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WTO Panel Issues a Mixed Result in China’s Challenge to U.S. Countervailing Duties

Washington, D.C. – United States Trade Representative Michael Froman announced today that a World Trade Organization (WTO) dispute settlement panel issued a mixed result in a broad challenge brought by China against various aspects of 17 separate countervailing duty investigations conducted by the U.S. Department of Commerce.

“The Administration is committed to the strong enforcement of U.S. countervailing duty laws in order to respond to unfair subsidies, and to a strong defense of those duties when challenged by any U.S. trading partner,” said U.S. Trade Representative Michael Froman.  "The WTO panel’s decision to reject many of China’s challenges to U.S. countervailing duties on unfairly subsidized Chinese imports is a victory for American businesses and workers.  With respect to the other findings in the panel report, the Administration is carefully evaluating its options, and will take all appropriate steps to ensure that U.S. remedies against unfair subsidies remain strong and effective.”

The WTO panel rejected most of the claims brought by China against U.S. countervailing duties under the WTO Agreement on Subsidies and Countervailing Measures Agreement (SCM Agreement).   The Chinese claims rejected by the WTO panel involved challenges to the use of facts available, the use of out-of-country benchmarks, important aspects of the analysis used to determine whether a subsidy is “specific”, and the initiation of investigations of particular subsidies.  The claims on which China prevailed mainly involved issues where the WTO panel followed findings made in previous WTO reports. 

Background:

In this dispute, China/CVD2 (DS437), China alleged that the United States had acted inconsistently with the SCM Agreement in 17 countervailing duty investigations with respect to Commerce’s determinations on public bodies, applications of facts available, calculations of benchmarks, determinations of specificity, and decisions to initiate investigations.  

The panel made the following findings: 

  • On Facts Available, China brought 48 challenges under Article 12.7 of the SCM Agreement to Commerce’s use of “facts available” when making findings of facts in the face of non-cooperation by respondent companies or China.  The panel found that China had not established that the United States had acted inconsistently with the Agreement in 42 of those instances, and declined to make findings in the remaining six, finding that those claims were outside its terms of reference. 
  • On Benchmarks, China brought claims on 12 investigations.  The panel found that China failed to establish that Commerce acted inconsistently with the obligations of Article 14(d) on all 12 investigations.  
  • On Specificity, with respect to 12 investigations, China brought four claims against Commerce’s determinations that the subsidies at issue were specific under Article 2.1 of the SCM Agreement.  The United States prevailed on three of those claims, and China prevailed on one. 
  • On Initiations, China brought 20 challenges to Commerce’s initiation of investigations of particular subsidies under Article 11 of the SCM Agreement, and the panel found that the China had not established that the United States had acted inconsistently with the Agreement in the challenges related to public bodies and specificity.   
  • On Public Bodies, the Panel found that, in 12 investigations, Commerce’s determinations that certain SOEs were public bodies were inconsistent with Article 1.1(a)(1) of the SCM Agreement.  
  • On Regional Specificity, China brought seven challenges to Commerce’s findings that certain subsidies were regionally specific under Article 2.2 of the SCM Agreement, and the panel found that China had established that Commerce acted inconsistently with the Agreement in six of those investigations.  
  • On Export Restraints, China brought claims on two investigations.  The panel found that China established that Commerce acted inconsistently with Article 11.3 when it initiated these two investigations without adequate evidence of the existence of a subsidy. 

Both parties have the right to seek adoption or appeal of the report within 60 days of the report’s circulation.