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United States Welcomes WTO’s Rejection of China’s Challenge to U.S. Countervailing Duty Law, Regrets Findings on Challenge to Specific Proceedings

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 challenge brought by China against a U.S. trade remedy law and 25 determinations issued by the Department of Commerce.

The WTO panel found in favor of the United States and rejected China’s challenge to 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 on imports from non-market (NME) countries, including China. 

“This dispute is another example of the vigorous efforts of the Obama Administration to fight for American workers under international trade agreements. The panel saw through China’s effort to attack our transparent and democratic process in enacting this law. 

“The WTO panel’s decision to reject China’s challenge to our law is a significant victory for the United States.  The WTO report preserves the ability of the United States to remedy unfair subsidies and dumping by China, for the benefit of American businesses and workers,” said U.S. Trade Representative, Ambassador Michael Froman.

“At the same time, we’re disappointed that the panel found that the United States breached WTO rules in 25 countervailing duty proceedings by failing to investigate an alleged overlap between antidumping and countervailing duties on Chinese imports.  However, the panel’s concerns relate to certain past determinations, and U.S. law now directs the Department of Commerce to investigate any possible overlap.”

“I am pleased that today’s decision confirms that U.S. businesses and exporters have a remedy against unfair subsidization of imports by non-market economy countries”, said U.S. Commerce Secretary Penny Pritzker. “The Department of Commerce will continue to enforce the countervailing duty law to ensure that U.S. firms and workers have the opportunity to compete on a level playing field with their international competitors.”

In addition, China challenged certain countervailing duty proceedings on imports from China initiated by the Department of Commerce between November 20, 2006, and March 13, 2012.  China alleged that the Department of Commerce failed to investigate whether the concurrent application of antidumping and countervailing duties on those imports may have resulted in an overlap of remedies.  Today’s panel report followed the findings of 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.

Background:

In this dispute, China alleged that the United States had acted inconsistently with 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.  

The panel rejected all of China’s claims under Article X of the GATT 1994.

  • The panel rejected China’s claim under Article X:1, which requires a WTO Member to promptly publish laws and certain other measures when they are “made effective.”
  • The panel rejected China’s claim under Article X:2, which states that certain measures that cause an increase in duty rates, or impose a new or more burdensome requirement, restriction or prohibition on imports cannot be enforced until the measure has been officially published.
  • The panel rejected China’s claim under Article X:3(b), which requires WTO Members to maintain independent judicial systems that provide for the prompt review of customs matters, such as Commerce’s CVD proceedings.   The final results of such reviews shall be binding on the agency charged with administering the customs matter.

China also alleged that the Department of Commerce failed to investigate whether a possible overlap may have resulted from the concurrent application of antidumping duties determined using a 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.  

With respect to this claim, the panel found that the United States breached WTO rules in 25 proceedings initiated between November 2006 and March 2012 because the United States did not affirmatively investigate the alleged overlap.  The panel found that this was inconsistent with Article 19.3 of the Agreement on Subsidies and Countervailing Measures, which requires a WTO Member to impose countervailing duties “in the appropriate amounts.”  

Section 2 of the GPX legislation directs the Department of Commerce to investigate any possible overlap in remedies when antidumping duties are imposed on imports from an NME country concurrently with countervailing duties.  Section 2 of the GPX legislation applies to those proceedings initiated after the enactment of the GPX legislation – that is, after March 13, 2012. 

Both sides have the right to seek adoption or appeal of the report within 60 days of the report’s circulation.  The monitoring and enforcement unit of USTR’s Office of General Counsel, in close collaboration with colleagues at the Department of Commerce, defended the challenged U.S. law and determinations before the WTO panel.