DISPUTE SETTLEMENTS
440, 419, 431 & 437
ITRN 603
Pamela Rooney, Ana Rogers & Betsy Savage
Introduction
Dispute
Complainant Respondent
Settlement
Topic
DS440
U.S.
China
AD & CD on Certain Automobiles
from the U.S.
DS419
U.S.
China
Subsidies and Wind Power Pending
DS431
U.S.
China
DS437
China
U.S.
Exportation of Rare Earths,
Tungsten, and Molybdenum
Countervailing Duties Measures on Certain
Products from China
The following 4 dispute settlements between China and
the U.S. expose the complexities of an international
trade system that has to accommodate partners at
different levels of economic development, government
interference and trade liberalization.
DISPUTE SETTLEMENT 440
U.S. v. China — Anti-Dumping & Countervailing
Duties on Certain Automobiles from the U.S.
Background - Leading up to DS440
• This is the third dispute settlement the U.S. has filed against China
concerning antidumping and countervailing measures targeting U.S.
exports
• September 2009 – President Obama imposes a 3 year safeguard
measure against Chinese tire imports after an investigation indicating
domestic market disruption
• December 2011 – After investigating imports of American-made cars
and SUVs, China’s Ministry of Commerce imposes both antidumping
and countervailing duties on imports of American-produced
automobiles
• July 2012 - The U.S. requests consultations with
China to impose anti-dumping and countervailing
measures on certain automobiles from the U.S.,
including any and all annexes
Antidumping and Countervailing Duties
on U.S. Automobile Imports to China (%)
DS 440 Background, Cont’d
• August 2012 – The U.S. and China held a consultation meeting which did
not result in resolving the charges being brought against China
• September 17, 2012 – The U.S. requests the establishment of a panel 
September 28, 2012, China objects to the establishment of a panel
• October 2012 – U.S. resubmits its request for the establishment of a panel,
at which time the panel is created
• Colombia, the European Union, India, Japan, Korea, Oman, Saudi Arabia
and Turkey reserved their third party rights
• February 1, 2013 - the U.S. requested the Director-General to determine
the composition of the panel  February 11, 2013, the Director-General
composed the panel
WTO Issues - Article VI of GATT 1994
Part I: Anti-dumping
1
3.1
3.2
3.4
3.5
4.1
Establishes the principles that guide the application of anti-dumping measures
Examines the elements that need to be considered when determining injury to
domestic industry caused by dumping measures, including the volume of the dumped
imports and their effect on prices and the consequent impact of these imports on
domestic producers.
5.3
Estblishes the conditions for an investigation to be initiated, based on accuracy and
adequacy of the evidence provided (5.3) and the support for the application which
needs to be representative of the domestic producers (5.4)
5.4
6.2
6.5.1
6.8
6.9
Annex II
Defines the term Domestic Industry for the purposes of the agreement
Discusses the evidenciary requirements and principles of dealing with evidence,
particularly of confidential evidence.
Establishes the requirements for the parties to the dispute in terms of providing access
to information
WTO Issues - Article VI of GATT 1994
Part V: Subsidies & Countervailing Measures
10
11.3
11.4
12.4.1
12.7
12.8
15.1
15.2
15.4
15.5
16.1
22.3
22.5
Establishes the principles that guide the application of countervailing measures
Estblishes the conditions for an investigation to be initiated, based on accuracy and
adequacy of the evidence provided (11.3) and the support for the application which
needs to be representative of the domestic producers (11.4)
Discusses the principles when dealing with confidential information and the decision
making process in cases where the inormation is not made available
Examines the elements that need to be considered when determining injury to
domestic industry caused by subsidized imports, including the volume of imports and
their effect on prices and the consequent impact of these imports on domestic
producers.
Defines the term Domestic Industry for the purposes of the agreement
Establishes the requirement of providing public notice to interested members of any
initiation, suspension or conslusion of an investigation as well as the acceptance
and/or termination of any countervailing measures.
Position of Parties
• The United States believes that China:
• initiated the investigations without sufficient evidence
• failed to objectively examine the evidence
• made unsupported findings of injury to China’s domestic
industry
• failed to disclose “essential facts” underlying its conclusions
• failed to provide an adequate explanation of its conclusions
• improperly used investigative procedures
• failed to require non-confidential summaries of Chinese
company submissions
• China has not commented on the DS440 allegations being
brought against it.
Resolution Proposal
• The U.S. requests that the Panel find that China’s measures
are inconsistent with its obligations under the
• GATT 1994
• SCM Agreement
• AD Agreement
• The U.S. requests that the Panel recommend that China bring
its measures into conformity with these obligations
• China says it will respond to the consultations request “in line
with the procedural rules of WTO dispute settlement”
- According to a statement issued by the Head of the
Ministry of Commerce’s Department of Treaty and Law
National & International
Implications
• China is currently the U.S.’s second-largest trading partner, its thirdlargest export market, and its biggest source of imports
• General Motors has invested heavily in China, having sold more cars
in China than in the U.S. from 2010 to 2012, despite having been the
most heavily penalized automaker (12.9% CVD and 8.9% AD)
• Taking a more aggressive stance against China over its trade policies
could induce it to retaliate against U.S. exports to China
• Since having joined the WTO, China has been the target of 29 WTO
disputes initiated by its trading partners.
 If current trends continue, this could raise important systemic
issues for the WTO and its existing rules in coping with the challenges
posed by large trading countries, such as China.
Current Status on DS440
• September 25, 2013 – The panel informed the Dispute
Settlement Body that it was not able to issue a report within
six months (in accordance to Article 12.9)
• The Panel expects to issue its final report to the parties by
March 2014, in accordance with the timetable adopted after
consultation with the parties
DISPUTE SETTLEMENT 419
U.S. v. China — Subsidies and Wind Power
(Pending)
DS 419 – History and Context
• September, 2010 – U.S. United Steel, Paper & Forestry, Rubber,
Manufacturing, Energy, Allied Industrial & Service Workers
International Union file petition with the U.S. administration to launch
a formal investigation into Chinese support to its clean
energy and tech sector.
• December 22, 2010 - The U.S. requests consultation with China
concerning measures providing grants, funds, or awards to
enterprises manufacturing wind power equipment (including
overall unit, & parts thereof) in China
• January 12, 2011 – European Union requests to join consultation
• January 17, 2011 – Japan requests to join consultation
DS 419 – History and Context
Continued
• China's 12th Five Year Plan for Economic and Social
Development Plan includes $473.1 billion spend on
renewable energy
• Half of Chinese Wind procurement is decided by State
Owned Enterprises
• Chinese Wind Power has two prong approach
• Connect more renewable energy to the grid
• Develop manufacturing base for wind turbines for export
• Chinese Wind Power energy generation underperforming
leading to emphasis on exports
Main WTO Issue
•GATT 1994: Article XVI:1
•Clarifies that any contacting party that grants a subsidy
which operates to increase exports of any product, or to
reduce imports of any product, shall notify the
CONTRACTING PARTIES in writing of the extent and
nature of the subsidization.
•Subsidies & Countervailing Measures Agreement
•Article 3, 25.1, 25.2, 25.3, 25.4
•Prohibits grants as a form of subsidy and clarifies
reporting requirements
•Protocol of Accession: Part 1, paragraph 1.2.
•Clarifies that China will abide by the WTO rules as written
prior to their joining the WTO and will notify members of
subsidies in one of the three approved languages
DS419 – Position of the Parties
• June 7, 2011 – USTR announces China agrees to bring an end
to a controversial public fund for wind power manufacturing. USTR
considers this a WTO victory
•“The United States is pleased that China has shut down this subsidy program. Subsidies requiring the
use of local content are particularly harmful and are expressly prohibited under WTO rules. This
outcome helps ensure fairness for American clean technology innovators and workers. We challenged
these subsidies so that American manufacturers can produce wind turbine components here in the
United States and sell them in China. That supports well-paying jobs here at home,”
• June 9, 2011 - China responds to USTR statement regarding suspension
of Special Fund for Wind Power Equipment Manufacturing
•Rejects US take on the issue states “The aim of the measure at issue is to enhance investments
on research and development in wind power technology, but not to use domestic goods instead
of imported goods”
Resolution
• At this time the dispute seems to be resolved
although the resolution took place outside the
parameters of the WTO resolution system
National and International
Implications
• The
removal the subsidy program by China is
favorable for the U.S. renewable energy equipment
market however it came late in the game
•China has already dominated the Wind Power
equipment market and the removal of the subsidies is
actually favorable for China as they move to exports
•Grant program was no longer needed – provided one
off subsidies to countries for first 50 turbines.
• Will
empower other industries to petition their
government and countries to file complaints with
regards to renewable energy
• Japan vs. Canada – Solar Energy
DISPUTE SETTLEMENT 431
U.S. v. China — Measures Related to the
Exportation of Rare Earths, Tungsten, and
Molybdenum
DS 431 – REE Trade and Complaint History
• Pre 1990’s: US, Australia major REE producers
• 1990’s: China exports REEs, prices plunge, driving producers from market and
creating monopoly
• “The Middle East has oil; China has rare earths” – Deng Xiaoping
• 2002 – Major US mine Mountain Pass closes
• China attempts to buy control of Australia’s largest REE mine
• 2008: China begins imposing export quotas
• September 2010: Japan captures Chinese fishing boat in disputed territory; China
embargos REE export to Japan
• October 2010: China embargos REE exports to US
• 2011- current: Export quotas continue to decline; worldwide demand increases,
and prices rise
13 March 2012: US requests consultations; conducted 25-26 April
27 June 2012: US requests establishment of panel
23 July 2012: DSB established Single Panel for US, EU, and Japan complaints
24 Sept 2012: Panel composed
22 March 2013: Panel Chair indicates final report to be issued 21 Nov 2013
China controls 97% of worldwide
Rare Earth Element (REE) production
REE Context
• Rare Earth Elements are critical to:
• High-technology products
• Miniature batteries, wind turbines, hybrid cars
• Defense Articles
• Missile guidance systems, radar systems
• Export restriction drives end product manufacturing into
China
Main WTO Issue
• US (and EU and Japan) assert that China’s Export Restrictions are
inconsistent with:
• GATT 1994 Article XI: General Elimination of Quantitative
Restrictions
• No prohibitions or restrictions other than duties, taxes or other charges,
whether made effective through quotas, import or export licenses or other
measures, shall be instituted or maintained by any contracting party… on the
exportation or sale for export of any product destined for the territory of any
other contracting party
• Article VIII – Fees and Formalities – Export duties, prior performance,
minimum capital
• Article X – Publication and Administration of Trade Regs – Unpublished
restrictions that are not administered in “uniform, impartial, and reasonable”
• China’s Protocol of Accession Para 11.3:
• China shall eliminate all taxes and charges applied to exports unless specifically
provided for in Annex 6
• REEs not included in Annex 6
DS431 – Position of the Parties
US1
• Export quotas are inconsistent
with GATT Article XI
• The quotas force “downstream”
industries to China to the
detriment of other members
• Export duties on REEs violates
China’s Accession Protocol 11.3;
DS 394 China-Raw Materials
established precedence that
GATT Article XX(g) does not
apply2
• No evidence is provided that
export duties on REEs are
connected to environmental or
health goals (which would be
related to mining, not export)
China
• GATT Article XX (g) allows
restrictions if related to the
conservation of exhaustible
natural resources
• The quotas support reduction of
illegally produced material
• GATT Article XX (b) allows export
duties on REEs to protect human
health
Article XX(g)
• To use Article XX(g) to impose numerical export quotas,
two conditions must be met:
1. Quota is established to conserve natural resources
2. Quota has parallel domestic program to establish
“evenhandedness” (based on China-raw materials
Appellate conclusion)
•
While the first condition is doubtful, the second is not
met since there is no domestic regulation.
Resolution Possibility
• China must bring its measures into
compliance with its commitments and
remove the export quotas
• If conservation is a goal, then production
quotas should be imposed
• A single market for REEs should exist, not
separate domestic and foreign markets
National and International
Implications
• China has established a near-monopoly of REE
production
• Single source of REEs coupled with export quotas:
• Drives manufacturing of high-tech equipment into
China
• Increases availability risk and market uncertainty
• Makes the world beholden to China for REE supply – at
any price
• Potentially prevents production of advanced products
and national security assets
What if the export quota were zero?
DISPUTE SETTLEMENT 437
China v. U.S. — Countervailing Duties Measures
on Certain Products from China
DS 437 – History and Context
• China is challenging the US Department of Commerce (USDOC)
determinations that led to imposition of countervailing duties (CVD)
on certain products imported into the US from China
• Products include paper, pipes, citric acid, lawn groomers, shelving, wood
flooring, photovoltaic cells, sinks1
• 97 alleged breaches across 22 products
• The CVDs are based on the products receiving subsidies including
below-cost inputs from SOEs
• CVD is a trade remedy that allows governments to take remedial
action in situations where the domestic industry is being injured by
subsidies in the exporting country
• Complaints against trade remedies increased in 20122
• DS 437 is one of the largest disputes in history of WTO3
Timeline
• 25 May 2012 – Request for Consultation
• 28 Sept 2012 - Panel established by DSB
• 26 November 2012 – Panel Composed by DG
• January 2014 – Final Report expected
Main WTO Issue
• China asserts that the CVD determinations are
inconsistent with:
• GATT Article VI - Anti-dumping and Countervailing
Duties
• Subsidies and Countervailing Measures Agreement
Articles 1, 2, 10, 11, 12, 14 and 32 (definitions and
calculations, but NOT 15 – Determination of Injury)
• Article 15 of China’s Protocol of Accession (Price
Comparability in Determining Subsidies and Dumping)
• Related cases:
• DS379 (2008) - US imposed CVDs; public body = “any
entity controlled by a government”
• DS449 (2012) - US imposed CVDs
DS437 – Position of the Parties
China – Commerce’s CVD
determinations are
inconsistent with GATT, SCM,
Accession Protocol4
• SOEs (which provide inputs
to downstream
manufacturers at below
market cost) are not
“public bodies”
• Subsidies were not specific
to a specific enterprise
• Absence of sufficient
evidence to make claims
US – claim has no merit and
should be rejected by Panel3
• Arguments lack supporting
text to identify deficiencies
in Commerce’s findings
(request is 3 pages)
• Panel request includes
topics not covered in
request for consultations
• China has misinterpreted
the SCM agreement
• Evidence not provided
Sample CVD Order Notice –
Federal Register
Certain Kitchen Appliance Shelving and Racks from the People’s
Republic of China: Countervailing Duty Order5
Directs Customs and Border Patrol to assess CVD on items (based
on HS and specific product parameters) entered or withdrawn
form warehouse after the publication date.
Resolution Possibilities
• Because of the visibility of China-US trade
disputes, it is not likely that the Panel can simply
dismiss the Complaint
• The breadth of the products may need narrowed
and China requested to address specific
deficiencies in USDOC calculations
• Group by Steel products, paper products,
chemicals
• Products with CVD determination orders (vice
initiations)
National and International
Implications
• Do independent CVD (and AD) determinations hold up
upon contention or is direct complaint more effective?
• What is the role of State Owned Enterprises – public or
private?
• What is the Panel’s responsibility for discovery when
complaints lack data fidelity?
• CVDs level the field between two members, but formal
complaint resulting in removal of subsidy benefits all
members
Takeaways
• Do these cases improve the liberalization of
global trade?
• Do these seemingly retaliatory cases have
the potential to overwhelm the WTO process?
• Do such cases have the potential of
overburdening the DSB, instead of utilizing it for more grievous
trade disputes?
• Do developing countries benefit from these decisions?
• Is the WTO becoming a forum for geopolitical posturing?
• In light of China’s lack of transparency, how (if at all) can the WTO
further ensure that countries such as China are not evading their
transparency commitments?
Notes
• In FR 74 14 Sept 2009 p. 46971, also A/D determination –
same for others? Why is A/D not contested by China?
CVD starts p 46973.
• “Ministerial errors” are identified by Chinese industry and corrected by USDOC
prior to final CVD order; see FR 75 17 November 2010 p. 70202. But caused CVD to
increase.
• Types of subsidies for coated paper: Preferential Lending to the Coated Paper
Industry, Income Tax Subsidies for FIEs Based on Geographic Location, Exemption
from Maintenance and Construction Taxes, VAT and Tariff Exemptions on Imported
Equipment
References (slides 3-12)
• http://www.ustr.gov/about-us/press-office/pressreleases/2012/july/obama-administration-challenges-chinas-unfairduties-american-made-cars
• http://www.ustr.gov/sites/default/files/US.Sub1_.DS440.ForPosting.pdf
• http://www.fas.org/sgp/crs/misc/R40844.pdf
• https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S006.aspx?Query=(
@Symbol=%20wt/ds440/*)&Language=ENGLISH&Context=FomerScript
edSearch&languageUIChanged=true#
• http://www.ustr.gov/webfm_send/3492
• http://www.wto.org/english/docs_e/legal_e/19-adp.pdf
• http://www.fas.org/sgp/crs/row/RL33536.pdf
References (slides 13-19)
http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds419_e.htm
http://www.fratinivergano.eu/Trade%20perspectives%202011/Issue%20No.%
201.pdf
http://www.ustr.gov/about-us/press-office/press-releases/2011/june/chinaends-wind-power-equipment-subsidies-challenged
http://www.windpowermonthly.com/article/1076799/end-chineseequipment-subsidy-sight-us-calls-wto
http://www.forbes.com/sites/jackperkowski/2012/07/27/china-leads-theworld-in-renewable-energy-investment/
http://www.renewableenergyworld.com/rea/news/article/2013/08/despiteslowdown-china-to-hold-wind-power-market-leadership-to-2020
http://ictsd.org/i/news/biores/108435/
References (slides 20-27)
1.
USTR. China – Measures related to Rare Earths, Tungsten, and Molybdenum. US
Second Integrated Executive Summary. 25 July 2013.
http://www.ustr.gov/sites/default/files/DS431.US_.Exec_.Summ_.2.Public.pdf.
Accessed 14 September 2013.
Dickinson, Steve. China Business, Legal News. 19 Jan 2011.
www.chinalawglog.com/2011/01/china_rare_earths_quota__the_facts_and_the_law.html. Accessed 15 Sept 2013.
2.
Week 5 reading Dispute Settlement Anrep13, p. 91. Appellate body report for
the combined panel of US, Mexico, and EU was issued on 30 Jan 2012.
References (slides 28-36)
1.
2.
3.
4.
5.
6.
US Federal Register Volume 77, Number 180, September 17, 2012.
http://www.gpo.gov/fdsys/pkg/FR-2012-09-17/html/2012-22870.htm.
Accessed 14 Sept 2013.
Week 5 reading – Dispute Settlement anrep13 Ch 5; p. 87
USTR. United States – Countervailing Duty Measures on Certain Products
from China (DS437). Executive Summary of First Written Submission of
the USA. 22 March 2013.
www.ustr.gov/sites/default/files/DS437.US_.Exec_.Summ_.Sub1_.Public.
pdf. Accessed 28 Sept 2013
United States – Countervailing Duty Measures on Certain Products from
China. Request for Consultations by China. 25 May 2012.
www.worldtradelaw.net/cr/ds437-1(cr).pdf.
Federal Register/Vol. 74, No. 176/Monday, September 14, 2009/Notices.
P. 46975. www.gpo.gov/fdsys/pkg/FR-2009-09-14/pdf/FR-2009-0914.pdf
Federal Register/Vol. 75, No. 221/Wednesday, November 17,
2010/Notices. P. 70202. www.gpo.gov/fdsys/pkg/FR-2010-11-17/pdf/FR2010-11-17.pdf