China — GOES

China — Countervailing and Anti-Dumping Duties on Grain Oriented Flat-rolled Electrical Steel from the United States WT/DS414
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Type of case:
Inter-State
Date of introduction:
15 Sept 2010
Status of the case:
Adopted
Complainant:
United States
Respondent:
China
Institution:
WTO (World Trade Organization)
Applicable treaties:
GATT (1994)
Anti-Dumping Agreement (A...
SCM Agreement (1994)

Documents of the case

Jan Heukelman Member
Anthony Abad Member
John Adank President
Source(s) of the information:
Reproduced with the permission of the World Trade Organization :
Link1 (EN) Official source ,
Link2 (ES) Official source ,
Link3 (FR) Official source

Lawyers, other representatives, expert(s), tribunal’s secretary

Report of the Panel

TABLE OF CASES CITED IN THIS REPORT

Short TitleFull Case Title and Citation
Argentina – Ceramic Tiles Panel Report, Argentina – Definitive Anti‑Dumping Measures on Imports of Ceramic Floor Tiles from Italy, WT/DS189/R, adopted 5 November 2001, DSR 2001:XII, 6241
Argentina – Poultry Anti‑Dumping Duties Panel Report, Argentina – Definitive Anti‑Dumping Duties on Poultry from Brazil, WT/DS241/R, adopted 19 May 2003, DSR 2003:V, 1727
Australia – Salmon Appellate Body Report, Australia – Measures Affecting Importation of Salmon, WT/DS18/AB/R, adopted 6 November 1998, DSR 1998:VIII, 3327
Brazil – Retreaded Tyres Appellate Body Report, Brazil – Measures Affecting Imports of Retreaded Tyres, WT/DS332/AB/R, adopted 17 December 2007, DSR 2007:IV, 1527
Canada - Aircraft Panel Report, Canada – Measures Affecting the Export of Civilian Aircraft, WT/DS70/R, adopted 20 August 1999, upheld by Appellate Body Report WT/DS70/AB/R, DSR 1999:IV, 1443
Canada – Wheat Exports and Grain Imports Appellate Body Report, Canada – Measures Relating to Exports of Wheat and Treatment of Imported Grain, WT/DS276/AB/R, adopted 27 September 2004, DSR 2004:VI, 2739
EC – Bed Linen Panel Report, European Communities – Anti‑Dumping Duties on Imports of Cotton‑Type Bed Linen from India, WT/DS141/R, adopted 12 March 2001, as modified by Appellate Body Report WT/DS141/AB/R, DSR 2001:VI, 2077
EC – Countervailing Measures on DRAM Chips Panel Report, European Communities – Countervailing Measures on Dynamic Random Access Memory Chips from Korea, WT/DS299/R, adopted 3 August 2005, DSR 2005:XVIII, 8671
EC – Fasteners (China) Appellate Body Report, European Communities – Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China, WT/DS397/AB/R, adopted 28 July 2011
EC – Fasteners (China) Panel Report, European Communities – Definitive Anti-Dumping Measures on Certain Iron or Steel Fasteners from China, WT/DS397/R and Corr.1, adopted 28 July 2011, as modified by Appellate Body Report WT/DS397/AB/R
EC – Hormones Appellate Body Report, EC Measures Concerning Meat and Meat Products (Hormones), WT/DS26/AB/R, WT/DS48/AB/R, adopted 13 February 1998, DSR 1998:I, 135
EC – Salmon (Norway) Panel Report, European Communities – Anti‑Dumping Measure on Farmed Salmon from Norway, WT/DS337/R, adopted 15 January 2008, and Corr.1, DSR 2008:I, 3
EC – Tube or Pipe Fittings Panel Report, European Communities – Anti‑Dumping Duties on Malleable Cast Iron Tube or Pipe Fittings from Brazil, WT/DS219/R, adopted 18 August 2003, as modified by Appellate Body Report WT/DS219/AB/R, DSR 2003:VII, 2701
Guatemala – Cement I Panel Report, Guatemala – Anti‑Dumping Investigation Regarding Portland Cement from Mexico, WT/DS60/R, adopted 25 November 1998, as reversed by Appellate Body Report WT/DS60/AB/R, DSR 1998:IX, 3797
Guatemala – Cement II Panel Report, Guatemala – Definitive Anti‑Dumping Measures on Grey Portland Cement from Mexico, WT/DS156/R, adopted 17 November 2000, DSR 2000:XI, 5295
India - Autos Panel Report, India – Measures Affecting the Automotive Sector, WT/DS146/R, WT/DS175/R and Corr.1, adopted 5 April 2002, DSR 2002:V, 1827
Japan – DRAMs (Korea) Appellate Body Report, Japan – Countervailing Duties on Dynamic Random Access Memories from Korea, WT/DS336/AB/R and Corr.1, adopted 17 December 2007, DSR 2007:VII, 2703
Japan – DRAMs (Korea) Panel Report, Japan – Countervailing Duties on Dynamic Random Access Memories from Korea, WT/DS336/R, adopted 17 December 2007, as modified by Appellate Body Report WT/DS336/AB/R, DSR 2007:VII, 2805
Korea – Certain Paper Panel Report, Korea – Anti‑Dumping Duties on Imports of Certain Paper from Indonesia, WT/DS312/R, adopted 28 November 2005, DSR 2005:XXII, 10637
Mexico – Anti‑Dumping Measures on Rice Appellate Body Report, Mexico – Definitive Anti‑Dumping Measures on Beef and Rice, Complaint with Respect to Rice, WT/DS295/AB/R, adopted 20 December 2005, DSR 2005:XXII, 10853
Mexico – Anti‑Dumping Measures on Rice Panel Report, Mexico – Definitive Anti‑Dumping Measures on Beef and Rice, Complaint with Respect to Rice, WT/DS295/R, adopted 20 December 2005, as modified by Appellate Body Report WT/DS295/AB/R, DSR 2005:XXIII, 11007
Mexico – Olive Oil Panel Report, Mexico – Definitive Countervailing Measures on Olive Oil from the European Communities, WT/DS341/R, adopted 21 October 2008, DSR 2008:IX, 3179
Mexico – Steel Pipes and Tubes Panel Report, Mexico – Anti‑Dumping Duties on Steel Pipes and Tubes from Guatemala, WT/DS331/R, adopted 24 July 2007, DSR 2007:IV, 1207
US – Anti-Dumping and Countervailing Duties (China) Appellate Body Report, United States – Definitive Anti-Dumping and Countervailing Duties on Certain Products from China, WT/DS379/AB/R, adopted 25 March 2011
US – Anti-Dumping and Countervailing Duties (China) Panel Report, United States – Definitive Anti-Dumping and Countervailing Duties on Certain Products from China, WT/DS379/R, adopted 25 March 2011, as modified by Appellate Body Report WT/DS379/AB/R
US – Countervailing Duty Investigation on DRAMS Appellate Body Report, United States – Countervailing Duty Investigation on Dynamic Random Access Memory Semiconductors (DRAMS) from Korea, WT/DS296/AB/R, adopted 20 July 2005, DSR 2005:XVI, 8131
US – Countervailing Duty Investigation on DRAMS Panel Report, United States – Countervailing Duty Investigation on Dynamic Random Access Memory Semiconductors (DRAMS) from Korea, WT/DS296/R, adopted 20 July 2005, as modified by Appellate Body Report WT/DS296/AB/R, DSR 2005:XVII, 8243
US – Export Restraints Panel Report, United States – Measures Treating Exports Restraints as Subsidies, WT/DS194/R and Corr.2, adopted 23 August 2001, DSR 2001:XI, 5767
US – Hot‑Rolled Steel Appellate Body Report, United States – Anti‑Dumping Measures on Certain Hot‑Rolled Steel Products from Japan, WT/DS184/AB/R, adopted 23 August 2001, DSR 2001:X, 4697
US – Offset Act (Byrd Amendment) Panel Report, United States – Continued Dumping and Subsidy Offset Act of 2000, WT/DS217/R, WT/DS234/R, adopted 27 January 2003, as modified by Appellate Body Report WT/DS217/AB/R, WT/DS234/AB/R, DSR 2003:II, 489
US – Oil Country Tubular Goods Sunset Reviews (Article 21.5 – Argentina) Panel Report, United States – Sunset Reviews of Anti‑Dumping Measures on Oil Country Tubular Goods from Argentina – Recourse to Article 21.5 of the DSU by Argentina, WT/DS268/RW, adopted 11 May 2007, as modified by Appellate Body Report WT/DS268/AB/RW, DSR 2007:IX‑X, 3609
US – Softwood Lumber II GATT Panel Report, Panel on United States – Measures Affecting Imports of Softwood Lumber from Canada, SCM/162, adopted 27 October 1993, BISD 40S/358
US – Softwood Lumber IV Appellate Body Report, United States – Final Countervailing Duty Determination with Respect to Certain Softwood Lumber from Canada, WT/DS257/AB/R, adopted 17 February 2004, DSR 2004:II, 571
US – Softwood Lumber IV Panel Report, United States – Final Countervailing Duty Determination with Respect to Certain Softwood Lumber from Canada, WT/DS257/R and Corr.1, adopted 17 February 2004, as modified by Appellate Body Report WT/DS257/AB/R, DSR 2004:II, 641
US – Softwood Lumber V Panel Report, United States – Final Dumping Determination on Softwood Lumber from Canada, WT/DS264/R, adopted 31 August 2004, as modified by Appellate Body Report WT/DS264/AB/R, DSR 2004:V, 1937
US – Softwood Lumber VI (Article 21.5 – Canada) Appellate Body Report, United States – Investigation of the International Trade Commission in Softwood Lumber from Canada – Recourse to Article 21.5 of the DSU by Canada, WT/DS277/AB/RW, adopted 9 May 2006, and Corr.1, DSR 2006:XI, 4865
US – Tyres (China) Appellate Body Report, United States – Measures Affecting Imports of Certain Passenger Vehicle and Light Truck Tyres from China, WT/DS399/AB/R, adopted 5 October 2011
US – Wool Shirts and Blouses Appellate Body Report, United States – Measure Affecting Imports of Woven Wool Shirts and Blouses from India, WT/DS33/AB/R, adopted 23 May 1997, and Corr.1, DSR 1997:I, 323

ABBREVIATIONS

Abbreviation Full Reference
Additional Application New Subsidy Allegations Application (20 July 2009) (Exhibits CHN-5 and US-16)
AK Steel AK Steel Corporation
Anti-Dumping Agreement Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994
Application Petition for the Anti-Dumping and Anti-Subsidy Investigation (29 April 2009) (Exhibits CHN-2 and US-2)
ATI ATI Allegheny Ludlum Corporation
AUV Average unit value
Baosteel Baosteel Group Corporation
DSU Understanding on Rules and Procedures Governing Settlement of Disputes
Final Determination MOFCOM, Final Determination [2010] No. 21 (10 April 2010) (Exhibits CHN-16 and US-28)
Final Disclosure MOFCOM, Memorandum Regarding the Factual Disclosure on the Dumping Margin and Ad Valorem Subsidy Rate for Grain Oriented Flat-Rolled Electrical Steel Antidumping and Countervailing Cases (15 March 2010) (Exhibit US-26)
Final Injury Disclosure MOFCOM, Essential Facts under Consideration which Form the Basis of the Determination on Industry Injury, 5 March 2010 (Exhibits CHN-29 and US-27)
GATT 1994 General Agreement on Tariffs and Trade 1994
GOES Grain oriented flat-rolled electrical steel
MOFCOM Ministry of Commerce of the People's Republic of China
POI Period of investigation
Preliminary Determination MOFCOM, Preliminary Determination [2009] No. 99 (10 December 2009) (Exhibits CHN-17 and US-5)
SCM Agreement Agreement on Subsidies and Countervailing Measures
USD US dollars
VRA Voluntary restraint agreement
WISCO Wuhan Iron and Steel Corporation
WTO Agreement Marrakesh Agreement Establishing the World Trade Organization

I. INTRODUCTION

1.1.
On 15 September 2010, the United States requested consultations with China under Articles 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (the DSU), Article XXII:1 of the General Agreement on Tariffs and Trade of 1994 (the GATT 1994), Article 30 of the Agreement on Subsidies and Countervailing Measures (the SCM Agreement) (to the extent that Article 30 incorporates Article XXIII of the GATT 1994), and Article 17.3 of the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (the Anti-Dumping Agreement) with respect to China's measures imposing countervailing duties and anti-dumping duties on grain oriented flat-rolled electrical steel (GOES) from the United States, as set forth in the Ministry of Commerce of the People's Republic of China (MOFCOM) Notice No. 21 [2010], including its annexes.1 The consultations were held on 1 November 2010. The consultations failed to resolve the dispute.
1.2.
On 11 February 2011, the United States requested, pursuant to Article 6 of the DSU, Article 17.4 of the Anti-Dumping Agreement, and Article 30 of the SCM Agreement, that the Dispute Settlement Body (the DSB) establish a Panel to examine this matter.2
1.3.
At its meeting on 25 March 2011, the DSB established a panel pursuant to the request of the United States in document WT/DS414/2, in accordance with Article 6 of the DSU.
1.4.
The Panel's terms of reference are the following:

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 document WT/DS414/2 and to make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in those agreements.

1.5.
Following the agreement of the parties, the Panel was composed on 10 May 2011 as follows:

Chairman: Mr John Adank

Members: Mr Anthony Abad

Mr Jan Heukelman

1.6.
Argentina; the European Union; Honduras; India; Japan; Korea; Saudi Arabia and Viet Nam reserved their rights to participate in the Panel proceedings as third parties.
1.7.
The Panel met with the parties on 15-16 September and 6-7 December 2011. It met with the third parties on 16 September 2011. The Panel issued its interim report to the parties on 24 February 2012. The Panel issued its final report to the parties on 1 May 2012.

II. FACTUAL ASPECTS

2.1.
The United States challenges various aspects of the measures imposing countervailing duties and anti-dumping duties on GOES from the United States. The measures are set forth in MOFCOM's Notice No. 21 [2010], including its annexes.3 The United States claims that the measures are inconsistent with China's commitments and obligations under the GATT 1994, the Anti-Dumping Agreement and the SCM Agreement.
2.2.
An application for initiation of an anti-dumping and countervailing duty investigation was filed on 29 April 2009 by two Chinese steel producers, namely Wuhan Iron and Steel (Group) Corporation (WISCO) and Baosteel Group Corporation (Baosteel). The applicants alleged that 27 federal and state laws provided countervailable subsidies to the United States producers of GOES. The application also estimated a dumping margin for GOES imports from the United States of 25%. Finally, the application alleged that the imports of GOES from the United States and Russia caused and threatened injury to the Chinese domestic industry. On 1 June 2009, MOFCOM initiated anti-dumping, countervailing duty and injury investigations. In the countervailing duty initiation notice, MOFCOM initiated on 22 of the 27 federal and state laws that the applicants had alleged provided countervailable subsidies. On 20 July 2009, the applicants filed new subsidy allegations regarding a further 10 federal and state laws. On 19 August 2009, MOFCOM initiated an investigation covering six of these programmes.
2.3.
On 10 December 2009, MOFCOM published its preliminary determination. MOFCOM calculated ad valorem subsidy rates of 11.7% for AK Steel Corporation (AK Steel) and 12% for ATI Allegheny Ludlum Corporation (ATI). The "all others" subsidy rate reported in the preliminary determination was 12%. MOFCOM calculated preliminary dumping margins of 10.7% for AK Steel, 19.9% for ATI and 25% for "all others".
2.4.
Prior to issuing its final determination, MOFCOM released a final disclosure document, in which it revealed that the "all others" subsidy and dumping rates had increased to 44.6% and 64.8% respectively.
2.5.
On 10 April 2010, MOFCOM issued its final determination for the anti-dumping and countervailing duty investigations. MOFCOM calculated ad valorem subsidy rates of 11.7% for AK Steel, 12% for ATI and 44.6% for "all others". MOFCOM applied a dumping margin of 7.8% to AK Steel, 19.9% to ATI and 64.8% to "all others". MOFCOM found that China's domestic GOES industry sustained material injury and that there was a causal link between the injury and the dumped imports of GOES from Russia and the dumped and subsidized imports of GOES from the United States.

III. PARTIES' REQUESTS FOR FINDINGS AND RECOMMENDATIONS

A. THE UNITED STATES

3.1.
In its written submissions, the United States requested the Panel to find:

(a) China acted inconsistently with Articles 11.2 and 11.3 of the SCM Agreement when it initiated a countervailing duty investigation with respect to 11 of the programmes included in the application;

(b) China acted inconsistently with Articles 12.4.1 of the SCM Agreement and 6.5.1 of the Anti-Dumping Agreement because it failed to require adequate non-confidential summaries of confidential information included in the application;

(c) China acted inconsistently with Article 12.7 of the SCM Agreement because its use of facts available for known exporters was improper;

(d) China acted inconsistently with Article 12.2.2 of the Anti-Dumping Agreement because it failed to make available to the respondent companies the calculations used to determine these companies' final dumping margins;

(e) China acted inconsistently with Article 22.3 of the SCM Agreement because it failed adequately to explain the findings and conclusions supporting its determination that the competitive bidding process under the United States Government procurement statutes at issue did not result in prices that reflected market conditions;

(f) China acted inconsistently with Articles 6.8 and 6.9 of the Anti-Dumping Agreement because it applied anti-dumping duties based on facts available to "unknown" United States exporters and did not disclose the essential facts that led to that result;

(g) China acted inconsistently with Articles 12.2 and 12.2.2 of the Antidumping Agreement because MOFCOM failed to provide in sufficient detail the findings and conclusions leading to application of facts available to "unknown" United States producers/exporters. MOFCOM also failed to provide "all relevant information" on the facts underlying its determination that recourse to facts available was warranted in the calculation of the "all others" antidumping rate;

(h) China acted inconsistently with Article VI:2 of the GATT 1994 because the "all others" anti-dumping duty levied by China was greater in amount than the appropriate margin of dumping;

(i) China acted inconsistently with Articles 12.7, 12.8, 22.3 and 22.5 of the SCM Agreement because it applied countervailing duties based on facts available to "unknown" United States exporters and provided no detail in its final determination or final disclosure documents regarding the findings that led to the application of facts available;

(j) China acted inconsistently with Articles 3.1, 3.2, 6.9 and 12.2.2 of the Anti-Dumping Agreement and Articles 15.1, 15.2, 12.8 and 22.5 of the SCM Agreement because its price effects analysis was not based on positive evidence and it did not engage in an objective examination of the evidence. Further, China did not disclose the essential facts supporting its price effects analysis and did not offer an adequate explanation for its price effects findings;

(k) China acted inconsistently with Articles 3.1, 3.5, 6.9 and 12.2.2 of the Anti-Dumping Agreement and Articles 12.8, 15.1, 15.5 and 22.5 of the SCM Agreement because its causation analysis was not supported by positive evidence or based on an objective examination of the evidence. Further, China failed to disclose the essential facts supporting its analysis and did not provide an adequate explanation for its causation findings; and

(l) Consequently, China also acted inconsistently with Article 1 of the Anti-Dumping Agreement and Article 10 of the SCM Agreement.

3.2.
Pursuant to Article 19.1 of the DSU, the United States requests the Panel to recommend that China bring its measures into conformity with the Anti-Dumping Agreement, the SCM Agreement and the GATT 1994.

B. CHINA

3.3.
China requests the Panel to reject the United States' claims in their entirety, finding instead that, with respect to each of them, China acted consistently with all of its obligations under the WTO Agreements.

IV. ARGUMENTS OF THE PARTIES

4.1.
The arguments of the parties are set out in their written submissions, oral statements to the Panel and their answers to questions. Executive summaries of the parties' written submissions, and their oral statements or executive summaries thereof, are attached as addenda to this Report in Annexes A, C, E and F (see List of Annexes, pages iv-vi).

V. ARGUMENTS OF THE THIRD PARTIES

5.1.
India and Viet Nam did not submit third party written submissions, while Viet Nam did not submit a third party oral statement. The arguments of Argentina; the European Union; Japan and Korea are set out in their written submissions, oral statements and answers to questions. The arguments of Honduras and Saudi Arabia are set out in their written submissions and oral statements. The arguments of India are set out in its oral statement. The third parties' written submissions and oral statements, or executive summaries thereof, are attached as addenda to this Report in Annexes B and D (see List of Annexes, pages iv-vi).

VI. INTERIM REVIEW

A. INTRODUCTION

6.1.
On 24 February 2012, the Panel submitted its Interim Report to the parties. On 16 March 2012, both parties submitted written requests for review of precise aspects of the Interim Report. On 30 March, the United States submitted comments on China's requests for review. Neither party requested that the Panel hold an interim review meeting.
6.2.
The Panel explains below its response to issues of a substantive nature raised by the parties in their comments on the Interim Report. The Panel has also corrected a number of typographical errors identified by the parties.
6.3.
Due to changes as a result of our review, the numbering of the footnotes in the Final Report has changed from the Interim Report. The text below refers to the footnote numbers in the Interim Report, with the footnote number in the Final Report in parentheses for ease of reference.

B. PARTIES' REQUESTS FOR CHANGES TO THE INTERIM REPORT

1. Paragraph 7.28

6.4.
China submits that the Panel's description of its argument regarding whether the United States made a prima case under Article 11 is incomplete. China requests that the Panel supplement the description to reflect the argument that the United States failed to engage in a serious evaluation of the evidence that accompanied the application at issue.
6.5.
The United States does not agree that the Interim Report incorrectly characterizes China's argument. However, if the Panel agrees to amend the description of China's argument, the United States requests that the Panel note the sections of the United States' first and second written submissions where it addressed the contents of the application and each allegation.
6.6.
The Panel has expanded upon its description of China's argument in paragraph 7.28, so that it is in the level of detail requested by China. The Panel has also accepted the United States' request, by referencing the sections of its submissions that the United States relies upon as addressing the contents of the application (see footnote 19).

2. Paragraph 7.91

6.7.
The United States requests some minor changes to the wording in the penultimate sentence of paragraph 7.91, in order to add greater clarity to the sentence.
6.8.
China does not comment on this request.
6.9.
The Panel has decided to accommodate the United States' request and has made the adjustments sought.

3. Paragraphs 7.105, 7.108 and 7.111

6.10.
The United States submits that the Panel should change references to the "Economic Stimulus Package" to the "Economic Stimulus Plan" in its own descriptions of the alleged subsidy and when describing the arguments made by the United States, as this is the correct terminology.
6.11.
China does not comment on this request.
6.12.
The Panel notes that Exhibits CHN-8 and US-29 refer to the programme at issue as the "Economic Stimulus Plan" rather than the "Economic Stimulus Package". Therefore, the Panel has accommodated the United States' request.

4. Paragraph 7.206

6.13.
The United States suggests a minor change to the wording of the final sentence of paragraph 7,206.
6.14.
China does not comment on this request.
6.15.
In the Panel's view, the United States' suggested change does not alter the meaning of the sentence, but perhaps makes the Panel's statement in the sentence more definitive. The Panel has decided to accommodate the United States' request in order to add greater clarity and force to the sentence at issue.

5. Paragraph 7.365

6.16.
China submits that the first sentence of paragraph 7,365 should be struck from the Report. The sentence in question states: "[a]rguably, if the United States' claim were one of substance, regarding for example the benefit determination under Articles 1.1(b) or 14(d) of the SCM Agreement, we may find certain problems with the reasoning used by MOFCOM".
6.17.
The United States does not comment upon China's request.
6.18.
The Panel has removed the sentence from the Report, on the basis that it is not strictly necessary to its reasoning. The Panel has also added a new footnote to paragraph 7,365 (footnote 357) to emphasise that the United States' claim was not one of substance and Article 22.3 of the SCM Agreement does not discipline the substantive adequacy of an investigating authority's reasoning.

6. Paragraphs 7.527, 7.629, 7.635 and footnote 601 (footnote 604 in the Final Report)

6.19.
China argues that the Panel's use of the terms "regrettably", "failed to", "failure" and "impaired", as used variously in paragraphs 7,527, 7,629, 7,635 and footnote 601 (footnote 604 in the Final Report), is inappropriate. According to China, these terms convey value judgments that are not appropriate in a panel's description of what happened during the course of panel proceedings. Further, China argues that the term "impaired" may inadvertently reflect some judgment by the Panel of intent by China to frustrate the Panel's analysis. According to China, where there is no breach of the relevant general and/or special panel working procedures, it is inappropriate for a panel to use language that suggests a motive or intent outside the confines of these rules and obligations.
6.20.
The United States disagrees with China's objections and argues that other panels have used the term "regret" to refer to the conduct of a party during a proceeding.4 Further, the term "impaired" was used by the Panel as part of a factual statement about the impact on the Panel's work.
6.21.
The Panel has reflected on the terminology used in the paragraphs at issue and, where it considers appropriate, has made some of the changes requested by China.

7. Paragraph 7.530

6.22.
China considers the Panel's statement in the fifth sentence of paragraph 7,530, namely that "such prices should be adjusted to ensure that they are properly comparable", suggests that the Panel is articulating a mandatory methodology the authority must follow. China believes it would be more appropriate to state that the authority should either adjust the prices to ensure comparability, or otherwise explain why specific adjustments are not necessary in a particular situation. China suggests that there may be cases in which adjustments would be immaterial. For example, China posits a scenario in which there are two grades of a product, one priced at $10/unit and one priced at $12/unit. China suggests that, if there were a finding of price undercutting of $5/unit, any adjustment would be immaterial, since the $2/unit difference between the two products could never change the overall existence of undercutting.
6.23.
The United States disagrees that the Panel's statement is articulating a mandatory methodology that authorities must follow. The United States understands the point in the final clause of the sentence to be that when making a finding of price undercutting, the prices being compared need to be comparable. The United States asserts that China's proposed revision of the second clause would appear to provide an authority with the ability to use non-comparable prices. The United States also asserts that China's hypothetical is confusing since it appears to be referring to two different domestic prices, while the Panel is discussing the comparison between imported and domestic prices. Should the Panel decide to rephrase the last clause of the sentence, the United States suggests that the clause could be rephrased as: "and the authority should ensure that the prices it is using for its comparison are properly comparable."
6.24.
The Panel has decided to adjust the fifth sentence of the paragraph to clarify that, for the purpose of price comparisons, prices should always be comparable.

8. Footnote 525 (footnote 528 in the Final Report), paragraph 7.549

6.25.
China suggests deleting the last sentence of footnote 525 (footnote 528 in the Final Report) at paragraph 7,549. According to China, there is no basis before the Panel to express any opinion on whether new capacity has higher costs than expanding existing capacity. China contends that the Panel might properly note this as an issue the authority should address, but the Panel should not use any language that prejudges what the authority might find on this issue.
6.26.
The United States contends that the last sentence of footnote 525 (footnote 528 in the Final Report) accurately describes the record before the Panel and should not be deleted. The Panel correctly observed that the United States explained that improvements in existing facilities were unlikely to engender the same degree of start-up costs as opening an entirely new facility. The United States contends that if this statement were not true, China (unlike the United States) had access to the information from the confidential MOFCOM record with which to rebut it. China did not do so.
6.27.
The Panel has decided not to accommodate China's request. The United States' argument that creating new capacity is likely to incur greater costs than merely improving existing capacity is relevant to the Panel's findings. In making its findings, the Panel is entitled to rely on relevant United States arguments that were not contested by China.

9. Footnote 602 (footnote 605 in the Final Report), paragraph 7.630

6.28.
China disagrees with the first sentence of paragraph 7,630, and the last two sentences of footnote 602 (footnote 605 in the Final Report). China submits that the first sentence of paragraph 7,630 and the entire footnote 602 (footnote 605 in the Final Report) are unnecessary to the Panel's analysis and should be deleted. China asserts that the relevant issue is completely addressed by paragraph 7,632. China submits that, although it may not have been able to provide the precise number for the capacity utilization in 2008 because of confidentiality concerns, China did provide a confidential range that provided upper and lower limits that more narrowly prescribed the actual number. China contends that when a party provides a range and states the actual number is within that range, it is no longer reasonable for the other party to make assumptions that generate a number outside the range.
6.29.
The United States disagrees with China's request that the Panel delete the first sentence of paragraph 7,630 and footnote 602 (footnote 605 in the Final Report). According to the United States, the first sentence of paragraph 7,630 is a factually accurate description of the United States' argument and China has no basis to object to the inclusion of a United States argument in the Report. The United States further asserts that the statement and accompanying footnote are directly related to the remainder of paragraph 7,630 so they are not "unnecessary" and should be retained. Finally, with respect to China's use of a range of numbers, the United States considers that the Panel properly noted in the final sentence of footnote 602 (footnote 605 in the Final Report) that China's mere assertion of error, without providing the actual underlying data, is insufficient to reject the basic point being made by the United States.
6.30.
The Panel has decided not to accommodate China's request. The first sentence of paragraph 7,630 describes an argument made by the United States that is highly relevant to the Panel's subsequent analysis. Furthermore, footnote 602 (footnote 605 in the Final Report) clarifies the reasons the Panel was not able to reject the United States' argument on the basis of China's simple assertion of error.

10. Paragraph 7.637

6.31.
China believes the statement "it is clear" in the second sentence of paragraph 7,637 is inappropriate. Given the Panel's earlier discussion of the limitations on its analysis, China contends that it is hard to see how the conclusion could be "clear". In this situation, China believes the phrase "it appears" more appropriately describes the situation.
6.32.
The United States asserts that the fact that the information available to the Panel was limited does not mean that there can be no clear conclusions drawn from it. Moreover, the Panel's statement is qualified by stating the increase was "at least" partially responsible for the accumulation of inventory. According to the United States, therefore, the Panel's use of the phrase "it is clear" is entirely appropriate.
6.33.
The Panel has reconsidered the wording it used in the second sentence of paragraph 7,637 and has decided to adjust it to accommodate China's request.

VII. FINDINGS

A. GENERAL PRINCIPLES REGARDING TREATY INTERPRETATION, THE APPLICABLE STANDARD OF REVIEW AND BURDEN OF PROOF

1. Treaty Interpretation

7.1.
Article 3.2 of the DSU provides that the dispute settlement system serves to clarify the existing provisions of the covered agreements "in accordance with customary rules of interpretation of public international law". It is generally accepted that the principles codified in Articles 31 and 32 of the Vienna Convention on the Law of Treaties are such customary rules.5

2. Standard of Review

7.2.
Panels generally are bound by the standard of review set forth in Article 11 of the DSU, which provides, in relevant part, that:

[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.6 (emphasis added)

7.3.
According to the Appellate Body, the "objective assessment" to be made by a panel reviewing an investigating authority's determination is to be informed by an examination of whether the agency provided a reasoned and adequate explanation as to: (i) how the evidence on the record supported its factual findings; and (ii) how those factual findings supported the overall determination.7
7.4.
The Appellate Body has also commented that a panel reviewing an investigating authority's determination may not conduct a de novo review of the evidence or substitute its judgment for that of the investigating authority. A panel must limit its examination to the evidence that was before the agency during the course of the investigation and must take into account all such evidence submitted by the parties to the dispute.8 At the same time, a panel must not simply defer to the conclusions of the investigating authority. A panel's examination of those conclusions must be "in-depth" and "critical and searching".9

3. Burden of Proof

7.5.
The general principles applicable to the allocation of the burden of proof in WTO dispute settlement require that a party claiming a violation of a provision of a WTO Agreement must assert and prove its claim.10 Therefore, as the complaining party, the United States bears the burden of demonstrating that certain aspects of the anti-dumping and countervailing duty measures at issue are inconsistent with the Anti-Dumping Agreement, the SCM Agreement and the GATT 1994. The Appellate Body has stated that a complaining party will satisfy its burden when it establishes a prima facie case, namely a case which, in the absence of effective refutation by the defending party, requires a panel, as a matter of law, to rule in favour of the complaining party.11 Finally, it is generally for each party asserting a fact to provide proof thereof.12

B. WHETHER CHINA ACTED INCONSISTENTLY WITH ARTICLES 11.2 AND 11.3 OF THE SCM AGREEMENT IN INITIATING AN INVESTIGATION WITH RESPECT TO CERTAIN PROGRAMMES

1. Provisions at issue

7.6.
The United States' claim relates to Articles 11.2 and 11.3 of the SCM Agreement. These provide, relevantly:

11.2 An application under paragraph 1 shall include sufficient evidence of the existence of (a) a subsidy and, if possible, its amount, (b) injury within the meaning of Article VI of GATT 1994 as interpreted by this Agreement, and (c) a causal link between the subsidized imports and the alleged injury. Simple assertion, unsubstantiated by relevant evidence, cannot be considered sufficient to meet the requirements of this paragraph. The application shall contain such information as is reasonably available to the applicant on the following:

...

(iii) evidence with regard to the existence, amount and nature of the subsidy in question.

11.3 The authorities shall review the accuracy and adequacy of the evidence provided in the application to determine whether the evidence is sufficient to justify the initiation of an investigation.

2. Factual Background

7.7.
On 27 April 2009, two Chinese steel producers, WISCO and Baosteel, filed an application with MOFCOM, requesting relief under China's anti-dumping and countervailing duty laws on behalf of China's domestic GOES industry. The applicants alleged that United States producers of GOES, in particular, AK Steel and ATI, had engaged in injurious dumping and had benefited from various countervailable subsidies.
7.8.
In relation to the subsidies, the applicants alleged that 27 federal and state laws, including several federal procurement statutes, provided countervailable subsidies to the United States companies. On 1 June 2009, MOFCOM initiated a countervailing duty investigation in relation to 22 of the 27 programmes included in the application.
7.9.
On 20 July 2009, the applicants filed new subsidy allegations regarding 10 federal and state laws. MOFCOM initiated a countervailing duty investigation in relation to six of the programmes included in the additional application.
7.10.
In its claim under Articles 11.2 and 11.3 of the SCM Agreement, the United States challenges the initiation of an investigation in relation to six of the programmes included in the original application and five of the programmes included in the additional application. Therefore, the United States' challenge regarding the initiation of the investigation relates to 11 programmes, namely the Medicare Prescription Drug, Improvement and Modernization Act of 2003; the Economic Recovery Tax Act of 1981, the Tax Reform Act of 1986; the Steel Import Stabilization Act of 1984; the State of Indiana Steel Industry Advisory Service; grace periods for meeting the Clean Air Act emissions standards; the "supply of electricity to the steel industry at a low price"; the "supply of natural gas to the steel industry at a low price"; a "subsidy to coal for the steel industry"; the 2003 Economic Stimulus Plan of Pennsylvania; and Pennsylvania's Alternative Energy Funding Program.

3. Arguments of the United States

7.11.
According to the United States, the initiation by MOFCOM of the countervailing duty investigation in relation to 11 United States federal and state programmes was inconsistent with Articles 11.2 and 11.3 of the SCM Agreement.

(a) Article 11.2 of the SCM Agreement

7.12.
The United States notes that Article 11.2 requires that "an application…shall include sufficient evidence of the existence of…a subsidy". Read in the context of Article 1 of the SCM Agreement, Article 11.2 requires that an application to initiate a countervailing duty investigation include sufficient evidence of the existence of a financial contribution, a benefit (requirements for the existence of a subsidy) and specificity (since Part III of the SCM Agreement applies only if a subsidy is specific).13 According to the United States, Article 11.2(iii), which refers to evidence "with regard to the existence, amount and nature of the subsidy in question", supports its position.14
7.13.
With respect to what evidence is "sufficient" in a petition, the United States refers to the second sentence of Article 11.2, which provides that "simple assertion, unsubstantiated by relevant evidence, cannot be considered sufficient".15 To meet the standard for "sufficient evidence", an application must contain a degree of actual evidence.16 The panel in US - Offset Act (Byrd Amendment) noted that Article 11.2 ensures that "investigations are not initiated on the basis of frivolous or unfounded suits".17 The United States also argues that while it is not necessary for an applicant definitively to establish the existence of each element of a specific subsidy at the time of lodging a petition, there must be at least some evidence of financial contribution, benefit and specificity. The United States rejects China's attempt to rely on "the broader context provided by the application" in place of evidence for one or more of the necessary elements.18
7.14.
In relation to the GOES investigation, the United States argues that for 11 of the programmes investigated by MOFCOM, the initial and additional applications included no evidence of basic subsidy elements and were based on simple assertion. Further, the applications did not state that relevant information was not "reasonably available".19 The United States alleges deficiencies in the application in relation to the following programmes:

(i) Medicare Prescription Drug, Improvement and Modernization Act

7.15.
The United States argues that the application included no evidence indicating that the alleged subsidy was specific. According to the United States, the statement in the AK Steel Annual Report indicating that AK Steel sponsors the relevant type of healthcare plan to qualify for the subsidy does not indicate that the company was the only such company to do so, or that it was one of a limited group of such companies. Further, there was no evidence to indicate that "sponsors of retiree healthcare benefit plans that included a qualified prescription drug benefit" was a de jure or de facto specific group.

(ii) Economic Recovery Tax Act of 1981

7.16.
The United States notes that the Economic Recovery Tax Act of 1981 was in effect for only two years and ceased to operate 27 years prior to the period of investigation. The United States argues that the application contained no evidence indicating that a benefit existed during the period of investigation. According to the United States, China's speculation, after the fact, that it is possible the subsidy could have been allocated over time, and that the allocation period, which was never alleged in the first place, could have exceeded 20 years, is inadequate to support a decision to initiate.20

(iii) Tax Reform Act of 1986

7.17.
The United States complains that the applicant failed to provide any evidence indicating that a benefit could exist during the period of investigation in relation to subsidies allegedly provided 24 years prior to this period.21

(iv) Steel Import Stabilization Act of 1984

7.18.
According to the United States, the application was deficient due to lack of evidence of the existence of a financial contribution. The application alleged that the voluntary restraint agreements (VRAs) established under the Steel Import Stabilization Act constituted a price support mechanism within the meaning of Article 1.1(a)(2) of the SCM Agreement.22 However, the sole evidence relied upon by the petitioner was that the VRAs "effectively provided" steel producers with a price support mechanism. According to the United States, this is not evidence that the VRAs constituted "price support" within the meaning of the SCM Agreement.23

(v) State of Indiana Steel Advisory Service

7.19.
The United States argues that the application included no evidence that the State of Indiana Advisory Service constitutes a financial contribution. The applicant merely stated that the Advisory Service constitutes the provision of a good or service and that the programme was "indicative" of a financial contribution and could "quite plausibly" have constituted a financial contribution.24 The United States contends that no evidence was provided indicating that a study would be performed under the programme and, even if it were, whether it would be available to the steel industry. Finally, the United States argues that the application did not indicate what the benefit under the programme would be.25

(vi) Grace periods for compliance with the Clean Air Act

7.20.
According to the United States, the application appears to allege that steel companies were given a three year postponement for compliance with certain environmental standards in the Clean Air Act and that this "special environmental immunity is virtually an income support to the steel industry". However, the United States argues that the application included insufficient evidence of actual income or price support within the meaning of Article 1.1(a)(2) of the SCM Agreement.26 With respect to benefit, the United States notes that the "special environmental immunity" ended on 31 December 1985. The applicant did not provide evidence indicating how a benefit could exist in relation to a grace period that expired more than 20 years prior to the start of the period of investigation.27

(vii) 2003 Economic Stimulus Plan of Pennsylvania

7.21.
According to the United States, the petition did not include sufficient evidence of specificity in relation to the 2003 Economic Stimulus Plan of Pennsylvania. Noting that there are steel production facilities in Pennsylvania does not constitute evidence that steel is a "favoured" industry. Although a focal point of the programme was to provide "[r]esources that allow our traditional industries, especially manufacturing, to access new technology", the United States argues that this was only one of seven focal points. In fact, the Plan "sought to serve a wide variety of economic sectors, industries and firms".28

(viii) Pennsylvania's Alternative Energy Funding Programme

7.22.
The United States argues that the application was deficient in providing evidence of specificity. The application asserted that "looking at the full range, the applicants could easily discover the fact that…most…grantees were from energy or steel industries" and that the steel industry "was absolutely one of the most important receivers". The United States argues that it is unclear how these statements provide sufficient evidence of specificity.29 The United States also argues that the application did not provide evidence of the existence of a benefit. MOFCOM ignored evidence provided by the United States demonstrating that, for the most part, the programme was not operational during the period of investigation. For the part of the programme that was operational, the United States provided evidence that the respondent companies did not receive a benefit.

(ix) Natural Gas

7.23.
The United States argues that the petition included no evidence of a financial contribution, benefit or specificity in relation to the allegation that GOES producers received a countervailable subsidy through the pricing of natural gas. The evidence provided by the applicants demonstrated that the natural gas market was deregulated in 1985, at which time users negotiated directly with producers to set prices.30 China does not point to any evidence in the application to indicate that the United States Government sets prices, let alone sets prices in a discriminatory manner. Further, price differentiation is not, in and of itself, evidence of specificity. Finally, to the extent the applicants argued that subsidies were provided to natural gas producers, China cannot point to any evidence in the application to indicate pass-through of such subsidies.31

(x) Electricity

7.24.
According to the United States, the petitioners' allegation that GOES producers received a subsidy through the pricing of electricity was not supported by evidence of a financial contribution, benefit or specificity. The evidence in the petition was consistent with the fact that, while the United States Government regulates the provision of electricity, it does not set retail electricity prices. Further, the evidence did not support the applicant's assertion that the United States Government sets preferential prices for certain industries and regions. Price differentiation is not, in and of itself, evidence of specificity and China cannot point to any evidence indicating that the United States Government sets prices in a discriminatory fashion.32 In addition, the United States notes that, to the extent the applicants argued that subsidies were provided to electricity producers, no evidence was cited indicating pass-through of such subsidies to the steel industry.33

(xi) Coal

7.25.
The United States notes that there was no evidence in the application that any subsidization to the coal industry passes-through to the steel industry. This was merely asserted by the applicants. Further, China cannot point to any evidence that the United States Government sets the price for coal or in any way sells coal to the steel industry on preferential terms.

(b) Article 11.3 of the SCM Agreement

7.26.
The United States claims that China acted inconsistently with its obligations under Article 11.3 because MOFCOM failed to examine the accuracy and adequacy of the evidence provided to substantiate the existence of a subsidy. Regarding the correct interpretation of Article 11.3, the United States cites the panel's interpretation of the analogous provision under the Anti-Dumping Agreement in US – Softwood Lumber V, in particular that a panel should determine "whether an unbiased and objective investigating authority would have found that the application contained sufficient information to justify initiation of the investigation".34
7.27.
According to the United States, for many of the programmes included in the petition, evidence of the basic subsidy elements was missing. The United States argues that no reasonable investigating authority would have initiated an investigation of the 11 programmes at issue.35 Prior to the initiation, the United States highlighted to MOFCOM the problems with the application. Notwithstanding the information provided to it by the United States, MOFCOM initiated the countervailing duty investigation with respect to all of the programmes at issue.36

4. Arguments of China

7.28.
China disputes the United States' claim that MOFCOM acted inconsistently with Articles 11.2 and 11.3 of the SCM Agreement. In fact, China contends that the United States has not made a prima facie case with respect to its Article 11 claims. In particular, China argues in its first and second written submissions that the United States failed to engage in a serious evaluation of the evidence that accompanied the application at issue. Rather, the United States simply asserted that "the petition did not contain any evidence" of one or more elements of an actionable subsidy, without referring to the information accompanying the application.37 China also argues that the allegation that the application failed adequately to allege one or more elements of a subsidy with respect to each of the 11 programmes at issue is in fact incorrect.

(a) Article 11.2 of the SCM Agreement

7.29.
According to China, Article 11.2 of the SCM Agreement contains a low application threshold that requires far less substantiation and analysis than claimed by the United States.38 The objective of Article 11.2 is to limit the evidentiary burden on the applicant. Although China agrees with the United States that Article 11.2 requires evidence of a financial contribution, benefit and specificity, this is qualified by the chapeau to Article 11.2, which requires only the information "reasonably available to the applicant".39 China argues that, given the lack of any direct reference to "specificity" in Article 11.2, and the difficulty applicants face in obtaining evidence of specificity, particularly de facto specificity, a different and less stringent evidentiary standard exists for this element.40
7.30.
China contends that the jurisprudence relating to the analogous provision under the Anti-Dumping Agreement, namely Article 5.2, provides important context for the interpretation of Article 11.2 of the SCM Agreement.41 According to China, the panels that have examined Article 5.2 of the Anti-Dumping Agreement have held that applicants need only submit enough evidence to justify an investigation and do not need to analyse the evidence or explain the ultimate conclusion. China notes "the quantity and quality of the information provided by the applicant need not be such as would be required in order to make a preliminary or final determination" and the inclusion of raw information is sufficient to overcome the proscription on simple assertion.42
7.31.
Although China's primary position is that the United States has not made a prima facie case under Article 11.2 of the SCM Agreement, China also seeks to demonstrate that the application for initiation included sufficient evidence for each of the 11 programmes at issue:

(i) Medicare Prescription Drug, Improvement and Modernization Act

7.32.
In response to the United States' claim that the application did "not include any evidence of specificity", China argues that AK Steel's Annual Report, which was annexed to the application, stated that the Medicare Act "provides a federal subsidy to sponsors of retiree healthcare benefit plans" and that AK Steel is such a sponsor. According to China, this demonstrates contingent access to the subsidy and could indicate the existence of de jure or de facto specificity.43

(ii) Economic Recovery Tax Act 1981

7.33.
China disputes the significance of the United States' argument that the application did not include any evidence showing that the programme provided a benefit during the period of investigation. According to China, implicit in the evidence of a large benefit to the steel industry is a claim that a benefit was received during the period of investigation. There is no requirement to fix a benefit allocation period at the time of filing an application. China concludes that the lack of analysis linking evidence of the subsidy in 1981 and 1982 to benefits during the POI does not invalidate the allegation.44

(iii) Tax Reform Act 1986

7.34.
In response to the United States' allegation that the application did not contain evidence of a benefit during the period of investigation, China relies upon the explanation provided for in the Economic Recovery Tax Act. Further, China contends that the applicant had no evidence before it indicating that the programme had been repealed, leaving open the possibility that it was still in effect during the period of investigation.45

(iv) Steel Import Stabilization Act 1984

7.35.
China disputes the United States' argument that the application included no evidence that the VRAs concluded under the Act constituted a financial contribution. According to China, the application included information that actions under the Act led to "pecuniary benefits" to the United States steel industry. China concludes that whether this could definitively be found to be a financial contribution was not for the application conclusively to determine.46 In response to a Panel question, China argues that the VRAs caused a transfer of wealth from steel purchasers to the United States steel industry, due to higher domestic steel prices. This could be construed generally as a form of price or income support. Alternatively, China argues that it could be evidence of a financial contribution under Article 1.1(a)(1)(iv) of the SCM Agreement because the effect of the measure is to cause a transfer of funds from private parties to the steel industry.47

(v) State of Indiana Steel Industry Advisory Service

7.36.
China argues that the evidence in the application demonstrated that the programme provided support to the steel industry, including a mandate to examine laws and problems affecting the industry, and that this was "indicative of a financial contribution" in the form of the provision of goods or services.48 In response to the United States' argument that a study was never actually conducted under the programme, China argues that the applicants were dealing with imperfect information.49

(vi) Grace Periods for Compliance with the Clean Air Act

7.37.
China argues that the application articulated a theory regarding the existence of a financial contribution, namely the provision of income or price support to the industry through delaying an obligation to invest in clear air technology. Regarding the United States' argument that the application did not include evidence of benefit, China argues that the applicant provided specific estimates of the cost savings associated with the grace periods. Although the grace periods ended more than 20 years ago, China relies on its previous argument that it is not necessary to allocate a benefit across time in the context of an application for initiation.50

(vii) 2003 Economic Stimulus Plan of Pennsylvania

7.38.
China argues that there was "circumstantial evidence of specificity" included in the application, which is sufficient for the purposes of Article 11.2 of the SCM Agreement. In particular, China argues that the evidence demonstrating the prominence of the GOES industry within Pennsylvania was evidence of specificity. Further, the programme included a focus on "resources that allow…traditional industries, especially manufacturing, to access new technology". China argues that a programme emphasizing traditional manufacturing industries suggests the prospect of de facto specificity.51 Finally, China rejects the United States' argument that if more than one sector of an economy is targeted for support, a finding of sufficient evidence of specificity is not possible for the purposes of initiation.52

(viii) Pennsylvania's Alternative Energy Funding Plan

7.39.
China argues that the application included evidence that certain defined projects were eligible for loans under the programme. Further, "based on actual utilization, these categories could in fact define a very small range of industries that benefited, providing the basis for a de facto specificity finding". On the question of benefit, China contends that evidence that individual respondents actually received a benefit under the programme is not required. Rather, presenting evidence of the "implication of a program focused on clean energy in relation to an industry known to be high polluting" is plausible evidence of the existence of a benefit.53

(ix) Natural Gas and (x) Electricity

7.40.
China argues that, contrary to the United States' allegation, the application did provide evidence of a financial contribution, benefit and specificity associated with the supply of electricity and natural gas to the steel industry. In particular, the application included evidence that the United States Government regulates the electricity and natural gas industries and that the average price paid by the steel industry for electricity and natural gas is lower than the total average price paid in the United States and the price paid by other sectors.54

(xi) Coal

7.41.
China argues that the application included evidence of subsidies to the coal industry, which "is evidence of benefit through an indirect financial contribution" and evidence of the steel industry's substantial use of coal, "which goes to the issue of de facto specificity".55 Further, China argues that the Coal Subsidy Act is "directly related to the steel industry's use of coal" and therefore provides evidence of a direct financial contribution to the industry.56

(b) Article 11.3 of the SCM Agreement

7.42.
According to China, Articles 11.2 and 11.3 of the SCM Agreement impose distinct obligations.57 Article 11.3 obligates an investigating authority to satisfy itself that the information in an application is sufficient evidence of the existence of a financial contribution, benefit and specificity for the purposes of initiating an investigation.58 China agrees with the United States that in examining whether an initiation is justified, the standard of review to be applied by a panel is "whether an unbiased and objective investigating authority would have found that the application contained sufficient information to justify initiation of the investigation".59 China argues that Article 11.3 does not require a full investigation; rather the investigating authority's obligation is only to substantiate a need for a more in-depth analysis.60 As a result, the quantity and quality of the information provided by an applicant need not be such as would be required in order to make a preliminary or final determination.61
7.43.
China questions whether the United States has made a prima facie case under Article 11.3. In particular, the United States' Article 11.3 claim is dependent upon its flawed Article 11.2 claim.62 In any event, China argues that MOFCOM's initiation of the investigation with respect to the 11 programmes at issue before the Panel was consistent with Article 11.3 of the SCM Agreement. China acknowledges that the United States raised certain objections regarding the evidence underlying some of the programmes at issue. However, MOFCOM concluded that these were issues to be resolved during the course of the investigation, rather than issues fatal to initiation of an investigation.63

5. Arguments of third parties

(i) Honduras

7.44.
According to Honduras, the evidence required under Article 11.2 cannot consist of mere conjecture, speculation or abstract inferences.64 In relation to those programmes at issue that expired prior to the period of investigation, Honduras argues that the lack of guidelines in the SCM Agreement regarding the allocation of subsidies over time does not lead to an exception to the requirement to provide sufficient evidence of the existence of a subsidy under Article 11.2.65 In relation to the State of Indiana Steel Advisory Service, Honduras argues that the mere creation of an entity whose apparent function is to conduct studies or analyses should not be considered sufficient evidence of the existence of a financial contribution.66

(ii) India

7.45.
India notes that whether the application included the requirements found in Article 11.2 of the SCM Agreement is a question of fact, which India urges the Panel to "evaluate…cautiously and keeping in view an objective interpretation of the requirements enunciated under Article 11.2".67

(iii) Korea

7.46.
Korea submits that the initiation of a countervailing duty investigation is supposed to be a meaningful step, in which the investigating authority carefully examines the information in the petition to determine whether an investigation is justified.68 Article 11.3 of the SCM Agreement requires the investigating authority to examine all the relevant information and materials in the application and to confirm its veracity before making a decision to initiate an investigation. According to Korea, an investigating authority cannot "passively accept the allegations in the petition…and initiate an investigation hoping to confirm the veracity down the road".69

(iv) Saudi Arabia

7.47.
According to Saudi Arabia, Articles 11.2 and 11.3 of the SCM Agreement establish "strict disciplines" to govern the initiation of investigations. The jurisprudence on initiation establishes that authorities have an obligation to ensure that the evidence in an application gives a "reasonable indication" of the existence of subsidization.70 Further, Saudi Arabia notes that the "reasonable availability" of the evidence to the applicant under Article 11.2 is not determinative of the "sufficiency" of the evidence under Article 11.3.71

6. Evaluation by the Panel

7.48.
The United States claims that China acted inconsistently with Articles 11.2 and 11.3 of the SCM Agreement. According to the United States, with respect to 11 programmes, the initial and additional applications did not meet the requirements of Article 11.2. Further, under Article 11.3, an objective investigating authority would not have found sufficient evidence to initiate the investigations. The Panel notes that the United States' claim is the first under Articles 11.2 and 11.3 of the SCM Agreement in the context of WTO dispute settlement, although the initiation of a countervailing duty investigation was considered in the context of the Tokyo Round Subsidies Code.72

(a) The relationship between Articles 11.2 and 11.3 of the SCM Agreement

7.49.
Article 11 of the SCM Agreement sets out certain procedural rules relating to the initiation of countervailing duty investigations. In particular, Article 11.2 of the SCM Agreement sets forth the evidence that must be included in an application for initiation submitted to an investigating authority by or on behalf of a domestic industry. Article 11.3 of the SCM Agreement requires an investigating authority to review the accuracy and adequacy of the evidence in order to determine whether it is "sufficient" to justify initiation of an investigation.
7.50.
The Panel notes that the WTO covered agreements are international agreements between the WTO Members. Consequently, the obligations embodied in them are binding only upon Members and not upon private actors. In the Panel's view, the obligation upon Members in relation to the sufficiency of evidence in an application finds expression in Article 11.3 of the SCM Agreement, which provides that an investigating authority must assess the accuracy and adequacy of the evidence in an application to determine whether it is sufficient to justify initiation. The obligation in Article 11.3 must be read together with Article 11.2 of the SCM Agreement, which sets forth the requirements for "sufficient evidence". If an investigating authority were to initiate an investigation without "sufficient evidence" before it, this would be inconsistent with Article 11.3. Given this interpretation, the Panel considers it appropriate to make findings under Article 11.3 with respect to the 11 programmes at issue. The Panel will reach its conclusions by reference to the requirements for "sufficient evidence" set forth in Article 11.2, but does not consider it necessary to reach separate conclusions under this provision.

(b) Article 11.3 of the SCM Agreement

7.51.
Regarding the standard of review that the Panel should apply under Article 11.3 of the SCM Agreement, both parties agree with the interpretation of the analogous provision under the Anti-Dumping Agreement adopted by the panel in US – Softwood Lumber V. In particular, the parties submit that a panel should determine "whether an unbiased and objective investigating authority would have found that the application contained sufficient information to justify initiation of the investigation".73 The Panel agrees with the parties that its role is not to conduct a de novo review of the accuracy and adequacy of the evidence to arrive at its own conclusion regarding whether the evidence in the application was sufficient to justify initiation. Rather, the Panel must consider the reasonableness of MOFCOM's conclusions, by reference to the test articulated by the panel in US – Softwood Lumber V.
7.52.
Under Article 11.3 of the SCM Agreement an investigating authority has an obligation to determine whether there is "sufficient evidence" to justify initiation of an investigation. Part of this analysis must involve an assessment of the accuracy and adequacy of the evidence furnished. In the Panel's view, when evidence not in the application but relevant to the decision to initiate is submitted to an investigating authority, for example by an exporting Member, an unbiased and objective investigating authority would weigh this evidence in its assessment. Indeed, this is what the language in Article 11.3 implies, in providing that an investigating authority has a duty to determine the accuracy and adequacy of the evidence in the application.74

(c) The "sufficient evidence" requirement under Articles 11.2 and 11.3 of the SCM Agreement

7.53.
A major issue in contention between the parties is the meaning of "sufficient evidence" under Articles 11.2 and 11.3 of the SCM Agreement. China argues that the standard for "sufficient evidence" is much lower than that advocated by the United States.
7.54.
The term "evidence" is defined, relevantly, as "the available facts, circumstances, etc. supporting or otherwise a belief, proposition, etc., or indicating whether or not a thing is true or valid" and "information given personally or drawn from a document etc. and tending to prove a fact or proposition". The term "sufficient" is defined, relevantly, as "adequate".75 The Panel notes that the phrase "sufficient evidence" in Articles 11.2 and 11.3 of the SCM Agreement is used in the context of determining whether the initiation of a countervailing duty investigation is justified. In making this determination, the investigating authority is balancing two competing interests, namely the interest of the domestic industry "in securing the initiation of an investigation" and the interest of respondents in ensuring that "investigations are not initiated on the basis of frivolous or unfounded suits".76 It is clear that at the stage of initiating an investigation, an investigating authority is not required to reach definitive conclusions regarding the existence of a subsidy, injury or a causal link between the two. Rather, as the panel noted in Guatemala – Cement II, an "investigation is a process where certainty on the existence of all the elements necessary in order to adopt a measure is reached gradually as the investigation moves forward".77 Indeed, both parties appear to agree with the reasoning of the panel in US – Softwood Lumber V, in examining the analogous provisions under the Anti-Dumping Agreement, that "the quantity and the quality of the evidence required to meet the threshold of sufficiency of the evidence is of a different standard for purposes of initiation of an investigation compared to that required for a preliminary or final determination".78
7.55.
Therefore, while the amount and quality of the evidence required at the time of initiation is less than that required to reach a final determination, at the same time the requirement of "sufficient evidence" is also a means by which investigating authorities filter those applications that are frivolous or unfounded. Although definitive proof of the existence and nature of a subsidy, injury and a causal link is not necessary for the purposes of Article 11.3, adequate evidence, tending to prove or indicating the existence of these elements, is required. Indeed, in considering the quality of the evidence that should be provided in an application before an investigation is justified, we note that Article 11.2 requires "sufficient evidence of the existence of a subsidy",meaning that the evidence should provide an indication that a subsidy actually exists. It is also clear from the terms of Article 11.2 that "simple assertion, unsubstantiated by relevant evidence" is not sufficient to justify the initiation of an investigation.
7.56.
According to China, the standard for "sufficient evidence" must be interpreted in the light of the requirement in Article 11.2 that the application contain such information as is "reasonably available" to the applicant. In the Panel's view, the fact that an applicant must provide such information as is "reasonably available" to it confirms that the quantity and quality of the evidence required at the stage of initiating an investigation is not of the same standard as that required for a preliminary or final determination. However, an investigation cannot be justified where, for example, there is no evidence of the existence of a subsidy before an investigating authority, even if such evidence is not "reasonably available" to the applicant. Indeed, to justify initiation under Article 11.3, an investigating authority must have "sufficient evidence" (whether from the applicant, exporting Member or arising out its own enquiries) and not mere assertion before it.79
7.57.
In the light of these considerations, the Panel considers that the standard advocated by China is at times overly permissive, as indicated in the Panel's consideration of the 11 programmes at issue.

(d) The required evidence

7.58.
Although the parties disagree about the appropriate standard for "sufficient evidence" under Articles 11.2 and 11.3 of the SCM Agreement, they concur about the categories of evidence referred to under Article 11.2. In particular, the parties note that evidence of the "existence of a subsidy" requires evidence of the existence of a financial contribution and a benefit. The parties also agree that the reference in Article 11.2(iii) to evidence of the "nature" of a subsidy refers to whether or not the subsidy is specific under Article 2 of the SCM Agreement. However, in response to a Panel question, China argues that the lack of any direct reference to "specificity" under Article 11.2 suggests a different and lower evidentiary standard in relation to it. According to China, this distinction recognises the difficulty applicants may face in obtaining evidence of specificity, particularly de facto specificity.80
7.59.
The Panel notes that Article 1.1 of the SCM Agreement provides that a subsidy exists when (a) there is a financial contribution or any form of income or price support; and (b) a benefit is thereby conferred. Therefore, the Panel agrees with the parties that evidence of the existence of a subsidy requires evidence of these two elements.
7.60.
In relation to whether evidence of specificity is required in an application, the Panel concurs with the parties that the reference to evidence of the "nature of the subsidy" includes evidence regarding whether the subsidy is specific. Article 11 is found within Part V of the SCM Agreement. Further, Article 1.2 provides that a subsidy will be subject to Part V only if it is specific within the meaning of Article 2. Therefore, in our view, it is reasonable to conclude that evidence of the "nature of the subsidy" includes evidence regarding whether the subsidy is specific. The alternative would be that the initiation of an investigation would be justified under Article 11.3, even though it may be clear at the time of initiation that the alleged subsidy is not subject to the disciplines of Part V of the SCM Agreement because it is broadly available in a given jurisdiction. This would not be effective in filtering those applications that are "frivolous or unfounded".
7.61.
The Panel acknowledges that the term "nature" is used in a number of sections of the SCM Agreement, and that it may not necessarily refer to "specificity" in each instance. For example, the reference to "nature" in Article 4.5 of the SCM Agreement appears to refer to whether or not a subsidy is prohibited. However, in the Panel's view, and as both parties agree, a consideration of the context in which a term is used can result in different meanings across different provisions.81 As outlined in the previous paragraph, the context in which Articles 11.2 and 11.3 are found supports the parties' view that the "nature" of a subsidy under Article 11.2 (iii) includes evidence of whether or not an alleged subsidy is specific.
7.62.
Having concluded that the evidence referred to in Article 11.2 of the SCM Agreement includes evidence of specificity, the Panel finds no basis for China's argument that a lower evidentiary standard applies in relation to it. There is nothing within the terms of Articles 11.2 or 11.3 to suggest that differing evidentiary standards apply depending upon the purpose for which the evidence is furnished. Rather, the same standard of "sufficient evidence" applies regardless of whether the evidence relates to the existence of a financial contribution, benefit or specificity.

(e) The 11 programmes at issue

(i) Medicare Prescription Drug, Improvement and Modernization Act

7.63.
The issue in contention between the parties is whether the application included any evidence of specificity in relation to the Medicare Prescription Drug, Improvement and Modernization Act. While the United States claims that the application "did not…include any evidence of specificity"82, China argues that evidence that "could represent the existence of either a de jure or de facto specific measure" was submitted with the application.83
7.64.
The purported evidence of specificity relied upon by China is a statement from the AK Steel Annual Report, annexed to the application, that the subsidy is available to "sponsors of retiree healthcare benefit plans that include a qualified prescription drug benefit" and that AK Steel is a sponsor of such a plan. The Panel notes that the application also includes a statement that "the subsidy…is specific".84
7.65.
In the Panel's view, the fact that the subsidy programme is available to sponsors of particular healthcare plans does not provide an indication of de jure specificity. To the contrary, the evidence indicates that eligibility for the subsidy is governed by "objective criteria or conditions" in the sense of Article 2.1(b) of the SCM Agreement, which provides that, subject to Article 2.1(c), "specificity shall not exist" under such circumstances. Further, the evidence that AK Steel sponsors the relevant type of healthcare plan merely indicates that AK Steel is a user of the programme. In our view, this is not sufficient for an unbiased and objective investigating authority to conclude there was any evidence to indicate that the programme was de facto specific. For this purpose, at least some evidence that, for example, AK Steel was the only user or one of a limited number of users of the programme would be required.
7.66.
Further, the Panel is not convinced by China's argument that the purported evidence of specificity was sufficient in the light of the pervasive government support to the United States steel industry, which was discernible from the application. Article 11.2(iii) requires evidence of the "nature", namely the specificity, "of the subsidy in question". In our view, this requires evidence of the nature of each alleged subsidy programme. General information about government policy, with no direct connection to the programme at issue, is not "sufficient evidence" of specificity.
7.67.
China suggests that direct evidence of de facto specificity is typically not reasonably available to applicants.85 However, the fact that an applicant must provide such information as is reasonably available to it does not suggest that an investigating authority is justified in initiating an investigation under Article 11.3 of the SCM Agreement even though there is no evidence of specificity before it.
7.68.
The Panel finds that an unbiased and objective investigating authority could not have concluded that there was sufficient evidence of specificity to initiate the investigation in relation to this programme. Therefore, the Panel finds that China acted inconsistently with Article 11.3 of the SCM Agreement.

(ii) Economic Recovery Tax Act 1981

7.69.
According to the evidence annexed to the application, the Economic Recovery Tax Act 1981 allowed unprofitable corporations with certain unusable federal income tax credits and deductions effectively to sell them to profitable corporations that could use them to reduce their tax liabilities.86 The Act operated for a period of two years, expiring in 1983.87
7.70.
The applicants alleged that the United States steel industry received a subsidy under the Act to the value of USD 750 million.88 The issue in contention between the parties is whether the application included sufficient evidence of the existence of a benefit during the period of investigation, where the application proposed and was based upon a period of investigation from 2006 through the first quarter of 2009 (i.e. the same as the period of investigation ultimately adopted by MOFCOM).89 The purported evidence relied upon by China is a "large benefit" to the steel industry when the subsidies were disbursed over a two year period concluding in 1983.
7.71.
In the view of the Panel, in order to impose a countervailing duty, it is necessary that the product against which it is imposed be presently subsidized. We find support for this in Article 19.1 of the SCM Agreement, which provides that a countervailing duty may be imposed where the "subsidized imports" are causing injury. Further, footnote 36 of the SCM Agreement states that a countervailing duty is "levied for the purpose of offsetting any subsidy bestowed directly or indirectly upon the manufacture, production or export of any merchandise". If the product were not currently subsidized, there would be no subsidy to offset and therefore, no basis for the imposition of countervailing duties. The panel in Japan – DRAMs (Korea) agreed that "present subsidization" is required before countervailing duties may be imposed. In the case of non-recurring or expired subsidies, "present subsidization" requires the benefit of the subsidy to be allocated to the period of investigation and indeed, to the period of imposition of countervailing duties.90
7.72.
Given that Articles 11.2 and 11.3 of the SCM Agreement set out the evidence required before an investigating authority is justified in initiating a countervailing duty investigation, in order to filter those applications that are frivolous or unfounded, we consider that the reference in Article 11.2 to evidence of the existence of a subsidy refers to evidence of the existence of a present subsidy, including the existence of a benefit during the expected period of investigation. The alternative would be that an investigation would be justified under Article 11.3, even though it may be clear that there was no present subsidization and therefore that countervailing duties would ultimately not be authorized.
7.73.
In the Panel's view, an unbiased and objective investigating authority would not have found that the application included "sufficient evidence" to indicate the existence of a benefit during the period of investigation proposed by the applicants. Although the programme ceased to operate more than 20 years prior to the period of investigation, the application does not mention the allocation of the benefit of the subsidy or allege that it would be appropriate to allocate the subsidy over time, much less provide any concrete evidence to this effect. While we do not disagree with China's argument that it may not be appropriate to finalize the allocation period for the benefit of a subsidy at the time of initiation of an investigation, this does not lead to the conclusion that no evidence or even argument regarding "present subsidization" was required in the application. Although China argues that "implicit" in the evidence of a large benefit to the steel industry is a claim that the benefit was allocated to the period of investigation, in our view, in the light of the long period between the expiration of the programme and the period of investigation, an unbiased and objective investigating authority would not conclude that such a claim was indeed implicit in the evidence regarding the amount of the subsidy.
7.74.
In conclusion, given the absence in the application of even a reference to or an argument about allocation of the benefit of the subsidy to the proposed period of investigation, much less the inclusion of any evidence in this regard, the Panel finds that China acted inconsistently with Article 11.3 of the SCM Agreement. In our view, an unbiased and objective investigating authority would not have concluded that initiation was justified.

(iii) Tax Reform Act 1986

7.75.
The Tax Reform Act 1986 granted the steel industry a special transition rule to mitigate the impact of the repeal of a federal investment tax credit.91 The application claimed that this resulted in a benefit of USD 574 million to the United States steel industry over the period 1986-1990. The issue in contention between the parties is the same as that in relation to the Economic Recovery Tax Act, namely whether the application included sufficient evidence of the existence of a benefit during the period of investigation. The United States argues that the alleged subsidies referred to in the application were provided over 15 years prior to the beginning of the period of investigation.92
7.76.
Similarly to its argument in relation to the Economic Recovery Tax Act, China argues that "given the outstanding issue of a potential allocation period and petitioners' claim that a benefit was received", there was sufficient evidence of benefit in the application. Perhaps in an attempt to highlight that the applicants were operating with imperfect information about the subsidy programme and that they presented the information reasonably available to them, China also argues that there was no indication in the evidence collected and presented by the applicants that the programme had been repealed, leaving open the possibility that the programme was still in operation during the period of investigation.93
7.77.
In relation to the latter point, the Panel does not find this line of argument convincing. The evidence in the annex to the application, and cited by the applicants, states that the cost of the subsidy to the government was incurred over the period 1986-1990.94 Further, the evidence cited in the application indicates that the Tax Reform Act provided "an exceptional transitional period" for the steel industry to mitigate the repeal of a certain tax credit. In these circumstances, it is difficult to conclude that the programme may still have been in operation at the time of filing the application, particularly in the light of the fact that the document from which the information was drawn was written in 1999 and does not state that any benefit was received after 1990.95
7.78.
For the same reasons as expressed in relation to the Economic Recovery Tax Act, the Panel concludes that China acted inconsistently with Article 11.3 of the SCM Agreement. In particular, the evidence in the application indicates that the benefit of the subsidy was received during the period 1986-1990, over 15 years prior to the expected period of investigation. In these circumstances, we consider that an unbiased and objective investigating authority would not view information about the amount of the benefit to be sufficient evidence of the existence of a benefit during the period of investigation.

(iv) Steel Import Stabilization Act 1984

7.79.
The annex to the application indicates that under the Steel Import Stabilization Act, VRAs restricting imports of steel into the United States were established. Total imports of steel were capped at 18.5% of market share, with this later increasing to 20.26%.
7.80.
The issue in contention between the parties appears to be whether the application included sufficient evidence of the existence of a financial contribution under Article 1.1(a)(i) of the SCM Agreement, or of "any form of…price support" within the meaning of Article 1.1(a)(2).
7.81.
At the outset we note that it is not entirely clear whether the applicants were alleging that the VRAs constituted a financial contribution or a form of price support or both. The application uses the sub-heading "financial contribution", but the sub-section states that that the voluntary restraint agreements constituted a "government compulsory pricing support mechanism". The sub-section also includes a reference to a document prepared by the American Institute for International Steel, which provides that the Steel Import Stabilization Act "protected the domestic market share of U.S. steel producers…effectively providing them with a government-enforced price support mechanism".96 However, the application also states that the VRAs constituted a subsidy within the meaning of Article 3 of the Chinese Regulations on Countervailing Measures.97 Article 3 effectively replicates Article 1.1(a) of the SCM Agreement, including a reference to financial contribution and "any form of income or price support". In its first written submission, China contends that the application included sufficient evidence of the existence of a financial contribution. In response to Panel questioning, China argues the applicants alleged that the VRAs were a subsidy within the meaning of Article 3 of the Regulations on Countervailing Measures and, according to China, the evidence supported the existence of a financial contribution within the meaning of Article 1.1(a)(1)(iv) of the SCM Agreement, although the application did not include the latter assertion. China notes that, in suggesting the VRAs provided a price support mechanism, the applicants did not specifically reference GATT Article XVI. Nevertheless, the VRAs "might be construed generally as a price or income support".98
7.82.
In the Panel's view, the commentary in the application indicates that the applicants were focused on the VRAs as a form of price support within the meaning of Article 1.1(a)(2) of the SCM Agreement. The application twice refers to the VRAs as a "government compulsory pricing support mechanism" and includes a similar reference in the annex to the application.99 Although there is a reference to Article 3 of the Regulations on Countervailing Measures, this Article refers to "any form of income or price support", so does not necessarily indicate that the applicants were alleging the existence of a financial contribution, as suggested by China. In any event, despite the absence in the application of a specific assertion regarding the existence of a financial contribution, the Panel will assess whether the application included sufficient evidence of either a financial contribution or price support. This is consistent with the terms of Article 11.2 of the SCM Agreement, which focuses on the evidence, rather than the assertions, included in an application.
7.83.
Regarding whether the application included sufficient evidence that the VRAs constituted a form of price support, we note that Article 1.1(a)(2) of the SCM Agreement provides that a subsidy shall be deemed to exist if "there is any form of income or price support in the sense of Article XVI of GATT 1994", where Article XVI deals with subsidies that increase exports or decrease imports. In order to assess whether the application included sufficient evidence of "price support", it is necessary to consider the meaning of this term under Article 1.1(a)(2). There is no definition or other form of guidance in the SCM Agreement regarding the meaning of "price support". Although the Appellate Body has commented that the concept of "income or price support" under Article 1.1(a)(2) broadens the range of measures capable of providing subsidies beyond those that constitute financial contributions, it has not otherwise been required to consider the meaning of Article 1.1(a)(2), and nor has any WTO dispute settlement panel.100
7.84.
On the one hand, the phrase "any…price support" under Article 1.1(a)(2) of the SCM Agreement is broad and, on its face, could be read to include any government measure that has the effect of raising prices within a market. According to Blacks Oxford Dictionary of Economics, price support includes "government policies to keep the producer prices…above some minimum level".101 This does not necessarily contradict a broad reading of Article 1.1(a)(2), although it does suggest that the government sets or targets a given price, and consequently does not capture every government measure that has an incidental and random effect on price.102
7.85.
However, despite the potential for a broad interpretation of the term "price support", reading it in the context of Article 1.1(a) of the SCM Agreement suggests that a more narrow interpretation is appropriate. Under Article 1.1(a)(1)(i)-(iv), the existence of each of the four types of financial contribution is determined by reference to the action of the government concerned, rather than by reference to the effects of the measure on a market. This is consistent with the panel's interpretation of "financial contribution" in US – Export Restraints, which the Appellate Body concurred with in US – Countervailing Duty Investigation on DRAMS.103In US – Export Restraints, the panel noted that the concept of "financial contribution" was included in the definition of subsidy in order to avoid an effects-based approach to the concept of a subsidy. According to the panel:

[B]y introducing the notion of financial contribution, the drafters foreclosed the possibility of the treatment of any government action that resulted in a benefit as a subsidy. Indeed, this is arguably the principal significance of the concept of financial contribution, which can be characterised as one of the 'gateways' to the SCM Agreement, along with the concepts of benefit and specificity. To hold that the concept of financial contribution is about the effects, rather than the nature, of a government action would be effectively to write it out of the Agreement, leaving the concepts of benefit and specificity as the sole determinants of the scope of the Agreement.

Reading the term "price support" in this context, it is our view that it does not include all government intervention that may have an effect on prices, such as tariffs and quantitative restrictions. In particular, it is not clear that Article 1.1(a)(2) was intended to capture all manner of government measures that do not otherwise constitute a financial contribution, but may have an indirect effect on a market, including on prices. The concept of "price support" also acts as a gateway to the SCM Agreement, and it is our view that its focus is on the nature of government action, rather than upon the effects of such action. Consequently, the concept of " price support" has a more narrow meaning than suggested by the applicants, and includes direct government intervention in the market with the design to fix the price of a good at a particular level, for example, through purchase of surplus production when price is set above equilibrium.

7.86.
Although neither the Appellate Body nor any WTO dispute settlement panels have been required to resolve the meaning of the term "price support" under Article 1.1(a)(2) of the SCM Agreement, we find some support for our approach in the reasoning of a GATT panel, which speculated on the circumstances under which "a system which fixes domestic prices to producers at above the world price level might be considered a subsidy in the meaning of Article XVI". The panel agreed that "a system under which a government, by direct or indirect methods, maintains such a price by purchases and resale at a loss is a subsidy". However, the Panel speculated that "where a government fixes by law a minimum price to producers which is maintained by quantitative restrictions…there would be no loss to government" and consequently, no subsidy.104 We note that the conclusion regarding the latter example is less relevant in the context of the SCM Agreement, under which the benefit of a subsidy is defined by reference to market benchmarks, rather than by the cost to government. However, both examples used by the GATT panel at least illustrate that it envisaged "price support" to involve the government setting and maintaining a fixed price, rather than a random change in price merely being a side-effect of any form of government measure.
7.87.
Further, although the SCM Agreement does not include a definition of the term "price support", we note that a concept of "market price support" is included in the Agreement on Agriculture. Annex 3 of that Agreement provides that "market price support" is calculated as the difference between an external reference price and the "applied administered price".105 This indicates, at least for the type of price support contemplated in Annex 3 of the Agreement on Agriculture, that a direct form of government control over domestic prices is required, in the form of a fixed, administered price, rather than a movement in prices being an indirect effect of another form of government intervention.
7.88.
In the light of these considerations, in the Panel's view, "any form of…price support" is not broad enough to encompass VRAs, which may have an incidental side-effect, of random magnitude, on prices. Therefore, we conclude that an unbiased and objective investigating authority would not have concluded that an investigation was justified under Article 11.3 on the basis of the existence of a subsidy in the form of price support.
7.89.
In relation to whether the application included sufficient evidence of the existence of a financial contribution under Article 1.1(a)(1), in its first written submission, China argues that the evidence indicating that the VRAs resulted in "pecuniary benefits" to the United States steel industry constitutes evidence of a financial contribution. In response to a Panel question, China clarifies that its argument relates to Article 1.1(a)(1)(iv) of the SCM Agreement. In particular, according to China, the evidence that the VRAs led to a transfer of wealth from steel purchasers to the United States steel industry "might be seen as evidence of a financial contribution under Article 1.1(a)(1)(iv) of the SCM Agreement given the effect of the measure on private parties, causing them to provide a transfer of funds in the form of higher prices".106
7.90.
The Panel does not agree with the interpretation of Article 1.1(a)(1)(iv) of the SCM Agreement that is advocated by China. In particular, the Panel does not consider that when a government policy, such as a border measure, has the indirect effect of increasing prices in a market, the government has entrusted or directed private consumers to provide direct transfers of funds to the industry selling the good in the affected market.
7.91.
In US – Countervailing Duty Investigation on DRAMS, the Appellate Body found that under Article 1.1(a)(1)(iv) the term "entrusts" connotes "the action of giving responsibility to someone for a task or an object" and the term "directs" involves the exercise of authority by a government over a private body.107 In our view, when the action of a private party is a mere side-effect resulting from a government measure, this does not come within the meaning of entrustment or direction under Article 1.1(a)(1)(iv). The fact that the VRAs resulted in private bodies paying increased prices for steel to the United States steel producers was in no way the result of United States Government action giving responsibility to purchasers to transfer funds to the steel industry or because the Government exercised its authority over the purchasers to ensure that a transfer of funds would occur. Therefore, the increased revenue that the steel industry received after the VRAs came into existence cannot be characterised as evidence of a financial contribution.
7.92.
This conclusion accords with our reasoning in analysing of the meaning of the term "price support".108 In that context, we noted that a financial contribution is defined by reference to the nature of the government action, rather than by its effects. Indeed, in US – Countervailing Duty Investigation on DRAMS, the Appellate Body agreed with the panel's analysis on this point in US – Export Restraints. The Appellate Body stated:

Entrustment and direction do not cover 'the situation in which the government intervenes in the market in some way, which may or may not have a particular result simply based on the given factual circumstances and the exercise of free choice by the actors in that market'. Thus, government 'entrustment' or 'direction' cannot be inadvertent or a mere by-product of governmental regulation…[N]ot all government measures capable of conferring benefits would necessarily fall within Article 1.1(a); otherwise paragraph (i) through (iv) of Article 1.1(a) would not be necessary because all government measures conferring benefits, per se, would be subsidies.

7.93.
In the light of the preceding reasons, the Panel concludes that China acted inconsistently with Article 11.3 of the SCM Agreement. In the Panel's view, an unbiased and objective investigating authority would not have concluded that the application included sufficient evidence of the existence of price support or a financial contribution.109 The fact that a side-effect of the VRAs was that the United States steel industry received increased revenue does not provide evidence of the existence of a financial contribution under Article 1.1(a)(1)(iv). Further, China's reference to the evidence of "pecuniary benefits" received by the steel industry is not evidence of government action within the meaning of Article 1.1(a)(1)(i)-(iv). Therefore, we find that an unbiased and objective investigating authority would not have concluded that sufficient evidence existed to justify an investigation under Article 11.3.

(v) State of Indiana Steel Industry Advisory Service

7.94.
According to the information annexed to the application, in 1987 the State of Indiana formed a "Steel Advisory Commission to examine state and federal laws affecting the steel industry and to consider industry problems such as foreign competition and economic decline".110
7.95.
The issues in contention between the parties are whether the application included sufficient evidence of the existence of a financial contribution and a benefit. The purported evidence of a financial contribution relied upon by China is the existence of "a program established to perform a function in support of the steel industry", including a mandate to "examine state and federal laws affecting the steel industry and to consider industry problems".111 In relation to evidence of a benefit, China argues that the fact the government assumed an obligation that might normally be undertaken by the industry itself is evidence of the conferral of a benefit.112
7.96.
In relation to whether the application included sufficient evidence of the existence of a financial contribution, the Panel notes that it is entirely possible that a programme under which a government studies the laws and problems affecting an industry could give rise to a financial contribution in the form of a provision of a good or service. However, the Panel is not satisfied that an unbiased and objective investigating authority could have concluded that the application included "sufficient evidence" to indicate that this was the case in relation to the Steel Industry Advisory Service. The application includes an assertion that the "government undertook a project which should had been founded by companies with large expense, and therefore provided a large financial contribution".113 Yet the application does not include evidence to indicate that studies under the programme were to be provided or made available to the steel industry, rather than being for internal government use, for the purpose of formulating government policy, for example. Given that "simple assertion unsubstantiated by relevant evidence" is not sufficient under Article 11.2, in the Panel's view, further evidence was required from the applicants tending to indicate that the government was providing a good or service under the programme. The fact that, according to China, the programme "quite plausibly" constituted the provision of a good or service is not sufficient. Rather, some evidence, although not definitive proof, to indicate that the programme conferred a financial contribution was required.
7.97.
The United States argues that a further problem in relation to whether the application included evidence of a financial contribution was that there was no evidence indicating that a study had actually been performed under the programme. In response, China contends that the applicants were dealing with imperfect information and did not know with certainty whether the programme had ever produced a study. Even if such information were not "reasonably available" to the applicants, without evidence of the existence of a financial contribution before it, an unbiased and objective investigating authority could not have found initiation to be justified under Article 11.3 of the SCM Agreement. In the Panel's view, as indicated in the preceding paragraph, and also in the light of the fact that there was no evidence in the application of a study having been conducted under the programme, the evidence regarding the existence of a financial contribution was not such that an unbiased and objective investigating authority could have found an investigation justified. In any event, given that the programme has been in existence since 1987, it would be reasonable to expect the applicants to be able to point to some evidence of its use.
7.98.
In the light of the Panel's finding that China acted inconsistently with Article 11.3 with respect to the evidence of a financial contribution, the Panel does not consider it necessary to proceed to consider the United States' arguments regarding the sufficiency of the evidence of the existence of a benefit.

(vi) Grace Periods for Compliance with the Clean Air Act

7.99.
The application explains that in 1981, legislation granting the steel industry a three-year extension on the deadline for complying with the Clean Air Act came into force. The legislation extended the deadline from 31 December 1982 until 31 December 1985 and the applicants alleged that this reduced the steel industry's costs by USD 3.7 billion.114 The application also refers to a 30 year exception for complying with certain standards in the Clean Air Act Amendment of 1990, which was granted to the steel industry in 1989.115
7.100.
The United States' challenge is limited to the decision to initiate an investigation into the allegation that the three-year extension for compliance with certain environmental standards in the Clean Air Act constituted a subsidy. The United States does not challenge China's investigation into the 30 year exception granted to the steel industry in relation to compliance with the Clean Air Amendment Act of 1990.116
7.101.
The issue in contention between the parties is whether the application included sufficient evidence of the existence of a financial contribution or "any form of income or price support" within the meaning of Article 1.1(a)(2) of the SCM Agreement, and whether it included sufficient evidence of the existence of a benefit during the period of investigation.117
7.102.
The Panel commences its analysis by consideration of the latter point, namely whether the application included sufficient evidence of the existence of a benefit during the expected period of investigation. We note that the grace period for complying with the Clean Air Act ended on 31 December 1985.118 The United States argues that the applicants did not indicate how a benefit could exist during the period of investigation in circumstances where the grace period ended more than 20 years prior to the expected period of investigation. This aspect of the United States' claim raises the same issues as arose in relation to the alleged taxation subsidies.
7.103.
As indicated in our analysis of the taxation programmes, in circumstances where a long period of time has elapsed between the expiry of the alleged subsidy and the period of investigation, a lack of any evidence, or indeed any argument or assertion, regarding whether allocation of the benefit to the period of investigation would be appropriate, leads us to the conclusion that an unbiased and objective investigating authority would not have concluded that there was sufficient evidence of the existence of a benefit during the period of investigation to justify initiation.119
7.104.
Consequently, the Panel concludes that China acted inconsistently with Article 11.3 of the SCM Agreement. In the light of this conclusion, the Panel does not consider it necessary to proceed to consider the second issue in contention between the parties, namely whether, in relation to the grace periods for compliance, the application included sufficient evidence of the existence of "any form of income or price support" within the meaning of Article 1.1(a)(2) of the SCM Agreement.

(vii) 2003 Economic Stimulus Plan of Pennsylvania

7.105.
The evidence annexed to the additional application indicates that Pennsylvania introduced an Economic Stimulus Plan aimed at "creating jobs, bolstering business growth, and revitalizing…communities".120
7.106.
The issue in contention between the parties is whether the additional application included sufficient evidence of de facto specificity. The purported evidence relied upon by China includes documentation demonstrating that AK Steel and ATI are located and prominent in Pennsylvania. Further, China contends the evidence in the additional application demonstrates that the programme is focused on "traditional industries, especially manufacturing".121
7.107.
The Panel does not consider the information regarding the presence and prominence of GOES manufacturers in Pennsylvania to be evidence of de facto specificity. This information demonstrates that AK Steel and ATI may be eligible to be users of the programme, but does not provide any evidence that the steel industry is one of a limited number of users or that it receives a disproportionately large amount of the subsidy, for example. The additional application also states that "the purpose of the Stimulus Packages is to create jobs, bolster businesses and revitalize communities. To achieve this, the Packages must particularly provide its contributions and preference to those influential enterprises and industries in creating jobs and bolstering economies, such as steel industry. Indeed, it's not difficult to discover the de facto specificity clearly existed".122 In our view, the notion that the steel industry must be one of a limited number of enterprises to receive the subsidy, on the basis that the purpose of the Economic Stimulus Plan is to create jobs, bolster business growth and revitalize communities, is mere assertion and is not supported by relevant evidence.
7.108.
The second element of China's argument regarding the sufficiency of the evidence of specificity is that the economic development plan included a focus on "resources that allow our traditional industries, especially manufacturing, to access new technology to enhance their productivity". The parties' arguments regarding whether this provides evidence of specificity seem to reflect different conceptual approaches to the issue. The United States argues that because the Economic Stimulus Plan as a whole included six other focal points, apart from traditional manufacturing industries, the information regarding traditional industries is not evidence of specificity. However, China submits that individual subsidies within a single piece of legislation or measure should be analysed separately. China argues that otherwise there would be "a huge loophole in the specificity requirement where authorities would simply lump different kinds of support for different sectors of the economy into a single piece of legislation or measure in order to claim that, in the aggregate, the measure is too diverse or generally available to justify a finding of specificity".123
7.109.
In order to assess whether the information regarding the focus on traditional industries constitutes sufficient evidence of specificity, it is necessary for the Panel to determine the appropriate conceptual approach to analysing this issue. If the legislation through which a subsidy is enacted necessarily defines the breadth of the specificity analysis, loopholes in the SCM Agreement may arise. In addition to allowing governments to group specific subsidy programmes together in a single piece of legislation to avoid a finding of specificity, a broadly available subsidy programme could be found to be specific if extended to each industry through separate pieces of legislation. Consequently, in the specificity analysis, a subsidy programme should be considered as a whole. The programme should define the breadth of the specificity analysis, rather than the legislation through which it is enacted.
7.110.
In the circumstances of this case, we note that the evidence in the annex to the additional application provides that the economic development package includes:124

· Over $2.8 billion dollars in loans, grants, and guarantees;

· Programs to leverage funds generating at least USD 5 billion in private investment in economic and community development projects;

· Investments in rural, urban, and suburban sites;

· New capital resources for small cities and communities;

· Tools to make Pennsylvania a leader in real estate and business development;

· Incentives and services to attract high-growth firms;

· Resources that allow our traditional industries, especially manufacturing, to access new technology to enhance their productivity

7.111.
In response to a Panel question, China appears to argue that the final "focal point" listed above is an individual subsidy and that its specificity should be analysed by reference to the universe of industries and enterprises to which it applies.125 However, an examination of the additional application indicates that the applicants treated the Economic Stimulus Plan as a single subsidy programme. Although it was open to the applicants to present their arguments on the basis of a number of individual subsidy programmes all enacted under the Economic Stimulus Plan, there is no indication in the additional application that the applicants did this or viewed the provision of access to new technologies as a separate subsidy programme. Rather, the allegations regarding financial contribution and benefit refer to the programme as a whole, with particular examples provided by reference to certain aspects of the programme, including the loans and grants, the research and development tax credits and the joint venture investment guarantees.126 The access to new technologies is not referred to by the applicants until the section on specificity. Certainly, the applicants did not provide any arguments regarding the existence of a financial contribution and benefit in relation to the access to new technologies. As a result, we cannot find any basis for treating this as a separate subsidy programme. Consequently, we consider it appropriate to analyse the question of specificity by reference to the Economic Stimulus Plan as a single subsidy programme.
7.112.
We note that the Economic Stimulus Plan included a diverse range of "focal points", such as economic and community development projects; rural urban and suburban sites; resources for small cities and communities; real estate and business development; and high-growth firms. The information in the additional application indicates that a number of enterprises or industries may have been eligible to receive the alleged subsidies under the programme, including, for instance, the real estate industry, venture capital partnerships, businesses making research and development investments and high-growth enterprises.127 Further, in relation to some of aspects of the programme, such as the provision of loans, grants and guarantees, it is not clear from the evidence in the additional application whether or not these were broadly available. In our view, the evidence suggests that the programme had a much wider application than suggested by China. Consequently, the Panel is not convinced that an unbiased and objective investigating authority would have found that the information regarding a focus on "traditional industries, especially manufacturing" was sufficient evidence of specificity to justify initiation under Article 11.3 of the SCM Agreement.
7.113.
Finally, we note that China repeats the argument made in relation to the Medicare Prescription Drug Improvement, and Modernization Act, namely that the purported evidence of specificity was sufficient in the light of the pervasive government support to the United States steel industry, which was discernible from the application. For the reasons expressed in relation to the Medicare Act, we again do not consider this argument convincing.128
7.114.
Therefore, we conclude that the additional application did not include sufficient evidence of specificity for an unbiased and objective investigating authority to conclude that initiation was justified under Article 11.3 of the SCM Agreement. Although China argues that information regarding de facto specificity is typically not reasonably available to applicants, in the Panel's view, an investigating authority must nevertheless have "sufficient evidence" of specificity before it before an investigation is justified under Article 11.3.

(viii) Pennsylvania's Alternative Energy Funding Plan

7.115.
The evidence in the annex to the additional application indicates that the State of Pennsylvania invested USD 650 million towards "expanding the alternative fuel, clean energy and efficiency sectors". Approximately half of the funding is managed by the Department of Community and Economic Development and this part of the programme focuses on "investing in infrastructure, economic development projects, alternative energy companies and early-stage activities". The remainder of the programme is administered through the Commonwealth Financing Authority, which focuses on business assistance through providing loans and grants to companies for certain categories of projects.129
7.116.
The issue in contention between the parties is whether the additional application included sufficient evidence of the existence of a benefit during the expected period of investigation and sufficient evidence of specificity. The purported evidence of benefit relied upon by China is the "implication of a programme focused on clean energy in relation to an industry known to be high polluting". According to China, evidence that individual respondents actually received a benefit under the programme is not required. The purported evidence of specificity relied upon by China is the documentation which it claims indicates that the loan programme was directed at a narrow group of beneficiaries.130
7.117.
At the outset, we note that the alleged subsidy to the steel industry, as detailed in the additional application, relates to that part of the Alternative Energy Funding Plan administered through the Commonwealth Financing Authority. This is evident because the information in the additional application regarding the existence of a financial contribution refers to the "provision of loans and grants to the local enterprises for their clean and alternative energy projects". Further, the section of the additional application relating to benefit discusses the "provision of loans and grants to qualified enterprises".131 The allegations in the additional application regarding the existence of a financial contribution, benefit and specificity do not refer to the projects to be managed by the Department of Community and Economic Development, namely investment in "infrastructure, economic development projects, alternative energy companies and early-stage activities".132
7.118.
In relation to whether the additional application included sufficient evidence of the existence of a benefit, China argues that for the purposes of an application, it is not necessary to demonstrate that the steel industry actually received a benefit under the programme. However, in our view, on the of basis the totality of the evidence before the investigating authority, an unbiased and objective investigating authority could not have considered an investigation justified under Article 11.3. This is because the United States submitted evidence to MOFCOM demonstrating that the only aspect of the programme administered by the Commonwealth Financing Authority under which loans and grants were distributed during the period of investigation was the Solar Energy project. The evidence provided by the United States to MOFCOM included a document, prepared by the Commonwealth Financing Authority, listing eight companies that had had projects approved for loans and grants as of 14 July 2009.133 None of the companies listed were producers of GOES, or indeed part of the steel industry. As discussed previously in our reasons, when evidence not in the application but relevant to the decision to initiate is submitted to an investigating authority, an unbiased and objective investigating authority should weigh this evidence in its consideration of whether initiation is justified.134 Indeed, this is what the language in Article 11.3 implies, namely that an investigating authority has a duty to determine the accuracy and adequacy of the evidence in the application. Weighing the evidence submitted to MOFCOM by the United States, namely a document prepared by a government body indicating that no financial contribution or benefit was received by the respondent companies during the period of investigation, against the additional application which did not include any evidence or even an assertion to the contrary, a reasonable investigating authority could not have concluded that an investigation into the programme was justified. This is because it was clear at the time of initiating that there would be no basis to impose countervailing duties against the products exported by AK Steel and ATI. In reaching this conclusion, we note that the additional application is concerned with a benefit to be received directly by the steel industry, rather than a benefit "passed-through" from other companies.
7.119.
Therefore, the Panel concludes that China acted inconsistently with Article 11.3 of the SCM Agreement on the basis that an unbiased and objective investigating authority could not have concluded that there was sufficient evidence of the existence of a benefit to the steel industry during the expected period of investigation to justify initiation. In the light of this conclusion, the Panel does not consider it necessary to proceed to examine whether the additional application included sufficient evidence of specificity.

(ix) Natural Gas

7.120.
The issue in dispute between the parties is whether the additional application included "sufficient evidence" of the existence of a financial contribution, benefit and specificity under Articles 11.2 and 11.3 of the SCM Agreement. The additional application includes allegations of two different types of subsidies. In particular, the additional application contends first, that the United States Government regulates the price of natural gas and provides it to the steel industry at below market prices and second, that subsidies provided to the natural gas industry "pass-through" to the steel industry.135
7.121.
The annex to the additional application includes a significant amount of evidence related to the natural gas industry. In its first written submission, China highlights a number of aspects of this evidence that it relies upon as "sufficient" for the purposes of Articles 11.2 and 11.3 of the SCM Agreement. In particular, China notes the evidence of a long history of government regulation of the natural gas sector; evidence of price differentiation between the prices paid by the steel industry and the average price paid in the economy; and evidence of subsidies to the natural gas industry.136
7.122.
In relation to the first type of subsidy alleged in the additional application, namely the government provision of goods or services at below market prices, the additional application discusses historical regulation by the United States Government of natural gas prices. The additional application also states that despite the "loosening of regulation…over the natural gas industry…industrial enterprises still had no other choice but to buy natural gas from the network companies at regulated prices".137 However, an examination of the evidence regarding the United States natural gas industry in the annex to the additional application does not support the applicant's position that the government currently regulates natural gas prices. In particular, the evidence suggests a history of government regulation of natural gas prices, with a gradual decrease in the degree of regulation, to the current situation of market determined prices. The evidence provides that in 1985, the Federal Energy Regulatory Commission published Decree 436, which opened up the function of the delivery of natural gas "to allow the user to negotiate directly with the producer to set the price".138 Further, in 1989 the Natural Gas Wellhead Decontrol Act was passed, which abolished all regulation over the wellhead price of gas. The Act required abolition of the price regulation by 1993, from which time the market determined the natural gas price.139 Finally, in 1992, the Federal Energy Regulatory Commission published Decree 636, which abolished "take-or-pay" contracts and reorganized network companies to allow users to choose any producer of natural gas.140
7.123.
Although China argues that the additional application includes evidence of "continued vestiges of government price regulation through lower-reach development companies", we do not agree with this reading of the evidence.141 The evidence regarding the history of government regulation of the natural gas industry, found in the annex to the additional application, indicates that, when the government began loosening its regulation over the industry "the lower-reaches distribution companies (LDC) and industrial corporations still had no other choices but to purchase gas from network companies at the regulated price".142 However, the annex states that Decree 436, published in 1985, required network companies to "open the function of delivering natural gas to all natural gas users including low-reaches selling companies…and to allow the user to negotiate directly with the producer to set the price".143 As indicated in the preceding paragraph, the government continued with further deregulation after Decree 436. Therefore, China's reference to government price regulation through lower-reach development companies is a reference to historical regulation and does not provide support for the allegation that the government currently provides natural gas to the steel industry at below market prices.
7.124.
As well as the evidence in the additional application indicating that the United States Government does not regulate natural gas prices, this was drawn to MOFCOM's attention in the United States' comments on the new subsidy allegations. In its comments, the United States noted that "the natural gas market was deregulated in the 1980s. The market described by petitioners no longer exists (if, indeed, it ever existed). GOES producers purchase natural gas on the open market".144
7.125.
Therefore, in the light of the evidence provided by the applicants themselves, which was supplemented by comments from the United States to MOFCOM prior to initiation, the Panel concludes that China acted inconsistently with Article 11.3 of the SCM Agreement. In the Panel's view, an unbiased and objective investigating authority could not have concluded that there was sufficient evidence of a financial contribution or a benefit, in the form of government provision of a good or service at below market prices, to justify initiation under Article 11.3 of the SCM Agreement.145 The evidence indicates that natural gas is purchased by the steel industry at prices determined by the market.
7.126.
With respect to the second type of subsidy referred to in the additional application, namely indirect subsidization of the steel industry via subsidies provided to the natural gas industry, the Panel is not convinced that an unbiased and objective investigating authority could have found that the additional application included sufficient evidence of specificity to justify initiation under Article 11.3 of the SCM Agreement.
7.127.
The Panel is satisfied that the additional application includes evidence of subsidies granted to the natural gas industry.146 Regarding the existence of a benefit to the steel industry, the additional application includes an allegation, although no supporting evidence, of "pass-through" of the subsidies to the steel industry. The position of China appears to be that an allegation of pass-through of a subsidy from an upstream to a downstream producer is sufficient for the purposes of initiating an investigation. The Panel does not consider it necessary to resolve what type of evidence of pass-through is required at the stage of initiating an investigation. This is because, even assuming that the additional application included sufficient evidence of pass-through of the benefit to the steel industry, an unbiased and objective investigating authority could not have concluded that there was sufficient evidence of specificity.
7.128.
Although the subsidies could be specific to the natural gas industry, the applicants alleged that the subsidies ultimately flow through to the steel industry, with steel being the product to be countervailed. In these circumstances, some evidence that the steel industry falls within a category of "certain enterprises" to which the subsidy is specific is required. However, there is no evidence that any pass-through that occurs is specific to the steel industry. In particular, if an allegation of pass-through is accepted for the purposes of the application, there is no reason to assume that the benefit did not pass-through to all purchasers of natural gas, rather than to the steel industry specifically. In this regard, we note the panel's statement in US – Softwood Lumber IV that where a subsidy is provided in the form of the provision of a good by the government, where the good is in the form of a natural resource, there is no implication that such a subsidy is necessarily specific, precisely because such goods may be used by an indefinite number of industries.147 Similarly, in this case, the subsidy to the natural gas industry may "pass-through" to an indefinite number of industries that purchase natural gas.
7.129.
Although China appears to rely upon evidence of price differentiation to indicate "the possibility of…specificity",148 in circumstances where we have found that natural gas prices are set by the market, we have no basis to conclude that any price differentiation indicates that pass-through is specific to the steel industry. There is nothing to indicate this is the case rather than the price differentiation being due to market forces.
7.130.
Finally, the Panel notes that China makes a general argument that evidence of specificity may not be "reasonably available" to applicants.149 In the Panel's view, whether or not this is the case, an investigating authority must nevertheless have "sufficient evidence" of specificity before it, whether provided by the applicants or otherwise, before an investigation can be justified. The Panel is not convinced that this was the case.
7.131.
Therefore, with respect to the second type of subsidy alleged in the additional application, namely indirect subsidization of the steel industry via subsidies provided to the natural gas industry, the Panel finds that an unbiased and objective investigating authority could not have concluded that the additional application included sufficient evidence of specificity to justify initiation under Article 11.3 of the SCM Agreement.

(x) Electricity

7.132.
The issue in contention between the parties is whether the additional application included sufficient evidence of the existence of a financial contribution, benefit and specificity in accordance with Articles 11.2 and 11.3 of the SCM Agreement. The applicants alleged that the United States electricity industry, including its pricing, is largely controlled by the United States Government and that electricity is provided to the steel industry at a low price. The applicants also argued that subsidies provided to the electricity industry pass-through to the steel industry.
7.133.
Before addressing the substance of the United States' claim, we note that the additional application includes a number of exhibits related to the electricity industry in the United States. For the purposes of our analysis, we have found the following information in the exhibits to be of most relevance:

(i) The Federal Energy Regulatory Commission regulates interstate power transmission and the wholesale electricity market. The regulation of the wholesale market includes examining and approving the power price. In particular, every power company submits a tariff table to the Federal Energy Regulatory Commission, which has the power to adjust and amend the table if it is not in line with the public interest150;

(ii) There are also state-based electric power regulatory institutions that regulate the price for power distribution and in-state retail sales151;

(iii) The additional application also indicates that there are four categories of companies that make up the United States electricity industry: (a) public power companies that are "operated by privates"; (b) independent power generating companies; (c) municipal power companies owned by local governments; and (d) the hydropower regulatory bureaus belonging to the Federal Government152; and

(iv) There is differentiated pricing in the electricity market, with the steel industry receiving a lower price than some other industries and a lower price than the national average.153

7.134.
In its comments on the additional application, the United States adds the following information about the United States electricity industry:154

(i) There are no national policies directing the electricity industry to provide energy to the steel industry at lower prices;

(ii) There is no agency that sets retail prices for electricity for the entire country;

(iii) Any difference in price paid by the steel industry for electricity is due to a "bulk discount" negotiated directly between the steel industry and the electricity company;

(iv) Differences in prices are due to market forces;

(v) Steel producers pay less for electricity because they purchase it from non-utilities at a substantial discount; and

(vi) One of the GOES companies in the United States receives its electricity purely from private entities.

7.135.
With respect to the alleged direct subsidies to the steel industry, assuming arguendo that the additional application included sufficient evidence of the existence of a financial contribution, namely the provision of goods or services by the government, or by a private body entrusted or directed by the government, the Panel is not convinced that the additional application included sufficient evidence of the existence of a benefit, such that an unbiased and objective investigating authority could have considered initiation of an investigation to be justified. The additional application asserts that "the amount of subsidy for this program shall be the difference between the preferential electricity power price actually paid by the companies concerned and the normal market electricity power price payable to the companies concerned".155 However, the additional application does not include evidence of the appropriate market benchmark price, or evidence that the comparison between the benchmark and the price charged to the steel industry was performed by the applicants. Although the additional application compares the price paid by the steel industry with the national average electricity price and with two selected industries, it is not clear why these constitute comparisons to an appropriate market benchmark. Indeed, if the electricity industry operates as the applicants asserted, namely that the government intervenes to set prices, rather than market forces doing so, a benchmark chosen from within this system would not appear to represent a market price.
7.136.
Similarly, even assuming that the government intervenes in the electricity market to provide it to the steel industry at below market prices, there is nothing to suggest that the steel industry alone benefits from this intervention, or that access to this subsidy is otherwise limited to "certain enterprises". The additional application includes broad assertions regarding specificity, including "the [United States Government]… controls the electricity power price of electricity power companies owned or controlled by the government to provide low-priced electricity to the steel industry…such preferential treatment specific to a certain industry is clearly characterised as specific".156 However, the additional application does not include evidence to indicate that the alleged subsidy is indeed only provided to the steel industry or to a limited group of beneficiaries. In our view, an unbiased and objective investigating authority could not have concluded that the differentiated pricing in the market provided sufficient evidence of specificity. In fact, the evidence of the wide range of prices charged by the electricity industry in the United States tends to suggest that deviation from the market benchmark price, whatever that may be, is widespread. In general, the arguments in the additional application that the Government intervenes in the pricing of electricity specifically to benefit the steel industry are somewhat speculative.
7.137.
The additional application also includes an allegation of pass-through of subsidies from the electricity industry to the steel industry.157 To the extent the allegation of pass-through relates to private companies that are entrusted or directed to provide electricity to the steel industry at particular prices, including being directed to pass-through subsidies, the preceding paragraph of our reasoning applies. In particular, apart from assertion, there was not sufficient evidence in the additional application for an unbiased and objective investigating authority to conclude that the steel industry specifically benefits from this intervention.
7.138.
To the extent the allegation of pass-through refers to subsidies provided to private electricity companies that are not directed by the government to provide electricity to the steel industry at particular prices, we refer to our analysis of the allegations of pass-through in relation to the natural gas industry.158 Even assuming that the additional application included sufficient evidence of pass-through of the benefit to the steel industry, an unbiased and objective investigating authority could not have found that the additional application included sufficient evidence of specificity. Although the subsidies could be specific to the electricity industry, the applicants alleged that the subsidies ultimately flowed through to the steel industry, with steel being the product to be countervailed. In these circumstances, some evidence that the steel industry falls within a category of "certain enterprises" to which the subsidy is specific is required. However, there is no evidence that any pass-through that occurs is specific to the steel industry. In particular, if an allegation of pass-through is accepted for the purposes of the application, there is no reason to assume that the benefit did not pass-through to all purchasers of electricity, rather than to the steel industry specifically. Although China appears to rely upon evidence of price differentiation for this purpose,159 in circumstances where a private company is setting the price for electricity, without direction from the government, which is the focus of our analysis in this paragraph as opposed to the preceding one, there is no basis to conclude that any price differentiation indicates that pass-through is specific to the steel industry. There is nothing to indicate this is the case rather than the price differentiation being due to market forces.
7.139.
Therefore, the Panel finds that the additional application included insufficient evidence for an unbiased and objective investigating authority to conclude that initiation was justified under Article 11.3 of the SCM Agreement.

(xi) Coal

7.140.
The issue in contention between the parties is whether the additional application included sufficient evidence of the existence of a financial contribution, benefit and specificity for the purposes of Articles 11.2 and 11.3 of the SCM Agreement. The additional application alleges that the United States Government provides subsidies to the coal industry and that the subsidies "pass-through" to the steel industry, which is a major user of coal.160
7.141.
The Panel notes that the additional application included some evidence of subsidization of the coal industry, although not through the American Clean Energy Security Act 2009, which did not exist during the proposed period of investigation.161
7.142.
In relation to whether the additional application included sufficient evidence of pass-through of the benefit of the subsidies from the coal industry to the steel industry, we note that the additional application included an allegation that the subsidies to the coal industry would "no doubt allow the subsidized companies to…confer considerable benefits to the GOES producers".162 The additional application does not include any supporting evidence for this statement.
7.143.
Again, in a similar manner to our reasoning in relation to the alleged pass-through of natural gas subsidies, the Panel does not consider it necessary to determine what evidence would be "sufficient" under Articles 11.2 and 11.3 for the purposes of tending to prove the "pass-through" of a benefit from an upstream to a downstream entity. This is because, in any event, in the Panel's view an unbiased and objective investigating authority could not have concluded that the additional application included sufficient evidence tending to indicate that any subsidy to the steel industry was specific. Although the subsidies may have been specific to the coal industry, the applicants alleged that the subsidies ultimately flow through to the steel industry, with steel being the product to be countervailed. In these circumstances, some evidence that the steel industry falls within a category of "certain enterprises" to which the subsidy is specific is required.
7.144.
In the section on specificity, the additional application asserts that "coal is an important energy input for the steel industry".163 Further, China argues that "the steel industry's substantial use of coal…goes to the issue of de facto specificity".164 However, this is not evidence indicating or tending to prove specificity. It does not demonstrate that the coal subsidies pass-through to a limited number of enterprises or in a disproportionately large amount to the steel industry, for example.
7.145.
The application also relies upon a history of government support to the steel industry as evidence of specificity.165 However, as indicated in our analysis of the Medicare Prescription Drug, Improvement and Modernization Act, Article 11.2(iii), which sets out categories of evidence for which sufficient evidence is necessary before an investigation is justified under Article 11.3, requires evidence of the nature "of the subsidy in question". In our view, this requires evidence of the specificity of each alleged subsidy programme. General information about government policy, with no direct connection to the programme at issue, is not "sufficient evidence" of specificity.
7.146.
Although China argues that evidence of de facto specificity is typically not reasonably available to applicants, in the Panel's view, an investigating authority must nevertheless have "sufficient evidence" of specificity before it to justify an investigation under Article 11.3 of the SCM Agreement.
7.147.
In the light of the preceding reasons, the Panel concludes that an unbiased and objective investigating authority would not have found that the additional application contained sufficient information of specificity to justify initiation of the investigation. Consequently, China acted inconsistently with Article 11.3 of the SCM Agreement.

(f) Conclusion

7.148.
The Panel concludes that China acted inconsistently with Article 11.3 of the SCM Agreement in relation to each of the 11 programmes at issue.

C. WHETHER CHINA ACTED INCONSISTENTLY WITH ARTICLES 12.4.1 OF THE SCM AGREEMENT AND 6.5.1 OF THE ANTI-DUMPING AGREEMENT BECAUSE MOFCOM FAILED TO REQUIRE ADEQUATE NON-CONFIDENTIAL SUMMARIES

1. Provisions at issue

7.149.
Article 12.4.1 of the SCM Agreement and Article 6.5.1 of the Anti-Dumping Agreement provide:

The authorities shall require [interested Members or] interested parties providing confidential information to furnish non-confidential summaries thereof. These summaries shall be in sufficient detail to permit a reasonable understanding of the substance of the information submitted in confidence. In exceptional circumstances, such [Members or] parties may indicate that such information is not susceptible of summary. In such exceptional circumstances, a statement of the reasons why summarization is not possible must be provided.166

2. Factual Background

7.150.
The applicants sought and obtained from MOFCOM confidential treatment in relation to a number of types of information, listed in Part II-1 of the application.167 Consequently, broad categories of information about GOES were redacted from the application, including the total domestic output, the applicants' total output, the domestic sales price, domestic consumption and the applicants' sales revenue, costs and pre-tax profit. The United States argues that the applicants did not provide adequate non-confidential summaries of the information.

3. Arguments of the United States

7.151.
The United States submits that Article 12.4.1 of the SCM Agreement and Article 6.5.1 of the Anti-Dumping Agreement require parties to furnish adequate non-confidential summaries, allowing for a reasonable understanding of the substance of the confidential information.168 The United States interprets China's position as claiming the existence of "exceptional circumstances", to excuse it from the obligation of providing non-confidential summaries. The United States notes that this was never asserted during the course of the investigation and is post hoc rationalization.169
7.152.
According to the United States, an examination of the petition demonstrates that the applicants intended Part II of the petition to constitute the non-confidential summary of the redacted information. This is clear because page 2 of the petition states that "a non-confidential summary of the confidential information was provided along with this petition" and Part I of the petition directs the reader to consult Part II of the petition for the purported non-confidential summaries. Further, Part II is entitled "non-confidential summary".170 The United States argues that the purported non-confidential summaries in Part II are "utterly inadequate" and say almost nothing about the "substance" of the confidential information submitted.171
7.153.
The United States suggests that MOFCOM could have used any of a number of techniques to summarize the information in a manner that would have preserved its confidentiality, while still allowing interested parties to have a reasonable understanding of the substance of the information submitted. The United States gives the example of presenting numerical data as a trend-line or in indexed fashion, instead of in absolute terms.172
7.154.
The United States characterizes China's response to its claim as suggesting that an "adequate" non-confidential summary need only be provided if an interested party objects to the manner in which confidential information is summarized. However, the United States argues that whether an interested party objects during the proceeding to the adequacy of a summary is irrelevant to whether the obligations in Articles 12.4.1 of the SCM Agreement and 6.5.1 of the Anti-Dumping Agreement are met.173 The United States also argues that China's submissions reflect a mistaken view that an investigating authority's obligation to ensure that the interested parties furnish adequate non-confidential summaries may be excused if there is some subsequent "non-confidential analysis" contained in the investigating authority's own determinations.174
7.155.
The United States' primary position is that Part II of the petition contains the purported non-confidential summaries. However, the United States contends that even if the general statements "scattered" throughout Part-I of the petition could be relied upon as summarizing the confidential information, as argued by China, the supposed summaries in the body of the petition are inadequate. Unlabelled trend lines and year-over-year percentage changes without the necessary context of absolute values (in the form of an average, for example) are inadequate. Further, the absence of a label or other form of identification linking the purported non-confidential summaries, found throughout the petition, with the redacted information, is a factor that undermines the adequacy of the summaries. According to the United States, it was not practicable for interested parties to piece together information from the record to create non-confidential summaries.175 The United States addresses the arguments of China in relation to each of the categories of confidential information that it challenges as inadequately summarized:

(i) Output of the applicants, total output of GOES in China, proportion of the applicant's output in relation to China's total output

7.156.
According to the United States, at no point does China assert that the non-confidential summary of the output of the applicants was sufficient. Rather, China contends that the "details are not needed" or that the "main point" was standing and that this was evident from the other information provided. The United States argues that China requires the respondents to engage in guesswork to surmise an understanding or "the point" of the substance of the confidential information. Further, China's reliance on "Appendix 13" as summarizing the output of the applicants is inapposite. The petition does not contain a single reference to Appendix 13 and it is impossible to determine whether the applicants relied on Appendix 13 for their output figures. Therefore, it is not possible to determine whether Appendix 13 provides an adequate non-confidential summary.176

(ii) The Chinese Industry

7.157.
Regarding trends in domestic consumption, the United States argues that redacting the data on the consumption of GOES in China and stating that it represents "a growth of about 50% over 2006", does not provide a reasonable understanding of the redacted information. Without absolute values, it is impossible to attribute any meaning to the statement that there was 50% growth.
7.158.
With respect to the trends in domestic production, the United States argues that stating domestic output grew less rapidly than imports does not shed light on the contents of the redacted information, namely the numerical data on domestic output over the period 2006-2008. Further, China's reliance on percentage changes more than fifty pages later in the petition is not credible and would require respondents to engage in a fishing expedition for the missing information.
7.159.
Regarding trends in domestic prices, the United States contends that stating "the price of subject imports was always lower than that of the applicants" does not shed light on the contents of the redacted information, namely the domestic price per ton. China's reliance on unlabelled trend lines in a section of the petition disconnected from the Chinese domestic industry discussion is an inadequate summary of the information.177

(iii) Similarity or likeness of production techniques

7.160.
The United States notes that the application simply redacts certain information. Therefore, the respondents could not comment meaningfully on the "like product" issue.178

(iv) Change of price

7.161.
The United States' position is that the trend lines found in the petition are an inadequate summary of the pricing data. The United States argues that trend lines need to be labelled to provide necessary context.179

(v) Dumping margin of GOES imports from the United States

7.162.
In response to China's position that the United States could have performed reverse engineering to obtain the redacted data, the United States argues that this is an admission that the non-confidential summary was inadequate. It is not acceptable to require respondents to make educated guesses regarding information for which a non-confidential summary was not provided.180

(vi) Apparent consumption of GOES in China

7.163.
The United States contends that the purported summaries of the consumption of GOES in China are inadequate. The reliance by China on Table 23 of the petition does not advance China's case, because the information in it is entirely redacted, with no cross-reference to a summary in any other section of Part I of the petition.181 Further, the "percentage change" discussed fifty pages earlier in the petition is merely a statement that consumption grew by 50% between 2006 and 2008. Finally, in relation to China's reliance upon Table 32 of the petition, the United States notes that the table does not provide a proper contextual framework to allow the substance of the information to be understood.182

(vii) Suppressing or depressing effects on domestic prices

7.164.
The United States argues that year-on-year percentage changes in domestic average prices are not an adequate non-confidential summary because the significance of the absolute changes is not revealed. Unlabelled trend lines are also inadequate.183

(viii) Influence on the Chinese domestic industry

7.165.
The United States contends that a significant portion of the injury indicia data is missing some or all of the non-confidential summary information. In particular, aside from the fact that year-over-year percentage changes are not an adequate non-confidential summary, they are not provided on a consistent basis for all indicators.184

(ix) Statistics and information about dumping by the United States

7.166.
According to the United States, China does not contest its claim that the petitioners provided an inadequate summary of this category of confidential information.185

4. Arguments of China

7.167.
China disputes the United States' claims under Articles 12.4.1 of the SCM Agreement and 6.5.1 of the Anti-Dumping Agreement. In particular, China argues that proper non-confidential summaries were provided in Part I of the petition and that these summaries were later supplemented by the non-confidential analysis by MOFCOM in its determination and by the parties in their arguments to MOFCOM.186 China does not invoke the "exceptional circumstances" exemption under Articles 12.4.1 of the SCM Agreement and 6.5.1 of the Anti-Dumping Agreement. Rather, China argues that the adequacy of the non-confidential summaries should be assessed in the context of the circumstances of the investigation. In particular, China argues that in the GOES investigation the fact that there were only two Chinese producers constitutes an "exceptional circumstance".187 In this context, if an authority were to aggregate the data provided by all domestic producers in order to provide a non-confidential summary to interested parties, each domestic producer would be able to disaggregate the data to reveal the confidential information submitted by its competitor. This would not adequately protect the confidential information.188
7.168.
According to China, Article 12.4.1 of the SCM Agreement and Article 6.5.1 of the Anti-Dumping Agreement do not require complete or perfect disclosure. Rather, the summary must be in "sufficient detail" to allow a reasonable understanding of the information, in the light of the purpose for which the information is submitted.189 In determining whether a summary permits a "reasonable understanding" of the confidential information, relevant context, such as the importance of precise numerical information to an argument and whether there is public information that can provide context for the missing information, should be considered. China argues that the United States' approach, requiring a statement of reasons if a single number is missing, is too impractical and mechanical.190
7.169.
China contends that the United States mistakenly focuses on the statements in Part II of the petition, assuming that they are the non-confidential summaries. Part II of the petition clearly states that the "petitioners made explanations in the public version of the petition about the part that were applied for confidential treatment".191 Part II was included "to identify each category of information for which confidential treatment was requested, to justify confidential treatment on the basis of competitive or adverse effects, and to ensure that other parties fully understood what information was redacted".192
7.170.
In addressing Part I of the petition, China understands the United States to be arguing that it cannot comprehend the non-confidential summaries because they are in the substantive portion of the text of the petition (Part I), rather than in the portion of the text which describes the categories of information for which confidential treatment was sought.193 China responds to this argument by noting that Articles 12.4.1 of the SCM Agreement and 6.5.1 of the Anti-Dumping Agreement do not address the manner in which a non-confidential summary should be identified or the form it should take. In particular, there is no requirement for the non-confidential information to be "linked" to the information being summarized.194
7.171.
China addresses each of the topic areas that United States claims was treated confidentially but was not adequately summarized:

(i) Output of petitioners and standing

7.172.
China acknowledges that a table regarding the production of the petitioners was redacted. However, China reasons that the information was relevant to the standing of the petitioners. As the public version of the petition makes a factual assertion of standing, this is sufficient to allow a reasonable understanding of the table. China also argues that there was evidence in the public version of the petition indicating that the two petitioners make up the entire Chinese GOES industry, therefore satisfying the standing criteria under WTO rules.195

(ii) Chinese domestic industry

7.173.
China notes that a section of the petition detailing trends in the Chinese GOES industry had specific numbers deleted. China argues that the deleted information was summarized either in the same section or elsewhere in the public version of the petition. For example, trends in consumption were summarized through the provision of percentage changes in domestic apparent consumption; trends in domestic production were summarized by contrasting the rate of growth of imports with the rate of growth of domestic shipments and by providing the specific growth percentages in another section of the petition; trends in domestic prices were summarized by asserting that import average unit values were below the average unit values of the petitioners and by graphing trend lines.196

(iii) Similarity or likeness of production techniques

7.174.
China argues that information about specific production processes was confidential but that a "general overview of the basic points" of this information was provided.197

(iv) Change of price

7.175.
China notes that information on specific average unit values of the petitioners' product was removed from a table. However, the public version of the petition includes a non-confidential version of the information in the form of trend lines, comparing relative domestic and import prices.198 According to China, when read in conjunction with public import prices, the trend lines allow interested parties to understand both the relative trend in prices and the magnitude of the price differential over time.199

(v) Dumping margins for GOES from the United States

7.176.
China notes that the petitioners' estimates of freight costs and the numbers derived from that information are deleted from the petition. However, China contends that disclosing the relevant methodology and the majority of numbers is an adequate summary. Further, based on the formula and numbers disclosed, some of the missing information could have been derived by the United States.200

(vi) Apparent consumption of GOES in China

7.177.
China argues that deleted information about the apparent level of domestic consumption was summarized in the form of year-to-year percentage changes.201

(vii) Suppressing or depressing effects on domestic prices

7.178.
China submits that data on average unit values for the domestic product was summarized through the use of trend lines and percentage changes.202

(viii) Influence on the Chinese domestic industry

7.179.
Actual numbers regarding the state of the domestic industry were deleted. However, China states that for each indicator a percentage change was provided as a non-confidential summary.203

(ix) Statistics and information about dumping by the United States

7.180.
China relies upon the same summary as it does for the category "dumping margin of GOES".204

5. Arguments of third parties

(i) Argentina

7.181.
Argentina submits that the objective of Article 6.5.1 of the Anti-Dumping Agreement and Article 12.4.1 of the SCM Agreement is to guarantee a right of defence to interested parties. MOFCOM should have required the interested parties to furnish non-confidential summaries.205
7.182.
According to Argentina, providing year-on-year percentage changes and trend lines not labelled to scale does not constitute an adequate non-confidential summary because information on absolute values should be provided. However, Argentina submits that absolute values should not be required for production costs, due to the sensitivity of this information.

(ii) European Union

7.183.
The European Union argues that Articles 6.5.1 of the Anti-Dumping Agreement and 12.4.1 of the SCM Agreement not only impose an obligation on the interested party to provide a non-confidential statement, but also impose an obligation on investigating authorities to require that such a statement be provided.206
7.184.
The European Union is not convinced by China's position that "exceptional circumstances" within the meaning of Articles 6.5.1 of the Anti-Dumping Agreement and 12.4.1 of the SCM Agreement exist when there are only two producers. In the European Union's view, in cases where there are only two producers, it is still possible to prepare non-confidential summaries (in the form of indices, for example).207

(iii) India

7.185.
India submits that Article 6.5.1 of the Anti-Dumping Agreement is of critical importance in preserving the balance between the interests of confidentiality and the ability of interested parties to defend their rights in an investigation.208

(iv) Korea

7.186.
Korea notes that in its anti-dumping investigations, the Korea Trade Commission utilizes "percentage numbers" in lieu of actual numbers, as a form of non-confidential summary. However, if indices or other alternative means of summarization would reveal confidential information (for example, when only two or three firms are involved), "such information may warrant confidential treatment".209

6. Evaluation by the Panel

(a) Articles 12.4.1 of the SCM Agreement and 6.5.1 of the Anti-Dumping Agreement

7.187.
The issue in contention between the parties is whether the applicants provided non-confidential summaries of the confidential information redacted from the application, in accordance with the requirements of Articles 12.4.1 of the SCM Agreement and 6.5.1 of the Anti-Dumping Agreement.
7.188.
Articles 12.4.1 of the SCM Agreement and 6.5.1 of the Anti-Dumping Agreement oblige investigating authorities to require interested parties, and interested Members in the case of the SCM Agreement, to furnish non-confidential summaries of any confidential information provided. The summaries must permit a "reasonable understanding" of the substance of the confidential information submitted. In the Panel's view, the broad nature of the requirement to furnish non-confidential summaries applies to confidential information submitted in an application, as well as to information submitted in the course of an investigation. Articles 12.4.1 and 6.5.1 permit an exemption to the requirement to provide non-confidential summaries when "exceptional circumstances" exist, which render the confidential information incapable of summarization. However, in such a case, a statement of reasons why summarization is not possible must be provided.
7.189.
The obligations in Articles 12.4.1 of the SCM Agreement and 6.5.1 of the Anti-Dumping Agreement fall upon the investigating authorities. The Appellate Body agreed with this interpretation in EC – Fasteners (China). The Appellate Body found that in respect of information treated as confidential under Article 6.5, Article 6.5.1 imposes an obligation on the investigating authority to require that a non-confidential summary of the information be furnished.210 The Appellate Body noted that this accommodates the concerns of confidentiality, transparency and due process.211 Where "exceptional circumstances" exist, such that non-confidential information is not susceptible of summary, Article 6.5.1 requires that the party identify the exceptional circumstances and provide a statement explaining why summarization is not possible. The investigating authority must scrutinize such statements to determine whether they establish "exceptional circumstances".212
7.190.
An issue in contention between the parties in the circumstances of this case is when the obligation to furnish a non-confidential summary arises. In particular, China argues that the "non-confidential summaries provided in the application itself were later supplemented by non-confidential analysis provided by MOFCOM in its determination, and by the parties in their arguments to MOFCOM".213 In the Panel's view, China's reasoning in this regard is not convincing. Given the Appellate Body's statement that Article 6.5.1 of the Anti-Dumping Agreement affords "due process" to interested parties in an investigation, China's argument that non-confidential information submitted in the application can be summarized in the investigating authority's determination is problematic. In order to allow an interested party the opportunity to defend its interests, the summary of the confidential information needs to be provided before the investigating authority has reached its determination. Further, Articles 12.4.1 of the SCM Agreement and 6.5.1 of the Anti-Dumping Agreement expressly provide that the authorities shall require "interested parties providing confidential information to furnish non-confidential summaries thereof". It is difficult to read this obligation as being fulfilled when an investigating authority produces a summary of information submitted to it.
7.191.
The parties also disagree regarding the relevance of whether a respondent contests the issue the subject of the summary. In its first written submission, in defending the adequacy of its non-confidential statements with respect to certain categories of information, China variously notes that "this issue was not seriously contested" by the respondents. However, whether or not a respondent makes a substantive challenge regarding the subject matter that has been treated confidentially does not affect the standard for an adequate non-confidential summary under Articles 12.4.1 of the SCM Agreement or 6.5.1 of the Anti-Dumping Agreement. Indeed, without an adequate non-confidential summary, the ability of an interested party to contest the relevant issue is compromised.
7.192.
Finally, with respect to whether the "exceptional circumstances" exemption is at issue, in response to a Panel question, China clarifies that, in the event the Panel finds the non-confidential summaries inadequate, it does not invoke the exceptional circumstances exemption. Indeed, the text of the provisions at issue, and the Appellate Body and panel reports, clearly state that if information is not susceptible of summarization, the party must identify the exceptional circumstances and provide a statement explaining why summarization is not possible. The investigating authority is required to scrutinize such statements to determine whether they establish "exceptional circumstances". It is clear that this did not occur in the context of this case. However, although it does not rely on the exemption, China contends that the adequacy of the non-confidential summaries should be assessed in the light of the "exceptional circumstance" that there were only two Chinese producers of GOES, making it difficult for summaries of aggregate data adequately to protect the confidentiality of the information.
7.193.
In considering China's argument in this regard, we note that Articles 12.4.1 of the SCM Agreement and 6.5.1 of the Anti-Dumping Agreement explicitly establish the standard by which the sufficiency of non-confidential summaries is to be assessed, namely by reference to whether the summaries "permit a reasonable understanding of the substance of the information submitted in confidence". If the information is not susceptible of summary, for example because it would not be possible to summarize the information while still preserving its confidentiality, the provisions allow for an exemption to the requirement to furnish a non-confidential summary. However, if this "exceptional circumstance" exemption is not invoked, as in this case, there is no basis to conclude that purported "exceptional circumstances" alter the standard that applies under Articles 12.4.1 and 6.5.1. Therefore, the Panel will assess the adequacy of the non-confidential summaries by reference to whether they "permit a reasonable understanding of the information submitted in confidence". If they do not, the fact that there were only two Chinese producers of GOES will not alter the conclusion that China acted inconsistently with Articles 12.4.1 and 6.5.1.

(b) Part II of the application

7.194.
The major issue in contention between the parties is where in the application the non-confidential summaries can be found. While the United States contends that the purported non-confidential summaries are the general statements found in Part-II of the application, China contends that non-confidential summaries can be found throughout Part-I of the application.
7.195.
We note that within Part-I of the application, there are several sections in which confidential information, generally numerical, has been redacted. The end of each section containing redacted information includes the phrase "[p]lease see Part II-2, Non-confidential summary [x] for confidential information".214 Part II-2 of the application is entitled "non-confidential summary" and its introductory paragraph, in China's version of the English translation, provides:

For the convenience of interested parties to have a general idea about the confidential information, the petitioner hereby summarize the confidential information applied including the narratives and annex marked **.

7.196.
By contrast, the United States' translation of the opening paragraph of Part II-2 provides:

To help other interested parties to access to comprehensive information the petitioners applied for confidential treatment, the petitioners made explanations in the public version of the petition about the part that were applied for confidential treatment, and below are non-confidential summaries of the appendices that have been applied for confidential treatment.215

7.197.
A review of the application provides support for the United States' position that the applicants intended Part II-2 of the application to provide the non-confidential summaries of the redacted information. This is due to the consistent instructions in the body of the application, following redacted sections, to consult Part II of the application for summaries of the non-confidential information. Further, the title to Part II-2 is "non-confidential summary", which somewhat undermines China's argument that Part II merely identifies each category of information for which confidential treatment was requested and justifies the confidential treatment for each category. Further, China's English translation of the introductory paragraph to Part II-2 states that "the petitioner hereby summarize[s] the confidential information applied".
7.198.
We note that Part II-2 of the application consists of short and general statements regarding the nature of the information treated as confidential. For example, the section in Part II-2 that refers to the redacted information regarding "change in price" provides:

This part involves sales price of the subject merchandise by the petitioners from 2006 to February 2009. As they are business proprietary of the petitioners, disclosure of which will seriously harm the interest of the petitioners; therefore, the petitioners applied for confidential treatment of the information.

7.199.
Therefore, in the Panel's view, the "summaries" in Part II-2 provide minimal descriptions of the nature, rather than the substance, of the information treated as confidential. Indeed, China does not even attempt to argue that the summaries in Part II-2 are sufficient under Articles 12.4.1 of the SCM Agreement and 6.5.1 of the Anti-Dumping Agreement.
7.200.
Consequently, the Panel concludes that Part II of the application was intended to provide the non-confidential summaries of the confidential information, but the summaries are inadequate under Articles 12.4.1 of the SCM Agreement and 6.5.1 of the Anti-Dumping Agreement.

(c) Part I of the application

7.201.
Although the Panel concludes that Part II of the application was intended to provide the non-confidential summaries, we note China's argument that neither Article 12.4.1 of the SCM Agreement nor Article 6.5.1 of the Anti-Dumping Agreement specify that the required non-confidential summaries must take a particular form or be labelled in a particular manner. Consequently, China argues that non-confidential summaries can be interspersed throughout the body of an application and still provide a reasonable understanding of the substance of the confidential information. Even if we were to accept China's argument that non-confidential summaries can be found in Part I of the application, as indicated in the reasons which follow the Panel is not convinced that the purported summaries provide a reasonable understanding of the substance of the confidential information.
7.202.
At the outset, we note certain problems with some of the summaries relied upon by China. In particular, in some instances, China's position is that a non-confidential summary has been furnished within the meaning of Articles 12.4.1 of the SCM Agreement and 6.5.1 of the Anti-Dumping Agreement when it is possible to infer the "main point" of the confidential information from the context surrounding the redaction. In our view, this is not what is envisaged as a non-confidential summary under the SCM and Anti-Dumping Agreements. Articles 12.4.1 and 6.5.1 explicitly require the interested party furnishing the confidential information to provide a summary thereof, rather than requiring other interested parties to infer, derive and piece together a possible summary of the confidential information. The following analysis of a selection of the categories of confidential information redacted from the application highlights the problems with the purported summaries relied upon by China. Given our conclusion that certain categories of confidential information were not adequately summarized in Part I of the application, we have not considered it necessary to proceed to analyse each of the nine categories set out in the United States' first written submission.216

(i) Output of the petitioners, total output of GOES in China, proportion of the petitioners' output in China's total output

7.203.
Table 1 of the application includes information about the output of each applicant, the total output of GOES in China and the proportion of total output of each of the two applicants over the period 2006 through the first quarter of 2009. All of the numerical information in the table is redacted. The information in the application that China claims summarizes the table includes:

(i) an assertion that the applicants met the standing requirements under the Chinese regulations;

(ii) the discussion of the domestic industry in the application, which mentions only two producers. China argues that this indicates that the applicants account for 100% of the domestic industry; and

(iii) Appendix 13 to the application, which provides figures for the total domestic GOES output and the output of each applicant over the period 2006-2007, and estimates for 2008 and beyond.217

7.204.
China argues that Table 1 was included in the application for the purpose of demonstrating that the applicants met the standing requirements under the Anti-Dumping and SCM Agreements. Although the United States argues that "standing" was not mentioned in the application, it is included in China's version of the English translation of the application. While the United States' translation does not include the term "standing", the description under Table 1 makes clear that whether the two companies "qualify for petitioners" was at issue.218
7.205.
According to China, the assertion that the applicants met the standing requirements under WTO rules is an adequate summary of the confidential information redacted from Table 1 of the application. However, we recall the Appellate Body's statement that Article 6.5.1 of the Anti-Dumping Agreement accommodates the concerns of confidentiality, transparency and due process. In the Panel's view, to accommodate the concern of due process, interested parties must have access to a summary of the confidential information that is relied upon to draw certain conclusions, so that those conclusions may be challenged. Simply relying on the conclusion as the non-confidential summary does not provide interested parties with a means to challenge whether the confidential information in fact provides a basis for the conclusion drawn. China's position is that interested parties reading the application should assume that the applicants correctly interpreted the redacted data to reach the conclusion relating to standing. In our view, this is not what is envisaged by Articles 12.4.1 of the SCM Agreement and 6.5.1 of the Anti-Dumping Agreement. Rather, it is necessary to provide a summary of the substance of the confidential information and not merely to assert the conclusions that may be drawn from it.
7.206.
With respect to the discussion of the domestic industry, China relies on Part I(1)(i)(d) of the application, which discusses the technology investments made by the two applicants and also states that "in recent years, major steelmakers in China are making huge investments to expand GOES production capacity to satisfy domestic demand. Up to now, most capacities built with newly added investment are ready for production".219 In our view, this does not make it as clear as China asserts that the domestic industry consisted of only two producers. Although China argues that "it was common knowledge" that there were only two producers in the Chinese GOES industry and "this was widely known from the public press reports about the Chinese industry", this begs the question of why the information was treated as confidential.220 If information is treated as confidential in an application or investigation, the obligation to provide a non-confidential summary of it cannot be avoided by claiming that the information is public in any event.
7.207.
Finally, China relies upon Appendix 13 as a summary of Table 1 of the application. However, we find reliance on this appendix to be problematic. Appendix 13 is referenced twice in the body of the application: first, in explaining the use of the export price to the European Union as the normal value, and second, in claiming the existence of threat of material injury. In both instances, it is relied upon for the information it includes regarding the state of the steel markets in the United States and Russia.221 In no place in the application, least of all in relation to Table 1, is the information in Appendix 13 regarding domestic output of GOES in China referenced. It is uncertain whether the data in Appendix 13 is the source for the confidential information in Table 1 or provides a summary of it. Indeed, the information in Appendix 13 includes actual values only up to and including 2007, with estimates of output provided for 2008 and beyond. Given this mismatch between the data in Table 1 and Appendix 13, and the stated purpose in the body of the application for the inclusion of Appendix 13, in our view it does not provide readers of the application with a summary of the confidential information redacted from Table 1.
7.208.
Consequently, even if we were to accept China's argument that the non-confidential summaries are to be found in Part I rather than Part II of the application, the information relied upon by China as the summary of the confidential information redacted from Table 1 is inadequate under Articles 12.4.1 of the SCM Agreement and 6.5.1 of the Anti-Dumping Agreement.

(ii) Apparent consumption of GOES in China

7.209.
Tables 23 and 24 of the application redact data on the annual domestic apparent consumption of GOES over the period 2006 through the first quarter of 2009. China relies upon the following sections of the application as the non-confidential summaries of this information:

(i) Percentage changes in domestic apparent consumption on page 5 of the application. In particular, page 5 states that since 2006, domestic apparent consumption has maintained a year-on-year growth rate of 20%. By 2008, there had been a growth of 50% over 2006 levels.

(ii) Table 32 of the application provides year-on-year percentage changes from 2006 to 2007 and from 2007 to 2008. These figures are also discussed in the commentary on causation following Tables 32 and 33.

(iii) Appendix 13 to the application, which provides public data on apparent domestic consumption over the period 2006-2007, with estimates for 2008 and beyond.

7.210.
The United States and China disagree regarding whether year-on-year percentage changes can provide an adequate non-confidential summary of the confidential information on the apparent domestic consumption of GOES in China. According to the United States, it is impossible to gain a reasonable understanding of the substance of the redacted information because, in the absence of information about the absolute values, "growth of about 50%" could mean growth from 100 to 150 or 100,000 to 150,000.222 The United States argues that absolute values could have been reported as an average without disclosing the confidential information.223 However, a review of Tables 23 and 24 in the application indicates that the tables report data in the form of annual averages, including redacting the data on the annual average domestic apparent consumption. Therefore, it is the annual averages of domestic apparent consumption of GOES that is treated as confidential in the application. Given that the United States has not brought a claim regarding the classification of particular types of information, including annual averages, as confidential under Articles 6.5 of the Anti-Dumping Agreement or 12.4 of the SCM Agreement, its argument that the very information treated as confidential should have been disclosed under Articles 6.5.1 of the Anti-Dumping Agreement and 12.4.1 of the SCM Agreement is not convincing.
7.211.
However, in the Panel's view, there remain significant problems with the purported summaries of the confidential information relied upon by China. In particular, there is a mismatch between the redacted information and the alleged summaries. Table 32 includes the percentage change in domestic apparent consumption between 2006 to 2007 and between 2007 to 2008. Although the information redacted from Tables 23 and 24 includes a figure for apparent domestic consumption in the first quarter of 2009, no percentage change or other form of summary is provided for this in Table 32 or elsewhere in the application, including on page 5. Therefore, even accepting China's arguments regarding the adequacy of year-on-year percentage changes as a means of summarizing confidential information, the summary is deficient in any event, with respect to the data for the first quarter of 2009.
7.212.
With respect to China's reliance upon Appendix 13 of the application as a form of non-confidential summary, we recall our previous discussion of this Appendix at paragraph 7,207 of this Report.
7.213.
Finally, we note the United States' argument that China would require respondents to "piece together a puzzle of data and information scattered throughout the petition". This is because information 50 pages prior to, and 8 pages after, Tables 23 and 24 is supposed to summarize the information redacted from Tables 23 and 24.224 On the one hand, the Panel notes that Articles 12.4.1 of the SCM Agreement and 6.5.1 of the Anti-Dumping Agreement do not include any requirements regarding the form a non-confidential summary must take. However, on the other hand, given the lack of cross-referencing and the mismatch between the redacted information and the purported non-confidential summaries, a respondent may be confused regarding whether the summary information is based on the same data source as the redacted information and thus represents the "non-confidential" summary. In this sense, the due process objective of Articles 12.4.1 and 6.5.1 may be undermined, as an interested party may not be aware that the redacted information has in fact been summarized and can be contested.
7.214.
In the light of this reasoning, even if we were to accept China's argument that year-on-year percentage changes in domestic apparent consumption may constitute non-confidential summaries, there remain significant problems with the summaries relied upon by China, such that they are inadequate under Articles 12.4.1 and 6.5.1 of the SCM and Anti-Dumping Agreements.

(iii) Influence on the Chinese domestic industry

7.215.
The section of the application describing the impact of the dumped imports on the domestic industry includes 24 tables of data, from which either all or a significant portion of the data is redacted.225 China relies upon year-on-year percentage changes as the relevant non-confidential summaries, provided either within the relevant tables or in the accompanying commentary. China again relies upon Appendix 13 as providing a non-confidential summary of some of the factors at issue.
7.216.
Again, even accepting that year-on-year percentage changes may constitute a form of non-confidential summary, there remain certain gaps in the summaries provided in the section of the application examining the impact of the dumped imports on the domestic industry, as outlined in the following paragraphs.
7.217.
Figures for the injury indicators are provided separately for each applicant, WISCO and Baosteel. Generally, the percentage change in each indicator from 2006 to 2007 and from 2007 to 2008 is provided for WISCO. However, summary data is generally not provided for Baosteel. We note that Baosteel commenced production in May 2008 and therefore, the redacted information presumably included absolute values for Baosteel for 2008 and the first quarter of 2009.226 Further, China did not claim that such information was incapable of summarization due to "exceptional circumstances" under Articles 12.4.1 of the SCM Agreement or 6.5.1 of the Anti-Dumping Agreement. In Table 38, summary data is provided for Baosteel, by breaking the data down and providing quarter-on-quarter changes, indicating that some form of summarization was possible for Baosteel. Therefore, for those tables where no summary data is provided for Baosteel, and the subsequent commentary also fails to summarize the information, we cannot conclude that China acted consistently with Articles 12.4.1 of the SCM Agreement or 6.5.1 of the Anti-Dumping Agreement.227
7.218.
For some of the tables in which no summary data is provided for Baosteel, year-on-year changes for WISCO and for the total industry are provided. Therefore, it is possible to derive Baosteel's contribution in 2008 and the first quarter of 2009.228 However, where an interested party is required to perform its own calculations in order to derive its own summary of the confidential information, this is an indication that the party providing the confidential information did not furnish an adequate summary to the investigating authority in accordance with Articles 12.4.1 of the SCM Agreement and 6.5.1 of the Anti-Dumping Agreement.
7.219.
Although year-on-year percentage changes are generally provided for WISCO, in relation to a number of tables a percentage change for only one year is provided, with the summary data for the other annual change missing.229 Finally, in a number of instances, no year-on-year summary is provided for either WISCO or Baosteel. In these cases, there is some limited commentary following the redacted tables.230
7.220.
In the light of these observations, even if we were to accept China's theory that the non-confidential summaries can be found in Part I of the application, the purported summaries relied upon by China are deficient in a number of respects. Consequently, we cannot conclude that the summaries provide a reasonable understanding of the substance of the confidential information in accordance with Articles 6.5.1 of the Anti-Dumping Agreement and 12.4.1 of the SCM Agreement.

(iv) Dumping Margin of GOES imports from the United States

7.221.
China argues that the dumping margins for GOES were adequately summarized because the methodology for calculating the margins was outlined and the vast majority of numbers were provided in Part I of the application. Given the Panel's conclusions regarding the numerous problems with the purported non-confidential summaries in relation to the three preceding categories of confidential information, we do not consider it necessary to reach a definitive conclusion regarding whether, in this context, outlining the methodology for calculating the dumping margins was sufficient to permit a reasonable understanding of substance of the redacted information.
7.222.
However, in relation to China's argument that, based on the formulas and numbers disclosed, interested parties could derive much of the missing data, the Panel feels it necessary to comment that this kind of process is not what is envisaged by Articles 12.4.1 of the SCM Agreement and 6.5.1 of the Anti-Dumping Agreement. The Articles explicitly require parties to furnish non-confidential summaries of any information submitted in confidence. Where other interested parties are required to derive their own summary and make educated guesses about the substance of the redacted information, the requirements of Articles 6.5.1 and 12.4.1 are not met.

(d) Conclusion

7.223.
The Panel concludes that Part II-2 of the application was furnished by the applicants as the non-confidential summary required under Articles 12.4.1 of the SCM Agreement and 6.5.1 of the Anti-Dumping Agreement. However, the purported summaries in Part II are inadequate in permitting a reasonable understanding of the substance of the information submitted in confidence.
7.224.
As highlighted in the preceding reasons, the Panel has analysed the information on the basis of China's argument that the non-confidential summaries can be found in Part I of the application. The Panel has concluded that, for at least some of the categories of confidential information, there are deficiencies in the purported summaries relied upon by China, such that they do not provide a reasonable understanding of the substance of the confidential information. In addition, we are not convinced by that aspect of China's defence which suggests that a non-confidential summary exists where an interested party is able to derive, or infer from the context, the possible nature of the confidential information. Rather, there is an explicit obligation under Articles 6.5.1 of the Anti-Dumping Agreement and 12.4.1 of the SCM Agreement for an interested party submitting confidential information to furnish a summary of it. It is not for other interested parties to derive their own summary based on the context from which the information is redacted.231
7.225.
Accordingly, the Panel concludes that China acted inconsistently with Articles 12.4.1 of the SCM Agreement and 6.5.1 of the Anti-Dumping Agreement.

D. WHETHER CHINA ACTED INCONSISTENTLY WITH ARTICLE 12.7 OF THE SCM AGREEMENT IN ITS USE OF FACTS AVAILABLE IN CALCULATING THE SUBSIDY RATES (FOR THE TWO KNOWN RESPONDENTS) UNDER CERTAIN PROCUREMENT PROGRAMMES

1. Introduction

7.226.
MOFCOM applied facts available to calculate the subsidy rates for the two known respondents, AK Steel and ATI. MOFCOM found that the respondents had not cooperated with its investigation, since they had failed to provide certain sales data.
7.227.
The United States contends that MOFCOM's reliance on facts available was improper, and therefore contrary to China's obligations under Article 12.7 of the SCM Agreement.
7.228.
China asks the Panel to reject the United States' claim.

2. Arguments of the United States

7.229.
The United States denies that the two respondents failed to provide requested information, or that they otherwise impeded MOFCOM's investigation. The United States asserts that the respondents cooperated, responded to MOFCOM's questionnaires, and to the extent they did not provide information it was because MOFCOM's own questionnaires did not require it. The United States asserts that the two respondents engaged with MOFCOM on its terms throughout the investigation.
7.230.
Regarding the information actually used by MOFCOM once it resorted to facts available, the United States also contends that there were no facts available on the record supporting MOFCOM's choice of a 100% utilization rate, i.e. a rate indicating that all domestic sales of GOES and non-GOES products by the respondents were subsidized.

(a) Failure to cooperate / provide data

7.231.
The United States notes that, in its original August 2009 questionnaire, MOFCOM gave the following general instructions for the respondents:

Please read questions carefully before answering. When answering a question, please write the question down first and put your answer directly below it and point out the support evidence to it. If the question does not apply to you, please write down explicitly, "this question does not apply to my company" and state the reasons.232

7.232.
The United States asserts that, in addition, MOFCOM posed the following questions under the heading "government procurement programs" relating to the applicants' government procurement allegations:

(1) Please answer all the questions listed by Annex I.

(2) Does your company attend bidding when selling products to government? If yes, please explain the specific bidding procedure and bidding rules as well as the agencies and departments to which your company submit bid tender.

(3) Please provide all the relevant information (not limited to the subject merchandise), in the form of tables, regarding government procurement signed within the POI as well as those not performed within the POI, which includes: the specific names of the purchaser, purchasing time, name of purchased products, the supply quantity, [value], price, payment and the contract progress, etc. The contract, bid tender etc. related evidence shall be provided. The selling price of the involved products that are sold to other private purchaser shall be provided as well.

(4) Please provide the information regarding domestic sales of all the products in POI, in the form of tables. The quantity and [value] of each product sold to each client shall be provided.233

7.233.
The United States contends that, in response to questions 2 and 3, AK Steel answered that, as demonstrated by the sale data for subject merchandise provided in the parallel anti-dumping proceeding, the company did not sell any GOES to any government entity during the POI. AK Steel continued: "[a]s a result, this alleged subsidy program is not relevant to AK Steel."234 The United States asserts that ATI provided a similar answer.235 The United States asserts that, pursuant to MOFCOM's instructions, AK Steel noted that no government procurement was signed during the POI, and therefore the question was inapplicable.
7.234.
The United States submits that, in response to Question 4, which only relates to the POI, and which does not contain the proviso "not limited to the subject merchandise" found in Question 3, AK Steel referred MOFCOM to the sale data for subject merchandise provided in the parallel anti-dumping proceeding.236 ATI indicated that the question was "[n]ot applicable."237 The United States contends that, in the light of the fact that AK Steel and ATI did not use the alleged program, and none of the predicates for reporting data in response to Question 3 were met, the summary quantity and value data requested in Question 4 were superfluous.
7.235.
The United States acknowledges that MOFCOM issued a deficiency letter regarding the respondents' replies to the above questions. The United States asserts that, in its deficiency letter issued 10 August 2009, regarding government procurement, MOFCOM appears to request transaction data, but at the same time explains that if the facts are such that the request is not applicable, the respondents should demonstrate inapplicability:

The prima facie evidence owned by the Investigating Authority showed that your company's products (not limited to the product concerned) could have been sold to the USG or public bodies, or have been sold to contractors of relevant projects who have been bound by the Buy America Act. There was a possibility that the prices of these transactions was higher than then market prices and consequently brought benefit to your company. Therefore, so long as your company's products were sold in the domestic market, the transactions shall be reported. If your company was of the view that, regarding the product concerned and your company's other products, there was no purchase from the government or public body, or there was no transaction bound by the Buy America Act, it was your company who shall bear the burden of proof.238

7.236.
According to the United States, both of MOFCOM's requests are predicated on the existence of government procurement transactions. In the original questionnaire, MOFCOM asked for volumes of information for "signed" procurement contracts and sales of "involved" products to private parties. In the new subsidy questionnaire, MOFCOM asked for sales "under the influence" of any "Buy American" law. The United States submits that, in the absence of any procurement sales, a company would have no transactional data to report, and the quantity and value data requested by MOFCOM for the POI in the original questionnaire would be irrelevant.
7.237.
The United States explains that, in its revised questionnaire response dated 9 September 2009, AK Steel attached a customer list showing that the government did not purchase any AK Steel products (i.e. GOES or non-GOES) during the POI – including products unrelated to subject merchandise, and revised its narrative response to address the question as clarified by the deficiency letter.239 In its separate deficiency letter response, also dated September 9, 2009, AK Steel explained that it was impossible to know what its customers did with its products. According to the United States, AK Steel's customer list and explanation were responsive to the deficiency letter.240 According to the United States, therefore, AK Steel did not impede the investigations; it explained why the question was not applicable. The United States notes, moreover, that MOFCOM did not follow-up with any additional questions on this subject or otherwise suggest that AK Steel's explanation was not adequate. The United States asserts that AK Steel only learned of MOFCOM's dissatisfaction with its response when MOFCOM issued the preliminary determination.
7.238.
Regarding ATI, the United States asserts that ATI attached a customer list to its revised questionnaire response and pointed to the financial statements submitted with its original questionnaire response to establish the fact that ATI made no sales of the subject merchandise (i.e. GOES) to the United States Government. ATI also pointed out that MOFCOM could confirm the inapplicability of the question to ATI when MOFCOM conducted the on-site verification.
7.239.
The United States asserts that MOFCOM failed to react to the respondents' supplemental questionnaire responses until issuance of its preliminary determination on 14 December 2009. The United States asserts that this appears to be the first instance where MOFCOM highlighted any need for transaction data without conditions. The United States contends that, in response to MOFCOM's approach in the preliminary determination, AK Steel submitted the sales data for subject merchandise as an exhibit to its comments on the preliminary determination about a week before the verification began.241 The United States asserts that ATI appeared to have decided that it no longer had an opportunity to engage with MOFCOM, as it concluded that MOFCOM had a pre-determined result in mind. The United States suggests that, as demonstrated by MOFCOM's treatment of AK Steel's sales data, ATI's decision was correct.
7.240.
The United States submits that, in its January 2010 CVD verification memo, MOFCOM acknowledges that the sales data submitted by AK Steel is at least partially responsive, but nonetheless rejects the sales data because of past supposed "non-cooperation":

Since the investigation authority had already given explanations to relevant issues and offered the respondent a chance of re-submitting the responses, the investigation regret to see that AK Steel Corporation still didn't answer the questions for Government Procurement Program as required by the questionnaire. Therefore, though AK Steel Corporation provided some of its domestic sales data in the Comments on Preliminary Determination, the investigation authority would not verify those sales data in the anti-subsidy verification.242

7.241.
According to the United States, MOFCOM therefore refused to verify the sales data, which were already in its possession, and had been verified in the parallel anti-dumping proceeding. Regarding the customer lists, AK Steel submitted a written request to verify the customer lists. The United States asserts that MOFCOM, however, did not verify the lists.243
7.242.
The United States notes that China complained that the companies' failure to provide transaction data prior to the verification denied MOFCOM "the ability to plan efficiently" for verification.244 The United States suggests that, to the extent that MOFCOM may have suffered any inconvenience, however, this was simply the result of its own questionnaire and the apparent differences between the instructions in the questionnaire and what MOFCOM actually wanted. The United States contends that if MOFCOM deemed transactional data necessary from the outset without regard to whether a company participated in government procurement during the relevant period, its questionnaire should have so stated from the outset.

(b) Factual basis for 100% utilization rate

7.243.
The United States contends that, even if an investigating authority is entitled to resort to facts available, the investigating authority does not have carte blanche in choosing which facts, or information, to rely on. The United States asserts that the investigating authority must take into account the information actually provided by the exporter. The United States relies in this regard on the following findings of the Appellate Body in Mexico – Anti-Dumping Measures on Rice:

We understand that recourse to facts available does not permit an investigating authority to use any information in whatever way it chooses....to the extent possible, an investigating authority using "facts available" in a countervailing duty investigation must take into account all the substantiated facts provided by an interested party, even if those facts may not constitute the complete information requested by the party...the facts available to the agency are generally limited to those that may reasonably replace the information that an interested party failed to provide.245

7.244.
Regarding the context of Article 12.7 of the SCM Agreement, the United States submits that the Appellate Body has compared the Anti-Dumping Agreement to the SCM Agreement, and stated that an investigating authority is obliged to consider information submitted by an interested party:

Like Article 6 of the Anti-Dumping Agreement, Article 12 of the SCM Agreement as a whole sets out evidentiary rules that apply throughout the course of the...investigation, and provides also for due process rights that are enjoyed by interested parties throughout...an investigation....[T]his due process obligation...requires the investigating authority...to take into account the information submitted by an interested party.246

Though the SCM Agreement does not have a facts available Annex, "it would be anomalous if Article 12.7 of the SCM Agreement were the permit the use of facts available in countervailing duty investigations in a manner markedly different from that in anti-dumping investigations."247

7.245.
The United States argues that MOFCOM appears to have concluded that if a company does not provide some information, or if the information provided does not perfectly fit the request to which it responds, MOFCOM may reject all information provided by the company. The United States recalls that the respondents provided sales data showing that they did not sell subject merchandise to the United States Government. AK Steel additionally provided customer lists showing that it did not make any direct sales to the United States Government. The United States contends that MOFCOM rejected these facts, which were verifiable, and assumed that the United States companies sold all of their output to the United States Government, and that this output garnered a 25% price premium. The United States submits that there are no facts available on the record to support MOFCOM's conclusion that the respondents sold all of their output to the Government.
7.246.
The United States contends that MOFCOM ignored information on the record demonstrating that the respondents did not sell exclusively to the US Government or Government contractors. The United States explains that, to calculate the amount of the alleged "subsidy" to producers resulting from the procurement programs, MOFCOM assumed that AK Steel and ATI sold all of their output to the government under programs requiring the payment of a 25% price premium. Had MOFCOM not entirely disregarded the factual information actually supplied by the companies, it could not have assumed that the companies sold all of their output to the government. At most, AK Steel, for example, could have sold 29% of its output to industries with some relation to construction. MOFCOM required AK Steel's 10-K annual report be translated in its entirety. Page 2 of that report provides the percentage of AK Steel's sales attributable to three market segments. In 2008, the percentages were:

· Automotive: 32%;

· Infrastructure and Manufacturing: 29%; and

· Distributors and Converters: 39%.248

7.247.
The United States asserts that MOFCOM improperly ignored this information on the record. The United States contends that, to the extent that any AK Steel products could have made their way through commerce to government construction contractors, these sales would be included in the infrastructure and manufacturing segment. Because neither automotive manufacturers nor distributors and converters include construction contractors, sales to these market segments are necessarily unaffected by the government procurement statutes under investigation. The United States asserts that if MOFCOM was going to ignore all evidence indicating that AK Steel sold nothing to the government, MOFCOM should have at least limited its subsidy calculation to AK Steel's United States sales of products for the infrastructure and manufacturing segment, or 29% of the company's United States sales.

3. Arguments of China

(a) Failure to cooperate / provide data

7.248.
China submits that MOFCOM's requests for data, and the underlying theory of indirect subsidization, were well articulated and plainly understood by the respondents. Regarding question 3 in MOFCOM's original questionnaire, China asserts that Question 3 went to the issue of acknowledged utilization under the program. The exporters were to report all transactions during the POI involving government purchases, not limited to the subject merchandise, as well as information on the selling price for the same products in transactions outside the program. Question 4 was broader. It sought a simple tabulation of all domestic sales by product in the POI, including quantity, value, and customer. According to China, the questions were unambiguous in referring to both GOES and non-GOES products.
7.249.
China notes that AK Steel's response to Question 3 only concerned sales of GOES to government entities during the POI. AK Steel did not provide any information regarding sales of non-GOES products to government entities during the POI. China notes that AK Steel's reply to Question 4 referred only to sales data for GOES transactions submitted for the purpose of the anti-dumping proceeding. Regarding ATI, China notes that ATI merely stated that Questions 3 and 4 were inapplicable to the company or its affiliates. China notes that, ultimately, AK Steel provided transaction data for GOES products only, whereas ATI submitted no transaction data at all (not even for GOES). According to China, therefore, neither respondent provided sales data for all (i.e. GOES and other steel) products over the period of investigation, as requested by MOFCOM. China asserts that both respondents had understood the questions to refer to both GOES and non-GOES products, as AK Steel argued that data for non-GOES products was irrelevant, and ATI stated that it did not benefit from any subsidies for either GOES or non-GOES products.249
7.250.
China submits that MOFCOM's deficiency letter was even clearer in requiring transaction data for all products, since it stated that "so long as your company's products were sold in the domestic market, the transactions shall be reported". The deficiency letter also stated that, before making any arguments as to whether or not transactions involved government entities, or were bound by the Buy America Act, "it was of the first importance that [respondents] respond completely and accurately to the questions of the Investigating Authority". China submits that MOFCOM's deficiency letter could not have been clearer.250
7.251.
China contends that AK Steel's response to the deficiency letter was similar to its reply to the original questionnaire, although AK Steel did provide a table listing all customers of its products (i.e. GOES and non-GOES). However, China notes that AK Steel still did not provide non-GOES transaction data. In addition, China notes that AK Steel also made the following remarks in an accompanying letter:

With regard to government procurement, AK Steel provides in Exhibit II.3 of the Revised Subsidy Questionnaire Response a list of all its customers during the period of investigation ("POI") grouped by product category. This list demonstrates that AK Steel did not sell either the subject merchandise or any other product to any government entity during the POI.

To the extent MOFCOM is requiring AK Steel to demonstrate that none of the steel it sold to non-government entities was used in a project that was subject to the "Buy America" or similar act, MOFCOM is imposing an impossible burden. AK Steel has no reason to know what its customers do with their purchases. Because such a substantial proportion of AK Steel's products are sold to service centers, which resell the products to end users, there is no way to find out. Moreover, as stated in AK Steel's questionnaire response, even if the government ultimately overpaid for a project incorporating steel that may have originated with AK Steel, the entity that received the overpayment did not provide any of that overpayment to AK Steel, which received only a market-determined price for its product.251

7.252.
According to China, "AK Steel had thrown down the gauntlet" by being argumentative.252 China further contends that MOFCOM needed the transaction data precisely in order to test AK Steel's assertions that it "has no reason to know what its customers do with their purchases", and that "even if the government ultimately overpaid for a project incorporating steel that may have originated with AK Steel, the entity that received the overpayment did not provide any of that overpayment to AK Steel, which received only a market-determined price for its product". China submits that AK Steel's continued refusal to respond again seriously impeded the investigation. China submits that ATI's response to the deficiency letter was even less forthcoming, since it provided only a customer list for GOES, and stated that it did not sell GOES to any government entities.
7.253.
China acknowledges that AK Steel did ultimately submit transaction data for sales of GOES during the POI (i.e. the same data that had already been submitted in the anti-dumping proceeding), after issuance of MOFCOM's preliminary determination. According to China, though, the data came 150 days after the original deadline for submission, 142 days after the extended deadline for submission, 126 days after the deadline for the second opportunity provided by MOFCOM to respond, and just 3 business days before the commencement of verification. Moreover, the data was limited to GOES transactions even though AK Steel clearly understood that Question 4 of the initial questionnaire was seeking POI transaction data on all sales.
7.254.
Furthermore, China notes that even the United States appears to concede that, at the very latest, MOFCOM's requests for data were clear as of issuance of the 26 August 2009 deficiency letter. China notes in this regard the US statement, in describing the deficiency letter, that "MOFCOM… demanded that the respondents prove non-use of the alleged programs by providing detailed sales information for all products and all customers over the POI and the preceding 14 years".253

(b) Factual basis for 100% utilization rate

7.255.
China contends that MOFCOM reasonably determined, based on the "facts available", the degree of utilization of the Government Purchase of Goods Program. China notes the United States' argument that, according to AK Steel's 10-K report, only sales within the infrastructure and manufacturing segment, representing 29% of total sales, could be relevant to the program at issue.254 China contends that the use of this 29% figure, however, does not represent the most reasonable "facts available," given the circumstances of this particular case. China asserts that MOFCOM had four alternatives before it: (1) find 0% utilization; (2) find 29% utilization; (3) find some other degree of utilization; or (4) find 100% utilization, as it did in the preliminary determination. China submits that, after considering these alternatives, and comparing each of them relative to the others based on the facts before MOFCOM – including critically the nature and degree of non-cooperation – MOFCOM reasonably determined that 100% utilization was the most reasonable "facts available" in this particular case.
7.256.
China asserts that the first option, 0% utilization, was inconsistent with the record, which showed at least some degree of utilization of the program. China asserts that this fact has been conceded by the United States. China also asserts that the various arguments by the United States respondents had always focused on direct utilization, and consciously avoided (or admitted) indirect utilization. China states that, given the MOFCOM focus on both direct and indirect utilization, the available facts strongly suggested that the degree of utilization was not 0% and was some other figure.
7.257.
China identifies "several serious problems" with the second option of 29% utilization. First, although AK Steel asserted that only the relevant segment was the "facility and manufacturing industry segment" – which represented 29% of the AK Steel sales for calendar year 2008 – MOFCOM had no factual support for this assertion. China contends that a customer in the "automobile manufacturing" segment might well have produced items that were sold to the government or were used in some construction project. Similarly, a customer in the "distributor and converters" segment might well have resold items to the government or government related construction projects.
7.258.
Second, China asserts that the 29% figure came from a financial report prepared for the calendar year 2008, which does not relate specifically to the period of investigation (March 2008 through February 2009). MOFCOM had no equivalent figure for the period of investigation.
7.259.
Third, China asserts that the 29% alternative came very late in the process, in AK Steel's comments on the preliminary determination, a submission not filed until 30 December 2010. Coming on the very eve of the verification, MOFCOM was unable fully to evaluate and test this alternative during the verification.
7.260.
Fourth, this alternative was filed on the same day – 30 December 2010 as the final AK Steel effort belatedly to respond to the MOFCOM request for information. Yet even at this late date, AK Steel still did not respond properly, and provided transaction data only for a subset of the customers that had been previously identified. Indeed, AK Steel did no more than submit data that it had readily available for months. So instead of making a good faith effort finally to respond to the request, AK Steel yet again decided it could pick and choose how and whether to respond. Thus, rather than submitting data that would allow MOFCOM to ascertain the actual rate of utilization, AK Steel submitted proposed 29% without any factual basis.
7.261.
Regarding the third option, of some other rate of utilization, China identifies two "fundamental flaws". First, as a factual matter MOFCOM had no data from respondents that would allow it to determine some other number in which it would have any degree of confidence. Second, as a legal matter a utilization figure not grounded in the record evidence would not qualify as "facts available", for it would not be a "fact" in any sense of that term, and would be pure speculation by MOFCOM.
7.262.
Regarding the fourth option, of 100% utilization, China contends that MOFCOM had announced this figure in its preliminary determination, and thereby squarely put this alternative into play and made that fact clear to all the parties. China notes that, with full knowledge that MOFCOM was actively considering 100% utilization, AK Steel still refused to cooperate. Instead, it made a calculated judgment that it was somehow better off proposing 29% rather than submitting the information needed to determine the actual degree of utilization, and allowing that information to be verified.
7.263.
According to China, MOFCOM knew the correct utilization was more than 0%. MOFCOM also had a reasonable basis to believe the correct utilization was more than 29%, since AK Steel had proposed that alternative rather than providing the requested data. Furthermore, MOFCOM had no information with which it could determine some alternative more than 29% but less than 100%, in large part due to the refusal of ATI to provide any information and AK Steel to provide complete information. In these circumstances, China asserts that the "facts available" announced in the preliminary determination proved still to be the most reasonable "facts available" for the final determination.

4. Arguments of third parties

(a) Korea

7.264.
Korea argues that Annex II of the Anti-Dumping Agreement sheds some light on the application of facts applicable in the context of countervailing duty investigations. In particular, according to Korea, an investigating authority is required to consider the information actually provided by a respondent, even if the respondent does not submit all the requested information.255

(b) Saudi Arabia

7.265.
In Saudi Arabia's view, the standards that apply to the use of facts available in anti-dumping proceedings apply equally to countervailing duty proceedings. Saudi Arabia argues that if an authority receives information from a respondent, it must use that information if the respondent acted to the best of its ability. Facts available should only be used to fill in gaps in the necessary information. Further, facts available must not be used in a punitive manner.256

5. Evaluation by the Panel

7.266.
There are two main issues raised by the United States' Article 12.7 claim. First, did MOFCOM properly find that the respondents failed to cooperate with MOFCOM's requests to provide transaction data for domestic sales of GOES and non-GOES products during the POI? Second, did MOFCOM properly apply a 100% utilization rate when determining the extent to which respondents' domestic sales of GOES and non-GOES products during the POI were subsidized? We address each of these issues in turn, after first considering the text and obligations inherent in the relevant provision.

(a) Provision at issue

7.267.
The United States' claim is brought under Article 12.7 of the SCM Agreement, which provides:

In cases in which any interested Member or interested party refuses access to, or otherwise does not provide, necessary information within a reasonable period or significantly impedes the investigation, preliminary and final determinations, affirmative or negative, may be made on the basis of the facts available.

(b) Did MOFCOM properly find that the respondents failed to cooperate with MOFCOM's requests to provide transaction data for domestic sales of GOES and non-GOES products during the POI?

7.268.
In order to resolve this first issue, we begin by examining the relevant requests for information made by MOFCOM, and the respondents' responses to those requests. We then examine MOFCOM's finding of non-cooperation, and consider whether that finding was justified by the facts. Thereafter, we consider a United States argument that data requested by MOFCOM was not "necessary" within the meaning of Article 12.7 of the SCM Agreement.
7.269.
The relevant requests for information were set out in Questions 3 and 4 of MOFCOM's original questionnaire, as clarified by deficiency letters issued by MOFCOM on 26 August 2009. Questions 3 and 4 of the original questionnaire were worded as follows:

(3) Please provide all the relevant information (not limited to the subject merchandise), in the form of tables, regarding government procurement signed within the POI as well as those not performed within the POI, which includes: the specific names of the purchaser, purchasing time, name of purchased products, the supply quantity, [value], price, payment and the contract progress, etc. The contract, bid tender etc. related evidence shall be provided. The selling price of the involved products that are sold to other private purchaser shall be provided as well.

(4) Please provide the information regarding domestic sales of all the products in POI, in the form of tables. The quantity and [value] of each product sold to each client shall be provided.257

7.270.
In its initial questionnaire response, AK Steel replied to Question 3 in the following terms:

As demonstrated in Table 4-2 of AK Steel's Antidumping questionnaire response, the company did not sell any GOES to any government entity during the POI. As a result, this alleged subsidy program is not relevant to AK Steel.258

7.271.
AK Steel provided a similar response to Question 4:

Please see Table 4-2 in AK Steel's Antidumping Questionnaire Response for a list of companies that purchased GOES from AK Steel during the POI.259