Yes, I know, that's a lot of acronyms in the post title!
Those who read my previous post on this topic may have noticed that I buried the NME issues towards the end. You may have suspected that was because I wasn't quite sure what to say about them. If so, you were right. I still don't have the issues quite sorted out yet, but I thought I would point readers to the recent U.S. statement to the panel in the DS379 case, where the issue was discussed as follows:
2. NME Methodology is Not Designed to Offset Subsidization
75. China’s position rests on the extraordinary proposition that an NME anti-dumping methodology, by its very nature, offsets subsidization.59 This proposition is without merit. It reflects an understanding of the NME methodology that has no basis in, and is contradicted by, the text of the covered agreements.
a. The Covered Agreements Provide No Support for China’s Proposition
76. First, as the United States has observed,60 the covered agreements establish the antidumping and countervailing duty regimes as two different mechanisms to address two separate and distinct unfair trade practices. China has not cited any provision of the GATT 1994, Anti-Dumping Agreement or SCM Agreement that would support its proposition. Indeed, if the NME methodology does in fact counteract subsidization, leading directly to a so-called double remedy, one might have expected China to negotiate in its Protocol conditions on a Member’s recourse to that methodology or, even better, an express prohibition on the concurrent application of AD and CVD measures, as it seeks to have the Panel insert now. China did neither.
77. Furthermore, accepting the view that the NME methodology is designed to offset subsidization would lead to incongruous results under the covered agreements. The United States recalls that footnote 36 to the SCM Agreement states that a countervailing duty “shall be understood to mean a special duty levied for the purpose of offsetting any subsidy bestowed directly or indirectly upon the manufacture, production or export of any merchandise, as provided for in paragraph 3 of Article VI of GATT 1994.” If China’s theory was applied, that is, if the NME methodology offset subsidization, then any anti-dumping duty calculated pursuant to the NME methodology would fall squarely within this definition of “countervailing duty.” Because such an anti-dumping duty would also be a countervailing duty, that anti-dumping duty, as required by Article 10 of the SCM Agreement, could “only be imposed pursuant to [an] investigation initiated and conducted in accordance with [the SCM Agreement].”61 Therefore, an investigating authority could not impose an anti-dumping duty calculated pursuant to the NME methodology without first also conducting a CVD investigation. In the absence of such an investigation, an anti-dumping duty calculated pursuant to the NME methodology, under China’s theory, would appear to be inconsistent with Article 10 of the SCM Agreement. Under China’s theory, this would be the case whether or not a concurrent CVD case were ongoing. And of course, under China’s argument, even after conducting the two investigations, that investigating authority could not also impose the duty resulting from the separate CVD investigation, but instead, would be permitted to impose only one of the duties calculated.
b. U.S. Law on the NME Methodology Provides No Support for China’s Proposition
78. Just as China’s view that the NME methodology counteracts subsidization cannot be
reconciled with the text of the covered agreements, so too can it find no support in the text of the U.S. law governing the NME methodology. As explained in the U.S. rebuttal submission,62 U.S. law identifies an exporting country as an “NME” based on an examination of multiple statutory factors, none of which references subsidization. Put simply, the existence, nature, or extensiveness of subsidization in the exporting country has no bearing on the designation of that country as an “NME.” There is no basis to contend that subsidization is one of the “‘distortions’ in the market that the NME construct was designed to address”63 when it is not even a factor examined when considering whether a country constitutes an NME.
79. The exclusive focus of the NME methodology on making a price comparison for the purpose of calculating the dumping margin is also reflected in U.S. legislative history, which notes that normal antidumping methodologies were “insufficient to counteract dumping in State controlled economy countries where the supply and demand forces do not operate to produce prices … which can be relied upon for comparison purposes.”64 In its First Written Submission, China relies on one mention of subsidization in the NME context in the U.S. legislative history as support for its view that the NME methodology offsets subsidization.65 However, this reliance is misplaced.
80. The United States has explained in its rebuttal submission that Commerce tends to avoid
factor values in the limited circumstances where those values are based on import prices of inputs and the inputs are from countries that have been found in prior CVD investigations to be providing non-product-specific export subsidies.66 This naturally leaves a whole swathe of
potential subsidies unaccounted for in Commerce’s application of the NME methodology. In
respect of this broad range of potential subsidies, Commerce undertakes virtually no inquiry.
Moreover, even where Commerce excludes factor values based on subsidized inputs, the factor values that are ultimately selected may well reflect subsidization themselves because Commerce does not and cannot ensure otherwise. Therefore, the prices used by Commerce when constructing normal value under the NME methodology cannot be concluded to be “unaffected by subsidies,” as presumed by China’s theory.67
81. This is not surprising, though, when one recognizes that the proper objective of the NME
methodology is not to offset subsidization, but is to measure the margin of dumping in a context where normal value cannot be reliably measured using the exporting country’s own costs and prices.68 China’s attempt to argue otherwise finds no basis in the covered agreements or in U.S. implementation of the NME methodology.