US Request for Retaliation against India in Solar Dispute Referred to Arbitration

At a special meeting of the WTO’s Dispute Settlement Body (DSB) on 12 January, a request from the United States for authorization to suspend concessions or other obligations with respect to India in a dispute relating to domestic content requirements for solar cells and solar modules was referred to arbitration. The DSB also adopted a panel ruling concerning US anti-dumping duties on Korean oil country tubular goods (OCTB) after both Korea and the United States agreed not to appeal the panel’s findings.

DS456 India — Certain Measures Relating to Solar Cells and Solar Modules

The United States noted that on 19 December it requested authorization from the DSB to suspend concessions with respect to India due to what it said was India's failure to comply with the rulings in this dispute by the 14 December 2017 implementation deadline. On 3 January India submitted a communication in which it objected to the US request. However, nowhere in this communication did India state that it "objects to the level of suspension proposed" by the US, which would automatically trigger arbitration on the amount of retaliation under Article 22.6 of the WTO's Dispute Settlement Understanding (DSU), the US said. Therefore, the DSB needs clarity from India whether it is objecting to the level of suspension proposed by the US; if it does so, the matter is referred to arbitration pursuant to Article 22.6, if not, the DSB must grant authorization to the US to suspend concessions.

The US said India made several incorrect claims in its 3 January communication, namely that 1) the US did not sufficiently indicate a level of proposed retaliation or why it considers India has not complied; 2) there is an obligation for the complaining party to negotiate compensation with the responding party before requesting retaliation; and 3) a panel must first rule whether India has complied with the WTO ruling before the US requests authorization to retaliate. India's claim that it has complied with the WTO ruling is wholly unsubstantiated and limited to a mere assertion that the measures found in violation of WTO rules are no longer being imposed, the US said. The US also said it did set out the level of suspension proposed in its retaliation request in the form of a formula commensurate with the trade effects caused to the interests of the US, and that past requests from members to suspend concessions commonly expressed the proposed level of suspension in the form of a formula rather than a specific monetary amount.

India noted the arguments it laid out in its 3 January communication and said it was surprised with the US request for authorization to retaliate; if the US had any doubts about India's compliance, it should have sought discussions with India. India stands severely prejudiced by the vagueness and opaqueness of the US request, which contains no indication why the US believes India has not complied with the ruling or what the level of suspension the US considers equivalent to the purported harm to US trade caused by the Indian measures. India emphasized that if the US had any disagreement with India on compliance, this first must be addressed through compliance panel proceedings under Article 21.5 of the DSU. However, despite repeated requests from India, the US refused to sign a sequencing agreement with India establishing this process, which goes against the standard practice of WTO members acting in good faith. India concluded by reaffirming its objection to the US Article 22.2 request of 19 December.

A number of WTO members intervened to comment. Several expressed concern about the absence of a proposed level of retaliation in the US request and said such a request should include either the proposed amount of retaliation or a description of the proposed formula; failure to do this adversely affects the rights of the responding member. Others said that there was no need for the DSB to consider the US request as India had already objected, which meant that arbitration was automatically triggered under Article 22.6 of the DSU. One delegation agreed with the US that the US was under no obligation to negotiate compensation with India before requesting authorization to retaliate, as that right is reserved for the complaining party to decide.

The United States responded that its request for the right to retaliate contained an appropriate indication of the level of retaliation, and that members in the past had done exactly as the US had done in not indicating a specific monetary amount. India then said it objected to the purported level of retaliation set out in the 19 December US communication, as per its 3 January communication, without prejudice to whether the US request was deficient because it failed to specify the requested amount.

The DSB took note of the statements and that the matter raised by India has been referred to arbitration, as required by Article 22.6 of the DSU.

DS488 United States — Anti-Dumping Measures on Certain Oil Country Tubular Goods (OCTG) from Korea

Korea told the DSB that this was an important case that clarifies the obligations of investigating authorities under the Anti-Dumping Agreement (ADA), especially in using data from a global producer with no record of sales or production in the exporting country's home market for the calculation of "constructed value" and in defining the concept of the "same general category of products" under Article 2.2.2 of the ADA. The panel correctly found that an investigating authority's discretion in selecting a constructed value profit source is not without limits, and that investigating authorities must comport with the requirements of the ADA when calculating constructed value profits, Korea said.

While Korea is satisfied with the panel's important findings on this point, it does have some concerns with some of the panel's other findings. In particular, Korea registered its disappointment that the panel failed to properly assess the magnitude of the US political pressure it said persistently forced US investigating authorities to deviate from the legal standards set out in the ADA. Even though the panel's findings are not completely satisfactory, Korea said it believes that the panel's ruling, if properly implemented by the US, will significantly alleviate the harm suffered by the Korean OCTG producers in this investigation.

The United States noted that Korea raised a number of claims before the panel and that the panel rightly rejected a majority of these claims. It welcomed the panel's rejections of Korea's claims that Article 2.2.2 of the ADA requires an authority, where home market sales are not viable, to evaluate third-country export sales before determining whether to construct normal value and Korea's argument under Article 2.3 which essentially asked the panel to review US compliance with US law, not with the text of the ADA.

However, the US was disappointed with the panel's conclusions on several points, including on the calculation of constructed value, which the US said could prove very burdensome for foreign respondents in an investigation by requiring them to gather and provide additional and potentially voluminous data on home market sales. Nevertheless, the US decided to permit the panel report to be adopted, citing the overall quality of the findings, and encouraged other WTO members to similarly consider the nature and number of appeals they file.

The DSB took note of the statements and adopted the panel report.