WASHINGTON, Aug. 2, 2013 – A World Trade Organization panel has ruled that China violated its WTO obligations by imposing higher duties on broiler chicken imports from the United States in 2010. The duties precipitated an 80 percent drop in U.S. chicken sales to China.
China’s Ministry of Commerce began antidumping and countervailing duty investigations in September 2009 in a move believed to be in retaliation for U.S. trade restraints on Chinese tires. The duties were imposed the following August and September, ranging from 50.3 percent to 105.4 percent for dumping (selling at less than cost) and 4 percent to 30.3 percent for countervailing duties (to offset alleged subsidies).
The U.S. Trade Representative’s office took the case to the WTO process in September 2011 and the panel found in favor of the United States on nearly all U.S. claims, according to a statement from USDA, USTR and the Department of Commerce.
The panel ruled that the countervailing duties exceeded the amount of any subsidy and relied on flawed price comparisons in determining that China’s domestic industry had suffered injury. It also was found to have followed many flawed procedures, including unjustifiably declining to use the books and records of two major U.S. companies in calculating their costs of production and failing to consider alternative allocation methodologies presented by U.S. producers.
The effect of the decision is to invalidate the production cost estimating method employed by China that resulted in high dumping margins. Mexico subsequently filed what the U.S. industry said is a “copy cat” complaint. Both countries calculated an average cost of production for an entire chicken, while U.S. companies price different parts, with dark meat cuts favored by export markets generally commanding lower prices than chicken breasts preferred in the U.S. market.
“For years, we have been concerned about other countries rejecting costs based on U.S. producers’ books and records and instead using the weight of a product to allocate production costs,” U.S. Trade Representative Michael Froman said in a statement. “This methodology artificially inflates or creates dumping margins. China had adopted this flawed approach, and the WTO panel found that China breached WTO rules.”
Among procedural flaws, the panel said that China improperly denied a hearing request, failed to require the Chinese industry to provide non-confidential summaries of information it provided to the government, and failed to disclose essential facts to U.S. companies on how dumping margins were calculated. Each side has the right to appeal issues of law or legal interpretation in the panel report to the WTO Appellate Body. See a copy of the WTO panel’s report here.
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