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United States – Definitive Anti-Dumping and Countervailing Duties on Certain Products from China: Passing the Buck on Pass-Through


In 2007, the United States reversed its long-standing policy prohibiting the simultaneous imposition of anti-dumping duties (ADDs) and countervailing duties (CVDs) against nonmarket economies. Subsequently, the United States has imposed concurrent ADDs and CVDs in numerous cases against China. China challenged a number of aspects of the US practice, most notably the double-remedies issue, which occurs when a domestic subsidy is offset by both an ADD and CVD. The Appellate Body (AB) correctly ruled that double remedies are inconsistent with the Agreement on Subsidies and Countervailing Measures and that the burden was on the investigating authorities to ensure that double remedies were not being imposed; however, the AB largely limited its discussion to measurement concerns, an approach that may have inadvertently opened the door to future double-remedies disputes involving other methods for computing normal value. Two other issues that are likely to have significant long-term ramifications are (i) the scope of the term ‘public body’ and (ii) the appropriate use of out-of-country benchmarks. On both issues, we believe the AB's conclusions and analysis were correct.

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1 Since the policy change, more than two-thirds of all Chinese and Vietnamese products subject to AD scrutiny have also been simultaneously subject to a CVD investigation, a remarkable statistic given that there had been very little use of CVD by the United States during the preceding decade. See Kelly Brian D. (2011), ‘The Offsetting Duty Norm and the Simultaneous Application of Countervailing and Antidumping Duties’, 11:2Global Economy Journal, 131; Kelly Brian D. (2008), ‘The Law and Economics of Simultaneous Countervailing Duty and Antidumping Duty Proceedings’, 3:1Global Trade and Customs Journal, 4150; and Chad P. Bown (2010), Global Antidumping Database, available at

2 United States – Definitive Anti-Dumping and Countervailing Duties on Certain Products from China, Panel Report, WT/DS379/R, adopted 25 March 2011, modified by Appellate Body Report, WT/DS379/AB/R, adopted 25 March 2011 (hereinafter US–AD and CVD (China)).

3 Panel Report, US–AD and CVD (China), paras. 14.67–14.75.

4 United States – Final Countervailing Duty Determination with Respect to Certain Softwood Lumber from Canada, WT/DS257/AB/R, adopted 17 February 2004, DSR 2004:II, 571 (US–Softwood Lumber IV).

5 First formalized in the 29 March 2007 USDOC Memorandum ‘Countervailing Duty Investigation of Coated Free Sheet Paper from the People's Republic of China – Whether the Analytical Elements of the Georgetown Steel Opinion are Applicable to China's Present-Day Economy’ (hereinafter ‘Georgetown Steel Memo’), available at (last visited 10 December 2012).

6 Georgetown Steel v. United States, 801 F.2d 1308 (Fed. Cir. 1986).

7 Ibid., at 1316.

8 Georgetown Steel Memo, p. 2.

9 Poland and Czechoslovakia were the subjects of the Georgetown Steel case.

10 Georgetown Steel Memo, p. 2.

12 Ibid., p. 5.

13 As we discuss in section 5, a series of US domestic-court challenges to the USDOC's change of practice were pursued concurrently with this WTO dispute. These challenges ultimately forced the US Congress to revise the United States's CVD statute in order to allow its use against NMEs. The revisions to the statute were also aimed to address the AB's adverse findings in this dispute.

14 Namely, (i) Circular Welded Carbon Quality Steel Pipe; (ii) Certain New Pneumatic Off-the-Road Tires; (iii) Light–Walled Rectangular Pipe and Tube; and (iv) Laminated Woven Sacks. See Panel Report, US–AD and CVD (China), para. 2.1.

15 It is normally taken for granted that export subsidies, i.e. subsidies contingent on export performance, do reduce export sales prices pro rata. This view is reflected in GATT Article VI:5, which provides that ‘[n]o product shall be subject to both anti-dumping and countervailing duties for the purpose of dealing with one and the same situation arising from dumping or from export subsidization’.

16 The arguments made before the USDOC by both China and the interested producers on double remedies can be found in the 17 October 2007 Issues and Decision Memorandum for the Final Determination in the Less-Than-Fair-Value Investigation of Coated Free Sheet Paper from the People's Republic of China, pp. 10–12 (hereinafter ‘CFS Paper Decisions Memo’).

17 See CFS Paper Decisions Memo, p. 19 et seq.

18 Namely, Articles VI:3 and 1:1 of the GATT 1994 and Articles 10, 12.1, 12.8, 19.3, 19.4, and 32.1 of the SCM Agreement.

19 Panel Report, US–AD and CVD (China), para. 14.120 (Article 19.4 of the SCM Agreement), 14.130 (Article 19.3 of the SCM Agreement), 14.136 (Article VI:3 of the GATT 1994), 14.138 (Article 10 of the SCM Agreement), 14.139 (Article 32.1 of the SCM Agreement), 14.147 (Article 12.1 of the SCM Agreement), 14.148 (Article 12.8 of the SCM Agreement), 14.182 (Article I:1 of the GATT 1994).

20 It is noted that Article 9.2 of the WTO Anti-Dumping Agreement contains very similar wording.

21 AB Report, US–AD and CVD (China), para. 547 et seq.

22 Ibid., paras. 596–604.

23 Panel Report, US–AD and CVD (China), para. 8.94.

24 Ibid., paras. 8.133–8.136.

25 Ibid., paras. 8.139–8.143.

26 AB Report, US–AD and CVD (China), para. 345.

27 Panel Report, US–AD and CVD (China), para. 8.99.

28 Panel Report, US–AD and CVD (China), paras. 9.80–9.94.

29 Ibid., para. 9.106.

30 AB Report, US–AD and CVD (China), paras. 398–400.

31 Although China argued that geographical regions ‘must necessarily have some sort of formal administrative or economic identity’ in the manner of political subdivisions, which the industrial park was not, the Panel considered that the term ‘geographical region’ could ‘encompass any identified tract of land within the jurisdiction of a granting authority’. Panel Report, US–AD and CVD (China), paras. 9.140–9.144.

32 It should be noted that the Panel's holding on regional specificity, and the United States's decision to not appeal it, has not disposed of the question of whether and how China's provisions of land-use rights might be considered ‘sectorally’ specific pursuant to Article 2.1 of the SCM Agreement. For a critique of the methodology of the European Commission in its attempt to do just that in the Coated Fine Paper from China investigation, see Vermulst Edwin and Gatta Brian (2012), ‘Concurrent Trade Defense Investigations in the EU, the EU's New Anti-Subsidy Practice against China, and the Future of Both’, 11:3World Trade Review, 527553.

33 AB Report, US–AD and CVD (China), para. 424.

34 Panel Report, US–AD and CVD (China), para. 10.76.

35 Ibid., paras. 10.144–10.148, emphasis added. The reader may make what it will of the unexplained difference between articulation of the standard of review employed by the Panels in the US–AD and CVD (China) case, on one hand, and the China – Countervailing and Anti-Dumping Duties on Grain Oriented Flat-Rolled Electrical Steel from the United States case, WT/DS414/R, circulated to WTO Members 15 June 2012 (appeal in progress), on the other. In the former case, in which the Panel upheld substantially all of the US practice vis-à-vis China, the Panel applied the ‘could have found’ formulation, whereas in the latter, in which the Panel rejected substantially all of the challenged elements of the Chinese CVD practice vis-à-vis the United States, the Panel consistently framed its inquiries in terms of what an ‘unbiased and objective investigating authority would have found’. See paras. 7.51, 7.112.

36 Ibid., paras. 10.144–10.148.

37 AB Report, US–AD and CVD (China), para. 441.

39 Ibid., para. 490.

40 Ibid., para. 501.

41 Panel Report, US–AD and CVD (China), paras. 10.192–10.194.

42 Ibid., para. 10.210.

43 Ibid., para. 10.187 (footnotes omitted). It was also noted that in US–Softwood Lumber IV, the Appellate Body cautioned that: ‘[w]hen an investigating authority resorts … to a benchmark other than private prices in the country of provision, the benchmark chosen must, nevertheless, relate or refer to, or be connected with, the prevailing market conditions in that country, and must reflect price, quality, availability, marketability, transportation and other conditions of purchase or sale, as required by Article 14(d)’. Ibid., para. 10.181.

44 Ibid., para. 10.206.

45 Ibid., paras. 10.187, 10.205 (emphasis added).

46 Ibid., paras. 10.217–10.219.

47 Ibid., para. 10.207.

49 Ibid., para. 10.208.

50 AB Report, US–AD and CVD (China), para. 518.

51 Ibid., para. 525.

52 Ibid., para. 526.

53 Ibid., para. 519.

54 Ibid., para. 523 (emphasis added).

55 As we will see below, some of these issues may be relevant in market-economy cases, too.

56 The decision whether to treat certain countries as nonmarket economies lies with the investigating authorities, at least until 2016 in case of China and until 2019 in case of Vietnam. Even though more and more countries treat China as a market economy these days for purposes of application of their anti-dumping law, key trading partners of China, such as the EU, the United States, and Brazil, still treat it as a nonmarket economy for that purpose.

57 This note still applies as Article 2(7) of the current Anti-Dumping Agreement explicitly provides that ‘this Article is without prejudice to the second Supplementary Provision to paragraph 1 of Article VI in Annex I to GATT 1994’.

58 In a variation of the surrogate-country concept, the United States uses the so-called factors-of-production test, taking the quantities of inputs used in the production process by the nonmarket economy producer, but valuing them at their prices in a market economy.

59 AB Report, European Communities – Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China, WT/DS397/AB/R, adopted 28 July 2011, para. 289 (‘EC–Fasteners’) (emphasis added).

60 Ibid., n.460 (emphasis added).

61 See, e.g., paragraph 15(b) of the Protocol of Accession of China quoted above.

62 The United States's CVD statute requires the USDOC to treat the entire subsidy as a benefit, even if it is not fully passed through to the prices. Said differently, US CVD rules assume complete pass-through of the subsidy and do not require the USDOC to measure pass-through in a typical CVD investigation.

63 See Froot Kenneth A. and Klemperer Paul D. (1989), ‘Exchange Rate Pass-Through When Market Share Matters’, 79:4The American Economic Review, 637654; Knetter Michael M. (1993), ‘International Comparisons of Pricing-to-Market Behavior’, 83:3The American Economic Review, 473486; Knetter Michael M. (1994), ‘Is Export Price Adjustment Asymmetric?: Evaluating the Market Share and Marketing Bottlenecks Hypotheses’, 13:1Journal of International Money and Finance, 5570; Goldberg Pinelopi K. and Knetter Michael M. (1997), ‘Goods Prices and Exchange Rates: What Have We Learned?’, 35:3Journal of Economic Literature, 12431272; McCorriston Steve, Morgan C. W., and Rayner Anthony J. (1998), ‘Processing Technology, Market Power and Price Transmission’, 49:2Journal of Agricultural Economics, 185201; Karp Larry S. and Perloff Jeffrey M. (1989), ‘Estimating Market Structure and Tax Incidence: The Japanese Television Market’, 37:3The Journal of Industrial Economics, 225239; McCorriston Steve, Morgan C. W., and Rayner Anthony J. (2001), ‘Price Transmission: The Interaction between Market Power and Returns to Scale’, 28:2European Review of Agricultural Economics, 143159; Campa José Manuel and Goldberg Linda S. (2005), ‘Exchange Rate Pass-Through into Import Prices’, 87:4The Review of Economics and Statistics, 679690.

64 See Rogoff Kenneth (1996), ‘The Purchasing Power Parity Puzzle’, 34:2Journal of Economic Literature, 647668; Kenneth A. Froot, Michael Kim, and Kenneth Rogoff (2001), ‘The Law of One Price Over 700 Years’, International Monetary Fund Working Paper, WP/01/174.

65 At the time of this WTO proceeding, US statutes prohibited the USDOC from making any adjustments to its calculated CVD to account for pass-through issues. Whether the statutory changes enacted subsequent to this case are sufficient to satisfy the WTO AB will likely be the subject of future WTO disputes.

66 Other WTO members, such as the EU, do not require the surrogate country to be at a level of economic development similar to the NME under investigation.

67 But see the caveats in Section 4.2.5, infra.

68 The US Congress recently changed the statute to allow USDOC to make adjustments.

69 AB Report, US–AD and CVD (China), para. 541.

70 The USDOC's response to the Section 129 proceeding highlights the complications in attempting to measure the extent of double remedy. See USDOC memo ‘Section 129 Proceeding Pursuant to the WTO Appellate Body's Findings in WTO DS379 Regarding the Antidumping Duty Investigation of Circular Welded Carbon Quality Steel Pipe (CWP) from the People's Republic of China: Preliminary Determination of Adjustments to the Antidumping Duty Cash Deposit Rates’, 31 May 2012.

71 For simplicity, in these examples we assume the firm's home-market price is equivalent to a price obtained using the constructed-value method. This is not necessarily the case, and we do so only to be explicit how the dumping amount and countervailing duty would be calculated.

72 The United States does not have a lesser-duty rule so the dumping amount would be the dumping duty.

73 AB Report, US–AD and CVD (China), para. 599.

74 See, for more detail, Vermulst Edwin and Gatta Brian (2012), ‘Concurrent Trade Defense Investigations in the EU, the EU's New Anti-Subsidy Practice against China, and the Future of Both’, 11:3World Trade Review, 527553.

75 See for EU practice on calculating injury margins, Vermulst Edwin (2010), EU Anti-Dumping Law and Practice, 2nd edition, London, UK: Sweet & Maxwell, pp. 461486.

76 AB Report, US–AD and CVD (China), para. 349, citing the CFS Paper Decisions Memo, pp. 58–60.

77 As China had argued before the USDOC during the administrative proceedings.

78 AB Report, US–AD and CVD (China), para. 343.

79 Ahn Dukgeun (2011), ‘United States – Definitive Anti-Dumping and Countervailing Duties on Certain Products from China’, 105:4American Journal of International Law, available at SSRN:; SSRN version at 3.

80 Ibid., at 4.

81 AB Report, US–AD and CVD (China), para. 369.

82 Ibid., para. 372.

83 Ibid., paras. 374–378.

84 There was no Panel finding on loans to the permitted category. Ibid., para. 385.

85 Ibid., paras. 386–395.

86 Ibid., paras. 413–414.

87 Ibid., paras. 421–422.

88 Article 14(d) SCM Agreement provides that 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).

89 Article 14(b) SCM Agreement provides that a loan by a government shall not be considered as conferring a benefit, unless there is a difference between the amount that the firm receiving the loan pays on the government loan and the amount the firm would pay on a comparable commercial loan which the firm could actually obtain on the market. In this case, the benefit shall be the difference between these two amounts.

90 Interestingly, China had initially pursued claims under Paragraph 15 of its Accession Protocol before the Panel, but later decided not to pursue those, see AB Report, US–AD and CVD (China), n.401.

91 Appellate Body Report, US–Softwood Lumber IV, para. 102.

92 Ibid., para. 103.

93 AB Report, US–AD and CVD (China), para. 441.

94 Ibid., para. 454.

95 Ibid., para. 480.

96 Ibid., paras. 484–487.

97 Interest rates charged by the Central bank on loans made to banks.

98 AB Report, US–AD and CVD (China), para. 494.

99 Ibid., para. 523.

100 See GPX Int'l Tire Corp. v. United States, 645 F. Supp. 2d 1231 (Court of International Trade 2009) and GPX Int'l Tire Corp. v. United States, 715 F. Supp. 2d 1337 (Court of International Trade 2010).

101 See GPX International Tire Corp. et al. v. United States, 666 F.3d 732 (Fed. Cir. 2011), reh'g granted, 678 F.3d 1308 (Fed. Cir. 2012).

102 H.R. 4105, 112th Congress, 2nd Session, Pub. L. No. 112–99, 126 Stat. 265 (2012).

103 GPX Int'l appealed the constitutionality of the new legislation. The issue of constitutionality first arose in the immediate aftermath of the legislation, when the Court of Appeals asked the parties for briefs on the implications of the new legislation for the pending case. GPX raised the constitutional issues. The Court of Appeals decided to send the case back to the Court of International Trade to hear the constitutional issues in the first instance. GPX's brief raised three constitutional issues concerning the retroactivity provisions of the new law: (1) that they impermissibly impose punishment in violation of the Ex Post Facto Clause; (2) that they fail the requirements for a retroactive tax to be consistent with the Due Process Clause; and (3) that they apply only to certain importers, in violation of the Equal Protection Clause. As of this writing, the Court has not yet ruled on these constitutional-law arguments.

The views expressed in this paper are those of the authors and all omissions and errors are also of the authors. We would like to thank Brian Gatta for helpful comments.

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