October 18, 2012
Today United States Trade Representative Ron Kirk announced that the World Trade Organization (WTO) Appellate Body found in favor of the United States in a dispute challenging China’s imposition of duties on U.S exports of grain oriented flat-rolled electrical steel (GOES). A WTO Panel agreed with the United States that China had acted inconsistently with its WTO obligations in imposing the duties. The Appellate Body, in turn, rejected all of China’s claims on appeal.
“This is a victory for the United States as well as for American workers and manufacturers,” said Ambassador Kirk. “The Obama Administration will not stand by and allow China to break international trade rules. American manufacturers and workers can compete and win on a level playing field, but China’s unfair duties choked off nearly all U.S. GOES exports to its market. Today we are again plainly stating that we will continue to take every step necessary to ensure that China plays by the rules and does not unfairly restrict exports of U.S. products.”
GOES is a high-tech, high-value magnetic specialty steel that is used primarily by the power generating industry in transformers, rectifiers, reactors, and large electric machines. The United States pursued this case to ensure that China does not harm U.S. exports, and the American workers and firms that make them, by abusing trade remedy practices. AK Steel Corporation, based in Ohio, and Allegheny Ludlum, based in Pennsylvania, manufacture GOES.
On June 9, 2009, China initiated separate antidumping (AD) and countervailing duty (CVD) investigations on GOES from the United States. On April 10, 2010, China issued final determinations of dumping, subsidization, and injury, along with a notice of imposition of antidumping and countervailing duties. MOFCOM’s determination of injury applied equally to both the AD and CVD investigations.
On September 15, 2010, the United States requested dispute settlement consultations with China concerning its imposition of these duties on GOES from the United States. After consultations failed to resolve the matter, the WTO established the Panel in March 2011. In 2008, U.S. exports of GOES to China were valued at $270 million. By 2011 those exports had fallen to less than $3 million.
The United States alleged that China improperly initiated the CVD investigation of several U.S. laws. The United States also challenged the manner in which China conducted its investigation, alleging that China violated numerous procedural and due process obligations, impairing the ability of the United States and U.S. companies to defend their interests. The United States also alleged that China’s finding of injury to its domestic industry was unsupported by the evidence on the record. A WTO Panel sided with the United States in a report circulated in June 2012.
Today, the Appellate Body rejected China’s claims that the Panel misinterpreted the Subsidies and Countervailing Measures (SCM) Agreement and the Anti-Dumping (AD) Agreement. In particular, the Appellate Body upheld the Panel’s findings of defects in China’s determination that U.S. exports caused adverse price effects. The Appellate Body also upheld Panel findings that China failed to disclose essential facts, and failed to explain its determination.
Notably, China did not appeal several Panel findings that China applied duties in a manner inconsistent with numerous obligations under the SCM Agreement and the AD Agreement. In particular, China did not appeal Panel findings that China:
1. Initiated countervailing duty investigations with respect to several alleged programs based on insufficient evidence;
2. Failed to provide non-confidential summaries of Chinese submissions containing confidential information;
3. Calculated the subsidy rates for U.S. companies in a manner unsupported by the facts;
4. Calculated the “all others” subsidy rate and dumping margin without a factual basis;
5. Failed to disclose essential facts and failed to explain its calculation of the “all others” subsidy rate and dumping margin; and
6. Made unsupported findings that U.S. exports caused injury to China’s domestic industry.
The Appellate Body’s report can be found here.
Within 30 days, the WTO Dispute Settlement Body will adopt the Panel and Appellate Body reports and recommend that China take appropriate steps to bring its measures into conformity with its obligations under the SCM Agreement and the AD Agreement within a reasonable period of time.