Articles 3.1 and 3.2 of the Anti-Dumping Agreement (ADA)

The panel rejected Canada's argument that MOFCOM failed to provide a reasoned and adequate explanation of how MOFCOM's reference to the share of dumped imports in total imports support its conclusion that the volume of dumped imports had increased in absolute terms. Canada contended that MOFCOM did not take into account market expansion and increased sales of domestic and non-dumped ‘like’ products. The panel found that, pursuant to Article 3.2, the investigating authority is required to consider, not to determine, whether there was a significant increase in dumped imports in absolute terms. As there is no requirement to make a determination, there would be no obligation under Article 3.2 to provide a reasoned and adequate explanation. Whether an increase in dumped imports supports a demonstration that dumped imports cause material injury under Article 3.5 requires an explanation to also be consistent with Article 3.1.Footnote ³

The panel thus concluded that Canada did not demonstrate that MOFCOM's consideration of the volume of dumped imports was not consistent with Articles 3.1 and 3.2.Footnote ⁴

Articles 3.1 and 3.2 of the ADA

The panel found that although MOFCOM reasonably found that there were parallel trends between the prices of dumped imports and domestic ‘like’ products, it failed to explain the role of the parallel price trends in the decline of the prices of domestic ‘like’ products and how changes in the prices and volumes the dumped imports affected domestic ‘like’ product prices.Footnote ⁵ The panel also considered that MOFCOM failed to adequately explain its consideration of price depression in light of the undisputed fact that the prices of the dumped imports were higher than the prices of the domestic ‘like’ products in the latter part of the period of investigation (POI).Footnote ⁶ Regarding MOFCOM's consideration of changes in the market share of the dumped imports, the panel found that during the POI, dumped imports, non-dumped imports, and domestic ‘like’ products gained market share.

The panel distinguished the facts of this case and the panel report in China–Autos (US), upon which Canada relied to assert that MOFCOM needed to consider changes in market share of various market participants. The panel found that in the current case, both the domestic industry and the dumped industry gained market share. Therefore, MOFCOM did not rely on lost domestic market share in its consideration of price effects. Thus, there was no need for it to explain the relevance of this loss in the light of the gains of other market participants.Footnote ⁷

The panel concluded that Canada failed to demonstrate that MOFCOM violated Articles 3.1 and 3.2 in considering the market share changes of dumped imports in its consideration of price effects.Footnote ⁸ Further, the panel found that Canada failed to demonstrate that MOFCOM had violated Articles 3.1 and 3.2 by taking into account pricing documents and minutes of meetings in its consideration of price effects.Footnote ⁹

The panel ultimately concluded that MOFCOM's consideration of price effects was inconsistent with Articles 3.1 and 3.2.Footnote ¹⁰

Articles 3.1 and 3.4 of the ADA

The panel rejected Canada's arguments that MOFCOM did not conduct its evaluation of the market share of the domestic industry in an appropriate manner.Footnote ¹¹ The fact that MOFCOM characterized the domestic industry's market share as having ‘remained low’ in the light of increased domestic capacity to meet increase demand was not unreasonable and unobjective.Footnote ¹² Further, the panel found that MOFCOM evaluated all the mandatory economic indicators required under Article 3.4. It noted the positive and negative trends and considered them in its causation analysis between dumped imports and material injury.Footnote ¹³ The panel thus concluded that Canada failed to establish that MOFCOM failed examine the impact of dumped imports on the state of the domestic industry in a manner that is inconsistent with Articles 3.1 and 3.4.

Articles 3.1 and 3.5 of the ADA

Due to deficiencies in its causation analysis, the panel found that MOFCOM failed to demonstrate a causal relationship between the dumped imports and injury to the domestic industry in a manner that is consistent with Articles 3.1 and 3.5. The panel considered this finding a sufficient basis to conclude that China failed to comply with its obligations under the ADA with respect to the impugned anti-dumping measure. It nevertheless provided some guidance in the context of implementation of any recommendation of the Dispute Settlement Body by considering Canada's non-attribution claims.

The panel concluded that MOFCOM did not properly examine the effects of cotton and viscose staple fibres (VSF) prices and failed to ensure that any injury caused by those prices was not attributed to dumped imports. Further, the panel found that MOFCOM failed to properly examine the domestic industry's overcapacity, overexpansion, and inventory build-up as other injury-causing factors. Thus, MOFCOM did not ensure that the injury caused by these ‘other factors' was not attributed to dumped imports.Footnote ¹⁴ MOFCOM also did not adequately examine non-dumped imports as other factors that could cause injury.Footnote ¹⁵ Moreover, the panel found that MOFCOM did not adequately examine the injury caused by the shortage of cotton linter as another factor that could cause injury.Footnote ¹⁶

The panel thus concluded that MOFCOM acted inconsistently with Articles 3.1 and 3.5.

Consequential Claims

Canada presented claims that MOFCOM violated Article 1 of the ADA and Article VI of the GATT 1994 as a consequence of its inconsistency with the various provisions of the ADA. The panel confirmed Canada's consequential claims and found that China indeed acted inconsistently with the aforementioned provisions.Footnote ¹⁷