Dispute Resolution Case
(DS422)
US Anti-dumping Measures on
Shrimp & Diamond Sawblades from
China
[Fall 2014]
Presenters:
Stella Vewessee
Henri Yuan
AGENDA
• Overview of U.S-China Trade
• Background Information
• MES, U.S Trade Remedy & Zeroing
• Facts about the Case
• Relevant Demand Outlook
• WTO Agreements & Articles Involved
• Measures at Issue
• Timeline and Procedural History
• Third Party Submissions
• DSB Proceedings
• Final Determination
• Implementation
• Significance of Case for U.S Trade Policy& Global Trade Relations
• Q&A Session
US-China Trade
AFTER CHINA JOINED WTO….
MARKET ECONOMY STATUS
 Defined by Article VI of the GATT 1994 and the Antidumping Agreement, the
Market Economy Status (MES) refers to the eligibility of a country for the
obligatory use of domestic prices or costs when determining the normal value
of the products in antidumping investigations
 Before China joined the WTO in late 2001, it agreed that other members could
treat it as a Non-Market Economy (NME) until 2015 (Accession Protocol)
 Arguments for denying China MES: Some firms in China still get preferential
access to bank credits and government supports and some commodity prices
are still largely e controlled by the government
DUMPING ACTIONS & NME STATUS
• MES in the World Trade Organization has become a top priority for Beijing because
the surrogate country method just about guarantees that it will be found guilty of
dumping
• The European Union has already responded to China's changing economy by reclassifying it as an "economy in transition." This means EU considers dumping
complaints by looking at Chinese firms on a case-by-case basis (to see if they are
operating in a market environment)
• China currently subjected to more anti-dumping measures than any other country
in the WTO (Over 500 cases from about 30 WTO members. About 68% of cases
resulted in punitive measures). Till 2003, U.S had 3rd highest anti-dumping actions in
the WTO behind China & Korea
US TRADE REMEDY OF DUMPING
 U.S manufacturer or Industry files petition with both USDOC
(Enforcement and Compliance within ITA and with USITC)
 USDOC investigates and calculates amount of dumping. USITC
determines “material injury” on domestic industry (output, sales,
market share, employment & profits)
 If both USDOC and ITC make affirmative findings, USDOC instructs
U.S Customs & Border Protection to assess duties against imports
of that product
 Duties are equivalent to the dumping margins e.g. if USDOC finds
a dumping margin of 35%, Customs will collect 35% duty on the
value of the product at the time of importation
 Typical investigation takes about 12 to 18 months but importers
are required to post bond or cash within 190 days of the
investigation to cover estimated amount of Anti Dumping Duties
(ADD)
“ZEROING” METHODOLOGY
 Definition: A controversial methodology used by the U.S for calculating
anti-dumping duties against foreign products
 USDOC omits calculations were the difference between export price were
and normal value is negative thus inflating dumping margins
 The United States is the only member state of the 153 WTO members to
back zeroing, which the Appellate Body has ruled against consistently
Sale
Domestic Price
1
2
3
Total
Assesed
Dumping
$100.00
$100.00
$100.00
Export
Difference(Zeroing) Difference (No Zeroing)
Price
$90.00
$0.00
-$10.00
$110.00
$10.00
$10.00
$100.00
$0.00
$0.00
$10.00
$0.00
300 = total
Dumping Margin 10/300 x 100% 3.33% import
value
$10.00
$0.00
0%
FACTS ABOUT THE CASE
• US anti-dumping measures on Shrimp and Diamond Sawblades from China
(Dispute Number: DS422)
• Complainant: People’s Republic of China
• Respondent: United States
• Dispute Subject: Anti-dumping
• The European Union, Honduras, Japan, Korea, Thailand and Viet Nam reserved
their rights to participate in the Panel proceedings as third parties.
www.dailymotion.com/video/xir5um_anti-dumping-dispute-on-chineseshrimp_news
FACTS ABOUT THE CASE
The United States initiated an anti-dumping
investigation of certain frozen warm-water
shrimp from China on January 27, 2004
(Investigation No. A–570–893).
The USITC determined that the industry in the
U.S was materially injured by reason of Less
Than Fair Value (LTFV) imports of certain frozen
warm-water shrimps and prawns from China.
The USDOC initiated an anti-dumping
investigation on Diamond Sawblades from
China on 21 June 2005.
The USDOC's final determination was issued
on 22 May 2006. In this final determination,
the USDOC calculated margins of dumping
for Chinese exporters
INCREASING U.S DEMAND FOR SHRIMP
• 3% of shrimp supply produced through aquaculture by natural fisheries and over
90% is either farmed or imported
• 75% of farmed shrimp is produced in Asia, primarily in China and Thailand
Source: “Frozen Warmwater Shrimp from Brazil, China, India, Thailand, and
Vietnam”, US International Trade Commission, March 2011
SHRIMP IMPORT FROM CHINA
Source: China’s Growth and Seafood Market, ‘Southern Shrimp Alliance’, November
2011
MARKET FOR DIAMOND SAWBLADES
US Demand for Diamond Sawblades
•The U.S. diamond sawblade market is supplied
by three sources: domestic producers, nonsubject imports, and imports from Korea and
China
•Demand for diamond sawblades is derived from
the demand for construction projects cutting
various aggregates like stone, concrete, asphalt,
masonry, brick, block, marble granite, and tile
•Non-Substitutes: U.S. producers focus on larger
blades used in professional construction
applications whereas imports of diamond
sawblades from China and Korea are commonly
used general contractors and for personal home
improvement projects
US Domestic producer: > 14 inches
diameters or larger
Chinese producer: < 10 inches diameters
or smaller
Source: “Diamond Sawblades and Parts Thereof from China and Korea”, US
International Trade Commission, August 2005
ARTICLES & WTO AGREEMENT AND INVOLVED
• Article VI of GATT 1994: Anti-Dumping and Countervailing Duties
• Violation of first sentence of Article 2.4.2 of the WTO Anti-Dumping
Agreement
• China alleged that the US Department of Commerce's (“USDOC”) use of
zeroing in the original investigation and several administrative reviews to
calculate dumping margins for the subject imports is inconsistent with the
United States' obligations under Article VI:1 and VI:2 of the GATT 1994 and
Articles 1, 2.1, 2.4, 2.4.2, 5.8, 9.2, 9.3, and 9.4 of the Anti-Dumping
Agreement.
FIRST SENTENCE OF ARTICLE 2.4.2
“Subject to the provisions governing fair comparison in paragraph 4, the
existence of margins of dumping during the investigation phase shall
normally be established on the basis of a comparison of a weighted
average normal value with a weighted average of prices of all
comparable export transactions or by a comparison of normal value and
export prices on a transaction-to-transaction basis”
MEASURES AT ISSUE
USDOC “Five Components” (five-step approach) in calculating dumping margins –
“Zeroing”
(a)
In the calculation of the dumping margins for mandatory respondents Allied,
Yelin and Red Garden in the Shrimp investigation, by the use of the zeroing
methodology, the United States acted inconsistently with the Anti-Dumping
Agreement
(a)
In the calculation of the “separate rate” for non-mandatory respondents in the
Shrimp investigation, by relying on company-specific dumping margins that
were calculated with the use of the zeroing methodology, the United States
acted inconsistently with the Anti-Dumping Agreement
(c)
In the calculation of the dumping margin for AT&M in the Diamond Sawblades
investigation, by the use of the zeroing methodology, the United States acted
inconsistently with the Anti-Dumping Agreement
SHRIMP INVESTIGATION: ‘ZEROING’IMPACT
Source: Executive Summary of the First Written Submission, China, Feb. 9, 2012
TIMELINE/PROCEDURAL HISTORY
The United
States initiated
anti-dumping
investigation of
shrimp from
China in
January 2004
2004
In December,
USDOC published
Shrimp Final
Determination with
dumping margins
In Feb. USDOC issued
Shrimp Amended
Determination to
correct ministerial errors
with recalculated
dumping margins
2005
The United
States initiated
anti-dumping
investigation of
Diamond
Sawblades from
China in June
2005
In May, USDOC published the
final determination with a
calculated dumping margin of
2.50% of AT&M
In April, a result of injurylikelihood
determination, USDOC
published notice of
continuation of the antidumping duty order on
Shrimp from China
In June, USDOC published an
amendment and revised the
dumping margin of AT&M to
2.82%
2006
In Aug 2006, USDOC
issued Second
Amendment to an
additional 11
Chinese exporters
2010
In Sep. 2010, USDOC
issued amended final
determination
pursuant to a
decision made by
the US Court of
International Trade.
2011
In July, China
requested
consultations with
respect to antidumping measures
on certain frozen
warmwater shrimp
and diamond
sawblades from
China
THIRD PARTY STATEMENTS TO WTO PANEL
Countries
Reference Cases
In favor of…
Dumping within meaning of Article
2.4.2 – product as a whole and not
model, product type or category
ENDING U.S Zeroing
practice
U.S – Stainless Steel (Mexico)
US –AD Measures on PET bags from
Thailand
US-Shrimp (Ecuador)
US-Softwood Lumber (Canada)
US-Zeroing (Korea)
US-AD Measures on PET bags
US-Softwood Lumber (Canada)
US-Shrimp (Ecuador)
US-Shrimp (Thailand)
CHINA
CHINA
DSB PROCEEDINGS
• Consultations were held on May 11 2011 and September 8 2011
• Agreement on Procedures between China & U.S – October 11, 2011
• Panel established on October 25, 2011
• Article 11 of DSU – Panel needs to make “objective assessment of the facts”
even though U.S does not contest China’s claims
• China also still has the burden of proof – “prima facie”
• China provided statement from Valerie Owenby as expert witness and
computer programing logs from USDOC
• Third party submissions from EU, Japan and Thailand
• Panel decided to not hold any meetings with the parties or third parties
FINAL DETERMINATION
Interim Panel Report was released on April 2012 and the Final Report June 8, 2012
The Panel found China had proved that zeroing was used in calculating the dumping margins for
mandatory respondents in the shrimp investigations and AT & M in in the diamond sawblades case
and this was inconsistent with Art. 2.4.2, of the Anti-Dumping Agreement. Under article 19.1 of the
DSU panel recommended that U.S bring its measure into conformity with its obligations under this
Agreement
Concerning the separate rate in the shrimp investigation the panel did not believe China had met
the burden of proof on how Art 2.4.2 could provide a legal basis. However following the reasoning
of the US-Shrimp (Ecuador) case, panel decided that the separate rate had also incorporated the
inconsistent zeroing methodology which was inconsistent with Art 2.4.2 of the Anti-Dumping
Agreement
IMPLEMENTATION
• In February 2012, USDOC announced a policy change to end zeroing
threatened by EU and Japan in order to initiate trade retaliation on U. S exports
• According to the “Agreement on Procedures”, the reasonable period of time
for the United States to implement the DSB recommendations and rulings
expired on 23 March 2013 (8 months)
• At the DSB meeting on March 26, 2013, the United States informed the DSB that
it had implemented the DSB recommendations and rulings but China did not
share the US' views because it had failed to revoke the anti-dumping duty on
sawblades
• US increased anti-dumping duties on China’s three largest exporters of
diamond sawblades and sawblade parts during 2012 and 2013.
• Gang Yan’s applicable duties were increased from zero to 164.09% as a result
of the Chinese government’s control over the company.
IMPORTS OF DIAMOND SAWBLADES
US Imports of diamond saw blades and parts
Source: “United States-Anti-dumping Measures on Certain Shrimp and Diamond
Sawblades from China: never ending zeroing in the WTO?”, World Trade Review, March
2014
SIGNIFICANCE ON US TRADE POLICY
• Increasing volume of cheaper imports from China hurts U.S manufacturers
and producers. This case illustrates a typical U.S “trade protectionism”
measure to secure the competitiveness of domestic producers.
• China’s NME status exempts it from countervailing duties, so USDOC uses
ADD to target export subsidies received by Chinese manufacturers
(Diamond sawblades duties on Gan Yang)
SIGNIFICANCE ON GLOBAL TRADE RELATIONS
• U.S still exerts sovereignty in international trade but is receiving increasing push
back from other WTO members
• The case highlights the systemic problems of the WTO dispute settlement system
when it comes to the implementation of rulings
APPENDIX
THANK YOU & QUESTIONS