China to Request WTO Decision On U.S. Countervailing Duty Orders


Source: BNA Snapshot
Related Topics: International Trade

By Daniel Pruzin

China will ask a World Trade Organization dispute panel to rule whether U.S. countervailing duty orders targeting nearly two dozen imported Chinese goods are in violation of global trading rules.

China has inscribed a request for the establishment of the panel on the agenda of the next meeting of the WTO's Dispute Settlement Body scheduled for Aug. 31. The United States can block China's request at that meeting, but any subsequent request from China would automatically be accepted by the DSB.

On May 25 China requested WTO dispute consultations with the United States on the matter. Under WTO rules, a country may request the establishment of a panel if the two sides in a dispute are unable to resolve their differences through consultations within 60 days.

The Chinese complaint concerns CVD orders targeting 22 imported Chinese products that Beijing says are worth $7.3 billion in export sales. Among the Chinese products subject to the CV duties are solar panels, wind towers, thermal paper, steel grating, steel wire, oil country tubular goods (OCTG), and several varieties of steel pipe.

The dispute proceedings are a follow-up to an earlier WTO case brought by China against U.S. antidumping and countervailing duty determinations and final duty orders issued between June and August 2008 on imports of circular welded carbon quality steel pipe (CWP), pneumatic off-the-road tires (OTR), light-walled rectangular pipe and tube, and laminated woven sacks (LWS) imported from China.

In that case, the WTO's Appellate Body ruled in March 2011 that the U.S. Commerce Department violated global trade rules by determining that state-owned suppliers of goods to Chinese producers targeted by the CVD orders were “public bodies” under WTO subsidy rules and therefore provided government financial contributions to the producers. The Appellate Body also ruled that Commerce illegally applied a “double remedy” in the form of simultaneous application of antidumping and countervailing duties on the targeted imports.

The United States had until May 25 to comply with the WTO's ruling. On May 18 Commerce issued a preliminary determination which concluded that the Chinese government “is exercising meaningful control over all enterprises in which the government has maintained a full or controlling ownership interest,” that the Chinese government “meaningfully controls certain key aspects” of the enterprises targeted with the CVD orders, and that all such enterprises “will be considered to be public bodies” within the meaning of the WTO's Agreement on Subsidies and Countervailing Measures (SCM Agreement).

On July 31 Commerce issued a final determination in response to the WTO ruling which found that the concurrent application of countervailing duties and Commerce's nonmarket economy (NME) antidumping methodology does not necessarily result in a double remedy.

Commerce Erred, China Says
In the current dispute proceedings, China once again argued that Commerce erred in determining that state-owned suppliers of goods to Chinese producers of the 22 targeted imports constitute “public bodies” under WTO rules, that the alleged subsidies were specific to the Chinese producers (and thus countervailable), and that the alleged provisions of subsidized goods conferred a benefit on the producers.

China also contends that Commerce erred in concluding that export restraints on two products targeted with U.S. CV duties—magnesia bricks and seamless pipe—constitute a financial contribution from the government to Chinese producers.

Furthermore, China argued that Commerce illegally used “adverse facts available” in the countervailing investigations at issue.

“Facts available” refers to the practice by investigating authorities of relying on other sources of information—including from the petitioning company—when a foreign producer targeted in an investigation does not provide required information or fails to provide usable information concerning its sales on the importing market. “Adverse facts available” is Commerce's practice of choosing the most adverse facts available on sales in order to make an example of the targeted exporter and deter other exporters from not cooperating with the investigation.

India to Renew Its Request
Separately, India will renew its request Aug. 31 for the establishment of a WTO dispute panel to rule whether U.S. countervailing duties on imports of Indian hot-rolled carbon steel flat products violates global trade rules.

India submitted a first request for the panel at a DSB meeting on July 23, but the request was blocked by the United States.

At the center of the dispute is a U.S. CVD order on Indian hot-rolled steel first imposed in December 2001 and then extended in December 2007 following a sunset review. India is challenging the U.S. conclusion that Indian steel producers received a countervailable subsidy through the purchase of iron ore from a state-owned producer for less than adequate remuneration.

India also charges that the U.S. legislation serving as the basis for the duty order, Title 19, Part 351 of the U.S. Code of Federal Regulations as well as certain provisions of the 1930 U.S. Tariff Act, are “as such” in violation of WTO subsidy rules by requiring various practices such as the automatic adoption of benchmark prices and “delivered” prices as well as the automatic use of adverse facts available.

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