The World Trade Organization on Wednesday adopted an Aug. 2 dispute settlement panel report in favor of the United States in a major trade dispute with China, proving the country’s imposition of duties on U.S. chicken “broiler” products violates international trade rules.
With the report now formally adopted by the WTO Dispute Settlement Body, China must bring itself into compliance with its WTO obligations. In 2009 – the year before China imposed the duties – the United States exported over 613,000 metric tons of broiler meat to China. Exports fell almost 90 percent after the imposition of the duties.
“This decision represents a significant victory for American farmers and chicken producers and proves that the United States will not stand by while our trade partners unfairly hurt U.S. exports and U.S. jobs,” said U.S. Trade Representative Michael Froman in a statement. “Given the wide-ranging violations found by the WTO, I hope that China’s acceptance of the WTO’s decision without appeal signals a recognition by China that it needs to take a serious look at its trade remedies regime and bring its rules, procedures and practices into line with its WTO obligations.”
On Sept. 27, 2009, China’s Ministry of Commerce (MOFCOM) initiated antidumping and countervailing investigations of imports of so-called “broiler products” from the United States. Broiler products include most chicken products, with the exception of live chickens and a few other chicken products such as cooked and canned chicken. MOFCOM imposed antidumping and countervailing duties on these products on Sept. 26, 2010 and August 30, 2010, respectively. The antidumping duties ranged from 50.3 percent to 53.4 percent for the U.S. producers who responded to MOFCOM’s investigation notice, while MOFCOM set an “all others” rate of 105.4 percent. In the countervailing investigation, MOFCOM imposed countervailing duties ranging between 4.0 percent and 12.5 percent for the participating U.S. producers and an “all others” rate of 30.3 percent.
On Sept. 20, 2011, the United States requested dispute settlement consultations with China concerning the conduct and results of MOFCOM’s antidumping and countervailing duty investigations. After consultations proved unsuccessful, the United States requested the WTO establish a panel to hear U.S. claims that China violated numerous procedural and substantive obligations under the WTO’s Antidumping Agreement and Agreement on Subsidies and Countervailing Measures.
In its report, the WTO panel found in favor of the United States on nearly all its claims, specifically:
- Levying countervailing duties on U.S. producers in excess of the amount of subsidization.
- Relying on “flawed” price comparisons for its determination that China’s domestic industry had suffered injury.
- Unjustifiably declining to use the books and records of two major U.S. producers in calculating their costs of production; failing to consider any of the alternative allocation methodologies presented by U.S. producers and instead using a weight-based methodology resulting in high dumping margins; improperly allocating distinct processing costs to other products inflating dumping margins; and allocating one producer’s costs in producing non-exported products to exported products creating an inflated dumping margin.
- Improperly calculating the “all others” dumping margin and subsidy rates.
The WTO panel also found that China breached its WTO obligations by:
- Denying a hearing request during the investigation.
- Failing to require the Chinese industry to provide non-confidential summaries of information it provided to MOFCOM.
- Failing to disclose essential facts to U.S. companies including how their dumping margins were calculated.