Article 2.4.2 of the ADA

China submitted four claims under Article 2.4.2, second sentence concerning the USDOC's application of the WA-T methodology to all exports in the three challenged investigations (Oil Country Tubular Goods (OCTG), Steel Cylinders, and Coated Paper investigations). China alleged that the USDOC acted inconsistently with the pattern and explanation clauses of that provision. Further China challenged the USDOC's application of the weighted average-to-transaction (WA-T) methodology to all export transactions and its use of zeroing under the WA-T methodology.Footnote ²

Regarding the pattern clause, China challenged the USDOC's four quantitative flaws in the application of the Nails test and two SAS programming errors, which distorted the application on the so-called Nails test (a quantitative multi-tiered test) in some investigations.Footnote ³ The Panel concluded that the USDOC violated the pattern clause of Article 2.4.2 in the OCTG and Coated Paper investigations because of a quantitative flaw concerning the Nails test and an SAS programming error. The Panel further rejected China's claim in relation to the all the flaws with the Nails test in respect of the Steel Cylinders investigation.Footnote ⁴

The Panel concluded that the USDOC acted inconsistently with the explanation clause of Article 2.4.2 in all three challenged investigations because it did not explain why neither the weighted average-to-weighted average (WA-WA) nor the transaction-to-transaction (T-T) methodologies could take into account adequately ‘the significant difference in the relevant export prices, within the meaning of that clause’.Footnote ⁵ The Panel also found that the USDOC acted inconsistently with Article 2.4.2, second sentence in all the investigations by applying the WA-T methodology to all export transactionsFootnote ⁶ and by using zeroing under the same methodology in calculating the dumping margins for the Chinese exporters concerned.Footnote ⁷

On appeal, China challenged the following Panel findings under Article 2.4.2: first, the first and third quantitative flaws with the Nails test. China also argued that the Panel acted inconsistently with Article 17.6.Footnote ⁸ Second, its claim on the consideration of certain qualitative factors when determining whether prices differ ‘significantly’. Third, the USDOC's use of weighted average export prices to establish the existence of a ‘pattern’. Fourth, the Panel's error in suggesting that an investigating authority may combine comparison methodologies to establish dumping margins.Footnote ⁹

The Appellate Body rejected China's first claim and found that China failed to establish that the Panel erred in its interpretation or application of Article 2.4.2, second sentence and Article 17.6(i) in rejecting China's claims regarding the alleged quantitative flaws with the Nails test as applied in the tree challenged investigations.Footnote ¹⁰ Second, the Appellate Body found that the Panel correctly found that an investigating authority should conduct quantitative analysis of the significance of a difference in export price. The Appellate Body thus found that China did not establish that the United States acted inconsistently with of Article 2.4.2, second sentence with regards to the qualitative issues with the Nails test. Third, the Appellate Body found that China did not establish that the United States acted inconsistently with Article 2.4.2, second sentence in the challenged investigations by determining the existence of a pattern or the basis of average prices instead of individual export transaction prices.Footnote ¹¹ Finally, the Appellate Body referred to its findings in US–Washing Machines Footnote ¹² and considered that Article 2.4.2, second sentence permits an investigating authority to establish dumping margins by applying the W-ATFootnote ¹³ only to pattern transactions; this provision does not permit the combining of comparison methodologies. The Appellate Body thus declared the Panel's findings moot to the extent that they are based on the erroneous understanding that Article 2.4.2 permits the combining of comparison methodologies to establish dumping margins.Footnote ¹⁴

Article 9.3 of the ADA and Article VI:2 of the GATT 1994

China noted that the USDOC used zeroing under the WA-T methodology to calculate the dumping margin for a Chinese exporter in an administrative review.Footnote ¹⁵ The Panel upheld China's claim that the USDOC acted inconsistently with Article 9.3 and Article VI:2 of the GATT 1994.Footnote ¹⁶

Articles 6.10, 9.2, and 9.4, Second Sentence of the ADA

China submitted that the ‘Single Rate Presumption’ that the USDOC applied to exporters from NME countries amounts to a norm of general and prospective application. Hence, that measure is ‘as such’ inconsistent with Articles 6.10 and 9.2, and Article 9.4, second sentence.Footnote ¹⁷ The Panel analysed the instruments that constitute and inform the Single Rate PresumptionFootnote ¹⁸ and upheld China's claim that the Single Rate Presumption is a norm of general and prospective application that can be challenged ‘as such’ in WTO dispute settlement.Footnote ¹⁹

The Panel explained that Article 6.10 requires Members to calculate individual dumping margins for each known exporter of the subject product. Further, Article 9.2 obliges the investigating authority to specify individual anti-dumping duties and name the individual suppliers of the product. The Single Rate Presumption is inconsistent with these obligations because it subjects NME exporters to one dumping margin and duty rate, unless each exporter overcomes the presumption of governmental control over its exports. The Panel thus concluded that the Single Rate Presumption ‘as such’ is inconsistent with Articles 6.10 and 9.2.Footnote ²⁰

China submitted that the Single Rate Presumption is inconsistent with Articles 6.10 and 9.2 ‘as applied’ in the challenged determinations.Footnote ²¹ The Panel found that the USDOC had applied the Single Rate Presumption in 13 of the challenged original anti-dumping investigations. The Panel thus found that the application of this measure ‘as such’ was inconsistent with the aforementioned provisions.Footnote ²² In respect of the 25 administrative reviews, the Panel similarly found sufficient evidence to conclude that the USDOC presumed the existence of governmental control and required the Chinese exporters to pass the Separate Rate Test in order to obtain a separate rate from the PRC-wide entity.Footnote ²³

The Panel thus concluded that by applying the Single Rate Presumption in all the determinations, the USDOC presumed the existence of a PRC-wide entity from the beginning. The USDOC thus failed to make an objective determination that the multiple exporters included in the PRC-wide entity were in such a relationship that they could be treated as a single entity. Further, by presuming governmental control over the exporters, the USDOC subjected them to a single, PRC-wide anti-dumping duty that is inconsistent with Articles 6.10 and 9.2.Footnote ²⁴

Finally, China argued that the Single Rate Presumption ‘as such’ and ‘as applied’ is inconsistent with Article 9.4, second sentence. China asserted this violation because the Single Rate Presumption subjected the right to an individual duty or normal value to the completion of a Separate Rate Test. According to China, this constitutes an additional condition that does not exist under Articles 9.4 or 6.10.Footnote ²⁵ The Panel concluded that the Single Rate Presumption is ‘as such’ and as ‘applied’ was inconsistent with Articles 6.10 and 9.2. The Panel exercised judicial economy with respect to China's ‘as such’ and ‘as applied’ claims under Article 9.4, second sentence.Footnote ²⁶

Articles 6.1, 6.8, Paragraphs 1 and 7 of Annex II and Article 9.4 First Sentence of the ADA

China challenged several facets of the USDOC's methodologies ‘as such’ and ‘as applied’ for determining one anti-dumping duty rate for NME-wide entities. China argued that the ‘AFA Norm’ (adverse facts available) is a norm of general and prospective application, which is inconsistent with Article 6.8 and paragraph 7 of Annex II. In addition, ‘as applied’, certain determinations are inconsistent with Articles 6.1 and 6.8, paragraphs 1 and 7 of Annex II, and Article 9.4, first sentence.Footnote ²⁷

Relying on the Appellate Body's findings in Argentina–Import Measures,Footnote ²⁸ the Panel concluded that it was not persuaded that the practice reflected in the USDOC's anti-dumping determinations is sufficient to demonstrate that the AFA Form has general and prospective application. Particularly, there is no sufficient evidence indicating that the AFA Norm has prospective application because it does not demonstrate that the USDOC will continue to follow the same actions in the future.Footnote ²⁹ Based on this finding, the Panel exercise judicial economy with regard to whether the AFA Norm has general application.Footnote ³⁰ The Panel concluded that China had failed to demonstrate that the AFA Norm constitutes a measure ‘as such’. The Panel thus found it unnecessary to determine whether the AFA Norm is inconsistent with Article 6.8 and paragraph 7 of Annex II.Footnote ³¹ The Panel further exercised judicial economy with respect to China's ‘as applied’ claims under Articles 6.1 and 6.8, paragraphs 1 and 7 of Annex II, and Article 9.4, the first sentence of.Footnote ³² The Panel nonetheless set out the factual aspects that is considered relevant to this issue to assist the Appellate Body to complete the analysis in case of an appeal.Footnote ³³

China appealed the Panel's findings and requested the Appellate Body to complete the analysis in two respects: (i) to find that the AFA Norm can be challenged ‘as such’ in WTO dispute settlement; and (ii) to find that the AFA Norm is inconsistent with Article 6.8 and paragraph 7 of Annex II.Footnote ³⁴ The Appellate Body found that the Panel erred in concluding China did not demonstrate that the AFA Norm has ‘prospective application’ and thus reversed the Panel's findings.Footnote ³⁵ The Appellate Body completed the analysis and found that the AFA Norm has prospective application as it reflects USDOC policy, provides administrative guidance for future action, and generates expectations among economic operators. It will thus continue to be used in the future. The Appellate Body thus concluded that the AFA Norm is a rule or norm of general and prospective application and can be challenged ‘as such’.Footnote ³⁶ However, the Appellate Body refused to complete the analysis on whether the AFA Norm is inconsistent with Article 6.8 and paragraph 7 of Annex II.Footnote ³⁷