On September 17, 2012, China requested World Trade Organization (WTO) consultations with the United States regarding US Public Law 112-99, “An Act to apply the countervailing duty provisions of the Tariff Act of 1930 to nonmarket economies, and for other purposes” (“PL 112-99”), as well as certain antidumping (AD) and countervailing duty (CVD) measures imposed by the United States on imports from China (DS449). In a September 17 statement, Chinese Ministry of Commerce (MOFCOM) spokesman Shen Danyang emphasized that China has “reiterated on different occasions that China resolutely objects to abuse of trade remedy rules and trade protectionism and will firmly exercise [its rights as a WTO member] to protect [the] legitimate rights and interests of domestic industries.” According to MOFCOM, the dispute covers 24 types of products amounting to US$7.23 billion, including, among others, paper, steel, photovoltaic cells, tires, magnets, chemicals, kitchen appliances, wood flooring, and wind towers.

Pursuant to the WTO Dispute Settlement Understanding (DSU), China and the United States have 60 days to settle the dispute through consultations. If the parties fail to settle the dispute through consultations within the designated timeframe, China may request the WTO Dispute Settlement Body (DSB) to establish a panel to consider whether the contested measures are WTO- inconsistent.

After it was approved by the US Congress, President Obama signed PL 112-99 into law on March 13, 2012. The legislation was passed in response to the United States Court of Appeals for the Federal Circuit’s (CAFC) December 19, 2011 ruling in GPX International Tire Corp. v. United States (“GPX case”), which found that the US Department of Commerce (DOC) lacks the legal authority to impose CVDs on imports of merchandise from countries designated as “nonmarket economies” (NMEs), e.g., China and Vietnam, under the US antidumping law. PL 112-99 consists of the following two main components: (i) Section I amends US law to include an additional section specifically stating that CVDs can be applied to imports from NME countries, including retroactively to all proceedings initiated on or after November 20, 2006, i.e., the date on which the United States initiated its first CVD case against imports from China; and (ii) Section II authorizes DOC to address the issue of “double counting,” i.e., the simultaneous application of both AD duties and CVDs on imported merchandise from NMEs. It applies prospectively to all AD/CVD investigations and reviews initiated on or after the law’s enactment, i.e., March 13, 2012.

China’s Request for Consultations (WT/DS449/1) makes the following claims:

  • Section 1 of PL 112-99. China alleges that Section 1 of PL 112- 99, and all CVD actions and determinations carried out between November 30, 2006 and March 13, 2012, violate the United States’ transparency obligations pursuant to Articles X:1, X:2, and X:3 of the General Agreement on Tariffs and Trade 1994 (GATT 1994) because, among other reasons, the United States: (i) did not publish the provisions of Section 1 of PL 112-99 in a prompt manner so as to allow companies and other WTO members to become acquainted with them; and (ii) enforced PL 112-99 prior to its official publication;
  • Section 2 of PL 112-99. As a result of the varying effective dates between Sections 1 and 2 of PL 112-99, China alleges that the United States violates Article X:3(a) of GATT 1994, which requires the United States to administer its trade remedy laws in a “uniform, impartial and reasonable manner”; 
  • No Legal Authority to Identify and Avoid Double Remedies. Also as a result of the differing effective dates between Sections 1 and 2 of PL 112-99, China alleges that the United States does not currently have the legal authority to identify and avoid double remedies in the AD/CVD investigations or reviews initiated between November 30, 2006 and March 13, 2012. China considers this lack of authority an omission that prevents the United States from ensuring that the imposition of AD/CVD in these cases is consistent with key WTO commitments, including Articles 10, 15, 19, 21 and 32 of the WTO Subsidies and Countervailing Measures Agreement (SCM Agreement), Articles 9 and 11 of the WTO Anti-Dumping Agreement (AD Agreement) and Article VI of GATT 1994; and 
  • Failure to Investigate and Avoid Double Remedies. The last of China’s claims makes no reference to PL 112- 99. Instead it alleges that the United States has not taken steps to investigate and avoid double remedies in AD/CVD investigations and reviews initiated between November 30, 2006 and March 13, 2012. According to China’s Request, this failure on the part of the United States renders such trade remedy measures inconsistent with the same WTO measures mentioned above, i.e., Articles 10, 15, 19, and 21 of the SCM Agreement, Articles 9 and 11 of the AD Agreement, and Article VI of GATT 1994.  

Notably, China has already brought a successful WTO dispute against the United States’ practice of imposing double remedies. In March 2011, the Appellate Body (AB) ruled in DS379 that the United States’ imposition of double remedies in four trade remedy cases involving China-origin imports to the United States is inconsistent with the SCM Agreement. DOC issued final Section 129 determinations in July 2012 to comply with AB’s ruling.

The legality of PL 112-99 is currently being contested in the US court system as well. After President Obama signed PL 112-99 into law, the CAFC remanded the GPX case to the US Court of International Trade (CIT) for a determination on the constitutionality of the retroactive application contemplated in Section 1 of the law.

On the same day that China made their request for WTO consultations with the United States, the United States also requested WTO consultations with China regarding certain export subsidies provided to Chinese producers of automobiles and automobile parts. DS449 comes in the context of a recent increase in the number of WTO disputes the United States and China have filed in which one country alleges that the other imposed trade remedies on its imports in a WTO-Taiwan Signs Agreements on Investment Protection and Customs Cooperation with the Mainland inconsistent manner. For example, on July 5, 2012, the United States requested WTO consultations regarding China’s alleged failure to, inter alia, gather sufficient evidence and disclose the essential facts underlying its conclusions when it imposed AD/CVD measures on certain US automobiles. In addition, on May 25, 2012, China requested WTO consultations with the United States regarding certain US CVD practices, including, among others, DOC’s alleged presumption with regard to whether stateowned enterprises (SOEs) can be classified as “public bodies.”

For more information please visit http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds449_e.htm.