China: Anti-dumping Duty On Steel Products - Chinese Measures Inconsistent With WTO Obligations

Introduction

In 2019, China imposed anti-dumping duty on imports of certain Steel Products from European Union, Japan, Indonesia and Korea. The measures imposed were challenged by Japan before the WTO Dispute Settlement Body. Japan requested the Dispute Settlement Body for establishment of a Panel with regard to the inconsistency in the Findings. Japan raised multiple issues including those related to composition of domestic industry, price comparability, determination of injury and causal link as well as fulfilment of disclosure requirements by the Chinese Authority. The Panel issued its findings on 19^th June 2023, wherein it was held that the measures imposed by China were not in conformity with the Anti-Dumping Agreement.

Composition of domestic industry

Japan contended that the composition of domestic industry was not appropriate. Inter alia, Japan highlighted that there was a discrepancy in market share and share in total production of the domestic industry. Since the volume of imports in China were low, the market share of the domestic industry should have been similar to the share in domestic production. The Report issued by MOFCOM is silent in this regard. Further, Japan alleged that MOFCOM failed to ensure that the domestic industry substantially reflected the total domestic production of all three products, that is, billets, coils and plates.

As regards market share, China stated that market share is irrelevant for the purpose of defining the domestic industry. The difference between the market share and share in domestic production arose due to the reason that while certain companies were excluded from determination of domestic industry, on account of relationship with exporters, their sales were a part of the consumption determined. With regard to examination of total production, China asserted that major proportion is required to be examined with respect to production of domestic like product as a whole and there was no requirement to analyze major proportion separately with regard to billets, coils and plates.

The Panel noted that the requirement to analyze major proportion focuses on share of domestic industry in domestic production and not share in total consumption. Thus, there was no obligation on MOFCOM to analyze the same for the purpose of defining the domestic industry. Since source of the data for total domestic production and total consumption are different, it cannot be considered that discrepancy between the share in production and share in consumption rendered them unreliable. Regarding the second issue, the Panel found that the requirement under Article 4.1 is that the domestic industry should be representative of domestic producers as a whole. However, in case where domestic industry focuses on production of only one type of product, then the domestic industry may be unrepresentative. The burden of proving unrepresentativeness of the domestic industry lies upon the complainant. The Panel found that in the present case, Japan had failed to demonstrate that the domestic industry defined by MOFCOM is not representative of domestic producers as a whole.

Price comparison between subject imports and domestic like product for injury analysis

Another issue raised by Japan concerned the comparison of the import price and domestic prices for analysis of price undercutting and price suppression / depression. Japan claimed that MOFCOM did not consider differences in prices between product categories, that is, billets, coils and plates, but took the average price of imports and domestic like product. This does not ensure price comparability between various products.

China countered that the product categories had no difference or had a minor price difference between them. Since the imports and domestic like product are sufficiently similar in composition, comparing average prices will lead to objective results.

The Panel noted that there are differences between product categories in terms of prices, physical characteristics, end-uses and customers which led to difference in competitive relationship between such product categories and accordingly, comparability of their prices. The Panel found that MOFCOM failed to provide reasonable explanation supporting its determination that the prices of product categories were comparable for price analysis. Therefore, the Panel found that the injury analysis undertaken by MOFCOM was not consistent with the Anti-Dumping Agreement.

Examination of other causes of injury

Lastly, Japan alleged that MOFCOM failed to examine factors other than dumped imports causing injury to the domestic industry. Japan emphasized that the injury analysis undertaken by China did not consider the effect of decline in price of nickel.

However, China emphasized that none of the interested parties argued that decline in Nickel prices was a factor causing injury to the domestic industry.

In this regard, Panel concluded that since decline in prices of nickel were in the period prior to the period of investigation and no dumping was established in the prior period, MOFCOM was not required to consider it as a factor for causing injury to the domestic industry. Therefore, the causal link and non-attribution analysis undertaken by MOFCOM was appropriate.

Conclusion

The Panel held that the measures imposed by China on imports of certain Steel Products from Japan, Korea, European Union and Indonesia were not in conformity with the Anti-Dumping Agreement. However, the Panel held that some of the claims made by Japan were not justified. The Panel held in favour of China that there was no need for examination of market share of the applicants in order to determine the constitution of the domestic industry. Additionally, the Panel rejected the claim by Japan that MOFCOM failed to examine causal link due to injury to the domestic industry due to decline in nickel prices prior to the period of investigation and held that there was no need to establish causal link for a period where no dumping was established.

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