On October 18, 2012, the Appellate Body of the World Trade Organization (WTO) issued its report upholding on all issues the WTO dispute settlement panel report, China – Countervailing and Anti-Dumping Duties on Grain Oriented Flat-Rolled Electrical Steel from the United States.

The panel report, issued on June 15, 2012, was the result of claims made by the United States to the Dispute Settlement Body (DSB) of the WTO on certain aspects of China’s original countervailing duty and anti-dumping determinations on grain oriented flat-rolled electrical steel (GOES). The panel found that China’s investigating authority, the Ministry of Commerce of the People’s Republic of China (MOFCOM), acted inconsistently with several aspects of both the WTO Subsidies and Countervailing Measures (SCM) Agreement and the WTO Anti-Dumping (AD) Agreement in the GOES investigations. Certain key findings of the panel report include MOFCOM’s inconsistencies with the following provisions:

  • Article 11.3 of the SCM Agreement, on the basis that MOFCOM had initiated countervailing duty investigations of certain programs without sufficient evidence.
  • Article 12.4.1 of the SCM Agreement and Article 6.5.1 of the AD Agreement, because MOFCOM did not require the Chinese petitioners to furnish non-confidential summaries of information in sufficient detail.
  • Articles 12.8, 15.1, 15.2 and 22.5 of the SCM Agreement and Articles 3.1, 3.2, 6.9, and 12.2.2 of the AD Agreement, in connection with MOFCOM’s findings on the price effects of subject imports.
  • Articles 12.8, 15.1, 15.5 and 22.5 of the SCM Agreement and Articles 3.1, 3.2, 6.9, and 12.2.2 of the AD Agreement, with respect to MOFCOM’s finding that subject imports caused material injury to the domestic industry.

Further examination of these and other issues resolved in the June 15, 2012 panel report can be found in Mayer Brown’s June 15, 2012, Legal Update.

On July 20, 2012, China announced its decision to appeal certain issues in the panel report. China’s appeal centered on the panel’s findings with respect to MOFCOM’s price effects determination and the disclosure of the underlying facts related to the determination.

The October 18, 2012 Appellate Body report upheld all aspects of the DSB panel report with respect to these issues. The Appellate Body found that the panel was correct to conclude that MOFCOM’s finding that the subject imports were merely low priced was insufficient to determine that the subject imports caused injury to the domestic industry in China. The panel agreed with the United States’ claim that MOFCOM’s finding of significant price depression and suppression was not based on positive evidence and did not involve an objective examination of the facts.

The Appellate Body also agreed with the panel that MOFCOM failed to disclose all of the essential facts related to its low price finding. The Appellate Body found that MOFCOM was required to disclose under Articles 6.9 and 12.2.2 of the AD Agreement and Articles 12.8 and 22.5 of the SCM Agreement the price comparisons of subject imports and domestic products that were necessary to understand MOFCOM’s finding regarding the “low price” of subject imports.

This decision by the Appellate Body may lead the United States, the European Union and others to bring additional complaints before the WTO over the practices and procedures of countries such as Brazil, China and India in how they administer their anti-dumping and countervailing duty laws, especially considering the increasing use of these measures by these countries.

For additional information about the Appellate Body’s decision, the panel’s initial ruling, or any other matter raised in this Legal Update, please contact Duane W. Layton or Paulette Vander Schueren.