On 3 December 2013, China requested consultations with the United States regarding the use of certain methodologies in anti-dumping investigations involving Chinese products. China claims that the measures mentioned in the request for consultations are inconsistent with: Articles 2.4.2, 6.1, 6.8, 6.10, 9.2, 9.3, 9.4 and Annex II of the Anti-Dumping Agreement; Article VI:2 of the GATT 1994. On
19 December 2013, Japan requested to join the consultations. On 25 December 2013, the Russian Federation requested to join the consultations. On 8 January 2014, Ukraine requested to join the consultations. On 13 February 2014, China requested the establishment of a panel. At its meeting on 26 February 2014, the DSB deferred the establishment of a panel.
Panel and Appellate Body proceedings
At its meeting on 26 March 2014, the DSB established a panel. Brazil, Canada, the European Union, India, Japan, Korea, Norway, the Russian Federation, Saudi Arabia and Ukraine reserved their third-party rights. Subsequently, Chinese Taipei, Turkey and Viet Nam reserved their third-party rights. On 18 August 2014, China requested the Director-General to compose the panel. On 28 August 2014, the Director-General composed the panel.
On 23 February 2015, the Chair of the panel informed the DSB that the start of the proceedings was deferred owing to the unavailability of Secretariat lawyers. Pursuant to the timetable adopted by the panel, and in light of the amount and complexity of the work involved, the panel expects to issue its final report to the parties in June 2016.
On 19 October 2016, the panel report was circulated to Members.
Summary of key findings
In this dispute, China raised claims with respect to three issues concerning certain anti-dumping measures imposed by the United States Department of Commerce (USDOC).
In particular, China challenged the USDOC’s use of the exceptional weighted average-to-transaction (WA-T) methodology, including its use of zeroing under this methodology; the USDOC’s treatment of multiple exporters from non-market economies (NMEs) as a NME-wide entity (single rate presumption); and its use of facts available in determining anti-dumping duty rates for such entities, as well as the level of such duty rates.
China’s claims concerning the USDOC’s use of the WA-T methodology
China claimed that the USDOC’s use of the WA-T methodology in three anti-dumping investigations involving Chinese exporters was inconsistent with Article 2.4.2 of the Anti-Dumping Agreement because the USDOC used this methodology without meeting the conditions for its use, and because it applied this methodology in a manner that was inconsistent with this provision.
Regarding the conditions prescribed in Article 2.4.2 for the use of the WA-T methodology, China claimed that the USDOC failed to properly find a “pattern of export prices which differ significantly” among different purchasers or time-periods because the method adopted by the USDOC, namely, the Nails test, to find such a pattern suffered from several flaws. The Panel rejected most aspects of China’s claims in this regard.
But the Panel agreed with China that the application of the Nails test in two of the three anti-dumping investigations of the USDOC was inconsistent with Article 2.4.2 because in seeking to find the relevant pattern among different purchasers and time-periods, the USDOC failed to take into account the export prices to all purchasers or in all time-periods, and provided no explanation for such an omission.
China also claimed that the USDOC acted inconsistently with Article 2.4.2 by failing to provide an adequate explanation as to why the relevant differences in the pattern of export prices could not be taken into account appropriately through the WA-WA or T-T comparison methodology. In this regard, the Panel found that the USDOC acted inconsistently with Article 2.4.2 because it only explained why the WA-WA methodology, and not the T-T methodology, could not be used to take into account appropriately the relevant differences in the pattern of export prices.
The Panel also found that the explanation provided by the USDOC was inadequate to discharge its obligations under Article 2.4.2 because that explanation was premised on the use of zeroing under the WA-T methodology, which the Panel considered to be impermissible.
With respect to the application of the WA-T methodology, the Panel agreed with China that the USDOC acted inconsistently with Article 2.4.2 by applying this methodology to all export sales instead of limiting it to those export sales which were found to fall within the relevant pattern of export prices.
The Panel also found that the USDOC acted inconsistently with Article 2.4.2 because it used zeroing under the WA-T methodology.
China’s claims concerning the Single Rate Presumption
China claimed that the USDOC’s presumption of government control over exporters from NME countries and treatment of NME exporters as part of a single NME-wide entity constituted a rule or norm of general and prospective application, the so-called “Single Rate Presumption”, which China challenged as such and as applied in 38 anti-dumping determinations involving Chinese exporters.
The Panel agreed with China’s characterization of the Single Rate Presumption as a rule or norm of general and prospective application, which could be challenged as such in WTO dispute settlement.
Following the Appellate Body’s approach in EC — Fasteners (China), the Panel found that while Articles 6.10 and 9.2 of the Anti-Dumping Agreement permit the determination of a single dumping margin and a single anti-dumping duty rate for multiple exporters following an objective and affirmative determination that such exporters are in a sufficiently close relationship to constitute a single entity, the Single Rate Presumption violated — as such and as applied in the 38 determinations involving Chinese exporters — these provisions by subjecting NME exporters to a presumption of government control and singularity.
In making this finding of inconsistency, the Panel rejected the United States’ contention that paragraph 15 of China’s Accession Protocol, whether viewed in isolation or in the context of China’s Accession Working Party Report, serves as a basis for WTO Members to presume government control over Chinese exporters.
Having found that the Single Rate Presumption violated Articles 6.10 and 9.2 of the Anti-Dumping Agreement, the Panel exercised judicial economy with respect to China’s claim that this presumption also violated the second sentence of Article 9.4 by imposing an additional condition on the right of NME exporters to receive individual anti-dumping duties.
China’s claim concerning the use of adverse inferences and selection of adverse facts available
China claimed that the USDOC’s systematic use of adverse inferences and selection of adverse facts available when it finds that an NME-wide entity has failed to cooperate constituted a rule or norm of general and prospective application, i.e. the alleged “Use of Adverse Fact Available Norm” or “AFA Norm”.
The Panel disagreed with China’s characterization of the alleged AFA Norm, finding that China had not demonstrated its general and prospective application. While the Panel agreed that the USDOC’s use of adverse facts available in anti-dumping determinations involving NME countries constituted more than mere repetition of conduct, the Panel found that the USDOC’s practice did not demonstrate the requisite level of security and predictability typically associated with rules or norms.
Having found that China did not demonstrate the existence of a rule or norm of general and prospective application, the Panel did not consider it necessary to address China’s as such claims against the AFA Norm under Article 6.8 and paragraph 7 of Annex II to the Anti-Dumping Agreement.
Independently of the AFA Norm, China challenged the manner in which the USDOC determined a single anti-dumping duty rate for the People’s Republic of China-wide entity (PRC-wide entity) in 30 of the 38 anti-dumping determinations involving Chinese exporters, found to be inconsistent with Articles 6.10 and 9.2 of the Anti-Dumping Agreement.
Having already found that the USDOC had not established the existence of a single PRC-wide entity in a WTO-consistent manner in these 30 determinations, the Panel did not consider it necessary to address China’s claims regarding the manner in which the USDOC determined anti-dumping duty rates for that entity or the level of such rates.
The Panel therefore exercised judicial economy with respect to China’s as applied claims under Articles 6.1 and 6.8, paragraphs 1 and 7 of Annex II, and the first sentence of Article 9.4 of the Anti-Dumping Agreement.
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