Adopted 28 February 2018
Complainant United States
Respondent China
Third Parties Brazil, Ecuador, European Union, and Japan
Measure at Issue
This dispute concerns the challenge by the United States to measures taken by China to comply with the rulings and recommendations of the Dispute Settlement Body (DSB) in the original proceeding China–Broiler Products. Based on a redetermination issued by the Ministry of Commerce (MOFCOM), China continued to impose anti-dumping and countervailing duties on imports of broiler products from US producers (Keystone, Tyson, and Pilgrim's Pride). Overall, the compliance panel concluded that China failed to bring its measures into conformity with the Anti-Dumping Agreement (AD Agreement) and the Agreement on Subsidies and Countervailing Measures (SCM Agreement).
Main Adopted Findings of the Panel
Article 2.2.1.1 of the AD Agreement (Proper Allocation of Costs)
MOFCOM rejected Tyson's value-based cost allocation because it considered that a weight-based cost allocation would be a more reasonable method. However, it also rejected Tyson's proposed weight-based methodology on the basis that it was ‘not reasonable’.Footnote 1 The panel concluded that China acted inconsistently with Article 2.2.1.1 because: (1) ‘MOFCOM did not explain why the concern – that allocations must “reasonably reflect costs” of production – it had relied upon to choose a weight-based cost allocation for subject product models nonetheless allowed for the exclusion of certain parts of a live broiler (feathers, blood, and viscera) that are necessarily part of the production of the subject broiler product models from its cost allocation’; and (2) ‘MOFCOM did not provide a reasoned and adequate explanation for its rejection of Tyson's alternative weight-based cost allocation methodology’.Footnote 2 In respect of Pilgrim's Pride, the panel also concluded that China acted inconsistently with Article 2.2.1.1 because, despite in the original report the panel had found that China had acted inconsistently with the second sentence of Article 2.2.1.1, China ‘did not in any way address this implementation obligation’.Footnote 3
Articles 3.2 of the AD Agreement and 15.2 of the SCM Agreement (Price Effects)
The panel considered first MOFCOM's findings regarding price undercutting. It found that China ‘failed to address the comparability of [average unit values] derived from different baskets of products for the purpose of considering the effects of prices of subject imports on domestic like prices’.Footnote 4 The panel also found that China failed ‘to explain in what way the companies chosen were “representative” such that a consideration of price effects based on data for these companies could be generalized to the domestic industry’.Footnote 5 Regarding MOFCOM's price suppression analysis, the panel found that it was ‘undermined by a flawed analysis of price undercutting’.Footnote 6 In light of this, the panel found that China acted inconsistently with Articles 3.2 of the AD Agreement and 15.2 of the SCM Agreement in respect of price undercutting and price suppression; and, ‘as a consequence’, China also acted inconsistently with Articles 3.1 of the AD Agreement and 15.1 of the SCM Agreement.Footnote 7
Articles 3.4 of the AD Agreement and 15.4 of the SCM Agreement (Impact on Domestic Industry)
The panel found that China acted inconsistently with Articles 3.4 of the AD Agreement and 15.4 of the SCM Agreement because MOFCOM's evaluation of ‘capacity utilization rates’ was faulty and MOFCOM erroneously relied on an irrelevant economic factor – i.e. the impact of likely future imports – when it examined the impact of subject imports on ‘potential decline’ in the domestic industry. As a consequence, the panel found that China also acted inconsistently with Articles 3.1 of the AD Agreement and 15.1 of the SCM Agreement. However, the panel found that the United States did not establish that China had acted inconsistently with all these provisions as a consequence of MOFCOM's evaluation of ‘inventories’ or of its ‘focus’ on the last part of the period of investigation.Footnote 8
Articles 3.5 of the AD Agreement and 15.5 of the SCM Agreement (Causation/Non-Attribution)
Having found that MOFCOM's consideration of price effects was inconsistent with Articles 3.2 of the AD Agreement and 15.2 of the SCM Agreement, and given that MOFCOM took into account price effects as one element of its determination of causation, the panel further found that, by relying on a defective consideration of price effects in MOFCOM's demonstration of a causal link between the subject imports and injury to the domestic industry, China acted inconsistently with Articles 3.5 of the AD Agreement and 15.5 of the SCM Agreement.Footnote 9 As a consequence, the panel also found that China acted inconsistently with Articles 3.1 of the AD Agreement and 15.1 of the SCM Agreement. The panel concluded, however, that the United States did not establish that China acted inconsistently with Articles 3.5 and 15.5 by (i) failing to consider the volume of dumped imports in both relative and absolute terms; (ii) failing to reconcile its analysis with evidence of improved performance in the domestic industry; and (iii) failing to adequately consider alleged market constraints on greater domestic production of chicken feet.Footnote 10
Articles 6.1 of the AD Agreement and 12.1 of the SCM Agreement (Notice to Interested Members and Parties)
China pointed to three documents – the Notice of Initiation, the General Verification Letter, and the non-confidential summaries of the data provided by the Chinese producers – as collectively constituting ‘notice’ to interested parties. MOFCOM placed these documents in the trade remedy public information room, but did not actively inform the US interested parties that the documents had been made available.Footnote 11 The panel found that, ‘[w]hile each document may have some connection to China's obligation to give notice of the information required, none … makes enough of a contribution such that, taken together, they suffice to demonstrate that MOFCOM gave notice to US interested parties of the information required consistently with the requirements of Articles 6.1 of the AD Agreement and 12.2 of the SCM Agreement’. As a result, the panel concluded that China acted inconsistently with these provisions.Footnote 12 Having reached this conclusion, the panel found it unnecessary to make additional findings as to whether, as a consequence of the violation of the notice requirement, MOFCOM also failed to give interested parties ample opportunity to present in writing all evidence which they considered relevant under those same provisions.Footnote 13
Articles 6.4 of the AD Agreement and 12.3 of the SCM Agreement (Opportunities to See Information/Prepare Presentations)
During the reinvestigation, MOFCOM sought and obtained new pricing data from four Chinese producers through on-the-spot visits.Footnote 14 The United States claimed that MOFCOM acted inconsistently with Articles 6.4 of the AD Agreement and 12.3 of the SCM Agreement because it did not provide timely opportunities for US interested parties to see the questions or requests for information that MOFCOM put to these Chinese producers. The panel saw ‘no reason to exclude, a priori, requests for information from the scope of “information” within the meaning of Articles 6.4 and 12.3’.Footnote 15 It thus concluded that China acted inconsistently with these provisions by failing to provide timely opportunities for the US interested parties to see these requests issued to the Chinese producers.Footnote 16 As a consequence, ‘MOFCOM also failed to provide timely opportunities for the US interested parties to prepare presentations on the basis of this information’.Footnote 17 On the other hand, the panel concluded that the United States did not establish its claim under Articles 6.4 and 12.3 in respect of (i) the non-confidential summaries, (ii) the identities of the Chinese producers, (iii) the additional ‘context’ regarding the data in the non-confidential summaries and aggregate data, and (iv) the basis for selecting Chinese producers in the sample and the methodology for collecting pricing data from them.Footnote 18
Article 6.8 and Annex II(3, 5) of the AD Agreement and (Facts Available)
MOFCOM rejected certain of Tyson's reported cost data and it used facts available instead. The United States claimed that MOFCOM acted inconsistently with Article 6.8 and paragraph 3 of Annex II of the AD Agreement because it failed to demonstrate that Tyson's reported data were not ‘verifiable’, within the meaning paragraph 3 of Annex II. The panel considered that ‘nothing in the redetermination demonstrates meaningful consideration by MOFCOM of the criteria in paragraph 3’ nor is there ‘any link between those criteria and MOFCOM's ultimate decision to reject all of the reported data’.Footnote 19 Moreover, the panel disagreed with China's understanding of paragraph 5 of Annex II, pointing that ‘nothing in its structure or actual wording suggests that [it] allows for the rejection of information that meets the criteria set forth in paragraph 3 but is not ideal in all respects’. Rather, the panel noted that this provision ‘establishes an obligation for an investigating authority to use such information provided the interested party submitting it acted to the best of its ability’.Footnote 20 On this basis, the panel concluded that China acted inconsistently with Article 6.8 and Annex II(3) of AD Agreement.Footnote 21
Article 6.9 of the AD Agreement (Essential Facts)
The United States claimed that MOFCOM acted inconsistently with Article 6.9 by failing to disclose the essential facts underlying the determination of the dumping margin in respect of Pilgrim's Pride and Keystone. It argued that ‘MOFCOM should have disclosed the actual ‘calculations’ underlying the dumping margin determination, not only the calculation methodology’. The panel, however, pointed out that, in the original dispute, it specifically had found that ‘calculations’ are not ‘essential facts’ that must be disclosed.Footnote 22 On this basis, it concluded that the United States did not establish its claim.Footnote 23 The United States also claimed that MOFCOM did not provide ‘original’ data to Pilgrim's Pride during the reinvestigation and did not disclose the data from the original investigation or from the reinvestigation to Keystone. However, based on the totality of the evidence and arguments before it, the panel concluded that the United States did not establish that China acted inconsistently with Article 6.9 of AD Agreement by not disclosing the original data to Pilgrim's PrideFootnote 24 or by not disclosing the confidential data at issue to the purported agents of Keystone.Footnote 25
Article 9.4(i) of the AD Agreement (Duty for Unknown Exporters)
The panel noted that MOFCOM ‘had originally limited the examination to three selected exporters and continued to do so in the reinvestigation’, and, as far as the panel was aware, ‘no previously ‘unknown’ exporter sought to participate or provide information in the reinvestigation’. In these circumstances, the panel saw ‘no basis to conclude that MOFCOM was somehow precluded in the reinvestigation from establishing a duty rate based on facts available for all other ‘unknown’ exporters without regard to the limitation set forth in Article 9.4(i)’.Footnote 26 On this basis, the panel concluded that the United States did not establish that MOFCOM failed to comply with Article 9.4(i) of the AD Agreement in the reinvestigation by determining a ‘residual’ duty rate based on facts available to be applied to ‘unknown’ exporters.Footnote 27
