Today, the World Trade Organization (WTO) released the dispute settlement panel report in the Chinese government’s challenge to U.S. countervailing duty (CVD) law:  United States – Countervailing and Anti-Dumping Measures on Certain Products from China (DS449).  The panel report upheld the application of U.S. CVD law to non-market economy countries like

China. Today’s decision means that the 27 CVD orders imposed by the U.S. Department of Commerce (USDOC) on certain Chinese products pursuant to proceedings conducted between November 2006 and March 2012 will remain in effect.

The report, released today, confirmed that the United States acted consistently with its WTO obligations  when it passed Public Law 112-99 (the so-called GPX legislation) in March 2012.  The GPX legislation clarified and  confirmed the authority of the USDOC to apply countervailing  duties to offset subsidies  provided by non-market economy countries, most importantly  China.  The USDOC has been applying  the CVD law to China since 2006.  The GPX legislation became necessary when a 2011 decision by the Court of Appeals for the Federal Circuit held that the USDOC lacked authority to apply the law to China.

The Chinese government claimed that the GPX legislation violated U.S. WTO obligations  under Article X of the General Agreement on Tariffs and Trade (GATT) in three ways.  First, China claimed that, because the GPX legislation was “made effective” on November 6, 2006 (i.e., some 5 1/2 years before the legislation  was enacted), it was not published  promptly as required by Article X:1 of the GATT.  Second, China claimed that the legislation’s retroactive enforcement element was inconsistent with the prohibition  in Article X:2 of the GATT against the enforcement of a measure “before such measure has been officially  published.”   Finally,  China claimed that the GPX legislation violated Article X:3(b)  because it prevented the prior judicial decision of the Federal Circuit in GPX Int’l Tire Corp. v. United States from being “implemented  by” and “govern[ing] the practice of” the USDOC.  The panel rejected all three claims.

China did prevail on one claim.  The panel found that the United States had failed to satisfy its obligation  under Article 19.3 of the Agreement on Subsidies  and Countervailing  Measures because it did not investigate whether a double  remedy results when antidumping  and countervailing  duties are applied concurrently in non-market economy cases.  This finding  was not surprising,  given the WTO Appellate Body’s findings  to the same effect in United States — Definitive Anti-Dumping and Countervailing Duties on Certain Products from China (DS379).

China and the United States  have 60 days to appeal the panel’s recommendations to the WTO Appellate Body.  A decision would be issued by the Appellate Body within 90 days of the initiation  of the appeals.  Once the decision is adopted by the WTO Dispute Settlement Body, the United States would be required to take actions to comply with any adverse rulings  within a “reasonable period of time.” 

A copy of the panel report can be found at http://www.wto.org/english/tratop_e/dispu_e/449r_e.pdf.