1. By: Lynne W., Qadeer Z., Rian W., Susan Z. March 7, 2018
DS471:  UNITED STATES — CERTAIN METHODOLOGIES AND THEIR APPLICATION TO ANTI-DUMPING PROCEEDINGS INVOLVING CHINA
By: Lynne W., Qadeer Z., Rian W., Susan Z.
March 7, 2018

2. Opening Context
China’s formal complaint in Dec 2013 was the eighth trade complaint China filed against US trade remedies
Was filed on the first day of the WTO’s biennial ministerial conference in Bali, Indonesia
China took issue with the way the US measured price comparisons

3. What happened?
Prior to December, 2013 the U.S. antidumping measures on the following products from China:
Certain coated paper suitable for high- quality print graphics using sheet-fed presses, certain oil country tubular goods, high pressure steel cylinders, polyethylene terephthalate film, sheet, and strip, aluminum extrusions, certain frozen and canned warm water shrimp, certain new pneumatic off-the- road tires, crystalline silicon photovoltaic cells, whether or not assembled into modules, diamond sawblades and parts thereof, multilayered wood flooring, narrow woven ribbons with woven selvedge, polyethylene retail carrier bags, and wooden bedroom furniture.

4. Inconsistencies
GATT 1994: Art. VI:2 - Anti-dumping and Countervailing Duties
Agreement on Implementation of Article VI of the GATT 1994
Art
Weighted average (WA- T) methodology to all export transactions and its use of zeroing
Art. 6.1, 9.2, and 9.4
“Single Rate Presumption”
Art. 6.10, 6.8, Annex II and Art. 9.4
Methodologies “as such” and “as applied” for determining duty rate for NME- wide entities
Art. 9.3,and Art. VI:2
Zeroing and weighted average (WA-T) methodology to calculate dumping margin
Annex II - The General Agreement on Tariffs and Trade (GATT 1947)

5. China’s Reaction
December 3, 2013 China notified the WTO of a request for consultations with the United States
China’s claims regarding three issues related to certain anti- dumping measures applied by the United States Department of Commerce (USDOC):
the USDOC's use of the weighted average-to-transaction (W-T) methodology in three anti-dumping investigations and one administrative review;
the USDOC's treatment of multiple economic operators from a non-market economy (NME) as a single NME-wide entity;
the manner in which the USDOC determines anti-dumping duty rates for NME-wide entities, as well as the level of such duty rates.

6. Third Parties
Brazil; Canada; European Union; India; Japan; Korea, Republic of; Norway; Russian Federation; Saudi Arabia, Kingdom of; Ukraine; Viet Nam; Turkey; Chinese Taipei

7. DS 471 Timeline (2013-2018) Panel deferred twice
Request
Action
Outcome
Consultations
December 2013
January 2014
Failed
Panel
February 2014
July 2015
June 2016
Report Issued
Appellate Body
November 2016
May 2017
Report Adopted
Arbitration
July 2017
November 2017
January 2018
Panel deferred twice
Issue over the composition of Panel
Shortage of Secretariat lawyers
China’s Notice of Appeal:
“Certain issues of law and legal interpretations”

8. DS 471 Timeline ( )
Request
Action
Outcome
Consultations
December 2013
January 2014
Failed
Panel
February 2014
July 2015
June 2016
Report Issued
Appellate Body
November 2016
May 2017
Report Adopted
Arbitration
July 2017
November 2017
January 2018
June 2017, United States intends to comply with the DSB’s recommendations, but need a reasonable period of time to do so.
July 2017, Joint letter to the DSB Chairman requesting an arbitrator.
October 2017, China requested that the Director-General choose the arbitrator.
Simon Farbenbloom, determines 15 months.

9. Key Findings - Panel Report
Article of the Anti-Dumping Agreement
“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.
A normal value established on a weighted average basis may be compared to prices of individual export transactions if the authorities find a pattern of export prices which differ significantly among different purchasers, regions or time periods, and if an explanation is provided as to why such differences cannot be taken into account appropriately by the use of a weighted average-to-weighted average or transaction-to-transaction comparison.”
Challenged USDOC actions related to the pattern clause
Challenged USDOC actions related to the explanation clause
Challenged USDOC application of Weighted Average-to-Transaction (WA-T) methodology
Challenged USDOC use of zeroing under the WA-T methodology
Findings:
USDOC violated the pattern clause for two of the three challenged investigations (but not in the third investigation).
USDOC did not explain why neither the WA-WA or T-T methodologies could not take into account adequately the significant difference in export prices…
USDOC acted inconsistently by applying WA-T methodology
USDOC acted inconsistently by using zeroing to calculate dumping margins.

10. Key Findings - Panel Report
Article 9.3 of the Anti-Dumping Agreement and Article VI:2 of GATT 1994
ADA: The amount of the anti-dumping duty shall not exceed the margin of dumping as established under Article 2.
GATT 1994: “In order to offset or prevent dumping, a contracting party may levy on any dumped product an anti-dumping duty not greater in amount than the margin of dumping in respect of such product. For the purposes of this Article, the margin of dumping is the price difference determined in accordance with the provisions of paragraph 1.”
Challenged USDOC use of zeroing under the WA-T methodology to calculate dumping margin for a Chinese exporter in an administrative review.
Findings:
Panel upheld China’s claim that USDOC acted inconsistently with the above Articles.

11. Key Findings - Panel Report
Articles 6.10, 9.2, and 9.4 Second Sentence of the Anti-Dumping Agreement
6.10 “The authorities shall, as a rule, determine an individual margin of dumping for each known exporter or producer concerned of the product under investigation. In cases where the number of exporters, producers, importers or types of products involved is so large as to make such a determination impracticable, the authorities may limit their examination either to a reasonable number of interested parties or products by using samples which are statistically valid on the basis of information available to the authorities at the time of the selection, or to the largest percentage of the volume of the exports from the country in question which can reasonably be investigated.”
9.2 “When an anti-dumping duty is imposed in respect of any product, such anti-dumping duty shall be collected in the appropriate amounts in each case, on a non-discriminatory basis on imports of such product from all sources found to be dumped and causing injury, except as to imports from those sources from which price undertakings under the terms of this Agreement have been accepted. The authorities shall name the supplier or suppliers of the product concerned. If, however, several suppliers from the same country are involved, and it is impracticable to name all these suppliers, the authorities may name the supplying country concerned. If several suppliers from more than one country are involved, the authorities may name either all the suppliers involved, or, if this is impracticable, all the supplying countries involved.”
9.4 “When the authorities have limited their examination in accordance with the second sentence of paragraph 10 of Article 6, any anti-dumping duty applied to imports from exporters or producers not included in the examination shall not exceed: (i) the weighted average margin of dumping established with respect to the selected exporters or producers or, (ii) where the liability for payment of anti-dumping duties is calculated on the basis of a prospective normal value, the difference between the weighted average normal value of the selected exporters or producers and the export prices of exporters or producers not individually examined, provided that the authorities shall disregard for the purpose of this paragraph any zero and de minimis margins and margins established under the circumstances referred to in paragraph 8 of Article 6. The authorities shall apply individual duties or normal values to imports from any exporter or producer not included in the examination who has provided the necessary information during the course of the investigation, as provided for in subparagraph 10.2 of Article 6.”
Challenged that the USDOC application of Single Rate Presumption to exporters from Non-Market Economy countries amounts to a norm of general and prospective application. “As such,” it is inconsistent with the above Articles.
Findings:
Panel upheld China’s challenge “as such” in WTO dispute settlement.

12. Key Findings - Panel Report
Articles 6.1, 6.8, and Paragraphs 1 & 7 of Annex 2 and Article 9.4 of the Anti-Dumping Agreement
“All interested parties in an anti-dumping investigation shall be given notice of the information which the authorities require and ample opportunity to present in writing all evidence which they consider relevant in respect of the investigation in question.”
“In cases in which any interested party refuses access to, or otherwise does not provide, necessary information within a reasonable period or significantly impedes the investigation, preliminary and final determinations, affirmative or negative, may be made on the basis of the facts available. The provisions of Annex II shall be observed in the application of this paragraph.”
Annex 2, Para 1. “As soon as possible after the initiation of the investigation, the investigating authorities should specify in detail the information required from any interested party, and the manner in which that information should be structured by the interested party in its response. The authorities should also ensure that the party is aware that if information is not supplied within a reasonable time, the authorities will be free to make determinations on the basis of the facts available, including those contained in the application for the initiation of the investigation by the domestic industry.”
Annex 2, Para 7. “If the authorities have to base their findings, including those with respect to normal value, on information from a secondary source, including the information supplied in the application for the initiation of the investigation, they should do so with special circumspection. In such cases, the authorities should, where practicable, check the information from other independent sources at their disposal, such as published price lists, official import statistics and customs returns, and from the information obtained from other interested parties during the investigation. It is clear, however, that if an interested party does not cooperate and thus relevant information is being withheld from the authorities, this situation could lead to a result which is less favourable to the party than if the party did cooperate.”
Challenged several of USDOC’s methodologies “as such” and “as applied”, arguing that the Adverse Facts Available (AFA) norm is of general and prospective application, which is inconsistent with the above Articles.
Findings:
Panel found that USDOC did not provide sufficient evidence indicating the AFA norm has general and prospective application or show that it will use those actions in the future. Panel concluded that China failed to demonstrate AFA norm constitutes a measure “as such” (for Articles 6.1, 6.8, and Paragraphs 1 & 7 of the Annex 2) and “as applied” (Article 9.4 of the GATT).

13. Key Findings - Appellate Body Report
Panel’s findings regarding the first and third alleged quantitative flaws with the Nails test 01
The Appellate Body rejected China's claims regarding two alleged quantitative flaws with the Nails test.
China didn’t show how the Panel erred in its interpretation of Article of the ADA.
Panel’s findings regarding the consideration of certain qualitative factors when determining whether prices differ “significantly” 02
Appellate Body agreed with Panel that investigating authority should conduct quantitative analysis of significant difference in export prices.
The Appellate Body found China did not establish that the U.S. acted inconsistently with regarding qualitative issues with the Nails test.
Panel’s findings regarding the determination of a “pattern” based on averages 03
The Appellate Body found that China did not establish that the U.S. acted inconsistently with Article in the challenged investigations by determining the existence of a pattern on the basis of average prices instead of individual export transaction prices.
China claims that the Panel erred in suggesting that an investigating authority may combine comparison methodologies to establish margins of dumping 04
The Appellate Body said Article allows an investigating authority to establish dumping margins by applying W‑T only to “pattern” transactions and does not permit the combining of comparison methodologies.
The Appellate Body thus declared moot certain of the Panel's statements to the extent they were premised on the understanding that Article permits the combining of comparison methodologies to establish dumping margins.

14. Key Findings - Appellate Body Report
Appeal for analysis that AFA Norm can be challenged “as such” in WTO Dispute Settlement 01
Appellate Body reversed the Panel’s findings -- China did demonstrate that the AFA norm has “prospective application” as it reflects USDOC policy and provides administrative guidance for future action and therefore generate expectations among economic operators.
Appeal for analysis that AFA Norm is inconsistent with Article 6.8 and Paragraph 7 of Annex 2. 02
Appellate Body refused to conduct this analysis.

15. “Reasonable Period of Time” Debate
Article 21.3(c) of The Dispute Settlement Understanding (DSU)
In general, the reasonable period of time should not exceed 15 months, but that time may be shorter or longer, depending on the particular circumstances of the dispute
United States, in this dispute, claims
15 months would be “insufficient” and requested at least 24 months to complete all of the steps required to comply with the DSB’s recommendations.
“Breadth and complexity”
Multi-phase process
Workload of USDOC

16. “Reasonable Period of Time” Debate
China claims,
24 months “far exceed what is reasonable under the circumstances,” submitting a period of 6 months is a reasonable period of time.
“overlap”
inactivity since Nov. 2016
The arbitrator determines,
15 months as the “reasonable period of time,” from the date on which the DSB adopted the Panel and Appellate Body Reports (22 May 2017), expiring 22 August

17. U.S. and Zeroing Zeroing distorts dumping calculations
Ignores ('zeroes out') instances when prices are lower at home than in the export market
Only acknowledges when dumping margins are positive
This inflates dumping margins and allows for inappropriately high anti-dumping duties on competing imports
Can increase or create dumping margins

19. U.S. and Zeroing Historically has been a problem:
DS264 US-Softwood Lumber from Canada [2004]
DS294 US-Zeroing (EC) [ , 2009]
DS322 US-Zeroing (Japan) [ , 2009)
DS350 US-Continued Zeroing (EC) [2009]
DS382 US-Orange Juice (Brazil) [2011]
DS402 US-Zeroing (Korea) [2011]
DS422 US-Shrimp and Sawblades from China [2012]
DS429 US-Shrimp II (Viet Nam) [2014]
Non-US cases: DS141 European Communities-Imports of Cotton-type Bed Linen from India [2000]

20. China’s Perspective
With regards to DS422 case [March 2011]: "Once the cancellation of zeroing was approved officially, it should have applied to all global trade cases."
-- Zhang Aiqing, former director of Department of Treaty and Law under Ministry of Commerce
On ruling of DS471: Chinese claim that Commerce Department systematically punishes Chinese state enterprise by assigning them high anti-dumping rates
"This is a major victory for China in its efforts to use WTO rules to fight the U.S. abuse of trade remedy measures and protect China's own legitimate interests."
-- Sun Jiwen, spokesman for the Ministry of Commerce
"China hopes to see the U.S. face up to its long-standing and systemic legislation and practices in the field of trade remedy, which are against WTO rules, and correct its wrong conducts in a timely and all-round manner so as to safeguard the authority and seriousness of WTO rules and create a good environment for world trade."
-- Sun Jiwen
DS516 EU-Price Comparison Methodologies [Dec 2016]: continued trend of China challenging anti-dumping methodologies
Nov US joining EU dispute of China’s market economy status in WTO, which China finds unfair

21. SOURCES