The World Trade Organization Appellate Body ("AB") issued its report in US - Definitive Anti-Dumping And Countervailing Duties On Certain Products From China. This report resulted from the Government of China's appeal of many of the lower level WTO Panel's legal findings, which generally held that U.S. actions in four antidumping ("AD") and countervailing duty ("CVD") investigations were consistent with the World Trade Organization ("WTO"). In its findings, the AB reversed two key conclusions reached by the Panel. United States Trade Representative Ron Kirk ("USTR Kirk") referred to the decision as "overreaching by the Appellate Body."

China appealed four issues from the Panel report, including certain specificity determinations, the calculation of benefit using certain benchmarks, the determination that over 50 percent government ownership is sufficient to find an entity to be a "public body," and the determination that the concurrent application of countervailing and antidumping duties calculated under the non-market economy ("NME") methodology is permissible. The AB found that United States' specificity and benchmark determinations were consistent with the WTO Subsidies and Countervailing Measures Agreement. The AB also determined that the WTO agreements do not prohibit the concurrent application of CVD and AD duties calculated using the NME methodology.

The AB reversed the Panel on two key issues. First, the AB held that the United States violated its WTO obligations by finding that certain state-owned enterprises were "public bodies" capable of conferring subsidies because the U.S. Department of Commerce ("Commerce") had failed to determine that these enterprises, despite being majority-owned by the Chinese government, were indeed being directed by the government, or otherwise carrying out government functions. Second, the United States violated its WTO obligations by applying CVDs concurrently with AD duties based on the NME methodology without assessing whether any adjustments were needed to avoid double counting.

The AB report and Panel report, as amended by the AB report, were adopted by the WTO's Dispute Settlement Body ("DSB") on March 25. The United States must now advise the DSB before April 25 of its intentions with respect to implementation of the reports.

If the United States decides to implement the adverse rulings in this case, it is expected to do so under Section 123 and/or Section 129 of the Uruguay Round Agreements Act. Action under Section 123 would require Commerce to amend its AD NME and/or CVD regulations or practice to conform to the adverse WTO findings. Action under Section 129 would result in the issuance of redeterminations by Commerce in the four AD and CVD proceedings at issue. In addition, a statutory change in AD/CVD laws may be needed to enable Commerce to make any required downward adjustments in the AD or CVD orders at issue.

The United States will undoubtedly request a reasonable period of time ("RPT") to implement the adverse findings of the AB. Based on past experience, it is expected that the RPT likely will range somewhere between 11 months and 15 months from March 25, the date the reports were adopted. Certain companies and groups, including the Committee to Support U.S. Trade Laws, have called on the U.S. government not to implement the AB decision because of their view that it goes beyond the WTO Agreements.