WTO Panel Issues Report on U.S. Section 301 Tariffs on $250 Billion of Imports from China

In United States – Tariff Measures on Certain Goods from China, WT/DS543/R (15 Sept 2020), a WTO panel grappled with issues raised by China’s challenge to the United States’ highly-contentious decision to impose tariffs on approximately $250 billion of imports from China, under Section 301 of the Trade Act of 1974. A link to the panel’s report is here.

The panel first addressed an important preliminary issue, by rejecting the United States’ argument that there was no need for the panel to resolve the issues raised by China because the United States and China had entered into bilateral negotiations to address the underlying trade issues and hence had reached a “mutually satisfactory solution” under Article 12.7 of the DSU.

On the merits of the dispute, the panel noted that the United States did not attempt to directly refute China’s arguments that the Section 301 tariffs violated the MFN provision of Article I:1 of the GATT and the prohibition against excessive duties under Article II:1(a) and (b). Rather, the United States claimed that the tariffs were necessary to protect “public morals” and thus were excepted under GATT Article XX(a). The panel agreed with the United States (and several third parties) that economic concerns can have a “public morals” dimension, which would permit an exception under Article XX. But the panel concluded that the United States had failed to explain the necessity of the specific measures at issue. That is, the United States had failed to articulate a “genuine relationship” between the challenged measures (tariffs imposed on a broad range of imports from China) and the public morals objective.

The report includes unusual closing comments in which the panel recognized the larger context of this dispute and the existence of “a range of unprecedented global trade tensions”. Meanwhile, response to this report has been remarkably muted – perhaps signifying either that the outcome was not a surprise or, more ominously, that the credibility of the WTO as a dispute settlement body has been eroded. And given that there is currently no method by which a panel report in a dispute involving the United States may be appealed, this panel decision will remain on uncertain ground for the foreseeable future.

Lawsuits Launched to Challenge Section 301 Tariffs on Imports from China

In 2018 the Administration launched a series of tariffs targeting a broad range of imports from China, under the authority of Section 301 of the Trade Act of 1974. These tariffs initially targeted $50 billion of goods, but the scope was quickly and dramatically expanded to cover an additional $300 billion. Over the past few days, several lawsuits have been launched in the U.S. Court of International Trade, challenging the imposition of the expanded tariffs. The lawsuits challenge both the justifications for the expanded tariffs and the process by which the Administration adopted them. If you would like more information, please contact us at neil@neilellislaw.com.

Court of Appeals Issues Important Decision on the Calculation of Anti-Dumping Duties

On September 3, the Court of Appeals for the Federal Circuit issued a decision in Changzhou Trina Solar Energy v. US, regarding the calculation of anti-dumping (AD) duties in cases involving parallel anti-subsidy (or countervailing duty, CVD) determinations. (The decision may be found here.) The Court concluded that where the Department of Commerce found that an export subsidy had been conferred on an exporter by its government, Commerce must adjust the calculation of the parallel AD duty to avoid double counting the economic impact of the subsidy. Even where the export subsidy finding was based on “adverse facts available” (AFA) because of non-cooperation by the foreign government, the mandatory language of the AD statute (using the word “shall”) requires the adjustment. Commerce cannot refuse to make the statutory adjustment as punishment, in order to induce the foreign government to cooperate in future cases. The Court’s decision is significant in light of the number of cases in which there are parallel AD and export subsidy determinations involving the application of AFA. For more information, contact us at neil@neilellislaw.com.