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World Trade Organization Establishes Panel to Address U.S. Challenge to China’s Duties on Autos

10/23/2012

10/23/2012

Washington, D.C. – United States Trade Representative Ron Kirk announced today that, in response to a request from the United States, the World Trade Organization (WTO) established a dispute settlement panel to address China’s imposition of antidumping duties (ADs) and countervailing duties (CVDs) on automobiles from the United States. The United States is challenging China’s imposition of duties allegedly because U.S. automobiles were subsidized and sold at less than fair value (i.e., “dumped”) into the Chinese market. The Chinese duties affect more than $3 billion in exports of American-produced automobiles.

“The United States today obtained establishment of a panel by the WTO to review China’s unfair imposition of duties on U.S. autos. We will not stand idly by while China misuses trade remedy procedures and puts American jobs at risk,” said Ambassador Kirk. “As we have demonstrated in numerous cases, we are serious about holding China accountable to its WTO commitments and ensuring that there is a level playing field for American workers and businesses.”

More information about the dispute may be found here.

Background

Shortly after President Obama decided in September 2009 to impose a safeguard measure against Chinese tire imports, China’s Ministry of Commerce announced that it would initiate antidumping and countervailing duty investigations of imports of American-made cars and sport utility vehicles (SUVs). China’s Ministry of Commerce initiated those investigations two months later. In May 2011, China’s Ministry of Commerce issued final determinations in which it found that imports of American-made automobiles had been sold at less than fair value (i.e., “dumped”) into the Chinese market and had also benefited from subsidies. However, at that time, China suspended the imposition of duties.

Subsequently, in December 2011, China began imposing both ADs and CVDs on imports of American-produced automobiles. The ADs range from 2.0 percent to 8.9 percent, with an “all others” rate of 21.5 percent, and the CVDs range from 6.2 percent to 12.9 percent, with an “all others” rate of 12.9 percent. The specific products affected by the duties are American-produced cars and SUVs with an engine capacity of 2.5 liters or larger.

On July 5, 2012, after working closely with the U.S. Department of Commerce and the U.S. International Trade Commission to analyze China’s determinations, the United States requested consultations with China regarding China’s imposition of ADs and CVDs. The United States believes that China failed to objectively examine the evidence and made unsupported findings of injury to China’s domestic industry. The United States also believes that China failed to disclose “essential facts” underlying its conclusions; failed to provide an adequate explanation of its conclusions; improperly used investigative procedures; and failed to require non-confidential summaries of Chinese company submissions. Consultations were held in Geneva on August, 23, 2012, but were unable to resolve the dispute.

WTO rules permit China to impose duties on imports of merchandise that are subsidized or dumped – provided those imports cause injury to the domestic industry. But these rules also require WTO Members to follow specific procedures and apply defined legal standards when conducting the investigations that determine whether duties are warranted. The U.S. panel request alleges that Chinese authorities failed to abide by applicable procedures and legal standards, including by finding injury to China's domestic industry without objectively examining the evidence, and by failing to adhere to various transparency and due process requirements.

This is the third time that the Administration has challenged China’s misuse of trade remedies at the WTO. In the first dispute, commenced in September 2010, the United States challenged China's imposition of ADs and CVDs against U.S. exports of certain grain-oriented flat-rolled electrical steel products. The panel in that WTO dispute issued its report in July 2012, largely siding with the United States. China subsequently appealed, and the Appellate Body rejected China’s appeal in its entirety in October 2012. In the other earlier dispute, commenced in September 2011, the United States is challenging China’s imposition of ADs and CVDs against U.S. exports of chicken broiler products. Panel proceedings in that dispute are ongoing.