Mainland China Awarded US$645 Million in WTO Retaliation Over U.S. CV Duties on Various Products

A Word Trade Organisation panel has awarded mainland China US$645.1 million in annual retaliation against the United States for its failure to comply with a previous ruling relating to the U.S. imposition of countervailing duties on a range of mainland Chinese products as well as the proceedings that led to such CV duties. As soon as this decision is adopted by the WTO Dispute Settlement Body, Beijing will be able to impose or increase its import tariffs on a range of U.S. products and/or suspend other trade concessions granted to the U.S., which could further strain an already fraught Sino-U.S. trade relationship.

This ten-year long dispute concerns a number of CV duty investigations carried out by the U.S. Department of Commerce between 2007 and 2012 (during the George W. Bush and Barack Obama administrations) on various products exported from mainland China. The products at issue include pressure pipe, line pipe, tow-behind lawn groomers, kitchen shelving, oil country tubular goods, wire strand, seamless pipe, coated paper suitable for high-quality print graphics, aluminium extrusions, steel cylinders and solar panels.

The WTO Appellate Body ruled in July 2019 that the CV proceedings involving these products violated certain multi-lateral subsidy rules and mainland China requested a US$2.4 billion retaliation award in October 2019, although it subsequently reduced the requested amount to US$1.02 billion and later to US$788.75 million. The U.S., for its part, claimed that an award of no more than US$106 million per year was more appropriate.

In its CV duty analysis, the DOC classifies state-owned enterprises as “public bodies” if they are majority owned by the government, with their financial contributions to other companies then considered countervailable subsidies. Commerce’s methodology on non-market economies then incorporates third-country prices to calculate the actual CV duties. Although the Appellate Body agreed with the U.S. that SOEs can be considered public bodies, it disagreed with the DOC’s CV duty calculation method in 12 of the 17 cases under scrutiny, arguing that third country prices can only be considered after the DOC has sufficiently analysed “how these interventions actually resulted in distortion of in-country prices for the inputs subject to the determinations at issue.”