China Loses to US in Auto Duty Case at WTO

A WTO dispute panel has found a series of Chinese duties on imports of US-made cars and SUVs to be largely in violation of international rules, faulting them on a series of procedural and substantive points, according to a report issued on Friday, 30 May.

While the panel’s ruling did issue some findings in Beijing’s favour, the case has been hailed by Washington as a victory overall, both for its automobile producers and as a sign that China needs to reconsider the way it conducts trade remedy investigations.

The US filed the original complaint (DS440) in July 2012, charging that China’s decision in December 2011 to impose anti-dumping (AD) and countervailing (CVD) duties on American-made cars and SUVs was unjustified.

The anti-dumping duties ranged from 2.0 to 21.5 percent, according to the Office of the US Trade Representative, while the countervailing duties were between 6.2 and 12.9 percent. The duties affected US vehicles with an engine capacity of 2.5 litres or larger.

With China being the second-largest export market for US automobiles – selling US$8.5 billion worth of automobiles to the Asian economy, out of a total US$64.9 billion in exports – the WTO panel’s ruling was welcomed by USTR Michael Froman as a “significant victory.”

“China’s unjustified duties affected an estimated US$5.1 billion of those exports, and applied to well-known models, like the Jeep Grand Cherokee, Jeep Wrangler, Buick Enclave, Cadillac Escalade, and others,” he told reporters on Friday.

Mixed ruling

In its ruling last week, the panel found that MOFCOM failed to require the submission of adequate non-confidential summaries of confidential information concerning certain injury factors – namely apparent consumption, return on investment, salary, and sales-to-output ratio – in the petitions for both types of duties.

The panel said that the US had provided sufficient initial evidence to prove that MOFCOM failed to disclose the essential facts to American respondents prior to making its final determination in the AD investigation at issue, and that China failed to rebut that claim. The panel thus found that China acted inconsistently with Article 6.9 of the AD Agreement.

The panel also found that Chinese investigators failed to give “unknown” US exporters the opportunity to provide them with the necessary information, before a determination of a residual AD duty rate could justifiably be made on the basis of “facts available.”

For the panel, there was a disparity between the information requested from a producer and the determination of the residual AD duty rate which was ultimately made, on the basis of facts available. This, in turn, undermined the due process rights of the parties concerned. The panel made a similar observation with respect to the CVD investigations.