WTO Finds U.S. Inconsistent with Obligations in India and China CVD Cases
July 15, 2014
On July 14, 2014, the World Trade Organization (WTO) issued two important decisions involving U.S. countervailing duty actions against certain products from India and China. In both decisions, the WTO Panel found that the U.S. had acted inconsistent with its obligations under an international agreement and must bring its practices inline.
India requested consultations with the United States in April, 2012 regarding the imposition of countervailing duties (CVDs) by the United States on certain hot rolled carbon steel flat products. India claimed that the CVD investigation and related measures were inconsistent with Articles I and VI oaf the GATT 1994 and various articles of the Agreement on Subsidies and Countervailing Measures (SCM Agreement).
Although the Panel limited the scope of the review requested, it agreed with many of India’s claims. The Panel found that the United States acted inconsistently with several provisions of the SCM Agreement by failing to take account of all the mandatory factors in its determination of de facto specificity and failing to consider the relevant domestic price information for use as Tier I benchmarks in connection with the provision of high grade iron ore by the National Mineral Development Corporation (NMDC). The Panel also found that the United States should not have applied “facts available” that were not connected to relevant determinations.
The Panel did not agree with several of India’s claims, including (i) that de facto specificity was determined without positive evidence; (ii) that the U.S. International Trade Commission (USITC) improperly evaluated certain economic factors in its injury determination; and (iii) that using the highest non-de minimis subsidy rate in connection with the “facts available” calculations was inappropriate.
As a result of the inconsistencies found, the Panel concluded the United States’ actions nullified or impaired benefits accruing to India under the SCM Agreement. Consequently, the Panel recommended that the United States bring its measures into conformity with the requirements under the SCM Agreement. The Panel opted, however, not to exercise its discretion to suggest ways in with the United States might do so, as India requested. A copy of the decision is available here.
The dispute brought by China addressed several U.S. Department of Commerce (USDOC) decisions to initiate CVD investigations and preliminary and final determinations issued in 17 CVD investigations conducted from 2007 through 2012. The Chinese products affected by these investigations include solar panels, wind towers, thermal paper, coated paper, tow behind lawn groomers, kitchen shelving, steel sinks, citric acid, magnesia carbon bricks, pressure pipe, line pipe, seamless pipe, steel cylinders, drill pipe, oil country tubular goods, wire strand, and aluminum extrusions.
China asked the WTO Panel to find that the USDOC acted inconsistent with numerous obligations in the SCM Agreement when it initiated those CVD investigations made preliminary and final determinations. Ultimately, the Panel upheld the following claims against USDOC’s findings: (i) that certain Chinese State-owned enterprises were public bodies within the meaning of Article 1.1(a)(1) of the SCM Agreement, capable of providing financial contributions; (ii) that alleged subsidies were regionally specific; and (iii) on the existence of financial contributions in light of export restraints maintained by China.
The Panel, however, partially rejected China's claims against the USDOC's findings that alleged subsidies were specific to certain enterprises and fully rejected China's claims involving USDOC’s finding (i) that there was “market distortion” justifying the use of an out-of-country benchmark in the benefit calculation; (ii) that there was sufficient evidence of financial contributions by public bodies and of specificity to justify the initiation of countervailing duty investigations; and (iii) on the use of “adverse facts available.”
In light of the inconsistencies found, the Panel concluded that the CVD cases involved have nullified or impaired benefits accruing to China under the SCM Agreement and recommended that the United States bring its measures into conformity. A copy of the decision is available here.