4 Nov 2016
Mainland China Prevails in WTO Case Against U.S. AD Methodologies for NMEs
The World Trade Organisation issued on 19 October another ruling against U.S. methodologies for combating the below-cost sale of foreign goods. The ruling was issued nearly three years after mainland China filed the case challenging the U.S. Department of Commerce’s conduct of antidumping proceedings involving dozens of goods from mainland China accounting for a reported US$8.4 billion in annual sales in the U.S. market. U.S. trade officials said they are “disappointed” with the decision, which could be appealed.
Beijing claimed that in utilising a targeted dumping methodology the DOC failed to properly find a pattern of export prices that differ significantly among different purchasers or time periods because the method used to find such a pattern (i.e., the Nails test) suffered from several flaws. The panel rejected most aspects of mainland China’s claims in this regard but agreed that the application of the Nails test in two AD investigations violated WTO rules because in seeking to find the relevant pattern the DOC failed to take into account the export prices to all purchasers or in all time periods and provided no explanation for this omission. The panel also ruled against the DOC’s (i) application of the targeted dumping methodology to all export sales instead of limiting it to those found to fall within the relevant pattern of export prices and (ii) use of zeroing, which tends to increase AD duties, in cases involving targeted dumping.
Single Rate Presumption
Beijing claimed that the DOC’s presumption of government control over exporters from non-market economy 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 mainland China challenged as such and as applied in 38 AD determinations involving mainland Chinese exporters. The panel found that while WTO rules permit the determination of a single dumping margin and a single AD 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 DOC’s single rate presumption violated these provisions – as such and as applied in the 38 determinations – by subjecting NME exporters to a presumption of government control and singularity. The panel rejected the United States’ contention that paragraph 15 of mainland China’s protocol of accession to the WTO serves as a basis for WTO members to presume government control over mainland Chinese exporters.
Adverse Facts Available
Beijing claimed that the DOC’s systematic use of adverse inferences and selection of adverse facts available when it finds that an NME-wide entity has failed to co-operate constituted a rule or norm of general and prospective application. The panel disagreed, stating that while the DOC’s use of adverse facts available in AD determinations involving NME countries constituted more than mere repetition of conduct it did not demonstrate the requisite level of security and predictability typically associated with rules or norms. As a result, the panel did not address mainland China’s claims that the use of adverse inferences and adverse facts available violates WTO rules as such.
Beijing also challenged the manner in which the DOC determined a single mainland China-wide AD duty rate in 30 AD determinations. Having already found that the DOC had not established the existence of a single mainland China-wide entity in a WTO-consistent manner in these 30 determinations, the panel did not consider it necessary to address mainland China’s claims regarding the manner in which the DOC determined AD duty rates for that entity or the level of such rates.