Dispute DS 437 United States — Countervailing Duty Measures on Certain Products from China ITRN 603 – DISPUTE RESOLUTION CASE STUDY TEAM 7: TERRY MULLAN,

Dispute DS 437United States — Countervailing Duty Measures on Certain Products from ChinaITRN 603 – DISPUTE RESOLUTION CASE STUDY

TEAM 7: TERRY MULLAN, KIRK RIGGS, ROB ROSALES

Summary of DS 437 25 May 2012: China requests consultations with U.S.

◦ Disputing the USDOC investigations and countervailing duty measures of 22 products

Import DOCInvest. Import DOC

Invest. Import DOCInvest.

Lightweight Thermal Paper C-570-921 Circular Welded Austenitic Stainless Pressure Pipe

C-570-931 Certain Circular Welded Carbon Quality Steel Line Pipe

C-570-936

Citric Acid and Certain Citrate Salts C-570-938 Certain Tow-Behind Lawn Groomers/Certain Parts Thereof

C-570-940 Certain Kitchen Appliance Shelving and Racks C-570-942

Certain Oil Country Tubular Goods C-570-944 Pre-Stressed Concrete Steel Wire Strand

C-570-946 Certain Steel Grating C-570-948

Wire Decking C-570-950 Certain Magnesia Carbon Bricks C-570-955 Certain Seamless Carbon and Alloy Steel Standard Line and Pressure Pipe

C-570-957

Certain Coated Paper Suitable for High-Quality Print Graphics Using Sheet-Fed Presses

C-570-959 Drill Pipe C-570-966 Aluminum Extrusions C-570-968

Multilayered Wood Flooring C-570-971 Certain Steel Wheels C-570-974 Steel Wire C-570-976

High Pressure Steel Cylinders C-570-978 Crystalline Silicon Photovoltaic Cells C-570-980 Utility Scale Wind Towers C-570-982

Drawn Stainless Steel Sinks C-570-984

Summary of DS 437 - Continued China alleges that the United States acted inconsistently with:

◦ Article VI of the General Agreement on Tariffs and Trade 1994 (GATT 1004)◦ Articles 1, 2, 10, 11, 12, 14, and 32 of the Agreement on Subsidies and Countervailing Procedures (SCM

Agreement)◦ Article 15 of the Protocol on the Accession of the People’s Republic of China

China also is requesting a panel on the “rebuttable presumption” established by the US DOC◦ DOC considers majority government ownership of an enterprise sufficient to determine it a public body◦ Unless, that party is able to demonstrate that majority govt ownership does not result in “control of the

enterprise”

Key Terms – U.S. Procedural Shortcuts

State-owned Enterprise: “a subsidy shall be deemed to exist if there is a financial contribution by a government or any public body within the territory of a member”◦ Appellate Body had found that the key consideration in identifying a public body is whether the latter has the authority to perform governmental functions

Rebuttable Presumption: majority government-owned enterprises are public bodies unless that assumption is proven otherwise◦ This norm restricts Commerce from considering any other evidence purely on its own initiative

Adverse Facts Available: used in the event that foreign firms do not provide information that domestic authorities deem satisfactory in antidumping investigations◦ Administering authorities must rely on secondary sources of information◦ USDOC has often used domestic firms’ allegations about foreigners’ costs and sales data, a process that can lead to much higher margins than those calculated based on

foreigners’ own submissions◦ These substantially higher margins carry with them the possibility of much greater trade disruption as a consequence of antidumping duties.

Benchmark Price: market price used to establish occurrence of countervailing duty/anti-dumping◦ The price is not a function of its source, including government-related prices◦ Is it a market-determined price reflective of prevailing marking conditions in the country of provision◦ Countries must conduct their own investigations and necessary market analysis to disprove the government price and prove the subsidy

Double Remedy Issue: long-standing policy of not applying countervailing duties to nonmarket economies like China's◦ March 2007 - began applying both anti-dumping and countervailing duties to the country’s products

Summary of Complaints - ChinaDocument Article SummarySCM Agreement 1.1.(a)(1) The USDOC’s findings of financial contribution are inconsistent with the SCM Agreement,

because the USDOC incorrectly determined, or did not have a sufficient basis to determine, that certain State-owned Enterprises (SOEs) are “public bodies” within the meaning of that provision

SCM Agreement 1.1.(a)(1) The “rebuttable presumption” established and applied by the USDOC in respect of whether SOEs can be classified as “public bodies” is inconsistent

SCM Agreement 1.1.(a)(1), 11.2, 11.3

The USDOC’s initiation of countervailing duty investigations in respect of allegations that SOEs confer countervailable subsidies…in the absence of sufficient evidence/review is inconsistent

SCM Agreement 1.1.(b), 14(d) Inconsistent because the USDOC improperly found that the alleged provision of goods… conferred a benefit; and improperly calculated; erroneous findings that market was distorted

SCM Agreement 2.2, 2.4 Specificity findings are inconsistent; failed to make determination on basis of positive evidence

SCM Agreement 2, 11.2, 11.3 The absence of sufficient evidence and sufficient review is inconsistent in certain investigations

SCM Agreement 12.7 Use of “adverse facts available” inconsistent; USDOC did not rely on facts available on the record

SCM Agreement 2.2, 2.4 Failed to make a proper determination that the subsidy was specific to an enterprise or industry

SCM Agreement 11.2, 11.3 Determination that export restraints provided a “financial contribution” is inconsistent

Quick Summary of ArgumentsChina’s request for consultations involved:

◦ Alleged provision of input goods for less than adequate remuneration◦ Land and land use rights for less than adequate remuneration◦ Export restraints allegedly maintained by China ◦ US improperly resorted to (“adverse”) facts available ◦ “As such” claim against “rebuttable presumption”

US main arguments throughout◦ Most of China’s claims have failed to make a prima facie case ◦ China has not analyzed each initiation or determination, which is dependent on contexts

◦ Lacks a case-by-case basis◦ Non cooperation from China

Notes going forward◦ Initiation vs. determinations, facts available, and public bodies

Summary of Panel Findings The Panel UPHELD China's claims against the USDOC's findings

◦ (i) that certain Chinese SOEs were public bodies within the meaning of Article 1.1(a)(1) of the SCM Agreement, capable of providing financial contributions;

◦ (ii) that alleged subsidies were regionally specific; and ◦ (iii) on the existence of financial contributions in light of export restraints maintained by China

The Panel PARTIALLY REJECTED China's claims against the USDOC's findings that alleged subsidies were specific to certain enterprises.

The Panel REJECTED China's claims against the USDOC's findings ◦ (i) that there was “market distortion” justifying the use of an out-of-country benchmark in the benefit calculation; ◦ (ii) that there was sufficient evidence of financial contributions by public bodies and of specificity to justify the initiation of

countervailing duty investigations; and ◦ (iii) on the use of “adverse facts available”.

Regarding China's claims made on an “as such” basis, the Panel UPHELD China's claim challenging the USDOC's “rebuttable presumption” that majority SOEs are public bodies within the meaning of Article 1.1(a)(1) of the SCM Agreement, and thus capable of conferring a financial contribution.

As a consequence of the inconsistencies of the USDOC's actions with Articles 1, 2 and 11 of the SCM Agreement, the United States has acted inconsistently with Articles 10 and 32.1 of the SCM Agreement.

1. On USDOC's findings that certain SOEs were public bodies

Relevant provision: Article 1.1(a)(1) of the SCM Agreement◦ 1.1 For the purpose of this Agreement, a subsidy shall be deemed to exist if: (a)(1) there is a financial contribution by a government or any

public body within the territory of a Member (referred to in this Agreement as "government")

Chinese claim◦ “The US acted inconsistently with Article 1.1(a)(1) of the SCM Agreement because the USDOC determinations that certain SOEs in China were public

bodies are inconsistent with the interpretation of the term "public body" set out by the Appellate Body in its report in US – Anti-Dumping and Countervailing Duties (China).”

◦ Government ownership cannot serve as a basis for establishing that the entity is vested with authority to perform a government function

Main arguments of US ◦ China has a flawed interpretation of the term “public body,” it means an entity controlled by the government such that the government can use that

entity’s resources as its own; not as it relates to the “authority to regulate, control, supervise or restrain” the conduct of others◦ Financial contribution is a conveyance of value and that entitles controlled by the government can convey value just as the government can

Panel result◦ The US acted inconsistently when the USDOC found that SOEs were public bodies◦ USDOC determined that the relevant input suppliers were public bodies only on the grounds that they were majority owned or controlled by GOC

◦ Simple ownership or control by a government of an entity is not sufficient to establish that it is a public body◦ A public body is “an entity vested with certain governmental responsibilities, or exercising certain governmental authority,” so investigating authority

must evaluate the core features of the entity in question and its relationship to the government, in order to determine whether it has the authority…”

2. On the USDOC's "rebuttable presumption" being inconsistent “as such”

Chinese claim◦ Because the US is acting inconsistently, as such, with Article 1.1 of the SCM Agreement, it follows that the US does not impose countervailing duties in

accordance with the requirements of the SCM Agreement and Article VI of the GATT 1994 ◦ USDOC Kitchen Shelving (2009) investigation: it is a “rebuttable presumption” that majority government-owned enterprises are “authorities”

◦ Rebuttable presumption: rule or norm of general and prospective application that may be subject to an “as such” challenge◦ This “rebuttable presumption” is inconsistent because it is premised on the idea that government control over an entity, by itself, is sufficient evidence

on which to base a finding that an entity is a “government authority”

Main arguments of US ◦ China has not found any causation between the Kitchen Shelving memorandum and any other action by the US that would indicate that it is an “act” or is

“doing something”◦ The Kitchen Shelving policy has no general and prospective application, it only describes what has been done in the past, ignores context of that policy

Panel result◦ The policy of an investigating authority can be a “measure” subject to WTO DSP; USDOC applies it by default, “has been a constant feature”◦ With majority government ownership, US ignores other four factors in whether a firm was an “authority:” presence on the entity’s Board, government’s

control over the entity’s activities, entity’s pursuit of governmental policies or interests, whether the entity is created by statute ◦ A firm evidentiary foundation is required in each case for a proper determination of an entity being a public body, majority ownership is not conclusive◦ The USDOC's policy, to presume that a majority government-owned entity is a public body, is inconsistent, as such, with Article 1.1(a)(1) of the SCM

3. Whether USDOC's initiations of investigations are inconsistent due to insufficient evidence of a financial contribution◦ Relevant provisions: Articles 11.2 and 11.3 of the SCM Agreement

◦ 11.2 An application under paragraph 1 shall include sufficient evidence of the existence of (a) a subsidy and, if possible, its amount, (b) injury within the meaning of Article VI of GATT 1994 as interpreted by this Agreement, and (c) a causal link between the subsidized imports and the alleged injury. Simple assertion, unsubstantiated by relevant evidence, cannot be considered sufficient to meet the requirements of this paragraph. The application shall contain such information as is reasonably available to the applicant on the following: ◦ … ◦ (iii) evidence with regard to the existence, amount and nature of the subsidy in question;◦ …

◦ 11.3 The authorities shall review the accuracy and adequacy of the evidence provided in the application to determine whether the evidence is sufficient to justify the initiation of an investigation.

3. Whether USDOC's initiations of investigations are inconsistent due to insufficient evidence of a financial contribution

Chinese claim◦ USDOC's initiation of these countervailing duty investigations, in the absence of sufficient evidence in the petition to support an allegation that SOEs

constitute public bodies within the meaning of Article 1.1(a)(1) of the SCM Agreement, is inconsistent with Articles 11.2 and 11.3 of the SCM ◦ China objects to the initiation of the four investigations solely on the basis of evidence of majority government ownership, without any indication

that the SOEs were "vested with, and exercising, authority to perform governmental functions”

Main arguments of US ◦ China has failed to establish a prima facie case with regard to its claims; Initiation decisions are fact-specific, dependent on the facts presented by

each individual application, which China has not analyzed◦ For initiation purposes under Article 11, what is required is adequate evidence tending to prove or indicating the existence of a financial

contribution by a government or public body, in light of what is reasonably available to the applicant

Panel Result◦ Agree with the United States that evidence of government ownership of an entity can serve as evidence that the entity is a public body within the

meaning of Article 1.1(a)(1)◦ State ownership, while not being a decisive criterion, may serve as evidence indicating, in conjunction with other elements, the delegation of

governmental authority◦ Initiation of an investigation vs. preliminary or final determination◦ China has failed to establish that the USDOC acted inconsistently with the United States' obligations under Article 11 of the SCM Agreement by

initiating the challenged investigations without sufficient evidence of a financial contribution.

4. On USDOC's determinations that SOEs provided inputs for LTAR are inconsistent

Relevant provisions: Articles 1.1(b) and 14(d) of the SCM Agreement ◦ “1.1 For the purpose of this Agreement, a subsidy shall be deemed to exist if:

◦ (a)(1) there is a financial contribution by a government or any public body within the territory of a Member (referred to in this Agreement as "government"), i.e. where: ◦ … ◦ (iii) a government provides goods or services other than general infrastructure, or purchases goods; ◦ …

◦ (b) a benefit is thereby conferred.” ◦ “14 For the purpose of Part V, any method used by the investigating authority to calculate the benefit to the recipient conferred

pursuant to paragraph 1 of Article 1 shall be provided for in the national legislation or implementing regulations of the Member concerned and its application to each particular case shall be transparent and adequately explained. Furthermore, any such method shall be consistent with the following guidelines: ◦ … ◦ (d) the provision of goods or services or purchase of goods by a government shall not be considered as conferring a benefit

unless the provision is made for less than adequate remuneration, or the purchase is made for more than adequate remuneration. The adequacy of remuneration shall be determined in relation to prevailing market conditions for the good or service in question in the country of provision or purchase (including price, quality, availability, marketability, transportation and other conditions of purchase or sale).

4. On USDOC's determinations that SOEs provided inputs for LTAR are inconsistent

Chinese claims◦ USDOC's determinations that SOEs provided inputs for less than adequate remuneration (LTAR) are inconsistent, as applied, with Articles 1.1(b) and

14(d) of the SCM Agreement in the 12 countervailing duty proceedings◦ The mere fact that SOEs provided a substantial portion of relevant inputs provides an insufficient basis on which to reject Chinese prices as a benchmark ◦ USDOC did not rely on any “other facts” beyond SOE presence in a market to reject Chinese domestic prices◦ USDOC applied same erroneous ownership/control test in both the financial contribution and distortion analysis

Main US arguments◦ Does not matter whether or not SOEs are public bodies in distortion analysis, but the extent of their involvement as a market power that distorts prices◦ China failed to provide information that USDOC requested to assess the government's role in the relevant input market, the USDOC's benefit findings,

based on facts available, are consistent with Article 12.7 of the SCM Agreement

Panel Result◦ “The evidence before us does not support China's assertion. There were only a few cases that the USDOC's findings of a predominant role of the

government in the relevant market, because of the market share of SOEs, refer to the SOEs as public bodies.”◦ Each USDOC determination's analysis is somewhat different from another depending on the facts before it◦ Can use out of country benchmark when government is only supplier, or administratively controls all of the prices for those goods in a country◦ China has failed to establish that the USDOC acted inconsistently with the obligations of the US under Article 14(d) or Article 1.1(b) of the SCM

Agreement by rejecting in-country private prices in China.

Later Reversed by AB

5. On USDOC's determinations regarding the specificity of alleged input subsidies

Relevant provisions: Articles 2.1 and 2.4 of the SCM Agreement ◦ “2.1 In order to determine whether a subsidy, as defined in paragraph 1 of Article 1, is specific to an enterprise or industry

or group of enterprises or industries (referred to in this Agreement as "certain enterprises") within the jurisdiction of the granting authority, the following principles shall apply: ◦ (a) Where the granting authority, or the legislation pursuant to which the granting authority operates, explicitly limits

access to a subsidy to certain enterprises, such subsidy shall be specific. ◦ (b) Where the granting authority, or the legislation pursuant to which the granting authority operates, establishes

objective criteria or conditions governing the eligibility for, and the amount of, a subsidy, specificity shall not exist, provided that the eligibility is automatic and that such criteria and conditions are strictly adhered to. The criteria or conditions must be clearly spelled out in law, regulation, or other official documents, so as to be capable of verification.

◦ (c) If, notwithstanding any appearance of non-specificity resulting from the application of the principles laid down in subparagraphs (a) and (b), there are reasons to believe that the subsidy may in fact be specific, other factors may be considered. Such factors are: use of a subsidy programme by a limited number of certain enterprises, predominant use by certain enterprises…”

◦ “2.4 Any determination of specificity under the provisions of this Article shall be clearly substantiated on the basis of positive evidence.”

5. On USDOC's determinations regarding the specificity of alleged input subsidies

Chinese claim◦ USDOC's specificity determinations are inconsistent with Articles 2.1 and 2.4 of the SCM because the USDOC failed to make a proper

determination on the basis of positive evidence that the alleged provision of inputs for less than adequate remuneration was specific to an enterprise or industry or group of enterprises or industries in the above input subsidy investigations

◦ USDOC applied the same "legal standard," which has flaws, including failure to identify a "subsidy programme”◦ USDOC finds in each instance that the types of enterprises or industries that make use of a particular input are limited in number that they are

recipients of a specific subsidy, although they fail to identify any subsidy programme◦ USDOC does not identify the relevant granting authority, and fails to consider the “extent of diversification of economic activities within the

jurisdiction of the granting authority, as well as the length of time during which the subsidy programme had been in operation”

Main arguments of US◦ China has not discussed the elements of the USDOC’s analysis on a case-by-case basis◦ No order of analysis is needed; does not require an investigating authority to identify a formal subsidy programme

Panel Result◦ China has established that the USDOC acted inconsistently with the obligations of the United States under the last sentence of Article 2.1(c) of the

SCM Agreement by failing to take account of the two factors listed therein: “end-use” approach and diversification of economic activities and length of time during which subsidy programme existed

◦ However, China has not established that the USDOC acted inconsistently with the obligations of the United States under Article 2.1 of the SCM Agreement by failing to identify a "subsidy programme"; or by failing to identify a "granting authority".

Later Reversed by AB

6. Whether USDOC's initiations of investigations are inconsistent due to insufficient evidence of specificity

Relevant provisions: Articles 11.2 and 11.3 of the SCM Agreement (Same involved in #3)Chinese claim

◦ The USDOC's initiation of these 14 countervailing duty investigations in respect of the alleged provision of inputs for less than adequate remuneration, in the absence of sufficient evidence in the petition to support an allegation that any such subsidy would be specific under Article 2 of the SCM Agreement is inconsistent with Articles 11.2 and 11.3 of the SCM

◦ China objects to the initiation of the investigations on the basis of evidence that the inputs were used by a limited number of industries or enterprises, since such evidence fails to address the four factors required under an Article 2.1 specificity analysis

Main arguments of US◦ China has failed to establish a prima facie case with regard to its claims◦ Initiation decisions are fact-specific, and the question of whether an investigating authority has complied with the standard set out in Article 11 of

the SCM Agreement is similarly dependent on the facts presented by each individual application◦ The relevant issue under the first factor of Article 2.1(c) is whether there are a limited number of users of the subsidy programme; as such, the

question of which enterprises use the input is relevant to the inquiry

Panel Result◦ China has not established that the USDOC acted inconsistently with the United States' obligations under Article 11 of the SCM Agreement by

initiating the challenged investigations without sufficient evidence of specificity. ◦ Within the context of specificity, the legal standard that China objects to is one based on an erroneous understanding of Article 2.1(c);

furthermore, some of China’s assertions are factually incorrect

7. Whether the uses of "adverse facts available" by the USDOC are inconsistent

Relevant provisions: Article 12.7 of the SCM Agreement◦ “12.7 In cases in which any interested Member or interested party refuses access to, or otherwise does not provide, necessary information within a

reasonable period or significantly impedes the investigation, preliminary and final determinations, affirmative or negative, may be made on the basis of the facts available. “

Chinese claim◦ USDOC's use of adverse facts available to support findings of financial contribution, benefit and specificity is inconsistent with Article 12.7 of the SCM,

so USDOC’s determinations lack a factual foundation◦ Once USDOC finds that there is non-cooperation, simply pronounces the ultimate legal conclusion without relying on any “facts on the record”◦ This drawing of adverse inferences, if authorized, would provide a vehicle for an investigating authority to punish non-cooperation

Main arguments of US◦ China has failed to make a prima facie case in support of the 48 alleged breaches of Article 12.7 and bases its claims on sweeping and inaccurate

generalizations; China should have to demonstrate that USDOC acted inconsistently in each of the 48 uses of facts available◦ Use of the terms “inferring” or “assuming” reflect the fact that, due to a lack of cooperation, there was often very little factual information available

Panel result◦ China put forth insufficient evidence to establish that each of the 42 challenged adverse facts available determinations lacked a factual foundation◦ US did not use just one legal standard and performed analysis ignored by China◦ China has not established that in 42 instances the USDOC acted inconsistently with the United States' obligations under Article 12.7 of the SCM

Agreement by not relying on facts available on the record.

Later Reversed by AB

8. Whether the USDOC's findings of regional specificity are inconsistent

◦ Relevant provisions: Articles 2.2 and 2.4 of the SCM Agreement ◦ “2.2 A subsidy which is limited to certain enterprises located within a designated geographical region within the jurisdiction of the granting authority shall

be specific. “◦ “2.4 Any determination of specificity under the provisions of this Article shall be clearly substantiated on the basis of positive evidence.“

◦ Chinese Claim◦ USDOC failed to demonstrate, on the basis of positive evidence, that either the financial contribution or the benefit of the subsidy was "limited to certain

enterprises located within a designated geographical region", as required by that provision◦ A finding of regional specificity was premised solely on two factors, namely (i) a finding that the land in question was within an industrial park or economic

development zone, and (ii) a finding that the park or zone was within the seller's (e.g. municipality's or county's) jurisdiction◦ Main arguments of US

◦ China has failed to make a prima facie case with respect to any of the alleged breaches of Article 2.2 of the SCM Agreement◦ China does not address the facts of the seven investigations at issue in this dispute and does not explain its legal reasoning◦ Whether the provision of land-use rights takes place within an industrial park or economic zone is material to the analysis of a “geographical region”

◦ Panel Result◦ In 6 of the 7 challenges, China has established that the USDOC acted inconsistently with the United States' obligations under Article 2.2 of the SCM Agreement by

making positive determinations of regional specificity while failing to establish that the alleged subsidy was limited to certain enterprises located within a designated geographical region within the jurisdiction of the granting authority.

◦ Agrees with China that the fact that the land in question is located within an industrial park is insufficient by itself to establish that there is a limitation of access◦ China again, purported factually inaccurate statements against the US analysis

9. Whether the USDOC's treatment of certain export restraints is inconsistent

Relevant provisions: Articles 1, 11.2 and 11.3 of the SCM Agreement◦ 1.1 For the purpose of this Agreement, a subsidy shall be deemed to exist if:

◦ (a)(1) there is financial contribution by a government or any public body within the territory of a Member (referred to in this Agreement as "government"), i.e. where:

◦ … (iv) a government makes payments to a funding mechanism, or entrusts or directs a private body to carry out one or more of the type of functions illustrated in (i) to (iii) above which would normally be vested in the government and the practice, in no real sense, differs from practices normally followed by governments; …

9. Whether the USDOC's treatment of certain export restraints is inconsistent

◦ Chinese Claim◦ Initiation of these investigations is inconsistent with Article 11.3 because in the absence of any evidence of a financial contribution, an unbiased and

objective investigating authority would not have "found that the application contained sufficient information to justify initiation of the investigation“◦ USDOC initiated investigations based solely on export restraints and their purported effects on downstream prices◦ WTO jurisprudence compels the conclusion that export restraints do not constitute a "financial contribution" within the meaning of Article 1.1(a)(1) of

the SCM Agreement, so the USDOC applications did not "provide an indication that a subsidy actually exists“◦ Main arguments of US

◦ China has not made a prima facie case in relation to its export restraint claims. This is because China relies on a single panel decision to invalidate all of the USDOC's determinations rather than making an adequate legal argument for each of its claims, based on the facts of each investigation

◦ Export restrictions can be financial contribution within the meaning of Article 1.1◦ Panel Result

◦ Past panel concluded that an export restraint, as defined in the dispute, could not constitute government-entrusted or government-directed provision of goods under Article 1.1(a)(1)(iv) of the SCM

◦ The terms "entrust" and "direct" require that the action of the government under Article 1.1(a)(1)(iv) of the SCM Agreement contain a notion of delegation/command

◦ The Panel is not persuaded that such evidence demonstrates that this exercise of authority occurs in respect of the function of providing goods to domestic users in China of magnesia and coke

◦ China has established that the USDOC acted inconsistently with the obligations of the United States under Article 11.3 of the SCM Agreement by initiating investigations in respect of certain export restraints.

Appeals Procedures•After the rulings, China filed an appeal on August 22, 2014. China’s filing which covered most of the issues where the panel did not rule in favor of Chinese claims.

•As a result of China’s appeal, the United States filed a cross-appeal of the panel’s preliminary determination on 27 August 2014. This cross-appeal dealt with the consistency of one section of China’s request to the panel in regards to article 6.2 of the DSU. It is important to highlight the following:• The U.S. did not submit an appeal to the panel’s ruling the the USDOC’s application of what is

considered a “rebuttable presumption” to comclude whether some entities may be labeled as “public bodies” was not consistent as such in Article 1.1(a)(1) of the SCM Agreement.

• In addition, the U.S. did not challenge the panel’s finding that the “public body” conclusions made by the USDOC in 14 countervailing investigations were inconsistent with the same provision; or to the panel’s conclusions that certain export limits in both investigations in dispute.

Appeal 1: Articles 14(d) and 1.1 (b) of the SCM Agreement –Benefits• China’s Argument:• China argued that the panel mistakenly concluded that it had failed to establish that the USDOC acted

erratically with the commitment of the U.S. under Articles 14(d) and 1.1(b) of the SCM Agreement.U.S. Counter Argument:

• The U.S argued that the panel correctly interpreted Articles 14(d) and 1.1(b) of the SCM Agreement; in it’s view, the U.S. believed that China’s claim did not have merit in either article AND is that this stance is further strenghtened by the approach of the Appellate Body in examining "benefit" in previous reports.

•Appalate body Findings:• Reversed the intial finding upholdong the USDOC’s rebuffing of private prices as a conceivable standard in this

dispute on the basis that these prices were distorted. • Reversed the intial ruling that China did not make the case that the USDOC acted inconsistently with the

commitment of the U.S. under the presented articles of the SCM Agreement regarding benefit analysis in the OCTG, Solar Panels, Pressure Pipe, and Line Pipe dispute.• Found that the USDOC acted inconsistently with the U.S. commitment under the presented articles of the

SCM Agreement by rejecting prices in China as standard in its benefit analyses.

Appeal 2: Article 12.7 of the SCM Agreement – Facts available• China’s Argument:• China claims that the panel did not adhere to its obligations under Article 11 of the DSU in assessing China’s “as

applied” allegation under Article 12.7 of the SCM Agreement. In particular, China argues that the panel did not apply the the correct standard of review "to a single one of the 42 challenged instances that were within [its] terms of reference.” • China believes that the panel behaved inconsistenly with its commitment under Article 11 of the DSU and committed

careless analyses.• U.S. Counter Argument:• The U.S. asserts that the panel was objective under Article 12.7 of the SCM Agreement and adhered to Article 11 of

the DSU. The U.S. alleges that China did not meet the expectations of making a strong case to desmostrate that the panel did not act objectively and correctly when making a determination in the dispute at hand.

•Appalate Body Findings:• Reversed the panel's finding that China had not made the case that the USDOC acted inconsistently with the U.S.'

committment under Article 12.7 by unrelying on facts in the 42 “adverse” determinations throughout the 13 cases objected by China. This body also determined that the panel’s analysis was not critical and thorough and was instead concentrated on the language used by USDOC when they made their case.

Appeals: Article 2.1 of the SCM Agreement – Specificity•China argued that the panel erred the following:•Finding that USDOC did not act inconsistently with Article 2.1 by analyzing specificity exclusively

under Article 2.1(c)•Rejected China’s claim that USDOC failed in its obligation under Article 2.1(c) to identify a subsidy

program•China had failed to establish that the USDOC did not meet its obligation to identify the granting

authorityU.S. Counter Argument:• It asserted that the panel did not misinterpret Article 2.1(c) of the SCM Agreement. In addition,

the U.S. believed that China's arguments are based the same misinterpretation of the SCM Agreement that China pursued before the panel and that it correctly rejected China's arguments.

• The U.S. asked the Appellate Body to not complete the legal analysis and should not find the that the USDOC’s identification of the subsidy program as inconsistent with Article 2.1, if this body were to reverse the panel's findings.

Appeals: Article 2.1 of the SCM Agreement – Specificity (Cont’d)•Appalate Body Findings:• Upheld the finding that China did not prove that the USDOC acted inconsistently with the U.S.

commitment under Article 2.1 of the SCM Agreement by analysing specificity exclusively under Article 2.1(c). The Appellate Body did not agree with China’s assertion that the first sentence of Article 2.1(c) conditions the assessment of de facto specificity on the basis of the factors listed under that subparagraph upon an application of the principles set out in subparagraphs (a) and (b).

• Reversed the finding that China had not proven that the USDOC acted inconsistently with the U.S. commitment under Article 2.1 by failing to identify a subsidy program.

• Found that the existence of an unwritten subsidy scheme or plan may be evidenced by, inter alia, a systematic series of actions pursuant to which financial contributions have been provided to certain enterprises. Nevertheless, the panel failed to apply and properly interpret Article 2.1(c) because it did not provide any case-specific discussion or references to the particular USDOC determinations of specificity challenged by China on an “as applied” basis. Therefore, the Appellate Body Reversed the panel's finding and was not able to complete the analysis.

Appeals: Article 6.2 of the DSU – The Panel's terms of reference•United State’s Argument:•The U.S. asserted that the Panel misconcluded in its Preliminary Ruling that Section B.1(d) of

China's panel request meets the requirements of Article 6.2 of the DSU. Particularly, the United States believed that the panel errously found that China's panel request “to provide a summary of the legal basis of the complaint sufficient to present the problem clearly.” •China’s Counter Argument:•China believed that the panel’s conclusion is accurate under Article 12.7. It believed that the

request satisfied the requirement under Article 6.2 of the DSU. "to provide a brief summary of the legal basis of the complaint sufficient to present the problem clearly". •China called the allegations of error "baseless" and should not considered. •Appalate Body Findings:

• It was clear from China's panel request that it was challenging all instances where the USDOC used “facts available” across the 22 disputes listed in China's panel request. •Disagreed with the U.S. that Article 12.7 of the SCM Agreement contained multiple, distinct

obligations. As a result, it rejected the U.S. appeal and Upheld the panel's finding.

WTO and Market vs. Non-Market Economies

DS 437 puts the onus on the investigating nation to conduct a market analysis, to include:◦ The structure of the market◦ The nature of the entities operating in the market and their respective market share◦ Any barriers to entering that market◦ Analysis as to whether the government asserts influence on the market to a distortable level

When considering a closed and centralized marketplace such as China, this presents an increased burden on the investigating nation

Although challenging, it does force a more positive line of disputes within WTO◦ China is currently able to side-step market reform based on procedural missteps by the U.S.◦ The U.S. is forced to develop a methodology for determining market prices within China, as well as the role of government in

manipulating those prices◦ This methodology may lead to WTO disputes or reform where China is forced to be more open with its market and financial

reporting

There is a difference between a central government and a regional or local government – an understanding of the governing body issuing a subsidy is important to specificity

Timeline of Events – 3 Years, 11 Months

October 2008 – August 2012: USDOC completes investigations on 22 different types of products 25 May 2012: China requested consultations with the U.S. on associated CVDs 20 Aug 2012: Unable to settle dispute, China requests the establishment of a panel 31 Aug 2012: The Dispute Settlement Board deferred the establishment of a panel 28 Sep 2012: Panel established with multiple third parties 14 Nov 2012: China requested the Director-General to determine the composition of the panel 26 Nov 2012: The Director-General composed the panel 29 Apr 2013: Panel chair determines final report will be issued by January 2014 19 Nov 2013: Panel chair extends to May 2014, due to complexity of issues 14 Jul 2014: Panel report circulated to Members 22 Aug 2014: China filed an appeal covering most of the issues in which the panel did not rule in its favor 27 Aug 2014: The U.S. filed a cross-appeal of the Panel’s preliminary determination 18 Dec 2014: The Appellate Body report was circulated to Members 16 Jan 2015: DSB adopted the Appellate Body report and the panel report, as modified by the Appellate Body report 13 Feb 2015: U.S informed DSB that it intends to implement the DSB recommendations and needs a reasonable period of time 26 Jun 2015: China requested that the reasonable period of time be determined through binding arbitration 22 Jul 2015: Arbitrator accepts appointment 9 Sep 2015: U.S. presents oral statement requesting a reasonable period of 19 months 9 Oct 2015: Arbitrator determines reasonable period of time is 14.5 months 1 Apr 2016: Deadline by which U.S. must adopt DSB recommendations and rulings

Where does the Case stand now?

On October 9th, the case Arbitrator announced that the U.S. must be complete by 1 Apr 2016

There are multiple implementation obligations required by the U.S.:◦ USDOC must consider and apply an entirely new analysis that is different from any used in the past ◦ USDOC had failed to provided “reasoned and adequate explanations” as to its CVDs – requires ample

time to conduct the analysis and explanation called for in the dispute

Interestingly, China cited U.S. regulations (because they are open) in its appeal for the RPT

On 27 Apr 2015, the U.S. issued a Notice of Commencement of Compliance◦ 15 separate proceedings to gather information, analyze record evidence, and consider determinations

The USDOC is in the process of recalculating CVD and the associated duties