CHINA –
COUNTERVAILING AND ANTI-DUMPING DUTIES ON
GRAIN ORIENTED FLAT-ROLLED ELECTRICAL STEEL
FROM THE UNITED STATES
RECOURSE TO ARTICLE 21.5 OF THE DSU BY THE
UNITED STATES
Report of the Panel
BCI
deleted, as indicated [***]
TABLE OF CONTENTS
1 Introduction.. 10
1.1 Complaint by the United States. 10
1.2 Panel establishment and composition. 10
1.3 Panel proceedings. 10
1.3.1 General 10
1.3.2 Working procedures on Business
Confidential Information (BCI) 11
2 Factual aspects. 11
2.1 The measures at issue. 11
3 Parties' requests for
findings and recommendations. 11
4 Arguments of the
parties. 11
5 Arguments of the thiRd
parties. 11
6 Interim review... 12
6.1 Requests submitted by the United States. 12
6.2 Requests submitted by China. 13
6.3 Editorial changes. 16
7 Findings. 16
7.1 General principles regarding treaty
interpretation, the standard of review, and burden of proof 16
7.1.1 Treaty interpretation. 16
7.1.2 Standard of review.. 17
7.1.3 Burden of proof 18
7.2 The United States' claim with
respect to adverse impact 18
7.2.1
Main arguments of the parties. 18
7.2.2
Evaluation by the Panel 19
7.2.3
Conclusion regarding adverse impact 22
7.3 Whether MOFCOM's Redetermination
regarding price effects is consistent with Articles 3.1 and 3.2 of the
Anti-Dumping Agreement and Articles 15.1 and 15.2 of the
SCM Agreement 22
7.3.1 Introduction. 22
7.3.2 Provisions at issue. 23
7.3.3 Main arguments of the parties. 23
7.3.3.1 United States. 23
7.3.3.2 China. 24
7.3.4 Main arguments of the third parties. 25
7.3.5 Evaluation by the Panel 26
7.3.5.1 The effect of the increase in the
volume and market share of subject imports on domestic like product prices. 27
7.3.5.1.1 Price Suppression in 2008. 29
7.3.5.1.2 Price suppression and depression in
Q1 2009. 30
7.3.5.2 MOFCOM's finding regarding price
competition between subject imports and the domestic like product 33
7.3.5.2.1 AK Steel's evidence of
non-substitutability of certain product categories. 33
7.3.5.2.2 Seven factors supporting MOFCOM's
finding of price competition. 36
7.3.5.2.3 Conclusions on price competition. 42
7.3.6 Conclusion. 43
7.4 The United States' claim with
respect to causation. 43
7.4.1 Provisions at issue. 44
7.4.2 Factual background. 44
7.4.3 Legal framework. 45
7.4.4 Price effects. 45
7.4.4.1 Main arguments of the parties. 45
7.4.4.2 Main arguments of the third parties. 46
7.4.4.3 Evaluation by the Panel 46
7.4.5 Economies of scale. 46
7.4.5.1 Main arguments of the parties. 46
7.4.5.2 Main arguments of the third parties. 47
7.4.5.3 Evaluation by the Panel 47
7.4.6 Domestic industry expansion and
increased production. 48
7.4.6.1 Main arguments of the parties. 48
7.4.6.2 Main arguments of the third parties. 49
7.4.6.3 Evaluation by the Panel 49
7.4.7 Non-subject imports. 51
7.4.7.1 Main arguments of the parties. 51
7.4.7.2 Main arguments of the third parties. 52
7.4.7.3 Evaluation by the Panel 52
7.4.8 Conclusion regarding causation. 53
7.5
The United States' claim with respect to disclosure. 53
7.5.1
Introduction. 53
7.5.2
Provisions at issue. 53
7.5.3 Legal framework. 53
7.5.4 Failure to disclose essential facts
regarding MOFCOM's price effects determination. 54
7.5.4.1 Main arguments of the parties. 54
7.5.4.1.1 United States. 54
7.5.4.1.2 China. 55
7.5.4.2 Main arguments of the third parties. 56
7.5.4.3
Evaluation by the Panel 56
7.5.4.3.1 Alleged non-disclosure of
information underlying MOFCOM's conclusion that the trend of the prices of the
subject imports and the domestic like product were the same. 56
7.5.4.3.2 Alleged non-disclosure of essential
facts regarding MOFCOM's finding that the domestic industry's loss in market
share in 2008 led it to slash prices by over 30% in Q1 2009. 57
7.5.4.3.3 Essential facts regarding MOFCOM's
finding that the price-cost differential for Wuhan decreased in 2008. 58
7.5.5 Failure to disclose essential facts
regarding MOFCOM's causation determination. 58
7.5.5.1 Main arguments of the parties. 58
7.5.5.1.1 United States. 58
7.5.5.1.2 China. 59
7.5.5.2 Main arguments of the third parties. 59
7.5.5.3
Evaluation by the Panel 60
7.5.5.3.1 Essential facts regarding "sales obstacles". 60
7.5.5.3.2
Essential facts regarding economies of scale. 60
7.5.5.3.3
Essential facts regarding capacity, output and demand. 60
7.5.5.3.4
Essential facts regarding inventory overhang. 61
7.6
The United States' claim with respect to public notice. 61
7.6.1
Introduction. 61
7.6.2
Provisions at issue. 62
7.6.3
Legal framework. 62
7.6.4 Main arguments of the parties. 64
7.6.4.1 United States. 64
7.6.4.2
China. 64
7.6.5 Main arguments of the third parties. 64
7.6.6 Evaluation by the Panel 64
8 Conclusions. 66
List of Annexes
ANNEX A
Working Procedures of The Panel
Contents
|
Page
|
Annex A-1
|
Working
Procedures of the Panel
|
A-2
|
Annex A-2
|
Additional Working
Procedures on Business Confidential Information
|
A-6
|
ANNEX B
ARGUMENTS OF THE UNITED
STATES
Contents
|
Page
|
Annex
B-1
|
Executive
summary of the first written submission of the United States
|
B-2
|
Annex
B-2
|
Executive
summary of the second written submission of the United States
|
B-9
|
Annex
B-3
|
Executive
summary of the oral statements of the United States at the Substantive
Meeting
|
B-17
|
Annex
B-4
|
Executive
summary of the oral statement of the United States at the
Interim Review Meeting
|
B-21
|
ANNEX C
Arguments
of CHINA
Contents
|
Page
|
Annex
C-1
|
Executive
summary of the first written submission of China
|
C-2
|
Annex
C-2
|
Executive
summary of the second written submission of China
|
C-10
|
Annex
C-3
|
Executive
summary of the oral statements of China at the Substantive Meeting
|
C-18
|
Annex
C-4
|
Executive
summary of the oral statement of China at the Interim Review Meeting
|
C-22
|
ANNEX D
Arguments of the Third Parties
Contents
|
Page
|
Annex D-1
|
Integrated executive
summary of the arguments of the European Union
|
D-2
|
Annex D-2
|
Integrated executive
summary of the arguments of Japan
|
D-6
|
CASES CITED IN THIS
REPORT
Short title
|
Full case title and citation
|
Argentina – Ceramic Tiles
|
Panel Report, Argentina – Definitive
Anti‑Dumping Measures on Imports of Ceramic Floor Tiles from Italy,
WT/DS189/R, adopted 5 November 2001, DSR 2001:XII, p. 6241
|
Argentina – Poultry Anti‑Dumping
Duties
|
Panel Report, Argentina – Definitive
Anti‑Dumping Duties on Poultry from Brazil, WT/DS241/R, adopted 19
May 2003, DSR 2003:V, p. 1727
|
Canada – Aircraft
(Article 21.5 – Brazil)
|
Appellate Body Report, Canada –
Measures Affecting the Export of Civilian Aircraft – Recourse by Brazil to
Article 21.5 of the DSU, WT/DS70/AB/RW, adopted 4 August
2000, DSR 2000:IX, p. 4299
|
China – Autos (US)
|
Panel Report, China – Anti-Dumping and
Countervailing Duties on Certain Automobiles from the United States,
WT/DS440/R and Add.1, adopted 18 June 2014
|
China – Broiler Products
|
Panel Report, China -
Anti-Dumping and Countervailing Duty Measures on Broiler Products from the
United States, WT/DS427/R and Add.1, adopted 25 September
2013
|
China – GOES
|
Appellate Body Report, China –
Countervailing and Anti-Dumping Duties on Grain Oriented Flat-Rolled
Electrical Steel from the United States, WT/DS414/AB/R, adopted 16 November
2012, DSR 2012:XII, p. 6251
|
China – GOES
|
Panel Report, China – Countervailing
and Anti-Dumping Duties on Grain Oriented Flat-Rolled Electrical Steel from
the United States, WT/DS414/R and Add.1, adopted 16 November
2012, upheld by Appellate Body Report WT/DS414/AB/R, DSR 2012:XII, p. 6369
|
China –
HP-SSST (Japan)/ China – HP-SSST (EU)
|
Panel Reports, China – Measures Imposing
Anti-Dumping Duties on High‑Performance Stainless Steel Seamless Tubes
("HP-SSST") from Japan / China – Measures Imposing Anti-Dumping
Duties on High-Performance Stainless Steel Seamless Tubes
("HP-SSST") from the European Union, WT/DS454/R and
Add.1 / WT/DS460/R and Add.1, circulated to WTO Members 13 February 2015
[adoption/appeal pending]
|
China – X-Ray Equipment
|
Panel Report, China – Definitive Anti-Dumping Duties on X-Ray Security Inspection
Equipment from the European Union, WT/DS425/R and Add.1, adopted
24 April 2013
|
EC – Approval and Marketing of
Biotech Products
|
Panel Reports, European Communities –
Measures Affecting the Approval and Marketing of Biotech Products,
WT/DS291/R, Add.1 to Add.9 and Corr.1 / WT/DS292/R, Add.1 to Add.9 and Corr.1
/ WT/DS293/R, Add.1 to Add.9 and Corr.1, adopted 21 November 2006,
DSR 2006:III, p. 847
|
EC – Bananas III (US)
|
Panel Report, European Communities –
Regime for the Importation, Sale and Distribution of Bananas, Complaint by
the United States, WT/DS27/R/USA, adopted 25 September 1997,
as modified by Appellate Body Report WT/DS27/AB/R, DSR 1997:II,
p. 943
|
EC –
Bananas III
(Article 21.5 – Ecuador)
|
Panel Report, European Communities –
Regime for the Importation, Sale and Distribution of Bananas – Recourse to
Article 21.5 of the DSU by Ecuador, WT/DS27/RW/ECU, adopted 6
May 1999, DSR 1999:II, p. 803
|
EC –
Bananas III
(Article 21.5 – Ecuador II)
/
EC – Bananas III
(Article 21.5 – US)
|
Appellate Body Reports, European
Communities – Regime for the Importation, Sale and Distribution of Bananas –
Second Recourse to Article 21.5 of the DSU by Ecuador, WT/DS27/AB/RW2/ECU, adopted 11 December 2008, and
Corr.1 / European Communities – Regime for the Importation,
Sale and Distribution of Bananas – Recourse to Article 21.5 of the DSU
by the United States, WT/DS27/AB/RW/USA and Corr.1, adopted
22 December 2008, DSR 2008:XVIII, p. 7165
|
EC – Bananas III
(Article 21.5 – US)
|
Panel Report, European
Communities – Regime for the Importation, Sale and Distribution of Bananas –
Recourse to Article 21.5 of the DSU by the United States,
WT/DS27/RW/USA and Corr.1, adopted 22 December 2008, upheld by Appellate
Body Report WT/DS27/AB/RW/USA, DSR 2008:XIX, p. 7761
|
EC – Bed Linen
|
Appellate Body Report, European
Communities – Anti‑Dumping Duties on Imports of Cotton‑Type Bed Linen from
India, WT/DS141/AB/R, adopted 12 March 2001, DSR 2001:V,
p. 2049
|
EC – Bed Linen
|
Panel Report, European Communities –
Anti‑Dumping Duties on Imports of Cotton‑Type Bed Linen from India,
WT/DS141/R, adopted 12 March 2001, as modified by Appellate Body Report
WT/DS141/AB/R, DSR 2001:VI, p. 2077
|
EC – Bed Linen
(Article 21.5 – India)
|
Appellate Body Report, European
Communities – Anti‑Dumping Duties on Imports of Cotton‑Type Bed Linen from
India – Recourse to Article 21.5 of the DSU by India, WT/DS141/AB/RW, adopted 24 April 2003,
DSR 2003:III, p. 965
|
EC – Bed Linen
(Article 21.5 – India)
|
Panel Report, European Communities –
Anti‑Dumping Duties on Imports of Cotton‑Type Bed Linen from India – Recourse
to Article 21.5 of the DSU by India,
WT/DS141/RW, adopted 24 April 2003, as modified by Appellate Body Report
WT/DS141/AB/RW, DSR 2003:IV, p. 1269
|
EC – Chicken Cuts
|
Appellate Body Report, European
Communities – Customs Classification of Frozen
Boneless Chicken Cuts, WT/DS269/AB/R, WT/DS286/AB/R, adopted
27 September 2005, and Corr.1, DSR 2005:XIX, p. 9157
|
EC – Hormones
|
Appellate Body Report, EC
Measures Concerning Meat and Meat Products (Hormones),
WT/DS26/AB/R, WT/DS48/AB/R, adopted 13 February 1998, DSR 1998:I,
p. 135
|
EC – IT Products
|
Panel Reports, European
Communities and its member States – Tariff Treatment of Certain Information
Technology Products, WT/DS375/R / WT/DS376/R
/ WT/DS377/R, adopted 21 September 2010, DSR 2010:III, p. 933
|
EC – Salmon (Norway)
|
Panel Report, European Communities –
Anti‑Dumping Measure on Farmed Salmon from Norway, WT/DS337/R,
adopted 15 January 2008, and Corr.1, DSR 2008:I, p. 3
|
EC – Sardines
|
Appellate Body Report, European
Communities – Trade Description of Sardines, WT/DS231/AB/R,
adopted 23 October 2002, DSR 2002:VIII, p. 3359
|
EC – Selected Customs Matters
|
Appellate Body Report, European
Communities – Selected Customs Matters, WT/DS315/AB/R, adopted
11 December 2006, DSR 2006:IX, p. 3791
|
EU – Footwear (China)
|
Panel Report, European Union –
Anti-Dumping Measures on Certain Footwear from China, WT/DS405/R,
adopted 22 February 2012, DSR 2012:IX, p. 4585
|
Korea – Certain Paper
(Article 21.5 – Indonesia)
|
Panel Report, Korea – Anti‑Dumping Duties on Imports of Certain Paper from
Indonesia – Recourse to Article 21.5 of the DSU by Indonesia,
WT/DS312/RW, adopted 22 October 2007, DSR 2007:VIII, p. 3369
|
Mexico – Olive Oil
|
Panel Report, Mexico – Definitive
Countervailing Measures on Olive Oil from the European Communities,
WT/DS341/R, adopted 21 October 2008, DSR 2008:IX, p. 3179
|
US – Countervailing Duty
Investigation on DRAMS
|
Appellate Body Report, United
States – Countervailing Duty Investigation on Dynamic Random Access Memory
Semiconductors (DRAMS) from Korea, WT/DS296/AB/R, adopted
20 July 2005, DSR 2005:XVI, p. 8131
|
US – Countervailing Measures on
Certain EC Products
(Article 21.5 – EC)
|
Panel Report, United States –
Countervailing Measures Concerning Certain Products from the European
Communities – Recourse to Article 21.5 of the DSU by the European
Communities, WT/DS212/RW, adopted 27 September 2005,
DSR 2005:XVIII, p. 8950
|
US – FSC
(Article 21.5 – EC)
|
Appellate Body Report, United
States – Tax Treatment for "Foreign Sales Corporations" – Recourse
to Article 21.5 of the DSU by the European Communities,
WT/DS108/AB/RW, adopted 29 January 2002, DSR 2002:I, p. 55
|
US – FSC
(Article 21.5 – EC II)
|
Appellate Body Report, United
States – Tax Treatment for "Foreign Sales Corporations" – Second
Recourse to Article 21.5 of the DSU by the European Communities,
WT/DS108/AB/RW2, adopted 14 March 2006, DSR 2006:XI, p. 4721
|
US – Hot‑Rolled Steel
|
Appellate Body Report, United
States – Anti‑Dumping Measures on Certain Hot‑Rolled Steel Products from
Japan, WT/DS184/AB/R, adopted 23 August 2001,
DSR 2001:X, p. 4697
|
US – Lamb
|
Appellate Body Report, United
States – Safeguard Measures on Imports of Fresh, Chilled or Frozen Lamb Meat
from New Zealand and Australia, WT/DS177/AB/R, WT/DS178/AB/R,
adopted 16 May 2001, DSR 2001:IX, p. 4051
|
US – Oil Country Tubular Goods
Sunset Reviews
(Article 21.5 – Argentina)
|
Appellate Body Report, United
States – Sunset Reviews of Anti‑Dumping Measures on Oil Country Tubular Goods
from Argentina – Recourse to Article 21.5 of the DSU by Argentina,
WT/DS268/AB/RW, adopted 11 May 2007, DSR 2007:IX, p. 3523
|
US – Oil Country Tubular Goods
Sunset Reviews
(Article 21.5 – Argentina)
|
Panel Report, United States – Sunset
Reviews of Anti‑Dumping Measures on Oil Country Tubular Goods from Argentina
– Recourse to Article 21.5 of the DSU by Argentina,
WT/DS268/RW, adopted 11 May 2007, as modified by Appellate Body Report
WT/DS268/AB/RW, DSR 2007:IX, p. 3609
|
US – Softwood Lumber VI
(Article 21.5 – Canada)
|
Appellate Body Report, United
States – Investigation of the International Trade Commission in Softwood
Lumber from Canada – Recourse to Article 21.5 of the DSU by Canada,
WT/DS277/AB/RW, adopted 9 May 2006, and Corr.1, DSR 2006:XI,
p. 4865
|
US – Tyres (China)
|
Appellate Body Report, United
States – Measures Affecting Imports of Certain Passenger Vehicle and Light
Truck Tyres from China,
WT/DS399/AB/R, adopted 5 October 2011, DSR 2011:IX, p. 4811
|
US – Wool Shirts and Blouses
|
Appellate Body Report, United
States – Measure Affecting Imports of Woven Wool Shirts and Blouses from
India, WT/DS33/AB/R, adopted 23 May 1997, and Corr.1,
DSR 1997:I, p. 323
|
US – Zeroing (EC)
(Article 21.5 – EC)
|
Appellate Body Report, United
States – Laws, Regulations and Methodology for Calculating Dumping Margins
("Zeroing") – Recourse to Article 21.5 of the DSU by the
European Communities, WT/DS294/AB/RW and Corr.1, adopted
11 June 2009, DSR 2009:VII, p. 2911
|
US – Zeroing (EC)
(Article 21.5 – EC)
|
Panel Report, United States – Laws,
Regulations and Methodology for Calculating Dumping Margins
("Zeroing") – Recourse to Article 21.5 of the DSU by the
European Communities, WT/DS294/RW, adopted 11 June 2009, as
modified by Appellate Body Report WT/DS294/AB/RW, DSR 2009:VII,
p. 3117
|
ABBREVIATIONS USED
IN THis REPORT
Abbreviation
|
Description
|
Anti-Dumping Agreement
|
Agreement on Implementation of Article VI of the
General Agreement on Tariffs and Trade 1994
|
AK Steel
|
AK Steel Corporation
|
AK Steel Supplementary Questionnaire Response
|
AK Steel Corporation, Supplementary Industry Injury
Investigation Questionnaire Response (Exhibit US-18) (BCI)
|
Allegheny Ludlum
|
ATI Allegheny Ludlum Corporation
|
AUV
|
Average unit value
|
Baosteel
|
Baosteel Group Corporation
|
DSU
|
Understanding on Rules and Procedures Governing the
Settlement of Disputes
|
GATT 1994
|
General Agreement on Tariffs and Trade 1994
|
GOES
|
Grain oriented flat-rolled electrical steel
|
MOFCOM
|
Ministry of Commerce of the People's Republic of
China
|
Original Determination
|
MOFCOM, Final Determination in Anti-Dumping and
Anti-Subsidy Investigations on GOES Imports from the US and Russia, No. 21,
10 April 2010 (Exhibit US-4)
|
Price negotiation letters
|
Price negotiation letters exchanged between a Chinese
producer and Chinese purchasers (Exhibits US-7, US-8 and US-9) (BCI)
|
Redetermination
|
MOFCOM, Determination on the Re-investigation of
Anti-Dumping and Countervailing Duties on Grain Oriented Flat-Rolled
Electrical Steel Imports from the United States, Public Notice [2013]
No. 51, including its annexes (Exhibit US-1)
|
Redetermination –
China's translation
|
MOFCOM, Determination of the Ministry of Commerce of
the People's Republic of China on the Anti-dumping and Countervailing
Reinvestigation on Imports of Grain Oriented Flat-rolled Electrical Steel
Originating in the United States (Exhibit CHN-1)
|
Redetermination Disclosure
|
MOFCOM, Notice of information disclosure before the
industry injury verdict of the anti-dumping on imported grain-oriented
silicon electrical steel with the country of origin in the United States
and Russia and the anti-subsidy on the imported grain-oriented silicon
electrical steel with the country of origin in the United States, Public
Notice [2013] No. 327 (Exhibit US-3)
|
Redetermination
Disclosure – China's translation
|
MOFCOM, Notice of Disclosure Prior to Industry Injury
Determination in the Anti-dumping Reinvestigation on Imports of Grain
Oriented Flat-rolled Electrical Steel originating in the U.S. and Russia and
the Anti-subsidy Reinvestigation on Imports of Grain Oriented Flat-rolled Electrical
Steel originating in the U.S. SDCYCH [2013] No. 327 (Exhibit CHN-2)
|
Russian contract
|
Contract between a Russian producer and a Chinese
purchaser (Exhibit US-6) (BCI)
|
SCM Agreement
|
Agreement on Subsidies and Countervailing Measures
|
Wuhan
|
Wuhan Iron and Steel Corporation
|
WTO Agreement
|
Marrakesh Agreement Establishing the World Trade
Organization
|
1.1. This compliance dispute concerns the challenge by the
United States to measures taken by China to comply with the rulings and
recommendations of the Dispute Settlement Body (DSB) in China – Countervailing
and Anti-Dumping duties on Grain Oriented Flat-rolled Electrical Steel from the
United States.
1.2. On 13 January 2014, the United States requested consultations with
China pursuant to paragraph 1 of the understanding reached on 19 August 2013
between China and the United States in "Agreed Procedures under
Articles 21 and 22 of the Dispute Settlement Understanding"
(Sequencing Agreement), which states that should the United States
consider that the situation described in Article 21.5 of the Understanding
on Rules and Procedures Governing the Settlement of Dispute ("DSU")
exists, the United States will request that China enter into consultations
with the United States.
1.3. Consultations were held on 24 January 2014, but failed to resolve
the dispute.
1.4. On 13 February 2014, the United States requested the
establishment of a panel pursuant to Articles 6 and 21.5 of the DSU with
standard terms of reference.[1]
1.5. At its meeting on 26 February 2014, the Dispute Settlement Body
(DSB) referred this dispute, if possible to the original Panel, in accordance
with Article 21.5 of the DSU.
1.6. The Panel's terms of reference are the
following:
To examine, in the light of the relevant provisions of the covered
agreements cited by the parties to the dispute, the matter referred to the DSB
by the United States in document WT/DS414/16 and to make such findings as
will assist the DSB in making the recommendations or in giving the rulings
provided for in those agreements.[2]
1.7. In accordance with Article 21.5 of the DSU, the Panel was
composed on 17 March 2014 as follows:
Chairperson: Mr John Adank
Members: Mr Anthony Abad
Mr Jan Heukelman
1.8. The European Union, India, Japan and the Russian Federation notified
their interest in participating in the Panel proceedings as third parties.
1.9. After consultation with the parties, the Panel adopted its Working
Procedures[3]
and timetable on 22 May 2014. After further consulting the parties, the Panel
revised its timetable on 24 October 2014. The Panel further modified
its timetable on 19 January 2015.
1.10. The Panel held its substantive meeting with the parties on 14 and 15
October 2014. A session with the third parties took place on 15 October 2014.
The Panel issued its Interim Report to the parties on 17 March 2015. At the
request of China, the Panel held a further meeting with the parties to consider
issues identified in the parties' requests for interim review on 23 April 2015.
The Panel issued its Final Report to the parties on 5 May 2015.
1.11. After consultation
with both parties, the Panel adopted, on 22 May 2014, additional procedures for
the protection of BCI.[4]
2.1. This dispute concerns measures taken by China to implement the DSB
recommendations and rulings in China – Countervailing and
Anti-Dumping duties on Grain Oriented Flat-rolled Electrical Steel from the United States,
as set forth in MOFCOM's Redetermination issued on 31 July 2013, pursuant to
which China continues to impose anti-dumping and countervailing duties on
imports of GOES from the United States.
3.1. The United States requests that the Panel find that:
a. MOFCOM's injury determination is inconsistent with
Articles 3.1, 3.2, 3.4 and 3.5 of the Anti-Dumping Agreement and
Articles 15.1, 15.2, 15.4 and 15.5 of the SCM Agreement.
Specifically:
i.
MOFCOM's price effects
analysis is inconsistent with Articles 3.1 and 3.2 of the Anti‑Dumping
Agreement and Articles 15.1 and 15.2 of the SCM Agreement;
ii. MOFCOM's impact analysis is inconsistent with Articles 3.1 and
3.4 of the Anti‑Dumping Agreement and Articles 15.1 and 15.4 of the
SCM Agreement; and
iii. MOFCOM's causation analysis is inconsistent with Articles 3.1
and 3.5 of the Anti‑Dumping Agreement and Articles 15.1 and 15.5 of the
SCM Agreement.
b. MOFCOM acted inconsistently with its obligations under
Article 6.9 of the Anti-Dumping Agreement and Article 12.8 of the
SCM Agreement by failing to disclose certain essential facts in connection
with its Redetermination.
c. MOFCOM acted inconsistently with its obligations under Articles 12.2
and 12.2.2 of the Anti-Dumping Agreement and Articles 22.3 and 22.5 of the
SCM Agreement by failing to set forth in sufficient detail in its
Redetermination or a separate report, China's findings and conclusions on
certain material issues of fact and law in connection with its Redetermination.
3.2. China requests that the Panel reject the United States' claims
in this dispute in their entirety.
4.1. The arguments of the parties are reflected in their executive
summaries, provided to the Panel in accordance with paragraph 18 of the Working
Procedures adopted by the Panel (see Annexes B and C).
5.1. The arguments of the European Union and Japan are reflected in their
executive summaries, provided in accordance with paragraph 19 of the Working
Procedures adopted by the Panel (see Annex D). India and the Russian Federation
did not submit written or oral arguments to the Panel.
6.1. On 17 March 2015, the Panel submitted its Interim Report to the
parties. On 31 March 2015, the United States and China both submitted
written requests for the review of precise aspects of the Interim Report. In
addition, China requested an interim review meeting, which was held on 23 April
2015.
6.2. In accordance with Article 15.3 of the DSU, this section of the Report
sets out the Panel's response to the parties' requests made at the interim
review stage. We modified certain aspects of the Report in light of the parties'
comments where we considered it appropriate, as explained below. As a result of
the changes that we have made, the numbering of footnotes in the Final Report
has changed from the Interim Report. References to footnotes in this section
relate to the Final Report. References to paragraph numbers are to the Interim
Report.
6.3. The United
States requests that the Panel revise the last sentence of paragraph 7.20 of
the Interim Report to reflect the fact that it challenged China's argument
regarding the replacement of the term "low" with the term
"unfair" in MOFCOM's Redetermination, referring to its oral statement
at the Panel's meeting with the parties in this regard.[5]
China did not comment on this request.
6.4. We
have reviewed the United States' oral statement at the Panel's meeting with the
parties, and we have amended the last sentence of paragraph 7.20 to reflect
more accurately the arguments made by the United States.
6.5. The
United States requests that the Panel revise the last sentence of paragraph
7.63 of the Interim Report to align this sentence with the standard of review
as enunciated by the Panel at paragraph 7.4 and as applied by the Panel in
paragraphs 7.58 and 7.120.[6]
China did not comment on this request.
6.6. We
agree that, for consistency and clarity, the same terminology should be used in
our report where, as in this instance, the same standard is being applied and
the same meaning is intended. We have therefore amended the last sentence of
paragraph 7.63 to align this sentence with other references to the standard of
review as set out in paragraphs 7.4, 7.58 and 7.120.
6.7. The United States requests that the Panel modify its findings in
paragraph 8.2 of the Interim Report. The United States recalls that it
requested the establishment of the Panel pursuant to Article 21.5 of the DSU
because it considered that China's measures taken to comply were inconsistent
with the covered agreements, and as a result, China failed to comply with the
DSB's recommendations and rulings in this dispute, and suggests that the Panel
modify paragraph 8.2 to frame its findings of inconsistency in similar terms.[7]
At the interim review meeting, China commented that there was no need for the
new language suggested by the United States, contending that since the measures
at issue no longer exist, there is no basis for a statement that China has
failed to bring its measures into compliance.[8]
6.8. Having considered the matter, and in light of our decision regarding
the United States' request concerning paragraph 8.6 of the Interim Report below,
we have granted the United States' request and modified paragraph 8.2, albeit
using different language from that suggested by the United States. Notwithstanding
China's views concerning the termination of the measures, in this proceeding we
have found that the measures taken by China to comply with the recommendations
and rulings in the original dispute are inconsistent with relevant provisions
of the Anti-Dumping and SCM Agreements. In this context, we consider that the
conclusion that China failed to comply with the recommendations and rulings of
the DSB is justified, regardless of subsequent events.
6.9. The United States requests that the Panel delete the recommendation
set out in paragraph 8.6 of the Interim Report. The United States notes
that this is a compliance proceeding, and suggests that there is consequently
no need for the Panel to make a recommendation that China bring its measures
taken to comply into conformity. The United States contends that a panel in a
compliance proceeding is tasked with determining whether a measure taken to
comply by the Member concerned that is within the panel's terms of reference
exists or is inconsistent with a covered agreement, and asserts, relying on the
report of the Appellate Body in US – FSC (Article 21.5
– EC II)[9],
that the Panel fulfils its mandate when it concludes that China has failed to
implement the recommendations and rulings of the DSB, and that until a Member
has brought its measures found to be inconsistent by the DSB into full
compliance with its WTO obligations, the original recommendation by the DSB
will remain operative, and no further recommendation pertaining to the measure
taken to comply is necessary.[10] At
the interim review meeting, China argued that the original recommendations were
no longer operative, as there are no longer any disputed measures in effect to
which those recommendations could apply, and asserted that termination of the
measures at issue in this proceeding brings China into full compliance.[11]
6.10. While US – FSC (Article 21.5 – EC II) concerned
in particular a recommendation under Article 4.7 of the SCM Agreement, the
Appellate Body's reasoning suggests that a recommendation to bring the measures
taken to comply into conformity is not necessary in an Article 21.5 compliance
proceeding in any case, as the original recommendations and rulings of the DSB
under Article 19.1 remain in effect until fully complied with. The Appellate
Body and a number of panels have in fact taken this view and not issued
recommendations in Article 21.5 proceedings.[12]
As discussed below, at paragraphs 6.20-6.25, we have no evidence properly before us on the basis
of which we could conclude that there is no longer any disputed measure in
effect to which the original recommendations and rulings of the DSB could
apply, and thus no basis on which we could conclude that China is in compliance
with those recommendations and rulings.
6.11. Having considered the matter, we agree with the United States that a
recommendation is not necessary in this proceeding, and have therefore decided
to grant the United States' request and modified paragraph 8.6 to reflect our
views.
6.12. China
requests that paragraph 7.21 of the Interim Report be modified to reflect its
view that the term "unfair imports" is not unclear and that the
change from "low-priced imports" to "unfair imports" was
not cursory, and that the changes were necessary to refer more precisely to the
imports at issue and avoid confusion about whether MOFCOM had engaged in price
comparisons. China makes no specific suggestions in this regard.[13]
At the interim review meeting, the United States recalled its arguments on
this issue and argued that China provided no basis for its request.[14]
6.13. We
recall that we found China's explanation for the change in terminology, rather
than the term "unfair imports" itself, to be unclear. Nothing in
China's request affects our conclusion that the change in terminology appears
to have been made primarily to avoid the reference to low prices that both we
and the Appellate Body found problematic in the original dispute. Moreover, we
considered the change in terminology specifically in evaluating whether it
demonstrated a change in the Redetermination sufficient to allow the United
States to challenge MOFCOM's analysis of the relevant injury factors, concluding
that it did not. Accordingly, we see no reason to make any changes to paragraph
7.21, and deny China's request.
6.14. China
requests that the Panel delete paragraphs 7.55-7.57 and 7.66 of the Interim
Report. China notes that the Panel stated that it could "draw no
conclusion" on the quarterly data under the standard of review, and states
that it is not clear why the Panel included this discussion. In China's view,
the Panel should discuss and rely upon only those facts that the Panel finds
properly within its purview under the standard of review. China suggests that
the discussion at these paragraphs, and "elsewhere" in the Interim
Report, of facts the Panel believes are not properly before it should be
deleted. In addition, with respect to paragraph 7.56, China states that the
Panel appears to have transposed inadvertently the shift in market share by
subject imports and non-subject imports in Q1 2004. China makes no specific
suggestions in this context, and cites no support with respect to its assertion
regarding paragraph 7.56.[15]
At the interim review meeting, the United States observed that the facts at
issue were evidence submitted by China to the Panel, and that it was therefore
appropriate for the Panel to examine and discuss that evidence, including its
role in light of the standard of review and of the fact that it provided
further support for the Panel's findings. The United States asserted that no
changes to the report were therefore necessary.[16]
6.15. With
respect to the alleged "inadvertent transposition" of data in
paragraph 7.56, we have double-checked the figures set out in that paragraph
against those provided by China in its response to Panel question 14, and they
are the same. Therefore, there is no evidentiary basis for any changes to
paragraph 7.56 in this regard. Turning to the remainder of China's comments regarding
paragraphs 7.55 to 7.57 and 7.66, we note that while we made
"observations" in paragraphs 7.55 to 7.57 on
the basis of the quarterly data submitted by China, our findings in paragraph
7.66 were made on the basis of China Customs import data that was available to
MOFCOM and the data on subject import volume in Q1 2009 set out in MOFCOM's
Redetermination Disclosure. We do not consider that we are precluded from
making the observations in paragraphs 7.55 to 7.57,
despite the fact that the information in question was not relied on by MOFCOM.
We made it clear that we drew no conclusions, adverse or otherwise, concerning
shifts in market share based on the quarterly data submitted in this proceeding
by China, relying in our conclusions on evidence that was appropriately before
us in light of the standard of review. In light of the foregoing, we deny
China's request to delete paragraphs 7.55-7.57 and 7.66, and have made no
changes to paragraph 7.56.
6.16. China requests the Panel to clarify
that the only pricing data on the record were average unit values ("AUVs")
and to reflect China's explanation that MOFCOM addressed the price data, but
did not compare the relative prices of subject imports and the domestic like
product because of the deficiencies associated with AUV comparisons pointed out
by the Appellate Body, referring specifically to paragraphs 7.58 and 7.63-7.65 of
the Interim Report in this regard.[17]
At the interim review meeting, the United States, noting that China offered no
basis for the Panel to modify the reasoning or findings in question, stated its
view that no changes were necessary.[18]
6.17. China's request essentially would
require us to make a finding that the "only" price data before MOFCOM
was AUV data. It is not clear to us, and China has not explained, why such a
finding is necessary or appropriate. The issue before us was not whether the
AUV data was the "only" price data available to MOFCOM, but rather
whether MOFCOM could have reached the specific conclusions that it did,
regarding the linkages between increases in volume of subject imports and price
effects suffered by the domestic industry, without comparing the prices of
subject imports and the domestic like product. Whether AUV data was the only
data before MOFCOM on prices is not relevant to our consideration of that
issue. Insofar as China requests us to include its explanation that MOFCOM
addressed the price data regarding subject imports and the domestic like
product, China's request does not clearly identify which specific aspect of
MOFCOM's consideration of the price data remained unexplained in our report,
what specific explanations it seeks to have included, or any support for such
explanations. We therefore deny these aspects of China's request. However, having
reviewed China's arguments in this regard, we grant China's request that we reflect
its explanation that MOFCOM did not make price comparisons between subject
imports and the domestic like product because of the deficiencies in the price
data that were highlighted by the Appellate Body, as this relates to an aspect
of China's own arguments. We have therefore added a new footnote 128 to paragraph 7.65 in this report.
6.18. China asserts that the Panel
dismissed as insufficient MOFCOM's verification of the domestic industry's
production capability with respect to high grade GOES despite the fact that MOFCOM
properly addressed the issue of whether subject imports and the domestic like
product were substitutable, referring to paragraphs 7.72-7.81 of the Interim Report. China expresses
concern that the Panel's finding sets a precedent that "an authority must
address every factual assertion placed on record, even where it is adequately addressed
by other means, and no matter the context in which it is offered or the extent
to which its significance is rendered moot by other facts and findings of the
authority."[19]
China makes no specific requests for changes to the interim report, and cites
no evidence in support of its concerns. At the interim review meeting, the
United States, noting that it had responded to China's arguments on this
issue, and the Panel had explained its findings, stated its view that no
changes are necessary.[20]
6.19. We explained the basis of our
conclusions in paragraphs 7.72-7.81, which include our review of the evidence
before MOFCOM, relevant arguments provided by the parties and MOFCOM's ultimate
conclusions as provided in its Redetermination finding. In the absence of any
specific suggestions for change, we see no basis to modify our analysis and
conclusions and have made no changes in this section of the report.
6.20. Finally, China stated in its
request for interim review that the measures at issue in this proceeding would
expire on 10 April 2015 because the domestic industry did not request a review
of those measures, which might have resulted in their continuation, and
requested that the Panel take this into consideration and issue no
recommendations in the final report.[21] On 21 April 2015, China submitted exhibit CHN-3, a copy of MOFCOM's
public notice of termination of the measures dated 10 April 2015. At the interim review
meeting, the United States argued that the Panel should reject China's attempt to
introduce new evidence during the interim review stage of this proceeding as
contrary to the DSU, inconsistent with paragraph 8 of the Working Procedures of
the Panel and not based on the evidence before the Panel.[22]
The United States noted that in its request for interim review, China stated
its expectations regarding the future termination of the measures at issue. In
the United States' view, since China's request was not based on any evidence
that had been developed by the parties and considered by the Panel prior to
issuance of the report, there was no need or basis for the Panel to review its
findings further.[23]
Finally, the United States asserted that China's new evidence, in addition to
being untimely, was not relevant to the matter being examined by the Panel,
noting that the Appellate Body has stated that, as a general rule, the measures
subject to a panel's review "must be measures that are in existence at the
time of the establishment of a panel," and therefore the task of the panel
is to determine whether the measures at issue are consistent with the
obligations at issue "at the time the
Panel was established."[24]
According to the United States, China's exhibit has no relevance to the legal
situation that existed on the date of the Panel's establishment when the DSB
referred the matter to the Panel, and thus is not relevant to the Panel's legal
assessment and its findings and conclusions in this proceeding.
6.21. Article 15.2 of the DSU entitles
parties to submit a written request for the panel to review "precise
aspects of the interim report" prior to circulation of the final report.
However, a number of panels and the Appellate Body have held that Article 15.2
is available only for the panel to review precise aspects of the interim report
and does not permit parties to introduce new evidence.[25]
Further, the panel in EC - IT Products
concluded that evidence regarding the repeal of a measure at issue in that
dispute, submitted by the EC subsequent to the issuance of the interim report,
was such "new evidence" and could not be considered at the stage of
interim review.[26]
The panel in that case retained its recommendation under Article 19.1,
observing that there was no evidence "properly before the Panel"
confirming the repeal of some of the measures at issue.
6.22. The situation in the present case
is analogous to that in EC - IT Products.
As in that case, China has submitted new evidence, i.e. Exhibit CHN-3, subsequent
to the issuance of the interim report. In our view,
MOFCOM's public notice of termination is new evidence that was not before the
Panel at the time it issued its interim report.
6.23. We note in this context the
similarities between this case and the proceedings in EC -
Bananas III (Article 21.5 – US). In that case, as here,
both parties requested during interim review that the panel delete the
recommendation made in the interim report, but for different reasons: the
United States because it considered such a recommendation to be unnecessary in
a compliance proceeding, and the then-European Communities because it had
adopted an amending regulation eliminating the measure challenged by the United
States in that compliance dispute. The European Communities informed
the compliance panel of the repeal of the measure when it filed its comments on
the interim report, and submitted a copy of the amending regulation at the
interim review meeting. The panel found the evidence regarding the amending
regulation to be inadmissible as it had been submitted after the comments on
interim review had been filed, at which stage it could no longer consider new
evidence, but decided to delete the recommendation, considering that the
original DSB recommendations and rulings continued to be operative in the
compliance proceeding.[27]
6.24. On appeal, the European Communities
argued that the panel's statement that the original DSB recommendations
continued to be operative in the compliance proceeding constituted a
"concealed recommendation" and that the panel had erred in issuing
such a recommendation in relation to an expired measure. The Appellate Body disagreed,
concluding that the panel had made no recommendation in relation to a measure
which was no longer in force.[28]
The Appellate Body itself made no recommendation on the ground that the measure
at issue had ceased to exist.[29]
6.25. In light of the above, we deny
China's request. Nonetheless, we note that, if the measures have in fact
expired, there would in our view be no further obligation on China to
"bring the [expired] measure[s] into conformity".
6.26. Finally, we have made a number of changes of an editorial nature to
improve the clarity and accuracy of the Report or to correct typographical
errors, including certain changes suggested by the United States.[30]
7 Findings
7.1. Article 3.2 of the DSU provides that the WTO dispute settlement
system serves to clarify the existing provisions of the covered agreements
"in accordance with customary rules of interpretation of public
international law". Article 17.6(ii) of the Anti-Dumping Agreement
similarly requires panels to interpret that Agreement's provisions in
accordance with the customary rules of interpretation of public international
law.[31]
It is generally accepted that the principles codified in Articles 31 and
32 of the Vienna Convention on the Law of Treaties are such customary rules.
While we have not found it necessary to engage with any significant issues of
treaty interpretation in this proceeding, we have nonetheless been mindful of these
principles in our analysis.
7.2. Article 11 of the DSU provides, in relevant part, that:
[a] panel should make an objective assessment of the matter before it,
including an objective assessment of the facts of the case and the
applicability of and conformity with the relevant covered agreements.
In addition,
Article 17.6 of the Anti-Dumping Agreement sets forth the special standard
of review applicable to disputes under the Anti-Dumping Agreement:
(i) in its assessment of the facts of the matter,
the panel shall determine whether the authorities' establishment of the facts
was proper and whether their evaluation of those facts was unbiased and
objective. If the establishment of the facts was proper and the evaluation was
unbiased and objective, even though the panel might have reached a different
conclusion, the evaluation shall not be overturned;
(ii) the panel shall interpret the relevant
provisions of the Agreement in accordance with customary rules of
interpretation of public international law. Where the panel finds that a
relevant provision of the Agreement admits of more than one permissible
interpretation, the panel shall find the authorities' measure to be in
conformity with the Agreement if it rests upon one of those permissible interpretations.
Thus, Article 11 of the DSU and Article 17.6 of the
Anti-Dumping Agreement together establish the standard of review we will apply
with respect to both the factual and the legal aspects of the present dispute.
7.3. The Appellate Body has explained that where a panel is reviewing an
investigating authority's determination, the "objective assessment"
standard in Article 11 of the DSU requires a panel to review whether the
authorities have provided a reasoned and adequate explanation as to (i) how the
evidence on the record supported its factual findings; and (ii) how those
factual findings support the overall determination.[32] In the context of Article 17.6(i)
of the Anti‑Dumping Agreement, the Appellate Body has clarified that a
panel should not conduct a de novo
review of the evidence, nor substitute its judgment for that of the
investigating authority. A panel must limit its examination to the evidence
that was before the investigating authority during the course of the
investigation and must take into account all such evidence submitted by the
parties to the dispute.[33] At the same time, a panel
must not simply defer to the conclusions of the investigating authority; a
panel's examination of those conclusions must be "in-depth" and
"critical and searching".[34]
7.4. The Appellate Body has clarified a panel's standard of review of the
facts pursuant to the above provisions in the following terms:
It is well established
that a panel must neither conduct a de novo review
nor simply defer to the conclusions of the national authority. A panel's
examination of those conclusions must be critical and searching, and be based
on the information contained in the record and the explanations given by the
authority in its published report. A panel must examine whether, in the light
of the evidence on the record, the conclusions reached by the investigating
authority are reasoned and adequate. What is 'adequate' will inevitably depend
on the facts and circumstances of the case and the particular claims made, but
several general lines of inquiry are likely to be relevant. The panel's
scrutiny should test whether the reasoning of the authority is coherent and
internally consistent. The panel must undertake an in-depth examination of
whether the explanations given disclose how the investigating authority treated
the facts and evidence in the record and whether there was positive evidence
before it to support the inferences made and conclusions reached by it. The
panel must examine whether the explanations provided demonstrate that the investigating
authority took proper account of the complexities of the data before it, and
that it explained why it rejected or discounted alternative explanations and
interpretations of the record evidence. A panel must be open to the possibility
that the explanations given by the authority are not reasoned or adequate in
the light of other plausible alternative explanations, and must take care not
to assume itself the role of initial trier of facts, nor to be passive by
'simply accept[ing] the conclusions of the
competent authorities.'[35] (Footnote omitted.)
7.5. The general principles applicable to the allocation of the burden of
proof in WTO dispute settlement require that a party claiming a violation of a
provision of a WTO Agreement must assert and prove its claim.[36] Therefore, as the
complaining party in this proceeding, the United States bears the burden
of demonstrating that certain aspects of the measures at issue are inconsistent
with the Anti-Dumping Agreement and the SCM Agreement. The Appellate Body
has stated that a complaining party will satisfy its burden when it establishes
a prima facie case, namely a case which,
in the absence of effective refutation by the defending party, requires a
panel, as a matter of law, to rule in favour of the complaining party.[37] Finally, it is generally
for each party asserting a fact to provide proof thereof.[38]
7.6. In this
section of our report, we examine the United States'
claim that MOFCOM's finding that the subject imports had an adverse impact on
the domestic industry was not based on an objective examination of all relevant
economic factors and indices having a bearing on the state of that industry. More
specifically, the United States claims that, in its Redetermination, MOFCOM failed to examine the impact of subject
imports on the domestic industry and to evaluate all relevant economic factors
and indices having a bearing on the state of the industry consistently with
China's obligations under Articles 3.1 and 3.4 of the Anti-Dumping
Agreement and Articles 15.1 and 15.4 of the SCM Agreement. China
responds, in the first instance, that the United States' claim is not
properly before the Panel in a compliance proceeding under Article 21.5 of
the DSU. China adds that, even if it were to be considered, the US claim would
fail on the merits. Given China's jurisdictional objection, we must first consider whether the US claim with respect to adverse
impact falls within our terms of reference before turning, if
necessary, to its merits.
7.7. The
United States argues that its claim is properly before the Panel because
it challenges aspects of China's compliance measure that are inconsistent with
the covered agreements. The United States specifically alleges that MOFCOM
modified its adverse impact analysis in the Redetermination by (i) replacing
all references to imports of product concerned "at a low price" with
references to "unfair" imports of the subject merchandise and (ii)
relying significantly on market conditions in 2008, in contrast to its original
impact analysis.[39]
The United States considers that its claim relates directly to China's
compliance measure, which it argues includes a revised injury analysis and
newly disclosed facts.[40] It maintains that
China's arguments regarding the admissibility of claims under Article 21.5
of the DSU are misguided.
7.8. China
asserts that the United States is not entitled to expand the scope of the
dispute in this Article 21.5 proceeding to include a wholly new claim not
previously addressed by the panel, and that it would be extremely unfair to
allow this claim.[41]
China notes there is no question that this is a new claim by the
United States, as there was no reference to either Article 3.4 of the
Anti‑Dumping Agreement or Article 15.4 of the SCM Agreement in the
original request for consultations.[42]
China relies on several Appellate Body reports in arguing that a complaining
Member ordinarily would not be allowed to raise a claim in an Article 21.5
proceeding that it could have pursued in the original proceedings, but did not.
According to China, the first mention of any such claim was in the
United States' first written submission in this proceeding. Moreover, China maintains that MOFCOM's discussion of injury in the
Redetermination is essentially unchanged from the original.[43]
China
argues that the introduction of a new claim at this stage of the proceedings
would be contrary to basic principles of fairness and due process.[44]
It would give the United States a second chance to raise a claim it failed
to raise in the original proceeding and would expose China to possible
suspension of concessions for a violation it was never given a fair opportunity
to address.[45]
7.9. In the original proceedings, the
United States made no claim concerning MOFCOM's evaluation of the various
economic factors and indices having a bearing on the state of the domestic
industry for purposes of the injury determination under Articles 3.4 and
15.4 of the Anti‑Dumping and SCM Agreements, respectively. Accordingly,
the Panel and Appellate Body did not consider any claim under these
Articles and made no findings in this respect. Therefore, the question we must
resolve is whether this aspect of the Redetermination is subject to review by the
Panel in this Article 21.5 proceeding.
7.10. Article 21.5 of the DSU
provides, in relevant part:
Where there is disagreement as to the existence
or consistency with a covered agreement of measures taken to comply with the
recommendations and rulings such dispute shall be decided through recourse to
these dispute settlement procedures, including wherever possible resort to the
original panel.
7.11. Inherent in
proceedings under Article 21.5 of the DSU is the need to balance important
systemic interests. Expanding the scope of a compliance proceeding to measures
not originally challenged by the complaining Member may be necessary to ensure
prompt and thorough verification of compliance. However, it could also result
in circumvention of the normal dispute settlement process if it allows the
complaining Member to obtain a finding of non-compliance and potentially seek
retaliation without the responding Member having had a reasonable period of
time in which to bring any inconsistent measures into compliance.
7.12. The scope
of a panel's jurisdiction with respect to what measures and claims it may
consider in an Article 21.5 compliance proceeding has been addressed by a
number of panels and the Appellate Body. Several fundamental principles have
emerged from these decisions. Thus, it is now accepted that nothing in
Article 21.5 limits a compliance panel to considering only certain issues,
or certain aspects of a measure taken to comply. Panels have found that to
satisfy the objective of prompt settlement of disputes, a complainant can
challenge all aspects of a new measure taken to comply, not only those related
to issues covered by the original proceedings.[46]
7.13. Similarly,
the Appellate Body has found that a panel is not limited, in conducting its
review under Article 21.5, to examining the measures taken to comply from the perspective of the
claims, arguments and factual circumstances that related to the measure that
was the subject of the original proceedings.[47]
The Appellate Body has observed that if a compliance panel were restricted to
examining the new measure from this limited perspective, it would be unable to
examine fully, in accordance with Article 21.5, the consistency with a
covered agreement of the measures taken to comply.[48] The
Appellate Body has also upheld compliance panels' rulings that new claims challenging a changed component of the measure taken to comply are
admissible.[49]
7.14. However,
the Appellate Body has also concluded that, in the context of a compliance
proceeding, a Member may be precluded from bringing the same claim with respect
to an aspect of another Member's redetermination that is unchanged from the
determination at issue in the original dispute.[50]
An unchanged aspect of the original measure that a Member does not have to
change, and does not change, in complying with the recommendations and rulings
of the DSB thus should not be susceptible to challenge in a compliance
proceeding.[51]
One panel, in applying these principles, distinguished between a new claim on
an aspect of the measure taken to comply that constituted a new or revised
element of the original measure, and which thus could not have been raised in
the original proceedings, and another new claim that concerned aspects of the
original measure that were unchanged.[52]
The panel found the former to be admissible, and the latter inadmissible.[53]
7.15. We now
proceed to consider the facts of this case, in light of the principles just
described, to determine whether the
United States' claim with respect to adverse impact is properly before us
in this compliance proceeding.
7.16. Were we to conclude that MOFCOM changed the substance of its analysis or
conclusions regarding adverse impact in the Redetermination, such that the
United States could not have meaningfully raised the claim it now asserts
in the original proceeding, we might conclude that allowing the
United States' claim in this compliance proceeding would not unduly
deprive China of its due process rights. However, should the changes in
MOFCOM's Redetermination not be sufficient to justify this conclusion, we may
find that the United States is challenging aspects of the original measure
that are essentially unchanged, and which it could have challenged in the
original dispute, and therefore conclude that allowing the United States'
new claim in this compliance proceeding could jeopardize fundamental principles
of fairness and due process and should therefore not be allowed to proceed. We
are of the view that the latter conclusion is warranted in this case.
7.17. It is undisputed that the United States is introducing a new claim
in this compliance proceeding. The United States made no claims under
Articles 3.4 and 15.4 of the Anti-Dumping and SCM Agreements in the
original proceeding. However, the United States asserts that MOFCOM's
Redetermination was changed from its original Determination, and that its claim
is a justified challenge to this changed Redetermination. In arguing that
MOFCOM's Redetermination is changed from its original Determination, the
United States focuses on the deletion of references to subject imports
"at a low price" and an alleged change in the temporal focus of
MOFCOM's injury analysis to 2008. China maintains that MOFCOM's Redetermination
is essentially unchanged from its original Determination.
7.18. MOFCOM's injury analysis in the original Determination contained four
references to imports of the product concerned "at a low price".[54]
In the Redetermination, these four references have been reformulated, and now
refer to "unfair" imports of subject merchandise in the otherwise
nearly identical text.[55]
China contends that "none of these references are engaging in price
comparisons of any sort" and that "references to 'low price' imports
in this discussion are just synonyms for unfairly traded imports."[56]
China thus suggests that these different formulations are simply
interchangeable references to the subject imports in the context of MOFCOM's
injury analysis.
7.19. The Panel and Appellate Body in the original proceeding considered
MOFCOM's discussion of the "low price" of subject imports in the
context of price effects and found that, "although MOFCOM did
not make a finding of significant price undercutting, MOFCOM's finding as to
the 'low price' of subject imports referred to the existence of price
undercutting between 2006 and 2008, and that MOFCOM relied on this factor to
support its finding of significant price depression and suppression."[57]
The Appellate Body specifically was not persuaded by China's arguments that the
references to "low price" were simply references to the prices of
subject imports in relation to their historical prices or to the low price
established by virtue of the sale of subject imports at dumped and/or subsidized
levels.[58]
Thus, MOFCOM's references to "low price" were considered more
significant by the Panel and Appellate Body in the original proceedings than
was argued by China.
7.20. Accordingly, we have considered whether the deletion of these
references from MOFCOM's injury analysis in the Redetermination and their
replacement by a term that does not directly implicate price reflects a change
in the focus and substance of the Redetermination from the original. We
specifically asked China to clarify why MOFCOM replaced the original term in
the Redetermination. China responded that MOFCOM replaced the Chinese term
meaning "low" with one meaning "unfair" to avoid any
confusion with the concept of price undercutting.[59]
China further responded that MOFCOM thus inserted what it deemed to be the more
precise term for "unfair" in its injury analysis in the
Redetermination to refer to subject merchandise in the sense of "unfairly
traded dumped or subsidized imports."[60]
The United States argued that China provided no support for this
assertion, and that the Appellate Body had already rejected this argument.[61]
7.21. In our
view, the term "unfair imports" appears to connote a broader concept
than the term "low-priced imports", as it implies that the imports in
question are dumped or subsidized. But dumping and subsidization are
determinations that can only be reached following thorough investigation and
analysis. Accordingly, we find China's explanation for this change in
terminology unclear. The change seems to be a cursory attempt to eliminate the
reference to low prices that both we and the Appellate Body found problematic
in the original dispute. Nevertheless, in the present proceeding, we consider
this change in references specifically to assess whether it demonstrates a
change in the Redetermination sufficient to allow the United States to
challenge MOFCOM's analysis of the relevant injury factors.
7.22. On the basis of China's explanation, and in light of the text of the
Redetermination and the arguments in the original dispute, we are
of the view that the injury analysis and determination component of the measure
taken to comply in this case, that is, the Redetermination, has not been
changed from the original determination in a manner that makes it susceptible
to challenge in this compliance proceeding. As was the case in EC
– Bed Linen (Article 21.5 – India), there was no need
for MOFCOM in this case to change its determination of injury in seeking to
comply with the DSB's recommendation.[62]
As that determination was unchallenged in the original proceeding, the
Redetermination simply incorporates elements of the original determination,
unchanged in any material respect. In our view, the changes in wording between the original determination and the
Redetermination are not substantively relevant to MOFCOM's analysis and
determination of injury, and do not constitute a change that gives rise to a
new aspect of that analysis and determination that can be challenged in this
compliance proceeding.
7.23. The same
reasoning applies to the United States' allegation that MOFCOM changed the temporal focus of its injury analysis to 2008. The
texts of the original Determination and Redetermination with respect to
MOFCOM's injury analysis are identical in almost all respects[63];
the minor changes between the original determination and the Redetermination do
not reflect a shift in the temporal focus of MOFCOM's analysis to 2008.[64]
7.24. Finally,
while the United States has focused on the
changes in wording in the Redetermination, the new claim it is raising in this
compliance proceeding does not relate specifically to those changes, but rather
to aspects of MOFCOM's analysis and conclusions regarding the injury factors
that are unchanged from the original determination and unaffected by the change
in wording. We note that in a previous dispute, the Appellate Body emphasized that
disallowing Brazil's claim in the compliance proceeding in Canada – Aircraft
would have resulted in Brazil being precluded from making claims that it could
not have raised in the original dispute.[65]
In contrast, in this case, the substance of
MOFCOM's injury analysis in the original determination and in the
Redetermination are identical to such a degree that it is clear to us that the
United States could have raised, in the original dispute, the same claim
regarding the injury analysis in the original determination it now seeks to
bring before us with respect to the Redetermination. It chose not to do so in
the original proceeding, and we conclude that it may not do so in this
compliance proceeding.
7.25. Thus, we find that the few changes
between MOFCOM's original determination and Redetermination are inconsequential
in the context of the latter, and the United States in this case seeks to
challenge aspects of the Redetermination that are essentially unchanged from
the original determination. In these circumstances, allowing the United States' new
claim under Articles 3.1, 3.4 and 15.1, 15.4 of the Anti-Dumping and
SCM Agreements respectively, with respect to adverse impact in the present
compliance proceeding would jeopardize fundamental principles of fairness and
due process, and we therefore conclude it is not properly before us.
7.26. The United States contends that the following three aspects of
MOFCOM's Redetermination on price effects were not based on an objective
examination of positive evidence, in violation of China's obligations under
Articles 3.1 and 3.2 of the Anti-Dumping Agreement and Articles 15.1
and 15.2 of the SCM Agreement:
a.
Subject imports
suppressed domestic prices in 2008 and Q1 2009;
b.
Subject imports
depressed domestic prices by 30.25% in Q1 2009; and
c.
Pricing policies
of subject country exporters caused price depression in Q1 2009.
In particular,
the United States makes a number of fact-specific arguments questioning
MOFCOM's finding that subject imports had the "effect" of suppressing
and depressing domestic prices, and also questions MOFCOM's decision to not
make price comparisons between subject imports and the domestic like product,
as part of its price effects analysis.[66]
7.27. China rejects the United States' contentions, asserting that
MOFCOM's conclusions that the increased volume of subject imports and the
domestic industry's loss in market share had a suppressive and depressive
effect on domestic like product prices were supported by factual findings
indicating a competitive relationship between subject imports and the domestic
like product.[67] China further argues that price negotiation letters exchanged
between Chinese producers and customers, as well as provisions of a contract
between a Russian producer and a Chinese customer (collectively referred to as
"pricing policy documents") supported MOFCOM's conclusions regarding
the existence of price competition and also the influence of prices on
purchaser decisions as well as attempts by subject country exporters to set
prices lower than those of the domestic like product.[68] These three factors, in turn, supported MOFCOM's conclusion that
subject imports had had a suppressive and depressive effect on domestic prices.[69]
7.28. Article 3.1 of the Anti-Dumping Agreement provides:
A determination of injury for purposes of
Article VI of GATT 1994 shall be based on positive evidence and
involve an objective examination of both (a) the volume of the dumped
imports and the effect of the dumped imports on prices in the domestic market
for like products, and (b) the consequent impact of these imports on
domestic producers of such products.
Article 3.2
of the Anti-Dumping Agreement provides:
With regard to the volume of the dumped imports, the
investigating authorities shall consider whether there has been a significant
increase in dumped imports, either in absolute terms or relative to production
or consumption in the importing Member. With regard to the effect of the dumped
imports on prices, the investigating authorities shall consider whether there
has been a significant price undercutting by the dumped imports as compared
with the price of a like product of the importing Member, or whether the effect
of such imports is otherwise to depress prices to a significant degree or
prevent price increases, which otherwise would have occurred, to a significant
degree. No one or several of these factors can necessarily give decisive
guidance.
Articles 15.1
and 15.2 of the SCM Agreement are identical to Articles 3.1 and 3.2,
respectively, of the Anti-Dumping Agreement, with the exception that all
references to "dumped imports" are replaced by references to
"subsidized imports".
7.29. The United States rejects MOFCOM's conclusion that the
increased volume of subject imports and consequential loss of market share by
the domestic industry, predominantly to subject imports, had the effect of
suppressing or depressing the prices of the domestic like product.[70] The United States argues that MOFCOM could not have concluded
that subject imports had the effect of suppressing or depressing domestic like
product prices without comparing the actual prices of subject imports and the
domestic like product, which MOFCOM admittedly did not do.[71] Further, the United States questions the linkage that MOFCOM
drew between increases in the volume of subject imports in 2008 and adverse
effects on the domestic like product prices in Q1 2009, contending that the
volume of subject imports declined from Q3 2008 to Q4 2008 and from Q4 2008
to Q1 2009, making it less plausible that the decline in domestic industry
prices in Q1 2009 was related to subject imports.[72] The United States also requests the Panel to reject as ex post facto rationalizations arguments made by China in
this proceeding on the basis of quarterly 2008 market share data
concerning shifts in market shares of subject imports, non‑subject imports and
the domestic like product. The United States asserts that this information
was neither considered by MOFCOM in the Redetermination nor disclosed to the
interested parties.[73] The United States emphasizes, however, that the quarterly
market share data casts further doubt on MOFCOM's conclusions regarding the
linkage between increases in the market share of subject imports and price
effects in Q1 2009. According to the United States, the fact that
non-subject imports gained market share in Q4 2008 makes it more plausible that
the decline in domestic like product prices in Q1 2009 was in response to
increases in non-subject imports' market share rather than that of subject
imports.[74]
7.30. The United States submits that MOFCOM's factual findings
purporting to demonstrate that the subject imports and the domestic like
product competed on price were flawed. First, the United States contends
that MOFCOM failed to consider submissions by the US exporter AK Steel that [***].[75] In particular, the
United States emphasizes that MOFCOM failed to consider evidence submitted
by AK Steel that GOES produced by domestic producers was not certified for use
in large transformers, i.e. transformers of 500kW and above.[76]
7.31. Further, the United States questions MOFCOM's conclusions concerning
price competition on the ground that the factual findings relied upon by MOFCOM
in support of this conclusion were either general in nature, or were not
representative of the market dynamic as a whole.[77]
7.32. China rejects the United States' contention that MOFCOM could
not have reached its conclusions regarding the suppressive and depressive
effect of subject imports on the domestic like product prices without
considering evidence of actual prices of subject imports compared to the prices
of the domestic like product. China contends that Article 3.2 of the Anti‑Dumping Agreement
and Article 15.2 of the SCM Agreement do not require investigating
authorities to make comparisons between the prices of subject imports and the
prices of the domestic like product.[78] Further, China argues that while MOFCOM did not compare the prices
of subject imports and the domestic like product, MOFCOM's Redetermination
discussed and demonstrated the competitive relationship between subject imports
and the domestic like product.[79]
7.33. China submits that increases in the volume of subject imports, and
in particular, gains in market share, may affect domestic prices regardless of
whether the subject imports are priced higher or lower than the domestic like
product.[80] China notes that the domestic industry lost 5.65 percentage
points of market share in 2008 while subject imports gained 5.56 percentage
points of market share in the same period.[81] China submits that this showed that it was the subject imports,
which were taking market share from the domestic industry, which forced the
domestic industry to respond to that loss by restraining or reducing prices.[82] In addition, China also submits that MOFCOM had specific evidence
that the domestic industry lowered its prices in reaction to the loss of market
share during 2008.[83]
7.34. China argues that MOFCOM's factual findings regarding (a) likeness
and cumulation, (b) statements by US exporter Allegheny Ludlum that its
exports were highly substitutable with the domestic like product, (c) parallel price
trends, (d) consumer overlap, (e) market share replacement and (f) pricing
policy documents, all supported its conclusion that subject imports and the
domestic like product competed on price.[84]
7.35. Regarding the United States' arguments concerning evidence
furnished by US exporter AK Steel, China argues that first, while AK Steel
submitted a questionnaire response during the original proceeding, it did not
make any comments on the factual disclosure or the preliminary determination in
the original investigation regarding the non-substitutability of certain
product categories exported by it with the domestic like product or make any
comments on this issue during the Redetermination proceedings.[85] Second, AK Steel's exports of high-end GOES accounted for only
about ten per cent of total subject country exports to China.[86] Therefore, according to China, the United States' argument
regarding MOFCOM's failure to consider AK Steel's submission would have no
bearing on MOFCOM's review of the effect of subject imports as a whole.[87]
7.36. Further, China asserts that while it may be true that test
manufacturing of 500 kW transformers employing domestically-produced materials
was not expected until the end of 2009, i.e. subsequent to the period of
investigation, it did not necessarily follow that the domestic industry did not
produce GOES capable of being used in 500 Kw transformers earlier.[88]
7.37. The European Union contends that an increase in the volume of
subject imports and a decline in the domestic industry's market share, taken
together with the existence of price competition between subject imports and
the domestic like product, will generally indicate that subject imports
suppress or depress domestic like product prices.[89] However, the European Union adds that while in principle, it may be
possible to establish price competition between subject imports and the
domestic like product without comparing the prices of subject imports and the
domestic like product, it is unclear whether in practice, it is possible to do
so.[90] Further, the European Union submits that by disregarding evidence
that may call into question the explanatory force of subject imports for price
effects, an investigating authority acts contrary to its obligations under
Articles 3.1 and 3.2 of the Anti-Dumping Agreement and Articles 15.1
and 15.2 of the SCM Agreement.[91]
7.38. Japan submits that an increase in the volume of subject imports and
a decline in the domestic industry's market share, coupled with the existence
of price competition, will not be sufficient to demonstrate price depression or
price suppression within the meaning of Articles 3.1 and 3.2 of the
Anti-Dumping Agreement.[92] It contends that if increases in import volume and decreases in
domestic industry market share were sufficient to find price effects, the price
effects analysis would be rendered redundant.[93] In Japan's view, an increase in the volume of subject imports or
parallel pricing between subject imports and the domestic like product only
establishes the potential for subject imports to suppress or depress domestic
like product prices, and not actual price suppression or depression by subject
imports.[94]
7.39. Japan finds MOFCOM's reliance on (a) the likeness analysis, (b)
parallel pricing between subject imports and the domestic like product, (c)
overlap in consumers between subject country exporters and domestic industry
and (d) pricing policies of subject countries producers to establish price
competition between subject imports and the domestic like product to be flawed.[95] Japan submits that while investigating authorities may assess a
competitive relationship for the purpose of a likeness enquiry, such inquiry is
different from the scope, purpose and depth of consideration of a competitive
relationship necessary in the context of a price effects analysis.[96] With respect to parallel pricing, Japan argues that parallel
movement in prices of subject imports and the domestic like product is not
evidence of a competitive relationship between subject imports and the domestic
like product, and that the existence of parallel pricing between subject
imports and the domestic like product does not necessarily mean that subject
import prices are having an effect on domestic like product prices.[97] Further, Japan questions MOFCOM's reliance on consumer overlap,
arguing that when subject imports and the domestic like product are
concentrated at different ends of the like product spectrum, the fact that the
same consumer may be procuring from subject country exporters and the domestic
industry does not mean that price competition exists between subject imports
and the domestic like product.[98] Finally, with respect to pricing policies of subject country
exporters, Japan states that the mere consideration of prices of other
producers while setting prices does not by itself establish the existence of a
competitive relationship.[99]
7.40. The principal issue before us is whether MOFCOM's conclusions
regarding the price suppressing effect of subject imports in 2008 and the price
suppressing and depressing effect of subject imports in Q1 2009 were based on
an objective examination of positive evidence, in accordance with
Articles 3.1 and 3.2 of the Anti-Dumping Agreement and Articles 15.1
and 15.2 of the SCM Agreement. In other words, we must determine whether
the conclusions reached by MOFCOM, as explained in the Redetermination, are
such as could be reached by an objective and impartial decision-maker on the
basis of the information and arguments that were before MOFCOM.
7.41. Regarding price suppression and depression, Articles 3.2 and
15.2 require investigating authorities to consider whether the effect of
subject imports is to "depress prices to a significant degree or prevent
price increases, which otherwise would have occurred, to a significant
degree". The Appellate Body has stated that this requires investigating
authorities to consider whether certain price effects are the
"consequence" of subject imports.[100] We agree. But Articles 3.2 and 15.2 do not prescribe any
particular methodology for that consideration. Therefore, investigating
authorities retain some degree of discretion in adopting a methodology they
deem fit for this purpose. This discretion, however, is not without limit. It
is qualified by the overarching obligation set out in Articles 3.1 and
15.1 that investigating authorities shall base their determinations on an
objective examination of positive evidence of, inter alia,
the effect of subject imports on the market prices of domestic like products.
7.42. In China – GOES, the Appellate Body
stated that the objective examination of positive evidence, in the context of
price suppression or depression, requires that when an investigating authority
"is faced with elements other than subject imports that may explain the
significant price depression or suppression of domestic prices, it must
consider relevant evidence pertaining to such elements for purposes of
understanding whether subject imports indeed have a depressive or suppressive
effect on domestic prices".[101] The Appellate Body found support for this conclusion in
Articles 3.2 and 15.2, which obligate investigating authorities to
consider whether subject imports prevented price increases "which
otherwise would have occurred".[102] We agree with the Appellate Body that investigating authorities may
not disregard evidence which raise questions as to whether it is subject
imports or some other element or elements that are suppressing or depressing
domestic like product prices.
7.43. In this case, the United States argues that MOFCOM failed to compare
the prices of subject imports and the domestic like product, despite evidence
in the record indicating that there was a substantial divergence in the prices
of subject imports and the domestic like product, and that in Q1 2009, subject
imports were priced higher than the domestic like product. The
United States argues that this evidence raised questions as to whether
subject imports in fact had a suppressive or depressive effect on the domestic
like product prices which MOFCOM, by not comparing the subject import and
domestic like product prices, failed to consider. The United States
contends that MOFCOM failed to explain how subject imports had the effect of
suppressing or depressing domestic like product prices when subject import
prices were higher in Q1 2009 than domestic like product prices. China argues
that Articles 3.2 and 15.2 do not require investigating authorities to
compare the prices of subject imports and the domestic like product, relying,
in particular, on the Appellate Body's statement that, in light of the text of
Articles 3.2 and 15.2, price suppression or depression may stem from
"the price and/or volume of such imports".[103] China contends that increases in the volume of subject imports may
have the effect of suppressing or depressing domestic prices independently of
any effect of the prices of those imports, and that therefore no consideration
of their prices in comparison to domestic like product prices is necessary in
making such a determination.
7.44. In our view, the issue in the present case is not whether price
comparisons are mandated under Articles 3.2 and 15.2, whether increased
volumes of subject imports may have a price suppressive or depressive effect
independent of any consideration of their relative prices, or whether higher priced
imports may have a suppressive or depressive effect on domestic like product
prices. Instead, the issue is whether, with respect to the findings of price
suppression and depression, MOFCOM's Redetermination in this case, on its own
merits, was based on an objective examination of positive evidence and provides
reasoned explanations for those findings, in light of the evidence and
arguments before it. Therefore, we do not consider it necessary to determine
whether price comparisons are or are not required by Articles 3.1 and 3.2
of the Anti‑Dumping Agreement or Articles 15.1 and 15.2 of the
SCM Agreement as a general matter of law. Rather, we will consider, as
part of our overall review of MOFCOM's conclusions on price effects, whether
MOFCOM's failure to make price comparisons in this particular case, in light of
the evidence and arguments before it, meant that it failed to make reasoned
determinations regarding price effects on the basis of an objective examination
of positive evidence.
7.45. MOFCOM concluded that the increases in the volume of subject imports
and consequential gains in their market share, at the expense of the domestic
like product sales, had the effect of suppressing and depressing domestic like
product prices. China asserts that its conclusions were supported by factual
findings demonstrating that the subject imports and the domestic like product
competed on the basis of price. Therefore, we will commence our analysis by
considering MOFCOM's conclusions on the effect of the increased volume of
subject imports and consequential increase in their market share in 2008 on the
prices of the domestic like product in 2008 and Q1 2009. Second, we will
consider MOFCOM's findings concerning price competition between subject imports
and the domestic like product. In that context, we will also consider whether,
as argued by the United States, MOFCOM failed to properly take into
account specific assertions by US exporter AK Steel that certain product
categories it exported could not be commercially supplied by the Chinese
domestic industry. Finally, we will assess whether, as argued by China, these
findings, viewed as a whole, are sufficient to sustain MOFCOM's conclusions
with respect to the price suppressing and depressing effects of subject
imports.
7.46. MOFCOM found that the volume of subject imports increased in 2008
and the domestic industry consequently lost 5.65 percentage points of market
share in 2008, predominantly to subject imports, which gained 5.56 percentage
points of market share in the same period. MOFCOM concluded that the domestic
industry had no option "but to compete with the subject merchandise on
pricing".[104] This precluded price increases in 2008, despite rising costs,
resulting in a 7% decline in the domestic industry's price-cost differential.[105] On this basis, MOFCOM concluded that subject imports suppressed
domestic like product prices in 2008.
7.47. Further, MOFCOM found that as a result of the increase in the volume
of subject imports in 2008, and a decline of 1.25% in subject import
prices in Q1 2009 as compared to Q1 2008, the domestic industry reduced its
prices by 30.25% in Q1 2009 as compared to Q1 2008 so as to avoid further loss of
market share, resulting in price depression in Q1 2009.[106] MOFCOM also found that, as a result of the decline in the domestic
like product prices, the price-cost differential of the domestic industry
declined by 75% in Q1 2009, as compared to Q1 2008, and thus found that subject
imports also suppressed prices in Q1 2009.[107]
7.48. In this regard, we note China's argument that although market share
increases of subject imports alone do not necessarily explain price effects in
all cases, in this particular case they did.[108] China focuses on the close correspondence between the domestic
industry's loss of market share and gains in market share by subject imports.
Further, China contends that the "extent and nature of the other evidence
in this case" was sufficient to support the inference that subject import
had adverse price effects and also that MOFCOM had "specific
evidence" that the domestic industry lowered its prices in reaction to the
loss of market share during 2008.[109]
7.49. China has not identified any "specific evidence" before
MOFCOM that indicates that the domestic industry lowered its prices in reaction
to the loss of market share during 2008. Nor has China identified the
"other evidence in this case" whose "extent and nature"
allegedly supports the inference that subject imports suppressed and depressed
domestic prices. To the extent that China's reference to such evidence is
actually a reference to the various factors relied on by MOFCOM in its
conclusions on price competition, we discuss these separately below.
7.50. Before examining MOFCOM's conclusions, we recall that
Articles 3.2 and 15.2 require investigating authorities to consider two
lines of enquiry. With regard to the volume of dumped or subsidized imports,
investigating authorities are required to consider whether there has been a
significant increase in dumped or subsidized imports, in absolute terms, or
relative to production or consumption in the importing Member. With regard to
the effect of the dumped imports on prices, investigating authorities are required
to consider "whether there has been a significant price undercutting by
the dumped imports as compared with the price of a like product of the
importing Member, or whether the effect of such imports is otherwise to depress
prices to a significant degree or prevent price increases, which otherwise
would have occurred, to a significant degree". In our view, it is clear
that these two lines of enquiry are separate, and that increases in subject
import volume and/or market share may, or may not, have consequences for
domestic prices. In order to decide which the case in any given investigation
is, the investigating authority must specifically consider the question of
price effects, guided by the requirements of Articles 3.2 and 15.2. It is
clear to us that it cannot simply be assumed that an increase in subject import
volume and market share will have a price suppressing or depressing effect on
domestic prices. If investigating authorities could simply assume that an
increase in subject imports' volume and market share suppresses and/or
depresses domestic like product prices, without specifically explaining whether
the effect of such dumped or subsidized imports was to suppress or depress
prices, the second prong of Articles 3.2 and 15.2 would be rendered redundant.
7.51. Therefore, in our view an investigating authority may conclude that
increases in the volume of subject imports and consequential market share gains
have a price suppressing and depressing effect on the domestic like product
only if it establishes a linkage between the subject import's increased volume
and market share on the one hand and the price suppression or depression
observed on the other. Furthermore, where an authority is faced with elements
other than subject imports that may explain the price depression or
suppression, it must consider the evidence relevant to such elements for
purposes of understanding whether subject imports indeed have a depressive or
suppressive effect on domestic prices.[110] By taking into account such elements, an investigating authority
ensures that its consideration of significant price depression and suppression
under Articles 3.2 and 15.2 is properly based on positive evidence and
involves an objective examination, as required by Articles 3.1 and 15.1.[111] With this understanding in mind, we turn to the specific facts in
this case.
7.52. MOFCOM concluded that subject imports suppressed domestic like
product prices in 2008 because the volume of subject imports increased in 2008
and the domestic industry lost market share as a consequence, predominantly to
subject imports, which precluded price increases by the domestic industry
despite rising costs. MOFCOM's analysis and determination raise a number of
concerns.
7.53. First, MOFCOM assumed that if the domestic industry was losing
market share, predominantly to subject imports, any inability to raise domestic
prices must be a consequence of that loss in market share. We see no reference
in MOFCOM's Redetermination to any evidence which could have led MOFCOM to the
conclusion that the domestic industry's inability to increase prices and cover
increased costs was actually the result of the loss in the domestic industry's
market share to subject imports. Nor is there any explanation of how MOFCOM
linked lost market share, which may well translate into lost revenues, to the
industry's inability to increase prices to cover costs. MOFCOM's assumptions
are particularly problematic in light of its failure to engage with or consider
relevant evidence on the record, which could have affected MOFCOM's conclusion
that the close correspondence between the domestic industry's loss of 5.65
percentage points of market share and the subject imports' gain of 5.56
percentage points of market share showed the suppressive effect of increased
imports on domestic industry prices.
7.54. For instance, while MOFCOM concluded that price suppression was an
effect of the domestic industry's loss of significant market share almost
entirely to the subject imports, as we discuss below in considering MOFCOM's
causation analysis, it failed to consider the impact of non-subject imports on
domestic like product prices, even though the volume of such imports was
greater than that of subject imports. Moreover, as MOFCOM itself observed, the
prices of non-subject import prices were "close to" the price of
subject imports in 2008.[112] Since subject imports, non-subject imports and the domestic like
product all competed in the Chinese market, it is unclear how MOFCOM reached
the conclusion that domestic industry prices were precluded from increasing as
a result of the increased volume of subject imports, but that the significant
volume of non-subject imports in the Chinese market, at prices similar to those
of subject imports, had no such effect. Similarly, it is not clear to us how
MOFCOM concluded that relative changes in market share between the domestic
industry and subject imports had the effect of suppressing and depressing
domestic prices, but relative changes in the much greater volume of non-subject
imports did not.
7.55. China argues that non-subject imports gained only 0.09 percentage
points of the 5.65 percentage points of market share lost by the domestic
industry in 2008, given that subject imports gained 5.56 percentage points.
Therefore, China contends that it was the subject imports' volume and market
share increase that had the effect of suppressing and depressing domestic
prices.[113] In response to questions from the Panel, China provided the
following information concerning quarterly shifts in market share in 2008 and
Q1 2009 to the Panel, which was not set out in MOFCOM's Redetermination.[114]
Quarterly
shifts in market share
|
Q1 2008
|
Q2 2008
|
Q3 2008
|
Q4 2008
|
Q1 2009
|
Q1 2009 compared to Q1 2008
|
Domestic Industry
|
…
|
-1.85%
|
-5.00%
|
0.39%
|
7.50%
|
1.04%
|
Subject imports
|
…
|
10.28%
|
4.14%
|
-4.69%
|
-8.75%
|
1.17%
|
Non-subject imports
|
…
|
-8.44%
|
0.86%
|
4.30%
|
1.08%
|
-2.21%
|
Source: China's
response to Panel question No. 14.
7.56. While, in light of the standard of review, we draw no conclusions on
the basis of this quarterly data, we observe that it undermines to a degree
MOFCOM's conclusion that the market share lost by the domestic industry in 2008
was taken up almost exclusively by subject imports. For instance, we note that
China submits, relying on this quarterly data, that in Q4 2008, "subject
imports remained very high", "the domestic industry began to
react" to increases in volumes of subject imports, and that the domestic
AUV fell in Q4 2008, in comparison to Q3 2008.[115] Further, China explains that it is only in Q1 2009, with the
cumulative effect of price decreases in Q4 2008 and Q1 2009, that the domestic
industry began to regain market share that it had lost in 2008.[116]
7.57. Yet, the quarterly data show that in Q4 2008, non-subject imports
gained 4.30% market share, in comparison to Q3 2008, whereas subject imports
lost 4.69% of market share, in comparison to Q3 2008. We observe that MOFCOM's
conclusion that in 2008 the domestic industry lost market share predominantly
to subject imports does not adequately reflect the market dynamics prevalent in
Q4 2008, and thereby understates the relevance or possible effect of non‑subject
imports on the domestic like product prices in 2008. This is particularly
difficult to understand because China's submissions indicate that the price reactions
from the domestic industry started in Q4 2008 and continued in Q1 2009, both of
which are quarterly periods when non-subject imports gained and the subject
imports lost market share.[117] Therefore, we observe that far from offering relevant context for
MOFCOM's conclusion regarding linkages between increases in subject import
volume and adverse price effects suffered by the domestic industry, the
quarterly data casts further doubt on MOFCOM's conclusions.
7.58. Second, in our view, a reasonable and unbiased investigating
authority could not have concluded that the domestic industry reacted to
increased volumes of subject imports by competing on price without considering
the relative prices of subject imports and the domestic like product. We recall
that there was information before MOFCOM on the prices of the subject imports,
non-subject imports, and the domestic like product. While we draw no
conclusions as to the probative value of that information, we do question
MOFCOM's failure to consider it at all in the Redetermination. Such a
consideration is, in our view, important to understand the relationship between
subject import and domestic like product prices. For example, if there is a
significant variation between the price levels of subject imports and the domestic
like product, it may be questioned whether domestic industry prices were, in
fact, precluded from increasing by the increases in the volume of subject
imports in the market, or whether other factors were responsible for such price
suppression. It is undisputed that MOFCOM did not make price comparisons.[118] In our view, MOFCOM could not have reached a reasoned and adequate
conclusion that the domestic industry's prices were suppressed by the volume of
subject imports, having failed to consider the relative prices of subject
imports and the domestic like product at all.
7.59. With respect to the price suppressing and depressing effect of
subject imports in Q1 2009, MOFCOM concluded that (a) the "large
increase" in the volume of subject imports since 2008 and
(b) the "sharp decrease" in the price of those imports in the first
quarter of 2009, together depressed and suppressed the price of the Chinese
domestic like product in Q1 2009.[119]
7.60. In our view, when an investigating authority concludes that the
increased volume and decreased prices of subject imports, taken together,
affects domestic prices, it is not for a panel to independently seek to
determine the price suppressive or depressive effect of either the volumes or prices
of subject imports alone. Absent some indication that the investigating
authority itself considered the effect on domestic prices of the volumes and
prices independent of each other, such an inquiry would require us to undertake
a de novo analysis of the facts, which we
are not permitted to do.[120] Therefore, we asked China to clarify whether MOFCOM found that the
domestic industry's loss of market share to subject imports in 2008 and the
1.25% decline in subject import prices in Q1 2009, taken together, forced the
domestic industry to lower prices by 30.25% in the same period.
7.61. China clarified, referring to other parts of MOFCOM's
Redetermination, that while MOFCOM noted both the increased volume of subject
imports and consequential gains in market share and the decrease in import
prices, it placed much more emphasis on the loss of domestic market share and
was more concerned with the decline in subject import prices in the face of
rising domestic costs than it was with the extent of the decline in subject
import prices.[121] The following statement reflects this:
In the first quarter of 2009, drawing upon the lesson
of losing market share in 2008, the domestic industry was forced to cut price
to avoid further losing market share. Given that sales price of the domestic
like product fell by 30.25% compared to the previous year, the domestic
industry won back part of the market share that was lost in 2008, but still
failed to recover to the market share level of 2007 when the subject
merchandise had not yet been imported in large quantities.[122]
7.62. This statement refers to the effect of the increased volume of
subject imports and consequential loss in domestic industry's market share
alone on the domestic like product prices, suggesting that MOFCOM did consider
the effect of the volume of subject imports independent of the effect of the
price decline.[123] Therefore, we now turn to consider whether MOFCOM's conclusion
regarding the linkage between the increased volume of subject imports in 2008
and price effects in Q1 2009 was based on an objective examination of positive
evidence.
7.63. We have two specific concerns regarding the linkage that MOFCOM
draws between increases in subject import volume and price effects in Q1 2009.
First, MOFCOM found that the domestic industry was forced to lower prices to
avoid further loss of market share.[124] However, MOFCOM made no attempt to compare the prices of subject
imports and the domestic like product. If subject imports were priced higher
than the domestic like product, it is not clear that further price reductions
by the domestic industry would enable it to limit further market share losses,
which occurred even though domestic prices were lower than subject import
prices. We note in this context that the US government specifically argued that
subject imports were priced higher than the domestic like product in Q1 2009
and MOFCOM did not find this assertion of fact to be incorrect.[125] In our view, MOFCOM could not have reached a reasoned and adequate conclusion
regarding the linkage between increases in subject import volume and price
effects suffered by the domestic industry, without examining the price levels
of subject imports and the domestic like product.
7.64. We recall that, in the original proceeding, the Appellate Body found
that the "fact that there was a substantial divergence in pricing levels
over that period [Q1 2009] could suggest that the two products [subject imports
and the domestic like product] were not in competition with each other or that
there were other factors at work".[126] In the Redetermination, instead of considering whether this
substantial divergence in pricing levels (which China does not deny existed)
brought into question its determination, MOFCOM simply chose not to make price
comparisons or take the price levels into consideration at all.[127] In our view, in situations where a panel or the Appellate Body
highlights certain concerns, based on the underlying evidence, regarding the
consistency of a measure with the Anti-Dumping Agreement or SCM Agreement,
it is on its face problematic for an investigating authority to simply decline
to engage with the evidence that was the basis of the decision it is seeking to
implement by making a new determination based on the same record evidence.
7.65. In this case, given the nature and scope of the findings in the
original proceeding, we would have expected MOFCOM, in making a new
determination based on the same record evidence, to provide some analysis or
explanation as to why the evidence regarding divergences in price levels
between subject imports and the domestic like product did not affect its
conclusions, or why it found it unnecessary to consider such evidence at all.
However, MOFCOM chose not to address that question, and ignored the evidence
altogether, relying on the Appellate Body's statement that price comparisons
are not required as a matter of law.[128] Even if price comparisons
are not required in order to make a determination regarding the price effects
of imports as a matter of law, a failure to at least consider evidence of price
divergences where such evidence is before the investigating authority is
difficult to understand. An analytical approach based on disregarding evidence
which might lead to a different conclusion casts doubt on the reasonableness
and objectivity of the investigating authority's examination of the evidence
and its conclusions. This is particularly so in a case like the present one,
when there were specific arguments advanced by the United States
government that subject imports were priced higher than the domestic like
product in Q1 2009, both the panel and the Appellate Body questioned the
adequacy of MOFCOM's analysis of the pricing evidence in the original
determination, the record evidence underlying the Redetermination is unchanged
from the original proceeding, and the same ultimate conclusions were reached by
MOFCOM.
7.66. Second, MOFCOM's conclusions seem even more questionable given that,
as argued by the United States, subject imports declined from Q3 2008 to
Q4 2008 and from Q4 2008 to Q1 2009, undermining the plausibility of a
conclusion that the price suppression and depression in Q1 2009 were the
effect of increases in subject import volumes.[129]
7.67. China questions the United States' reliance on quarterly import
statistics from China Customs, on the ground that quarterly data may have
anomalies.[130] China argues that such anomalies may arise because it takes time
for subject imports to arrive in China and be counted, while decisions about
how much to import and how much to charge for those shipments are based on information
from an earlier time.[131] However, China clarified that its arguments "relate more to
the price than the volume" and that given the closer proximity to the
market, domestic producers could react with a new price while the subject
imports would react on a delayed basis.[132] Since the United States' argument concerns the effect of the
declining volume of subject imports rather than their price, we do not consider
that China's argument undermines the argument raised by the United States,
that is, whether MOFCOM's redetermination could be considered reasonable since
MOFCOM focused on shifts in market share in 2008 as a whole, while ignoring
evidence that the volume of subject imports declined from Q3 2008 onwards.[133]
7.68. MOFCOM's Redetermination does not suggest that this issue was
considered by MOFCOM, nor has China argued to the contrary. In our view, a
reasonable and unbiased investigating authority could not conclude that an
increase in the volume of subject imports and a consequential market share gain
of 5.56 percentage points in 2008 resulted in domestic price declines in
Q1 2009 to avoid further loss of market share, without taking into account
the fact that subject imports actually declined from Q3 2008 to Q4 2008
and again from Q4 2008 to Q1 2009. In our view, this evidence is clearly
relevant to assessing the linkages, if any, between market share shifts in 2008
and price declines in Q1 2009.
7.69. To be clear, we do not mean to suggest that it is impossible that
the Chinese domestic industry experienced price depression in Q1 2009 in the
face of a declining volume of subject imports from Q3 2008 to Q1 2009. However,
we do consider that, faced with evidence of declining import volumes toward the
end of the period, which could potentially affect any findings regarding the
price suppressing and depressing effect of subject imports, MOFCOM should have,
at a minimum, considered and addressed this evidence. MOFCOM failed to do so.
7.70. Our review of MOFCOM's determination with respect to price
suppression and price depression in 2008 and Q1 2009 based on subject import
volumes and market share has revealed serious errors in MOFCOM's analysis of
the underlying evidence, which in our view call into question whether MOFCOM's
conclusions regarding price effects could have been reached by an investigating
authority considering the evidence objectively, and are supported by reasoned
explanations. Nonetheless, we now turn to an examination of whether this
evidence, considered in conjunction with evidence of price competition between
the subject imports and the domestic like product is an adequate basis for
MOFCOM's conclusions regarding the price suppressing and depressing effect of
subject imports on domestic like product prices.
7.71. Turning to MOFCOM's findings on price competition, we will first
examine MOFCOM's consideration of evidence furnished by the US exporter AK
Steel that certain product categories manufactured by it could not be commercially
supplied by the domestic industry. In our view, the inability of the domestic
industry to meet the needs of certain specific end-uses may well affect a
finding of price competition between subject imports and the domestic like
product. Second, we will examine whether, as argued by China, MOFCOM's seven
factual findings concerning price competition, taken as a whole, supported
MOFCOM's conclusions regarding price competition between subject imports and
the domestic like product. Finally, we will consider whether, and if so how,
MOFCOM's finding of price competition, taken together with its findings
regarding the volume and market share of subject imports, reasonably explain
and support its conclusions regarding the price effects of those imports.
7.72. The United States argues that MOFCOM failed to adequately
consider evidence submitted by AK Steel that [***].[134] Further, AK Steel also contended that lower grade
Chinese-produced GOES was not readily substitutable for imported GOES and that
any substitution would require downstream users to make significant
manufacturing changes, with consequent adverse effects on the final product and
on manufacturing costs.[135] In particular, the United States emphasizes that MOFCOM failed
to consider evidence submitted by AK Steel that GOES produced by domestic
producers was not certified for use in large transformers, i.e. transformers of
500kW and above.[136] The United States asserts that AK Steel was a much more
significant participant in the Chinese market than the other participating US
exporter, Allegheny Ludlum, and that by ignoring AK Steel's submissions,
MOFCOM disregarded evidence relating to a significant proportion of the imports
under investigation.[137]
7.73. China responds first that, while AK Steel submitted a questionnaire
response during the original proceeding containing the assertions relied on by
the United States, it did not make any comments on MOFCOM's factual
disclosure or preliminary determination in the original investigation with
respect to the issue of non-substitutability of certain product categories or
any comments on this issue during the Redetermination proceedings.[138] Second, China contends that AK Steel's exports of high-end GOES
accounted for only about ten per cent of total subject country exports to China
and for that reason, would not have had any material impact on MOFCOM's
analysis of the cumulated effect of subject imports as a whole.[139] Further, China asserts that while it may have been true that the
Government of China did not expect test manufacturing of 500 kW transformers
employing domestically-produced GOES until the end of 2009, i.e. subsequent to
the period of investigation, it did not necessarily follow that the domestic industry
did not produce GOES capable of being used in such transformers.[140] Finally, China submits that since AK Steel did not distinguish the
product categories exported by it from those exported by Allegheny Ludlum,
MOFCOM was well within its rights to forego any further consideration of AK
Steel's contentions.[141]
7.74. China referred to the following excerpt from MOFCOM's
Redetermination, which China contends responded to the submissions of AK Steel
regarding the inability of the domestic industry to manufacture certain product
types in commercial quantities, without explicitly referring to AK Steel
by name:
The interested parties that submitted responses to the
questionnaire for overseas producers and domestic importers at one point argued
that laser scribing, low iron loss and other high-end products can only be
produced in the U.S., Japan and other countries. During the verification of the
domestic producers, the Investigating Authority verified their production lines
of laser scribing, collected evidence such as their product catalogues, product
testing reports and sales invoices, which prove that the domestic industry
indeed did produce and sell laser-scribing and low-iron-loss grain GOES
product. The domestic industry also provided use evaluation reports from the
downstream users, proving that domestic like product is of similar quality to
the subject merchandise and that the two are competitive and substitutable.[142]
7.75. There is a considerable degree of factual dispute between the
parties as to whether AK Steel's submissions were considered by MOFCOM and
whether AK Steel's submissions were accurate in light of MOFCOM's conclusions
concerning the substitutability of different product types. While we will not
undertake a de novo review of the information
provided by AK Steel, we will examine carefully whether the "explanations
given disclose how the investigating authority treated the facts and evidence
in the record" and whether the "explanations provided demonstrate
that the investigating authority took proper account of the complexities of the
data before it, and that it explained why it rejected or discounted alternative
explanations and interpretations of the record evidence".[143]
7.76. First, we do not accept that merely because AK Steel did not advance
specific arguments on an issue beyond providing information in its
questionnaire, MOFCOM was entitled to disregard the relevant facts submitted by
AK Steel. [***][144] We understand China to be arguing that in order for MOFCOM to
consider whether this was in fact true, AK Steel was required to make some
additional submission specifically raising an argument based upon the facts
presented in its questionnaire response. We disagree. If interested parties
make available relevant evidence to the investigating authority, within prescribed
timelines, there is no obligation on those parties to, in addition, make
further arguments based on that evidence in the form of separate written or
oral submissions. On the other hand, investigating authorities are required, in
order to ensure an objective examination of the evidence, to consider all the
evidence presented, and not merely that which is the subject of elaborated
arguments.
7.77. Further, MOFCOM based the Redetermination on "record evidence
submitted by interested parties as well as record evidence collected by the
investigating authority in the original investigation".[145] It is clear that AK Steel was not required to resubmit its
questionnaire response again in the Redetermination proceeding, and the same
consideration we discussed above means it was not required to make additional
arguments on the basis of the facts it submitted originally in the
Redetermination proceeding. Therefore, as the questionnaire response continued
to be part of the evidence on record before MOFCOM in the Redetermination
proceeding, MOFCOM remained obligated to consider the information in its
analysis and conclusions or explain why it was not relevant or probative.
7.78. Second, we reject China's argument that, absent an attempt by AK
Steel to distinguish its steel from that shipped by Allegheny Ludlum, or any
arguments on the issue, MOFCOM was entitled to forego any further consideration
of AK Steel's contentions. Indeed, we find it difficult to understand this
argument, given that it is entirely possible that one exporter simply has no
knowledge of the product mix of another exporter, and therefore could not make
such an argument. Moreover, even if the exporter did have this information, we
cannot accept the view that the failure of an interested party to make certain
arguments justifies an investigating authority's failure to consider relevant
evidence submitted to it. China has pointed to no provision in the Anti-Dumping
Agreement or the SCM Agreement, which would allow this. To the contrary,
it is clear to us that the obligation of an investigating authority is to
consider all the evidence presented to it, evaluate and weigh it, and draw
conclusions supported by reasoned explanations. We fail to see how an
investigating authority can satisfy this standard if it refuses to consider
seemingly relevant information without a sufficient explanation.
7.79. Third, looking at MOFCOM's statement concerning arguments regarding [***],
we observe that while MOFCOM took note of the assertions by interested parties
that laser scribing, low iron loss and other high-end products could only be
produced in the US, Japan and other countries, it is unclear to us how this
responds to the specific assertions of AK Steel.[146] For instance, AK Steel stated that "HiB grades"
manufactured by Wuhan were not certified for use in large transformers of 500
kW and above, and that based on AK Steel's feedback from its customers, Chinese
transformer manufacturers were refusing to use domestically-produced GOES for
these applications.[147] It is not discernible from MOFCOM's analysis or explanations how or
if it considered this specific assertion. In our view, the fact that the
domestic industry was allegedly unable to satisfy a specific end-use need in
the Chinese market, i.e. supply GOES for use in large transformers of 500 Kw or
above, was a relevant fact which should have been considered and resolved by
MOFCOM in concluding that the domestic product and subject imports competed on
price.
7.80. Finally, China contends that AK Steel did not quantify its shipments
of GOES destined for use in transformers of capacity 500 Kw and above and
therefore questions the United States' reliance on AK Steel's information.[148] Further, China argues that high-end GOES accounted for only about
10% of total subject imports and for that reason, United States' argument
was not material to MOFCOM's analysis of the effect of subject imports as a
whole.[149] We reject both of these arguments. The fact that the volume of
imports of a grade not produced by the domestic industry may be relatively
small as a percentage of total imports may well be relevant in assessing the
question of price competitiveness, but it does not justify an investigating
authority's refusal to undertake an analysis on the issue. Further, it is not
for the Panel to make de novo
findings as to whether MOFCOM's failure to consider such evidence was
inconsequential in light of the limited volume of exports of such product
categories into China.[150] There is nothing in the Redetermination that suggests that MOFCOM
itself took this view.
7.81. In sum, MOFCOM's Redetermination does not explain how MOFCOM
actually considered the information submitted by AK Steel in the context of its
conclusion that the subject imports competed with the domestic like product on
the basis of price.
7.82. China argues that, in making its determination of price effects,
MOFCOM considered the domestic industry's loss of market share to increased
volumes of subject imports in conjunction with other evidence demonstrating a
competitive relationship based on price between subject imports and the
domestic like product.[151] We agree that price competition may be a relevant element in
determining whether subject imports had an effect on domestic like product
prices. In that context, an investigating authority must be able to explain the
connection between a factual finding of price competition between the domestic
like product and subject imports and its ultimate conclusions concerning the
price effects of those imports.
7.83. We now turn to consider each of the seven factors which China argues
supported MOFCOM's finding of price competition. We note that China
acknowledges that each of these factors, viewed in isolation, may be
insufficient to support a finding regarding price competition or price effects.[152] Thus, while we review each of the factors individually, our
conclusions will take into account all of them as a whole.
Like product and cumulation
7.84. In the Redetermination, MOFCOM summarized its analysis of likeness
as follows:
In summary, the GOES produced by China's domestic
industry and the subject merchandise are not different in terms of physical
character, and aspects such as production techniques and processes, product
use, product substitutability, evaluations by consumers and producers, and
sales channel are fundamentally similar and the
price trends are overall consistent. Being similar
and comparable, they are substitutable. Therefore, the GOES produced by China's
domestic industry and the subject merchandise are like products.[153] (emphasis added)
With respect to
cumulation, MOFCOM stated:
Based on investigation, comparing the subject
merchandise and the subject merchandise and the Chinese domestic like products,
the physical characteristics, production techniques and processes and end uses
are fundamentally the same, the sales
channel and sale price trends are fundamentally the same,
they all arose in the Chinese market at fundamentally the same
time, product quality is similar, they
satisfy customer requirements, they are substitutable, a competitive
relationship exists between them, and the competition conditions are fundamentally the same.[154] (emphasis added)
7.85. The United States argues that MOFCOM's determinations of
likeness and cumulation did not go beyond very general similarities or include
any meaningful consideration of the nature of price competition or lack
thereof.[155] China contends that it is difficult to conceive that subject
imports and the domestic like product which were (a) "fundamentally
the same", in terms of physical characteristics and terms of use, (b)
travelled through the same channels, (c) were directly competitive with each
other, (d) and were substitutes of each other, were not competing on price.[156] China argues that the finding of substitutability, in particular,
strongly supported the notion of price competition.[157]
7.86. We agree that products which have similar physical characteristics
and uses and are directly competitive and substitutable with each other are
likely to compete on price. However, MOFCOM's findings are qualified, as
indicated by the text italicized in the quotations above. Thus, in our view,
the extent of similarities between subject imports and the domestic like
product is less than clear, and thus the conclusion of price competition is
somewhat attenuated. For instance, MOFCOM finds that the end uses of the
domestic like product and the subject imports were "fundamentally the
same". However, the extent and nature of the differences might well give
insight as to whether the domestic product and subject imports are only broadly
similar or close substitutes which could be used interchangeably for many,
most, or all commercial purposes. In particular, we recall the assertions of AK
Steel that certain GOES manufactured by the domestic industry was not certified
for use in large transformers, and thus did not compete with the imported
product.[158] MOFCOM's qualified conclusions give no indication as to whether or
how it considered these assertions, which in our view would be relevant to a
conclusion that the domestic like product competed with subject imports on the
basis of price.
Statement
by US producer Allegheny Ludlum
7.87. MOFCOM also relied on US producer Allegheny Ludlum's statement that
the subject merchandise it produced and exported to China was highly substitutable
and competitive with the domestic like product and the like product from other
countries in its finding of price competition between subject imports and the
domestic like product.[159] The United States asserts that MOFCOM could not have properly
drawn conclusions regarding price competition based on Allegheny Ludlum's
statement, particularly because MOFCOM failed to consider the submission of AK
Steel, a bigger participant in the Chinese market, which argued that [***].[160]
7.88. While MOFCOM was entitled to take into account Allegheny Ludlum's
statement that its exports were highly substitutable and competitive with the
domestic like product, we note that there is nothing in MOFCOM's determination
suggesting that the product types exported by Allegheny Ludlum were
representative of subject imports from the United States, or subject
countries, as a whole. We recall our concerns with MOFCOM's failure to fully
consider the information submitted by AK Steel, and the fact that AK Steel's
exports accounted for a larger share of US exports than did those of Allegheny
Ludlum. Since MOFCOM was making a finding with respect to subject imports as a
whole, it is not clear to us why MOFCOM would rely on Allegheny Ludlum's
statement without thoroughly considering the submissions of AK Steel, whose
exports to China were greater than those of Allegheny Ludlum, and would thus
seem to have been more likely to be representative of US imports, even if not
of subject imports as a whole. In these circumstances, we consider that Allegheny
Ludlum's statements give little support to MOFCOM's conclusion of price
competition.
Parallel
price trends from 2006 to 2008
7.89. MOFCOM also relied on parallel trends in the prices of imports and
the domestic like product in finding price competition. China argues that the
divergence in the price trends of subject imports and the domestic like product
in Q1 2009 did not undermine MOFCOM's conclusions because MOFCOM adequately
explained the reasons for that divergence.[161] According to MOFCOM, the
domestic industry reduced prices in Q1 2009 in order to regain market share
lost to subject imports in 2008.[162] The United States
contends that MOFCOM's reliance on parallel price trends to show price
competition was misplaced, especially in light of the substantial divergence in
the price trends of subject imports and the domestic like product in Q1 2009.[163]
7.90. MOFCOM relied on the following data concerning the average unit
values (AUV)[164] of subject imports and domestic like product over the period of
investigation[165]:
Percentage changes in AUV of subject imports and domestic like product
|
2007
|
2008
|
Interim 2009
|
Subject imports
|
+2.9%
|
+17.57%
|
-1.25%
|
Domestic like product
|
+6.66%
|
+14.53%
|
-30.25%
|
Source:
United States' second written submission[166]
On the basis of this data, MOFCOM concluded:
The Investigating Authority based on the investigation
determines that the conclusion that the pricing trends are fundamentally
consistent was arrived at from the analysis of the import price of the subject
merchandise during the period of the investigation and domestic price of the
Chinese domestic like product. From 2006 through the first quarter of
2009, the two prices first increased and then decreased. The trends are
fundamentally consistent.[167]
7.91. In response to arguments by the US government and AK Steel that the
1.25% drop in subject import price in Q1 2009, compared to the drop of 30.25%
in domestic like product prices, indicated a lack of correlation between the
prices of subject imports and the domestic like product, MOFCOM noted as follows:
The Investigating Authority finds that the analysis in
the price effects section of the redetermination comprehensively analysed the
situation in 2008 and the first quarter of 2009. After taking into full
consideration the import volume of the subject merchandise, corresponding
changes in the market share of the subject merchandise and domestic like
product and the corresponding changes in average price, the Investigating
Authority finds that the continual substantial increase in the import volume of
the subject merchandise caused the domestic [industry] to face a dilemma: if
the domestic industry maintained the proper price level, the domestic industry
would lose its market share; if the domestic industry wanted to avoid losing
market share, then it had to lower the price. The evidence that the
Investigating Authority obtained fully support[s] this determination.[168]
7.92. We recall that in the original proceeding the panel and the
Appellate Body had questioned MOFCOM's failure to explain why the different rates
of decrease in the prices of subject imports and domestic like product did not
affect its parallel price trends analysis or its overall price effects
analysis.[169] China argues that MOFCOM did explain this in the Redetermination
and that MOFCOM's analysis addressed trends both over the 2006 to 2008 period,
as well as the divergence in Q1 2009, referring to the following:
The domestic industry had no choice in the first
quarter of 2009 but to substantially lower the price to avoid further losing
its market share. Based on a comprehensive rather than isolated analysis of the
situation in 2008 and the first quarter in 2009, the abovementioned evidence
fully support the decision of the Investigating Authority, namely that in light
of the impact of the large volume of the subject merchandise starting in 2008,
the domestic industry was facing a the [sic] loss of
market share and the decline in profitability; if the domestic industry hoped
to maintain its market share, it had to reduce price and bear a further decrease
in profitability.[170]
7.93. We have already explained our concerns with MOFCOM's conclusions
regarding the price suppressing and depressing effects of the increased volume
of subject imports and consequential gains in market share. For the same
reasons, we find MOFCOM's explanation of the divergence in the prices of
subject imports and the domestic like product in Q1 2009 to be unpersuasive,
and thus the finding of parallel price trends lends little if any support to
the finding of price competition.[171]
Customer overlap
7.94. In the Redetermination, MOFCOM found a degree of overlap between the
users of subject imports and the domestic like product:
Based on the comparison of the top ten clients by
purchase volume provided by the domestic importers and domestic producers, the
overlap ratio of the downstream users of the subject merchandise and domestic
like product is around 50%. The sales contracts for the subject merchandise and
the price negotiation documents between the domestic industry and the
downstream clients that were provided by the domestic producers also prove that
the subject merchandise and domestic like product are directly competitive and
price is an important factor in the purchasing decisions of the downstream
clients.[172]
7.95. The United States argues that MOFCOM's finding on consumer
overlap does not support MOFCOM's conclusions on price competition, because the
same customers may be buying different types of GOES for different applications
from different sources.[173] China emphasizes that MOFCOM's finding was part of its overall
evaluation and that MOFCOM reasonably established that subject imports and the
domestic like product had (a) common customers, (b) sold the same products
and (c) there was no attenuated competition due to specialty products.[174]
7.96. In our view, MOFCOM's analysis on customer overlap is at a level of
generality which is insufficient to shed light on the issue as to whether there
was price competition between subject imports and the domestic like product. In
particular, it is not clear to us from MOFCOM's analysis how it reached a
conclusion that the subject imports and domestic like product competed on the
basis of price, simply because half of the customers in a sample provided to
MOFCOM purchased both the subject imports and the domestic like product.
MOFCOM's analysis offers no insight as to whether individual customers were
sourcing the same GOES from both subject imports and the domestic industry for
the same uses. It may very well be, as
suggested by the United States, that customers purchased subject imports
and domestic product for use in different applications. Thus, we conclude that
MOFCOM's finding of consumer overlap lends little support to its finding of
price competition.
Market
share recapture
7.97. In the Redetermination, MOFCOM stated that the domestic industry was
able to regain some market share in Q1 2009 by reducing its prices.[175] China argues that the domestic industry was able, in Q1 2009, to
regain 5.15 of the 5.65 percentage points of market share that it had lost over
2008.[176] China acknowledges
that there is no specific reference to
the extent of market share recapture in Q1 2009 in MOFCOM's Redetermination but
contends that recapture of market share, pursuant to a significant decline in
domestic like product prices, was indicative of price competition between
subject imports and the domestic like product.[177] The United States argues that MOFCOM's Redetermination does
not refer to a 5.15 percentage point gain in market share in Q1 2009, and
therefore, this line of argument is entirely ex post
facto rationalizations.[178]
7.98. As noted, China itself admits that there is no reference in MOFCOM's
Redetermination to the extent of market share regained in Q1 2009.[179] Indeed, there is nothing in the Redetermination that would suggest
that the extent or quantum of market share recaptured by the domestic industry
in Q1 2009 was even considered by MOFCOM in finding price competitiveness
between subject imports and the domestic like product.[180] We agree with the United States that this focus on the amount
of market share re-captured in Q1 2009 is an ex post
facto argument, and we will not consider it, but will rather focus
on MOFCOM's actual findings as set out in the Redetermination.
7.99. MOFCOM did find that the domestic industry was able to regain
"some" of the market share that it lost in 2008, as a result of a
reduction in its prices.[181] The question therefore is whether this finding supports MOFCOM's
conclusions on price competition between subject imports and the domestic like
product.
7.100. We recall that the domestic industry's prices declined significantly
in Q1 2009. In our view, the fact that the domestic industry is able to regain
market share from subject imports when its prices decline, suggests that
consumers were reacting to the price decline. This could indicate that
customers were sensitive to price changes and were basing their purchasing
decisions on price considerations. Therefore, in our view, it was plausible for
MOFCOM to consider that the gain in market share in Q1 2009 supported the
conclusion of price competition between subject imports and the domestic like
product.
Pricing policy documents
7.101. MOFCOM relied on a contract between a Russian supplier and a Chinese
customer and price negotiation letters exchanged between domestic producers and
Chinese suppliers ("pricing policy documents") in support of its
findings of price competition.[182] China clarified that MOFCOM also considered that these pricing
policy documents demonstrated that prices were influencing purchaser decisions
and that subject country exporters were attempting to set lower prices than
those set by the domestic industry.[183] As we find MOFCOM's conclusions and the parties' arguments based on
these documents to be interlinked, we examine them together below.
7.102. In the Redetermination, MOFCOM made the following findings on the
basis of the pricing policy documents:
During the verification period, domestic producers
submitted to the Investigating Authority a contract concerning the foreign
producers' sales of subject merchandise in the Chinese market, in which
relevant provisions of the contract demonstrate that in the first quarter in
2009 Russian producers adopted a pricing strategy that set lower prices than
those of the domestic like products. The domestic producers also submitted
documents on price negotiations with downstream users, which demonstrated that
the prices of subject merchandise imported from the United States in the
first quarter of 2009 were lower than that of the domestic like products,
forcing the domestic industry to lower its prices. The Investigating Authority
finds that the aforementioned evidence reveals that the subject merchandise has
a direct competitive relationship with the domestic like products in terms of
sales and pricing, that prices have a marked influence on the purchasing
decisions of downstream users, and that in the first quarter of 2009 the
subject merchandise attempted to set the price in the Chinese domestic market
lower than the domestic like product.[184]
7.103. We turn first to the contract between a Russian producer and a
Chinese purchaser ("Russian contract"). MOFCOM considered that the
Russian contract indicated that "in the first quarter in 2009 Russian
producers adopted a pricing strategy that set lower prices than those of the
domestic like products".[185] The United States argues that [***].[186] We agree with the United States, as in our view, the contract
is clear that [***]. We do not consider that a reasonable investigating
authority could have inferred from the cited provisions of the contract that
the Russian exporter adopted a "price strategy that set lower
prices". Moreover, the contract certainly cannot be understood as
providing any information as to the pricing policies of exporters in other
subject countries, or even other Russian exporters. We do not consider that
this contract demonstrates that subject country exporters attempted to set
lower prices than those of the domestic industry.
7.104. In relation to MOFCOM's conclusions regarding price competition and
the relevance of prices in consumers' purchasing decisions, the fact that [***].
Therefore, we consider that MOFCOM could have relied upon the contract as part
of its overall evaluation of price competition between subject imports and the
domestic like product. Nevertheless, since the Russian contract set out the
terms and conditions applicable only between one specific Chinese purchaser and
the Russian supplier, the contract offered only very limited insight into the
competition between subject imports and the domestic like product as a whole.
7.105. Second, [***]
7.106. The United States argues that the price negotiation letters,
involving limited tonnage, provided nothing more than limited, anecdotal
evidence and that since these letters all pertained to negotiations in Q1 2009,
they offered no insight on price competition prior to that.[187] China argues that the price negotiation letters indicate that the
domestic consumers were using subject import prices to drive down domestic
prices and the pricing policy documents as a whole were further evidence of a
competitive relationship between subject imports and the domestic like product.[188]
7.107. MOFCOM stated that the "domestic producers also submitted
documents on price negotiations with downstream users, which demonstrated that
the prices of subject merchandise imported from the United States in the
first quarter of 2009 were lower than that of the domestic like product,
forcing the domestic industry to lower its prices".[189] In the absence of any comparison of the prices of subject imports
and the domestic like product, we have serious concerns regarding a conclusion
that the price negotiation letters "demonstrated" that the prices of
subject merchandise imported from the United States in Q1 2009 were lower
than those of the domestic like product. However, we can accept that, as
suggested by China, MOFCOM's reference to the "lower" prices was only
a description of the prices mentioned in the documents themselves, and not a
finding as to the overall relationship between the price levels of subject
imports and the domestic like product.[190] However, in this context, the reference to "lower" prices
gives little support to MOFCOM's conclusions regarding price competition
overall.
7.108. With respect to the conclusions reached by MOFCOM in light of these
letters we consider that, like the Russian contract, they have some relevance
to understanding the competitive relationship between prices of subject import
and the domestic like product. However, it is unclear from MOFCOM's
Redetermination why it considered the price negotiation letters, which concern
specific transactions of limited tonnage, to be representative of direct price
competition between subject imports and the domestic like product as a whole.
There is nothing in MOFCOM's Redetermination that would even suggest that these
three groups of letters were somehow representative of the entire spectrum of
competition between subject imports and the domestic like product. Given their
limited scope, while they do show that, in the transactions concerned,
customers used the prices of subject imports in negotiating prices with Chinese
suppliers, we have no basis on which to conclude that the facts represented in
those letters, i.e., that subject import prices were lower than the originally
quoted domestic like product prices, were true. Thus, these three groups of
letters at most demonstrate the existence of price negotiations driven by
customers, which suggests some degree of price competition in the transactions
at issue. However, they lend at best little support to MOFCOM's overall
conclusions.
7.109. While as set out above, we do have some concerns regarding the
factual findings relied upon by MOFCOM in support of its conclusions on price
competition between subject imports and the domestic like product, as well as
MOFCOM's failure to adequately consider submissions made by AK Steel, the
question before us is whether MOFCOM's conclusion regarding price competition
between subject imports and the domestic like product, on the basis of the
factual findings taken as a whole, is one an objective investigating authority
could have reached based on the facts and explanations given.
7.110. We consider that the concerns highlighted above with respect to
MOFCOM's price competition finding weaken MOFCOM's conclusion concerning price
competition. In particular, MOFCOM's failure to engage with evidence furnished
by AK Steel regarding [***], raises doubts as to whether subject imports and
the domestic like product were in competition with each other across at least
some part of the spectrum of the GOES like product. Nonetheless, we find that
the facts overall, including the fact that the domestic industry was able to
regain market share from subject imports (as well as from non-subject imports),
provided a reasonable basis for MOFCOM to conclude that subject imports and the
domestic like product competed on the basis of price. However, we recall that
the core issue we are called upon to resolve is whether MOFCOM's conclusion
that the volume and market share of subject imports had a suppressive and depressive
effect on domestic like product prices is one that could be reached by a
reasonable decision maker on the basis of the evidence and arguments before
MOFCOM, and not simply whether subject imports and the domestic like product
competed on price.
7.111. The concern that remains, having considered MOFCOM's Redetermination
in light of the evidence and arguments presented to it and to us, is that it
does not explain how MOFCOM's findings on price competition support its
conclusions regarding the suppressive and depressive effect on domestic like
product prices of the volume and market share of subject imports. We consider
price competition to be an important analytical tool that goes to the question
of whether subject imports have the potential to affect domestic prices – if
subject imports and the domestic like product do not compete on price, it is
unlikely that subject imports will affect domestic like product prices.
However, it does not necessarily follow, in our view, that just because subject
imports and the domestic like product compete on price, increases in subject
import volumes and market share will necessarily have a suppressive or
depressive effect on the domestic like product prices.[191] Therefore, we consider that it is incumbent on an investigating authority
to demonstrate how its factual findings concerning price competition support
its conclusions regarding the price effects of subject imports on the domestic
like product.[192] MOFCOM failed to draw any such analytical linkage in this case.
7.112. Based on the foregoing, we conclude that MOFCOM's conclusions
regarding the price effects of subject imports are not consistent with
Articles 3.1 and 3.2 of the Anti‑Dumping Agreement and
Articles 15.1 and 15.2 of the SCM Agreement.
7.113. In this section of our report, we
consider the United States' claim that MOFCOM's finding of
causation in the Redetermination is inconsistent with China's obligations under
Articles 3.1 and 3.5 of the Anti-Dumping Agreement and Articles 15.1
and 15.5 of the SCM Agreement because it is not based on an
"objective examination" and "positive evidence" as required
by those provisions. The United States argues both
that MOFCOM's determination of causation under Articles 3.5 and 15.5
of the Anti-Dumping and SCM Agreements is undermined by its defective
conclusions with respect to price effects under Articles 3.2 and 15.2 of
the Anti-Dumping and SCM Agreements, and that MOFCOM's analysis of the
effect of subject imports on the domestic industry under Articles 3.5 and
15.5 of the Anti-Dumping and SCM Agreements is itself invalid. With
respect to the latter aspect, the United States focusses on MOFCOM's
conclusions regarding the industry's inability to benefit from economies
of scale, and its failure to consider properly the effects of other causes of
injury, i.e., domestic industry expansion and increased production, as well as
non-subject imports. China counters that none of the United States'
arguments undermine MOFCOM's basic finding that the increasing volume and market share of the
directly competitive subject imports caused material injury to the domestic
industry.
7.114. Articles 3.1 and 15.1 of the
Anti-Dumping and SCM Agreements are set out above at paragraph 7.28.
7.115. Article 3.5 of the
Anti-Dumping Agreement provides:
It must be demonstrated that the dumped
imports are, through the effects of dumping, as set forth in paragraphs 2
and 4, causing injury within the meaning of this Agreement. The
demonstration of a causal relationship between the dumped imports and the
injury to the domestic industry shall be based on an examination of all
relevant evidence before the authorities. The authorities shall also examine
any known factors other than the dumped imports which at the same time are
injuring the domestic industry, and the injuries caused by these other factors
must not be attributed to the dumped imports. Factors which may be relevant in
this respect include, inter alia,
the volume and prices of imports not sold at dumping prices, contraction in
demand or changes in the patterns of consumption, trade restrictive practices
of and competition between the foreign and domestic producers, developments in
technology and the export performance and productivity of the domestic
industry.
7.116. Article 15.5 of the
SCM Agreement is virtually identical to Article 3.5 of Anti‑Dumping Agreement
but for references to "subsidized imports" and "subsidies"
in place of "dumped imports" and "dumping".
7.117. In the original dispute, the
United States claimed that MOFCOM's analysis and conclusion regarding
causation were inconsistent with Articles 3.5 and 15.5 of the Anti-Dumping
and SCM Agreements, respectively, because MOFCOM's finding of a causal
link was inadequate, and because MOFCOM failed to adequately consider the
effects of other known factors causing injury to the domestic industry. We
agreed, finding:
a. With respect to price effects, MOFCOM's
findings on price depression and price suppression suffered from a number of
analytical shortcomings.
As MOFCOM relied primarily on the price effects of subject imports in its
finding that subject imports
caused material injury to the domestic industry, these shortcomings undermined
its conclusion. While
MOFCOM had also considered the adverse effects of the volume of subject
imports, the Panel concluded that it would be inappropriate to consider the
possibility that MOFCOM's finding of causation might be upheld purely on the basis of MOFCOM's
analysis of the effects of the volume of subject imports.
b. With respect to other causes of
injury, MOFCOM had concluded that the increase in the domestic industry's
inventories was caused by the increase in subject imports rather than the increase in
the domestic industry's capacity and production. However, the Panel noted that
the increase in the
domestic industry's production was greater than the increase in subject imports. As a
result, the increased domestic production would have accounted for at least
some of the increase in inventories. As MOFCOM had failed to address the fact
that domestic production increased more than subject imports in this context,
the Panel concluded that MOFCOM had failed to adequately consider other factors
possibly causing injury.
7.118. China did
not appeal our finding that
MOFCOM's causation determination was inconsistent with Articles 3.1 and
3.5 of the Anti-Dumping Agreement and Articles 15.1 and 15.5 of the
SCM Agreement. The Appellate Body observed that, as a result, the Panel's finding
regarding MOFCOM's causation finding stands.[193]
7.4.3 Legal framework
7.119. The interpretation of Articles 3.5 and 15.5 of the Anti-Dumping and
SCM Agreements has been considered by a number of panels and the Appellate
Body. In addition, given the near identity of the texts of Article 3.5 of
the Anti-Dumping Agreement and Article 15.5 of the SCM Agreement, we
consider that the principles derived from these decisions are equally
applicable in cases involving either.[194] It is by now well understood that investigating authorities are required, as a part of their causation
analysis, to examine all "known factors" other than dumped imports
that are causing injury to the domestic industry. Where such other known
factors are causing injury, the investigating authority must ensure that the
injurious effects of these factors are not attributed to the dumped imports.
The non-attribution analysis requires "separating and distinguishing the
injurious effects of the other factors from the injurious effects of the dumped
imports", rather than making "mere assumptions" about the
effects of the imports and the other factors.[195]
7.120. It is
also well established that the role of a panel considering an investigating
authority's causation findings is not to conduct a de novo review of the facts considered by the investigating
authority in making its determination.[196] However, neither may a panel simply defer to
the conclusions of the investigating authority.[197] Rather, we must determine whether the
explanations given by the investigating authority for the conclusions reached
are reasoned and adequate to support those conclusions, in the light of other
plausible alternative explanations.
7.121. The United States argues that MOFCOM's
conclusion that a causal link exists between subject imports and the material
injury suffered by the domestic industry rests on a price effects analysis that
is contrary to the evidence, lacks a discernible factual basis, and fails to
reflect an objective examination of the record.[198]
The United States claims the present case is analogous to China – Autos, in which the Panel concluded that MOFCOM's
defective price effects analysis undermined its causation analysis.[199]
The United States argues that, far from being collateral to its injury
determination, MOFCOM's price effects analysis was an important element of that
determination in this case, as in China – Autos.[200]
The United States further argues that, as in China – Autos,
it would be difficult for MOFCOM to have made its determination of causation in
this case without relying on price effects.[201]
Absent a demonstration that subject imports had any significant price effects
on the domestic like product, MOFCOM's causation analysis must therefore fail.[202]
7.122. China does not accept that
MOFCOM relied on an allegedly defective analysis of price effects to establish
causation. China first maintains MOFCOM was not required to, and did not in
fact, make price comparisons in considering price effects.[203]
Rather, MOFCOM considered the increased volume of imports, along with a number
of other elements (i.e., product comparability and substitutability, price
trends consistent with a competitive relationship, overlap in customers, and
evidence of purchasers' attempts to use subject import prices to reduce the
prices of the domestic like product) in its
analysis, and made well-reasoned findings that properly establish the explanatory force of
increasing subject import volumes and market share on domestic prices and thus
establish the necessary causal link.[204]
7.123. Japan
agrees with the United States that a flawed price effects determination
necessarily results in a flawed causation analysis, citing several panels that
have reached this conclusion, and argues that the Panel should follow the same
approach in evaluating MOFCOM's determination in this proceeding.[205]
7.124. As discussed above, MOFCOM found
that the subject imports caused price suppression and depression based
primarily on the volume and market share of the subject imports, considered
together with its findings regarding price competition between the subject
imports and the domestic like product. Given the shortcomings we have
identified in MOFCOM's findings regarding price effects, as set out above, we
consider that those findings cannot adequately support a finding that the
subject imports caused material injury to the domestic industry. We recall that
several panels have similarly found determinations of causation to be
inadequate where underlying determinations of price effects were found to be
inadequate.[206]
It is clear to us that MOFCOM's causation determination rests, at least in
part, on its conclusions regarding the price effects of subject imports.
Accordingly, we find that, to the extent that it is based on the
price effects of subject imports, MOFCOM's causation determination is
inconsistent with Articles 3.5 of the Anti‑Dumping Agreement and 15.5 of
the SCM Agreement.
7.125. While
this finding resolves the United States' claim with respect to its
arguments regarding the element of price effects, the United States made
further arguments regarding economies of scale, domestic industry expansion and
increased production, and non-subject imports. Accordingly, we now proceed to
consider specifically these additional elements below.
7.126. The United States argues that MOFCOM's
conclusion that the domestic industry was prevented by subject imports from
reaping the benefits of economies of scale does not rest on an objective
examination of positive evidence. The United States maintains that
MOFCOM's findings in this context are merely conclusory assertions unsupported
by any factual analysis.[207]
The United States asserts that Baosteel commenced production of GOES in
May 2008 and Wuhan's largest capacity expansion occurred in the first quarter
of 2009.[208]
Given that steel production facilities have high start-up costs, the
United States asserts that it was unrealistic for MOFCOM to expect the
domestic industry to realize economies of scale and attendant profits
immediately upon bringing significant new capacity online.[209]
The United States further argues that neither of the two separate and
competing companies in the domestic industry could be expected to realize
economies of scale as a result of an increase in the production capacity of the
other.[210]
7.127. China counters that MOFCOM
determined that the domestic industry reasonably invested in new or additional
GOES production capacity in an expanding domestic market.[211]
China argues that investment in greater production capacity in an expanding
domestic market should have allowed domestic producers to realize economies of
scale and reduce per-unit costs.[212] However, in the present case,
unfairly traded subject imports captured a significant part of the expanding
domestic market.[213]
Domestic producers' resulting inability to benefit from the expected economies
of scale thus constitutes an adverse effect that reasonably supports a finding
of causation.[214]
7.128. Japan
argues that "even
if MOFCOM's finding that the domestic industry was prevented from realizing the
benefits of economies of scale had certain evidentiary support and was not a mere conclusory assertion, that finding
cannot be sufficient to establish a causal link."[215]
It argues that it would be untenable to allow investigating authorities to
impose anti-dumping duties simply on the basis that the domestic industry was
prevented from realizing the benefits of economies of scale.[216]
Japan maintains that investigating authorities must base their causation
determinations on examinations of the volume of dumped imports and their price
effects.[217]
7.129. Economies of scale may be defined
generally as the cost advantages realized by an enterprise as a result of the
size, output or scale of its operations. Assuming fixed costs that can be
spread over additional units of output, economies of scale would generally
cause the cost per unit of output to decrease as the size, output or scale of
an enterprise's operations increases, and thus result in increased profits at
the same price level. However, there are a number of underlying considerations
as to the nature of the industry, product, market, etc. that must be taken into
account in an analysis of economies of scale. MOFCOM's Redetermination does not
address, much less establish, even basic premises and assumptions, such as the
extent to which economies of scale may be realizable in this particular segment
of the steel industry.
7.130. In the Redetermination, MOFCOM
refers to the domestic industry's inability to realize economies of scale as
evidence of the causal relationship between the subject imports and injury to
the domestic industry. However, the Redetermination contains only passing
references to economies of scale.[218]
MOFCOM does not analyze economies of scale in the same manner in which it analyzes the other principal indicators of
injury in the Redetermination.
7.131. In its answers to our questions,
China asserted that fixed costs for this industry "in the range of 30-40
percent of total costs" constitute "a significant percentage of the
total costs" and, based on "accounting truisms", concluded that
a lower production volume necessarily results in higher fixed costs per unit.[219]
However, China itself characterizes MOFCOM's consideration of economies of
scale simply as a qualitative assessment and as establishing a qualitative
connection.[220]
China concludes by confirming that MOFCOM did not perform any specific
calculations in this regard.[221]
7.132. We also note that the impact of the
timing of the domestic industry's capacity expansions is important. Wuhan was
the only domestic producer of GOES for much of the POI, until Baosteel's later
entry into the market, with its capacity coming online at the end of 2008 and
in the first quarter of 2009. It is unclear what, if any, data MOFCOM had
before it on the basis of which it could conclude that either Wuhan (which
expanded its capacity steadily from 2006 through 2008, with the greatest
increase of 51.65% in 2008[222])
or Baosteel (which entered the market in 2008) individually were unable to
benefit from economies of scale, or that the domestic industry as a whole was
unable to benefit from economies of scale towards the end of the POI.
Similarly, it is entirely unclear how MOFCOM linked this alleged inability to benefit
from economies of scale to the subject imports. China argues that "when
subject imports gained volume and market share at the expense of the domestic
industry, subject imports by definition imposed higher per unit costs on the
domestic industry."[223]
However, while increased volume and market share of subject imports may well
have affected the domestic industry's sales and profitability, this does not
necessarily mean that unit costs increased as a result, particularly in view of
continued increases in the domestic industry's output, which would tend to lead
to lower unit costs. Nothing in the Redetermination explains how, or to what
degree, unit costs for the industry increased as a result of the subject
imports' increased market share, and thus we fail to see how MOFCOM linked the
increased imports to the domestic industry's failure to achieve economies of
scale.
7.133. Given the lack of underlying
information and the minimal nature of MOFCOM's analysis of economies of scale,
we find MOFCOM's conclusions in this context insufficient to support its
determination of causation.
7.134. The United States argues that the
domestic industry's overexpansion and overproduction caused injury that MOFCOM
failed to attribute properly. It maintains that MOFCOM assumed that the
domestic industry could have reasonably expected the domestic market to absorb
all of its increased production from increased capacity[224],
but that Baosteel and Wuhan in fact were forced to compete aggressively with
each other for customers in the domestic market, as their expanded capacity and
production far outstripped the growth in demand in the domestic market.[225]
The United States further argues that MOFCOM avoided acknowledging the
role of the domestic industry's overexpansion and overproduction in the large
increase in domestic inventories by attributing this increase instead to
unspecified "sales obstacles".[226]
7.135. The
United States also challenges MOFCOM's use of 2007 as the baseline for its
analysis, as it is the year in which the domestic industry had the highest
market share, thus understating the domestic industry's contribution to
inventory overhangs.[227]
The United States further challenges MOFCOM's failure to consider the
first quarter of 2009 separately from 2008.[228]
It argues that the domestic industry's contribution to inventory overhangs
through overproduction was particularly significant in the first quarter of
2009, which was the only
part of the period of investigation when the domestic industry's prices
declined and the domestic industry was not profitable.[229]
7.136. China argues that the volume of
GOES resulting from Baosteel's entry into the market and Wuhan's production
capacity expansion did not exceed the growth in overall demand on the domestic
market, and that MOFCOM properly separated and distinguished the effect of this excess volume by
identifying subject imports as the "sales obstacles" hindering the
domestic industry.[230]
It also contends that MOFCOM explained its choice of 2007 as the base year as
being a reasonable basis for the industry's market forecasts, a comparable and
representative year for evaluating changes in 2008, and a year in which imports
were stable and the industry was not showing declines.[231]
China also contends that MOFCOM explained its consideration of inventory
build-up over the period 2008-Q1 2009 on the principle that inventory
accumulates over time, and thus requires a different approach to understand the
reasons for increases.[232]
7.137. Japan
maintains that MOFCOM does not appear to have distinguished properly the
injurious effects of the domestic industry's overexpansion and overproduction
from those of the subject imports.[233]
7.138. In the original proceeding, we
found that the
increase in production by the domestic industry from 2007 to 2008 was greater
than the increase in subject imports, and would have accounted, at least in
part, for the inventory accumulation, which thus could not be attributed
entirely to the lesser increase in subject imports.[234] We were unable to verify MOFCOM's finding
that total domestic capacity did not exceed total domestic demand
because China failed to provide the underlying data.[235] Nevertheless, we concluded that "even
if this finding were accurate, it would not change the fact that subject imports did
not account for the totality of the injurious inventory overhangs."[236] We concluded that MOFCOM had failed to
examine properly whether a known factor other than subject imports was simultaneously
injuring the domestic industry, as "an objective and impartial
investigating authority could not properly have found that the domestic
industry's increase in production was not a cause of injury."[237]
7.139. In the present compliance
proceeding, the United States makes essentially the same argument it had
made in the original dispute. The United States contends that "[t]he
domestic industry's expansion of capacity and production outstripped the growth
in demand for GOES in the Chinese market by wide margins."[238]
In support of its argument, the United States relies on information on
growth in demand, capacity and output in MOFCOM's original Determination and
the Redetermination[239]
to calculate and compare the percentage changes in these growth rates from 2006
to 2008. We have compiled this information, including the United States'
calculation, in the chart below:
Changes in demand, capacity, output and inventories
|
Demand
|
Capacity
|
Output
|
Inventories
|
2007
|
22.80%
|
35.33%
|
36.76%
|
-49.01%
|
2008
|
18.09%
|
53.67%
|
23.91%
|
839.02%
|
2006-08[240]
|
45.01%
|
107.96%
|
69.46%
|
--
|
Q1 2009[241]
|
12.46%
|
80.13%
|
55.23%
|
978.81%
|
Source: MOFCOM's Determination and Redetermination,
United States' first written submission[242]
7.140. China faults the United States
for making comparisons on the basis of percentage changes in demand, capacity
and output, each with potentially different base levels. However, the
Redetermination does not contain the underlying data from which these changes
were calculated, as MOFCOM treated the information as confidential. China has not
pointed us to any additional information in the record before MOFCOM on these
factors. Thus, the United States' argument is based on the only
information available to it, the percentage changes reported in the
Redetermination. While it may well be that the underlying base values are
different, which could affect the validity of the comparisons made, there is no
better basis of information for either the United States' argument or our
review. At a minimum, the United States' argument highlights seemingly relevant
comparisons in the changes in the growth of demand, capacity, output and
inventory that would have merited more detailed
examination and explanation by MOFCOM. Indeed, even if the base levels from
which the changes began were different, it is clear that the rate of increase
in the domestic industry's capacity and output was notably greater than the
growth in demand during the entire period examined. Unless demand was fairly
high at the beginning of the period, and capacity and output were very low, at
these rates of increase it is difficult to envision a situation in which
domestic industry capacity and output did not surpass domestic demand.
7.141. MOFCOM also compared percentage
changes in demand and output in the Redetermination.[243]
It found that domestic demand was "almost twice" the output of the
domestic like product in 2007, and that the growth in domestic demand of 18.09%
in 2008 must therefore be "roughly equivalent" to a 36% increase in
output over the level of 2007. It then concluded that this 36% figure was
greater than the increase in output in 2008 over 2007 of 23.91%.[244]
This is simply an approximation of output relative to demand which we cannot
verify from the limited information before us. Nothing in China's arguments in
this proceeding persuades us that our original conclusion, that, relative to
the increase in domestic demand, the increases in the domestic industry's
capacity and production were at least partly responsible for the accumulation
of inventory in 2008 and the first quarter of 2009, was wrong.
7.142. As to MOFCOM's choice of 2007 as
the baseline year for its analysis of domestic demand and output, as well as
the consideration of 2008 and the first quarter of 2009 as a whole for its
analysis of inventories, China asserts that the WTO agreements do not specify
any particular methodology. China also contends that MOFCOM sufficiently and
reasonably explained its choices.[245]
We agree with China that the Anti-Dumping and
SCM Agreements do not specify a particular methodology in this context,
especially not at the level of detail of how an investigating authority
establishes a baseline year for its analysis. However, an investigating
authority's choice of methodology or baseline year should not affect the
objectivity of its analysis, as the United States argues happened in this
case.[246]
7.143. In this situation, an explanation is necessary to enable us to
ensure that the choice of baseline year was appropriate. To justify MOFCOM's choice of
baseline year, China argues that using 2006 as the baseline year would not have
allowed MOFCOM to focus on the impact of subject imports at the end of the
period of investigation and specifically the effect of the surge in subject
imports in 2008.[247]
However, we fail to see how the use of 2006 as the baseline year could have prevented
MOFCOM from focusing on these specific developments in 2008. China also
reiterates MOFCOM's explanation that inventory accumulation is a continual
process, warranting its analysis across time periods.[248]
However, production and sales could also be argued to be continual processes,
yet MOFCOM did not analyse them across time periods as it did inventories.
Moreover, companies are likely to assess these elements at specific times to
gauge performance and establish accounts. In our view, inventories are not
significantly different from production, sales, or indeed, other economic
factors, and we find nothing further in the Redetermination that explains why
inventories, whether in this particular industry or more generally, should be
treated differently.
7.144. While MOFCOM considered the fifteen
months of 2008 and the first quarter of 2009 together, it accorded particular
weight to inventory data for 2008.[249]
However, in the first quarter of 2009, the volume of subject imports decreased
while inventories skyrocketed. In our view, an objective and impartial
investigating authority examining this evidence would not have considered the
first quarter of 2009 together with the rest of 2008, and virtually disregarded
the changes happening in the first quarter of 2009 for purposes of its
analysis. MOFCOM's approach fails to consider the changes in inventories in a
manner that would ensure that any injurious effects of those inventories are
not attributed to subject imports.
7.145. In the continued absence of
underlying data regarding growth in domestic demand, capacity and output, even
if only in summary form to preserve its confidentiality, and given the
inconsistencies in MOFCOM's analytical approach to inventories and time
periods, we conclude that MOFCOM's determination that the domestic industry's
expansion and increased production did not cause injury to the domestic
industry is not one that could have been reached on the basis of the
information and arguments in this case. Accordingly, we find that MOFCOM failed
to ensure that injuries caused by increased inventories were not attributed to
the subject imports consistently with the requirements of Articles 3.5 and
15.5 of the Anti-Dumping and SCM Agreements.
7.4.7 Non-subject imports
7.146. The United States argues that,
given the rising and substantial volumes and competitive prices of non-subject
imports, MOFCOM should have considered more carefully whether it was
attributing to subject imports injury actually caused by non-subject imports.[250]
The Redetermination includes additional evidence in this context that was not
in the original Determination, but the United States contends MOFCOM did
not examine this evidence objectively.[251]
The United States questions how the increase in non-subject imports
throughout the period of investigation could have had no injurious effects on
the domestic industry.[252]
The United States also focuses specifically on the first quarter of 2009,
during which the volume of subject imports decreased while that of non-subject
imports increased.[253]
In addition, the United States argues that MOFCOM's analysis of market
share conflates shifts in market share with absolute market share data.[254]
The United States alleges that MOFCOM limited its analysis to the former
and ignored the latter.[255]
7.147. China argues that the
United States errs in focusing entirely on the absolute volume of
non-subject imports and average sales values, while completely ignoring the
market share shifts that MOFCOM emphasized in its analysis.[256]
China further argues that MOFCOM's emphasis on market shares was important
because market share figures adjust for the changing size of the overall market
when it is expanding and market share figures allow for a direct comparison of
all the analytically relevant actors in the market (i.e., the domestic industry,
subject imports and non‑subject imports).[257]
MOFCOM established that subject imports accounted for the vast majority of the
increase in imports in 2008 and the first quarter of 2009, and that the
condition of the domestic industry began to deteriorate when subject imports
surged in 2008.[258]
By comparison, non-subject imports never gained market share and were fairly
traded.[259]
China thus maintains that MOFCOM properly accounted for the effect of
non-subject imports.
7.148. Japan
maintains that MOFCOM does not appear to have distinguished properly the
injurious effects of the non-subject imports from those of the subject imports.[260]
7.149. It is apparent from the
Redetermination that the volume of non-subject imports was greater than that of
subject imports throughout the period of investigation. In fact, the volume of
non-subject imports was twice that of subject imports in 2007, more than twice
that of subject imports in 2008, and almost three times that of subject imports
in the first quarter of 2009. Even in 2008, when the difference was the
smallest, the volume of non-subject imports was one and one-half times that of
subject imports. The price of non-subject imports was also below that of
subject imports in 2006 and 2008. The volume of subject imports increased
significantly in 2008, when they were priced higher than non-subject imports,
and declined significantly in the first quarter of 2009 as compared to the
first quarter of 2008, when they were priced well below non‑subject imports.[261]
7.150. The data relied on by MOFCOM in the
Redetermination, including those relating to non‑subject imports which were not
provided by MOFCOM in the original Determination[262],
are compiled in the chart below:
Volumes and prices of subject and non-subject imports
|
Subject Imports Volume (tons)
|
Subject Imports Price (RMB/ton)
|
Non-Subject
Imports Volume (tons)
|
Non-Subject
Imports Price (RMB/ton)
|
2006
|
83,837
|
25,913
|
169,846
|
25,468
|
2007
|
84,600
|
26,684
|
183,349
|
28,701
|
2008
|
135,900
|
31,372
|
213,517
|
30,999
|
Q1 2009
|
19,400
|
26,673
|
54,206
|
32,359
|
Source: MOFCOM's Determination and Redetermination[263]
7.151. MOFCOM's reliance primarily on
shifts in market share for purposes of assessing the causal link between
subject imports and injury to the domestic industry causation in this context
is perplexing. The data considered in the Redetermination suggest that the
price of the larger volume of non-subject imports fluctuated as much as that of
the smaller volume of subject imports. Subject imports recorded the most
striking increase in terms of volume during the period of investigation
(approximately 60% from 2007 and 2008), at a time when their price increased
faster and to a higher level than that of non-subject imports. In addition, the
volume of subject imports dropped in the first quarter of 2009, at the same
time as their prices declined from 2008 levels to approximately 18% below that
of non-subject imports, which by contrast had increased from 2008 levels.
7.152. In our view, this relationship
between volumes and prices, with volumes of subject imports increasing when
their prices are higher than those of non-subject imports and vice versa, would
seem to warrant a more careful examination and more detailed explanation than
MOFCOM provided in the present case. For example, the volume of non-subject
imports and the changes in their prices are such that it is conceivable
respondents and members of the domestic industry occasionally may have
established their volumes and prices in response to non-subject import trends.
A simple comparison of percentage changes in the market share of the various
sets of actors, rather than a comparison of actual or even indexed volume and
price data established on clear bases, cannot serve to explain satisfactorily
the trends in this market.
7.153. Given the shortcomings in MOFCOM's
analytical approach to non-subject imports, we conclude that its determination
that non-subject imports were not a cause of injury is flawed. Accordingly, we
find that MOFCOM failed to examine properly whether non-subject imports injured
the domestic industry at the same time as subject imports consistently with the
requirements of Articles 3.5 and 15.5 of the Anti-Dumping and
SCM Agreements.
7.154. For all the above reasons, we conclude that MOFCOM's revised finding
that subject imports caused material injury to the domestic industry is
inconsistent with Articles 3.1 and 3.5 of the Anti‑Dumping Agreement and
Articles 15.1 and 15.5 of the SCM Agreement.
7.155. In this section of our report, we
consider the United States' claim that MOFCOM failed to
disclose facts under consideration that formed the basis for the
Redetermination, inconsistent with China's obligations under Articles 6.9
of the Anti-Dumping Agreement and 12.8 of the SCM Agreement. The
United States contends that the facts allegedly not disclosed were
significant in MOFCOM's determination and formed part of the basis for its
determination and decision to apply definitive measures. China contends that
the United States has failed to demonstrate that these facts were
"essential", and in any event argues that MOFCOM did disclose all the
facts identified in the US claim, while striking a balance between necessary
disclosure and the need to protect confidential information.
7.5.2 Provisions
at issue
7.156. Article 6.9 of the
Anti-Dumping Agreement provides as follows:
The authorities shall, before a final determination is made, inform all
interested parties of the essential facts under consideration which form the
basis for the decision whether to apply definitive measures. Such disclosure
should take place in sufficient time for the parties to defend their interests.
Article 12.8 of the SCM Agreement is
identical to Article 6.9 of the Anti-Dumping Agreement but for the
addition of a reference to "all interested Members" as well as all
interested parties in the first sentence, which is not relevant in this
dispute.
7.157. The scope of the disclosure
obligation under Articles 6.9 of the Anti-Dumping Agreement and 12.8 of
the SCM Agreement has been discussed in a number of previous panel and
Appellate Body reports. Recently, the Appellate Body in China – GOES
observed that "essential facts" are those that (a) form
the basis for the decision to apply definitive measures and (b) ensure the
ability of interested parties to defend their interests.[264]
Further, Articles 6.9 and 12.8 do not require the disclosure of all facts
before an investigating authority.[265]
Facts that do not form the basis of the decision to impose definitive measures
do not constitute essential facts.[266]
Also, as we observed in the original proceeding, essential facts refer to facts that were actually under consideration by
the investigating authority rather than facts that should have been considered
by the authority.[267]
7.158. The Appellate Body has indicated
that what constitutes an "essential" fact must be determined in light
of the findings an investigating authority must make to satisfy the substantive
obligations of the Anti-Dumping and SCM Agreements in order to apply
definitive measures under the Anti-Dumping and SCM Agreements.[268]
Put differently, the relevant facts are those that are essential to reach
conclusions on the issues of dumping and/or subsidization, material injury and
causation, as well as other issues the investigating authority must resolve in
a particular case in concluding that whether to impose definitive measures.[269]
However, essential facts are not limited to those facts that support a
determination, but rather are the body of facts essential to any determinations
that are being considered in the process of analysis and decision-making by the
investigating authority.[270]
The obligation to disclose under these
provisions applies only to facts, as opposed to reasoning. In addition, the obligation to
disclose applies even where the essential facts in question are confidential,
in which case investigating authorities may discharge their obligation through
disclosure of non-confidential summaries of those facts. Investigating
authorities may not, however, rely on confidentiality to justify a failure to
disclose essential facts.[271]
7.159. With this understanding of the relevant obligations in mind, we turn
to the specific facts at issue in the dispute before us. In our
evaluation, we will address separately the allegedly undisclosed essential
facts with respect to MOFCOM's determination regarding price effects and the
allegedly undisclosed essential facts regarding its determination of causation. As noted above, disclosure must come before the determination is final,
so as to allow parties to defend their interests. Therefore, the relevant
document for our consideration of whether MOFCOM disclosed the essential facts
in this case is the Redetermination Disclosure provided to interested parties
on 4 July 2013.[272]
7.160. The United States'
claim of failure to disclose essential facts relating to MOFCOM's price effects
determination focuses on the following three elements:
a.
Information
underlying MOFCOM's assertion that the trends of the prices of the subject
imports and the domestic like product were the same;
b.
Information
regarding the evidence that MOFCOM allegedly considered, and the analysis that
it allegedly conducted, in concluding that the domestic industry's loss of
market share in 2008 led it to slash prices by over 30% in the first quarter of
2009; and
c.
Information
regarding MOFCOM's assertion that the price-cost differential for Wuhan
decreased in 2008.
7.161. First, with respect to MOFCOM's statement that the price trends of
subject imports and the domestic like product in 2007, 2008 and Q1 2009 were
the same, the United States argues that MOFCOM failed to disclose the basis
of MOFCOM's conclusions and in particular, takes issue with China's argument
that some of the data could not be disclosed because it was confidential.[273]
The United States argues that while there may be some complications where
essential facts are confidential information, this does not excuse the
investigating authority from its obligation to disclose the essential facts
which formed the basis of the decision to apply definitive measures.[274]
7.162. Second, the United States asserts that MOFCOM failed to
disclose the essential facts under consideration with respect to its conclusion
that the domestic industry's loss in market share in 2008 led it to slash
prices by over 30% in Q1 2009.[275]
The United States emphasizes that the information disclosed by China could
not be considered to be essential facts but was, in fact, the reasoning
provided by MOFCOM for its conclusions.[276]
7.163. Third, the United States contends that China failed to disclose
any essential facts in the Redetermination Disclosure relevant to MOFCOM's
conclusions regarding a decline in Wuhan Iron and Steel's price-cost
differential over 2008.[277]
It reiterates the view that claims of confidentiality do not justify failure to
disclose essential facts.[278]
7.164. China argues that the United States has failed to make a prima facie case with respect to the specific claims made by
the United States with regard to MOFCOM's alleged failure to disclose all
essential facts that formed the basis of the Redetermination.[279]
China contends that the United States' non-disclosure claim is factually,
as well as legally, incorrect.
7.165. First, China contends that MOFCOM did disclose the essential facts
relevant to MOFCOM's finding that the price trends of subject imports and the
domestic like product were the same. The price trends or percentage changes in
subject import prices were based on China Customs data and both the trends and
the underlying data are set out in the Redetermination Disclosure.[280]
The price trends of the domestic industry were based on verified data of the
domestic industry and are set out in the Redetermination Disclosure. The
underlying data was treated as confidential and thus not disclosed.[281]
China asserts that the percentage changes in domestic like product prices,
disclosed in the Redetermination Disclosure, constitute an adequate public
summary of that confidential information.[282]
7.166. Second, China argues that MOFCOM's conclusion that the domestic
industry's loss in market share in 2008 led it to slash prices by over 30% in
Q1 2009 was based on the following information, which was disclosed in the
Redetermination Disclosure:
a.
subject imports
surged in 2008 resulting in loss of market share for the domestic industry[283];
b.
one-to-one
correlation between the market share lost by the domestic industry and the
market share gained by subject imports[284];
and
c.
faced with a
continued surge in the volume of subject imports in Q1 2009, the domestic
industry was forced to lower prices by 30.25% to compete with the subject
imports to regain market share.[285]
China submits that these
statements and the specific facts, upon which they were based, were the
essential facts that were under consideration before MOFCOM.[286]
7.167. Third, China rejects the United States' assertion that MOFCOM
failed to disclose essential facts regarding the extent of the decline in Wuhan's
price-cost differential. In this regard, China asserts that MOFCOM did disclose
the extent of decline in Wuhan's gross profit, and that gross profit is a
common way of expressing the price-cost differential.[287]
China contends that the percentage figures showing the extent of decline in
Wuhan's gross profit constituted an adequate non-confidential summary of the
confidential information.[288]
7.168. Japan supports the United States' claims regarding MOFCOM's
failure to fulfill its disclosure obligations under Articles 6.9 and 12.8 of the
Anti-Dumping and SCM Agreements. It contends that the facts identified by
the United States were taken into consideration by MOFCOM in its injury
and causation determination, and therefore should have been disclosed.[289]
7.169. With respect to the question of whether parallel price trends of
subject imports and the domestic like product constituted "essential
facts" for the purpose of Articles 6.9 and 12.8 which MOFCOM
allegedly failed to disclose, we recall that "essential facts"
include all facts necessary to the process of analysis and decision-making by
an investigating authority.
7.170. In the Redetermination Disclosure, MOFCOM found that the prices of
subject imports and the domestic like product first went up and then went down.[290]
On this basis, MOFCOM concluded that the prices of subject imports and the
domestic like product kept "in line", i.e., were parallel.[291]
MOFCOM relied on this finding of parallel pricing in support of its finding of
price competition, which MOFCOM relied on in turn in its final conclusions
regarding the price effects of imports and causation. Indeed, this is precisely
what China has argued before us. Thus, it is clear that the facts on which the
finding of parallel pricing was based were part of the facts under
consideration in MOFCOM's analysis and conclusions regarding the effect of
subject imports on domestic like product prices. Put differently, they were
essential facts under consideration which formed the basis of MOFCOM's decision
to impose definitive measures.
7.171. The question raised by the United States' claim is whether
MOFCOM failed to disclose these essential facts. In the Redetermination
Disclosure, MOFCOM stated that the price of the subject imports was based on
Chinese Customs data and that the price of the like products was based on the
verified data of the domestic industry.[292]
The price trends on which MOFCOM based its conclusion of parallel prices were
based on the weighted average unit values of imports from the Russian
Federation and the United States combined with respect to subject imports,
and the weighted average unit values of the domestic like product. MOFCOM
disclosed the weighted average prices of subject imports from the
United States and the Russian Federation. Therefore, it is clear that
information concerning subject import prices was disclosed to interested
parties. However, we do not consider that this was sufficient to constitute
disclosure of the essential facts underlying MOFCOM's conclusions on parallel
pricing.
7.172. China maintains that price trends of the domestic like product over
the period of investigation were based on confidential AUV data of the domestic
producers and therefore could not be disclosed to the interested parties.[293]
We note that China provided, in the course of this proceeding, information on
domestic price ranges on a confidential basis. While this information provides
a better understanding of MOFCOM's finding of parallel pricing, and apparently
was part of the record before MOFCOM, it was not included in the
Redetermination Disclosure. As a consequence, it cannot be considered in our
evaluation of whether China complied with the disclosure obligations at issue.
7.173. Further, while we are sympathetic to the fact that in situations
where there are only two domestic producers, disclosure of even average
domestic sales prices may allow the competing producers in that two producer
industry to calculate each other's information, this does not obviate the
obligation to disclose essential facts, at least in some non-confidential
summary form. There is no indication in the Redetermination that MOFCOM even
attempted to do so, and no explanation of why it was impossible to do so, if
that was MOFCOM's view. We emphasize that we do not understand Article 6.9
or Article 12.8 to require an investigating authority to disclose confidential
information which it is obliged to protect pursuant to Article 6.5 of the
Anti‑Dumping Agreement or Article 12.4 of the SCM Agreement. We
note that the United States has not challenged MOFCOM's decision to treat
the domestic price information as confidential. Nonetheless, we find that
having failed to even attempt to provide a non-confidential disclosure of
essential facts regarding domestic prices which formed the basis of its
consideration of parallel pricing, MOFCOM acted inconsistently with Articles 6.9
and 12.8 of the Anti-Dumping and SCM Agreements.
7.174. In the Redetermination, MOFCOM found that the domestic industry's
loss of market share in 2008 led it to slash prices by over 30% in Q1 2009.
MOFCOM relied on this finding in support of its conclusions regarding the price
effects of imports and causation. Thus, again, it is clear that the facts on
which the finding was based were part of the facts under consideration in
MOFCOM's analysis and conclusions regarding the effect of subject imports on
domestic like product prices. Put differently, they were essential facts under
consideration which formed the basis of MOFCOM's decision to impose definitive
measures.
7.175. China asserts that the following statements, along with the specific
facts upon which they were based, are the "essential facts" which
were under consideration and that formed the basis of MOFCOM's decision:
a. subject imports surged in 2008 resulting in loss of market share for
the domestic industry;
b.
there was a
one-to-one correlation between the market share lost by the domestic industry
and the market share gained by subject imports; and
c.
faced with a
continued surge in the volume of subject imports in Q1 2009, the domestic
industry was forced to lower prices by 30.25% to compete with subject imports
and to regain market share.
7.176. We note that the United States contends that "MOFCOM
fail[ed] to support its assertion that the domestic industry's loss of market
share led it slash prices by over 30% in the first quarter of 2009".[294]
Further, the United States submits that "obligations contained in the
covered agreements apply to the disclosure of facts, and not reasoning".[295]
We understand the United States to argue that the three factors relied
upon by China, set out in paragraph 7.175 above, were in fact "reasons" provided by
MOFCOM for its conclusions rather than essential facts. As noted above,
Article 6.9 of the Anti-Dumping Agreement and Article 12.8 of the
SCM Agreements require the disclosure of "essential facts", not
the reasoning of the investigating authority.[296]
In this instance, it seems to us that the United States is arguing that
MOFCOM disclosed reasoning, but not facts, and that the reasoning was
unsupported by facts disclosed to the parties.
7.177. As explained above, we do have serious concerns regarding MOFCOM's
conclusions regarding the linkage between the domestic industry's market share
loss in 2008 and the 30.25% decline in the domestic industry's price in Q1
2009. However, MOFCOM did disclose the essential facts under consideration on
the basis of which it made these findings, i.e. percentage figures relating to
market share shifts and price fluctuations. Moreover, we understand that
subject import statistics from China Customs were available to the interested
parties. It is not clear to us from the United States' submissions what additional
facts it contends MOFCOM should have disclosed, but did not. For these reasons,
we reject the United States' claim in this respect.
7.178. Before considering the United States' claim, we wish to clarify
our understanding of why a decline in the price-cost differential for Wuhan in
2008 was relevant to MOFCOM's Redetermination. In the original proceeding, we
expressed specific concerns regarding MOFCOM's failure to consider the possible
effect of Baosteel's start-up costs in suppressing domestic like product prices
in 2008.[297]
We understand from China's argument that MOFCOM, in the Redetermination,
examined this question, and concluded that Wuhan did not experience such
start-up costs, and faced an even more significant decline in its price-cost
differential. On this basis, MOFCOM found that the effect of Baosteel's
start-up costs on the domestic industry was relatively small.[298]
7.179. In light of China's argument, it seems to us that facts concerning
the decline in Wuhan's price-cost differential were considered by MOFCOM in
determining whether subject imports had a price suppressive effect in 2008, and
in this context, therefore, constituted essential facts under consideration by
MOFCOM.
7.180. The United States argues that MOFCOM failed to disclose facts
underlying MOFCOM's finding that Wuhan's price-cost differential decreased in
2008. China asserts that the gross profit margin is the difference between
price and costs and thus serves as a sufficient proxy for the price-cost
differential.[299]
It further asserts that figures concerning the decline in Wuhan's gross profits
were disclosed.[300]
The United States does not dispute that MOFCOM disclosed facts regarding
the gross profit margins, but asserts that this is not a sufficient disclosure
of the essential facts. However, the United States does not specifically
explain why the disclosure of gross profit margins cannot be considered a
sufficient non-confidential summary of a decline in Wuhan's price-cost
differential. In light of United States' failure to rebut China's
argument, we reject the United States' claim in this respect.
7.181. The United States'
claim of failure to disclose essential facts relating to MOFCOM's causation
determination focuses on the following four elements:
a.
Information
regarding the "sales obstacles" that allegedly prevented the domestic
industry from making more sales in 2008 and the first quarter of 2009;
b.
Information
underlying MOFCOM's assertion that the domestic industry was prevented by
subject imports from realizing economies of scale;
c.
Information
underlying MOFCOM's finding that the capacity and output of the domestic GOES
industry did not exceed market demand; and
d.
Information
supporting MOFCOM's division of responsibility for the inventory overhang.
7.182. The United States argues the
following with respect to these four elements:
a.
the Redetermination Disclosure does not make clear what were the sales
obstacles to which MOFCOM referred[301];
b.
MOFCOM failed to disclose any facts
underlying its conclusion that the domestic industry was prevented by subject
imports from realizing economies of scale[302];
c.
MOFCOM failed to disclose any information
underlying its finding that the capacity and output of the domestic industry
did not exceed market demand[303];
and
d.
MOFCOM failed to disclose any information
supporting its allocation of responsibility for the domestic industry's
inventory overhang.[304]
7.183. China maintains the following with
respect to these four elements:
a.
MOFCOM's Redetermination Disclosure makes clear that the increase in
subject imports that were the sales obstacle in issue[305], and the United States does not clearly
identify the facts regarding subject imports which MOFCOM purportedly failed to
disclose[306];
b.
MOFCOM explained the reasoning for its
finding regarding economies of scale[307];
c.
MOFCOM disclosed not only information on the
percentage changes in capacity and output, adjusted for differences in the base
amounts of each[308],
but also facts showing
that domestic capacity from 2006 through 2008 remained significantly below the
total market demand despite the growth in capacity during that period[309];
and
d.
MOFCOM extensively discussed the cause of the
domestic industry's inventory overhang, relying on the percentage changes in
the relevant factors, which were disclosed in the Redetermination Disclosure,
to establish that inventories first declined while subject imports were steady
in 2007 and then increased when subject imports also increased in 2008.[310]
7.184. Japan supports the United States' claims regarding MOFCOM's
failure to fulfill its disclosure obligations under Articles 6.9 of the
Anti-Dumping Agreement and Article 12.8 of the SCM Agreement. It
contends that the facts identified by the United States were taken into
consideration by MOFCOM in its injury and causation determinations, and
therefore should have been disclosed.[311]
7.185. China asserts in this proceeding
that the "sales obstacles" to which MOFCOM made reference in the
Redetermination were specifically subject imports.[312] While the Redetermination
Disclosure does contain information on the volumes of subject imports, we see
nothing that would connect that information to the notion of subject imports
specifically constituting the "sales obstacles" referred to in the
Redetermination. Thus, to the extent MOFCOM considered "sales
obstacles" in making its determination of causation, we see nothing in the
Redetermination Disclosure that could be understood to constitute the essential
facts concerning those sales obstacles. In this respect, MOFCOM failed to comply
with the obligations set out in Articles 6.9 and 12.8 of the
Anti-Dumping and SCM Agreements.
7.186. MOFCOM
referred to economies of scale in the context of its injury and causation
analyses in the Redetermination.[313]
These references consist of the repeated statement that the increase in the
domestic industry's output and capacity did not result in "corresponding
economies of scale" for the domestic industry. However, the references in
the Redetermination appear unsupported by any specific underlying facts. China
refers to the Redetermination Disclosure at pages 22-23 to argue that MOFCOM
disclosed the essential facts regarding economies of scale and at page 13 to
argue that the percentage changes in demand, capacity and output are the facts
that were the basis for MOFCOM's findings regarding economies of scale.
However, pages 22-23 appear to relate to US comments on the disclosure of
information in the original investigation and the percentage changes at page 13
do not relate specifically to economies of scale. Thus, we fail to see the
relevance of China's references to these pages of the Redetermination
Disclosure in the context of this claim.
7.187. As discussed above, MOFCOM's
findings with respect to economies of scale rely on several premises that are
not explained in the Redetermination, and for which there are no facts set out
in either the Redetermination itself, or in the Redetermination Disclosure.
Indeed, China acknowledges that there are no facts other than the information concerning
percentage changes in demand, capacity and output relevant to the issue of
economies of scale set out in the Redetermination Disclosure.[314]
Thus, it appears that MOFCOM did not actually have any other facts before it
that could be under consideration with respect to this issue.
7.188. While we have concluded that
MOFCOM's findings regarding economies of scale are not sufficiently explained,
and therefore are not substantively adequate, it does appear that MOFCOM
disclosed the essential facts under consideration with respect to that
substantively inadequate determination. In this situation, we see no basis for
a finding that MOFCOM failed to comply with the obligation to disclose
essential facts set out in Articles 6.9 and 12.8 of the Anti-Dumping and SCM Agreements.
7.189. In support of its conclusion that
domestic capacity and output did not exceed demand from 2006 through 2008,
MOFCOM referred only to the percentage changes in these factors and a statement
that domestic demand in 2007 was "almost twice" domestic output.[315]
China has not asserted that there was any other information in the record that
formed the basis for MOFCOM's findings regarding capacity, output and demand.
7.190. While we find it difficult to
understand how MOFCOM based its findings regarding these factors on the facts
to which China refers, these facts are undisputedly set out in the
Redetermination Disclosure. Accordingly, MOFCOM did
disclose the essential facts under consideration with respect to its
determination. In this situation, we see no basis for a finding that MOFCOM
failed to comply with the obligation to disclose essential facts set out in
Articles 6.9 and 12.8 of the Anti-Dumping and SCM Agreements.
7.191. In support of its conclusion that
subject imports caused the increase in the domestic industry's inventory in
2008, MOFCOM relied on the fact that the domestic industry's inventory and
subject imports increased at commensurate rates during that period. China has
not asserted that there was any other information in the record that formed the
basis for MOFCOM's findings regarding inventory overhang.
7.192. While we consider that MOFCOM's findings
regarding inventory overhang are not sufficiently explained, and therefore are
not substantively adequate, it does appear that MOFCOM disclosed the facts
under consideration with respect to that substantively inadequate
determination. In this situation, we see no basis for a finding that MOFCOM
failed to comply with the obligation to disclose essential facts set out in
Articles 6.9 and 12.8 of the Anti-Dumping and SCM Agreements.
7.6 The United States' claim with respect to public notice
7.193. In this section of our report, we consider the
United States' assertions that MOFCOM explained neither the matters of
fact and law nor the reasons that led it to maintain anti-dumping and
countervailing duties in the public notice of the Redetermination, and thus
claims that its public notice is inconsistent with China's obligations under
Articles 12.2 and 12.2.2 of the Anti‑Dumping Agreement and
Articles 22.3 and 22.5 of the SCM Agreement. Specifically, the United States contends
that MOFCOM's Redetermination does not explain:
a. MOFCOM's finding that the trends
of the prices of the subject imports and the domestic like product were the
same;
b. the evidence that MOFCOM
allegedly considered, and the analysis that it allegedly conducted, in
concluding that the domestic industry's loss of market share in 2008 led it to
slash prices by over 30% in the first quarter of 2009;
c. its assertion regarding the
"sales obstacles" that allegedly prevented the domestic industry from
making more sales in 2008 and the first quarter of 2009;
d. its assertion that the domestic
industry was prevented by subject imports from realizing economies of scale;
and
e. MOFCOM's finding that the
capacity and output of the domestic GOES industry did not exceed market demand.
The
United States contends that these findings and conclusions were material
and thus subject to public notice requirements because they had to be resolved
before MOFCOM could make an affirmative determination.[316]
7.194. China counters that the
Redetermination is sufficiently clear as to the facts and reasoning that led
MOFCOM to its conclusions, while also respecting the need to protect
confidential information. China maintains that (i)
MOFCOM fully respected the requirement to provide a reasoned account of the
factual basis for its decision to impose definitive measures[317],
(ii) the United States failed to establish a prima facie
case[318],
and (iii) some of the United States' claims are factually inaccurate.[319]
In addition, in its second written submission, China contends that the
United States abandoned some of its original claims concerning public
notice.[320]
7.195. Article 12.2 of the
Anti-Dumping Agreement provides:
Public notice shall be given of any preliminary or final determination,
whether affirmative or negative, of any decision to accept an undertaking
pursuant to Article 8, of the termination of such an undertaking, and of
the termination of a definitive anti‑dumping duty. Each such notice shall set
forth, or otherwise make available through a separate report, in sufficient
detail the findings and conclusions reached on all issues of fact and law considered
material by the investigating authorities. All such notices and reports shall
be forwarded to the Member or Members the products of which are subject to such
determination or undertaking and to other interested parties known to have an
interest therein.
Article 22.3 of the SCM Agreement is
virtually identical to Article 12.2 of the Anti‑Dumping Agreement but
for references to "Article 18" and "a definitive
countervailing duty" in place of "Article 8" and "a
definitive anti-dumping duty" in the first sentence.
7.196. Article 12.2.2 of the
Anti-Dumping Agreement further provides:
A public notice of conclusion or suspension of an investigation in the
case of an affirmative determination providing for the imposition of a
definitive duty or the acceptance of a price undertaking shall contain, or
otherwise make available through a separate report, all relevant information on
the matters of fact and law and reasons which have led to the imposition of
final measures or the acceptance of a price undertaking, due regard being paid
to the requirement for the protection of confidential information. In
particular, the notice or report shall contain the information described in
subparagraph 2.1, as well as the reasons for the acceptance or rejection
of relevant arguments or claims made by the exporters and importers, and the
basis for any decision made under subparagraph 10.2 of Article 6.
Again,
Article 22.5 of the SCM Agreement is virtually identical to
Article 12.2.2 of the Anti‑Dumping Agreement. None of the differences are
relevant in this dispute.[321]
7.197. We begin by recalling the
difference in the obligations imposed by Articles 6.9 and 12.2.2 of the
Anti-Dumping Agreement and the analogous provisions, Articles 12.8 and 22.5, of
the SCM Agreement. As explained by the Appellate Body in the original
proceedings, Article 6.9 concerns the disclosure of essential facts prior
to a definitive determination. Article 12.2.2 requires "public notice
of conclusion" of an investigation, and thus applies once a final determination
is made.[322]
Therefore, in this case, the document to be considered in resolving the
United States' claims is the Redetermination document issued by MOFCOM.
7.198. Further, the chapeau of
Article 12.2.2 (i.e., Article 12.2) and the corresponding provision of
the SCM Agreement, Article 22.3, require investigating authorities to make
available, in sufficient detail, the findings and conclusions reached on all
issues of fact and law "considered material by the investigating
authorities." Therefore, if an issue of fact or law was not considered
material to its determinations, MOFCOM would not be obliged to give public
notice of findings and conclusions on that issue, regardless of its relevance
or importance to the parties, or a reviewing panel. However,
we also agree with the view taken by some panels that material issues of fact
and law include issues that arisen in the course of an investigation and which
must necessarily be resolved in order for the investigating authorities to make
the necessary determinations.[323]
In other words, an investigating authority cannot simply conclude that an issue
that arises in an investigation is not material and make no findings regarding
it if, viewed objectively, that issue requires resolution in the context of the
findings made by the investigating authority.
7.199. In addition, as we stated in the
original proceedings, the public notice requirement under Article 12 of
the Anti-Dumping Agreement and Article 22 of the SCM Agreement does
not extend to confidential information.[324]
Indeed, both provisions make clear that "due regard" must be paid to
the requirement to protect confidential information. Where the public notice
requirement implicates information treated as confidential in an investigation,
investigating authorities may reconcile their obligation to protect
confidential information from disclosure with their obligations with respect to
public notice by basing the public notice on non-confidential summaries of the
relevant information.[325]
As the public notice obligations only require investigating authorities to make
available "findings" and "conclusions" on issues of fact,
and "matters of fact" which have led to arguments being rejected, it
is also not necessary to include all relevant underlying, or even supporting
facts, in the public notice.[326]
7.200. Before we turn to the specific
assertions of the United States regarding allegedly inadequate public
notice, we have considered the application of judicial economy with respect to
those assertions which relate to aspects of MOFCOM's Redetermination which we
have, in this report, found to be inconsistent with China's substantive
obligations under the Anti-Dumping and SCM Agreements. We note that where
we have found such inconsistency, we have based that decision principally on
the basis of the explanations of MOFCOM's analysis and conclusions in the
Redetermination, consistently with the applicable standard of review. In this
situation, we consider immaterial the question of whether the public
notice of such an inconsistent determination is "sufficient". We find the question of whether it is necessary or appropriate for
us to make findings on the adequacy of the public notice to be particularly
relevant in this case as, where we have found substantive inconsistencies in
MOFCOM's price effects and causation analysis, the primary basis for those
findings is our conclusion MOFCOM failed, in the Redetermination, to engage
adequately with relevant evidence before it, and/or failed to explain the basis
of its finding.
Therefore, where we have found that aspects of MOFCOM's Redetermination are
inconsistent with China's substantive obligations we exercise judicial economy
and make no finding on the corresponding claims under Articles 12 and 22
of the Anti-Dumping and SCM Agreements respectively.
7.201. Our decision is in keeping with
that of several previous panels, which have concluded that, where there is a
substantive inconsistency with the provisions of the Anti-Dumping Agreement, it
is neither necessary nor appropriate to make findings on claims of violation of
Articles 12 and/or 22 of the Anti-Dumping and SCM Agreements.[327] In this regard, we note in particular the findings of the panel in EC – Bed Linen:
A notice may adequately explain the determination that was made, but if
the determination was substantively inconsistent with the relevant legal
obligations, the adequacy of the notice is meaningless. Further, in our view,
it is meaningless to consider whether the notice of a decision that is
substantive [sic] inconsistent with the
requirements of the AD Agreement is, as a separate matter, insufficient under
Article 12.2. A finding that the notice of an inconsistent action is
inadequate does not add anything to the finding of violation, the resolution of
the dispute before us, or to the understanding of the obligations imposed by
the AD Agreement.[328]
We
agree with the findings of the panel in EC – Bed Linen
to this effect, in particular with respect to the lack of any additional value
to be had from findings as to whether a notice of a substantively inadequate
determination is consistent with the public notice requirements of the
Anti-Dumping and SCM Agreements. We therefore adopt them as our own, and
will follow the same approach in evaluating the United States' public
notice claims in this proceeding.
7.202. The United States
contends that, inter alia, MOFCOM's
Redetermination did not contain all relevant information on matters of fact and
law which led MOFCOM to conclude that price trends of subject imports and the
domestic like product were the same.[329]
7.203. The United States further
contends that MOFCOM's Redetermination explains neither its conclusions
that the domestic industry was prevented by subject imports from realizing
economies of scale[330]
nor its finding that the capacity and output of the domestic industry did not
exceed market demand.[331]
In its second written submission, the United States further argues that
China's representations that increased imports are the "sales
obstacles" referred to in the Redetermination are not supported by the
Redetermination itself.[332]
7.204. China argues that by failing to establish that the facts referred to
by the United States in its public notice claims were critical to an
understanding of the factual basis that led to the imposition of final measures,
the United States has failed to make a prima facie
case that MOFCOM violated Articles 12.2 and 12.2.2 of the Anti-Dumping
Agreement and Articles 22.3 and 22.5 of the SCM Agreement.[333]
With regard to MOFCOM's conclusions regarding trends in prices of subject
imports and the domestic like product, China argues that MOFCOM provided, in
the Redetermination, the public version of the data supporting these
conclusions.[334]
In relation to MOFCOM's conclusion that the domestic industry's market share
loss in 2008 led it to reduce prices significantly in Q1 2009, China submits
that MOFCOM disclosed all matters of fact and law that led to this conclusion.[335]
7.205. In addition, China
contends that MOFCOM fully explained not only its analysis and findings
regarding the domestic industry's failure to realize economies of scale due to
subject imports, referring to pages 23 and 24 of the Redetermination[336],
but also the basis for
its finding that domestic capacity and output did not exceed market demand,
referring to the Redetermination at page 52.[337] China
further contends that it was clear from MOFCOM's Redetermination that subject
imports were the sales obstacles in issue, and how MOFCOM considered them,
referring to the Redetermination at pages 24-26.[338]
7.206. Japan argues that the facts identified by the United States in
its public notice claims were material because they were taken into
consideration by MOFCOM in its injury and causation determinations. Japan
requests us to examine carefully whether MOFCOM complied with its obligations
in this regard.[339]
7.207. Turning to the specific assertions
of the United States regarding allegedly inadequate public notice, we note
that each of these relates to aspects of MOFCOM's Redetermination which we have
found, in this report, to be substantively inconsistent with China's
obligations. More specifically, the United States'
claims regarding the adequacy of the public notice of MOFCOM's price effects
and causation determinations relate to our substantive findings as follows:
a.
In relation to
MOFCOM's conclusions regarding similar trends in the prices of subject imports
and the domestic like product, we note that MOFCOM's conclusions were relevant
to its factual findings on parallel trends in prices of subject imports and the
domestic like product. The findings on parallel trends formed part of MOFCOM's
intermediate findings concerning price competition and were part of MOFCOM's
price effects analysis. We found MOFCOM's parallel pricing analysis to be erroneous,
for the reasons described above.[340]
It is also relevant to note that we found MOFCOM's overall price effects
analysis to be inconsistent with China's obligations under Articles 3.1
and 3.2 of the Anti-Dumping Agreement and Articles 15.1 and 15.2 of the
SCM Agreement.
b.
With regard to
the United States' claim concerning MOFCOM's alleged failure to provide in
the Redetermination, relevant information on facts and law, which led MOFCOM to
the conclusion that the domestic industry's loss of market share in 2008 led it
to slash prices by over 30% in the first quarter of Q1 2009 we highlighted
specific errors in MOFCOM's analysis, in particular, in light of MOFCOM's
failure to engage with probative evidence before it, which could have brought
its conclusions into question, and also because of MOFCOM's failure to
adequately explain the basis for its finding.[341]
We found MOFCOM's volume based price suppression analysis, in this case, to be
flawed and inconsistent with China's obligations under Articles 3.1 and
3.2 of the Anti-Dumping Agreement and Articles 15.1 and 15.2 of the
SCM Agreement.
c.
With respect to economies of scale, the US
claim is based upon MOFCOM's failure to explain its conclusions that the
domestic industry was prevented by subject imports from realizing economies of
scale. Similarly, our finding that MOFCOM's conclusions regarding economies of
scale do not support its determination of causation is based on the fact that MOFCOM's findings in this context
rely on several premises that are not explained in the Redetermination, and for
which there are no facts set out in either the Redetermination itself, or in
the Redetermination Disclosure.[342]
d.
With respect to capacity, output and demand, the US claim is based upon
MOFCOM's failure to explain its finding that the capacity and output of the
domestic industry did not exceed market demand. Similarly, our finding that
MOFCOM's conclusions regarding these three economic factors do not support its determination of causation
is based on the
continued absence of underlying data regarding growth in domestic demand,
capacity and output.[343]
e.
With respect to sales obstacles, the US claim
is based upon the fact that China's
representations that increased imports are the "sales obstacles"
referred to in the Redetermination are not supported by the Redetermination
itself. Similarly, we have found nothing that would connect the information presented by MOFCOM on the
volumes of subject imports to the notion of subject imports specifically
constituting the "sales obstacles" encountered by the domestic
industry.[344]
7.208. As the United States'
claims of inadequate public notice relate specifically
to the aspects of MOFCOM's price effects and causation determinations that
constitute the basis of our findings of inconsistency of those
determinations with various provisions of the Anti-Dumping and
SCM Agreements, we apply judicial economy based on the considerations set
out above and make no findings on these public notice claims under Articles 12 and 22 of
the Anti-Dumping and SCM Agreements respectively.
8.1. For the reasons set forth in this Report, we conclude that the
United States' claim regarding adverse effects under Articles 3.1 and
3.4 of the Anti-Dumping Agreement and Articles 15.1 and 15.4 of the
SCM Agreement is not properly before us.
8.2. Further, and for the reasons set forth in this Report, we conclude
that:
a.
MOFCOM's
conclusions regarding the price effects of subject imports are not consistent
with Articles 3.1 and 3.2 of the Anti-Dumping Agreement and
Articles 15.1 and 15.2 of the SCM Agreement;
b.
MOFCOM's revised
finding that subject imports caused material injury to the domestic industry is
not consistent with Articles 3.1 and 3.5 of the Anti-Dumping Agreement and
Articles 15.1 and 15.5 of the SCM Agreement; and
c.
MOFCOM acted inconsistently
with Article 6.9 of the Anti-Dumping Agreement and Article 12.8 of
the SCM Agreement with respect to the disclosure of essential facts
regarding parallel pricing and sales obstacles.
Accordingly, China's measures
taken to comply with the DSB's recommendations and rulings, at issue in this proceeding,
are inconsistent with the relevant covered agreements, and therefore China
failed to comply with the recommendations and rulings of the DSB.
8.3. In addition, and for the reasons set forth in this Report, we
conclude that the United States has failed to demonstrate that MOFCOM
acted inconsistently with Article 6.9 of the Anti‑Dumping Agreement
and Article 12.8 of the SCM Agreement with respect to the disclosure
of essential facts regarding the domestic industry's loss of market share in
2008 and price reduction in the first quarter of 2009, the decrease in Wuhan's
price-cost differential in 2008, economies of scale, domestic capacity, output
and demand, and inventory overhang.
8.4. Finally, in light of our findings of substantive violations, we
exercised judicial economy and made no findings with regard to the
United States' public notice claims under Article 12 of the Anti-Dumping
Agreement and Article 22 of the SCM Agreement.
8.5. Under Article 3.8 of the DSU, in cases where there is an
infringement of the obligations assumed under a covered agreement, the action
is considered prima facie to constitute a case
of nullification or impairment. We conclude that, to the extent that we have
found the measures at issue inconsistent with the provisions of the
Anti-Dumping and SCM Agreements cited above, they have nullified or
impaired benefits accruing to the United States under these agreements.
8.6. We therefore conclude that China failed to implement the
recommendations and rulings of the DSB to bring its measures into conformity
with its obligations under the Anti-Dumping and SCM Agreements.[345] To
the extent that China failed to comply with the recommendations and rulings of
the DSB in the original dispute, those recommendations and rulings remain
operative.
__________
[3]
See the Panel's Working Procedures in Annex A-1.
[4]
See Additional Working Procedures on BCI in Annex A-2.
[5]
United States' request for interim review, paras. 3-4.
[8]
China's oral statement at the interim review meeting, para. 15.
[9]
Appellate Body Report, US
– FSC (Article 21.5 – EC II), paras. 85-87, 100.
[10]
United States' request for interim review, paras. 11-12.
[11]
China's oral statement at the interim review meeting, paras. 12-14.
[12]
E.g. Panel Report, Korea
– Certain Paper (Article 21.5 – Indonesia), para. 7.4 (the
panel found that the Korean investigating authority's redetermination finding
violated the Anti-Dumping Agreement but stated that since the original DSB
recommendations and rulings remained operative, it would make no new
recommendation under Article 19.1 of the DSU); Appellate Body Report, US – Zeroing (EC)
(Article 21.5 – EC), para. 470; Panel Report, US – Zeroing (EC) (Article 21.5
– EC), para. 9.2 (neither the panel nor the Appellate Body made a
new recommendation, but the Appellate Body recommended that "the DSB
request the United States to implement fully the recommendations and rulings of
the DSB [in the original proceeding]"); Appellate Body Report, US – Oil Country Tubular Goods
Sunset Reviews (Article 21.5 – Argentina), para. 186; Panel
Report, US – Oil Country Tubular
Goods Sunset Reviews (Article 21.5 – Argentina), para. 8.2 (neither
the panel nor the Appellate Body made a new recommendation but the Appellate
Body recommended that the DSB request the United States to "implement
fully the recommendations and rulings of the DSB"). See Panel Report, EC –
Bananas III (Article 21.5 – US), paras. 6.50, 8.13.
[13]
China's comments on the interim report, para. 3.
[14]
United States' oral statement at the interim review meeting, para. 23.
[15]
China's comments on the interim report, paras. 4-5.
[16]
United States' oral statement at the interim review meeting, paras. 24-26.
[17]
China's comments on the interim report, para. 6.
[18]
United States' oral statement at the interim review meeting, para. 27.
[19]
China's comments on the interim report, para. 7.
[20]
United States' oral statement at the interim review meeting, para. 28.
[21]
China's comments on the interim report, para. 8.
[22]
United States' oral statement at the interim review meeting, paras. 6-14.
[24]
Ibid. paras. 17-18, citing Appellate Body
Report, EC
– Chicken Cuts, para. 156; Appellate
Body Report, EC – Selected Customs
Matters, para.
264; Panel Report, EC
– Approval and Marketing of Biotech Products, para. 7.456.
[25]
Appellate Body Report, EC
– Sardines, para.
301; Appellate Body Report, EC
– Selected Customs Matters, para. 259; Panel Report, EC
– Bananas III (Article 21.5 – US), paras. 6.1-6.18; Panel Report, EC – IT Products,
para. 6.48.
[26]
Panel Report, EC - IT Products, para. 6.48. The
panel observed:
Consistent with the Appellate Body's approach and in the interest of
protecting the due process rights of the complainants, who had no opportunity
to make submissions for the record on the documents provided, we decline to
consider further the documents attached by the European Communities to its
request for interim review. The Panel also declines to make adjustments to the
Interim Reports to exclude the measures in question from the Panel's
recommendation and to add text about the European Communities' confirmation
that certain measures have been repealed, as requested by the European
Communities.
[27]
Panel Report, EC – Bananas III (Article 21.5
– US), paras. 6.50, 8.13.
[28]
Appellate Body Report, EC
– Bananas III (Article 21.5 – US), para. 272.
[30]
United States' request for interim review, paras. 13-37.
[31]
Article 17.6(ii) of the Anti-Dumping Agreement also provides that if a
panel finds that a provision of the Anti-Dumping Agreement admits of more than
one permissible interpretation, it shall uphold a measure that rests upon one
of those interpretations.
[32]
Appellate Body Reports, US – Countervailing Duty
Investigation on DRAMS, para. 186; and US – Lamb,
para. 103.
[33]
Appellate Body Report, US – Countervailing Duty
Investigation on DRAMS, paras. 187-188.
[34]
Appellate Body Report, US – Softwood Lumber VI
(Article 21.5 – Canada), para. 93.
[35]
Appellate Body Report, US – Softwood Lumber VI
(Article 21.5 – Canada), para. 93.
[36]
Appellate Body Report, US – Wool Shirts and
Blouses, para. 337.
[37]
Appellate Body Report, EC – Hormones,
paras. 98, 104.
[38]
Appellate Body Report, US – Wool Shirts and
Blouses, para. 337.
[39]
United States' second written submission, para. 67.
[40]
United States' second written submission, para. 69.
[41]
China's first written submission, para. 68.
[43]
China's second written submission, paras. 60-61.
[44]
China's first written submission, paras. 71, 74.
[46] See, e.g. Panel Report, EC – Bananas III (Article 21.5 – Ecuador), paras.
6.3-6.12.
[47] See, e.g. Appellate Body Report, Canada – Aircraft (Article 21.5 – Brazil), paras.
37-41.
[48] Appellate Body Report, Canada – Aircraft (Article 21.5 – Brazil), paras.
37-41.
[49]
See, e.g. Appellate Body Report, US – FSC
(Article 21.5 – EC), paras. 197-222.
[50]
Appellate Body Report, EC – Bed Linen
(Article 21.5 – India), paras. 88-89. In that case, the Appellate Body found that India was seeking
to challenge an unchanged aspect of the original measure that the European
Communities did not have to change, and did not change, in complying with the
recommendations and rulings of the DSB. The Appellate Body considered that: (i)
the EC's redetermination could be separated into distinct parts; (ii) India was
merely reasserting a claim that it had raised, and as to which it had failed to
make a prima facie case before the
original panel; and (iii) India was precluded from bringing the same claim
with respect to an aspect of the redetermination that was unchanged from the
determination at issue in the original dispute.
[51]
Appellate Body Report, EC – Bed Linen (Article 21.5
– India), paras. 88-89.
[52]
Panel Report, US – Countervailing Measures on Certain EC
Products (Article 21.5 – EC), paras. 7.1‑7.77.
[54]
MOFCOM, Final Determination in Anti-Dumping and Anti-Subsidy Investigations on
GOES Imports from the US and Russia, No. 21, 10 April 2010 (Original
Determination) (Exhibit US-4), pp. 60-63.
[55]
Compare Original Determination, (Exhibit US-4), pp. 60-63, with MOFCOM,
Determination on the Re‑investigation of Anti-Dumping and Countervailing Duties
on Grain Oriented Flat-Rolled Electrical Steel Imports from the United States,
Public Notice [2013] No. 51, including its annexes (Redetermination)
(Exhibit US-1), pp. 29-32; and MOFCOM, Determination of the Ministry of
Commerce of the People's Republic of China on the Anti-Dumping and
Countervailing Reinvestigation on Imports of Grain Oriented Flat-rolled
Electrical Steel Originating in the United States (Redetermination – China's
translation) (Exhibit CHN-1), pp. 29-33.
[56]
China's second written submission, para. 64.
[57]
Appellate Body Report, China – GOES,
para. 196.
[59]
China's response to Panel question No. 48, para. 135.
[61]
United States' opening statement at the meeting of the Panel, para. 48.
[62]
Appellate Body Report, EC – Bed Linen
(Article 21.5 – India), paras. 86-87.
[63]
Original Determination, (Exhibit US-4), pp. 60-64; Redetermination, (Exhibit
US-1), pp. 28-33; and Redetermination – China's translation, (Exhibit CHN-1),
p. 29-33.
[64]
Redetermination, (Exhibit US-1), p. 28 (The only textual change of a temporal
nature in MOFCOM's injury analysis in the Redetermination consists of the
addition of the phrase "during the same period" at the end of the
last full paragraph on page 28 in reference to the period 2007, 2008 and Q1
2009). See also Redetermination – China's translation, (Exhibit CHN-1), p. 29.
[65]
Appellate Body Report, EC
– Bed Linen (Article 21.5 – India), para. 88, discussing Appellate Body Report, Canada – Aircraft (Article 21.5 – Brazil). That is not
the situation in this case.
[66]
See, e.g. United States' first written submission, para. 46.
[67]
China's second written submission, para. 23. In this regard, China argues that
MOFCOM's factual findings regarding the following seven factors supported its
finding of a directly competitive relationship between subject imports and the
domestic like product: (a) like product analysis; (b) cumulation analysis;
(c) statement by US producer Allegheny Ludlum that the subject merchandise
that it produced or exported to China was highly substitutable and competitive
with the Chinese domestic like product and the like product from other
countries; (d) parallel price trends of subject imports and the domestic like
product; (e) pricing policy documents; (f) customer overlap; and (g) market
share replacement. See also China's opening statement at the meeting of the
Panel, p. 5; China's response to Panel question No. 4, para. 18.
[68]
China's response to Panel question No. 1, paras. 13-17.
[70]
See, e.g. United States' first written submission, paras. 49-53, 59-62; and
second written submission, paras. 23-27, 48-56.
[71]
United States' first written submission, para. 47.
[73]
United States' comments on China's response to Panel question No. 14.
[75]
United States' opening statement at the meeting of the Panel, para. 30.
[76]
United States' comments on China's response to Panel question No. 40.
[77]
United States' opening statement at the meeting of the Panel, paras. 25-35.
[78]
China's first written submission, para. 15.
[81]
China's response to Panel question No.1, para. 9.
[82]
China's response to Panel question No.1, para. 9.
[84]
China's opening statement at the meeting of the Panel, p. 5.
[85]
China's comments on the United States' response to Panel question No. 40.
[89]
European Union's third-party response to Panel question No. 3.
[90]
European Union's third-party response to Panel question No. 1.
[92]
Japan's third-party response to Panel question No. 3.
[94]
Japan's third-party submission, para. 9.
[95]
Japan's third-party response to Panel question No. 1.
[100]
Appellate Body Report, China – GOES,
para. 136.
[103]
Appellate Body Report, China – GOES, para.
138.
[104]
Redetermination, (Exhibit US-1), p. 26; and Redetermination – China's
translation, (Exhibit CHN-1), p. 27.
[106]
Redetermination, (Exhibit US-1), p. 24; and Redetermination – China's
translation, (Exhibit CHN-1), p. 25.
[107]
Redetermination, (Exhibit US-1), p. 26; and Redetermination – China's
translation, (Exhibit CHN-1), p. 27.
[108]
China's response to Panel question No. 1, para. 9.
[110]
Appellate Body Report, China – GOES,
para. 152.
[112]
See Redetermination, (Exhibit US-1), p. 37; and Redetermination – China's
translation, (Exhibit CHN‑1), p. 37; GOES: Imports into China (China
Customs import data), (Exhibit US-12) (this exhibit contains no page numbers).
[113]
China's first written submission, para. 119.
[114]
China's response to Panel question No. 14, para. 52.
[115]
China's response to Panel question No. 14, paras. 55-56.
[115]
Ibid. para. 55.
[117]
Ibid. paras. 55-56.
[118]
See, e.g. China's response to Panel question No. 7, para. 29.
[119]
Redetermination, (Exhibit US-1), pp. 28, 41; and Redetermination – China's
translation, (Exhibit CHN-1), pp. 28, 42.
[120]
See Appellate Body Report, China – GOES,
paras. 216, 220.
[121]
China's response to Panel question No. 27, para. 93.
[122]
Redetermination, (Exhibit US-1), p. 49; and Redetermination – China's
translation, (Exhibit CHN-1), p. 49.
[123]
In this regard, we find no similar independent references to the depressive or
suppressive effect of a 1.25% decline or sharp decrease on domestic like
product prices, nor does China argue that MOFCOM's finding could be sustained
on the basis of a sharp decrease in subject import prices in Q1 2009.
Therefore, we do not consider this issue further.
[124]
Redetermination, (Exhibit US-1), p. 26; and Redetermination – China's
translation, (Exhibit CHN-1), p. 27.
[125]
Redetermination, (Exhibit US-1), p. 41; and Redetermination – China's
translation, (Exhibit CHN-1), p. 42.
[126]
Appellate Body Report, China – GOES,
para. 226.
[127]
See, e.g. Redetermination, (Exhibit US-1), p. 41; and Redetermination – China's
translation, (Exhibit CHN-1), p. 42.
[128]
In this regard, China argues that it did not consider the price
differences between subject imports and the domestic like product because, in
the original proceeding, the Appellate Body found deficiencies in the price
data that was used for price comparisons. In the absence of new price data in
the redetermination proceeding, MOFCOM could not have made price comparisons
without using the same deficient price data. China's comments on the interim
report, para. 6. In its Redetermination, MOFCOM decided not to collect new
evidence and based its redetermination on the evidence from the original
investigation and determination. While China may, in the first instance, seek
to bring its measures into conformity with its WTO obligations in whatever
manner China deems appropriate, any measure taken to comply with its WTO
obligations, in this case, MOFCOM's Redetermination, must itself be consistent with
China's WTO obligations. In this case, for the reasons set out in this Report,
we have found that MOFCOM's failure to make price comparisons, as well as other
errors, resulted in findings and explanations which were not "reasoned and
adequate" to support MOFCOM's determination, and therefore concluded, inter alia, that the Redetermination is inconsistent with
Articles 3.1 and 3.2 of the Anti-Dumping Agreement and Articles 15.1 and 15.2
of the SCM Agreement. We do not consider that China's explanation as to why
MOFCOM did not make price comparisons between subject imports and the domestic
like product justifies the errors that we found in MOFCOM's price effects
analysis.
[129]
United States' first written submission, para. 78.
[130]
China's first written submission, para. 62; and response to Panel question No. 35,
paras. 108-110.
[131]
China's response to Panel question No. 35, para. 108.
[132]
China's response to Panel question No. 35, paras. 108-109.
[133]
See Redetermination, (Exhibit US-1), p. 50; and Redetermination – China's
translation, (Exhibit CHN-1), p. 50.
[134]
United States' opening statement at the meeting of the Panel, para. 30.
[136]
United States' response to Panel question No. 40, para. 22.
[137]
United States' opening statement at the meeting of the Panel, paras. 30, 32.
[138]
China's comments on the United States' response to Panel question No. 40.
[142]
Redetermination, (Exhibit US-1), p. 51; and Redetermination – China's
translation, (Exhibit CHN-1), p. 51.
[143]
Appellate Body Report, US – Softwood Lumber VI
(Article 21.5 – Canada), para. 93.
[144]
United States' response to Panel question No. 40, paras. 10-13 (quoting AK
Steel Corporation, Supplementary Industry Injury Investigation Questionnaire
Response, (AK Steel Supplementary Questionnaire Response), (Exhibit US-18)
(BCI)).
[145]
Redetermination, (Exhibit US-1) (this part of the Redetermination contains no
page numbering); and Redetermination – China's translation, (Exhibit CHN-1), p.
1.
[146]
Redetermination, (Exhibit US-1), p. 51; and Redetermination – China's
translation, (Exhibit CHN-1), p. 51.
[147]
United States' response to Panel question No. 40, paras. 13, 22 (quoting AK
Steel Supplementary Questionnaire Response, (Exhibit US-18) (BCI),
p. 4). See also News article, China encourages domestic
production of grain-oriented electrical steel for large transformers,
(Exhibit US-19). This Exhibit was presented as evidence in the original
investigation before MOFCOM and cited in AK Steel's supplementary questionnaire
response. See AK Steel Supplementary Questionnaire Response, (Exhibit US-18)
(BCI), p. 4.
[148]
China's comments on the United States' response to Panel question No. 40.
[149]
See, e.g. China's comments on the United States' response to Panel question No.
40.
[150]
In this regard, we do not share China's view that because AK Steel's exports [***]
constituted only ten per cent of total subject imports, it would not materially
affect MOFCOM's analysis of price competition between subject imports and the
domestic like product. In our view, the non-substitutability of even
ten per cent of subject imports with the domestic like product may
well be relevant in assessing the extent of price competition. In any event,
investigating authorities may not summarily reject arguments regarding non‑substitutability
solely because they affect a relatively small segment of the domestic market.
[151]
China's response to Panel question No. 5, para. 21.
[152]
China's response to Panel question No. 4, para. 19.
[153]
Redetermination, (Exhibit US-1), p. 12; and Redetermination – China's
translation, (Exhibit CHN-1), p. 13.
[154]
Redetermination, (Exhibit US-1), p. 21; and Redetermination – China's
translation, (Exhibit CHN-1), p. 22.
[155]
United States' second written submission, para. 31.
[156]
China's second written submission, para. 34.
[158]
United States' response to Panel question No. 40, para. 9.
[159]
China's opening statement at the meeting of the Panel, p. 5 (quoting
Redetermination, (Exhibit US‑1), p. 51; and Redetermination – China's
translation, (Exhibit CHN-1), p. 51).
[160]
United States' opening statement at the meeting of the Panel, paras. 29-30.
[161]
China's first written submission, para. 43.
[162]
Redetermination, (Exhibit US-1), p. 49; and Redetermination – China's
translation, (Exhibit CHN-1), p. 49.
[163]
United States' second written submission, paras. 34-35.
[164]
Average unit values or AUVs, as noted in the original proceeding, represented
the volume weighted average unit values for all transactions during a given
calendar year. See Panel Report, China – GOES,
footnote 497. China clarified that the AUV data on domestic prices was the
same data on domestic prices available and discussed in the original
determination. See China's response to Panel question No. 7, para. 25. We
understand that MOFCOM used AUVs as proxies for actual prices of the domestic
like product.
[165]
See United States' first written submission, p. 19. The United States provided,
in table form, the percentage changes in prices of subject imports and the
domestic like product, as considered by MOFCOM, in the Redetermination.
[166]
United States' second written submission, para. 33. The figures are based on
percentage changes in price trends that were disclosed by MOFCOM in the
Redetermination.
[167]
Redetermination, (Exhibit US-1), pp. 39-40; and Redetermination – China's
translation, (Exhibit CHN-1), p. 40.
[168]
Redetermination, (Exhibit US-1), pp. 48-49; and Redetermination – China's
translation, (Exhibit CHN-1), pp. 48-49.
[169]
Appellate Body Report, China – GOES,
footnote 350.
[170]
Redetermination, (Exhibit US-1), pp. 49-50; and Redetermination – China's translation,
(Exhibit CHN-1), p. 49.
[171]
In this regard, we also note China's assertion that from Q4 2008 to Q1 2009,
domestic AUVs fell by 31.11% while subject import AUVs fell by only 18.32%. On
the other hand, subject import AUVs were 1.25% lower in Q1 2009 than in Q1
2008, while domestic AUVs were 30.25% lower. China emphasizes that the
difference in the decline in AUVs of subject imports and the domestic like
product was less from Q4 2008 to Q1 2009 than it was from Q1 2008 to Q1
2009. China argues that this quarterly data regarding changes in AUVs of
subject imports and the domestic like product from Q4 2008 to Q1 2009 was
before MOFCOM but not discussed in the Redetermination, and strongly supports
the finding of parallel pricing. Since we can find no reference in MOFCOM's Redetermination
to such quarterly data, or any consideration thereof, we decline to rely on China's
arguments in this regard, as there is no indication that MOFCOM itself took
this into account in the Redetermination. See China's response to Panel
question No. 10, para. 42.
[172]
Redetermination, (Exhibit US-1), p. 51; and Redetermination – China's
translation, (Exhibit CHN-1), p. 51.
[173]
United States' first written submission, para. 72; and second written
submission, para. 43.
[174]
China's second written submission, paras. 50-51.
[175]
China's opening statement at the meeting of the Panel, p. 5 (citing
Redetermination, (Exhibit US-1), p. 28; and Redetermination – China's
translation, (Exhibit CHN-1), p. 27).
[176]
China's opening statement at the meeting of the Panel, para. 20.
[177]
China's response to Panel question No. 18, para. 66.
[178]
United States' comments on China's response to Panel question No. 18 (citing
Panel Report, Argentina – Ceramic Tiles, para. 6.27).
[179]
China's response to Panel question No. 18, para. 66.
[180]
See, e.g. China's response to Panel question No. 18, paras. 66-68 (citing
Redetermination, (Exhibit US-1), pp. 26, 34, 43; and Redetermination –
China's translation, (Exhibit CHN-1), pp. 25-27, 32, 43).
[181]
See Redetermination, (Exhibit US-1), p. 26; and Redetermination – China's
translation, (Exhibit CHN-1), p. 27.
[182]
China's opening statement at the meeting of the Panel, p. 5. See Contract
between a Russian producer and a Chinese purchaser, (Russian contract),
(Exhibit US-6) (BCI), p. 3 and Price negotiation letters exchanged between a
Chinese producer and Chinese purchasers, (Price negotiation letters), (Exhibits
US-7, US-8 and US-9) (BCI).
[183]
China's response to Panel question No. 3, para. 13.
[184]
Redetermination, (Exhibit US-1), p. 24; and Redetermination – China's
translation, (Exhibit CHN-1), p. 25.
[186]
United States' first written submission, para. 69.
[187]
United States' comments on China's response to Panel question No. 3; and second
written submission, para. 39.
[188]
China's first written submission, para. 47; and second written submission,
para. 56.
[189]
See Redetermination, (Exhibit US-1), p. 24; and Redetermination – China's
translation, (Exhibit CHN-1), p. 25.
[190]
China's response to Panel question No. 3, para. 13. In this regard, we also
have concerns with MOFCOM's statement that prices of subject merchandise
imported from the United States in the first quarter of 2009 "were
lower" than those of the domestic like product, forcing the domestic
industry to lower its prices, in light of the specific argument by the US
government that subject imports were priced higher than the domestic like
product in Q1 2009, which was not examined by MOFCOM.
[191]
See, e.g. Japan's third-party submission, para. 9. Japan argues that factors
such as increases in volume of subject imports or parallel price trends between
subject imports and the domestic like product at best only establish the
potential for subject imports to suppress or depress domestic prices. As
explained, in our view, even the fact of price competition between subject
imports and the domestic like product at best only establishes the potential
for subject imports to suppress or depress domestic prices. See also, Appellate
Body Report, US – Tires (China), para. 192.
The Appellate Body in US – Tires
commented on the relevance of an analysis of the conditions of competition
between subject imports and the domestic like product in the context of the
causation analysis under paragraph 16.4 of China's Accession of Protocol to the
WTO. We are mindful that the discipline under paragraph 16.4 which stipulates
that market disruption shall exist when imports of an article, which is like or
directly competitive with an Article produced by the domestic industry, is
increasing rapidly, either absolutely or relatively, so as to be a significant
cause of material injury, or threat of material injury to the domestic
industry, is different from the considerations set out in Articles 3.2 and
15.2 of the Anti‑Dumping Agreement and SCM Agreement respectively.
The Appellate Body also commented that unless there is actual or potential
competition between imports and the domestic like product, imports cannot be a
significant cause of material injury to the domestic industry, but noted that
the examination of the conditions of competition is an analytical tool which is
not dispositive on the question of causation. In other words, while competition
may be a necessary element for causation of material injury, it is not
necessarily sufficient. Similarly, in our view, while price competition may be
a necessary element of price suppression or depression, it is not necessarily
sufficient.
[192]
See, e.g. Panel Report, China – Autos,
para. 7.265. In this regard, we find it relevant that the panel considered that
although parallel pricing may provide some basis for a determination that
subject imports depressed domestic like product prices, such a determination
must explain the role of parallel pricing in the price depression found. In the
case before us, MOFCOM relied on parallel pricing analysis in support of its
intermediate finding of price competition. However, we consider that as
explained by the panel in China – Autos ultimately,
the investigating authority must show how its findings on factors such as
parallel pricing supports its ultimate conclusions regarding the suppressive or
depressive effect of subject imports on domestic like product prices. In that
sense, we find no analysis in MOFCOM's Redetermination as to how its
conclusions on parallel pricing or the other factors, on the basis of which it
reached its intermediate finding of price competition, supported its
conclusions regarding the suppressive or depressive effect of subject imports.
[193]
Panel Report, China – GOES, paras. 7.620-7.638;
Appellate Body Report, China – GOES,
para. 114.
[194]
See also Declaration on Dispute Settlement Pursuant to the Agreement on
Implementation of Article VI of the General Agreement on Tariffs and Trade
1994 or Part V of the Agreement on Subsidies and Countervailing Measures.
[195]
See, e.g. Appellate Body Report, US – Hot-Rolled Steel,
para. 226.
[196]
Appellate Body Report, US – Softwood Lumber VI
(Article 21.5 – Canada), para. 93.
[198]
United States' first written submission, para. 109.
[199]
United States' second written submission, para. 81 (citing Panel Report, China –
Autos, para. 7.327).
[202]
United States' first written submission, para. 110.
[203]
China's first written submission, para. 97.
[204]
Ibid. para. 98; and second written submission, para. 92.
[205]
Japan's third-party written submission, para. 16 (citing Panel Reports, China – GOES, para. 7.620; China –
X-Ray Equipment, paras. 7.239-7.240; and China –
Autos, paras. 7.327-7.328).
[206]
Panel Reports, China – X-Ray Equipment, para. 7.239; China – Autos,
paras. 7.327-7.328; and China – HP-SSST (Japan)/China – HP-SSST (EU), para. 7.191.
[207]
United States' first written submission, para. 112; and second written submission,
para. 89.
[208]
United States' first written submission, para. 113.
[209]
Ibid.; and second written submission, para. 84.
[210]
United States' first written submission, para. 115; and second written submission,
para. 87.
[211]
China's second written submission, para. 96.
[212]
China's first written submission, para. 100.
[214]
China's second written submission, para. 95.
[215]
Japan's third-party written submission, para. 17.
[218]
Redetermination, (Exhibit US-1), pp. 28, 29, 42, 43; and Redetermination –
China's translation, (Exhibit CHN-1), pp. 29, 43, 44.
[219]
China's response to Panel question No. 58, paras. 158-160.
[220]
China's second written submission, paras. 94, 98.
[221]
China's response to Panel question No. 57, para. 156.
[222]
United States' first written submission, para. 123; China's response to Panel
question No. 59, para. 162.
[223]
China's second written submission, para. 95.
[224]
United States' first written submission, para. 133.
[225]
Ibid. paras. 122-123.
[227]
United States' first written submission, para. 130; and second written submission,
paras. 91-92.
[228]
United States' second written submission, para. 93.
[229]
United States' first written submission, para. 132.
[230]
China's first written submission, paras. 105-106.
[231]
China's second written submission, para. 105.
[232]
China's second written submission, para. 111.
[233]
Japan's third-party submission, paras. 18-20.
[234]
Panel Report, China – GOES, para. 7.632.
[238]
United States' first written submission, para. 122.
[239]
Original Determination, (Exhibit US-4), p. 60; Redetermination, (Exhibit US-1),
p. 28; and Redetermination – China's translation, (Exhibit CHN-1), p. 29.
[240]
United States' first written submission, para. 122.
[241]
Compared with Q1 2008.
[242]
Original Determination, (Exhibit US-4), pp. 60-61; Redetermination, (Exhibit
US-1), pp. 28, 30; and Redetermination – China's translation, (Exhibit CHN-1),
pp. 29, 31; United States' first written submission, para. 122.
[243]
Redetermination, (Exhibit US-1), p. 52; and Redetermination – China's
translation, (Exhibit CHN-1), p. 52.
[245]
China's first written submission, para. 116. China cites to pages 53 and 54 of
the Redetermination, which provides the following main reasons for the choice
of 2007 as the baseline year for MOFCOM's analysis: (i) 2007 is the closest,
most comparable and representative year to 2008, when the volume of subject imports
and domestic inventories started to increase substantially; and (ii) 2007 can
be regarded as a year of normal market conditions during which the volume of
subject imports did not increase substantially and the domestic industry did
not yet show signs of being adversely affected.
[246]
United States' second written submission, paras. 90-95. The United States
argues that MOFCOM's choice of 2007 as the baseline year for its analysis
minimizes the responsibility of the domestic industry's overproduction for inventory
overhangs in 2008 and the first quarter of 2009, because the domestic
industry's market share increased significantly in 2007. Had MOFCOM used 2006
as the baseline year, its analysis would not have been distorted by the
domestic industry's significant market share gain in 2007. The United States
argues that MOFCOM modified its analysis in this context to obtain the result
it wanted.
[247]
China's first written submission, para. 116.
[248]
Ibid. para. 117 (citing Redetermination, (Exhibit US-1), pp. 54-55).
[249]
China's second written submission, para. 113.
[250]
United States' first written submission, para. 139.
[253]
Ibid. para. 140; and second written submission, para. 96.
[254]
United States' second written submission, para. 100.
[256]
China's first written submission, para. 121.
[257]
Ibid. para. 120; and second written submission, para. 120.
[258]
China's first written submission, para. 122; and second written submission,
para. 121.
[259]
China's first written submission, para. 124.
[260]
Japan's third-party submission, paras. 18-20.
[261]
Redetermination, (Exhibit US-1), pp. 23, 24, 36, 37; and Redetermination –
China's translation, (Exhibit CHN-1), pp. 24, 37.
[262]
Original Determination, (Exhibit US-4), pp. 57-58 (data on subject imports
only); Redetermination, (Exhibit US-1), pp. 23, 24, 36, 37 (data on subject and
non-subject imports, respectively); and Redetermination – China's translation,
(Exhibit CHN-1), pp. 24, 37.
[263]
Original Determination, (Exhibit US-4), pp. 57-58; Redetermination, (Exhibit
US-1), pp. 23, 24, 36, 37; and Redetermination – China's translation, (Exhibit
CHN-1), pp. 24, 37.
[264]
Appellate Body Report, China – GOES,
para. 240.
[266]
Panel Report, Argentina – Poultry Anti-Dumping Duties,
para. 7.223.
[267]
Panel Report, China – GOES, para. 7.653.
[268]
Appellate Body Report, China – GOES,
para. 241.
[269]
Panel Report, Mexico – Olive Oil, para. 7.110.
[270]
Panel Report, EC – Salmon (Norway), para.
7.796.
[271]
Appellate Body Report, China – GOES,
para. 247.
[272]
MOFCOM, Notice of information disclosure before the industry injury verdict of
the anti-dumping on imported grain-oriented silicon electrical steel with the
country of origin in the United States and Russia and the anti-subsidy on the
imported grain-oriented silicon electrical steel with the country of origin in
the United States, Public Notice [2013] No. 327 (Redetermination
Disclosure) (Exhibit US-3); and MOFCOM, Notice of Disclosure Prior to Industry
Injury Determination in the Anti-Dumping Reinvestigation on Imports of Grain
Oriented Flat-rolled Electrical Steel originating in the U.S. and Russia and
the Anti-subsidy Reinvestigation on Imports of Grain Oriented Flat-rolled
Electrical Steel originating in the U.S. SDCYCH [2013] No. 327 (Redetermination
Disclosure – China's translation) (Exhibit CHN-2).
[273]
United States' second written submission, para. 107.
[275]
United States' second written submission, para. 115.
[276]
Ibid.; and comments on China's response to Panel question No. 62.
[277]
China's second written submission, para. 116.
[279]
United States' first written submission, paras. 130-135.
[280]
China's first written submission, para. 138; and second written submission,
para. 128.
[281]
China's second written submission, para. 128.
[282]
China's comments on the United States' response to Panel question No. 64.
[283]
China's first written submission, para. 141 (quoting Redetermination
Disclosure, (Exhibit US-3), p. 10); and response to Panel question No. 62,
para. 175.
[286]
China's response to Panel question No. 62, para. 175.
[287]
China's first written submission, paras. 142-143; and second written
submission, para. 132.
[288]
China's second written submission, para. 132.
[289]
Japan's third-party submission, para. 24.
[290]
Redetermination Disclosure, (Exhibit US-3), p. 10; and Redetermination Disclosure
– China's translation, (Exhibit CHN-2), p. 11.
[292]
Redetermination Disclosure, (Exhibit US-3), pp. 9-10; and Redetermination
Disclosure – China's translation, (Exhibit CHN-2), p. 11.
[293]
China's first written submission, para. 138. In this regard, we note that
MOFCOM's parallel pricing analysis concerned price trends in 2007, 2008 and Q1
2009. The AUV data for 2007 was based on Wuhan's prices alone while the AUV
data for 2008 and Q1 2009 reflected the weighted average of Baosteel's and
Wuhan's prices. See China's response to Panel question No. 7, para. 27.
[294]
United States' second written submission, para. 115.
[295]
Ibid.; and comments on China's response to Panel question No. 62.
[296]
See, e.g. Panel Report, Argentina – Poultry Anti-Dumping
Duties, para. 7.225. The panel in that case concluded that the
"essential facts" within the meaning of Article 6.9 of the
Anti-Dumping Agreement did not include motives, causes or justifications for
the investigating authority's findings. We agree.
[297]
Panel Report, China – GOES, para. 7.548; and
Appellate Body Report, China – GOES,
para. 168.
[298]
China's first written submission, para. 30 (quoting Redetermination, (Exhibit
US-1), p. 25).
[301]
United States' second written submission, para. 114.
[302]
United States' first written submission, para. 146; and second written
submission, para. 111.
[303]
United States' first written submission, para. 146; and second written
submission, para. 117.
[304]
United States' first written submission, para. 146; and second written
submission, paras. 118-119.
[305]
China's first written submission, para. 140; and second written submission,
para. 130.
[306]
China's second written submission, para. 130.
[307]
China's first written submission, para. 139; and second written submission,
para. 129.
[308]
China's second written submission, para. 144, footnote 186.
[309]
China's second written submission, para. 133.
[310]
China's first written submission, para. 145; and second written submission,
para. 134.
[311]
Japan's third-party submission, para. 24.
[312]
China's first written submission, para. 140; and second written submission,
para. 130.
[313]
Redetermination, (Exhibit US-1), pp. 28, 29, 42, 43; and Redetermination –
China's translation, (CHN-1), pp. 29, 43, 44.
[314]
China's second written submission, paras. 94, 98; and response to Panel
question No. 57, para. 156.
[315]
Redetermination, (Exhibit US-1), p. 52; and Redetermination – China's
translation, (CHN-1), p. 52.
[316]
United States' first written submission, para. 154.
[317]
China's first written submission, para. 153.
[319]
United States' second written submission, para. 122.
[320]
China's second written submission, para. 137.
[321]
Article 22.5 refers to "an undertaking" rather than "a
price undertaking" in the first sentence, and refers to "paragraph
4" rather than "subparagraph 2.1" and "interested
Members" in addition to " exporters and importers" in the second
sentence. Article 22.5 of the SCM Agreement also omits the reference
at the end of Article 12.2.2 of the Anti-Dumping Agreement to sampling
under Article 6.10 of the latter Agreement. There is no corollary
provision to Article 6.10 in the SCM Agreement.
[322]
Appellate Body Report, China – GOES,
para. 240.
[323]
See Panel Reports, China – Broiler Products,
para. 7.527; and EU – Footwear (China), para.
7.844.
[324]
Panel Report, China – GOES, para. 7.334.
[325]
Ibid. para. 7.335; and Appellate Body Report, China – GOES,
para. 259.
[326]
See, e.g. Appellate Body Report, China – GOES,
para. 256.
[327]
Panel Reports, EC – Bed Linen, para. 6.259;
and EC – Salmon (Norway), para. 7.831.
[328]
Panel Report, EC – Bed Linen, para. 6.259.
[329]
United States' second written submission, para. 122.
[330]
United States' first written submission, para. 153.
[332]
United States' second written submission, para. 124.
[333]
China's first written submission, para. 150.
[336]
Ibid. para. 157; and second written submission, para. 143.
[337]
China's first written submission, para. 161.
[339]
Japan's third-party submission, para. 24.
[340]
See, above, paras. 7.89-7.93.
[341]
See, above, paras. 7.40-7.112.
[342]
See, above, paras. 7.129-7.133.
[343]
See, above, paras. 7.138-7.145.
[344]
See, above, para. 7.185.
[345]
We recall that China asserts that the measures at issue expired after the
issuance of the Interim Report. However, there is no evidence properly
before us in this regard.