On May 23, 2014, a World Trade Organization (WTO) dispute settlement panel issued its report, finding that China’s imposition of antidumping (AD) and countervailing (CVD) duties on certain U.S. automobiles violated numerous procedural and substantive obligations under the WTO’s Antidumping Agreement and Agreement on Subsidies and Countervailing Measures.

The U.S. initiated the WTO challenge in July 2012, following the imposition of the AD and CVD duties by China in December 2011.  According to the Office of the U.S. Trade Representative, approximately $5.1 billion worth of U.S. auto exports to China in 2013 were affected by the Chinese duties.  China is the second-largest foreign market for U.S. automakers after Canada, accounting for 13 percent of the total value of U.S. auto exports last year.  The U.S. alleged that China launched the case against U.S. autos in retaliation for U.S. safeguard measures against Chinese tires.

Although China terminated its duties on U.S. autos in December 2013, the U.S. continued to pursue the case to ensure that the WTO would adopt findings that China’s duties are inconsistent with WTO rules.

In its panel report, the WTO upheld nearly all of the U.S. claims.  Specifically, the WTO found that China breached its WTO obligations by:

  • improperly determining that U.S. exports were causing injury to the domestic Chinese industry;
  • improperly analyzing the effects of U.S. exports on prices in the Chinese market;
  • calculating the “all others” dumping margin and subsidy rates for unknown U.S. exporters without a factual basis;
  • failing to disclose essential facts to U.S. companies, including how their dumping margins were calculated; and
  • failing to provide non-confidential summaries of Chinese submissions containing confidential information.

This case represents the third time in the past two years that the WTO has ruled in favor of the United States and found China’s use of the trade remedy measures to be unjustified.  The two other cases in which the WTO issued similar findings, involved U.S. grain-oriented electrical steel (GOES) and chicken products. 

Both parties have a right to appeal the panel report to the WTO Appellate Body, and we anticipate that China will do so.