US files WTO case against China
Sept. 20, 2011
by Bryan Salvage
WASHINGTON –On Sept. 20, the United States filed a case against China before the World Trade Organization “to protect up to 300,000 American agricultural jobs being threatened by China’s imposition of duties on imports of American chicken products,” announced US Trade Representative Ron Kirk.
The US is requesting dispute settlement consultations – the first step in a WTO dispute – to challenge China’s imposition of antidumping and countervailing duties against imports of US chicken “broiler products,” which are both chicken products that are not cut into pieces, as well as various cuts and pieces. The US is addressing its concerns that China’s duties appear to be inconsistent with WTO rules. Parties that do not resolve a matter through consultations within 60 days may request the establishment of a WTO dispute settlement panel, under WTO rules.
Before imposing these duties, the US was China’s largest chicken broiler products supplier with more than 600,000 metric tons of broiler products exported in 2009. US exports to China are down 90 percent since the duties have come into force. If these duties are not lifted, the US poultry industry will have lost approximately $1 billion in sales to China by the end of this year, industry sources claim.
Here’s the history leading up to today’s actions. China’s Ministry of Commerce (MOFCOM) initiated antidumping and countervailing investigations of imports of chicken broiler products from the US on Sept. 27, 2009, and then imposed antidumping and countervailing duties on Sept. 26, 2010, and Aug. 30, 2010, respectively. The duties were based on China’s findings that American broiler products had been sold at less than fair value (“dumped”) into the Chinese market as well as subsidized.
WTO rules permit member countries to impose duties on imports of merchandise that are found to be dumped or subsidized, if those imports cause injury to the domestic industry. However, WTO rules also require member countries to follow specific procedures and legal standards when conducting their investigations and making determinations.
The US is concerned that China’s investigating authorities, in levying these duties, appear to have failed to adhere to their WTO obligations in numerous respects. China seems to have failed to observe numerous transparency and due-process requirements, failed to properly explain the basis for its findings and conclusions, incorrectly calculated dumping margins, incorrectly calculated subsidy rates and made unsupported findings of injury to China’s domestic industry.
China imposed dumping duties ranging from 50.3 percent to 53.4 percent for the participating U.S. producers and exporters, and set an “all others” rate of 105.4 percent in the antidumping investigation. In the countervailing duty investigation, China imposed countervailing duties of between 4.0 percent and 12.5 percent for the participating US producers and exporters and an “all others” rate of 30.3 percent.
“The US industry greatly appreciates the determination that Ambassador Kirk and his staff have shown to address this significant trade problem,” said a joint statement by the USA Poultry & Egg Export Council and the National Chicken Council.” The action being brought is a trade remedy case that challenges the method by which China determined that the product was allegedly sold as less than normal value.”
Their statement charged the China case used “average cost of production” to determine normal value rather than using domestic US market prices for comparable sales as is customary in anti-dumping actions. The use of “average cost of production” reflects neither market realities nor the way in which companies in the industry commonly keep their accounts, the statement added.
“The Chinese authorities also found that US poultry exports benefit from farm subsidies, such as support prices for corn and soybeans,” the statement added. “The reality is US poultry receives no government subsidies and does not benefit from any of the government crop programs.”
Both poultry groups said the US industry has been cooperating with the Chinese industry and the Chinese government on other initiatives to improve conditions of two-way poultry trade that are unrelated to the issues being addressed in the case initiated Sept. 20. Industry’s commitment to those initiatives will continue and not be affected by the initiation of the WTO case, they added.
“The US industry is hopeful the case will proceed on an expeditious schedule, and that there will be a timely and satisfactory resolution that enforces US rights under the WTO,” the statement concluded.