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Mainland China’s Retaliation Request in Dispute over U.S. Dumping Methodology Referred to Arbitration

The World Trade Organisation has referred to arbitration a request by mainland China to retaliate on US$7 billion worth of U.S. goods for the alleged failure of the United States to comply with an Appellate Body ruling regarding its methodology for calculating dumping margins. At issue is the 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 and which tends to increase the level of U.S. antidumping duties on foreign producers.

A 2016 WTO dispute settlement panel ruling on this matter was largely favourable to mainland China. The dispute then proceeded to 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.”

At a 21 September DSB meeting, mainland China requested authorisation to suspend concessions or other obligations with respect to the United States at a level equivalent to the nullification or impairment suffered as a result of the failure of the United States to comply with the Appellate Body ruling. The United States noted that on 19 September it objected to the level of suspension of concessions or other obligations proposed by mainland China. Under the terms of Article 22.6 of the DSU, the filing of such an objection automatically results in the matter being referred to arbitration. The United States said it is willing to discuss implementation with mainland China on a bi-lateral basis but that it was incorrect to suggest that no action has been taken on the matter.

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