(Matthew Pereira/Kelley, Drye & Warren LLP) On November 1, 2019, the World Trade Organization (WTO) authorized China to suspend $3.579 billion in trade concessions to the United States, roughly half the $7 billion amount China had requested. The Arbitrator’s Decision stems from a complaint originally lodged by China in 2013 regarding the use of certain methodologies in antidumping investigations on Chinese goods. China must now request the WTO’s permission to suspend specific concessions, which will likely take the form of increased tariffs on U.S. goods.
The underlying dispute focused on three issues in U.S. antidumping proceedings: (1) the weighted average-to-transaction methodology applied by the U.S. Department of Commerce (the Department) in antidumping cases, including the use of zeroing; (2) the Department’s treatment of certain exporters in non-market economies (NMEs) as an NME-wide entity (the single rate presumption); and (3) the Department’s use of adverse facts available in determining dumping margins. The zeroing methodology has been the subject of numerous disputes at the WTO. While some have argued that the practice violates WTO rules, the U.S. has continued to defend it. Speaking in April, Ambassador Lighthizer stated “[t]he WTO rules do not prohibit ‘zeroing[.]’ The United States never agreed to any such rule in the WTO negotiations, and never would. WTO Appellate Body reports to the contrary are wrong. . .”
This award, which comes in the wake of last month’s $7.5 billion award in the U.S.-E.U. Aircraft dispute, is the third largest in WTO history. The $3.579 billion award is authorized on a per annum basis until the U.S. brings its law into compliance with its WTO obligations. The U.S. and China may also seek to resolve the dispute as part of the negotiations in the ongoing trade war.