China v U S DS 437 CVD on

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China v. U. S. (DS 437) CVD on Products from China Meer Susey and

China v. U. S. (DS 437) CVD on Products from China Meer Susey and Jason Zimmermann 1

History, Business, and Political Context of the Case ● ● Trade in environmental Goods

History, Business, and Political Context of the Case ● ● Trade in environmental Goods (Brewster, et al) ○ Government subsidies needed for clean energy goods to overcome market failure : i/e social cost > market cost of burning fossil fuels ■ Subsidies to green energy firms seen as a net positive by both govt and business. ● Govt wants to cultivate new green industry within their state in the hope that early support will give its domestic firms a head start over foreign firms. ● Green energy firms face significant fixed costs and competition from traditional energy firms ○ Subsidies help cover these costs and make it possible for them to compete in the market. ○ The US, EU, and China were/are arguably in environmental goods trade war (Brewster, et al) US comes to believe that China, through its SOE’s, was giving its green energy producers unfair advantage over US domestic firms in the form of subsidies. Thus enacted CVD’s against China 2

History continued ● US Department of Commerce begins investigations to determine the level of

History continued ● US Department of Commerce begins investigations to determine the level of subsidies Chinese exporters are receiving due to their relationship with the Chinese govt (2007 - 2012) ○ USDOC found that: ■ that certain State-owned enterprises (SOEs) are “public bodies” within the meaning of Article 1. 1(a)(1). ■ As such, these Chinese SOEs confer countervailable subsidies through their sales of inputs to downstream producers. ■ The Chinese Govt, through SOE’s provided goods for less than adequate compensation and further conferred a benefit upon the recipient. ■ Found that the prevailing market conditions in China were distorted. This allowed investigators to reject using the actual transaction prices in China in its determination of a benchmark from which to judge the value of the benefit conferred (WTO. org) ○ Products included: Thermal paper, pressure pipe, line pipe, citric acid, lawn groomers, kitchen shelving, oil country tubular goods, wire strand, magnesia bricks, seamless pipe, print graphics, drill pipe, aluminium extrusions, steel cylinders, solar panels, wind towers, and steel sinks. (WTO. org) 3

Proceedings ● ● Request for Consultations by China- May 25 th 2012 ○ No

Proceedings ● ● Request for Consultations by China- May 25 th 2012 ○ No mutually satisfactory solution was reached Request for Panel - August 20 th 2012 ○ Panel formally established on September 28 th 2012 ○ due to the complexity of the issues raised by the parties in this dispute, the panel expected to conclude its work in May 2014. ■ Panel Rulings- July 14 th 2014 Appellate Body- On 22 August 2014, China filed an appeal ○ U. S. ’s position ○ China’s position ■ China appeals ■ US appeals ○ Circulation of AB report ○ Adoption of Report Findings 16 January 2015 Compliance and Reasonable time period - February 13 th 2015 ○ Arbitrator determined the reasonable period of time as 14 months, 16 days. 4

Main Issue ● ● ● Whether State Owned Enterprises are necessarily a Public Body

Main Issue ● ● ● Whether State Owned Enterprises are necessarily a Public Body under the Subsidies Code which then allows for a finding of subsidies that can be legally offset by imposition of countervailing duties. The Contested practice: ○ The primary issue that the appellate body resolved was the US Dept of Commerce’s creation of a benchmark to evaluate the SOE’s benefit from the alleged Chinese government subsidy. ■ The SCM Agreement requires both that the government offers a subsidy and that domestic firms receive a benefit from the subsidy for an importing state to impose a CVD (SCM Article 1. 1). (WTO. org) ■ The importing country can impose a duty only up to the point that the foreign government subsidy provided the exporting firm with a benefit (SCM Article 14(d)). (WTO. org) ○ The methodology used by the DOC to determine the benchmark for determining the benefit of the subsidy was the root of the issue The Appellate Body decided that a 'State Owned Enterprises' (SOE) is not necessarily a 'Public Body' under Subsidies Code as to allow a finding of subsidies. The AB decision: The AB cut a middle ground between the two member states’ arguments, determining that US procedures are inconsistent with the SCM Agreement, but also rejecting China’s argument that the activities of state-owned enterprises(SOEs) that are not acting as public bodies can never be relevant to the choice of the market benchmark. (Brewster, et al) 5

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OUSDOC's findings that certain SOEs were public bodies Relevant Article: Article 1. 1(a)(1) of

OUSDOC's findings that certain SOEs were public bodies Relevant Article: Article 1. 1(a)(1) of the SCM Agreement ❖ 1. 1 “For the purpose of this Agreement, a subsidy shall be deemed to exist if: (a)(1) there is a financial contribution by a government or any public body within the territory of a Member (referred to in this Agreement as "government")” Chinese Claim ❖ The US acted inconsistently with Article 1. 1(a)(1) of the SCM Agreement because the USDOC determinations that certain SOEs in China were public bodies are inconsistent with the interpretation of the term "public body" set out by the Appellate Body in its report in US –Anti-Dumping and Countervailing Duties (China). ” ❖ Government ownership cannot serve as a basis for establishing that the entity is vested with authority to perform a government function US Claim ❖ China has a flawed interpretation of the term “public body, ” it means an entity controlled by the government such that the government can use that entity’s resources as its own; not as it relates to the “authority to regulate, control, supervise or restrain” the conduct of others ❖ Financial contribution is a conveyance of value and that entitles controlled by the government can convey value just as the government can Panel Result ❖ The US acted inconsistently when the USDOC found that SOEs were public bodies ❖ USDOC determined that the relevant input suppliers were public bodies only on the grounds that they were majority owned or controlled by GOC ❖ Simple ownership or control by a government of an entity is not sufficient to establish that it is a public body. A further inquiry is needed. ❖ A public body is “an entity vested with certain governmental responsibilities, or exercising certain governmental authority, ” so investigating authority must evaluate the core features of the entity in question and its relationship to the government, in order to determine whether it has the authority…” 8

USDOC's "rebuttable presumption" being inconsistent “as such” of countervailing duty investigations Relevant Article: Article

USDOC's "rebuttable presumption" being inconsistent “as such” of countervailing duty investigations Relevant Article: Article 1. 1(a)(1) of the SCM Agreement ❖ 1. 1 “For the purpose of this Agreement, a subsidy shall be deemed to exist if: (a)(1) there is a financial contribution by a government or any public body within the territory of a Member (referred to in this Agreement as "government")” Chinese Claim ❖ Because the US is acting inconsistently, as such, with Article 1. 1 of the SCM Agreement, it follows that the US does not impose countervailing duties in accordance with the requirements of the SCM Agreement and Article VI of the GATT 1994 ❖ USDOC Kitchen Shelving (2009) investigation: it is a “rebuttable presumption” that majority government-owned enterprises are “authorities” ❖ Rebuttable presumption: rule or norm of general and prospective application that may be subject to an “as such” challenge ❖ This “rebuttable presumption” is inconsistent because it is premised on the idea that government control over an entity, by itself, is sufficient evidence on which to base a finding that an entity is a “government authority” US Claim ❖ China has failed to establish that the Kitchen Shelving discussion necessarily results in a breach, nor has China shown that discussion is a "measure”. The discussion in Kitchen Shelving does not have "general and prospective application". ❖ China's statement that the Kitchen Shelving policy is the only ratio decidendi mentioned by the USDOC in its public body findings made subsequent to Kitchen Shelving is an unsupported assertion Panel Result ❖ The policy of an investigating authority can be a “measure” subject to WTO DSP; the application of this policy has been a constant feature of the US countervailing proceedings for a considerable period of time. ❖ US ignores other four factors in whether a firm was an “authority: ” in regards to majority government ownership. Specifically: presence on the entity’s Board, government’s control over the entity’s activities, entity’s pursuit of governmental policies or interests, whether the entity is created by statute ❖ The USDOC's policy in presuming that a majority government-owned entity is a public body, is inconsistent, as such, with Article 1. 1(a)(1) of the SCM 9

Determination that export restraints provided a “financial contribution” Relevant Article(s): Article 1. 1(a)(1), 11.

Determination that export restraints provided a “financial contribution” Relevant Article(s): Article 1. 1(a)(1), 11. 2 and 11. 3 of the SCM Agreement ❖ ❖ 1. 1 “For the purpose of this Agreement, a subsidy shall be deemed to exist if: ➢ (a)(1) there is financial contribution by a government or any public body within the territory of a Member (referred to in this Agreement as "government"), i. e. where: ” ➢ … (iv) “a government makes payments to a funding mechanism, or entrusts or directs a private body to carry out one or more of the type of functions illustrated in (i) to (iii) above which would normally be vested in the government and the practice, in no real sense, differs from practices normally followed by governments” 11. 2 “An application under paragraph 1 shall include sufficient evidence of the existence of (a) a subsidy and, if possible, its amount, (b) injury within the meaning of Article VI of GATT 1994 as interpreted by this Agreement, and (c) a causal link between the subsidized imports and the alleged injury. Simple assertion, unsubstantiated by relevant evidence, cannot be considered sufficient to meet the requirements of this paragraph. The application shall contain such information as is reasonably available to the applicant on the following: ” ■ (iii) evidence with regard to the existence, amount and nature of the subsidy in question; ➢ 11. 3 “The authorities shall review the accuracy and adequacy of the evidence provided in the application to determine whether the evidence is sufficient to justify the initiation of an investigation. ” Chinese Claim ❖ ❖ ❖ Initiation of these investigations is inconsistent with Article 11. 3 because in the absence of any evidence of a financial contribution, an unbiased and objective investigating authority would not have "found that the application contained sufficient information to justify initiation of the investigation“ the contextual argument advanced by the United States for its position that export restraints is a repackaging of an argument advanced by the United States, and rejected by the panel, in US – Export Restraints. WTO jurisprudence compels the conclusion that export restraints do not constitute a "financial contribution" within the meaning of Article 1. 1(a)(1) of the SCM Agreement, so the USDOC applications did not "provide an indication that a subsidy actually exists“ US Claim ❖ ❖ ❖ China has not made a prima facie case in relation to its export restraint claims. This is because China relies on a single panel decision to invalidate all of the USDOC's determinations, rather than making an adequate legal argument for each of its claims, based on the facts of each investigation The USDOC's decision to initiate investigations into China's export restraints is not inconsistent with Articles 11. 2 and 11. 3 of the SCM Agreement because the applicants submitted sufficient evidence of the existence of a subsidy to justify the initiation of an investigation. the USDOC's decisions to countervail China's export restraints on coke and magnesia are not WTO-inconsistent where they were based upon the use of facts available pursuant to Article 12. 7 of the SCM Agreement. Panel Result ❖ ❖ An export restraint, as defined in the dispute, could not constitute government-entrusted or government-directed provision of goods under Article 1. 1(a)(1)(iv) of the SCM Agreement and therefore could not constitute a financial contribution. The ordinary meanings of the terms "entrust" and "direct" require that the action of the government under Article 1. 1(a)(1)(iv) of the SCM Agreement contain a notion of delegation (in the case of entrustment) or command (in the case of direction) The definition of the terms "entrustment" and "direction" that the panel in US – Export Restraints had adopted was too narrow. Body finds the argument of the United States that through the export restraint measures at issue in this dispute, private entities are "invested with a trust" that they will sell the good to the domestic market unpersuasive. 10

USDOC’s initiation of countervailing duty investigations Relevant Article(s): Article 1. 1(a)(1), 11. 2, and

USDOC’s initiation of countervailing duty investigations Relevant Article(s): Article 1. 1(a)(1), 11. 2, and Article 11. 3 of the SCM Agreement ❖ ❖ 11. 2 “An application under paragraph 1 shall include sufficient evidence of the existence of (a) a subsidy and, if possible, its amount, (b) injury within the meaning of Article VI of GATT 1994 as interpreted by this Agreement, and (c) a causal link between the subsidized imports and the alleged injury. Simple assertion, unsubstantiated by relevant evidence, cannot be considered sufficient to meet the requirements of this paragraph. The application shall contain such information as is reasonably available to the applicant on the following: ” ➢ (iii) evidence with regard to the existence, amount and nature of the subsidy in question; 11. 3 “The authorities shall review the accuracy and adequacy of the evidence provided in the application to determine whether the evidence is sufficient to justify the initiation of an investigation. ” Chinese Claim ❖ ❖ USDOC's initiation of these countervailing duty investigations, in the absence of sufficient evidence in the petition to support an allegation that SOEs constitute public bodies within the meaning of Article 1. 1(a)(1) of the SCM Agreement, is inconsistent with Articles 11. 2 and 11. 3 of the SCM China objects to the initiation of the investigations on the basis of evidence that the inputs were used by a limited number of industries or enterprises, since such evidence fails to address the four factors required under an Article 2. 1 specificity analysis. US Claim ❖ ❖ China has failed to establish a prima facie case with regard to its claims; Initiation decisions are fact-specific, dependent on the facts presented by each individual application, which China has not analyzed For initiation purposes under Article 11, what is required is adequate evidence tending to prove or indicating the existence of a financial contribution by a government or public body, in light of what is reasonably available to the applicant Panel Result ❖ ❖ Agree with the United States that evidence of government ownership of an entity can serve as evidence that the entity is a public body within the meaning of Article 1. 1(a)(1) The understanding of Article 2. 1 advanced by China is mostly incorrect in the Panel's view. Initiation of an investigation vs. preliminary or final determination China has not established that the USDOC acted inconsistently with the United States' obligations under Article 11 of the SCM Agreement by initiating the challenged investigations without sufficient evidence of specificity. 11

USDOC's determinations that SOEs provided inputs for LTAR Relevant Article(s): Article 1. 1(a)(1) and

USDOC's determinations that SOEs provided inputs for LTAR Relevant Article(s): Article 1. 1(a)(1) and Article 14(d) of the SCM Agreement ❖ ❖ 1. 1 “For the purpose of this Agreement, a subsidy shall be deemed to exist if: ➢ (a)(1) there is a financial contribution by a government or any public body within the territory of a Member (referred to in this Agreement as "government"), i. e. where: ➢ (iii) a government provides goods or services other than general infrastructure, or purchases goods; ➢ (b) a benefit is thereby conferred. ” 14 “For the purpose of Part V, any method used by the investigating authority to calculate the benefit to the recipient conferred pursuant to paragraph 1 of Article 1 shall be provided for in the national legislation or implementing regulations of the Member concerned and its application to each particular case shall be transparent and adequately explained. Furthermore, any such method shall be consistent with the following guidelines: ” ➢ (d) “the provision of goods or services or purchase of goods by a government shall not be considered as conferring a benefit unless the provision is made for less than adequate remuneration, or the purchase is made for more than adequate remuneration. The adequacy of remuneration shall be determined in relation to prevailing market conditions for the good or service in question in the country of provision or purchase (including price, quality, availability, marketability, transportation and other conditions of purchase or sale). ” Chinese Claim ❖ ❖ USDOC's determinations that SOEs provided inputs for less than adequate remuneration (LTAR) are inconsistent, as applied, with Articles 1. 1(b) and 14(d) of the SCM Agreement in the 12 countervailing duty proceedings USDOC used out-of-country benchmarks in the benefit calculation on the basis of market distortion caused by the predominant role of the government. Article 1. 1(a)(1) of the SCM Agreement sets forth a single definition of the term "government" which applies throughout the SCM Agreement, covering also Article 14(d). USDOC did not rely on any "other facts" beyond SOE presence in a market US Claim ❖ ❖ China mischaracterized the analyses underlying and facts of the USDOC's determinations. China erroneously considers that distortion can be found only when a government's role in the market is so predominant that the benefit analysis becomes circular. Panel Result ❖ ❖ The evidence before us does not support China's assertion. some determinations are based on the market share of government-owned/controlled firms in domestic production alone , others on adverse facts available, others on the market share of the government plus the existence of low level of imports and/or export restraints. China's claim that the USDOC based its findings solely on the lack of information regarding state ownership is not accurate. Can use out of country benchmark when government is only supplier, or administratively controls all of the prices for those goods in a country China has not established its claim's basic factual premise, failing to establish that the USDOC acted inconsistently with the obligations of the US under Article 14(d) or Article 1. 1(b) of the SCM Agreement by rejecting in-country private prices in China. 12

USDOC's determinations on the specificity of alleged input subsidies Relevant Article(s): Article 2. 1

USDOC's determinations on the specificity of alleged input subsidies Relevant Article(s): Article 2. 1 and 2. 4 of the SCM Agreement ❖ ❖ 2. 1 “In order to determine whether a subsidy, as defined in paragraph 1 of Article 1, is specific to an enterprise or industry or group of enterprises or industries (referred to in this Agreement as "certain enterprises") within the jurisdiction of the granting authority, the following principles shall apply: ➢ (a) Where the granting authority, or the legislation pursuant to which the granting authority operates, explicitly limits access to a subsidy to certain enterprises, such subsidy shall be specific. ➢ (b) Where the granting authority, or the legislation pursuant to which the granting authority operates, establishes objective criteria or conditions governing the eligibility for, and the amount of, a subsidy, specificity shall not exist, provided that the eligibility is automatic and that such criteria and conditions are strictly adhered to. The criteria or conditions must be clearly spelled out in law, regulation, or other official documents, so as to be capable of verification. ➢ (c) If, notwithstanding any appearance of non-specificity resulting from the application of the principles laid down in subparagraphs (a) and (b), there are reasons to believe that the subsidy may in fact be specific, other factors may be considered. Such factors are: use of a subsidy programme by a limited number of certain enterprises, predominant use by certain enterprises…” 2. 4 “Any determination of specificity under the provisions of this Article shall be clearly substantiated on the basis of positive evidence. ” Chinese Claim ❖ ❖ ❖ USDOC's specificity determinations are inconsistent with Articles 2. 1 and 2. 4 of the SCM because the USDOC failed to make a proper determination on the basis of positive evidence that the alleged provision of inputs for less than adequate remuneration was specific to an enterprise or industry or group of enterprises or industries in the above input subsidy investigations The end-use approach to specificity applied by the USDOC suffers from the four following flaws: (i) failure to apply the first of the "other factors" under Article 2. 1(c) in light of a prior "appearance of non-specificity" resulting from the application of the principles laid down in subparagraphs (a) and (b); (ii) failure to identify a "subsidy programme"; (iii) failure to identify a "granting authority"; and (iv) failure to take into account the factors in the final sentence of Article 2. 1(c). The USDOC's failure to carry out the four aspects of a specificity analysis required under Article 2. 1(c) is "evident" from the excerpts cited in Exhibit CHI-1 and provided in Exhibit CHI-122 US Claim ❖ ❖ China has failed to make a prima facie case with respect to its claims that the USDOC's specificity determinations were inconsistent with Article 2 of the SCM Agreement. United States rejects China's claim that Article 2. 1 contains any order of analysis. Article 2. 1 does not require an investigating authority to identify a formal subsidy programme. Panel Result ❖ ❖ ❖ Given the nature of the subsidies that the USDOC found to exist, the USDOC did not act inconsistently with Article 2. 1 by analysing specificity exclusively under Article 2. 1(c). Body finds that evidence of such systematic activity or series of activities provided an objective basis for the USDOC to sufficiently identify subsidy programmes for the purposes of the first of the "other factors" under Article 2. 1(c) of the SCM Agreement in the relevant specificity determinations. the USDOC did not act inconsistently with Article 2. 1 by analysing specificity exclusively under Article 2. 1(c); that the USDOC sufficiently identified subsidy programmes for the purposes of the first of the "other factors" under Article 2. 1(c); and that China has failed to establish that the USDOC acted inconsistently 13 with Article 2. 1 by failing to explicitly identify the relevant granting authority.

USDOC's findings of regional specificity are inconsistent Relevant Article(s): Article 2. 1 and 2.

USDOC's findings of regional specificity are inconsistent Relevant Article(s): Article 2. 1 and 2. 4 of the SCM Agreement ❖ ❖ 2. 2 “A subsidy which is limited to certain enterprises located within a designated geographical region within the jurisdiction of the granting authority shall be specific. “ 2. 4 “Any determination of specificity under the provisions of this Article shall be clearly substantiated on the basis of positive evidence. “ Chinese Claim ❖ USDOC failed to demonstrate, on the basis of positive evidence, that either the financial contribution or the benefit of the subsidy was "limited to certain enterprises located within a designated geographical region", as required by that provision ❖ A finding of regional specificity was premised solely on two factors, namely (i) a finding that the land in question was within an industrial park or economic development zone, and (ii) a finding that the park or zone was within the seller's (e. g. municipality's or county's) jurisdiction US Claim ❖ China has failed to make a prima facie case with respect to any of the alleged breaches of Article 2. 2 of the SCM Agreement ❖ China does not address the facts of the seven investigations at issue in this dispute and does not explain its legal reasoning ❖ A finding that the provision of land-use rights takes place within an industrial park or economic development zone is material to the analysis of whether the land at issue constitutes a "geographical region Panel Result ❖ ❖ ❖ China has established that the USDOC failed to ascertain a limitation on access to either the financial contribution or the benefit when making its determinations of regional specificity. The land in question is located within an industrial park or economic development zone, and that park or zone is within the seller's jurisdiction, is insufficient by itself to establish that there is a limitation of access to the subsidy With respect to six of the seven challenged investigations, namely Line Pipe, Thermal Paper, Citric Acid, OCTG, Wire Strand Seamless Pipe, China has established that the USDOC acted inconsistently with the United States' obligations under Article 2. 2 of the SCM Agreement by making positive determinations of regional specificity while failing to establish that the alleged subsidy was limited to certain enterprises located within a designated geographical region within the jurisdiction of the granting authority. ➢ With respect to the Print Graphics investigation, however, the Panel finds that China has failed to establish that the USDOC acted inconsistently with the United States' obligations under Article 2. 2 of the SCM Agreement 14

Absence of sufficient evidence and sufficient review is inconsistent in certain investigations Relevant Article(s):

Absence of sufficient evidence and sufficient review is inconsistent in certain investigations Relevant Article(s): Article 11. 2 and 11. 3 of the SCM Agreement ❖ ❖ 11. 2 “An application under paragraph 1 shall include sufficient evidence of the existence of (a) a subsidy and, if possible, its amount, (b) injury within the meaning of Article VI of GATT 1994 as interpreted by this Agreement, and (c) a causal link between the subsidized imports and the alleged injury. Simple assertion, unsubstantiated by relevant evidence, cannot be considered sufficient to meet the requirements of this paragraph. The application shall contain such information as is reasonably available to the applicant on the following: ➢ (iii) evidence with regard to the existence, amount and nature of the subsidy in question; …” 11. 3 “The authorities shall review the accuracy and adequacy of the evidence provided in the application to determine whether the evidence is sufficient to justify the initiation of an investigation. ” Chinese Claim ❖ ❖ The USDOC's initiation of these 14 countervailing duty investigations in respect of the alleged provision of inputs for less than adequate remuneration, in the absence of sufficient evidence in the petition to support an allegation that any such subsidy would be specific under Article 2 of the SCM Agreement is inconsistent with Articles 11. 2 and 11. 3 of the SCM China objects to the initiation of the investigations on the basis of evidence that the inputs were used by a limited number of industries or enterprises, since such evidence fails to address the four factors required under an Article 2. 1 specificity analysis US Claim ❖ ❖ ❖ China has failed to establish a prima facie case with regard to its claims Initiation decisions are fact-specific, and the question of whether an investigating authority has complied with the standard set out in Article 11 of the SCM Agreement is similarly dependent on the facts presented by each individual application The relevant issue under the first factor of Article 2. 1(c) is whethere a limited number of users of the subsidy programme; as such, the question of which enterprises use the input is relevant to the inquiry Panel Result ❖ ❖ China has not established that the USDOC acted inconsistently with the United States' obligations under Article 11 of the SCM Agreement by initiating the challenged investigations without sufficient evidence of specificity. Within the context of specificity, the legal standard that China objects to is one based on an erroneous understanding of Article 2. 1(c); furthermore, some of China’s assertions are factually incorrect 15

Uses of "adverse facts available" by the Relevant Article: Article 12. 7 of the

Uses of "adverse facts available" by the Relevant Article: Article 12. 7 of the SCM Agreement USDOC ❖ 12. 7 “In cases in which any interested Member or interested party refuses access to, or otherwise does not provide, necessary information within a reasonable period or significantly impedes the investigation, preliminary and final determinations, affirmative or negative, may be made on the basis of the facts available. ” Chinese Claim ❖ 48 instances in which the USDOC uses adverse facts available in making determinations on financial contribution, benefit and specificity across 15 investigations are inconsistent with Article 12. 7 of the SCM Agreement because the USDOC did not rely on facts available on the record. ❖ USDOC's determinations lack a factual foundation. ❖ the USDOC refers to as "adverse inferences" in fact amounts to "assumptions". US Claim ❖ China has failed to make a prima facie case in support of the 48 alleged breaches of Article 12. 7 and bases its claims on sweeping and inaccurate generalizations; China should have to demonstrate that USDOC acted inconsistently in each of the 48 uses of facts available ❖ In the course of the proceedings, China has attempted to refocus its position by alleging that the USDOC failed to provide a "reasoned and adequate explanation" of its facts available determinations. Panel Result ❖ China put forth insufficient evidence to establish that each of the 42 challenged adverse facts available determinations lacked a factual foundation ❖ Not evident that one and the same legal standard was applied across the 42 challenged adverse facts available determinations. ❖ China has not established that in 42 instances the USDOC acted inconsistently with the United States' obligations under. Article 12. 7 of the SCM Agreement by not relying on facts available on the record. 16

Appeals The following issues are raised in appeals: A. Whether the Panel erred in

Appeals The following issues are raised in appeals: A. Whether the Panel erred in finding that certain administrative and sunset reviews identified by China were within its terms of reference (raised by the United States); A. Whether the Panel erred in finding that China has not demonstrated that the United States acted inconsistently with Article 1. 1(a)(1) of the SCM Agreement. In particular: ○ Whether the Panel erred in finding that the legal standard for public body determinations under Article 1. 1(a)(1) does not "require a particular degree or nature of connection in all cases between an identified government function and the particular financial contribution at issue" (raised by China); and ○ Whether the Panel erred in rejecting China's claims that: (i) the USDOC misconstrued the concept and relevance of "meaningful control" and based its determinations on "mere ownership or control over an entity by a government, without more"; and (ii) The USDOC failed to consider relevant evidence in the five investigations in which the Government of the People's Republic of China (GOC) participated (raised by China); A. Whether the Panel erred in finding that China has not demonstrated that the Public Bodies Memorandum is inconsistent "as such" with Article 1. 1(a)(1) of the SCM Agreement. In particular: ○ Whether the Panel erred in finding that the Public Bodies Memorandum falls "as such" within the scope of these Article 21. 5 proceedings (raised by the United States) ; ○ Whether the Panel erred in finding that the Public Bodies Memorandum can be challenged "as such" as a rule or norm of general or prospective application (raised by the United States) ; and ○ Whether the Panel erred in finding that the Public Bodies Memorandum does not restrict, in a material way, the USDOC's discretion to act consistently with Article 1. 1(a)(1) (raised by China); 17

Appeals (Cont. ) D. Whether the Panel erred in finding that the United States

Appeals (Cont. ) D. Whether the Panel erred in finding that the United States acted inconsistently with Articles 1. 1(b) and 14(d) of the SCM Agreement. In particular: ○ Whether the Panel erred in its interpretation of Articles 1. 1(b) and 14(d) in finding that an investigating authority may reject available in-country prices if there is evidence of price distortion, and not only if there is evidence that a government "effectively determines" the price at which the good is sold within the country of provision (raised by China); and ○ Whether the Panel erred in its interpretation and application of Articles 1. 1(b) and 14(d) in finding that the United States "failed to explain … how government intervention in the market resulted in domestic prices for the inputs at issue deviating from a market-determined price" and by failing "to provide a reasoned and adequate explanation for its rejection of in-country prices in its benchmark determinations" (raised by the United States) ; E. Whether the Panel erred in finding that the United States acted inconsistently with Article 2. 1(c) of the SCM Agreement. In particular: ○ Whether the Panel erred in faulting the USDOC for not having sufficiently explained its conclusions regarding the "existence" of the relevant subsidy programmes in circumstances where this issue was not covered by the DSB's recommendations and rulings in the original dispute, and thus could not serve as an appropriate basis upon which to assess the consistency of the measures with that provision (raised by the United States) ; and ○ Whether the Panel erred in its interpretation and application of Article 2. 1(c), including in finding that the United States did not comply with the requirement to "take account of the length of time during which the subsidy programme has been in operation" because it failed to adequately explain its conclusions regarding the existence of the relevant subsidy programme (raised by the United States). 18

Implementation ❖ ❖ ❖ ❖ On 13 February 2015, the United States informed the

Implementation ❖ ❖ ❖ ❖ On 13 February 2015, the United States informed the DSB that it intended to implement the DSB's recommendations and rulings in a manner that respects its WTO obligations, and that it would need a reasonable period of time to do so. On 26 June 2015, China requested that the reasonable period of time be determined through binding arbitration pursuant to Article 21. 3(c) of the DSU. On 9 July 2015, China requested the Director-General to appoint the arbitrator. On 17 July 2015, the Director. General appointed Mr Georges M. Abi-Saab to act as arbitrator under Article 21. 3(c) of the DSU. On 9 October 2015, the Award of the Arbitrator was circulated to Members. The Arbitrator determined the reasonable period of time as 14 months, 16 days. The reasonable period of time will thus expire on 1 April 2016. On 15 April 2016, China and the United States informed the DSB of Agreed Procedures under Articles 21 and 22 of the DSU. On 13 May 2016, China requested consultations pursuant to Article 21. 5 of the DSU, in connection with the United States' alleged failure to implement the recommendations and rulings of the DSB in this dispute. On 27 April 2018, the United States notified the DSB of its decision to appeal to the Appellate Body certain issues of law covered in the compliance panel report and certain legal interpretations developed by the compliance panel. On 2 May 2018, China notified the DSB of its decision to cross-appeal. On 2 July 2019, the Chair of the Appellate Body notified the Chair of the DSB that the Appellate Body Report in these proceedings would be circulated to WTO Members on 16 July 2019. In an earlier communication, the Chair of the Appellate Body had explained that this was due to a number of factors, including the backlog of appeals pending with the Appellate Body at present and the overlap in the composition of all divisions resulting in part from the reduced number of Appellate Body Members. 19

Implementation On 16 July 2019, the Appellate Body report was circulated to Members. Key

Implementation On 16 July 2019, the Appellate Body report was circulated to Members. Key Findings: ❖ ❖ ❖ The Appellate Body found that the Panel correctly assessed the scope of the measures falling within its terms of reference in these Article 21. 5 proceedings. The Appellate Body upheld the Panel's finding that Article 1. 1(a)(1) does not prescribe a connection of a particular degree or nature that must necessarily be established between an identified government function and the particular financial contribution at issue. The Appellate Body also upheld the Panel's finding that the USDOC's public body determinations at issue were not based on an improper legal standard. The Appellate Body upheld the Panel's finding that the Public Bodies Memorandum fell, “as such”, within the scope of the compliance proceedings. The Appellate Body found that central to the inquiry under Article 14(d) in identifying an appropriate benefit benchmark is the question of whether in‑ country prices are distorted as a result of government intervention. The Appellate Body agreed with the Panel that, while “evidence of ‘a systematic series of actions’ may be particularly relevant in the context of an unwritten programme, the mere fact that financial contributions have been provided to certain enterprises is not sufficient to demonstrate that such financial contributions have been granted pursuant to a plan or scheme for purposes of Article 2. 1(c). Report(s) adopted, with recommendation to bring measure(s) into conformity on 15 August 2019 20

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Key Takeaways DS 437 establishes that the burden of proof is on the investigating

Key Takeaways DS 437 establishes that the burden of proof is on the investigating nation who must conduct a robust market analysis which takes into account: market structure, nature of operations of entities within the market and their market share, barriers to entry, and an assessment of government influence on the market the ability of said government to cause distortion. In the case of China, it is difficult to effectively capture this assessment as it is both a closed and centralized market environment. With specificity in being able to determine central, regional, and local governments at the root of the issue, this will compel the United States to correct its mistakes and develop a more adequate methodology for evaluating prices within the Chinese marketplace and the factors which influence these prices. Additionally, this increased focus may result in a more transparent reporting process from China in regards to its market and finances. Save for a complete reform in the structure of the Chinese economy, the US will have to take the necessary steps in revamping its investigative procedures in order to avoid similar situations. Until then, it must comply and bring the disputed measures to conformity. 22