WTO Rules Against U.S. "Double Counting" on China Products Subject to AD/CV Duties

The U.S. Trade Representative issued a statement expressing strong disappointment in the ruling.

(In October 2010, a WTO panel had ruled largely in favor of the U.S. in this dispute. See ITT’s Online Archives or 10/25/10 news, 10102509, for BP summary.)

WTO Findings to Be Adopted in 30 Days, U.S. Must Notify Its Intent on the Ruling

According to USTR, the WTO Dispute Settlement Body is expected to adopt the Appellate Body report and the panel report within the next 30 days.

Under WTO rules, once a panel report or AB report is adopted, the party concerned has to notify its intentions with respect to implementation of adopted recommendations. If it is impracticable to comply immediately, the party concerned is given a reasonable period of time, the latter to be decided either by agreement of the parties and approval by the DSB within 45 days of adoption of the report or through arbitration within 90 days of adoption. In any event, the DSB will keep the implementation under regular surveillance until the issue is resolved.

AB Says U.S. “Double Counting” of AD/CV Duties is WTO-Inconsistent

The Appellate Body has now agreed with China on several points and reversed some of the panel’s October 2010 findings. In reversing these findings, the AB now finds that the following Commerce Department practices are inconsistent with the Subsidies and Countervailing Measures Agreement (SCM Agreement) (partial list):

• imposition of double remedies (i.e., the offsetting of the same subsidization twice by the concurrent imposition of AD duties calculated on the basis of an NME methodology and CV duties); and
• determination that certain Chinese state-owned enterprises (SOEs) are “public bodies.”

Upholds Earlier Rulings on State-Owned Banks, Specific Subsidies, Etc.

The Appellate Body also upheld certain of the panel’s findings, including findings that the following Commerce practices were consistent with U.S. WTO obligations:

• “public body” determinations with respect to certain state-owned commercial banks (SOCBs);
• use of benchmarks from outside of China to measure the “benefit” of certain subsidies (though the AB found that the panel failed to properly analyze the benchmark Commerce used to measure the benefit of government-provided loans); and
• its determination that certain subsidies were “specific” to a particular industry.

(See AB ruling for a description of its complete findings.)

CIT also Ruled Against AD/CV Double Counting in China Tire Case

In August 2010, the Court of International Trade also rejected Commerce’s approach to combined AD and CV duty tariffs on imports from non-market economies, and ordered the agency to forego imposing CV duties on off-the-road (OTR) tires from China (one of the four products at issue in the WTO dispute).

However, the court denied a motion by Chinese producers of OTR who sought an injunction to lift the CV duty deposits based on this August 2010 finding, citing the unsettled state of the law, a pending appeal by the government, and lack of irreparable harm. (See ITT’s Online Archives or 08/09/10 and 10/21/10 news, 10080911 and 10102104, for BP summaries.)

USTR “Deeply Troubled” with Findings, Will Work with Commerce on Response

USTR Kirk issued a statement on the findings stating that he was “deeply troubled” by the report which he said “appears to be a clear case of overreaching by the Appellate Body.”

Kirk added that his office is reviewing the findings closely in order to understand fully their implications and will work with Commerce to determine the appropriate response to the adverse findings.

(Prior to 2007, Commerce did not apply CV duties to non-market economy (NME) imports because the existence of a centrally controlled economy in an NME made it difficult to identify specific actions as subsidies. However, in 2007, Commerce reversed this long-standing position and found that although China remained designated an NME country for AD duty purposes, it could also apply CV duty law to products from China.)

USTR press release, dated 03/11/11, available here.