TWN Info Service on WTO and Trade Issues (Jun23/12)
21 June 2023
Third World Network

Trade: WTO rules against Chinese duties on Japanese stainless steel products
Published in SUNS #9807 dated 21 June 2023

Washington DC, 20 Jun (D. Ravi Kanth) — A World Trade Organization dispute panel on 19 June apparently issued a ruling largely in favour of Japan against China in a trade dispute concerning anti-dumping duties imposed by Beijing on imports of certain stainless steel products from Japan, said people familiar with the panel’s report.

The panel’s report provides some relief to China by rejecting some of Japan’s claims, which are now expected to be arbitrated, perhaps under the newly established Multi-Party Interim Appeal Arbitration Arrangement (MPIA), said people familiar with the development.

The trade dispute arose over the imposition of anti-dumping duties by China on imports of certain stainless steel products from Japan such as billets/slabs, plates, and coils, which are referred to as “flat” products in steel industry jargon.

In June 2021, Japan requested consultations with China pursuant to Articles 1 and 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU), Article XXIII:1 of the General Agreement on Tariffs and Trade 1994 (GATT 1994), and Articles 17.2 and 17.3 of the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (Anti-Dumping Agreement) with respect to the measures at issue in the dispute.

In its complaint, Japan claimed that China violated several provisions of the Anti-Dumping Agreement (ADA) in imposing the anti-dumping duties, which seems to have been “weaponized” by many powerful WTO members in the past decade.

The two sides failed to amicably resolve the claims raised by Japan in its complaint, resulting in Japan requesting the establishment of a dispute panel on 19 August 2021, to adjudicate on the issues raised by Tokyo.

On 27 September 2021, the Dispute Settlement Body (DSB) agreed to establish a panel, with the panelists appointed in January 2022.

The panel was tasked to adjudicate on China’s imposition of anti-dumping duties on imports of certain stainless steel products from Japan.

Apparently, the panel rejected China’s claim that Japan was precluded, in light of its panel request, from making certain claims challenging the Ministry of Commerce of China (MOFCOM)’s definition of the domestic industry.

The panel also concurred with Japan over Tokyo’s challenge to China’s definition of the domestic industry under Article 3.1 of the ADA was a consequential claim that could only be examined as a consequence of any violation under Article 4.1 of the ADA.

On the substantive aspects concerning the dumping determination by MOFCOM, the panel sided with Japan on several key points.

The panel’s conclusions are as follows:

1. The panel found that Japan has established that MOFCOM’s definition of the domestic industry was inconsistent with Article 4.1 of the ADA because MOFCOM “failed to provide a reasoned and adequate explanation of its finding that the production of the firms included in the domestic industry represented a “major proportion” of the total production of all Chinese producers”;

2. The panel rejected other claims made by Japan regarding MOFCOM’s definition of the domestic industry under Article 4.1 of the ADA;

3. With regards to MOFCOM’s decision to cumulate imports from the different sources under investigation, the panel found that Japan failed to establish that MOFCOM acted inconsistently with Articles 3.1 and 3.3 of the ADA in finding that a cumulative assessment of the effects of the subject imports was appropriate in light of the conditions of competition, and also rejected Japan’s claims that MOFCOM’s price effects analyses, impact analyses, and causation findings were, respectively, inconsistent with Articles 3.2, 3.4, and 3.5 of the ADA;

4. With respect to Japan’s claims concerning MOFCOM’s price effects analysis, the panel found that Japan has established that MOFCOM acted inconsistently with Articles 3.1 and 3.2 of the ADA because, in making its findings on price effects, MOFCOM failed to ensure that there was no issue of price comparability between the product categories;

5. The panel found that Japan has established that MOFCOM’s series-specific price effects analyses were not based on an objective examination of positive evidence and, therefore, inconsistent with Articles 3.1 and 3.2 of the ADA;

6. The panel found that Japan has established that MOFCOM’s overall conclusion of price depression was inconsistent with Articles 3.1 and 3.2 of the ADA because it was dependent on MOFCOM’s flawed findings of price comparability between product categories and series-specific price effects.

In light of these findings, the panel declined to make findings on the merits of certain additional arguments made by Japan in support of its claim under Articles 3.1 and 3.2 of the ADA.

7. With respect to Japan’s claims concerning MOFCOM’s analysis of the state of the domestic industry, the panel found that Japan has established that MOFCOM acted inconsistently with Articles 3.1 and 3.4 of the ADA with regards to MOFCOM’s findings on trends in sales prices, its examination of domestic market share for the purpose of examining the impact of the subject imports on the domestic industry, and its examination of the evidence concerning capacity utilization and ending inventory.

The panel found that Japan has not established that MOFCOM acted inconsistently with Articles 3.1 and 3.4 of the ADA when examining the domestic industry’s sales volume, apparent domestic consumption, pre-tax profits, and return on investment.

The panel declined to make findings on the merits of certain additional arguments made by Japan in support of its claim under Articles 3.1 and 3.4 of the ADA;

8. With respect to Japan’s claims concerning MOFCOM’s determination on causation, the Panel found that Japan has established that MOFCOM’s causation analysis was inconsistent with Articles 3.1 and 3.5 of the ADA because MOFCOM’s causation analysis relied on its price effects and impact analyses which were inconsistent with Articles 3.1, 3.2 and 3.4 of the ADA, and that its analysis of the increase in nickel prices since mid-2016 as a factor other than dumped imports allegedly injuring the domestic industry was not based on an objective examination of positive evidence, and was not reasonably and adequately explained.

According to the panel report, Japan has established that MOFCOM acted inconsistently with Article 6.9 of the ADA in not disclosing the essential facts underlying its price effects analysis, and in not disclosing the essential facts underlying its causation determination in relation to the fluctuation in nickel prices.

The panel, however, rejected some of Japan’s procedural claims.

For example, the panel rejected Japan’s claims concerning the confidential treatment of certain company names in the domestic industry’s application for the duties.

It also ruled that Japan failed to establish that MOFCOM’s public notice in relation to its cumulation analysis, its examination of the state of the domestic industry, its causation determination in relation to the cost of environmental regulations, and its definition of the domestic industry was inconsistent with Articles 12.2 and 12.2.2 of the ADA.

The panel found that Japan has not established that MOFCOM acted inconsistently with Article 6.9 of the ADA in relation to its disclosure of the essential facts pertaining to MOFCOM’s cumulation analysis, its examination of the state of the domestic industry, its causation determination in relation to the cost of environmental regulations, and its definition of the domestic industry. +