Reposted from the King and Spalding newsletter: Trade & Manufacturing Alert
Lee Smith | July 2012 |Trade & Mfg Alert
On May 25, 2012. China requested consultations at the World Trade Organization (“WTO”) relating to 22 countervailing duty (“CVD”) investigations conducted by the United States. The challenged CVD cases are the investigations that were initiated by the United States other than the four already subject to WTO dispute settlement in United States – Definitive Anti-Dumping and Countervailing Duties on Certain Products from China (DS379). The products at issue in these investigations cover numerous industries, including paper, steel, and solar cells.
China’s request focuses primarily to the issue of the provision of manufacturing inputs for “less than adequate remuneration.” In all 22 cases, petitioners alleged that China provided inputs such as raw materials, land, and electricity for “less that adequate remuneration,” i.e., below a market benchmark price. These subsidy programs accounted for a large portion of each Chinese exporter’s total subsidy rate. In order to make a finding of unfair subsidization, the WTO requires that (1) a government or a “public body” make a financial contribution; (2) the provision of the input is specific to an industry or group of industries; and (3) the provision of the input provides a benefit when compared to a market benchmark. In past CVD cases, the U.S. Department of Commerce (“Commerce”) has found the company providing an input to be provided by a “public body” if the company is majority-owned by the Government of China. China challenged this approach in DS379. In that dispute, the WTO Appellate Body found that the majority-government-ownership standard was insufficient and that the United States must investigate whether the public bodies are “vested with governmental authority.” This finding is likely the basis for China’s new appeal.
Other aspects of the 22 CVD cases also are being challenged. China is challenging the sufficiency of the evidence used to make certain determinations, the use of out-of-country market benchmarks to value goods or services, and the use of “facts available” when the Government of China or the respondent in the investigation did not fully cooperate with Commerce’s information requests. China also is challenging whether restraints on the exportation of input materials could give rise to an illegal subsidy.
Under WTO procedures, China and the United States have 60 days to consult. Assuming that consultations do not resolve the dispute, China may then request the establishment of a panel to hear its claims before a dispute settlement panel.