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 documents WT/DS427/11 and WT/DS427/11/Corr.1 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

Chairperson: Mr Faizullah Khilji

Members: Mr Serge Fréchette

Ms Claudia Orozco

a. adopted its Working Procedures³ and timetable on 9 November 2016;

b. revised the timetable on 1 December 2016, and again on 4 July 2017; and

c. adopted, on 22 November 2016, additional procedures for the protection of Business Confidential Information (BCI).⁴

a. Articles 3.1 and 3.2 of the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (Anti-Dumping Agreement), and Articles 15.1 and 15.2 of the Agreement on Subsidies and Countervailing Measures (SCM Agreement), because MOFCOM's analysis of the alleged price effects of imports under investigation did not involve an objective examination of the record and was not based on positive evidence. For example, MOFCOM:

i. failed to account for differences in the product mix between the average unit value (AUV) of subject imports and the AUV of domestic sales;

ii. failed to explain how it collected product-specific pricing data in the reinvestigation, why data was solicited from only four domestic producers, and what proportion of total domestic industry sales were covered by the data;

iii. failed to explain how the alleged price underselling could have suppressed domestic prices in the first half of 2009 when similar underselling had no price suppressive effects at other points during the period of investigation (POI); and

iv. failed to address evidence that prices for domestically produced products that competed with subject imports declined far less than prices for other domestic products in the first half of 2009.

b. Articles 3.1 and 3.4 of the Anti-Dumping Agreement, and Articles 15.1 and 15.4 of the SCM Agreement, because MOFCOM's findings that subject imports had an adverse impact on the domestic industry did not involve an objective evaluation of all relevant economic factors and indices having a bearing on the state of the industry. For example, MOFCOM did not address economic evidence and factors that contradicted its finding that the industry was suffering material injury on account of US imports.

c. Articles 3.1 and 3.5 of the Anti-Dumping Agreement, and Articles 15.1 and 15.5 of the SCM Agreement, because MOFCOM's determination that subject imports were causing injury to the domestic industry was not based on an examination of all relevant evidence, including that subject import volume did not increase at the expense of the domestic industry and that a large portion of subject imports consisted of products that could not have been injurious, and was based on MOFCOM's flawed price and impact analyses.

d. Articles 6.4 and 6.5 of the Anti-Dumping Agreement, and Articles 12.3 and 12.4 of the SCM Agreement, because during the reinvestigation MOFCOM did not provide interested parties timely opportunities to see all non-confidential information that was relevant to their case and that was used by the investigating authority, and MOFCOM treated information as confidential absent good cause. For example, MOFCOM failed to disclose the questionnaires it submitted to Chinese domestic producers during the reinvestigation.

e. Article 6.1 of the Anti-Dumping Agreement and Article 12.1 of the SCM Agreement because during the reinvestigation MOFCOM did not provide notice of the information that MOFCOM required and did not provide interested parties ample opportunity to present in writing all evidence they considered relevant. For example, MOFCOM did not disclose the questionnaires it submitted to Chinese domestic producers during the reinvestigation.

f. Article 6.9 of the Anti-Dumping Agreement and Article 12.8 of the SCM Agreement because MOFCOM failed to inform interested Members and parties of the essential facts under consideration which form the basis for its decision to apply definitive measures. For example, MOFCOM did not disclose the calculations utilized to determine the dumping and subsidy margins for US producers.

g. Articles 12.2 and 12.2.2 of the Anti-Dumping Agreement, and Articles 22.3 and 22.5 of the SCM Agreement, because MOFCOM failed to provide in sufficient detail the findings and conclusions reached on all issues of fact and law it considered material, all relevant information on matters of fact and law and the reasons which led to the imposition of final measures, and the reasons for the acceptance or rejection of relevant arguments or claims. For example, MOFCOM's explanations with respect to its findings for its material injury determination fail to address key arguments made by interested parties.

h. Articles 2.2 and 2.2.1.1 of the Anti-Dumping Agreement because MOFCOM improperly calculated the cost of production for US producers, failed to calculate costs on the basis of the records kept by the US producers under investigation, and did not consider all available evidence on the proper allocation of costs. For example, MOFCOM allocated production costs of non-subject merchandise to subject merchandise and failed to properly allocate processing costs for subject merchandise.

i. Article 9.4 of the Anti-Dumping Agreement because MOFCOM applied to imports from producers and exporters not included in the examination – and to which the application of facts available was not warranted – an anti-dumping duty that exceeded the weighted average margin of dumping established with respect to the selected exporters or producers. For example, MOFCOM failed to correctly calculate dumping margins for US interested parties, and then applied a rate to imports from producers and exporters not included in the examination that exceeded the selected exporters or producers' weighted average margin of dumping.

j. Article 6.8 and Annex II of the Anti-Dumping Agreement (including, inter alia, paragraphs 1, 3, 5, and 6) because MOFCOM made determinations for US producers on the basis of the facts available even though it:

i. failed to specify in detail the information required from interested parties and the manner in which it should be structured;

ii. did not take into account verifiable and appropriately submitted information; and

iii. failed to provide supplying parties of the reasons evidence or information was rejected and an opportunity to provide further explanations.

k. Article 1 of the Anti-Dumping Agreement as a consequence of the breaches of the Anti‑Dumping Agreement described above.

l. Article 10 of the SCM Agreement as a consequence of the breaches of the SCM Agreement described above.

m. Article VI of the General Agreement on Tariffs and Trade (GATT) 1994 as a consequence of the breaches of the Anti-Dumping Agreement and the SCM Agreement described above.

I refer to China's letter of 28 September 2017 and the response of the United States in its letter of 2 October 2017. China requests that the Panel extend the time-period for comments on the Interim Report from 6 October to 13 October 2017, to accommodate a Chinese national holiday. In the event China's request is acceded to, the United States requests a commensurate extension of the deadline for comments without further delay in the issuance of the final report.

My colleagues and I are sensitive to the importance of accommodating national holidays in timetables where possible. It may be recalled, for instance, that following their comments at the organizational meeting, the parties' requests to avoid domestic holiday periods (Thanksgiving, Christmas and Chinese New Year) were accommodated in setting the dates for the first and second written submissions.

It may also be kindly recalled that both parties were provided with the final revised timetable on 4 July 2017. China did not raise any concerns about the timetable at that time or, indeed, at any point before its letter of 28 September 2017. In its letter, China merely requests a one-week delay in the deadline for submission of requests for interim review. It neither explains why it failed to alert the Panel earlier of the possible impact of the Chinese National Day holiday on its ability to comment on the Interim Report, nor explains why it failed to do so at this point until nearly a week after it received the Interim Report.

It needs emphasizing that the Panel is mindful of the importance of national holidays, and recalls that it took such holidays into account in establishing the original timetable in this dispute. However, the Panel is also concerned with preserving the integrity of dispute settlement procedures and protecting the rights of both parties. In this regard, the Panel considers that it is necessary, as a rule, for a party to a dispute to:

1. raise procedural objections at the earliest point at which it becomes or ought to become aware of the facts underlying those objections; and

2. if it is unable to do so, set out clearly in its request for a remedy the reason why it could not have made its objections earlier.

China's letter of 28 September 2017 came very late in the proceedings – well after China knew, or should have known, of the potential conflict with its holiday. China's letter contains no explanation or justification for raising its objection so late in the proceedings, more than two months after the final revised timetable was issued to the parties. Please note that the United States requests a commensurate extension of the deadline for comments, in the event that China's request is acceded to, but further asks that the issuance of the final report not be delayed. It is not possible for the Panel to accommodate both parties in this matter. In these circumstances, and having considered the interests of both parties and of orderly proceedings and the needs of the Panel, the Panel has decided on balance to deny China's request for an extension of time to request review of precise aspects of the interim report.

The dates for the remainder of this dispute, as set forth in the Timetable circulated to the parties on 4 July 2017 are therefore confirmed:

· Deadline for parties to request review of part(s) of the report and to request interim review meeting: 6 October 2017, 5 p.m.

· Interim review meeting, if requested – If no meeting requested, deadline for comments on requests for review: 20 October 2017, 5 p.m.

· Issuance of final report to the parties: 17 November 2017, 5 p.m.¹²

[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 out 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 that a panel is required to apply with respect to both the factual and the legal aspects of the present dispute. This means that in reviewing the investigating authority's determination in this dispute, we must:

a. examine whether the authority has provided a reasoned¹⁶ and adequate¹⁷ explanation as to:

i. how the evidence on the record supported its factual findings¹⁸, and

ii. how those factual findings support the overall determination¹⁹;

b. not conduct a de novo review of the evidence or substitute our judgment for that of the investigating authority;

c. limit our examination to the evidence that was before the investigating authority during the course of the investigation²⁰;

d. take into account all such evidence submitted by the parties to the dispute²¹; and

e. not simply defer to the conclusions of the investigating authority: our examination of those conclusions must be "in-depth" and "critical and searching".²²

a. the measures found inconsistent with the WTO Agreement have been brought into conformity;

b. the "measures taken to comply"²⁶ are otherwise substantively consistent with the WTO Agreement²⁷; and

c. in seeking to bring itself into compliance, the investigating authority observed the procedural protections of the relevant WTO agreements in the compliance investigation/determination/proceedings.

For the purpose of paragraph 2, costs shall normally be calculated on the basis of records kept by the exporter or producer under investigation, provided that such records are in accordance with the generally accepted accounting principles of the exporting country and reasonably reflect the costs associated with the production and sale of the product under consideration. Authorities shall consider all available evidence on the proper allocation of costs, including that which is made available by the exporter or producer in the course of the investigation provided that such allocations have been historically utilized by the exporter or producer, in particular in relation to establishing appropriate amortization and depreciation periods and allowances for capital expenditures and other development costs.

The issue before us in this proceeding is whether, in its redetermination, MOFCOM complied with the second sentence of Article 2.2.1.1. Given the structure of the provision and the arguments of the parties in these proceedings, it is useful to briefly revisit our findings under both sentences of Article 2.2.1.1:

First sentence

a. The two conditions of the first sentence of Article 2.2.1.1 are cumulative²⁸: for the requirement to use the respondents' books and records to apply, those books and records must be both consistent with Generally Acceptable Accounting Principles and reasonably reflect costs associated with production and sale.²⁹

b. An investigating authority is required to explain why it has declined to use a respondent's books and records.³⁰

c. MOFCOM did not explain its decision not to use the books and records of Keystone Foods, LLC (Keystone) and Tyson Foods, Inc. (Tyson), but in respect of Pilgrim's Pride Corporation (Pilgrim's Pride) it specifically found "the data as originally submitted was irreconcilable and that the information to correct the errors was untimely".³¹

d. China acted inconsistently with the first sentence of Article 2.2.1.1 when MOFCOM declined to use Keystone's and Tyson's books and records in calculating the cost of production for determining normal value.

e. With respect to Pilgrim's Pride, MOFCOM explained its reasons for departing from the norm and declining to use Pilgrim's Pride books and records. Therefore, with respect to Pilgrim's Pride, the United States did not establish that China acted inconsistently with the first sentence of Article 2.2.1.1.³²

Second sentence

a. The requirement to "consider" evidence goes beyond merely taking note of evidence; it entails examining, and weighing the merits of, relevant evidence.³³

b. An investigating authority is required to engage in "some degree of deliberation" in considering "all available evidence … so as to ensure that there is a proper allocation of costs".³⁴

c. Although an investigating authority will not always have to examine and weigh the merits of evidence relating to alternative allocation methodologies, the circumstances of a particular case may require such consideration in order to act consistently with Article 2.2.1.1³⁵ and this must be reflected in the record of its decision.³⁶

d. "Given the explanations and alternative cost methodologies proposed to MOFCOM by the respondents, there was 'compelling evidence' that more than one allocation methodology potentially may be appropriate. Therefore, MOFCOM was required to reflect on and weigh the merits of the various allocation methodologies".³⁷

e. MOFCOM acted inconsistently with the second sentence of Article 2.2.1.1 because there was "no evidence on the record of the investigation that the merits of the alternative allocation methodologies put forward by the respondents after the Preliminary Anti‑Dumping Determination were weighed or reflected upon".³⁸

f. MOFCOM's straight allocation of total processing costs to all products necessarily means that it included costs solely associated with processing certain subject broiler products in its calculation of costs to all subject broiler products.³⁹

g. Evidence relied upon by China did not support its position that "the per pound costs assigned to each product were derived from total cost minus the costs associated with the production of the products derived from a chicken that are not in the list".⁴⁰

h. MOFCOM acted inconsistently with the second sentence of Article 2.2.1.1 also because it "improperly allocated costs from certain products derived from a chicken to other products derived from a chicken".⁴¹

a. In respect of certain broiler product models (such as chicken feet) valued and costed as offal, "export sales prices were much higher than the prices of other offal products sold in the domestic market".⁴⁸

b. Tyson did not allocate costs on the basis of "overall sales price" to those broiler product models, but rather costs on the basis of their domestic price.⁴⁹

c. Tyson did not allocate various other common costs (such as feed and common processing) to these broiler product models.

MOFCOM determined that Tyson's records did not "reasonably reflect the production cost associated with the product concerned".⁵⁰

a. "it was not able to distinguish which feeds were specifically used to produce which parts of the product concerned";

b. "weight-based method could be more objective and more reasonable than the value‑based method … [to] reflect the production cost associated with the product concerned"⁵¹; and

c. "[t]he weight-based methodology … would not allocate too much meat costs to a part of products, while allocate almost none of meat cost to other part of the products".⁵²

In its comments in the original investigation and then again in the questionnaire response to the reinvestigation, Tyson argued that:

[I]f the Ministry of Commerce insists to use the weight-based cost allocation method in the final determination, it shall consider all products generated from live chickens, and use the cost data re-submitted by Tyson company.⁵³

MOFCOM considered Tyson's approach "not reasonable"⁵⁴ because:

a. Tyson's methodology did not account for weight loss due to dead birds or birds "inappropriate for processing"⁵⁵;

b. "during the original investigation and re-investigation, the Investigating Authority calculated the production costs of each model of the products concerned … this production cost didn't include that of the non-concerned products, such as feather, blood, etc. … [t]he cost allocation method for other products generated from the live chicken products (e.g. feather, blood, deep processed product, cooked product) is not the target of this investigation"⁵⁶;

c. "costs of live chickens were monthly different during the period of the investigation. The Company did not explain in details [sic] which parts of live chickens were used for the production of the product concerned, and which parts were used for the production of other products"⁵⁷; and

d. "by using the method claimed by the Company to calculate the cost, the total cost of the product concerned would be lower than the total cost of the product concerned in the Company's accounting book, but the Company did not explain in details what cost was reduced therefrom".⁵⁸

a. "the meat cost for all models of the product concerned should be calculated by using the weight based methodology";

b. "processing cost of common process should be allocated to all products by using the weight-based methodology";

c. "processing cost incurred for the particular product should be allocated to the particular product"; and

d. "production costs for all models of the product concerned should be determined on the basis of facts available and best information available".⁶⁰

Since the Dispute Settlement Report does not address the determination of the investigating authority on the Company's normal value, export price, price adjusted items and [cost, insurance, freight (CIF)] price, the investigating authority decides in the re-investigation to maintain the determination of the original investigation with respect to the Company's normal value, export price, price adjusted items and CIF price.⁶¹

a. asked Tyson "for the breakdown of sales into subject and non-subject merchandise", adding a clarification with respect to "non-subject merchandise" that "products not for human consumption, such as chicken feather, chicken blood, internal organs" are not subject products⁸²;

b. sought Tyson's own allocation method for dividing subject and non-subject products⁸³ and accepted Tyson's division⁸⁴;

c. found that Tyson "reasonably drew distinctions between higher revenue and lower revenue products"⁸⁵ and accepted "Tyson's normal accounting approach for this initial distinction into subject and non-subject merchandise"⁸⁶;

d. considered "the evidence about the proper way to allocate costs among the specific products within the subset of edible subject products"⁸⁷ and "realized that the Tyson's [sic] value-based method in fact introduced a distortion by using a very low value of offal (or price of waste products) to establish costs for the certain products (like chicken paws)"⁸⁸; and

e. rejected Tyson's proposed cost allocation methodology as not correctly reflecting costs.⁸⁹

Article 2.2.1.1 focuses on the "product under consideration". Therefore, including products not under consideration, such as the by-products at issue here, would not "reasonably reflect" the cost of the products at issue.⁹⁰ The US approach would require that "even though Tyson had itself assigned few costs to inedible waste products, MOFCOM had to go back and take costs that Tyson had itself allocated to edible broiler parts, and reallocate them back to the inedible waste products based on weight."⁹¹ MOFCOM accepted the total meat costs of the subject products reported by Tyson, and then allocated that total meat cost to individual models of the subject broiler products based on weight.⁹²

a. the Panel in its original report "never found any inconsistency with the second sentence of Article 2.2.1.1 with regard to MOFCOM's determination for Pilgrim's Pride"⁹³;

b. the reference to "respondents" in the original report is only to Tyson and Keystone⁹⁴ because:

i. the Panel's summary of the arguments does not refer to Pilgrim's Pride⁹⁵,

ii. the Panel's analysis does not mention Pilgrim's Pride⁹⁶,

iii. the only finding specific to Pilgrim's Pride was in respect of the first sentence of Article 2.2.1.1⁹⁷, and

iv. the Panel in its original report could not have found that MOFCOM should have considered Pilgrim's Pride's alternative methodologies, because "[t]he errors in the [sic] Pilgrim's Pride data rendered any alternative allocations largely irrelevant, since they would have been based on fundamentally flawed information that had not been corrected on a timely basis"⁹⁸;

c. because the Panel did not find any inconsistencies in an original panel report, China cannot be found not to have implemented a finding in a subsequent Article 21.5 dispute⁹⁹; and

d. if there are any ambiguities in the original report, they should be resolved in favour of China because "it would be unfair to penalize China for not specifically addressing an issue not raised in the Panel Report".¹⁰⁰

For the purpose of paragraph 2, costs shall normally be calculated on the basis of records kept by the exporter or producer under investigation, provided that such records are in accordance with the generally accepted accounting principles of the exporting country and reasonably reflect the costs associated with the production and sale of the product under consideration.

Authorities shall consider all available evidence on the proper allocation of costs, including that which is made available by the exporter or producer in the course of the investigation provided that such allocations have been historically utilized by the exporter or producer, in particular in relation to establishing appropriate amortization and depreciation periods and allowances for capital expenditures and other development costs.

Unless already reflected in the cost allocations under this sub-paragraph, costs shall be adjusted appropriately for those non-recurring items of cost which benefit future and/or current production, or for circumstances in which costs during the period of investigation are affected by start-up operations.

When there are no sales of the like product in the ordinary course of trade in the domestic market of the exporting country or when, because of the particular market situation or the low volume of the sales in the domestic market of the exporting country, such sales do not permit a proper comparison, the margin of dumping shall be determined by comparison with a comparable price of the like product when exported to an appropriate third country, provided that this price is representative, or with the cost of production in the country of origin plus a reasonable amount for administrative, selling and general costs and for profits.¹⁰³

Thus, by its own terms Article 2.2.1.1 sets out parameters for a methodology for arriving at a proper allocation of costs necessary to arrive at a "cost of production" that may be used in constructing a normal value for purposes of the comparison required under Article 2.2. This requires, in the context of the second sentence of Article 2.2.1.1, the investigating authority to "consider … all available evidence on the proper allocation of costs".

a. in the first sentence, the rule as to the information to be used, including allocated costs; and

b. in the second sentence, the method for resolving issues of allocation when those records cannot be used in this respect:

i. consideration of all evidence as to proper allocation; and

ii. choosing an appropriate methodology to ensure a proper allocation of costs of production to the subject product in constructing normal value.

a. all;

b. available;

c. evidence;

d. on the proper allocation of costs:

i. including that which is made available by the exporter or producer in the course of the investigation; and

ii. provided that such allocations have been historically utilized by the exporter or producer, in particular in relation to establishing appropriate amortization and depreciation periods and allowances for capital expenditures and other development costs.

a. The first sentence of Article 2.2.1.1 refers to "records [that] reasonably reflect the costs associated with the production and sale of the product under consideration".¹⁰⁶

b. The last sentence of the same subparagraph provides that "costs shall be adjusted appropriately" for certain items or in respect of certain circumstances.¹⁰⁷

c. Article 2.2.2 refers to costs that are "based on actual data pertaining to production and sales in the ordinary course of trade" of the product at issue.

a. When an investigating authority constructs a normal value for purposes of the comparison under Article 2.2, Article 2.2.1.1 sets out two requirements for the calculation of costs of production.

b. Where the conditions of the first sentence are met, an investigating authority must use the information reported in the records kept by the exporter or producer in question to calculate cost of production for the product and the producer in question. This is the "normal" method, and an investigating authority may not reject the records without having first established, and explained, why the records are either not in accordance with the generally accepted accounting principles of the exporting country or do not reasonably reflect the costs associated with the production and sale of the product under consideration.

c. When questions of cost allocation arise in calculating cost of production for the purposes of constructing a normal value for purposes of the comparison under Article 2.2, whether or not on the basis of:

i. the information in the producer's records, or

ii. an alternative set of data because the producer's records are rejected under the first sentence of Article 2.2.1.1.

d. The investigating authority must consider all available evidence related to the proper allocation of costs.

e. This evidence includes:

i. evidence made available by exporters and producers, where the cost allocation was historically utilized: this includes evidence of cost allocation methodologies in records rejected under the first sentence, where the allocation is historically utilized;

ii. calculations, data, and allocation methodologies generated by an exporter at the behest or request of the investigating authority; and

iii. alternative allocation methodologies put forward by an exporter or producer during the investigative process (including a reinvestigation), either on its own, or to address concerns or questions raised by the investigating authority, in, for example questionnaires or follow-up questions, verification, etc.

f. Article 2.2.1.1 requires an investigating authority not just to "consider" certain evidence but to do so with a view to a proper allocation of costs for the purposes of Article 2.2.

g. There may be no single "proper" allocation of costs. An investigating authority's cost allocation is proper when it is appropriate to the facts and circumstances of the producer and product in question, and is arrived at following the investigating authority's consideration of all available relevant evidence.

h. An investigating authority must adequately explain its consideration of the evidence and its choice of allocation methodology based on that consideration as one that, if applied properly, will result in a proper allocation of costs.

Detailed description of the product concerned: broiler products after slaughter and processing of living broiler chickens, including whole chickens, parts of whole chicken after cutting, by-products of broiler chickens, regardless whether it is fresh, chilled or frozen. Living chickens, broiler products packed in cans and other similar ways, broiler sausages and similar products, cooked broiler products are all not included in the scope of the investigation.

Main application: the main application of the broiler products in domestic market is for human consumption, which normally reach the consumers directly or indirectly through whole-sales or retail-sales channels such as agricultural products markets or supermarkets, and through the catering industry.¹⁰⁹

MOFCOM realized that the [sic] Tyson's value-based method in fact introduced a distortion by using a very low value of offal (or price of waste products) to establish costs for the certain products (like chicken paws).¹¹⁵

MOFCOM considered the use of the value of offal "a distortion" in Tyson's subject product allocation because, unlike certain other product models valued as offal in the United States, chicken feet had a consumer market outside the United States that valued those product models more highly. Accordingly:

MOFCOM then reasonably and objectively concluded that for this anti-dumping investigation, a weight-based allocation was more reasonable method than the Tyson value-based method to allocate costs among those products that were physically subject products.¹¹⁶

a. the reasons for doing so are unbiased and reasonable in the circumstances;

b. the methodology chosen results in a proper allocation of costs; and

c. the investigating authority explains its choice as between different methodologies.

Of the two types of methodologies for doing so that were discussed in this case – one based on relative sales value ("value-based allocation") and one based on the weight of the products ("weight-based allocation"), the Panel is of the view that neither method is in principle inherently unreasonable.¹¹⁹

Having identified a problem with an exporter's cost allocation methodology, an investigating authority that is required to consider all available evidence may not, however, disregard evidence related to that allocation, and use its own methodology, without an explanation of its decision that is reasoned and adequate.

a. "[p]roduction cost means the necessary expenses invested by a producer to produce products, rather than the income that a producer can gain from sales of a product"¹²⁰; and

b. MOFCOM "was not able to distinguish which feeds were specifically used to produce which parts of the product concerned".¹²¹

In respect of subject product models, MOFCOM decided to allocate "the necessary expenses invested by a producer to produce products" on the basis of the weight of the entire broiler less the weight of feathers, blood, and viscera – because, it stated, the latter were non-subject products.

a. MOFCOM could, and did, isolate the cost of production of a broiler;

b. in respect of a broiler, MOFCOM found that it could not distinguish between the costs of feed used to grow breast meat and feed used to grow chicken feet;

c. feathers, blood, and viscera are broiler product models that, while according to China not subject to the investigation, are no less intrinsic to the production of a live broiler than subject broiler product models such as its breasts or feet; and

d. the other non-subject products comprised "[l]iving chickens, broiler products packed in cans and other similar ways, broiler sausages and similar products, cooked broiler products"¹²⁶ – they do not form part of a single live broiler that will be slaughtered and separated into various product models before export, and are thus not intrinsic to the production of subject broiler product models.

a. nothing in Article 2.2.1.1 requires an investigating authority to apply a single cost allocation methodology in all aspects of its investigation; and

b. in the facts of this case, use of both a value-based methodology and weight-based methodology was not, in itself, unreasonable.

a. Tyson's methodology did not account for weight loss due to dead birds or birds "inappropriate for processing"¹²⁸;

b. "costs of live chickens were monthly different during the period of the investigation. The Company did not explain in details [sic] which parts of live chickens were used for the production of the product concerned, and which parts were used for the production of other products"¹²⁹; and

c. "by using the method claimed by the Company to calculate the cost, the total cost of the product concerned would be lower than the total cost of the product concerned in the Company's accounting book, but the Company did not explain in details [sic] what cost was reduced therefrom".¹³⁰

Tyson disputed that these problems justified rejecting its proposed methodology.

[D]uring the original investigation and re-investigation, the Investigating Authority calculated the production costs of each model of the products concerned … this production cost didn't include that of the non-concerned products, such as feather, blood, etc. … [t]he cost allocation method for other products generated from the live chicken products (e.g. feather, blood, deep processed product, cooked product) is not the target of this investigation.¹³¹

As MOFCOM itself acknowledged, albeit indirectly, the production costs of "each model of the products concerned" are not separable from the production costs of the live broiler from which both subject and non-subject products derive: the same feed that allows chicken breasts and chicken feet to grow, also enables the growth and "production" of feathers, blood, and viscera, without which neither feet nor breasts would exist. As well, MOFCOM's observation that "[t]he cost allocation method for other products generated from the live chicken products … is not the target of this investigation" is true, but not germane. This is because the distinction between subject and non-subject products by Tyson, based on domestic-value and accepted by MOFCOM, in fact resulted in the following formula:

Total cost of production - cost of non-subject goods = cost of subject goods

And so the cost figure that MOFCOM used in its weight-based cost allocation for subject products was inextricably linked to "[t]he cost allocation method for other [non-subject] products generated from the live chicken products". As we have explained, Article 2.2.1.1 does not require an investigating authority to use the same cost allocation methodology throughout the investigation. Nevertheless, in respect of cost allocation to parts of a single animal, reliance on a value-based distinction between subject and non-subject products, in a context where the costs of producing both are entwined, does not suffice in itself to justify rejecting evidence of a proposed methodology that purports to take this into account.

China has not provided any citations to the record of the investigation where MOFCOM deliberated or explained the weight-based methodology it chose to apply or why it chose that methodology over the alternatives proposed by the respondents. All of the evidence of consideration that China points to in its submissions relates to MOFCOM's consideration of the original books and records of the respondents, rather than to the appropriateness of MOFCOM's allocations or the alternative methodologies that Keystone and Tyson proposed.¹³⁵

MOFCOM's basis for rejecting the costs as recorded in the respondent's books and records is not the unreasonableness of the allocation, but rather a specific determination that the data as originally submitted was irreconcilable and that the information to correct the errors was untimely. … Indeed, Pilgrim's Pride's Comments on the Preliminary Anti-Dumping Disclosure acknowledge and confirm that the data was incorrect as Pilgrim's Pride goes into great detail describing how the errors arose.¹³⁶

a. MOFCOM did not explain why the concern – that allocations must "reasonably reflect costs" of production – it had relied upon to choose a weight-based cost allocation for subject product models nonetheless allowed for the exclusion of certain parts of a live broiler (feathers, blood, and viscera) that are necessarily part of the production of the subject broiler product models from its cost allocation; and

b. MOFCOM did not provide a reasoned and adequate explanation for its rejection of Tyson's alternative weight-based cost allocation methodology.

a. in the original report we found China to have acted inconsistently with the second sentence of Article 2.2.1.1 in respect of Pilgrim's Pride; and

b. China did not in any way address this implementation obligation.

a. an investigating authority has "a certain level of discretion" in the methodology used for a price effects analysis¹³⁷;

b. that discretion is not unbounded: Article 3.2 of the Anti-Dumping Agreement and Article 15.2 of the SCM Agreement¹³⁸ require that "the prices being compared must correspond to products and transactions that are comparable"¹³⁹;

c. "price comparability needs to be examined any time that a price comparison is performed in the context of a price undercutting analysis"¹⁴⁰; and

d. where an investigating authority performs a price comparison on the basis of a "basket" of products or sales transactions, it must:

i. "ensure that the groups of products or transactions compared on both sides of the equation are sufficiently similar so that any price differential can reasonably be said to result from 'price undercutting' and not merely from differences in the composition of the two baskets being compared"¹⁴¹, or

ii. "make adjustments to control and adjust for relevant differences in the physical or other characteristics of the product".¹⁴²

a. the "like product" at issue was a broiler and nothing in the Anti-Dumping Agreement or the SCM Agreement requires "a price comparison on the basis of product segments within the single like product"¹⁴³; and

b. "MOFCOM … considered that all chicken parts competed and were substitutable with one another".¹⁴⁴

a. "the product mix varied considerably between the two sets of data compared by MOFCOM in the investigations at issue"¹⁴⁵; and

b. "the information before MOFCOM … revealed important price differences between the different broiler products".¹⁴⁶

China acted inconsistently with Articles 3.1/15.1 and 3.2/15.2 because MOFCOM relied for its findings of price undercutting on a comparison of subject import and domestic average unit values that included different product mixes without taking any steps to control for differences in physical characteristics affecting price comparability or making necessary adjustments.¹⁴⁷

a. "conducted on-site verifications on four domestic producers in the reinvestigation";

b. "collected supplemental sales data that distinguish the different product specifications";

c. "analyzed these sales data"; and

d. "cross-checked with the Customs import data of the product concerned and the data provided in the injury questionnaire responses of the exporters".¹⁵¹

a. did not consider it necessary to conduct a new underselling analysis, as it had "confirmed" the reliability of the results of the original investigation and analysis;

b. found that "the basic facts on which the U.S. relevant claims were based are not consistent with the actual situation"¹⁵²; and

c. "considered that the selling prices of the different product specifications in the domestic market supported by these evidences are representative".¹⁵³

[B]ecause the import volume of the product concerned increased continuously afterwards, the import price further undercut the price of the like product of the domestic industry, resulted in the selling price of the like product of the domestic industry was further suppressed [sic] …

During the investigation period, the increase of the import volume of the product concerned was obtained by making low-priced sales. Such low-prices [sic] sales caused price undercutting to the selling prices of the like product of the domestic industry, and further more suppressed the prices of the like product of the domestic industry significantly … [.]¹⁵⁵

[C]onsidered that, from 2006 to 2008, although the domestic market had a continuously high demand in broiler products, the domestic like product also obtained some market shares. However, that did not imply that the domestic industry did not suffer from injury. On the contrary, because the import volume of the product concerned increased substantially and the import price remained at a relatively low level, resulted in significantly undercutting and suppression to the domestic like product …

…

[T]he effect of the import volume of the product concerned on the domestic industry should be investigated comprehensively combined with the situation of change of the import price in the corresponding period.¹⁵⁷

[T]he data indicates that the import price of the product concerned was still lower than the price of the domestic like product, and significantly undercut the price of the domestic like product. Affected by this, the domestic like product was forced to reduce the price substantially to maintain market share.¹⁵⁸

a. The long-term trend in the domestic industry's net loss does not support the conclusion of price suppression.

i. The domestic industry's decrease in losses (due to prices increasing more than the increase in costs) during the period 2006 to 2008 is inconsistent with a finding of price suppression.

ii. MOFCOM failed to explain or investigate how the alleged underselling could have suppressed domestic prices in the first half of 2009 when similar underselling had no price suppressive effects between 2006 and 2008.¹⁷⁵

b. The short-term price trend for domestic product types competing directly with subject imports compared to the price trend for other domestic product types suggests that other factors unrelated to the dumped imports were responsible for the alleged price suppression.¹⁷⁶ MOFCOM disregarded evidence that prices for domestically produced products that competed directly with most subject imports (i.e. chicken drumsticks, feet, and gizzards) declined far less than prices for other domestic products in the first half of 2009.

a. The legal standard under Articles 3.2 and 15.2 is not a full causation analysis but asks whether subject imports have "explanatory force" for the price suppression. MOFCOM made such a showing on the basis of the correlation between domestic and import prices, the consistent underselling and losses of the domestic industry, the increase in the margin of price undercutting in 2008, and the consistent increase in import volume.¹⁷⁸

b. Regarding the US argument on decreasing losses, losses only narrowed in 2007 which cannot preclude a finding of price suppression on the basis of the totality of the evidence over the full period, in particular the increase in volume and market share of subject imports.¹⁷⁹

c. Regarding the US argument on price suppression during the first half of 2009 being driven by other factors¹⁸⁰:

i. the US argument is not compatible with MOFCOM's aggregate approach;

ii. there was a price undercutting effect for the product as a whole and model-specific prices fell even if the degree of the decline varied between product models; and

iii. the price decline for those product models directly competing with imports was still "significant".

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 … [.]¹⁸¹

As we observed in the original report, "price comparability has to be ensured in terms of the various features of the products and transactions being compared".¹⁸² We concluded that, as a matter of law, where an authority:

[P]erforms a price comparison on the basis of a "basket" of products or sales transactions, the authority must ensure that the groups of products or transactions compared on both sides of the equation are sufficiently similar so that any price differential can reasonably be said to result from "price undercutting" and not merely from differences in the composition of the two baskets being compared. Alternatively, the authority must make adjustments to control and adjust for relevant differences in the physical or other characteristics of the product.¹⁸³

a. In the original case, MOFCOM disagreed with the arguments of US interested parties that imports from the United States contained "low value" products, as opposed to what the United States characterized as "high value" domestic product models in the domestic comparator basket.¹⁸⁸

b. In the redetermination, MOFCOM sought to verify whether "the selling prices of the different product specifications in the domestic market supported by these evidences [sic] are representative".¹⁸⁹

c. MOFCOM selected four domestic producers for additional verification of data and obtained further product-specific information from these companies. The data verified and gathered were not for the purpose of comparing prices, but rather, "to establish price relationships across product types, irrespective of their absolute values".¹⁹⁰

d. The data gathered from the four domestic producers indicated that product models identified by the United States as "low value"¹⁹¹ or "high value" do not have similar "values" in the Chinese market¹⁹², at least for those producers, and could not be considered "low value".

e. In the light of this model-specific evidence, MOFCOM considered that the domestic benchmark AUV it used for its price underselling analysis was more "conservative"¹⁹³ than an AUV based on a basket of product models including only models in the US‑export basket.

a. a simple comparison of prices in respect of baskets with different compositions does not indicate the effect of one set of prices (of the subject import basket) on the other set of prices (the domestic basket, comprising a larger number of product models); and

b. where AUVs are based on baskets whose product mixes are not comparable, an investigating authority is required to seek to "control for differences in physical characteristics affecting price comparability or making necessary adjustments".¹⁹⁸

[T]he "representativeness" of the selected producers [is] a question regarding price comparability of specific products, which was not the purpose of the MOFCOM verification exercise and collection of supplemental information.²⁰¹ …

China further argues that:

The exercise did not require any direct product price comparisons, but merely to establish pricing relationships across product types, whatever the absolute prices may be.²⁰²

[P]ricing evidence collected by MOFCOM through verification during the re‑investigation process further established a pricing spectrum showing products like paws to be high value. None of the U.S. interested parties submitted any evidence or argument during the re-investigation process in an attempt to rebut these facts and common knowledge.²⁰³

[B]ecause the import price of the product concerned was always lower than the average selling price of the like product of the domestic industry, it undercut the price of the like product significantly, resulted in the suppression on the selling price of the domestic like product, and could not pass through the cost caused by price increase of raw materials downward, and the due price increase of the like product which should have occurred hadn't been realized.²¹¹

And again, responding to the pork price argument of the interested parties:

While its price was significantly lower than that of the domestic like product, it caused apparent suppression on the price increase of the domestic like product, and the price was lower than the production cost for a long time, and could not gain the profit margin. Therefore, the low-priced activity of the product concerned was the direct reason causing the injury to the like product of the domestic market [sic].²¹²

a. China acted inconsistently with Article 3.2 of the Anti-Dumping Agreement and Article 15.2 of the SCM Agreement in respect of price undercutting;

b. China acted inconsistently with Article 3.2 of the Anti-Dumping Agreement and Article 15.2 of the SCM Agreement in respect of price suppression; and

c. as a consequence, China acted inconsistently with Article 3.1 of the Anti‑Dumping Agreement and Article 15.1 of the SCM Agreement.

a. MOFCOM's examination of the state of the domestic industry was "inextricably linked" to its flawed consideration of price effects; and

b. implementing the report on Articles 3.2 and 15.2 would require MOFCOM to re-examine its the impact of subject imports.

a. In its redetermination, MOFCOM limited the scope of its reinvestigation to "the implementation of the rulings and recommendation of the DS427 Panel on the issues of injury and causality".²¹⁵

b. MOFCOM did not examine different or additional information; its evaluation of all relevant factors is not different from that in its original investigation.

In these circumstances, to assist the parties to secure a positive resolution to the current dispute, we consider it appropriate to make findings with respect to the US claims.²¹⁶

a. MOFCOM ignored that between 2006 and 2008 the decline in capacity utilization was due to the fact that the domestic industry's capacity increased in excess of demand growth.²²⁰

b. The decline in capacity utilization between 2006 and 2008 was also not the effect of subject imports because their share of apparent consumption increased entirely at the expense of non-subject imports, not at the expense of the domestic industry, whose share of apparent consumption also increased.²²¹

[B]y China's own admission, MOFCOM's impact analysis focused on the first half of 2009, when the domestic industry's performance lagged, while failing to account for the impact of subject imports on the domestic industry between 2006 and 2008, when the domestic industry's performance strengthened.²²³

MOFCOM was required to consider the impact of subject imports on the domestic industry during the entire POI, including those periods in which the industry's performance improved.²²⁴ MOFCOM was not entitled to "focus" its impact analysis "on the financial indicators that were consistently weak throughout the period of investigation" to the exclusion of other contradictory factors.²²⁵

a. they relate to causation, which is irrelevant under Articles 3.4 and 15.4²²⁷;

b. MOFCOM did not base its evaluation primarily or exclusively on capacity utilization, but evaluated "all of the injury factors, both individually and collectively"²²⁸;

c. the observed capacity expansion is in part the result of "a shift from smaller producers to large producers", reflecting the "recent trend in the Chinese market" of "larger firms consolidating a growing portion of the market"²²⁹; and

d. the "allegation that capacity grew in excess of increasing consumption is not factually true".²³⁰

a. improperly focused on volume indicators and ignored the weak financial indicators;

b. improperly focused on the period 2006-2008 and ignored the most recent period, the first half of 2009;

c. ignored the "cumulative impact of consistent pre-tax losses"²³⁴; and

d. did not take account of expected near term trends.

a. negative financial indicators over the full POI;

b. the deterioration in most injury factors during the first half of 2009²³⁷; and

c. expected negative near term trends.²³⁸

Table 1: Market trends

Source: Redetermination, (Exhibit CHN-1 (translated version)), pp. 65-68 and 78.

The examination of the impact of the dumped imports on the domestic industry concerned shall include an evaluation of all relevant economic factors and indices having a bearing on the state of the industry, including actual and potential decline in sales, profits, output, market share, productivity, return on investments, or utilization of capacity; factors affecting domestic prices; the magnitude of the margin of dumping; actual and potential negative effects on cash flow, inventories, employment, wages, growth, ability to raise capital or investments.

a. "[T]here is no requirement in Article 3.4 that each and every injury factor, individually, must be indicative of injury."²⁴⁷

b. The factors and indices evaluated under Article 3.4 may be found to be "negative" in terms of the state of the industry even in the absence of "an actual decline in performance".²⁴⁸ Similarly, "positive" trends (that is, where there is no absolute decline) may nonetheless be negative in terms of the state of the industry, for instance "when those increases are significantly less than the expansion in demand".²⁴⁹

c. Even if there are no actual declines – in absolute or relative terms – an investigating authority may consider potential negative effects or declines in the industry. At issue when a "potential negative effect" is evaluated is still the impact of imports during the POI on the domestic industry during the POI, and not the possible impact of future (possible or likely) imports on the future state of the industry.²⁵⁰ What is relevant is the existence of a latent, as yet unrealized decline (again, in absolute or relative terms).

d. Nothing in Article 3.4 prohibits an investigating authority from focussing on a part of the POI and undertaking a more detailed analysis of developments during that part of the POI in examining the impact of imports.²⁵¹

a. Domestic industry capacity increased by 780,000 tons, or 26.2%, in 2006-2008.

b. Domestic demand (apparent consumption) increased by 955,000 tons, or 17%, in 2006‑2008 and the domestic industry's share of apparent consumption increased from 37.81% to 42.2% in 2006-2008.²⁵²

According to the United States, MOFCOM's reliance on capacity utilization rates without considering that total capacity (the denominator in the rates being compared) was actually expanding in this period was misplaced.

a. a continuous increase of domestic demand in broiler products, resulting in

b. expansion of capacity in each covered period²⁵⁴:

Table 2: Production capacity

Source: Redetermination, (Exhibit CHN-1 (translated version)), p. 65.

a. at least one factor is, or is kept, constant;

b. if both factors vary over time, at least one factor is controlled or adjusted for any changes; or

c. if both factors vary over time and are not controlled or adjusted for any changes, a reasonable explanation of the circumstances and any reliance on the comparison is provided.

We stress that there is nothing inherently wrong about comparing rates over time where both the numerator and the denominator change. Indeed, we do not understand the United States to be arguing that such a comparison is always faulty; the United States does not challenge the rate comparisons related to market share, profits or return on investment, even though in each case both factors were in a state of flux over the POI.

[D]ata indicated that: when the domestic demand increased continuously, the production capacity utilization rate from 2006 to 2008 was lower than 80%, but … in the first half of 2009, the domestic demand further increased, but the production quantity of the like product of the domestic industry didn't increase correspondingly with the increase of production capacity, instead, it decreased by 4.37% compared to the same period of the previous year.²⁵⁶

MOFCOM did not address the problem of comparability of the rates in the light of continuous increases in production capacity. Given those increases, it is not clear what, if anything, the comparison of capacity utilization rates might explain in respect of the impact of imports. For instance, MOFCOM did not take into account in its evaluation:

a. whether capacity was increasing in response to, in tandem with, or ahead of domestic demand;

b. in what way any of these might affect the significance of any comparison of capacity utilization rates; or

c. how shifts in the industry from smaller producers outside the defined domestic industry²⁵⁷ to larger producers within it could explain or affect the reliability of the data before it.

a. "reasonably focused on the adverse condition of the domestic industry at the end of its period of investigation, noting the sharp deterioration in numerous indicators of domestic industry health in the first half of 2009"²⁵⁸; and

b. "made a simple point about capacity utilization in its Redetermination – it was persistently low over the period of investigation".²⁵⁹

But regardless of the increase in domestic capacity, the rate of capacity utilization would have been higher than it was, but for the presence of increasing volumes of subject imports.²⁶²

Where capacity increases outstrip increases in market demand, even a constant or declining volume of subject imports could result in a decline in capacity utilization without any decline in domestic production. We recall that MOFCOM found that: "When capacity utilization rate is at a relatively high level, the production of more chicken breast means increase of production quantity of more other broiler products."²⁶³ Combined with China's argument about cross-price elasticity of all broiler product models²⁶⁴, this would suggest that an expansion of production capacity in China would result in greater production of other broiler product models than wings and feet, with consequent impact on the prices of all product models. This is why an integrated examination of all of the factors evaluated is necessary in the examination of the impact of subject imports, and thus why a flawed capacity utilization comparison results in a flawed examination under Articles 3.4 and 15.4.

a. "MOFCOM focused on the purported increase in end-of-period inventories", while the observed relative increases were not significant²⁶⁵; and

b. MOFCOM relied exclusively²⁶⁶ (or primarily²⁶⁷) on such flawed analysis.

We have two observations in respect of these arguments.

However, the capacity utilization of the like product of the domestic industry during the same period always remain [sic] at a relatively low level, the ending inventories presented an increasing trend. Because the selling price of the like product of the domestic industry remained below the sales cost for the long period of time, it resulted in that the like product of the domestic industry could not obtain reasonable profit margins, and the pre-tax profits of the like product of the domestic industry remained negative. … During the investigation period, the operational cash net flow of the like product experienced relatively significant fluctuations, which also influenced investment and financing activities of the domestic industry.²⁷⁰

The United States has not explained in what way this paragraph represents undue reliance on this one factor.

[B]y China's own admission, MOFCOM's impact analysis focused on the first half of 2009, when the domestic industry's performance lagged, while failing to account for the impact of subject imports on the domestic industry between 2006 and 2008, when the domestic industry's performance strengthened.²⁷¹

The United States does not contest that industry performance "lagged" in the last half-year of the POI. As well, the United States does not contest MOFCOM's findings that some factors evaluated showed negative effects throughout the POI.²⁷² Rather, it asserts that "the domestic industry's performance strengthened" in 2006-2008, that MOFCOM did not adequately "focus" on this period and that MOFCOM focused its examination of impact "on the financial indicators that were consistently weak throughout the period of investigation", to the exclusion of other contradictory factors.²⁷³

The above evidence indicates that, during the investigation period, in order to meet the increasing demand of the domestic market, from 2006 to 2008, the production capacity, production quantity and sales volume of the like product of the domestic industry all increased, and the indicators including market share, employment, per capita wages and labor productivity also increased in different degrees. However, the capacity utilization of the like product of the domestic industry during the same period always remain [sic] at a relatively low level, the ending inventories presented an increasing trend. Because the selling price of the like product of the domestic industry remained below the sales cost for the long period of time, it resulted in that the like product of the domestic industry could not obtain reasonable profit margins, and the pre-tax profits of the like product of the domestic industry remained negative. … In the first half of 2009, all the economic indexes of domestic industry continued to deteriorate.²⁷⁴

a. "potential" means "possible as opp{osed} to actual; capable of coming into being or action; latent"; and

b. "a decline need not have occurred during the period under consideration in order for an investigation authority to find injury".²⁸⁴

a. the requirement to consider "potential decline" under Articles 3.4 and 15.4 relates to the impact of current imports on the domestic industry such that even absent actual declines, the potential for such declines to materialise may be relevant to the examination of the present impact of subject imports; and

b. MOFCOM's overall examination and evaluation of all relevant economic factors was affected by its examination of and reliance on an irrelevant factor – the impact of likely future imports – such that its examination of the impact of subject imports on the domestic industry is not consistent with Articles 3.4 and 15.4.

a. MOFCOM's evaluation of "capacity utilization rates" was faulty; and

b. MOFCOM relied on an irrelevant economic factor when it examined the impact of likely future imports on "potential decline" in the domestic industry.

a. evaluation of inventories; or

b. "focus" on the last part of the POI.

a. the domestic industry gained market share at the same time as subject imports gained market share²⁹¹; and

b. MOFCOM did not examine or explain why such evidence did not undermine its finding of causation, rather MOFCOM insisted that Chinese law allowed it to consider either the absolute volume increase or relative volume increase, but did not oblige it to consider both.²⁹²

a. almost all indicators (market share, capacity, output, sales quantity, sales revenue, employment, decrease in loss) show an improvement in the domestic industry's performance between 2006 and 2008, the period during which subject import volume increased by 47%.²⁹³ Many performance indicators also show an improvement if the 2006 figures are compared to those for the first half of 2009²⁹⁴;

b. MOFCOM predicated its demonstration of causation entirely on developments in the first half of 2009, whereas it was required to examine the causal relationship in relation to the entire POI, not just for a selected period²⁹⁵; and

c. the domestic industry's lagging performance in the first half of 2009 could not have been the result of subject imports when the bulk of the increase in subject import volume – 90% of the total increase – coincided with strengthening domestic industry performance during the 2006-2008 period.²⁹⁶

a. MOFCOM did not ignore evidence about the domestic industry's market share.³⁰⁰ Rather, MOFCOM:

i. acknowledged and discussed the increase in market share of domestic firms; and

ii. focused on the increase in absolute volume, the drop in market share in the first half of 2009, and low prices/price suppression, which are sufficient to establish a causal link regardless of market share trends.

b. MOFCOM did not rely on a flawed analysis of price effects³⁰¹, and its conclusions on import volume and price suppression stand and sufficiently support MOFCOM's causation analysis regardless of the Panel's findings on price undercutting.

c. MOFCOM did not fail to reconcile its analysis of subject import volume and market share with its analysis of causation and the condition of the domestic industry³⁰²:

i. the United States wrongly focuses on the period 2006-2008. MOFCOM drew a causal link between the increase of subject imports and the declining conditions particularly in the first half of 2009; and

ii. the United States selectively relies on volume indicators and downplays in particular the sharply weaker financial performance, which MOFCOM relied upon. The US argument that the operating loss narrowed between 2006 and 2008 ignores the growth of the operating loss in absolute terms (on which MOFCOM relied), the cumulative effect of continuing losses, and the increase in operative losses when taken as a percentage of sales.

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.³⁰³

a. demonstrate that subject imports are causing injury to the domestic industry; and

b. ensure that injury caused by other known factors is not attributed to the subject imports.

In making its determination, the investigating authority must demonstrate a relationship of cause and effect, such that subject imports are shown to have contributed to the injury to the domestic industry. Subject imports need not be "the" cause of the injury suffered by the domestic industry, provided they are "a" cause of such injury; that other factors may also have caused injury to the domestic industry is no bar to establishing this causal relationship.³⁰⁵

a. examine other known factors that are causing injury to the domestic industry at the same time as subject imports; and

b. not attribute to subject imports injury caused by such other factors.

Articles 3.5 and 15.5 also set out an illustrative list. For these obligations to be triggered, however, Articles 3.5 and 15.5 require that the factor at issue be³⁰⁶:

a. "known" to the investigating authority;

b. a factor "other than dumped imports"; and

c. injuring the domestic industry at the same time as the dumped imports.

The investigating authority must make an assessment of such other factors that involves "separating and distinguishing the injurious effects of the other factors from the injurious effects of the dumped [or subsidized] imports".³⁰⁷ Neither Agreement, however, sets out specific guidance on how an investigating authority should undertake this assessment or ensure that injuries caused by other factors are not attributed to the subject imports.

[C]ould not further reduce its losses or turn losses into profits, and both the pre-tax profit rate and the rate of return on investment were in an extremely low level [sic]. In addition, the operational net cash flow fluctuated significantly which also affected investment and financing activities of the domestic industry.³¹⁰

[B]ecause the import volume of the product concerned increased substantially and the import price remained at a relatively low level, resulted in significantly undercutting and suppression to the domestic like product; and the domestic like product, while to stabilize the market share, was forced to be sold at a price lower than the production cost [sic].³¹⁵

[T]he domestic industry implemented some newly constructed projects and expansion projects, it was normal that the production capacity, production quantity, sales volume and market share of the like product presented an increase to certain extent [sic] in general, but this did not mean that the domestic industry did not suffer from injury. These indicators were not decisive for determining the injury of the domestic industry in its development period, and could not change the fact that the effective use of the production capacity and the inventory of the domestic industry increased continuously during the investigation period; neither could it change the worsening financial situations of the domestic industry.³¹⁷

[B]ecause the import price of the product concerned was always lower than the average selling price of the like product of the domestic industry, it undercut the price of the like product significantly, resulted in the suppression on the selling price of the domestic like product, and could not pass through the cost caused by price increase of raw materials downward, and the due price increase of the like product which should have occurred hadn't been realized.³²⁶

[T]he demand of the domestic market increased continuously during the investigation period, but the good market environment didn't bring the due profit margin to the domestic industry. On the contrary, the impact of the low-priced import of the product concerned in a large quantity on the domestic industry was significant.³²⁹

a. the domestic industry gained market share at the same time as subject imports;

b. "the domestic industry gained more market share between 2006 and the first half of 2009, 4.38 percentage points, than the 3.92 percentage points gained by subject imports over the same period"³³¹;

c. "any increases in U.S. imports simply filled the gap left by Brazil and Argentina when they effectively exited the China [sic] market"³³²; and

d. "40 percent of subject imports consisted of chicken paws that could not have injured the domestic industry, which was incapable of increasing its production of chicken paws".³³³

As to the above claims, the investigating authority considered that, from 2006 to 2008, although the domestic market had a continuously high demand in broiler products, the domestic like product also obtained some market shares. However, that did not imply that the domestic industry did not suffer from injury. On the contrary, because the import volume of the product concerned increased substantially and the import price remained at a relatively low level, resulted in significantly undercutting and suppression to the domestic like product; and the domestic like product, while to stabilize the market share, was forced to be sold at a price lower than the production cost. [sic]

…

When the market demand increased continuously, affected by the further increase of import volume of the product concerned and the continuous decline of price of the product concerned, the production quantity, sales volume, capacity utilization rate and market share of the like product of the domestic market all presented a trend of decrease or reduction of different degrees.³³⁴

The U.S. Poultry and Egg Export Council claimed in Comments after the Preliminary Determination that, from 2006 to 2008, the increase of the absolute import volume of the product concerned was to complement sales on the domestic market in China, and the sale volume of the domestic producers in China also increased in the corresponding period, so the import volume of the product concerned had a small effect on the domestic industry. In the first half of 2009, the increase of the import volume of the product concerned was caused by "the seasonal characteristics".³³⁶

Immediately following this paragraph, MOFCOM found that "because the import volume of the product concerned increased substantially and the import price remained at a relatively low level, resulted in significantly undercutting and suppression to the domestic like product".³³⁷ And later, MOFCOM noted: "When the market demand increased continuously, affected by the further increase of import volume of the product concerned and the continuous decline of price of the product concerned …".³³⁸ Given that MOFCOM expressly acknowledged the argument and responded to it, we cannot find that MOFCOM "ignored" the evidence before it, as the United States argues. Accordingly, we find that the United States has not established that China acted inconsistently with Articles 3.5 and 15.5 on the ground that MOFCOM ignored evidence of import volumes in relation to market share.

a. Performance indicators were moving in different directions throughout the first three years of the POI; most indicators, however, trended downward in the first half of 2009. MOFCOM was entitled to look at the information before it and assess the cumulative impact of years of dumped imports on the domestic industry during the most recent period.

b. Information regarding the most recent period is generally most relevant for an analysis of present material injury.

c. An investigating authority is entitled to consider the possibility of a time-lag between dumped and subsidized imports and injury to the domestic industry through their effects.

MOFCOM was correct when it found that subject imports of chicken paws were adversely affecting the entire domestic industry producing the like product. The impact was felt on both domestic production of chicken paws, but also domestic production of other chicken parts.³⁴⁴

MOFCOM could in our view have satisfied its obligations under Articles 12.2 and 12.2.2, and Articles 22.3 and 22.5 through a simple reference to its treatment of the issue in the Preliminary Determination.

The Investigating Authority holds that as there are some differences between the Subject Products and the like products in terms of specific feature, usage and quality, they may have their respective types or specifications, and the relationship between them does not necessarily constitute a one-to-one correspondence. However, such differences do not prevent the Investigating Authority from deeming products of different types or specifications as the same category of product for the purpose of investigation. In this case, chicken feet are included in scope of the Subject Products, therefore, the Investigating Authority has carried out investigation on import of all Subject Products including chicken feet, and has analyzed and examined injuries brought to the domestic industry by the Subject Products [sic].³⁴⁷

a. did not consider the volume of dumped imports in both relative and absolute terms;

b. "failed to reconcile its analysis with evidence of improved performance" in the domestic industry; and

c. failed to adequately consider alleged market constraints on greater domestic production of chicken feet.

a. giving advance and "active notification" in respect of the party from whom information is required³⁶³; and

b. access to the required information, in respect of all other interested parties, for example by placing the information provided in response to the information request in a public reading room.³⁶⁴

a. the Notice of Initiation No. 88 (Notice of Initiation) of 25 December 2013.³⁶⁷ The Notice of Initiation indicated that evidence would be re-examined. It referred to the scope of the Panel's finding in its original report, instead of providing interested parties with a listing of the specific information to be requested from the Chinese producers;

b. the General Verification Letter of 19 February 2014 addressed to Chinese producers and released in MOFCOM's trade remedy public information room, announcing on-the-spot "verifications"³⁶⁸; and

c. the non-confidential summaries of the sales data provided by the four Chinese producers made available on 20 May 2014 in MOFCOM's trade remedy public information room.³⁶⁹

a. it gave adequate notice to the US interested parties; and

b. throughout the reinvestigation, US interested parties were free to present evidence, and in fact they did so.³⁷¹

All interested parties in an anti-dumping investigation shall be given notice of the information which the authorities require and ample opportunity to present in writing all evidence which they consider relevant in respect of the investigation in question.

The text of Article 12.1 of the SCM Agreement is essentially identical, with references to "interested members" in addition to "all interested parties" and "countervailing duty" rather than "anti-dumping" investigation.

a. to give notice to all interested parties of information required by the investigating authorities; and

b. to provide to all interested parties ample opportunity to present relevant evidence in writing.

a. "all interested parties";

b. "shall be given notice"; and

c. "of the information which the authorities require".

Below, we consider the meaning of each of these phrases in context and in the light of the express purpose of the requirement embedded in the provisions themselves.

a. Article 6.1.2 of the Anti-Dumping Agreement and Article 12.1.2 of the SCM Agreement require that written evidence provided by one interested party "shall be made available promptly" to other participating interested parties;

b. Article 6.2 of the Anti-Dumping Agreement establishes an obligation to "provide opportunities" for all interested parties to meet with parties with adverse interests;

c. Article 6.4 of the Anti-Dumping Agreement and Article 12.3 of the SCM Agreement require that investigating authorities "provide timely opportunities" for all interested parties to see relevant non-confidential information used; and

d. Article 6.9 of the Anti-Dumping Agreement and Article 12.8 of the SCM Agreement require the investigating authority to "inform" all interested parties of essential facts.

On September 25, 2013, WTO dispute settlement body passed the panel report on the dispute case of "China's antidumping and countervailing measures against whitefeather broiler chicken products originated in the U.S.".

… [T]he Ministry of Commerce decides to reinvestigate this case in accordance with the rulings and suggestions in above relevant reports of WTO upon the date of issuance.

The Ministry of Commerce will re-examine the evidence and information obtained in the original anti-dumping and countervailing investigations, and carry out reinvestigations through questionnaires, hearings, and other measures.³⁹²

You are requested to prepare for the verification beforehand and fully cooperate with the Investigating Team during the verification. Please prepare all the materials and produce relevant evidence in view of the Panel Report.³⁹⁷

Any interested parties may refer to the public evidence and information via Trade Remedy Public Information Room of the Ministry of Commerce. The Ministry of Commerce will guarantee the legal rights of interested parties though such procedures as disclosing information and providing chances for statement of opinions and comments.⁴⁰³

Thus, as we understand it, China argues that:

a. the Notice of Initiation referred interested parties to the public information room for access to public evidence and information;

b. MOFCOM placed the General Verification Letter in the public information room;

c. an online index⁴⁰⁴ was immediately updated to list the non-confidential summaries as available in the public information room; and

d. the General Verification Letter conveyed more precision about the information required of the Chinese producers.

a. the letter did not convey any understanding of the additional (pricing) information MOFCOM required from the Chinese producers and thus did not relate to the information required; and

b. by merely placing the letter in MOFCOM's trade remedy public information room in connection with a reference to that room in the Notice of Initiation, MOFCOM failed to give notice.

a. non-confidential summaries of pricing data provided by four Chinese producers during the reinvestigation at the request of MOFCOM⁴¹³;

b. the precise identities of these Chinese producers⁴¹⁴;

c. MOFCOM's questions or requests issued to these Chinese producers⁴¹⁵;

d. the "context"⁴¹⁶ of these data, including "the specific products for which pricing was requested, whether the pricing was requested and/or reported on the basis of one sale, quarterly sales, annual sales, or sampled invoices; and what quantity of each producer's sales, or of the domestic industry's sales, were represented by the pricing sample"⁴¹⁷;

e. aggregate data reflecting the information received from the Chinese producers⁴¹⁸; and

f. MOFCOM's "basis for selecting [the four Chinese] producers for the sample and its methodology for collecting pricing data from them".⁴¹⁹

The authorities shall whenever practicable provide timely opportunities for all interested parties to see all information that is relevant to the presentation of their cases, that is not confidential as defined in paragraph 5, and that is used by the authorities in an anti-dumping investigation, and to prepare presentations on the basis of this information.

The text of Article 12.3 of the SCM Agreement is essentially identical, with references to "all interested Members and interested parties" instead of "all interested parties", "paragraph 4" instead of "paragraph 5" and "countervailing duty" rather than "anti-dumping" investigation.

a. whenever practicable, provide timely opportunities for all interested parties;

b. to see all information that is:

i. relevant to the presentation of their cases,

ii. not confidential as defined in paragraph 5, and

iii. used by the authorities in the investigation; and

c. to prepare presentations on the basis of this information.

We address each of these criteria below.

[A] violation of Article 6.4 would normally require a showing that the investigating authorities denied an interested party's request to see information used by the authorities, which was relevant to the presentation of that interested party's case and which was not confidential.⁴⁴⁸

a. Article 6.1.3 of the Anti-Dumping Agreement and Article 12.1.3 of the SCM Agreement require that the investigating authority "shall provide" the written application to the known exporters and the authorities of the exporting Member (without reference to any request), and "shall make it available, upon request, to other interested parties involved"⁴⁵⁰; and

b. Article 6.2 of the Anti-Dumping Agreement conditions the obligation to "provide opportunities" to meet with adverse interests with the phrase "on request".⁴⁵¹

The fact that the "relevance" of the information must be assessed from the perspective of the interested party does not detract from our understanding that investigating authorities must provide opportunities irrespective of a request to see the information being made.⁴⁵² Interested parties that are not aware of the existence of certain information before the investigating authority obviously cannot make a request to see that information.⁴⁵³ Such interested parties may well be most in need of the due process protection afforded by Articles 6.4 and 12.3. Yet, a requirement for a request would render void their right to have an opportunity to see information of which they are unaware.⁴⁵⁴ Attributing such a meaning to a treaty provision would lead to an unreasonable result.