China Wins in Appeal at WTO in EU Fasteners Case

India Case cannot be a Full Surrogate for China NME says WTO AB

The WTO’s highest court ruled on Monday that an EU review of earlier anti-dumping duties on Chinese-made iron and steel fasteners – such as screws, nuts, and bolts – was insufficient to bring the measures in line with global trade rules.

The WTO dispute (DS397) was launched in 2009, when Beijing requested consultations with the 28-nation bloc on the anti-dumping duties, which at the time ranged from 26.5 to 85 percent. At the time, China argued that both the EU’s Basic Anti-Dumping Regulation and its fasteners anti-dumping measure violated WTO rules.

When dealing with non-market economies (NMEs), the EU’s Basic Anti-Dumping Regulation says that determining “normal value” – in other words, the product’s price domestically or production cost – allows for using an “appropriate market-economy third country.” Normal value is used in the calculation of dumping margins, which is the difference between normal value and export price.

The regulation originally provided that in the case of imports from non-market economies, the duty shall be specified for the supplying country concerned rather than for each supplier. It also stated that an individual duty will only be specified for exporters that demonstrate that they fulfil certain criteria.

In the original fastener investigation, EU authorities chose to use India as this third country, with Pooja Forge, a producer of fasteners based in that country, used to help determine these margins. A dispute panel found in favour of China in December 2010, with the Appellate Body later agreeing in July 2011 that elements of the Basic Anti-Dumping Regulation and the fastener investigation violated certain trade rules, though for different reasons.

Following the result, the EU adopted a new regulation, which featured changes such as removing the list of substantive criteria that exporters need to demonstrate in order to receive an individual duty in the old regulation.

The new regulation also provided that “suppliers which are legally distinct from other suppliers or which are legally distinct from the State may nevertheless be considered as a single entity for the purpose of specifying the duty,” as well as those factors that can be taken into account in applying the regulation.

The EU later also conducted a review investigation, ultimately deciding to continue imposing anti-dumping duties on certain fasteners, while making some changes to the actual dumping rates. However, a panel ruled in August 2015 that this was not enough to achieve compliance with the 28-nation bloc’s WTO commitments.

This week’s Appellate Body ruling came following appeals from both parties of the compliance panel report. The ruling upheld the bulk of the compliance panel findings, many of which dealt with the availability of information regarding Pooja Forge’s products in determining normal values for Chinese producers, along with finding that there had not been an objective assessment of whether the Indian firm had shown “good cause” for some of its information being treated as confidential in the anti-dumping proceedings.

The Appellate Body did disagree with one of the panel’s rulings of compliance, specifically finding that the EU actually had violated WTO anti-dumping rules in not reflecting in its anti-dumping determination a proper assessment of tax differences and other costs that Chinese producers say they are subject to and had therefore requested adjustments for.

“The measures have negative effect on exports from China around US$1 billion and more than 100,000 jobs from thousands of fastener producers in China,” said an e-mailed statement from China’s Head of Department of Treaty and Law at the Ministry of Commerce (MOFCOM).