On April 25, 2017, the World Trade Organization (WTO) Report of the Panel in China – Anti-Dumping Measures on Imports of Cellulose Pulp from Canada was released. The dispute concerned the anti-dumping measure imposed by China on imports of cellulose pulp used in paper and textiles originating from Canada. Following an investigation at the request of Chinese cellulose pulp producers, the Ministry of Commerce of the People’s Republic of China (“MOFCOM”) concluded that imports of cellulose pulp from Canada (as well as from the United States and Brazil) had been dumped and this had caused material injury to the domestic industry of China. This resulted in the imposition of anti-dumping duties at the rate of 13% for imports from cooperating Canadian producers and at the rate of 23.7% for imports from all other Canadian producers.

Canada challenged the duties in the WTO, claiming that they were inconsistent with China’s obligations under Articles 3.1, 3.2, 3.4, and 3.5 of the Anti-Dumping Agreement, and, as a consequence, also inconsistent with Article 1 of the Anti-Dumping Agreement and Article VI of the General Agreement on Tariffs and Trade 1994 (GATT 1994).

The Panel concluded that Canada had established that China acted inconsistently with:

1.Articles 3.1 and 3.2 of the Anti-Dumping Agreement with respect to MOFCOM’s consideration of price effects. According to the Panel, MOFCOM failed to adequately explain both the role of parallel price trends and the fact that dumped import prices were higher than the prices of the domestic like product. Canada had based its allegations of violations of Articles 3.1 and 3.2 on China’s finding that the subject cellulose imports depressed its domestic pricing. Canada asserted that China had failed to establish how dumped imports established pricing depression from midway through 2011 to the end of 2012. Canada alleged that China had incorrectly calculated its price trend analysis by disregarding the fact that the imports from Canada were actually sold at higher prices than China’s domestic industry had sold like products in the domestic market. In response, China submitted that those pricing trends were in the record, and, according to WTO law, the Ministry need not find price undercutting to find price depression. The Panel stated that the fact of parallel price trends provides little support, if any, for MOFCOM’s conclusion that dumped imports had the effect of domestic price depression. A for the price undercutting issue, the Panel held that MOFCOM had not adequately justified its conclusion that dumped imports had depressed domestic prices when those imports were sold at higher prices, particularly toward the end of the anti-dumping period of investigation.

2.Articles 3.1 and 3.5 of the Anti-Dumping Agreement with respect to MOFCOM’s demonstration of a causal relationship between the dumped imports and injury. Canada had claimed that China violated Articles 3.1 and 3.5 of the Anti-Dumping Agreement when it found a causal relationship between the dumped cellulose imports and injury to China’s domestic industry. According to Canada, China used flawed analyses of volume and price effects in reaching that conclusion. The Panel accepted this submission, finding that MOFCOM had failed to demonstrate how the increased volume of dumped imports over the period of investigation was linked to the alleged injury to the domestic industry, particularly given increasing market demand during this time.

3.Articles 3.1 and 3.5 in connection with MOFCOM’s examination of the effects of changes in cotton and VSF prices; domestic industry overexpansion, overproduction and inventory build-up; and the impact of non-dumped imports as allegedly known factors other than the dumped imports causing injury to the domestic industry. The Panel held that MOFCOM had failed to ensure that injuries caused by these factors were not attributed to the dumped imports.

As a consequence of the inconsistencies outlined above, Canada was successful in establishing that China had acted inconsistently with Article 1 of the Anti-Dumping Agreement and Article VI of the GATT 1994. China has until June 23, 2017 to appeal the Panel’s findings.