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March 14 — China will secure the establishment of a World Trade Organization dispute panel to rule on whether the U.S. Commerce Department's use of the targeted dumping methodology in antidumping (AD) investigations violates global trade rules.
China will submit a second request for the panel at a meeting of the WTO's Dispute Settlement Body (DSB) scheduled for March 26, according to an agenda for the meeting circulated by the WTO March 14.
China's first request for a panel was blocked by the U.S. at a DSB meeting on Feb. 26. Under WTO rules, a second request for a panel can only be blocked if all members in attendance agree to reject the request.
Once established, the two sides will then sit down to select the three panelists who will rule on China's claims. The panel is normally required to issue its ruling within six to nine months.
China is challenging the Commerce Department's application of the targeted dumping methodology in three original investigations regarding imports of Chinese coated paper, oil country tubular goods and high-pressure steel cylinders, as well as the review of an existing duty order on imports of polyethylene terephthalate film, sheet and strip.
In particular, China is challenging the series of steps applied for determining whether targeted dumping is taking place known as the “nails test,” which was first set forth in 2008 in Commerce's AD investigation into steel nails imported from China and the United Arab Emirates. The process is used to determine the existence of a pattern of export prices that differ among different purchasers, regions or periods of time, and it uses a weighted-average to transaction comparison of prices.
China is also challenging Commerce's application of the” zeroing” methodology when aggregating the results of the comparisons. The WTO already condemned zeroing when used in the original AD investigation as well as in other contexts, but it has never addressed the use of zeroing in targeted dumping probes.
The application of the targeted dumping methodology with zeroing “is inconsistent with the obligations of the United States under Article 2.4.2 of the (WTO's) Antidumping Agreement,” China says, because the standard established under the nails test is “not appropriate” to identify significantly different patterns of export prices needed to justify the use of the methodology. Commerce also applied the methodology to all U.S. sales by relevant exporters even though the conditions of the nails test were only satisfied with respect to certain U.S. sales.
China is also challenging Commerce's practices related to China's status as a non-market economy (NME), as well as the use of “adverse facts available” in its AD investigations on various Chinese imports. In particular, China is challenging Commerce's use of the “single rate presumption” for NMEs, under which a single AD rate duty is determined under the presumption that all producers and exporters in an NME comprise a single entity under common government control, as well as other practices related to the NME-wide methodology.
These practices have been used in U.S. investigations targeting the following Chinese goods: coated paper suitable for high-quality print graphics using sheet-fed presses; oil country tubular goods; high-pressure steel cylinders; polyethylene terephthalate film, sheet and strip; aluminum extrusions; frozen and canned warmwater shrimp; new pneumatic off-the-road tires; crystalline silicon photovoltaic cells; diamond sawblades and parts thereof; multilayered wood flooring; narrow woven ribbons with woven selvedge; polyethylene retail carrier bags; and wooden bedroom furniture.
South Korea secured a separate WTO panel Jan. 22 to rule on a similar complaint regarding Commerce's use of targeted dumping in an AD investigation on imported Korean washers.
Daniel Porter, a partner in the International Trade group with the law firm Curtis, Mallet-Prevost, Colt & Mosle LLP, said that exporters in Japan and Thailand have also voiced complaints about Commerce's use of targeted dumping, which only became more widespread after the WTO issued its earlier rulings against zeroing in other types of investigations.
The Korean and Chinese challenges are “very significant” because if the WTO rules in favor of the complainants, “another major trade remedy practice of the United States will have to be changed,” Porter said. “It could really force the U.S. to abandon something which exporters think is driving up antidumping margins.”
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