations of Chinese products, or 2. for the USDOC to declare, unilaterally, that it will applying CVDs to imports from NME (GAO cautioned this could be challenged in court).

2006 – US Department of commerce begins investigating the legality of applying countervailing duties (CVD) to coated free sheet paper (CFS Paper) imports from China and issued and affirmative CVD determination in Oct. 2007. This decision unleashed a wave of new countervailing duty petitions against Chinese products.

2007 - Titan International Inc., the United Steelworkers Union, and later Bridgestone, argued to the Department of Commerce that off-the road (OTR) tires imported from China were “causing material injury to U.S. OTR tire makers” Source: offroaders.com

2008 – Commerce directed the enactment of CVD’s of up to 210 percent on certain OTR tire imports from China

2011 – After a number of appeals by GPX, which was forced to file for bankruptcy following the enactment of new tariffs, a federal US court ruled that the Department of Commerce did not have the legal authority to enact CVD’s on NME and that if USDOC “believe that the law should be changed, the appropriate approach is to seek legislative change.”

U.S. Public Law 112-99 (the “GPX Legislation”)

Passed on 12 March 2012, enabling the Department of Commerce to levy CVD’s on subsidized imports from non-market economies

China responds by requesting consultations with the U.S. through the WTO on 17 September 2012

The U.S. would not have won the case had it not been for China’s status as a “non-market economy” Is the U.S. simply using this status as an

excuse to implement protectionist policies?

What happens in December 2016?

China argued that Section 1 of the PL 112-99 is inconsistent with the requirements of Article X:1 of the GATT to "publish promptly” because it was “made effective” as of 20 November 2006, but was not published until 13 March 2012.

China also claimed that Section 1 of the PL 112-99 is inconsistent with Article X:2 of the GATT 1994 because as a “measure of general application which effects an advance in a rate of duty and imposes a new or more burdensome requirement or restriction on imports” it should had been enforced after its official publication on 13 March 2012.

That the US applied Section 1 of PL 112-99 retroactively to events that took place between 20 November 2006 and 13 March 2012, and such retroactivity is inconsistent with Article X:3 of the GATT 1994.

That the United States failed to investigate and avoid double remedies in 26 countervailing duty investigations and reviews initiated between 20 November 2006 and 13 March 2012. Accordantly, the resulting countervailing duty measures, and countervailing duties collected during this period are inconsistent with Article 10, 19, and 32 of the Agreement of Subsidies and Countervailing Measures (SCM).

The United States published PL 112-99 on the on the same day it was enacted, fulfilling the transparency called by Article X:1 of the GATT 1994.

X:1 of the GATT does not prohibit a measure to touch on events that happened prior to its publication.

GPX legislation was not enforced prior to its publication. No U.S. entity acted upon this new law prior to its publication.

Section 1 of the law is not a measure of general application since it only applies to a limited and known set of imports and proceedings covering the period 20 November 2006 to 13 March 2012. Therefore, it is not inconsistent with Article X:2 of the GATT 1994.

China’s Protocol Accession to the WTO gives every WTO member the right to apply CVDs to imports from China as a NME including the United States which the United States has exercised since 2006.

The actions taken by US government administrative authorities between November 20, 2006 and 13 March, 2012 were based on pre-existing CVD law and not on a future authorization from Congress.

The United States has not changed the way in which it applies CVD to NME countries. And the goal of PL 112-99 was to clarify and confirm the applicability of CVD law to imports from NME countries and to resolve the ambiguity created by the 2011 decision by the US Court of Appeals of the Federal Circuit.

That the US did not act inconsistently with article X:1 of the GATT 1994 because Section 1 “was made effective” on 13 March, 2012 and was published on the same day.

Although the US enforced section 1 prior to its publications, this is not inconsistent with article X:2 of the GATT 1994 because Section 1 is a measure of general application that does 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.”

The United States did not act inconsistently with Article X:3 of the GATT 1994, because that provision does not prohibit a member from taking legislative action in the nature of Section 1 of PL 112-99

Regarding China’s claim that the US acted inconsistently with the SCM Agreement by failing to investigate and avoid double remedies in 26 investigations and reviews, the Panel found that: in the Drawn Stainless Steel Sinks case China did not provide enough evidences to back its claim, And on the other 25 cases that the United States acted inconsistently with Article 19.3 of the SCM; therefore, it should bring these investigations and reviews into conformity with its obligations under the Agreement.

Reversed the Panel’s interpretation of Article X:2 of the GATT 1994 because the Panel failed to compare the US Tariff Act of 1930 and the Section 1 of PL-112 to determine if the PL advanced the rate of duty or imposed new or more burdensome requirements.

Because of the erroneous interpretation of Article X:2, it declared moot and with not effect the Panel’s findings that the USDOC’s practice of applying countervailing duties to China between 2006 and 2012 was lawful in the context of the Article X:2. However, the Appellate Body was not able to make the correct interpretation of Article X:2.

Recommended that the Dispute Settlement Body request the United States to bring the investigation and reviews inconsistent with the SCM agreement into conformity.

New Section (f) of the United States Tariff, established by Section 1 of the 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 purpose.”

New Section 777A (f) of the United States Tariff established by Section 2 of the PL 112-99 entitled "Adjustment to Antidumping Duty in Certain Proceedings Relating to Nonmarket Economy Countries".

Articles X:1, X:2, X:3 of the GATT of 1994.

Article 10, Article 19, and 32 of the SCM (Subsidies, Countervailing Measures) Agreement.

Article 6.2 of the Dispute Settlement Understanding (DSU).

Aluminum Extrusions Certain Circular

Welded Carbon Quality Steel Line Pipe Certain Kitchen

Appliance Shelving and Racks Certain Magnesia

Carbon Bricks Certain New Pneumatic

Off-The-Road Tires Certain Oil Country

Tubular Goods Certain Potassium

Phosphate Salts Certain Steel Grating

Certain Tow Behind Lawn Groomers and Certain Parts Thereof

Circular Welded Austenitic Stainless Pressure Pipe

Citric Acid and Certain Citrate Salts

Lightweight Thermal Paper

Narrow Woven Ribbons with Woven Selvedge

Prestressed Concrete Steel Wire Strand

Raw Flexible Magnets Sodium Nitrite

21 August 2014 – U.S. informs the WTO that it planned to implement the recommendations, but that it would need a “reasonable amount of time” to do so

China and the U.S. agreed that the recommendations would be implemented by 22 July 2015 – which was later extended to 5 August 2015

January 2015 – U.S. Department of Commerce began investigating whether the “double remedies” had arisen on the products involved in the WTO case

Mid-July through Early-August 2015 – Department issued its findings and instructed U.S. Customs and Border Protection to begin collecting the revised duties

U.S. Department of Commerce’s findings were only recently released China and U.S. seem to have worked out

their issues in this particular case

China’s status as a “non-market economy” had a major impact on the case, and has a major impact on global trade Is the U.S. simply using this status as an

excuse to implement protectionist policies? What happens in December 2016?

The United States should continue to review its anti-dumping and CVD policies to ensure they’re not creating unnecessary barriers to trade The U.S. should also look ahead to

December 2016 and consider how it would handle a change in China’s non-market economy status

"DISPUTE SETTLEMENT: DISPUTE DS449." World Trade Organization. Accessed October 1, 2015.Dalton, Matthew. "Malmstrom: No Automatic Market Economy Status for China in 2016." Real Time Brussels RSS. December 11, 2014. Accessed October 1, 2015."Implementation of Determinations Under Section 129 of the Uruguay Round Agreements Act." Federal Register 80, no. 157 (2015): 48812-8819. Accessed October 5, 2015. http://www.gpo.gov/fdsys/pkg/FR-2015-08-14/pdf/2015-20085.pdf.Moore, Miles. "GPX Challenges Countervailing Duties Law - Rubber & Plastics News." Rubber & Plastics News. September 3, 2012. Accessed October 1, 2015. "PUBLIC LAW 112–99." March 13, 2012. Togni, Pat. "WTO Appellate Body Issues Report In China's Challenge To U.S. Trade Laws." King & Spalding: Trade & Manufacturing Alert. August 1, 2014. Accessed October 1, 2015.