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 China in document WT/DS449/2 and to make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in those agreements.⁴

Chairperson: Mr José Graça Lima

Members: Mr Donald Greenfield

Mr Arie Reich

a. Sections 1 and 2 of United States Public Law 112-99, "An act to apply the countervailing duty provisions of the US Tariff Act of 1930 to nonmarket economy countries, and for other purposes" (P.L. 112-99);

b. any and all determinations or actions by the United States Department of Commerce (USDOC), the United States International Trade Commission (USITC), or United States Customs and Border Protection (USCBP) relating to the imposition or collection of countervailing duties on products imported into the territory of the United States from the People's Republic of China, where such determinations or actions were made or performed in connection with countervailing duty investigations or reviews initiated between 20 November 2006 and 13 March 2012;

c. the anti-dumping measures listed in Appendix B of its panel request, including the definitive anti-dumping duties imposed pursuant to their authority, as well as the combined effect of these anti-dumping measures and the parallel countervailing duty measures identified in Appendix A of its panel request; and

d. the failure of the United States to provide the USDOC with legal authority to identify and avoid the double remedies that are likely to result when the USDOC applies countervailing duties in conjunction with anti-dumping duties determined in accordance with the US non-market economy methodology, in respect of investigations or periodic reviews initiated between 20 November 2006 and 13 March 2012.

a. Section 1 of P.L. 112-99, including the new Section 701(f) of the United States Tariff Act which it establishes, is inconsistent as such with Articles X:1, X:2¹⁰, X:3(a), and X:3(b) of the GATT 1994;

b. Section 2 of P.L. 112-99 amending Section 777A of the United States Tariff Act is inconsistent as such with Article X:3(a) of the GATT 1994;

c. the United States lacks legal authority to identify and avoid double remedies in respect of certain investigations and reviews initiated between 20 November 2006 and 13 March 2012, and is thereby prevented in all such investigations and reviews, from ensuring that the imposition of countervailing duties is consistent with Articles 10, 15, 19, 21, and 32 of the SCM Agreement and Article VI of the GATT 1994, and from ensuring that the imposition of anti-dumping duties in the associated anti-dumping investigations and reviews is consistent with Articles 9 and 11 of the AD Agreement and Article VI of the GATT 1994;

d. the United States failed to investigate and avoid double remedies in certain investigations and reviews initiated between 20 November 2006 and 13 March 2012; that the resulting countervailing duty measures, including any countervailing duties collected pursuant to their authority, are inconsistent with Articles 10, 15, 19, 21, and 32 of the SCM Agreement and Article VI of the GATT 1994; and that the associated anti‑dumping measures in each such instance, including any anti-dumping duties collected pursuant to their authority, are inconsistent with Articles 9 and 11 of the AD Agreement and Article VI of the GATT 1994.

a. Section 1 of P.L. 112-99, including the new Section 701(f) of the United States Tariff Act which it establishes, is inconsistent as such with Articles X:1, X:2¹², and X:3(b) of the GATT 1994;

b. the United States failed to investigate and avoid double remedies in certain investigations and reviews initiated between 20 November 2006 and 13 March 2012; and that the resulting countervailing duty measures, including any countervailing duties collected pursuant to their authority, are inconsistent with Articles 10, 19, and 32 of the SCM Agreement.

a. Section 1 of Public Law (PL) 112-99 is inconsistent as such with Articles X:1, X:2²², X:3(a), and X:3(b) of the GATT 1994;

b. Section 2 of PL 112-99, amending Section 777A of the United States Tariff Act, is inconsistent as such with Article X:3(a) of the GATT 1994;

c. the United States lacks legal authority to identify and avoid double remedies in respect of certain investigations and reviews initiated between 20 November 2006 and 13 March 2012, and is thereby prevented in all such investigations and reviews, from ensuring that the imposition of countervailing duties is consistent with Articles 10, 15, 19, 21, and 32 of the SCM Agreement and Article VI of the GATT 1994, and from ensuring that the imposition of anti-dumping duties in the associated anti-dumping investigations and reviews is consistent with Articles 9 and 11 of the Anti-Dumping Agreement and Article VI of the GATT 1994; and

d. the United States failed to investigate and avoid double remedies in certain investigations and reviews initiated between 20 November 2006 and 13 March 2012; that the resulting countervailing duty measures, including any countervailing duties collected pursuant to their authority, are inconsistent with Articles 10, 15, 19, 21, and 32 of the SCM Agreement and Article VI of the GATT 1994; and that the associated anti‑dumping measures in each such instance, including any anti-dumping duties collected pursuant to their authority, are inconsistent with Articles 9 and 11 of the Anti-Dumping Agreement and Article VI of the GATT 1994.

a. China indicated that it was not pursuing the claim, contained in Part A of its panel request, that Section 1 of PL 112-99 is inconsistent with Article X:3(a) of the GATT 1994²³;

b. China indicated that it was not pursuing the claim, contained in Part B of its panel request, that Section 2 of PL 112-99, amending Section 777A of the United States Tariff Act, is inconsistent as such with Article X:3(a) of the GATT 1994²⁴;

c. China indicated that it was not pursuing the claims, contained in Part C of its panel request, that the United States lacks authority to identify and avoid double remedies in respect of certain investigations and reviews initiated between 20 November 2006 and 13 March 2012²⁵; and

d. China indicated that with respect to the claims in Part D of its panel request, regarding the USDOC's alleged failure to investigate and avoid double remedies in certain investigations and reviews initiated between 20 November 2006 and 13 March 2012, China would only pursue its claims under Articles 10, 19, and 32 of the SCM Agreement. Furthermore, the Panel, in its preliminary ruling, ruled that the general references to Articles 10, 19, and 32 contained in Part D of the panel request warrant the inference that the obligations at issue are those contained in Articles 10, 19.3, and 32.1 of the SCM Agreement.²⁶

a. Section 1 of PL 112-99 is inconsistent as such with Articles X:1, X:2²⁷, and X:3(b) of the GATT 1994; and

b. the United States failed to investigate and avoid double remedies in certain investigations and reviews initiated between 20 November 2006 and 13 March 2012, and the resulting countervailing duty measures are therefore inconsistent with Articles 10, 19.3, and 32.1 of the SCM Agreement.

Public Law 112-99—March 13, 2012

Public Law 112-99

112th Congress

An Act

To apply the countervailing duty provisions of the Tariff Act of 1930 to nonmarket economy countries, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. APPLICATION OF COUNTERVAILING DUTY PROVISIONS TO NONMARKET ECONOMY COUNTRIES.

(a) In General.—Section 701 of the Tariff Act of 1930 (19 U.S.C. 1671) is amended by adding at the end the following:

"(f) Applicability to Proceedings Involving Nonmarket Economy Countries.—

"(1) In general.--Except as provided in paragraph (2), the merchandise on which countervailing duties shall be imposed under subsection (a) includes a class or kind of merchandise imported, or sold (or likely to be sold) for importation, into the United States from a nonmarket economy country.

"(2) Exception.—A countervailing duty is not required to be imposed under subsection (a) on a class or kind of merchandise imported, or sold (or likely to be sold) for importation, into the United States from a nonmarket economy country if the administering authority is unable to identify and measure subsidies provided by the government of the nonmarket economy country or a public entity within the territory of the nonmarket economy country because the economy of that country is essentially comprised of a single entity.''.

(b) Effective Date.—Subsection (f) of section 701 of the Tariff Act of 1930, as added by subsection (a) of this section, applies to—

(1) all proceedings initiated under subtitle A of title VII of that Act (19 U.S.C. 1671 et seq.) on or after November 20, 2006;

(2) all resulting actions by U.S. Customs and Border Protection; and

(3) all civil actions, criminal proceedings, and other proceedings before a Federal court relating to proceedings referred to in paragraph (1) or actions referred to in paragraph (2).

SEC. 2. ADJUSTMENT OF ANTIDUMPING DUTY IN CERTAIN PROCEEDINGS RELATING TO IMPORTS FROM NONMARKET ECONOMY COUNTRIES.

(a) In General.—Section 777A of the Tariff Act of 1930 (19 U.S.C. 1677f-1) is amended by adding at the end the following:

"(f) Adjustment of Antidumping Duty in Certain Proceedings Relating to Imports From Nonmarket Economy Countries.—

"(1) In general.—If the administering authority determines, with respect to a class or kind of merchandise from a nonmarket economy country for which an antidumping duty is determined using normal value pursuant to section 773(c), that—

"(A) pursuant to section 701(a)(1), a countervailable subsidy (other than an export subsidy referred to in section 772(c)(1)(C)) has been provided with respect to the class or kind of merchandise,

"(B) such countervailable subsidy has been demonstrated to have reduced the average price of imports of the class or kind of merchandise during the relevant period, and

"(C) the administering authority can reasonably estimate the extent to which the countervailable subsidy referred to in subparagraph (B), in combination with the use of normal value determined pursuant to section 773(c), has increased the weighted average dumping margin for the class or kind of merchandise,

the administering authority shall, except as provided in paragraph (2), reduce the antidumping duty by the amount of the increase in the weighted average dumping margin estimated by the administering authority under subparagraph (C).

"(2) Maximum reduction in antidumping duty.—The administering authority may not reduce the antidumping duty applicable to a class or kind of merchandise from a nonmarket economy country under this subsection by more than the portion of the countervailing duty rate attributable to a countervailable subsidy that is provided with respect to the class or kind of merchandise and that meets the conditions described in subparagraphs (A), (B), and (C) of paragraph (1).''.

(b) Effective Date.—Subsection (f) of section 777A of the Tariff Act of 1930, as added by subsection (a) of this section, applies to—

(1) all investigations and reviews initiated pursuant to title VII of that Act (19 U.S.C. 1671 et seq.) on or after the date of the enactment of this Act; and

(2) subject to subsection (c) of section 129 of the Uruguay Round Agreements Act (19 U.S.C. 3538), all determinations issued under subsection (b)(2) of that section on or after the date of the enactment of this Act.

Approved March 13, 2012.

Table 1: List of Investigations and Reviews Cited by China³⁰

Laws, regulations, judicial decisions and administrative rulings of general application, made effective by any [Member³¹], pertaining to the classification or the valuation of products for customs purposes, or to rates of duty, taxes or other charges, or to requirements, restrictions or prohibitions on imports or exports or on the transfer of payments therefor, or affecting their sale, distribution, transportation, insurance, warehousing inspection, exhibition, processing, mixing or other use, shall be published promptly in such a manner as to enable governments and traders to become acquainted with them. Agreements affecting international trade policy which are in force between the government or a governmental agency of any contracting party and the government or governmental agency of any other contracting party shall also be published. The provisions of this paragraph shall not require any contracting party to disclose confidential information which would impede law enforcement or otherwise be contrary to the public interest or would prejudice the legitimate commercial interests of particular enterprises, public or private.

a. is a "[l]aw[], regulation[], judicial decision[] [or] administrative ruling[] of general application … pertaining to the classification or the valuation of products for customs purposes, or to rates of duty, taxes or other charges, or to requirements, restrictions or prohibitions on imports or exports or on the transfer of payments therefor, or affecting their sale, distribution, transportation, insurance, warehousing inspection, exhibition, processing, mixing or other use";

b. was "made effective" by the United States; and

c. was not "published promptly in such a manner as to enable governments and traders to become acquainted" with it.

Nor does the fact that it was a country-specific measure exclude the possibility of it being a measure of general application. If, for instance, the restraint was addressed to a specific company or applied to a specific shipment, it would not have qualified as a measure of general application. However, to the extent that the restraint affects an unidentified number of economic operators, including domestic and foreign producers, we find it to be a measure of general application.⁵¹

While the restraint measure was addressed to particular, i.e. named, exporting Members, including Appellant Costa Rica …, we note that the measure did not try to become specific as to the individual persons or entities engaged in exporting the specified textile or clothing items to the importing Member and hence affected by the proposed restraint.⁵²

a. Section 1 is part of a "law" and contains a provision that is of "general application" and "pertains" to "rates of duty";

b. Section 1 as a whole was "made effective" by the United States on 13 March 2012; and

c. Section 1 was published "promptly", once it had been made effective.

No measure of general application taken by any contracting party effecting an advance in a rate of duty or other charge on imports under an established and uniform practice, or imposing a new or more burdensome requirement, restriction or prohibition on imports, or on the transfer of payments therefor, shall be enforced before such measure has been officially published.

a. is a "measure of general application taken by [a Member] effecting an advance in a rate of duty or other charge on imports under an established and uniform practice, or imposing a new or more burdensome requirement, restriction or prohibition on imports, or on the transfer of payments therefor"; and

b. has been "enforced before [it] has been officially published".

At the same time, we are bound to observe that Article X:2 of the General Agreement, does not speak to, and hence does not resolve, the issue of permissibility of giving retroactive effect to a safeguard restraint measure. The presumption of prospective effect only does, of course, relate to the basic principles of transparency and due process, being grounded on, among other things, these principles. But prior publication is required for all measures falling within the scope of Article X:2, not just ATC safeguard restraint measures sought to be applied retrospectively. Prior publication may be an autonomous condition for giving effect at all to a restraint measure. Where no authority exists to give retroactive effect to a restrictive governmental measure, that deficiency is not cured by publishing the measure sometime before its actual application. The necessary authorization is not supplied by Article X:2 of the General Agreement.¹⁷⁵

It would have been an exercise in speculation on the part of the Panel to predict either when or how that case may be concluded, or to assume that injunctive relief ultimately would be granted and that the United States Court of Appeals or the Supreme Court of the United States eventually would compel the Department of State to modify the Revised Guidelines. The Panel was correct not to indulge in such speculation, which would have been contrary to the duty of the Panel, under Article 11 of the DSU, to make "an objective assessment of the matter … including an objective assessment of the facts of the case".³⁰⁴

a. Section 1 has been "enforced" before its official publication through Section 1(b) and relevant determinations or actions made or taken by the United States between 20 November 2006 and 13 March 2012 in respect of imports from China;

b. Section 1 is part of a United States law, and hence a "measure" taken by the United States, and contains a provision that is of "general application"; but

c. Section 1 does not effect an "advance" in a rate of duty or other charge on imports under an established and uniform practice, nor does it impose a requirement, restriction, or prohibition, on imports that is "new or more burdensome".

In this regard, it is important to note here our practice of not applying the CVD law to non-market economies. The CAFC upheld this practice in Georgetown Steel Corp. v. United States, 801 F.2d 1308 (Fed. Cir. 1986). See also GIA at 37261. We intend to continue to follow this practice. Where the Department determines that a change in status from non-market to market is warranted, subsidies bestowed by that country after the change in status would become subject to the CVD law.³⁴³

If Section 1 of PL 112-99 was merely a clarification of existing law, which did not change United States law or make it stricter towards imports from NMEs, this would mean that USDOC was always under an obligation to impose CVDs on subsidized goods from NMEs. That this was not the case can be seen clearly from the above pronouncement by USDOC. Clearly, if USDOC was under such a legal obligation it could not have followed a "practice of not applying the CVD law to non-market economies."

The substantive issue in this case, here on appeal from the Court of International Trade, is whether the countervailing duty provisions in section 303 of the Tariff Act of 1930, as amended, 19 U.S.C. § 1303 (1982), apply to alleged subsidies granted by countries with so-called nonmarket economies for goods exported to the United States. The International Trade Administration of the Department of Commerce (Administration) held that section 303 does not apply to nonmarket economies.³⁴⁵

It is hence clear that USDOC itself did not consider itself at the time authorized to apply CVDs on NMEs. This is so, because if the countervailing duty provisions of United States law, as it then was, did not apply to NMEs, that means that USDOC had no legal authority to impose such duties on NMEs. The court then went on to define the legal question that it had to rule on:

In other words, we must determine, as best we can, whether when Congress enacted the countervailing duty law in 1897 it would have applied the statute to nonmarket economies, if they then had existed.³⁴⁶

The court reached the conclusion that Congress would not have done so, and in the many years that passed since 1897 never wanted to do so (i.e., apply CVD law to NMEs):

Further support for our conclusion is furnished by the more recent actions of Congress in dealing with the problem of exports by nonmarket economies through other statutory provisions. Those statutes indicate that Congress intended that any selling by nonmarket economies at unreasonably low prices should be dealt with under the antidumping law. There is no indication in any of those statutes, or their legislative history, that Congress intended or understood that the countervailing duty law also would apply.³⁴⁷

The court then discussed the 1974 amendments to the CVD laws and noted:

There is no indication, however, that in doing so Congress intended to change the scope of that law or believed that it covered nonmarket economies. If Congress had so intended or believed, it is curious that the legislature gave no such indication, particularly in view of the specific changes it made in the antidumping law to deal with the problem.³⁴⁸

The court concluded its analysis with the following statement:

Congress … has decided that the proper method for protecting the American market against selling by nonmarket economies at unreasonably low prices is through the antidumping law. This law is designed to protect domestic industry from injury resulting from the sale in the United States of foreign merchandise that is priced below its fair value, and provides a remedy therefor in 19 U.S.C. § 1677b(c). If that remedy is inadequate to protect American industry from such foreign competition — a question we could not possibly answer — it is up to Congress to provide any additional remedies it deems appropriate.³⁴⁹

This judgment is a final and binding decision, and as can be seen by the pronouncement of USDOC published in the Federal Register,³⁵⁰ USDOC itself saw it as such and based its practice of not applying CVDs on imports from NMEs on this judgment. Indeed, the parties agree that this decision was a final, unappealed decision, and was governing and controlling under United States law.³⁵¹

[W]e find that when amending and reenacting countervailing duty law in 1988 and 1994, Congress legislatively ratified earlier consistent administrative and judicial interpretations that government payments cannot be characterized as "subsidies" in a non-market economy context, and thus that countervailing duty law does not apply to NME countries.³⁵³

It went on to hold:

We thus find that in amending and re-enacting the trade laws in 1988 and 1994, Congress adopted the position that countervailing duty law does not apply to NME countries. Although Commerce has wide discretion in administering countervailing duty and antidumping law, it cannot exercise this discretion contrary to congressional intent. We confirm the holding of the Trade Court that countervailing duties cannot be applied to goods from NME countries.

Hence, the CAFC rejected the argument by the United States administration that the United States Tariff Act permitted USDOC to impose countervailing duties on imports from nonmarket economy countries if it was "possible to identify a subsidy" in such countries. The court concluded by stating that if USDOC wished to impose countervailing duties on imports from NME countries, "the appropriate approach is to seek legislative change".³⁵⁴ It was on this background that the United States authorities did in fact turn to Congress and requested it to adopt PL 112-99, which as noted above is entitled "an act to applythe countervailing duty provisions of the Tariff Act of 1930 to nonmarket economy countries".