China's Tire Firms topple the U.S. Department of Commerce’s counter-subsidy investigation was overturned

On December 19, 2011, the United States Federal Circuit Court of Appeals made a historic judgment on a non-road tires judicial litigation, and ruled that the US Department of Commerce could not conduct anti-subsidy investigations when China regards it as a non-market economy country.

This ruling fundamentally confirmed that the US Department of Commerce’s anti-dumping and anti-subsidy investigations against Chinese export companies was “illegally”. This also means that, since the end of 2006, the DOC relied on dozens of anti-subsidy investigations against China, and all of the dozen anti-subsidy decisions made were inconsistent with current US laws.

The person in charge of the Fair Trade Bureau of the Ministry of Commerce said in a speech yesterday that the counter-subsidy investigations China has conducted over the years have violated WTO rules and there is no US legal basis, and he hopes that the US can correct it as soon as possible without recognizing China’s market economy status. The wrong practice of product anti-subsidy investigations.

Tu Xinquan, deputy head of China’s WTO College at the University of International Business and Economics, said in an interview with the reporter that for Chinese companies suffering from the “double reverse” investigation by the US Department of Commerce, this is an epoch-making institutional important victory. "This verdict has made a clear judgment on how the administrative authorities should follow the use of the countervailing law and on the non-market economic investigation methods, while imposing anti-dumping duties and levying a countervailing duty on the applicability of this law."

Fundamentally negate the legitimacy of more than 30 anti-subsidy cases

The litigation that triggered this ruling was a Chinese tire company, Hebei Xingmao and its US parent company.

The case dates back to 2007. In June 2007, U.S. manufacturer Titan Union Labor Union filed a complaint requesting anti-dumping duties on imported products. In August 2008, the United States International Trade Commission (ITC) issued a final result of affirmative damages: the dumping rate was 28.69% for Hebei Xingmao, 5.25% for Guizhou Tire, and 8.44% for Tianjin. The subsidy rate for the three companies was divided into 14% and 2.45. %, 6.85%; the other 23 individually responding companies 12.58%; the unpunished companies' punitive tax rate is still 210.48%.

At that time, Hebei Xingmao and its American parent company GPX dissatisfied this result, and immediately entrusted Winston Law Firm with a complaint.

According to Li Yu, a lawyer of Winston Law Firm, the Chinese agent of the case, "When we began our defense, we raised two points. First, according to the famous Georgetown Steel case 24 years ago, countervailing laws were applied to the non-market economy. The state does not apply. First, the U.S. government (Ministry of Commerce) has failed to properly resolve the 'double calculation' issue and the anti-subsidy decree should be revoked. These two points have also been emphasized by the Chinese government."

In the “Double Anti” investigation, anti-dumping and countervailing investigations were aimed at different types of unfair trade. The purpose of anti-dumping investigations is to investigate whether foreign exporters are selling products in question in the United States at unfairly low prices; anti-subsidy cases are aimed at investigating whether foreign exporters have received subsidies from the host country.

According to the person in charge of the above-mentioned Fair Trade Bureau, since November 2006, the U.S. Department of Commerce has launched a countervailing investigation on China without recognizing China as a market economy country. In particular, after the international financial crisis, the United States used anti-dumping and anti-subsidy measures more frequently to restrict Chinese products.

According to statistics from the Ministry of Commerce, the U.S. Department of Commerce has so far initiated 30 anti-dumping and countervailing investigations on Chinese products without the authorization of domestic laws. The person in charge of the Fair Trade Bureau said that while the US Department of Commerce is using anti-dumping duties on Chinese companies using alternative country methods, it also imposes countervailing duties, which constitutes an unfair treatment for Chinese companies and undermines the legitimate rights and interests of Chinese companies.

On December 19, the Court of Appeal announced the result of the verdict. “We believe that the US Congress passed two amendments to the anti-subsidy laws in 1988 and 1994. It has approved the explanations given by the executive authorities and courts before: the government under non-market economy conditions. Financial assistance cannot be considered as a subsidy. Therefore, anti-subsidy laws do not apply to non-market economy countries."

China's enterprises are still facing anti-dumping challenges due to difficult trade frictions

Li Yu said, “The benefits will be more than just Hebei Xingmao, and more than 10 companies involved in the export of engineering tires. In the past five years, more than 30 anti-subsidy investigation cases initiated by the United States to China have to be corrected. A recent big case of solar cells."

The person in charge of the Fair Trade Bureau stated that the WTO ruling and the US Court of Appeals decision show that the US investigation of anti-subsidy against China over the years has violated WTO rules and there is no US legal basis. Although the lawsuit procedure in this case has not yet been concluded, the Chinese side hopes that the United States will abide by the laws and regulations, respect the judicial decisions of the United States, and correct its mistaken practice of countervailing investigations of Chinese products without recognizing the status of China’s market economy.

However, the industry is not optimistic as to whether this verdict can prevent the arrival of the Sino-US trade friction peak.

Tu Xinquan thought that this victory can only be interpreted as "institutional." If the political intent of trade protectionism is still in place, it cannot stop the emergence of similar technical operations. For companies that have suffered “double reverse” pressure since 2007, this pressure will not be reduced significantly.

The judgment stated that if the Ministry of Commerce considers that “the existing remedy is insufficient to protect the interests of the U.S. industry”, it believes that it needs to amend the law. It should go through the due process to the legislative branch.

The aforementioned attorney of Hebei Xingmao also disclosed to reporters that the US Department of Commerce and the judiciary have expressed their opinions. Therefore, the next step depends on the attitude of the US Congress. As of now, the U.S. Congress is silent about this. “The law modification process in the United States is indeed complicated. However, in times of rapid public opinion, it is also necessary to make amendments. Even if the anti-subsidy is cancelled, it does not rule out that the US Department of Commerce will impose a higher anti-dumping tax at the same time.”

It is worth noting that in the upcoming 2012, the opening of the US presidential election war is about to take place, the economic recovery situation is not clear, and the unemployment rate remains high.

Eric Emerson, a trade and antitrust partner at the Washington headquarters of the US firm, said that job creation is undoubtedly the weight of any presidential candidate to win votes, so Emerson expects that in the future In 9 to 12 months, Chinese export companies will still face an anti-dumping peak.

The person in charge of the above-mentioned Fair Trade Bureau of the Ministry of Commerce stated that at present, there are still many uncertainties in the global economic recovery and they face serious downside risks. Both China and the United States should work together with a more long-term perspective and a more open attitude to strengthen dialogue and coordination. , oppose trade protectionism and dispel the haze of the international financial crisis as soon as possible.

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