Geneva: A World Trade Organization (WTO) dispute panel report regarding additional Chinese duties on certain American products today found China infringing its obligations and that its action was inconsistent with certain provisions of the General Agreement on Trade and Tariff (GATT) 1994.
The Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) Panel recommended that China brings its WTO- inconsistent measure into conformity with its obligations under the GATT 1994.
The Panel ruled that China’s additional duties measure was inconsistent with Article I:1 of the GATT 1994 because, with respect to customs duties imposed on or in connection with importation, it failed to accord an advantage granted to products originating outside the United States immediately and unconditionally to products originating in the United States.
Moreover, the Panel found that
- China’s additional duties measure was inconsistent with Article II:1(b) of the GATT 1994 because it results in the imposition of ordinary customs duties on 123 tariff lines in excess of the bound rates set forth in China’s Schedule.
- China’s additional duties measure was inconsistent with Article II:1(a) of the GATT 1994 because it imposes ordinary customs duties on United States-origin imports in excess of those set forth in China’s Schedule, thus according to those imports treatment less favourable than that provided for in China’s Schedule.
On July 16, 2018, the United States had requested consultations with China pursuant to Article 4 of the DSU and Article XXIII of the General Agreement on Tariffs and Trade 1994 (GATT 1994) concerning China’s imposition of additional duties on certain products originating in the United States.
Consultations were held on August 29, 2018, but failed to resolve the dispute. Thereafter, at its meeting on November 21, 2018, the Dispute Settlement Body (DSB) established a panel pursuant to the request of the United States.
It may be mentioned that on March 8, 2018, the United States announced tariffs on imports of steel and aluminium products (Section 232 duties). On March 23, 2018, the Ministry of Commerce of China (MOFCOM) issued the Ministry of Commerce Notice on Publicly Soliciting Opinions on US Imported Steel and Aluminum Products and Chinese Countermeasures (Opinions Notice).
In the Opinions Notice, MOFCOM expressed the view that the Section 232 duties constitute “a safeguard measure”, and indicated China’s intention to “suspend the implementation of substantive equal concessions and other obligations to the United States”. Through the Opinions Notice, MOFCOM also sought public comments on the import tariffs China proposed to apply on certain products originating in the United States.
On March 26, 2018, China notified the WTO Committee on Safeguards of its formal request for consultations with the United States under Articles 12.3 and 8.1 of the Agreement on Safeguards and Article XIX:2 of the GATT 1994. In its notifications, China indicated that it was “exercising its right to trade compensation consultations”.
On March 29, 2018, China notified the WTO Council for Trade in Goods of its proposed suspension of concessions and other obligations with respect to imports from the United States under Article XIX:3 of the GATT 1994 and Article 8.2 of the Agreement on Safeguards. According to this notification, the proposed suspension would consist of an increase in tariffs on selected products originating in the United States, “based on the part of the measures of the United States which were not taken as a result of an absolute increase for the [years 2014-2016]”.
On April 1, 2018, MOFCOM issued the State Council Customs Tariff Commission Notice on Suspension of Duty Concession Obligations on Some Imported Products Originating from the UnitedStates (Implementation Notice) “suspend[ing] tariff concession obligations”, as of April 2, 2018, for 128 imported products originating from the United States.
The 128 tariff codes identified in the Opinions Notice, to which China proposed to apply the additional duties measure, were set out in the Specific Product List attached to the Opinions Notice. They comprised products in seven categories: (i) fresh fruit, dried fruit, and nut products; (ii) wine; (iii) denatured ethyl alcohol; (iv) American ginseng; (v) seamless steel tubes; (vi) meat of swine and its products; and (vii) aluminium waste.
The Implementation Notice indicated an increase in the tariff rate for each of these 128 products, to be applied in addition to the “current applied base tariff rates”. It imposed additional duties on the 128 tariff codes identified in the Opinions Notice, and these additional duties were made applicable to “imported products originating from the United States” and assessed on an ad valorem basis:
a. For 120 of these tariff codes, including fruits and derived products, the Implementation Notice imposed an additional tariff rate of 15% on top of the current applied base tariff rates.
b. For eight of these tariff codes, including pork and derived products, the Implementation Notice imposed an additional tariff rate of 25% on top of the current applied base tariff rates.
Subsequent to the Implementation Notice, China imposed certain “other additional duties”, that is duties on top of the additional duties imposed under the Implementation Notice.
The United States claimed that, in total, these other additional duties affected the importation of products falling under 112 of the 128 tariff lines already subject to the additional duties measure.
On April 4, 2018, the US informed China that it did not consider there was any basis to conduct consultations under Article 12.3 of the Agreement on Safeguards, as it did not agree with China’s characterization of the Section 232 duties as safeguard measures.
Thereafter, in its panel request, the US described the measure at issue as “China’s imposition of additional duties on certain products originating in the United States (the ‘additional duties measure’)”. It claimed China imposed the additional duties measure through the Opinions Notice and the Implementation Notice, operating separately or collectively, as well as any amendments, replacements, related measures or implementing measures.
It may be noted that Brazil, Canada, Egypt, the European Union, Guatemala, India, Indonesia, Japan, Kazakhstan, Mexico, NewZealand, Norway, the Russian Federation, Singapore, South Africa, Switzerland, Chinese Taipei, Thailand, Türkiye, Ukraine, and the Bolivarian Republic of Venezuela had reserved their rights to participate in the Panel proceedings as third parties.
– global bihari bureau
