The Great Significance and Enlightenment of China's Winning Case in Fastener Cases

Article 6.10 of the "Anti-Dumping Agreement" of WTO gives exporters "separate tax rate treatment" as a mandatory and binding obligation to the investigation authority of the importing country. However, for a long time, the European Union, the United States and other Western countries have used China as a "non-market economy" as an excuse to continue to impose a "single anti-dumping tariff" on China, that is, all Chinese exporters are subject to anti-dumping duties at a tax rate regardless of the export price. . This approach is typically subjective and arbitrary, unfair and unfair, and it also seriously affects the enthusiasm of Chinese exporters in responding to suits. The main goal of the Chinese government's prosecution of EU fastener rulings in the WTO is to challenge the EU’s long-term discriminatory legislation and practices on Chinese exporters.

The ruling of China’s WTO fastener appeals case on July 15 this year attracted the attention of Chinese and international news media. China has won both the expert group stage and the appeal stage in the major litigation cases of fasteners. However, the reason why the case aroused such great concern lies in the main points of success. That is, whether Chinese export enterprises are entitled to “separate tax rate treatment” in the EU anti-dumping investigation respectively.

In January 2009, the European Union decided to impose anti-dumping duties on fasteners from China after investigation. Among them, the dumping margins determined by the EU for two European-funded enterprises were zero, 26.5% for a joint venture, 63.1% to 78.3% for enterprises that were sampled through sampling, and 77.5% for enterprises that were not sampled but responded; others 85% of responding companies. According to reports, there are as many as 1,700 companies producing fasteners in China, and each year it exports more than 800 million U.S. dollars to the EU market. It can be seen that the EU ruling has jeopardized the economic interests of many Chinese export companies. However, the Chinese government is concerned with a problem with broader economic interests and more important legal principles.

Western countries' discrimination against China in anti-dumping In international trade, product dumping means that a product is sold at a price lower than the domestic sales price of the product, or exported to other countries at a price lower than the cost. According to the WTO rules, if dumping causes industrial damage to the industries in which the importing country produces similar products, dumping will be condemned. At the same time, the importing country is allowed to conduct anti-dumping investigations, and an additional anti-dumping tax is levied on dumped products.

According to the WTO Anti-Dumping Agreement, the dumping margin is calculated by comparing the export price with the domestic sales price or cost (normal value). If the former is greater than the latter, there will be no dumping, and vice versa.

However, for a long time, Western countries, especially the European Union and the United States, have always regarded China as a “non-market economy country (NME)”. They do not recognize China’s domestic sales prices or production costs, and believe that such prices are not formed by market mechanisms. Government intervention. Therefore, when calculating dumping margins, we use the so-called “substituting country price”, that is, the selling price or production cost of similar products in a so-called “market economy country” as the “normal value” of China’s export products, and calculate accordingly. The dumping margin of Chinese products often leads to an artificial expansion of the dumping margins of Chinese exports. For example, if the cost of Chinese exports is $100 and the export price is $125, there should be no dumping based on the rules of the WTO; but the surrogate prices found in the European Union or the United States, such as $150, have been proven in Europe and America. "Substitute country prices" are higher than Chinese companies' domestic sales prices or production costs. As a result, there is dumping in China's export products. For this kind of disinterested practice in the West, Chinese companies and governments have been strongly opposed to urge them to correct this discriminatory practice, but this has not been resolved.

What is more, even if the price of "substitute countries" is compared with the export prices of Chinese export enterprises, the dumping margin calculated should be different because of the different export prices of each exporter. However, the European Union, the United States, and other Western countries use China as a "non-market economy" as an excuse. They suspect that the Chinese government may evade anti-dumping measures through enterprises. They have also imposed a "single anti-dumping tariff" on China, that is, all Chinese exporters regardless of export prices. High and low are levied anti-dumping duties at a tax rate. In this way, those exporters with higher export prices will also be subject to higher anti-dumping duties. This approach is typically subjective and arbitrary, unfair and unfair, and it also seriously affects the enthusiasm of Chinese exporters in responding to suits. The main goal of the Chinese government's prosecution of EU fastener rulings in the WTO is to challenge the EU’s long-term discriminatory legislation and practices on Chinese exporters.

The EU's Discrimination Legislation The 1996 EU Anti-Dumping Basic Regulations (384/96) is a typical reflection of China's export product discrimination policy. It first designated China as a "non-market economy country" by listing its methods. Then, it stipulates that only a national anti-dumping tax rate should be imposed on China's NME export products. If a company wants to obtain a separate anti-dumping tax rate, it must follow the provisions of the basic regulations, or through the "Market Economy Treatment (MET) test, or through a separate tax treatment (IT) test.

The so-called MET inspection, NME companies to prove: (1) prices, costs and inputs, including raw materials, technology and labor costs, output, sales and investment, enterprises decided by the market mechanism, without major government intervention; (2) The company has a clear accounting book that has been audited in accordance with international accounting standards; (3) the company's production costs and financial status, especially in the depreciation of assets, other cancellations, barter trade and debt compensation payments, have not been subject to the previous non-market economic system (4) The bankruptcy and property laws that ensure the legal certainty and stability of corporate operations are applicable to the company; (5) Exchange rate conversion is based on market exchange rates. In accordance with the MET inspection standards, the exporter may use the domestic sales price or cost of its product as its normal value, and then determine its dumping margin in comparison with its export price. If it proves unsuccessful, it depends on whether the company still requires IT inspection. If not required, companies will be subject to a single anti-dumping tax rate in the country.

IT inspection, NME companies to prove: (1) wholly foreign or part foreign-funded enterprises or joint ventures, exporters can freely repatriate capital and profits; (2) export prices, quantity, sales conditions and terms, the company can decide independently; (3) More than half of the company's equity is private; government officials occupying important management positions in the board of directors are either minority, or must prove that the enterprise is independent of government intervention; (4) exchange rate conversion is based on the market exchange rate; (5 ) If the exporter is given a separate anti-dumping tax rate, the government will not intervene to allow other exporters to evade the anti-dumping measures. If the IT inspection proves to be successful, the dumping margin of the exporter will be determined based on the price of the “substitute country” found by the EU for Chinese companies compared with its export price. If it proves unsuccessful, companies will be subject to the EU's single national anti-dumping tax rate.

The core of European Union law is that the principle of giving a single national anti-dumping tax rate to all exporters of the so-called NME is the principle, and the main purpose is to provide a separate anti-dumping tax rate for each enterprise. The EU's export products to China only give a nationwide anti-dumping tax rate, which means that the EU neither adopts the domestic sales price of Chinese companies nor the export prices of the surveyed companies.

WTO rules and rulings However, how is the WTO's Anti-Dumping Agreement stipulated? 6.10 of the Agreement states that the anti-dumping investigation authority of the importing country “generally determines the respective dumping margin for each known exporter or manufacturer of the product being investigated”. The article also stipulates that when the number of exporters, producers, importers or the types of products being investigated are particularly large and such determinations are not practical, the competent authority may use sampling methods to determine the dumping margin. It can be seen that the principle of the WTO is that, when importing countries conduct anti-dumping investigations, it is a principle to calculate individual tax rates for each exporter. Sampling of dumping margins is the only exception. The WTO agreements, including the Anti-Dumping Agreement, have no concept of a "non-market economy." Of course, there are no rules on how to calculate the dumping margins from NME exporters.

In the case of fasteners, the Appellate Body found that the "Anti-Dumping Agreement" 6.10 stipulates that the "single tax rate treatment" for exporters is a binding mandatory obligation for the investigation authority of the importing country. The only exception to this obligation is that the importing country may adopt a sampling approach because of the large number of exporters or products under investigation and the fact that it is not practical to determine "separate tax rate treatment."

The Appellate Body found that it did not find any provision of the WTO's other agreements allowing importing members to deviate from NME members' obligations to establish "separate tax rate treatment." Article 15 of the Protocol on China's Accession to the WTO only allows importing members to deviate from the domestic sales price or cost of products of Chinese exporters under certain circumstances. This article requires Chinese exporters to prove that their domestic product production, manufacturing and sales are based on market economic laws. Otherwise, "WTO import members can use methods that are not strictly based on Chinese domestic prices or costs." At this point in the protocol, at most, only importing members are allowed to compare prices, and they can use alternative methods to calculate the "normal value" of Chinese exports. The protocol did not mention the issue of "export prices" of Chinese companies at the time of price comparison. Article 15 of the Protocol does not replace Article 6.10 of the WTO Anti-Dumping Agreement. In addition to the special rules governing the domestic prices of Chinese companies at the time of price comparisons, there is no “open-ended exception” for the differential treatment of China.

Accordingly, the Appellate Body ruled that the EU's "Anti-dumping Basic Regulations" concerning the "separate tax rate treatment" for "non-market economy" exporters itself is not in conformity with the relevant provisions of the "Anti-Dumping Agreement," and its application to the fastener case itself Does not comply with the provisions of the Anti-Dumping Agreement.

At this point, the decision of the Appellate Body showed that the EU's "Basic Anti-dumping Regulations" not only violated the WTO's Anti-Dumping Agreement, but also did not have the legal basis for China to participate in the WTO Protocol.

The Enlightenment of the Determination of Fastener Case The determination of the fastener case is a major victory for China in the settlement of the WTO dispute.

First of all, the multilateral mechanism of the WTO has solved the problem of "separate tax rates" that we have not resolved in bilateral relations for decades. The Appellate Body ruled that the EU's "Anti-dumping Basic Regulations" violates the WTO's "Anti-Dumping Agreement," and the EU must revise its own laws. This helps eliminate discriminatory laws and practices for Chinese exporters in Europe and the United States and is conducive to the anti-dumping and responding actions of Chinese exporters. Safeguard China's legitimate trade interests.

Secondly, the Appellate Body’s ruling clarified its understanding of the “China’s Accession to the WTO Protocol.” Europe and the United States have erroneously understood that Article 15 of the Protocol is a stipulation of China’s “non-market economy,” and accordingly discriminates against Chinese exporters and export products. . The Appellate Body unequivocally ruled that Article 15 of the Protocol only deals with the calculation of the “normal value” of Chinese export products in certain circumstances. This article is not an “unrestricted exception” that can treat China differently. It is of great significance for the Appellate Body’s positive hearing to understand and correctly understand the Protocol and strictly implement it. In addition, this is beneficial to the review of those fastener exporters that have been implemented with a single tax rate, using the WTO agreement and the Appellate Body ruling as a weapon, and trying to restore the export of fasteners through reexamination.

Finally, it is a common problem that Western countries impose a single anti-dumping tax rate on China's export enterprises. We should take this opportunity to do a good job of research and actively negotiate, and strive to comprehensively solve the problem of unfair and unfair single tax rates.

However, while we welcome the WTO ruling, we must not take it lightly. Western countries are still at risk of imposing a single tax rate on Chinese companies. In particular, the Appellate Body mentioned in its ruling that if there are multiple exporters that have corporate and structural relationships, such as joint control, mutual shareholding and management, if there is a corporate and structural relationship between the government and the enterprise, such as the existence of joint control, Government shares or government participation in management; if the government controls, directs, or exerts substantive influence on the price and output of the company, importing countries can still treat these companies or groups of companies as single exporters and impose a single anti-dumping tax on them. At the same time, the EU will not stop there, they will certainly make full use of this expression of the Appellate Body, and the challenge will not end here. Therefore, we need to pay close attention to how the EU modifies its inconsistent laws.

Another point we should realize is that the rules of the WTO are based on a market economy. In terms of economic and trade, any policy and practice that violates market economic rules may violate the rules of the WTO. Therefore, we must adhere to reform and opening up, insist on acting in accordance with the laws of market economy, and not leave a handle for the other party to implement a single tax rate.

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