Anti-dumping and Safeguards with Chinese Characteristics

In its WTO Protocol, China agreed to comply with the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade and the Agreement on Safeguards. As a result, China's State Council promulgated the PRC Anti-Dumping Regulations (中华人民共和国反倾销条例)and PRC Safeguard Measures Regulations, both of which took effect on January 1 2002 and replaced rules from 1997.

Compared to the 1997 rules, the new regulations follow more closely the substance and intent of the WTO agreements. Specifically, under the new Anti-dumping Regulations and Safeguards Regulations, three elements must be proven before anti-dumping or safeguards measures may be employed: (1) the existence of dumping (in the case of an anti-dumping action) or a significant increase in the import volume of the products (in the case of a safeguard action); (2) material injury to the relevant domestic industry; and (3) causation between the dumping/import increase and the injury. Dumping is defined in the regulations as "imported products entering the Chinese market under an export price that is lower than the normal value". In most cases, normal value is determined by reference to the comparable price of an identical product in the exporting country. Where no such comparable price is available, reference may be made to the export price in an appropriate third country or a constructive price (i.e., manufacturing cost plus reasonable expense and profit). The difference between the normal value and export price is deemed to be the dumping margin, constituting the basis upon which anti-dumping duties may be calculated. In the case of a safeguard claim, mere increased quantities of imported products (absolute or relative to domestic production) is sufficient.

A number of factors may be taken into account during an investigation to determine domestic injury, such as the quantity of imported products, price and production capacity in the country of origin, as well as the inventory of the product under investigation in the domestic market. The key consideration in examining material injury caused by an increase in imports is the rate and volume of increase as well as the market share held by the imported products.

Procedural Aspects

As a result of governmental restructuring in March 2003, MOFTEC and SETC merged into the Ministry of Commerce (MOFCOM) and MOFCOM thereby became the sole authority in charge. The Bureau of Fair Trade for Import and Export is responsible for accepting or rejecting anti-dumping or safeguard petitions, investigating dumping margins or import increases, and determining preliminary and final measures. The Bureau of Industrial Injury Investigation is empowered to investigate injuries or threats to domestic industries or impediments to the establishment of such industries.

The Anti-dumping Regulations set forth detailed procedures in respect of the petition, investigation, determination and review of sanctions in anti-dumping cases. An anti-dumping investigation must be concluded within 12 months, with an extension of no more than six months permitted under special circumstances. Temporary measures may be taken upon a preliminary decision before MOFCOM fully completes the proceeding, although such measures may not, however, be imposed within 60 days following an investigation announcement, and should in no event exceed four months. A final decision may take the form of anti-dumping duties or price commitments for up to five years.

Conclusion

ChinaÕs WTO accession necessitates the countryÕs gradual removal of various tariff and non-tariff trade barriers, leaving anti-dumping and safeguard measures among the very few legitimate tools available to China to protect its domestic industries. Despite new regulations promulgated in light of WTO requirements, transparency in ChinaÕs investigative procedures remains a major concern of foreign countries and companies. Moreover, it is a widely held belief that relevant authorities sometimes make arbitrary decisions against foreign exporters without holding sufficient hearings, citing solid statistics, or applying logical reasoning in determining causation. Request for access to Chinese party filings can be rejected on the basis of confidentiality. Although the central issue in many dumping cases brought against Chinese products in foreign countries is whether or not China maintains a planned or market driven economy in the particular industry in question, dumping cases against foreign goods in China are in fact often initiated by State-owned companies struggling to survive in ChinaÕs new more market-oriented and competitive environment.