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Mainland China Seeks Permission to Retaliate in WTO Case Against U.S. Dumping Methodology

In December 2013, mainland China initiated a dispute settlement case at the World Trade Organisation regarding the U.S. methodology for calculating dumping margins. Dumping is found when a foreign producer’s U.S. prices are lower than its home market prices for the same or similar goods, or when the imports are sold at prices below production costs. Antidumping duties can then be applied by the importing country against imports from all firms found to have “dumped” their products.

In its initial ruling issued in 2016, a WTO panel disagreed with a portion of mainland China’s allegations but largely ruled against the U.S. position regarding dumping. The ruling asserted that the U.S. practice of “zeroing,” in which the U.S. Department of Commerce assigns a value of zero when a producer’s export price is above that of the producer’s normal home market price, tends to increase the level of U.S. AD duties on foreign producers. The ruling involved AD duties imposed on 13 mainland Chinese products, including machinery, electronics, metals and minerals.

The case was then brought before the WTO Appellate Body, which ruled in May 2017 that the DOC had improperly used “zeroing”, the single rate presumption and the weighted average-to-transaction methodology in its targeted dumping investigations. While the United States had until 22 August 2018 to comply with this ruling, it acknowledged in a 27 August 2018 statement to the Dispute Settlement Body that “as we have reported to the DSB, the United States continues to consult with interested parties on options to address the recommendations of the DSB.” The U.S. submission added that the internal consultation process is “ongoing.”

Dissatisfied with this response, mainland China is asking the DSB for permission to retaliate on US$7 billion worth of U.S. goods, which is roughly equal to the value Beijing believes was lost due to the improperly calculated AD duties. Mainland Chinese authorities indicated in their submission to the DSB that mainland China “considers that the United States has failed to comply with the recommendations and rulings of the DSB in U.S.–Anti-Dumping Methodologies (China) within the reasonable period of time determined by the arbitrator.” The retaliation would come in the form of suspended WTO concessions or obligations for the United States vis-à-vis mainland China.

The WTO is scheduled to take up mainland China’s request on 21 September. At that time the United States could object to the amount of retaliation requested, which would send the matter to arbitration, or could seek the establishment of a panel to determine whether it has in fact complied with the WTO ruling.

Content provided by Picture: HKTDC Research
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