WTO Case DS397
European Communities –
Definitive Anti-Dumping Measures on
Certain Iron or Steel Fasteners From China
March 21, 2012
Simonetta Simmons
Brandon Taylor
Baiba Tora
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Background
China is the world's biggest producer of screws, nuts, bolts and washers, while
the EU is its major market.
Nearly 900,000 tons of China-made fasteners (1/6 of the country's output)
worth about $809M were exported to Europe in 2007.
In January 2009 the EU decided to impose five-year tariffs ranging from 26.5
to 85 percent on imports of Chinese iron or steel fasteners to "prevent further
distortions and restore fair competition.”
Fontana Luigi SpA (Italy) demanded the levies to counter below-cost,
or dumped sales in Europe by Chinese competitors.
China's fastener exports to the EU plunged from almost 1 million tons in 2008
to merely 100,000 tons in 2010.
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..
Background (Cont.)
*WTO, 2009
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Timeline
Jul 31, 2009: China requested consultation with the EU concerning article 9(5)
Oct 12, 2009: China requested establishment of a panel
Oct 23, 2009: Panel established (3rd parties join)
Dec 3, 2010: Panel report circulated
Mar 25, 2011: EU notified of decision to appeal
Mar 30, 2011: China notified of decision to appeal
July 15, 2011: Appellate Body report circulated
Aug 18, 2011: EU agrees to implement the recommendations and ruling
Jan 19, 2012: China and the EU agreed that ruling shall be implemented by
October 12, 2012
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China's Complaint
EU's anti-dumping duties ("ranging from 63.1 percent to 105.3
percent"*) against non-market economies violate international
trading law since a single anti-dumping duty is applied to the whole
country rather to individual firms.
"The EC also established
…a countrywide dumping margin that amounts to 115.4 percent
…based on the highest margins found for applicable products,
…due to the low-level of cooperation found amongst exporter."
*Inside U.S. Trade, Aug. 7, 2009
EU duties exempted subsidiaries of two European companies - Celo
and Agrati - leading China to argue that these practices were
discriminatory.
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China's Complaint (cont.)
China's complaint incorporated 3 concepts:
1) PRINCIPLE
China challenged the consistency of Article 9(5) of the Basic AntiDumping Regulation "as such" with the a number of international
obligations including:
Article XVI:4 of WTO Agreement
Articles I:1, VI:1, and X:3(a) of the GATT 1994
Articles 6.10, 9.2, 9.3, 9.4, 12.2.2 and 18.4 of the Anti-Dumping
Agreement
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China's Complaint (Cont.)
Article 9(5) of the Basic Anti-Dumping Regulation:
provides that individual exporting producers in non-market conomy
countries which do not receive market economy treatment pursuant
to Article 2(7)(c) of the Basic Anti-Dumping Regulation will be
subject to a countrywide duty rate unless such exporters can
demonstrate that they meet the conditions for individual treatment
laid out in Article 9(5) of the Basic Anti-Dumping Regulation.
Article XVI:4 of WTO Agreement:
establishes a clear obligation for all WTO Members to ensure the
conformity of their existing laws, regulations, and administrative
procedures with the obligations in the covered agreements.
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China's Complaint (cont.)
GATT 1994
I: 1 General Most-Favoured-Nation Treatment - provides that any advantage,
favour, privilege or immunity granted by any contracting party to any product
originating in or destined for any other country shall be accorded immediately
and unconditionally to the like product originating in or destined for the
territories of all other contracting parties.
VI:1 Anti-dumping and Countervailing Duties - the contracting party recognized
that dumping, by which products of one country are introduced into the
commerce of another country at less than the normal value of the products, is to
be condemned if it causes or threatens material injury to an established
industry.
X:3(a) Publication and Administration of Trade Regulations - each contracting
party shall administer in a uniform, impartial and reasonable manner all its
laws, regulations, decisions and rulings of the kind described in paragraph 1 of
this Article.
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China's Complaint (cont.)
Anti-Dumping Agreement
Articles 6.10 - Evidence - The authorities shall, as a rule, determine an
individual margin of dumping for each known exporter or producer
concerned of the product under investigation.
Article 9.2/9.3/9.4 - Imposition and Collection of Anti-Dumping Duties.
Article 12.2.2 - Public Notice and Explanation of Determinations.
Article 18.4 - General Provision - each Member shall take all necessary steps,,
to ensure, not later than the date of entry into force of the WTO Agreement,
the conformity of its laws, regulations and administrative procedures with
the provisions of this Agreement as they may apply for the Member in
question.
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China's Complaint (cont.)
2) APPLICATION of the Rule
China challenged Article 9(5) of the Basic Anti-Dumping Regulation "as
applied" in the fastener investigation under
Articles 6.10, 9.2, 9.4 of the Anti-Dumping Agreement
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China's Complaint (cont.)
3) PROCEDURE
China also challenged various substantive and procedural aspects of the
Definitive Regulations imposing anti-dumping duties in the fastener
investigation under
Articles 2, 3, 4, 5, 6, and 12 of the Anti-Dumping Agreement
* Including the Commission's determination regarding standing, the
definition of the domestic industry, the product under
consideration, dumping and price undercutting, volume and impact
on dumped imports and causation.
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China's Complaint (cont.)
Anti-Dumping Agreement
Article 2: Determination of Dumping
Article 3: Determination of Injury
Article 4: Definition of Domestic Industry
Article 5: Initiation and Subsequent Investigation
Article 6: Evidence
Article 12: Public Notice and Explanation of Determinations
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EU Defense
April 19, 2010 – China’s Panel request failed to meet the requirements of
Article 6.2 of the DSU
The Panel should not enter into the substantive analysis of China’s claims
China’s claim that the EU’s exclusion from the “domestic industry” of
producers that did not make themselves known within 15 days from the date
of initiation of the investigation or that did not support the complaint is
inconsistent with Articles 4.1 and 3.1 of the Anti-Dumping Agreement is
flawed.
May 7, 2010 – EU requests consultations with China regarding China’s
provisional anti-dumping duties on certain iron or steel fasteners from the
EU.
EU alleges that notice 115 is inconsistent with the WTO Anti-Dumping
Agreement and GATT
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EU Defense (Cont’d.)
EU considers Article 56 of China’s Anti-Dumping Regulations to be
inconsistent with Anti-Dumping Agreement, DSU, and GATT
July 15, 2011 – EU requests the Appellate Body to reject China’s appeal
against the Panel’s finding that the EU acted inconsistently with
Articles 4.1 and 3.1 of the Anti-Dumping Agreement
Third parties: Brazil; Canada; Chile; Colombia; United States; Chinese
Taipei; Norway; Turkey; Japan; India; Thailand
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Panel Report Findings
For each article and provision mentioned in the complaint, the panel either:
(1) made no findings;
(2) found the EU measures inconsistent; or,
(3) concluded that China did not establish that the EU was inconsistent.
Recommendations
For (2), the Panel recommended the EU to "bring measures into conformity"
Furthermore, they denied China's request to suggest specific implementation.
Report of the Panel, p. 223 - 237
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Appellate Body
The EU appealed certain findings, while China cross-appealed findings,
as well.
The Appellate Body either:
-“…Agreed …Article 6.10 … requires an investigating authority to
calculate individual dumping margins for each foreign exporter or
producer.”
-Found that the EU investigating authorities acted inconsistently with
AD Agreement Articles 3.1 and 3.2 with respect to the consideration
of the volume of dumped imports.
-Rejected China’s claims with respect to the standing determination;
definition of domestic industry; product under consideration;
dumping determination; price undercutting determination;
treatment of imports from non-sampled producers; etc.
-Found that China’s claims concerning the definition of like product
were not within its terms of reference.
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U.S. Third Party Submission
In general, the U.S. disagreed with China’s complaint against the EU.
Regarding individual margins for CVDs:
“In a non-market economy, such as China
…the government’s interference in the functioning of market
principles
…could lead to the government making business decisions for
the individual companies,
…the government forcing the companies to harmonize their
business activities to fulfill the government’s objectives,
…or the government shifting production between the
companies” USTR Report, March, 2010.
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Recent U.S. Legislation
House (HR.4105) and Senate (S.2153) Bills sent to the President 3/8/12:
"Amends the Tariff Act of 1930 regarding
... countervailing duties on imports
... from a country subsidizing
....merchandise which materially injures a U.S. industry or threatens
to."
And:
"Declares that merchandise on which countervailing duties must be
imposed includes merchandise from a nonmarket country ..." *CRS
Summary
This is an unsurprising response given a report from the USTR in 2011:
"China continues to provide injurious subsidies to its domestic industries,
and some of these subsidies appear to be prohibited under WTO rules."
"China's WTO Compliance," 2011.
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Implications
- Use of marginal subsidies (and "zeroing") and treatment of non-market economy
exporters/producers under scrutiny from WTO.
"The [Panel] ruling could also set a precedent, making it harder for the EU and the
U.S. to impose antidumping tariffs on developing economies like China and
Vietnam." Dec. 2010, WSJ.
- However, the EU replied by filing a similar suit against China:
"The European Union also considers that Article 56 of the Chinese Anti-Dumping
Regulations is inconsistent with various provisions of the Anti-Dumping Agreement,
the DSU, and GATT 1994." DS407
- Though China had a significant win -> more pressure is likely regarding its undervalued
currency.
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- Domestic pressure for the EU and the US will not diminish, creating increasingly
complex political problems. Ultimately, China will continue to be a primary target of
WTO disputes for the US and the EU in the coming years.
Sources
"2011 Report to Congress On China’s WTO Compliance." United States Trade Representative, December, 2011.
“Association asks EU to drop anti-dumping measures on Chinese steel fasteners”
http://news.xinhuanet.com/english2010/china/2011-07/18/c_13993038.htm
"China Update." Inside U.S. Trade, August 7, 2009.
European Communities — Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China
http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds397_e.htm
“Executive Summary of Third Party Submission of the United States,” United States Trade Representative,
March 1, 2010.
Freedman, Jennifer. 2009 "China Complains at WTO Against EU Duties on Fasteners.”
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aSgp6MpXLw3Q
Map of disputes between WTO Members
http://www.wto.org/english/tratop_e/dispu_e/dispu_maps_e.htm
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Sources (Cont’d.)
Miller, John W. 2010. “EU Dealt Setback on China at WTO.” Wall Street Journal,
December 4.
Von Reppert-Bismarck, Juliane. 2010 "WTO raps EU anti-dumping in China fasteners
case.”
http://www.ibtimes.com/articles/42628/20100811/wto-raps-eu-anti-dumping-in-chinafasteners-case.htm
http://www.worldtradelaw.net/reports/wtoab/ec-fasteners%28ab%29.pdf
http://trade.ec.europa.eu/wtodispute/show.cfm?id=461&code=2#_eu-submissions
http://trade.ec.europa.eu/doclib/docs/2010/december/tradoc_147077.pdf
http://www.worldtradelaw.net/reports/wtoab/ec-fasteners(ab).pdf
http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds407_e.htm
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