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China Fails A Second Time in its Challenge to U.S. Countervailing Duty Law

Washington, D.C. – United States Trade Representative Michael Froman announced today that a second WTO report found that China failed  to support its challenge under Article X:2 of the GATT 1994 to a U.S. trade remedy law, U.S. Public Law 112-99 (commonly referred to as the GPX legislation). 

The GPX legislation was enacted on March 13, 2012, to confirm the Department of Commerce’s ability to apply the U.S. countervailing duty (CVD) law to subsidized imports from non-market economy (NME) countries, including China.  As a result of today’s report, together with the May report from a WTO panel rejecting all of China’s claims under Article X of the GATT 1994, there are no WTO panel or Appellate Body findings that the GPX legislation breaches WTO rules. 

“This is the second WTO report that has found that China has failed in its attack on our transparent and democratic process in enacting this law and applying countervailing duties to China,” said Ambassador Froman.  “The Obama Administration will continue to vigorously defend any challenges to the application of our trade remedy laws to ensure that U.S. workers and businesses are not put at a disadvantage by Chinese or other subsidies. The United States acted within its WTO rights in enacting the GPX legislation to confirm that duties could be applied to counteract unfair Chinese subsidies. 

“Today’s decision allows U.S. industries to continue to rely on U.S. trade laws to address unfair competition from their subsidized Chinese competitors. As we closely review the impact this decision may have, the Obama Administration and the Commerce Department remain committed to robustly enforcing the U.S. trade remedy laws that allow our producers and firms to compete on a level playing field,” said Secretary of Commerce Penny Pritzker.  

China has been on notice since 2006 that the United States might apply countervailing duties to unfairly subsidized Chinese imports that cause injury to U.S. workers and businesses, just as the United States does to unfairly subsidized imports from other countries.

The Appellate Body also turned down a U.S. procedural challenge to the panel’s findings relating to 25 countervailing duty proceedings on Chinese imports.   The panel report had followed a previous Appellate Body report and found that the United States breached WTO rules by failing to affirmatively investigate an alleged overlap with respect to 25 countervailing duty proceedings.  A provision of the GPX legislation already directs the Department of Commerce to look at the issue of so-called “double remedies” and make any necessary adjustments in determinations. 

Background

China initiated a WTO dispute settlement proceeding against the United States in November 2012.  In this dispute, China alleged that the United States had acted inconsistently with the transparency, administration, and judicial review requirements in Article X of the GATT 1994 by specifying an effective date for Section 1 of the GPX legislation (November 20, 2006) that was prior to the enactment of the law (March 13, 2012).  Section 1 of the GPX legislation confirmed Commerce’s longstanding authority to apply the U.S. countervailing duty law to NME countries, such as China.   In March 2014, a WTO panel rejected all of China’s claims under Article X of the GATT 1994. 

China also alleged that the Department of Commerce failed to investigate whether a possible overlap may have resulted from the simultaneous application of antidumping duties determined using an NME methodology and countervailing duties on the same products for proceedings initiated by the Department of Commerce from November 20, 2006, to March 13, 2012.  China’s argument was based entirely on the findings of the WTO Appellate Body in the dispute U.S. – Definitive Anti-Dumping and Countervailing Duties on Certain Products from China (DS379) regarding a similar issue.   In March 2014, the same WTO panel found that the United States breached Article 19.3 of the Agreement on Subsidies and Countervailing Measures (SCM Agreement) in 25 proceedings initiated between November 2006 and March 2012 because the United States did not affirmatively investigate the alleged overlap.    

China appealed but failed to prevail on its Article X:2 claim concerning the GPX legislation before the Appellate Body.  The United States will continue to address injurious Chinese government subsidization through the application of the U.S. CVD law in order to help level the playing field for American manufacturers and their workers.  

The United States also appealed the panel’s findings that China’s panel request satisfied the pleading requirements of Article 6.2 of the Understanding on Rules and Procedures Governing the Settlement of Disputes.  The Appellate Body did not agree with the U.S. appeal and upheld the panel’s findings with respect to 25 proceedings initiated between November 2006 and March 2012.