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U.S. Wins Trade Enforcement Challenge to China’s Duties on Steel

China Revokes Illegal Duties Burdening U.S. High-Tech Steel Exports Following U.S. Action

Washington, D.C. – U.S. Trade Representative Michael Froman announced today that the United States has prevailed in a WTO challenge to China’s compliance actions following WTO findings in 2012, that China’s duties on high-tech steel were inconsistent with WTO rules – duties that contributed to over $250 million in annual export losses for American steel exporters.  This compliance challenge was the first time any WTO Member had initiated a WTO proceeding to challenge a claim by China that it had complied with adverse WTO findings.

In 2012, the United States prevailed in a WTO dispute that found that China broke WTO rules by imposing antidumping and countervailing duties on U.S. exports of grain oriented electrical steel (“GOES”).  Despite these adverse findings, China decided to continue to impose duties on GOES from the United States and claimed that its new rationale for the duties brought China into WTO compliance.  The United States then took the unprecedented step of challenging China’s claim to ensure that China lived up to its WTO obligations and stopped misusing trade remedies in a manner that harmed American workers and businesses.

“The Obama Administration is committed to standing up for American workers,” said Ambassador Froman. “When China decided to maintain its WTO illegal duties, we did not hesitate to challenge that action. The WTO report confirms we were right. Following our challenge, China terminated those duties just a few months ago, reopening a more than $250 million market for American workers and steel companies. Today's report highlights once again that the United States can and will ensure that our trading partners live up to their obligations.”

This enforcement win, the second received this year, underscores the Administration’s strong record enforcing U.S. rights under our trade agreements.  Recent WTO victories include:

  • In June 2014, the WTO found that China breached WTO rules by imposing unjustified extra duties on American cars and SUVs.  In 2013, an estimated $5.1 billion of U.S. auto exports were covered by those duties.
     
  • In August 2014, the WTO found that China breached WTO rules by imposing duties and quotas on exports of rare earths, tungsten, and molybdenum.  Those export restraints promote China’s own industry and discriminate against U.S. companies using those materials, which are key inputs by critical American manufacturing sectors, including hybrid car batteries, wind turbines, energy-efficient lighting, steel, advanced electronics, automobiles, petroleum, and chemicals. 
     
  • In January of this year, the WTO found that Argentina’s import licensing requirements and other import restrictions breach international trade rules.  These restrictions potentially affect billions of dollars in U.S. exports each year, including exports of energy products, electronics and machinery, aerospace equipment, pharmaceuticals, precision instruments, medical devices, motor vehicle parts, and agricultural products.
     
  • In June of this year, the WTO found against India’s ban on products such as poultry meat, eggs, and live pigs allegedly maintained to protect India against avian influenza.  The WTO panel and Appellate Body overwhelmingly agreed with U.S. claims that, for example, India’s ban is not based on international standards or a risk assessment, India discriminates against U.S. products in favor of Indian products, India’s measures are more trade restrictive than necessary because it is safe to import U.S. products meeting international standards, and India’s restrictions are not adapted to the characteristics of U.S. exporting regions.

Since 2009, this Administration has brought 19 enforcement actions in the WTO, and won every single one decided thus far.
 

BACKGROUND

GOES is a high-tech, high-value magnetic specialty steel that is primarily used by the power generating industry in transformers, rectifiers, reactors, and large electric machines.  AK Steel Corporation, based in Ohio, and Allegheny Ludlum, based in Pennsylvania, manufacture GOES in the United States.

On April 10, 2010, China imposed antidumping (“AD”) and countervailing duties (“CVDs”) on GOES from the United States. Before China imposed these duties, U.S. exports of GOES amounted to more than $260 million.  The year after China imposed the duties, the value of U.S. exports of GOES fell to less than $3 million.  The antidumping duties ranged as high as 64.8 percent, and the countervailing (anti-subsidy) duties ranged as high 44.6 percent.

On September 15, 2010, the United States initiated dispute settlement proceedings challenging China’s imposition of these duties.  The WTO panel decided in favor of the United States, finding that China breached several procedural and due process obligations in conducting its AD and CVD investigations. 

In addition, the Panel found numerous defects in China’s determination that U.S. exports caused adverse price effects in the Chinese market.  The Panel also found that China claimed unsupported findings that U.S. exports caused injury to China’s domestic industry.  In October 2012, the Appellate Body upheld the Panel’s findings relating to China’s material injury determination.

The WTO recommended that China bring its measures into conformity with WTO rules.  On July 31, 2013, China issued a re-determination, which continued the imposition of AD/CVD duties on imports of GOES from the United States -- again finding that U.S. exports caused adverse price effects in the Chinese market, and that U.S. exports caused material injury to the domestic industry. 

On January 13, 2014, the United States initiated a compliance challenge.  As in the original proceeding, the compliance panel sided with the United States, finding numerous defects in China’s determination that U.S. exports caused adverse price effects in the Chinese market.  The compliance panel also found that China again claimed unsupported findings that U.S. exports caused injury to China’s domestic industrys.  Furthermore, China failed to disclose the essential facts underlying its revised material injury determination.  As a result, the WTO panel found that China failed to comply with the recommendations and rulings of the DSB in this dispute.

In April 2015, after the compliance panel’s meeting with the parties and after the parties had submitted all of their submissions, China’s Ministry of Commerce (MOFCOM) revoked the AD and CVD duties on GOES from the United States before the compliance panel issued its public report. 

Attorneys from the Monitoring & Enforcement unit of USTR’s Office of General Counsel worked closely with staff from the U.S. International Trade Commission and other USTR offices in preparing and litigating this compliance challenge.  

See a copy of the compliance panel’s report here.