The International Trade Law Review: China
Overview of trade remedies
China first introduced anti-dumping measures in the Foreign Trade Law in May 1994. In 1997, China promulgated the Anti-dumping and Anti-subsidy Regulations and initiated its first trade remedy case – the anti-dumping investigation against newsprint from Korea, Canada and the United States. Nowadays, China has become one of the major users of trade remedy measures.
As at July 2021, China has initiated 119 anti-dumping investigations, 17 anti-subsidy investigations and two safeguards investigations.
There are three basic trade remedy regulations: the Anti-dumping Regulations, the Anti-subsidy Regulations and the Safeguards Regulations, all of which were enacted in 2002 and amended in 2004.
The Ministry of Commerce (MOFCOM) is the competent authority in charge of all trade remedy cases. MOFCOM has also promulgated a number of implementing rules concerning various issues, such as initiation, questionnaire response, hearing, verification, among other things, throughout investigations.
After China's accession to the World Trade Organization (WTO), the People's Supreme Court promulgated three rules concerning judicial review of trade remedy measures in 2002: Rules on Certain Issues Concerning Hearing of International Trade Administrative Cases; Rules on Certain Issues Relating to Application of Law in Hearing of Anti-dumping Administrative Cases; and Rules on Certain Issues Relating to Application of Law in Hearing of Anti-subsidy Administrative Cases. No cases have been brought to judicial review to date.
i Regional Comprehensive Economic Partnership
To deepen and broaden the engagement among parties and to enhance parties' participation in the economic development of East Asia, the leaders of 16 countries, including the 10 Member States of the Association of Southeast Asian Nations (ASEAN) and six ASEAN free trade agreement (FTA) partners (Australia, China, India, Japan, South Korea and New Zealand), signed the world's largest trade agreement, the Regional Comprehensive Economic Partnership (RCEP), in November 2020. The RCEP was established with the spirit to enhance trade and investment as well as to contribute to the economic integration of East Asia. This is the first time China has included government procurement rules in a plurilateral agreement, focusing on improving the transparency of laws, regulations and procedures, and promoting cooperation between signed parties in government procurement.
ii Comprehensive Agreement on Investment
The negotiations on the Comprehensive Agreement on Investment (CAI), a bilateral treaty between China and the European Union, were officially concluded on 30 December 2020. The CAI will replace the existing bilateral investment treaties between the 27 EU Member States and China. Once signed and enforced, the CAI will be the first agreement to deliver on obligations for comprehensive transparency rules for subsidies, the behaviour of state-owned enterprises and commitments related to sustainable development. The content of the CAI still needs to be approved, signed and enforced by both parties. Nevertheless, according to the principles stated in the CAI, European investors will enjoy better access to the Chinese market. As the CAI has not changed the European Union's existing security and anti-monopoly review on foreign investment, Chinese companies, especially state-owned companies, will be subject to more stringent supervision on investments in Europe.
In May 2021, Members of the European Parliament (MEPs) voted overwhelmingly to 'justifiably' freeze the legislative process of the CAI until China lifts sanctions imposed against several European individuals and entities, including five MEPs, in March 2021.
iii Comprehensive and Progressive Agreement for Trans-Pacific Partnership
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which took effect on 30 December 2018, is a trade agreement between Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. Compared with the RCEP, the CPTPP is an FTA with a higher entry threshold and more requirements for state-owned companies. The CPTPP provides more opportunities for government procurement, investment protection and guarantees; a facilitative framework for digital economy and intellectual property protection; and restrictions for state-owned companies on government subsidies. It is reported that China is actively dealing with issues concerning joining the CPTPP and has begun talks with some members of the CPTPP.
Recent changes to the regime
Before April 2014, the dumping and subsidy investigation and the injury investigation were conducted separately by two bureaus under MOFCOM, specifically, the Fair Trade Bureau determining dumping and subsidy and the Industry Investigation Bureau deciding on injury. After April 2014, the two bureaus were combined into a single investigating agency – the Trade Remedy and Investigation Bureau (TRIB). Since then, one team at TRIB assigned to a case conducts both the dumping and subsidy, and the injury investigations.
Significant legal and practical developments
i Interim reviews
Cases based on domestic industry's requests as compared to exporters' requests
It is not easy for interested parties to persuade MOFCOM to initiate interim reviews seeking to update its anti-dumping duty rates, particularly for foreign producers and exporters. Between 2012 and June 2021, MOFCOM initiated 15 interim reviews in total: three in 2012, two in 2015, three in 2016, two in 2017, one in 2018, three in 2019 and one in 2020. Notably, of the 15 interim reviews, only four were based on requests from foreign producers or exporters; the other 11 were based on requests from domestic industries.2 Those interim reviews as requested by Chinese domestic industries always result in raising anti-dumping duty rates.
An interesting interim review was initiated in the case relating to distillers' dried grains with or without solubles (DDGS) in 2019. In January 2017, MOFCOM issued anti-dumping and anti-subsidy orders on DDGS from the United States. In February 2019, only two years after the issuance of the orders, the US Grains Council applied for a termination of anti-dumping and anti-subsidy duty orders, pursuant to Article 49 of the Anti-Dumping Regulation of the People's Republic of China and Article 48 of the Anti-Subsidy Regulation of the People's Republic of China rather than the Rules on the Interim Review of Dumping and Dumping Margin. Unexpectedly, MOFCOM initiated an atypical interim review with regard to whether the orders should be terminated per the US Grains Council's request, which is generally determined in a sunset review. It was widely believed that the orders might be revoked owing to the easement of China–US relations. However, in June 2019, as the tensions in US–China trade continued to deteriorate, MOFCOM determined not to revoke the orders in the final determination.
ii The second safeguard investigation after 14 years
MOFCOM initiated a safeguard investigation into sugar in September 2016, which is the second safeguard investigation by China. The first, in 2002, was in respect of certain iron and steel products.
The 2002 steel investigation was initiated under special circumstances relating to a US investigation. On 20 March 2002, the US government imposed safeguard measures by imposing special duties and a tariff rate quota. These US safeguard measures severely affected international trading in steel industries and, as a result, major trade partners, including China, the European Union and Canada, imposed their own safeguard measures as counter-measures and brought the investigation to the WTO Dispute Settlement Body.
To some extent, the sugar investigation is the first safeguard investigation that China has initiated based on its own concerns. The investigation was completed in May 2017, and resulted in safeguard measures of special duties of 45 per cent, 40 per cent and 35 per cent for the first year, the second year and the third year, respectively. During the past decade, the government of China has not resorted to safeguard measures to protect its domestic industries. In light of the greater uncertainty in international trade policies taken by the world's major trading partners, particularly the US trade policies under the Trump Administration, it is yet to be seen whether the government of China might change its position after the sugar investigation.
iii DDGS, sorghum and barley investigations
MOFCOM's sampling practice
More than 80 US companies registered with MOFCOM to participate in the anti-dumping and anti-subsidy investigations against DDGS from the United States in 2016. MOFCOM decided to select respondents for individual examination through a sampling procedure.
In previous investigations, MOFCOM had always based its sampling decisions on the simple sales information reported in the registration forms. In the DDGS case, however, MOFCOM issued sampling questionnaires for the first time to the registered US respondents. The sampling questionnaires are quite complicated. For example, MOFCOM requested all registered companies to 'provide the name, address and contact number of all the suppliers from whom your company purchased corn or other grains used for the production of the Product Under Investigation during the POI [period of investigation]'. MOFCOM also requested details that were not normally required for sampling purposes, such as information regarding shareholders, subsidiaries, production and sales costs, domestic sales and exports to third-country markets, as well as information that relates to a material injury investigation, such as Chinese like products, sales and production capacity.
Completing such complex sampling questionnaires in 15 days was not an easy task. Many respondents failed to provide complete requested information and were eventually determined by MOFCOM to be uncooperative.
In this regard, the anti-dumping and anti-subsidy investigations against grain sorghum from the United States in 2018 are even more extreme examples. In its sorghum investigations, MOFCOM deviated from its long-time practice and did not conduct sampling before issuing its anti-dumping and anti-subsidy questionnaires. MOFCOM required all interested parties, including more than 20,000 US sorghum farmers, to respond to its anti-dumping and anti-subsidy questionnaires. All US producers or exporters who failed to provide complete requested information were determined by MOFCOM to be uncooperative. MOFCOM repeated this practice in the anti-dumping and anti-subsidy investigations against barley from Australia later the same year, during which MOFCOM did not conduct sampling before issuing its anti-dumping and anti-subsidy questionnaires and instead required all interested parties to respond to the questionnaires.
Traders v. producers
It is MOFCOM's long-established practice to assign individual dumping and subsidy duties only to foreign producers, not to traders. For exports through foreign trading companies, anti-dumping and anti-subsidy duties assigned to foreign producers will be applied.
This producers-only practice presented challenges in the DDGS case. Unlike vertically integrated industries, the US DDGS industry consists of a large number of producers, marketing companies, traders and exporters. Most of them are not affiliated with one another in any manner. The US DDGS are produced at more than 100 ethanol plants, and sold to the Chinese market through many different channels, such as via:
- on-the-spot market sales to unaffiliated traders, who then resell to China and other countries;
- sales under contract to unaffiliated traders, who then resell to China and other countries;
- indirect purchase from a producer by an unaffiliated trader (usually through another trader);
- purchase by one or multiple unaffiliated traders through marketing companies that sell for one or multiple producers who then export the DDGS to China and other countries; and
- direct sale to importers or customers in China by a producer or its affiliated reseller.
Only a small number of US producers are themselves responsible for sales or exports of their products to China through their own company or its affiliates. On the other hand, the vast majority of DDGS exports to China were not made directly by US producers themselves but through intermediaries and, thus, US producers do not know, nor do they control, the destination of their DDGS after they are sold to traders or any intermediary parties.
Despite this unique and complex trading pattern in the industry, MOFCOM declined to deviate from its normal practice and continued to select respondents only from the producers and excluded traders (unless they were producers at the same time) from the sampling pool.
MOFCOM's sampling was based on the total sales volume, rather than the export volume to China, as is usually the case, of the self-produced DDGS (including domestic sales and exports), excluding purchased products, by the US DDGS producers. MOFCOM selected three US producers (including their affiliated companies) for individual examinations: POET LLC, Big River Resources LLC and Marquis Energy LLC and its affiliate, Marquis Energy-Wisconsin LLC.
Owing to the unique trading pattern in the industry, in most cases, DDGS producers do not know the destination of the products they sell through intermediaries. MOFCOM, therefore, found that the producers selected for the sample failed to provide complete and accurate information regarding both their exports to China and their domestic sales.
In its final determination, MOFCOM stated that it could not verify the completeness, accuracy and authenticity of domestic sales data reported by the respondent Marquis. Therefore, it found the domestic sales data reported unsuitable as the basis for determining the normal value, and opted to use the constructed value (i.e., production cost plus reasonable expenses and profit) to determine the normal value. For the export price, MOFCOM accepted the sale price of Marquis Energy to Chinese unaffiliated importers or US unaffiliated traders, but used the 'reasonably presumed export price' for Marquis Energy-Wisconsin because it was found that it had failed to provide complete and accurate information regarding its exports to China. The 'reasonably presumed export price' for Marquis Energy-Wisconsin was in fact the export price determined for Marquis Energy.
For the other two respondents (POET and Big River), MOFCOM calculated their normal values based on the constructed cost (i.e., production costs plus reasonable expenses and profits) and determined their export prices based on 'reasonably presumed export price', which is also the export price to unaffiliated customers determined for Marquis Energy.
For other cooperative companies, MOFCOM calculated a weighted average dumping margin using total sales volume of DDGS sold during the POI as the weighing factor.
Although MOFCOM adopted the cooperative sampled companies' own data to determine their normal values, the export prices for all respondents were based exclusively on one: the export data of one respondent (Marquis Energy), and only those sales in which Marquis Energy knew its DDGS would be exported to China at the time of the sale.
As one can see, MOFCOM also acknowledged that owing to the unique and complex trading patterns in the industry, the majority of DDGS exports to China were not made directly by producers themselves, but through intermediaries; and, thus, the producers did not know, nor did they control the destination of their products in the case of sales to traders or any intermediaries. Thus, the methodologies used by MOFCOM in the DDGS case to sample, to determine the export price and to calculate the dumping margin for cooperative companies would not encompass the majority of exports of US DDGS to China. It is doubtful that the dumping margins of 42.2 per cent to 50 per cent determined by MOFCOM can be representative for the US DDGS industry.
In this regard, the anti-dumping and anti-subsidy investigations against sorghum from the United States in 2018 and the anti-dumping and anti-subsidy investigations against barley from Australia in 2019 are even more extreme examples.
The industry of agricultural products normally consists of a large number of small and medium-sized enterprises, farmer producers, marketing companies, and traders and exporters, almost all of whom are not affiliated with one another in any way. Over tens of thousands of farmers who grow agricultural products do not themselves export to China and have no direct role in exports to China. Instead, they sell their agricultural products locally to traders, exporters and others, who are then responsible for any sales to China and for setting the price for exports to China.
In the anti-dumping preliminary determination in the sorghum case and the final determination in the barley case, MOFCOM assigned a dumping margin of 178.6 per cent for all US companies and a dumping margin of 73.6 per cent for all Australian companies, based on the best information available, because it determined that no respondent had provided sufficient requested information. All responses submitted by respondents are disregarded by MOFCOM, as producers and traders did not provide responses together. MOFCOM rejected the respondents' claim that individual dumping and subsidy duties should be assigned to traders rather than exporters, as it determined that traders' responses are incomplete without responses from their supplying producers.
iv Surrogate value and non-market situation
The investigating authorities of the United States, the European Union and certain other jurisdictions do not accept the domestic prices and costs of the Chinese companies when they conduct anti-dumping or countervailing investigations against imports from China. They use the surrogate value instead, based on price or cost data from other countries, to determine the normal value of products that have originated in China, which often results in a very high dumping or subsidy margin.
The provisions of subparagraph (a)(ii) of Article 15 of the Protocol on the Accession of China (i.e., the non-market economy clause) expired on 11 December 2016, 15 years after China's accession to the WTO. On 12 December 2016, China immediately brought the United States and the European Union to the WTO's Dispute Settlement Body (DSB), requesting consultations concerning certain provisions of US laws and EU regulations pertaining to the determination of normal value for 'non-market economy' countries in anti-dumping proceedings involving products from China.3 In May 2019, it was reported that the WTO ruling in the EU case may not be in China's favour. On 7 May 2019, China requested that the DSB panel suspend its proceedings. On 14 June 2019, the panel informed the DSB of its decision to grant China's request and suspend its work. The authority of the panel lapsed within 12 months of the suspension. The United States and the European Union have been continuing to determine normal value for Chinese imports on the basis of a special calculation methodology.
As a result, MOFCOM has been increasingly using surrogate value to determine the cost of production in cases involving US or EU companies. Large vertically integrated multinational companies are often the targets of Chinese trade remedy cases. These multinational companies use self-produced material inputs to produce the subject merchandise of Chinese anti-dumping investigations. MOFCOM is replacing the internal prices of these self-produced material inputs of multinational companies with surrogate 'market prices' in anti-dumping investigations more and more frequently. In the anti-dumping final determination relating to phenol, which was published in September 2019, MOFCOM scrutinised the cost tables submitted by foreign respondents very strictly and adjusted the internal price of the self-produced material inputs, and therefore the costs of production reported by all seven mandatory respondents, which were from the United States, the European Union, Korea, Japan and Thailand.
In retaliation against its treatment as a non-market economy (NME), China employs a new 'non-market situation' (NMS) approach, setting aside foreign producers' domestic production costs in calculating an anti-dumping margin. The NMS investigation approach was first applied against imports from the US producers in China's anti-dumping investigation into phenylethylene from South Korea, Taiwan and the United States in 2017. In that case, MOFCOM determined that a NMS exists in the oil industry, natural gas industry and electricity industry of the United States. An interesting fact is that MOFCOM determined not to make adjustments for an NMS in the case.
Another application of an NMS is the anti-dumping investigation against polyphenylene sulfide (PPS) from Japan, the United States, Korea and Malaysia in 2019. In the final determination on 30 November 2020, MOFCOM determined that an NMS exists in the US oil, natural gas, electricity and coal industries, which further leads to a distorted cost of downstream products, dichlorobenzene and sodium hydrosulfide, the raw materials for PPS. MOFCOM made adjustments to the normal value and assigned a dumping margin of more than 200 per cent for US companies.
Considering the treatment of Chinese companies in anti-dumping and countervailing investigations by the United States and the European Union, it may be expected that there will be further instances in which MOFCOM resorts to surrogate value to determine the cost of production of the subject merchandise when US or EU companies are involved.
v Sunset review
According to the WTO Anti-Dumping Agreement, any definitive anti-dumping duty shall be terminated on a date no later than five years from its imposition, unless the authorities determine in a review that the expiry of the duty would be likely to lead to continuation or recurrence of dumping and injury.4
The WTO Anti-Dumping Agreement does not specify whether a second sunset review can be initiated before expiry of an anti-dumping duty extended by a previous sunset review; as a result, WTO members adopt different approaches in practice. In China, MOFCOM did not initiate a second sunset review on anti-dumping duties extended by a previous sunset review until 28 September 2014. Before that, the anti-dumping duties were always lifted after one or two five-year terms of anti-dumping measures being in place. In the newsprint and polyester film investigations, domestic industries requested the initiation of a second sunset review, but later withdrew their requests. This is seen to be related to the position of China in the WTO Doha negotiations on anti-dumping rules: China had argued vigorously for the automatic termination of all anti-dumping duties within 10 years of the imposition of the definitive anti-dumping duty.
In the Doha round of WTO negotiations, delegations had widely differing views regarding various aspects of the sunset review issue, especially on whether there should be any automatic termination of anti-dumping duties after a given period and, if so, after how long. On the two extremes of this issue were those delegations that favoured automatic termination after five years without any possibility of extension and those that reject the principle of automatic termination (anti-dumping duties can be extended through sunset review) altogether. China argued on this issue: 'In no event shall such a review be initiated more than one time and any definitive anti-dumping duty be applied for a period longer than ten years from the date of its imposition.'5
This position reflects China's understanding of the spirit and intent of Article 11.3 of the WTO Anti-Dumping Agreement (provisions concerning the sunset review issue). China, and other friends of anti-dumping (FANs), pointed out that Article 11.3 adopts the structure of 'shall be terminated . . . , unless . . .' and 'this suggests that most, if not all, AD measures will be terminated after 5 years' and that sunset review is just an 'unless' case. However, 'the current situation is that undue emphasis has been put on the “unless” clause' and anti-dumping duties are being extended repeatedly through sunset reviews'. This contradicts the spirit of the WTO Anti-Dumping Agreement and the entire sunset review system. Therefore, the FANs argued that anti-dumping duties should be terminated after a period of imposition (periods are different according to proposals by different members, for example, five years, eight years or 10 years). The FANs further explained that:
the essence of the proposal is to prevent the case of extending AD measures through a forward-looking analysis (i.e., likelihood test). After the lapse of the five years, exporters must be given clearance and a further restriction should only be made possible through an analysis on the current (or immediate past) situation ('he is (has been) dumping') and not by the prediction of the future ('he is likely to dump'). An anti-dumping measure must not be taken in a pre-emptive manner.6
China was always an active supporter of this proposal.
China's position on the sunset issue appears to be changing; it appears to have abandoned its previous position that measures should not be applied for a period of more than 10 years. On 28 September 2014, MOFCOM initiated the second sunset review of the anti-dumping measures on imported PVC originating from the United States, Korea, Japan, Russia and Taiwan. As a result of the review, the anti-dumping measures on imports from the United States, Korea and Japan were extended for another three years. During 2016 and 2018, MOFCOM initiated another four and five second sunset reviews, respectively. On 28 September 2018, MOFCOM initiated the third sunset review of the anti-dumping measures on imported PVC originating from the United States, Korea, Japan and Taiwan. It is now 18 years since the anti-dumping duty was first imposed on imported PVC. On 30 October 2019, MOFCOM determined to terminate the anti-dumping measures in the third sunset review, based on a withdrawal request from the petitioner. However, on 25 September 2020, MOFCOM launched a new anti-dumping investigation and an anti-subsidy investigation on the same products but targeted at imports from the United States only. The investigations were launched amid rising political tensions between China and the United States.
vi MOFCOM amended its anti-dumping and anti-subsidy rules
In April 2018, MOFCOM published three revised anti-dumping and anti-subsidy implementing rules. These relate to (1) the Rules on Interim Review of Dumping and Dumping Margins, (2) the Rules on Hearing for Anti-Dumping and Anti-Subsidy Investigations and (3) the Rules on Anti-Dumping Investigation Questionnaires. The amendments, particularly the one for interim review, reflect some significant changes to the 2002 versions.
The amendments to the Rules on Anti-Dumping Investigation questionnaires incorporate some existing practices and requirements of MOFCOM regarding the investigation questionnaires. For example, it makes clear that an investigating authority may not individually examine responses from those that have not registered with that investigating authority.
The amendments to the Rules on Hearing for Anti-Dumping and Anti-Subsidy Investigations are mainly to consolidate the current three separate but essentially same rules provided in the Provisional Rules on Hearing for Anti-Dumping Investigations, the Provisional Rules on Hearing for Anti-Subsidy Investigations and the Rules on Hearing for Industry Injury Investigations. This consolidation reflects the combination of the two bureaus of MOFCOM – the Fair Trade Bureau and the Industry Investigation Bureau – in April 2014.
Notably, three significant changes have been made in the amendments to the Rules on Interim Review of Dumping and Dumping Margins, specifically relating to the standing of the petitioners, the criteria to initiate an interim review, and an interim review of foreign producers and exporters with a zero dumping margin.
Furthermore, in July 2019, MOFCOM published drafts of three anti-dumping implementing rules for comments, namely (1) the Rules on Sunset Review of Anti-Dumping Investigations, (2) the Rules on Price Commitment of Anti-Dumping Investigations, and (3) the Rules on New Shipper Review of Anti-Dumping Investigations. As at 16 July 2021, these rules have not yet been finalised and are not effective.
Evidence of the standing of petitioners in an original investigation
An interesting question would be whether the petitioners in an original investigation can ask for an interim review of certain producers or exporters when the circumstances of the domestic industry have changed and the petitioners in the original investigation no longer satisfy the standing requirements needed for petitioning for an original anti-dumping investigation. The answer to this question is 'no' under the previous rules, because the same standing requirement as in an original investigation was clearly included in the previous Rules on Interim Review of Dumping and Dumping Margins. But the answer is 'yes' under the new rules because 'where the petitioners in the original investigation apply for an interim review, it is unnecessary to prove their standing again'. This change makes it easier for the domestic industry to apply for an interim review.
Changes to the legal standard for requesting an interim review
The basis for initiating an interim review is that the normal value or export price, or both, has changed, and it is necessary to review the margin of original anti-dumping measures. The applicant must provide evidence relating to the change in the normal value, export price and dumping margin compared with the level of original anti-dumping measure when submitting a request for an interim review.
The 2018 amendments added one more requirement for foreign applicants: evidence that the change will continue in the future. This amendment requires that the foreign applicant must not only prove that the dumping margin has changed significantly in the 12 months before the filing date, but also explain the reasons for that change. Moreover, based on those reasons, it would also need to prove the changes did not just happen in the previous 12 months, but will also continue in the future.
This amendment may inevitably make it more difficult for foreign producers or exporters to seek an interim review. The foreign applicant would need to prepare more evidence. The interim review may not be initiated even if the normal value, export price and dumping margin do change significantly, if the foreign applicant cannot explain the reasons for the changes well and, more critically, prove that the change will continue in the future.
Interim review of exporting producers with zero anti-dumping duty
Domestic industry and foreign competitors definitely wish to push MOFCOM to review foreign exporting producers that have a zero dumping duty rate after the original investigation and that continue their sales in the Chinese market.
According to the previous rules, whereby domestic industry files an application for interim review, the exporters and producers whose dumping margins were determined as zero or de minimis in the original anti-dumping investigation shall also be subject to the review investigation.
Interestingly, under the new rules, reviewing zero margin exporters or producers has to be done through a new anti-dumping investigation – which covers both dumping margin examination and injury evaluation – rather than an interim review.
In the meantime, the new rules also provide that if the investigating authority determines in an interim review that the anti-dumping margin for a foreign export producer is zero, then this zero margin may be reviewed in future interim reviews.
The three rules concerning judicial review of trade remedy measures promulgated by the People's Supreme Court in 2002 establish the legal ground for interested parties to challenge MOFCOM's trade remedy actions. However, there is no public information to show that any such case has ever been brought.
In contrast, other WTO members, including the European Union, the United States, Japan, Canada and Brazil, have brought 10 cases concerning Chinese trade remedy measures before the DSB as at July 2021:
- DS407: China – Provisional Anti-Dumping Duties on Certain Iron and Steel Fasteners from the European Union;
- DS414: China – Countervailing and Anti-Dumping Duties on Grain Oriented Flat-Rolled Electrical Steel from the United States;
- DS425: China – Definitive Anti-Dumping Duties on X-Ray Security Inspection Equipment from the European Union;
- DS427: China – Anti-Dumping and Countervailing Duty Measures on Broiler Products from the United States;
- DS440: China – Anti-Dumping and Countervailing Duties on Certain Automobiles from the United States;
- DS454: China – Measures Imposing Anti-Dumping Duties on High-Performance Stainless Steel Seamless Tubes (HP-SSST) from Japan;
- DS460: China – Measures Imposing Anti-Dumping Duties on High-Performance Stainless Steel Seamless Tubes (HP-SSST) from the European Union;
- DS483: China – Anti-Dumping Measures on Imports of Cellulose Pulp from Canada;
- DS568: China – Certain Measures Concerning Imports of Sugar;
- DS589: China – Measures Concerning the Importation of Canola Seed from Canada; and
- DS598: China – Anti-Dumping and Countervailing Duty Measures on Barley from Australia.
In several reports by WTO panels and the Appellate Body, the DSB announced that certain aspects of MOFCOM's trade remedy actions were inconsistent with WTO rules. Transparency is one of the outstanding issues identified by the panels and the Appellate Body. For example, in the case of DS414, the complainants sought and obtained from MOFCOM confidential treatment in relation to a number of categories of information. The panel upheld the United States' claim that MOFCOM acted inconsistently with Article 12.4.1 of the Subsidies and Countervailing Measures (SCM) Agreement and Article 6.5.1 of the Anti-Dumping Agreement by failing to require the complainant to submit adequate non-confidential summaries of the information. The panel concluded that the purported summaries did not provide a reasonable understanding of the substance of the information submitted in confidence. The panels also concluded that China acted inconsistently with Articles 6.9 and 12.2.2 of the Anti-Dumping Agreement and Articles 12.8 and 22.5 of the SCM Agreement, on the basis that China failed to disclose the essential facts supporting its causation analysis and did not provide an adequate explanation for its causation findings.
In July 2013, MOFCOM promulgated Provisional Rules for Implementing the WTO Rulings on Trade Remedy Disputes, a set of simple rules containing eight articles. In practice, when the DSB delivers a ruling that China's trade remedy measures are inconsistent with WTO rules, MOFCOM will reinvestigate the relevant case and issue new determinations.
Decisions by WTO panels and the Appellate Body have had a positive effect on MOFCOM's practice in trade remedy cases. In recent years, we have noticed obvious laudable improvements in transparency throughout the proceedings at MOFCOM. It is not too long since a foreign producer or exporter may have found that MOFCOM's simple and short disclosures made it quite difficult to understand its calculation of a specific dumping margin. In recent investigations, however, MOFCOM has provided detailed information to foreign producers and exporters about the calculation of the dumping margins. It is now conducting more thorough price impacts and causation analysis in its investigations.
During 2018, the number of trade remedy investigations newly initiated by China was still very high: seven new anti-dumping investigations and three new anti-subsidy investigations. To some extent, the tide receded a little in the first half of 2019 and MOFCOM initiated just five new anti-dumping investigations and one new anti-subsidy investigation during that year. During 2020, four new anti-dumping investigations and four new anti-subsidy investigations were initiated. No new investigations were initiated by MOFCOM in the first half of 2021.
Although the setbacks China has faced in challenging NME treatment have not been publicised, it has had profound impacts. While the case against the United States stopped at the consultation stage, China requested the panel to suspend its proceedings against the European Union, which means that China has to accept the continued application of the surrogate value methodology in anti-dumping investigations. MOFCOM may more frequently resort to the surrogate value to determine the cost of production of the subject merchandise in its anti-dumping investigations when US and EU companies are involved. Furthermore, an NMS investigation may be another instrument used by MOFCOM for adjusting the cost of production, which may be also applied to other countries and regions, such as the European Union.
China has initiated a total of 17 anti-subsidy investigations as at July 2021. The first of these was in 2009, concerning grain-oriented flat-rolled electrical steel from the United States. The first eight anti-subsidy investigations were all targeted against the United States (five cases) and the European Union (three cases). In February 2017, MOFCOM initiated its first anti-subsidy investigation against imports from India, concerning the product ortho chloro para nitro aniline. In 2018, MOFCOM initiated three anti-subsidy investigations against US sorghum, Indian 7-phenylacetamido-3-chloromethyl-3-cephem-4-carboxylic acidpmethoxybenzyl ester and Australian barley. In 2019, MOFCOM initiated one anti-subsidy investigation against US n-Propanol. With the unsound global economy and the great uncertainty of trade policies adopted in leading countries, it is expected that there may be more anti-subsidy cases initiated by MOFCOM.
The intensification of trade frictions between China and the United States in the past year has dramatically affected Chinese trade remedy investigations against US products and will continue to do so. The NMS investigation approach has been adopted by MOFCOM to assign extremely high rates to US companies in recent cases. In the PPS, n-Propanol, ethylene propylene diene monomer and m-Cresol anti-dumping cases, MOFCOM determined that an NMS exists in US industries and calculated a dumping margin of 131.7 per cent to 267.4 per cent for US companies, by making adjustments to the normal value for an NMS.
MOFCOM also initiated four new anti-dumping investigations in 2020, three of which were against US products and an NMS was alleged. These three cases are under investigation and it is expected that MOFCOM will take the same position in the NMS determination in the aforementioned cases.
Similarly, the tensions between China and Australia have significantly affected the results of the anti-dumping and anti-subsidy investigations against Australia. Although China has denied the move is a result of diplomatic tensions, it is widely reported that the result of the barley case (see below) is retaliation for Australia's calls for an international investigation into the origins of the coronavirus pandemic. In recent months, MOFCOM has targeted Australian imports, including coal, sugar, barley and lobsters, amid political tensions. This situation is unlikely to change unless Australia becomes politically independent from the United States and strengthens its ties with China.
Following an 18-month investigation, MOFCOM imposed a 73.6 per cent dumping duty against barley from Australia, even higher than the 56.14 per cent dumping margin alleged by the petitioner. Moreover, MOFCOM did not issue a preliminary determination in the case and provided only 10 days to the Australian government and barley exporters to comment on its disclosure of findings for final determination. Given that the final determinations of the anti-dumping and anti-subsidy investigations were issued on the due date for the comments, it is clear that MOFCOM did not give serious consideration to the comments by the Australian government and barley exporters. On 16 December 2020, Australia brought China to the WTO's DSB, requesting consultations with China,7 claiming that its anti-dumping and countervailing duty measures on barley from Australia are inconsistent with its WTO obligations as MOFCOM did not take into account the difficulties of traders and producers in providing information, and determined that no Australian respondents had provided a complete response. It also did not grant interested parties a full opportunity to defend their interests. MOFCOM took a similar position in the investigation against wines from Australia and imposed a dumping margin ranging from 116.2 per cent to 218.4 per cent. Although MOFCOM dropped the countervailing measures, the high anti-dumping rates could wipe out Australian wine's competitiveness in the Chinese market.
1 David Tang and Jessica Cai are partners, Yong Zhou is a counsel and Jin Wang is a senior associate at JunHe LLP.
2 The interim review of pyridine produced by Jubilant Life Sciences Limited in India was requested by both the Chinese domestic industry and Jubilant Life Sciences Limited.
3 World Trade Organization dispute settlements: DS515: United States – Measures Related to Price Comparison Methodologies; DS516: European Union – Measures Related to Price Comparison Methodologies.
4 See Article 11.3 of the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994.
5 See TN/RL/GEN/149, dated 29 June 2007.
6 See TN/RL/GEN/74, dated 17 October 2005.
7 World Trade Organization dispute settlements: DS598: China – Anti-Dumping and Countervailing Duty Measures on Barley from Australia.